Further tax cuts and "imaginative methods of gain sharing" should provide the basis for any successor to Partnership 2000, the Tanaiste, Ms Harney, has told the Institute of Personnel and Development conference in Galway.

She also said that inadequate transport infrastructure was seriously undermining our competitiveness.

Giving the keynote address yesterday, Ms Harney, said that wage moderation had been "the engine of progress" in the economy. Future increases would have to be linked with productivity.

"What I want to see now is more gain sharing and profit sharing. Any successor to Partnership 2000 will have to show a much more imaginative approach to gain sharing and profit sharing".

At a time of economic boom, when enormous profits were being generated, "it's only right that workers should share in that growth in return for upgrading, flexibility and new working".

She believed that such a system would also allow for more flexibility at local level, which would suit companies under pressure, as well as those doing well.

While social partnership had served Ireland well, she said: "We can't have partnership for the sake of partnership. We can't have partnership on one side and we can't have partnership at any price." The Tanaiste warned that the Government could not allow selfish demands by individual groups to undermine the agreement by threats of industrial action.

She added that some of the increases already granted in the public sector were now causing wage pressures in the private sector. Turning to taxation, she said the Government should aim to raise the threshold for income tax from £100 a week "as high as possible". Ideally no one earning less than £170 a week, the figure set for the proposed national minimum wage due to be introduced next April, should have to pay tax.

She also said that she wanted to reduce the standard rate of tax from 24 per cent to 20 per cent and the marginal rate from 46 per cent to 42 per cent, "or even 40 per cent if we can afford it".

She urged companies to increase expenditure on research and development. Only 20 companies in the Republic spent more than £1 million a year in this area and two-thirds of R & D was done by multinationals. She criticised small and medium-sized Irish companies for over-dependence on the State in this area.