AIB chief indicates support for pay pause

AIB would support the introduction of a "pay pause" for workers along the lines of that proposed by employers' body, IBEC, bank chief executive, Mr Michael Buckley indicated yesterday.

Mr Buckley said that as a member of IBEC, AIB was supportive of the association's views on social partnership.

The bank is one of the largest employers in Ireland, with 6,500 Irish employees.

He said that while a pay pause was "not the important issue", he agreed that efforts should be made to bring pay "on to a lower plane over the next few years".

On Thursday, IBEC urged the social partners to consider a pay pause to give the economy some "breathing space" on the competitiveness front.

Addressing an audience at the annual lunch of the Small Firms Association (SFA), Mr Buckley took up this theme, urging the parties involved in the pay discussions to concentrate on competitiveness when drawing up a successor to the Programme for Prosperity and Fairness.

"The need for the next pay round to draw a firm line in terms of preventing any further erosion of cost competitiveness is crucial," said Mr Buckley.

"Our cost competitiveness has been eroding since 1997 and we are now back at 1991 levels," he added, noting that "this is a time when we all need to be realistic about expectations".

Responding to Mr Buckley's implicit support for a pay pause, Mr Larry Broderick, general secretary of the Irish Bank Officials' Organisation, was later scathing about the idea of such a mechanism being introduced within the banking sector.

"My view is that it would be outrageous," said Mr Broderick.

He said that a pay pause would be tantamount to making employees of the bank "the fall guy" for the €700 million losses incurred through the rogue trading activities of Baltimore-based trader John Rusnak earlier this year.

Mr Buckley yesterday expressed satisfaction at last week's news that Mr Rusnak was to be jailed for seven and a half years for his role in this fraud.

"I always knew that this guy was going to jail for a long time," said Mr Buckley, adding that the bank had subsequently "moved on".

AIB expects to conclude the sale of its Baltimore subsidiary Allfirst to US bank M&T by March next year.

Mr Buckley - a former senior civil servant in the Department of Finance - used his SFA address to urge the Government to apply spending restraint, while maintaining its focus on infrastructural development.

"The soft option would be to defer capital spending to avoid restricting current spending but that would be a very short-sighted approach," he said.

He added that current problems in the economy could be attributed to the rapidity of the growth in public spending, rather than any shortfall in tax receipts.

Taxes should not be raised in the forthcoming Budget, according to Mr Buckley. Rather he said, a low tax regime was the driver of economic growth.

Mr Buckley also called for "radically improved productivity in the public sector", so that increases in public spending on services could be justified.

"People do not feel that the increase in public spending has given us substantially better services," he said.