The Minister for Finance, Mr McCreevy, has delivered a populist "give away" Budget with £517 million in tax cuts, mainly aimed at middle- and upper-income groups. In response, trade unions have criticised the low increases in personal allowances and warned the Government that Mr McCreevy's approach to commitments made to the low-paid in Partnership 2000 could jeopardise the prospects for a new national agreement.
The business community broadly welcomed the Budget provisions, expressing satisfaction with changes in corporation tax and PRSI, although some organisations said Mr McCreevy did not go far enough.
The employers' lobby group, IBEC, said in general the Budget underpinned Partnership 2000, would help investment and employment, and would and contribute to social inclusion. Critics, however, pointed out that while reducing the higher rate of income tax from 48 per cent to 46 per cent and the standard rate from 26 per cent to 24 per cent makes for good headlines, it also throws up a series of anomalies.
The trade unions uniformly criticised Mr McCreevy's decision to cut the top rate of PAYE tax at the expense of concessions to the lower paid. The strongest reaction came from the country's largest union, SIPTU. Its president, Mr Jimmy Somers, described the Budget as "a wasted opportunity" to reform the tax system and warned that it could make negotiation of a successor to Partnership 2000 difficult.
The Minister "has not delivered on tax reform, or on improving the lot of the less well-off, or improved the incentive to work," Mr Somers said last night.
"As a result of his focusing so much money on cuts in tax rates, there will still be poor people trapped at the top rate of tax."
Indeed, the Budget appears to benefit those who Mr McCreevy perceives to have contributed most to the Celtic Tiger - higher rate taxpayers and pensioners. The "payback" varies considerably between 1 and almost 4 per cent.
The biggest beneficiaries are married people on £28,000 or more and single people on about £14,000. A married person with two children, however, needs to earn £13,000 before he sees the same gains as an unemployed person, and would need to earn £28,000 before reaping gains of 3 per cent or more.
One beneficiary will be widows with children, who see a huge increase of £3,500 to £5,000 for the special relief available for those recently bereaved.
Individual measures do, of course, help all taxpayers and no-one will actually lose. The allowances increase, for example, puts £60 into the hands of single standard rate taxpayers and £115 for those at the higher rate.
However, according to Mr Somers, the decision to increase allowances by £250, instead of £1,000, meant that single workers on just £2 an hour, or married workers on £4 an hour would be paying the top rates of tax in some cases.
In addition, a £100 increase in the standard rate tax band saves a maximum of £22 over the year for those on the higher rate. And while the Minister was claiming 15,000 low-paid workers would be removed from the top tax bracket by his proposals, SIPTU's proposals to concentrate cuts on tax allowances and widening the standard tax band would have removed 40,000 workers from the tax net completely, Mr Somers insisted.
"This Budget further widens the gap between rich and poor," he said. "The trade union movement entered these national agreements with a view to creating a just and fair society, and it was recognised that the use of the taxation system had a key role in achieving this objective.
"The failure of the Government to honour the thrust of Partnership 2000 by concentrating on allowances and bands, and removing people from the higher tax rate, will undoubtedly impact on trade union attitudes to any new programme in future." The general secretary of the Irish Congress of Trade Unions, Mr Peter Cassells, said the Budget "goes some way towards tax improvement for PAYE workers". However, "it does not go far enough to distribute the benefits of economic growth to people on low and middle income".
"Business has done very well out of this Budget. There is now a powerful social and moral obligation on business people to distribute these gains by supporting a fair national minimum wage and by introducing profit-sharing schemes for workers."
Mr Cassells welcomed the measures to help the unemployed, pensions and those with disabilities. But more was needed to distribute the benefits of economic growth to them, he said.