Borrowing for pandemic rules out major public sector pay hike, Varadkar signals

Government borrowing to cope with the pandemic rules out significant pay increases next year for all of Ireland’s 340,000 public sector workers, Tánaiste Leo Varadkar has signaled.

The Fine Gael leader and Minister for Enterprise, Trade and Employment suggested the lowest-paid public services staff should be targeted for wage hikes rather than any “across the board” pay deal.

“I think there is a general level of appreciation from everyone, that because of the level of borrowing the Government is incurring this year and next, the capacity for significant public sector pay increases just isn’t there,” he said.

Delivering a talk at an online event organised by the think tank Tasc, Mr Varadkar said “that isn’t to say we should do nothing” and suggested any pay rises next year should be for the lowest paid.

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The Tánaiste said he didn’t think “across the board increases” of 1 or 2 per cent was a good idea, as it made little difference to those on low incomes and benefited higher paid earners the most.

There are “lots of people working in the public service on low pay”, he added.

The current public service pay agreement is set to lapse at the end of the year.

Government and trade unions have been exploring the scope for a new deal, however Minister for Public Expenditure and Reform Michael McGrath has previously said an agreement “cannot be at any price”.

Speaking on addressing inequality, Mr Varadkar also acknowledged “hundreds of thousands of people in Ireland” don’t get paid very well for working “very hard in difficult jobs”.

Low pay means it is “hard for them to live a good life, it is impossible for them to save for a pension, impossible to put together precautionary savings, extremely hard at the moment to buy their own home.”

Mr Varadkar also said the minimum wage in Ireland is too low, adding that the country had fallen behind the UK in terms of worst off workers being able to afford goods and services.

“When you think of it that way it is not so good,” he added.

“We like to see ourselves as a northern European country, and we like to see ourselves on pretty much everything being a little bit better than the United Kingdom. Us following behind them in terms of purchasing power parity is a matter of concern and would suggest to me that our minimum wage is now too low.”

The Tánaiste said he was meeting with Government’s Low Pay Commission this week, and suggested he would be directing the commission to recommend the phasing in of a so-called living wage which would be “substantially higher” than the minimum wage from 2022.

His department has yet to come up with an Irish model for calculating the living wage, he added.

Speaking about cost of living problems for the lower paid, Mr Varadkar flagged healthcare, childcare and housing costs as particular problems.

But he ruled out a British National Health Service (NHS) style solution to health costs.

“I think the NHS is overrated – their patient outcomes aren’t great,” he said.

“They are inferior to Ireland in a lot of cases. You are much more likely to die of cancer, for example, in the NHS, than you are in the HSE.”

Mr Varadkar said he personally favoured a “single payer system” – akin to Germany’s or France’s – where public, private and voluntary healthcare were funded by social health insurance.

There was “something fundamentally wrong” with the childcare system in Ireland, he added, as “huge amounts” of public money were being poured into it while parents still pay high fees.

Mr Varadkar suggested a largely State-subsidised childcare system be developed with fees capped at “something like €500 a month”.

Asked during the event about his centre-right politics, Mr Varadkar compared himself to two former British prime ministers.

“I’m probably closer to [Tony] Blair than [Margaret] Thatchter,” he said.