This will allow space in personnel spending for such measures as the Senior Management Service, the new Pay Progression System and the cost of restructuring employment to develop the capacity needed to spend capital allocations in the first place. [...] It should be remembered that the rise in personnel expenditure in the period 1995/96 to 1997/98 was driven by a step increase in the 1996/97 budget year, the result of the implementation of the three year wage agreement with the unions. [...] When one compares increases in salaries and wages (excluding severance payments and bonuses) in the public sector to average increases in the formal non-agricultural sector the 1996 step adjustment is apparent in the average increases for the period June 1996 to June 1998. [...] While the evidence is not conclusive it is sufficient to raise the alarm that earnings in the public service may continue to relative to the private sector. [...] This has severe implications for changing the structure of employment in the public service from pockets of over-employment in the lower (unskilled) grades (where there is higher supply in the general labour market) combined with severe shortages in the skilled, professional and management grades (where there is a national shortage of skills).