The value of public service pensions has increased in recent years and the fact should be taken into account in determining future pay rates, Minister for Public Expenditure Paschal Donohoe has said.

Mr Donohoe said pension value would be a key issue for the new Public Service Pay Commission to examine. He insisted that the work of the commission would represent a new approach to dealing with public service pay.

The Minister said the country could not afford to return to the previous benchmarking system for determining rates or to social partnership-style wage awards.

Speaking after an address to a Public Affairs Ireland conference on Thursday, Mr Donohoe said: "The value of public service pensions has clearly increased in recent years and this is why the work of the Public Service Pay Commission is going to be so important."

“What I want to ensure is that in the engagement that we have in the future (with trade unions) in relation to the setting of public pay, we take account of the value of future pensions in determining rates of remuneration.”

He added: “I want the Public Service Pay Commission to provide an input into how we will do this. What is crucial is that all of this work is fact based and evidence based.”

Stable economy

Mr Donohoe said reasonable and affordable pay increases were a normal part of a stable economy and could help drive public service reform and modernisation.

However, he warned there could be no going back to to benchmarking and social partnership-style pay awards but neither could there be a return to the old system of pay relativities and leapfrogging claims where one group of State employees sought to out do others.

The Minister said the reason benchmarking had become “something of a dirty word in policy circles” owed much to the failure of its first report in 2002 to publish its research on the two fundamental questions: the existence of a pay gap between the public and private sector at various levels; and the extent that this pay gap, if it did exist, was broadened or bridged by public service pensions.

“The decision not to publish the research underpinning the pay recommendation of 8.94 percent fatally undermined public support for the process”, he said.

‘Bad old days’

Mr Donohoe said he was “absolutely certain”that the new pay commission represented “a new approach and not a return to the bad old days”. He said the analytical work drawn up by the commission “will be an input into the negotiation process rather than an end to the negotiation process.

“Ultimately it is the role of Government, based on a mandate directly conferred by the people, to make choices and allocate scarce resources across competing priorities in a fair and fiscally sustainable manner,” he said.

“As such we may not always agree with the findings of the Pay Commission but we will engage and negotiate on the basis of their findings.”

Mr Donohoe said the work of the commission would be published and that it would operate in a transparent fashion.