ANALYSIS:Unions have rejected cuts in basic pay, but alternative savings will also prove controversial, writes Martin Wall
THE TRADE union movement will next week begin talks with the Government on economic recovery proposals that are likely to prove the most testing ever in the history of social partnership. However, while union leaders have been emphatic in rejecting cuts in basic wages, most have not specifically ruled out other measures that could be introduced to save money on payroll costs. This means that areas beyond the scope of basic pay such as increments or premium payments to staff for working outside regular hours could be on the table.
The unions have accepted that the problems facing the public finances are genuine and extremely serious. The Irish Congress of Trade Unions (Ictu) will today present its proposals for dealing with the economic problems and these are likely to form the basis of its talks with the Government next week.
Ictu will argue that the burden of the adjustments to come cannot be carried by workers alone – whether they are in the public or private sectors. It will propose the negotiation of a social solidarity pact to manage the changes in living standards in a fair manner that would see those able to pay most contribute the most.
The unions are also likely to argue that even if the economy recovers in a relatively short timeframe, that the level of tax revenue previously generated as a result of the property bubble of recent years will not return. In essence, they will maintain that the tax base needs to be restructured – which may mean higher taxes or new taxes in some areas.
Ictu also believes the difficulties facing private-sector pension schemes, issues around bank recapitalisation and top-level pay should be addressed as part of the new talks.
However, it is on the issue of public sector cuts that trade unions are coming under most pressure. While the Government has said that it wants to cut €2 billion on exchequer spending this year, it has not officially said where it intends to wield the axe.
On Tuesday, The Irish Timesreported that sources close to Minister for Finance Brian Lenihan had made clear that "a substantial portion" of the €2 billion savings would have to come from pay. On Wednesday, Peter McLoone, the head of the largest public sector union Impact, told his members it was clear that public sector pay "will be targeted".
However, across the board, public sector unions have ruled out cuts in basic pay, with some warning that unilateral Government action would be resisted through strikes or legal challenges. Union leaders have argued that going into next week’s talks, they will not be in a position to conclude a deal that would involve pay cuts as this could not be binding on members. They also questioned what would happen in relation to staff who were not union members or who resigned their membership when pay cuts were announced.
“There is no reality to the notion that social partnership or negotiation on that scale could be for that purpose. The reality is that it cannot be about pay cuts. There are no circumstances in which you could make an agreement that would seek to bind people to a reduction in pay because they are paying a subscription,” a union leader said yesterday.
However, while rejecting the concept of pay cuts, the unions want to remain in the economic recovery process and realise they will have to come up with alternative savings that could prove to be painful. Senior union leaders acknowledge that if the Government pressed ahead with pay cuts on a unilateral basis, it would lead to inevitable industrial relations unrest and would mean the end of the 20-year era of social partnership.
And social partnership is not only a pay agreement. It also provided the unions with significant access to the corridors of power and the ability to influence key decisions affecting a whole range of areas.
But if the unions have ruled out pay cuts, what else could they offer to generate savings?
The current pay agreement provides for a 6 per cent increase phased over 21 months. Public sector workers are due to receive the first 3.5 per cent when a current 11-month pay pause ends in September. Privately, there are few trade union leaders who believe that this increase will be paid on schedule, although at least two unions are publicly demanding that the rises be honoured by the Government.
The Government could save €260 million if the current public sector pay pause was continued for the rest of the year as well as €990 million in 2010 and €1.2 billion in 2011 if it were extended further. However, some union leaders believe that even this would not be sufficient on its own to save the amounts being sought by the Government.
Separately, it is understood that some union leaders could be open to a possible deal with the Government on increments. At present, most public sector staff work on incremental pay scales, which sees them gradually work their way towards the maximum salary. As part of this they receive regular incremental increases, in addition to wage rises. In many cases, the scales are constructed in such a way that a long-service increment is paid three years after the staff member reaches the top level.Union sources suggested there could be scope for an agreement with the Government that regular increments would be deferred for this year and next on the understanding that when the economy improved, the final long-term increment would be paid immediately on reaching the top of the scale rather than the worker waiting for three years. The non-payment of increments could save the Government €250 million this year.
Perhaps more controversially, some union leaders have suggested that the issue of premium payments paid to public sector staff for working at weekends, night-time or public holidays could be examined. Informed sources said that while it was acknowledged that these payments could not be eliminated, there could be scope for them to be pared back.
However, such a proposal may prove to be highly controversial even within the trade union movement as particular sectors such as gardaí, nurses or prison officers – who operate 24-hour services – would be affected more than other staff who work regular hours.
Union proposals for generating alternative savings are likely to emerge when the talks with the Government get under way in earnest next week. For the trade union movement, the negotiations ahead present many potential difficulties. They believe that any agreement on pay cuts is not on as it could not be enforced and even if it could, it would effectively be suicidal for them as it could lead to mass resignations.
Alternative savings will undoubtedly cause pain for members and will be difficult to sell, but opting out of the process would leave the Government free to do as it liked and would also signal the end of social partnership.
Martin Wall is Industry Correspondent of The Irish Times