Unions will seek a major renegotiation of the pay terms of the Programme for Prosperity and Fairness (PPF) given the latest inflation figure of 6.2 per cent. SIPTU, the State's largest union, has set a headline figure of 5 per cent and put its proposals to other senior union leaders at yesterday's meeting of the Irish Congress of Trade Unions.

SIPTU's president, Mr Des Geraghty, said: "The General Purposes Committee of the ICTU has today agreed to recommend for acceptance, a proposal from SIPTU that the ICTU submit a pay claim of the order of five per cent under the PPF to compensate workers for the erosion of their living standards due to inflation."

ICTU's vice president, Mr Joe O'Toole, CPSU leader Mr Blair Horan and IMPACT general secretary Mr Peter McLoone were among those who warned of the need for pay increases afterwards. MSF national secretary Mr Jerry Shanahan said the PPF would be "dead by Christmas" if Government and employers did not address pay.

In contrast, the director of economic affairs for the Irish Business and Employers' Confederation, Mr Brian Geoghegan, said that "We should keep cool heads and take a consensus approach to pay, tax and ultimately employment". SIPTU's proposals are based on an internal memorandum - seen by The Irish Times - presented by the union's new vice president Mr Jack O'Connor last week. PPF, Pay, Inflation outlines a proposed pay strategy for the union subsequently endorsed by its powerful industrial relations committee.

Besides a pay increase SIPTU wants local charges abolished, reductions in fuel tax and an interim budget to bring forward next year's social welfare increases to October 1st.

Mr O'Connor has been highly critical of the PPF and accepts that "this strategy may well result in the collapse of consensus" among the social partners. His memorandum states, however, that inflation has made adherence to the PPF "untenable" in its present format. While "further pay increases may exacerbate the inflation crisis", he says, "we cannot manage the economy and we cannot allow union members to suffer the burden of maintaining economic competitiveness for the benefit of others".

He adds: "Acute labour shortage in all sectors is driving up the market rate. Accordingly, the relative and absolute position of the thousands of our members who are restricted to the minimum 5.5 per cent increase is actually deteriorating.

The full text of the internal SIPTU memo on pay increases is available from The Irish Times website at: www.ireland.com