FINE GAEL has decided to concentrate its £1.5 billion tax reform package on people with middle and low incomes. It will do this by increasing personal allowances by 50 per cent and widening the standard band by 20 per cent.
The result will cut the tax rate on average earnings from 27p to 22p in the pound for a single person and from 19p to 14p for a married couple over the next five years.
Upper income earners will have the top rate of tax cut from 48 to 45 per cent under Fine Gael's proposals, and employees' PRSI will be reduced to 3 per cent. But the standard rate of 26 per cent will be unchanged.
The tax reform package came under immediate attack from Fianna Fail and the Progressive Democrats as lacking credibility and failing to establish spending limits.
The Fianna Fail leader, Mr Bertie Ahern, said the document was flimsy, lacked detail and made no attempt to provide an introductory, 20 per cent, rate.
Launching the Fine Gael manifesto in Dublin yesterday, the Minister for Justice and deputy leader of the party, Mrs Owen, admitted that some differences existed between the three Government parties on how the reform package would be structured to reach their agreed objective.
Fine Gael, the Labour Party and Democratic Left were distinct parties, she said, and would make their own preferences known within the broad brushstrokes of agreed policy.
After the election, negotiations would take place between the three parties on these matters. But because the broad agenda had been decided there would be no fundamental disagreement, she insisted.
The Fine Gael manifesto envisages the creation of 200,000 jobs over the next five years and the halving of the unemployment rate to 6 per cent over 10 years. As an incentive, the first £160 of weekly earnings for people under 23 years of age would be free of PRSI charges in their first fulltime job.
A parents childcare supplement, worth £300 per child up to the age of five years, would be phased in over the lifetime of the government, and would be paid to mothers working inside or outside of the home.
Thresholds at which income tax levies would be payable would be increased by 66 per cent, and up to 80 per cent of employees would pay tax at the standard rate. This would mean a single person would pay 26 per cent tax on earnings up to £17,000, while the figure would be £34,000 for a married couple.
Fine Gael, in government, would continue to encourage small businesses and service companies by reducing corporation tax to 12.5 per cent and by introducing new, low interest, long term loans, according to the manifesto.
It would eliminate all borrowing for current and capital purposes over a five year period; would aim to keep inflation below two per cent a year and hoped to achieve mortgage and interest rates of no more than 5 to 6 per cent from 1999 onwards.
To control public spending, a fiscal transparency act would be passed which would lay down strict legal requirements on spending in relation to value for money and productivity. Government Departments would be encouraged to cut spending by allowing them to devote 70 per cent of savings to new or improved services.
Challenged on the party's failure to indicate spending limits for future years, the Minister for Enterprise and Employment, Mr Richard Bruton, replied that the party's commitment to phase out all current and capital borrowing over five years would squeeze public spending.
Any initial capital borrowing and the cost of the party's tax commitments would provide the projected spending limits, he said.