Enthusiastically welcomed by government back-benchers, Budget 2007 was received reluctantly and with scepticism by the opposition parties.
Opposition parties argued that Fianna Fáil was merely using the budget as an electioneering opportunity. The previous two budgets had attempted to target the less well off by taking the lowest paid out of the tax net alongside the introduction of a new childcare package.
The 2007 budget was introduced in a time of economic buoyancy allowing for a reduction in the top rate of tax to 41% and further increases in social welfare payments. Fianna Fáil also fulfilled their previous election promise by increasing the old-age pension to €200. This generous package was seen by many as a way of securing Fianna Fáil success in the forthcoming general election. However, these measures were introduced against the backdrop of a housing market that was continuing to spiral out of control, and the lack of action by government in this regard would come back to haunt them in the coming months and years.
With money in the bank and windfall gains to the public finances, the government set out to reward workers and encourage further spending in the economy.
Cowen’s budget sets out to reward workers with an increase in tax credits, and a widening of the tax bands.