Outrage at Family tax measures took Government by surprise

On Wednesday morning an opposition figure remarked privately that it was a rotten day not to be in Government

On Wednesday morning an opposition figure remarked privately that it was a rotten day not to be in Government. The Government had almost £1 billion to give out in tax cuts that day. "They can't get it wrong. We just have to take the hit and hope next year brings us a break."

That afternoon and evening, the Opposition was in full cry in the radio and television studios of Dublin, capitalising on the most negative reaction to any budget since John Bruton tried to tax children's shoes.

Politically, the Government had got it spectacularly wrong, announcing a controversial change to the ethos of the taxation system and the State's attitude to the family without any prior warning or debate.

By last night, independent TDs and a large number of Fianna Fail backbenchers had been joined by the Archbishop of Dublin, Dr Desmond Connell, and the Irish Family Planning Association in calling for a rethink.

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Fianna Fail TDs reported a record number of calls from constituents objecting. This weekend as they hold their constituency clinics throughout the State, they will feel the full extent of public anger at the measure.

They didn't see it coming. On Wednesday morning, Ministers gathered at Government Buildings to hear Charlie McCreevy outline the details of the Budget he would announce in the Dail that afternoon.

Most were focused on their own departments, and on whether they would get money for pet projects, so when he explained his plan to separate tax bands for husbands and wives, there was no objection or debate.

In conversations after the meeting, the issue did not feature highly either. Several ministers, including the Minister for Health, Brian Cowen, and the Minister for Social Affairs, Dermot Ahern, were particularly pleased with allocations Mr McCreevy would be making to their departments.

It was Michael Woods, the Minister for the Marine, who first remarked that the plan might cause trouble. Dr Woods was a long-time Minister for Social Affairs and understands better than most tax and social welfare measures and the impact they have on families. However alarm bells did not ring. The Cabinet had never debated the proposal in detail, leaving it to Mr McCreevy and his pre-Budget consultations with the Taoiseach and Tanaiste. Ministers, distracted by the historic developments in relation to Northern Ireland and the sheer size of the tax giveaway, had not spotted the storm that was about to break. Mr McCreevy is a man with a mission in relation to personal taxation. At his post-Budget briefing on Wednesday, he repeated his view that the personal taxation system was "viciously penal" and paid tribute to accountant friends who had helped him form his views on how it should be reformed.

He believed in the "individualisation" of tax bands, and was supported in his belief by the ESRI, although not by his own department. He had decided he was going to do it.

Mr McCreevy's speech took over an hour. Deputies remained quiet for most of it, with an uninterested hum of conversation rising occasionally during the more technical aspects. But when Mr McCreevy announced the change in the tax treatment of married couples, there were several gasps and exclamations from the opposition benches. Deputies with their eye on the ball had no difficulty in identifying the issue straight away.

Since then, the Government has been on the defensive and has moved belatedly to explain the measure.

Fianna Fail backbenchers were briefed by Department of Finance officials on Thursday, and about a dozen met Mr McCreevy for 90 minutes before the annual Cairde Fail dinner dance in Dublin on Thursday. Mr McCreevy has been joined by a number of economists in maintaining that far from discriminating against single-income couples, the measure is ending a discrimination against two-income couples and single people.

It makes allowances for the fact that double-income couples have greater expenses, such as child care and travel, for which they receive no other allowance, they say. The ESRI had recommended the change, saying that the situation where the income of a second working spouse can all be taxed at the top rate was inequitable.

But the economic defence of the proposal ignores the fact that this is not simply a financial matter but a proposal involving a profound cultural change.

Up to 30 years ago the stay-at-home mother was a central feature of Irish society. While a small number of mothers worked, they were the exception. This has changed dramatically due to economic and social pressures.

However Mr McCreevy's plan involves, for the first time, the State officially encouraging this development. The economy is short of workers and in attempting to meet the needs of the economy, the Government has left itself open to accusations of being insensitive to the needs of the family.

While the Constitution recognises the special place of women in the home, the Government proposes to use tax policy to encourage women to join the workplace.

This is a profound change, and one which is an even greater surprise coming from Fianna Fail, the party most associated with the traditional view of the family. Next week the pressure on the Government to change its plan is likely to grow further.

The Government faces a severe problem: refusing to back down on a deeply unpopular budgetary measure will involve facing down enormous public anger and internal Fianna Fail opposition; backing down would involve a humiliating retreat from a central plank of budgetary strategy.

The third option being canvassed within Fianna Fail this weekend is the introduction of a "balancing measure" giving some concession to stay-at-home pa rents. Mr McCreevy has told backbenchers he will introduce the £2,000 tax allowance for stay-at-home parents, promised in the Fianna Fail manifesto, within the lifetime of this Government.

That, however, would put only a small dent in the advantage Mr McCreevy's plans give to dual-income couples. Backbenchers are seeking more, and seeking it much sooner.