This Government has a clear and coherent plan for tax reform. And the latest Budget was yet another significant step along the way to achieving a radical transformation of the system.
Our objective as a Government is to ensure that, out of every 10 earners: four are exempt from tax altogether;
four pay only at the standard rate;
and only two are liable for tax at the top rate.
That would have seemed a wildly extravagant ambition when this Government took office 3 1/2 years ago but we are within reach of it now. After Budget 2001, 38 per cent of earners will be exempt from income tax, 39 per cent will pay only at the standard rate. And I am confident next year's budget will improve further on those figures.
Much of the post-Budget debate has centred on fairness.
I believe low tax rates are fair tax rates. And, as leader of the Progressive Democrats, I am very pleased this Government has succeeded in lowering tax rates for workers right across the board.
There is one very easy way of measuring the tax burden on incomes and that is to look at average tax rates. Your average tax rate is your total deductions - income tax, PRSI and levies - as a percentage of your gross income.
This Government's performance in reducing average tax rates has been spectacular by any standards. We inherited from the previous administration a tax regime which imposed very heavy rates on people on modest and middle incomes and we have taken decisive action to change that situation.
The reductions in average tax rates over our four budgets have been dramatic:
For a single person on £10,000 a year the average rate has fallen from 19 per cent to 5 per cent.
For a single person on £20,000 a year the average rate has been halved from 34 per cent to 17 per cent.
For a single-income couple on £30,000 a year the average rate has been cut from 28 per cent to 15 per cent.
That represents rapid reform and compares more than favourably with the snail's pace progress that was made under the previous Fine Gael-led government.
The reductions in average rates have been greatest for those on modest and middle incomes and smallest for those on higher incomes. This reflects the balanced approach to tax reform being taken by this Government - a mix of substantial cuts in the headline rates and record increases in bands and allowances.
The fact that those on modest incomes have fared best in terms of rate reductions is proof positive of this Government's commitment to a fairer tax system for everyone. Next year's budget will see all those on the minimum wage taken out of the tax net.
Fairness is not just about tax changes, of course. Cutting taxes - on incomes, on capital, on companies - helps to improve the competitive position of the Irish economy. But there is no conflict between competitiveness and competition. In fact, I believe that only an enterprise economy can generate the resources required to create an inclusive society.
And so in Budget 2001 we were able to deliver the biggest-ever increases in child benefit, in social welfare rates and in old-age pensions. We have now increased the old-age pension by £28 a week: it's hard to think now that the Rainbow government increased it by just 26p per day in their first budget.
When I said during the 1997 election campaign I was committed to raising the pension to £100 a week over the lifetime of the next government not everybody believed me. We have surpassed that target now. It shows politics can work for people.
The pace of change in our economy over the last three years has been so dynamic and so dramatic that some commentators find it difficult to keep up. Comparisons can be made as to how someone in long-term unemployment and someone on £20,000 a year have fared under this Government's four budgets. An analysis of the budget tables will show the person on £20,000 a year did better.
What that analysis would not show is the long-term unemployed person of three years ago may well be the £20,000 earner of today, because long-term unemployment as a social phenomenon in Ireland is disappearing rapidly.
Three years ago there were almost 90,000 people - 5.5 per cent of the workforce - in long-term unemployment. Today, that figure is down to just over 25,000, or 1.4 per cent of the workforce, as more and more people move from long-term joblessness into mainstream employment. That is huge social progress and it flows directly from the socially inclusive tax and welfare policies pursued by this Government.
I am already on record as saying we can achieve the effective elimination of long-term unemployment before we complete our term of office in 2002 and I believe that is now an eminently reasonable target.
We have now learned how to generate prosperity in this country. Among the key factors contributing to our success have been reductions in taxation and the liberalisation of important sectors of our economy. It is vital progress continues on both of these fronts if we want to sustain our social and economic success.
Both of these policies - tax reduction and market liberalisation - have been the very bedrock of the Progressive Democrats' political beliefs since the party was founded 15 years ago. Fifteen years on, we are still the only party committed to both.
Tomorrow: Father Sean Healy of the Conference of Religious of Ireland gives his verdict