Before calling on the Minister for Finance, I remind Members that the principal features along with the Minister's speech are being circulated strictly on condition that the budget measures remain confidential until the Minister has announced them in the House. I ask Members to respect the confidentiality of the information being supplied to them.
Financial Resolutions, 1999. Budget Statement, 1999.
It is my privilege to present the third budget of this Administration. At the mid-point of our time in office, and with two budgets remaining, it is timely to review the progress made and set a new vision and strategy for the future. Our broad budgetary objectives are similar to previous years. We need to sustain economic growth; reward work and enterprise by reducing the tax burden; promote a fairer society, with opportunities for all; and prepare for the future. While these broad objectives remain, as a society we need a new vision – a new set of goals. For two decades we grappled with the problems of emigration, unemployment and a crippling debt crisis – in short, the problems of economic failure.
All this has changed. Rapid economic growth has transformed our society and this improvement is most evident in employment. In the past two years, the numbers at work increased by 150,000. Unemployment has fallen and is heading towards 5 per cent compared to 10 per cent when the Government was formed. Living standards continue to improve. These are clear indicators that our policies are working. Tribute is due to all who helped to bring about this transformation. In particular, I stress the role social partnership has played. The continuation of social partnership is a major element of our economic strategy and a key consideration in framing this budget.
As a society we now face a new set of problems. Instead of unemployment many sectors face labour shortages. Unless addressed, these shortages will hinder future economic progress. We also need to raise the capabilities of our workforce. Progress is becoming more dependent on having a highly skilled workforce. The cost of child care has also risen dramatically. This places an enormous burden on people trying to raise a family and work outside the home. Despite increased prosperity and greater opportunities, there is a growing sense that improvements in the quality of life are not keeping pace.
In our towns and cities congestion is increasing – undermining the quality of life for many of our citizens. House prices have risen rapidly. This risks putting home ownership beyond the reach of many young people and generating a new set of social problems. We must provide a first class infrastructure – better transport, roads and housing to improve the quality of life for all our citizens. Today's budget measures complement this longer-term goal. They must be seen in con junction with last month's national development plan, which targeted more than £40 billion to develop the economy over the next seven years. This is a real indication of our commitment to tackle infrastructural problems.
We must also ensure all our people share in the growing prosperity. I know some people can get left behind amid increasing overall affluence. Sean Lemass reportedly said that "a rising tide lifts all boats". However, we should not forget those with only small and vulnerable boats – or none at all. Despite the reduction in unemployment – and the improved social conditions this brings – we must redouble our efforts to tackle disadvantage and promote social inclusion. We must also ensure our elderly population share in our increased wealth. The Estimates Volume I published recently outlines our plans to tackle our most pressing social priorities. I will add further to these expenditure allocations. Our vision for the future must include a modern and efficient public service. Here also new thinking is required.
Preparing for the Future
Strong economic growth has greatly improved the public finances. With a substantial budgetary surplus, there is scope for both higher expenditure and greater tax relief, but here again we must have a vision for the future. We must take care that what we are doing today does not create difficulties in a few years. One does not have to be a practitioner of the “dismal science” of economics to appreciate that economic conditions will not always be as favourable as they are today. We must ensure that we can maintain a sound budgetary position even when conditions deteriorate. Looking further ahead, we must ensure that we can maintain satisfactory levels of public services and pensions as the population ages in the coming decades.
Public Service Pay
We need to get away from the old system of public service pay determination which is based on rigid analogues and internal relativities. Is it not ironic that the new dynamic, buzzing, technology-driven, “up and at them” Ireland of the 1990s is handicapped with a public service pay determination system of rigidities more in tune with the Ireland of the 1940s and 1950s?
We need a new approach which supports the modernisation of the public service, respects the unavoidable limits on public spending and meets the reasonable aspirations of public servants. The best way of doing this is to have a pay system which, instead of compensating people for agreeing to change, focuses on rewarding them for the outputs and outcomes delivered as a result of change. Only in that way can we expect to deliver good services efficiently to the public within an appropriate overall expenditure burden.
The post-budget current expenditure projections I am publishing today do not include any provision in respect of further pay increases for public servants when the Partnership 2000 pay agreement expires in the public service. Discussions on a possible successor agreement are currently under way between the social partners. Public service pay will be a vital element in these discussions. The Government is anxious to continue with the social partnership process which has played such a major role in the transformation of our economy. However, I am not exaggerating when I say the chances of negotiating a new programme will be determined in very large measure by the progress made on public service pay. As things stand, the Exchequer pay and pensions bill is projected to increase from £4,440 million in 1995 to £6,633 million in 2000, an increase of 50 per cent in only five years.
National Development Plan
The national development plan is a key element in the Government's strategy for sustained economic and social development. The investment of £40.6 billion is designed to ensure that Ireland remains competitive and that economic growth is shared more equally at regional level and throughout society. The largest share of plan investment is devoted to economic and social infrastructure. This reflects the Government's determination to tackle infrastructural bottlenecks. Accordingly, very significant additional capital resources are provided in 2000 in areas such as roads, sanitary services, public transport, housing and health.
The Government is committed to the full implementation of the plan over seven years. Implementation will be comprehensively monitored. Particular attention will be paid to the efficient and timely delivery of the major investment in infrastructure provided for in the plan.
Public Private Partnerships
The Government is committed to using public private partnerships in addressing infrastructural investment needs with the aims of maximising value for money and improved delivery of infrastructure projects. In the national development plan, public private partnerships are particularly focused on the economic infrastructure programme. Provision is included for £1.85 billion of funding. Precise designation of projects or parts of projects for public private partnerships purposes will be decided as the plan is implemented. If the aims of public private partnership are successfully met, the plan figure of £1.85 billion will be increased.
CAPITAL EXPENDITURE
Exchequer capital spending in 2000 will be at an all time high. The provision for capital spending next year is 26 per cent up on the projected 1999 outturn. This is the third successive year in which the Government has increased substantially the resources for voted capital expenditure. Between 1996 and 2000, voted capital expenditure has increased by 125 per cent. Housing has been a particular priority. Exchequer capital expenditure on local authority and social housing has increased by 160 per cent since 1996. The Exchequer spending will be supplemented by expenditure from the local government fund and other sources bringing total spending on roads next year to £622 million; on water and sewerage projects, which are essential to the provision of land for housing, to £413 million; and on local authority, social and affordable housing, to £718 million.
Pensions pre-funding
Last July, I announced the Government's decision to begin to make provision for the increased social welfare and public service pension costs associated with the ageing of the population in the decades ahead. The Government decided to set aside 1 per cent of GNP annually for this purpose, together with a major tranche of the proceeds of the Telecom Éireann flotation. This is a prudent measure, designed to secure the ability of future Governments to maintain and improve public services as our population ages. Detailed legislative and other arrangements are currently being worked out. I intend to bring forward the legislation early in the new year.
Review of 1999
For 1999, economic and employment growth was greater than forecast at this time last year. The general Government surplus will be 1.4 per cent of GDP. This includes a Central Fund outturn of £3,453 million. This forecast outturn includes provision for an additional £68 million contribution to the EU budget and an increase of £307 million in the assets of the capital services redemption account going into 2000.
While the 1999 surplus will be applied to reducing our debt burden, the nominal debt level increased in 1999 due to a securities exchange programme carried out to ensure that Irish Government bonds remain competitive in the euro environment. This increase in the nominal debt level will be offset by reduced debt service payments for some years ahead due to the lower interest coupons on the new bonds. Even with this nominal increase in our debt level, our debt/GDP ratio continued to fall in 1999 and is forecast to be around 47 per cent at year end.
Economic Outlook 2000-2002
I am publishing today our updated stability programme which contains economic and budgetary projections out to 2002. We expect GNP growth over the next three years to average about 5.75 per cent, with inflation averaging below 2.5 per cent a year. Average annual employment growth of 2.5 per cent is expected with unemployment to fall to about 4.5 per cent of the labour force by 2002. The budget is projected to remain in substantial surplus throughout the period.
Budget Targets for 2000
Taking account of the measures I am announcing today, the budget targets for the year 2000 are as follows: a general Government surplus of 1.2 per cent of GDP; an Exchequer surplus of £1,608 million; a current budget surplus of £4,558 million; and a capital budget deficit of £2,950 million. These targets take account of the pension pre-funding provisions.
SOCIAL INCLUSION
Partnership 2000 indicated that social inclusion would be pursued as a strategic objective in its own right and that the national anti-poverty strategy would be a central feature of the partnership. The wide range of targeted initiatives taken and relevant programmes developed over the period of the partnership, underpinned by an allocation of resources almost double what was promised, confirms this Government's commitment to tackling poverty and disadvantage.
Today's budget will consolidate this progress and advance matters considerably in other respects. The policy is to ensure that the more vulnerable sections in our community share in the benefits of our successful economy. The needs of disadvantaged individuals and communities continue to pose a collective challenge for us and we will be rightly judged as a caring society by the adequacy of our response. In line with my previous budgets, the needs of the elderly, disadvantaged families and children, the disabled, carers and those who need to be assisted on the path to greater economic and financial independence were of particular importance in formulating my financial proposals, as was the need to expand programmes targeted on disadvantaged areas.
SOCIAL WELFARE
The social welfare improvements I am about to announce will cost almost £400 million in a full year, compared to £215 million in the 1997 budget. This is by far the largest social welfare package ever in our history, and many of the increases will be payable earlier than previously.
Next year, total spending by the Department of Social, Community and Family Affairs will be almost £5.4 billion, or 20 per cent above the 1997 level. I am also announcing other social inclusion measures which will bring total additional social inclusion current spending to £485 million in a full year.
Earlier Date of Payment
In my first budget I stated my intention, over the term of office of this Government, to bring forward the implementation date for budget welfare increases to coincide with the start of the tax year in early April. The weekly payment increases which I am about to announce will take effect from the first week of May next, or four weeks earlier than this year, and I will complete the process in 2001.
Pensioners
The priority which the Government accords to older people was illustrated by the increases given to pensioners in my first two budgets. They remain a priority. On this occasion, I am increasing the full personal rate of old age and related pensions by a further £7 per week. When the increase in the qualified adult payment is taken into account, a contributory old age pensioner couple both aged over 66 will receive £160.60 per week from next May, compared with £133.40 in 1997.
Weekly Welfare Payments and Qualified Adult AllowancesIn general, other personal social welfare rates will be increased by £4 per week. For some time now, the qualified adult allowance has been set at roughly 60 per cent of the personal rate. I propose to move this to 70 per cent over three years, commencing next year. As a result, qualified adult allowances will be increased next year by a minimum of £3.80 per week, with substantially higher increases for those currently below 60 per cent of the personal rate. These rises are well ahead of the corresponding increases in recent years.
Child Income Supports
The Government appreciates that child benefit is an important financial support for families with dependent children and a key instrument in combating child poverty. The child benefit rate for first and second children is being increased by £8 per month and by £10 per month for third and subsequent children. These increases will raise monthly payments to £197 for families with four children. In addition, a £20 increase in the back to school clothing and footwear allowance is being granted.
Work Incentive Measures
I am taking a number of steps to further improve work incentives and to ease remaining unemployment traps. First, to ensure that the financial incentive for work is maintained for low-income families, I am increasing the weekly income threshold for the family income supplement by £13, which will increase by almost £8 per week the average FIS payment. Second, a tapered withdrawal arrangement of rent and mortgage supplement will be introduced for those returning to work and improved conditions will apply to those attending training courses and to part-time workers. Third, improvements and extensions are being made to the tapering arrangements for withdrawal of the qualified adult allowance where that person has earnings from employment. An additional 5,000 places are being provided on the back to work allowance scheme.
Bereavement Grant
We are all aware of the particular grief that families experience on the death of a spouse and parent. In special recognition of the difficulties arising for widows and widowers with children in the immediate aftermath of such loss, I am intro ducing, from today, a special additional grant payment of £1,000.
Carers and Carer's Benefit
The Government recognises the significant contribution which carers make in our society and I propose to develop the supports available in this area. I am introducing a new insurance-based carer's benefit for people who leave employment to look after persons in need of full-time care and attention. This new benefit will be payable for a period of 12 months to those who meet the qualifying contribution conditions. Legislation will be introduced to protect fully the person's employment rights over the period.
Last year I introduced an annual payment of £200 towards the cost of respite care. This is being increased to £300 from next June. The free schemes relating to electricity and the television licence are being extended to recipients of the carer's allowance.
Older People-Centenarian's Bounty
As well as the substantial rate improvements to which I have already referred, other measures are being taken which will benefit older people. These are a reform of the capital assessment arrangements applying to social assistance pensions and an extension of the free schemes to all persons aged 75 years and over. I have also decided to increase the centenarian's bounty for the year 2000 from £500 to £2,000.
Pre-1953 Social Insurance Contributions
Certain people fail to qualify for social welfare old age pensions, as insurance contributions they paid prior to 1953 are not taken fully into account in assessing title to pensions. It is intended that the Social Welfare Bill will contain measures to address this issue.
Other Social Welfare Improvements
A range of other social welfare improvements are set out in the Summary. My colleague, the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, will announce the full details.
OTHER SOCIAL INCLUSION
Health Measures
The Government is particularly conscious of the need to put in place the modern health service that the public has a right to expect. The extent to which the Government has increased spending on the health services bears repeating. Having reached just £3 billion by 1998, the Estimates Volume published recently provided over £4 billion for the Health and Children Vote in the year 2000 and after my budget this figure will be £4.2 billion. Thus, the level of health spending has increased by over one third in two years.
The Estimates Volume already allows for substantial extra funds next year across a range of key areas, including £35 million more for services for older people; £23 million to child welfare ser vices; over £10 million more each for physical disability, mental handicap and dental services and almost £8 million for mental health; and £25 million to commence a group C meningitis vaccination programme. We have also allocated over £23 million to deal with hospital waiting lists and another £11.5 million to commission new acute hospital units.
These existing allocations also allow for the further increase in the income guidelines for medical card eligibility, which, as I announced last year, are being doubled over three years for persons aged 70 years or over.
I propose today to add a further £64.9 million to these allocations to support the development of the health service in the year 2000. The additions, which have a full-year cost of some £105 million, include £12 million for the initial phase of the cardiovascular strategy announced earlier this year; an extra £7 million for physical disability, plus £2.25 million to ensure that all carers of children in receipt of domiciliary care allowance will receive a respite grant; and additional allocations for palliative care, mental health, child welfare and dental services.
Other measures are included in the Summary.
Mental Handicap
Since taking up office, the Government has clearly indicated its commitment to the ongoing development of services to persons with an intellectual disability and their families. The development of these services has been one of the priorities of the Minister for Health and Children. The overall level of additional funding, £53 million up to the end of 1999, which he has already allocated to these services, is concrete evidence of his commitment to this disadvantaged group.
However, more needs to be done if we are to meet the needs of this group and their carers. I share with the Minister a concern to be of practical assistance to both individuals with an intellectual disability and their families by further enhancing the overall level of residential, day and respite services throughout the country.
I am, therefore, very pleased to inform the House that an additional £28 million, with a full year cost of £35 million, is being allocated to the services for persons with an intellectual disability.
Local Development
Provision for local development has been increased substantially in 2000 to £33 million from just under £17 million in 1999. This has been provided to augment the valuable work currently undertaken by the area based partnership companies and community groups throughout the country in implementing local action plans drawn up specifically to counter social exclusion and address the needs of people living in disadvantaged areas.
Environment and Local Government
I am providing an additional £5.7 million of capital next year to increase the maximum grant under the disabled persons grant scheme and under the essential repairs grant scheme. This brings the total provision for next year to £18.4 million. In addition, I am providing an extra £1 million of capital for the task force for the elderly, increasing the provision in 2000 to £8 million.
I am also providing an additional £5 million of capital over two years to fund hostel facilities in Dublin for homeless persons with drug and alcohol addiction problems. This brings the provision next year to £6.5 million.
Education and Science
This Government has shown an unmatched commitment to investment in our education system at all levels. We recognise the central role of education in both economic and social progress and have already provided for a major increase in education funding in the Estimates. Next year alone will see an increase of £385 million over the 1999 Estimates provision. The gross spend provided in the Estimates for education in 1997 was £2,301 million. Next year, the equivalent sum will be £3,244 million, or 41 per cent higher. On the current side, I am today providing an extra £17 million in programme spending on top of the allocation in the Estimates Volume.
Of the £17 million, £3.5 million in 2000 and £10 million in a full year is for a number of targeted initiatives which will enhance the quality of the education services and improve equality of access for those who are disadvantaged. This is on top of education measures to promote social inclusion which have already been included in the Estimates Volume. I am also providing for significant additional administrative support and caretaking services in schools.
An unprecedented increase of 75 per cent in capital funding is being made available for education services next year. This will see the largest school building and renovation programme in our history getting under way. Details are given in the Summary.
TRAINING FUND
I turn now to the issue of training.
The labour market in Ireland is changing dramatically. Unemployment is below 5 per cent and is predicted to fall further. Competitive pressures are increasing and Irish companies have to respond, domestically and in the global marketplace. In this new environment, employers have to redouble their effort to raise the skills of their existing workforce and to attract qualified staff. Similarly, for those currently in employment, the concept of a job for life is becoming obsolete. The State and employers need to work together to meet this challenge and to share the cost of so doing if Ireland's current prosperity is to continue.
We need a new funding structure to achieve the goal of improving skills and facilitating lifelong learning. I am therefore initiating a significant reform of the way training is funded. Central to these reform proposals is the establishment of a new national training fund. The fund will be resourced through a national training levy payable by all Class A and H employers. The levy will be charged at a rate of 0.7 per cent on the same income base as employers' PRSI. This will yield about £120 million in a full year. There will be no additional financial imposition on employers. The introduction of the levy will be balanced by a corresponding reduction of 0.7 per cent in employers Class A and H PRSI contribution rates. Existing sectoral and apprenticeship levies paid to FÁS will be abolished.
The levy will be collected by the Revenue Commissioners and the Department of Social, Community and Family Affairs and will be paid into the national training fund which will be under the control of the Minister for Enterprise, Trade and Employment. The fund will be dedicated to a range of training measures to upskill staff and give prospective employees relevant skills in response to the needs of business.
Structure of PRSI and Levies System
I am very conscious of the need to keep tax and levy systems as simple as possible. The PRSI regime has become complex over time, adding to overall administration costs in the economy. I intend to review the structure of the system with a view to its simplification.
DECENTRALISATION
Since 1987, 4,000 Civil Service jobs have been transferred from Dublin to provincial locations. The Government considers that the time has now come to start a further round of decentralisations which will involve, for the first time, the semi-State sector. The Government intends that the next round of decentralisations will be more radical than those to date. We intend to transfer the maximum possible number of public service jobs from Dublin. In pursuit of this policy, we will transfer almost complete Departments of State and other public bodies to provincial centres.
CHILD CARE
Earlier this year, the Government set up an interdepartmental committee to examine the important question of child care. The Government has considered the report of the committee and has accepted their recommendation that the most urgent task is to increase the number of child care places. I have decided to implement a major package of measures recommended by the committee to increase the supply of child care places significantly. These measures will cost over £46 million in a full year. The measures are £23 million to expand the small equal opportunities childcare programme; £10 million for a grant scheme for child care service providers, caring for up to 20 children, towards the capital upgrading of premises; £2 million per annum for local child care network initiatives; £5 million to provide grants to schools that set up and run after-school child care services; £5 million for community based groups to develop community out-of-school hours services and £1.4 million for the establishment of an advisory service by health boards.
In last year's budget, I introduced a number of tax reliefs to encourage the provision of cre±che facilities. As I will announce later, I am enhancing some of these provisions again this year.
TAXATION
I will now deal with taxation matters.
PERSONAL TAXATION
Total cost of personal tax changes
The total full year cost of the changes to the personal income tax rate structure that I am about to announce is £942 million, and a breakdown of the cost of the individual components is set out in the Summary.
Introduction
Last year I announced the new tax credits system. That initiative was generally regarded as the most radical innovation ever in Irish personal taxation. This year I am proposing what can be regarded as an even more radical and fundamental change to the system.
The net effect of this further initiative will be – over this and the next two budgets – to reduce the percentage of taxpayers on the top rate of income tax to 17 per cent, or to 12 per cent if the exempt cases on the tax file are also included. In simple language, the full effect of this initiative, if implemented in one move, would be to leave only 17 per cent paying tax at the top rate.
To appreciate the magnitude of this move, it is well to note that 46 per cent of taxpayers would be paying tax at the top rate from 6 April next before today's budget changes. This will be reduced to 37 per cent for the next tax year as a result of this budget. I am setting out in the Summary the relevant numbers of taxpayers involved.
Last year's radical income tax reform was designed to improve equity, to reduce the burden of tax on employment and to enable the removal of a substantial number of income taxpayers from the tax net altogether.
The Minister has given up on that idea.
This year I intend to build on this reform – to assist earners, reduce the level of tax for all taxpayers, exclude more on low income from the tax net and remove a large number of middle income earners on the average industrial wage from the top rate of tax.
Individualisation of Standard Rate Band
One of the main problems we have is the low level of income at which single people become liable at the top tax rate. At present, single persons pay the top rate of tax on earnings less than the average industrial wage. One of the main difficulties with the present band structure is that the single person's tax band is doubled for all married couples. I am, therefore, proposing the radical change of moving to individualisation of the standard rate band over this and the next two budgets. This will ultimately involve each individual having his or her own standard rate band. As I have stated earlier, the effect of this change on completion will be to reduce the percentage of taxpayers on the top rate of income tax to 17 per cent.
This year I am proposing to widen the standard rate tax band for a single person by £3,000 from £14,000 to £17,000 per annum. The tax band for two income married couples will be set at double this individual band, that is £34,000 per annum with transferability of the individual bands between spouses up to a maximum band of £28,000 per annum for either spouse. I propose to leave the married band for one income couples unchanged at £28,000 per annum.
A Deputy
Shame.
It should be noted that as the distribution of income earners is in the shape of a pyramid, the Exchequer cost for each thousand pound widening of the band lessens as one goes up the income scales. To illustrate this point, today's announcement of the standard rate band widening costs £310 million; whereas the full move would have cost £839 million.
Changes in Allowances
I am also making the following changes to the personal allowances.
What did the Minister do to the bank charges?
The basic single and married personal allowances, which applied since last year at the standard rate of income tax, are being increased by £500 single and £1,000 married per annum, bringing them to £4,700 single and £9,400 married. When the PAYE allowance of £1,000 per annum is included, these changes will result in standard-rated personal allowances for single persons on PAYE or £5,700 per annum. This will remove nearly 40,000 taxpayers from the net.
Tax Rates
I have always made it clear, both in and out of Government, that I regard high marginal tax rates on income as an unacceptable feature of the tax system which, in the end, not only reduces the incentive to work but also adds to the attraction to some persons of not paying their due taxes.
Furthermore, there can be no doubt where the Government stands on the issue of tax rates. We draw our mandate from the will of the people who clearly favoured the Fianna Fáil-Progressive Democrats prescription on taxation at the last general election. As I have stated in my previous budgets, I will fulfil the taxation commitments set out in the programme for Government over the lifetime of this Administration.
This year I am proposing a further cut in the standard rate of 2 per cent from 24 per cent to 22 per cent and a 2 per cent cut in the top rate from 46 per cent to 44 per cent. These rate cuts benefit practically all 1.2 million taxpayers in the State. These tax reductions mean that single persons on PAYE on the average industrial wage will see their income tax cut next year by nearly £20 per week; and a married couple with both spouses on the average industrial wage will gain almost £40 per week.
Tax Credits
My last budget announced the move to a tax credit system, beginning by standard rating the basic single and married personal allowances and the PAYE allowances. This year I am happy to announce that the full tax credit system will be put in place for the income tax year commencing 6 April 2001. Changes to certain personal allowances are necessary to accommodate the transition to tax credits. These changes affect the age allowance, widowed person's allowances, the blind person's allowance, the dependent relatives allowance and the incapacitated child's allowance. In order to standard rate these allowances, while ensuring no loss to those on the higher tax rate, it is proposed to double them in all cases from their current levels. These changes are set out in the Summary.
Last year it was not possible to standard-rate in full the lone-parent's additional allowance of £4,200 per annum. As a result, £3,150 per annum of this remained at the taxpayer's marginal rate of tax. In order to facilitate the completion of the move to tax credits, it is proposed to standard-rate this remaining element of the lone-parent's allowance and, so as to ensure no loss to those lone-parent taxpayers on the higher rate of tax, to increase the current single income tax band which applies to lone-parents by £3,150. As a consequence, the standard rate tax band which applies in the case of lone parents, including widows with children, will be £20,150 per annum for the next income tax year.
Deduction at Source
The move to tax credits will make the system more transparent and ultimately easier to follow. To simplify matters further, I am proposing that medical insurance relief and mortgage interest relief should no longer appear on the taxpayer's tax free allowances form but instead should be deducted at source and netted off against the premium or interest paid by the taxpayer concerned. I have asked the Revenue Commissioners to move to this deduction at source from 6 April 2001 and to make the necessary arrangements with mortgage lenders and health insurers.
Changes to Mortgage Interest Relief
In view of these new arrangements for deduction of tax relief at source from 2001 and to simplify the existing system, I propose to amend the current provisions relating to mortgage interest tax relief. At present the maximum level of interest which can be taken into account for this relief is £2,500 single, £3,600 widowed and £5,000 married per annum.
First-time mortgage holders are allowed to claim 100 per cent relief at the standard rate of income tax on interest paid up to these limits. I do not propose to change these rules, except to increase the widowed limit to the married limit of £5,000. Non-first-time buyers are entitled to claim relief on only 80 per cent of the interest but, even then, this is subject to a further deduction of £100 for single and widowed and £200 for married persons. Thus, the maximum amount of interest on which a single non-first-time buyer can claim tax relief is £1,900 per annum while the maximum for a married couple is £3,800 per annum.
I propose to abolish the 80 per cent rule and the de minimis deduction for non-first-time buyers. They will be replaced by a simple ceiling on interest of £2,000 single and £4,000 married, with widowed at the married rate of £4,000, all of which will continue at the standard rate of income tax. There will be no losers from these changes and, indeed, there will be a considerable number of gainers. The total cost in a full year is £33 million.
Tax Relief for the Elderly
I have just announced an effective doubling of the age allowance for those aged 65 and over on the standard rate of income tax. I also propose to increase the threshold at which any person aged 65 or over enters the tax net from £6,500 per annum for single and widowed persons to £7,500 per annum and from £13,000 per annum to £15,000 per annum for married couples. This means that in my three budgets I have increased the income tax exemption limits for the elderly by up to two thirds. The increases I have just announced will remove almost 10,000 elderly persons from the income tax net.
How many will remain on it?
Rent Relief
Under 55s
The second Bacon report on housing last March recommended that the rent relief for under 55s be increased to take account of the recent trends in rents across the country. Accordingly, the rent relief allowance for those under 55 will be increased by 50 per cent from 6 April next from £500 single, £750 widowed and £1,000 married to £750 single, £1,125 widowed and £1,500 married per annum. The cost of this increase is estimated at £7 million in a full year.
Over 55s
In addition, I propose to standard-rate the rent relief for those aged 55 and over, which is currently available at the taxpayer's marginal rate, while ensuring, at the same time, that no person claiming the relief at the higher rate of income tax will lose out. Consequently, the rental relief for those aged 55 and over will be doubled from 6 April next to £2,000 single, £3,000 widowed and £4,000 married per annum, and will be applied at the standard rate of income tax. Since 80 per cent of those on the relief are standard rate taxpayers, this amounts in effect to a doubling of the relief for four out of five claimants. The cost of this measure is just under £1 million in a full year.
Health Levy
As in previous years, the threshold for the payment of the health levy will be increased by £500 from £11,250 to £11,750 per annum, or from £217 per week to £226 per week.
Capital Allowances for Child Care Facilities
Last year I introduced a number of tax measures aimed at encouraging the increased supply of child care facilities. I propose this year to allow full 100 per cent cent capital allowances in year one for capital expenditure incurred on the construction or refurbishment or conversion of premises for the provision of child care. This effectively accelerates the capital allowances I brought in for child care premises last year which were claimable over a seven year period. The accelerated allowance will be available for qualifying expenditure incurred on or after today. The relief applies to all child care facilities, whether provided by employers or commercial child care operators and the reliefs can be used by owners of the facilities or by investors who wish to invest by way of leasing arrangements, subject to the normal tax rules which apply to such investors.
Profit Sharing/Gain-Sharing
A significant number of new and enhanced tax incentives were introduced in the recent past to help promote profit sharing schemes in the private sector. Various calls are being made in the context of the Partnership 2000 successor negotiations for the Government to introduce further profit and gain-sharing tax incentives to assist initiatives in this area which would apply across the public and private sectors. No clear picture has so far emerged of what form these initiatives might take or how they would operate in terms of proposed incentives. The Government is prepared to look at this issue provided that any such incentives are properly focused and justified, offer benefits to as wide a range of employees as possible, do not open the door for what may be costly tax planning schemes and do not result in substantial tax resources being taken up in relieving the remuneration of the few at the expense of the tax burden on the many.
Effects of Changes
This year's tax changes will remove 125,000 taxpayers from the top rate of tax and reduce the percentage of taxpayers who would otherwise have been on the top rate of tax in the 2000-01 income tax year from 46 per cent to 37 per cent. The changes mean that all taxpayers up to and at average industrial earnings will pay tax at the standard rate. Examples of how the new system will work are set out in the summary. This new band structure is a fundamental change to the system. It will improve considerably the position of single taxpayers on middle incomes. For certain two income families, the doubling of the band will increase the reward for both spouses working.
Real Tax Reform
For many years, the phrase tax reform has been bandied about, but for most of that time, all we did was tinker at the edges of the existing system. However, the fundamental changes initiated by this Administration can be described as real tax reform. Last year's move to tax credits; this year's launch of a three year strategy on individualisation of the standard rate band; and our continuation of reductions in both tax rates will finally give us tax reform.
These strategic taxation changes are a conscious attempt to remove taxpayers on average earnings from very high tax rates, which is very costly to achieve with the current structure. This real tax reform package is Exchequer costly. Neither is it possible to uniformly benefit all tax payers during the transition reform period. However, once completed and when the new overall structure is put in place, it will be relatively easy and less costly to focus and target.
BUSINESS AND OTHER TAXES
Corporation Tax
The Finance Act, 1999, set out the schedule of corporation tax reductions designed to achieve a single rate of 12.5 per cent on trading income by 1 January 2003. The standard rate of corporation tax which will apply from 1 January 2000 will be 24 per cent on trading income as provided for in that Act. To assist small and medium-sized firms, I have now decided that the 12.5 per cent rate will apply from 1 January 2000 to the trading income of a company where that trading income does not exceed £50,000 per annum.
Film Relief
Last year I extended the current tax incentives for investment in film-making in the State for one year pending the examination of detailed reports dealing with the operation of the incentives and the future development of the film industry here. The short span of that extension caused some disappointment and misplaced concern. I have decided to extend the current tax relief for a period of five years to April 2005, subject to one modification which is necessary to meet the terms of the EU Commission's approval of this relief as a State aid.
A welcome defeat for the Department of Finance.
The changes are detailed in the summary.
Life Assurance Companies and Collective Funds
At present, there are two different systems in operation for taxing the investment returns accruing to policyholders of life assurance companies and investors in collective funds. In the case of the domestic sector, the tax is levied at the standard income tax rate on an annual basis on the investment returns at the level of the company or fund and the policyholder or unit holder subsequently receives the net proceeds tax free when the investment is terminated. In the case of life assurance companies and collective funds in the IFSC, there is no such annual tax. In the light of changing circumstances I have now decided to apply a common system across the board on the lines of the present arrangements now applying in the case of the IFSC. The new system, which will include an exit tax on the investment returns received by the resident investor, will apply from 1 January 2001. The details are set out in the summary.
Mining Tax
Earlier this year I indicated that I would consider the case for taxing profits from the mining sector at the standard rate of corporation tax rather than at the 25 per cent rate which applies to non-trading income. The Government has undertaken to conduct a consultancy study on comparative tax and royalty regimes with a view to encouraging further exploration and mining. Consequently, I have deferred a final decision on this issue until the findings of this study are available.
Capital Gains Tax
In my first budget, I reduced the rate of capital gains tax from 40 per cent to 20 per cent in the case of disposals of most categories of assets. The rate change affected four months of the 1997-98 tax year yield, and the entire yield for 1998-99. Instead of reducing the yield the figures are as follows: 1997 – £132 million; 1998 – £193 million and 1999 – an estimated £343 million. Need I say more?
(Interruptions).
The one category of asset that was left after my first budget at the 40 per cent capital gains tax rate was development land. However, to encourage landowners to sell land for housing, as recommended in the Bacon report, this rate was since reduced to 20 per cent for the disposal of land zoned for residential use or with residential planning permission. This now leaves only one type of asset still liable at the 40 per cent rate, that is disposals of development land for non-residential purposes such as for example road-building, or the construction of factories or offices. I have decided, therefore, for simplification reasons to apply the 20 per cent rate to this remaining type of asset in the case of disposals occurring after today.
In addition, where the holders of development land are taxed under the corporation tax or income tax codes instead of the capital gains tax code, the rate of tax that will apply in their case on the sale of land for residential purposes will be reduced to 20 per cent. I am introducing this incentive rate for such situations to increase the supply of land for housing. Further details are contained in the summary. I am increasing the limit for the capital gains tax retirement relief for businesses sold outside the immediate family from £250,000 to £375,000 to encourage the transfer of business assets to younger entrepreneurs.
Capital Acquisitions Tax
I have made it clear for some time that I intended to make substantial changes to the capital acquisitions tax system. This tax has increasingly shifted its focus from real wealth to becoming a tax on gifts and inheritances taken by persons of more modest circumstances who would not normally be regarded as wealthy or well off. Recent budgets have made major changes in the amount of capital acquisitions tax applying to business and agricultural assets – giving up to 90 per cent relief in both situations.
It is hardly equitable that no capital acquisitions tax may be due on the transfer of a farm or business with a valuation of up to £1.9 million, yet a significant tax liability can arise on the inheritance of a modest three bedroomed house in our capital city.
The burden of the tax on the inheritance of the family home on those beneficiaries who are subject to the low thresholds has become an issue of considerable concern and worry to persons who may have limited resources to pay a significant tax demand on inheriting what is in effect their family residence. This situation applies in the case of brothers and sisters sharing the family home, aunts and nieces in similar circumstances and those in family and personal relationships who, under the tax law, are treated as strangers. I propose to address these difficulties.
The Irish capital acquisitions tax code is based on the domicile of the disponer as well as on the location of the assets comprised in a gift or inheritance. Many other countries base similar taxes on the rules of tax residence which is a much more common concept. One result of this present Irish tax arrangement is that it is possible for an Irish resident who has lived here all his or her life to avoid any liability on any gift or inheritance irrespective of its magnitude, provided the disponer is non-Irish domiciled and the assets given are foreign, for example, property located abroad or foreign currency assets.
I propose to change the basis for determining liability to gift and inheritance tax from domicile to residence in order to bring it into line with the income tax and capital gains tax codes which have always been based on the concept of residence. Accordingly, as and from today, a liability to capi tal acquisitions tax will arise where either the disponer or the beneficiary of a gift or inheritance is resident or ordinarily resident in the State. A liability will also arise, as before, where the assets in the gift or inheritance are situated in the State – regardless of the residence status of the disponer or the beneficiary. Further details are set out in the summary.
I have also decided to radically restructure the rates and the thresholds for all three classes of beneficiaries and to increase the threshold for probate tax. On or after today the following rules will apply.
CAT on the Family Home
The family home will be exempt from capital acquisitions tax where it is either the disponer's principal private residence and/or the principal private residence of the beneficiary and the beneficiary has continuously resided in the house for at least the previous three years and does not have an interest in any other residential property. It will be a condition of the relief that the beneficiary does not dispose of the residence within the subsequent six years.
New Thresholds
I am increasing the particular thresholds as follows: Class I – applicable to gifts and inheritances from parents – from £192,900 to £300,000; Class II – applicable to gifts and inheritances from brothers, sisters, aunts and uncles – from £25,720 to £30,000; Class III – applicable to all other situations – from £12,860 to £15,000 and the probate tax exemption threshold from £11,250 to £40,000.
There will be a new single capital acquisitions tax rate of 20 per cent instead of the current rates of 20 per cent, 30 per cent and 40 per cent and it will apply uniformly to both gifts and inheritances, instead of the present situation where gift tax is three-quarters of the rate applicable to inheritances. The total cost of these changes is estimated at £46 million in a full year.
Farmer Tax Issues
Turning to farmer taxation, I am increasing the current expenditure limit for capital allowances under the farm pollution control allowance scheme from £30,000 to £40,000 per annum and extending the operation of the scheme until 5 April 2003. I am also continuing for a further three years the two-thirds stamp duty relief on the transfer of land to young trained farmers which is due to run out on 31 December next.
The flat rate of VAT which may be charged by unregistered farmers on their sales to registered traders will be increased from 4 per cent to 4.2 per cent from 1 March 2000 at a cost to the Exchequer of £3.6 million in 2000 and just over £5 million in a full year. The associated VAT rate for livestock will also be increased to 4.2 per cent from the same date.
Capital Allowances for Multi-Storey Car Parks
In order to encourage the construction of multi-storey car parks outside the Dublin and Cork Corporation areas, I am proposing the continuation of the present scheme of capital allowances for such projects for another two years to the end of December 2002, where 15 per cent of the total cost of the project has been incurred by 30 September 2000.
Capital Allowances for Business Cars
In line with the policy followed over several years, the car value threshold for business cars is being increased from £16,000 to £16,500 for the capital allowances for new cars and for the allowable expenses for all cars arising in the course of a business.
New Pension arrangements for the Self-employed and others
I want to take this opportunity to record the great interest that has been generated in response to the new pension arrangements for the self-employed and proprietary directors which I introduced in the last Finance Act. These changes have fundamentally altered the situation facing the self-employed person and proprietary directors at retirement. These consumers now have a choice at retirement as regards their pension product, thereby eliminating the forced purchase of an annuity. As I have indicated previously, I am not finished with this area yet and I intend to address some further anomalies in the pensions area for the next Finance Bill.
MISCELLANEOUS TAX ITEMS
Revenue Powers
The faith of the taxpayer in the effectiveness of the tax system in identifying, pursuing and dealing with tax evasion has been tested by recent events. The Government is only too aware of the need to maintain confidence in the efficacy of the tax system in dealing with those who seek to evade their tax responsibilities.
The Government has already acted decisively in this regard. The Finance Act, 1999, contained major and extensive powers to allow access by Revenue to records in financial institutions and to third party information on taxpayers generally, and gave Revenue greater powers in requiring the provision of information directly by the taxpayer. The scope of these new powers is perhaps not generally appreciated. These powers are already being used by Revenue.
The Government has also acted in pursuing vigorously the various inquiries into certain companies' affairs using the powers under the Companies Acts. The relevant reports have been provided to Revenue, which is actively following these up. Revenue is also following up matters arising from the McCracken tribunal report. We established the inquiry by the Committee of Public Accounts into the DIRT affair. We have made it clear that the corporate governance provisions of company law will be strictly enforced to achieve much greater compliance levels with regard to meeting the filing and return requirements laid down by law.
I have acted already to provide the Revenue Commissioners with more resources in the specialised areas and skills involved in pursuing complex tax investigations. I understand that the Revenue Commissioners are at present reviewing the staffing of their Office and I will be prepared to consider requests which the commissioners, based on their experience and estimate of needs, may put to me in this regard.
There is an ongoing determination on the Government's part to tackle this issue and to see those culpable dealt with to the fullest extent. The new powers given to Revenue, applied forcefully and targeted on serious tax evasion, will produce results and ensure that public confidence in the professional organisation into which Revenue has developed over the past ten years can be justifiably reinforced and sustained.
Tax Consolidation Acts
In recent years substantial consolidation of various taxes has been effected. I aim, however, to build on this significant record and I have asked Revenue to turn its attention to the remaining areas of tax law not yet consolidated, that is, capital acquisitions tax and VAT, and to prepare a programme of work to consolidate tax law in these areas.
Travel Tax
Ireland applies a travel tax on passenger tickets of £5 per ticket on travel by air or sea to locations outside of the island of Ireland. There are some limited exemptions from the tax. It does not apply to journeys within the State. The EU Commission has challenged the tax before the European Court of Justice on the grounds that its non-application to domestic journeys or to Northern Ireland is discriminatory under the EU Treaty in that it favours domestic journeys compared with overseas cross-frontier trips. Rather than extend this tax, I propose to abolish it with effect from 1 January 2000, at a cost of approximately £20 million to the Exchequer. I would expect that the operators will use this development to keep access transport costs low to benefit both business and tourist traffic to Ireland.
Michael O'Leary will be delighted.
This measure will also assist the elderly in visiting friends and family, including any holidays to the south of France. Concerns about the effects on health of smoking intensify day by day. It is necessary to send out a clear message about the Government's concern about the substantial health damage caused by tobacco consumption and to help persuade consumers of the very serious health risks they run. I propose accordingly to increase the excise duty on ciga rettes from midnight by 50p per packet of 20, inclusive of VAT, with corresponding increases in other tobacco products. This will raise £132 million in a full year and add 0.75 per cent to the consumer price index.
In line with the announcement earlier this year by my colleague, the Minister for Health and Children, Deputy Cowen, that the tobacco industry should be seen to pay for the health effects of tobacco usage, I am proposing that the revenue equivalent to this tax increase will be paid by the Revenue Commissioners by way of appropriation-in-aid to the Department of Health and Children to help fund the increasing cost of health provision in this State – a cost to which cigarette smoking adds significantly. I do not propose to seek additional revenue from any other excises. I have decided to cut the excise duty on kerosene which is mainly used as home heating oil, from £37.30 to £25 per thousand litres in view of the large price gap for this product with Northern Ireland and the trade distortion which that gap has given rise to in Border areas.
Last year, I indicated that it was intended to take up the issue of green tax policy with the social partners in the context of the successor to Partnership 2000 with a view to putting in place an agreed policy in this area in view of the impact of tax increases on inflation and those on low incomes. My Department will raise this issue in the course of the negotiations which have just recently begun. For many years, the Government has given a tax concession for diesel fuel used in buses and trains. I propose to modify the existing excise duty rebate on diesel fuel, which is available to CIE and certain other bus operators, by stipulating that this concession will only be available where low-sulphur diesel is used.
What about LPG?
Last year, I indicated that I proposed to introduce a benefit-in-kind charge for car parking spaces and I asked the Department of Finance and the Revenue Commissioners to undertake a review and come up with a fair and workable system. Surprisingly, the working group has not been successful so far in resolving the issues involved. To ensure that the initiative in this area is not lost, I have directed my Department to consult with the Dublin Transportation Office and other relevant agencies on the practical measures required to impose a straightforward tax on persons using any employer-provided car parking spaces in the inner city area of Dublin.
A Deputy
Does this apply to Leinster House?
The Action Programme for the Millennium, published last month by the Government parties, reaffirmed the 4 per cent ceiling on the average annual increase in net current spending. In 2000, the annual average increase in net current spending over the 1997 outturn will be marginally more than 4 per cent. This does not include a provision for a new pay round or for other spending measures which might arise from a new national agreement. Adhering to the 4 per cent target in 2000 and in subsequent years will represent a considerable challenge which the Government is determined to meet.
In keeping with the practice of previous years I am including a contingency against all budgetary costs of £769 million in 2001 and £1,508 million in 2002.
For the election.
In addition, provision for pensions' pre-funding will reduce the general Government surplus by about 0.3 per cent of GDP in each of the two years. The general Government surplus is projected at 2.5 per cent of GDP in 2001 and 2.6 per cent of GDP in 2002. It is entirely appropriate that we continue to run substantial budgetary surpluses while economic conditions are favourable.
Budget 2000 is the third in a series of five for this Fianna Fáil-Progressive Democrats Government. It sets new goals and a vision for our future. It is innovative and radical.
In the national interest.
It consolidates our economic and social progress. It presents a strong economic and budgetary position and ensures that it will be maintained. It aims at improving not just income levels but also the quality of life for everyone. It provides for progressive improvement in living standards and social services. It aims to sustain our capacity to grow through massive investment and by increasing incentives to work. It addresses the problem of skills shortages in a fast-growing economy. It addresses the problems of child care in a balanced and equitable manner.
(Interruptions.)
Over its lifetime, this Government will have brought about fundamental change to our taxation system, thereby ensuring fairness and equity between all taxpayers.
Amen.
This Government has prepared the ground for our continued ability to maintain services and pensions in the face of fundamental demographic change. I commend the budget to the House.
EXPLANATORY TABLE OF BUDGET 2000 (a)
CURRENT BUDGET
|
Revenue |
£m |
£m |
£m |
|
Pre-Budget Tax Revenue |
20,475.0 |
||
|
Deduct:Income Tax reliefs: |
|||
|
–changes in exemption limits, personal allowances, standard tax rate and standard bands |
509.4 |
||
|
–other Income Tax concessions |
34.3 |
543.7 |
|
|
VAT measures |
3.6 |
||
|
Corporation Tax measures |
7.2 |
||
|
Capital Tax measures |
15.8 |
||
|
Abolish Travel Tax |
20.0 |
||
|
Excise measures |
10.8 |
57.4 |
|
|
Other measures |
0.8 |
0.8 |
|
|
Net effect on tax projections of tax and spending changes (b) |
276.8 |
||
|
Post-Budget Tax Revenue |
20,150.0 |
||
|
Non-Tax Revenue |
429.3 |
||
|
Post-Budget Current Revenue |
20,579 |
||
|
Expenditure |
£m |
£m |
£m |
|
Pre-Budget Voted expenditure [per Estimates for the Public Services (Abridged Version)] |
12,965.0 |
||
|
Adjust for: |
|||
|
Net revisions to Estimates (c) |
88.6 |
||
|
Add:Impact of Social Inclusion Measures |
|||
|
Social Welfare improvements (d) |
138.1 |
||
|
Health Developments |
45.5 |
||
|
Education and Science |
7.5 |
||
|
Other |
16.9 |
208.0 |
|
|
Add: |
|||
|
Transfer of Excise Duties to Health Vote |
132.0 |
||
|
Increase levy threshold by £500 |
3.8 |
||
|
Training Fund to Enterprise Trade and Employment |
105.0 |
233.2 |
|
|
Other Health Service Developments |
30.8 |
||
|
Miscellaneous |
56.2 |
||
|
Estimated Departmental Balances (e) |
20.0 |
||
|
Voted Expenditure on post-Budget basis |
12,918.2 |
||
|
Non-voted (compulsory expenditure charged directly on Central Fund) |
3,102.9 |
||
|
Total Current Expenditure on post-Budget basis |
16,021.1 |
CURRENT BUDGET SURPLUS4,558
CAPITAL BUDGET DEFICIT(2,950)
EXCHEQUER SURPLUS1,609
(a)This table shows the effects of the implementation of the Budget day measures on the pre-Budgetary position shown in the White Paper on Receipts and Expenditure.
(b)The Budget Measures have an impact on the economy with changes in consumption and investment patterns etc. leading to additional tax buoyancy. It is estimated that this buoyancy will result in an additional £276.8 million accruing to the Exchequer.
(c)The net total of non-Budget day revisions (both increases and decreases) to the Estimates. The main change results from the delayed receipt of European Social Fund payments in respect of 1999 into the Exchequer in 2000.
(d)The full Department of Social, Community and Family expenditure in respect of the social welfare package in this Budget is £398.4 million. In the year 2000, the total gross cost of the package is £231.34 million of which £138.06 million is funded from the Exchequer and £93.28 million is met from the Social Insurance Fund.
(e)Departmental balances are those amounts issued from the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year. They have no effect on Departmental spending which is governed by the allocation in the Estimates for Public Services.
TABLE 1
Summary of Current and Capital Budgets, 1999 and 2000 and Projections for 2000 and 2001
|
1999EstimatedOutturn |
2000Post-BudgetEstimate |
2001Projection |
2002Projection |
|
|
Current Budget |
m |
m |
m |
m |
|
Current Expenditure |
||||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
17,113 |
18,637 |
19,643 |
20,439 |
|
Non-voted (Central Fund expenditure) |
4,385 |
3,940 |
3,635 |
3,658 |
|
Expenditure from Social Insurance Fund |
2,820 |
3,128 |
3,329 |
3,450 |
|
Gross Current Expenditure |
24,317 |
25,705 |
26,607 |
27,548 |
|
less Appropriations-in-aid (including PRSI)Note 2 |
(4,465) |
(5,337) |
(5,446) |
(5,541) |
|
less Departmental BalancesNote 3 |
(97) |
(25) |
(0) |
(0) |
|
Net Current ExpenditureTables 4 and 4a |
19,756 |
20,343 |
21,160 |
22,007 |
|
Current Receipts |
||||
|
Tax RevenueTable 2 |
23,343 |
25,585 |
27,630 |
29,902 |
|
Non-Tax RevenueTable 2 |
572 |
545 |
494 |
497 |
|
Total Current Receipts |
23,915 |
26,130 |
28,123 |
30,399 |
|
Current Budget Surplus |
4,159 |
5,788 |
6,963 |
8,393 |
|
Capital Budget |
||||
|
Capital Expenditure |
||||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
3,189 |
4,004 |
4,503 |
4,658 |
|
Non-voted (Expenditure under legislation) |
1,601 |
114 |
127 |
131 |
|
Pre-funding of future pension liabilitiesNote 4 |
3,808 |
2,266 |
884 |
– |
|
less Appropriations-in-aidNote 2 |
(98) |
(124) |
(118) |
(91) |
|
Net Capital ExpenditureTables 5 and 5a |
8,500 |
6,260 |
5,395 |
5,653 |
|
Capital ResourcesNote 5 |
5,738 |
2,515 |
1,193 |
1,047 |
|
Capital Budget Balance |
(2,762) |
(3,745) |
(4,203) |
(4,605) |
|
General Contingency ProvisionNote 6 |
(0) |
(0) |
(976) |
(1,914) |
|
Exchequer SurplusNote 7 |
1,397 |
2,043 |
1,785 |
1,873 |
|
General Government SurplusNote 8 |
1,151 |
1,116 |
2,617 |
2,913 |
|
GG Surplus as % of GDP |
1.4% |
1.2% |
2.5% |
2.6% |
|
GDP Value (ESA 95 basis) Note 8 |
84,882 |
93,992 |
102,849 |
111,610 |
Notes to Table 1
Note that figures may not add due to rounding.
Note 1.The projections reflect:
(a)the impact of the measures announced in the Budget 2000;
under the expenditure heading, an overall net current expenditure envelope of 4% per annum for 2000 to 2002;
unchanged interest rates;
(b)under the taxation heading a technical provision for further possible changes in both 2001 and 2002 in personal taxes costing 444 million euros in a full year – the level of tax changes in these years will be subject to review in the light of emerging economic conditions;
(c)a provision for the cost of reducing Corporation Tax rates by 4 percentage points in each of the years 2001 and 2002.
(d)a decrease in Capital Services Redemption Account assets of 152 million euros and 63 million euros in 2001 and 2002; respectively.
Note 2.Appropriations-in-Aid are Departmental receipts which, with the approval of the Dáil, may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund. Details of gross voted Departmental expenditures are contained in the Estimates for Public Services. PRSI receipts accrue to the Social Insurance Fund.
Note 3.Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year.
Note 4.The Government has decided to set aside 1% of GNP annually for the pre-funding of part of the future cost of social welfare and public service pensions. In addition, part of the 1999 receipts from the sale of Telecom Eireann and all of the 2000 receipts will be dedicated to this purpose.
Note 5.The 2000 figure excludes the repayment of a loan of 127 million euros by the Insurance Compensation Fund which the Exchequre will repay to the Central Bank. This loan was advanced by the Central Bank to the Exchequer in 1985 for on-lending to the Insurance Compensation Fund for a 15 year term.
Note 6.This is a contingency provision against all budgetary costs which cannot be quantified at this stage.
Note 7.The 1999 outturn estimates are identical to the White Paper figures except in the Tax Revenue figure which is 2.2m euros higher due to the additional Excise receipts as a consequence of the Budget changes.
Note 8.The figures for GDP and GGB values are the ESA 95 equivalent.
Measurement of Expenditure Increases
Current Departmental Expenditure
With the introduction of the new Local Government Fund in 1999, 303 millions euros is included in the 2000 Estimates which is not included in 1998 and earlier years. To allow a proper assessment of the annual average increase in current expenditure, 303 million euros must be removed from the 2000 figures.
|
1997Outturnm |
2000Estimatem |
Annual Averageincrease |
|
|
Central Fund |
4,687 |
3,940 |
-5.6% |
|
Net Voted Departmental Expenditure |
13,123 |
16,403 |
7.7% |
|
Total Net Current Expenditure |
17,809 |
20,343 |
4.5% |
|
Less |
|||
|
Local Government Fund |
303 |
||
|
Total Net Current Expenditure (adjusted) |
17,809 |
20,039 |
4,0% |
TABLE 2
Current Receipts 1999 to 2002
|
1999EstimatedOutturn |
2000Post-BudgetEstimate |
2001Projection |
2002Projection |
|
|
m |
m |
m |
m |
|
|
Tax Revenue |
||||
|
Customs |
182 |
189 |
199 |
208 |
|
Excise Duties (a) |
3,970 |
4,260 |
4,579 |
4,888 |
|
Capital Taxes |
623 |
681 |
686 |
731 |
|
Stamp Duties |
895 |
1,084 |
1,187 |
1,252 |
|
Income Tax |
7,898 |
8,252 |
8,484 |
8,997 |
|
Corporation Tax |
3,412 |
3,970 |
4,581 |
5,201 |
|
Value-Added Tax |
6,231 |
7,132 |
7,902 |
8,613 |
|
Agricultural Levies (EU) |
13 |
11 |
11 |
11 |
|
Employment and Training Levy |
119 |
5 |
0 |
0 |
|
Tax Receipts |
23,343 |
25,585 |
27,630 |
29,902 |
|
Non-Tax Revenue |
||||
|
Central Bank – Surplus Income |
194 |
212 |
160 |
160 |
|
National Lottery Surplus |
154 |
159 |
159 |
159 |
|
Interest on Loans & Dividends |
131 |
79 |
78 |
80 |
|
Other Receipts |
93 |
96 |
97 |
99 |
|
Total Non-Tax Revenue |
572 |
545 |
494 |
497 |
|
Total Current Receipts |
23,915 |
26,130 |
28,123 |
30,399 |
(a)The 1999 outturn includes an additional 2.2 million euros over the White Paper figure which is the net impact in 1999 resulting from the changes to Excise Duties on 2 December, 1999.
TABLE 3
How gross current expenditure will be allocated
|
2000 Post-Budget |
m |
m |
Percentage of Total GrossExpenditure |
|
Service of National Debt |
|||
|
Interest |
2,339 |
9.1% |
|
|
Sinking Funds |
479 |
1.9% |
|
|
Other debt management expenses |
28 |
0.1% |
|
|
2,846 |
11.1% |
||
|
Economic Services |
|||
|
Industry and Labour |
988 |
3.8% |
|
|
Agriculture |
971 |
3.8% |
|
|
Fisheries, Forestry |
90 |
0.4% |
|
|
Tourism |
83 |
0.3% |
|
|
2,132 |
8.3% |
||
|
Infrastructure |
85 |
0.3% |
|
|
Social Services |
|||
|
Health |
5,029 |
19.6% |
|
|
Education |
3,581 |
13.9% |
|
|
Social Welfare |
6,853 |
26.7% |
|
|
Subsidies, etc. |
146 |
0.6% |
|
|
15,609 |
60.7% |
||
|
Security |
2,028 |
7.9% |
|
|
Other |
3,005 |
11.7% |
|
|
Gross Expenditure |
25,705 |
100.0% |
Note that figures may not add due to rounding.
TABLE 4
Summary of Adjustments to 2000 Net Current Expenditure
|
Vote No. |
Vote |
2000Estimates on Pre-Budget basis (a) |
Adjustmentsin theBudget |
2000RevisedEstimates |
|
000 |
000 |
000 |
||
|
1 |
President's Establishment |
1,340 |
225 |
1,564 |
|
2 |
Houses of the Oireachtas and the European Parliament |
52,709 |
52,709 |
|
|
3 |
Department of the Taoiseach |
30,335 |
1,359 |
31,694 |
|
4 |
Ordnance Survey Ireland |
6,972 |
6,972 |
|
|
5 |
Central Statistics Office |
26,012 |
26,012 |
|
|
6 |
Office of the Minister for Finance |
73,725 |
8,888 |
82,613 |
|
7 |
Superannuation and Retired Allowances |
143,092 |
143,092 |
|
|
8 |
Office of the Comptroller and Auditor General |
4,922 |
4,922 |
|
|
9 |
Office of the Revenue Commissioners |
212,296 |
212,296 |
|
|
10 |
Office of Public Works |
106,254 |
106,254 |
|
|
11 |
State Laboratory |
4,709 |
4,709 |
|
|
12 |
Secret Service |
933 |
933 |
|
|
13 |
Office of the Attorney General |
8,634 |
8,634 |
|
|
14 |
Office of the Director of Public Prosecutions |
12,616 |
12,616 |
|
|
15 |
Valuation Office |
6,665 |
6,665 |
|
|
16 |
Civil Service Commission |
9,655 |
9,655 |
|
|
17 |
Office of The Ombudsman |
3,186 |
3,186 |
|
|
18 |
Chief State Solicitor's Office |
24,566 |
24,566 |
|
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
111,166 |
2,603 |
113,769 |
|
20 |
Garda Síochána |
818,077 |
818,077 |
|
|
21 |
Prisons |
216,255 |
1,524 |
217,779 |
|
22 |
Courts |
45,292 |
45,292 |
|
|
23 |
Land Registry and Registry of Deeds |
26,333 |
26,333 |
|
|
24 |
Charitable Donations and Bequests |
362 |
362 |
|
|
25 |
Environment and Local Government |
496,554 |
1,460 |
498,014 |
|
26 |
Office of the Minister for Education and Science |
175,352 |
-2,263 |
173,089 |
|
27 |
First Level Education |
1,068,189 |
7,067 |
1,075,256 |
|
28 |
Second Level and Further Education |
1,243,658 |
-14,122 |
1,229,536 |
|
Vote No. |
Vote |
2000Estimates on Pre-Budget basis (a) |
Adjustmentsin theBudget |
2000RevisedEstimates |
|
29 |
Third Level and Further Education |
838,545 |
-29,261 |
809,284 |
|
30 |
Marine and Natural Resources |
76,690 |
76,690 |
|
|
31 |
Agriculture, Food and Rural Development |
619,593 |
619,593 |
|
|
32 |
Public Enterprise |
183,265 |
762 |
184,027 |
|
33 |
Health and Children |
4,118,943 |
-65,899 |
4,053,043 |
|
34 |
Enterprise, Trade and Employment |
893,934 |
-160,068 |
733,865 |
|
35 |
Tourism, Sport and Recreation |
145,686 |
4,444 |
150,130 |
|
36 |
Defence |
607,017 |
241 |
607,259 |
|
37 |
Army Pensions |
107,674 |
107,674 |
|
|
38 |
Foreign Affairs |
104,894 |
927 |
105,821 |
|
39 |
International Co-operation |
174,875 |
174,875 |
|
|
40 |
Social, Community and Family Affairs |
3,498,125 |
181,649 |
3,679,773 |
|
41 |
An Comhairle Ealaion |
38,727 |
38,727 |
|
|
42 |
An Roinn Ealaion, Oidhreachta, Gaeltachta agus Oileain |
121,148 |
1,032 |
122,181 |
|
43 |
National Gallery |
3,174 |
3,174 |
|
|
44 |
Administrative Budget Carryover |
– |
25,395 |
25,395 |
|
Total Net Voted Expenditure (b) |
16,462,148 |
-34,038 |
16,428,110 |
|
|
Less Departmental Balances (c) |
-25,395 |
-25,395 |
||
|
Exchequer Payments Towards Voted Expenditure (d) |
16,462,148 |
-59,433 |
16,402,715 |
|
|
Plus Non-Voted Current Expenditure (i.e. Central Fund) |
3,939,912 |
3,939,912 |
||
|
Net Current Expenditure (e) |
20,402,060 |
-59,433 |
20,342,627 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
(c)Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year.
(d)Certain ESF grants expected in 1999 will not be received until 2000, giving a saving on Education, Enterprise, Trade and Employment and Health. The estimate for Enterprise, Trade and Employment also takes account of extra receipts from the new Training Fund. The estimate for Health and Children takes account of 168 million euros additional receipts as a result of the changes in Excise Duty on tobacco.
(e)The above projections make no provision for the cost of any post-Partnership 2000 pay agreement or for other spending measures which might arise from a new National Agreement.
TABLE 4 (a)
Current Expenditure Projections – 2001 and 2002
|
Ministerial Group |
2001Net |
2002Net |
|
000s |
000s |
|
|
01 Taoiseach |
65,199 |
41,697 |
|
02 Finance |
691,228 |
704,489 |
|
03 Public Enterprise |
186,919 |
190,015 |
|
04 Justice, Equality and Law Reform |
1,176,344 |
1,187,421 |
|
05 Environment and Local Government |
534,459 |
547,051 |
|
06 Education and Science |
3,564,286 |
3,660,593 |
|
07 Marine and Natural Resources |
76,310 |
78,151 |
|
08 Agriculture, Food and Rural Development |
589,471 |
617,954 |
|
09 Enterprise, Trade and Employment |
810,343 |
848,409 |
|
10 Tourism, Sport and Recreation |
110,000 |
137,728 |
|
11 Defence |
762,160 |
725,395 |
|
12 Foreign Affairs |
296,323 |
301,837 |
|
13 Social, Community and Family Affairs |
3,928,201 |
4,062,100 |
|
14 Health and Children |
4,432,513 |
4,687,377 |
|
15 An Roinn Ealaion, Oidreachta, Gaeltachta agus Oilean |
165,716 |
167,779 |
|
Unallocated current expenditure (a) |
136,088 |
390,100 |
|
Total Voted Expenditure (b) |
17,525,560 |
18,348,096 |
|
Plus Non-voted Current Expenditure (i.e. Central Fund) |
3,634,625 |
3,658,496 |
|
Net Current Expenditure (c) |
21,160,185 |
22,006,592 |
(a)This is the amount within the limits of 4% average annual growth in net current expenditure which is available for allocation across Vote Groups above the projected expenditure for those groups on a "no-policy change" basis as shown in this table.
(b)This is the net voted current expenditure total consistent with the Government's limit of a 4% average annual increase in net Current Expenditure (i.e. net voted plus non-voted current expenditure).
(c)The above projections make no provision for the cost of any post-Partnership 2000 pay agreement or for other spending measures which might arise from a new National Agreement.
TABLE 5
Summary of Adjustments to 2000 Capital Expenditure
|
VoteNo. |
Vote |
2000Estimates onPre-Budgetbasis (a) |
Adjustments inthe Budget |
2000RevisedEstimates |
|
000 |
000 |
000 |
||
|
3 |
Department of the Taoiseach |
15,872 |
1,270 |
17,141 |
|
4 |
Ordnance Survey Ireland |
2,159 |
2,159 |
|
|
5 |
Central Statistics Office |
1,044 |
1,044 |
|
|
6 |
Office of the Minister for Finance |
78,142 |
78,142 |
|
|
9 |
Office of the Revenue Commissioners |
13,745 |
13,745 |
|
|
10 |
Office of Public Works |
138,266 |
3,174 |
141,440 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
15,199 |
15,199 |
|
|
20 |
Garda Siochána |
34,661 |
34,661 |
|
|
21 |
Prisons |
36,495 |
36,495 |
|
|
22 |
Courts |
27,325 |
27,325 |
|
|
25 |
Environment and Local Government |
1,559,919 |
12,189 |
1,572,108 |
|
26 |
Office of the Minister for Education and Science |
121,440 |
121,440 |
|
|
27 |
First Level Education |
106,372 |
2,539 |
108,912 |
|
28 |
Second Level and Further Education |
126,974 |
4,285 |
131,259 |
|
29 |
Third Level and Further Education |
170,780 |
170,780 |
|
|
30 |
Marine and Natural Resources |
80,971 |
5,079 |
86,050 |
|
31 |
Agriculture, Food and Rural Development |
132,118 |
132,118 |
|
|
32 |
Public Enterprise |
337,174 |
1,270 |
338,444 |
|
33 |
Health and Children |
292,040 |
1,270 |
293,309 |
|
34 |
Enterprise, Trade and Employment |
316,762 |
339 |
317,101 |
|
35 |
Tourism, Sport and Recreation |
76,583 |
254 |
76,837 |
|
36 |
Defence |
33,172 |
63 |
33,235 |
|
38 |
Foreign Affairs |
1,905 |
650 |
2,555 |
|
40 |
Social, Community and Family Affairs |
8,082 |
8,082 |
|
|
41 |
An Comhairle Ealaion |
5,079 |
5,079 |
|
|
42 |
An Roinn Ealaion, Oidreachta, Gaeltachta agus Oileain |
109,509 |
127 |
109,636 |
|
43 |
National Gallery |
4,762 |
4,762 |
|
|
44 |
Flood Relief |
204 |
204 |
|
|
Total Net Voted Capital (b) |
3,846,750 |
32,510 |
3,879,261 |
|
|
Plus |
Non-voted Exchequer Capital |
114,293 |
114,293 |
|
|
Plus |
Pre-funding of future pension liabilities |
2,266,482 |
2,266,482 |
|
|
Total expenditure |
6,227,526 |
32,510 |
6,260,036 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
TABLE 5 (a)
Capital Expenditure Projections – 2000 and 2001
|
VoteNo. |
Vote |
2001Net |
2002Net |
|
000 |
000 |
||
|
3 |
Department of the Taoiseach |
||
|
4 |
Ordnance Survey Ireland |
2,222 |
2,057 |
|
5 |
Central Statistics Office |
3,106 |
554 |
|
6 |
Office of the Minister for Finance |
62,348 |
62,350 |
|
9 |
Office of the Revenue Commissioners |
11,209 |
8,888 |
|
10 |
Office of Public Works |
122,931 |
103,538 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
24,298 |
16,762 |
|
20 |
Garda Siochána |
12,819 |
10,461 |
|
21 |
Prisons |
41,120 |
43,998 |
|
22 |
Courts |
24,930 |
25,199 |
|
25 |
Environment and Local Government |
2,148,558 |
2,346,663 |
|
26 |
Office of the Minister for Education and Science |
26,210 |
26,210 |
|
27 |
First Level Education |
106,735 |
107,121 |
|
28 |
Second Level and Further Education |
126,974 |
126,974 |
|
29 |
Third Level and Further Education |
226,013 |
219,665 |
|
30 |
Marine and Natural Resources |
73,576 |
78,160 |
|
31 |
Agriculture, Food and Rural Development |
95,061 |
115,018 |
|
32 |
Public Enterprise |
337,950 |
338,741 |
|
33 |
Health and Children |
342,829 |
368,224 |
|
34 |
Enterprise, Trade and Employment |
337,438 |
327,884 |
|
35 |
Tourism, Sport and Recreation |
69,827 |
72,751 |
|
VoteNo. |
Vote |
2001Net |
2002Net |
|
36 |
Defence |
55,253 |
18,106 |
|
38 |
Foreign Affairs |
3,041 |
3,041 |
|
40 |
Social, Community and Family Affairs |
8,126 |
6,577 |
|
41 |
An Comhairle Ealaion |
5,079 |
5,079 |
|
42 |
An Roinn Ealaion Oidreachta, Gaeltachta agus Oilean |
115,666 |
131,996 |
|
43 |
National Gallery |
952 |
952 |
|
Total Voted Net Capital (a) |
4,384,272 |
4,566,970 |
|
|
Plus |
Non-voted Exchequer Capital |
126,974 |
130,783 |
|
Plus |
Pre-funding of future pension liabilities |
884,055 |
954,843 |
|
Total Capital Expenditure |
5,395,301 |
5,652,596 |
(a)The above figures for 2001 and 2002 are NPC projections of the post-Budget 2000 figures (as set out in Table 5). These NPC projections are consistent with the Exchequer Capital expenditure portion of the allocations in the National Development Plan 2000-2006.
TABLE 6
Explanation of net difference between Exchequer Surplus and General Government Surplus
The Exchequer Surplus is the traditional domestic budgetary aggregate which measures Central Government's net surplus or borrowing position. It is the difference between total receipts into and total expenditure out of the Exchequer Account of the Central Fund.
The General Government Balance (GGB) measures fiscal performance of all arms of Government, i.e. Central Government, Local Authorities, Health Boards, Vocational Education Committees, non-commercial State sponsored bodies, as well as Funds such as the Social Insurance Fund which are managed by Central Government Departments. It thus provides a more accurate assessment of the underlying fiscal performance. However, it does not reflect the position of commercial State sponsored bodies as these agencies are classified as being outside the General Government Sector.
The GGB is calculated in accordance with ESA95, a consistent standard, developed by the EU to facilitate budgetary comparisons between EU member States in accordance with their obligations under the Maastricht Treaty.
Details of the variation between the Exchequer and the General Government measures are set out in the table below.
|
Data are in million euros |
1999EstimatedOutturn |
2000Post-BudgetEstimate |
2001Projection |
2002Projection |
|
Exchequer Surplus |
1,397 |
2,043 |
1,785 |
1,873 |
|
Interest adjustments (a) |
429 |
99 |
36 |
61 |
|
Exclude equity and loan transactions (b) |
4,649 |
1,357 |
20 |
22 |
|
Net (Borrowing)/Surplus of non-commercial State sponsored bodies |
41 |
|||
|
Adjustments for Transactions between the Exchequer and Government Departments/Offices and Extra-Budgetary Funds (c) |
99 |
46 |
3 |
|
|
Accrual Adjustments (d) |
38 |
|||
|
Adjustment to reflect the impact of pre-funding of futures pensions liabilities (e) |
||||
|
Payment into Temporary Holding Fund in 1999 and 2 permanent funds from 2000 |
3,808 |
2,266 |
880 |
947 |
|
Impact of establishment of Public Service Pension Fund in 2000 |
2,025 |
293 |
316 |
|
|
Net (Borrowing)/Surplus of Central Government |
807 |
980 |
2,430 |
2,587 |
|
Net Surplus of the Social Insurance Fund |
295 |
136 |
188 |
326 |
|
Net (Borrowing)/Surplus of Local Authorities |
50 |
|||
|
General Government Surplus |
1,151 |
1,116 |
2,617 |
2,913 |
|
Net Difference between Exchequer Surplus/Deficit and GGS/(Deficit) |
245 |
927 |
833 |
1,040 |
(a)This adjustment reflects the requirement, under ESA rules, that changes in the assets of the Capital Services Redemption Account and capital gains or losses on foreign exchange contracts, swaps, etc, should be excluded from the interest to be recorded for the purposes of calculating the General Government Surplus.
(b)Equity and loan transactions are excluded from the General Government Surplus on the basis that they affect the composition but not the level of assets and liabilities. The proceeds from the sale of shares in Telecom Éireann, and the expected receipts in 2000, do not affect the General Government Surplus as this is treated as a financial transaction under ESA conventions and is not counted as income of the Government Sector.
(c)Transfers between units within the General Government Sector do not affect the General Government Surplus.
(d)This adjustment is required in respect of certain property transactions recorded on an accruals basis in calculating the General Government Surplus.
(e)The adjustment for pre-funding of future pensions liabilities is made because the Temporary Holding Fund (which is due to be established in 1999) is part of the General Government Sector and transactions within the Sector do not impact on the GGB. Legislation is due to be introduced in 2000, which will dissolve the Temporary Holding Fund, and the balance in the Fund will be paid into two permanent Funds which will be established – a Social Welfare Reserve Fund and a Public Service Pensions Fund. It is expected that the Social Welfare Reserve Fund (two-thirds of the provision) will be part of the General Government Sector whereas the Public Service Pension Fund (one-third of the total) will be outside the Sector. The figure quoted above for 2000 includes an adjustment of 1.27 billion euros (one-third of the 3.8 billion euros) which is the transfer to the Public Service Pension Fund. It also includes the impact of one-third of the provision for pre-funding in 2000 (2.3 billion euros).
TABLE 7
EXPLANATORY TABLE OF BUDGET 2000 (a)
CURRENT BUDGET
|
Revenue |
000 |
000 |
000 |
|
Pre-Budget Tax Revenue |
25,997.9 |
||
|
Deduct:Income Tax reliefs: |
|||
|
–changes in exemption limits, personal allowances, standard tax rate and standard bands |
646.8 |
||
|
–other Income Tax concessions |
43.6 |
690.4 |
|
|
VAT measures |
4.6 |
||
|
Corporation Tax measures |
9.1 |
||
|
Capital Tax measures |
20.1 |
||
|
Abolish Travel Tax |
25.4 |
||
|
Excise measures |
13.7 |
72.8 |
|
|
Other measures |
1.0 |
1.0 |
|
|
Net effect on tax projections of tax and spending changes (b) |
351.5 |
||
|
Post-Budget Tax Revenue |
25,585.2 |
||
|
Non-Tax Revenue |
545.1 |
||
|
Post-Budget Current Revenue |
26,130 |
||
|
Expenditure |
000 |
000 |
000 |
|
Pre-Budget Voted expenditure [per Estimates for the Public Services (Abridged Version)] |
16,462.1 |
||
|
Adjust for: |
|||
|
Net revisions to Estimates (c) |
112.5 |
||
|
Add:Impact of Social Inclusion Measures |
|||
|
Social Welfare improvements (d) |
175.3 |
||
|
Health Developments |
57.8 |
||
|
Education and Science |
9.5 |
||
|
Other |
21.5 |
264.1 |
|
|
Add: |
|||
|
Transfer of Excise Duties to Health Vote |
167.6 |
||
|
Increase levy threshold by £500 |
4.8 |
||
|
Training Fund to Enterprise Trade and Employment |
133.3 |
296.1 |
|
|
Other Health Service Developments |
39.1 |
||
|
Miscellaneous |
71.4 |
||
|
Estimated Departmental Balances (e) |
25.4 |
||
|
Voted Expenditure on post-Budget basis |
16,402.7 |
||
|
Non-voted (compulsory expenditure charged directly on Central Fund) |
3,939.9 |
||
|
Total Current Expenditure on post-Budget basis |
20,342.6 |
CURRENT BUDGET SURPLUS5,788
CAPITAL BUDGET DEFICIT(3,745)
EXCHEQUER SURPLUS2,043
(a)This table shows the effects of the implementation of the Budget day measures on the pre-Budgetary position shown in the White Paper on Receipts and Expenditure.
(b)The Budget Measures have an impact on the economy with changes in consumption and investment patterns etc. leading to additional tax buoyancy. It is estimated that this buoyancy will result in an additional 351 million euros accruing to the Exchequer.
(c)The net total of non-Budget day revisions (both increases and decreases) to the Estimates. The main change results from the receipt of European Social Fund payments in respect of 1999, which will not be received into the Exchequer until 2000.
(d)The full Department of Social, Community and Family Affairs expenditure in respect of the social welfare package in this Budget is 506 million euros. In the year 2000, the total gross cost of the package is 294 million euros of which 175 million euros is Exchequer cost related and 118 million euros is Social Insurance Fund.
(e)Departmental balances are those amounts issued from the Central Fund for departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year. They have no effect on departmental spending which is governed by the allocation in the Estimates for Public Services.
I know that we are supposed to be impressed on this side of the House, but I feel a bit like Mark Twain when he visited Niagara Falls.
Lost in the mist?
When he saw that great flow of water going over the falls he was silent. His companion asked him if he was impressed and he said: "Yes, I'm impressed all right, but I'd be more impressed if it flowed up the other way". This is the most socially divisive budget I have seen presented to the House.
For God's sake. Come on, Deputy.
I will return to that point when I analyse the budget. The Government is now well into the second part of its period of office. It is the third of a possible four budgets being presented by the Minister. The Government has now served almost as much time in office as its predecessor, the rainbow Government, and has little real achievement to show for it. The Government in which I had the honour to serve – with Deputy John Bruton as Taoiseach and Deputy Quinn as Minister for Finance – left the country in great shape with unprecedented growth rates, rapidly declining unemployment, low inflation and a big balance of payments surplus. When we left office the economy was boom ing and there was little doubt but that it would continue to grow.
For the foreseeable future Governments will continue to have unprecedented resources at their disposal. The issue for Governments is no longer whether they will have money to spend, but how effectively they will use the financial resources at their disposal. The Government has the resources required to build a new Ireland, to raise the standard of living of all our people, to lift everyone out of poverty, to provide proper inclusive health care and education services, and to provide the physical infrastructure of a modern economy.
In the past, Governments could explain away their failure by claiming they suffered from a lack of resources. This excuse is now redundant and Governments in future – and this Government in particular – will be measured not by what they give but by how they use resources to create a fairer more inclusive nation where growth and prosperity are sustained and where the fruits of economic growth are used to enhance and improve the quality of life of all our people. The issues now are the competence and effectiveness of the Government and I will judge the budget on that basis.
I now turn to the only radical element in the budget which concerns the income tax proposals. Fine Gael published its income tax proposals last September and, initially, I would like to measure them against what the Minister has done today. We said it was illogical to tax the minimum wage and that if policy makers decided that people needed £170 a week to live on, it was folly to take back a quarter of it by way of income tax. We advocated this very strongly and I thought we had impressed the Minister with the strength of our argument. We thought, when our proposals were supported by the Congress of Trade Unions, that the Minister would use the bulk of the resources at his disposal to take people completely out of the tax net. Instead, he failed at the first fence and has just moved the amount of money exempt from tax per week from £100 to £110. That is a long way from the minimum wage, which the Minister will introduce in a few months. It will take another £65 or £66 to remove the minimum wage from the tax net. That is a basic and fundamental flaw in this budget. The resources which should have been dedicated to people on very low incomes have been dissipated elsewhere.
Deputies
Hear, hear.
Fine Gael's second proposal was to extend the standard rate band to £17,500, just above the average wage, and to double that to £35,000 for married persons. The Minister has brought forward a more radical proposal than that. He has extended the range of the standard rate band to £17,000, but he has decided to individualise it. The current Attorney General once said that the choice facing his party was to be radical or redundant. This is radical, but it is also possibly redundant because I cannot see how it is constitutional.
Deputies
Hear, hear.
I cannot see how this squares with the findings in the Murphy case. It is socially divisive, blindingly unfair and discriminates against one income families where a mother stays at home to look after her children.
They took the Attorney General's advice.
The tax system should reflect the real cost of a second spouse going to work. That option was open to the Minister by increasing the PAYE allowance. However, the provision that one family will pay the higher rate of tax when it exceeds an income of £28,000, but another family will only pay the higher rate of tax when it exceeds an income of £34,000, is socially divisive, blindingly unfair and probably unconstitutional. I would like to see the advice.
That is the present position. However, the Minister went on to say that he will individualise the standard rate band at £28,000 over the next three years. Therefore, when we bring it forward, the one income family will go on the higher rate band when it passes £28,000 but, when this is fully implemented and fully individualised, the two income family will not go on the higher rate band until it reaches a gross income of £56,000. This is where we are going in three years' time.
One might say there is not much difference between £28,000 and £34,000 and that it takes into account the cost of a second spouse going to work. However, if we take it forward to the full implementation of the Minister's plan we see that, under the policy the Minister has now stated, the differential after the third budget will no longer be £6,000 but the difference between £28,000 and £56,000. That is unfair and will be difficult to stand up in court. More importantly, allowing the transfer of the individual standardised bands between spouses is separating in order to bring together again, and the Minister is not being clear-cut about it. The Minister will have a major legal difficulty with this.
He might say that he will not standardise it at £28,000 but will increase the £28,000 level to £35,000. However, because he is individualising it, if he standardises it at £35,000 he will have to double it for couples who are both earning to £70,000. This proposal is a very radical one but it will be very unfair.
It is a major departure from what I understood to be the principles on which Fianna Fáil was founded and those frequently expressed by its founding father, Éamon de Valera. I thought it was the party of the family and the party which supported the woman who stayed at home to mind her children. I did not think it would involve itself in a socially divisive policy, designed to fuel the labour force by forcing women out to work.
It is disgraceful.
I believe in a taxation policy that encourages extra women to participate in the labour force. However, the Minister is going beyond that. It will become impossible for the one income family to survive if the current situation continues, with increasing house prices and the other asset inflation in the economy. The Government's policy is not to encourage women to go to work but to drive them into the labour force. The Minister is doing that in circumstances where he still has not made any adequate provision for child care.
Deputies
Hear, hear.
This is certainly radical but it deserves to be redundant. It is anti-family and I do not think it will stand up. The Minister can put a spin on its effect over one year. However, when the figures are projected forward and the individualisation is taken to the ultimate, I cannot see how he can justify, in terms of social policy, that where two families have the same expenses and the same number of children, one will pay the higher tax rate of 44 per cent at £28,000 and the other will not pay the higher rate until it reaches £56,000. I cannot understand how the Minister can present that as a socially acceptable policy.
Another shambles.
The income tax element of the package in the proposal is very big. The Minister has dedicated £940 million to income tax reform, which I welcome.
We, on this side of the House, are committed to social partnership. The present social partnership agreement, Partnership 2000, was negotiated by the people I mentioned previously, with the assistance of other Ministers in the rainbow Government. We would like to see a new social partnership negotiated. There is a trade-off at social partnership level between moderate wage increases and a generous tax package. The Minister had the resources at his disposal and spent almost £1 billion. However, he will get into great difficulty with his radical proposal, which will be an issue for social partnership.
The Minister has gone too far. He could have achieved the labour force effects he desires by significantly increasing the PAYE allowance. Fine Gael proposed an increase to £3,600, which would be translated into an earned income tax credit. That would reflect the difference in costs between two spouses working and one. The Minister's proposal is certainly radical but it is socially divisive and we will be debating it for a long time.
The Minister has insisted again that the tax rates are important and has taken 2 per cent off both the top and standard rates. A more radical view of rates would be to introduce a 35 per cent rate and a progressive tax system. The difficulty with the tax system is not only the level of income at which persons are taxed at the higher rate, but the jump between the standard and higher rates. The jump is too steep. There is a 22 point jump between 24 per cent and 46 per cent. The Minister is maintaining that jump with the new rates of 22 per cent and 44 per cent. He has also failed in this regard.
I hope this is sufficient to lever a partnership agreement because much of our prosperity is based on partnership. I also hope the Minister does not get tied up in a series of court cases, from which we will not be able to extricate ourselves for years. We have serious doubts on this side of the House about his principal proposal to individualise the standard rate band, so that a couple will no longer be treated as a couple but as two individuals who work.
There is a basic change of philosophy here. This feeds into one of the undesirable features of the Celtic tiger, which is the increasing individualism in society. The sense of community and parish spirit is going. The Minister is now intruding between married couples. This will lead to conflict in many families with spouses saying "Our neighbour is out working – why are you not?".
This is a serious issue of social policy which will be very divisive within families. From a philosophical, logical or taxation base the Minister has gone down a dangerous road. When he says he is moving towards tax credits I presume he is doing so based on a 22 per cent rate rather than a 24 per cent rate. This means that, instead of £1,000 of tax credits being worth £240, they will be worth £220, so the Minister is slipping a few pounds back by the date on which he is moving to tax credits. We will be watching for other such sleight of hand proposals.
I am glad that in the socially sensitive allowances, such as the blind person's allowance and the incapacitated person's allowance, the Minister is reflecting the full marginal tax rate by doubling the allowances before establishing the tax credit. I advocated this measure last year and I welcome it.
I am surprised that a budget which was signalled as containing revolutionary proposals on child care has been so meagre in its provisions on this issue. The increase in child benefit will be £8 per month for the first two children. This is an extremely low increase – it is only £2 per week.
It would not pay the bus fare.
In his own family situation the Minister is still familiar with Pampers, Huggies and Comfies – items I left behind some years ago. One of my researchers told me that the basic pack of Pampers costs £7.99, so the Minister's £8 will enable the average family with one child to buy an extra pack of Pampers, Huggies or Comfies each month. This is a major step in child care.
Children will have to be toilet trained early.
The Minister's proposals on child care are so meagre that the £46 million he is dedicating to this issue includes £20 million which was already in the Book of Estimates. When one removes this figure the Minister is doing virtually nothing for the care of children in this budget. His tax measures will force more women out to work so we will have more children in need of proper, affordable child care. However, at the same time, he is giving £2 per week in child benefit for the first two children and £2.50 per week for subsequent children, but doing very little on the supply side.
The Minister is a great believer in capital allowances and the market economy. Capital allowances might build holiday homes in seaside resorts but they will not necessarily build child care facilities in housing estates where they are needed, whether or not they get 100 per cent accelerated allowances. There is a fundamental flaw in the budget because it is geared for individuals, for materialism, it is devoid of social values, anti-family and anti-children. The proof of that assertion is in these proposals.
I am glad that the Minister accepted Fine Gael's proposals on inheritance tax almost in their entirety. We will comment on this during debate on the Finance Bill because I do not think it is tenable to place a time limit on the person who benefits and the period of their residence in the family home. This will lead to chaos. Anyone involved with taxation will understand the concept of principal primary residence. It is sufficient for the person to be there immediately before the disponer dies and to bear the onus of proof that the residence was their principal primary residence at the time of the death of the disponer. However, in general terms we welcome the proposals on inheritance tax.
The social welfare provisions in the budget represent a failure. I would like to establish a principle to which we on this side of the House will subscribe when we return to Government. We do not think that increases in social welfare benefits should be measured against the consumer price index but against the average increase in wages. That is a fairer measure. The budget increases fall far short of what is desirable and amount to about 6 per cent. I thought that, for the millennium, the Minister would at least take the contributory old age pension to £100 per week, but he fell well short of that mark. People on UA or UB will get a fairly small increase. There is no change in the carer's allowance or the criteria by which one qualifies for such an allowance. The Minister is introducing a new concept of a carer's benefit but he did not spell out the detail. We will listen to the proposal fairly and adjudicate on it in due course. However, in terms of children, pensioners, widows, the disabled and carers the budget falls far short of what we were expecting and what would be acceptable in circumstances where the Exchequer is awash with money. The Minister had the resources, so why is he so hard on the poor, on pensioners and on carers? Why has this anti-social budget been extended into the area of social welfare? We were expecting an all out war on poverty but the Minister has announced fairly meagre increases for everyone on social welfare. In the case of the low paid he has moved another £10 of their weekly income out of the tax net. This budget is skewed in the wrong direction and this day will be remembered in Irish social history because there has been a major new departure by a Fianna Fáil Government.
It is a greedy budget.
It is a greedy budget and God help those who are lagging behind.
Another one for the bookies.
There is little change in excise duties and I welcome the abolition of the travel tax. The 50p increase in the cost of a packet of 20 cigarettes was well signalled and is justified, but is a departure from policy. We expect the receipts from this extra imposition to be used for health purposes. We have no tradition of earmarked taxes and I see no provision in the Budget Statement that this 50p is earmarked and will not just be subsumed into the general figures. I want this money ringfenced and I want the Minister for Health and Children to be accountable to the House for receipts and expenditure under this heading. If we are moving towards earmarked taxes then the proceeds should be dedicated.
The 2 per cent health levy brings in an enormous amount of money but it is not used for the health services – it is gathered into the general Exchequer. I do not want this to happen with this 50p increase in excise duty on cigarettes. Deputy Cowen said he wanted this money to fund his programme against cardiovascular disease. This is important as this disease is the biggest killer, but cancer is the second biggest killer. I left a fully developed cancer policy in the Department which had begun to be implemented and money was voted for that implementation. Every day in the newspapers I read that cancer services are totally out of line with the European norm. It seems that as soon as the new Minister took office, the anti-cancer health policy was jettisoned. If any connection is imprinted on the public's mind concerning health it is that between cigarettes and cancer. If the Minister is using this money for the treatment of cardiovascular disease, he should also use it for the cancer programme. We should earmark this money so that we get real progress on these two killer diseases and improvements in the health services.
There are not any provisions in the budget to deal with hospital waiting lists.I cannot understand why this Government, with all its resources, continues to preside over such a divisive health policy. Approximately 40 per cent of the population is insured. They have one health service which is as good as that anywhere in the world. The other 60% avail of the public health services and have one of the worst health services in the world. Yet, both services are, by and large, delivered in the same institutions by the same people. That is a real social division in circumstances where there are 37,500 people on waiting lists. The Minister did not provide any resources for waiting lists. He did not make any proposal to ensure a person will not have to wait two and a half years for a hip operation, that an old person will not have to wait two years to have a cataract removed and that one will not have to wait for a heart operation until one dies on the waiting list. People have died on waiting lists. I cannot understand a Government with unlimited resources not applying them to the basic needs of people. What is more basic than health care? A person has no quality of life if he is wracked with pain, waiting for a hip operation. A person has no quality of life if he has rheumatism in his hands and needs a home help to turn on the gas because he is afraid he will be burned. A person has no quality of life if he cannot see the television because he is old and has a cataract in the right eye and is getting another in the left. He goes to the doctor who says it can be removed in two and a half years. That is a great consolation if one is 78 years old. This is a socially divisive Government whose flaws are well disguised by the prosperity of the economy. However, people are not foolish.
Every time I have arrived at Leinster House in recent weeks there have been farmers protesting at the gates. Fianna Fáil has abandoned farmers.
It has consigned them to history.
We know the problems in the pig and sheep industries. We know the decline in rural Ireland and that sons and daughters on family farms are no longer willing to take on the burden of being a farmer. Fianna Fáil has done absolutely nothing to reverse the trend. The farming organisations lobbied like every other organisation for certain budget provisions and suggested that if they were large enough to incorporate and run their enterprises like any other business they should be taxed as such. Of all those who lobbied, the Tánaiste took out her machine gun and shot the farmers dead.
Machine Gun Kelly.
Annie Oakley.
What would the Deputy do?
A great social revolution commenced here when my cityman, Donogh O'Malley, introduced free education. However, free education is not effective for about 20 per cent of children who cannot cope in normal schools. Any wise Government investing in the resources of this country would target that 20 per cent and look after them with extreme care, while educating them in the mainstream. Not only would they benefit enormously but they would have an enormous contribution to make when their nurtured talents could be applied to social and economic life. Very little attention has been paid in this budget to social objectives, the disadvantaged and the needs of children who require extra attention from remedial teachers. We have a Minister for teachers but it is about time we had a Minister for Education.
On the macro presentation of the budget, the Minister is clearly running a surplus. He and his successors for the next ten to 15 years will run surpluses without any great effort. The Minister referred to the danger of inflation. He projected that inflation rates at the year end will be plus 3 per cent, which is about double the European average. The Minister plans to spend a billion pounds a year more than the upper limit advised by the ESRI. There is huge asset inflation, not only in the price of houses, with which we are all familiar. The price of land is crazy. Any piece of bog or snipe grass is attracting enormous sums of money. This inflation is transferring to the building industry which cannot employ people to work on sites unless they pay huge wages. Inflation is also being fuelled by the fall of the Irish pound, in common with other euro currencies, against sterling. Inflation can be imported from the United Kingdom. I do not wish to overemphasise the point but there is a danger of overheating in the economy. There is a minority economic view from people outside our shores that our economy is overheating. The Minister must be prudent and continuously monitor what is going on.
One of the novel features of the figures presented by the Minister in the Book of Estimates to which he referred today is the new pension fund, which, I presume will be debated in due course. It is a real marker of how prosperous the country is and how many resources there are in the Exchequer when a Minister can put aside £630 million next year for a pension fund and still show a surplus. Members do not appreciate the level of resources available to this Minister – £630 million is plucked out without debate or discussion.
Without an idea.
There is so much money around, £630 million is not missed. Nothing is provided for child care, little for pensioners and less for widows. The residual long-term unemployed will have to suffer on. There is no money for those on waiting lists, the children needing remedial attention or the disadvantaged farmers. Where are the social objectives of this Government? Where has the social conscience of Fianna Fáil gone? Has it been cloned by the Progressive Democrats?
They are first cousins.
They are genetically modified.
There is one plank of Government policy which is now totally askew – its privatisation programme. The events surrounding Eircom in recent days have been disturbing. That ICC now only has one willing purchaser, the Bank of Ireland, is disturbing. That the TSB-ACC merger and flotation is at risk because of industrial relations problems is disturbing. The public has little confidence in the Government's privatisation programme and it will be reluctant to purchase shares if and when the Government decides to float Aer Rianta, Aer Lingus or Coillte.
This Government has no vision of the future of Ireland. There is no overall picture, just a series of disconnected decisions and once-off projects. There is no underpinning social policy. This Government is reactive rather than proactive. Every week the Government must manage crises of its own making. Procrastination is the key note. The immigration issue became chaotic before the Government acted and the action it has taken is ineffective. The lack of taxis in Dublin is a farce and the proposal of the Minister of State, Deputy Molloy, will not apply until next Christmas. The bulk of people who go out to enjoy themselves this Christmas will walk home. Nothing is planned or managed and action is not taken until situations become chaotic.
The Cabinet looks more like an accident and emergency unit than the Government of the country. Even the little things go wrong. The millennium candles promised by the Government are found to be undeliverable, they will not fit in through the letter boxes. Mr. Haughey, fair dues to him, at least delivered the tooth brushes. The new millennium pound coin will not fit in parking meters in Dublin. People will park their cars, take out their money, it will not fit in the parking meter and, while they try to get old money for new money, like new lamps for old, they will be clamped and towed away. This is planning.
The spatial plan, which is fundamental to the national plan, will not be available until the end of 2002, despite the dedication to this task of half a principal officer in the Department of the Environment and Local Government. This half a principal officer will take three years to deliver the plan. How can there be a national plan which ignores where people live? A spatial plan is not a very complicated concept – we need to find out which areas will grow as a result of Government policy, where will people live, where will they work and how will they move from home to work. This is what a spatial plan is about. Yet a national plan is designed with no spatial plan in sight. What type of people are in Government? This brings me back to the fundamental point that the Government has no social policy, it does not care about people. It is running an economy, not a nation and different values apply to running an economy. The lurch goes on.
The Government is lucky to be in office in times of plenty. If it was judged on its lack of competence and effectiveness, it would have been hunted out of office long ago. Traffic is chaotic and the Government fails to take effective action; house prices are beyond the reach of most young couples and the Government fails to take effective action; public transport, whether by bus, train or DART is totally inadequate and the Government fails to take effective action; the health services continue to decline and the Government fails to take effective action; people never worked harder or longer and their quality of life continues to deteriorate and the Government fails to take effective action. This Government is on the slide and this budget will not arrest the slide.
It seems we have lost the Minister for Finance.
We lost him a long time ago.
Two years ago he got off the leash and wreaked havoc. We all regretted it, as did the Taoiseach. Last year he got him back again, but now we all have lost him. Now, sadly, he is wreaking havoc and back to his old habits.
I will deal in some detail in a few moments with the income tax changes announced today. There are times when the figures speak for themselves. These figures are taken from the budget documentation the Minister has circulated. A single person taxed under PAYE, earning £13,000, will gain £266 or 2.5 per cent of their income as a result of today's changes. A single person on £40,000 will gain £1,421 or 5.9 per cent, and for someone earning £50,000 the figures rises to £1,621 or 5.5 per cent. I see how the Minister for Finance might stand over these figures, but how can the Taoiseach stand over them? This is about as outrageous as it gets. We are taking the wealth of this country, earned by all of us, and giving it back to those who need it least. We are giving it back to those who are already wealthy. In my view that is an utter disgrace
I am married and earn a fairly decent income. My wife also earns a decent income. We have no children. Under the provisions of this budget, we stand to gain approximately £2,444. If we had children, we would gain £997. Will someone explain to me the logic in this? We will gain £1,500 more because we have no children. If the Taoiseach can explain this to a married couple with one earner, he will be doing a very good job. I would not like to try to explain it. I will return to this issue later in my contribution.
Prior to today, I thought this would be a difficult speech to make. Journalists, colleagues and friends have been saying that they would not like to be in my position opposing a budget in these economic circumstances. Needless to say, I welcome the solidarity but the sympathy is unnecessary because the presumption is basically wrong. It is also an interesting presumption, however innocent it might seem. The presumption is that in times of plenty it is impossible for the Minister to get it wrong. The presumption is that just because the Minister has a lot of money to spend he is bound to spend it wisely and well. The suggestion is that in times of plenty there are no choices to be made. Of course, the presumption that underpins this is that we are really all the same. I reject this point of view. In the 1980s, we had very little scope for choice and very little room for manoeuvre. Now that times are so much better there is far more scope for choice. The choices may appear less stark but they are no less important.
I have taken the view for some time that this piece of theatre we call the Budget Statement is little short of farcical. However, it is rapidly becoming more than that – it is becoming a real problem in that it masks the real decisions being made. A few months ago, in the middle of summer, the Minister made an important decision – a decision more important than any decision made by a Minister for Finance for many years which is likely to have repercussions well into the next century. He decided to set aside money now to cater for pension liabilities which may or may not arise in 20 or perhaps 30 years' time. Last week, we found out the true measure of that decision. The Minister is to set aside £2,999 million this year. Most, but not all of that comes from the privatisation of Telecom Éireann. As Deputy Noonan said, the Minister decided last week to add a further £582 million to that in 1999 from general taxation. Next year, the Minister will siphon off £633 million of taxpayers' money together with approximately £1,150 million from Eircom. By any standards, these figures are staggering. The Minister is setting aside in one year more money than he intends to spend on the entire national roads programme for the next seven years. He is setting aside in this one year the equivalent of £1,500 for every man, woman and child. I supported the Minister in principle when he made the decision and I still do. However, I am becoming more and more worried about how he is going about it.
A few weeks ago there was a demonstration outside this House by a relatively broad-based group called Share the Wealth. They were looking for a slice of the £6 billion surplus which the Minister had. In the intervening weeks Members have received representations from a wide range of groups looking for a few crumbs from the Minister's table. Now we know where the £6 billion has gone – some £1.250 billion went back into Eircom to discharge the State's outstanding liabilities, another £1 billion went to early discharge of the national debt and almost £4 billion has been set aside not to be used for another 30 years. In essence, a large slice of our new found wealth is being swept away – it is a case of "now you see it, now you don't". Not a single penny of that £6 billion will be used to improve the living standards of our people. The Exchequer has never been more flush but none of us is any better off as a result.
The Minister has much explaining to do. I would like to hear him explain to the 34 people who were waiting on trolleys last Wednesday for beds in the accident and emergency unit of Beaumont Hospital why they could not have a bed. I would like to hear him explain why there are 16 casualty consultants in this country when everyone acknowledges we need twice as many. I recently received a letter from a principal of a national school in my constituency – I am sure most Members have received similar letters – demanding to know why he could not have a remedial teacher in a school of 250 pupils. A few months ago I visited a day care centre for people with Alzheimer's that operates in a prefabricated building by virtue of voluntary help and a CE scheme. We have all received similar representations from groups such as the Irish Wheelchair Association, the CRC and so on. How can all this unmet need sit alongside a budget surplus of such enormous measure that no-one can get their head around the figures? It does not mean much to people to tell them that the current budget surplus for next year is £4,836 million but they certainly know what it means to be told that their child cannot get an orthodontic appointment for two years. It is of little consolation to know that the Minister is awash with money if one cannot afford a house. I do not want to mislead anyone. None of these issues can be solved by money alone but none of them can be solved without money.
I started my contribution by rejecting the notion that all political parties were the same. I addressed this issue as recently as a few weeks ago. Some points bear repeating. I differ, as does my party, on a number of important respects on what passes for Government policy. I do not agree with the policy that the Government should run what it calls a substantial surplus as measured by GDP. I readily agree that we do not need to borrow for capital or any other purpose and are not likely to need to do so for the foreseeable future. I indicated a few weeks ago that I saw scope for further investment in services of about £500 million this year over and above that proposed by Government. Such additional investment, which should be in health and social welfare, is needed to make up for decades of under-investment and it is affordable in the circumstances.
I do not agree that we should be looking to reduce spending on services as a proportion of national income. We already spend proportionately less on services such as health than many of our neighbours and it is unconscionable in current circumstances that we should look to reduce spending even further, as we are as is made clear from the budget documentation today, not least because so many of our essential services are in dire need of investment. Nor do I agree with the Government's stated limit of 4 per cent increase on net supply services. Spending increases should be limited to what we can afford. Nominal GNP will rise by at least 9 per cent next year and tax revenues are predicted to increase by something in the region of 12 per cent. In those circumstances, a limit of 4 per cent is unnecessarily low.
A curious consensus has grown up in the past few years. Almost everyone agrees that we need to invest more in infrastructure. Whereas two or three years ago it would have been difficult to find an economist who would argue in favour of more current spending, now rather more of them are willing to do so. Interestingly, there does not seem to be a consensus on current spending. We are willing to build hospitals but we are not willing to put the staff in to man them. Of course, there is a distinction between capital spending and recurring current expenditure but, in fact and in truth, one very often necessitates the other. Even the Department of Finance seems to have some difficulty in this regard.
The national plan is instructive. As we know, it sets out a series of plans for infrastructural development, some of them ambitious, but the whole plan is circumscribed by an important rider. It states:
Ultimately the overall NDP commitment will have to be kept to a level that respects the public expenditure ceiling set by the Government, takes account of the wider budgetary priorities and accords with the requirements of economic stability.
This qualification, if we are to take it seriously, could tear the guts out of the whole plan. It is simply not possible to carry through the national plan while holding the increase in current spending to 4 per cent year on year. It cannot be done and the Government knows that.
We know that the Minister is ambivalent about his spending target. On the one hand, he never ceases to assert the importance of the limit and, on the other, he has engaged in a series of sleights of hand to enable him to exceed the limit. This year is no exception in that he has transferred payments in respect of social welfare schemes into the social insurance fund so that they will no longer be counted as part of current expenditure. Either way he would do well to look at the needs of the economy and set limits – I believe in limits – that bear a closer relationship to reality.
As regards the income tax package announced by the Minister, as he rightly pointed out, two years ago the Government was elected on foot of a manifesto that promised to cut income tax rates. I believed at the time that policy was profoundly unfair but, nonetheless, the Government got its mandate. In his first budget, the Minister set about implementing the policy. It proved to be as unfair and divisive in practice as we thought it was in theory, and many of those who originally supported the policy subsequently recanted. Needless to say, the Minister was not one of those who changed his mind. It, therefore, came as something of a surprise, I suppose a pleasant one, when he effectively reversed that last year by introducing a system of tax credits. In his third budget, the Minister has returned to type.
We should remind ourselves why we moved over to tax credits in the first place – the Taoiseach knows this well. We did it not just because it was fairer in year one but because it provided a fairer framework in which to introduce further reductions in future years. The tax credit is deducted after the liability is assessed and, therefore, it is possible and desirable to confer the same benefit on all taxpayers simply by adding to the tax credit. A few weeks ago, I expressed amazement in this House that the whole taxation argument was proceeding apace with all the arguments about rates and bands as if last year had never happened. Interestingly, the Minister interrupted me at the time to state that he agreed with me. Why then today has he reverted to the old argument about rates? He has always said he does not agree with high nominal rates of tax but surely he accepts the incontrovertible logic of what he did last year? He knows better than most people that last year was only the start of the process. For some reason he has lapsed back into his old ways. Could it be that he is bowing to the wishes of his belle amie, the Tanáiste, or that he was never much taken with tax credits in the first instance? It could, of course, be both.
Let us say it up front A reduction in the higher rate benefits only those who are paying tax on a significant amount of their income at the higher rate. Nobody has argued that the better off should not benefit from a reduction in income tax. What we are saying is they should not benefit to a greater degree than anyone else. In fairness, the Minister has not totally abandoned tax credits. He has eliminated some of the remaining anomalies and that is good, but he has increased tax credits by what is by any standards a tiny amount.
My first reaction when I heard about this notion of individualising the standard rate band was to say this could not possibly be right. Why is he doing this? The Murphy judgment jumps immediately to mind. Even if it is not caught by the Murphy judgment surely it will be caught by the provisions of the Constitution which values the position of someone who wants to stay at home to look after children. Why should we actively look to discriminate against married couples who decide that one of them should stay at home to look after the children? I believe in choice. I choose to go out to work as does my wife but others take a different view. Some married couples will choose to have both working, some will choose to have one person go out to work. Many will choose to have the mother stay at home and look after the children. Why should the State say to a married woman who wants to look after her children in the home that she should be discriminated against by the tax code if she does so? Why should we do that? This is a profoundly anti-family change in the taxation policy by a party which has claimed in the past to be pro-family.
A few weeks ago I set out what the Labour Party would look to do in this budget. I proposed a package that would have been worth a little less than what the Minister has proposed – some thing in the region of £800 million but it is close enough to allow for comparison. I argued that we should increase the tax credit by £500 for each single person and £1,000 for every married couple, whether there was one earner or two. It is interesting to note that our proposals have come out roughly the same for most people on middle incomes but they would have been vastly more advantageous for those on lower incomes. Most importantly, the proposal we made, which is relatively simple and straightforward, would have taken 750,000 people out of the income tax net altogether and would have meant that people earning less than £150 would not pay income tax. That would have been a vastly more socially acceptable and desirable outcome than what the Minister did today.
There is still some scope for income tax reduction in the future. However, it would be wrong to give the impression that this scope is unlimited. A poll conducted by The Irish Times a month ago indicated that a majority of Irish people are willing to pay for good quality public services, even if that means forgoing income tax cuts. There is a clear message in this for politicians. If we get it right and if we make the critical link between investment spending and better services, we can reasonably expect public support.
We should continue down the road of tax credits until all income below the minimum wage is exempted from income tax. If we go beyond that point, and we should be slow to do so, we should consider the notion of refundable tax credits. In effect, this means that, if a particular worker is not paying enough tax to benefit from a further reduction in tax, he or she would receive a cash payment. That would lead to the effective integration of FIS and the income tax system.
I will return to the other tax proposals later but I wish to deal now with the social welfare proposals. For many of us, the budget is just a bit of theatre. Any reduction in tax is welcome but it is not vital. However, there are many hundreds of thousands of people for whom today is very important. There are hundreds of thousands of people who depend entirely on the State for their livelihoods. At a time when the newspapers are full of the hyperbole of the Celtic tiger, the State still insists that widows can live on just over £77 per week. Whatever the chances of someone eking out a living in the short-term on that amount of money, it is simply not possible to do so in the long-term on such a contemptible allowance. It should be a source of embarrassment to every Member that we would ask anyone to do so.
Deputies
Hear, hear.
For many years the social insurance fund was in deficit, so much so that many of us had come to regard it as just another form of taxation. However, things have changed. Two years ago the fund moved into surplus and the estimate before today was that it would show a surplus of no less than £577 million next year. It is important that we understand what this means. In effect, it means that the Minister could have afforded to do pretty much what he wanted. He could have chosen to increase old age pensions to £100 per week, raised everything else in line with the expected increase in wages and he would still have had money to spare. He could also have raised the adult dependant allowance by the same amount as the main pension and brought back the payment date to April.
All of this would have been affordable within the social insurance fund with no additional call on the taxpayer, at least for non-means tested benefits. However, the Minister chose not to do it. He chose to hold off on the final increase in old age pensions to £100 per week, presumably in the hope of getting another bite at the cherry before the next election. In doing so, he is seriously underestimating the judgment of senior citizens. I accept that the £7 per week increase is large but it is still only a fraction of what could have been afforded in the current economic climate.
The Minister has effectively reduced the projected take from PRSI. That is a mistake. Our rates of social insurance are not high by European standards. On the contrary they are quite low by the standards of most of our neighbours. I understand they amount to approximately 50 per cent of the rates that apply in Italy and Germany. For much of the 1980s, it was argued that our rates of PRSI were a work disincentive. It may well have been true then but it is hardly true now. The major problem which employers or potential employers now have is not the rate of social insurance or the likely level of the minimum wage, it is simply the fact that they cannot find workers.
We need to consider where the real problem exists, namely, in the rate of payments and benefits which issue from the social insurance fund. Many of these are far too low by international standards. We cannot stand over average payments of £80 per week when the nation's wealth is climbing to levels above the EU average.
The time has come to do two things. First, we must reconsider the absolute value of current payments. In the 1980s we asked the Commission on Social Welfare to do this and we have only now met some of its recommendations. It is time to establish a new commission to which one brief should be given, namely, to propose rates that will eliminate absolute poverty. I accept that employment is the best way to do this but we must equally acknowledge that there are many people who cannot or who will not work again. It is unconscionable that these people should be condemned to absolute poverty for the rest of their lives.
Having set absolute rates, we should commit ourselves to maintaining the value of those payments relative to the rest of society. The best way of doing this is to link social welfare increases to increases in wages and not to inflation, as was frequently the case in the past.
Today, the Minister has increased the main social welfare payments by £4 per week. A person might be able to buy a pint and a half of beer with that amount but they could hardly afford to buy a packet of 20 cigarettes. The increase may well be ahead of inflation but it is less than the expected rise in wages and a good deal less than the wage demands now being made in the context of a successor agreement to Partnership 2000. The blunt reality is that, with the exception of old age pensioners, everyone in the State who depends on social welfare payments will be relatively less well off this time next year than they are now. For many years we did not have the resources to take action in this regard. Now we that we do, the Minister has refused the fence.
In last year's budget the Minister passed on the issue of child care. We gave him grief about this at the time but, with the benefit of hindsight, perhaps this was not such a bad thing. Had he not passed on it he might have been tempted to deliver on his manifesto commitment to introduce a tax free allowance for child care costs which would have been a thoroughly bad development.
Before considering the detail of what the Government has proposed, we should stand back for a moment and take stock. We need to start by considering what we hope to achieve and a little honesty is called for in that regard. For many years, successive Governments paid lip-service to this issue and did little or nothing. They did this for one reason and one reason only, namely, the labour market. With unemployment standing at more than 300,000, the last thing we wanted to do was actively encourage married women and lone parents to make themselves available for work. Now, of course, the demands of the labour market have changed and there is a demand from some quarters for measures which will actively encourage mothers to enter the workforce.
I do not believe that action on this issue should be driven exclusively by the demands of the labour market. People are entitled to make their own choices. The State should support children and their parents. It is for parents to choose whether one or both of them work. The State should facilitate choice, it should not seek to make the choice which only parents can make for themselves.
I accept that for many people there is no real choice, not least because of the dire shortage of good quality, affordable child care. The primary problem – I agree with the Minister in this regard – is one of supply. We need to give all the incentives required to increase supply and to ensure that it is up to scratch. This will not be easy because many of those in the sector currently operate in the black market. Incentives such as the capital allowances announced by the Minister are all very well, but we know from experience that incentives of this kind are less than fully effective when dealing with facilities which do not have a guaranteed profit into the future. The private sector is more than happy to build apartment blocks but it seems less than enamoured of projects such as park-and-ride facilities, where returns are less secure.
There will be a need for direct grant-aid to allow existing providers to improve facilities, to bring new people into the business and to bring new facilities on stream. In addition, we must use public money to allow local authorities to provide child care facilities whether they be playgroups, crèches, pre-school facilities or whatever. Obviously, the thrust of direct public provision should be in areas where the private sector does not deliver. However, I do not believe that local authorities or voluntary groups should be confined to those areas.
Much of the child care sector operates in the black market. People must understand that this has to change, not least because we have to be in a position to ensure the quality of the services provided to our children. Providers should be given time, advice and assistance, including financial assistance, in order to help them to comply with regulations, but comply they must. Families must be given choice. It follows that direct payments to parents should be made irrespective of whether they decide to work and the easiest way to do so is through child benefit. A number of weeks ago I met the representative group, Childcare 2000, which is in favour of an increase in child benefit matched by parental care payments. It is an innovative idea, which has many attractions. The Minister has adopted part of the proposal but has ditched entirely the notion of providing direct assistance to parents in order to pay for child care. I remind the Minister where this came from – two years ago he actively sought support for a manifesto which guaranteed direct payments to taxpayers for child care. Where has that commitment gone? Many people were entitled to expect to receive assistance for rapidly increasing child care costs in the budget. They will get no more than the increase in child benefit, which is approximately £2 per week per child. Does the Minister seriously believe that will help people to pay for child care?
That is bad enough but I have even more difficulty understanding how the supply measures will make any impact. A total of £46 million will be provided and, as Deputy Noonan said, most of that had already been announced in the Estimates. Health boards will receive £2 million while child care task forces will be allocated £5 million. These are small amounts when one considers the resources available to the Minister and the fact that there are hundreds of thousands of children whose parents wish to avail of child care facilities. He must know in his heart and soul that he has failed those who looked to him to make a real impact on this issue and he will regret that in the weeks and months ahead.
The Minister's capital budget next year must be seen in the context of the national develop ment plan which he published a fortnight ago. It was launched with all the razzmatazz one would expect, with Ministers, officials and the social partners lined up in the impressive surroundings of Dublin Castle. The Taoiseach and other Ministers produced their bank of figures and projects and the press dutifully covered them for a few days at least. However, the hype disappeared almost immediately and it is interesting that the public never engaged with the process. I find fault with the plan in that it is not ambitious enough and does not blend together well.
If one examines the total expenditure and the nature of some projects in it, one might reasonably have expected the public to take more interest but it did not engage in the process for one primary reason. Many people do not expect that the various projects will see the light of day. They have heard us speak about Luas for seven or eight years and it will be at least three years before the first tram rolls. The C-Ring in Dublin has been on the stocks for 20 or 30 years and it is still not complete. There are myriad other examples.
I acknowledge that there are problems with the planning process and, shortly, we will know whether the Government is serious about addressing them. However, there is also a serious problem in the way the Government has gone about that doing so and I refer, in particular, to public transport in Dublin. The only hard proposals in the plan are modest compared to the problem one has in moving from A to B in the city. The Government will authorise Iarnród Eireann to buy more rail carriages and lay more track and Dublin Bus will be allowed to acquire 50 buses annually for the duration of the NDP. However, extra buses and rail carriages do not make a plan. Virtually everything else in it is tentative. The north side Luas line seems to have been lost altogether, as it is not explicitly mentioned and one must look at a straight line on a map in one of the appendices to confirm that it still exists.
There is a commitment to examine the feasibility of a link to the airport but there is no indication whether this will be by way of mainline rail, DART or Luas. The NDP does no more than state the obvious, namely that a rail link to the airport is good, something which any Dubliner could have pointed out 20 years ago. Similarly, there is a commitment to examine the possibility of linking the two primary railway stations in Dublin, Connolly and Hueston. Once again, no real indication is given as to how or when this might be done. The plan refers to the possibility of re-opening the Navan rail link. I have no problem with this proposal but it is not the product of a detailed plan. The only reason this proposal made it into the NDP is that there is already a disused railway in existence and given that the Government was desperately looking around for projects to fill the pages, it felt that it rated a mention, subject to a feasibility study.
I do not want to seem unduly cynical. I genuinely hope that these projects begin soon because the quality of life of everyone who lives in Dublin depends on them, but the record so far gives no confidence that the Government has the determination or interest to make them happen. It is clear that the NDP was not the product of genuine planning. Nobody sat down with a map of Dublin to assess current and likely future needs, and that is necessary. The price tag must be forgotten about for once and the provision of projects must be outlined. If they cannot all be afforded at once, their delivery can be prioritised but at least we will be aware of what we are trying to achieve.
I take public transport as an example because it is an issue with which many people will be familiar, but there are similar difficulties with other issues. The health section of the NDP is wonderful as it reads like a wish list to which any of us could subscribe, but after I read it I did not have any confidence that it would be implemented. There is a credibility gap borne out of previous experience and it arises partly because we have never previously been able to pay for our wish lists. The task for the Government and its successors is to bridge that gap and the mere establishment of a Cabinet sub-committee by the Taoiseach will not do the job.
In 1997 Ireland signed up to the Kyoto agreement on greenhouse gas emissions, which is legally binding and very onerous. It obliges us to limit the increase in such emissions to 13 per cent above the 1990 level by 2008. The problem is that Ireland has already exceeded that and the ESRI has calculated that if nothing is done to tackle the problem, emissions in 2008 will be at least 37 per cent above 1990 level, which is well in excess of the Kyoto commitment. This issue has enormous implications for the energy sector, in particular, but it will also impact seriously on Ireland's capacity to sustain economic growth if something is not done about it soon.
Thus far the Minister for Finance and his colleague, the Minister for the Environment and Local Government, have done nothing and the budget confirms that he intends to do nothing. The Government has at last begun to think about the issue. The Minister of State at the Department of Public Enterprise published a Green Paper on Sustainable Energy which stated, for example, that peat stations should be closed. The Minister for the Environment and Local Government recently published a discussion paper, which stated, for instance, that excise duty on petrol should be increased by at least 10 per cent per annum. Strangely, these publications have attracted virtually no comment.
Debate is all very well but decisions are needed soon. Until recently, the Government did not take this issue seriously. When it woke up to the implications of our commitment it then sought to take refuge in the possibility that Ireland could trade emissions with other countries but the EU will require us to meet at least 50 per cent of our commitment through domestic action. This needs to be addressed now. For example, it will take the ESB several years to convert to gas if it is decided to take such a measure. This is not an esoteric, arcane side issue as it is central to our capacity to sustain economic growth into the next century. It is no exaggeration to say that the Government is playing with fire and it must get its act together soon.
I refer to the principle of capital acquisitions tax. The tax base in Ireland has been too narrow for too long. The primary result is that VAT and income tax rates have been higher than the EU average, notwithstanding the fact that the overall tax burden is lower. The reason is that our level of capital taxes is, and always has been, relatively low.
I believe in capital taxes. They are largely paid by the better off and by people who can afford to pay. They are often paid on windfall or unearned income such as gifts, unearned gains or inheritances. If I earn £20,000 a year by the sweat of my brow, I will now pay 44 per cent tax on every additional penny I earn. Why then should I be entitled to inherit several times that from a maiden aunt and not pay a penny in tax? There is also a powerful argument in terms of equity. CAT is one of those taxes which, despite all the attention it attracts, few people pay. However, it has a distinct redistributive effect and it should only be tampered with if there is good reason to do so.
I told the Minister in the House a few weeks ago that I would not support him if he took a knife to CAT in the way that he did to CGT in 1997. I also indicated at that time that I would support any move intended to ensure that people already living in the family home and intending to stay there did not have to sell the house in order to pay the tax. It is a case of one up and one down. I support the measure the Minister has introduced in relation to the family home, although it is more generous than I would have allowed. Nevertheless, the broad thrust of the measure is reasonable. If a person is living in a house and intends to stay there, it is reasonable that they should not be obliged to sell it or mortgage themselves to the hilt to stay in a house in which they have always lived.
However, I do not support the rest of the proposal. It is unreasonable to increase the thresholds by 50 per cent or more so that a person who inherits £300,000 in addition to the family home from their parents will not pay a penny in tax. How can that be fair? One can inherit a house worth up to £350,000 – which is not difficult to find in Dublin these days – and also inherit a further £300,000 without paying tax. This is not fair at a time when one pays 44 per cent on any additional income over £30,000. The Minister has torn the guts out of CAT as he tore them out of CGT a few years and it is a move I do not support.
There are good elements in the budget and items which will be popular – it would be churl ish and stupid to say otherwise. Even the most unimaginative and incompetent of Governments could not fail to get some things right given the resources and opportunities available to the Government. However, there are also plenty of elements which the Minister has done badly or not at all. If I was to crystallise my comments I would say to the Minister and the Taoiseach that the Government and the Department of Finance are used to saying no. They are geared up to say no and, as a result, the Minister for Finance and the Department have failed to grasp the measure of the opportunity now available to the country. We are the first generation of Irish people to hold the destiny of our country in our hands. By their failure to understand that, they have failed us all.
Ar dtús, ba mhaith liom a rá gur mian liom labhairt ar an gcáinfháisnéis sa chéad teanga oifigiúil ach ag cur san áireamh nach mbeidh córas aistriúcháin ar fáil do na daoine a bheidh ag éisteacht nó ag féachaint tá sé chomh maith agam labhairt sa teanga is coitianta.
In the context of the budget, it is important to consider the effects of the policies being adopted by the Government. The World Trade Organisation is meeting in Seattle today and many people are considering economics in the most global terms. It is important to also do so in the House. After each 3.6 seconds spent speaking about the budget, someone dies of hunger on this free trading planet of ours. Three quarters of these deaths are of children under the age of five. As the Minister toasts himself and his free trade policies, 24,000 people die every day from hunger or hunger related causes.
The World Trade Organisation is also toasting itself, although it seems to be hotter over there because of the protests. In its structure and agreed policy positions the WTO does not operate in the best interests of the consumer or even in the interests of the nation state. The WTO is a tool of the corporate world. The Seattle Round offers the prospect of rolling back international agreements on environmental protection and food safety in the name of what is laughingly referred to as free trade. In the face of this onslaught, the Minister for Finance and the Government by their silence have confirmed their impotence or perhaps it is stupidity or lack of concern. The Government's policies and those of the EU and the WTO enrich the few and impoverish the many and, in doing so, destroy the earth.
Depending on the agency to whom one speaks, there are approximately 2,000 homeless people in the greater Dublin area, which includes parts of Kildare, Meath and Wicklow. They are trying to get warm in doorways close to Leinster House. In spite of Government smugness, this society fares badly in many respects in comparison to several of our partner countries even in the developed world. This may not be the case in terms of the economic statistics of GNP and GDP which are increasing at present. However, given the effect of increasing economic prosperity, one cannot be immune to how superficial reliance solely on economic indicators can be.
If the Minister had chosen to couch his financial report and plan for the nation in relation to social indicators, he would reveal a society that in terms of equity, justice and being at peace with itself is destroying community life, wasting finite resources and neglecting the growing number of marginalised people in Ireland. The most recent statistics continue to make disturbing reading. The 1999 UN Human Development Report reiterated the statistic that among industrialised countries, Ireland rates second from the bottom in the percentage of its population living in poverty.
This indicator was reached by examining the number of people who are likely to die before they reach the age of 60, by measuring the level of functional illiteracy, by recording the number of people who rely on income that is less than half the average income and by counting those who have been unemployed for over one year. In each of these respects, Ireland performs significantly worse than any of its European neighbours.
That Ireland is a country of consistent and persistent levels of poverty is confirmed by other recent reports. EUROSTAT, the statistical agency of the European Union, released a report this year on redistribution, measuring the gaps which exist in each member country between the top 20 per cent and the bottom 20 per cent of the population in the share of national income. In no European country was this difference more marked than in Ireland. Those who are affected by economic inequality represent the most marginalised of our society. What Government can take pride in reports which indicate that between one quarter and one third of children are at risk of poverty? The situation of people with disabilities has scarcely improved during this era of growth in gross national product. The ability to house and be housed has become a faded dream for the vast bulk of our population.
Not only has house purchasing become compromised for would-be home owners, a more significant phenomenon is the growing incidence of homelessness on our streets. The Cork Simon Community reported that for the first six months of 1999, they had received as many requests for nightly accommodation as for the whole of 1998, a practical doubling of a problem that is worsening in every Irish town and city.
Government policies, formed on indifference and inaction on the question of immigration, have placed inordinate pressures on State agencies and have confined asylum seekers and refugees to a guaranteed poverty status, due to the Government's unwillingness to make use of the economic potential of those who are seeking the opportunity to become residents of our country.
The Green Party is strongly committed to the principles of social and environmental justice. However, it is difficult to see that this Govern ment, given its policy direction to date, is as committed to these principles. Our commitment is based on our belief that social justice springs from a commitment to sustainability. Sustainability has become a term more talked about than understood, much less practised. This Government has shown less understanding of the term than most. Sustainability is not about sustaining growth in consumption. It is about hard assessments about the nature and quality of wealth, about how resources can be best utilised for long-term use. We are talking here of generations, not simply the term of a Government.
Social justice is the ultimate goal of pursuing sustainable policies. The Government's unwillingness to promote sustainability has helped worsen social exclusion and has made it more difficult to achieve social justice in Irish society. A continuing commitment to "short-termism" and to policies that benefit the few at the expense of the many, is hardly the best starting point from which to promote sustainability.
It may surprise many that the Green Party sees sustainability in social and economic terms, as much as in environmental terms. In many respects achieving environmentally sustainable policies should be that much easier. However, even on these terms the Government has been failing miserably. Our international obligations in relation to the Kyoto Agreement on carbon emissions have been breached well ahead of schedule. That is nothing to be proud of, yet this Government still shows no willingness to introduce measures to tackle our growing fossil fuel dependency. Given a golden opportunity to institute real taxation reform by transferring taxes from labour to resources, the Minister for Finance continues to effectively show two fingers the issue.
As with other areas of environmental policy, the Government has been showing perfect consistency. There are growing mountains of waste, increasing deterioration of water quality and never-ending traffic gridlock, yet we see no incentives or any use of tax instruments to solve the problem. This Government wishes to avoid undertaking environmental policy initiatives. It is a Government which is only too willing to penalise those who, individually and voluntarily, seek to promote and protect local environments. One need only think of the attempts to impose a £20 charge on people who have an interest in local planning applications to understand that point.
It could be that the Government does not necessarily care about its inactivity in these areas. It could be that the problems of social exclusion are of peripheral interest to it. We live in a period characterised by what the economist, John Kenneth Galbraith, described as the politics of contentment. Maybe the Government is unconcerned that as few as 28 per cent of the registered electorate participated in the recent Dublin South-Central by-election and that the majority of those who did not participate were those most marginalised within our society. The impression is clear that as long as those who participate are being satisfied by policies that are selfish and are helping to produce a selfish society, the Minister, Deputy McCreevy, does not really care.
I turn now to some of the main points the Green Party would like to have seen in this budget. Our policy goal is to remove more of those on low salaries from the tax net. Increasing personal allowances achieves this. A higher than usual increase in the PAYE allowance allows those households dependent on second incomes additional relief. There has been some movement in this direction, and we welcome it.
A second policy goal must be to delay as long as possible entry to the highest rate of tax. This is done by increasing the standard rate band, which we have proposed. However, we are also further proposing the introduction of a 10 per cent starting rate on the first £1,000 of taxable income and an intermediate tax rate of 33 per cent on the £1,000 of taxable income after passing through the standard rate tax band. These measures would assist progressiveness in the tax system to the extent that a single person on a salary of £23,500 per annum would not pay tax at the higher rate. Discretionary tax reliefs work against progressiveness and have long been seen as an anomaly within the tax system. The Green Party is calling for a 10 per cent discounting of all discretionary tax reliefs, with the exception of mortgage interest relief and, given this exception, the anomaly in respect of those in rental properties must be addressed by giving them a similar level of relief. Ultimately, a ceiling must be put on the amount of rent that can be extracted from people by the rackrenting property owners in this city and country. If that requires a change in the Constitution, the Green Party would support such a change.
A proposal to tax child benefit has to be seen in the context of this benefit being doubled. That would be the rationale explained in our social welfare section. Costings are in a full year and transition year format, in keeping with the promise of the Minister for Finance to bring the financial and calendar years together. Even a doubling of child benefit would not address the crisis in child care to any extent. Tax concessions will not address it either. Addressing the problem has to be about investment in community infrastructure and child care provisions, such as grants for crèches. This must not just be a priority but has to be acted on immediately.
Let me turn to the suggested employee PRSI and levy changes. Although ostensibly an insurance fund, PRSI is in reality a flat-rate tax. Changes in this area could be more beneficial for workers, especially lower paid workers, than cuts in tax rates. The Green Party is proposing three measures to help alleviate this burden: first, increasing the amount at which one is exempted from PRSI payments from £100 to £120 a week; second, reducing the employee PRSI rate by 1.5 per cent, a far greater benefit than a similar tax cut and, third, increasing the payment level at which payment of the health levy is exempt to £12,500. We would propose a slight clawback by increasing the ceiling at which employee's PRSI is to be paid.
Employer's PRSI changes that we propose relate to the aspect of the PRSI system that operates most negatively as an incentive towards work. It is in effect a tax on employment. As part of our policy of reducing tax on labour and replacing such taxes with taxes from other sources, such as consumption, the Green Party is proposing the following measures to reduce the liability of employers for PRSI. First, a reduction in the standard rate of employer's PRSI to 10 per cent; second, a change in the reduced rate to 7.5 per cent and, third, an increase in the reduced rate ceiling. As a clawback, we would propose increasing the upper ceiling for the payment of employer's PRSI to wages up to £40,000 per annum.
With regard to our social welfare section, given the increasing disparity created by the wage increases and capital benefits enjoyed by others, the benchmarking of social welfare payments must now become a priority. Target figures set by the report of the Commission on Social Welfare over ten years ago have still to be reached. The Green Party believes that minimum social welfare payments should be at least 50 per cent of average household income. In this regard we have three proposals. To achieve this, we propose social welfare increases of 10 per cent. A similar increase is needed next year to achieve 50 per cent of average household income. The effect of this increase will be to move the old age contributory pension to beyond £100 a week, with the non-contributory pension poised to do likewise next year, two years ahead of the Government's scheduled target of 2003.
Our proposal to double child benefit and subject the benefit to tax assessment would give full benefit to those who are not in the tax net. Even those paying tax at the higher rate would receive at least a 6 per cent increase in benefit. This additional payment should also be of great assistance to those in need of child care. All payments are a full-year cost because the Green Party believes that the staggered increases of social welfare payments is demeaning to social welfare recipients and all increases should be made on 1 January. Waiting until May while the Government congratulates itself for doing so is a disgrace and a further indicator of the difference in the attitude taken to different people in our society, with the marginalised generally coming off worst.
The existence of low rates of corporation tax has been a major factor in attracting foreign direct investment, leading to charges of unfair tax competition from other EU countries. However, given the high rates of economic growth we have been achieving we may need to accept that we could have undersold ourselves. The Green Party believes the agreement for a single rate of corporation tax at 12.5 per cent is further evidence of this trend. We agree with the Economic and Social Research Institute in its medium term economic review that a higher rate should be sought. A rate of 17.5 per cent would be more proportionate. To achieve this rate would result in a slower rate of decrease. In this regard we have three proposals. First, we propose a 2 per cent rather than a 4 per cent rate cut and as this decrease has been anticipated in the costings prepared for the budget the slower rate of decrease will result in additional revenue. Second, to achieve a 17.5 per cent rate we believe there is scope to change the 10 per cent rate to a 12.5 per cent rate. Third, the 25 per cent rate for small to medium sized businesses should be reduced to 20 per cent to allow such businesses to maintain their competitive advantage.
Banking taxes need to be reviewed in the light of the enormous profits which banks enjoy, not to mention the information emanating from the Committee on Public Accounts and on a daily basis from tribunals. In this regard the Green Party proposes a 5 per cent social solidarity levy on the profits of banks and financial institutions which we estimate to be about £2 billion per year. At the other end of the scale, we believe the recommendations of the working group on the taxation of credit unions should be implemented in full, as accepted by the Irish League of Credit Unions. It is only right that the credit unions maintain something of a competitive advantage given that they remain the only financial institution to be committed to local investment.
I come to the eco-tax proposals which are a huge disappointment in this budget. The Green Party is committed to facilitating the transfer of taxation on labour to taxation on resources while maintaining tax receipts as a percentage of GNP. We repeat our proposals which we have made again and again. Our chief proposal is a call for the introduction of a carbon tax on the industrial use of energy. Other environmental taxes would be levied on the use of pesticides and packaging such as plastic bags. It is disgraceful that the Government proposes to give away £622 million for more roads while the use of liquid petroleum gas in buses is not to be assisted, not an extra metre of railway track is to be built – and has not been since the foundation of the State – and nothing is to be done to address the issue of carbon tax or the transfer of tax from labour to consumption.
We propose, as we have before, that motor tax be abolished and the necessary revenue be collected in the form of a tax on motor fuel. We hope the Government will listen to this proposal and implement it quickly. This would link the taxation of motor vehicles to their usage. This measure need not make motoring more costly because the fewer journeys made by car the cheaper motoring would be. We support any Government proposal to impose a large increase on the price of cigarettes on the proviso that the revenue raised will go directly to the health service. We welcome that provision.
I outlined these measures, particularly the replacement of motor tax with a levy on motor fuel, to a taxi driver yesterday and found him quite supportive of them. This may seem surprising but taxi drivers in general support the motor tax measure because they feel that the large number of single occupancy cars prevents them from doing their work so that everyone is frustrated and less happy. The Government has chosen to do absolutely nothing on this issue and is being criminally irresponsible in this regard.
Our policy in relation to property and capital taxes is to pursue a number of objectives. Taxes can have a dampening effect on profiteering in the housing market. To this end we propose two windfall taxes on the increase in values of rezoned land and on house profits which exceed amounts stated on certificates of reasonable value. We have three proposals on this matter. First, we propose a residential property tax on second homes used for holiday purposes. Second, the effects of hyperinflation on home buyers need to be alleviated. Increasing the exemption level from stamp duty to houses valued up to £150,000 would help. Third, in considering capital taxes two policy goals need to be examined. The threshold of property exempted from capital acquisitions tax needs to be increased to £250,000 and under capital gains tax, the swingeing rate cut from 40 per cent needs to be redressed by beginning a clawback with a 5 per cent increase.
In our overall budget surplus reconciliation the Green Party fully accepts the need for a retained budget surplus of £2.5 billion. Taken from our tax and social welfare proposals, we believe that close on £375 million would be available which would give the Government latitude in the continuing negotiations for a replacement agreement for Partnership 2000.
The urgent issue which needs to be addressed, not in May or even in January but now, is homelessness. Priority must be given to the setting up of a national agency to solve the growing problem of homelessness. We propose that a new agency be set up, to be called Dídean, the Irish word for shelter, which would have the overall responsibility of co-ordination and supervision for solving the homelessness crisis. Dídean would need to have responsibility for the provision of all services to homeless people, including rescue, hostels, analysis, addiction treatment, education, training and employment placement. Dídean would have the power to avail of services being provided by other State agencies, for example, health boards and FÁS and to co-ordinate these services for the homeless. I welcome the provision in the budget for hostel accommodation but more hostel accommodation is urgently needed. The Government's timespan of two years does not demonstrate a sense of urgency. Our proposal would enable homeless people to be brought off the streets into a healthier environment where their needs could be analysed and an assistance programme set in train for them. Finally, Dídean should be accountable to the Oireachtas and should report to an Oireachtas committee every year on the current situation, progress made and present objectives and plans. This would at least ensure that homelessness is kept high on the political agenda.
What comfort is there in this budget for people with disabilities, carers, those dependent on public transport, long distance commuters and families unable to find child care facilities? The comfort for them is very little. The Government has offered crumbs from the rich man's table whose top rate of tax is to be cut. The ultimate question is how much the Government will have available to it if, a matter that has not been mentioned so far, the forecasted spending on Partnership for Peace interoperability with NATO, to which this country has signed up, comes to pass. The Minister, Deputy McCreevy, seems unaware that that will become a reality. The Minister for Foreign Affairs, Deputy Andrews, and the Minister of State, Deputy O'Donnell, who were absent from the budget debate were, I believe, signing this country into Partnership for Peace. Partnership for Peace in budgetary terms is the biggest blank cheque ever given by Ireland to the arms trade and there is enough in that cheque to blow any goodies in the budget from here to the Cayman Islands. The Government has to address what money will be owed by Ireland before we begin to discuss what the budget actually means.