Well done everyone! But we can’t afford a €1bn public-sector bonus

It is hard to imagine that the Government would even contemplate picking up the tab of €1bn for special public-sector Covid bonus payments.

 A Labour Court claim from health unions, seeking 10 days’ additional holidays in recognition of their outstanding frontline work during the pandemic, is likely to cost around €370m.

If given a green light, it is pretty obvious that other frontline public-sector workers would expect and demand something similar – which would bring the bill up to an estimated €1bn.

This of course would do nothing for the private-sector workers in many jobs who also helped to keep the country moving.

Minister for Public Expenditure Michael McGrath would want the wisdom of Solomon to try and figure his way through this one.

The Labour Court batted the claim back to the employers – mainly the HSE – and the unions to work out. But the HSE cannot simply decide to increase expenditure by that much, even as a one-off, without getting budget approval from the Cabinet.

So the Government has gone into a sort of huddle while they think through how they can recognise or reward the enormous lengths which some people went to, in the course of their work during the pandemic.

This will be an open goal for political opposition – no matter what the Government decides. They will line up to decry the meanness of the Government as they vie for those public-sector votes.

The pandemic has already cost the Exchequer tens of billions – and at a time when we still haven’t figured out how we are going to pay for all that borrowing, it seems a little bit crazy.

Yet who can argue with thousands of people who, in many cases (but not all), did so much to care for people and keep the country moving.

When it comes to a financial reward, it isn’t always about whether it is deserved or not – but more about whether it can be afforded. The healthcare trade unions have pointed out that places such as Northern Ireland, Scotland, Denmark and France have made special bonus payments.

France has a debt-to-GDP ratio of 98pc. Denmark’s was just 33pc back in 2019.

In the UK, with its debt-to-GDP ratio of 106pc, only the regions of Scotland, Northern Ireland and Wales have said they will make a payment. England has declined.

In Ireland, our debt-to-GDP ratio is officially about 58pc –  but everybody knows our GDP figure is pumped up on multinational steroids.

 Even the NTMA, which manages the debt, prefers to use GNI* as a guide  –  which reduces the artificial influence of multinationals.

On that basis our debt is around 115pc of GNI* – and counting.

If the principle of making a recognition payment is acknowledged, and it sort of has been by the Government, then how much should be made ?

In Northern Ireland, health care workers were due to receive £500 each. But this was taxable and paid on a pro-rata basis for part-time workers.

They ended up accidentally overpaying some people and then looking for some of the money back. Not a good approach.

In France, healthcare workers received different payments. Some got €1,500 while those not dealing directly with Covid patients received €500. These payments were tax free and the bill to the French state was around €1.3bn.

The payments were top-ups to a pay agreement negotiated during the pandemic, which saw pay rises in the health sector of around 1.5pc to 2pc, and which will cost the French exchequer €7.5bn per year.

In Germany, health workers got a pay boost rather than a recognition payment.

In Ukraine, where ambulance crews were reduced because of Covid, staff had to work 16-hour shifts. Low pay in that sector is a real problem, and the government announced 300pc pay increases for those working directly with Covid-19 patients.

The health sector everywhere is made up of so many different jobs, with different pay scales, terms and conditions.

Take nursing in Ireland, where the average salary is around €38,362. Based on a five-day week, ten days’ holidays would be equivalent to a payment of €1,475 per nurse on average.

Perhaps the most shocking thing about the possible €1bn Covid bonus payment bill for the public sector, would be how it compares with the private sector. Supermarket chains creamed it during the pandemic, while relying on the risks taken by all of their staff.

Bus drivers and anyone else providing what were deemed essential services were in pretty tricky situations. So far there has been little sign from these employers of special payments being made.

Ironically, some businesses thrived and made huge profits during the pandemic, in sectors such as technology and pharma.

Well-paid and highly-skilled employees here would have seen their earnings intact, and may well be in a strong position to negotiate pay rises in a tightening labour market with rising costs.

Given that tens of thousands of people lost their jobs in this pandemic, I am sure they would find it very hard to watch public-sector workers – whose jobs were always fully assured – receive a pay rise and a bonus payment.

Instead of 10 days’ holidays for public-sector staff, why not have two extra bank holidays in the next 12 months? It now looks like the Government might do one at least anyway.

It would cost public-sector and private-sector employers. It would be open to everybody, except essential and hospitality workers who might be paid a bank-holiday rate for working it. It would also be a boost to the hospitality industry, which was so badly hit.

Not enough, I hear you say.

Okay. Then how much is enough?

Banks should contribute to Mica plan

The banks will find themselves in a tricky situation when they meet Finance Minister Paschal Donohoe to talk about how they can contribute to the Mica compensation scheme.

Around 4,000 houses are affected by faulty blocks, and many will have to be rebuilt through a State scheme which might cost close to €2bn.

But if your house is falling down around you, you still have to pay the mortgage. How soul-destroying is that?

The banks are sitting on around 4,000 pieces of mortgage security which has collapsed in value. Should the State pay all of the cost of bringing that security back to par?

Housing Minister Darragh O’Brien doesn’t think so, and wants the banks to be part of the solution. They are in an awkward spot. The Government cannot tell them to take a write-off on part of the loans. Yet they do stand to benefit from the State scheme.

The banks will argue that if people were to fail to keep up repayments and the houses were repossessed, they would take a massive hit on the loan. This wouldn’t be as big as the reputational hit they would take from repossessing a house in those circumstances.

So the banks need the State scheme to deliver, but it won’t be easy to find a mechanism by which they can play their part in the scheme.

Given that two of the banks are majority-owned by the State, it will make for an interesting conversation. Anything they agree to do, will end up being voluntary.

Expect a modest contribution that will have as much substance as the blocks now failing to keep people’s houses standing.

Avolon puts electricity into aviation industry

Aviation leasing group Avolon surprised a great many people with two statements last week.

One came from a senor executive, who said the group wouldn’t need to place an order with a manufacturer for another five years.

The other came from CEO Domhnall Slattery, who said Avolon was getting into electric air taxis by placing a $2bn order for these new small aircraft which are still in development.

Made by the UK’s Vertical Aerospace, the new electric vertical take-off and landing aircraft will be sold to a low-cost Brazilian airline.

It is good to see an industry player putting its weight behind new technology in this area, and Avolon is going to take a stake in the manufacturer as it prepares to float on the New York Stock Exchange through a special purpose vehicle.

One can only assume the purchase contracts have many clauses around the aircraft meeting performance criteria. Right now, the new aircraft have a range of 120 miles and carry just five passengers.

They won’t be taking on Boeing just yet. But this all has to start somewhere.

According to Vertical Aerospace’s website, the company expects to have an equity value of $2.2bn when it lists (based on a multiple of 0.5 x 2026 revenue or 1.3 x 2026 EBITDA).

It’s a pretty big prize to aim for if the technology can crack it – but right now big industry players are attaching themselves to the concept via preliminary orders for the new aircraft.,