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Dáil Éireann debate -
Wednesday, 23 Feb 2000

Vol. 515 No. 1

Finance Bill, 2000: Second Stage (Resumed).

The following motion was moved by the Minister for Finance, Deputy McCreevy, on Tuesday, 22 February 2000: "That the Bill be now read a Second Time".
Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:
"in view of:
–the absence of a clear economic policy underpinning the Finance Bill,
–the continual changing of expenditure targets by the Government,
–the threat to competitiveness caused by inflation,
–the inadequacy of income tax relief for the lower paid,
–the contradictions in labour force policy in the tax proposals which apply to spouses,
–the absence of fair and practicable proposals on child care, and
–the refusal by the Minister for Fin ance to introduce a fair and equitable tax regime for credit unions,
–Dáil Éireann declines to give a second reading to the Bill.".
–(Deputy Noonan).

Before the Adjournment I was dealing with the whole issue of individualisation and the claims which the Minister made for the measures he proposed on budget day and which he is implementing in the Finance Bill today and I dealt with the £3,000 tax free allowance.

One of the primary reasons the Minister gave for the proposals he made was that it allowed him to take 83% of taxpayers out of the top rate of tax. The Minister knows this policy is not as relevant as it would have been a couple of years ago, for reasons which, on the face of it, sound technical but which are nonetheless important. In the first case the introduction of tax credits means, of necessity, that a higher percentage of taxpayers will pay tax at the higher rate of tax, since much of the tax which those people pay at the standard rate is actually refunded. For obvious reasons this point is lost on the general public who cannot be expected to follow such points of detail but the Minister understands it only too well. It is now the stated objective of Government and the social partners to take nearly 300,000 additional people out of the income tax net. There are already hundreds of thousands of income earners who do not pay tax at all and these people should be factored in when calculating the percentage of income earners who pay tax at the higher rate. Because they are factored out of the equation the overall picture given by the simple presentation of statistics which the Minister gives is misleading. My party and I believe that the higher rate of income tax kicks in at a level of income which is too low but structural changes in the tax system mean we have to have a fresh look at how we go about this. More importantly, we should be very wary of the distorted presentation of statistics which is intended to sell an unpopular measure which primarily benefits better off DINKIES. In his statement the Minister concludes with the interesting comment and observation that ultimately in a democratic society this boils down to electoral choice. This is a mantra which we have heard frequently from the Minister. He claims, with some justification, that he has a democratic mandate to reduce tax in the way he has done, namely, by reducing tax rates. How can he possibly claim he has a mandate for this measure and that it is a matter of democratic or electoral choice that he wants to individualise the standard rate band?

For goodness sake, there has not been any debate on this issue. The tax strategy group set up by the Fianna Fáil-Labour Government in 1993 hardly debated it. So far as we can tell from the minutes of the meetings, it debated it at one meeting and it was dismissed as improbable and as something that was unlikely to get a significant basis of public support and the meeting moved on to the next issue. All the indications are that this was a big idea which the Minister arrived at all by himself without going through even the normal process of Government. So far as we know, he bounced it off his ministerial colleagues on either budget day or the previous day. To suggest there is anything resembling an electoral mandate for it, if that is what the Minister intended to suggest yesterday, is clearly wrong. If he is suggesting he can get a mandate in retrospect for that sort of move his understanding of democracy is different from mine.

I was interested to hear the comments of Commissioner Solbes in relation to the inflationary risks. This is pertinent in light of the new inflation figures published in the past week. I have been slow to push this button although I have been urged to do so on a number of occasions. The normal practice of the Opposition is to push that button whenever it is there to be pushed. I have been slow to do it largely because I accept much of the analysis which the Minister offers. I accept that much of our inflation is imported and is as a result of factors beyond our control. I have to agree with the Minister when I read in the Irish Independent this morning his scepticism in relation to the advice he gets from international organisations. From contacts which I have had with individuals in the IMF or in the OECD I sometimes think there are economists on the top floors of some of these buildings who are only waiting to be proved right. To that extent I have some sympathy with where the Minister is coming from. There is no doubt but that the open nature of the Irish economy means that, to use the Minister's words, the normal rules of economics do not apply with the same force here. Having said that, there are distinct danger signals and we would be foolish not to pay some attention to them. It is unquestionably the case that asset price inflation is beyond control, at this stage. It is unquestionably the case that the price of services is spiralling to a worrying extent. We are now talking about 5% or 5.5% year on year increases in the price of services. That is worrying.

There is no doubt but that domestic demand, the one part we can hope to control, is also increasing. This is clear from the credit figures and a whole range of indicators. The danger signs are there. Equally, and this may be most important from a political point of view, there is no doubt that in reducing tax by the measure and in the way he did, the Minister has sent a signal which is unhelpful and has injected into the economy money which unquestionably will stoke up domestic demand further and which can only lead to further inflation. Specifically by putting £500 million too much as spare cash, largely into the pockets of people who are better off, the Minister has stoked domestic demand unnecessarily and recklessly. That is something we may rue as the next year unfolds. I share some of the Minister's basic analysis but he is playing this game far too hard. He has done things recently which are reck less and he needs to keep a close watch on this part of the game.

I do not wish to say a great deal at this stage about the Programme for Prosperity and Fairness since there will be statements on that issue tomorrow but I shall refer to two issues which leap off the pages in terms of the macro-economic argument. On taxation, it is now the stated objective of the social partners and of Government to take people on the minimum wage out of the income tax net. I do not know what this means. Are we being told explicitly that this will be done in the next two and three quarter years? Are we being told this is the sole tax policy of the Government over the next two and three quarter years or, as I suspect, that on the one hand some progress will be made, probably by way of tax credits on taking those on the minimum wage out of the tax net? The Minister will at the same time and at enormous expense look to pursue his own agenda which is to reduce the tax rates further. If the Minister seeks to reduce the tax rates, to take people on the minimum wage out of the income tax net, and at the same time seeks to pursue his individualisation project further, possibly to the end he outlined in the budget, he will be faced with an enormous reduction in income tax. He is certainly facing a reduction of far more than £1.5 billion over the next three budgets, assuming he is in office to introduce three more budgets. The Minister is facing a tax reduction of at least £2.5 billion. This is too much. Apart from the equity considerations of the way used to reduce tax, the economy cannot afford that sort of stimulus.

How will the minimum wage relate to the wage increases which are part of the programme? This will have an impact on employment over the next few years. Will the national minimum wage become effective first, to be followed immediately by an increase of 5.5%, or can employers increase salaries up to the minimum wage level and claim that this also comprises the 5.5% increase? For low paid workers this is a significant question which could involve a large difference in the salary they take home. My party leader will take part tomorrow in the statements on the programme.

The Bill confirms the reductions in capital acquisitions tax which the Minister announced on budget day. The question of family homes presents a real problem with regard to CAT, whether they are owned by married couples, elderly siblings, gay couples or people who have been living in the same house for quite some time. Some time ago I indicated to the Minister that we would support his efforts to deal with that problem. By and large, the measures he proposes are worthy of support. However, I enter two caveats. First, there will be difficulty in policing this measure. I will be interested, on Committee Stage, to tease out the mechanisms for ensuring that people have been living in a house before the death of the person who makes the bequest and that they continue to live there for a period of time thereafter. Second, I do not support the taking of family homes out of the tax net altogether. I would not have given a complete exemption. My party might have reduced the value of the house, for tax purposes, by 60% or 70%. I support the general thrust of this measure although I feel it is a little too generous.

I do not support the remainder of the measures the Minister has taken. During the PAYE workers' marches and the great debates about tax reform in the late 1970s and early 1980s, tax reform was synonymous with broadening the tax base. We spoke of increasing capital taxes, property taxes, taxes on corporations and so on. Twenty years later the process has gone into reverse. I do not blame the Minister for this; previous Governments also played their part in the process. Nevertheless, the tax base has contracted dramatically in the past four or five years. Corporation tax is to be reduced to the basic minimum of 12.5%, the Minister has reduced the level of capital gains tax to 20% and he proposes to minimise the effectiveness of capital acquisitions tax. We have abolished service charges and residential property tax. We have no other property tax and no political prospect of introducing one. The only direct tax remaining is income tax. This causes us little difficulty at the moment because income tax and indirect taxes are giving high yields, but in future years we may regret that we have so precipitously reduced the tax base.

The Minister will argue that by reducing the rate of capital gains tax he has increased the take. I do not accept that argument, but I will be fair and say that the jury is out on the matter. Because economic activity is at an unprecedented height, because people are transferring income into capital gains and because of one-off gains such as the privatisation of Telecom Éireann, one could claim that the take from CGT has increased. It is not clear that the reduction in the rate of CGT has stimulated activity or simply brought people into the net who were previously avoiding tax. One cannot argue that CAT – and certainly not inheritance tax – is demand led. By reducing the tax one does not encourage people to die or to leave bequests in a particular way. A son or daughter may inherit even a modest family home in Dublin which may be worth up to £350,000 and a further £300,000 without paying tax. Such a person may inherit unearned income of £600,000 without paying a penny in tax whereas someone who is earning £8,000 or £9,000 must pay 22p in the pound on every extra pound he or she earns. I cannot see the equity in that. Equity dictates that earned and unearned income should be taxed at the same rate and that is not happening.

A number of issues were avoided in the budget and are not being dealt with now. The Minister has suggested that a measure will be introduced next week to address the issue of ESOPs and ESOTs. My party will support share option schemes provided they are intended as a means of encouraging participation and are widely available to all employees in a particular place of employment. We will not support measures which are intended to allow employers to select favourite employees – perhaps high fliers in the IT sector – and give them share options as a means of retaining them. If employers wish to give favoured employees particularly favourable terms of employment, that is their entitlement and most have sufficiently deep pockets to do so. If employers wish to effect a broad structural change within their companies and encourage all or most employees to participate financially and to have a stake in the company, we will support measures to facilitate that. In the past, in this jurisdiction and in the UK, share option schemes have been abused as a means of tax avoidance. That is something against which we must guard. However, in our current economic circumstances we can afford to take some risks in this area and we would broadly support the Minister in doing that.

If we have learned nothing else from the political events of last December, we must surely have learned that we must look again at our way of introducing budgets. The Estimates process, in particular, is nonsensical. It is absurd that Ministers and accounting officers are accountable to the House only when all the money, or most of it, has been spent. We should move to the system used by almost every other parliament in Europe where the projects and plans of each Department are accounted for in advance. Departments should come to committees of Dáil Éireann to ask for money to spend on various projects so that when ministerial or governmental decisions are made they can be read in that light. Our tradition of secrecy is one we have borrowed from the British. It may have served us well 20, 30 or 40 years ago but it no longer does so. The only justification for budgetary secrecy relates to excise duty or major tax changes. Ironically, the only change in excise duty in this year's budget – the 50p increase on cigarettes – was signalled well in advance so that people who wished to hoard cigarettes could have done so. I am not aware of evidence of much hoarding. In so far as one could have justified secrecy, that was the one issue on which it could have been justified but the Minister chose to fly the kite in advance. Clearly a major proposal such as individualisation should not have been sprung on the Cabinet, the Dáil, the Fianna Fáil parliamentary party or an unsuspecting public. There should have been genuine debate in advance. The Minister had nothing to fear from such a debate. It would have been good for the House and the Government to be able to argue the merits of the Minister's case in advance of its introduction.

On the budgetary process I put down a marker in relation to multi-annual budgeting which has become a perennial issue raised at the end of budget speeches, but there is no doubt that it has run into the sand at this stage. Two years ago the Government undertook to introduce disaggregated Estimates for particular Departments, but this was postponed in light of the talks on a successor to Partnership 2000. I wager that we will not witness it as long as the Government is in power. Is the Minister still committed to multi-annual budgeting and, if so, when will it commence? It is an important part of the reform of Civil Service management and, if used properly, will add to the transparency and accountability of the budgetary process which is badly needed.

I started my contribution yesterday evening by making some personal comments about the Minister. In a sense they were justified principally because it was very much his budget. Many of the central tenets, particularly those which got him into trouble, were his. He holds responsibility. I look forward to debating these matters in greater detail on Committee Stage next week.

I wish to share my time with Deputy Brendan Smith.

Is that agreed? Agreed.

I am glad of the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters in this House. It is particularly appropriate at a time when we are putting in place a further national partnership programme that the Bill gives effect to the largest budget tax package we have seen. All will agree that social partnership has contributed substantively to economic and social development. The latest agreement is the fifth since 1987. Their operation has been central to the economic stability which enabled the economy to grow more than twice as fast as the EU norm since 1987, to deliver six times the EU rate of employment growth and to raise living standards twice as fast as the EU average.

The programme is dependent upon achieving an average annual GNP growth rate of just under 6% over the period to 2002. This is in the expectation that there will be ongoing improvements in productivity, that emerging supply side constraints will be overcome and that significant budgetary surpluses will be maintained throughout the period. If economic growth exceeds assumptions, it may be possible to apply additional resources to accelerate progress towards the priority objectives of the programme, including social inclusion. Equally, if growth falls below this level it may be necessary to make more gradual progress.

The partnership concept represents an exercise in social governance. The parameters of the policies agreed in the partnership indicate the way ahead to secure further prosperity and a fair sharing of resources. It is important that the House should debate the policies and involve itself in how the agreement is rolled out. Representation of the people and governance is after all a key role of the Oireachtas and its elected Members.

The imposition and levying of taxation is the prerogative of the House. That is the reason we have the Money Bill mechanism to ensure legislative decisions on such matters can only be taken in this Chamber. It is only right, therefore, that the House should take particular interest in the taxation initiatives in the programme and I note from the questions tabled to the Minister today that Members opposite will be looking carefully at how those initiatives are developed.

They were all ruled out of order.

That is a surprise to me, I thought they were being taken. Tax reform and reduction have been a central element in policy debate and political choices put before the electorate. The Government's record in delivering on what it put before the electorate has been good. The recently agreed programme review between the Government parties envisages further active tax reform. Clearly the Government is committed to radical tax change. We have introduced tax credits and acted to remove substantial numbers from the tax net. We have pursued a policy of increasing allowances, widening bands and cutting tax rates. These measures have been welcomed by taxpayers and contributed to increasing prosperity and the fair distribution of resources.

Under the Government, more than 175,000 taxpayers have been removed from the tax net since 1997. In the previous three years the figure was 38,000. Yet, the message that some have put abroad is that the Government cares less for the lower paid than our predecessor. As I said last week, we should debate issues on the basis of facts, and the facts are clear when it comes to actual performance in taking the low-paid out of the tax net.

I agree with the programme when it concludes that confidence in the fairness of the tax system is a prerequisite for successful partnership and that this must be maintained by determined action to combat tax evasion and fraud and to reduce opportunities for tax avoidance. The Government is fully aware of the need to maintain confidence in the effectiveness of the tax system and the major and extensive new powers given to the Revenue Commissioners in last year's Finance Act provide a sound basis for tackling those who seek to evade their tax responsibilities. The inclusion of powers in last year's Act was timely given all that has transpired in this area in the past 12 months. It is fair to acknowledge the work of the Committee of Public Accounts in bringing the issues to public attention.

I will now deal with some of the more important and relevant aspects of the Bill. The personal tax changes set out in sections 2 to 12, inclusive, continue the progress already made by the Government to implement the commitments on personal taxation which we set out in An Action Programme for the Millennium and which were reconfirmed in our review of the programme last November. The Government's stated objective is to reduce the burden of taxation to reward effort, to incentivise the take-up of work and to remove more of the low paid from the tax net.

The personal taxation package of £1 billion which the Minister for Finance announced on 1 December and which will be implemented by the Bill is the largest ever. It will benefit all taxpayers through increases in personal allowances, the 2% reductions in the higher and standard rates of tax, the broadening of the standard rate band for single and two earner couples and a range of other measures, including the increase in the elderly exemption limits and the doubling and standard rating of the allowances for widows, blind persons and others.

We are embarking on a major and ambitious programme of tax reform in the area of personal taxation, the two central pillars of which are the move to a system of tax credits announced in last year's budget and the creation of a single standard rate band for individual taxpayers. The Bill continues the first of these reforms with the standard rating of the remaining personal allowances. It also initiates the move to individualisation of the tax bands. These far-reaching reforms will radically alter the structure of the taxation system so that it is more equitable, efficient and effective.

The changes we are presenting in the Bill will remove 73,000 taxpayers, including 10,000 elderly persons, from the tax net and increase the income at which a single PAYE worker enters the tax net from £100 to £110 per week. The budget taxation measures will be complemented by additional measures for the low-paid in the Social Welfare Bill. I am pleased our vision for reforming the tax structure has been endorsed by the social partners in the new Programme for Prosperity and Fairness. We are all agreed that our taxation system will be further developed to deliver tax reductions in a fair, targeted and equitable way.

Section 12 of the Bill introduces a new £3,000 home carer's allowance for married spouses caring for certain people in the home. When deciding the parameters for this relief much thought was given to whom this allowance should apply and consequently it recognises the responsibilities of married spouses who work mainly in the home caring for children, the aged and the incapacitated as well as those who care for elderly or incapacitated relatives who do not live with the carer but within a reasonably close distance. The new allowance complements the Government's other personal tax changes. The allowance provides for an income disregard and its tapered withdrawal so that any spouse returning to work with significant income will retain it for a certain period. This will ensure the relief will not be lost when the circumstances of the family change. The home carer's allowance and the increased standard band for certain two earner couples are mutually exclusive but taxpayers will be entitled to which ever is more beneficial to them in the particular tax year.

Section 21 provides for tax relief for post-graduate fees under certain conditions for post-graduate courses in Ireland and other EU member states and includes distance education courses offered by publicly funded colleges in other EU member states. Since the commencement of free fees in 1995 for undergraduate students at publicly funded colleges, the Government has introduced tax relief for full-time courses at private colleges and part-time courses at publicly funded and private colleges. Last year tax relief was provided for full-time undergraduate students in publicly funded colleges in other EU member states. The introduction of tax relief for postgraduate fees builds on the Government's clear commitment to enhancing Ireland's reputation for having a highly educated and skilled workforce. The relief will also encourage people to take up further education which, while benefiting the individuals concerned, will also benefit society as a whole.

The tax relief for certain expenditure on significant buildings and gardens is a generous one. Section 42 will change the opening days needed to qualify for the relief. Individuals claiming the relief must now open for ten weekend days during the period 1 May to 30 September. This will benefit people who want to visit these properties by improving the consistency and convenience of the opening hours for the public by increasing weekend access to such properties over the summer months while considering the needs of owners by not making the weekend opening requirement too burdensome.

Existing legislation recognises the importance of fundraising for third level institutions and section 43 extends and develops the tax relief available for such donations. A broader base for fundraising initiatives should be encouraged by reducing the de minimis for tax relieved donations from £1,000 to £250, and the legislation allows the Minister for Education and Science, with the consent of the Minister for Finance, to increase the areas of expenditure beyond the four areas as set out currently in the legislation.

Section 44 proposes two changes to the tax relief for "save as you earn" share option schemes. The first change allows the use of a trust to purchase existing shares for a "save as you earn" scheme. The current legislation only allows the use of new shares. The second change reduces the age of retirement from 66 years of age to any age between 60 and 66. These two changes should improve the attractiveness of "save as you earn" schemes and the Government is watching the take-up and success of these and other profit and employee share schemes with interest.

The tax relief for donations of heritage items to national heritage institutions has proved its worth since its introduction in 1995. The increase in the limit from £750,000 to £3 million in section 137 is a reflection of the number of major heritage items made available in this way since the relief was introduced. These donations include a collection of five modern Irish paintings by Jack B. Yates, William John Leech and James Humbert Craig valued at £125,000 and an Italian marble sculpture, "Amorino", by Antonio Canova, valued at £520,000.

Sections 33 to 40 deal with changes to the relief for the Custom House docks area, the urban and rural renewal schemes, enterprise areas and certain offshore islands. Many of the amendments have been made necessary to comply with the European Commission's conditional approval of a number of tax reliefs over the past year.

Section 72 will provide for tax relief in respect of certain towns with populations between 500 and 6,000. The Minister for the Environment and Local Government will announce the areas which are to be designated under the new scheme in the near future. The relief provided for under the scheme will be similar to the relief already available under urban relief. The residential elements of the scheme will commence from 1 April 2000. The business tax reliefs must be notified to, and approved by, the European Commission before they can be introduced. The scheme is intended to aid the restoration of the centres of small towns by restoring or improving the built fabric and by promoting sensitive local development. In common with many large urban areas, the centres of some smaller towns have experienced dramatic declines in population and increases in dereliction as more people choose to live on the edge of these towns or in open countryside. This scheme will help to arrest this decline and to increase the housing stock in a cost-effective way by encouraging the renovation of existing accommodation in the centre of towns.

The Minister announced in the budget that he had decided to abolish the £5 excise duty levied on tickets issued for travel overseas. This tax was first imposed with effect from 1 September 1982. Because of the growing increase in travel overseas, the annual yield from this tax has risen steadily over time to approximately £19 million in 1999. However, with the improvement in Government revenues and in recognition of the abolition of duty free sales for intra-Community travel, the budget afforded an opportune time to abolish this tax. This is a positive measure in support of the business and tourism sectors and will be of considerable benefit to air and sea transport operators and, in particular, to regional airports. The move has been welcomed by the travel trade.

The House will be aware that smoking rates in Ireland are on the increase. The recent SLAN lifestyle survey points to an overall rise in smoking among the population and, in particular, among young women. Tobacco consumption is the single most preventable cause of early mortality in the State. Half of all smokers eventually die from smoking-related disease and half of these will die prematurely in middle age. It is estimated that around 7,000 deaths each year in Ireland are attributable to smoking. An inordi nate number of hospital admissions each year are due to smoking-related conditions, including cancers, heart and circulatory system diseases and respiratory conditions such as emphysema. It is hoped that the highest single excise tax increase ever imposed at budget time of 50p on a packet of 20 cigarettes – I, as a heavy smoker, smile inwardly – will act as a deterrent and will reduce projected cigarette consumption below what it would otherwise have been, particularly among young smokers who may be more price sensitive than other persons.

The Bill introduces some of the most significant reforms of the capital acquisitions tax code since that tax replaced estate duties and death duties almost a quarter of a century ago. On the interaction of this taxation with housing, Deputies on all sides will be well aware from their constituency work that for many people taxation on the inheritance of the home, in which they may have lived for many years, had become a serious issue. Frequently the people faced with the demand from the Revenue Commissioners could not be described as wealthy by any standard. This problem first manifested itself in the greater Dublin area but it had become an issue throughout the country due to the recent sharp and sustained increase in house prices. The inflation in house prices had greatly exceeded the indexation arrangements in the CAT system which is linked to the general consumer price index.

Section 130 resolves the problem of taxation on the inheritance of a person's dwelling once and for all. The new family home relief removes the tax, where the person inherits or has been gifted the home provided that person has been living in the residence for the three years prior to the inheritance or gift. However, it does so in a way which is sensitive to the many different types of relationships which are to be found in contemporary Ireland as well as relationships that take a more traditional form.

While the family home relief will include conditions requiring the beneficiary of the relief not to dispose of the dwelling for six years and to reside in it for the same period, a number of exceptions from this general rule are contemplated by the Bill. In particular, I would draw the attention of the House to the special arrangements being made for people aged 55 or over who will not be subject to the post-transfer ownership and residence requirement. Similar exceptions are being made for those who are in need of long-term medical care.

The family home relief is a suitably prompt and compassionate response to an issue which was causing anxiety for many. The aftermath of a bereavement is sufficiently distressing without the added worry of whether one is to be forced out of one's home simply because escalating house prices meant that a tax bill could not be met. The relief also takes account of a reality of modern day life, that not all committed relationships are based on marriage.

I welcome the provision that will ensure that the names of tax defaulters will be published in cases where proceedings may have been initiated by Revenue, and whether any fine or penalty is imposed by the courts. This provision will also confirm that publication will take place in settlement cases where the full tax, interest and penalties have been paid, and it will permit that the details to be published may include a brief summary of the nature and circumstances of the default. In view of public concern over recent high profile cases of tax evasion, I see this as a timely measure which will copperfasten the public's right to information about the progress made by Revenue in pursuing tax evaders.

The latest inflation figures released this week by the Central Statistics Office show headline inflation for January to be 4%. On a HICP basis, inflation was 3.9% in December compared with an EU average of 1.7%. I listened with great care to what Deputy McDowell said in his analysis, which I thought was reasonably fair.

As this House is aware, the economy is extremely open and, as such, international inflation and exchange rate movements play a significant role in determining our inflation rate. It is more significant than in most economies. It is fair to say also that there is much misunderstanding about this point. Domestic pressures are leading to higher prices in some sectors but the most important reasons for the increase in inflation are external and outside our control.

The euro has been extremely weak since its launch and has fallen by about 15% against the dollar. In addition, crude oil prices have gone from $11 per barrel last spring to about $28 at present. Combining these two factors, crude oil prices have increased by close to 180% in Irish pound terms. This has fed through into higher petrol and home heating oil prices and, in total, has added more than 1% to headline inflation.

This increase in inflation will be temporary. The impact of euro weakness and higher oil prices will be reduced over the course of the year and inflation will start to fall steadily. However, there would be consequences for our future economic prospects if this temporary increase in prices started adding to wage inflation. This is the crucial issue for this Government and for the social partners. We must avoid this and ensure wage increases remain competitive.

Towards this end, the Government has just completed negotiations on a successor to Partnership 2000. This will continue the consensus based approach to managing our economic affairs. The pay terms of the new agreement are fair and reasonable. They strike a balance between providing gains in real disposable incomes while maintaining the economy's competitiveness. Adherence to these pay terms is essential if we are to sustain economic and social progress. The Government's tax policy is an integral part of this. Reducing taxes is vital to secure moderate wage increases and low inflation. Commentators who criticise this policy stance need to put for ward a viable alternative to policies which have been successful for the past 13 years.

This Finance Bill will underpin the recent progress of our economy and prepare the ground for greater growth in living standards. I commend this Bill to the House.

I am glad to have the opportunity to make a short contribution on this important Finance Bill which is among the most progressive legislation ever brought before this House. The Finance Bill, 2000, has to be seen in the context of budget 2000, to which it gives legislative effect, the Social Welfare Bill and the recently negotiated Programme for Fairness and Prosperity.

Arising from these measures, particularly the Bill we are discussing, there will be just rewards for the public. The Minister of State spoke about the largest tax package in the history of the State to which this Bill gives effect. Coupled with the Fianna Fáil Party's commitment before the 1997 general election to introduce substantial personal taxation relief packages, it is heartening to note that this Bill provides for more than £1 billion in personal tax reductions along with the £1 billion already delivered in the Government's previous two budgets.

Some 70,000 taxpayers will be removed from the tax net, including 10,000 over 65 year olds. This Bill and the budgetary measures takes 125,000 taxpayers off the top rate by substantially widening the standard rate tax band. The standard and top rates of tax have each been cut by 2%. The doubling of personal allowances for the aged, the widowed, dependent relatives and incapacitated children are all very welcome measures.

Deputy McDowell rightly spoke about the burden of capital acquisitions tax, particularly in regard to family homes. The Government has adopted the right measures in exempting the shared family home from capital acquisitions tax and also cutting the capital acquisitions tax rates to 20%. These are all very necessary measures which take account of today's prices.

Great credit is due to the Government and the social partners on negotiating a very fair Programme for Fairness and Prosperity. Most of us who represent the less well-off in society, and who have a particular interest in advancing the needs of the less well-off and lower income groups, are tired of right-wing economists having constant access to the airwaves propagating their right-wing views that the working class does not deserve a pay rise.

The pay proposals in the newly negotiated Programme for Fairness and Prosperity are justified. The tax reliefs are justified for those on the lower income scale who have not benefited to the same extent from the strong economy as have the better-off in society. All of us who have an interest in ensuring that the country's wealth is shared will reject many of the views put forward by these right-wing economists.

These same people bemoan the Government's lack of investment in infrastructure. They talk constantly about gridlock, the lack of infrastructure throughout the country, whether with regard to water, sewerage or telecommunications, while at the same time, they propagate the view that Government expenditure should be reduced. One cannot provide infrastructure and housing and improve the traffic situation unless there is investment.

The Government has rightly provided a huge investment programme through the national development plan. Some £41 billion will be invested over the next six years in building up the country's infrastructure, in providing housing and water, sewerage and roads services to bring them up to a standard so that we can ensure the economy and employment opportunities grow and that future employment opportunities will be provided for people who want to work in this country.

Coming from a Border region, I was particularly glad the Government had the courage and the political vision to regionalise the country. Fianna Fáil and the Progressive Democrats are the only two political parties which wholeheartedly supported regionalisation which gave us Objective One status. The Objective One designation for the Border, midlands and western regions will be beneficial to all those areas.

We went to Brussels about it.

The Government made the decision. I have to tell Deputy Belton that when this matter was discussed, the Fine Gael leader or party spokesperson on finance—

Deputy Healy-Rae made the decision.

—did not come down in favour of supporting the Government proposals. The only two parties which were unequivocal in their support of regionalisation and giving the Border, midlands and western regions Objective One status were Fianna Fáil and the Progressive Democrats – this Government. That decision will bring major benefits to—

Fair play to Deputy Healy-Rae.

—the areas concerned. Deputy Durkan's constituency colleague, the Minister for Finance, was foremost in his commitment to ensuring that the less developed areas got the necessary infrastructure development to enable them to obtain employment opportunities and bring inward investment to those areas. It is unfortunate that Fine Gael, a party which is represented in most constituencies, did not have the courage to come down in favour of and support the development of the less well off areas.

Outrageous.

It is easy for them to do so at a local level but they did not have the guts or the courage at national level to support the Government in a policy which will benefit the less well-off in society, particularly the less developed areas.

I am glad the Government agrees on something.

The facts might hurt Deputy Belton and he might talk to his constituents.

Deputy Smith without interruption. Deputies will get a chance to speak.

Deputy Smith is naming people.

I was glad to hear the Minister of State speak about the extension of tax relief at the standard rate for post-graduate fees under certain conditions. He stated the relief can be claimed by the person concerned or by his or her parents, guardians or spouse where they pay the fees. This is a welcome measure because we all know of students who have gone through college and who need to do post-graduate research to enable them to acquire skills and to involve themselves in research and development which is very important for the further development of our economy.

I would like the Government to improve higher education grants. The income limits are too restrictive and the maintenance grants have decreased in real value because of the increase in the cost of accommodation, particularly in centres where universities and institutes of technology are sited. It would be welcome if the Government could improve substantially the income levels to qualify for higher education grants and the maintenance element of those grants. There are particular problems in the Border areas because many students from those areas study in the North of Ireland, England or Scotland and given the current punt-sterling differential, the grant payment here is substantially devalued when converted to sterling. A general improvement in the level of such grants would enable many more students to partake in third level education.

Under the Finance Bill the Minister has extended the urban and rural renewal schemes until 31 December 2002. Two years ago the Minister for Finance introduced the rural renewal scheme, which is applicable to west Cavan, Leitrim, Longford and parts of Sligo and Roscommon. That scheme is most beneficial. It arose from a commitment in the Fianna Fáil election manifesto prior to the 1997 election when the party stated it would give focus to a pilot scheme for an area that had suffered through depopulation and lack of development. I am pleased the qualifying date under that scheme will be extended.

I welcome the measures in the Social Welfare Bill, which run parallel to those in the Finance Bill. The measures in the Social Welfare Bill will provide for the less well off and introduce many innovative and welcome changes to the social welfare system.

I wish to share my time with Deputies Stanton and Durkan.

That is agreed.

I welcome the opportunity to speak on this Bill. I was one of ten members of the Fine Gael Party who went to Brussels at the invitation of Joe McCartin, MEP, to make the case for the areas that qualified for Objective One status. When we went there we discovered the Government had done almost nothing to further that cause. I was pleased to be part of that deputation, which included Deputies who represent constituencies that are directly involved. We then witnessed the shambles left by the Government when Independent TDs tried to include counties that did not qualify for that status. I record my position and that of my colleagues on this matter.

With regard to the rural renewal scheme, I compliment the former Minister, Deputy Kenny, who pioneered the seaside resort tax incentive scheme for the Government to follow it through under the rural renewal tax incentive scheme. A good deal of investment is being made in the counties involved in the scheme, including my county of Longford. That tax incentive scheme has done a good deal to attract investment and encourage people to return to areas that were denied opportunities in the past.

The Department of Agriculture, Food and Rural Development has signed contracts with farmers under REPS, but it has failed to honour them. Some farmers who qualified under the REPS are waiting for 12 months for their payment. I would like the Minister to tell the House what the Government will do about honouring its contracts. Will it pay interest on the payments due? The Government has failed miserably to provide the necessary funding to employ inspectors in the Department and that is why the Government has failed to honour its contracts.

As regards Defence – this is an area in which the Acting Chairman is also interested – it has emerged that the Department of Finance is planning to cut the Defence Forces personnel by 2,000. The Minister for Finance should forget about doing that. We should stand by the Army that has stood by this country since the foundation of the State. The Army has given an excellent service and when various crises have arisen it has come to the rescue. We are proud of Connolly Barracks in Longford and of the Army presence there. The Minister should leave the Army alone. The Civil Service may have ideas about cutbacks and it is there to advise Ministers where to cut back. Elected representatives, and that includes the Fianna Fáil and PD Ministers, are there to represent the people and the people are saying, "Hands off the Army, leave the Army alone." The Government should provide the necessary funding to ensure the Defence Forces have the resources to continue the work of the Navy, which is vital in terms of coastal inspections to detect drug trafficking and the protection of our fisheries, but all that is being neglected by the Government.

The Minister should provide funding for the carer's allowance. Under the current scheme, if a social welfare recipient qualifies for the carer's allowance, that allowance is immediately taken into consideration because he or she is in receipt of social welfare benefit. That is not a level playing pitch. People who qualify for the carer's allowance who are social welfare recipients should be treated the same as carers who are non-social welfare recipients, but they are not. I hope the Minister will address that anomaly immediately.

I am disappointed the house improvement grant has not been restored. It was an exceptionally good grant that was made available from 1983 to 1987. The first act of the then Fianna Fáil Government when it returned to office in 1987 was to discontinue that grant. I ask the Government, as I asked the previous Government, to restore the house improvement grant. Many houses throughout the length and breadth of the country could be restored if the necessary incentive was provided. That could be done by restoring the house improvement grant. It is vital to finance the Department of Agriculture, Food and Rural Development to enable it to employ more inspectors to complete the REP inspection. The Government has failed to honour its contract. It should now have to pay interest on top of the REP payment.

Regarding the Department of Defence, the Minister for Finance should forget about cutting back the Army and provide funds for it. The military authorities – the Army, the Navy and the Air Corps – have told the Minister for Defence where they stand, and they are the professionals. There must be no barrack closures. That is important to the Leas-Cheann Comhairle in the context of Mullingar. It is important also in the case of Connolly Barracks to provide the funding and keep the barracks open. The opportunity of a good healthy life in the Army should be there for our young people. That is what this country needs. I am afraid this Government is failing on that front.

I am pleased to contribute on the Finance Bill. This Government was lucky to achieve power when it did and to find itself in a position in its first two budgets to be able to give tax reductions of £1 billion and, in the budget this year, to give tax reductions of another £1 billion. This Government has been quick to blame the last Government for shortcomings, but perhaps it is time to give credit to previous Governments for the current state of the country's finances. When a Government gives away such a large amount of money it should make everybody happy. However, the Minister for Finance made many people very unhappy and had to make quite an embarrassing U-turn within two weeks of budget day. It is quite worrying when a Minister gets things so wrong that he is forced, within such a short time, to make a U-turn that adds another half a billion pounds to the cost of the budget.

I agree with my colleague, Deputy McDowell, that our approach to budgets is archaic. We should have a debate on taxation to prepare people for the budget and highlight any drawbacks, although, for obvious reasons, not everything can be covered.

It is worrying that only the Minister for Finance and a very small number of people were privy to the proposal on individualisation for tax purposes. It was not mentioned in any election manifesto, so the Government did not have a mandate for it. The Minister made a mess of bringing in individualisation. He wanted to achieve fairness. He also wanted to encourage or possibly force people, mainly women, into the workforce. Because individualisation was so unfair and inequitable, the Minister then had to grant a £3,000 allowance to carers at home. Now he has created a number of different types of family under the tax regime, and this problem will be exacerbated in the years ahead because of individualisation and how it was handled by the Minister.

This "make it up as you go along" budget gives cause for serious concern and added to that is the stance the Minister has taken in relation to the credit union debacle, another situation where we have to question the Minister's judgment. First, we had the debacle regarding individualisation. Now we have what I can only describe as a scandal with regard to the credit unions. For two years the Minister has refused to meet a group which represents over one million people, and the Taoiseach has to trot off and meet with it instead. It is the job of the Minister for Finance to meet it but he said recently there is nothing new he can learn by doing so. That is not the point. It may have something to learn by meeting him. It's requesting a meeting with the Minister and he is refusing it. That is wrong. Is the Exchequer going to lose out in the long run because of the Minister's refusal to meet with the credit unions?

There are even more serious issues around this. The credit unions want a fair and equitable system of taxation. The reason we have DIRT in the first place is that people, being human beings, may be slow to declare all their interest. In the past many people assumed they did not have to declare interest on savings. Now the credit unions want to pay DIRT and the Minister is refusing even to discuss the matter. This is crazy. I cannot understand it. It makes no sense whatsoever. In the final analysis not only are the credit unions losing but taxpayers also. I appeal to the Government to sort it out.

We are also quite worried about inflation. I will not say too much about it other than to note that the gap between Ireland and the EU in relation to inflation has tripled in the past six months. We have had a number of budgets, all of which have been inflationary. That is worrying. Many of the points being made are coming from outside this House. The increase in cigarette duty and costs has been partly to blame. I agree with that increase and hope it will serve to curb smoking among younger people. I, with Deputy Shatter, am in the process of publishing a Bill on this issue because action has to be taken on it. I am also concerned that increases in the price of petrol, motor oil and heating oil are having a serious effect not only on inflation but also on business competitiveness. The Minister missed an opportunity to reduce duty on fuels to compensate business and motorists who are paying a lot towards the Exchequer at the moment.

I welcome the relief being given in respect of post-graduate courses, but it does not go far enough. Perhaps fees should be covered to a greater extent. Income limits in respect of undergraduate courses are also too low. I call on the Government to look at these again. I am glad the Minister of State involved in education is in the House. I am sure most people would agree that students are under pressure at the moment. If we are to be competitive as an economy we have to ensure that people are encouraged to stay on in education, and any impediment must be removed. Some people do not qualify for a grant because their income is £100, £200 or £300 over the limit. At those levels it causes huge strain and means that some people cannot afford stay on at third level. The Minister of State should make a special effort to get this addressed. The amount of the grant and the income limits should be increased. Many older workers need retraining, and it would be useful if tax relief could be given on the cost of retraining should somebody decide to do a course with this in mind.

I have been speaking to some accountants who agree that the Bill is very complex and that the changes to it and the fact that they were made so late could give rise to loopholes. If a self-employed person earning £35,000 per year decides to employ his or her spouse and pays him or her £6,000 or £7,000, it will change the overall taxation situation. There have been some publications about this recently. I do not know if that was intended, but perhaps the Minister will examine the matter and come back to the House on it.

I am puzzled that the Minister for Defence tells us he has to cut back on the Army because he does not have the money. That does not make sense at a time when the problem this lucky Minister for Finance has is that he has too much money. Last year there were differences of opinion between the National Treasury Management Agency and the Department of Finance as to what the surplus would be, and the Department got it wrong because it was far greater than it had anticipated. The Minister for Defence is now saying that he must cut back on the Defence Forces and the reason he gives is that he does not have sufficient resources, but that does not hold water. The Minister must re-examine that matter and come up with a better argument.

House prices are a major worry and we also have a problem with industrial relations. These matters are linked. According to the reply to a parliamentary question I received yesterday, the number of man days lost in the first three quarters of 1999 equalled the 1998 total. The 1999 figure of 37,000 man days lost does not include the nurses' strike or other disputes that occurred in the final quarter of last year. While there are many good measures in the budget and the Finance Bill, we have reservations about some aspects which need to be teased out.

I am sorry the Minister of State, Deputy Cullen, has left the House. He obviously has a memory problem and would not qualify for a "beat the memory man" team. In his speech he referred to the great work done in the past 13 years, implying that the great work started in 1987. The work that had to begin in 1981 was to repair the damage done in 1977. I would remind the House of the circumstances that prevailed at that time when, following the effects of an oil crisis and following good Government and management of the economy, the incoming Government decided that the fire was not burning brightly enough, so more petrol was poured on it. The effect lasted for precisely two years, at which point the whole thing collapsed. Inflation and interest rates went wild and the Government virtually abdicated because it no longer had the nerve to face the responsibilities it had taken upon itself. It has become known as the greatest fiasco in recent history. Obviously, the Minister of State, Deputy Cullen, does not remember it but I do, very clearly. I can remember the daily news headlines at the time and I hope we are not facing a similar situation now.

Over the past six months, particularly as we approached budget day, there was a daily mantra from the newspapers that represent the Government side of the House. Those newspapers regularly attempted to identify the full extent of the money the Government had to spend. Was it £1 billion, £2 billion or in excess of that? Public expectation was hyped up in an extremely dangerous way and the result is that not only did the Government create the expectation but it failed to identify it fully. In the budget the Government decided to throw money in certain directions but left a number of people out, and it paid the price for that very quickly.

Never in the history of the State has a Minister for Finance had to come back three or four times with a revised budget. The Government brought this upon itself. It is most extraordinary that a pilgrimage to the plinth of Leinster House can result in a change of budget. It paid off, however, because most of the people who visited the plinth at that time were subsequently promoted. I would suggest that a visit to the plinth is not a bad idea for those on that side of the House who are seeking promotion in future.

I fully recognise that this country has had, for several years going back to the mid-1980s, higher growth rates than any other European Union member state. I am not so sure, however, it is such a good indicator that we now have the highest inflation rate in the EU. In those circumstances I am concerned that we might be on the run into something we experienced before. I have no doubt that the Government is fully conversant with the consequences of that type of situation and I hope it will not just hang in until the next general election in the hope that it might obtain an overall majority. I can tell it that it will not achieve that – perish the thought. It will not happen. I have a deep suspicion, however, that that is in the back of the Government's mind and that two months after regaining office with this so-called overall majority it will then be in a position to tell the electorate: "Sorry folks, we got it slightly wrong, you are going to have to take a cut-back now". I am predicting that is the Government's thinking, but it will have to face a very angry electorate if that comes about. There should be no doubt in anybody's mind about that and the public will not be duped in that fashion.

The Minister of State's speech contained the usual stories that are trotted out at Finance Bill time. I am not sure whether the same people actually produce the speeches, but there is a common thread running though them. Every year at budget time somebody gives a huge tax relief to the poorer people. Earlier in his speech, the Minister of State said: "The changes we are presenting in the Bill will remove 73,000 taxpayers, including 10,000 elderly persons, from the tax net and increase the income at which a single PAYE worker enters the tax net from £100 to £110 per week." That represents a whole £10 a week. If one calculates it carefully, however, what usually happens is that people on the fringes will be taken out of the taxation net, but it does not quantify the benefit to those concerned because in most cases it is minimal. The same story has been trotted out for every budget and every Finance Bill, certainly since I became a Member of the House. I am sure it also happened long before I came here and I have no doubt that it will continue long after I have left. I am not trying to disillusion anybody but that is the way it is.

Various excuses have been put forward concerning the causes of inflation, such as the increase in the price of cigarettes or the plummeting value of the euro. Sterling is strong and oil prices have the same impact in the UK as they do here, yet oil prices are about 15% higher in the UK. What is the explanation for that difference?

One of the points that has not been referred to in the Minister of State's speech and is not taken into account in the consumer price index is the increase in house prices. In certain parts of the country house prices have doubled in the past three years. If somebody can tell me how that can happen without some impact on wage demands and, ultimately, on inflation, I would be extremely surprised. People are now making wage demands that compensate for inflation, but if inflation is on the way up, how can one anticipate the extent of future wage claims? The Minister for Finance says inflation will level off in the middle of the year, but will house prices level off then? Will people seeking mortgages in the middle of this year be able to say they can now borrow £10,000 or £20,000 less to buy a house? Nothing like that will happen. Nothing has been done to address the problem of housing demand and all that goes with it. Unless and until something is done, people will not be able to accurately predict what will happen in the economy in future.

A matter that affects my constituency – and particularly my former constituency – is the revisionism relating to the Defence Forces. I do not accept the theory now generally applied that all is well in the land and that we do not really need an army any more. It is ironic that the Naval Service is the most under-financed and under-supplied navy of its size in Europe. We have more miles of coast than any other country in Europe apart from our near neighbours, and we are supposed to be combating a drugs problem which will require a higher degree of surveillance from the Air Corps and the Naval Service. However, the only thing that has happened is that the Government has decided to close the Army down. Attempts are being made daily to say that anything proposed in that area must be self-financing, while at the same time the Government has virtually told the public for months that it has so many billions of pounds available that it does not know what to do with it. It is an extraordinary situation.

I propose to share my time with the Minister of State, Deputy O'Dea.

Is that agreed? Agreed.

This is a large Bill and shows the work the Minister for Finance is doing to update the taxation system since coming to office. Before dealing with it I will refer to some of the comments of previous speakers. I must comment on the Army and the Naval Service, given the latter is based in Cobh, which is in my own back yard.

The impression given by some people is that the Naval Service is from the last century, but that does not stand up. Many new ships have been purchased in recent years and equipment on the ships has been updated to bring them into the modern age of computerisation. A new ship was brought to Ireland last month which was built abroad, but the supervision of its construction and any changes made to the original plan were due to the engineers and officers – up to the rank of captain – in the naval dockyard. They supervised the project and brought it in under cost. We owe a great debt of gratitude to those members of the Naval Service who are willing to use their expertise for the good of the country and the Naval Service now has a fine ship available to patrol the coast. One of the other Naval Service ships is getting refitted in what is called a half life job.

The problem of the Naval Service is getting people to join it, which is also a problem for the Army. Speakers have said the Minister for Finance is trying to cut Army numbers to 8,500 members. I do not know where this figure is coming from; I believe it is being plucked out of the air. The Minister for Defence is not talking about reducing the Army to 8,500, and listening to him this morning the Army will have 10,500 to 11,000 members. Many of these scare stories are simply that – stories.

Deputy Durkan mentioned the national debt. The national debt went from zero to approximately £9 billion from 1973 to 1977. From 1977 to 1981 it went from £9 billion to approximately £12 billion, the period in which everyone says the country was run into the ground. From 1982 to 1987 it doubled from £12 billion to £24 billion under that great economist, Dr. Garret FitzGerald. From 1987 onwards the brakes were put on and all Governments since have followed the lead given in 1987 and which was necessary to bring our economy out of danger of being taken over by the IMF.

When Fianna Fáil was last in opposition we looked at what needed to be done to ensure the continued growth of the economy. We prepared a tax reform document for 1997 to 2002 which the Minister for Finance is now implementing and refining. That document contained plans to reduce the taxation rates, such as reducing the top rate of income tax to 44% over a five year period and reducing the standard rate to 20%. We are bringing both rates down by 2% this year. We were going to bring in a carer's tax allowance and that has been done. The document also stated that we would consider reducing capital gains tax and that was done, bringing great returns to the State. The document stated we would clarify the role of ownership of semi-State bodies and this is continuing. The document proposed getting four in five employees on to the standard rate of tax and with the policy of increasing the tax bands and allowances, we are on the road to achieving that. We proposed introducing tax credits to create a more equitable tax system and that has commenced. It is not yet fully developed, but it will be by the time we leave Government.

Deputy Stanton said we were lucky that we were able to fall into government with all this money. We were lucky, but people make their own luck. The Minister for Finance was attacked because, when under pressure, he brought in the £3,000 allowance for stay at home spouses, whether they are caring for children or disabled people. That was also a published part of our policy. If I was Minister I would have brought it in at the very beginning of our period in government, but I am not the Minister. The Minister promised he would do it and he did so. Those who made a song and dance about individualisation initially talked of it as if it were a change in principle from what had been in our taxation system. That is not correct; it was a change in the level of allowances granted to two different sets of people. The principle was already established in that if both a husband and wife worked outside the home, each received a PAYE allowance whereas only one PAYE allowance was granted if only one of them worked outside the home. The principle already existed but the difference in take home pay was one of the reasons for the discontent about this issue. The Minister changed the provision and I do not see anything wrong with somebody recognising the need for change and, accordingly, making that change. I would not have been elected to this House 18 years ago but for a particular Minister for Finance imposing tax on footwear in January 1981. He did not get outside the door of this House with those proposals. That Minister was asked to change the provision but was unwilling to do so. We must be flexible and apply common sense in regard to these matters. The Minister to whom I refer also failed on a subsequent occasion when the Labour Party jumped ship because of his proposals. Perhaps some more members of the Fine Gael Party should also consider jumping ship given that he has such a bad record.

The Finance Bill is to be welcomed as it will deliver the largest tax package in the history of the State, a fact which is widely acknowledged. Some people may not yet appreciate this as the media have overemphasised the slight disparities in tax allowances without providing a full explanation of their effects. When people receive their first wage packets after 1 April, they will realise they are gaining significantly from the Bill's provisions. More than £1 billion is being provided in personal tax reductions in addition to the £1 billion provided in the two previous budgets. We were informed that £600 million or £700 million in tax cuts was required and more than £1 billion was provided. Yet, some people persist in saying that we are not giving enough. There is an onus on Government when times are good not to waste the State's finances but to spend them wisely.

Inflation and the overheating of the economy were referred to. Some European economists have stated that the increase in tax allowances is too generous and that the economy will implode. Our own economists point out that our economy is not similar to the European system and can withstand increased expenditure.

The budget and the Finance Bill will result in an additional 70,000 people being removed from the tax net. It is our duty to look after the elderly and, in this regard, an additional 10,000 people over 65 years of age will be exempted from the taxation system. The widening of the standard tax band will remove 125,000 taxpayers from the top tax band making them liable to tax at 22% rather than 44%. That is something of which we could only have dreamt five years ago. The increase in PAYE allowances to £500 for a single person and £1,000 for a married person means a person must earn £110 before coming into the tax net. An extra £10 per week amounts to £520 over a year and is not an insignificant increase. It would be considered significant if it were a wage increase.

I welcome the exemption of shared family homes from capital acquisitions tax which has caused great problems over the years for brothers, sisters, nephews or nieces who lived with relatives. In regard to qualification for agricultural relief, I welcome the increase from 75% to 80% of the beneficiaries' assets; 80% of assets must now comprise agricultural property. The increase in the threshold for residential property tax from £200,000 to £300,000 is also welcome. I welcome this Bill which will ensure Ireland continues to grow and I commend it to the House.

I ask the Minister of State at the Department of Education and Science, Deputy O'Dea, to ask the Minister for Finance to consider providing tax relief for parents to purchase information technology equipment for their children. The continuing growth of this country will depend on properly educated and computer literate young people.

I am disappointed that Deputy Durkan sought to impute such machiavellian motives to the Government and assure him that sort of disgraceful manoeuvring is the furthest thing from our minds. I concur with Deputy Ahern about the need for flexibility in government, particularly on the part of Ministers for Finance. For a person to change his or her mind merely implies the person is wiser today than he or she was yesterday. Had Deputy John Bruton learned that lesson, his career path might have taken a different course.

There is perhaps a grain of truth in Deputy Durkan's advice in regard to trips to the plinth. He should consult his constituency colleague, Deputy Dukes, about that as we will all recall that his return from the wilderness was preceded by several appearances on plinths throughout the country.

I congratulate the Minister for Finance on this Bill which is a further instalment in a comprehensive package of tax reform he initiated on taking office. The changes and reforms he introduced have rightly earned him the respect and admiration of everyone who understands how the Irish taxation system works. Some of his reforms have been misrepresented, deliberately or otherwise, for example, in regard to the change in tax as it applies to bookmakers, with which Deputy Yates will be familiar, and the decision to slash the basic rate of capital gains tax.

The Minister's brave decisions have been vindicated by their out-turn. When this Bill becomes law, the standard rate of tax – that paid by two out of every three taxpayers – will be at its lowest level since before World War II. It might prove salutary to reflect on that. It is worthwhile remembering that the Minister, Deputy McCreevy, has not finished. His stated objective, which I have no doubt he will attain, is that when this Government goes before the people to seek renewal of its mandate, four out of five taxpayers will pay income tax at an even lower standard rate. That is real progress.

The Minister has been accused on many occasions of being ideologically committed to the rich and favouring them in Finance Bills, budgets, policy pronouncements and so on. The financial legislation introduced by the Minister is replete with examples which belie that assertion. For example, it is salutary to reflect that when this Bill becomes law, a jointly assessed married man over 65 years will be exempt from income tax if his income does not exceed £15,000 per annum, which is almost £300 per week.

Corporation tax continues to fall, in line with the long-standing target of an ultimate 12.5% rate. This is in the interests of the economy and the Minister will achieve it. The Government is committed to a lower tax rate economy and the Minister has resolutely and rightly refused to allow himself to be deflected by the occasional carping of our EU partners and the discordant background noises from those who see it as their mission in life to promote policies which deal exclusively with the distribution of wealth at the expense of policies which lead to its creation.

Capital acquisitions tax has been radically restructured. The extension of the 20% rate and the long overdue increase in thresholds, which reflects the substantial growth in the value of capital assets in this country, mean that before long the distinction between income tax and capital acquisitions tax will have disappeared, to all intents and purposes. Many provisions in the capital acquisitions tax reforms introduced by the Minister in the past two and a half years remain unsung. For example, section 127 provides that if a farmer does not qualify for agricultural relief, he or she will be entitled to business relief. This is a substantial boon which has not been referred to in the media.

The war on tax evasion is being stepped up significantly. The fact that a special levy on the financial institutions which colluded in DIRT fraud is absent from the Bill does not mean they will escape unscathed. Penalties and interest on back tax since 1996 will yield a significant levy. I can already hear the howls of anguish from boardrooms around the country. The Government's proposals in this regard represent one of the most comprehensive onslaughts in our history on the Irish culture of tax evasion. Section 56 substantially increases the Revenue's powers of audit in the case of DIRT returns by financial institutions.

Deputy Noonan recently referred on the national airwaves to the new "handyman" phenomenon in taxation. He alleged that the change from a domicile base to a residence base in relation to capital acquisitions tax will open the door to tax avoidance or tax evasion – he used the expressions intermittently and I am not sure he understands the distinction. I wish to make it clear that the change in the basis of charging for capital acquisitions tax from domicile – a vague, abstract concept – to residence, is in line with every other similar tax jurisdiction. It is perfectly tailored to suit the change in economic circumstances which has resulted in a large number of people coming in and going out of the country. Domicile is a vague, abstract concept and residence is clear. If CAT on foreign assets remains the same, I predict that many transfers of foreign assets which hitherto escaped capital acquisitions tax will be caught as a result of the changes introduced in this legislation.

In the case of Claire Proes v. Revenue Commissioners – Irish Reports, 1998, IV, p.174 – , the High Court made it clear that in relation to domicile, the correct question to be answered in any case was whether the appellant had abandoned their domicile of origin, not whether they had acquired a new domicile of choice in this State. In seeking to establish domicile of origin and prove it had been abandoned, in which case no tax would apply, the onus is on the Revenue. Instead of opening the door to widespread tax avoidance of capital acquisitions tax, precisely the opposite will be achieved. Deputy Noonan's assertions in this regard betray a fundamental misunderstanding of the law. That is what one gets for sending a handyman to do a job which is more appropriate to a professional.

I welcome the obligatory technical changes to the save-as-you-earn scheme. However, the Minister for Finance has stated that he intends to introduce radical changes to profit sharing schemes. I urge him to introduce these at the earliest possible opportunity. The high technology sector has been the lynchpin of our new prosperity. In order to continue to attract the necessary skills to sustain our competitive position in this vital area, we need to adjust the tax system. Ireland's tax treatment of employee share options must rival that of our global competitors. It will be argued that in the interests of tax equity, it may not be possible to do that. Equity has nothing to do with it – it is about naked greed and acquisitiveness. If we want to attract highly valued skills we must be in a position to give a similar remuneration package to that offered by our competitors. The skills of those we are seeking to attract to this sector are extremely mobile. If we do not provide the same as our competitors we will inevitably lose out to them. There are over 700 software companies operating here and there is a new start-up every week. Despite this, only 40 of those companies employ more than 50 people. The sector cannot achieve its full potential if these companies do not consolidate and focus on global leadership.

Export growth in the sector has been spectacular – 20% per annum for the past five years. More than 80% of the indigenous product is exported. This can only continue if companies here can actively recruit world leaders in their niche technologies. They can only do that if they can offer competitive remuneration packages. The individuals they are seeking to attract expect stock options. This is an area where we could quickly lose competitive advantage. It is not a future case scenario. I know the Minister's intentions in this regard are good and I urge him to bring forward those changes at the earliest possible opportunity.

I congratulate the Minister on continuing along the path of fundamental, necessary and welcome reform of the taxation system – reform in the interests of equity and the economy. I think it was Aristotle who said it was not possible to both tax and please. He was subsequently plagiarised by Edmund Burke, Conor Cruise O'Brien's hero. The package of tax reforms introduced by the Minister since his accession to office, particularly those contained in this Finance Bill disproves that to a great extent. He is to be heartily congratulated. Long may the work continue – before we leave office and seek a renewed mandate, we will achieve our target of reducing corporation tax to the target outlined in our programme for Government. We will achieve the target of having four out of five taxpayers on a 20% rate of tax. This Bill is a necessary milestone on the way to achieving those desirable objectives. I commend it to the House.

I propose to share my time with Deputies Perry and Kenny.

This Bill is the primary economic policy instrument of the management of the economy, given that exchange rate policy is fixed with the euro, inflation seems to be beyond the control of the Minister and interest rates are primarily set by the European Central Bank.

It is in this regard I wish to make my first comments. I want to put on record my belief that the palpable and definite seeds of the movement from economic boom to economic burst are being laid in the first quarter of the year 2000. All the warning signals exist about the rise in interest rates and the highest inflation rate in Europe at double the European average. All the issues that are at the root of Ireland's competitiveness are being eroded. There is total disregard on the part of the Minister for Finance for a fiscal policy that will do anything other than throw petrol on the flames of translating from boom to burst. He is determined to disregard all external advice. If he looks at the performance of the Irish Stock Exchange and whether there is a vote of confidence from foreign investors, he will see there has been a sea change in attitude to the economy. In relation to pay, once blue flu occurred, the Government's economic credibility on controlling pay went out the window. Pay rates will rise by approximately 12% in the next 14 months. The baseline has been established in the programme for fairness, love, prosperity and so on, but the reality is that already the teachers' unions, the bus workers and so on are lining up, creating an opening pitch, and a very serious situation is emerging. The Government is not concerned. The economy is on auto pilot, revenue exceeds expectations and things roll merrily on.

The Minister lectured the rainbow Government on a mantra of controlling public expenditure. Some 4% per annum was the pre-election commitment, but public expenditure has risen by over 20% in the past two years, and it is rising rapidly. I want to put on record that all the historic cyclical signs exist that we are going in the wrong direction. No one in Government is concerned, they are totally preoccupied with patting themselves on the back, saying what a good job they are doing, ensuring that every issue is fudged and that no one rocks the boat. This will be all right for the time being, but it will be all wrong in due course. The only people crying halt are those in Brussels, people in the European Central Bank and foreign investment brokers. Even the domestic economic prophets are all caught up with the present propaganda and do not seem to recognise the serious warning signals. In due course, when this unfortunately comes to pass, which is regrettable and somewhat avoidable, I want to have it on the record that it was said at this time.

Businesses have a huge competitive advantage given that the Irish pound is 78p against sterling, but some of the chickens will come home to roost when this is no longer the case. I cannot understand, in the context of a pay agreement and inflation being such a key issue, how the Government allowed a 1% increase in the CPI through the increase in cigarettes. I agree there should be an active deterrent to the usage of cigarettes and smoking, but there should have been a pro rata reduction. Using the surplus funds that are overshooting each month to reduce prices would have been a sensible way to keep inflation at 3% even by way of the domestic assessment through the CPI. This would at least give the impression abroad that inflation is under control. It would have been easy for the Minister to do this and it is regrettable that no one in Government seems to have thought of this.

There is no doubt that there is too much money chasing too many limited factors in the economy. The shortage of workers is driving pay rates. The minimum wage no longer matters. The traditionally lowest paid jobs in the economy are now paying well above £5 per hour. Minimum pay is already in operation. Job shortages are in the region of 64,000. However, service inflation currently exceeds 6%. All the warning signals exist. These are not my statistics, but I can see matters getting much worse.

On taxation policy, I welcome the Minister's complete U-turn from budget day in relation to individualisation which has been greatly watered down. There has been a meagre recognition of the stay-at-home spouse and the social partners have made the Minister change completely his policy on the low paid. He proposed that the tax free allowance would be increased from £100 to £110 per week for a single person, but the programme for love, fairness, partnership and so on proposes that the minimum wage should be £200 per week. When we proposed £170 per week last fall, it was rubbished by the Taoiseach who said it could not be afforded. I am pleased the Government has now moved in that direction. However, it is unfair that two earners in one household will hit the top rate of tax at £56,000, whereas a single earner will hit it at £28,000. The focus on the top rate of tax is not the problem – 44p in the pound is not an unreasonable rate of tax. The problem is that single people hit the top rate at £14,500 heretofore. The problem is the rate at which it applies.

The way to deal with this problem is to introduce a new middle rate of income tax of 35p in the pound, not to keep cutting the top tax rate because that confers the biggest benefits on the best off. Middle income earners should pay a new middle rate of tax of 35p in the pound. The £3,000 tax allowance has created huge anomalies. For example, someone who is sick and works in the home will not get the £3,000 allowance. Someone whose spouse is in a nursing home will not qualify. A spouse who is on disability benefit will not qualify. A single person acting as a carer cannot avail of this allowance whereas other carers in the home can. There are clear anomalies in this measure.

On economic management and the partnership agreement, the failure to deal with child care is quite clear-cut. It is acknowledged by the social partners that they failed to reach agreement on this issue. It is obvious that children under five years of age who are not in the formal education system require more child care where two people must work to pay the mortgage. Therefore, child benefit should be £25 per week for children under five years of age. When they are in the formal education system the cost to the State is so much greater and this needs to be looked at. The failure to deal with this serious issue is acknowledged in the partnership agreement.

I regret the Finance Bill has failed to deal with the problems of the credit unions. If one invests in a bank, one will pay DIRT at 20p per pound. If one receives a credit union dividend one will pay at the marginal rate of tax which in many instances is 44p in the pound.

I would like the Minister to deal with a specific matter on Report Stage. This relates to sections 77, 78 and 79 and the fuel rebate on low sulphur content diesel oil. I have received representations from the Coach Tourism Council to say that only CIE can benefit from this new rebate. I would like the Minister to revisit the issue and give a level playing pitch to all coach tour operators.

Things have been bigger, better, onward and upward in the economy, but that is not the prognosis for the future. Inflation and costs are out of control and we will lose competitiveness. We are at a crucial turning point in the economy's performance and, unfortunately, whether in relation to house prices or whatever, we are predictably moving from boom to burst.

I am pleased that small enterprises now employ more than half the labour force. These 160,000 enterprises form the backbone of employment and accounted for more than 150,000 new jobs in the economy over the past four years. The owners of these enterprises must cope with the fundamental changes occurring today by identifying and dealing with all the risks which may affect the work being carried out by the company.

The competitive environment for small businesses is all embracing. Due to the size of the domestic economy, many small companies are highly dependent on export markets. Competitiveness is a day to day reality for business, embracing economic and physical infrastructure, management expertise, labour costs, productivity, innovation, education, training, marketing and design, cost control and a variety of other factors which combined create the environment for business and ensure the profitability necessary for enterprise to survive, invest and expand.

Interest rates are of major concern to the business community at present. Interest rates are volatile at present and the current figure is over 4%. Last year interest rates increased promptly in response to international developments and this was justified by the Central Bank on the basis of maintaining our ERM position and the need to avoid large outflows. However, many people are concerned that the current high level of interest rates will have a negative effect on business and associated maintenance costs.

From a business point of view, a marketing campaign should be undertaken to promote the county enterprise boards as first stop shops for people trying to access information. Much more work could be done in this area for people setting up businesses. County enterprise boards do not have sufficient funds and the rate of corporation tax on profits should be reduced more quickly from 25% to 12.5%.

I have received many representations to the effect that the PAYE allowance should be extended to proprietor directors, all self-employed taxpayers and spouses engaged in a family business. This is most important. Although the Department said the cost of implementing the recommendations is prohibitive, the PAYE allowance should be abolished and the money redistributed among employees, proprietor directors, self-employed people working in a trade or profession and spouses working in a family busi ness in the form of increased personal allowances. Owner occupiers, particularly of companies, are not receiving any benefits and this matter should be considered.

Commercial rates are an unfair burden and an arbitrary form of taxation and they should be examined with a view to reducing them. Rates on business are an indirect form of taxation. The rates are not tax allowable and people with small businesses who not making any profit must still pay them. In some cases, the rates amount to thousands of pounds and the people concerned find it extremely difficult to pay them. From personal experience, I am aware that some businesses find them extremely difficult to pay.

Roll over relief should be introduced where proceeds from the disposal of business assets acquired by inheritance or as gifts are subsequently reinvested in another business. This area should also be considered.

The FÁS apprenticeship scheme is too inflexible. Small firms find it difficult to accommodate the block release of apprentices for 20 weeks in module two, ten weeks in module four and a further ten weeks in module six. The main difficulty is the lack of operational flexibility for small companies and the net result is that companies do not train apprentices. This has decimated some of the trades and led to a great shortage of sheet metal workers, electricians, plumbers, etc. There is a lesson to be learned in this regard. The old method of day release and evening classes is more manageable for small companies. An updated version of this system should be introduced. A review of the apprenticeship scheme should be undertaken with a view to introducing a scheme that is more flexible, would encourage in-house training and is tailored to customer needs. The Minister should give a tax concession to businesses, with accreditation from FÁS and the training agencies, to train people in their companies because the current system, which involves releasing people for three or months, is a major difficulty.

The current system of providing grant assistance to companies employing more than ten people is a form of employment grants. Many companies would benefit more if they received support which was not linked to job creation because in many cases taking on an extra employee for the sake of getting assistance is more restrictive than helpful to the company's growth and profitability. Assistance should be focused away from labour and towards companies with profit and growth potential. The issue of companies getting employment grants is major. The largest single investment a company makes today is in personnel; they can pay up to £20,000 for an employee. Companies are being encouraged to take on people for the sake of the Minister's job creation figures. In certain cases companies are taking on staff but they are not making profits. A due diligence investigation of a company would show its profitability and whether it would grow and its viability would increase if a grant was provided. This would be better than encouraging companies to take on employees without a viability study.

To succeed in business firms must be innovative and stay close to markets which are becoming increasingly competitive. In addition to managing the overall change in business effectively, innovation involves selling new and modified products. In terms of research and development, it has been shown that of the top 50 companies only five had proper R&D divisions. This aspect should be considered in the context of the growth of small companies.

There are huge barriers to enterprise. For example, the Minister should consider simplifying administration in business in terms of PAYE, VAT and corporation tax. Every small business must employ a full-time secretary to deal with all the red tape. The audit requirements should be linked to the consumer price index and the statutory auditing of companies with a turnover of less than £100,000 should be abolished.

There should be increased interaction between the teachers' unions and the Department with regard to the education and training system with a view to increasing awareness of careers in enterprise and business. Unfortunately, the school system only caters for people considering undertaking academic degrees. It does not cater for people who want to be plumbers or electricians. Those areas have been down-scaled. There is a need for refocusing in the education system. Videos should be produced for schools on different trades and what it would be like to be a plumber, an electrician or a carpenter. They are important trades and people are having extreme difficulty getting a qualified tradesperson at present.

Enterprise boards should be restructured to ensure that representatives of small business make up 25% of the membership. There are 160,000 small companies in Ireland and they have created the bulk of the jobs in recent years. However, there is no regard for small businesses. A person who wishes to start a company with only two employees cannot approach the enterprise board because it only deals with companies with over ten employees. I have expertise in the area of small business and the Government is not catering for such companies.

Regarding take home salaries and the tax free allowance of £79, the minimum wage of £4.40 an hour will be introduced shortly. However, it is disingenuous of the Government to introduce the minimum wage in the absence of tax reform. People do not consider the gross salary of £176 a week, based on £4.40 an hour; they are entitled to that amount, but they should not have to pay tax on any amount above £79. The tax allowance should be £150. The requirement to pay tax on amounts above £79 is totally wrong. Amounts up £150 should be exempt from taxation. This change should be made in conjunction with the introduction of the minimum wage. All the fan fare about the introduction of the minimum wage in the absence of tax reform is a joke.

I know from my experience of employing people that they do not look at their gross salary. They want to know what is in it for them.

When they open their wage packets will they get £150 or £180 out of £300 gross? On a previous occasion I heard the Minister say that a married person on £15,000 should not pay any tax at the age of 65. That is no consolation to a young person starting off who has to pay tax or earnings over £79, car expenses and incur travelling expenses getting to work. Employers cannot get people to work solely because there is not an incentive for them, as the benefits from the social welfare system are on a par with the benefits of going to work. That system must change. There should be immediate tax reform to ensure that the salaries people take home are adequate. There is a huge difference between gross pay and take home pay. Deputy Noonan has clearly established that tax reform starts at the bottom whereas this budget started at the top and thus benefits those on high salaries. People at the lower end of the scale who are starting off should be given incentives.

I support the sentiments expressed by Deputy Perry who knows what he is talking about in terms of small business. Coming from a rural constituency in the centre of the border, midlands and western region he understands the day to day problems of ordinary workers. His central point of tax reform, starting from the bottom up, is absolutely right.

There is nothing in the Bill that was not contained in the budget except for the changes in respect of the £3,000 allowance for the stay at home spouses. This Finance Bill was introduced by a Minister for Finance who is discredited by his own party. When the row initially broke out about the £3,000 allowance for stay at home spouses it was a deliberate tactic to remove the credit from those in the Independent benches who would claim it, to send out battalion after battalion of Fianna Fáil speaker on the plinth – an unheard of proposition previously – to discredit their own Minister for Finance. In my 25 years here it has never happened that a Minister for Finance proposing a budget would be overruled by the Cabinet and his colleagues and still remain in office.

The Minister is a likeable person whom I know since he became a Member in 1977. He introduced the Finance Bill with a cloud hanging over him, which was put there by his own party, and a certain amount of discredit as a consequence. Whether that influenced his approach to dealing with the credit unions remains to be seen. I cannot understand it. The problem here is a taxation matter and deals with taxation relevant to hundreds of thousands of small savers throughout the country and yet the Minister has publicly refused to meet the Irish League of Credit Unions. Why? Because of his obstinacy and refusal to meet them the Independent Members put pressure on the Government. As a consequence the Taoiseach and the Tánaiste decided to meet the league of credit unions. What kind of Government is this? Who is in charge? Is this an effort by the Minister for Finance to stand his ground and the Taoiseach can meet them if he wishes. We know that the Taoiseach is amenable to meeting all and sundry. In the past week he launched Paudie O'Shea's Gaeltacht tournament, the AIB club championship, he called in to see Mick O'Connell and now he is on his way to Eddie Jordan in Brisbane. The intricacy of politics and sport is very evident in this Taoiseach.

It goes to show we are not an elitist Government.

When I have completed with the said Taoiseach and the superstars in 1979 I will show who was elitist – I say that in jest.

The Minister for Finance introduced the Finance Bill, discredited by his own party and wounded politically as a consequence. The Tánaiste said this is not about money but about imagination. I live in the border, midlands and western region – the centre of the Objective one status area approved by Government after an attempt to include west Kerry and west Cork – where we are told that £6 million per day will come into this region for the next six years. It is the management and the effective spending of that money that causes me concern. Without effective co-ordination most of it will be wasted.

Recently the Government having arrived in Knock Airport, had a jamboree in Ballaghadereen, met the farmers and so on. However, even after meeting in the house of the late great James Dillon in Ballaghaderreen and having attended the launch of the Western Development Commission in the esteemed square in Ballaghaderreen, money has not yet been allocated to that commission, whose filing cabinets are stuffed with applications for equity, shareholding and so on.

That is true.

Throughout the length and breadth of the Western Development Commission nothing can be done about these applications because approval has not been given by Brussels. Despite the billions of pounds lavished all over the place from Malin Head to Dingle, not a bob has yet been allocated to the Western Development Commission. That commission is strangled, frustrated and has no money. Yet we hear about the free flowing economy, an inclusive society and all the other wonderful and wild things that are to happen in that region.

Competitiveness in an Irish sense is critical for the future. Half the money generated in this economy comes from multinational companies. When I had the opportunity and the privilege to serve as Minister for Tourism and Trade we dealt with the up to date presentations from former eastern bloc countries wishing to join the European Union. They made their presentations with a passion and a fanaticism that will bear fruit in their countries in due course. They have an extremely good education system. They have turned their back on Communist countries and want to embrace western democracy and western ways of doing business. Unless we invest more in our education system and unless the training mentioned by Deputy Perry, from the ground up, is available we stand to lose substantial amounts of money in the coming years, and our workforce will not be able to match up.

The Department of Enterprise and Employment says that in an international sense we should be dealing with China. I know from first hand experience, having led trade delegations abroad, that the British send delegations abroad for six or nine months of the year. Their Minister is away all the time. I make the observation that any Government should appoint a Minister of State, who will not stand again, who can concentrate on leading delegations internationally because ministerial involvement opens doors that will never again be opened in a business sense. It is difficult for the Tánaiste or any Minister with responsibility for trade to concentrate on the job of Government while opening doors in an international trading sense for Ireland. It is wrong to invest in China rather we should invest in India which is an English speaking country which has the second largest population, a stable Government, and has gone into high technology with an involvement in a traditional sense with Ireland, in that Ghandi came here to see what Mr. de Valera was doing at the beginning of this State. There are strong missionary relationships there and very strong research and development and hi-tech relationships that should be built on. It is an English speaking country, outward-looking and open to that kind of involvement and we should get involved.

The carer's allowance is available to people who live close by the person being cared for. I brought a case to his attention recently, that of a man living on his own who will not have a relationship with any family members except his daughter-in-law, her husband and their children who live seven or eight miles away. Her husband is a shift worker and she can have the car only when he is off work. The Department say the allowance is not available unless the carer is within walking distance. In rural areas different things dictate where one buys a site, gets planning permission and so on. The regulation regarding living close by should be interpreted flexibly and with a light touch.

I wish to share my time with Deputy Pat Carey. I was very surprised to hear Deputy Yates's boom to bust speech in which he claimed that the economy is falling apart and that the country will be on its knees in a very short time. His hysterical, historical and cyclical signs point to the fact that the country is in ruins. We hear much talk these days of economic immigrants. I wonder that Deputy Yates is not an economic emigrant in view of his opinion of the country's economic performance. He laughs off the Programme for Prosperity and Fairness as a love-in in Government Buildings but the opinion poll in last week's Sunday Independent, which I am sure Deputy Yates did not enjoy reading, indicated that 55% of the population feel the programme is a good one while only 16% hold the opposite view. This augurs well for the acceptance of the programme among all the social partners in the time to come.

Deputy Yates also suggested that the Minister has done a U-turn on individualisation. This is not true. In three years time, March 2002, when we will still be on this side of the House and Deputy Yates will be calling for an election – depending on the previous week's Sunday Independent poll – the third phase of the individualisation programme will be put in place. We have a special regard for the family as the basic building block of our society. Measures must be continued to recognise its position. The special £3,000 tax allowance, which all carers in the home will receive, must be increased in future. However, our regard for the family is quite separate from the concept of individualisation. Individualisation was accepted by all the social partners who negotiated the Programme for Prosperity and Fairness.

Deputy Perry has said that small businesses are in disarray because interest rates are at 4%. In the early 1980s interest rates rose to 20% and it was not until 1987 when Fianna Fáil had an input in the national economy that things began to improve.

The Government was left with a good economy.

That is not what we were left with in '87.

Deputy Finucane cannot say that on the basis of interest rates at the time. Industries complained then, but now they are well able to manage interest repayments. Deputy Perry displays an excellent grasp of his brief. However, I must inform him that enterprise boards deal with companies with fewer than ten employees. Enterprise Ireland and IDA Ireland deal with companies with more than ten employees.

The concept of care and management in relation to the tax Acts came to the fore recently. The care and management provision is dealt with in section 141 which states that, "All taxes and duties imposed by this Act are by virtue of this section placed under the care and management of the Revenue Commissioners.". All tax Bills and consolidated tax Acts contain this provision. What is "care and management"? This question arose during the DIRT inquiry. Does it mean the Revenue Commissioners are entitled to write off huge amounts of tax or does it mean they are only entitled to write off a small amount of tax because it would be more expensive to collect it than to write it off? This question of whether the Revenue Commissioners have the authority to give an amnesty to a bank or banks and to write off tax, arose during the inquiry. I do not believe the duty of care and management allows the Revenue to write off liability for tax which would be collectable at a cost less than the amount of tax to be collected. I would like to see a clearer definition of care and management and of the methods used by the Revenue to deal with the tax system included in the tax Acts.

Section 140 inserts a new section 1006B of the Taxes Consolidation Act, 1997, to deal with the appropriation of payments. It often happens that individuals overpay taxes for certain years and underpay for others. Until recently such taypayers received bills for the years they had underpaid while there was not any reference to the years in which they had overpaid. If taxes have been overpaid the Revenue Commissioners should allocate the overpayment to the years when tax was underpaid so that no liability is outstanding.

Section 138 deals with the question of the publication of settlements with the Revenue Commissioners. To have evaded tax and to have stolen from one's fellow citizen is not a badge of honour. It is a shameful thing to do and we should persuade the public that publication of one's name for non-payment of tax is shameful and something to be frowned upon.

The question arises of whether disclosure should be prohibited in cases involving voluntary disclosure. What is a voluntary disclosure? If a non-compliant taxpayer knows he will be caught and makes a voluntary disclosure at the last minute, can this be called an involuntary voluntary disclosure? If it becomes known, for example, that account holders of a particular bank are to be pursued by the Revenue Commissioners within two months, could disclosure by account holders in such circumstances be called voluntary? I do not believe it could. The question of what constitutes a voluntary disclosure must be examined.

The question of disclosure where the settlement does not exceed £10,000 also arises. This should be questioned and the care and management provisions should be brought into play. If, for example, a person underestimates his or her travel expenses or makes a similar genuine error and underpays by an amount less than £10,000, I can accept that the matter should not be published. However, where actual fraud is involved the matter should be published, even when the amount involved is less than £10,000.

On donations of important heritage items, relief is being increased from £750,000 to £3 million as requested by the Minister for Arts, Heritage, Gaeltacht and the Islands. This has the support of the whole House. I understand there is a selection committee which will ensure the State gets good value and nobody is allowed to over- value a particular item in donating items of national heritage to museums and galleries. I am delighted with this proposal.

One of the best provisions in the budget and the Bill is the one under which brothers or sisters or two partners or friends who have been living together for at least three years, who have no interest in any other dwelling and will continue to live in the house, will be able to inherit the dwelling-house in which they are living without having to come up with a sizeable amount to pay capital acquisitions tax. In many cases up to now the dwelling-house had to be sold to pay the tax as the person concerned was not in a position to raise a mortgage as they had insufficient income to service it. This measure therefore is a source of great relief for a large number of people. I have received a number of telephone calls in connection with it and I am aware that Deputies from all sides of the House made representations in relation to it.

The question of capital acquisitions tax is tackled well and ably in the Bill. Although house values have increased substantially in recent years the thresholds, in particular for sons and daughters, have remained at the same level for a long period. I am delighted that they are now being raised and that there will be a 20% tax rate.

The Minister said he will introduce new sections dealing with share options on Committee Stage. The Minister of State, Deputy O'Dea, referred to this matter in a substantial way. I agree with him. I heard Deputy McDowell say in throwaway remarks that he does not want to see them being introduced for a few individuals in hi-tech industries. I am sure that he and the House recognise the importance of e-commerce internationally. We can ensure Ireland maintains its competitiveness, continues to grow and that there is an increase in GNP by ensuring we are part of that business and that our international markets continue to increase. There are thousands of young entrepreneurs who are setting up software, website and e-commerce companies to sell products over the Internet who have small amounts of money to invest. They need highly trained staff who can demand salaries between £75,000 and £100,000 in London and New York. They are prepared to invest £20,000 a year in and work for a new business venture in Ireland provided they know that there is something to be gained in the future if the company develops and attains value. These are the innovative companies in which all employees can participate on a share option basis.

Will the Deputy give way? On a point of information and not to be argumentative, what I said was that we would not support a scheme which was targeted only at a few whiz kids working for hi-tech companies but that we would support a more broadly based scheme.

I thank the Deputy. This is an innovative, imaginative and forward looking Bill and I am delighted to support it.

It is a pity Deputy Finucane has left the Chamber. In an interjection he suggested the economy was in good hands in 1987, the year in which his party left office and in which officers of the World Bank were as near as made no difference to the front gates of Government Buildings to take over the shop. In the last ten years 500,000 new jobs have been created and unemployment has decreased from about 17% to less than 5%. A total of 1,000 emigrants are now being attracted home each week. A similar number of new homes are being built every week. These statistics speak for themselves but the Deputy will have an opportunity of addressing them from his perspective later.

The budget must be placed in the context of the national development plan and, more recently, the Programme for Prosperity and Fairness. The Bill copperfastens the announcements made in the budget. While I expressed concern about certain elements at the time, I did not attack the Minister on the plinth. In fact I was accused of being overly defensive of the position taken by him but it was one of a series of reforming budgets. As my colleague, Deputy Ardagh, said, by the time we face the electorate a series of reforming measures in the area of personal taxation will have been put in place.

The budget and the Bill will put more money in people's pockets and encourage more people to return to the workforce. In recent weeks I attended a meeting of the local drugs task force in which I am involved in my area at which we were given the most recent long-term unemployment figures for Finglas and Cabra. I was taken aback. As of mid-January 350 people in Cabra were termed long-term unemployed and 460 in Finglas. The figure for Ballymun in my constituency is significantly higher, although there has been a reduction of about 35% in the level of unemployment in the area. Incentives are therefore being provided to return to work.

The Government has been criticised for setting the national minimum wage at £4.40 but this figure is almost redundant. Even McDonalds is offering a higher rate but it is important that a minimum rate is set. It is an indication that the wages of low paid workers will be protected. I am glad that my concerns have been understood and underpinned in the Programme for Prosperity and Fairness, particularly by the community and voluntary pillar, to encourage the low paid to return to work.

The issues on which I wish to focus include taxation. On inheritance tax, I welcome the raising of the threshold from £192,000 to £300,000 where gifts are passed from parents to their children. Even in areas where dwellings are modestly priced inheritance tax has to be paid and it can be penal. I welcome the Minister's decision.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.
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