The Coalition Government has made a serious error of judgment by seeking to improve the tax position of single earners and two-income families at the expense of women working in the home. It is possible to argue for such an initiative on purely economic grounds, in terms of encouraging or dragooning married women back into the workforce. But the inequity involved and the social divisiveness inherent in the decision should have made the Government think again. Instead, the Minister for Finance, Mr McCreevy, has signalled his intention of increasing the standard-rate tax band to £17,000 for an individual and £34,000 for two-income married couples this year, while the band for single income families remains unchanged at £28,000.
The Government was clearly taken aback by the negative reaction generated by the initiative. The radio waves were dominated by the issue yesterday. And politicians at Leinster House were heavily canvassed by some of the women and men directly affected. Representations on behalf of the 103,000 single income families - who now pay tax at the higher rate - convinced many Fianna Fail TDs of the need to revisit the issue and this view is believed to have been communicated firmly to the Minister for Finance, Mr McCreevy, last night. At the same time, a number of the Independent TDs who support the minority Government in the Dail expressed their concerns on the issue.
The Taoiseach, Mr Ahern, responded by embarking on a spirited defence of his beleaguered Minister for Finance. He argued that the change was needed in order to reduce discrimination against single workers and married women returning to the workforce who faced deductions of up to 50 per cent of their earnings. In support, he quoted from an ESRI document on childcare options which recommended phasing out of the transferability of tax bands between spouses on the basis that "it inhibits greater equity . . . is economically inefficient . . . and is regressive in effect".
But Mr Ahern did not refer to the contrary advice offered by the Department of Finance. It stated: "the option ignores the key justification for the introduction of the existing treatment of married couples, i.e. the need to avoid unjustifiable discrimination against one-earner married households."
In the context of the broad thrust of the Budget, which was unashamedly biased towards business and the better-off, it is understandable that single-income families should feel they are being victimised and that the choice of looking after their children is being taken away from them. This attitude was probably reinforced by the inadequacy of the measures taken by the Government to address the childcare issue. Not only does this initiative run counter to the Government's own argument on childcare - that it couldn't provide a special tax-free allowance for working mothers because it would discriminate against those not working and those without taxable income - it also ignored a commitment made by Fianna Fail before the last election to recognise the work done by women in the home and pay them £2,000. Even at this late stage, the Government should think again and reverse this shabby decision.