Public expenditure minister Michael McGrath has now raised the issue of public service pay and inflation at Cabinet earlier this week, and a formal engagement with his department’s officials is expected to get underway soon.

Last month Mr McGrath acknowledged the impact of inflation on public servants and other workers, and indicated that he favoured a short agreement because of uncertainties in the global economy.

Earlier, Fórsa general secretary Kevin Callinan and other union leaders met senior Department of Public Expenditure and Reform (DPER) officials last week after the ICTU Public Services Committee (PSC) triggered a review clause in the Building Momentum public service agreement.

Fórsa had proposed this, arguing that sustained high inflation was grounds for a review of the agreement’s pay terms. The union said the assumptions underpinning the agreement needed to be revisited in view of soaring prices, which were not expected when Building Momentum was negotiated in December 2020.

Kevin has said there was an urgent need for measures to be taken “in the form of additional pay increases” to stabilise the agreement.

“While the various Government measures go a little way to address the effect of the cost-of-living crisis, workers can’t be expected to bear the increased cost of living on their own. All employers who can afford it will have to assist with efforts to maintain living standards through the normal bargaining processes,” he said.

Fórsa has been warning for months that unexpectedly high inflation was not a short-term problem. Earlier this year the union called for immediate Government action to protect living standards and stabilise the public service agreement, which expires in December.

“When we negotiated Building Momentum, it wasn’t the intention of any of the parties – unions or Government – to see public service pay movement so out of step with prices. Modest increases were agreed on the understanding that prices would be relatively stable. There must be an adjustment in the pay terms,” he said.

Kevin added that unions also wanted to avoid a ‘wage-price spiral’ where pay increases start to fuel inflation. “But we must strike the right balance. We can’t end up destroying consumer confidence and affecting jobs and exchequer returns unintentionally,” he said.