1999 Budget makes new agreement more likely

By concentrating largely on income tax cuts for the lower paid, the Irish Government's tax-cutting Budget for 1999, unveiled on 3 December 1998, may help to prepare the way for a new national pact to replace the current three-year Partnership 2000 agreement. which expires in March 2000.

Ireland's state Budget for 1999, unveiled by the Finance Minister, Charlie McCreevy, on 3 December 1998, has shortened the odds in favour of a new national agreement to replace the current Partnership 2000 (P2000) (IE9702103F) deal which expires on 31 March 2000.

Nonetheless, the government - despite having more than delivered on its P2000 tax commitments in the past three Budgets - has a number of formidable obstacles to overcome if it and the social partners are to conclude what would be the fifth consecutive three-year partnership arrangement since 1987. The Budget, which received a largely positive response from the trade union movement and employer bodies, included the following key provisions:

• personal income tax allowances are increased from IEP 3,500 to IEP 4,200 per year for a single person and from IEP 6,300 to IEP 8,400 for a married couple;

• the "Pay As You Earn" (PAYE) tax allowance is increased from IEP 800 to IEP 1,000 per year; and

• the standard-rate income tax band is increased by IEP 4,000 to IEP 14,000 per year for a single person and by IEP 8,000 to IEP 28,000 for a married couple.

The government estimates that a total of 80,000 workers will be taken out of the tax net entirely, with a further 17,000 coming off the top rate of tax.

Substantive talks on any new national agreement are unlikely to get going in earnest until early in 2000 - after the next Budget. That means that the Budgets of 1997, 1998, 1999 and 2000 will all be factored into the pre-talks equation. A key issue for the 2000 Budget will be what the government plans to do about childcare, an area which remains mostly unregulated despite increasing demand for childcare services.

The Budget should help to further dampen down pay demands in the private sector. In contrast to the public service, private sector pay settlements have largely conformed with the terms agreed in P2000 (IE9810262N). However, this has not inhibited companies from increasing pay to meet specific skill shortages in Ireland's booming economy, nor have the national pay agreements blocked company-specific, performance- and profit-related pay innovation.

The 1999 Budget, however, is unlikely to dampen down widescale public service pay discontent (IE9812266F). That is why the government wants to devise a system which restructures public service pay along lines which meet some of the criteria evident in the private sector while, in the interim, bridging the gap between what remains of the local bargaining element of the 1994-6 agreement (the Programme for Competitiveness and Work) and the local bargaining element of the current agreement, P2000.