PLANNED TAX CUTS will not necessarily encourage people to get back to work, the new head of the Economic and Social Research Institute has warned.

Prof Alan Barrett questioned claims made by several delegates at last week’s national economic dialogue that “marginal tax rates are now sufficiently high that they act as a disincentive to work”.

He said there was no evidence that the assertion is true in the case of many men whose hours do not tend to alter in response to wage changes.

Barrett – who chaired last week’s talks with government, business, union, farming and voluntary sector representatives - also noted that “women’s labour supply could be more responsive to childcare improvements as opposed to tax cuts”.

The national economic dialogue was held in Dublin Castle last week with the aim of giving different groups the opportunity to present alternative economic views to government officials.

In a report on the two-day event, Barrett further warned tax cuts should not come at the cost of quality public services, saying government officials “need to discuss what level of public services we want in combination with a discussion on what the overall tax take should be”.

He said that most delegates did not support the view that tax cuts boost economic growth.

Some participants “expressed a view that we need to be careful not to hollow out the tax base as we did during the boom years”.

Others, however, felt it was reasonable to reduce taxes that had increased during the crisis.

Budget giveaways

Delegates at the talks also discussed the government’s stated intention to split about €1.4 billion on tax cuts and spending increases in the next budget, the last to be announced before the general election.

According to Barrett’s report, one reason many were “less inclined” to agree with this 50:50 split was that they felt the money should be allocated to higher capital spending as well as spending increases and tax cuts.

However, there was a “general acceptance” among representatives that the €1.2 billion to €1.5 billion “fiscal space” should be observed, Barrett noted.

What do you think?

Should the government focus on better childcare provision or tax cuts?

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