Public sector pay cuts set to be reversed
The move follows a raft of initiatives aimed at beefing up measures to tackle the mortgage debt crisis after previous attempts by the Government to get a grip on the situation were branded inadequate.
The first spring budget statement has been pencilled in for Tuesday, April 28, and will see Finance Minister Michael Noonan and Public Expenditure and Reform Minister Brendan Howlin forecast growth and spending projections out until 2020.
As the statement comes before talks in May with unions on a partial restoration of public sector pay, the Dáil announcement looks set to broadly lay out how much money could be handed back.
“With spending plans being outlined, it would be difficult not to outline a huge item like funds available for the public sector. The pension levy is an obvious area [where] public sector unions will be looking for a relaxation,” a Government source said.
A revamped mortgage package, to be announced the week before the spring statement, is expected to: n Reduce the bankruptcy period from three years to 12 months; n Make the mortgage-to-rent option viable by raising caps on the value of properties covered by the scheme; n Create an independent appeals panel intended to prevent banks vetoing sustainable solutions
Ministers are keen for the spring statement to appear substantive rather than be portrayed by the opposition parties as a pre-election stunt. However, the Cabinet has not yet finalised details of its key elements and the mortgage package.
Resistance within Fine Gael to reducing the bankruptcy term to a single year appears to have been overcome. Labour had pushed the reform as a key measure to pressure banks into cutting realistic deals with customers in financial trouble.
The scheme, whereby mortgages are converted into rents so that families can remain in their homes, sees the property sold by the lender to an approved housing body or local authority. It was branded as “unfit for purpose” by the Dáil finance committee last year as properties must be purchased for less than €220,000 in Dublin or €180,000 in the rest of the country. Properties currently need to be in negative equity to qualify for the initiative.
Take-up of the scheme has been minimal since it was launched in 2012 due to the restrictions surrounding it.
Mr Howlin has already signalled that the Financial Emergency Measures in the Public Interest Acts (Fempi), which were introduced during the economic crisis in order to impose cuts on public sector pay and pensions, need to be revisited as the country is in better economic times. He has said that partial restorations of reductions will be examined ahead of the Haddington Road agreement ending in 2016.
With the EU giving the Government the green light to bring in a more generous autumn budget after it eased financial restraints on what can be spent, the Coalition is set to have an extra €700m to use for tax cuts or extra funding in October.
Although the Government does not have to call a general election until April next year, senior figures in the Coalition are considering February, or even a post-budget snap poll in November, as more viable options.
A spokesperson for Mr Noonan said the spring statement would cover the issue of reversals of public sector pay cuts in “broad terms” in order to give a “flavour of where priorities lie” and an opening position on the matter.
“Fempi can only be used in the case of a financial crisis. Now we are moving out of that situation we get all the speculation about unwinding the cuts. It won’t be possible to unwind them all at once — decisions will need to be made,” the spokesperson said.
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