The Irish Congress of Trade Unions (ICTU) will take a less "philanthropic" stance on the current round of national pay talks than it did when negotiating the first leg of Sustaining Progress, Congress general secretary Mr David Begg has warned. Una McCaffrey reports.

Mr Begg, who met officials from the Department of the Taoiseach last night with a view to kick-starting the stalled talks, said unions would seek to protect the employment conditions of workers when negotiating the second 18 months of the pay deal.

He said that while a second pay deal under Sustaining Progress was unlikely to beat the 7 per cent delivered under the first leg, it would have to ensure that employment standards do not "race to the bottom".

Mr Begg pointed out that the last round of pay negotiations had been held on the cusp of an economic slowdown, noting that attitudes and expectations had changed since then.

"The feeling now is that economic conditions are better," he said yesterday at the launch of ICTU's latest inflation outlook and the basis for its entry into the pay talks.

Mr Begg declined to specify a pay increase that would be acceptable to unions, saying simply that they would be lodging a pay claim based on both the anticipated inflation rate over the second 18 months of the agreement and productivity growth in the economy. Inflation is expected to average 2-2.5 per cent over the period.

The role of Government in controlling prices becomes more important at a time of low inflation, according to Mr Begg.

Mr Begg said ICTU had written to the Minister for Finance, Mr McCreevy, to seek an assurance that indirect taxes would be kept low for the second leg of Sustaining Progress but admitted that the Minister had rejected the call.

Mr Begg said the unions simply wanted some understanding of the Government's intentions on taxes so that it could be happy that increases agreed over the next few months would not be quickly eroded.

Mr Begg also pointed to Eurostat figures showing that productivity in the Republic had grown by 4.6 per cent in 2003. This came, according to ICTU's analysis, as Irish workers faced prices that were 14 per cent higher than the rest of Europe.

"Workers' expectations on prices have been conditioned by rises of around 5 per cent in Ireland over the past four years," the ICTU analysis finds.

"There is a lag in people's perceptions of prices with which Congress will have to deal."

The ICTU study also finds that, on average, Irish companies' labour costs are less than 60 per cent of what they were almost 10 years ago in 1995.

It goes on to highlight a dramatic drop in the Irish tax wedge - the difference between the amount an employer pays to a worker and the pay packet that worker takes home. This fall - 18 per cent since 1996 - is the most substantial to have been recorded in any OECD country and means that Irish workers are now cheaper to employ, according to ICTU.

Mr Begg said it was clear that productivity in Ireland had outpaced labour growth. He said that although the unions had no desire to "disrupt" Government policy, it should be designed with reference to the interests of workers.

Mr Begg said concerns on this area had formed the basis of SIPTU's withdrawal from the pay talks at the end of March.

SIPTU president Mr Jack O'Connor was among those who attended last night's informal discussions with Mr Dermot McCarthy, secretary general of the Department of the Taoiseach.

The two sides agreed to reflect on the discussions before arranging a further meeting. In the meantime, no date for the pay talks to begin has been fixed.