The Government has pledged that it will keep to its ambition that 80 per cent of taxpayers should pay tax at the standard rate only. The Minister for Finance, Mr McCreevy, acknowledged the State's inflation performance was disappointing and represented a "serious challenge", but said a lot of inflation was outside domestic control.

Speaking during a debate on a Fine Gael motion condemning the Government's handling of inflation, the Minister said there would always be challenges in sustaining a strong economy and sound finances and in this context he would be framing the Budget in December.

Fine Gael's finance spokesman, Mr Michael Noonan, said the Government failed to manage the economy effectively. "The Ministers with primary responsibility for economic management have failed across a range of issues and continue to fail in controlling inflation." Mr McCreevy said the best defence against inflation was an even more open and flexible economy where artificial barriers were minimised. "With support from the social partners, we are introducing a single standard rate income tax band for all individual taxpayers. This is the type of transformation in people's financial situation and the tax system that the Government is making on the basis of our strong economy."

Emphasising the role of the Social Partnership, he said the Government was making every effort to sustain the partnership "which kept inflation low.

He said he was confident that "notwithstanding the unwelcome increase in inflation, we can ensure that the PPF will deliver real improvements in living standards while ensuring we maintain our competitiveness". Opening the debate, Fine Gael's finance spokesman, Mr Noonan, said the Government had failed to anticipate the inflationary pressures or take any real measures to combat inflation. The Government had been consistently warned but "still will not act in any realist way but continue to trot out the same tired old excuses".

He called for the introduction of a non-inflationary gain-sharing mechanism and a coherent strategy to reduce Ireland's exposure to external shocks. Labour's finance spokesman, Mr Derek McDowell, said people on fixed incomes were worse off now than this time last year.

The priorities for this upcoming Budget "must be people on social welfare pensions and people on low pay".