THE Minister for Finance, Mr Quinn, is seeking reductions of £150 million in spending plans from other Government Departments in an attempt to leave room for significant tax cuts in next year's Budget.
The move comes as support grows in Fine Gael and Labour for a cut in the 27 per cent income tax rate in next year's package, which will be the last before a general election.
As part of a new planning process, Government Departments have drawn up spending plans for next year on the basis of no change in existing policy. Mr Quinn has asked for these plans to be reduced by £150 million, or 1.2 per cent on average. This would hold day to day spending close to the Government's 2 per cent target increase and give scope for substantial tax cuts.
The Fine Gael chairman, Mr Phil Hogan, said yesterday that the party believes the Government should aim next year to reduce the personal income tax rates to 45 per cent and 25 per cent, from 48 per cent and 27 per cent now. While such reductions would be very costly, there is understood to be support in the Labour party for a reduction in the 27 per cent rate as a high profile measure to make an impression on the voters. The Fine Gael plan, drawn up by its tax committee, will be considered by the government's taxation commitment.
Meanwhile, with ministers due to lodge final spending plans for next year with the Department of Finance this week, it has been learned that Mr Quinn had previously called for a tight rein on spending. Normally the Minister for Finance is left to seek cuts of hundreds of millions on grossly inflated departmental demands. But Mr Quinn has moved to try to ensure that the initial departmental plans are kept in line.
The Government is beginning to plan its Budget against a strong economic backdrop. The Department of Finance's Economic Review and Outlook, published today, shows the Government has increased its Gross National Product growth forecast from 5 per cent to 6 per cent but still expects inflation to remain subdued at 2 per cent.
Higher growth is expected to lead to more jobs and the Department now expects a 40,000 increase in total employment this year, a 9,000 rise on its Budget day prediction.
Strong growth is already boosting the exchequer finances. Mr Quinn predicted yesterday that the Government's current budget its account of day to day spending and receipts is likely to be in surplus at the end of the year. This will be only the second time this has occurred since 1967, with the last time being in 1994.