Finance (No. 2) Bill 2013: Report Stage (Resumed) and Final Stage

Debate resumed on amendment No. 36:
In page 87, to delete lines 14 to 30.
- (Deputy Thomas P. Broughan).

I thank Deputies for their comments on the proposed amendments to section 71 of the Bill which provides for the introduction of an additional levy of 0.15% on pension scheme assets in 2014 and 2105. The existing levy of 0.6% which was introduced in 2011 to fund the jobs initiative will cease to apply on 31 December 2014. Amendment No. 36 seeks to delete section 71 from the Bill, while amendment No. 37 seeks to reduce the rate of the levy to 0.5% in 2014 and zero in 2015 and all subsequent years. As explained during the debate on Committee Stage, the additional levy of 0.15% will contribute towards continued funding of the jobs initiative and help to make provision for potential State liabilities which may emerge from existing or future pension fund difficulties. In the circumstances, we cannot accept either amendment as to do so would adversely impact on the funding of the jobs initiative and not provide the required provision against existing or future fund difficulties.

The revenue arising to the Exchequer from the stamp duty levy on pension fund assets is, in common with Exchequer revenues generally, not hypothecated or set aside to meet any particular item of expenditure or liability. This will be the same for the additional levy of 0.15% in 2014 and 2015. The revenues from the levies have and will be used to help to fund various measures introduced under the jobs initiative. The proceeds from the additional levy will also help to meet State liabilities which may emerge from existing or future pension funds difficulties. The Government has agreed to meet these liabilities from the Exchequer as they arise.

A significant and successful measure introduced by the jobs initiative is the reduced VAT rate of 9% on tourism and certain other services which was due to end this year. In the Budget Statement the Minister for Finance announced a continuation of the reduced 9% VAT rate and indicated the yield from the additional 0.15% pension fund levy in 2014 and the reduced level of 0.15% in 2015 would continue to help to fund the jobs initiative. The cost of continuing with the reduced 9% VAT rate is estimated at €350 million in a full year and the additional yield from the changes to the levy in 2014 and 2015 is estimated at €135 million in each year. The 0.15% levy is legislated in the Bill to end in 2015.

With regard to Deputy Broughan's comments, while the levy does not apply to unfunded public service pension schemes, this is not to say public servants or public service pensioners have been unaffected by requirements for fiscal retrenchment in recent years. The public service pension reduction, PSPR, was introduced from 1 January 2011.

While the PSPR is not a levy, it is a cut which affects public service pensions.

At the time of its introduction, the PSPR was designed to cut all public service pensions above €12,000 in payment or awarded up to the end of a grace period which ultimately expired at the end of February 2012. It was initially estimated that the PSPR would reduce public service pensions by 4% on average, with more severe effects experienced at higher pension levels as a result of the progressive and multi-band structure of the reduction. The PSPR did not originally apply to pensions of post-grace period retirees on the basis that their pension awards had otherwise been reduced by being based on actual reduced pay rates reflective of the 2010 pay cut, not pre-cut pay rates as applied to retirees during the grace period. A change was made to the PSPR on 1 January 2012, when a 20% reduction rate - previously 12% - was imposed on pension amounts above €100,000. With effect from 1 July 2013, more changes were made to the PSPR to deliver on the Government's commitment to further reduce those public service pensions above €32,500 by between 2% and 5% in certain circumstances, including the pensions above that level of individuals who had retired after the end of February 2012.

In the context of Deputy Róisín Shortall's point, the standard fund threshold, SFT, is not the subject of the amendments under discussion. The changes being made to the SFT regime will restrict the capacity of higher earners to fund or accrue large pensions through tax relief or subsidised sources and will do so effectively over time in line with the commitment in the programme for Government. The changes also represent a balance on conflicting issues as between, for example, the impact of the SFT on defined contributions as compared to defined benefit pension arrangements and also between those who are able to take retirement benefits at an early age and people who can only retire later in their careers.

In order to safeguard the restrictive changes being made to the regime against any threat of a successful legal challenge, the Minister has been obliged to provide, in so far as possible and in accordance with legal advice, for the protection of individual pension rights against any charge of retrospective or unjust treatment. The requirement to protect or "grandfather" pension rights in this way is not new and was put in place when the SFT regime was first introduced in 2005 and when the threshold was previously reduced in 2010.

I thank the Minister of State for his comprehensive response, with most of which I do not agree, and for his illuminating comments on the PSPR. People are conscious of the fact that public sector pensioners are on fixed incomes. As time passes and as increasing numbers of utility charges, new taxes, etc., are introduced, people in the mid to late 70s and upwards - even those who previously worked in the public sector - are finding the going very tough. I do not believe one side is being set against the other. What happened in this instance was that there was a grotesque breach of faith in respect of people with private sector pensions. These individuals made a commitment in the past and just because he was of the view he could do so, the Minister imposed the levy on them. For the reasons outlined, people now feel incredibly hard done by. It is deplorable that, as a result of the recent budget, the levy will be increased in 2014 and again in 2015.

I do not believe the Minister of State has addressed this matter. He has referred to the fact that we do not have hypothecated taxes, which is generally the case. I supported the continuation of the 9% VAT rate for the hospitality sector, particularly in view of the overall position in the economy. However, measures of this nature should be kept under review. We have never carried out proper cost-benefit analyses of tax expenditures and that has led to us making very bad policy decisions on pension pots and other matters. I reiterate my opposition to section 71.

I have raised the issue of the failure to fulfil the promises made relating to the SFT, especially as these are directly related to the increase in the levy. That is the whole point. The Government incurred a shortfall of €130 million as a result of not doing what it had promised to do in respect of high-end pensions and it made up that shortfall by increasing the levy on persons with small pensions by 0.15%. There is a direct correlation in this regard, namely, a new measure to raise €135 million being introduced to meet a shortfall of €130 million. The two are absolutely interconnected. Not only is there an issue with regard to a conflict of interest for the people who designed this measure, it is also the case that these individuals are not affected by the levy. It may be stated there have been previous cuts. I accept that is the case and that everybody has experienced these cuts. However, the measure before the House will be used to hit the lowest earners on the smallest pensions in order to benefit those who are on the highest pensions. That is the sum total of what is involved.

The 9% VAT rate seems to be having a positive effect in certain areas. However, there are other areas in which it is not justified. For example, this rate of VAT relates to the fast food industry at a time when public policy should be moving in the opposite direction. It also acts as a subsidy for lap dancing clubs. People on small private pensions are actually subsidising this tax break for these sectors. There is no justification for this.

I ask the Minister of State to confirm that the increased levy of 0.15% which will be applied in 2014 and 2015 will be removed in 2015.

Under the legislation, provision is made for it to end by that date.

Provision in that regard was made two years ago.

Will the Minister of State confirm that there is no intention to extend it further?

As I understand it, the legislation makes provision for it to finish on that date.

We were previously informed that the levy would be brought to an end in 2014. However, that will not now be the case.

That was also provided for in legislation.

Question put: "That the words proposed to be deleted stand."
The Dáil divided: Tá, 65; Níl, 42.

  • Bannon, James.
  • Barry, Tom.
  • Breen, Pat.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Eric.
  • Carey, Joe.
  • Coffey, Paudie.
  • Conaghan, Michael.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Daly, Jim.
  • Deering, Pat.
  • Doherty, Regina.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Ferris, Anne.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Heydon, Martin.
  • Howlin, Brendan.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Kathleen.
  • McEntee, Helen.
  • McGinley, Dinny.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Mitchell, Olivia.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • Nolan, Derek.
  • Ó Ríordáin, Aodhán.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • Penrose, Willie.
  • Perry, John.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Rabbitte, Pat.
  • Reilly, James.
  • Ring, Michael.
  • Ryan, Brendan.
  • Stagg, Emmet.
  • Stanton, David.
  • Tuffy, Joanna.

Níl

  • Boyd Barrett, Richard.
  • Browne, John.
  • Calleary, Dara.
  • Collins, Joan.
  • Colreavy, Michael.
  • Cowen, Barry.
  • Crowe, Seán.
  • Daly, Clare.
  • Doherty, Pearse.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Flanagan, Luke 'Ming'.
  • Fleming, Tom.
  • Grealish, Noel.
  • Halligan, John.
  • Healy, Seamus.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Mac Lochlainn, Pádraig.
  • McConalogue, Charlie.
  • McDonald, Mary Lou.
  • McGrath, Finian.
  • McGrath, Michael.
  • McLellan, Sandra.
  • Murphy, Catherine.
  • Nulty, Patrick.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Dea, Willie.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Smith, Brendan.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Troy, Robert.
  • Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Róisín Shortall and Thomas P. Broughan.
Question declared carried.
Amendment declared lost.
Amendment No. 37 not moved.

Amendments Nos. 38 to 40, inclusive, are out of order.

Amendments Nos. 38 to 40, inclusive, not moved.
Bill received for final consideration.
Question put: "That the Bill do now pass."
The Dáil divided: Tá, 70; Níl, 42.

  • Bannon, James.
  • Barry, Tom.
  • Breen, Pat.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Coffey, Paudie.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Creighton, Lucinda.
  • Daly, Jim.
  • Deering, Pat.
  • Doherty, Regina.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Ferris, Anne.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Gilmore, Eamon.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Heydon, Martin.
  • Howlin, Brendan.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kelly, Alan.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Kathleen.
  • McEntee, Helen.
  • McGinley, Dinny.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Maloney, Eamonn.
  • Mitchell, Olivia.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • Nolan, Derek.
  • Ó Ríordáin, Aodhán.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Mahony, John.
  • Penrose, Willie.
  • Perry, John.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Rabbitte, Pat.
  • Reilly, James.
  • Ring, Michael.
  • Ryan, Brendan.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Tuffy, Joanna.

Níl

  • Boyd Barrett, Richard.
  • Broughan, Thomas P.
  • Browne, John.
  • Calleary, Dara.
  • Collins, Joan.
  • Colreavy, Michael.
  • Cowen, Barry.
  • Crowe, Seán.
  • Daly, Clare.
  • Doherty, Pearse.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Flanagan, Luke 'Ming'.
  • Fleming, Tom.
  • Grealish, Noel.
  • Halligan, John.
  • Healy, Seamus.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Mac Lochlainn, Pádraig.
  • McConalogue, Charlie.
  • McDonald, Mary Lou.
  • McGrath, Finian.
  • McGrath, Michael.
  • McLellan, Sandra.
  • Murphy, Catherine.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Dea, Willie.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Smith, Brendan.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Troy, Robert.
  • Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.
Question declared carried.

A message shall be sent to the Seanad acquainting it accordingly.