Deputy Catherine Murphy was in possession. I understand she is sharing time.
Finance Bill 2013: Second Stage (Resumed)
Yes, I wish to share time with Deputy Finian McGrath and Deputy Shane Ross.
Is that agreed? Agreed.
The Bill also makes provision to abolish the job assist scheme, but I wonder why. Will the JobBridge scheme replace it? I hope not. Long-term unemployed people were taken on to the job assist scheme. In recent weeks, a landmark case in the United Kingdom deemed something very similar to the JobBridge scheme to be unlawful. These kinds of incentives are really important.
Before the debate was adjourned, I was trying to draw attention to the fact that there is no strategic focus. We are being told that there is a two thirds to one third approach to cuts and revenue, which was supposed to foster economic growth. However, unemployment has not budged. In fact, it has remained stubbornly high, so that approach is not working.
The lack of any sort of cohesive strategy is also evident in the current handling of public sector reductions. We are hearing about cuts in numbers and wages, but there is no real public debate, engagement or involvement by citizens about the type of services we want or how we would go about paying for them. That is a wasted opportunity.
A recent paper from the Nevin Economic Research Institute states that while we may well recover our banking system and international reputation, we will be left with a number of serious socioeconomic scars from the recession. The chief one of these would be the unemployment crisis.
The scope for investment is limited but there are things that can be leveraged. I would like to have seen them in the Bill. Some things can be targeted, such as broadband, repairing leaky water pipes and retrofitting houses, all of which would draw people in. The issue of carbon tax arises in the Bill, but because we do not ring-fence the take from carbon tax, people see it as being just another general tax. If that tax was ring-fenced, people would accept that, while fuel and heating costs were increasing, they would have the possibility of reducing such costs by insulating their homes. That is a missed opportunity.
SIPTU has argued that there should be a tax exemption on the pension fund levy, given that private pension funds would increase the level of their investment in Ireland by 6%. The union's rough calculation comes to an investment prospect of €4.5 billion, so it is not without the decent prospect of a return. I am not talking about throwing money at anything, but if the National Pensions Reserve Fund was targeted towards job-rich growth, it would be the right way to go.
As regards the take from corporation tax, some of the companies that get the benefit of our human capital - the likes of Google - pay minuscule amounts of tax. Some of the reasons for that are not necessarily about research and development. They should be re-examined so that they can make a contribution to the education system that will return additional people.
A speaker on the Government benches referred to great optimism and the fact that Moody's and Standard & Poor's were complimentary about us at the moment. I would remind the House that those ratings agencies were the very people who once told us we had a great economy and that our banks were triple-A rated. I would be careful about using those kinds of sources as being reliable, given that they got it so wrong in the past.
I am glad of the opportunity to speak about this Bill. At a critical time in our economic history, it is important to have a comprehensive and inclusive debate on all economic matters affecting this country and our citizens. At all times, we must take a measured view and get the finances right for the greater good of society. Sadly, however, this concept has been lost in the current debate, as citizens have been largely forgotten at the expense of economic and fiscal matters.
The Bill before us deals with important issues, such as the income levy, the universal social charge, income tax, corporation tax and capital gains tax. These are major issues concerning the running of this country, particularly at this time. They are covered in section 1.
As regards tax issues, we must deal with the financial deficit while at the same time bringing some common-sense politics into our taxation system as it relates to citizens. Currently, there is a major sense of injustice among people who are crying out for fairness. For example, on Monday I met the family of a severely disabled young man who have paid their taxes and levies all their lives, yet they were told that their son's five day care service has been cut back to three days per week. I raised this matter with the Taoiseach earlier today. In the context of this debate, where is the tax justice and equity for this family? If a family is tax compliant, why should they not receive a decent service for their son? That is all that families of people with disabilities ask. They are taxpaying citizens who have rights and they deserve equality. Surely this is also a clear breach of the disability legislation. It is not fair for families who pay their taxes and that is why I am raising the issue again in this debate.
Looking further into the legislation, we can see that full-time workers on or above the minimum wage have had their pay reduced due to the abolition of the PRSI disregard of €127 per week. Those on huge incomes of €500,000 per year, for example, will suffer an identical reduction, but is that tax justice?
We also see that the household charge - or the home tax, as I call it - is now being introduced. Does that represent tax justice for families who are in the current mortgage crisis? The budget also attacked children, families, those with disabilities, senior citizens, PAYE workers and social welfare recipients. Child benefit was cut by €10 per month, which represents another broken promise. In addition, the respite care grant was reduced by €325. The prescription charge for medical card holders is up from 50 cent to €1.50 per item, with a monthly cap for a family rising from €10 to €19.50. Is that tax justice? Meanwhile, the drugs payment scheme threshold is being increased from €132 to €144, which is a cut of up to €10 million. Is that tax justice?
Approximately €3 million is being spent on special Government advisers, including family members, many of whom are paid in excess of promised limits and this equates to 300,000 home help hours. In my constituency, Craobh Chiaráin GAA club, for example, got nothing, while €195,000 went to the constituency of the Minister, Deputy Reilly. Is this tax justice? A proposed €250,000 cut to the service for the blind and disabled children on Grace Park Road, Drumcondra, is now on the table. Is that tax justice for those families?
Two minutes remain to the Deputy.
Can one's household afford to employ a tax consultant to reduce its tax bill? A total of 40,000 senior citizens are about to lose their medical cards. I ask these questions in this debate because the tax issue is a very important part of this legislation. The top 10,000 taxpayers each have an average income of €595,900. This information was contained in a reply given by the Minister, Deputy Noonan, to a parliamentary question. Not a penny in wealth tax has been imposed and these top earners will suffer the same reduction of €260 per annum as a person in receipt of the minimum wage. These all are the real issues and this is the reason there is much anger abroad in respect of the Finance Bill. In Tallaght the other night, public sector staff were at boiling point because once again, they were being punished for the actions of others. Moreover, they are right. Why should a nurse, a teacher, a firefighter or a young garda suffer because of reckless bankers, regulators, some politicians and some developers? This is the reason there is so much anger and many Members believe that respect has gone out the window on this issue.
There has been debate this week on the Croke Park agreement. I am very worried about it because there is much misinformation abroad. For example, many German public servants earn more than do Irish public servants. The Committee of Public Accounts has found that many allowances comprise core pay. The Croke Park agreement savings are not overestimated and the Central Statistics Office has found a narrowing gap between the private and public sectors. As for public sector pay, while it is broadly in line with comparable European Union countries, many media reports give the opposite impression. In this debate, no divide and conquer approach should emanate from different people, politicians and Ministers. I am extremely concerned about the issues I have raised.
Finally, on excise duties, section 47 confirms the increase in the rates of tax on tobacco products announced in the budget. I am concerned that this is at a time when major illegal smuggling of cigarettes is taking place. In addition, small businesses again are being hammered as designated smoking areas are being closed down, which costs jobs and people's livelihoods.
I thank the Deputy and call Deputy Ross.
Finally I welcome the opportunity to put this on the record of the Dáil. It is important to have an inclusive debate in which these issues are dealt with in a sensible manner.
I am grateful for the opportunity to speak on this Bill, which I find to be a deeply depressing reflection of the thinking, not so much of the Government but of the Department of Finance and those who dictate their thought to them from elsewhere. It is a sort of monument to financial orthodoxy and it possibly is the most conservative Finance Bill of the past 30 or 40 years. It is completely lacking in imagination or vision and certainly reflects a conservative way of thinking that does not reflect the sense of urgency or vision that might be included in such a measure.
My problem with it is it simply comes back to all the same sources for income and revenue and looks little further than that. There was an opportunity in the budget and this Finance Bill to embark upon a new model. There was an opportunity to tell the troika the Government acknowledges it must reduce a certain amount of revenue to bridge the budget deficit and that there is a problem in this regard. At the same time, however, the Government could seek to be allowed to do what it likes within those parameters and available projections. Anyone who has met representatives of the troika, as virtually every Member of this House now appears to have done, seems to get a different interpretation from what they say and what the Government says. When it is politically convenient, the Government blames the troika for the thinking and measures behind the budget. However, the troika states the Government can do what it likes, as long as the figures at the end pretty roughly measure up. Moreover, they do pretty roughly measure up and I do not dispute that. However, the measures are those of financial orthodoxy.
I have been listening for a long time to my colleagues on this side of the House from the left and while I do not agree with much of what they say, I find it far more challenging and in some cases more convincing to listen to Deputies Higgins and Boyd Barrett then I do to listen to Mr. John Moran of the Department of Finance. I think the aforementioned Deputies are wrong about their sums but at least they are trying to portray a new model and a new way of doing things, not within those same parameters. I listen to Deputy Boyd Barrett from time to time when he talks about multinationals and advocates something I do not believe makes financial sense in the long run. He suggests there is a great pot of gold out there among the multinationals because they are not paying tax at the right rates. He believes one will get billions more for the Exchequer if one taxes them that much more, which will gradually bridge the gap. While I do not agree with him, he has put his finger on a quite interesting point, which is there is great potential in these multinationals which, after all, are a kind of political grey area here because people treat them rather tenderly. They encourage them in some ways and then go and batter them on the head in others. My contention is they should be nurtured and encouraged. I do not know whether anyone in the Chamber remembers the budget introduced some years ago by a Fianna Fáil Government in which it actually reduced capital gains tax with the result that revenue rocketed. I suggest the Government should think a little outside the box and, to reiterate a point I have made previously, it should consider reducing the rate of corporation tax because personally, I believe it would bring in more of the big-ticket items we so badly need. Whatever people feel ideologically about multinationals, they do certain things here. The Americans on their own have brought in more than 100,000 jobs and on top of that, they bring in enormous spin-off activity in the economy. I do not care as much as others obviously do whether they are paying 0%, 12.5% or 33%. At present, the more of them the better because they will produce more jobs and will produce activity in the community, which is so important and is what is needed. However, the Government appears to have absolutely no jobs policy whatsoever. One cannot really have a jobs policy if one is doing what the mandarins and the troika tell one to do.
I thank the Deputy.
The only jobs policy I have seen from the Government is to crucify the pensioners by placing a 0.6% levy on them and putting the proceeds into some sort of mythical bucket elsewhere, which will produce jobs. The Government's second jobs policy is emigration. It is a kind of unsung Government hero because emigration sorts out unemployment in a highly negative and miserable way. It is not acceptable that this should be the safety valve for a Government which preaches that jobs and unemployment are one of the great problems of the economy.
The next Members to speak will be Deputies Donohoe, Fitzpatrick, McLoughlin and Kyne, all of whom have five minutes each.
I thank the Acting Chairman. Just before addressing a core point on the Finance Bill, I will respond to a point made by my colleague, Deputy Ross. As someone who worked in a multinational company myself, I acknowledge Deputy Ross is well aware of the sector's importance.
Yesterday, Facebook announced it would create another 100 jobs in the country. I also remind the Deputy that our balance of payments surplus is one of the best in Europe, despite the fact we are in such difficulty. Our share of multinational business is two to three times what it should be relative to our size and we attract more multinational investment than some of the largest European countries. An analysis that says we are not attracting enough such investment flies in the face of the fact that many of the world's largest companies are investing a significant amount in our economy. I understand the American Chamber of Commerce Ireland published a video yesterday entitled, "13 Reasons Why? FDI". Our country is doing exceptionally well from a foreign direct investment point of view and we want to do better.
I would like to return to the central theme of the budget debate, which is only touched on in the Bill. This is the introduction of the new property tax system and I refer to an issue close to my heart and that of the Acting Chairman's, which is flooding and the impact it has on the value of people's homes. A flooded home is a calamity. I have witnessed home owners waist high in water and I have witnessed how upset they were and the damage caused to their homes. Communities in my constituency that have been affected by flooding include Ballybough, Cabra, East Wall, North Strand and Drumcondra. People have been devastated by repeated flooding but, unfortunately for them, that is the only the start of a difficult experience because they then face being unable to insure their homes. This means that when they are flooded again, they are still trying to deal with the previous repairs let alone the current repairs. The second issue they face is they cannot sell their homes because of the flood risk.
I was in a home in the North Strand recently that had been flooded and I could see the damage to the property from the previous time it had been flooded. However, the home owners were not insured on this occasion because they were unable to get insurance due to the previous flooding. This is an essential issue the new property tax system must recognise. We cannot tax flooded properties or homes that could potentially be flooded at the value of unflooded homes. It would not be fair. If a house has been flooded and it faces the risk of future flooding, it is worth less than a home that has not been flooded and is unlikely to be flooded in the future. The property tax valuation model must make this distinction. If a property owner cannot obtain home insurance, then the market value of the house is massively reduced and the new system must recognise this. It is a market valuation system and, therefore, it should be coherent and consistent. If it should recognise that factors beyond the influence of the home owner mean the market value of his or her home is massively reduced, then that is the value on which he or she should be taxed.
I have raised this issue with the Department of Finance but I am raising it in the House now because it is vital that it be recognised. I would like the Government to give specific guidance to residents who cannot get home insurance and who face a flooding risk. They must know, first, that they will not be taxed on a value their home does not hold and, second, this must be recognised by the Revenue Commissioners. Residents represented by the Acting Chairman and I were not flooded through any fault of their own and we must not add to their plight through this system.
The Bill implements the taxation measures announced in budget 2013. In addition to introducing the tax increases announced on budget day, the Bill builds on the SME supports introduced in the budget and includes a number of new measures to support them. The SME sector will be the driver of the economic recovery across the country and the Government is committed to supporting this key sector. This is why the primary focus of budget 2013 and this legislation is on jobs and, specifically, why the Government prioritised the introduction of measures that will support the sector. SMEs are the key providers of jobs throughout the State and with the loss of 250,000 private sector jobs between 2008 and 2011, the sector will lead the recovery in the domestic economy and create the jobs to make serious inroads into our all too high unemployment level. Each of the measures in the Bill is designed to help this critical sector to trade, invest in new products, enter new markets, sustain existing jobs and create new ones. These initiatives will build on the supports available through Departments and agencies and the measures introduced to support credit flow into the sector.
The ten-point tax reform plan was announced in the Budget Statement. This plan includes measures that will make a difference for the SME sector such as reforming the three-year corporation tax relief for start-up companies, increasing the tax receipts basis threshold for VAT, amending the close company surcharge to improve the cash flow of SMEs and extending the foreign earnings deduction for work-related travel to certain additional countries.
The Bill gives effect to auto diesel excise duty relief for licensed and compliant hauliers. Following consideration, the relief will be extended to the licensed passenger transport sector. The relief will take effect from 1 July 2013 and the amount of relief will be linked to the price of auto diesel with the maximum amount of relief being 7.5 cent per litre.
As well as being extended for a further seven years from 2014 to 2020, the employment and investment incentive will be amended to allow the operators or managers of hotels, guest houses and other self-catering accommodation to qualify subject to review after two years. The hotel sector currently employs approximately 51,000 individuals and the extension of the incentive to cover investment in the sector will help to sustain these jobs and potentially create additional employment.
The Bill also provides for measures announced in the Budget Statement to enable farm restructuring. Capital gains tax relief will be available where proceeds of a sale of a farm are reinvested for restructuring purposes. The relief will also apply to farm land swaps subject to certification by Teagasc for all transactions seeking relief. The commencement of the relief is subject to receipt of EU state aid approval.
The Bill also provides that individuals will be allowed a once-off option to withdraw up to 30% of the value of AVCs made to supplement retirement benefits. Withdrawal will be liable to tax at the marginal rate and the option to withdraw will be available for three years following the passage of the Bill.
The legislation also provides for changes to the USC. Standard USC rates will apply to those aged 70 and over and to medical card holders - both PAYE and self-employed income earners - who have income in excess of €60,000 per annum. The current lower rate of USC, which applies until the end of 2013, will continue in place for all other relevant income tax earners. The Bill also contains an additional measure to improve the access of SMEs to the "key employee" provision of the research and development tax credit regime. Under current legislation, to qualify for the credit an employee must spend at least 75% of his time working in research and development and this threshold is being reduced to 50% to assist SMEs to avail of this provision.
On a daily basis in my constituency office in Dundalk, people are saying Ireland is on the road to recovery from the biggest downturn in the history of the State. I commend the Bill to the House.
In the short time available to me I propose to comment on a number of significant proposals in the Finance Bill, as set out by the Minister for Finance, Deputy Noonan. These measures will create opportunities, particularly in the tourism sector. The inclusion of hotels, guesthouses and self-catering accommodation under the employment and investment incentive scheme is one such example. The Bill provides for an extension of the scheme until the end of 2020 and as part of this extension, hotels, guesthouses and self-catering accommodation will be allowed to qualify on a temporary basis where they meet the conditions of the incentive. This will cover investments in this sector, help sustain current jobs and potentially create additional employment.
Recent budgets have introduced sharp increases in the overall tax burden. It is vital that we maintain a tax system which encourages investment. Targeted measures which support construction are welcome and provide, in a small way, a stimulus for the domestic economy. The higher VAT threshold, which will increase from €1 million to €1.25 million, will give companies with a small turnover more time to pay VAT bills. This measure will improve cashflow for many smaller businesses.
Like many of my colleagues, I warmly welcome the return of a fuel excise rebate. This is a welcome measure for hauliers and bus and coach operators, all of whom have been badly hit by the high cost of diesel. It will also support job creation and growth by reducing the cost of moving goods and give a further stimulus to tourism in the year of The Gathering. I am pleased to note the rebate of 7.5 cent will only be available to properly licensed and tax compliant operators. This requirement will help to prevent legitimate operators from being undercut by non-compliant operators. Currently, bus and coach operators cannot reclaim VAT on fuel, which creates major difficulties for them and impacts on their profitability.
While the Minister had few options available to him in framing the Bill given the current budgetary position, he has introduced some welcome initiatives with regard to small and medium sized businesses and certain property tax incentives.
I urge the Minister to examine options to encourage greater investment in the economy in the Finance Bill 2014 through tax reliefs that will direct investment towards areas where it is needed. We must avoid the previous approach where tax incentives drove a false economy and contributed to the boom and bust disaster in the property sector. As with incentives introduced in the mid-1990s and driven by the rainbow Government, any new initiatives must have advantages for taxpayers and investors and act as a stimulus in sectors that require a stimulus. I look forward to some imaginative proposals in the 2014 budget when the budgetary position will, I hope, be better.
The main objective of this year's Finance Bill is to continue the vital task of stabilising the State's finances, which continue to be in a precarious position unfortunately. Balancing the books and returning the nation to a sustainable footing is of paramount importance. As can be seen in this and previous Finance Bills, performing this task is easier said than done. Widening our tax base in order that we reduce borrowing is vital and unavoidable. It should not be difficult for any Member to appreciate the substantial gap between income and expenditure, which currently requires the State to borrow €1.2 billion per month. The troika has also stated that Ireland must broaden its tax base.
Balancing the books is not sufficient, however. For example, substantial increases in expenditure in the health sector in recent decades have not, on their own, resulted in better outcomes. Smarter, more effective and targeted ways of working and achieving results are essential.
While the Finance Bill contains measures to widen the tax base - increased taxes are never popular - it also has a clear focus and purpose. Revenue raising measures are accompanied by a new vigour and an emphasis on positive actions in areas which will speed up our return to sustainability. For example, the ten point plan for medium and small sized businesses will collectively support job creation initiatives that will, in turn, reduce pressure on the social protection budget. The plan will help small and medium sized companies reduce administration costs, protect and enhance cashflow and extend the foreign earnings deduction for work related travel, which is essential for building export links.
Section 20, which extends the tax relief programme for the film industry, is another welcome initiative. I appeal to the Minister to consider extending this relief to other creative industries such as gaming. Cities such as Galway and Dublin are fast becoming locations of choice for this rapidly growing industry. We can and should encourage Irish entrepreneurs by supporting the development of an indigenous industry alongside the multinational companies, all of which are very welcome.
On the issue of multinational companies, section 31 is relevant as it concerns the agreement between Ireland and the United States regarding the system to improve our international tax compliance. The agreement also facilitates recognition of US accounting standards, a matter referred to in last year's Companies (Amendment) Act. Such innovation ensures that we will reduce and minimise red tape and bureaucracy while prioritising job creation.
I am also heartened to note the inclusion in the Bill of a provision addressing another issue that I and many others have raised with the Minister. I refer to the provision in section 16 allowing citizens to make a once-off withdrawal of up to 30% of the value of a pension created through additional voluntary contributions, AVCs. This issue has been raised a number of times in the Joint Committee on Jobs, Enterprise and Innovation, of which I am a member. The measure clearly required careful consideration as a balance needed to be struck between assisting citizens who are experiencing financial difficulties and protecting the provision they are making for retirement. I hope the measure will boost consumer spending and allow people to withdraw from an AVC pension to help out family members if they so desire.
On farming, of which I have significant knowledge, I welcome the Minister's initiative on stock relief. That more farmers are aged over 80 years than under 35 years is a major problem in agriculture and for this reason I welcome the initiative.
Budgets must be framed in a fair and transparent manner and the Finance Bill builds on the verified fact that the Irish taxation system is one of the most progressive in Europe, as has been confirmed by the OECD, Economic and Social Research Institute and European Commission. While the Bill, by necessity, widens the tax base, it also contains further measures to ensure that those who are most able to contribute to restoring the nation's finances do so. These include such initiatives as the requirement that older citizens with income in excess of €60,000 per annum pay the standard rate of the universal social charge, the abolition of top-slicing relief for lump sum payments of more than €200,000 and the 3% increase in deposit interest retention tax and capital gains tax, which brings CGT up to 33%. These and other measures ensure we can protect and maintain social welfare payments, while holding to the commitment not to increase tax bands or rates.
A sense of fairness is also evident in section 97. The section includes the necessary legislative changes to facilitate the Personal Insolvency Act, which is essential to alleviating the serious problem of mortgage arrears, an issue being debated in Private Members' time this week. I also welcome initiatives for hauliers and passenger transport companies, which will allow them to remain competitive and protect and expand their businesses. Deputies were subject to considerable lobbying to ensure the budget was at least cost neutral for hauliers.
The Finance Bill gives effect to a pro-jobs budget and sets in train a process that will ensure we broaden our tax base and secure sustainable funding sources for local authorities. The latter is important as Deputies, most of whom are former members of local authorities, know too well. The Bill is the latest in a series of Finance Bills planned by the Government to restore economic sovereignty and I welcome its many initiatives.
To reflect the comments of previous speakers, I acknowledge that the Finance Bill and budget contain measures which will positively impact on small business. I also acknowledge the change in respect of diesel rebates introduced in the Bill. As someone with a background in haulage and transport, I appreciate the necessity for a diesel rebate.
It will impact down the line in terms of the cost of delivering services to customers across the country. I welcome the diesel rebate's extension to bus and tour operators, those who are central to transport operations. Undoubtedly, they will feel the benefit.
Consider what occurred in the lead up to the budget and what is occurring now. In a debate on the Finance Bill, one cannot but help highlight the fact that finance through the banks is not being made available. As I have stated time and again - the Minister of State, Deputy Perry, was present in the Chamber one such time - small businesses are not receiving the type of support one would expect from the banks, particularly given that the latter have been allocated so much money year on year to support the SME sector. To date what is happening in the banks is nothing short of restructuring. They are restructuring term loans and overdrafts and in some instances are withdrawing overdraft facilities.
There are conflicting views on this, but if it was not the case we would not need the Credit Review Office, CRO. The banks would be functioning and everything would be grand. The business person, the young entrepreneur, would be getting the money he or she requires. However, that is not the case.
The Government must tell the banks to do much more for enterprises and to focus on family businesses and small employers in every parish, which is currently not the case. We are giving banks taxpayers' money, but it is going directly to their bottom lines to correct their balance sheets. They are not interested in helping enterprises to correct their own balance sheets despite this being what they are meant to do. It is disgraceful that they ignore the representative bodies of businesses as well as the Government while reconstructing themselves so they can step out from under the Government's control at some stage in the game. For one or two banks, this will not be for a long time yet, but it will be business as usual once they are out of Government control. They must meet businesses' needs.
I ask the Government to listen carefully to the SME sector. Consider what it is doing. We have listed the benefits to haulage and transport operators. If one tries to renew a haulage licence or to have another truck added to it because of a new job or contract or an improvement in business, it will not be done overnight. It will be put into a pile that will be dealt with, to cite departmental officials, in due course. Will the Minister of State find out from them what they mean by this? Have they no respect for the fact that, in due course, that contract may no longer be available to the haulier and the renewal or addition - perhaps a new job or two - might no longer be required? Perhaps "in due course" could be granted a different urgency and officials should be told to review such applications urgently. Jobs depend on it, but they are ignoring the pleas of enterprises to deal with applications expeditiously. Will the Minister of State take note of this fact? Perhaps someone in the Department will bring about a change in how it handles applications.
For the Government, its commitment on upward-only rent reviews was a major issue. I am a landlord and I understand how difficult it is to legislate in this regard, but there is not a single landlord in the country who has not been approached by tenants on long or medium-term leases about reducing their rents. The collapse began in 2006. Anyone who examined his or her costs, including rent obligations under leases, would have appealed to his or her landlord. Most sensible landlords set aside their upward-only rent review clauses and reduced their rents.
Many significant companies are locked into upward-only rent reviews and have failed to get their landlords to see common sense. I appeal to the Department to establish a means, where necessary, of forcing landlords into reviews of their upward-only clauses.
I ask the Government to lead by example. I have been told that Shannon Development holds 43 leases with upward-only rent review clauses; the IDA holds 74 leases, of which 63 have upward-only rent review clauses; the Department of Agriculture, Food and the Marine has 70 leases, 90% of which have upward-only rent review clauses; and Údarás na Gaeltachta has hundreds of leases, a significant number of which surely have upward-only rent review clauses.
I draw the Minister's attention to an individual in Donegal who sent the keys to his premises back to the Minister for Agriculture, Food and the Marine, Deputy Coveney, in an envelope because he could not negotiate new terms that reflected the true value of rents in the marketplace. The man wrote to the Taoiseach asking him to intervene because jobs, a mortgage and a business were at stake. Since then, the man has closed his business and he has gone on the dole. A young entrepreneur, he was finished by the Government and its attitude to its own properties and upward-only rent reviews.
There is a case to be answered. It is not pie in the sky. I am reading from a letter to the Taoiseach, citing the example of a small, true businessman who was trying to make ends meet. He is one example of many. Many of the units in most of the ports controlled by the Minister for Agriculture, Food and the Marine have been closed, some for up to ten years. Will the State get off its behind and try to solve these problems for enterprises so that people can stay in employment? They are willing to pay rents, but not the daft rents of many years ago. The old levels need to be reviewed. The State should lead the way.
I will cite a further example of how the SME sector is treated. Highbank Organic Orchards in Kilkenny is a craft cider maker. The budget increased excise duty from 47 cent to 57 cent, representing a 22% increase. In 2002, the last time there was a substantial increase in excise duty, the sale of cider fell by 11.3%. Why can we not redefine what this business is so that it equates to the definition of a micro-brewery? This would provide the business with reliefs similar to those seen in that industry. It employs 30 people. All of the apples are grown in Ireland, supporting a further 200 jobs. Surely we must consider these people and understand that other concessions, tax reliefs and so on sometimes only apply to exporting companies or niche markets, such as research and development.
We completely forget the indigenous sector that is creating and sustaining jobs in this country at huge effort to family-run businesses that are run on an individual basis that create sustainable jobs. The Government thinks that without a whisper one can increase such a person’s problem by 22%. It is a disgrace. It should have been challenged in the Finance Bill. The Bill should contain a provision to give such a person and the industry some relief. After all, they are Irish businesses creating Irish jobs and they export if possible. It is not too late for the Government to introduce an amendment. Regardless of what kind of circuits we go through in this House or in the committees, the Government has a substantial majority and it can if it wants introduce the appropriate amendment to deal with what is a simple issue. The Government should do so. It affects small jobs in this country and we must indicate our absolute support for them.
Vintners are another group that exists in every single parish in the country. They made representations to Deputies and Senators across all political parties because their business is dying on its feet. The Minister of State, Deputy Perry, is aware of that. If one calls to any establishment in the country one will find that they are not doing the same turnover as previously. They are paying for water at the rate of €3 per cu. m. They contribute substantially to the local economy. They made recommendations because their trade is affected by off-licences. One suggestion is to introduce a system whereby one’s turnover for off-licence activity would form the basis of one’s tax liability and licence renewal fee. The vintners made simple, sound suggestions. I do not back up any single industry; it just happens that they are small businesses that are good examples of how Government policy can affect business in a negative way. Each and every one of them pays rates to local authorities. Rates are another Government-imposed tax that could have been addressed in the context of the budget. Why does the Government not introduce a Bill that would allow each and every one of those businesses to have a self-assessment system whereby following an assessment their rates might come down. The rateable valuation system will not affect any such businesses for another five or six years. Vintners do not have that much time yet the cost imposed on them by local authorities continues at a level that is unbearable for small enterprises around the country. Why does the Government not do something for them? Why does it not introduce the simple system I suggested with appropriate guidelines and penalties if someone decides to take advantage of it? The Government must ensure rates for vintners are revalued and that the contribution continues but at a lower level. That could be done without a problem yet there is no response from the Government on it.
I wish to refer to PRSI contributions that will be taken from rental income in the future. All of the tax initiatives have now been withdrawn and those who were involved in developing properties from a pension perspective rather than for the sake of development are the ones who are being penalised. Now they will be taxed further through a new initiative from the Government. They will pay their property tax and rates where they apply instead of property tax. Anyone who is making an effort and attempting to do business is being penalised left, right and centre. The Government boasts about its support for the SME sector. I do not know many SMEs that have felt the benefit of any measures introduced by the Government in the budget or through the Finance Bill. They have not benefited. Even the concession on cashing in one’s pension will not apply to the self-employed yet they are the very people the Government is expecting to grow the economy. Speaker after speaker has said we rely on the SME sector. In its day the sector created up to 900,000 jobs. In the United States one hears talk about the single entrepreneur as the person who will lead the way out of its economic difficulties. We are exactly the same in a much smaller way. We heap praise on them every single day yet we do nothing to help them. I acknowledged previously the business initiatives the Government took in the budget but when one comes down to the level of families working in their petrol station, pub, off-licence, haulage company, cleaning service or other small business that is supportive of jobs within a local area, they will not feel one single benefit from the Bill except that the Government will take more money from their employees and from them as employers.
The Minister of State, Deputy Perry, is familiar with business. I appeal to him to reconsider some aspects of the Finance Bill and to give people such as those to whom I have referred a break. It is necessary to understand what is happening in the wider economy. What seems to happen in this House is that when we arrive on Tuesdays, Wednesdays and Thursdays we are in a bubble and we forget the real dilemma in which people find themselves. People face problems such as mortgage arrears, mortgage debt, personal debt, negative equity. One hears about it every single week at one’s clinic. One hears businesses complain every single week at one’s clinic. They are not feeling any relief from the budget. The introduction of the property tax is another example of the disconnect that exists between the Oireachtas and the people we represent.
One could argue about whether Fianna Fáil had an agreement with the troika and that the Government is left to implement it. That is a political argument. Let us look at the reality. People cannot afford to pay the septic tank charge and they cannot afford the household charge yet the Government intends introducing a property tax which Revenue will require another 100 staff to administer. It is the wrong tax at the wrong time. People do not have the money to pay it. The imposition of a tax at this rate is a further nail in the coffin of some people in terms of their finances. There is still time to review the Bill in terms of the supports that are necessary for the SME sector. There is still time to address the issues I have raised based on the examples I outlined.
I urge the Minister of State, Deputy Perry, to ask the Taoiseach to look at the letter from the man in Donegal. It is a complaint and a suggestion but it is a true story similar to the experience of those involved in cider manufacturing or the haulage sector. For the past 20 years the Government has said it has reduced the burden of bureaucracy and red tape, in addition to the cost of business. If one asks anyone in business he or she would say that it costs a considerable amount for administration to keep the show on the road. The smaller the business, the more difficult it is. In the case of each small business one will find a family member is working double the normal hours every week in order to provide employment in a local area.
The next speaker is the Minister of State, Deputy John Perry. He is sharing time with Deputy Noel Harrington. They have ten minutes each. Is that agreed? Agreed.
Before I read my prepared script I wish to respond to Deputy McGuinness’s point about the confidence in credit. One must remember the legacy we inherited. Miracles take a while longer.
We heard all of that rubbish before.
It is not rubbish.
There is no need to go into that now.
That is the point.
The Government has been in office for two years. It would want to start accounting for itself now.
If the Deputy wants a reply, a review of licensing is ongoing with which I am dealing. That is a fact. We are now reviewing 50 licences in the retail trade involving 15 different authorities.
We are hoping to have one authority by the end of the year. Members can call for rent reviews but the Deputy must remember that it was the previous Government that signed up all the soft leases. I checked the leases and I noted the generosity of the last Administration on leases and the clauses in them.
I am talking about private businesses.
This is about private businesses.
There is no point in talking about that. The Minister of State should read the letter.
It is easy for the Deputy to come with all the solutions and all the answers. His party was long enough in government and it did nothing about these matters. We have an understanding, concern and respect for business and we are in touch. We know only too well that the issue is about getting the banks to lend. It is not that simple to get money to small business because there is also the issue of their viability. It is an issue of confidence and raising the confidence of the public. When the Deputy and his colleagues come into the House and are pessimistic every day of the week, it does not build confidence among people. Irish exports are at an unprecedented level. I meet business people all the time. They are not as pessimistic as the Deputy makes out that they are. He must remember that during the boom in the economy we had 13,000 sq. ft. of retail area per head of population compared with 1,000 sq. ft. per head of population in the UK. That is the backdrop from which we are coming in terms of the leases. It would be no harm for us have some straight talk.
On that point, before Deputy Ross came into this House, he talked about monetary policy and fiscal policy. He was the man who said that Seánie FitzPatrick was the best man who ever came into town. That was monetary policy. The Government is doing its best to deal with fiscal policy.
I can assure the Deputy that Mr. John Moran, the Secretary General of the Department, and the Minister for Finance have put together a very comprehensive package in the Bill for SMEs. This Government has an understanding and respect for business and is providing a service for SMEs. In the previous Administration it was all about the big cats. We are dealing with the small SMEs who employ one or two people.
That is not in the Bill.
This is a budget to provide for SMEs and the focus is on creating jobs in the real economy. The Taoiseach is very much aware of small companies. The Forfás report reviewed 159 licences required to do business. We are reducing them and will get rid of every one of them if we can. That is the legacy we inherited. The Minister, Deputy Noonan, has put together a comprehensive package. I read an appalling article the subject of which was a major attack on Enterprise Ireland by Deputy Ross. He is the business editor of a leading newspaper. If he was meeting the SMEs he would know only too well the role being played by Enterprise Ireland and what it and the IDA are doing for SMEs in every region. It is easy to take an article from a national newspaper and make a major attack but the facts are that they are doing the job on the ground. The Minister, Deputy Noonan, is addressing the challenges facing SMEs. We are examining the issues of late payments and a review of licences. The Taoiseach is meeting the banks almost every day of the week on the issue of the availability of credit and also Mr. John Trethowan's office regarding people who have been refused credit.
The Deputy, being a businessman, will know only too well that even dropping rates by 10% will not make a fundamental difference-----
It would matter to the people about whom I am talking.
-----but the Minister, Deputy Hogan, is examining that.
That is an outrageous statement. A drop in the commercial rate would affect people in terms of the viability of their businesses, and the sooner the Government does that, the better.
Deputy, allow the Minister of State to continue.
It is not a difference of profit and loss because on the basis of the rates of an average business of €3,000 per year, per euro it is 310%. No rates have gone up under this Administration. The Minister, Deputy Hogan, is dealing effectively with a major reform of local government.
As the Minister with responsibility for small business, I welcome the opportunity to speak on the Finance Bill. In budget 2013 the Minister for Finance put the SME sector at the centre of this Government's strategic plan for economic growth and job creation. The Government recognises that the operating environment for SMEs remains difficult, which is the factual position, and therefore we are committed to taking a range of actions to support this important sector.
Deputies will be aware that in the November medium-term fiscal statement, which is all about the fiscal management of Government, the Department of Finance published an economic assessment of the SME sector in Ireland. This paper highlighted that SMEs make up 99% of businesses in the enterprise economy in Ireland and account for almost 70% of people employed by them. These figures show how important SMEs are to Irish economic life. The numbers highlight the importance of sustaining and generating employment in Ireland and suggest that our recovery strategy must focus additional support on SMEs. The issue is about confidence and credit, buying to support the Irish economy, supporting small companies and getting the domestic economy up and running. If every politician is pessimistic about the economy, however, people will not buy products and will instead save their money. People are not shopping or spending locally. Our job in government is to create an air of confidence.
To that end, I very much welcome the ten point tax reform plan announced in the budget. This plan includes measures that will make a real difference for the SME sector such as reforming the three year corporation tax relief for start-up companies, increasing the cash receipts basis threshold for VAT, amending the close company surcharge to improve cashflow for SMEs and extending the foreign earnings deduction for work related travel to certain additional countries.
The Deputy referred to the issue of vintners, and the Government is introducing major reform of the alcohol trade in terms of addressing below cost selling, the abuse of the alcohol trade and the unitary cost of alcohol. The Government will bring forward significant proposals to deal effectively with the issue of the home consumption of alcohol. The viability of the licensing trade is suffering as a result of the selling below cost of brand leaders and that issue will be dealt with by the Government.
I am also pleased that two additional SME measures are included in this Bill, namely, the amendment of the key employee provision of the research and development tax credit regime by reducing, from 75% to 50%, the proportion of time that such an employee must spend solely on research and development activities - which must be welcomed - in order to qualify for the credit, and the amendment to the employment incentive and investment scheme to permit operating or managing of hotels, guesthouses, self-catering accommodation or comparable establishments to qualify for this incentive. That must make a real difference. These initiatives will build upon the supports that are available through Departments and Government agencies and the measures introduced to support credit flow into the SME sector. The action plan for jobs will be announced very shortly and Members will see what the Government is doing to revitalise this economy in the SME sector.
The Government is focused on ensuring all businesses, including SMEs, are supported in every way to develop their business, increase exports, create jobs and rebuild the economy. By far the most talked about problem in recent times facing the Irish SME sector is the non-availability of adequate credit facilities, and we all agree that is a problem, but banks will not give money to businesses that are not viable. The Deputy knows that only too well, regardless of the situation.
That will not give money to anyone.
They will not give money to non-viable businesses. Access to finance is a key issue for SMEs and is critical to long-term economic success. We have brought in the microfinance fund, the partial loan guarantee fund and there are private investors and other investors, but it is all about investing for a return.
Increasing access to credit is a priority that the Government is addressing in a comprehensive and co-ordinated manner. The initiatives taken by the Government to restructure and recapitalise the banking system are the principal response to make credit available as banks will continue to be the primary and dominant supplier of credit for SMEs. There are 23 million SMEs in Europe. I attended the competitiveness Council meeting during the past two days and the availability of credit is an issue in the UK and throughout Europe. Unfortunately, that is the legacy of the financial fallout.
The action plan for jobs also highlights the importance of access to finance for enterprise in Ireland. In particular, it advocates a proactive approach to the SME sector, which is fundamental to the future of Irish business, banking and the economy as a whole.
A range of national initiatives have been developed to support the flow of credit to enterprises. In addition to initiatives to recapitalise and restructure the banking sector, which taxpayers have done, we are examining a code of conduct for business lending to SMEs, which has been done, and we also established a simplified application for banking.
My Department has also taken action to address some specific market failures which will add value to the actions the Minister for Finance has taken. In particular, I refer to the two targeted schemes , the microfinance fund and partial loan guarantee scheme. In addition to these initiatives, the seed and venture capital scheme, Innovation Fund Ireland and the development capital scheme are also helping Irish companies. The other side of credit revolves around prompt payment and we have put in place a measure to address that, which is critical. The late payment legislation is a welcome mechanism.
It is important to ensure Ireland becomes a thriving innovative economy which is the best small country in which to do business, which is not easy. The Deputy knows that. He was in the job I was in. The recognition of the importance of and support for small business is vital to kick-start this economy. The Government is determined that we will restore confidence and the issue is about confidence, access to credit and getting people to believe in job creation. I travel from Donegal to Cork and meet people in enterprises every day of the week. All they want is to see a sense of confidence, and those people are extraordinarily confident. I attended the crafts fair in the RDS and the people I met there were not talking about doom and gloom. They were all getting on with their job, finding new markets, adopting new technologies and finding other mechanisms to get funding into their business.
I compliment the Government on its recognition of the role played by small business.
Turning the ship around takes some time, unfortunately, but this Government is determined to support the critical role of SMEs in this economy. The Taoiseach has the personal motivation and interest in ensuring that we recognise every business person as a real job creator. We do not create the jobs in this House. It is business people who create the jobs and we must create the environment that will encourage them to create jobs.
I am grateful for the opportunity to speak on the Finance Bill 2013. It is obviously not a pleasant experience to introduce property taxes and so forth but we must concentrate on the positive measures in the Bill. The SME sector has been spoken about a lot in this Chamber today and it will benefit from the Bill.
We must take corrective measures because this Government inherited a country that was practically bankrupt. The behaviour of the previous Government was reckless. The ship of State was adrift and the officers were in the mess rather than the wheelhouse. They were not in the bridge and we had a problem. I do not know of any Deputy who likes imposing these cutbacks or who does so lightly but we do not have an option. According to the estimates for 2012, we spent approximately €55 billion but only took in €38 billion. We are overspending by almost €4,000 for every person, which is an extraordinary figure that must be addressed. When my party leader became Taoiseach there were many issues to be addressed but because of the totally dysfunctional state of the country and the economy, it was almost impossible to do so.
This Bill contains many incentives to encourage job creation and economic growth, particularly in the SME sector. I also welcome the support for the agricultural sector, particularly the capital gains tax reliefs to encourage farm restructuring. The capital gains tax restructuring relief and young farmer's stamp duty relief until 2015 have been described by the ICMSA as "pragmatic". The ICMSA recognises the benefits of this Bill and welcomes it.
I also welcome the sections of the Bill relating to real estate investment trusts. It is quite extraordinary that in the time of the greatest building boom this country has ever known, the setting up of companies to develop was discouraged. It was necessary to set up syndicates, conglomerates or associations and the sector was out of control. In the United States, where similar provisions were introduced in the 1960s, there was a measured, structured approach to construction. It may not be popular to say this but we need a thriving construction sector in this country. However, we need it to be carefully regulated and sustainable. We need a construction industry that will provide employment for those men and women who do not have the skills to seek employment elsewhere. The construction industry needs nurturing, as does the retail industry and this Finance Bill will go some way towards encouraging those sectors.
I have heard it suggested that Government Deputies live in a bubble and are out of touch but I know plenty of Deputies and Senators - I am one of them - who run small businesses. I employ four staff and I know that the SMEs in this country, generally speaking, want to be left alone. They want to develop their own businesses, have access to credit and when they have an idea for expansion, they want to be able to do it without any outside interference. They want to deal with the financial institutions fairly and they want a chance to pay back any loans they get. They do not want red tape and the Government is doing a lot to remove it.
Many references have been made to rates. I pay business rates and I know that a 5% or 10% reduction would not make or break my business. However, it would be a significant torpedo to the local authorities in terms of their finances and a bonanza for the larger multinational companies who pay between €100,000 to €1 million in rates. They would be absolutely thrilled to get a reduction in rates that they have never sought. The businesses who are screaming about an increase in rates closing them down would find a drop in rates would result in an insignificant reduction in their overall bills. Rates never closed a business. It is always a combination of issues that closes a business. Regrettably, we see such closures every day. Indeed, I saw one such closure in Skibbereen at the weekend and I have also seen another in Bantry recently. Those business people need to be encouraged to get back into the market, to get back into an entrepreneurial spirit and they need credit. They know what they are about. They have employed staff and know what their markets are, and they want to be left alone to carry on their work.
Rates and the property tax have been referred to on numerous occasions today. The decision taken by the Fianna Fáil Government in 1977 to abolish rates has critically damaged local government for the past 30 years. The introduction of a new property tax has been described as punitive and grossly unfair. While it is not a pleasant measure to have to introduce, it is a sustainable charge that must be introduced to support local government. It is worth noting that in 1977 when rate collectors were calling to every household in the country, the rate at the time was around 55 old Irish pounds. It was the equivalent of a month's income. It was the greatest and toughest bill for any household to pay. Many people could only pay in instalments and the rate collectors had to keep calling back to get the money. Very few people were able to pay it all in one go in the first month of the year. That puts the new property tax in context. For many people, the new property tax will amount to €90 per year and the majority of people in my county will be paying somewhere in the region of €220 per annum. Those payments will support local government and will take some of the burden off businesses like my own which have, for the last 20 years, funded local government to the tune of 30% to 40%. What do businesses get for that? We must get real in this country about who pays for what services.
I also welcome the extension of the fuel rebate to bus and coach tour companies. The rebate will not only add to their bank balance but will also add to the confidence of those operators who are trying to formulate their business plans for 2013 and beyond. The tourism industry, while challenging, is growing and these companies want to tap into that. They need the assurance from Government that it will support them in their plans. That measure is very welcome.
I also welcome the changes announced recently to the property tax for those hard-pressed owners of pyrite-affected properties. They are in an awful situation and I am glad that the Government has acknowledged that. An exemption from the property tax will not solve their problems but it at least acknowledges the situation they are in. I also welcome the exemptions for properties owned by charities or occupied by those who are permanently incapacitated.
Between 1997 and 2007, money was spent by Government on countless mismanaged, wasted, white-elephant ego-trips. The waste and Government mismanagement at that time cost this State €10 million per annum per Deputy on that side of the House. It is an extraordinary figure. This Government has business as it focus. It is jobs oriented because that is how this country will get back on its feet - one job at a time, one SME at a time, one county at a time. That is how it will happen. The ship of State is still in treacherous waters. However, the officers are no longer in the mess but are in the bridge.
Is the tide going in or out?
Difficult decisions must be taken and Deputy Ferris knows exactly what I am talking about. I know that Deputy Ferris's compass is generally working but maybe once there was a slip-up along the line.
He knows exactly what happened. We are doing the best we can. It is acknowledged that Ministers, Ministers of State and Deputies are working extremely hard to rebuild the country's reputation and bring back the confidence of the country. It will bring the economy back, one SME and one job at a time.
With the agreement of the House, I will share my time with Deputy Martin Ferris.
Any Deputy who tells the House we have no choices is telling a lie. Anyone who studied economics knows that the world of economics is replete with theories and mechanisms to manage an economy and with levers to pull to stimulate different parts of the economy. It is a lie to say to the Irish people that there are no choices. It is important to state those facts so baldly. There are different routes to achieving Irish economic regrowth. The Government has chosen an extremely regressive route of retraction which is based on Margaret Thatcher's economic theories. We are all aware of the context of the Bill. The domestic economy is hammered as a direct result of the calamitous mismanagement of Fianna Fáil, but in a democracy, by definition, there are always choices.
The Finance Bill 2013, as part of the budget process, is an example of the type of socioeconomic choice the Government has made. There are a number of routes back to growth, balanced budgets and a sustainable debt-to-GDP ratio. The route to which Sinn Féin subscribes is one where commercial debt is dealt with on a commercial basis. It is not the perverse Fianna Fáil-Fine Gael-Labour policy that private debt is paid for by people with disabilities through cuts in respite grants, by poor families through cuts in child benefit, by pensioners through cuts in fuel allowances and by targeting maternity leave. They are all the choices the Deputies on the Government side of the House have made.
The route to sustainability to which Sinn Féin subscribes is through fiscal responsibility, ensuring those who can pay do so and not through the fiscal irresponsibility of the Government which has re-nationalised the Fianna Fáil golden circle of debt. The route to growth to which Sinn Féin subscribes involves the reduction of cost to business through the reform of upward-only rents which the Minister refuses to acknowledge is the source of many job losses in the retail economy. It also involves reform of the rates system and the introduction of progressive rates. Growth through the refocusing of funds from the National Pensions Reserve Fund, the European Investment Bank and the private pension industry would build badly needed infrastructure now, put people back to work now and create efficiencies and competitiveness the country could enjoy into the future.
These are the choices Sinn Féin would make. They are not unique to Sinn Féin. If Government Ministers would only open their eyes they would see that many governments throughout Europe and the rest of the world are currently carrying out these policies to great success. Such choices would, of course, demand strong leadership and, unfortunately, we have no leadership in the Government. We have a Government that bends to the vested interests of Europe and the various lobby groups in Irish society.
To date, the economic management choices of the Government have led to continuous high unemployment and a disgustingly high level of emigration. One of the major costs of the Government's economic plans is the shocking figure of 167,000 people who have left the State since it came to office. They face no chance of a job, collapsed living standards, higher and unfair taxes and increased costs. Many of those individuals left through no choice of their own. What is left behind is 350,000 out of work, 60% of whom are long-term unemployed.
These figures would have embarrassed the Governments of the 1980s. In some way, the Government tries to spin them as progress. We are told the programme for Government is being implemented and we are meeting the criteria of the troika. These figures represent failure by any economic measurement. When Sinn Féin met the troika I asked if the policies they were espousing - unemployment, reduced living standards and emigration - were not economic failures. They acknowledged that while the debt collector was being paid, they could not stand over these economic indicators as in any way positive. We have seen major increases in poverty levels, child poverty levels and mortgage distress. The domestic economy continues to shrink, creating a cycle of economic retraction.
While the export sector is performing better, there are a number of structural problems in this area. Pharmaceutical patents are running out, exports to the United States fell in the last year and our major export markets, Britain and the rest of the EU, are falling in and out of recession.
From the point of view of jobs, enterprise and innovation, I welcome a number of the initiatives in the Finance Bill. Qualifying group expenditure on research and development will increase from €100,000 to €200,000. Investment in research and development is investment in jobs and innovation. The Bill contains other job creation initiatives. When our party was briefed by the Department of Finance, however, I was surprised by how little evidence these policies are based on. It seems that unseen lobbyists are having policies introduced that are not evidence based.
Tax credits for key employees engaged in research and development will be reduced from 75% of the time engaged in research to 50%. We asked why this was the case and what were the projected improvements to the system, the projected costs to the State and the likelihood of increased investment in research and development. The Department of Finance did not know the answers to any of those questions. The same is true of section 9, which seeks to include additional countries in lists for which companies can claim tax deductions on employee pay. Again, the staff of the Department of Finance could not give us figures for how this was already working for the countries that are included and had no projections based on fact for what was expected to be achieved from the other countries that were included in the lists.
These may be good initiatives. It may that, through luck, they will offer improvements and growth within the market, but this is not evidence-based policy. The least that could be expected from the Minister is that there would be cost-benefit analysis of schemes that are focused on job creation and measurement of jobs created, jobs retained and jobs displaced. That is not the foundation on which these initiatives were created. A number of other tax concessions are clearly lobby based rather than evidence based. From now on the Minister should provide full assessments of the cost of schemes. The airplane leasing industry enjoys considerable tax breaks. We have not been able to find out the cost-benefit of these to the economy. The incentive to Georgian homes in the Minister's constituency of Limerick seems like stroke politics. I respect the need to maintain inner city streetscapes, but when one gives money to the owner of a Georgian house in a city, one takes it away from someone else. There is an opportunity cost there, and we need to know the opportunity cost of that initiative.
The initiatives in the Bill cannot mask the fact that the medicine, Government policies, is killing the patient. The Bill will place further pressure on those on benefit and the working poor. It disproportionately hurts lower and middle income households. Excluded from the Bill is a wealth tax. The Minister for Finance said a wealth tax would likely bring in €500 million. In direct contrast to the wealth tax, the Government has introduced a family home tax with no regard for stamp duty, negative equity, unemployment or ability to pay.
Instead of reform of upward only rents, we have incentives for landlords. A number of weeks ago, The Sunday Business Post reported that landlords lobbied Fine Gael to stop it from reforming the upward only rent system. Once again, the budget provided more goodies for landlords, goodies that could re-inflate the property bubble.
This budget will suck money from the economy; it will remove €3.5 billion. It is a retracting budget by its very nature. The Minister will claim to have limited room to manoeuvre, which is often the response from Fine Gael or Labour Party Deputies, but they say this simply to close down debate because there are other ways economically and democratically.
The Government has chosen to tax families rather than tax the most wealthy. It has chosen to cut benefits while giving tax breaks for Georgian home owners. It has incentivised property developers and failed to act for tenants with upward only rents. It has failed to burn the bondholder and has instead burned the Irish citizen. This budget fails the test of fairness and it fails the test of promoting economic growth and jobs.
The Finance Bill as it deals with farm-related revenue issues has some positive aspects. Capital gains tax relief will assist in farm restructuring. The extension of the 50% stock relief has also been welcomed. On the other side, however, the increase in capital taxes and the 10% reduction in capital acquisitions tax threshold as applied to farms will have a negative impact. Most capital taxes applied to farms are on intergenerational transfer and do not represent an actual tax on a capital gain. That will further impede the necessary transfer of land to younger farmers on top of previous cuts to installation and other schemes designed to encourage farm transfers in a situation where a significant proportion of Irish farmers are over 65 and would like to pass their land on if the proper structures were in place. One of the most negative measures was the ending of the early retirement scheme in conjunction with the end of installation aid.
Small to medium farmers, particularly in the western counties, also suffered from other budgetary measures. Among these were the changes to the disadvantaged area scheme and a €5 million cut to the suckler welfare scheme. Many struggling farm families will also be severely impacted by the cuts in the farm assist programme administered by the Department of Social Protection. That has played a significant role since its introduction in providing some relief for low income farm households, many of which depend on farm assist to supplement income levels well below the national average. I doubt there is a Deputy in the House who has not had representations from small family farmers who are practically destitute and completely dependent on the farm assist scheme to put food on the table. The cut was one of the most retrograde and disgraceful aspects of any budget.
The cuts are actually far more severe than other social protection programmes and entail a significant cut in farm income for many farm families. Between the cuts made in last two budgets, a family with three children would have seen farm assist cut by 50%, from just over €200 per week to a little over €100 per week. There are currently 11,000 farm families who are part of the farm assist scheme but the majority of those families are in the western part of the country, with the Taoiseach's own County Mayo alone having over 1,800 families who rely on the scheme
Another issue that threatens farming families is the proposal to base third level grants on the market value of the land and other assets rather on the actual household income. Many farmers who have what would appear to be above average holdings earn well below the average industrial wage and it is unfair to effectively deny children the opportunity to attend third level based on an arbitrary change in the criteria for the awarding of grants.
Farm families, and rural families in general, have been impacted along with the rest of the population by other negative measures introduced as part of the austerity programme. Among them is the property tax, which has generated considerable opposition with reports of large crowds turning out at meetings around the country. It is also clear, as we can see from the meeting of front-line public sector workers in Tallaght on Monday, that despite the euphoria that was being talked up regarding the Government's deal on the bank debt, people do not perceive there will be any benefit to them, in spite of the claim that the burden will be significantly reduced. Indeed, the longer austerity continues and the more people realise the negative impact it will continue to have on all aspects of their lives, the more it will dawn on them that the extension of the debt repayment schedule, with no relief for Irish people themselves, is a bad deal.
The indications from the IMF and elsewhere seem to signal clearly that it would not be in the least bit happy if the Government or its successor were to use the potential easing of the debt burden to reduce the level of cuts or perhaps even to inject some badly needed capital into a stalled economy. One must suspect, however, that this idea finds a willing reception among members of the Government who, apart from the bank debt and the fiscal crisis engendered by it, are in any event ideologically committed to cutting public provision and attacking the public sector by undermining wages and conditions, and by selling off lucrative parts of State companies and State assets. It is clear that we need a stimulus programme but the commitment is to go in the opposite direction, including the short-sighted sale of State assets which could be utilised as part of encouraging economic growth.
In a reply to a question I put last week regarding NewERA, the Minister for Agriculture, Food and the Marine stated that the Government still intended to use it to supervise the investment strategies of State companies that could work together in certain areas, specifically in the general area of energy, which would involve the ESB, Bord Gáis, Bord na Móna and Coillte. Unfortunately, the clear intent as signalled by the McCarthy report on State assets, and the Government decision to follow its recommendations, is in the opposite direction, and will involve not the positive utilisation of public companies and their assets, but their sale or lease to the detriment of any longer term plan of public investment. Indeed, one doubts whether the initial concept of NewERA, which involved a specific investment sum, would be tolerated by the troika, which is clearly opposed to any public investment of this type to help stimulate growth.
The lack of such stimulus and the commitment to austerity is why we have this Finance Bill with the measures that flow from the last austerity budget in December. Contrary to what democratic economies and societies learned from the 1930s on, some people have still not learned that we cannot cut our way out of a recession. If there is leeway in repayments on the debt, that should be regarded as a potential opportunity to inject some stimulus into the economy. The evidence from around the country is crystal clear. Just as every euro invested in growth and job creation has a positive multiplier effect, so every euro taken out of the economy has an opposite and negative impact. This Finance Bill is part of the mechanisms of austerity by which it is being implemented and that is why my party will be opposing it, just as we opposed the budget on which it is based in December.
I mentioned many aspects of the budget in my remarks this evening. As a Deputy from rural Ireland, I know the significance of each small contribution to survival on the family farm, such as farm assist. I cannot understand how rural Deputies who know the crisis faced by small farmers could come in here and vote in support of the disgraceful cut by the Government to that lifeline.
Not alone is the Government voting away that lifeline, it is penalising ordinary innocent decent people who kept the struggle going in a way of life, and the previous Government, and now this Government, have carried out a policy of driving them off of their holdings. That is what is happening here. Farm assist could help some to get over the current impasse but, by reducing it and by also taking away the installation aid and early retirement from the farming sector, the Government has done untold damage to that community. I will leave it at that.
There are 20 minutes in the next slot. Deputies O'Mahony and Dara Murphy are here. I call Deputy O'Mahony, whose name is the first I have here.
I welcome the opportunity to speak on the Finance Bill which puts into effect the measures of the recent budget. Whatever the criticisms, and we all have them, we must acknowledge that it was one of the most difficult budgets, probably in the history of the State, to put together, especially due to the fact that at the beginning it was stated that income tax would not increase because one cannot tax work and the main social welfare payments would not be reduced. Difficult decisions had to be made in this budget, as in the previous one, but I commend the Minister on including some protections and safety nets. Last year the Minister took 300,000 persons out of the universal social charge and this year there are also a number of protections. It is not enough and we all would like to see more, but we must not forget the reason for some of these difficult decisions is because of the recklessness and bad decisions of previous Governments. We cannot merely take everything and not balance the books in some ways.
In that context, I compliment the Minister for Finance, Deputy Noonan, and his team for the promissory notes deal of two weeks ago. Everyone acknowledges it is only one, perhaps small, step but in many respects it is a major step in regaining economic sovereignty. What I would hope would come about as a result is that it would give some flexibility in future budgets to allow more safety nets and protections, in particular, for low and middle-income families.
I have talked to many such families over the past couple of months. Deputy Martin Ferris referred to small farms and farm assist, but many of those families are also affected by other measures, such as the child benefit reduction and the lack of eligibility or having to wait for student grants. There are many difficulties here and we must acknowledge that there has been much pain taken by those families on low incomes who are just above the line.
I particularly refer to the matter of farm assist. There are 1,820 persons on farm assist in my constituency of Mayo. The scheme provides a safety net for farmers on very low income and due to the reductions in some of the farm payments, they got farm assist which helped them. Under the changes proposed here, a married couple with two children on an income of €15,000 a year, which is a very small income, will see their payment reduced from €131 per week to €83 per week. This does not apply to those on family income supplement. There is a discrimination against the small farmers here. One also must remember that it is only those on farm assist who qualify to get on the rural social scheme which means that their employment prospects are affected as well.
In addition, there are the child benefit changes that were announced in this budget and even the proposals of which we have heard in the past 24 hours. I intend to follow this. Child benefit is vital to many thousands of families around the country and whatever proposals are introduced in the coming budgets or finance Bills, there needs to be a restructuring where those on higher incomes suffer all of the reductions in child benefit and those on low and middle incomes do not suffer any further reductions in it.
I take it Deputy O'Mahony is sharing time with Deputies Dara Murphy and Timmins. He has one minute remaining.
Yes. I want to bring some balance to this. I welcome the provisions in the Bill, for instance, the extension of the fuel rebate to the licensed transport hauliers. This protects thousands of jobs around the country and enables and supports the tourism sector and helps the growth for which we all yearn. I also support the changes in the SME sector and the farming sector in the transfer of lands and consolidation of farms. The latter will facilitate farmers. It will encourage the transfer of land to younger farmers to allow them consolidate their farms and be more efficient and productive.
I note two small provisions that may not bring in a great deal of revenue this year, the relief of universal social charge for those over 70 years on high earnings and the increase for those on over €100,000 on self-employed pensions. The way to go in future budgets and finance Bills must be that more of the pain is taken by the high-income earners.
I call Deputy Dara Murphy who has six and a half minutes.
The Leas-Cheann Comhairle might tell me when I have two minutes remaining.
I also very much welcome the opportunity to speak on this year's Finance Bill. This continues a succession of measures over the past couple of years to restore the economic prospects of the country. On the deal on the promissory note - there was much discussion about whether it was sustainable debt - it is probably true to say it was unsustainable and now has moved to a far more sustainable level. Our foreign direct investment sector remains strong and we have a balance of payments level that would be the envy of most countries.
Mention was made by Members from Sinn Féin about stimulus and austerity. This year, we are injecting a huge stimulus by way of €15 billion, which will be reduced to €12 billion over time. That, by any measure, is a stimulus. It is a borrowed stimulus.
The rule that Sinn Féin seems to not wish ever to accept is a simple rule of economics, that over time income and expenditure must balance out. That is not the same as austerity. It is a simple rule that applies to every household, business and economy. It is a very difficult path because we were spending beyond our means, but there is no other option. There is no silver bullet.
While some of the sectors of the economy are showing signs of improvement and strengthening, the one area which gives rise to the most concern and which needs the most urgent address by the Government is the area of domestic demand, which remains very weak. There are measures, such as the increase in deposit interest retention tax, to stimulate spending but it is the challenge for all of us over the next couple of years to look at measures whereby we can increase domestic demand. There has never been such a level of domestic saving in the country.
While many people are certainly in very difficult banking circumstances and have a large amount of debt, there has never been so much money held on deposit in our banks. We need to consider creative measures to incentivise people through the tax code or the VAT code to encourage them to take some of the money they have on deposit and spend it in the domestic economy. I believe this could be targeted particularly in areas such as construction that have high levels of employment and where the services are predominantly provided by indigenous and Irish owned companies. For example, Canada has schemes whereby an amount of value added tax can be reclaimed for spending within certain parameters and on a certain scale, and indeed when the businesses engaged in the provision of those services also qualify by virtue of tax clearance and employment levels.
Two further areas need to be addressed. In Dublin and in Cork and even in smaller cities like Limerick it is hard to believe there is the possibility of a shortage of large office space. While two or three years ago this would have seemed a ridiculous suggestion, we may need to consider introducing some tax incentives and using publicly owned land for the provision of large office space. In my city of Cork some very large office space has all been filled, thankfully, for which IDA Ireland, in particular, deserves great credit.
We need to consider how the valuations for property tax will apply to houses that have been affected by flooding. This is not just an issue in Cork, although in my constituency areas such as Blackpool, Ballyvolane, Glanmire and other areas are affected. It also affects Dublin and other parts of the country. A valuation for a house that has been flooded is different from the exact same house perhaps in the exact same suburb that is not subject to a flood risk. Owners of such houses cannot receive insurance. When deciding the valuation of a property, account needs to be taken of it being subject to flood risk while flood remedial works may be due to take place in the future. If a house cannot get insurance as it is subject to flooding, its valuation cannot be deemed to be the same as a similar property perhaps in a very similar location. The matter was raised by Deputy Donohoe from Dublin Central earlier and while it will not affect a vast amount of properties, for the people involved it is a very serious issue.
I wish to pick up on the point Deputy Dara Murphy made on property tax and house insurance. A large number of properties cannot receive insurance owing to flood risk. In my county, householders in Bray, Arklow, Baltinglass and several other towns approached me long before the concept of property tax was mentioned to say they could not get insurance owing to flood risk. We need to make provision to compensate or recognise the difficulties such people have.
I welcome the Finance Bill, which contains many progressive measures. I also welcome that since the publication of the budget the Minister has taken on board some suggestions to introduce progressive measures to help the economy back on its feet. I recently called on a friend who, like most businesspeople, has not been in the best of form in recent years. He outlined to me the various bodies he had to deal with, including the local authority, health and safety, health inspector relating to catering, health inspector for tobacco control, fire officer and IMRO. That was before he ever went to deal with traders, Revenue or his customers. I welcome that the Minister for Jobs, Enterprise and Innovation is making progress in trying to deal with the difficulties with bureaucracy that businesses are encountering.
The same individual recounted to me - I went to the film "Lincoln" recently so I hope these statistics are fairly accurate - that the Gettysburg address contains 272 words and yet EU directives on eggs contain approximately 10,000 words. That tells us something. My grasp of detail is not very good but I know that Deputy O'Dea has a considerable amount of spare time on his hands and will go away and research the matter, and come back to correct me or otherwise.
The Deputy has five minutes remaining.
How many words have I spoken a Leas-Cheann Comhairle? I can say in five minutes what most people take 30 minutes to say.
Two Gettysburg addresses.
I welcome the measures for small and medium-sized enterprises because the retail trade is dying on its feet throughout the country. Every night in most provincial towns is like Christmas night - bereft of cars and bereft of people. Notwithstanding that it is hard to stand in the way of people's changing purchasing habits, we need to bring in measures to facilitate them.
I want to address some measures in the Bill, starting with section 16. For some years I have raised with the Minister for Finance and his predecessor the concept of releasing money caught up in pension funds. I welcome that a person can now access up to 30% of accumulated additional voluntary contributions, AVCs. However, this should be extended to other categories of pensions. It is difficult to understand how somebody - an employer or whoever - might have invested and money is caught up in it. They cannot get access to money from the banks and yet we will not permit the release of this money. It is important to realise that if the money is released, tax will be paid on it. I would like to see the Minister extend this measure.
I welcome the section 20 provisions on film relief, which is very important in my county. I would be a strong advocate of tax reliefs. While I accept it was populist to change the provisions on stud fees a number years ago, I disagreed with the removal of it. It helped the industry greatly at the time and we should not shy away from reliefs when we believe they are appropriate.
Section 21 extends the timeframe for the employment investment incentive, EII, scheme and its remit to include hotels, guesthouses and self-catering accommodation for a two year trial period. However, Dublin, Meath, Wicklow, Kildare, and Cork county and city, with the exception of the docklands in Cork, are excluded. Deputy Dara Murphy will be interested to note that a person seeking to invest in a small and medium-sized enterprise in Cork will not get the tax relief he or she might get across the border in Tipperary or somewhere. This is inequitable and unfair to the counties. There may have been a logical and pragmatic reason for introducing it in the boom time period from the point of view of having regional balance. However, there are parts of those counties, including in my county, where areas are definitely as impoverished as anywhere else in the country. I ask the Minister to go back to the EU and try to get this issue addressed so that there is a level playing pitch. It is difficult to understand how a hotel in Galway, Mayo or Kerry can avail of this tax relief and yet a hotel in parts of south-west Wicklow cannot. Actually we have very few, if any, hotels in that area because we do not have the tourist numbers.
Section 24 deals with the donation of heritage property. I am glad that has been extended to include certain accompanying buildings, outbuildings, yards and land. I note that the tax relief has been decreased from 80% of the value of the property to 50%. If I am reading this correctly, it is a retrograde step because the values of properties have decreased anyhow. We should be encouraging people who want to hand over property. Altamont Garden in Carlow is a classic example of a property handed over to the State and is of great benefit to the State. If Coolattin House on the golf club in south Wicklow were handed over to the State, it could be of great benefit to the country. When the Minister is wrapping up I ask him to outline why this measure has been taken, which seems retrograde and not progressive.
I wish to make a point about the economy in general. The only way we can come out of this difficulty is by making everything subject to measurement.
We cannot afford to be wedded to outdated ideology. Whether an organisation is in private or public ownership is irrelevant to me if it works. If a hospital, school or local service operates better in private ownership, let it be. Equally, if they operate better in public ownership, let it be. We should be prepared to remove services from organisations that are not efficient. No one can stand over the inefficiency and complete mess made by SUSI of the third level grants system. It is totally unacceptable that families, six or seven months after their children started college, have not still received their grants. When grants had not been processed within three months we should have introduced emergency legislation to remove that function from SUSI and give it to another body. There are plenty of organisations that could do the job.
We must also address the issue of labour law. The hands of companies are tied, in terms of dealing with employees who are inefficient, owing to our labour law. Companies are afraid to address this issue owing to the raft of labour law in place. Equally, we must ensure there are in place measures such as education, retraining and upskilling for people who are unemployed. I am a great advocate of workfare rather than welfare. I welcome the moves being made in this regard. People want to work and to have an opportunity to contribute. It improves their self esteem, the economy and society as a whole. Every cause has its merits. However, there is a limit to funding. The population of the European Union accounts for approximately 10% of the world population yet it spends in the region of 50% of its budget on welfare. We need to address the issues of good causes and value for money.
The Gettysburg Address contains 272 words and the EU directives on eggs contain 10,000 words. Somebody might confirm for me if the latter statistic is correct. The lesson in this regard is that we need more action and less words.
It is always difficult to follow Deputy Timmins. I have had a look at section 24. The Deputy's reading of it, that relief is reduced from 80% to 50%, is correct.
The purpose of the Finance Bill is to give legislative effect to the changes, in particular tax changes, announced in the budget. This Finance Bill, like others, provides for a number of changes, most of which are marginal and some of which I welcome in so far as they go.
The budget did little to tackle the main two ills confronting Ireland socially and economically, namely, the massive and growing unemployment crisis and the lack of credit which is causing much of the unemployment crisis. The official statistics, which do not always tell the full story, indicate that 14.6% of our population are unemployed. The figure in respect of people under 25 years of age is more than 30%. As I said, the official statistics do not, unfortunately, tell the full story. There are many schemes in place, including social employment and community employment schemes, all of which are worthwhile and many of which I support and accept the necessity for, which tend to mask the true rate of joblessness in this country. What also conceals the true unemployment statistics is the fact that many people are now hiding out in the education system. People are now remaining longer in the education system because there is no prospect of their getting employment.
What is worrying about the official statistics is that on each occasion the unemployment rate is announced, which is on a monthly basis, the proportion of people defined as long-term unemployed grows inexorably. We have reached the stage where more than 50% of the people in this country who are officially unemployed fall into the category of long-term unemployed. This is a social, personal and economic tragedy for the country. What more than anything else masks the true rate of unemployment or lack of job opportunities in this country is our startling levels of emigration. According to the Department's figures, last year more than 70,000 people left our shores. No doubt there are some who would have us believe these people left voluntarily as they wanted to see the Seven Wonders of the World. In my experience - I am sure Deputies on the other side will share this experience - 99% of the people emigrating from this country are doing so because they cannot find a job here.
The figure of 70,000 is startling. It amounts to 1,400 per week and 200 per day. Many of the 200 people per day who are leaving are people who have been highly educated, which education was dearly paid for by the taxpayers of this country. They are the type of people who have the skills, expertise and education we badly need to lift this country out of the economic morass. That they have to leave the country and go overseas to get work is a real tragedy. My main point is that emigration tends to mask the true rate of unemployment here.
The other difficulty confronting business here is the lack of credit. This country is starved of credit. In the mid-1840s we experienced the great potato famine. For the past number of years we have endured a great credit famine. The Minister for Finance has, by his own admission, stuffed the banks with capital, which is taxpayers' money. This was done not because we like the banks or because they are venerable institutions that need to be preserved but to enable them to extend credit to business. Credit is the lifeblood of business. It is needed if we are to get the economy and employment moving again. The banks have failed abysmally to give credit and nobody can dispute that. Nobody looking at this from the outside or objectively can deny that the banks have failed abysmally to do so. I will give an example.
The stated target in 2012 in terms of new lending by the pillar banks, as given to me by the Minister, Deputy Bruton and a number of other Ministers, including the Minister for Finance, Deputy Noonan, was €8 billion. The pillar banks did lend €8 billion in 2012 but only €2.5 billion of it was new lending. The remainder relates to the continuation of loans and facilities already in existence for another year. The amount taken in by the pillar banks in 2012 by way of repayments from SMEs was €4.5 billion. Taking the figures of €2.5 billion in new lending and €4.5 billion in repayments, the amount of credit available to SMEs from the pillar banks in 2012 contracted by €2 billion. That is a fact.
The banks are still engaged in an Orwellian exercise to get people to disbelieve the evidence before their eyes, pretending that everything is normal. The latest argument is the old chestnut resurrected that they are prepared to lend but people are not asking for credit. People in business are not asking for credit because, while the banks say they have money to lend, the conditions attached to that lending are so stringent there is no point in their putting themselves to the expense of applying for it. That is the reality. Two years on, the Government needs to apply direct pressure on the banks. I welcome the proposed moves in this regard.
The Taoiseach seems to be acting like a latter day King Canute, suggesting to the banks that they might change their policy and advance credit, but this patently has not worked.
I welcome a number of measures in the Finance Bill, but somebody looking at the economic context in which we are debating the Bill would wonder to what extent are we detached from reality. The Bill contains various improvements, for example a provision that airport hangars will be treated as industrial buildings to attract accelerated capital allowances. Shannon Airport is in my neighbourhood and I welcome this measure, but one wonders what contribution it will make to the 440,000 people looking for jobs and the 200 people who emigrate per day.
As one of the many people who lobbied in favour of it, I welcome the extension of the fuel rebate to include coach and tour operators and hauliers. However, I remind the Minister of State that other businesses use their own fleets, such as catering businesses and concrete manufacturing businesses. From my reading of the legislation, if it is correct, the rebate does not extend to these and therefore they will be at a disadvantage vis-à-vis large operators. I would like the Minister to examine this.
Changes are being made with regard to research and development reliefs, including to the definition of a key employee. The point has been made that there is no accurate measurement of the potential impact of this on investment in research and development. In fairness to the Minister I do not think there could be; it is not possible to measure it. This is a step in the right direction and I welcome the steps, small and incremental though they are, to change the tax regime with regard to research and development. We are seriously in danger of falling behind. Other countries have latched onto this and made their research and development systems very attractive from a tax point of view. We urgently need to encourage more investment. I repeat that the Minister, Deputy Noonan, is moving in the right direction in this regard but he is moving far too slowly.
I am totally opposed to section 8 which for the first time in history will impose a tax on maternity benefit. This has to be taken in conjunction with the cuts in child benefit in the two most recent budgets and the cuts to the back to school clothing and footwear allowance. It is an attack on children and women. Niamh O'Ceallaigh, a spokesperson for a leading parent's group, stated when this was announced in the budget that it is as if the Government does not want women to have children. This provision will affect 46,000 people and will yield €40 million for the Government's coffers. This means that a woman who happens to get pregnant will be on average €833 worse off. What I equally object to is the spurious reason given in the budget speech for its introduction. We were told there is a lacuna in the law as this State benefit is not taxed. We lived with it for a long time and suddenly when the country is on its knees and people are literally struggling to get by from week to week we discover we have fallen in love with the idea of uniformity in the tax system.
I welcome the measure to provide groups for retail investments but I wonder how effective it will be in practice. I imagine there will be very few of them because the company must be quoted on the stock market and taking into account the expense of this I doubt we will see more than one or two in the country. However, it is a move in the direction of other countries and may attract some foreign capital into a sector that has run into the ground.
The Minister, Deputy Noonan, also announced that when he obtains permission from the European Union he will introduce a scheme to enable people to repair their houses and repair retail shops in certain city centre areas. The two cities chosen were Limerick and Waterford. I must be careful about what I say because I represent a Limerick constituency in conjunction with the Minister, Deputy Noonan. I welcome any concession coming to Limerick. The Minister, Deputy Noonan, explained this was not just a stroke and that he was not just giving money to his own constituency. He explained there was a very good scientific basis for this and I agree. He based it on the level of unemployment. Limerick is the unemployment blackspot of the country. Unemployment in Limerick city runs at 28.2%, which is almost double the national average, and youth unemployment runs at more than 50%. This is the constituency represented by me, the Minister for Finance and the Minister of State with responsibility for housing.
I know many people who live in the inner city area of Limerick, which will be subject to this tax relief. They live in pretty shabby rundown derelict houses and are in a very poor position to repair them. They could do with assistance from the taxpayer or whoever. I am very surprised the forthcoming assistance will be confined to people living in Georgian piles. I have represented the constituency for a long time and there are people living in Limerick city centre who are a hell of a lot poorer than people who happen to be living in Georgian houses in Limerick. Georgian houses look well and add to the tone of an area but the Minister, who knows the city pretty well, knows there are many others apart from those living in Georgian houses who could do with a bit of assistance and it certainly would improve the aspect of the city.
With regard to the other part of the concession, which is assistance for retailers to do up their shops, it will be difficult enough to operate it in Limerick because as far as I can see most retail units in the city centre have closed down. The place is a shambles. I was approached at the weekend by one or two people who were minded to take over derelict shops and do them up. They asked me to find out how the tax relief would operate and when it would come into effect. I made inquiries from the Department of Finance and spoke to some very courteous officials who told me that given the necessity to obtain European consent it would be at least 12 months before it comes on stream and that there is little or no chance it will be retrospective. When I told my constituents this and gave them the bad news they said they would not go ahead but would wait. Instead of acting as an incentive to do something with the rundown retail shops in Limerick it is beginning to act as a deterrent, which I am sure is not the intention.
I welcome the provisions for early access to pensions, but I must say they are too restricted and are likely to make very little difference because they exclude the self-employed, who are the people who would be most likely to benefit from the measure and take down capital and put it into the economy. This will reduce the effectiveness of the schemes severely. The increase in the health insurance level comes at a time when the sector is being driven to the brink of collapse. I deplore the provision which scraps the €127 PRSI exemption for those earning more than €352 per week. It means that people earning just over €18,000 a year will be hit in the same way as people who earn a multiple of this. It is a blunt, unfair and regressive provision. I find it deeply ironic that a Government which includes the Labour Party could not bring itself to impose an extra 3% in the universal social charge on the share of income of people earning more than €100,000 per annum but could bring itself to impose an extra €5 a week, or €264 per annum, in tax on people earning €18,000.
I do not see any thing in the Finance Bill, and nor did I hear anything in the budget, about pensions payable to senior civil servants, senior bankers and senior politicians.
The level of those pensions has scandalised the public, the people who are struggling from week to week. Is the Government aware of credit union surveys that show people who are supposed to be on respectable incomes, such as gardaí and nurses, have little or no disposable income once they have paid their bills? They are scandalised by the amount of pensions being paid to retired civil servants, bankers and politicians.
Fianna Fáil has definitive proposals in that regard and the Government could do much worse than take those in hand and implement them. It would demonstrate leadership and give an example to the people whom we are asking year in and year out to bear austerity.
The forthcoming insolvency legislation will not make any impact on the question of mortgage arrears, which represent a dam waiting to burst. Those arrears have the potential of an iceberg threatening the ship of State. Some 190,000 people, or one in five, are in mortgage arrears. Almost 30% of residential mortgages are either in arrears or have had their mortgages restructured. We are talking about 450,000 people who are experiencing difficulty in repaying their mortgages. That is a serious problem.
Some 50% of house owners with mortgages are in negative equity, yet those are the people on whom the Government is proposing to impose a property tax. I always thought the idea of a wealth or property tax was to tax an asset, but for over half of mortgage holders we will be taxing a debt. It is a new departure to impose tax on debt. Those in arrears, in negative equity and struggling to survive, are being forced to pay a property tax, while water charges are coming down the road. The Government must focus on these issues from now on.
The 2013 budget follows its predecessor of 2012 in being regressive. We have had about eight budgets since the advent of austerity. The 2012 budget was the first regressive one, which punished the poor more than the well off. The 2013 budget continues this trend.
The Government's own think-tank, the ESRI, has pointed out that in budget 2012 the poorest 40% of households saw a decrease in their income of 2.5%, while the income of the wealthiest 30% of households decreased by only 0.7%. In other words, the poor were hit four times harder than the rich and the budget of 2013 continued this process.
I wish to share time with Deputy Michael Creed. There is a total of 20 minutes for the slot.
Ten minutes each. Is that agreed? Agreed.
I also welcome the opportunity to speak on the Bill. This Government has had three objectives since it was elected to office two years ago: first, to return the country to stability and deal with the national finances; second, to repair the banking system and get Ireland's banks lending again, particularly to enterprises; and, third, to restore jobs and economic growth.
A lot has been achieved in stabilising the economy, rebuilding the country's reputation internationally and getting the banking system working. There is, however, a lot more work to be done in dealing with the unemployment situation which is totally unacceptable. The Government will be dealing with it as a matter of urgency over the coming years.
The promissory note has been replaced with a new long-term Government bond which is very welcome. It provides the necessary breathing space for other options which the Government can take in the forthcoming two budgets. Work is taking place in getting financial help from the European Stability Mechanism in relation to the other 50% of total banking debt that went into our banks.
This Bill contains many good initiatives, including some new things from the budget. Some of these ideas have already been mentioned by the Minister for Finance, Deputy Noonan, in his Budget Statement. The primary focus of the budget and the Finance Bill is to create jobs and get Ireland working again.
The introduction of the new Jobs Plus scheme later this year will provide grants to employers to encourage them to employ individuals who have been on the live register for longer than 12 months. That move is to be welcomed and I look forward to hearing more details about it.
In the Bill before the House, the Government has rightly decided to focus on a 12-point plan for small and medium enterprises, which are the key providers of jobs across the country. If the domestic economy is going to recover, it is crucial that we deal with the high unemployment problem by encouraging enterprise and creating jobs.
Over 250,000 private sector jobs were lost between 2008 and 2011. This is a challenging time for all sectors that have been hit by the recession. Job creation is the key in this regard. Each of the 12 points contained in the SME plan is designed to help this critical sector to trade, grow new products and markets, and ensure that existing jobs are retained and new jobs created. SMEs account for almost 70% of people employed in Ireland, hence the strong focus in the Bill on that sector.
I wish to put on record the great work that the Minister of State, Deputy John Perry, is doing in this area. He comes from a business background and is committed in this respect. He understands the issues involved and is working extremely hard for small and medium-sized enterprises. The measures in the Bill include a three-year corporation tax relief for start-up companies; extending foreign earnings' deduction for work-related travel to certain newly included countries, such as those in Africa; increasing the VAT cash receipts basis threshold from €1 million to €1.25 million; and amending the close company surcharge to improve cash flow for SMEs.
The Bill proposes to amend the research and development tax credit by reducing it from 75% to 50%. This concerns the proportion of time an employee has to spend exclusively on research and development activities in order to qualify for the tax credit. That is an improvement on the previous onerous position.
In addition, the employment and investment incentive is being amended to include hotels, guest-houses and self-catering accommodation, which will greatly help existing and new employment in this industry. There is a glut of hotels around the country but this is an important sector, particular this year with The Gathering. The hotel sector currently employs approximately 51,000 people, so it is only right that it should be included under this incentive.
This Bill underpins decisions made in the budget to help farmers who are restructuring operations to benefit from capital gains tax relief when the proceeds of a sale of farm land are reinvested in the farm. Should individuals dispose of agricultural assets to their children, there is relief from stamp duties on transfers of agricultural lands up to December 2015. That is a concrete step for agriculture, which plays such an important economic role. We want to see a future for young farmers so they can continue working in this green industry.
Individuals will be allowed, on a once-off basis, to withdraw up to 30% of the value of their pension AVCs.
Members will be aware that such additional voluntary contributions, AVCs, are supplementary benefits on top of one's ordinary retirement benefits. This is bound to help ordinary people who find themselves with cash flow problems and who are unable to access - or who lack - other savings. Withdrawals will be taxed because individuals will have benefited from tax reliefs initially when taking out such AVCs but they will have an opportunity to use their money and hopefully will spend it within the country, because that is what is needed at present. As a previous speaker has noted, the aviation sector also is important and the Minister has dealt with the provision of accelerated capital allowances regarding the construction of hangars and in respect of the refurbishment of certain buildings or structures to deal with commercial aircraft. Very generous capital allowances and reliefs will be available in this regard. The cost of fuel has made things difficult for this industry, which provides a considerable number of jobs. Moreover, many aviation European headquarters are based in Ireland and, accordingly, it is quite appropriate to provide some help in this regard.
I greatly welcome the living city initiative that has been announced on a pilot basis. It pertains to regeneration and is similar to other urban renewal schemes that were provided in the past. While Waterford and Limerick are the two cities that have been selected on a pilot basis, as a Dublin Deputy I certainly hope Dublin also will be included over time. In particular, there are parts of the north and south inner cities in which there are Georgian buildings that could do with encouragement to their owners to live there and to refurbish such buildings. This is a very worthwhile initiative.
In respect of cigarettes, I note the Bill provides for an increase of 10 cent per packet of 20 cigarettes. Were Members to be serious about dealing with smoking, they should be considering a higher charge per cigarette packet. Obviously, I can make this point as a non-smoker but I acknowledge that others may feel differently. Nevertheless, it is known that smoking-related illnesses account for many of the reasons people find themselves in hospitals. A new graphic photograph is being placed on cigarette packets to discourage younger people who may be starting to pick up the habit in an effort to put them off. I have been approached by the National Federation of Retail Newsagents in Ireland, as well as other retailers, regarding this issue. In particular, its president, Joe Sweeney, has informed me that the federation's members are greatly concerned about a new European tobacco products directive, which provides for the oversized graphic image. In addition, it proposes that from henceforth, the cigarettes will be in plain packaging. This is of major concern to the federation and is a blow to struggling retailers who are concerned that as a consequence, the issue of the black market, which already is massive-----
The Deputy's time is up.
Very well. It already is a massive market and the retail sector requires protection. It is Ireland's biggest employer with more than 260,000 employees or 14% of the workforce. The introduction of this directive will reduce Government revenue and, consequently, there certainly is genuine concern about it. While I could go on, I will conclude by welcoming the Finance Bill.
I welcome the opportunity to speak briefly on the Finance Bill 2013 and on the Finance (Local Property Tax) (Amendment) Bill 2013. Like most people, it is not so much that I welcome the Bills' contents but I acknowledge the rationale behind them. There is an old country saying in respect of people who come into an inheritance that has been carefully gathered together over many years, which is that after a gatherer comes a scatterer. However, in respect of Ireland's current position, it is a case of after a scatterer comes a gatherer. Regrettably, the country's inheritance is the consequence of many years of untargeted and poorly-focused scattergun approaches to public expenditure, which, allied with a banking crisis and collapse, as well as a collapse in the country's tax base, has left us in our current position. In so far as I welcome the opportunity to speak, it is because this Bill provides a clear line of sight for members of the public who, it must be acknowledged, are suffering from the consequences of the economic recession and the difficult times in which we live. I believe that, inasmuch as they yearn for financial relief from the predicament in which they find themselves, they also yearn for some degree of certainty. Consequently, while the contents of this Bill will not be widely welcomed, they provide certainty both in respect of the current financial year and with regard to the medium-term horizon, with the advent of a property tax, water charges and so on.
I also make this point in the context of the current ongoing talks on a successor to the Croke Park agreement. There is a perception, which perhaps is being perpetuated by many colleagues on the Opposition benches, that the current Administration for some reason would be hostile towards public servants. There is not a family in the country that does not have someone who works in the public service or which has no relations who work as gardaí, teachers, in 24/7 Frontline Services Alliance-type roles or any other aspect of the public service, be it on the front line, back line, middle line or wherever. I acknowledge the country would not function without these people. Members must try to provide a clear line of sight in order that people know where they are going and how we are going to get out of it. Regrettably, one thing that has eluded us in recent years is the growth needed in the economy, allied to the necessary retrenchment that has taken place. While growth has occurred at very low levels, Ireland's problem has been that its export markets have been in recession, which has stymied its recovery prospects. This legislation contains something that will provide such a line of sight. While it is hoped to get out of the bailout agreement by the end of this year, so doing is not in any way a cause for jumping up and down or for celebrations because it merely is a case of moving from the intensive care unit to the critical care unit. Ireland still will be in an extremely difficult position, not so much because of the legacy debt and high levels of unemployment, which are the headline issues of its recession, but because there continues to be a highly significant gap between what the State raises from taxes each year and what is spent. This really is where the pain is for people on a daily basis. These remarks comprise a preliminary overview to a couple of observations I wish to make.
Much has been made about the requirement for a stimulus package and, certainly, in the context of employment and unemployment, this will be necessary. A mini-stimulus package was launched last year, which was very welcome and which addressed areas such as local authority expenditure on roads, school building programmes and so on. However, much more of this is required and in this context, I wish to encourage the Taoiseach, the Minister for Finance and their Government colleagues to acknowledge that the biggest crisis facing householders today is the mortgage crisis. If one takes it that more than 100,000 mortgages are in considerable difficulty and arrears, relief of approximately €100 per week for each of those mortgage households would result over a year in half a billion euro of additional expenditure being released into the economy. I acknowledge that while €100 goes nowhere near what is required, half a billion euro will go nowhere near to sinking the banks' recovery. The State has equipped the banking institutions, and the pillar banks in particular, with significant resources to deal with this issue. Moreover, the legislative framework now is in place to deal with insolvency and lesser levels of unaffordable debt. It really is unacceptable that to date, there has been no significant willingness by the individual banks to address this issue. In acknowledging what the Government has achieved in respect of the demise of Anglo Irish Bank and the promissory notes, I ask it to accept this is an issue of equal significance to ordinary householders. People may well ask what was the gain for them in respect of the promissory note deal and the truth is, relatively speaking, probably very little because it is not additional money available to the Government to spend but is less money it is obliged to borrow. However, this would be a significant issue for individual householders and would be a boon to the local economy. It would be a stimulus package by another name.
That is something the Government needs to move urgently to the top of its priority list. There are no easy solutions and I understand why banks do not come out with headline figures for debt write-downs and say, "We will write off 40% of our loan book" and so on. This has to be dealt with on a case-by-case basis and moral hazard is an issue, given the "can pay, won't pay" issue. I urge the Government to roll up its sleeves on that issue.
On a related issue, we often celebrate in the House our success in targeting FDI. This is a mobile commodity and we are fortunate that we secure a significant element of such investment. More than 700 US companies are based in Ireland employing 115,000 people. That is not to be trifled with and we punch way above our weight in the context of competition on the global markets to attract such investment. I was inclined to tiptoe around one issue in this regard and I had been in contact with the IDA and the Minister for Jobs, Enterprise and Innovation but it will reach a crisis point soon. It is the availability of suitable accommodation for companies that may be willing to relocate to Ireland. I come from a provincial town in Cork and I acknowledge not all of the multinationals can be relocated to such towns but we need a critical mass of infrastructure to be made available to the IDA to market the country appropriately. It is regrettably the case that in Cork and many other provincial cities advance factories, as they used to be known, are not in place. We need to move on that and I hope NAMA will play a role in financing and rezoning lands they control.
I welcome the fuel rebate and its extension to transport operators, which is an acknowledgement that the tourism sector, in particular, has a significant role to play. It has been one of our success stories and, as Deputy Terence Flanagan said, in the context of The Gathering, it can be built on.
I hope the officials will bring the issue of the tax free status of income from forestry to the attention of the Minister for Finance. Some tax free shelters are being phased out but there is an issue with reducing this threshold to €80,000 because it will impact on the flow of forestry goods to the market, which, in turn, could impact on employment in timber processing, etc. Five-year averaging needs to be considered rather than adopting a single approach to that.
I am very dissatisfied with the public procurement issue in the OPW. It is displacement by another name, which is being dressed up well in the context of the savings it is hoped to generate but I am not satisfied at all that displacing a local employer on the basis of using a single supplier of, for example, books to schools or janitorial services to Garda stations and schools is necessarily good. We need more of a regional emphasis in this regard and a weighting needs to be provided for in the tendering process for companies that are committed to producing Irish or EU goods as opposed to imports from outside the Union, which could displace employers and throw their employees on the live register.
I wish to share time with Deputy Higgins.
The Bill has to be viewed in the context of the overall budgetary adjustment under which €3.5 billion is being removed from the economy this year and the significant impact this will have on citizens' daily lives. It also has to be viewed in the context of the changes to social welfare benefits under which farm assist payments have been reduced, which is having a severe impact on rural communities. Farm assist is being adjusted for recipients across the country and they are experiencing significant reductions in their weekly payments. The inclusion of Sunday working in the assessment of applications for jobseeker's benefit and jobseeker's allowance will also have a significant impact.
Fine Gael has constantly said that it will not increase income tax but, in the Budget Statement last December, the Minister announced the abolition of the PRSI threshold, which is for all intents and purposes an increase in tax because PRSI is part of the tax take out of people's weekly salaries. Fine Gael's claim that it is not increasing taxation is, therefore, a fallacy and it should be seen for what it is.
The Government parties budgetary strategy is wrong and it cannot deliver the return to growth they intend. No stimulus is included in any of the provisions. Previous speakers referred to SMEs providing 70%of the country's employment but I wonder how many are involved in research and development and how many have the capital to have a corporation tax liability that would allow them to benefit from the measures in the legislation. I imagine there are very few.
Section 8 provides for the taxing of maternity benefit. When this is considered in the context of the proposal by the Minister for Social Protection to remove the universal child benefit payment, it can be seen as an attack on women. The taxing of maternity benefit is a mean spirited provision and I oppose the section on that basis.
Section 5 provides for the threshold for the time key employees must be involved in research and development to be reduced from 75% to 50%. That is lauded as one of the provisions that will help SMEs to increase employment but there is no provision to prevent large multinationals from availing of this tax break. This should be included to ensure the provision is directed at SMEs, which have a research and development aspect to their work. It should be pitched in a way that does not allow large companies to benefit from it and to piggyback the change.
The Labour Party has made much play on the increases in the DIRT and capital gains tax rates describing them as taxes on wealth. While wealthy people will be affected by the increases, many small savers and others who are not high net worth individuals will be affected. This could hardly be described as a wealth tax on their small savings. Where people get small inheritances, the capital gains tax increases will impact on them. This cannot be stated to be a wealth tax, as it is a general tax that targets everybody.
Section 97 provides that where property is held by a trustee on behalf of somebody subject to a personal insolvency arrangement, the tax on rental income will be levied on the person. The tax should be deduced from the rental income paid to the trustee and not levied on the person who is insolvent. If somebody is subject to a personal insolvency arrangement, the fact he or she does not have control over the property and is not benefiting from the rental income means he or she should be liable for tax on the rental income. If the section does not provide for this, it should be amended to ensure the tax will be collected on the rental income paid to the trustee who would be required to pay it on behalf of the person who is insolvent.
One measure I welcome is the extension of the fuel rebate to coach and bus operators. This should provide a small benefit and an incentive to such companies to continue in business.
The Minister should have rebalanced excise duty on alcohol. Earlier today, a publican told me he pays approximately €160, including excise duty and VAT, for a keg of beer but can buy the equivalent quantity of beer in cans in a supermarket for €90. This does not make sense, particularly in light of the harm alcohol causes in communities. Alcohol abuse is predominately caused by off-sales. The position should be rebalanced by increasing taxation on off-sales and reducing it on the pub trade in order that people can drink in a safe environment. The Cabinet is due to sign off on an alcohol Bill in the coming days, if it has not done so already, and should use this legislation to address the issue I raise.
The Finance Bill 2013 merely carries on the failed austerity policies the Fine Gael and Labour Party in coalition have been implementing for two years. This does not prevent the Minister for Finance from trying to spin economic figures in favour of the Government. Introducing the Bill, he presented 0.8% growth in gross domestic product in the first three quarters of 2012 as if it were a success. I remind him that the Department of Finance, in December 2010 after the troika programme of salvaging the European speculators and bankers on the backs of Irish working people, forecast growth in 2012 of 3.2%, a decline in unemployment and an increase in the number of people at work. All these forecasts were nullified by the experience of the past two and a half years.
The austerity programme of cuts and tax increases is playing havoc with the domestic economy, yielding the disastrous unemployment situation, with approximately 444,000 people on the live register, emigration last year of approximately 80,000 people, mainly the young, and the general difficulty people are experiencing in surviving. Introducing the Bill, the Minister outlined growth in exports of 3.2% in the first three quarters of last year and indicated this was a major success. While every job in the export sector is welcome, the economic crisis and mass unemployment will not be resolved by export growth. Exports arise from areas of the economy which are generally highly capital intensive and do not, unfortunately, significantly increase the numbers at work relative to the amount of capital invested. Moreover, they do not in any way make up for the damage or decimation done to the domestic economy by the cuts and tax increases of this Government following on the example of the Government of Fianna Fáil and the Green Party.
Increasing investment is fundamental to job creation. Private investment has, however, collapsed catastrophically in the past five years and there is a paralysis of private investment all over Europe. According to McKinsey global forecasting, the decline in Ireland over this period was 64%. Last year, the financial press indicated that major European corporations in the eurozone and Britain were sitting on €3 trillion of accumulated profits which they failed to invest, while 26 million people are unemployed in the European Union. The reason they have not invested is that they are not confident of securing sufficient profit if they were to do so. European capitalism is, therefore, on an investment strike and when one combines this with savage austerity and cuts in public investment in many countries of Europe, one gets a eurozone economy in serious crisis.
The puny measures in this budget are totally inadequate to meet the extent of this crisis in Ireland. Some of the measures introduced in the past year or two, for example, the so-called JobBridge scheme, are contemptible initiatives designed simply to massage the figures. In the case of JobBridge, it provides exploitative packages to take young people off the official lists, while doing nothing to resolve the essential and serious problem of providing jobs. Radical measures are needed, including major investment in public infrastructure. Public funding should be directed into this area, rather than to continuing to fund the disastrous bailout of bankers and the European financial markets.
The Minister and Government refused to tax the top 5% of earners, despite our pre-budget submission demonstrating that this group of earners could afford to pay another €2.5 billion this year alone without breaking their hearts. This is the type of funding that is required for major infrastructural projects which could take tens of thousands of skilled and unskilled workers off the dole, kick-start the economy and recreate economic growth. Instead, Fine Gael and the Labour Party bowed to the financial markets in carrying out their programme. What we need to do, on a European basis, is break the power of the financial markets, take the major banks and financial institutions into public ownership under democratic control of working class people and in that way use and direct them towards investment in infrastructure for the good of society, rather than the destructive profits of a tiny elite.
The property tax, if allowed to be implemented in 2013 and onwards, will be another major drain on individuals and families, which will further depress the domestic economy and give another twist to austerity. There will be consternation if letters are issued to every home next month demanding hundreds of euro, to be joined the following year, if Government plans are implemented, by a water tax that will come close to €1,000 per household. This will give rise to a massive campaign of opposition which should be fully supported, as citizens and ordinary taxpayers bring their power democratically to bear on a Government that is putting the interests of bondholders and bankers before those of the majority.
Therefore, the boycott of that odious so-called property tax, a tax on the individual and the family home, should be supported and political pressure should be applied to force the Government to relent.