Charlie McCreevy (Kildare North, Fianna Fail)

Recommendations Nos. 3 and 4 propose to increase the basic personal tax credits from €1,520 to €2,000 for single persons and from €3,040 to €4,000 for married persons. The cost of the increase proposed by the Senator, taking account of the consequential increase in the one-parent family tax credits, would be €557 million in 2003 and €777 million in the full year. This cost represents more than four times the full year costs of the 2003 budget income tax package and would not be possible in the current economic circumstances. I have already indicated to Senators, or will indicate to them, the other reasons I cannot accept this amendment.

In this year's budget I have made only a limited number of changes to the personal tax system. These will have a total cost of €186 million in a full year. That is all that can be afforded in the current economic circumstances. When the resources were there we made the corresponding improvements, as the following facts will confirm. The value of the personal credit increased by almost 16% in the period from 2000 to end-2002 while the value of the PAYE credit, or allowance as it was then, increased by over 136% in the same period. The value of the standard rate bands for a single person increased by over 29% over the same period, while the exemption limits for those aged 65 and over increased by over 57%. By comparison, in the same two-year period the consumer price index rose by less than 10%.

If the Senators wish to examine the issue going back as far as 1997 they will see that, in terms of income relieved of tax for the standard rate taxpayer, the combined value of the personal credit and the PAYE credit, or allowances as they were then, has increased by over 78% up to the end of 2002. Over the same period the consumer price index increased by about 22%. In 1997, before the Government came into office, a single person with an income above €17,207, or as it was then £13,600, which was lower than the average industrial wage, became liable for the top tax rate. Currently the standard rate band for a single person stands at €28,000 per annum, higher than the average industrial wage. Over the period since 1997, the average tax rate of a single person on the average industrial wage has dropped by over ten percentage points or well over 27% to 17% today. These are the facts.

The Government is committed to sustaining economic growth, strengthening and maintaining the competitive position of the economy and maintaining full employment. Responsible fiscal policies are central to the achievment of these aims and the proposal, as outlined by the Senators, would be inconsistent with this approach. Therefore I cannot accept the recommendation.

Senator McDowell, having marked me in the Dáil for five years, knows we have gone over this ground on many previous occasions. I am well aware of his views on this matter, as he is of mine. Although Senator Higgins was a Member of the Dáil he may not be as aware of my views because he was a spokesperson in another area.