Dáil Éireann debate -
Thursday, 25 Mar 1982

Vol. 333 No. 4

Financial Resolution No. 2. - Financial Resolution No. 3: Income Tax.

The Taoiseach

I move:

(1) That, in relation to income tax for the year 1982-83 and any subsequent year of assessment—

(a) section 8, of the Finance Act, 1980 (No. 14 of 1980), shall be amended, by the substitution of the Table to this subparagraph for the Table to that section:

TABLE

PART I

Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first £1,000	25 per cent.	the reduced rate
The next £3,000	35 per cent.	the standard rate
The next £2,000	45 per cent.
The next £2,000	55 per cent.	the higher rates
The remainder	60 per cent.

PART II

Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first £2,000	25 per cent.	the reduced rate
The next £6,000	35 per cent.	the standard rate
The next £4,000	45 per cent.
The next £4,000	55 per cent.	the higher rates
The remainder	60 per cent.

, and

(b) (i) where a deduction falls to be made from the total income of an individual in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subparagraph and the amount of the deduction would, but for this subparagraph, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2):

TABLE

Statutory provision	Amount to be deducted from total income for 1981-82	Amount to be deducted from total income for 1982-83 and subsequent years
(1)	(2)	(3)
	£	£
Income Tax Act, 1967 (No. 6 of 1967):
section 138
(married man)	2,230	2,900
(man married in the year of assessment)	2,345
(widowed person)	1,185	1,950
(widow bereaved in the year of assessment	2,230	2,900
(single person)	1,115	1,450
section 138A(additional allowance for widows and others in respect of children) (widowed person)	650	950
(others)	650	1,450
section 138B(employee allowance)	600	600
section 139(housekeeper taking care of children)	165	Nil
section 140(relative taking care of unmarried person's brother or sister)	165	Nil
section 141(child allowance)	195	100
(incapacitated child)	500	500
section 142(dependent relative)	95	110
Finance Act, 1969 (No. 21 of 1969):
section 3(housekeeper taking care of incapacitated person)	500	700
Finance Act, 1971 (No. 23 of 1971):
section 11(blind person)	400	500
(both spouses blind)	1,000	1,200
Finance Act, 1974 (No. 27 of 1974):
section 8(age allowance, single or widowed person	80	100
(age allowance, married man)	180	200

(ii) section 138 of the Income Tax Act, 1967, shall be amended—

(I) in paragraph (a), by the substitution of "£2,900" for "£2,230" where it first occurs and by the deletion of the proviso thereto,

(II) in paragraph (b), by the substitution of "£1,950" for "£1,185" and of "£2,900" for "£2,230", and

(III) in paragraph (c), by the substitution of "£1,450" for "£1,115",

(iii) section 138A of the Income Tax Act, 1967, shall be amended by the substitution for "he shall be entitled to a deduction of £650" of "he shall be entitled, if he is an individual to whom paragraph (b) (i) of section 138 applies to a deduction of £950 or, if he is an individual to whom paragraph (c) of sections 138 applies, to a deduction of £1,450",

(iv) sections 139 and 140 of the Income Tax Act, 1967, shall not apply or have effect,

(v) section 141 of the Income Tax Act, 1967, shall be amended, in subsection (1A), by the substitution of "£100" for "£195",

(vi) section 142 of the Income Tax Act, 1967, shall be amended, in subsection (1), by the substitution of "£110" for "£95", in each place where it occurs,

(vii) section 3 of the Finance Act, 1969 (No. 21 of 1969), shall be amended, in subsection (1) by the substitution of "£700" for "£500",

(viii) section 11 of the Finance Act, 1971 (No. 23 of 1971), shall be amended, in subsection (2), by the substitution of "£500" for "£400" in each place where it occurs and of "£1,200" for "£1,000", and

(ix) section 8 of the Finance Act, 1974 (No. 27 of 1974), shall be amended, in subsection (1), by the substitution of "£200" for "£180" and of "£100" for "£80".

(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Mr. J. Bruton

I move amendment No. 2:

In the table to subsection (I) (a) to delete "The first £1,000" and "The first £2,000" and substitute "The first £2,000" and "The first £4,000" respectively therefor.

My amendment increases the 25 per cent and 35 per cent bands for income tax and my reason for tabling it is twofold. I wish to establish, by means of proposing increases in the bands applying to the low paid, the fact that the budget, in particular this resolution, by abolishing the concept of tax credits and the family income supplement — both provisions of the January budget — is taking from the people most directly affected by this relief benefits that would have gone to them under the January budget. The low paid were to benefit from the family income supplement and from tax credits. The decision of the Government to retain the unfair allowance system and not to provide for tax credits is abandoning a possibility which existed for the reforming of our tax system in order to help the low paid in a very constructive and direct fashion.

It is very important that people at work who are on the margin between social welfare and work, whose income at work is not appreciably greater then their income would be under social welfare, should be given an added incentive to work because it is work that makes a country strong and creates prosperity for everybody. The family income supplement and the general reform of the tax system in favour of substituting tax credits for tax allowances had the effect of helping the low paid at work and giving them benefits they could never get from social welfare because they are not on social welfare. I regret that the Government have decided not to introduce the tax credits or the family income supplement. It is a very pale and insufficient substitute for this lack on their part that I am moving this amendment.

Unfortunately, it is not possible for me within the rules of order to move an amendment which would provide for tax credits because that would represent a charge on the Exchequer. It is not possible for me for the same reason to move an amendment which would reinsert the family income supplement because again that would represent a charge on the Exchequer. It would be ruled out of order by the Chair. However, it is possible for me to move this amendment, inadequate though it is. It is an insufficient surrogate for tax credits and the family income supplement. I am moving the amendment in order to help, as far as it is possible to do so within the very inadequate tax allowance system, the low paid. The fact that everybody up to the 60p band will benefit from the widening of the 25 per cent and 35 per cent band and the fact that those on the higher rate will benefit more than those on the lower rate because it will be worth more to them indicates clearly the defects of the allowance system as against the tax credits system. The tax credits system would give an equal benefit to everybody and not a disproportionate benefit to those at a high pay level.

I want to bring to the attention of the House that, from the point of view of social equity, the greatest defect in the budget is the abandonment of tax credits and the family income supplement. I hope all Members on this side of the House will see their way to supporting my amendment so that we can show that we believe in a progressive income tax system, that we believe in tax credits and in the principle represented by the family income supplement which would give direct help to the least well off people at work in our community.

The Taoiseach

This amendment is unacceptable for the very simple reason that it would cost about £100 million in the year. One does not need to be a very skilled mathematician to appreciate that that would throw the whole budgetary arithmetic out of order. Apart from that the effect of the amendment would be to benefit those with large incomes. The case Deputy Bruton has made for his amendment is not valid because the benefit of these changes would go almost entirely to people with large incomes some of whom would benefit from this proposal by up to £700 per year. With regard to the general case made by Deputy Bruton, I should like to put the record straight. The first thing I should like to deal with is the question of tax credits. When we came to office we found a situation in which it was virtually impossible to proceed with that tax credits scheme because the administrative machinery was not there to do the job. It almost certainly could not have been created in time so that the production of that tax credit scheme was impracticable this year and in the circumstances of this year. Therefore, we said to the Revenue Commissioners: "Please devise for us a scheme within the existing structure which would, in so far as the income taxpayer is concerned, grant him the same measure of relief at least". The proposal in this resolution is to give effect to that.

What we propose in the budget will effect the same improvement in the situation of the PAYE taxpayer as the tax credit scheme would have done but it has the advantage that it does it in a far simpler way and in a way which can be effectively and efficiently administered in the year ahead. The argument about the tax credits put forward by Deputy Bruton in favour of his amendment does not stand up. With regard to the question of the family income supplement—Deputy Bruton referred to this on a number of occasions today — the situation there is that without the introduction of the £9.60 scheme that scheme could not have been introduced, the two were inextricably bound up together. Again, we said to the appropriate administrative officials: "Devise for us a scheme which will use the same amount of money as would have been involved in the family income supplement scheme, namely, £4 million, which will go to the same type of families and in the same amount". The Minister for Finance has already outlined that that £4 million which would have been absorbed by the family income supplement scheme will now be distributed to the same sort of families through the child allowance scheme announced today. On the income tax credits scheme and the family income supplement scheme the provisions announced by Deputy MacSharry achieve almost identical results for the same sort of people as the other schemes would have brought about. On that basis we recommend the resolution which brings considerable relief to PAYE taxpayers.

We are also asking that the amendment put forward by Deputy Bruton be rejected, first because it could not be accommodated within the budget figures, and Deputy Bruton and the Fine Gael Party in particular have been adamant that we must reduce the current budget deficit. At the same time they now bring forward an amendment which would add £100 million to that current budget deficit. Further, I want to remind Deputy Bruton in regard to this amendment that when he came to put his budget before the House last January he had to run away from his proposal about reducing the 35 per cent tax band to 25 per cent. It is a bit insincere and hollow of him in view of his own approach to the January 27 budget now to come in with this amendment which would cost the Exchequer at least £100 million in the coming year when we are achieving by our proposals very considerable relief both for PAYE taxpayers and the category of families in the £2,000-£4,000 income bracket who would have been covered by the family income supplement.

Mr. G. Mitchell

First of all——

Mr. B. Desmond

On a point of order, it is the custom in this House and the precedent, with respect, that when a Member of Fine Gael speaks and the Taoiseach speaks, a Member of the Labour Party is then called on a Financial Resolution.

An Ceann Comhairle

The Deputy is correct.

Mr. B. Desmond

I am pleased that Deputy Gregory is here tonight because I want to quote him a particular statement by a well-known trade union group to the effect that Congress supports the proposal that the system of personal tax allowances be changed.

An Ceann Comhairle

Would the Deputy address the Chair?

Mr. B. Desmond

I am never quite sure; I have to watch my back. Congress regards this a progressive step which will improve the equity of the system. As far as I know the general secretary of my trade union fully supports the introduction of a system of tax credits. So far as I know the general president of my union, who is also on the executive of Congress, fully supports the introduction of tax credits. I do not know what personal rates of tax Members of the front bench opposite pay but I assume they pay rates which would vary from 35 per cent to 60 per cent.

I may take my own simple case. I earn a Dáil Deputy's salary of £13,890 a year of which 50 per cent is tax free. The tax liability on general income is half of that. I get a married allowance of £2,230; I get allowances for three children — I have four but one is working. I tend to have a liability of 35 per cent. The £2,230 married allowance that I have is worth to me precisely £780. There are other Deputies who are paying tax at 60 per cent. I do not necessarily envy them but I am aware that they have much higher incomes. They have a married allowance equally of £2,230 but because they are on the 60 per cent tax rate it is worth to them £1,338 on the marginal rate. That is what the tax credit is all about. I repeat the figures. A tax credit of £2,230, which is the current married allowance to somebody on the 35 per cent rate, is worth £780 but it is worth a great deal more to somebody on the 60 per cent marginal rate — it is worth £1,338.

The Taoiseach was very careful when he said that it would produce almost identical results. Of course one always has to qualify the very careful generalities of the Taoiseach. The reply is "not quite almost". The Taoiseach says it is virtually impossible to implement the tax system. In my very short sojourn with Deputy Bruton in the Department of Finance I received in seven months no submission from the Revenue Commissioners. I have had many contacts, questions and answers but I know of no computer breakdown and, as far as I understand, the system would be ready for operation almost immediately as they were fully aware of the previous Government's commitment in that direction. The Taoiseach said the administrative machinery would not be able to cope. I have not heard of principal officers or assistant secretaries, HEOs or tax officers having traumatic nights trying to implement tax credits. I have no reports of industrial disputes, go-slows or prospects of stoppages. The system is quite capable of being introduced, as the Taoiseach well knows.

Therefore, I do not accept the preposterous argument advanced tonight or the very weak argument of the Minister for Finance, Deputy MacSharry, that a switch to tax credits for the next income tax year at this stage would merely give rise to enormous administrative confusion. The Irish people, when it comes to income taxation are, I can assure the Taoiseach, well aware of their rights. I am quite certain that a tax credit system which we were proposing of £1,000 for all married couples irrespective of their tax liability was an entirely new and progressive approach to taxation.

Mr. G. Fitzgerald

Unfortunately the union president did not approve of it completely.

Mr. B. Desmond

I rest our case on that. I support Deputy Bruton's amendment. If those who claim to be progressive in their taxation outlook find that amendment unsupportable they must have a very different perception of taxation equity than we have because for a long time both the trade union movement and the labour movement, if there is such a thing, have very actively said there should be a radical change in the system of taxation by the introduction of tax credits.

The Taoiseach

On a point of information, I assume Deputy Desmond is not under the impression that this amendment purports to introduce a tax credit system?

Mr. B. Desmond

No.

An Leas-Cheann Comhairle

I am calling Deputy Nuala Fennell.

Mr. G. Mitchell

On a point of order, just before Deputy Desmond spoke the Chair called me to speak but asked me to give way to Deputy Barry Desmond who indicated that there was a precedent for the Labour Party to speak before Fine Gael. I would ask that you now call on me because I had been called on.

An Leas-Cheann Comhairle

I am sure Deputy Fennell will not mind if I am less chivalrous than I was and call on Deputy Mitchell.

Mr. G. Mitchell

I feel that those who took part in the PAYE marches in Dublin will be very disappointed with the budget proposals before us here today. If there is anything missing from this budget it is an attempt to reform the PAYE system. In fact this resolution indicates that not only is there no proposal to reform the PAYE system, but in fact a retrograde step is being taken even by comparison with the reforms in the January budget. This, together with the proposed changes in the allowances for mortgage interest against tax, will hit more those on slightly above average taxable incomes. It is very clear that those who call this budget a good one have very little knowledge of the tax system. Those who are on £5,500 taxable income, if they exceed that income, will have their rate of tax increased by one-third.

It is a very significant change which is being imposed here. It works against the average income earner. It is not anything that one who represents a working class constituency, as I do, could support. It is a very backward step, which I resent very much. This point should be highlighted and I propose to do so whenever I get an opportunity. Very simply, for those who do not know the tax credit system, £1,000 tax allowance for a man in the 60 per cent tax band is worth £600, whereas it is worth only £250 to a man on the 25 per cent band. Tax credit proposes to change that and give the same allowance to both these people. The steps being taken to depart from the tax credit system and further narrow the tax bands will hit very hard individuals with the £5,500 taxable incomes. The Taoiseach has indicated that the cost of this change will be in excess of £100 million. It is obvious that this £100 million is taken from the lower paid workers to be used in subsidising those who are not paying capital gains tax, although these will have their capital gains tax liability, as proposed in the January budget, further reduced. I do not see how anybody who represents a constituency similar to mine could support this resolution. I support very strongly the amendment put down by Deputy John Bruton.

Mrs. Fennell

I would like to address myself to the Minister for Finance and to say that I am sorry that the tax credit is gone and that we are back to the old system. In his budget speech the Taoiseach, when talking about the £9.60 weekly payments, said:

The response to this scheme has illustrated clearly that the general public saw no merit in a cumbersome and complex scheme which merely transferred money from one spouse via the Revenue Commissioners to the other.

That is very regrettable. I believe that I represent a large number of workers, that is, housewives who work at home. They are not recognised in any shape or form in terms of payment, whether by tax credit as our Government was trying to do or——

An Leas-Cheann Comhairle

Might I explain to the Deputy that in a debate on the resolution the debate is confined to what is in it. We are not allowed to discuss what might be in it. Comments of that kind will be appropriate to the general discussion later on.

Mrs. Fennell

In the general resolution debate?

An Leas-Cheann Comhairle

Yes.

Mr. M. Noonan

(Limerick East): On a point of order, could the Chair explain, for my benefit as a new Member, why discussion was allowed on tax credits up to now and now discussion on the £9.60, which is an integral follow-on to the tax credit system, is being ruled out?

Mrs. Fennell

A question has been disallowed already. I am not saying that there is a conspiracy, but it appears that there is an attempt not to allow this to be discussed.

An Leas-Cheann Comhairle

There is nothing conspiratorial about it at all. I am telling what the tradition on the debate on the Finance Resolution is. It is an opportunity for Deputies to have elucidation or information on what is proposed, not on what is omitted. In respect of the amendment which is here there is no reference to the £9.60. Therefore, it is not relevant either.

Mrs. Fennell

Let us forget about the £9.60. I accept the point made by the Chair.

Mrs. G. Hussey

On a point of order, Deputy Barry Desmond treated us to a very interesting discourse on tax credits and the difference between those and the old system. He described the difference it would make to his income. We had quite a substantial discourse from him and now part of the tax credit system is not allowed to be discussed. I cannot understand that.

An Leas-Cheann Comhairle

Again, Deputy, what is in the resolution one could argue might be an alternative to what is here, but there is no reference to the £9.60 in the resolution or in the amendment.

Mrs. Fennell

May I continue? I shall not mention the £9.60 again. Might the Minister for Finance consider the need for some wives, who so wish and whose husbands so wish, to have the married allowance paid to the wives — as we still have the allowance to married couples? Perhaps that is not in order, either?

The Taoiseach

Perhaps, the Deputy could argue that during the course of the budget debate.

Mrs. Fennell

I intend to do that.

The Taoiseach

We could go into the matter then.

Mr. G. Birmingham

In rejecting the amendment, as the Taoiseach did, his substantial ground for so doing was that if Deputy Bruton's proposals were to find favour with the House, those on the upper income levels would benefit disproportionately, that they would be the people who would benefit most from the widening of the tax band, as proposed by Deputy Bruton. If that objection is valid for the widening suggested by Deputy Bruton, then it is an objection which is equally a substantial argument against the resolution as introduced by the Taoiseach. In fact, it is a valid objection both to the amendment and to the resolution. It is an objection to any tax system which is based on tax allowances. The Taoiseach told us that he had decided that the tax credits were administratively impossible——

The Taoiseach

This year.

Mr. G. Birmingham

Yes. He said that he looked to the Revenue Commissioners to produce a formula which would achieve almost the same result. With respect to the Taoiseach, it is an abuse of language to suggest that to replace a system which provided flat relief across the board by a relief which is regressive and which gives relief disproportionately to those on the upper end of the scale——

The Taoiseach

It does not.

Mr. G. Birmingham

It is not valid to suggest that has almost the same effect. Of course, it gives disproportionate relief. Any system based on a widening of tax allowances, as distinct from tax credits, must have that effect. If that was a strange use of the words "almost exactly the same", even stranger was the ground on which the Taoiseach rejected any suggestion of a need for the family income supplement. The Taoiseach, in opposing the amendment, said that it was an integral part of the tax credit system, that it could not stand on its own without it, but that they had come forward with a scheme which would help the same sort of families. Do I quote the Taoiseach correctly in saying that when he found he could not go ahead with the family income supplement he looked for a device which would help the same sort of families?

The Taoiseach

This year. That is all in the short term of this year, again.

Mr. G. Birmingham

May I suggest to the Taoiseach that the families he suggests he has helped by the reallocation of the formula involved are, by definition, families which would have not been involved in the family income supplement?

Mr. J. Bruton

Hear, hear.

Mr. G. Birmingham

The family income supplement, by definition, was designed to help people, not in the social welfare net but who are working and are on low incomes. The Taoiseach has told us that he is taking £4 million which was originally available for people working but on low incomes and giving it to social welfare beneficiaries and says that he is giving it to the same families. It is a matter for the House to decide where the £4 million should be spent, but to suggest that one is giving it to the same families when, by definition, not one single family which would have been a beneficiary of the family income supplement could now be a beneficiary under the Taoiseach's proposal and to suggest that that is more or less the same, is to turn logic on its head.

Mr. J. Bruton

Hear, hear.

The Taoiseach

The Deputy from my own constituency is doing less than justice to the scheme brought in under Resolution No. 3. By and large it achieves what we asked the Revenue Commissioners to do and people in the upper limit pay considerably more than they were paying before and people earning under £7,000 pay considerably less. The tables are there to show that the Revenue Commissioners have succeeded in making changes which give very considerable relief to lower income taxpayers and making the higher income taxpayers pay more. In that regard, it does a better job than the tax credits scheme would have done.

Mr. J. Bruton

Social welfare recipients are not taxpayers.

The Taoiseach

I am talking about the tax credits scheme versus the scheme brought in in Financial Resolution No. 3.

Mr. G. Birmingham

The Taoiseach said he was seeking to help people who would have been helped by the family income supplement but the scheme he is introducing to the House cannot help a single person who would have been a beneficiary under the family income supplement.

The Taoiseach

I said it would help people in the same income category.

Mr. Noonan

(Limerick East): In the previous budget proposals a tax credit of £1,000 was the equivalent of an allowance of £4,000. At the appropriate bands, if one's marginal rate was 60p in the £ it was a net saving of £2,400 but, if one was paying the standard rate of tax, it was a net saving of £1,400. The difference between working on tax credits and bands favours somebody on the 60p tax band to the tune of £1,000. There is obviously no attempt to reform income tax payments in these tables. Does the PAYE allowance remain?

The Taoiseach

Yes.

Mr. Noonan

(Limerick East): Taking that into account, could the Taoiseach confirm that a single PAYE worker now proceeds to the 45p band when he has earned £6,050 and that a single person moves to the 55p band once he or she has earned £8,750? Does a single person move to the 60p band when he or she has passed £10,050? These are my calculations. I would like confirmation of those figures because that information is not supplied in the tables supplied.

The Taoiseach

I have no intention of debating those figures tonight but I will give an example. A PAYE worker earning £7,000 under the existing scheme pays £1,259.50. Under the proposed scheme he will pay £1,025 so, compared with 1981-82 he will be better off by the sum of £234.50 and, compared with the proposed tax credits system, he will be £15 better off.

Mr. Noonan

(Limerick East): I am not arguing the case on that basis. The tables provided in the yellow document give all that information. I want to confirm the relevant levels of income on which a single person proceeds to the tax bands. On my calculations a single person goes on to a 45p band at £6,050, a 55p band at £8,750 and to a 60p band at £10,050. We have all seen payslips and P.60s belonging to people who are applying for loans from local authorities or building societies. These are extraordinarily low levels of income on which to be moving to very high tax bands. A single person earning over £10,000 a year is on to the maximum tax band rate. This resolution, as presented, and the financial provisions for income tax in the budget, make no attempt to remove the heavy burden on PAYE workers. The increases in wages which have been granted will be reduced substantially because people will move so quickly to high levels of taxation that the net effect will be a substantial reduction in living standards.

The Taoiseach

There are only two valid bases of comparison. We can all employ accountants to go into the finer details but let me give the following example. A married person, with a spouse, earning from £4,400 per annum to, say, £8,000 per annum, which is probably the bulk of PAYE workers, makes a saving of £234.50 between the coming year and last year. There is a saving between what we are now proposing in Financial Resolution No. 3 and what would have obtained under the tax credit system. What we are proposing comes out a winner, whether you compare the situation in 1982-83 with 1981-82, or whether you compare what we propose and what was proposed in the January budget.

Mr. Yates

A married man with no children, whose wife is not working, who is earning £4,400 and who gets a minimal increase of 12 per cent has a present tax liability of £240. When he gets the 12 per cent increase he will be earning £5,000 but his tax liability will go to £360, which is a net increase of 50 per cent extra in tax. Under the tax credit scheme there was a real commitment to help these people because there was a net reduction in their tax. Could the Taoiseach explain how this shows any commitment to tax equity or fair play for the lower paid?

The Taoiseach

One must compare like with like. The example which the Deputy has chosen, a married person whose spouse is not working, who have no family and paying PAYE on £4,400 under the existing system would pay £240. Under the system we propose he would pay nil so there will be a saving of £240 per annum.

Mr. Yates

We must not assume that the pay remains static. Naturally 12 per cent would be an acceptable increase but, if he is earning £5,000, he will be paying £360, which is a net increase of 50 per cent.

The Taoiseach

You must compare a figure of £4,400 in 1981-82 with a similar income in 1982-83.

Mr. Shatter

Some moments ago the Taoiseach referred to the fact that what is being done in the context of redistribution of wealth by way of social welfare payments would have the same effect as the family income supplement. Possibly I am naive but I am confused about this. The income supplement proposed in the previous budget would have provided assistance for those in employment but with low pay, whereas the proposal the Minister for Finance put before the House today is concerned with a transfer of money to those in receipt of social welfare who, by definition, would be unemployed. I am not suggesting that those in receipt of social welfare benefits should not receive additional assistance. But this budget, by retaining the allowance and by not providing a family income supplement, has not provided additional assistance for those on low incomes. The amendment would provide that extra assistance to the extent that those in receipt of low pay in employment would be left with a larger sum of money in their pockets than they will be left with under the resolution. I fail to understand how it can be suggested that what the Government now propose to do is in any way a substitute for or equivalent to the the family income supplement.

The Taoiseach

Are we in order in discussing a family income scheme?

An Leas-Cheann Comhairle

I seem to have inherited a situation that a discussion took place. If I had been present I do not think it would have taken place.

The Taoiseach

I will say a word about the family income supplement. It was a daft scheme. I have in front of me five cases known to the Revenue Commissioners. Two farmers, two television dealers and one agricultural contractor, with profits of £26,000, £70,000, £14,000, all sorts of incomes, would have benefited. The social welfare scheme that we have brought forward, using the same amount of money, will achieve a far more equitable social purpose.

Mr. Shatter

Will the Taoiseach explain how people in receipt of £26,000 and £14,000 could have benefited?

Mr. Haughey

Their incomes could have been adjusted and they could have qualified for marginal relief.

Mr. J. Bruton

Under the family supplement scheme the income would have to be below £4,000. Anybody is entitled to claim allowances against gross income. Quite clearly the Taoiseach has been quoting gross income figures which apparently do not take any account——

The Taoiseach

In one case a farmer with 393 acres and a PLV of £173 would have qualified for the family supplement.

Mr. J. Bruton

He would benefit only if his income was less than £4,000 a year. I would point out that the amendments I have tabled, as the Taoiseach has claimed, would cost £100 million, but only because it is not possible to give a benefit to low income people within the tax allowance system without giving unintended benefits to people on higher incomes. It is that sort of thing that contributes to the cost. Unfortunately, because of the rules of order, it is not possible for me to introduce an amendment to provide for tax credits or a family income supplement scheme because they would represent a charge. Oddly enough, I am able to introduce an amendment which would represent a loss of revenue of £250,000. I have been forced into the position of introducing the amendment. As I have said, I introduced the amendment to provide an inadequate substitute for the family supplement and the tax credits. I hope I will be able to get a decision in this House accepting this, inadequate though it is.

Mr. Wilson

What is £100 million?

The Taoiseach

What Deputy Bruton is proposing to us seriously is that we should benefit a large number of reasonably well-off people, high income people, some of them to the extent of £700 a year in tax benefits. To do that he would add £100 million, at least, to the current budget deficit. The effect of his amendment would be to add £100 million to the current deficit in order to give relief to very well-off people, some of them to the extent of £700 a year.

Dr. FitzGerald

That is precisely the point. The effect of the amendment shows up the absurdity and the inequity of the decision to retain the tax allowance system as against the credit system. The Government's decision to do that is a move away from the first real attempt to get equity into the taxation system, so that allowances which benefit the well-off much more than the less well-off would be replaced by a system of credits of equal value to people, regardless of income. The fact that that has been turned down by the Government means that any step taken to help those at the bottom of the scale would have a disproportionate effect on those higher up. Out of his own mouth the Taoiseach has condemned his own decision to stick to the allowance system.

I will try to illustrate the effect of his decision. First of all, his statement about a person with 393 acres of land is nonsense. Only a person whose taxable income did not exceed £4,000 would have benefited. That was defined in the January budget statement. I do not know what kind of system has been thought up to produce the effect the Taoiseach has spoken of.

Mr. Wilson

The lazy farmer with 393 acres.

Dr. FitzGerald

Had we gone ahead with that the effect would have been that a family man with £2,500 a year would have his tax liability reduced to £65 whereas this budget will mean that figure will be £112. A person with £3,000 a year whose tax liability would have been £240 will now pay £287. They are single people at the bottom of the scale. It is the Government's proposal to tax such people more heavily. That is what we will be voting on, more taxation of the less well-off because they earn their incomes. There are some people who earn as little as £2,000 a year. In their cases there will be £500 of a difference — £500 in benefit they would have got under our scheme. People with £4,000 a year will now have to pay £125 a year in tax whereas under our scheme they would have got £280. We come to people with six children. At £2,000 a year they would have got a benefit of £500. They will get nothing now. At £5,000 a year people with six children would have paid £32 tax but now they will pay £225, £4 per week extra.

This Government have not been prepared to introduce an equitable system of taxation and have rejected our system for no other reason than that we proposed it. The equity of our system is self-evident. There can be no justification for turning away from it and the Taoiseach's statement during the campaign that it could not be implemented on time was incorrect and did not derive from consultations with the Department of Finance, who informed us subsequently that there was no problem because all preparations were made. It was sabotage by the incoming Government because it was something we had thought up to help the less well-off people in the community, and it is because we thought it up that they are to suffer under this Government. That is what this debate is about and that is what we are discussing here. Putting down this amendment was the only way within the rules of order of this House that we could illustrate the absurdity and inequity of the decision of the Government to abolish this major tax reform, both in the form of the tax credit itself and in the form of the additional family income supplement, which was introduced as a joint measure by Fine Gael and Labour according to their proposal before the election of 1981.

One of the reasons I most regret the change of Government is that, as a result, these less well-off people will be deprived of the benefits which we had arranged —and for no reason. Not because it cannot be done, because we were told firmly that there was no problem and that it could be done and arrangements had been made; not because there was something wrong with the system; but simply because we had thought it up. It was because of sheer desire to sabotage what we had proposed that people on low incomes are deprived. Of course, if one happens to be somebody with a discretionary trust and passing on money from one generation to the next by that means, then one is all right under Fianna Fáil. But if one has an income of £5,000 a year——

An Leas-Cheann Comhairle

Would the Deputy accept that the matter which he is discussing now is not relevant to either the amendment or the resolution? Perhaps we have exhausted what can be usefully said on both the amendment and the resolution and perhaps the Chair might put the question.

Dr. FitzGerald

I have said what I need to say. I am quite happy to let it go to a vote.

The Taoiseach

I am increasingly amazed that Deputy FitzGerald has the audacity to come in here and even talk about these matters. Deputy FitzGerald is the man who at one stage assured us that it was absolutely essential in the national interest — and he assured not only the people of this country but the people of the world — that we would put VAT on clothing and footwear.

(Interruptions).

Mr. G. Birmingham

On a point of order——

An Leas-Cheann Comhairle

Would the Deputies resume their seats?

Mr. G. Mitchell

If the Chair would be consistent. The Taoiseach is not referring to the motion and is constantly interrupting people.

(Interruptions.)

Mr. G. Birmingham

I submit to the Chair that the rules of procedure as we have heard them during this debate tonight seem less than equal. Speakers on this side of the House have been constantly hauled up for straying beyond the strict terms of the resolution and the amendment. The Taoiseach is now allowed to proceed to a discussion on VAT on a resolution on income tax.

Mr. Browne

Deputy FitzGerald spoke for five minutes on something which was not on the resolution.

An Leas-Cheann Comhairle

While I do not have to explain myself to the House, Deputy Birmingham hears as well as I do and will accept that, if I did allow some freedom to Deputy FitzGerald in perhaps allowing him a minute where he strayed, then it is not unfair that I would allow the same time to somebody to reply.

(Interruptions.).

Dr. FitzGerald

On a point of order, where did I stray? I think the record of the House will show that I uttered no sentence that was not relevant to the debate. I would like to be shown where I strayed.

(Interruptions.)

The Taoiseach

We are sitting here on this side of the House endeavouring to deal with the resolutions which are before us and constantly from that side of the House one Deputy after another makes accusations of one sort or another against the Government and we have no opportunity to reply to them. I want to complain about this treatment and ask you, a Leas-Cheann Comhairle, either to make Deputies stick to Financial Resolution No. 3 or, if they stray into other areas, to give us the opportunity of replying to them. The point that I wanted to make — and I want to prove that it is in order — was that Deputy Bruton's amendment would add £100 million to the current budget deficit and that party over there stumped this country on the basis that the current budget deficit had to be reduced or the country would go bust. All I am asking is that they be consistent in their approach to this matter.

Mr. G. Mitchell

Why could it not be taken from the wealthy?

Mr. J. Bruton

Let me conclude on the amendment. This amendment is designed to help the low paid. It is embedded in the allowance system, which is the only system we can use as a basis for amendments on this because of the unwise decision of the Government to abandon tax credits. However it is our intention, at the earliest available opportunity, in Government with a majority, to get rid of this allowance system and introduce credits. In this way changes like this designed to help the low paid will help the low paid and no one else and will not be wasting money, as will happen so long as we retain the allowance system. This Government are asking this House to vote to give costly benefits to people who do not need them.

Question put: "That words and figures stand."

The Dáil divided: Tá, 85; Níl, 78.

Tá

• Ahern, Bertie.
• Ahern, Michael.
• Allen, Lorcan.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Bellew, Tom.
• Blaney, Neil T.
• Brady, Gerard. (Dublin South-East)
• Brady, Gerry. (Kildare)
• Brady, Vincent.
• Brennan, Matty.
• Brennan, Ned.
• Brennan, Seamus.
• Briscoe, Ben.
• Browne, Sean.
• Burke, Raphael P.
• Byrne, Hugh.
• Byrne, Seán.
• Callanan, John.
• Calleary, Seán.
• Colley, George.
• Conaghan, Hugh.
• Connolly, Ger.
• Coughlan, Clement.
• Cowen, Bernard.
• Daly, Brendan.
• De Rossa, Proinsias.
• Doherty, Seán.
• Ellis, John.
• Fahey, Francis.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Filgate, Eddie.
• Fitzgerald, Gene.
• Fitzpatrick; Tom. (Dublin South-Central).
• Fitzsimons, Jim.
• Flynn, Pádraig.
• Foley, Denis.
• French, Seán.
• Gallagher, Denis.
• Gallagher, Paddy.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Gibbons, Jim.
• Gregory-Independent, Tony.
• Harney, Mary.
• Haughey, Charles J.
• Hilliard, Colm.
• Hyland, Liam.
• Keegan, Seán.
• Kitt, Michael P.
• Lawlor, Liam.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leyden, Terry.
• Loughnane, Bill.
• Lynch, Michael.
• Lyons, Denis.
• McCarthy, Seán.
• McCreevy, Charlie.
• McEllistrim, Tom.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Morley, P.J.
• Murphy, Ciarán P.
• Noonan, Michael J.
• O'Dea, William G.
• O'Donoghue, Martin.
• O'Hanlon, Rory.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond.
• Power, Paddy.
• Reynolds, Albert.
• Sherlock, Joe.
• Tunney, Jim.
• Walsh, Joe.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Níl

• Allen, Bernard.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bermingham, Joe.
• Birmingham, George.
• Boland, John.
• Bruton, John.
• Corr, James.
• Cosgrave, Liam T.
• Cosgrave, Michael J.
• Creed, Donal.
• Crotty, Kieran.
• Crowley, Frank.
• D'Arcy Michael J.
• Deasy, Martin A.
• Desmond, Barry.
• Desmond, Eileen.
• Donnellan, John.
• Dukes, Alan.
• Enright, Thomas W.
• Farrelly, John V.
• Fennell, Nuala.
• FitzGerald, Alexis.
• FitzGerald, Garret.
• Fitzpatrick, Tom. (Cavan-Monaghan).
• Flaherty, Mary.
• Flanagan, Oliver J.
• Fleming, Brian.
• Governey, Des.
• Griffin, Brendan.
• Harte, Patrick D.
• Higgins, Michael D.
• Hussey, Gemma.
• Kavanagh, Liam.
• Keating, Michael.
• Kelly, John.
• Kemmy, Jim.
• Kenny, Enda.
• Bruton, Richard.
• Burke, Dick.
• Burke, Liam.
• Carey, Donal.
• Cluskey, Frank.
• Collins, Edward.
• Conlon, John F.
• Connaughton, Paul.
• Cooney, Patrick M.
• L'Estrange, Gerry.
• McGinley, Denis.
• McMahon, Larry.
• Manning, Maurice.
• Markey, Bernard.
• Mitchell, Gay.
• Mitchell, Jim.
• Molony, David.
• Moynihan, Michael.
• Naughten, Liam.
• Nealon, Ted.
• Noonan, Michael. (Limerick East).
• O'Brien, William.
• O'Donnell, Tom.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Quinn, Ruairí
• Ryan, John J.
• Shatter, Alan.
• Sheehan, Patrick J.
• Spring, Dick.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Treacy, Seán.
• Yates, Ivan.

Tellers: Tá, Deputies B. Ahern and Fitzsimons; Níl, Deputies Barrett (Dún Laoghaire) and Taylor.

Question declared carried.

Financial Resolution agreed to.