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Dáil Éireann debate -
Thursday, 6 Dec 2001

Vol. 546 No. 1

Financial Resolution No. 6: General (Resumed).

Debate resumed on the following motion:
THAT it is expedient to amend the law relating to inland revenue (including value-added tax and excise) and to make further provision in connection with finance.
–(Minister for the Marine and Natural
Resources, Deputy Fahey).

There is one thing for which poor people are grateful, that is, this is, thankfully, the last budget the Government will ever introduce. Fianna Fáil and its partners will be judged on their record over five years, not just five months. It is quite shocking to discover that in the past four budgets two thirds of all surplus resources have been allocated to tax reductions for the richest 30% of our society who have received over half of all available resources. Yesterday's budget will not undo the damage caused by the previous four in the name of the Minister for Finance, Deputy McCreevy.

The people have already seen through the half-baked accountancy exercise presented in the House last night. This is arguably the most dubious budget ever presented. Whoever forms the next Administration will have to deal with the projected 3 billion deficit as we enter 2003. Yesterday, the Minister for Finance put a small elas toplast over the difficult financial situation that we face. He was fooling nobody when he suggested that no borrowing would result from measures announced yesterday. In fact, he borrowed away the future benefits of workers when he decided to raid the social insurance fund.

The social welfare system is just one of the ways the State can help and intervene to protect the standard of living of low income families. In recent years, despite the considerable resources at the disposal of the Government, the real standard of living for some of the poorest people in the country has substantially disimproved. Their story can be seen in the misery inflicted on over 120,000 people awaiting social housing or in the poor condition of the public health service for the needy of the country. Poverty is wider and deeper than the issue of income alone. As was admitted recently by the Government, in excess of 50,000 local authority homes have no central heating. A scandal in our country must be the level of fuel poverty, particularly at this time of year, for those living in the social housing sector.

It does not matter how the Minister for Finance dresses up the figures – the Government has allowed the sharpest rise ever on the issue of relative income poverty. This is a fact, not a philosophical construction. The gap between rich and poor is growing at an alarming rate and this budget will do nothing to help those in difficult income situations. The Government should be ashamed. A weekly income of £93 for a person on unemployment assistance or social welfare allowance is not just or acceptable. More progress should have been made to meet the £100 target for the lowest rate of social welfare, a key target of the Programme for Prosperity and Fairness.

I now know the reason the Minister for Social, Community and Family Affairs has refused to sign up to the majority recommendation of the benchmarking and indexation group which recommended that by 2007 the lowest rate of social welfare should represent 27% of gross average industrial earnings. The Minister knows that it will be virtually impossible to make progress in linking welfare rates to general wage levels in the economy when the financial situation looks so grim in the years ahead. The proposed £8 increase in all social welfare schemes is ahead of projected inflation next year. However, there is a projected 8% increase in wage inflation over the same period. As long as the situation continues where wage inflation outstrips the consumer price index, we will continue to see a substantial rise in relative income poverty.

The small increases in various social welfare schemes announced yesterday had Members opposite in wild applause. They greeted the announcements as if something significant had happened. The real issue is that for a significant minority the problem of putting food on the table for their families will continue in the year ahead. In their world they live with ever increasing food bills which make it more difficult to make ends meet. The St. Vincent de Paul Society has already highlighted the fact that 60% of the weekly income of low income families is spent on food. Increasing VAT, petrol and other old reliables will only add to the increasing difficulty this group will face.

The social insurance fund raid by the Government is the greatest con job since the days when Fianna Fáil decided to buy the votes of the people in the 1977 general election campaign. The move is illegal and flies in the face of providing a social security fund which benefits those who have paid into it. Those who pay PRSI have seen their fund decimated by the trickery announced by the Minister for Finance yesterday. The PAYE sector must now look upon this fund as nothing more than tax through the back door. If the Minister really wanted to hand something back from it to the PAYE sector, why did he not reduce employee PRSI? If we pay into something, we expect to get something back. People make contributions on the basis that the fund will be available for future benefits. The raiding of the fund ensures that future benefits, such as paid paternity leave or enhanced redundancy payments, cannot be put in place by a future Government. This raid is also irresponsible given the likely increase in the number of unemployed in the next year. The reduction in employer's PRSI will further reduce the fund for possible future benefits.

The policy is a sham. The Government wants to borrow on the backs of future generations of workers, but they will not get away with it as this money does not exist for electioneering. Did the Minister for Social, Community and Family Affairs have discussions with the Irish Congress of Trade Unions before the decision was taken to raid the fund? He owes it to people inside and outside the House to appear here this afternoon to explain what discussions took place with ICTU.

One of the most appalling things about the budget is the fact that the Department of Social, Community and Family Affairs cannot pay what are relatively small increases in social welfare from 1 January. No other category of customer who deals with the State would accept this. The Minister knew for over two years that it was the Government's intention to realign the tax year from 1 January 2002, but, despite this, many social welfare recipients will have to wait until February to obtain a small backdated payment. It is clear that prompt payment legislation does not exist for those on low incomes.

Is the Minister telling the country that for the past two years he was unable to develop an administrative system to give social welfare recipients their small increases on time? If he admits that, he is admitting to gross incompetence. No other category of worker would allow a situation to develop where their increases were backdated six or eight weeks. Social welfare customers are dealt with differently by the Government, which shows a clear policy of discrimi nation against them. The Revenue Commissioners practises prompt payment with its customers but social welfare customers are told to wait six weeks. This is not good enough and, with available technology, I do not accept the Minister's arguments that he could not have developed an administrative system to deliver the increases from 1 January.

There has been much play about the increases given to pensioners, but those on non-contributory pensions will continue to see a significant difference between their pensions and those of contributory pensioners. More should have been done to improve non-contributory pensions. The difficult budgetary situation we will face over the next 12 months, as I said earlier, will make it more difficult to improve the lot of pensioners.

The small changes to the free schemes are welcome and I look forward to the opportunity to consider them in the Social Welfare Bill. Tax individualisation, now a permanent feature of our tax policy, does not apply to social welfare recipients. It is unacceptable that a married pensioner couple should not be treated as two individuals when pension income is assessed. This is another Government failure. If the Minister is serious about helping widows, he should have extended all the benefits under the free schemes to help them. They have been treated atrociously by the Government. The £12 increase in the widow's contributory pension only applies to those aged over 66 years. Virtually nothing was done to help young widows. I challenge commentators to read the details of the proposals instead of taking the headline announcements at face value.

After three years in office the Government finally made progress last year in child benefit, following lobbying by the Opposition and many agencies which work in the child poverty area. Increasing child benefit is the most effective way of tackling child poverty. One in eight children experience consistent poverty. As was recently highlighted, Ireland has the sixth highest percentage of children living in income poverty among the 22 OECD countries. Parents should receive child benefit on a weekly or fortnightly basis. The Government should amend the Social Welfare Bill to allow this.

One of the greatest disappointments in yesterday's statement was about child dependent allowances. This is one of the few areas where low income families obtain additional support, but the rates have remained unchanged since 1993 and there are many anomalies relating to the different ones that apply. An opportunity was missed to reform it. Why was a proposal from the PPF, to extend CDAs to all children up to the age of 22 years in full-time education, not brought forward? The proposal to change the back to school footwear and clothing allowance represents a tiny improvement to a scheme which has the potential to help directly low income families. We will return to this in the debate on the Social Welfare Bill.

The Government failed to deliver significant benefits for carers. None of us should forget that family carers save the State about £1.8 billion in unpaid work. The changes announced yesterday will increase the total number who can obtain carer's allowance, but the Department estimates that at least 52,000 full-time carers exist but only 22,000 receive the allowance. The income disregard for a couple will increase to £250, but it should be increased to £370, twice the current minimum wage. Nothing was done to allow carers receive social welfare benefits and their allowance or to introduce a cost of care grant to meet the massive costs involved in caring for a loved one or friend. In short, they are the big losers in the budget. The increase in the respite care grant is not enough to offset the Minister's failure to improve significantly the income disregard for carer's allowance.

The decision to restore mortgage interest relief for those involved in the private rented sector and to substantially reduce stamp duty was castigated by the Minister for the Environment and Local Government, Deputy Dempsey, only three weeks ago in the House when he said:

The Government does not believe that speculators are equal to first time house buyers. When the Government took office, speculators were having a great time in the housing market. They were buying numerous houses, getting rich quickly and squeezing first time house buyers out of the market.

He spoke of why speculators should be taken out of the market and why mortgage interest relief should not be re-introduced for the private rented sector. The Minister was not here yesterday, this morning or now. He has clearly lost another battle at Cabinet. He had other losses over the dual mandate, the planning system and the electoral system. Does he have any credibility at all? The time has come for him to consider his position. In all the areas in which he has stated positions of principle, the Government, and specifically the Minister for Finance, Deputy McCreevy, have dumped on him. He should resign because the Government which he supports is not introducing measures he has outlined. Today or tomorrow, he should make a statement about the announcements on the housing market.

As the Minister for Finance travels in his chauffeur driven car from the corporate box in Croke Park to the reserved enclosure in the Curragh and to dinner in the K Club, life must appear very rosy. It is a long way from the life lived by many people in my constituency. He put himself forward yesterday as the new champion of the poor. After five years in office, the Government has squandered the boom. The social divisions between our people have never been greater. The majority of right-thinking people will reject the McCreevy ideology when it is presented to the people next year in the general election.

Acting Chairman

Deputy Clune has 14 minutes speaking time.

I wish to speak on two issues. I believe the issue of the environment has been completely neglected in this budget. The only reference made by the Minister in his speech was to the climate change policies. Last year the Government adopted the national climate change strategy. It was a recognition that climate change is now a global environmental problem. Last year after extensive consultation the Government produced the national climate change strategy. The Minister, Deputy McCreevy, referred to the need to reduce sulphur emissions. Sulphur is not a greenhouse gas. This is a complete con-job, a fobbing off and trying to give the impression that something was done to meet our commitments under the Kyoto agreement. The Minister for the Environment and Local Government has just returned from a meeting in Marrakech where the agreement was discussed. President Bush rejected the Kyoto agreement. We are committed to the reduction of greenhouse gas emissions. We have one of the highest rates of emissions in the EU. We have been let off the hook by the EU. The targets which we are bound to reach by the year 2008 are not as onerous as those imposed on other countries.

The climate change strategy produced by the Minister last year recognised that global weather conditions have focused our minds on the potentially devastating impact of climate change. Ireland could experience higher winter rainfall with much more severe flooding, lower summer rainfall and water shortages, rising sea levels, accelerated coastal erosion and loss of bogland. The list goes on.

Last year we were told that the Government would introduce appropriate tax measures to prioritise the reduction of carbon dioxide emissions from 2002 onwards. The Minister made a commitment under a global agreement that this country would reduce the emissions of carbon dioxide, methane gas and nitrous oxide. Another opportunity has passed in which we could have addressed our obligations under that agreement. Where stands the commitment to the environment now?

In the past five years we have seen no measures to address the increasing problems in waste management. Yesterday under the section dealing with the environment, £16 million was allocated for waste management. Yet last week in the Estimates we were told by the Minister that he does not spend the money allocated to him for waste management because he regards waste management as a matter for local authorities. When will the Minister take charge of waste management and introduce a coherent, national plan to ensure that waste management is addressed in a meaningful fashion across the country? This morning the Minister is visiting illegal dumps in Blessington, County Wicklow. There are further reports of illegal dumping in Fingal in north Dub lin. I have no doubt but that these reports are only the tip of the iceberg. This illegal dumping has been going on wholesale across the country. The Minister responsible for environmental protection washes his hands of the matter and says that it is a matter for the local authorities and bodies other than himself.

The allocation of £16 million for waste management will certainly be spent on an inquiry to establish the extent of illegal dumping. It will go nowhere towards addressing remedial measures necessary to rectify the present situation. Wicklow County Council is investigating up to 100 illegal dumps. The taxpayer will have to pay for that. It certainly will not be funded from the £16 million allocation.

Where is the necessary infrastructure to develop a recycling culture in this country? Where are the segregated waste systems? There are some pilot projects in Dublin. That is not recycling. We all know that most of that waste is ending up in landfill sites. There are no recycling facilities in this country and no recycling initiatives. It is all being shipped abroad. The Smurfit company deals with cardboard and the collection of waste paper. It is shipping the material abroad and is forced to chase markets in China because the UK market has dried up. We do not have the facilities to deal with it on this island. There are proposals for seven incinerators but not one proposal to develop a paper recycling facility. The Minister is aware that paper can be recycled easily and I know that he has received submissions on this proposal. We should deal with our waste in an efficient manner but we need someone to take control of the issue and manage it in a competent fashion.

Depending on local authorities to cobble together a national waste management infrastructure and recycling system is not feasible. They do not have the expertise nor the finances. It is an ad hoc approach to something that is a national problem.

Fine Gael and the Labour Party have proposed a national waste management authority to take hold of the situation and to put the infrastructure in place. The people are frustrated by the lack of advancement, the lack of movement in our waste management policy. We have one of the worst records in Europe. Less than 9% of our municipal waste is recycled and the rest is disposed of in landfill sites. We are learning more every day about the extent of illegal dumping and it is an indictment of the Government's approach to waste management.

We are fast moving towards a national crisis. We see the extent of that crisis in the media reports. The cost of that clean-up and the effect it has had on our environment is inmeasurable. Dumping hazardous waste, household waste and municipal waste in unprotected and unlicensed sites is having severe effects on our water courses and land. It is a problem that has not been sorted out. We have had numerous policy statements by the Minister about the waste management prob lem. In 1998 he produced Changing our Ways. Here we are facing 2002 and we still have not changed our ways. The figures are getting worse. The waste mountain is increasing, landfill sites are closing and there is lack of recycling infrastructure and manufacturing capacity to deal with recycling materials.

There is an allocation of 100 million for road improvements and 38 million for water and sewerage services. That will not contribute to an increase in the protection and treatment of water. We are all aware of the cost overruns in major treatment plants which are planned for Cork, Dublin, Limerick and Waterford. The nature of ground works is such that they run into problems. They can meet rock or encounter unforeseen construction difficulties. The contribution shown here to water and sewerage services refers to money that is already spent on projects that are in place or at an advanced stage of construction. This does not go any way towards the level of investment needed in water and sewerage projects.

The £25 increase in child benefit is welcomed by those of us who have been involved in campaigning for child care. It means £92 for the first two children and £116 for the third and fourth which gives £416 per month for four children. It goes some way towards the cost of child care but local authorities and others face enormous difficulties in providing crèches and other child care facilities as well as getting staff to work in the area.

I would like to have seen more imaginative measures introduced in the budget. If an employer provides a crèche, that is not allowed as a benefit in kind. That is something that should have been done. Measures should have been introduced to encourage those with child care qualifications to take up positions. Those people are leaving the country or going into other professions. Apart from the cost, there is also a huge problem with supply. Last year's increase was taken up completely in crèche charges. Although an additional £25 per month is welcome, this only represents the cost of one day in a crèche and there are 20 working days in a month.

In most cases, the woman who stays at home with the children will not be greatly influenced by this provision. More imaginative measures to reduce the cost of child care are needed. We should consider parental leave, family friendly work places, etc. This problem needs to be addressed because many women who have qualifications and energy and want to contribute to the workplace are being held back. As many employers will tell the Tánaiste, we need imaginative measures to encourage women to come back to work. We must get away from strict nine to five work regimes. The State has invested in the education of these women but they are not able to contribute in the work force. The Tánaiste has responsibility for employment and the Government needs to do much more to facilitate women in whatever way it can.

I wish to share my time with the Minister for Education and Science, Deputy Woods. Being in the Chamber with Deputy Clune and Deputy Keaveney in the Chair gives me a sense of what an all-female parliament might be like, with the exception, of course, of the wonderful staff in the centre.

Yesterday the Fianna Fáil-Progressive Democrat coalition Government delivered the fifth of our five budgets. Very few Administrations in recent years have had the privilege of delivering five budgets. If my memory serves me correctly, the last Government to do so was the 1973 to 1977 coalition Government. When we took office in 1997, many commentators, including many Members of the Opposition, felt the Government would not last five months, never mind deliver five budgets. During those five years and five budgets, we had an opportunity to implement a clear and coherent strategy for ordering our fiscal, economic and social affairs.

We laid down a number of principles that guided us in the strategy for this country. We set out to achieve prudent management of the public finances. It is only through sound government that it is possible to have a sound economy. We set out to give incentives to investment because we know it is the only way to increase employment and generate prosperity. We set out to reform the tax and PRSI systems to make it worthwhile for people to move from welfare to work and to reward working people. We set out to protect the less well off in society because we believe that by delivering record increases in welfare payments we protect social justice, the bedrock on which our society is built. Any objective analysis of the five budgets shows the fantastic results this Government has achieved. Our record is extraordinary.

In the past 24 hours there has been considerable confusion and scaremongering over the public finances. From the comments of some, people might think we were about to fall off the cliff or go back to the 1980s style of economic chaos. The normal test of fiscal prudence is the ability of a Government to manage its day-to-day affairs, its current account, in other words its ability to raise on a current basis sufficient resources to meet its day-to-day spending.

By any measure, the present Government has been extraordinarily successful. We have run a surplus on our current account in each year since coming to office. In 1998, it was £2.1 billion; in 1999 it was £3.4 billion; in 2000 it was £5.5 billion; and in 2001 it was £3.5 billion. From the reports of yesterday's budget, people might think we were about to return to deficit budgeting. However, I am happy to say that is not the case. This year the current budget surplus will be £4.4 billion; next year it will be £3.4 billion; and even in 2004, it is forecast on a conservative basis to be £3.6 billion. Over the next three years, that averages between 4% and 5% of our national output. It is the kind of budgetary performance that would make ministers and governments in any country in the world very envious indeed. In Ireland, however, there seems to be a certain sense of begrudgery.

We did not achieve these surpluses by increasing taxes. We did so by giving incentives to business, increasing employment and reducing taxes on work, capital and corporations. We did not achieve the surpluses by reducing public spending. By any standards, our record on public spending is extraordinary. While we were generating huge budget surpluses, we have increased social welfare spending by 66%. We have increased spending on the old age pension by 50% and a couple, both aged over 66, have seen their pension increase by 54%. We have increased spending on health by 125%. We have increased spending on child benefit by 300%. We have huge surpluses that are unprecedented without reducing social spending. On the contrary we have hugely increased it by a factor of three in many cases and we have reduced taxes. That is the prudent way to manage the public finances in this country.

A number of questions have been raised about how the Government compiled its figures for this year's budget. Reference has been made to fraud and deceit. The Minister put on the record yesterday in a clear, open and transparent fashion how the money will be raised. It is there in black and white; it is not concealed. Some commentators and Deputies believe we should borrow money.

Friends of yours.

I am talking about the comments made by Deputy McDowell and others yesterday.

Friends of yours in the media.

Acting Chairman

I ask the Deputy to address his comments through the Chair.

Unlike Deputy Quinn, I do not take my politics from my media.

The Minister does.

I do not need Deputy Quinn to read the newspapers for me as I can read them myself. I do not need to take opinion polls to find out what my policies should be. I believe in certain things, such as if effort is rewarded and investment incentivised, things will happen. The Government has proved that.

As regards the budgetary arithmetic, we will run a budget surplus on the current account next year of £4.8 billion. We will raise in revenue £4.8 billion more than we will spend. Where we have a difficulty is trying to meet the ambitious capital programme we have put forward through our national development plan. We all recognise that notwithstanding the huge progress made in this country in recent years our infrastructure is not what it should be. Some would suggest we should borrow money for infrastructure, such as roads, public transport, health, education, water and sewerage, which is necessary to grow employment and maintain our competitiveness. I reject that. The money could be borrowed if we did not have another way to find it and everybody would justify that. However, does it make sense to have funds which are surplus to requirements sitting in the Central Bank of Ireland? What value is it to the national infrastructure to leave money sitting in a Central Bank account when it could be applied to build the infrastructure of the country rather than borrow money from international bankers and increase the national debt? Is anyone seriously suggesting that for some ideological reason or a reason unknown to me – it is weird economics – we should leave money sitting in a bank account and borrow money from international bankers to complete our roads and provide for a public transport, health and education infrastructure? It does not make sense.

The other source of money which is being attacked is the allocation of approximately 635 million from the social insurance fund, which is in surplus in 2001 to the tune of 1.4 billion. Next year, even when we take the money out, it will be in surplus to the tune of 1.2 billion. Is someone seriously saying that we should leave it there, borrow money and let the taxpayers service the debt which will be increased as a result of borrowings? That does not make sense. When the social insurance fund was in deficit in the ten years to 1996, £2 billion was put into it by the Exchequer. Is it reasonable at a time when there is a surplus to use that money wisely, not for day to day spending or to fritter it away, but to help to complete the capital programme necessary to make this a country of which we can all be proud?

As regards the social insurance fund, I may be accused of comparing apples and oranges, although I am not, but in Deputy Quinn's last budget as Minister for Finance in the Rainbow Government he was prepared to put the social insurance fund in deficit to the tune of £80 million to meet his budgetary arithmetic. It did not happen because there was a change of Government, employment grew and the fund ended up marginally in surplus. However, that Government's arithmetic in 1997 was based on a calculation that the social insurance fund would be allowed to go into deficit because PRSI was going to be reduced from 5.5% to 4.5%. That was the projection in Deputy Quinn's Budget Statement and that Government was prepared to stand over it. It is ironic that a Government which was prepared to put the fund into deficit to meet its budgetary requirements in an election year is now criticising us because we are taking a sum of money out of that fund to meet the capital and infrastructural requirements of the economy.

I also heard criticism about bringing forward the date for the payment of corporation tax. There has not been any Government in the history of this country which has been more pro-business than this Government. All the objective analysis done and the comments made in the public domain by business sources and organisations have often confirmed that. The Government has taken the standard rate of corporation tax down from 36% when we came to office to 16% as a result of yesterday's budget. The Government halved capital gains tax to make more things happen and to reward risk takers. As a result of that decision, the yield from capital gains tax has increased by 71%. Yesterday the Government reduced the rate of employers' PRSI by 1.25% because we want to maintain employment. We know the payroll and overall costs of employing individuals is what matters to companies. We want to ensure that Ireland remains attractive and competitive. No one should lecture me about whether we are pro-businesss. The Labour Party feels we are too pro-business. Last night Deputy Rabbitte criticised what he called the windfall being given to employers and employer organisations.

As regards bringing forward the date for the payment of corporation tax, in every country in the OECD, including the United States which is the home of the free market and the most successful economy in the world historically, companies pay their corporate tax on a current year basis. All PAYE citizens do not see their tax as it is taken from their income. The self-employed pay their tax on a current year basis. The Minister said that over the next five years we will move to a situation where corporations, like the rest of us, will pay their tax on a current year basis. I accept there may be some marginal difficulties, but I want to put them on the record because people do not seem to understand them. If a company on 10% tax, in other words, a manufacturing company which does not receive any benefit from reducing the rate of corporation tax because it gets the lowest rate of 10%, makes a profit of 10 million, it will pay 1 million in tax. If it must borrow the money to pay the extra tax this year which it should pay next year, it will pay that at a rate of approximately 6% and it will cost them 6,300. Is somebody seriously telling me that 6,300 is an incredible obstacle for a company which earns 10 million? We could take the example of a service company which earns profits of 10 million and it is not on 10% tax. It will benefit from the reduction from 20% to 16%. It will gain 389,920 as a result of yesterday's decision. Who will tell me that is anti-business?

Deputy Dukes said this morning that what the Minister was doing in this regard was a once-off measure. It is not because it has implications in the budgetary arithmetic for the next five years. It will bring in an extra 792 million to the 2002 accounts, an extra 821 million in 2003, an extra 945 million in 2004, an extra 1.073 billion in 2005 and an extra 1.124 billion in 2006. That will be done over five years at 20% per year.

The Minister is talking about the same money.

I am not talking about the same money but about additional moneys.

It is the same money the Government will have the year after. It is bringing it forward next year to cook the books.

Five years of budgetary arithmetic benefits. I am not cooking the books. When one cooks the books, one conceals what is happening. The Government is not doing that.

Accountancy tricks.

Deputy Hayes referred to the rich and poor. I want to put one figure on the record because it speaks volumes about what the Government has done. How have our budgetary policies and tax changes affected people on what I call average incomes? What are their average tax rates as a result of what we have done? Since the Government took office a single person on £12,000 a year has had the average rate of tax reduced from 18% to less than 2%. A single person on £20,000 a year has had the average rate of tax reduced from 29% to 14% per year and a person on £60,000 a year has had the rate reduced from 44% to 32%. The huge increases are for those at the bottom.

When we took office a single person paid tax on income greater than £77 per week, but as a result of yesterday's budget, he or she will not begin to pay tax until he or she has earned £165 per week. If we had not radically transformed the tax system and introduced tax credits, that could not have been done. As we approach the next election, we need to know from the parties opposite what their policies are. The Government wants to keep taxes down and employment high. We need to hear from others what they intend to do in relation to tax and employment.

Hear, hear, but what about 2002?

The prophets of doom are shell-shocked. One can see it on the television screens. They expected a deficit and a downturn, into which they were talking us. Instead, they got a surplus, albeit a small one. It is a good break-even, which is what we need just now, economically and competitively. The message we want to go out around the world is that Ireland is fighting back and its economic fundamentals are still very strong.

The Labour Party states, "Do not borrow for day-to-day purposes," but those purposes are related to people – old age pensioners, widows and those with a disability. If we look at the record of the Labour Party and Fine Gael, we see that when they were stuck for cash they put back payments to widows and old age pensioners to October and, eventually, July. We are paying them from 1 January. That is an enormous breakthrough. The Opposition claims we brought forward payments to help cash flow in that area, but it was done by bringing forward the cash from corporation profits, among other sources. That was a different approach. It put people first and then looked at where the money could be found. We introduced more equity into the system by bringing forward corporation profits.

The Christmas bonus was reduced by the rainbow Government. I had the privilege of introducing it in 1982. The rainbow Government reduced the bonus to 65% when it was stuck for cash. We brought it back up to 100% and it is once more a double payment.

What did Ray MacSharry do?

Workers at or below the average industrial wage will gain most. A further 79,000 low earners are being removed from the tax net and 57,000 taken off the higher rate. The Opposition states, "Borrow, but do not use your own money." The Labour Party states it would look again at taxes on industry. In that case, let industry beware.

The Opposition argues about the social insurance fund. It is very upset because there is money available from that source. We are providing for exceptional increases, but social assistance is also available and needs funds. We have acquired these funds by broadening the fund's base in which I was involved. We brought in everyone involved, such as the self-employed and farmers, and let them all contribute. We are now benefiting from the fact that most are contributing. As staff in the public sector are contributing, it is going to continue to be strong for the future. Let the economists realise this. They do not realise what is happening organically in our system which is strong and will continue to be. The fund will keep increasing. Our objective was to ensure everybody had two pensions, a State pension and an occupational pension.

I am particularly proud, as Minister for Education and Science, to commend the budget of a Government which has increased the level of expenditure on education by a massive 92% since it came to office. This level of growth is unprecedented and has allowed us to make massive new investments in every major facet of education. Investment in education is a vital component of investment in our future to which the Government has demonstrated an unstinting commitment. Budget 2002 underlines and underpins this commitment. The budget additions bring the total gross provision for the education Votes to an unprecedented £5.4 billion for 2002, representing an increase of over 15% compared to the 2001 allocation. This unparalleled provision will allow us to make further significant investment in critical areas of education.

The abridged Estimates for 2002, published in November, allowed for increased provision of a range of measures in education. This provision has been further enhanced by new measures announced in the budget, including an additional 67.83 million to address the capital needs of first and second level schools. This brings the total capital allocation for education to over 600 million in 2002, an increase of 19% on the 2001 allocation, or over four times that provided in the 1997 Estimates. This will be welcomed by Members on the opposite side of the House because they are forever requesting more capital projects of me.

Provision of 70 million has been made for supervision and substitution in 2002 while extra funding is available to provide 350 additional primary teachers and 200 additional secondary teachers in line with the PPF commitment. By 2002 the Government will have provided 3,000 extra teaching posts since taking office. An additional 10.25 million is being provided for a range of measures to assist pupils with disabilities and provide improved services in special education.

An additional 5 million has been provided to allow for further development of skills programmes and research and development activities at third level, meaning that current expenditure on research and development in third level institutions will increase by 23%. These allocations are in addition to the significant increases in my Department's funding in the abridged Estimates which will allow me to make major improvements in education, especially for children with special needs, and provide for greater current and capital funding of schools.

Among the measures provided for in 2002 is a substantial increase in per capita grants at primary and post primary levels. In addition, capital and capitation grants in respect of the 2001-02 school year are being brought forward to help schools with cash flow by means of a Supplementary Estimate before the end of 2001. There is also an increase of almost 70% in the provision for special needs assistants, including provision for 450 additional special needs assistants in schools. A 30% increase in the fund to improve access to third level education for those from disadvantaged backgrounds has been made. An additional 4 million has been provided to intensify efforts to ensure pupils complete their schooling, as has an additional 5 million for adult education and literacy initiatives. The funding provided for the expansion of the national education and psychological service has been increased by 19%.

In addition to the increases in the education Votes there are a number of important aspects of the budget on which I would like to comment briefly. Last year the Government announced its intention to invest around £1 billion in increased child benefit over a three year period. Our central objective is to support parents in whatever choices they make in looking after their children. Child benefit is also an effective means of channelling money to low-income families as a way to tackle child poverty and enable children to gain more from their time in the classroom. In line with the record increases provided for last year, the budget increases child benefit rates by a further £25 per month for the first and second children, to £92.62, and by £32 for a third and subsequent children, to £116. From next year a family with four children will receive £417 per month.

The back to school clothing and footwear schemes have been improved and, as a result of the budget, from next year, more than 70,000 children aged 12 years and over will benefit from an increase in the payment rate to more than £94 a child. In addition, some 8,000 children will be eligible for this payment due to the easing of the means test.

Debate adjourned.
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