FINANCE Minister Omar Davies will announce a “substantial” hike in the income tax threshold in the 2004/2005 budget as part of the sweetener to make more palatable the two-year wage freeze that has been agreed to by trade unions on behalf of 40,000 public sector employees.

However, the precise level to which people’s non-tax pay would increase could not be immediately ascertained.

Jamaicans now have to earn $120,000 a year before they pay a flat rate income tax of 25 per cent – the threshold having been last lifted in the 2001/2002 fiscal year by $19,536 or about 19.5 per cent. However, when all taxes are taken into account, including statutory contributions to the National Housing Trust and the National Insurance Fund, the average Jamaican pays abut 31 per cent of his income to the Government.

“The new threshold was not given,” one source close to the negotiations admitted. But Davies did promise that the “increase will be substantial”.

Davies himself was not available for comment.

Unions agreed to the wage freeze in the face of pressure for the Government to bring its salary bill – which accounts for about a third of the annual budget – under control as part of a programme to rein in a public sector deficit, which is now running at more than seven per cent of gross domestic product (GDP).

Although the undertaking by the unions is not part of a wider arrangement being spearheaded by the private sector, it is being viewed in the context of arriving at societal consensus on developmental issues and a programme to drive economic growth. As part of that so-called Partnership for Progress initiative, financial institutions are considering converting some element of the Government’s domestic debt to longer-term instruments to ease the burden of interest payments.

Davies and union leaders are to have a final meeting with union leaders to tie up the loose ends on a memorandum of understanding (MOU), which will be rubber-stamped by the Cabinet on Monday. Ministers had given Davies authority to negotiate the agreement.

The broad outlines of the agreement were presented to 400 union delegates yesterday by their leaders. Most gave the pact the greenlight.

Only one senior trade unionist, Norman DaCosta, a vice-president of the National Workers Union (NWU), has publicly voiced reservations about the agreement, in which workers are being asked to trade the freeze on wages for job security.

“I have very serious concerns about this agreement and from what I’ve determined, the majority of the workers also have concerns,” DaCosta told the Observer. “They listened politely for a time then expressed a number of concerns.”

Among DaCosta’s complaints was that union leaders had not first gone to workers to obtain a mandate for the negotiations and had not given employees periodic progress reports before asking for ratification of the agreement.

Moreover, he said, the Government had not kept its part of the bargain in a MOU with trade unions and bauxite/alumina companies in which employees made concessions to lift the competitive position of the Jamaican industry.

However, Dwight Nelson, the vice-president of the Jamaica Confederation of Trade Unions (JCTU) who lead the negotiations with the Government, pointed out that breaches of the agreement on either side could lead to its termination.

Nelson told the Observer unions have insisted that inflation be maintained at single-digit figures during the two years of the agreement – April 2004 to March 2006.

He said, however, that while the Government had agreed to no broad-based job losses, the unions have accepted that plans were already active for the restructuring and merging of some departments and agencies, which would likely lead to some level of separations.

“But there will have to be bilateral discussions before a decision is made,” Nelson said.

Dr Trevor Munroe, head of the University and Allied Workers Union (UAWU), rejected that the agreement with the Government was either “a sellout” or a case of the trade unions being “given basket to carry water”.

What would be important, he said, was the monitoring process – the point made by DaCosta.

In addition to a monitoring committee comprising members of the JCTU and the Government, Munroe said, unions would also be setting up similar committees inside the departments and agencies.

“You have every reason to want to make certain that agreements are carefully, systematically and consistently monitored to ensure that each side lives up to it,” Munroe told the union delegates at yesterday’s meeting.