Michael Noonan
Question:21 Mr. Noonan asked the Minister for Finance the reasons for the decisions to abolish the employment levy and to increase the health levy to 2 per cent; and if he will make a statement on the matter. [27935/98]
Written Answers - Employment and Health Levies.
Róisín Shortall
Question:30 Ms Shortall asked the Minister for Finance the reason he made alterations to the health levy in his Budget Statement; and if he will make a statement on the matter. [28041/98]
I propose to take Questions Nos. 21 and 30 together.
The employment and training levy and the health contribution combined currently amount to 2.25 per cent. The restructuring which I announced in my Budget Statement on 2 December will reduce the overall levies burden by 0.25 per cent, to 2 per cent. This is consistent with the commitment in the Government's policy programme An Action Programme for the Millennium, which aims to lower the burden of levies and PRSI. It is also consistent with the approach recommended by the expert group on the integration of the tax and social welfare systems, that the levies should be phased out over time as resources permit.
The Government has decided to apply the reduced yield from the levies to support the provision of health services for the public. This involves abolition of the employment and training levy and the application of the reduced yield from the combined levies to the Department of Health and Children.
The decision to abolish the employment and training levy reflects the changed employment situation. The increase in employment, the fall in unemployment and the continuing rise in the qualifications of those seeking work mean that we no longer need a dedicated funding mechanism to provide resources for the drive to achieve full employment. On the other hand, spending on health services is increasing very rapidly. When adjusted for extraordinary factors such as the hepatitis C compensation payments, this expenditure reached £2,000 million for the first time in 1994, but will total some £3,000 million in 1998. In these circumstances, the Government considers that the public should be made aware of the cost of the continued improvements in the health services and have, therefore, decided that the proceeds of the levies should, from now on, be devoted entirely to financing the health services. The effect of the change is expected to bring the share of the gross Vote for the Department of Health and Children paid for by the health contribution to just over 11 per cent in 1999.