Dáil Éireann debate -
Wednesday, 2 Feb 1994

Vol. 438 No. 2

Taxation of Social Welfare Benefit: Motion.

Minister for Finance (Mr. B. Ahern)

I move: That Dáil Éireann approves the following Order in draft:

Finance Act, 1992 (Commencement of Section 15) (Unemployment Benefit and Pay-Related Benefit) Order, 1994;

a copy of which Order in draft was laid before Dáil Éireann on 26th January, 1994.

Section 15 of the Finance Act, 1992, provided for the treatment as income for tax purposes of certain short term social welfare benefits. These are disability benefit, injury benefit, unemployment benefit and pay-related benefit. The section can come into operation generally or in relation to specific benefits or categories of recipients of benefits on such day or days as may be fixed by the Minister for Finance by order. Prior to such an order being made it is required that a draft of the order be laid before Dáil Éireann and a resolution approving of the draft be passed by Dáil Éireann.

A commencement order of 10 March 1993, brought the section into operation with effect from 6 April 1993, in respect of disability benefit and injury benefit. As I announced in the Budget Statement, I now propose to bring the section into operation with effect from 6 April 1994, in respect of unemployment benefit and pay-related benefit. A draft order to that effect was laid before the House on 26 January.

Before I discuss the making of these benefits reckonable as income for tax purposes, I would like to say a few words on the overall issue of tax reform. The Government is committed, through the Programme of Partnership Government, to continue the process of tax reform. Substantial progress has been made in this regard over recent years but further action is required.

Our overriding economic and social objective is to resolve our critical unemployment situation. As I indicated in the Budget Statement the three yardsticks against which a "pro-jobs" taxation policy must be measured are those of assisting competitiveness, promoting the best economic use of our resources while favouring employment where possible, and being, in the broad sense, as employment-friendly as practicable given that revenue must be raised.

Ensuring that taxation policy is proemployment means increasing rewards and incentives for working and reducing the cost of employing workers. By reorienting the income tax and PRSI systems the Government is helping to promote wage moderation and to increase the competitive position of industry. Changes in this area are important for labour intensive industries, particularly those with large numbers of low paid workers. In general terms our tax system no longer stands out as having exceptionally high rates of tax. It is in the area of income tax that there remains considerable need for positive tax reform.

The proportion of all tax which is collected from incomes is very high. Furthermore, the burden of income tax bears heavily on those with modest incomes. This is because of the speed at which individuals enter the tax net and, more importantly, the speed at which the higher rates of tax come into play. It is in these respects that our current tax system impacts negatively on enterprise and employment and where significant changes are essential. I was, therefore, delighted to be able to announce very significant improvements in the income tax position of all earners in the budget. In particular, I was delighted to be able to focus the benefits on low and medium earners.

The budget reduced the overall take from income tax by almost £200 million in 1994 and by £333 million in a full year. It did this first by abolishing the temporary 1 per cent levy. The budget also increased significantly the personal allowances and the standard rate bands, helping to reduce the burden of taxation on the low and middle income earners. In addition, the rate of tax at which marginal relief is charged was reduced by 8 percentage points. This significant reduction in the marginal rate of tax faced by many low paid workers will alleviate the poverty trap and increase the incentive to work.

In addition to the general income tax measures mentioned here, a number of other measures was taken to improve the position of the low paid and to help improve the competitive position of those industries which employ large numbers of low paid workers. Finally, I have introduced a differential employers' PRSI contribution rate structure. From 6 April 1994 a reduced rate of 9 per cent will be levied on incomes up to £173 per week. Above £173 the normal rate of 12.2 per cent will apply on all income subject to a weekly ceiling of £496 equivalent to £25,800 per annum. It will cost £28 million in 1994. Secondly, an exemption from the health and employment and training levies has been introduced for those earning less than £9,000 per annum. The obligation for employers to pay the cost of these levies for those with medical cards has also been removed. The total cost of the changes in PRSI and these levels is £63 million in a full year. This represents a very significant boost to the cost structure of firms with large numbers of low paid employees and should improve significantly the competitive position of those firms.

Of course, tax reform is not simply a matter of tax reduction. The overall level of taxation is primarily determined by the level and quality of services which we as a society decide should be provided or financed by the State either directly or indirectly. As I said, the strategy behind the tax changes involves a reorientation of the income tax and PRSI code to be more employment friendly. Focusing reliefs and reductions on the lower paid inevitably involves trade-offs elsewhere in the tax code. In the income tax area the base broadening measures which I have taken this year involve confining tax relief for mortgage interest and VHI to the standard rate and making unemployment benefit reckonable for tax purposes. While I will explain the specific equity arguments which point to the fairness of making unemployment benefit reckonable for tax purposes in a moment, it is essential to recognise that this change is part of the ongoing tax reform programme. Furthermore, the significant improvements in the tax position of the low paid made in this year's budget will, of course, apply to those claiming unemployment benefit.

Returning to unemployment and pay-related benefits, I should stress that making these benefits reckonable as income for tax purposes is essentially a matter of equity. The reason for treating unemployment and pay-related benefit as income for tax purposes is merely to treat people in similar circumstances, with similar amounts of incomes in a tax year, in the same way. It is to ensure that for two people in similar circumstances having the same level of income, one does not pay less tax than the other simply because one person's income contains unemployment benefit and the other person's does not.

The extent to which taxation will actually arise in a given case as a result of this change will, of course, depend essentially on the amount of other income that the recipient of unemployment benefit or the recipient's spouse has in the same tax year. I would like to draw Members' attention, in this context, to a paper entitled "Income Tax and Welfare Reforms" published by the ERSI in 1991. As I indicated when the commencement order on the taxation of disability benefit was being discussed last year, the ERSI paper demonstrated the flaw in the argument that taxation of short term social welfare benefits would impact unfairly on those on low income. The study found that most of the benefit from the non-taxation of certain short term benefits, including unemployment benefit, went to those on higher incomes. In particular it found that 70 per cent of those tax units affected by the taxation of short term benefits are in the upper half of the income distribution range and that in removing the exemption fewer than one in ten of those affected would be in the lower income ranges. These figures are based on a study carried out in 1987. The increases in the income tax exemption limits since then and the introduction of substantial child additions to them should mean that the effect on the lower income groups would be even less now.

The change to making short term social welfare benefits, including unemployment benefit and pay-related benefit, reckonable as income for tax purposes has been recomended by a number of groups, including the Commission on Taxation, the Commission on Social Welfare, the National Economic and Social Council and the Industrial Policy Review Group — Culliton. The change now being made should ensure that persons are not better off because portion of their annual income arises from unemployment benefit than they would be if the same overall income arose from being employed. It will help to reduce the replacement ratio of those affected and make it more attractive for them to remain in or take up employment.

A number of other PRSI benefits are already reckonable as income for tax purposes. These include, for example, invalidity pensions, disability benefit, injury benefit, retirement pensions, widows pensions and old age pensions.

Social welfare payments in general and unemployment benefit in particular have improved significantly in recent years. For example, in 1987 the personal rate of unemployment benefit was £42.30 per week. Following this year's budget the rate will be £61.00. This represents an increase of 44 per cent or over 20 per cent after the effects of inflation have been allowed for. The new £61.00 per week rate will come into operation from July of this year and will ensure that those on unemployment benefit will be receiving a payment which is above the priority rate recommended by the Commission on Social Welfare. Further progress in improving the unemployment benefit rate will be made in future years as economic conditions permit.

When the House was debating the commencement order for disability benefit in March last, I indicated that when unemployment and pay-related benefits were brought into taxation in 1994 they would be taxed at source by the Department of Social Welfare. This would mean that in addition to paying the unemployment and pay-related benefits the Department would also make refunds and deductions of tax where appropriate. This is still the intention for the permanent system. The necessary preparations for the introduction of the permanent system of tax are currently being undertaken by the Department of Social Welfare with a view to its implementation in 1995. Consequently in the short term an interim taxation arrangement will be operated by the Revenue Commissioners.

The interim system will involve the Department of Social Welfare continuing to pay unemployment and pay-related benefit gross, that is, without deduction of income tax. Any tax due in respect of the benefit will be collected essentially through Revenue restricting tax refunds to take account of any unemployment and pay-related benefit received.

I want to indicate how the proposed arrangements will operate in practice in some situations. Where a person ceases work during the tax year and goes on unemployment benefit, the person will continue to claim refunds of tax previously paid in the tax year from Revenue at four-weekly intervals as at present. However, Revenue will take the amount of unemployment and pay-related benefit received into account in computing the amount of any refund due. If the person's weekly receipt of benefit is less than their weekly tax-free allowance some tax refund, but at a reduced level, will still be due. If the benefit received is greater than the person's weekly tax-free allowance then no tax refund would in future be due. Of course if a person has paid no tax since the beginning of the tax year no refund would arise. This is what happens at present also.

When a person resumes employment or takes up employment for the first occasion during the tax year, having been on unemployment benefit, the following arrangements will apply. Where the person's unemployment and pay-related benefit is less than their weekly tax-free allowance Revenue will instruct that the cumulative basis of PAYE will be operated in the employment, with the unemployment and pay-related benefit being taken into account. The operation of the cumulative basis will give the employee immediate benefit of any unused tax-free allowances for the period of unemployment in the tax year which are not required to cover the unemployment and pay-related benefit received.

Where the person's unemployment and pay-related benefit is greater than their weekly tax-free allowance the benefit received will not be taken into account on resuming or taking up employment for the first time in the tax year. However, the employer will be instructed by Revenue to operate the non-cumulative basis of PAYE, which is generally known as the "Week 1" basis, in respect of the person's further taxation. Normal cumulative PAYE takes account of the employee's cumulative tax position from the beginning of the tax year up to the pay week that is being dealt with. "Week 1" non-cumulative PAYE, on the other hand, looks only at the employee's tax position in the week that is being dealt with. "Week 1" in this instance will, in order to prevent possible hardship to the employee, prevent collection of the undercharge which has arisen because the benefit was greater than the tax-free allowances. It will also deny the person any access to the tax-free allowances for the period of unemployment, thereby preserving such tax free allowances to be offset against any tax due on the unemployment and pay-related benefit received.

The arrangements I have outlined are those that will apply in the great majority of cases, which are straight forward. In non-straight forward cases where the employee does not permanently cease work with the employer but is in receipt of benefit — for example, systematic short-time workers — the Revenue will, where appropriate and possible, restrict their tax-free allowances by the amount of their expected unemployment benefit. The employer will continue to operate PAYE on a cumulative basis in respect of their earnings from employment.

In the case of undercharges of tax arising from this measure Revenue will, in general, follow the usual procedures which normally apply in respect of other tax undercharges.

I must again stress that the extent to which taxation will arise under this measure will essentially depend on the amount of other income which the person or the person's spouse has in the tax year. If there is no other income in addition to unemployment and pay-related benefit, the exemption limits will generally ensure that there is no tax to pay. The yield that it is estimated will arise from this measure is £18 million in 1994 and £30 million in a full year.

I wish to share my time with the Minister of State at the Department of Finance, Deputy Eithne Fitzgerald and with Deputy Ó Cuív.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Minister of State at the Department of Finance (Ms E. Fitzgerald)

Most unemployed people would prefer to be offered a job than to be offered better welfare benefits. This budget provides for action on both fronts. Unemployment benefits are being increased by 10 per cent and this is accompanied by special measures targeted at the low paid and designed to reduce unemployment traps. The budget provisions in relation to unemployment benefit have to be seen in the light of what has been done on the low pay front and what has been done to alleviate unemployment traps.

In addition to the macro-economic strategy to increase total employment, the budget has particular strategies targeted at unemployed people and ensuring they are facilitated in taking up new job opportunities. This budget was a budget for jobs, a budget which reduced the tax wedge considerably, which targeted income tax relief particularly on those with low and middle incomes. This budget saw the first reduction in employers' PRSI and simplified and streamlined tax affairs for small business. Most important, this budget marks the first step to real reform of the tax structure on the lines suggested by so many reports: Culliton, the Commission on Taxation, the NESC and the Commission on Social Welfare, of which I was a member.

The strategy is to build on the National Development Plan's programme for job creation by a complementary fiscal and tax strategy which will encourage the maximum job potential from this enormous investment.

The prudent financial management of the Government, which has seen interest rates tumble, is a major fillip to investment and job creation. Everyone in this House maintains that the creation of employment is the first aim of economic and social policy. Attaining that aim involves change and sometimes taking tough decisions if we are serious about tackling unemployment. It would have been easier to have lower tax give-aways and leave the structure of our tax system alone. That structure, which has penalised productive earnings as compared with property investment, left the Irish economy with lower investment for growth and with fewer jobs than with a system restructured on the lines on which the Government has now embarked.

The Opposition has consistently called for the implementation of the Culliton report, but they are not so good at calling for it when it comes to specifies. The core recommendation of that report is to move towards a tax system which rewards productive work and where individuals and businesses seek markets rather than tax breaks.

Mr. Allen

Is that the reason so many work schemes were introduced?

Ms E. Fitzgerald

Those tax changes will deliver higher growth in employment in the Irish economy. As a Government which is serious about its commitment to job creation, it would be irresponsible for us to bypass the opportunity to restructure the tax system while still leaving families better off in aggregate.

Much concern has been expressed in recent years about unemployment and poverty traps. Some of this concern has been focused on hypothetical examples, of which there are few if any to be found in the real world, but we all recognise there have been areas of real problem. Much discussion has taken place in this House on the hypothetical example of the family with four children on FIS, moving from £7,000 to £15,000 and paying marginal relief. There are fewer than 1,500 families in that position and it is possible to target help in that area; we have done that in this budget without a major hullabaloo. The most significant problem is the unemployment trap, which makes it very difficult for people to get back into the workforce. In the Irish economy the people who lose their jobs and find it very difficult to get back in tend to be those with a lower skill base and with lower earnings potential.

Mr. Allen

That is great academic stuff, but where are the jobs?

Ms E. Fitzgerald

According to the Labour Force Survey of last April there was a net increase of 7,000 jobs since this Government took office.

Mr. Allen

Where are the jobs?

Ms E. Fitzgerald

That is the reason for the focus in this budget.

Mr. Allen

That is a lecture for UCD rather than for the Dáil.

Ms E. Fitzgerald

May I continue without interruption? This budget is focused in particular on helping the low paid and dealing with the unemployment trap.

Mr. Allen

Those are the words of an economist, not a socialist.

Ms E. Fitzgerald

They are the people I deal with in my constituency——

An Leas-Cheann Comhairle

The Minister please, without interruption.

(Interruptions.)

Ms E. Fitzgerald

——and in my community. It is certainly practical socialism to do something about the low paid, rather than whingeing about the people in £200,000 houses, which is what the Opposition is concerned about.

(Interruptions.)

An Leas-Cheann Comhairle

Order please.

Ms E. Fitzgerald

Could we have some order in the House? The most significant problem relates to the person with limited earning power who would not be much better off if he took up a job. There is little evidence that this factor influences the level of unemployment but it has an important bearing on it, in particular in putting parents of families at higher risk of being out of work. Recent social welfare statistics suggest that 45 per cent of parents with four or more children are without a job. Where the head of a household is out of work there is a strong likelihood that unemployment will pass from one generation to the next, so it is important that we address these unemployment traps.

The budget focused in particular on helping the lowest paid, including people already below tax exemption thresholds.

Mr. Allen

So, the first thing the Government do is tax the unemployed, is it?

An Leas-Cheann Comhairle

Deputy Allen, I must ask you not to continue to interrupt.

Mr. Allen

This is economic waffle.

Ms E. Fitzgerald

The budget focuses on helping the lowest paid. I do not know if Deputy Allen has any concern about them.

Mr. Allen

I represent them. I represent an area with the highest unemployment level in the country.

An Leas-Cheann Comhairle

Deputy Allen, please desist.

Ms E. Fitzgerald

I am glad that we have been able to do something about that area in the budget.

Mr. Allen

The Minister will not do something by taxing them.

An Leas-Cheann Comhairle

Deputy Allen, I have asked you on a number of occasions to desist.

Ms E. Fitzgerald

Health and employment and training levies are being abolished for those being paid under £9,000. This is focusing on many people already under the tax exemption thresholds, who would not gain if all the benefits were on the tax side in the budget. Tax exemption limits are being raised by £100 per child and they are up by £400 for a person with four children. It is the larger families that are hit worst by the unemployment trap. The marginal relief tax rate is reduced from 48 per cent to 40 per cent for those who are slightly above the income tax exemption limits. This will focus help on the low paid and will reduce their marginal tax rate. Personal allowances are being increased by £350 per couple and family income supplement, targeted at people in low paid employment, particularly at families, is up by £6 per week per family. Children's allowances are being increased for families with three or more children. There is a specific focus, and a higher percentage increase in this budget on the lower paid and that will help the prospects of people whose earning power is poor, to take up jobs.

Mr. Allen

Where are the jobs?

Ms E. Fitzgerald

These changes, together with the abolition of employers PRSI for the low paid, and the abolition of employers liability to health and training levies for medical card holders, should help the supply of jobs on offer to people out of work and increase the attraction of taking up a job for those who are unemployed.

Provision is being made for up to 40,000 places on a new community employment programme offering work, progression and development opportunities for unemployed people, with 25 per cent of places reserved for the long term unemployed with a view to reintegrating people into the mainstream job market.

Fifty five thousand people have been unemployed for three years or more. From research and practical experience we know that private employers are not interested in offering these people jobs. We need a programme which offers real work opportunities and an income ahead of social welfare rates. It must offer the opportunity to keep secondary benefits and offer real opportunities for training, development and progression so that people can be integrated into the economic mainstream and have the opportunity to compete on a level playing field for the additional jobs that will arise from the macro-economic strategy and change in the tax structure in this budget.

Mr. Allen

Do not hold your breath.

Ms E. Fitzgerald

On the taxation of unemployment benefit I would point out that there are many firms here who are using the Department of Social Welfare to cross subsidise their layoffs particularly towards the back end of the tax year. It is about time we addressed that issue.

Éamon Ó Cuív

I am glad to have the opportunity to speak on this issue which most people would not see as a popular measure. There has been a peculiar attitude to coherent change, and efforts made to introduce coherent change have been derided by the Opposition. If one believes that people should be taxed on income, the logic is that the more income one has the more tax one should pay. We all accept that we should take as many low paid people as possible out of the tax net.

It is important to have uniformity in how we organise our affairs. Since I entered the Dáil I have not seen any private members' motions from Opposition parties proposing that widows, old age or invalidity pensions should not continue to be taxable income. If certain types of social welfare payment should be taxed and others should not, it is about time we had an explanation for the way the Opposition look at some social welfare payments as opposed to others.

Long before I became involved in politics pensions were considered to be taxable income. If we disregarded all social welfare income, people on relatively high incomes would have an extra tax free bonus and to pay for that we would have to lower the threshold for the lower paid workers. On the other hand we could count all income as taxable and raise the thresholds at which people enter the tax net and decide on ability to pay tax with reference to gross income for a year. In the case of a couple where one earned £40,000 a year and the other earned £10,000 in nine months and then went on unemployment benefit and received another £3,000 giving that household an income of £53,000, why should the last £3,000 not be counted as taxable income? I have never heard a rational explanation for exempting such income. I cannot see how that would help the poor or the less well off.

On the other hand a widow on old age pension in receipt of anything more than £4,050 must pay tax. If she has a small independent income she pays income tax. It is about time people stopped taking an emotional line on this issue of taxing unemployment benefit and looked at it rationally. Who could better afford to pay the tax in the examples I have outlined, the person with the family income of £53,000 or the widow with a family income of £4,300? Nobody would dispute that the second person is less able to pay tax.

The thrust of taxation policy must be to take as many lower paid people as possible out of the tax net. I fail to see how any other proposal could lead to greater equity. I would therefore like to see people being taxed on gross income, taking their ability to pay into account. I have yet to hear a cogent argument against this.

We should ensure that as many of the low paid as possible are taken out of the tax net and that we use available resources to ensure that they pay tax at low rates. In this regard I was highly critical of the fact that people who found themselves just over the income threshold paid tax at 48 per cent. I compliment the Minister for reducing this to 40 per cent this year. For many of the people I represent this is a major step forward, but much more remains to be done. We will never be able to take the low paid out of the tax net and do all of the things that we are told week in week out should be done if we fail to ensure that all income is treated the same in a system in which the low paid pay the least amount of tax.

Coupled with the reduction of the tax burden on the low paid in particular, this would be a reasonable step. When people try to twist things it may not sound popular, because it is easy to use slogans, to say we are taxing the unemployed and to misrepresent what is being done. The fact is that if the unemployed wind up being taxed under this system, the reason will not be that unemployment benefit is regarded as income for tax purposes but rather that the tax thresholds are too low. The way to rectify this is to raise the thresholds at which the low paid enter the tax system, reduce the marginal rates and increase the exemption limits in respect of children. That is the way we should proceed rather than bury our heads in the sand and continue to live with a system which is patently inequitable and in which social welfare payments are treated differently. That has been the position up to now. If people criticise this move, in all logic they should state whether all social welfare payments should be taxed, particularly contributory social welfare payments.

Mr. Yates

With the permission of the House, I propose to share my time with Deputy Allen.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Yates

I listened carefully to the Minister and the Minister of State, Dame Eithne, in relation to these matters. I always appreciate the lectures on tax reform; but I could not help thinking that if the Minister for Finance was to stand up and say he was putting 1p on the pint of beer and argue that this represented a major leap forward in reducing the income tax burden, people would not take him seriously. The amount of extra tax to be raised by way of the changes to the residential property tax is less than the amount that would be raised if 1p was put on the price of beer. Therefore we should not have any arguments that the residential property tax changes represent a radical step forward.

There has been much talk about economics and labour market dynamics, but very little from the Government side of the House about ordinary people, about people who have lost their jobs and will have to pay this tax and who do not know when they are going to find another job. I am surprised that this measure has not received more media attention, because we have been told that many aspects of the budget have a hidden sting. If we make a simple calculation we will see just how savage this measure is. The Minister states that in a full year he will save £30 million. As I wanted to get some idea of what this will mean for the ordinary unemployed person I rang the Central Statistics Office in Cork — not the easiest place to find but I am sure they are very welcome in Cork——

Mr. Allen

They are very welcome.

Mr. Yates

——to ask them how many people were in receipt of unemployment benefit last year and the year before to work out the average number of unemployment benefit claimants who will pay this £30 million in a full year. In 1992 the figure was 76,653 and 74,885 in 1993. Let us assume therefore that the average figure is 75,000. If we divide the sum of £30 million by 75,000, lo and behold we will find that the unemployed will have £400 a year taken out of their pockets, or £7.62 a week.

I submit that if the Minister for Social Welfare was to stand up in this House and announce that unemployment benefit was to be cut by £7.62 a week there would be howls of anguish right across the country and that if we were in Government the Labour Party, and the present Tánaiste in particular, would lead the howls of protest. I remember the Fianna Fáil taunts about Thatcherite and monetarist government, about bookkeepers and accountants and my colleagues, Deputies Dukes and Bruton, being accused of all those things. But they never cut unemployment benefit by £7.62 a week on average.

What we have seen in recent years, especially since this Government came into office, is a systematic dismantling of the benefits of insured workers. It started first by cutting pay-related and disability benefit. This time last year it was announced that disability benefit was to be taxed, while in this budget the abolition of pay-related benefit for those in receipt of unemployment benefit from 6 April this year was announced. Now, it is proposed to tax unemployment benefit. In addition, treatment benefits such as optical and dental benefits have been reduced. Finally, the widow's mite, the contributory widow's pension — this is the final straw — has to be attacked, cut and means tested. They are going to root around the cupboard to see what extra she has and if they can cut it they will.

Those who have paid contributions, who are trying to be prudent and who have worked hard all their lives are now being told that the ground rules are to be changed and that they are going to get less. I should point out that the most significant study in this area was carried out by the ESRI and published in 1991. But if one analyses this move, one will see that it was based on a survey carried out in 1987. Therefore it is being put forward on data which is out of date.

One of the arguments that has been advanced is that people are working and milking the system, that they are deliberately drawing unemployment and disability benefit when they should be at work, that they are claiming tax refunds and that therefore this acts as a disincentive to work. Regardless of what argument can be made about people going sick during the final weeks of the tax year to claim a refund or disability benefit, this does not apply in the case of unemployment benefit, because one would first need collusion and connivance on the part of the employer to rig the system and this is not credible. Therefore those arguments do not apply with equal force in relation to unemployment benefit.

There is another significant group of workers to which little reference was made. In his speech the Minister said: "The people I am most concerned about are short-time workers". We all know of firms, such as clothing and construction firms, which run into difficulties due to bad weather and which have to go a two or three day week for a limited period until the order book is full again.

People working in such firms have to go on a three day week for a limited period until the order book is again full. The Minister acknowledged that there are complexities in calculating the wages of systematic short-time workers and says that the Revenue will, where appropriate and possible, restrict their tax free allowances by the amount of their expected unemployment benefit. This is a quagmire because people on short-time working will now suffer a cut in their income; their unemployment benefit will be cut, not at source, but as part of their pay packet and their tax free allowance will have to be reduced. This morning Mr. Jimmy Somers of SIPTU beseeched AT Cross not to lay workers off but to put them on short-time, but the Government is systematically destroying short-time working by ensuring that short-time unemployment benefit will be taxed. Half a job is better than no job but the people in AT Cross in Ballinasloe will feel the cold winds of the Minister's policies blowing down their backs when these taxation measures go through.

Often we lose sight of the effect of these measures on married couples. I would like to examine in detail the effects on the standard case of a married man with two children. That man and his wife are both at work in relatively low-paid jobs. According to the social welfare rates booklet if one spouse becomes unemployed he or she is entitled to claim but not for an adult dependant, and would only be entitled to claim an allowance for one child. Before the budget increase that person would have been entitled to £55.66 for themselves and £12.80 for one child, totalling £68.40. He or she would have got another £16.80 in pay-related benefit but, as we know, that has been butchered.

The spouse who remains at work is on the top or standard rate of tax or below the exemption limit. Let us see how these measures affect them. The new tax free allowance exemption limit for a married man with two children is £8,100. The £68.40 a week which works out at £3,556 a year now becomes liable to tax. If the man stays at work and earns £88 a week, a very low figure, because his wife's unemployment benefit is now taxable their income will be £50 over the exemption limit of £8,100 and they will be in the tax net. In spite of all the nonsense we have listened to about lifting low-paid workers out of the tax net, this measure will bring many people into it.

The second effect is in regard to people paying tax at the standard rate. This £3,556 is now liable to tax. When one works out the PRSI and the PAYE the effective marginal rate of tax, including the lower rate on the levies, is 32.75 per cent. Under this measure people on this rate will lose £1,164. For people on the upper rate of tax, the marginal rate is 55.75 per cent, and they will lose £1,982. It is Hobson's choice. The Minister may wax eloquently about his concern for all those people — low paid or middle income earners — but they cannot afford to lose money. The wives of really well-paid people are painting their nails at home because they do not have to work. These measures will systematically attack low and middle income earners and inflict gross hardship on them. They mean that a married man with two children will lose at most £38.13 at the top rate or £22.40 at the standard rate of tax. If one spouse is on £88 a week or more people who would otherwise be exempt will be brought into the tax net.

The Labour Party's concept of well off people is very strange. The whole purpose of our tax system is that people should pay according to their ability and that those who have more pay more. I am not convinced by the arguments of the spin doctors although they are doing a very good job and giving very good value to the Government. They have massaged the media, put it across that this is an income adjustment which is perfectly reasonable, logical and fair. However, to the average punter it means a loss of £25 a week. There is no way this message can be massaged to the point that it can conceal the truth.

My experience as a constituency TD is that those on unemployment benefit lose. I, and I am sure every other Deputy, have heard the problems of people who do seasonal work. In ports in my constituency people do seasonable work relating to tourism and the same applies to the construction industry. They work for, perhaps, 20 weeks, go off long term assistance and back on unemployment benefit; they lose the free fuel allowance, the £5 a week paid from October to March and the butter vouchers. If their child is 18 years of age and still at school, people on long term unemployment assistance can continue to be paid the child dependant allowance until the child is 21 years of age. If people are on unemployment or disability benefit, they cannot get that, or the Christmas bonus. It does not pay people to take up seasonable employment because they lose the benefits of long term unemployment assistance. This is a further erosion of the rights of people who want to work, to get away from being long term unemployed and who do not want to do nixers. There are severe potential losses involved for people on long term unemployment assistance if they take up a short term job because of the loss of the fringe benefits to which I referred. Before this budget the same married man with two children got £116.70 in unemployment benefit whereas on long term unemployment assistance he got nearly £4 more at £120.30 a week. There are huge anomalies and discriminations in out system against short term workers.

All these measures put an added administrative burden on employers, particularly small businesses. There is a voluminous report by the task force on small businesses and there were extensive leaks, with Minister of State Brennan preening himself as a Minister for Enterprise and Minister Quinn putting it out that Government wanted to remove the red tape from small businesses, to help the entrepreneur. There has been much rhetoric but in the fine print of this budget there is a further series of complex arrangements in relation to the application of the week one tax free allowance and the adjustments that will have to be made for people who have come off unemployment benefit. To calculate their tax free allowances one would need a computerised system.

We will be voting against this measure, not on the principle of taxation on social welfare but because of the real hardship it will inflict on ordinary people, particularly married couples who both work, and because of the further diminution of the rights of insured workers.

Mr. Allen

The Minister is introducing taxation on social welfare payments such as unemployment benefit at a time when the abolition of pay-related benefits is also taking place. Those moves were clearly telegraphed last year by the Minister, but I understood they would take place only when the social welfare system was brought into line with the report of the Commission on Social Welfare. It was nauseating to listen to the Minister of State at the Department of Finance, Deputy Fitzgerald, a Dublin 4 socialist, crying on the backs of the unemployed. She does not understand the realities of life outside the cloistered haven she represents. Today she gave a lecture on economics which was totally at variance with the realities of life with which some of us are familiar. The people we represent are in a totally different position to that referred to by the Minister. As a former member of the Commission on Social Welfare, it should be her responsibility as a Minister to implement many of the recommendations of that commission. As our spokesperson on Finance stated, we must oppose this measure because it involves selective implementation of the commission's report and conveniently ignores many of its urgent recommendations.

Unemployment benefit is means tested for those who are made redundant, deserted wives benefit is similarly limited and as a result of this budget widows pensions will be means tested. Surely that is corruption of our social insurance system and must be questioned. I listened to the personal attack on the leader of my party this morning by the Tánaiste and Minister for Foreign Affairs, who was once a Minister in Government with our party. It was nauseating to hear him insult the intelligence of the people of this country. Since taking up office he has been spineless in protecting the interests of the elderly, the sick and the unemployed. As I said previously, the Labour Party's perspective of life changed suddenly from the back of a Mercedes. The type of abuse hurled at Deputies on this side of the House this morning, because they are doing their job of representing the people, is unacceptable. It is fine for the Tánaiste and Minister for Foreign Affairs to come in here with a script written by some other person and hurl insults from the reams of paper in front of him, but he is spineless in his defence of the sick, the elderly and the less-welloff.

The budget announcement that a means test is to apply to widows' contributory pensions shows the Government up for what it is, an uncaring Government. In that context I will refer to a statement by the Minister of State at the Department of Social Welfare on the budget debate on Thursday, 27 January. That Minister showed herself up in the House today for her lack of knowledge on the regulations of the social welfare code. In her speech last Thursday she expressed delight that widows aged 60 to 65 years would benefit from changes in the regulations for free schemes. She described as perks the well deserved allowances in respect of telephone rental, fuel, television licences, butter vouchers and ESB, which are necessary for those less well off than herself. Perks such as the hiring of programme managers, a State car, two drivers and a mobile phone are luxuries the Minister may enjoy; but the allowances offered to widows in the 60 to 65 years age bracket are urgently needed. To say the least, her comments were uncaring, patronising and the widows of Ireland deserve a public apology from the Minister of State, Deputy Burton. A person with no real feeling for or sensitivity to widows should not be in her position. She should reconsider her position as Minister of State at the Department of Social Welfare because she does not understand real life beyond the cocoon in which we work here. The widows of Ireland who are labouring under tremendous difficulties should not be insulted in that manner.

The Minister of State would like to forget the phrase "dirty dozen".

Mr. Yates

The Minister of State present, Deputy Stagg, knows all about the dirty dozen.

Mr. Allen

He certainly does. He got a large number of votes because of them.

Mr. Yates

Was it 11,000 votes the Minister of State got as a result of the dirty dozen?

Mr. Allen

The Minister of State, Deputy Burton, came into this House and stated that the ghost of the dirty dizen should be laid to rest. The ghost of the dirty dozen should be laid to rest, because if not it will continue to haunt the Minister of State, Deputy Burton, throughout the lifetime of this Dáil. In the discussions taking place between Government and the social partners at present there is much talk about salary increases and wage payments, but when a comprehensive agreement is reached what exactly will be done in regard to the dirty dozen cuts?

As a result of this budget the unemployed and their dependants will be worse off. In his speech Deputy Yates outlined the reality of the position and not what the spin doctors and programme managers are feeding to the media. The increases given to social welfare recipients will simply maintain purchasing powers at their current level. The immediate increase in VAT on essentials such as clothing and footwear will erode part of that increase. In a few weeks time rents on local authority houses will increase and the Minister of State, Deputy Stagg, could do something in that regard. That will further erode the increases given to the unemployed, especially the elderly. Some households will be far worse off as a result of this budget.

Despite all that has been said there has not been any fundamental change or improvement in the overall design of the social welfare system. Ministers are unaware of the realities of life for the families of the unemployed. They appear to be insulated from reality. Daily, some children go to school hungry because of a lack of food, and I am not exaggerating in saying that. That is happening in my constituency and in many other areas badly affected by unemployment. Were it not for the commitment and dedication of both religious and lay teachers, those children would find it impossible to study because of hunger. Ministers appear to be unaware that this is happening, as they glibly give us lectures on economics and divorce themselves from reality. Those are the realities, but the scriptwriters, spin doctors and programme managers employed by the Government can never hope to understand the reality of life in real Ireland, not Dublin 4.

It is understandable that a Minister who is relatively well off and insulated should introduce this measure, even having listened to the comments about its impact on those in need. Many families receiving unemployment benefit cannot exist on the levels offered. They are unemployed through no fault of their own but because of the failure of the Government's economic policies. They are casualties of the Government's ineptitude.

This piecemeal measure will seriously affect families. The reality for many families where one spouse is unemployed and drawing the minimum social welfare payment is that the other spouse is forced to work for long hours for low pay. In some cases one spouse needs to work and is condemned for it. I know the realities of life for many people and understand why they need to work, but those who work are labelled as spongers and fraudsters. Unfortunately, the spouses and many of the unemployed must take work at low pay and there are many service industries here who still exploit their unfortunate circumstances. There is an excess of people for the number of available jobs here. People are working longer hours for less money. As a result of working and in an attempt to keep body and soul together for the sake of their family, those families are to be further subjected to attacks which will force them out of employment back into the home where they will be forced to sub-exist on unemployment payments alone. This measure is not the sign of a caring Government and one that has so-called socialist involvement.

Mr. Yates

They dropped that.

Mr. Allen

It is an insult to the name. Socialists are caring people. It was appalling for the Tánaiste and Minister for Foreign Affairs, who should know better, to throw insults left, right and centre here this morning at Opposition Deputies. He is only covering up for his betrayal of the people he represents. The arrogance displayed by him does not surprise many Deputies. He is a great man to attack when in Opposition — he dealt it out hot and heavy to Ministers and the Taoiseach of the day in Opposition — but he cannot take valid criticism now. Such intolerance to criticism shows a horrible arrogance of someone who does not care. My party will be opposing the motion because it is not being considered in the context of overall social policy. It is a piecemeal and punitive measure. I will deal with this matter in greater detail during my contribution tomorrow.

The two Ministers representing the Department of Social Welfare today at Question Time used spun out texts written by civil servants in their replies which bore no relation to the questions tabled. They misled Deputies here and thousands of women throughout the country who are seeking to get their entitlements under the social welfare code. Both Deputy De Rossa and I tabled questions today.

Acting Chairman (Mr. Leonard)

The Deputy must conclude as he is sharing time.

Prionsias De Rossa

The Government will put a tax on it.

Mr. Yates

I have spoken.

Acting Chairman

As Deputy Yates has spoken, Deputy Allen has two minutes remaining.

Mr. Allen

I was at a meeting in Cork the other night attended by approximately 500 women. Those women attempted during the past few months to get information regarding their entitlements arising from the McDermott case, about which the Minister is well informed. Every time questions are put to the Minister in relation to the entitlements of women under the holiday Act he gives a reply which succeeds in misleading the thousands of women who are entitled to benefit. Those women attending the meeting in Cork told of horrifying stories of deceit, misrepresentation, exploitation and blackmail by the Department of Social Welfare. People were intimidated into giving guarantees that they would not disclose details of payments they received in respect of social welfare equality payments.

I will deal with this matter in greater detail during my contribution tomorrow, but I put the Minister on notice that the women of Ireland who are entitled to millions of pounds in social welfare payments will not go away and will continue to press for their rights. In view of the Minister's response today I intend to table a Private Members' motion in relation to this matter which is affecting thousands of women in Cork, Waterford, Limerick, Dublin and all urban and rural areas here. Ministers are misleading and intimidating people who are seeking their rights.

Ms Keogh

I sympathise with Deputy Allen's last point; he made a very good case in relation to that matter earlier today. The debate on this motion concerns the order under the Finance Act, 1992, to introduce taxation of unemployment benefit. Our party is not opposed to the principle of integrating the tax and social welfare systems. The Progressive Democrats believe that income from all sources should be subject to income tax on a similar basis. That is in line with our view that all income from whatever source should be treated in an identical manner. Where there is deviation in this regard certain groups of people, by virtue of where they derive their incomes, can gain an advantage over other compliant taxpayers. The taxation system of any country must be equitable. Unless taxation is fair, sections of the community will consider themselves justifiably hard hit and paying for everything while other sections get away with contributing nothing. I am not talking about those in receipt of welfare payments, but those who evade the tax net and for whom an amnesty was conveniently provided.

A priority for any reform of the tax and social welfare systems must be that all payments are uniformity treated. While I welcome the move to integrate the tax and social welfare systems and will support the motion, there are some questions about commitment to real tax reform that must be answered. The measure to include those on social welfare benefit in the tax net is one that must be addressed. Such a measure will do little or nothing to address the serious flaws in our tax and social welfare systems. Our party has said many times that we need radical pro-jobs tax reform and a greater indication of commitment to such reform than was evident in the budget last week and in the Government's previous budget. More must be done than merely redefining income and ensuring equity.

The tax system into which those in receipt of unemployment benefit will enter is manifestly unfair, anti-jobs and anti-enterprise. We know that work is taxed here at a rate and in a manner that is not remotely close to that in any other OECD country and is greater than any economy with a level of unemployment, economic development and population growth such as ours. Work is taxed at a rate more appropriate to luxury, but unfortunately it is a luxury in very short supply. We need pro-jobs tax reform which will reduce our tax rates further, greatly expand the lower tax band and dramatically reduce the gap between payroll expenditure, which must be met by employers, and the take home pay of workers. The Progressive Democrats believe Ireland needs a radical new programme of tax reform over a number of years during which tax, PRSI and levies will be amalgamated into a single upper rate and a standard rate of 25 per cent. That standard rate must also be extended to the average industrial wage.

Evidence of a real desire for tax reform or for the integration of the tax and social welfare systems cannot be proven by the motion before the House today. I remind the Minister that the taxation of unemployment benefit was first recommended by the Commission on Taxation as long ago as 1982. We have been dithering in regard to this matter for some time. At that time the taxation of incomes derived from receipt of all social welfare payments was also recommended. My argument is that we should not tax those on the lowest income level.

This time last year this House debated and agreed that income from disability payments should be liable for taxation, and now we are extending the tax to unemployment benefit. This is a tax reform by default. The Minister is unfortunately wandering around, doing bits and pieces and tinkering with the system. We need a coherent tax reform strategy designed to tackle all the inequities in our system within a reasonable period. I see no evidence of this to date and I appeal to the Minister and Minister of State to make it a priority.

The Minister of State gave what some people described as a lecture — I have no doubt she felt she was giving very good advice which was well thought through——

Ms E. Fitzgerald

Well researched.

Ms Keogh

——very well researched by her Department.

Ms E. Fitzgerald

By me.

Ms Keogh

I do not doubt that. I am struck by one measure — I am in a sense pre-empting my contribution to the budget debate — that is employers' PRSI for the low paid. At first glance one would welcome the abolition of this tax. I would have no ideological difficulty with that because we want to see the reduction and abolition of tax on employment. However, I would sound a cautionary note in this regard. It is not acceptable that employers who pay employees a fair wage lose out by this measure. It may encourage the payment of lower wage rates by employers in certain sectors. We should have sympathy towards, for instance, the clothing industry, the at-risk jobs. I would ask the Minister to take on board the fact that the measure will encourage companies to eliminate fulltime employment and replace it with lower paid, part-time work. This is a genuine fear which should be addressed.

In the United Kingdom one-third of the jobs in the retail sector are estimated to be part-time and lower paid. There is evidence to suggest that the bulk of new jobs being created in the retail trade there are lower paid part-time jobs. It is interesting that in the United States, as shown by official Department of Labour figures, up to 95 per cent of new jobs in certain retailing sectors over a ten year period have been classified as dead-end jobs. Let us not anticipate that result here, with the creation of dead-end, poorly rewarded, under-classed jobs, with all their inherent ills.

I will not deal in this contribution with the property tax. I stated that a tax system must be equitable and fair and must be seen to be so. I have grave misgivings, as have the public, about the fairness of the property tax. However, our party will be supporting the motion before the House.

Proinsias De Rossa

I wish to make a number of points about this proposal. Now that the dust has settled on the budget and people have had an opportunity to examine its provisions in some detail, it has become very clear that it is far from the give away budget as it was described by many commentators the day after the Minister's speech. It is obvious that for any little thing Bertie gave away, he also took something back. This is very much a budget with 100 stings in the tail.

This proposal to tax unemployment benefit and pay-related benefit, which is proposed to be abolished by the Minister for Social Welfare under the Social Welfare Bill, is another example of the sting in the tail which will hit people on relatively low incomes. The Minister attempted to argue on the one hand that it would not hit many people on low incomes while at the same time he went on to argue that it would reduce the replacement ratio, thereby encouraging people to take up work. I intend to return to that issue because the two points are contradictory. Either the measure does not hit people on low incomes or it does not assist those who are regarded as unable or not prepared to take up work because of the replacement ratio. Both arguments cannot be made in support of the same proposal.

This measure will hit people on relatively low incomes, reducing living standards and adding to the difficulties in making ends meet. It is another example of making people at the lower end of the income range cough up more while further concessions are provided for the well-off. The result of the implementation of this order will be to take more tax from those on low and moderate incomes and to reduce the living standards of persons dependent on welfare.

The decision to reduce the threshold for residential property tax has been the subject of widespread media and political criticism. The annual yield from the increased scope of the residential property tax will be about £5 million, a fact that has been so far ignored. Yet the annual yield from this order to tax the unemployed will be £30 million, six times higher than the expected yield from residential property tax. Another fundamentally unjust aspect of the budget is that while the miserable general increases in social welfare benefits will not be paid until the end of July, the provisions regarding taxation of unemployment benefit and pay-related benefit will come into operation on 6 April, months before the general increases of 3 per cent will become available.

The principal of treating welfare payments as taxable income could only be acceptable in the context of a full integration of the tax and social welfare systems and a substantial increase in both the basic level of welfare payments and the exemption limits for tax and PRSI payments. I suggest, as I have in the document produced by Democratic Left which argues for an end to the poverty and unemployment traps, that no tax or levies be applied below the exemption limits. In the case of the new exemption limit for PRSI of £9,000, if your income is £9,000 or less you do not pay PRSI but if your income is £9,001 you pay PRSI on all the money. That is what creates the poverty and unemployment traps. In the absence of such reform this measure is a further penalisation of those on low incomes and must be resisted.

This order is part of a process started by the Fianna Fáil-Progressive Democrats Government in 1992 — I presume that is why Deputy Keogh took very little of her time to argue the issue — and it has been adopted with great enthusiasm by the Labour Party. The power to tax social welfare benefits was included in the Finance Act, 1992, and was at that time opposed by the Labour Party. Last year the first steps were taken in implementing the taxation of disability benefit and now it is being extended to unemployment benefit and pay-related benefit. Not only did the Labour Party oppose the section of that Finance Act dealing with this aspect, but they voted for an amendment put forward by my party which would have allowed for the continued exemption of social welfare payments. Speaking in the debate on 19 May 1992, as reported in column 1903 of the Official Report, on the Report and Final Stages of the Finance Bill, Deputy Quinn stated:

The principle of persons earning income or getting income from any source and then paying tax on it is not one with which the Labour Party would disagree. With the present low threshold of income tax allowances, and bearing in mind the tax rebate as a result of redundancy or illness in one year, and in one year only, the Minister is being unnecessarily harsh and uncharacteristically cruel if that is all he is going after. There are other ways of collecting revenue, as the Minister has shown.

The question has to be asked: what has changed to transform a measure described by Labour in 1992 as harsh and cruel into something now quite acceptable? There has been no significant increase in the tax threshold. There has been no significant increase in the level of general social welfare payments. Indeed, the National Economic and Social Forum presented a report to the Government the day before the budget was read into the record of this House in which it expressed dismay that something like only four social welfare payments had reached the minimum income level that the Commission on Social Welfare believed was necessary in 1985-86. It seems that the only thing that has changed to justify this dramatic U-turn is that the Labour Party was then in Oppossition and it is now comfortably in Government, that it was then professing an interest in the welfare of those on low income and that it now regards these as soft targets.

This order to impose taxation on social welfare payments which were formerly tax free is, in effect, another social welfare cut. It is a further extension of the process of social welfare cutbacks introduced by the then Minister for Social Welfare, Deputy McCreevy, in 1992 and subsequently dubbed "the dirty dozen" by the Labour Party. We warned at the time that what we were witnessing was the beginning of the end of the insurance based system of social welfare. Over the years the additional pay-related benefits which people paid for through their PRSI contributions have been whittled away. The benefits have been systematically reduced, but there has been no corresponding reduction in the level of PRSI. This budget represents the final nail in the coffin of the insurance based benefits system.

If this order is passed it will mean that a further £30 million will be taken out of the pockets and purses of those on low incomes. There is no justification for that, especially when — as the then Deputy Quinn noted in 1992 — there are so many other ways of raising revenue. The treatment of those who are unfortunate enough to lose their jobs or to be ill is in stark contrast with the generous concessions granted to businesses and commercial interests in the budget. If the Minister needed to raise another £30 million to balance his books, why did he not look at a tax on land rezoning profits? In Dublin we have seen an orgy of rezoning which has led to profits of hundreds of millions of pounds for the speculators, a factor which feeds into the price of houses in the Dublin area. A relatively low level of rezoning tax on this activity would bring in the £30 million the Government is looking for in the measure before us today.

Again, huge multi-million pound profits have been made from the obscene currency speculation which preceded the devaluation of the Irish pound last year. At that time the Governor of the Central Bank called for an anti-speculation tax and both the Minister for Finance and the Taoiseach promised action to prevent further anti-social speculation of this type. However, no action was taken. Clearly, the Fianna Fáil-Labour Government regards the unemployed and the sick as a softer target and an easier source of tax than either land or currency speculators.

Compare the treatment of those from whom this extra £30 million will be extracted with the tax treatment of farmers. The annual total tax take from the unemployed and sick will now be the equivalent of the total tax take from the entire farming sector. The yield from tax on disability benefit and unemployment benefit will approach £50 million in a full year; yet the total tax take from farmers in 1991 amounted to just £36 million and to just £48 million in 1992.

Many of the people who will now have to pay tax on their unemployment and pay-related benefit previously had to pay tax at a rate of 48 per cent on their wages. The tax take from farmers has been little more than a joke; yet farmers received further generous concessions in the budget. Between 1989 and 1992 the average tax paid by PAYE workers increased from £3,122 to an average of £3,622. This represents an increase of £540 or 17 per cent, more than twice the rate at which wages and salaries increased during the same period. At the same time the average tax paid by farmers fell by £72 or 9.3 per cent, and the average tax paid by farmers is less than one-fifth of that paid by PAYE workers. Any Government with even a token commitment to the principle of tax equity should be seeking to extract a fairer contribution from farmers rather than tightening the financial noose on already heavily taxed PAYE workers who are unfortunate enough to lose their jobs or become sick.

The Minister for Finance referred to the Commission on Social Welfare as the justification for introducing this tax. The Commission on Social Welfare recommends that social welfare benefits should be taxed, but it does so in the context of a range of other reforms of the social welfare system, not least of which is increasing social welfare payments to what they defined as a "minimum adequate income". The fact is that most of the social welfare benefits and allowances are up to £12-£15 below that minimum adequate income which the Commission on Social Welfare recommended in 1986. If the Minister for Finance — I am sure the Minister for Social Welfare will advise him on where to find a copy — reads chapter 9 of the report he will see what the commission had to say on the issue of a basic income, and I quote:

The most important issue dealt with is the specification of a minimally adequate income. Social welfare payment should be set at a level that ensures a minimally adequate standard of living relative to incomes and living standards in society generally. While some social welfare recipients have additional sources of income, e.g. occupational pensions, or are living in households with additional sources of income, we believe that in establishing an adequate minimum income and an adequate basic level for social welfare payments, our primary concern should be to ensure that social welfare payments offer an adequate standard of living to social welfare recipients whatever their household circumstances and independent of any other income sources accruing to individuals or households.

That was the objective which the Commission on Social Welfare proposed should be sought by the Government. We now have the extraordinary position where a Government, which has within it the largest number of Labour Party Deputies ever seen in this State, is proposing to reduce the level of people's income by taxing their unemployment benefit.

I said earlier that there was a contradiction between what the Minister for Finance said about the effects of this tax on those who will become unemployed, arguing that it would affect only those on high incomes, and his statement that:

The change now being made should ensure that persons are not better off because portion of their annual income arises from unemployment benefit than they would if the same overall income arose from being employed. It will help to reduce the replacement ratio of those affected and make it more attractive for them to remain in or take up employment.

That argument implies, although it does not say so explicitly, that the people who will be hit by this tax are in low paid jobs, otherwise the replacement ratio issue does not arise. The replacement ratio is a formula worked out by social scientists and economists to try to identify the difference between what a person would have to earn to be at the same level of income or standard of living as they would on social welfare. The Minister's argument fundamentally contradicts the point with regard to this tax not affecting people on low incomes.

Minister of State, Deputy Eithne Fitzgerald, is right in saying that most unemployed people would prefer a job to getting better welfare benefits.

Mr. Allen

If there were jobs.

Proinsias De Rossa

Of course they would, there is no doubt about that but it is not their choice. If the Government is serious about that, it could take on board the proposal to which it agreed when it negotiated the last Programme for Economic and Social Progress agreement when it indicated it would examine the question of a statutory minimum wage. There is no doubt that the poverty and unemployment traps in which people on social welfare are caught are due to the deplorably low wages on offer, particularly to those who are unskilled.

The Minister of State, interestingly, also said:

There has been a great deal of concern expressed over recent years about unemployment and poverty traps — [and quite rightly so] — Some of this concern has focused on hypothetical examples of which there were few, if any, to be found in the real world but we all recognise there have been areas of real problems.

She says it is hypothetical and that no real problems have been found yet it is something which the Minister for Finance says the taxing of unemployment benefit will solve. Therefore, we have a problem which the Minister of State, Deputy Fitzgerald, says does not exist because it is hypothetical while the Minister for Finance justifies the taxation of unemployment benefit to solve this hypothetical unemployment trap. These are the type of dubious arguments put forward in relation to taxing unemployment benefit.

As I said earlier, the proper integration of the tax and welfare systems, combined with raising welfare payments and tax thresholds to at least the minimum income levels recommended by the Commission on Social Welfare, must be put in place before welfare payments can be treated as taxable income. There is no other way of doing it equitably. The Government made a commitment to examine the possibility of integrating the tax and welfare systems but progress has been painfully slow. The Interim Report of the Expert Working Group on the Integration of the Tax and Social Welfare Systems, launched recently by the Minister of State, Deputy Burton, was welcome in so far as it clearly identified some of the more glaring poverty and unemployment traps. Perhaps the Minister of State should show it to her colleague, Minister Fitzgerald, so that she will appreciate that poverty and unemployment traps are not hypothetical.

Even allowing for the fact that this was an interim report its recommendations were cautious and limited. It contains a number of useful suggestions but what is needed is a far more radical approach along the lines advocated in the Democratic Left's document, "Ending the Poverty Trap", published last month. The experience in the past year has shown that the ad hoc approach to reform does not work and that only a phased but comprehensive approach will end poverty and unemployment traps and provide a living income for all persons, whether in employment or dependent on welfare.

In our document we set out an integrated approach which would significantly increase welfare levels, pitch social welfare rates and the exemption levels for tax at around the same point, abolish the PRSI ceiling while exempting the first £4,000 from PRSI and other levies, and integrate existing tax and social welfare child support schemes into one enhanced and comprehensive child benefit.

In its final report, whenever it appears, the working group should bite the bullet and accept the need for this integrated, comprehensive approach. Until that is done and until the Government acts in this radical way, the Democratic Left will continue to oppose piecemeal measures such as this which clearly further disadvantage those in need.

Minister for Social Welfare (Dr. Woods)

Deputy De Rossa mentioned one point which I would like to clarify. He said that the pay related benefit would be phased out from April. I want to make it clear to Deputy De Rossa that the pay related benefit will be phased out from July at the same time as the——

Proinsias De Rossa

I said "taxed".

Dr. Woods

——as the increases occur. I was not sure whether the Deputy had separated the two points. The tax is a separate question.

Proinsias De Rossa

It is almost all gone anyway, what is left of it.

Dr. Woods

The phasing out begins from July and I want to make that point clear.

I reject the accusation of Deputy Jim Higgins who accused the Department of Social Welfare of blackmail and deceit in handling equal treatment payments. This is a particularly low type of accusation from a Member.

Mr. Allen

I made the accusation.

Dr. Woods

I was informed that Deputy Higgins made the accusation at approximately 4.40 p.m.

Mr. Allen

I made the accusation and I will stand over it.

Dr. Woods

I am glad Deputy Allen is here and I ask him to apologise to the House——

Mr. Allen

I will prove the accusation tomorrow in my budget speech because I have evidence.

Dr. Woods

——and to the Department because it is a particularly low form of accusation to make. It is false and can be clearly shown to be so.

Mr. Allen

I will substantiate it tomorrow in my budget speech.

Dr. Woods

If the Deputy does not understand the matter I would be happy to explain it to him.

Mr. Allen

I will explain it now.

Acting Chairman

The Minister, without interruption. The Deputy will not explain.

Mr. Allen

If the Minister wants me to applogise or withdraw the accusation I will tell him——

Dr. Woods

If the Deputy is honourable he should withdraw such an accusation——

Mr. Allen

I will tell the Minister about it now if he wishes to listen.

Acting Chairman

The Minister, without interruption.

Dr. Woods

Not at this stage, Deputy.

I listened to him long enough this afternoon.

Mr. Allen

So the Minister does not want an explanation? He is playing to the gallery. If the Minister is here tomorrow morning I will give him a full explanation.

Dr. Woods

The Deputy should read the reply which I gave him this afternoon in relation to the question he raised.

Mr. Allen

The Minister misled people again, not for the first time.

Dr. Woods

The Deputy is being less than honourable in not withdrawing the accusation and I believe it is something he will personally come to regret in time.

Mr. Allen

I will not regret it because I can stand over it.

Dr. Woods

The Deputy is wrong.

Mr. Allen

Did the Minister or his Department not warn people that if they disclosed the amount of money they got——

Dr. Woods

As Minister for Social Welfare I would like to formally reject and refute——

Mr. Allen

——in equality payments, action would be taken against them? Is that true?

Acting Chairman

I ask the Deputy to please sit down. The Minister, without interruption.

Mr. Allen

Is it not true that I wrote to the Minister requesting information but I was told by him that I could not have it?

Dr. Woods

I do not want argy-bargy with the Deputy at this stage.

Mr. Allen

It is not argy-bargy, they are facts.

Acting Chairman

If Deputy Allen continues to interrupt I will have to ask the Ceann Comhairle to ask him to leave the House.

Mr. Allen

The Minister is asking me to applogise for something which I stand over.

Acting Chairman

I am asking the Deputy not to interrupt and to allow the Minister to continue.

Dr. Woods

It is a matter for the Deputy and his party as to the standards they wish to adhere to in this House.

Mr. Allen

The Minister even got the name wrong. He was blaming Deputy Jim Higgins.

Dr. Woods

I am glad the Deputy cleared that up because the record will show who it was in any event.

Section 15 of the Finance Act, 1992, provides for the treatment as income for tax purposes of certain short term social welfare benefits. These are disability benefit, injury benefit, unemployment benefit and pay-related benefit. This section was brought into operation in respect of disability and injury benefit from 6 April 1993. The proposed commencement order is designed to bring this section into operation with regard to unemployment benefit and pay-related benefit and to include these benefits as part of taxable income with effect from 6 April, 1994.

I should like to refer briefly to another comment of Deputy De Rossa and, again for the record, to make it quite clear that this budget, which has been discussed in the context of the making of this commencement order, brings all the rates up to the minimum rate recommended by the Commission on Social Welfare or the priority rate.

Proinsias De Rossa

The Priority rate.

Dr. Woods

——which this year is £58.90 and that it was a special 6 per cent increase which brought it to that level.

Proinsias De Rossa

The difference between the priority rate recommended by the Commission on Social Welfare and the minimum adequate income is what I was referring to.

Dr. Woods

That is a new concept which has been introduced recently. In referring to the Commission on Social Welfare let us adhere to what they recommended.

Proinsias De Rossa

It was recommended in 1986 by the Commission on Social Welfare. I am simply offering the Minister some information of which he may not be aware.

Dr. Woods

I am conscious of the fact that a number of people have endeavoured to suggest that the increase to £58.90 was not meeting the priority rate. I want to make it quite clear for the record that £58.90 meets the priority rate and that the special 6 per cent was designed to do that.

Proinsias De Rossa

I did not mention the priority rate.

Dr. Woods

Long term payments, such as old age contributory and retirement and widows pensions, always have been reckonable for tax purposes. The treatment of these benefits as income for tax purposes is intended to bring them into line with other taxable income so that all income which exceeds the tax threshold will be liable to income tax. This means that people in similar circumstances, with similar amounts of income, whether derived from employment or social welfare benefits, will be treated in the same way for tax purposes. The move is a further step in the Government's commitment to closer integration of both these codes. There is no tax liability for social welfare income alone. The move does not mean that each recipient of unemployment benefit will pay tax on their benefit. The extent to which a tax liability will arise for people will depend largely on the amount of other income which the person or the person's spouse has in the tax year. The potential liability to tax for people will be looked at in the context of total income, including income from employment, in the tax year. The exemption limits, which have been increased in this year's budget, will generally ensure that there is no tax to pay where there is no income additional to the unemployment or pay-related benefit payments. The proposed exemption limits for the 1994-95 tax year ensure that people whose sole income derives from unemployment benefit will not incur a tax liability in respect of this benefit. This is despite the fact that I have provided for a substantial increase — 10 per cent overall — in the personal rates of unemployment and disability benefit in this year's budget.

For example, in the case of a single person the personal rate of benefit will amount to £3,172 per annum while the corresponding tax exemption limit will be £3,600. The benefit for a person with an adult dependant will be £5,075 and the exemption limit will be £7,200. The corresponding amounts for a person with a family of three children will be £6,822 and the exemption limit will be £8,750. Therefore, it is quite clear that taxation will not affect people who are dependent on their social welfare benefits alone.

The proposed arrangements for the tax treatment of these benefits were outlined earlier by the Minister for Finance. My Department will continue to pay unemployment benefit and pay-related benefit without deduction of income tax, to all recipients of unemployment benefit, some 70,000 people. The Revenue commissioners will take account of these payments when determining claims to refunds of tax following unemployment, when employment is resumed, or when reviewing the tax affairs of recipients or their spouses. Recipients of unemployment benefit and pay-related benefit will be obliged to declare such income on their tax returns or when establishing contact with their tax office.

This move was recommended by various expert groups who have studied our tax and social welfare systems over the years. The change in the tax treatment of unemployment and pay-related benefits has been recommended by among others, the Commission on Taxation, the Industrial Policy Review Group, better known as Culliton, the Commission on Social Welfare and the National Economic and Social Council. I would like to briefly outline to the House what these bodies recommended in relation to this issue.

The Commission on Taxation stated:

The exemption of short term social welfare benefits from income tax is contrary to equity principles, which dictate that the amount of income rather than its source should determine the amount of tax which is payable...

They recommended:

That those on social welfare benefits which are at present not charged to tax be brought within the tax net.

A similar view was expressed by the Commission on Social Welfare, who stated:

Short-term benefits should be treated as part of total annual income and should, therefore, be charged to income tax where such liability arises. This would remove the so-called incentives to absenteeism created by the current exemption of these benefits from tax but would, more importantly, deal equitably between people in similiar financial circumstances.

The Industrial Policy Review Group —Culliton — stated:

The fact that certain low or middle income married workers with children would be as well off drawing unemployment and other social benefits is another demoralising and inequitable feature of the existing system.

In this context the measure will minimise the effects of a practice which occurs in some sectors whereby it may be attractive for a worker to reduce his working week or cease working altogether for short spells in the latter part of each tax year because the benefits and tax rebates he would receive would exceed the net income which could be received while working for that period.

The National Economic and Social Council, in its paper entitled Income Tax and Welfare Reforms, stated:

In support of the proposal (to tax short term benefits) it can be argued that it would remove a horizontal inequity: the exemption of short term social welfare payments from tax when persons on similar incomes from other sources have to pay tax.

It is quite clear therefore that this is the direction in which we must move in the integration of the tax and social welfare systems, in the removal of disincentives and anomalies and in freeing up the systems so that the allocations and resources we wish to provide for people in need of them can be provided directly to them.

Members will recall that last week I gave details of a substantial package of measures arising from the budget and costing some £157 million extra in a full year. These included special increases of up to 10 per cent in the personal rates of unemployment benefit and disability benefit. In addition, the budget reduced the overall take from income tax by almost £220 million in 1994 and by £333 million in a full year. This was done by the abolition of the temporary 1 per cent income levy, by very significantly increasing the standard rate bands and increasing personal allowances to reduce the burden of taxation on low and middle income earners. That is the specific objective of this Government: to use available resources to reduce the burden of taxation. That should and will apply to all people equally from whatever source their income arises.

As I indicated to the House last week, the savings arising from the phasing out of pay-related benefit from July next will be devoted in full to providing the special increase in the personal rates of unemployment and disability benefit. At present only 45 per cent of all recipients of unemployment benefit qualify for the pay-related supplement. In addition to the full use of the pay-related benefit savings, an extra £2.7 million is being provided to give the special 10 per cent increase to everyone on unemployment and disability benefit.

In relation to pay-related benefit not only have we put the total amount from pay-related benefit back into unemployment and disability benefits to build up the basic rates — as recommended by the Commission on Social Welfare — we are putting in an additional £2.7 million to bring it up to the 10 per cent special increase and everybody on disability or unemployment benefit will gain from that.

Personal rates of disability benefit and unemployment benefit are being increased from £55.60 to £61 a week, an increase of £5.40 a week. The new rate for a married recipient with an adult dependant and three children will be £137.20 a week — an increase of £7.70 a week.

The increases in the budget provide for real and substantial improvement in the position of those who depend on social welfare payments. I trust that once the tax and social welfare systems have been integrated in the way outlined today it will be easier for me, or any future Minister for Social Welfare, to get the level of increases we require at budget time for those who depend on social welfare. Clearly those who depend on social welfare will not be affected by these changes but where there is additional income over and above social welfare payments they will rightly come into the tax net and will be assessed on their total income.

I wish to share the remaining time with my colleague, Deputy Burton.

Acting Chairman

The time remaining will be exhausted at 5.56 p.m.

Minister of State at the Department of Social Welfare (Ms Burton)

First, I wish to comment on a point made by Deputy Allen earlier in the debate. The record of the House will show that I did not use the term "perk" but instead used the word "allowance". The term "perk" was in the speaking notes supplied by my Department but I corrected it in the official version and I did not use the word in the course of my speech to the House. Yesterday my office was in contact with Deputy Currie who first raised the matter and he was informed of the situation and invited to check with the records of the House and with the Ceann Comhairle's office. Ungraciously, he did not do so. I advise Deputy Allen to check the record and he will then see that the word I used was allowance.

The integration of tax and social welfare has been a cherished ambition of public policy in Ireland for a number of years. As the Minister with responsibility for overseeing the integration of tax and social welfare I could bring to the attention of Deputies any number of reports which set out the basis on which such an integration can take place. The issue was examined by both the Commission on Taxation and the Commission on Social Welfare. In addition consideration was given to the matter by the Industrial Review Group, commonly known as the Culliton group and by the National Economic and Social Council.

There was fundamental agreement by all the bodies on the basic principles involved in the issue, that is that the exemption of short term social welfare benefits from income tax was contrary to the principle of equity. Even Democratic Left in their recent policy document issued in January of this year, supports the principle of the taxation of all sources of income. That was stated no less than three times in the course of that party's document.

One of the basic premises of integration of tax and social welfare is that all sources of income should be subject to taxation, and all sources of income obviously include social welfare payments. Deputies will be aware, of course, that a number of social welfare payments are already subject to taxation and have been for a long time, for example, old age, widow's and invalidity pensions. A number of social welfare payments up to now were exempt from taxation. We are bringing short term social welfare payments, in this instance unemployment benefit, into the tax net in the context of major improvements in both tax free allowances and bands.

Let me state unequivocally that an unemployed person whose only income is unemployment benefit will not have to pay any tax. Furthermore tax will not impact unfairly on the worst off sections of society. As indicated earlier by the Minister it has been demonstrated by the ESRI in its paper entitled, Income Tax and Welfare Reforms, published in 1991, that taxation of short term social welfare benefits would not impact unfairly on those with low incomes. The study found that most of the benefit from the non-taxation of these benefits, including unemployment benefit, went to those on higher incomes. In particular, it found that the majority, 70 per cent of people and households affected by taxation of short term social welfare benefits are in the upper half of the income distribution range and that in removing the exemption less than 10 per cent of those affected would be in the lower income ranges.

Those figures are based on a study undertaken in 1987. The increases in the tax exemption limits since then, the introduction of substantial child additions to them should mean, in effect, that the effect on lower income groups will be even less at this stage. Therefore, there will be many unemployed people who will not be affected by this measure because their incomes fall below the appropriate tax exemption limits.

If we are honest, Deputies will recognise that this is an essential component of reform. However, what we have had in the aftermath of last week's budget is a series of scaremongering exercises on its reform elements. The Deputies, whether from Fine Gael, the Progressive Democrats or Democratic Left, who have called time and again for fundamental reform of our tax system have run away from the logical consequences of that reform. While it may be political point scoring, the effect is also to produce political gridlock. Democratic Left indicated it was prepared to enter into a coalition with Fine Gael and I put it to that party that in the event of it entering Government it will reverse all of these reforms.

Deputy Yates, the Fine Gael spokesperson on finance, in an interview in The Irish Times last year when commenting on his ideas for cuts in Government spending — Fine Gael held up a number of documents this morning and let me hold up this extract from The Irish Times which makes interesting reading and I will make a copy of it available to the Deputies——

Mr. Deenihan

The Minister has good spin doctors and I hope they will make no mistakes in her speech today.

Ms Burton

Deputy Yates when giving his ideas for cuts in Government spending and new taxes which would amount to £700 million said:——

Mr. Deenihan

What about Deputy Quinn's statements?

Ms Burton

Deputy Yates said:

I can't yet predict their appetite for this level of change, but I believe that Fine Gael has to show that it will make a difference and that this is most required in the area of tax reform.

Mr. Deenihan

The Minister is being selective.

Ms Burton

The article continued:

To pay for this the Fine Gael spokesman would cut £200 million in Government spending and raise another £500 million by widening the tax base and increasing charges on items other than direct income and employment.

That is a matter of public record and I refer the Deputy to it. Deputy Deenihan's colleague, Senator Ross, when writing in the Sunday Independent two weeks ago referred to the “social welfare monster”.

Mr. Deenihan

He writes as an independent and not on behalf of the Fine Gael Party. That is most unfair.

An Leas-Cheann Comhairle

I must ask Deputy Deenihan to desist.

Mr. Deenihan

Senator Ross was writing in his profession as an independent journalist. The spin doctors are being most unfair, why do they not get something decent.

An Leas-Cheann Comhairle

Deputy Deenihan.

Mr. Deenihan

A person who is acting in an individual capacity should not be quoted.

An Leas-Cheann Comhairle

The Minister is in possession and must be allowed to make her contribution.

Mr. Browne

(Carlow-Kilkenny): On a point of order, is it right to refer here to Senators?

Mr. Deenihan

And especially when they are not speaking on behalf of the party but in their own professional capacity.

Ms Burton

May I ask Fine Gael Deputies from where the £200 million reductions and the extra £500 million in taxes would come? I listened to Deputy Yates characterise the budget as a tax and spend budget. Each Fine Gael Deputy who contributed to the debate advocated the spending of almost £1 million by way of the additional moneys they would wish to see spent on the various elements of the system. Many of the points made were creditable but let us have an honest debate.

Mr. Deenihan

Where is the honesty here? The Labour Party are the dregs.

Ms Burton

For example the improvements in the carer's allowance have been warmly welcomed by Deputies from the Opposition parties but criticised on the grounds that they do not go far enough. Fine Gael wants to have it both ways — cut and spend, new taxes and new programmes everywhere.

Mr. Durkan

Get rid of the spin doctors.

Ms Burton

How, then, can we proceed with a degree of honesty in the debate? We will continue to face an intellectual logjam on the issue of reform. The first report of the National Economic and Social Forum was agreed, less than two months ago, by all the participants and then included representatives of Fine Gael, Democratic Left and the Progressive Democrats. Its first report called for "sweeping tax reforms" and stated that this would involve painful adjustments. Why are those Deputies who put their names to that report saying something entirely different now?

I should like to draw the attention of the House to a number of other important changes to these short term benefits. The Government has provided that all short term payments are to be increased to the level of the priority rates, set by the Commission on Social Welfare, and that there should be a reallocation of the overall resources provided with the social insurance system for short term illness and unemployment. A general increase of 3 per cent is being provided to all social welfare recipients with effect from July next. This will ensure that the purchasing power of social welfare payments will be more than maintained throughout the whole year. In addition to this general increase, a further increase of 3 per cent, £1.60, is being added to all short term weekly payments to bring them up to the priority rates level set by the Commission on Social Welfare.

The short term benefits include unemployment benefit, disability benefit, short term unemployment assistance, supplementary welfare allowance and unemployability supplement. Some 185,000 recipients will benefit from this special increase. From July next, all social welfare payments will have reached the priority level recommended by the Commission and will be at a level equivalent to at least 90 per cent of its recommended main rate of £65.40 per week. The cost of the special increase amounts to more than £15 million in a full year and almost £7 million this year.

The Government has also decided to restructure the benefits payable under the social insurance system in respect of short term illness and unemployment. In relation to unemployment benefit and disability benefit the total increase will be 10 per cent. This increased level will bring the basic rate into line with the basic rate for long term unemployment assistance.

Reform of the system is a more appropriate means of cushioning people against sudden reduction in income as a result of unemployment. The present payments structure takes account of adult and child dependants. This helps to cushion the impact of a sudden reduction in income for those with families. In the case of unemployment, many employees are entitled to redundancy payments which can also lessen the impact of losing one's job. At present some 45 per cent — 33,000 — of unemployment benefit recipients qualify, the vast majority of whom receive less than the maximum amount payable. It is intended that some 114,000 recipients will benefit from the special increase provided for in the budget.

I should like to turn briefly to the issue of social insurance, and the Minister has already made this point. The social insurance fund which is financed by PRSI contributions from employees, employers and the self-employed is not self-financing. Any deficit between expenditure and income in any year has to be met by the Exchequer. For example, in 1993 total expenditure amounted to £1,720 million while income from PRSI contributions amounted to £1,600 million. This resulted in the Exchequer coming to the aid of contributors to cover the shortfall of £120 million to ensure payment of all those who qualified for benefit. The social insurance system is an expression of social solidarity and citizenship in which the risks and costs are spread as widely as possible within the community. Contributions made to the fund confer a benefit entitlement on the individual contributor if and when a specific contingency arises.

One of the reform questions we face is that fact that the social insurance system was designed at a time of a pattern of full-time, usually life time, employment from the age of 16 to 65. Every Deputy in the House will be aware that work patterns have changed. There has been a huge increase in part-time work, contract work and self-employment — what is sometimes called a typical employment.

An Leas-Cheann Comhairle

I would ask the Minister to conclude her contribution.

Ms Burton

We have to reform the system in such a way as to take account of the changes in employment patterns while retaining, as the bedrock principle, the collective responsibility and the collective solidarity which the social welfare system gives us.

Mr. Deehihan

I wish to share time with my two colleages, Deputy Browne, Carlow-Kilkenny, and Deputy Finucane.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Deenihan

I regret that the Minister of State at the Department of Social Welfare, Deputy Burton, should have used so cynically here today the report of the National Economic and Social Forum. If that attitude is to continue to be adopted, it will only lead to the breakup of the forum. The selective usage of statements and reports, such as we had today, is not in the spirit of that forum. I am very disappointed, too, with the statements the Minister made in regard to some of those who participated in the forum.

The proposal to discontinue, with effect from April 1994, pay related benefit with unemployment benefit makes a total mockery of insurance for workers. Insurance is there to cushion the impact of becoming redundant, unemployed or ill while at work. The proposed change is a total contradiction of the meaning of insurance if one is working. It is another attack on those people who are working and it is a real attack on those who are unfortunate enough to lose their jobs, those in short time or seasonal employment or those who become ill. I am disgusted that the Labour Party have stood over this imposition on the most vulnerable section of our community. Indeed, as Deputy De Rossa pointed out the Leader of the Labour Party criticised this move when it was mooted in the Finance Bill 1992. The support of Labour in this instance is but another of their major U-turns. So far as I can see there is nothing in the budget to indicate a reversal of the dirty dozen cuts.

Ms Burton

They have gone.

Mr. Deenihan

They have not gone, far from it, and no effort is being made to reverse them.

Proinsias De Rossa

If the Minister chooses not to acknowledge them, that does not mean they have gone.

An Leas-Cheann Comhairle

Order, please.

Mr. Deenihan

They are still very much there.

An Leas-Cheann Comhairle

Deputy Deenihan has the floor.

Mr. Deenihan

The taxation of unemployment benefit and disability benefit will have a devastating effect on over 75,000 people who, on average, will lose £400 per year. The Government estimates that in a full year the measure will yield about £30 million. It has been put in place to save money, not to benefit people paying insurance or who become unemployed or sick. This money is being taken from the most vulnerable people. The average number of people on unemployment benefit in 1992 and 1993 who would be affected by this measure is 75,000. This measure will reduce their income by approximately £7.62 per week. That will erode all their benefits from other measures, like the abolition of the 1 per cent levy. They will end up as net losers irrespective of the concessions in the budget.

Ms Burton

They will not.

Mr. Deenihan

They will, and they will find that out in the year ahead.

Ms Burton

The Deputy should do his arithmetic.

Mr. Deenihan

The Government is systematically dismantling the benefits to PRSI workers.

Ms Burton

Where are these £200 million worth of cuts?

An Leas-Cheann Comhairle

Without interruption please. Deputy Deenihan has the floor.

Mr. Deenihan

The credibility of the pay related system has been dealt a major blow. Deputy Burton may use the research provided by her spin doctors but they are selective in their research. They should look at the Labour Party statements made a year ago so that the Minister of State does not come into the Dáil and contradict what her party said then.

The value of PRSI contributions has been seriously eroded since the last budget. It started with the abolition of pay related benefit on disability and unemployment benefits, now there will be taxation of disability and unemployment benefits and optical and dental benefits have also been curtailed. The latest instalment is a cutback in widows' entitlement to contributory pension. It has been argued that absenteeism from work has been due to the tax and social welfare system. Whatever argument can be made for that with regard to disability benefit it cannot be made with regard to unemployment benefit. One would need the collusion of the employer and that would be ridiculous. An employer would not deliberately make an employee redundant; it would not pay him.

Ms Burton

I do not understand that.

Mr. Deenihan

The effect of taxing unemployment benefit will be to cripple those on short-time work. One factory in Listowel would be closed now if it was not for this system of working for half a week while employees get unemployment benefit for the remainder. This applies to many business. This measure will close factories throughout the country. Unemployed people will generally find that they cannot get tax refunds as they have lost their jobs. On top of the trauma of being made redundant unemployed people will now face a cut in pay related benefit of up to £16.80 per week and the taxation of their basic benefit. The impact of this measure on married couples will be particularly significant. In the case of a married couple where both work and one becomes unemployed, where their combined income was below the income tax exemption threshold, the inclusion of unemployment benefit for tax purposes will now make them liable to income tax.

Ms Burton

They will get £102 a week extra in FIS.

Mr. Deenihan

The present exemption limit for such a case is £8,100. Where a spouse is on unemployment benefit they will be paid £68.40 a week. This means that if the other spouse is even earning as little as £88 a week it will push them into the income tax net for the first time.

(Interruptions.)

Mr. Deenihan

Taking the same case of a spouse on unemployment benefit at £68.40 a week or £3,556.80 per year, if this is taxed at the marginal top rate of tax the loss will be £1,982 a year. At the lower rate of tax the loss is £1,164 per year.

Ms. Burton

The Deputy's figures are wrong.

Mr. Deenihan

Leaving aside the pay related benefits cuts these couples will face a loss of either £38.13 a week or £22.40 a week. This will be devastating for families, the people who are most vulnerable. This Government is trying to destroy the family structure. Already those on unemployment benefit are discriminated against in the social welfare code. A claimant on unemployment benefit or disability benefit has been paid at a lower rate than those on long term unemployment assistance.

Ms. Burton

The budget changes that.

Mr. Deenihan

A married man with two children is paid £116.70 on unemployment benefit and £120.30 on unemployment assistance.

Ms. Burton

That is changed in the budget.

Mr. Deenihan

Those on short term benefits are not eligible for free fuel, the double Christmas bonus payment or butter vouchers and they lose child dependant allowance payments for children over 18 years still at school. This budget worsens their plight.

Ms. Burton

It improves it.

Mr. Deenihan

It will not.

Proinsias De Rossa

Just because the Minister says it will, does not mean it will.

Mr. Deenihan

I am disgusted with Deputy Burton's attitude this evening. She has continuously heckled me. We have obviously hit a sensitive spot in the Labour Party armour, it cannot reconcile what it said before the last election with what it is doing now, systematically dismantling all the benefits for PRSI workers which is totally wrong.

Mr. Finucane

I welcome the Minister of State, Deputy Browne, who I think will be more tolerant and will not interrupt as often. When the Minister is uneasy, obviously there must be a feeling of guilt.

We all respect the Conference of Major Religious Superiors who speak sensibly. It stated that the resources allocated to social welfare are disappointing. It is significant that of the total budget, £72 million was allocated to social welfare. Although there are good features in the budget and some social welfare increases are welcome, in many cases the increases will only match inflation.

A major issue was the former discrimination against widowers with regard to contributory pension — which was rectified in the budget — and which the Government anticipate will cost £16 million during the year. It is interesting to note from where the £16 million will come. What the Minister giveth, the Minister taketh away. Given EU legislation it was only a matter of time before the discrimination between widows and widowers was highlighted. The Minister and the Department would have been in serious difficulty with the EU if they had persisted with the anomaly. In its comments the Conference of Major Religious Superiors referred to the inadequate amount of support documentation circulated with the budget. Its analysis is far more meaningful than all the Minister's speeches, including the speech on budget day.

The Minister for Social Welfare has announced that the contributory widow's and widower's pension is to be means-tested. While many other benefits are means-tested this is a retrograde step. Many of us are appalled that shortly after the death of her husband a spouse loses her entitlement to free fuel. This displays a lack of sensitivity. I note, however, that it is recognised in the budget that a widow should be allowed to continue to avail of free schemes. I welcome this.

The Taoiseach constantly reminds us that the economy is performing well and refers us to OECD reports which describe Ireland's achievements as being significant. While the official unemployment figure is almost 300,000 the true figure is nearer 350,000. This includes more than 17,000 people in receipt of pre-retirement allowance — those aged 55 and over — 15,000 on FÁS courses and a further 20,000 on other schemes. It should also be borne in mind that many women who are not included in the live register would take up employment if they had an opportunity to do so. Therefore, one needs to be extremely cautious before one says that the economy is performing well. Much remains to be done.

On the question of job creation, the number of places available on job training courses is to be dramatically increased while the social employment scheme, the CEDP and teamwork are to be streamlined under the community employment programme. Perhaps the most significant allocation that will be available to the Minister for Enterprise and Employment will be that for training courses given that in the budget an extra £5 million has been allocated for the provision of advance factories around the country. To put the matter in context, will we end up, in order to avail of European Union funding, with FÁS and other agencies trying to create community enterprise projects and trying to find people to participate in them? One has to ask, will we get a return on these schemes?

I am not talking about schemes on which we do not get a great return but rather about social employment schemes run by the local authorities. As we are aware, because of the lack of funding, most social employment schemes lead to significant improvements to footpaths and so on in towns and villages. I appreciate that these schemes will have a different title in the future but I hope to see a dramatic expansion in this regard.

In the budget the Minister followed up one suggestion by the Conference of Major Religious Superiors. He proposes to introduce a pilot training programme under which 100 places will be available for unemployed people who will be given meaningful jobs for which they will receive extra money. I have often said in council chambers that there is a great need, where problems exist, to create meaningful jobs within the local authorities. While there has been an increase in the number of places available on training courses the number of outdoor workers employed by local authorities has declined dramatically. We are all aware of the problems being experienced in this regard.

I would now like to refer to the free fuel allowance. During the week on Limerick radio I took part in a phone-in with Deputy Kemmy during which one woman asked if we knew the price of a bag of coal. The point she was trying to make was that the allowance had remained at £5 for many years. Fortunately for me, Deputy Kemmy answered first and mentioned a figure of £7 but the woman replied immediately that it was £8. It has never ceased to amaze me that the allowance has not been increased and has remained at £5 for many years. I would like to see this matter addressed.

I would like to deal with the programmes I mentioned earlier. While travellers, ex-prisoners, the long term unemployed, lone parents and those in receipt of disability benefit can avail of these schemes — as I said, 40,000 places will be available on these training courses during 1994-95 — widows and widowers cannot. This amounts to discrimination. This matter should be addressed also.

The old age non-contributory pension is means-tested. In this regard it is not fully appreciated that there is a special section in the Department of Social Welfare in Sligo which deals with the question of over-payments. Before an estate is administered that section writes to the solicitor to discover if information was withheld when the original application was made for an old age non-contributory pension. Sometimes a husband does not tell his wife everything. In this regard, I am aware of a recent case where out of the blue a poor woman received a bill for £1,200. She was mystified by this but seemingly when her late husband applied originally for an old age non-contributory pension he withdrew money from his bank account and lodged it again once he received the pension. She only discovered this when the will was being administered. While it was true to say that he did not reveal this information when he applied for the old age non-contributory pension it was also true to say that he did not tell his wife what he was doing at the time. She was extremely upset when she discovered this. When I discussed the matter with the Department of Social Welfare in Sligo, it was prepared to modify the figure to £1,000. The point I am trying to make is that one must offer a sympathetic ear in such cases given that a husband may not necessarily tell his spouse what he is doing. Officials should show sensitivity when this happens.

Mr. Browne

(Carlow-Kilkenny): When I entered the Chamber, the Minister of State, Deputy Burton, was defending the use of the word “perks” in her script. I do not know whether it is a sign of the times — this is the most high spending Government we have ever had in terms of the number of advisers and script writers available to it — that somebody should use that word in a script. The Minister of State either reads a script like a newsreader on the 9 o'clock news or else she and the Minister have no influence. Anybody who would use the word “perk” to describe widow's allowance does not deserve to be in charge of social welfare or even to be dealing with it because they are out of touch. The Minister was able to produce a photostat copy that she did not have to obtain herself because there are so many people there to get it for her. At least the Opposition have to go to the bother of doing this themselves, it takes much work and one must have a good memory to know where to look for things. On the Government side all this stuff is handed out and Government spokesmen produce it as if they were whiz kids. Maybe it is a sign of the times that people who are elected to the Dáil find themselves appointed Ministers on the first day. Perhaps that practice should end because there is nothing like the old dog for the hard road and people who have come up the hard way understand what life is all about.

When Minister Burton was criticising the Opposition she used the phrase "if they were honest". I find it difficult to listen to any Minister from the Labour Party talking about honesty. I do not intend to get into an argument about whether or not Fianna Fáil were telling lies — that is another kettle of fish altogether. However, for the Labour Party to put an advertisement in the paper saying that they had no intention of introducing property tax, charges etc. and do what they have done and then expect us to listen to a Labour Minister of State talking about honesty is stretching things a bit. The sooner they forget about discussing honesty the better for all of us, because nobody had done a greater somersault than the Labour Party, even though their leader can come into the Dáil and be hurt at things that are said to him. I remember quite well the way he folded his arms when in Opposition and savaged the then Taoiseach, and had no worries about doing it either.

The tone is set in regard to the treatment of widows by the mere fact that anyone associated with the Department of Social Welfare would use the word "perks" to describe their allowances. If we cannot look after widows in this Christian country with some degree of decency and generosity we do not deserve to describe ourselves as Christians. Widows have enough to suffer from the loss of their partner and the added responsibilities thrown on them to act as father and mother. A Government which considers that widows' allowances should be means tested lacks any feeling or sympathy for widows, who should be getting above the odds if at all possible. I find it appalling that a means test would be devised for someone who is entitled to a certain rate of pension. It cannot be justified if we deserve to be called Christians. We should be doing everything possible to make life easier for widows, who have a double role to play and often have to deal with difficult situations. Here we are deciding that they are living in luxury and even describing some of their allowances as perks.

I am not so sure what is going on in this Government. Perhaps there are too many people giving advice. I note the Tánaiste said that the treatment of unemployment benefit as income for tax purposes is accompanied by significant increases in both unemployment and disability benefit. It is said "The Lord giveth and the Lord taketh away". In this case the left hand giveth and the right hand taketh away. The Minister is giving an increase, but he is taxing it. I do not know if this is just a way to get one Department to contact another. The net benefit is of very little advantage to those getting it. We should give an increase and leave it at that instead of what we are doing now, giving an increase and taxing it, thereby taking back what we are giving.

I am completely mystified by the comments of the Minister of State, Deputy Eithne Fitzgerald. She said that a great deal of concern had been expressed in recent years about poverty traps and that some of his concern had focused on hypothetical examples, of which there were few if any to be found in the real world. She said that we all recognise there have been real problems areas and that the most significant problem had been the unemployment trap, whereby someone out of work with limited earning power would be little or no better off on taking up a job. She said there is little evidence that this factor influences the level of unemployment but that it had an important bearing on the composition of unemployment, in particular, in putting parents of families at higher risk of being out of work.

Someone was paid to write that script and the Minister was paid to read it, but it takes much reading to make any sense out of it. I think what she is saying is that there is no poverty trap in existence in reality but only in theory. As someone who came up the hard way, I can tell her that when I asked to get details of a job for a person who was unemployed and supplied those details, the person rang me to say he could not take the job as he calculated that he would need £250 a week to justify leaving the unemployment sector, taking into account what his medical card etc. were worth to him. There is many a good person working for £150 and paying tax on it. This poverty trap obviously exists, although Deputy Fitzgerald does not seem to understand it, but then she also found herself appointed a Minister on the first day in the Dáil. Maybe it proves the new theory I have come up with that newly elected Deputies should be debarred from becoming Ministers because they often do not know what they are talking about.

The Tánaiste gives increases in unemployment benefit but at the same time taxes them. Poverty traps appear to Deputy Fitzgerald to exist only in theory, when I and everybody else knows they exist in practice. The reference to widow's allowances as perks — the Minister disclaims she used it but it was in the script because I saw it myself — suggests a lack of feeling for those who need our support. All this — and the fact that a Minister of State would talk to us about honesty when the assurances of costly advertisements have been contradicted — leaves me worried that, despite its huge majority, this Government is not doing a good job for the country. People who should be getting benefits and who should have a future are being fobbed off because there was a few pounds to spend from the amnesty. People were given £5 million here, £10 million there and finished up appearing to have something this year. What the Minister for Finance will do next year I do not know, because he will have that money. What the unemployed will do next year I do not know either, because there seems to be no Government policy. It is unfortunate that when there was an opportunity to do something positive, the Government missed the boat.

Minister for Finance (Mr. B. Ahern)

I want to thank the Deputies, the Ministers and the Minister of State who contributed to this debate.

Aside from what I said at the outset about equity — I am not particularly picking up what Deputy Browne said — it is extraordinary that we will not accept that people who get their incomes from different sources should be taxed in the same way.

I have listened to all the arguments about equity in the past few days, but we spend a fortune commissioning expensive reports and getting the best brains in the country to compile them. Successive Governments have launched such reports in Dublin Castle. Members claim that the provisions of such reports should be implemented, in my 16 years in this House, I have not met many people who had the guts to do anything except talk but when a Minister proposes a measure the Opposition oppose it. In future when commissioning reports we should do what Brendan Behan proposed. When the Cabinet decide to implement a measure, there should be two choices, one for those who support it and another for those who oppose it and then Members can carry on with the same old waffle here. Members should be either for or against tax reform. Two sides of the fence do not seem to be enough for many Members of this House, but politicians should be able to take the heat.

Mr. Browne

(Carlow-Kilkenny): The Minister will have to take the heat in respect of the property tax.

Mr. B. Ahern

I am well able to take the heat in respect of £5 million in a budget totalling £12,800 million. In fact, I would not lose two seconds' sleep over such a minor issue and we should not get tied up in knots over it. The public will not be impressed if they are listening to this debate. The Leas-Cheann Comhairle has heard me make a similar argument many times at parliamentary party meetings, it does not matter if the issue involves taxation on investment or other income. I have been involved in many arguments about taxation on income from capital and other investment. All income must be taxable in an equitable manner and if we are not prepared to do that we should propose an income tax level of 15 per cent for Ministers and TDs and a level of 27 per cent and 48 per cent for others.

Mr. Browne

(Carlow-Kilkenny): The amnesty gave them that concession.

Mr. B. Ahern

Deputy Browne was opposed to that measure, but it was successful as we have brought many more people into the tax net.

Mr. Browne

(Carlow-Kilkenny): The Minister pointed out that such measures are inequitable.

Mr. B. Ahern

The Deputy obviously promoted it in his county because it had the largest take-up. I appreciate him doing that because we received money which will augment the social welfare package.

Mr. Browne

(Carlow-Kilkenny): I hope the Minister gives it back.

Mr. B. Ahern

We have done so in the budget by giving back £155 million in a year when inflation is at 1.5 per cent. The overall budget and Exchequer borrowing requirement strategy was designed to reinforce economic confidence as it affects investment, recruitment, consumption and interest rates. The underlying emphasis on tax measures was to promote employment; that is what this Government stands for. We will promote employment by securing wage moderation through reducing the tax wedge, in other words dealing with the levies, exemptions, margin reliefs, allowances and bands.

It was not possible to include everybody in those measures. The measure in respect of marginal relief affected 111,000 people and I thank Deputy Ó Cuív for his support and excellent contribution on that topic. Approximately 42,000 people will be taken out of the 48 per cent tax band. By and large we have improved the take-home pay of most of the 900,000 people in the tax net. A small portion of the funding came from the frequently recommended and modest tax reform measures based on equity considerations, for example, the reduction of mortgage and VHI tax relief to the standard rate, the objective of reducing the tax disadvantage to employment orientated business and commercial investment opportunities relevant to housing and the residential property tax. We also encouraged the development of small businesses as a major source of employment for entrepreneurs under the business expansion scheme, changes in respect of capital gains tax, roll over reliefs, capital acquisition tax, VAT thresholds, single registration forms, single tax clearance forms and so on. All those measures were introduced to promote fairness, enterprise and employment growth in the economy.

There will not be any additional burden on employers in respect of the taxation on unemployment benefit. I had the pleasure today of addressing the national council of IBEC who are very happy about the measures we have introduced to streamline the burden on employers in respect of such issues. Deputy Yates stated that 75,000 was the average number in receipt of unemployment benefit on a weekly basis. The number of claimants on an annual basis is in excess of 200,000, perhaps up to 220,000. Therefore, a weekly figure of 75,000 does not appear to be accurate.

Deputies Allen and De Rossa referred to the incentive to work. The budget will substantially improve the position of the low paid, alleviate the poverty trap and increase the incentive to work. The change proposed in relation to unemployment benefit will ensure that people are much better off because a portion of their annual income will come from unemployment benefit which will help to reduce the replacement ratio of those affected and make it more attractive for them to remain in or take up employment.

Deputy De Rossa stated that the measures should not reduce the living standards of those whose sole income is derived from welfare payments. The income tax exemption limits will cover that group. The tax liability will apply only to income in addition to welfare payments. If one's income is derived solely from unemployment benefit, it will not be affected. The same provision applied last year in respect of disability benefit. The income of both spouses is taken into consideration, which is the case in respect of PAYE and PRSI. Taxation of social welfare payments must be equitable and all sources of income taken into account.

Deputies Deenihan and De Rossa referred to the £30 million yield from the 200,000 plus claimants. Again, tax payable will depend on additional income. Deputy Deenihan referred to systematic short-time workers who are no longer able to depend on the social welfare system to maintain jobs and said that the exemption from tax is used by companies in difficulties to fund payroll costs. He also referred to the amount of tax liability arising at the 27 per cent and 48 per cent rates on unemployment benefit. That is an inevitable consequence of bringing unemployment benefit into the tax net. However, the liabilities referred to by the Deputy will arise only where there is additional income.

A number of Deputies raised the issue of systematic short-time workers who usually work for three days a week and receive unemployment benefit for the remainder of the week or work a week on for which they receive full wages, and a week off for which they receive unemployment benefit. In either case such workers do not cease employment and, therefore, would not need to approach the tax office for a tax refund. Any refund due would be made by their employer in the course of the operation of the cumulative PAYE system. In order to deal with those cases, it is proposed that workers on systematic short-time work will have their annual tax free allowances restricted by the amount of the unemployment benefit it is anticipated they will receive during the tax year.

For example, a married man entitled to an annual tax free allowance of £5,786 on systematic short-time work for the full year, week on week off, will receive £97.60 per week. He will expect to receive unemployment benefit of £2,537.60, that is, £97.60 for 26 weeks in a tax year for the weeks he is not working. His tax free allowance which will be set against his earnings will include, an annual tax free allowance of £5,786 less expected unemployment benefit of £2,537 having a net tax free allowance of £3,249 or £62 per week.

The measures we are attempting to deal with to make tax reform more acceptable and equitable will give rise to difficulties. I assure Deputies that, prior to the system being taken over fully by the Department of Social Welfare, the Revenue Commissioners will deal with this matter in as fair and equitable a way as possible. As it is a new system we will monitor it for any difficulties that may arise and ensure the matter is dealt with appropriately. Hopefully, late next year or early the following year the system will be taken over and administered by the Department of Social Welfare. I thank the House and you, Sir, for co-operating in quickly finalising this budgetary matter.

Question put.

The Dáil divided: Tá, 92; Níl, 40.

Tá

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Ahern, Noel.
• Aylward, Liam.
• Brennan, Séamus.
• Broughan, Tommy.
• Browne, John (Wexford).
• Burke, Raphael P.
• Burton, Joan.
• Byrne, Hugh.
• Callely, Ivor.
• Clohessy, Peadar.
• Collins, Gerard.
• Connolly, Ger.
• Costello, Joe.
• Coughlan, Mary.
• Cullen, Martin.
• Dempsey, Noel.
• de Valera, Síle.
• Doherty, Seán.
• Ellis, John.
• Ferris, Michael.
• Fitzgerald, Brian.
• Fitzgerald, Eithne.
• Fitzgerald, Liam.
• Flood, Chris.
• Foley, Denis.
• Foxe, Tom.
• Gallagher, Pat the Cope.
• Gallagher, Pat.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Seán.
• Higgins, Michael D.
• Hilliard, Colm M.
• Howlin, Brendan.
• Jacob, Joe.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenneally, Brendan.
• Kenny, Seán.
• Keogh, Helen.
• Killeen, Tony.
• Kirk, Séamus.
• Kitt, Michael P.
• Bell, Michael.
• Bhamjee, Moosajee.
• Bhreathnach, Niamh.
• Bree, Declan.
• Brennan, Matt.
• Kitt, Tom.
• Lawlor, Liam.
• Leonard, Jimmy.
• Martin, Micheál.
• McDaid, James.
• McDowell, Derek.
• McDowell, Michael.
• Moffatt, Tom.
• Moynihan, Donal.
• Moynihan-Cronin, Breeda.
• Mulvihill, John.
• Ó Cuív, Éamon.
• O'Dea, Willie.
• O'Donnell, Liz.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Leary, John.
• O'Malley, Desmond J.
• O'Rourke, Mary.
• O'Sullivan, Toddy.
• Pattison, Séamus.
• Penrose, William.
• Power, Seán.
• Quill, Máirín.
• Reynolds, Albert.
• Ryan, Eoin.
• Ryan, John.
• Ryan, Seán.
• Shortall, Róisín.
• Smith, Brendan.
• Smith, Michael.
• Stagg, Emmet.
• Taylor, Mervyn.
• Treacy, Noel.
• Upton, Pat.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Eamon.
• Walsh, Joe.
• Woods, Michael.

Níl

• Allen, Bernard.
• Barrett, Seán.
• Barry, Peter.
• Boylan, Andrew.
• Browne, John (Carlow-Kilkenny).
• Bruton, Richard.
• Carey, Donal.
• Connaughton, Paul.
• Connor, John.
• Crawford, Seymour.
• Creed, Michael.
• Crowley, Frank.
• Currie, Austin.
• Deasy, Austin.
• Deenihan, Jimmy.
• De Rossa, Proinsias.
• Doyle, Avril.
• Durkan, Bernard J.
• Finucane, Michael.
• Fitzgerald, Frances.
• Flanagan, Charles.
• Gilmore, Eamon.
• Harte, Paddy.
• Hogan, Philip.
• Kenny, Enda.
• Lowry, Michael.
• McCormack, Pádraic.
• McGahon, Brendan.
• McGinley, Dinny.
• McGrath, Paul.
• McManus, Liz.
• Mitchell, Gay.
• Molloy, Robert.
• Nealon, Ted.
• O'Keeffe, Jim.
• Owen, Nora.
• Rabbitte, Pat.
• Shatter, Alan.
• Sheehan, P.J.
• Yates, Ivan.

Tellers: Tá, Deputies Dempsey and Ferris: Níl, Deputies E. Kenny and Boylan.

Question declared carried.