Ahern puts emphasis on soundness of 'fair' Budget

Budget 2003 is "not without some pain" but it is a "fair and progressive budget that looks after those who are least well off", according to the Taoiseach.

Mr Ahern emphasised its "soundness" and its "real contribution to continuing confidence in the Irish economy". It would send out a "message of confidence at home and abroad that "we are determined to remain on top of the situation despite the further deterioration in the world economy".

He warned against tax harmonisation, lauded the completion of the schedule to reduce the corporate tax rate to 12.5 per cent, and defended the Government's modest borrowing increase. There were many uncertainties "not least the uncertainty over Iraq, and our aim must be to get through this period with minimum disruption".

Mr Ahern said the Budget was "socially caring". There was in real terms no reduction in Government expenditure and in fact "there is likely to be a modest real increase". The overall positives included a modest general borrowing requirement of 0.7 per cent of gross domestic product next year.

Other European countries and the former Asian tigers had shown "how quickly economic reputations built up painstakingly over a long period of time can be undone, if the right action is not taken in good time", he said.

Some had suggested the Government could afford to borrow more. "But I have no desire to see this country under the sort of pressure that we were facing in the past or indeed that some of our partners are under today in struggling to achieve acceptable deficits, nowadays defined as below 3 per cent of GDP." The Budget meets "two imperatives. It strikes the right balance between social protection for today's people and today's needs, and investment to underpin and secure our economic prospects into the future". Lower personal taxes had been maintained, and the move to a unified corporate tax rate of 12.5 per cent had been completed on schedule. Defending the rate against the background of renewed European debate on tax harmonisation, he said it "would have been very unwise from a confidence point of view to delay or defer completion of the process of achieving a unified rate of corporation tax".

Warning against tax harmonisation Mr Ahern pointed to the US, which had a fully federal constitution and said that "a key part of the competition between different States is their freedom to set different rates of business taxes".

On personal income tax rates, he said that "only 30 per cent of those potentially subject to tax are on the higher rate, which has been reduced to 42 per cent.

"We have over-indexed tax credits and bands consistently in the past few years, so the pause in this year's Budget, given the difficult circumstances, will I believe be understood by most taxpayers."