Dáil Éireann debate -
Wednesday, 28 Feb 2001

Vol. 531 No. 4

Finance Bill, 2001: Second Stage (Resumed).

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

Mr. B. Smith

In discussing financial and economic matters the preceding debate was highly relevant to the future of the economy, particularly the rural economy. I hope the preventative measures being implemented by the Minister for Agriculture, Food and Rural Development, his departmental officials and other State agencies will be successful in keeping the country free of foot and mouth disease. Ireland exports £5 billion worth of food and drink products each year. This represents an enormous share of the economy. The agriculture sector is not just of crucial importance to the rural economy, it is the backbone of the national economy. Accordingly, the Minister and various Departments concerned are pursuing the proper course of action by ensuring the highest and most rigorous protective standards are speedily implemented and fully adhered to.

The Minister of State at the Department of Finance, Deputy Cullen, referred to the huge improvements which have been made to the taxation system. The provisions of the Bill will remove 133,000 taxpayers from the tax net, bringing the total number of income earners excluded to 668,000. This is a clear measure of the success of the economic and fiscal policies pursued by the Government since taking office in June 1997, under which the standard rate of income tax has been reduced by six percentage points.

The Minister for Finance has introduced welcome changes in stamp duty and measures to encourage the provision of housing. There are severe difficulties confronting house purchasers, particularly first-time buyers, in cities and large urban areas. Most private sector housing is over-priced and, in many instances, of low quality. In administering the grants scheme for new houses the Department of the Environment and Local Government insisted on a certificate of reasonable value endorsed by a departmental inspector prior to the approval of such grants. This requirement should be reintroduced and rigorously implemented. There is widespread concern about the severe over-pricing of housing by a speculative element in the building industry.

The rural renewal scheme, introduced by the Minister for Finance two or three years ago and applicable in parts of County Cavan and all of counties Leitrim, Longford, Sligo and Roscommon, has been beneficial in providing additional housing units. In particular, it has encouraged young people to provide their own housing.

I welcome the Minister's proposal to increase the floor area limit for qualifying houses which meet the relevant criteria. He should also consider increasing the floor area limit for existing houses in need of refurbishment. It is important to maintain and restore as much as possible of the older housing stock.

An issue often raised by county councillors is the need to introduce a grants scheme for house reconstruction. The Minister for the Environment and Local Government, Deputy Dempsey, and the Minister of State at that Department, Deputy Molloy, have dramatically improved the valuable grant schemes for essential repairs and disabled persons, both of which are contributing to an improvement in housing conditions for people with disabilities and elderly persons. They should, however, be streamlined.

The introduction of a house reconstruction grants scheme would assist those who need to provide additional bedroom accommodation or carry out necessary repairs to their homes, but find the cost of such works prohibitive. Such a scheme would provide a worthwhile incentive to refurbish and upgrade older houses and thereby contribute to the quantity and quality of the housing stock.

I welcome the improvements the Minister is introducing in relation to taxation, including tax relief for third level education fees. I hope this measure will be further improved. Many of those whose incomes are slightly above the qualifying threshold for higher education grants find it extremely expensive to put their children through college.

The Minister for the Environment and Local Government introduced a special infrastructural programme to provide for water and sewerage schemes in small towns and villages from which many villages in my county have benefited. The Minister should consider providing additional funding to enhance the programme. It would relieve pressure on housing in larger urban areas if infrastructure was put in place in smaller towns and villages to enable them to be regenerated, to provide additional housing and to ensure a better population spread. This would be particularly beneficial to County Cavan and the constituencies of Deputy Kenny and the Minister of State, Deputy Moffatt.

Mr. Roche

I thank my colleague, Deputy Smith, for sharing time with me.

The Bill develops and builds on measures taken by the Government, not only to facilitate growth, employment and prosperity, but to ensure the tax system is brought into line with what is considered the norm. The reality is that the era of high spend and high taxation government has come to an end. In his address this week to the Houses of Congress President Bush said that the American people had been paying far too much and were long overdue a refund. If that is true of the United States, which has a history of low tax regimes, it is true of Ireland also.

The Bill introduces innovative new measures to promote savings, to encourage donations, particularly for educational purposes, which I greatly welcome, and to deal with the situation of domestic charities. It also provides for structural changes, including the move to a tax credit system, the alignment of the tax year with the calendar year and the currency conversion to the euro.

The central emphasis in the Bill and the budget which preceded it is to return equity to taxpayers. There has been a general welcome for the decision that the tax year will correspond to the calendar year as and from 1 January next. The 6 April start to the income tax year, which is a left over from the time income tax was introduced on a temporary basis in the 18th century, is to go.

The most important and significant element in the budget is not the structural tidying up but the cuts in taxation. The cut of 2% in the higher and standard tax rates together with the increases in tax free allowances and the widening of tax bands represent the best deal ever for workers. Thanks to the Government's policies, more people are in work than ever before. When Fianna Fáil entered office in 1997, the basic income tax personal allowance was £2,900 per annum for a single person and £5,800 for a married couple. We have radically improved the tax allowances, not just in this budget but in the years since 1997. A single person on the standard rate now has a tax free allowance of £5,500 and it is £11,000 for a married couple with one earner. The Bill will increase PAYE allowances from £1,000 to £2,000 bringing total tax free allowances of PAYE workers to a remarkable £7,500 and £13,000 for single people and married couples respectively. We should all celebrate that achievement because the basis on which it has been done has been put in place by a number of Administrations. However, this Administration has delivered and is delivering tax equity.

We have also radically changed the number of people paying taxes in the different tax bands. We have now removed more than 209,000 people from the tax net. These were people on low, marginal wages and it is appropriate that they should be removed from the tax net. Over our four budgets, we have removed 268,000 people from the top rate of tax and put them on the standard rate. The threshold at which the top rate was previously applied was unacceptable. These changes make a massive difference to the take home pay of every worker. They also make a massive difference to the national psyche and the approach to taxation.

The difference the Government has made is best demonstrated by the level at which people begin to pay the higher rate of tax. In 1997, which is not long ago, a single person began paying the top rate of tax when they earned more than £9,900. A single person does not pay the top rate of tax now until they earn more than £20,000. It is astonishing to listen to people from the Labour Party criticising this. It seems they were happy for people to hit the higher rate of tax at less than £10,000. That is a level no one in their right mind could support.

Our progress in lowering the standard rate of tax is in stark contrast to that of the Opposition when in Government. Where we have reduced the standard rate by 6% since coming into office, the Opposition during its term achieved a decrease of just one miserly percentage point. That is on record and is an objective fact. The Opposition parties' inability to reward the people for their hard work was highlighted by Deputy McDowell on the "Prime Time" programme on the night of the previous budget. He said he would not have reduced tax rates to 20% and 42% and, in saying that, he was telling the truth. History shows that the ideological commitment of socialist parties throughout Europe is to high spending which, by necessity, requires high taxation regimes.

Since the "Prime Time" programme, the Labour Party has been mute on this issue. Where its members are loquacious on everything else, it is very difficult to get them to admit that a vote for Labour, and by extension a vote for Fine Gael, is a vote for a higher taxation regime. I tell my constituents in Wicklow that is the case, but I cannot get the Labour Party to engage in a debate on it. It would be a bad mistake for Fine Gael to engage in a similar debate.

I welcome the extraordinary changes for old age pensioners. I am sure we all agree that whatever we have achieved is because of the commitment of preceding generations. It is therefore appropriate and right that, at a time when the nation has something to celebrate in its economic achievements, they are shared with old age pensioners.

Mr. Kenny

Lying on trolleys in Galway Hospital.

Mr. Roche

It is not so long since you voted in the House for the most miserly increase the budget ever gave to old age pensioners.

Mr. Kenny

The waiting time for cataract and hip operations is two and a half years.

Mr. Roche

If I were in your position, I would have more sense—

Mr. Kenny

The Deputy is being hypocritical.

An Leas-Cheann Comhairle

Deputy Kenny should not interrupt, and if Deputy Roche addressed his remarks through the Chair, he might not invite interruption.

Mr. Kenny

Forty eight hours on trolleys.

Mr. Roche

It is a fact that, not that long ago, Deputy Kenny shamed himself by walking through the division lobbies to vote for an increase for old age pensioners which was miserly, miserable and despicable. I am surprised—

Mr. Kenny

This is the usual Roche rubbish.

Mr. Roche

The record will show that is the truth.

Mr. Kenny

The Deputy should go back to Wicklow and tell his constituents the truth.

Mr. Roche

When Deputy Kenny stops telling lies about us, I will tell the truth about his party.

An Leas-Cheann Comhairle

It is inappropriate to accuse a Deputy of telling lies. Deputy Roche should withdraw the remark.

Mr. Roche

I certainly do not suggest he is doing that. He is inviting—

An Leas-Cheann Comhairle

I ask you to withdraw the remark.

Mr. Roche

I certainly do. The last thing I want to do is insult Deputy Kenny. He has had a bad fortnight. When the finances were in the charge of the leader of the Labour Party and social welfare rights were in the charge of the President of the Labour Party, Deputy De Rossa – an occasional visitor to the House – under the rainbow coalition, Deputy Kenny was willing to defend the most miserable increases to pensioners. I celebrate the fact this Government is in a position to give a record increase this year on top of the record increases it gave last year and the year before, and I celebrate the fact we have extended the medical card across the board to pensioners.

Another change I welcome is the savings scheme, and I was amazed by Deputy McDowell's remarks on this. I am sure we all accept the fact, as does anyone who knows anything about the economy, that there has been an extraordinary and disastrous slippage in the level of savings over the past 15 years. The marginal propensity to save is disastrously low by any objective standard and it is right and proper that the Bill should address that issue. The savings scheme, which was rightly described by the Consumers' Association of Ireland as the best savings plan on the planet, is a marvellous scheme, and I compliment the Minister on introducing it. It is something we should have done before. It is like every good idea. When it is implemented, one must ask why it was not done before. It will have three major effects: it will move more people into savings, which is welcome, it will deflate an economy which is overspending, and it will encourage people to look to the future.

The achievements of the Government as regards the national debt have been put on record but it is worth reminding ourselves that the rainbow coalition increased the debt by £600 million during its term in office while we reduced it to the second lowest in the EU.

Taxation relief for ship owners is one taxation issue which has been overlooked by successive Governments. We are an island nation and have not ever recognised that reality. For reasons I can neither understand nor trace, we have always been deficient in maritime and marine related policies. When I was a civil servant in the then Department of Transport and Power under the late Brian Lenihan, we introduced the Shipping Investment Grants Act. It was prudent legislation which assisted the shipyard in Cork because there was a bias towards supporting domestically built ships. It also tried to bring new shipping tonnage on to the Irish register. At one point the expansion of the B & I and the Irish Shipping fleets depended on that Act. Tragically, Irish Shipping was sunk by Deputy Mitchell and his colleagues and B & I has moved out of public ownership.

As an island nation we have the lowest level of tonnage for a long time. I have asked the Minister to consider introducing a tax tonnage regime along the lines operated by 12 EU member states. Even Luxembourg, has a tax tonnage regime for shipping. I can understand the Minister being reluctant to do it this year, but the absence of a balancing measure on tax tonnage for shipping will have a disastrous effect. We have already lost a number of ships off the Irish register. Arklow Shipping, one of the largest shipping operators in the State, is willing to put additional tonnage on the register but cannot do so because of the absence of a tax tonnage regime. As it is not possible, because the mandarins in Brussels have the knives out for us, for him to accept an amendment to the Bill at this stage, will the Minister give an undertaking that he will give the issue serious consideration in the next Finance Bill? I am sure the proposition would have the support of all sides of the House.

Ms Clune

I wish to share my time with Deputies Sargent, Kenny and Healy.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Ms Clune

The Finance Bill enacts the provisions announced in the budget before Christmas. The Minister who was publicly criticised recently by our European partners for the parameters laid down in the budget intimated that there was jealously in Europe at our strong economy, but I do not believe that. What we have done is respected. Nevertheless, we should be seen to be playing ball and obeying the rules by sticking to agreements made. As these issues have been covered by our spokesperson on finance, Deputy Jim Mitchell, I will not elaborate on them.

I wish to refer to a number of issues of interest to me. I am disappointed at the lack of attention paid to the protection of our environment in the Bill. No fiscal measures have been introduced to develop badly needed recycling initiatives. Although objections have been raised at local, county and regional level about landfills and incineration, one rarely hears about the low level of recycling. Of the waste produced, 91% is consigned to landfills. About 3% of domestic waste is recycled.

The recycling industry is based on voluntary effort. It relies on members of the public to bring the waste they produce to bottle banks and so on. On a pilot basis, there is a limited door-to-door collection of recyclables in a number of areas. The issue must be addressed. There is strong public desire that we do so. Provisions to deal with it should have been included in the Bill.

Recycling is a difficult industry. It is a known fact that it is cheaper to produce paper from virgin material than to recycle. Ensuring recycled paper is cheaper to produce than virgin paper will require Government intervention by way of financial support. Recycling should also be classed as a manufacturing industry. There are many initiatives the Minister could have taken to deal with the issue. I had hoped the Minister for the Environment and Local Government, Deputy Dempsey, who is concerned about waste reduction would use his influence to ensure the problem of recycling was addressed in a meaningful way. That will not happen if we continue to proceed on an ad hoc basis.

Repak, the scheme introduced to deal with commercial packaging waste, is not working; it has not been successful. The Minister admitted in reply to questions in the House that he was not satisfied with the progress being made by local authorities in producing waste management plans under the Waste Management Act. He stated that he would have to introduce new measures to ensure action was taken. I hope the new measures to be introduced will extend to plastics for which we there are no collection facilities. Rehab, the largest collector of recyclable bottles, tins, glass and so on, does not receive State support, an issue that must be addressed. Recyclable products have a value. A target of recycling 50% of waste products has been set. This will not be met unless financial measures are put in place. Many other countries operate imaginative schemes. It is disappointing that no provision is made in the Bill to deal with the issue. I hope the Minister for the Environment and Local Government and the Minister for Finance will look again at ways of dealing with what is a very real problem.

There was much comment at budget time about the issue of child care. The allocation provided for in the national development plan is not being drawn down in many areas. The provision of child care places is stagnant. I received a telephone call yesterday from a girl who cannot secure planning permission for a child care facility. I am aware that the issue does not come within the remit of the Minister for Finance, but providing for an increase in child benefit is not the solution to the problem, much more needs to be done. Of a class of 100 who graduated in the area of child care from a school of commerce in Cork, only ten are working in the industry which does not pay well. The remainder have either taken up employment in other areas or left the country.

Child care is a low paying industry which is not attracting new entrants. The answer does not lie in increasing child benefit. The increases granted in previous budgets have been absorbed by increased crèche charges. There is a need for affordable and reliable child care facilities. The lack of such facilities is one of the main reasons women cannot commit to re-entering the jobs market. Older persons who would have accepted a position as a child care provider, having reared their own children, have taken up part time jobs on comparable pay in banks, etc. The problem is multi-faceted. Funding available under the national development plan is not being drawn down because of the difficulties being experienced in obtaining staff and securing premises.

The Minister announced the introduction of the living over the shop scheme last September, which I welcome. Tax incentives, similar to those provided under the urban renewal scheme, have been provided in Cork, Dublin, Galway, Limerick and Wateford. Many buildings in Cork could be utilised in this way. If the scheme is advertised and promoted locally, it will lead to the regeneration of our cities, as has happened in many parts of Dublin. It is important that contact is made with county and city managers to ensure the scheme is fully utilised and people are brought back to our cities.

Debate adjourned.