Budget will see promised cuts in tax - McCreevy

The Government will proceed with individualisation and tax cuts in the upcoming Budget, the Minister for Finance, Mr McCreevy, said yesterday.

Putting the responsibility for holding back inflation firmly on the social partners and on workers as well as the Government, the Minister insisted he would not renege on any commitments or promises.

The Minister is understood to be holding firm on spending plans.

The traditional bilateral negotiations between Mr McCreevy and the other Ministers are now over. Despite the abundance of money in the State's kitty, many will be getting far less than they asked for.

The demand by the Minister for Health, Mr Martin, for a 20 per cent increase on his budget of £800 million (€1.02 billion) was rejected out of hand.

He now has to come up with a far lower figure and put in a written submission.

In a speech yesterday to the Leinster Society of Chartered Accountants, Mr McCreevy called on the social partners not to "blow it". He insisted: "We all have a role to play."

The Minister said: "The Government will introduce an anti-inflation package in the Budget, but the social partners need to remember that the agreement is for 33 months and the combination of wage rises and tax cuts over that period will deliver real gains to all taxpayers. "We will not make any short-term decision that could have long-term consequences."

The trade-off for the unions was that they needed to moderate wage claims and not push the boat out too far, the Minister said.

He added that the Government would not withdraw from its electoral and partnership commitments on tax and wages.

"We will keep to our ambition that 80 per cent of taxpayers should pay tax at the standard rate only. We are also introducing a single standard rate tax band for all individual taxpayers."

Mr McCreevy admitted that he would like inflation to be a lot lower but insisted that much of it was externally generated and outside the Government's control. "We have to avoid a wage price spiral," he stressed.

The Minister also pointed out that, while he had received conflicting advice from a range of institutions such as the ESRI, the OECD and the IMF, "we entered into commitments on pay and taxes in 1997 and it is important to deliver on one's promises".

He added that he was not ignoring the advice of the European Central Bank but it was all a matter of how different agencies perceived the situation.

"The job of Government is to make a decision."

The Minister was also slightly dismissive of warnings from the Central Bank to introduce a neutral Budget.

"Each year the Central Bank advises the Government in the same manner; if you went back over the last 20 years you would see that is the case."