SENSITIVE AND carefully designed redundancy programmes are required to reform the public sector, Dermot Gleeson SC, chairman of the country's largest bank, AIB, told the Kenmare economic conference.

Mr Gleeson said that "tough economic times give opportunities for more change" and questioned whether the Civil Service would be designed as it is now if the Government were creating it from scratch.

He said the number of people working in the public service had risen by 30 per cent since the start of the decade and that annual expenditure in State agencies had risen from €3.7 billion in 2003 to €6.1 billion this year.

"The State undoubtedly remains in areas where it really has no business. The most egregious example I think is the ownership of nine greyhound tracks, but selling the greyhound tracks is not going to solve the public expenditure problem," he said.

Mr Gleeson said that as the economy slows, the ratio of public sector workers to those in the private sector would rise as increasing numbers of private sector workers lose their jobs.

"That diminishes competitiveness and loads more cost on to private sector workers and in turn makes them less likely to hold on to their jobs. That is not fair and it is not sustainable but it can be changed," he said.

Mr Gleeson told the conference that lack of competition and restrictive practices in the civil service "makes change more difficult".

Mr Gleeson said there was "a strategic hole at the heart of Government" with the absence of a department in charge of the public service because every department was "fighting its own battle" and there is no central authority to manage the deployment of experienced workers, for example.

He said the State has a record of dealing with a spending problem, pointing to the 1980s when public expenditure fell over a seven-year period from 1980 and public sector employment declined by 14 per cent between 1982 and 1989 due to a hiring freeze.