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Dáil Éireann debate -
Wednesday, 16 May 1979

Vol. 314 No. 5

Finance Bill 1979: Finance Bill, 1979: Committee Stage (Resumed).


I move amendment No. 4:

In page 7, in the Table to subsection (1), to insert the following after the reference to section 141 (child):


Finance Act, 1971

Section 11 (blind person)



Income Tax Act, 1967

Section 142 (dependent relative)




This amendment is concerned with increasing the blind allowance and the dependent relative allowance. The blind allowance has not kept pace with increases in other allowances. Since 1974-75 the married allowance has increased ten times as much as the blind allowance. The allowance for a married person has increased by 178 per cent since 1974-75 while the allowance for a blind person has increased by only 17 per cent—one-tenth as much as the increase in the married allowance. The dependent relative allowance has increased by 18 per cent—again, by one-tenth as much as the increase in the allowance for a married person with no children. That is not right.

A dependent relative can cost as much to keep, if not more, than a wife. It does not seem right that a person supporting a dependent relative should have received an increase of only 18 per cent while a person supporting a wife has received an increase in his tax-free allowance of 178 per cent. It may cost much more to keep a dependent relative because of incidental expenses that may have to be met if the person is not in good health than to keep a spouse who is in good health; I realise I should not always use the word "wife" in this context because it may be the other way around, that the wife is supporting her husband.

The dependent relative allowance was introduced in the budget of 1956 at a rate of £60 and now in 1979 it is a mere £95. There has been an increase of only £35 in this allowance even though there has been a tremendous change in the cost of living since 1956. This is a meagre amount in a period of 23 years. It does not seem to be a very generous encouragement to people to look after a dependent relative in their own home. We hear from all sides of the House exhortations to families to look after relatives when they are unable to look after themselves. A lot of lip-service is paid to the great contribution of those who keep aged relatives at home, thus saving the Exchequer the immense amount that would have to be paid if they were committed to a county home or some other institution supported by the Exchequer. Yet when it comes to the tax code all we have been able to give to such a taxpayer is a meagre £35 increase in the tax-free allowance since 1956. That is not generous.

I believe the Minister is prepared to listen to the kind of case I am making in respect of individual allowances in the tax code. He demonstrated this very clearly in the improved allowance that he is giving in section 4 to one-parent families. That arises in substantial measure from a case made by this side of the House and which was accepted in general terms by the Minister in last year's Finance Bill about the problems of one-parent families. It was a credit to him that he was able to respond in great measure to the case made last year in this connection by a number of Deputies, including Deputy Barry, Deputy Eileen Desmond and myself. In section 4 the Minister has gone much of the way to meet the case we made and he deserves credit for that.

Therefore, it is not without a certain amount of optimism that I am making the case this year in respect of the dependent relative allowance and the blind allowance. The Minister has shown that he is able to meet a case. I can understand that he may not be able to meet this case this year because the Finance Bill has already been drawn and the sums on which it is based have been set out, but I hope that when he looks at next year's budget he will be able to do something radical about the dependent relative allowance. It certainly needs to be done when such a meagre increase has been given over the years by comparison with the increase given taxpayers in respect of supporting a spouse, as against another form of dependent relative.

The blind person's allowance was introduced in the 1971 budget at £100. It has been increased to £165—in eight years an increase of £65. It is not quite as bad as the record in relation to the dependent relative allowance but it is not very good, particularly when one realises that the number of blind people is so small that one can afford to be generous. We are talking of a tax free allowance to blind people who are working. We should make every effort to encourage people disabled in any way, in this case blind, to go out and work to support themselves, to become taxpayers, not only because of the contribution they can make to the community but also because if they are working the sense of value they get from it contributes greatly towards reducing the demoralising defects of their disability.

A tax free allowance is one of the very best ways in which one can help a disabled or blind person to achieve the most possible from their talents. Instead of giving them a dole, something for nothing, some social welfare allowance or a form of sheltered employment or something like that, you are giving them something which encourages them to go out and work on a normal basis like everybody else. You are saying: "It does not matter how much you earn; do as much as you can and you will get an extra allowance on your tax over and above what is available to anybody else." The blind person's allowance does precisely that; it encourages people to seek work. The allowance has been increased by a mere £65 since 1971 while the single person's allowance has increased from £249 to £1,115, by about £900 in the same period. That is not equitable. There should have been a proportionate increase. A proportion should have been kept between the single person's allowance and the blind person's allowance as regards increases. If the blind person's allowance had been increased by the same proportion as the single person's allowance it would now be in the region of £700 instead of £165.

The amendment I am putting forward, which is merely to increase the blind person's allowance from £165 to £302, goes only half way along the road one would be justified in going on the basis of the figures. It is not an over-generous amendment in regard to the blind. I arrived at the figure by taking 1974-75 as the base year and seeking to give the same percentage increase to the blind and the dependent relative allowance as has been given in the married couples' allowances since 1974-75. I could have got a much more generous figure if I had taken 1971 as the base year but I took 1974-75 because it was mid-term in the period of office of the previous Government and covers part of the term of office of this Government and the previous one. The record, when one is comparing it with what should be the case, is one for which both sides of the House bear responsibility and cannot be the subject of partisan discussion. There is a very strong case for giving substantial increases in the dependent relative and the blind person's allowances. These allowances tend to be forgotten in the Finance Bill because the numbers involved are not large. They do not form part of a big political constituency. None of them have influential organisations speaking for them. They are not one of the social partners and are not represented in the pay talks. If they do not agree with the Government policy—the blind and the dependent relatives—it will not mean there will be no national agreement. It will not mean people marching in the streets and that the Minister will be forced to climb down on his taxation proposals if these groups are not satisfied. It is perhaps because of their small size that successive Ministers for Finance have neglected to do anything meaningful about the blind persons and dependent relatives.

If this House has any purpose it is to represent those who are unrepresented in the type of discussions in which any Minister must take part, what is now described as a national understanding. Between now and the next Finance Bill I hope the Minister—if not on this occasion—will take a very close look at the record of his predecessors and himself in regard to blind allowances and dependent relative allowances and give a truly dramatic increase in both allowances in next year's budget.

I should like to support Deputy Bruton, who has made a very fair case in a non-contentious way. If the Minister intends to reply perhaps he would tell us how many people would be involved in this and what it would cost. We are only talking about blind people who are working and I would guess that the number of dependent relatives being supported by taxpayers is quite small so that to accept the amendment might not cost much and would only affect a small number of people, but it would be a real benefit to those people.

I am very glad to support an amendment of this kind. The case has been presented in a way that could not excite the Minister to say that it was politically motivated or that it sought to take advantage over him in his position as Minister for Finance, because under all Governments this matter has been relatively neglected. These are groups whose allowances have not kept pace with others for various reasons that have been put forward. Perhaps Deputy Bruton is right when he says that they do not gain representation in the larger national economic talks. One way or the other, the dependent relative allowance and the blind person's allowance should be reviewed as a matter of urgency and a planned programme to bring these allowances up to more realistic levels should be embarked upon. The point has been made that the number involved is relatively small and it would do the Minister for Finance credit to be able to claim that he has rectified an anomaly that has grown over the years. Presumably hardship is being caused to a relatively small number of people. The cost to the Exchequer to rectify the anomaly would not be large and it would only be doing what we have done with more influential sectors. I support the case that has been made.

The case made for an increase in the blind person's allowance and the dependent relative allowance is one that can be made with considerable persuasion. However, there is one fallacy inherent in Deputy Bruton's approach in comparing the increases in these allowances over the years with the increases in such things as the single person's allowance and, by implication, suggesting that the rate of increase ought to be the same if we are to achieve justice.

Any person in receipt of either of these allowances must come into one of the categories of single, married, widowed or single parent. Therefore, they have been given the benefit of the increase in such allowances provided for in the budget. The Bill provides for an increase in the single person's allowance of £250, an increase of £500 in the married allowance and an increase of £250 in the single parent's allowance. All of these people who are in receipt of either the dependent relative's allowance or the blind person's allowance have received these increases. We are talking about increases over and above those increases.

Having said that, I am not suggesting that the existing allowances are generous. I am saying that one must have regard for the overall position and try to achieve some kind of balance between the different kinds of allowances. If one increases the main allowances substantially, then one is covering every taxpayer. There are, as Deputies know, a number of allowances of this kind which only apply in a limited number of cases. One has to try to achieve some kind of balance. One cannot pick out one or two categories and ignore the others.

One must also have regard to the overall cost of all the changes. It is true that the relative cost of the proposed increases, particularly in the case of the blind person's allowance, is not very great. At the moment I do not have the exact number involved but the cost of the implementation of these two proposals would be £4 million, of which about £20,000 would relate to the proposal in respect of the blind person's allowance and the balance to the dependent relative allowance. One might well say that since the cost is so small, particularly in relation to the blind person's allowance, we should make a worthwhile increase in it. As I said, items of that kind cannot be picked out because they do not cost too much. It would be invidious to those in receipt of similar kinds of allowances that are not of general application to approach the matter in that way. Furthermore, one must have regard to the overall position.

In this connection perhaps the Deputies opposite might be interested to know that, taking the various amendments that they have put down to increase various allowances of one kind or another, including the amendment being discussed, the total cost involved in their proposals would be an additional £173 million. I hope that that will put into perspective the problem that we face in dealing with these matters. It is not simply a question of picking out one or two categories and dealing with them. While I am not unsympathetic to the case made nor suggesting that the existing allowances are over-generous, in the context of the overall increases being given, which apply to all these people, and in the context of the budgetary position I could not undertake to accept these amendments at this time.

With reference to the dependent relative allowance, I should like the Minister to draw the attention of the Department to the bureaucratic rigmarole which anyone claiming the extra allowance of £95 must endure. There are 11 questions to be answered on the form such as "Please give evidence of how you support this relative.", and so on.

I will convey the Deputy's remarks to the Department and will look at the situation. I am not aware of the position being as he says. Without having looked into the matter, my immediate reaction is to point out that it is not open to the Revenue Commissioners or Inspectors of Taxes to grant allowances of this kind to people for whom the Oireachtas does not lay down an entitlement. The Revenue Commissioners must ensure, as reasonably as they can, that if such an allowance is specified as being subject to certain conditions, those conditions are complied with. Subject to that, however, it may be that the questions are unnecessary. I will have the matter examined on that basis, but I must remind the Deputy of what I said about the overall responsibility of the Revenue Commissioners to ensure that such an allowance is given only to those entitled to it by law.

That only arises because of a law made by us. The Revenue Commissioners are asking unreasonable questions because we are making unreasonable laws. We have to have a look at that. Deputy McCreevy was raising a legitimate matter that perhaps the Minister should have a look at. The Minister used the phrase we must try to keep some kind of balance in this discussion. That is precisely what I am trying to do. I am trying to restore the kind of balance that existed as between the blind and dependent relative allowances and the single or married allowance in 1974-75. What has happened since is that there has been an imbalance. Very big increases have been given in the married and single allowances but equivalent increases have not been given in the blind and dependent relative allowances.

I am disappointed at the Minister's response to the case that is being made and would ask him to do two things between now and Report Stage. I would ask him to ask his officials to have discussions with the National Council for the Blind to ascertain the manner in which this allowance is used and how valuable it is in promoting employment. If the Minister got information from the council on that issue it might be of help to him in assessing next year whether or not an increase would be justified. In the case of the dependent relative allowance, it would be a good idea for the Minister to have a look at the kind of person getting this allowance and the kind of relative in respect of whom they are getting it, to see if a significant increase in the allowance would not result in an overall net saving to the Exchequer. A number of people would be able to be kept at home instead of going into county homes if the allowances were increased.

The £4 million referred to by the Minister in terms of cost of an increase in the dependent relative allowance would be more than outweighed by a reduction in costs to the health boards in respect of maintaining such people in institutions. The health boards spend somewhere in the region of £400 million on various services, not all directed to the alleviation of the position of dependent relatives. A lot of the health board expenses could be saved if what I am proposing were done. That is only a bland assertion on my part as I have no evidence to substantiate it beyond the evidence of reason. The Minister should have consultations with the health boards to see if the case I am making is justified and if an increase in the allowance would mean an overall net saving to the Exchequer. If he finds that it does, he would be justified in making the increase we are looking for, if not this year, then next year.

When I was talking about balance between these allowances I thought I was making it clear I was talking about allowances other than the main personal allowances. They apply to all of these people, single, married, widowed or whatever. I was talking about balance in the non-main personal allowances. There are other categories affected in this way and I was saying one cannot pick out one of these categories and accelerate it beyond the other categories. That is what I was trying to convey.

That is what happened. The Minister decelerated them.

In so far as there have been substantial increases in the personal allowance all these people have benefited. As far as the use being made of these allowances in the case of blind persons is concerned, I can claim to be appreciative of their value, since I introduced them. Any representations that are made from time to time by the National Council for the Blind and other similar bodies are always listened to carefully and that will continue to be the case.

Like Deputy Bruton what I am about to say is an assertion and not based on facts as I do not have them at my disposal at present. In relation to the dependent relative allowance an increase sufficient to make any impact on the cost of the health boards would be an enormous increase. The kind of increase one could keep the other similar allowances in line with would not be sufficient to make any impact on the cost of the health boards. That is an assertion and not based on an examination of facts. I am not ruling out the possibility of improvements in these allowances at any time in the future. I am speaking merely of the position as of now in relation to this Finance Bill.

If that is the case the Minister might consider introducing a somewhat more narrowly drawn form of dependent relative allowance which would be increased and have the type of effect on health board costs I have been talking about. If certain facts could be proved which would suggest that a saving would be made, the Minister could give an increase then without any overall net cost.

I will examine that.

Amendment, by leave, withdrawn.
Section 3 agreed to.

Amendment No. 7 is consequential on amendment No. 5 and they may be discussed together.

I move amendment No. 5:

In page 8, subsection (2), line 1, to delete "Subject to subsection (3),".

Could I ask a question on section 3?

Just a brief question. We have gone on to the next section.

The increase in a married man's allowance is 29 per cent, in the single person's allowance it is 29 per cent and the increase in the widowed person's allowance is only 26 per cent. There is a difference of 3 per cent there which is not justified. The Minister should bring the widowed person's allowance up to about £2,000 to get the same percentage increase as is being given to the married and single allowances. There is no real justification in fiscal policy for giving 26 per cent to widowed people and 29 per cent each to married and single people.

This is an old argument and arises not only in this area but in the settlement of pay claims and so on if there are different categories. Does one go for a flat percentage increase or a flat cash increase? Whichever one goes for, one will get different results. One could argue either way depending on which category one is in. There is no right or wrong in it. In cash terms, the increase is the same for both categories.

The fact that people are starting from a high base and therefore the same cash increase yields a smaller percentage increase indicates that at some time in the past somebody thought that their needs were relatively greater than people in other categories. Otherwise they would not have had the high base in the first place. Previous Ministers for Finance felt that the relative position of the widowed person against the single person—and the widowed person against the single person is getting approximately £70 more—and the relativity as between the two which existed in 1978 to 1979 should be maintained this year. It was presumably based on an understanding of the relative needs of single people as against widowed people.

We will have to leave it there. I only let the Deputy in to ask a brief question. I have already called section 4.

May I say a brief word in response? On a previous occasion on the previous Finance Bill I went in considerable detail into the argument in relation to the allowance as between single, widowed and married people. The case is made frequently by single persons that there ought not be a bigger allowance to widows without dependants than to single persons. Nevertheless I have gone into this in detail before and have explained the reasoning behind it and I do not propose to go over that again. But I must direct the Deputies' attention to the fact that if we are talking about widowed persons with dependants I have introduced a special allowance in respect of these.

The Minister deserves full credit for that.

But in regard to the argument the Deputy makes for maintaining the same percentage increase as against cash increase for widows, leaving aside dependants, it is much weaker.

The single person could also be supporting a parent. It is not just widows who are in that situation.

The Minister on amendments Nos. 5 and 7.

The primary effect of these amendments is to grant the single parent allowance to each parent in the case where parents are separated and where children reside with each parent for part of the year. In these circumstances it is considered that both parents should get the allowance rather than have one allowance shared between them. The deletion of subsection (3) achieves this. Subsection (4) deals with the case of a separated father making maintenance payments in respect of a child and is unnecessary as the matter is already covered.

I want to support the three amendments on the section. I welcome this and I thank the Minister for bringing it in. Both myself and Deputy Eileen Desmond made a strong plea for this last year when the Finance Bill was going through and I am very glad the Minister has agreed to bring in the amendments in this case. It is something that was overdue but it is something that was needed because there is no doubt that the costs of a household for the single parent is very much greater than half the cost for a married couple. That is a roundabout way of putting it but the Minister knows what I mean. I wanted to increase the amount from £250 to £500. I appreciate what the Minister has done but I want to put him on notice that if he and I are here next year I will be looking for an increase.

I wholeheartedly endorse what Deputy Barry has said. This was a very good move on the Minister's part. He has met the case which was made and it is to his credit that he has done so.

Arising from what the Minister said regarding the deletion of subsections (3) and (4) am I right in thinking that subsections (3) and (4) are taken out altogether?

So that means then that in the case of a husband and wife who are separated and where the child is resident with either of the parents for any part of the year both of those people will now get the allowance of £250. Am I right in assuming that?

What the Deputy says is correct but subject to the fact that they would have to qualify for the child allowance. In other words, they will have to have care of the child. I do not know if the Deputy has in mind that people might try to work a quick one on this by simply having the child for one day. They would in fact have to have care of the child for part of the year. I do not know if I can define what part of the year but it would have to be sufficient to enable them to qualify for the child allowance.

The reason I am asking the question is because I want to know if the child allowance is split would the extra allowance also be split in the same way?

The Deputy is saying that if the child allowance was split then that would have to be a pre-condition before they could get this special allowance which I think he said would also be split. This is a point I want to make clear. This allowance will not be split. Each of the parents would get the allowance separately. The child allowance might be split but the allowance we are dealing with here will not be split. If each of them qualifies each of them gets a separate allowance.

I asked that because the case was made that for one child the allowance to be given would be £500—each parent would get £250.

That could arise.

I just want to thank the Minister for meeting the points made on this section. We do not often do so in this House but I want to compliment the Minister on it. We find ourselves very frequently disagreeing but here we can agree.

Amendment agreed to.
Amendment No. 6, by leave, withdrawn.

I move amendment No. 7:

In page 8, lines 3 to 25, to delete subsections (3) and (4).

Amendment agreed to.
Section 4, as amended, agreed to.

The new section has already been discussed.

I move amendment no. 8:

In page 8, before section 5, to insert the following section—

5.—(1) For the purposes of ascertaining the amount of the income on which an individual is to be charged to income tax for the year 1979-80 in a case where the total income of the individual for the said year consists of or includes emoluments—

(a) a deduction of £175 shall be made from so much, if any, of the emoluments (but not including any emoluments deemed to be his income by virtue of section 192 of the Income Tax Act, 1967) as arise to the individual, and

(b) a deduction of £175 shall be made from so much, if any, of the emoluments as arise to the wife of the individual and as are in excess of the amount, if any, by which the deduction to which the individual is entitled for that year under section 138 of the Income Tax Act, 1967, is increased by virtue of subsection (3) of the said section 138.

(2) In determining cumulative tax-free allowances in relation to the year 1979-80 for the purposes of the Income Tax (Employments) Regulations, 1960 (S.I. No. 28 of 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.

(3) In this section—

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

(a) emoluments paid, directly or indirectly, by a body corporate, or any person who would be regarded as connected with the body corporate for the purposes of Part IV of the Finance (Miscellaneous Provisions) Act, 1968, to a proprietary director of the body corporate or to the spouse of such a proprietary director, and

(b) emoluments paid, directly or indirectly, by an individual or by a partnership in which the individual is a partner, to the spouse of the individual; ‘proprietary director' has the meaning assigned to it by section 226 of the Income Tax Act, 1967.

(4) This section shall come into operation on such day (if any) as the Minister for Finance may appoint by order.

Amendment agreed to.

I move amendment No. 9:

In page 8, before section 5, to insert a new section as follows:

"5.—As respects the year 1979-80 and any subsequent year of assessment so much of any contribution paid by a person under the Social Welfare Acts, 1952 to 1979 and any subsequent enactment with which those Acts may be cited, shall be deducted from or set-off against the income of that person for the year of assessment in which the contribution is paid.".

The object of this amendment is quite clear. It is to restore the position that was there up to last year when some proportion of the social welfare contributions made were allowable as tax deductions. There is a section further on in the Finance Bill which will for the first time allow people who have taken out private insurance to recover, in the event of illness, their contributions as an allowance against tax. But in the same Finance Bill we find that people who are making their insurance contributions to the State other than to an ordinary insurance company are being denied this benefit and this is a regressive step. We are one of the few countries in Europe who do not allow social security contributions to be deducted for tax purposes. I know that in Belgium, Germany, Luxembourg and the Netherlands this is allowed and it is allowed in a peculiar way in France in so far as there is a 30 per cent blanket reduction on tax there which covers the ordinary welfare contributions. I believe they are allowed in Denmark in a different way but the situation there is very much more complicated. The social welfare code and the tax code are a lot more integrated than they are here and it is difficult to decide it. Up to now they were not deductible. This year Ireland joined the UK in this matter. We are not allowing social welfare contributions to be tax deductible. The Minister has said previously in relation to the 4 per cent which is being deducted that the allowance being made would be higher except for the tax deductible element of it. People who are not taxpayers get the benefit of that as well as taxpayers.

The level of contribution by the State to the social insurance fund has been steadily falling. It has gone down from 35.6 per cent in 1972 to as low as 15.6 per cent in 1979. It is difficult to see how the benefits of tax deductibility in the pay-related scheme will be evident to the people who are contributing this money. This is another point which will annoy taxpayers. Those who pay social welfare contributions who are not taxpayers are still contributing this percentage point but they are not being allowed deduct their social welfare contributions against their taxable income. Those who take out insurance with a private insurance company to cover them against illness are being allowed deduct their contributions against their taxable income. In a year when the Finance Bill includes a provision which allows somebody who pays a premium to a private insurance company to deduct that for tax purposes the ordinary PAYE taxpayer, the ordinary social welfare contributor, who makes that insurance contribution to the State, is not being allowed deduct it for tax purposes. The Minister should accept this amendment.

On Second Stage I made a point about the social welfare allowance which used to be part of the tax-free allowance certificate. The Minister has already pointed out that the new rate of pay-related contribution takes account of the deduction and that most taxpayers are better off. In section 10 short-term social welfare benefits will be regarded as part of the taxable income of people and we will tax them on that. In all other aspects of the income tax code what is taxed as income from one person is used in the expense of another person. Perhaps a case could not be made previously that a person should be allowed his full social welfare stamp against his taxable income and that that person was not taxed when he got those benefits, unemployment benefit and so forth but in section 10 we have extended the principle of taxing short-term social welfare benefits.

I do not want to help Deputy Barry but there is a prima facie case for allowing the total social welfare contribution of an employee against his gross taxable income. There would be no need to include that on his tax-free allowance certificate because his gross income would be less his social insurance, as superannuation is treated, and he would be taxed on that. This would be allowed as a full deductible expense against his taxable income.

Deputy Barry asked why we could not revert to the previous position whereby a small part of the social welfare stamp—last year it was £64 and two years previous to that it was £48—would be deducted. Even though the allowance was small then we did not have a section like section 10 in this year's Finance Bill. We did not tax the person when he got unemployment benefit. I would like to make the case that since we are extending the principle of taxing social welfare benefits the person paying social welfare contributions should be allowed deduct from his taxable income the total amount he pays. This might help the Opposition and make things more difficult for the Minister. It is a very important principle of the tax code that when people are allowed expenses against their profits in business those expenses must be the income of some other person. When we are taxing a person on short-term social welfare benefits it is only logical to give him the full benefit of his social welfare contributions. I know that section 10 will only have effect for the tax year 1980-81. Perhaps the Minister will have time between now and next year to ensure that from 6 April 1980 the total social welfare contribution of an employee is allowed in full.

It is a reason for bringing this country into line with other countries to allow for tax deductible purposes the welfare contributions which are made by PAYE people. Deputy McCreevy has made my case for me. I know he put it forward as an observation on what he saw as something illogical in the present system, that there are categories under the taxation code such as self-employed who quite legitimately can offset expenditure against tax and this is quite legal and approved of. In the case of PAYE taxpayers it would lessen the sense of grievance which exists at the moment if they were allowed offset their social welfare contributions against income tax.

This case is much stronger when we come to section 10 where almost 100,000 people who depend on benefits, unemployment, maternity allowances, deserted wives' benefits will become liable for tax. This surely strengthens the case being made in relation to this section when we are looking for offsetting the contributions made under the welfare code for tax purposes. I hope the Minister will look at this favourably. I know we are talking about next year but he should consider that this is another area where his intervention might assist in removing some of the grievances which are felt at the moment by the PAYE categories.

This amendment proposes to allow the fully pay-related social insurance contribution as a deduction for income tax purposes. The cost of such a proposal would be of the order of £20 million this year and £31 million in a full year. It will be clear that apart from any other consideration the cost would rule it out, but there are other considerations.

It is quite misleading to present the case as it has been presented by some Deputies. The fact is that under the new pay-related scheme the pay-related contribution has been calculated on a net basis, the contribution being 3.4 per cent rather than 3.9 per cent as it would have been if calculated on a gross basis. The reason for this reduction is to compensate for the withdrawal of the income tax relief granted in respect of part of the former flat rate contributions.

If we are told, as Deputy O'Leary told us, that there ought to be allowed for tax purposes the amount of the social welfare contribution, then I have to put the question: does Deputy O'Leary wish that we should increase the social welfare contribution to 3.9 instead of the present 3.4 element, or is he saying that it should be allowed as an expense for tax purposes and in addition should be held at its present level and not be increased? If that is what he is saying, I am afraid it is dishonest. It is trying to avoid the issue concerned.

The fact is that up to now that part of the contribution to social welfare which was referable to the provision of widow's contributory pensions, orphans' contributory allowances, retirement pensions, old age contributory pensions and death grant was allowable for tax purposes and the income tax deduction in the ordinary case was £64. The simplest thing would have been to continue with that arrangement. However, for reasons which I do not think I need go into now, but which were spelt out by the Minister for Social Welfare in both Houses when introducing the Social Welfare Act, 1978, it was not possible administratively to provide a pay-related scheme. Heretofore it was not pay-related, it was a flat contribution. Once it became pay-related, considerable difficulties arose relating to the anticipation of what the person's contribution should be during the year. It was not possible to calculate it entirely in advance and the only practical way of dealing with this was to take away the income tax allowance, but the contributor was compensated by reducing the amount he would have to pay under the pay-related contribution and the effect on the Exchequer was the same. In other words, the amount gained by the Exchequer by disallowing this as a tax allowance was lost by the Exchequer by way of additional contribution to the social welfare fund.

It is a purely mechanical arrangement. The person concerned is no worse off. He ends up with the same net position as before. One Deputy referred to the fact that this benefits people who are not liable for income tax. That is true, but I do not think administratively anything else is possible. Furthermore, a person who is not liable for income tax can, by definition, be taken to be very much among the lower paid. I do not think that presents any major problem in dealing with this. The bulk of the people concerned are liable for income tax and their position is precisely the same as it was before. It is for purely mechanical, administrative, reasons that the change was made.

That should not be misrepresented, and it is misrepresenting it to say that we provide in a later section of this Finance Bill for the allowance for health insurance contributions for the self-employed and we are taking away that allowance from those who are employed. That could be factually true, but in its implications it is misrepresenting the position. It takes no cognisance of the fact that the person concerned is in precisely the same position in cash terms as he was before. This is purely an administrative arrangement entered into for good reasons which have been explained in this House before.

In the circumstances, if one were to accept this amendment at the cost I mentioned, the only way it could be done would be by increasing correspondingly the amount of contribution to pay-related social welfare, assuming that could be done administratively. What benefit would that be to anybody? I do not think it would be worth the effort even if it could be done administratively, which it cannot. If that is not what is sought, then what is being sought is, on the one hand, to reduce the pay-related contribution and, on the other hand, to allow the income tax allowance for which the person has already been compensated in pay-related contributions —in other words, to give it on the double. Deputy Barry has not made that case and I do not know whether he would try to justify it, but if that is not his case I see no real purpose in this amendment.

I must look up that quotation attributed to Deputy FitzGerald. The election that year was in June and presumably the Finance Bill was over at that stage. Maybe there were two Finance Bills that year.

I gave the Deputy the reference.

I am not questioning it; I am curious. The case had been made on numerous occasions during Question Time and in debates on Finance Bills, that people should not be taxed on their old age contributory pensions. The reply always was that their contributions were tax deductible and that these people could not have it both ways. The Minister says the pay-related element has been reduced to take account of the £64 they paid last year. I do not know if that is right or wrong, but obviously there is something in the figures which does not add up—at least it is not obvious to me. During the budget debate in this House on 7 February last, at column 705 of the Official Report, I said:

But, in fairness, it is one of the points that the trade unions will want to know about before they negotiate a new wage agreement—what is the level of the stamp going to be in April after the pay-related scheme comes in?

Mr. Haughey: Eleven point two per cent.

He said all that was discussed long ago in the House and was fixed. If that was so in February why was it 13.6 per cent on 6 April, 4.4 per cent from the employee and about 9 per cent from the employer? It is not 11.2 per cent. If the Minister is making the case that there is a 3.9 per cent——

The Deputy will appreciate that this is not my area and therefore I do not have the whole of this at my fingertips, but I think that the 11.2 per cent which the Minister for Social Welfare prepared was the total of the various items including the health contributions and that the figure which the Deputy has mentioned of 14 per cent or thereabouts is the total contribution including the employer's

What I was referring to was the dole, including the employee and the employer, and I used those words in the budget debate. At that stage the Minister for Health said 11.2 per cent but I believe that it is 13.6 per cent or something like that.

I have here a quotation of what the Minister for Social Welfare said on the Social Welfare (Amendment) Bill, 1978.

I was making the point that when the pay-related stamp came in—and we are discussing that here now—this would be a further imposition on taxpayers, and I said that I did not know what it was. The Minister for Health, who was sitting in the House at the time, said that that was 11.2 per cent. I have got it now from the Minister that 11.2 per cent is something else.

If the Deputy would yield to me for the moment I will quote what the Minister for Social Welfare said on the Social Welfare (Amendment) Bill, 1978, as reported in the Official Report of 9 November, 1978, column 598, volume 309:

There was some confusion about the rates of contribution that will come into operation under the new legislation. Section 5 provides for a standard rate of social insurance contribution of 11.2 per cent. That will be made up of 3.4 per cent from the employee and 7.8 per cent from the employer. That contribution will cover benefits other than occupational injury. That is paid exclusively by the employer and, from now on, it will be at the rate of .45 per cent. Now the 3.4 per cent employee contribution is, in fact, 3.9 per cent. That 3.9 per cent is reduced by .5 of 1 per cent to compensate for the fact that the pension element of the contribution will no longer be deductible for income tax purposes. That .5 of 1 per cent concession in the employee's rate is related directly to what will be lost to employees and gained by the Exchequer because of the fact that we will no longer be able, for administrative reasons, to make the deduction in income tax to allow for the pension element in the contribution rate.

I can see why there is some confusion. It is not easy. I thought there was a difference between what the Minister said in February and what happened in April.

I do not think so.

Maybe not; I am not sure. But the Minister says it would have to be contributed by somebody else. I made the point, which the Minister did not answer, that the Government contribution to the social insurance fund has decreased this year. It has gone down from 20.8 per cent to 15.1 per cent. If that had been kept at the 1978 level it would go some of the way towards meeting the shortfall this year. As Deputy McCreevy said—I do not wish to put him in a spot—when people pay insurance it should be deductible. That is the net point I am making.

Offhand I cannot comment on the Deputy's figures for the overall Government contribution to the social welfare fund. I do not have that information here at the moment. However, I can tell him that the calculation of the different shares of contribution to that on the introduction of pay related social welfare was gone into in considerable detail and was the subject of detailed discussions and negotiations with the trade union and employer representatives. The Deputy can rest assured that every step of the calculations was examined with a magnifying glass. As I have indicated in the quotation of the Minister for Social Welfare at that time, the result of the calculations was to show that what should have been a 3.9 per cent contribution was reduced specifically to 3.4 per cent precisely to compensate for the abolition of the tax allowance. The question of whether this should be tax-allowable may be a nice point of theory but in practice it is not possible to do that.

In any event, the point that I am making is that if this amendment were to be accepted if it were administratively possible, it would mean simply that the social welfare contribution would be increased in order to allow the tax allowance to be made. Otherwise, what the Deputy is seeking is to have it allowed both ways, in a reduced contribution and in a tax allowance.

Amendment, by leave, withdrawn.
Section 5, as amended, agreed to.

Amendment No. 10 is merely a drafting amendment. I will wait and move other later amendments. I will move No. 13, which is a substantive one.

Amendment No. 10 not moved.

Amendment No. 12 is cognate with amendment No. 11 and therefore these amendments may be taken together.

Amendment No. 13 also is cognate.

As regards taking Nos. 11 and 12 together, I put in a further amendment last night which would be also related to the Schedule. Whether it will come under this section or under the Schedule I do not know. Which way are they taken?

The Deputy will meet the other section when we come to it. These are grouped for the purpose of the debate and we may deal with them now.

Amendments Nos. 10, 11 and 12 are related to one another.

Amendments Nos. 11 and 12.

Amendment No. 10 is related to amendments Nos. 11 and 12. You could not take Nos. 11 and 12 without No. 10.

Amendment No. 10 has been withdrawn.

I understood that Deputy Barry was suggesting withdrawing amendments Nos. 10, 11 and 12 and that he wanted to deal with the other one that he was referring to.

No, I was saying that Nos. 11, 12 and 13 were related.

Amendments Nos. 11 and 12 are cognate.

I move amendment No. 11:

In page 8, subsection (1), line 38, before "labour" to insert "insulation materials and".

The Minister is giving a tax-free allowance in respect of labour costs of certain building works, and this is very welcome even though it is to be for only one year. If it is right in principle I do not see why it is given only for one year but that is a matter we can discuss on the section. The purpose of my amendment is that in so far as insulation is concerned we should not only give the tax allowance in respect of labour costs but also in respect of materials.

What amendment is the Deputy dealing with?

We are dealing with amendment No. 11.

The Deputy spoke about the materials involved but that is not what the amendment says. I do not want to interrupt the Deputy but I want to be clear about what we are dealing with. The Deputy referred to materials which seem to me to relate to amendment No. 10.

I am talking about insulation costs. I am not trying to extend it to materials other than insulation materials. In fact, it was never my intention to do so. Amendment No. 10 was not designed to extend it; it was merely to make the Schedule consistent with the section if the amendments in my name were accepted. That is all.

We must take urgent action to increase the level of insulation in our houses in order to take account of the energy situation. This is getting worse all the time because we are relying to a great extent on imported energy to keep our economy going and to heat our houses. Various people made optimistic forecasts about native sources of energy being developed, about offshore gas and so on. These forecasts may have given grounds for optimism three or four years ago but they have not been fulfilled.

At the moment we import very substantial amounts of energy. In 1977 some 80 per cent of our energy needs were supplied from outside the country and only 20 per cent from within the country. The Department of Industry, Commerce and Energy estimated in their White Paper on energy needs that by 1990 only 11 per cent, as against 20 per cent, of our then energy needs will be met from within the country and 89 per cent will be met from outside the country. The Department might be expected to be optimistic but their projection shows an increasing dependence on externally supplied energy and a doubling of the over-all energy consumption by our economy between now and 1990. That doubling of energy consumption is deemed by the Department and perhaps by others as absolutely necessary to achieve the increased employment needed to provide jobs for our young people. Every new job increases considerably the demand for energy.

The consumption of energy for essential purposes, namely, the maintenance and creation of employment, will be doubled while the proportion of energy supplied from domestic sources will be halved. Therefore, there is a very strong case for eliminating every form of waste. One prime way in which energy is wasted is as a result of bad insulation of houses. The insulation of practically every house in the country could be improved. We could make a dramatic reduction in our overall energy consumption if this were done, thus releasing substantial amounts of energy for use in essential purposes such as the preservation and creation of jobs rather than heating the air around houses because those houses are not sufficiently insulated. What we are doing is sending valuable energy, purchased at extremely high cost to the State and to our balance of payments, up into the air to heat the stratosphere over Ireland where it is of no benefit to anyone.

We are one of the countries who have not given sufficient attention to insulation. There are wide differences from one country to another in the level of insulation of houses. Even though the climate in Sweden is far colder than in Holland or the UK, it has been shown that it takes less energy to heat houses there than in the two other countries. This is because houses in Sweden are properly insulated while houses in Holland and the UK are not. Although I do not have information about Ireland, I imagine the same is probably true about us and probably we are in the same category as the UK.

This amendment is a modest move in the direction of encouraging people to insulate their houses. It is particularly necessary to insulate roofs. Much money is spent on insulating windows but the heat loss through windows is quite small. The big loss of heat is through roofs. Tremendous savings could be achieved if roofs were properly insulated. In any tax allowances the materials used for insulation should be included with labour costs as an item deductible against tax liability. If the Minister would consider doing this it would be in line with the over-all policies of his Government in trying to reduce our dependence on unnecessary imported energy.

I wish to support the amendment. There is a reference in the Second Schedule which I cannot find now but I think it refers to improvements to houses, including insulation—the last two words were in brackets. I shall have a lot to say about the Schedule later because it appears to me that it is designed to ensure that nobody can claim relief under it.

Yesterday the Minister for the Environment was asked at Question Time about a special grant for house insulation. He said the cost of insulation, of cylinder lagging and draught stripping which he had already mentioned were taken into consideration and may be reckoned in calculating the appropriate amount of the improvement grant. The Minister was questioned about this. Evidently one cannot get a separate grant for insulation from the Department of the Environment. If one does a general scheme of improvements which includes insulation, then insulation is grant-aided.

Because of the energy situation it is essential that we take measures to reduce our consumption of energy. Section 6 of the Finance Bill should encourage people to insulate their houses, not inhibit them. The grant scheme is a good idea but I have grave doubts whether it is workable having regard to the conditions in the Second Schedule. I should like an assurance from the Minister. The surest way of achieving saving in energy would be to accept the amendment put down by Deputy Bruton and by me to include not only labour costs but also the cost of materials.

What assurance is the Deputy seeking?

Section 6 allows a person to claim for the labour content in improvements to his house and garden. Deputy Bruton and I are seeking to ensure that not alone the labour cost where insulation is involved but the cost of materials also could be claimed.

That is what the amendment says. Is the Deputy asking for an assurance about that, in other words asking me to accept the amendment? Or, is he asking something else?

No, I am asking the Minister to accept the amendment. If the Minister has any other assurances to suggest that would encourage people to insulate their houses and save energy the House would certainly welcome them. Many amendments could be worked in under this section that would help the drive for conservation of energy in the context of insulation. Perhaps we could even extend the section to the use of cars, so that people who get their cars regularly serviced, use high grade fuel, keep cars balanced with correct tyre pressures and so on would benefit. All these are savings. Much of the energy in the motoring field goes out through the exhaust pipe and is wasted because people do not keep their cars in good condition and over-drive them. By using the tax mechanism and perhaps through this section of the Finance Act, if people could be encouraged in that direction it would be very welcome, in addition to doing what Deputy Bruton and I suggest, giving relief for the material used in the insulation of a house as well as for the labour content of the improvement in that regard.

As has been pointed out, the section to which this amendment relates is specified to operate for one year only. The reason for that is that it is introduced on a pilot basis. It is a new concept for the income tax code and we must see how it works. It is not an unreasonable assumption that if it works well it is likely to continue beyond the end of the present year although I cannot give an assurance to that effect in advance. I mention this because Deputies should see it in the context of being a pilot scheme or experiment.

How does the Minister define "working well"—no claims or a lot of claims?

A lot of genuine claims, I would say, would mean it was working well.

Would the Revenue Commissioners agree?

I think they would but they would be concerned about a lot of claims which were either spurious or in respect of which there were reasonable grounds for suspicion. Deputies will be aware that one of the primary purposes of this arrangement is to encourage employment and for that purpose the relief is confined to expenditure on labour rather than on materials. We do not want to see a situation in which relief is being given in respect of work where the great bulk of expenditure is on materials and there is little or no assistance to employment. That is why the provision is there confining the relief to the expenditure on labour. We want to see how this works.

In regard to energy conservation it is clearly a matter of very great importance and concern to all of us. Many people might argue that the conservation of houses so that they do not fall in decay and have to be replaced with all the economic consequences is equally, or some people might say more, important and would argue that expenditure of that kind should be treated at least as favourably as we propose to treat energy. I fully accept that it is necessary to encourage conservation of energy and in particular an important way of doing that would be by adequate insulation particularly in houses and in other buildings also. There are grants available—it may be that technically grants are not available specifically for insulation—which cover insulation work; I have heard of cases where they have been received. That aspect of it is not my direct responsibility but so far as the tax code can be used effectively to encourage conservation of energy of course as a member of the Government I am fully willing to facilitate a development of that kind. But first I would need to be convinced by my colleagues and particularly by the Minister for Industry Commerce and Energy that such an arrangement would be effective in helping to conserve energy.

Secondly, even if that were so I think it would be necessary for me to examine it very closely to see if, for instance there would have to be a differentiation between the allowance in respect of labour and the allowance in respect of materials, assuming it was for insulation purposes. I would be apprehensive about a situation in which the bulk of the allowance was going, even in the case of insulation, for materials.

I am trying to convey to the House that the section in respect of which this amendment is put down is an experiment. I am not ruling out the possibility of it being used for the purpose of encouraging energy conservation by encouraging insulation but I cannot accept that in the experimental stage it should incorporate that. If it were to do so in due course the Minister for Industry, Commerce and Energy would require to be convinced that it was a worthwhile project and in those circumstances I would have to consider whether it would be wise to contemplate granting the allowance in respect of the materials used, either wholly or to a very large extent. Offhand, I think it would not be right and that we would have to ensure that the bulk of the allowance would go in respect of labour in order to encourage employment. But I am not closing the door on the idea. I cannot accept it in relation to the operation of this section on an experimental basis as it will now be operating. Changes may be possible later but I cannot accept it as part of the experimentation in the circumstances I have described.

In the Dáil yesterday I asked if it was correct that where insulation work was done as part of a general scheme of improvement it was grant-aided. The Minister replied that it was under the ordinary improvement grant. I asked why it could not be done separately and the Minister replied that the cost of insulation, cylinder lagging and draught stripping could be taken into consideration and reckoned in calculating the amount of the improvement grant. I asked: "Only if they are part of a general improvement?" The Minister replied: "They may be reckoned in calculating the appropriate amount of the grant under the existing house improvements grants scheme." He continually batted it back and it is quite obvious that the only way you can get an aid towards insulating your house from the Department of the Environment is by carrying out an improvement to your house, in other words, adding a wing, putting on a new roof or something else that qualifies for an improvement grant.

I do not think that is correct.

Progress reported; Committee to sit again.