I welcome the Finance Bill. I also welcome the statement on a pilot scheme for the upper Shannon region. There is no doubt but that a number of rural areas will seek inclusion in the pilot scheme. Given the proper incentives and encouragement from the Government and the EU life can be restored to these areas, although perhaps not at the standard to which we had been accustomed. We have seen pressure on family farms and this will continue. We must put in place alternative employment and ensure a good cross section of jobs is available for skilled and semi-skilled workers and for graduates. A cause of great hardship in rural communities is the movement of graduates to large urban areas in search of employment. This issue must be addressed and I have no doubt it will be in the life time of this Government.
Finance Bill, 1998: Second Stage (Resumed).
I welcome the opportunity to speak on the Finance Bill and look forward to its successful passage through the House. A basic issue is income tax rates. Before the recent general election Fianna Fáil, in conjunction with the Progressive Democrats Party, gave a clear commitment to reduce income tax rates. We went before the electorate with that policy which a number of people described as flawed. It was said we should concentrate on widening bands, etc. However, the people supported our party and voted us into Government to pursue the policy we highlighted during the election. We said we would reduce the top rate of tax whereby people would in time pay no more than 50 per cent of their salary in PAYE and PRSI. The Finance Bill takes the first step in that direction by reducing the top rate of tax from 48 per cent to 46 per cent. More importantly, the standard rate has been reduced from 26 per cent to 24 per cent. These new rates constitute the single biggest reductions in income tax rates for some time. Overall the package amounted to approximately £500 million in terms of savings to ordinary taxpayers. It is important that this be spread throughout the PAYE community.
We also increased the bands by £200 for a married couple and £100 in the case of a single or widowed person. This will result in substantial increases in net take home pay for people in the PAYE sector.
Regarding rural Ireland, I am particularly pleased with the increase in allowances under the farm pollution control scheme. The eligible limit for a 50 per cent special year one capital allowance for expenditure incurred on necessary farm pollution control measures is being increased from £20,000 to £30,000 with effect from 5 April 1998. This will continue until 6 April 2000. This is important for rural Ireland and is a welcome additional incentive in the context of the problems of farm pollution.
The Finance Bill contains one or two novel aspects with which I am pleased. One of these concerns tax relief for company donations to charities. This issue has been debated for some time. The group representing the charities approached all the parties before the budget as they did in previous years. They received positive soundings from the previous Government but this did not translate into action. I am pleased that for the first time ever this level of tax relief for company donations to charities has been provided for. This relief will apply to all charities and not just domestic charities as announced on budget day.
A new element of the Finance Bill which is particularly welcome is the provision of tax relief on certain donations to disadvantaged schools. This constitutes a major innovation. There are some schools in every county with disadvantaged status. By their nature these schools have difficulty raising funds through the normal level of fundraising engaged in by the parents' council and the board of management. Now, a company which gives £1,000 to a school will receive tax relief. There is an untapped source of income for many schools in this context and I encourage the Department of Finance and the Revenue Commissioners to publicise this new relief as widely as possible as people are not fully aware of it yet. This provision will have major benefits for schools which have been unable to raise funds through local voluntary fundraising efforts.
I am also pleased by the provision for increased capital allowances for nursing homes. It is important that nursing homes which come up to the required standard receive additional capital allowances to allow for an increase in the numbers being accommodated. This is important given the ageing population and the costs associated with people maintained in hospitals run by health boards.
A longstanding anomaly in the taxation law relates to the commencement rules.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
On a point of order, it is clear that if quorums are called in this House, committees will be unable to operate their business. The committee I was attending, which was doing serious business, had to be suspended because a quorum was called. I hope, in the interests of responsibility and democracy, Deputies do not play games for the purpose of frustrating the other activities of the House.
I welcome the provisions dealing with capital allowances for nursing homes and look forward to their successful passage through the House.
I wish to refer to the tightening up of the commencement rules for income tax. For traders and professionals commencing business, there are different dates of assessment in respect of the first three years of trading. It has come to the attention of the Revenue Commissioners that many companies deliberately organise their business and taxation returns in such a way that they can avoid paying income tax by ensuring income falls within a particular tax period. There is evidence of abuse in this regard and I am pleased the Minister has put forward proposals to deal with it.
Significant change is proposed in regard to self-assessment, for people who make their own tax returns on an annual basis. For people paying preliminary tax for the years 1999 to 2000 the present deadline is 1 November 1999. It is proposed to extend that date to allow one additional month for the payment of preliminary tax. On the other side of the equation it is proposed to bring forward by two months the date for filing of returns, from 31 January to 20 November. There is no change in respect of payment of the balance of tax for the year. Complaints have been received from practitioners that by bringing forward by two months the date for filing returns difficulties will arise for small businesses and practitioners, but that is balanced by the fact that the date for paying preliminary tax is extended by one month.
When self-assessment was introduced some years ago the deadline for payment was set at 30 November. That date was decided so that it would not coincide with the tax amnesty, and in the Bill the Minister is simply changing the date. I am pleased the Minister indicated his long-term intention to bring the tax year into line with the calendar year. The fact that the tax year starts on 5 April is an anomaly. That type of tax year bears no relation to anybody's daily life and it has its traditions in a British calendar which was dispensed with many centuries ago. This measure is long overdue and I look forward to people's taxation returns coinciding with the actual calendar year. If that happens over the coming years, it will represent a major advancement.
The provisions in respect of the credit unions are being withdrawn completely. If there is one lesson which should be drawn from this entire episode it is that when an organisation such as the Irish League of Credit Unions makes proposals to the Department of Finance, it should ensure that it fully reflects the views of its membership. Because of the outcry since last week, it is clear to everyone that what was being proposed by the league to the Minister for Finance was totally at variance with its members' wishes and upset practically all of them.
We are all aware of the invaluable work the credit unions do. People avail of loans for back to school expenses, confirmations, holidays, cars, motorbikes, house improvements and other expenses as they may not have sufficient credit ratings with the local bank. Credit unions have provided, and continue to provide, an invaluable service. They have been badly served in recent times by the senior people in the organisation who may feel they had good reason for their proposals but who certainly were not in touch with their memberships. I am pleased a forum has now been established between the Department of Finance and the credit unions to discuss this issue throughout the year. The Irish League of Credit Unions should consult its membership and listen to their concerns. When they return to the Minister for Finance, they should return with views which reflect the concerns of their members and not views which have been dreamt up at national level. They caused unnecessary concern to their own members and it should be acknowledged that is where the proposals originated.
I welcome the reduction of the interest rate being charged by the Revenue Commissioners from 15 to 12 per cent. There has been a general reduction in interest rates in recent years and it is appropriate that the monthly rate be reduced from 1.25 to 1 per cent. The corollary of that is that those tax payers who were paying their tax in advance or had overpaid their tax were getting——
—— a very nice return.
The extraordinary 15 per cent rate of interest being provided by the Revenue Commissioners was totally out of line. I am very pleased the 12 per cent rule has been introduced and even at that I believe it is very generous. I hope the Revenue Commissioners will ensure this interest is only paid to people who have genuinely overpaid their tax bills rather than those who deliberately overpaid it to avail of this interest. I do not know how that can be done but I hope it can be examined on Committee Stage.
I acknowledge this is the first time ever that the amendments to the Finance Bill will be made with reference to the Taxes Consolidation Act 1997 which was a tremendous volume of work put together by successive Ministers for Finance in recent years. We now have a composite Taxes Consolidation Act which will make the work of amending a Finance Bill such as this considerably easier in the coming years.
A number of restrictions have been placed on the capital allowances available in respect of people investing in hotels. I am pleased to note this does not apply to owners and operators. The restrictions seek to specifically exclude high income earners who invested in hotel projects without having any hand, act or part in their management but merely used them as vehicles to reduce their income tax bills. These provisions specifically exclude a number of Border counties which have not done as well as other counties in terms of hotel development in recent times. The list of counties should be extended on Committee Stage to include counties such as Laois, Offaly and others in the north Munster area. Over recent years, there has been a plethora of hotel development in major cities but some rural counties such as Laois have received no hotel developments under this scheme and it is appropriate that they be given an opportunity to get one or two good quality hotels in the county to improve the business environment and the potential for tourism.
One of the biggest announcements made in respect of the Bill relates to urban renewal although provisions in respect of this are not contained in the Bill as published last week. An announcement was made at the weekend that the current urban renewal scheme is being extended until 31 December 1998. The deadline for completion of projects had, until now, been 31 July but this additional five months will allow for the completion of a number of major projects throughout the country, 12 of which are based in Portlaoise. This extension will allow for the development of a multi-screen cinema complex and additional shops and houses in Portlaoise. The extension will allow schemes which were at an advanced stage to be completed and without it they would not have proceeded. I particularly welcome that measure, details of which will be announced on Committee Stage. I welcome the fact that all towns and cities included in the scheme will be able to avail of this extension. I also welcome the fact that the Minister announced he would bring forward taxation proposals in respect of the new urban renewal scheme on Committee Stage. I look forward to discussing these to ensure they are provided in areas which need extra tax relief for the integrated schemes which are planned. It is important to state that the location of the towns and areas concerned will not be revealed on Committee Stage but will be based on recommendations made by the Department of the Environment and Local Government on the basis of submissions received from local authorities. Only the financial and taxation incentives which will apply to these areas will be discussed on Committee Stage.
I have heard a great deal of discussion here today about the economy and house prices. As a new Deputy in this House, the enormous increase in house prices is one of the issues about which I am most concerned. This is a taxation issue, a grants issue, a land availability issue and a profit issue and all of these issues will have to be brought together before this problem can be solved. I look forward to the Government working on this problem in the months ahead as I consider it to be one of the priorities with which the Government must deal.
I welcome the publication of a White Paper on rural development by the Department of Agriculture and Food and I hope to make some proposals for taxation incentives on Committee Stage whereby people could avail of tax incentives for investment in their own area rather than having to invest in an urban renewal scheme in a neighbouring town.
I compliment Deputy Fleming on his contribution and I apologise to him for the disruption which occurred in the middle of it. I suspect he will be here for a long time and will come to understand why these things occasionally occur. While I compliment him on his speech, through which his financial and accountancy background became apparent, the political spin he attempted to put on the reasons the Minister for Finance shot himself in the foot in regard to the credit unions, displayed the dispassionate exposition one would come to expect from an accountant but unfortunately it will not wash. To fall on one's sword on behalf of one's general is perhaps a testimony of loyalty from a new lieutenant——
The Deputy would know a fair bit about that himself.
I do and I have a few scars to show for it. However, I survived them and Deputy Fleming doubtless will too. If that is the spin emanating from Upper Mount Street, it will have to be better polished because it simply will not wash. The Deputy has doubtless been in the company of Mr. Tony Smith and other members of the Irish League of Credit Unions at the AGM in Killarney or in various parts of the country. I met an avid member of the credit union movement, who has a furniture shop in the Deputy's native town, on the train to Killarney last spring. The idea that head office is not in touch with those people simply will not wash. Nevertheless, it was a loyal and reasonable effort to put a few bandages on the corpse and the Deputy should be complimented on it.
He was shot to death.
The Finance Bill is, if nothing else, honest. Running through it is Deputy McCreevy's long held Thatcherite view that if one looks after the rich, the poor are forced to look after themselves. If there is one defence to be made of Deputy McCreevy, it is that he is both honest and consistent. As Minister for Social Welfare he sought to attack the position of the least well off in society. His first Finance Bill is simply more of the same.
What should this Bill have sought to do? It should have made it easier for people to move from welfare to work by increasing personal allowances substantially. It should have removed workers on average incomes from the marginal tax rate and buttressed social partnership, which is already under threat from the outrageous behaviour of the management at Ryanair. The Minister has tackled none of these issues. He has succeeded only in exacerbating the problems. In that sense, this is a highly irresponsible Bill from an irresponsible Minister.
Thankfully, the Minister has been forced to withdraw his proposed changes to the taxation of credit union earnings in a public and humiliating fashion. Last week on the front page of The Examiner the Minister was hung out to dry by the Taoiseach. Taking their lead from their party leader, Fianna Fáil backbenchers soon followed suit, some with less elegance than the previous speaker. However, in fairness to those backbenchers, their political antennae are more acute than those of their Minister who defended his policy approach on radio over the weekend. I was mesmerised as I listened to him digging himself deeper and deeper into a hole on midday last Saturday. He was clearly unaware the ground would be swept from under him and that he would be buried in the mess he had created.
The Minister did not act alone. These measures were brought before the Cabinet and its members agreed to them. The outrage expressed by the public at the Minister's intentions appears to have passed him by. He sees no reason there should be dissent from his intention to impose obligations on credit unions which he has not imposed on either banks or building societies. He does not see a contradiction in his pursuit of credit union savers and his Government's refusal, ably argued by the Minister, to open the Ansbacher accounts to full and public scrutiny. That is either arrogance or mere simplicity on his part. I believe it is the former because nobody could accuse the Minister of being simple.
As Deputy McDowell pointed out last night, the Minister is an old-fashioned class warrior for the affluent sections of society. However, competence is important. The Minister is so out of touch with reality that he is obviously impervious to advice. His attempt to implicate the Irish League of Credit Unions in his proposals was the act of a Minister with his head in the sand.
On the most significant issue facing the country since independence, the advent of the single currency, the Minister has also adopted a head in the sand or, as he prefers to call it, a "buttoned lip" policy. That policy is not conceived in the national interest but in the Minister's fear of his capacity to get it right. Despite advice from economists, stockbrokers and commentators that he should declare the rate at which Ireland will enter EMU, he has refused to act. In the absence of direction from the Minister, the markets have made their decision.
What else can one expect from a Minister who is so in thrall to Thatcherite ideology in respect of markets? How dare a Minister deem to or contemplate intervening in a market mechanism? If the market is to decide everything it should not be interfered with, particularly by a politician. This appears to be the Minister's ideological position and at least it has the merit of being consistent. However, the Minister has gambled that entry at the rate set by the market will not have inflationary consequences. While he is known to be fond of a flutter, on this occasion he is not gambling with his own money.
Much attention has focused on halving capital gains tax and the Minister's failure to explain why he believes it is necessary. He does not see the need to vindicate his decision. It is a good idea merely because the Minister thinks so. He believes his job is to facilitate the serious wealth earners in this economy at the expense of the ordinary taxpayer. That it will further exacerbate the housing crisis for young couples appears to be of little concern to him.
The Labour Party will table amendments to reverse this proposal. I do not expect the Minister to accept our arguments, which are based on social equity, so we will table additional amendments to exempt property from the overall measure and to impose a time period for which property must be held before the owner can avail of the reduced rate. If the Minister accepted the first amendment, the other would be redundant. I do not expect him to do so but he should be given a number of opportunities to intervene on behalf of people who are currently being priced out of the housing market. When he fails to act, he can explain why they are being denied a basic right, a right their parents had. Contrary to the line being spun by Fianna Fáil contributors to this debate, the measures in relation to capital gains tax impact considerably on the ordinary taxpayer.
The Minister's ideological approach to taxation policy carries over to the changes in income tax proposed in the Bill. In response to parliamentary questions he has been forced to concede that these proposals will lead to an increased number of people paying the higher rate of tax. If one were to read the various political spins on the budget, which were put out with dramatic failure by Fianna Fáil advocates and apologists, one would think this measure had resulted in a reduction of the number of people paying tax at the higher rate.
That is because there are more people working for higher incomes.
Listen to the parliamentary replies from the Civil Service.
The Minister's refusal to index the bands and personal allowances instead of reducing the rates was designed specifically and exclusively to benefit the better off. It was known who would benefit in the Law Library. The business classes which would benefit from this measure were known. They were so far away from marginal relief with regard to bands and allowances that the only way to deliver the money to that group of people, who were not shy about making contributions to the political parties on the other side of the House, was to reduce the top rate of tax by 2 per cent. It is no surprise that the Minister has been forced to concede, under the pressure of parliamentary questions, that the declared intent and effect of the measures are at variance with what has happened.
The benefit accrued to marginal rate taxpayers, regardless of their income, will be 2p. Increasing the bands, which we proposed, would have led to benefits of about 20p or 22p for each pound by which the band was widened.
There are four budgets to come.
Take the example of a person earning the average industrial wage and paying the higher rate of tax. There is no question about which approach available to the Minister would have benefited such a person. However, the Minister is not in politics to look after these people and, self-evidently, neither is Deputy Harney.
This Bill is wrong. It runs counter to the spirit of Partnership 2000 at a time when other issues, about which this Government seems determined to do nothing, have tensions running high. It fails to increase incentives for people to move from welfare to work. It fails on any objective test of fairness. It will undermine any approach based on consensus and mutual support, to resolve the serious problems facing this country.
The Taoiseach, who, unlike Deputy McCreevy, has a reputation for looking after the man and woman in the street, is notable only for his inability to rein in the excesses of his Minister for Finance. His reaction to the changes in credit union taxation announced last week, which he approved at Cabinet, was more akin to that of Bart Simpson —"What Bill? I did not see any Bill. It was not me, I was not there and even if I was you could not prove it. Nobody saw me." This sentiment ran across the headlines of what used to be known as The Cork Examiner but which is now, following the demise of the Irish Press, known as The Examiner.
It is a great supporter of my party and always has been.
Deputy Quinn's address will not go down in history.
A paper from Deputy Michael Ahern's province quoted the Taoiseach as trying to distance himself from his Minister for Finance. It is clear the honeymoon this Government thought it was having is definitely over. It is staring at defeat in two by-elections. In the absence of any real leadership, the Government is floundering from one crisis to the next and sections of the Cabinet appear to be in a state of paralysis. This Government needs manners put on it and I am sure that given the opportunity, three weeks from today the people of Limerick East and Dublin North will take up the challenge with relish.
I am delighted to speak on the first Finance Bill presented by Deputy McCreevy. The Minister has received some stick for this Finance Bill and his budget speech. The method of personal assassination disturbs me. Policies are ignored because the truth does not read well in the context of the plans of those opposing the Minister. They know the facts will give the lie to the picture that is painted of the budget and the Finance Bill.
The Bill gives effect to the budget which cut tax rates for one million taxpayers by 2 per cent and increased tax bands. For four budgets under the previous Government, there was no decrease in tax rates although there was widening of tax bands, as there was also this year.
There was.
The Deputy should check his records.
The previous Government had its chance but did not take it.
This budget and the Finance Bill will be seen from 6 April next to be the most beneficial for many years.
The Opposition parties, especially Deputy Noonan, attempted to portray the budget and the Finance Bill as an attack on the poorest and weakest in our society. The facts contradict this. When one remembers Deputy Noonan's history, including the "can of worms" statement, it shows he does not allow the truth to get in the way of a good story.
The tax deduction package of £500 million is the highest ever tax handout in the history of the State. Allied to this, the Minister has closed many tax shelters used to reduce tax liability by some of the wealthier members of society, to ensure greater equity in taxation.
With increased exemption limits, thousands of people will be taken out of the tax net. Deputy McCreevy said the take home pay of a single person will increase by 2.5 per cent to 4 per cent. Taking the average industrial income of £14,000, this means £350 for a single person and £560 at the higher rate, which is £6.70 to £10.77 per week. For a married couple with two children the increase will be from £6.70 to £14.80 per week. These are real increases, not the fiction we heard from Deputy Quinn.
Listening to Opposition speakers, one wonders whether they bothered to take the time to read the Bill or the Memorandum, or listen to the Minister's speech. I will mention some of the sections which will highlight how positive this Bill is, how it will help job creation and social inclusion and how it will provide better facilities and a more equitable tax system.
Employees holding shares in their company were previously required to hold them for five years before disposing of them as otherwise there was a clawback. Section 10 reduces this period to three years. This is a welcome provision which helps employees. Section 11 is an anti-avoidance measure which will stop people transferring assets offshore in order to avoid tax on income arising from same. Job creation is highlighted in section 12 which contains a relief to encourage the long-term unemployed to take up employment. It gives an incentive to employers, as well as employees. Employees receive an increased tax allowance for themselves and their children. Employers are given extra allowances against their profits. This is a double deduction for wages and PRSI. It is a welcome job creation provision aimed at putting the long-term unemployed back on the jobs market.
Section 13 is a welcome provision socially and gives tax relief for gifts, in money or in kind, to help socially and economically disadvantaged schools. Many of these require extra funding and people now have a greater incentive to contribute. Section 17 provides for the granting of capital allowances for the construction, extension or refurbishment of buildings to be used as private nursing homes. We appreciate the need for good quality accommodation for the elderly. As our population grows, the Exchequer cannot cater for the demand. It is important that private investors can provide that accommodation at a reasonable cost.
Section 18 covers the fishing industry. Fishing is one of the greatest sources of wealth in this country. The quality of fishing fleets is a problem. The Minister provided for accelerated capital allowances at 50 per cent of the cost in year one and the balance over the following seven years. Relief will be set off against other income or profits which means it will be worthwhile investing in new boats.
Sections 20 and 21 refer to the extension of determination of tax relief on multi-storey car parks and seaside resort schemes. This is essential as lack of car space is a problem in every town and city. Many seaside resort schemes were held up because of planning objections etc. The Minister extended the termination date for these projects. This will ensure they are completed in due course and do not become eyesores.
Sections 24, 27 and 28 provide closing of more tax shelters. People have been calling for more equity in the tax system for many years. The Minister noted their concerns and included these section in the Bill.
Section 24 limits the amount of capital allowances on buildings that can be set off against non-rental income. This is another provision which Deputy Noonan forgot in his invective. Under this measure people can set off their capital allowances on buildings against income derived from rent, but not against all their income. Wealthy people tend to invest in property in towns like Youghal and Clonakilty, where special allowances apply, and this puts house prices out of the reach of locals. Curtailment of the capital allowances set off against non-rental income will go some way to help resolve that problem.
Farmers are finding the going tough. Pollution controls are being implemented more strenuously and, consequently, many farmers have to carry out expensive pollution control works. I welcome the increase from £20,000 to £30,000 for capital allowance purposes. Section 31 amends the special temporary scheme of 100 per cent stock relief for certain young farmers for a further two years.
Section 35 includes another anti-avoidance measure under which scrip dividends will be treated the same as cash dividends. It provides that the issue of a scrip dividend will give rise to an income tax charge under Case /V of Schedule D for unquoted companies resident in the State and under Case III of Schedule D for companies resident outside the State. This will mean that in future people will have to pay tax on scrip dividends.
Section 37 provides for a number of changes in the self assessment system. The return filing date will be brought forward from 31 January to 30 November in the year following the year of assessment. As an accountant I am well aware of the reasons for introducing this measure. Most accounts are not submitted until three or four months after the preliminary tax date, but they are the previous year's accounts. For example, the 1996-97 accounts were submitted in January of this year but the 1997-98 preliminary tax was payable on 1 November last. Therefore, people to avoid interest charges were required to pay 100 per cent of 1996-97 tax bill or 90 per cent of the 1997-8 tax bill. As the 1996-97 tax bill for most taxpayers would not be calculated by 1 November, the preliminary tax payment in most cases would therefore be a shot in the dark.
Many small accountants may find it difficult to reorganise their work in the two month period, but there must be a coterminous date. Using the calendar year for accounts purposes and filing them six to nine months later might solve many of the problems in this area. I am pleased the Minister decided to hold off on this measure until the matter has been properly discussed.
The reduction from 40 per cent to 20 in capital gains tax has been scarified by the Opposition. The rate was increased to 40 per cent some years ago because of an increase in inflation. Inflation and interest rates have decreased. People, many of whom were not wealthy, would not sell their properties because they would have to pay 40 per cent capital gains tax. The reduction in the rate will encourage people to sell these properties.
The credit union issue has caused great concern. Having listened to Deputies Rabbitte, Noonan, Quinn and others, it is evident they are ignorant of the tax law. Tax was due on interest and dividends, irrespective of whether it was being paid, declared or not. I will give a simple example of what DIRT at 20 per cent would have meant. A person with £1,000 on deposit would be liable to £50 interest. The 26 per cent tax rate plus levies equals £14.12 and the 46 per cent tax rate plus the levies equals £25.12. DIRT would have been at 20 per cent i.e. £10. Thus, there would have been a saving of £4 for taxpayers on the lower rate or £15 for taxpayers on the higher rate. The Minister was giving back money to people. The main concern, however, was about reporting. I am pleased the Minister has referred the matter to a working party where the problems can be discussed in detail. There was a great deal of mischievous misinformation about the matter because of the forthcoming by-elections. The truth did not matter. When the measure was considered in detail people realised they would have benefited.
The Government has addressed the sectors of society that need help. The Bill is pro-taxpayer, pro-employment, pro-job creation, pro-greater tax equity and pro-development of the economy.
The budget and the Finance Bill that gives it legal effect contains many innovative measures. The Opposition latched on to a few matters and made much hype about them. We cannot ignore the fact that the amount of relief given to PAYE taxpayers, totalling approximately £500 million, is the greatest ever. While I accept people might differ about the way that should be shared out, there was a huge payout to the PAYE earner. Some single people will benefit to the tune of 4 per cent in their net take home pay and married people with a family will receive an increase of 5.5 per cent. Those are considerable increases.
There have been many snide references to the rich and people in the Law Library. That is nonsense. We are talking about people on the high tax rate, but who earn approximately £15,000 or £16,000 per annum. In one's wildest dreams one could not consider such people rich. They may be in the high tax bracket, but people reach that bracket far too soon. Unfortunately, there was not much improvement in that respect this year, but it is difficult to tackle all problems at the same time. The Minister took the view that if he fiddled around with several areas he would not make a meaningful impact. He targeted the tax rate and made meaningful inroads. I hope other aspects will be considered in future budgets.
Last year I raised the issue of exemption limits following which a detailed discussion took place on Committee Stage. The people who suffered were those over 65 who did not get the general tax increases because they were on the exemption limits. This year, those over 65 have regained some of the ground lost last year but for some reason, those under 65 have been harshly treated. The policy of the former Minister for Finance, Deputy Quinn — based on some internal report which seemed to suggest there were too many people on the exemption limits — has held through two different Governments. There may be good financial reasons but it is a scandal that individuals have to suffer because of some report.
While the personal allowance has increased by £250 for a single person and £500 for a married person those on exemption limits are receiving only £100 or £200. That is unfair, it is a repeat of something that happened last year and emanates from some report in the Department. I wish some Minister of some Government would bury the report and not sacrifice any element of the taxpaying population in a particular year.
The age allowance should be improved. I meet many pensioners who complain bitterly that they are paying tax on their social welfare or occupational pensions. There will never be a time when pensions will be exempt from of tax but we should move in the direction of increasing the age allowance which would make some progress in that direction.
There are many welcome provisions in the Bill including inducements to the long-term unemployed to take up employment and the tax allowances being offered to them are generous. I hope it will not upset people who work with them. This puts paid to the argument that some unemployed people have no incentive to work. The inducements being offered are generous and encourage the employer to recruit people who have been long-term unemployed. I agree with the measures proposed in that regard.
There are some good sections which provide for reducing tax shelters which in the past a small number of wealthy individuals have used to the maximum.
Section 13 provides for tax relief for corporate donations to schools in disadvantaged areas. A similar provision applies tax relief on donations to charities. Those are welcome measures as is the incentive to people to build nursing homes. Provision is made also for a reduction in VAT on magazines.
A further section deals with unmarried brothers and sisters living in the family home. I recall three or four sets of such people who as siblings died and the house was passed on had to pay inheritance tax a couple of times. It is reasonable to pay tax when a property is passed from one generation to another but when three or four brothers and sisters have to pay it time after time it is unfair. I am pleased relief has now been provided. I understand people are not totally happy about it and given the rate at which the value of property is increasing, some will be clawed back into the system. However the relief is targeted at a real anomaly and I am pleased it has been addressed.
Last week the Opposition was worried about the late opening of bookmakers shops. I have no problem with that and I do not know what the objection is. That the law is changed in relation to bookmakers shops, pubs or anything else does not mean an individual has to work more hours per week. Those are matters to be worked out between employer and employee. We are all aware there are many evening race meetings. Those who are interested in backing a horse still do so. The question is whether the bet is legal or illegal. I see no problem whatsoever with bookmakers shops being open a few extra hours on a sunny summer's night.
There has been an extraordinary fuss about taxation of credit union savings. I am not trying to take from the good work done by the credit union movement in the past but much of what has been said in the past week is in stark contrast to the positive approach adopted last year when people lobbied us to have the Credit Union Bill introduced. The credit union needs to make up its mind on whether it is the poor man's bank or a big financial institution. The problem is that some credit unions are into the big league and some are not. It is like a committee in any walk of life, committees can speak with different voices on different nights depending on who attends the meeting. There are too many spokespeople in the credit union movement, all of whom speak from their own points of view.
The credit union movement magazine which arrived yesterday announces the official opening of its new office block in prestigious Lower Mount Street on 21 February. In the past it had an old office in the suburbs but it is moving to downtown Dublin to rub shoulders with the financial elite. It will have to make up its mind whether it is small fry or big fry. If it big fry and has legislation geared to its status it will have to take the rough with the smooth. Some of the stories last week were extraordinary. However I understand the media is looking for material and has to sell newspapers and encourage people to listen to radio and television programmes. There was nothing meaty in the stories but the media just had to wind up a few people. It all created a nice image and in the context of other financial matters it was probably a good story to run with for 24 hours. However, the manner in which the whole issue was handled by the media was scandalous particularly in view of the letters which had passed previously between the credit union movement and the Minister who did as requested.
While some of the credit unions are large and have total assets of £2.6 billion, some are small and provide the same service as in the past.
An aspect of the budget I do not like, and which is linked to the credit union, is the proposal to increase DIRT on special deposits. When my colleagues in a previous job get their lump sum, and go on early retirement, and invest it they pay a low rate of tax on the interest. That special low rate has been changed by both Governments. Unlike ten years ago, the Department of Finance is of the view that there is no threat to exchange controls. I am worried about the small saver because deposit interest rates are pathetic. It is predicted that when we join EMU mortgage interest rates will fall. This means deposit interest rates will also fall. I am concerned about the image being created. There is no respect for old fashioned values. People are not being encouraged to be thrifty and to save for a rainy day. The major financial players, be it the Irish Permanent or the AIB, have reported large profits. On the other hand, those with a few thousands pounds on deposit are being offered buttons. If interest rates fall, consideration should be given to encouraging people to save rather than live for today and to hell with tomorrow.
I wish to share my time with Deputy Gormley.
Is that agreed? Agreed.
There is no need to dwell in detail on the positive features of the budget because anything that was given has been taken back 45 times over by the Government. On balance, given that there was £500 million available, the rich did better than the poor. The correct balance was not struck. As happens when people break their pledges, there is trouble brewing. It appears that some in the trade union movement are far from happy about the way the benefits were distributed.
This is a crucial time for the economy. As legislators, we should consider which sectors are performing well. During the past seven or eight years there has been a high level of investment. The construction industry is performing well; job creation has been nothing short of phenomenal; interest rates and inflation are low, while the IDA has been very successful in attracting foreign investment.
There are, however, dark clouds on the horizon as we approach EMU. Restrictions could be placed upon us. If we join EMU at the middle rate of 2.41, some sectors of the economy will go through a rough time. If we join at a lower rate, this will create havoc in the agriculture sector. As we are all aware, we will not attract the same level of Structural Funds as in the past. Countries with weaker economies than ours are seeking to join the European Union and they will have to receive their share of the cake. There is a need for sewerage schemes and improved water supplies in many small towns and villages. The road network also needs to be improved. Who will make up the shortfall in funding? We will have to fight harder to ensure most parts of the country but particularly the west, the midlands and the Border counties retain objective one status.
I had to smile when Deputy Noel Ahern tried to blame the media for the credit union fiasco. The entire Cabinet is involved in the formulation of the Finance Bill. It is comprised of 15 experienced Ministers who decided in a cold and calculating way that the 2.8 million credit union investors who save to spend——
What about the tax on children's shoes?
It is clear, when one considers what has happened since they got their hands on the propeller, that Members on the Government side were shedding crocodile tears on the Credit Union Bill last year when on the Opposition benches. The Cabinet decided to tax the small man. That is the philosophy underlying the Bill which has shades of the men in mohair suits in Fianna Fáil in the 1960s. Were it not for the efforts of the three Independent Members it would become law within the next few days. The Cabinet was going for the jugular on this occasion and the Minister for Finance, unjustly, has had to carry the can. That is the reason the people will never give Fianna Fáil an overall majority. Fianna Fáil will not win the two by-elections either for the simple reason that nobody trusts it. This is the most serious injury inflicted on it since it took office.
The legislation that Deputy Rabbitte piloted through the House last year placed the credit union movement on a sound footing. I hope it will prosper and be able to rub shoulders with the best on the high street. Small is beautiful. It is a co-operative movement and the backbone of the country. At times it appeared as if Deputy Noel Ahern was sneering at it.
The Deputy is misrepresenting him.
The Bill has a number of positive features. Section 17, which deals with the provision of relief for private nursing homes, is a step in the right direction and an excellent idea. They appear to be based in every rural village and there must a need for them given that there are now so many elderly people. It appears that aspect of rural life will continue to flourish. I hope the subvention will be increased in line with the costs of staying in a nursing home.
I am not sure how the Minister for Education and Science will deal with the provision for tax relief on personal corporate donations to disadvantaged schools. I hope the disadvantaged areas will not include only the inner city. There are disadvantaged schools in rural Ireland and I assume that provision will be extended to them.
Wearing my hat as chairman of the Fine Gael agricultural group I met a deputation from the IFA pigs committee last week. Because of recent rules laid down by the EPA, pig farmers will no longer be allowed to stock their animals at the same intensity as they did. They will be required to keep fewer pigs in each pen. I agree with that, but the implication is that pig farmers will have to double the size of their piggery buildings. As Members will be aware the provision of such buildings is very expensive. I and the Fine Gael spokesperson on agriculture and food, Deputy Coveney, will table an amendment to the Bill to ensure a special allowance will be made available to pig farmers who have to provide such buildings to ensure the pig industry is kept on an even keel.
A line was devoted to the rural renewal scheme in the budget and another line is devoted to it in the Finance Bill. If there was good news about that scheme I am sure we would have heard a good deal more about it. I hope that scheme will not be a "lucky bag" job and that whatever will be provided will be relevant to the depopulated areas along the banks of the Shannon. I hope the scheme will be people oriented and will not deal only with habitats and so on. I await its provisions with interest. Unless enough people are living in a rural area such a scheme will not generate the type of activity that is needed.
I hope the urban renewal schemes when announced will be realistic and will enjoy the same success as the old ones. I will make a strong case for Tuam in County Galway. It missed out on a number of occasions in the past and I hope it will be included this time.
I thank Deputy Connaughton for sharing his time with me. The debate has run on fairly predictable lines. The Minister began by singing the wonders of his legislation, he was quickly followed by his acolytes who supported him and Opposition speakers accused the Minister of all sorts of inadequacies and claimed his policies will result in dreadful consequences. As an Opposition speaker I will shortly line up my pot-shots at the Minister and the policies of the Government, but there are areas in the Bill that should be acknowledged. Efforts to tighten tax loopholes to make tax evasion more difficult must be welcomed, even if the general public have a right to expect even more of the same. Difficult as it is to slip from the Opposition mindset, it is difficult to commend the Minister too much because in the areas where he is heading in the right direction he seems to be heading forward somewhat slowly and grudgingly. Given the leeway he has had to initiate major change and reform, he seemed to travel a most peculiar route, eliminating very few tax anomalies but helping to create and to exacerbate social anomalies where those who have are to receive more while those who have not must wait.
The Minister may argue, as have his lapdogs in this debate, that this Bill is but the first in a series of Finance Bills that will bring about social equality. If that argument were true and was not just a desperate attempt to cover the shame the recent budget brought on the Government, it means the areas the Government and the Minister have chosen to highlight first are those issues that benefit the better off in our society. By his actions the Minister has shown himself to be practising the doctrine of "the poor must wait".
The Green Party views this Bill as it viewed the budget, as yet another exercise fiddling around the edges of a system that is beyond reform and needs to be utterly and totally reconstituted. The ways in which the Government acquires finances and the ways in which such funds are spent are typical of a system that thrives on anomalies and laughs at the idea of social equity.
The debate which surrounds the fair payment of taxes has concentrated on the difficulties of the PAYE earner. It is undoubtedly true that of the total amount of taxes collected here too many of them are collected through the PAYE system and that within that system too much of the burden is carried by low and middle income earners, but it is also true that the total amount of owed taxes collected here as a proportion of gross national product is among the lowest of all the OECD countries. That must mean there are many citizens who are paying very little tax, a disparity this Bill is helping to further entrench.
The Green Party has consistently asked several of the previous Ministers for Finance to seriously consider the ideas of green taxation. Some of those Ministers have paid lip service to the idea, promising that their next budgets and future Finance Bills would contain such principles, but unfortunately the scripts remain unwritten. The greens believe that the use of fiscal and other measures can reward beneficial activity and discourage harmful practices. If properly introduced, green taxes can more fairly distribute the tax burden and introduce true tax equity into the system. A major green tax would be the introduction of a carbon-energy tax. If operated as proposed, it could raise a considerable amount of revenue, some of which could be offset against taxes currently raised against labour. Such remodelling of the cost structure would increase the costs of resources, but would reduce the price of labour and would act as an incentive to increase competitiveness in general. Such economic benefit would be matched by considerable environmental improvements. However, the response of the Minister for Finance has been the same as that of his predecessors. He is indifferent to radical tax reform. He must be aware that the impending arrival of tax harmonisation within the European Union will mean that such taxes will have to be introduced, but if he approaches it the way he is going about it these taxes will be introduced as additional and not as replacement taxes.
The area of transport is particularly well placed to benefit from the introduction of effective green taxation. Our system is riddled with anomalies where free car parking spaces are provided to employees and where employees who receive free bus and train passes are taxed as having benefits in kind. Travel expenses, particularly in the public sector, are seen as a means to increase income, but the financial incentive for public sector workers is to drive as often as possible, as far as possible and in as big a car as possible with the maximum detrimental environmental impact. An imaginative Minister for Finance would reverse the travel expenses system so that those who choose to travel by means of public transport would receive the highest rate applicable.
In waste management the proper application of "the polluter pays" principle would go some way towards reducing the massive subsidy that local authorities continue to give away to throw-away societies. This does not need to be an additional tax. At present consumers give 15 per cent of their spending money to retailers for packaging they do not need and which they immediately dispose of. As a Deputy for County Kildare, where the monument that is Kill waste disposal site is located, the Minister for Finance must be aware it is madness to adopt this sort of approach.
With regard to planning, the untenable increase in house prices can be curbed by the introduction of a series of price controls and through the imposition of a windfall tax on the increase in the value of rezoned land.
The only green initiative in this Finance Bill is the promise of measures to develop wind power generation. This initiative, however, is on so small a scale that it does not even begin to consider other forms of alternative energy such as solar energy.
The Minister of State, Deputy Cullen, said he will be looking with interest at the forthcoming UK budget to see if the British Chancellor of the Exchequer follows the lead set by the Government in fiscal and taxation policies. The Green Party is the only political group to have advocated initiatives such as a 10 per cent starting rate of income tax and a planning windfall tax, measures now being considered by the British Government.
Short of being in Government, the Green Party's ideas will not be implemented. I look forward to the time, however, when — like our colleagues in Finland, Italy and probably in Germany after next October's election there — the Greens will participate in Government. In that case we will be able to put forward these ideas. Who knows what will happen in the forthcoming by-elections? We may be approached at some stage for support, but that is in the future.
If the Minister does not conform to green economic ideals, I hope he can produce a social policy in the best interests of the country. The Finance Bill is a Government measure, passed and approved by the Cabinet. When the Government signalled its intention to attack the savings of small investors in the credit union movement it did so on a collective basis.
Paradoxically, there are areas that require scrutiny if the Government is serious about tackling tax avoidance. Even seemingly innocuous means, such as An Post savings bonds and Government securities, can be used to dispose of hot money. The Finance Bill could be used to reclaim moneys and additional interest earned on these schemes if the moneys involved were shown to be linked to a deliberate avoidance of tax.
The changes in capital gains tax have been commented upon by previous speakers. I regard the halving of capital gains tax to be an obscenity. Halving the rate of that tax only benefits those who already have wealth. It is yet another lever to widen the growing chasm between rich and poor. The increase in the proposed reduced capital gains tax allowance is further evidence that the Minister responds only to those who are wealthy.
Some of the initiatives announced in the Bill are quite bizarre. The proposal that betting shops should be open longer demonstrates a peculiar sense of priorities when so many social problems remain to be tackled. It shows the Minister still has to learn the lesson of why there was so much public dissension about the £20 million granted to the GAA in the budget.
Tax incentives for seaside development and the Dublin docklands need to be examined in greater detail on Committee and Report Stages to ensure the right type of development is encouraged. Previous experience of the urban renewal scheme in particular, saw over development in apartment accommodation without proper emphasis on social housing and a consequent deterioration in community life. I speak from experience about this because we have seen the number of apartments that have been constructed in the Dublin docklands area. Zoe Developments is proposing whole areas of the docklands for huge development, but many people in that community are worried about the development of high rise buildings in their areas.
Would the Deputy prefer to see derelict sites there?
Or the green fields being built on?
They are dumps.
I would not prefer to see derelict sites, but the community would like to see social housing which people can actually afford. I am sure the Deputies are aware that many couples cannot afford to continue to live in their own areas due to the rise in house prices. The docklands area is a charter for developers, but allowances should be made for social housing. We have been told that 20 per cent has been set aside for social housing, but since there is no legally binding commitment the developers can promise as much as they like. If this is to be a success we must have social housing. The matter needs to be addressed on Committee stage.
As the only Deputy who lives in the Dublin docklands area, I will not tolerate people giving a blank cheque to developers. That simply is not on. Seemingly, they have plans to construct buildings from ten to 14 storeys high, but people in Ringsend and Irishtown will not accept that. I live in Irishtown.
Is the Deputy not worried about the countryside?
The Deputy can support his constituents and I will support mine.
I am just pointing out the rag bag of contradictions in the Deputy's policies, that is all.
What does the Deputy mean? There is no contradiction. The Deputy will have an opportunity to speak for himself.
The Deputy should proceed without interruption.
The Deputy and I share an aversion to much of the rezoning that has gone on. We have that much in common, at least.
The question also needs to be posed as to why so much attention is being placed on the reduction of corporation tax levels. What benefit is accruing in terms of value added to the economy in relation to this generous regime?
I listened to Deputy Connaughton earlier speaking about EMU and it seems more and more people are becoming worried about it. I am reminded of Dr. Samuel Johnson's comment that: "When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully". The debate on this important issue is now heating up. We know about the problem associated with the housing market and if interest rates drop, as predicted, we will see more of that occurring. We need to address the important issue of rising house prices. Young people cannot afford to buy a house. It is completely out of their range. We have lost many opportunities in this Finance Bill and while it goes some way towards tackling some of the problems, it certainly does not address the real problems of social disadvantage.
With the permission of the House I intend to share my time with Deputy Daly.
I have listened to much of this debate with great interest, although the debate on the Finance Bill has become something of a farce. The Finance Bill has become such an unrelentingly complex Bill that it is virtually impossible to cover its entirety in a traditional debate format. It is interesting to note that the only person who attempted to cover the whole Bill was the Minister for Finance. Because of this rather extraordinary situation, after the Minister for Finance and the leading spokespersons have made their contributions, it would be prudent and wise to refer the Bill to a special Finance Committee of the House. In that way, real work could be done involving an exchange between Members and a cross fertilisation of ideas. While some of the ideas touched upon in this debate made good sense, others were patent nonsense. It behoves us to recognise that absolute wisdom does not reside in any part of the House.
However, we are stuck for the moment with the current format and I intend to focus my comments on five or six specific areas. There has been a quite extraordinary reaction to the general tax provisions in the budget. This has been a good budget and it is disingenuous of Deputies to suggest otherwise. It is a well crafted budget, except for one noteworthy slip, and it should be generously recognised as such. In fairness to Deputy Gormley, he made the point that valuable efforts were made in the budget to close off some of the tax breaks.
The second point with which I will deal is the Minister's new tax incentive scheme for hotels. Talking about tax breaks leads me specifically and aptly to this. I have some critical comments to make about it.
The third area about which I will talk briefly is the seaside resorts scheme, which is currently being reviewed. The fourth point is the issue of taxation on credit unions. If Deputy Gormley believes the only criticism to fall on the Minister's head over the weekend came from Independents, he is sorely mistaken. The most caustic commentary came from the Minister's side. To his credit, the Minister recognised an error and moved quickly to redress it.
The fifth point with which I will deal, which is not dealt with in this Bill, is escalating house prices. I will also comment on one or two other propositions made by the Minister and respond to one or two of the disingenuous comments which have been made.
By any objective standard the budget was a good one and the Finance Bill, which gives it effect, is also good. The Minister and his officials are entitled to credit for the good they have done, in the same way they are entitled to be criticised for things with which we disagree.
It is an extraordinary comment, an extraordinary attempt to mislead the electorate and it is treating the intelligence of the ordinary voter and taxpayer with contempt to say other than that this is a good budget. In the months since the budget was produced, there has been an attempt to distract from the reality. The budget introduced by the Minister was good and it should be welcomed. By objective standards, it is undoubtedly one of the best budgets produced in a generation. I say that having spent a considerable time in the past 30 years in the Department of Finance and at least a decade between this and the other House.
Let us remind ourselves of the realities. The budget delivered more over £500 million in tax breaks to ordinary taxpayers. That is the largest single return to taxpayers since the State was established. It is astonishing Members opposite should try to dismiss that. Some of the rhetoric we have heard in the past two days is astonishing, particularly that from senior spokespersons whose record is far from generous to say the least. They have tried to discount the reality that ordinary taxpayers have every reason to be grateful to the Minister for Finance. More grist to his mill and more strength to his elbow. I look forward to his next budget. If he can do the same again for ordinary taxpayers, I for one will be a very happy person.
I am amazed by the carping criticism, especially that from Fine Gael. To my mind, a budget which gives back more than £500 million to hardpressed taxpayers is something which should be welcomed on all sides, especially when it is compared with what was introduced in budgets by Ministers from other parties over the past 15 years. It is astonishing that a party which introduced a tax on children's shoes and had to go to the country over it should point a finger at this side of the House as regards collective responsibility. We bear the blame for that which is blameworthy, but it is also reasonable to expect a smidgen of generosity for the good points.
The budget also contained extraordinary provisions not only for ordinary taxpayers but also for pensioners, people who are widowed and families on lower pay. If one examines the changes to the family income supplement, to pensions and for the long-term unemployed, this is a good budget by any objective standards, and the Finance Bill, which gives it effect, deserves support in the House.
On the issue of the long-term unemployed and what the Finance Bill will do for them, I received a curt note from a Labour Party activist who works in one of the centres for the unemployed asking what precisely this budget did for disadvantaged groups. What astonished me was this was a person who was supposed to objectively analyse the budget to determine the measures in it which were good for the unemployed. I was pleased to be able to reply in five or six pages of detail comparing the positive steps in this budget with those in the most recent budget introduced by the now Labour Party leader. His budgets had their high points. Some creative measures were taken by Deputy Quinn and they were generously recognised last night by the Minister, Deputy McCreevy. It is astonishing the generosity never flows in the opposite direction. In this case a Labour Party activist simply misled the people the unemployed centre was set up to assist. I am sure the suggestion will be made that if we were in Opposition the boot would be put in but I do not think that is true.
The Oscar for ham acting, in so far as the budget and the Finance Bill is concerned, should go to Fine Gael's Deputy Noonan. We saw him at his most extraordinary. He displayed curmudgeonly behaviour, hand wringing and insincerity in equal proportions. This man certainly deserves an Oscar nomination. If he were in the big disaster film which has been nominated, he would undoubtedly be in the running for the best actor Oscar. As the House knows, Deputy Noonan is something of a disappointed thespian. While his performances can be very engaging, he is not sufficiently gifted as a ham actor to distract from our memories of his personal performance in ministry. Any attack from that quarter on the Minister, Deputy McCreevy's, generosity certainly raises a laugh when one considers Deputy Noonan's generosity when it came to dealing with the unfortunate victims of hepatitis C. Enough has been said about that.
That is a rather low blow.
It is not; it is a fair and reasonable blow. If the Opposition cannot take it, it should not give it. The tragedy is that last night and today, abuse was heaped on the head of the Minister rather than there being an objective appraisal of or even an objective dealing with the Finance Bill.
I will deal briefly with a number of issues in the Bill. One is the hotel tax scheme, which is interesting. By any standards, this is an encouraging and positive scheme. In introducing the budget and the Finance Bill, the Minister indicated the benefits and the basis of the scheme. He made the point that it will be ringfenced and that capital allowances in it will be offset only against rental income in the case of individual passive investors. The point I made privately to the Minister about this scheme is that it is selective. For any scheme to be beneficial, it must be so. The Minister selected seven counties surrounding the Border: Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo to benefit from the scheme. He made the point that these areas are off the beaten track and that they have not reached their full potential in terms of tourism activity. I hate to disagree with a Minister from my side but, while I have a capacity to be objective, I also have a capacity to be parochial. If the number of Grade A, four or three star bedrooms available in County Wicklow, for example, is compared to some of those counties, we fare very badly. The seaside resort scheme applies in just one resort, Arklow. I will unashamedly push the Minister on this issue, not just tonight but as the Finance Bill progresses through its later stages.
This scheme is well worth developing. If Deputies have not looked at it I would recommend them to do so in some detail. However, the objective appraisal of where the scheme has to go requires rejigging.
The second scheme which is of interest to me is the seaside resort scheme to which other contributors have referred. The Minister made a very good decision to extend the scheme for a year in the case of resorts where work has already been undertaken. Will he be as generous as possible in this because environmental and planning issues delayed schemes in some areas? A degree of additional urgency needs to be entered into the departmental reappraisal which is currently under way in relation to this scheme. It is a very good scheme which was originally conceived by Deputy McCreevy when he was Minister for Tourism and Trade and implemented by Deputy Quinn as Minister for Finance. I complimented Deputy Quinn at the time because it was an innovative scheme. Sadly, the Minister caved in to pressure for extensions to the scheme, some of which were, to say the least, bizarre. To suggest that some of the areas in question were seaside resorts stretched the imagination just a little, but those people were fortunate enough to be able to exert some leverage.
However, one seaside resort was left out of this scheme. It is Ireland's original seaside resort, Bray. This is not just a question of parochialism. That town could have benefited hugely from this scheme, and the Minister agrees with me that this is the case. He put the point reasonably that last year when he tried to introduce an amendment to the Finance Act the Minister for Finance at the time, Deputy Quinn, shot it down, with the support of Fine Gael, Labour and Democratic Left Deputies from County Wicklow. It is not possible to bring it in this year, because the scheme runs out in June. I emphasise that up to £50 million of potential development is going begging on the seafront area in Bray which would revive that whole area of the town.
I spoke not just to this Minister but to his predecessor and to civil servants in the Department concerned this year, last year and the year before, and I am flabbergasted at the form of analysis which they are bringing to bear on this scheme. They are arguing that the scheme is costly, that it is having negative side effects. They talk, for example, about "bungalow blight" in a number of areas. It might be better to have some development rather than none at all but, whatever about the quality of some developments, the reality is that in an area like Bray this scheme could have been the catalyst to create a huge amount of economic development which would not happen otherwise. The previous Minister for Finance, Deputy Quinn, argued last year that he would not include Bray in the scheme, first because it was not a seaside resort — that is patent nonsense — second, because it was a suburb of Dublin — that shows a very poor grasp of geography — and third, because the scheme had been extended, by himself, to too many places already — that is a poor excuse. I have spoken to the Minister and I continue to speak with him and to civil servants. It is my concern that this scheme should be extended very quickly to the town of Bray.
One other issue was mentioned by a number of speakers, including Deputy Gormley. That was the issue of escalating house prices. I am not sure whether this Finance Bill is the place to deal with that problem, but there is an urgent need to deal with it through the taxation system. For more than a decade I have been an advocate of a windfall tax, on the benefits that people get when land is rezoned. For example, as a result of a motion by Deputy Fox and Councillor Ruttle in my constituency recently, land in Blessington was turned from agricultural land to building land and literally millions of pounds were made in a five minute debate. It is not unreasonable that the millionaires who were created out of that debate should make some contribution to the development of infrastructure in the constituency. We need to have a look at this. There is a particularly pernicious thing happening in County Wicklow, and I believe it is happening in other county councils as well. Councils in areas faced with a lack of money to invest in infrastructure are now putting the cost of infrastructural development on as development levies. For example, in County Wicklow an individual household development levy, in addition to the levies for specific planning costs, is running as high as £6,000 or £7,000. That is a direct tax on young people buying new houses. I asked a parliamentary question of the Minister for the Environment and Local Government yesterday, suggesting that it is something that has to be discouraged. There is no doubt but that the consequence of development is that one has to invest in infrastructure. I am surprised, therefore, at Deputy Gormley's view that one does not develop brown field sites, that one develops green field sites. That seems to be in violation of what the Green Party are supposed to stand for. I would urge this Minister and his civil servants to look at this issue of the relationship between the tax system and house prices. I have already asked the Minister for the Environment and Local Government to discourage effective taxation being introduced on new houses.
The tax concessions for schools have been welcomed by Members on all sides. I listened earlier today to one Member of the Opposition cautioning the Minister to ensure that there is no disadvantage to people living on the periphery of a disadvantaged area but it is a good scheme.
The Finance Bill is a good Bill. I was very pleased at the decision the Minister reached about credit unions. I had been highly critical of the original proposals in the Bill. The working group which the Minister set up with the Irish League of Credit Unions is a good way forward. The credit unions are not looking to be treated in a very special way. They simply want to be treated in a way which does not disadvantage either the credit unions or their shareholders.
I too welcome the Bill and pay tribute to the Minister for Finance for the valuable work he has done in the preparation of the budget and of the Bill. Traditionally budgets signal changes that will be given effect in the Finance Bill and the time between the Budget Statement and the introduction of the Finance Bill afforded an opportunity for various lobby groups, organisations and associations to make representations with a view to effecting changes. I would, therefore, caution against the practice which has been developing in recent years whereby completely new announcements are incorporated in the Finance Bill which are not heralded in the Budget Statement, because if difficulties arise they cannot easily be resolved. The difficulty that arose in relation to the credit unions might not have arisen if some indication had been given in the Budget Statement of what was proposed.
I support the taxation measures announced in the Bill. I welcome the overall reduction in taxation of £500 million or thereabouts which will make a significant contribution to people's incomes. It will certainly help to stabilise and underpin the partnership arrangement between Government, unions and employers. That is fundamental. It is critical that we continue that partnership arrangement which has been the key to the current success of the economy. The economy will be damaged if this arrangement is undermined in any way. It is vital to deal with economic and social problems by way of partnership between the Government, employers, trade unions, farmers and others. I am glad the Bill will underpin this arrangement.
On the proposed changes in tax incentives, I remind the Minister of the necessity to expand these incentives. When it was first proposed to decentralise Departments the provision of office accommodation posed a problem. However, under imaginative design, finance and lease back arrangements, accommodation was successfully provided. Similar schemes should be extended to other areas. There is nothing wrong in using private sector financing to develop infrastructural services. For example, the seaside village of Quilty in west Clare has no sewerage system. However, several builders are interested in designing, financing and constructing this project which will cost approximately £2 million on a lease back arrangement with the local authority. Today a bank announced that it made a profit of £1 million a day last year. It should be possible to organise private sector finance in such a way that both sides win: the Department of the Environment and Local Government or the local authority wins in that the service is provided and the contractor or builder wins in that he gains valuable work.
At the time of the decentralisation programme it was suggested it would not work. However, eight contractors and financiers tendered to provide accommodation for the office in Ennis. The availability of tax breaks and incentives would be readily availed of by contractors, builders and financiers. Hundreds of millions of pounds are invested in legitimate investments in other countries and a tax incentive would entice investors to redirect their money to projects here. Some projects will never be completed without an imaginative scheme of this nature.
I welcome the decision to give tax incentives to investors in nursing homes. The lack of geriatric beds has been criticised and this incentive will help to improve the level of accommodation in this area. Nevertheless there is a fear that some of the expensive developments which took place in the past few years will be put at a disadvantage as their competitors will benefit from the new tax incentives. Will the Minister consider backdating this incentive to cover investments in institutions built by private investors in the past few years? They should be given an allowance which enables them to operate on a level playing pitch and not put at a disadvantage.
There was a recent debate on the extension of the seaside resort scheme and the designation of areas under the new urban renewal scheme which will be introduced later in the year. While I welcome the decision to extend the seaside resort scheme, a number of developments may be put in jeopardy if it is not further extended. I will not go into the matter in detail other than to say that the extension of the scheme in western areas will provide increased opportunities for the development of the tourism and leisure sectors.
Consideration should also be given to including smaller towns in the urban renewal scheme. The population figures for qualification under the new scheme may be detrimental to smaller towns in western areas which are suffering severe hardship. I am referring to towns such as Lisdoonvarna, the only spa town in the country, Scarriff, which has no hotel, Ennistymon and Miltown Malbay. The population of these towns is declining and incentives should be given to entice people to invest in them.
The Department of Finance may believe that the inclusion of too many areas may be detrimental but I have not exaggerated the need to include these towns in the schemes. Given the availability of finance, schemes should be extended, not curtailed. The reduction from £1 million to £250,000 in the amount which can be invested under the BES will effectively bring the scheme to an end. There is a necessity for some of the bigger schemes to be completed in these areas. I have not exaggerated the importance of these schemes to western areas. Given the amount of money available for investment, I strongly urge the Minister for Finance to look favourably at smaller towns and villages which have been depopulated and where businesses have closed down.
I welcome the Bill. The provision of special incentives in the industry and tourism sectors will be necessary for a long time to come and it would be unwise of the Department to curtail them, particularly in western areas where the population is falling and there are derelict towns and villages.
I welcome the opportunity to contribute to the debate. Many Opposition Deputies referred to their disappointment at the budget introduced on 3 December last. However, their disappointment was increased when they saw the Finance Bill. Deputy Daly referred to the practice of providing in the Bill for issues which were not part and parcel of the budget. The Minister has learnt a salutary lesson in terms of his proposal in relation to credit unions. The Bill is equally disappointing for not including promises made on budget day, in particular, the pilot project for rural renewal. The Minister has given a commitment to publish amendments in advance of Committee Stage to include these provisions. I hope that these amendments will be given to parties in adequate time.
The Finance Bill is second only to the budget in importance. More than any other legislation it charts the Government's course for the next 12 months and gives an indication of the underlying economic philosophy. Those underlying principles are the source of the greatest disappointment. We are all satisfied with the broad economic parameters within which Governments now operate and the discipline which has been foisted upon us by external forces on issues such as borrowing, expenditure and so on. However, the disappointment was particularly acute when one considered the unprecedented opportunity the Minister had to tackle many of the underlying structural problems in the economy.
Much has been made of the £500 million available to the Minister to give away in income tax reductions. Unfortunately, he did not avail of that opportunity to resolve the fundamental problems. Fianna Fáil and the country lost the battle at the Cabinet table. A Progressive Democrats-driven budget has been foisted upon the House which is more concerned with looking after those who have a sufficient stake in society at the expense of those who have been striving to establish themselves in a situation where they too deserve a pay back.
If this budget has echoes of times past, the phrase which comes to mind is the "golden circle". Those who contributed most to the much heralded Celtic tiger received least from the budget. Those who rode the tiger to greatest advantage over the past few years benefited most. Historically Fianna Fáil has portrayed itself as the party of the small man. It has vied with the Labour Party as the voice of true labour. Unfortunately, Fianna Fáil has acquiesced in the argument. These are not just my words; a post-budget submission by CORI is critical of the direction of the budget and claims that it is unprecedented. However, all CORI's budget responses have been critical over the years so we can take it with a pinch of salt.
The dangers posed by the budget to social partnership should set alarm bells ringing. There has been a betrayal of low paid workers. The Minister should heed the clear signals emanating from the trade union movement. He may have opportunities between now and the passing of the Finance Bill to row back from the provisions of the budget and introduce measure which target the real problems in society.
The budgetary provisions on income tax and capital gains tax most clearly identify our reasons for opposing the Finance Bill. Notwithstanding the Fianna Fáil-PDs' Programme for Government commitment to reduce the number of people who pay tax at the higher rate, and that the higher rate has fallen by 2 points, this budget will result in 15,000 additional taxpayers paying tax at the higher rate than in the tax year 1997-98. This is a nail in the coffin of the aspirations for meaningful tax reform contained in the Programme for Government.
There is an obsession with tax rates. At the same time there is an unwillingness to tackle the real problem. Whether the rate is 48 per cent or 46 per cent, the problem is that people are hitting the higher tax rate too early. The £500 million available for tax reform presented the Minister with an opportunity to remove a large number of low paid workers from the tax net. By widening the bands he could have ensured that work would be more profitable than welfare.
I wish to recount the example of a widow in my constituency who had a widow's pension and a job opportunity which she could not take up. She has a personal tax free allowance equivalent to £2.50 per week when her widow's pension is taken into account. This is the problem where welfare and work interact. This will not be resolved by reducing the top rate from 48 per cent to 46 per cent or by reducing the lower rate. It will only be resolved by significantly widening the bands. This will benefit all taxpayers but it will be proportionately more beneficial to those on low incomes where the need is greatest.
When one considers the Government's readiness to forego that element of equity in the taxation system and compare it with what was proposed and dropped with regard to the credit unions, one gets a distillation of the fundamental principles of the Fianna Fáil-PDs Government. This can be summarised as follows: if one has a large stake in society this Government will assist you in increasing that stake. However, if one is on an average industrial wage or on social welfare and trying to get into employment, there is little concern for one's predicament.
I wish to comment on the reduction in capital gains tax from 40 per cent to 20 per cent on the disposal of shares. In the lead up to the general election an editorial in one of the national newspapers advocated a vote for the Fianna Fáil-PDs alliance on the basis that it was pay back time. For whom is it pay back time? Who requested this reduction in capital gains tax? Who is the biggest beneficiary of this measure? It is not those on low incomes. This measure is of no interest to 99 per cent of the population. Is there not a danger in the lead up to a single currency that investors may be attracted by the new rate of capital gains tax to speculate with their gains from this windfall, creating a run on the Irish currency? Is there not a danger that equity may flow out of Irish business into foreign stock markets? This is one of the more amazing but least commented on aspects of the budget. It is pay back time for someone but not for those who most deserve it.
I mentioned that the Minister included in the budget a decision which is not included in the Finance Bill, but which will be provided for by way of amendment, namely, the pilot project for rural development. It has become unfashionable in this Chamber and among reporters to comment on rural decline and difficulties in the agricultural industry. A contradiction which many observers cannot come to terms with is that the Celtic tiger is alive and well in certain parts of the economy but not present at all in rural areas. There is an onus on Members who represent rural constituencies to stand up and be counted. It is obvious that rural Ireland is dying before our eyes. There is a distinct difference between rural Ireland and agriculture. Some agricultural policies are contributing to the decline. Two out of every three people living in rural Ireland, many of whom are not working there, are not dependent on agriculture.
We must seriously examine the economic and social cost of rural decline in comparison with the costs of increased urbanisation. Eight years ago when I came to Dublin first, it was possible to leave the House at 5 o'clock and be on time for the 5.30 p.m. train from Heuston. The cost of increased urbanisation in terms of traffic and the economic inefficiencies which excessive traffic generates is a direct consequence of the decline of rural Ireland. It should not be beyond the capacity of those who devise imaginative and successful schemes for urban renewal to devise similarly imaginative, though of necessity different, schemes to revitalise rural Ireland.
Why has the Minister selected the upper Shannon region, something that was never explained in detail? What criteria were used in selecting it above other areas? In his budget speech the Minister indicated that consultations would have to take place with the EU Commission before such a project could be finalised. What progress, if any, has been made in this context? We have been kept in the dark on this issue since the original announcement.
The level of visible decay, migration, lack of participation in the workforce, unemployment, lack of services, poor infrastructure and evidence of decaying and dying villages and towns is something that should concern every Member representing rural constituencies. While it may have been payback time at the last election it is now fight back time. John Healy, the late columnist of The Irish Times and author of books including Nineteen Acres, referred to the decline of rural Ireland in the 1960s and made the statement that nobody shouted stop. It is time somebody shouted stop. Many of the fine qualities which are part of rural Ireland will not survive long into the new millennium if steps are not taken.
I asked about the objective criteria and studies used in selecting the upper Shannon region. The economics department of UCC carried out a study at the behest of Cork County Council into rural decline in the Duhallow and Sliabh Luachra area, much of which I represent in my constituency. The document portrays a vivid image of the problem and contains many suggested solutions. On Committee Stage I will be moving an amendment, with the support of Fine Gael, to have the area identified in that study included in the pilot project. I will do so because the area complies with all the objective criteria necessary to have such a pilot project. I see no good reason why the Minister should refuse to include the area which forms part of my constituency and the constituencies of Kerry North, Kerry South and Limerick West. I will be looking forward to the support of all my Oireachtas colleagues in these constituencies to ensure this region is included in the pilot project.
A pilot project raises the question of the type of incentives which are necessary. The most obvious incentives are those which will bring industry to the area. However, in offering incentives we must also be aware of the difficulties existing businesses face in surviving in these areas. Programmes of assistance, be it in conjunction with local authorities on the issue of rates or in the context of special tax rates for companies operating in these areas, could be examined. Such incentives are necessary.
Infrastructural development will also have to be tackled. The potential of many rural towns and villages is not reached owing to their lack of adequate facilities, including water, sewerage and telecommunications. ISDN lines, for example, are an essential element of telecommunications. Many products are exported or imported down telephone lines and there is a need for significant investment in such facilities.
We could also learn from the pilot projects which have been embarked upon with EU assistance, including the area based partnerships, the Leader projects and the town and village renewal schemes which have proven very beneficial where applied. Rural areas need the type of attention urban renewal schemes received over the past ten to 15 years in order to reverse the predominant trend of the past number of years.
Section 17 of the Bill deals with capital allowances for nursing homes. In our constituency work we have all been confronted with the traumatic problem of families caring for the elderly while State agencies, including health boards and voluntary hospitals, provide an inadequate number of beds. This is the area which causes greatest angst. A number of years ago we recognised the demographic trends and introduced a nursing home subvention, a useful development at the time. However, we need to keep pace with the ageing population and the fact that people are living longer. Therefore, I welcome section 17. The provision should be pursued in conjunction with increased subvention rates. There is a reluctance in the community to embrace the concept of private nursing homes when a district or community hospital is available locally. There is always pressure on public representatives to get people into the district or community hospital. We must make private nursing homes more attractive by increasing the subvention.
I have some reservations about the capital allowances as proposed in the budget. We must distinguish between services such as hotels, restaurants, etc. and services such as beds for care of the elderly. The consumer is king when it comes to the former, but the latter services are consumed reluctantly and only when frailty and old age dictate their use. We must ensure that investment driven by tax incentives will not compromise the quality of care. There are provisions in the legislation whereby the capital allowances will be effective over a ten year period. However, they must only be available where they are matched by an approved level of care as determined by health boards under the nursing homes subvention legislation. It must be recognised that such provision could be a blunt instrument used against the interests of those who without tax incentives, already provide private nursing beds for care of the elderly. Those allowances should be available only where the need is identified, primarily by health boards which have statutory responsibility for implementing health care in their respective areas.
While this is a welcome provision, we must ensure the legislation achieves the desired outcome. There may be merit in ring-fencing availability primarily to those who are already in the nursing homes business. It would be extremely unfair if the business viability of existing nursing home owners, who invested significantly in that business and provide a level of care approved by the local health boards, was undermined by the availability of capital allowances. In principle, I welcome this provision, but it must be adequately policed.
If rural decline is the battle-cry from areas outside the pale, a specific voice within rural communities is that of agriculture. These are extremely difficult times. I am not suggesting the problems were created solely by a change of Government, but an unforgivable approach was adopted by the Government when in Opposition of raising expectations and making promises which could not be delivered. It was suggested that it was only a matter of changing the incumbent in the ministerial car and live export markets would reopen, control of farmyard pollution grants and installation aid would be available to everybody, dairy hygiene grants would be introduced, agricultural headage payments would not be capped and there would never be a poor day again for farmers. Fianna Fáil, when in Opposition, lied in regard to all those matters.
It is to the eternal shame of the Minister for Agriculture and Food that at such a difficult time for farmers he raised expectations and made promises on which he could not deliver. Where he had an opportunity to deliver, on the issue of live exports, he has failed dismally and that is unforgivable. Lack of confidence in the agricultural sector is reflected in our agricultural colleges, which cannot fill places to train young farmers. That is no wonder given that the one incentive for young farmers, the installation aid scheme, was suspended, notwithstanding what the Minister for Finance or the Minister for Agriculture and Food might say about the budget. That scheme is available only to those who submitted applications prior to suspension of the scheme on 7 August last. When we are facing difficult problems such as reform of the Common Agricultural Policy, the performance of the Minister for Agriculture and Food is not heartening and does not create confidence in his capacity to deliver a good deal for agriculture.
On reform of the Common Agricultural Policy, the proposals by the Commission as published in recent days are frightening. I would put down one marker in regard to our negotiating stance. It is opportune that the Government should lift production restrictions in terms of Common Agricultural Policy reform. It is inevitable that quotas, particularly dairy quotas, will be abolished. It is desirable that we operate on a phased basis in terms of supports rather than, in the next round of Common Agricultural Policy reforms, face a position where all supports would be abolished, in which case many people struggling to survive would have to leave their farms because they would be unable to compete.
The increased production capacity which could accrue if we were successful in negotiating in this area should be focused on small-scale producers who would have an opportunity to prepare for such circumstances. Any instrument used, particularly in the dairy area, whether relating to clawbacks or milk quota tribunals, to provide additional production capacity has been unsuccessful in achieving its objective.
I was extremely disappointed there were no proposals in the budget arising from the excellent report submitted to the Minister for Arts, Heritage, Gaeltacht and the Islands and the Minister for the Environment and Local Government on strengthening the protection of our architectural heritage. There are thousands of listed buildings throughout the country of varying degrees of architectural importance, many of which are in private ownership. The maintenance of those buildings is beyond the financial capacity of many owners. If action is not taken in the immediate future, those buildings will be beyond repair. It is interesting to note that the European Commissioner with responsibility in this area, who recently visited this country, criticised us on this.
While the report on this matter was published only recently, this is an area that is in great need. I will table amendments on Committee Stage to deal with this matter. We must be particularly cognisant of buildings in private ownership where the owners are not in a position to maintain them and very often have to abandon them to the elements. There is an onus on us to introduce tax incentives in that area — the structure of such incentives is clearly outlined in the report. Action should be taken immediately.
An analysis of new jobs created in the Cork region in the past 12 to 18 months shows that all new jobs are in extensions to existing plants or new plants that move into existing advance factories available to the IDA. I bet my bottom dollar — I hope this is the case — the next new jobs announcement in Cork, if not for an extension of an existing plant, will be in Mallow, the only place where there is vacant industrial space in Cork. Incentives should be made available in this Bill, whether through capital allowances or a revamped business expansion scheme, whereby local communities, individuals, development associations and enterprise boards can become involved in providing the necessary factory space to attract investment to their areas. I recognise the success of areas such as Cork city, Limerick city, Galway and Dublin, but if incentives are not made available to smaller towns, industry will be concentrated in those areas. The Minister should consider that.
Given the enormous opportunities available to the Minister, the Finance Bill is disappointing and we will table constructive amendments on Committee Stage.
The Finance Bill, which gives effect to the budget, is an excellent Bill. The budget was designed to maintain and accelerate the healthy growth in the economy. Nobody can say that in this Bill the Government has not honoured its electoral mandate. It encourages enterprise and helps to create jobs. It will stimulate the economy and help it to grow at a greater rate in 1998. That growth will enable us to introduce further tax cuts in the next budget and to continue to maintain ongoing social welfare improvements.