Finance Bill 2006: Second Stage (Resumed).

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

Before the change in the business of the House, I was reminding the Minister of State of the neglect of the elderly, with specific reference to the callous attitude of recent years whereby even the homes they have built up and paid for over the years must be taken from them before they qualify for any kind of nursing home care. Incidentally, such care does not come cheap, as we know.

Another recent announcement concerned the closure of all psychiatric hospitals. I know it was heralded on the other side of the House with great applause, foot-stamping and the general acclamation that accompanies such serious announcements. Perhaps we will shortly hear that the various psychiatric institutions will be sold for urban development or apartment complexes. As one who has spent some considerable time on a health board, I hope that the promised community care follows. If it does not, the other side of the House, and everywhere else, will reap the whirlwind.

Does the Deputy agree with the plan, however?

We have no problem with the plan. It is its implementation with which I have difficulty, since I do not trust the Government with it. I particularly do not trust the Minister of State at the Department of Finance, Deputy Parlon. Every plan he has produced hitherto has fallen short of the guidelines, deadlines or target. There are few places one can go after that.

The Deputy had better start listing them.

If the Minister of State so desires, I have no difficulty in doing so. I do not wish to embarrass the Minister of State. However, if he was on a rifle range and missed as many targets, the spectators would need to be herded away from the scene for their own safety.

The Deputy should name a few instead of waffling. This is more empty rhetoric.

To return to the Minister of State's missed targets, it would be the most callous action to close down institutions on the basis that primary care was to be available, if that primary care is not available. I remind the Minister of State that primary care does not come cheap. It is not as cheap as promises and it should be capable of lasting somewhat longer. This affects vulnerable people, those needing support and back-up. To do anything other than deliver would be appalling. Needless to say, nothing would surprise me because there are people on the other side of the House who are quite capable of doing just that.

The Minister of State suggested I refer to specific targets. Unfortunately, time does not permit me to go through that long list but given the opportunity, I would cite missed targets such as the Red Cow, the M50, the voting ballot boxes, the electronic ballot boxes that were never used. These are all missed targets. It is not so much missed targets as invisible targets and perhaps this is the reason they were missed. I could cite instances of failure to deliver on time, on price or within budget price. One of the major themes of this Government and its immediate predecessor has been its total, absolute and abysmal failure to meet any kind of price target. There has hardly been a project that has not doubled and quadrupled in price.

How then did we end up with €1.6 billion?

I will explain how the Government ended up with €1.6 billion although I thought the total was €1.8 billion but perhaps it has shrunk in the meantime.

The Deputy said €1.6 billion earlier.

I said €1.8 billion. I am surprised the Government found the €1.8 billion. I am surprised this was not overlooked as well, on the basis that it was only a small sum of money when there was a great deal of money around.

The Deputy is contradicting himself.

The Minister of State should be ashamed of himself. He has come to the House and has the effrontery to suggest that the Government had done well and had a good surplus of money, even though it did not know it was there. This is like the postman going out to deliver letters but discovering his bag is empty one day and he has a full bag another day. The Government should be careful; it will do very well if it keeps going like that.

If the Government is overspending, how did it end up with a massive surplus?

I wish to emphasise the failure of the Government to deliver on its projects, failure to deliver on time, failure to deliver within price and failure to deliver to the people to whom it made wild promises.

The Government should be given time to apologise to the people. Just as in American football, there should be time out allowed for the Government to issue a profound apology to the people for the manner in which it has treated them, misled them, misguided them and taken their money out of their pockets. This is money the Government has lost and they cannot even count it as they have so much of it.

I wonder whether the Deputy has been on the Kinnegad motorway lately.

The Government could not even leave the Kinnegad motorway alone. It has immediately established toll booths, in case the motorway might work. There are now more tolls. The motorist who contributes €5.2 billion to the Exchequer every year gets nothing in return. He cannot park and if he parks where he should not park, his car will be clamped. He cannot drive anywhere because somebody will stop him for some reason or another. The clowns on the Government side have decided that not only must the motorist pay beforehand, but he will pay on the double and if he is on the M50, he will pay four times over because there will be four toll plazas. If he escapes one, he will still encounter more.

The Kinnegad motorway is a tremendous success. It was built on time and within budget. It has taken half an hour off a journey.

The Government is deluding itself——

The Deputy only sees the negatives and he is deluding himself.

Is the Government sure it has not been eating magic mushrooms? It is delirious, delusional and hallucinating. It does not know what the people are thinking. They should come up close and ask the questions because the people will tell them very quickly.

I note the new rules governing the right of Revenue to make inquiries and this is to be welcomed. I participated in the DIRT inquiry and I appreciate the importance of such legislation. The lack of legislation is not always the cause of failure to detect. Countless cases were dealt with during that time and it was not necessary to introduce any legislation but it was clear to all that the rules had been broken several times over, at will, and yet nothing had been done. It is not sufficient to simply state that more legislation and more controls will be introduced. I agree that some controls are necessary and I would expect these controls to be exercised.

In a recent reply to a Dáil question, I was informed that €7.3 million was taken in armed robberies in ten months during 2005 and a total of €38,000 was recovered. This is a very poor show. It is important that the resources of the State be used to detect where such moneys are going. There is far too much organised crime, far too much talk about it and far too much talk about introducing more legislation coming from the other side of the House but far too little action in dealing with it.

I agree that tax concessions are desirable and can be used positively. In some towns and villages the urban renewal schemes fell apart and never materialised because a deadline was not imposed on their use. Potential investors thought the schemes would remain unchanged in the future.

I cannot understand the reason that at a time when there were tax concessions and allowances for everything and at a time when we could not produce enough houses for people who were eligible for social or affordable housing, it was not possible to produce a scheme to give tax relief to those willing, ready and prepared to build houses for them. I rest my case.

I wish to share time with Deputies Andrews and Fiona O'Malley.

I am glad to have the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters.

The Finance Bill demonstrates the continued commitment of this Government to use the tax system to expand our economy, reward work and alleviate the burden on taxpayers, especially those on lower pay. It also underlines the Government's commitment to a fairer and more equitable tax system.

I welcome the income tax changes confirmed in the Bill which will have the effect of removing all those on the minimum wage from the tax net, excluding workers on the average industrial wage from the higher tax rate, ensuring that high income taxpayers pay a minimum amount of tax and ending the remittance basis of taxation. The ESRI has said that budget 2006 had a more progressive impact on the distribution of income than any other in the past decade or more.

With reference to tax changes which impact positively on particular sectors of the economy, I welcome those affecting the farming community, including the continuation of the stamp duty exemption for young trained farmers for a further three years, the increase in the tax exemption limits for income from long-term farm leasing, a further improvement to the special tax relief for farm pollution control measures and the extension of certain existing capital acquisitions tax, capital gains tax and stamp duty reliefs to cover the EU single farm payment entitlement in appropriate circumstances.

With reference to the construction, meat processing and forestry sectors, I welcome the tightening of rules on relevant contract tax which will help tackle shadow economy operators and eliminate the competitive advantage enjoyed by non-compliant operators.

The Bill confirms the introduction of a tax disregard of up to €10,000 for child minders minding up to three children in their homes. It proposes significant improved tax reliefs aimed at restoring Ireland's competitive position as a film location. The Bill introduces a new scheme of relief for heritage property donated to a proposed new Irish heritage trust.

With regard to pension improvements, I applaud the significant pension initiatives in the Finance Bill which are aimed at SSIA investors and individuals who are 55 and over. These measures will greatly assist those on lower incomes or those not using their current full entitlements to provide themselves with reasonable retirement arrangements.

On the subject of Revenue powers, the proposed requirement for automatic reporting by financial institutions to Revenue of interest payments and other profit payments made to customers is reasonable and justified on the grounds of transparency and openness. Likewise, the proposed surcharge of 10% of the tax payable on undisclosed transactions that are ultimately determined to be purely tax avoidance transactions should send out a clear signal to those who seek to circumvent the system that they will be penalised if they flout it at the expense of others. Taxpayers who are open about their earnings and tax planning arrangements have nothing to fear from these revised arrangements.

There are no increases in VAT rates or in excise duties on petrol, tobacco or alcohol. In addition, a halving of excise duties on certain home heating oils is significant. These policy measures will make a significant contribution to ensuring that overall inflation is kept low during 2006.

I welcome the phased five-year scheme of targeted excise relief for biofuels introduced in the budget for 2006 with a view to assisting biofuels to achieve an initial target of 2% penetration of the transport fuel market by 2008. I understand that when fully operational in 2008, this relief is expected to support the use and production of 163 million litres of biofuels per year. I also welcome the vehicle registration tax relief of 50% for new flexible fuel vehicles — vehicles capable of running on both conventional fuel and high-grade biofuels — which is being introduced for a pilot two-year period with effect from 1 January 2006.

This Finance Bill builds on the solid achievements of recent years and supports the progress of our economy. In its totality, it reflects the Government's commitment to consolidating our economic gains and creating the conditions for future employment growth. It is a Finance Bill which should be broadly welcomed by both the ordinary taxpayer as well as members of the business community.

I thank the Minister of State for his comments. I wish to address two issues in which I have taken an interest — child care and pensions. Like the Minister of State, I welcome the proposals which will make a great difference to people struggling to manage their domestic and working lives. The Bill contains some imaginative and useful proposals. I hope in future we can expand the benefit-in-kind rules in the taxation legislation so that it will be simpler for companies to extend benefit-in-kind to their employees without tax. In that way, employees will know that is a right they can argue for in the context of pay negotiations. I also hope that in conjunction with this Bill, planning legislation will be relaxed to allow for much greater access to child care facilities.

There should also be a requirement to ring-fence development levies for child care. As things stand, there is simply a discretionary duty on the county manager to include child care as part of a development. This should be specifically ring-fenced and made mandatory so that funding will be available for child care facilities from local authorities. On the other hand, employees will be able to negotiate benefit-in-kind in pay talks in the context of their employment. I hope that will happen in future but perhaps it is a bit early for it to occur now. The Taxes Consolidation Act contains certain provisions in this regard but they are much too complicated. My information is that only one employer in the State is taking advantage of those provisions, which is a clear failure of the original intention of that measure.

I also wish to refer to pensions. It is well known that in Ireland we are perhaps going backwards in terms of pensions coverage. The PRSAs have not taken off successfully, although the country is in the fortunate position of not having the worst demands on the pension sector because of the high working population to dependants ratio. In addition, the older segment of the population is not as high a percentage as in other countries. We have, therefore, an opportunity to solve the pension problem for future generations.

To the credit of the Minister for Finance's predecessor, Mr. McCreevy, the National Treasury Management Agency manages a large fund for future pensions, which is to be commended. The current State pension is heading towards €200 per week, which is also commendable. Currently, however, only 50% of workers have pension coverage, which is far short of the 70% target.

Recently, the Pensions Board suggested that compulsory pension coverage should be introduced but, in my view, this is not a very well thought out suggestion. I admit that the Pensions Board was split on the issue but there are clearly those who hold that view, including the Minister for Social and Family Affairs who suggested it as a possibility. It would, however, penalise employers and small businesses in particular. In other countries, employees and employers share the contributions to mandatory pension schemes. Inevitably, however, employees will seek that their half should be paid through wage increases. We live in a competitive environment for insurance rates and other requirements on employers, so if mandatory pensions were to be introduced, it would have a bad effect on small and medium-sized enterprises which do not have the resources, expertise or time to devote to setting up such a system.

The recent Central Statistics Office figures also show that we had a reduced pension coverage in 2005 compared with 2004. We need to take advantage of the fact that people are willing to save — the SSIAs are a classic example of that — and tap into it. The Minister is to be commended on the €1 for €3 initiative when SSIAs are used for pensions, but there is much more potential for development in this area. What is missing is a high profile campaign to make people aware of the need to provide for pensions. Such a campaign should paint the stark picture that because so few have pension coverage, many people will face into a difficult retirement period. We need to undertake such a campaign straight away.

We also need to introduce the concept of a pensions regulator, as they have done in the United Kingdom, to increase public confidence in pensions. Currently, the Pensions Ombudsman is simply a reactive office which deals with queries as they arise.

While we face a real challenge on pensions, the Bill has gone a long way towards improving the situation as well as ameliorating the issue of child care. There is great potential for tackling both issues. Thanks to the Government's financial management, we will be able to deal with such problems in future.

I am glad of this opportunity to speak on the Finance Bill which is passing quickly through the House. A budget such as the current one does not happen overnight. Prudent management of the economy and sound investment have led us to a position whereby we are able to deliver such a budget. We should cast our minds back to the 1980s to realise the transformation that has taken place in Ireland since then. Massive unemployment, economic stagnation and emigration created an air of seemingly permanent despair that was a feature of the country in those years. Tax reform, compliance with EU criteria, the Maastricht treaty, the Stability and Growth Pact in particular, and social partnership have all contributed to the economic and social transformation we now experience.

This is the eighth budget which bears the hallmarks of the Progressive Democrats's philosophy. Together with Fianna Fáil, we have put in place economic policies which have permitted us to generate wealth which can then be redistributed to the most vulnerable and marginalised in society. However, if one does not generate wealth, one cannot disperse it. This budget, more so than any other, is tackling in particular the needs of people on lower incomes. It takes those on the minimum wage out of the tax net. It removes those on the average industrial wage from the top rate of tax and brings the old age pension up to €193 weekly, well on the way to the target of €200. This represents an increase of 67% since 1997.

It is such details and statistics which are long forgotten because we now have days of plenty and we forget. Looking back, nobody would have thought that over the lifetimes of the current and previous Governments, we would be in a position to increase the old age pension by 67%.

The early child supplement to which Deputy Andrews referred is an example of an innovative response to a particularly trying challenge. I commend the Minister on his flair in dealing with the situation.

Another commendable measure relates to biofuels. This is an area in which Ireland can grow and develop. Recently we have all become more aware of energy issues and the energy crisis. Ireland can play a major role in developing biofuels and renewable alternative energy. There are opportunities for Ireland if someone is prepared to take a bold step. We have the expertise but we need the taxation and fiscal incentives. In time to come, we will reap the rewards. I commend the Minister on taking a stand on this matter and, as he is aware, he is very popular with the biofuels sector because he has taken a brave step by allowing the sector to grow and advance. It is an area of major growth in this country.

A Minister for Finance has a responsibility and an opportunity to be forward looking and to take bold steps for the future. Two commendable examples are the strategic initiative fund for higher education and the measures the Minister proposes with regard to SSIAs and pensions. Education is the bedrock on which our economic prosperity has been built. As with the advances in second level education in the 1960s, the new fund for higher education will turn out to be just as important a measure as we advance.

Given the demographics of the country, pension provision for the future is a challenge. Prudent management of the economy involves providing for the citizens' financial well-being in the decades to come. The National Pensions Reserve Fund was the result of one commendable measure in this area and the Minister's SSIA pension contribution plan is another. Lack of pension provision for the future, especially among women, is a real problem which the Government needs to keep an eye on. The Finance Bill measures are a start but with regard to public sector pensions and the benchmarking issue, we need to be fully aware of their true value.

I commend the Minister's vision in solving these problems of tomorrow with the prudent management of today. That is a virtue often overlooked and seldom rewarded. Aristotle said that economics is merely a means but what is important is the aims we wish to serve. This budget has demonstrated that once one has provided the money and the wherewithal to generate income, we can deliver for our citizens economic prosperity in which they can all share. That is what they deserve.

I welcome the opportunity to speak on the Finance Bill and to highlight some areas where the Government could have taken further steps to address some anomalies in the Bill.

Regarding the publication of the Finance Bill and the budget, it is clear that the situation continues whereby one third of taxpayers pay the highest rate of tax of 42 cent in the euro. That is unacceptable and is a long way off the target set by the Government, namely, 20% of taxpayers paying at the higher rate of tax. While the Government says we have a low-tax regime, that is a long way off considering the 41 stealth taxes in place and the fact that one third of all taxpayers pay at the top rate of tax. The Government is far from being a low-tax one. In 2005, almost €2 billion in excess tax was taken from taxpayers.

The 2006 budget sets a number of targets. One relates to carers and care of the elderly. The total package involved is €150 million, which does not even come to the amount the Government has squandered on the PPARS electronic payment system. It all seems to be a mess. The Government is rudderless and cannot deliver on projects. For example, €2.5 billion in the capital spending programme has been left unspent. In the capital spending programme of the Department of Health and Children, €54 million has gone missing. We do not know if it has been spent. The budget and the Finance Bill reveal a litany of missed opportunities by this Government and no coherent action has been taken to address the ongoing wasteful expenditure. That is a major disappointment.

I am disappointed that the Minister of State, Deputy Parlon, did not stay in the House because I wanted to address specific points to him. However, some of them are close to the heart of the Minister of State, Deputy Treacy, and I am sure he will take note of them. There was no mention in the budget speech of the Minister for Finance of the grand plan for decentralisation.

It is decided and it is proceeding.

I know that the decentralisation to Carrick-on-Shannon and Athlone is moving along at a snail's pace but decentralisation to Ballinasloe and Roscommon seems to have stalled. We have been informed that approximately 200 Land Registry jobs will not be relocated to Roscommon town until mid-2009. That is greatly disappointing. The demand exists and there are more than enough civil servants willing to relocate. I am aware of quite a number of public servants from County Roscommon working for the Land Registry who are willing to relocate to Roscommon. We have the technology, the expertise and the skill there and the General Register Office in Roscommon town is fully automated. It is a great disappointment that the Government has long-fingered the decentralisation proposal which would have benefited not only people in my constituency of Roscommon-South Leitrim but also the Minister of State, Deputy Treacy, in his constituency across the River Suck.

I want an explanation why the Railway Safety Commission has not already been decentralised to Ballinasloe. When I asked the Minister for Transport last year when the commission would be established in Ballinasloe, he said it was not an early mover. I would like to know why not considering the legislation establishing the Railway Safety Commission was only passed into law late last year. If the commission was not established statutorily until late last year, why can it not be an early mover? It is a new State or semi-Stage agency. There is no reason it should not be initially formed in Ballinasloe.

Someone needs to explain what is happening as there does not seem to be a political push in the Minister of State's office or the constituency for the relocation. It involves a small number of jobs, approximately 20 in total, but there is no impediment to this happening. The agency is new and the people going into those positions knew it would be decentralised to Ballinasloe. The announcement of its decentralisation took place before the establishment of the commission. There is no excuse whatsoever.

One aspect of the Finance Bill 2006 to deal with tax evasion is that of giving Revenue powers to access bank accounts. This worries me, as I am sure it worries the Minister of State. We know of people in the west who were assaulted and robbed because they kept money in mattresses and biscuit tins. The Minister of State and I went on the public airwaves and dealt with people on a one-to-one basis to actively encourage them to put their money into bank accounts. We explained that the Department of Social and Family Affairs would deal with the matter in a sympathetic manner, which it and the Revenue Commissioners have done.

In many cases, the few euro the people had were purely to pay for their funeral expenses. We are now telling them that, after their money has gone into bank accounts, we will refer them to the Revenue Commissioners. It should be pointed out that all these accounts have had DIRT paid on them already. We are encouraging people, especially the elderly, to take that money out of their accounts. It is a retrograde step and it will undo the good work that has been done.

The big difficulty between today and when the Government took office nine years ago is that we no longer have rural gardaí. It has been the active decision of the Government over the past nine years to close down rural Garda stations. They are there in theory as they are open a couple of hours per month. As the Minister of State knows, anyone trying to renew a gun licence will not find a garda in the local rural station. Through the Minister for Finance's decision, we are encouraging people to take the money in their bank accounts out again even though DIRT is being paid on it.

It is not just me who is highlighting this problem. The OECD in a 2004 report raised serious concerns about the Department of Finance's proposed policy. It stated that citizens "may feel a certain unease at the powers that such techniques would provide to the tax authorities". Will the Minister of State examine this matter from the point of view of elderly people in our community, especially when the Government is not prepared to fund the maintenance and policing of rural areas?

I wish to make a number of points on agriculture. One relates to a very positive decision taken by the Minister for Finance in budget 2005, namely, allowing farmers to average their income tax liabilities over a three-year period from 2005 to 2007, the reason being that farmers were going to get a double payment in 2005, that is to say, their 2005 and 2004 single farm payments. They would have applied in 2004 and drawn on the entitlements in 2004 but the payments only issued in the subsequent year. As they got double incomes in one year the Department of Finance rightly agreed to average it out. It made more sense.

However, there are 5,000 farmers at present who still have not received their single farm payments. Approximately 5,000 farmers who received their payments since 31 December are now losing out on the average liabilities and will be stuck with a double single farm payment in 2006. Their 2005 payments will be made at the start of 2006. Hopefully, their 2006 payments will be made in the first week of December this year. Those people are caught in the situation of being unable to average their income tax liabilities over three years. They can only average it over a two-year period. Will the Minister for Finance review this matter on Committee Stage and ensure those farmers can, like every other farmer, average their liabilities over a three-year period?

The Department of Agriculture and Food has failed in responding to and addressing the queries made by farmers. Will the Minister of State, who was previously a member of that Department, get in contact with his colleague, the Minister for Agriculture and Food, and ask her to ensure that each and every one of those 5,000 farmers receives an explanation about what the difficulty is? None of us can get through to the Department to determine where the problem lies. If farmers telephone, many cannot understand where the problem is due to the amount of double Dutch spoken to them. Talk of swapping, changing and transferring entitlements is extremely confusing. It would be easier for a letter to be sent to each of the 5,000 farmers to explain where the difficulty lies and what must be done to resolve it.

Another issue that should be examined on Committee Stage is the position of farmers who purchased suckler cow premium quotas. There are many such persons in the Minister of State's constituency, as there are in mine. These farmers purchased suckler cow quotas but, because there is no provision in the tax code for writing off the quotas, they cannot receive tax relief against their purchasing costs. This is unlike the circumstances of people who purchased milk quotas, which is still an asset. Its value has reduced over recent years but the suckler cow quota has no value whatsoever now. Farmers spent much money but are getting no reliefs.

As the Minister of State is aware, since the mid-1990s there has been a requirement for livestock farmers to have suckler cow quotas to draw down the entitlements based on the premium payments. Farmers paid between €200 and €750 for those quota rights, which needed to be approved by the Department of Agriculture and Food at the time and was the State's recognition of the matter. However, since 2005 and the introduction of the single farm payment and due to the decoupling policy, those quotas have no actual value.

For example, a part-time suckler farmer with 20 suckler cows purchased ten new suckler cow premium quotas in 2001 at a cost of €600 each amounting to a total cost of €6,000. It is likely that this farmer borrowed most if not all of that money. The expenditure was made from his after tax income. The quota has now been abolished and is worthless but the farmer must still repay most of the borrowing associated with the purchase.

The farmer should be able to write off the €6,000 expenditure against his income tax as a balancing allowance. It is the case in respect of the milk quota and it makes sense that it would be the case for the suckler cow quota. There is a precedent, not only in the form of the milk quota. The case of the buddies of the former Minister of State at the Department of Transport, Deputy Callely, who were also close buddies of the Taoiseach — taxi drivers — was sorted out quickly. Their licences were worth nothing overnight and they have received income tax relief on the purchase price of licences. Why should taxi drivers be given the benefit of relief when farmers in a similar situation are not given this benefit? I hope Deputy Treacy will bring this to the attention of the Minister for Finance and officials at the Department and table an amendment to ensure farmers who have purchased suckler cow quotas receive the same benefits as farmers who have purchased milk quotas or receive the relief provided to taxi drivers.

The farming community has received the thin end of the wedge from this Government. When a similar situation arises in another Department, a different interpretation is taken. This is a litmus test for the Government and I hope the Minister will address this on Committee Stage.

I also hope the Minister will address the issue of compulsory purchase orders. The Minister of State, Deputy Treacy, is familiar with this and the notice to treat has been issued to farmers.

I am sure Deputy Naughten is pleased.

I would be pleased if the Government abolished the 20% tax and if the capital gains tax roll-over relief had not been removed.

It was 40%.

No, it was zero.

It was 40%, reduced to 20%.

I will explain this for the benefit of the Minister of State, who has many irate constituents because of this.

Capital gains tax was levied at 40% but farmers who were forced to sell to the State under a compulsory purchase order paid no capital gains tax if they reinvested the sum prior to, or within a subsequent five-year period of, the compulsory purchase order. The majority of farmers in this situation, including my constituents in south Roscommon, want to reinvest this sum in facilities or additional land for the farm. They will have to pay 20% tax rate regardless of whether they do this.

As president of the IFA, the Minister of State, Deputy Parlon, struck a deal with Charlie McCreevy on these issues, including an agreement that the capital gains tax scheme would not be changed. This was changed in the following budget when Deputy Parlon was Minister of State in the Department of Finance.

It is morally wrong that farmers are being forced to sell land below the market price. My colleague, Deputy Paul McGrath, states that the valuation set on land in County Westmeath is between €15,000 and €17,000 per acre when land is selling at €24,000 per acre on the open market. Not only are farms being undervalued, the Government is taking 20% from farmers after forcing them to sell land. It is morally wrong that this Government has made a U-turn on this decision and it is worse that the man who claimed to represent farmers was involved in the U-turn when he was Minister of State at the Department of Finance. I hope this scheme is amended on Committee Stage as this is the last chance for farmers in counties Galway and Roscommon. I ask the Minister of State to use his influence to remove this unjust tax and ensure farmers receive a fair price for land forcibly taken from them.

Ba mhaith liom mo chuid ama a roinnt le mo chomhghleacaithe, an Teachta Devins agus an Teachta Blaney. I value the opportunity to contribute to this debate.

This is the second Finance Bill of the Minister for Finance, Deputy Cowen, and the ninth successive such Bill that has been introduced by this Fianna Fáil-led Government, which has steered our economy, now seen as one of the most dynamic in the world, on a vigorous course of success since 1997. This Finance Bill sets into law many of the landmark policy decisions outlined in the Minister's recent budget as well as containing important new initiatives.

Over the past nine years, the Government has followed a strategic path of economic and social policies, aimed at supporting sustained economic growth and promoting improved equality and opportunity for all. We must follow a path that continues to build on our recent phenomenal success while remaining focused on the need to keep the economy competitive in an increasingly globalised world.

This Bill will give effect to the major tax and fiscal aspects of a budget that builds on its eight predecessors and brings more good news for old age pensioners, social welfare recipients and those on the minimum wage. Child care measures are of particular significance in this budget. Having addressed the concerns of many young couples in last year's budget, with significant adjustments to stamp duty, increases in child benefit and a special €1,000 supplement to all children under six years of age have been widely recognised as enlightened, far-sighted measures.

It is in sharp contrast to the voucher system proposed by Fine Gael, which would discriminate against women in the home and which was so effectively rebutted by the Taoiseach last week in this House. Does the main Opposition party have so little regard for mothers who have chosen to stay at home to raise their small children?

The taxation and fiscal measures announced in the budget for 2006 and given legality in this Finance Bill are designed to stimulate equality and fairness while sustaining an economic climate built on competitiveness. Among the most notable measures in this Bill are increases in the personal and PAYE credits to ensure the removal of all those on the minimum wage from the tax net, increases in the standard rate bands to ensure the exclusion of workers on the average industrial wage from the higher tax rate, the restriction on the use of tax reliefs by high income taxpayers, the phasing out of various tax schemes and exemptions, the ending of the remittance basis of taxation for certain non-domiciled employees, the continuation of the stamp duty exemption for young trained farmers for a further three years, the increase in the tax exemption limits for income from farm leasing for over five years, the extension of certain existing capital acquisitions tax, capital gains tax and stamp duty reliefs to cover the EU single farm payment entitlements in appropriate circumstances, the introduction of a new scheme of tax relief for heritage property donated to a proposed new Irish heritage trust, the introduction of a tax disregard for certain childminders who mind up to three children in their homes, adjustments to rules governing top-hat pension provisions and approved retirement funds, increases in VAT registration thresholds to help small business and an exemption from excise duties for biofuels and reductions in excise duties on certain home heating oils, such as kerosene and liquid petroleum gas, LPG.

Building on the unprecedented success of this Government's initiative to engender a saving culture among the population, this Finance Bill also outlines a further initiative aimed at encouraging lower income holders of SSIAs to transfer funds into pension schemes. Despite being pilloried by the Opposition, the National Pensions Reserve Fund has been an outstanding success in investing for the future but we know we must do more. I hope we will have the support of the Opposition parties to achieve more.

This SSIA initiative will mean a person transferring €7,500 from an SSIA into a pension scheme could receive a top-up of €2,500 from the Government to give a total pension contribution of €10,000. In addition, the exit tax to be paid on SSIA moneys transferred to pensions will be waived, giving a further top-up to the overall contribution.

I am long enough in this House to remember what it was like when the main Opposition parties, Fine Gael and Labour, were last elected to Government.

That is a broken record. We were creating 1,000 jobs per week.

The economy was on it is knees, a real basket case, and we were described as the poorest of Europe's rich in 1987. Deputy Naughten is very young and may not remember this period. Thankfully, Fianna Fáil returned to Government that year and set about pulling the country out of the doldrums.

I remember the by-election in which the Minister of State was elected.

Excellent. I remember it fondly.

Due to utter mismanagement and incompetence, Fine Gael presided over a situation where taxes went through the roof, inflation was rampant and industrial unrest was widespread, while our young people were leaving in search of jobs in numbers not seen since the bad 1950s.

The glory days of de Valera.

The facts of history also show that in 1987, faced by an economic wasteland of incompetence and mismanagement, the Taoiseach, Deputy Bertie Ahern, then Minister for Labour, crafted the first social partnership agreement. This first historical agreement became the template model on which stability and prosperity were built and it continues to be a crucial aspect of economic and social policy.

If the Deputy is going through history he should remember the Tallaght strategy.

We certainly remember the Tallaght strategy with great respect. What happened to the great man who collaborated with us? Fine Gael decided to destroy him and take him out of politics. It was a terrible thing to do.

Fianna Fáil broke its agreement as usual.

I listened with interest to what Deputy Naughten stated. He discussed a low tax situation and stated that this is a high tax Government. He forgets that we have a minimum wage and that due to training and retraining our workers——

Surely the minimum wage should not be taxed.

With their high intellectual capacity, they earn much more than ever.

Do not tell me the Minister of State proposed that.

Deputy Naughten mentioned PPARS. Consider the success of PPARS in St. James's Hospital. It will roll out elsewhere throughout the country.

The people of Ballinasloe and east Galway would not be impressed with that.

Deputy Naughten had his opportunity and he should allow the Minister of State to speak.

Deputy Naughten said that money went missing. He might not understand accountancy. There is no money missing. Deputy Naughten mentioned decentralisation, but he never mentioned that we gave the GRO to Roscommon and he never stated how good it is for Roscommon, for his constituency and for his county.

I did mention it.

We will deliver decentralisation. As we have done for Carrick-on-Shannon we will do for Ballinasloe and Roscrea.

What about the railway safety commission? What is the Minister of State at? Is he asleep?

It is in law. It is being created and constructed. Be assured, it will be located——

It is already in law. Is the Minister of State asleep?

Deputy Naughten also mentioned that the banks and the Department of Social and Family Affairs do not treat people generously. We will continue to treat people generously. Deputy Naughten said that 5,000 farmers are still awaiting money to be paid to them. These cases involve accounts and applications with certain technical difficulties. They are resolved at the rate of 500 per week and will soon be concluded. The decision we took on the last budget means that people will have the opportunity to average the income over three years. The Revenue Commissioners will deal with it. People will continue to be treated fairly.

The Government consistently shows that it has the vision and the resolve to keep our country competitive and sustain the conditions that give us low taxes, low unemployment, low inflation and low interest rates. This Finance Bill continues the policies of a Government deeply conscious that in an increasingly prosperous Ireland, no boundaries should be placed on giving people the opportunity to enjoy the fruits of this prosperity.

I congratulate the Minister for Finance, Deputy Cowen, on his budget and this Finance Bill, which continues a spectacularly successful approach to the governing of this country, by any yardstick. The Opposition might be in denial, but it is becoming increasingly clear that the Irish people are convinced that only the present Government has the capacity to marshal the economy and continue this success.

The capacity to squander money.

This Finance Bill is fair, balanced and very much in keeping with the visionary strategic approach of the Government to the economy. I commend it wholeheartedly to the House for its full and final approval. I am sure it will be endorsed.

I thank the Ceann Comhairle. I am delighted to have this opportunity to speak on the Finance Bill 2006.

Deputy Devins will speak much more sense than the man who just sat down.

There is no doubt in my mind that this budget was universally accepted as one of the most successful budgets in the history of this country. I congratulate the Minister, Deputy Cowen, for the thought and diligence he put into preparing and presenting the budget. There has been a lot of media coverage during the past few days regarding the tax exemption schemes, in particular the urban and rural renewal schemes. Most of the coverage, I am afraid to say, has been from a purely economic point of view, which tends not to take into account the human and sociological aspects of life.

In my constituency of Sligo-Leitrim, I see at first hand the dramatic impact of both schemes. In the first instance, Sligo city is unrecognisable today from what it was ten years ago. It was then a town which, by common consent, had not achieved its full potential. Most of its shops, offices and streetscapes had not changed for 80 to 100 years. Commercially, there was a fear that Sligo was dropping behind many of the towns and cities within a 90 to 100 mile radius. People from Sligo started to shop and do their business elsewhere.

I would like the House to contrast that picture with the one we have today. We now have one of the largest shopping centres in the north west, which opened last year. A massive reconstruction is occurring throughout the city centre, with new shops, offices, hotels and retail parks opened or about to open. A great sense of excitement and prosperity is in the air. The city has been refocused towards having the river Garavogue as its focal point, with cafés, restaurants and modern buildings housing a host of activities. A key component of this regeneration is the impetus supplied by the urban renewal scheme. It is not the only reason for the transformation that has taken place in Sligo. However, it is an extremely important component.

Likewise, many areas of County Sligo and the entirety of County Leitrim have benefited from the rural renewal scheme. Villages which were literally dying on their feet have been reinvigorated and many small towns and villages show an increase in population for the first time in more than 100 years. It may not mean much to people who live along the east coast, where population densities can be quite high. However, when the population in a small village or townland increases from 30 to 60 or 70 people, it represents an increase of more than 100% in numbers. Sociologically, that small increase can mean the difference between life or death for that area.

The Minister pointed out that life has been restored to the west and north west by the success of these schemes. There is an indication that these schemes will be tapered off. The Bill also includes many other changes, which will ensure that growth and employment continue, while at the same time making sure that those on low to middle incomes are major beneficiaries. Nobody on the minimum wage will pay tax. Those on the average industrial wage will pay tax at the lower rate, not at the upper rate as is currently the case. The closing off of tax advantages to high income earners is most welcome. Everybody will now pay their fair share of tax according to their means.

The provisions relating to child care have been well discussed and well flagged. I commend the Minister for his vision in introducing them. The Bill also contains many more provisions that are welcome, but time does not permit me to refer to them. I commend the Bill to the House.

I support the Finance Bill 2006. Incentives in the budget such as the extension of maternity leave, child benefits, extra resources for the elderly and social welfare top-ups are extremely welcome. Anyone who thinks it is not a good budget is not too wise. It is an excellent budget.

I wish to bring to the Minister's attention anomalies regarding access to the north west of Ireland that have continued for quite some time and can no longer continue. I wish to mention my dismay and disgust at the recently announced Transport 21 Government policy document. With colleagues from my county, I met the Taoiseach and the Tánaiste on several occasions during the past five years. We outlined that we do not get a fair share of the cake regarding infrastructure and access to the north west. We always receive the same old reply, that the Northern Ireland authorities are not in favour of co-operating on transport. However, during that period the final parts of the M1 motorway were constructed. I want to mark the cards of the Government, particularly the Minister for Finance, on this issue.

I come from a county with four out of six Government Deputies and I vote with the Government on the majority of occasions. We have no deep sea port. There is a greater volume of traffic on the N2-A5 roads between Dublin and Derry than on the Galway, Limerick and Waterford routes. However, those three routes will be upgraded to motorway status whereas the N2-A5 is completely forgotten about. If this was the Minister's constituency he would not stand for this response, and I can no longer stand for it. We did not even get a mention in the Transport 21 document.

We have had the highest unemployment level in the country for many years. It is currently running at four times the national average and we can forget about that figure getting any better with the current Government proposals.

I will inform the Minister of what is coming down the track in regard to access to the north west. The Irish Central Border Area Network has done much groundwork on infrastructure in the north west. It has consulted all relevant authorities along the Border as well as all the county and city managers on both sides of the Border with a view to seeking funding from this Government, the British Government and the relevant European bodies for two motorways — one from Derry to Dublin and another from Sligo to Larne — and a rail line to the north west. The cost of the three projects is estimated at €5 billion between now and 2017. The well known Peter Quinn of the Quinn Group is leading this lobby and the whole Border region is behind him, North and South. The argument about the Northern bodies not being consulted and not co-operating has changed. If we are serious about North-South co-operation, this is the ideal project to consolidate this idealism if it truly exists.

I have strayed a bit from the Finance Bill but this issue needs to be brought to the fore to ensure moneys are included in the budget as and from this year for the projects mentioned. Nothing less for the north west is acceptable. I very much support the Bill but I ask the Minister for Finance to seriously look at the north west to see why we are lagging behind and to bring us up to the same level as the rest of the country.

I welcome the opportunity to speak on the Finance Bill 2006. Following on from what Deputy Devins said on the recent analysis of the rural renewal and the town renewal schemes, those schemes go far beyond the issue of economics, the economy and value for money. In the towns of Kanturk and Charleville, the town renewal scheme provided a huge impetus to re-energising and putting money into properties which had fallen derelict, particularly in the town centres. It is vitally important that tax incentives put in place have far more than economic value because for years, the life was being sucked out of some of these towns for one reason or another. We can look back over the 1950s, 1960s and 1980s when all our young people were exported out of towns and villages in rural areas. Thankfully, for the first time in many years, our population is growing.

Provision has been made in the budget and by the Department of Enterprise, Trade and Employment for community enterprise centres. These centres are vital as incubation units in small towns and villages and should be tax incentivised. Will the Minister look at this to try encourage people to construct community enterprise centres? They are used to try to foster employment in small-scale facilities. Some villages and towns in rural areas, including in my constituency of Cork North-West, would benefit greatly from community enterprise centres.

Decentralisation and the pros and cons of it have been mentioned. I am a huge supporter of decentralisation and for the past ten years, I have advocated the idea. The belief that the Government can only work if everything is centralised in one location, such as Dublin, is ludicrous. This is a small country and peripheral parts can communicate easily with the capital. The national Parliament and parliamentarians from rural constituencies far from Dublin should advocate the merits of decentralisation and inform Government policy. People must work and live in rural communities. We must influence Government policy so that everything is not centred around Dublin, as we would say in Duhallow in Cork North-West, and that there is decentralisation. There is plenty of room for decentralisation in constituencies such as this. I congratulate the Minister on a fine Bill and budget.

In the short time available to me I wish to raise a few fundamental questions about the Finance Bill. Debate on the Finance Bill is one of those very few occasions when Members have the opportunity to ask questions or reflect on the performance of the economy and particularly the relationship of the economy to society. This afternoon we have had a type of outing by Fianna Fáil backbenchers who got so carried away as to describe the Minister, Deputy Cowen, as a visionary, which perhaps is a step too far.

I would like to speak about the vision which lies behind the Bill and I do so by seeking to answer a simple question. How can the economy do so well with so many people unhappy? The manner in which the economy has expanded — I listened carefully to the speeches which described its expansion — raises some fundamental questions. For example, we must ask how much time is spent on survival and by what proportion of our population. It is unrealistic not to take into account that the housing market has so torn a hole in the economy that there is now no longer a choice for one or both partners to work. Both partners must work in an inflated housing market which has been driven by speculative tax allowances to those who want to own multiple homes.

Again, it seems like puncturing the heady nonsense we have had for quite a while to suggest that out of 81,000 housing finishes in this current year, we built less than one quarter of the social housing we built in the 1970s. I do not have the figures but it is perhaps 6,000. In between, we have a small number of what is called affordable housing. I will not delay on that, other than to say there is no comparison between the requirements for inclusion on the social housing list and those for inclusion on the affordable housing one.

What we have witnessed is the people being driven into the economy without choice. More than 65% of the women who are available for work now work in the economy and 1.5% are over the age of 65 years. I wrote elsewhere that there is no one else left to be driven into the economy. That raises a question about what a number of speakers said. I believe Deputy Fiona O'Malley mentioned that the economy was only an instrument. However, let us examine the relationship of the economy to the society. I suggest that what was described in the Minister's speech and right through several supporting speeches is a depeopled version of the economy which raises issues. The economy is being described as a mechanistic model which is separate from people's lives. It seems irrelevant that one must work longer hours and drive longer distances, one no longer has any hope of owning one's own home and that elderly people must subsidise deposits on homes for their children. It is as if this does not matter and as if the economy has been spun away from the society.

Irrespective of which party is in power — I say this genuinely — this is a dangerous model of the economy and society. It is predicated on a type of radical individualism which has nothing to do with personal freedom or choice.

I will suggest how a social economist might have looked at this in the past. He would ask what evidence existed that the tax breaks to which the Minister for Finance referred were an incentive and if this economy was like an engine into which one must continually pour fuel to get it to start. For example, one might provide incentives to initiate a productive activity about which one could then measure productivity or its outcome. However, what kind of old engine is this that regularly needs to be primed to such an extent that it spews out a divisive kind of redistribution to the rich rather than to the poor? It is reasonable to ask, for example in respect of the model at the core of the Finance Bill, what is the distributive effect of the market worth? Then in turn, to ask what is the distributive effect of the Government's action? Can we assess the Government's action in terms of compensation for market effect, in terms of market correction, or is there an attempt at redistribution?

Let us be real. What has happened in relation to the redistribution of either income or possibilities for housing? If we looked at this another way, as the economy generates surpluses that are historic, could we not have afforded universalism across a range of different things if we wished to regard the economy, as Deputy O'Malley did, as instrumental to a set of social purposes? We could have had universal access to education and improvements to the capital schemes which would have improved schools at all levels. We could have had universalism in health and transport as well as having universal provision in respect of a set of securities for old age.

None of this is mentioned in either the Minister's speech or in any speech in support of the Finance Bill. It is as though the social purposes of the economy do not require mention. It describes a private world of consumption, based on a radical individualism in which for example, it is taken for granted that there is an endless amount to which an individual is entitled by way of tax incentives. There is no limit to the number of houses an individual in the Irish Republic should own. There is no limit to the amount people should put into their pension funds and millions of euros are insufficient. There is no limit to the amount that someone with a contract for gathering tolls on the roads may receive.

It behoves Members to ask how this could be so while many people still struggle with rent allowances. If the income of two working people goes a few euro above a particular level, they will lose their rent allowance and their medical cards. Consequently, a significant section of the population is locked into an economics of survival. Even if one asserts, in the manner of those 19th century ladies who visited the poor of London, that it is sufficient to scatter something in their direction, this still does not answer the question as to how one can justify an economic structure that systematically redistributes to those who already avoid bearing any burden of taxation.

There is a profound ideology behind this, which posits a certain kind of connection between the individual and the State. Since the House last discussed a Finance Bill I was interested to discover that the Taoiseach's reading material had included Professor Putnam's book,Bowling Alone. Professor Putnam’s work was interesting in its description of what it might be like in a white suburb in the United States where people had become bored and no longer joined voluntary organisations. However, they could muse on this point while enjoying an income of more than $200,000. However, Professor Putnam’s model had very little to do with what was thrown up by events in New Orleans, where poor white and black people lacked cars to escape from what happened to their city. Huge pockets of poverty are buried deep within any society and the Finance Bill is when one has an opportunity to either address or ignore this issue. The notion that we can somehow begin a debate as to why people do not volunteer for this or that is nonsensical, if one has conscripted people into the economy and has not given them any time to be at home with their families, never mind to join voluntary organisations. Moreover, some of the Government’s ideological gauleiters in the PDs have suggested that we should conscript people into the economy until the age of 75.

A debate on citizenship will require a debate on rights. Such rights will include social, economic and cultural rights and the test of an economic Minister, or a Minister for Finance is the degree to which he or she has defined citizenship in terms of participation, inclusion and security in old age, the kind of housing to which one is entitled and how one can have time with one's children and in what environment. Since I entered this House almost 20 years ago, I have often heard Ministers state that while they would like to implement one policy or other aimed at inclusion or universal provision, the resources were never there. Now however, although the resources are there, they are not being allocated within a social framework that would address such issues.

The Taoiseach has been described as the midwife of social partnership. So be it. However, when he proceeds to the rebirthing that is currently under way for the new social partnership agreement, perhaps he will inform the House of his discussions with the social partners on their attitudes towards State assets and State property and the acceptability of selling State property in the capital to purchase property above the market rate in places in which staff are to be sent. Moreover, as for State assets held in the semi-State companies, what ideological force drives the compulsion to sell them? Why must we sell the Great Southern Hotel group? Undoubtedly, the trade union representatives will want to ask the Taoiseach why, under a ruling of the Competition Authority, they are not allowed to represent atypical workers in collective agreements. Moreover, when the trade union representatives consider the long history of social partnership, they might ask why the commitments to social housing provisions have never been met.

This matters because that is what people are asking on the street. In the short evenings that families currently have together, they ask how they will manage. For example, on Monday some members of a family described to me how they moved from a house which they rented for €850 per month to one for €650 per month. They paid €200 for two days in a crèche for one of the children. However, when one member received overtime in the building industry, they lost both their medical card and their rent allowance.

This took place in an Ireland with a surplus of billions. Ministers state that we have a healthy economy and we have had an economy in surplus. While it is good that those who did not previously pay their taxes now do so to some extent, it is obvious — the Taoiseach referred to a group he called the bright boys — that some get away with a great deal. Interestingly, and the Labour Party will raise this issue later this week, the Great Southern Hotels group had a trading deficit of €6 million in the current year. At the same time, we have transferred, in terms of taxation foregone, €128 million to private hotels which do not carry the same burden of the training as the Great Southern Hotels group. Therefore, one must penalise the semi-State sector that provided the infrastructure for the private sector which must be assisted to the tune of €128 million.

People will return to consider this issue. They will ask how, in the best of times, with historic surpluses running to billions, Ireland could be unable to have a public transport system or a health system that could give security to the vulnerable. They will ask why approximately 750 schools were in a state of deterioration and how could it have a school transport system which was not entirely safe. I welcome the benefits from external circumstances and favourable trading conditions, but I found it provocative to describe what is being put before us by way of a Finance Bill as "visionary" or as something that expresses a deep social commitment. That is a great nonsense. An interesting tension arises in every aspect of Government policy to which I have referred.

This brings us back to something in which all Members are interested, that is, the tension between the two pillars at the root of the Lisbon agreement. One is competitiveness, which absorbs all the energies of Government, and the other is cohesion. Cohesion is important because citizenship is about solidarity and being able to extend beyond the self to take other considerations into account. What is at stake is the destruction of the public world and the suggestion that a private world can replace it. Citizenship is predicated on solidarity, participation, equality of provision, security and universalism. It is high time we had more space to discuss what social agenda and vision should drive the economic instrument that is the Finance Bill.

The Government, particularly the Minister for Finance, has sought to convey the impression that it has moved to close off tax schemes as a result of a review but that is not true. Final closing dates have been set for many of the property-based schemes but such commitments were made previously and reasons were always found later to grant a further extension. The Government's characteristic hallmark is the broken promise. It does not have credibility regarding these open-ended commitments. It has also sought to convey the impression that it was not the case that rich people made a killing out of the generous tax breaks, but the Minister for Finance was wrong in making this case in his contribution. Eleven millionaires pay no tax while hundreds of people earning more than €200,000 pay minimal tax because of these schemes.

The Bill contains a list of schemes that will be restricted but the list is not exhaustive. In other words, other schemes, most notably that relating to private medical facilities, will not be subject to the proposed restriction. Investors will flood towards the medical facilities and a wall of money will fall into the laps of hospital promoters, the no tax millionaires will return and a fundamentally unjust and unsound health policy will be stitched into the fabric of Irish life. When the Minister for Health and Children who is not able to grasp the most basic elements of good health policy announced her proposals on private hospitals, one developer commented, "It is the answer to our prayers; we couldn't have written it better ourselves."

We have a two-tier health service where the experience of the public patient and the private patient is markedly different. The promotion of for profit hospitals is being introduced, encouraged and fuelled by Government policy. No report on the primary care, acute hospital or mental health sectors has argued for this change. That is not the way experts in health policy view the needs of the health service and patients, but because the Ministers for Health and Children and Finance have tunnel vision, a new element is being introduced, which will siphon off important resources into areas of less need.

For profit private hospitals will be established on the grounds of public hospitals. This is reintroduction of the old dispensary model where if one is poor, one is directed into an inadequate substandard dispensary in which doctors are not encouraged to work within the field and best practice does not prevail but where if one is privately insured, one will be directed into the private hospital where, very often, if the American experience is anything to learn from, procedures will be carried out which are not necessary or a priority but which benefit hospital promoters who are in it to make money.

We cannot afford to adopt this approach in our health service. It should be recognised that the distortional effect of this policy will deepen the divide within the health service and move even primary care away from the integrated approach that has developed over years and spearheaded by a Fianna Fáil Minister, Erskine Childers. It took a great deal of courage and legislative change to introduce an integrated service at primary level. A Progressive Democrats Minister for Health and Children, assisted by a Fianna Fáil Minister for Finance, is ensuring the old divide will be deepened and strengthened at a time when we have the capacity to move in a much better direction to meet the needs of patients.

I wish to share time with Deputies O'Connor, Fleming and Mulcahy.

I will forgo the platitudes justly earned by the Minister of Finance and refer to important issues relating to the legislation. The first is the 10% surcharge on undisclosed transactions, which, ultimately, are determined to be in breach of anti-avoidance rules. This is an excellent idea and I can understand why tax consultants oppose it. However, it is just and equitable that people who dream up schemes to avoid tax should inform the Revenue so that if they are found to be in breach, no surcharge would apply. It is not the intention of law makers to provide tax avoidance opportunities so that people can dream up such schemes. The opposite applies and there is a good case for increasing the surcharge.

The automatic reporting to Revenue by financial institutions of interest and other profits is also a positive idea. DIRT is applied at 20% and a number who have large deposits in financial institutions should pay tax at 42%. There is a perception that if they have paid DIRT, there is no need to mention the deposit in their tax returns. That is also just and equitable.

I am worried about one aspect of relevant contracts tax as it applies to tradesmen. To qualify for a C2 certificate, a subcontractor must be tax compliant historically. The Bill provides that Revenue must have good reason to expect that the subcontractor will also be tax compliant in the future. That is a heavy-handed approach. For example, if somebody buys IBM, he or she will never be fired from his or her job. In this instance, a tax inspector may refrain from issuing an RTC card because it is easier not to issue such a card to a subcontractor. This should be changed to ensure that if the tax inspector does not have good reason to believe the taxpayer will not be in compliance in the future, the card is issued. We must endeavour not to hamper, but to give encouragement to people in the trade who are the basis for our growth and engineering our economy.

On the Private Residential Tenancies Board, there is one line in the measures proposed which states that it is envisaged the linkage between registering and complying with registration with the Private Residential Tenancies Board and eligibility for mortgage interest relief on rental properties will improve registration compliance rates. That is the greatest understatement I have ever heard. Effectively, registration with the PRTB costs €70, but if an individual does not register and one takes a €400,000 apartment at 3% interest, it amounts to €12,000 interest a year. If this is disallowed at 42%, it will cost over €5,000. The number of investors who own and let apartments and who have not yet registered is huge. This will be an incentive to everyone to register. If one does not pay the €70 to register, Revenue will have no option but to disallow relief on the €12,000 interest, therefore, it will cost €5,000 not to register. It is important that everyone registers and that the Private Residential Tenancies Board is allowed to operate effectively. It cannot do so unless everyone is compliant. This is a very good proposal, which should be advertised widely so that everyone is given a chance to comply fully with it.

On tax relief on pensions, the maximum allowable pension fund on retirement for tax purposes will be €5 million or higher depending on the value of the fund on 7 December. This is a very high maximum. If one works on the basis of a factor of 20, it would represent a pension of €250,000 per annum, which should be more than enough for anyone. When the budget was discussed at the parliamentary party meeting, I suggested that the limit should be €5 million, and I am pleased it has been set at that amount. Some people might say it is very high. However, there are certain people — I do not include anyone in the House at the moment — who have worked hard and built up businesses whose pensions would amount to that sum. I do not believe anything in excess of that sum would be just or equitable.

In the internal review of certain tax schemes, the current regime of relief for pensions may be perceived to be inequitable — this was a conclusion of the Department of Finance — in so far as more generous reliefs are available to those in occupational pension schemes than to the self-employed using RACs or relying on PRSAs. There is a huge divergence. There is no PRSI relief, particularly in regard to the absence of earnings caps on employer contributions or the absence of age-related percentage limits. What I have said is quite technical but I am sure the officials will take note of it. It is very important and needs to be addressed.

I am pleased to have had an opportunity to contribute to the debate.

I welcome the opportunity to make a brief contribution to this important Bill. I was going to spend my five minutes talking about Tallaght because it is important to correct what has been said during the week in regard to urban renewal schemes, tax exemptions and so on. Members who know Tallaght will know that the Tallaght to which I moved in 1969 was a completely different place from what it is today. Fifteen years ago it was said that Tallaght had a population of a city but the status of a village. The decision of the Fianna Fáil-led Government at the time to grant urban renewal status to the area allowed for the development of the Square and other projects. Tallaght is now a major city in its own right, with many of the facilities that one would expect. I say this because I was sensitive about some of what was said during the week. I am proud of where I live and where I represent.

The annual budget and Finance Bill are as much part of the annual winter festive season as Christmas. Prior to the budget, our media friends often speculate whether the Minister for Finance will prove to be Santa Claus or Scrooge. That can be seen as entertaining speculation and another friendly form of Christmas fare. However, it is far removed from the work of compiling the document that will affect the lives and welfare of all those who live in the State and beyond. There has been reference to the image of the Minister, Deputy Cowen, and I have been a long time admirer of his work. I have always admired what he did in government, particularly when he was Minister for Labour and in other Ministries. I commend him and wish him well on this Bill.

The Minister is neither a Santa nor a scrooge. He is a servant of the State who is forced by circumstances to make choices between competing demands, many of them valid in their own right, and limited resources. The Minister must listen to many hard cases and at times adopt the policy, if not the persona, of a scrooge. It would be easier for a Minister to adopt the persona of a Santa and have goodies for all. He would still be criticised by the Opposition because the goodies were not good enough, too few of them went to certain places or the reindeer did not manage to cross the Shannon and so on. The one thing the Minister for Finance has in common with Santa is his range of willing helpers. These men and women are specialists, experts in the areas of economics, insurance, banking, taxation, business and highly specialised areas that now form part of a modern and well developed economy which is what Ireland is now.

Any pre-Christmas budget, whether it is the work of a Santa or a scrooge, must be given legal expression. This is the task in which we are now engaged with the Finance Bill. It is not a Bill that displays outbursts of Santa-style largesse or scrooge-like retrenchment, it is a Bill which has been put together in conjunction with the budget, and by the team of men and women to whom I referred. The Bill is designed to address and remove certain anomalies in financial practices where they are known to have been identified. To address this and to ensure that no further example of high earning tax residents manipulate the system to their advantage, the Minister is granting extra powers to the Revenue Commissioners. He will approve regulations under which financial institutions and Departments will automatically report interest, profit and certain other payments to customers.

The balanced approach taken by the Minister in the Bill can be seen in the area of property. Some reliefs have been exposed as having outlived their usefulness while others, some new and some existing for some time, are being retained, and even in some cases enhanced to encourage further innovation and economic development. I gave my support in the House to what the Minister is doing in regard to the film industry. I gave my strong support last week to proposals being brought forward by SIPTU and other agencies to produce a film about the life of Connolly. I record my strong support in that regard.

The Minister has proved himself to be neither a Santa nor a scrooge, but rather a careful manager of this country's finances. When he introduces the budget this time next year, we can be assured that there will be real goodies in his bag, goodies that will not be the product of empty promises made out of smoke and mirrors, but the result of real economic progress. I commend the Bill to the House and look forward to supporting it.

I welcome the opportunity to speak on the Finance Bill. I congratulate my constituency colleague, the Minister, Deputy Cowen, on bringing this successful Finance Bill to the House — he became Minister for Finance more than a year ago.

It is important to reiterate the main features in the Bill. Most of them which were announced on budget day before Christmas have been forgotten with the passage of time. It is important to reiterate that the Finance Bill will remove all those on the minimum wage from the income tax net and that it will exclude workers on the average industrial wage from the higher tax rate. It will confirm the restrictions on the use of tax relief by high income taxpayers to secure greater equity in the tax system. If I was asked what the Finance Bill was all about, I would say it was about equity.

Anomalies have shown up as a result of the major reviews and reports carried out by, and on behalf of, the Minister for Finance in the past year. Once he received the relevant information he moved immediately to introduce restrictions to ensure everybody paid a fair level of tax in view of their income and the services they obtained in the State.

We are phasing out a number of other tax reliefs and exemptions. In addition, we are continuing the stamp duty exemption for young trained farmers for a further three years, have increased the tax exemption limits for income from farm leasing for over five years and are extending certain reliefs to cover the EU single farm payment entitlement in appropriate circumstances.

For the first time ever the Bill will introduce a new scheme of tax relief for heritage properties donated to the proposed Irish Heritage Trust. The new body will have an important task ahead of it. I wish it every success when it gets up and running.

The Bill will introduce a new initiative aimed at encouraging low income earners who hold SSIA accounts to transfer funds to pension schemes. The Minister referred to the Opposition's reaction to SSIAs when first introduced. They said they were a disgrace and should be cancelled. They said there was no place for them and that they were for the well-off and so on. We now know that many low income earners, even people not in the income tax net, were careful with how they saved their money and will be getting their just rewards when the accounts reach maturity in the months ahead.

Hear, hear.

This legislation will also provide for significant improvements in film tax relief aimed at enhancing Ireland's competitive position as a location for film making, a topic discussed at length by the Joint Committee on Finance and the Public Service. I am delighted with this development. The film industry is a mobile one that operates worldwide. If the tax regime is not right here, producers will just move to another country. Production companies do not have to be based here but can use this country as a base to make films. This provides a great deal of revenue, income and employment. Producers will only come here if the tax regime is sufficiently attractive to them. We must be able to compete with other countries.

I seek clarification on three or four sections and ask that they be further developed. Section 8 deals with the tax relief provisions in respect of service charges to take into account the introduction of the pay-by-use principle for local authority waste charges. The relief has been capped this year at a maximum of €400 per annum. In County Laois the waste service was privatised several years ago and the charge is in the range of €300 to €400. The relief will be capped at this rate from 2007 onwards, even though I expect the charges will increase above this in future.

I question why I and others who are in the high income bracket get tax relief whereas my next door neighbour in receipt of disability benefit is not entitled to get any from the Department of Social and Family Affairs. I hope the generosity which dictates that those who earn income are entitled to relief will also be extended to persons on social welfare, in the same way as they avail of the free schemes such as telephone rental and television licences. I say this in the interests of equity.

Most who have received their wheelie bin charges, especially from private sector operators, will have noticed the addition of 13.5% in VAT charges. This is an extra charge on the consumer. I hope the interpretation of EU rules or whatever led to this charge will ensure equity because the charge is too severe.

Section 11 provides that in future those getting relief for interest payable on borrowed money for rented property will have to register with the Private Residential Tenancies Board. This is a great idea and the provision is long overdue. It should be done. I call on the Minister to extend it one step further in order that those who receive rental subsidies through the Health Service Executive would also have to register with the Private Residential Tenancies Board. Although they are in a minority, some landlords have poor accommodation and would not pass the registration test. Such persons should not be getting money through the Health Service Executive for their poor accommodation.

Sections 34 and 35 deal with the inclusion of mental health services in the schedule of qualifying services to be provided in hospitals that qualify for tax relief in the private sector. This has long been advocated and I welcome its inclusion in the Bill. This sector of the health service has been neglected in recent years.

I welcome the Bill in general and the stewardship of the national finances by the Minister for Finance. I also welcome the important provision relating to the Private Residential Tenancies Board, as referred to by my colleague, Deputy Fleming. I agree with him that it should be extended to payments made by health authorities for private rented accommodation. It is absolutely unacceptable. It does happen that landlords renting out substandard accommodation do not register with the board. It would be a good move to extend the system to include those benefiting from Health Service Executive subventions.

I disagree with one or two points in the Bill. For example, I do not agree with section 117 which relates to the interest payable on bank accounts being automatically forwarded to the Revenue Commissioners. This is a step too far and an invasion of privacy. People are entitled to bank in confidence without anyone else knowing about it, including the Revenue Commissioners. There is an obligation on taxpayers to pay their due tax, which I fully support, but I do not agree that the Revenue Commissioners should have unfettered access to information on people's private bank accounts. This is a dangerous step. I respectfully ask that if this measure has to be brought forward, that strict safeguards be put in place because it is a breach of confidentiality.

I also disagree with the proposed change in section 15 relating to the remittance basis of taxation which is largely used by the chief executives of multinational companies coming to Ireland.

Like Gama.

We should accept that this is one of the principal reasons chief executives choose Ireland as a location. If, for example, the company is an American multinational, it can choose to have a certain portion of its income sent back tax free to America and will only pay tax on the income earned in Ireland. I am concerned that we would send the wrong signal to chief executives and leading business people in multinational companies on which we depend for the creation of much of our employment. This is a step we might regret.

A constituent raised with me the matter of the 3% imputed distribution of the value of assets in approved retirement funds. The reason I am a little sceptical about this is that it changes the rules to some extent. As I understand it, certain people saved up money in their retirement funds and have not yet drawn it down. Because they have not drawn it down a 3% tax is now being imposed. I urge the Minister to look carefully at this measure. Those concerned may be treated a little harshly in this case. The provision may be aimed at persons with large amounts of money but it may also apply to those with moderate savings in approved retirement funds. They should not be subject to this 3% tax.

I am delighted Deputy Burton is present because I recall her saying in her reply to the 2003 Budget Statement that the National Pensions Reserve Fund was a failure and a fiasco. It now stands at €13 billion or €14 billion. It grew by over 19% last year and is one of the greatest successes——

It is not being invested in Ireland. We have the mess on the M50 that the Government cannot address.

The Deputy may be embarrassed.

I am not embarrassed at all.

We could bring up the words she uttered.

The Deputy should visit the M50 and see what motorists have to suffer.

I have the floor.

Order, please. Deputy Mulcahy should conclude.

That mess was designed by the Government.

It is an incredibly successful reserve fund.

The Deputy should go and see the M50.

The Deputy is embarrassed.

No, I am not.

That is why she is trying to shout me down but her words are to be found on the record of this House——

——that the pension reserve fund was more or less a bad scheme. It is probably the most successful scheme in the history of the State which will secure the pensions of the people well into the future. By and large, I approve and support the Bill.

I propose to share time with Deputies Healy, McHugh and Sargent.

This legislation fails to fulfill what should be the primary objective of tax policy, that is, to make the tax system equitable and progressive and redistribute wealth in favour of the less well-off. Under a progressive tax regime, those who have more pay more, while those who have less pay less. The system is regressive as the opposite is the case here.

The extent to which the system is regressive was demonstrated in the review of tax reliefs, finally published in recent days. It clearly illustrates that the tax policies pursued by the Government have enabled the wealthy to further enrich themselves at the expense of the ordinary tax compliant PAYE worker. It is astounding to read that certain individuals took €25 million in tax free lump sums from their €100 million pension funds. It is no wonder that the recently published NESF report entitled, Creating a More Inclusive Labour Market, found that we had a wealthier but more unequal society and that the richest 20% of the population earned 12 times as much as the poorest 20%. This regressive tax system is matched by an abject failure to tackle growing wage differentials.

My party, Sinn Féin, has long been critical of the Government's plethora of tax exemptions and reliefs, more accurately described as tax expenditures. We have been particularly critical of the many property based tax reliefs. We pointed out the extent to which these were being used by the wealthy to avoid paying their fair share of taxation. We now have confirmation that €3 billion in tax revenue was lost to the State as a result of such reliefs——

Money-laundering and such.

——at a time when in excess of 43,000 households remained on social housing waiting lists and young couples across the State struggled and over-borrowed to secure over-priced housing. We also pointed to the adverse effect which these reliefs and exemptions were having on property prices. The Indecon review confirmed that they had led to "an increase in site prices, financial returns to promoters and property prices", yet under this legislation, at a time when house prices continue to escalate unabated, the termination dates for many of these schemes have inexplicably been extended until 2008. That is completely absurd.

My party is also vociferously opposed to tax breaks for developers of private hospitals, sports clinics and now private mental health services. The State should not be subsidising private health care in this way. The revenue lost to the State as a result of these tax breaks should be used to deliver a public health care service.

Tax expenditures are generally regressive because they primarily benefit the better-off — a fact clearly demonstrated by the Indecon report. Therefore, all tax exemptions should be ended, except where the economic and social value outweighs the cost to the Exchequer of the exemption. In such cases the exemption should be at the minimal rate necessary to achieve the goal which it was introduced to achieve. As my colleague, Deputy Ó Caoláin, pointed out in his contribution to this debate this morning, "the lack of social analysis across the range of reliefs is one of the major flaws in the report".

I wish to raise the issue of tax exiles and the Minister's utter failure to introduce legislative change to end the ability of wealthy individuals to declare that they are non-resident for tax purposes. The Department of Finance does not even collate data for the number of persons who claim to be non-resident for tax purposes. My Sinn Féin colleagues previously questioned the Minister on the number of investigations carried out by the Revenue to confirm the veracity of declarations made by those claiming to be non-resident for tax purposes, the number of days spent in the State in a given tax year and the number of cases where it had been found that false declarations had been made. This issue must now be tackled as a matter of priority.

Another issue which I am disappointed has not been dealt with in this legislation is the removal of the employee PRSI ceiling. Its removal is necessary because it is regressive and inequitably benefits higher paid workers. This view has been supported by the Department of Social and Family Affairs which, in 2002, stated:

Abolition of the ceiling would make the employee PRSI system more progressive. The current system is regressive in that those over the ceiling pay a smaller proportion of gross income in PRSI than those earning under the ceiling. Both receive the same benefits. Abolition of the ceiling would therefore strengthen the social solidarity element of the system in that a proportion of all income would be pooled for the benefit of all contributors.

If that Department cannot make the case and change the mind of the Minister, I expect my contribution will have little effect.

This Bill continues the policy which the Government has had in place since its inception and election in 1997, that is, to prioritise spending on infrastructure such as roads, bridges and broadband over spending on services such as health, education, social welfare and housing. The continued effect of this policy is that there are considerable increases in the numbers on local authority housing lists, involving approximately 50,000 families, hundreds of patients on trolleys in the accident and emergency departments of hospitals on a daily basis and some of the largest class sizes in Europe. In my constituency I have come across cases where there are 39 pupils in the fourth class of a primary school. One quarter of all primary school students are taught in classes, the sizes of which are over 20% above that recommended.

Various reports, the most recent of which is the report of the National Economic and Social Forum, have shown clearly that the position on inequality is now worse than ever. Since the Government assumed power in 1997 the gap between rich and poor has increased by approximately €300 per week or over €15,000 per annum. The recent report states we have a wealthier but more unequal society, with the richest 20% earning 12 times as much as the poorest 20%. It also states, for instance, that 14% of households are living in poverty and that these are headed by a person with a job. There is also significant child poverty, with about 16% of children living in poverty. That is a scandal, given that this is one of the wealthiest countries in Europe and the world. The reason for this is that the Government has prioritised spending on infrastructure rather than on services. We can do both. There is a vast Government surplus, which amounted to over €6 billion last year and is projected to amount to over €4.4 billion this year. That surplus should be allocated to expenditure on services such as health, education and housing.

The Bill does nothing for a town such as Carrick-on-Suir which has been totally abandoned by the Government. Its unemployment rate is five times that for the country as a whole. Almost 1,000 people are unemployed in a town of 5,000. The Government has washed its hands of job creation in the town by refusing to establish a jobs task force for it. The Bill does nothing for the town and the people there who are unemployed. It is indicative of the policy of the Government which prioritises infrastructure over housing.

For many years tax incentive schemes have been favourite soundbite material for politicians. When the interest of the press wanes the interest of the politicians also wanes. That superficial interest ensured that the schemes continued. Some were good and some were inequitable and wasted public moneys without any scrutiny.

I welcomed, therefore, Deputy Cowen's decision on becoming Minister for Finance to set up a complete review of the schemes. The report of that review has been published giving a clear picture for the first time ever on one hand of the benefits, and on the other of the shameful waste of public finances. It is important in the discussion on this topic to realise that we cannot throw them all into the one barrow and make a global decision on them.

There are property-based incentive schemes and tax reliefs such as exemptions for artists and stallion and greyhound stud fees. Many of the property-based schemes have worked well and rejuvenated certain derelict areas. In my constituency, Galway East, investment has occurred solely because these schemes were in place. It would not have been financially viable for a developer to carry out these schemes without the bonus offered by the tax incentive.

We now hear calls for all those schemes to be subject to a cost-benefit analysis. This approach is too simplistic. For example, if all the schemes were subject to a cost-benefit analysis constituencies such as Galway East would not benefit from them. Successive Governments have neglected Galway East. The absence of a critical mass of people would ensure that the results of any cost-benefit analysis would be negative.

The logical conclusion is that the balanced regional development of which Government and Opposition parties often speak but on which they rarely act would never become a reality. In this case projects in the west must receive positive discrimination because cost-benefit analyses would confine us to the third tier for a longer period.

Some scandalous behaviour has occurred, however, under other tax exemption schemes, such as people setting themselves up with €100 million pension funds and zero tax liability because there were no effective limits placed on stashing away cash. This is an abuse of the tax paying public. Elements of our tax system are supporting some fat cats who abuse the system for their own advantage. This abuse should be stopped immediately.

Tááthas orm deis a fháil labhairt ar an mBille Airgeadais.

The Finance Bill reflects Government interests and an increasingly outdated reality and is not in the public interest now or for the future. I listened to the Minister's speech in which he stated, "The policies of recent years have delivered a personal tax environment that fosters and supports effort and enterprise." He could argue that for as long as energy is affordable.

Unfortunately, that situation is changing rapidly. The Bill continues in this direction which is a very short-sighted approach. He also claimed that there is much reform in this Bill. I do not see anything like the reform that is needed. A headline inThe Guardian newspaper today shows that other countries are copping on very fast, “Sweden plans to be world’s first oil-free economy”. To many in the Government that might seem to be going a bit far but Ireland is more oil-dependent than Sweden, which is focused on international competitiveness, in which the Minister too claims to take a serious interest. The reality and the Minister’s aspirations do not gel.

How cynical is it for the Minister to boast about a rise in fuel allowance, which is badly needed, while standing over a situation in which Ireland has the worst insulated housing stock in northern Europe, and fuel costs that will soak up the increase before the next budget is announced? There is no attempt to remove VAT on insulation to enable people to offset the fuel demand. There is no grant aid for the type of installation I and many others have added to houses, such as solar panels, which are costly. Interest free loans for such installations are available in other countries but not here.

This Minister does not see the picture presented by experts and commentators. Economist David McWilliams writes about house prices in theIrish Independent today. It is quite cynical for the Government to fail to address in this Bill the unaffordability of house prices. David McWilliams writes that the consumer price index gives a false read on reality, yet it guides the Government.

The all-party committee on property laid down a clear road map for the Government, if it was serious about addressing this issue. One wonders whether the Government prefers not to address the issue. The further people must go from their workplace to live, the further they must drive, and the more VAT and excise return the Government gains on the energy and transport for which people must pay. Is the Government not being extremely short-sighted in that regard? It may gain a good revenue return on those items but people will find it impossible to live. That is increasingly the case as the cost of living increases with rising fuel prices.

There was some attempt to address the issue in dealing with biofuel. The Government's audacity, however, is amazing when it says it will comply with an EU biofuel directive for 2% usage by 2008 although the legal requirement is that it comply two years before then. We are announcing to the world that we will break the law for two years and that is supposed to be good news. Perhaps it is good news when one considers that we quite often break the law for many more years but it is nothing of which to boast. It should have been done a long time ago. There should be no excise on biofuel if we are serious about kick-starting the biofuel industry and providing alternative enterprises for farmers.

We have heard many warnings from wind energy companies which have gone to other countries because they did not find this Government helpful, co-operative or understanding of the need for large capital investment in renewable energy. These companies were prepared to take the risk, yet the Government confined itself to land-based wind energy projects and the offshore projects have not materialised as they should have, given the resources here. This is another example of Government short-sightedness.

There is no escaping the fact that the Government is overseeing a giveaway in terms of tax breaks and write-offs to exploration companies. We need the energy now but will need it far more in the future. To give it away now will leave us in an even more precarious position. We should not rush to give away our oil or gas, no matter how small the find. The finds are not very big to judge by geological figures. As the cost is being offset, in effect there is a zero return to the State. We simply buy it at the market price, and that is certainly not in this country's interest, either now or in future. If the exploration companies can effectively be treated as charities, then charities have a good case to ask why there is not a VAT refund, as the Green Party advocated in its pre-budget submission. Why is the section 45 threshold not brought down to €135, and why is section 45 relief not extended to cover donations of non-cash assets such as property, shares and securities? In effect, charities — not only the Society of St. Vincent de Paul or the better-known ones — carry out a considerable amount of work and fill in many of the gaps in community life not being addressed. Quality of life is not a measurement in the Government's economic calculator. GDP and GNP are not sufficiently wide to cover the work of many charities. At a cost of €40 million, which is the cost of the measures we propose — less than the loss on the electronic voting debacle, for example — we would secure a far better quality of life based on the fact that charities would be able to be more viable than they are under the Government.

I would like to share time with Deputies Moloney, Finneran and Peter Power.

Is that agreed? Agreed.

Having listened to the last speaker's contribution, I can say that, if his points had all been accurate and valid, the country would not be in the situation in which it finds itself today, with 2 million people working and a little more than 4% unemployed.

I was thinking ten years in advance.

It is one of the best economies in Europe, and I wonder what we would say today if the Deputy's policies had been followed by the Government.

They are policies for today.

We have changed this country radically, and the Deputy is living in the past. He referred to the Government as being short-sighted, exhibiting a lack of reform, and missing the big picture. It is his party that is failing to see the big picture.

Deputy Curran will see.

He keeps saying we will see, yet he fails to see where we are today. The Deputy should not read what is in the newspaper but see what is happening all around him.

I should not read?

He should read about where real people are in employment today who were not in employment before. That is the reality, rather than the opinion or view of some so-called economic expert. My point is that the policies pursued for the last decade or so have changed this economy radically. That is why it is growing so rapidly.

We are losing competitiveness.

That is why we have a low rate of unemployment and 2 million people in work in the economy. Despite what the Deputy might say about people's purchasing power, most if not all surveys on it indicate that while our costs are higher our real purchasing power is greater than in most equivalent countries across Europe. The Deputy might not like to recognise that, but those are the facts.

Often in politics we get up here and speak about matters and it is a long time before we see the real change. It was a little more than a year ago when Deputy Cowen delivered his first budget, referring to a review of the various tax relief schemes. That review formed a substantial part of the last budget and the current Finance Bill. He has gone into numerous parts, and if I have time, I will examine some of them. Changes have been made, and various people on the Opposition benches will say that because we have made changes, something was inherently wrong. I do not agree with that at all.

We want more change.

I do not believe it is always possible to cost a specific scheme in advance. For many on the Opposition benches, that is what they want us to do. I will refer specifically to the urban renewal scheme. I do so because I was a member of a local authority and witnessed its implementation. One could not cost the scheme's impact on Clondalkin, part of my constituency, in advance.

When the scheme's completion date was first announced and subsequently extended, not a single developer or business person came to me to apply for it. However, local people in the community and members of the local authority did so because they could see the benefit being derived. It was slow and tortuous to deliver, but it brought benefits, not necessarily economic ones, but a whole new social aspect. Many of those points are not reflected in simple economic terms in the various reports. If it had been so great and economically beneficial to the large property-developers, we would not have left sites that were too awkward and difficult and never fell into it.

People argue that it was right to review the schemes, and I agree with the Minister that it is correct to make changes. However, because we have reviewed the schemes and made changes does not mean they did not deliver benefits as originally presented. Many of those benefits cannot be calculated in pure or simple economic terms. Deputy Burton would agree with many of those points. The benefit cannot always be determined in advance of the scheme, and the SSIAs were a case in point. There was no way of accurately determining in advance what the take-up would be. Although the merits may be assessed, the take-up could not have been forecast.

While I acknowledge and appreciate the review undertaken by the Minister and his subsequent changes in this Finance Bill reflecting its recommendations, that does not mean we have not derived significant social benefit or made changes to our economy based on the schemes in place.

I, too, am glad of a few minutes to refer to the provisions of the Finance Bill and, like Deputy Curran, to congratulate the Minister on delivering on commitments and, more importantly, taking on board submissions. I refer to the commitment that high earners will no longer be able to reduce their taxable income to zero. I am happy that the Bill considers such matters. As a former member of the Committee on Social and Family Affairs, I have heard a great deal about the fact that people had prepared very little for their future pension entitlements. The Minister has recognised that, and I congratulate him on his initiative aimed at the lower-income SSIA-holders, particularly those under funded for pensions. There is no need for me to rehearse every provision, but they are very important and represent a commitment clearly entered into and delivered upon.

In the past, the rural community made submissions to various Ministers, especially those who tried to advance farm development. I refer specifically to submissions made by the IFA and especially Macra na Feirme. Often the case was made to us politicians that we should encourage people to stay on the land with little inducement. I am aware that in recent years many submissions were made on behalf of young farmers.

I was in the company of the Minister when some submissions were made, and I am delighted he recognised that the way to encourage people to participate in farming is to secure land that has not been available hitherto. I welcome the fact that in this year's budget, through the Finance Bill, exemptions for long-term land-leasing have been considered. In the budget, for instance, the Minister had allowed for individuals leasing out land on a long-term basis from €7,500 to go as far as €12,000 for leases between five and seven years and from €10,000 to €15,000. While I might welcome that as a member of the Minister's party, it is worthwhile recognising that it has also been welcomed by the president of Macra na Feirme itself. He went on to make the point that this provision in the Finance Act goes a long way toward encouraging people to stay in farming, and more particularly those of an age to consider retiring. Macra na Feirme's basis for seeking an amendment to the Finance Act was that the overall rental value of land would increase due to the fact that the value of the single payment entitlements attached to the land would be built into the rental price of land and this is to be welcomed.

Previous speakers referred to the increase in funding for the disability sector which has been in place for several years. Will the Minister take into consideration the issue of VAT relating to disabled drivers and VAT exemptions on modified vehicles? The limit on the value of qualifying expenditure was decided in 1994-95 and was set at a value of approximately €40,000, which was quite generous at the time. However, the cost of appropriate vehicles has risen over the past 11 or 12 years by almost 30% and the figures have not been adjusted to the upper limit. I acknowledge this is a very good scheme but it requires updating, as inflation has somewhat diminished its value.

Suitable vehicles for disabled persons' transport tend to be expensive. It is not a case of these vehicles being used as status symbols or as signs of outward materialism but rather it is a matter of safety, access, reliability, comfort and the promotion of an inclusive lifestyle for disabled persons. Knowing the Minister's style, I am confident he will take this submission into account. I welcome the Bill.

I compliment the Minister for Finance on this Bill and on the recent budget in which he addresses many issues affecting everyday lives. The elderly, the disadvantaged, those with disabilities, parents of children, all are to receive their fair share of the national cake.

The taxation proposals leave citizens with one of the lowest tax demands in the European Union. Those on the minimum wage are excluded from the income tax net altogether. At the same time, business and enterprise is encouraged and supported in the national interest. Major capital investments are being made in schools, hospitals, housing, road and rail and in the general infrastructure.

Farmers and farming families are afforded less attention in a modern, affluent Ireland. My constituency of Roscommon-South Leitrim contains approximately 10,000 farmers. They contribute greatly to the local economy, not alone in production but also in the high level of employment created through the food processing industry in both counties.

The Finance Bill demonstrates a clear commitment to farmers and to young farmers, in particular. I compliment the Minister for Finance for his initiative in this area. The changes made by the Bill will see tax exemptions in place for long-term land leasing which will encourage more young farmers to involve themselves in the industry as more land will become available to them on a long-term leasing basis. The Bill is a real shot in the arm for young farmers as it includes the single farm payment element for tax exemption purposes. This should produce a knock-on effect by encouraging farmers to lease part of their lands to young farmers. It is a progressive move which highlights this Fianna Fáil-led Government's commitment to the sector, its future and young farmers.

The Finance Bill and the budget will enable young farmers to save almost €60 million over a three-year period of exemption from stamp duty. This is a significant initiative for young farmers. The measure allows young farmers to expand their farms without incurring stamp duty tax which in some cases could amount to thousands of euro. Young farmers will be allowed full stamp duty relief on entitlements, transfer or purchase of land, with a measure worth more than €2 million in a full year.

Stamp duty measures are part of a generous package of farm-specific measures worth more than €24 million which were announced in the budget last December. This will help farmers consolidate their holdings and meet new challenges in the global market place.

The 2006 budget has made significant improvements to the rental income exemption available to land owners who lease out farm land for five or more years. The income tax exemption for leases of five to seven years has been increased from €7,500 to €12,000 with an increase from €10,000 to €15,000 for leases of more than seven years. These measures will optimise land use and encourage high productivity on agricultural soil.

From the beginning of 2006, the qualified adult rate for farm assist will increase from €148.80 to €165.80. This will directly benefit the 8,020 farm families in receipt of farm assist payments. In addition, the payment rates for the rural social scheme will be increased in line with social welfare rates. I commend the Bill to the House.

I thank my colleagues for sharing their time with me.

I compliment the Minister on an excellent budget. It is a budget which helps families, the elderly and the disadvantaged in our community.

The Deputy should keep this up and he might get the call.

It will be regarded in years to come as being one of the most reforming budgets for the way in which it has tackled the tax breaks accumulated in the past 20 years.

I will concentrate on the debate about the phased abolition of tax breaks which will take place over the next few years. There has been much discussion on the reasons for the establishment of these tax breaks and their subsequent use. It has been suggested that various cost benefit analyses should be incorporated into the Finance Bill.

The introduction of tax breaks, specifically property-based tax breaks, is a matter for political judgment. They were introduced by parties of different colours in the 1980s and 1990s, which used the best political judgment available at the time.

I had the honour of chairing the inner city renewal committee of Limerick City Council for several years when I was a city councillor. Without any fear of contradiction I can state that the development which took place in Limerick has been one of the shining examples of the success of inner city renewal development and tax breaks. This development in Limerick city would not have taken place without these tax breaks.

Many of the criticisms voiced about the budget and the Finance Bill contain a subtext that the tax forgone amounted to dirty or grubby money in the hands of developers or those who took risks at a difficult period. I refer to individuals in my constituency such as Michael Tiernan who took huge personal risks——

The Deputy should not refer to individuals by name.

——to assemble land banks when the country was on its knees and nobody wanted to touch these properties. The titles to the properties were a shambles and they took huge personal risks in assembling these properties. They were courageous in availing of the tax breaks and building developments in Limerick such as Arthur's Quay, Charlotte's Quay and transforming the river front. None of this would have taken place otherwise. It has been suggested that somehow this is tax forgone. However, I strongly suggest — I agree with Deputy Curran on this point — that the tax contribution arising from the original tax breaks far exceeds the tax forgone on individual developments. No calculation can be made of the economic activity generated in all the buildings in all the inner city areas which have been developed.

I agree with Deputy Burton that there should be a direct correlation between future tax breaks and specifically focused Government policy. There must be such a direct connection. In that regard, the focus of this year's budget on a package for the elderly should be underpinned by tax breaks in the future. I am referring to the capital allowance for nursing homes and qualified residential units. I ask the Minister and his officials to take note of this point because there are difficulties with the amendments to section 36, specifically, which provides that the tax breaks will not flow until such time as the units are first used, as distinct from completion of construction. That will drive away the investors who have traditionally supported such developments. Therefore, I ask the Minister to re-examine the provisions included in section 36 on Committee Stage.

I wish to share my time with Deputy Paul McGrath.

Is that agreed? Agreed.

I am delighted to have an opportunity to speak on the Finance Bill. Deputy Finneran referred to small farmers whom the Government has done more to encourage to leave the land than any previous Administration. The Government has taken hope away from the agricultural community to the extent that in most cases farming is now a secondary career option. The Bill will do nothing to stem the flow of young and old from the land which we are witnessing.

As regards Deputy Peter Power's remarks, all our party leader, Deputy Kenny, and Deputy Bruton are seeking is a cost-benefit analysis of schemes. When in government, Fine Gael and the Labour Party introduced the urban renewal scheme that changed the face of Limerick, Cork and the Dublin docklands. Subsequently, the scheme was rolled out to other provincial centres by the Fianna Fáil led Government and it certainly had an effect on the economy of such areas. Nonetheless, we are calling for a cost-benefit analysis and evaluation of schemes.

As a Minister, Deputy Kenny introduced the seaside renewal scheme which was very successful in some places but never properly evaluated. That is what has occurred recently and that is all we are seeking. As I have said on a number of occasions, I am in favour of targeted tax incentive schemes, which is the only way to secure development into many parts of the country. There is a disparity between east and west which is growing every day. I am convinced that more building occurs in Dublin in one day than in an entire year in County Kerry. The level of activity in places such as County Kerry and along the west coast, including the Minister of State's constituency of County Donegal, is minuscule compared to what is happening on the east coast, especially in Dublin. There are two economies in the country which are evolving at different speeds. Unless the Government provides incentives to invest along the western seaboard and other areas not experiencing the same economic growth as the east, we will have greater division. Future tax breaks will have to be targeted, evaluated and monitored closely to this end. The main problem is that people have become careless about tax breaks. Deputies Kenny, Bruton, Burton and others have questioned why such schemes were rolled out and extended without being properly monitored. There is no doubt they have led to increased economic activity but they must be re-examined from a cost-benefit viewpoint.

I wish to refer to some of the areas for which I have responsibility as party spokesperson. I welcome the provisions in the Bill concerning the film industry. The qualifying budget for a film will now be €35 million — an increase from €15 million. In 2003 the Irish film industry directly employed approximately 3,400 people — technicians, beauticians, including hair stylists, and many others involved in ordinary jobs. There was a major fall-off in production last year, however, with only one film of any significance. On his return from America, the Minister made much noise over that film, "Lassie", and was photographed on television with the dog. Lassie was all that barked last summer because no other major films were made here.

During the years we had blockbuster films made in Ireland but that activity has now moved elsewhere. People have gone off and taken other jobs. The structural base that produced such films here has been dismantled. I hope, however, we will attract some films on foot of the Bill's provisions. For example, yesterday's newspapers reported that this summer the actor Jonathan Rhys Meyers who is in Dublin at the moment will be involved in filming a new eight-part film series entitled "The Tudors". While that is welcome news, there is not much more happening in the Irish film sector.

I would like the Minister's officials to note that there is still uncertainty about section 481 which has been extended to the end of 2008 but, typically, a major film has a lead-in period of one year. Next year is not far away and unless there is certainty about that provision, it will cause difficulties. The Minister should make a statement clarifying what will happen regarding the extension of section 481, otherwise there will be uncertainty. Some films may be shot here in 2007 but there will be major concerns about 2008 since the Minister has said the provision will be terminated then.

I remind the Minister that some British newspapers have reported that major incentives are to be introduced soon for the UK film industry. When the UK lost "Braveheart" to Ireland, that country became aware of our tax incentives. At the time I met members of a committee from the House of Commons who had come here to examine our incentives and discover why we were so successful in attracting film projects. As a result, the UK authorities improved their incentives which will be improved still further in April. They will be a lot more attractive than those contained in the budget here. The film sector, therefore, is becoming very competitive.

I thought the Minister would use the budget to address the issue of VAT. There was a lobby seeking an exemption from VAT for non-resident performing artists' fees for non-profit organisations. Performing arts companies or festivals are forced to pay VAT on the fees of many artists who come here from abroad. Many such artists are Irish people who have been forced to work overseas. VAT represents a major imposition on many small festivals and could put them out of business. There was an expectation that this matter would be addressed in the budget. My understanding is that the exemptions set out in the relevant EU directive do not require a change in legislation but simply a reinterpretation of current VAT law in Ireland. This can be achieved by granting an exemption to not-for-profit cultural arts companies from the payment of VAT on the fees of non-resident performers. I am sure the Arts Council could provide a definition of such companies. I would like consideration to be given on Committee Stage to the removal of VAT on fees of non-resident artists.

The issue of VAT on many of our tourism products must be addressed. The VAT rate of 13.5% is one of the highest in the euro zone, the second highest after that in Germany. This makes our tourism product less competitive. If one goes to Portugal, France or Spain, for example, one pays on average about 5% in VAT on accommodation and meals, whereas the rate in Ireland is 13.5%. That is a considerable amount of money, even if one is only talking about a bill of €100.

I wish to bring the issue of business tourism to the attention of the Minister of State. People who come to Ireland for conferences are charged VAT on their accommodation, food and so on. In other countries, they can reclaim VAT paid. If, for example, they attend a conference in Northern Ireland, they can reclaim the amount paid. One cannot reclaim it here. This matter should be re-examined.

I thank my colleague, Deputy Deenihan, for sharing his time with me.

Listening to some Fianna Fáil backbenchers earlier, I felt I was living in a different area from them. Some of them seemed to lose the run of themselves because they were talking about the budget being family-friendly and farmer-friendly. I will combine the two and point out a couple of items in the budget which are anything but family-friendly.

While I welcome the increased income disregard for the leasing of farmland, I remain disgusted that the Government will not change the system in order that one can obtain tax relief in leasing a farm to a family member. If farmer Murphy in County Waterford or County Westmeath wants to retire and hand over his farm to his son, he cannot lease it to him and gain the advantage he would get if he leased the farm to someone down the road, a total stranger. If we are trying to encourage farming and young people to enter it, as well as succession, it is very strange that a young farmer cannot lease the farm from his parents and see them receive the same tax relief as they would if they leased it to a stranger. That is awful. I looked up to see why this happens and when it first happened. The reason given for the ruling is that the provision is in place to avoid abuse. Who introduced this anti-family rule in respect of farm leasing? No one other than the Taoiseach when he was Minister for Finance. He brought forward the rule. That is disappointing.

Deputy Finneran told us what a great budget this was for young farmers and others. Has he gone deaf to what farmers are saying? Does he not hear the clamour from farmers with regard to EU directives, about which we heard much last night and will hear more tonight? Unfortunately, because of time pressures, I will not be able to join in the debate.

There is one aspect of the directive which has not received much mention, namely, the cap on nitrogen usage levels on farms. This evening I spoke to a well informed farmer who told me that one of the greatest difficulties in the introduction of the nitrates directive was the way in which the spreading of nitrogen on farms would be curtailed, that it would bring to an end commercial farming or play a major part in its ending. That will have a further effect on farm families.

Let us look again at the tax credits awarded in the budget. The Minister made much of the fact that he was increasing the tax credit for the coming year from €29,400 to €32,000. He must have forgotten that he had not increased it for a long time and that just to keep pace with wage increases and so on he needed to bring the figure up to €34,000.

We are failing to hear about a certain matter from the Government backbenches. The Minister of State is a very busy man and is aware, just as I am, of the following. Let us imagine two families living beside each other, one with two earners and the other with one. Let us say income between the two is €64,000. However, the household with one earner is penalised to the tune of €140 per week, or €7,000 per annum. It is penalised because the second member will not go out to work. Is that fair? It is anti-family. It is driving people out to work. That is not right.

I am glad the Minister for Finance has joined us because I want to mention a couple of particular items. In the budget he clamped down on investment in pension funds. That is a complex area which is difficult to fully understand. In fairness, he has tried to counter some of the difficulties and — let us be honest — abuses which have emerged. The approved retirement funds provision was introduced by the Minister's predecessor in 1999 and there was a big uptake but, of course, people began to abuse it. As the case studies show, some invested about €100 million in such funds. Who first designed this system? Did the designers not see that such difficulties could arise? Was it copied from some other country which had introduced it and, if so, did they not learn from its experience, or was it only the Irish Paddy who was going to abuse the system?

I understand the reason the Minister wants to close the gate. He is right and I agree with him. However, there are many at the lower end of the approved retirement fund investments scale who do not have €100 million invested in them but will now be penalised by virtue of this rolling tax which the Minister will impose on them, whereby 1%, 2% and 3% will be taken. This will affect those who are not well off but comfortable; individuals who have planned well for their retirement. It will affect them in how they plan for nursing home care and so on. While I agree with the Minister in introducing a cap at the top end, I do not agree with him in hitting those who have modest sums in such accounts. Before the Minister finalises it, perhaps he could examine this matter again. I have come across people with relatively modest sums. They made a wise investment. They did not abuse the system but they are annoyed because they are being clobbered because others abused the system. It is not fair.

The second matter I will ask the Minister to examine is the disclosure on bank accounts. I do not know how it will work or be enforced. Quite frankly, the Minister is using a sledgehammer——

Gabh mo leithscéal leis an Teachta ach tá nóiméad amháin fágtha aige.

No one else is offering. Perhaps I could steal a couple of extra minutes if the Minister agrees. He is enthralled.

Midlands solidarity.

I thank the Minister. I appreciate it.

The mandatory reporting on bank accounts is over the top in terms of personal freedoms and so on and I wonder where it will stop. The Minister might examine a number of issues in this context. He is not very long in the job but he is making shapes in the right direction.

The discrepancies that appear in terms of different means tests and treatments of accounts for different scenarios bug me on a regular basis. For example, if I run a taxi business, lease a taxi rather than own it and return my accounts for the taxi business to Revenue, it will tell me that I have run my business properly, what expenses are allowable and that my income is €20,000. If I have a child going to higher education and send in my accounts approved by Revenue and stating my income to my local authority to ask for a higher education grant, it will tell me that this is not the situation. Revenue might believe I have an income of €20,000 but the local authority knows that I have leased my taxi and will add the money I am paid for it as an income.

In marginal situations this could put a family above the threshold to qualify for higher education grants, which is unfair. Where Revenue agrees there is legitimate expenditure by way of leasing, why should a local authority — in fact, it is the Department of Education and Science — not recognise leasing in accounts? In effect, the Department is telling Revenue that it does not trust it to do its job well. This matter should be ironed out.

Another example would be for me to be a self-employed person on a relatively low income looking for a family income supplement, FIS. The Minister is from a rural area and will be aware of many people operating small post offices and shops who are on relatively low incomes. If that income is PAYE, they would qualify for FIS. However, as soon as they put in their applications and state that they are self-employed, the answer is no, they should forget it as they cannot have it. In other words, the Department of Social and Family Affairs is saying that it does not trust the Revenue, that they are not able to do their business. The low income of the person in question might be recognised by Revenue but the Department does not recognise it. This is not fair. The Government is treating people differently. This situation should not continue.

In the same vein, the Minister should examine what happens in terms of assessing capital for various schemes. There is no uniform approach. If one is looking for an old age non-contributory pension, there is an income disregard of €20,000 of capital. If one is looking for a nursing home subvention, there is an income threshold of €7,500. Anything over that amount counts in income terms. Why can we not standardise these types of income disregards, which would be fair in this day and age?

The Deputy to conclude.

I thank the Acting Chairman and the Minister for allowing me these extra few minutes.

I thank the House for the many interesting contributions to the debate on the Finance Bill 2006. I look forward to a constructive and informed discussion on Committee Stage on the many matters raised.

Much of the debate on the Finance Bill has focused on the question of tax reliefs. Unfortunately, there is no shortage of misinformed comment on this issue. First, let us be clear about who benefits from tax reliefs. Some tax reliefs are specially designed as incentives to favour development in particular geographical areas or sectors and it is principally these that have been the subject of our discussion.

However, tax reliefs must be seen in a wider context. The cost of tax reliefs and the question of who benefits from such reliefs were raised by many Deputies, including Deputies Bruton, Burton and Ó Caoláin. The comments made by Deputy Burton suggested that tax equity was being compromised because of a two tier tax system, one for the wealthy and one for ordinary taxpayers. This is quite untrue. I refer the Deputies to page B.23 of the Budget 2006 booklet, which contains a table detailing where tax reliefs go. They will see that, of the €10.8 billion in relief for the tax year 2002, €5.6 billion or 52% went on personal tax credits and reliefs, €3.4 billion or 31% to help fund pensions and savings and well more than €1 billion or 10% on capital allowances for traders, including farmers, to ensure their viability and job creation capacity. The vast bulk of tax relief each year thus goes to ordinary taxpayers at all income levels and to sustain business investment and jobs.

Tax reliefs should be kept under review, most particularly those that are of benefit to particular sectors or groups within the economy. Deputy Devins quite rightly pointed out that policy makers must take account not only of economic measures but also of the sociological benefits that can accrue to regions from these schemes. When these are reviewed properly and carefully, the results must be treated with an open mind. I have had carried out a detailed and sophisticated analysis of a very wide range of tax reliefs and incentives. I have published those reports and have, in substance, accepted what they are telling me.

Deputies Burton, Ó Caoláin and others are happy to accept the conclusions of these reviews where they support their own views but not otherwise. The Deputies argue against a tapered run down of those of the reliefs that are being terminated. They want them stopped straight away. However, this is not what was advocated by the consultants, who are rightly concerned about the economic effects of a sudden change. I am happy to follow the consultants' views in doing away with reliefs but I, too, am determined not to damage our very successful economy in so doing. For this reason, subject to the relevant EU clearances, I intend that reliefs should be abolished on a tapering basis.

I am also criticised for "bringing in new reliefs" for psychiatric hospitals. What I am actually doing is extending a system in place for general hospitals which has just been reviewed in order that it can also apply to psychiatric health providers. I do not believe the current discrimination in this regard should be sustained but I will keep the extended relief under review.

Deputy Bruton and others have argued that I should put into the Finance Bill statutory provision for further reviews of tax reliefs and for prior assessments of new reliefs. I have told the Deputies concerned that I am committed to doing this where appropriate but that there seems to be no requirement to put this into legislation. It is suggested that I am somehow recalcitrant on this issue but I cannot see how, as the Minister who has just commissioned and published a very wide ranging review of such schemes, I can be tarred with that brush. I have proven mybona fides in this regard.

The Government is not afraid of properly conducted policy reviews or making changes when appropriate. Incidentally, while on the subject of reliefs, I note that Deputy Burton suggests that I have introduced a special roll over relief by virtue of the provisions of section 38. This is not at all the case and I will be happy to expand on the issue on Committee Stage but what is actually being done is some tightening up to close off a possible opportunity for abuse. I would also point out that I have extended the holding period generally for all health related facilities and child care facilities to 15 years for new facilities put in use from 1 August 2006. These provisions are included in sections 34 to 37.

As I mentioned yesterday in the House, I am addressing in the Bill the issue of a small number of individuals with very high incomes who, up to now, by aggressive use of tax reliefs, have been able to reduce their income tax liability to a very low level or zero. From 2007, such individuals will not be able to do so.

I have covered all the incentive type reliefs likely to be used in this way by those on high incomes. Accordingly, the specified list contained in section 17 covers a broad range of reliefs and incentives. The scheme has been tested by the Revenue Commissioners using real cases to ensure it will be effective and such taxpayers will have an average tax rate each year of not less than approximately 20%.

Contrary to what was asserted yesterday by Deputy Rabbitte and today by Deputy McManus, the new tax relief for investment in private mental hospitals is one of the specified reliefs covered by the new restriction. I refer the Deputies to pages 71 and 73. While Deputies Bruton and Burton may believe the new restriction on the use of reliefs does not go far enough, I consider it to be a significant step towards promoting tax equity and getting the balance right by ensuring those on high incomes pay their fair share, while at the same time maintaining the incentive effect of the various tax reliefs introduced to achieve a particular public benefit.

A number of Deputies referred to the new income disregard for childminders and whether such minders would have social insurance cover. As I indicated yesterday, the issue of PRSI is being examined by the Minister for Social and Family Affairs for the forthcoming Social Welfare Bill. The adequacy of the €10,000 threshold and the possibility of a tapering arrangement were also raised. A tapering arrangement would considerably complicate the scheme designed with simplicity as a priority. I consider the €10,000 threshold to be reasonable, considering the other child care measures included in the budget. It can, of course, be reviewed in future budgets.

I am satisfied that a straight cut-off from the scheme at an income in excess of €10,000 is the simplest and most practical option and will I hope encourage people to provide such services and also encourage existing minders out of the black economy. Where a childminder's income exceeds €10,000, the total amount will be taxable, as normal, under the self-assessment system. The income limit of €10,000 refers to gross income. In determining the individual's income level no deductions will be allowed for expenses, for example, whereas they would be allowable if the individual declared the income as normal under the self-assessment system.

Deputy Burton referred to the tax position of those earning the average industrial wage, approximately €32,000 in 2006. The reality is that since 1997 a single person on the average industrial wage will have seen his or her pay rise by over €12,600 and the tax bill cut by over €400 per annum as compared to that year. In the same period the person's average tax rate has dropped by 12 percentage points from 27% to 15%. In real terms, when the cost of living as measured by the CPI is taken into account, the person on the average industrial wage will have seen his or her take home pay rise by 44%, of which about half is due to tax reductions. Year after year, independent data from the OECD indicate that for those on average pay we have the lowest tax wedge in the European Union and one of the lowest in the entire OECD. The fact that our unemployment rate is half the EU average is no coincidence.

Those who earn more contribute more to the income tax yield than was the case in 1997 when we took office. It is estimated that in 2006 the top 1% of income earners will pay approximately 20% of all income tax collected, whereas in the 1997-98 tax year, they paid less than 15% of all income tax collected. In the same period the contribution of lower earners to the income tax yield has reduced significantly. Those earning at or under the average industrial wage will pay 6% of the expected income tax yield for 2006 as compared with over 14% in 1997 when the Government took office. It is a source of amazement to me that the Government is accused of favouring the wealthy when the facts speak for themselves.

In its recently published quarterly economic commentary the ESRI observed that "the direct tax and welfare provisions in budget 2006 — including the new early child care supplement — were strongly progressive". It also observed that "budget 2006 strongly favoured low-income groups, with smaller percentage gains for those on higher incomes". The provisions of section 17 will also ensure that from 2007 the small number of high income individuals who have been able to reduce or eliminate their income tax liability through the use of tax incentives and reliefs will generally have an average tax rate of not less than about 20% each year. As a higher percentage of the tax take is paid by high earners and a lesser percentage is paid by lower earners, this is a strongly progressive budget with limits on tax reliefs and their use for the wealthy. In the face of the evidence, how can the Opposition mantra retain any credibility? Political attacks are not facts.

I reject Deputy Bruton's assertion that no serious effort is made to give tax refunds to compliant taxpayers. The Revenue Commissioners make every effort possible to inform taxpayers of their entitlements using every available means at their disposal, including leaflets, the Internet and media campaigns. They have recently introduced a range of self-service facilities aimed at allowing PAYE workers claim certain reliefs on the Internet or telephone. This service is being extended further in 2006. A number of years ago the Revenue Commissioners introduced a tax relief at source system for items such as pension contributions, permanent health insurance, medical insurance and mortgage interest payments. The difficulty lies in areas where expenditure cannot be quantified until year end such as medical expenses. The taxpayer must submit a claim to the Revenue Commissioners telling them what was spent in the previous year. I remain open to suggestions that will improve the take-up of various relief schemes. Deputy Bruton has suggested the establishment of a tax ombudsman with the remit to take cases on behalf of ordinary taxpayers to the Revenue Commissioners in the event of overpayments. I do not agree with this approach as we should concentrate on making the system as effective as possible rather than inventing a new bureaucracy.

Many Deputies referred to pensions and I am glad to have the opportunity to clarify a number of points. The Government has been criticised because it is suggested an individual can take a large lump sum payment out of his or her pension fund without paying tax. This cannot be done as the Government has closed off that possibility since the budget. The Government reviewed the use of pensions by high earners, identified the issue and closed off the possibility for abuse.

I have been asked why individuals who have built up large pension funds can continue to hold them tax free. This is a misconception. We cannot tax a pension fund retrospectively but have ensured these moneys which are kept in approved retirement funds will be taxed at the individual's marginal rate as they are drawn down, or by reference to a notional rate of draw down. For the future the size of fund allowable has effectively been capped.

I have been asked why I have not prevented individuals who control companies from arranging to have those companies make unlimited payments into the fund. On the basis of evidence arising from the review which I commissioned, we have effectively placed a cap on the size of the fund which can be built up for an individual and any excess is taxable at prohibitive rates. An individual can no longer take enormous lump sums tax free, cannot use tax incentives to build up an unreasonably large fund, or indefinitely defer payment of tax on such funds. Deputy Burton suggests there is some way a person can take €250,000 in tax reliefs under the new capped arrangements and also an additional €250,000 in pensions relief but that is not the case. An earnings limit of €254,000 applies to tax relievable pension contributions. The tax benefit for pension contributions paid is limited to a percentage of €254,000, between 15% and 40% per year, depending on age, and relief is payable at the marginal rate. There is no question of an individual putting €250,000 into pension schemes, let alone getting a tax break of that value. Those who have build up pension contributions using tax reliefs will eventually have to draw down a pension and pay tax on it. Pension tax breaks are, to an extent, a deferral of tax, rather than an absolute exemption. Our recent analysis has shown that the use of approved retirement funds to defer tax and the taking of large lump sums tax free was capable of undermining that position, but we have taken steps to set this right.

Deputies Burton, Boyle and Ó Caoláin have criticised the scheme for incentivising the conversion of SSIAs into pension contributions. I seem to be in a no-win situation as I am criticised for not giving the benefit of this scheme to the 42% taxpayer, but the 42% taxpayer already has considerable incentives available to him or her. I am also criticised for not being more generous in regard to the scheme but this is the first time any Minister in any Government has taken a step to incentivise pension provision for lower earners. This is a good scheme and the cost will be determined by the take-up but I am hopeful large numbers of individuals will see that there is a real long-term benefit in continuing the savings habit developed under the SSIA scheme and that the availability of this once-off bonus will give an extra impetus. This will help with pension coverage and the take-up of PRSAs, as mentioned by Deputy Andrews.

The question of pensions provision in the longer term is a separate one. Deputy Bruton pretends that I do not believe in studies or analysis, never mind that the evidence——

I must interrupt the Minister. It is 7 p.m and the order of the House requires that I put the question. However, if there is general agreement, I will allow the Minister some latitude to conclude. Is that agreed? Agreed.

I thank the Acting Chairman. I am obliged to him.

Regarding pensions, Deputy Bruton has no doubts about the answers. However, does he not want us to study and analyse these issues also? The national pensions review produced by the Pensions Board provides a good base for the consideration which the Government is giving to the overall pensions situation. However, that consideration is a work in progress. As the chief executive of the Pensions Board said of the review:

its detailed analysis and costing of the pension situation are at least as important as the recommendations and should continue to be used as a frame of reference going forward. The board understands that further decisions must be made in the context of employment interests, competitiveness and overall economic and social considerations.

The Pensions Board itself sees that its analysis and recommendations must be considered by Government in a wider context.

Deputy Boyle referred to the new biofuels scheme which is included in the Bill but implied that the provision was simply an enabling provision. Perhaps I can clarify that. The provision is subject to a commencement order but this approach is required because the scheme requires EU state aid approval. While this can take some months, I assure the Deputy that the process has commenced and exploratory discussions have taken place between my officials, officials of the Department of Communications, Marine and Natural Resources and the European Commission.

The Deputy might wish to know that I have budgeted for excise relief of €20 million this year under the scheme, rising to €35 million next year and €50 million in each of the following three years. This relief scheme, when fully operational, is expected to support the use and production in Ireland of approximately 163 million litres of biofuels per year, which is 20 times the current level of biofuels that is excise-relieved.

I note what Deputy Naughten and others stated regarding the proposal in the Bill on automatic reporting to Revenue by banks and others. The provision is an enabling one and before the regulations are drafted there will be appropriate consultations, which will allow account to be taken of the points made by Deputies. There are differing views on this and we can have a useful discussion on this on Committee Stage.

Deputies Ardagh, Naughten and others referred to tax issues of interest to farmers. Under this Finance Bill, disposal of the single farm payment entitlement is exempted from stamp duty in its entirety. This entitlement will be regarded as an asset for capital gains tax and capital acquisitions tax retirement reliefs, which are very generous. The young trained farmers scheme is extended for another three years. This is a generous scheme which facilitates the transfer of land to young farmers by exempting the transfer from stamp duty.

Deputy Bruton referred to what he called the "collapse" of the expenditure review initiative. That is simply not the case. I informed the Deputy last November of the 54 expenditure reviews completed or under way in 2005 under the existing round of the expenditure review initiative, covering indicative total expenditure estimated at €3.8 billion. At that stage, 12 of the reviews had been completed, 14 had been quality assessed and were close to completion, seven were at quality assessment stage and 21 were ongoing. I will bring proposals to Government shortly for the approval of topics for review in 2006-08, to include the outstanding reviews carried forward from the previous round.

As regards the position of the Department of Health and Children and the OPW, I accepted the view of the expenditure review central steering committee that both bodies should be temporarily exempt from participation in the expenditure review initiative owing to the extensive reform programme being undergone in the case of the former and the demands of decentralisation in the case of the latter. Both bodies will be asked to carry out expenditure reviews under the 2006-08 round of the initiative.

On infrastructure, a statement was made that we have not brought forward decent projects to tackle the infrastructure deficit. It is clear that more than €43 billion will be available under the capital envelopes for 2006-10, more than €34 billion of which is for transport over the next ten years. This investment is making a real difference through better roads, better public transport, more houses and more child care places. In health and education too there has been real enhancement in services. I accept that value for money in expenditure must be a paramount objective. The multi-annual framework provides a much better way of having better planning and management of capital projects.

I thank Deputies for their attention to this important Bill and for their contributions. I look forward to Committee Stage when we can elucidate and detail some of the more important provisions highlighted on Second Stage.

Question put.
The Dáil divided: Tá, 78; Níl, 56.

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Ardagh, Seán.
  • Blaney, Niall.
  • Brady, Johnny.
  • Brady, Martin.
  • Brennan, Seamus.
  • Browne, John.
  • Callanan, Joe.
  • Callely, Ivor.
  • Carey, Pat.
  • Carty, John.
  • Cassidy, Donie.
  • Collins, Michael.
  • Cooper-Flynn, Beverley.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Cregan, John.
  • Cullen, Martin.
  • Curran, John.
  • Davern, Noel.
  • de Valera, Síle.
  • Dempsey, Noel.
  • Dempsey, Tony.
  • Dennehy, John.
  • Devins, Jimmy.
  • Ellis, John.
  • Finneran, Michael.
  • Fitzpatrick, Dermot.
  • Fleming, Seán.
  • Gallagher, Pat The Cope.
  • Glennon, Jim.
  • Hanafin, Mary.
  • Haughey, Seán.
  • Hoctor, Máire.
  • Jacob, Joe.
  • Keaveney, Cecilia.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Kirk, Seamus.
  • Kitt, Tom.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • McDaid, James.
  • McDowell, Michael.
  • McEllistrim, Thomas.
  • McGuinness, John.
  • McHugh, Paddy.
  • Moloney, John.
  • Moynihan, Donal.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M. J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Connor, Charlie.
  • O’Dea, Willie.
  • O’Donnell, Liz.
  • O’Donovan, Denis.
  • O’Flynn, Noel.
  • O’Keeffe, Batt.
  • O’Keeffe, Ned.
  • O’Malley, Fiona.
  • O’Malley, Tim.
  • Parlon, Tom.
  • Power, Peter.
  • Power, Seán.
  • Sexton, Mae.
  • Smith, Brendan.
  • Smith, Michael.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilkinson, Ollie.
  • Woods, Michael.
  • Wright, G. V.

Níl

  • Allen, Bernard.
  • Boyle, Dan.
  • Breen, James.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burton, Joan.
  • Connaughton, Paul.
  • Connolly, Paudge.
  • Costello, Joe.
  • Cowley, Jerry.
  • Crowe, Seán.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Ferris, Martin.
  • Gregory, Tony.
  • Hayes, Tom.
  • Healy, Seamus.
  • Higgins, Joe.
  • Higgins, Michael D.
  • Hogan, Phil.
  • Howlin, Brendan.
  • Kehoe, Paul.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McGrath, Finian.
  • McGrath, Paul.
  • McManus, Liz.
  • Mitchell, Olivia.
  • Morgan, Arthur.
  • Murphy, Catherine.
  • Murphy, Gerard.
  • Naughten, Denis.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Keeffe, Jim.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Pattison, Seamus.
  • Penrose, Willie.
  • Perry, John.
  • Rabbitte, Pat.
  • Ring, Michael.
  • Ryan, Eamon.
  • Ryan, Seán.
  • Sargent, Trevor.
  • Sherlock, Joe.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Twomey, Liam.
  • Upton, Mary.
Tellers: Tá, Deputies Kitt and Kelleher; Níl, Deputies Kehoe and Stagg.
Question declared carried.