ANALYSIS:It was only at about 1am yesterday that trade union leaders received the proposals, writes Martin Wall
FOR THE last fortnight or so, trade union leaders had been aware that the Government was moving towards a pension levy for staff in the public service as an alternative to salary reductions in its effort to cut €2 billion from exchequer spending.
The Government’s intention had been widely flagged and even the general secretary of the Irish Congress of Trade Unions David Begg acknowledged that the final phase of talks would focus “inexorably” on pensions.
However, it was only at about 1am yesterday that trade union leaders received the full details of the Government’s proposals and alarm bells immediately started to ring.
Union leaders had earlier received a briefing from a senior official in the Department of Finance which was vague on specifics, but which had maintained that the lion’s share of the €2 billion cuts sought by the Government would have to come from the public sector pay bill.
On hearing the detailed proposals, the unions were unhappy at the scale of some of the proposed deductions and argued that low and middle-income earners – who make up the bulk of public sector staff – would be hit disproportionately.
However, revelations that the Government intended to include all forms of income – including some elements which are not currently considered reckonable for pensions – under the scope of the levy and that it planned to introduce special legislation within days added to the concern.
Informed sources said some union leaders feared that the measure could produce significant anomalies and could appear to members as very strongly resembling the pay cuts which the union movement had ruled out.
One senior union leader said yesterday that it had never been made clear before the early hours of yesterday that the Government intended to legislate immediately for the levy and that all income would come within its scope.
It is understood some unions pointed out that staff who worked limited hours and were currently not in the tax net would be forced to pay the new levy.
There was also unhappiness in some quarters at a signal from the Government that it was prepared to pay a 1 per cent outstanding rise due under benchmarking to relatively highly paid principal officers at a time when those in lower grades would see their take-home pay reduced.
There were also concerns that, due to the imminent deadline set by the Government, there would be no time to seek a reworking of the scheme in negotiations.
There was also much concern that members could see themselves being presented with significant cuts in their take-home pay for which they were largely unprepared.
However, it was not just the levy but also the lack of any substantive progress on a range of other issues of union concern in regard to private sector pensions, mortgage protection and executive pay that ultimately led to the collapse of the process.
The glacial pace of the negotiations on the economic recovery programme – which led to the pension levy plans only emerging late on the final night – was partly due to the strategy for the talks adopted by the unions.
Initially, the Government signalled that it wanted to engage on its plans for €2 billion in spending cuts.
However, the agenda later expanded considerably to include a wide range of other issues.
Sources said that the Ictu executive had sought in the course of the process not to let the expenditure talks get too far ahead of the non-expenditure elements.
The unions had in effect divided up their resources for the talks with the public sector committee of the Ictu, with its chairman Peter McLoone and Dan Murphy of the Public Service Executive Union (PSEU) involved in talks on the expenditure cuts.
Other senior union leaders from the Ictu’s general purposes committee dealt with the other issues.
On the Government side, the secretary general of the Department of the Taoiseach, Dermot McCarthy, had a key role in the whole process.
Taoiseach Brian Cowen was in attendance at Government Buildings all day before finally leaving shortly after 4am on Tuesday just after the talks collapsed.
Tánaiste Mary Coughlan left at around 5am.
One source said that some of the non-expenditure areas such as pension protection – hugely important in the wake of the Waterford Crystal closure – were highly complex and that the slow pace in relation to these topics left the expenditure strand squeezed for time as the Government’s deadline approached.
Some sources said that while drafts had been discussed over recent days, position papers on the various issues emerged only on Monday evening.
The reason for the unions not seeking to deal with the €2 billion cuts immediately was that their overall strategy was to push the Government to indicate what other groups were going to contribute.
The unions were determined that the process could not be solely about public sector pay. They wanted to see “pain-sharing” across all sectors.
This was essentially a code for tax rises either through income tax or through a new form of property tax. The unions wanted tax changes to be introduced this year.
This led to the other areas such as executive remuneration, assistance for people with mortgage arrears and pension changes, coming into the frame.
In effect, the unions needed progress on the non-expenditure areas to make acceptance of the €2 billion in spending cuts more acceptable to staff.
Employers, for their part, wanted issues such as new supports for business and energy reforms to be considered as part of the talks.
The result of all this was that by the time the overall framework document for the process was completed, the process which started out as a move by the Government to engage on spending cuts began to resemble the agenda for an overall partnership deal but with a much tighter timeframe for negotiation.