McDowell reaction:Tánaiste Michael McDowell insisted last night that the Progressive Democrats were not disappointed with the 1 per cent cut in the top tax rate announced in the Budget, but said the party has been given a firm commitment for another 1 per cent cut in budget 2008 if they are back in government with Fianna Fáil.
The PD leader also said he has made it clear to his Fianna Fáil Government partners that reform of stamp duty, raised by him at a party meeting in Malahide last September, should be a "priority" for the next government.
"The issue of reform of stamp duty is a complex one and needs to take place as part of a programme over time if it is to be of genuine use to homebuyers," he said.
The PDs were pushing vigorously for a cut in the top tax rate from 42 to 40 per cent in the build-up to the Budget, as promised in the Programme for Government. But after securing just a 1 per cent cut Mr McDowell said yesterday the reduction would still benefit people in incomes over €34,000.
"It is the view of the Government that the current economic conditions allow for a 1 per cent reduction now, while prudence dictates that a further cut of 1 per cent should take place in budget 2008," Mr McDowell said. He said a 2 per cent cut would have added to inflationary pressure on the economy.
"What Brian Cowen and myself and the Taoiseach agreed was that it would be better to do it over two years. We don't want to set off inflationary pressures on the economy at this stage when things are going so well. But the commitment is there."
He said he was happy with the so-called stamp duty issue in the Budget and what the party was interested in was doing something for first-time purchasers. Mr McDowell said he made it very clear at the Malahide meeting that the PDs were talking about stamp duty reform in relation to their manifesto for the next general election.
Mr McDowell said he sat down with Brian Cowen and went through a series of options in relation to this territory and the concerns were that in a strongly rising property market the effect of reform would benefit the vendor.
Mr McDowell said it has always been a central tenet of Progressive Democrat policy that a low-rate tax regime is the catalyst to "release the natural energy, effort and enterprise of the people".
The Tánaiste said the Budget will allow for significant increases in social welfare and in other services for society, especially the elderly, and provided a great package for the Irish people. He said the PDs were not just interested in looking after the well off but "ordinary people working for their families who have made the difference in Ireland".