Dáil Éireann debate -
Wednesday, 19 Feb 2003

Vol. 561 No. 5

Finance Bill 2003: Second Stage (Resumed).

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

Ms Burton

When the debate was adjourned, I was talking about how hard the Minister's budget has been on working families. In pages 24 to 26 of his Budget Statement, the Minister provided us with details of how various hypothetical families would benefit from his limited tax changes. He was anxious that we should know how much these couples, Liam and Georgina and John and Stephanie, would gain from the budget. The answer I have is that they will not gain very much. The Minister, unsurprisingly, chose to ignore the downside of his measures and so conveniently forgot to measure how much they would lose if budget measures, and the price increases introduced on a daily basis since the Government was returned to office, were taken into account.

Let us take the example of Duncan and Mary. Who is Duncan? When I first heard of him I thought he sounded like the star of a boy band, but he is actually an information technology technician earning €40,000 per year and is married, happily or otherwise, to Mary, who works in the home. They have two children, God bless them. We are told that they will gain €95 from the Minister's budget. Is that not great? This is because the tax credit was increased very slightly. However, what the Minister left out is what happens to Duncan and Mary and their two charming children when it comes to all the extra taxes, charges and so on that they will have to pay. For instance, if they have a child in college they will pay an extra €274 in college registration fees. If both their children are in college, they will pay twice that. If any of the family requires medication they will pay an extra €200 per annum for prescription drugs. Their average ESB bill will go up by €78. They will pay an extra €178 in VHI charges. It is reasonable to assume that somebody on an income of €40,000 is probably on one of the VHI schemes, because he or she would be in difficulty otherwise. They will pay an extra €30 to tax their 1.4 litre family car. If they have a credit card and a Laser card each they will pay an extra €69.50 in stamp duty. If their two children are in college and need to have a card, they will also pay extra stamp duty. These are only some of the increases that Duncan and Mary, an average family, will have to pay. This list goes on. Last week's inflation figures show—

Mr. M. Ahern

Are those figures gross or net?

Ms Burton

These are the charges that will have to be paid from one's pocket as a consequence of the increases the Government has introduced.

Mr. M. Ahern

They get a tax allowance.

Ms Burton

This Government is driving most of the inflation with which people are being assaulted each week. Last week's inflation figures showed that inflation is now being driven by areas under Government control. They include inflation in education costs, such as the registration charges for students, which are up 10.2% in the year to January. Water, refuse and other service charges are up 19.3%, hospital service costs are up by 19.3%, motor tax has increased by 11.9%, bus fares have increased by 10.1% while postal services are up 8.8%.

The Taoiseach and the Tánaiste said in the election campaign, like George Bush, that there would be no more tax increases. They did not say anything about the price increases with which they would hit us as soon as they got back into Government.

Mr. M. Ahern

They were not half the increases the Deputy's party intended.

Ms Burton

This is not an accident. This is deliberate policy. Duncan and Mary are not my creation. They are the creation of the Minister for Finance and he is relentlessly raiding their family budget at every turn with taxes on this, charges on that and levies on the other. The Government is willing to tolerate this level of inflation. It is not prepared to introduce any balancing measures to address price increases in other areas.

After five years of this Fianna Fáil-Progressive Democrats Government and endless old guff from the Tánaiste about competition, the consumer need not expect any comfort from that quarter. It is one thing to talk about competition but quite another to take on the wealthy interests and deliver for consumers such as Duncan and Mary and their children across a range of sectors.

Mr. M. Ahern

It has been done. Tax is down to 20%.

Ms Burton

The Government lied in the election and it is still at it.

Mr. M. Ahern

We did not.

An Leas-Cheann Comhairle

Do not use the term "lie".

Ms Burton

I withdraw that term. The Government was inaccurate in the various promises it made to the electorate in the course of the election—

Mr. M. Ahern

We did not make promises.

Ms Burton

—and the electorate is paying for it.

An Leas-Cheann Comhairle

Deputies should be allowed to make their contributions without interruption.

Mr. M. Ahern

I am correcting inaccuracies in the Deputy's allegations.

An Leas-Cheann Comhairle

The Minister of State will have an opportunity to speak.

Ms Burton

The other main area of neglect is investment. The boom in the 1990s was stoked by tax cuts and then it was choked by bottlenecks in the economy. Try to move on any of the roads in Dublin.

Mr. M. Ahern

That is because we have improved the economy so much. Everybody is working now.

Ms Burton

The Deputy can give it but he cannot take it. Sustained, non-inflationary growth requires investment to tackle bottlenecks but the Government is not delivering. The national development plan is hopelessly behind schedule. It is being starved of resources and is grossly mismanaged by the Government.

Look at the roads programme. The Government has admitted that its roads programme, due for completion in 2006, will not be completed until 2009. The Construction Industry Federation believes 2012 is a better guess, at current levels of funding. However, the Government refuses to borrow funds to invest in the economy. There are 22 major National Roads Authority projects ready to proceed. All they need is funding but only seven have been given the go ahead so far this year.

The other projects offer significant returns. One of the standard measures used in cost benefit analyses of road projects is the internal rate of return. It is analogous to the rate of interest which investment in road projects yields in time saved and deaths averted. The internal rate of return on the Monaghan bypass is estimated at 16.6%. The return on the Ashbourne bypass is estimated at 15.95%. These are attractive investments and returns – the return on bank deposits is negligible at present – particularly when compared with the cost of Government borrowing. The Minister, however, refuses to make these investments. He is happy to blow €743 million of the national reserve fund on the stock market but he will not invest in projects with a guaranteed rate of return to the economy.

There is an even bigger return from these projects, the benefit of non-inflationary growth. Investing in infrastructure frees up bottlenecks that drive up prices and choke off competitiveness but the Minister refuses to do it. It is ironic that a Government committed to Boston rather than to Berlin can be criticised by the American Chamber of Commerce in Ireland. However, in last Sunday's Sunday Tribune we read that infrastructure is now top of the agenda for the American Chamber of Commerce in Ireland. The Government's failure to tackle bottlenecks is putting costs under pressure and making Ireland unattractive to US investors. It is ironic, too, that they should point to insurance costs as a major concern. The chief apostle of the Boston model, the Tánaiste, has had ministerial responsibility for the insurance sector for five years. Once again, however, there is plenty of waffle about reform but no delivery. We can expect to live with higher inflation for the foreseeable future.

Austin McCabe, the new president of the American Chamber of Commerce in Ireland gave lengthy interviews last week to various media organisations. He is the managing director of Symantec, a major and good employer in my constituency. It is the type of employer we want to encourage to come to Ireland. He said with regard to basic infrastructure:

There are programmes in place to alleviate congestion in Dublin but they're just not coming on stream. All the plans are in place for the country but we just need to plough ahead and implement them. I know that might mean increasing national debt, for example, but I think if we don't, we're going to be constantly playing catch-up and we've been doing that already for the past few years. The government says it doesn't have the money but I think if construction means shoving up borrowing so be it. If we don't have the infrastructure we won't get the foreign investment.

If we do not have the infrastructure, we will lose competitiveness. Hence the bleeding of jobs that we have seen in the first two months of this year and for much of last year. This phenomenon is set not only to continue but to grow in the future, unfortunately for the workers involved.

Mr. McCabe also said that staff coming to live in Ireland from the US and other countries

"often find it unbelievable that they cannot get high speed Internet access in Ireland when they are used to dialling up late at night in their home countries when inspiration suddenly hits them. Others are paying [this will interest Deputy Harney] five times the car insurance costs they would at home, just for basic cover. It's certainly not an advert for attracting highly qualified technical staff."

That is what the president of the American Chamber of Commerce in Ireland says about this Government's policy. It is a plea to the Minister and the Government to act sensibly in relation to investing in the infrastructure we need.

The Bill also brings into force, in great detail, the proposal to increase the VAT rates which was implemented on 1 January 2003. Like other spokespersons on finance, I have been inundated by submissions, particularly from people in the tourism industry – a major employer, essential to our economic growth – which has been knocked for six by the increases in VAT rates. I have received many letters from family hotels which are having difficulties in the post-11 September downturn, which are worsened by the threat of war that hangs over the global economy. Family-run hotels and restaurants in the tourism sector are taking a major hit.

Mr. M. Ahern

Tourism figures have increased year on year.

Ms Burton

These businesses are trying to retain their competitiveness, yet the Government has significantly increased the basic rate of VAT which has knocked them for six. That is not the way to improve competitiveness in a tourism industry which is already under huge pressure.

Mr. M. Ahern

They appreciate the reduction in corporation tax.

Ms Burton

The reduction in corporation tax which, by the way, was negotiated and introduced by Deputy Quinn as Minister for Finance, affects companies which are profitable. Many of these companies will not be profitable so they will not be able to avail of reduced corporation tax. The point they make is that by increasing the VAT rate on services like hotels and restaurants, the Government is taking from them the little profitability they had.

I mentioned that the Minister for Finance, in section 150 of the Bill, changed some tax arrangements and payments from the public purse which dated from the 17th century and I complimented the Minister, the parliamentary counsel and the Department officials in paying such minute attention to legislation, but what about the really important areas? The Minister for Finance and his Department have not done as well in estimating the costs of the SSIAs – there has been a series of different figures. It is a pity the same powers of financial acumen were not applied to the deal between the religious congregations and the Government. This deal has opened up the State to enormous financial obligations which we cannot yet calculate and is letting the religious orders off the hook. It is a pity the same Government was not alert when we lost €743 million of the national pensions reserve fund on investments on falling stock markets around the world.

Mr. M. Ahern

What will the Deputy say when the stock markets rise again?

Mr. Boyle

If they rise again.

Ms Burton

Stocks are going through a bear market, which may last for ten years or more. The notion that €743 million will flow back to us soon is misplaced. If one's pension is maturing now, rather than if and when the stock market readjusts itself, that is just bad luck. The Minister's policy seems to be to watch the pennies – like the grant of €600 to Dublin Corporation from the 17th century – while the State incurs liabilities of billions of euro on the special savings scheme, the deal with the religious orders and the investments of the national pensions reserve fund. The Minister is suddenly shy to talk about these matters.

The material the Minister gave me in answer to a parliamentary question a month ago showed that 400 high income earners got an incredible deal on their tax liability and many paid no tax at all. According to the Revenue Commissioners, between 31,000 and 53,000 taxpayers earn more that €100,000. One of the most fundamental questions which the Department of Finance and the Revenue Commissioners have not tackled is how we get information on who pays tax and whether tax is applied evenly to all citizens. This is an essential component of the contract of taxation. At the weekend, the Minister probably saw the march in Dublin which was an attempt to stop the war and dissuade the Government from being involved with it.

Mr. M. Ahern

As the Taoiseach said, the march was in support of the Government's policy.

Ms Burton

The last marches on that scale were the PAYE tax marches the purpose of which was to seek fundamental fairness.

Mr. M. Ahern

They were to reduce tax, which we have done.

Ms Burton

This budget does nothing for fairness. The papers released by the tax strategy group show how little is known by the Revenue Commissioners and the Department about the cost of tax breaks in the economy. It is extraordinary that massive amounts of money are given away in tax breaks each year without the most basic up-to-date information being available about how much they cost and who benefits from them.

There is now a clear case for the implementation of a minimum effective tax rate to be put in place for all high-income earners. This would mean that taxpayers with high incomes would have to pay a minimum percentage of their income tax, irrespective of what schemes they were in, to avail of tax relief. I approach tax policy with one simple guiding principle, set out some time ago by the report of the tax commission after the marches by PAYE workers in their hundreds of thousands, that taxes should be simple and easily understood. We should keep tax rates as low as possible but they should be paid by everybody across the board with as few exemptions as possible. This principle has been flouted and the problem for the Government is that the ordinary taxpayer has no confidence in the system.

Mr. M. Higgins

I welcome the opportunity to say a few words on the Finance Bill. One of the defects of the House is that we have few opportunities to discuss the shape of the economy or the assumptions that guide economic policy. The slight opportunity we have is this discussion on the Finance Bill. This is an important point because as one listened to the budget debates over the past few years, it became increasingly difficult to try to elicit from the Minister's speech what assumptions guided the casting of the budget and the framing of the Finance Bill. This point has been illustrated by the publication on 13 February 2003 of the EUROSTAT survey on social protection in Europe.

Across a set of chosen indicators, it considers the concept of social protection, that is the kind of life available to people in member states of the European Union. One can note the purchasing power standards, which is the measure, in Belgium, Denmark, Germany, Greece, Spain and Ireland. EUROSTAT found it necessary to include an introductory paragraph in its publication. It states that the relevant importance of social protection varies considerably from one member state to another. It states that in 2000 the lowest shares of gross domestic product attributable to social protection were 14.1% in Ireland and 20.1% in Spain. It goes on to state that the figure was highest in Sweden at 32.3%, followed by France at 29.7% and by Germany at 29.5%. What that is really saying, in a straightforward way, is that to advocate a policy rather like the one Progressive Democrats advocate – that all money is one's own money and, therefore, one should not put anything into the public space or enrich it – is a backward notion.

The absence of an opportunity to discuss the assumptions under which the Minister for Finance operates and has operated under for several budgets does not allow some fundamental questions to be asked. Is it his intention to be regressive or progressive in regard to taxation? Is it his intention to be redistributive in any way? The only conclusion anyone can draw from examining the effect of Finance Acts over several years is that they have neatly, consistently and openly transferred wealth from the poorest to the wealthiest. It was fascinating to hear the Minister give a list of closures of tax loopholes in his speech on this Finance Bill, when one considers that these thickets in which people hid their speculative money were created by him. The vast thicket of speculative money has been created out of the philosophy of the Fianna Fáil and PD parties.

It is interesting to consider how rent rolls can be sold to finance companies and the income taken off them reduced from the 42% income rate to effectively a 12% rate. This tells us that our economy was rank with speculation in the good times. In the times of economic growth, instead of making anything secure in terms of infrastructure or the surplus being used as an opportunity for redistribution or extending social protection, it was fired away into a vast speculative miasma. At about every fourth paragraph in his speech the Minister said he is the kind of person who likes to close these loopholes. I find that absurd.

I will deal with one or two of the main assumptions, the points that I said are rarely discussed. I was at a meeting of the Committee on Foreign Affairs about two weeks ago at which we had a visit from the Croatian Foreign Affairs committee which is preparing for entry into the European Union. I asked its members two questions, one of which is relevant to what we are discussing. I asked one of its members how had the people managed the adjustment between social protection, by which I meant the social floor below which people would not fall by way of pensions, housing and health, the many public provisions that were provided under the old state system, and their preparations for the market economy as required in their negotiations with the European Union. The man looked directly at me and said that they had imposed upon them a 19th century model of economics and they have no choice. As they prepare for the elections, they have had a general strike preceded by a strike of health workers and the entire social space is disrupted by the imposition of a harsh economic regime that they were not allowed to mediate. In answer to why that is the case, he suggested that it was imposed upon them by the IMF and they have no choice. I felt like saying to him that he has come to the IMF's best friend, he had come to the right place. I do not know where we will find the opportunity of discussing this ever.

The Minister goes from this country with his retrograde and backward view of the economy and he delivers support for an even more vicious retrograde version of the economy in the IMF, the World Bank and the other international institutions of which we are members. The Minister likes to conduct himself as some kind of folksy commentator on one level in the sense that he is galloping along with the figures and the next minute he gets an old fashioned rush of blood to the head, but then I remind myself that I am not fair, as he has described himself as the happiest right of centre Minister of Finance in Europe, and that he is, but the people are paying the price for that. How else could one find such an old fashioned notion which used to be discussed in the 19th century, the distinction between the effect of direct and indirect taxes on poor classes and poor people?

Indirect taxes introduced by stealth in this Finance Bill, particularly through changing the basic rate of VAT, fall on those who are most vulnerable in relation to the proportion of their income that they have available to expend. Put in plain terms, it affects people who want to buy bottled gas, briquettes, coal and so forth and who are aware that on the other side there has been a shrinkage in the public provision as a result of which their fuel allowances will not rise. Therefore, people find they are squeezed in every direction. There has been a series of rises in university charges, which are really university fees. There have been increases all around. People with the largest necessity in various areas in terms of their disposal income have no choice but to spend and suddenly they find they are on the receiving end of a plethora of indirect taxes.

This is somehow or another regarded as new economic thinking, as it is described. There is not anything particularly new about it. Most economic theorists writing now look at the period following Keynes when capitalism was saved from itself by Keynesian interventions and the 40 years which followed that. Then one comes to the 1980s where there is a leap back to the previous century, naked tooth and claw individualism is brought forward and people are told quite clearly that they should not be paying tax to provide for public housing, public health, public space, public parks or anything that is enjoyed in public.

I note from a EUROSTAT table on social protection that the greatest neglect is in Ireland in comparison to other European countries, particularly the Scandinavian countries. This neglect is in relation to the care of the elderly. An older person moving out of the workforce in Sweden can look forward to a set of state provisions that are automatically taken for granted and provided. People pay tax during their working lives in the knowledge that there is a certain level of social security and social provision. What is happening in our case? In addition to acceptance of the speculative core of the economy which tore the heart out of it, what we are really saying is that those who were gambling did best when the economy was doing best and those who earn and have to spend most of their direct income must pay most in the poorest times when the economy is in a downturn. This leaves aside altogether the sheer economic illiteracy of trying to run an economy, even if one was not any kind of a left progressive or left of centre person, on a simply inflate and deflate basis, which the Minister is trying to do in relation to the overall fiscal policy he is following.

An ordinary person would ask the Minister how does it make sense that we could lose a €1 billion or €1.5 billion in relation to the stock market in forward provision for pension funds and at the same time be short of capital expenditure for infrastructure that is needed for schools, hospitals, roads and housing? The answer is rather like what I heard the Minister of State say – what if the stock market goes up again? The most bankrupt of investment advisers associated with the banks who have drawn large sums at scandalous levels for hopeless performances in one form of bond after another tracking different investments suggest that maybe now is the Minister's chance, that he could stay in the market for another five to ten years and buy at a very low level.

Mr. M. Ahern

People can invest in infrastructure if they want to.

Mr. M. Higgins

The point I am making is interesting.

Mr. J. Burton

They invested in the infrastructure of Hong Kong.

An Ceann Comhairle

Allow Deputy Higgins to continue as he has only one minute remaining.

Mr. M. Higgins

I find it an extraordinary version of a republic where the major asset manager is precluded from investing in necessary infrastructure in one's own country and is required to invest speculatively abroad. It is also extraordinary that when there is such a clear social need, such an enormous gap between what our citizens receive and what citizens may expect in every other country, that the country that boasted of the fastest economic growth in Europe and of becoming one of its richest states ends up at the bottom of the heap in Europe in terms of social protection.

In good times we went gambling, and when the bad times came, the people who were hammered were those who were poorly provided for already. That is the story of the tricky kind of financial management we are getting. The only thing left to support it is the brazen hussy kind of economics we get from the Minister for Enterprise, Trade and Employment, Deputy Harney. Her attitude is that she is brazen enough to say anything she likes and that we must put up with it. At least the Progressive Democrats were never anything else but right-wing people who did not care about anybody but themselves.

Mr. Boyle

I wish to share time with Deputies Joe Higgins and Caoimhghín Ó Caoláin. The introduction of a Finance Bill gives the Minister for Finance the opportunity in good times to embellish a popular budget, to pull further rabbits out of the hat and to ingratiate himself to a grateful public. In bad times, it offers the Minister the opportunity to counteract any bad feeling that has followed any particularly unpopular measure. In the Finance Bill 2003, the Minister for Finance has done neither of these things. Either the Minister for Finance has become tired, stale and past his sell-by date or the current economic situation in which we find ourselves is a constraint that prevents him from doing anything in his Ministry.

This is being presented as a Bill containing many reforming measures for which we are meant to be grateful. It contains the closure of many avoidance measures. The question we should be asking the Government, however, is why, in a period of tax freefall, many of these avoidance measures existed at all. Why were they allowed to persist and why were many of them even introduced by this Minister for Finance? A Minister for Finance who claims credit for reversing policies he should never have introduced is a Minister who is scraping the barrel.

In his speech opening the Second Stage debate, the Minister sought further credit by claiming that 90% of the income of those on the minimum wage is exempt from income tax. Everyone on the minimum wage is still liable for tax on 10% of his or her income. This includes people who earn €223 a week, or £185 in the old currency. The introduction of the new currency has given a psychological advantage to Government in that the €200 figure for minimum weekly earnings has been surpassed. It may be a higher figure but its value has not changed one iota. The Minister is playing tricks with figures and is not dealing with the reality of people's everyday lives. The fact that anyone on a minimum wage is paying income tax is an indictment of this Government, and the fact that no real measure of reform has been introduced either in the budget or the Finance Bill 2003 shows that the Government cares little about this sector of society and is not prepared to offer any incentive towards changing the situation in which these people find themselves.

In terms of the anti-avoidance measures I spoke of earlier, it is interesting to observe the tightening up that is going on. The Minister is not introducing this series of measures in the interests of reform. This is a Minister who is desperate for any means he can find of achieving additional revenue in the years to come. It is obviously all over for good time Charlie. Every avoidance opportunity in the tax system is being scrutinised and closed if the effects are not too damaging to those who have benefited most from the previous McCreevy budgets.

I go back to the minimum wage example and the fact that 10% of the income of everyone on a minimum wage is still being taxed. The Minister boasts of bringing that 10% figure down from 36% when the minimum wage – which is still only £5 per hour in the old currency – was introduced. The Minister, through his tax policies, however, has produced a greater percentage decrease and a bigger sum of money for those on the highest income level. The Minister seeks to make these types of boasts while ignoring the more obvious boasts he could make but of which he should be ashamed. This is a Minister who is past his sell-by date.

Many of the avoidance measures related to capital allowance schemes, and we will now see the potential closures of the urban renewal scheme, the park and ride scheme and the student accommodation scheme. These schemes were sometimes introduced without much thought. They were introduced to influence and to benefit a certain sector of the population who were grateful for the money and ran. Many of the buildings constructed were put up without thought, were of poor quality and introduced living arrangements in communities that were not of a proper type or mix. The Minister must take responsibility for introducing taxation measures that have not been of benefit to society.

Some of these schemes have been contradictory in policy terms. For instance, the park and ride scheme, which continues until the end of 2004, was contiguous with the scheme introduced by the previous Government giving tax incentives for building car parks in city centres. Thus, Government policy was to give tax incentives to build car parks in the middle of urban areas so that people could drive their cars and park them in city centres while, at the same time, giving tax incentives to create park and ride facilities on the outskirts of cities so that people could park their cars and take public transport into city centres. That kind of double-think may be typical of Fianna Fáil Governments but in terms of economic logic it is a nonsense, and the Minister does not deserve credit for bringing an end to these types of schemes.

The Minister also talked about favouring certain sectors of the population, and he referred in particular to reduced taxation on the elderly. It is true that many elderly people were being taxed unnecessarily, but this measure, along with several other measures the Minister has introduced, takes a broad brush stroke approach that has seen people over 70 getting medical cards and pension entitlements being treated differently, not because of the need of the people involved, but because they pass an arbitrary age level. As a result, people who did not need the benefit and who are quite wealthy have been rewarded by this Government.

One of the more insulting aspects of this Bill is how it deals with the concern about the nontaxation of certain industries in certain ways, including the bloodstock industry, the greyhound industry and forestry. There may be a case for assisting and benefiting each of those industries, and I have talked to several of their representatives. However, the Minister's approach is to rule out any taxation this year, next year or even the year after that, and to merely request that people involved in these industries submit a statement of earnings. If anything is more calculated to anger ordinary taxpayers who pay without the benefit of such scrutiny of their weekly income, it is that type of activity, that type of kicking into touch, that unwillingness to deal with the tax system in its totality. Many of us will challenge the Government strongly on this issue when we look at the Finance Bill 2003 on Committee Stage.

Strangely enough, in a Finance Bill that seeks to close tax loopholes and avoidance measures, the Minister has slipped in a new one while nobody was looking. He has said that capital gains tax exemptions will be applied to sporting bodies and trade unions. This might help some sports clubs and it might even help the new partnership agreement to be passed, but the sole attempt of this exemption is to bring the "Bertie Bowl" back into play. It is another attempt to use public money in a wanton manner as the Government has done through the special savings scheme, the national pensions fund and the open-ended agreement for residential institutions redress. The Government has shown itself to be one that loosens the purse strings when it wants to, does not care for the consequences and makes other areas of society pay for its indolence and inability to have a proper sense of control.

The Minister has repeated many of the boasts he made in the past about the effect of the reduction of capital gains tax from 40% to 20%. Yet he is telling us that he is only now getting rid of the additional, supposedly ameliorative, measures to help people pay this tax. Why did opportunities exist for people to write off capital gains tax when it was reduced so substantially? The increase that was brought about in a one or two year period was merely an exercise in asset stripping. People with capital are being taxed at less than half the rate of income tax. It is a double standard and can be ill afforded in the times we live in.

Opportunities in terms of excise have been missed. If the Minister wanted to be thought of as radical from an environmental perspective he could have introduced different levels of excise, or even exemptions from excise, for products such as bio-fuels. The Minister talked about an indication of introducing a carbon tax in the next budget but I will believe it when I see it. If it happens, I suspect he will introduce it in the wrong way. If a carbon tax is introduced – the Green Party believes it should be – it will be introduced as an additional tax. The Green Party has argued for years that it should be introduced as a substitute tax in concert with reductions in other taxes. Given the times we live in and the current behaviour of the Minister for Finance I do not believe this is likely to happen.

There is something of a gimmick in trying to blame the excessive use of alcohol on one product, namely, alcopops. I would not encourage people to use this product. People will not give up consuming excessive levels of alcohol because of the way in which excise is structured, they will just change products. If this is supposed to be part of a co-ordinated holistic campaign the Minister for Finance has worked out with the Minister for Health and Children – if they are still talking to each other – it does not seem to work well on paper.

The same can be said of stamp duties that encourage people to trade down their properties. Mark FitzGerald of Sherry FitzGerald recently proposed that people should be encouraged to move out of the city centre and take to Castlepollard or other points west to free up housing stock. The Green Party does not agree with that. There is, however, an argument for building smaller units within existing urban areas where older people live and encouraging them to move to those units. Restructuring stamp duties can do this. My party will make proposals on this on Committee Stage.

In the days after the budget was delivered the social and family affairs committee met the Combat Poverty Agency. The agency described the budget as "slightly distributive” in its effect – the term was italicised to stress the sense of irony. The actual effect for the most poor in our society as opposed to those who have the most was a factor of 0.2%. It was the only budget from this Minister in which that direction was taken. That effect will be eaten up by all the increases that have been made subsequently. The Combat Poverty Agency only measured the effect of the social welfare increases as opposed to the tax reductions. Everything else neutralises the effect of this.

In the conclusion of his introductory speech on this Bill, the Minister gave a sense of a Finance Bill building on a coherent Government policy that is aiming to achieve certain things. It may be all those things but I believe it will achieve more of the same. It will give more benefits to those who already enjoy advantages in our society. It will create a greater gap in leaving behind those who have always been left behind, who have always been thought less of and have been forgotten about by the Government in successive budgets and Finance Bills.

Caoimhghín Ó Caoláin

The Minister for Finance previously acknowledged that he read with interest what Sinn Féin had to say in its pre-budget submission about the profiteering of banks and financial institutions and the need to tax them in a real way. I welcome the Minister's interest and attention to the argument I have presented over the past six years. Perhaps it was a nod in our direction when he announced a €100 million per year levy on financial institutions up to 2005. However, my temptation to claim some little credit for this is tempered when I see the pre-tax profit of Allied Irish Banks in 2002 was €1.375 billion. It has taken the shine off this levy somewhat. AIB's profit is the highest recorded of any Irish company and the directors of AIB will not lose a wink of sleep over the Minister's levy. On the contrary, they will have pleasant dreams about how they will benefit from the slashing of corporation tax from 16% to 12.5%.

In this context, the levy can only be described as cosmetic. It is public relations in what I regard as a futile attempt to address the widespread resentment felt by citizens at the gross profiteering of banks, insurance companies and other financial institutions. It does nothing to harness those profits for social benefit. The tax regime implemented by the Minister over six budgets has rewarded the greed of these institutions and culminated in the cut in corporation tax.

What is the practical result of this policy? It means less money for the repair and building of schools, for people with disabilities, health services and housing. The untaxed portion of these massive profits enriches a privileged minority in our society while our infrastructure suffered and the marginalised stay, as always, on the margins. After six years in the Department of Finance, the Minister for Finance, Deputy McCreevy, has no excuse and no one other than himself to blame because he has presided over not only the most inequitable tax regime, but also the most unfair allocation of Government resources. He has also presided over budgetary decisions that have widened the gap between the wealthiest and the weakest—

Mr. M. Ahern

This is like Grimms' fairy tales.

Caoimhghín Ó Caoláin

—and between rich tax evaders who have the ear of Government and the mass of workers who must pay the price. Since his first Finance Act when he slashed capital gains tax from 40% to 20%, the Minister has stayed—

Mr. M. Ahern

Capital gains tax has been reduced to 20% and income tax has been reduced as well.

Caoimhghín Ó Caoláin

Would you, a Cheann Comhairle, be interested in correcting the interruptions? I am sure if they came from the Opposition benches, you would be quick to claim that the speaker should be allowed to proceed without interruption. Perhaps the same ruling might apply to the Government benches. We might return the courtesy to the Minister of State when he has a chance to respond.

The Minister for Finance, Deputy McCreevy, has stayed firmly on course with tax cuts and kickbacks that have overwhelmingly benefited the wealthy in society and overlooked the low income earners and, worst of all, those on fixed incomes such as pensions and welfare payments. We have a rich business elite who enjoy tax breaks unparalleled anywhere else in the European Union. If that is not enough, they can become tax exiles and expect no penalty.

The Minister's philosophy is well known and apparently simple: put the money back in people's pockets, keep taxes low and everyone will benefit. However, if one takes a closer look, the approach is far from simple and definitely not what it seems. One quick snapshot of the unequal Ireland the Minister has created is that many of the lowest paid workers are still in the tax net despite years of promises to take them out. One in three PAYE workers pays tax at the top rate of 42%, even though the Minister's target is to have this figure at one in five. However, the real inequality has been uncovered not by the Department of Finance but a Revenue Commissioners survey of the highest earners in society conducted last December which found that one quarter of the highest earners in this jurisdiction pay no tax.

The other side of the equation is the fact that the State has a low overall tax take as a direct result of the failure to tax wealth. The State's total receipts from tax and social insurance after the budget for 2003 are the lowest in the European Union when measured either in gross domestic product or gross national product terms. This means we have a higher than average EU per capita income but much lower social provision and infrastructure quality. The outcome of the Minister's hard cash in the pocket philosophy is that the community suffers because the Government failed to develop the infrastructure and the social services that benefit us all, especially those who do not have the cushion of wealth. The hard cash in the pocket approach works well on the race course but is no basis for social and economic planning.

We should not be too hard on the Minister. He has surprised us once or twice. He can make some progressive and just decisions and I instance the Finance Act 2001 as an example. In it he cut mortgage relief for speculators and investors who used the tax break to subsidise housing investment. The purchasing power was raising house prices to such an extent that they were out of the reach of ordinary workers and their families. The Minister rightly acted on the recommendations in the Bacon report on housing and cut this relief.

However, like the cow that gives the best cream, he kicked the bucket over at the doorstep. In 2001, the first year in almost a decade when house price rises eased and it appeared the endless saga of annual double digit rises had evaporated, the Minister made his plans to reintroduce the relief in the Finance Act 2002. It is no surprise, therefore, that there has been another year of house prices racing well ahead of not just inflation but the wage increases of workers. The annual cost of the tax break to the Exchequer was a mere €50 million. The cost to the households who must pay monopoly money prices for houses is incalculable.

This year the Minister returned to the housing market with renewed purpose. He needed to cut the fat from Government expenditure, which had swelled by more than 20% as the coalition prepared to face the electorate in the general election. The €50 million lining the pockets of speculators, investors and landlords was safe. Instead, the Minister cut the €40 million allocated as grants for first-time buyers who were to be doubly discriminated against. House prices rise continually. I understand the increase last year was 20%. Now the small sum in the first-time buyer's grant that was an essential part of the deposit for many new house owners has been abolished. These are facts.

In the 1999-2000 tax year, tax revenue in the Twenty-six Counties topped €30 billion, an impressive sum. However, total tax revenue could have approached €40 billion if it had not been for the €8.5 billion written off that year in tax reliefs and allowances. Most of the reliefs offered lucrative tax breaks to the wealthy. A Revenue Commissioners report last November showed that more than 22,000 people in the Twenty-six Counties earn more than €100,000 annually. It is these earners who escape tax payments through Government avoidance schemes.

One of the largest write-offs was the €1.629 billion lost in capital allowances. This write-off was initially created to help businesses that invested in plant and equipment but over the years was extended to include airports, hotels, nursing homes, private hospitals, convalescent facilities, student accommodation, third level colleges and the maintenance and repair of significant buildings and gardens, wherever they might be. It is one of the injustices of the tax system that one can avail of tax relief for building a child care facility, but not for the substantial costs borne by many workers who must pay exorbitant child care fees. Other property-related schemes, such as the resort allowance scheme or the double taxation relief cost the State hundreds of millions of euro.

The system of capital allowances needs to be reviewed. Those that are of no social benefit should be eliminated and that is the bottom line. Many are being used as tax avoidance measures and should be abolished. The Bill merely tinkers with the tax system and brings us no nearer to the creation of an equitable tax regime. That said, I welcome the crackdown on last minute pension top-ups and the exercising of stock options. Work remains to be done on the fair treatment of ordinary workers who have received share options or have partaken in profit sharing schemes as distinct from high-flying speculators. Likewise, the ending of the seaside resorts scheme and other property-based allowances is welcome because they had, in many cases, lived long beyond their sell-by date.

The failure to deal with the issue of stallion fees is shocking given that it is only this year that those who benefit from the scheme must make returns on their tax exempt income. Did it never occur to the Minister in his frequent visits to the race track and his many appearances in the winner's enclosure – I am not speaking electorally in this sense – that none of his friends, either the horse owners or the trainers, had to provide details of their tax-free income? It strikes me as strange and is all the stranger when we consider the Minister, the Department and the Revenue hounds would rather chase to ground the mná tí of our Gaeltacht communities, who open their homes each summer to children from the broadly non-Irish speaking community thereby offering an important educational experience. Shame on the Minister.

Many of the Minister's proposals can only be described as ill thought out and this may account for the surprise he sometimes expresses when people object. Let us consider for example the proposed abolition of rollover relief and the effect it could have on farmers whose land has been subject to compulsory purchase orders. This is a major issue for people in farming to which I intend to return on Committee Stage. I hope the Minister will address the issues with me in a more dignified manner and with respect. This measure has clearly not been thought through and the Minister needs to think again. It is a serious issue, which I urge the Minister to address on Committee Stage. It is having a devastating effect on landowners adjacent to proposed bypasses and other such infrastructural developments. It is very important to that sector and to many others.

I intend to table a number of amendments on Committee Stage and I look forward to the opportunity of further engagement with the Minister.

Mr. J. Higgins

If I were a speculator, landlord, millionaire stud farm owner, multi-millionaire tax exile or a wealthy backer of the Fianna Fáil Party who regularly appeared in the Fianna Fáil tent at the Galway Races, I would congratulate the Minister for Finance on this Finance Bill as a job well done in protecting the interest of my class. However, representing as I do working people and working class communities, there is nothing here for us to celebrate.

The Minister for Finance regards each budget and each Finance Bill he presents as a monument to himself and his right wing ideology. The Finance Bill 2003 is no exception. In implementing the provisions outlined in the budget last December, the Minister is continuing the policy of the Fianna Fáil and Progressive Democrat Coalition. This is a general policy that calculatedly causes wealth to be transformed to the capitalist class in our society, from waged and salaried workers to the owners of capital, land and property. The Minister for Finance will protest and in his speech he referred to the reductions in PAYE taxes that he has effected in recent years from the penal levels of the past. However the reductions in income taxation are absolutely useless to workers if the money accruing as a result is immediately soaked up by other demands or other agencies. For hundreds of thousands of Irish workers this is exactly what has happened in the economy under the stewardship of the Government for the past six years.

Let us consider young workers in particular. While their PAYE tax was reduced somewhat, Fianna Fáil and the Progressive Democrats did absolutely nothing effective while the price of a home – a fundamental need for people – doubled and trebled in many cases. For the half million families and individuals who had to buy a home in that time, concessions on income tax went straight to the housing building speculator, the banks and the building societies. It was enough of a scandal when penal taxation was levied on the ordinary PAYE worker while the multi-millionaires escaped – which was the regime of the past – and those taxes went to the State to finance the services of the State and of course an enormous amount went to enrich the international and domestic bankers. However, that the tax concessions go straight to enrich the land speculators, building contractors and developers – the friends and backers of the Government – is an absolute outrage.

Perhaps there would be some small consolation for those purchasing a home. At least some day they will have ownership of the home albeit having paid the banks and building societies two or three times the cost of the house in interest. However, there is a substantial and increasing sector of workers who now depend on landlords in the private rented sector. Every penny they gained in tax concessions from the Government went into the maw of the landlord class. Low paid workers may not be able to afford to purchase a home even with the shared ownership schemes and the affordable housing programmes. Tens of thousands of low paid workers, many of them civil servants and other categories are affected in this way. The Government is utterly oblivious to the struggle of such workers to survive.

We know the Minister for Finance lives in a very plush mansion in County Kildare. The journalist, Frank Connolly, exposed another string of mansions owned by the wealthy backers of Fianna Fáil in last weekend's edition of Ireland on Sunday. Workers in Dublin pay €600 per month for a bedsit that is not much bigger than a dog box. That is at the lower end of the costs. A one bedroom flat begins at around €900 per month and, for a three bedroom house in working class communities, €1,500 per month is a common price. It is therefore obscene to hear the Minister for Finance boast today about the fact that he has reduced the tax burden somewhat on workers in receipt of the minimum wage. It is incredible that workers facing the type of costs of accommodation alone – let alone all the other price rises and demands – should be subject to taxation at all. Workers on the minimum wage of €254 per week could pay €150 in accommodation alone.

When I spoke in the budget debate, I pointed out how this transfer of wealth was systematic, continuous and was also Government policy under the misnamed partnership deals. I gave the figures showing how between 1987 and 2001, the share of national production going to working people in salaries and wages reduced significantly as a percentage, while interest, profits and dividends rose dramatically. In other words, this Government and previous Governments presided over a systematic transfer of national wealth from working people to the privileged minority, the capitalist and landlord classes.

The Socialist Party has always understood that this is the nature of capitalism, the system under which we live. I was gratified to see an article by Mr. David McWilliams in the most recent edition of The Sunday Business Post, for which he writes a column. He also presents “Agenda” on TV3 and the “Morning Show” on NewsTalk 106. Mr. McWilliams is neither a revolutionary nor a socialist, but he can be perceptive in analysing economic trends. I will cite the conclusions he has drawn:

We have seen an unprecedented transfer of wealth, unparalleled in peacetime. The property boom has resulted in the transfer of billions of euro from workers to landlords.

Historically, it would take a war and the consequent forced expropriation of assets to result in such a transparent and blatant movement of wealth from the majority to the minority. Yet this is precisely what we have seen in Ireland..

All discussions on the economy, pay, income, immigration, tax and so on should be seen in light of the land-inspired transfer of wealth. The property boom has acted like an extraordinarily regressive tax, imposed on the working population of Ireland by the state to the benefit of a small, powerful class of landlords.. [I would add house builders and speculators]

I am not contending that this was absolutely intentional or pre-planned, but that is the outcome. Rising land prices have indebted the productive sector of the society and enriched a modern class of unproductive drones who live off exorbitant rent.

The Minister for Finance and undoubtedly the Government spokespersons who wait in line to speak on the Bill will be silent on these issues if possible. This is the reality for working people in Ireland today.

The tax concessions of recent years must be set against not only the surge in accommodation prices, but also the whole range of increases in charges for various services for ordinary people, including RTE, VAT, ESB and excise on those unfortunately addicted to nicotine. The bin tax, also called household refuse charges, is rapidly becoming a parallel tier of local taxation. It costs €350 to €400 a year and Sligo Corporation could charge €520 for it this year. The Minister for Finance also wants the return of water tax and a local income tax has been mooted. It is clear the Government is in the process of setting up a parallel tier of taxation levied locally so that Ministers for Finance can preen themselves on budget day, pretending to be doing the devil and all for the PAYE worker while, at the same time, imposing the dirty work of raising money locally for crucial services on local authorities and other local agencies.

At the same time, we have had massive tax concessions for big business. It is incredible that the effect of reductions in corporation tax and employers' PRSI in the last two budgets alone will, according to the figures we were given, return just under €1 billion this year to the corporate sector. This comes at a time when it has never been more profitable. The current Finance Bill continues this approach and is full of provisions to suit various wealthy interests.

Section 23 provides for the reduction of the annual rate of write-off for capital expenditure incurred on hotel buildings. Originally the Minister planned to introduce this measure immediately. Now, however, he has introduced transitional arrangements which provide that these changes will not apply to such capital expenditure incurred by 31 December 2004 if a full and valid planning application is received by the planning authority by the end of May. Which special interests, developers and Fianna Fáil Party supporters approached the Minister and asked for a further six months to allow them to get planning permission for projects they had in the pipeline and thus avail of the tax break? The Minister, of course, obliged. Who approached him and who is being facilitated by this measure? It contrasts with the approach taken to first-time house buyers who watched as the grant they desperately needed was scrapped and the pleading of the majority in society to change the provision was not entertained.

The Minister continues to favour the super wealthy in our society. The stallions continue to sleep peacefully in Kildare by night as they need not worry that their owners will tear their hair out over large tax bills and rock stars in their mansions do not have to worry about making tax returns.

Acht náireach eile déanta ag an Aire Airgeadais leis an mBille seo. Lucht an rachmais, lucht mór tógála agus lucht mór spéacláireachta a bhainfidh buntáiste as an mBille a chuireann ina chroí an cháináisnéis a thug an tAire isteach mí Nollag seo caite. Leanann an Bille le polasaí an Rialtais le cúig bhlian go leith anuas saibhreas na tíre a dhíriú i dtreo an mhionlaigh is saibhre, i dtreo na gcomhlachtaí is láidre agus lucht oibre atá thíos leis. Tá malairt polaitíochta agus eacnamaíochta ag teastáil uainn sa tír seo. The quicker we get a political and economic alternative to this right-wing Government, the better for working people.

Mr. Ardagh

I am glad to be able to make a contribution on the Finance Bill 2003. Deputy Ó Caoláin stated that capital allowances need to be reviewed and the tax avoidance measures therein should be addressed. I agree with him.

Section 24 extends the expiry date for the urban renewal scheme until 30 June, provided 15% of the total project costs have been expended. A number of projects in integrated area plan areas, such as the Liberties, the Coombe and Inchicore, could be commenced before 20 June. I ask all the principals involved to proceed to do the necessary work in order that these areas are improved and brought up to a standard we all want.

I am delighted that section 25 provides that the areas which can be designated for urban renewal relief will now include the refurbishment of the facades of certain buildings. This will help O'Connell Street in particular, as well as other Dublin streets and streetscapes in the major cities. In addition, the relief will apply to the owners of the buildings, not speculators and high income tax earners.

Deputy Burton appropriately raised the study by the Revenue Commissioners on the effect of tax rates on high earning individuals. The number of high earning individuals paying very little tax is not right. Of the top 400 earners, 117 individuals had an effective tax rate of less than 30%. An examination of their tax returns found that the losses generated from multi-storey car parks, hotels and miscellaneous property for this group of 117 people amounted to €68,243,068. That is nearly €1 million in income per earner on which they pay less than 30% tax. Some 51 of the top 400 earners paid less than 5% tax. That is not sustainable. Those 117 individual earners also got relief on their heritage homes of €4,105,355 and whatever the tax relief, they got it from a position of comfort. The ordinary people of Ireland will not accept that in the future.

Tax schemes are devised by taxation specialists and a number of taxation specialists are former inspectors of taxes. If inspectors of taxes, particularly those involved in strategy and policy, go into the private sector, there should be a three year moratorium on getting involved in tax avoidance schemes or developing various taxation systems for the private sector. The gamekeeper turned poacher scenario is not helping the current situation.

Under section 39, capital gains tax is now payable much earlier than was previously the case. There are many shareholders in the country, many of whom did not do well from Eircom.

Mr. P. McGrath

And Élan as well.

Mr. Ardagh

A number of insurance companies went private. Anybody who had over £100 in the Irish Permanent Building Society got 300 shares. A large number of Irish residents who have shares are now in the position where they will have to pay capital gains tax if they decide to sell those shares. Previously they would have, on average, up to 18 months to pay the tax but they now have to pay it within three to six months. On that basis they will probably hold on to the money to pay the tax whereas previously they would have spent it all. That is a welcome measure in the Bill.

Section 61, which deals with capital gains tax, refers to indexation on the cost of assets. There has been much confusion about this in that people were of the view that if an asset is sold after 31 December 2003, no indexation will accrue on it but it should be advertised that there is an indexation table available which is equivalent to the indexation that would accrue up to the end of December 2003. In terms of an item acquired in 1974, therefore, which I understand was the year capital gains tax was introduced, indexation of five or six times the actual cost for a sale in 2004 will accrue.

I welcome the proposal whereby roll-over relief is no longer allowed in relation to capital gains tax. The proposal does not apply to sports clubs, which will continue to benefit from roll-over relief. As Deputy Boyle said, this measure appears to benefit the provision of a stadium. I hope a stadium will result and that this measure will help in that regard.

It is appropriate that in the case of people who sell pubs, large blocks of apartments or buildings for millions of euro, the tax is paid at the time of those transactions and not later.

Mr. P. McGrath

What about compulsory purchase orders?

Mr. Ardagh

I do not intend to go into that but I am sure Deputy McGrath will do so.

Mr. P. McGrath

I will.

Mr. Ardagh

Section 64 provides for relief from capital gains tax where the individual has attained the age of 55. In the past, on the death of a person who worked in a business for 20 to 30 years and developed it to the extent that it is worth, say, €500,000, the widow was not allowed to get an exemption for the first €500,000 but under this provision, she can have that exemption. Previously only the owner of the business or the shareholders were entitled to it. That is an excellent provision.

Section 86 gives Revenue officers the power to break into any part of a premises being used for excise related purposes to search for concealed pipes or other equipment which may be used to evade alcohol products tax. I thought I was back in the prohibition era in the United States when I read that section, but I am sure it is a useful provision.

I welcome the provision for the increase in the rate of duty on low-strength alcopops.

On the problem of laundering red and green diesel and selling it in garages, that is being tackled in a straightforward and effective manner. The measurement will no longer be the colour of the diesel but its maximum sulphur content, and if the sulphur content is over a certain rate, it will be assumed to be auto diesel.

On the question of vehicle registration tax, measuring engine capacity is a difficult task and regardless of whether an engine has 1,900 or 1,850 cubic centimetres of capacity, Revenue should be careful in that regard.

Mr. P. McGrath

Will the Deputy oppose the increase?

Mr. Ardagh

No. The provision in section 117 for retaining the records of the VAT life of a property from beginning to end, plus a further six years, is important. In the past records were disposed of after six years and enormous problems arose not only for the owners of properties but for Revenue. It is reasonable, therefore, that somebody who is paying VAT on a property would retain full records of the property.

Under section 152, the Exchequer will be reimbursed from the small savings reserve fund for amounts transferred to the dormant accounts fund which represent accrued interest on national savings schemes such as savings bonds, savings certificates and instalment savings schemes. I would be interested to know the number of accounts in the different savings schemes, the total individual amounts and the efforts that have been made to contact these people. That is important.

To go back to the start of the Bill, section 2, I congratulate the Minister for Finance on the way he has looked after senior citizens over recent years. Not only has the old age pension increased significantly but a commitment has been given that by the end of our term in office, the old age pension will be €200 per week. The tax exemption limit is €30,000 for a married couple. In the area I represent, Walkinstown, there are a number of electoral districts in which there is a large proportion of elderly people who are extremely happy with the Government.

On the question of the application of PAYE and PRSI to benefit in kind from 1 January 2004, we have to be careful that tax avoidance schemes are not established in that regard. One area I suggest we watch is companies setting up car rental companies so that employees would rent the car and be reimbursed rather than owning the car. Regarding short-term hire, car rental companies can write off 40% of the value of a car in the first year. Has this issue been addressed? If a Mercedes is bought new in 2000 for €60,000 and then a second hand 2000 Mercedes is bought for €30,000 three years later, what is the original market value? Is it €30,000, as in the case of the second hand car? Is the value the same for both?

Repayment of tax was an issue in the Ombudsman's report in November that caused much discussion. The care and management of this matter was given to the Revenue Commissioners according to the legislation and the Ombudsman suggested the Revenue Commissioners were obliged to make repayments of tax, particularly when the Ombudsman directed it. I am delighted this is now being inserted in legislation. There is a four year limit on claims of repayment and interest; will that reduce record keeping from six years to four? The amount of invoices and other records businesses must keep is a huge burden and it would be helpful if it were reduced.

The budget was a balanced one and will consolidate the growth and advances we have made in the past five years. It has steadied the ship and when the world's economy turns around Ireland will be in a position to benefit from that and to go forward to the advantage of all our citizens.

Mr. B. Smith

This is the most important legislative measure to come before the House each year. The Minister of State at the Department of Communications, Marine and Natural Resources, Deputy Browne, is present and he is responsible for the forestry industry. Those involved in that industry have expressed concerns to me regarding the reduced expenditure and funding available for the forestry sector and the Finance Bill indicates possible changes in taxation for that sector. Those working in forestry appreciate the Minister of State's efforts in working alongside them to achieve the planting targets set out some years ago. The Minister of State is confident that a substantial programme will be achieved in 2003.

Mr. P. McGrath

Did he tell the Deputy that?

Mr. B. Smith

The Minister of State is working with the industry and will succeed in reaching those targets.

Mr. P. McGrath

He will put that on the record shortly.

Mr. B. Smith

It will not be a matter of making promises; the Minister of State will deliver.

One group in the forestry sector asked me to express to the Government their concern that the value of forestry to the economy is not given due consideration. The group points out that afforested land is removed from the area of agricultural subsidy and other schemes which eat up much public funding while contributing surplus foods to the marketplace. The forestry sector argues that its contribution to the economy is very important when one considers the reduction in imports and the production of raw material for downstream industries in Ireland. There is also the argument that forests absorb large amounts of carbon dioxide and will go a long way in assisting Ireland to reach its obligations under the Kyoto Protocol. The forestry industry states that one hectare of forest fixes 12 tonnes of carbon dioxide per annum. If the Government achieves its stated target of 20,000 hectares then our obligations under the Kyoto Protocol would be 24,000 tonnes less per annum, so the industry is keen that the major planting programme continues and that the generous financial incentives be left in place, allowing the industry to grow.

Deputy Ardagh spoke for all of us regarding the need to remove tax anomalies, particularly the loopholes allowing higher earners to dramatically reduce their tax burdens. There have been tax scams in the past and I am glad the Minister for Finance tackled them in the last few Finance Bills; he is also addressing them effectively in the present Bill. Deputy Ardagh also referred to the improved incomes of senior citizens. The Minister referred to section 2 of the Bill, which increases the exemption limits from income tax for persons aged 65 or over to €15,000 if single and €30,000 if married. This represents an increase of over 15% which, when combined with the changes last year, means the limits have increased by over 40% in the last two years. In effect, the Minister is removing large numbers of elderly taxpayers from the tax net through these legislative measures. No Member could quibble with that.

An Opposition speaker referred earlier to the need for tax relief on child care. The Government is going the right way about this, as did the previous Administration, by substantially increasing child benefit payments in recent years. Deputy O'Donoghue, when Minister for Justice, Equality and Law Reform, introduced the equal opportunity child care programme, which contained both a staffing grant element and a capital element to assist in providing more child care places.

Mr. P. McGrath

It did not work.

Mr. B. Smith

The scheme is working but it should be expanded, which I suggested to Deputy O'Donoghue, when he was responsible for this area, and also to the current Minister. Assistance must also be given to private child care providers. Such providers in rural areas argue that their margins are very tight if they are to meet the criteria that are rightly laid down by the health boards. There are substantial staffing grants going to community organisations and non-profit groups which are providing child care places but the programme was originally designed to assist those from less advantaged areas. However, as we know, it is not just people from less advantaged homes who are availing of this facility. I welcome the mix of people from different social backgrounds in the same child care facilities but in many rural areas undue pressure is put on private child care providers to offer the level of care needed at a cost parents can afford. This area should be revisited.

Deputy Higgins is not present but he referred to the cost of housing, both to rent and to purchase, with particular reference to Dublin. Those of us from rural areas have argued for the decentralisation of Government services to the regions. I hope Deputies representing the greater Dublin area who continually complain about traffic gridlock and the pressure on housing will support the efforts of rural Members.

I have always argued, irrespective of the make up of the Government, that there should be more decentralisation. Public private partnerships offer the Government the opportunity to provide facilities in provincial areas. The substantial programme of decentralisation initiated by the Fianna Fáil Government in 1987 could not have been undertaken without provision of Government offices by the private sector. With the improved public finances, the Government was able to buy those offices back. They were provided on a lease-back basis enabling decentralisation that would not have taken place if we had been waiting for Government financing.

We have made substantial economic progress. The best way to measure that is the number of people in work now in comparison with ten years ago. There is, however, an economic imbalance between the east and the north-west and Border regions. There is much to be done to ensure the BMW region achieves the necessary economic development. We must expedite the infrastructural programmes under way. The Government is providing substantial funding through the National Roads Authority for the upgrading of the N2 and N3. I argued along with Senator Diarmuid Wilson with the Minister for Transport that routes that service parts of the country where there is no rail network should be given priority in the provision of new roads. I am not taking away from the need to upgrade the N4, N5 or N6 but all of those have rail services that are unavailable to those using the N2 and N3. The N2 and N3 should be given greater priority because those routes are the only way to transport people and goods to Derry, Monaghan, Donegal, Cavan and Fermanagh.

Mr. P. McGrath

That will stall the national development plan even further.

Mr. B. Smith

Deputies Paul McGrath and Crawford would agree that we want to prioritise the N2 and N3. There is a good rail service through Mullingar these days.

Mr. P. McGrath

The Deputy has obviously not been on it. The carriages are from the 1950s.

Mr. B. Smith

I return to my constituency on Thursday or Friday night so, unfortunately, I do not have time to go to County Westmeath.

Mr. Crawford

At least Deputy Paul McGrath has a railway.

Mr. B. Smith

If we are to attract the inward investment we need to generate employment in the Border area, the necessary infrastructure must be put in place. The former Minister for the Environment and Local Government, Deputy Noel Dempsey, made exceptional progress in the upgrading of water and sewerage schemes. If we are to reduce pressure on housing stock we should avail of the newly serviced land in towns and villages in rural areas. An Taisce, which is unfortunately in receipt of State funding, is now objecting to housing developments in rural towns and villages. It argued in the past that it only opposed single dwelling houses in rural areas. That organisation now objects to housing schemes in villages and towns, a ludicrous situation. Unfortunately, in some instances An Bord Pleanála has made decisions that are contrary to proper planning and development and to the Government's policy of developing rural areas and ensuring a better spread of population.

Public private partnerships present an opportunity to undertake a major programme of infrastructural development. The national pensions reserve fund contains exceptional amounts of money put away to meet the future pension needs of the State. However, there should be a mechanism in place whereby some of those funds can be invested in the provision of schools or roads and not in building up the asset base of other countries. It cannot be beyond the ability of those in the Department of Finance, the Central Bank and the National Treasury Management Agency to ensure that those funds are available to Government and private developers to build up the asset base of the State. Every day that we are waiting for a new road, scheme or school, we are losing the use of that asset.

The Minister for Education and Science has indicated that he is anxious to provide new school facilities through public private partnerships. I welcome his decision to initiate a pilot scheme devolving decisions to local boards of management. That will speed up projects and we will not have to continue with the present farcical situation where projects pass to and fro between boards of management, consultants, architects and back to the Department. Some professions want to retain that system because there are fees of 11% but I would like to see those fees going into the provision of facilities.

Mr. P. McGrath

Previous speakers have talked about issues that are important in their areas. Deputy Brendan Smith will doubtless send the section of his speech on forestry to interested groups and say how he raised the matter in the Dáil. He pointed out that the Minister of State in the Department of Communications, Marine and Natural Resources, Deputy Browne, is not providing enough funding for forestry this year and hopes more will be done. He will not include in the letter to those groups that when it came to voting on Second Stage of the Finance Bill that put in place the restriction, he voted to reduce forestry in this State. The people who get the letter will say that the Deputy is fighting for them. When the crunch arrives, however, he will support the Government. We have heard this time after time.

Mr. B. Smith

We voted on the Estimates last year.

Mr. Browne

The Deputy did that when his party was in Government.

Mr. P. McGrath

Is it any wonder people become somewhat cynical about politics and what politicians do and say? The Minister for Finance, Deputy McCreevy, is very proud of what he has done in his budgets over the past six years. However, it should be remembered that he inherited a very sound economy when he took over as Minister for Finance. The Celtic tiger era has been hailed as a great achievement. The reality is that the Celtic tiger has been pursued, harried and wounded by the Minister, Deputy McCreevy, who chased the unfortunate animal at every opportunity until he eventually cornered and slaughtered it. He did this by allowing public expenditure to grow grossly out of proportion. In the past two years, public expenditure has grown by 40%.

The Minister has allowed a savings scheme to rob the economy. No doubt, all us have availed of it – we would be very foolish not to do so – but it is costing the taxpayers €500 million per year to service that scheme. Some of that money is being borrowed to give people like me a 25% return on savings. Is that not a mad scheme? Money is being borrowed to go into the pensions fund. As Deputy Brendan Smith said, that pension fund should be used for investment in this country's infrastructure. However, the Government will not use it for infrastructure in our own country but will give it to others for investment elsewhere.

In the run-up to the last election, the Fine Gael party advocated the use of the pension fund for infrastructure investment but, of course, the Government did not accept that. At that time, the Minister, Deputy McCreevy, issued letters stating that no significant overruns were projected and no cutbacks whatever were planned, secretly or otherwise. Since then, there has been an increase of 26% in the cost of hospital casualty services – that is if the Minister allows the hospital to remain in operation. Deputy Brendan Smith will be conscious of that issue in his area. There have been increases in VHI charges and ESB charges, college fees have increased by 69% and the drugs refund scheme has also suffered. The list of issues on which the Minister has reneged is endless.

Although he claims to be a reforming Minister, he has not implemented reform. There are many basic problems and anomalies in the taxation system. Let us take the example of two families living next door to each other in Westmeath, Cavan, Wicklow or wherever. Each family has three children and an income of, say, €15,000 per annum. That is not a great deal of money by any standard. Let us suppose one householder is self-employed in running the local post office and the other is a PAYE worker. The latter, by virtue of being a PAYE worker, will get a top-up of about €80 per week from the Government to help that family survive. That is excellent and I applaud it. However, in the case of the family next door, on the same income as verified by the Revenue Commissioners, there is no top-up of €80 per week to support them. Is it fair that they should be excluded from that scheme because they are self-employed? I say it is not.

I note that Deputy Mary Wallace is in the House today. In a previous incarnation, she participated in a committee in which I was also involved and was very much in favour of allowing the self-employed to benefit from FIS – family income supplement. Regrettably, nothing has happened in that regard during the intervening period and self employed people are still excluded despite the fact that their incomes are verified by the Revenue Commissioners. I hope Deputy Wallace still adheres to the same view of this matter and that, when it is put to the test in a vote in the House, she will not abandon the principles she supported in the past.

Higher education grants are also subject to a two-tier system when income returns are submitted to the local authorities for assessment in that regard. A PAYE worker with an income of, say, €20,000 per annum will submit a P60 for verification. Let us compare that with the treatment of a self employed person, such as a taxi driver. In that case, the local authority will demand the production of full tax returns and will insist that, since the taxi is leased, the relief allowed by Revenue in that respect must be added back to the net income figure. In other words, the local authority will not accept the income figure as determined by the Revenue Commissioners but will argue that the applicant has a higher income. Is it fair that, although two families have the same level of declared income, one will qualify for the higher education grant and the other will not? What has the Minister, Deputy McCreevy, done about that situation? Absolutely nothing.

However, the Minister has embarked on a system of individualisation of the tax code. In this case, let us compare the position of two fairly well-off families living next door to each other in County Wicklow, each earning €56,000 and with no dependent children. The family with just one income will pay a net tax of €11,600 if they are self employed or €12,340 under PAYE. Their next door neighbours, with the same total income from two people at work, will only pay €6,840 in tax. In other words, the single income family is being penalised to the extent of €5,500 if they are self employed or €4,840 if they are in the PAYE system. Does the Minister, Deputy McCreevy, wish to be remembered as the Minister who introduced such inequality to the Irish taxation code? Are Deputies on the Government side of the House content with that situation? They will support it by going through the lobbies when the time comes. Are they happy that that is how the situation should be?

In this budget, the Minister abolished new house grants. I have seen mean moves but that is one of the meanest. I never cease to wonder at the degree of stupidity or brass neck, as the case may be, of certain people. Members of this House have defended at public meetings the abolition of the new house grant and have said that what has been put in place is better than what was there already. I will outline some figures. The new house grant stood at €3,800, paid up front. The system which has now been put in place provides for tax relief on €3,300 per annum, spread over seven years. As one who was always fairly good at sums, I calculate that the tax relief on €3,300 over seven years amounts to €2,310. How can anybody claim that €2,310, spread over seven years, is as good as a system which gave €3,800 up front?

Mr. Browne

It is far better.

Mr. P. McGrath

To confirm that the Government did not even believe it themselves, they said that the first-time buyer's grant scheme was costing €38 million a year and the new house scheme was costing €8 million a year.

Mr. Browne

You get the relief on new houses and second-hand houses.

Mr. P. McGrath

I am amazed sensible people would reach that conclusion, that the system of tax relief could come anywhere near the first-time buyer's grant scheme that was previously in place.

Mr. Crawford

I want to return to a couple of issues raised by my constituency colleague, Deputy Brendan Smith, and use the opportunity to support him in this House on those issues. As the Minister of State, Deputy Browne, will be aware, the cut in forestry grants is having a serious effect on those who want to get out of ordinary farming and make use of their land for profit. When one considers that in 1995-96, at a time when there was not as much money available, there were 26,000 hectares being planted and this has fallen to less than 16,000 hectares, it gives some idea of how the Celtic tiger has been passing away slowly but surely. I know that the Minister of State, Deputy Browne, wishes he would get the money to make sure that those who want to utilise their land for planting would get the opportunity to do so.

I also support those who highlight the need for proper roads infrastructure in the Border regions. Deputy Brendan Smith stated clearly that there is a need for moneys towards the N2 and N3. I am proud that even at this late stage there has been a reasonable injection of funds towards the N3. I hope it will be the first of a number of years where realistic funding will be made available which will bring that up to a proper standard, however I was disappointed that significant funds were not made available for the N3. While a good job was done near Cavan town with the bypass, a small sum of money would allow for the through road towards Longford, which is a major handicap at present.

We all heard the Minister trumpeting about the great job he did with the budget and the moneys made available to the different sectors. When you look at the health budget of €9.2 million, for instance, one must say that is a lot of taxpayers' money. It is not the Government's money, it is the recycling of money of which the Minister has control. Yesterday I listened to Deputy Breeda Moynihan-Cronin spelling out the problems with home care and home help in Kerry. I did the same last week regarding the position in Cavan-Monaghan. What saddened me most was that one of the cases I raised in this House was visited by a health board official who advised the family that if they had written a quiet letter to the health board the problem would have been solved, that they went the wrong way about it by going to a politician. You would think that this was only an incidental matter, yet the district nurses in the system are being ordered by the health board to cut 28,000 hours from the home care system in 2003. If anyone says that is not a cutback affecting the people at the lowest level of the spectrum, I do not know what is.

I appreciate one small bit of good news in the Bill for young farmers, that the stock relief is granted, but there is very little else. While my colleague, Deputy Timmins, will deal with the agriculture area in more detail, there is a major problem in the cutbacks in that overall structure. On top of that, last year there was an agreement between the Minister for the Environment and Local Government and none other than the Minister of State, Deputy Parlon, when he was leader of the IFA. Mr. Parlon trumpeted the great deal he had got, an increase in prices for land under CPO, the road building to which I referred and the roll-over opportunity for those who needed to purchase other land or whatever else they wanted to do.

The Minister came into this House only a few months later and completely ignored the fact that a deal had been written in stone with the farm organisations and property owners, and did away with that roll-over tax relief. At this late stage I beg the Minister, if he wants to bring the farmers and other people into the national agreement, to honour that commitment and let justice be done. People do not give up land for road building for the sake of the country. They give it up because it is being taken from them under compulsory purchase order. It is not only landowners who are affected, it is property owners in my constituency in Carrickmacross, Monaghan town and Castleblayney. These people were given promises. I hope this can be solved before those promised projects are held back by some protest. I certainly hope that will not happen and I plead with the Minister to have common sense.

This matter affected not only the farmers. I received an interesting, but very difficult, letter from one of my constituents. In it he spells out how he built up a retail business down through the years. He took over a site in one of our larger towns and built a brand new structure to centralise his business and give a better service to the public. He is an Irishman. He is competing against those from outside this country who come in on a greenfield site and get all possible help and encouragement to build shops and supermarkets. To finance the project, this man will sell off existing property, draw down savings and borrow money from the bank. That was agreed last year. It took him a number of years to get the project through planning.

Now he finds that the Minister for Finance, in one fell swoop in this House, has cut the ground from under him. His letter states, in bold type, that in such circumstances he now finds that he has a substantial capital gains tax liability without the funds to discharge that liability. This man employs 50 people and intends to employ another 30. He has specifically asked me, as one of his local Deputies, to raise this in the Dáil. He has political affiliations – that is no secret – but he has found himself on the wrong side of the car this time.

There is one other issue I will raise, although I would like to have the time to raise more. As one of the stealth issues in the budget, the Government removed subsidies of €45,000 in the meat and bonemeal area and I want to make a couple of short comments in that regard. Two thirds of the poultry of Ireland is produced in my constituency. As a result of this measure, imported poultry product will gain a stronger foothold in the Irish market. Product produced in the EU is still subsidised, creating an uneven playing field for Irish poultry. The withdrawal of the subsidy will result in an increase of 5% in the price of Irish poultry product and it will result in increased costs of €8 million to the industry. The large retail multiples, who currently support Irish poultry products, could be forced to import products, given the significant price differential. Some 1,500 people are employed directly and 3,000 indirectly.

This industry has been put at risk by a Government which is taking money out of the system through the back door. If that had been done in an organised fashion rather than with a hatchet, there might have been some hope for the industry. That is what has happened to the poultry industry. The same has happened to the pig industry and the beef industry as a result of the withdrawal of funds, which was not mentioned in the budget, the Book of Estimates or anywhere else. This Finance Bill, budget and Book of Estimates will be remembered long after the Government is forgotten.

Mr. Timmins

I thank Deputies McGrath and Crawford for allowing me time. Over the last number of years I have sat here and watched those on the Government benches, every budget day, clap their hands in glee at all the goodies that were being given out. Some day the history of the past few years will be written. The Government has spent money like a drunk at a wedding. Perhaps we will some day establish where it went, because no one really knows.

I asked the Minister for Agriculture, Food and Forestry a question last week. I notice that he took on 600 extra employees between 1997 and 2003 – an inordinate amount for a Department which deals with falling farm numbers, according to the Minister, where red tape is being cut back and the systems are being made more useful. I must table a question to the other Departments because I am sure the figures will be even more frightening. This must have helped the Government by contributing to the rise in the number of people employed.

It is a fact of life that Irish people do not like paying tax. No constituent of mine likes doing so. Maybe we still have a colonial hangover and think our taxes are going to the king or queen and that we are pulling the wool over the eyes of the imperial power by not paying. More pertinently nowadays, we may feel we do not all pay our share. If people felt they were being treated fairly, they would willingly pay their share, but we are always looking over our shoulders at people who are not paying what we think they should be. From one point of view, I welcome the fact that the Minister has set out to close off the loopholes used by some very wealthy people. I am sorry the Minister of State, Deputy Browne, is gone because I know he was not fond of the Progressive Democrats in times past. Perhaps he is singing from the right hymn sheet now; I did not hear him say anything about it during this campaign. Maybe he got his just deserts, or experienced a Pauline conversion. The Minister for Finance talks about bringing the standard rate of tax down to 20%, the higher rate to 40% and capital gains tax to 20%. That is fair enough, but he should acknowledge the stealth taxes that were brought in to compensate.

My colleague, Deputy Crawford, covered most of the topics I intended to discuss in relation to agriculture, but he did leave some scope for me. Rollover relief does not only pertain to agriculture. I acknowledge that it is good to close off loopholes, but this relief could have been used to reinvest in industry or property. It is inherently unfair that somebody who unwillingly disposes of a capital asset in the common good, to assist an infrastructural project, should have to pay tax on it. Everybody would agree that this is most unfair. In addition, with regard to business in general, it is a difficult change. I am aware, for example, of a factory that recently relocated from Dublin to County Wicklow. The owner is in the process of selling his premises with a view to reinvesting in Wicklow and he will also suffer. It can be seen that it is not only the farmers who suffer, although it is particularly difficult for them because they do not willingly enter into the transaction. Fine Gael will be opposing this section of the Bill on Committee and Report Stages.

I acknowledge some of the measures introduced by the Minister. He extended stock relief for farmers, which was not flagged during the budget but appeared in this Bill. However, as a result of the floundering and the waste of money over the last number of years, certain measures have been imposed upon the agricultural community that should not have been. I mentioned the 600 additional staff in the Department of Agriculture, Food and Forestry. I recently looked at the report of the three wise men, in which four or five recommendations were made, such as doubling disease levies, testing for BSE and pulling back from subsidising the disposal of meat and bone meal. All of these recommendations have been carried out. Why do we need the Department of Agriculture and Food? Why did we not just hire these three wise men? Whatever they decided to do was implemented.

One of the groups that will suffer is Teagasc, which met today to examine the possibility of closing 20 centres around the country. It has delayed its decision, but I think it is terrible that an area involved in research and development should suffer as a result of Government cutbacks. Farm incomes are down by 8.5% and there is a lot of despondency out there. Farm groups have not gone into the partnership because, as Deputy Ellis knows, they see nothing for themselves therein. Last week the Minister said there was a package of €300 million for the area. In a 16 or 17 page document, he is the only one who actually sees that. I do not expect the Minister of State, Deputy Lenihan, to know the details of that, although I know he has an interest in agricultural issues, but I would like the Minister for Agriculture, Food and Forestry, if he gets the opportunity, to explain.

Housing is about supply and demand. I am totally in favour of zoning as much land as possible in an area as long as a time limit and population limit are implemented. If we are afraid to zone land because of the tribunals, we are abdicating our responsibilities. If we were to follow the planners blindly, house prices would be far greater than they are. I am not condoning some of the zoning decisions that were made, but I would never be afraid to propose a rezoning against the advice of the planners if I thought it was for the common good. We must zone more land than we need, because if there is a limited amount held by a small group of people they will not release the land until it suits them. They can operate a cartel.

I take the opposite view to Deputy McGrath on the first-time buyer's grant. I have always felt it was a bit of a gimmick. If it was index-linked it would be around €14,000 or €15,000. We call it a first-time buyer's grant, but it only went to about a third of first-time buyers because two thirds of them bought second-hand houses. I stated here during the Estimates that I did not disagree with the Minister. I thought it was a good idea to abolish the grant if it was compensated for with mortgage interest relief. However, he did not do that. He increased it a bit and extended it from five to seven years. What he should do is front-load the relief. Instead of having it extend over 20 years or the lifetime of the mortgage, he should put it all into the first ten years of the mortgage. I am at the ten-year stage: I do not know what I get in mortgage interest relief every year, but it might be €600 or €700. It is not important to me or to other people who have had a mortgage for ten years or more. It would be more beneficial to people to receive it during the first five or six years, which is the difficult time. I ask the Minister to investigate this.

The Minister has extended the town renewal scheme until 2004. This excellent scheme applies to towns with a population between 500 and 6,000. There are five or six towns in most counties, except the upper Shannon region. The one regret I have is that many people who have properties eligible for the scheme are not aware of this. I ask the Department of Finance, in conjunction with the Department of the Environment and Local Government and the local authorities, to go on an educational tour, informing people that their properties are eligible. The more innovative people in these areas are having the scheme put in place but as time goes on it will be too late for people to obtain maximum benefit from it.

I do not know whether the Minister is specifically responsible for tax relief on cars for people with disabilities. There is a review group sitting on this at the moment. One of the conditions for this relief is that the applicant does not have the use of a limb. I have come across a person who was severely handicapped with Down's syndrome and was not allowed to participate. This is something the Minister should investigate. The N81, a secondary route, is probably one of the busiest roads in the country, yet it is the most dangerous and in the poorest condition. The national development plan states that it is to be upgraded from Blessington to Tallaght, but there is no funding for major works on it. It is in terrible condition. I regret I have so little time to speak on the Bill.

Mr. Killeen

I wish to share my time with Deputies Ellis and Mary Wallace.

The Bill is a responsible and balanced response to the current economic situation, as was the budget that preceded it. We need to look carefully at the significance of the income tax burden. It has been reduced from 28% to 17% of income for a single person on the average industrial wage. That is a substantial reduction. It has an enormous impact on the amount of money directly available to somebody in employment at that level. Deputy McCreevy has made it clear since he took office that one of his objectives was to reward those who are working. That has been to the benefit of the economy.

There is another part to the equation. The reduced taxation burden has enabled employers to be more competitive and, thereby, to maintain employment. We need to bear in mind, particularly at present, that a number of employers, in some cases significant employers, are just about surviving. The significance of these elements of taxation is substantial and makes a major contribution to maintaining maximum numbers in employment. When the minimum wage was introduced in October 2000, 64% of people on that wage were exempt from tax. By the budget in 2002, that had increased to 90%. Despite the difficulties in the interim, and there have been many, the Minister ensured in the budget that the 90% level was maintained. That happened despite the fact that last October there was a substantial increase in the minimum wage to €6.35 per hour. Of all the areas that come within the remit of the budget and finance legislation, this is the one that is most significant and far reaching. I commend the Minister for the progress he has made in this area.

It is extraordinary that some Deputies continue to begrudge the benefits extended to older people. The Green Party spokesman today attacked the additional benefits made available to people aged 70 years and over. This is difficult to comprehend with regard to people who have made a lifetime contribution to the country in economic, social and other important terms. It is extremely small minded.

I query the Minister about income tax on shares, a matter I have raised with him on a number of occasions. It is dealt with under section 8 but I am not sure what the effect of the provision will be. There are some people, many of them elderly, whose only income is from the sale of shares or dividends paid on shares. Many of them sold farms or businesses to go into retirement and they depend on this source of income. In many cases, and I am familiar with some, it debars these people from qualifying for the old age non-contributory pension. It becomes, in fact, their only source of income.

Until recently, income tax relief did not apply to income from shares, even where that is the only income. That is a double burden on elderly people because apart from debarring them from getting the old age pension it is also a heavy tax burden. A number of exemptions are outlined in section 2. The exemptions in that section for elderly people are generous, relative to the provisions for other members of the population. However, I am not clear if they apply to the cases I have outlined.

I welcome the anti-avoidance measures. They send the right message. The Minister has always acted swiftly when he has become aware of avoidance measures and, on this occasion, he has introduced more new provisions. I also welcome the changes introduced in section 15, which ensure that BES and seed capital schemes apply as intended. There were some fears that the schemes might be discontinued. That would have been a retrograde step and I welcome the introduction of provisions which allow the schemes to continue and ensure that they are utilised as intended.

Section 17 provides for the repayment of tax overpayments if they are claimed within four years. I have a quibble with the time scale. I am aware that it arises in part from the Ombudsman's report on interest on overpaid tax and it is a first step in the right direction but it will need to be revisited in the future. I also welcome the changes in the arrangements announced in the budget for the write off of capital expenditure incurred on hotel buildings. This will allow people who had entered into contracts or who were at an advanced stage of planning to proceed with their projects. I am familiar with some of these cases and I raised them with the Minister.

The provisions in section 24 allow for the expiry of certain tax incentive schemes. I had great hopes for the town renewal scheme and I was disappointed with the uptake and many elements of that scheme as it operated in County Clare. I always believed Lisdoonvarna would have been the most suitable town. I made that judgment partly on the basis of the relative success of the resort scheme. That scheme has been subject to an enormous amount of unfair criticism but it worked extraordinarily well in providing additional accommodation, both hotel and self catering, in resorts. Unfortunately, the town renewal scheme did not have the same success. It is difficult to know why, but I am glad that although the Minister believes the appropriate move is to remove some of these incentives, he has also indicated that he has not closed his mind entirely to incentive schemes. I particularly welcome his mention of research and development, an area which has an enormous impact on the quality of jobs which might be available in the future.

Section 36 provides for exchange of tax information and is connected with international criminal justice measures. That is to be lauded. I hope the undertaking to OECD from certain countries which have been regarded as tax havens will be acted on quickly. There is also provision for the National Development Finance Agency to get exemptions from tax in the performance of its statutory functions. This agency has the potential to have an enormous impact on the development of infrastructure here. In the aftermath of the publication of the national spatial strategy, I look forward to this agency playing an active role in ensuring the roll out of infrastructure. Naturally, I am anxious to see it happen in my constituency but I welcome the fact that the strategy points to the importance of the Galway-Shannon-Limerick-Cork axis and route. I hope the Ennis bypass and other projects in that area will qualify for funding from the agency.

The Minister has also indicated his support for the international financial services industry in Ireland, particularly for investment fund management. We have been doing well in fund administration but there is a huge area of management and international services in which we have become involved to some extent, but to a much lesser extent than is possible. The Minister's indication of his commitment to this is welcome.

Section 68 adds sporting bodies to those exempt from capital gains tax. Deputy Boyle found fault with this. I welcome it. I made strong representations to the Minister about this issue. It will substantially benefit the GAA in County Clare in terms of investment over the next few years and I thank the Minister for taking my views on board.

I also welcome the Government's commitment to public private partnerships. A huge number of schools, including Ennis national school and other schools in my constituency, are awaiting announcements. I understand there are difficulties arising from the EUROSTAT definitions and provisions in this regard. What progress has been made in this area? We need clarification and movement on these schemes in the short-term.

The extension of the existing stock relief scheme for farmers in sections 18 and 19 is welcome, as is the section 132 provision for stamp duty relief for farmers. Forestry has been mentioned. We have obligations under the Kyoto agreement, among others, and this issue will have to be revisited. I particularly welcome the provisions of section 136 which provide for a contribution from the financial sector, in view of the wonderful results for AIB shareholders announced today.

Mr. Ellis

In my early days in this House, we had problems with the State finances. Since Deputy McCreevy became Minister for Finance, he has continued the work begun by one of his predecessors, former Deputy Ray MacSharry. When he came into office in 1987, the national debt had doubled during the lifetime of the previous coalition Government. He set about trying to remedy the situation and we now have balanced budgets.

While we might all like to see further expansion in expenditure, we must also realise that it must be kept under control. In doing so, we must also be careful that we do not hurt the weaker sections of society and that has been the approach taken in this Finance Bill. In the tax changes, the Minister has addressed the most vulnerable groups, namely, those on low incomes and pensioners. The Minister has singled out these groups for extra assistance. Some 90% of people on the minimum wage will now be tax exempt, a measure we all welcome. The changes in the income levels for persons aged 65 and over is also to be welcomed because these people made a tremendous contribution to our country. They have worked all their lives and, in many cases, have paid substantial amounts into pension funds to supplement their social welfare pensions. It is only fair they should be rewarded for having done so because the money they have paid in will have been used in the development of the country.

I agree with Deputy Timmins's point on mortgage interest relief because, in many cases, the first-time buyer's grant had surpassed its usefulness by not having changed for some years. Instead, extra mortgage interest relief has been given which will be more beneficial to recipients than the grant because the number of applicants for the grant had dwindled significantly because many houses were outside grant size. The number of applicants in each county was far more limited than we dreamed of. I was shocked to see the figures for my own constituency – remarkably few applicants qualified because of the house size.

The Finance Bill is the source of the funding for many of the capital projects we want to see put in place. I welcome the €200 million spend on broadband which will help to bring more rural areas into the economic loop at a much higher level. At the risk of being parochial, two towns in my locality – Carrick-on-Shannon and Manorhamilton – have been included on the broadband network. It is a positive move and one which shows that the Government wants to have balanced regional development.

Decentralisation must be rolled out because it will free up Dublin traffic and homes. In many cases, civil servants will find they can sell their homes in Dublin, pay off their mortgage and buy a house in a rural town that will leave them with money which they can use to educate their children. They will live a healthier, better quality life in a rural town than in Dublin's urban sprawl. The time spent by people travelling even short journeys by car demonstrates the need for further investment in transport systems such as Luas.

We must look at the roads infrastructure and I am delighted to see that the NRA will this year commence a number of major projects which will help access into and out of the city. The N4 is something Deputy Connaughton and I will welcome, even if it is to be tolled, because of the severe pressure on people who have to drive on the roads. I pity people, especially truck drivers, when I see the problems they face trying to get in and out of Dublin every morning. Every day we see the need for further investment in infrastructure.

There are a number of towns that could service sections of Departments. Nobody would like to see 1,000 civil servants being sent to one town but, if some 300 or so were dispatched and offered the opportunity of moving to a rural town, we would see major progress. Carrick-on-Shannon ought to be considered because it offers a way of life and opportunities to people that may not be available in other applicant towns.

I have a different view to other speakers on forestry in that the tax proposed for forestry may encourage ordinary farmers to remain in farming and give them an opportunity to expand. Otherwise pension fund investors and others buy up the land, taking it out of agriculture and preventing farmers becoming viable in the area. This deserves to be re-examined. Pension funds and some of the banks that Deputy Killeen mentioned are investing in forestry but their maintenance needs to be monitored because, in many cases, trees are planted only to be abandoned in a dilapidated state so they are of no commercial value when they mature. This is an annoying reality of much forestry development.

Everyone welcomes stock relief. There may be time to look at roll-over relief in the context of compulsory purchase orders, provided that the money is re-invested in the activity of the business of the person concerned. Farming organisations have pushed for this for some time. If someone is to re-invest what he or she has had to accept as compulsory purchase payment in a business, he or she should be allowed to do so. The question of roll-over for other businesses is something that should be looked at. If someone is re-investing money into a project that will create employment, it can be the difference between its being successful or unsuccessful.

The town renewal scheme is welcome and will do good, although the upper Shannon renewal scheme has probably done more to develop that area than anything done by Government for 50 years. The initiative taken in that project has brought about a new sense of growth and has encouraged people to invest in the area. Therefore, perhaps an extension of the scheme could be examined as most of the area did not have the necessary water or sewerage infrastructure to benefit from it fully. The scheme could be appropriate for other parts of the country where rural development has been stagnant. The Minister, Deputy McCreevy, has done his best to ensure that we maintained a balanced position. I hope that by the end of this year we might see a change in the world economy which would allow matters to be a little freer next year.

Ms M. Wallace

I thank the Deputies who shared their time with me. Most reasonable people would accept that in the past six years the Government has reduced the income tax burden significantly. There is no doubt that lowering the tax burden has made a major contribution to strong employment growth and to the economy. As the Minister said, the period we now face is one of consolidation, which is important for all of us.

The Minister indicated in his budget speech the importance of a broad tax base if we are to maintain our low rates of direct taxation, which have been an obvious factor in our economic success. Under this Bill he introduces a number of changes to ensure that tax relief schemes work as they are intended to. These schemes are important and must be properly focused to deliver the desired objectives.

Many provisions in the tax code allow different types of income to be exempt from tax. I note the changes in terms of stallion fees, forestry and greyhound and stud fees. The Minister is anxious to ensure that people in these areas make the necessary return of information. These changes are merely about the return of information as distinct from taxation. I welcome this especially as there is no change in tax free status in these areas.

In terms of modernising the tax system, the Minister has a good record of continually examining issues. I welcome the new general provision covering the refund of overpaid taxes and interest on such refunds. Many self-employed people pay their tax in advance and may make an overpayment on their preliminary tax liability as a result of endeavouring to get a tax clearance certificate which they might urgently require for a licence application or for subcontracting. It is to be welcomed that this taxation aspect has been dealt with in a humane fashion. We are frequently reminded of the importance of keeping the tax system under review and modernising it. This Bill yet again underlines that.

I support the issue raised by Deputy Brendan Smith regarding the N2 and N3. As the Deputy said, in the absence of a rail service to Cavan-Monaghan it is essential to maintain road improvements, especially in the case of the Dunshaughlin bypass on the N3 where people often find they have to queue in traffic for distances of up to two or three miles and in the case of the Ashbourne bypass where motorists experience similar delays. I welcome the €13 million allocated this week to keeping work moving on that project.

I particularly welcome the changes in the Bill with regard to sports. Under the Bill, sports bodies will not face capital gains tax bills on the sale of land provided the money stays in the organisation and is used for promoting sports. This is an excellent measure. It will enable groups to retain more money to invest in clubhouses, playing fields, gyms and training grounds, which will give our young people outlets through which to channel their energies.

Any help from the Government in this area is welcome. Sporting facilities are needed in areas of south County Meath and other areas where there are new housing developments. People who move to a rural area are surprised that unlike the rate base in Dublin where sports facilities can be provided by the local authority, this is not the case in places like south County Meath and north Kildare. Facilities in these areas are provided on a voluntary basis. Clubs have to fundraise to provide facilities and they are highly dependent on any grants or support they get from the Government. I commend the Minister on the measure introduced in this regard and appreciate that there is a national dimension to this in terms of the IRFU and the FAI. This move has been welcomed by Sean McCague from the GAA in terms of its being consistent with the Minister's record of investment in sport. It is a welcome measure at national level and it is also particularly welcome for the thousands of young people who play sport in rural areas, especially in places such as those I mentioned, where there are many new housing estates to which many people have moved form the city and where there are no sports facilities. I strongly underline the importance of anything the Government can continue to do in regard to sports.

It is important to take account of the needs of people on lower incomes in the Finance Bill. In last year's budget, 90% of people on the minimum wage were exempt from liability to tax. The minimum wage was set at €6.35 per hour in October 2002 and it is important that the necessary changes are made in this Bill to maintain that level of tax exemption in respect of 90% of people on the minimum wage.

The budget provided for increases in the exemption limits from income tax for persons aged 65 and over to €15,000 for single people and €30,000 for a married couple. In this Bill, as in the budget, the Minister has sought to work towards his goal of removing large numbers of elderly taxpayers from the tax net which is an important objective.

I welcome the simplification in the benefit-in-kind taxable charge in respect of cars and vans. It is almost unbelievable that under the current system there are 17 percentages and categories. From next January a simple five rate structure will apply to cars replacing the existing 17 rate system. Many thousands of people paying benefit in kind taxable charge in respect of cars and vans will find that charge reduced as a result of this change.

I welcome the changes in respect of share options in the Bill. Some constituents have raised this matter with me in the past. It is incredible that people would be taxed in a case where they have lost money. It is a positive step that under the Bill there is an emphasis on paying tax when one makes a gain. However, it is disastrous when people have to pay tax on a loss in respect of shares, especially when the tax liability is higher than the value of the shares at that time. While people do not like paying tax, nobody likes paying it on a loss. The increase in mortgage tax relief available to first-time buyers is welcome. Some 45,000 first-time buyers will benefit from this scheme.

I wish to draw the Minister's attention to the changes proposed under sections 24 to 28, inclusive, particularly as they affect the park and ride scheme. We understood that this tax incentive scheme would continue up to 30 June 2004, but under the Bill it is being extended to 31 December 2004. Perhaps it is the Minister's intention to expedite matters in terms of providing such facilities before the incentive scheme expires. If that is the case, that is fine. However, whether through the provision of tax incentive grants or other measures, the Government needs to do a great deal more in terms of the provision of park and ride facilities.

To prevent people from parking their cars all day in the car parks of shopping centres, urban district councils and shopping centres within a 30 mile radius of Dublin are using a parking disc system to ensure that car parking spaces are kept for customers. The Government encourages people to use the public transport system to commute to work in Dublin, but it is not providing sufficient parking facilities for them to do so.

On the Dublin side of Navan, cars are parked along the N3 for a long distance. That road is just outside the disc area and fair dues to commuters for finding a free car parking space along the national primary route, but they have done so at their own initiative. More needs to be done to provide for the parking needs of commuters. I am glad to underline that the Minister said that he considered it necessary to keep all tax expenditures and incentives schemes under review. I highly recommend that the park and ride scheme should be kept under review in terms of its effectiveness in making a difference between now and when it is due to expire on 31 December 2004. The Government must also consider what else it can do to encourage people to use public transport rather than sit in their cars, as motorists on the N3 do for two hours travelling to and from work in Dublin.

I support the point made by Deputy Timmins concerning the disabled drivers and passengers regulations review which was concluded earlier this year. Some action is needed in this area by the Department of Finance. One of the critical difficulties is the primary medical certificate issue in respect of which I wish to highlight two points. There is no difference in the primary medial certificate between an adult and a child and no difference between a driver and a passenger. If there were differences in these areas, it would make matters much simpler. There is also a confined board of appeal with an 18 month waiting list and some incentive needs to given to help expedite matters for all the disabled drivers and passengers who need support around the country. It has been good work in terms of tidying up the various schemes, modernising the system and keeping the show on the road. With the two provisos I raised in regard to park and ride and disabled drivers, I am very supportive of what the Minister is doing in the Finance Bill 2003.

Mr. Deenihan

I wish to share time with Deputies Coveney, Hayes and Connaughton.

An Ceann Comhairle

Is that agreed? Agreed.

Mr. Deenihan

I shall confine my remarks to two aspects of the Finance Bill, section 115, which deals with the increase in VAT from 12.5% to 13.5%, and section 27, which deals with the town renewal scheme. We read in the Irish Independent today that tourism is experiencing a crisis as fear of war impacts upon travel. The article states that the tourism industry is facing its bleakest year for a decade, with holiday bookings from the US slowing to a trickle over the past three weeks. This relates to concerns and fears about a potential war in Iraq. Americans are putting their travel plans on hold. This will have serious repercussions for Ireland because a collapse in the number of American visitors similar to that caused by the last Gulf War would cost shops, hotels and tour operators an estimated €1.4 billion. During the Gulf War, travel from the US fell by 20%, and a repeat of this would reduce the number of US visitors by 180,000, to under 700,000.

We hear from the likes of the Irish Hotels Federation that US bookings and inquiries for hotels have almost stopped since President Bush's State of the Union address. CIE Tours International, which brings tens of thousands of Americans into Ireland every year, says that there has been a dramatic slowdown in US bookings over the past few weeks. The fall-out from reduced bookings has also hit car hire operators. One operator who had just returned from a roadshow in the US said that the phones had almost stopped ringing. Paul O'Toole, the chief executive of Tourism Ireland, stated that the industry is very concerned because it is trying to operate in a very uncertain environment.

It is in this context that I refer to section 115 of the Bill. In 1992 and 1993, when there was a similar hike in VAT rates – from 10% from 12.5% – businesses that had completed contracts before the budget and had already sent out their promotional literature and so forth were granted a derogation. It is very important that a similar derogation is granted on this occasion. The travel industry, by its very nature, is currently engaged in promoting its product for next year, and most of its promotional material is distributed in April and May. A number of the incoming tour operators, whom this will mostly concern, will be abroad on St. Patrick's Day, alongside Ministers and everybody else, promoting their product.

The problem is that they cannot go back and increase their charges. The only way they can absorb the VAT increase is by paying for it themselves. As they have, in many cases, already entered into contractual arrangements, they cannot go back to their clients at this stage and say that their costings have now changed. If there is no derogation, this will cost incoming tour operators about €1.5 million. Incoming tour operators are small or medium-sized companies, and many are family-run operations. The only way they can absorb this deficit and survive is by cutting back on marketing for next year or by cutting back on staff levels. It will certainly result in job losses.

I hope to put down an amendment to the Finance Bill 2003 on Committee Stage and I would like the official present to bring this matter to the attention of the Minister. A derogation should be given to contracts that have been agreed upon, as was done in 1993 when the then Minister recognised the problem. It would certainly be welcomed by the tourism industry. There has already been strong lobbying of the Minister for Finance and the Minister for Arts, Sport and Tourism on this issue. The precedent is there, and the Minister would not be extending a derogation to any other sector. It is this sector that is most affected so I appeal to the Minister to look at that very positively. I signal my intention to bring forward an amendment to this effect on Committee Stage.

The other issue I wish to raise is the town renewal scheme, dealt with in section 27 of the Bill. The urban renewal scheme is being extended. The date by which 15% of the total project cost must be incurred is being extended by six months, from 31 December 2002 to 30 June 2003. The period for completion of projects has been extended to December 2004. I am sure the same provisions would apply also to the town renewal scheme, and I would like to have that clarified. I call upon the Minister to extend the date whereby 15% of the total cost must be incurred to December. In many cases, particularly in Kerry, there has not been a great take-up of this scheme, mainly because of the absence of an intensive public awareness campaign.

People did not understand the scheme or the benefits that accrued from it because they were not told about it. There should have been far more public consultation and more public briefings in various towns. The scheme is only now about to take off so I appeal to the Minister, through the Minister of State here and his official, to consider extending the date whereby 15% of the costs must be incurred until the end of December. I see no reason this should not be done. It will not change the scheme dramatically and would be a very welcome provision.

Mr. Coveney

I shall first try to put this debate on the Bill into context. This has been the third instalment in a three-part series of financial bad news. The first was the shock of the Estimates in November 2002, which, we were told, made the necessary financial adjustments to Government spending. For everybody else, it spelt cut-back time in a very dramatic way, following all the promises we heard in the build-up to the May 2002 election. Then we had the budget, which confirmed the cut-backs and outlined how the Government intended to make ordinary people pay for its financial mismanagement by taxing and increasing costs in almost every sector of expenditure. VAT has increased, resulting, in turn, in increases in the cost of building houses, house prices and home fuels. Motor tax has increased, increasing the price of some cars by up to 12%. Hospital charges have increased by up to 26% in certain cases, the drug refund threshold has increased by 31% and ESB bills have increased by 13%. College fees are up by 59%, parking fees have increased by 25%, bus fares are up by 9% while the television licence fee has increased by 40%. The cost of buying a house continues to increase with no real assistance for first time buyers. The Minister made a token gesture to try to counteract the adverse publicity arising from the removal of the first-time buyer's grant. Bin charges are up by 29% on average but it will be considerably more in County Cork as we need a source of revenue because of cutbacks in the revenues granted to local authorities.

We run a very serious risk of dramatic inflation because of these increases. Although the most recent inflation figures do not suggest this, let us not be fooled – the cost of living in Ireland will continue to increase in the coming 12 months. Ireland is becoming one of the most expensive countries in Europe to live in and that may well have serious implications for our competitiveness. Deputy Deenihan spoke about the serious consequences for tourism because of the impending crisis in Iraq but there is a much quieter threat to tourism in the shape of increased inflation. The high cost of living here is driving away many low-budget tourists. This will also have implications for foreign investment.

With limited resources available we needed to target and prioritise certain areas in both the Estimates and the budget but this has not happened in an effective way. We have seen cutbacks in forestry that have led to a dramatic reduction in planting for next year. This will have long-term consequences for the forestry industry in Ireland and this country has the most suitable climate for forestry in Europe. Research in the maritime sector has been cut back at a time when we need to be putting tax incentives and money in place, particularly for research on the conservation of fish stocks. Our communications infrastructure is the most important issue for Irish competitiveness over the next five years. We are making some progress through policy initiatives, but not from a financial point of view. Finance has been cut back in research projects in wireless broadband technology.

The Bill confirms much of what was announced in the budget. It is important to recognise that it contains some elements that are to be welcomed. The Minister has made an effort to close some loopholes in the tax system. I welcomed Financial Resolution No. 1 in the budget that aimed to close off the loophole whereby tax refunds can no longer be gained and used outside of a business by individuals for business activity unless that person is an active trader in that business, meaning that the person works in the business on a day-to-day basis. The Minister has sensibly made a number of exceptions to this in the areas of electricity supply and generation, oil and gas exploration and in music and film-making. The closure of other tax loopholes is also to be welcomed. I am pleased with the closure of the loophole relating to the effective transfer of capital allowances and buildings from companies to individual investors.

I welcome the extension of expiry dates to the end of 2004 on both town renewal and park and ride schemes. It is very disappointing, especially in the area of park and ride, that no new incentives exist for new projects. Little or no progress has been made on the provision of park and ride facilities in most of our major cities. Further incentives are necessary and we had an opportunity to introduce them.

Regarding student accommodation, the expiry date for the tax incentive scheme provided under the Taxes Consolidation Act 1997 is being pulled back from 30 September 2005 to 31 December 2004. What is the reason for this? Perhaps it can be changed on Committee Stage. It makes no sense to me that this date is being pulled back when many projects are planned to finish in early 2005. Now they will miss the expiry date and be ineligible.

I have a specific interest in renewable energy but an opportunity has been missed in this Bill. There is a real need to encourage and promote renewable energy sources in this country but we have failed to take the opportunity to do so in this Bill through tax incentives. The only way the Government can be proactive in encouraging the construction of wind turbines or research in wave energy, tidal energy or biomass is by offering tax incentives for that type of investment. We have not done this. We are missing an opportunity to comply with the Kyoto Protocol. Instead we will introduce carbon taxes that will only serve to increase inflation.

Mr. Hayes

Everybody knows that inflation is killing this country. Inflation in Ireland is running at 5.5% to 6% while it is approximately 1% all over Europe. There is no way this country can sustain this level of inflation. It is having an affect across the board. Despite the pious platitudes we heard earlier about protecting older people, inflation is hitting them hard. Their bills are rising by up to 8%. It also affects younger people. Students have told me that they find the cost of living in Dublin to be prohibitive. Inflation must be tackled but this Government has caused much hurt by not doing so. In the mid-1980s one of the sources of our economic problems was the high rate of inflation.

Debate adjourned.