IT all started with tax. And late yesterday some of the last exchanges in the election debate were again on the tax issue, as Fianna Fail and the Progressive Democrats gave the outlines of the first Budget they would introduce in November and the Rainbow responded.
The proposals put forward by the Opposition were largely a reheat of the Fianna Fail tax plan introduced at the start of the campaign, with the emphasis on what could be promised in the first year. A plan to review the pension entitlements of retired public servants was thrown in for good measure.
In their first Budget in November, the two parties are promising to introduce a new lower tax rate of 20 per cent, chargeable on the first £2.000 of income and to commence the extension of the standard rate income tax band to ensure fewer people pay at the higher rate. They are also committed to a reduction in the top tax rate. PRSI cuts and the introduction of Fianna Fail's £2,000 tax allowance, payable to a spouse staying at home to mind children, or against the cost of childminding expenses.
The PDs - whose original tax plan was based on cutting the two tax rates and abolishing employee PRSI and the 2.25 per cent levies - would have had little difficulties agreeing to the plan. It neatly slides out of one area of policy difference between the two. The PDs favour the complete abolition of employee PRSI, a move to which Fianna Fail is unlikely to agree. Last night's statement merely promises to start the process of reducing PRSI. The proposal for a tax allowance for the long term unemployed returning to work is in Fianna Fail's jobs programme, published last week.
The cost of the overall plan is impossible to calculate completely. because full details are not given in many areas. However, with the introductory 20 per cent rate and the tax allowance to families with children costing around £250 million, the whole package would be likely to come to around £400 million. It is thus above the £300 million per annum which has been the rough amount promised by most parties in annual tax cuts. It is, however, less than was given away in this year's Budget and the net cost to the Exchequer would be cut by the tax buoyancy which the reductions themselves would create.
Rainbow criticism of the plan surrounded a headline in one morning newspaper yesterday saying that the cuts would offer £11 a week to the PAYE worker on £300 a week. They would offer nothing of the sort, with the total gain coming to perhaps £4 to £5 a week to a worker on this wage. The Fianna Fail/PD statement did not claim the £11 figure, the original source of which remains a mystery.
Giving £11 a week to everyone would, as the Rainbow parties were quick to point out, cost around £600 million. The only people who would benefit by this amount would be those who qualified for the £9,000 tax allowance relating to childminding expenses or a spouse staying at home. This would be worth £10 a week to those who benefit.
The one significant area where the plan differs from the original Opposition proposals is that it promises to increase personal tax allowances, at least in line with inflation. Increasing allowances is the centre point of the Rainbow programme and was not in the original Fianna Fail plan, although a later party document did contain an aspiration to increasing allowances. Most expert analysis has recommended higher allowances as the best way to reform the tax system and the benefits of the Rainbow package are certainly more tilted towards average to lower paid workers.
Fianna Fail and the PDs have also promised to resolve the claim for pension parity for retired public service staff. Mr Ahern and Ms Harney said they are committed to restoring the link between pensions and increases in current rates of public sector pay.
However, a spokesman for the Department of Finance, said it is in negotiations with Congress at the moment about resolving the issue.