THE MAJORITY of the €2 billion that must be cut from exchequer spending this year will have to come from pay cuts for civil and public servants, unions will be told by the Government next week.
Meanwhile, a public service union leader has warned members that the International Monetary Fund could be brought in if the Government cannot cut borrowing and bring the State’s finances back under control.
“The IMF’s normal prescription in such situations involves mass dismissals from the public service (without compensation) and pay cuts for the remainder, along with cuts in pensions,” said Public Service Executive Union general secretary Dan Murphy.
He warned that pay cuts would provoke industrial action but said unions would be “constructive provided no unilateral actions are taken that would render our co-operation impossible”.
Up to now, there has been some doubt about how much of the €2 billion savings required by the Government could be generated by cutbacks in services and how much would have to come from the State’s pay bill. However, sources close to Minister for Finance Brian Lenihan made it clear last night that a “substantial portion” of savings would have to come from pay.
Given that low-paid public sector workers will have to be exempted, the Minister is determined to seek pay cuts from the rest of significantly more than 5 per cent.
The tough line comes in the wake of a chorus of warnings from union leaders that pay cuts would provoke serious industrial difficulties, up to and including strikes.
A memorandum to the Cabinet has yet to be prepared by Mr Lenihan, and a final pay cuts figure has yet to be decided, but he appears ready now to demand major sacrifices in talks next week with the social partners.
Taoiseach Brian Cowen and the Minister will be together for face-to-face negotiations with unions, employers and others once Mr Cowen has returned from leading a trade mission to Japan.
Today Mr Lenihan will outline the exchequer’s difficulties to voluntary and social groups. The Cabinet is to hold meetings next week to identify savings but Ministers do not believe that major service cutbacks can produce hundreds of millions worth of savings by year’s end.
The review of all spending by an expert group, widely referred to as An Bord Snip Nua, will feed into the preparation of the December budget rather than drive the cuts needed immediately.
Meanwhile, the Green Party has proposed that some Ministers of State should be fired to cut costs, while the expenses deal enjoyed by TDs and Senators should be overhauled, including a major cut in mileage rates.
Senator Dan Boyle said “a sense of political realism” was needed given the scale of the country’s economic woes.
