Trade unions are likely to press for income tax cuts in excess of the £1 billion promised over the lifetime of Partnership 2000 as a result of the continuing good news on the economic front.
The last Budget gave cuts worth £393 million to the PAYE sector, and unions are expected to seek at least £500 million in the next Budget. According to one senior union leader, the £1 billion is now being seen "as a minimum rather than a maximum of what can be achieved".
Two unions, SIPTU and Impact, demanded yesterday that the Budget in December contain at least £500 million in tax cuts for the PAYE sector. This follows a statement by the Tanaiste, Ms Harney, in Killarney yesterday, that the Government would provide "drastic tax cuts" in the Budget.
Her announcement coincided with news that unemployment has fallen to 250,000 for the first time in six years and follows Thursday's announcement of record Exchequer returns.
Ms Harney's comments were made at a conference on EMU. She is the first member of the Government to state publicly that the Budget would contain significant cuts in income tax.
She departed from her script to tell an audience of senior managers and trade unionists: "It's payback time for Irish workers." She said that "over the past 10 years the trade union movement and working people of this country have made a huge contribution to our economic prosperity".
She wanted to see a new national agreement when Partnership 2000 ran out. She accepted that in return for pay moderation, there must be significant tax reform.
She added: "Clearly, the priority will be low- and middle-income groups. Everyone accepts that the PAYE sector pays too much." She indicated that cuts in income tax would be significantly more than the 1 per cent provided for in the last Budget.
SIPTU vice-president Mr Des Geraghty, who also addressed the Killarney conference, said he was "delighted to hear that the Government is taking on board our call for a return of £500 million to PAYE workers."
He said the Government should make the maximum cuts now, "before Ireland is locked into our single currency obligations in 1998". Cuts should go mainly to improving personal allowances, as this would benefit low and medium earners most.
However, the Minister for Finance, Mr McCreevy, said in a statement later: "Nothing about the tax package has been agreed yet. The announcement of the details will be in the Budget."
The leader of Democratic Left, Mr Proinsias De Rossa, and the national secretary of the main public service union, Impact, Mr Paddy Keating, also called for tax cutbacks to be aimed at lower- and middle-income earners.
The director of the Irish Business and Employers' Confederation (IBEC), Mr Turlough O'Sullivan, came out strongly against conceding large tax cuts to PAYE workers. He said the priority in the Budget should be to reduce the national debt.
The £1 billion commitment to reduce the PAYE tax burden was to be phased in during Partnership 2000. The monthly unemployment figures show one of the largest falls on record, with 9,145 fewer people signing on than last month. The seasonally adjusted figure stands at 251,100, the lowest since May 1991 when it was 250,000. There are now 249,300 people signing on, compared to 278,700 for the same time last year.