I move:
That Dáil Éireann, in view of the inflation now raging in the economy and the consequent hardship being inflicted on most income tax payers and in particular on those with very low incomes who were never intended to be subject to income tax, calls on the Government to increase substantially the personal, earned income, marriage, child and age allowances under the income tax code and to provide by legislation that, thereafter, such allowances will be adjusted annually in relation to movements in the cost of living index.
This is a motion which, as you know, Sir, under our Standing Orders, would normally have come before the House last week; but the Government, for reasons best known to themselves, decided on two occasions last week to propose and vote that this motion should not be discussed by this House then. I would point out that this motion was put down by me during the Christmas Recess and before the rejection of the national pay agreement. We know that there are further proposals now under consideration. However, the proposals which were rejected would, I think, have been a great deal more attractive to most of the workers if prior to their voting on them this motion had been either discussed or an indication given by the Government of their acceptance at least of the principle behind this motion.
It is rather sad that the Government found it necessary to play politics with this motion, as they did last week, and then to come along today and hold a meeting with the Irish Congress of Trade Unions and subsequently with the Irish Employers' Confederation—a very brief meeting in each case—during the course of which the Taoiseach informed those parties that the Government proposed to do precisely what they are called on to do in this motion.
I believe if the Government, before the voting took place on the Employer-Labour Conference for terms of a national agreement, had approached this problem on the basis on which they are now proposing to do so and on the basis urged in this motion, it might well be that the proposals would have been acceptable. But, for reasons best known to themselves, the Government decided not to do that. It was clear to most people, if not to the Government, that it was essential that the Government should take action if the national pay agreement were to be accepted. The action open to them substantially lay in the field of personal taxation.
I do not profess to understand why it was not possible for the Government a short time ago to make the announcement they made today. It is reprehensible that last week, when this motion was due to come before the House, the Government should on two occasions vote it down and then announce today that they proposed to do precisely what they are called on to do in this motion. It may be that the Minister will have a satisfactory explanation for that conduct by the Government; but in the absence of such an explanation people can only conclude that the Government were playing party politics, not just with this motion but with the whole prospect of a national pay agreement, an agreement which the Government profess to regard as being of vital importance to our economy. Certainly that is a view we take, and our actions in government and indeed in opposition have confirmed that that is our attitude.
It is, however, of some satisfaction to us that our motion has finally wrung out of the Government the statement issued today to the effect that the Government propose in the forthcoming budget to announce increases in income tax personal allowances to commence on the 6th April next and also to provide, as is called for in the motion, that these increases will mark the first step in a policy towards reviewing the personal allowances regularly and at frequent intervals. That is from the statement issued by the Government Information Services today. It does not go as far as this motion goes, but at least it is a step in the right direction. It does show that the Government, despite their mishandling of this situation, are learning something.
It is difficult to discuss this motion while ignoring the context of the national pay agreement but in that context I believe that the Government statement, while it is welcome, should, if it is possible at all, be firmed up by the Minister in his contribution to this debate. All the indications are that in the absence of a very firm commitment by the Government the new proposals for a national pay agreement will not be accepted. You will have noted, Sir, that having refused to give Private Members' time under Standing Orders for this motion the Government then, in the name of the Minister for Finance, put down an amendment. That amendment, of course, is an attempt to justify the Government's inaction in this field in the last budget by suggesting that the previous Government were inactive in this field. It is merely a smokescreen behind which the Government are trying to hide. If the Government believe what is in the amendment, and I propose to show that the considerations that applied in the past are not by any means the same as those which apply today, that is that the previous Government failed to increase income tax allowances adequately in accordance with the fall in the value of money, if that is so then this merely highlights the failure of the present Government when they assumed office and brought in their budget to do anything about it. I would remind you, Sir, that in the last budget brought in by this Government, new increased rates of taxation were imposed on almost everything you can think of and an absolutely record amount of new taxation was imposed. I am not even talking about the yield, which is greater than was estimated but even on the estimate submitted by the Minister it was historically high. I believe that that approach was economically unsound, to say the least, but at least one could expect that in circumstances of that kind the Government would have seen to it that income tax allowances would have been substantially increased. There are a number of reasons for this— firstly, because social justice would have required it and, secondly, because the Government were increasing VAT rates as well as everything else. Remember, you pay the same VAT rate whether you are rich or poor.
Therefore, the Government, in a context of vastly increased taxation, should have increased the income tax allowances in order to assist those who were being hardest hit by the new taxation being imposed. Furthermore, in the context of an increasing rate of inflation and the desire to achieve a national pay agreement it was essential for the Government, if they wanted to create the climate in which a national agreement would be acceptable, to make these further concessions in income tax allowances. They did not do so. All that was done in this Government's budget in relation to income tax was to increase from a maximum of £74 to £104 the wife's earned income relief at a cost, in the present financial year, of half a million pounds.
Whatever the Minister may have to say in the course of his contribution to this debate about failure by previous Governments to adjust income tax allowances, he cannot gainsay the fact that in a previous budget in 1972, when for very sound economic reasons no new taxation whatever was imposed by the Government then in office, they managed to provide more relief in expansion of social welfare services in that year than was done under the extraordinarily high taxation imposed in this year's budget. More was done in that year than in this year if one excludes EEC money but at the same time, the following increased allowances were given in income tax. Personal allowances were increased in respect of the single and widows allowance by £50 to £299 and £324 respectively and the marriage allowance was increased by £70 to £494. The child allowances were increased by £20 each. This took approximately 50,000 taxpayers from the income tax net and reduced the income tax bill for a single person by £17.50 a year, a married man with no children by £24.50 a year and a married man with four children by £1 a week. That cost £11 million in that year. In addition, the age relief for persons of 65 or over was raised by £25 for single and widowed people and by £50 for married persons. A special increase in child allowance for the incapacitated of £50 was introduced and the upper limit of £500 on non-reimbursed medical expenses for each person was abolished. There was no upper limit thereafter.
Therefore, in so far as the Minister wants to make any case about the past, he must remember that to the extent that his case is valid he is simply making a case to show what he should have done in his budget and failed to do it. However, if any comparisons are to be made it is far more valid to compare the budget of 1972 with the budget of 1973 because the circumstances of those, while not the same, were quite similar, far more similar, say, than the budgets of 1957, 1958 and 1959 to which the Minister refers in his motion. The comparison between the budgets of 1973 and 1972 is startling where one finds on the one hand enormously increased taxation and virtually no relief in income tax and on the other hand in 1972 no increased taxation and fairly substantial relief in income tax apart from social welfare.
I suggest that the Minister's amendment takes no account of such things as the fact that the country is now much wealthier than it was in the 1950s, that inflation is now running at an historically high rate and all the indications are that it is going to go considerably higher. Furthermore, from the Minister's point of view, there is now a broad tax base available which was not available in the past. I am sure the Minister is well aware of the problems which faced Ministers for Finance in the past, where there was an undue reliance on what are known as the old reliables—beer, tobacco, spirits and taxes.
As a general approach to the whole problem of taxation, Fianna Fáil broadened the base by introducing turnover and wholesale tax and, ultimately, value-added tax. The result is that the base of tax for the Exchequer is now so broad—and, indeed, was increased substantially by the present Minister in his last budget—that there is no comparison between the situation which faces the Minister for Finance today and that which faced Ministers for Finance in recent years. The present Minister has, ready made, this broad base of tax which provides him with a substantial amount of revenue that would not otherwise be available and a revenue which is related directly to the degree of inflation in the economy.
I do not know—and the Minister does not know—at the moment what the out-turn will be in the current year in regard to value-added tax. But the figures available at the moment seem to show that, from April to December of 1973, value-added tax brought in £96 million : the budget Estimate for the whole year was £116 million. Consequently, whereas—on the basis of the estimates—75 per cent of value-added tax for the whole year should have come in by the end of December, in fact, 83 per cent only had come in. That would suggest a gain to the Exchequer in the region of 8 per cent. The odds are that that will go considerably higher before the end of the financial year. But I cannot say that with certainty and neither can the Minister. Nevertheless, what is clear is that the receipts from value-added tax are considerably higher than the Minister estimated, and he estimated them reasonably generously having regard to the commitments he was entering into in the budget.
Apart from the broad base provided—a base which is related directly to the inflationary situation— the fact is that, with the degree of wage and salary increases which have taken place and are likely to take place now, relief from income tax under the headings we have sought in this motion can result in virtually no cost to the Exchequer. For instance, it is reasonable, I think, to estimate that, in relation to the terms of the proposed national agreement— if they are accepted—between one tax and another, 30 per cent will come back to the Exchequer.
Therefore, there is quite a difference between the situation now and that which obtained in the past. I would remind the Minister, since he wants to go considerably far back in his amendment—I think the public would prefer that he dealt with the present situation and what is looming up—that when we took over Government in 1957, which is the year to which he refers in his amendment, we found the country a considerably poorer place than it is now, and that the overall strength of the economy is now quite different, apart from the factors to which I have already referred.
The great difficulty in the past was the enormous cost to the Exchequer of granting income tax relief. I tried to point out that that problem is by no means as great today as it was in the past, for the reasons I have outlined. Indeed, I think the actions which the previous Government took in the 1972 budget will bear that out; that we were able, without any increase in taxation, to give the substantial income tax relief I detailed earlier. From the point of view of the Minister, that position has improved even further since then. That being so, there is less excuse for the Minister than for any predecessor of his failing to give these reliefs—which he did fail to do in his budget and of which he failed to give any indication until we dragged it out of him with this motion which he tried to prevent being discussed last week.
I would remind the Minister, if he needs reminding—I am never too sure just how far the Minister, like his colleagues, has lost contact with the people; I rather suspect from some things that happen that the loss is somewhat substantial—how people feel at the present time about these income tax allowances. In case he does not know I want to tell him there is no single factor about which people feel a greater sense of grievance than the present income tax allowances. I want to tell him, too, that I believe that apart from the question of social justice, from the point of view of stability in this State, it is vital that adequate allowances be given in income tax under the headings we have sought in this motion; that is the personal, earned income, marriage, child and age allowances. It is essential that substantial increases be given under these headings.
By quick calculation, the Minister will see that if he wants to adjust the tax allowances to allow for the fall in the value of money since we adjusted them in the budget of 1972, he will have to increase them by something in the region of 25 per cent. If he is going to get up here and try to make a case that allowances should have been increased considerably more than they were prior to 1972, then whatever ultimate figure he arrives at as regards the shortfall, he should add that to 25 per cent; to arrive at the correct figure, he should, on his own figures, increase these various allowances.
There is a considerable degree of concern in the country at present on the part of income tax payers in regard to various aspects of the taxation code. There is a widespread demand for a complete revision of the income tax code and for the abolition of anomalies which arise at present. The majority of income taxpayers, if asked what was the first priority for action by the Minister for Finance in regard to any reform of the income tax system, would tell him that it is precisely what is proposed in this motion : substantial increases in the various personal earned income, marriage, child, and age allowances, plus a provision that they will be adjusted hereafter in accordance with the cost of living.
The statement issued today on behalf of the Government does not make that commitment. If I may quote it again:
The increases will mark the first step towards a policy of reviewing the personal allowances regularly and at frequent intervals.
If the Minister and the Government can make such a commitment, why can they not make the commitment called for in this motion? It would be far more effective if such a commitment were made than the kind of statement made here on behalf of the Government. It would be far more effective if there was a firm commitment to review these allowances annually in accordance with the cost of living. The statement by the Government is, I think, intended to convey something very close to that. The Government would have derived far greater benefit by making a firm commitment. There is nothing to be got by the suggestion in the Government statement without that commitment. That is getting the worst of both worlds; it is making the commitment but not getting the value of making it.
It may be asked why such commitment is made at this time and why it was not necessary in the past. There is a very good reason for that. First, never before have our people experienced the present degree of inflation. It is agreed on all sides of the House that the inflation which is to come will be considerably greater than that being experienced at present. This produces a new situation. If a worker is making a claim for an increase in wage or salary he must consider not only an increase which will give him a real improvement but also—and this is even more vital—how much he needs to keep up with the cost of living. His experience tells him, and all the indications of an increasing rate of inflation are, that he must make an estimate of how much the cost of living will increase and then ask for considerably more if he is even to keep pace with the fall in the value of money. The consequence of this is that wage claims in future are likely to be enormously inflationary in themselves. Nobody can legitimately blame the people who make such claims having regard to what has been happening in our economy. If the Government were to act on this motion by increasing the allowances and if they were to meet the commitment we have called for by adjusting allowances annually in relation to the cost of living, that would go a long way towards reducing the number of inflationary wage and salary claims which would be made.
One of the factors which must be taken into account is that the bigger the increase the more will be taken off in taxation. We have now reached the stage, as indicated in this motion, where many people who were never thought of as being liable to pay income tax, and who by any reasonable standard can only be regarded as poor people, are paying income tax, and sometimes relatively substantial income tax in relation to their earnings. We cannot allow this situation to continue. It is a situation which will become increasingly more difficult and intolerable for many wage and salary earners because of impending inflation. The Minister could make a very substantial contribution to reducing the impact of this if he were to adopt what is proposed in this motion.
The question of income tax allowances is becoming inextricably mixed up with negotiations for national agreements. If we want national agreements—and we say on both sides of the House that we do—then the Government have an obligation to do what they can to make such an agreement acceptable and to create a climate in which a national agreement is acceptable. Up to now the Government have singularly failed to create any such climate. They now have an opportunity to do so, or at least to contribute to it without interfering in any way with free collective bargaining. It seems to me that because of impending inflation, the time is coming when negotiations on national agreements should be conducted in relation to post-taxation income rather than gross income. In a situation of rapidly accelerating inflation, it would seem to be a more equitable way of approaching the problem of wage increases. If the Minister, even at this late stage, approached the problem of personal taxation on the lines suggested in this motion, he would make a substantial contribution to the stability of the economy. In the circumstances in which we exist, and with the possibility of a national pay agreement being negotiated and accepted, he would be contributing to the creation of industrial peace.
I accuse the Minister and his colleagues of gross neglect of duty and incompetence in failing to create such a climate in the budget and subsequently. Even when the national pay agreement was about to be voted on, the Government were inactive. Only when it had been rejected and new terms had been put forward was there any sign of activity by the Government. That activity, though very belated, was welcome. I do not believe it is sufficient in the sense that there is not a firm enough commitment to an adjustment of income tax rates in line with the cost of living. Although there is enough of a commitment to make a problem for the Government there is not enough of a commitment to get the benefit of it.
The Minister should firm up the general statement of the Government's intention in regard to the immediate increases proposed, something which should have been done a long time ago. I hope it is not too late, and if the Minister is going to use this debate for the purpose of firming up the Government's position my motion will be a worthwhile exercise. If, however, the Minister wants to use this debate solely for the purpose of arguing about what previous Governments did, or failed to do, he is not going to contribute anything to the vital concerns of this nation at this time. He is simply going to draw attention to the gross failure, on his part in particular, and on the part of the Government in general, to deal with this problem in the last budget when he had the opportunity and when he imposed all the taxes which he imposed.
The options of the Minister for Finance in the coming budget in regard to taxation will be a great deal more limited because he used up so many of them in the last budget. However, the Minister did not make the adjustments necessary and he is now being forced into the position of having to make those adjustments come what may. I have pointed out where he can make those adjustments and meet those commitments without undue strain on the Exchequer. He can do so because of the greatly increased receipts from VAT, and because of the greatly increased receipts he will get as a result of the increases in wages and salaries which are coming up.
I hope the Minister will approach this motion on a realistic and constructive basis. I said before when the Government tried to prevent this motion being discussed that I thought the Government would have welcomed the fact that this motion was coming up in order to make their position clear, in order to make the kind of statement the Government made today. I hope the Minister will approach this on a more constructive basis than his amendment indicates and that as a result of the motion being put down, although we have achieved a statement from the Government, we will achieve something more which could be of vital importance to all the taxpayers of the country and the future of the economy.
