Next few days will determine if recovery deal is possible

ANALYSIS:THE NEXT few days of talks between the Government and the social partners on an economic recovery plan should determine whether a deal is possible.

Contacts between the Government and unions, employers, farmers and social groups have been continuing in one form or another since early January.

However, at this stage there have been no substantive negotiations on one of the core elements of any agreement – how the Government will secure € 2 billion in savings in exchequer spending in the current year.

Over recent days the unions (led by Irish Congress of Trade Unions’ secretary general David Begg and the head of its public sector committee, Peter McLoone), employers, farming representatives and the social and voluntary pillar have been engaged in a series of bilateral meetings with Government representatives headed by the secretary general of the Department of the Taoiseach, Dermot McCarthy.

Although the various groups did meet with the Minister for Finance earlier this month and four senior union leaders held talks with the Taoiseach on Saturday when the entire process seemed in some disarray – by and large the recent contacts have been at official level.

Over recent days the process has been aimed at producing a “framework document”. Essentially this is a paper setting out the scale of the economic difficulties facing the country and identifying the key areas that will have to be considered as part of any agreed recovery programme. However, in reality, this framework document is far more important than simply a list of headings.

One of the criteria for signing up to the framework is likely to be a commitment from the various social partners to answer two questions: one, posed by Ictu on what other groups are prepared to contribute; the second put by the Government on how the € 2 billion in savings will be realised.

This could see the employers’ and farming representatives having to agree in some form to “share the pain” while unions would have to bite the bullet on payroll cuts.

The unions have argued that the current process cannot be exclusively about cutting pay and public services. They have maintained that any deal has to embrace all sectors and recognise that the solution to the current difficulties goes far beyond the € 2 billion in cuts and may involve reductions in spending of about € 16 billion over the next five years or so.

When the unions say they want all sectors to contribute in accordance with their ability, this effectively means either higher taxes for the wealthy (through the introduction of a 48 per cent band, or some form of property tax), new and stronger curbs on top-level executive pay and restrictions on tax breaks which they believe predominantly benefit the better off.

The unions want definite and concrete evidence set out in the framework document that the Government will move on these areas and they rejected the first draft paper drawn up on Monday as being too vague.

Ibec, while also supporting a widening of the tax base, has argued that “the greater share of adjustment must come in the form of reduced current expenditure”.

It told the Government that cuts in expenditure by the State should be front-loaded “while taxation increases should not occur until the economy shows some signs of recovery, ie in 2011”.

Yesterday Government officials met with the parties in a bid to put together a consensus document to which everyone could agree.

However, agreement on a framework document, while signalling substantial progress, would not necessarily mean that a deal on economic recovery will be secured.

At that point the focus is likely to shift to the specifics of the € 2 billion in cuts.

Ictu has ruled out cuts in core pay but has left the door open for talks on the broader public sector pay bill including deferral of increases, restrictions on overtime working, incentivised career breaks or flexible working.

Very few union leaders privately believe that increases due in the public sector will be paid on schedule over the next three years.

Some, but by no means all, are prepared to go further and contemplate cuts in other areas including increments, allowances and premium pay.

However, groups such as nurses and gardaí – who operate a 24-hour service – rely more on premium payments and allowances than do others.

In addition, unions such as the Irish Nurses’ Organisation and the CPSU, representing lower-paid civil servants, have totally rejected cuts in pay of any description.

It remains to be seen whether Ictu could maintain a consensus among its constituent unions if the talks with the Government get down to dealing with the practicalities of cutting the pay bill.