Donohoe beats retreat to buy time on public service pay

Unravelling of pay deal will take months and may get subsumed into an election

Minister for Finance Paschal Donohoe. “Donohoe did a deal; he will pay the nurses more; he has opened his wallet.” Photograph: Niall Carson/PA Wire

Minister for Finance Paschal Donohoe. “Donohoe did a deal; he will pay the nurses more; he has opened his wallet.” Photograph: Niall Carson/PA Wire

 

Government is rarely about straightforward choices between good and bad; usually it is about choosing between two unpalatable alternatives.

Last weekend, Minister for Finance Paschal Donohoe was faced with precisely such a decision: concede a pay increase to the nurses and undermine his own national wage agreement (and therefore his entire budget) or allow the health service to shudder to a halt for a three-day strike, with potentially lethal consequences.

Much had been written hereabouts and elsewhere about how caving in to the nurses would threaten the Government’s ability to keep control of the public finances, though Donohoe and his boss across the Government Buildings quadrangle were able to figure this much out for themselves.

Undermining the pay agreement by granting a special deal to the nurses would effectively reopen the Government’s budgetary settlement.

Coming out of the negotiating bubble, the Government was convinced it had secured a good deal

The overall annual budget of the Government is made up – roughly – by a third welfare, a third public-sector pay and a third everything else. Reopening a major budget line at the beginning of the year calls into question the Government’s ability to stick by its decisions and therefore hold the line on everything else. A Government that can’t budget can’t govern.

Against that, though, had to be set the human and political consequences of allowing the health service to shut down. The great fear in Government was that someone could die as a direct result of the strike. That would be a tragedy for the family or families affected – and a political atomic bomb.

There was a school of thought in Government Buildings which suggested that Donohoe and Minister for Health Simon Harris had to tough it out for one more week; other advice said that a further week would only harden attitudes on the picket lines.

Containable cost

In the event, Donohoe’s decision was to settle it if he could do so at a containable cost. The nurses’ leadership eventually accepted an offer which contains some money up front and the promise of more to come, but much less than they were demanding.

Coming out of the negotiating bubble, the Government was convinced it had secured a good deal. On Monday night, as news of the settlement filtered through, I spoke to several people at the heart of the Government. Their chief anxiety was that the media reaction would suggest that the deal was a triumph for Donohoe and that would make it harder for the nurses to accept it. As gently as I could, I suggested that a more likely outcome would be that the Minister would be accused of caving in to the nurses.

This illustrates Donohoe’s problem now. He now must face two ways, Janus-like, telling the other public-sector unions that the nurses have not won very much at all, while nodding to the nurses that they have done very well indeed and they would be mad not to accept the deal.

The truth, I think, is that Donohoe did not cave in – the deal is cleverly structured such that annual costs are manageable, even if they are most unlikely to be as low as the €15 million this year and €35 in a full year that the Government is suggesting. But he did retreat.

A more likely outcome, however, is that the Government does not last that long

And that step back from the uncompromising position of the previous weekend is the more significant fact. Donohoe did a deal; he will pay the nurses more; he has opened his wallet.

There is no getting away from that fact. The other unions see it: he’s open for business.

And that fact means that there will be knock-on claims from the other unions, in some shape or form, before too long. Do you really think that the other unions will stand by and say: “Fair enough, it’s the angels of mercy, they deserve it”?

There were shudders in Government Buildings when The Irish Times reported on Wednesday that the gardaí would see if they could squeeze the State for more money on the back of the nurses’ deal.

The Government’s claims that this is all being done under the umbrella of the national pay agreement is understandable. What else would they say?

Capitulation to gardaí

But as Irish Times industrial corespondent Martin Wall pointed out this week, that’s what the Government said in the wake of the capitulation to the gardaí – under threat of what was an illegal strike – back in 2016.

The €50 million Garda settlement ended up costing a further €120 million in accelerated pay rises elsewhere in the public service – to save the wage agreement then in force. Similar pressures are almost certain now. That is the way the world works.

The unravelling of the pay deal will take some months. If the Government lasts, it will probably have to bring forward the end of the current wage agreement and the negotiation of a new one in summer or autumn.

Much will depend on the mood of the union conferences that are coming up. But this Government, as some of its members privately admit, is not in a strong position to be negotiating with anyone.

A more likely outcome, however, is that the Government does not last that long. The extent to which both Fine Gael and Fianna Fáil believe the current arrangement has run its course is sometimes not appreciated outside; inside each party, however, it is ever-present.

If British prime minister Theresa May gets a tweaked EU-UK agreement through her parliament either in March or after a short extension in June – still just about the most likely outcome – then we are into the countdown to a general election.

Public-sector pay – and its first cousin, tax cuts – will be a central part of that campaign.

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