No income tax cuts in Budget, says McCreevy

The Minister for Finance, Mr McCreevy, has insisted today there will be no income tax cuts in the upcoming Budget.

Speaking on his way into today's gathering of the social partners in Dublin Castle, Mr McCreevy said the Government purse strings were tighter now than they had been when the last

Programme for Prosperity and Fairness

was signed in 2000.

"The scope for future tax reductions . . . is very limited," he said. "I think that is recognised by all sides".

Also arriving at the talks this morning were the Taoiseach, Mr Ahern, and the Tánaiste, Ms Harney.

Ms Harney noted the Government "no longer has the resources it used to have,"so there was no scope to reduce personal income tax. But she insisted the top rate payable by the highest earners will not be raised to alleviate the tax pressure on thelower-paid.

She also said corporation tax would not be raised to offset falling income tax revenue. There would be no delay in the plan by the Minister for Finance to lower the rate to 12.5 per cent, she insisted, arguing that "an important commitment has been given".

The Government will consider othertax changes, including in the area of excise, VAT and other indirect taxes that would not affect competitiveness.

Under previous social partnership deals, income tax cuts were combined with pay increases to keep both employers and unions happy. The idea was that workers' net take-home pay would rise significantly, but employers would not have to bear the full brunt of the costs.

However, Mr McCreevywarned this morning that the wage increases enjoyed by Irish workers over the past number of years were unlikely to continue. "We have awarded ourselves higher pay raises than any of our European competitors," he said. "In doing so we are in danger of pricing ourselves out of the market".

The outgoing PPF gave workers wage rises of about 20 per cent over the past three years.