WITH between 32 and 42 per cent of the state budget going towards the civil service wage bill, it is no surprise that experts stress that drastic measures need to be taken soon in order to cut the public deficit and meet the Maastricht criteria to join the common European currency.
Fear of the political cost is perhaps the primary reason why respective governments throughout the years have not dared to ‘touch’ the civil service, while at the same time using it to further their political goals.
This has inexorably created a money-guzzling monster, which in recent years needs at least a billion pounds a year for wages, pensions and bonuses.
The size of the public sector has risen sharply since the founding of the Republic in 1960, with civil servants making on average in 2001, 44.3 per cent more than their private sector counterparts.
In 1960, the civil service numbered just 9,730 employees – including the police, fire service, and teachers.
By 2001 the number had risen to 29,860 – one civil servant (costing on average £22,800 per year) to every 23 citizens or 10.5 working citizens.
The magnitude of the problem is further illustrated when the 10,535 contractual and casual workers are included in the equation.
This raises the number to 40,396: one civil servant (costing an average £18,150) for every 17.1 citizens or 7.9 working citizens.
In 2002, taxpayers paid £124 million on civil service pensions and bonuses, while in 2003 the amount reached £145 million.
The forecasted amount for 2004 is £176.1 million, up 20 per cent, and expected to keep on rising thereafter.
Considering the rise in life expectancy, one could only imagine the extent of the increase over the next several years.
There are currently around 31,000 civil servants plus 10,500 contractual and casual staff in a gainfully employed population of 317,000.
In 2003, the state received £440.6 million in direct taxes and £1.57 billion from indirect taxes.
From around £1,497 billion in total tax income, the state had to pay £370.1 million in loan interests and other related fees, and £923.6 million on the civil service wage bill.
From every tax-pound received, 86.4 cents went to the wage bill and loan interests – 61.7 per cent on the wage bill and 24.7 per cent on the interest.
The increased spending has resulted in the state borrowing further money not only to cover its investment and development needs, but also for covering part of its expenses.
This has turned into a vicious circle with no end in sight.
A former government official suggested that the only way to solve the problem was to freeze hiring in the civil service and progressively start buying services from the private sector.
For instance, the government could buy legal services from private law offices and gradually phase out many positions in the legal service, where some attorneys receive salaries that are 20 per cent higher than those of ministers.
Another department that could be phased out over the long run is the public works department, whose 439 employees, most with ill-defined duties, are expected to cost taxpayers around £86 million this year.
The former official pointed out that the current customer relations practice needed to stop immediately.
And political parties should stop pressuring for new positions to cater for the needs of their supporters – the tradition, which through the decades has opened many positions to suit specific interests and individuals.
But any genuine attempts to address the civil service issue have always met with the strenuous objections of the unions, which at times seem to ignore the interests of the country to focus only on the short-term interests of their members.
The secretariat of the civil servants union (PASYDY) met on Wednesday to discuss the government’s plans to cut costs, and more specifically the issue of pay raises for the three years 2004 to 2006, and the extension of the age of retirement.
The meeting also discussed the needs for the opening of new positions as well as the transfer of personnel to other departments.
The secretariat reaffirmed its fixed position that any problems of the economy could not be solved on the backs of civil servants and by refusing to grant them what they were entitled to.
PASYDY stressed that the problems faced by the economy were created to a large extent by tax evasion and tax breaks adding, that it was necessary to take measures to tackle the specific phenomenon.
The union suggested that £170 million were lost every year through tax evasion and tax breaks.
Fighting tax evasion and improvement of the state’s ability to collect taxes is among the measures the government is considering in order to tackle the deficit.
Other measures include a freeze in new positions in the civil service, and local authorities and semi-governmental organisations, which receive state funding.
To top this up the, government is considering a four-year civil service wage freeze.
It is estimated this measure alone would save the state £15 million per year.
But the government has also suggested cuts in the state benefits given to various categories of citizens, a move immediately blocked by its communist partners AKEL, who do not want to hear anything about cutting social benefits.
Benefit cuts would have saved the government around £29 million in 2005 but have been abandoned for the time being to avoid a rift with AKEL.
The deficit busting measures also provide for an increase of the civil servants’ contribution to the social insurance fund – they currently contribute 3.2 per cent with the state footing the rest 9.4 per cent.
The government wants the contribution to be equal – 6.3 per cent apiece.
On top of that the state is looking to do away with the civil servants’ right to collect unemployment benefits for six months after retirement.
These two moves would save the state £17 million next year while an additional £30 million would be saved by extending the retirement age from 63 to 65.
With these measures, the government hopes drastically to cut the public deficit by 2007 in order to meet the Maastricht criteria and join the common European currency unhindered.
If the government measures are not implemented, Cyprus’ budget deficit is estimated to reach 8.2 per cent of GDP, well over the three per cent mark set under the Maastricht Treaty.
If everything goes according to plan, the budget deficit in 2007 would be 1.5 per cent, officials say.
But any move to rattle the civil service is more than likely to meet the opposition of the mighty PASYDY.
It is thought, however, that there is no going back to avoid any future dire consequences.
In any case, experts believe that if the government does not apply the measures, the European Union will at some point force their imposition, no matter what.
