The offer to give stay-at-home families an additional tax allowance goes some way to addressing the criticisms of the Budget. However, it also leaves the Government's future policy on taxation confused and unclear and may even encourage some women in low-paid jobs to leave the workforce.
This year, all one-income families with spouses who work at home caring for children, the aged or a handicapped person will receive an additional tax allowance of £3,000.
The measure, which will cost £125 million, is aimed at closing the gap between double-income and single-income married couples which was introduced in last week's Budget.
The tax allowance can be claimed at the standard rate and thus will be worth £660 next year to the families who will benefit.
This compares with a benefit for two-income couples from the controversial widening of the standard rate income tax band of a maximum of £1,320 for those earning over £34,000.
The new measures, which the Minister hopes will defuse the immediate political row, will benefit the 180,000 single-income couples who are in the tax net and have children. Better-off double-income earners will still do better - whether they have children or not. But not everyone will be happy.
Two-income families earning less than £28,000 will not benefit at all from the invidualisation - or from the new measure. The Department admitted last night this was an "anomaly", but said the new measure was aimed at stay-at-home families. This is despite the fact that the widened tax bands benefit all double-income couples whether they have children or not.
It is now unclear where the individualisation plan, which was perhaps the most significant change ever in the Irish tax code, will go. The initial measure, which was introduced to encourage more married women back to the labour force, has now been watered down.
The Minister for Finance, Mr McCreevy, initially intended to encourage more women back to the labour force using the taxation advantages for double-income couples. These incentives are still in place for women who do not benefit from the new allowance - in other words those who have no children and who are not minding an elderly or handicapped person at home.
However, some women in low-paid jobs may be better off, in some circumstances, by leaving the workforce so that their spouses can claim the £3,000 allowance. For many others, the incentive to work will be sharply diminished.
It is also unclear what will happen in future years. Yesterday's statement talked about "the transition to individualisation of tax bands proceeding". The Budget set out a three-year programme which would leave two-income couples benefiting from twice the standard rate tax band as that applied to single-income couples, meaning an annual income gain rising to some £6,000 for the dual earners.
But a few paragraphs later, the Minister's statement says that "in the light of the strong views expressed on the whole issue of individualisation, the Minister proposes to invite the Social Partners to consider the future development of the individualisation process in the course of the current talks on a successor agreement to Partnership 2000".
This may mean the concept is not off the agenda, but the Minister is certainly hedging his bets. It is quite possible the process will continue, but if so it is likely to be accompanied by a range of other measures. These could include additional child benefit, allowances for young children, or additional pre-school places as recommend in the working report on the issue last summer.
The Minister will now be very wary of the distribution effects which a move to full individualisation will have. According to Mr Jim O'Leary, chief economist at Davy Stockbrokers, in future years the benefits will be concentrated further and further up the tax scale - if the individualisation plan continues. This would be compounded by promised cuts in the top rate of tax which the Coalition has said will fall to 40 per cent over the term of the Government. This would mean the Government would need to introduce a very substantial range of measure to benefit the less well off in order to find a balance.
Either way, the Minister has his work cut out trying to untangle the tax system again. There is now a new layer of complexity introduced with tax payments, depending not only on marriage and income but also on children and their age. This runs counter to his attempts to simplify the tax code.
The new measure will cost about £75 million in 2000 and £125 million in a full year. But given so-called tax buoyancy, which estimates the amount that will flow back in additional revenue such as VAT and excise duties, the overall impact is likely to be about £50 million this year. That is insignificant in terms of the underestimate of tax revenues for this year, which will see around an extra £150 million flow into the Exchequer's coffers in December and, in turn, benefit the outlook for next year.