View from City Road: Irish budget gets on with the job

Kenneth Clarke must have been green with envy this week. Bertie Ahern, his Irish counterpart, announced a budget that included tax cuts, a forecast of 4 per cent economic growth and a budget deficit within the Maastricht guidelines of 3 per cent of national output.

But there was also a clear ideological divide. Mr Ahern's budget had a central theme of job creation. Strong growth has boosted tax revenues and allowed tax cuts for the lower paid, a widening of the standard rate income tax band and elimination of a 1 per cent income levy.

This should improve the incentive to work rather than to stay on welfare. Employees' and employers' national insurance contributions were also reduced and personal allowances raised. The measures are likely to spur demand and help industries serving the domestic market, which have lost the most jobs. They are partly financed by higher property taxes, the termination of certain tax reliefs and increased excise duties.

Though the budget is unlikely to make a big dent in Ireland's high unemployment rate - 18.4 per cent - it is a step in the right direction and in tune with the times.

The US will host a jobs summit in March that is likely to lean towards official job-creating measures - financed by taxes on capital if the OECD secretariat has its way. Mr Clarke may be inclined to mock such ideas and to point out that Britain's jobless rate is only 9.8 per cent. But a fair amount of the recent decline is due to part- time employment in the service sector, now regarded as evidence of recovery in Britain.

Elsewhere, as in Ireland, a determination still exists to create manufacturing jobs. The UK may find itself isolated at the jobs talks in Washington.