BENCHMARKING: IMPACT, which has 43,000 members throughout the Civil and wider public service, called for immediate talks with the Government on its planned mechanism to cut jobs. The union's general-secretary, Mr Peter McLoone, said capping public sector jobs at current levels was an "inflexible, blunt instrument", which meant necessary improvements would be jeopardised in the health service and elsewhere.

The promise of a benchmarking pay increase in the Budget was not enough to appease public service unions, angered by the decision to cut staff numbers by 5,000 over the next three years.

Mr McCreevy announced he was setting aside €565 million to pay for the first phase of benchmarking, which is backdated to December 1st last year.

He also provided a further €50 million for any pay or related costs arising from the current talks on a new partnership deal.

The good news on benchmarking, however, was quickly followed by the Minister's assertion that the public service pay bill would have to be contained.

One way of doing this was through pay restraint; the other was by tackling the rapid growth in public service staff numbers.

"These have risen by about 50,000 over the last five years. As a first step, the Government has decided that \ numbers employed across all sectors of the public service are to be capped at their present authorised levels with immediate effect," he said.

"In addition, the Government has decided that there will be a reduction of 5,000 in those numbers over the next three years."

"There is no doubt that this will damage public services. But if it is not managed properly, the effect could be disastrous in some service areas," he said.

The Civil and Public Service Union (CPSU), which represents lower-paid civil servants, also claimed the cap on numbers would affect services to the public.

Mr Blair Horan, the union's general-secretary, said any attempt by Mr McCreevy to cap promotion posts would be "strongly resisted".

Mr McCreevy's commitment on benchmarking was, however, welcomed by Mr McLoone, who said payment of the full award by the end of next year remained achievable following the Budget.

The backdated element comprises only 25 per cent of the overall pay increase. The remaining 75 per cent is conditional on public servants agreeing to a programme of modernisation and change. Negotiations on this are near and end. The average overall increase recommended by the benchmarking body was 8.9 per cent, to enable public servants to "catch up" with those in similar jobs in the private sector.

Mr McLoone said the Minister could not realistically have done more that commit to the backdated payment yesterday, given that negotiations on modernisation were not yet completed.

"The union's objective of a December 2003 payment date for the remainder of the awards means there may be no practical need to allocate more money in 2003. "So far, the Government has neither accepted nor rejected the union proposal. But they know it means most of the benchmarking bill would come in 2004 and after."

The CPSU has rejected the benchmarking recommendations, claiming its members, most of whom are women, were discriminated against in favour of higher-earning civil servants.

Reaction by other trade unions to the Budget was negative. Mr Brendan Archbold of Mandate said it was of little benefit to low-paid workers when changes to indirect taxation and inflation were taken into account.

Mr Des Geraghty of SIPTU said the Government had done a "grave disservice" to low-paid workers, while the social welfare increases were "miserly".