Dáil Éireann debate -
Tuesday, 29 Nov 2011

Vol. 748 No. 1

Leaders’ Questions

Deputy Micheál Martin

Although the Taoiseach and I met yesterday, on behalf of the Fianna Fáil Party, I offer our sincere sympathy on the recent death of his mother, Eithne. May she rest in peace. In that context, I appreciate the Taoiseach's attendance today.

The budget leaks have been continuing at an unprecedented pace. The most recent leak, on motor tax hikes, is particularly cynical in so far as any such increase in motor taxation would appear to target fuel efficient cars. The Minister for the Environment, Community and Local Government, Deputy Phil Hogan, has confirmed he will increase the bands and rates. To reduce carbon emissions, enhance the environment, help produce a cleaner environment, tackle climate change and promote energy efficiency the previous Government introduced various incentives for the purchase of more fuel efficient cars. This policy worked. Those who bought fuel efficient cars did so on the basis that there would be certainty and consistency in the motor taxation regime. They will, therefore, view the Government's decision to increase motor taxation rates as an act of treachery which flies in the face of measures being taken globally to tackle fuel emissions. As the threat is a significant one in terms of our environment and so forth, time is not on our side. As a result of the various leaks and commentary by the Minister, there is widespread uncertainty concerning the motor taxation regime. There is also a lack of clarity and many doubts in respect of the sustainability or long-term nature of the regime when people make decisions on the types of cars they wish to buy. We have been promoting the idea that people should buy fuel-efficient cars. Does the Taoiseach accept that increases in rates and bands for fuel-efficient cars would essentially reverse the trend towards a better and cleaner environment in Ireland? Does he accept that in such circumstances, the Government would essentially be engaging in an act of treachery against those who have gone down that route?

The Taoiseach

I thank the Deputy for his kind words and for his attendance at the funeral yesterday. I appreciate that very much. The issue he has raised is obviously a tax measure that will be referred to when the Minister for Finance delivers his Budget Statement on 6 December. The change that was made was partly responsible for people wanting to buy more fuel-efficient cars, in the interests of a cleaner environment and better regulation in that regard. New rates of motor tax based on emissions were introduced by the then Minister in 2008. They provided for significantly reduced rates of motor tax for new smaller cars. The income from motor tax was just over €1 billion in 2008, €1.058 billion in 2009 and €1.024 billion in 2010. The income from motor tax this year is expected to be €988 million. That will represent a reduction of 3.5%. The Minister for Finance has not yet brought his tax proposals to Cabinet. He will do so this week as part of the preparation for next week's budget. If changes in motor tax rates are adopted by the Cabinet, the owners of cars with smaller engines and lower emissions can expect to continue to pay substantially less in motor tax than those who purchased cars with bigger engines and higher emissions. I understand what Deputy Martin is saying. There are inadequacies in the system that was introduced. This is one of the tax measures that will have to be considered by the Minister for Finance and the Cabinet when matters are being finalised in advance of the budget on 6 December.

Deputy Micheál Martin

My difficulty with what the Taoiseach said is that the Minister, Deputy Hogan, has confirmed publicly that there will be changes. He has said there will be "adjustments in the bands" and "adjustments in the rates". He has argued that the Minister for Finance needs to use resources from motor tax and adjustments in the bands to reduce the budget deficit. The Minister has said there will be changes. Other leaks have added to the Minister's statement. The Minister for Finance said VAT will increase by 2%. The Dáil should have been brought into these discussions at a much earlier stage. The budget will be a fait accompli by the time the Dáil gets a chance to discuss these issues adequately. Any analysis of the climate change agenda will show that the transport sector in Ireland has always been the biggest factor here. We need consistent policies to change the nature of emissions from transport in particular. It is the big area. The cumulative effect of the 2% increase in VAT; the pension levy, which will hit ordinary pensioners; the increase in motor tax that has been confirmed by the Minister, Deputy Hogan; and the lack of relief for mortgage holders will be a significant imposition on people on budget day. Has the Government considered the cumulative impact of all the tax measures confirmed by the Minister for Finance to date? Perhaps we do not yet know about some of them. Would the Taoiseach care to comment on the cumulative impact? Does he not accept that the move to a fuel-efficient motor tax model was a good idea and a strategy that should be continued?

The Taoiseach

The first thing the Deputy should bear in mind is that the budget has not yet taken place.

Deputy Mattie McGrath

It has almost taken place.

The Taoiseach

The only comment to have been made by the Minister for Finance, who is responsible for tax measures in the budget——

Deputy Micheál Martin

He is running out of scope.

The Taoiseach

——related to his intention to bring a proposal before the Cabinet for a 2% increase in VAT as an alternative to increasing income tax, which would have a direct impact on jobs. That is a fundamental concern for the Government. The Minister for the Environment, Community and Local Government has pointed out that the income being gained from motor tax has decreased by 3.5%. He has said he intends to bring proposals to the Government. I can genuinely say the tax aspect of the budget has not yet been presented by the Minister for Finance. There has been speculation and comment on the matters mentioned by the Deputy when he spoke about the cumulative effect of the budget because people know they have to be considered. The overall position of the Government is that the deficit will be reduced to 8.6%. A balance will have to be struck between current cuts and tax measures. The Government has set out its stall in this regard. The list on either side is not very palatable. The Government has to make choices and it will do so. We will take account of the cumulative impact of our decisions on people in the harder-pressed sections of our society.

It would be lovely to say we have discovered a new pot that will deal with all of these problems, but we have not. Regardless of the crisis in the eurozone, which is of utmost concern to everybody, we have to sort out our problems here. We cannot do that without making political decisions. I assure the Deputy that the Cabinet has reflected long and is reflecting hard on the decisions that have to be made. Decisions must be made and will be made. Our people know this reality. As the Deputy is aware, a balance always has to be struck in a way that allows for growth to return to the economy, jobs to be created and work to be facilitated. We have to keep that balance. We have a fix on the need to deliver on the 8.6% commitment. It is unpalatable in the extreme to have to decide between increasing tax and cutting current expenditure. The Government will finalise its decisions in this regard in the coming days. I can confirm that the Minister for Finance has not yet brought his tax proposals to the Cabinet.

Deputy Gerry Adams

I dtús báire, ba mhaith liom mo chomhbhrón a dhéanamh leis an Taoiseach faoi cailliúnt a mháthair. Bhí mé i Londain ag an deireadh seachtaine. Bhí mé ag smaoineamh faoin Taoiseach agus faoina chlann. Tá a fhios agam nach bhfuil sé éasca dó bheith anseo inniu.

A particular characteristic of these leaks is that they are planned ministerial leaks. They are coming from Ministers. Details of cuts in child benefit, VAT increases, huge hikes in prescription charges and community nursing home closures have been leaked. The Taoiseach has said on many occasions that all citizens are in this together. I remind him that 30 former politicians — members of Fianna Fáil, Fine Gael, the Labour Party and the Progressive Democrats — are earning pensions that are significantly in excess of €100,000. Some of them are earning an additional €3,000 for attending certain meetings. In addition, some 100 civil servants take home pensions that are in excess of €100,000. The Taoiseach knows that if an ordinary citizen — I use the word "ordinary" advisedly — won €50,000, €60,000, €70,000 or €100,000 on "Winning Streak", he or she would be over the moon. These elites take such money home every single year. It is coming out of the people's pockets. It is not the case that all of us are in this together. There are two Irelands. The Taoiseach should take this opportunity to say that the Government will cap public pensions and stop the payment of pensions to people who are still in employment. These people are still working. They have not retired. The Taoiseach should set the record straight on this issue today.

The Taoiseach

Ba mhaith liom mo bhuíochas a ghabháil leis an Teachta as ucht an glaoch a chur sé orm nuair a bhí sé i Londain. Tá a fhios agam go raibh leas-Chéad Aire an Tionóil sa Tuaisceart ag an sochraid inné. Tá mé buíoch as ucht é sin. Ní chuireann sé isteach ró-mhór orm bheith anseo. Déarfadh sí féin liom gur cheart go mbéinn anseo. The question of serious amounts of money being paid in pensions to retired persons is a matter of some importance to the Government. I get it all the time myself around the country. It did not start just now but has been going on for some time. In its own small way, I happened to be the first public servant to take a voluntary pay cut and leave aside whatever bits and pieces of pensions I had, including one from a different profession.

The Government is concerned about this matter. The Minister for Public Expenditure and Reform will make a statement about it later this afternoon. It might be more appropriate for the Deputy to wait for it rather than me giving the details about it now.

Deputy Richard Boyd Barrett

Will the Minister be making the statement in the House?

Deputy Micheál Martin

That is unusual.

Deputy Gerry Adams

We wait to see what the Minister has to say. However, I will give the Taoiseach a health warning, if I may. It will not be good enough unless the Minister clearly brings an end to the obscene practice in question, especially when budget cuts, as heralded by other Ministers, will not just affect the most vulnerable of our citizens but people who never thought of themselves as economically vulnerable. It is disgusting that for attending a meeting a person would be paid €3,000 by the taxpayer, on top of an exorbitant salary of €100,000 and a pension.

I applaud the Taoiseach's willingness to set aside whatever pension payments he had before coming into office. We wait, however, in anticipation of the Minister's statement and hope it will not be another broken promise. All the issues that I signalled, the subjects of ministerial leaks, are ones which the Taoiseach's Government partner described as red line issues. Thug an Taoiseach agus daoine eile ó Fhine Gael a lán gealltanas faoi na rudaí seo. Tá a fhios acu go bhfuil go leor de na gealltanais sin briste acu.

While the Government got a huge mandate in the election, it will not get any more support if it goes forward with these budget cuts while the elites cream off moneys from the taxpayers' pockets.

The Taoiseach

I have gotten to know Deputy Adams a little better since he was elected to the Dáil. I get suspicious, however, when I get health warnings from him.

Deputy Gerry Adams

I do not.

Deputy Michael P. Kitt

A threat.

The Taoiseach

The pension levy was introduced on the remuneration of all public servants which will realise over €1 billion in savings this year. A tiered reduction in all public service pensions above €12,000 was also introduced which has cut pensions on average by 4% while retirement lump sums of over €200,000 will be taxed. The grace period which allows people to retire on their pre-cuts salary will end on 29 February 2012. Those retiring after then will see a pension reduction of 7% on average as their final pensions will be calculated on a reduced pay level.

The Minister's statement later this afternoon will be in respect of the superior pensions, as one might call them. There are approximately 250 people in receipt of pensions over €100,000 which is the focus of some considerable attention. There are also other areas where huge amounts are paid every day. The Government will look across the range of these payments. The Minister for Public Expenditure and Reform will deal with the large amounts paid in pensions to a specific number of people in the House later.

Deputy Shane Ross

I join with my colleagues, Deputies Martin and Adams, in expressing my sympathy to the Taoiseach on the recent bereavement in his family and to thank him for being in the Chamber today at a time which must be difficult for him.

While we have been discussing what may possibly be in next week's budget, I believe it will be one of the last meaningful budgets in this State's history, particularly if events take shape in the manner they seem they will in Europe in the next several weeks. Last week, the German Chancellor, Angela Merkel, said Europe should take one big step towards fiscal union. The European Council meeting the Taoiseach will attend on 9 December is beginning to shape up and become clearer. What will probably happen is that the weaker European Union countries, including Ireland, will concede fiscal union while the stronger countries will allow the European Central Bank to release the funds and take the measures to give necessary relief to the euro. This will have serious implications for Ireland as it will involve EU treaty changes. The Taoiseach will have to go to the country with a referendum suggesting fiscal union and its implications. This will be serious for Ireland as it will involve the second surrender of our sovereignty in recent times, the first being the surrender to the European banks by the last Government.

An Ceann Comhairle

Thank you, Deputy Ross. Is there a question?

Deputy Shane Ross

This will be swapped if we get the deal, which is looking possible, for the surrender of our independence to the larger European nations.

What attitude will we take if we are faced with such a deal? Will he assure the House that he will never put any referendum to the people that permanently hands over our economic and fiscal sovereignty to any external European body?

Deputy Mattie McGrath

Hear, hear.

The Taoiseach

I thank Deputy Ross for his kindness. His question is valid. Clearly, there is a difference between fiscal union and fiscal discipline. What the German Chancellor, Angela Merkel, has talked about is fiscal discipline. She believes that if countries sign on for a set of conditions, then they should be seen to be enforceable. At the recent meeting I had with her, she stated the European Court of Justice should be enabled to impose sanctions on a country that did not measure up in its budgetary fiscal discipline. The French President, however, has a different view about the requirements for fiscal union, an entirely different matter, in areas such as tax harmonisation.

The Government has made the point that Ireland never breached the Stability and Growth Pact. We support regulations and conditions that are enforceable. We have actually gone beyond this with the EU-IMF-ECB troika regularly forensically analysing our budgetary position. Next spring, the Government will introduce legislation to establish a debt break for the State's finances.

Under the Constitution, any changes to the EU treaties are subject to legal advice from the Attorney General as to whether a referendum is required. Treaty change is a large process of intergovernmental conferences, conventions and so forth, unless it is decided to be done by a specific narrow amendment which may still require a referendum here.

The crisis is now. It has to be addressed with the facilities and tools available. From our perspective, I have not hitched our wagon to the concept of eurobonds because one might well store up serious trouble for the country further down the line. Our view is that the ECB should be the backstop of ultimate and infinite firepower to deal with the question of contagion that affects every country.

As Deputy Ross will be aware from his study of history, in the 1930s people assumed that banks that were well managed and well run could survive when in fact they could not. They cannot, and will not, in the future unless a credible backstop is provided. That backstop must be dealt with in the immediate future by political consideration because even if one assumed treaty change would be accepted by everyone, one could still not do it in time to deal with the crisis that affects us now.

My perspective for the meeting on 9 December is to deal politically with the crisis we have now and that means making political arrangements to provide a sufficiently credible backstop. The Ministers for Finance are attending a meeting today to discuss some technicalities around this. The EFSF has failed to attract the confidence of the markets and, whether it is a combination of the ECB, the IMF or whatever, that is where the focus of political leadership should be and decisions have to be made and made quickly. The question of anything beyond that is a matter for serious consultation in this Parliament and so on.

Deputy Shane Ross

I thank the Taoiseach. I understand his point about fiscal discipline but the quotes I used from Angela Merkel specifically referred to fiscal union. Fiscal discipline may be the one step she referred to but, undoubtedly, fiscal union is on the agenda and it will be on the agenda on 9 December even if it is deferred. Could the Taoiseach assure us that the Government will not allow the issue of tax harmonisation to arise at that meeting and that he will not countenance any talk, as a quid pro quo, of a change in the 12.5% corporate tax rate, which may well arise?

The Taoiseach

The objective of our political direction is to retrieve economic sovereignty for our people and our country. That has been lost in the sense that we have been subject to a bailout in the troika programme. As I have said previously on many occasions, I have no intention of agreeing to anything on tax harmonisation. We have been clear about our corporate tax rate, as has everybody else in the House. It is set out clearly across the entire spectrum at 12.5%, with an effective rate of 11.9%. It is there for everybody to see and it has not moved up or down. Given that it is a legal right and responsibility of the Commission to produce papers in respect of the common consolidated corporate tax base, we participate in discussions but the paper to be tabled on 9 December will be about President Van Rompuy's proposals, which he has been mandated to produce. I have heard a great deal of comment about what might or might not be in them but, suffice it to say, we have no intention whatsoever of doing anything to disrupt the confidence in inward investment in regard to our corporate tax rate.

I go back again to the difference between fiscal discipline, which was the focus of the Chancellor's words, and fiscal union, on which other countries might have a view. With regard to fiscal discipline, the problem is countries signed on for conditions to which they have not adhered and, therefore, this naturally causes a lot of angst for countries providing loans in such situations. Ireland has measured up in this programme to all the conditions and has never breached the Stability and Growth Pact. We will go further next year by legislating for debt brake. From that perspective, I have absolutely no intention of doing anything disruptive to our corporate tax system and we will focus on every attempt we can to retrieve our economic independence and sovereignty, which is a requirement of everybody in the country.