Fianna Fáil has been left floundering in the wake of a budget it would dearly have loved to have delivered.
Financial Resolutions, 1995. - Financial Resolution No. 4: General (Resumed).
Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(The Taoiseach.)
The Government is floundering.
It is so ambivalent towards it that some of its former Ministers act as if they had delivered it. Their criticisms are not serious.
(Interruptions.)
They feign outrage about the leaks, mock concern at the increase of 2.25 per cent and outright opposition to what they would have us believe are the consequences of abolition of the bank levy. I think that achieves the purpose and I will now return to my script.
The Consumer Credit Bill which is emerging from my Department will have a major impact——
Is there a quorum since the Minister of State is speaking so much about Fianna Fáil?
——in that it will enhance the powers of the Director of Consumer Affairs and make credit arrangements entered into with financial institutions more transparent and understandable. All this is happening in consultation with the banks.
Has Deputy Callely called for a quorum?
The Minister of State is speaking so much about the Fianna Fáil Party I am wondering if there is a quorum in the House.
Is the Deputy calling for a quorum?
Yes.
Notice taken that 20 Members were not present; House counted, and 20 Members being present,
I opposed the Fianna Fáil-Progressive Democrats Government decision to allow the banks to offset the levy against corporation profits tax. This budget is formalising that decision in a phased manner that will lead to no loss to the Exchequer. The tax position of the banks will be kept under continous review and the Government is committed to the promotion of the third force. The tax take from the banks has grown enormously in the years since the levy was introduced.For example, since 1988-90 the total tax take from the banks has risen from around £63 million to £135 million in 1993-94. The levy has achieved its desired effect.
Fianna Fáil will not reintroduce the bank levy since it effectively abolished it. Now having been found out, it says that instead of reducing corporation profits tax from 40 to 38 per cent it would have conceded a special rate of 25 per cent to small business.
I have no doubt about that.
After seven years in Government there is no evidence which shows that any Fianna Fáil Minister for Finance had an intention of implementing a special rate for small business but consistency never impeded Fianna Fáil from taking the populist road.
We were working on it.
The reasons the present leader of Fianna Fáil opposed such a special rate were remarkably similar to the reasons set out by the Minister for Finance, Deputy Quinn.
I wish to refer to the social welfare measures contained in this reforming and radical budget.
The Minister of State should ask Deputy Lynch about the equality payments.
(Interruptions.)
The parties of the Left and the Government in general stand accused of being welfare Scrooges, penny pinching with pensioners and devoid of concern for the problem of poverty but nothing could be further from the truth. After years of failure by previous Ministers of Social Welfare payment will be made six weeks earlier than usual and there is the commitment from the Minister, Deputy De Rossa, to press for earlier payment of increases in future budgets. He has already asked his Department to gear itself up to changing its production schedules to facilitate this to the greatest extent possible. Why should social welfare recipients have to wait longer than taxpayers for the benefits of the budget?
Within the global increase special attention has been paid to marginalised groups of recipients, especially mothers who are caught in low income and poverty traps. We have provided for the biggest increase in child benefit in 50 years. In other reforms the first step has been taken towards the development of a basic income approach to support for children. There is also a commitment after ten years to pay 70,000 women their equal treatment payments starting this year.
There is a number of other significant reforms for various groups. The disabled persons maintenance allowance is being transferred to the Department of Social Welfare; the rate of unemployment assistance paid to young people living at home is being increased while child benefit for 18 year olds and those in full-time education, including those attending certain FÁS courses, is being extended. There is further improvement in the carer's allowance and the significant extension of the back to work allowance. The qualifying age is being reduced as is the period of attachment to the live register.
Special funding is being allocated for those starting up their own businesses under the scheme and £0.25 million is being made available to establish a joint venture enterprise fund with the First Step Organisation.
What about wages?
The Conference of Religious of Ireland has strongly criticised the tenor and thrust of the Budget. It is wrong. The organisation has made much of the Government not adopting the basic income approach, but I would ask the members of CORI to read the speech of the Minister for Social Welfare.
The changes in child benefit amount to a first step to taking a basic income approach in that area of the social welfare system. As the Minister for Social Welfare pointed out, an expert group is currently examining the question of the integration of the tax and social welfare codes, a concept to which he and Democratic Left have long been committed.
The expert group will address the question of the extension of the basic income approach to all citizens. I would ask CORI to wait and see what the expert group has to say — and that is not a political fob-off. As to the arithmetic calculations the CORI post-budget response indulges in to show that this is a budget in which the poor have come out badly, one cannot take it from looking at the social welfare allocation in isolation and comparing it to other global areas of spending that this budget has not taken sufficient action to tackle poverty. The CORI approach ignores the fact that many thousands on low pay are also caught in the poverty trap. One must look to policy in its totality to see that this budget does a great deal to tackle poverty.
An increase of 10p a week in the living alone allowance.
It tackles poverty in a real way. For those who are poor as a result of being low paid, there is a real reduction in the tax wedge effect and the poverty and unemployment traps that have, for far too long, been part of the system as a result of the interaction between the social welfare system and an unfair system of taxation.
For the long term unemployed there are the enhancements to the back to work allowance. There is also the introduction of the locally based intensive guidance and placement service on a pilot basis initially. This is the implementation of a concept developed by the National Economic and Social Forum. Provision for the community employment programme is being increased and my colleague, the Minister for Enterprise and Employment, Deputy Bruton, dealt with that yesterday.
I could go on but the basic point is clear. This budget sets out to maximise the growth dividend for all the people of Ireland. In particular, it sets out to bring the benefits of that growth dividend into the unemployment blackspots, the marginalised communities, to make it work for and benefit those groups thereby fighting poverty.
Not in Cork.
In fighting poverty, we must look beyond what the Government is doing through the budget measures. Those measures fit into a wider framework, that of the European Union's Community Support Framework and its various operational programmes, virtually all of which have now been announced.
This week we saw the unveiling of the Human Resources Development Operational Programme, with its significant emphasis on strengthening the education base at primary and secondary levels and improving the educational opportunities, training and life chances of early school leavers. The problem of early school leaving is a critical ingredient in the long term danger of people in poverty-ridden unemployment blackspots being caught in a permanent poverty trap.
Fianna Fáil has been left foundering in the wake of a budget it would dearly loved to have delivered. Indeed, some of its former Ministers act as if they did deliver it. Their criticisms are not serious. They feign outrage over the leaks, mock concern at the 2.5 per cent general increase to pensioners and outright opposition to what they would have us believe are the consequences of abolition of the bank levy. None of these criticisms withstand serious examination.
Fianna Fáil led Governments leaked budget details with impunity. There were no investigations and no resignations in 1994. The difference between the 2.5 per cent social welfare general increase and the 3 per cent which Fianna Fáil said it would provide ranges from 30p to 35p per week——
On a point of order——
——and it ignores the fact that the money has instead been concentrated on children in a focused attack on poverty. The bank levy charge is simply a lie. The Exchequer, far from losing £36 million, does not lose a penny and the levy included in the 1992 Finance Act was a Fianna Fáil decision when it was in Government with the Progressive Democrats.
I am calling for a quorum and I would like to see the Taoiseach in the House.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
It is most unusual for someone to be interrupted twice while trying to make a few moderate comments on the budget. I was about to point out that if there was so much information about the budget in the public domain, I thought it would have enabled the spokesperson for Fianna Fáil to at least prepare a decent speech rather than the vaudeville act to which he treated us.
Tell us the truth.
In the Fianna Fáil Party political broadcast we had the spectacle of Deputy Ahern and Deputy McCreevy wandering around town trading gossip like a Dublin version of "Chah and Miah". On the one hand they wanted to give more to social welfare recipients——
The Minister is supposed to be speaking on the budget.
——while, on the other hand, as they came around the docks they wanted to express their concern about public spending——
Speak to the budget.
——being out of control.
Is the Minister of State, Deputy Rabbitte speaking on the budget?
There is neither rhyme nor rhythm to the Opposition. For example, Deputy Seamus Brennan, who had himself measured in Louis Copeland's for a suit for the position of Minister for Finance which he thought he was getting, is concerned that we are fiscally reckless.
The Minister, Deputy Rabbitte, is out of order, Chairman.
Meanwhile, the "Chah and Miah" act wants a social welfare increase more than 2.5 per cent——
The Minister will take a lot of bread off the tables in many homes.
This is coming from a Government that spent 9 per cent on average over the past two years.
Chairman, will you please protect the speaker?
The Minister, without interruption.
The Minister is provoking us.
I submit that the entire Fianna Fáil front bench is in need of bereavement counselling as a result of the loss of power. Nothing hurts Fianna Fáil more than the loss of power—
The Minister is out of order.
—and it is in need of bereavement counselling because it has not made any serious criticisms of the budget.
The Minister would make a bad counsellor.
I want now to refer briefly to the Progressive Democrats. I have been invited by Deputy Harney to comment on the increase for pensioners. I thought that a leader of the Progressive Democrats would want to avoid any mention of pensions. Deputy McDowell posing as the champion of the poor is about as plausible as Ian Paisley announcing his candidacy for the papacy. Deputy McDowell's criticisms are out of date. On the night the Government was formed and following a speech by Deputy Bertie Ahern, who could not detect any left-wing influence in the programme for Government, Deputy McDowell told us that it was a left-dominated programme for Government.Both cannot be right. Deputy McDowell went on to vent his indignation against the Labour Party in particular.He gave us a long dissertation on Tony Benn. Deputy McDowell seems to know a great deal about Tony Benn, but seems never to have heard of Tony Blair. The more I hear Deputy McDowell's contributions — and I always enjoy them— the more I am reminded of the Japanese soldier who emerged from the jungle a few years ago waving his sword and threatening to resume the Second World War. Deputy McDowell resembles that soldier more and more. He now has to construct his own imaginary windmills before he can tilt at them.
This side of the House should, however, concede that, for an Opposition, floundering in the wake of the budget, the controversy surrounding the leaks was a Godsend. No one can in the least condone what happened. However, it goes to show how much the present system of budget formulation is in need of reform. It shows also the difference between a Fianna Fáil-led Government and this Government. A Fianna Fáil Minister would rather cut off his or her own toe than resign office.
We inherited our budget system from the 19th century British Empire. I cannot remember who it was among the leaders of the independence movement who summed the movement up by describing himself and his associates as the most conservative bunch of revolutionaries ever to achieve power.
It was Kevin O'Higgins.
In terms at least of the budgetary process we inherited from our founding fathers, which they took intact from imperial Britain, he was absolutely right. Budget day is only a small part of the equation. The Estimates and the capital programme have all been decided well in advance of budget day. The Estimates procedure begins around mid year. The budget, the Estimates and the capital programme are all framed in the context of the European Union Community Support Framework — a five year framework subject to ongoing review.
We have, in the context of budget day itself, the sight of the media circus, of the pre-Christmas pre-budget submissions and delegations from the various lobby and interest groups as they march in to see the Minister. Like the children who, at around the same time, are writing to and queuing to see Santa, they have their lists and are hoping for the best at a time when they know many of the major decisions have already been taken. We should begin to change this. We should create a more open and transparent budget procedure. There should be more timely discussion of the parameters, the overall framework within which the budget will be cast and we should have time to debate priorities.Apart from anything else, that would be healthy for politics.
This Government of Renewal has taken a major step in enunciating in its progamme a fiscal framework, a medium term financial strategy. It is the first Government to do so.
This is a budget that sets out to maximise the growth dividend to everyone in our economy and society. It seeks to maximise growth. By that I mean the level of real economic activity carried out within our society.
It seeks to redistribute the fruits of our economic growth, firstly, through seeking to secure jobs for more and more of those too many people in our society who are seeking work. It seeks, through our taxation system, to redistribute wealth in our society and yet avoid penalising reward in a way that would ultimately undermine investment and effort. It begins to put a welfare policy in place that seeks to provide those who cannot find employment with access to as high a standard of living as our society can afford and also a system that affords those seeking work the support they need to re-enter successfully the labour market. It begins the process of educational reform — to create a high quality education system to which each person has equal access.
There is much still to be done, but this is the first of three budgets and it must be seen in that light. The process that began with budget day will continue to unfold in the ongoing process of reform that we will see through the rest of the year and beyond. We have made an effective start to the process of renewal.
The mantle of ministerial office has deeply afflicted Deputy Rabbitte.We still appreciate his sense of humour, but a sense of humour and barbed comments do not make for the type of debate we should be having on a budget. It is remarkable that we have descended to a level of personal abuse in this Chamber which I am quite uncomfortable with — that is not to say that it comes from just one side.
In his budget speech last week, the Minister for Finance made many claims and set out objectives about rewarding work, promoting enterprise and strengthening social solidarity. I agree with many of the Minister's claims. Work is the key to our success as a people and as a society. We should develop, foster and promote enterprise, and much of what the Minister says about business and the need to develop and participate sounds very good. The Minister says that Ireland must become a good place in which and with which to do business. The word "radical" has been bandied about by many Ministers in the context of the budget. This budget is certainly not that. It is a budget that increases our rate of borrowing at a time when we are better placed economically than we have been for years. It is a budget that increases spending by three and a half times the rate of inflation. It is a budget under which a worker on the average industrial wage will still pay a marginal tax rate of 55.75 per cent, exactly the same as before the budget. There is very little incentive for people to work harder.
The Labour Party, in its efforts to please as many people as possible, has forgotten the maxim that one can fool all of the people some of the time, some of the people all of the time but not all of the people all of the time. The Minister does not appear to have any underlying strategy and he has missed his opportunity. There is no radical reform of tax, rather a fiddling around with the system.
There are some good things in the budget, My party welcomed the abolition of PRSI on the first £50 of income per week. This does not go far enough. In 1987 my party advocated that the first £3,000 should be exempt from PRSI.
Why did we not avail of the opportunity of this budget to pay some of our debts? Instead, borrowing will be about £161 million higher than before. Perhaps there is a question as to why we need radical reform, but since we do not have radical reform, let us see what will happen if the more relaxed attitude of this Government continues. Exchequer borrowing requirement will be at the highest level since 1987. The underlying trend is even greater because of the delay in the receipt of the £124 million from the EU Structural and Cohesion Funds. Taking this and other factors into account, the Exchequer borrowing requirement last year should have been about £500 million, and this year's figures would be £990 million. A spot of creative accounting conceals the slippage in this year's budget. The current budget moved from a surplus of £15 million to a deficit of £310 million.
It is very difficult to discern a strategy when there is no commitment on the part of the Government to reduce the level of new borrowings in future years as part of a policy to consolidate the progress that has undoubtedly been made up to now to rectify the state of the public finances. Under the Maastricht guidelines the 3 per cent of GDP maximum level of borrowing has become a target rather than a maximum. Ireland is not in recession, and with this high level of debt overhanging us we have small justification for increasing our new borrowing requirement. Our level of debt now will not even stay static. In giving a little here and a little there and not attacking the tax system with true reform the Minister has allowed a golden opportunity to slip away.
It is wrong to say that the Progressive Democrats have not considered those people in receipt of social welfare benefits.At least when we were in Government we were not responsible for implementing a disgraceful increase of 2.5 per cent for social welfare claimants.