Vol. 539 No. 2
10 Mr. M. Higgins asked the Minister for Finance if he has received figures from the banks or financial institutions an indication of the numbers of applications received for the special savings investment scheme; if so, if, on the basis of such figures, his Department has an assessment of the likely cost to the Exchequer of the special savings investment scheme; and if he will make a statement on the matter. [19042/01]
On the basis of the first monthly returns made by the qualifying savings managers under the new savings scheme, the total tax credits claimed by the institutions amount to some £1.5 million in respect of deposits of £6 million in the month of May. Details of the number of accounts involved will not become available until the first annual return due under the scheme is made by the savings managers on or before 28 February 2002. As I indicated recently when replying to a parliamentary question from Deputy Howlin regarding the likely cost of the scheme, it is difficult to estimate the Exchequer cost of the special savings incentive scheme because of its very nature – it is new and innovative and the size of the Exchequer contribution will depend on take-up by participants in the scheme. In developing proposals for the Finance Bill provisions my Department considered various ranges of costs depending on different assumptions. As I said on February 20th in reply to Dáil Question No. 36 from Deputy Jim Mitchell, a tentative estimate is for a full-year cost of around £100 million for the savings scheme. In so far as the take-up turns out to be very strong, then this figure may have to be revised upward. The more successful the scheme is, the more relief it will entail.
It is not possible to extrapolate from the figures available to date what a more likely cost to the Exchequer of the SSIA scheme will be. It is anticipated, however, that the June returns will show an increase on the May figures.
Since the Minister last answered questions on this documentation has been released to the public by his Department under the Freedom of Information Act, 1997 in which Department officials who made a presentation to him before he made his decision estimated the likely cost could run to £700 million. They also estimated that 84% of the benefit of the scheme would go to households with an income of more than £25,000 a year and that one-third would go to households earning more than £50,000 a year. On what basis did the Minister decide to discount that advice or to disprove its contentions?
We have had many discussions about my role as Minister for Finance and the advice I take.
I am not arguing with the Minister's right to discount the advice. I just wonder why he did so.
It is the job of the appointed Minister for Finance to take advice and then to make his decision.
That is remarkably healthy.
It certainly is. During the last general election, and during the previous seven or eight I contested, I saw no candidate putting their name forward with Department of Finance appended in brackets. I did not see Jim Mitchell, Department of Finance, or McGrath, ESRI or McDowell, NESC. Perhaps Deputy McGrath or Deputy Jim Mitchell could tell me if that is so. I saw old names like Fianna Fáil, Fine Gael, Labour and PD. Until we change the Constitution to oblige one to take advice I intend to continue as is my wont. Deputy McDowell has complimented me saying he loves reading the tax strategy group's papers and other material from the Department of Finance because he finds out things I definitely will not do.
I sometimes think I read these things far more carefully than the Minister. The Minister has not answered my question as to the basis on which he discounted or disproved the advice offered to him by his officials. I do not dispute his right to discount it, I am just wondering why he did.
I take advice from everybody and then make my own decisions. I even take advice from Deputy Mitchell and have implemented matters on which Deputy McDowell advised me.
Let us take one of the points, that of the distribution effect. It is claimed that one-third of the benefit will go to families with an income of more than £50,000. Does the Minister accept that is a likelihood or did he discount it on the grounds that he did not think it likely to happen?
Any tax concession or grant is only available if you carry out the acts necessary to obtain it so there are people who have higher disposable incomes who will benefit from the scheme. This is the only scheme that was ever introduced which is open to everybody. It is a tax-based scheme. It is my own idea, has proved particularly attractive and gives the same benefit to everybody, whether one pays tax at 42% or 20% or does not pay tax at all. Remember the result of successful policy initiatives of mine, not taking account of all the advice I received from Deputy McDowell. There are now 668,000 out of 1.7 million taxpayers who are out of the tax net altogether and the scheme will be available to them also. This scheme is egalitarian in its approach.
Is there any evidence that the money being used in the special savings scheme is coming from existing savings rather than new money?
The Minister cannot possibly describe as egalitarian a scheme which requires one to have £200 a month disposable money before you can enter.
The minimum contribution is £10 a month which is £2.50 a week. Though I do not drink anymore, that is definitely less than the price of a pint in Dublin, Kildare or Westmeath. The figures for the first month show the scheme has cost the Exchequer £1.5 million on total deposits of £6 million. People might say that is very low. I caution Deputies against extrapolating from the figures what might be the likely outcome of this scheme because the figures for June will be somewhat greater. My nose tells me that there is a considerable level of interest among all classes of people.
We will not have any evidence for some time, it be a year or two, to answer the question asked by Deputy McGrath about the transfer of savings. Surveys made by some of the major institutions before the scheme commenced indicate that at least 70% are new savings, while anecdotal evidence related to me suggests that the bulk of the money is new savings as was intended.
