Olivia Mitchell (Dublin South, Fine Gael)
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Question 18: To ask the Tánaiste and Minister for Finance if he will make a statement on his objectives in the negotiations of the forthcoming social partnership agreement. [15708/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As the Deputy is aware, the social partners meet today to open negotiations on a new pay agreement under Towards 2016. The Government's objective in entering these talks is to achieve a sustainable agreement compatible with improving competitiveness and productivity. Pay developments in the period immediately ahead must reflect the more challenging economic and competitiveness scenario that we now face and be accompanied by improvements in productivity. Any agreement will have to take account of the economic and budgetary realities. Therefore, pay increases must be kept at a level which will not undermine our competitive position relative to our main trading partners.

It is crucial that wage expectations are kept in line with the rapidly changing economic environment in which we are operating. Over the last number of years, wage increases have exceeded productivity growth, with a resulting loss in competitiveness. Regaining market share will require an approach to wage determination which takes greater account of productivity developments as well as labour cost developments in our major trading partners. As a small and open economy, our priority must be to ensure that our economy is in a position to take advantage of the global recovery when it emerges. This will require a renewed focus on competitiveness. As regards public sector pay, the public service pay bill remains the biggest single element in public expenditure accounting for around half of all current expenditure. Each 1% increase in the public service pay bill costs around €185 million. The development of public service pay costs must ensure that resources allocated to public service pay do not cause a shortfall of resources for other key priorities.

One of the core strengths of Social Partnership has been its strong foundation in realism regarding the nature of the competitive challenge for Ireland. It is important that all those in the public service improve their productivity and continue to deliver the best possible quality services to the public. The structures we have put in place in the public service pay agreements are an important mechanism to help ensure that we achieve that goal. We need to build on that base in what is agreed in the current negotiations. The national partnership agreements have served us well over the last decade and I would hope that this well tested approach can once again be relied upon in helping us meet the emerging challenges we now have to face as a small open economy.