No Minister for Finance, in the history of the State, had as much largesse to spread around as Mr Charlie McCreevy yesterday. And spread it around he did. The largest ever welfare increases and tax cuts; a give-away amounting to a breathtaking £942 million. But while the scale of the measures is considerable, the structure is deficient. As has happened before, the measures are slanted in favour of the well-off. The lowest income-groups will see their incomes rise the least in percentage terms. The middle income groups will do somewhat better and the higher income groups will receive the greatest percentage increase. So much for social inclusion. This Budget was expected to pave the way for a successful negotiation of a successor to Partnership 2000. A Budget which does not seek to build on social partnership will hinder rather than help negotiations. Mr McCreevy maintains that the Budget is innovative and radical. It certainly is. He says also that it addresses the problems of skill shortages and childcare. It does not. Mr McCreevy claims that this Government will have brought about fundamental change to the taxation system "ensuring fairness and equity between all taxpayers". But Mr McCreevy has decided that families with both parents working will pay far less tax than families with one parent working. Where is the equity in that?
The Government has been under pressure to address the problems of skills shortages and childcare costs. It has been argued that the cost of childcare facilities, which are in short supply, works against a return of mothers to the labour force. Mr McCreevy could have decided to boost the income of families with children through a substantial increase in child benefit payments; instead, he raised it by only £2 a week. Mr McCreevy must know that £104 a year does not go very far. The Minister could also have taken direct steps to encourage the expansion and opening of childcare facilities. But tinkering around with the tax benefits will make little difference. There are too few childcare facilities for the simple reason that providers are burdened by high costs.
To make matters worse, the Government has decided that mothers who stay at home to mind their children will be penalised. It matters not, it would seem, that such discrimination goes against the spirit of the Constitution and directly contradicts the Fianna Fail manifesto which got the party into government. From now on, a family with a sole income of £50,000 will pay £1,300 more in tax than a family where both parents are working. And the plan is to increase this divergence in following budgets to the point where, on the basis of this year's allowances, one family will move on to the top rate of tax with an income of £28,000 while another will pay the standard rate right up to £56,000, a difference of over £6,000 in take-home pay. The Institute of Taxation is not impressed with this provision and neither should it be. It would have been far better, and much less extreme in its consequences, if instead the PAYE allowance had been increased.
Mr McCreevy, believes this individualisation will encourage mothers back to work and solve the skills shortage. But it might not. Already, the percentage of mothers under 40 years of age who are in the workforce is well up with the EU average. Does Mr McCreevy hope to entice the over 40s? They may be attracted by the tax break but, having been out of the workforce for a lengthy period, will they have the skills which are in such shortage - for example, in information technology? Mr McCreevy seeks to put the needs of the economy before fairness. The measure is not justified and in addition it may not succeed.