Taxation has so far taken centre-stage in the election debate. Once Democratic Left launches its policies today, the platforms being offered by all the major parties will be known. All are offering roughly the same amount in tax reductions - £300 million a year over five years - although in detail they differ substantially. And what the voters must realise is that all the plans are contingent on a continuation of strong economic growth.
The debate on how to reform the tax system must be kept in context. Plans for the exchequer finances over a five-year time frame can only be tentative. All the parties agree that control of the public finances must take priority and that we can never again go down the road of allowing borrowing to mushroom. And doubts remain about how successful any incoming government can be in controlling expenditure. So the amounts being promised in tax reductions should be seen as the most that is likely to be available.
Most of the tax plans published to date have points to commend them. There is, indeed, a need to increase personal tax allowances as the three Coalition parties are proposing. This is an important way to give a boost to lower- to middle-income earners, as well as attacking some of the problems caused by the interaction of the tax and social welfare system. Widening the standard income tax rate band, as all the main parties are proposing, is also important. This is because the problem with the tax system is not so much the overall burden, but rather the relatively high imposition at incomes at or below the average industrial wage. And the Progressive Democrats have proposed the introduction of tax credits to replace allowances, a measure worthy of consideration and which the social partners have undertaken to examine as part of Partnership 2000.
But questions need to be asked about some of the measures being proposed. Is there really a need, for example, to reduce the top income tax rate to 40 per cent, as the Progressive Democrats promise? And are the special allowances and subsidies which Fine Gael and Fianna Fail are offering to married couples with children confirmation of a sign of a return to auction politics, as both parties try to win votes from specific sections of the community? There may well be a case to direct help towards families with young children, but blanket allowances or subsidies are a relatively expensive way of doing this. There is now a need to move on to a more balanced and fundamental consideration of the economic policies being offered by the different parties. Tax policies are important, but the election should not be won or lost on the basis of aspirational offers of greater take-home pay. Other more important policy matters must also be considered. In just a year and a half, Ireland is due to be one of the founder members of EU monetary union. Entering the single currency will be perhaps the most far-reaching economic move ever taken by an Irish government. We need to hear more from the parties about how they intend to prepare for the challenges of monetary union and how they propose to manage the changeover.
The campaign must now focus on the more fundamental issues of how we sustain prosperity, how we distribute the resulting wealth and how we build on the social partnership of recent years. Voters can look at the tax issues and calculate who offers them most in the short term. But they would be better to base their voting decision on which of the combinations on offer is best placed to build on recent successes and to secure the job prospects of coming generations. Long term stability and coherence must take priority over a short-term windfall of a few pounds. Who can best offer that - the Rainbow or an alternative coalition with Fianna Fail and the PDs at its centre?