Cowen rejects Opposition claims on Budget

Minister for Finance Brian Cowen has denied accusations by the Opposition that yesterday's Budget was an attempt to buy the next election.

"How high a surplus am I to have before that charge is not levelled against me," Mr Cowen asked in an post-Budget interview on RTÉ Radio this morning.

Yesterday the Minister announced a €1.25 billion package of tax changes, including a widening of tax bands and a one percentage point cut in the top tax rate in his Budget for 2007.

He also announced significant increases in pension and welfare payments and a doubling of mortgage interest relief for first-time buyers.

Speaking on RTÉ's Today With Pat Kenny, Mr Cowen said: "Thankfully the public finances are in a good shape, and we had a surplus to deal with."

He said: "One third of the windfall gain is being spent on immediate priorities and two-thirds retained as surplus because we can't put all that money back into the economy without having inflationary effects and affecting the cost of living."

Mr Cowen rejected criticisms about the pace and planning of infrastructural development, claiming the economy was a victim of its own success not failure.

But Labour leader Pat Rabbitte claimed there was no imagination in the Budget, "just a safe targeting of interest groups that might show an electoral dividend".

Speaking in the Dáil, Mr Rabbitte said: "Once again this PD/FF Government has favoured the super high earners in our economy and has failed to use the resources to relieve the strain on our society."

"A 1 per cent cut in the top rate of tax delivers more than €2,000 to a person with an annual income of €250,000. It gives nothing to someone on €32,000," he said.

Mr Rabbitte said: "One of the most striking elements of the Budget is that the Government has decided to completely jettison its promise to the electorate, that only 20 per cent of taxpayers would pay tax at the higher rate."

But the Taoiseach Bertie Ahern defended the budgetary changes, saying they were "designed to sustain the strength of the Irish economy".

Mr Ahern said: "The Budget is an entirely responsible one, designed not to overheat the economy and to give us a substantial safety margin, if the existing environment should disimprove."

He criticised the Opposition parties, whom he claimed were making contradictory demands on the public coffers.

"On the one hand, they have argued that our strong performance showed that taxes should be lower, that the Government did not need the money because public spending was high enough and could be funded through lower taxes.

"On the other hand, they argue that there should be higher public spending, because the resources are now available for an unlimited spending spree, except, of course, that it would be irresponsible of the Minister to embark on such a pre-election splurge," he said.