Budget tax hikes possible, says council

AN increase in the burden of taxation cannot be ruled out in the Budget, warns the National Economic and Social Council.

NESC's reports have provided the framework for national agreements between the Government and social partners since they were first initiated in 1987.

Eoin Fahey, senior economist at KBC Asset Management says suggestion of tax increases are a nonsense.

Reports from NESC tend to have a strong trade union flavour, which he hopes will not become reality in the next Budget.

Due for publication shortly the reports deal with economic development and the more difficult question of bringing the poor in from the margins. Its main recommendations are:

* Tackling inflation to ensure economic competitiveness is not lost.

* On-going investment in infrastructure.

* The maintenance of growth oriented policies to support economic growth in more difficult times.

It is understood the report stresses the importance of competitiveness and social inclusion as the basis for a better society. NESC says inflation must be tackled to avoid a wage price spiral becoming embedded in the economy.

Their fears echo warnings from the employer body IBEC which argues that the economy cannot afford pay increases at this stage due to its growing loss of competitiveness. IBEC wants a pay freeze.

Leaking of the report came on the day that the Irish Congress of Trade Unions met the Taoiseach, Tánaiste and Minister for Finance to discuss the prospects of a new partnership deal.

Taoiseach Bertie Ahern reiterated the Government's commitment to a new deal but refused to pull back from any of the drastic cut backs signalled in last week's estimates.

After the meeting president of Congress Joe O'Toole said the Budget will be critical in determining the prospects of another national agreement which currently looks under threat.

The report does not rule out a modest increase in the tax share of GNP though it says a substantial increase could damage competitiveness.