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Dáil Éireann debate -
Wednesday, 16 May 1979

Vol. 314 No. 5

Finance Bill, 1979: Committee Stage (Resumed).


Amendment No. 2 in the name of Deputy Peter Barry. Amendment No. 8 is related and we will take amendments Nos. 2 and 8 together.

Am I right that we will not discuss amendment No. 2 now? My understanding from the Bills Office was that I would withdraw this amendment and it would be reintroduced under section 5 with an almost similar amendment from the Minister.

The Chair is not so informed.

Would the Deputy repeat that please?

I am talking about my amendment No. 2. The Minister has an amendment which has a rather similar effect. It is on page 2 of the amendment sheet but it comes in under section 5. It is in relation to the national understanding and the rebate of tax.

Amendment No. 8 is related to amendment No. 2. Is the Deputy withdrawing amendment No. 2?

When the Deputy refers to amendment No. 8 he is not referring to amendment No. 8 on the green sheet. Is that correct?

Is amendment No. 2 being withdrawn?

It is postponed.

The Chair is not clear. Does the Deputy expect that we will come back to it? We cannot do that when the section is dealt with.

I understood that I was being asked to do that, that I would postpone my amendment until section 5 came up and that my amendment would be discussed with amendment No. 8.

The Deputy would have to move amendment No. 2 now and let amendment No. 8 stand or fall with it.

I understand that the amendment is not really appropriate to section 2 but rather to section 5.

We have to dispose of section 2 at this stage. Amendment No. 2 refers to section 3. We will dispose of section 2 first. Amendment No. 2 refers to section 3. It was misplaced in the printer's amendment sheet.

Section 2 agreed to.

Amendment No. 8 is related to amendment No. 2 and we will discuss them both together but only one amendment can be proposed at a time.

I move amendment No. 2.

In page 7, after line 3, to add a new subsection as follows:

"(3) A PAYE Taxpayer shall, for the purpose of ascertaining the amount of the income on which he is to be charged to income tax for the year 1979-1980, be entitled to a special deduction of £175."

The object of this amendment is quite clear. Under the agreement published last week entitled National Understanding for Economic and Social Development there is a paragraph on page 8 which says:

As a contribution to promoting the present National Understanding, the Government will provide a special allowance for PAYE taxpayers at a cost of approximately £39 million in 1979. This allowance will operate in December, provided (1) that the budgetary position is reasonably in line with expectations, and (2) that any funds needed for employment creation, which is a first priority, have been made available.

The purpose of my amendment is to write into the Finance Bill, 1979, a provision for the payment of this £39 million which I understand works out at £175 per PAYE taxpayer without the two provisos which I have just read.

I would like to see this national understanding signed. I believe it would be a great help towards having it voted on favourably by both the employers and the unions if the refund of tax was made unconditional. If this was written into this Bill it would be a help towards having the national understanding accepted.

It is worth saying that the national understanding will bring in a large amount of revenue to the Government because it will mean that a large number of people will be getting additional earnings which will push them into higher tax brackets. I have estimated that the national understanding will bring in an increase of approximately £187 million in PAYE receipts because of the extra money which will be received if it is signed. The Government are "generously" giving £39 million out of this £187 million at the end of the year in tax relief. I realise that that is not presenting the full picture because if the national understanding is accepted the Government will have to pay out a lot more in increased salaries.

Deputy Barry's amendment is a very sensible one. I would like the Minister to elaborate on how the figure of £39 million was arrived at in the course of discussions on the national understanding? What was subtracted from what to reach this figure? Was it purely plucked from the air as a figure which would be attractive? It is hard to understand how the figure of £39 million could be linked to two very imponderable things, employment creation and budgetary considerations, which are so broadly drawn as to be open to a very wide variety of subjective judgments. In almost any situation the Minister could decide that not enough money was being given for job creation or he could not decide to give it. Either could happen because the terms are so broadly drawn. That contrasts rather oddly with the very precise figure of £39 million which it is alleged could be given.

I should like the Minister to explain this point more fully. I am not raising this matter in a partisan fashion but we are being asked to give the Minister authority to do something by order without coming back here and we should have full information for the basis on which this figure is being worked out and why it will be done in a particular way.

Are we discussing amendments Nos. 2 and 8 together?

Amendment No. 2 is before the House and we are discussing No. 8 with it.

My questions are of a technical nature dealing with amendment No. 8. We can discuss the pros and cons of the matter and the fact that it is part of the national understanding to give the PAYE taxpayer a reduction in the tax he will have to pay, but I am interested in how the Revenue Commissioners will administer this. Will the taxpayer get the full £175 allowance? Will a new tax-free allowance be issued in, say, November incorporating this special additional allowance or will it be incorporated in the amended tax-free allowance certificates which will issue shortly? Since the allowances are on a cumulative basis, how would a person get the full benefit of £175 in December when the allowance will run until 5 April 1980? In my opinion he should only be getting three-quarters of the allowance which will accumulate up to 31 December. How will this be administered?

I take it from reading paragraph (1) (a) of amendment No. 8 that the Minister does not intend to make any change in the allowance. He says that "a deduction of £175 shall be made from so much, if any, of the emoluments... as arise to the individual". May I take it, from paragraph (1) (b) of amendment No. 8 that £175 will be given to the working wife as well?

I will deal first with the queries raised by Deputy McCreevy and, if I omit dealing with some of them, he can come back again. The Deputy is correct in assuming that the allowance would be made available separately to the working wife. Secondly, a special tax deduction card would be issued in connection with this allowance. Subsection (2) of amendment No. 8 says:

In determining cumulative tax-free allowances in relation to the year 1979-80 for the purposes of the Income Tax (Employments) Regulations, 1960 ... deductions under this section shall be deemed to have accumulated in full on such date in the year 1979-80 as the Minister for Finance shall by order direct.

The special allowance will be operated in such a way as to concentrate the full benefits for most taxpayers in the month of December. The tax-free allowances of each PAYE taxpayer will be increased by £175 at a particular date to be specified by order. This will result in a reduction in tax liability at that time. Taxpayers will get either a refund of tax or a reduction in the tax deducted from their salary at that time. Where taxpayers now had £175 in taxable income up to the date on which the special allowance will operate, the balance of the allowance will be available for deduction from further income earned up to 5 April 1980.

PAYE earners who are not employed at the time of operation of the special allowances will still benefit from the allowance if they have any tax liability over the full income tax year, either by a refund of tax already paid or by a reduction of the tax payable on any further incomes earned during the income tax year. It is expected that for the great bulk of PAYE taxpayers the allowance will become available in the month of December either by way of tax refund or reduction in the deduction for tax.

Can I take it that the accumulated allowances of a taxable person which will have accumulated to, say, 30 November, will stand at a certain figure and that the two allowances will be added together making a new cumulative figure from that date?

Even though they might not have used up the tax-free allowance certificate between their first employment date in December and the 52nd week in the financial year?

They will have a tax-free allowance, plus a cheque to make up the difference?

They would have an increased tax-free allowance.

That might mean that they would not be taxable persons in the current financial year?

Suppose they used £100 tax-free allowances by the end of financial year—say from 1 December to the end of the financial year—will they get a cheque for the balance, £75?

They can only get the allowance in respect of tax to which they are liable. In other words, if they are not liable for tax they do not get the allowance. If they are liable for tax which is less than the allowance they get the amount of tax refunded for which they are liable.

Deputy Bruton raised the question as to the manner in which this sum was arrived at. I want to make it clear that this figure was not the subject of negotiation in connection with the national understanding because this is a function of the Government. The Government decided on the figure and communicated it to the parties to the negotiations but it was not negotiated on. The amount involved was arrived at by reference to (a) what could be afforded without affecting the overall budgetary figures and (b) having regard to other committments that were being entered into by the Government under the national understanding.

That brings me to the substance of Deputy Barry's amendment No. 2 where he is seeking to remove all conditionality from the granting of this special tax allowance. The conditions are two-fold: first, that the budgetary position is reasonably in line with expectations, and secondly, that any funds needed for employment creation, which is a first priority, have been made available. Taking the first one, it must be accepted that there is no point in providing for allowances if we are not providing for the money to meet the cost to the Exchequer. In this connection, whatever the figures are, Deputy Bruton can rest assured that the Exchequer is not gaining under the arrangements for the national understanding which in fact is costing considerable sums of money. I am speaking, of course, in relation to the matter to which he referred which is the cost that the public sector pay but also in relation to other aspects of the national understanding where the Government are undertaking various financial commitments.

There is the change in the health contributions.

Yes, that can involve expenditure for the Government. There are some others but I am thinking particularly of one which comes up under condition No. (2) and that is in relation to employment creation. This is not merely a question of a broad figure as Deputy Bruton thought would be the position. I refer the House to the provision in the draft national understanding in regard to a guarantee relating to a shortfall in the Government's target in employment. The House will recall the provisions in regard to that under which the employers would contribute a sum of up to £10 million and the Government would contribute at least the same in order to implement the guarantee against the shortfall. That is quite specific. It is primarily what was in mind in that phrase "any funds needed for employment creation". I have not gone through the draft of the national understanding just now in this connection, but speaking from recollection, there are other commitments in relation to the Exchequer, for example, the National Prices Commission. Having regard to these various commitments and availability of money without changing the overall budgetary figures, the sum of £39 million was arrived at but it was arrived at by the Government and not by the parties to the negotiations on the national understanding.

Having regard to the overall requirement that one shall make provision for the increased income tax allowance, one has the obligation to ensure that it is provided for in our budgetary exercise. Having regard to the specific commitment I have referred to in regard to employment creation—which, as is stated in the national understanding and has been stated repeatedly by the Government, is the first priority—it is necessary to have these conditions in. Provided that the national understanding is accepted, and provided it is reasonably implemented in the letter and in the spirit, there is no reason to believe that the budgetary expectations would not be in line with expectations nor, since provision has been made in our calculations for the employment creation aspect, is there any reason to believe that that would cause any difficulty?

The basic requirement in order to ensure that this special allowance becomes available is that the national understanding be accepted and that it be operated reasonably in accordance with its spirit and letter. If that is done there is no reason whatsoever to anticipate that these conditions will not be met and there is every reason in these circumstances then to expect the implementation of this special tax allowance provided for and referred to in both of these amendments before the House.

In the circumstances I have outlined, circumstances in which this provision arose, I could not accept the proposition that it would or should be done unconditionally, but the conditions which are laid down are such that acceptance of the understanding and implementing it in accordance with its provisions will ensure that the conditions will be met and the allowance will be given.

I want to ask a few questions in relation to the undertaking that the budgetary position is reasonably in line with expectations. Do I take it that "expectations" means the expectations as expressed in the current budget for 1979, in other words that the deficit would be somewhere in the region of £288 million? I take it that that would be the figure that the Minister has in mind.

The Minister has said that the national understanding is going to cost the Exchequer a net amount of money. It would be useful if he could let us know, taking all things into account, what the net cost to the Exchequer of the national understanding would be. We are told that the budget deficit of £288 millions not being exceeded to any appreciable extent is to be the condition upon which these allowances will be made available. Yet the budget when it was drawn up for 1979 was drawn up in the absence of the national understanding and before this additional burden of expense was placed on the State as a result of the national understanding. Therefore, the national understanding obviously changes the calculations. On the face of it, unless there is some compensating factor to bring in money if the national understanding is going to cost the Exchequer say a net £100 million, that should mean that the budget deficit of £288 million provided in 1979 should be £388 at the end of 1979. If that happens the contingency mentioned by the Minister, the budgetary position being reasonably in line with expectations, would not be fulfilled and the tax-free allowance which he has mentioned would not be given.

Therefore, inherent in what the Minister is now saying is that something has happened since the budget was drawn up to increase revenue by the same amount as expenditure is to be increased by the national understanding. Otherwise it would not be possible to fulfil the condition that the budgetary position would be in line with expectations in order that this allowance should be given. The Minister should give us some idea of his calculations. He should tell us where he gets these figures. Otherwise we are carrying on a debate very much in the dark.

This agreement has points that will be of benefit to the three parties involved and it will also cost the three parties something. The first condition attached to the £39 million is that the budgetary position is reasonably in line with expectations. If the agreement is signed, the trade unions will be giving something from the point of view of industrial disputes, limitation of wages and so on. They will be bound to that. While I accept that the Minister would feel obliged to pay it, the Government are not bound to pay the £39 million unless the budgetary position is reasonably in line with expectations. However, the budget was not drawn up by either of the social partners. They had no say in it other than making representations. As far as I remember £75 million was written into the budget. It was drawn up by this Government and if there is something wrong in it, if there is a mistake in the figures or if the expectations in respect of revenue and expenditure are incorrect, that is the fault of the Government. Yet it could be used in December as a reason for the Government not paying £175 in respect of the taxpayer, the £39 million.

A second condition is that any funds needed for employment creation, which is the first priority, be made available. In the edition of the national understanding that I have with me, on page 5 it is stated:

The employer and industry organisations will contribute 50 per cent of the necessary finance for this programme, to yield up to £10 million, collected by means of a ½ per cent charge on the employer social security contribution.

The trade unions will have no control over this and if there is a shortfall in the number of jobs—for reasons outside the control of the Government or industry—it may not be possible to obtain this amount, even with the collection of a ½ per cent surcharge on the employers social security contributions. That ½ per cent charge will weigh even more heavily on those employers who have increased their employment and to that extent it is unfair. The benefit to the taxpayer is conditional on two bodies over whom he has no influence.

We should be careful in this House not to interfere with the bargaining position or assessment by the parties involved in the national understanding that might undermine it or encourage people not to vote for it. We should be careful not to damage the national interest in this way. I have made these points on a few occasions before. They are important and I think they could assist in getting a favourable reception for the national understanding.

With regard to the £175 extra allowance, it will mean that the personal allowance, for the married taxpayer will be £2,405. The tax allowance for a single person will be £1,115 plus £175, making a total of £1,290. I was pleased last year that the Minister ensured that the tax-free allowance for a married couple was double the single allowance. That never happened before. If the £175 is paid, as I assume it will be, it will mean that the allowance for a married couple will not now be twice the allowance for two single people. I know that when the national understanding was being drawn up it was a matter of agreeing a figure that would suit everyone——

The Minister said it was decided by the Government.

It hardly arises here.

When £175 is added to the allowances there is this anomaly.

We cannot start adding figures to the various scales. We are only dealing with one amendment.

When £175 is added to the allowance for a working wife, the amount involved is £405. Next year's budget will have to increase the allowance for a working wife at least to that figure because we could not reduce it to the £230 that obtained prior to this.

I should like to start with the point made by Deputy McCreevy. Earlier I may have referred to this as a special allowance. If I did so I was not accurate because the House will see that it is referred to as a special deduction. It is not really part of the allowances but is a special deduction in arriving at the amount of tax for which a PAYE taxpayer would be liable.

It is referred to as an allowance in the national understanding where it is stated that a special allowance will be provided for PAYE taxpayers.

As the Deputy will see, it is referred to as a special deduction in amendment No. 8. The section sets out the legal provisions. The national understanding draft is not a legal document in that sense. As will be seen, it is provided for only in respect of this tax year. The question of what allowances or deductions might apply in the following or in any other tax year is another matter that we are not dealing with now.

I submit that the question of the cost to the Exchequer in implementing the national understanding is a separate question. All that is relevant here is the effect that might be had on the conditions laid down in implementing this special deduction. So far as that is concerned, as the House is aware in any budget the basis of calculation of revenue and expenditure is spelled out. I do not think there ever was a budget that turned out to be precisely correct. It is of course an estimate 12 months in advance. Sometimes it can turn out to be extremely accurate, but if one analyses how that happens one finds that on both sides of the account, whether expenditure or revenue, some items are up and some are down and it is the final figure that works out and indicates how close estimation overall was. It is a well-known fact that it never works out exactly.

Further, the basis for calculation is set out in the budget this year as in every other year. It should be clear therefore that when we are talking about the budgetary position being reasonably in line with expectations we are talking about the basis of calculation. In so far as this might be out of line for reasons that would have occurred whether there was or was not a national understanding, I would certainly accept that is a matter that cannot be affected by the parties to the national understanding other than the Government. I tried to indicate that what was envisaged in this regard is that if the national understanding is accepted and implemented reasonably in line with its letter and its spirit then there is no reason to believe that the budget figures would not be in line with expectations. The implication in that statement is fairly clear.

Could the Minister spell it out?

I think I have spelled it out quite clearly. I do not think there is anybody who does not understand what I am saying.

I accept that, but in that case why not leave it out?

Because it is a very important aspect of this; and I also want to say that those who were parties to the negotiation of this draft understanding, both employers and union representatives, accepted this wording and accepted, if you like, a degree of good faith on the part of the Government. Certainly, they did not expect, and were right in my opinion in not expecting, that the Government would try to engage in some kind of trick to evade their responsibilities in this regard. That would be the furthest thing from our intentions. If the understanding is accepted and implemented reasonably in line with letter and spirit, that will ensure compliance with condition No. 1.

In regard to condition No. 2, I think it was Deputy Barry who said that there could be a very considerable shortfall for one reason or another in job creation and how could one determine the cost of meeting that. The Deputy will recall that in fact the national understanding provides for an upper limit on the short-fall—5,000. That was the basis of calculations made by the Government in regard to the obligation they were taking on in relation to the guarantee on the shortfall in job creation if such occurred. So, the bases for these conditions are as precise as they could be, given all the circumstances, and for the reasons which I have outlined earlier I could not contemplate having no conditions attached to it. The conditions here are reasonable and can be complied with by accepting and implementing the national understanding. Beyond that I do not think I can go or should be asked to go.

I question the assumption behind the Minister's final statement. I think the making of a budget is too serious a matter——

I am sorry. There is a point I omitted to deal with. The Deputy may have been going to make it again.

No, I was not.

He referred to the figures for the budget and the fact that there would be some expenses anyway for the Exchequer arising out of this and he asked how would that not affect the deficit in the budget. The Deputy will be aware that in the Budget Statement I referred to the fact that we anticipated on the revenue side receipts from subsidies on EMS loans for which I had made no provision in the budget as regards expenditure. In my view implementation of the national understanding would be a very important step on the road to gearing the economy to life within the EMS. Obviously, we cannot do this overnight; but there is an adjustment process which is necessary and this is one of the purposes for which the subsidies are being made available. From a budgetary point of view, these were not allocated in the Budget Statement and so there is a source of revenue unallocated which can operate to prevent the budgetary outline being upset.

Could I have the reference as to the EMS moneys being included in the revenue side of the Budget?

Not being included.

No, the Minister said the had included it in one side but not on the expenditure side.

No. I said it was not included, or at least I intended to convey that I had not included it either in revenue or expenditure. I did refer to it in the Budget Statement. I shall have to get it looked up.

My memory is that the Minister did not include it in either, but I thought he had said now that it was.

I shall tell the Deputy later. I mentioned that it was not in either but I did refer to it.

It looks as if the Minister said that the EMS subsidies are going to be used to pay the cost of the national understanding—at least to make up the difference in terms of increased expenditure arising from the national understanding being balanced out by increased receipts from EMS subsidies. This is a very interesting discovery. It certainly was not the impression one got during the EMS negotiations when one gathered that the subsidies were being given in respect of loans for very specific projects of an infrastructural nature.

Loans, but the subsidies were to be in respect of loans for projects——

Is the Deputy saying that the loans and the subsidies were all to be——?

The subsidies were to be in respect of the interest on loans.

Is the Deputy saying that they were to be used for the same purpose, both subsidies and loans?

I would have presumed that, if the EEC were giving a subsidy for a particular project in the form of an interest subsidy, it would be a project that would not otherwise be undertaken and that in order to get the subsidy the Government would have to borrow extra money in order to undertake an extra project to get this extra interest subsidy. But if the interest subsidy is, as it now appears, to be available for use to finance the national understanding, it would seem that what the Government intended to do with the EMS subsidy is merely to use it to pay some of the interest on this existing national debt. In other words, the EMS interest subsidies will not be used for new infrastructural improvements in our economy but will be used to subsidise the interest on existing debts for existing projects.

The Deputy has lost me.

If the Minister wants to follow the debate he should not have difficulty in doing so.

The Deputy is beginning to lose the Chair, too, because we are hanging a debate on this amendment which is not really relevant.

It is relevant. It seems that the argument for these subsidies has been invalidated. The reason we were getting the subsidies was to help us to overcome problems of competitiveness that would arise from our entry into the EMS. We have now discovered that the money is to be used to continue with last year's programme as if nothing had happened in the meantime. It appears that the basis of the negotiation has been undetermined. The Minister may have more explanations to give to the House.

It would be a matter for another occasion.

I should like clarification of what the Minister said.

We should keep to the amendment we are dealing with.

It is relevant.

It may have some relationship but it is a remote one.

If the Chair wishes me to do so I can explain precisely how the connection arises. There is a direct chain of causation between what we are now talking about and the situation in regard to the tax-free allowances.

We could bring in everything under that heading.

The allowances will only be given if the budgetary situation is as anticipated. The budgetary situation has been changed by the cost of the national understanding. Therefore, it would appear to be unbalanced and not as anticipated. The Minister says that something else has happened since to put it back in balance, namely, the extra subsidies from the EMS. If all those things do not happen the allowances cannot be given. Therefore, we must know each of the contingencies which have to occur before this happens.

In the budget the Minister provided £75 million for additional costs in public service pay on the basis of what the Government then hoped for in relation to income increases. I quote from the Minister's statement on that subject. He was talking about 1978 and he said: "In the event, the increase in average earnings per worker in 1978 worked out at over 16 per cent." Later on he said: "Incomes clearly should not continue to grow in 1979 at the rate set in 1978." In fact, the national understanding provides for an increase of 15 per cent, which is only 1 per cent under the figure of 16 per cent.

If the Deputy must go into these areas he should not compare 15 months with 12 months.

We are only considering one aspect of the national understanding. We are certainly not going into the whole matter on this amendment. I would ask the Deputies to keep closer to the amendment.

I accept the Chair's ruling and I accept the Minister's correction. Can the Minister give us more information on the amount of money that is involved? What does he expect the extra cost of the national understanding to be and what does he expect the figure for interest subsidies this year from the EMS to be?

The questions are not relevant to the amendment but if the Minister wishes to answer them the Chair will not stop him.

The Minister said that the £39 million involved in the national understanding would not be directly financed but would be related to the £45 million interest subsidy.

That is not quite correct. That is not what I said.

The point I want to make clear is whether the £39 million is to be used in this way. I did not expect the subject of the EMS to be introduced here today——

Neither did the Chair.

——but I presumed that the EMS money would be used for infrastructure. Earlier this week in a newspaper article it was stated that the ESB had been given a loan from the European Investment Bank and that it qualifies under the subsidised loans from the EMS.

That is correct.

This is what Deputy Bruton referred to as something that was on-going and not new infrastructure. It is merely the substitution of EMS money for money already negotiated from another source. If that is correct, how is there money also available to finance the £39 million that is part of the national understanding?

I do not want to pursue this matter too far.

I think we should finish it.

If I were to get into the area of the loans which qualify for EMS subsidies I should be widening the scope of the debate. The question of the subsidies may be relevant to this matter. As Deputies Barry and Bruton are not clear on this matter, I should like to point out that there is an enormous difference between an EMS loan and a subsidy in cash which is related to the amount of interest payable on the loan. To revert to a point raised earlier by Deputy Barry, on page 36 of the printed version of my Budget speech I said: "I have made no allowance in my budget estimate of resources for the capitalised interest subsidies payable in accordance with the resource transfer arrangements. The Government have decided that these resources should not be allocated until the European Monetary System gets under way and the flow of funds commences. There will then be a clearer view of suitable areas for their application in the light of actual participation in the system." There is a clear distinction between the subsidies and the loans. It was made clear that the loans would be used, not exclusively, but to a large extent, for infrastructural purposes. Some industrial purposes could be envisaged and perhaps some other purposes.

The interest subsidies are another matter. They are cash grants. There is no condition, nor did we accept any condition, on the use to which those grants or subsidies might be put. We would certainly favour the idea of using them in a way which would help to adjust the economy to the EMS regime. As I have already indicated the implementation of the national understanding would be an important step on the road to that adjustment.

The point at issue is that there were resources available to which I referred in the budget statement which had not been allocated. Therefore, it is possible to visualise the expenditure of further moneys than were provided for in the budget without upsetting budgetary balance. That is the whole point of this discussion in so far as it relates to the conditions attaching to this special deduction provided for in amendment No. 8.

My understanding is—I am speaking from memory—that the ESB got a loan which was subsidised.

In respect of which part of the interest subsidies arranged under the EMS will be payable——

The ESB have not got an interest subsidy?

They are paying the interest.

The Minister is getting the money and the ESB are paying the normal commercial rate of interest but the subsidy is being paid directly to the Exchequer.

Yes, directly or indirectly, it is Exchequer money.

It did not appear to me that that was so when I read it in the paper. The net point is that the £39 million will be paid out of EMS money.

If the Deputy is waiting for a response, I have said on a number of occasions what the position is. I cannot add to what I have already said.

I do not intend to put this to a vote as I would like to see as much unity as possible in the House about the matter. The Minister's amendment is much longer than mine. I do not know whether the length of it can be equated to its worth or not.

In relation to the Minister's amendment, the Minister says that: "This section shall come into operation on such day (if any) as the Minister for Finance may appoint by order." What sort of an order would this be and under what power would it be made? Is it under this Bill? I notice there is no section in the Bill concerning the procedures for the making of orders. Usually in sections where orders are being made there is provision which says that the order shall be laid before the House and that it may be annulled or, alternatively, that the order shall not be made unless it is confirmed by the House. There is no power in this Bill for the making of orders. How can the Minister make an order in the absence of an order-making power related to it?

The order would be made under this Bill when enacted. The provision in subsection (4) would be sufficient to enable such an order to be made. It is the traditional way of doing it when there is a conditional situation to be covered by a Bill. Perhaps the more frequent one is where either a Bill or part of a Bill is to come in at a later date.

A commencement order.

Yes. There is no need in such circumstances for the other kind of order, laying before both Houses of the Oireachtas.

There should be some requirement that the order be laid before the House. This will change the taxation code to a considerable extent. It should be a statutory requirement that it be laid before the House. The House should not find out about the order through a concession or press release.

In the normal way, it would be laid on the table of the House.

It would be a nonstatutory presentation and there is no requirement on the Minister to lay it.

If the Deputy means he thinks it should be brought before the House and that there should be the possibility of revoking it——

No. That is not what I mean. There should be a requirement on the Minister to lay it before the House without any revocation provision. We do not want to have uncertainity which might arise if there was a possibility of having it revoked by a majority of the House. It is discourteous to the House that there is no statutory requirement that the making of an order, which changes our tax code to a material extent, should be laid before the House in any shape or form. The Minister should add to the amendment: "May appoint by order and a copy of such order shall be laid before the House".

I have no objection in principle to that. I am not sure it is necessary but I will look into it.

I know it will happen anyway but I want it to be seen to be required to happen.

I will look into it. I intend that it should be laid before the House.

Amendment, by leave, withdrawn.

I move amendment No. 3:

In page 7, in column (3) of the Table to subsection (1), to delete "218" and substitute "290".

In amendment No. 8, in subsection (3):

"emoluments" means emoluments to which Chapter IV of Part V of the Income Tax Act, 1967, applies save that it does not include—

(a) or (b). They are really emoluments paid to a director of a limited company, like a director's fees or salary. Part (b) is emoluments paid by a partnership or the wife of a partner in a firm. I have no objection to that being included. I presume the idea is not to extend——

The Deputy is going back on the amendments. Amendment No. 2 has been withdrawn. We have closed the debate on that.

Are we not discussing amendments Nos. 2 and 8 together?

When amendment No. 2 is withdrawn that finalises it other than moving by the Minister of amendment No. 8 later on. We are already on amendment No. 3, which Deputy Barry moved.

I want to bring up an important point. Where the total income of the individual includes emoluments, he will get £175. In the case of a person who has director's fees and also PAYE income, such as a Member of Leinster House——

If the Deputy puts a brief question it could be answered. This is a new section and there will be no further debate on it. We have already departed from it, so if the Deputy puts a brief question I will allow the Minister to answer it.

Will people who have director's fees from a limited company and also ordinary PAYE income— many Members of the House would fall into this category, having a Dáil salary which is an emolument to which this section would apply, and they also might be directors of private firms—get the £175 allowance? Their income includes emoluments of a PAYE nature, so they should get it, whereas in subsection (3) they would be excluded. Perhaps the Minister would enlighten me on whether such people will get the allowance.

In the case of a person who had an income consisting partly of income subject to ordinary PAYE and partly emoluments as a proprietary director or within the terms of subsection (3), what would happen is that the special deductions would be applied to the proportion of his income which was subject to ordinary PAYE but that portion of his income which came within the definition of emoluments would be excluded from this and would not benefit by the special deduction. But I would like to point out to the Deputy that we are talking here about emoluments paid to a proprietary director and not just any director, or to the spouse of such a director and emoluments paid by an individual to his spouse by whatever means.

Section 226 of the Income Tax Act, 1967, defines a proprietary director as——

a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent. of the ordinary share capital of the company;

It is that kind of director that we are talking about.

I appreciate that (b) will be excluded and will not be able to receive this £175 additional allowance. But a person who would be perhaps one of those people who would also have income subject to PAYE, such as a Dáil Deputy, would be entitled to the allowance of £175.

Emoluments are not accepted for the exclusion in (a) and (b) so that it is only the (a) and (b) part that is excluded. The rest of the emolument would qualify.

Deputy Barry on amendment No. 3.

In section 141 the Minister reduces the child allowance from £240 to £218. The purpose of my amendment is to lift it from £218 in the Bill to £290. The old allowance is £240 and I am adopting the same practice as I did earlier on today of lifting this by 20 per cent. The Minister in his budget speech said that in regard to the reduction of £22 the direction of benefits in this manner will be effected by reducing the child allowance in the income tax code by £22 per child. The children's allowance is a sum of money given to people with children. It is as simple as that and to try to claw it back by means of the income tax code from people with families is quite wrong because many people in the income tax net are not well off and sometimes not much better off than those who are outside the code. To attempt to claw back money by means of a reduction in the child allowance in the income tax code is petty and mean and it should not be done particularly in this year, 1979, which has been hollowly referred to as the Year of the Child. We can do a lot of talking about the Year of the Child but we seem to do nothing concrete to make this in fact the Year of the Child. The Minister in this year has gone in the reverse direction by reducing the child allowance from £240 to £218. This is a retrograde step and my amendment seeks to redress it.

The fact that the Minister is in this year reducing the child allowance for income tax purposes is merely confirming a trend which has been taking place over a considerable period. I will just give a figure to illustrate this. Since 1974-1975 the tax free allowance of a married couple with no children has increased by 178 per cent whereas the tax free allowance of a married couple with six children has only increased by 76 per cent, a good deal less than half as much as the increase in the tax free allowance of the married couple with no children. The social justification for discrimination of that sort against large families in favour of those with small or no families is very hard to find and yet it is something that is happening.

The argument that is put forward by this Minister and also by his predecessor on another occasion was that this was justified because children's allowances were being paid to all children including those from well-off families, that it is wrong that the cost of this should be so great and that one way the cost could be reduced would be by clawing it back from the taxpayers with large families. If however, that argument is valid and there is too much money being spent on children's allowances, it is not right that the cost saving should only be made amongst middle income people with large families. Surely if there is any money to be got back it should be got back from all taxpayers and not just middle income people with families and income tax liabilities.

I just do not see the logic of it at all. If the Minister wants to make a change in children's allowances by introducing a means test, that is fair enough. But the fact that too much money is being spent on child allowances is no justification for reducing allowances on the income tax code because that is a different thing altogether. The backdoor way of doing things should not be used. It is quite wrong that a married couple with no children should have an increase of more than twice as much proportionately in their tax free allowance as the married couple with six children have had in 1974-1975 and this year. That is socially wrong and I do not understand why it has happened. The Minister should take another look at it. If he wants to save money he should find some other way.

The effect of the reduction being introduced this year in the child tax allowance, taken together with the new social welfare children's allowance, is to grant increases in net incomes ranging from £100 to £140 for the year to most families. Deputies opposite must not have thought this out very well but perhaps they have because I concede to them that it is much easier to make the arguments they are making than to make the argument I am about to make. Therefore I suppose it is more attractive politically. But I want to make it clear that in my view, whatever about the political advantages, there is no doubt at all but that the approach adopted here is a far more just one than if we did not have this approach of reducing the child tax allowance.

The first thing to bear in mind is that the poorest sections of the community who are not liable to income tax get the full benefit of the increase in the social welfare child allowances. We were able to make that increase in the social welfare child allowance substantially bigger because of this clawback. Therefore we are able to provide more for those most in need. Then when we come to the people who are liable to tax we find that the effect of this clawback is that we have reduced substantially the benefit which would otherwise apply to better-off people.

For example, with the clawback provisions that apply here a married man on £80 a week with two children and a wife who is not working has a net saving of £125.80, and a married man with two children, wife not working, on £200 a week has a net gain of £139.80. The difference between those respective gains is £14, that is between the man on £80 a week and the man on £200 a week. If we had no clawback the gain for the first man would be £141.20 and for the second man £166.20 and the difference then would be £25. One of the consequences of approaching it this way is to reduce the margin of gain for the better off as against those who are less well off. Of course, in the case of the person who is not liable to tax he gets the full benefit of what we can make a bigger increase in the social welfare child allowance by doing this.

This is not the first time this approach was adopted. It was adopted on a number of occasions in the past. Deputy Barry and Deputy Bruton might be particularly interested in one occasion on which it was done, the 1969 budget, because of a comment made on this point by Deputy FitzGerald, now the leader of their party speaking in this House as reported in the Official Report, volume 241, column 587:

Therefore, I should like to congratulate the Minister on this move. What he has done is, in fact, to recover only a proportion, a fraction, of the amount involved. Perhaps he might go further, not because anyone wants more taxation—none of us wants it; none of us paying it want it; I am one of those who suffer from it—but because every £ we get back from people who do not need children's allowance is an extra £ which we can give to people who are in very real need.

The Deputies opposite will have to concede at the very least that there is an arguable case for what is being done in this Bill. I will concede to them that it is easy to argue the other side of the coin, but I suggest that if you are concerned, given that there are limited resources and that you want to get the maximum amount of those resources that can be made available directed to those in greatest need, this is the approach you must adopt. I am afraid for that reason, that I cannot accept the amendment.

I suppose all I can say is touché. It is a bit disconcerting to have one's leader quoted against one. I must look up what Brian Boru said about this particular problem. I am sure the Minister probably has it on record somewhere if we go back far enough.

I am afraid the Chair would hardly let you go back that far.

Unless the Deputy was talking about clawbacks.

I am sure Mr. de Valera had something to say about it in the twenties and Mr. Lemass also had something to say about it. I am sure I would get a good defence for what Deputy FitzGerald said. I must send it to Deputy McCreevy because he will be very interested in what this Minister said when he raised taxes up to 80 per cent, the highest on record in this country and probably anywhere in the world. I am sure the then Minister for Finance put up a good argument for that.

The Minister has not answered the point made by Deputy Bruton about the lack of concern for large families. He defends the fact that he is reducing the child allowance under the income tax code because he is increasing the children's allowance. In fact, for the third and every subsequently qualified child it goes up from £485 to £550, which is an increase of 15p a week for the third child. Nobody will pretend that those are the people most affected by the increase in the cost of food subsidies. I quoted what was said in a programme for the Minister this morning where meat has gone up by 35 per cent in 12 months and vegetables by 100 per cent. Part of that increase has been caused by the Government removing food subsidies on 1 January last. Does the Minister seriously consider that the people affected by those increases are compensated, when they have large families, by 15p a week? There are two separate things here, the reduction in the child's allowance for the income tax code and the increase in the children's allowance. One should not be made compensate for the other. The reduction of this is a bad thing.

To the best of my knowledge there were no subsidies on either meat or vegetables.

That makes it even worse because they went up without the removal of food subsidies.

We are not discussing food subsidies on this.

Bread has been substantially increased as well as many other foods. I am sure Brian Boru would be interested in that.

We are not discussing either Brian Boru or the food subsidies.

The question arises in relation to what those tax allowances are being given for. They are being given to bring about equity between taxpayers as regards their expenses. We are telling a taxpayer this year that if he has a wife he is entitled to a very substantial increase in tax-free allowances to enable him to meet the expenses involved in supporting a wife. Nobody is suggesting that the cost of keeping a wife as against keeping a child has changed in the last year to the extent that it has become less expensive to keep a child and far more expensive to keep a wife. Both of them presumably have to be fed. I know nothing about either but looking at it from an outsider's point of view it appears to me that if tax-free allowances are justified they should be related to expenses. There is no way that one can argue that over the last few years the expenses involved in supporting a child have not increased whereas the expenses involved in supporting a wife have increased by 178 per cent and that one must give a large increase to a person supporting a wife only and very little increase to somebody supporting a number of children.

There is no change in the dietary patterns or accommodation patterns of children as against adults which would justify this discrimination in favour of a person supporting another adult but against a person supporting a number of people who are not yet adults. We are not talking about equity between people inside the tax net and outside it, between people getting children's allowances in their tax and people who are not but are only getting it in the form of social welfare allowances. We are talking about equity between taxpayers.

There is a grave inequity being perpetrated here between a taxpayer with six children to support and a taxpayer with a wife and no children to support. There is an inequity between two taxpayers both earning £6,000, £8,000, £10,000, £20,000 or even a higher figure. If you have two people with £20,000 a year one with six children whose tax allowances have only been increased by 76 per cent and another man earning £20,000 with no children and only a wife to support whose tax-free allowance has been increased by 178 per cent that is clearly wrong. There is inequity between those two taxpayers. The Minister has a responsibility to achieve equity not just between those who are not paying and those who are paying tax but as between taxpayers in the same position. He is not achieving that by discriminating against people who have large families. The Minister made the case that this money has been used, and in order to be politically neutral, I have been taking as my base year 1974-75 and compared what has happened since then in the tax code.

I have already pointed out that since then a married person with six children has had his tax-free allowance increased by only 76 per cent and a married person without any children had his tax-free allowance increased by 178 per cent. The Minister told us that the effect of this has been to improve children's allowances. One would have expected an increase in children's allowances since then of about 178 per cent, roughly equivalent to the increase that has taken place in the tax-free allowance of the married couple. But what has happened since 1974-75?

The increase for the first qualified child has been a mere 52 per cent as against 178 per cent for the married couple; for the second qualified child it has been 66.7 per cent and for the third and subsequent children there has been a meagre 35.8 per cent since 1974-75, a period of very high inflation which occurred in the tenure of office of a Government in which I was a Junior member. That does not matter. What matters is that the Minister is now using the level of children's allowance as an argument for discriminating against taxpayers with very large families. A person with six or eight children got an increase in the region of 40 per cent in children's allowances. In my opinion, that is not making up the difference to justify such gross discrimination in the tax code against large families, and I use those words advisedly. This is discrimination and I do not care what Government are responsible. The Government of which I was a member did something along those lines in one of their budgets. It was wrong then and it is wrong now. There is no justification for it. We must have equity between taxpayers and that is not occurring in this situation.

The Minister's argument is convincing. Presumably his intention is that the well off taxpayer will be receiving increased children's allowances and the Minister will get most of that money back from him through taxation. I agree with Deputy Bruton's viewpoint that there should be a means test for children's allowances, because there are people receiving these allowances who should not. I understand that it may not be possible to do this because it was tried in 1969 and the last Minister for Finance also had a clawback to recover money. I would like to see this possibility investigated. We get tax-free allowances for our children and we also get social welfare children's allowances. Could we not increase social welfare allowances and do away with tax allowances for children? This would make more money available for social welfare allowances for people with large families. Perhaps we could increase the tax-free allowance for a married person.

We could do away with all tax-free allowances.

A tax-free allowance of £240 to the standard rate taxpayer works out at £80 to £90 per year in real money terms. That amount will not keep a child. The Department might look at the idea of increasing social welfare tax-free allowances and abolishing tax allowances for children. The Minister's argument of the clawback from the wealthy people in our society can be sustained as can Deputy Bruton's argument.

The logic of Deputy McCreevy's proposal seems to suggest that all tax-free allowances should be done away with and should be paid for by way of social welfare. Why should one only consider a clawback in the case of children's allowances? Should the dependent relative's allowances be done away with, too, and a social welfare allowance given instead? Should the blind allowance be done away with?

We are getting into a new area.

Why should the clawback be considered only in the case of children's allowances?

We are getting into a new field.

What the Deputy is saying will be taken down and used as evidence against him when he is Leader of the Opposition in ten years' time.

I am putting the amendment.

Deputy McCreevy should be allowed reply.

Deputy McCreevy and Deputy Bruton have not been speaking to the amendment. I am putting the question.

Question put: "That the figure proposed to be deleted stand."
The Committee divided: Tá, 64; Níl, 28.

  • Ahern, Bertie.
  • Ahern, Kit.
  • Allen, Lorcan.
  • Andrews, David.
  • Andrews, Niall.
  • Aylward, Liam.
  • Barrett, Sylvester.
  • Brady, Gerard.
  • Brady, Vincent.
  • Briscoe, Ben.
  • Browne, Seán.
  • Callanan, John.
  • Calleary, Seán.
  • Cogan, Barry.
  • Colley, George.
  • Collins, Gerard.
  • Connolly, Gerard.
  • Cowen, Bernard.
  • Daly, Brendan.
  • Davern, Noel.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leonard, Tom.
  • Leyden, Terry.
  • Loughnane, William.
  • Lynch, Jack.
  • McCreevy, Charlie.
  • McEllistrim, Thomas.
  • MacSharry, Ray.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Morley, P.J.
  • de Valera, Sile.
  • Fahey, Jackie.
  • Farrell, Joe.
  • Faulkner, Pádraig.
  • Filgate, Eddie.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom (Dublin South-Central).
  • Fitzsimons, James N.
  • Fox, Christopher J.
  • Geoghegan-Quinn, Máire.
  • Haughey, Charles J.
  • Herbert, Michael.
  • Hussey, Thomas.
  • Keegan, Seán.
  • Kenneally, William.
  • Kileen, Tim.
  • Lalor, Patrick J.
  • Lawlor, Liam.
  • Lemass, Eileen.
  • Noonan, Michael.
  • O'Connor, Timothy C.
  • O'Hanlon, Rory.
  • O'Malley, Desmond.
  • Reynolds, Albert.
  • Smith, Michael.
  • Tunney, Jim.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael J.
  • Wyse, Pearse.


  • Barry, Peter.
  • Begley, Michael.
  • Boland, John.
  • Bruton, John.
  • Burke, Joan.
  • Cluskey, Frank.
  • Collins, Edward.
  • Conlan, John F.
  • Corish, Brendan.
  • Crotty, Kieran.
  • D'Arcy, Michael J.
  • Deasy, Martin A.
  • Desmond, Barry.
  • Enright, Thomas W.
  • Fitzpatrick, Tom. (Cavan-Monaghan).
  • Gilhawley, Eugene.
  • Horgan, John.
  • Keating, Michael.
  • Kelly, John.
  • Kenny, Enda.
  • McMahon, Larry.
  • O'Brien, Fergus.
  • O'Brien, William.
  • O'Leary, Michael.
  • O'Toole, Paddy.
  • Quinn, Ruairí.
  • Treacy, Seán.
  • Tully, James.
Tellers: Tá, Deputies P. Lalor and Briscoe; Níl, Deputies McMahon and B. Desmond.
Question declared carried.