I move:
That Seanad Éireann notes the Minister for Finance's Budget Statement and, in particular, notes the budgetary response to the taxation and other commitments in the Programme for Prosperity and Fairness (PPF).
I thank the Leader of the House for allowing Senators to discuss the Minister's Budget Statement in this House on each of the last three occasions. It has been indicated to me that it may not be a great idea for this House to discuss the budget at this time, as attention is, understandably, focused on the Dáil. It is crucially important, however, that Senators put their views on the record of the House, rather than looking for an opportunity to do so on the Order of Business tomorrow morning. It should be recognised that merely an initial response can be given at this point, as the Budget Statement has been given in the last hour or so. The statements I make represent my initial reaction to the Minister's proposals.
The Minister's decision to reassign the surplus reserves of the Central Bank to the national finances is a positive move, in the best interests of Irish taxpayers. I have raised the quaintly described surplus revenues of the Central Bank on many occasions during the past ten years. The Minister's decision represents the best way to address the matter. I have no doubt that the economic purists and virgins of this country, such as Moore McDowell, are unhappy with anything which is not written in college textbooks. In this House and at meetings, I have pleaded with the Minister to show this kind of creative thinking. Similarly, I have often asked the Minister not to renege on his commitment to the national development plan and to making progress on the requirements of the PPF. While more could have been done in the budget to this end, I recognise that he has managed to put money that was unusable to good use. I agree with the decision to demonstrate good housekeeping by continuing to invest in the pension reserve, which is important. I wish to move on to the main issues.
As president of the Irish Congress of Trade Unions, I believe the issue of income tax is a central plank of the financial aspects of the Programme for Prosperity and Fairness. A commitment was made that workers would, in the round, receive tax benefits over the three years of the PPF amounting to between 9.5% and 10%. When I spoke on the budget last year, gains had been made of between 4% and 6%, bringing us half way to our target. Speaking in this House recently, I said it was crucially important for workers who voted for the PPF to see further progress in the budget. It would be an important step regardless of how it could be achieved, I said, if we were to retain trust and confidence in the process of national partnership. Considering that about 5% or 6% of the tax gains remained to be achieved, the least we sought this year was a further 2% to 4%. I acknowledge that at least 2% has been given to the group I have mentioned and in some cases a net tax gain of 3.5% will result from today's budget. The ICTU admits that the Minister has covered half the distance and it hopes that the remaining half will be covered in the third PPF budget next year. I recognise that it is a positive development.
Like the curate's egg, the budget is good in parts, as evidenced by its social welfare provisions. There have been improvements in social welfare payments and the Government listened to much of the case put forward by the ICTU in its pre-budget discussions with the Minister. However, what has been delivered and for what did we look?
We asked that the lowest payment, employment assistance, be increased to a minimum of £100 from the current level of £83 or £84. The Minister has increased it to £94.50 which does not meet our request, but it goes a long way towards it. The other increases work out at about £8 per week for various payments and allowances and this is also progress.
However, we have been trying to establish a link between social welfare payments and the average industrial wage to create a certain ratio which could be worked on from year to year, even if only as an objective at this stage. The Minister has not done so and that is a reflection of the current finances. We are disappointed in this regard, as will be those who deal with people who are dependent on social welfare payments. The Minister's decision in this regard will also be regretted by trade unions which operate in areas in which many people are dependent on social welfare. Teachers in disadvantaged areas feel strongly that progress in this area, while welcome, should be made more permanent through a linkage with the average industrial wage.
I am also disappointed by the Minister's decision to increase VAT to 21%, a move for which he gave no justification. This measure is disappointing at a time when we are trying to improve consumer confidence. VAT is being increased to a level which was originally introduced as an emergency measure many years ago. The Minister of State may correct me on this point, but it is like the emergency which never ended. This measure could damage consumer confidence. Senator Quinn, who will second the motion, will support me on this point even though he may disagree with some of my other comments. This move may prove to be a mistake given that we are trying to retain competitiveness, create wealth, ensure that the economy moves forward and maintain confidence.
I also regret that the Minister crumbled so cravenly in front of the IBEC and business lobby on the issue of employers' PRSI. I sought odds on the fact that the Minister was not for turning on this issue. He will claim that there is still no limit. However, the reality is that he has given back €347 million to the business community which could be better used on something sensible like primary education or even the roads in Waterford.