Talks are reported to be at a critical stage this evening on the restoration of public sector pay.

One union representative said there was a determination to complete the talks in this session and there is an expectation they will run into the early hours.

A two-year extension of the Haddington Road agreement is being considered, with reports that public servants will receive up to €1,000 next year and the year after, but nothing has been signed off on.

It is understood changes to the pension levy would come into effect in the first year and the low paid would be a priority in second year.

In return the unions would sign up again to the same procedures and processes for settling disputes and in relation to other issues.

A senior Government source said the draft agreement involves a re-commitment to the flexibilities contained in the Haddington agreement and stressed the need for reform and change.

IBEC, the employers' group which is not involved in the talks, said that for taxpayers to get value for money, there would need to be a strong commitment to productivity, outsourcing and competition.