The background papers made available to this newspaper yesterday under the Freedom of Information Act cast the budget debate on the individualisation of tax bands in a more damaging light for the Taoiseach, the Tanaiste and the Minister for Finance. They show that some eight weeks before the budget the Tax Strategy Group had warned the Government in no uncertain terms that it would be inequitable, divisive, constitutionally questionable and politically unacceptable to proceed with the plan to improve the tax position of single earners and two-income families at the expense of women working in the home.
The Tax Strategy Group is the Cabinet's official advisory committee on budgetary and taxation matters. It comprises not just the top officials in the Departments of Finance and Enterprise and Employment and the chairman of the Revenue Commissioners, but the most senior political advisers to the Coalition leaders. In other words, it is the type of advisory group which no Government should ignore lightly.
Up to this point, it had been known that the Minister for Finance's officials had opposed the individualisation proposals in the run-up to the unveiling of Budget 2000 on December 1st. The preparedness of a Minister to go against the wishes of civil servants, especially the more conservative breed in the Department of Finance, is no political sin. It had also been known that the Taoiseach, Mr Ahern, the Tanaiste, Ms Harney, and Mr McCreevy were the only members of the Government to have foreknowledge of the controversial tax plan. The full Cabinet was only informed of the changes in a briefing at noon on budget day.
Forced within days to make a £3,000 a year tax concession to the spouses of one-income families, Mr McCreevy maintained that he had looked at individualisation with 20:20 vision. He claimed that if he had foreseen the combination of political forces to be unleashed by the budget he would have done things differently. The revelations in the FOI papers, however, show that the Minister had full knowledge of all the pitfalls surrounding the individualisation measure. The Tax Strategy Group, which had been examining the taxation issue for many months, opined on October 5th that it would be "very difficult to generate a public consensus which would be necessary for any such change". The resources raised by the move towards individualisation would not be targeted towards families with children and "as such this approach would be at variance with Government policy to re-focus tax and social welfare in favour of the family unit", it said.
Armed with such a prior warning from the Tax Strategy Group, eight weeks before the announcement of the budget, it seems extraordinary that Mr McCreevy and the two Coalition leaders proceeded with the individualisation proposal in the manner in which they did. The warnings about the social and political pitfalls came not just from Finance officials but from chosen and trusted programme managers and political advisers. They ignored them. They didn't even prepare the case to defend such a radical initiative. Their subsequent climbdown - on the grounds of the criticisms set out by the Tax Strategy Group - will involve the spending of a further £500 million in the Finance Bill. The FOI documents demonstrate a classic case of political ineptitude.