Harney says PDs, FF differ on tax cuts but will negotiate for Budget

The Tanaiste, Ms Harney, has acknowledged differences between her stance on tax cuts and that of the Taoiseach by saying they are in different political parties and would have to negotiate on the issue.

While Ms Harney has called for a two percentage point cut in the higher tax band of 44 per cent and the standard rate of 22 per cent, Mr Ahern has said he favours tax cuts which target the lower paid.

"We're all in different parties and we will negotiate the Budget. This is the seventh budget the Progressive Democrats have been involved in in 10 years, and in those 10 years 23 points have come off the tax rate and 22 of them have been done while we were in government. I think we have a strong, good record in relation to tax and we want to continue with it," she said.

She said tax cuts should also be brought in for workers because their companies were paying a lower rate. "It's not fair to Irish workers that companies pay 12.5 per cent tax on their profits but workers pay 44 or 22 per cent . . . taxes on work have to be reduced, otherwise we'll have wage inflation, a spiral of wage increases," she said.

In response to concerns that tax cuts would fuel inflation, she said: "We're told in good times we can't have them because they're inflationary and in bad times we can't have them because we can't afford them, so we can't have that strategy."

Addressing the National Economic and Social Forum on labour shortages, Ms Harney said tax was one of the few weapons the Government had to influence behaviour in the labour market.

She added, however, that changes in taxation were no solution to helping some low-paid earners particularly with regard to childcare. "Clearly as we take more and more people out of the tax net altogether - 25 per cent of families in Ireland don't pay any tax - if you have a tax-based solution then immediately you don't help 25 per cent of families at the bottom," she said.

She added that plans had to be implemented rapidly to encourage the long-term unemployed back to work.

"One thing is certain - that the jobs that are being created now in many sectors in many prime communities that are close to some of the huge investments in the west side of Dublin or indeed out in Clondalkin or wherever, those jobs are not acceptable to the people who are unemployed in those areas because they don't have basic skills," she said.

Ms Harney said companies needed to spend more money on training their workforces. "If one was to take away the larger companies and the multinational sector, the spend by the typical small to medium-sized Irish companies is negligible and for some there is no spend at all. It never ceases to amaze me that some very dynamic companies invest in the latest piece of technology but never see the need to invest in the people that work in that enterprise."

The Tanaiste also said she may extend working visas for migrant workers from abroad into other sectors of industry. Currently visas are given for workers in IT, nursing and building professionals, and the Tanaiste said other sectors would be included if shortages emerged.