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Dáil Éireann debate -
Tuesday, 7 Feb 2006

Vol. 614 No. 1

Leaders’ Questions.

The people have grown tired of the Government's continuing inability to deliver public services. They are equally tired of the Taoiseach's inability to manage their money competently. After nine years of the present Government in office, we are still waiting for a decent health service. Levels of crime are practically out of control, and literacy among children is as bad now as six years ago. The Government has a shameful record of misspending public money. Some €50 million has so far gone on redundant electronic voting machines, and €135 million on a failed computer system in the health service. Millions more have been wasted on such issues as the national stadium and what has been called "the great bowl project".

Yesterday's report on an analysis of tax incentives over which the Government has presided for nine years must bring about a new level of despair among hard-working, tax paying families. In this case, the facts are indisputable. Those schemes have cost €1.6 billion in the past five years, and we have not yet seen the final bill. The cost of the reliefs is double that of the benefits arising. Most schemes have benefited a relatively small number of high-earning individuals, some developers and several landowners. So much for fairness in the tax system.

The Taoiseach presides over the Government and has had the honour of doing so for the past nine years. Does he accept that the failure of his Government properly to evaluate incentives and undertake full cost-benefit analysis before renewing schemes has literally cost the Irish taxpayer millions? As head of the Government, does he accept that the inability in question and the fact that no cost-benefit analysis was carried out have been a fundamental mistake? Will he now issue instructions to the Minister for Finance, Deputy Cowen, that any new relief be subject to a full cost-benefit analysis before introduction and a statutory sunset clause to prevent its renewal without such a review in the interests of those who have paid €1.6 billion in taxes in the past five years?

The Government decided back in December 2004 to report on a total appraisal of all the reliefs that have been in place for the past 17 or 18 years. It was agreed to report on and publish the documents in full at the conclusion of the deliberative process and with the publication of the Finance Bill. The three sets of documents were published yesterday. They demonstrate for the first time the historical context of these reliefs which have been in existence for the better part of 20 years.

A total of 24 schemes were reviewed. Goodbody Economic Consultants reviewed four schemes: the area-based renewal scheme, the urban town renewal scheme, the rural renewal scheme and the living over the shop scheme. Indecon Economic Consultants reviewed 11 sectoral property-based schemes, namely, reliefs for hotels, holiday cottages, student accommodation, third level buildings, car parks, hospitals, nursing homes, sports clinics, park and ride facilities, child care buildings and rental refurbishment. The Department of Finance and the Revenue Commissioners revised and reviewed nine schemes: reliefs for forestry, significant buildings, patent income, pensions provisions, artists' income, certain investment loans, greyhound stud fees, donations to charities and other approved bodies and the tonnage tax. The results have been published.

I am sure, like everyone else, Deputy Kenny welcomes the fact that the Government had the foresight to undertake the first in-depth analysis of these schemes to review which ones should be retained, which should be phased out in the short term and which require amendment. The Minister has moved to amend some of the schemes, phase out others, curb others and cap others. He has introduced a range of other initiatives. Some of the schemes being examined are gone, such as the Temple Bar scheme, the Custom House docks scheme, the seaside resorts scheme and some other schemes.

I do not regard all the schemes as a waste of money. Many of the schemes were initiated in different times when this country was on its knees. Many of them were an attempt to prime-pump a lifeless economy. Some of them were good value for money and some created many jobs. However, some of the schemes have outlived their usefulness. I expect Members will express their views on the schemes during the debate on the Finance Bill. Some schemes were too generous and were picked up and used by smart people and people who could go close to the line of tax evasion. That can happen with such schemes and the Government has made its decision on them.

In the cold light of day, people will realise that many of these schemes were introduced when it was not possible to generate activity in this and other cities and, even with the generous schemes on offer, it was difficult to find people to develop and invest. Last year a total of 95,000 jobs were created in the economy and it will be argued that schemes are not necessary. However, this review is a historical examination to form a basis for future action. The Minister has already taken action on a number of the schemes. The Minister has stated that an economic analysis of the schemes will be undertaken.

In reply to Deputy Kenny, I remember many of the arguments made by politicians about past schemes. The argument was that they amounted to tax foregone. It was a good argument then and it may be a good argument now, but if nobody was interested in investing in, for example, a site lying unused in an area of social exclusion, it was not a case of tax foregone. That is the assumption made when something has been developed but I never agreed with that point of view, which is the purist, economic view of mandarins who did not understand the real world. I disagreed with that view a decade ago and I disagree with it now. If it had prevailed, there would have been no schemes and this country would still be a basket case.

The place would be barren.

The charge I have made against the Taoiseach is that the failure of the Government to properly evaluate incentives and to have a full cost benefit analysis carried out before any extension has in the past five years cost the taxpayer €1.5 billion. The two mistakes made were non-evaluation of the schemes and no cost benefit analysis was carried out prior to an extension taking place. Four years ago the then Minister for Finance, Mr. McCreevy, announced the ending of these schemes. He knew then, as did the Government, that their time was up. Yet, in 2002, for example, the relief for multi-storey car parks, which was to end in 2000, was extended three times, to 2002, 2004 and 2006, with no examination carried out of worthwhile progress made. In December 2003, with one wave of the Government pen, the life of a range of schemes was extended from 2004 to 2006, with no examination carried out. These schemes included the urban renewal scheme, the multi-storey car park, hotels, student accommodation, rural renewal and park and ride facilities schemes.

The Government failed by not carrying out any proper evaluation of the incentives and analysis before the schemes were extended. The Taoiseach could have saved a fortune for the taxpayer if this had been done and I ask him to include it now. I presume those who were creaming off the benefits of these schemes went to Government and made their case to have the schemes renewed without analysis. Does this not demonstrate beyond yea or nay, beyond denial, that the Government of which the Taoiseach has been head for nine years, has a much greater care for and pays much greater attention to a small number of elite super rich who have benefited greatly from these schemes, extended without examination to the detriment of the hard-working taxpayers who cannot find a garda on the street, cannot get into an accident and emergency department and cannot get teachers for their schools, whose children are being bullied in other schools and who find that life in this country has become nothing but pressure? There is no escape for them from paying their taxes, yet the Government has cost them €1.5 billion in the past five years by allowing a range of these schemes to have continued without a cost benefit analysis.

Deputy Bruton has been calling for the past five years for these measures to be implemented. The then Minister, Mr. McCreevy, was aware of the situation four years ago but nothing was done by the Government. Will the Taoiseach admit to those two fundamental failures which, if dealt with, could have saved the taxpayer millions of euro but which have cost him €1.5 billion in the past five years?

I will explain to the House the reason I do not accept the Deputy's view. Given that the number of people working here is double that when many of these schemes started, we are not paying the same high levels of taxation or interest on the national debt. Savings of hundreds of millions of euro have been made in the economy. We have primed an economy to a state where there is investment, activity and employment, and taxes are generated.

The advice was given to successive parties and Governments that on every scheme up for extension a year should be taken to do an economic analysis, but most of these schemes would never have happened if such advice had been heeded. I acknowledge there are areas where bright sparks have managed to find ways to use the schemes and that every year — and I suppose this will happen every year forever more — it is necessary to close down loopholes on budget night. This is one of the best economies in Europe, based primarily on the building-up of intelligence, incentives and activities for investment. I remind the House that 3% of the highest earners in this country pay 28% of the total tax take. It is always necessary to keep an eye on investment schemes but we do not wish to create a culture where our people invest all over the world.

(Interruptions).

Members of the Opposition complain that the 9% stamp duty is driving investment out of the country. These initiatives were designed to keep people investing here. When the then Minister, Mr. McCreevy, announced he was curtailing film relief, which is not a sector that creates the highest number of jobs, this House was delirious with condemnation that this could be done. We cannot have it both ways. One may undertake economic analyses but this country employs 2 million people, the economy has been growing by 7% or 8%, we have no debt crisis and our taxes are low because we have helped to make this economy strong.

The Taoiseach should have kept them so.

In some of those cases that has been driven by some issues.

If the Taoiseach read the evaluations he would see the truth.

I have declined to get into the debate over who introduced certain schemes.

Bring back Charlie.

People did that for the best reasons at different times. Not all the schemes worked but the overall health of the economy has been good. We could have had economic analyses that would have stifled everything but we would still be on 18% unemployment. There are too many people in State jobs who can sit down and tell one why not to do things.

Deputies

Hear, hear.

Living in Drogheda.

I do not recall anybody in the House saying that, at the right time and for the right duration, tax-based incentive schemes cannot make a contribution to economic activity. That is not the issue and the Taoiseach knows that better than most in the House. The issue is that they were allowed to go on and on and were renewed and extended. There was no cost-benefit analysis of their merit at any given time. However, as Deputy Kenny said, it was suspected that the Department of Finance would have known that some of them had long outlived their usefulness when Ministers were forced to come into the House and announce that they would take action on them——

——but never did. I take issue with a great deal of what the Taoiseach has said. I wish to focus on an issue which the Taoiseach is getting away with in his remarks. Listening to public commentary on it, on radio and elsewhere, the Government has also got away with it — that is, conveying the impression that this is now a historical issue, that it is over and has been dealt with. Nothing could be further from the truth. Let us be clear that all that has been announced is that most of the property-based schemes will be terminated from July 2008 on the other side of the general election. We have heard it all before. Even the former Minister for Finance, Mr. McCreevy, infatuated as he was by some of the high rollers who benefitted from this, announced termination but it never happened. We have now got to the other side of the general election and the impression is being given that some action is being taken.

The Government has conveyed the notion that there will now be — what my colleague, Deputy Burton, argued for over a number of budget speeches — a minimum effective tax rate. That is not clear either, because it is only in the case of a certain number of reliefs that will be scheduled that the extent of relief will be capped.

The Deputy's time has concluded.

There are others that are not included and entirely new ones have been opened. These include, for example, the new provision for private mental hospitals. The McCreevy one for the constituent in Naas is now being extended to allow money to go into building private mental hospitals. That seems absolutely remarkable to me. I know of no report or cost-benefit analysis on this. I have strong views on the question of the development of a parallel private health service based on the public hospital campuses. What is the basis of this latest provision? It is a new loophole, which is wide open in the Act. The money that is shut off in certain schemes will now flood into the new schemes. It is not just bright sparks; there are bright sparks working for the Taoiseach who know this. They have found it out over the years but they do not act on it.

The Taoiseach says the Government has made decisions on this, but the Government has only made such decisions as have been made as a result of the issue being raised on these benches over the years. For example, for the past five or six years, Deputy Burton has been pushing for the abolition of a tax exemption for stallion fees, which does not feature here. There is a paragraph saying "We will pass it over" but it has not been dealt with at all. The decisions taken by the Government are minimal and by comparing it to stamp duty, the Taoiseach pays serious disrespect to people's intelligence in this House.

The Deputy's time has concluded.

Unfortunate first-time buyers paying 9% stamp duty cannot be compared to high rollers who got tens of millions from such schemes.

The point about the stamp duty is that investors state that the reason they pushed money out of this country has nothing to do with first time buyers.

What does that mean?

It is camouflaging.

The Government examined the position that pertained over the past 20 years. The last review of shelters and tax allowances was undertaken in 1992, which did not cover all the schemes. We have gone back to Goodbody, Indecon, the Department of Finance and the Revenue Commissioners, and have examined all the schemes and have comprehensively reported on them. The results of those reviews were available for this year's budget in which the Minister for Finance announced the termination of ten property relief schemes. As Deputy Rabbitte said, transitional arrangements will apply until July 2008. That was done on the advice of the consultant not to overheat the construction sector in the current year. The reliefs for stallion and greyhound stud fees will also end on that date, as has already been announced.

In the case of pension funds, since budget day on 7 December 2005, a cap of €5 million has applied to the size of a pension fund, except where a higher value applied on that day. In all cases, no tax-free lump sum greater than €1.25 million can be paid out of a pension fund on and from 7 December 2005. A cap on the use of various tax reliefs by high earners to reduce their annual tax liability was announced by the Minister. That legislation is now contained in section 17 of the Finance Bill before the House today. That cap applies to those with incomes of more than €250,000 per annum. It will increase the effective rate of tax on those with high incomes who use the particular reliefs. Some of them over use those reliefs. This was the most detailed review ever undertaken on tax schemes. Specific property schemes have been terminated in other cases in recent years, including the Temple Bar, seaside resort and Customs House docks area schemes. Many other schemes were analysed also.

It is untrue to state that the construction schemes were rolled over. The original scheme was the section 23 one that was effectively available anywhere in the State. That was curbed to apply only for urban renewal areas that were designated by local authorities as areas that developers would not develop. Parts of Cork, Limerick, Dublin and Galway that were most deprived ten or 15 years ago have now been fully developed to include residential communities. That is because we curbed section 23. The economic analysis showed that provision was not required in the good areas of various cities. When the section was curbed it forced money into developing deprived urban areas. That initiative has been highly successful, if sometimes costly, and I am aware of the argument concerning taxes foregone. Nonetheless, it has generated large-scale employment and investment while reducing taxes to create a vibrant economy.

When I referred earlier to bright sparks I was referring in particular to pension schemes. The way in which some people used pension funds was certainly not what was foreseen. That is the point I was making.

That was six years ago. It is six years since Mr. McCreevy opened that loophole.

A number of changes were made, as the Deputy knows.

Please allow the Taoiseach to continue.

Only a small number of people started them.

It was well known around town.

I am not here to condone people who used the schemes like that.

Some €25 million went into a pension fund.

These reports are before us for debate because the Government has undertaken this fundamental review going back over 20 years. We have put them into the public domain and whatever other decisions we have to take, we will take.

Will they be there to take them?

The Deputy will not, anyway.

That has been a good day's work by the Government.

I am not contesting that it is a detailed review and neither am I contesting that some of the schemes for some of the time made an important contribution that otherwise might not have happened. There is an impression being sold about the tax system under which we live, the sort of Vincent Browne-like, naive, 1960s analysis, that because we do not pay a 75% rate of personal tax, this is a very fair tax system. What is fair about a tax system whereby high-rollers get the kind of benefits exposed in these reports? The cost of €1.6 billion is double the benefit. What is fair about that? The Progressive Democrats have a "40-20" mantra with regard to personal tax, although the actual figure is 42%. The 40-20 figure is easily sold to people, but this is where the real unfairness exists in the tax code, has been allowed to exist, and after yesterday's announcements will continue to exist. It is not true to suggest it is a historical issue with which we have now dealt. No action will be taken. The existing schemes will obviously continue to run. That is a contract.

The property-based schemes will not finish until after the general election when we will have a new situation. The fear of overheating the construction sector is a fear of overheating it between now and the general election. The Government has taken no action over nine years to interfere or intervene in that market, which has produced the circumstances which the Government and I know will inevitably come to grief down the road. As the Minister for Finance said this morning, he merely hopes for a soft landing. There was no intervention of any kind, so the Government is not going to terminate these schemes before the general election because it is fearful of the fallout.

Regarding the pension fund, a cap of €5 million is supposedly fantastic news for the unfortunate worker on 20% tax who received a big break from the Minister for Finance. Instead of the 20% relief the worker could expect to get, he or she will now get €2,500 on €7,500 out of the SSIA. Compare that with the €5 million cap that is left, not to mention the sort of person who could put €25 million into a pension fund and avoid paying any tax as a result.

This is the serious inequity and unfairness in the tax code, not the blather about 20-40 or 20-42, which is almost meaningless when one looks at the amount of tax which people with wealth pay, and the amount of tax which ordinary workers on the average industrial wage and somewhat more are liable to pay.

I will not deal with all the points made but the following is the position. We have taken a historical and a current look at all the schemes in every area and made changes to some of them. Some are gone or are being phased out. Others will remain for continual appraisal by the Department of Finance to see their merits over time. Some will live on because they are beneficial. The cap on various tax reliefs on high earners to reduce their annual tax liabilities, an issue debated in this House over a long period, was announced by the Minister for Finance and will be passed into law by means of the Finance Bill, debate on which will begin today.

The effective tax rate in this country for people on the average wage has fallen from about 28% to 15%, which represents a considerable reduction for the ordinary hard-pressed person. I will not discuss the SSIA scheme, but it is always amusing that people criticised the initiative and said it was ridiculous yet now say we should extend it.

I am glad this debate has shown that many of these schemes are beneficial. Where they are not, are being abused, have run out of time or are not necessary, we will move on from them, as the Minister for Finance said. This has been a good year's work by the Minister for Finance in being the first person in 20 years to do a full examination of all the schemes, to outline his future intentions in the case of a large number of them and to enact relevant legislation, some of which he has done since the budget.

In the week leading up to the 25th anniversary of the Stardust disaster, I wish to ask the Taoiseach a few questions. More than 800 young people attended that disco on the eve of St. Valentine's Day 1981. By the end of the night, 48 were dead and hundreds more injured. There are unresolved issues following the inquiry which sat for 122 days but left so many questions unanswered. It is now clear the inquiry did not go far enough and there are many questions which the Taoiseach might begin to answer if he were to focus on the issues. Despite numerous inspections of the Stardust building by Dublin Corporation, the owners were able to get away with repeated breaches of fire regulations and building by-laws. The question many ask is why so many patrons were prevented from escaping because of locked or chained fire exits.

Fianna Fáil was in power at the time and many of the Stardust victims feel they were badly let down. Many of the relatives are still grieving for many reasons. They did not receive any counselling, while medical cards were given and withdrawn even before the injured could return to work. The tribunal claimed the cause of the fire was probably arson, yet the Garda report disputes this. Victims lodged 245 writs but the only one to come to court was made by the Stardust manager. State compensation was paid on condition that no further claims would be lodged, and the biggest beneficiary was the Stardust management.

Many of the relatives would like an answer to a basic question. After 25 years, will the Taoiseach meet them at least to hear what they have to say and perhaps address some of the issues which arise if we are to prevent another Stardust tragedy?

The Deputy's time is concluded.

I will not take up the same amount of time taken by the other party leaders. In 1985, 11 ambulances were available to Dublin fire brigade to answer 26,000 emergency calls. In 2005, 68,500 emergency calls were made, nearly a trebling of such calls since 1985, but the number of ambulances remains at 11. After the Stardust tragedy, seven fire prevention officer posts were created by Dublin Corporation for the whole of Dublin city and county. Today, that number remains at seven despite the expansion of Dublin city and its council with all the new hotels, tax breaks notwithstanding, and many more concert venues and pubs on the outskirts and suburbs of Dublin. Does a cold shiver run up the Taoiseach's spine with the thought that another Stardust could happen? The way the figures look, that is very possible. Will the Taoiseach meet the relatives of the victims? Will he double the Dublin fire brigade ambulance numbers and at least double the district office fire prevention posts?

The anniversary of that tragic night is a week away and the thoughts of all are with the families of those killed or injured in the Stardust tragedy. As we approach the 25th anniversary of a terrible night, the Minister for Justice, Equality and Law Reform understands the families' concerns regarding the background, and his Department has been working with and assisting the families in a number of ways. The Government is prepared to continue that help. Officials in the Department of Justice, Equality and Law Reform recently met representatives of the Stardust victims committee, one of a series of meetings held with that committee.

The committee also forwarded a report prepared on its behalf to the Garda Commissioner and the Garda forensic science laboratory. I know the Commissioner and the laboratory responded that the report contained no new evidence. I can confirm to the House that the Garda concluded that no new evidence was forthcoming which would warrant it revisiting the investigation and it was considered that all the matters raised were adequately addressed at the time. I understand this information was given to the Stardust victims committee. Any further submissions the committee might wish to make will be carefully examined by the Department of Justice, Equality and Law Reform.

The Deputy mentioned counselling and other issues. I understand they are being dealt with on an ongoing basis. Parliamentary questions have been asked but there is no need to go through them. Obviously, since the Stardust tragedy — as we have seen internationally — there have been two not unrelated issues. It is always a concern that these kinds of events and tragedies like them can happen in different ways. Most of the recommendations following the Stardust tragedy — I am reading from a note from the Minister for the Environment, Heritage and Local Government — go through all of the areas, such as investment, infrastructure, equipment, better training and communications, legislation and other issues. The facts about what happened are there.

I do not want to mix the two issues. It is a particularly difficult time for the families. I have received communications from some members of the groups while other members take different views. However, they are communicating with the Department of Justice, Equality and Law Reform. I do not want to read off a list of the significant amount of investment in staff, fire and ambulance services in respect of these issues.

Is it true?

It is not what the individuals want to hear during this week. It is a remembrance of the tragedies of the night. The evidence of what has happened was found in the intervening period. However, it has been a long period and the service is entirely different and invested in now. The Government will continue to keep in touch with the families as is necessary.

I assure the Taoiseach that he is not mixing two issues. The relatives certainly want to know whether lessons have been learned.

The Taoiseach spoke about other countries and their tragedies but it is painful to realise that Ireland has the highest rate of fire accidents in the EU and one of the worst in the world. Ireland has 58 fire related deaths on average per year. The United Kingdom spends twice as much per capita in this area, as this country. We have not learned the lessons.

Notwithstanding all of the Taoiseach's talk about reform and change, there has been change. We have dozens more pubs, more concert venues, bigger stadia and more hotels but for this city and county on any typical night we only have one fire prevention officer on the north side of the Liffey river and one on the south side.

The Deputy's time has concluded.

I have not concluded on this matter. The Ceann Comhairle must allow me one last question.

This situation has gone from bad to worse since the Stardust disaster. It seems that lessons have not been learned. The Taoiseach talks about everything being fine; it is not fine. The Dublin fire brigade service had 11 ambulances then and has 11 ambulances now. Basically, there is one person per ambulance, meaning that, if there were to be any disaster with more than 11 people involved, the rest would be left on the side of the road to get taxis or anything else they could manage to reach a hospital.

The situation is dire. The current Government — Fianna Fáil was in Government then — should certainly learn the lessons. I ask that the Taoiseach address the issue. He should meet the relations and double the number of ambulances and fire prevention officers. Anything else is irresponsible.

Deputies

Hear, hear.

I remember well the night of the Stardust disaster and the issues surrounding it. As the Deputy knows, it was not a matter of ambulances. It was one of the best co-ordinated efforts by the emergency services of this city and one of the best ever seen.

The Taoiseach is wrong.

The fire service's ambulance service has radically changed. There have been massive improvements and significant additions to the fire service, such as fire appliances, emergency service rescue equipment. There have been improvements in the number of personnel involved and the level of training and the number of facilities in Marino, Athlone, Bray, Clonmel and some of the other parts of the country. All of the figures are in the public domain

This is not to say, as the Deputy believes I am saying, that everything is fine and there are no problems. When dealing with tragedies and fires and in spite of the fact that the Stardust changed the attitudes in this country totally in terms of regulations, planning permission, new buildings and inspections, it is an entirely different position now than it was then but it does not mean——

We have the same number of inspectors.

——that people can ever stop. There are 3,400 fire service personnel in the country compared to quite small numbers in many areas then. Premises are being inspected. The new Building Control Bill 2005 deals with a significant number of issues. I reiterate that the Government is very sensitive to the families.

It always has been and has always dealt with them. It will continue to do so. They are actively engaged in meetings with the Minister for Justice, Equality and Law Reform.

Totally misleading.

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