Increments 'are unjustifiable'

Minister for Transport Leo Varadkar has said that the payment of increments to staff in the public service should be deferred.

He was speaking after Minister for Health James Reilly raised the prospect of cutting overtime and premium pay rates in response to a call from Minister for Public Expenditure Brendan Howlin for “immediate action” to address a huge costs overrun at the Health Service Executive (HSE).

Any such move would have serious implications for the Croke Park agreement between the Government and public sector unions, which protects core pay until 2014.

Speaking this morning, Mr Varadkar said he recognised that cutting increments would probably be a breach of the Croke Park agreement. However, he said it was it was hard to justify giving anyone a pay increase in the current when services were being cut.

Mr Varadkar told Newstalk radio that the Government would have to make a judgement call on issues such as increments later in the year. He said a decision to defer the payments of increments could save €170 million to €200 million per year and insisted such savings would not hurt anyone.

Mr Varadkar said Minister for Finance Michael Noonan had to find about €1.25 billion in new taxes in the budget without increasing income tax and that was possible through the introduction of a property tax, through some changes to motor tax and by abolishing some tax breaks.

On the savings side, some €2.25 billion was required, with roughly €550 million coming from capital. "That’s doable too. We know how we’re going to do that," he said.

Many staff in the public service on paid on the basis of a incremental pay scale. This involves their pay increasing annually, subject to performance. Although pay cuts have been introduced across the public service, the payment of annual increments has continued.

Meanwhile, Siptu, the country’s largest trade union, has said Dr Reilly is seeking to distract attention from his performance in running the health service by raising the prospect of cuts in overtime and premium pay rates.

Siptu health service division organiser Paul Bell said the union considered overtime and premium rates to be integral parts of pay. He said there would be no further pay cuts for staff in the health service. He said this issue had been addressed under the Croke Park agreement and was closed.

Nurses today said any move by the Government to cut overtime and premium pay rates would represent "a line in the sand".

The general secretary of the Irish Nurses and Midwives' Organisation (INMO), Liam Doran, said pay rates were protected under the Croke Park agreement as long as public servants co-operated with reform. He said staff were co-operating with the agreement.

Mr Doran said if the Government wanted to walk away from the Croke Park deal, his union would have to look at its options. He added the INMO would protect its members' interests.

Dr Reilly has proposed cuts in the €800 million currently spent annually on overtime and premium rates for health service staff should be considered as an alternative to further reductions in services.

New figures show the HSE has overspent its budget by more than €200 million in the first four months of the year.

Mr Howlin has called on Dr Reilly to take immediate action to bring health service spending back into line. Mr Howlin and Minister for Communications Pat Rabbitte have refused to rule out further social welfare cuts and tax increases.

Overspending in the HSE is causing serious concern in Government circles and has sparked a debate on how best to tackle it.

Mr Howlin has urged Dr Reilly to “personally engage” with his department and the HSE to ensure steps are taken to bring spending into line.

Mr Howlin says the deficit could reach €500 million by the end of the year. He told Dr Reilly to take “immediate action”, including measures on top of those already set out in the budget for this year, to deal with the deficit.

Dr Reilly is arguing that a choice has to be made between cutting health services further and looking at issues such as the €800 million currently spent in the health service on overtime, allowances and premium pay. He also pointed to “anomalies” in the current climate, such as the requirement to pay staff double time for working Sundays.

The Croke Park deal with public service unions permits the Government to reduce its exposure to overtime or premium payments. However, unions have maintained that cutting actual rates would be in breach of the agreement and would be seen as a pay cut.

The Department of Health is currently working on a paper for Cabinet on how to address the HSE’s financial difficulties. The HSE’s €13.317 billion budget for this year required it to make cost reductions of €750 million. However, it is understood senior management have raised doubts as to whether planned savings on drugs of more than €100 million, as well as the generation of more than €140 million in additional revenue from health insurance companies, will be fully realised.

HSE chief executive Cathal Magee is understood to be seeking “guidance” from the board of the organisation – made up of senior health service administrators – on how to deal with the financial difficulties. One of the options is understood to include further cuts in hospital capacity, such as more closures of wards or theatres.

The issue of reducing labour costs through moves such as cutting overtime or premium rates is a policy matter for the Department of Health and Cabinet and is understood not to form part of the HSE paper.

Separately, the Government is expected to publish proposals for reconfiguring services in smaller hospitals later this week.

Hospitals in Mallow, Cork, and Loughlinstown, Dublin, could be most affected by the moves, which are likely to involve the transfer of more complex services to Cork city and to St Vincent’s University Hospital in Dublin.