Finance Bill, 2001: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Section 53 provides for a scheme of tax relief aimed at providing residential accommodation in the vacant space over commercial premises in the five cities Dublin, Cork, Waterford, Limerick and Galway. The framework for the scheme provides for a range of tax incentives similar to those available under the urban renewal scheme. These are 100% relief in respect of refurbishment and necessary construction and expenditure for owner-occupiers and lessors of residential property. There is also relief for expenditure incurred on refurbishment and construction of the associated commercial property. To comply with EU state aid rules, qualifying commercial services must be involved only in local services. The reliefs will be applied to specific lengths of streetscape which are to be recommended by the Minister for the Environment and Local Government in the five cities covered following recommendations by the relevant local authority and approval by a special panel of experts.

Sections 56 to 65 make various changes to the taxation of life assurance and collective investment funds mainly following on the arrangements introduced last year. Section 58 provides that the same tax rate will apply to investment in both Irish and certain foreign life assurance companies and investment funds. The foreign countries involved are all EU and European Economic Area countries and OECD countries with which Ireland has a double taxation treaty. Where an Irish resident receives the proceeds of such foreign investment products on or after 1 January 2001 the same tax rate will apply to such proceeds as will apply where an Irish citizen invests in an Irish life assurance company or Irish investment fund, provided certain conditions are met. Section 63 mirrors these arrangements in the case of persons who hold an interest in certain off-shore funds.

The other changes largely reflect discussions with the industry and clarify issues that have arisen under the new tax regime as well as making certain changes to special investment schemes and special investment policies following on the fact that the tax rate applying to these is the same as the standard rate of tax.

Capital allowances are available for expenditure on certain buildings used for the purposes of third level education. Section 66 contains an amendment so that capital expenditure on certain sports facilities associated with third level educational institutions can also benefit from these capital allowances.

The income tax and capital gains tax year is being aligned with the calendar year from 1 January 2002. This will involve a transitional tax period or short tax year running from 6 April to 31 December 2001. Section 67 and Schedule 2 provide for the necessary changes to the various areas of the tax code consequent on the changeover to a calendar year of assessment. The short year involves allowances, credits, reliefs, thresholds, qualifying days, etc. being reduced in that year to 74% of their full year equivalent.

To coincide with the move to the calendar year, section 68 also provides for a common return filing and payment date of 31 October for those on the self-assessment system. This means that by that date taxpayers will be required to have filed their tax return for the preceding tax year and paid any balance of income tax and capital gains tax for that year, having taken credit for preliminary tax already paid. They will also be required to have paid their preliminary tax for the current year. Given these new arrangements, it is proposed to allow a margin of error in relation to computational errors. Provided the taxpayer has otherwise made a correct tax return and pays any shortfall by 31 December in that year, no interest or penalties will apply. There will also be a number of consequential changes to the rules on payment of preliminary tax and, in addition, the terms for payment of preliminary tax by the direct debit method are being made more attractive.

Profits from shipping which are charged to tax at the 10% rate would, in the absence of change, be charged to corporation tax from 1 January 2001 at the prevailing standard rate of corporation tax, that is, 20% in 2001, 16% in 2002 and 12.5% in 2003. Section 69 provides for the 12.5% corporation tax rate to apply from 1 January 2001 for shipping activities.

Section 73 abolishes the exemption for dividends remitted to an Irish company from its foreign subsidiaries under section 222 of the Taxes Consolidation Act, 1997, unless the dividends were certified by the Minister for Finance before publication of the Bill. Section 76 abolishes the exemption for foreign branch income and gains from tax under section 847 of that Act but only in the case of new applications for this relief. These reliefs are seen as no longer necessary for new investment in current economic conditions.

Section 78 provides capital gains tax relief when a parent transfers a site to a child to enable him or her to build a principal private residence. The related stamp duty relief is provided in section 189.

There will be no taxes on that site.

I will deal further with the provision on Committee Stage. There will be no capital gains if the house is the principal private residence of the son or daughter to whom it is transferred.

The Deputy should wait for Committee Stage to raise questions.

Section 79 removes the capital gains tax rate of 60% which was introduced in 1998 for disposal of certain residential development land on or after April 2002. CGT rollover relief is available on farmland which is the subject of a CPO for road building or road widening where the proceeds of the CPO are reinvested in trading assets within a specified time period. Section 80 extends the time period for such reinvestments.

Sections 81 to 138 of Part 2 contain provisions to consolidate and modernise general excise legislation. This continues the process of updating excise law undertaken in the past few Finance Acts. Sections 139 to 141 confirm the budget day decreases in rates of excise duty in unleaded petrol and auto diesel and the increase in duty on tobacco products to compensate for the VAT reduction. Sections 142 to 147, 151 and 162 increase the maximum penalty level for conviction for summary offences from £1,000 to £1,500, the tariff now regarded as standard. Section 216 later applies this new limit to all summary tax offences.

Section 512 does away with the special advance payment of excise duty in December and provides in future that all payments in respect of December must be made by the end of the subsequent month. This is the practice for all other months during the year.

Section 153 provides, as announced in the budget, for a 50% repayment of vehicle registration tax in respect of hybrid electric vehicles. The scheme is intended to encourage the purchase of new technology vehicles that have the capacity to significantly reduce harmful emissions. The scheme is to operate for a two year period from 1 January 2001 to 31 December 2002.

Section 154 amends the rules governing the classification for VRT purposes of certain vehicles, mainly jeep derived and car derived vans, to ensure greater evenness of treatment of such vans classified under category B of VRT, taxable at 13.3% of the open market selling price. The rules for classification will be much clearer and less easy to manipulate. Sections 155 to 164 deal with definitional and other procedural matters in relation to excise duties and licences.

Sections 165 to 179 and 174 to 177 are largely technical changes. However, the transfer of business provisions included in these sections allow for the VAT free transfer of milk quotas between farmers. Sections 171 and 173 confirm the budget VAT changes. These are the reduction in the rate of VAT from 21% to 20% and an increase in the farmer's flat rate VAT from 4.2% to 4.3%. Section 172 makes a technical change to the VAT rules on foot of the recognition of the Department of Agriculture, Food and Rural Development as a taxable person for the purposes of the cattle testing or purchase for destruction scheme.

Sections 178 to 180 are part of a package of measures to improve the tax collection system, especially VAT direct debit. The new provisions will develop and enhance arrangements governing payment of VAT through direct debit, including the imposition of interest in certain cases of underpayment. Section 181 imposes a penalty for the use of a registration number after it has been cancelled.

Section 183 contains three significant provisions. First, it clarifies that the supply of research activities is not an exempt educational activity. Arising from an approach from the European Commission, the Bill applies VAT at the standard rate to research provided for a fee by educational institutions. This will help to ensure a level playing field in tendering for research services. This amendment will also enable third level bodies to reclaim VAT on taxable services provided under EU and other research programmes.

Second, this section gives effect to the European Court of Justice ruling that existing tolled facilities, tolled roads and bridges, operated by the private sector are subject to VAT. Such tolls will be subject to the standard rate of VAT from 1 July 2001. Third, the services supplied by insurance companies and related services by insurance agents are outside the scope of VAT. The section also provides for this exemption to apply to loss adjusters and to claims handling services, when they are acting as an insurance agent on behalf of an insurance company.

The VAT directive on fiscal representatives will come into force on 1 January 2002 and is being transposed into Irish law by section 182. The directive abolishes the right of a member state to impose a requirement for a VAT fiscal representative on a non-established person. This will require revocation of section 37 of the VAT Act, 1972, from that date.

Sections 186 and 195 provide for an increase in the stamp duty exemption threshold for mortgages from £20,000 to £200,000 to have effect for mortgage instruments executed on or after 26 January 2001. While mortgages represent almost half of all documents stamped each year by Revenue, they account for a very small proportion of the tax revenue yield from all stamped deeds. The increase in the threshold will reduce the administration burden in Revenue and ease the compliance requirements for solicitors.

The Finance (No. 2) Act, 2000, provided for particular reliefs from stamp duty on first-time house purchase on certain conditions, where the second home is acquired following a marriage break-up under a decree of divorce or a judicial separation. Section 191 extends these provisions to circumstances where there is a deed of separation or a decree of nullity of a marriage. I agreed to consider an extension to such cases when the Finance (No. 2) Bill, 2000, was being passed by the Dáil.

A stamp duty exemption is being provided in section 192 for approved voluntary and co-operative housing bodies for land acquisition coming within the ambit of the Housing Acts. Those voluntary bodies which are not registered charities are at present liable to pay stamp duty at 9 per cent. Section 193 provides for a stamp duty exemption for the National Building Agency for land acquired for social and affordable housing.

Section 194 abolishes the £1 per policy stamp duty on permanent health insurance policies and critical illness policies. Section 195 also abolishes the 0.1 per cent stamp duty on life assurance policies announced in the budget.

Under the Finance (No. 2) Act, 2000, investors who have a contract evidenced in writing before 15 June 2000 can avail of the previous stamp duty rates in existence prior to 15 June where the conveyance or lease is executed before 31 January 2001. This deadline is being extended to 31 July 2001 in section 196.

Where an individual has obtained relief from capital acquisitions tax on certain farm lands and these lands are subsequently acquired from the individual under compulsory purchase order within six years of the transfer, the CAT relief given will be clawed back unless the lands involved are replaced within a specified time. Section 199 extends the period allowed for such replacement investment.

At present, works of art which are lent to cultural institutions in the State by non-Irish resident individuals may be liable to CAT should the lender die during the period of the loan, as the asset would be situated in the State at the date of death. Section 200 provides for an exemption for CAT purposes in such cases.

Irish Government securities are exempt from CAT where the disponer and beneficiary are neither domiciled nor ordinarily resident in the State. If the disponer is domiciled and ordinarily resident in the State, the securities must be held for three years prior to the gift or inheritance in order to obtain the CAT exemption. Section 201 extends this three year time period to six years to reduce the opportunity for tax planning in this area.

Section 203 provides that, as and from 6 December 2000, foster children will be treated the same way as other children for the purpose of CAT. To qualify for this equality of treatment, a fostered individual must have been cared for and maintained from a young age up to the age of 18 for a successive period of five years. This change responds to representations made to me on this issue by many Deputies.

Where an amount exceeding £5,000 stands in a joint deposit account in the names of a deceased person and another person, the bank concerned cannot release the account into the name of the survivor without a clearance from the Revenue Commissioners. Section 204 increases this clearance threshold to £25,000. Section 206 abolishes probate tax, which I consider to be an invidious tax.

Section 205 extends the CAT exemption which currently applies to IFSC-Shannon certified collective funds to funds established under the Finance Act, 2000, provided both the disponer and the donee or successor are not domiciled or ordinarily resident in the State.

Section 209 amends CAT business relief to allow the relief to apply in the case of businesses which are carried on either within or outside the State. The change acknowledges the increased overseas diversification of Irish businesses since the relief was introduced in 1994.

Section 215 abolishes the requirement in direct tax law that electronic record-keeping systems be approved on a case by case basis by Revenue. Instead, Revenue will set out standards for such systems and the taxpayer will ensure the system used complies with the published standards. This measure will reduce the burden of compliance on taxpayers and make electronic record-keeping a more accessible option. The section also places obligations on intermediaries in relation to the acquisition by another person of an interest in an offshore fund or foreign life assurance policy.

As a central part of the e-Government initiative, legislation to permit electronic filing of tax returns was put in place in the Finance Act, 1999. The legislation was enacted before the Revenue on line system was developed. Section 218 provides a number of technical changes to the legislation to ensure that the law corresponds with the practical operation of the Revenue on line system, which is being phased in. The section also extends these provisions to enable documentation other than tax returns to be provided under this system, for example, claims for medical expenses relief.

Section 219 streamlines the arrangements for Revenue providing certificates of tax outstanding in court proceedings to make prosecutions easier to mount. Section 220 strengthens the PAYE collection provisions to combat certain practices by employers in delaying payment of PAYE.

The Finance Act, 2000, included a provision to allow the Revenue Commissioners to offset a claim for a repayment of tax against outstanding liabilities where a taxpayer had failed to comply with his or her statutory obligations regarding the submission of returns and the payment of tax due. Section 222 contains a provision to allow revenue to refuse to repay a claim until any outstanding return has been submitted. The Bill also includes a technical amendment to put beyond doubt that a repayment may be offset against interest on overdue tax.

Amounts in tax legislation are converted in section 223 and Schedule 5 into convenient amounts in euro. This will generally involve smoothing amounts in favour of the taxpayer. Some few amounts are left in tax legislation expressed in Irish pounds because they apply to periods prior to 2002. If payments arise in relation to earlier periods by references to these amounts the euro liability will be calculated by the standard conversion.

As I announced already I will bring forward proposals on Committee Stage for a new savings incentive. There has been much focus in recent press coverage on my proposal for a savings incentive as a means of taking demand out of the economy. This is an important aspect. However, I have another goal, which is to encourage individuals to provide for the future by a regular pattern of savings. This is consistent with my approach in earlier Finance Bills, of encouraging pension provision by tax reform. I consider it essential that the savings scheme be as broadly focused as possible. It is for this reason I propose a straightforward scheme, involving a tax credit mechanism. The proposed scheme has attracted much interest and positive comments. I made it clear in the budget that I would take an initiative in the savings area and the scheme has been carefully developed. It is consistent with the approach I set out in the budget of countering inflation through a series of measures including the promotion of savings.

The discussion of our budget in an EU context has highlighted for us all the role of national budgetary policy in developing a strong and flourishing economy. It is important that we retain the say in this process. This is the essential issue in the recent exchanges with the Commission on this subject. Keeping control of fiscal policy is a core value of all Ministers for Finance around the ECOFIN table and we should not forget that.

My budgets and Finance Acts during the past four years, including this Bill, have made and will make significant changes to the structure of our tax system, not just in lower rates of income and corporation tax but to the structure of the tax system. I acknowledge the role of the Revenue Commissioners in implementing these wide ranging changes and I appreciate their work.

I hope the House has benefited from the detailed outline I gave of the provisions in the Bill. This is a substantial Bill both in terms of content and size. I look forward to the debate on its passage and I commend the Bill to the House.

In a period of continuous strong economic growth and large surpluses the real test of the wisdom of a Minister for Finance is not how much he gives out to how many but how he adopts policies with long-term benefits rather than long-term traps. A further test is the extent to which he addresses urgent and deep disadvantage. There is no doubt that Deputy McCreevy is a courageous, even innovative Minister for Finance, but is he a wise one? These are the questions I will raise during the course of my Second Stage contribution on the Finance Bill, 2001.

With your permission, A Cheann Comhairle, I wish to share time with my assistant, Deputy McGrath. Being wise is not always popular. It is undoubtedly true that the budget to which this Finance Bill will give statutory expression was a popular one but so too was the Fianna Fáil mani festo of 1977. That ran into major problems within two years and created problems which lasted for 20 years. I agree with the Minister on his determination to share wealth with the creators of that wealth, the people. This is achieved by tax reductions and improved public services. However, I disagree fundamentally with the Minister in the way he has chosen to give these tax cuts and in his Government's ineffectiveness in delivering improved public services. Indeed, the Taoiseach spoke today in the House about how much more money has been provided to the health service, which is true. However, the output and services provided are not as good as they used to be because the extra money is being managed ineffectively. We heard today also about Newtown House, County Wicklow. The Taoiseach spoke about the extra money being provided to these areas, which is also true. The Government seems to think that throwing money at issues is the way to solve problems. More is required. It is undoubtedly true that many areas require extra public expenditure but this should not be provided if the money is managed ineffectively and the desired results are not achieved. I will return to that issue later.

The Minister's policy of providing income tax reductions is correct but it is going about it in the wrong way for the following reasons. He has consistently given more to the rich than to the poor. He has added to inflationary pressures, thus eroding competitiveness while, at the same time, hiking up expectations. He has taken on commitments for future years when the economy may not be as buoyant as it is now. The Finance Bill is to be amended on Committee Stage to introduce a new five year savings scheme. The fact that it is not already included in the Finance Bill indicates that the proposal is a late and rushed reaction to EU criticism of the Government's budgetary strategy.

The savings scheme, as presented, is ill-considered for the following reasons. First, its costs are unquantifiable; second, it takes on budgetary commitments for six years hence when the economy may be less buoyant that it is now, third, its contribution to an increase in savings is unquantifiable and questionable; fourth, the major response is likely to be a switch of existing savings, thus adding to Exchequer costs without any economic benefit and, fifth, it is like the morning after pill in that the Minister is seeking to remedy his earlier excesses in the budget. The budget encourages spending while the savings scheme is an ill-defined attempt to discourage it. In effect, the Minister for the stud County of Kildare is riding two horses at the same time. It is exciting now but before long it will end in tears.

A test of the Minister's wisdom would be to project his existing spending and tax commitments to the end of the saving scheme period, six years hence, and then apply varying growth assumptions for the six year period. It is easy to see that if growth slips to European norms and below, we could quickly end up in difficulty. There is a better way to share our wealth and provide better for the future.

Fine Gael's tax and savings strategy is better and different from the Government's. The following is a summary of our proposals. At least 75% of future income tax concessions should be given each year by issuing shares in a newly created national investment fund to the value of the tax break proposed. The national investment fund should be run by the NTMA along the lines set out in legislation. The shares would not be cashable for five years but, after five years, all dividends and added value would be tax free. This would be a year on year decision, based on the surplus of the preceding year, and no ongoing commitments are involved. This protects the Exchequer for future years. Further incentives to save would include the abolition of deposit interest retention tax. Interest rates are less than the rate of inflation and DIRT represents a tax on negative income. Its abolition would cost £132 million gross a year. We also believe that income tax bands and allowances should be index linked, otherwise there would be creeping increases in taxation. Despite the reductions in tax rates, the transfer to tax credits and the abolition of many allowances, the reality is that people are paying more income tax, not less. I will quote the figures later.

Fine Gael would also introduce a middle 30% tax rate. Our objective is to increase the number of people on the standard rate of tax. As this would be progressively implemented, a middle rate of 30% would be introduced to remove the current step from 20% to 42%, which is more than a doubling of the rate.

It was 35% last week.

I will refer later to the anomalous situation whereby capital gains tax is 20%, share options tax is proposed to be at 20%, unearned income is taxed at 25% but people on very ordinary incomes are paying at the rate of 42%. This will have inevitable consequences. We believe also there should be a move to reduce VAT to 15%. The move in this budget to 1% is very welcome. However, e-commerce will be the way of the future and Brussels has already proposed that the VAT rate charged in e-commerce should be on the VAT of the producer country rather than on the country of last sale. Whatever country has the lowest standard tax rate will have an enormous competitive advantage. Luxembourg is currently at the minimum permissible level of 15%, which is where we should be heading.

The proposal to abolish the employer's PRSI ceiling threatens competitiveness and employment, particularly high earning employment. We will reintroduce a ceiling. We will increase the present 1% set aside for future pension needs to 1.5%, thus making provision for other future contingencies in addition to pensions. Part of our philosophy is now that we have enormous surpluses, we should set aside more to provide for the future so that when the inevitable downturn comes, we will have made contingency provisions. This would also reduce the current surpluses which are contributing to unreal expectations. This Fine Gael package will increase or maintain competitiveness, achieve a quantifiable increase in private savings at a quantifiable cost, increase public savings as a safeguard for the future and not have a savings policy at cross purposes with income tax policy.

There are many worthy and supportive proposals in the Labour Party's economic policy document. However, one proposal which is wrong and even dangerous is the suggestion that the 1% of GNP which is now being set aside annually to meet future pension needs should be reduced to 0.75%. It is dangerous because in less than 20 years there will be an additional 300,000 people entitled to old age pension in the Republic. Taking the present pension of approximately £100 per week, which is equal to more than £5,000 per annum, the additional cost of pensions alone in the not too distant future will be £1.5 billion per annum. The supplementary costs that invariably accompany old age could increase the cost by hundreds of millions of pounds. Therefore, I believe that, far from being too large, the 1% being set aside is too little. Nothing is set aside to meet other future contingencies. While so called budget surpluses are so large as to be increasing expectations and demands and this, in turn, will affect our future economic buoyancy. There is a strong case for reducing budget surpluses by means of increases in public and private savings. Fine Gael's policy is to provide not just for the rainy day, but for the nation and the individual.

I now wish to turn to the emerging labour market problems which are a serious potential threat to our prosperity. There are labour shortages at every level and in every region. These, with budget surpluses, are leading to major pay demands and other inflationary pressures. One of the fundamental pillars of our prosperity – social consensus – is threatened. In more difficult times it has been supported by the trade unions and consensus among political parties. I was Opposition spokesman on labour affairs from 1977 to 1981. Even then the trade union movement was far more prescient, patriotic and far seeing than many other interest groups, including employers. The trade union movement has played an enormous role in bringing about our prosperity and it is right that that should be recorded in this House and repeated frequently. I greatly value the contribution the movement has made and continues to make. The labour market requires a much higher priority from the Government and Opposition. The day may not be far off when the restoration of the Department of Labour may be justified in order that a Cabinet Minister can give his or her undivided attention to this serious threat.

It is a shared policy in the House to reduce the rate of corporation tax to 12.5%. It is a major contributory factor to our prosperity. The rate of capital gains tax has been reduced to 20% and the Minister's decision was more than justified by the greatly increased return. I welcome the proposal in the Bill to tax share option gains at a rate of 20%. Unearned income, such as rental income, is taxed at a rate of 25%. Given these figures, how can it be justified that 509,000 people will pay income tax at a rate of 42%? Social justice issues arise from reducing the top rate of income tax, but they will also arise if it is not reduced. This matter needs careful consideration in the next year or two.

The recent criticisms by the European Union of the Government's budgetary policy are only half right. In part, they are prompted by irritation on the part of our partners that Ireland has drawn and continues to draw down large sums from the EU budget. These draw-downs are diminishing and our capital investment will in future depend largely on our resources. The scale of what must still be achieved is massive. Although we have reached and exceeded average EU levels ofper capita income, this is only a recent phenomenon. Most of our EU partners have had our present levels of wealth for over a quarter of a century. It will take another 25 years of budget surpluses to be invested in economic, social, sporting and cultural infrastructure before we reach the stage of development achieved in most EU member states. We will need to generate significantly higher levels of GNP growth for the next 20 years, at least, compared to our richer EU partners if we are to catch up in terms of economic and social infrastructural development.

The scale of investment needed gives rise to its own problems. There is a danger of providing so much money for capital purposes that the result will be increased inflation rather than output. We need, therefore, to spend our capital funds wisely and prudently. Moreover, we need to urgently address how we can provide greatly increased capacity for infrastructural development in order that the level of investment needed can be made and increases in output achieved and on time. This is a major problem and challenge.

The most important failure of the Government is the creation of a socially just society. I became involved in politics with Fine Gael in the 1960s because of the philosophy of the just society. The gaps in equality today are wider than they were then. I encounter awful problems from the streets of this city in my clinics. A young battered wife lived with a man, a foreigner, for a few years before marrying him whereupon he badly beat her with great regularity. After covering up for a long time she left him and ended up in not one, but two woman's refuges and not one, but approximately six bed and breakfast establishments. She walked the streets from 9 a.m. until 6 p.m. with no home to go to. She has secondary cancer. It was hard to tell her about the Celtic tiger.

If this woman was an exceptional case, allowance might be made, but she is not. This week I met a mother of two children, a sub-tenant of her brother. Her 16 year old daughter has secondary melanoma and needs regular baths during the day and quiet and privacy, but cannot get it because of living in an overcrowded house. This woman has no prospect of securing housing in this wealthy, prosperous city. These are the realities over which the Government presides. It has failed dismally to achieve or even to attempt to achieve social justice.

Thousands of young children leave primary school every year with major literacy problems. I am informed that in 90% of cases they are avoidable. All that is needed to reduce the problem are proper resources for schools and home-school liaison. Each one of these children is embarking on a life of permanent disadvantage and poverty.

The Minister has reduced the top rates of capital taxes because of the problems in those areas, but they are nothing compared to the problems on the ground. I make no apologies for getting angry about the failure to address these problems and the indifference of our economic and media commentators. There is a job to be done, but it will not be done by the Government.

The lack of a coherent policy for the elderly who require long-term care, especially those who depend on the charity of neighbours and friends, is another chronic failure of the Government. It will not go away; the magnitude of the problem will increase ever year. Yet, there is no plan to ensure those who built our economic prosperity by their sacrifices are able to live out their final years in dignity, comfort and security. Headline figures about tax give-aways and rate reductions ignore these realities. It behoves us all to evaluate our economic policies in a new and deeper way.

My party is opposed to the Minister's individualisation programme. In introducing this measure he has focused on rewarding women who go out to work. The reality is that the Government is not thinking of women as citizens, it treats them as units of the labour force. Individualisation is a naked attempt to increase female participation in the labour force and to coerce women, who might otherwise opt to work at home while their children are young, into the labour force. That is not to say there should not be recognition of the costs of going to work. There are costs involved in going to work, not only child care costs, although they are very significant. What happens when the woman has to or wants to give up work or where one of the spouses loses his or her job? Not only do they lose their salary but they lose £11,000 of the tax allowance. They suffer a double whammy. That is when the chickens will come home to roost. When there is a downturn in the economy, when people start to lose their jobs or leave work to care for relatives or for whatever other reason, they suffer cruelly not just the loss of one salary, but also the loss of £11,000 of the tax allowance.

As citizens, many women choose to pursue careers while many others choose to work in the home. The reality is that many women whose preference is to work in the home have been forced to work because of the abject failure of the Government to deal with the accessibility of housing. A starter house is now outside the financial capacity of even a two income family, both on the average industrial wage or, indeed, above it. It is socially unacceptable that women are forced to work merely to meet the monthly cost of today's basic mortgage. Today's reality is that the housing crisis has become so critical that both spouses are forced to work not to meet a mortgage on a home they own, but to meet the cost of rent.

It is an insult to taxpayers to tell them how much this budget and previous budgets presented by this Minister have benefited them. Are a couple who leave their children in a crèche at 7.30 a.m., travel for over an hour to work, travel a further hour home in the evening and pick up their children at 6.30 p.m. better off? This is the new way of life for many. It is a lifestyle which requires both parents to work and which entails seeing their children for less than an hour each weekday. It is a way of life where home ownership is the aspiration of the few and the financial struggle to meet rental costs is the lot of many.

What has the Government done to address the quality of our citizens' lives? It can continue to fool itself that reducing the tax take is enough, that the cost of accommodation, the crisis of child care and the hours spent in commuting do not matter, but quality of life matters. The Government does not see this and has done nothing to help improve it.

In pure monetary terms, taxpayers are better off. In disposable income terms, taking account of housing costs alone, they are worse off under this Government. Furthermore, if they are sick, they must wait longer for treatment. If their elderly parents require care, they must struggle harder to find a way to let them live their lives with dignity. By any measure, the quality of life for many citizens has disimproved significantly, and the Government seems completely oblivious to the reality. Good government requires vision and leadership to plan for a fair future for all, but this budget has no such vision, awareness, equity or leadership.

Ireland has changed dramatically over the last decade. Our society and way of life have changed even more. Much of this has been driven by economic prosperity. We can be proud of these achievements but to pretend that all is well would be a grave mistake. Some 20 years ago we judged the budget by how much our income had increased. Ten years ago our assessment was based on how much our income tax was reduced. Today, we are still using the same yardstick to decide whether a budget is good or bad. It is convenient to do so. A standard rate of income tax of 20% sounds good. What does not sound as good is that under this Government, the percentage of taxpayers paying tax at the standard rate has increased by a mere quarter of one per cent, from 38.75% in 1997-98 to 39% in 2001-02. It is convenient to use old guidelines because they ignore new realities.

This year's budget provides a gain of about £15 per week for a single person on the average industrial wage. The new reality is that because of the Government's failure to deal with the housing crisis, that £15 will be absorbed by rent increases. While the Minister can trumpet a reduction in tax of £15 per week, the reality is that disposable income is not increased when the cost of accommodation is taken into account. The reality is that for many citizens, the benefits of this budget in real life terms are illusory.

I refer briefly to some of the items the Minister mentioned. He announced a reduction in stamp duty for investors in new homes. In so far as that goes, I welcome it because there is a major and growing problem in the rental sector. However, it must be clear to the Minister that the first, second and third Bacon reports, individually or collectively, have not resulted in an improvement in the position. It is still the case that two young people on good incomes trying to buy a starter home find it extremely difficult to do so. In this city alone, hundreds of acres of land, which has been identified by Dublin Corporation, is in the ownership of the State, and that includes health board land, Department of Defence land and CIE land. Nothing has been done to marshal Government land for housing purposes. There is land in my constituency which was to have been sold by CIE each year for the past six years. Department of Defence land at Clancy Barracks was to have been sold each year for the past six years but it is still there. There are many other such examples.

When one has lots of money it is very easy to give away lots of money, but it must be clear that the Government is getting poor results and little value for that money, whether in education, health, social services, housing or traffic. There is a better way. I hope that when the election comes, whether in three months or six months, there will be a clear alternative for the people – the current Government or, alternatively, a Government committed to social justice and to the effective running of the country.

I thank my colleague, Deputy Jim Mitchell, for sharing time with me. Budget time is a time when successive Ministers for Finance talk about the global picture and about how good they have been at delivering tax cuts and so on. So many people have been taken out of the tax net in recent years, I am surprised anybody is paying tax. Unfortunately, the Minister, Deputy McCreevy, went down that road again.

On budget day he said that tax reform is a matter of fairness and that in his first three budgets, he made radical reforms to the whole tax system. He went on to state that he had removed substantial numbers from the top tax rate and that for the first time in many years had ensured that single earners on the average industrial wage and others on modest incomes would no longer have to pay the top rate of income tax. The Minister stated that he had also radically improved the position of the lower paid in the tax system and that to listen to some commentators, one would believe that all the gains from tax reform had accrued to those they like to call "high earners".

The Minister went on to state that in the past three years, he had removed 176,000 low earners from the tax net, cut the burden on the lower paid in half, reduced the tax rate on the low paid in many cases up to ten percentage points or more and had done far more than many other advantaged economies in cutting taxes for single and married earners and those on low and middle earnings. That is what the Minister said on budget day but, regretfully, it is not a view shared by everybody, particularly if one looks at what some of the commentators have said.

I would like to refer to some of the responses to parliamentary questions. In Parliamentary Question No. 215 of 9 December 1997, I sought information on the annual percentage of taxpayers who had paid income tax at the higher rate for each of the ten preceding years. In 1994, the percentage was 38.4%. It was 37% in 1997 but this figure increased by 1.2% to 38.2% post-budget in 1998.

The figures reflect the growth in the economy.

The Minister stated in his budget speech that he took more people out of the top rate but the figures show that is not true.

There was a huge growth in employment.

In Parliamentary Question No. 178 of 15 November 2000, I sought further information. It looked bad to have 38% and 39% at the top rate so the Department changed its methods of calculating the figures. I tabled a parliamentary question to elicit the reasons for the discrepancy between the figures issued two years ago and those issued in 2000. I was informed that the method of calculation had changed but even the new figures, irrespective of how they were manipulated, showed that 29.27% were at the top rate in 1997, 29.9% in 1998 and 31% in 1999. In real terms, the figures increased from 379,000 in 1997 to 453,000 in 1999, after which there was somewhat of a decrease. Why is the Minister trotting out figures which he knows are not accurate?

A report entitled "Ireland – Changing Incomes, Unchanged Taxation" written by Mr. Eunan King, a senior economist with NCB stockbrokers, revealed the results of a survey on taxation in Ireland in the 1990s. Mr. King's conclusions, reproduced more concisely in an article inThe Irish Times, stated that income taxes remained at about 21% of income on average throughout the 1990s, in spite of various reforms. Stating that a decrease in tax rates is necessary to keep the tax burden from increasing, Mr. King argues that this would not adversely affect inflation. It is clear from his research, he states, that income tax reform has not stimulated the economy because the average tax burden has remained unchanged throughout the past decade. The figures Mr. King outlines are quite startling. He found that the average tax rate for the top 10% of taxpayers increased by 0.4 percentage points from 29.6% to 30% over the ten year period. For the next 30% of taxpayers, the average tax rate fell from 21.8% to 20.5%. The average rate for the remaining 60% – the low earners for whom the Minister claims to have done so much – fell from 11.2% to 10.2%. Mr. King also states that although a person earning £15,000 per annum would have seen a reduction in his tax bill, both in absolute terms and as a percentage of income, few people were on unchanged incomes for long periods. As incomes increase, allowances in the standard rate band shrink as a proportion of pay and the rise in income may mean movement to a higher marginal tax rate or that a larger proportion of income is taxed at the higher rate unless allowances and bands are adjusted in line with the rise in pay. He also points to the difficulties encountered by people returning to Ireland.

People will obviously pay more tax if they earn more.

The reality is that the number of people on the higher tax rate is not decreasing. There is a failure to change the tax bands.

The Deputy's party leader said we were giving away too much.

The Minister will have his opportunity to contribute.

If one were to ask people if they are paying less tax than they did previously, they would probably say they are. A couple who had £5,000 in interest relief five or six years ago were able to claim that against their tax, probably at the top rate if they were paying the top rate of tax, and that was worth in the region of £2,500. The same £5,000 is now allowable at 20% and is, therefore, only worth £1,000. The same applies to VHI and other allowances.

People can exercise choice and discretion.

Deputy McGrath, without interruption.

Personal allowances are also only allowable at the 20% rate which means that they are worth significantly less. A couple with £7,000 income tax relief some years ago took that off their income and paid tax on the balance. The allowance now stands at £11,400 but, as a tax credit, it is worth a good deal less.

The Minister provided a rent allowance increase in the budget to people in the private rented sector. The figure increased from £750 to £1,000, an increase of £1 per week at 20%. However, if one does one's sums properly, it is actually only an increase of 35p or 70p per week. The Minister further stated in his budget speech that this measure would cost £7 million in a full year. I have consulted the Department and gone over my own figures and that figure is wrong; £3.5 million is a more realistic figure. The figure was exaggerated to twice its actual cost. I wonder why that figure was allowed through and why, when I pointed it out to the Department, it was not changed. If that figure is wrong, how many other figures might be wrong? Such inaccuracy is unacceptable and should be stamped out very quickly.

I will refer briefly to two items which may be more appropriate to the Social Welfare Bill. I do not agree with lifting the cap on employers' PRSI as I believe it will adversely affect our competitiveness in Europe. On individual PRSI ceilings and the question of the "PRSI holiday", all of the allowances stand at 74% this year, yet the PRSI ceiling remains at 100%. Many of the people who should qualify for a PRSI holiday during the tax year from April to December this year will not get it. This suits the Department which will collect approximately £130 million in additional revenue. That is unfair. If allowances stand at 74%, the ceiling should too. The people affected will have to pay an additional £300.

The Minister referred to moneys gained from compulsory purchase orders. The Minister will be aware that compulsory purchase orders are applied to certain sections of land when new roads are being built and farmers receive a relatively low rate for their land. If a new road is built there are compulsory purchase orders under which farmers get a low rate for their land. They must pay tax or reinvest it. With the advent of toll roads there could be, as in my area, 300 hundred farmers affected. The land is sold to developers who build the road to make a profit. Is it fair to use this 1919 measure to give land to people who exploit it through tolls? This is unfair and the legislation must be updated to account for this.

I recommend the removal of excise duty on non-automotive LPG for heating purposes in the poultry sector. I am glad that the Leas-Cheann Comhairle is taking the Chair as it particularly affects County Monaghan. In its budget submission 2000, the IFA proposed that duty on this kind of LPG be eliminated or rebated for agricultural use to enable the poultry sector to compete with Northern Ireland and Great Britain. The level of excise duty on the LPG is 1.43p per litre or 6.5p per gallon. Council Directive 92/82EEC allows zero minimum rate of excise duty on LPG, methane and kerosene used for heating purposes from 1 January 1993. For the sector to remain competitive, this measure must be applied. An amendment could be introduced on Committee Stage.

I and other Members received a letter from the Irish Wheelchair Association. It says:

I am writing to express the outrage of the members of the Irish Wheelchair Association regarding the negative change in the budget announced in September 2000. The association is particularly concerned about the withdrawal of some people's entitlement to the mobility allowance. The criteria for the mobility allowance are so stringently applied that only 2,600 people were in receipt of this allowance last year. The Irish Wheelchair Association is calling on you to demand that the Minister for Finance rescinds his decision regarding eligibility for the mobility allowance.

I am sure the Minister received this letter and will respond on Committee Stage.

In the half minute I have left I want to discuss child care.

Child care in half a minute?

I am sure that Deputy McDowell will take the subject up after me. In the 1999 budget, the Government said it was allocating £46 million, with £20 million for capital projects, in the 2000-01 tax year. In October 2000, £58,000 had been allocated. The Government then announced two further allocations of about £25 million for capital projects knowing that the money had not been spent That is political deception of the highest order. It knew it would get maximum media attention by making this announcement. The child care system is a disaster from a funding point of view. The Government should stop paying lip service and treat it properly. It is not a question of money. As Deputy Gay Mitchell said earlier, there is plenty of money but it is not taken up. The Government is not managing the services and not delivering at local level in health, education and elsewhere. The service is not getting to the user.

The Minister announced in his speech, in two paragraphs, that he had abandoned the tax proposals in the third Bacon report. I did not consider those proposals a panacea or that they would solve the problems of first time buyers immediately. No one did. I supported them, as did my party, because we believed that they would allow first time buyers a leg up for a time by taking investors out of the market by putting in disincentives. The Minister said something similar.

Six months later, this evening he announced that he is abandoning the strategy. He had no argument and gave no indication that he has assessed the effect of the policy. He did not say that the policy is not working. He baldly announced that he will reverse one part and abandon the other.

We are entitled to ask why. The Minister could not have assessed the impact on the housing mar ket in the last six months. How could he have assessed whether first time buyers have derived a benefit from it? Has such an assessment been done? I doubt it. It has the appearance of this Fianna Fáil Minister bending the knee to a small group of developers and builders in the centre of Dublin. They and the pressure they have been applying are known. We see the results.

I am amazed that the Minister has not the courage to come here and justify his decision. He simply announced that what was a good idea six months ago is no longer the case. This is not good enough. We spent a lot of time last year as inflation slowly spiralled out of control asking for compensatory measures for social welfare recipients. We were told to wait months, until the budget but, suddenly, when a few well-heeled Fianna Fáil supporters seek action then they get it with no prior consultation or warning. The Minister ought to explain.

Is he satisfied that first time buyers have improved access to the market? It is now as difficult for them as it was six months ago. It is a disgrace that the Government has not even the fig leaf of a policy in this area. The taxation element was not a panacea but we must know why it was shamefully reversed.

I am sorry that Deputy Mitchell is not here but I understand why. Fine Gael's social democracy is not for me. Deputy Mitchell announced that they would abolish DIRT, cut five points off VAT, reduce the upper rate of income tax from 44% to 30% – it was 35% last week – and reduce capital spending, plus restoring the PRSI ceiling for employers. All these proposals diminish the capacity of the State to deal with the social issues he referred to. I do not doubt the sincerity of Deputy Gay Mitchell, and indeed the Minister, when they say they are concerned about social issues like housing, education and health. I do not understand how he can make a speech which devastates the State's capacity to perform its central role in getting to grips with these problems and making the social investment needed. We cannot pretend that one can have it both ways, as the Government did in its most recent budget. It seems that Fine Gael is determined to go down the same road, and I deplore that.

Perhaps I should move on to the Government. The Labour Party wants to see a sustained period of investment in services, by which I primarily mean health, as well as education, housing and the care of those who are dependent on social welfare.

Which is what we have done, to a large degree.

I think the secretary general of the Department of Health and Children put it neatly last week, when his unscripted comments were reported inThe Irish Times. He said that a low-tax, low-spend economy leads to what he acknowledged as an inadequate health service. That one crisp, devastating sentence summarised where we find ourselves at the start of the 21st century. Although our GNP and GDP per capita will soon rank among the richest in Europe, and indeed the world, our health service, schools and roads are among the worst. Not only that, we have a Government which is determined to do little or nothing about it.

The secretary general's message is simple and should be obvious: quality and equity in the health service cannot be brought about without spending more money. If we want a system to provide a quality service to the entire population, not just a minority, then we have to pay for it. When Fianna Fáil and the Progressive Democrats were last in power, they devastated the health services with the cutbacks of the late 1980s. Much of the intervening time has been spent getting ourselves back to the already unsatisfactory position of 1987. In the meantime, the population has increased by 20%, medical science has moved on, and people's demands have, understandably and rightly, increased.

The health system is undermanned, under-resourced and has too few beds. It has about the same number of beds as it had ten years ago, despite the fact that the population has increased by 350,000 or 400,000. The service is hopelessly unequal in terms of access, and fails a sizeable percentage of the population. There are, admittedly, problems with administration and rigidities in the staffing structure as there are in much of the public service. The ultimate blame for this undoubtedly lies with the Government, which had the resources to do something about it, but flatly refused to do so.

We have doubled spending from £2.5 billion to £5 billion.

The Government had a unique opportunity to invest in the health services and to make reforms which are unquestionably needed. For most of its four years, it refused to do so. The comments of the Minister for Finance's last year were instructive he described the health service as a black hole into which he was pouring money without any obvious results. He had a unique opportunity to invest in the health service, but his body language and his words make clear that he regards it as a waste of money. It is fair to say this year's Estimates suggest a last minute realisation that the Government was, and is, getting it horribly wrong.

No doubt the Fianna Fáil focus groups tell them that people are not quite so self-centred as they thought, and that people want something other than tax cuts. No doubt Fianna Fáil has realised that it will suffer electorally because of its abject failure over the past four years. No doubt the Minister for Health and Children will be trotted out to ooze concern over the next few months, and I may well be given a few shillings or a few euros more. It is a drastic, desperate, last minute attempt to dress up and conceal a policy failure, which arose from a policy choice.

From the start this Government committed itself to a spending limit which never made any sense and which is now patently ludicrous. The Government limited itself to year-on-year increases in net current spending, as it defined it, of 4%. This limit took no account of inflation or economic growth. It was deliberately pitched as a limit on investment which took no account of our capacity to pay. That was no accident as it was deliberately designed by the Minister in that way. He even went so far as to say that if inflation exceeded 4%, he would introduce real cuts in spending to meet his own target. He went on to say, after the election was won but before he took up power, that this was an absolute priority for him and he would stake his credibility on it.

It may well be that many Fianna Fáil members, both inside and outside this House, did not know what they had bought into, but the Minister, Deputy McCreevy certainly did, and the Taoiseach who appointed him certainly did. The effect has been dramatic and unambiguous. Needless to say, the target has not been met, as spending has increased by an average of 6% over four budgets. Economic growth has averaged half as much again, with the result that the proportion of our national income which we invest in services has consistently declined over the last few years. Spending in social services has come down from well over 30% when the Minister came to power to 25.9% now. According to the stability programme produced by the Department of Finance in the last few weeks, it will continue to diminish to 22.5% in 2003. This is by far the lowest figure in the EU, if one measures by GDP figures, which I use only because they are used in the stability programme. It is the second lowest figure, after Britain, if one uses GNP figures, which is a fairer way to do it. This level of investment, which was the deliberate choice of the Government, is inconsistent with a decent level of social provision. That is the central message that I and the Labour Party have made for several years.

It is interesting to look at the nature of Fianna Fáil. I recently re-read the contribution by the Minister for Social, Community and Family Affairs to the budget debate last year. It really is wonderful stuff. The rhetorical parts of the speech's opening would not be contested within my party. He even says he has no ideological problem with identifying himself and his party as left-wing and social democrats. Last week, however, the Minister for Finance, who controls the nation's purse strings, quite happily and comfortably defined himself as a member of a centre-right party. Most people in Fianna Fáil, I suspect, do not really care, which is in the nature of the party.

The party looks in both directions at the same time, continues to straddle the fence and continues to do whatever its Government partner wants. For a long time, that was perfectly acceptable and still seems to be for a percentage of the population. It was acceptable because Fianna Fáil cloaked itself in the green cloak of nationalism. We all know the green cloak is thinner these days, and that defining one's self on that issue is not as easy as it once was. I suspect that more and more people are judging Fianna Fáil by its actions, and are seeing in whose interest it is working, and has worked over the past few years. I suspect that there might be something of an electoral shock for both the social democrats and the Christian democrats, or any other labels it may choose to use, in that regard.

I would also like to mention an article by Deputy Andrews inThe Irish Times just ten days ago, when he said he was astonished that the Labour Party seemed to be arguing against increases in spending. I have never argued against meaningful increases in spending, nor has anyone in the Labour Party, to the best of my knowledge. I have always insisted we get value for money. I have gone to some trouble to set out mechanisms and units we would use in order to ensure we could assess the sort of value we are getting. I have not argued against increases in investment spending during the past three or three and a half years I have been spokesperson for my party. How Deputy Andrews could have formed the view that I have, is beyond me. I say that in a sense of desperation, as there is a significant difference between my party and Fianna Fáil or Fine Gael. A choice is available to the public. They can discern, with relative ease, that we are saying different things. It is not necessary for Fianna Fáil spin doctors or the press office to come up with false differences. There is no need for them to distort what we are saying. I am happy to stake out my territory. I am sure the Minister for Finance and the Minister of State would be happy to do the same. Therefore, let us have a genuine, open and honest debate. There is no need to get into, what I conclude are, deliberate distortions of the Labour Party's position for party political gain.

Tax is central to the Finance Bill, which implements the tax changes announced on budget day. Three commitments were given by the Government in the PPF and renewed in the PPF renewal document. One was to reduce the tax rates. That commitment was given at the time of the formation of the Government. The second was to take those on the minimum wage out of the tax net and the third was to complete the individualisation project.

The argument about the rates is well worn at this stage, but I will restate one element of it. Deputy McGrath gave us an interesting exposé on the higher rate of tax. I am on record many times as saying that should not be a priority, and in the current circumstances we should not touch it. That is not a suggestion on my part or on the part of my party that we should screw the rich or everybody who pays the higher rate of tax, far from it. The 30% or so of income earners who pay the higher rate of tax benefit disproportionately well from all the other taxation measures. They benefit from the reduction of the standard rate and from the increase in the credit. There is no need to put icing on the cake. Why the Minister chose to do so and continues to pursue that policy is beyond me. It can be read only as a deliberate skewing of the benefits of economic growth in the direction of people who need it least, those who are best off in our society.

The Minister went a little further in relation to the minimum wage than I thought he would be able to in this year's budget by taking some earnings out of the tax net altogether. I commend him for that, as that is the way to go. That is how I would have liked to do it. I sound a note of caution, however, as he achieved it largely by the increase in the PAYE allowance. My concern about this is twofold. First, the Minister of State will be well aware that concern was expressed in the past about the legal difficulty in increasing the PAYE allowance because not everybody would benefit from it. We discussed this on Committee Stages of earlier Finance Bills. The Minister appears to have miraculously overcome those difficulties and I would be interested to know how he has managed to do that.

Doing it by way of the PAYE allowance is effectively an introduction of individualisation of the personal allowances. It is the poor man's individualisation. I have not supported the whole individualisation process and at best I am lukewarm about the process of doing it through the PAYE allowance. I support the principle of taking the minimum wage out of the income tax net altogether and I hope whoever is in Government at the end of this year will be able to complete the process in that budget.

The third element of the income tax changes is individualisation. I received a number of e-mails and letters, some from noted commentators, such as Garret Fitzgerald, after the budget, inquiring why I had not condemned the pursuit of the individualisation project. It made me wonder about the effectiveness of language, as the word "individualisation" was not used in the Minister's budget speech. In my naiveté I thought people will see through this but, with the benefit of hindsight, I see they have not. The Minister appears to have got away with a significant further progression of the individualisation process without a significant number of people even noticing it is happening. The arguments put forward last year still apply this year. My party believes women who choose to take a few years out of the work force, perhaps to spend time looking after their children, should be allowed to do so without that family unit being penalisedvis-à-vis the position that prevailed two or three years ago. That the Minister has gone further down the road of penalising those people is fundamentally wrong and should be reversed, if and when resources allow for that.

I accept the general proposition and have done for some time, that this is a small open economy, and that we import a great deal of our inflation. When it comes to energy prices, there is not a great deal we can do about them, but that is a long way from saying the common sense rules of economics do not apply, as that seems to be what the minister and the Department are saying. They seem to suggest that the expenditure increase and the tax reductions which were substantial by any reasonable standards, will have no substantial impact on inflation. That is great news if one is Minister for Finance, as one can pursue fiscal policy without having to have regard to any increase in domestic demand or retail prices to which it might lead, but I do not believe that. It would be great if it were true and I would love to be Minister for Finance if it were, but I do not believe it is. I cannot believe the Minister who lectured us to the contrary for the past 20 years could possibly believe it is true. The Minister came into the House in 1997 when Deputy Quinn announced his last budget and told us that a tax cutting package, which amounted to about £400 million, would break the bank and that it was so inflationary he could not contemplate the awful consequences, yet he does something in the budget and appears to suggest it will not have any inflationary consequences. I do not believe that can possibly be so.

We need to maintain the level of investment in service and sustain it over a period. We have to make a choice. We have to slow down the rate of tax reductions. We cannot continuously and endlessly deplete the capacity of the State to make the investment I am talking about. That means we must prioritise where we wish to make tax reductions and there is some scope for further tax reductions, but not of the sort the Minister made in his most recent budget.

On the Minister's European experience, having listened to the Minister's interview with Olivia O'Leary last week, I found it interesting when he said he and the Spaniards were the only centre right Finance Ministers in Europe and that the rest had a different approach, that they are all social democrats and nasty lefties, that we should not pay much attention to them and it was not terribly surprising they found what he was doing in some way distasteful. Maybe I could offer some words of advice. I found it strange that he regarded the Austrian Government as being too left wing.

Much of the criticism the Minister got came unquestionably from the double whammy of increased expenditure and significantly reduced taxes. It also arose because he blithely ignored guidelines to which he and his officials subscribed and because of the rhetoric the Minister consciously used. Much of the criticism came from Ministers who have supported Ireland in the past and who represent countries and governments whose taxpayers have subsidised Ireland's infrastructure in the not too distant past. Much of it came from northern European countries who sustain the European social model through high taxes and who resent the fact that we seem to be using their subsidies and taxes to reduce our taxes. Much of it came from Ministers who at the end of their electoral cycles would like to spend a little more.

Debate adjourned.