The Tánaiste, Ms Harney, yesterday warned that increasing the Republic's low corporate tax rate would actually reduce the revenues generated from business.

She told the Small Firms' Association (SFA) annual lunch that the Government was committed to maintaining corporation tax at 12.5 per cent. Ms Harney was responding to calls from trade unions to increase the levy.

"In 1999, it was 20 per cent and it generated €3.4 billion, last year it was 12.5 per cent and it generated €5.2 billion," she said. "The Enterprise Strategy Group said that, not only is it the best rate, it's also the rate that delivers maximum value. If you're going to raise the rate, then you will reduce revenues."

Ms Harney said anyone considering increasing the corporate tax rate would have to come up with an alternative means of raising the lost revenues and deal with the damage to the State's competitiveness. "Change it at your peril," she warned.

The Minister for Health ruled out a cash bonanza for health services in next month's Budget. "We cannot just put more money into a system that has not reformed itself," she said.

She argued that, in the future, financial incentives would have to follow patients. Ms Harney said hospitals could not expect to be funded on the basis of the historic numbers of patients they have treated.

SFA president Ms Angela Kennedy told the gathering that increasing local authority service charges were a key concern of the business people.

"The latest consumer price index showed a 25 per cent hike in the price of water supply, refuse and miscellaneous services provided by our local authorities," she said. "The cost associated with local authorities and environmental charges will bankrupt this country if something is not done soon."