Public sector pay deal: everyone gets just about enough as Government buys industrial peace

So the pay deal is done. In time-honoured fashion, with agreement reached in the early hours of Wednesday morning, bleary-eyed union officials explained it to bleary-eyed journalists.

There is relief all round that the public sector strikes scheduled for Thursday – and which would have caused severe disruption not just to people’s lives, but to the European summit taking place in Dublin – will now not go ahead.

There had been a clearing of the industrial relations decks in the last two days, with gardaí cancelling a work to rule on Monday and solicitors reaching a deal with the Minister for Justice in the long-running dispute on legal aid fees on Tuesday.

Of course, there is a price for all this. The Government always has to buy industrial peace (if not harmony). The issue is the price.

This pay deal is not cheap – €5.2 billion over two years and nine months. And that is not, of course, a one-off cost; it recurs every year.

Pay deals permanently increase public sector salaries, and also pensions, which rise parallel with wages. The public sector pay bill has rocketed in recent years from €22 billion in 2020 to €34 billion this year, as both wage levels and the number of public servants increased (by 70,000 since 2020 to 420,000 this year). That trend will continue in the coming years.

The cost may not be cheap, but it is affordable for the Government – assuming the present stream of corporation tax revenues continues. This year’s €8.5 billion budget – the real number will be nearer €10 billion when all is done – shows that this is probably the minimum required to keep things on an even keel politically.

Wednesday’s deal will push that number up a bit. Nobody likes to think about what happens in the event of an economic slowdown. Like everything else in the Irish public finances, it’ll be okay as long as everything stays okay.

A few other things might be said for this deal as it is digested on Wednesday morning. There are significant benefits for lower-paid public servants, and the deal specifies that the threshold for qualifying as one will increase from €50,000 a year to €60,000, about €5,000 a year above the average income. In other words, people on the average wage are lower-paid by public service standards.

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Some of the increases that these public servants will see include: starting pay for a cleaner up by 18.3 per cent; for a special needs assistant, the figure is 17.2 per cent; for a healthcare assistant, it’s 15.4 per cent; for a Garda, starting pay would increase by 14.6 per cent; for a nurse, 13.3 per cent; a teacher, 13 per cent; a clerical officer in the Civil Service will receive 17.1 per cent.

These increases have come in addition to, not instead of, the significant flat-rate increases available to higher-paid public servants. Average Garda pay, including overtime, will go up by about €10,000 a year; a secretary general of a Government department (depending on the department) might see a €25,000 a year increase.

And remember, these pay increases are in addition to the increments many public servants receive every year, when their salaries go up steadily the longer they are in their jobs.

The unions may have been frustrated by the Government’s failure to engage in talks before the summer, but they have used their leverage effectively this week, monetising the prospect of massive disruption on the day of the Government’s showcase European summit. They figured out early that at least one strike day would be an important element of their campaign. They can go to their memberships to seek approval for the deal with some confidence.

Both sides emerge from the process with reasonable satisfaction. The unions brought the Government back to the table with a better offer over the weekend and have secured decent increases for everyone. And big increases for the lower paid. The timing of the agreement means it will conclude just as politics is winding up for the next general election, likely in the second half of 2029. That will put the unions in a strong negotiating position.

On the Government side, Minister for Public Expenditure Jack Chambers can say he has held the line at about 4 per cent a year at a time of relatively high inflation. He showed he could stand up to a strike, but also that he could move to settle the dispute at just about a sustainable cost. His reputation as the Cabinet’s leading fiscal hawk remains intact, though it is not a title for which the competition is intense.