I wish to share time with Deputy Seán Power.
Finance Bill 2003: Second Stage (Resumed).
Is that agreed? Agreed.
In recent years, there has been a great deal of concern about State contracts and about the amount of public spending and whether it is being well spent, particularly on the capital side of the State finances. In that regard, I welcome the decision of the Minister for Education and Science, Deputy Noel Dempsey, on school building projects, selecting 20 schools to be given a devolved grant. This enables the local boards of management to spend the money, and it is their responsibility to seek tenders and quotations from architects and builders. This is a very good scheme and I am delighted that my local school in Kiskeam is included in it.
I am aware of another school seeking refurbishment which has spent upwards of €100,000 on architects fees, planning consultants and so on. The school in my area, however, has got its costs down to something like €25,000 for the same services. I hope the scheme works well. It seems that it will be of immense value for money. For the price of the devolved grant that is being given to the board of management, it, in turn, does an excellent job. Many more of these types of schemes could be considered, particularly on the capital side of the national finances. When money is devolved to local groups or organisations, they are in a far better position to get value for money because they are in contact with the local people and with local builders, architects and so on. I compliment the Government on this initiative. It should be considered in every Department.
There are a few other issues I wish to raise regarding the Finance Bill 2003, the first of which is the abolition of the roll-over relief. I understand some of the reasons it has been abolished, but I call on the Minister to consider the situation of farmers in particular. Farmers who wish to consolidate fragmented holdings may, in order to do so, have to sell some land they had bought previously, or that may even have been bought in previous generations. There have even been cases of people selling forestry ground or other poor agricultural ground in order to buy better land and consolidate their holdings. There is enough difficulty in trying to keep farmers, young farmers in particular, on the land, and this roll-over relief went a long way towards helping people to consolidate their holdings and their incomes. I would appreciate if a derogation or other measure could be considered in this respect.
I spoke last night about sport and about the provision in the Finance Bill 2003 whereby one can get tax relief on funding given to a sports body that has charitable status. This is very welcome, but there are a few projects in my constituency that I would like to single out for consideration, particularly the Charleville special projects group, which is also a sports facility for disabled people. It will cost a great deal of money but the project may attract funding under the terms of the Finance Bill 2003.
Since the introduction of the minimum wage, there has been considerable debate about taking those on the minimum wage out of the tax system. A number of years ago, 64% of those earning up to the minimum wage did not pay tax and that has since increased to 90%. I hope the Government ensures that all people who earn the minimum wage or less are exempt from tax.
Many measures have been taken in recent years to ensure people pay less direct income tax. This is welcome and will help ensure that we have as strong an employment economy as possible. If unemployment can be maintained at a reasonable rate, such as the current percentage, the economy will stay in good shape. It is only when people begin to lose their jobs that the economy gets into trouble.
I note that the Minister has brought in measures to ensure that earnings from stallion fees, forestry and other areas are accounted for. The perception was that the rich were avoiding tax through availing of loopholes. The Bill closes off many of these. If a person is well off, he or she pays tax consultants to ensure he or she pays the minimum amount of tax. Plenty of tax shelters are available and if one has the income, one can pay for the best possible advice to avoid paying tax. I welcome the Government's decision to eliminate the tax loopholes to ensure a fairer and broader tax base. It is only right that those who have a great deal of money should pay more tax than the less well off.
The tax designation for seaside resorts and holiday cottages was a facility to ensure that seaside towns expanded and provided summer or year-round accommodation for people. In my area of Duhallow in north Cork, attempts were made to initiate a number of schemes for providing tourist accommodation. It is difficult to attract tourists to areas that have not traditionally been tourism areas. It requires a great deal of marketing through Leader groups, community groups, Bord Fáilte and so on to establish a tourism market where none existed before. Nonetheless, that should not deter us. I welcome the extension in the Finance Bill of the holiday cottages scheme. I understand that if a full and valid planning application is made by next May and the work is completed by the end of 2004, it will qualify for the scheme. That gives sufficient time to those who were anxious to develop holiday cottages under the scheme.
The Minister has extended the town renewal scheme in the Bill. Some 100 towns are designated under the scheme. All we hear is that the areas that were chosen do not appear to have benefited. I thought the scheme would have been highly beneficial to the designated towns. I am aware that some work has taken place but perhaps people are concerned that as deadlines approach, the facility may be closed earlier than normal. I hope as the deadline approaches, there will be an increased take-up.
There are some glaring examples of inconsistencies under the town renewal scheme. The Town Renewal Act 2000 allowed derelict and vacant properties within a town to have tax designation to improve and enhance the visual impact and streetscape of the town. However, there have been glaring inconsistencies where properties that should have qualified for tax designation, and which anyone who studied the Act would have said should have qualified, have been the subject of dereliction orders from local authorities. One arm of the local authority states that certain buildings do not qualify for tax designation under the town renewal scheme because they are in reasonable repair and do not need a tax incentive to encourage investment, while another arm of the same authority serves dereliction orders on the same properties. Will the Minister for Finance examine this scheme in conjunction with the Department of the Environment and Local Government? I have made numerous representations on it and it is appropriate it is examined with a view to attracting more funding to smaller towns that qualify under the scheme.
I encourage the Minister to bring forward the decentralisation programme as quickly as possible. As public representatives, we are in contact with Government offices throughout the country. People working in such offices in Dublin city centre tell me about the length of time it takes them to get to and from work and the areas in which they must buy their first houses to set up home. There is plenty of scope in many towns throughout the country to provide proper facilities for decentralisation. The infrastructure is in place and they should be seriously examined as candidates in the roll-out of the decentralisation programme which should happen as soon as possible.
I am glad work is under way on the construction of a new road network. I am aware that inflation has hampered progress in this area and that the Department had intended to have a greater number of kilometres of road built at this stage. Perhaps, as with other Departments, expenditure should be monitored closely to ensure we receive proper value for money, especially where the capital budget is concerned.
I welcome the opportunity of contributing to the debate and commend the Bill to the House.
I realise that the Finance Bill deals with a number of issues, but I will confine my comments to a few specific areas. The first relates to local authorities. Work began in 1997 on developing a management system capable of identifying and assessing the performance of local authorities in their statutory environmental protection functions. Following the success of the initial pilot scheme, a full-scale demonstration of the system commenced during 2001 in local authorities in Galway, Cork and Cavan. I know it was the intention of the Environmental Protection Agency to run these demonstrations for a 12 month period and to roll out the system to all local authorities over a three year period.
It is vital that this management system is adopted by all local authorities because the performance of some authorities leaves a great deal to be desired. It is obvious when one examines the performance, especially in the context of the Waste Management Act, that a number of them would fail miserably if there were a national test.
In 1996 we passed the Waste Management Act, which paved the way for the introduction of a new licensing system for all significant waste recovery and disposal facilities in the country. The Waste Management Act 1996 provides for a more effective organisation of public authority waste management functions involving new or redefined roles for the Minister for the Environment and Local Government, the EPA and local authorities. It introduced enabling measures designed to improve our performance on prevention, minimisation, recovery and recycling of waste and a comprehensive regulatory framework for the application of higher environmental standards in response to EU and national waste management requirements.
It is obvious that the workload of the EPA increased significantly following the introduction of the Waste Management Act. The agency is responsible for the licensing of all significant waste disposal activities, including all landfill sites and waste recovery facilities operated by local authorities and private enterprises. It should be the goal of all families, communities and local authorities to produce and dispose of less waste. We need all waste management facilities to be operated in a professional and competent fashion; they must not cause environmental pollution or be a nuisance to the public. This will require a great commitment from individuals and local authorities.
We should encourage prevention, minimisation, re-use, recycling, energy recovery and finally disposal. It is obvious that local authorities have not played their part in bringing this about. With the number of illegal dumps that have been discovered in recent months, it is obvious that local authorities have turned a blind eye to this activity and have, in some cases, assisted in this serious wrongdoing. This cannot be allowed to continue and it is important that the Minister takes action.
It was heartening to read this week of a High Court decision handed down by Mr. Justice Ó Caoimh, who ordered a waste disposal firm to shut its premises following a breach of its licence. Members must acknowledge, support and welcome that decision. Such action sends out a clear signal that non-compliance with environmental regulations will not be tolerated. This message cannot be broadcast in strong enough terms. With the new rules in place, the huge moneys and the huge gains that illegal operators can make from dumping their loads illegally makes it very attractive. There is already serious difficulty with illegal dumping, without authorised firms engaging in similar activities. It is important that people who decide to live within the law are protected and those who operate outside it are punished at every opportunity.
The most recent report from the Adoption Board was for 2000. The adoption system is out of date, out of touch with modern society and in need of change. It has become more acceptable for single parents to have a child and keep it. Some years ago, this was very much frowned upon by society. However, people now accept it as being the norm. For that reason, the number of babies being handed up for adoption has decreased dramatically. The number of adoption orders made in respect of non-family adoptions in 1997 was 172; in 1998 this reduced to 136; in 1999 it reduced further to 120 and in 2000 it was only 96. On the other hand, the number of for eign adoptions has increased. In 1997 there were 51 foreign adoptions and by 2000 this had increased to 209. It is obvious the number of parents seeking to adopt children is increasing and that the supply does not equal the demand.
We must change the way this operates and the way adoption is sold or perceived in this country. We cannot return to the old times when many women were forced, against their will, to give up their babies. We should all be ashamed of the heartbreak this caused for many people throughout the country. It is good that the position has changed. When a young woman becomes pregnant now, she sees just two choices: parenthood or abortion. It is vital that we highlight the existence of a third option: adoption.
The old system of giving up a child and waving goodbye to it must be changed. A number of countries have introduced what is referred to as "open adoption", where the birth mother and, in some instances, the birth father are involved in selecting the parents for their child. Ultimately, the most important person is the child and suitable parents must be found to give that child the best life he or she should expect or need. Due to various circumstances some women find themselves pregnant, but they are not suitable parents. In those instances, a child would be better off being adopted. We must change the attitude among the vast majority of people in this country who see adoption as selfish. We must see adoption as a selfless act rather than a selfish one.
The Adoption Board has made a number of recommendations in its most recent report to the Minister and I ask him to treat these seriously. Too often we establish boards – with good people on them – that spend much of their time carrying out their functions and duties as laid down by the House. When these bodies publish reports, they are put on the shelf and not given the serious consideration they deserve.
There is no such thing as an unwanted child. We are all familiar with people who have gone to great lengths to adopt children from foreign countries. There is a huge demand for such adoptions, but if we could make major changes in the way we deal with adoption in this country, we could increase significantly the number of children available for adoption.
In recent months, I have had the opportunity to visit the United States on more than one occasion. In speaking to people in immigration centres who deal directly with Irish people abroad, it is obvious that since the tragic events of September 2001, attitudes towards immigrants in the US have changed dramatically. This has led to significant changes in the laws, resulting in a severely negative impact on Irish and other immigrants to the US. The US Immigration and Naturalisation Service is engaging in strict enforcement, which has caused a significant upsurge in the number of deportations of Irish immigrants in the past 12 months. This trend is expected to continue.
The coalition of Irish immigration centres in the USA welcomed publication by the Department of Foreign Affairs of the report of the task force on policy regarding emigrants, which recommended an expansion of assistance to this group. I appeal to the Minister for Foreign Affairs to implement the recommendations.
People moved to the USA for different reasons. Some of them are illegal and find themselves in an impossible position when deciding whether to attend family occasions such as weddings and funerals at home as they face the possibility of not being able to return to the United States afterwards. They are anxious to remain in the US as it is their home, where they have put down roots. According to information I have been given, things have got very tough for this group since 11 September 2001. I ask the Minister for Foreign Affairs to watch developments and ensure the recommendations of the task force are implemented as quickly as possible.
I turn to the Minister's decision on stallion fees. Race horse owners will have to submit their accounts for assessment to ascertain what income, if any, is being lost by the State. In 1969, when the measure exempting the horse racing industry from taxation was introduced by Charlie Haughey, it was supported by all sides of the House, including the Fine Gael Party under Liam Cosgrave and the Labour Party under Brendan Corish.
Some of the recent comments on this issue, particularly by members of the Labour Party, have been selective and ill-informed. Owners invest by purchasing race horses and paying the costs of their training. They pay 31% of prize money to Horse Racing Ireland to cover entry fees. It is estimated that the total cost to owners of keeping their horses here last year was in excess of €110 million.
The purpose of not taxing income from stallions was to develop an industry of which we could be proud. The sector is one of the few areas in which we can correctly claim to lead the world. While it is important to acknowledge the tremendous contribution of the renowned Coolmore and the dizzy heights it has reached throughout the world, we should also note that we have only one Coolmore.
The figures on income from this sector will make interesting reading. The vast majority of people who invest money in racing lose it. The only guarantee of making a small fortune in Irish horse racing is to invest in a large one. We should appreciate the tremendous contribution and significant progress the racing industry has made. I acknowledge the efforts made to bring it to its current position.
I wish to share time with Deputies Harkin, Eamon Ryan and Ó Snodaigh.
An Leas-Cheann Comhairle:
In that order?
An Leas-Cheann Comhairle:
Will the Deputy's time be shared equally?
The Deputy has always believed in equality.
I wish my time to be shared equally between the Independents, the Green Party and Sinn Féin. Is that in order?
An Leas-Cheann Comhairle:
I thank the Leas-Cheann Comhairle for the opportunity to address the House on the Finance Bill 2003. Part I of this important legislation deals with income tax, corporate tax and capital gains tax. These taxes are the engine room for services in our society and the public places its trust in politicians to spend and use them wisely, but sadly, this has not been the case. The gap between rich and poor has grown during the past seven years. We all have a duty to do something about this development. The question facing us, therefore, is not just one of spending, but of how to achieve a fairer distribution of wealth. The shift to the centre-right here and around the world has distorted wealth distribution to the detriment of many, particularly those on low incomes.
It is a national disgrace that the Government has refused to allow a supplementary budget of €35 million to fund the crisis in services for people with intellectual disabilities. Even at this stage, I urge it to reverse its decision and find a loophole in the Bill or another creative way of funding these services. There are many creative minds in the Department of Finance who could devise new ways to raise funds for these kinds of emergencies.
I do not agree with the cosy, conservative view that increasing taxes is bad for the economy or runs counter to the will of the people. People would not mind paying extra taxes to fund our health service or other important services which benefit people and society. I know many people who would be prepared to pay an additional €5 or €10 per week if they were guaranteed a better health service or the waiting lists for day care and respite services were eliminated. These are ordinary, law-abiding taxpayers who already pay their fair share of taxes, while other sections of society, many of which are very well off, avoid paying tax or receive the best available advice on how to dodge it. I am not demanding tax cuts. I demand tax equity by which everybody pays his or her fair share. This would deliver more than enough resources and finances to run our services.
The Government cannot expect poor people to bear the burden of its mismanagement of the unprecedented resources available during the boom years. Giving an unemployed couple an extra 20 cent per week in this day and age is inhumane, degrading and extremely bad social policy. Meanwhile a person earning €50,000 per year is €25 per week better off.
The figures for older people living alone are startling. The general risk of poverty for single, older people in Europe is about 27%. In Ireland the figure is 62%, by far the highest in Europe, with Britain on 55% and Portugal following on 51%. The good performers are the Netherlands and Sweden.
Why do we not examine good practice in other countries? We all know the reason. The Minister for Finance, who, incidentally, appears to have a major problem with the election of Independents to the Dáil, keeps his head in the sand on the tax debate because he knows that to provide services to a high standard we have to pay additional taxation. We all know this is the case, yet he calmly ignores it.
Despite a high level of economic performance, we have a disastrous record of social exclusion and poverty. Leadership is called for on this central part of the tax debate. We need courage and steel to stand with the PAYE workers and take on the tax dodgers and scam merchants. Following all the scandals and tribunals, there is a mood among the general public to deal with such people head on and to introduce a taxation system that is fair to all, particularly the low paid and those living in poverty. This requires vision and courage, but it will be worth it in the end and will make the debate on the Finance Bill more relevant to the people.
I am pleased to make a contribution to the Finance Bill, which implements the measures contained in the budget. I wish first to return to a general issue I have raised in the past, namely, the decision of the Minister to once again invest more than €1 billion in the pension fund this year. I ask him to reconsider this decision.
While it may appear prudent and wise to invest in the pension fund and the future, we do not have the demographic time bomb faced by other countries, such as the United Kingdom and continental states. For example, for every 12 people aged 50 years or over in the UK, there are only nine people under 20 years, whereas the equivalent figure here is 16. In other words, we have a young population, not one which is ageing. Given that our population is generating wealth, we do not need to invest in pension funds. This money should be invested in infrastructure, for example, in building schools. We should consider the difference which €1 billion a year would make to the schools building programme.
The programme has 12 sections. Section 6 refers to large-scale primary and post-primary projects at an advanced stage of architectural planning. It states that these projects cannot progress to tender and construction until funding allocations in 2004 and subsequent years are known. What a difference it would make to the masters, teachers, parents and children in Kinlough or Rockfield, in Coolaney, if the pension fund money could be invested in the school building programme.
Section 7 refers to projects being at pre-plan ning stage. These will not be authorised to progress beyond current stage of architectural planning for the time being. Mohill, Diffreen, Dowra and the Masterson school in Manorhamilton would like to see a change. The primary school projects in Moylough, Drumeela, Carbury and Dromore West, in Sligo, could be brought to fruition if the Minister would consider putting the money into the school building projects instead of investing in a pension fund that the figures show we will not need.
I am seriously concerned about the cuts in the back to work enterprise allowance announced in the budget. Recently, the County Leitrim Partnership did a survey of the 297 people who participated in the scheme from 1996 to the end of 2001. Of those 297, 218 are self-employed, 17 are in paid employment, five are in community or social economy projects and 57 are no longer self-employed. Forty of those who are self-employed have employed additional workers. The partnership estimates that this accounts for an additional 85 jobs. The recent changes in the back to work allowance scheme will severely reduce the options open to unemployed people. I ask the Minister to reconsider that and return to the pre-budget position.
Many people were extremely disappointed that the Minister did not use the budget as an opportunity to end the means testing of carer's allowance. There are more than 50,000 full-time family carers caring 24 hours a day, seven days a week, with a further 70,000 caring at home for at least 40 hours per week. More than 35,000 children have severe disabilities, more than 30,000 people suffer from dementia and more than 50,000 older people need high levels of care at home due to frailty or old age. Over 90% of the care of these citizens is provided at home by a family carer, not by the State. It is estimated that family carers save the State over €2 billion per year yet less than one in six gets a carer's allowance.
The Minister had the opportunity to abolish means tests on carer's allowance. I realise he does not have an endless supply of money and that he must prioritise but when he had an opportunity to do something meaningful for so many families, and to make a difference to so many people's lives, he did not take it up.
Farming was treated with contempt in the budget. The Government's attitude to farmers and their representatives is exemplified in the dismissive attitude which has forced them out of the next partnership agreement. Compounding that attitude is an attempt by the Minister to fool the public into believing that farmers stand to gain €300 million from the partnership agreement. The Minister has failed to substantiate any figure to benefit farmers. Obviously the €300 million figure was plucked out of thin air.
Yesterday in the Dáil the Taoiseach was loud in his praise for the extent of American involvement in our economy. I agree. That involvement is most important but why does the Government not have at least the same respect for our core indigenous economic activity which delivers every year for this nation?
I commend Deputy Harkin for articulately fitting a ten minute contribution into a five minute slot.
I welcome the opportunity to speak on the Finance Bill. I hope I will get an opportunity to put down an amendment on Committee State in regard to changing our stamp duty system. I am looking to develop an idea put forward recently by Mark FitzGerald of Sherry FitzGerald estate agents, and which was taken up by the media, with regard to encouraging greater flexibility in the housing market, particularly in Dublin. It relates particularly to my own constituency but applies nationally also. I realise this is a difficult, controversial and sensitive issue. There is a sense abroad that in encouraging such flexibility, one would be in danger of typifying the relationship between the younger and the older generations, with the grandchild visiting the grandparents' house and saying, "My goodness, Granny, what a big house you have", and an insensitive pressure to encourage freedom in the market. I do not want to be part of that but an idea that involves changing the stamp duty system to free up the housing we need has much merit. It is an idea that we have worked on and espoused for several months in advance of Mr. FitzGerald's presentation. His presentation was flawed, particularly in its emphasis on moving people out of Dublin in an effort to free up some housing. However, a slightly different version could work very well, and that is what I want to now propose.
There is a crisis in our housing market by international comparison. The cost of new or second hand properties here in relation to income is far ahead of that in any other comparable European nation. Young people now face major challenges in their lives to pay the mortgages necessary to acquire a house. Due to the lack of flexibility in the housing market, young people are being forced to purchase houses 30, 40 or even 60 miles from Dublin and commute to work because that is where the lower priced houses are located. That will create a society where parents do not see their children, both parents have to work all hours and a couple will have to have two cars. That will create a damaged society and we need to change it.
In my constituency, which is a more traditional suburb, significant areas are suffering population decline. Many of the older suburbs in Dublin are showing about a 10% decline in population. The people purchased their houses 30 or 40 years ago, their children have been raised and they have moved on. The children are now living in Portlaoise because they cannot afford to buy in the areas where their parents live. We need to change that and introduce more flexibility in the market.
I hope to propose an amendment to introduce flexibility into the stamp duty system. If someone trades down from a larger to a smaller property, the stamp duty on the purchase of the smaller property would be exempted. Typically it might be an elderly person living in a five bedroom house where only one bedroom is being used, which is very common throughout Dublin, particularly in my own constituency. If such people were given an incentive to move into smaller accommodation they would save the €40,000 or €50,000 involved in stamp duty.
We would have to be careful about introducing such a system. There might have to be a reduction in size in square footage before it could be implemented – possibly 70% or 80%; that could be worked out by the officials – but there would be no cost involved in trading down. Currently the cost is huge and, as a result, there is an enormous existing housing stock which is not being used at a time when there is an incredible housing shortage.
We have to ally that with very good planning. I do not want to see an elderly person being told they have to move to Belmullet or somewhere outside Dublin. We need good planning to provide high quality, smaller accommodation closer to traditional village centres. Rather than families being separated and not having time to see each other, we will return to a more nuclear society where elderly people can live close to their children and grandchildren and a social structure is recreated.
The stamp duty system is a barrier in the housing market and unless we change it, every part of society will suffer. Our economy will suffer because, if current circumstances continue to obtain, it will almost be impractical for people to live in Dublin. We would get far better value from our infrastructure if we could get young families to return to traditional suburbs where they could walk to shops, schools and churches. We would not have to invest in putting in place massive infrastructure outside towns and we would make savings in many other ways.
The collection of taxation is not just a matter of raising revenue. Taxation should also relate to how we regulate our society and how we fix the engine of our society. We have a completely imbalanced taxation system which is geared towards labour and taxes such as the stamp duty system. That may be easy to collect – stamp duty means someone writing their signature on paper and the Minister can then automatically collect money from their solicitor – but we have an obligation to be flexible and balanced in our taxation system. The Green Party would argue for a tax on resources and energy taxes to make us careful in our use of those resources. However, our biggest crisis is housing, particularly in Dublin, and we should use the taxation system creatively to deal with it.
The measure I am proposing would not have major revenue implications. If one gives a rebate to someone trading down, it would lead to a significant increase in activity in housing in traditional suburbs. In that increased activity, the per son who is buying up – going from a smaller to a bigger house – or buying a first property would have to pay stamp duty. This would increase revenue to the State. My proposal would not have serious revenue implications, but it would have massive implications for the proper planning of Dublin and the proper regulation of our society and economy. There would be environmental advantages also because we would be saving on the long distance travelling in which people in Dublin must engage.
I will put down an amendment in this regard and the Minister should give it serious consideration. If he does not do so, he will find himself with a housing crisis that will cause an economic and social crisis.
My colleague Deputy Ó Caoláin has already spoken on the Bill but apart from its social equality aspect, the Bill is deficient and inequitable in other areas. One of those areas was brought to the attention of Members by the IFA delegation which made a presentation to the Joint Committee on Agriculture and Food last Wednesday on the abolition of certain categories of tax relief. The delegation outlined its position regarding compulsory purchase orders and the proposal in the Bill abolishing the previous exemption from capital gains tax for lands subject to CPOs.
Despite what many people believe, CPOs are not always the equivalent for farmers of winning the lottery. In many cases the order comes as a severe blow to the farmer, whose land is fragmented and whose plans for future development of the farm are turned upside down. Until now, a farmer had the comfort of knowing that he or she could reinvest in new assets without being subject to capital gains tax. This change means that is no longer the case and it will be more difficult for many farmers to continue operating with minimal disruption after a CPO is made.
The issue is not one of increasing the tax take from wealthy individuals. A minority of farmers may fall into the latter category, with some suffering from the change, but the vast majority of farmers will lose out. Most of them have small to medium sized farms and are finding it difficult enough to operate due to other recent developments in the agricultural sector. They will now be placed under further constraints if CPOs are forced on them. If a farmer wishes to invest in new land in order to continue operating as he or she has done in the past, he or she should be able to avail of the same relief that applied until now.
More could be done to encourage the early entry of younger trained farmers into agriculture, but my party welcomes some of the measures announced in the Estimates and the budget, such as the proposal regarding retirement relief. Any such proposal must be contrasted with cuts in installation aid and early retirement schemes in the budget. The overall effect of these Government policies will be to discourage the necessary generational change in farming. The same applies to the other cuts in agriculture funding, particularly those which affect education and training. In this regard, the plan to close Mellowes College Athenry is crazy.
In addition, we have the madness of cuts in funding for research and testing, not to mention the retrograde step of cuts in many schemes which could be broadly described as rural development programmes. This is at a time when we are calling for more professionalism from farmers and when food safety measures demand absolute care in food production. However, we are cutting back on educational facilities for farmers.
The fundamental flaw which underlies this approach to agriculture is the same one that informs the Government's attitude to society as a whole, namely, a refusal to tackle real inequalities. This shows the Government's desire that the wealthiest sections of Irish society should continue to benefit from the taxation system. The cuts in agriculture are reflected in cuts in schemes for the most marginalised urban centres. In my area, cuts in the CE, J1 and social economy schemes are forcing the closure of many valuable community facilities when investment should be increasing instead.
The Government needs to learn that this is an investment and not an expenditure. People are calling mostly for investment programmes and we and the Exchequer will reap the benefit of investment in those programmes in the future. Until attitudes change we will continue to be presented with Estimates, budgets and Finance Bills designed to ensure that not only do the wealthy remain as they are, but that any changes implemented will generally work to their benefit.
I reiterate the comments of many previous speakers on education, health and housing. It is ridiculous to have had capital expenditure in the past by Governments, but that funding is not made available to the health service to operate properly, forcing beds and wards to close. Community centres built by Government money cannot be operated because there are no funds for staff or community employment schemes to ensure vital facilities are available.
Deputy Eamon Ryan referred to educational facilities. There are plans for over 1,000 new houses in Cherry Orchard in my constituency, but there is no school in the area. The plans for a school are still on the back burner in the Department of Education and Science, which is crazy. Cherry Orchard is not a new town; it has been in existence for almost 20 years, but it still has no school. It has one bus service and one shop in a converted house. That is how crazy the planning system is. We need investment in such areas in order to benefit in the future.
If we invest now and build up these communities we will not have to pay for those programmes in future years.
Déanfar an argóint go meallann bristeacha cánacha daoine atá ag iarraidh infheistíocht a dhéanamh ach tá sé feicithe cheana againn gurbh iad an dream is mó a bhaineann buntáiste as a leithéid ná na rachmasóirí. Caitheann na rachmasóirí seo an t-am ar fad ag iarraidh éalú ó cháin a íoc agus triall a maoine a chosaint. Is fíor-bheagán a fhaigheann an Stát i gcáin astu.
The abolition of the first time buyer's grant for housing was a retrograde step. There was a double whammy for young couples trying to enter the housing market with the additional 1% on VAT. Several constituents have approached me about their plight since these steps were announced. One constituent who is trying to buy a relatively inexpensive house is faced with an additional VAT bill of €2,000. He has scrimped and saved to cobble together the money for the house and has no way to come up with the money other than adding it to his mortgage. Over the term of the mortgage, that bill will cost him €9,000. That demonstrates the insanity of this increase. We should reverse that decision and reintroduce the first time buyer's grant. Stamp duty should also be removed from all houses under €250,000 for young couples at the lower end of the market who are already fully stretched and who will face major problems trying to match their mortgages if interest rates increase or they have children.
Stamp duty is not payable on a first home.
Some people trade up from very small homes. A threshold of €250,000 would be a very low figure.
The changes in this Bill are inequitable because they are targeted at hard pressed communities that are already finding it difficult to survive. The amendments on Committee Stage that would make the Finance Bill more equitable should be taken on board by the Minister. He must change his attitude and invest for the future rather than say we must tighten our belts and cut back on expenditure.
At a time when Deputies on this side of the House are slapping the Minister on the back and the Opposition is very critical, it must be seen that when Government finances were in a difficult situation, the budget and this Bill were measured. The economy is continuing steady as she goes and many of the taxation measures in the Bill are equitable. The vast majority of people on the minimum wage and those over 65 have been removed from the tax net and that is welcome. At a time when priorities have to be identified, it is good that those on low wages and older people are chosen for special measures.
I am pleased the Minister has used the Bill to close off a significant number of loopholes. Sections 24, 25 and 28 deal with urban renewal, park and ride and student accommodation schemes. I have been around long enough to remember when the quays in Dublin were absolutely derelict and I can see the advantages that have accrued to the city in places like Temple Bar, Smithfield, Kilmainham and Ballymun through tax incentive schemes.
I support targeted, well designed tax incentive schemes. It is regrettable, however, that people who have plenty of money to pay accountants have been able to exploit even those socially desirable schemes. We need to balance that with the need to regenerate many of our towns and cities. Not all these renewal schemes should be closed off. The regeneration scheme in Ballymun is the largest such scheme in Europe and it is only at this stage that we are seeing the effects of some of the measures. We are moving from the situation where there were only two privately owned houses in all of Ballymun to one where a significant number of people are buying their own homes.
Much of the student accommodation that has been built, particularly on campus, is good quality but some investors have exploited loopholes in previous Finance Acts to build very poor quality accommodation. In a number of cases, such accommodation is situated over a public house to maximise the value of a site for the public house owner. Often these developments are of inferior quality.
I welcome the provision in section 33 to examine the equine industry. I am concerned, however, that the greyhound industry has been included with it. I am not a race goer but the greyhound industry generates significant revenue and there are many small scale owners and trainers involved in it. We should avoid tarring large and small owners with the same brush.
The measures targeting oil and spirits laundering are welcome. It is no secret that there is large scale racketeering, particularly in diesel laundering. The Garda, the Customs authorities and the Revenue Commissioners have recently discovered that problem in my constituency. There is a trail which seems to terminate at a certain site in Finglas-Castleknock, originating on the other side of the Border and bringing a huge quantity of laundered diesel into this country. Unfortunately – perhaps sometimes unwittingly but sometimes, I suspect, very wittingly – people such as taxi drivers are buying that laundered diesel. I welcome the measures in this Bill to tighten up that situation. I suggest to the Minister that he encourage even more co-operation between the Revenue Commissioners, the customs authorities and the Criminal Assets Bureau.
I refer to counterfeit spirits in the same context. In today's newspapers, there are reports of a second successful prosecution in that area. At a time when alcohol abuse is rampant, the last thing we need is to have somebody benefiting from such operations. It is high time we looked at how alcohol is taxed generally. Some of the alcopop drinks which are readily available in supermarkets and petrol stations in this country should be taxed even more severely. By way of an aside, I suggest that the relatively innocent poitín makers, wherever they may be, should not become the target of this provision.
It is a matter of quality control.
Quality control – perhaps there is a point there. I refer to a few further issues in the short time available to me. First, there is need for greater enforcement of the arrangements in relation to landlords renting properties to tenants. The penalties for non registration of properties are so low that nobody, except for a very small number of landlords, bothers to register their property. Second, I congratulate the Environmental Protection Agency, the Garda and some local authorities for their vigour in pursuing the waste disposal issue. While a licensing system for waste disposal operators is beginning to be enforced, the penalties involved and the level of co-operation between the various authorities is inadequate.
A very technical issue which I will arrange to have brought to the attention of the Minister for Finance relates to what I understand is an anomaly arising from the operation of approved retirement funds. It appears that some people who otherwise ought to be excluded are in a trap in terms of non-residence. I will arrange to have the matter raised by a colleague who is a member of the appropriate committee. I urge the Minister to review the position with regard to VRT on cars. Finland changed its VRT rate and that led to increased car sales. It might be a revenue-neutral measure worth looking at.
I welcome the opportunity to refer to some matters which need to be addressed in this Finance Bill. I recognise and acknowledge on behalf of the hotel and guesthouse sector that the Minister has made a genuine adjustment from his Budget Statement by permitting capital allowances to remain in place in respect of work that had commenced and obtained planning permission, thereby enabling such work to be completed.
The Irish hotels and guesthouses sector is experiencing difficult trading conditions at present. This is due to various events that have happened worldwide, some beyond the control of the Government or the industry. Profit margins have been eroded over the past two years. I need hardly remind the House of the impact of the foot and mouth disease crisis, the aftermath of the events of September 11 and, now, the impending situation involving the US and Iraq. Over the past two years, trading has been extremely difficult. Substantial increases in costs and the imposition of an increased VAT rate on accommodation and restaurant services is additional burden.
Will the Minister to consider deferring the proposed increase of 1% on guesthouses, restaurants and hotels for some time? In the vast majority of cases, hotel prices for the 2003 season in respect of overseas and tour operators' businesses were negotiated early in 2002. This has been normal practice for very many years. The annual Bord Fáilte workshops held last May have been the highlight of this contracting process. Those involved in that operation are to be congratulated on their marketing effort over the years, giving an opportunity to the industry to bring the world to our doorstep through those workshops.
Tour operators' brochures in the overseas market for 2003 would have been prepared during last summer and launched between September and Christmas. The prices negotiated with tour operators are inclusive of VAT and, where applicable, service charges and all costs for which the operator is liable. As the tour operators have to commit on price in the preparation of their brochures, they will not entertain any subsequent changes in rates. Accordingly, the Minister must understand that the imposition of an increase in the VAT rate at short notice creates a major problem.
In the past, the Government has recognised this difficulty and made transitional arrangements allowing that contracts in existence prior to budget day would not be subject to the VAT increase in that year. The most recent example of this was in 1993, when the VAT rate was raised from 10% to 12.5%. Will the Minister consider making this concession again in respect of the increase due from 1 January 2003, particularly in light of the very small margin within which the sector is now forced to operate and the uncertain international tourism market? Rather than relying on my opinion, I refer to a statement by the Secretary General of the Irish Hotels and Guesthouses Federation that business and bookings have been practically at a standstill for the month of February, due to the impending uncertainty in the market.
In its pre-budget submission, the federation expressed serious concerns at the level of VAT applicable to hotel and restaurant services in Ireland, which is the second highest in the Euro zone. This has been further exacerbated by the recent 1% increase. Accordingly, at the first opportunity I ask the Minister to consider, bringing the rate into line with other EU countries where tourism is also an important part of their economies and has been recognised as such in terms of their governments' response. Some comparable VAT rates are: Spain – 7%; Netherlands – 6%; France – 5.5% and Portugal – 5%.
As far back as 1987, this industry was flagged as one of the principal industries which were expected to lift Ireland out of the massive recession which prevailed at that time. All fair minded people will acknowledge that the Governments of the day, by giving the necessary capital tax allowances and incentives to those in the private sector to invest in the industry, have transformed that industry, for which all concerned are to be congratulated. I urge the Minister to consider including in the Finance Bill a provision that hotel and restaurant costs incurred by businesses registered for VAT are allowed as VAT inputs. This treatment occurs in most EU countries and places Ireland at a serious competitive disadvantage in respect of corporate, conference and incentive business. An example of this is that the VAT registered business situated anywhere in the EU can claim VAT inputs in respect of hotel accommodation and restaurant charges incurred as a business expense in Belfast, but not in Dublin. This immediately places Irish hotel, restaurants and conference centres at a competitive disadvantage of 12.5% to even our nearest neighbour, Belfast. An Irish VAT registered company can reclaim the VAT on accommodation and restaurant charges incurred for business reasons in most European countries but cannot benefit from the same treatment at home in Ireland. I would urge the Minister to consider introducing this change in the treatment of VAT inputs in this Bill if it is not too late.
The industry is indeed grateful to the Minister for leaving the capital allowances and allowing those people to continue in what are often family businesses in every constituency. They are the backbone of the services industry and a very high level employer. There is not a decent hotel in the country that does not employ 40 or 50 people, or as many as 80 or 100 people. In fact, in Mullingar the hotel sector is a supreme employer, with over 700 people.
I join the many Deputies who called on the Minister to do something meaningful regarding the allowance for carers, and particularly the family members – daughters for the most part – who give up their careers to come back home and care for an ailing mother or father suffering from Alzheimer's and all these dreadful diseases which hopefully none of us will have the misfortune of suffering at the end of our days. Something substantial must be done. It will not cost a great deal of money but it will show that we appreciate the efforts made to continue to give the love, care and family respect which has been known to us in Ireland for generations.
While most of my part of north-west Meath is in the CLÁR area, which means the population has decreased by 50-70% over the past 75 years, we have the SRFB coming into the area and imposing charges for fishing in Lough Derravara, the River Inny and Lough Sheelin. Worst of all, they are trying to forbid the coarse angler coming from German and the UK, who have been the backbone of the industry for generations in our area, by starting to net pike out of the River Inny, Lough Derravara and Lough Sheelin.
The SRFB unveiled a seven-year plan which would take them to 2007. This plan involved removing all species of fish so that they could introduce 18,000 stocked farmed trout in 2002, which totally nullifies the dream of Lough Sheelin being the fishery for wild brown for which it has been recognised and known the world over.
They are still gill netting and indiscriminately killing wildlife and financially important fish such as pike, bream and tench, which anglers would flock to catch but are not allowed to. They allow this on the magnificent River Mask and the Cor rib, of course, but not in an area of declining population in north-west Meath.
Tá an t-am istigh.
As this is one of my first contributions since I became a Member of the House, and I had the great pleasure of serving with you in the Seanad, I thank you, Chairman, for your understanding and co-operation.
A hotel and six guest houses in my area had to close because of this ridiculous ruling of the SRFB. I call on all Deputies and Senators in the midland area to join together to see that the Minister will stop this.
Tá an Teachta ag chur isteach ar am an Teachta eile.
I will try to bring this to the floor of the House in another form.
Tá go maith.
We are all elected here to represent the people, not the wealthy big shots but the small people who are trying to survive.
A Theachta, tá tú ag chur isteach anois ar am Teachta eile atá ainmnithe anseo.
I will be asking the Ceann Comhairle to allow me to come back to the floor of the House later today on this matter.
The Deputy may do that.
Deputy Cassidy's enthusiasm for this Bill and indeed for the tourism industry is well noted and I certainly compliment him on his contribution. I am sorry that I have to use up the few remaining minutes for my own contribution.
There are ten minutes remaining.
I welcome the opportunity to speak on the Finance Bill and commend the Bill to the House. I compliment the Minister, Deputy McCreevy, on his policy over the past number of years in trying to maintain a low tax environment across all tax heads. His philosophy in that area is the correct one. I have heard many contributions from different sides of the House, but when we consider that 100% of the total income tax take is spent on the health services we recognise the importance of this Bill every year. I have heard many valuable contributions on health, education and carers, but of course it all has to come from the taxation system.
I want to turn to a few important sections of the Bill and perhaps ask the Minister to consider a few possible amendments on Committee Stage.
I compliment the Minister on some of the changes made under the personal income tax sections of the Bill, particularly under section 3. This relates to the minimum wage, where the Minister is moving to a position where, hopefully by next year, 100% of the minimum wage will be completely exempt from tax. Under the current Bill, that percentage rests at 90%, even with the increase in the minimum wage to €6.35 per hour.
This is an important issue. My colleague, Deputy Cassidy, said we are here to represent the small people. We are here to represent everybody, be they less well-off or wealthy. When we are debating the Finance Bill it sometimes seems bad to be a person who is extremely successful and has generated a large income tax bill. In fact, many of the loopholes for writing off those particular tax bills are cut off in this Bill, but we must recognise that many of those high earners have also benefited the economy by their huge investment in infrastructure and in many essential developments. This is something I want to touch on later, that we do not cut off our nose to spite our face.
The Minister stated in his speech that he has always held the view that targeted well-designed tax incentive schemes can be a useful instrument in achieving desirable public policy objectives. I agree wholeheartedly with that statement. This issue is particularly relevant in the west of Ireland. I listened to Deputy Eamon Ryan of the Green Party talking about the possible abolition or reduction of stamp duty in Dublin because of the high prices of houses in the capital. It is a valid point. It is probably not something of which we are quite as aware in the west where house prices are not as expensive although have gone up significantly. However, there are other incentives and schemes, which I hope the Minister will take on board, which will be of huge benefit to us in the west, and I will touch on those shortly.
A Bill which aids the elderly is always to be welcomed. In section 2, the Minister has seen fit to increase the income a person over the age of 65 can earn without having to pay any tax. I would like the Minister to look at the position of the low paid and also of the elderly every year. If we are taking care of those two sections of society, we are doing a very good job indeed.
It would be remiss of me not to mention section 9. This has been controversial this year, due to the abolition of the first-time buyer's grant. As a relatively young person myself – I am approaching middle age at this stage and can no longer consider myself in the very young category anymore – I recognise the importance to young people of the first-time buyer's grant. While one may argue that the benefit of it has been eroded over the years with rising house prices, the cheque of €3,800 in the post was always welcome to furnish a home. I welcome the fact that the Minister has gone some way towards redressing that situation in section 9 where he has improved mortgage interest relief. I hope we continue to help and facilitate young people to purchase a house because it is the most important investment they will ever make.
The Minister has agreed, as I said earlier, that targeted, well designed tax-incentive schemes can be useful in achieving desirable public policy. I ask the Minister to bear this in mind in relation to section 13 of the Bill, in which he closes a loophole in regard to the transfer of capital allowances on buildings from companies to individual investors. This is where a building, in respect of which a company has claimed capital allowance, is sold to individual investors, who are now only allowed to use that capital allowance in relation to the rental income from that building. This is something that needs to be monitored. In many cases, the incentive for an individual to invest is a significant tax bill they have received elsewhere. Sometimes the development of the new building may not be attractive enough in itself to encourage investment and it certainly may not be attractive enough to provide a financial institution with the necessary confidence to facilitate the raising of funds to carry out that development. I can understand where the Minister is coming from in this section, but I ask him to monitor the situation closely.
I hope the Minister will make a number of changes in section 23, which relates to reliefs and capital allowances on hotels. The Minister provides for a reduction in the annual rate of write-off of capital expenditure incurred on hotel buildings to 4% per annum. In other words, he is allowing a 25-year period for the write-off of the capital for the building of a hotel. He goes on to say that the transitional arrangements provide that these changes will not apply to such capital expenditure incurred before 31 December 2004 or to those who have lodged a full valid planning application with the relevant planning authority by May. I ask the Minister to consider, on Committee Stage, extending this deadline, particularly as it applies to the BMW region.
I have listened to other people making the case for Dublin and I understand where they are coming from – there are problems that do not occur down the country. However, to implement a 25-year write-off for hotel investment in the BMW region, especially my county of Mayo, effectively makes it a non-runner. It has been a very successful scheme in Dublin and we have seen the development of many hotels of high quality over recent years, which has improved the tourism product. In last week's debate on tourism, I made the point that County Mayo was one of the premier tourist destinations 15 or 20 years ago, but the numbers have since dwindled. We all know how cosmopolitan Dublin is and how attractive it is for people from Europe and the wider world. I would like to see a comparable level of invest ment come to the west, particularly Mayo. I know of a consortium that is interested in building a hotel in my home town of Castlebar. Under the previous capital allowances for hotels, that was an attractive option. This change will put a dampener on things.
To allow for an appeal against a planning application – unfortunately, appeals are made all the time – the Minister should extend the planning application deadline, which is currently the end of May, or the deadline of 31 December 2004. If a valid application is in by May and is then appealed, to carry out the necessary work by 2004 is an unrealistic deadline. I would hate to think that a valuable development in my home town could be put at risk for something I do not believe will cost the taxpayer anything. If he does not make this change, the development will not go ahead, so all bets are off in any event.
I do not want to cut in on the time of my colleagues, but I ask the Minister to look at section 63, which abolishes roll-over relief, and bear in mind his actions in relation to the residential market after the Bacon report, which resulted in the loss of hundreds of millions of pounds in foreign investment. We do not want to see the same thing happen in this sector.
I wish to share my time with Deputies Ring, O'Dowd and Enright.
Is that agreed? Agreed.
I welcome the opportunity of contributing to the Finance Bill. I ask the Minister to intervene specifically with regard to the provision of facilities for those with intellectual disability. No increase in funding has been given this year for this sector. We have had a comprehensive debate about this in the House but it is important that it is raised during the passage of this Bill.
At present there are 1,711 people living at home who require full-time residential services. There is no provision for any of these this year. A total of 861 people require day services and 1,014 require respite services. Nothing will be done for these people either. I listened to the Minister of State at the Department of Health and Children, Deputy Tim O'Malley, on RTE radio the night before last, and he made it very plain that he did not have the money. He said he should have had the money but he did not get it. It will take €20 million to overcome these difficulties, according to the National Association for the Mentally Handicapped in Ireland. Those with intellectual disabilities, their carers and their parents are asking the Minister for €20 million. He should bear in mind that the surplus this year was €93 million and that in the context of spending nowadays, €20 million is a small amount.
There is no funding for emergencies this year and 30 to 40 people with intellectual disabilities will lose their carers. Their parents will die and there will be nobody to care for them. There is no provision for these people to be put into care or into a residential home. Four hundred children this year, including 62 in the mid-west, where both the Minister of State and I come from, will leave their schools for children with intellectual disability and have nowhere to go – the Minister may have received an e-mail from one of her constituents to that effect.
I am aware of one case.
I will not go into personal details here, but I ask the Minister to read the plea of those parents in their 60s whose child will be leaving school with nowhere to go. I am asking the Minister to talk to the powers that be. The Tánaiste made it clear to me in a letter that there was an extra allocation of about €300 million or €400 million for the area of health this year and it was up to the Minister to decide where it went. He decided that none of it should go to the Minister of State, Deputy Tim O'Malley, to provide for these services. All that is needed is €20 million. I plead with the Minister to support the Minister of State, Deputy O'Malley, because I know he is anxious to get something done in that area.
Investment in mental health services over the decades has been a disgrace. Conditions and services are so bad that Amnesty International has declared a year of human rights for those affected by mental health problems and disabilities. In its report, Mental Illness: The Neglected Quarter, it wrote: "Amnesty International is concerned at the inattention paid by the government of the Republic of Ireland . . . to a series of national and international reports critical of its failure to fully respect the human rights of people with mental illness." Their human rights are not being respected. The report also states:
Irish mental health care policy and service provision remain out of step with international best practice and, as such, fail to fully comply with international human rights law. . . . Ultimate responsibility for compliance with international law lies with the government, not with individual government departments, health boards, civil servants or service providers.
Amnesty International, the most respected human rights organisation in the world, has decided that the human rights of those suffering from psychiatric conditions in Ireland are being denied.
When I asked the Minister of State, Deputy Tim O'Malley, about the provision of moneys for intellectual disability, he said that it could not be done. He said that the priority of the Government was to ensure that it acquired the funds by getting the economy right. It would then provide the same amount of money, if not more, for those with intellectual disabilities. People in that category cannot wait for the economy to improve and they should not have to. If money can be given to other sectors of society, and the Government boasts about an agreement which gives increases to people, can they have something too? People with mental disabilities were obviously not represented at the discussions because they were given nothing.
In 2001, 448 people died by suicide. Last year, 379 died in road accidents. Money spent on suicide prevention is only 8% of the amount spent on road safety, excluding spending on the Garda. I got these figures in parliamentary replies from the Minister for Health and Children and the Minister for Transport. I am ignoring the vast expenditure on the Garda and referring only to the amount spent on promotion of road safety. I am aware there is a stigma attached to suicide and, as a result, people do not interest themselves in it. Perhaps they are afraid. However, people involved in this area get extremely frustrated with the lack of attention it receives from the State. I will not name Ministers. Everybody has goodwill, but I plead with the Government to accept that this is a serious problem which must be tackled.
There is a special problem with young children. Ireland now has the second highest level of youth suicide, that is, people under 25 years of age, in the OECD after New Zealand. That is a serious national problem which deserves attention but is getting none.
A year is a long time in politics. This time last year when we were discussing the Finance Bill, Ministers from every constituency, including the Minister for Finance, told us to drink the champagne because the good times were here. Is it not amazing that within a few months the bad times have arrived?
A number of monsters have been created in the lifetime of the Government. The first monster is the Government. It is out of control, arrogant and mean. It just does not like people anymore. The people do not like the Government anymore either. Last year Ministers in my constituency promised new schools and new hospitals. If one had a second-hand car, one would have got a new one from them they promised so much. I watch Ministers on the Order of Business each day, and they think they are untouchable. The Tories in England were the same and after 20 years the people rebelled. The people of this country will also rebel against the Government.
The health service is the second monster that was created. It is the greatest monster of all time. It means jobs for the pencil pushers but the medical service is collapsing. The third monster, the local authorities, was created by the Minister, Deputy Noel Dempsey, and his work was continued by the current Minister, Deputy Cullen. In 1997, Mayo County Council had 700 employees. The number is now 1,100. In this year's Estimates I discovered that of those 1,100 employees, 333 had mobile phones paid for by the taxpayer at a cost of €140,000 last year. People then wonder why money is needed for tipheads and why there had to be increases in water, rates and sewerage charges. It is no wonder. The Ministers are not prepared to take on these monsters, rationalise them and do something about overcharges.
Not many members of the media are present for this debate but I will make my point in their absence. The media, whether it is Independent Newspapers, RTE or other newspapers, will not speak out about the other monster that has been created within Departments. That monster is advertising. I put down a parliamentary question on this issue last week. Deputy Neville spoke about $20 million for people with disabilities, but I have found it for him. It is the amount of money that was wasted by Departments in the past year on spin and advertising.
I can give an example. The Department of Social and Family Affairs spent €300,000 advertising information on the budget. The advertisement carried a photograph of the Minister and was run in all the local and national newspapers. It was even run in the Sunday Business Post. How many people who are unemployed read the Sunday Business Post? That is the type of wastage taking place.
We cannot discriminate.
The Minister of State, Deputy de Valera, is from the west. She and her predecessors like to pretend they are west of Ireland people when they come to the west. When they are in Dublin, they claim to be Dublin people and when they were in Derry, they claimed to be Derry people. I ask the Minister of State, as a person from the west, to support me. I hope my party will put down an amendment relating to Knock Airport. It is hoped to establish a business park at the airport, thus creating employment. The National Road Authority recently announced its roads programme. As a colleague of mine told me, the National Roads Authority is not known as such in the west but as "No roads at all". That is how the west is treated by the National Roads Authority.
I am seeking a special tax designation for the business park. I am disappointed my colleagues, Deputy Cooper-Flynn and Deputy Carty, are not here to support me. Tax designation is needed in the west if it is to develop. It does not have infrastructure, roads or a rail service so we need tax designation to create jobs. I am not referring to vested interests because I have no vested interests. People are prepared to invest in Knock Airport if it gets a tax designation. They are prepared to invest their money to develop it and create employment. I do not know or care who they are but if they want to develop the west, I will support them. I am seeking a tax designation and I ask the Minister of State, to try, with her colleague, the Minister, Deputy Ó Cuív, to put the necessary pressure on the Minister for Finance.
The Minister looks after Alex Ferguson. Does Alex Ferguson, a man who is badly paid by Manchester United, who has no resources and who would want to know the increases every year in social welfare, not need the money? The Minister provided in the Finance Bill that the Alex Fergusons of this world need only notify the Department about the money they are making. They will not be taxed. They need only notify the Department about how much money they are making from horses.
Alex Ferguson might invest in Knock.
The Deputy's point is correct.
He will give you the boot.
The Deputy is looking for individuals to invest in Knock and does not care who they are. Alex Ferguson is an individual.
You would be far better off if you were fighting for the poor of Dublin and Ireland.
The Deputy must speak through the Chair.
Yes. I have great respect for the Chair. Motor tax is up by 12%, hospital charges are up by 26% and the drugs refund scheme is up by 31%. Even cigarettes and alcohol have been increased to tax the poor and the weak and increase the rate of inflation. This is the meanest, greediest and most arrogant Government since the foundation of the State. However, the people are waiting in the long grass. They will not forget the promises of last year. They will not forget their loved ones waiting in the waiting rooms of hospitals while we see smiling Mike sitting across the Chamber every morning doing nothing about it but smile and send his PR people out to spin each day.
The media have a job to do. They should investigate the amount of money being wasted on PR people and advertising. The taxpayer is hardly able to live with increases and budgets every day. There is a budget every hour, on the hour. The Minister for Finance told us last year to drink champagne. Do Members remember the lottery grants last year? We were told to have the forms in by January. Why? The Government wanted to get the money out by May, before the election. It is now February and we do not yet know when the lottery forms will be available and whether there will be lottery grants this year. We do not know what is going on because there have been cutbacks in the economy. People are angry and they are waiting in the long grass. They will have a message for Fianna Fáil and the Progressive Democrats who comprise this arrogant, mean Government.
Tá díoma ar mhuintir na Gaeltachta mar gheall ar an Bhille seo. Tá an Rialtas ag cur isteach go mór ar a saol. Le cúpla lá anuas, tá tuairiscí sna nuachtáin fán scéim do mhná tí. Tá cáin le bheith curtha ar na teaghlaigh seo. Tá sé soléir le blianta fada go gcoinníonn mná tí na Gaeltachta an Ghaeilge beo. Téann na mílte páistí gach bliain go dtí an Gaeltacht chun na Gaeilge a fhoghlaim ach tá an Rialtas ag iarraidh tuilleadh cáin a bhrú ar na mná seo. Tá mé ag fiafraí den Aire a rá leis na Coimisinéirí Ioncaim gan dul síos an bóthar sin agus cúrsaí a fhágáil mar atá siad mar níl mórán airgid sa Ghaeltacht agus ní bheadh mná tí in ann seirbhís a chur ar fáil do pháistí na tíre má chuirfear tuilleadh cáin orthu. Molaim an obair atá déanta ag mná tí na Gaeltachta. Ní amháin go bhfuil siad ag sólathar bidh agus dí, tá siad ag soláthar na Gaeilge agus an chultúir náisiúnta. Caithfidh an tAire Ó Cuív sin a chosaint agus brú a chur ar an Aire Airgeadais.
Tá díoma ar Fhoras na Gaeilge mar tá laghdú 10% sa bhuiséad a bheidh aige i mbliana. Téann sin ar ais go dtí an Bille Airgeadas mar níl airgead ansin do lucht na Gaeilge.
I support Deputy Ring's comments regarding the west of Ireland. Part of my responsibility is as spokesman on the Gaeltacht and western development. The Minister has ruthlessly cut the summer jobs scheme from his budget. The main people who availed of it live on the western seaboard in counties Donegal, Sligo, Mayo, Galway, Clare, Cork and Kerry. Hundreds of students stayed home to work in their local communities in GAA clubs and schools and on summer tourism projects. However, they will not do so any longer because the Government has cut this excellent scheme completely. The disadvantage is that the tremendous benefits the scheme brought to local communities are now gone forever. Many of those students came from low-income families – of the 4,500 who participated in the scheme last year, some 1,300 of them came from homes which were dependent on social welfare. This was an important contribution to the local economy, particularly in the west of Ireland, but it is now gone forever and that is shameful.
The Cabinet sub-committee on social inclusion and drugs, chaired by the Taoiseach, has allocated over €23 million to local drugs task forces. The subcommittee has declared that the projects must go ahead but the Department of Finance has cut the budget of the national drug strategy by over €7 million. The impact of that on the local drugs task forces is serious. A departmental document which deals specifically with this matter states that "on a pro rata basis, this represents about 45% of the projects in the local drugs task forces in the City of Dublin”. It is shameful and disgraceful that 45% of the drug task forces are being affected by this Government cut. On the streets of Dublin, drug barons are murdering one another every day in one part of the city or another and in Limerick, the same situation prevails where people are living in fear. On the other side of the equation, there are over 13,000 heroin addicts in Dublin, some 6,500 of whom are on Methadone treatment. In the past week, two people died in County Wicklow from overdoses of contaminated heroin. The Government's policy means nothing because it is not funding the fight against drugs, community supports or the regional and local drugs task forces. It is most shameful that such a cut has been made to the biggest battle we face.
The Minister will claim he increased the budget under the drugs Estimate by 16%, but the problem is getting out of control and his own advisers are telling him that if he does not invest properly in the local and regional drugs task forces, this problem will get out of control in the rest of the country as well as in Dublin. The Minister can still table an amendment to the Bill to provide more funding in this area.
On tonight's "Prime Time" programme we will see how the drug problem is changing. It is no longer just about heroin, affecting mainly people from economically-deprived communities. The middle-class drug of cocaine is spreading all over the city. There have never been so many seizures of cocaine by the Garda and I commend them for their excellent vigilance and work in this area. If the local community is not involved and the programmes and task forces are not there, God knows what will happen. On the Taoiseach's return from a recent trip to Mexico, he commented on the cocaine issue. The Taoiseach is speaking out of both sides of his mouth because he is not providing the money he agreed in the Cabinet subcommittee would be provided to fight this issue. It is a great shame and it is the ordinary people of his own city who will suffer. I urge the Minister for Finance to think again about the national drugs issue and provide the required funding.
I welcome the opportunity to speak on the Finance Bill 2003. Under this Finance Bill and December's budget, the schools building initiative was largely ignored. The increases that were made were below the level of inflation and were relatively insignificant and irrelevant. I ask the Minister for Finance and the Minister for Education and Science to give serious consideration to putting a real schools building programme in place. On 21 or 22 January, a schools building programme was announced by the Government. However, a programme has a beginning, a middle and an end and all we have is a bit of a beginning for 28 schools. There is no middle except in the sense that 400 people are stuck in the middle with no end in sight. This is not a schools building programme. The Ministers should put a multi-annual programme in place, in a similar manner to those that county councils use for roads programmes. If people could see an end in sight, when their schools would be completed, they could cope with the circumstances better. If people knew that the work would take two or three years to complete and that they would have to put up with the position for a little longer, they could mentally and physically deal with that in the school system. However, if there is no end in sight, as is the position currently, they do not know where to go. That is the difficulty.
Schools are allocated capitation grants. Contrary to what has been said, the majority of schools with one or two exceptions, use their capitation grants properly to provide facilities, be it heating, lighting, new windows and so on in their schools. I do not believe that the abuse claimed by some people is the true position. The amount of the capitation grant is irrelevant in this day and age in that it simply does not meet the existing need.
Representatives of numerous schools have been in touch with me concerning the increasing cost of insurance for schools. I am sure all Deputies have had similar representations. The capitation grant has been cancelled out by that increased cost. On top of that cost, schools have to cover the cost of lighting, heat, electricity, cleaning services and so on – all those services that have been hit by the 1% increase in VAT under this Bill. Those services have become more expensive as a result of that increase. Out of the existing capitation grant, schools have to pay for the increase in the cost of these services. This matter needs to be addressed. It is not sufficient to say that schools can fundraise to cover such costs. They can and they kill themselves doing so to meet their existing expenses, but they cannot do anymore. There are many disadvantaged schools where the parents of the pupils attending do not have the financial wherewithal to meet the shortfall. In some schools parents can meet it, but that is not true of the parents of pupils in every school.
The reintroduction of third level fees was not mentioned in the Bill or in the budget, but it seems that is coming down the tracks. We should have clarification on that. I am glad that proposal is not in this Bill. Students, parents and families are living under the threat of the reintroduction of fees. The Government should give a clear answer as to where it stands on this issue, as every Deputy opposite seems to have a different opinion on it.
On 30 April last, the former Minister for Education and Science announced plans to establish an Irish academy of the performing arts. He said that this was a clear statement of the Government's commitment to make a major long-term investment in encouraging and supporting the development of Irish artistic talent. That project was approved at a cost of €44 million and it was to be funded under the national development plan. However, responsibility for it was transferred to the Department of Arts, Sport and Tourism two or three weeks ago. I do not mind what Department runs this project, but responsibility for it was transferred without the provision of €44 million or any capital funding. Effectively, the project has been cancelled. Almost €70,000 was spent in this regard between April and December. In the overall scheme of things, €70,000 is not a great deal of money, but it has simply gone down the tubes through pure and utter waste. An interim authority sat for six or seven months prior to the election because that announcement was being made. No report or findings on this project have issued. Sub-committees have sat and some recommendations have been made, which the Minister for Arts, Sport and Tourism is considering. It is a joke and a waste of resources to make decisions such as this one, to promise millions of euro to fund a project and then nothing happens. That is not acceptable.
I wish to deal with an amendment to the Bill in regard to the roll-over relief, which this side of the House will table on Committee Stage. Credit is due to the Minister of State, Deputy Parlon, for negotiating the package between the IFA and the Government last year in terms of relief and the deal for farmers on the roads issue. The issue of rollover relief was not part of that package. I genuinely believe that nobody would have accepted the package had the roll-over relief provision not been included. Only farmers whose lands border proposed roads on a national route were included in that package. Many farmers with lands bordering some proposed by-passes and other roads have not been considered in this regard. Many farmers are affected by the road being built in north Offaly on the N4. To have such relief in place and then remove it in the way the Government has done is not acceptable. If land is compulsorily acquired from a farmer and he decides to reinvest in land, he is not given a choice about selling his land or the price for which his land is to be sold. The Government sets the price it wants to pay for such land and it will charge 20% on that sale price. If a farmer subsequently wants to reinvest in land, he will be 20% down on his gain and will have to pay 9% stamp duty on the purchase price. I ask the Minister for Finance, the Minister of State at the Department of Finance and the Government to reconsider this matter.
I wish to share my time with Deputies Eoin Ryan and Fleming.
That is agreed.
I am glad to have the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters in this House.
The measures contained in the Bill consolidate the budget and help to continue the work done by the Government over the past six years. It does this in two ways. It concentrates the resources available on the delivery of further improvements to people on low incomes while simultaneously keeping the public finances in a healthy condition and thereby underpins the competitive position of the Irish economy.
Through specific measures taken by the Government in recent years, Ireland is now in a very favourable position internationally. The most recent data available from the OECD relating to 2000 indicate that for a single person on the average production wage Ireland has the lowest tax wedge in the European Union; the EU average tax wedge is 42.4% while the figure for Ireland is 29%.
The reduction in the level of taxation has positive effects for individual taxpayers. For example, the income level at which a single person, or a second earner, becomes liable for the higher rate of tax has increased significantly since the mid-1990s and a single person does not now pay tax at the higher rate until his or her income reaches €28,000.
The replacement of allowances with tax credits has simplified the income tax system and made it fairer. There is no doubt but that these reductions in personal taxation brought in by the Government have facilitated wage moderation and increased labour force participation, thereby contributing to the remarkable employment growth that has been achieved.
However, there would be negative consequences for our future economic prospects if we were to allow a temporary increase in prices to fuel wage inflation. This is a crucial issue for the Government and for the social partners. We must ensure our wage structure remains competitive. The Government's tax policy is a central part of the fight against inflation. Keeping income taxes as low as possible is vital to assist in the control of wage increases and inflation.
The Government has also met its commitment to set the corporation tax rate at 12.5%. This continues the promotion of a strong business sector in Ireland at a time of economic turbulence when our competitive position is of crucial importance.
This Bill, building on the recent budget and the six years of prudent and long-sighted work by the Government, addresses a number of policy goals. I will deal with some of the taxation changes proposed in the Bill. As Deputies know, tax systems have multiple goals. In addition to the central and primary objective of raising revenue for Government expenditure, there are a number of other important goals, including stabilising the economy and achieving various other social and economic objectives. The Government has always borne this in mind and has managed, over time, to make progress on many of these wider goals.
The personal tax changes set out in sections 2 to 9 continue the progress already made by the Government to implement the stated objective of keeping the burden of income taxation as low as possible so as to reward effort, continue to incentivise the take-up of work and remove more of the low paid from the tax net. We have not been deflected from maintaining lower personal tax rates and the consolidation of corporation tax at 12.5%. There has been an increase in the employee tax credit, or the PAYE allowance, from €660 to €800, maintaining the position whereby 90% of the minimum wage is tax free, even allowing for the recent increase.
There is increased help for first-time buyers in the form of a substantial increase in the ceiling on mortgage interest payments relief. It should be borne in mind that this increased relief will be available both for new and second-hand homes. Again, these measures are directed at the lower end of the income scale.
The Minister for Finance has consistently acted swiftly to close off tax loopholes and tax avoidance schemes where, for example, an elaborate sequence of transactions and steps are carried out to contrive an unreasonably beneficial tax result.
I applaud the Minister for his anti-avoidance measures, as I am sure would all members of the taxpaying public. It is recognised that our tax system depends on each person who is meeting his or her tax obligations having confidence that his or her neighbour or competitor is also complying fully with the tax regime. This confidence in the fairness of the tax system is a prerequisite for successful partnership and is reinforced by determined action to combat tax evasion and fraud and to reduce opportunities for tax avoidance. The Government is fully aware of the need to maintain and strengthen the public's trust in the effectiveness of the tax system and, towards this end, this Bill introduces several measures that aim to assist the Revenue Commissioners in tackling those who seek to evade their tax responsibilities. It includes 12 anti-avoidance measures, two of which were announced in the budget and one of which was announced by press release.
These anti-avoidance and anti-abuse measures cover a number of areas: an amendment to ensure that contrived financial arrangements in relation to capital expenditure incurred on the provision of student accommodation no longer qualifies for tax relief; provisions to close a loophole relating to the transfer of capital allowances on a building from a company to individuals; a provision that the sale from an individual to a company of a rent roll from a building can no longer be used to facilitate tax avoidance; a restriction on losses and capital allowances claimed by passive investors in regard to films, music and oil and gas exploration or drilling; and a provision to counteract tax avoidance schemes that have arisen following the disposal of machinery or plant and which could result in any balancing charge arising being passed from an individual to a company, which is taxed at a lower rate.
A number of other changes are also being made to ensure that tax relief schemes work as intended. Such schemes remain very important but they must be properly focused, as well as effective, in order to deliver the desired objectives in a cost-efficient manner. All tax incentives and expenditures must be kept under review.
In this context, information capture is of importance, and section 33 changes the relevant legislation to provide for the return of income information in the case of three of these tax incentives, namely, stallion fees, forestry and greyhound stud fees. The Bill will serve to stabilise and bolster the recent progress of our econ omy and prepare the ground for further growth in living standards. The Government has taken measured action to secure the economic gains made in the recent past and this Bill helps to signal our ongoing commitment to sound budgetary management.
I am delighted to speak on this Bill. The Minister has kept the economy on a sound footing, and this Bill ensures that it will stay there and that we can look positively towards the future. There is no doubt, as some of the Opposition speakers have said, that the economy is undergoing change. The whole international economic outlook has changed. What we must do is change with it, maintain our economy on solid ground and ensure that it can continue to grow in the years ahead.
The Minister for Finance has mentioned the importance of broadening the tax base, and that is very important if we are to maintain our lower rates of direct taxation. If one looks at other European countries, it is obvious that low tax is one of the main factors in our economic success. Some people may not like that, but if one looks at recent reports and at comparisons between the three European countries that have low taxes – Ireland, Luxembourg and Portugal – and those that do not, there is a direct link between economic success and low taxation.
I congratulate the Minister for Finance for introducing 12 anti-avoidance measures. It is very important that people see that there is a fairness in the system and do not feel others are getting away with avoiding tax through various loopholes. The measures the Minister has introduced therefore have to be welcomed. It is also important to recognise that there are tax relief schemes that work. However, they must be focused and we must ensure they achieve what they were intended to achieve. There has been a great improvement in our film industry because of tax relief and a huge improvement also in urban renewal schemes. The Dublin Docklands Authority is a good example. Huge areas of the city of Dublin and other urban areas have been transformed beyond all recognition in a very positive way for everybody. These things must be recognised and welcomed. We must ensure that tax relief schemes do what they were intended to do, and I am delighted that the Minister intends to keep a closer eye on many of these schemes to make sure they are producing positive improvements and fulfilling their intended purpose.
I cannot quite understand all the criticism of capital gains tax. When capital gains tax was set at a rate of 40%, the State was getting about €20 million or €30 million in revenue from it. It is now getting closer to €300 million. There has been an enormous increase in the take from the tax, and how people can argue for going back to a 40% tax rate is beyond me. People are more likely to sell shares or property if their tax liability is set at a rate of 20%. At a much higher rate of 40%, however, they are more likely to hold on to their assets because they do not consider it worth while disposing of them. We should encourage people to move goods and assets through the economy as the State gets more revenue as a result. The reduction in the capital gains tax is a great example of something that works.
People have written to a number of Deputies, particularly those sitting on the transport committee that I chair, about tax breaks for companies who supply railway sidings and rolling stock for our railways. This has been done in other countries, including the UK, and has been quite successful. We are investing a fortune in our railways at the moment, especially in ensuring that tracks are safe, and an opportunity exists to encourage investment in rail transport and rolling stock. If one looks, for example, at Lisheen Mine, which produces iron ore, its produce was once transported by rail but is now transported by truck. Those trucks are extremely heavy and are wrecking the roads, whereas our railway system is under-utilised.
If we were to encourage companies to invest in sidings, products like iron ore from Lisheen or timber from Sligo could very successfully be transported by rail. There is an opportunity there for us to encourage people to change from road to rail transport and to tie companies into investments in rail wagons or sidings for a number of years through a tax exemption. An exemption is offered for sidings in the UK, but it could also be considered for rolling stock if CIE does not have it. The Minister should look at this because we should encourage motor traffic off the road, especially heavy trucks, and switch to railways. It would be positive for the environment and for railways.
The other issue which has also been mentioned by Opposition spokespersons, is continued funding for the National Drugs Strategy team through direct funding and also through the young people's facilities and services fund. It is very important that we do not forget this. I know the economic situation has changed, but more than 600 projects are being financed through both of these channels and it is very important that we not alone continue to fund them but try to expand many of these programmes. Addiction is a very difficult area. Up to now, it was confined to certain areas that have suffered from social deprivation, but we now have more than 6,000 people in treatment and we must broaden the supports. We must ensure people have a range of options if they want treatment.
An Opposition Member referred to the two people in Wicklow who died from a drugs overdose. We tried to locate a treatment facility in Wicklow but, unfortunately, were not allowed. I understand one will open there soon and I am glad the members of the local community changed their minds. It is important that these treatment facilities are made available in local communities in order that they see the benefit of them as opposed to the fear they have about methadone maintenance clinics being located in their areas.
I encourage the Minister to ensure money is made available to continue and expand the programmes. Addiction is very difficult to cure and the problem is growing. The number of young women presenting for treatment for drug and alcohol abuse is growing at an alarming rate according to the Rutland Centre and other groups that treat addiction. It does not matter whether it is alcohol or illicit drugs, it is a problem we will have in future. If proper services are put in place now, they will assist in dealing with it.
The one factor which is of great concern to us all is inflation. We must be very mindful of it to ensure it does not undermine the economy. It is the one factor that can undermine our economic success. It has been referred to by people in business and is now being referred to by people from abroad who have invested in the country. It is an issue we tackled in the late 1980s when everyone pulled together. It is time we did so again. I am aware that those involved in the new national agreement have a sub-committee to examine it.
I welcome the Bill. It stabilises the economy and places us on a sound footing to take advantage of an improvement in the world economy and to benefit from such changes.
I welcome the opportunity of speaking on the Bill. I wish to place a number of matters on record that are not included in the Bill as published and on which I ask the Minister for Finance for a change of heart on Committee or Report Stage before the Bill is passed.
The Minister of State, Deputy Parlon, who is present, will be aware of the first issue, namely, the abolition of roll-over relief for capital gains tax purposes for people whose land is compulsorily acquired for the construction of motorways. There are two aspects to this. I first wish to deal with the people who may have been affected by this change in the context of the Monasterevin bypass, on which work will commence shortly. The majority of people had signed their agreements before the budget day announcement. However, through no fault of their own, some people were caught in the transitional period. Will the Minister make arrangements for them? While their neighbours may have completed the process a week or two earlier, in the interests of fairness, everyone involved in the same motorway project should be treated equally when it comes to taxation. Consistency should be applied in this case.
On the general issue of the abolition of the roll-over relief, I have said to the Minister for Finance and the Minister for Transport that it is counter-productive and will achieve nothing in the national interest. It will do nothing to improve the public finances. All that will happen is that when land is acquired in these areas, farmers will know they may be subject to a capital gains tax liability of 20% to which they were not subject prior to the budget day announcement and will demand 20% more from the National Roads Authority or local authority to compensate for that. While the State will gain through the capital gains tax mechanism, it will pay out the same amount through another agency. It will keep many consultants and legal people in well paid jobs and they will be the only ones who will benefit from this change. It will not result in cost savings for the Exchequer. In that context and from a pragmatic point of view, roll-over relief should not be abolished for people whose land has been compulsorily acquired. They are not willing sellers and have a special case to make.
The Minister has made some improvements to the urban renewal and town renewal taxation schemes and has indicated his intention that they should cease at the end of 2004. People have two years in which to complete their projects and that is fair enough. There are cases in Portlaoise, as in other places, where projects are in hand and a change in tax designation would be of major assistance, not just to the projects but also to the town. The designation would only last until the end of next year. I do not require an extension, merely a change of classification in some cases in the full knowledge that it will expire on 31 December 2004. There cannot be that many such projects in the system and they should be facilitated in the interests of the areas in which they are located. They will have undergone a vigorous vetting procedure in the local authority and expert group in the Department of the Environment and Local Government to have been approved. They are above board and have gone through several Departments in getting to the current stage. Perhaps they can be facilitated.
As well as reinstating roll-over relief, will the Minister extend the capital gains tax retirement relief to farmers who, having actively farmed their land for more than ten years, lease their land after reaching 55, irrespective of the number of subsequent periods during which they have continued to lease the land? We are finding that the regulations state that many elderly people who lease land cannot avail of the retirement relief because they have not been in active farming for the past ten years. By definition this involves a small group of older people who retired from farming after 55, many of them widows who could be in their 70s or 80s. The retirement relief should be extended to them. It is a small issue but would be a very kind gesture.
As Chairman of the Oireachtas Joint Committee on Finance and the Public Service, I met the Irish Charities Tax Reform Group which has two modest proposals which I ask the Minister to take on board. If a person makes a donation of more than €250 per annum to a designated charity that is registered with the Revenue Commissioners to obtain this relief and not just one with a tax registration number, the person can avail of income tax relief on his or her donation. The way it tends to work is that if a person contributes €580 to an approved charity, the Revenue Commissioners pay the gross amount of €1,000. It is of tremendous benefit to the charities. Will the Minister reduce the qualifying figure to €100? Many people donate smaller amounts than €250 and charities believe that if this figure were lowered, it would lead to an improved level of income for their generous voluntary activities.
The other demand relates to where a donor wishes to give a non-cash donation by way of property, shares or assets when that person is still alive as opposed to the donation being left in a will. Under current legislation it must be a cash donation. If a person wishes to transfer shares or property, to make it tax-efficient he or she must sell the asset to convert it to cash and donate it. When he or she sells it for cash, he or she will in all probability pay capital gains tax. The amount available to the charity is much less than if the Minister were to allow tax deduction facilities for the transfer of property to registered charities. The Minister has been very good at dealing with those charity groups in recent budgets and perhaps he can go one step further in this case. I support all these cases I have been asked to raise.
Even though it is modest, there is an increase in the mortgage interest relief for first time buyers in the Bill. This important change came in after the hoo-ha about the abolition of the first-time house buyer's grant. This relief will benefit far more people than that grant ever did, because that grant was only available to people buying new houses. However, as many people now buy a second-hand house as their first home, they will now qualify for the increased level of mortgage interest relief but would never have got the first-time house buyer's grant. I am pleased this relief applies to a wider group of people.
On budget day the Minister announced a 50 cent increase, including VAT, on a packet of cigarettes. Through the social partnership regime, we should agree that cigarette prices next year will be increased very substantially, by at least €1 or €2. In the interest of public health people should not seek wage increases to compensate for the knock-on effects such an increase would have on the consumer price index. I ask the social partners to consider that.
I was very pleased at the increased excise on some drinks, especially the substantial increase applied to alco-pops. Unfortunately, at 35 cent per bottle, it was not half enough. The generation who go out at weekends and drink alcopops do not know the price of those drinks in the first place. If the increase had been €1, they might not have even noticed the difference. A greater increase in excise duty should be placed on these drinks. We have all seen the programmes on television that detail what happens to those people who arrive in casualty units having spent up to €100 in pubs. When there, at the taxpayers' expense, they abuse nurses and other staff and get in the way of people who need urgent medical attention. We need a change of attitude on that.
Two other Members mentioned the drugs issue during the debate, which is also connected to this. On television tonight, there will be a "Prime Time" programme showing that in 20 Dublin pubs, recently inspected by investigators for that programme, there was evidence that the patrons had been taking illegal drugs, including cocaine and crack cocaine. If there is any illegal activity is any such pub, those running the establishment must forfeit their licence and be closed down. We cannot turn a blind eye to those issues. If a proprietor is doing nothing about unruly or disorderly conduct or illegal taking of drugs, he is not a fit person to run that premises. When his licence comes up for renewal – at the latest – the Garda must object to that licence being renewed. There should be sanctions such as those that apply to a publican found guilty of serving drink to under 18 year olds, whose pub can be closed for a week or two. This is a very harsh lesson for a publican and is having the desired effect.
The Finance Bill is very comprehensive legislation. It is very important that the Minister is taking a significant number of anti-tax avoidance measures. It is very upsetting for people to read reports showing the top 100 income earners paying as little as 2% or 4% in income tax. They are availing of many investment opportunities to reduce their tax bills and it is unfair to society, because everybody should pay their fair share of tax. As those on higher incomes have been able to get out of their legal obligation, they appear to have no moral obligation either. I am pleased the Minister is now closing off some of those loopholes.
I look forward to the passage of this Bill. I ask the Minister, Deputy McCreevy, to consider the points I raised in the early part of my contribution with a view to incorporating them in the legislation before it is finalised.
I wish to share my time with Deputy Howlin.
The 19th century economist, David Ricardo, once wrote that the principal problem of political economy is to determine the laws which regulate the distribution of income. The Minister for Finance, Deputy McCreevy, has solved this problem in his own head, to his own, obvious satisfaction and McCreevy's law is very simple. In good times, to those who have, much shall be given. In bad times, from those who have, nothing shall be taken away. In this Bill the Minister is writing McCreevy's law into the law of the land. This Bill is its detailed implementation. It is certainly going to regulate the distribution of income, because it is also the detailed implementation of what follows from McCreevy's law. If the rich cannot be asked to pay, the Government will squeeze working families instead.
This Finance Bill is the legislative by-product of the budget package and it is imbued with all the faults and misguided thinking that underlay the budget. Once again it is based on political expediency and the Minister's own homespun version of Thatcherite ideology. In his early years in office, he squeezed public expenditure, building up a war chest for the spending splurge and tax cuts that were to come just before the general election. Now he is repeating the process, by cutting services now in order that the largesse can flow again at the next election. Poor public services are the inevitable result of his stop-go approach.
Of course, it helped that he inherited a booming economy, but the Minister had no interest in macroeconomic management. "We can only spend it when we have it" has been his mantra. He introduced massive tax cutting packages at the height of the boom, even though interest rates were also falling to converge with the rest of the eurozone. With low interest rates and taxes falling year on year, we had an explosion in consumer credit. The number of credit cards in this economy increased by 150% in four years between 1998 and 2002. The Minister stoked up a booming economy, and it overheated, resulting predictably in higher prices and falling competitiveness. In a monetary union, that is how an overheated economy like Ireland reacts. We now have the twin pains of high inflation and rising redundancies. To top it all, the Minister is pulling back on Government spending at precisely the time the economy is slowing.
Throughout his time in office, the Minister has presided over a substantial redistribution of income that has favoured the wealthier interests in our society. As the ESRI has clearly shown, his budgets have disproportionately favoured the rich. That was in the good times. This year things are not so good. The Minister's mishandling of the public finances, and of the economy at large, means he needs to find extra resources. However, he will not seek those resources from those to whom he has already given so much. Instead, he is imposing the burden of his mistakes on ordinary working families.
The list of broken promises after the general election is getting longer and the list of cuts is becoming more infamous. The impact on working families is plain to see. The inflation figures released last Friday are one of the clearest statements yet of the economic failings of this Government. It has chosen not to impose the burden of its mismanagement on the wealthier interests, but instead is squeezing working families by increasing every charge and levy it can think of. In doing so, it is driving up the consumer price index. The inflation figures last week made it clear that inflation in Ireland is now being driven by factors which are in the control of the Government.
Inflation in the year to January increased by 10.2% in education, 19.3% in water, refuse and other service charges, 19.3% in hospital services, 11.9% in motor tax, 10.1% in bus fares and 8.8% in postal services.
These figures, taken from the consumer price index, are the direct result of Government decisions to increase levies and charges since the general election. Working families are now being asked to pay an extra €274 in college registration fees for each student at third level. If a member of the family requires regular medication, he or she will pay an extra €200 per annum for prescription drugs. The average ESB bill will increase by €78 per annum. Families will pay an extra €178 in VHI charges and an extra €30 to tax their 1.4 litre car. Every adult who holds a credit card and laser card will pay an extra €34.75 each year in stamp duty.
I saw Deputy Richard Bruton on the monitor yesterday doing his own calculation of these increases from a different angle. He came to the conclusion that the average increase imposed directly by Government levies and charges on the average family was just short of €1,500 per annum. The figures I have detailed bear his conclusion out.
At the same time, the Government is doing nothing to address inflation in other areas of the economy. The most obvious measure it could take would be to invest in capital projects to relieve congestion and bottlenecks. It refuses to do so because the Minister is ideologically opposed to borrowing for investment. The consumer, therefore, is caught in a trap between two ideological brick walls erected by a Government, which will not impose taxes on the wealthy and, instead, pushes up inflation by increasing charges and levies.
On the other hand, it refuses to adopt a sensible policy on capital investment, again for ideological reasons. The result is that we are condemned to higher inflation. The only way inflation can be pushed down now would be by prolonged economic slowdown. Until then, families can expect to feel the pressure on their household budgets in every way the Government can devise.
This is not inevitable. There are alternatives. The Government has other options open to it if it feels the need to raise revenue. It did not need to implement the cut in corporation profit tax this year or continue with a system of capital taxation which treats capital gains and acquisitions more favourably than income from work. It could have lived up to its own rhetoric about tackling tax loopholes.
If ever there was a weather vane which signalled the Government's seriousness on this issue, it is the way in which it treats the horse breeding industry. So cushioned is this industry, that the Minister does not even know how much tax he is foregoing by letting it off scot free. When the pressure came on before the budget, the spin machine went into overdrive. Dark murmurings were heard about cracking down on loopholes. When I and my colleague, Deputy Burton, had the pleasure of meeting representatives of the horse breeding industry before the budget, they voiced concern that they were about to lose their privileged status and pleaded for 12 months to enable them to make an input into the kind of legislation that would be sensitive to the needs of their industry.
The Government's talk on the issue was all bluster. The more it talked tough, the less inclined the Minister was to do anything. The Taoiseach led the House to believe that the tax exempt status of the industry would be tackled, which the Minister then refused to do. The compromise is that the industry will be asked to report how much income it earns tax free. This is a fantastic way to crack down on loopholes. Only this Government and this Minister for Finance could get away with it. However, that is "McCreevy's law"– in good times, to those who have, much shall be given; in bad times, from those who have, nothing shall be taken away. In the Minister's Ireland, the wealthy are protected and ordinary working families are squeezed.
On Tuesday morning, my office took a call from a constituent who cares for her 21 year old son. He has Down's syndrome and heart and lung disease and uses oxygen ten hours a day. Last November his mother contacted the health board to say his wheelchair was broken and he needed a replacement. A functioning wheelchair is vital to them both. Nothing has been done. The health board informed her it would have to send out an occupational therapist to assess the severity of the young man's case and then put him on a waiting list. The assessment has not been done. Despite Down's syndrome, heart and lung disease and having to use oxygen ten hours a day, there is a waiting list for wheelchairs. We have a waiting list for wheelchairs while a whole industry which pays no tax can feel secure in the knowledge it will pay no tax for as long as Deputy McCreevy is Minister for Finance. That is "McCreevy's law" in action. I suppose the rest of us should be grateful he is not imposing VRT on wheelchairs.
Last Monday night I listened as a victim of abuse in a residential institution told me his story. All I and a hall full of people could do was listen. One can find no words which could console this man for what he suffered. There is no financial compensation in the world that could undo the damage of those places. However, one can ask for justice which in this case means three things – telling the truth, compensating the victim and punishing the guilty. Compensation was the last thing this man cared about. He was more interested in the truth being told and the guilty being called to account.
The Minister for Finance has dramatically changed from a position, presumably dictated by his Department, that compensation be apportioned on a 50:50 basis, as between the State and religious congregations, to a position of arguing that the State has the liability and the religious congregations are making a voluntary contribution for which the taxpayer should be thankful. It is a nonsensical position, since liability would be decided in the courts. The proposition that the congregations would be found to have no liability is simply not tenable.
Under pressure in the House last week, the Taoiseach defended the deal on the basis that CORI had threatened to take the issue through the courts on a case-by-case basis. Both the Minister and the Taoiseach cannot be right. Incidentally, I would not be prepared to take seriously the Taoiseach's claim given that nobody in CORI will admit he was ever threatened in the manner he suggests. He has the habit of making such statements and getting away with them.
We are told the Minister for Finance signed off on the deal with the religious. Perhaps he did so in the same careless way he signed off on the SSIA scheme, that is, without regard to the cost to the public purse. I would be interested in seeing the papers which show how two such fine guardians of the public purse, the Minister for Finance and the then Attorney General, managed to find themselves in agreement with a proposal written for them by CORI's solicitors.
I would be interested in seeing any of the documents relating to the scheme, which the Government seems so reluctant to release. On the other hand, the deal with the religious orders is entirely in keeping with the thrust of the Government's financial policies, namely, wealthier interests will be protected and working families will pick up the tab. This is clearly set out in the Bill. At a time when charges and levies for every conceivable Government service are being pushed up, the taxpayer is picking up the tab for the residential institutions redress scheme.
Hard as it is to believe, this Finance Bill has been introduced when a new partnership agreement is being negotiated. This is remarkable because the spirit of partnership is entirely absent from the Bill. We know the Minister for Finance has never been a fan of social partnership. The information we are getting from the partnership talks suggests that he and other Ministers who share his views have been successful in emasculating the partnership process.
I have long been a supporter of social partnership and the idea of a social contract. I have been around long enough to recall the days of rampant inflation and illusory wage increases. I saw the problems and the major contribution partnership can make to the solution. I am convinced partnership is an important process, which has been of tremendous value to our society and economy since 1987. However, the simple fact of the social partners reaching a deal is not in and of itself the fundamental issue. The process alone is not what matters. What matters is what is in the agreement. From what we have seen, there is precious little on the non-pay side of the agreement.
The inclusion of a version of the Labour Party Bill on redundancy payments is certainly welcome but given the recent rate of job losses, where workers were left exposed to statutory entitlements only, the Government had little choice but to respond to that pressure. The Forfás report, published recently, shows a loss of 61,000 IDA Ireland and Enterprise Ireland sponsored jobs in the past two years in the wealth creating sector of the economy. That reflects the new balance of power in the partnership process.
In the most recent negotiations, the trade union movement and the community and voluntary sectors have been confronted by one of the most right-wing Governments in Europe. They were also confronted by IBEC which made no secret of who it supported in the general election. IBEC has no interest in the non-pay elements of partnership. It will get anything it wants from the Government or, more accurately, it will have no trouble in persuading Fianna Fáil and the Progressive Democrats to block progressive measures.
This agreement bears the indelible mark of a Government dominated by right-wing ideologues, the most right-wing in the history of the State according to my friend, Deputy Ned O'Keeffe, who knows a thing or two about this.
Mr. Durkan: Yes.
Mr. Rabbitte: It is based on ridiculously tight financial targets. It offers little on the issues which define us as a people and on which our society should be judged, such as the manner in which we treat people with disabilities. It brings no resources to bear on the issue of disability. It offers not a single cent to deal with poverty and if the Minister of State, Deputy Parlon, was still wearing a different hat, he would tell us it offers very little to farmers. It is a recipe for the continuation of crisis in health care and education. It continues the process of cutbacks in public services, which hit ordinary working families and makes them pay for the Government's mistakes.
On balance, centralised pay deals are in the best interests of the economy but let us not pretend that this social partnership agreement is anything more than a pay deal. Let us not pretend that this agreement involves serious commitments by Government to address issues of social inclusion. For example, what are we to make of the chapter entitled The Challenge of Delivering a Fair and Inclusive Society? If it were honest, it would be entitled The Challenge of Delivering a Fair and Inclusive Society Without Spending an Extra Penny on Public Services. The chapter, and indeed the whole document, is replete with reports, reviews, strategies, committees, task forces, progress reports, monitoring and evaluation. There are no commitments, specific proposals, funding or investment. Like the milk one buys in supermarkets, it is 97.5% commitment-free.
The Simon Community made it clear this week that there is nothing in the agreement which will address the issue of homelessness. I regret that because I am a supporter of genuine partnership but we should not pretend that this is a genuine partnership deal.
On the commitment to build 10,000 affordable houses, for example, neither the Taoiseach nor the Minister for the Environment and Local Government, Deputy Cullen, could tell the House last week who would build these houses, where they would be built, how quickly and who will pay for them. There is no clarity about that. We do not know whether it will overlap into the existing affordable housing. The trade unions believe they have got 10,000 net additional new affordable houses in one year. The Minister, Deputy Cullen, said it is on the record of the House. I say it will have no Exchequer implications. I repeat my conviction that the Minister of State, Deputy Parlon's farming people must be providing the land, Fr. Seán Healy is building the houses and IBEC must be paying for them because otherwise I cannot see where they are in the budget or in the Finance Bill.
We are also told that the agreement will provide for the setting up of a group that will be charged with the vital task of monitoring inflation. This is presumably in case they might discover something the Central Statistics Office has missed. This sounds like a time-consuming and important exercise for a high-powered committee. It is doomed to failure unless the Government shifts the stance on inflation I described earlier. With the Government determined to push up charges and levies on working families and refusing to adequately address bottlenecks through capital investment, high inflation will continue and no committee or working group will change that reality. It will certainly not change the ever-increasing perception that this is a rip-off economy and that the biggest rip-off merchant is the Government.
These past few months have seen many U-turns from Fianna Fáil, many promises broken and many shifts in position but if we are to believe yesterday's papers, the Minister for Finance has recently experienced a conversion that is positively Pauline. The Labour Party has been telling the Minister for years that his policy of squeezing current spending to pay for capital projects is unnecessary, unfair and uneconomical. As I pointed out on several occasions recently, this country ran a current budget surplus last year of €5.4 billion. Many people cannot draw distinction between the surplus and the combined capital on the current side and the current budget surplus. There is a current budget surplus of €5.4 billion but because the Minister has been so opposed to borrowing, this surplus has been used entirely to finance capital spending. The consequence has been poorer public services. It has also led to reductions in spending on capital projects. The Minister has been unwilling to borrow to invest in our economy and he has cut spending on capital projects from 5.5% of GNP to 5%. That half of 1% is the equivalent of €500 million.
I remind the House again of how the Minister opened his 2002 Budget Statement, although I am sorry I am not Packie O'Callaghan to do this properly. He stated: "My views on the imprudence of Exchequer borrowing are well known and of long standing", and he carried that through in his budget this year when he squeezed spending and borrowing. Meanwhile, he seemed to ignore the debate going on in Europe about the stability and growth pact. He ignored the fact that the Commission has conceded that countries such as Ireland should be able to borrow for investment purposes. Yet we read that in Brussels on Tuesday the Minister conceded that he has been wrong. He conceded that rigid balancing of the budget in the short term leads to a squeezing of public services. He has conceded that Ireland is in a sound position to borrow for investment. He stated: "It seems to me that it's unfair for Ireland, which has reduced debt but has large infrastructure problems and a close to balance spending requirement". I could not agree more.
Having conceded all those arguments, arguments that the Labour Party has been making for some time, we must wonder about the reason for all the cuts. Why is spending being squeezed if this is the Minister's view? Was he wrong when he said that Exchequer borrowing was imprudent or is it the case that he now wants to blame Brussels for the cuts?
The people will not be fooled by this. I do not believe the Minister has been converted. He is ideologically opposed to public spending and to public services, although he may now wish to blame Brussels for the more unfortunate results of his policies. He is equally ideologically opposed to imposing any burden on the "haves" in our society. The contrary is the case. As we have seen once again in this Bill, he is intent on protecting the "haves", shamefully neglecting the "have-nots", and screwing everyone in between.
With a Bill of 155 sections to guide through the House, the Minister has clearly been a busy man, so busy perhaps that he seems to have missed one or two changes that have been taking place in our economy. Yesterday he stated:
I have managed in successive budgets and Finance Bills to create a low tax rate environment across all tax heads. It is a position from which our economy has thrived.
He does not seem to be aware of the litany of bad news that has been emerging from the CSO in recent days. Retail sales were down 0.5% in the year to December. New car sales were down by 6% last year. Employment in construction was down by 2.3% last year. Industrial production was down 6.6% last year.
The live register is up 10,741 in the year to January. Agricultural income was down 8.9% last year and redundancies doubled in 2002. The latest national accounts figures show the first fall in GNP in years. Only today we learn from the quarterly national household survey that employment in industry is down by 16,000 and unemployment is up by 11,500. Yet the Minister and his colleagues think the economy is thriving.
The reality is they are sleepwalking the country into a recession. They have no answers for the thousands who have lost their jobs and those whose jobs are under threat. It is clear there are no such answers in this Bill either.
I thank Deputy Rabbitte for sharing his time with me. I agree with everything he said in his thorough analysis of the deficient economic policies being pursued by this Government and which were pursued by its immediate predecessor, a strategy which was well exposed in the comprehensive contribution of our finance spokesperson, Deputy Burton. I intend to deal with one specific issue which has an impact on my constituency and on many others. I am delighted to see Deputy Tony Dempsey present because I hope he will re-echo what I have to say. It is a small but dramatic issue for the people I represent and for other communities.
I refer to the impact of VAT on fees for foreign artists. This is an esoteric subject for many but one of the nation's flagship cultural events is Wexford Festival Opera. It is worth well over €10 million to my home town of Wexford and to the county. The festival is already reeling this year, as is every other arts body in the country, from the 8% cut in its direct funding through the Arts Council. The Arts Council is only passing on an 8% cut it has endured. Absorbing that cut is very difficult for a voluntary, non-profit organisation like this and others, but the impact in the same year of requiring VAT at 21% to be paid on the fees of foreign artists will be crippling for Wexford Festival Opera and other cultural events.
This arises from the sixth EC VAT directive, which has not been implemented in all EU countries. The VAT will be a direct cost to the arts organisations. It is described as a charge on artists but the artists will charge their fees anyway and the voluntary organisations will have to cough up. Arts organisations cannot afford that additional burden this year on top of the cut in their direct funding. This measure will have a huge impact for negligible gain for the Exchequer. The amount of money that will accrue to the State is negligible but the tourism revenue we will lose will be far greater. It makes no sense to do this. Ireland's international reputation will be damaged. Far from encouraging and developing Ireland as a cultural leader – Cork is shortly to be the European city of culture – it will have an impact on the availability of international talent to come to visit and to perform in this state.
The Minister should accept a simple proposal. If he is unwilling to undo this imposition he should at least defer it for this year so the double blow of the savage cut in direct funding will not be confounded by this 21% cost factor imposed on not only Wexford Festival Opera, but on cultural events the length and breadth of this island.
Colleagues from different parts of the country have made similar pleas to the Minister. I have only a minute or two to say this. However, in this last minute I appeal to the Minister to whom I have already spoken directly, and I ask my Fianna Fail colleagues, particularly those representing Wexford, to add their voices to call for a a simple amendment to the Bill to allow a deferral of the imposition of VAT until 2005. Then there can be discussions with the various artistic bodies about how it can be managed rather than striking a body blow to the cultural life of the country.
There is more I could say about the Bill and the Government's economic policy but I make this parochial plea to the Minister to do something within his remit that would have an immeasurably positive effect on Wexford and on cultural institutions all over Ireland.
I propose to share my time with Deputies Curran, Finneran and Fitzpatrick.
I dtús baire, glacaim leis an seans labhairt ar an mBille seo inniu, mar is é seo an Bille is tábhachtaí a tháinig os comhair an Dáil le fada an lá. In order to carry out a meaningful analysis of this Bill, we need to look back at the budgets the Minister for Finance has introduced and we must also look at the present changed circumstances.
A well known management guru in America said that management ability should be examined by the ability of the manager to manage change. Deputy Rabbitte has outlined many changes in 2002 which require a different approach in this budget than the approach in past budgets. Let us look at their impact. Since this coalition Government took over in mid-1997, 380,000 jobs have resulted from the budgets of Deputy McCreevy. There have been increases in social welfare payments of €72 to €100 for the old age pensions and there has been a 20% reduction in capital gains tax. The corporate rate of tax has come down to 12.5% and PAYE has also come down. Much has been given to worker, the socially disadvantaged and creators of job opportunities. One cannot give to the poor if one does not allow the better off to create jobs in order to increase their capital. One must obviously take money from them and how much one takes, that delicate balance, decides what one has for social welfare. The rate of unemployment in 1997 was 12% and it was 4.8% in January 2003, in comparison with a European average of 8%.
Let us look at the present and the downturn in the global economy as a result of 11 September. This has created huge problems for an open economy like Ireland's, given that six in ten jobs here are a result of foreign direct investment. Obviously that global downturn and pending war could have a devastating effect on our tourist trade, for example. Caution is advised but the Minister has demonstrated his ability to increase the tax take while not increasing tax rates, to his eternal credit. How does he increase the tax take? By attacking the rich, even though he is often attacked for defending them, and by bringing in anti-avoidance measures to close loopholes.
For example, in the past wealthy people exploited interest relief by selling property from one spouse to another – that is hardly the hallmark of someone on social welfare. The Minister has brought in an anti-avoidance measure to prevent this. He has eliminated the relief on student accommodation and that is not to say that relief was not needed but it is no longer needed and social welfare recipients were not benefiting from the building of student accommodation. The Minister can hardly be accused of defending the rich when introducing such measures. He has introduced 12 anti-avoidance measures. I commend him for doing that because it will broaden the tax take. In the past people have used property as a means to avoid tax but the Minister has taken that on. He is modernising the tax information exchange agreements, closing off tax havens. While we cannot enforce our legislation in foreign countries, we can enter agreements that benefit this State and the taxpayer.
The Minister has introduced a levy of €100 million on the financial institutions, hardly the measure of a man fighting for the rich. The banks and financial institutions would readily admit that they benefited from the Minister's stewardship so it is time to give something back.
He has been criticised for his approach to the equine industry. Whether we like it or not a stallion is as at home in Scotland as it is in Wexford. Those who own them would not be reluctant to move them if they did not have sufficient reason for staying. People in the equine industry pay heavy taxes and employ many people. Since stallions can be moved, the Minister was wise not to levy taxation at this time.
I commend the Minister on the introduction of transparency by requiring those in the equine and other industries to declare income that is exempt, a healthy measure at which Opposition Deputies have scoffed. Let us see what people are earning and what it is costing the Exchequer. I do not think it costs us anything because they are more likely to move if taxation is introduced. The Minister has proven that he is a man for all seasons. He is a man for the present difficult times and was a man for the plentiful times, to which he contributed magnificently.
I am very interested in the elimination of capital gains tax for sporting organisations. Seán McCague, president of the GAA, an organisation in which I am closely involved, said that the Gaelic Athletic Association hailed the Minister's understanding and vision and that the move was consistent with his record in investment in sport. The youngsters I train in the fields in Wexford will benefit from the Minister's vision.
This Bill and the budget in 2002 were formulated in different and challenging economic times. Listening to Opposition Members, one would think Ireland was a closed shop but we are a small, open economy that is part of the global scene. We export a wide range of commodities and we are affected by world trade conditions.
Speakers criticised the Government, saying it had failed to provide for infrastructure across a range of areas. The Minister is facing a challenging time and the test for him is to steer the economy in a sound financial direction in these challenging times. It is not correct, despite the allegations made, that there is no funding for infrastructure.
At a meeting of the Committee of Public Accounts this morning, Mr. Michael Tobin, the chief executive officer of the National Roads Authority, said that last week the authority announced details of allocations to local authorities for 2003 based on the record Exchequer provision of €1.263 billion, an increase of 11.4 % on the expenditure out-turn in 2002. The level of funding represents a major boost for the construction industry, with the planned commencement of at least seven additional road schemes this year with a combined estimated cost of €1.138 billion. The roads in question are the N1 Dundalk western bypass, the N2 Carrickmacross bypass, the N4 Kilcock-Kinnegad bypass, the N7 Monasterevin bypass, the N7 Naas Road Kingswood interchange, the N8 Cashel bypass and the N25 Waterford city bypass. I use them as an example that despite what has been said in this House, expenditure on infrastructure is still taking place.
When the minimum rate of income tax was introduced in 2000, over 60% of people on the minimum wage were exempt from tax. Since then the minimum wage has increased to €6.35 per hour and over 90% of minimum wage earners are now exempt from tax. That is only right and proper, low earners should be taken out of the tax net. I know many people on the minimum wage. Many people in my area were long-term unemployed and, having found a job in the last few yeas, they appreciate the low tax they pay. The tax burden on take home pay across all sectors has been reduced by the Minister.
A dozen tax loopholes are addressed in the Bill. Deputy Tony Dempsey referred to the sale of houses from one spouse to another. Many tax experts are making a living from devising these ingenious schemes and it is right that the Bill eliminates them as far as possible.
Under the Bill, sports bodies will not face capital gains tax on the sale of land when the money is kept within the organisation and used for promoting sport. Around Dublin, many clubs and sporting organisations have seen communities grow up around them and they have had to change location. This will make those changes viable. Many Dublin GAA clubs have already had to relocate.
Section 24 deals with urban renewal. It might only be a small part of the Bill but the urban renewal scheme has been of huge significance to my area. It was introduced to bring development to neglected areas. The scheme had been due to terminate at the end of 2002 but the Minister has extended it until June 2003. The sites designated under the scheme had proven in the past to be very unpopular and prone to antisocial behaviour. It took a lot of work for local authorities to make these sites available, bring them to market and put them to tender. The additional time will bring at least two additional schemes to the market place in Clondalkin and both the local auth ority and the local residents welcome that. Most of these areas were previously derelict.
I listened to Deputy Rabbitte characterising the Minister for Finance as a right wing ideologue. Coming from the leader of the Labour Party, it was not without its ironic undertones. I recommend John Horgan's book on the history of the Labour Party as a good read for Deputy Rabbitte.
This Bill, which runs to 155 sections, implements the budget measures announced in December 2002. As the Minister for Finance said in his budget speech, it will also close tax loopholes and modernise the tax system. He referred to 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. The Bill includes 12 anti-avoidance measures, two of which were announced in the budget and one in a subsequent press release. A number of other changes are also being made to ensure that tax relief schemes work as intended. Such schemes are important, but they must be properly focused to deliver the desired objective.
The Minister said he would keep all tax incentives and expenditure under review. Improving information is essential if the costs and benefits of such schemes are to be evaluated. There are many provisions in the tax code which allow tax exemption for different types of income, only some of which require the recipients to make a return of exempt income to the Revenue Commissioners. The relevant legislation is now being changed to provide for the return of such information in the case of three of those tax provisions – stallion fees, forestry and greyhound stud fees. I believe those exemptions have outlived their usefulness in the financial scheme of things. Deputy Tony Dempsey referred to stallions as "moveable objects". That term could also apply to a number of other things, but I would applaud if taxpayers obtained a return on them.
The Bill includes a series of measures to modernise the tax system, both in terms of making provisions across different taxes more coherent and improving enforcement. These include a new general provision covering the refund of overpaid taxes and interest on such refunds. In my previous life, I had an overpayment which dated back to 1987 but which did not come about as a result of an error on my part. The Revenue Commissioners took the money and paid me back, with no interest allowed. If I had been late in paying, I would have been charged interest. As Deputies will appreciate, there are high interest charges for failure to meet one's financial obligations to the Revenue Commissioners on time.
Measures are also being introduced to facilitate prosecutions, for example in relation to "laundered" oil or counterfeit spirits. Deputy Durkan may have seen reports of recent court cases in the west where it appears the vodka was not up to scratch in one or two areas.
Sadly indeed. The Bill will provide authority for the Government to enter into tax information exchange agreements with jurisdictions often regarded as tax havens. The Minister indicated that, while the tax system needs to be kept under review and modernised to ensure collection and enforcement, it also needs to be updated on an ongoing basis to facilitate modern business developments. In 2003, we will see the final step in achieving our 12.5% corporation tax rate for trading income. The Bill contains a number of provisions to take account of modern business practice and ensure that Ireland is competitive internationally in areas of securitisation, funds management and electronic commerce.
The Minister also pointed out other significant items in the Bill including: implementation of budgetary changes in personal income tax in employee credits, age exemption limits and first-time buyers' mortgage interest relief; implementation of budget changes to various schemes of capital allowances and tax incentives, including amended transitional arrangements for capital allowances for hotels and holiday cottages; implementation of the significant capital gains tax changes announced in the budget; and implementation of the levy of €100 million on the financial services for the years 2003 to 2005. Those are hardly the actions of a raving right-wing ideologue in the financial sphere.
I welcome the capital gains tax exemption for certain sports bodies and registered trade unions. Unfortunately for the people of Dublin Central, unless the Croke Park authorities decide to sell up and move elsewhere, we will be unable to avail of this as all pitches are provided by the local authority, Dublin City Council. However, as Deputy Curran said, the provision is still welcome for clubs in areas where playing pitches have become unsuitable for use. They can now sell up that property and buy more suitable land without incurring capital gains tax.
I welcome the Bill and recommend it to the House.
I thank colleagues for sharing time. I welcome the opportunity to speak on the Finance Bill 2003, which, of course, is based on the provisions in the budget. The budgetary provisions, as outlined in the House by the Minister for Finance, were clear in terms of protecting the weaker sections of society, investing in the future, positioning ourselves for a return to better growth levels and securing stable public finances to safeguard gains we have already made. That is a very sound economic policy in current circumstances. The Minister's statement was made at the end of a very difficult year at national and international level, including the events of 11 Sep tember 2001 in New York and the foot and mouth disease crisis at home. Those problems compounded the situation with which the Minister and the Government had to deal.
The record of the Minister for Finance, Deputy McCreevy, has to be accepted as outstanding. He has brought this country through a period of economic growth unparalleled in the history of the State. He has brought the economy to a position where we have practically full employment. Last year, some 40,000 people from other countries came to Ireland on work permits. It is not long since the opposite was the case, with similar numbers of people boarding boats and planes to seek work in foreign lands. Many of those who left the country at that time have since returned. That is as a direct result of sound economic policies.
The Minister's approach to management of the national finances is to be commended. Not alone did he look after the weak and underprivileged in our society – with major increases in child benefit, old age pensions and other social welfare benefits – he also set aside some €9 billion for future pensions, not to be touched until after 2025. He is to be commended for that.
In addition, the Minister has not forgotten areas, particularly my constituency, which were neglected for many years. In the past year, he has provided €6 million for a swimming pool and leisure centre in my county town. He has given €12 million for a Government office block, €11 million for upgrading the Roscommon county hospital, €17 million for 16 sewerage schemes and €32 million for roads in County Roscommon, including €19.5 million for national primary routes and €12.5 million for county roads. Those are just some of the measures which are important to the people I represent; we will be seeking many more this year and in succeeding years.
There are other provisions in the Bill on which I lobbied on behalf of western counties, in particular, including reinstatement of capital allowances for hotels. In the west, we have not had the development and proliferation of hotels, conference and leisure centres that has taken place in the east and midlands. I was very pleased that, following my representations in conjunction with other Deputies from western counties, the Minister saw fit to make provision in the Finance Bill to accommodate our very practical request. I have no doubt that the extension of time to apply for planning permission up to June of this year will accommodate many of the projects that were in the pipeline but had not reached the stage where they could benefit from that scheme.
I recall that an issue raised by Deputy Fitzpatrick was dealt with at the joint SMI committee, namely the right of people to refunds of income tax. This was debated, fought about and discussed with officials from Revenue, and I am glad to see that it is now included in the Finance Bill and that the people will get their rightful entitlement of interest on refunds due to them.
The public private partnership arrangement being provided in the Bill is an important measure, which is not being spoken about much but which will have major positive implications for the country during the next ten years. I understand the county managers met the Minister for the Environment and Local Government in Dublin yesterday. Every county manager in the country is identifying projects which can proceed under public private partnership arrangements and there are many people in the private sector who are waiting to become part of these county, regional and national developments. I see that as the way forward.
The Minister has introduced the necessary legislation. We will see a proliferation of these type of projects during the next number of years. I have always believed that too much Government involvement in the services of the country is a recipe for inaction and poor service. There must be private sector involvement and there must be competition. The marketplace must be allowed to dictate in economic situations.
I have always held the view that there should be intervention in terms of protecting essential services and the weak and underprivileged. The current Minister for Finance has done so. I listened with interest to Deputy Rabbitte, the leader of the Labour Party. When the Deputy was a member of one of the other three parties of which he has been a member, he served in Government at a time when his colleague, Mr. De Rossa, gave a £1.50 increase to old age pensions and social welfare recipients. Earlier today, Deputy Rabbitte lectured the House and the Minister for Finance, Deputy McCreevy, on what he has not done for the underprivileged and referred to his support for people with higher incomes. The Minister has introduced more anti-tax avoidance measures in this budget than have been brought in for the past 25 years. I include in this the period when Deputy Rabbitte's former party was in Government with his current party and another partner and when no action was taken in respect of this area. The opportunity to do what the current Minister is doing existed at that time, when Deputy Quinn was Minister for Finance. Why did the then Government not introduce anti-avoidance measures during its term instead of sitting idly by and allowing those avoidance loopholes to remain in place? Deputy McCreevy has addressed the matters to which I refer.
The country needs a steady hand at the helm of its finances in order to prevent it slipping from the sound financial position it currently holds. One must remember that our debt ratio, which stands at 34%, is the second lowest in Europe. That is something we cannot allow slip. If we return to serious borrowing such as that which took place in the 1980s, it will take us another decade to get out of it and we will waste all of money we have accrued in repayments and interest. The prudent management of the economy by Deputy McCreevy is exactly what is needed in the interests of continuing growth. We are expecting growth in the region of 4%, while the figure for inflation stands at just over 4%.
This country is in one of the best positions in the world as regards unemployment. I identify with those who are losing their jobs. There are a number of reasons for this. One of these is the fact that our economic base, wage levels and inputs have become so costly compared to some other countries that it makes more economic sense for some companies to move to countries where there is a low wage base. While that is happening, we must monitor events and move into areas, such as financial services, IT and pharmaceuticals, in respect of which we can attract investment and in which we have expertise. Our third level sector has provided us with the expertise we need and we can attract all the new jobs that are needed.
This is an important Finance Bill. It brings in the provisions of the budget with some amendments and it sets us on course for a year of stability. I hope, following that stability, we will be in a position to avail of the upturn which no doubt will take place.
Let us hope that international events do not interfere with our opportunity in that regard. Everyone is aware of the events to which I refer. The threat of war looms over the world, particularly the Middle East, and we cannot put our heads in the sand and think that we will not be affected if a conflict erupts. Let us all hope and pray that war does not take place, that there is a peaceful resolution to the current conflict, that the world does not feel any threat from Saddam Hussein or from Iraq, that there are no weapons of mass destruction, that the economic development taking place in Ireland and in the European Union can continue and that we will be in a position to avail of the upturn when it comes.
I wish to share time with Deputy Cowley.
Is that agreed? Agreed.
The Minister, Deputy McCreevy, made a guest appearance to introduce his sixth Finance Bill and he indulged in his now familiar back-slapping and self-congratulatory exercise of how he cut taxes and made everybody happy. This seems to sum up the politics of many in Fianna Fáil and many of those who spoke today, who believe that if they put some small change into the pockets of ordinary workers and the small farmers, no one will notice the huge kick-backs and the pay-offs to the wealthy which will also leave the poorest and the weakest in society with little or nothing. What the Minister forgot to say was that although his first five budgets gave away substantial sums of money, €4.8 billion to be exact, 25% of this went to the richest 10% in Irish society while the poorest 20%, or those on the margins of society, received only 5% of the budget give-aways.
There was much talk from previous speakers of horses and stallions and so on, but it is clear that many Deputies seem to have a blinkered view of what is actually happening in Irish society. They do not have far to walk to see it. I represent a constituency where people are living in disadvantage. One need only walk 100 yards from the door of Leinster House to find people living rough on the streets. The reality is that they are society's forgotten.
Other Deputies referred to the drugs crisis and the cocaine problem in Dublin and other parts of the country. There is a crisis because many young people in Irish society are turning to drugs because they feel they have no hope. I do not know in what world many of the Deputies live, but certainly many of the people who come to me are ground down by poverty. They do not see any hope.
We were told that the great hope for many areas was the RAPID programme, for which a number of areas were selected. However, anyone in those areas will tell you that RAPID has stood still. If one has a child with a disability or one is elderly, the reality in the majority of cases is that one is living on the edges of society. Community facilities are facing closure because community employment schemes are being brought to an end. Therefore, people do not even have anywhere to go to enjoy themselves. The Minister, in this Bill, is doing absolutely nothing to address the growing problem of poverty in Irish society.
The Minister has failed to deal with a number of areas in the Finance Bill. These include the growing amount of hidden or stealth taxes introduced by this Government. For example, this month many workers and their families will wake up to having to accommodate higher gas, ESB and VHI bills as the double-digit price hikes bite into their disposable income. There are also many other serious concerns, but I just want to address two areas, namely, environmental taxes and tax reliefs.
People may ask why am I concentrating on environmental tax. The reality is that poor people are the ones who will be affected by fuel poverty. The Finance Bill should have included sections dealing with environmental taxes and making polluters pay, but these are strangely absent. Why has the Minister, Deputy McCreevy, scuppered them? Environmental protection is the last thing on the Government's agenda. The publication of a recent tax strategy paper showed not only that there was not one voice in the Government actively advocating a pro-environment position, but that many were actively lobbying against these policies.
Two weeks ago the Department of Finance released discussion documents produced in advance of last December's budget. The deliberations of the tax strategy group centred around what, if any, energy taxes were needed to help the State fulfil its obligations under the 1997 Kyoto Convention on climate change. Under the convention's protocol, the State must not let green house gas emissions rise by more than 13% of their 1990 levels. The reality is, however, that by 2000 greenhouse gas emissions here were already 24% higher than their 1990 levels.
The Department of the Environment and Local Government proposed that a carbon tax be levied on fuel, with the highest rates falling on fuels that were responsible for the most greenhouse gas discharges. The tax would have increased household energy bills by 6% and industry costs by 9%. Unfortunately, the Minister, Deputy Cullen, wanted the tax to be introduced in 2003, without giving the industry or homeowners the chance to change their energy consumption patterns and even though the Government's tax strategy group paper on environmental taxes concludes that "the tax should be directed at the agents most capable of the behavioural changes". It also concluded that it was power stations and the hard-hit motorist that would be taxed. Yet the Minister's proposals, which are much more extensive, will hit all households. It fell to the Department of Social and Family Affairs to point out that 300,000 households in this State are dependent on fuel allowances and would be hit hardest by these price increases.
The thinking of the Department of the Environment and Local Government lacks clarity. Does anybody believe that imposing taxes on householders will help create the conditions for energy producers to find ways of reducing emissions? The Department of Finance effectively vetoed all of the Minister's proposals in the last budget, saying that proposals would be announced at the end of 2004, seven years after the Kyoto accord was agreed. Also opposing the carbon tax is the Department of Enterprise, Trade and Employment, which is instead in favour of using a negotiated agreement. This means buying emission quotas from other European states without actually doing anything to lower emissions here. This is like asking one's poor next-door neighbour if one can dump rubbish in his back garden, knowing full well he will not be able to clean up the mess.
The Government's policy ranges from penalising consumers to doing nothing or simply buying our way out of responsibilities. In the budget, the Minister for Finance, Deputy McCreevy, withdrew tax relief for wind farm projects even though increased use of renewable resources as a method of generating electricity would reduce greenhouse gas emissions. We still have tax exile status and tax relief for stud farm owners but none for encouraging the development of renewable resources. What is not in the tax strategy papers is recognition of the need for the Government to take a proactive stance and begin a process of offering incentives to move electricity production towards renewable resources. We need more funding for public transport and investment in new, innovative methods of energy conservation. Instead, the message from the Government is simple: we can do nothing, buy our way out of trouble, or make the weakest in society carry the cost. Once again, it is business as usual for the Government. Sadly, this Finance Bill reflects that.
The Bill is fundamentally unjust. It is ill thought out and favours the rich elite. It penalises those who do not have the Minister in their pockets: he is busy picking them.
Tell us about Shergar.
I would not know about Shergar. The Minister probably knows more than I do.
A fair and inclusive society is just not on the Minister's agenda. This Bill, if passed, will continue the thrust of the last few budgets, widening the gap between the haves and the have-nots. It is shameful that those on the benches opposite continue to support those budgets.
That is some hypocrisy.
I wish to share my time with Deputy Sargent.
They say that politics is the art of the possible, but it is impossible to accept this Bill, which is remarkable for what is not in it. Each of us has his own ideas about what should be in the Bill, but there are certain essentials. Old people say that if one has one's health, one has everything, which is true. Yet I know that in my own health board area there is not enough money to run our services, and the chief executive officer has predicted cutbacks. There is nothing in this Bill that could help. The lack of planning in the health services is evident in the fact that the Government will give a health board its budget and insist it lives within it even though the costs are not covered because of inflation and so on.
In my own county recently, screening equipment broke down in not one but two main hospitals. To date, these have not been replaced. The replacements have finally been sanctioned, but the word is that they will have to be paid for out of the ongoing revenue budget, which is already clearly inadequate. This makes no sense. It was well flagged that those machines would break down – in fact, they were closed down by the Radiological Protection Institute. This happened before the election, but there was no forward planning.
The health services are impossible, especially when it comes to cancer services in the west. The failure to extend BreastCheck and the failure to put the necessary €6 million into health services this year is unacceptable. The Minister for Health and Children said that it was poppycock that BreastCheck needed its own unit in the west. It is poppycock because it did not need its own units on the east coast. I cannot agree with the Minister. This is a service that was good enough for the east coast, while in the west and south we are losing 65 people every year.
In Castlebar we have surgeons and medics, but no urologist. We have virtually no waiting list, but in Mayo General Hospital there are massive waiting lists in urology. People are waiting for five years for an operation that takes 20 minutes. About 1,200 men are waiting, getting up five times every night for five years. People with rheumatoid arthritis wait four years for their first appointments and irreparable damage is done to their joints in that time. That is not good enough. Even Croatia has more consultants than we have. The Minister has talked about a consultant-led system, but what is the problem with hiring these consultants? In Galway, there is a unit that will not be ready until the summer even though the Western Health Board has made it known that the services would be ready to run if it had a consultant. The services and equipment are there, but the consultants will not be hired. The Minister refuses to allow the go-ahead for these consultants to be hired until the unit has been opened, although everybody knows it will take 18 months to two years for the hiring process to be completed. The system will lie idle for about three years while people die all around. I predict that there will be protests. The students have marched and the farmers have marched, but the plain people of Ireland will march for proper cancer services. This is health apartheid. One part of the country is receiving favourable treatment and that is not right. Anything we can do should be done.
That is why I am disappointed with this Finance Bill. It is not right that children's hearing will be damaged while they wait for ear, nose and throat services. We should also consider orthopaedic services. There is a ward with 33 beds lying idle in Mayo General Hospital in Castlebar. A dedicated orthopaedic theatre has been lying idle for some time. We need two orthopaedic consultants, but those appointments have not even been advertised. What kind of health service is this? Many cancers, such as breast cancer and bowel cancer, require radiotherapy. Half of these patients should be receiving radiotherapy, but in the west and the south only 20% do so. It is too harsh to send people long distances and specialists refuse to do so. As a result, the death rate for those cancers is 5% higher in the west. That is despicable and something should be done about it.
At the end of the day, this is about saving people's lives. What is more important, as the old people say, than one's health? This Government is determined to run the public health service into the ground and to force people into the private health service. People come to me every day asking what they should do as they fear they will be dead by the time they are called. They ask why they cannot have it done privately. They can have it done privately but they do not have the money. They wonder why people who have the money can get it done. That is health apartheid as well. There is major inequality.
The apartheid applies not just to health but also to roads. Deputy Dempsey spoke proudly about the allocations for roads. He was proud that the level of the allocations to the NRA had increased to a record amount. It was wonderful news but not for the west. The west is always last. Why is that? The Fitzgerald report said the west is not even at the races in this regard. It said the south and the east are thriving. They are over budget and doing well. The NRA says the roads and planning are progressing well and according to the national development plan. The same report shows the west is lagging behind and will fall back further. What is the logic in that? What has the west done to deserve this? Why are we always last in this so-called balanced regional development? It is not fair.
The Minister makes brave statements. He said yesterday:
I have always held the view that targeted, well designed, tax incentive schemes can be a useful instrument in achieving desirable public policy objectives . . . I will be keeping all tax expenditures and incentive schemes under review. This is not to say that I will not consider introducing tax incentives where I see the potential benefits as outweighing the other factors I mentioned.
Fair play to the Minister but he should introduce a tax incentive scheme for the west. Professor Seamus Caulfield has predicted that, according to census figures, there will be nobody left in west Mayo by the end of the century.
Farmers have also been let down. They have had the enormous cost of killing cattle over 30 months of age. There has been a huge increase in deductions as a result of the Government's withdrawal of support. That should be reversed. There is also the situation regarding roll over relief for capital gains tax on land acquired for road making. A farmer is not a willing vendor. If he has to sell, he has to replace the land. He is compelled to sell his land and buy other land while paying the 20% capital gains tax and stamp duty, and this should also be reversed.
Ba mhaith liom ar dtús báire mo buíochas a ghabháil don Teachta Cowley as a chuid ama a roinnt liom. One figure that stands out from reports in recent days which will have an impact on this country far into the future is the 82% increase in greenhouse gas emissions over the last six years in the transport sector. That fact will, unfortunately, make matters difficult.
Deputy Cowley will appreciate how important it is for people to be able to get around and for infrastructure to be provided in all parts of the country, particularly in Mayo. The Government seems to be blind to the fact that it is investing in a disproportionate and irresponsible way in the eastern region with infrastructure, as was shown by the National Roads Authority before the Committee of Public Accounts today, running into billions of euro in overruns of expenditure. That is careless, irresponsible and negligent and in the future people will wonder how it happened. At the same time rail infrastructure is being cut back. Most of the investment is going into rail safety, which is welcome, but it is not improving capacity or meeting the needs that exist.
I am not making a party political point but repeating the point made by the Economic and Social Research Institute, an independent think tank, that we need to rebalance our taxation. We need to give incentives to people to conserve energy and finite resources. These resources will not be around indefinitely. We will have labour and people seeking work so let us not tax those. Instead, let us tax the finite resources to encourage better planning and wiser use of those resources. The ESRI said that not only would this be good in terms of future sustainability but it would also help improve our competitiveness. We talk about America ignoring the Kyoto protocol but it cannot continue to ignore it. In the meantime countries such as Denmark, the Netherlands and the Scandinavian countries, which have embraced the need to conserve resources, are developing technologies that are efficient and able to operate within a taxation regime that encourages work and employment but curtails wastage of finite resources. That type of economy would put us in a position to take advantage of conditions that are beyond our control but will make the globalisation policy of this Government difficult to sustain and increasingly self destructive.
Globalisation favours cheaper wages. In this country we might be keeping wages under control but they are not as cheap as the wages in poorer countries. It also means transport costs will rise. A total of 98% of our transport relies on oil and oil prices are going to rise. Markets will suffer as well if we blindly go down the road of, for example, utilising incineration to deal with the waste crisis. In fact, it will damage farming and remove the incentive to reduce waste generation.
I appeal to the Minister to take on board the arguments for not relying on globalisation policy, but to take that policy in hand with the need for local economic development. The French have done this well. They have their local economies and products. They export these products and take advantage of every market available. However, they do not rely solely on exports and, as a result, are more secure in the long-term. The Tánaiste is drastically reducing funding for Enterprise Ireland, which is responsible for indigenous industry, while the IDA appears to be the favoured area for Government grants. That sends the message that there is a narrow minded focus or over reliance on that type of investment. The investment is welcome but it will not be possible to depend on it if international conditions change.
I urge the Minister to look again at what is happening. The cutbacks in education are indiscriminate. There are special education classes in many schools, including in Malahide community school which I visited a few days ago. That school is suffering the same cuts as a school that does not have facilities for special needs, dyslexia and so forth. That widens the inequality in society. The people who are affected, because they do not have access to special needs education, have to rely on private fundraising to get grinds. The facilities are not available even though they have a constitutional right to them.
The Minister is implementing cutbacks in the wind energy sector. If there was more electric transport and greater reliance on renewable energy, we would have greater security. He is also cutting back on Teagasc and the agriculture sector. I hope the Minister of State, Deputy Treacy, is having a word in the Minister's ear about that so he will not cut back on organic farming training at Mellowes College in Athenry. The Minister is also seriously ignoring the needs of the marine sector. We saw the warning signs with the Prestige oil tanker. If we do not have facilities to protect us from that type of disaster, we could be badly affected. Other issues are coming down the track. Issues surrounding the Kyoto protocol, for example, will turn quite nasty unless we embrace it. Obviously, we are not doing so with an 82% increase in emissions of greenhouse gases in the last six years.
International litigation is now being considered as a tool to combat global warming. Ireland faces not only being in the dock but also matters outside our control, such as the war in Iraq, which teach us that we must overcome our over reliance on oil if we are to have any future security.
I thank the Deputies who contributed to the debate. Deputies Richard Bruton, Burton and others referred to accelerating inflation. In case the Deputies opposite had not noticed, the annual rate of inflation for January 2003, as measured by the consumer price index, fell to 4.8% from 5% in December. Various economists – and probably Deputy Bruton from his recital of price rises – were expecting the rate to increase to over 5.5%. Simply because there are price rises taking place, whether in the budget or in the pipeline, as the Deputies well know, does not mean that inflation is rising – it depends on the size of the increases. I added less to inflation in this year's budget than last year. I have helped reduce inflation, year on year, and have not added to inflation anything in the vicinity of what was added to it by Deputy Bruton's party when it last held the reins in the Department.
Many Deputies raised the issue of increased Government charges. I have always taken the view that once the Government has agreed resources, it is a matter for each Minister to manage his or her allocation to deliver quality services and one of the key issues in service delivery is to target resources to those most in need. In the course of agreeing the 2003 Estimates, the Government, with the assistance of the independent Estimates review committee, considered the introduction of user charges which would help ease the pressure on expenditure. While there has been criticism of these charges, it should be recognised that the State continues to provide a wide range of services at low cost or for free. It was considered appropriate to introduce new charges or to increase existing charges in some areas. Not only do charges provide additional resources for improved services, they also have a role to play in the efficient delivery of services to those most in need as, in general, they do not pay the charges. For example, medical card holders do not pay the health charges.
The essential message of the stability and growth pact, raised by Deputy Bruton, is that through fiscal prudence we can ensure economic growth and financial stability. Low debt, low deficits and sound fiscal policies are the bedrock of these goals. I should not be castigated by the Deputy simply for observing that where a country – as in Ireland's case – has low debt, low deficits and sound fiscal policies, there must, by definition, be more room for some extra investment of resources in infrastructure than there is in other cases. Such limited and temporary flexibility was put forward by the EU Commission in its special paper on the stability and growth pact last November and not by me. I am, therefore, not complaining about or blaming the Commission for anything. Nor do I suggest that the only reason for pursuing sound fiscal policies is the existence of EU rules. I am committed to pursuing them anyway for good domestic reasons.
Some Deputies have criticised the creation of the National Pensions Reserve Fund and stated that funds under their control should be directed into infrastructure projects. Deputy Harkin suggested Ireland did not face the demographic problems of other countries. This may be true at present but not in the long-term, which is why I am providing for the fund. Some Deputies have criticised the performance of the National Pensions Reserve Fund, but it is controlled and managed by a seven member commission which is independent of the Government and has discretionary authority to determine and implement an investment strategy for the fund in order to obtain the optimal financial return, subject to prudent risk management. These arrangements were purposely designed to mirror those existing in private pension funds. While the NPRF commission could invest in State infrastructure projects through PPPs, any such decision would be a matter for the commissioners themselves who would have to have regard to their mandate of investing fund moneys only with a view to commercial return.
Deputy Richard Bruton referred to the PAYE tax marches and the need to have a better deal for PAYE taxpayers, Deputy Ó Caoláin is concerned by the high percentage of PAYE workers on the top rate of tax and Deputy Boyle criticised the fact that only 90% of the minimum wage was exempt. The Government has an outstanding record in these areas. When we came into office, a single employed person on the equivalent of €98 per week was liable for tax. Following this year's budget, the figure is €223 per week – an increase of 128%. Some 380,000 persons – or 25% of income earners – were exempt from tax in 1997. Following this year's budget, the figures are 618,000 persons and 36% of income earners. This increase of over 40% in the numbers of exempt earners is even more impressive when one remembers that the workforce and the number of these on the tax record have grown very substantially over the past six years – again directly as a result of the economic policies pursued by the Government. Before the Government came into office, a single person with an income above €17,270 became liable at the top tax rate. At present, the standard rate band for a single person stands at €28,000 per annum – higher than the average industrial wage.
In Budget 2003, I was faced with a different and much less benign scenario than had existed in previous years. Nevertheless, despite the limited resources available to me, I put in place a personal income tax package which focused available resources on those on lower incomes through substantial increases in the employee credit and in the age exemption limits for those aged 65 and over. The PAYE credit was increased in value by over 20% while the age exemption limits were increased by over 15%. The result is that even though the minimum wage increased again in October 2002, we have managed to stay on course to achieve the Government's stated aim of exempting the minimum wage altogether from tax over the next five years. One of the underlying principles behind the Government's approach to tax reform has been greater equity. The move from the system of tax allowances to tax credits which was completed in April 2001 brought greater fairness into the system.
Deputy Rabbitte treated us to his revisionist history of the economy and of my budgets over the past four years – the usual canard about favouring the rich was trotted out. However, of the reductions of the €5 billion or so in tax since 1998, nearly 46% went on personal tax credits – including the PAYE tax credit – 20% on widening the standard band, 15% on cutting the standard rate of tax and 10% on cutting the higher rate of income tax. In my previous two budgets, I gave nearly three times more to social welfare increases than to personal tax reductions. The corresponding ratio in the 1995 to 1997 era was 2:1 against social welfare.
It was the Government of which Deputy Rabbitte was a member that abolished the bank levy and I seem to recall him defending that action at the time. Yesterday, a number of deputies referred to the Revenue Commissioners' study carried out in 2002 on the effective tax rates for high earning individuals. What Deputies did not point out was that this study actually indicates an increase in the effective tax rate of high earners in 1999-2000 compared with the findings of a similar study carried out by the Revenue Commissioners in 1997 on the effective tax rates of high earners in the tax years 1993-94 and 1994-95, as a result of actions taken by me to cap capital allowances.
Deputy Burton claimed that I was behaving like St. Augustine in the closure of tax loopholes. Perhaps she has not yet studied in detail the provisions of the Finance Bill, which has closed a record number of tax loopholes. The press release issued on the publication of the Bill sets out details of 12 of these anti-avoidance measures which have immediate effect. The Deputy may not be aware that I have also closed off many other tax avoidance loopholes in my five previous annual budgets and Finance Bills and I will provide her with a note summarising these anti-avoidance measures, if she is interested.
Deputies Joe Higgins and Boyle suggested that I had created many of these loopholes. Deputies should not confuse tax avoidance measures or tax loopholes with tax incentives. The first are unintended uses of provisions, while the second are introduced deliberately for public policy purposes.
Deputy Burton also referred to the lack of information available in relation to the cost of some tax reliefs. I assure the House that I will continue to examine and evaluate existing tax reliefs. Where information is currently lacking, steps will be taken to ensure it becomes available over time without making the system of collecting tax too bureaucratic.
Deputy Richard Bruton claimed that I regarded low tax rates as a totem and was ignoring effective tax rates. If low tax rates are a totem, or a symbolic feature of the Irish tax system, I would regard this as an excellent description. As a former Minister for Enterprise, Trade and Employment, Deputy Bruton would be fully aware, as I am, of the vital role played by our low 10% rate of corporation tax for manufacturing and now our general 12.5% rate in attracting foreign direct investment into the economy over the last two decades. The IDA has always marketed this low rate as a key feature for such important investment, whereas other countries, in contrast, had higher tax rates coupled with special allowances or administrative ruling, which were far less successful as a marketing mechanism in this regard. The headline rate is what counts and in a domestic context the same goes for the 20% capital gains tax rate, which proved very effective in the last five years in encouraging disposals of assets thereby assisting the asset-holders and increasing the Exchequer take from capital gains tax.
Many Deputies raised the increase in the reduced rate of VAT from 12.5% to 13.5% and transitional measures for the tourism industry. As Deputies are aware, the VAT provisions are already in law since budget night. Any transitional measures, such as those that were suggested by the Deputies, would have reduced the yield from this increase in the rate and would have reduced the yield from VAT in 2003. VAT has become one of the most significant sources of revenue for the Exchequer and is important for funding much needed public services.
Deputy Richard Bruton asked why I have abolished roll-over relief for capital gains tax, given its impact on business. Roll-over relief is a deferral of tax on gains already realised. In some cases the tax has been rolled over on several occasions, and in some cases gains realised over 20 years ago remain untaxed. It should also be remembered when discussing the taxation environment for businesses that since coming to office I have reduced the top trading rate of corporation tax from 36% to 12.5%. Sole traders have also seen their top rate of tax reduced from 48% to 42%.
The abolition of this relief is very much in line with the philosophy of the report of the Commission on Taxation referred to by Deputy Burton yesterday. That report urged a low rate and a wide base as the fairest and most efficient way to reform the tax system. The low rate has already been introduced and now is an opportune time to widen the base to ensure all pay tax on their gains when they are realised.
During my time practising as a chartered accountant I never dealt with a case where rollover relief washed out of the system. I thought that experience might have been unusual to my practice. However, since publishing the Bill and abolishing the relief, I checked with other tax advisers, including one adviser in a major accountancy firm who is a friend of mine. He told me that during his 18 years in practice he never dealt with a case where the roll-over relief washed out of the system. I then checked the position with a friend who is high up in the Revenue Commissioner and he told me that he had never dealt with a case in the tax office where the rollover relief has washed out of the system. However, there have been some cases because in the recent past a case was brought to the appeal commissioners concerning certain aspects of it.
We might have some information on this before Committee Stage. I understand we are trying to study the number of times this has occurred, but they are limited. In my view the State has not got its tuppence work from this measure except in limited cases. If there were cases where it did wash out of the system, the files going back over a long time may have been kept in such a way that people were not aware of it.
Deputies should realise that, effectively, rollover relief has become a permanent deferral of tax. That might have been okay when the tax rate was 40% and higher, but I reduced the rate to 20% and people should be proud of that low rate. Some people rather than availing of rollover relief in recent years have paid tax at 20% rather than having such a charge hang over them.
Death does not trigger a capital gains tax liability. Therefore, if a person applied for rollover relief and subsequently died leaving a business to a son or daughter, that tax would come under an inheritance tax problem and there would be no question of there being a capital gains tax. That would be an obvious answer to why the rollover relief did not wash out of the system in many cases. I do not agree with the case made against me for abolishing rollover relief.
Deputies Ellis, Fleming, Crawford, Timmins, Ó Snodaigh, Enright and others raised the matter of capital gains tax roll-over relief in the context of compulsory purchase orders, and the agreement made between the Government and farming organisations in December 2000. Farmers who have been subject to a CPO have been very generously compensated by the State for the land they sold. Those who had already been subject to a CPO on budget day have three years under current rules to reinvest the funds in order to qualify for the relief. Those who do not may have a capital gains tax liability, but if so it is on a very real and substantial gain, and having sold their land at a premium, it is not unreasonable that they should be expected to pay a 20% tax on the resultant gain that they made.
This does not amount to a reneging on the deal made in 2001. There were some minor extensions made to the general relief in 2001. What is now being done is an abolition of roll-over relief as a whole.
Deputy Bruton attacked my decision to abolish indexation relief in respect of capital gains tax. When capital gains tax was introduced in 1974-75, it was at a rate of 26%, and indexation was not included. It was introduced in 1978-79 and it should be noted that inflation during the 1970s was very high.
Did the commission that the Minister mentioned not recommend indexation and was that not one of its principles?
The commission also advocated having a low rate of tax and having a wide tax base. I have moved towards having a wide tax base. It is inconsistent—
It is perfectly consistent.
—to have a low rate of tax and also indexation. With inflation now consistently much lower and the rate of capital gains tax only 20%, the rationale for this relief no longer applies. Inflation can be said to impact on many areas of taxation, including VAT, corporation tax and income tax, and indexation relief does not apply to these three major taxes, and with capital gains tax at a 20% rate, there is no basis for this anomaly to continue.
Internationally, surveys have shown that most countries do not index capital gains in the tax code. With capital gains tax at one of the lower rates internationally, it makes sense that we remove reliefs like this to help keep the rate low.
When Deputy Bruton condemned the increase in the duty on credit card accounts, he understandably did not mention the history of this charge. It was introduced by his own party in 1981 at £5. Only three years later, in 1984, it was doubled to £10. That was not done by Fianna Fáil Ministers. Deputy Bruton would have more than a passing—
However, the Minister knows that the need for it was created by a Fianna Fáil Minister.
This increase, in contrast, is the first on credit card accounts in ten years. I was encouraged to introduce this increase by the findings of a survey of credit card holders carried out in September 2001 or 2002, which showed that 50% of people did not know that there was any charge on credit cards.
The Minister codded them.
This was brought to my attention at the time and I thought I must do something about this in the budget.
When all those types of charges are added up, they amount to a cost of €1,500 per annum for the typical household.
Deputy Boyle stated that carbon taxes should be a replacement rather than additional tax. As I said in my budget speech on 4 December 2002, Ireland has international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. For this reason, the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004. Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction.
It would be inappropriate for me to speculate at this stage as to what taxation measures may or may not be introduced or whether any carbon energy taxation would replace existing taxes or would be used for necessary public services.
That is the St. Augustine principle again.
Many other Deputies have contributed to the debate and they can be assured that their positions have been noted. I have been unable to comment on all the points made due to time constraints, but we can pursue various issues further on Committee Stage.
Ahern, Dermot.Ahern, Michael.Ahern, Noel.Andrews, Barry.Ardagh, Seán.Aylward, Liam.Blaney, Niall.Brady, Johnny.Brennan, Seamus.Browne, John.Callanan, Joe.Callely, Ivor.Carey, Pat.Cassidy, Donie.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cregan, John.Cullen, Martin.Curran, John.Davern, Noel.Dempsey, Noel.Dempsey, Tony.Dennehy, John.Devins, Jimmy.Ellis, John.Finneran, Michael.Fitzpatrick, Dermot.Fleming, Seán.Gallagher, Pat The Cope.Grealish, Noel.Hanafin, Mary.Harney, Mary.Haughey, Seán.Jacob, Joe.Keaveney, Cecilia.
Kelleher, Billy.Kelly, Peter.Killeen, Tony.Kirk, Seamus.Kitt, Tom.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McEllistrim, Thomas.McGuinness, John.Martin, Micheál.Moloney, John.Moynihan, Donal.Moynihan, Michael.Mulcahy, Michael.Ó Cuív, Éamon.O'Connor, Charlie.O'Donnell, Liz.O'Donoghue, John.O'Donovan, Denis.O'Flynn, Noel.O'Keeffe, Batt.O'Keeffe, Ned.O'Malley, Fiona.O'Malley, Tim.Parlon, Tom.Power, Peter.Power, Seán.Ryan, Eoin.Sexton, Mae.Smith, Brendan.Smith, Michael.Treacy, Noel.Wallace, Mary.Wilkinson, Ollie. Woods, Michael.
Boyle, Dan.Breen, James.Broughan, Thomas P.Bruton, Richard.Burton, Joan.Connaughton, Paul.Coveney, Simon.Cowley, Jerry.Crawford, Seymour.Crowe, Seán.Cuffe, Ciarán.Deasy, John.Deenihan, Jimmy.Durkan, Bernard J.English, Damien.Enright, Olwyn.Fox, Mildred.Gogarty, Paul.Gormley, John.Gregory, Tony.Harkin, Marian.Higgins, Joe.Higgins, Michael D.Howlin, Brendan.McCormack, Padraic.
McGrath, Finian.McGrath, Paul.McManus, Liz.Mitchell, Olivia.Murphy, Gerard.Naughten, Denis.Neville, Dan.Noonan, Michael.Ó Caoláin, Caoimhghín.Ó Snodaigh, Aengus.O'Dowd, Fergus.O'Shea, Brian.O'Sullivan, Jan.Pattison, Seamus.Penrose, Willie.Perry, John.Quinn, Ruairi.Rabbitte, Pat.Ring, Michael.Ryan, Seán.Sargent, Trevor.Sherlock, Joe.Shortall, Róisín.Stagg, Emmet.Stanton, David.Wall, Jack.