Charlie McCreevy (Kildare North, Fianna Fail)

I welcome the amendment put forward by my colleague, Senator Mansergh. This issue was debated fully in the Lower House last week but I welcome the opportunity to outline the Government's position to Senators.

The Fine Gael motion asks the Government to break an agreement reached only last January with the social partners, with consequent effects on the continuation of Sustaining Progress and for the social partnership process that has served this country well since the late 1980s. I ask Senators to reflect on the consequences of such an action and on whether this would lead to industrial relations stability and an improvement in public services. What implications would it have for the partnership process? To do as suggested would lead to industrial relations disputes, undermine co-operation with the continuing changes in the public service and bring the social partnership process close to collapse.

The Fine Gael motion states we should re-negotiate the arrangement. What does this entail? Should the payment dates or the conditions attached to the payments be changed or both? What extra productivity should be required of public servants to receive the increase? If there are specific suggestions, I would be glad to hear them because in all the recent debate I have not heard specifics mentioned.

There has been some confusion about the process of benchmarking. I will outline the background to the development of this process and the benefits that will come from it. Senators may recall that in the years prior to the establishment of the public service benchmarking body, the public service pay scene was very unsettled. They will recall a series of disputes, particularly the nurses' strike and the "blue flu". The main cause of these disputes was rising wages in the private sector as the economy boomed and the labour market tightened. Unions wanted to catch up with the private sector as they felt the public service was being left behind. Without benchmarking, we would have faced a series of claims for increases.

However, a large part of the cause also lay with the old pay determination system in the public service that was based on cross-sectoral relativities. This system had grown up because of the need to link groups for pay purposes in the public service to other groups because there was no obvious private sector comparator. The system became rigid and inflexible over the years. This meant it was difficult to deal with any one group when the employer had to take into account the knock-on effects on related groups. Even if an increase in pay was justified, perhaps by a change in work practices or new skills in one group, other groups would seek the increases without any justification other than that they had a traditional link. Previous Governments made attempts to break this. In the Programme for Competitiveness and Work, the use of local bargaining was proposed to allow local productivity packages to be negotiated. That approach did not work for a variety of reasons, but cross-sectoral relativities were one major reason.