Diarmaid Ferriter: Workers’ demands for a cost-of-living package won’t be easily dismissed

During the Celtic Tiger era, memoranda in the Department of Finance frequently highlighted the pressures building in a booming economy. The minister for finance appointed in 1997, Charlie McCreevy, initially committed to keep nominal current spending growth to 4 per cent annually. He dismissed the European Commission’s view that his budget in 2000, involving a £2 billion “giveaway”, would be inflationary. The following year, current spending increased by 17 per cent. Unwillingness to follow advice about sustainability and reluctance for political reasons to temper an overheating economy ultimately generated a crisis.The establishment of the Irish Fiscal Advisory Council (Ifac) after the economic crash was designed to formalise the need to learn the lessons. In 2022, its own review of its first 10 years identified too many “worrying echoes of the past” and failure to address long-term pressures and over-reliance on corporate tax windfalls. Ifac’s report last month not only advised that the Government’s proposed budgetary package for this year is too large, but that “spending overruns have become routine and have repeatedly pushed spending above budget-day plans”. Total spending last year was €4 billion more than allowed for in the original budget for the year. In relation to the public service pay deal agreed in 2024, to cover two-and-a-half years, Ifac has also observed that Budget 2024 and the Revised Estimates of Public Services 2024 “allocated only €0.7 billion towards the potential cost of a new pay deal for 2024. However, the cost of the subsequently agreed pay deal amounted to €1.1 billion, more than 50 per cent higher than allocated, resulting in substantial overruns”. Ifac has also concluded that “if a [new] public service pay deal were to be agreed, matching economywide wage growth, that would mean additional costs in 2027 of €1.1 billion”. The current deal expired on June 30th with nothing in its place. Public service trade unions have been balloting their members and the response so far has been militant. In May, Taoiseach Micheál Martin addressed the largest of the public service unions, Fórsa, with almost 90,000 members, and said, “One of Ireland’s real strengths in navigating change is our tradition of social dialogue and partnership”. Earlier this month, however, Fórsa announced the result of its ballot for action on public sector pay, up to and including all out strike, and 96.6 per cent of voters endorsed this strategy. Siptu’s public sector members approved action by a similar amount. Other ballots are continuing. READ MOREThis might be seen as predictable sabre-rattling in advance of negotiations. But these votes carry more of an edge. Minister for Public Expenditure Jack Chambers has said reaching a new agreement “is around looking at the wider inflation environment, looking at the sustainability of what’s available in the context of the next number of years ... Any additional increase in public sector pay has to be accommodated within the fiscal parameters that we’ve set.”The assertions about “fiscal parameters” will be taken with a pinch of salt given their usual looseness. The real issue is what “the wider inflation environment” means for workers seeking pay rises, and there is no way that €1.1 billion next year will be acceptable to public service unions, partly because of previous Government decisions that mean it will be hoisted by its own petard. Irish Congress of Trade Unions general secretary Owen Reidy has rubbished talk of fiscal constraints, because “if the Government can find €1.25 billion that easily” for the fuel package and VAT cuts in hospitality “they can definitely afford a bespoke cost-of-living package for workers along with private-sector employers”.The Government will now face the overall strain on “fiscal parameters”, the absence of a public service pay deal and inevitable wider dissatisfaction due to any tax concessions being devoured by continued cost-of-living increases. Over promising and mixed messaging have not helped; we are told tax cuts will be “meaningful” or “modest”, depending on who is spinning on a particular day. Likewise, on one day, the Government maintains it is not possible to “fully absorb” cost-of-living increases, but on another day, there are promises of relief for users of home-heating oil. All surrounded by the lazy, divisive rhetoric of championing those “who get up early in the morning”.[ If you think public sector workers have it better, that’s because we doOpens in new window ]And in the background, the heft of historic mistakes remains stubbornly in place. Can it be shifted? Social partnership – inaugurated in 1987 in an attempt to create stability, affordable tax cuts and modest wage growth – died with the economic crash, replaced by sector-specific bargaining. The partnership was no magic wand, but initially at least, it provided a necessary bedrock. Is some new form of social partnership worth trying? Jack Chambers has dismissed the prospect; Micheál Martin hints at openness to it. More mixed messaging, but what is clear is that the current path is a doomed one; decent leadership involves creating a new departure instead of the constant use of sticking plasters that ignore the need for stitches.