THE Labour Party is blocking Fine Gael's moves to cut taxes for middle-income families in October's Budget.

Labour has also dropped its own plans to seek tax hikes for high earners, which Fine Gael vetoed in last year's Budget.

Labour wants available funds to go towards providing financial help for middle-income parents who are struggling with mortgages and bills.

But the junior coalition party doesn't see tax cuts as the way to help hard-pressed families – the so-called coping classes.

Instead, Labour wants to use a specific range of options targeted at parents with school and medical costs.

A series of low-cost measures aimed at alleviating health and education costs are in the offing.

The policies being examined are understood to include giving the back-to-school allowance to more parents, which would be worth €100 for primary school children and €200 for secondary school children.

Senior Labour sources say the party does not favour tax cuts. "It's about targeted measures for families being hardest hit by everyday bills and mortgages," a source said.

"These people are still at work, still paying their mortgages but the bills are mounting."

The credibility of tax cuts was called into question.

But the party has also dropped its plans to seek a tax for high earners.

"That discussion happened last year. Fine Gael didn't move from it. We had a position where people on over €100,000 would make a greater contribution," a source said.

Fine Gael believed the tax system was the way to give back to the squeezed middle classes of families.

"Surely the easiest way to give relief is through the back pocket, through the tax system?" a source said.

Jobs Minister Richard Bruton has proposed the tax burden would be reduced, but did not specify if this would involve a cut in tax rates, allowances, bands or credits.

Mr Bruton was putting forward the principle of cutting the tax burden.

In the summer, Mr Bruton said a reduction in taxes would enhance the country's competitiveness and ability to create jobs.

"If we are to create the jobs we need, I believe we must as soon as possible begin to reduce the income tax burden, starting with hard-pressed families on average incomes.

"These are the often silent majority who have gone through so much over recent years who, along with our economy, could really benefit from having a little extra cash put back in their pockets. With even a small incentive, a small signal of confidence about the future, I am convinced the response would be a positive one," he said in June.

Irish Independent