Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar has said he believes that there is a “good possibility” of striking a pay deal with public sector unions.

He told Fine Gael TDs and Senators tonight that history has shown such discussions can take time, but he’s “keen” to come to an agreement to get the country through a high inflation period.

Negotiations at the Workplace Relations Commission (WRC) ended last Friday without agreement after unions claimed that the Government’s offer of wage increases fell far short of inflation.

It comes after he said the Government intends to re-engage with public service unions to make a further offer on stalled pay talks.

Speaking on RTÉ’s Morning Ireland, Mr Varadkar said he believes public servants deserve a pay increase.

“I do believe the public servants deserve a pay increase,” he said.

“You know, they get a hard time sometimes, but most of them are teachers, nurses, local authority staff, people working very hard and looking after us very well and this also impacts on retired public servants who are feeling the pinch due to the increase of the cost of living too.

“The current agreement gives them an increase of between 2% and 3% a year this year plus increments if they get an increment and that is well below the rate at which inflation is currently running at and so understandably they’re looking for a better pay increase.”

This negotiation will include discussions about this year and next year, Mr Varadkar added, “so that we have industrial peace and stability for the next year or two”.

The economy is in “good condition”, he said, with more people in work and earning more with record trade numbers.

“We do have financial firepower that we didn’t have in the past and some of that, not all of it, can go towards public sector pay.”

He said tax reform was also required to prevent pay increases being lost through higher taxes.

Elements to address the problem include a bigger pay increase for lower paid public servants, a smaller increase for the higher paid, along with tax reform and assistance with childcare costs, Mr Varadkar said.

When discussing the budget next October during the Fine Gael parliamentary party meeting, Mr Varadkar described tax receipts as “very robust” and said the Government was in a position to assist people to access services and ensure work pays better.

The parliamentary party meeting also passed a motion from Clare TD Joe Carey, in relation to issues at University Hospital Limerick.

The motion “calls on the Minister for Health to produce an action plan to address the short, medium and long term issues at the University Hospital Limerick including plans for the provision of an Elective Only Hospital for the Mid-West Region, that provision is immediately made to fast-track developments to increase in-patient bed capacity throughout the network of Mid-West Hospital sites and that the necessary resources including staff are made available to provide 24/7 access to diagnostic equipment”.

It follows serious concerns about patient safety due to overcrowding at the hospital, which were raised by the Health Information and Quality Authority last week.