Giveaway budget and extra pay increase save national partnership

In December 2000, Ireland's national pay and partnership deal was saved by agreement on an extra 2% pay increase in 2001, plus a lump-sum of 1% in 2002, and by a national budget delivering major income tax cuts. However, employers still have their doubts.

The first week of December 2000 saw two events which saved Ireland's national social partnership and the current three-year national wage deal, the Programme for Prosperity and Fairness (PPF) (IE0003149F), which had been threatened by an upsurge in inflation (IE0010159F). The government announced a national budget for 2001 which provides for income tax cuts of almost IEP 1.2 billion and, separately, the PPF was reviewed, providing an extra 2% pay increase in 2001 and a 1% one-off lump sum in 2002.

The combination of the two measures ensured that the Irish Congress of Trade Unions (ICTU) and the Services Industrial Professional and Technical Union (SIPTU), the largest individual trade union, both reaffirmed their commitment to national partnership deals. The Irish Business and Employers Confederation (IBEC) also approved the deal, but in doing so expressed two major reservations: on the trade unions' ability to deliver industrial peace; and on budget measures affecting employers' social insurance contributions.

In the pay talks (IE0012226N), the employers had finally agreed to union demands for extra pay increases to compensate for inflation, now running at 7%. The extra 2% is to be added to the 5.5% increase already agreed for the second year of the PPF and the one-off lump sum of 1% of basic pay is to be added to the 4% increase already agreed for the third year. These increases are not to be pursued through industrial action and a new "national implementation body" representing the social partners is to meet quarterly to ensure delivery of industrial peace and pay stability.

Employers in financial difficulties are to be given special consideration, as are those who have already paid above the national pay deal's terms (although in the case of the latter, union members at the workplace may still expect the extra increase anyway).

The budget reduced the standard rate of income tax from 22% to 20% and the top rate from 44% to 42%. Annual personal allowances were raised by IEP 800 per person and another allowance for those whose taxes are deducted at source was raised by IEP 1,000. The standard-rate tax band was expanded by IEP 3,000 per working person, with a smaller expansion for single-income couples.

Employee social insurance contributions were reduced from 4.5% to 4%, but more controversially, an annual ceiling of IEP 36,000 on the pay on which employers' contributions are levied was removed. There have been calls by major high-technology multinational investors in Ireland to reverse this move. However, if this were to happen, it would be resisted by the unions.