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Dáil Éireann debate -
Tuesday, 22 Nov 2011

Vol. 747 No. 3

Leaders’ Questions

A few weeks ago, the Taoiseach announced in terms of the budgetary process "What I intend to do this year is very different to ... any other budget to date". We did not quite understand what he meant when he made that statement some weeks ago. However, since then, his Government has announced the fiscal framework, the capital investment programme as well as the expenditure sector reform programme outside of this House. His disregard for the House and its participation in the budgetary process has reached new levels.

On Thursday last, it was announced that he intended to increase the rate of VAT by 2% in one fell swoop in 2012. This information came to Members of this House after it had been distributed to members of the German Parliament. Clearly, the Taoiseach's budgetary process was different to any previous budgetary process. He has doubled the press conferences, trebled the leaks and halved the information to this House. In passing, I ask the Taoiseach to confirm that the documentation that was sent to the German Parliament has now been lodged in the Oireachtas Library, where it should be, so Members from across the House can have access to it.

The Taoiseach must accept that this shows contempt for this House and its elected representatives. To be specific, at a time when economic growth rates are very low, retail businesses are on their knees and confidence is low across the eurozone and in the United States because of difficulties there, surely the Taoiseach must agree it is the worst possible time to increase VAT by 2% in one fell swoop in 2012. Without question, does he agree that this is a tax on jobs and will damage the overall domestic economy, particularly the economy of the Border counties? I point out to the Taoiseach that in 2009, when the VAT rate was increased by 0.5%, the current Minister, Deputy Bruton, described it as turning a recession into a depression, and the current Minister, Deputy Burton, described it as an astronomical increase.

When this proposal is combined with other suggestions about sick leave and redundancy payments, it all adds up to a Government that is heading towards a massive disincentive to job creation and an attack on jobs and small business. Will the Taoiseach consider reversing the decision to increase VAT by 2%?

For the Deputy's information, no decision has been taken by the Government in respect of details of the budget. The only reason the information was sent to Mr. Draghi, Mr. Juncker, Mr. Rehn and the Minister for Finance in Poland, signed by our Minister for Finance and the Governor of the Central Bank, was because of the mess we inherited. I will not go back into that kind of politics. I have no intention of it.

Another promise.

A Deputy

Another U-turn.

Part of the memorandum of understanding that we have had to change is in respect of a commitment to take out €250 million extra in income tax in this year's budget for next year, which was agreed by the previous Government. We take a different view here. The Minister for Finance made clear his intention to bring a proposal as one of a number of proposals to the Government for its consideration in respect of a VAT increase of 2% and with no further increase planned over the period of the programme. The difference now is that the exchange rate has moved in our favour as distinct from what it was when Deputy Martin referred to differences in VAT rates previously. If tax plays a role in driving cross-Border shopping, it is the overall level of taxation which combines income tax, corporation tax, VAT and other charges. The UK increased its standard rate of VAT by 2.5% in 2010 and by a further 2.5% earlier this year, and that was up from the temporary lower level of 15% in 2008. We take a different view than Deputy Martin. As far as the Government is concerned, we want to focus on not impeding the opportunity for people to have jobs and to be able to go work. The evidence clearly is that increases in income tax, which were followed by Deputy Martin and his party, directly hit people who want to have a choice in spending their money and in what they purchase.

Tell us what the impact of the VAT increase will be?

To return to Deputy Martin's question, he asked would the decision be reversed. The Cabinet has not made a decision in any of the details of the budget to date but will do so obviously in the next few days.

I have no difficulty with information being sent anywhere once it is sent to this House first — that is the point. If the Taoiseach was sincere about his budgetary process——

The Deputy does not seem to realise that he left us in the lurch.

Allow me to make my point. If the Taoiseach was sincere about his budgetary process, greater transparency and greater detail, he would have given all of this information to the House——

Tell us about your legacy to this country.

A Deputy

Mr. Popularity.

——three or four weeks ago. There is no difficulty. When 41 members of the German Parliament can read this documentation, why cannot Members of this House read it? It is a disgrace that the Taoiseach has not already circulated this to every Member of the House, given that 41 members of the German Parliament have it. I have no difficulty about who gets it, once this House gets it first. That is the key point.

Can I have a supplementary question from the Deputy?

The Minister, Deputy Noonan, has made it absolutely clear that a decision has been taken on the 2% increase. The Taoiseach should stop maintaining a fiction about it. He is reported this morning; again, he made it very clear. He said the only reason he is sticking to the 2% is that it is obvious. All the other stuff he describes as speculation. The Tánaiste said he was very puzzled about how all this documentation got to the German Parliament. The Taoiseach said it was speculative. It took the Minister, Deputy Noonan, to confirm it in an honest and open manner.

(Interruptions).

Thank you, Deputy. Your time is up.

Did you give all that information——

The fundamental point is this — the ESRI has said that this VAT increase will hit the poorest households the most. I am asking the Taoiseach to stop maintaining the fiction——

Could we have the Deputy's question?

——and indicate this evening that he will reverse that decision of a 2% increase on the VAT rate.

The Deputy's party proposed that 2% increase.

(Interruptions).

A Deputy

Timing is everything, Bernard.

Timing is everything.

Let us just put something on the record now for Deputy Martin.

On the promissory note.

He and his party——

I thought the Taoiseach said he had——

What about the promissory note?

——signed off in the middle of the night and they imposed on the backs of the Irish generation to follow a €3 billion charge every year for the next ten years.

We put it through the Dáil and the Taoiseach voted for it.

Deputy Martin voted for it.

A man who is not even in the House——

The Taoiseach voted for it.

He voted for it.

In the light of day, the Taoiseach voted for it.

A Deputy

And he extended the guarantee last week.

Will the Deputies cool down?

We are being provoked.

That is what Deputy Martin did. He can waffle all he likes about it but facts are facts.

The Taoiseach voted for it.

Yes, and the Deputy's colleagues came in here and the Deputy said it will cost €6 billion instead of €100 million. The man seated beside the Deputy said it was his idea and a wonderful thing in the following weekend's newspapers. It was his idea, a brilliant opportunity and here we go.

A Deputy

Thanks, Willie.

I am not that good.

We are over time, Taoiseach.

The 2% increase that the Minister will bring to Government as a proposal, upon which I might add the Government has not signed off on yet, means that the zero rate of VAT which currently applies to a range of goods and services, including most foods, children's clothing and, importantly, footwear——

The Taoiseach knows all about that.

——oral medicines and so on will not be touched. The 9% rate which involves the reduction of VAT across the hospitality sector will remain unchanged, will not be touched——

So the Taoiseach has a brief.

Is the Taoiseach confirming the 2% — that the rate is going up? This is pathetic, Taoiseach.

——and the 13.5% rate which applies to residential housing, labour intensive services and general repairs and maintenance are unaffected.

The Taoiseach should move Standing Orders and bring in——-

Thank you, Taoiseach.

The point I am making to Deputy Martin is that this Government makes a deliberate choice in what it wants to do——

I just asked the Taoiseach to confirm it.

——and what we want to do is sort out our public finances by a different route to the one his crowd adopted——

Has the Taoiseach made a choice?

——and therefore we have renegotiated with the troika in respect of income tax.

The Minister will bring his proposal to Government for a 2% increase in VAT with no further increase for the remainder of the programme and no further increase in income tax for the remainder of the programme, and the Government will make its decision on that——

No cut in the rate. He made too many commitments——

——in due course over the next few days.

The Taoiseach has boxed himself into a corner.

What the Deputy stated, therefore, is not true.

The damage is done.

Tá an Rialtas ag magadh faoi seo ach tá sé tromchúiseach gur tharla díospóireacht i bparlaimint eile le heolas ón Rialtas nuair nach bhfuil díospóireacht nó eolas anseo. Sin iontach tromchúiseach — ich spreche kein Deutsch mein Herr, aber haben——

Could the Deputy translate that for us please? I do not have German.

I would say that would be easy enough.

(Interruptions).

——dem Bundestag. Chuir mé ceist an bhfuil aon scéal aige ón Bundestag because that is where the decisions are being taken.

I want to deal with another issue. The issue of VAT is one which will destroy small and medium businesses but the big issue that has emerged in recent days is to do with the Government's commitment to maintain social welfare rates. Labour was crystal clear about that, particularly on the issue of child benefit. The Tánaiste said the issue of child benefit was a red line issue for the Labour Party. Will that be reflected in the budget? Will the Taoiseach make it clear that there will be no cuts to child benefit on 6 December? In case the Taoiseach says he has not made decisions on that, he is able to make it clear on other matters, for example, that there will be no increase in direct taxes. There are also suggestions that lone parents allowance will be stopped when a child reaches the age of seven? Why seven? Does a child not need to be fed, clothed or looked after in terms of going to school after the age of seven? In our view child benefit should be a universal payment and the simplest way to do that is to give every child the same payment and introduce a third rate of income tax for those earning over €100,000 a year. The Taoiseach said in his remarks earlier that these are deliberate choices. About that I agree with him. These are deliberate choices. Will he choose, make it clear here and give a clear commitment that there will be no cuts to child benefit in this budget?

Tá a fhios agam nach bhfuil sé ar chumas an Teachta bheith páirteach sna díospóireachtaí a bhíonn ann idir Baill Rialtais ach tá an Teachta ag labhairt faoi ráflaí ag dul timpeall agus faoi dhíospóireachtaí nach bhfuil cinneadh ar bith déanta fúthu. Níl cinneadh ar bith ag an Rialtas i leith na mionrudaí a bhfuil an Teachta ag caint fúthu. Tá siad fíor-thábhachtach agus cuirfidh siad isteach ar dhaoine agus ar chlanna ar fud na tíre. Ní bheidh córas leasa shóisialaigh againn, ní bheidh córas eacnamaíochta an Rialtais againn, áfach, mura bhfuil gearradh siar sna struchtúir atá ann. Tá an Teachta ag caint fúthu le fada an lá. Ní dhearna na Rialtais na cinntí mar ba chóir go mbeadh an struchtúr sin i gceart. Caithfimid díriú isteach orthu siúd agus cinntí a dhéanamh. Séard atá an Teachta ag rá faoin gearradh siar agus na laghduithe rátaí agus mar sin, déarfaidh mé an fhírinne leis — is fíor-annamh go bhfuil díospóireacht ann ar fud na tíre fúthu ach níl cinneadh déanta ag an Rialtas maidir le ceann ar bith acu go fóill ach beidh laistigh de sheachtain. Táimid ag éisteacht leis na díospóireachtaí atá ar siúl ach tá dualgas ar an Rialtas cinneadh dearfa a dhéanamh faoi seo agus sin an rud a bheimid ag déanamh as seo amach.

Rogha atá ann, aontaím leis an Taoiseach faoi sin. Tá mé ag lorg freagra simplí don cheist agus go mbeidh an Taoiseach soiléir nach mbeidh aon ghearradh siar ann do pháistí. Ní ceart don Taoiseach a rá nach bhfuil an díospóireacht fós críochnaithe. I ask the Taoiseach to take the opportunity to be as clear on this issue as he has been on others which benefit the elites. He states money cannot be taken from pensions, that bonuses cannot be taken from the big bankers and that the sum of €700 million must be given to the bondholders. He is very clear about this.

What about closing down Dunmurry High School?

All I am asking is that he be equally clear in stating the red-line promises made at the time of the election will be maintained in the budget and making it clear it will not provide for cuts in child benefit.

The programme for Government.

Bhí mé thuas i mBéal Feirste cúpla oíche ó shin and one of the things I was told was that Sinn Féin had refused school transport for children who wished to attend an all-Irish school. So much for the cúram faoi chúrsaí teanga. I will be very clear with Deputy Adams. It is the responsibility of the Government to make decisions about the budget. The Government has set its task in fulfilling the mandate given to us by the people to sort out the public finances, reduce the deficit to a figure of 8.6% and remove €3.8 billion from the economy next year. This is not easy and every Department is being examined. The Government will make definitive decisions on all these issues in the coming days. I will not answer for the Cabinet now on the final decisions it will make, nor should I. I am aware of the difficulties for all Ministers in cutting back; these things are never easy.

What about the children? Forget about the Ministers.

As I stated, it would be lovely to be able to stand up and state it has all been sorted and everybody will be better off. If we are to have our country and economic sovereignty back, we cannot go on in the way we did and we will not do so. Therefore, we must make decisions which, on the one hand, will meet that target and, on the other, do everything possible to return people to work and take them off the live register, while protecting the most vulnerable in society. That is what the Government will do.

Tá na ráflaí go léir ag teacht ón Rialtas.

I wish to follow up on the issue of child benefit and its importance to children and families. There has been much misinformed debate in the past 48 hours. Does the Taoiseach accept the principle that child benefit helps to reduce the level of poverty for disadvantaged families and that a cut to this payment would be a nightmare for them? Does he accept that child benefit is not a slush fund for the rich but is a huge help to families, particularly those women and children at risk in dysfunctional families where the partner or husband controls the purse strings? All Deputies are aware of this in their clinics. Does the Taoiseach agree that it is all very well for the likes of Michael O'Leary and other rich people to dismiss it out of hand, but for many families, child benefit can be a matter of life and death? Does he also accept that if he was to dig deeper into child poverty problems, he would see one of the ways out of child poverty is through child benefit? Does he accept that these are the facts for many poor families? I, therefore, ask him not to cut child benefit.

The Deputy's question is the same as that put by Deputies Martin and Adams.

No, the Minister for Finance, Deputy Noonan, confirmed the VAT increase.

All of these matters must be considered and decided on by the Government. In the past ten days there has been public comment on sickness benefit, child benefit, VAT rates——

——and indirect taxation measures.

From where did the rumours come?

The Taoiseach should get off the stage.

This is perfectly normal in the run-in to any budget.

It is normal now.

Last year we had the same thing; every year I have been in the House there has been the same speculation during the preparation of a budget. It is part of the normal discourse that takes place. It is the responsibility of the Government to see to it that those who are most vulnerable in society are protected. It is clear that child benefit is of importance to this category. In recent days I have heard people state child benefit is of no particular interest to them. Deputy McGrath mentioned one individual who, at least, makes a very substantial contribution through his taxes to the country, for which I respect him and also for what he does.

He delivered for County Mayo yesterday.

The Government is cognisant of the difficulty, on the one hand, in meeting the conditions of the IMF, the ECB and the European Union and, on the other, providing for the protection of the most vulnerable and the provision of front-line services, while offering whatever incentives we can for people to avail of the opportunity to seek gainful employment. Deputy McGrath is no different from anybody else. We have a duty and a responsibility in these straitened circumstances to ensure the decisions made by the Government are as fair as is possible, particularly as they affect those who are most vulnerable.

What I stated was very different from what many commentators had stated in the past 48 hours. I targeted the money provided for the most disadvantaged families, a key aspect of which is child benefit. I ask the Taoiseach not to play games with this issue because it is a very important one. Will he ensure child benefit is not cut because of its importance in assisting families to meet their child care costs and creating many jobs in child care services? He mentioned job creation. If child benefit is removed, this will damage jobs in child care services. From an economic point of view, child benefit generates employment and a €10 cut would pose a threat to jobs. On the broader issue involved, does the Taoiseach accept that if a sum of €150 million is removed from child benefit payments, it will destroy child care services and many jobs in the sector? The Minister of Jobs, Enterprise and Innovation is sitting beside the Taoiseach.

We all knew about the state of the public finances prior to the general election. I, therefore, accept the point made by the Taoiseach in that regard. However, does he agree that it was pathetic for Labour Party leaders to promise they would not agree to a cut in child benefit? They did so prior to the election knowing the figures. They made these false promises and are now turning their backs on women and children. It is a bit rich and hypocritical to speak about having a referendum on children's rights when the Government is planning to take €10 from poor families.

Give back the leader's allowance.

Deputy McGrath saved his best rant until last. The Labour Party has never turned its back on the people and will not do so now. The Deputy continuously refers back to the decision made by the people. The people made their decision in the general election, prior to which the Deputy had his own programme, like every other party, including the Labour Party and Fine Gael.

I did not make false promises.

The Deputy never stopped making promises.

What we are working on is the programme for Government. The mandate given to the Government was to sort out the public finances——

What the Taoiseach told the people was completely irrelevant.

——and to provide a social welfare system that encouraged and incentivised work. If something is not done about these issues, we will continue in the way we did, which is not the way for the future.

Does starving children help to incentivise work?

I understand what the Deputy is saying but let me remind him that when one brands party X or party Y, we are now operating off a programme for Government. That programme is the mandate given to us by the people.

They did not know about that beforehand. They voted for something different.

Part of that mandate is to have a social welfare system that incentivises and encourages people to get off the live register, away from social protection and back into the world of work. I am sure the Deputy supports that. If I read his programme prior to the election properly, it contained references to that in his own McGrath way, which is a very special way of saying things.

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