Cowen ready to wield axe on public sector pay

THE Government is getting ready to impose pay cuts across the public sector -- with or without union agreement.

taoiseach Brian Cowen yesterday gave the first clear indication he is prepared to face down the public service unions, as the country's finances continue to spiral out of control.

Speaking during his trade visit to Japan, Mr Cowen said he would have no hesitation taking tough decisions, if no agreement could be reached with unions and employers over the public-sector pay bill.

He said his Government had already made tough decisions by implementing spending cuts last June and now needed to tackle the multi-billion shortfall in tax revenue.

"We'll take whatever decisions are necessary. That's what we have to do in the interests of the country," he said. "We're going to work with the social partners to see can we project a way forward, because it's not something we can defer and [say] it'll be easier next year. We have to start working on it."

Justice Minister Dermot Ahern also rowed in, saying the Cabinet was going to have to make the most drastic decisions any government has faced for decades. "I think there is an understanding now, when you even hear some of the comments from the social partners, that they do accept that the financial position of the country is difficult, that we can't go on spending the way we have been. We have to cut our cloth to meet our measure," he said.

This left the Government on a collision course last night with trade unions, with one major public-sector union warning it would ballot for "widescale industrial action" if the government imposed pay cuts or a pay freeze.

The Civil Public and Services Union said its 13,000 members would resist any attempt to reduce wages or defer pay rises due under the national wage agreement.

However, ICTU chief David Begg has already indicated there may be room for discussion on the deferral of the new national wage agreement. And SIPTU General President Jack O'Connor has also claimed that the prospect of pay cuts is being used to soften up unions.

However, Mr Cowen was not as clear-cut as Finance Minister Brian Lenihan in outlining the envisaged pay cuts.

A further €2bn must be cut from spending this year, with the public pay bill of €20bn being the only obvious source for the bulk of the savings.

The Cabinet will hold two special meetings next week, where Mr Lenihan is expected to set out the extent of the savings to be made at this point.

Ministers are expected to agree to at least €1bn worth of cuts to come in by the start of February.

A pay freeze will come nowhere near balancing the books -- only bringing in €260m this year because the public sector rise was only due to take effect from September.

It would be €780m in 2010, but this is just over a third of the required savings of €2bn.

Forcing further pay cuts will provoke an unprecedented confrontation with the public sector unions. But the prospect of severe industrial unrest and strikes may see the Taoiseach back off from a confrontation.

Mr Cowen was urged yesterday to state clearly what his plan is to cut the spending, after Minister Dermot Ahern warned the cuts would be the worst in decades.

The mixed messages continued to come from the Government, despite Mr Cowen denying a rift with Mr Lenihan over the cuts. Tanaiste Mary Coughlan claimed nobody should "pre-empt the outcome of discussions".