The Government has told trade union leaders that it wants to secure savings of €1.3 billion from the public sector wage bill next year.
Public sector unions, who have rejected any proposals for cuts in pay, are to meet the Government next week to see if this level of saving could be achieved by other means.
In talks with Taoiseach Brian Cowen and Minister for Finance Brian Lenihan at Government Buildings on Tuesday night, union leaders were told that the Cabinet was looking to cut the public sector wage bill by 6.85 per cent, or €1.3 billion.
Union leaders were told this reduction could either come about by means of pay cuts or through other means.
Mr Lenihan said today that the Government has no plans to introduce new taxes – other than a carbon tax – in the upcoming December Budget.
Speaking at a lunch hosted by the Chartered Accountants Leinster Society in Dublin, Mr Lenihan said the Government would have to tackle expenditure on salaries and social welfare, which, he said, accounted for about two-thirds of current spending, if there was to be “a successful adjustment” in the public finances.
His comments came as Irish Congress of Trade Unions announced plans to hold protests in eight regional locations on Friday November 6th to encourage the Government to adopt an alternative plan for economic recovery.
Mr Lenihan's remarks also appeared to set the Government on a collision course with the country's main public sector union Impact which voted overwhelmingly in favour of strikes if the Government introduces further cuts in pay for staff on the State payroll.
Impact said this afternoon its public service members had backed industrial action by 86 per cent to 14 per cent. The central executive committee of impact is to meet tomorrow to consider its next steps.
The union's general secretary Peter McCloone said strikes now seemed inevitable because the Government had refused to consider alternatives to a second cut in public service pay in just 18 months.
Mr Lenihan said that the introduction of a property tax, as recommended by the Commission on Taxation, would take “some years to implement” and would have to paid out of incomes.
“Apart from a carbon tax there will be no new taxes in the Budget,” said the Minister.
He said that the Commission on Taxation recommendations were for “peacetime conditions” but that the Government was in “wartime conditions” and needed to respond with appropriate measures.
Mr Lenihan said that the Government would engage in talks with trade unions, representative groups and Opposition parties about the Budget but that it would ultimately have to take decisions on its own which were for the good of the country.
The Minister stressed that the required adjustments in public spending had not arisen as a result of the Government’s measures to support the banking sector.
The top 4 per cent of earners account for 48 per cent of all taxes, said the Minister, and that the high earners were paying taxes similar to 1992 levels, while middle and low-income earners were paying rates of tax similar to 2005 levels.
He said that there “doesn’t seem to be great scope” to increase taxes to make the €4 billion savings required in the Budget or to seek higher taxes from the biggest earners or from increased excise duties. “We must proceed with great care,” he said.
Mr Lenihan said that public spending had to be reduced to stabilise the Budget deficit at 12 per cent of the country’s economic output and warned that failure to do so would lead to increased borrowing costs.
Meanwhile Ictu president Jack O'Connor said it would be encouraging workers to take time off to attend the rallies next month however he said the move does not represent a strike.
The rallies will take place in Dublin, Cork, Limerick, Sligo, Galway, Tullamore, Dundalk and Waterford.