Finance Bill, 1988: Committee Stage (Resumed).

SECTION 49.

I observe that amendments Nos. 41f and 41e are related. I suggest that we debate these amendments together. There can be separate decisions, if required.

I move amendments No. 41e:

In page 52, subsection (14) (a), lines 15 and 16, to delete "a chargeable amount" and substitute "an amount in respect of the levy".

These amendments are to correct drafting errors in section 49. The House will see that they are only minor corrections.

(Limerick East): I find it very difficult to hear the Minister. Did he say that these were just drafting amendments?

They are drafting amendments, correcting drafting errors in the section as it now is.

It has been very difficult to hear the debate in the House due to the noise emanating from the lobby. I should be very grateful, therefore, if the Members who have no interest in the debate in the Chamber would leave as quietly as possible.

Amendment agreed to.

I move amendment No. 41f:

In page 52, subsection (14) (a), lines 16 and 17, to delete "chargeable".

Amendment agreed to.

Amendment No. 41g is the next amendment. Amendment No. 41h is related so I suggest that both amendments be taken together.

I move amendment No. 41g:

In page 52, subsection (14) (b), lines 21 and 22, to delete "a chargeable amount" and substitute "an amount in respect of the levy".

These amendments are proposed for the same reasons as are the other two amendments.

Amendment agreed to.

I move amendment No. 41h:

In page 52, subsection (14) (b), line 23, to delete "chargeable".

Amendment agreed to.

(Limerick East): I move amendment No. 42:

In page 52, between lines 25 and 26, to insert the following:

"(15) The provisions of this section will apply to the 1988-89 tax year only, and will not be renewed in the 1989 Finance Act.".

Section 49 has given rise to a number of concerns, and this amendment is moved with a view to meeting one of these. When the Minister announced the proposed levy on pension funds in his budgetary speech, it was framed in a different manner from the way in which it eventually ended up in the Finance Bill. I welcome the change from the proposals on budget day to the proposals now incorporated in section 49, but there are still major difficulties.

I should like to explore the area first, and see how we move when we hear the Minister's reply. As I understand it now, pension funds will be subject to a levy which will be based on the assets of the pension fund with certain deductions allowable on 1 January 1988. It has been announced that there will be an imputed income of 9 per cent, or realised capital gains on both, and that then a 6 per cent levy will apply. That is a rather complex formula for finding out what level of tax any particular pension fund will be subjected to. Am I right in believing now that the calculation is 0.54 of the asset value of the pension fund on 1 January and that then pensions to be paid in 1988 will be deducted from that and that there is a lower limit of £5,000 — if the answer to the sum is £5,000 or less, that low levy will apply? Could it be confirmed that this is the procedure?

Secondly, I should like the Minister to do the reverse arithmetic for the benefit of the House. Starting with the £5,000 exemption limit, could he work back up the figures and indicate what level of assets the pension fund would have before it would be exempt? What is the Minister's intention with the £5,000 limit? On the face of it, it seems that smaller pension funds will be totally exempt; certainly, pension funds with about £1 million of an asset base would seem to be exempt. However, I should like the Minister to give far more detail than he has already given. I think we should spend some time on this section, because the proposal in the section is not the one made on budget day. It is very different now.

With regard to my amendment, the Minister gave assurance on budget day that this was a once-off measure. Commitments to levies being once-off are frequently made. There was a commitment that the bank levy would be a once-off levy. I read somewhere that income tax was introduced as a once-off measure to fight the Napoleonic Wars. Does once-off mean once off in the traditional sense, once off but it will be renewed next year? The Minister made a commitment in his budget speech that this would be once off but the proposal has changed now. I understood from him on Second Stage of the Finance Bill that he was reconfirming the commitment that this would be once off. My amendment seeks to put that provision into the text of the section by way of an additional subsection, that the provisions of the section will apply to the tax year 1988-89 only and that they will not be renewed in the 1989 Finance Bill. This is reasonable. I know that it is not foolproof. Anything of this nature that is put in by the House can be taken out next year by the House. It does not prevent the Minister from renewing the levy, but it makes it slightly more difficult. It is a far firmer commitment that this levy will be once off than a commitment by the Minister on the record of the House.

There are very serious implications for pension funds in the proposal as modified in the section from the original proposal of the budget. Any of the literature that deals with pension funds would suggest that one either taxes contributions on the way into the pension fund, or taxes pensions on the way out of the pension fund, but that while the funds arein situ in the pension fund and are subject to income gains and capital gains which are realised, the fund should be sacrosanct. Pension funds have such a long lead-in time and the actuarial assessment has to be done over such a long period that it is not only unfair but downright dangerous, not only to the pension fund but to the interests of the pension holders, to tax a pension in the manner suggested.

There are many pension funds. Some are quite large. There are very significant funds in the country. Some of the State companies, for example, have very large pension funds and a very large asset base and others are quite small. Some funds are very immature. The effects of this proposal will not be spread evenly, and information which has been provided to all of us in the House would suggest that some pension funds will find it quite difficult to meet their commitments as a result of this imposition.

I am extremely unhappy about the whole concept of the levy on pension funds. If there is any suggestion that this is not a once-off proposal and if we do not get a firm commitment that this is a once-off proposal it is completely unacceptable. There are things we have to swallow against a background of adverse financial conditions which in normal circumstances we would not agree with at all. The proposal regarding pension funds is in that area and I am very uneasy about it.

I do not want to get into the scare politics of pension funds becoming insolvent because obviously the effects of this will vary from fund to fund, but it would be of benefit to the House if the Minister could provide information on the effects of this imposition on a range of pension funds, some large some small and some semi-State funds, for instance, the pension funds of Aer Lingus of the airline pilots, the ESB and funds of that nature. They may not be driven into insolvency, and probably will not be by the imposition of this levy for one year but many of the funds now have actuarial assessments done on the basis that they will be able to pay pensions to their contributors and they are extremely worried they will not be able to maintain index-linked pensions for their members who are on pension. Even quite large funds have actuarial projections made on the basis of being able to provide for their members and pay them pensions of half or two thirds of salary as the case may be. They are extremely worried and have in their actuarial assessments shown that they can only guarantee somewhere between 60 per cent and 70 per cent of the projected cost of living increases.

Maintaining the real value of pensions will be very difficult and obviously an imposition such as this makes it even more difficult. If we look at it against the background of what is happening to the profile of our population at the moment things can become quite scary. We have declining numbers at work, declining numbers of people in the productive age groups, an increasing dependency ratio and lower numbers providing the funds which will subsequently pay the pensions of the others.

There are ways in which one could make a quite frightening case on the prospects for pensioners, even over a 12 to 15-year time scale. I do not want to go down that road either, but there are real concerns which have not been met by the modification of the budget day proposal and by the substitution of section 49 for that proposal. It is certainly a move in the right direction but a move which should be taken very reluctantly indeed. I have some other things to say but I would like to hear the Minister's reply before I proceed further.

Deputy Noonan's amendment has certainly been the beneficiary of a good deal of latitude from the Chair because it is a most unconstitutional proposition that this House should seek in one year to bind its successors in another Finance Bill. Doubtless the amendment will not be pressed to its ultimate conclusion because it seems strange to me that in one Bill we should attempt to bind perhaps our successors as there may be an election between now and the time somebody has to grapple with Deputy Noonan's suggestion.

It does not need to be amended. It is only once.

I accept that but the principle is wrong.

The Deputy will accept that the constitutionality of the matter is not one for the Chair.

I appreciate that. I suggest it is an odd creature and it is odd because it is designed to allow the Fine Gael Party to appear to oppose or to criticise this levy and to appear to accept it as a once-off measure without having to oppose it if there were a vote in this House, which there will be, on the principle of such a levy.

(Limerick East): Do not count the arithmetic on that basis. I may oppose the section.

I do not think the Deputy will oppose the section somehow, and if we are playing poker I do not think that will happen.

It is perhaps skittles rather than poker. In relation to the pension funds levy, this is money which is available in large amounts and which is identifiable both as a capital sum and as a source of income flow. In those circumstances it was predictable that someone would suggest that it should be made the subject of a special tax. It is particularly predictable that the impetus for such a tax should come in the last analysis from the public service, because they are in the happy position of having by law as a legal entitlement unfunded index-linked pensions which private people could not with all the money in the world purchase. There is no way in which a private sector person could buy an unfunded pension equivalent to a certain fraction of his income, no matter what happened and that is what the public service have.

The capital sums we see in these pension funds, tempting as they are in the fiscal larder, as targets for the hungry fingers of the Exchequer, seem to represent nothing but accumulated saving and accumulated deprivation of spending power on the part of those who contributed to those funds. The moneys in the last analysis, because they are held inevitably in trusts, must be applied for certain purposes and it is usually payment of pensions to the beneficiaries of those trusts. That is why the moneys are accumulated and invested in pension funds to provide a mutual form of insurance against a particular contingency, and that is payment of a pension, and also to provide that there should be sufficient funds to pay a contingency which, by definition, is postponed and in some circumstances is unpredictable.

It is possible on an actuarial basis to decide whether any pension fund at any given time is solvent or insolvent. Actuarial calculations as Deputy Noonan hinted at, involve presuppositions of longevity of the people who will be the recipients of pensions and in this day and age it is certainly the case that with greater longevity there will, as a general rule of thumb, be a greater and greater draw on those pension funds.

In relation to the Minister's levy, I can see that the proposal he is now putting up is a substantial improvement on the original proposal and I can see that to charge a levy of six hundredths of nine hundredths of the capital value of a fund is itself not something which will dramatically change the status or the solvency of any pension fund. I see, too, that the exemption of the first £5,000 of levy payable under this measure, coupled with the subtraction of pensions actually paid during the year, means that where there would be an instant cash flow problem the Minister has gone a long way towards obviating that difficulty. What I do not see, and this is where I differ in principle with the Minister, is how in logic he can say that one can subtract pensions paid out now from the amount of money one would have to pay by way of levy and that because those liabilities accrue in the given year they can be taken into account in reducing the liability of this pension fund to this levy, but that future and equally predictable and equally certain liabilities cannot be taken into account.

The fundamental flaw of this measure is that, even in its own terms and even assuming in principle that it is right to put a levy on pension funds, it does not distinguish between funds which are underfunded with regard to their potential liabilities in the long run and those which are overfunded. It does not distinguish between the healthy fund and the unhealthy fund. It imputes to all funds a certain 9 per cent return and provides in respect of all funds over a certain size a 6 per cent levy on that imputed income but it seems to me that no effort has been made to take into account one of Adam Smith's great canons of taxation which is the ability to pay. In my view ability to pay in relation to pension funds can only be decided on in respect of their present solvency. When I say their present solvency I mean their present capacity to meet targets today which will put them on line to pay their liabilities in the future.

What is wrong with this levy is that it totally disregards the fact that one pension fund may be in a very healthy position and able to sustain the amount of the levy without difficulty, whereas another pension fund may already be insolvent and under-funded. Yet that fund is charged with an equal levy and is made to haemorrhage a little bit more and to become a little bit more insolvent without regard to the fact that it cannot deliver on the trusts for which it was established.

It has been said that this is a once off levy and that it is not intended to reproduce it. The Minister in an aside assured us that that would be the case. If it is a fair levy and a fair system, I cannot see why it should not be reimposed next year. If it is something which people can stand over in principle and say that it is fair taxation, I cannot see why, taking one thing with another, it should not be a permanent part of our tax system. I am not advocating that it should be a permanent part of the system but what I am saying is that it is being presented as a temporary measure and its temporary nature is being put forward as an excuse to explain away its unfairness and the lack of principle and philosophy behind it. It seems that, come the next Finance Bill when it is reimposed, we will be told it is virtually part of the furniture; it is dog-eared with use; it is accepted; nobody has whimpered about it; it is easy money and there is no clamour to get rid of it. If we were to be realistic and honest, politically, we would admit that that is by far the most likely thing to occur.

I will reduce my comments on Deputy Noonan's amendment to this. First of all, for technical reasons this House cannot possibly purport to bind how future legislation can or cannot be enacted and, secondly, the purpose of this amendment is to disguise a failure to oppose something in principle. The principal objection which I have is that these funds are not available for taxation in many cases because they are already inadequate to meet the trusts for which they were established and that this measure in no way distinguishes between funds which are capable of meeting their liabilities and those which are not. I can also see the obverse side of the coin. People may ask; why tax more aggressively a fund which has been well managed and well run while, at the same time, giving a tax subsidy to pension funds which are under-funded due to the culpable neglect of those who have established them and managed them?

What is wrong and unfair with this pension fund is that it does not address itself to the real issue of ability to pay. It flies in the face of the purpose for which these pension funds were established. As a society we said to employees that we would give them an incentive to put moneys away to provide for old age pensions and the public service were told that they need not bother because we would give them unfunded pensions and that we would take that into account in their wages. I do not believe that very much and possibly that is the fiction of their salary structure but we the ordinary Joe Soaps in society were told that we must make provision for our old age and that if we could make provision for our old age we would be encouraged to do so and the mechanism which was given to us in order to do this was pension trust funds.

The moneys which come in to a pension trustee are not automatically benefits to the potential beneficiaries of the trust because, first of all, their interest is only contingent and, secondly, it may well be that even after aggregating all the income in a particular fund it is still insufficient to meet the obligations under the trust deed. Therefore, from that point of view, no effort has been made to distinguish between those funds which can bear this levy because they are doing well and those which cannot because they are already off the tracks and getting more and more incapable of discharging the liabilities which they were established to meet.

I would like the Minister to indicate in relation to this measure why he feels he should have a uniform rate which would make no distinction between funds which are on target and those which are off target, between those which are solvent and those which, in the last analysis, are becoming insolvent. I would also like him to indicate why in those circumstances it is right to tax such funds while at the same time continuing to agree to pay to the public service unfunded pensions, guaranteed inflation proof, related to their salaries not only at the date of their retirement but also of their successors after they retire. I would further like the Minister to indicate how he can justify a pension fund levy of this kind which is selective in one sense in that it takes out one group from society who have done something to meet their own social obligations and disregards others who are in a better position and who have pensions which money cannot buy. I would also like him to tell us why in the formulation of this levy he cannot make a solid distinction not merely on the basis of present outgoings on pension payments but on future outgoings relative to the capital value of the pension fund.

It is a pity that Deputy McDowell does not stick to the procedures of the House. The same happened all day yesterday. At present we are speaking to an amendment to the section. We are opposed to this section and I intend to give the reasons why we oppose this section when we come to deal with the section. Deputy McDowell dealt mainly with the section and made only a few references to the amendment. He made the point that it was ridiculous to put down this amendment but I think, if accepted, it would be an improvement on the section. Despite the guarantees which have been given by the Minister if there is nothing in the Bill it will not mean anything. Deputy McDowell missed the point. If such an amendment was not put down, the levy would continue on under this Finance Bill and would not need to be referred to in next year's Finance Bill.

The section proposes that the levy should last for one year only. People involved in pension funds and a number of trade unionists have made contact with me to make the point that, if the Minister cannot be persuaded to drop the levy, I should try at least to ensure that it will be a once-off levy and I promised that I would try. Deputy Noonan's amendment offers the best way as far as I can see of going about that and I hope Deputy Noonan is also opposed to the section. I certainly am opposed to the section and I would like to see this amendment accepted.

The provisions contained in this section would apply only in the 1988-89 tax year and would not be renewed in the 1989 Finance Bill. A Minister for Finance can bring forward anything he likes in a new budget or Finance Bill but if this amendment were accepted it would be a marker that this tax would not automatically be continued and everybody involved in pension funds and trade unionists would know that this levy would cease at the commencement of the 1989-90 tax year and would only reappear if the Minister for Finance decided to reintroduce it. I think that would certainly be an advance on the present position and for that reason I support the amendment. I will speak on the reasons I oppose this pension levy when we come to deal with the section.

I wish to deal with the amendment first and then to try to cover the many important points that have been raised, particularly by Deputy Noonan, who asked a number of questions on the section. I am sure others will have more questions to ask after I have given out more information.

The proposed amendment seeks to ensure that the 6 per cent levy on pension funds provided for in section 49 of the Bill shall be for one year only and that the Government will be statutorily barred from renewing it. Section 49 imposes the levy for one year only and subsection (3) expressly provides that: "For the year 1988, there shall be charged,... a levy... at the rate of 6 per cent". I will repeat that subsection (3) states: "For the year 1988". To repeat the levy a provision would be required in another Finance Bill.

I have already indicated on a number of occasions — and I repeat — that this is a once-off levy. I am advised by the parliamentary draftsman that this amendment is unnecessary and inappropriate. It is unnecessary because, as I have stated, this is a once-off levy and the section will be void next year. It is inappropriate and of no practical value because, neither the Dáil nor the Minister can be bound in this way as regards the future. If the amendment were passed — and I think Deputy Noonan referred to this point in the course of his remarks — it could be overturned by the Dáil next year in the Finance Bill. This Dáil cannot bind either itself or a future Dáil to future legislation.

I do not mind whether we continue the debate on the amendment and deal with the amendment first, but if Members prefer I will deal with the questions that were raised on the section.

Would it be possible to dispose of the amendment?

(Limerick East): I am not disposed to press the amendment.

The amendment, I take it, is withdrawn?

(Limerick East): I am not disposed to press the amendment.

I am sorry, Deputy.

(Limerick East): Has the Minister something further to say on the amendment?

No. It is well covered already and I think it is no harm to read into the record section 49 (3):

For the year 1988, there shall be charged, in accordance with the provisions of this section, on the chargeable person in relation to any assets of a scheme, a levy (hereafter in this section referred to as "the levy") at the rate of 6 per cent on the chargeable amount in respect of the assets.

It could not be any more explicit than that. The provision is for one year.

(Limerick East): That is drafted by the parliamentary draftsman along the lines of the draft of the bank levy. What worries me is that all the Minister has to do next year is to say that “section 49 of the Finance Act, 1988 be amended as follows, to delete the year 1988 and substitute the year 1989,” and here we go again, and around we go. The type of amendment where you substitute one year for another is so simple that it provides very little barrier to a Minister who is interested in continuing the revenue flow that comes from this levy. I would like something firmer in the section.

I appreciate the Minister's point that this House is not able to handcuff either itself or its successors, or this Minister or successive Ministers, but it would make it more difficult for a Minister to come into the House and simply change the date so that the levy would run again during the next financial year. The Minister would have to come in and delete a subsection. There could be a fairly serious debate on the issue. Now, the mechanism as drafted for renewing the levy is so simple that I am afraid it will become part of the furniture, just like the bank levy, and the year 1988 will be dropped and substituted by 1989.

Before I proceed further on this issue, I have one question which the Minister might answer. Is the expected yield from the levy the same as announced in the budget? Perhaps the Minister would refresh our memories on the expected yield from the levy.

I was going to deal with these issues in the course of the quite extensive information that I have here in reply to the questions you have raised already. The yield is to be £16.5 million.

(Limerick East): I am pressing the amendment. However, if the House wishes, it may proceed to deal with the section.

Before Deputy Noonan brings the matter to a vote which he is obviously intending to do, may I make a point in regard to the procedure? Deputy Noonan acknowledges that the amendment has no effect except to make it slightly more embarrassing for a subsequent Minister for Finance to prolong this levy. That is what he is about. I wonder whether it is within the power of this House and as a matter of order is it proper for this House to purport to decide in one Act what a subsequent Act may do. In my submission it is entirely nugatory and it is out of order as an amendment.

The reason that I am making this point is that it is wrong for this Legislature and it is unconstitutional in every respect for this Legislature to attempt to tell the people that it is enacting laws today which tells a subsequent Legislature what it can or cannot do. While to some extent it is a matter of mirrors and optics, and I accept that is the case, and its purpose is to make it more embarrassing for a Minister to renew the levy, it is wrong in principle for one Dáil to even purport to tell its successors what they may or may not do.

The amendment proposes to lay down as a point of law of this country what can or cannot be in a subsequent law. This is law we are talking about, not merely a resolution or a feeling of what we would like to do next year. This is law, and the law of the land will be that in the 1988 Finance Act there cannot be this kind of measure. I wonder whether it amounts to actually saying that in the Finance Bill, 1989, there can be no such provision either, because the law of the land would be that such an Act could not deal with this issue and could not re-impose this levy. Deputy Noonan is now saying that the law of the land is to be that this cannot be in a subsequent Act. If that is the case, can the House, which is the master of its own procedure and which decides what it can or cannot debate and has full power under the Constitution to state what it can or cannot do, ever by legislation purport to exclude itself from doing something in a subsequent Act?

I think that is wrong in principle. It has never been attempted before. There must be oodles of precedents, of which I am unaware, where such attempts to bind the Legislaturein futuro have been knocked aside as invalid. It is all very well for Deputy Noonan to outline his purpose. I see what his purpose is and I agree with it, but he is trying to do something which this House is not competent to do and has no constitutional mandate from the people to do, and that is to say what another House on another occasion may or may not do. I am genuine when I say that I believe this is ultra vires this House.

We have no right to say what another Act may contain in the future or to prohibit another Act from doing any such thing. Because we are masters of our own procedure, we have not the right to enshrine in law what may or may not be in a subsequent Bill of the House. I am strongly submitting that this measure should not be put to a vote because it is constitutionally outside our powers to do so. You might as well have a proposal from Deputy Noonan to amend some Article in the Constitution, or to prolong the life of this Dáil for 15 years. He can say until he is blue in the face that he knows it has no effect, but he should not attempt to put it into law and in my submission it should not be moved.

(Limerick East): The amendment is properly before the House and, in those circumstances, it is proper for me to press it if I want to do so. Every decision this House takes pre-empts other decisions. We are doing that all the time and we did so all day yesterday. The fact that we have now arranged matters for the next two years so that the rate of corporation tax will decrease progressively from 50 per cent to 47 per cent to 43 per cent prevents this House from doing other things next year. It ties the hands of this House in the same manner as this amendment would do.

With respect, it does not.

(Limerick East): A House of Parliament can change by majority any decision which a previous House has made. This does not pre-empt the action of future Dáils. The Dáil will be quite free to treat this section, as amended, as it sees fit in 1989. It has the effect of giving a statutory base to the Minister's commitments on the record of the House. Of course it is a matter of law; it is not a motion. I want it in the law that governs this section so that the Minister, or his successor, will not be in a position to come in here next year with a minor amendment, as has happened quite frequently on the bank levy, simply changing 1988 to 1989. On we roll and the levy on pension funds becomes part of the financial furniture of the country.

The bank levy has to be introduced and is totally new every year. It could be argued — I am not properly advised on it at the moment because I did not raise it — that what the Deputy is seeking to do, and might succeed in doing if the amendment is passed today, is to prevent this happening in 1989, but there would be nothing to stop anybody doing it in 1990 or 1991. It could be argued on that basis. I stand by the section as it is drafted and particularly subsection (3) and repeat that for the year 1988 this is the position. It is once off; I have given that assurance and in so far as this Government are concerned I repeat it again today.

(Limerick East): If the Minister sees a technical problem with the amendment and gives a commitment to introduce his own amendment along the same lines on Report Stage, I will not press the amendment.

I would be probably misleading the Deputy if I said I would examine it because I am quite satisfied, and I am advised fairly strongly by everybody concerned, that subsection (3) is fairly clear and this is only once off for 1988.

(Limerick East): As this provides the Minister with no legislative difficulty, why not be generous for the sake of goodwill and co-operation in the House?

If the word "only" was inserted after 1988 it might satisfy the Deputy.

Amendment put.
The Committee divided: Tá, 37; Níl, 82.

  • Barnes, Monica.
  • Barry, Peter.
  • Boland, John.
  • Boylan, Andrew.
  • Bruton, Richard.
  • Carey, Donal.
  • Connaughton, Paul.
  • Cooney, Patrick Mark.
  • Cosgrave, Michael Joe.
  • Creed, Donal.
  • Crotty, Kieran.
  • Crowley, Frank.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • De Rossa, Proinsias.
  • Doyle, Avril.
  • Dukes, Alan.
  • Durkan, Bernard.
  • FitzGerald, Garret.
  • Fitzpatrick, Tom.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Harte, Paddy.
  • Higgins, Jim.
  • Kemmy, Jim.
  • Kenny, Enda.
  • McCartan, Pat.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • Mac Giolla, Tomás.
  • Mitchell, Jim.
  • Naughten, Liam.
  • Noonan, Michael (Limerick East).
  • O'Brien, Fergus.
  • O'Keeffe, Jim.
  • Sherlock, Joe.
  • Yates, Ivan.

Níl

  • Abbott, Henry.
  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Aylward, Liam.
  • Brady, Gerard.
  • Byrne, Hugh.
  • Clohessy, Peader.
  • Colley, Anne.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Cowen, Brian.
  • Cullen, Martin.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Denis.
  • Gibbons, Martin Patrick.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm Michael.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kennedy, Geraldine.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John.
  • Burke, Ray.
  • Lynch, Michael.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McCoy, John S.
  • McCreevy, Charlie.
  • McDowell, Michael.
  • MacSharry, Ray.
  • Molloy, Robert.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M. J.
  • Noonan, Michael J.
  • (Limerick West).
  • O'Dea, William Gerard.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • O'Malley, Pat.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Quill, Máirín.
  • Reynolds, Albert.
  • Roche, Dick.
  • Smith, Michael.
  • Swift, Brian.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Joe.
  • Walsh, Seán.
  • Woods, Michael.
  • Wright, G.V.
  • Wyse, Pearse.
Tellers: Tá, Deputies O'Brien and Flanagan; Níl, Deputies V. Brady and Browne.
Amendment declared lost.
Question proposed: "That section 49, as amended, stand part of the Bill."

I had agreed that I would reply to the amendment and to the very important points raised by Deputies. It is best that I give the information I have to the House in relation to the operation of this pension fund levy.

As we know, the section provides for the charging for the year 1988 of the once-off levy on pension funds announced in the budget. It is intended that the levy should yield in total £16.5 million, £15 million of which is expected to be received in the year 1988.

Following discussions with representatives of the pensions industry the basis on which the levy will be chargeable has changed somewhat from the scheme as originally announced. The changes will not affect the intended yield. As originally proposed, the levy would have been chargeable at the rate of 6 per cent on the investment income and realised capital gains of the year 1988 of any pension fund, be it a self-administered scheme or an insured scheme. Small self-administered schemes were to be exempt if the chargeable amount did not exceed £5,000. On an estimated total chargeable amount of somewhat less than £300 million it is expected that the total yield would be £16.5 million. Up to 25,000 schemes would have been chargeable. Of those some 17,000 are small insured schemes catering for individual, self-employed people or small numbers of employees. The administrative burden in such cases would be large for a relatively small yield.

The arrangements now contained in section 49 provide for a chargeable amount determined by reference to an imputed return on the value of the assets of pension funds on 1 January 1988. That imputed return will be at the rate of 9 per cent. On an asset base of £4,900 million the imputed income will be £440 million. From this a deduction of approximately £160 million for pensions paid in 1988 will be allowable, leaving a chargeable amount of £280 million. A levy at 6 per cent on this amount, subject to certain small deductions, will produce the required yield of £16.5 million. Deductions will be allowed in the case of, first, self-administered schemes, in respect of any interest received net of DIRT — there can be a refund of DIRT in the case of insured schemes — and, second, of an amount up to £5,000, if the chargeable amount does not exceed £5,000 in the case of self-administered schemes, so that such small schemes will be exempt.

The major differences between the scheme, as announced, and the arrangements now contained in the Bill are as follows. The deduction in respect of pensions paid allows for the fact that the circumstances of schemes differ widely. For example, a young scheme with many currently employed contributors and few, if any, pensioners will have a large income relative to its outgoings. In contrast, a mature scheme, with many pensioners and relatively few currently employed contributors, would have large outgoings relative to income. A deduction for pensions paid in 1988 ensures equity between such cases and relates the levy to ability to pay. Furthermore, in the case of closed schemes, that is schemes which have ceased to receive contributions from either employers or employees — for example, where a business will have ceased — the deductions for pensions paid, in most cases, will mean that such schemes are exempt because outgoings would usually exceed income, which would not have been the case under the original proposals. Under the proposals now contained in the Bill the levy will be chargeable in respect of approximately 1,500 schemes instead of up to 25,000, as in the original proposal.

It is expected that the administrators, trustees and insurance companies concerned will be capable of dealing with the necessary valuations of assets held at 1 January 1988 and the calculation of the levy. The original scheme would have imposed a levy on a very large number of small insured schemes which cater for self-employed persons, often on an individual basis, or small numbers of employees. Furthermore, the initial premiums paid in such cases are already subject to a 3 per cent insurance stamp duty under the provisions of section 92 of the Finance Act, 1982, as amended. Such cases are now excluded by virtue of the provisions of paragraph (b) of the definition of "excluded assets" in subsection (1).

Instead of a levy on actual investment income and capital gains of the year 1988, it will now be based on a notional investment yield of 9 per cent. This notional basis was suggested in the course of discussions with representatives of the pensions industry. It overcomes certain problems of an actual basis, for example, the lack of adequate records to calculate capital gains where a fund has changed its investment manager and by a new manager might not know when a particular security was bought.

Furthermore, there is less scope for avoidance, for example, by incurring losses on disposal of securities. On an asset base of £4,900 million, an imputed yield at 9 per cent and a levy at 6 per cent achieve the required £16.5 million yield after the deduction of pensions payable in 1988. This rate of 9 per cent is slightly lower than the 12.5 per cent average return quoted in two recent surveys of pensions fund performance in 1987 but investment returns may be expected to be lower in 1988 than they were in 1987.

By way of further information to the House I should say that funded pension schemes enjoy very favourable tax treatment. The funds' contribution income, at least £400 million in 1987, is tax exempt. Their gross investment income — £325 million in 1987 — is also tax exempt except for the small part on which DIRT is payable without a refund. The lump sum payments from the funds are tax free. In view of this very generous tax treatment it is appropriate for pension funds, with assets of up to £5,000 million, to make this once-off modest contribution to the Exchequer, given that it is estimated that they had a real rate of return of over 9 per cent in 1987.

I might add that a number of OECD countries tax pension fund income in various ways. There has been considerable discussion about the tax on pension funds in general. Other countries which tax pension funds include Belgium and Sweden. A once-off tax payment of 6 per cent on the 1988 gross investment income will have a minimal or nil effect on the actuarial solvency of the funds, bearing in mind the size of the assets, the annual contribution income and the annual investment income.

A recent report of the National Pensions Board on the tax treatment of occupational pension schemes acknowledged that a temporary tax is likely to have a lesser impact on the funds than a major or permanent change in their tax treatment.

Finally I might quote from an article entitled "Pension funds levy to have little impact?" by Jim Aughney in theIrish Independent of 16 February 1988 which had this to say:

The proposed 6 per cent levy on pension funds will have little or no impact on the funds and will not have to be passed on to contributors, according to a leading actuary, Derek McNamee, of Buck Paterson Consultants.

(Limerick East): I think that you, a Cheann Comhairle, with your interest in Irish history, will remember the decision in respect of St. Colmcille at Comhdháil Drom Cheat — to every cow its calf and to every book its copy. This principle could apply to pension funds also — to every pension fund the income that accrues to it. We accept that contributions to pension funds are treated favourably for tax purposes. Up to 15 per cent of income can be exempt from taxation if it is a contribution to a pension fund. However, the pensions which are paid from funds are taxable at the highest marginal rates. I believe it is very bad practice to interfere with the asset base of the pension fund and to put a levy on that.

I should like the Minister's help on a number of points. First, how widespread is the practice of contribution holidays? Is there any information on that in the Department? Secondly, the Minister mentioned other countries which impose levies on pension funds and he mentioned Denmark in particular. I thought the Danish scheme allowed a return equivalent to the rate of inflation and allowed another 3 per cent or 4 per cent on top of that so that there would be a guaranteed income allowed for pension funds. If pension funds were under-performing in terms of realised capital gains or income, they were protected from the imposition of the levy. That seems to be a better type of scheme. I should like the Minister, for the benefit of us all, to provide further information on the scheme.

Recent studies have indicated that the average rate of return on pension funds was 12 ½ per cent last year. I accept that the Minister's proposal is a lesser imposition than this. In the mid and late seventies when inflation rates were quite high and real returns were small, returns were negative rather than positive. When one looks at the profile of a pension fund over a period of time one can see that there are significant periods during which there are negative returns but there are other significant periods when the returns can look very good. We have just come through a period where the returns on pension funds were sizeable both on the income side, as a result of high interest rates, and on the realised capital gains side, on account of the way the equities performed up to October last year. If one looks at a profile over a period of 40 years, one can see that the peaks have been matched by the valleys and that the great valley in the seventies needed to be matched by the peak of the mid and late eighties. If one takes too narrow a view of it and says: "We have a survey which shows that last year the average return on pension funds was 12½ per cent; consequently pension funds can carry this levy and there will be no problem", one is looking at the problem with too narrow a focus.

I welcome the information which the Minister has given. The changes made in the Finance Bill from the original proposals in the budget are major changes. I accept the Minister's statement that the changes were made consequent on discussions with people who have experience of pension funds. The Minister said that 25,000 funds could have been affected by the proposal as it was put forward on budget day but that the vast majority of these are now exempt. The imposition will fall on about 15,000 medium to large funds and the revenue flow will be more or less what the Minister predicted on budget day. I do not have any other point to raise on this section and I know other people are anxious to contribute.

I am opposed to the section and the Labour Party are very much opposed to the levy. There are a number of valid reasons why the House should not accept the levy as proposed. It is, in effect, a charge on deferred income and a charge which was not anticipated by the tens of thousands of superannuation contributory, and in some cases non-contributory, pensioners who contribute to the funded schemes. It is also a charge which the trustees of those schemes did not anticipate. Inevitably it will have an impact on the management, the returns and the pension paid to the tens of thousands of workers who are directly affected. The £16.5 million must come from somewhere and it can only come from the overall viability of the funds themselves. For these reasons we are completely opposed to the levy.

It is a panic-stricken measure and the only real rational explanation I heard for the bringing in of this levy is that the Government ran scared when the Fine Gael Party announced that they were totally opposed to any change in mortgage interest relief because all the indications were that there would be a further 10 per cent reduction, which ironically amounts to £16 million——

That has been abolished since.

The only reason I can give for that is that it was done in haste. It has been completely changed. It was announced by the Minister in the budget as a form of levy scheme. It was cobbled together four or five days prior to the budget and I do not think it was subjected to any indepth discussion at Government level. If it had been discussed internally, the flaws in the original scheme as proposed would have become evident after a ten minute discussion. A completely new scheme had to be brought in when the Finance Bill was published. The proposed levy on bank cards was the result of more panic. Mercifully this has now been dropped.

I do not believe that when the levy is collected it will be limited to £16.5 million. It will be very similar to the DIRT tax; the original finance computation on the DIRT tax was about £180 million. Then it was revised upwards to around £200 million and, lo and behold, it is now £300 million, and that was done on the basis of an asset base of what the deposits were. I would like the Minister to give us some information about the £4.9 billion asset base that he is using. It has been suggested to me that that asset base is substantially more, that it is well over £5 billion and that it could be £5.5 billion. I would like to know the official source for the estimated asset base of £4.9 billion as of the estimate of 1 January 1988 on which this levy is semi-applied because the Minister is now talking about 1,500 schemes coming within the ambit of the levy from a derived asset base of £4.9 billion. I suggest to the Minister that he will, in fact, get more.

I would also point out that the trustees of quite a number of schemes are very worried about the application. In the case of one closed scheme, trustees told me that they are not going to pay any increase in 1988; they normally would have expected to pay an increase of around 6 per cent — but they regard themselves as caught. They may get the exemption that the Minister has referred to and be classified as an excluded scheme but the indications I have from them, and they are a prominent public company, is that they do not at the moment regard themselves as having got that exclusion. On that basis their pensioners will not get a penny increase in 1988.

Equally, we have had substantial representations from the managers and the associations involved, and individual representations from a number of occupational schemes, such as the Aer Lingus occupational scheme, who are genuinely fearful about the introduction of this levy. I cannot understand why it is being brought in on a once-off basis. I do not believe it will be on a once-off basis. This scheme is now in. The Minister will get not less than £15 million in 1988 and he says he will get another £1.5 million in June 1989. I submit he will get far more and I can see the levy staying despite the fact that he has received representations from one trade union who were given solemn assurances across the table that this is on a once-off basis. If this is so, why have we gone to such inordinate lengths to concoct the scheme and try to build upon the scheme, because with the changes announced here it will be very difficult and will require an investigation of pension fund assets to compile a formal asset base on which to obtain the return talked about here this morning?

I believe that when the Revenue Commissioners get down to examining all this and when they see the volume of asset money there the temptation to introduce another levy next year may not be resisted. Maybe the Minister will reduce the charge. He may well go for an imputed income of less than 9 per cent because he is going to get a higher yield anyway. In next year's budget he may bring it down to 6 per cent, and the following year, bring it down to 4 per cent but, of course, the asset base of the schemes is growing all the time.

It is wrong in principle. Every pensioner here pays income tax on his pension off the occupational scheme. Now he is going to pay a levy on top of that on the basis of imputed income on the asset base and that is unfair. It is yet another taxation measure. We have had so many levies that have come and gone; they are the bane of the Revenue. It confuses our tax system and it must be heartbreaking that in any endeavour on the part of the IDA where there is a foreign company coming into this country they are told that if they are setting up in 1988 and bringing in £3 million, they will be stuck for 6 per cent but that this will not apply next year. This is the kind of thing which gives the raising of money a bad name at national level and at international level. Five years down the road one will meet people in the UK involved in pensions who will refer to the Irish levy even though at that stage the levy may well be gone. It builds up a climate which is not conducive to rational taxation application and the raising of revenue in the State.

I am opposed to the proposal. I do not really know why the Minister has gone to such trouble to raise £16 million. I was in such a scheme when I came into the Dáil and then lost my membership of the scheme because in 1969 it was not transferable; one just got a refund of contributions and went. That is changed now but those were the days when the schemes were embryonic. If I were an occupational pensioner I would prefer to pay an extra twopence on the pint of Guinness or on a glass of whiskey by way of optional indirect taxation. That is where revenue could be raised if the Minister is that strapped because, in the case of people coming up to the late forties, the fifties or late fifties, their pension scheme or the prospect of their pension and retirement is about the only thing they have left.

In a situation where there is massive shedding of labour, where people are almost being humped out willy-nilly by employers on early retirement, on accelerated pension exits and payment of lump sums, a further impetus will be given because people will just say they are not going to pay any more levy on this but will just close it off and shed more labour because of the cost of paying the State another 6 per cent.

Finally, there are the anomalies. This will apply to 1,500 schemes. There will be 23,500 schemes exempt. The original application covered 2,500 schemes. It now boils down to 1,500 major schemes. I am not quite certain how the Revenue Commissioners and the Department of Finance and the Minister have worked out that structure. It is certainly one which requires further elaboration by the Minister — but, overall, to go to such lengths to raise £16 million on a once-off basis is shoddy in terms of a Finance Bill and of presenting a budget.

We in The Workers' Party are opposed to this section also. We welcome the major climb down by the Minister as between the original proposal and what is now before us but I find it very difficult to understand how the yield remains the same. I would like if the Minister would explain how he expects the yield of £16.5 million to remain the same having regard to the changed circumstances.

I would calculate that in the case of a medium-sized pension fund yielding an income of, say, £1 million with a pension pay out of £500,000, 9 per cent of the assets amounting to, say, £1 million, 6 per cent on the remaining £500,000 would amount to £30,000. Before the change whereby the pension pay out would be taken into account, that scheme would have been paying £60,000 — 9 per cent of its £1 million. In cases like that, and probably in many other cases, there would be a reduction of almost half the return to the State under the new arrangements. I welcome this new arrangements as it changes the situation considerably from the original proposal. Nevertheless, we are totally opposed to the whole principle of this tax and the manner in which it is being imposed by the Minister. There is no question but that it is double taxation.

The funded pensions we are talking about are continuously regarded by workers as part of their pay deal and their negotiations and where the employer is making a contribution that is seen as a deferred payment. That is how trade unions always regard the pension contributions made by the employers. When the person retires and begins to get that deferred payment — they have paid tax on it — they are paying a tax on their weekly payments. The deferred payment which is put into a pension fund is paid when they reach pensionable age and when that is paid they pay tax on that as well. The Minister is getting at working people whose earnings and pensions funds are known to everybody. They pay all their taxes for 40 years of their lives, get their deferred payment when they retire and again they pay tax on that. Now the Minister is taxing their pension fund in the meantime. Clearly, this is double taxation of pensioners' funds.

The Minister is making the argument — it is an argument that has been made in the past few months — that these pension funds are huge amounts of, say, £5,000 million, and that when a few million pounds are taken out it will not be noticed, that when £16 million is taken out of these enormous assets of £5,000 million it is not significant. That is the old argument of tossing out huge figures. It is like putting together the total wage and salary bill of the entire State and saying that a couple of hundred million pounds out of that enormous figure would not be noticed and that we could take another lump from them. The Minister in his contribution today said that there is £5,000 million in these funds and that we are taking only a small portion of that.

In respect of the vast majority of pension funds there was no provision until recent years for inflation and increased pensions. They were standard fixed amounts. The investment funds in the pension allows the opportunity for increasing pensions in line with increases in the cost of living. The Minister quoted a Mr. O'Neill, somebody of whom I have never heard. I do not know why he bothered quoting him. Why can the Minister not make his own point? He quotes Mr. O'Neill to make the point that the Minsiter's proposal will not increase the contributions to the pension funds. That is possibly true. As a once-off tax it will not increase the contributions but if it becomes a permanent tax it will very quickly increase the contributions because all the actuarial decisions will be made on the basis of this tax. That was the important point of Deputy Noonan's amendment, to prevent this tax being included in actuarial assessments. If there was a specific payment to be made it would stop this year, but that is not in the Bill. As a once-off item I agree that it will not increase contributions but it can reduce payments out of the scheme immediately. They will not have to make higher contributions but they can either receive less payments or, at least, no increase in their payments. There will be no 2½ per cent or 3 per cent rise in line with the cost of living following this year for the people who will be getting their pension next year. That would be one immediate effect because the money is taken out by the Minister, money which would have been used to give increases in pensions in line with the cost of living.

The Minister cannot claim that this does not affect the individual. It affects the individual pensioners, each of whom has spent their 30 or 40 years of service paying their taxes, their employers paying contributions for them, and they are the ones who will get less when they retire. Regarding this tax, every penny will come out of workers' pockets. That is what it amounts to. These are the people whom it is easy to hit because everybody knows what they have and what they earn. They know every penny that is in their pension fund so it is quite simple for Ministers to grab it. That is the reason it is done. It is the simple way out of taking money out of workers' pockets. It is discriminatory, as has been pointed out, because it is dealing only with the funded schemes and not the unfunded schemes in the public service. Presumably that is to avoid complications which might arise for the Minister but it is the type of thing which makes the tax a burden on a certain number of people. Instead of bringing parity, clarity and simplicity into the taxation system, it is complicating it further, creating further divisions among people and being selective and discriminatory.

When I say every penny will come out of workers' pockets it may well be that the Minister himself had something else in mind which I would agree with but perhaps it is too complicated to get at, that is, to get at the pension fund managers and the pension business. There is a whole huge business in operating these pension funds. The various people who have the pension funds give the money over for investment to people who run the investment business for the pension funds to see they get a regular return on their investment.

They are all taxed already.

The Minister says that last year the regular return they got on their investment was 12.5 per cent, but on their own operations they are making a fat profit for themselves. It is a huge area in the Stock Market these days and large profits are being made in the operation of these pension funds. Perhaps that is what the Minister was thinking of, or maybe the impression has been given that the public might think that those other people are being got at. They are not being got at, at all. The acturaries, accountants, and so on, are going to make money out of the very fact that the Minister put the tax on this because a whole range of new calculations will have to be made now for which they will charge fees etc.

There is a great deal of money to be made out of the Minister's proposal — far from taking money from the people who are feeding off these pension funds. In fact, this money is being taken directly out of pensioners' pockets and that is why we are opposed to it. We would not object to taxes like the levy on banks' profits if a similar levy was imposed on companies handling the funds for pension schemes and if the tax was seen to be on the profits they make from operating these schemes.

Another point which has been made by the ICTU in response to the Minister's proposal is that last year as a result of the autumn Stock Exchange crash etc., the value of the present pension funds was reduced substantially and they calculated that the outcome for 1987-88 would be a real return of a mere 1 per cent. The Minister has calculated 12.5 per cent for 1987. That will be 1986-87 presumably. Therefore, many things need to be taken into consideration in relation to this tax and the manner in which it is being imposed. I agree with the Minister that, as a once off payment, it is not going to be paid for by increased contributions, but it is going to be paid for by lesser pension payments, if not by lower payments by at least a lack of increase in payments. The purpose of the investments is to allow for an increase in pensions in line with the standard of living. Even as a once off issue for this year only, there will be a reduction in the pay outs from the pensions schemes next year.

I have said a few things generally about the matter and I was reprimanded by Deputy Mac Giolla, correctly, for generalising on a particular amendment, but at least I have had the benefit of receiving some feedback already from the Minister in relation to the points I made. This matter requires some examination. He says the new arrangement as proposed should reflect ability to pay. Why does he say that? He says the new arrangements reflect ability to pay in that mature pension funds with greater pay out will pay less than young pension funds whose liabilities are much more future liabilities and not present liabilities. Therefore, he is talking about ability to pay like a snapshot taken with a camera, ability to pay right now.

The very point I was making was that it is a very naive and superficial approach to pension funding to say that at the moment, because you are paying out pensions now, you will pay a lesser levy than some trustees who are building up a fund against future liabilities and that in relation to them you have a greater or lesser ability to pay based on what you are paying out this week, this month or this year. That is precisely what is wrong with the Minister's thinking on the ability to pay front.

When you are a trustee and your liabilities as a trustee go across a time frame and just cannot be isolated at any given instant, ability to pay depends on the extent to which the fund is on target to meet its liabilities judged over a time frame, not judged today, not because people cannot demand the money back now because it is an immature scheme — to use the Minister's phrase — it is not a fully matured scheme which is in the process of paying out. With all due respect to the Minister, that is not a fair yardstick by which to judge ability to pay. Ability to pay in relation to a pension fund is decided on totally different, absolutely rational and cold criteria. You ask what this pension fund as at present constituted has to pay out over its entire lifetime as far as we can see that, and where it is going in relation to satisfying its liabilities. One pension fund may be doing very well and have plenty of funds to meet its anticipated liabilities and another pension fund which may be accumulating money at a fierce rate apparently with no day to day liabilities at the given date we are talking about, 1988, it may be in dreadful trouble because it may be wholly underfunded and going further and further off the rails.

The Minister's definition of "ability to pay" is how much of this year's income is immediately spoken for in terms of pensioners who are entitled to receive it now. That is precisely what is wrong with this measure. It just takes ability to pay as a simplistic notion of what is available in the kitty now, who is looking for it and what is the difference. That is like saying that the amount of money in a safe constitutes a bank's ability to pay. It is naive and simplistic in terms of pension fund arrangements.

I believe Deputy Mac Giolla was perfectly correct. There is no question of a tax on institutions. Pension funds are not institutions. They are solely the aggregate of the people who are entitled to receive moneys from them. They are not separate. They are not like a corporation who exist on a separate plane and are entitled to be taxed separately. Pension funds consist of aggregations of deferred income and the State is saying to people during their working lives: "Defer your income; put it aside; make provision for your old age and we will allow you to deduct that from your taxation. In other words, if you do not take your income now and you defer it to look after yourself in your old age we will not regard it as taxable now but will regard it as taxable when you receive income from it, when it turns into an income flow in the fullness of time."

That is the essence and philosophy of our system of pension funding and what we are doing now is, by any standards, double taxation. We are saying that deferred income will be taxed when it has been invested in a pension fund and a person is receiving a return on the investment. In the last analysis, the pension fund will be taxed when a payment is made to the person who is entitled to receive it.

The bigger pension funds in this country are not capable of keeping up with the rate of inflation. Every Deputy in this House received a very interesting letter from Professor Brendan Walsh, an economist of high repute, who is involved in the airline pilots' fund. He is one of the trustees of the fund and he pointed out that, whatever about this year or last year, the capacity of pension funds to keep up with inflation, judged over a time frame — this is where one has to make a judgment — allows them to keep up with inflation only to the extent of 60 per cent or 70 per cent. We can argue about the effect on an instant pension fund and the Minister can say that it will have virtually no effect on funds but it will have an effect because, if pension funds fail to keep up with inflation, the people who are deferring their income will get less and less on them. That is why we should be very slow to attack the process whereby that sum is attempted to be made inflation-proof by taking some moneys out of a fund which is merely a defence mechanism for deferred income to retain its value. That is where we are making such a mistake in this measure. We are not taking a long, candid, hard view of the likely effects on insolvent funds.

In relation to a fully matured fund, which is closed in terms of further people coming into the category of potential beneficiary, of course we can view it on the basis of its aggregated assets, what its payments out are likely to be and what kind of moneys it can afford to pay out each year by way of increases. However, it is much more difficult to calculate in relation to a young firm which is immature and open-ended in terms of actuarial calculations, predictions of the rate of inflation and the rate of return. Are the trustees of those funds in a position to give to the people who paid into the fund the real value of their contributions over time? If Professor Walsh's statement is correct and if keeping up with inflation is beyond some companies, that they are only achieving to the extent of two-thirds in terms of keeping up with the rate of inflation, then you are taxing deferred income which is, itself, becoming less and less capable of dealing with the purpose for which it was deferred, to provide a pension for people over a period of time.

In defending this levy, the Minister said it is related to a capacity to pay. It is, if you take a totally simplistic view of what capacity to pay means, or their ability to bear the levy. However, if you take a view that takes into account the distinctions between immature and mature funds and if you take the view that a fund which simply does not have a liability today or tomorrow is not necessarily solvent, it is obvious that liabilities which have not yet accrued are by no means a yardstick on which to decide ability to pay.

We are taking £16.5 million out of these funds, and if Deputy Desmond's calculation is correct it could be £20 million or £30 million. It does not matter, it is taking those moneys from people, not from inanimate, disembodied, or theoretical entities. Is taxation of those people fair and equitable? I will go back to my earlier remarks about the public service. They get unfunded pensions which are inflation-proof and related to their salaries, including productivity increases over time. Are we indulging in a fair exercise? Is there a fair balance between them and ordinary people — employees, not the super-rich — paying into pension funds? The incomes of these people in their old age will not be inflation-proof, in fact their incomes will become less and less. The effect of this levy is to come down hardest on the funds which are most at risk, those which are now immature. The levy is hardest and harshest on the funds whose liabilities are furthest away. The deductions in the formula provided for in the Bill gives the letter "P" as meaning payments out of pensions this year so the more liabilities you have at present the less this levy will impact on you. At the moment, deferred liabilities are much riskier and much more doubtful as to whether they will ever be met and that is where the pension levy hits hardest and digs deepest.

On that basis alone, the effect of this levy is unfair. Is it right to allow the payments made this year to be fully deductible just because it is a pension fund whose liabilities have now accrued? Is it right, between two pension funds, one of which has a big liability to payments this year and the other may have a liability to pay in ten years' time and to a much more significant extent, that this year one of the pension funds can pay much less than the other whose liabilities are likely to accrue in ten years' time and whose capacity to bear those payments in ten years' time is much more doubtful? That is wrong and is an error in principle.

I heard the Minister say that this is a once-off levy but the more I think about it, the more I realise how unlikely that is as a proposition. There is a lot of masquerading in the House. The Fine Gael amendment was a smokescreen for the fact that they will not oppose this measure. The Minister is, theoretically, correct in saying that this is a once-off levy. The only provision we are enacting today is a once-off levy and some other Parliament will have to decide, in its wisdom, whether to scrap the measure. If it will yield £20 million, who will come up with that amount next year? Where will it come from? That is the issue and it is very unlikely that a Government seeking cutbacks in public expenditure and striving for fiscal rectitude will be in a position to widen the tax base by another £16 million just to get rid of this measure. It is realistic to see this as something which, once in place, will continue. On that basis it is reprehensible.

My last point is in relation to foreign pension funds. We are going towards 1992. We are going towards an era in which it will be possible, I believe, to move moneys out of the country for various purposes, including looking after a pension in the last analysis. I accept that our tax laws at present may require that the pension fund be held in Ireland but, in the last analysis, we are going towards an economic community where these moneys will be mobile. I do not believe that in those circumstances Irish pension funds should be at a significant disadvantagevis-á-vis foreign pension funds. The Minister may say it is the intention of the Government to discriminate between funds held in Ireland and funds which go abroad and that people who invest their moneys abroad will not be entitled to the tax relief with the result that there is no question of that happening in the long run. I wonder if we will be allowed to keep that fiscal discrimination in our laws post-1992. If we are not allowed to do that by the European Community, if we are not entitled to restrict pension funds to investments in Ireland effectively or to those companies who have their domestic place of business in Ireland for tax purposes, we will be placing Irish pension funds at a significant disadvantage in relation to potential foreign pension funds.

This levy is flawed in principle and is likely to be permanent. When all the huffing and puffing and rhetoric in the House abate, the question that must be answered is: are we going to vote in favour of it or not? To a large extent the decision on this provision falls firmly into the lap of Fine Gael. If they want to oppose this provision in regard to pension funds then, forgetting about their amendment, now is the time. It is on that basis that we are indicating that we are opposing this provision.

I should like to support Deputy McDowell in what he said which is absolutely right and cannot be contradicted. The plain fact of the matter in basic realities is that, if Fine Gael are prepared to vote against this section, as they sought to give the impression they were some weeks ago, it will not be carried and this double tax on pensions will be defeated. Fine Gael put down an amendment to this section and of all the foolish amendments I have seen, that one took the biscuit. The effect of the amendment was to confirm what was in the section. The section purports to declare that this will apply to 1988 only and I wonder why an amendment should be tabled to that effect unless, as Deputy McDowell says, the intention is to create a smokescreen and give the impression that Fine Gael are against the provision although in reality they are afraid to exercise their right to vote against it. If this tax is imposed today it will be Fine Gael's decision to impose it.

It seems to me that this proposed double tax on pensions is entirely discriminatory because it applies only to funded pensions and only to 1,500 of the 25,000 funded pension schemes that exist here. If, therefore, a person is wealthy enough to have a scheme of his own on which the tax payable on the inputed income after deductions and so on is less than £5,000, that person is exempt. However, if a person was not wealthy enough to have a scheme of his own and he had to go into a general scheme, of which there are 1,500 that will not be exempt under this section, that person is heavily penalised. On the other hand, if a person works for the public service generally and does not make any contribution but will be paid a pension on retirement from current revenue, from totally unfunded sources, and if the employer has made no provision for that person's retirement, that person is not penalised at all. That is totally discriminatory. Why should the entire public service, apart from a limited number of institutions that were prudent enough or one might say foolish enough to have funded schemes for the benefit of their employees, be entirely exempt from this?

If we were not talking about pensions but referring to pay, I wonder if the House would for one minute accept that a certain tax should be put on the pay that some people got but not on the pay that other people received? Would they, for example, accept that people working for Irish Airlines who have a funded pension scheme, and a very good one run by Professor Walsh and other trustees, should be subject to tax on their pay but that people working for the Department of Transport should not be subject to tax on their pay? That would be regarded as outrageous but what is the difference if the Minister is going to impose that tax on their pensions? Why should an official in the Department of Transport be free of this double tax on his pension when a person working for Irish Airlines who has a funded pension will be subject to tax?

In my view, this is just as outrageous as if it were a discrimination on tax on pay and it is indefensible. I am sure somebody will challenge this in the High Court and the Supreme Court. I have long since given up forecasting what the result of this type of case will be because some of what appear to be the more obvious cases seem to get through and others whose chances appear to be rather slim are struck down by the High Court or by the Supreme Court. For that reason I do not forecast these results any longer. However, I must say that there is a very arguable case in relation to this. It is indefensible on the basis that it is entirely discriminatory as between different classes of people.

The Irish Airlines Pension Fund scheme applies not just to Aer Lingus personnel but to Aer Rianta personnel. I recall that some ten or 12 years ago when the arrangements in Shannon Airport were being changed, the people who worked in what was called the sales and catering organisation, an autonomous organisation started by Dr. Brendan O'Regan, were given the option of either going into Aer Rianta, who were about to take over that organisation, or into the Department of Transport and Power, as it then was, and become ordinary civil servants. Those who opted to go into Aer Rianta are paying into the Irish Airlines funded pension fund while those who opted to go into the Department of Transport and Power are not. They are being looked after on the normal Civil Service basis. Why is it that the person who opted to go into Aer Rianta and has made contributions into a fund over the years will be subject to this tax, while the person who opted to go into the Department of Transport and Power and made no contribution will be free of all tax?

It seems to me to be basically inequitable and indefensible. I do not think it should be allowed to go through. I invite all concerned to have a rethink about this. I have not dealt with the figures involved but with the basic principle involved and it is my view that it is entirely wrong. I do not see how it can be defended. If it is challenged in a court I do not know what argument can be made to convince the court that it is not discriminatory as between people in roughly similar types of employment who happen to find themselves on one side of the line or the other.

Professor Walsh wrote a letter to the 9,000 or more members and pensioners in the scheme I referred to — happily up to now it has been a very successful scheme — and I should like to quote some of the comments he made about it. Brendan Walsh is regarded as an independent, objective and reasonable man and an economist of standing. He states that the actuary has told them he would expect to be able to pay increases of between 60 per cent and 70 per cent of the annual rate of inflation. That is not bad, given that the rate of inflation was very high up to some years ago. The letter goes on to state:

The Actuary now advises that any tax imposition on the Schemes, even on a once-off basis, would reduce any surpluses likely to arise and seriously impair our capacity to pay future pension increases.

It is grossly unfair that those people who have been prudent and provident enough to make arrangements for their own future should be penalised in this way. They can get no increases, but people who have made no arrangements whatever and are relying on unfunded payments of their own pensions out of current revenue are subject to no tax on the funds and no inhibition whatever on the rate of increase. They will get a full index-linked increase every year or an increase linked to the Civil Service increase. It is entirely wrong.

Professor Walsh goes on to say:

Any tax on Pension Schemes is therefore a tax on the retirement provisions of individuals. Furthermore, as pensions are subject to PAYE, the Government's proposals would be an exercise in double taxation.

He is perfectly right. He goes on to state:

The proposed tax is not only based on a flawed view of the nature of pension funds, it is also being implemented in a very inequitable manner because only pensions paid out of funded Schemes would be affected. The pensions of civil servants and the vast majority of public sector employees would not be affected.

He also states:

The thinking behind the proposed tax appears to be based on a tendency to depersonalise Pension Schemes by classifying them as financial institutions. This may be because of a lack of understanding or a reluctance to accept the basic reality that Pension Schemes are there to provide future financial protection for employees and former employees.

That letter has been circulated generally during the past two months and I have not seen any of Professor Walsh's assertions contradicted. The points he makes are perfectly valid. I am amazed that the Government propose to go on with this. If Fine Gael said they would vote against it, obviously the Government would not go on with it. It is wrong in principle, discriminatory and unfair and should not be proceeded with. All concerned should think of it now in that way.

I will give this much to the Government: what is now in section 49 is very different from what was announced by the Minister for Finance on budget day. About 23,000 small schemes have been taken out. That does not help the smaller people who tend not to be in the small schemes which are often very selective one or two-man operations for people who are relatively wealthy. The system proposed to collect this money under the scheme as announced in the budget was obviously unworkable. Major changes have been made and the income is now an imputed income rather than the actual income. It is also permissible now to deduct actual payments in the present year, which was not the intention of the Minister in the budget. There are various other major changes of that kind, but it is still onerous, inequitable and discriminatory.

It is indefensible to try to put through a measure like this. It is the clear duty of an Opposition to oppose it. Any Opposition Deputy who does not oppose this today is neglecting his duty to prevent something that is obviously unfair and inequitable. Irrespective of what one thinks about the merits of it, even if one could convince oneself that double taxation on pensions had some merits — a point on which I would find it hard to be convinced — it is not possible to be convinced that it should apply to one group of people and not to others. In particular one cannot be convinced that it should apply to those who are provident and not apply to those who have made no arrangements for their future retirement.

Most of the points raised in the recent contributions have been replied to already in the information I have given to the House. I do not think the contribution by Deputy O'Malley adds anything to the debate. Deputy McDowell made his party's points extremely well and there was no necessity for the political child's play of Deputy O'Malley's contribution.

Foreign funds are exempt. What will happen in 1992 does not arise under this section since this is a once-off scheme for 1988. Most, if not all, of the arguments on this section were on the basis that it would be permanent. That is not the case; it will be there only for 1988. Deputy Noonan referred to Denmark, but their scheme is much more severe and was changed recently. Regarding the solvency of particular companies and the question of ability to pay, it is quite clear that current returns are good and there is no difficulty in payment of this once-off levy. There is not much point in going through all the detailed questions again. Most of the arguments made were political and dealt with the scheme as if it were to be a permanent feature.

Funded pension schemes enjoy very favourable tax treatment. The funds income contribution was at least £400 million last year and it is tax exempt. Their gross investment income of £325 million in 1987 is also tax exempt, except for the small part on which retention tax is payable without a refund. This is a very modest contribution and is being seen as such. Most of the changes made since the announcement on budget day arise from suggestions made in the course of discussions with representatives of the pension industry.

I will conclude on a point which continues to amuse me. Many speakers have said we do not need this £16.5 million or that it could be found in other ways. Nobody suggested any way in which even £1 million might be raised. Deputy McDowell and Deputy O'Malley were trying to amend corporation tax to reduce the rates. There are plenty of proposals for reducing taxation but none for ways of increasing taxation to raise the funds which the Exchequer so badly needs to reduce our enormous debt. Where are all the pious statements of 14 months ago?

Standing Orders of the House do not allow us to do that.

We know it is not allowed but Deputy McDowell made two excellent contributions on this section without referring to how he would raise the funds by other means.

If the Minister wants to give us the decision, we will show him.

You will observe that there is no reply to what I said.

What did you say? That Fine Gael will not vote for it? Because that is about all you came in to say.

It is true, too.

The Minister for Finance is very touchy. When he finds he cannot reply to an argument he becomes petulant.

I do not get involved in arguments and I have already replied to the points raised but the Deputy was absent.

(Limerick East): Easy now, boys. Do not fight. Petulance will not do any good.

Question put.
The Committee divided: Tá, 67; Níl, 27.

  • Abbott, Henry.
  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Aylward, Liam.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Brennan, Sémus.
  • Browne, John.
  • Burke, Ray.
  • Byrne, Hugh.
  • Collins, Gerard.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Cowen, Brian.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Foley, Denis.
  • Gallagher, Denis.
  • Haughey, Charles J.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Joe.
  • Hilliard, Colm Michael.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lynch, Michael.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • MacSharry, Ray.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M.J.
  • Noonan, Michael J. (Limerick West).
  • O'Dea, William Gerard.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Leary, John.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Roche, Dick.
  • Smith, Michael.
  • Swift, Brian.
  • Treacy, Noel.
  • Walsh, Seán.
  • Woods, Michael.
  • Wright, G. V.

Níl

  • Bell, Michael.
  • Clohessy, Peadar.
  • Colley, Anne.
  • Cullen, Martin.
  • De Rossa, Proinsias.
  • Desmond, Barry.
  • Gibbons, Martin Patrick.
  • Harney, Mary.
  • Higgins, Michael D.
  • Howlin, Brendan.
  • Kavanagh, Liam.
  • Kemmy, Jim.
  • Kennedy, Geraldine.
  • McCartan, Pat.
  • McCoy, John S.
  • McDowell, Michael.
  • Mac Giolla, Tomás.
  • Molloy, Robert.
  • O'Malley, Desmond J.
  • O'Malley, Pat.
  • Pattison, Séamus.
  • Quill, Máirín.
  • Quinn, Ruairí.
  • Sherlock, Joe.
  • Stagg, Emmet.
  • Taylor, Mervyn.
  • Wyse, Pearse.
Tellers: Tá, Deputies V. Brady and Browne; Níl, Deputies Kennedy and Colley.
Question declared carried.
SECTION 50.
Amendments Nos. 43 and 44 not moved.
Question proposed: "That section 50 stand part of the Bill."

(Limerick East): Could we have agreement to move fairly rapidly through these sections which were already dealt with on budget night and the impositions are in place and the tax is being collected? There are very important sections later so I would be obliged if the Minister would guide us through, and just a casual question here and there will take me through the next chapter.

The purpose of section 50 is to define abbreviations used in sections 51 and 52.

Question put and agreed to.
Sections 51 and 52 agreed to.
SECTION 53.
Question proposed: "That section 53 stand part of the Bill."

(Limerick East): That section excited my curiosity. What scam is the Minister trying to get at there?

(Limerick East): Was it the Cork vodka scandal?

The purpose of the section is to make it an offence for any person to remove substances which are mixed with goods liable to excise duty for the purpose of revenue control, or to deal in goods from which such substances were removed. The section also provides for penalties for those convicted of such an offence but that vodka case is what gave rise to it.

(Limerick East): The Minister has no other cases in mind?

I hope there are not, but if there are this section will take care of it.

Question put and agreed to.
SECTION 54.
Question proposed: "That section 54 be deleted from the Bill."

Deputies will recall that I indicated in my winding up on the Second Stage that if the associations representing disabled drivers were unable to agree to the terms of the new scheme as designed by the Department of Health, I would consider removing section 54 and allowing the existing arrangements to continue. Since agreement on a new change has not been reached I have circulated an amendment to remove section 54 from the Bill. The purpose of this proposal was to expand eligibility for transport grants among a wider category of disabled persons and to secure a more equitable distribution of available funds. Cost saving was not the objective. I hope that further efforts to resolve difficulties will be made and that progress can be made towards an agreed scheme in the coming year.

I welcome the Minister's decision. I hope that agreement will be reached. The decision that the National Rehabilitation Board would be involved instead of the health boards was a very sensible decision and I regret that no agreement was reached before the section was put into the Finance Bill. Be that as it may, the Minister has withdrawn the rescinding of the previous Finance Act provision. I am told that a large number of the applications which had been received in the first quarter of the year were not dealt with pending the introduction of the new scheme on 1 May. Can the Minister tell us whether those applications will now be cleared rapidly? Provision has been made in the budget for an allocation of £2.8 million this year and £3.3 million in a full year. I do not want to see a scheme being introduced in next year's budget with a reduced allocation because of only £2 million being spent this year.

I welcome the Minister's decision to delete this section. The mistake which was made initially was to attempt to a abolish the scheme without any consultation with the organisations representing the disabled. I understand the fears which the disabled had about the proposed scheme in that there would have been a limitation on the amount of money which could be spent on any of the new shcemes which would be proposed whereas there are no such limitations under the present scheme. Improvements can be made to the present scheme. The Revenue Commissioners have been implementing the regulations far more rigidly in recent times and those who qualified in years past are now finding themselves in difficulties.

I also ask the Minister to take into consideration in any new proposals which may be brought forward the position of hand amputees who are not covered under the present scheme. There are quite a number of people around the country who cannot drive the normal type of car and they are not covered by the scheme. Now that the heat is off I ask that those organisations representing the disabled, the Minister and the Minister for Health would, in a calmer atmosphere, bring about further improvements as improvements can be made to the scheme. I note that the Minister recognises that the wrong track was taken initially and that because pressure was put on people they became entrenched in their views. Now that the heat is off I think a more equitable and flexible scheme can be negotiated by all concerned.

I also welcome the Minister's decision to withdraw the section. As Deputy Allen has said, the difficulty arose because of a lack of consultation and it seemed that the disabled were being told that they did not know what was best for them. They were being treated like children. Their independence and any issue relating to mobility is of vital importance to them. It would be great if improvements could be made in consultation with them. The Minister assures us that it was not a question of saving money. Nevertheless, as it was introduced in a Finance Bill by a Minister for Finance it was seen as a way of saving money for the Exchequer in one way or another and not as something which would be of benefit to the disabled. I think the move the Minister is making is the correct one and will prove of most benefit to the disabled in the long run.

(Limerick East): I thank the Minister for withdrawing the section. I think he has handled this problem very well. It was a complicated and difficult issue to handle. I accept his good intentions in seeking to improve the scheme. I have no objection to the Minister continuing the discussions with a view to achieving a more satisfactory scheme because a more satisfactory scheme could be negotiated and we are all aware of this. I thank the Minister for withdrawing the section at this stage. There would be strong support from all parties in the House for modifications of the scheme if the discussions were to continue and the Minister could agree on a satisfactory solution.

A response is needed to some of the points which have been made. First of all, all applications under the existing scheme are being dealt with as we are not now going to change it. On budget night I said that what we were going to do was improve the scheme and that this would only be done in consultation with the interested parties concerned. Therefore, there was no question of us doing anything without first having done that. Those consultations did not lead to agreement and that is why I am now withdrawing this section of the Bill.

In order that everybody would fully understand what we were trying to do because of the difficulties which many of the disabled genuinely found themselves in let me quote from section 43 of the 1968 Act:

Where a person shows to the satisfaction of the licensing authority that, in consequence of injury, disease or defect, he is wholly, or almost wholly, without the use of each of his legs, the duty imposed by...

Therefore, the person had to be without the use of each of his legs. If they had use of one leg they were not entitled to this benefit. If the person was a dwarf or a midget and had the use of two legs they were not entitled to the benefit. A substantial number of people who are genuinely disabled do not qualify under the existing scheme. We were trying to change that by agreement with the Wheelchair Association and the disabled drivers. I understand that the Wheelchair Association were prepared to agree to this but disabled drivers were not. If their representatives felt that we were not improving things then so be it. Allegations have been made against the Revenue Commissioners on their interpretation of the law but I think anybody could interpret what is clearly implied in section 43 of the 1968 Act. If a person has the use of either one or both of his legs he cannot qualify for benefit, he has to be without the use of both of his legs to qualify. We are trying to change that but we are not being allowed to do so because there is no agreement. As I have said, on budget night I indicated that unless there was agreement arising out of consulations there would be no change.

I agree with what the Minister has said in that the section of the 1968 Act is rather restrictive and that there are a number of people who would not qualify even if the section was interpreted liberally. There is something to be said for the proposition that a realistic scheme where the entitlement would not tempt doctors out of the goodness of their hearts to bend the rules a little should be introduced in which the entitlement would be spelt out more clearly so as to make it quite clear as to who is and who is not entitled to avail of the scheme. In relation to those who suffer from dwarfism their capacity to use their legs can be limited in many cases to walking between 40 and 100 yards. They are not able to walk much further than that because their legs will not support them. As the Minister has suggested the phrase "without the use of each of his legs" is capable of being interpreted as excluding them and that is an unfortunate state of affairs.

In respect of Deputy Allen's proposal for the Minister to consider extending the scheme to cover people with hand problems I would like to say that I would be wary of doing so, not because of any lack of sympathy for those people because I am sure that they go through an awful lot in their day-to-day lives, but because, as I understand it, the purpose was to give mobility. People who have hand problems are not normally immobile. It would be a mistake in my view if the scheme was diluted so as to generally cover everyone who for one reason or another had to have a special adaptation to their cars. This benefit was not introduced to cover the cost of specially adapting a car but rather to give mobility to those people who cannot get around without it. Let me enter a warning that if we start extending the scheme to cover disabled people who need their cars adjusted in various ways but who can get around without a car we will dilute the whole purpose of the scheme.

I am glad that this section has been withdrawn. I received a large amount of correspondence from members of the Wheelchair Association and from disabled drivers who expressed concern over what was being proposed. Many of their members were not able to enjoy a normal life as they had to remain at home and the provision of these cars meant a lot to them. It is important that they are able to avail of this scheme. As the scheme is too restrictive at present I think we should consider extending it——

I am afraid the Deputy cannot develop that point any further.

We are looking for agreement on that.

I hope there will be agreement on it.

As it is now 1.30 p.m. I must put the question but before doing so let me direct your attention to the top of page 5 where there is a misprint. The word "here" should read "hereby".

I am putting the question: "That amendment No. 44a set down by the Minister for Finance is hereby made to the Bill, that section 54 is hereby deleted and in respect of sections 55 to 59 that the section or, as appropriate, the section, as amended, is hereby agreed to".

(Limerick East): I thought we were just deleting a section.

I must put the question in accordance with the order of the House.

(Limerick East): Are we taking the time motion now?

As ordered by the House.

(Limerick East): I just wanted to clarify what you were doing and I want to indicate that on Report Stage I may be moving an amendment on the aspect we have been discussing.

Question put and declared carried.
Progress reported, Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.