Papers reveal political wrangling behind State's boom-time giveaway budget

BACKGROUND:An unexpected tax perk for dual-income families led to major acrimony

Budget 2000 has been described as the greatest giveaway budget in the history of the State, but a landmine was buried in the text of then finance minister Charlie McCreevy’s speech.

Shouts of “shame” echoed around the Dáil chamber when McCreevy announced an unexpected tax perk for double-income families on December 1st, 1999.

He was soon accused of an attack on stay-at-home mothers with his “radical” change to the tax treatment of married couples.

The goal of his move towards the “individualisation” of the standard rate band was to encourage more married women to return to the workforce.

It meant a married couple with two spouses working would have twice the tax allowance of a couple with one partner working.

McCreevy insisted that far from discriminating against single-income couples, the measure was aimed at ending discrimination against two-income couples and single people.

But the damage was done and the minister faced a furious backlash from Fianna Fáil backbenchers and various interest groups.

McCreevy quickly told his party TDs he would introduce the £2,000 tax allowance for stay-at-home parents, promised in the 1997 Fianna Fáil manifesto, within the lifetime of the government.

Pressure continued to mount, however, and within a week he announced a damage-limitation measure: a tax allowance for carer spouses in the home.

Shell-shocked cabinet

The £3,000-a-year tax allowance at the standard rate was for spouses of married one-income families who worked in the home caring for children or elderly or “handicapped” people.

Cabinet papers released under the Freedom of Information (FoI) Act show how the “pros” and “cons” of this new proposal were viewed by the shell-shocked cabinet in the aftermath of the banana-skin budget.

The “cons” were that the measure to extend the married one-income band by £3,000 “would dilute the move to individualisation”, according to an options paper prepared for ministers and dated December 7th, 1999.

Other disadvantages outlined were that it “would still leave one-income couples with lower bands than two-income couples” and “would probably not satisfy the demands being made by stay-at-home spouses”.

The only argument outlined in favour of the proposal was that it “would go some way to bridging the gap between one- and two-income married couples”.

However, a note presented the following day provided ministers with arguments to use in favour of the new tax allowance.

The note said the new measure would help more than 180,000 stay-at-home spouses and that it “more than fulfils” the government’s pre-election promise to introduce a tax allowance of £2,000.

It was “worth proportionally more to those on lower incomes because it is standard-rated”, the note added.

22 records withheld

The Irish Times sought copies of all cabinet papers relating to budget 2000 under FoI.

A total of 60 records were released in full; one record was released partially; and 22 were withheld.

The documents reveal attempts by McCreevy to rein in the spending demands of his fellow ministers.

He complained about the “huge” estimates demands submitted by ministers, which he felt “mirrored” the “growing signs of widespread, unrealistically high expectations among the public”.