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Dáil Éireann debate -
Tuesday, 10 Nov 2009

Vol. 694 No. 1

Leaders’ Questions.

We are now four weeks from the budget when the Government will attempt to put forward its choices in respect of bringing in €4 billion. These choices are obviously difficult. Owing to choices made in recent budgets we now find ourselves in an unprecedentedly serious situation. In 2008 some 600,000 families received child benefit in respect of 1.1 million children. These families are put to the pin of their collar to manage on a day-to-day basis and the money received from child benefit has become a central source of income for the vast majority of these families. Last night I understand the Minister for Social and Family Affairs, obviously speaking on behalf of the Government, indicated that it is the intention of Government to cut child benefit in the budget four weeks from tomorrow.

Budgets are about choices as the Taoiseach knows. I want him to understand that the Fine Gael Party has accepted the broad principles of the figures he has mentioned. We have looked at the situation that applies here. I want the Taoiseach to know that it is my choice and our choice that we can achieve the savings that are required, and the reductions and adjustments to be made without touching child benefit. I want to be absolutely clear on that. There are thousands of families now heading towards negative equity and thousands of families where one job is gone or two jobs are gone as the case might be. Hundreds of thousands of such families are under serious financial pressure on a daily basis. Is it the intention of the Government to cut child benefit as proclaimed by the Minister for Social and Family Affairs last night?

What the Minister for Social and Family Affairs pointed out last night in an effort to be helpful in a discussion that took place on an RTE programme was to the effect that, obviously, no decisions are yet taken but every area of public expenditure, including social welfare, must be looked at in the context of what contribution it can make towards making the €4 billion savings that must be made to stabilise the deficit. Budgets cannot be about false choices. Certainly there will be an opportunity in the pre-budget outlook debate that can take place here in coming weeks for parties to outline their positions as to how they would make up the €4 billion saving. However, the Minister, Deputy Hanafin, was simply outlining the various options and issues being looked at in that context.

If we look at the child benefit situation, we have seen a trebling of child benefit for the first two children and an increase of more than 185% for the third child and subsequent children since 2001. The cost of child benefit at the time was approximately €960 million and it is now approximately €2.5 billion. The overall social welfare budget is more than €21 billion. The total moneys coming into the Exchequer as of the end of October was €26 billion. Clearly large areas of expenditure, including social welfare of course, cannot be immune from consideration when the Government decides what savings to make.

The Minister, Deputy Hanafin, was simply outlining that position and saying obviously that Government will make the decisions in due course. What we are always trying to achieve of course is, in the context of any expenditure savings or adjustments that have to be made, to protect the least well off to the very best extent we can.

I disagree with the Taoiseach. The Minister for Social and Family Affairs did not appear on a popular television programme merely to muse aloud in what has amounted to a cruel exploitation of hundreds of thousands of families who do not now know where they stand in regard to child benefit. The Taoiseach is right that organisations and individuals deserve to know with clarity what lies ahead in respect of their economic circumstances. The child benefit payment to more than 600,000 families in respect of 1 million children has been of direct income support to hundreds of thousands of those families. The Minister for Social and Family Affairs was either flying a kite or deliberately laying down a marker in what, as I said, has amounted to a cruel exploitation of families who do not now know where they stand.

It seems to be acceptable to pump billions into banks and to allow people who borrowed enormous amounts of money to swan around as if they are untouchable by any law. Yet people who find themselves in negative equity or who have lost a second or sole income are faced with a senior Minister implying that it is the Government's intention to cut child benefit. The McCarthy report recommended that €500 million be saved from child benefit payments. However, that amount could have been saved if the Government had accepted the Fine Gael recommendation of freezing public sector pay increments last year and this year. The same amount could have been found if the percentage pay increase under the national wage agreement for this year and last year had not been applied.

I agree with the Taoiseach that there are no false choices. We have looked closely at the circumstances we now face as a result of mismanagement by successive Governments in the last 12 years. We are in a position now where hundreds of thousands of families are under pressure. The Taoiseach's party in Government has, over a period of years, done down the worth of families and children by means of tax individualisation, slashing medical allowances, depriving children of educational facilities and so on. Families have been done down in so many areas and there are now choices to be faced.

I wish to be clear in this regard — my party will achieve the savings that are required without touching child benefit.

Deputies

Hear, hear.

That is our choice and we will not hide behind any other choices we have to make. We will defend those choices. I wish to know, with all due respect, whether it is or is not the Government's intention to make the choice to cut child benefit. I am saying "No" to that choice. What does the Taoiseach say?

I have made the point to Deputy Kenny that total expenditure must be looked at in all aspects. Decisions will be taken by the Government in due course in terms of whether there must be a reduction in the area of child benefit expenditure, which amounts to €2.5 billion, in a way that is as fair as possible given the varying degrees of household income to which it applies. That is something that must be considered by the Government. Where there are limited resources, one must target those resources to best effect and do so in as socially just a way as possible. It is not easy given the scale of the issues before us.

What is not being made clear in respect of Deputy Kenny's position is whether the social welfare budget will make any contribution towards the adjustment that is required. I am sure plenty of people want to know the answer to that.

The social welfare budget will make a contribution because people will be taken off welfare and into work.

Deputy Kenny should specify his proposals.

We will look with interest to see how that will work.

The Minister for Social and Family Affairs is flying kites.

I listened to the Deputy in silence, he should do me the same courtesy.

Deputy Kenny is flying an empty kite.

The Minister for Justice, Equality and Law Reform is proposing to imprison 4,000 people for non-payment of fines.

Deputy Kenny is saying nothing. He is talking waffle.

(Interruptions).

The Taoiseach should be allowed to continue without interruption. There is limited time for Leaders' Questions.

The point is that it was indicated as far back as the April supplementary budget, as well as in the McCarthy report, that child benefit is an area of expenditure that must be examined. We must see how, on the basis of the limited resources available to us, expenditure can best be allocated across the social welfare budget. There is a great discrepancy of income to which child benefit applies.

There is no question that this is all about choices. I must contrast the signal the Taoiseach is sending to the parents who are worried about what the Minister for Social and Family Affairs said last night — which is, in essence, that child benefit will now be targeted in the forthcoming budget — with the answer given by the Minister for Finance last week to Deputy Burton when she put to him a different type of choice that he might make. I refer in particular to the treatment of the "golden ten" — the people who were loaned the money by Anglo Irish Bank to purchase shares in order to bail out the bank and bail out an even larger shareholder. We are now stuck with the bulk of that loan, three quarters of which was on a non-recourse basis, that is, supported only by the value of the shares themselves, which are now worthless. As a result, the taxpayer is stuck with a loss of some €300 million on that loan.

Deputy Burton pointed out to the Minister for Finance last week that not only are we stuck with the loss on the loan but that these people can write off the losses on the entire amount against their future capital gains tax liabilities. She pointed out that this did not seem to be a good idea and asked the Minister for Finance if he would do something about it. He replied that he had "no plans at this stage to make a change in this area", that "the current symmetry of treatment between losses and gains would be affected", and that this "would represent a significant change to our capital gains tax legislation".

Such a change is very necessary. We have a situation where the persons who borrowed this money and who contributed to the difficulties in the banking system will be able to claim tax relief on losses the taxpayer is already carrying while, on the other hand, the Government is telling parents to expect reductions in child benefit. There is no similar arrangement for those unfortunate householders who are now in negative equity and who may have to sell their homes because they cannot pay the mortgage or because they have to emigrate. They cannot write off losses against future tax liability as the "golden ten" are being allowed to do. Does the Government seriously propose to do nothing to address this anomaly in the forthcoming budget?

In regard to specific issues that arise regarding the banking situation, they will be dealt with on the basis that whatever debts are due and owing will have to be paid. Mr. Appleby and others are looking at the corporate enforcement side of this. The fact is that anything that is transferred does not exclude the liability people owe to financial institutions in respect of any debts they have. That remains the case.

A further issue has arisen today in regard to repossessions. The idea has been put about that when the six or 12 months are up, depending on the financial institution in question, people will suddenly be subject to legal proceedings and with possible involuntary repossession of their homes imminent. That is not what is envisaged. A code of conduct has been agreed and the announcement today offers a further improvement on the situation. People who engage and come to an arrangement with lenders on a six-monthly review basis can continue to maintain their position and keep their home. That is something to which we all subscribe and expect in the context of a fair and equitable approach until the situation improves for those people. It is important to point out that where there are arrears, arrangements are in place and the advice is for people to engage with their lenders and the Money Advice and Budgeting Service. In regard to the previous matter, as I have said, the liability continues to be owed.

That was an answer to a question about house repossessions I asked the Taoiseach last week. I asked whether the Government will do anything to close a tax loophole, which will cost the taxpayer approximately €80 million on top of the €300 million we are stuck with for the non-recourse element of the loans taken out by these people. The issue is simple. Ten people who belong to the golden circle borrowed this money, three quarters of it on a non-recourse basis, which means we are stuck with this and there is no question of it being repaid. That is €300 million we are caught for as taxpayers. On top of that, those involved will be able to write off the entire losses they make on this arrangement against future capital gains tax liability. This is open-ended and they will be able to do so indefinitely. This is a huge loophole in the arrangements governing capital gains tax.

Deputy Burton put it to the Minister for Finance that this loophole should be closed and he replied that he does not want to do so. Before the Taoiseach, the Minister for Finance, the Minister for Social and Family Affairs or any other Minister comes into the House to tell us and the people that parents will have to take a cut in child benefit, pensioners may suffer a cut, the pay of State employees will be cut and God what knows else will be inflicted on people in the budget, will they not first close this loophole? Why should there be one law for these people who are operating a sweetheart arrangement, which will result in a tax write-off for losses that are being borne by the taxpayer? It is madness.

With regard to the point the Minister for Finance made, it is not correct to suggest there is a particular deal with these people; that is not the case.

It is a sweetheart deal with the banks.

How the capital gains tax code operates in respect of gains and losses is a matter of general character. It is a general provision in the Finance Acts. It is predicated on gains being made. In the current declining asset market, the big complaint in the discussion on the NAMA legislation was the level of discount——

They can write the losses off against last year's tax.

The Taoiseach, without interruption.

When Deputy Gilmore is given an answer, he does not want to hear it.

The argument he put forward for the past number of weeks on the NAMA legislation related to the discount in the value of assets transferred from financial institutions to the agency.

They are worthless.

Deputy Gilmore's argument now is that gains will be made in respect of those assets but the opposite will be the case.

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