Dáil Éireann debate -
Wednesday, 9 Dec 2009

Vol. 697 No. 3

Financial Resolution No. 3: Value-Added Tax.

Minister for Defence (Deputy Willie O’Dea)

I move:

(1) THAT the rate of value-added tax on the supply of certain goods and services at present chargeable at the rate of 21.5 per cent be decreased to 21 per cent of the amount on which tax is chargeable in relation to the supply of such goods and services, and that, accordingly, subsection (1) (inserted by the Finance Act 1992 (No. 9 of 1992)) of section 11 of the Value-Added Tax Act 1972 (No. 22 of 1972), be amended in paragraph (a) by substituting "21 per cent" for "21.5 per cent" (inserted by the Finance (No. 2) Act 2008 (No. 25 of 2008)).

(2) THAT this Resolution shall have effect as on and from 1 January 2010.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

The standard rate of VAT is being reduced from 21.5% to 21% with effect from 1 January 2010. This change is being introduced to assist businesses in difficult economic times, improve competitiveness and consumer confidence and to reduce the burden of VAT on individuals. This VAT rate reduction will cost €140 million in 2010 and €167 million in a full year.

The goods positively affected by this VAT reduction include items such as soft drinks, confectionary, alcohol, tobacco, adult clothing and footwear, sports goods, cars, petrol, diesel, electrical equipment, CDs, DVDs, furnishings and jewellery. The services affected include telecommunications, toll roads, television rental, haulage, advertising and professional legal services. From 1 January 2010, the differential between the standard VAT rates of Ireland and Britain is due to reduce from 6.5 percentage points to 3.5 percentage points; 21% compared to 17.5%.

After the reduction, five countries in the EU will have higher standard VAT rates than Ireland, namely Denmark, Hungary and Sweden at 25%, and Finland and Poland at 22%. Furthermore, three other member states, Belgium, Lithuania and Latvia, will share our same standard rate of 21%. Some other member states have indicated their intention to increase their VAT rates in 2010, at which point Ireland will have the eighth highest standard VAT rate in the EU.

On resolution No. 4, a new VAT margin scheme in respect of second-hand means of transport was announced on 14 September 2009 following discussions with the motor industry. This replaces the existing special scheme. A margin scheme was initially announced last April in the supplementary budget but it was decided not to proceed with the proposed scheme in the Finance Bill 2009. After further consideration, the margin scheme as announced on 14 September 2009 is now being put it place.

Currently, all EU member states apply the margin scheme to second-hand vehicles with the exception of Ireland and Denmark. The scheme is estimated to cost €7 million in 2009 and €20 million in 2010, with no further cost in future years. As the scheme was already announced and accounted for last September it is not deemed to be a new budget measure, and as such was not included in the budget speech or budget costings. This resolution gives legal effect to the introduction of the scheme.

The margin scheme, which will apply from 1 January 2010, is simple and straightforward in that a dealer accounts for VAT on his or her profit margin, that is, on the difference between the cost of acquiring a second-hand vehicle and the re-sale price of the vehicle. Under the margin scheme, if a dealer agrees to allow an amount of €10,000 on a second-hand car as a trade-in, and subsequently resells that car at a VAT inclusive price of €12,000, the VAT due to the Exchequer is based on the margin achieved by the dealer, €2,000. In this particular case, the dealer would be currently liable for €354, or €346 at the new 21% rate, in VAT. If there is no margin then no VAT liability arises; if there is a positive margin, VAT is charged based on that margin.

Deputy Bernard Allen

Does it apply to helicopters?

Deputy Willie O’Dea

It applies to any mode of transport.

Deputy Joe Costello

Tanks?

Deputy Willie O’Dea

Not tanks, tanks are exempt.

Deputy Kieran O’Donnell

On financial resolution No. 3, the reduction in the standard rate of VAT from 21.5% to 21% was part of our pre-budget submission. It defied logic why the Government sought in its wisdom to increase the VAT rate from 21% to 21.5% in the last budget. It also increased the VAT rate on the day of the budget but we now find that when it proposes to reduce VAT, the reduction does not become effective until 1 January. It makes no sense.

There is an old rule in business that should apply to Government — if business is going badly the last thing to do is increase prices. How did the Government think that raising VAT from 21% to 21.5% in the busiest month of the year for traders and in the middle of a bimonthly VAT period, November-December, would work? It showed a complete lack of understanding of how business operates.

I congratulate the Government for admitting its error and reversing the increase but the reverse should be effective from today to allow people to benefit for the month of December. Why is the reduction not happening until 1 January when last year the increase was effective from the date of budget?

The Minister for Defence has explained resolution No. 4. It is a margin scheme that brings us into line with other EU countries, whereby VAT is now paid on the margin, a fair move. Why was the VAT rate increased last year? It affected a range of businesses.

Why did the Government not see fit to reverse the travel tax? Deputy O'Dea will be well aware of its effect on our constituency and the wider mid-west. It did not generate a huge amount for the Exchequer but it has done massive harm to tourism and the hotel industry. Both Aer Lingus and Ryanair have stated that the travel tax was a huge deterrent. Holland and Belgium reversed their travel tax but it is not a measure allowed for in this budget.

In our pre-budget submission, we called for a reduction in the 21% standard rate of VAT and for a reduction in the lower rate of VAT from 13.5% to 10% as a temporary measure until the end of 2010. The lower rate applies to many labour intensive industries. The Tánaiste must elaborate why the reduction is not being introduced until 1 January, why the increase was introduced much earlier last year and why the Government did not abolish the travel tax. Was consideration given to a reduction in the lower rate of VAT?

Deputy Willie Penrose

At least this a belated recognition of the wrong-headed decision to impose an increase in VAT in last year's budget. The Government has contributed significantly by way of charges and indirect taxation to our loss of competitiveness. Forfás and other groups have pointed out repeatedly those are an essential component in that loss.

VAT is an essential component that drives prices, particularly when it is increased, and its impact is felt across a significant and comprehensive range of goods and services. A significant reduction in VAT leads to an increase in competitiveness. It helps to sustain existing employment and acts a beacon of hope for incubator industries to get off the ground, it is a light at the end of the tunnel. That is where this budget fails. There is no light at the end of the tunnel when it comes to a stimulus for job creation. In terms of stimulating job creation there is no spark or impetus to give hope to those thousands of people who look to this budget for a ray of hope to get them back into employment. Sometimes the Government will say it cannot reduce VAT as it would leave a bigger hole. If there are outflows as a result of the Minister's decision, the hole gets bigger. It is like the circular bird, no matter how often one goes around one will come back to where the bird started to fly. This is the Government's thinking. It does not think outside the box. It is a very worrying feature of Government of late.

We still have VAT rates notwithstanding the decreases in excise duty which were passed earlier. I would like to see a comprehensive cost-benefit analysis in respect of excise reductions to see what they will mean and where they will impact and how they will sustain employment. We all know that areas in the drinks industry are under pressure. I know from my constituency that people in Mullingar who have an industry in that area certainly reflected that this would be an important aspect of the budget. Given all that, it is difficult to see how that measure alone, together with the 0.5% reduction in VAT proposed, will stem the flow of people across the Border.

I am chairman of the Joint Committee on Enterprise, Trade and Employment and I have to be reasonably constructive. I want to take every positive and constructive measure to ensure people are put back into employment and jobs under threat are retained. How will this work? The 0.5% VAT increase by the Minister for Finance, Deputy Lenihan, in the previous budget can be described as the most foolhardy imposition every made. Its impact was as much psychological as it was real because within weeks Mr. Alistair Darling reduced his VAT by 2%. We increased the rate by 0.5% and widened the differential to 6.5%. Nobody should try to tell me that did not have a significant impact on a range of goods and services in this context. It sent all the wrong signals and contributed to a significant loss of competitiveness and ultimately the loss of jobs. It also helped accelerate the level of traffic across the Border, having accentuated a price differential which was already significant in the context of competitive factors feeding into it and the weakness in sterling.

I accept that every reduction is important. It is time to move further in this area. Indirect taxation leads to a loss of competitiveness. I appreciate it is important in terms of raising revenue but this is an important area.

The Minister gave a comprehensive outline of Resolution No. 4 which bring us into line. I am not in a position to dispute it or to make a constructive contribution in that regard. However, the VAT reduction, although small, is a step in the right direction but it is an inch instead of a yard.

Deputy Seymour Crawford

I welcome any reduction in costs. The increase from 21% to 21.5% in the second last budget was unreal at the time. Subsequently the Minister did admit that it cost the country €700 million in a year. It has caused much damage to the nation because, as Deputy Penrose said, it was not altogether the amount but it happened at the same time as Mr. Alistair Darling reduced the rate by 2% in the opposite direction and it meant a 6.5% differential. That differential, together with the change in the value of sterling as well as the drinks issue, meant a major exodus of shoppers north of the Border.

Given that the Minister has seen the light in respect of the 21.5% VAT rate can he see the light in respect of the 13.5% rate and reduce it to 10%? Employment is in a desperate state at present. The building trade is dead, yet many small jobs could be done if they were more competitive. A builder employing a plumber from County Monaghan has to pay a minimum of €22 under law, yet he can get a plumber from Middeltown, County Armagh, a couple of miles down the road, for €12. We are still in a seriously uncompetitive position and we must look at every means to try to rectify that situation. We are losing work to Northern Ireland contractors and we are putting up capital in this country to provide those jobs for them. I want to see free movement of people between North and South but it is all one way and the Minister knows that as well as I do. I welcome the particular move to reduce VAT by 0.5% but it is not sufficient. I ask the Minister to look at it again before the finance Bill to see what can be done in respect of the 13.5% VAT rate from tourism, building and employment points of view because, without jobs, we can go nowhere.

An Leas-Cheann Comhairle

Amendments Nos. 1 to 3, inclusive, are related and will be discussed together with the Financial Resolution.

Deputy Aengus Ó Snodaigh

I move amendment No. 1:

In the second line of subsection (1) of the Resolution, to delete "21 per cent" and substitute "17.5 per cent".

The reasons for the amendments are quite simple. I listened to the Taoiseach speaking on Resolution No. 1 when he referred to the haemorrhage of funds from the Exchequer that should have gone to the Exchequer because of the differentiation in the excise duty. The resolution before the House is a welcome admission by the Government that it made a mistake and some months ago it realised that. It should have realised it when we pointed it out at the time of the budget but, as usual, it was not listening. The resolution before the House seeks to correct that mistake but it is too little, too late. My amendments suggest a reduction to 17.5% in the VAT rate. It is a substantial reduction and it would help ensure many jobs in the retail trade not only in the Border areas but throughout the country would be saved. The proposal would be revenue neutral by virtue of the fact that people would increase spending and people would be retained in employment rather than unemployment. Therefore they are reasonable and, hopefully, the Minister will accept them.

Any change in the VAT rate must come about a little slower than we might wish. Next Monday would be time enough for it to take effect. If we are to wait until 1 January many jobs in the retail industry will be gone. We have to take steps now and send out the message that we in this House are serious about retaining jobs at the very least.

Another aspect of the VAT rate — I heard the Minister mention the goods in question — is that a reduction in same might encourage people to buy sports equipment to enable them get involved in sports and become fit and tackle one of the major health crises, that of obesity. I suggest the Minister consider at another time making sports equipment and the like zero rated for VAT to encourage more people to get involved in sports, to be fit and healthy. It would be cost-neutral because there would be a saving in expenditure on the health services. I would like to hear an explanation from the Government as to why the three amendments will not be accepted. If they are accepted Sinn Féin will support the resolution.

Deputy Paul Gogarty

It may have helped if Deputy Ó Snodaigh had tabled a parliamentary question a few weeks' ago on this matter. I agree with the sentiments of the amendments in terms of bringing down prices and keeping jobs. The annualised cost of a 0.5% reduction in VAT would mean €167 million. It would be interesting if the Tánaiste or Minister for Finance could elaborate on what would be the estimated cost of bringing in a rate of 17.5%. It might not have been the intention when the VAT rate was increased last year but it turned out to cost the State more than the actual fiscal instrument in the first place. We are hoping that a reduction will have some positive effect.

Deputy Penrose thought it might be a symbolic move and I agree that it is symbolic. The cost of a CD including the profit margin for a retailer in the South of Ireland is €15.99. The current rate of 21.5% VAT, brings the cost of the CD to €19.43. If the VAT is reduced to a rate of 21% then the cost of the CD is €19.34, a saving of 9 cent on a CD. In the case of electronic goods costing €160, the equivalent of a fair-sized weekly shopping bill for some families, then there is a saving of €10 and that €10, when the cost of petrol is included, could be the difference for someone from Dublin or south Louth travelling to the North rather than staying and shopping locally. If the rate were to be brought down to 19.5% that differential would be there again. I would like to see the figures for the cost to the Exchequer if more were to be done as opposed to the benefits in terms of jobs kept and keeping people shopping on this side of the Border.

I have a friend who married someone from Belfast so they travel to Belfast frequently. They were married in Belfast.

Deputy Kieran O’Donnell

The VAT is less there.

Deputy Paul Gogarty

I have attended two weddings in Belfast in the past five years——

Deputy Kieran O’Donnell

Is the Deputy going to give seed, breed and generation?

An Leas-Cheann Comhairle

Please, Deputies.

Deputy Paul Gogarty

They are ordinary hard-working citizens. I was not up there for the shopping; I have not been up North for two years for that very reason because even going up to see a relative means one would be scrutinised and the cameras would be out but this is beside the point.

I have been told that a person working in a garage or in retail in the North can make a reasonable living and keep a family. The cost of housing rents and mortgages and the level of social welfare paid is lower in Northern Ireland. It is no wonder the price of everything is lower because the costs are lower. This forms a certain aspect of the price differential but the other reason is the rate of sterling and the UK VAT rates. These all combine——

An Leas-Cheann Comhairle

A number of Deputies are offering.

Deputy Paul Gogarty

I welcome this measure and I ask if there is scope for a further reduction next year. I ask the Minister to provide the figures as per Deputy Ó Snodaigh's proposal to see if it could be a runner next year.

Deputy Joe Costello

I am not sure that Deputy Gogarty's arithmetic is correct on the DVD and the electronic goods. I would not like to discuss the wedding. This is a fairly modest proposal of half a percentage point and it is not going to dramatically change the cost of any item. It is symbolic in the sense that when it was introduced last year it had a deadening effect as it increased the differential between VAT rates in the UK and Northern Ireland and the VAT rate here in the Republic. It almost symbolically seemed to increase it more and it led to increased numbers of people crossing the Border because they believed they were being penalised unduly in the last budget. While this is a modest change it is welcome and it would have a beneficial effect.

As other speakers have said, it is very strange that it will not be introduced until after the winter sales instead of being introduced immediately. It will be introduced on 1 January 2010. If it is designed to influence people's behaviour then the benefit of having the reduction will be lost by waiting until the new year because people will see no change over Christmas and they will have forgotten about it in the new year. The momentum will be lost that might have been gained and it will put pressure on retailers in the Republic. It would have been advantageous from the Government's point of view to amend its own proposal with a view to implementing it immediately. It is a very modest redress of the situation.

Deputy Leo Varadkar

I was interested to hear Deputy Gogarty's remarks. I never thought I would see the Greens voting for a scrappage scheme, no matter how it is dressed up.

Deputy Tom Hayes

These are changing times.

Deputy Leo Varadkar

I never thought I would hear the Greens arguing to cut welfare in order to bring down prices. If I made that kind of argument a year ago I would have been accused of all sorts of things. It is a very strange argument.

The reduction in the rate of VAT is welcome and the increase last year is now acknowledged as a significant mistake. The reduction of 0.5% will not make a significant difference in behaviour. What would have been useful to do would be to follow the proposal made by Fine Gael to reduce the middle rate significantly because that is the rate which affects services and will help deliver jobs. The Government has done something on excise duty to stop people travelling North or to encourage them not to go North and it is making a very small change in the VAT rate but if jobs had been put at the centre of this budget the money used in this reduction and the money from the carbon tax could have been used to reduce employers' PRSI and also to reduce that labour-intensive rate of VAT.

The same applies on the capital budget side. A total of €130 million is to be invested in new training and jobs schemes but the Government has taken €1 billion out of the capital budget so that is a cut of €900 million from jobs. In coming to this decision I wonder if the Government considered reducing the middle rate of VAT. If this was regarded as being too expensive did the Government consider reducing it for certain services? In France the rate was reduced for hotels and restaurants because they are particularly labour-intensive. It could even be reduced for the construction industry. Was any consideration given to this or was it the case that the Government thought the reduction in price difference between North and South would change behaviour?

Deputy Bernard Allen

At a time when we needed decisive action on VAT, what we got was a token gesture and a reversal of last year's decision. It will not have any impact. The Minister took action on excise duty on drink. Traders are already making the excuse that they have bought in stock and cannot possibly reduce prices to the consumer. I hope the Minister for Finance will stand over his assertion that he will take action against the profit-taking practices in which some traders will engage. That said, the measure is too little, too late.

The travel tax was ignored in the budget. Is the Government being bloody-minded towards Michael O'Leary who proposed that the travel tax be reduced or abolished because he has been a critic of the Government in recent times? West Cork, which I represent, is a wasteland for tourism. I expected the budget to provide a stimulus for tourism by reducing or abolishing the travel tax. Such a stimulus would have delivered many benefits but the tax was ignored. This indicates the Government has taken a bloody-minded approach to Mr. O'Leary's suggestion.

Deputy Tom Hayes

On the same issue, the thrust of the budget was to improve economic competitiveness and I welcome some of the measures because they will help us become more competitive. Did the Government give any consideration to the travel tax, which is a major issue?

An Leas-Cheann Comhairle

The travel tax has nothing to do with the financial resolution before us.

Deputy Tom Hayes

It does.

An Leas-Cheann Comhairle

I am afraid it does not.

Deputy Tom Hayes

It is very important.

An Leas-Cheann Comhairle

In the general debate on the budget, which will be the final resolution tabled, it will be possible to raise issues of this nature.

Deputy Bernard Allen

The Leas-Cheann Comhairle allowed Deputy Gogarty to discuss CDs.

Deputy Willie O’Dea

He referred to them in the context of VAT rates.

Deputy Tom Hayes

I have a simple question. Was any consideration given to suspending the travel tax on a temporary basis? Michael O'Leary has stated that he would bring 1.2 million visitors into my region if the tax were suspended.

An Leas-Cheann Comhairle

The Deputy knows the resolution relates to VAT and has nothing to do with the travel tax.

Deputy Damien English

While I welcome the reduction in the VAT rate, let us not kid ourselves that it will make a major difference. I accept the reduction will go some way towards repairing the damage done last year when VAT was increased. Given the widespread perception that taxes increased significantly last year, the reduction marks a step in the right direction.

Is the reduction in VAT part of a strategy by the Department of Enterprise, Trade and Employment to tackle retail problems or a knee-jerk reaction to the comment by the Minister for Defence on radio at the weekend that such a measure could be introduced? When we asked officials of the Department what plan they had for the retail sector we learned the Department does not have any such plan.

If we are to tackle the problem of cross-Border shopping, we must address the costs of doing business, of which VAT is one. The Fine Gael Party has proposed to change PRSI, a massive cost for business. Other Government controlled costs, including energy, waste, water and council rates, must also be tackled.

The Tánaiste

The Deputy's party controls the county councils. It can tackle rates.

Deputy Damien English

The budget does not tackle any of these areas and may even result in an increase in rates because it cuts the local government fund by 13%. Does the Tánaiste and Minister for Enterprise, Trade and Employment have a strategy for the retail sector to ensure many thousands of jobs are not lost? As Deputies are aware, many businesses in our towns, from Navan to Cork, will close after Christmas because they cannot compete. The solution lies in the hands of the Government. The reduction in VAT is only a small step in the right direction. We must do much more and the Finance Bill provides an opportunity to do it. The Tánaiste also has an opportunity to outline her plans for the retail sector when she contributes to the debate later in the week.

Deputy Pat Breen

I welcome the reduction in VAT. Visiting retail stores on Friday and Saturday last, most of the proprietors complained about slow business as we approach Christmas. Why will the VAT reduction not apply immediately? This would have given retail outlets a badly needed boost through increased sales before Christmas. Given that many small and medium size enterprises will close after Christmas, the measure is too little, too late.

On the resolution which deals with support for the tourism sector, there is not much point introducing a travel scheme for overseas visitors using Iarnród Éireann if airlines are not flying to Ireland. Ryanair and Aer Lingus are seeking to reduce the number of flights to and from the country. The two companies do not often issue joint statements, as they have done in urging the Government to abolish the travel tax. While increasing the budget for tourism to support a marketing drive aimed at increasing tourism by 3% is fine, it is pointless if airlines decide to move their services elsewhere. Airlines are parking aeroplanes and reducing schedules all over the world.

Deputy James Bannon

Failure has become the driver of this Fianna Fáil-Green Party Government. The Green Party, which has behaved in a mean spirited manner towards the electorate, should have walked last October but refused to do so.

Deputy Paul Gogarty

We were protecting education and were honour bound to stay in government.

Deputy James Bannon

I have no doubt that come February or March 2010, when we experience civil unrest, the Green Party will be forced out of office by good, decent people who have been crippled by its reign in power.

The midlands counties of Longford and Westmeath suffered the largest fall in VAT receipts last year and the position will be much worse in the next county survey. Since the Minister for Defence, Deputy O'Dea, closed Longford Barracks 12 months ago, 53 businesses have closed on the town's main street. In Mullingar, Edgeworthstown, Athlone and Granard the position is similar. It is the result of the failure of the Government to look after those it is supposed to represent and weak representation in the constituency of Longford-Westmeath by Deputies Peter Kelly and Mary O'Rourke.

The Tánaiste

We will tell Deputy O'Rourke what Deputy Bannon said.

Deputy James Bannon

I have no doubt that come the next election, which will take place sooner than the Tánaiste believes, the electorate will give the Government an answer by putting it out of office.

The budget fails to give any practical assistance to business people who urgently require support. The Government has failed dismally on this issue. We are experiencing one company closure after another as the owners of small firms are driven from their shops and factories as a result of the Government's behaviour, particularly since the current Taoiseach, Deputy Cowen, assumed office. The Taoiseach has let down the midlands badly. Shame on him. If he was an honourable politician, he would travel to the park tonight and submit his resignation to the President.

The current crisis is entirely of the Government's making. Its knee-jerk, reactionary policies are preventing a full economic recovery from taking place. Recovery is not possible under a Fianna Fáil Government because people have lost trust in it. The Tánaiste has done a very bad job in the area of employment. No one has trust or confidence in the Government's ability to get the economy up and running again. It has failed and should resign immediately.

An Leas-Cheann Comhairle

The Deputy has made his point.

Minister for Defence (Deputy Willie O’Dea)

Deputies asked the reason the VAT reduction will not kick in until 1 January 2010 given that last year's increase took effect on 1 December. I am informed that last year's increase was announced in the October budget to kick in on 1 December. Therefore, there was a fair gap between the announcement and the actual implementation.

Deputy Joe Costello

What is the reason?

Deputy Willie O’Dea

It takes some time for people to get their affairs in order and their systems in place, etc.

Deputy Pat Breen

Are they real or simply symbolic changes?

Deputy Willie O’Dea

In any case the retail sector will need it a good deal more in January than now.

Deputy Damien English

They will need a good deal more than this in January.

Deputy Willie O’Dea

I refer to another question raised.

Deputy Kieran O’Donnell

On a point of order, would the Minister not agree——

An Leas-Cheann Comhairle

That is not a point of order.

Deputy Kieran O’Donnell

It is a point of order.

An Leas-Cheann Comhairle

No, it is not.

Deputy Kieran O’Donnell

It seems extraordinary that the increase for labour related VAT——

An Leas-Cheann Comhairle

The Deputy is attempting to ask the Minister a question that is not a point of order.

Deputy Willie O’Dea

We gave five or six weeks' notice. In this case people will only get three weeks notice which is not unreasonable.

Deputy Joe Costello

It is a half a per cent.

Deputy Damien English

They dropped it. It was not the Minister.

Deputy Willie O’Dea

I refer to the question of why the VAT rate was increased last year.

Deputy Leo Varadkar

They did not give it to everyone else in their pay packet.

Deputy Willie O’Dea

It was done as a revenue raising measure. If one examined the cost of decreasing it, even by a half a percent, it would be €140 million in 2010 and €167 million in a full year.

Deputy Kieran O’Donnell

The economy was in trouble.

Deputy Joe Costello

The economy is even worse now.

Deputy Willie O’Dea

Although Fine Gael maintain it does not believe in any taxes——

Deputy Pat Breen

Our budget is costed.

Deputy Willie O’Dea

——and that every tax should be reduced, it promised a budget to find €2,300 million but only came up with €15 million.

Deputy Damien English

We had a very good budget.

Deputy Willie O’Dea

It has only €2,885 million to go.

Deputy Damien English

There were many good alternatives.

Deputy Kieran O’Donnell

Did the Minister even read our budget?

Deputy Willie O’Dea

I have read it, my God have I read it.

Deputy Damien English

He has not read it.

Deputy Willie O’Dea

I refer to the lower rate of VAT. I understood in parliamentary debate——

An Leas-Cheann Comhairle

Through the Chair, Minister.

Deputy Willie O’Dea

——Members spoke uninterrupted from the other side and Members were supposed to be able to reply from this side also without interruption.

Deputy Damien English

I learned from the Minister.

Deputy Bernard Allen

We do not have the same latitude as the Sunday Independent.

An Leas-Cheann Comhairle

Deputy Allen should allow the Minister to reply, please.

Deputy Damien English

He has not answered anything.

An Leas-Cheann Comhairle

Deputy English should note he has put questions.

Deputy Damien English

That is right.

An Leas-Cheann Comhairle

Has he any interest in hearing the reply?

Deputy Damien English

Yes, provided I get an answer.

Deputy Willie O’Dea

He does not have any interest.

An Leas-Cheann Comhairle

The Deputy should listen and he might hear.

Deputy Bernard Allen

The Minister stated a good deal on Sunday in the Sunday Independent.

Deputy Joe Costello

We cannot hear the Minister.

An Leas-Cheann Comhairle

The Minister without interruption, please.

Deputy Willie O’Dea

I refer to the proposed reduction from 13.5% to 10%. It would have cost €880 million. That would have been the revenue lost.

Deputy Kieran O’Donnell

A temporary measure, Minister.

Deputy Willie O’Dea

Some €880 million of a temporary nature for how long? For one year.

Deputy Kieran O’Donnell

No.

Deputy Damien English

That is rubbish.

Deputy Willie O’Dea

That represents €880 million in one year.

Deputy Kieran O’Donnell

The difference between 13.5% and 10% is €175 million.

Deputy Willie O’Dea

Some €880 million is the official figure. That is what the Fine Gael amendment would have cost the State.

Deputy Kieran O’Donnell

For a change from 13.5% to 10%?

Deputy Willie O’Dea

Admittedly, as Deputy Varadkar and others have stated, there are some labour intensive activities to which the 13.5% rate applies but there are other activities.

Deputy Kieran O’Donnell

It would have provided a stimulus to the economy.

Deputy Willie O’Dea

I have a list of the activities here which are covered in the 13.5% rate. They include laundry services. Would people get more laundry done if the rate were reduced? Other services include hairdressing, electrical repairs, driving instructions, travelling shows, chip shops and fast food outlets.

Deputy Damien English

The Minister is not making any sense.

Deputy Willie O’Dea

I do not believe that is the best way in which to spend State money.

Deputy James Bannon

The Minister should not speak of travelling shows. This began more than two years ago.

Deputy Willie O’Dea

I refer to the amendment in the name of Deputy Ó Snodaigh. The Deputy is entitled to a reply. The cost of Deputy Ó Snodaigh's amendment in a full year would amount to €1,169 million. That would be the result of a reduction to 17.5%.

Deputy Arthur Morgan

It would represent good value.

Deputy Willie O’Dea

I realise that the UK Chancellor, Alastair Darling, was quoted earlier. He reduced VAT in the UK last year from 17.5% to 15% and he increased it again very quickly this year. There must be a logical explanation for that.

Deputy Damien English

He increased it once the recession was over in the North.

Deputy Willie O’Dea

Let us consider the measures in the UK budget announced today and this reduction of a half a per cent in VAT. The net result is the differential between Irish and UK rates of VAT has gone from 6.5% to 3.5% in one go, which is not unreasonable.

An Leas-Cheann Comhairle

By order of the Dáil of this day, I am required to put the following question:

"That amendments Nos. 1 to 3, inclusive, to Financial Resolution No. 3 are hereby negatived and Financial Resolution No. 3 is hereby agreed to."

Question put and declared carried.