Friday 20 April 2018

Public sector set for 2% pay rise

Wage hikes to be approved before Dail breaks in July

Brendan Howlin
Brendan Howlin


The country's 290,000 public sector workers are in line for pay increases of at least 2pc that could be approved as early as the summer, the Sunday Independent can reveal.

Senior Cabinet sources this weekend confirmed that the controversial pay increases are just the first in a round of planned pay rises for State employees, whose pay has dropped by an average of 14pc since the height of the boom.

It is expected the pay hikes will be sanctioned before the Dail rises in July, after negotiations with unions.

One senior minister told the Sunday Independent: "The pay rises will be brought in before the Budget and before the Dail summer break. My expectation would be between 2pc and 3pc."

The revelation, which comes as the Government prepares to deliver its 'Spring Statement' on the economy on Tuesday, will fuel claims the Coalition is trying to buy votes ahead of the looming General Election.

The Sunday Independent has also learned that, as the economy continues to improve, the Coalition parties are planning to unleash a package of tax cuts and spending measures worth at least €1.5bn before the next election.

Public Expenditure Minister Brendan Howlin is expected to refer to the pending pay talks with public sector unions - which are due to commence in May - in his Dail speech on Tuesday.

While he is unlikely to reveal specific details on the day, senior sources in both Coalition parties confirmed the Government's intention to unwind the impact of Financial Emergency Legislation (FEMPI) earlier than was previously expected.

It is understood the Government will introduce legislation to implement the first stage of the public sector pay hikes before the end of the Dail term, with State workers receiving improved pay packets by the end of the year.

Defending the move - which is certain to be criticised by private sector employers - Coalition sources insisted a 2pc increase in pay was "reasonable and appropriate" given the return of pay increases in certain parts of the private sector.

However, Fine Gael sources warned unions that there would be "no bonanza for the public sector".

One source told the Sunday Independent: "Fine Gael and Labour are united on this, there will be parity between the public and private sector on how the modest prosperity is shared out."

It is understood the fiscal parameters for the 'Spring Statement' are based on the expectation of economic growth of 5pc a year for the next two years.

While both parties were this weekend attempting to downplay the significance of the statement as an event, details of further tax cuts to be revealed on Budget day have emerged.

The Coalition is planning a further cut to the top rate of income tax, but there is an emphasis on eliminating "pinch points" in the Universal Social Charge (USC).

Under the plans, the likely entry point at which people would start paying Universal Social Charge will be increased from €17,000 to €30,000.

There is also a growing desire to reduce the "penal impact" on those low-to-middle-income earners of between €17,000 and €70,000.

Fine Gael and Labour backbench TDs are increasingly raising their concerns about the need to further reduce the impact of the hated charge ahead of the General Election.

Government sources said that while the abolition of the USC was not possible, as it raises €4.5bn a year for the Exchequer, the Coalition was determined to reduce the harsh impact of the tax on low and middle-income workers.

Among the moves under consideration is a cut to the 7pc rate levied on all income between €17,000 and €70,000 to 5pc or 6pc.

It is estimated that a 1pc rate cut would cost around €500m, but the final decision on whether to introduce a flat USC rate cut or to widen the bands has not yet been taken.

One senior Government source said: "We have not come to any conclusions on this, next week will be about the principle."

The Coalition, in an attempt to woo voters, plans to market the USC cuts as the 'peoples' dividend'.

Since January 1, the entry point at which people begin paying increased from €10,036 to €12,012. Those earning between €12,012 and €17,000 pay up to 4pc USC, with the rate rising to 7pc after that.

All salaries above €70,000 are levied at 8pc, while self-employed people are hit for a further 3pc on the portion of their income above €100,000.

The Coalition is also planning to secure a social dividend from the sale of AIB bank shares, which will be expected to fund a major childcare plan. In addition, the Government plans to deliver its free GP care for under 6s and over 70s, while Social Protection Minister Joan Burton will restore child benefit to pre-recession levels and is expected to restore more of the Christmas bonus for welfare recipients.

The wide-ranging package of planned tax cuts and spending increases marks a dramatic move away from the Coalition's austerity policies as the General Election looms.

However, Coalition sources denied the Government was engaging in a "Fianna-Fail style" giveaway to buy votes.

"If we engage in an absolute giveaway then we lose the high moral ground to Sinn Fein and Fianna Fail, we will just be playing the same game," the source said.

The Coalition will use the 'Spring Statement' to attack the dangers of a Sinn Fein-led 'Coalition of Chaos'.

However, Fianna Fail leader Micheal Martin accused the Coalition of "going into overdrive" over the past year in their efforts to buy their way out of unpopularity. "By the time it's over this will be the longest election campaign by any government in our history," Mr Martin's told his party's ard fheis yesterday.

Sunday Independent

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