Finance Bill, 2001: Second Stage (Resumed).

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

I congratulate the Minister for Finance, Deputy McCreevy, on so ably playing the part of Leonardo DiCaprio in riding the Celtic tiger which, when one examines it more closely, looks more like theTitanic on a fated voyage. The Minister is presiding over substantial growth in energy demand and waste output as his friends continue to sip champagne as if there were no problems in the offing. I hope we can have a realistic debate about the prospects for the future. There is a need to realise that the fines that will be incurred because of our broken promises in respect of the Kyoto Protocol and other legally binding international agreements into which we have entered will cost the country dear, a matter which ought to be of interest to the Minister. There will also be a significant cost to the State in terms of the human misery caused in the wake of the performance of the Celtic tiger by the difficulties encountered in providing accommodation and in the health service. Many have to live in appalling conditions. The poverty trap particularly affects single parents and those who are unable to take advantage of the many jobs available which, in many cases, are so badly paid that they result in impoverishment rather than enhancement of quality of life.

The level of investment in public transport is so poor that people wonder whether they are martyrs, rather than civic minded, in using public transport. Their perception ought to be that they are trying to prevent chaos on our roads.

Níl mórán ama agamsa ach is féidir liom a rá gur scannal atá sa Bhille seo do chosmhuintir na tíre. Is maith an rud é do na daoine saibhre, mar go bhfanann an leibhéil ath-chreasú i talún mar atá sé nó níos measa. Má tá acra talmhaíochta ar luach £10,000 ag duine ar imeall chathair Átha Cliath is féidir é a dhíol ar thart ar £1,000,000 le lucht tógála. Níl le h-íoc ansin agat ach 20% ar Capital Gains Tax. I gcomparáid lena lán daoine atá ag íoc 42% níl a fhios agam conas is féidir leis an Rialtas a rá go bhfuil siad i bhfábhar ísliú cánach sa tslí sin. Is é an cáin íseal atá ag na daoine is saibhre sa tír agus má tá scaranna ag duine níl le h-íoc ag duine ach 20% cánach ar Capital Gains Tax ach oiread. Dá bharr sin is iad na daoine a bhfuil airgead acu atá i bhfábhar na Bille seo don chuid is mó. Tá an cuma céanna ar an gcóras coigealtais, Savings Scheme, chomh maith. Is iad na daoine ag a bhfuil níos mó airgid gur féidir an méid is mó brabúis a thuilleamh.

The Minister managed to get us into a mess on the budget with our EU colleagues, particularly the European Commission. Deputy Clune said that we are all in favour of centralisation, but we are not; we are in favour of economic co-operation. When one considers the degree to which we will increasingly be told how to organise our budget one will realise that we have sold out on much of the independence for which we fought long and hard. On that basis there is a need for a more rational debate on how should we proceed from here.

We are reaching the point where we will have a debate on the Nice Treaty, the ramifications of which should be debated in the House. If he continues to disregard European rules, the Minister will run into more brick walls.

I congratulate Deputy Coghlan on her elevation to the rank of Minister of State. It is a well deserved tribute for her endeavours. Her family has given a lot to politics, Fianna Fáil and County Donegal. I wish her every success in her new portfolio. As they say in politics, some go forwards, some go backwards.

The Bill gives legal effect to the budget. It is the legislation that drives the management of our prosperity in an equal society. I would like to think that its prudent use will lead to a situation where families will grow up in communities, where common sense and balance will apply in granting planning permissions for development where people will be more important than grass or wind, where the young will show respect and have opportunities available to them and where the old will be respected in security and comfort. Unfortunately, there are many instances where this does not apply.

The headlines in the national newspapers this evening state that it took 20,000 people two hours to travel 12 miles into the city today. Given the reverberations from the Celtic tiger, one cannot put a price on the business lost, the loss of economic attractiveness and on the frustration, bad feeling and ill will caused.

There is something missing from the economy which, on the one hand, is being powered along like a well-oiled machine for which we have all paid and of which we can justly be proud, but which, on the other, leaves a great deal to be desired in terms of its effect. It is like a hollow shell whereby hundreds of millions of pounds are paid to consultancy bodies and agencies for reports on various developmental issues without real management of the prosperity generated for everyone's benefit. What is missing, in the context of the national development plan, a substantial document covering every conceivable idea from Malin Head to Mizen Head, is a public-private partnership involving a world class management consultancy project team, of which there are a number in Ireland, to implement the proposals contained in the plan not only by setting targets and objectives, but by specifying timescales for their implementation.

Last week the chairman of the National Roads Authority spoke about the development of dual carriageways from Dublin to Waterford, Cork, Limerick and Galway. Given that there can be objections, CPOs, archaeological excavations, questions about contract capacity, etc., the targets for that kind of development will not be achieved under the current capacity. The Government should ask project team consultancy firms of world class standard in Ireland to move in to ensure the proposals in the national development plan are delivered on time. This would be a worthwhile move.

Under the new savings scheme, which was heralded by the Minister and the Tánaiste last week, the maximum amount which can be saved is £200 per month for five years. At the end of that time the Minister will give back a quarter of that amount to the saver. Does this mean the £200 paid in during the sixtieth month must remain in the account for five years before the interest is paid or will the full interest be paid on the maximum amount saved after the sixtieth contribution? We have been told these savings will be taxed at the normal rate. However, this will depend on the rate the banks are offering. If people are to be enthused about this scheme a rate higher than 3.9% should be offered. Extra facilities should be made available for people over 65 years. Many of the people in the active age retirement associations do not think they will be around in five years to avail of the maximum return on their savings. The Minister might consider reducing the period to three years for those over 65 years.

If the scheme is a success and £2.5 billion is invested each year for five years, giving a savings account of £12.5 billion, the Minister will have to pay out much interest. The Government takes in approximately £130 million in DIRT each year, which amounts to £650 million over five years. If the scheme is as successful as envisaged, then consideration should be given to the abolition of DIRT.

The National Treasury Management Agency recommended that people should invest their money in post office savings over a period of, I think, 4.9 years at a certain rate of interest. Was the National Treasury Management Agency consulted about the savings scheme? Are people being advised to take up the new savings scheme with banks and other financial institutions as against the recommendation of the National Treasury Management Agency? What is the difference between the two schemes and which one is best? Should one take the advice of the Minister for Finance or of the National Treasury Management Agency? Will a person who has money in a deposit account be entitled to ask the bank to shift the money to the savings scheme as it might attract a greater rate of interest? Has the Minister looked at the liquidity ratios in an effort to keep money in the country? We hear that Brussels has full control over our money, but that money is in the Central Bank system and could be retained here.

Last year the Minister, Deputy Woods, said education is the engine of the Celtic Tiger. In his analysis of the economy "Growing by Knowing – How Ireland's expansion can be sustained" Jim O'Leary of Davy Stockbrokers said in relation to wages that public sector pay is the main part of the PPF and that if we want to retain people in teaching, nursing and other professions we will have to look to paying more or suffer the consequences as people vote with their feet. It appears as if this year's leaving certificate examination will not have the traditional involvement of teachers. The Labour Court will deal with this matter next week. It is difficult to see the Labour Court over-ruling the Government agreement with the social partners and unions, involving 235,000 civil servants, as otherwise it would stand for naught. The supervision and substitution elements, which are causing so much trouble among members of the teaching profession, particularly in second level schools, should be taken out and dealt with quickly under the benchmarking system. The remaining problems can be either ring fenced or analysed and clarified by the commission which I called for last year.

I am not sure if the Minister of State, Deputy Coughlan, will deal with the Belmullet task force report which was to be sent to the Minister of State, Deputy Ó Cúiv. This report is a microcosm of a national development plan and it cannot work unless the Minister of State marries it to a contracting company which will set implementation dates. The Minister of State should tell the Taoiseach that she cannot do this job unless he gives her political direction and authority to cross Department so that she can get what she needs. The report contains a series of recommendations by Departments, local authorities and agencies but they will not be implemented unless the Minister of State has the necessary political clout. I will support her in what she does. As a new Minister of State she is entitled to make one wish and I hope she does as I have suggested.

Radical income redistribution in favour of those on low incomes is central to reducing poverty and creating an inclusive society. Unfortunately, the Finance Bill continues the policy pursued in recent years under which the gap between rich and poor is widened. In recent budgets capital taxes such as capital gains tax, capital acquisitions tax and corporation profits tax have been significantly decreased.

They are bringing in more money.

Income tax changes have favoured the rich rather than lower earners. Under the Finance Bill people on a minimum wage of £171.60 come within the income tax bracket. This cannot be allowed to continue and I ask the Minister to amend the Bill to ensure that those on the minimum wage are taken out of the tax net.

I wish to refer to the lack of child care measures in the budget. The necessary measures must be put in place to assist parents to purchase child care. The lack of Government support for parents in meeting child care costs is a travesty. The child care needs of parents, who have been hugely instrumental in creating the Celtic Tiger economy, have been ignored. Parents continue to pay for child care out of taxed income. In the past two budgets the Government sent out the clear message that supporting parents in paying for child care is not its responsibility. It is out of line with every Government in modern Europe in this regard. This policy is irresponsible.

The reconciliation of work and family life is critical to the achievement of gender equality in society and equal participation in employment. The absence of family friendly policies in employment makes it more difficult for women to remain in paid work, to have real choices regarding work options or to improve their labour market position in terms of pay and promotional opportunities. The commitments made in the Programme for Prosperity and Fairness to provide equitable financial support for all parents must be fulfilled. This can only be done through the provision of a universal child care payment for all parents irrespective of their employment or income status. It is essential that access to affordable, quality child care is provided for all parents through the introduction of a universal parental child care payment at a rate of, say, £20 for children under five years and £10 for those aged between five and 14 years.

I am disappointed that the Finance Bill does not contain incentives under the town renewal scheme announced almost 12 months ago. Incentives for commercial and industrial development in designated towns were to be introduced late last year, but this has not happened.

In reply to a parliamentary question the Minister indicated that he is having difficulty with the European Commission on this issue and said that as things stand it appears it will take some more months before the business tax incentive elements of the scheme will be approved by the Commission. I wonder whether the Minister's recent difficulty with the Commission is having a negative effect on this scheme, which is worthwhile and is badly needed in towns in my constituency, such as Cahir, Cashel, Fethard, Killenaule and other towns throughout the country.

The position of first time house buyers is one which gives cause for concern. I wonder whether the Minister is aware of the serious housing crisis? If there are first time house buyers who cannot afford to buy their homes there will be large scale numbers on local authority housing lists with little or no hope of being housed.

I wish to share time with Deputies Power and Fleming.

Is that agreed? Agreed.

I welcome the Finance Bill and congratulate the Minister on its introduction. I will refer to the changes in stamp duty, the change in the 2 per cent anti-speculative property tax and the changes to the proposed share option scheme. Certainly the flat 9 per cent stamp duty for investors in new property was a source of great concern to many in the western region who had many meetings to discuss it. There was even a suggestion that there might be a special tax for the so-called border, midlands and western region. That was never going to be introduced by the Minister but he has now said the new rate will be 3 per cent for properties up to £100,000. The same rate applies to properties to first time owner occupiers for properties valued at more than £100,000. The invester rate for second-hand properties will remain at 9 per cent. That is welcome. On the anti-speculative property tax he said the Government would review it and it would only apply to a limited number of people. I welcome also the share option scheme.

One of the great benefits of the Bill is that a new saving scheme is being introduced. People have been talking about savings for a long time. As a nation we do not get serious about savings until we see a proposal such as this. Given that the scheme is innovative there will be a good response. There is great interest in it and it will be assisted by a top up to a net saving of 25 per cent out of tax revenue by the State. When the scheme commences on 1 May 2001 savers will be anxious to save for five years. Deputy Kenny asked about the actual workings of the scheme. The Minister will provide further details. However, in an example of a person deciding to save £50 per month for a five year period he made the point that this person would have £4,050 at the end of the five years for £3,000 saved, a gain of £1,050 after tax. A person who would save, say, £200 per month would have £16,204 at the end of five years, a gain of £4,204 after tax. This is a useful scheme.

I have spoken with a number of people in the credit union movement. Given the difficulties the Minister has had with the Irish League of Credit Unions he may not like me to use the words "credit union". They made the point since the playing field has been levelled between all financial institutions that they are concerned that the banks are still trying to take business from them. They are concerned that the older people who have saved for many years with credit unions will not able to join the savings scheme. They are of the view that the Minister should look at it again. It is clear to me from the credit unions in north Galway that the League of Credit Unions has not consulted widely. It told the Minister what the credit union movement wants.

One of the problems which the Minister and all of us have had with the credit unions, is that the League of Credit Unions says one thing and the local credit union offices say something else. While this may be a difficult matter to deal with I hope the Minister would always favour some bias towards credit unions. I am more in favour of credit unions than of any other financial institution. The previous Government put a 20 per cent cap on credit union borrowings at a time when we were all in agreement here that more money should be available for loans. If they are to be given an opportunity to compete with other financial institutions it is time that cap was lifted.

I welcome the recent announcement concerning changes to the mobility allowance. There was much concern after it was announced that the £45 per month would be taken from those who had their own transport. I met a group from Galway, Mayo and Kerry and the Minister of State, Deputy Mary Wallace, two days after the budget, and made a strong case to the Minister for Finance. I am pleased the Minister has said that while he has doubled the allowance for those who do not have access to transport he will allow the continuation of the £45 allowance for those who have transport. While those who have transport get exemptions on VRT, VAT, a refund of excise duty on up to 600 gallons of fuel per year and exemptions on road tax they still have to pay car insurance. In all cases that £45 was put towards the car insurance.

The Vantastic scheme which operates in many cities does not operate in rural Galway. It is important that the mobility allowance be the same as it was irrespective of whether the recipient has transport. The Minister has rectified that in his announcement on the changes to the mobility allowance.

An issue I have raised on a number of occasions is higher education grants. While it does not come directly under the Finance Bill, something will have to be done at Government level given the higher rents for students and the cost of transport. I am pleased there is a provision in the Bill for tax relief on third level fees. This will remove some of the restrictions. The four existing tax reliefs will be merged and standardised. The restrictions that applied for repeat years or more than one course or the exclusion of medicine, dentistry, veterinary, or teacher training will be removed. Relief will be extended for post-graduate fees paid in the US and other countries, not covered by existing schemes. We must ensure the third level institutions provide campus accommodation. The Bill provides for the rent-a-room scheme where a room or rooms in a person's private residence can be let as residential accommodation. The gross annual rental income of less than £6,000 will be exempt from tax. I note the Minister will provide on Committee Stage for some of the proposals of the commission on the private rented housing sector. That would cater for across the board priority housing needs but I ask him to look again at students who have had great difficulty in getting accommodation.

There is an interesting proposal for carers. While the Minister for Social, Community and Family Affairs has increased the payment under the provisions of the Social Welfare Bill and has given a good income disregard, the Minister for Finance has said the amount that may be claimed to employ a carer will be increased from £8,500 to £10,000. Relief at the marginal rate of tax is available for the employment of a carer for a family member who is incapacitated. That is welcome. The definition of "medical expenses" has been widened as has the definition of "relative" which will include persons currently included in the dependant relative allowance category. Taxpayers will be able to claim relief on medical expenses for designated relatives instead of first having to claim the dependant relative allowance for which there is an income limit or engaging in the covenant procedure. The Minister will table an amendment to the Bill on Committee Stage to provide for the inclusion of expenditure on educational psychologists and speech therapists within the relief. It is vital, particularly in relation to primary education, that psychologists and speech therapists are made available for children. What the Minister has introduced is very welcome.

I welcome the provision in the budget of £1.2 billion in personal tax reductions. This will remove more than 133,000 low paid people, including the elderly, from the tax net. The reduction in income tax rates will involve approximately 1.2 million taxpayers. There has been criticism by the European Commission. I do not understand why it is worried about what the Minister is doing because he has been very prudent. The savings scheme is a good example of where he has been prudent in taking measures to encourage savings and reduce inflation. Criticising the Minister for reducing the top rate of income tax is somewhat misplaced. The widening of the standard rate tax band and reducing the percentage of taxpayers on the top rate of income tax to 23% is the relevant figure when the exempt cases are included.

I welcome the Bill. The Minister has gone a long way towards meeting the views of Members on all sides of the House. He has introduced a Bill which will be the basis for improving the economy and improving the standard of living of everyone in the country in the months and years ahead.

I wish the Minister of State, Deputy Coughlan, every success in her new appointment. She took the big jump last week but most people will agree she had a very long run up to it. Many of my colleagues may be disappointed at being overlooked on this occasion but there could not be a more popular choice and I wish Deputy Coughlan well.

On the Finance Bill, politics is a funny game and no one knows that better than the Minister. Six months ago, surveys indicated half the country wanted him locked up but if one were carried out now, he would be seen almost as Santa Claus. He introduced a budget last December from which everyone will benefit. Even the social partners, who were given every opportunity to put forward their views on how it should be framed, were surprised at a number of the provisions and the generosity shown by the Government. Members on the opposite side of the House were very critical of some of the changes made by the Minister, particularly in previous budgets. One of the changes relate to the reduction in capital gains tax. He was criticised at the time for a introducing a reduction which would benefit the poor. This is a self-financing tax reduction whereby we are gaining more from reducing the tax than was the case heretofore.

The Minister has a vision of where he sees the economy going. The steps he has taken, particularly in relation to capital gains tax, are very welcome because this will mean more money for the Exchequer. However, I would encourage him to show a little bit more initiative in this regard. Reducing the tax even further for those who keep shares for a longer period would encourage more people to invest in shares and reduce the speculative element in purchasing shares. This system operates in other European countries and could be considered here.

The only negative comment I heard in relation to the savings scheme was from the Fine Gael spokesman. Given that he is new in the job, perhaps he felt he had to oppose the measure. This measure has gone down extremely well among ordinary people throughout the country and I appeal to the Minister to consider reducing the age limit. When the scheme was announced, the intention was that anyone with a PRSI number who was 18 years or over could enter the scheme. It is important that young people be given an opportunity to participate in this savings scheme. In recent weeks, there has been a great deal of negative publicity about young people dropping out of third level education and about under age drinking. To a large extent, young people feel excluded. This is a very imaginative scheme and there is no reason young people cannot be allowed to participate in it. Many young people who are working part-time during the week or at week-ends have money and they should be given an opportunity to save it wisely. There is a tremendous gain at the end of the five year period and I appeal to the Minister to give young people this opportunity.

I read in this morning's newspapers that the Minister is making major changes in relation to the smoking issue. Being Ash Wednesday, it is fitting that he should announce these changes today. He is considering banning cigarette vending machines in pubs. That is a serious mistake because vending machines are a very secure way of doing business as far as publicans are concerned. It will have serious consequences if publicans or other shopkeepers are forced to carry large stocks of cigarettes. This will lead to increased insurance costs for these premises. From the point of view of theft, it will make it much easier to steal cigarettes. Shopkeepers must be allowed to continue selling cigarettes through vending machines. This will not be a problem if the machines are placed strategically in a pub. We are reaching a ridiculous stage where it will be easier to buy a packet of condoms than a packet of cigarettes.

I appreciate that the Minister is serious about reducing the numbers smoking cigarettes. I applaud him for his efforts, particularly in relation to the ban on advertising cigarettes. These sexy advertising campaigns are targeted at young people who believe it is fashionable to smoke. Unfortunately, the tobacco industry is very wealthy and has spent millions of pounds trying to encourage young people to smoke. The reason is that great numbers of its customers are dying. It is as simple and straightforward as that. Smoking kills and the industry must recruit young people. While I welcome the Minister's initiatives in relation to the ban on advertising, he should look again at the ban on vending machines. From a shopkeeper's point of view, this is a very secure way of doing business. If these machines are strategically placed, it will reduce the risk of young people purchasing cigarettes.

On the foot and mouth crisis, much of the talk in County Kildare in recent days has been about Cheltenham. While I see no possibility of the festival going ahead, if it does, it is important for people to look at the bigger picture and not con sider their own interests. Sacrifices will have to be made. Aidan O'Brien expressed the view that Istabraq would run in the champions' hurdle. People like him must give leadership and set an example in the present crisis. While it would mean a lot to those connected with it and to those interested in racing for the horse to win a fourth championship hurdle, Mr. O'Brien's choice of words this morning was unfortunate. I appeal to him to rethink what he said.

Some months ago a meeting was held with the Taoiseach when we outlined the difficulties experienced by stable staff. The Minister for Agriculture, Food and Rural Development has taken a good interest in this but, unfortunately, we have not seen the kinds of changes that are necessary. Many stable staff are being asked to work in facilities, especially at the racecourses, that no other industry or people would tolerate. A few race tracks have taken the initiative and have provided modern and acceptable facilities, but in many cases no hot food or accommodation is provided. The staff travel to the racecourse perhaps two hours before the first race and they may have to wait for approximately 30 minutes after the last race. It can be a long day, especially in the winter months.

The Minister is drafting legislation to create a new authority to oversee racing. Unless we address this matter quickly there will be difficulties in attracting new people to the industry and retaining present staff. Many other industries have employment opportunities on offer with all kinds of enticements but the racing industry must hold on to its staff. They have a special expertise that is acknowledged and appreciated throughout the world but we should not take them for granted. They have not had a voice in the past but they are organising themselves. They play an important part in the racing industry and they should be properly compensated and rewarded.

I ask the Minister for Finance to look at the stable staff bonus scheme which has been in operation for less than year. It should have presented a wonderful opportunity to reward stable staff for their involvement. The scheme provides that a percentage of the winnings should be deducted and paid among the staff. Unfortunately, trainers are being asked to make a payment. I have been in contact with the Minister and the Taoiseach about the scheme but unless changes are made it will have to be scrapped, which would be most unfortunate.

I welcome the opportunity to speak in this debate and I look forward to Committee Stage when the Bill will be considered in greater detail. The Bill this year is bigger than normal because it deals with two one off features. First, the forthcoming tax period will last nine months because of the changeover to the commencement of the tax year to coincide with the start of the calendar year. This change is long overdue and it is an appropriate time to make it. Second, this time next year all reference to money will be in the form of euros. People will need time to adapt to these two major changes. The social welfare year is also being changed to commence at the start of the calendar year. The social welfare increases and tax benefits to be announced in the next budget will be implemented from 1 January 2002, which I hope will be several months prior to the next general election.

The overall figures announced in the budget speak for themselves. The taxation measure means that a total of £1.2 billion has been given back to the taxpayer. It is right that the Minister should seek to return the money paid by taxpayers. Tax rates were high in the past because of high unemployment and the need to finance high social welfare payments. However, due to the successful policies pursued by the Minister and the Government there has been an increase in the number employed from 1.4 million to 1.7 million people. That has resulted in more people contributing to the Exchequer and fewer claiming social welfare payments while the Government has been able to reduce the income tax rates. The standard rate is to be reduced from 22% to 20% while the marginal rate is to be reduced from 44% to 42%.

The Opposition proposes to introduce a medium income tax rate of 30%. I reject that idea and will oppose it. It is likely that a standard rate of 20% and a marginal rate of 40% will apply. That is adequate because it is important that the tax system be simple, transparent and easily understood by the taxpayers. Two rates – the standard and marginal – will be sufficient for the future.

Medical expenses tax relief will be allowed to all designated relatives and not only to those claiming a dependent relative's allowance. This will allow people to claim tax relief where they pay bills and medical expenses for members of their family, be it a parent or otherwise. I am also pleased that tax relief will apply in respect of expenses incurred with educational psychologists and speech therapists.

The Minister is allowing tax relief on the first £100 of trade union membership dues. I welcome that. Most of the trade unions make a small contribution to the Labour Party from the dues their members pay. I would not like the Government to be giving tax relief in respect of donations to the Labour Party. I am sure that is not the Minster's intention, but it is necessary to ensure on Committee Stage that political contributions arising from union dues do not benefit from tax relief. It would be inappropriate and against the spirit of the House to proceed on that basis. I would object strongly if the Labour Party was to be favoured in this way.

Would the Deputy make a report to the Public Offices Commission?

I raise it here first and if it is not addressed I would have no hesitation in doing so. I am confident the Minister will address my concerns. When answers were not forthcoming from other sources the only remedy was to contact the commission.

I thought we got rid of such levies in 1921, but it would seem not.

My concerns will be addressed. The Bill provides that medical insurance and mortgage interest tax relief will be paid at source, from the VHI, BUPA or the building societies, by way of reductions in the payments made. I am also pleased that tax relief is being provided for donations to charities by companies and individuals.

What about charitable payments by Fianna Fáil?

We do not intend to make charitable donations to the Labour Party. I wish to see the potential anomaly I have raised addressed. Some people may say the Minister is an immodest man. One of his predecessors, also called Charlie, is still remembered, 30 years later, for introducing free travel for old age pensioners. The Minister has a comparable if not greater achievement to his credit with the introduction of a free medical card to everybody over 70 years of age. A medical card is more valuable to most people than their free travel pass. That is the test by which the Government will be judged at the next general election. It is not just generating income for people at work; it is looking after the elderly as well.

The Minister in the budget provided funding for the centres for independent living and the Carer's Association and he gave a special £0.5 million allocation for the breast cancer unit in Portlaoise General Hospital. The Taoiseach was down there last Friday to turn the sod on the new extension and we are very pleased that this should come about.

The Minister mentioned reducing the annual paper chase in his speech last night. I will highlight a situation I mentioned to the Minister in correspondence in recent weeks. There are well over half a million Eircom shareholders and people who have shares in what were formerly the building societies. A person showed me documentation the other day indicating that he had 100 shares in Eircom. He received a dividend of 98p and had a tax credit of 26p. He will have to go through a whole rigmarole if he wants to be a completely compliant taxpayer. He will have to fill in his income tax return form and if he has to pay the balance at the top rate, he will owe the Exchequer 28p or, alternatively, he might be due a rebate. A minimum figure of, say, £100 should be introduced below which people do not have to send in a return because it will create an unnecessary paper chase.

The new savings scheme recently announced by the Minister is a godsend. It will result in people getting approximately a 7% return on their income after tax for the duration of the scheme. That is a good return after tax. I asked the Minister before the budget to consider increasing the figure for registration for business for VAT purposes. The £40,000 turnover, which was introduced years ago, is farcical. I understand the figure in England is at least twice that. We should eliminate some of the unnecessary paperwork for small businesses. I look forward to discussing all these matters in detail with the Minister on Committee Stage next week.

In the next speaking slot, we have Deputies Connaughton, Ring, Timmins, Ulick Burke, Boylan and Durkan.

There are two specific matters in regard to the Finance Bill, 2001. I bring to the Minister's attention something which is not ever too far from his mind, that is, the credit unions. Whatever the League of Credit Unions has said or done, many of its component members are not happy with what is contained in the Finance Bill. They have said the Minister is levelling the field for all financial institutions. All I can say – it is a matter I will take up on Committee Stage, if I get the opportunity – is that one cannot compare the major banks with the credit unions. It is neither fair nor reasonable when one considers the type of clientele credit unions have, what they do, how they do it and the fact those involved work for nothing.

This proposal came from the League of Credit Unions.

I can see what is happening here. I compliment the Minister on his new savings scheme. I consider it a good scheme, certainly for young people starting out.

To return to the credit unions, I put it to the Minister that given the way he is approaching this, the banks will have the same privileges as credit unions. That is neither fair nor reasonable. It is only now that the real credit union members are catching on to what is happening. Whether the Minister took his cue from the league of credit unions or has done what he has always wanted to do with the credit unions is a mute question. It appears that the Minister did not ever like the credit unions. This proposal shows scant regard for what those people have done voluntarily. There are no shareholders or profits of millions of pounds, yet when the Minister got the chance, he seemed to put all the financial institutions in the one category. I do not have time to go through the—

It was its proposal, Deputy.

That is what the Minister is at and we had better open it up to scrutiny so the public can decide for themselves.

I cannot understand how the Minister's fingerprints are on the disabled driver's scheme. There is a new proposal to increase the allowance from £45 to £90 per month, which is good. However, there is an either-or situation. People will no longer be able to claim the VRT and the VAT on a suitable car but will have to claim one or the other. What a group to have a gun put to its head by the Minister. It is not right that he should do this to people in wheelchairs or those who are otherwise disabled. I have been on to the Minister's Department and, according to his officials, this is the proposal.

I amended that last week.

It was a daft decision. I do not believe the Minister took that decision. It would have been a shame if a Minister's signature had been put to such a proposal.

I had about ten items to mention but I will only be able to discuss one or two.

Acting Chairman

The Deputy has five minutes by agreement.

It should be worth it.

I have been very critical of the Minister in recent years but at times, I agree with him. When he says he will do something, he does it, and I must compliment him on that. I do not want to be always critical of him. There are some very good points in the budget and some disastrous ones.

The Minister let me down badly on one issue. I was on his side, although he would not believe that. The 9% tax on second houses was the one thing the Minister did that actually worked in the past 12 months in relation to enabling young people to get houses. The Minister stopped the investors and the money merchants from Dublin, Cork and elsewhere from going around the country buying three, four or five houses and getting tax breaks and relief on them. The Minister made a mistake last night in changing that and I was very disappointed in him. If a motion had been tabled, I would have voted with the Minister on that issue because I believed he was right. The builders, the power brokers, were certainly able to get the Fianna Fáil backbenchers and frontbenchers to put pressure on the Minister and the Government to change this. This was working. I am an auctioneer and I speak against my interests but I have seen young couples and young people who could not buy property. For the first time in a few years, there was a bit of hope when the price of property began to decrease in the past 12 months. What the Minister did last night was wrong.

To hell with the builders. They were making money, as we have seen, in the past ten and 15 years. They appear to have been giving it away as quickly as they were making it, although I am sure they were not giving away everything they were making. They were giving money away in buckets, bags and everything else. We see now that they will win again and I think it is wrong.

It is a pity the Minister did not give an opportunity to those on middle incomes, who want to repair their houses. There will be a further crisis in respect of people on middle incomes who have been buying out their houses for the past ten or 15 years. There is no grant for them.

If the Minister had wanted to help young couples, he could have increased the first time buyers' grant. It has been £3,000 for the past ten years and the Minister should have substantially increased the amount because it would help young couples to get into the housing market. I would have liked to have seen that happen. Perhaps the Minister should look at restoring grants for those on middle incomes – I am not talking about millionaires – to restore and repair their houses.

As the Minister is aware, there has been a big gas find off north Mayo. I heard the previous speaker speak about next year and maybe with a bit of luck he will be on this side of the House and we will have a new Government by the time the next Finance Bill comes around. I believe that will happen and that we will have a general election.

In relation to infrastructure, the road from Longford to Westport is a disgrace. It is no wonder we cannot get investment in the west, that people do not want to invest there and that people cannot get jobs when we have to travel on that road. Now we have natural gas and we have been told it will benefit the whole country. I hope the price to be paid will be the provision of necessary infrastructure in the west. A proper national primary route should be built from Longford to Belmullet. I want to put the Minister, the Government and the county council on alert that if the people of north Mayo do not gain from the gas find, there will not be much gas leaving north Mayo. It may be carried out overground, but it certainly will not be carried underground. That is a guarantee. North Mayo is in serious need of infrastructure and development. The IDA has turned its back on the people of the west.

Dublin is booming to such an extent that people can no longer live in the city. It takes one hour to travel a distance of one mile, yet other parts of the country are not receiving much needed infrastructure and employment. Something is wrong and it is time the Minister exerted pressure on the NRA and other State agencies in an attempt to distribute wealth, jobs and infrastructure fairly.

The league table of non-national roads reveals that County Kildare has done well in recent years. County Wicklow has not done too badly either. However, roads in County Wicklow are susceptible to certain hardships which roads elsewhere are not.

I compliment the Minister on the introduction of the new savings scheme. Many elderly and vulnerable persons who receive pensions continue to lodge them in their local banks without examining their details. It probably costs them money to lodge their pensions in some cases. Perhaps the Minister would arrange for pension slips to be provided which would outline details of the savings scheme. Such schemes often do not come to people's attention, even if they are advertised in national newspapers.

I am intrigued by one aspect of the Bill. I sought to table an amendment to the Finance Bill following the announcement of the 1998 budget. Section 38 concerned foreign earnings deduction relief for those working abroad, with the exception of those working in the United Kingdom. The Minister imposed an expiry date of 31 December 2003. At the time I sought to have members of the Garda and Defence Forces serving overseas included in the scheme. I am perplexed by the provision's origin and the application of an expiry date, although I was given to understand that it applied to telecommunications workers and those working in Third World countries. Perhaps the Minister will clarify the matter.

I am aware that some members of Fine Gael called for the provision of an allowance in regard to the room rental scheme. On the face of it, the provision of a £6,000 allowance seems worthwhile, but it will prove unworkable and the issue may need to be revisited. I note that a 100% capital allowance is to be provided over seven years for rental income set against expenditure on rented accommodation. Many houses have been subdivided for rental purposes and the accommodation is in poor condition. It is only a matter of time before a tragedy occurs as a result of overcrowding. Pressure is being exerted on the housing system with which it does not have the capacity to cope. Section 52 refers to the rural renewal scheme. I am aware that the Minister is doing everything possible to expedite the EU decision on this important scheme.

The Bill includes a provision to deduct mortgage interest relief at source. This is a welcome development. The Minister disagrees, by and large, with State intervention. The housing market is affected by stamp duty, mortgage interest relief and first-time buyer's grants. I agree with the Minister's stance in this area. Fine Gael was the only party which disagreed with the attitude he adopted following the publication of the first and third Bacon reports in regard to mortgage interest relief not being allowed against rental income. Housing supply slowed down as a result of the measures introduced. Neither Independent Members nor other Opposition parties agreed with Fine Gael's stance on the issue. Deputy Noonan was Fine Gael finance spokesman at the time and, together with Deputies Hayes and Enright, indicated the potential adverse con sequences of the Minister's action. I compliment the Minister for rectifying the situation.

My colleague called for the extension of the first-time buyer's grant which should be abolished. The grant was introduced in 1987 as a boost to the building trade, not house buyers. The grant was increased to £2,000 in 1993 and it could be in the region of £10,000 to £15,000 now if it had been index-linked. The grant does not benefit anyone. Two thirds of first-time buyers buy second hand houses. We should target all first-time buyers, not one third. Mortgage interest relief should, therefore, be increased. For the first five years of mortgage payments, £54 million is returned by the State to 100,000 mortgage holders. This means that people only receive £500 per annum into their hands. If I hold a mortgage of £100,000 on which interest is charged at 5%, I pay interest of £5,000. I urge the Minister to double mortgage interest relief for the first five or six years of repayment. Stamp duty, which does not yield a huge amount of revenue, should be abolished.

I welcome many aspects of the Bill. It has been stated on many occasions since the budget's introduction that the Minister has failed for the third time running to narrow the gap between the rich and poor. The concessions he has made favour those who least need them and penalise those who need them most. The UN human development report, 2000, highlights the fact that of the world's 18 most industrialised countries, Ireland is second last at number 17 in terms of the number living above the poverty line. Only the United States has a worse record on the percentage of its population living in poverty and the United Kingdom is just ahead of Ireland at number 16. That is a terrible indictment and the Minister has done little to change our position.

Unemployed persons will benefit by £10 per week from the Bill's provisions while those earning £50,000 per annum will benefit to the sum of £49 per week from the Minister's tax concessions. A married couple in receipt of a long-term unemployment payment will benefit by the princely sum of £17 per week. The Minister's thinking is clear.

Three years ago, the Minister introduced an imaginative and progressive element in his budget in regard to underdeveloped areas. He highlighted the upper Shannon region in particular. Last year and the year before, I asked him to consider extending the pilot scheme to other areas. The scheme has created massive investment potential in the affected areas, but Bacon III has had a very serious impact on that development potential throughout the BMW region.

I asked last year and I ask again if the Minister will extend that to the other areas, particularly the middle Shannon area, from Ballinasloe, through Portumna, to Woodford in East County Galway, my own constituency. We have not had one IDA assisted job in the last 25 years. AT Cross in Ballinasloe closed down. The record speaks for itself. The Minister and the Government have neglected east Galway. Will he show some anxiety about what is happening in this area by extending this pilot scheme to the middle Shannon region immediately?

I welcome what the Minister did on third level education fees. That is only part of an overall problem. In the Minister's own constituency, the university has one of the highest drop-out rates. Why is this so? It is not just one factor like a wrong initial choice by the students in Maynooth or other colleges. It just happens to be one of the worst. Many students cannot maintain themselves on the current £1,700 grant. Will the Minister who controls the purse strings, unlike the other Ministers, increase that figure so that students can maintain themselves without having to work? There are other reports saying that students spend a lot of money on drink or cigarettes. That nonsense must be nailed immediately. Will the Minister, as a matter of urgency, to prevent the education system collapsing, double the grant at least in the interim for the students who are now making a decision about third level? That is why we see from the current CAO applications that numbers going into third level education have decreased. It is not because they do not want to go but that they cannot maintain themselves, particularly those in the lower income bracket.

First, the system in the House is wrong. The Opposition Members are rushed into contributing. This must be examined by the committee of the House.

Knowing that the Minister is a jovial person who would not set out to pick a fight with his friends, I fail to understand how he got himself into the mess in Europe. He embarrassed us—

He stood up for us. He did not embarrass us.

—and our good friends in Europe were pushed into reprimanding a country they admire. It has done us no good. We may need our friends now and again if our worst fears are realised in the present situation here and in Britain. We should be grateful to them and not forget that. The Minister is not an aggressive person but he got himself into that mess.

The Minister fails to understand the role of the credit unions. They have done vital voluntary work and despite the Celtic tiger they continue to do so. The booming economy is not all inclusive and people still depend on the credit unions and its voluntary work and advice. The high rollers and those on a good income are all right but there are still many on a small income. This must not be forgotten.

The £45 increase to £90 for the handicapped is welcome, but the withdrawal of the VRT relief was an insult to people who are trying to make something of their lives in difficult circumstances. Am I correct in saying that the Minister has reversed this?

It is not yet in the Finance Bill but I withdrew it last Friday.

I appreciate that the Minister is listening to the Opposition which is an indication that we are making progress.

Regarding the BMW region of which I am a member—

If the Deputy sees it happening enough, he will believe it.

The East-West link, the road linking Sligo to the Ceann Comhairle's constituency in Louth has disappeared off the National Roads Authority's drawing board. It is a vital link if we are to develop the BMW region. It is one of the most neglected areas. All the developments are on the east-south-east coast. The Minister must examine this region in terms of balancing the country. I support Deputy Ring in saying that the gas connection from the Mayo coast must come through the BMW region. It stated on television last night that it will go up the south-east coast to the capital. Everything is developed towards this region where you cannot get into or out of the city. I left home at 7.30 a.m. and arrived at the outskirts of Dublin at 10 a.m. and it was 11.05 a.m. when I reached Leinster House from the Clonee by-pass. This city is choked.

I welcome the over the shop scheme. It is for the large cities like Dublin, Galway and Cork, but not the small provincial town. Why are these towns, which need life too, excluded? We do not want the situation where people lock up shops and go home outside the town leaving the small town or village dead. It is a question of encouraging people to live in the small towns. The Minister is encouraging people to stay in the cities when they want to get out. This is not common sense. This is a good scheme with merit but it is being applied wrongly.

I also support the case for third level students. They cannot exist on the present allowances. When a child qualifies for a grant, why can an advance payment not be made on the day of enrolment? As I stated before, young people, particularly girls, going to colleges in strange towns find that when they enrol and enter accommodation that the grant is not available until November or December. In the first weeks in a strange town, when they are vulnerable, they must spend their pocket money paying for costly accommodation. The recent drop out figures have been mentioned. These students dropped out but not because they made wrong choices or were socialising. We should not downgrade our young people. They are committed to education but the cost is prohibitive. The State must assist them.

I support the last speaker in saying that five minutes is inadequate to address the most important legislation the House passes in the year.

There will be three days next week.

We shall see about that. There are many positive aspects to the Bill but many flaws also and some glaring injustices. Previous speakers referred to a few. There are people who are becoming increasingly disadvantaged each passing year because of the policies that are pursued. This is not a personal but a general statement. As I have said before, the same thing has happened in other economies that pursued the same policies. One example is the interdepartmental committee on the disabled drivers 1994 tax concessions issue that has been sitting on the shelf for three years. Its purpose is to alleviate the burden on people who have a disability and wish to go to work or college at a time when their services are needed. It was possible, and still is, to give them a tax concession on motor vehicles and other items, as others have indicated. The essential issue is that the number who need it exceeds the number receiving it. It should not take so long for the inter-departmental committee to make a decision. The Minister should bring the heads together under the chairmanship of a civil servant from the Department of Justice, Equality and Law Reform and ask them to come to a decision that reflects modern times. The situation regarding house prices has gone from a crisis to a tragedy. Many people argue that house prices do not affect inflation because they are not part of the CPI. I believe they do affect the spiral of price inflation.

The Minister has made changes in the past few days, but I do not know if they are welcome. A house for letting in most parts of the greater Dublin area can achieve a rental of about £2,000 per month. It increases with each week and month that passes. The chances of a young couple being able to compete in the marketplace are virtually nil and are decreasing with each passing day. I ask the Minister to make arrangements whereby first time buyers can compete, or else we will have a tragedy on our hands. People are sleeping in the open air because of lack of access to a roof over their heads, which is an awful reflection on society, given the Celtic tiger economy, and on all of us in this House. I have raised this issue before. Everyone talks about it, making passing reference to it, but nothing is being done. The Minister for Finance is the only person who can do something about this problem.

Reference has been made to the Minister's brilliant fight with our European colleagues at the ECOFIN meeting. The Minister can rightly justify his case relating to our tax regime on the grounds that we lost heavily on our entry into the EU when faced with stiff competition that had not been experienced before. Our European col leagues have to be reminded of that again and again. Our argument may be seen in some quarters as a reluctance to support the European concept, and if that happens we will have a serious problem on our hands. The Nice agreement has teed us up for a two-speed Europe, which has already been talked about and thought about by our more powerful European colleagues. If that should occur, it would be a disaster for us. Robin Cook, the British Foreign Secretary, boasted on television the other night that in the aftermath of Nice, Britain is now in a stronger position. Britain is just like all the other more powerful economies in Europe.

I wish to share my time with Deputies Michael Ahern and Michael Moynihan. How much time is available ?

Acting Chairman

There is slightly less than 30 minutes remaining.

It is a pleasure to speak in a debate such as this. When history judges this period, people will point to this budget and the Finance Bill that implements it in a practical and forthright way, and this will be seen as the golden period of Irish economic development. For the first time, we see a budget, following in the slipstream of a succession of earlier budgets produced by this Minister, which sets out the course to be taken well into the future. The work of a reforming Minister, who is prepared not only to cut taxes but to reform the taxation system in a radical and improving way, can be seen in this budget.

Under this Minister, we have seen unrelenting tax cuts, reform and attention to detail, which is what this country needed. Ever since the first tax rally in Dublin in 1979, people have demanded action on taxation, which is the huge besetting, elemental issue which has pervaded and influenced our economy and our political system. The Minister, Deputy McCreevy, has proved his commitment to reforming the tax system. He has done this in office, and advocated it in opposition and in difficult circumstances within our party. He excited the enmity of some within our party because of his reforming zeal, but I have always supported him. When many condemned him on the matter of individualisation, I was prepared to defend him fulsomely.

Fair play to you. Well done.

I did not parade around the plinth saying that this was a gross inequity perpetrated against stay-at-home women. The Minister is profoundly egalitarian in his outlook and approach. This budget, and other budgets, has put thousands of women back to work, as I see in my own constituency.

Most movingly, I have also seen a wonderful leaflet from the Labour Party in the past few days. For the first time ever at local level politics, I read a leaflet, produced by Deputy Rabbitte and his running mate, Eamonn Walsh, which set out in detail the improvements in the budget and how much better off people are as a result.

It is important to get the message out there.

I was a little shocked. The leaflet is in distribution in the Tallaght area. Never one to shy away from a little carping, there is a homily from Deputy Quinn buried in the middle, speaking of how the budget is not good for the disadvantaged. The overall impression from this leaflet is that the Labour Party has cottoned on that this is a very good budget, that there is no harm in telling people just how good it is and letting them in on the secret that they will be better off as a result of this budget.

Fine Gael will produce one next.

I find it ironic because it is normally left to poor souls like myself on the Government benches to push out little leaflets extolling the benefits and the detailed contents of the budget.

Did they not include the Deputy in the leaflet?

Now, thankfully, the Labour Party has cottoned on, although it appears the Members opposite have not really done so. Perhaps the coming election will see the Labour Party advance itself to a far greater extent than Fine Gael. It seems to have the common-sense values of seeing a good thing, recognising it, and giving credit where credit is due.

Do not criticise the Labour Party now.

I was intrigued by Deputy Durkan's remarks about widening the gap, which was the sort of cliché that we hear from a variety of sources, not just Fine Gael, whose new-found concern about the less well-off is designed to put them in a cosy position relative to Labour if there are coalition negotiations after the next election.

The Deputy's party will be careful in negotiations soon as well.

Deputy Durkan seems to be wilfully ignoring the figures that indicate that the social gap is being narrowed, not widened. Hundreds of thousands of people have been taken out of the tax net altogether, which is a huge and profound achievement of this and the last three budgets. I was intrigued by the remarks of Deputies Durkan and Boylan regarding the European reprimand. I am not a Euro-sceptic and never have been. I worked for the European Commission when I was living in London, conducting economic research on the impact that Europe had on the United Kingdom. Being a member of the EU, or EC or EEC as it used to be, does not mean that one suspends one's critical faculties. While Europe has had a benign and positive influence, economically and socially, it is important that we recognise that everything that emanates from Brussels is not necessarily good. Fine Gael is the most slavishly pro-European party in this House.

I would not say that.

Fine Gael takes the view that having separated ourselves from the yoke of Britain, we should become slaves to Brussels. Neither Fianna Fáil nor myself advocate that philosophy.

It might come back to haunt the Deputy.

It will not. It is time people were forthright and honest about their views on this country's relationship with Brussels. The Minister was courageous. He is not lacking when it comes to courage and, if necessary, facing down public opinion and the cosy consensus on how we should never upset people in Brussels. It is important to upset them from time to time, to argue our case hard and to push matters to the limit. Rather than challenge, insult or attack the wonderful bureaucrats in Brussels, the Minister merely indicated a few hard facts about this economy and his role in its development. Those hard facts are unpalatable not only to those opposite who must maintain some semblance of an Opposition, but to others.

Remember Robin Cook.

Some facts about the wonderful Irish economic miracle are inconvenient, difficult and unpalatable to some European powers. The burden of taxation borne here by individuals and the corporate sector is among the lightest, if not the lightest in Europe.

The emphasis in recent years has been to lower corporate taxation. Lowering it has created a valuable platform from which employment has been created and inward investment attracted. In an ideal world, one would prefer to reduce individual taxation faster than corporate taxation. When the Government took office in 1987 the country was in a parlous and difficult state thanks to the—

The Government took office in 1997, at a time when the country was in a better state.

—heady mixture of idealism and confusion provided by Dr. FitzGerald. To quote Gay Byrne, "the country was banjacked".

Go back to 1977.

The Government had to agree on certain key, strategic priorities—

They were key and strategic.

—one of which was to lower the tax burden to encourage the corporate sector and employers to employ staff.

In 1977 it was called "sinking the country up to its ears".

Deputy Durkan should restrain himself.

The Government made those decisions and we stand by them. Fianna Fáil made a solemn promise during the 1997 general election campaign to reduce personal taxation to 20% and 40% if economic circumstances permitted. I hope by the end of this year the Government will be in a position to lower the higher rate to 40% and fulfil our solemn pledge to the maximum. That is a good approach, it is both egalitarian and the right way to proceed. Some argue that lowering the higher tax rate means helping the better-off, but that is not necessarily the case. The figures show that middle to higher income earners provide the volume of Exchequer revenue that flows from taxation.

The Minister has shown a reforming zeal in reforming the tax system which has been expressed not only in the pursuit of individualisation, but in the various measures he is taking to tackle the vexed issue of PRSI. I hope he will carry it forward to the next budget and give the matter serious consideration. IBEC is upset about provisions in the budget, but if it takes a long-term view, the prospects are much better, particularly if the entire regime is reformed.

Other speakers have referred to the housing crisis, which cannot be addressed by waving a magic wand. It is a complex problem.

I am waiting for this.

There is a supply and demand aspect which involves a difficult management exercise in seeking to reduce the price of houses. If the radical measures proposed by the former Fine Gael spokesperson on housing were introduced overnight, we would face the dangerous prospect of the price of property being reduced to such an extent as to create negative equity.

There is no chance of that happening now.

If we were to succeed overnight in reducing the price of housing to the values that obtained five, six or seven years ago, there would a great danger that negative equity would be created, as happened in the United Kingdom. It would squeeze consumer spending and have the opposite effect to that desired by anyone who knows anything about economics. In other words, a situation would be created where a plethora of young people would lose money on the sale of their house with the result that many houses would be repossessed.

Where would those young people live?

That would be a most dangerous situation.

That is an extraordinary argument.

It would not be dissimilar to the situation facing the US economy. The simplistic solutions offered by the Opposition, particularly in relation to housing, are ill-judged.

I ask the Minister to consider favourably the position of the elderly with regard to equity reversion, to introduce reform, whether in the Bill or the next budget, to ensure proper treatment to enable the elderly to reduce their overheads and release and, as a consequence, look after themselves better in the long run.

That is tinkering with the issue.

It is interesting that the Deputy considers it to be such a minor issue—

It is a major issue.

—that the elderly do not count. I am glad there are people in the public gallery who heard that message.

That is an extraordinary explanation.

Mr. Moynihan

I welcome the opportunity to speak on the Bill which marks an extension of the budget debate. The majority of schemes and the detail of the Bill have great merit. Previous speakers referred to taxation. The Minister has introduced tax reform during his term of office. A professional informed me that in 1986, taking various schemes into account, he paid tax at the rate of 72p in the pound. I am glad that the position has changed and those working extremely hard can consider the money earned by them as their own.

I pay tribute to the Government for the way in which it has looked after the elderly in this and previous budgets. It should be remembered that the elderly worked hard to ensure our society reached the level it is at.

During the past two or three years, the political point has been made on numerous occasions that the budgetary increases for the elderly and others in receipt of social welfare payments have been eroded by inflation. Many elderly persons who left Ireland in more difficult times draw a pension of one type or another in England and on their return comment on how well off pensioners are here due to the various schemes introduced from the late 1960s onwards.

I welcome the innovative special savings scheme announced in the Bill. In recent days we have heard that the private sector borrowed approximately £25 billion last year. This will help to take some of the steam out of the market. The point has been made repeatedly that people are focused on spending and there is no incentive to save. At many meetings over the weekend, people from all sectors of society, including low paid workers, welcomed the scheme and said they would put money into it.

Regarding the taxation concessions for disabled drivers, in 1994, when the Taoiseach was the Minister for Finance, a tax exemption was given to people with disabilities. To qualify for the primary medical certificate, a person had to be without the use of one or both limbs. It is a worthwhile scheme and I understand an interdepartmental commission is reviewing it. It should be widened. People with conditions such as Down's Syndrome and autism qualify under the disabled passenger's scheme, but its provisions must be examined. I work closely with a group in north Cork called Cabhair, which involves the parents of mentally handicapped children. I have heard many stories about incidents in cars when parents have been driving to various places. The lack of restraints and other appliances in cars creates dangers. I appeal to the Minister and the Government to consider this matter closely because it concerns me greatly.

Self-employed people who joined the PRSI system in 1988 and who paid contributions for up to nine years do not qualify for a contributory pension because they do not have ten years worth of contributions. People who contribute for more than ten years qualify for such a pension. The Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, the Minister for Finance, Deputy McCreevy, and the Government put a scheme in place in 1998 under which such individuals would be granted apro rata pension. If a person has paid up to nine years worth of contributions, is there any possibility that he or she could be paid nine tenths of a pension? I appreciate there are difficulties but the matter should be examined.

Some 102 towns have been designated under the town renewal scheme. EU approval for the commercial and industrial elements is awaited and I hope that will come through shortly. However, a case can be made for re-examining elements of the designations in towns. For example, some of the properties that should have been designated in Charleville and Kanturk in my constituency were overlooked. It may be necessary to establish an appeals board or redraft the entire measure.

I am delighted the economy is doing so well. I spoke to young people who did the leaving certificate examination last year or who are doing it this year and when I did the examination in the mid-1980s, there was none of the confidence that exists now. I hope this confidence continues.

In the context of the debate on the Private Notice Questions earlier, I hope everything possible is done to prevent an outbreak of foot and mouth disease here. The Government and the Minister are doing everything in their power to ensure the disease is kept out of the country. I appeal to all citizens to do the same because it is their civic duty to ensure the country remains disease free.

I wish to share the remaining time with Deputy Browne of Wexford.

Is that agreed? Agreed.

Approximately five years ago, the Fianna Fáil Party started to prepare a comprehensive taxation policy for implementation when we returned to power. The policy was refined before the party came into office, but the measures implemented by the Minister for Finance over the past two years are 99% those prepared while we were in Opposition.

Only 1% is related to the Progressive Democrats?

The proposals were based on an overall assessment of what was needed to stimulate business activity while rewarding work. The policy document included a proposal to introduce tax cuts aimed at reducing the top rate of tax to 44% and the standard rate to 20%. The 20% target will be reached this year while the top rate will fall to 42%. We also planned to reduce the rate of capital gains tax because many properties were not being utilised due to the penal tax rate involved. In most cases the individuals who owned the properties would not be considered wealthy. They may have been left small properties which subsequently increased in value. However, it was not worth paying a tax of up to 60%. My party considered there was a need to free up such properties in towns, villages and cities and the policy has worked. The party also considered the role of semi-State bodies and whether they should be privatised. This process is ongoing.

Over the years, I have been interested in ensuring the taxation system was changed to a tax credit system. The report by Miriam Hederman outlined that people at the lower end of the income tax scale would benefit most from such a system as they would get proportionally higher benefits from changes to tax allowances. I am glad this has been adopted and the Minister, Deputy McCreevy, deserves great credit for pushing this change. The Minister should also be complimented on the special savings scheme. There is a need for a scheme that will give real returns to individuals and energise them in relation to saving. The Minister's scheme will encourage people to put money aside.

Share options schemes are important because they encourage people to put energy into and have an interest in their work. People who have taken part is such schemes in the past have proved to be energetic and honest workers. Previously, capital gains tax arose on any chargeable gain on the sale and an income tax rate of 44% also applied on the difference between the option price and the market price. It was a penal system and the Minister has changed it to a situation where only capital gains on the sale will arise. This will ensure people remain interested in working in their industries.

The success of the Government's taxation policies in recent years is obvious in every area. The situation I find myself in is similar to a child going into a sweet shop, but finding it difficult to make a choice because there are so many goodies on offer. That there were 288,000 people taken out of the tax net over the past two or three years proves that the policies of the Government are working. The number of people who have gone back to work and the numbers of people who are now able to afford to take holidays, buy cars and make improvements to their houses provide proof that the policies being pursued by the Government are working.

We can speak about the difficulties. There are difficulties and it is a challenge to the Government to face these and to help those who are left behind. Some people will always be left behind.

Deputy Connaughton attacked the Minister on the credit unions. However, the Minister has reached agreement with the credit unions and they have put into operation what was acceptable to both sides.

Deputy Jim Mitchell has taken over as finance spokesperson for the Fine Gael Party. He started off energetically. He wants to change the whole system again. Previously he succeeded in sinking the merchant navy spectacularly and if he continues the way he has started, he will do the same with the nation if he is ever put in charge of the tiller.

(Wexford): I compliment the Minister on the changes he has made in the taxation area over the past four or five years. They are to be welcomed. Tax reductions and the widening of the tax bands have certainly improved the take home pay of many people. As Deputy Ahern said, more than 280,000 were taken out of the tax net.

I was in this House when there were hard decisions taken, there was a penal taxation system and there was certainly no incentive to work. I am glad that in recent years this has changed. We now find that large numbers of people are returning to work and there more people than ever in employment. That must be of benefit to the country generally because it brings in more tax and more wealth and it ensures the Government has a substantial amount of money with which to play around.

The Minister has recognised the need to give incentives in this area. I welcome the new tax-based savings scheme. At a time when there is a tendency to spend it is important for people to do as the Minister has done on occasions, that is, put money by for the rainy day. The new saving schemes will encourage many young people and people who are not so young, to start a savings plan and get a generous reward for doing so after five years. It is an innovative scheme which gives an incentive to people to save. It should be welcomed by all sides of the House and I am sure it will be.

I welcome the changes to the mobility allowance because I felt the decision taken initially was not in the best interests of people with a disability. However, the disabled drivers and disabled passengers tax concessions scheme needs to be seriously looked at because it is too prohibitive. As Members will be aware, to qualify for the primary medical certificate one must fit the criteria. If one's circumstances do not fit neatly into the box provided on the form, one is ineligible. We all have come across cases where people, who are severely handicapped and physically challenged, do not qualify for the primary medical certificate and as a result do not qualify for concessions under the scheme. I understand the Minister of State at the Department of Justice, Equality and Law Reform, Deputy Mary Wallace, and the Minister for Finance are working on this and a working group was set up some time ago to make recommendations. I hope we will receive its report and recommendations in this area as quickly as possible. Too many people are being denied the concessions applicable to disabled drivers and passengers and as a result these physically challenged people are not able to meet their transport needs. It is important that this would be changed. Recently I came across the case of a person who lost his arm, part of his hand and part of his knee and yet when he went before the medical examiner he was told that he was not physically challenged enough to qualify for any of the tax concessions. That is appalling. I would ask the Minister to speed up the report and make the changes to ensure that these people are looked after as quickly as possible.

I propose to share my time with my colleague, Deputy Michael D. Higgins.

It is a great pity that a debate as important as this is squeezed into a few hours like this. It is an entirely inappropriate use of Dáil time that an attempt should be made to restrict the debate in this fashion.

Before I forget, I will make two quick points. When I came into the House, I heard Deputy Moynihan mention Irish emigrants. Given the contribution of Irish emigrants, I find it remarkable that we are not doing more for those who left here in the 1950s and 1960s when the econ omy was in very different shape, many of whom are in ill health and in poor circumstances in London. We now have the money. There is a commitment in the Programme for Prosperity and Fairness to set up a task force to look at this issue but, as yet, it has not even been put in place. That is a great pity and I urge the Minister to set it up.

The second matter is that the House may not be aware that a statement has been issued this evening by the Minister for Finance. I was going to say that it announces the date of the general election but it amounts, I think, to the same thing.

(Wexford): May 2002.

It states that 5 December 2001 will be budget day. The Minister has told us on several occasions that it would be in October. I do not know why it will be on 5 December and why he chooses to announce it today.

There is something in the statement which all Deputies in marginal constituencies, that is, most of us, should take into account. He says that around the end of February 2002, the budget day tax changes will be put into effect and, where relevant, this will involve a once-off correction payment to cover any arrears from 1 January 2002. In terms of the tax and social welfare, there will be a correction payment which will arrive eight, nine or ten weeks into the year. Unless one is being very gravely misled, that is about as broad a hint as one can get.

One must add on the euro conversion.

No doubt it will be in euro.

There are positive measures in this Bill and it could not be otherwise, given the unique surplus available to the Minister in this case. I give the Minister credit for those positive measures but in reading the Bill it is impossible to escape the conclusion that huge benefits are being conferred on certain wealthy interests in keeping with the Minister's avowed political bias in his three previous Finance Acts.

If I might concentrate on one of them in the limited time available to me, nothing betrays more the money bias of the Minister for Finance and the Government than the blatant abandonment of the measures previously announced to cause the release of hoarded land for house building purposes and to assist first time buyers. It is an action blatantly dismissive of the interests of the average citizen and unashamedly designed to benefit a small number of builders and developers.

This is the Minister who told us that the housing crisis was being aggravated by the kind of developer who calculatedly hoarded land and drip fed it into the market. The Minister said that therefore he was persuaded to extend the halving of capital gains tax to residential land but on what became known as the "20/60 basis", in other words, developers who refused to release the land for house building purposes would be subject from next year to a 60% punitive rate of CGT. This would have been a significant incentive to increase the housing output at a time of acute need. Without warning, but with the full support and knowledge of his Cabinet colleagues according to the Taoiseach on the Order of Business this morning, the Minister for Finance came into the House today to announce that he had reversed this measure. The type of developers who manipulate the market in the manner described by the Minister for Finance two years ago have been given the green light to resume their selfish agenda. What is inexplicable is that the Minister has made this announcement 15 months in advance. Surely if he were serious about tackling supply side problems he would have done two things – he would not have announced any change in strategy until the next Finance Bill and, in any event, he would have made clear that the rate would revert to the original 40%. The 20% rate was a favoured one, the purpose of which, the Minister said, was to release land for residential building purposes. Now there is no reversion to the original 40% rate but a maintenance of the favoured 20% rate for reasons known only to the Minister.

At a time when people on reasonable incomes cannot afford a mortgage and landlords force tenants on to the streets through rent increases, these measures are a disgrace. A 20% measure introduced as an incentive to help these people has now become a permanent measure to enrich people who have already become immensely wealthy in the boom of the past seven or eight years. The Minister has implemented the measures in the report of the Commission on the Private Rented Residential Sector which benefit landlords, but the Housing (Private Rented Sector) Bill, which promises measures to benefit tenants, will not be published until summer 2002. This is an outrage my colleague, Deputy Gilmore, has sought to highlight for more than two years. In the interim, the Minister responsible for the Bill, Deputy Dempsey, gives priority to the Electoral (Amendment) Bill to permit Ray Burke-type expenditure in the forthcoming general election.

I have some of the most harrowing constituency cases where rent hikes by landlords force tenants to become homeless, and these people must then live in the forlorn hope that the local authority will house them. I will mention two cases I had last week and I will give the details to the Minister to protect the confidentiality of those involved. A separated man with a 13 year old daughter told me he is going hungry. He works and pays rent on a house in Tallaght. The landlord is seeking to hike the rent for the third time and the man cannot make ends meet. He does not qualify for a housing subsidy and has no prospect of being housed.

The second case is of a woman who returned 12 months ago from a British city where she had lived for 15 years. She rented a house in my constituency and the landlord announced a 100% hike in the rent. That woman must pay £800 for a poorly kept, poor quality, three bedroomed house. She is awaiting an operation and cannot pay the rent. The landlord owns 12 houses in the greater Tallaght area. That woman faces homelessness if the local authority does not house her, which is not a likely prospect.

At a single stroke the Minister for Finance has abolished the 2% anti-speculation tax, reduced stamp duty from 9% to 3% and halved the traditional capital gains tax on residential land. The point of the report of the Commission on the Private Rented Residential Sector was that a balanced approach was necessary but the Minister has ignored the tenant friendly measures proposed in the report and implemented the measures which benefit landlords.

I agree with my colleague, Deputy McDowell, that moneyed interests have had their way with the Minister. House building is slowing down in the greater Dublin area and decreased by almost 3% last year. Despite that, the Minister told the House that the Government has decided not to proceed with the anti-speculative property tax next April "in light of developments in the housing market since last summer". What developments does the Minister have in mind? I hope he does not believe that, just because the rate of price acceleration for trophy houses in desirable areas has stabilised, ordinary citizens' aspirations for a home of their own is any more realisable now than it was last summer.

I draw attention to the example given by the Minister. How he could perpetrate such a cruel deception in his speech and maintain a straight face is beyond me. He said:

The Government has taken a range of measures over recent years to ensure [that it deals with the price of houses]. The Government is also concerned to ensure there is a supply of good standard accommodation in the private rented sector. The [Finance] Bill provides for various tax incentives announced by Government arising out of the recommendations of the Report of the Commission on the Private Rented Residential Sector.

The point is that the only measures from the report of the Commission on the Private Rented Residential Sector the Minister proposes to implement are those favourable to landlords. None of the measures which guarantee an element of security, standards, fixity of rents or anything similar is dealt with in the Bill. The Minister, Deputy Dempsey, whose task it is to deal with housing, tells us the Bill to deal with those matters will be published in the summer of 2002.

That is a disgrace and can only lead to the conclusion that it is a "scratch my back and I'll scratch your back" arrangement between the Government and some developers. The Minister, Deputy Dempsey, has succeeded in convincing most of the public that he has nothing to do with housing policy and that the real Minister with responsibility for housing is someone called Peter Bacon. Meanwhile, the Minister, Deputy Dempsey, is focused on how to get more spend for Fianna Fáil in the next general election. The question arises as to where this extra £1 million for Fianna Fáil will come. The answer is that it will come from some of the largest beneficiaries of the Finance Bill.

Reading through the Bill, one is struck by how it is characterised by relief after relief. There are reliefs for health insurance, rent a room, living over the shop, rural dwellings and even paltry relief for trade union contributions. That is the point of the clientelism philosophy behind the network of reliefs. Even trade unions will be on board because of this welcome but modest and, in the great scale of fiscal policy, inconsequential relief. Such an approach to taxation flies in the face of all literature from the time of the Commission on Taxation and serves mainly to water the grassroots and complicate the tax system.

I cite section 30 as an example. Its purported role is to give tax relief on interest on borrowings to purchase, improve or repair certain rented properties referred to as pre-1963. In the current environment, I can see the point of facilitating the restoration, repair and modernisation of these pre-1963 dwellings, but I am damned if I can understand the logic of facilitating tax breaks on borrowings to purchase them. What is the point other than facilitating wealthy interests to use their capital gains tax reliefs to buy these properties, keep prices high and push rents to a level that is fast becoming, and has already become in many parts of Dublin, unaffordable?

Deputy Michael Ahern said this was a 99% Fianna Fáil Finance Bill. I do not know how the newly self-proclaimed social democrats of the Progressive Democrats take to being treated to the remaining 1% of the Bill. Nevertheless, the fact remains that the Bill will widen the gap between the wealthy and the average citizen. The Labour Party showed how two thirds of the Minister's spend in his give-away tax package on budget day could have been focused in a manner which would have contributed more to real tax reform and would have targeted and benefited the low to average taxpayer. That was not done and, I believe, it was not done deliberately. That is true of most of the measures introduced in this Bill.

The share options scheme is a marvellous idea. A number of Fianna Fáil backbenchers referred to Ireland as a share-owning democracy and spoke of how this scheme will make shareholders of us all. The scheme is structured in such a fashion as to primarily benefit executives and managerial people. While the harmonising regime for deposit takers under the savings scheme, which is universally welcomed as a good thing, seems very attractive on the surface, it gives rise to some concern regarding the freedom to transfer moneys from non-incentivised schemes to this one. If its purpose was to mop up money out of the economy and to encourage people who may not be in the habit of saving to save, why not restrict it to them? Why facilitate, as happened with SSAs a few years ago, people to transfer moneys from other areas to this scheme? It is not necessarily proven that it will be a non-inflationary measure.

I agree with Deputy Rabbitte that the amount of time allowed to speak on the Finance Bill is extremely limited. I will make a few points which strike me, and would strike anybody, who looked at the budget closely.

Who will be celebrating when this Finance Bill is passed at 10 p.m. tonight? There is one group of people who will undoubtedly be celebrating, the speculative group, as Deputy Rabbitte referred to them, who sit on building land which enjoys planning permission but which they refuse to release or on land which has been zoned but for which they refuse to seek planning permission. They might have looked forward to paying 40% capital gains tax one year, they might have enjoyed paying it at the rate of 20% another year and then faced, if one was to believe the great bible of the current Government on the housing crisis, the Bacon reports 1, 2 and 3, a capital gains tax regime of 60%. They will not now pay capital gains tax at the rate of 60%. In addition, those who might have felt they would be affected by the 2% speculative tax will not pay it. Those who own many rental properties now face the most attractive regime to encourage them to buy more.

This budget, when one looks at those measures, cannot be described by any fair-minded person interested in housing as little less than a speculators charter. It is a matter of fundamental disgrace that local authority applicants are being told, for the first time since the 1970s, they will not be offered accommodation for at least five years. Rents have escalated and land which should be released for building purposes is not being released. It is that group of speculators who will celebrate at 10 p.m. tonight having received the finest give-away ever from a Minister for Finance.

It is at the same time a slap in the face to all those voluntary organisations and socially minded people who drew attention to the housing crisis, who are aware of the number of homeless people, who are aware of the number of people on the housing lists who have abandoned any prospect of putting a roof over their heads. I want to try to tease out what the Minister for Finance is trying to do.

The dangerous side of this Bill and the short discussion on it is that some of the Minister's fundamental assumptions of financial strategy might not be adequately addressed. He proudly said on "Later with O'Leary" the other night that the Government was right of centre. The Minister smiled wryly at the reference to an article in theBritish Telegraph of Tuesday, 13 February 2001 describing him as the Celtic Thatcher. It said: “Celtic Thatcher takes on Brussels”. The Minister sat back and gave one of his little smiles. In a way he is setting up the parameters of the forthcoming election. People should think long and hard about this Government. This speculative class to which the Minister has tied himself, the people who have done more than anyone else to enhance their greedy desire, have also shattered political confidence in this country. They are the ones responsible for offering various types of carrier bags and envelopes to the Fianna Fáil Party and for bringing them before the tribunals.

I hope the public think long and hard about who they will support. Do they want more of this McCreevyism, none of it startlingly original? We have heard much of it before. The Minister spoke about taking money at the top rate of tax from those who can well afford to pay it, those who are enjoying all the concessions under the various schemes. His description of taking tax from these people is, "I am giving them back their own money". That phrase was used by Mrs. Thatcher in Britain. That is ignorance and there is no economic basis for it. Speculators made their money from an economy into which people put their sweat and blood, into which hundreds and thousands of millions of pounds was invested by Irish taxpayers over the years. Do they pay education costs, the costs of infrastructure, the costs of the health system? Of course, they do not but the Minister chooses to take up this little populist piece of rubbish and say, "I am giving them back their own money". This kind of folksy ignorance, without a shred of serious economic basis to it, is precisely what the mad baroness in Britain came out with.

I thought the day would never come when I would say perhaps theDaily Telegraph got it right. It would have been different – and we are expected to say how it might have been different – if one approached the relationship between economy and society from a different set of assumptions. If it had been approached from a rights perspective, one would have arrived at the conclusion that at a time of unimaginable surpluses one could narrow the gap between that range of provisions that are available in every other European country, those countries which operate higher tax regimes but which enjoy public parks, different kinds of amenities, child care provision, which have first-class health services and public transport, none of which we have. Instead of saying he will use the surpluses to lift the life of our citizens to some kind of provision in the public space, the Minister comes out with these little trite pieces of British ignorance of the worst kind, “I am giving the people back their own money”.

I hope people see how that rights approach has been entirely discarded. I heard of a case of a person who attended the Regional Hospital in Galway and went home untreated after 18 hours. When the person returned the next day he saw 30 people lying on trolleys awaiting treatment. Is that the way to treat people? Is it fair to tell people who need a house they have to wait five years for one? The remark, "there are always people who will have to be lifted up" was made in this House today. A Deputy described the Irish economy as something like Willy Wonka's Chocolate Factory, "It's so good we do not know what to spend it on, holidays abroad, cars, whatever". This is so offensive to a country which desperately needs to restore social cohesion and which needs social solidarity, which should be using its surpluses to say a person's right to a decent health service, a house, to travel safely in old age, to live in a proper environment is a right. There are no rights, there are only concessions.

The principal group who get concessions in this budget are the speculators who, as I said, have a unique identity. Every one of those who attached themselves to those now being investigated for corruption were people from that speculative class. They drove a stake into the heart of Irish democracy and instead of that connection being broken, the Minister rewards them almost without their asking for it. Our colleague in Galway West, Deputy Molloy, as Minister of State at the Department of the Environment and Local Government with special responsibility for housing, spent about a year and a half standing on his hind legs saying we had no housing crisis and that the Bacon reports would solve all. Now the Bacon reports are discarded and no reasons are given why the members of the lobby which counts, which always counted and which always had a monopoly on the corruption and who knew where to go, are those who benefited. He will not have to come with a mask over his face to go into the tent at Galway races next year.

There are a few important points in relation to this. In 1955, 55,000 people left this country. They are now elderly and would like to come home, many to the places they left in much harder times. However, they cannot dream of coming back due to the housing shortage. There is something incredibly deadly about the morality of a country that accepts that something as basic as a roof over one's head can become the basis of speculative reward. It is time we built houses and when local authorities are slow to do it to establish a housing authority that will build them within a timescale to enable the State to offer houses.

It is part of the madness of this new version of ourselves as prisoners of the economy rather than as members of the society that the Tánaiste can say she will bring 200,000 people into the country because the economy needs them. Fine, but where are they to live? What about the housing needs of the entire population? She would say, rather like old Friedrich von Hayek who, as Mrs. Thatcher mentioned in many of her lectures afterwards, used to say, "Prime Minister, the markets will do it for you – be patient and the markets will do it."

Those engaged in every civilised economic discourse in any of the academies I know at present could tell the Minister that there are things the market cannot do. It cannot give you universality in health, it cannot give you universality in housing and it cannot give you universality in education. That is why there is a barbarous ignorance to this kind of logic that informs his decisions.

He pushed when it came to individualisation but when those of us who say that a woman has the right to choose whether to rear her children for a few years or that she be driven into the economy, we are supposed to be old fashioned. All we say is that one should not be penalised for choosing to want to look after one's children and to be with them at a time when society is torn apart by this ridiculous kind of selfish economics. That is all we asked the Minister yet he drives on his individualisation tax proposals as something that is supposed to be an automatic benefit, something progressive and when the markets are finished it will all be all right. It will not be all right.

The test of a budget or a Finance Bill is in the kind of country we create with it and what kind of life we want from it. Do we want the Tánaiste saying not just the 200,000 but also pointing to those who had gone out on retirement suggesting we bring them back as well. Why should we bring them back? Not to ensure that they might have a better standard of living or that they might have some enjoyment in old age, but because the economy needs them. That is why I use the phrase "prisoners of the economy". This is the deadly right wing logic of a Minister who, on Olivia O'Leary's programme, said he is proud to be a member of one of the only right of centre Governments in Europe and looks disparagingly at those who enjoy child care, good education, public transport, public parks and safety that are available in Europe.

The mentor, the Tánaiste, gives us her occasional insights into what she thinks we should be doing. She thinks that, for example, a country that probably pays no tax is a good thing. We are all willing to be taxed to provide the kind of country that will give dignity in old age, a good health service and provide an education that will give people chances.

There is a gap between those who are doing best under these tax concessions and those who are at the other end of the scale and as that gap widens it is markedly insulting to tell the latter they are defective people who will catch up when the benefits of the booming economy gets to them. When we examine this Bill and the thinking in it we see a clear division. There are those who are followers of a market model that suggests the people can drag themselves after it but who will make it efficient and will run it the way they do now and will to give back to those who pay most and there are others who suggest that this model is inimical to the public interests. It will shatter social cohesion and will drive bigger wedges between the gaps already in society and tragically it will not give us something we had the opportunity to have for the first time. We could have had a first class education service or a first class health service. We could be building tens of thousands of houses. We could have driven the speculators back into their place. We could have a happy country. We could have been talking about shortening the working week and the working day or increased holidays but we cannot do any of it as we have been condemned to prison by this ridiculous, nonsensical, right wing and ignorance based system of running the economy of which this Finance Bill is just instalment four.

I wish to share my time with Deputies Maloney and Pat Carey.

As we are all aware, the implementation of the provisions of the Bill will bring into effect the decisions taken by the Government in the budget of December last. That budget was one of the most innovative not only of taxation reform but also reform across a range of social welfare programmes. It was a budget which ensured that the less well off and disadvantaged in our society were given more social protection and financial support.

Looking at the provisions of the Bill it will ensure that all employees will be better off when the budget 2001 tax measures come into effect in April this year. PAYE taxpayers, particularly from the middle income earning bracket, will be the primary beneficiaries of the income tax changes in the Bill. The economic turnabout is a success story when one considers that nine years ago, in 1992, unemployment was over 16%, immigration was still prevalent and income tax rates were high.

The establishment of the national pension reserve fund was a highly innovative move. It will guarantee, as our population ages, that we will be able to meet our future public pensions bill. Merryl Lynch, a leading US bank, has carried out a survey within the EU on the state of pension policies within the EU. Ireland tops the league for the support it gives to the reform of our public pension programmes and also tops the league for the financial support given to pensioners.

Inflation is falling and is measured to the harmonised basis. It has fallen from 6% in November to 4.6% in December and is now at only 3.9%. The introduction of the new savings scheme, which is included in the Bill, will help to further reduce inflation. It is also an innovative measure designed to promote savings in our society. This new savings scheme will encourage substantial and regular saving among the population in general. It will be assisted by a top-up to net savings of 25% by the State from tax revenues. This is equivalent to a tax credit of 20%. The scheme will commence in May and savers will be asked to save for five years and it will be open for one year for those who wish to participate in it. We must always support savings policies. Reform of the pension programme is important but the implementation of new savings schemes will enable people to have access to more money as they grow older. The encourage ment of a regular savings programme can only have positive results.

The key aspect of the Finance Bill is that many people will have reduced income tax bills. We have enjoyed economic progress but we must ensure that lower and middle income earners are not penalised with higher income tax bills. The changes announced by the Minister, Deputy McCreevy, will help to substantially reduce the income tax bill for all families and significantly improve the take-home pay of all taxpayers. Under these changes no worker will pay tax on the first £144 earned per week, while the lower rate of tax will be reduced by 2p from 22p to 20p and the higher rate will be reduced by 2p from 44p to 42p.

I will give some practical examples of the effects of the income tax changes. A single taxpayer earning £12,500 per year will gain up to £42 per month in take-home pay, while a married couple earning £20,000 per year will gain up to £71 per month in take-home pay and a married couple earning £25,000 per year will gain up to £86 per month in take-home pay. A married couple on one income of £16,000 and four children will gain as much as £135 per month. In addition, 133,000 people will be removed fully from the tax net. These reductions will cost £1.2 billion and will ensure that 1.2 million taxpayers will be better off.

There has been a significant widening of the standard rate tax band, cutting to 23% the number of taxpayers on the top rate of income tax when exempt cases are included. One of the criticisms of the taxation code was that too many people earning average incomes were forced to pay tax at the higher rate, which was 44% prior to the budget. The widening of the standard rate band from £14,000 to £17,000 will ensure that only 23% of the population will pay tax at the higher rate. I am confident the Government will continue its policy of widening tax bands in the next budget to ensure that fewer people pay tax at 42%.

On a broader level, self-assessment for non-PAYE workers has proven to be a success. However, the Minister for Finance has announced that after 13 years of self-assessment there will be a pay and file system of income tax self-assessment with one key deadline in the annual tax calendar instead of three deadlines. Other tax changes announced in the budget are also highly innovative. The reductions in indirect taxation, including the VAT rate, has helped the Government's anti-inflation programme. These include the introduction of tax relief on trade union subscriptions, an exemption from tax income of the £6,000 derived from the rental of rooms in a person's principal private residence and an extension of tax relief for health insurance to cover premia for primary health care. From April 2002 medical insurance relief will be given at source, while permanent health insurance relief will be given on a net pay basis. From last January mortgage interest relief has also been given at source,

I support the provisions in the Finance Bill as they will help the less well off and lower and middle income earners. This is part of the broader Government strategy to reduce income tax burdens which are now one of the lowest in the European Union. I commend the provisions of the Bill to Members as they are a fair and balanced set of proposals which help to promote economic and social justice.

I have listened with interest to a number of contributions. Speakers have pointed out areas where further concessions or allowances could be provided for in Finance Bills. I support these points.

I listened with particular interest to the contribution of Deputy Higgins who is passionate in his beliefs. He has been a Member of the House for a number of years and impatience might be one of the reasons for his speech. We all wish to see greater changes introduced, but the Celtic Tiger economy was only born a few years ago and the Government is dealing with most of the issues, albeit in a fashion which might not be accepted across the board.

The Government has lived up to the commitments it gave prior to the last general election. Far too often parties made pledges which were forgotten in year two or three. I am pleased that the Minister for Finance has recognised the commitments we made and has confirmed once again in the budget the Government's sound management of the economy over the past years. It is fair to recognise that some of the provisions in the Bill have been included as a result of commitments made to lobby groups.

I welcome the reductions in the tax rates and the increases in the allowances. If I remember correctly, this was the most serious issue facing the country in 1997. A commitment was given in the election manifesto and programme for Government that recognition would be given to the over-burdened taxpayer over five budgets. I also welcome the increase in the carer's allowance. However, as a Government backbencher I wish to see further increases. I do not want to pay lip service to carers. They play a leading role in society and I recognise that monetary compensation will never be enough to repay them.

I welcome the share option scheme and the provisions relating to giving tax relief at source and the tax relief for third level fees. The Bill will increase the housing supply. Others may contradict me, but time will prove this. The Minister has listened to those who made submissions in relation to charitable donations. I welcome the provision dealing with the write-off period for the wear and tear of capital allowances. The reductions in the VAT rates, which have already had an anti-inflationary effect, must be welcomed. This is further evidence that the Minister has listened to those who made submissions. I also welcome the new savings scheme.

In our election manifesto we promised to reduce the personal taxation rates. The Minister has long been an advocate of low tax rates. One must recognise that the cornerstone of the Minister's policy has always been the reduction of tax rates. Despite criticism, he has argued that lowering tax rates can and does increase revenue. This cannot be contradicted. He has been proven correct in reducing the rate of capital gains tax from 40% to 20% which has resulted in more revenue and, more importantly, in greater economic activity. The increases in personal allowances and the reduction in tax rates are aiding the economy in a number of ways. It is more worthwhile for people to take up work and thereby reduce pressure on social welfare costs. They also give workers an opportunity to retain more of their hard-earned salaries and this encourages a sense of ownership of the economic success which we enjoy as a nation.

I welcome the fact that the Minister is introducing the favourable employer share option scheme. Employers and employees have requested these concessions so they can all share in the economic success of a company. Some 70% of employees must avail of the scheme. Employers complain that they are unable to retain employees in this competitive market but schemes such as this will serve to attract and retain employees. Obviously they will be motivated to develop the companies for which they work. Their work is an investment in the company and in themselves. The 70% threshold will bring home to employers and employees that employees have an integral part to play in the success of that company.

I welcomed the increases provided for the carer's allowance in the Social Welfare Bill some time ago. I welcome the provisions in this regard in the Finance Bill, 2001. The allowance for those who employ a carer to look after a relative has been increased from £8,500 to £10,000 per annum. The provision that allows medical claims directly from designated relatives is welcome. Many families will also welcome the Minister's approval to extend relief to cover education, psychologists and speech therapists.

In regard to the relief for trade union subscriptions, we all recognise that unions have played a major part in our economic success, through successive partnership agreements. This simple provision gives something back to trade union members. The provision also supports union membership which has been declining and will be recognised as a step to halt that decline. By way of tax relief at source the tax code is a complicated and cumbersome system. Any effort that reduces the administrative burden on the taxpayer and the Revenue Commissioners is welcome. If the reduction on the administrative burden can be coupled with the benefit to the taxpayer at source it is welcome. PAYE workers pay as they earn and it is only right and proper that they should receive benefits as they pay.

The extension of medical relief to cover premia for primary health care will make an important difference for those who have to pay for medical expenses. Obviously people should not be punished for receiving medical care. By way of the child care benefit in kind, the Government is doing much for child care across a wide range of Departments; the Department of Justice, Equality and Law Reform is funding a huge expansion in a number of child care places throughout the country. This provision will further encourage employers to provide child care facilities for workers. The Tánaiste has worked hard to develop family friendly work practices.

The abolition of third level fees helped to ensure increased participation in universities and colleges. It reduced the burden on families trying to fund their children's education. The increased participation extends to students studying abroad and taking part in graduate courses in the US. The Minister is now extending relief to fees for overseas and post-graduate courses. He has done this as a result of requests on Committee Stage which proves the Minister was listening.

The Government is facing the challenge of improving housing supply across every constituency. The Finance Bill is only part of that work. We all know the housing supply has be increased.

I wish to share time with Deputy Carey and I commend the Bill to the House.

I agree with Deputies Higgins and Rabbitte that we do not have sufficient time to debate this Bill. I would love the opportunity to have an extended debate to explore the dissertation from Deputy Higgins. I am not sure whether he thought he was on the back of a lorry in Eyre Square or in the hallowed halls of NUI, Galway, but I would love to explore his notion of social solidarity and his lectures to us on sensitivity and so on. I would love to examine how he can stand over being a member of a Government in which his president, Deputy De Rossa, gave a miserly £1.80 per week to social welfare recipients a few budgets ago. Will Deputy Higgins tell me honestly how he can stand over the decision of the then Minister for Education to abolish third level fees? Such a signal of social solidarity I have not seen. I would like to hear him comment on the report from the Higher Education Authority last week on the huge drop-out rates from third level education because the supports had not been put in place by the universities and the need for universities and third level colleges to introduce capitation grants which is fees by another name. The constituency I represent and certainly part of the one represented by Deputy Higgins has not benefited one iota from that measure.

The Deputy's colleague—

He was a member of a Cabinet that refused to introduce maintenance grants for post leaving certificate students who, in areas such as mine and the constituency represented by Deputy Joe Higgins, need to get on to further education.

The Deputy talked about health. The Government of which he was a member presided over a policy which used the long arm of the law to prosecute dying people. Surely that is not sensitivity. His colleague, Deputy Rabbitte, was Minister of State with responsibility for science and technology and had the high chair around the Cabinet table. He drip fed little grants here and there for educational and scientific research. He took everything out of Citywest Business Park. The Deputy talked about speculators and developers. The biggest speculators and developers are in Deputy Rabbitte's constituency and they benefit from the work Deputies Higgins and Rabbitte did when in Government.

That is not so.

Every time a member of the Labour Party stands up here they talk about the Electoral (Amendment) Bill. For goodness sake, let us have an honest debate and explore this properly because the thoughts of the Labour Party are simply a fraud.

I welcome the opportunity to make a contribution to this debate. I congratulate the Minister on producing a Bill that will go a significant way to reducing poverty levels. The reductions in the rates of income tax and the increases in the tax bands are fully in line with the expectations of the social partners. It is difficult to see how the Minister could not have announced these changes given the current favourable economic conditions this country enjoys. In addition, a further 133,000 people will be removed from the tax net. He could have done many different things but he has—

I do not wish to interrupt the Deputy. The surpluses were not there and the Deputy knows that.

There was good management by the current Government and appalling management by the Government of which the Deputy was a member. In 1985 when the Deputy's party was in Government with the Fine Gael Party we were lectured on housing. That Government gave £5,000 to people to evacuate their houses in areas I represent, and move to the leafy suburbs to buy houses they could not afford and they were up to their necks in mortgages.

I did not reward speculators.

Allow Deputy Carey to continue without interruption. If the Deputy addresses his remarks to the Chair he will not invite interruption.

It is absolutely appalling that the Deputy has contributed to some of the greatest—

Everything the Deputy addresses to me, I intend to reply to because I have had enough of it. I did not reward speculators.

Deputy Higgins, I have called on the Deputy to address his remarks through the Chair. In that way he will not invite interruptions.

I am afraid Deputy Higgins and some of his colleagues are quick to give it out but are ferociously slow to take it.

I would listen to the Deputy for an hour and reply to him.

I would ask the Leas-Cheann Comhairle for our privilege.

This country suffered economic hardship for a long time before achieving independence. The early years of the State were spent recovering from thelaissez faire policies of the previous century which had reduced much of the population to a state of grinding poverty. The financial focus was geared to capture the development of our infrastructure and we have much to be proud of for what was achieved in those early years.

We had to contend also with an economic war with Britain. The years during the Second World War were spent protecting whatever degree of economic independence we had achieved. This was a period of sustained protectionism. Little economic development could take place in the aftermath of the war. There was economic depression up to the end of the 1960s. Under the Government led by Seán Lemass, we enjoyed a period of successful development during the 1960s. This, in turn, was soured by forces beyond our control with the oil crisis of the 1970s, which led to disastrous inflation and a further downturn in the economy. Taxation during that period was also at an all time high.

The various programmes for economic expansion and the inclusion of the social partners in securing industrial peace have helped enormously to create an era of economic prosperity which this country has never before enjoyed at any time in our long and colourful history. Is it any wonder then that the Minister has reduced the high rate of income tax by 2p, from 44% to 42%. The new American Government – Deputy Michael D. Higgins would not be a great admirer, and perhaps I am imputing opinions to him that are not fair – wants to reduce the income tax rate from 38% to 33%.

The Government has increased spending on health by over 86% in the last four budgets and we still believe we are not doing enough. Education which has been the cornerstone of our economic development has seen an increase of 66% and we still do not have adequate facilities for our children, or indeed all our adults.

I want to refer to a number of specific points in the Bill. I am pleased the Minister has taken on board the retrospective tax relief and the purchase of a taxi licence. This will help in some way to overcome the sense of grievance felt by some taxi drivers as a result of the decision to increase the number of taxi licences. I am pleased also that the Minister said in his contribution he would be prepared to consider specific hardship cases. Taxi drivers are not the cute bunch people often portray them to be. Some of them made investments that in the cold light of day may be regarded as naive. A small number of these people are enduring real hardship, therefore, I ask the Minister to be as sensitive as he possibly can in dealing with those cases of genuine hardship. Some of these people bought taxi plates at inflated prices for what they saw as a pension investment.

I fully applaud the savings scheme the Minister announced. This will make a huge difference to the savings culture in this country. I recall when, as a young teacher, we were always promoting Post Office savings schemes in school. The smaller saver will benefit enormously from this measure but I do not think it will be of concern to the speculators.

The provision of tax relief on charitable donations is very worthwhile. It will benefit charities at home, including the contributions parents and others make to developments in primary, secondary and third level education.

The relief from stamp duty for first time buyers will be of considerable benefit and will help the housing market. Many first time buyers were not in a position to purchase a previously owned house because of the stamp duty demand.

The proposed changes from income tax to capital gains tax on the share saver schemes was widely welcomed. I was disappointed to note that the level of take-up of the scheme was so low and that just approximately 1,000 people contribute to the scheme at present. The schemes are an excellent means for employees to get a slice of their company's action and I hope this provision will encourage more companies to introduce them for their employees.

Tax relief on health insurance premiums is an excellent provision. The restrictions which apply to tax relief on third level fees are removed in the Bill. I welcome the tax relief for repeat years for more than one course to holders of existing third level qualifications. This is increasingly happening, particularly in relation to people who have studied under the open university regime. The exclusion of medicine, dentistry, veterinary medicine and teacher training has been removed.

The benefit in kind in relation to child care has been improved considerably. I applaud the Minister for what he has done in section 22 which allows an exemption from benefit in kind where employers are involved in financing but not managing facilities. Many small companies provide good child care facilities. This provision is to be welcomed.

I support the room for rent provision. This is an enlightened move whereby a person's principal private residence can be let as residential accommodation. Where the gross annual income is less than £6,000, the annual rental income will be exempt from tax. This will not affect stamp duty clawback, capital gains tax or the full entitlement to mortgage interest relief. It will help to provide additional accommodation. In the case of elderly people who might like to have someone share their house, it will remove the suspicion that they are breaking the law by letting a room and not declaring it.

I welcome the announcement on the mobility allowance scheme which the Minister made earlier this week. A working party is discussing this matter. There is an anomaly whereby someone who is disabled can benefit from the disabled drivers and disabled passengers tax concession scheme and travel with an able bodied driver in a three litre vehicle, an off road vehicle generally, but if they own the vehicle that concession does not apply. A small group of people who are interested in outdoor pursuits such as fishing, cross-country riding and so on have been in touch with me. They believe the scheme should be modified to take account of their concerns.

I commend the Bill to the House and I would welcome a more extended debate with Deputy Higgins.

I wish to share my time with Deputies Joe Higgins, Perry and Hogan.

Is that agreed? Agreed.

The Minister when introducing the budget stated that the measures announced would improve the quality of life of all our people. The question I would ask is when? The central issue in Irish society today is quality of life. The average person is tired of queuing and being caught in the traffic jam.

Health service budget allocations may well be up 87% over the life of this Administration, but do people believe that the availability of the service has improved? The people do not believe this. There is a lack of forward planning of the delivery of health services within the community. We have witnessed the erosion of the general practitioner's capacity to provide the level of service now required as community medicine while the hospital is over-stretched.

We must look at the education aspect. We are told of the major increase in funding, yet we have seen students demonstrate on the streets demanding that their teachers' grievances are addressed. The opportunity our current affluence affords was not seized to address meaningfully the effects of past educational disadvantage. While the Government continues to underfund educational supports in the formative years of school attendance, positive intervention in delivery of identification of children with learning difficulties at the earliest possible stage should have been targeted. Knowledge is power and the par ents of today want to ensure their children's capacity to absorb knowledge is not impeded.

The Minister speaks of creating a fair society, yet squanders a real opportunity to give young people the chance of a full life which would be fair and would improve the quality of life. However, before the child even gets to school, the Minister could have been of real help to parents and children by addressing the child care issue, with a real commitment to ensure best practice at an affordable price to average income earners.

The cost of child care is a constraint on family development, a source of worry to parents and a drain on the household budget. It also entails a loss in benefit to society, which includes the young child. The Minister's failure to reduce the burden on those involved is another missed opportunity. It is madness to under resource health and education and folly to fail to address the child care issue.

We are told the economy is over heating and that there is a scarcity of manpower. The cost of child care is not addressed in a way that would allow low income earners with children to rejoin the workforce because so much of the take home pay is spent before it is earned in securing child minding services. The Minister makes play of the concept of a fair society but he does not provide the basis for the fairness to apply across the board. Economic prosperity is great provided one can afford to partake. The Minister and his colleagues in Government may be able to afford it, but the woman with a couple of children cannot.

The lost opportunities in the Bill are a long-term disaster for the State. Young couples starting out in life naturally aspire to a home of their own. The State has played a major part in establishing the concept that home ownership is a right for each family. When that could not be immediately achieved local authority housing would be available until life improved when the family would have the option to acquire its own home. This has been eroded.

(Dublin West): I thank Deputy Cosgrave for sharing his time with me. It is an insult to Members of the Dáil and the people we represent that this massive Bill of 320 pages must be dealt with in such a peremptory fashion rather than allowing for a proper and real debate. The Bill reinforces the economic policies of the Fianna Fáil/Progressive Democrats Government, which have resulted in an increasing polarisation between the super rich and the very highly paid on the one hand, and the poor and low middle income earners on the other hand.

The Minister is a committed right wing politician who ruthlessly advances the economic interests of the wealthiest minority in this society. He and his Government are part of the international trend of globalisation which in the past decade has been responsible for the greatest ever shift in wealth from the poorest in society to the wealthiest. At the micro level of this State the Bill reinforces that right wing trend.

The Minister has maintained a tax liability for workers on the national minimum wage, which is set at £4.40 per hour. By contrast, a single person earning a salary of £80,0000 per annum will this year receive a hand back of £2,564 as a result of the budget. It has been the trend of the Government over the past three and a half years to cause increasing inequality between the poorer and the lower income earners on the one hand and the very highly paid and the wealthiest in society on the other hand.

Incredibly, given the housing crisis brought about by the actions of the speculators, the Minister has again facilitated them. They could have been attacked in the 1970s and since if the Kenny report had been implemented. Building land could have been taken from their grasp and utilised for the social purposes for which it should be used at cost price to provide cheap homes. In the last year or so the Minister made a major concession to the speculators by reducing the rate of tax on land sold to 20%. He then held up the stick of a tax rate of 60% to be applied next year if they did not get rid of the land before then. However, lo and behold, the stick turns into yet another fairy wand for the speculator friends of the Fianna Fáil Party.

It is scandalous that the tax on speculators who have been buying new homes is to be reduced. All restraints on the speculators are being reduced even though they are responsible for the crisis in the housing market. The Minister is making great efforts to realise the admonition of the New Testament that to those who have more shall be given. Unfortunately, the opposite is also part of the equation, that for those who have not, even that which they have shall be taken away.

The first time house buyers on average to middle incomes are now forced into the arms of the landlord class whose speculation forced them out of the market in the first instance. The Minister is further entrenching the trend whereby those who cannot afford houses are placed in the arms of the exploiting landlords. This is shameful day in terms of the implementation of policies. The young civil servants in Dublin, the Dáil secretary to whom the Minister will not even give a pittance to address their pay claim are forgotten. Likewise, students are again thrown on the charity of the landlords by the provision of more tax relief for student accommodation. The Minister should instead be providing purpose built State accommodation at cheap rates.

I am astounded that so few Fianna Fáil Deputies have mentioned the taxi drivers, the genuine taxi families – not the big speculators – who own one taxi and who were caught in the terrible bind of paying a heavy price for a plate. Three years ago a constituent of mine paid £80,000 for one plate. Despite the changes introduced to the granting of licences there is nothing in section 46 to provide for them. Where are their Fianna Fáil champions now? The Minister must consider hardship cases where there is genuine need and expand the policy to take care of them. I am sorry we must debate the Bill in this undignified rush.

The controversial decision to abolish the employer's ceiling on PRSI contributions is a cause of concern. The PRSI system is very complicated and needs radical overhaul. It features in seven sections in the Bill. The removal of the ceiling will generate an extra £159 million in revenue. The upper ceiling of £36,000 per employee will be abolished. High-tech companies holding on to staff will have to pay £120 for each additional £1,000 of salary. Staff retention is already a problem for a huge number of companies and this will exacerbate matters. As an ameliorating measure I welcome the proposals on a share options saving scheme.

People earning the minimum wage of £4.40 per hour are still being taxed. The budget is of most benefit to those earning higher incomes. It is regrettable that people earning a mere £176 per week will continue to pay tax. Given that so many people are dependent on it, the minimum wage should not be subject to tax. At present it is only a gross minimum wage, but speaking as an employer that is not good enough for employees who tend only to consider their net wages. I welcome the commitment to address this issue in the next budget.

The relaxation of the benefit in kind tax arrangement for employers who support child care must be welcomed. However, there is a difficulty with the provision of child care facilities. Responsibility for providing them has been removed from the employer, but who will provide them?

The Bill represents a lost opportunity to make future financial provision for those who are most in need. There is a need to encourage savings so that people will provide for pensions and other needs. However, people on benefit or in low paid jobs will not have the money to take advantage of the proposed savings scheme. We must remember that the budget is very much geared towards people on substantial salaries. People on low incomes, those to whom Deputy Higgins referred, who have to pay for child care, who must pay mortgages, rear children and educate their families, have not benefited. The wealthier have got wealthier as a result of this budget rather than those who needed it the most, those on low incomes. There were, however, benefits in regard to social welfare. This Government is obsessed with the millions it has to spend. It is important to remember people on low incomes. We should start on the bottom rung of the ladder and not at the top. That is what future Governments will clearly look at.

I am grateful to those who contributed to the debate yesterday and today. I must confess to being somewhat confused as to exactly what Deputy Mitchell and Fine Gael are concerned about. On the one hand Deputy Mitchell is saying too much has been given in tax reductions generally. On the other hand he and Deputy McGrath seem to be arguing that the 42% top tax rate is too high and that I have not reduced tax by enough.

Deputy Mitchell in his contribution accused me of always favouring the rich in my income tax changes. Presumably, he is classifying everyone on £15,000 to £20,000 per annum or more as rich since single people on those incomes are, or were, the higher rate taxpayers. It is a very unusual definition of being rich. Moreover, what he says in itself is not accurate. I have cut both high and low tax rates and have widened the standard rate band for middle incomes. I have introduced tax credits, a major socially progressive measure which our predecessors in Government failed to undertake. I have removed record numbers from the tax net.

However, where I have most difficulty is when the Deputy goes on to propose a tax cutting programme that would favour even more the very class that I am being accused of helping. Abolishing DIRT would favour higher earners with more savings. My tax credit proposal gives the same rate of credit to all, irrespective of income. Reducing the standard rate of VAT to 15% would give a big bonus to buyers of some luxury goods and, on balance, not be income-progressive. Introducing a middle tax rate of 30% is a 12 percentage point cut in the top rate of tax and would be great news for high income earners.

There is one thing on which we agree and that is providing for the future by allocating moneys to the national pension fund set up by me. As the former Chairman of the Committee of Public Accounts, Deputy Mitchell will have a keen appreciation of providing wisely for future liabilities and, like me, as someone who has seen the good times and bad times in our economic fortunes, he knows that there will be rainy days. I appreciate the Deputy's foresight in these matters and on his frankness in raising it as an issue. I would also echo what he said on our continuing need for capital investment in infrastructure on all fronts to consolidate the growth in income per head achieved in the last six years or so and the failure by some EU commentators to grasp this point. The Deputy is also right in the limit on how much one can prudently invest each year in catching up without risking unacceptable price effects.

It is obvious from Deputy McGrath's contribution and from the parliamentary questions he puts down that he takes a serious interest in income tax policy and its influence in shaping economic activity. I compliment him on his devotion to the subject and it enhances the quality of the debate in this House.

The Deputy repeated many statistics already on the record of the House from replies that I have given to his questions. I remind the House of a few key statistics that highlight the success of our income tax policies and, indeed, our overall economic success. When the Government came into office the Revenue Commissioners had 1.49 million income earners on the their books – on the income tax file, as it is known – of whom 380,000, or roughly 25%, had been exempted from paying tax. Currently, the Revenue have records of 1.769 million earners on the tax file of whom 668,000 will be taken out of the tax net by the provisions of this Finance Bill. In absolute terms, the number exempted from tax so far in our term of office has been almost doubled. In percentage terms, it has gone from 25% to 38%. The 668,000 are the pensioners, the lower paid and, in many cases, they are people who have only recently joined the ranks of the employed. They deserve to experience the rewards of their labours and are people deserving of support in taxation policies. This Government has given them that support in full measure.

The Deputy went on to deal with the numbers paying tax at the top rate. I would like to clarify for Deputies that when the Government came to office, of the 1.49 million income earners, some 424,000 were paying tax at the top rate. That was around 28% of all income earners. The measures in this Bill reduce the proportion of income earners who pay at the top rate to 23% or just over 400,000 taxpayers. What of that top rate itself? What the Deputy omitted to highlight is the telling statistic in relation to the rates of tax. The House need not worry about any information gap as I will put it on the record again. Since this Government took office, we have reduced both the top rate and the standard rates by a full six percentage points. That means that the 400,000 who remain paying tax at the top rate pay at a rate which is six percent less than was the case in 1997-98.

The other development is the point at which the top rate tax becomes applicable. For the single person – over 55% of those paying tax are of that status – this Finance Bill puts the threshold for the top rate of tax to £20,000 per annum. The message is simple. Ordinary people on ordinary incomes are being allowed to keep more of their income for their own use.

In his comments on changes in the way statistics are presented, Deputy McGrath fails to give us credit for the huge increase in the numbers that our policies have removed from the tax net completely. To persist with an approach to overall tax statistics that failed to take account of the 668,000 that have been exempted from tax would present an incomplete picture to this House and the public. The defects in such an approach would have become glaring as time went on and our policies removed still more people from the tax net. There may have been more of a case for a statistical approach that concentrated on those actually paying tax when the proportion exempt was just 25%. Now the exempts have increased to 38% of the income earner base and at that level, they have to be taken into account in the overall analysis.

The Deputy also commented on a reduction in value of allowances as a result of the change to tax credits. I should remind the House that when we changed over to the standard rating of tax allowances, as the prelude to the move to tax credits, we were careful to ensure that allowances were doubled so that persons paying tax at the higher rate did not lose out. In relation to the key allowances, that is, the personal allowance and the PAYE allowance, these are worth more this year compared to last year, notwithstanding the reduction in rates. The PAYE tax credit will be worth £400 to a taxpayer this year compared to £220 last year, while the value of the personal tax credit has gone up from £1,034 to £1,100 for a single person. The reduction in the tax rates affects the value of certain reliefs. However, what Deputy McGrath overlooks is that the balance of the unrelieved income is being taxed at a lower rate due to the reduction in the tax rates and as result taxpayers are better-off overall. I would also be surprised if he was questioning the value of giving reliefs in a way that benefit all taxpayers equally, irrespective of their marginal rate of taxation. There is a symmetry to these matters of which he may not fully have taken account.

Deputies Mitchell and McDowell suggested that the new savings incentive scheme I announced is a rushed reaction to EU criticism. I recommend that they re-read my budget speech. I set out a precise philosophy of countering inflation through a series of measures, including promotion of savings. The scheme we have come up with reflects careful consideration of this matter both before and after the budget and in response to a series of submissions from various groups, including IBEC and ICTU.

I would not fully accept Deputy Mitchell's and Deputy McDowell's other criticisms of the scheme. It is not that the costs of the scheme are unquantifiable. I do not fully accept Deputy Mitchell's and Deputy McDowell's other criticisms of the scheme. The costs of the scheme are not unquantifiable. As with any new scheme, a variety of assumptions may be made about take up etc. and this gives a range of costs depending on the various assumptions. As I indicated in response to Dáil questions last week, our best estimate is a cost in the order of £100 million in a full year. This would assume net savings of £400 million per annum in the scheme. I would be happy to see the scheme maximised, resulting in significantly more savings and, therefore, a greater cost. Most changes made to the tax system have effects that last for longer than one year, for example adjusting tax rates or bands or introducing a scheme such as BES or film tax relief. The budgetary commitments in this case are no different than this.

Of course, there is always a risk of some existing savings benefiting, but the scheme is designed in a way that should also guarantee new savings. Deputy Mitchell's proposal, supported by Deputy Kenny, to abolish DIRT would give more than £100 million per annum as a bonus to existing savers. What strikes me as more strange is his plan to give one-off tax concessions which would be put into a fund to be clawed back if the Government wished the following year. According to Deputy Mitchell, at least 75% of future income tax concessions would be given by shares in a fund in a year by year decision. Therefore, instead of getting increases in personal tax credits or bands or a reduction in rates, a once-off tax benefit would be given with basic tax credits etc. left unchanged. In the following year, the Government would decide whether to give some tax reduction again. At least when this Government gives a tax reduction, people know they will still have it the following year.

Deputies McDowell, Kenny and others had a number of questions about how the savings scheme would operate, which can be discussed further at a later stage. I might mention in response to one query from Deputy Kenny that the funds are to be saved over a five year period, not held for five years at the end of the period. I do not believe there is a fundamental difference of principle between Deputies and me on the matter of encouraging savings, rather on the different ways to achieve the desired effect. We can argue those differences further on Committee Stage.

Deputy McDowell raised various questions about the changes proposed in relation to housing. The Government has always been proactive on housing problems, commissioning studies and taking measures as needed. Housing output continues to grow at a rapid rate. In 2000, we built almost 50,000 units, an increase of 7% on the previous year's total and the sixth consecutive year of record housing output. Our house building rate is by far the highest in Europe. Last year, we built 13 new houses for every 1,000 people in the country, twice the EU average and almost six times the rate in the UK.

Yet, local authority waiting lists continue to increase.

That is due to our economic success.

Tell that to the people on the waiting lists. Providing sub-standard houses is not a solution to the problem.

The Minister's time is limited and the Deputy should allow him to continue uninterrupted.

Some 40,000 to 60,000 people left this country on an annual basis in the past but similar numbers are now returning each year. It is much more preferable to have an unemployment rate of 3.9% with people coming home than an 18% unemployment rate and people leaving the country.

Government measures have a positive effect on output and the output prospects for 2001 are promising. HomeBond registrations, a leading indicator of private new housing starts, last year totalled 34,6000 units, up more than 2% on the 1999 total; 86,500 housing units received planning permission in 2000, an increase of 13% on 1999; and output on local authority housing programmes will increase significantly this year. Further measures now under way, including the proposed designation of strategic development zones for residential development, completion of local authority housing strategies and proactive recruitment of construction professionals from abroad, will help further increase housing output over the coming years.

House price inflation peaked in 1998. Since then, in spite of continuing high demand and falling interest rates, the Government has succeeded in moderating house price trends. Provisional house price data for 2000 suggests that average new and second-hand house prices in Dublin grew by 10% to 12% in 2000, well down on peaks of 36% for new houses and 41% for second-hand houses in 1998.

Are we supposed to applaud the Minister for that?

There is firm evidence that first-time buyers are gaining an increasing share of the new housing market, especially at the lower end of the market with starter homes. Indicative figures from the Department of the Environment and Local Government's house purchase survey show that the first-time buyers' share of the £100,000 to £150,000 housing market increased by 6% both nationally and in Dublin. For example, it increased from 38% to 44% nationally and from 37% to 43% in Dublin since the introduction of the Government's targeted measures in June.

So why abandon them?

This trend is also supported by Irish Permanent house price statistics which show that first-time buyers now account for 55% of the under £150,000 housing market on a national basis, compared to 30% at the start of the year, with the first-time buyer share of the Dublin market under £150,000 growing from 24% to 30%. This welcome trend is also accompanied by a significant fall-off in investor activity in this market price range, with the investors' share of the under £150,000 housing market dropping from 16% at the start of the year to 3% in September according to Irish Permanent figures.

(Dublin West): Why is the Minister inviting them back in then?

Applications for the first-time purchasers' new house grant increased by 5% last year. Furthermore, the figure for applications in January 2001 was 23%, up on the same month last year. We have been vigilant in introducing and amending policies to deal with the evolving market situation. There are signs that supply may be affected by some of the measures taken to change the balance in the market between the investor and owner-occupier and we are refining the taxation regime to deal with this.

Back come the friends.

The proposed changes to the stamp duty regime will leave the investor rate unchanged in the second-hand market while reducing it somewhat for new property, thus providing a supply incentive in this area.

When will that come into effect?

It will apply to conveyances entered into on or after yesterday, 27 February.

What does the Minister mean by "entered into"?

The Minister, without interruption.

Deputy McDowell knows better than most what a conveyance is—

The Minister should not allow himself to be distracted by interruptions. He should address his remarks through the Chair.

Deputy Rabbitte referred to the change in the 60% rate of CGT and zoned residential land disposals. The purpose of the introduction of this provision in April 1998 was to encourage the supply of such land prior to April 2002. This supply has increased considerably in the past two years and there was a big increase in the number of full planning permissions granted in 2000, as compared to 1999. If the 60% rate of CGT were to apply from 6 April 2002, it would mean that the rate of CGT on zoned residential land would be three times that on zoned commercial land which could have resulted in land being diverted from residential to commercial development.

Not at all.

I have read a report of a discussion on the RTE lunch-time news between Deputy McDowell and a property expert from the IAVI. Obviously, I can speak for myself in outlining the reasons for the changes we made, but much of what was said by the property expert was to the point. The Government is not seeking to favour land owners or developers. We are simply trying to encourage those who can do so to increase the supply of residential properties to meet demand and housing needs. As was stated in the discussion, there are two sides to the coin – investors need tenants and tenants need investors. Is there not a public benefit all round where both sides gain?

Deputies

No.

(Dublin West): Tenants need homes, not speculators.

I regret that my motives on this seem to have been questioned by Deputy McDowell, but I assure him they are genuine.

Did the Minister seriously expect the tax to apply at a rate of 60%?

Deputy Timmins suggested abolishing stamp duty on all houses. Stamp duty is a significant source of tax revenue, bringing in approximately £1 billion this year, of which a very large part relates to real property. Deputy McDowell asked whether VAT reductions were passed on to the consumer. In my budget speech on 6 December 2000, I indicated that the Government expected the VAT reductions to be passed on to the final consumer, not absorbed in higher retail margins and that if this did not occur, the wisdom of future VAT cuts would be placed in doubt. Initial analysis from the CSO suggests that there has been some pass-on to the consumer with price reductions in a number of sectors due to VAT changes. My Department will continue to examine this closely in consultation with the CSO.

Deputy Crawford asked about the level of flat rate VAT returned to farmers. The purpose of the flat rate refund is to compensate unregistered farmers in full for the VAT they pay on the goods and services they use in carrying on their business. The Government is satisfied that the increase of 0.1% achieves this objective for 2001.

Deputies Reynolds and Crawford welcomed the alignment of the calendar and tax years and the application of tax and weekly social welfare changes from the beginning of the year. This is a very important feature of this year's Finance Bill. The Government has decided that budget 2002 will be presented to Dáil Éireann on Wednesday, 5 December 2001.

I commend the Bill to the House.

Question put.

Ahern, Dermot.Ahern, Michael.Ahern, Noel.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Byrne, Hugh.Callely, Ivor.Carey, Pat.Collins, Michael.Coughlan, Mary.Cullen, Martin.Daly, Brendan.Davern, Noel.Dennehy, John.Doherty, Seán.Fleming, Seán.Flood, Chris.Foley, Denis.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Haughey, Seán.Healy-Rae, Jackie.Jacob, Joe.Kelleher, Billy.Kenneally, Brendan.Killeen, Tony.

Kirk, Séamus.Kitt, Michael P.Kitt, Tom.Lawlor, Liam.Lenihan, Brian.Lenihan, Conor.McCreevy, Charlie.McGennis, Marian.McGuinness, John J.Martin, Micheál.Moffatt, Thomas.Molloy, Robert.Moloney, John.Moynihan, Donal.Moynihan, Michael.Ó Cuív, Éamon.O'Dea, Willie.O'Donnell, Liz.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.O'Kennedy, Michael.O'Malley, Desmond.Power, Seán.Reynolds, Albert.Ryan, Eoin.Smith, Brendan.Smith, Michael.Wade, Eddie.Wallace, Mary.Walsh, Joe.Woods, Michael.Wright, G. V.

Níl

Bell, Michael.Belton, Louis J.Bradford, Paul.Broughan, Thomas P.Browne, John (Carlow-Kilkenny).Bruton, Richard.Burke, Ulick.Carey, Donal.Connaughton, Paul.Cosgrave, Michael.Coveney, Simon.Crawford, Seymour.Creed, Michael.Currie, Austin.Deenihan, Jimmy.Dukes, Alan.Durkan, Bernard.Enright, Thomas.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gormley, John.Hayes, Brian.Healy, Seamus.Higgins, Joe.Higgins, Michael.Hogan, Philip.Howlin, Brendan.Kenny, Enda.

McCormack, Pádraic.McDowell, Derek.McGinley, Dinny.McGrath, Paul.McManus, Liz.Mitchell, Gay.Mitchell, Jim.Mitchell, Olivia.Naughten, Denis.Neville, Dan.Noonan, Michael.O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Jan.Owen, Nora.Penrose, William.Perry, John.Quinn, Ruairí.Rabbitte, Pat.Reynolds, Gerard.Ring, Michael.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Shortall, Róisín.Stagg, Emmet.Stanton, David.Upton, Mary.Wall, Jack.

Tellers: Tá, Deputies S. Brennan and Power; Níl, Deputies Bradford and Stagg.
Question declared carried.

I understand it is proposed to refer the Bill to the Select Committee on Finance and the Public Service.