Tax cut has every chance of making Labour more attractive

Analysis: Pat Rabbitte has attacked the Government in the rear, writes Stephen Collins , Political Editor

Analysis:Pat Rabbitte has attacked the Government in the rear, writes Stephen Collins, Political Editor

In war the surest way to victory is to attack the enemy where they least expect it. Pat Rabbitte's opening gambit of the election campaign is a direct application of that tactic.

His commitment to cut the standard rate of income tax from 20 per cent to 18 per cent is not only daring, it is the last thing the Government parties were expecting.

In fact Fianna Fáil and the Progressive Democrats had already prepared the ground to characterise Labour as the party of tax increases. By pledging instead to implement a significant cut in the tax paid by ordinary workers Rabbitte has gone right around the Government's Maginot Line and attacked them in the rear.

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The cost of the Labour proposal will be more than €1 billion a year but, as Rabbitte pointed out in his conference speech, Minister for Finance Brian Cowen last year pulled in over €5 billion more than he had forecast in his budget projections. In that context, a tax break costing €1 billion looks affordable.

The real appeal of Rabbitte's proposal is to the middle- and low-income earners, many of them in the private sector, who have not had the benefit of benchmarking and who often don't even get the national agreement pay rises. These are usually the same people who have to endure long commuting times and who derive little benefit from social partnership agreements.

Labour has been struggling to make itself relevant to these workers, most of whom are not even members of trade unions. The radical tax cut proposed by Rabbitte is designed to widen Labour's appeal and it has every chance of succeeding.

Mind you, the proposal surprised the delegates at the Labour conference almost as much as the Government parties. There was thunderous applause for Rabbitte's attack on Mary Harney's health policy and his attack on Fianna Fáil but the applause for the tax cut was more muted.

Still, the delegates did applaud and in conversation afterwards began to warm to the conference "big idea".

The tax cutting plan has the potential to change the image of the party. Since the "Spring tide" of 1992, Labour has been stuck in a rut in terms of popular support, with consistent election performances of about 11 per cent and similar figures in opinion polls.

Worryingly for the party, its attractiveness to younger voters has been declining steadily.

Labour has also been stuck in a policy rut and has been slow to come to terms with the changing nature of the economy and the collapse in trade union membership among private sector workers.

It has continued to focus on the goals of public sector unions, who now frequently represent privileged vested interests rather than the wider public interest.

That is why the pitch to the workers on lower and middle incomes makes eminent sense for the party if it wants to widen its base and attract new supporters. Some of its older traditional supporters, who think in terms of "tax and spend", may be puzzled by the new departure but in fact it was long overdue.

Rabbitte will now have to defend the policy and show how it can be paid for but, given the huge budget surpluses of recent years, that task may be easier than his opponents think.

By opting for a cut in the standard rate he has outflanked both Government parties who over the past five years have just one tax cut, a 1 per cent lowering of the top tax rate, to their credit.

Rabbitte can make the case that he proposes to cut the taxes of "the little people" by contrast to Fianna Fáil and the Progressive Democrats, who have focused on higher-rate taxpayers and who have failed to honour the commitment in the Programme for Government that only 20 per cent of taxpayers would actually pay the top rate.

Apart from promising to cut the standard rate to 18 per cent in two years, the Labour leader pledged a series of improvements in public services, all of which will also cost money. He will be asked where it is going to come from but again he can point to the massive unbudgeted surpluses of recent years.

As for the coalition issue which dominated so much media coverage of Labour in the first six weeks of 2006, Rabbitte declined to give commitments about a hypothetical hung Dáil but he didn't leave much room for ambiguity. Referring to persistent media questioning about whether he had left the Fianna Fáil coalition door even slightly ajar, he said: "The answer is no."

In the light of all that, he has said it will be virtually impossible for him to do a deal with Fianna Fáil, whatever the outcome of the election. If one conference message was "Read my lips: no coalition with Fianna Fáil", the really surprising one was "Labour will cut taxes".