Seanad Éireann debate -
Wednesday, 5 Dec 2007

Vol. 187 No. 25

Budget Statement 2008: Statements (Resumed).

Senator Joe O’Reilly

I welcome the Minister of State at the Department of Finance, Deputy Noel Ahern, to the House. The tragic backdrop to today's budget is the waste of the boom years. There is no improvement in services, traffic is in gridlock, class sizes are enormous in suburban schools and the health service is paralysed. We have created neither a fair society with the money earned in the boom nor a monetary war chest. We have failed in accountancy and social justice terms.

The Government has not achieved value for money. The budget failed to put in place a system to audit the delivery of services, monitor expenditure and evaluate results. There is still an opportunity to do this.

There should not be so many consultants, committees or the burgeoning industry around Government of advisers working in parallel to the Civil Service. It is bizarre to have parallel systems. When Members were at school, the cream of the country entered the Civil Service and went on to be junior executive officers, administrative officers and first secretaries. Why must a plethora of outside consultants sideline them? Not doing so would save a significant sum of money.

It is a crime that the Government has increased the number of its external agencies to 630. This is a bizarre, Byzantine and monstrous bureaucracy that needs dismantling. More reprehensible is the fact that the Government created the illusion of a boom for the general election. Now we are in deficit. The illusion was kept alive until the general election was over. We are now borrowing for current expenditure which is what we did in the bad old days.

Senators

For capital expenditure.

Senator Joe O’Reilly

For capital expenditure too. The budget is not progressive. In the year 2000 the Government published a climate change strategy that proposed a carbon tax by 2002, more investment in buses, the cessation of coal use at Moneypoint power station by 2008, rebalancing vehicle registration tax and integrated traffic management. None of this happened and consequently we are over our emissions limit. Since the publication of the report 500,000 houses have been built and 600,000 cars put on the road which blithely ignores the need for sustainable patterns of energy use. Over these years the movement of drivers to cars with larger engines wiped out the improvement in emissions performance achieved by car manufacturers and the average emissions per car increased by 11%.

The only provision in the national development plan on climate change is to pay €270 million in penalties for the failure of the Government strategy set out in 2000. The Green Party deserves some credit for dragging Fianna Fáil to face this important global challenge but it must also realise that enough is not being done. Today's balancing of VRT is welcome but it is a belated move that may not be enough. I also welcome the pilot programme on home insulation and believe it should be grant aided nationally because it will yield results.

There should have been a provision in today's budget to grant aid domestic turbines.

Senator Paddy Burke

Hear, hear.

Senator Joe O’Reilly

There should also have been a provision to grant aid the marshalling of water from old corn and flax mills to provide power to alternators to create electricity locally. I should acknowledge that my colleague, Senator Burke, has raised the question of domestic wind turbines on a number of occasions in this House.

The increases in social welfare are just about adequate but do not take enough account of the fact that one in five old age pensioners lives in poverty. In recent times the prices of essential foodstuffs such as bread, milk, butter, eggs and so on have increased by 15% and in this context the increases in social welfare are paltry. It is a horrendous shame that the living alone allowance was not increased today because there are obvious extra costs facing those in this area.

I have always argued in every chamber available to me, including local radio, that we should remove the means test for the carer's allowance and Senator Wilson will corroborate this. The carer's allowance is the most effective way of keeping people at home, where they are happiest, and more should be done regarding investment in home care assistance. This is all missing from today's budget, which is strong on platitudes but low on detail.

The budget has failed to deliver on the election promise on the top rate of tax, which is 41%, and it is worth noting that since 2002 the burden of taxation per person has increased by €9,500. The move on stamp duty is probably too little, too late to cope with the slump in housing prices and represents the Government's acceptance of an identical proposal made by Fine Gael during the election campaign. The budget provides no relief for those who decide to take a year or two of leave from their jobs to look after a child at home but such an initiative needs support.

This budget should have seen the Government reducing wasteful expenditure, eliminating the notion of big government and reducing the use of the traditional Civil Service. The budget should also have taken a more realistic approach to environmental issues and made more provision for social welfare. More could have been achieved in this budget, which represents the Government's poor attempt to back track on its election promises.

Senator Fiona O’Malley

I suggest that Senator O'Reilly read the budget because there is no plan to borrow for current expenditure.

Senator Joe O’Reilly

More than €1.5 billion is to be borrowed and there is no statement that we will arrive at current expenditure.

Senator Fiona O’Malley

The Senator has made an error and it is important that we do not scaremonger people into thinking we are returning to the days when we borrowed heavily for current expenditure. Any borrowing planned in this budget is wise, prudent and for capital expenditure. If one bought a computer the day it came on the market and did not buy a new one as technology advanced one would be left behind. We must update all kinds of infrastructure in the country through investment; for example, we should not have the same type of roads now as 15 or 20 years ago.

Senator Joe O’Reilly

On a point of information, would it be in order to ask——

Senator Fiona O’Malley

My time is limited and I will not give way. The hallmark of this budget is that it is fair and nobody in the country will lose out as a result of it, which is quite an achievement in more constrained economic circumstances than recent years. It is easy to be generous when money is widely available but it is harder to make choices when money is limited and that is why this year's budget is so commendable. It is difficult to find a group that will not benefit from this budget and none of the non-governmental organisations responding to it seemed to seriously criticise it.

People have said it is a pity certain areas did not receive more but, as the Minister for Defence, Deputy Willie O'Dea, said, we would all like to give everyone more but that is not the way of the world and that is not the purpose of a budget. There was a limited amount of money available in the budget, choices had to be made and the Minister has made his choices wisely.

Before Senator O'Reilly departs I want to raise the issue of the top rate of income tax.

Acting Chairman (Senator Dan Boyle)

The Senator may make her remarks through the Chair.

Senator Fiona O’Malley

This is the first budget of a five year programme and if everything was delivered in the first budget there would be little to do in the following years.

Senator Joe O’Toole

The Senator should see if the Government is still sitting in five years.

Senator Fiona O’Malley

It is madness to think that everything could be delivered today because this process is more a marathon than a sprint. We should take the time to recognise that a programme for Government is to be delivered over five years and items in the programme will be delivered in that timeframe. This Government and the previous Administration has form and has delivered on previous commitments, which is one of the reasons I am pleased to see an increase in old age pensions today. We are well on the way to reaching the figure of €300 that is indicated in the programme for Government and this is to be welcomed. One might have expected the first budget of a new administration to be parsimonious with contributions to social welfare because it will be some time before it faces the electorate again but the Minister has honoured commitments in the programme for Government. He is furnishing the appropriate increases to arrive at the levels sought by the time the administration ends.

I am particularly pleased with the Minister's comments on research and development, especially in the energy field. I have always contended that there are major opportunities for the State in terms of advancing our knowledge economy. The Minister has given a commitment that where investments show scope to go further, he is willing to assist them in doing so. I applaud him for this tremendous initiative. This is the correct way to approach the challenge posed by climate change and the energy supply crisis. I am pleased to see the Minister investing heavily and appropriately at this level.

The Minister is wise to reform the stamp duty system so fundamentally. The attractiveness of his initiative in this area is its simplicity. The Progressive Democrats Party has indicated its preference for streamlining the bands to make fairer what has been an extremely unfair tax. The Minister wisely kept close counsel about this. Having observed what happened in the housing market in the past year, his response is appropriate. It is not a minute response but a fundamental reform of the system. Stamp duty was the most unfair of taxes; in no other area of taxation did one pay tax at the higher rate on the full amount once one exceeded the defined thresholds.

The Minister deserves to be commended on his initiatives in many other areas, including motor taxation. One of the fundamental features of this budget is that it upholds the principle that those earning the minimum wage should remain out of the taxation system. This is important in terms of encouraging people on modest wages to continue working. Ensuring that four out of five taxpayers pay tax at the standard rate is a good principle to maintain. Economic stability is prudently safeguarded in the budget. I commend the Minister greatly on his achievement.

Senator Joe O’Toole

I propose to share time with Senator Doherty.

Acting Chairman

Is that agreed? Agreed.

Senator Joe O’Toole

This budget is about broken promises. I do not have time to go into detail but I will focus on education, an issue in which I am closely involved. Reference was made on the Order of Business to the Estimate for education. The increase in the allocation for the Department of Education and Science is appallingly small.

Senator Pearse Doherty

Hear, hear.

Senator Joe O’Toole

The reality is one of broken promises. At the Fianna Fáil Ard-Fheis, we were promised that the Government would double the capitation grant for primary schools. We were assured on numerous occasions that the pupil-teacher ratio would be reduced. Neither of these objectives has been achieved and their implementation will not be possible given the resources allocated.

I listened to the enthusiasm of the speakers on the Government side. The energised contribution of Senator MacSharry certainly made an impact. Senator O'Malley, meanwhile, put forward the point of view of the Progressive Democrats Party. Some of the provisions in the budget are undoubtedly welcome. I always point out the positives as well as the negatives in any Government initiative. For example, I support the exclusion of those on the minimum wage from the tax net. I welcome that some movement has been made in the area of housing, although I wonder whether the motivation for this was to satisfy builders and developers rather than buyers. I will let that rest for now.

In education provision, however, one does the sums and discovers there is an overall increase of less than 2%. This is an appalling increase. I emphasise to Senator MacSharry in particular that all the available funding will be used to build schools in the Pale.

Senator Fidelma Healy Eames

Hear, hear.

Senator Joe O’Toole

It will not be used to provide funding for the school I visited in Sligo last week. It will not address the difficulties experienced by the school in Ballina that I brought to the Minister's attention last week. The money is simply not there. I am not saying this is a poor budget. My point is that many issues have not been addressed. For instance, schools will continue to have to raise funds. This is unacceptable given that the people involved in these schools were allowed by the Government to entertain certain expectations. Perhaps the way to deal with this is to admit that it cannot be done now but will be done next month or next year, but I have not heard that either.

The commitments given have not been delivered upon. The commitment to reduce class sizes cannot be fulfilled because adequate provision has not been made for the increased population of school-going children. Neither can the increase in the capitation grant be made. Thus, there will no significant improvement in primary education. This reality puts some perspective on the welcome initiatives in the budget.

Senator Pearse Doherty

This the 11th budget presided over by Fianna Fáil in government. During that time, we have had unprecedented economic growth. Now, however, the Government is warning us to tighten our belts. Fianna Fail's pre-election promises were an illusion but also a masterstroke in terms of electoral strategy. It promised the earth, moon and stars but as soon as the votes were cast, it embarked upon a campaign to dampen down expectations by telling voters that many of its promises were no longer realisable. The commitments made by Fianna Fáil in its manifesto included the provision of 2,000 additional gardaí, 4,000 extra teachers, 1,500 new hospital beds and 2,000 additional health consultants, as well as tax cuts, PRSI cuts, affordable housing and so on. It was clear that all of these could not be delivered on if the Government was not willing to address new areas of revenue and reconsider those commitments, including tax cuts, that would reduce revenue intake.

This budget represents a missed opportunity. It was a more difficult budget to deliver given the economic circumstances that pertain, but it offered an opportunity to increase the net tax take. One way to do this was to harness the natural resources off our coasts that we have been handing over to multinationals. The €51 billion in gas that is expected to be discovered off the west coast could have funded this budget. European states such as Norway and other countries throughout the world use their natural resources to generate wealth that is invested in education, health and social infrastructure for the benefit of the people. It is a shame the Government did not replicate this stance.

The Government also failed to deal with the tax loopholes that allow individuals to write off tax under various schemes. These reliefs are being exploited by some wealthy individuals who reduce their tax bills to such an extent that they end up paying less than ordinary workers. The Minister has again missed an opportunity to deal with this.

This budget must be judged on facts rather than Government spin. The criterion for judgment is whether it will lift people out of poverty, ensure an equal distribution of wealth and deliver improvements in public services. It will achieve none of these. There are positive initiatives in the budget but no major increases in resource allocations. An increased allocation of €95 million for education will provide only for the extra 13,000 pupils who have come to this country and require a school place next year. We will not be able to provide for schools in bands one, two and three, which are operating out of dilapidated buildings throughout the State. No progress has been made on medical cards and child care. I spoke to a low-income worker yesterday, the sole earner in a family of five children who are cared for either in crèches or in after-school projects. This Government's position on child care means he will pay more than €500 per week.

The Government has spoken about the €12 increase for pensioners and those on social welfare and indicated this is a caring budget. I would compare this with what happened to three Ministers and their proposed wage increases.

Acting Chairman

Will the Senator do so in less than one minute?

Senator Pearse Doherty

I will do it in one sentence. The increase that has been given to three Ministers is equal to the same increase we gave to 120 pensioners. That demonstrates where the Government's commitment is in this budget. It was not for the most vulnerable or the weakest in society. We could have done much more and it is a missed opportunity.

Acting Chairman

I call Senator de Búrca and remind her there are five minutes left in the debate before the Minister of State makes his concluding remarks.

Senator Déirdre de Búrca

I was going to suggest I share my time with Senator Healy Eames.

Acting Chairman

Is it agreed to share time, with Senator de Búrca having three minutes and Senator Healy Eames having two? Agreed.

Senator Déirdre de Búrca

There is no such thing as a perfect budget but I suggest the budget announced by the Minister for Finance today was well balanced in the context of the straightened financial circumstances in which the country finds itself. The Minister's actions, in co-operation with the parties in Government, have meant the circumstances in which we find ourselves were turned into economic opportunities, particularly where the environment and sustainable development is concerned.

I emphasise the green imprint on the budget, which other Senators have mentioned. There are very positive initiatives which will allow, for example, companies to write off 100% of their expenditure on energy efficiency initiatives. There is also much greater access to the business expansion scheme for companies involved in recycling.

This, in a way, is the Government demonstrating that it is possible to turn a scenario where economic and environmental sustainability are an imperative into economic opportunity. Jobs will be created and very positive economic opportunities can be realised through the budget.

I commend the budget because of the emphasis on sustainable development. As the Green Party has repeatedly indicated, sustainable development is about finding balance between economic growth, social justice and environmental protection. The budget goes a good way towards achieving that kind of balance.

There is a strong emphasis on social justice within the budget, even within the compromised economic conditions we find ourselves. Those who have least in society have been the focus of the social welfare and taxation proposals framed within the budget. Health care is an issue of significant concern which has been the subject of many debates in the Seanad. The increase in the health budget is less than previous years but it has been targeted at areas where there is particular public concern. I specifically mention cancer care services, as the €29 million put aside towards screening and remediation is very welcome.

Acting Chairman

The Senator has exceeded her time.

Senator Déirdre de Búrca

I welcome the €12.5 million being given to fund the implementation of the recommendations of the national drugs strategy rehabilitation board. This will allow for the development and strengthening of the local drugs task forces and roll services out to the new commuter belt towns. We can see cases in the media where many young people are facing extremely adverse health conditions because of dabbling in recreational drugs, so the role of our drugs task forces is increasingly important. I am pleased to see this prioritised in today's budget.

Senator Fidelma Healy Eames

I thank the Senator for sharing her time. I would like to be fair but at best this is a maintenance budget. It is too little, too late because our great wealth has been squandered. The budget is lacking in vision and strategies, bearing in mind the needs of the knowledge economy which we must seriously address to sustain economic growth at a very uncertain time.

With regard to education, the quality of learning in the classroom depends on the quality of teaching. There has been no mention of targeted reductions in class size. In 2002 we heard there would be 20 pupils to one teacher in classes of under-nines. That promise was not kept. There is no commitment to preschool education and no thought has been given to universal preschool education, even if it was only in disadvantaged areas. There would be payback on such initiative in building hope and fighting crime by bringing people into the culture of education at an early age.

I spoke in the House on lifelong learning a number of weeks ago and indicated to the Minister the importance of making a commitment to ESOL, or English for speakers of other languages.

Acting Chairman

The Senator has 30 seconds.

Senator Fidelma Healy Eames

Some 250,000 people have no English in this country and they are a significant drain on public services, such as health and education. We needed €10 million in that area but I see only a commitment of €3 million for adult literacy, which may have an ESOL component. That is very disappointing. The advice to separate literacy from English for speakers of other languages was not heeded.

I have no idea how much an increase in capitation has been given to primary and secondary schools. We know how many of our schools must fundraise to meet heat, lighting and insurance bills. It is impossible for me to comment on the capital programme because I do not see——

Acting Chairman

The Senator must conclude as she is encroaching on the time set aside for the Minister of State.

Senator Fidelma Healy Eames

I do not see a commitment per county. There are new areas in Galway, such as Doughiska with 8,000 people and no school. When I see these nitty-gritty details, I will say it is a good budget.

I have a number of other points which I know I cannot air. Is the extra funding for cancer services being committed to cancer care centres? Has a costing per centre been achieved yet? I am not sure it is a good budget for families.

Acting Chairman

I ask the Senator to conclude. Her concluding question has taken her to a further point.

Senator Fidelma Healy Eames

I welcome the attempt to address mortgage relief but it was all taken back by the harsh increases in car tax. The Government gave on one hand and took with the other.

This is at best a maintenance budget desperately lacking in imagination when the Government could have grasped the opportunity before it. Although we are facing tougher economic times, this does not mean the budget can be totally lacking in imagination.

Minister of State at the Department of Finance (Deputy Noel Ahern)

I thank Members for their comments. To be fair the Minister for Finance and Tánaiste speaks for 45 minutes or so and does not cover every aspect of every cent spent. The Ministers will tomorrow make statements about the nitty gritty and much has already been discussed. At the various Estimates meetings, Ministers must outline what they will achieve for the year and they will be answerable at the end of the year for this.

Things have changed and everything is not covered in the Budget Statement. We should put what is said in the Budget Statement with the various Estimates meetings to see what has happened.

To be fair, the general comment over the past few weeks have described the problems the Minister for Finance was facing and how he could deal with various issues. In the media there was a reasonable understanding of the challenges ahead of us this year. Some of the speakers, particularly from the Fine Gael side, do not seem to understand this and prefer to state that it is all down to Government waste and other nonsense. They do not appear to have ever heard of financial turbulence in the markets, the sub-prime crisis, the rising price of oil and problems in the US and UK economies and the dollar.

The budget must take account of local issues.

Senator Fidelma Healy Eames

The Minister of State should stick to our own revenues.

Deputy Noel Ahern

We are a small country and unfortunately we are not in a position to dictate to the world yet.

I will deal with a few of the issues mentioned by a number of people. Senator Kelly stated the stamp duty provision would benefit people buying expensive houses. If a tax is changed, whether it is income tax or stamp duty, those who pay more benefit to a slightly greater extent. I was a Minister of State with responsibility for housing for five years and I take the view that the general attitude that the measure has come too late is nonsense. We had to wait until house prices stabilised before anything significant could be done on the stamp duty issue.

If we tried to implement the measure a year ago, people in the market would not have noticed any difference. Any saving would have been added to the price and people would carry on as if there was no difference. We had to watch and wait for an opportunity to deal with the matter. Fine Gael may argue that the measure is the same as what it proposed but it is not. The Fine Gael proposal was to change the stamp duty regime over a three-year period, reducing it by degrees by 2010. This would have resulted in the market stagnating because people would not want to buy in the knowledge that stamp duty would be lower the following year. The change to stamp duty is prudent as are so many other items in the budget. It is necessary to take account of the context. Gross domestic product is expected to grow by 3%, which is less than in other years and we need to take note of that.

A number of people spoke about the lack of atmosphere in the Chamber and that people were not jumping up and down. Some elements of the media try to pretend it is about the performance. If people want a performance they should go to the Abbey or somewhere like that. The budget is a statement taking prudent action on the running of the economy for the next year. The Minister needs to take account of the current situation and not necessarily put on a show.

I believe there is considerable good in the budget. The extra social welfare funding for the needy includes a €14 per week increase for pensioners and a €27 one for those on the qualified adult allowance, which is part of a three-year programme. Older people, usually women over 65 who are qualified adults on their husband's pensions, were very pleased last year and will be very pleased this year that their many years of working in the home is being recognised. They are quickly catching up with the non-contributory rate. Even up to last year I believe the rate for qualified adults was €149. In two years it has increased by €50.

Senator Fidelma Healy Eames

They certainly do not like being called qualified adults.

An Cathaoirleach

Allow the Minister of State to complete his contribution.

Deputy Noel Ahern

That is how they have been designated for years.

Senator Fidelma Healy Eames

However, we should change the language.

Deputy Noel Ahern

When the three-year programme has concluded they no longer will be because they will be at the same level as the non-contributory pensioner.

There was a lot of good today. It was an appropriate budget, relevant to the challenges facing us for the year ahead. There is no point in one batch of Senators speaking of all the extra things on which the money should be spent and another batch speaking of cutbacks, cutting the public service, value for money etc. It is very difficult to see a consistent view. The one person who must try to match the different challenges and demands together is the Tánaiste and Minister for Finance and he has done a damn good job.

An Cathaoirleach

When is it proposed to sit again?

Senator Marc MacSharry

Tomorrow at 10.30 a.m.