Finance Bill 2011 [Certified Money Bill]: Committee Stage (Resumed)

NEW SECTION

I move recommendation No. 2:

In page 7, before section 1, to insert the following new section:

"PART 1

PUBLICATION OF CERTAIN BONUSES

1.—Each credit institution that is participating in the eligible liabilities guarantee scheme shall be required, within 30 days of the passing of this Act, to submit to Dáil Éireann details of the names of all of its officers, employees or contractors to whom bonuses have been paid between 30 September 2008 and the date of passing of this Act, and the amount of the bonuses in each case.".

I formally move the recommendation and ask the Minister to address it. I reserve my right to come back in.

The Senator has that right on Committee Stage.

Is it open to others to speak?

Yes, there is no problem in that regard.

On Report Stage in the other House an amendment was introduced to provide for an aggregate charge of 90% to be applied to bonuses paid by certain financial institutions to their staff. The amendment applies a high rate of universal social charge to any payment in excess of regular salary made by a financial institution which has received financial investment from the State to any of its employees. The charge will also apply to benefits given in lieu of cash. The charge will be a universal social charge rate of 45% which, together with an income tax rate of 41% and a PRSI rate of 4%, gives an aggregate tax rate of 90% on these bonus payments. It will not be applied to bonuses to employees to whom no more than €20,000 in remuneration is awarded in a tax year. This is being done to reflect the remuneration packages available to some low to medium paid staff such as those working in call centres where there is a fixed basic salary supplemented by a performance related element which can make up as much as 50% to 60% of basic salary, rather like the insurance salesman of old. As such, this level of €20,000 is a reasonable measure to ensure such staff do not lose out.

On another point, I do not regard it as appropriate for the boards of State companies, commercial and non-commercial, to be approving bonus payments for their chief executive officers.

If the Minister might assist me, to what section of the Bill does this apply?

It is an amendment to section 3 on the social charge.

I will come to that matter shortly. To remind the House, the recommendation calls for the making of a submission to Dáil Éireann within 30 days of the passing of the Bill; the same technical objection applies, although, to be fair, the Minister was not making too much of this in regard to the earlier recommendation. Nonetheless, given that there will be no Dáil in place in 30 days time, the period could certainly be varied. The recommendation reads: "Each credit institution that is participating in the eligible liabilities guarantee scheme shall be required ... to submit to Dáil Éireann details of the names of all of its officers, employees or contractors to whom bonuses have been paid between 30 September 2008 and the date of passing of this Act, and the amount of the bonuses in each case".

It is not really a finance Act recommendation.

The Minister did not say that when I asked him to address the matter.

No, but having considered it, I say so now.

The purpose of my asking the Minister to address the recommendation was to see what his attitude towards it was. I note the amendment to the Bill he introduced in the Dáil which we can perhaps consider in due course. The recommendation is somewhat narrower, as the Minister will acknowledge.

It has to do with the submission of details of bonuses paid. There has been a problem in that regard and the Minister has expressed his own frustration.

Very good. His frustration is shared by the public, given the apparent inability, even of the Minister, to obtain details. However, we must accept what he tells us, as always. In regard to Bank of Ireland, for example, details of bonuses paid may have been withheld from him or at least not made available to him, as they should have been, in a timely manner.

It is a little like our earlier discussion. There is the substantive issue of bonuses and the fact that they have had such a corrosive effect on how the banking system operated and, ultimately, almost collapsed, not just in this country but also overseas. There is a huge debate about the excessive bonuses paid and the reckless lending engaged in by those who were able to earn these bonuses. However, we do not even have to have that debate on bonuses and their corrosive effect. All I seek in the recommendation is that the details of the names of all of the officers, employees or contractors to whom bonuses have been paid in the institutions covered by the eligible liabilities guarantee scheme be submitted to Dáil Éireann.

On reflecting on the recommendation at this relatively late stage of the discussion on the Bill, the issue of a 30 day period arises. The Minister said not so much that it was onerous, but that it might not be appropriate that details of every single bonus paid, right down to the man or woman earning €20,000 to €30,000 a year, would be required to be submitted. However, it seems not unreasonable in the case of bonuses paid above a particular level, where the liabilities are being guaranteed, where there is an enormous commitment on the part of the State to the institutions concerned and where the Government has stated it was unhappy with the level of bonuses paid and accepts there was a complete lack of reality in this regard, if that is not putting too mildly. It seems there is still an insistence on the part of many institutions to maintain this crazy culture of paying excessive bonuses. All we are doing is seeking to ascertain whether we can get hold of this issue by way of the information being communicated to Dáil Éireann. It is the State and its Parliament, the Oireachtas, that are guaranteeing these institutions and doing so much to revive and keep them alive — perhaps too much in the case of one or two of them. While we need to take steps to ensure we will have a banking system, the bonus culture is definitely at the heart of what has gone wrong. All we are looking for is information to be communicated on the level of bonuses paid across the board.

A number of Senators are offering. Does the Minister wish to hear them before he comes in?

My initial reply to the Senator reflected an understandable view in my Department in placing the issue in the context of the finance Bill. It simply outlined what was being done about bank bonuses in the Bill. I cannot accept the recommendation because it has nothing to do with the Bill. In, fact, its acceptance might even compromise the status of the Bill as a money Bill, although I do not say that with certainty. The recommendation as proposed does not concern taxation or the raising of money but the credit institutions participating in the eligible liabilities guarantee scheme; it is not, therefore, an amendment to the finance Bill or a matter that arises from it. The official reply dealt with how we were dealing with the bank bonuses issue in the context of taxation. Clearly, this does not involve the appropriation of money or taxation but a view, on which the Senator is anxious to make a recommendation, of how credit institutions should pay bonuses. That is the net issue. Therefore, I maintain it is entirely outside the scope of the Bill. There would be a risk it would cease to be a money Bill were I to accept the recommendation.

That said, on the merits of recommendation, let us be clear that the Government has a very solid record in dealing with the payment of bonuses. Let us move away from the headlines and see what actually has been done. First, as soon as the guarantee was introduced, all future bonuses were outlawed in the eligible guaranteed institutions. No guaranteed institution has been permitted to pay a bonus in 2009, 2010 or 2011. Clearly, the prospective tax measure in this Bill will copperfasten that position with regard to those that have been capitalised.

Second, difficulties have arisen but they are, by and large, of a transitional character. They relate to commitments to pay bonuses which were made before the beginning of the guarantee and they have had to be worked out in that way. As Senator Alex White and others are generally aware, retrospective legislation and the retrospective expropriation of individual rights is a difficult subject. It is very difficult to take away from people a right to which they can point by way of definite contractual entitlement and tell them they are not entitled to that. We were able in the context of Allied Irish Banks, for example, because a recapitalisation was imminent, to provide that certain bonuses that were payable did not become payable because the State supervened by insisting, in the context of the capitalisation, that these bonuses could not be paid. That meant the directors were able to invoke the legal doctrine of the supervening event, thenovus actus interveniens, to justify what would otherwise have been a breach of duty on the part of the directors. That is a very extreme example of how far we had to extend the law to ensure that bonuses would not be paid.

That happened in the context of Allied Irish Banks. In the case of Bank of Ireland, there is an investigation underway. Some concern has been expressed about the delay in the investigation. Again, it relates to an ascertained class of bonuses. It is a serious matter that Bank of Ireland had to apologise to me and to the Dáil for misleading the House in information supplied to my Department. That apology is on record. The reason the investigation is taking some time to complete is that there was a subscription agreement with Bank of Ireland, as there was with Allied Irish Banks, at the time of the initial capitalisation in early 2009. That subscription agreement contained definite contract terms regarding which bonuses could and could not be paid. Again, there was the issue of what past obligations had to be honoured by the bank. A due diligence was performed at the time by the NTMA with regard to all these matters. We have had to retrace the due diligence and all the documentation relating to each bonus and that investigation is approaching completion.

I accept what the Minister says about the drafting of this recommendation. However, the effect of what it is trying to achieve is what already exists in company law for publicly listed companies, that the payment of bonuses for directors, in particular, must be part of the annual reporting process. Now that many of these institutions are State institutions there should be something in our legislation that requires the payment of such additional moneys to be made publicly known, and not only the amounts that are paid but also the reasons such payments are given.

Much of the public frustration that currently exists is due to the existence of bonuses or the suggestion that they be paid in a time of obvious managerial crisis in many of these institutions. If the Minister is correct about the effect on this being a money Bill, perhaps there will be an opportunity on Report Stage, given that we are discussing it on Committee Stage, for an appropriate recommendation to be considered in the context of section 3 of the Bill, where the welcome changes regarding the universal service charge, USC, and the 45% rate added to the 41% rate and the 4% rate of PRSI achieve the 90% clawback on bonuses if paid, could also contain a declaration that people who come under this category should be publicly named as being part of the institutions that are covered by the eligible liability guarantee scheme. Such a measure would go a long way towards restoring public confidence which is badly lacking in this area.

I had intended speaking on this recommendation but the Minister highlighted a good point. However, as Senator Boyle pointed out, if this provision is in law elsewhere, why can it not be applicable here? If it is part of company law, what is stopping the banks from having to list bonuses that are to be paid?

First, I do not believe it is in company law and, if it is, the relevant section in the 2003 Act has not been commenced. There is much merit in this recommendation. Despite the fact that the Minister said it might not be relevant, I noticed he took the opportunity in his speech on Second Stage yesterday to make a passing reference to his relationship to the bonus scheme. He can hardly blame Senator Alex White for raising an issue which the Minister considered sufficiently important to raise in his speech or inThe Irish Times article yesterday. I also recall the Minister discussing this in the Lower House as well.

This issue is hugely important. Senator Alex White has pointed to changes that should perhaps be made in the recommendation if he were to redraft it. I do not agree with the Minister's statement that this Government has a good record on bonuses. It does not. The Minister can begin with his Department or any State Department. The bonus system in the Departments has been brought into disrepute and every review of higher remuneration since the introduction of the bonus scheme in 1995 has been unhappy with it. The reason is——

That system has been abolished.

Let me talk about abolishing it. That is a little like the Minister's response to the last recommendation. Nobody is saying all property tax reliefs are bad.

Bonus schemes are good, but badly implemented bonus schemes are bad. That is the problem. It is not just the bonus scheme but the points that were dealt with by Senator Boyle. Incidentally, I have raised this with at least half the Cabinet over the past five years. I have asked each Minister if he or she has been privy to or involved in the determination of the bonuses for the assistant secretaries in their Departments. I will not embarrass the Minister with the answers. I have also met Ministers who thought they saw the bonus scheme but I know what they saw. It was the outline scheme on which the bonus scheme is based.

The bonus scheme is very clear, and that is the reason it is very good. Before the year begins, stretched objectives are determined. These are not the objectives that already exist but objectives that are above and beyond one's normal day's work. These stretched objectives are written down and agreed. Next, an absolute weighting is put on the objectives, that is, what one gets if one achieves each one. Now the customer knows what is to be achieved and what he or she will get if he or she manages to achieve them. How will we know he or she will achieve them? There are the key performance indicators, KPIs. One looks at these at least twice in the course of the year and at the end of the year one makes the assessment. That assessment is written down and on that basis one decides on the quantum or amount of the bonus. It is not just the figure but how the figure was achieved and set up.

I have sat, and still sit, on a number of remuneration committees. One of the bonuses with which I was involved managed to get front page coverage on theIrish Independent recently. It was for a very hard working chief executive of a semi-State body. The bonuses attached to that position ran to 20 A4 pages in terms of the structure. I believe we should have explained to the public what can be achieved by bonuses, culminating in the point outlined by Senator Alex White whereby we point out that the person was given a certain amount. One of the big changes the Minister will have noticed in the debate on bank bonuses, particularly in the UK, Europe and the US, is that we are now working on the basis that where bonuses are being paid in well-run banks, they are only paid long after the event. In other words, it is not based on the performance this year but perhaps next year or the year after and there is a continuing gain.

If bonus schemes are properly implemented, they are a good thing. At present, they are in a haze of ignorance. People know nothing about them other than the amount. There should be openness not just on the amount, but on how it was achieved. I ask the Minister to reconsider that position in terms of where it works. People are annoyed because they do not know why the recipients are being paid and the money appears to be too high. Generally, it is too high. However, if we are running the banks, and regardless of whether the amendment is acceptable as part of the Finance Bill, it would be useful to hear from the Minister that there will be openness and transparency in the method of determination, the outline of the objectives, the weighting, assessment, the key performance indicators and the quantum given at the end, so people have a full understanding of it.

I listened with interest to what Senator O'Toole had to say. The point on which we all agree is that there needs to be clarity about the bonuses people are getting, the precise mechanism by which they get their bonuses and what is required for them to get the bonuses.

Senator White is right to bring forward this recommendation, but there are certain problems with it. I tend to agree with the Minister that it does not seem to be the place for it, although I note that the relevant constitutional section on a money Bill provides for the inclusion of matters subordinate and incidental to those matters at any time. Therefore, the Minister was probably right in expressing a degree of caution as to whether such a recommendation would change the status of this as a money Bill.

The recommendation essentially reflects public disquiet, to the say the least, at the payment of bonuses to officials and employees of banks who manifestly did not deserve them, and who have done damage to the public. This is a recommendation that effectively seeks to provide for some kind of reporting exercise. Dating it back to September 2008 raises issues of retrospectivity as well. These are not necessarily serious issues, but it is designed to reflect public concern. I would like to see the substance of this recommendation in the legislation, but I am not sure this is the place for it.

I was not giving Senator White an opinion on whether it affected the money Bill issue, but I do not think we can risk that issue at this stage of the proceedings.

I will consider the matter between now and Report Stage.

Recommendation, by leave, withdrawn.
Recommendation No. 3 not moved.
Question, "That section 1 stand part of the Bill," put and declared carried.
NEW SECTION

I move recommendation No. 4:

In page 7, before section 2, but in Chapter 2, to insert the following new section:

2.—The Principal Act is amended in section 531A(1) by substituting the following for the definition of "aggregate income":

"‘aggregate income for the year of assessment', in relation to an individual and a year of assessment, means the aggregate of the individual's relevant emoluments in the year of assessment, including relevant emoluments that are paid in whole or in part for a year of assessment other than the year of assessment during which the payment is made, and relevant income for the year of assessment, but excluding any amounts paid by an employer under section 787E(1) and section 787E(2):".

With respect, I would like the Minister to respond as he did to Senator White earlier, and I reserve the right to comment afterwards.

The proposal made by Senator Cannon appears to reflect a proposed change to the income levy that section 2 of the Bill proposes to abolish, rather than the universal social charge that is replacing it. However, the proposed recommendation appears to seek to grant relief from the charge in respect of payments to a personal retirement savings account made by an employer. An employer's contribution to an employee's PRSA is treated as a benefit in kind for income tax purposes. The employee is then entitled to claim personal tax relief, subject to the relevant ceilings, in respect of that contribution, as if he or she had made a personal contribution. In effect, this means that no additional income tax charge arises in respect of the employer's contribution, provided the relevant ceiling is not breached. For USC purposes, the individual's aggregate income from all sources is subject to the charge without relief for pension contributions. This includes such items as employer's contributions to PRSA, which are treated for income tax purposes as the income of the individual.

Were I to concede to Senator Cannon's suggestion, this would result in a position where an employee could benefit from an employer contribution to the PRSA by not paying USC on the amount of that contribution. This would occur even though the PRSA is treated as the employee's personal income, but an employee who is unable to get his or her employer to contribute to his or her PRSA, and instead personally makes contributions of the same amount from his or her own resources, would suffer the USC charge. I cannot accept that this is equitable.

The whole question of relief for pension contributions, including PRSA contributions, is being examined by my Department in the context of the national recovery plan and the Government's objective to raise €700 million from the pension sector over the period of the plan. In my view, a change in this area would be inappropriate. The plan indicates that the Government is willing to engage with the industry to examine alternatives to deliver the outcome. This invitation extends to this issue as well.

I must regret the insistence of the Fine Gael Party, the Labour Party and latterly, the Green Party on the fast-tracking of this Bill.

I had hoped that as Minister, in reflecting on amendments, I could have had a considered discussion with the pensions industry about how to structure the contribution that the pension industry should make in the national plan. We have had to stick to the original proposals because we have not had an opportunity to have an adequate dialogue with pensions industry representatives about how they could be revised. There was no question of departing from the target figure of €700 million, but I indicated on budget day that I was open to discussions which would secure the same money in an alternative way. This issue can be considered in such discussions, and I would urge that whoever takes power in the next Government, to look at that engagement quickly so that there can be a discussion with the industry about the implications of these proposals.

The reality in every budget is that governments often formulate proposals as an initial bid. If we do not have an initial bid, we will not make progress on the issues. There should be further discussion on this, but at this stage the measure must be adopted as it stands.

Has the Minister conceded that the imposition of the USC on the employer's contribution is inequitable? Did I hear him correctly?

No. What is inequitable is that this House and the other House did not have an adequate opportunity to consider the Finance Bill 2011. This is a minority Government. We were compelled to enact this legislation in a very short period of time. I would have much preferred to consult further about this matter. I am not indicating that it is inequitable, but that I was open to persuasion on this issue, were other alternative sources of finance identified by the industry.

I would just like to outline the context behind this amendment. These PRSAs were introduced in 2003 by the Pensions Board in an attempt to increase pension coverage across the whole working population. The idea was the lower paid and the self-employed would start making some provision for their pensions. The intention also was for PRSAs to supplement the State pension and to avert what many of us believe will be a major crisis in pension provision for many years to come.

This is an inequitable imposition upon a certain sector of the working population. Employees in other pension schemes are currently not taxed on any contributions that their employer puts into the pension plan. This recommendation seeks to correct what I believe was simply an error of omission. I do not believe this was deliberately done either by the officials or by the Minister during the drafting of the Bill. I cannot believe that such an unfair imposition was made upon a certain sector of the working population. Anybody who has been out canvassing on the doorsteps in the past few weeks will have been told of the horror people experienced when they opened their paychecks to find the serious chunk taken out of their pay by this new universal social charge. However, one cannot imagine the horror that people experience when they open their paycheck to discover that not only has the USC been applied to their pay, but also to any pension contribution that their employer is making on their behalf.

I agree with the Minister to some extent that this Bill has been rushed through the Seanad and the Dáil. I also recognise that we are living in extraordinary times and that we need to limit pension tax relief. However, this is a simple anomaly that unfairly singles out PRSA pension scheme members for an extra tax charge that their colleagues in traditional pension systems simply do not have to pay. The PRSA regime was introduced as a simple, transparent and portable pension arrangement for the lower paid. They are not used by high earners. We are talking about the self-employed and lower earners being hit unfairly in this situation.

I am informed by senior people in the pensions industry that removing this inequity simply requires a one or two line amendment to the Act. If it cannot be done now, over the coming months and perhaps even for a year, this universal social charge will be imposed unfairly and inequitably on PRSA contributions made by employers on behalf of their employees. It is unfair and unjust. I am informed that it is easily rectified, and I ask the Minister to accept that.

I strongly support Senator Cannon on this issue. It is unlikely the Minister will accept this recommendation because there are political aspects to it but at least this debate will signal to the incoming Government that this must be done in the Finance (No. 2) Bill. It unfairly singles out particular pension contributors and triggers them into this position simply because their employers make a contribution. That is obviously unfair. It revolts reason and any sense of equity.

I have a briefing all of which I will not put on the record because we want to get on to other matters and the timescale is short but it can be done simply. It requires very little in terms of tweaking and would have no further knock-on effect on other legislation. Those are all good reasons, and I strongly support Senator Cannon.

The principle here is in absolute agreement with a later recommendation of mine which is related but which we may not reach today, that is, it looks after people who come in at or under the minimum requirements for the State's old age pension. To impose this full charge would be iniquitous.

I read the Minister's speech. I did not see any reference to it in the Seanad but I understand this proposal may have had some tweaking in the other House. I would be interested if the Minister could tell me, perhaps privately later or whatever, if that is the case or could indicate to me now. I will be putting my amendment on this matter before the House on Report Stage.

There is a great deal of merit in what Senator Cannon said, and I support him on it. I want to note my formal opposition to section 2 but what Senator Cannon is proposing by way of his recommendation has enormous merit.

I was curious to hear one aspect of the Minister's response. He said it was a function of the fact that the Opposition parties and others were insisting on the Finance Bill being dealt with by this weekend. The Minister could spend all day telling us about what he would have done if he had more time. As I understood his remarks he said he was sorry he did not have an opportunity in this Bill to introduce wholesale reforms of the treatment of pensions and so on in regard to the tax code. I am sure there are many things the Minister would have liked to have done but he cannot visit that on the parties in the Seanad or the Dáil for wanting to see this legislation through and then say there are ten, 15 or 20 things he would have liked to have done. They are not in the Bill. The budget was in December. The Bill was published on 20 January. None of the decisions on truncating the debate were made before 20 January. In terms of anything the Minister wanted to do in the Finance Bill, he had every opportunity to put them into the Bill but they are not in the Bill of 20 January, which is when it was published.

I welcome the change in the universal social charge. Fortunately, I do not have to go for election and therefore I can speak for a group that does not have a big populist push behind it. I refer to sole traders. The reduction for medical card holders is reasonable but the increased 10% for the self-employed and sole traders on incomes over €100,000 is unfair because they are the group with impaired loans that they are finding difficult to pay back. For example, they must pay back capital on after tax income which means they have only 45% left for repayment. Based on that it would take a small business nearly €220,000 to pay back a capital loan of €100,000.

Small business does not need any more tax burdens. I do not know if the European Union will allow it. The Germans are trying to interfere with such changes but with the foreign investment sector, these sole traders are the engine that will power our recovery and everything that can be done to make life a little easier for them should be done.

For the past 15 years Europe has been trying to deal with the issue of pension liability in every estate. There has not been a year in the past 15 in which we have not examined it. Its importance was acknowledged by the Minister's own party in Government with the establishment of the National Pensions Reserve Fund to deal with these issues. It was also acknowledged by bringing in schemes to encourage employers and employees to set up pension schemes. There has been a European demand for portability which has been ignored effectively because portability does not exist, although we are moving more closely to it.

In terms of this section, the Minister cannot deny that it is a disincentive. The Minister appears to be uncomfortable with it also and that this has happened not in the way he precisely planned it but that is what the Seanad is about. The Seanad exists to have a second look at legislation.

Without getting involved in the debate about the rush to get the Bill through the House, I stated here last week and earlier that I do not like rushing legislation through the House but we can deal with this issue now, and all for the sake of calling back the Dáil tonight for ten minutes. A word will not be said against it anywhere.

There are two or three recommendations tabled about which it would be good from the Minister's point of view to acknowledge that they had merit. That would support the Minister's public position. He has said many times that it is in the course of debate in the Dáil and Seanad that issues emerge. He insisted that the Seanad would not meet until the weekend to allow him time to digest the issues that came up in the Dáil. We are here now. It would prove the Minister's point.

Effectively, he would be saying "I told you so" to people in that this is an example of an issue which will create problems, is a disincentive to Government policy and to European policy and we have, within our grasp, the opportunity of dealing with the problem in a way which meets everybody's requirements. It is a cross-party position. Everybody would agree with it. We all agree the merits of the recommendation; let us put that aside for the moment. We are now talking about the way we do it. The Minister has conceded the point in terms of what he would like to do. I urge him just to do it.

I voice my support for what Senator O'Toole stated but particularly for what Senator Harris stated. For years we have encouraged people to plan for their retirement and their pension and now we are creating a disincentive, to quote the word used by Senator O'Toole, to what we as a State should be encouraging people to do. It is not the only one. There are other instances in the Bill where that arises.

As Senator Harris stated, it is very difficult to support somebody who is a sole trader, self-employed or someone earning €100,000 and then to discover they are paying interest and all the other expenses to do so yet, under another part of this Bill, we will force them to pay tax on 5% of their pension as though they were withdrawing it each year.

All of what has been done in the Bill is not taking into account, and I believe the Minister has said also, the urgency required to create more jobs, encourage small and medium businesses to succeed, and for people to set up businesses. If we are making it such a disadvantage at this stage, certainly for people to start a business, be a sole trader or become self-employed, we are working in the wrong way. We can do much more in this area. The Minister's heart is in the right place. It seems a shame that we have not been able to give it the attention it deserves. I support Senator Cannon's recommendation.

I have listened to what other Senators, particularly Senator O'Toole, have said. When something is pointed out to the Minister does he not have a duty to remove an anomaly? As Senator O'Toole said, it is the reason we are here. It is the reason we are going through the Bill. Certainly, it should be considered.

I also echo the sentiments Senators Harris and Quinn expressed about sole traders. We need to keep the tax burden low. I will always have that mantra. I do not subscribe to high taxation.

The reason we are here today is to go through the Bill. So be it if the Dáil must come back to make an amendment. There seems to be a duty on the Minister to accept this recommendation.

I do not accept there is any duty to accept that recommendation and I never conceded that in the debate. On the merits of the recommendation, the position is that the PRSA contribution is fully taxed under the current income levy. As Senators will be aware, the social charge is a merger of the health contribution and the income levy. It is correct that the health contribution element of it was not taxed because that was levied on gross income but the income levy assessed it to taxation as a benefit-in-kind. It is not correct to say that this is a dramatic innovation in pensions. I accept it is an increase in taxation in so far as the health contribution element, fused now in the social charge, captures this income. That is the factual position.

I did not concede it was an anomaly. What I stated was that on this issue, along with all the issues on the treatment of the pension industry that I indicated in my budget speech, my position was I was open to amendment on all these issues and I would have liked a discussion with the pension industry about this.

The Fine Gael Party, the Labour Party or the Green Party did not recognise at any stage the proper timescale for a finance Bill implementing a budget. The priority has been to have a general election, not a finance Bill, and that is their, not my, decision. For example, normally I would spend a week going through the Finance Bill when the officials had the necessary draft ready for me. This year I was given a day to consider the Finance Bill. Last year I recall spending a week in total, over a four week period of separate sessions, considering in detail each section of the Bill. This year I only had a day to do it because the universal cry at that stage was to publish the Finance Bill. The Bill was published early to sate the demand for the exit of the Government.

I read editorials in many of the newspapers stating this Government has nothing to do and the Finance Bill can be passed in a day. We must learn from this episode that the Finance Bill cannot be passed in a day and the normal timescale, which would have been involved for many years, is that the Bill is enacted by the end of March. The Bill will not be enacted by the end of March this year. It will be enacted at the beginning of February.

The idea that the only consideration of the Bill takes place in the Dáil or the Seanad also is an illusion. The Bill is published and then there is a public response to that publication. The Bill was published on Friday week last. Normally, my Department would receive a considerable range of submissions, correspondence and representations about this. Likewise, Deputies and Senators would receive representations on an individual basis. My officials would have an opportunity to test these individual cases to see whether real anomalies were thrown up to see whether a particular exemption, proviso or qualification could address them. That opportunity has not been given because the headlong rush to have this general election has taken priority over the Finance Bill. Let us not delude ourselves into thinking that Seanad Éireann can solve this problem with a recommendation on a Saturday afternoon. I hope to discuss the constructive role of the Seanad in this Bill on Final Stage.

On the merits of the recommendation, I indicated that, along with the pension changes, this was an issue on which I would like to have had an opportunity to reflect. At the time of the plan, we had to identify that we would get a certain amount of revenue out of this sector and we put together a set of proposals with that end in view which we announced in the budget. We have not had the opportunity of refining this in the Finance Bill. Tax relief for pensions, the employer contribution, the employee tax relief in income tax, and the treatment of these in the levy system are all related. These issues could have been considered and should have been in a reflective way. That has not happened. There will have to be a finance (No. 2) Bill. I will arrange for my officials to have that necessary consultation with the interests involved and proceed on that basis.

The other question which was raised by Senators Harris and Quinn is an issue at the heart of tax policy. It is the question of marginal rates and how far one can push them. The specific issue raised by Senator Harris related to the treatment of the self-employed. By merging the health levy and the universal social charge, there was a reduction in the total income payable by all self-employed persons earning over €200,000. There was also a differential for those on between €100,000 and €200,000 in the impact of this year's measures. Hence, an amendment was introduced increasing the amount of the social charge for the duration of the four year plan for that group of taxpayers to put them in the same position as any other taxpayer.

That said, as a result of Government decisions and budgets adopted in recent years, marginal tax rates have slipped up beyond the 50% level. I have always believed that marginal tax rates should not exceed 50%. I have fought with might and main against it, but did so against a torrent of opposition, especially from the Labour Party and, of course, even more so from Sinn Féin which seems to believe there is a limitless pot of taxation and that taxation can be introduced and extended to 55%, 60%, 65% and 70%.

This was raised with me in social partnership.

Read the manifesto next week and see it.

This issue was raised by me with social partners in social partnership negotiations——

The Minister is making it up now.

——who objected to pay cuts and who turned around and asked why I would not bring in a 65% income tax rate.

Was the Labour Party in social partnership? I do not remember that.

These persons are all symbiotically linked.

That must be new. That is new to me, that nobody is invited to social partnership.

I have the honour of representing a north-side Dublin constituency and when I pass Liberty Hall I see Kim Il-sung-type pictures of Deputy Gilmore on the building.

It was former Taoiseach, Deputy Bertie Ahern, who invited them all in.

Please stop pretending to me that you are not symbiotically linked with all these people.

Do not offend Senator Harris now.

I look forward to seeing the Labour Party's manifesto.

The Minister will see it quickly. I wonder has Fianna Fáil one at all and who will write it.

Has Senator Alex White a point of order?

I have the honour of having written the manifesto for the next four years for this country——

——and Senator Alex White will depart from it at his peril. That is all I can tell him.

That is classic hubris. That is classic Fianna Fáil narrative.

There is no question of hubris. There are modifications that can be introduced, but the broad direction of that manifesto in the national recovery plan is that two thirds of the adjustment must take place on the expenditure and one third on the taxation side. Although Fine Gael is maintaining that it can make an even bigger adjustment on the expenditure side, it will find it will be difficult to do that in office. On the other hand, the Labour Party is saying that half of the adjustment must take place on the taxation side and Sinn Féin is maintaining that two thirds of it can be done on the taxation side, which is an impossibility. It is a politically attractive impossibility——

The Minister has increased taxes considerably.

——because it allows them engage in this endless politics of begrudgery——

We have never had such tax increases as we have had from the Minister.

——that there is someone else who has to pay.

The Minister is replying to the points raised. No interruption.

The Minister put the taxes up madly.

There is always someone else who must pay.

Some €1.5 billion of tax increases.

It allows Senator Alex White to go to the doorstep and state to the occupant that he or she is a poor man or woman who is being mercilessly treated by the last Government, that his party accepts all that it did and will not change the measures even though the party opposed them, but there is someone else who can pay in the future. There is not——

Read the document. Read the manifesto.

——and that will not work as an economic policy for this country.

Will Fianna Fáil have a manifesto?

As the Minister might expect, I am not happy with that response. TASC produced a report on the success or otherwise of PRSAs only a couple of weeks ago. It concluded that the scheme has not been successful and there has been a high dropout rate.

It was somewhat disconcerting to hear the Minister state earlier that — I apologise if I do not quote him accurately — sometimes a Minister for Finance prepares a finance Bill, throws it out into the ether and awaits a response from certain sectors of the industry in an auction-type process. This is not the way to prepare a finance Bill. There are 20 officials sitting in the ante-room to the Chamber who are assisting and aiding the Minister and I expect they have been closely involved in the preparation of the budget in recent months. It is strange that the consultation process with the pensions sector that would have identified this anomaly early on did not take place before the introduction of the Bill.

The Minister is a skilled orator, on which I congratulate him, but he often unintentionally tends to drift away from the core argument of a particular amendment. I will ask him two simple questions and would appreciate two straightforward answers. Does he believe the imposition of the universal service charge on the employer PRSA contribution to be unjust? A yes or no response would suffice. Second, if it is unjust, does he believe it can be amended by a short one or two-line amendment in this House today?

First, all taxation involves an element of injustice in that it removes someone's income from him or her. I pointed out in respect of this——

It would be helpful were the Minister simply to answer yes or no.

I will not answer yes or no because——

I thought he would not.

——Seanad Éireann does not consider legislation in a reflective way by simply answering yes or no to questions.

That may be a pity.

This House is not conducted like an opinion poll, as it is a deliberative assembly. My point is that, as far as there is an injustice, this income is already taxed by the income levy and the question is whether the imposition of the increased amount reflective of the health levy amounts to an injustice. We must raise this money and the question is whether — all must learn this lesson — there is a way to raise it from the pensions sector in a more equitable way. All I have said is that I am open to persuasion in that regard. Therefore, I would be open to an amendment were such discussions to eventuate in such an outcome.

The State has been obliged to move very rapidly to deal with a very severe crisis since last September. All I am saying is that it is not necessarily a good idea to have a general election in the middle of the crisis to sate the appetites of the political classes who read opinion polls every week or two. It would have been better for the country——

The Minister's party imploded. The Taoiseach was attacked from within.

No interruptions, please.

Irrespective of——

The Taoiseach was challenged from within. The Minister should talk to Deputy Martin.

——who is in power or the personalities involved, it would have been better for the country had it been permitted for the first three months under the EU-IMF arrangement to provide for a continuity of government. In late November the Green Party decided on what was constitutionally an extraordinary position, whereby it, effectively, withdrew confidence from the Government but decided to remain in office to do certain things. There was an argument for a dissolution at that stage, but it was overwhelmed by the circumstances in which the country found itself. It needed continuity of government in those few months but did not get it. Those responsible for not giving it will be obliged to take the judgment of history on the issue.

Deputy Martin, perhaps, for moving against the Taoiseach.

No interruptions, please.

My party certainly was prepared to ensure such stability.

Question put: "That the new Section be there inserted."
The Committee divided: Tá, 25; Níl, 28.

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Harris, Eoghan.
  • McCarthy, Michael.
  • McFadden, Nicky.
  • Mullen, Rónán.
  • Norris, David.
  • O’Reilly, Joe.
  • O’Toole, Joe.
  • Phelan, John Paul.
  • Prendergast, Phil.
  • Quinn, Feargal.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Ormonde, Ann.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Ciaran Cannon and Maurice Cummins; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Recommendation declared lost.
Question put: "That in respect of each of sections 2 to 61, inclusive, undisposed of, the section is hereby agreed to in Committee."
The Committee divided: Tá, 28; Níl, 24.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Harris, Eoghan.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Ormonde, Ann.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • McCarthy, Michael.
  • McFadden, Nicky.
  • Mullen, Rónán.
  • Norris, David.
  • O’Reilly, Joe.
  • O’Toole, Joe.
  • Phelan, John Paul.
  • Prendergast, Phil.
  • Quinn, Feargal.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Ciaran Cannon and Maurice Cummins.
Question declared carried.
Progress reported; Committee to sit again.