Trevor Sargent
Question:1 Mr. Sargent asked the Taoiseach his views on the findings of the three studies commissioned by the working group on basic income; and when a Green Paper on basic income will be produced. [9618/01]
Ceisteanna – Questions. - Basic Income Study.
Ruairí Quinn
Question:2 Mr. Quinn asked the Taoiseach if he has received the final report of the consultants conducting a study into basic income; his views on the consultants' findings; if it is now intended to publish a Green Paper on this issue; and if he will make a statement on the matter. [9630/01]
Michael Noonan
Question:3 Mr. Noonan asked the Taoiseach his views on the third consultancy report commissioned by the working group on basic income which was published recently; and if he will make a statement on the matter. [10744/01]
I propose to take Questions Nos. 1 to 3, inclusive, together.
The report of the steering group on basic income was made available to the social partners on 2 March last and placed in the Oireachtas Library at the same time. The steering group commissioned consultants to assess, as the first phase, the static effects of the introduction of a basic income system and, as a second phase, to take account of the dynamic effects and the long-term sustainability of a basic income scheme. The first phase was carried out by two separate consultants – Professor Charles Clarke, St. John's University, New York, and the ESRI. The second phase was carried out by a consortium led by the ESRI. The consultants' reports are included in full in the report of the steering group.
The studies show that a basic income system would give rise to an intricate set of effects and that issues arise in terms of the impact on the labour supply, the labour market, migration and the informal economy and economic growth and competitiveness. They show the tax rate neces sary to finance a basic income approach could range from 47.26% to 53%.
The steering group's task was to undertake an appraisal of the concept and of the full implications of introducing a basic income payment to all citizens. It was not its role to reach a conclusion or make recommendations about basic income.
I agree with the steering group's view that the studies represent a significant move forward in our understanding of the complex issues involved. These need to be teased out in detail. Implementation was not part of the steering group's mandate but clearly considerations of the administrative implications are an essential part of the next step. The report of the steering group has been made available to the social partners and their views will be taken into account fully.
The complexity and range of issues to be considered in taking forward the proposal for a basic income mean that a number of Departments will be involved in the preparation of a Green Paper. At present, my Department is in contact with the relevant Departments with a view to agreeing arrangements for the preparation of a Green Paper.
Notwithstanding recent high levels of economic growth and current levels of employment, does the Taoiseach accept there is a huge problem requiring radical restructuring along the lines of the guaranteed basic income report when the percentage of people below the poverty line as measured by the ESRI is higher than it was in 1987 and given that the gap between rich and poor has widened over the past 12 years and continues to widen? Does the Taoiseach agree there is a need to bring forward the Green Paper without further delay? Will he indicate as specifically as possible when it might be published? Will he give a date, if possible? Will the Green Paper be more specific in dealing with a proposed guaranteed basic income scheme or will it continue the work to date which has dealt with the concept? When will we get down to the detail of the scheme in that case?
As soon as the work was finished and possibly prior to that, I had asked officials to examine how we could do that and take the work forward. The Deputy has seen the papers and the complexity of the issue. It is not an easy topic. The steering group comprised all the social partners and they all made their submissions. It involved CORI, the INOU and groups representing the fourth pillar, such as the Society of St. Vincent de Paul, the National Women's Council and other groups working in that area. I have asked them to take on all the work that is done and there are a number of Departments involved. Unless everybody works together we will not get a meaningful Green Paper so I asked them to start that work, which they did in early March. I have not asked them for a date; I have asked them to get on with the work as quickly as possible to produce a Green Paper. The Department of Social, Community and Family Affairs, the Department of Finance and other Departments are examining this and I will give an assessment of the date as soon as I can. As they have taken all of the papers and the documents from the consortium in the ESRI, where a large group of people worked on this, a lot of the work is already there. It would be nice if the conclusions were a bit more manageable, but they had a certain job to do, as outlined in Partnership 2000, and it did not come down to conclusions and recommendations in the way it normally would. I certainly will not delay. We will move as quickly as we can.
I ask the Taoiseach, in addition to the Department of Finance, the Revenue Commissioners and the Department of Social, Community and Family Affairs, other than his own Department, what Departments are involved in drafting a Green Paper? We have been promised such a Green Paper and I wonder when we can see it.
It is promised, but it took the group over four years to do their work so there will not be any undue delay with the Green Paper; I simply do not know how long it will take. My own Department, the Department of Finance, the Department of Social, Community and Family Affairs are involved and the Department of Enterprise, Trade and Employment was involved. The social partners were involved and, even though the Department of Agriculture, Food and Rural Development was not on the steering group, many of the issues brought up were agricultural and consultation was sought from ICOS, Macra na Feirme, ICMSA, the IFA and others. We should not re-enact all the work as an enormous amount has been done in the last four years, which we should be able to use.
Deputy Noonan's questions asked if the Taoiseach had a view on the third consultancy report. He has not expressed any view which, be it deliberate or accidental, is in keeping with the Taoiseach's approach to various issues lately. I ask the Taoiseach if he has a view on the implications for behaviour in the labour market, and the implications for the economy, of a situation where, as he has pointed out himself, the single rate of tax that would apply would be between 47.26% and 53%. Is the Taoiseach indicating in this concept that the single rate of tax that would apply to any income earned above the basic income would be in that range and therefore equivalent to the current total of taxation and social welfare contributions made by the highest rate taxpayers? Would that not have an effect on incentive to work? Does the Taoiseach consider that a combination of that level of taxation and a replacement payment for employers' PRSI, as indicated in the third report, would have very substantial effects on the behaviour of employees and of employers? Could the Taoiseach indicate if, were the Government were to proceed in the direction of a basic income, he would consider it necessary to move towards a single rate of income taxation in order to make the transition possible? If these issues are not dealt with in the Green Paper, that paper will not advance the work.
Deputy Sargent has been diligent in raising this issue over the last four years and I have put forward my views on it many times. Deputy Dukes will be aware that there was a commitment under Partnership 2000 that this work would be undertaken and I have been diligent about making sure the work gets done. Deputy Dukes mentioned the tax rate and while there is a difference, the work by the consultants indicated that the tax rate necessary to finance a base income system would range from 47% to 53%. Professor Clarke estimated it would require a rate of 47.26% and the ESRI estimated a rate of 51.6%. When the social solidarity fund was specified more precisely, the rate was nearer to 53%. Clearly, the different rates represent the different approaches to determining the tax base, the cost of Government services and the treatment of the social solidarity fund. The steering group considered that the sets of estimates represented a reasonable indicator of a range of likely rates and the difference did not invalidate the study. The Deputy is correct in saying that they are the specified rates.
The different rates also reflect differences in the respective approaches to determining the tax base and the cost of funding Government services, other than the elements of a basic income system, which has to be taken into account. The big issue in all this was the treatment of the social solidarity fund which would compensate those losing out in a transition period. An enormous part of the work, concerning those who would lose or gain, was carried out both on the ESRI model and the New Zealand model. To date, a basic income has not been tried or implemented in any country.
Phase 2 of the inquiry sought relevant evidence to give best judgment on the likely impact of a basic income, and did so without any model. They did it on the ESRI model which is a good one at international level and has been perfected over the past 15 years. The key issues emerging from that inquiry were that a basic income would have a big impact on labour supply, migration, the informal economy and the current labour market.
Would the impact be positive or negative?
In most cases negative. It would also have an impact on economic growth and competitiveness. In fairness, I should say that as growth rates become higher there should be a corresponding lowering of tax rates. Much of the early work on the Green Paper was done from 1997 to 1999. As economic growth has increased it should have a correspondingly positive impact if one is using current 2001 figures. I do not know what that figure is but it is only fair to say that it would pull it down as the economy grows.
And equally, if growth rates decelerated, the opposite would be the case.
Exactly.
Has the Taoiseach any views on all this?
I have already given my views on the system.
I have not heard a single view from the Taoiseach so far.
The Deputy should not comment unless he is called upon to do so by the Chair.
I have given my views many times at Question Time.
The Taoiseach just keeps saying it is very complex.
It is.
We know that.
That is why nobody in the world has undertaken this. It involves bringing in a basic income system and totally changing the social welfare, tax and other systems in one fell swoop.
Yes.
The nearest thing to it was the New Zealand system – the big bang effect many years ago – which worked in some cases but not in others. There was a commitment to undertake an inquiry into this system, however, and it has been useful. It has not been overly expensive although much time has been devoted to it. I intend to see it through as per the negotiations on Partnership 2000, to which I was not a party. This was requested, however, and I will continue to follow it through.
The Taoiseach said the basic income system has not been tried elsewhere. Would he agree that the incremental changes that have been taking place, bringing together the tax and social welfare systems, are making it that much easier to introduce a guaranteed basic income as time goes on? There is a certain trend which would be of assistance in the introduction of a basic income.
On the date for completion of the Green Paper, has the Taoiseach given a target or working timeframe by which he would like the Green Paper published? That information would help us to estimate whether it will be published in the autumn, before the budget or even before the general election.
In relation to the figures on taxation mentioned by Deputy Dukes – I thank Deputy Dukes for his interest in this matter which we discussed some years ago – does the Taoiseach agree the figures the Deputy used were based on the study which used the January 1999 estimates and that the revised rates put the tax base at about 42.7%? That figure is fluctuating with economic growth but it might be more current when talking about this issue than the figures in the report.
They would be lower. I do not want to guesstimate that but certainly they would reflect the economic growth in three years. Taking all the data that is available from all the working papers, I have asked the relevant people – we probably received some of the working papers from the ESRI only recently – to examine how we would frame a Green Paper. I did not answer Deputy Dukes on that earlier. He is correct. For it to be a meaningful Green Paper it would have to contain the kinds of issues he raised to bring it forward, but they have not been able to make an assessment to date and I do not want to give a date off the top of my head. I am sure they will give me that fairly quickly.
Can the Taoiseach give a season off the top of his head?
I think I gave the Deputy a fair few dates on when I would have the reports, which were out of my hands and went way outside on this particular issue. None of the work on this issue reached the target even though an enormous amount of effort was put into it. I want to record my thanks to all of the people in the Departments, Professor Clarke, and all of the individuals in the ESRI who worked on this issue. They have been going through the submissions of the social partners, of which there are about 20—
The Taoiseach will hardly have it before the election. He better consult with the Progressive Democrats or he will be in trouble.
I am not sure where the Deputy stands on this one.
We cannot proceed with Question Time on the basis of people interrupting.
There might not be much consultation about the election.
Deputies should not intervene unless the Chair gives them the floor.
I heard the Minister of State, Deputy O'Donnell, stamping her foot on the 1 o'clock news.
To answer Deputy Sargent, as soon as I can get an assessment of when they can do it, I will give it to him.
On the question about the tax and social welfare changes, the reform of the systems, tax credits and all that has happened in the standardisation of social welfare, including the computerisation of the linked systems, there is no doubt that every one of those issues is helping in this area. They are also helping in the formulation of the information. The information available now compared with when I answered the Deputy's questions about three years ago is far better. As the Deputy will recall, we could not link the systems and we had a debate here on that three years ago, but being able to cost in the social solidarity fund and all the other issues have improved immensely since when we started this work.
Mr. Hayes
Some years ago, the Taoiseach and his Government introduced the individualisation of the tax code. Given the conclusions reached in coming to that policy statement, why has the Government not moved towards the individualisation of the social welfare code? Does the Taoiseach accept that a movement in that direction would be the first step forward in achieving a greater distribution of income?
The Minister for Social, Community and Family Affairs has discussed this issue in the House on many occasions and outlined his views on it. In my opinion there are many arguments in favour of it and he has expressed a similar view. However, I do not believe the arguments in respect of it link into those that obtain in relation to the basic income. It is a different issue. Perhaps it might lead to a fairer system, but it is not the same concept as what is being attempted vis-à-vis the basic income.
Ceann Comhairle—
I will allow the Deputy to ask a brief supplementary. We must move on because we have already spent almost 25 minutes on these three questions. We must deal with other questions.
I ask for no more latitude than that which has already been given to Deputy Sargent.
I have already given too much latitude. The Deputy should be brief.
I hope I can count on your generosity, Sir. Will the Taoiseach confirm that perhaps the best publication date for the Green Paper would be lá Philib an cleite? Will he indicate how he believes people would react if they were informed that, in a basic income system – I will now quote from the CORI example—
The Deputy should not quote at Question Time.
In that event I will cite the CORI example; I will not quote or read from it.
I would have thought that corú would be more relevant today than CORI.
That might well be the case and no doubt we will discuss that matter later. However, I hope I can speak about CORI for a moment without raising the Deputy's hackles. Will the Taoiseach indicate how he believes people might react if they were informed that, for example, anyone aged between 21 and 64 would obtain a basic income of £91 per week from the State and that by 2002, as CORI states, they would pay, on every other pound they earned each week, 40% tax? In my opinion the aspiration towards a 40% tax rate is wildly optimistic. Will the Taoiseach state whether he expects this would have an effect on people's readiness to work and, in particular, if it would encourage them not to evade tax? One of the virtues ascribed to a basic income system is that because everybody is treated in the same way, nobody will want to cheat on their tax. Will the Taoiseach indicate whether a single tax rate of over 40% on all earnings over £90 per week would persuade people not to try to evade tax?
As Deputy Dukes knows, the Government's policy is to try to remove people on basic incomes from the tax net altogether. We have been successful in removing approximately 300,000 people from the tax net and approximately 38% of those in employment pay no tax.
This system would bring 100% of them back into play.
I can only do what was asked of me in Partnership 2000 in respect of this matter. The argument put forward by CORI and others who wanted us to follow through correctly on this project was based the fact that between 1% and 1.5% of the population remain on long-term unemployment. Their philosophy is that the examination should be carried out in order to see how the distributional effects will operate and how it will work for those the less well off in society. That has been the basis of the project since the outset. It is clear that, to date, many of the difficulties have not been resolved. However, we have an obligation to complete the project.
Do I take it that the Taoiseach is somewhat less than passionately committed to this? Is that a fair deduction?
I have indicated my views.