The Government has invited unions and employers to more talks to avert the collapse of the Programme for Prosperity and Fairness (PPF). The latest inflation figure of 6.8 per cent has renewed pressure on the unions to secure a pay review while employers' group IBEC maintains its belief that nothing will be conceded outside the existing terms of the PPF.

While there has been consensus on budgetary policy in talks so far, the Government has until the ICTU executive meeting on Wednesday to devise a formula on compensation for workers. This could take the form of a general pay round, lump sums, more flexible local bargaining or accelerated pay rises under the PPF. Without some breakthrough it appears inevitable that ICTU will formally seek compensation from IBEC as the price of continued support for pay moderation. IBEC will then have to decide if it can pay more and, even more important, if extra money will solve the problem or simply whet workers' appetites.

ICTU's general secretary, Mr Peter Cassells, stressed the need for concessions from employers more clearly yesterday than ever before. "Workers must be compensated for the erosion of living standards caused by the continuing high level of inflation. It will not be sufficient for the Government alone to provide for compensation in the Budget although this compensation is essential," he said.

"Employers must also agree to provide compensation. Otherwise, workers and their unions will no longer support the pay agreement in the PPF."

The president of SIPTU, Mr Des Geraghty, said it was time for employers "to get real and accept that they will have to share their increased profits with their workers. If they failed to do so, they will have sabotaged not only the PPF review but the PPF itself."

He said "a detailed look at the components of this inflationary figure gives grounds for even greater concern" than previous increases. "The indirect taxation component of the consumer price index is up 1.6 per cent in the last 12 months, or three times as much as the increase last year."

He singled out increases in transport costs of 8 per cent, a 20 per cent increase in motor fuel, a "phenomenal 61 per cent increase in the cost of fuel oil", a 48 per cent increase in the cost of mortgage interest repayments and a 34 per cent increase in local authority charges as major burdens on workers.

"And if the overall rate of inflation is unacceptably high at almost 7 per cent, the 21 per cent increase in playschool and creche costs is even more so.

"That is why both Government and employers need to get real and understand we are not just experiencing what they have been inclined to call an inflationary blip."

But IBEC's new director of employee relations, Mr Brendan McGinty, robustly defended the employers' hardline approach so far in the talks. "Our position remains consistent," he said. "The only appropriate response to dealing with inflation is through the Budget. As for the pay terms of the PPF, IBEC will not be renegotiating these. The inflation figures annualised today are within the parameters anticipated."

Mr McGinty predicted inflation would fall to 4 per cent next year and that, even with the latest surge to 6.8 per cent, most employees would be about 9 per cent better off this year as a result of income tax cuts and pay rises under the PPF. Asked about the unions' demands for some form of compensation, he replied: "We would hold firmly to the view that it is entirely inappropriate that business should pay compensation for inflation it did not cause or contribute to. We need to remind people that business has suffered equally from the effects of inflation".

IMPACT's general secretary, Mr Peter McLoone, said workers were losing patience over the failure of the Government and IBEC to agree additional pay awards. "IMPACT has made it clear that the PPF will fall unless there is a pay element to the Government's anti-inflation measures."