There is now surely a sufficient consensus about the relationship between taxation policy and unemployment in this State to merit action that puts it to the test of practical implementation. This is why the Minister for Enterprise and Employment's proposals to the Cabinet for radical changes in the tax and social welfare systems should be welcomed. Mr Richard Bruton has timed them very well to coincide with the Government's discussion in the run-up to the Budget on January 23rd, just as the unemployment figures have shown an unexpected increase of 2,900. This should ensure that they get the detailed attention they deserve.
There is at least a real coherence about the plan. It aims to tackle from several different directions the question of how to make it more attractive for young people and the long-term unemployed to seek employment and of companies to offer it without, paradoxically, becoming financially worse off. This is the thrust of the proposals to exempt the first £75 of earnings from income tax and PRSI, to reduce employers' PRSI to British levels and to introduce a new subsidy of £80 per week for employers taking on the long-term unemployed.
Another batch of proposals would allow those taking on work to retain certain supplementary benefits for a specified period, reduce unemployment pay to 18- and 19-year-olds and allow long-term unemployed people who take work to retain child dependant allowance for three months. Finally there are suggestions for a temporary employment scheme to encourage small businesses and households to take on unemployed people and to top up the lowest incomes.
In certain respects this plan comes up against sensitive political or ideological points of disagreement within the coalition between Fine Gael, Labour and Democratic Left. Examples would include the reduction of unemployment benefit for young people and the pegging of employers' PRSI payments to British levels. Critics will say that the one begs the question of the need to transform facilities for education and training and that the other accepts too readily a benchmark of competition with Britain, as if that were the only relevant country for such comparisons.
Indeed, as Prof Joe Lee pointed out in these pages last week, the argument about competitiveness sits very awkwardly with the current high levels of economic growth here. These are cogent criticisms, but it will be up to the Cabinet to ensure that the package's coherence, relevance and typicality are not unravelled by such a cherry-picking approach.
According to the Progressive Democrats, who launched their own five-year programme of tax reform yesterday all this only tinkers with the existing system in ways that have been found wanting on three previous occasions. Their criticism is too sweeping and takes from the longer-term thrust of their own proposals. These concentrate on macro rather than micro taxation policy and are based on a radical lowering of its overall level; whatever one makes of this approach it is clear that action at both levels will be required if unemployment is to be tackled effectively. The PD proposals have the additional merit of underlining the urgent need to prepare Irish fiscal policy for the new century when EU transfers will sharply contract.