IBEC has endorsed the controversial Budget measure designed to make it more attractive for women to take up careers outside of the home, saying it has the potential to solve much of the economy's skills shortages. An Economic and Social Research Institute (ESRI) economist has also insisted that the change in the tax treatment of couples has introduced a fairer system for double-income couples and will not necessarily discriminate against single-income families in the longer term.

The proposal, which boosts the after-tax earnings of double-income families, was examined by an inter-departmental working group on taxation changes for families earlier this year. In that report the Department of Finance objected to the proposal on the basis that "it ignores the key justification for the existing married treatment - the need to avoid unjustifiable discrimination against one-earner married households".

Other Government departments also suggested combining the tax change with significantly increased child benefit and a special stay-at-home allowance for families with children under three.

IBEC said yesterday that the Minister for Finance's three-year "individualised" tax allowances could quickly bring substantial numbers of women into the workforce.

The organisation's director of economic policy, Mr Brian Geoghegan, said the initiative should tie in with the strenuous efforts being made by a wide range of employers to attract more employees and to retain staff. "It could very quickly address the skills shortages and dramatically improve the financial position of many women," he said.

Mr Geoghegan said that while the issue has attracted a lot of heated debate, particularly from single-income families, much of the negative sentiment is unfounded. The shift to individualised tax allowances reflects the reality that most women expect to work, he says.

"It's a quite different situation than say, a decade ago and the tax system should recognise that reality".

Mr Tim Callan, a research professor at the ESRI, says claims that the Budget favours married couples who are both working over families where one spouse stays at home, do not stand up.

He contends that the current tax system is unfair to couples where both partners work because single-income families enjoy greater benefits.

"Which family is better off, the one which earns £40,000 and has one partner available to care for children and/or manage the home, or the couple which earns the same cash amount, but does not have the benefits arising from having one partner in the home?" he asks.

Mr Callan says most people would agree that at the same cash-income level, a one-earner couple is indeed better off, not just because of the costs of participating in the labour market but also because of the value of the work done in the home.

Under the Government's three-year programme, one-income families will still be better off than double-income households, he suggests. "At the end of the Government's proposed three-year programme, the one-earner couple on £40,000 would still be better off than the two-earner couple in terms of total resources, unless the value they place on the work done by the partner in the home is less than £50 per week." The Dublin Chamber of Commerce welcomed the personal taxation elements introduced in the Budget.