Tax cuts planned for the forthcoming Budget may be jeopardised if the Government fails to reach agreement with the nurses when negotiations begin tomorrow in the Labour Court, according to Government sources.
The court is hearing submissions on whether nurses should receive increased allowances for holding additional clinical qualifications.
But there are another two issues, currently in the Labour Relations Commission, involving new grading structures for nurses and long-service increments, which are also likely to be referred to the Labour Court.
Although the amount being sought by the nurses is not yet public, it is understood the total claim could come to 6 per cent.
The Government believes that any pay award granted will not be limited to nurses and will automatically spread throughout the public sector.
Every 1 per cent increase on the public sector pay bill costs £60 million and up to £180 million could be taken from the Budget arithmetic if a 3 per cent increase were awarded, according to Department of Finance figures. A one percentage point cut in the standard income rate tax band would cost £116 million.
The Government will be arguing in the Labour Court that it met its commitments to the nurses in full in 1997, following recommendations from the court. It also argues that the new recommendations from the Nursing Commission were not part of the official terms of reference and that the Government has accepted the broad thrust of the commission's recommendations, including establishing new grades which will give pay rises to the nurses involved.
It points out that the commission made 200 recommendations and that pay is involved in only three of them.
The political problem with meeting the extra demands is that the Government feels the other public sector unions simply do not believe in the "uniqueness" of nurses. Following the 1997 deal with nurses, which gave average increases of 14.5 per cent and cost more than £80 million, paramedic grades were awarded about 10 per cent to 11 per cent.
Similar agreements were subsequently concluded with laboratory technicians, radiographers, prison officers, craft-workers and the Garda.
The Taoiseach, Mr Ahern, already attempted to draw a line in the sand as far back as last July. He said he is determined to avoid leap-frogging claims and that a fundamental look has to be taken at public sector pay.
At the time the Irish Congress of Trade Unions spoke of the need to develop "new methods of pay rewards for public servants which will not automatically result in knock-on claims".
The Government feels it has to act, given that public-sector pay now takes up to half of the Government's current spending. At the end of 1998 the bill is expected to be double what it was in 1989, while inflation has been about 30 per cent. In that time the health sector has shown the biggest increase, at about 135 per cent, accounting for about one-third of the pay bill; education accounts for another third.