IRELAND - Brian Cowen, Ireland's premier, has warned public sector pay and pensions could see fresh cuts in the December Budget, in the government's bid to stabilise the country's deficit and make €4bn of savings.

In a debate in the Dáil Éireann yesterday, Ireland's Taioseach told the members of parliament (TDs)that the exact source of the €4bn of savings from public expenditure is currently "the subject of budgetary discussion", but admitted the government believes "public sector pay and pensions need to be controlled".


He warned: "In light of the scale of the adjustment that is necessary (€4bn), reductions in those areas have to be part of the equation. The manner in which that is achieved can be the subject of further discussions. There is no doubt that the scale of adjustment is such that this issue cannot be avoided."


His comments came ahead of the next budget scheduled for 9 December 2009, and follow the introduction earlier this year of the controversial pension levy on public sector workers. (See earlier IPE articles: Ireland takes uni pensions to boost treasury coffers and Dáil passed pension levy ahead of first strike)


In response to questions from TDs, Cowen said in broad terms "one-third of public money is spent on social welfare and social services, one-third is spent on public sector pay and pensions and one-third is spent on the provision of services".


He added that as Ireland now has a large deficit, it has to show the world it is prepared to take the necessary steps to speed up a national recovery, and therefore "no area of expenditure is immune from consideration in this respect".


The Taoiseach argued "pay and pensions comprise a very considerable proportion of total public expenditure" and there is wide recognition among staff and their representatives that the way the public service conducts its business must be changed.


Cowen acknowledged that public sector workers have already demonstrated a capacity for change through the implementation of the pension levy, but suggested staff can continue to "respond positively and with flexibility" to the current economic difficulties.


In response to concerns from Enda Kenny, leader of the Fine Gael opposition party, on whether low and medium earners would be excluded from any pay cuts, Cowen claimed suggestions that there are swathes of the population who can be immune from the changes is "not a fair, comprehensible of accurate assessment of the objective" and would not allow for "the sort of budget that would meet the imperative in the situation that we face".


He added: "On the question of the public sector pay bill, we believe that is an area of public expenditure from which a contribution will have to be made towards making that adjustment and we are anxious to discuss with social partners how that can be best achieved, while recognising that it must be achieved."


"We are prepared to discuss with the social partners their views on that matter while, at the same time, noting, as an employer must, the fact that there is a contribution to be made from that side of the equation which cannot be avoided."


If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email