Fiscal Context: Public Sector Pay
Talks
Central Section / Pay Division
22nd May 2017
Context: Sustainable Expenditure Growth

The recovery in the economy has meant that real
increases to public spending can continue to be
made on a sustainable basis to deliver both on
economic priorities and also on the social goals.
Departmental expenditure growth:
Three-year intervals
2017-2020

The growth of Departmental expenditure in threeyear intervals illustrates that in the period from
2014 to 2017, expenditure will have grown by 9%
in comparison to growth of between 26% and
57% that were experienced in the 1999 to 2008
period.
10%
2014-2017
2011-2014
2008-2011
9%
-6%
-8%
2005-2008

Budget 2017 outlines average increase of 3½%
per annum over the 2017-2020 period and
represents the constraints from which precommitments such as demographics must be
financed alongside new policy proposals including
pay.
38%
2002-2005
26%
1999-2002
57%
-20% -10%
0%
10%
20%
30%
40%
50%
60%
70%
Requirement to Reduce Already High Debt Levels




General Government Debt forecast at
76% of GDP at end-2016 (significantly
higher than 2007 levels of 25%).
Unlike in 2008, limited room for
absorption of another fiscal or economic
shock
Running a structural balance in positive
cyclical times will allow for a significant
reduction in debt levels. Goal is to reduce
debt to more sustainable level (60% of
GDP target)
Budget 2017 estimates (graph) show the
proposed reduction in debt levels once
preventive arm rules are adhered to.
120%
105%
100%
79%
80%
76%
74%
73%
72%
67%
65%
2020
(f)
2021
(f)
60%
40%
20%
0%
2014
2015
2016
(f)
2017
(f)
2018
(f)
2019
(f)
General Government Debt as a % of GDP
SGP Debt Benchmark
PS pay costs substantial component of PS spending
Pension
5%
Capital
8%
17
16.5
16
15.6
Pay
28%
€Bn
15.1
Non Pay
59%
15
14.4
14
13
2014
• Pay and Pensions continue to make up
approximately a third of total expenditure
despite reductions in rates and numbers
relative to the peak.
2015
2016
2017
• On a like-for-like basis the Paybill has
increased by approximately €2.1bn (almost
15%) since 2014.
• In addition, a further €0.15bn increase in
net pay was allocated via a reduction in the
Pension-Related Deduction (PRD).
Recent trends in pay and staffing
320,000
4.5%
315,000
310,000
• Numbers are expected to increase by 9% by
the end of 2017 (+26,000).
3%
305,000
300,000
• Annual increases since the ending of the
Moratorium announced in Budget 2015 will
have been more than 8,000 (3%) per year
– end year projection 315,000 for 2017 –
increase 8,000 equals circa €400m in pay
2%
295,000
290,000
285,000
280,000
275,000
270,000
2014
2015
2016
2017
• The increase has been more heavily focused on numbers growth in particular to support improved
services in key areas of health and education.
• If continue to grow 3% - peak numbers 320,000 exceeded in 2018
Available Resources for Budget 2018




Ireland is subject to the Preventive Arm of the
Stability and Growth Pact which links
expenditure growth with the medium-term
growth rate of the economy.
There is a limited amount of resources available
for current expenditure measures in 2018
Of the additional €600m in current expenditure
outlined in Budget 2017, only €200m remains
unallocated due to the carryover of impact of
Budget 2017 measures (such as the full-year
cost of Social welfare Rate increases) uses
€400m in current expenditure.
Important to note that pay is competing for
resources with social welfare, childcare and
other priorities.
€ billion
Current
2018
2019
2020
2021
Total
0.6
1.0
1.0
1.0
3.6
Pressures and Risks
Demographics:

Funding an increased number of State Pension recipients or hiring additional teachers to deal
with class sizes is substantial and must be dealt with as a priority.
Brexit

Although some measure of the impact of ‘Brexit’ has been included in the calculations of the
fiscal space there may be sectoral and geographical funding requirements over the next few
years to deal with the impact of Brexit on trade.
Expectations

Sustained economic and revenue growth will build expectations for greater Governmental
expenditure to fund enhanced services and social welfare payments.
Summary



Growth in the pay bill has outstripped growth in total expenditure over the 2014-2017
period. Numbers are projected to increase by 9% by year-end and will need to be
controlled in order to facilitate any sustainable increase in pay.
EU obligations limit the room for manoeuvre with regards new expenditure measures.
After the carryover impact of Budget 2017 measures is accounted for – there is under
€200m available for new current expenditure measures in 2018.
Pay will be competing with other Government priorities in health (PfPG commitment is to
increase Health budget by 3% p.a.) social protection and housing etc.