the government has cleared the decks for a possible general election next year with a £2 billion tax-cutting and spending package in the Budget.
In a concentrated bid to defuse the political landmines laid in his previous three budgets, the Minister for Finance, Mr McCreevy, yesterday unveiled the most substantial child benefit package in the State's history, moderated the pace of tax individualisation and introduced measures to tackle inflation. He also resolved the thorny issues of taxing the credit unions.But there was criticism last night from employers, who will face large increases in PRSI payments and from childcare interests, who argued that Mr MrCreevy had not done enough to meet their needs.
The Minister for Finance pledged yesterday to introduce a fifth Budget next year and to stay in office into 2002 as the package came under fire from the Opposition and economists who fear it will fuel inflation.
Mr McCreevy unveiled major tax and social welfare benefits for all, the most substantial child benefit package in the State's history, anti-inflation measures and resolutions of thorny issues such as taxing credit unions and the hauliers' dispute. He also introduced a major package of benefits for pensioners.
As a result, he has fulfilled the Government's promises on tax rates, given the PDs a victory with a two-point top rate cut and - unlike last year - given the less well off as much proportionately as the better off.
He has fulfilled his commitment to proceed with his individualisation programme, albeit at a slower rate. He has widened the standard rate band for an individual earner from £17,000 to £20,000 but only raised the single earner married rate from £28,000 to £29,000. The maximum band for double income married earners is £40,000.
The continuing resentment of single-income households may be reduced by the universal increase in child benefit and the overall tax package. Child benefit will now be almost trebled in three years in what Mr McCreevy called "the fairest, most equitable and most pro-choice way" to deal with the childcare issue.
However, the absence of moves to help people pay for the cost of childcare was the focus of much criticism.
Benefits for well-paid self-employed people and proprietary directors could be largely eroded by the elimination of their PRSI ceiling.
The Opposition last night claimed the Budget would fuel inflation. Fine Gael's finance spokesman, Mr Michael Noonan, said the package would add to consumer demand and inflation and "will put the continuing prosperity of the country at risk".
Anti-inflationary measures include a cut in the standard VAT rate of one percentage point to 20 per cent. Excise duty on fuel is coming down by 6p a litre and on unleaded petrol by 2p a litre. The full impact of these changes will take 0.5 per cent off the annual inflation rate, Mr McCreevy said.
He has also introduced a nominal encouragement to save through a tax exemption for the first £375 per annum of dividend income from three-year accounts, or £500 from five-year accounts.
Mr McCreevy estimated that average inflation would fall back to 4.5 per cent next year. Mechanisms to allow gain-sharing and profit-sharing have also been put off until the Finance Bill.
IBEC broadly welcomed the Budget but also warned it will seek to change the abolition of the employers' PRSI ceiling. However, last night Mr McCreevy defended the increase in the light of all the pro-business measures he had implemented in his four Budgets.
Pensioners will receive a rise of £10 per week or 11.5 per cent. All over 70 will now automatically be given medical cards, regardless of means. Finally, income tax exemption limits for the elderly will be increased by £1,000 for a single person and £2,000 for a married couple.
Labour's finance spokesman, Mr Derek McDowell, said the increases of £8 for social welfare recipients and £10 for pensioners were "outrageous". The rises - representing 10.5 per cent on the lowest social welfare recipients and 11.5 per cent for pensioners - will make such people "no better off by the end of the year". He also condemned what he said was Mr McCreevy's continued "assault on any kind of capital taxation" through the abolition of probate tax.