Amendments Nos. 1 to 8, inclusive, are related and may be discussed together by agreement.
Finance Bill, 1986: Committee Stage.
SECTION 1.
I move amendment No. 1:
In page 9, line 17, to delete "£6,300" and substitute "£6,600".
We propose to increase the exemption limits for old people from income tax in these amendments. The Minister proposes an increase in the exemption limit of only £150 and I wish to indicate clearly the effects of the ministerial proposal and the amendments which I am proposing. For those over 65 the Minister's proposal will mean a net income of less than £1 per week and for those over 75 it will mean a net income of marginally more than £1 per week. We are satisfied that such a provision is totally inadequate.
Instead of enabling our old people to provide for themselves in the secure and familiar surroundings of their own homes, the Government's taxation policies now being proposed to us bite into their income at the rate of 35 per cent of anything earned in excess of £60 per week. Anything in excess of that figure will be taxed at the rate of 35 per cent. It must be remembered that in this context we are dealing with old people. The Government's policy undermines in many ways the independence and security of old people and obliges them to turn to the State because their capacity to provide for themselves has been reduced. Not only is this approach unfair and uncaring, but it is also economic nonsense. The Minister for Health has been demonstrating throughout the year that the cost to the State of the geriatric services, for instance, in our institutions must be reduced. Through his actions, in line with Government policies, geriatric facilities have been closed and be numbers reduced in many hospitals. The cheapest institutional care, at the lowest possible level, will cost the State £150 per week for maintenance, accommodation and food. However, instead of increasing the exemptions from income tax to a figure that will enable old people to provide for themselves at home or engage some help at home, the Government prevent them from achieving this independence by allowing them to keep less than two-thirds of anything they earn over £60 per week.
The Government have consistently shown a lack of awareness for the problems of the poor and the old and have deprived those people of their most important right to dignity and independence. In our amendments we are proposing as a first step — I must emphasise that it is only a first step and a small step — that the tax exemptions for people over 65 be increased to £3,300 per annum, £63.50 per week. We are proposing that a person over 65 should not come into the tax net until that person earns in excess of £63.50 per week whether single or widowed. Accordingly, we are proposing that the exemption for married people should be £127 per week. I acknowledge that even our amendments are not nearly adequate to meet the problems faced by old people and pensioners who are liable to taxation. I acknowledge that an income of £63.60 per week is subsistence level, if it is even that. I acknowledge that an increase to the exemption figure I have suggested does not meet the needs of many people but it is certainly a significant improvement on the Government's position.
For those over 75 we are proposing to the Minister that he should increase the exemption limits further, by £175 per annum for single people and £350 for married people. I do not have the figures as yet but I am satisfied with the order of them — the Minister may give the House the figures when replying — which is that the cost to the State of the extra exemptions we are proposing would be much less than £500,000. But the saving to the State from reducing the pressure on already overcrowded geriatric institutions would be far more than the cost, if one wants to call it that, of the initial tax concession. I should like to press the Minister, and the Government parties, to accept these amendments.
It is time for the Government to approach taxation policy in a much more constructive and sensible manner. Failure to apply minimal concessions such as we are proposing can cost the State very much more through institutional care and prolong the wasteful expenditure on drugs, medicine and institutional care, that is made necessary by shortsighted Government policies. Whether one approaches this argument from the point of view of justice, equity, social concern or social stability on the one hand or, on the other hand, from the point of view of minimising the cost to the State of providing security and comfort for our old people, the answer can only be the same.
What we are proposing is not only the better way but the only way from whatever point of view one looks at it. Our old people can make a major contribution to the stability of the family and the broader community in which they live. It is self-evident that, where there is a settled community with old people as part of the family or the extended family, one gets a stability that is not a characteristic of communities that do not have the influence of the old among them. Many of the new housing estates in our cities that do not have an established and settled old element prove the contribution old people can make. Where there are young families, without the advice, respect and patience of the old, tensions occur. For that reason it is essential, in the interests of all, that we do all we can to encourage old people to stay in their own home particularly if they can support themselves.
We are talking about a group of pensioners who are attempting to support themselves. We should ensure that that is established as a matter not just of Government policy today but of consensus Government policy for many years in the future. Those people are entitled to the dignity of independence and their pensions should not be savagely reduced by a Government who profess to care for them. They have already contributed handsomely to the welfare of the State throughout their working lives and also to the revenues of the State through taxation. The least they should get in their later years from any Government who care for them is to be allowed these exemptions. We are talking about people who might be able from their own income to provide for themselves if they were not subjected to further tax attacks on their meagre incomes which, in turn, will force them to turn to the institutions of the State, the welfare and medical services of the State at much greater cost to themselves and to the general body of tax payers.
Lest the Minister would make a case about exemptions or certain child benefit schemes, it should be remembered that, by definition, these people will not be entitled to the provisions of any child benefit scheme. They will not benefit from the bonanza the Government suggested would follow from the initiation of the child benefit scheme. Many of these are bread and butter people who have been very seriously affected by the cutback in food subsidies. There is no compensatory element for them in anything this Government have done. They should not be subjected to savage reductions of their very limited incomes. Surely it would be much more sensible to allow them whatever they have earned themselves up to a reasonable figure — and I believe our figure does not go far enough. But instead, having taken money from them by way of extra taxation, they force them to turn to the State, costing everybody more, in institutions where they will be less happy and secure than they would be in their own homes.
Coalition Governments have a very poor record in providing for the needs of our old people. I am afraid we are seeing it again. The Labour Party who, I understand, on this very day are paying lipservice to their founder, James Connolly, would do better, instead of honouring him just with words to do so through their actions. Seventy years after the man they commemorate, they might begin to examine their consciences. Rather than coming in here limiting the exemptions for the people they purport to represent, they might act in some way consistent with what they proclaim to be their principles by accepting our proposals. Indeed, it is no coincidence that Deputy Mac Giolla's amendments would have the same effect. It has to be said that anybody looking at the position must come to the same conclusion contained in the amendments before the House.
The winter we have just come through has been notable more than anything else for the horrific number of deaths of old people through malnutrition and particularly hypothermia. Inadequate heating, food and housing have become major problems for all but particularly for the old. Organisations such as The Simon Community, ALONE and the Society of St. Vincent de Paul who cater for the old will tell one that the biggest problem they have encountered this last winter has been lack of basic heating. Are we now proposing to impose tax on anything these people earn above £60? If we do, do we realise that we will be throwing them onto the institutional care of the State which is not very merciful these days and at much greater cost to everybody?
I plead with the House to support the amendments in my name and the name of Deputy Mac Giolla. They make social sense, ensure a sense of justice and economic sense. I can see no reason why the Minister should not accept them.
I also want to support the amendments listed here. Mine coincide with those put down by Deputy O'Kennedy without any consultation. It happened that we were of one mind.
I was pleased last year when an increase was granted in the age exemption limit because there had not been any granted for a number of years previously, I think since 1982. I am pleased to note that a small increase is being granted this year. But I do not think last year's or this year's make up in any way for the failure to increase these exemptions during the previous few years when inflation was running at a high rate. Even in an endeavour to make up for lost time at least a 10 per cent increase should be granted this year.
I agree with Deputy O'Kennedy that it is very strongly felt by many people that elderly people who have worked all their lives, perhaps 40 or 50 years, who paid their taxes in that period, should not have to pay any taxes in their retirement. Rather they should be allowed to take up work of some nature. They should be allowed their pension from their job and whatever other pensions are going in addition to whatever they might earn from some light work for a couple of hours in the morning, afternoon or whenever. Everybody agrees, certainly all medical opinion, that work therapy is the only therapy for the elderly. It keeps them mentally alert, gives them the will to continue and, once that is broken, they go into the institutions. Once they see themselves as of no use, then the senility commences, then the institutional care is needed. They no longer have the will to look after themselves.
A job of any nature, earning a few pounds, doing something useful, can be the greatest therapy of all for the elderly. It keeps them out of institutional care, indeed rendering them useful in the community. The Minister for Health is now trying to get everybody out of institutional care. He wants to empty them out of all the psychiatric hospitals and have them living in communities. Presumably he has in mind taking elderly people out of institutional care as well. Our hospitals are becoming more and more packed with geriatric patients, many of whom are in psychiatric hospitals, many just put into care which will not be of any real benefit to them. Presumably, when the Minister sees the benefit of taking psychiatric patients out of institutional care, he must also see the benefit of keeping elderly people in communities, helping and working within communities.
If the tax exemption limits are not sufficient to allow elderly people to go out and get some kind of job, part time or otherwise— because they lose through tax—then they will see it is not worth their while or is of no benefit to them. Certainly in respect of the over 75s there is a very strong argument for having no limits. These amendments specify minimum exemptions in an endeavour to make up for lost time. They are not really tackling the problem of taxation of elderly people and the effect taxation has on them. For example, the deduction of £1 tax from their pensions has an extraordinary effect on many elderly people who have had tax deducted from their wage packets all their lives, who perhaps paid for a pension out of their wages so that they would have a pension when they reached age 65. Then, when they get that pension, they see that tax is deducted. We hope the exemption amount will be brought up a little in an endeavour to give a rate at least equivalent to that which they received four or five years ago.
Our purpose in these amendments is to try to provide some comfort for elderly people who have spent their lives working for the country. We want to give them some comfort in their last years so that they will be able to think of, perhaps, enjoying a holiday, or relaxing in reasonable housing, and so that they will be able to provide themselves with a little heat. The present taxation system does not allow for those small comforts. These amendments are an indication of our attitude to the elderly, our recognition of the work they have done throughout their lives. The State should not be expecting them in their last years to contribute to the Exchequer in the same way as people still at work. At the moment the State expects them to do that until the day they go into their graves. The elderly should not be subjected to anything but minimal taxes. The meagre increase given by the Minister does not allow for the small comforts these people need and we are asking for an increase of 10 per cent.
I welcome the Minister's change. An increase in the exemptions represents a benefit in real terms to those people. In regard to Deputy Mac Giolla's reference to comfort and care, in order to ensure that people outside institutions are given proper care the solution is to increase the dependent relative's allowance so that people can be looked after in their homes. I would point out that those in hospitals and other institutions have their pensions taxed and therefore it does not matter whether people are in hospitals or not. If we want to keep people in the community we should do so by ensuring that those who take care of them will be given some tax relief.
I do not see the point in the age exemption. The retiring age should be reduced from 65 years. This would be an incentive to people to retire earlier. If we reduced the retiring age from 65 to 60 we would create 10,000 jobs. That would be more relevant.
The relief given here amounts to only £1 a week for people at 65 years and £1.20 for those aged 75 and over. I appreciate funds are extremely tight but, under the DIRT, people have their tax deducted and retained for a year and yet they are given £1 or £1.20 per week. It is a pity that we cannot get our act together on this. Here we give them increases of £1 or £1.20 but in another section those increases are being taken back and cannot be reclaimed for 12 months. The Minister may not be able to change the DIRT but he could improve the lot of the elderly by increasing the proposed allowance to £2 a week for all elderly persons. It is not realistic to hand out these increases and to take the money back at the same time. I shudder to think of the administrative cost of doing that and it leaves elderly people worse off than they were under the 1985 Act. The Minister should try to tidy up the Department's work on this. I cannot see any difficulty in doing that.
I am not convinced about the need for the difference in the allowances at 65 years and 75 years. Again I shudder when I think of the administration costs. There should be a straight age instead of differing between 65 and 75 years. I should not be surprised if opting for one age would not cost the State an extra penny and this would be far more efficient. Instead of having lower bands of taxation, we should follow the example set by successive Governments in bringing in exemption limits. In the pink document, "Principal Features of the Budget" issued by the Government at the time of the budget, I see that a single person on £3,000 a year is in the tax net, although for a very small percentage of the income, under Schedule D. It is suggested that we should follow the example set by the old age limit here. What must be the administration cost of charging tax to people with incomes of £3,000? It does not make any sense. Anybody earning under £7,000 or £8,000 a year should not be paying tax. The whole system of payments and claims and the administration cost is absolutely frightening. The Minister would learn from these exemption limits. Once the figure was ascertained, people under that income should not pay tax and they can then forget about the paperwork and go about their ordinary lives.
How many taxpayers are now being exempted under this section in the 65 and 75 age groups? How many are being exempted who before this budget would not have been exempted? Is the figure very significant?
First, what the Government are doing should be appreciated by the Deputies. I would point out that as a result of the increase in exemptions introduced, which would cost the Exchequer almost £1 million, or £0.9 million in 1986 and £1.5 million in a full year, a total of 2,700 people who previously were liable to tax will be able to leave the income tax net. A further 5,900 people, almost 6,000, will have reduced liability as a result of the operation of marginal relief. That is what the Government are doing against a background of 3 per cent inflation in the community. It is instructive to compare the rate of increase of this allowance with the rate of inflation in previous years. What is being done this year is far better than what has been done by various Government in the early part of this decade.
Let me give the House an example. This year, the increase in the allowance is 5 per cent, which by early 1980 standards is not a great deal but it is 5 per cent against a prospective inflation rate of 3 per cent — in other words, a 2 per cent real increase in the value of the exemption limit. Last year the increase was 7 per cent as against an increase in inflation of 4.9 per cent or almost 5 per cent. Again that was a 2 per cent real increase in the value of the exemption limit. Compare that with the situation pertaining in the earlier part of this decade. I am not making a political point here because these budgets were brought in by both Governments. In the year 1981-82 the value of the age exemption limit was increased by 15 per cent as against an inflation rate of 23.3 per cent — in other words, a reduction obtained in the value of the exemption in that year of 7.3 per cent as against an increase in the real value of the exemption limit this year of 2 per cent. The following year, 1982-83, the exemption limit was increased by 8 per cent in value as against a prevailing inflation rate of 12.3 per cent — again a reduction in value of the exemption limit in that year of 4.3 per cent when inflation is taken into account. This year, when inflation is taken into account, the 5 per cent increase represents a real increase of 2 per cent. Some people just switch off when figures such as these are quoted because the facts are expressed in figures and somehow lose their meaning. However, the reality is that these exemption limits are being increased more generously now when account is taken of inflation than was the case in the earlier part of the decade when larger nominal increases were given which meant nothing because the inflation rate was far greater than they were worth. Now inflation is less than what the increases are worth.
I agree completely with the sentiments expressed by Deputy O'Kennedy about the role of older people in our community and the need to integrate older people as far as possible into residential areas where younger people are also to be found. That is a matter primarily of housing policy and the policy of local authorities with regard to planning in regard to particular types of houses.
And also income tax in general.
Deputy Yates very rightly pointed out that the best approach to assisting old people in staying at home is to give tax allowances to those who are looking after them.
So the Government are with me on that? Does the Minister support me on it? He will get a chance now.
Deputy O'Kennedy should not be so consistently disorderly.
A Leas-Cheann Comhairle, I am thrilled to know that I have one convert on that side of the House.
I find it rather odd that Deputy O'Kennedy, who was not here for Deputy Yates' contribution, should now seek to interrupt me to comment on what I was saying about what Deputy Yates said. It would have been better if he had stayed in the House and listened to the debate.
I am taking the Minister as being a reliable witness.
Deputy O'Kennedy, would you please listen?
The Minister should not call his own integrity into question.
Deputy, please.
This is becoming very convoluted altogether. I have no intention of calling anybody's integrity into question, least of all Deputy O'Kennedy's. The cost of the combined proposals of Deputy O'Kennedy and Deputy Mac Giolla would be an additional £0.9 million this year — not £500,000 as Deputy O'Kennedy has said. The combined cost would be £0.9 million for 1986 and for the full year £1.4 million. That is in addition to the present expenditure of £0.9 million in 1986 and £1.5 million for the full year. We are doubling the cost, essentially. I should very much like to do what Deputy O'Kennedy has suggested for the reasons which he gave, which are not at all objectionable. Everybody on this side of the House and in other quarters of the House would favour the idea of giving greater income tax relief to older people. However, what we are giving this year is better than the rate of inflation whereas in earlier years it was considerably worse than the inflation rate.
The people had the food subsidies.
Points were made by Deputy O'Kennedy and others in respect of health expenses and so forth. As the Deputy knows, any excess of health expenses over £50 is, in effect, tax deductible under section 12 of the Finance Act. That should be taken into account in the Deputy's calculations.
(Interruptions.)
It is also worth recalling that the general principle was expressed in the Government plan, Building on Reality, that it is fairer to assist people who are in need by means of direct cash aid rather than by tax relief.
That is nonsense.
This is because some people will benefit from tax relief whose incomes will be very large and who will be paying a substantial part of tax at the maximum rate of 58 per cent. An exemption in such cases is worth 58 in the £ whereas it would be only 35 for people at the standard rate and nothing for those without taxable income. For that reason the Government are of the view that in general terms — this is not an absolute principle to apply to all cases — it is better to assist certain cases by means of direct assistance but that, essentially, would come within the responsibility of the Minister for Health.
We should like to do more but what we are doing now is ahead of inflation. We agree with the parties on all sides that it is best to assist people who live at home. We will continue to do everything possible for old people by way of our housing policy, an area in which we have been especially successfully in providing flatlets for old people on a scale that has not been the case before. In this way we are encouraging older people to live in their own neighbourhoods and in conjunction with younger people in the same estates. These are all matters on which we find common cause on both sides of the House but, as Deputy Brennan said fairly, the Government have the problem of finding the money. Deputy O'Kennedy and Deputy Mac Giolla have put forward many amendments but they do not have to add up the cost. However, that is in the nature of the exercise in which they are engaged so I am not making the point by way of any disdain. It is an exercise in which I have had to engage in the past.
In Opposition the Minister was a big spender.
Deputy Brennan is suggesting that the higher exemption limits apply to everyone.
I am suggesting that we should move towards that in our general tax policy. I am not saying it should be introduced now.
The cost of what the Deputy is suggesting would be £2.2 million in 1986 and £3.6 million in a full year. That is in terms of extending the exemption to everyone over 65 and under 75 the limits that apply to those now who are over 70.
Has the Minister any idea of what the consequent saving would be in administrative costs?
I expect it would be inconsequential.
I suggest that it would be very substantial and that we would have in operation a very simple system.
I am advised that the Deputy's proposal would lead to higher administrative costs because there would be more marginal cases. I will not undertake to explain that.
I do not see how a general exemption limit would be more difficult to administer.
We can talk about that in detail when we are dealing with the section in general. I submit that we are doing a good job in this instance relative to our means and to inflation and that the proposal compares extremely well with what was done in earlier budgets.
Can the Minister confirm if the £0.9 million figure would represent the additional cost of the amendments we propose, that is, additional to the cost of the Government's proposal?
Yes. It would be virtually doubling the cost.
I insist that the figure I gave was the net cost, and without having the benefit of what the Minister has indicated just now, is as near correct as possible. There will be a 40 per cent reduction on that figure for net cost.
That is taking buoyancy into account.
Not only buoyancy. All direct tax concessions have a built in factor — the Minister may refer to this as buoyancy if he so wishes — that allows for increased consumer spending as a result of the concession. If the Minister intends to dismiss that factor, he will be the first Minister ever to do so.
I do not dismiss it. One could make a case for abolishing tax.
Generally this is a factor of 40 per cent. The Minister gave the gross figure and that represents in net terms almost exactly what I said, that is, £500,000 though it could be up to £600,000. For a figure in terms of taxation costs of £600,000 there would be a saving of considerably more in terms of the cost of institutional care, maintenance, drugs and so on that otherwise the State would have to bear as people would be forced to turn to the State for such help because of not being able to provide for themselves. That is why, as I said initially, the argument is not only sustainable but is absolutely incontrovertible either in terms of social or economic policy. If the matter is approached purely in terms of the immediate cost or in terms of tax revenue foregone, one is ignoring the other consequences that arise by way of the alternative expenditure the State must undertake in respect of old people. That point cannot be overlooked. We all agree that old people should be encouraged and helped to live in their own communities where they are a stabilising influence but the difference between us and the Government is that, when it comes to implementing those principles, the Minister seems to suggest these are matters of housing and social welfare policy and not of taxation policy.
I did not say that.
The Minister concentrated on housing.
It is a factor we cannot ignore.
What we are proposing, when taken together with a later proposal on which I will be glad to have the support of Deputy Yates that is, the proposal relating to the dependent relative allowance, will minimise the cost to the State in the long run while promoting the principle of equity and justice for our older people.
I assume the Minister has details of how many people would be exempted from the tax net as a result of the adoption of our proposal. It is standard practice to ascertain such information when amendments of this kind are tabled. I should like to hear how many people would be paying tax as a result of the Minister's proposal but who would be exempt as a result of our proposal.
My proposal would exempt 2,700 people while the Deputy's proposal would exempt a further 1,700.
I will leave the facts to speak for themselves but we are talking of a relatively small number of people. The two proposals taken together would involve a total of 4,400 people. We are talking about a diminishing force in every sense of the word and certainly in terms of numbers but these old people should not be made a diminishing force in terms of their social impact, of their standing in our community, or of the contribution they can make. The additional cost to the State of exempting a further 1,700 people would probably be in the region of £500,000 but in the long run a lot of money would be saved. That is why I propose that the Minister accept the amendment.
The figure must be considered in the context of the total tax taken by the State, about £6,000 million. From that we get a picture of what the £500,000 represents. If what we are proposing is right in terms of social policy, if the principles which the Minister seems to accept are right and if the economic costs are persuasive, the Minister should accept the amendment.
Are we talking about 2,000 people at a cost of £500,000?
I said that in doing what I am proposing, we will exempt 2,700 persons from liability to income tax and a further 6,000 people, roughly, will have reduced tax liability because of marginal relief. That will cost £0.9 million in 1986.
The Minister's proposal will cost £0.9 million.
I said all that.
The Minister did specifically say that our proposal will cost £0.9 million. The record will show that.
I have said that also. I will take it very slowly. Our proposal will cost £0.9 million in 1986 and £1.5 million in a full year. It will exempt a total of 2,700 people from liability to income tax and a further 5,900 people will have reduced liability. Deputy O'Kennedy's proposal on top of the £0.9 million we are proposing to spend would cost another £0.9 million, making a total of £1.8 million. On top of the £1.5 million in a full year which our proposal will cost his proposal will cost — my sums add up to £1.4 million — probably another £1.5 million. For his doubling of the cost, whereas we are exempting a total of 2,700 people, his proposal would exempt a further 1,700. Is that superabundantly clear?
There is something very wonky in those figures.
If the voice from the pits and the prompter would keep quiet I will finish my contribution. I am getting lots of help which I do not need from Deputy O'Kennedy:
The Minister is well provided for. We have to do our best.
To clarify the figures, the Minister is proposing to give £1 million to 2,700 people.
Again?
Again, please. The Minister is proposing to give £1 million to 2,700 people?
Every taxpayer who is over 65 years of age will benefit — I am surprised Deputy Brennan is asking this — by either of the two proposals. The position is that 2,700 people under our proposal will come out of the tax net altogether because their incomes are so low. If Deputy O'Kennedy's and Deputy Mac Giolla's proposal were adopted, which would cost twice as much, a further 1,700 people on top of the 2,700 people who would be exempted under our proposal would also be exempt. Our proposal increases the exemption limit by 5 per cent. Inflation is 3 per cent. In other words, the value of the exemption limit is up 2 per cent in real terms. This compares with earlier years when the exemption limit was cut substantially after account was taken of inflation. I quoted figures already which showed quite clearly that to be the case. There was an increase of 15 per cent in the allowance in 1981-82 at a time when inflation was running at 23 per cent which meant a reduction in the value of the allowance of 7 per cent in real terms. Therefore, this year instead of reducing it in real terms, when inflation is taken into account, we are increasing it. That is something which needs to be borne in on the Deputies opposite. It is worth repeating given that I have had to repeat some of the other things a number of times.
There is something strange about these figures. The Minister said that 1,700 people under our proposal would benefit to the tune this year of £0.9 million. I have done a calculation on that figure and I find that means each of these would benefit by £530 net. This £530 which otherwise would go to the Revenue Commissioners will now be in their pockets. I cannot square that figure if each of them is to get the £530 net. Presumably, the Revenue Commissioners would be £530 worse off in respect of each of them. How can the Minister square that with the fact that our proposal is only to increase the actual tax exemption by £300 in the case of married couples?
The Deputy is under a misapprehension.
Could I suggest that the Minister sit in the shade here?
There is something blinding him.
Thank you very much. I am sitting in the spotlight here.
The Minister does not like being in the shade.
If the income to the Revenue Commissioners as a result of my proposal is to be reduced by £900,000 it follows as a consequence that the income of those we are speaking about will be enhanced by £900,000. I divide the number who will benefit from that enhanced £900,000 by 1,700, which is what the Minister has said, and I get an average figure of £530. It does not square.
I am surprised in a way. What I said was that an additional 1,700 people would be totally exempt from tax under the Deputy's proposal. That does not mean it is only those who will be exempt from tax who will benefit. Others who are paying tax higher up along the line will pay less tax because they will have a larger exemption limit. Therefore, there are two categories of beneficiaries: those who are totally exempt and those who pay less tax. We have to take both into account.
The exemption limits for the people we are talking about will have no effect at all on the body of taxpayers who are not included in the exemption. Therefore, when the Minister tells me that other people up along the line will pay less tax because of increased exemption limits, he is emphatically wrong. I do not know where he gets that nonsense from. He should spend a bit more time checking before he makes a statement like that. The smaller number on marginal relief, and they are a very small number, will be affected but they are of such a small number that it would make no difference to the Minister's calculations. To say that the rest of the taxpaying public will have their tax bills reduced, is wrong.
How many taxpayers are there over 65 years of age?
The position as I quoted earlier in regard to my own proposal, is that it would be similar on a pro rata basis in the Deputy's case, that a total of 2,700 persons will be exempt from income tax while a further 6,000 people will have reduced liability because of the operation of marginal relief as a consequence of the increases which are being introduced. The relevant figure in the case of distributing the benefit of our proposal is not 2,700. It is 2,700 plus the 5,900 or so who will benefit from marginal relief.
Marginal relief is buttons and it is rightly called buttons.
I mentioned in my earlier contribution on this amendment — the Minister did not respond to it — the possibility of inducing early retirement by reducing the exemption allowance age to 60 years. Is it technically possible to have a different tax treatment of retired persons' pensions from those of persons remaining at work in order to create jobs?
That does not arise on the section because this section is concerned with income regardless of whether it is in the form of a pension or otherwise.
Amendment put and declared lost.
I move amendment No. 2:
In page 9, line 18, to delete "£7,350" and substitute "£7,700".
Amendment by leave, withdrawn.
I move amendment No. 3:
In page 9, line 19, to delete "£3,150" and substitute "£3,300".
Amendment, by leave, withdrawn.
I move amendment No. 4:
In page 9, line 20, to delete "£3,675" and substitute "£3,850".
Amendment, by leave, withdrawn.
Amendment No. 5 not moved.
I move amendment No. 6:
In page 9, line 29, to delete "£7,350" and substitute "£7,700".
Amendment, by leave, withdrawn.
I move amendment No. 7:
In page 9, line 30, to delete "£3,150" and substitute "£3,300".
Amendment, by leave, withdrawn.
I move amendment No. 8:
In page 9, line 30, to delete "£3,675" and substitute "£3,850".
Amendment, by leave, withdrawn.
I move amendment No. 9:
In page 9, after line 33 to insert the following subsection:
"(2) Section 1 of the Finance Act, 1980, is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution in subsection (2) of "£5,800" for "£5,300" (inserted by the Finance Act, 1985), of "£2,900" for "£2,650" (inserted by the Finance Act, 1985).".
This deals with the area of the general tax exemption limits. For the first time in many years, certainly for the first time since I came into the House 17 years ago, the Minister for Finance has not increased the general exemption limits from income tax. The Minister now proposes that all married couples, irrespective of the number of children they may have, with a weekly income in excess of £102 should be subject to tax. At a time when the burden of taxation is hitting every section of the community it is abundantly clear that married couples with that level of income are unable to provide for themselves without assistance from the many voluntary and social organisations throughout the country. Those voluntary and social organisations will testify to this. It is grossly unjust that any State should exact tax from lower income families. The consequences of that reduction in their income will mean that those families will then have to turn to other organisations to restore what the State has taken from them so that they can provide for the most basic and fundamental needs of their families. When this is taken in conjuction with the abolition of the £100 child allowance it is causing intense hardship on many families. In addition, the Government have further aggravated the problems for these low income families by the reduction in food subsidies.
It has been established by many reports, among them the NESC reports, that the level of indirect taxation impinges about 35 per cent of total income on low income families and only about 12½ per cent to 15 per cent of total income on higher income families who earn about four times more than those about whom we are speaking. I ask the Minister to bear in mind that, even if he accepts what I am proposing, the indirect taxation will bite almost three times more severely on the low income groups than it does on the higher income groups. The Government are aggravating the social tensions that are so widespread in our community at present. They are directly and callously turning their backs on those in particular need. I demand that the Government parties give us the reason and the justification for this. When we see evidence of grinding poverty, reductions in food subsidies, problems of social tension, psychiatric disorders and everybody luxuriating in condemnation of the violent elements in our society, what we are doing is spreading the seeds of further tension. We react in a typical, uncaring, high-handed fashion by demanding tougher penalties, more law and order, more supervision and more prisons. It is the negative reaction of a Government who do not have any consistent direction either for economic policy or social concern. This is one area which should be tackled in an effective way.
I want to address the absent Labour Party. Nothing changes in a Finance Bill debate. For the record, this is my fourth successive time addressing this House on Finance Bill debates, on matters of exemptions for the lower paid and the old and on matters of reduced taxation for the lower paid. The benches of that shameless party have been in exactly the same condition as they are this morning. Not once in four years was any member of the Labour Party present to attempt to justify what they are supporting in the name of Government. When the bells ring they come in here and do not want to know what they are voting on because it is too hurtful and too shameful. They prefer to troop up the steps behind their masters and vote against everything they claim to represent. I understand that today is a special day for them——
There is nothing about the Labour Party in this amendment.
There is about Members of this House who will vote for this amendment. I want to address myself——
The Deputy may make a passing reference to it but he may not make a meal out of it.
This is stuff for the RDS.
The impact of the RDS was more than the Minister could take.
It made me dizzy.
All Deputies have certain constant obligations but those who proclaim a special concern for the poor, the old, and the sick have a special obligation.
The Deputy should relate his remarks to his amendment. He is making at best a Second Reading speech and at worst a totally irrelevant speech.
My speech has been relevant all along the line. How can the Minister who is present, members of the Labour Party who, as ever, are absent, or any other Member suggest to the people of the country in the way they vote today that £102 per week is adequate to meet all the outgoings of a family or that an income of £56 per week is adequate for a single or a widowed person? If that is what they assert by their vote the people should know it. I will not be personal in respect of the Minister. At least we do not hear him mouthing protests of his constant concern for the section the Labour Party pretend to protect. The people they honour today, and their founder member, James Connolly——
The Deputy will have to come back to the amendment.
It is a disgrace that in 1986 we have not increased the tax exemption limits beyond £102 for married people and £51 for single or widowed people. If I gave the figure of £56 earlier I wish to correct it to £51. That amount is entirely inadequate. As soon as a person receives in excess of that income he must pay 35 per cent to the State in respect of everything he earns. In this year we should not repudiate by our actions the people we proclaim to honour, particularly James Connolly. I hope the Labour Party, after four years of turning their back on the people they claim to respect, will face reality. Their conduct in the past four years has been shameful.
We propose that the exemption limits be increased to £5,800 per annum which works out at £111.50 per week for a married couple and to £2,900 per annum or £55.75 per week for single and widowed people. I do not think our proposals go near to meeting the case but at least they are an advance and it is a direction that I hope will be followed by future Governments, irrespective of their political background. Even if our proposals are accepted we will have in the tax net married and single people who would be well below income tax liability in any other EC country. In terms of social concern and justice there is a crying need to do something for the people to whom I have referred. There is also the economic argument which favours increasing the exemption limits.
The net cost to the State this year if our proposal is accepted would be much less than £3 million out of a total tax bill of £6,000 million. If we do not provide these exemptions a number of consequences will follow. First, a person will be better off being unemployed, thus receiving rent relief, a waiver on water charges and many of the other allowances available for the unemployed. In addition, the implications with regard to work are very serious. We are talking about people who have the lowest level of income and we have to consider the implications with regard to their health, the tension and the various psychiatric disorders many of them suffer and the cost of medicines and drugs. Neither can we forget the social rejection experienced by people who cannot provide for themselves. We force them to become dependent on the State for medical and other services. As an eminent social scientist pointed out, we provide them with medicines such as valium and librium at a high cost but we do not provide them with the right to keep for themselves an amount that will enable them to provide for their own families. Yet, it costs us much more when we force them to turn to the State for all their needs. There is also the danger that young people may rebel against authority.
I would have thought the Minister would have been aware of all these aspects. I did not think he would be caught in the trap of merely considering figures. I did not think his attitude would be just to get in the revenue irrespective of the consequences. That is no proper policy. The Minister has a great opportunity here at little cost in tax terms. If he adopts the attitude we have recommended there will be savings in the Votes for the Departments of Social Welfare, Health and Justice. Accepting our amendment is not only the right thing to do for social reasons but it is the right thing to do for economic reasons. I hope that for once he will give the lead to the Labour Party who are associated with him in Government. In that way we will get more economic sense and a greater degree of social justice.
It is a little unreal to debate these amendments when tax-free allowance certificates have been issued for the year to many people. I would have liked the House to have had an opportunity to debate the matter before hand. In relation to senior citizens who are the main group of people who will benefit by the exemption levels——
On a point of order, we have dealt at some length with the exemptions in respect of senior citizens and we are now dealing with the general exemptions. I presume we will confine ourselves, as I have done, to discussing the general exemptions, not referring to senior citizens.
Deputy O'Kennedy dealt with everything in his speech.
I did not. Now we are dealing with general exemptions, not just for senior citizens.
I do not see why Deputy Mitchell should be interrupted.
With the various rates of exemption there is also marginal relief from which many taxpayers will benefit. Most of them are senior citizens but not exclusively so. Taxpayers in general will benefit from marginal relief because of their low level of income. Such incomes may hardly exceed the exemption levels or they can exceed them by as much as £1,000 but because of marginal relief those affected can be better off than they would be on normal income tax allowances. Very few taxpayers are aware of this benefit.
I have a higher proportion of people coming with tax queries than most Deputies. The area in which I have the highest success rate, if I can use that term, in being of assistance to my constituents is in pointing out the area of marginal relief, something of which they are not aware and of which the inspector of taxes may not be aware because they will not have filled out form 12. I should like to see greater advertising of this relief because people who could benefit from it are not aware of it. Most of them are senior citizens but there are also others who would qualify. I would ask the Minister to make this information more widely available.
I think that would be more in order on the section when we reach it.
I thank Deputy Mitchell for his contribution and I will consider what he suggests in regard to providing greater information about marginal relief. I will ask the Revenue Commissioners to report on the extent to which they feel people are not claiming their rights in this area and where information could be given in relatively simple form which would be of assistance in this regard. Perhaps at a later stage I will be able to let the Deputy know the results of my inquiries. I have to bore Deputy O'Kennedy by referring to figures. I know he does not like it.
I would be very happy if the Minister would give the figures but they do not tell the full story.
The cost of his proposal would be £5.2 million in 1986 and £8.6 million in a full year.
I accept that.
That is a lot of money. It must be borne in mind that one cannot look at the exemption limits in isolation from other ameliorations in the tax position that are being introduced. We have a substantial increase in personal allowances, a reduction in the top rate of tax and the abolition of the 1 per cent levy. In the case of low income families at work, which I take to be a concern of Deputy O'Kennedy, we have the family income supplement, a very valuable assistance designed to help people out of the poverty trap and make sure that they are not worse off by being at work than being unemployed. All these measures are designed to help the people for whom Deputy O'Kennedy is making a case. If one shuts one's eyes to all the other things that are being done and hones in only on the exemption limits, I suppose it is possible to make quite an eloquent case. Nobody would accuse Deputy O'Kennedy of lacking eloquence in what he has had to say here.
Too kind.
He has ranged far and wide in the illustration used to make his case, but the case is very partial indeed because he is ignoring all the other things being done. That is not really very fair but it is in the nature of things in a debate of this kind.
The real problem is the cost. We have far too much taxation, as everybody knows. If one begins to chip away at the tax base without chipping away at spending one ends up with a bigger gap. One cannot bridge the gap indefinitely by borrowing. I do not want to go back over these time-worn truths but nonetheless they are true. Perhaps at a later stage I will add up the cost of all Deputy O'Kennedy's amendments and ask myself what programmes would have to be stopped, what health and social welfare services would have to be stopped to make——
The cost would be one-fifth of what the Minister proposed in one amendment when he was occupying this seat. I will give the figures.
The Deputy should not be so inclined to interrupt. We just could not do it. That is realistic.
The arguments have been made and I do not see any hope of persuading this Minister. I know that the figure I proposed of about £3 million as the net cost was precisely right. The gross figure is about £5 million which amounts to about £3 million net. The argument is made.
Amendment put.
The Committee divided: Tá, 62; Níl, 69.
Tá
- Ahern, Bertie.
- Ahern, Michael.
- Andrews, David.
- Barrett, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzgerald, Liam Joseph.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Keating, Michael.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Tom.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Leyden, Terry.
- Lyons, Denis.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Moynihan, Donal.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wyse, Pearse.
Níl
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Deasy, Martin Austin.
- Desmond, Barry.
- Desmond, Eileen.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hussey, Gemma.
- Kavanagh, Liam.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Tellers: Tá, Deputies V. Brady and Barrett(Dublin North-West); Níl, Deputies F. O'Brien and Taylor.
Amendment declared lost.
Progress reported; Committee to sit again.