Dáil Éireann debate -
Wednesday, 13 Mar 2013

Vol. 796 No. 2

Finance Bill 2013: Report Stage

Deputy Michael McGrath

I move amendment No. 1:

In page 12, to delete lines 32 to 42 and in page 13, to delete lines 1 to 14.

We had a good discussion last week on Committee Stage. No guillotine was needed because we got through our business ahead of time. I acknowledge the manner in which the debate was approached by the Minister, Deputy Noonan, the Minister of State, Deputy Brian Hayes, and their officials. We had a good session on Committee Stage. We got a feel for each other's positions on various issues. None the less, I have chosen to elevate a small number of issues for Report Stage debate because they need to be debated on the floor of the House.

Amendment No. 1 relates to the proposal in the Finance Bill to tax maternity benefit, adoptive benefit and health and safety benefit in the same way that all other income is taxed. We debated this issue at some length on Committee Stage last week. When the Tánaiste took Leaders' Questions last Thursday, he gave the clear impression that this measure will not result in a reduction in people's incomes. I was annoyed because it was quite misleading. He said on a number of occasions "There is no reduction in income". He gave the example of a woman who continues to be paid by her employer during the course of her maternity benefit. It is true to say that after this change is made, women in the limited circumstances highlighted in the Tánaiste's example will not be any worse off, based on a comparison between what they earned while they were working and what they will receive when maternity benefit is taxed in the normal way similarly to the remainder of their salaries. Women in a small number of cases will be worse off, however, because they will not receive the bonus they would have received until now by virtue of the non-taxation of maternity benefit. That is just a small part of the picture, however. It was misleading of the Tánaiste to make those comments without giving the full facts.

The bottom line is that the Department of Finance has estimated that a yield of €40 million will accrue from this change in a full year. Where will that €40 million come from? It will come from the pockets of pregnant women. That is the bottom line. In some circumstances, a woman will have used up her tax credits and her lower-rate band during the months she worked before she went on maternity leave, or she could use them up after she returns from maternity leave. I accept that will not happen in every case. It could also happen that the woman's partner or spouse will use her available credits and her lower-rate band and, as a consequence, her maternity benefit will be taxed in full. Some women who would otherwise have received maternity benefit of €262 per week will now receive maternity benefit that is reduced by €107 per week. I acknowledge that this will not happen in every case, but some women will be affected in this way. They will lose €2,800 over the course of their six months of paid maternity benefit.

It is important to put those facts on the record because last Thursday's debate was misleading. Anyone who followed it would have formed the clear impression that no woman will be any worse off as a result of this change. That is simply not the case. Some women will lose the bonus they gained by virtue of the non-taxation of maternity benefit.

I do not believe there is any objection among most Members of this House to deal with that issue but there will be other cases where women will lose out to the tune of €107 per week, or €2,800 over the course of the six-month maternity benefit.

I know the Minister is not for turning on this issue. I wanted to put on the record that those are the consequences for some people and to, in a fair way, point out that some are affected very severely by this while others will not be affected as severely. I repeat what I said on Committee Stage last week, namely, this is a tax on pregnancy and it will affect women during a very important time in their lives, when they are bringing life into this world and should be given every possible support. The Government will say it is aligning this with the taxation of other forms of social welfare but, as I pointed out last week, there continues to be a number of social welfare heads that are not subject to income tax whereas this one will now be. It will have an affect. At the end of the day, it is €40 million out of the pockets of pregnant women. Let us call it what it is and not try to dress it up in any way that would mislead people.

Deputy Pearse Doherty

Ar dtús báire, ba mhaith liom a rá, mar nach raibh an t-Aire i láthair fá choinne dheireadh Chéim an Choiste an lá deireanach, go raibh cruinniú iontach maith againn ar feadh dhá lá agus go rabhmar ábalta ár gcuid oibre a chríochnú taobh istigh den téarma ama a bhí leagtha síos. Bhí sin maith. Bhí díospóireacht mhaith ansin. Cé nár aontaigh muid leis an treo a bhfuil an tAire a ghlacadh san Bhille Airgeadais, bhí deis mhaith againn na pointí a ardú agus bhí díospóireacht mhaith ón dá thaobh. Ba mhaith liom comhghairdeas a dhéanamh leis an Aire. Tá a fhios agam gur éist sé le cúpla des na pointí a chuir mé cun tosaigh agus tá súil agam go bhfeicfimid dul chun cinn ansin níos moille sa bhliain.

Tá cúpla pointe a ardóidh mé féin le linn na Tuarascála. Níl mé chun dul tríd na pointí uilig atá pléite go dtí seo. Tá siad pléite go maith ó tugadh an cháinaisnéis isteach i Mí na Nollag. We are not going to exhaust the debate we have had since the first week in December, when the budget was introduced. We debated many of these issues in the resolutions on budget night and have debated them in the media and in this House in the intervening period, including on Second Stage of the Bill. The Committee Stage debate was good and useful, despite the fact many of the amendments and changes of direction my party asked the Minister to consider have been rejected. Like the previous speaker, however, I believe there are a number of key issues that need to be addressed on Report Stage.

I recognise this is an issue on which the Minister will not budge. Nonetheless, it is important that we put down a marker. The taxation of maternity benefit, adoptive benefit and health and safety benefit is a cruel cut. That is what it is - it is a cut to pregnant women and a tax on childbirth. At the end of the day, we have to realise this State provides very little to pregnant women and newborn babies.

We all know, as I know personally, the costs many families have to face in regard to a newborn child, for example, the cost of a cot, a car seat, a feeding seat, nappies, clothes and all of the additional costs people have to bear. Having maternity benefit exempt from taxation allowed, in some circumstances, that those who were pregnant and had a child had additional income to meet some of those costs, although it was not universal or across the board and depended on one's employment and tax situation.

The reality, as the Minister well knows, is that it will now be a question for many women of when they fell pregnant. If they have their child before a certain date, they have the benefit of maternity benefit that is exempt from tax. However, if the child is born after a certain date, many people will pay tax on maternity benefit at the higher rate of 41%. For a single person who has a child after the date prescribed in this legislation and who is earning, say, €33,000, which is under the average industrial wage, this means her maternity benefit will now be taxed and she will lose out to the tune of €2,792.92.

There are very few measures in the Finance Bill that have this deep an impact on individuals. We have discussed at length in this House the local property tax, which will be a huge burden on many individuals and families across the State, and the letters have started rolling out in recent days. Yet, that will not reach anywhere near this type of figure. Many women who are carrying a child in their womb will lose out, and they know the passing of this legislation today means they will see a reduction of €2,792 in the income they expected to have prior to the Minister's announcement. That is simply unfair. I do not believe we should tax maternity benefit. This State does not provide enough for expectant mothers and newborn children. This has been a very small gesture to compensate some women, although I recognise not all are able to benefit because they may not be in employment or their employers may not continue to pay them when they are on leave. However, for those who are in that situation, it is not fair to take this from them. I oppose section 8 and I support the amendment.

Deputy Richard Boyd Barrett

Likewise, as I indicated on Committee Stage, I oppose this move to tax maternity benefit. In the various comments from the Minister and Government spokespersons when this issue was first highlighted, the defence put up was to suggest this was a significant anomaly where, if people were on maternity leave, they would end up with more than if they had stayed at work. The problem lies in the way that is put because, of course, when a woman is on maternity leave, she is at work. She is doing additional work, and it is additional work that benefits our society and our economy. Frankly, women are not sufficiently acknowledged for the role and contribution they make to our entire society and economy as a result of their role in bringing up children. We need more acknowledgement of that role and contribution, not less.

I have no problem with women who are on maternity leave getting a bonus for giving birth to children and rearing those children in their early weeks and months. Indeed, I believe all women should get such a bonus and they should be recognised for the additional work they are doing for the whole of society, particularly when they work and then have to play this role as well. I do not believe this is acceptable. It is a cruel, anti-woman, anti-family and anti-child cut. Even at this stage, the Minister should row back on it.

We have so often heard from the Government fine words about children and families, and the esteem in which the Government holds them, but we then see a measure such as this, which will penalise women and reduce a small extra acknowledgment of the important role they play in our society. I hope the Minister will row back on this, although he has indicated he will not.

Deputy Catherine Murphy

I draw attention to the supports other countries put in place, particularly the more enlightened countries in the northern hemisphere such as the Nordic countries. These countries look at the replacement of population and solidarity across generations because we need to replace our population if we are to afford to cater for our aging population. There appears to be evidence that many people are delaying having children. Income plays a sizeable part in that decision, but there are consequences arising from that delay. Often it is a riskier time for women, as the ideal time to have a first child is when one is in one's mid-20s. We must look at this issue in the round and not introduce economic measures that produce less desirable scenarios not just found in the economic area. For that reason, selecting a particular group sends a very bad signal. We do not have very large families anymore. It only happens for a very short period of time in somebody's working life. This measure is the wrong way to go.

Deputy Peter Mathews

I thank the House for giving me a brief opportunity to echo what I said on Committee Stage, that maternity benefit is a qualitative as well as a quantitative salutation or encouragement for the role of motherhood. To reduce it to fiscal algebra or arithmetic is a backwards step. Motherhood is a wonderful role which society can endorse and support through maintaining maternity benefit.

Minister for Finance (Deputy Michael Noonan)

We had a long debate on this issue on Committee Stage and I thank Deputies Michael McGrath and Pearse Doherty for acknowledging that we had a very good Committee Stage debate in which matters were discussed very thoroughly. I thank the Deputies who participated because one needs two sides to get a good debate going. It was a very interesting and helpful debate. However, there is a tendency in such debates for the Opposition to always concentrate on the individual, which is fair enough, but the individual can only be aided in terms of tax breaks and social welfare benefits at the expense of the generality of taxpayers. It is my job to look at this generality. Deputy Michael McGrath has pointed out, rightly, that the full year yield of this measure is €40 million. We are phasing it out, but as the benefit is not being taxed until mid-year, the real effect will be felt in a full year. If we do not reduce the imposition, that €40 million will fall on to be met by other taxpayers - the poorest of the poor, as well the richest of the rich. The taxes paid by way of VAT and excise duties by people who do not even have an income tax liability go into the pool of taxes from which the funding for measures such as this come. It is not enough to argue all the time about the individual benefit, fly the flag for motherhood and say this is a dreadful imposition. One must look at what is happening across the board also. It would be great if we were living in the virtuous society to which Deputy Peter Mathews aspires where we could make our decisions without any acknowledgement of the fiscal consequences, but the hard facts are that one person's relief is another person's tax. We must always approach these issues to see whether we can achieve the best balance.

During the good years when the barns were being filled with wheat, as they were before the plagues in Egypt, many very generous measures were brought forward and at the time they were justified. We all supported them and they were a good idea, but there are some we can no longer afford. We are in a position where hard choices must be made. We see the Minister for Social Protection having to reduce the respite care grant for carers, at a total cost of €26 million. Not taxing what is an additional benefit for women on maternity leave adds up to €40 million. These are the choices that we are faced with and we must make the choice.

The Opposition would be right if there was not already much support provided in the tax system for pregnant women and children. Generous entitlements to paid maternity leave were increased to 26 weeks on 1 March 2007. Additional entitlements to unpaid maternity leave are also available, increased to 16 weeks from 1 March 2007. We are all familiar with child benefit payments and family income supplement is available to families on low pay. The one parent family payment is available, while the one parent family tax credit of €1,650 is payable to any single person with a child under 18 or over 18 years who is in full-time education or permanently incapacitated. Our benefits compare quite well to those available in many European countries. The duration of maternity leave is 26 weeks, or one half of the year. In Belgium, it is 15 weeks; in Denmark, 18 weeks; in France, 16 weeks; in Germany, 14 weeks; in Italy, 20 weeks; in the Netherlands, 16 weeks; and in Spain, 16 weeks. Compared to most other countries, about an additional ten weeks maternity leave is given in Ireland.

Deputies are all aware of how the payment works. The minimum payment is €217.80, while the maximum payment is €262 per week, but 90% of recipients receive €262 per week. For example, a schoolteacher on maternity leave has the same take-home pay in or out of work because her salary is deducted by €262 and replaced by €262 in maternity benefit. An anomaly arises in the sense that when she was in receipt of the €262 in her salary, it was taxed, but when she receives it in maternity benefit, it is not. We are removing that anomaly because persons in these circumstances have higher take-home pay than they would otherwise.

Deputy Michael McGrath is right in that there are other cases in which one can show losses. It is complicated because for some the losses are made up by having a tax credit; therefore, if someone is out of work for one half of the year, in many cases, they will not have used up their tax credits which will balance the maternity benefit payment.

Overall, there is a saving to the Exchequer in a full year of €40 million, but it is a question of choices. It is not free in the sense that the figure of €40 million comes from other taxpayers and if I do not get it in this case, I will have to get from somewhere else. Deputy Richard Boyd Barrett would have no problem in finding it. He will tell me to tax the rich. I have been searching for the small group of extraordinarily rich people who would pay all of our bills without making any imposition on anybody else if only we could find and tax them. We have been looking for two years and not found them.

On the balance of judgment, this is a fair scheme and measure.

Deputy Michael McGrath

I thank the Minister for acknowledging that the increase to 26 weeks in paid maternity leave was a very positive move. We can be proud that this is one of the countries leading the way on the issue of treating women well when they are pregnant and giving birth. The Minister has stated this change will yield €40 million in a full year. Is there any estimate of how much would be saved if, what the Minister terms, the loophole was closed to ensure that, as he spelled out in his reply to Deputy Stephen S. Donnelly's amendment, women would be no better off as a result of receiving maternity benefit for six months? Are figures available for the numbers of women who are paid in full by their employers while on maternity leave as against those who are not? The public sector scheme is a generous one and women continue to be paid, by and large. However, in the private sector the position varies significantly. The vast majority of small and medium enterprises, for example, cannot afford to continue to pay women their salaries while on maternity leave. Is there any estimate of how much of the €40 million would be saved if the change was restricted to ensuring women who are paid their salaries while on maternity leave would not benefit from this bonus, or this anomaly, as the Minister terms it?

Deputy Michael Noonan

The Deputy appreciates it would be administratively quite difficult to do so and that it probably would be legally impossible. We are discussing whether to tax a social welfare benefit. In deciding that it would only be taxed in the case of some recipients and not taxed in the case of others - not so much on the basis of income but on how their employers treated them - one would be in a very thin legal position in which to make that differentiation. We are in a position where it can be either taxed or not taxed and I have decided to tax it.

Acting Chairman (Deputy Bernard J. Durkan)

I call Deputy Pearse Doherty.

Deputy Michael Noonan

May a Deputy other than the mover of an amendment speak twice on Report Stage?

Acting Chairman (Deputy Bernard J. Durkan)

We will allow him to speak for just one moment but not to repeat what he said previously.

Deputy Pearse Doherty

I will be brief. This measure is far from fair. There are other options the Minister should consider to save €40 million and which have been presented to him by our party and others. He referred to the period of 26 weeks paid leave, but I point out to him that if this section was not enacted, women to whom I referred on maternity leave after 1 July this year would be the beneficiaries of €2,792. He has reduced their paid maternity leave from 26 weeks to 15. Instead of being paid €262 a week for 26 weeks, maternity benefit will be paid for 15 weeks. This is far from fair. I know I have to be brief, but we have made our point and I oppose the section, as there are other ways to save €40 million.

This benefit is also for the newborn child who depends on his or her mother for everything. The benefit should be universal. There are some things in life that should be available to everybody, regardless of income, although I acknowledge this may throw up anomalies. Sinn Féin does not believe in the taxation of child benefit, even for the super-wealthy; rather, it believes they should pay their appropriate part in direct taxation. That is the best way to deal with this issue. Maternity benefit is particular to women and we have been given an insight into the lack of their influence at Cabinet level by the fact that this proposal has made it this far.

Acting Chairman (Deputy Bernard J. Durkan)

For the benefit of the House, all Members may speak twice on Report Stage, but the mover of an amendment may speak three times, if he or she is so inclined.

Deputy Richard Boyd Barrett

The Minister has not really grasped the central point made by some of us on this side of the House. His defence for this move to effectively cut maternity benefit does not recognise the contribution and role of women in society as a whole and the economy. When he argues that we have to make fiscal choices, he is implying that there is fiscal rectitude and proper fiscal management, on the one hand, while, on the other, there is a giveaway to women who are having children. He argues that even though we might like to be able to do it, we cannot really afford it and that it is not in the interests of the economy. The point we are making - a point also made by Deputies Peter Mathews and Catherine Murphy - is that women are making a very significant - I would describe it as unparalleled - contribution to the economy in bringing up children. The Minister might consider that many countries in Europe such as Germany, for example, have real problems with an ageing population. That will be an economic problem. Therefore, encouraging, rewarding, incentivising and supporting women who make the choice to have children - in addition to working in other sectors of the economy - is a positive measure which is good for society and the economy as a whole. It is a false argument to set one against the other, as it is not a case of the individual against the rest of society. In fact, these individual women are making a very valuable contribution.

In some ways, the Minister's attitude sums up an ideological view that sees human beings as being in some way a burden on the economy, that the more we have, the more burdensome they become and that we cannot really afford this burden. That is a view which sees things completely the wrong way around. Those who generate wealth and economic activity are these very human beings. The idea that people should not be fully supported and that role should not be fully acknowledged is wrong, even in difficult economic circumstances. This is a mistaken cut which must also be viewed in the round, with the cuts to child benefit and the cuts affecting lone parents. These cuts have all hit women who are having and bringing up children.

At least let us be fully honest when debating alternatives. The Government endlessly repeats that there is no pot of gold. I am not saying there is, although some gold was discovered in County Wicklow recently which we should investigate.

Deputy Michael Noonan

Will the Deputy be out with a sign to stop it being mined?

Deputy Richard Boyd Barrett

We will consider our view on that issue when we see who is mining it and who will gain the benefit.

Deputy Michael Noonan

Is the Deputy in favour of the oil in Dublin ##Bay being brought ashore?

Deputy Richard Boyd Barrett

The Minister is diverting the discussion slightly. The economic cost of an oil spill in the bay would be far greater than the cost of any benefit we might receive. In any case, we would not receive the same benefit as the private multinationals.

The Minister has alternative proposals which have been put to him by various Members. As I pointed out to him, responses from his own Department indicate that 108,000 people - the top 5% of earners - are earning over €100,000 a year, with average earnings of €185,000. On average, they are paying an effective tax rate of 36%.

Acting Chairman (Deputy Bernard J. Durkan)

The Deputy has gone well over the two minutes allowed.

Deputy Richard Boyd Barrett

In our budget submission, we proposed that the effective rates relating to these people should be increased and that hundreds of millions or perhaps billions of euro could be captured as a result. There are alternatives but the Minister just does not accept that they exist. He is of the view that it is more acceptable to hit women who are bringing up children and we believe he is wrong.

Deputy Michael Noonan

In the first instance, I do not have the Malthusian fears regarding overpopulation which the Deputy ascribes to me. Like Deputy Pearse Doherty, I proved this in my own life because I have quite a large family. Deputy Boyd Barrett can rest easy because we do not have a big problem in that regard. His definition of wealth being an income of €100,000 is rather undermined by his claim that the average tax take on that amount is only 36%. Even if one subtracts the 36% from €100,000, it means that the very wealthy people to whom the Deputy refers still have €64,000. That is their net take home pay. Does he propose to take hundreds of millions of euro more from them? If one uses net rather than gross figures, the picture is slightly different.

Deputy Richard Boyd Barrett

I referred to those with incomes of more than €100,000, all the way up to €8 million.

Deputy Michael Noonan

Fine, people with incomes of €101,000 or more. If one takes 36% of their money, they will then have €64,000 plus a few cent change.

Deputy Richard Boyd Barrett

I stated that their average earnings were €185,000.

Deputy Michael Noonan

I do not have the kind of attitudes to women which the Deputy suggests. There are large numbers of women in the group that is going to have to come up with the €40 million. Many of those women are poor and they will be obliged to pay for this out of their family budgets. Choices must be made. In our wider family and in our circle of friends, we can all identify young pregnant women or young married women who plan to have children in the future which this may affect. We can identify with the individual and the personal. However, there are other women who are anonymous and frequently poorer than those in receipt of benefits and who must pay the relevant amount in tax. One can say that this is all right because only €40 million is involved. Such amounts all add up, however.

We continue to spend significantly more than we raise in taxes. The Government's job, among other things, is to reduce the gap between the two. A series of difficult choices must be made in order to get us there. Those choices involve increasing taxes, as in this case, or reducing expenditure, as in many others. They are difficult choices and we are engaged in making them. Deputy Boyd Barrett can disagree with what is proposed but if he does so, there is an obligation on him to inform me from where I might obtain the €40 million.

Deputy Richard Boyd Barrett

I just did.

Deputy Michael Noonan

No, the Deputy did not.

Deputy Richard Boyd Barrett

I did. The Minister is just not listening.

Deputy Michael Noonan

The Deputy's single solution to every problem is to take more tax off all these wealthy people.

Deputy Richard Boyd Barrett

I have suggested increasing corporate tax, introducing a financial transactions tax, etc.

Acting Chairman (Deputy Bernard J. Durkan)

The Deputy has already made his contribution. The Minister to continue, if he wishes to do so.

Deputy Michael Noonan

I had concluded my remarks.

Question, "That the words proposed to be deleted stand", put and declared carried.

Amendment put and declared lost.

Acting Chairman (Deputy Bernard J. Durkan)

Amendment No. 2 in the name of Deputy Donnelly is out of order for the reasons to which I referred earlier. The amendment contains a proposal to limit maternity benefit payable in order to confine the aggregate of benefit and pay it to a level that does not exceed the level of emoluments paid to the recipient immediately prior to receipt of maternity benefit.

Deputy Pearse Doherty

On a point of order, those of us engaged in debates on Committee and Report Stages research the amendments that are tabled and establish what is the voting position of our parties. When the relevant debate commences, we are informed that certain amendments are out of order. There must be a better way to inform Deputies that amendments have been ruled out of order in order that they will not be obliged to do all of the work to which I refer for naught and that they will be able to focus their energies more productively. I ask the Acting Chairman to bring this matter to the attention of the Ceann Comhairle's office. Information on amendments being ruled out of order should be circulated to all Deputies rather than just to those who tabled them.

Acting Chairman (Deputy Bernard J. Durkan)

The Deputy's comments are noted. Those of us who sat on the Opposition side of the House have had the same experience as him on many occasions. The purpose of the exercise should be to try to do the best we can by way of research. I accept it is not always possible to do that. The Deputy's point is noted.

Amendment No. 3 is in the name of Deputy Michael McGrath and it arises out of committee proceedings.

Amendment No. 2 not moved.

Deputy Michael McGrath

I move amendment No. 3:

In page 23, between lines 7 and 8, to insert the following:

"17.—The Minister for Finance shall, as soon as may be after the passing of this Act, prepare and lay before Dáil Éireann a report on the provision of early access to pension benefits in certain limited circumstances including employer paid contributions, regular employee contributions, self-employed personal pensions and Personal Retirement Savings Accounts.".

We discussed the issue to which this amendment relates on Committee Stage. I thank the Minister's officials for circulating his speaking note for Committee Stage, which was quite useful. I will certainly seek a copy of the report that was brought to the Economic Management Council, EMC, in September 2011. The ad hoc group responsible for compiling the report, which was chaired by the Department of Social Protection, recommended that pension savings being locked away until pension age should be maintained. In his speaking note, the Minister also indicated that an OECD report on this issue is currently being compiled. We will await the findings that will be contained in that report.

I am trying to establish Government policy in respect of this matter. A particular decision was made in the context of the budget and an initiative has been taken in respect of certain AVCs. However, the latter is quite restrictive. Is it Government policy that it would not be wise to grant employees or self-employed persons further access to pension funds which goes beyond the scope of what the Minister is proposing in this Bill and as announced in the budget? Is it the case that the Government is giving this a go and that it is not prepared to move any further at this point? Is the reason for this that the Government is in possession of a report which indicates that the State could be exposed to additional liabilities in the future if people's pension provisions were eroded by them accessing their funds early?

Deputy Pearse Doherty

I spoke about this matter at length on Committee Stage. I am concerned about some of the aspects of the relevant section. As stated on the earlier amendment, the universal social charge, USC, will not apply and, therefore, people with AVCs are not the poorest in society. These individuals have pensions and they have been able to top them up from their incomes. Basically, the Minister is not applying USC to these individuals and they are obtaining a benefit as a result.

There is a major issue relating to pensions which must be examined. I have no objection to amendments Nos. 3 and 4, which basically call for the laying of reports before the House. However, I am not committed to supporting them in the context of the direction they propose we should take. This entire issue must be examined. The more consideration we give to pensions, the better. I am of the view that there has been wholesale abuse of the taxation code in the context of pension reliefs. I spelt out specific examples in this regard on Committee Stage. As the Minister stated, for every tax relief of which a person avails, someone else must pay tax. Studies relating to pension tax reliefs indicate that 80% of such reliefs go to the top 20% of earners in society. We are not talking about €40 million in this regard, we are talking about something in excess of €500 million. That is a massive amount of money. We cannot justify the continuation of these tax reliefs into the future. The Government is moving in the right direction but is doing so far too slowly. I have a number of concerns regarding what it is doing but we will debate those in respect of later amendments. The reports that are being sought in amendments Nos. 3 and 4 would be welcome. The more information we have at our disposal the better.

Deputy Michael Noonan

Deputy Michael McGrath tabled this amendment for consideration on Committee Stage. It proposes the preparation of a report for the House in respect of pre-retirement access to all forms of pension savings in certain unspecified circumstances. What I have done, following quite an amount of consideration, has been measured. I outlined my concerns with regard to this matter on Committee Stage. I do not intend to return to this area of pension law during the remainder of the lifetime of the Government. I do not want to create any expectation to the effect that a more generous scheme might be introduced in next year's finance Bill. That will not happen. If I was to raise such an expectation, people who want to access AVCs might wait until next year to do so. If, on the other hand, I stated that it was going to be more restrictive next year, it would have the opposite effect and there would be a rush to access them.

I do not want either to incentivise or disincentivise and saying that I will go back into this next year would have an effect one way or the other. This was done after careful consideration, and it will stand.

On Deputy Doherty's point about the tax forgone, that is precisely why I made the announcements at budget time that tax relief on pension contributions would only apply in future to pensions valued at €60,000 or less. I gave notice of that because it requires not only tax law but pension law to be changed. That will have the effect of achieving significant savings in the coming years as contributions are no longer incentivised through the tax system for very large pensions. In the meantime, and in parallel, the Minister for Social Protection is also examining the generality of pension provision. There is quite a good deal in play already on the pensions front. I have set up a cross-departmental committee to examine my piece of it to ensure that the restrictions I announced in the budget will take effect from 1 January next year. It is quite severe, as the Deputy knows.

The Deputy will be familiar with the calculation of public service pensions. A pension of €60,000 would be based on 50% - I think 40 80ths is the correct calculation - of a salary of €120,000. In effect it means that once one's salary increases to €120,000, any contribution one makes to a pension fund or an investment fund beyond that will not have the benefit of tax relief. When one considers the private sector in that respect, it was common for people on very large salaries not only to pay annual amounts but for their employers to also pay annual amounts and sometimes bullet-type payments that were very large, and there were no limits. I will bring legislation before the House when we can get into this, but it certainly goes in the direction the Deputy is signalling, and we can debate the detail when the legislation comes before the House. I am not moving on this today, but I do not want to raise any expectations of a prospective change to what we have announced in the budget either next year or in the medium term.

Deputy Michael McGrath

On a related matter, when does the Minister expect the legislation to enact the change he announced on budget day in respect of the €60,000 limit? Is that expected in the autumn?

Deputy Michael Noonan

As the Deputy is aware, there is a new budget timeline. The budget will have to be introduced some time around the middle of October and therefore I would need the Bill to be fairly well drafted before the summer recess. They have only just started working on it and therefore I cannot give the Deputy a more precise timeline, but the timeline I would like is to get it done before the summer.

Deputy Michael McGrath

I have studied the two reports referred to and on that basis, I withdraw the amendment.

Amendment, by leave, withdrawn.

Acting Chairman (Deputy Bernard J. Durkan)

Amendment No. 4 in the name of Deputy Tommy Broughan is out of order on the basis that it is not relevant to the provision of the Bill.

Amendment No. 4 not moved.

Acting Chairman (Deputy Bernard J. Durkan)

Amendment No. 5 in the name of Deputy Pearse Doherty arises out of committee proceedings. Amendments Nos. 5 to 10, inclusive, are related and may be discussed together.

Deputy Pearse Doherty

I move amendment No. 5:

In page 27, to delete lines 8 to 26.

This is connected to the issue we discussed regarding the pensions. We thrashed this issue out on Committee Stage but I raise it again because we should sound alarm bells about what the Minister is doing regarding the approved minimum retirement fund and the requirement to have a pension income of €18,000, which the Minister is reducing to €12,700. That is not prudent. We spoke earlier about the pension reliefs. Sinn Féin is not arguing for the suspension of all pension reliefs, although some people might ask why we should give anybody relief to invest in pensions, but we recognise there is a pensions time bomb. The focus has gone off that because the country is like a time bomb, so to speak, and we need to stabilise its finances, but we also need to encourage people to invest in their pensions. However, the way the pension reliefs are structured, very few people benefit. The people who need to be incentivised to invest in pensions are not getting the benefit. We argued that pensions relief would be standardised. I acknowledge the Minister is considering introducing that next year and while I am disappointed it cannot be done this year, and bring in the additional tax, he must examine standardising pension reliefs.

The linkage I am making is that pension reliefs can incentivise people to put money in for the future. It is prudent that they do that for all the reasons that have been spelled out in numerous reports by successive Governments. Heretofore, a minimum retirement fund had to be established to the value of approximately €100,000. What the Minister is proposing in this legislation is to reduce that figure substantially from €119,000 to €63,000, and to reduce the minimum pension income from €18,000 to €12,700. As I explained earlier, someone on an old age pension currently gets approximately €12,000 and therefore the requirement to have that €700 extra put away is not good enough. It is not incentivising people.

The other issue is that in reducing the minimum retirement fund to the level the Minister is proposing, it will push the remainder of the funds into ARFs, which are taxable. Issues arise about that also. It is not prudent. I understand it is part and parcel of this policy to which the Minister is committed, but it is not prudent that we are reducing these thresholds to this level. I have raised that issue again in these amendments to send a signal that what the Minister is doing here is very dangerous. It is not sending out the right signals. He has said this caused a shock to the system in the past but as I said to the Minister earlier, he has not come forward with a sunset clause in this regard. Therefore, if the Minister were to introduce it and increase it again in three years' time, it would cause another shock to the system. I am very concerned about what the Minister is doing here on the issue of pensions into the future.

Deputy Michael Noonan

This is an issue that was discussed on Committee Stage and, with the Acting Chairman's permission, as amendments Nos. 5 and 10 are related to subsections (2) and (6) of section 17, as passed on Committee Stage, I propose to deal with them together.

These substitutions deal in one way or another with the temporary rescinding of certain provisions included in the Finance Act 2011 relating to ARF access conditions, which were introduced in the context of the extension of the ARF option to all defined contribution occupational pension arrangements at that time. The impact of the Deputy's amendments would be to continue with the more challenging conditions attaching to accessing the ARF option, which my changes are designed to ease, for a transitional period and which will have the greatest impact on those with modest pension incomes and modest pension savings.

It emerged during the debate on Committee Stage that there may be some concern or misunderstanding about the motivation behind the changes I have proposed. It may help to clarify the situation, therefore, if I explain the background and the rationale for the changes in more detail.

The flexible options at retirement are the ARF option, as it is commonly referred to, which was introduced in 1999 to give certain individuals with mainly defined contribution type pension arrangements more choice, flexibility and control regarding the use of their pension funds at retirement at a time when the only available option was to purchase a pension annuity. Such annuities were viewed as poor value at the time partly because of the fact that in most cases the annuity effectively died with the annuity holder and left nothing to be handed down through the annuity holder's estate. The ARF option was later extended to all holders of additional voluntary contributions.

Today, retiring individuals in defined contribution pension arrangements still have the option to purchase an annuity but as an alternative they can draw down their remaining pension pot after taking the tax free retirement lump sum by way of a taxable lump sum or invest it in an approved retirement fund, that is, the ARF.

Debate adjourned.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.