THE GOVERNMENT is considering the introduction of a pension levy for public service workers as an alternative to pay cuts in order to ease the crisis in the public finances. The Cabinet considered a range of options over the past two days designed to save €2 billion from its spending commitments this year.
Consultations with employer and trade union groups on the final shape of the package will begin today and are expected to continue over the weekend, but Ministers hope to make a final decision on a national rescue package by next Tuesday, when the Cabinet is due to meet again.
A cut in public service pay was one of the options considered by the Cabinet, but it is believed that the alternative of a significant pension levy was regarded as being more likely to win acceptance.
The levy would be on a graduated scale, with those on higher incomes paying a greater percentage than those on lower incomes.
Public service pensions in Ireland are on average far more attractive than those in the private sector.
On retirement public servants receive a tax-free lump sum of 1½ times salary and then receive a pension of half salary. That pension continues to increase in line with pay and productivity increases in the public service.
The idea of a pension levy is that, in the light of their job security and better pensions, public servants should be asked to make a contribution to easing the problems facing the exchequer.
Some sources believe the introduction of a new levy could prove easier for trade union leaders to sell to their members than a pay cut, for a number of reasons. The levy could be portrayed as a means of shoring up or guaranteeing the current public sector pension arrangements.
In addition, while a pay cut would automatically reduce the amount a public servant could expect to receive in their pension, the levy would not have such an effect.
Furthermore, the new levy would not affect the pensions currently paid to retired public sector staff.
If the Government opts for a levy this is likely to be signalled to trade union leaders in the days ahead.
Government officials are to meet all the social partners – employers, farmers, the social and voluntary sector and the trade unions – at separate meetings today.
The trade union movement has specifically rejected the concept of pay cuts and some unions have said they will refuse to take part in any process in which pay cuts in any form are on the agenda.
As well looking at the pay bill of close to €20 billion, the Government also considered a range of measures to cut spending in the year ahead.
Speaking after the Cabinet meeting yesterday, Minister for Transport Noel Dempsey refused to comment on the discussions, but said Ministers were discussing various options right across Government expenditure.
He said all options were looked at, discussed and argued about and at the end, Taoiseach Brian Cowen gave a synopsis of the position and would be engaging with the social partners.
The trade union movement has insisted that the economic recovery programme cannot just be about cuts in pay and services. It will be seeking evidence that the Government will be asking all sectors of society to contribute according to their ability to pay.
The unions have suggested that the Government should consider widening the tax base and have looked for a new property tax on second homes and trophy houses.
There are some suggestions the Government may review allowances paid to public sector staff.