Ending the phoney war with unions

THE memories of the 1997 budget, when the then newly appointed Minister for Finance, Mr McCreevy, cocked a snook at social partnership…

THE memories of the 1997 budget, when the then newly appointed Minister for Finance, Mr McCreevy, cocked a snook at social partnership, came flooding back yesterday.

Mr McCreevy even included in his 1999 Budget speech a re-run of his defence of tax cuts for the high-paid by pointing out that the Government drew its mandate "from the will of the people, who clearly favoured the Fianna Fail-Progressive Democrat prescription on taxation at the last general election. As I have stated in my previous budgets, I will fulfil the taxation commitments set out in our Programme for Government over the lifetime of this administration."

This does not mean the unions rejected the Budget. They represent many high and middle-income earners, but there was disappointment that Mr McCreevy had not bought into a more consensual approach.

Once the Budget was out of the way, the phoney-war atmosphere that has surrounded talks on a successor to Partnership 2000 was bound to dissipate. The Minister has dispelled that atmosphere overnight.

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Despite the generous tax cuts, there is disappointment he did not use the Budget to address low pay or provide major investment in State-funded childcare facilities. Instead he has offered tax breaks which will disproportionately benefit the high paid and could fuel inflation in the childcare industry.

Put in simple terms, the combination of increased allowances and tax cuts will mean a single PAYE worker on £14,000 (€17,776) a year will be 2.5 per cent better off (£5 a week), while a single worker on £50,000 (€63,487) will be 5.5 per cent better off (£32 a week).

The changes will certainly lead to demands from low paid workers for higher flat rate increases to bridge the growing divide between them and the rest of the workforce. This will ultimately put wage levels generally under pressure.

The president of the largest union, SIPTU, summed up the general mood on the union side. Mr Des Geraghty welcomed "the scale of the package and it will undoubtedly benefit many average wage earners, but we see it as a package of missed opportunities and a misdirection of available resources."

He expressed disappointment that Mr McCreevy seemed intent on repeating his performance in the 1997 budget where he alone would be the arbiter of fiscal policy. "He doesn't appear to have shifted, despite all the advice from the social partners, including the National Economic and Social Council, the National and Economic Forum and the third pillar. It certainly prepares the ground for tough negotiations."

Impact's general secretary Mr Peter McLoone, expressed particular disappointment that there had been no increase in the PAYE allowance. The State's largest public service union has made it known since last summer's conference in Bundoran that a large increase in the PAYE allowance was "an absolute priority".

Mr McLoone said the Budget was "hard to reconcile with what the Minister has been saying since the 1997 budget about social partnership. You can't help partnership, or social inclusion by weighting tax cuts towards the higher paid. At least when we sit down to talks we will know where the Government is coming from on incomes policy and pay agreements."

He predicted the Budget would "galvanise people into a determination that, if there is going to be another agreement, the only way left to bridge the gap for the low paid will be through large flat rate increases."

Mr Blair Horan, general secretary of the CPSU, was more blunt. He described the Budget as the Minister's worst. "For Charlie McCreevy to be so insensitive to the low paid is sending out all the wrong signals."

Mr McCreevy's failure to tackle the childcare problem also drew fire from private sector unions. The lack of legislation on gain sharing schemes further fuelled dissatisfaction.

The big difference between this Budget and 1997 is the timing. In 1997, the Government had two years to convince the unions it was serious about social partnership. Both sides meet again next Monday.

The fact the Budget has also alienated the "third pillar" to the talks, comprising the voluntary and community sector, will add to the task of achieving a new national agreement. The Irish National Organisation of the Unemployed was quick to accuse Mr McCreevy of resorting to bad habits and spending "most of his money on making the rich richer".