Finance Bill - Decision time at hand on bank bailout

THERE was some anticipation that Finance Minister Brian Lenihan might use the introduction of the Finance Bill yesterday afternoon to bring forward measures appropriate to the times we live in.

However, Mr Lenihan did nothing more radical or inspiring than announce a higher level of income levy (3%) on all earnings over €250,000. This was anticipated, though a €300,000 threshold had been expected. The extension is to counter-balance the removal of those earnings less than €50,000 from the scheme as had been proposed in the regrettably inept budget.

Undoubtedly, there will be some opposition to the move, but it should be dismissed out of hand, as there are few European economies with a lower tax to GDP ratio than Ireland.

The bill will also allow companies to claim additional tax relief on research spending and change how residency is decided for tax purposes, a move that will restrict the Cinderella law that facilitates our growing number of tax exiles.

The bill presses ahead with the fuddled parking levy measure, though how this will be administered equitably without costing more than it collects remains a mystery.

This leaves, at the time of writing, the elephant sitting in the corner of the room, awake and involved but as yet to take the field — to recapitalise the banks or not.

Just hours before Mr Lenihan introduced the bill he had been in talks with the banks, presumably about what could be done to save the remnants of our once-proud and haughty banks.

Discussing the meeting in the Dáil, Labour leader Eamon Gilmore asked Tánaiste Mary Coughlan for details of what was being proposed, but he was told that the discussions were confidential.

It is understandable that, until a deal is finalised, a considerable confidentiality is required but, once a deal is done, nothing less than complete transparency can be acceptable. Any politician who would dare to suggest that taxpayers cash be used to save failed banks and bankers without explaining fully the deal and the strings attached is living in cloud cuckoo land.

The Government is under great pressure to come to some sort of a conclusion on recapitalisation as the credit crunch bites ever-deeper into day-to-day business dealings. The Government has kept its cards close to its chest on this growing crisis, as it played for time. It commissioned an audit of the banks and has received the reports. As ever, patience may be rewarded but it would be economically dangerous to put the hard decisions off any longer.