Governor of Central Bank's advice should be heeded - Cowen

TAOISEACH Brian Cowen said the advice of the governor of the Central Bank should be listened to.

He said Prof Patrick Honohan had made the point that he believed a credible convergence path was being embarked upon by the Government to deal with the question of closing, over time, the deficit borrowing requirement.

“This has been reconfirmed in the newly-agreed programme for government,’’ Mr Cowen added.

Fine Gael leader Enda Kenny said the ESRI quarterly economic commentary had given very clear guidance regarding the balance between taxation and spending savings in the upcoming budget.

It had clearly pointed out the growing gap between the Government’s budgetary strategy and the advice given by his party colleague, Richard Bruton, over the years in terms of getting the balance right between taxation increases and spending savings.

He said the “shambles of the deal’’ agreed by Fianna Fáil and the Greens was shown clearly in the fact it was still not known how much it was going to cost.

Mr Cowen said the priorities and initiatives which would be proceeded with and pursued by the Government would operate under the same financial parameters which the Minister for Finance had already set out.

Mr Kenny said for three days before the weekend “we witnessed all the intrigue, hype and tension of the negotiations, with allegations and rumours about this, that and the other’’.

Fine Gael, he said, had carried out a preliminary calculation of the tax implications of the new deal. “Based on those estimates, the ordinary family will have to foot an increased tax hike of €2.5 billion.”

Mr Kenny asked where the money would come from to pay for the announcements contained in the deal. “Fine Gael has repeatedly pointed out that no country has ever taxed its way back to prosperity.’’

Mr Cowen accused the Fine Gael leader of “being disingenuous, as usual’’.

The fact was, he added, that the tax initiatives contained in the programme were about rebalancing the tax system to keep taxes on labour as low as possible.

“They require a good deal of preparatory work, and will be implemented over the lifetime of the Government,’’ said Mr Cowen.

It was important to point out, he said, that the removal of the PRSI ceiling, as proposed in the programme, did not constitute a new tax.

“It is proposed to change the existing tax, which would be redistributive in effect,’’ he added.

“The revised programme states the change would be introduced in parallel with the reduction of the temporary income levy.’’

Mr Cowen said the Government was setting out the objectives and direction of tax policy, and he would “take with a pinch of salt any preliminary costings of the Fine Gael party’’.