We now come to the Budget Statement. Before calling on the Minister for Finance, I remind Members that the budget documents being circulated remain confidential until the Minister has announced them. They should not be taken from the House before the conclusion of his statement. I now call on the Minister for Finance to make his Budget Statement.
Financial Resolutions 2003. - Budget Statement 2003.
This budget comes at a turning point in our economic prospects, when international growth is on the mend. As such, it will set the strategic direction which this country will follow for the next few years. Ireland has come through the recent international economic downturn better than most. This is in no small part due to our sound budgetary policies.
It is easy to forget the progress we have achieved – the defeat of unemployment as an economic scourge, the doubling of real income in the economy, the massive investment in infrastructure and the substantial enhancement of social benefits for the welfare of all our people. Today many tend to take these achievements for granted.
Even if we sometimes forget the progress we have made in recent years, other fair-minded and reputable international organisations do not have any difficulty reminding us. The IMF report last August commended the Irish authorities for their "exemplary track record of sound economic policies". The IMF referred to our enviable achievements: unemployment reduced from 16% to 4%; huge gains in competitiveness; and public debt reduced from more than 100% of GDP to 33%. The IMF also praised not only our prudent fiscal management and our tax reforms, but it also commended our sensible income policies and our investment in education. All these policies have laid the foundation for a virtuous circle, reinforcing growth and strengthening the resilience of our economy.
Budget and Strategic ObjectivesThis budget has the following basic objectives: to foster employment and growth; to continue a prudent approach to our public finances; to invest more in infrastructure; and to secure competitiveness by keeping inflation low, thereby, giving us the resources to meet our commitments on social inclusion. The strategic elements of delivering on these objectives involve: action to keep public spending within a sustainable growth range; an initiative on capital investment; action to sustain our public service pension capacity; and a balanced growth strategy for all areas of the State, which can be progressed through decentralisation.
Economic OutlookAs I have reminded the House before, Ireland is part of a monetary union with a low inflation target. Competition worldwide is exerting downward pressure on prices and incomes. As an open economy, we are more exposed than most and we face intensifying competition for international investment and the jobs that go with it.
These facts mean that there is an urgency attaching to getting our costs and prices back into balance with the rest of the EU. In doing so, we must keep the rate of increase in public spending in line with how we expect revenues to grow. In 2004, I am providing for Exchequer borrowing of €2.8 billion. That is the appropriate level to set for Exchequer borrowing in the current circumstances. This is equivalent to more than 50% of our capital budget for the year.
This time last year, I pointed to the high degree of uncertainty surrounding the economic outlook. My caution was well placed, as the pick-up in the major world economies has been slower than expected.
The current improvement in the international economy is a welcome development. However, there are still significant risks. For example, Ireland is particularly vulnerable to sharp falls in the US dollar exchange rate against the euro. On balance, the short-term prospects for the international economy have now improved. We need to ensure that we can capitalise on that improvement. Currently, GNP in 2004 is projected to grow at 3% and GDP at 3.3%. We also expect to see GNP growth rates increasing in 2005 and 2006 to about 4% and 4.5% respectively.
Employment is expected to grow next year by 23,000 with unemployment to average around 5%. Taking account of the changes in this budget, consumer price inflation should average 2.5% in 2004, half the rate we experienced at the start of this year.
Decentralisation of Government Departments and AgenciesAnois, seo é an dea-scéal do bhailte móra ar fud na tíre. It is important that the growth we expect should be regionally balanced. In this regard, I am announcing details of decentralisation of Government Departments and agencies as promised in the budget of 2000. For the first time ever, decentralisation will involve the transfer of complete Departments, including their Ministers and senior management, to provincial locations.
The Government will not be having a by-election in Tipperary.
A total of eight Departments and the Office of Public Works will move their headquarters from Dublin to provincial locations, leaving seven Departments with their headquarters in Dublin. All Departments and offices will be participating in the programme. Ministers with headquarters outside Dublin will be provided with a centralised suite of offices, close to the Houses of the Oireachtas, for a small secretariat to allow them to conduct business while in Dublin and when the Dáil is in session.
Why has it taken four years?
The Minister for Finance without interruption, please.
The previous decentralisation programme involved the relocation of some 4,000 public service jobs. The programme I am announcing today is far more radical. In total, it will involve the relocation of 10,300 civil and public service jobs to 53 centres in 25 counties.
Details of ImplementationFull details of the decentralisation programme are outlined in the budget summary. The programme will be implemented through the transfer of staff on a voluntary basis. There will be no redundancies and, as on previous occasions, the payment of removal or relocation expenses will not arise.
Is that the spatial strategy?
For the reasons outlined in the summary, decisions on location have yet to be made in respect of over 1,300 of the 10,300 jobs being decentralised. The final total can be closer to 12,000 jobs and I intend to examine options in this regard once the new programme is well under way. The Government has also decided that, save in exceptional circumstances, any new agencies or bodies being established in future should be located in areas compatible with the new programme of decentralisation.
I am establishing an implementation committee to drive forward implementation of the programme, with the chair reporting to a Cabinet sub-committee. I am also providing an additional €20 million capital in my Department's Vote for 2004 to meet any initial investment required.
Benefits for allOver time, decentralisation will lead to a radical change of culture in terms of policy formation in this country. No longer will policy be made entirely in Dublin on the basis of a Dublin mindset. I am also convinced that decentralisation offers considerable benefits for the Departments involved, the communities to which they will be relocated, the staff who will transfer and the country as a whole.
The Government has sought to ensure that the units being transferred are large enough to provide career opportunities for staff, either within their own Department or in another Department, within a reasonable distance. Indeed, the radical nature of this programme means that capable civil servants who are interested in decentralisation can look forward with confidence to good career prospects outside Dublin in the future, something which has been much less a feature of decentralisation in the past.
Decentralisation can bring very significant benefits for the staff involved. These benefits will include reduced commuting times and lower house prices outside Dublin. Discussions will be held with the public service unions on the programme.
National Spatial StrategyThe locations which have been selected take full account of the national spatial strategy, the existence of good transport links – by road, rail and air – and the location of existing decentralised offices. The aim has been to establish viable clusters of work units within a region, either in the form of self-contained locations or clusters of sites located geographically close to each other or to existing decentralised locations. This will help to avoid the pitfalls of fragmentation and protect service delivery.
Although Dublin remains vital to economic development, the Government's national spatial strategy recognises that Ireland also needs a more even spread of development. Unbalanced development is not sustainable in the longer term, economically, socially or environmentally. More balanced regional development will contribute to sustainable long-term economic growth to the benefit of all our citizens.
Budgetary ProjectionsThe 2004 budgetary targets are as follows: an increase in gross spending on public services of just under 7%, bringing it to a total of €41,117 million; a current budget surplus of €2,989 million; a capital budget deficit of €5,795 million; an Exchequer deficit of €2,806 million; a general Government deficit of €1,635 million or 1.1% of GDP; and a debt ratio of 33% of GDP, the second lowest in the EU.
Sustaining ProgressOne of the provisions agreed in Sustaining Progress was that the report of the independent public service benchmarking body would be implemented. The Government will honour that commitment. If we wish to deliver quality public services we have to pay the salaries necessary for their delivery. The key to this agreement is the fact that there will be gains for both sides.
We now have a pay determination system which rewards public servants by reference to the market value of their work and does not depend on historical links with other public service groups. Furthermore, payment of the increases is conditional on industrial peace and progress on modernisation across the public service. Failure to deliver on these requirements will mean that payments will not be made.
A further national pay agreement is due to be negotiated in the first half of 2004. These negotiations will have to take into account the facts that the competitive challenge is more intense than ever; inflation has halved since the present agreement was negotiated; and in the case of the public service, significant increases are being paid under benchmarking. As a consequence, we need a significantly lower outcome in pay terms than was the case the last time.
Public SpendingPublic spending is at an all-time high. Since 1997, this Government has dramatically expanded public spending on social welfare, health, education and infrastructure. We were able to do this when very high levels of growth delivered strong revenue flows. Now, lower economic growth means lower revenue growth. Looking to the future, we are locking in the gains we have made, but future growth in public spending must match available revenues. Accordingly, future annual public spending increases will have to be kept very close to this year's level. This will mean annual expenditure growth in the range of 5% to 7%, depending on the actual level of economic growth at the time.
Infrastructural InvestmentI am determined to get more and better value for the funds taxpayers are providing. A more focused and planned approach to spending is required to deliver this extra value. A coherent, strategic and cost-efficient approach to capital spending on infrastructure is key to our future growth potential.
Between 1997 and 2003 we will have spent almost €28 billion in capital spending. In 1997 we spent €2 billion on capital. Next year we will spend €5.6 billion. This is close to 5% of GNP – double the rest of Europe. As a result, dramatic strides have been made in tackling our infrastructure deficit. The Government will continue the existing high level of capital investment, building on the progress we have made over the last seven years. The future success of our economy depends on investment made now.
Capital EnvelopesThe overall level of capital spending must be maintained consistently. We need to avoid sudden spurts which drive up contract prices, followed by lulls in activity. The objective should be an even flow of investment projects and obtaining real value for money as they roll out. With this end in view I am announcing today a major change in the financial treatment of capital spending. In recent years I have committed to a rolling investment programme or financial envelope in public transport. This has allowed for a structured approach to spending which has delivered results. I am extending this approach through the introduction of rolling five year multi-annual envelopes for all investment areas.
Deputies
Hear, hear.
Brown envelopes.
The envelopes include a commitment to keep the level of Exchequer-funded capital investment at close to 5% of GNP over the period 2004 to 2008 – a total of €33.6 billion. In implementing the new envelope system I intend to allow Departments to carry over to the following year any unspent Exchequer capital allocations up to a maximum of 10% of each annual capital subhead. This carry-over facility, which will take effect from the 2004 financial year, should significantly assist in the better planning and execution of those projects which span a number of years. The Government will monitor the implementation of this initiative for capital spending with a view to considering its wider application in time. Further details of this initiative and the relevant capital envelopes are set out in the budget summary.
Public Private PartnershipsThe inclusion of a significant provision for public private partnerships in the five year envelope will provide a strong incentive to Departments and agencies to pursue the PPP route on a value-for-money basis. The National Development Finance Agency will have an important role to play in advising Departments and agencies in this regard. I want to see an increasing proportion of public investment undertaken by the private sector, increasing from 3% of total spending in 2004 to 15% by 2008.
The Minister is looking after his buddies.
To complement the new capital envelope system I also intend to introduce significant changes in the area of public sector contracts for construction and construction-related services. There will be greater use of contracts in which more of the risks of inflation and other cost increases will be borne by contractors and this will ultimately give better value for money to the State. I also propose to move away from the traditional approach to hiring consultants on construction contracts.
Deputies
Hear, hear.
Currently, fees escalate with project costs and this does not give good value to the taxpayer. Greater use of the design, build and transfer model is necessary. I will be bringing forward more detailed proposals in this area in due course.
Local Government FundI am providing an additional once-off contribution of €30 million to the local government fund in 2004 to assist in the management of local authority finances next year.
The election fund.
This will bring the total 2004 Exchequer allocation for the local government fund to €453 million.
Deputies
Hear, hear.
The budgetary targets announced today for 2004 include a significant provision for borrowing by the local government sector. As we have done at central Government level, it is important that local government adjusts its expenditure ambitions to the resources available.
Education – CapitalI have also decided to allocate a further €30 million for school buildings in the primary and secondary sectors, which will bring the total capital allocation in those sectors next year to €387 million.
Deputies
Hear, hear.
On public service pensions, anyone who has followed events in Europe will be aware of the major upheavals that have occurred in several member states in addressing the pension crisis. Those states were unwilling in the past to plan for the demographic consequences of ageing. This failure to act in good times leaves them with no option now but to make substantial changes to the pension entitlements of everyone in the public service, not just new entrants. I will build on the initiatives I have already implemented in the pensions area by addressing the issue of public service pensions today.
Principles for Public Service PensionsThe issue of public service pensions was considered by Government as early as 1996, when a commission was set up to examine and report on all aspects of the matter. The Government approved the commission's report in principle in September 2001 and its recommendations have been discussed since then in various joint union and management forums. However, the time to act is now.
The Government has decided to implement the bulk of the commission's recommendations in the light of certain guiding principles. The minimum age for receiving a pension should generally be 65.
Generally?
There should be no compulsion in the pensions system for people to retire at a particular age if they are fit and willing to stay on—
Deputies
Hear, hear.
—and full account should be taken of the special nature of the duties undertaken by certain categories of public service employees, as recommended by the commission.
Measures affecting New-Entrants to the Public ServiceI will be introducing the following measures for new entrants with effect from 1 April 2004, except in those cases where for legal or technical reasons a later commencement date is required. The minimum pension age will be increased to 65 for most new entrants to the public service; this includes new entrant civil servants and teachers and staff in local government, the health services and non-commercial State-sponsored bodies; the present compulsory retirement age of 65 will be removed, enabling staff to remain longer in work should they wish, subject to suitability and health requirements; the minimum pension age will be increased to 65 for Members of the Oireachtas and office holders elected or appointed on or after 1 April 2004; the minimum pension age will be increased to 55 for new entrant gardaí—
They will be glad of that in Nenagh.
—and prison officers and in the case of new entrant gardaí the compulsory retirement age will be increased to 60, subject to annual health and fitness certification after age 55; a minimum pension age of 50 will be introduced for new entrant Defence Forces personnel; and the current minimum pension age of 55 for fire-fighters will be retained for new entrants.
The public service unions will be fully informed about the implementation of the reforms in advance of their introduction for new entrants on 1 April 2004. These changes do not in any way affect existing staff or pensioners. This is underlined by the fact that the Government has decided not to accept the commission's recommendations on the introduction of an additional 1% pension contribution for all public servants or the use of a new index for determining pension increases.
Pensions of Serving Staff including lower paidI am also proposing changes to the pension terms and conditions of serving staff, including amendment of the formula used for integrating public service and social welfare pensions to make better provision for current and future staff on lower pay levels. Such a change will also be of benefit to some existing pensioners. I will also be proposing a scheme to provide for a new single additional voluntary contribution scheme for the public service as well as the possibility of optional early retirement on the basis of actuarially reduced benefits, as recommended by the commission. The details of these and other proposed pension changes for existing staff are also set out in the budget summary.
TaxationThe resources available for tax reductions are limited this year. However, there are a number of issues which need to be addressed.
Indirect TaxationI propose to make only limited changes to indirect taxes in this budget. The goal of keeping inflation low takes precedence on this occasion. In addition, excise revenue has underperformed this year. There is also more uncertainty about the prospects for excise revenue in certain sectors during 2004. Therefore, a prudent approach in this area is warranted. I propose to increase the VAT-inclusive excise duty on cigarettes and other tobacco products by the equivalent of 25 cent per packet of twenty cigarettes. The VAT-inclusive excise duty rate on petrol and diesel will be increased by 5 cent per litre. These excise duties increases will take effect from midnight tonight and will bring in €243 million in extra revenue next year.
It is a stealth tax.
These indirect tax changes will add less than 0.4% to the consumer price index. We have been clear that increases in public spending must be financed either by tax measures in general or by charging the user where this is reasonable. The alternative is unsustainable borrowing.
That is not true.
Such borrowing is the ultimate hidden tax on the public, as we all found out to our great cost 20 years ago.
Deputies
Hear, hear.
That was the last time Fianna Fáil was in Government.
On VAT anti-avoidance, I propose to put beyond doubt the VAT law as it applies to the site element in transactions involving the construction of new houses and apartments. This will deal with an unacceptable interpretation of VAT law being propounded by some tax practitioners and will safeguard the revenues of the State in such transactions. The measure will take effect from midnight tonight.
Income TaxConsiderable progress has already been made in reforming our direct tax system in the past six years and adapting it to the changing needs of our society. Lowering the direct tax burden has in particular produced positive results in our increased ability to create and protect employment. Some may think that they can reduce unemployment by high tax-and-spend policies. However, any such reduction would only be temporary and would in any case be reversed as tax increases damage our competitiveness. We, on the other hand, have got unemployment down and kept it at low levels by keeping tax rates low.
This lesson should be learned by those who mistakenly call for us to increase the tax burden towards the levels of some other states in Europe. Such calls are misplaced and those who make them fail to see that job creation is the appropriate goal if we are to achieve real social inclusion. High direct tax rates destroy jobs sooner or later. The Government has no intention of going down that route now or in the future.
Employee tax creditTo keep the income tax burden low, especially for the lower paid, I propose to increase the employee tax credit by €240 to €1,040 per annum. This will continue to ensure that tax is not payable on 90% of the minimum wage and will remove 39,200 taxpayers from the tax net. I also propose to increase the income tax exemption limits for those aged 65 and over by €500 single and €1,000 married, bringing them to €15,500 single and €31,000 married. This will remove an additional 2,200 taxpayers aged over 65 from the tax net. The combined cost of these two measures is €287 million in a full year.
When will the Minister start the budget?
On tax reliefs, last year I announced the termination of a series of major tax reliefs from the end of 2004. Since then, I have been bombarded by demands to revisit that policy, especially in the case of one particular relief. Whatever one's stance on the merit of any particular relief, there are a number of inescapable facts about their impact.
First, they narrow the tax base and make it harder to pursue the goal of lower tax rates for all. Second, they raise issues of equity since not everyone has the disposable income necessary to avail of them. Finally, tax reliefs reduce the tax bill of those in the higher income brackets. This is equally true whether the tax relief is granted for film relief or for urban or rural renewal. Those who simultaneously decry this fact and at the same time campaign to retain certain reliefs should recognise the inherent contradiction in their position.
BES and seed capital schemeI have always made it clear that I favour targeted reliefs which produce clear economic benefits. One scheme that meets these criteria is the business expansion scheme, which is due to expire on 31 December 2003. Accordingly, I propose to extend that scheme, and the associated seed capital scheme, for a further period until 31 December 2006. I also propose to increase the maximum amount that can be generally raised by a company under these schemes from €750,000 to €1 million.
Film reliefI have reviewed the case made to me by my colleague, the Minister for Arts, Sport and Tourism, Deputy O'Donoghue, and I have decided that film relief will be extended for a further period until the end of 2008, and that the ceiling per film will be increased to €15 million from 2005.
Fair play to the champagne.
(Interruptions).
The Minister must be allowed to continue.
Future decisions will depend on there being no further abuse of the scheme. There should also be clear evidence that the film industry can develop on a firmer footing throughout the country and not just close to Dublin.
Other tax incentivesA number of other reliefs were due to expire at end-2004. I am aware that there is a range of construction projects either in the pipeline or under way which will be seriously affected by this termination date. As the end-2004 deadline approaches, pressure on construction resources will mount to deliver these projects. Accordingly, I propose to extend the termination date for all these area-based schemes until 31 July 2006, as set out in the budget summary. I am also renewing the relief for corporate investment in renewable energy sources until end-2006.
R & D tax credit/stamp duty on patentsIn line with my approach of favouring targeted reliefs that can produce economic benefits, I propose to introduce a tax credit for incremental research and development expenditure by companies. Under this proposal up to 20% of such expenditure may be set against corporation tax in any given tax year. The scheme will be reviewed after five years. Full details of the scheme, which is subject to clearance by the European Commission, will be set out in the Finance Bill. I also propose to exempt transfers of intellectual property from stamp duty in that Bill.
Headquarters and holding companiesI propose to exempt the disposal of subsidiary companies from capital gains tax and to expand the scope of our double taxation relief provisions for dividend income paid to parent companies in certain cases. Details are set out in the budget summary. I am confident that this measure will help Ireland compete internationally for headquarters and holding companies and will create additional high-quality employment in the years ahead.
Dental insurance reliefI propose amending the relevant provisions in the Finance Bill to provide tax relief at the standard rate for all insurance premia in relation to non-routine dental care. This will encourage dental insurance providers to enter the Irish market to meet the demand for such cover.
Trade union subscription reliefI also propose to increase the tax allowance for subscriptions to trade unions, from the current €130 to a new rate of €200.
They are all Fianna Fáil anyway.
I now refer to rural economy measures. Arising from the recent EU decision regarding the mid-term review of the Common Agricultural Policy, I am improving the income tax relief for certain farm leases so as to encourage better utilisation of our agricultural land resources. The exempt annual threshold for leases of five to seven years is being increased from €5,079 to €7,500. For leases of seven years or more, the exempt annual threshold is being increased from €7,618 to €10,000. In addition, the age limit for qualifying lessors is being reduced from 55 to 40 years.
The scheme of capital allowances for investment in farm pollution control measures is also being extended for a further three years to end-2006. The farmers flat-rate VAT addition is being increased from 4.3 to 4.4%. I propose to provide an income tax exemption in respect of income received by Gaeltacht households under the summer college student scheme. Such income is already disregarded for social welfare means test purposes. My colleague, the Minister for Agriculture and Food, Deputy Walsh, will make an announcement later today on animal disease levies.
We will not touch the Opposition.
The programme for Government proposed the establishment of a rural social programme to provide secure, community-related, employment opportunities for persons in families eligible for the farm assist scheme. I am pleased to announce today that my colleague, the Minister for Community, Rural and Gaeltacht Affairs, Deputy Ó Cuív, is proceeding to establish a rural social scheme to help improve rural services in a more efficient way and at the same time to provide an income for small farmers with a working week compatible with farming.
It is estimated that the net cost of the new scheme would be relatively small given that participants will be in receipt of an existing payment from the Department of Social and Family Affairs. Net new funding of €10 million, to include the additional payments to individuals and the cost of materials, is planned for the scheme and the dormant accounts fund will fund this. It is estimated that this could provide for up to 2,500 places. Details of the scheme are set out in the budget summary.
Social inclusionSince 1997, the Government has substantially reduced consistent poverty and improved living standards for all. In this budget there will be substantial additional funds for those who are most in need.
Persons with disabilitiesI am providing an additional €25 million current expenditure in 2004 to support persons with intellectual, physical or sensory disabilities. This funding will be used to provide additional emergency residential placements and extra day services, especially for school leavers, and to enhance health support services for children. My colleague, the Minister for Health and Children, Deputy Martin, will be allocating capital funding for these services from within his 2004 allocation.
Social WelfareThe improvements in social welfare payments announced today will amount to an additional €630 million in a full year, that is, €100 million greater than last year. Despite all the talk after the publication of the Abridged Estimates volume, the total social welfare expenditure will be €750 million higher than in 2003, an increase of more than 7%.
As my colleague, the Minister for Social and Family Affairs, Deputy Coughlan, explained previously, expenditure on various social welfare payments is evaluated on an ongoing basis. Arising from this process, the Government decided regarding the 2004 Estimates to implement a number of measures to ensure the different schemes will continue to meet their objectives. The Government is prepared not just to evaluate public expenditure but to make the necessary changes. The resources which are freed up as a result can then be used for more effective social welfare spending. This is precisely what I am doing today.
Increases well ahead of inflationAll the increases in the social welfare adult personal weekly rates I will announce today are well ahead of the rate of inflation. They range from 6% to 8% and in the case of the lowest social welfare payments, are more than three times the expected rate of inflation.
Old age pensionToday I am increasing the full rate of old age and related pensions by €10 per week. This will bring the old age contributory pension to €167.30 per week. The new rate for the old age non-contributory pension will be €154 per week.
Widows and widowersI am providing a total increase of €11.50 in the weekly rate of the widows and widowers contributory pension for those aged 66 and over, to bring the rate of payment up to that of the old age contributory pension. For widows and widowers aged 80 or over, the new weekly rate will be €173.70.
Child benefitThe Government has significantly increased the rates of child benefit in recent years. In 2004, the monthly rate for the first and second child will increase by €6 on the 2003 rate and the rate for third and subsequent children will increase by €8.
Other weekly welfare payments and qualified adult allowancesAll other personal weekly social welfare rates will be increased by €10 per week.
It is not sufficient.
This will bring the lowest full personal social welfare rate to €134.80 per week. The full qualified adult allowance rates will increase by at least €6.60 per week. I am also providing for a special increase of €16.10 per week in the invalidity pension qualified adult rate, where the qualified adult is aged 66 or over, to bring it to the old age contributory pension equivalent. Proportionate increases will be paid for all persons in receipt of reduced rate weekly social welfare payments.
Other Social Welfare measuresThe budget summary contains a range of other social welfare improvements, the full details of which will be announced by the Minister for Social and Family Affairs. Among these measures are: an increase of €28 per week in the family income supplement income thresholds and a €7 increase in the minimum payment; an increase in the weekly income disregard for means assessment of the carer's allowance scheme; a further increase in the annual respite care grant provided to carers, bringing it to €835 per annum; and an increase in the widowed parent grant to €2,700. The increase in this grant will come into effect today and the effective payment dates for other increases in 2004 will be the same as this year. The very substantial real increases in social welfare rates which I have just announced are a considerable down payment on the implementation of our commitments under Sustaining Progress.
Concluding RemarksIreland has survived the economic downturn better than most other countries. This has not been without cost in terms of falling incomes and job losses for some, and disappointed expectations for many. The Government acknowledges this and the pain it has involved. The future, however, is now more hopeful and economic recovery worldwide offers a more optimistic prospect. The Irish public has accepted the need for fiscal restraint. We should all understand the need to avoid excessive borrowing. Borrowing is the real stealth tax. We need to limit our spending to what we can afford. We took decisive action on the public finances which was not without political cost. This is the correct thing to do, even if it is not politically popular. We intend to see this principle through but we will do so with responsibility and concern, as we have shown today.
We have in this budget protected the weaker sections of the community through substantial real increases in welfare payments. We have improved the tax position of the lower paid and consolidated the gains of low inflation.
Who paid the price?
(Interruptions).
The Minister without interruption.
We have introduced measures to foster enterprise and to protect our jobs base for the future. We sought to spread the fruits of growth on a regionally progressive basis, especially through our programme of decentralisation. We have unveiled a scenario for a sustained and prolonged level of significant capital spending to bring our infrastructure up to the mark. We have taken decisions on pensions which will help lower paid public service pensioners. We have also taken decisions on pensions for new entrants to the public service, which will safeguard pensions for all in the longer term. All this means that, given no major external shocks, we can look forward to more growth and more jobs in our economy, a better deal for all in society, better public services focused on delivery, a quantum leap in the quality and extent of publicly provided infrastructure and a better jobs balance through decentralisation.
This budget is a key step in achieving all of this. I commend the budget to the House.
(Interruptions).
Deputy Richard Bruton without interruption.
The House will be aware of the current consumer campaign on radio stations which is advising people to "know the price or pay the price". It could have been devised for this budget. The price of the budget is not what we see today. The price of the budget will be found in the continuing stealth taxes people will witness over the coming months. It will be found in the squeeze on services for people at the very bottom of the pile. People who depend on public services for survival will be squeezed as a result of the budget. The cost of benchmarking will amount to €1,000 per household.
The superficial smiles of many on the Fianna Fáil benches will soon fade away as the reality of the budget strikes home to ordinary families and ordinary businesses who are trying to make a go of living in Ireland, the Ireland the Government has created, the rip-off Ireland which has become the most expensive country in Europe. The Minister said we should expect social welfare recipients to be grateful for €10 a week to keep them going in rip-off Ireland. That will not go very far against the background of the stealth taxes we see day after day from the Government, including increases in bus fares, electricity prices and motor tax. Each day there is something fresh and the budget perpetuates it.
The Minister has allocated crumbs to the local authorities in an effort to calm the nerves of backbenchers, some €30 million to try to make up for the additional costs this year. This will mean increased bin charges, increased rates and the development charge. The question is who benefits from the budget. Whose quality of life will be markedly improved by the budget? The answer is no one's. One will have to look long and hard to find any section of the community, either the young, those looking to public services for help or those needing care who will benefit from the budget. The budget is not about people, it is about keeping the system going, farming it along and feeding it just to mark time.
Ministers boast of millions spent. The public does not care about how many millions are spent. They want to see what was received for it. Sadly if one looks at our public institutions, hospitals and schools one will see that little or nothing has been obtained for what was spent. The old saying, "Never attribute to evil what can be explained by incompetence," applies in spades to this Government. It was not through malice the Government said it would end the hospital waiting lists in two years and put 2,000 extra gardaí on the streets. Those were laudable ideas but were not thought through. There was no planning and they were not budgeted for and, ultimately, it proved they could not be delivered. This is the sort of approach that has cheapened the currency of political debate. Given that an election is on the sidelines next June, decentralisation is produced like a rabbit out of the hat. Decentralisation is supposed to solve all problems.
A Deputy
Is the Deputy against it?
When one looks at the small print €20 million is all that has been set aside to deliver decentralisation across the community. How far will that go? Will this be another pipe dream like the many we had heard announced from those benches before?
Donie's offices.
The sad reality is that the budget is the product of a lack of courage. It is the product of soft option politics, the politics that ducks responsibility, that puts off decisions, that sees opportunities but just does not bother to make the extra effort to take them on. This is a Government that has no interest in planning, reform, financial controls or accountability for outcomes and now we are paying the price. At the end of those years of Celtic tiger boom we survey the wreckage of dashed hopes for many who look to the State for leadership, who have lost trust that this system is able to serve us at all.
The budget was flagged as a strategic budget. This was a Minister who was going to lay down the foundations for the future. What is strategic about a budget that has failed to reform any of the spending systems that have delivered so little, absorbed so much money and delivered nothing in return? What is strategic about an economy that leaves the greatest rewards for the land speculators, not those who roll up their sleeves to employ people in exports and services who struggle to get by under the influence of Government stealth taxes? No, it is not them, but land speculators who are to get the greatest rewards in this new economy where we are building foundations for the future.
It is not laying any strategic foundations to leave 70,000 children in deprivation. Today €1.30 per week is provided to lift them out of poverty.
How much did they get last year?
It is a joke, against a background of so many children whose lives are blighted by deprivation and the lack of opportunity to succeed in school. That is not laying a foundation for the future. That is an insult to people and a product of soft option politics. Young families who should have been the seedbed for the future are being asked to fund not only child care out of the €1.30 child benefit, which is costing them out of the pre-tax income €400 per week, which was bad enough, but they are being asked to pay a development levy if they buy a new home. This is a levy to make up for the Government's failure to anticipate infrastructural needs and provide for them. Who are we asking to pay for this?
Builders, developers and speculators.
We are asking young families forming their new homes to pay. We are asking small businesses trying to set up something fresh to pay these development levies for the mistakes of many years. Our exporters are struggling in the face of an 8% drop in the prices they are getting this year. What has the Government done? It has increased the price of Government services by an average of 15% across the board and in many cases way above that amount. This is not creating the sort of future we want.
The Minister announced he would borrow €1,300 million to buy foreign shares on tick and he calls that providing prudently for our future pension needs. There is no prudence in this approach. Essentially the budget is misusing the valuable assets for our future. We should reward real enterprise, give children equal opportunities, help young families through those tough formative years, ensure export businesses can remain competitive, put aside savings to meet future needs and not borrow on tick. This is not the strategic view that the Government takes. The only strategic view it has in mind is the strategic view of electoral politics.
One will search in vain in the budget or the Estimates for any serious sign of reform. The effect of the funding system is that many hospital managers today trying to stay within budgets are mothballing hospital beds that are needed to treat the thousands on hospital waiting lists. They are put into cold storage. The facilities are not worked more efficiently or made to get more patients treated but are mothballed because of the type of financial provision over which the Minister has presided.
Hear, hear.
We will not see any reform or dismantling of bureaucracies or penalties for non-performance in these Estimates but we will persist with the top heavy approach that has characterised the two previous budgets of the Minister. This budget has no answers. It has no answers to rip-off Ireland which has taken a firm grip with the Government as its godfather. It has no answers to our ebbing international competitiveness, dragged down by Government costs, which is destroying jobs. It has no answer to the crisis of caring for many families throughout the country who are trying to cope in a difficult climate created by present policies. We look to the budget but there are few answers.
After last year, when there was no indexation or increase in the tax credits or in the cut-off income points, we expected the Government would do so this year. Once again there is no increase in the standard rate cut off point or in personal credits. The only change is in the PAYE credit but it has fallen far short of what the Government said it would be. It said it would take all those on the minimum wage out of the income tax code, but that would have required an increase in the PAYE credit of €520. It did not go half the distance to do that. The Minister has marked time in regard to those at the bottom of pile, those on minimum incomes.
As a result of the budget, instead of 20% paying the top rate of tax, next year one third of the population will be pushed into the top rate of income tax and more families will have to pay at the top rate of income tax, not because they are prosperous or doing well. They still continue to pay the stealth taxes because the Minister will not increase the tax allowances. He wants inflation on his side to take money out of people's pockets which he has not the courage to do directly. They will suffer.
It was a pathetic effort to give a little over €1 to deal with the many problems children face. For those at the bottom, many expected the child dependant allowance, provided to those on social welfare, and the family income supplement, the support for those on low incomes, would be the object of an increase, that at least he would give to those at the bottom of the pile when money was short. However, they did not get a penny. After ten years there is no addition for the support of children.
The Deputy is wrong about that.
Once again the Minister will turn to the consumer. Through a series of indirect taxes he will add 0.4% to inflation.
The Deputy has changed the script.
If we are judge from his prediction last year when he said it would be less than 1% when it turned out to be 2%, we can expect the impact on consumers will be substantially greater than he pretends. Those who look to the budget for some relief in trying to get on to the housing ladder will find nothing to assist them.
The Minister is like one of the racing set who has a poor horse in his stable. He is good at talking up the pedigree and can turn him out well in the parade ring but when he gets out on to the racecourse one sees what will happen. The voter is supposed to be blinkered. The consumer is the one who will be saddled up while the punter is skinned.
Hear, hear.
This budget is no "Seabiscuit", and I say that for those who are interested in films. The reality is that the jockey who created the budget should be before the stewards for excessive use of the whip. We will have the chance to see this jockey and his team go to the jump outing in the local elections next June. Perhaps the electorate will have something more to say when they try to cross that hurdle.
The electorate will have time before June.
Deputy Conor Lenihan should go outside. The Evening Herald reporters are waiting for him.
What is the name of the horse after that tortuous analogy?
The sad reality is we are experiencing the legacy of the "get out and party" years. Never did a Government spend so much to achieve so little. It had a golden opportunity to spend. There is a significant figure in the budget. After the Minister made his budget speech in 2000, he was able to look forward to the following three years in the expectation of a surplus of €6 billion. That was a sound financial position in which to be. That was before the general election spending spree began. What do we see now as we look three years ahead? We see a deficit of €9.5 billion. That turnaround of €15.5 billion reveals much about the way this country has been managed and run in the intervening period. This is the legacy of the "get out and party" years in euros and cents. The public is paying a high price for that. We see the inevitable outcome in the budget.
The Minister for Health and Children will no doubt boast that, at €2,600 for every person in the country, he has one of the highest levels of expenditure ever. He has 30,000 more staff on the payroll, yet he cannot even guarantee help for someone in an emergency in our accident and emergency departments.
Shame.
Despite employing 30,000 extra staff, how come he did not anticipate that the equivalent of 2,500 junior hospital doctors would be removed instantly from the system as a result of the EU working time directive? He did not think or plan ahead. No provision was made for this impact on the doctors serving our patients. Bureaucracy was expanded but there was no focus, even on areas where it was felt the impact approaching. No provision was made.
The Minister will boast to many that primary care is key and that we must ensure that people have access to primary care and do not impose a burden on the hospital system. However, someone earning less than the minimum wage will not qualify for a medical card if he or she has a child and an adult to support. What sort of country is it that tells people at the bottom of the pile that they must pay for their medical care?
Even if they are on social welfare.
There is no product out of the many millions of euro the Minister says he has spent on health.
Shame.
Everyone in the House knows that. The same is true of transport. The Minister for Transport will boast that he has €3 billion for Dublin transport, but we have no coherent transport leadership, no competition in the system, inept project design, and wanton disregard for the congestion costs that are loaded onto businesses and ordinary individuals day after day. The money is spent but there is very little to show for it.
The former Minister for Justice, Equality and Law Reform who advocated zero tolerance had big budgets for so many years, yet the criminal justice system has never been at a lower ebb than it is now when criminals thumb their noses at the State, and gangland murders, vendettas and the code of omerta characterise the workings of the justice system.
When will the Deputy speak on the budget? Will it be later on around midnight?
(Interruptions).
There are none so deaf as those who do not wish to hear.
The Minister for zero tolerance has come alive. Maybe he should speak up. He has been very quiet for some time.
Allow Deputy Bruton to speak without interruption.
We can understand the Deputy's difficulty.
He has gone back two general elections.
Many people who are surfing their channels and considering their viewing options may have tuned in to see what is happening in this Chamber. Perhaps they will find something more familiar. They might have been looking for "The Simpsons" but will find mischievous Bart, having smilingly knocked off the Punchestown candy store when he thought no one was looking, now brushing aside his critics with the usual caustic Bart comment "Eat my shorts". That is the sort of approach the Minister has adopted in this budget.
The Deputy will never be a comic writer. He needs a shorter sentence than that. He should make it snappy.
In other words, it is a good idea but a bad budget.
What does Deputy Bruton think of the budget?
The Taoiseach is responding. The poor hapless Homer of this Government is responding. The people look to him to exercise control over the Minister but he is more likely to be down in Moe's.
The Deputy should stick to one-liners.
I do not know what happened to poor exasperated Marge. She does not seem to have turned up today.
The Government has had unique opportunities to make an impact on many of the services that matter. The most recent was in benchmarking which is a debacle that has undersold the wonderful talents of many people who work in our public service. It was to be unique. It was not simply a matter of paying for industrial peace or co-operation with change because those were a feature of all previous agreements. Benchmarking was new and different and involved paying on the basis of hard evidence of gaps between the public and private sectors and a serious agenda of reform that would transform the delivery of public service. This made benchmarking special, a great opportunity that we would have expected our Progressive Democrat friends in Government to welcome as an opportunity to reform or be redundant, to paraphrase the Minister for Justice, Equality and Law Reform.
The Deputy should look at the prison service.
What happened in that case? Where is the agreement on benchmarking? I have read the Sustaining Progress document and there is no agreement negotiated by Government to deal with this area.
The Fine Gael Deputies cheered for benchmarking.
Instead of negotiating an agreement as he should have, the Minister for Justice, Equality and Law Reform is now going about it in the only way he knows: making provocative moves and trying to insist on getting his way. You had an opportunity to use benchmarking—
We are doing something.
Deputy Bruton, if you addressed your remarks through the Chair, you might not invite interruption.
Here was a golden opportunity to transform the way our system works and deliver the sort of changes in the health service that the Minister for Health and Children wants but is unable to make.
We are doing it.
This was a golden opportunity and the Government fluffed it. No reform agenda was pushed, no hard evidence was released, no union was pushed beyond its established positions in the Sustaining Progress negotiations, and the Minister for Finance knows that. The action plans that emerged were a re-statement of the change and modernisation programme that has always been under way in the public service. The fault does not lie with the trade unions, the performance verification groups or the public services which are trying hard to work within their systems. The fault lies squarely with the Government which had the opportunity and fluffed it.
It is said that it is far better to have a firm anchor in complacency than to put out on the troubled seas of reform. That is a very apt phrase for this Government.
Who wrote that?
The sad aspect is that underlying the budget is the formation of the Estimates. Some ask if there are great economic principles behind the Minister for Finance and the seventh chapter of his budget. Is he a Keynesian, leaning against the business cycle? Is he a Friedmanite believing in automatic correction and that nothing needs to be done? No, his approach beats to the electoral cycle. His principles are those of the hog cycle: fuel the boom, suck poorly informed people into taking a chance and, when it gets difficult, renege on the promises, pull all the credit lines and let the innocent be crushed. That is what we see in these Estimates.
How patronising.
As the Minister knows, the public pay in these Estimates has absorbed all the available resources. We have stripped away the small discretionary amounts that were available and would have trickled down to people at the bottom.
That is not so.
After the amount provided for public pay was removed, all that was left for non-pay items was €720 million.
Why does the Deputy hate the public sector?
What would John A. Costello or William Cosgrave say if they heard Deputy Bruton today?
Almost all this was committed in contracts.
Please allow Deputy Bruton to speak without interruption.
The Minister of State, Deputy O'Dea, does not like to hear the reality but the axe has fallen in these Estimates on places where it never should have. Who can defend the removal of the crèche allowance for poor parents who are trying to give children at risk of dropping out of school a chance? Who can justify cutting back on diet allowances for people who have special dietary needs? It cannot be justified.
Deputies
Hear, hear.
That is not happening.
Who can claim it was right to constrain the opportunities to return to education or to go on community employment schemes? I do not see the Minister of State with responsibility for that area in the Chamber. He is notably absent.
He has lost the battle.
He has lost the battle and deserted the ship.
He should look out. The people are marching on Government Buildings.
Carers have been sold short again in this budget. One of the innovations the Minister introduced in his budget a few years ago was the home carer's tax credit. Maybe he did it grudgingly after a lot of pressure from backbenchers, but it was an innovation, a recognition that people caring in the home deserve some recognition in our tax code. What has happened to that tax credit? It was not increased this year or last year. That helps to show what is happening to carers in our community today. I see the situation every day of the week. Home care and respite care are being cut back. All the services which go to make the life of people trying to care in the home a little easier are being cut back. That reality will be exacerbated by today's budget and the Estimates that lie behind them.
We will also see behind the Estimates many other cuts not yet visible. Scarce hospital beds will be mothballed. Long-stay places will be rationed. As we have seen this year, that will build up into our accident and emergency departments which are in chaos and cannot cope with the strain. It will mean that families who care on a 24-hour, seven-day per week basis will be denied respite care. We have seen that this year and will see it again next year. Do Ministers and backbenchers take us for fools when they set off on their little life rafts, promising to save accident and emergency services? They are mighty mice in the constituencies but church mice trooping into the Dáil lobbies when they come to Dublin.
Deputy O'Dea should note that.
The tragedy is that as these backbenchers sheepishly climb back on board, having abandoned their life rafts, they find a captain issuing increasingly garbled orders, his compass broken, searching the horizon for "geographics and demographics" that might provide a rescue for him. That is the sad reality that many face.
Is this the nautical section of the Deputy's speech?
Deputy Bruton without interruption, please.
The aerial section should be Deputy McDowell's area.
The Minister for Justice, Equality and Law Reform should know a lot about one-party government. Are we to protect it? No thanks. The Minister and his colleagues have become the godfathers of rip-off in this society. We have waited a long time to see addressed some of the issues which the Minister's party has espoused. He says we need competition and more vigour. We need to take on the lawyers with restrictive practices. We need to reform many of the restrictive practices holding back our economy.
All the things the Deputy's party never did. Let him look at the empty benches behind him.
What has happened? The Government has produced report after report. One report encourages another. That is the reality.
More jobs have been created. We have the highest level of employment.
What about more jobs in the Garda?
Deputy Bruton without interruption.
The Government has looked on while Ireland has become the most expensive country in Europe. The Government huffed and puffed about protecting people from rip-offs and was then found wanting. In these Estimates we see health charges up by 42% since the general election, an incredible increase. Government utility prices are up by 20% since the general election. Electricity charges are up 21%, gas charges up 10%, railway fares up 15%, bus fares up 17.5%, including the latest increase, postal charges up 17%, and television licence fees up 40%. These are the significant increases the Government is imposing on people while it expects businesses competing in international markets to survive in areas where prices are falling. The Government is living in a different world.
We need more gardaí.
I do not know if the Minister has been reading the report on competitiveness published recently. Ireland is falling way behind on competitiveness in all the areas for which the Minister and his colleagues have responsibility. In this survey, Ireland ranks 15th among 16 countries for consumer prices, 12th among 13 for broadband, 13th out of 16 for insurance, 16th for research and development spending, 16th for recycling, 15th for infrastructural quality, while for speed of delivery we are the worst capital city in the world, apart from Calcutta, which got in ahead of us.
We are bottom of the class.
That is the Government's record.
That is the record the Government seeks to defend – the record of the reforming Government.
Let the Minister answer that.
The Government is living in a world of its own. It is ordinary people who will carry the cost. We need to focus on competitiveness. The challenge of competitiveness is a key challenge for us today. The Minister will say he has responded to this with his five-year envelope for capital projects. We had these envelopes before. They were called the NDP and they ended in a shambles, being already 60% over cost, and two years behind plan. Providing an envelope and promising spending in that way does not change the reality. We want to see value, to see projects brought in on time and on budget. There is no such commitment or approach forthcoming from the Government.
I see PPP coming in. Public private partnership is supposed to be the new solution. In 2005 and 2006 the Minister is looking for PPPs to rescue him and come up with €1 billion. I would like to see the small print. So far the Minister has refused to release any information about these PPP projects so they would be open to scrutiny by this House. PPP projects may take borrowing off the Government's balance sheet but by God they put it on the consumer's balance sheet, with consumers having to pay exorbitant tolls at a time when the Government can borrow at a rate of 5%. These PPP funders are looking for 15%, three times the rate. This is not a remedy for our infrastructural deficits.
It is another rip-off.
It is another soft-option approach to the serious problems we have to address.
The five schools were also a PPP rip-off.
According to the world competitiveness report we have slid from fourth to 30th place in the space of two years. If that was a football league in which we had slipped like that, we would not even be in the second division, but the third.
The manager would be sacked.
The manager would be long gone, and his entire team with him. Here, these managers and teams cling on regardless.
What are the problems of business leaders, according to the surveys? According to each one, the issues are the same. They are transport and congestion, broadband access and insurance costs. They are the problems for which the Government is ultimately responsible. We have lost our lead in telecommunications and in e-access. We have ceased to be a leading country. I welcome the belated recognition of research and development, but we are now in 38th position for technology in the competitiveness ranking. In technology, we lie behind all the new EU applicants. We hope to build the future of the country on high value-added jobs, but under this Government's watch we have allowed our lead to fall away in those vital areas.
There have been a lot of panic attacks by the Minister regarding tax breaks. I am pleased that film relief has been given a reprieve. Perhaps the Minister hopes that his seven chapters will be made into a film. I welcome that worthwhile change.
The Deputy has ten minutes left.
Deputy Lenihan got his instructions.
I looked in vain for the resources that were to be used to implement the Ombudsman for Children Bill 2002. I though Deputy Lenihan was going to put up a battle for resources for vulnerable children, many of them come from the same small number of deprived districts in Dublin city. I thought we would have seen a real battle to get resources for them, but this budget has produced no such response.
Shame.
What is notable about this budget in that in the areas where we need resources, none have been provided.
They were provided for in the Estimates last year.
The Deputy admitted on television this week that the resources are not there to implement any of the family conferencing plans or other needed initiatives.
Deputy O'Dea should stick to the arbitration.
Minnie Mouse is there.
Deputy McDowell was instructed to heckle and is not doing so. He got his instructions and should follow them.
Deputy Bruton without interruption, please.
One of the groups for whom we thought we would see some recompense in this budget, but did not, is the substantial group of people on housing lists. I give the Government credit for coming up with the good idea of affordable housing. I would have expected to see in this budget an effort to get this project off the ground. However, four years after the idea was introduced we have produced only 1,450 affordable houses against an estimated 60,000 people per year who are looking for homes in the affordable category. Fewer than 1% of the houses needed have been produced. No serious effort has been made to reform the delivery of housing. The Government seems to be quite satisfied to stick with the unreformed system of zoning and hoarding of land which is pushing up prices and making it more and more difficult for young families to get on to the ladder of home ownership.
Today, we are seeing how the basic principles of prudent public spending were allowed to rust over in those heady years between 2000 and 2002 when any project would go. The ESRI tried to point out to the Government the follies of its approach. The institute pointed out poor project selection, poor cost control, vast overruns and expensive facilities funded by the State lying idle in Birr, Mullingar and Blanchardstown. The ESRI pointed out that the Government needed to get its act together in the management and delivery of public spending. The response of the Minister for Finance was like that of the old Roman emperors who, when they heard a message they did not like from the war front, decided to kill the messenger. Every effort was made to undermine the honest scout who was trying to tell Ministers that competence was required. If we want to address the needs of this country we must be competent in the management of public money. The ESRI got little thanks for its efforts.
Let no one imagine that the damage being done by undermining financial controls is trivial. This is the sort of thing which, in an international economy, quickly transfers into international confidence. We depend on low interest rates and on international confidence. The Government's approach has damaged that confidence.
Last week, the Minister sat down with his fellow finance Ministers to deal with the issue of the currency and those who would not abide by currency rules. They have been playing fast and loose with serious issues for ordinary householders who need low interest rates if they are to continue to afford their mortgages. When Ireland assumes the Presidency next year the Minister for Finance must ensure that there are workable rules regarding the Stability and Growth Pact and that they are enforced. He has not made a good start in that regard.
The Punchestown disease has damaged the authority of the Minister to manage the other spending Departments and to insist that they take a sensible approach. He will leave that sad legacy behind.
Today, we see €1.4 billion put aside for the pension fund. Here was money that I would have expected to see this year going to fund projects. There is no point in borrowing money to buy foreign shares when our infrastructural deficit is crying out. Nor is there any point, as the Minister has done since he introduced the pension fund, of cutting down on public savings. If one wants to provide prudently for the future one must set aside money to save. Instead, the Minister has visibly and rapidly cut the savings rate undertaken by the Government. This undermines the way in which we provide for our future.
Even in the area of tax, where the Minister might say his record is strongest, we see that his capacity to continue reforming the taxation system has run aground. I take off my hat to the Minister for introducing the tax credits system. That system ensured that reforms in taxation could be made equitable and that everyone would gain fairly. No sooner had he introduced that system to share the benefits fairly than he plunged down the road of the special savings accounts, designing a €3 billion tax giveaway, not to be shared fairly across the board but only by those who could afford to make the savings. That approach meant that his valuable reforms turned to sand. Each year since, there has been no increase in tax credits. The tax credits system was a vehicle for real reform to make our taxation system fairer but it has not been seized. On the contrary, many people have lost faith in the fairness of our tax code and do not see any changes today to make it more fair.
Many people live overseas for 183 nights of the year and pay no tax in Ireland. Where is the fairness in that? Where is the fairness in a tax system which allows mega-directors to bring home invaluable art belonging to their companies, set it up in their homes and pay no tax but expects an employee who takes out his van in the evening to buy a pint of milk to pay tax on that benefit in kind? There is no fairness in such a tax code and we need to start reforming.
We need to make sure that those who are availing of tax shelters, and some tax shelters may have valid reasons, at least pay a minimum amount of tax. We should have seen a move in this budget to ensure that people who avail of tax shelters will, at least, pay 20% of their incomes into tax if those incomes are very high.
The untouchables.
There has been no reform to bring a sense of fairness into the tax code. The budget will see one third of small income earners pushed up into the high rate of tax, but it will not address the need to create a fair tax code. This has been a missed opportunity.
Reform could have been the hallmark of this budget. We could have begun a budgetary process early this year to restore principles of sound finance to the way we manage our funds. We could have gone back to the old virtues of sound evaluation, only paying out money based on principles of cost effectiveness. This would have been the complete opposite of the Punchestown approach adopted by the Minister. That should have been a bedrock issue in this budget. We should have seen a vigorous programme of reform on the back of the benchmarking opportunity. Public service reform could have delivered value. We should have seen a determined effort by the Government to champion the cause of consumers and not to continue to take money out of their pockets to pay for the misspent years. We should have seen a determination to restore fairness and balance to our tax and welfare codes. Instead we have left people at the bottom with precious little to survive on and we have done nothing about the clear inequities at the upper end of our tax code.
The untouchables.
We should have seen a move to strengthen the position of families as they try to cope with the burdens of caring for young children or for people who are incapacitated, but no effort has been done to do this.
The budget answers the question of the sort of Ireland we want. The response of the Government is a jaded one characterised by political opportunism, poor management and lazy responses to difficulties. Ordinary people will pay dearly for this approach. The Government is like a candle guttering and burning out.
We heard a mercifully short budget speech, as the Minister had predicted. The budget was short on ideas and short-sighted and the public has been short changed. This budget has one item of big news, which the Minister did not mention. This year again, he has implemented the biggest stealth tax of all. By freezing the standard rate tax band he has ensured that tens of thousands of workers will be moved on to the higher rate of tax.
Last November the Minister answered a question of mine which showed that in 2002 27% of workers were in the top tax rate category, while this year 30.5% pay the top rate. In his Budget Statement the Minister said that last year saw an increase of 53,000 workers paying the top rate of tax while this year 62,000 workers will move on to the top rate. That is the biggest stealth tax of all and the Minister has not even spoken about it. One third of all taxpayers will pay the top rate of tax.
This is new Labour. They are only interested in high taxpayers. What about the social welfare increases?
Deputy Ahern should go and build a few houses.
The Minister of State should go and play with some of the 10,000 houses that are supposed to have been provided. Apart from this it was a budget of silence. It was silent on health care, education, crime, medical card holders and child poverty, with an increase in child benefit of €6 a month that would not buy a packet of Pampers. It was also silent on the savage 16 cuts.
However, there are goodies for all in the programme of decentralisation. We have heard about it every year since 1999 and twice in an election year. We can expect decentralisation to be talked up as much as possible between now and the local elections and then the great silence will fall again. Is that the best the Minister for Finance can do? There are no indications in the budget that the Government has a grip on our country's economic and social future.
I hear that all Ministers will receive bright new Mercedes cars. It is a pity that the policies are driven by the same old clapped out Progressive Democrats banger that seems to be driving the Government. This Administration squandered the boom and now seems set on frittering away the chances offered by the international recovery.
The Minister referred to tax and spend. He is a tax and spend Minister of a unique kind. He taxes unfairly and spends unwisely
Hear, hear.
Our young people travel the world to Hungary, Australia and the United States. They go as ambassadors of the Celtic tiger from one of the richest economies in the world. They see the infrastructure in eastern European countries and elsewhere – the trams, trains, roads and public facilities. It is no wonder that they are angry and bemused on their return to this country where two hour traffic jams are routine and there is no sign of them being seriously sorted out.
In this budget and the previous one the Government engineered a major shift in tax policy. In its first term it reduced personal taxation through lower rates of income tax. Now it has reversed engines and is increasing taxes through indirect and stealth taxes. The coming year will see another round of increases in such taxes. The House was informed about the increase in the price of duty on petrol today.
I remind the House of the Minister's creations of last year's budget, Duncan and Mary, his own special fictional couple. They featured in last year's budget as the typical couple with two children who would benefit from modest tax changes. This year they are replaced by Joe and Sarah, on page C20 of the Budget Statement—
They are the next door neighbours.
—if anyone wishes to look at what has happened in "Neighbours" to Joe and Sarah, the people next door to Duncan and Mary.
A Deputy
Duncan emigrated.
They will not be having a Christmas party on what they were given today.
Duncan left the country.
Duncan and Mary have disappeared this year. The Budget Statement is strangely silent on stealth taxes. There is no mention of the cost of in-patient accommodation in hospitals which has risen 25% in 18 months. The cost of a visit to an accident and emergency department has increased by 42%, the drugs payment threshold by 46% and VHI subscriptions by 27% in the same period. So-called college registration fees have increased by 89% and motor tax by 17% since the general election. The list includes gas, ESB, and television licences. Bus fares will be increased by a further 4% to add to last year's 10% increase. There are petrol price rises and other increases in the budget.
The key points of the Minister's policy shift is that these stealth taxes are regressive. The poor and those on low incomes will spend much more of their income on these. As far as the Minister is concerned, the more one has, the more one receives from the budget and the poorer one is, the more is taken away.
It is a budget for the well-off.
I draw the Minister's attention to Joe and Sarah and people like them. The percentage of deductions from gross income for 2003 was 15.5% compared with next year's 14.9%. When stealth taxes are deducted, such people will be considerably worse off and more of them will pay tax at the top rate.
For five of the six budgets presented by the Minister for Finance, he redistributed income upwards. It was a unique achievement but he did it. Will the Minister consider the families on low incomes and those who work and take home very modest wages? I want a pro-work and a pro-opportunity economy. The Minister has little to offer to people who take home very low wages. Once again he has failed to take those on the minimum wage out of the tax net.
The Government seems to have little or no interest in working people on low incomes. It has repeatedly made commitments on this issue but failed to deliver. Neither has it explored other avenues for dealing with the problem of low pay within the tax and social welfare code. It was agreed in Sustaining Progress that the national minimum wage would be increased to €7 per hour in February 2004. The value of this welcome increase will be eroded because, in amending the tax code, the Minister did the bare minimum for very low income families with the increase in the minimum wage.
The Minister has increased the ceiling for PRSI from €40,420 up to €42,140, which is a relatively modest increase. It avoids the comprehensive reform of PRSI and the 2% health levy which the Minister promised down the years but never delivered. This will have an impact on low income families. People who will pay the extra PRSI are entitled to ask what they will get for it. Four or five of the savage 16 cuts involve longer contributory periods with fewer benefits. People who at present earn more than €40,000 will pay more PRSI but will get nothing in return.
The social insurance fund is in considerable surplus. Had the Minister implemented the reform to which he referred, it could be used to fund a decent system of parental leave. Irish parents have some of the worst entitlements in Europe to paid maternity and paternal leave. This affects the young people who buy houses many miles from Dublin, have a two hour commuting journey, spend a fortune on child care and have a lifestyle which is extremely difficult for them and their children. The Minister has offered them nothing in terms of reform. There is nothing of substance for child care in the budget. The child care crisis continues and the Government continues to pay lip-service to addressing it. The Minister of State, Deputy Brian Lenihan, my esteemed colleague in Dublin West, stated that the child care provisions were in last year's budget. Will the Minister deal with child care every second year in future budgets? It is not good enough.
The Deputy praised the Minister in her election literature.
I wish to speak about those on low incomes. The PRSI exemption limit of €287 was not touched by the Minister. The Taoiseach will understand my point well because many of his constituents, like mine, are unfortunately on very low incomes. When a person earns more than that amount, the PRSI levy kicks in. Why has the Minister done nothing to stop this kind of trap? If the income of those on low levels of PRSI rises above €365 a week, they also have to pay the 2% health levy for which they get almost nothing. This is what economists call a very high effective rate of tax.
If a carer offering special assistance to the elderly is on this low income and accepts overtime offered by a health board, these levies will kick in rapidly. People will then have to make a choice between taking on extra work or falling into these traps. For working families on low incomes the lack of coherence between taxation and social welfare and the granting of medical cards means that many workers are faced with critical decisions about whether to earn more or risk losing benefits.
The most blatant example concerns the issue of medical cards and I am sorry the Minister was not able to deal with it today, given that Christmas is coming. The failure to increase the medical card threshold means that when the minimum wage rises in February, more families will be faced with this harsh choice. A lone parent with two children, may be working part-time and be in receipt of the lone parent's allowance, even though with the cuts it is somewhat restricted. Should one or both of her – and it usually is a she – children be asthmatic, as an accountant I would seriously advise her to cut back on work so that she would fall back into the medical card eligibility threshold. If someone is just above that medical card threshold and working, he or she will face the cost of visiting a doctor in addition to purchasing medicine for asthma, which is very expensive. The new generation of such drugs can cost €46 per dose.
We are agreed on a pro-opportunity and pro-work approach but lone parents should not be asked to make that choice. It is regrettable that in the context of a better opening position for the budget than had been indicated previously, the Minister did not find the time or have the interest to deal with that matter.
The family income supplement is designed to help low income families and I welcome the fact that the applied limits are being increased. Last week, a father phoned me in tears because his wife, who is earning approximately €300, will be subject to the cuts introduced by the Minister for Social and Family Affairs, Deputy Coughlan. I tried to explain to him that he would lose the half rate applying to his two children, which is €16 divided by two. The Minister did not change the child dependant allowance rate today, even though it is designed to help very poor families. I tried to explain to that man the principle of the family income supplement. He is going back and forth, while his wife has obtained certificates from her employers, but with the money available to the Minister he could have undertaken a thorough overhaul of the PRSI system, the levy structure and the family income supplement. The Minister could have begun to move towards a refundable child-based tax credit system. On behalf of poor working families, I am sorry he did not choose that option.
On his recent visit to Africa, the Minister for Foreign Affairs, Deputy Cowen, obviously quoted Tony Blair – do we not all do so nowadays?
The Deputy should speak for herself.
He described his approach to development aid as a hand up rather than a hand out. Deputy Cowen should have a word in the ear of the Minister for Finance, Deputy McCreevy, because that expresses perfectly the approach he could have adopted in the budget, yet he managed to miss out on doing so. For years there has been an unspoken agreement in the House that social welfare reform should be pro-employment, pro-education and pro-training. It should be a hand up, rather than a hand out. That unspoken agreement has lasted for ten years. The leader of our party, Deputy Rabbitte, correctly said that the only breach in that was the proposal by the Tánaiste before the 1997 general election to take rent allowances away from lone parents. The punitive Progressive Democrats model was off the agenda until the Minister for Social and Family Affairs, Deputy Coughlan, was railroaded into accepting the €58 million cutbacks announced in the Estimates. In this new McCreevy-style poor law, social welfare recipients who take up work or a CE place, or return to education, will have their opportunities reduced rather than expanded.
The thrust of Government policy on welfare is clear, it is no longer concerned with providing avenues through which people can improve their situation, rather they are to be confined to the rolls of the welfare system, which is to become harsher. Nowhere is this more evident than in the savage 16 cuts in social welfare. This is the meanest series of measures implemented in the welfare code since the Minister's "dirty dozen" cuts. The 16 cuts have been roundly and rightly condemned by a wide spectrum of groups working to alleviate poverty, and they should be withdrawn. We have come to expect little from Fianna Fáil Ministers for Social Welfare but the least we could expect is that the current Minister would have fought her corner in Cabinet.
Given the favourable opening position in today's budget, why does the Minister for Finance persist in creating fear in people suffering from diseases, such as coeliac, and those being treated for HIV or AIDS, whose dietary supplement allowance is now under threat? Every Deputy knows, particularly those from the greater Dublin area, that the poorest people in failing health qualify for the dietary supplement, the cost of which is minuscule. I urge the Minister to rethink this matter which hardly constitutes a blip in the context of the €40 billion the Government will be spending next year.
A few weeks ago, when the Taoiseach performed the ceremony at the present tree for the Society of St. Vincent de Paul, he seemed shocked by the figures which showed that 70,000 children are living in consistent poverty. The misery index of living in consistent poverty includes not having warm clothes, not eating decent food four or five days a week and families not being able to pay their bills regularly to avoid falling deeper into debt. The misery index comprises six or seven such items but if a child is affected by two or three of them he or she will be living in poor circumstances. The Minister has made promises with regard to alleviating child poverty, but once the pre-election child benefit payments were made, the commitment to dealing with child poverty was dropped.
Today's €6 increase in child benefit is modest in the extreme and way below the promises the Minister made, but yet again he has left child dependant allowances frozen. We could afford radical improvements in payments to lower income families but the lack of imagination on the Minister's part is disappointing. For example, he should examine the possibility of introducing refundable tax credits for children. Increasing child benefit is one of the best ways of assisting the reduction of child poverty but it is miserable to give such a small increase in child benefit, while leaving the child dependant allowances untouched.
Unless it is hidden in the small print, the Government has failed to respond to the call by the Combat Poverty Agency for a hot meals scheme for deprived children in disadvantaged areas. I have visited schools, as I am sure the Taoiseach and the Minister of State, Deputy Noel Ahern have done, where children get a small hot meal in the morning. Otherwise they would get nothing to eat as they come from very poor homes. The Combat Poverty Agency costed that provision for disadvantaged areas at approximately €11 million. My only reference to Punchestown was that it cost €15 million. I do not understand why one can be a priority but the other does not command an equal level of priority at the very least.
This year is the 40th anniversary of the death of John Fitzgerald Kennedy. One of the great society moves in the United States 40 years ago was the introduction of what was then called the American head start programme for children under the age of five. Those children have been tracked by American academics for the past 30 to 40 years. We all talk about value for money but for every $1 dollar spent on each child participating in the head start programme in poor communities, the American state saved $8 per head in reduced crime and health care costs. As they grew up, more of those children went to college, owned their own homes and, more importantly, became successfully employed. We require a similar consensus among politicians in this House that children who are poor count and that we will put the money towards their needs.
As the Minister spoke I waited to hear him make announcements of substance on current spending. I wanted to hear some more acknowledgement of the needs of people with disabilities. I welcome the €25 million allocation but having met most of the disability organisations I am aware they were looking for €50 million in terms of a very modest programme. We all know the sacrifices made by parents and siblings where there is a person with a disability in the household. People with disabilities in the centres for independent living made very modest requests also. The €25 million is a very poor response in the context of the €40 billion overall spend.
The White Paper last week and the opening position show that there is room to tackle crime, for example. We know now that the Government has no intention of recruiting the extra 2,000 gardaí it promised, but it could at least put some additional resources into tackling juvenile crime. The juvenile justice system is in crisis and that has been the case for years. The result of that is obvious. Communities live in fear of teenage gangs and if those gangs are left unchecked, they go on to become adult gangsters. Investment in juvenile justice would be money well spent but there is nothing in this budget to show that this is a Government with a coherent agenda to tackle crime, nor is there anything on hospital waiting lists. It is difficult to believe that the Minister for Finance is a member of a Government which has 155 days remaining to honour its promise to end hospital waiting lists forever. I do not see anything in the budget on waiting lists.
Radio listeners last week might have been somewhat taken aback to hear an urgent message from the health board in the eastern region asking people not to come to any of the Dublin accident and emergency units because of overcrowding. I suggest that might become a regular public information announcement on "Morning Ireland" and on other programmes. At 7.50 a.m. Emma from AA Roadwatch will tell us about the problems at the Red Cow roundabout and other road blocks and traffic jams, and at 8.10 a.m. the Minister for Health and Children, Deputy Martin, will bring us "Fianna Fáil Trolleywatch", sponsored by the Fianna Fáil-PD.com Government, the broken promises website, because that is what is in this budget for health.
Hear, hear.
Today the Minister announced his long-promised multi-annual budget for the road programmes but we have heard a number of multi-annual budgeting promises over the past few years. We had the national development plan, and we know the status of that. Several years later we do not even have a tunnel of the right height. We had the Fianna Fáil manifesto which made extravagant and attractive promises, and now we have the promised multi-annual budget. As a technique it is welcome but what about the commitment made by the Taoiseach to deal with price inflation in construction projects? The national development plan was launched in 1999, yet only today are we hearing a commitment to try to deal with the spiralling costs. What happened to the Taoiseach's commitment to change the tendering procedures so that larger contracts would be awarded and major players in the European market attracted to bid? I wonder if today's proposals will go the same route of much talk but relatively little delivered.
It is close to Christmas and there is plenty of bright, new wrapping paper in the shops. If one reads the small print of the announcements concerning the capital budget, one will note a dozen old programmes still unfulfilled and presented to the public under gleaming new wraps, but when the wrapping is torn, the same old promises are inside. Under the national development plan there is an ambitious agenda for primary schools, a multi-annual programme if ever there was one. My colleague, Deputy O'Sullivan, will deal with that matter in detail later, but €30 million will go nowhere towards meeting the kinds of ambitions the school programme would require and fulfilling Fianna Fáil's promises.
Nothing for the educationally disadvantaged.
Successive Ministers have failed to deliver.
Bring back Deputy Woods.
Year after year the conditions in substandard schools worsen. In terms of costs, we are unique here in that 30 year old school buildings are being condemned and replaced by new school buildings. That is being done because we cut back on the regular and routine maintenance of those buildings. Our form of economics is crazy. In every other country in the world the lifespan of school buildings can be 100 years, yet many of our schools appear to have only a 30 year life span. That is because the maintenance and heating programmes are so poor that schools are becoming clapped out. They cannot even be repaired and they have to be replaced. That represents bad value for money.
The roads programme has gone through bewildering shifts of policy and announcements by the Minister for Transport, promoted by a bewildering range of publicity, which I am sure his fellow Ministers must envy. A week after last year's budget, the Minister for Finance came into this House and unwrapped the Holy Grail which would transform the capital programme. That was the development of the National Development Finance Agency. That was Fianna Fáil's bright idea in budget 2003. If one checks the back of the Budget Statement where the work of the National Development Finance Agency is described, one will note that it is considering 40 projects, which is approximately ten more than was mentioned last year. It has done nothing about them – it is considering them. If this was Fianna Fáil's bright idea, it has not gone very far.
On the transport programme and the national spatial strategy, we broadly welcome the notion of decentralisation but we await what will happen in that regard.
In terms of the share of national wealth, not spending on our national investment programme is bad economics. Instead of a renewed boost to capital investment, the Minister has stood still. When inflation is added, there is nothing fantastic here and that message has not been lost abroad. One well regarded free market international index has pushed Ireland seven points further down on the index for competitive growth. It cites one outstanding reason for Ireland's fall, namely, its glaring deficiency in infrastructure. We can already see the warning signs. The Ernst & Young European investment monitor for 2003 reports that the number of new investment projects into Ireland decreased by 55% in the past two years. The figures reveal just 51 new investment projects attracted into Ireland in 2002. My colleague, Deputy Penrose, commiserated with the workers at Penn in Mullingar where over 100 jobs were axed today. Whether it is creamery jobs in Cork or manufacturing jobs in Mullingar, a daily toll of traditional manufacturing jobs are lost and they are not being adequately replaced.
By contrast, Portugal managed to boost project share by 23%, as did most of the accession countries. It is small wonder that the Tánaiste wants out of the Department of Enterprise, Trade and Employment and into a more comfortable slot in Government. We are losing jobs in industry and the public service and 40% of new jobs are part-time. The jobs haemorrhage has become deadly serious and requires a major switch in policy to complement our existing incentives. What does the budget do to stem this loss?
The chief executive officer of one of our most successful enterprises, Kerry Foods, hit the nail on the head when he urged a rapid move to knowledge-based industry as the safest antidote to the loss of existing manufacturing industries. I doubt he will see much evidence in this budget that the Minister has heard his message. This business leader specifically stressed the part that graduate employment can play in the move to this new type of industry. In response, the Minister has frozen the current budget for universities and institutes of technology. Astonishingly, he has reduced their building programmes by 45%. What does this say to those institutes of higher education that are supposed to be the catalyst that will attract knowledge industries? Investment in this level of education is an integral part of economic investment. While we recognise investment in trains as part of the infrastructure programme, investment in brains is no less important. We should invest in both trains and brains and, between them, we will get a knowledge economy. Alas, that economy will not come from this Minister.
Many years ago I heard the greatest of our public servants, T. K. Whitaker, deliver a lecture that set out in one simple sentence the case for capital taxes. He said that it could not be right or proper that the profits from speculation would be taxed more favourably than income from work. It is as simple as that. One third of our people will now pay tax at the 42% rate if they work overtime. If one makes a profit from shares or land, one will pay 20% tax. I am not surprised that the yield from capital gains tax has increased with this absurdly low rate. If someone has the chance to take income or shift activity into capital gains tax, he or she will do it. It would be mad to opt to pay a higher rate if by using the tax code one can shift one's income. People do this all the time through management companies. There is a quiet conspiracy of silence to pretend that this does not happen.
In a recent exam, the Institute of Taxation set a question where the examinee was asked to establish a scheme enabling a client to take advantage of the lower tax rate by choosing to take a portion of his or her earnings and profits through an appropriate mechanism of capital gains. I am sorry the Minister is no longer here as we suffered together at these exams a long time ago.
The current issue of Accountancy Ireland, a magazine I no longer often read, has a how to do it example comparing capital acquisition tax and discretionary trust taxes. I hope the officials from the Revenue Commissioners are taking note of this.
They probably wrote it.
No, they did not. It sets out an example showing how to avoid capital acquisition tax and use discretionary trusts. By using the discretionary trust, the tax is €273,000, yet if one uses capital acquisition tax, the tax bill is over €1 million. This simple device of tax planning, that even I could do at this stage, presents a saving of €744,000. What excuse does the Minister have for allowing this to continue? It is outrageous that this should be allowed.
The Minister is a true disciple of the neo-conservative agenda and would be warmly welcomed at any revivalist rally on the lawn of the White House. While President Bush and his acolytes have the same agenda, the Minister, Deputy McCreevy, was a true believer of that faith long before them. The American billionaire Warren Buffet believes in paying taxes and feels it is good for millionaires to do this as well as everybody else. He said:
Giving one class of taxpayer a break requires – now or down the line – that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch.
Guess who is paying for lunch this year? The extra 62,000 workers who have moved on to the 42% rate courtesy of the Minister for Finance.
I am disappointed that contrary to what the Taoiseach has mentioned a few times, the Government has done nothing about taxes on windfall gains. It has not adopted the sensible suggestion from the National Economic and Social Council that it should claw back, for the public benefit, some of the windfall gains that will come to certain owners and developers directly from the State's investment programme. The national spatial strategy and the roads and rail programmes have the potential to dramatically increase the value of large parcels of land. These added values arise directly from public decisions and public investment. Are we to sit on our hands while huge profits are once again made through rezoning and development? If the community at large is to benefit from these measures, we need some form of tax on windfall gains made from buying and selling land for development purposes.
The Minister for Education and Science had to pay €700,000 an acre for the site of a new primary school in Dublin West. These prices are a king's ransom and arise from the escalation in development land prices from rezoning and public investment. Taxpayers have to pay on the double. We pay to provide roads and services and, from next March, young people buying new houses will have to pay more because of the new levies. Taxpayers must then pay again to buy school lands at inflated prices of development land.
Last year we heard tough talk from the Minister about eliminating tax breaks and shelters. While he closed some shelters last year he opened others, such as the €63 million granted over a number of years to investors under the private hospital proposal. Many bottles of pink champagne will be opened today, and page B.6 of the budget booklet outlines the schemes that have been extended, many of them significantly. The revenue survey of the top 400 taxpayers, published last year, outlined that those taxpayers shared approximately €70 million in property-based tax breaks. We now see that this is to be extended and the Minister does not even give us a cost for the expenditure forgone. I bet it is more than is being spent on poor children, or the €25 million, welcome as it is, that is being given to disability services.
A few weeks ago an advertisement appeared in Sunday newspapers seeking investors in a proposed new hospital in Galway. While the Minister has talked about closing down tax shelters, he has extended them today and significantly increased their cost to the taxpaying public.
I congratulate the film industry and I am glad the Minister saw sense on this issue. Recent debate, discussion and examination of this sector at the Committee on Finance and the Public Service helped to expose some of the abuses under the current system. It is excellent that the scheme will be revised and, I hope, no longer the subject of future abuse.
The final taxation issue I wish to address concerns non-residents and residency requirements. I was disturbed recently by a reply I received from the Minister to a question I tabled on the number of non-residents for tax purposes. Astonishingly, it emerged that the Department does not appear to keep records because he was unable to provide me with figures. The issue of non-residents for tax purposes is fast becoming as great a scandal as the Ansbacher accounts and is causing a loss of tax revenue as significant as the bogus non-resident accounts of yesteryear.
It is bewildering for ordinary, compliant taxpayers to witness the extraordinary phenomenon of business leaders, who conduct a full commercial and social life in the State, mysteriously becoming non-resident based on their own say-so, with apparently little or no effort by Revenue or the Department to insist on observance of the rules. At a minimum, the budget should have included a commitment to review the residency requirements in our tax code. Currently, it is possible to become a non-resident if an individual spends less than 183 days in the State in one year or 280 days on aggregate over two years. A day only counts if an individual is present in the State at the end of the day, namely, midnight. This is Christmas pantomime stuff.
Oh no it isn't.
Provided Cinderella – Prince Charming would be more apt considering most of those involved are men – is out of the State at midnight, the day does not count. I have a mental picture of certain well-known individuals earnestly watching the clock to ensure they are out of the State at the dreaded stroke of midnight.
Our rules in this regard are immensely more generous and relaxed than those operating in other jurisdictions, which is unacceptable in an era of low taxes. I welcome people making money, succeeding in business and showing initiative and enterprise. I am delighted that many of the people with whom I went to college are now millionaires and many of my former students have done very well. I do not agree, however, that having done so well, they can then decide not to contribute their fair share of taxation. This is unacceptable. The kind of crony arrangement which appears to exist between parts of the Government and some of the individuals in question saps the contract between the compliant, honest taxpayer and the State. It needs to be changed. Other states, including the United Kingdom, have longer periods during which one must be out of the country to claim non-resident status, while in the United States the issue is linked to citizenship. These are issues we need to explore.
We are tolerating a breed of stateless people who are paying no contribution anywhere. They are akin to the ill-fated ship, the Prestige, which ran aground on the coast of Galicia – they sail the seas with no flag to indicate where they are owned and are subject to neither accountability nor responsibility. While I welcome the participation and success of these individuals, a fair taxation system requires that they pay their fair share. These lords of commerce behave with all the arrogance of a feudal aristocracy. It is time they learned the lesson of the Boston tea party, namely, that representation and taxation go together.
For people who may have been watching this debate on television, the budget means more tax breaks for the very wealthy because it has done nothing to plug the loophole which allows some of them to get away with paying no tax and the Minister even extended a number of schemes. For people who are earning little money, the budget contains virtually nothing. The budget contains little for families with many children. As we approach the festive period, many families are facing pressure to create a happy Christmas for their children. The Minister passed an opportunity to make it a happy occasion for such children.
I regret that the Minister for Finance has left the Chamber as I wanted to acknowledge his achievement in introducing his seventh successive budget. It is worth acknowledging as it is unprecedented in modern times. Although one has the impression of a Minister who has been in office permanently, in terms of longevity he is only the fourth longest serving Minister for Finance after Seán McEntee, Ernest Blythe and James Ryan and I suspect he will maintain that position. I note the Taoiseach has also left the Chamber.
We do not know if the Minister will introduce an eighth budget. If this is his last will and testament as Minister for Finance, it is a deflating document. This is the Minister who, in his first budget in 1997, asked to be judged not on one budget but on the pattern of reforms introduced over time. If this budget is the work of a reforming Minister, he is long past his sell-by date. In my contribution on last year's budget, I stated he had introduced six budgets too many. This is now his seventh. Seven is a significant number, which is open to creative interpretation by sub-editors. Perhaps the Minister is hoping to see a headline stating, "McCreevy in Seventh Heaven" tomorrow.
I would like to take the Minister at his word and examine not only this budget but the totality of his seven budgets. This is a Minister whose very philosophy should be regarded in terms of seven deadly sins. In his first budget he cut capital gains tax from 40% to 20%. He clearly believes in the philosophy that there are only two types of person, those who work for money and those who make money work for them. It has been clear from his subsequent budgets which group of people he favours. In 1998, he followed the reduction in capital gains tax with a cut in capital acquisitions tax from 40% to 20%.
It is interesting to note the Minister's statement when introducing his first budget that ruthless cutting of public expenditure in some areas might benefit the economy in the short-term but would have a lethal long-term effect on individuals and families on the margins. On the surface, the Minister seems to be a wise man but from experience we have learned we cannot believe a word he says. While he says one thing, he does exactly the opposite in terms of the effect of his budgetary policies.
In his second budget, the Minister stated that tax increases on energy and fuels could reduce emissions and bring about more efficient use of these products and that the revenue raised could be used to reduce taxation in other areas such as labour. If he was radical, he would have acted on this statement, yet five years later he failed to even mention the issue in the budget. Last year, he referred to it when he promised to take action by the end of 2004. This is the face value on which we must take the Minister and the reason we must believe that he is on his way out.
The Minister introduced individualisation in his third budget, a change which enhanced his credo as much as any other measure. While it was an excellent initiative for young single workers, it marked a statement of intent for those in partnerships who chose to care for children or incapacitated relatives without remuneration. This remains the position four years later.
In 2001 the Minister introduced the special savings investment accounts which, as many of us believe, are election bribes. They are due to come to fruition in 2006. They will buy the votes which the Government is unable to win through its inept efforts to implement policies which are not winning favour with the electorate. That money, if effectively used, could have provided the schools, hospitals and community centres for which many in our communities are crying out. They have been told they must wait because the fourth richest country in the world in terms of GDP has chosen not to provide them.
In 2002 we had the smash and grab budget. The Minister made his books balance by dipping into the social insurance fund to the tune of €600 million. The Minister has constantly reconfigured the figures in every budget he has introduced and today is another example.
In 2003 we had the decision about first-time home buyers. That grant was added to the price of a house and it was something from which property developers and builders ultimately benefited. However, when it was taken away, the prices remained the same or increased. Where was the benefit for first-time house buyers? What measures has the Government put in place since then?
This is the Minister's seventh budget. While it changes little, its statement of intent is clear. The decision to extend property reliefs in a range of areas has no practical economic benefit for the country. It only benefits those whom we assume are supporters of the Government. Why are we continuing to give tax benefits for building car parks and holiday homes? Why are we giving any tax relief on property when property values are buoyant? We welcome the decision to extend film relief and the business expansion scheme. However, the Bob the Builder type political pay-off, which Fianna Fáil seems unwilling to relinquish, is not a price that should be paid. It sends out all the wrong signals to the electorate.
The Minister has decided not to increase tax bands and allowances in line with inflation for the second successive year. That is his revenge for benchmarking. If he cannot justify benchmarking in terms of productivity or link it with the move to the new relocation centres, he will try to push as many workers as possible into the top income tax band and get as much of the benchmarking payments back as possible. It is a cynical use of the tax system and the Minister must be brought to account for it.
The social welfare increases are at the bottom end of the scale. They are less than what was demanded by non-governmental organisations. They do nothing other than encourage people who are in that position to stand still. We have not heard an apology from the Taoiseach or the Minister for Finance for the fact that this remains the most unequal country in Europe in terms of how we distribute our income. All we get are invectives against organisations, such as the St. Vincent de Paul Society. There is a lack of acknowledgement that its services have increased by 80% in the past year alone. There is a lack of recognition that homelessness has increased by 247% since the Government came to power in 1997. If the Government believes that is a road we should travel, it will not have many supporters outside this Chamber.
The budget is a scam in terms of decentralisation – it is office relocation. The decisions which will be made by the Government will continue to be centralised. It does not matter to the people affected by such decisions whether they are made in Nenagh, Sligo or Dublin. There will a benefit in terms of relieving pressure on Dublin and there will be an economic advantage to the towns where these offices are relocated, but the Government should not insult us by referring to it as decentralisation. We want to see proper decentralisation where the apparatus of Government is dismantled and decisions are made in the areas where the people affected by them live. That is not the inclination of the Government.
We are disappointed with the Government's reaction to green taxation. We want to reform all taxation. We should pay less tax on labour and more on resources. We have told the Government that year after year. The Minister mentioned it five years ago. He has set up many commissions, one of which is still in existence. Yet action has not been taken. Even if the agreement of which that commitment is part is under question, we have an international commitment to reduce our emissions so that they account for only a 13% increase over 1990 levels. The figure is currently at 31% and increasing. I fear that the Minister has once again succumbed to the pillow talk of IBEC on this issue. If we are interested in a balanced and fair taxation system, such initiatives should be put in place.
I could be wrong and the Minister could present an eighth budget. He might present it as the eight beatitudes budget – blessed are the horse traders budget. We see the cynicism attached to how Government operates in the decentralisation programme where Ministers seem to have successfully carved out the Departments which will be located in their constituencies. I do not think the national spatial strategy was the criterion used for the location of these Departments. This is a political consideration. It is an attempt to maximise votes for Ministers and backbench Government Deputies. The Progressive Democrats, who are absent from the House, must be taken to account for indulging in such Fianna Fáil chicanery.
Will the Minister of State at the Department of Finance, Deputy Parlon, get a Department as well?
It seems there is one for everyone in the audience on the other side of the House.
We must also consider how decisions are made about infrastructure. The Minister's words rang hollow when he spoke about providing infrastructure. He introduced the concept of envelopes. I thought the Government had enough envelopes in terms of infrastructural development in this country. We want a political commitment that the overspend, particularly the €250 million overspend by the National Roads Authority every year, will be stopped, that those who benefit from wasteful expenditure on projects which are not required will no longer be able to do so and that infrastructural programmes will be prioritised. We want a public transport system which is not worse than that in many of the EU accession countries, despite having lower standards of living. The Government does not move in those circles. The supporters of the Government do not see the benefits of providing such infrastructure.
The Punchestown mentality has infected the Government. While there are expectations that vital infrastructure, such as schools, hospitals and community facilities, will be provided, the people see how a decision is made instantaneously and without question, that money is added subsequently and that those who benefit are known to the Minister for Finance.
That is a personal assassination.
That is the reality.
The Minister does not have character.
When the Deputy does not have an argument, he attacks the person.
We are attacking policies.
There is good reason to be ashamed.
This is a nothing budget that does nothing for those for whom much needs to be done. By doing nothing it continues to perpetrate the inequality that benefits the haves in this country.
Is €1 billion nothing?
The Minister for Finance, Deputy McCreevy has learned well from his previous incarnation as Minister for Social Welfare.
What about the social welfare recipients?
Did the Minister of State never hear about the dirty dozen cuts?
Leaving aside the dirty dozen cuts, we now have the savage 16 cuts, which the Minister for Finance helped to influence. Unfortunately, this is social welfare for the rich. We on this side of the House have had enough of these policies. I look forward to the day when the Minister will not be introducing an eighth budget.
Speaking after the publication of the Estimates a few weeks ago, Father McVerry, a Ballymun-based priest who has dealt with disadvantaged young people for the best part of his adult life, said that the poor in society have been shown the two fingers by the Government. Those are strong words. Any hope that the Government might have had a change of heart between then and now has disappeared in the aftermath of the Minster's Budget Statement. This is the seventh budget in what is a seemingly endless and vicious assault on working people and the working poor.
In his Budget Statement, the Minister for Finance spoke of a better deal for all in society. That is the spin that will be propagated tonight by the various Fianna Fáil and PD Ministers and backbenchers. In the next few days people who are elderly, unemployed, or in hospital, will consult the newspapers to see how the budget provisions will affect them, although it must be borne in mind that the newspapers will put their own spin on the budget. Many will conclude that there is nothing in the budget for them. Some may look forward to a €10 per week increase in their incomes, but when they realise the number of stealth tax increases introduced by the Government they will conclude that they will be hardly any better off, despite the assurances and the illusion created in the budget that things would change for them.
There was much speculation as to whether the budget would seriously tackle disadvantage. It makes little or no attempt in this area. It is a minimalist budget designed to placate Government backbenchers in the approach to the elections to be held next year. It has done nothing to address the gross inequality that exists in society. The Minister's miserly increases in social welfare, that barely stay above the rate of inflation, have been wiped out by other cuts in social welfare payments already announced and by the introduction of numerous stealth taxes during the year.
On taxation, the Minister has left his big business friends, the high flying executives, untouched. The wealthy can once again rest assured that millions of euro buried in off-shore accounts will not be touched. Unfortunately, the Minister has again failed to take all those on the minimum wage out of the tax net. The Government had the opportunity to do so at little extra cost, yet the Minister once again flunked taking this action.
The Minister's announcement of an extra €30 million for school buildings is useless as it will go nowhere towards addressing the chronic needs of children, especially when it is estimated that primary schools alone need €300 million a year in extra funding.
Sinn Féin welcomes the decentralisation of Departments in principle, but questions the timing of the announcement given that it has been in the pipeline for over four years. I will reserve judgment until we see the detail because I fear that what is being done now is designed to impact on next year's local elections and allow Fianna Fáil councillors to make grandiose claims about job opportunities in their constituencies. Ultimately, this is yet another failed opportunity.
The Minister has tinkered at the edges of the taxation system when fundamental and real reform is required. He has done nothing to end inequality. Legalised taxation evasion is rife in this State. The Government has created a tax system where the top earners can pay little or no tax. In 2002, a survey of the top 400 earners found that 117 had an effective tax rate of less than 30%, this in a system where over 500,000 PAYE workers are paying income tax at the top rate of 42%. I am one of those who pays income tax at that rate.
What is the effective rate?
A fifth of the top earners pay less than 15% in tax and some of them do not have to bother paying any taxes. The exact cost to the State of the lower tax revenue generated by 20 tax relief schemes is not known, nor are we provided with a proper assessment of the benefit to the economy of these reliefs. Examples of some of them that have cost the Exchequer an unknown amount include commercially managed woodland, and, our old friends, stallion and greyhound stud fees.
Is the Deputy referring to stallions?
Yes, stallions. Is the Minister of State aware of stallions? He might know if one kicked him.
I thought he might be referring to an old friend.
Other tax relief schemes cover private hospitals, deduction of foreign earnings, investments in life assurance undertakings, off-shore life and collective investment products and the rent a room scheme. We do not know how much is being given in tax relief under these schemes.
I reiterate that Sinn Féin is not calling for the outright abolition of these reliefs, merely that there should be a cost-benefit analysis of all them so that a judgment can be made on their value to society.
A top income tax rate of 50% for individuals earning over €400,000 per annum and an increase in the capital gains tax rate to 40% would provide the kind of resources we need to invest in health, education and vital infrastructure. Why is it that workers pay tax at 40% but their wealthy bosses have seen their capital gains tax set at 20%? Employers' PRSI could be returned to a rate of 12% as employers' payroll tax is the lowest in the EU. A rate of 12% is still an internationally competitive figure. However, this would mean the Government would have to stand up to IBEC, and for the last six years this Government has served merely as IBEC's front operation in Leinster House.
Hear, hear.
Corporation tax could be increased—
They are not going to answer that one.
They are not going to answer anything.
We have the highest amount of people paying tax. Should I keep going?
Corporation tax could be increased to allow the State to have an increased benefit from companies that have been set up in Ireland. However, the Government prefers to invest in tax breaks. Since 1997, the tax breaks introduced by this and the previous coalition Government has resulted in the allocation of only 5% of budgetary provisions to the bottom 20% of earners.
The Minister has failed yet again to move towards the stated objective in An Agreed Programme for Government of taking everyone on a minimum wage out of the tax net. Currently, approximately 90% of minimum wage earners are kept out of the net. With the minimum wage set to rise to €7 an hour next year that is likely to decrease, making the Government's ambition all the harder to achieve.
The Government has persisted in the use of stealth taxes and service charges as a way of making money. This is regressive taxation of the worst kind that hits the low paid and the no paid worst of all. The Society of St. Vincent de Paul has again stated that these charges, including the bin tax increases and the increases in hospital and GP, fuel, transport and education charges, are the biggest factor in rising poverty and growing inequality in this State.
However, the Government maintains this rising inequality is not happening. It maintains those who argue otherwise are imagining things. It believes that poverty does not exist. The Government promised the people that child benefit would rise to €149.50 and €185.40 for the two respective rates by this budget. Under the terms of Sustaining Progress it promised to implement these increases in the budgets of 2004 and 2005. However, the increases announced today amount to less than €1.50 per week and fall short of those figures. They are €16 short for the lower rate, and €20 short for the higher rate. These are the increases the Government must deliver next year in order to make good its promises, albeit two years late. At the current rate of spending, however, it will fall short.
A paltry €1 million has been allocated to expand the school meals programme. Again we are told that there is no poverty, that children do not go to school hungry, but the Government only gives €1 million to expand this programme, which everybody working in the field feels is the best way to tackle the problem of children going to school hungry. There is no money for the back to school clothing and footwear allowance. Of all categories of society, children, particularly the 300,000 living in poverty, have done the worst out of this budget and have been betrayed the most blatantly.
Means tests for carers have still not been abolished. Carers receive less than half as much as they would if they were foster parents and do as much if not more work. The amount of the carer's allowance is a disgrace considering the amount of money saved by carers.
While I welcome the increase in the amount provided for school buildings, I am aware that it is far below what is needed. The move to multiannual funding is welcomed but €200 million per year is €100 million less than the amount the INTO and the Department of Education and Science say is needed over a five-year period. That is what is needed to eliminate the school building waiting list and to ensure our children are educated in a safe and secure environment. We also need more supports to encourage children to attend school. The National Educational Welfare Board received little joy in the budget. It can currently only cater for 26% of schools despite the recommendation of an independent consultant that it needs a staff of 363 to fulfil its legal obligation by the end of this year. It is provided with less than a third of that number. The Minister has failed to provide sufficient funding to meet the needs of the NEWB and to meet the demands of the Education (Welfare) Act 2000. Children who fall through the cracks every day will pay the price. Young people tend to pay the price for various measures at the hands of this Government. The urgent need for a mere €5 million for funding for youth work as outlined by the National Youth Council of Ireland has also been ignored by the Minister. While the capital investment in primary schools is welcome, it comes at the cost of investment in third level education. In 2002 the Government spent €125 million in capital investment in institutes of technology.
Increased health charges hit hardest those whose incomes are just above the limits for medical card qualification. The extension of the medical card scheme is one of Fianna Fáil's biggest broken election promises. Even those on the minimum wage will not be eligible for a medical card once the minimum wage is increased to €7 per hour. According to the most recent OECD study on health spending, we still lag behind the EU average in terms of investment in health.
This budget was a missed opportunity for the Government to tackle poverty and inequality in our society. The Minister has often spoken of how prosperous this State has been over the last five or six years. He talks about the success of the Celtic tiger and he has not been slow in taking credit for it. Such statements show a basic lack of understanding of economic theory. Almost 100 years ago James Connolly spoke of economic growth, saying that purely capitalistic prosperity is "prosperity gauged merely by the volume of wealth produced, and entirely ignoring the manner in which the wealth is distributed amongst the workers who produce it." Talking about the wealth produced without considering how it is distributed is the kind of shallow and childish economic thinking of which the Minister is capable. If the economy is growing but the workers and the poor are not benefiting, we are even worse off. Can the Government truly claim that growth is benefiting the people of our society?
This budget, like last year's and the one before it, represents the failure of the Government to tackle inequality in our society. This will have long-term implications. The Government has failed the working class, the poor, the disadvantaged, the vulnerable and the voiceless. As long as it remains in power inequality and poverty are inevitable, as it pursues the interests of its own class, the business class.
On budget day most people will check out the tax bands, the old age pensions, the increases in VAT, VRT and excise duty and so on – whatever is of immediate concern to them. That is human nature. That is what we all do – we first look to see how something will affect us as individuals. There will be varying reactions to that immediate scrutiny. However, it is only when we look at the bigger picture, the wider framework of the Estimates and the budget, that the truth begins to dawn. This is a budget of illusions – now you see it, now you do not. The Minister for Finance is a master at creating illusions. All he is missing is the long black cape, top hat and magic wand – but perhaps he only uses the magic wand when he wants to quieten Fianna Fáil backbenchers when they growl but do not bite.
To go back to reality, or should I say illusion, phrases such as "I am providing an additional amount", "I have decided to allocate", "I propose to increase" and "I am today providing" permeate the Minister's speech, as though in some way he is putting his hand in his own pocket and giving us his money. That is just the first illusion – that it is his money or the Government's money, when it is our money, that of the taxpayer. The Minister's job is to collect that money, spend it wisely and ensure we obtain value for the money we entrust to him.
The second illusion centres on the amounts spent. I am tired listening to Ministers telling us how much they spend, millions and billions, as though that in itself is supposed to mean something. What matters is how they spend it. Does it deliver the services we need and pay for? Does it deliver the world-class health service we were promised? Not according to those on waiting lists or hospital trolleys or those who marched in Nenagh and Ennis to prevent the closure of their accident and emergency services. Does it mean that carers, those who work 24 hours a day, seven days a week, 52 weeks a year, year after year, are entitled to an adequate carer's allowance? The current miserly allowance is €129.60 per week. Does it mean that if a carer is in receipt of another social welfare benefit he or she will still be eligible for carer's allowance? In other words, if somebody is receiving an old age pension or a one-parent family allowance will he or she qualify for carer's allowance? As of today, the answer is "No".
Does the Minister's allocation of an extra €25 million to those with physical and sensory disabilities – just €10 million more than he gave to Punchestown – mean that he will provide the required service?
It is a disgrace.
Once again the answer is "No". Does the spending of billions on infrastructure ensure that projects are delivered on time with no significant cost overruns and that we as taxpayers obtain value for money? Does the report of the Comptroller and Auditor General assure us that our money is being well spent? No – it tells us that hundreds of millions of euro are being squandered, disappearing into some kind of fiscal black hole. That lack of expertise in the planning, cost control and delivery of major infrastructural projects reveals a gross inadequacy in the systems of the Department of Finance. If the Department was as expert at controlling the cost of major infrastructural projects as it is at conjuring up miserly cutbacks we would have billions to spend where it is badly needed.
Another illusion constantly being put forward by the Government is that we have a regime of low taxes. I said when I spoke on the Estimates in regard to the advertisement paid for by our tax moneys which we hear everyday, "Know the price or pay the price"– if only it was that simple. We are paying the price of electing a Government which taxes us by stealth, which not only cuts back but claws back. Stealth taxes are well named. Like the thief who comes in the night, they are uninvited, unwelcome and unwanted. Stealth taxes aim to create the illusion that there is a low tax regime when in fact indirect taxation is rocketing. For example, the Government takes over 40% of the cost of a new house in taxes. Part of the cost of benchmarking is being passed over to the local authorities so that service charges will increase and huge development levies ranging from €5,000 to up to €18,000 are being put on new houses. Coupled with the abolition of the first time buyer's grant in the last budget, the VAT hike, house prices are now outside the range of the ordinary individual. An increase of 5% per litre in the cost of petrol and diesel will contribute hugely to costs over a wide area and will reduce our competitiveness even further internationally.
Today the Minister for Finance spoke of public private partnerships. One could say they are a reality, not an illusion, but they help to create the illusion that we are not borrowing to pay for these projects. Somehow the Minister for Finance conjures the money out of the air and the projects simply appear. This is because the initial capital cost, as such, disappears off the public expenditure balance sheet for this year.
What did the Minister for Finance say today? He said the real stealth tax is borrowing. Using public private partnerships is long-term borrowing. As with all stealth taxes, like the thief in the night it will creep upon us next year and the year after and the year after that. For 20 to 25 years significant payments will have to be made from the public purse to the private companies involved. This Minister is borrowing or stealth taxing by another name. He is remortgaging the house.
Deputy McCreevy is not only remortgaging the house, he is making decisions for every Minister for Finance and every budget for the next 20 to 25 years. At the same time he is creating the illusion that he is the man who is delivering. There is one good thing about it. He did not manage to pull the wool over the eyes of those in Brussels. The European Commission wants to clarify ESA 95 principles on the national accounting of public private partnerships. In other words, private resources for public projects must show up in our national accounts as public expenditure.
If Deputy McCreevy wants to use public private partnerships to finance infrastructural projects – and that is an issue that should be subject to evaluation by the Comptroller and Auditor General as to whether it delivers a cost-effective means of borrowing money – then the price must be accounted for now so that we are not in the realm of illusion whereby projects come on stream and nobody seems to be paying for them. We could say the Minister for Finance is not just taxing this generation by stealth, he will tax the next generation by stealth. Some 20 years from now the next generation will be paying for Deputy McCreevy's projects. That is the kind of illusion even Houdini would be proud of.
Not only is he remortgaging our future, he is selling part of our past. The cut in the Estimates for Teagasc ensured that it must sell property just to keep afloat and manage day-to-day spending. There is the illusion that somebody's head is well above the water when they are standing on quicksand. The Minister for Agriculture and Food, Deputy Walsh, said in this House two weeks ago that while no funding for capital development purposes was being directly provided from the Exchequer in 2004, Teagasc would be able to use part of the retained proceeds from the sale of its assets in 2003 and 2004 to fund its capital programme for next year. It is like selling one's house just to fund living expenses. The only problem is that when the house in sold there is no point in going to the Minister for Social and Family Affairs, Deputy Coughlan, for rent supplement because one simply will not get it.
That is untrue. Deputy Harkin thinks she is speaking to primary school children. That is the level of her debating.
The Minister for Finance said dramatic strides were being made in infrastructural development. Despite this, there is a significant underspend on national roads in the BMW region to the end of 2003. It is 40% behind in spend, while in the south and east are 45% ahead of target. This is another illusion, of balanced regional development. There is a significant underspend in the public transport operational programme in the BMW region. Yet there is no commitment to the western rail corridor. The illusion of balanced regional development was shattered yesterday when the Government voted down a motion at the Joint Committee on Transport to re-open parts of the western rail corridor. One of the reasons given was that the Department of Transport needed to continue discussions with the regional authorities. The Minister for Finance's millions will not be used to fund it. Once again we are being fobbed off with the excuse, "We need another study", giving the illusion that something might happen, just as it might happen with the community employment schemes, another of the cruel, unnecessary and unjustified cutbacks.
What did the Government motion state today? It welcomed the continuing review of the operation of these schemes. What a lovely phrase, the "continuing review". Maybe something will be done. Maybe it will not. In 2003 some 5,000 jobs were cut nationally. In my constituency of Sligo-Leitrim, at the beginning of this year 203 people were in community employment in Leitrim and 491 in Sligo. As of today there are 152 in Leitrim and 420 in Sligo. From 693 jobs at the beginning of the year we are down to 572, yet there is still the attempt to create the illusion that there were no cutbacks, planned or otherwise.
I am pleased at the announcement of decentralised jobs to a number of centres, including Sligo and Leitrim. However, two years ago the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Fahey, announced that the Central Fisheries Board was to move to Carrick-on-Shannon. Today we had the second announcement, so at least in that matter the Minister for Finance has caught up with the Minister of State. When can we have a date for the movement of these jobs, or will we face into a local election and a general election with the promised job still being dangled as a carrot in front of the electorate?
May next year.
The Minister for Finance referred to a cluster strategy as regards decentralised jobs. In the Sligo-Leitrim constituency the local community in Ballinafad has created a facility costing €750,000. If the jobs are not committed to Ballinafad – and they are not in today's budget – it will go into liquidation and be a lasting monument to this Government's lack of commitment to rural areas. The Taoiseach was pleased to open this facility. He can now preside over its closure.
Of the 9,000 promised decentralised jobs, approximately 850 will go to the province of Connacht, less than 10%. While those jobs are welcome, it is critical to put them in context. A recent survey in the north-west by IBEC showed over 1,500 redundancies in Sligo, Leitrim and Donegal in the past 18 months. Between 1996 and 2002 the number of IDA and Enterprise Ireland-backed jobs increased by approximately 4,000 in the BMW region, while increasing at the same time in the east region of Dublin, Kildare, Meath and Wicklow by 35,233. Although all jobs are welcome, they do not even begin to make up for the jobs lost during the lifetime of this and the previous Government. The real test of a Government committed to balanced regional development is that it spends on infrastructure. It must spend to attract inward and indigenous investment. That is not happening in the regions.
I am disappointed at a budget that delivers illusion and ignores the reality of unbalanced regional development and the fact that budget after budget gives more to the well-off and less to the poor. The conjuring Minister for Finance is stealth taxing while mismanaging the major projects. Sometimes I think illusion is preferable to reality.
Sitting suspended at 6.40 p.m. and resumed at 7.10 p.m.