Vol. 546 No. 1
Looking at this budget last night, certain memories came back to me. The first briefing document the new Minister for Finance will receive after the next election will be an analysis of how and to what extent the 2002 budget has gone off the rails. If that Minister, whoever he or she may be, is really lucky there might be a series of proposals as to measures that might be implemented in order to try to get back on track.
This is an event that seems to happen—
On a point of order, the Taoiseach has left the House.
That is not a point of order.
The Minister of State is sitting in to take his place.
It is a tradition of this House that there is collective responsibility in Government. I am here as a Member of the Government.
The Minister of State is not in the Government.
The Minister of State should not let it go to his head.
It is not in order to refer to the absence of Members from the House.
This kind of event seems to occur very frequently after Fianna Fáil leaves Government. It happened in June 1981 when the budget of that year was seriously awry and the then newly appointed Minister, Deputy John Bruton, had to take immediate and fairly vigorous measures to get things back on track. It happened again in December 1982 when I came into that office. Deputy Quinn will recall discussions we had at that time. It was a difficult business to begin to remedy the fact that the Fianna Fáil Government of 1982 with a plan notoriously called "The Way Forward", which turned out to be its downfall, had got things so badly out of line that it was immediately necessary to start from scratch in order to try to get things back into some kind of order again. My belief is that the budget presented to the House yesterday will unravel quickly. We should not be surprised because we can see that the budget policy for 2001 ended in tatters. I checked the figures last night and found the following benign presentation of the situation.
At budget time last year net current expenditure for the year was forecast to be 23.3 billion. The outturn revealed to us yesterday was 24.3 billion. Total current receipts at budget time last year were forecast at 31.1 billion. The outturn communicated to us yesterday was 28.7 billion. That must be the first time in a long time that the outturn of receipts was less than the forecast made at budget time. I note that seems to have got through to the Government this year because to the best of my recollection I did not hear the word "buoyancy" used once during the preparation of the budget for next year. We all remember buoyancy was the favourite ploy of Fianna Fáil Ministers for Finance. When they could not make the two ends of the budget meet, they looked up their Roget's thesaurus and found buoyancy.
Did the Deputy have to go that far to get it? We used to create it; we did not have to look it up.
Buoyancy would sort out all their problems. We have not seen buoyancy in revenue in the past year, but revenue sinking below expectations for the first time in my 20 years as a Member of the House.
The current budget surplus for 2001 was forecast on budget day last year to be 7.8 billion. The figure revealed to us yesterday was just under 4.5 billion, an undershoot of 3.3 billion. That shows how much and how far the budgetary arithmetic for 2001 had unravelled in relation to expenditure and revenue. The capital budget balance forecast of 4.6 billion turned out to be just under 4.2 billion. That reflects the fact that many of the undertakings and commitments made by the Government in the national development plan are grossly over-optimistic and that the management systems are not in place to ensure the plan happens as intended. There has been an undershoot of 400 million on expenditure on the national development plan and on the capital side of the budget generally. The result is that for 2001 the Exchequer surplus, which had been forecast at 3.2 billion at budget time, finally turned out to be 334 million. The Exchequer surplus for the year will turn out to be barely over one tenth of what was forecast at budget time and 2.9 billion below the Government's budget forecast. That is a dramatic unravelling of a budget. The general Government surplus at budget time last year was forecast at just under 5 billion. It turned out at less than one third of that, 1.6 billion, an undershoot of 3.3 billion.
By the middle of 2001 it was clear the Minister for Finance had lost control of the public finances. Expenditure was running ahead of budget figures, while expenditure in the second half of the year accelerated to a greater rate. Revenue was running at considerably below the budget figures. In the first half of the year it trailed substantially behind the forecasts and in the second half of the year the situation deteriorated further. It is important to highlight this because, as Deputy Jim Mitchell said last night, the Taoiseach in recent days has tried to pin the blame for the deteriorating fiscal situation on external factors.
Internationally recognised.
That is absolute nonsense. The deterioration in the budget arithmetic happened long before the events of 11 September and the establishment of a recession in the American economy and its affect on our trading partners in Europe. The Minister for Finance lost control of fiscal policy in the early part of last year. He was not able to contain expenditure within the limits he had set at the beginning of the year and grossly overestimated the type of revenue that would be forthcoming from the level of economic activity.
I am not surprised that is the case because there is a Fianna Fáil syndrome. We saw it with former Ministers for Finance, such as Gene Fitzgerald who presided over the most spectacular unravelling of budget policy. We saw it again in 1982 and during the tenures in that office of the Taoiseach, Deputy Bertie Ahern, and a former Taoiseach, Deputy Albert Reynolds. Fianna Fáil Ministers for Finance are notoriously unable to keep control of fiscal policy because they do not have the bottle to present realistic forecasts of expenditure and income or withstand the pressure from their colleagues to go outside the boundaries of agreed expenditure. The only case where I see the beginning of that type of discipline being imposed is in the way the current Minister for Finance treats the hapless Minister for Health and Children. He allowed him to go to Ballymascanlon and announce the beginning of a new health strategy, but smacked him in the face by saying there was no money. He then tor tured him for the next few months before another health strategy document was published, which was severely criticised by the Department of Finance. The allocation for next year barely allows the Government to put its toe in the water in terms of beginning to implement the health strategy, to which I will return.
We saw during 2001 a major unravelling and complete degradation of the budget arithmetic presented to us on budget day last year. As Deputy Jim Mitchell said last night, the Minister for Finance turned wine into water in 2001, a miraculous transformation. The Government started off with the most comfortable fiscal position, but found itself facing a major abyss by the end of the year. The Minister for Finance forecasts an Exchequer surplus of 170 million for 2002. I do not believe that figure is real. It was included to allow the Minister for Finance to idly boast yesterday that he would not borrow. He will not borrow, but steal. I have no doubt that by this time next year that 170 million, which is only a token when one looks at the total budgetary masses involved, will have evaporated and we will not be looking at an Exchequer surplus when we look back on 2002. If we are looking at it, it will be because another Minister for Finance has managed to pull the situation around because I do not see how it will improve or hold during the rest of the lifetime of the Government.
That Exchequer surplus of 170 million comes from a forecast increase of 10.6% in current expenditure, a 12.7% increase in total current receipts and a deterioration of 30% in the capital budget balance. Those figures will not hold up. That modest surplus of 170 million is arrived at through a series of funny money operations. That is the only way to describe them. The first funny-money operation is the raiding of the social insurance fund for 635 million and the second is the raiding of the Central Bank in two ways for a once-off injection of 610 million, of which 240 million will come from the contingency fund the Central Bank has for its note issue liabilities and 370 million from seigniorage, the profit taken from the minting of coins. I never thought I would see this in a Budget Statement because even officials in the Department of Finance and the Central Bank hesitate to use that money. The third funny money operation is a raid on the capital services redemption fund, for the second year running, to the tune of 500 million. That might be legitimate one year, but when it happens for a second I begin to worry.
A fourth funny money operation is the hijacking of 792 million of corporation profits tax income from 2003 to 2002, on a once-off basis. Its presentation in the budget document is very slick. It is presented as 792 million revenue for 2002. Some 29 million is shown for 2003, giving a total of 821 million. The casual observer would think there is a bonus of over 800 million in 2003, but there is not. There will actually be 29 million in 2003, reflecting the very temporary nature of the benefit we will get from this action.
The future has been raided.
It has been invested.
The social insurance fund is in place for a very specific purpose, of which Deputy McDowell dealt with some aspects very clearly last night, on which I heard him expand this morning. Conversations I have had since yesterday afternoon reveal that a great many understand what is going on. One person told me she feels afraid when she sees what is being done with the social insurance fund which is in place specifically to provide a safety net and improve the level of social benefits for those in need. We face a downturn in economic activity and in the last couple of months have seen a succession of firms closing down or reducing their numbers of staff. There are a lot of redundancies coming. It gives none of us joy to see this, in fact, it causes us a great deal of worry. The social insurance fund is in place in order that we can deal with the fall-out from such circumstances as they arise, but there is even more to it than that. It provides a series of benefits, some of which are addressed in the budget, designed to assist people when they are particularly vulnerable, when they have lost their jobs or have other difficulties. It is in place to improve their social welfare benefits.
The budget contains very modest provisions for increases in social welfare benefits. This morning, we heard from the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, say that taking money from the social inclusion fund is the same as giving the people back their money. That may be, but it is not giving it back to them for the purposes they paid into the fund.
It is not being given back to those who paid in.
It is not being given back to those who gave it in the first place and not necessarily to those who need it. Raiding the social insurance fund for the purpose of supporting general expenditure is a con job. It is a funny money operation which I hope will not become a standard element of Fianna Fáil and Progressive Democrats fiscal management. I hope that statement does not become too relevant in the next few weeks.
The Minister for Finance has asked the reason we should borrow money when we have money in accounts. That is a fair question, but I ask him if it makes sense to raid the social insurance fund for 635 million in a year he is putting the equivalent of 1% of GDP into a pensions fund. That is a provision we all support. However, I remind the Minister that when he brought forward the legislation to provide for the fund we proposed to him that he not indissolubly wed himself to the provision to it of 1% of GDP every year. We sug gested he give himself a margin of between 0.5% and 1.5% of GDP, precisely to cope with the kind of circumstances in which he now finds himself. He is being disingenuous and trying to conceal things from us when he asks, in his brash and apparently commonsensical and down to earth way, the reason he should borrow money when there is money lying in accounts. When he speaks like that he is trying to put something across on one. Why should he be putting so much money into a pension fund when he is at the same time raiding the social insurance fund?
There may well be a case for adopting the practice of other EU member states in relation to Central Bank surplus funds, whereby the profit made from seigniorage is allocated to the Exchequer. The Minister is going to bring legislation before the House to legitimise that process. In this case he proposes to include as a substantial part of his budget moneys totalling 370 million to which, strictly speaking, he does not have a right to and to take credit for doing so. He does the same thing elsewhere. That is odd and on that count the budget is vulnerable. He is also taking part of the Central Bank's surplus income worth 240 million, which is part of a reserve the bank keeps because it incurs liabilities when it issues bank notes. Over a period of time the bank has decided that there is a certain degree of risk for which it can provide, but the Minister has decided it will not need that provision and that he will take it. It may well be that he is right and the bank will not have to ask him for some of the money back because its expectations were unfounded.
I do not know how vulnerable the Central bank is, but find it odd that this is being done for the very first time in history in the year we are to begin using a new currency. We convert to the euro on 1 January and I am not sure anybody in the bank would claim that the level of realisation of this contingent liability will not change. We should remember that we will participate in a new currency which will be common to 12 states. It is not just our experience of what Irish people do with their bank notes which will count, it will also be the experience of what they do with them at home and abroad and the experience of what the citizens of 11 other states do with their bank notes when they are at home and abroad. The Minister has blithely ignored that the position will change. One part of the raid he has made on the Central Bank is vulnerable. There is a risk attached to it just as there is a risk attached to the social insurance fund.
The Minister is raiding the capital services redemption fund for the second year running to the tune of 500 million, about the same he took from it last year. Between these two years the capital services redemption fund will have been reduced by 1 billion, this at a time when the Minister's budget forecast indicates we will have substantial Government deficits in 2003 and 2004. What do these substantial deficits in 2003 and 2004 mean for the future of the capital services redemption fund? Will we need to call on it in 2003 and 2004 for the purpose for which it was established? Will a future Minister for Finance find himself or herself in the position analogous to that of Mother Hubbard who went to the cupboard and found it was bare? What are the implications for the future? There is a policy risk attached to raiding the capital services redemption fund for the second year running.
Then there is the corporation profits tax change which will not gladden the hearts of corporate Ireland. There is a once-off gain of 792 million which will not be available to the Minister for Finance next year or the following year. There will be 29 million for the Minister the following year. Next year is a once-off. Once that is done, the benefit is gone—
It is being done over five years.
—and not available on a repeated basis in future years.
It runs until 2007.
The process runs until 2007, but the big money comes out of it in 2002. What comes after it, if the Minister of State reads the budget again carefully as I recommend he does, is much less.
The Deputy could do with reading it himself.
What comes in the next four years is small potatoes or, to mix the metaphor, will not butter many parsnips for people like the Minister of State.
That part of the budget is subject to risk and, if those four elements where I have identified risk are added together, they come to a total of 2.537 billion. There is some 2.5 billion of revenue in the budget for 2002 to which a risk attaches. It is a variable risk depending on which element is concerned, but largely unknowable in each of them.
The fragility of the exercise is neatly illustrated by the Minister's projection of an overall Exchequer deficit of 3 billion in 2003 and 3.7 billion in 2004. That is on the basis, I gather, of a no policy change forecast. The Minister is saying his budgetary and fiscal policy this year is creating not just the risk, but the certainty of very large deficits in the next two years and the need to go back to increased borrowing—
With which the Deputy would be familiar.
—for current purposes in the next two years. It is not just for capital, but current purposes.
The Deputy's party doubled the national debt.
I spent enough of my life hauling it around to get us back into a sensible position with the consistent opposition of the Minister of State's party—
Doubled the national debt.
—which had economic common sense only once in its miserable life and that was when Ray MacSharry was Minister for Finance. It lost it again when the Taoiseach, Deputy Bertie Ahern, became Minister for Finance and when Deputy Albert Reynolds became Minister for Finance, recovered it as a Government when Deputy Quinn was Minister for Finance and lost it again with the Minister, Deputy McCreevy.
The Deputy's party doubled the national debt.
The Minister of State should not even open his mouth to me about fiscal propriety—
Damned by the figures.
Deputy Dukes to continue without interruption.
—because neither he nor any of his dyed-in-the-wool Fianna Fáil colleagues—
The Deputy is condemned by his party's record.
—has the slightest clue what fiscal management is about.
Damned by the record.
Who saved Fianna Fáil's neck? The answer is Deputy Dukes. The Minister of State should talk sense.
Order, please.
I used to be flattered by it, but now I am browned off by Fianna Fáil people telling me how good the Tallaght strategy was. I will tell any of them who talks to me any more about it to go and tell the Minister of State what it meant.
The Deputy does that in opposition, not in government.
This year's dangerously unravelling budget and the deficits in 2003 and 2004 are posited on the Minister's expectations of a gross domestic product growth rate of 3.9% in 2002, employment growth at 4.75% and a very odd and coy little reference to inflation in the Budget Statement which he expects will have an upward trend in 2002. He does not say anywhere in the body of the statement what his inflation forecast is for 2002. He says it will be on an upward trend and expects it to reduce in 2004. That indicates that there are solid reasons for being suspicious about the health of the budget.
An examination of the robustness of the expenditure and revenue forecasts gives us a great deal more cause for concern. There will be continued pressure during 2002 for more expenditure on health. Deputy Jim Mitchell pointed out that, taking away the sleight of hand and the reflections in mirrors which were part of the health presentation, there is about 220 million in the projected expenditure for 2002 which can be allocated to the collapsed health strategy. The strategy will cost 10 billion over ten years, 1 billion a year. In its first year we find 225 million allocated for new actions. I do not know how far that amount of money will go to getting us the 450 public hospital beds we heard about yesterday—
The Deputy should include the Estimates.
—or paying for the 200 contracted private hospital beds being brought into the system. I do not know how far 225 million will go to getting the extra 1,000 consultants we are told are needed—
Some 1 billion will go a long way.
—or how far it will go to getting the extra nurses we will need. What I do know is that there will be pressure. For example, last night during the course of a radio programme, I pointed out in the presence of the Minister of State that, this year for the first year I can remember, there is no provision for the ordinary indexation of medical card income guidelines. Even in years when no specific provision was made, the income guidelines were indexed in order that Members could usually tell concerned constituents in the autumn that, after a review in the new year, they would probably qualify for a medical card if they were just above the income guidelines at the time of speaking. That will not happen this year. Those just above the income level in recent months do not have any chance of becoming eligible for a medical card by the working of indexation. Apart from that, some people will receive an indexed increase for a relatively modest income level and will thus leave the medical card scheme more quickly in 2002 than ever before. I came across an example of the kind of pressure to come when listening to the Minister, Deputy O'Dea, on radio last night. He said, "Ah well, that's only for now. We don't know what might happen after the beginning of the year".
Watch this space.
I can understand it because he will get beaten from pillar to post in his constituency of Limerick East by people who will still not qualify for medical cards.
I will look after Limerick East.
Deputy O'Dea and his colleagues will be besieging the hapless, starved Minister for Health and Children, Deputy Martin, to try to get an increase in the medical income limit that will get some of those people into the system.
I was the representative for Limerick East long before the Deputy came here, and I will be there when he is long gone.
It will not be enough, however, if the Minister, Deputy McCreevy, sticks to his guns. If he takes too many walks along the canal he will become so serene that he will not give anything, so there will be cold comfort, or none at all, for these people.
Sure he can walk on water at this stage.
People who get the idea that they can walk on water usually come to a fairly sticky end. Unfortunately, the bottom of the canal at the sixth lock is pretty muddy.
The capital budget balance this year is set to deteriorate by 30%. I wonder what that means for the national development plan. If we are witnessing that much reduction in the capital budget balance, how much of it can hold up this year? This is happening at a time when construction industry inflation is running at higher levels than general inflation. That presages a substantial slowdown in the rate of work on national development plan projects. I forecast that by the middle of 2002, substantial parts of the national development plan will be very much behind schedule.
Just the other day I happened to be speaking to NRA engineers about one road project which is at the planning stage. So far they are on target but by mid-2002 money for the design operation will begin to dry up because it will be necessary to divert the greater part of the money to projects that are in the course of construction. I am sure that will happen to the roads programme and we will see echoes of that pattern affecting other parts of the national development plan.
There are worries about the vulnerability of a major fisheries development in Killybegs and I can see other areas where hesitation will arise over how much of the plan will be implemented. There are a series of inconsistencies in this year's budget policy. The VAT increase from 20% to 21% smacks of last minute desperation because they could not think of anything else to tie up the loose ends. It is a very unwise move. If there ever was a good time to increase tax, which there never is, this is certainly not a good time to increase VAT.
I am delighted to see that interest relief on rented residential property is being restored and that stamp duty rates for investors have been reduced. That will add some supply to the rented accommodation market, which is required. Yesterday we had another one of these asinine press releases from the Minister of State, Deputy Molloy, about the latest house price trends. He is rejoicing in the fact that the rate of increase in house prices is going down. It is like being happy that the starship "house-prices" has now slowed from warp speed to merely supersonic. It just means that houses are getting beyond the reach of ordinary people at a slightly less inter-stellar rate than before. Nothing in these figures will give anybody more confidence to buy a house now as opposed to doing so three months ago. I am glad, however, to see measures being taken that will bring back some supply to the rented residential property market. People who are purporting to speak on behalf of tenants of such properties, and who are criticising these measures, are entirely wrong.
I am glad to see a reduction in the top rate of the employers' PRSI contribution but it is hardly consistent with the removal of the cap last year. The Government does not seem to have any settled policy in that regard.
There is nothing in the budget to deal with the situation facing young farmers. I hope we will be able to return to these issues in the Finance Bill. There is nothing in the budget to improve the situation of third level students who are living away from home on meagre grants. There is no expenditure proposal to deal with that problem.
I was astonished to discover that the Taoiseach has gone back on what was understood to be a binding guarantee to provide £1.8 million for the Irish Seal Sanctuary which will now have to close. I have lobbied the Taoiseach and the Minister for Arts, Heritage, Gaeltacht and the Islands for months about that. The Minister, Deputy de Valera, says it is not her business because it does not involve conservation, but the Taoiseach apparently gave an undertaking that funding would be provided for the sanctuary.
There is a provision in the budget arithmetic for 115 million for benchmarking. I know the Government does not want to reveal its hand on this matter but how many public servants will get any kind of increase from this sum? That financial provision is seriously at risk of being grossly exceeded.
I can see this budget unravelling and by the time we get to the election it will be off the rails. The next Government will have to undertake a major operation to re-establish fiscal common sense.
In his Budget Statement yesterday, dealing with the topic of borrowing and investing, the Minister for Finance said:
In 2002 I will not be borrowing. I am budgeting for an Exchequer surplus and a general Government surplus. My views on the imprudence of Exchequer borrowing are well known and of long standing. We got ourselves into a mire by borrowing for current purposes in the past. The legacy hung around our necks for more than 20 years. I am not going to repeat the mistakes of the past.
I note the reference to current borrowing. Later on, the same Budget Statement deals with a set of projections required under our membership of the European Union. The EU stability programme concealed the duplicity of Mr. Haughey's budgets but prises open the stark reality of this budget. When one looks at the Exchequer balance to which the Minister, Deputy McCreevy, was referring, the estimated outturn for this year is 334 million, and it is 170 million for 2002. The estimated outturn for 2003, however, is minus 2,980 million and, as if that were not enough, it is minus 3,682 million for 2004. The Minister for Finance, arrogantly and proudly – it is hard to separate one from the other – stated yesterday, "judge me on my first five chapters of the book".
It will be a best seller.
Yesterday the Minister won the Booker Prize for fiction. Sometimes it is better not to make unsustainable claims about what he has done. To stand up yesterday as the Minister did and make a speech about sound finances merely invited scorn. Judging from this morning's newspapers, scorn is what the Minster has received. It is the inevitable fate of a man who believes his own press releases. I will return later to read into the record a sample of the quotations of objective observers rather than political participants.
If the Minister really believed what he said yesterday about borrowing, we would be looking at a totally different budget. If yesterday's budget says anything, it is that the Minister knows he has delivered his last hurrah as Minister for Finance. He cooked the books. He may not have to deal with the harsh reality of a deficit but he has made certain that his successor will.
Some 3 billion for 2003 and 3.7 billion for 2004, based on no policy change, represent stark deficits by anybody's language. There will be no general Government surpluses in those years but clearly the Minister, Deputy McCreevy, hopes that problems will not be attributed to him. The contrast between his legacy and the situation he inherited could not be greater. He advocates that, to maintain the integrity of a fund established by him to look after pension requirements until 2025, we should borrow on a year in year out basis from next year to put money away in this fund. It is nonsense and it is time those who have supported this nonsense came out and admitted it. Although I see from an article in The Irish Times of a couple of weeks ago that fewer and fewer economists are prepared to subscribe to this lunacy.
The Ministers downfall has been his dishonesty. Had he had the courage to stand up yesterday and declare that the requirements of the national development plan and our future economic growth required sensible deficit financing, he would have been lauded. One Sunday newspaper said as much last weekend. My party's position has been for some time that borrowing is justifiable for the purposes of capital investment in order to improve the capacity of the economy to grow. The Minister's previous rhetoric and his own puffed up sense of importance made this impossible. Instead he chose to spin the unspinnable story and it has landed flat back in his face.
If the Minister thinks the Labour Party intends to stand here and see the social insurance fund raided for this indulgence he can think again. There is a long way to go to Christmas and I can guarantee each and every Fianna Fáil backbencher that yesterday, the Minister made it longer. Deputy McDowell is right. What the Minster announced yesterday in respect of the social insurance fund is illegal. By agreeing that it needs to change the law before proceeding, the Government is accepting the analysis put forward by Deputy McDowell yesterday.
It is also an act of not inconsiderable hypocrisy on the part of the Minster who complained in the past about the payment of the equality social welfare arrears out of the fund. Those payments, which totalled no more than £50 million, 63.50 million, were described by this Minister in 1995 as a raid on the fund. If that is the case, what else can you describe dipping into the fund, a fund paid for by workers and employers, to the tune of ten times that amount? There is no doubt either on the Government side that this is a new and unprecedented raid. The Attorney General, Micheal McDowell, ranted about the social insurance fund, also in relation to the 1995 budget. He accepted that the fund constituted a hypothecated tax, namely a tax that must be spent for the purposes for which it was raised. There is no doubt that digging the Minister, Deputy McCreevy, out of a hole is not one of the hypothecated uses for the fund as set out in the 1993 Social Welfare Consolidation Act.
What about the review and operation of the social insurance fund board conducted in accordance with the Programme for Prosperity and Fairness with the social partners? Were they consulted on this matter? Perhaps the Taoiseach will elaborate on that point when he responds. Was the hapless Minister for Social, Community and Family Affairs consulted on the issue at all? What possible strategies is he to examine in relation to a denuded fund now? In July last he told Deputy Jan O'Sullivan that a review was necessary "in order to ensure that they are used to best advantage having regard to emerging demands and overall interest of its contributors."
It would appear that the Minister for Finance could not give tuppence for the concerns of the Minister for Social, Community and Family Affairs, Deputy Ahern, about the "overall interest of its contributors". Why is it that this Minister, the man who clambers around trees in North Dublin, is so badly treated by a Government that cares not for his dignity or his talents? It is not as if the fund could not have been used in the manner for which it was intended. Last Sunday at the launch of my party's pre-budget statement, we called for a £20 or 26 increase in the old age pension. That we believed would be a reasonable step towards benchmarking this critical payment at 34% of average earnings. It would not have gone the whole way, but it would have been a start and a good one at that. What we got instead was 12.7 and the path of pensioners into continued relative poverty was firmly set out by the Minister.
The other purpose for which the social insurance fund can be used is in accordance with the redundancy payments acts. In the present context, workers who were the unfortunate enough to lose their jobs in the current downturn, with minimal skills could have had their statutory entitlements increased. The Labour Party will bring forward legislation to that effect. If such entitlements were increased, combined with training allowances, they would have a cushion and a possibility to retrain while maintaining a decent level of income support so that they could return to the labour market with enhanced skills and take up the slack already there. This was not to be. We have had five chapters, five years, five awful years, five wasted years.
It is hard to think of it now but when looks at the figures they are quite stark. During those years, we have spent 4.8 billion on income tax and PRSI reductions. It is an unprecedented amount of money and the Minister sought to make much play of it yesterday. The Taoiseach will no doubt seek to do likewise this morning. We will hear tall tales of this Government's achievements and comparisons with years gone by and other administrations. It amounts to saying no more than the 20th century was better than the 19th century and that the 21st century will be better than the last. Things progress, even the inflation which this Government has stoked in its time, exaggerates the claims this Government makes about its own performance – figures are up, in part, because money has been devalued. I ask the Taoiseach not to give us that nonsense this morning. I know it is nonsense and so does he. If he wants to go into people's past records as Minister for Finance he should look at his own as well as others.
I am sick and tired of the Government regaling us with stories about how much more than the Rainbow Government it has spent in certain areas. As Minister for Finance in that Government I remember been subjected to barrages of abuse about being a "tax and spend" Minister, particularly from the current Minister for Finance and the current Attorney General. They wanted me to spend less money on social services, not more. They complained about the deficits we ran, they did not request that those deficits be higher. If they were as honest then about the macro-economic climate as my party has been in recent weeks, public debate would be all the better for it.
If the Minister and the Government insist on looking at the choices they have made then let us return to his home ground issue – taxation. The Minster was at great pains to suggest that his tax reductions have been progressive. It is abject nonsense. On the Minister's own figure 33% of the money spent on tax reductions over the past four years went exclusively to those on the upper income bracket. It sounds good, does it not? The Minister of State might even buy it. The reality is that 67% of the people, the least well off in our society, were excluded from that largesse. They did not benefit by one penny from it, but the lucky 33% benefited from the reminder of money spent on taxation. They shared in the benefits that accrued to the other 67% arising from the reductions in the standard tax rate and benefited from increases in the allowances.
Trick-o-the-loop economics and playing around with the figures was what we got yesterday. I am surprised the Minister sought to make a point of this yesterday. He may not like it but on this one the commentators are right. As Minister for Finance, he has created categories of taxpayers, deserving taxpayers and non-deserving taxpayers. For him and his political colleague and soul mate, the Tánaiste, high flyers and the well off are the most deserving recipients of the largesse he has distributed as Minister. They are also the people who probably benefited most from the reductions in capital gains tax and the latest schemes on capital acquisitions tax announced by him in this budget and in the previous one. These are the winners. The losers are those on low pay, on the minimum wage who, after seeing almost 5 billion spent on tax reductions in the past five years, still have almost 50 of their incomes subject to tax as a result of this budget.
Yesterday the Minister for Finance, always capable of a coup de grace, crowned it all by reducing business taxation by more than the reductions in tax on personal incomes for workers. The reality is that yesterday's budget is about the future, but in the eyes of this Government the future extends no further than the next six months.
The increase in indirect taxation, particularly in the form of a 1% VAT rise, will also disproportionately affect the least well off in our society. On this point, the Minister stretched the bounds of logic to its limits. He told us – this was straight out of Alice in Wonderland– he was reversing last year's 1% reduction, introduced as a result of his loss of control over inflation, because it had not been passed on to consumers. If that is his view, does he accept that it follows a further increase will this time be passed on to consumers and that the kindest interpretation of his intervention in this area in the past two years has been to push prices up by 1%, not to mention the cover he has given to anybody who might decide to use this increase as a further excuse to push up prices during the sensitive, complicated euro changeover period?
If there has been an economic consensus about how to react to the economic difficulties of the past six months, it has been that continued investment in the structural deficiencies of the Irish economy could not be sacrificed. It is fair to say we have all known for quite some time that the economy could not continue to grow at the pace it has grown in the past few years. We knew the slow down would inevitably come, that the economy has been skirting close to its productive limits, and that only so much economic activity can take place in a city like Dublin where traffic grinds to a halt on a regular basis. We also know an economy cannot continue to grow rapidly when it is close to full employment and that it is possible to move only so much freight on the worst railways and roads in Europe. We know that only so many workers can be employed when there is not enough housing, when the health system cannot look after them and when there is not affordable and decent child care places.
At the heart of our current economic problems is the fact that we are experiencing an external and a domestic economic shock. Perhaps there is not much we can do about the former, but if we fail to address our domestic constraints we will never make full use of our economic potential. It is a poor and selfish Government that cannot even support the national interest to jump this basic hurdle just because the Minister made his career talking tough on the economy more than 20 years ago.
Yesterday our worst fears were confirmed. A poor, ill conceived and limited national development plan was slow tracked officially by the Minster. If the Estimates day was bad, budget day was worse.
More spectacularly, whatever hopes we held out for a health strategy – announced at great expense by a Government within the past fortnight – have died completely. The Minister for Health and Children, Deputy Martin, is now the emperor with no clothes; there was a lot of hype but very little substance. As my colleague, Deputy McDowell, amply demonstrated yesterday, the National Health Strategy is a work of fiction. The Government is so inept that it set out a series of targets for itself over a ten year period and comprehensively failed to make an impact on those targets within ten days. That is a question only the Taoiseach can answer. Why lend one's name to a strategy that the Finance Minister has designated for scuttling? Why raise the hopes of a nation about something that one has no intention of fulfilling. Why say one will spend 11 billion on capital investment in health over ten years when one's investment goes no further than 200 million? Those who need medical cards are not the only losers this week. Those of us who had hoped for a decent and fair health system have also lost out badly.
I ask the Taoiseach to think seriously about the hypocrisy involved, not so much on the part of the Minister, but on the part of the Government as a whole. Having jumped through every hoop possible to return a budget surplus this year, the Government has failed to deliver on its health strategy. It wants somebody else to do it. The Government that will succeed it and inherit a 3 billion deficit from the Minister, Deputy McCreevy, is expected to try to implement it.
Make no mistake about it, the remaining signs of life were strangled out of the health strategy yesterday and the political career of the Minister for Health and Children, Deputy Martin, should go with it, but perhaps that would not upset the Taoiseach too much. Few politicians would lend their names to such a cynical exercise. That the Minister, Deputy Martin, should also be centre stage on a divisive and ill conceived referendum that may never happen makes him the fall guy of, to use a well known quote, "the most cunning and devious of them all". There is no fear from Cork.
Needless to say, the health strategy is not the only loser. Thankfully, social housing got a shot in the arm yesterday but not near enough to fulfil the commitments made in the PPF, as the Taoiseach acknowledged earlier this week during Question Time. The shambolic state of school buildings up and down the country, as described by the INTO, also seems set to continue. The roads programme will make no great recovery either from the assault waged on it on budget day.
I am pleased the Government lived up to its commitment on child benefit. We have gone some considerable way in the past ten years to tackle child poverty and the Government, at least in the past two years, has played its part, for which I unreservedly salute it. However, it is fraudulent to say that tackling child poverty amounts to tackling the issue of child care which remains a capacity constraint and an upward pressure on wages in our economy.
As I have said previously, part of this problem relates to supply side control. It is about the co-ordination of places in the right place and at the right time. Extraordinarily, the Government's response has been to deal with this problem within the Department of Justice, Equality and Law Reform. As an aside, in years to come when somebody compiles a lexicon of the greatest Irish oxymorons of all time, the author in respect of the Department of Justice, Equality and Law Reform will win the Booker Prize. There is no doubt about that.
Child care is something the bombastic Minister for Justice, Equality and Law Reform does when he takes a break from bullying refugees. In reality it never gets done, and its consequent drag-down effect on our economy has continued over the past four years because nobody is responsible for solving the problem of child care. One only has to look at the draw-down in the capital figures to see the accuracy of that analysis.
While I have commended the Government for its efforts to tackle child poverty, its efforts to tackle poverty as a whole have been lamentable. The gap between rich and poor has grown massively in the lifetime of this Government, the one Government with the time and the resources to address the issue. Why has the Taoiseach not accepted, as I have done, the need to benchmark our social welfare payments with earnings? Is he at all serious about the issue of relative poverty? Yesterday, rather than use the money in the social insurance fund for what it was intended, the payment of pensions and other social welfare benefits, it was raided to make the Minister for Finance look better. What we got yesterday in social welfare was more of the same. The gap between those on the poverty line and those in employment increased further. Another PPF commitment has fallen by the wayside.
The years from 1997 to 2002 have been bad for those of us who believe in a fairer and more humane society and feel that the State's role and responsibility is to actively intervene to correct the distortions of our market economy. They have been disastrous years for those of us who looked forward to a time when this country would have the resources to turn the republican dreams of our fathers into reality.
I want to turn now from my comments and criticisms of what is contained in the budget – understandably, as politicians elected to this House, we are partisan – and read into the record some of the comments from today's newspapers. Many of the commentators would be impartial, others no doubt have their own private views and support different political parties.
The concluding sentence in the Irish Examiner editorial states: “At a time when the economy has grown at an unprecedented pace, the stark reality remains that one in five Irish children is still going to school hungry.”. The opening paragraph in the same editorial states:
Make no mistake about it – underlying Finance Minister Charlie McCreevy's eleventh-hour conversion to tackling the problems of social inequality, the low paid, the most vulnerable in society and those in need – this is an election budget.
However, reading between the lines of yesterday's funding allocations, this budget could be described as a short-term fix for the economy. Politically, the minister stands accused of indulging in a slick performance of sleight of hand, of massaging the figures, and of unashamed creative accounting. Nor are such criticisms without foundation. It is clear that while a surplus of 170 million is projected for this year, that upbeat scenario is predicted to change dramatically to a projected deficit of 3 billion in 2003, and to a deficit of 3.7 billion in 2004.
The final quote from the editorial of the Irish Examiner states:
While the Government plans to spend £6.5 billion a year on health, its failure to bring more people into the medical card scheme is disappointing. Bluntly, it means the continuation of what amounts to medical apartheid.
On the front page of the Irish Independent, under the by-line, “Comment”, by Brendan Keenan, not one of the derided “pinkos” or lefties about whom the Minister, Deputy McCreevy, makes comment on occasion, it states:
We have had Charlie the party-giver, and Charlie the gambler. Now, it's Charlie the squirrel. He has been busily burying surplus nuts during the good times of the last few years and yesterday, amid the chill of the economic slowdown, was the time to dig them up. There was the social insurance fund, where accumulated PRSI payments had exceeded social spending by £1.1 billion Mr. McCreevy dug £500m out of that. Then there was a secret hoard where he had stored some of the recent budget surpluses towards paying interest on the national debt. He left it alone this year, but will extract £400 million from it next year. He raided the Central Bank's fairly lavish store for another £400 million and pulled off a stunt favoured by predecessors in hard times – making business pay next year's taxes this year. One remembers a similar trick with something called VAT at point of entry. That came to a grant total of £3 billion, which is an awful lot of nuts. As a result, Mr. McCreevy was able to do the apparently impossible – continue spending money like water but have no recourse to borrowing, even in an economy expected to grow by no more than 4% next year.
The final quote from that article states:
The Government has left the hard choices until after the election. The EU Commission may well be startled by Department of Finance figures which show the public finances deteriorating by 3% of GDP next year and by 5% of GDP in 2003.
The first sentence of the comment from the chief political correspondent of the Irish Independent, Chris Glennon, whom most people would say is an impartial correspondent, states: “Charlie McCreevy made three daring cash raids to balance his final Budget before the general election.”.
I want to turn now to the opening paragraph of a commentary in the Irish Examiner, under the headline “Budget 2002”, which states: “A quick raid on the Central Bank and a dip into the Social Insurance Fund afforded Mr. McCreevy the necessary resources to narrowly avoid a return to the days of deficit financing in Budget 2002.”. The political editor of the same paper, John Downing, on its front page states: “On the basis of Finance Minister Charlie McCreevy's own figures in yesterday's budget, the country will be almost £3 billion in debt by the year 2004”. Further on in the article he states: “Minister McCreevy's own figures show he has effectively mortgaged the future of the country – leaving us £2.4 billion in debt by 2003, and £2.9 billion in the red for the year after”.
I now want to turn to a very impartial reporter, Mr. Sam Smyth, a man known to us all. In the Irish Independent, under a headline, “What a great budget – if you're a betting landlord, that is”, he states:
The Minister raided the Social Insurance (SI) fund for £635 million (806 million) and scooped another £480 million (610 million) from the Central Bank's euro windfall. Yesterday, a leading accountant said that if Charlie McCreevy presented his clients' accounts to the Revenue in the same obfuscating way that he laid his budget before the Dáil, he would probably be arrested.
What else would we expect?
I want to turn now to the old lady of D'Olier Street, The Irish Times, and the political analysis on page 2 of the supplement, under the by-line of Denis Coghlan. The first paragraph states:
It was a "funny money" budget. The kind of figure-juggling that used to drive the Minister for Finance mad when he sat on the Fianna Fáil backbenches and Charlie Haughey was in charge.
Does the Taoiseach remember him? It is difficult to forget old tricks.
Another impartial observer.
Deputy Quinn, without interruption.
Jim Kemmy will never be dead as long as the Minister of State is here. I will never forget his comment, "Mickey Mouse and Mighty Mouse". The Minister of State lives up to it every time he opens his mouth.
Unlike what came after him, and I am not referring to the Deputy.
The article continues:
If you enjoy playing with mirrors, or the pleasures of the three-card trick, it was a virtuoso performance. In all, the Minister conjured up a whopping 2 billion euros from the three sources and announced he would not be borrowing by 2002. It didn't stop there. There were hints of another stroke as we approach the election. The Central Bank has already been put on notice that the Minister wants some of its surplus reserves – apart from the euro money – in the coming year.
And there is no knowing where the money will be bunged . . .
Mr. McCreevy protested that he didn't favour only the better off in the Budget. He didn't. He simply favoured them disproportionately. New tax breaks were introduced for the con struction of private hospitals; tax relief schemes were extended and investment in private rental accommodation was encouraged.
The editorial of The Irish Times states:
No Minister for Finance in the history of the State ever had it as good as Mr McCreevy who, year after year, has been able to deliver tax cuts along with spending increases. This year an Exchequer surplus was denied him but he still managed to find the money for both increased benefits and higher spending.
My quotations are selective, but balanced. Although less critical than some of the other newspapers, nevertheless The Irish Times editorial is critical. It states:
The social insurance fund is showing a surplus – which it may one day need – but he takes it. The Central Bank makes a profit on the euro switchover and he takes that too. In terms of budgetary integrity, there is little difference between going into debt or using up valuable reserves. Mr McCreevy did not, as his critics claim, falsify the figures but there is something of the three-card trick in the way he presented them.
The grab for revenue has been both careful and sloppy.
I could quote from many other pieces. I refer Members, in particular, to the critique of the budget by that left-wing economist, Moore McDowell.
The Deputy left some of them out.
There are even better ones there.
We will read the Deputy in the grouch corner of the Sunday Independent next week.
Is Deputy O'Dea a legal adviser to the accountancy practice? If so, he might get a great deal of work in years to come.
Deputy Quinn, without interruption.
It should be remembered that I share something in common with both the Taoiseach and the Minister for Finance other than that we held the position of Minister for Finance on different occasions. We were all elected to the House on foot of the landslide election of 1977. I bucked the trend somewhat, while both Deputy McCreevy and the Taoiseach rode on the crest of a wave – to use Deputy McCreevy's phrase – that was to haunt us for 20 years. It seems the imprint of that success has never fully left the heart or head of either of them because, as sure as it is 6 December, we are reverting to type.
I now turn to a very interesting calendar entitled, How the Budget Fits into the Political Calendar, which appears on page ten of The Irish Times supplement under the by-line of Mark Hennessy.
More Impartiality.
Deputy O'Dea needs to write his own articles.
It is worth reading because it shows how far the prostitution of Irish politics has come under the leadership of this Government. It states:
December 5th, 2001: Increases in drink, tobacco and petrol come into effect immediately.
January 2002: 275,000 social welfare recipients, including those getting supplementary social welfare and unemployment payments, will receive them immediately.
Cuts in house stamp duty cover all sales signed after interest relief on rental income returns from January 1st.
February: Increases in old age pensioners' electricity and gas allowances come into force.
February 8/9th: Progressive Democrats [Remember them, if in doubt leave them out?] annual conference [If they turn up].
Mid-February: A six week lump sum will be paid to 275,000 people for increases due on January 1st in carers allowances, one-parent family payment, deserted wives and invalidity pensions; a 13-weeks lump sum will be paid to cover increases due up to early April in disability allowances, old age contributory and non-contributory pensions.
March 1st: 1 per cent rise in VAT, employers PRSI will be cut to 10.75 per cent.
March 7/8th: Fianna Fáil Ard Fheis.
March/April: Income tax changes due from January 1st will be backdated.
Easter Sunday: March 31st.
May 7th: Monthly child benefit increases will be paid, backdated to April – three months earlier than last year and five months earlier than in 1997. Eligibility limits for carers will be raised.
May: Easing of free telephone rental eligibility rules comes into force. Betting tax to be cut from 5% to 2%.
The Government should not put too much money on winning the election.
It continues:
June: Respite Care Grant will be increased by 127.10 to 635.
June 1st: Beginning of Ireland's World Cup campaign. [As if anyone needs to be told.].
June 26th:—
New Government takes office.
—Date by which general election must be held.
That comment should have been applied in the last election. I have a good memory.
July 5th: Current Ministers on pension.
All the backdated payments would have been unnecessary and we would not be up to the wire in terms of having to enact legislation before Christmas arising from this budget, had the change in the budgetary timetable not been pushed back by two to three months in March-April in the Finance Act. We should have had yesterday's budget in October rather than December.
The Department of Finance is not incompetent and the Department of Social, Community and Family Affairs does not lack administrative skill. What has occurred is a deliberate distortion of the budgetary calendar to ensure this drip-feed of backdated money is paid in lump sums close to the probable date of a general election. Apart from the profligacy of the 1977 Fianna Fáil manifesto, from which the party appears to have learned nothing, I have not ever seen such a blatant attempt to buy the votes of the electorate. To quote my colleague, Deputy McDowell, this budget is a lie and a fraud and will be seen as such.
Is that the best the Labour Party can do?
It was weak applause.
It was a weak speech.
There is only six of them and not a Cabinet Minister among them.
They are all working hard.
The Taoiseach, without interruption.
This year's budget, the fifth and last of the current series, is a prudent budget committed to the urgent task of underpinning national development. Above all, it is a caring and equitable budget in keeping with our radical social philosophy.
This country has made magnificent progress, which is recognised everywhere, over the past four years. Our earlier budgets were central to boosting confidence and prolonging, for as long as international circumstances allowed, an unprecedented period of high growth which has allowed us to catch up with our European partners. While last year's record growth of 10% is likely to be halved this year, international agencies are still predicting that we will head the inter national growth league in 2002. This is not a bad achievement for a small country.
We have used every opportunity available to create close to full employment, build a competitive tax system in place of the unfair tax burden working people had to bear in the past and set out long-term plans in every area where we badly need progress. When we took office unemployment still stood at 10%, whereas today it is down to around 4%. In addition, numbers at work have increased from about 1.4 million people to more than 1.7 million people. Getting so close to full employment is the biggest social achievement in the history of the State. No one will be surprised that it was achieved with Fianna Fáil in Government together with our Progressive Democrats partners.
We have used to the full the opportunity to do the maximum for social inclusion in other ways as well. All the emphasis of the budget is directed towards the least well-off and improving public services.
Given the slowdown in the world economy, the budget is a fine achievement. We have managed, for the fifth year in succession, to avoid Government borrowing. The Labour Party in contrast, has urged us to borrow more than £1 billion and to raid the national pension reserve fund. Where would confidence be today if we had followed that advice?
We are not going to return to the bad old days of the 1970s style deficit economics. As we see from the experience of other countries, it is very easy to allow the public finances to deteriorate quickly and to get into a hole. That does not bring benefits to everyone and just means expenditure cuts, higher taxes, higher unemployment and a steep rise in poverty. It is difficult to predict what situation the Government will face this time next year but projections for 2003 and 2004 show a general Government deficit of 0.6% of GDP, comfortably within the 3% allowed by the EU Stability Pact. Many larger countries are already bumping up against that ceiling. In looking at our absolute figures, commentators are apt to overlook the 1% of GDP being set aside for pensions which has everything to do with the long-term sustainability of the public finances.
The public will need to decide next summer whether it really wants an alternative Government, which is not up to the job and which will ring the alarm bells, panic and destroy confidence, as opposed to an experienced Administration which will cope in the best available way with all eventualities.
It was somewhat difficult to listen to a lecture in the usual tone of effortless superiority from a former Minister for Finance, Deputy Dukes,—
The Taoiseach was not here.
I was listening to the Deputy who, despite his best efforts, never succeeded in the 1980s in even phasing-out the budget deficit, nor did he get anywhere near it—
The Taoiseach's party obstructed us every step of the way but we got there in spite of that.
Deputy Dukes, please.
The Deputy criticised a Minister who in five years has not borrowed a single penny in net terms and who will leave the national debt well below the level he found it. The Minister has very properly marshalled available resources to avoid a plunge into borrowing at this stage when we do not have any real idea of how long the economic slowdown will last. All the measures he has announced must be passed into law and confirmed by the Oireachtas. The prudence and the margin of safety created over recent years has paid off. If this is not a rainy day, I am not sure what is.
I find it laughable that the Labour Party, whose spokesperson has been urging us to raid the pension fund all year, becomes all concerned that we are using the surplus in the social insurance fund to part-fund increased social benefits. How often has the State had to put in additional funding in the region of £11 billion, if I recall the figure correctly? The social insurance fund is based on a tripartite principle. The Exchequer has assisted it in the past through substantial transfers for most of its history when it faced a deficit. There is nothing untoward in the fund reciprocating. Even after the event, there will still be a large and growing surplus in the fund of 1.2 billion. There is no question of contributors' benefits being put at risk. That should be made clear.
We are dealing here with surpluses and surpluses mean amounts above and beyond requirements. Is it not reasonable to recover some of the Exchequer's earlier contributions, particularly as we are putting much more money in on the other side anticipating future deficits in the social insurance fund in relation to pensions? In net terms, far from raiding the social insurance fund, this Government is preparing to beef it up in the future amid loud complaints from the Labour Party.
The other focus of attention is the transfer from the Central Bank. In the case of coinage, the ultimate property right in the profits from coinage issue has always been the Minister for Finance's. That is clear in the legislation since 1927. In other countries, the profits go directly to the public purse whereas here they accumulate in the Central Bank. What is being done is a legitimate exercise of the people's property right.
A raid.
The use of the windfall surplus to the bank arising on the exchange of currency notes by the bank is not unusual either. The position since 1942, when the bank was set up, is that the Minister is entitled to have a portion of the surplus transferred to the Exchequer. Every Government has availed of that surplus and that is what we propose to do. There is nothing out of the ordinary in this procedure.
What is different is that we are using these sums in a prudent manner by using them to help fund the national pensions reserve fund where they will be effectively locked away for at least another 25 years. This is hardly an imprudent or incautious course. It is certainly not what a raider would do. What is really upsetting the Opposition is that the Government has been able to put together a far better budget than it believed possible. When Opposition Members cry foul, their cry is to be understood in political terms.
What about these newspaper reports?
I will show the Deputy the others.
The Deputy had better get used to it.
Allow the Taoiseach to proceed without interruption.
I have had the honour of serving in this House for 25 years. Every budget night whoever is in Opposition – it has been very difficult in the past few years – has to get up and make these kind of statements and I thank them for doing so this year. Normally we would be here until midnight or 1 a.m. but I know that last night everyone, except me, was home in bed long before that. I understand that people must come in and say their piece the morning after. Frankly, we can see Members' enthusiasm.
The Taoiseach is showing the same enthusiasm himself.
Tongues in cheeks.
Even the people who are normally in the Visitors' Gallery are out celebrating, not to mind anybody else.
A £500 million tax package is substantial in present circumstances. Personal tax relief this year is concentrated on lower income groups.
I am beginning to think Deputy O'Dea had a hand in writing the Taoiseach's speech.
Through the years we have heard about the higher paid getting the benefits, even though the Minister's figures yesterday showed that in the accumulation of five budgets only 11% of the total figures went to the higher paid. I am astonished that nobody is commenting on what happened in the lower income groups. People talk about the national minimum wage. Half way through the last election campaign I eventually drew out the then Minister of State, Deputy Rabbitte's support for the idea. He had to go over to the Fine Gael offices to the then Taoiseach, Deputy John Bruton, and say, "This is a disaster. We really must have a minimum wage", after which a huge about-turn ensued. I congratulate Deputy Rabbitte for his success although it was half way through the campaign.
I know it was not easy.
The idea was brought forward by the then Minister for Social Welfare.
No, it was not. The idea was brought forward by me.
What about the commitments they made last night?
Personal tax relief this year is concentrated on the lower paid. The tables show that the proportional benefit—
I will find the quote where he opposed it.
Deputy, allow the Taoiseach to continue.
—of the tax changes is weighted towards those on low incomes. We have already been commended by the EU Commission for having a tax system that weighs least heavily on the low paid. The minimum wage was originally a Fianna Fáil initiative introduced during the last election, one which this Government implemented, and 90% of the minimum wage will now be tax free. Those on the minimum wage are not always the poorest people in our society but we must help them in every way we can.
Here we go, riff No. 3.
They would include many better off young people in part-time work so it would be wrong to present this, as some have done, as the absolutely overriding social priority.
A worker in MacDonalds is a well-off young person.
Deputy Dukes, please allow the Taoiseach to continue.
It is a considerable achievement that, following the budget, 36% of income earners will not be paying any tax and that those on the higher rate represent barely a quarter of all income earners.
The last few years represent a period of tremendous reform in the tax system. Rates have been reduced to a very tolerable 20% and 42%. The low or intermediate rates proposed by the Labour Party and Fine Gael Party are just gimmicks which do not hide the fact that their contribution to lightening the burden on the PAYE sec tor over the past 25 years has been either negligible or negative.
I must be honest and say that Deputy McDowell made a fair and good speech from his perspective.
We have also published the document on which it was based.
I was in the Chamber for the Deputy's contribution and I want to congratulate him for stating his position fairly and squarely because I believe people should do that. Deputy Quinn said he was being ridiculed for it but last night his own party spokesperson, presumably with Deputy Quinn's agreement, stated his support for higher taxes. Last night he pledged his party to higher rates of income tax, capital taxes and other taxes.
The election is coming. Beware of Greeks bearing gifts.
Just as the Taoiseach is.
This Government has truly liberated the PAYE taxpayer. We are proud of the reform that resulted in the introduction of tax credits and helped us produce fairer budgets, with the tax year now aligned to the calendar year.
In net terms, this year we have had to raise revenue. There have been modest increases in indirect taxation. We have long been urged to raise excise duty on fuel for environmental reasons and we have also increased the excise duty on high sulphur diesel as part of the national climate strategy.
Kyoto is safe.
We would have done more on cigarettes for health reasons were it not for the considerable inflationary consequences of such a move.
The Minister could not make up his mind.
We also have brought the payment of corporation tax, where the rate is being reduced by 4%, more into line with the practice of our partners and, indeed, with what is required of the self-employed. This is a very reasonable change which will be phased in over a period of five years. None of these tax increases need to impact on the poor, although I accept smokers are distributed throughout the population.
This is the first year in recent times that the social inclusion measures exceed by a wide margin the cost of the income tax package, £850 million as against £500 million.
One year out of five.
The social inclusion package for the second year running is three times the size of the package in the rainbow Government's last budget. Weekly payments have increased by £8, £10 and £12. This compares with an average £3 a week increase in the 1997 budget. When it comes to social progress, Fianna Fáil and the Progressive Democrats have consistently left Fine Gael and Labour in the shade.
I am immensely proud of what this Government has achieved on child benefit and old age pensions over our five budgets and I acknowledge what Deputy Quinn said on that issue this morning. Child benefit after the 1997 budget was £30 a month for the first two children and £39 for third and subsequent children. In 2002, child benefit will be more than £92 a month for the first two children and £116 a month for third and subsequent children.
The Taoiseach is very welcome.
I appreciate that. The old age pension has increased—
The old age pension has increased by almost 50%, from £78 in 1997 to £116 in 2002 and for a married couple it has increased from just over £100 to just under £200. Increases before 1998 simply kept pace with inflation, and more and more older people were falling into poverty. This year's increase is more than 9%. Furthermore, the old age pension will next year be at least 30% of the current average industrial wage. The sensible policy is to raise other payments, as and when this is possible. It will be my objective to pursue a strategy of increasing other payments, as resources permit, so that a broadly similar level in relation to average living standards in the community can in due course be achieved for all social welfare recipients.
This Government has given a very high priority to investing in our health services. As a result of the additional spending announced yesterday, health funding will be 134% higher than when we came to office. This represents the largest sustained increase in health funding in the history of our health services.
Deputy Mitchell yesterday claimed that this funding is not having an impact. He even supported his leader's claim that the health services were better under his stewardship. As with so many areas, this is a case of the Opposition making up the figures, when they do not like the facts. Deputy Mitchell yesterday claimed that the current waiting list figure represents a 91% increase since we took office. The figures publicly available and given to this House show that—
He did not say that. That figure was for his own constituency.
It was in Crumlin.
I stand corrected.
—they are down by more than 13%. In contrast, the waiting lists rose by an unprecedented 6,500, or 28%, when Deputies Noonan and Quinn were in charge. As a result of our increased investment, more and better paid professionals are delivering significantly more services. This year more than 4,000 more doctors, nurses, dentists and paramedics are delivering care than in 1997 and 90,000 more hospital treatments are being carried out than in 1997. There are more than 4,000 more day residential and respite care places to help people with disabilities and their families than there were in 1997.
These are improvements, making a difference in the lives of people. We have always said we see the work to date as a foundation. We have set out our plans for building on this foundation, and the budget has provided for the first phase of development. The health strategy which we launched last week is the most comprehensive and ambitious document of its type ever launched. It has received wide support. The Patients' Association for example has called it "Welcome and well thought out". It is a strategy of investment and reform which will achieve the permanent transformation of our health system.
Having failed to seriously challenge the strategy's proposals, the Opposition has attacked the fact that not every element of the strategy will be implemented in year one. If one were to believe the Opposition Deputies, everything can be done at once. We are committed to increasing the coverage of the medical card scheme. That is why we have already extended it to all people over 70 – the age group who rely most of all on our health services. We will go further in our next term. What I find most extraordinary in the Opposition's attack on this point is that the policy of indexation of income guidelines which we have implemented is exactly the one implemented by Deputies Quinn and Noonan. In addition, even though they demanded that the full strategy proposal be implemented next year, Labour's pre-budget statement did not mention either health or medical cards.
The additional funding we have provided will deliver significant service improvements next year. It will end all over 12 month waiting for adults and it will end all over 6 month waiting for children.
Where did we hear that before?
Déja vu.
It will provide more than 100 million to develop services for people with disabilities. It will fund a major expansion in supports for older people. It will extend 24-hour GP cover nation-wide and it will ensure important developments in areas such as cardiac care, cancer care, child care and youth homelessness.
We will go before the people with a record of developing our health services and planning for the future which will far outstrip that of any pre vious Government. We will also have shown our commitment to investing in the future by investing in education. We have comprehensively reversed the policy of our predecessors, which saw Deputy Quinn's January 1997 budget include a freezing in school funding and cutbacks in teacher numbers. In contrast, direct school funding for primary schools is now more than two thirds higher, and we are in the middle of a programme to hire 2,500 new teachers. We have achieved the lowest class sizes in the history of Irish education, and they are set to decline further. We have also opened up opportunity by increasing adult literacy funding more than tenfold, and we have created more than 15,000 new third level places.
In recent weeks we have heard the Opposition attempt to claim that there has been a cutback in the funding for school building projects. The facts show – and I want to deal with this because it is being run outside the House very diligently by at least some Opposition spokespersons – that this is another misrepresentation of the truth and we have heard much in the past 24 hours about truth. The January 1997 budget allocated 74 million to all school building projects. Yesterday's budget allocated 335 million and the impact of this funding can be seen throughout the country.
Will the Taoiseach publish the list?
In 1997 there were only 22 large scale school building projects under way. At the moment, there are 200 under way. That shows a real and sustained commitment to our schools and to our education system. An OECD study published this week saw Irish 15-year olds with the second highest ranking in Europe for literacy, significantly above average in relation to scientific literacy, and average in relation to mathematical ability. We have done better than many larger countries, ranking higher than the United States on all scores. The person who has lead that change is the Minister of State at the Department of Education and Science, Deputy O'Dea and I congratulate him.
We must continue to attach great importance to jobs. The reduction of employers' PRSI from 12% to 10.75% is a major boost to competitiveness that largely compensates for the removal of the ceiling and will help employers, in more difficult times, to maintain, sustain and grow employment. We have also taken steps to remedy difficulties in the construction industry related to the housing market by restoring tax reliefs, and to increase the supply of apartments for renting which are urgently needed by young people.
Where is the Minister for the Environment and Local Government? Is he sulking?
He is dealing with the environmental matters of waste management in Wicklow today. He is talking a hands on approach and working diligently on it.
I will tell the Taoiseach where the Minister is—
He is clearing up the mess that the Taoiseach dumped on him.
He is—
I feel another maiden speech coming from Deputy Wade.
Could we have silence for the Taoiseach? He is entitled to the same courtesy that was accorded other Members who spoke earlier. That applies to both sides of the House.
I understand that the five Opposition Deputies left in Leinster House today have to do their best so I am not upset by the interruptions. I acknowledge what Deputies Dukes and Quinn have said in wholeheartedly welcoming the changes is the construction industry and the excellent incentives for the construction industry and related areas. We are equally pleased with them and the fact that the Opposition is congratulating us on them makes us feel even better.
In relation to local authority housing and what I said the other day, which Deputy Quinn raised earlier, let me—
Is the Taoiseach about to correct the record?
No, I am not going to correct the record but we will put the facts on record. As soon as I said one thing, Deputy Gilmore went out and extended it by about 500 times. Let me finish what I was saying the other day. I said that, under the Programme for Partnership and Fairness, the commitment was ready to start and acquire 12,000 local authority houses in the four year period of 2000-03. The Government subsequently increased the target to 25,000, as Deputy Gilmore pointed out to me the other day, in the action for public housing document published last year. We discussed what was happening on the PPF sub-committee and I said what I had to say on that.
In 2000, the first year of the programme, 5,079 new starts were achieved. While this was somewhat less than expected much of local authority effort last year had to go into the planning stages of ramping up for the programme. As I said on Tuesday, the Minister of State at the Department of the Environment and Local Government, Deputy Molloy, had to put considerable effort into working with local authorities to achieve what he did last year. He worked extremely hard with the resources available and pressed right through the autumn of last year. This he successfully managed to do and the benefits of these increased planning efforts are now being seen. Some 7,000 starts are expected this year recovering most of the lost ground last year. By the end of this year – the half-way point in the programme – it is expected that over 48% of the increased target for programme starts will have been achieved subject to resources, which thankfully were provided yesterday. The Minister of State has the resources and the target of 25,000 starts by the end of 2003 is still considered attainable.
The Government is totally committed to the implementation of the national development plan. We have topped up capital spending by over £400 million, which includes what works out at 146 million for housing and 100 million for national road improvements. There is another 30 million for public transport. It should be remembered that in 1997 the Exchequer was contributing nothing to public transport, which was relying on EU funding and borrowing, whereas 388 million is being provided next year. If we wish to criticise the lack of past investment in public transport, which was a big issue here yesterday when Deputy Jim Mitchell was trying to talk to the people driving home which has led to the gridlock, we need look no further than the previous Government which spent no Exchequer money on public transport. How dare it come in here and lecture us when it spent nothing.
Not so.
Why have we not got the Luas today? It is because Minister for Public Enterprise, Deputy O'Rourke, went underground. All we have is a carriage on a rail going nowhere.
There is another 30 million for public transport. If the Opposition had had its way, the whole of Dublin would have been dug up and all of Dawson Street would have been closed off. There would not have been room for people to move around if that daft plan had been followed. The Exchequer was contributing nothing to public transport in 1997, but relied on EU funding and borrowing whereas 388 million is being provided next year.
I pay a warm tribute to the Minister for Finance and our partners in Government, in particular the Tánaiste. We have worked successfully to turn this country around. With the acknowledged support of all our backbenchers we have done a remarkable job over the last five years which will certainly enter the annals of history of public finance.
The challenge in the next five years will be to maintain the very high level of confidence that this country enjoys, both domestically and internationally, while spreading progress and prosperity, and giving people of all backgrounds opportunities they never had before.
I will share my time with Deputy Clune.
Will the Deputy allow me to read a brief change in the Order of Business?
