THE standard rate of tax would be cut to 20 per cent and the top rate would fall to 40 per cent over five budgets if the Progressive Democrats enter government, the party's finance spokesman, Mr Michael McDowell, said yesterday.
Committing his party to a radical economic strategy with a gross value of £2 billion over the five year period (the lifetime of the "next government), Mr McDowell also advocated total savings of £200 million in the Public Service, including job reductions of 1.75 per cent, or 3,750 positions.
He promised the phased abolition of employee PRSI and the "transformation" of employer PRSI to a single digit payroll levy.
Saying proper control measures would reduce the live register figures to 225,000, he pledged £100 million extra for spending on social welfare, including a £5 per week rise in pensions; £4 a month in child benefit; an extra 2 per cent in unemployment payments and a rise of £10 a week in the carer's allowance.
However, Government sources said last night the Progressive Democrats' proposal to slash the upper rate of tax by 2 per cent would cost the Exchequer £99.4 million, while a similar decrease in the lower rate would amount to £176 million.
Launching the party's 1997 Budget strategy, entitled "New Deal", Mr McDowell said if the Coalition had honoured its "solemn political commitment" of late 1994 to curb public spending to its own pre set limits, the Exchequer would be £550 million better off this year. This financial flexibility would be enough to allow a 20 per cent standard rate of income tax.
Denying his party's policies were the first cousin of "harsh Thatcherism", Mr McDowell insisted that its reform proposals aimed to establish a system that was socially just and concerned".
Declaring that Ireland needed a sea change in the management of financing the public sector, he said one could no longer justify a system whereby the Exchequer capitalised all public projects and enterprises.
Proposed cuts of 3,750 posts in the public service would not, however, affect the Garda, teachers, or health professionals' and there would be no redundancies, he said. The civil service overtime bill, now standing at £75 million would be reduced to £30 million.
While his party did not approach privatisation with an ideological "white heat", it believed there should be a pragmatic review of the ownership and capitalisation of certain aspects of the State and semi state sector. The full range of options from "no change to strategic partnerships, to worker/management buy outs, to stock market flotation, to sale as a going concern", must all be available to the State.
There was also ample room for "private finance initiatives" in funding public projects like roads, airports and energy schemes, as well as prisons and third level education buildings.
The Progressive Democrats were, contrary to "the facile propaganda of left wing politicians and commentators", prepared in government to honour the central elements of the Partnership 2000 deal.
"It is true that the document was hastily negotiated, furtively published and contains some matters which will require adjustment and refining. And it is also true that the document will make more difficult certain aspects of badly needed taxation and public finance reform," he added.
In spite of its limitations, however, the importance of continuity and abiding by the substance of a "done deal" meant that it should not be rejected by the incoming government, Mr McDowell said.
"The Progressive Democrats do not tell us where the savings should have been made," a Coalition source said.