The Government has targeted key voter concerns in €4.4 billion of spending measures announced in yesterday's Budget, tackling the issues of childcare and tax reliefs for high earners and substantially pushing up welfare rates, writes Mark Brennock, Chief Political Correspondent.
The measures, combined with the spending Estimates last month, will bring Government spending in 2006 to over €50 billion, a11 per cent increase on last year when special payments to those illegally charged for nursing home care are excluded.
While announcing significant childcare measures, social welfare increases and some widening of the tax bands, Mr Cowen also retained scope to make further dramatic advances in these areas in next year's budget, which the Government says will be its pre-election budget.
A new early childcare supplement will give €1,000 annually per child under six to all parents. The existing child benefit also rises to from €141.60 to €150 per month for the first and second child, and from €177.30 to €185 for subsequent children.
A family with two children under six will therefore receive an extra €2,200 per year in direct financial support, making a total of €5,600.
Maternity leave will be extended by four weeks to 22 weeks next year, and a further four weeks to 26 weeks - a full six months - in 2007. Unpaid maternity leave will also rise by four weeks in each of the next two years, bringing it to 16 weeks.
A range of tax reliefs on property - urban, town and rural renewal and special reliefs for building hotels, holiday homes, student accommodation, car parks, sports injury clinics, third-level buildings, park-and-ride facilities and the rental refurbishment scheme - are to be phased out gradually.
The most politically high-profile tax relief - that on stallion stud fees - is also to be phased out by 2008, although Mr Cowen indicated that some other scheme would be introduced to benefit the horse-breeding industry.
He also pledged to end the phenomenon of "tax-free millionaires", introducing a cap on the level of tax reliefs that could be claimed by those earning over €250,000 a year. These measures would increase the effective tax rate for high earners towards a minimum of 20 per cent, he said.
The Opposition parties last night criticised the broadening of the tax bands as not going far enough. Mr Cowen said his increases in the employee tax credit and basic personal tax credit will take all those on the minimum wage out of the tax net for all of 2006, while Fine Gael and Labour said some would drift back as inflation took effect during the course of the year.
The measure will remove some 52,000 earners from the tax net in 2006. In addition, the standard rate tax band goes up by 9 per cent or €2,600, removing over 90,000 taxpayers from the top rate. Mr Cowen said this would ensure taxpayers "earning around the projected average industrial wage" in 2006 would pay tax at the lower rate.
Extra grants for childcare providers will bring 50,000 new childcare places between 2006 and 2010, he said, which combined with existing schemes will create 65,000 new places by then. Some 17,000 new childcare workers will also be trained by 2010.
Individuals minding up to three children in their own home will be exempt from all income tax, PRSI and levies on their first €10,000 earnings.
The €1.1 billion social welfare package will see old age contributory pensions rise by €14 to €193.30 per week. Non-contributory pensions rise €16 to €182 a week. In addition, non-contributory pensioners will be able to earn €100 a week without affecting their entitlements.
All personal social welfare payments are to rise €17 a week, bringing the lowest personal social welfare rate to €165.80 per week, an 11 per cent rise.
The fuel allowance rises from €9 to €14 a week, the carer's allowance goes up to €200 a week for those aged over 65 and €180 for those 65 and under.
Today the Tánaiste is to outline a new €150 million annual package for older people.