I move:—
That a supplementary sum not exceeding £500,000 be granted to defray the Charge which will come in course of payment during the year ending 31st March, 1949, for increases in remuneration of civil servants.
The increase in Civil Service pay for which provision in regard to the financial year is being made in this Estimate, resulted in the first place from the increase of 11/- a week for men and a pro rata increase for women awarded by the Labour Court in respect of employees in various undertakings early this year. The Labour Court award was based on an agreement which was previously negotiated between employers and workers. The Government's first approach to the problem of applying the Labour Court's award to the Civil Service was to limit the concession to civil servants whose pay amounted to £350 or less. When that decision was taken, I entered into negotiations with the Civil Service Association. We found considerable difficulty in reaching an agreement that was acceptable to all parties concerned and the negotiations became very prolonged indeed. The result was that I found myself coming nearer to the pivotal date, namely the 1st November. That date had been fixed by my predecessor as being the date upon which a general revision of Civil Service salaries would be entered upon. That arrangement had been made when the pay consolidation agreement was concluded in 1946.
As the conditions laid down in that agreement for an upward revision showed every likelihood of being fulfilled, I decided that the wisest course was to try to merge in any settlement which could be arrived at under that head, the weekly increases that had already been accorded on the Labour Court pattern. The settlement ultimately made effected this merger. I think some publicity has been given to it. Under its terms, whole time civil servants whose pay does not exceed £350 a year—subject to certain adjustments at marginal points— receive as from the 29th May, 1948, increases at the rate of 11/- per week for married men and single men on rates of pay not differentiated on the basis of marriage and 5/6d. a week for other single men, women and juveniles. Part-time civil servants receive pro rata increases.
As from 1st November these increases will operate as minima for the Civil Service as a whole, the £350 ceiling disappearing, but every civil servant to whom it is more favourable will receive instead an increase calculated on a 20 points increase on the cost-of-living figure on which the consolidation agreement was based. In addition, I have decided to reduce by one third the "super cut", which under the bonus system, and with slight modification under the consolidation agreement, has hitherto applied to remuneration related to a basic of £500 a year. As the Estimate shows the cost of these concessions in the present financial year is expected to be £500,000. In a full year it will be in the neighbourhood of £700,000.
The new agreement will run for two years from the 1st November and will be subject to re-examination at the end of that time or at any time during the two-year period if the cost of living rises to or above 330 or falls to or below 250. I have, however, made it clear to the staff that any re-examination must be governed by these overriding considerations, viz., the economic conditions existing at the time of the re-examination, the then Exchequer position and the trend of remuneration outside the Civil Service in so far as that trend is affected by the cost of living.
I am acutely conscious that this heavy addition to the cost of the Civil Service requires strong justification. In the main, that justification is to be found in the undertaking given in the consolidation agreement that the terms of that agreement would be revised if at the end of two years the cost-of-living index number—the old series number—was as high as 300.
The Labour Court award was another important factor. The additions granted on these grounds, but especially the consideration of the cost-of-living index number, led to the decision to reduce the "super cut", because under the consolidation agreement, under the bonus system, an increase in the cost-of-living number to which salaries are related worsens the relative position of the grades to which the super cut applies and the grant of minimum increases has the same effect.
Perhaps at this stage I should give some explanation of the effects of the "super cut". Under the bonus system there was a gradual scaling down of the percentage of compensation given for increases in the cost of living. On these reductions there was superimposed on salaries above £500 a year this "cut" rising from 10 per cent. between £500 and £700 basic to 55 per cent. at £1,500 basic.
As a result of these drastic operations the percentage of bonus to basic pay immediately before the consolidation agreement ranged from 110 per cent. on the lowest salaries to 19 per cent. on the highest, thus causing a degree of "compression" of rates of pay which seriously reduced the incentives to ambition and effort in the Civil Service. My predecessor, recognising this ill-effect, made provision in the consolidation agreement for a minimum increase of 25 per cent. on total remuneration as obtaining in 1939, and indicated in doing so, that he was giving an earnest of his view that it would not be in the public interest to allow the salary compression to proceed further. The reduction in the "super-cut" now introduced will, in my opinion, remove any remaining reasonable ground for dissatisfaction on the part of the higher officers and provide the stimulus to zeal and energy which is so necessary in a large organisation like the Civil Service.
Although I have been compelled by circumstances and especially by the commitments accepted at the time of the consolidation agreement and the rise in the cost of living since 1946, to grant these big increases in Civil Service pay, I cannot profess to feel at all happy about the effects that they and the increases given in private employment and in the public utility services must have on the national economy. There is a certain element of danger in them. It is quite certain that, unless they are followed by corresponding increases in output—and I am afraid there is so far no indication of this—they will be a serious reinforcement of the inflationary agencies which are at work and that by raising costs of production they will lessen our already very limited ability to meet competition in the home and export markets.
These things have been said over and over again, and they have been confirmed by experience, but unfortunately they do not seem to be grasped by various sections of the public. Yet it is an elementary truth that increases in money income without corresponding increases in output can in the long run bring no advantage to anybody and must on the contrary, if not checked in time, bring disaster to the entire community. We are taking a risk but in doing so we believe that the incentives that would be provided in the way of increased pay ought to lead to increased production. I am able to say, however, that the present Estimate will not necessitate any increase in taxation in the current year. We have already raised a series of Post Office charges which will give us an additional £200,000 and the release of sugar for jam making should provide a sum of £150,000. In addition, we may rely on savings being effected in various Departments sufficient to bring the total up to the £500,000 required.
The increases provided for in the Estimate raise Civil Service pay generally to levels which, in my view, can be fairly described as very generous having regard to the general economic position of the country. In many grades they are substantially higher than the pay of corresponding grades in Northern Ireland and even higher than that of similar grades in the British Civil Service. In fairness to our people, we must now call a halt to the upward movement. For my part, I trust that this will be the last occasion on which I shall have to present a Bill of this kind to Dáil Eireann or to agree to any general increases in Civil Service pay which are not fully compensated by a reduction otherwise in the cost of administering the public services.
I have thought it desirable to make provision for the increases in this single Estimate, but each Department will be responsible for the detailed accounting for whatever money it gets out of the Vote in the same manner as if it were money from its own Vote or Votes.