McDowell defends tax plans

Huge tax cuts, a solution to the looming pensions crisis and family-friendly benefits were today unveiled by the Progressive Democrats as they set out their stall for a return to Government.

Widely seen as an attempt to curry favour with young voters and househunters, the PDs have upped the ante on the Labour Party who last week vowed to bring the standard rate of income tax down by 2% to 18%.

Not only did he vow to match Labour's pledge, but PD leader and Tánaiste Michael McDowell raised the stakes further by promising to bring the higher rate of tax down from 41% to 38%.

That move would allow workers to earn €50,000 a year and only pay tax at the standard rate.

Even though he has thrown down a massive challenge ahead of the May election, the Tánaiste said he was not playing auction politics and insisted it was conviction politics.

"As we made clear at our press conference last week, all of these measures are fully costed and will stay within strict fiscal limits," he said.

Worryingly for the PDs, the party only managed to secure 1% of voters' support in the last opinion poll.

But party faithful hope the election pledges, outlined at the weekend's party conference in Wexford, will be popular with young voters and those struggling to earn enough to buy a house.

The election pledges include:

* On income tax, a promise to cut the higher rate of tax to 38%, and bring the lower rate to 18% in the lifetime of the next Government.

* On pensions, a copycat SSIA scheme with the government saving €1 for every €2 euro put into a retirement fund.

* An increase in the standard state pension to €300 by 2012.

* An end to stamp duty for all first-time buyers.

* A doubling of the early childcare supplement to €2,000, while providing an extra 50,000 new childcare places by 2010.

* A pledge to increase Child Benefit in line with any increases in the cost of living.

Mr McDowell said: "The Special Pension Incentive Account will see the State contribute €1 for every €2 saved.

"Under this scheme, which is targeted specifically at those on lower and middle incomes, the Government will give you a euro for every two you invest."

He also explained the other proposals: "We will abolish stamp duty for all first-time buyers and make the tax fairer by 'banding' rates so that owner-occupiers pay the higher rate only on the portion of the price over each threshold.

"We will also adjust the tax bands so that a couple, both earning, can earn at least €100,000 and only pay income tax at the standard rate. This would mean that a single worker could earn €50,000 euro and only pay income tax at the standard rate.

"We will also increase tax credits so that couples earning up to €40,000 euro will pay no income tax. This would mean that a single worker could earn €20,000 euro and pay no income tax."

An opinion poll carried by RTÉ Radio's This Week programme at the conference, attended by 1,000 delegates, found only half of PD members questioned want to see a vote transfer pact with Fianna Fáil.

Two-thirds of delegates surveyed said they would be happy with a coalition with Fine Gael while 29% would say yes to Labour.

The Tánaiste is a former member of Fine Gael but insisted second preferences would be a matter for individual candidates.

In a separate poll for Newstalk radio, also taken at the conference, 52% of PD supporters want to see a coalition with Fianna Fáil after the next election.

It also showed 36% of delegates at the PD conference would prefer it if the party's options were kept open.