Colm McCarthy

It was the most draconian cost-cutting plan in the history of the state. Last July, economist Colm McCarthy produced his much feared An Bord Snip Nua report detailing 270 recommended cuts in government expenditure in order to save €5.3bn, or almost €1 in every €10 the government spends to run the country every day.

But nine months later, only 32 of the original 271 recommendations have been implemented in full while a further 89 have been introduced in part.

Excluding the almost €740m full year savings from the social welfare cuts that were already pencilled in before the An Bord Snip Nua report, the full year savings from the implementation of these recommendations comes short of €1.2bn, less than a quarter of McCarthy's recommended cuts.

The slash and burn approach recommended by McCarthy was, of course, a softening up exercise designed to remind free-spending departments of the new realities that were now in play.

Finance minister Brian Lenihan said last week that the An Bord Snip Nua report, which he described as "advisory", will continue to be "a central point of reference in the government's ongoing consideration of overall expenditure strategy". This will be even more the case if unions reject the Croke Park deal.

Below we list 10 key areas from the Report of the Special Group on Public Service Numbers and Expenditure Programmes, to give it its full title, that, to date, the government has ignored or conveniently forgotten about.

1. Further rationalisation of state agencies

Recommendation: In his April 2009 emergency budget, minister Lenihan proposed the rationalisation/ amalgamation of over 40 of the
hundreds of agencies or 'quangos' which some ministers were unaware even existed.

McCarthy recommended a further 43 rationalisations which he said would save €170m, including almost €20m in capital expenditure.

Action: To date, just a couple of agencies have been scrapped/amalgamated or brought back into the parent from whence they sprung.

McCarthy estimated that discontinuing the Family Support Agency, for example, would save over €30m.

But for this year, the agency is to receive a €33m grant – just €1m down on last year's allocation.

There is no sign of any movement against hundreds of 'quangos' which employ an estimated 16,000 people.

2. Abolition of two government departments

Recommendation: In typically blunt fashion, McCarthy recommended that the Department of Community, Rural and Gaeltacht Affairs, or 'Craggy Island' as it is affectionately known, should be closed with what's left of its spending programmes transferred to other departments.

It also recommended that the equally multi-tasked Department of Arts, Sport and Tourism should be "critically examined".

Action: Completely ignored. A bit too close to cabinet, it was never likely that Taoiseach Brian Cowen was going to run with this even if there were several in government circles who harboured a secret desire to annex what was Eamon Ó Cuív's personal fiefdom out west.

Changing the name to Community, Equality and Gaeltacht Affairs and switching the minister is not closure.

Similarly, the almost imperceptible change from Arts, Sport and Tourism to Tourism, Culture and Sport as well as a change of minister is well short of a "critical examination" as recommended by McCarthy.

3. Cutting public service numbers

Recommendation: The report recommended that amid a ballooning public service paybill edging past €20bn, public service numbers should be cut by 17,000 or almost 7%. "Initial reductions on this scale are the minimum that must be achieved," said McCarthy.

Action: Recent figures produced by Finance show that they expect public service numbers to drop by 410 this year, or 0.01%. While such a reduction will take time, such a small cut is hardly the best of starts.

4. Public service pensions

Recommendation: McCarthy pointed out that the real annual cost of providing public service pensions is €7.7bn a year.

Considering this massive cost, the report recommended a number of cuts including increasing public servants' pension contributions, breaking the link between pay increases and pension increases and dropping the early retirement provision for the likes of gardaí.

Action: A start was made on this when the government unveiled its pension reform plans last month but most of the cutbacks were targeted at state pensions with smaller scale changes proposed to public service pensions which are still subject to union negotiations.

5. Too many regulatory bodies and ombudsmen

Recommendation: McCarthy suggested there were too many regulatory bodies and that staffing levels were "too high" in a number of these bodies. The report also noted disparities in spending between these bodies and suggested they should be financed through charges from the industries or sector they regulate. He recommended a number of amalgamations including the Pensions Om­bud­sman with the Financial Services Ombudsman and the Health Insurance Authority and the Pensions Board with the Regulator.

Action: While noises have been made all are still in existence.

6. Sell state property

Recommendation: McCarthy said that the state should identify and prepare for sale all surplus property held by government departments and agencies and any department reluctant to sell should be forced to justify why they are hanging on to underused buildings.

Action: This has been compromised by the property crash but the department of finance is still experiencing difficulties even getting a list of property that could go under the hammer when prices improve.

But if anything, the ill-fated decentralisation programme has seen the state build and purchase even more property outside Dublin to house reluctant public servants moving out of the capital.

7. Outsourcing

Recommendation: McCarthy said that he saw "considerable scope" for the public service to get a large number of public services done more efficiently by the private sector.

Action: Outsourcing is like a red rag to a bull to the unions. Previous efforts to outsource driving tests, for example, provoked considerable reaction from the unions. Coincidentally, it is a key topic for discussion at the national pay talks.

8. Job Subsidy scheme

Recommendation: McCarthy warned the government that they should be "wary of introducing job subsidy schemes and other labour market interventions which would run the risk of repeating the failures and costs of similar schemes introduced in the past."

Action: However, minister Mary Coughlan announced a €250m employment subsidy scheme designed to help employers maintain 27,400 vulnerable industry jobs. But the scheme was criticised as too little too late so the government fell between two stools on this one.

9. IT spending

Recommendation: McCarthy noted that around 1,300 civil servants work on IT at a cost of €65m a year while an additional €200m a year is spent on IT consultants, contractors and service providers. But systems are not integrated even between departments and McCarthy suggested that a greater share of facilities would result in considerable savings.

Action: None.

10. Public sector pay

Recommendation: The one area that was outside McCarthy's remit but the veteran economist couldn't help making some comments on his favourite topic. He said that the government will need to secure further savings in public sector rates of pay and allowances on top of the €1.1bn it saved from the introduction of the public service pension levy in early 2009.

Action: As with the job subsidy scheme, the government followed through on McCarthy's comments with far more gusto than anything else even though it was outside the scope of An Bord Snip Nua to recommend on cuts.

Last December, the government introduced average pay cuts of around 7% across the board which will yield savings of €1.3bn in a year.

This is approximately the same amount as the total expenditure cuts implemented by the government so far arising from the An Bord Snip Nua report.

Concluding his report back in July 2009 , McCarthy acknowledged that "no proposal for reductions are painless."

But he added that in arriving at the 271 recommendations, the group had assessed "what it considers to be the relative priority of individual programmes and the affordability of these programmes in light of the budgetary crisis facing the country at present".

The underlying message from McCarthy to the government was clear: this is what I think needs to be done but implementation will create serious political fallout. It's up to you.

With over 85% of An Bord Snip Nua's recommendations fully or partly ignored, it seems the government, so far, has opted for political expediency.