The Government has agreed to provide an extra £125 million in social welfare payments for low-paid families to go with the £3,000 tax allowance for one-income households announced in the Budget climbdown.
The additional welfare payments were agreed by Ministers after three emergency meetings between Tuesday evening and Wednesday morning to devise a package to defuse the Budget furore and salvage the national pay talks, The Irish Times has learned.
Cabinet members who attended the meetings made it clear to the Minister for Finance, Mr McCreevy, they would not support the £125 million package for spouses who care for children, the aged or the handicapped unless there was a quid pro quo for the lower paid through the social welfare code.
It is understood the new package will cost at least £125 million, and the Government has signalled to the ICTU that it may be available to start negotiations on a successor to Partnership 2000.
Meanwhile, the advocates of income tax individualisation have criticised the context in which the Government introduced the policy in the Budget. Research professors Mr Brian Nolan and Mr Tim Callan of the Economic and Social Research Institute, writing in today's Irish Times, say the adverse reaction to the move mostly reflected the context in which the Budget had set increasing individualisation, rather than its own merits.
They also say the overall Budget package, including the change, remains "skewed towards the better-off. But this is not because of the individualisation of tax bands."
Government sources said last night it was hoped the new social welfare measure would appease union anger that not enough was done for the low paid in the Budget. The measures are likely to be introduced through the forthcoming Social Welfare Bill.
Exactly how the money will be paid has not been worked out. It is expected it will partly involve a payment to a woman in a welfare-dependent household.
The Taoiseach, Mr Ahern, signalled the move yesterday when he said he had no doubt the issue of low pay would arise and be dealt with in the forthcoming discussions in January and February. He said: "If progress could be made there would be plenty of time to deal with some of the issues in the Social Welfare Bill, provided there is an agreement."
Speaking at the opening of a new computer company in Blanchardstown, Mr Ahern denied that serious questions hang over Mr McCreevy's reputation as Minister for Finance. "He is an excellent Minister for Finance," he said.
Mr Ahern said the Government had brought in an excellent Budget, of which he was very proud. The Government had dealt with the controversy, and it was now time to move on and deal with the social partnership issue.
The Opposition put pressure on the Tanaiste, Ms Harney, in the Dail yesterday to have Mr McCreevy come into the House to make a statement on his Budget amendments. Ms Harney said she would pass the comments on to the Minister, who was in Helsinki for the EU summit.