February 16, 2011
By Staff Reporter
By Andrew Bushe
DUBLIN — As a budget it should have been a finance minister’s dream — a record tax and benefits giveaway of almost £1.5 billion — but for Charlie McCreevy it has turned into a nightmare and has plunged the coalition into a political crisis.
Where it all went wrong was with what the minister described as "individualized" tax allowances.
What it means is that there are extra tax breaks for households where both couples were working. In homes where only one of the spouses has an income, people are up in arms about discrimination.
It was good economics for the Celtic Tiger: a carrot to attract married women back to working in skills-starved industry and business.
Politically it has been a disaster.
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Instead of the expected plaudits for the cash handouts from bulging government coffers, a deluge of criticism has descended on the coalition, which is fighting a rearguard action to defend itself against accusations of being socially divisive and anti-family.
Lined up against them is an unusual combination of the Catholic archbishop of Dublin, family values groups, feminist radicals, farming interests and some of their own backbenchers — including even the taoiseach’s own brother, Noel, who is a TD in Dublin North-West.
In its 1997 manifesto, Fianna Fail had promised a £2,000 tax allowance for stay-at-home parents.
Despite pickets on his Kildare constituency office, McCreevy hasn’t blinked so far. He will face the wrath of disgruntled backbenchers at the parliamentary party this week who will want to know how it all went so wrong and can it be fixed.
There are also rumblings of dissatisfaction among some of the independents who are propping up the Fianna Fail-Progressive Democrat minority administration.
What has left the shocked Government mired in the major political row is a perceived unfairness to stay-at-home spouses — the vast majority of them women — caused of an increase in the dual income allowance to £34,000 while the single income household allowance remains at £28,000.
The effect of this on a £40,000 income household means that if there is one earner the tax allowance will mean £934 extra but if the couple jointly earn the income the benefit will be £2,244 — a difference of £1,310.
The minister, who admitted he had been forewarned there would be trouble ahead on the issue, said he was merely acknowledging huge social changes in Ireland where only 103,000 are single income families out of 1.7 million taxpayers.
He described individualised allowances as "innovative and radical" and denied there was any question of discriminating against women in the home but merely recognised that women who went out to work had extra expenses to meet like childcare and travel.
Up until now, he said, the tax system had been unfairly skewed against dual income households.
The Minister had planned that this sort of advantage for dual income households would accelerate and widen in his future budgets.
The budget has been generally welcomed by employers and trade unions who are vital if the Government is to get through a new partnership deal that will deliver wage moderation.
It is estimated that people on the average industrial wage will get the equivalent of a pay rise of over 12 percent.
Despite a social welfare handout of £400 million — the biggest ever — the budget has also been attacked for favouring the rich instead of the poor and institutionalising divisions in society.
"It is deeply divisive, unfair, lacked vision, squandered resources that are available, is anti-poor, anti-family and anti-women," said Fr. Sean Healy, director of the Conference of Religious in Ireland.
"All government claims that this is a budget for social exclusion amounts to a prostitution of the language. What we have as a result is a huge widening of the gap between poor people and the rest of society. In fact the budget widens social exclusion."
He said it was an insult to poor people and the figures spoke for themselves — 26p a day for children, £4 week for an unemployed person and £50 a week for people already on double incomes of over £50,000.
The income tax take is being cut by £942 million and will mean the numbers paying the new top rate will drop from 46 to 37 percent. He promised that in the next two budgets the numbers on the top rate would be cut to 17 percent taxpayers.
"This year’s tax changes will remove 125,000 taxpayers from the top rate of tax," he said.
The changes in tax bands and allowances will remove nearly 40,000 lower income taxpayers from the tax net.