Coalition prepares to accept demands from unions over 7.5pc pension levy
The Government is willing to significantly reduce the deeply-unpopular public sector pension levy as it prepares to enter crucial talks with unions aimed at thrashing out a new pay deal.
Senior Coalition figures last night admitted cutting the levy - which costs an average of 7.5pc of gross income - is a "likely option" because it will result in an increase in take home pay across the public sector.
Ministers believe the phasing out of the pension levy will shore up significant support among public sector voters ahead of the General Election.
But there were fresh warnings from Government circles last night after Siptu President Jack O'Connor said the abolition of the pension levy should be the first big ticket item agreed during this week's talks. Mr O'Connor also stoked up tensions with the Government after he said politicians should "refrain" from accepting pay increases.
As pay talks are set to begin tomorrow, the list of demands from unions includes the abolition of the pension levy, pay increases for workers, the ending of the recruitment moratorium in some sectors and a series of commitments against outsourcing and privatisation.
But sources have expressed caution, pointing out that Public Expenditure Minister Brendan Howlin will likely have just €250m to play with.
Nonetheless, both sides of the negotiations look likely to find common ground on the issue of the pension levy.
Union leaders have said since the levy was introduced during the recession it has been a deep source of anger among workers.
The measure was brought in by the late finance minister Brian Lenihan as part of the Financial Emergency Measures in the Public Interest Acts 2009-2013.
Along with the potential political benefits of reducing the levy, ministers believe it is an "ideal way" of restoring take-home pay for workers.
"Phasing the levy out over time would immediately ensure the take-home pay of workers across the public sector rises. The pension levy is a likely option for us," said one Government source.
But sources said the Government would put forward its own demands for increased productivity as a bargaining tool in return to reductions in the levy.
Speaking in Arbour Hill yesterday, the Siptu president said scrapping the levy should be the first headline issue agreed.
"I think we have to start with the ending of the pension levy, I think it's probably the best thing to start with," said Jack O'Connor.
Mr O'Connor said he believed Fine Gael was also in favour of starting with the levy issue, a claim backed by a number of party sources.
Asked whether politicians should also receive pay increases, as suggested by Public Expenditure Minister Brendan Howlin, Mr O'Connor replied: "I think that people in public life, at that level, should refrain from taking pay increases."
He also said he would not take a pay increase as Siptu president. Mr O'Connor's pay is benchmarked against the public sector, therefore, he is likely to be entitled to an increase in his pay if such an approach is agreed at the talks.
In his speech, Mr O'Connor drew comparisons between Labour and Syriza, the political party elected to lead the Greek government.
He said he anticipated a "significant" increase in the minimum wage following the recommendations to Government by the Low Pay Commission.