The Coalition is braced for demands for substantial pay increases across the public sector, but may support smaller increases alongside greater State supports to tackle inflation.
Formal public sector pay talks began at the Workplace Relations Commission on Monday, and will likely continue throughout the week.
Government sources say they expect unions to seek substantial pay increases to match inflation, which is at a 38-year high. One source said they believe a “landing zone” can be found which may involve a lower pay increase figure but concessions on the “social wage”, which is State spending on welfare supports and public services. This could involve measures to reduce the cost of childcare, healthcare and education through the next budget.
A Coalition source suggested that one option could see pay rises focused on pay below a certain level if the Government was to commit to meaningful changes in income tax for those on incomes above €40,000.
Under the current agreement public sector workers received a 1 per cent pay increase last year, with a further 1 per cent due in October.
The deal is due to expire at the end of this year, but Coalition sources have indicated than an extension may be needed. If there is any agreement to increase pay next year as part of an extended agreement, this would likely be included as part of the Budget 2023 package.
The Government will shortly publish the Summer Economic Statement which will set out how much money is available for next year, including how much is available for new spending measures.
The renewed pay negotiations come after unions triggered a review clause within the public sector pay deal due to rising inflation. Unions have not yet said publicly what percentage pay increase they are seeking.
Sources on both sides said they do not expect the talks to be prolonged, and that it will not be as complicated as previous negotiations especially if the agreement is extended.
Forsa general secretary Kevin Callanan said that unions last week told the Government that they needed “a sense from the other side on what their proposals were going to be”.
“So really the ball is in their court. So we don’t know what we will be met with when we resume here.”
Unions will argue that the annualised value of each wage increase is 0.25 per cent, while projections for inflation range from 6.25 per cent up.
Minister for Public Expenditure Michael McGrath last week told Cabinet that he believed there was a basis to proceed with the formal negotiations.
“I recognise that these will be very challenging negotiations given the impact high levels of inflation are having on living standards of workers but also because of the uncertainty in the global economic outlook. My aim in these talks will be to strike the right balance, and seek to achieve a deal that is fair and affordable to both taxpayers generally and public service employees.”
He previously said that it “cannot simply fall to the pay issue to address the full spectrum of inflationary pressures”, indicating that the Government has other options with further changes expected to income tax and social welfare rates in the budget. This would be “so it doesn’t solely fall to the pay bill to address the inflationary pressures. But undoubtedly it can and will play a role if we can reach an agreement over the period ahead.”
