Minister for Finance Brian Cowen last night responded to election promises of recent weeks by warning against sacrificing Ireland's economic success on "the altar of short-term political opportunism." Stephen Collins, Political Editor, reports.
He said Fianna Fáil's priority was the implementation of the National Development Plan, (NDP) and further tax- cuts would only be made if additional resources were available.
Speaking to the Irish Taxation Institute in Dublin, the Minister said that while the Government believed in low taxation, further cuts would be made only after the NDP commitments were met and 1 per cent of gross national product was invested in the National Pension Reserve Fund each year.
The Progressive Democrats last weekend committed themselves to reducing the higher rate of tax from 41 per cent to 38 per cent, and the lower rate from 20 per cent to 18 per cent during the lifetime of the next government. The Labour Party has also promised to reduce the lower rate to 18 per cent, and has been supported by Fine Gael.
Mr Cowen strongly attacked the Labour Party's tax proposals but he made no direct reference to the bigger tax-cutting commitments of his coalition partners, the PDs. As well as cutting tax rates, the PDs have pledged to widen the bands as part of a total package that would cost €5.5 billion.
The implication of Mr Cowen's line is that another coalition deal between Fianna Fáil and the Progressive Democrats will be difficult to negotiate, given the range of spending commitments announced by Tánaiste Michael McDowell last weekend.
Mr Cowen said that as Minister for Finance he had to promote "the right policies", namely those that would promote investment and hard work.
"I see that as my first responsibility and the continuation of prudent management of our economic affairs is the best way of meeting it.
"Others see things differently. Their view is that the heavy lifting has been done. Ireland has reached a plateau of permanent prosperity - that the time has come for us to throw caution to the wind and indulge in a bit of a spending spree. Their thinking is, 'Our economic boat has come in, it is time to let it rip'."
But the Minister rejected that analysis because the economy's current status could not be assumed to be a precise predictor of future success. "We have to keep working at our competitiveness. The only way forward is to continue to implement the right policies, the sustainable and affordable policies, if we are to continue enjoying economic success."
Mr Cowen added that the NDP, which committed €184 billion to Ireland's future, was the vehicle for the State to attain its objectives.
"I believe that its implementation is essential to our future well-being as a nation. For that reason, it will take precedence if Fianna Fáil is returned to office in this year's general election."
He said that the Government believed in the incentivising power of low taxation and had the record to prove it. But he said he would not introduce changes that either threatened current prosperity or impaired the ability to realise the vision set out in the NDP.
"We are in the midst of pre-election party conference season. The Labour Party leader's volte face on tax borders on the Orwellian. This week, tax cuts bad; next week, tax cuts good: 40 years of policy conviction extinguished in 40 seconds."