Labour is likely to push for changes in tax bands and credits, instead of flat rate cuts in the budget, as former party leader Ruairí Quinn warned against overcomplicating the tax package it offers voters.
Senior party sources said they favour a combination of tax credits and adjustments to the bands, in order to take middle income earners out of the higher tax bracket, rather than simple cuts to income tax rates in upcoming budget negotiations.
However, it was stressed that no official talks have taken place between the two parties on the exact structure of the tax measures for next month’s budget.
Rainbow coalition
During discussions at the Labour parliamentary party think-in in Wexford, Mr Quinn warned Tánaiste Joan Burton and party TDs and Senators they must not allow a repeat of what happened to the rainbow coalition, which lost the 1997 election against a strong economic backdrop.
During a discussion on the economy, Ms Burton was told by Cork South-West TD Michael McCarthy she must "get out to the country" to help Labour electorally, while leaving the business of government to Minister for Public Expenditure and Reform Brendan Howlin. Mr McCarthy said the party's poll performance was still poor, in reference to a weekend opinion poll that put Labour on 8 per cent, and said Ms Burton must capitalise on her popularity with the public.
He said “the clock is ticking” and insisted the Government must put “money back in people’s pockets” in order to reap the political dividend from the improving economy and avoid the mistakes of the rainbow coalition. He was supported in his point by Mr Quinn, who said: “We have saved the country, now we have to save the party.”
Too complicated
Mr Quinn said the rainbow went into the 1997 election having achieved a budget surplus, falling unemployment and strong economic growth, but the tax package it offered to voters was too complicated. Sources said Mr Quinn said: “I was minister for finance and even I couldn’t understand it.”
The 1997 election saw Fianna Fáil and the Progressive Democrats win on the back of promises to cut income tax rates, as opposed to the rainbow coalition's tax proposals.
Mr Quinn said Labour and the rainbow got “little or no thanks” for the performance of the economy and was “f***ed* in the election, consigning it to 14 years in opposition.
Labour Ministers were presented with an outline of budgetary options last week, including cutting income tax rates and the universal social charge (USC), as well as changes to tax bands and introducing more tax credits. However, senior party sources said they favoured changing the bands and increasing credits, rather than simple cuts to income tax rates.
