Pay deal is 'lunacy' in light of inflation fall, claims Isme

THE DRAMATIC fall in the level of inflation showed "the utter lunacy" of the new national pay deal which provides for average annual increases of 3.7 per cent, the Irish Small and Medium Enterprises Association (Isme) said yesterday.

Isme chief executive Mark Fielding said it was imperative that the Government cancel the new deal which it described as "ill-conceived".

He said the Government should ensure that public services achieved real efficiencies that could be reflected in better services at lower rates.

"This agreement threatens the very existence of businesses the length and breadth of the country, at a time when wage reductions are needed in many sectors to guarantee the retention of jobs," Mr Fielding said.

The new deal, which was ratified by the Irish Congress of Trade Unions and by employers' group Ibec last month, provides for increases of 6.5 per cent phased over 21 months.

A spokesman for Siptu, the country's largest union, said the new deal provided a platform for stability. He also said it contained adequate provision for companies who wanted to claim inability to pay the increases.

A spokesman for the Irish Congress of Trade Unions (Ictu) said that prices in Ireland were falling from a high level with reports that prices here were the fourth highest in the world.

Ictu also said that there were still major issues with regard to the benefits of the fall in sterling being passed on to consumers in some areas.

The spokesman also said that Ictu was concerned that the Government was "too hands off" in ensuring that mortgage interest decreases were passed on, "particularly since it is the taxpayer that is guaranteeing the banks' very survival".

Isme welcomed the reduction in inflation to 2.5 per cent from 4 per cent in October, but warned that the country was "far from being out of the woods on the costs front". It said that cost increases in certain parts of the economy were continuing to hurt business.

Mr Fielding said that while the new inflation figures were positive, the drop was due, "in the main, to external factors as distinct from any Government action".

"The lack of coherent national economic planning is leading to a reduction in business confidence and a curtailment of investment, while lack of bank credit, cost competitiveness and concerns over the dramatic drop in sterling represent the biggest threats to the business sector," he said.