Paschal Donohoe delivers stark warning over the Government’s ability to meet public sector pay demands
In a key intervention, Mr Donohoe delivered a major shot across the bows of the unions ahead of the commencement of talks on a new pay deal, which have to be concluded before October.
The timing of his comments is significant as he was speaking ahead of the teacher conferences next week where pay rises, especially for new entrants, are likely to dominate the agenda.
Mr Donohoe revealed that the Independent Public Sector Pay Commission, chaired by Kevin Duffy, will deliver its report next month, which would be ahead of schedule.
However, Mr Donohoe held nothing back in setting out how challenging it will be to deliver the pay deal, in light of competing demands on limited additional spending.
“The commission will have regard to the state of the national finances,” he said. “I expect the commission to report by May or even before then. In relation to the discussions themselves, they are going to be very difficult discussions and negotiations, as will all of the proceedings for next year.”
Mr Donohoe said because of commitments made in last year’s budget in relation to social welfare and tax cuts, the amount of additional money will be around €500m, far short of the €1.2bn available last year.
“For next year, commitments made by the Government to increased levels of social welfare and funding our tax reforms means the net amount of additional resources will be around €500m,” said Mr Donohoe. “That is a considerable amount of money but is against all the competing demands for additional spending on services. It is an amount of money that very careful choices will have to be made.”
He also committed the Government to remaining on a prudent spending path despite the increased demand for additional services.
“The commitment in respect of expenditure discipline and making sure that we meet our commitments will be particularly important in light of the difficult decisions that we will have to make in respect of budget 2018,” he said.
Mr Donohoe’s comments were seen last night as a clear attempt to contain expectations not only within the unions but also within the ranks of the Cabinet.
“This will be the single most challenging matter Paschal will have to deal with this year and managing expectations is his first goal and that what was behind his comments today,” a senior Fine Gael minister told the Irish Examiner.
However, Finance Minister Michael Noonan gave a slightly more optimistic assessment of the state of the public finances.
He said the amount of money available to increase spending and cut taxes in the budget should increase when new estimates are made in June.
He warned, however, that the amount of extra cash available won’t be dramatic.
Higher growth and strong tax revenues would allow for some upward revisions of the figure in the summer economic statement, Mr Noonan said.
“I would be hopeful we would revise it in an upward direction. It will probably be positive but it won’t be dramatic,” he said.
Mr Noonan added that any additional room for manoeuvre in the budget would be “modest”.
He said he did not expect a significant tax surplus at the end of the year, with revenues actually slightly behind in the first quarter.
Speaking to the Oireachtas Budget Oversight Committee, he said that discussions were under way on how cheap funding from the European Investment Bank could be used to help finance investment spending in areas such as the Dublin Metro, roads and social housing.
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