Priority Questions.
17 Mr. P. McGrath asked the Minister for Finance his plans to extend the scope of the tax review currently being undertaken to include additional tax shelters requiring assessment; and if these review studies will be published well ahead of budget 2006 in order that there will be adequate opportunity for the House to consider their implications for tax policy. [18652/05]
View answerI announced in my Budget Statement that my Department and the Office of the Revenue Commissioners are undertaking a detailed review of certain tax incentive schemes and exemptions during the course of this year.
On 9 April I announced the award of two external consultancy contracts for the reviews. One consultancy firm is examining the area-based urban, town and rural renewal schemes and the living-over-the-shop schemes while another is examining various sectoral property tax incentive schemes, namely, multi-storey car parks, park and ride facilities, student accommodation, third-level buildings, hotels, holiday cottages, nursing homes, private hospitals, sports injury clinics, child care facilities and refurbishment of rented residential accommodation.
I made it clear at the time of the budget that the review will also involve the examination by my Department and the Revenue Commissioner of certain other tax reliefs and exemptions and specifically mentioned those of stallions, woodlands, artists and greyhounds. Others which I have decided should be looked at for the budget are the reliefs for interest on loans to invest in companies or partnerships, significant buildings and gardens, donations, patent income and certain pensions reliefs.
These reviews are scheduled to be completed in time to inform the development of the 2006 budget and Finance Bills. I am not in a position to indicate any likely publication date for these studies.
The Minister mentioned at the time of the budget that he would be conducting reviews. Is he reviewing every available concession or tax break? Are they all eligible for review at this time? He indicated that one consultancy firm is examining urban and rural renewal schemes and another is examining other types of schemes. Has the Minister initiated a review of all the schemes that are in place? Are other consultancy firms involved in the review, apart from the two he mentioned?
The Tánaiste recently indicated that she was in favour of extending the tax breaks available in the health sector. How does that knit with the Minister's stated intention to curtail tax breaks available for very rich people? Has he discussed the matter with the Tánaiste or the Cabinet? Perhaps the Minister could indicate who might win that particular battle. If one invests equity of €75,000 in the health sector one is guaranteed a cash profit of €62,760. Does the Minister agree that taxpayers should facilitate such returns to obviously very rich people?
Any Minister of Finance would review the schemes, the way in which they interact with the economic and social priorities of the day and whether he or she wishes to continue with them or change, add to or detract from them. In this case, having taken up office shortly before my budget, I put in place a more structured review system and obtained consultancy help in looking at the schemes which I have outlined. Other schemes are continually under review by the Department and Revenue Commissioners which would be the case going into a budgetary process.
The BES and film relief schemes have been reviewed within the past 18 months and are already subject to caps and limitations. These, together with the seed capital scheme, will be examined during the review in terms of whether potential horizontal measures to limit the ability of high earners to substantially reduce their tax contribution should include these schemes.
With regard to share options, the schemes are considered very important in terms of social partnership and by business in general and are subject to conditions in order to qualify. We have no evidence from data and reports that share options are used by high earners to reduce their income tax liability and therefore it is not considered that they need to be examined in the context of the review. That is the situation with regard to what is being looked at and the reasons for it.
The Tánaiste indicated her interest in the prospect of certain private investment in the provision of health facilities. She was generally well-disposed to the idea and stated that it was ultimately a matter for the Department of Finance and Government in a budgetary context beyond this review to see what, if any, other areas will be considered. I am not restricting tax reliefs. Rather I am reviewing them and not prejudging the outcome of the review. I am waiting to see what comes forward on the evidence available. It is a matter for Government at any time, in preparation of budgets and in pursuance of economic and social policy, to ascertain the priorities it wishes to consider where private capital could play a role in addition to Exchequer commitments. I do not see any discrepancy in that regard. We are awaiting the outcome of the review.
In that context, has the Minister placed a timescale on when the consultants will report back to him? As he is conducting a review and perhaps will take action in the upcoming budget in December of this year, will the Minister give a commitment to put the consultants' reports into the public domain prior to the budget so we can all see what is involved, and the benefits, downsides and cost to taxpayers? We should all have a look at the reports in order to have a reasoned debate in the House with regard to the matter.
As I stated in my reply, I am not in a position to indicate any likely publication date for those studies at this time. We must first receive and consider them. Tax strategy documents are not published until after the budget and Finance Bills have been considered. I am leaving such matters open and am not prepared to give a commitment on anything until I see the contents of the report. As Minister, I am entitled to prepare budgetary parameters and process and the deliberative process of Government retains that prerogative. However, whatever decisions and assistance which may emanate from the efforts, discussions and consultations undertaken in addition to what we are doing ourselves will inform my budgetary decisions which will be announced on budget day.
Will the Minister publish it thereafter?
I am not in a position at this stage to say when it will be published. We will get it first and then decide what I can do with it.
It depends on what it states.
The Deputy will know all about it on budget day.
18 Ms Burton asked the Minister for Finance if his attention has been drawn to a Revenue Commissioners document (details supplied) which states that some persons who claimed to be non-resident for tax purposes were in reality living here; his views on this claim; the procedures in place to monitor whether those who claim to be non-resident for tax purposes are actually resident out of the country for the required period; the proposed nature of the review of the legislation and regulations regarding non-residency status for tax purposes in view of the comments made in Dáil Éireann on 23 and 24 May 2005; the person by whom the review will be undertaken; and if he will make a statement on the matter. [18472/05]
View answerI am informed by the Revenue Commissioners that the report mentioned was an internal report of an organisation review group which led in to the restructuring of the Office of the Revenue Commissioners. The comment in the report regarding the possibility that people claiming to be non-resident in Ireland might in reality be living here was intended to outline the group's perception of a risk on which Revenue's new structures would need to be able to focus. I am advised that the comment was not based on any research carried out at that time. The new structures that emerged from the report and which were put into place in late 2003 included a specialist high wealth individuals unit within a large cases division and specialist areas in each region, which were capable of focusing on the tax compliance behaviour, including residence patterns, of wealthy people.
I am also informed that the high wealth individuals unit is currently examining a number of claims to non-residence as part of its risk-based audit programme and that this type of audit will be a feature of all future audit programmes in this area.
I am further informed by the Revenue Commissioners that the procedures adopted in regard to validating a claim to non-residence status depend on the circumstances in each case. The administration of these validation procedures is a matter for the Revenue Commissioners and I am informed by them that these procedures are kept under review. The methods used to verify claims to non-residence include a range of tests and an intelligence dimension which for obvious reasons Revenue do not publicise. In addition, Revenue has statutory powers to make relevant inquiries regarding any aspect of tax returns, including claims to non-residence status.
The rules on residency are not a tax relief scheme as such and are therefore not included in the review of tax relief schemes that I announced in the 2005 budget. However, as already outlined to the House, I have asked the chairman of the Revenue Commissioners to monitor the application of the current non-resident rules, through examination of cases handled in the Revenue large cases division and to provide me with a report once this examination is complete.
Has the Minister had an opportunity to view the RTE "Prime Time" investigation programme in which the report on non-residence was raised? The comment was quoted from the report about non-residents who are non-resident for tax purposes but yet in reality appear to live here. I am aware the Minister was appearing on "Questions & Answers" that night but has he had an opportunity since then to view the programme?
I refer to the two statements the Taoiseach made on successive days in the House last week that this non-residency issue was to be included in the examination of tax incentives and tax exiles to which Deputy Paul McGrath referred earlier. I understand the Minister to say now, contrary to what the Taoiseach said, that it is a review by the high net worth individuals group in the Revenue. Will the Minister tell the House the length of time that review has been going on and when it is likely to be concluded? Will the Minister publish the review and will he tell the House who is undertaking that review?
Will the Minister ask the reviewer if we can clarify the Cinderella rule whereby if a non-resident has left the country by one minute to midnight, it does not qualify as a day of residency? Does the leaving of the State have to be for a minimum period or is it the case, as has been suggested, that someone can take a trip out of the jurisdiction, perhaps by plane or helicopter, for an hour or two from one minute to midnight until, say, 1.10 a.m., return to the State and still qualify? Understandably, the compliant taxpayers view such people as, in effect, living here. Will the Minister clarify if he has been able to firm up the Cinderella rule and the 183 day rule, the way the Revenue Commissioners apply those rules and whether they actively check their operation?
I saw the programme. As I indicated in my initial reply, the comment referred to was not based on any research carried out at that time. It was intended to outline the group's perception of a risk on which Revenue's new structures would need to be able to focus. Subsequently, the new structures I outlined in the reply have been doing that. Revenue have ways and means, which they do not publicise for obvious reasons, of checking and satisfying themselves as to the position. They are the people who do that.
When I outlined the position in regard to the budget last November I spoke about tax relief schemes. It was clear I was talking about tax relief schemes. As I understand it, when the Taoiseach was asked for his view on these matters in the House during the week he said he had no problem with the idea of it being monitored and reviewed. I have confirmed that the chairman of the Revenue Commissioners does that on a continuing basis through the relevant personnel who deal with these cases in the Revenue large cases division and that he will provide me with a report once an examination is complete. That can be done in the course of this tax year.
On the matter regarding the residency rule, that was updated in the 1994 Finance Act, when Fianna Fáil and Labour were in power, following a comprehensive review of the matter by the Revenue Commissioners and the Department of Finance. The person is regarded as resident in Ireland for tax purposes in a particular tax year if he or she spends 183 days in the State in that year or 280 days in aggregate in that tax year and the preceding tax year. This aggregation rule does not apply if he or she has been in the country for less than 30 days in the tax year being examined.
The key 183 day rule that contributes to determining residence in Ireland is also a key rule in other countries including Australia, Austria, Canada, the Czech Republic, Denmark, Finland, Germany, Italy, New Zealand, Norway, Portugal and Sweden. The United Kingdom, which still operates rules similar to our pre-1994 rules, published a background paper in 2003 aimed at reviewing its rules, acknowledging that its rules are complex and poorly understood.
As has been said, a person is regarded as having spent a day in the State if he or she is there at midnight. On the changes introduced by the then Government in the 1994 Finance Bill, it was the then Fine Gael spokesperson, Ivan Yates, who on Committee Stage of that Bill pointed out that the provisions as they were then drafted would render a person who stayed overnight in the State present in the State for two days rather than one. Hence the rule was changed to count only a presence at the end of a day.
The Minister reduced it to zero.
No. That is the way it is currently.
There is no day——
We are dealing with priority questions.
That is the current position. Facts sometimes hurt.
No.
The Deputy is not entitled to interrupt on priority questions.
It is prejudicial to a former Member.
I am here to give the facts. That was consistent with Revenue practice under the pre-1994 rules. While the 183 day rule is a common rule among other jurisdictions, not every jurisdiction applies it in the same way. For example, the UK ignores the day of arrival and the day of departure regardless of the number of visits that take place in a tax year. In Denmark, an individual would be resident if he or she has lived there for six consecutive months. Those are the full facts.
Will the Minister confirm whether, under the Cinderella rule, it is possible to leave the State at one minute to midnight and return to the State at perhaps 1.10 a.m., an hour and ten minutes later, and satisfy the rules on exit from the State? Compliant taxpayers are greatly concerned that a single person earning €30,000 will pay some of their tax at 42% while, as the Revenue Commissioners have said, very wealthy individuals who are non-resident for tax purposes but who attend every charity function, ball and race meeting appear, as the programme indicated, to live here full-time. Will the Minister clarify the exit rule under the Cinderella rule?
Non-residence for tax purposes does not mean that people are exempt from paying tax in Ireland. It means that they only pay tax on their Irish sourced income. Non-residency enables them not to be subject to tax on worldwide income.
Almost none of them have Irish sourced income, and the Minister knows that. He is protecting his rich friends again.
We must proceed to Question No. 19.
Every time I come into this House there is a theme from the Labour Party spokesperson, based on her acute sense of conspiracy, that I am knowledgeable about the income tax affairs of individuals other than myself. I certainly am not and if she is, she is a better woman than I am. I understand that everyone's tax affairs are confidential between the individual and the Revenue Commissioners. The purpose of Question Time is to give accurate information to the public.
Can the Minister clarify the Cinderella rule?
I want to make this clarification.
Be Prince Charming and clarify it for us.
We must proceed to Question No. 19.
A serious charge has been made. I must insist on replying.
Did the Minister watch the "Prime Time Investigates" programme?
I am not prepared to allow such unnecessary charges to go unchallenged. They are unnecessary and have no basis in fact.
The Minister should clarify the rule and give the House the information.
It would be far better if the Deputy were to be so gracious as to withdraw such charges. I would never make such misleading charges against a Deputy in this House. It does not become Deputy Burton. If she thinks she can make such charges and that people whose job it is to report to the wider public will publish these charges unchallenged, it suggests there is some foundation to what she alleges. However, what she has said is a total untruth.
The eminent Minister is at every race meeting in this country where people who are non-resident for tax purposes are walking around.
On a point of order——
The Minister is in possession.
The non-residency rules that apply in this country were agreed under a Fianna Fáil-Labour coalition Government in 1994.
We are asking the Minister to review them.
It has been suggested that I am seeking to help or protect people. That is not the situation. I am here to provide factual information. The Cinderella rule means that only if one is resident in the State at midnight is one deemed to have been resident in the State for that day. The Deputy can conjure up any number of possibilities, however realistic or precedent-setting, that meet that rule. I cannot verify where the regulation has been used. I can confirm that the Revenue Commissioners, in whom I have full confidence, monitor this situation very closely. In so far as matters stand, they are satisfied that there have been no deviations from the regulations and they will continue to monitor and will report to me in due course. Perhaps Deputy Burton will, upon reflection, withdraw the charge she made, which I find ungracious and unnecessary but not untypical of her style.
We must proceed to Question No. 19.
On a point of order, the Minister is supposed to answer my questions. He earlier said that there was an ongoing review.
That is not a point of order. The Chair has called Question No. 19. We have spent 14 minutes on a question that should have been limited to six minutes.
It is unfortunate, but some things cannot be allowed to pass.
The Minister should give us the answer.
My integrity is not going to be challenged under privilege. If the Deputy wants to challenge it outside the House, she should do so. I will gladly sue her.
19 Mr. Boyle asked the Minister for Finance the reason there is still no comprehensive list of tax reliefs that are being reviewed six months after the review of tax reliefs was announced and two months after the deadline for public consultation on tax avoidance measures passed; the further reason tax residency rules have been excluded from the comprehensive review; if it is within the remit of the review group to recommend measures such as a maximum tax relief threshold; if the Revenue Commissioners have been asked to undertake a separate and full review of tax residency rules, the outcome of which will be published; when the Revenue Commissioners were asked by him to undertake this review; and if he will make a statement on the matter. [18473/05]
View answerAs the Deputy is aware, I announced in my Budget Statement that my Department and the Office of the Revenue Commissioners will undertake a detailed review of certain tax incentive schemes and tax exemptions in 2005. I subsequently announced in a press release on 6 January 2005 that my Department had advertised for two external consultancy studies to separately review area-based tax incentive schemes, such as urban, rural and town renewal, as well as the living-over-the-shop scheme, and sectoral property-based schemes, such as multi-storey carparks, park and ride, student accommodation, third level buildings, hotels, holiday cottages, nursing homes, private hospitals, sports injuries clinics, child care facilities and the countrywide refurbishment scheme.
I also made it clear at the time of the budget that the review will involve the examination by my Department and the Revenue Commissioners of certain other tax reliefs and exemptions and I specifically mentioned those for stallion and greyhound stud fees, woodlands and artists. Others which I have decided should be examined in the context of the review are the reliefs for interest on loans to invest in companies or partnerships, for significant buildings and gardens, for donations and patent income as well as some pensions reliefs, especially if these may be used by high earners to reduce their tax bills. Other incentives and reliefs are kept under review in the normal course by my Department.
With regard to the public consultation process, additional time was given where requested to allow social partners and others to finalise their submissions and some of these have been received recently by my Department. It is within the remit of the review to consider options for limiting the extent to which high income individuals can use these reliefs to reduce their tax liability and these were specifically sought in the invitation to submit to the consultation process.
The rules on residency are not a tax relief scheme as such and are therefore not included in the review of tax relief schemes that I announced in the 2005 budget. However, as already outlined to the House, I have asked the Chairman of the Revenue Commissioners to monitor the application of the current non-resident rules through examination of cases handled in the Revenue Commissioners large cases division, and to provide me with a report once this examination is complete.
I thank the Minister for providing the most comprehensive list to date of what schemes are to be reviewed and how. This process has been clouded in mystery. At his budget speech in December the Minister listed close to two dozen schemes, the advertisement for the public consultation process talked in generalities about property tax reliefs, and the terms of reference for the consultants in the review did not mention generalities of what reviews were to be examined and how. At least the Minister's reply provides us with a list of what is being examined.
Nevertheless there are many other tax reliefs that are not being examined. The Minister needs to state why this is so. In his reply to the first Priority Question he indicated that he is not taking this review as an indication of whether these tax reliefs should be abolished, merely to inform him for the next budget. Why does the Minister need a review when we have the obvious abuses that were seen in the recent "Prime Time Investigates" programme, where bar stools covered with whale's foreskin are subsidised by the Irish taxpayer? Is it not the Minister's political initiative and intuition that his existing powers to do away with these schemes or introduce subsequent legislation, such as a special Finance Bill, do not need to wait for a review?
We are still uncertain of the status of this review and if it will be published. The previous answer seems to indicate that it may not be published in advance of the Finance Bill. As part of this was predated by a public consultation process, not only should the review be published, there should be a date set when it will be published. Otherwise the Minister is engaged in a further act of deceit.
Regarding the residency rules the Minister is being economical with the truth. Not only is he exempting a wide swathe of tax relief schemes that are not examined by the current review, he is failing to treat the residency rules as the obvious tax expenditure they are. If the Minister is undertaking an all-embracing review of tax relief, he cannot ignore and avoid a public examination of the residency rules. Otherwise all we can presume on this side of the House, as many people outside the House presume, is that the Minister is engaged in an academic exercise that will result in no change and, unfortunately, we will see many other "Prime Time" programmes in advance of the next general election. Many of these tax relief schemes will still be in place and the people who benefit from them, while perhaps not in his own circle, are people who have a history of supporting his party and the way in which his party runs its operations. Until the Minister can get rid of those implications by showing firm action on tax relief, they will remain in the public realm.
The Deputy makes a presumption he is not entitled to make. There is no basis for such a presumption. He is entitled to the view that there should be no tax relief schemes in the country, if that is his view. As any Minister for Finance would, I review on an ongoing basis the opportunities that exist to raise revenue or economic activity or to create incentives for certain activities. These are judgments that must be made depending on economic and social circumstances.
I have outlined the first comprehensive structured review of the schemes outlined. I am examining those in the context of the consultations that have taken place. As one prepares the budget one can examine any number of tax relief schemes. I am explaining what I am doing. If, as his question suggests, the Deputy does not concede that any benefit has derived from these schemes, then the evidence is against him. I am prepared to await the outcome of the ongoing review. Our own eyes confirm, however, that significant benefits have been derived from these schemes. The issue to which I adverted in my budget speech was that I felt it was appropriate to see in what way we should strike into the balance potential benefits to investors through schemes which bring a wider community benefit, as well as a personal benefit in terms of investment in such schemes. The wider community derives a benefit from them. If the Deputy's ideological position is that he does not believe in them at all, then fine — we will agree to disagree.
I did not say that.
The Deputy did not say that but neither did he suggest that any benefit was to be derived from these schemes. I will cite some benefits, for example. There is a financial services centre in Dublin, with 20,000 of the best paid jobs in the country. There also happens to be an annual revenue take for the Exchequer of €700 million. I suggest to the Deputy that a more balanced reaction to all of this would lead to a more accurate assessment of the benefits — or what he perceives as the problems — of the schemes. That is fair enough and the Deputy is entitled to put that point of view. At no stage in his contribution, however, did he suggest that any benefit derived from them at all. I do not agree with him on that point.
The Deputy asked why I did not introduce a finance (No. 2) Bill on the basis of what he perceives I should do. That underestimates, however, the important economic interaction that occurs because of the existence of these schemes. I will await the outcome of the review before informing myself of that decision and will not pre-empt it, as the Deputy may wish. I will decide what, in my best judgment and based on Government approval, is the best interaction for the continuance, discontinuance, modification or alteration of these schemes, or a change in priorities as to whether private investment should be sought at all. We do live in a market economy and there is much private capital in the country. It may be open to people to consider, at least, whether some public benefit might be derived by the utilisation of that private capital into economic and social priorities that we would identify, in addition to whatever increased Exchequer allocation we are giving to it ourselves. Infrastructural and other deficits are often identified by the Opposition that seemingly require immediate solutions, yet the Opposition is not prepared to examine access to every capital source in order to do so.
With respect to the Deputy, these are the sort of considerations that need to come into play. Throwing old jibes at me because I am a Fianna Fáil man will not work as far as I am concerned. My integrity remains at it always was. The Deputy can throw his jibes and play to his political constituency if that suits him. If it gets him a few votes at my expense, then fair enough. I advise the Deputy, however, to keep using the privilege of the House when he does so, because if he ever does it outside the House I will have a chat with him.
The Minister seems to think I have maligned his personal integrity.
He certainly did.
I do not think anything I said would have done that.
It did.
Whom the Minister chooses to mix with is his business and that of his party. I asked why all tax reliefs were not being reviewed but the Minister steadfastly refused to answer that question.
I will answer it now.
The Minister can wait until I have finished my supplementary question.
My apologies. I will certainly wait.
In preparing this question, researchers from the Green Party contacted the Department of Finance and sought a comprehensive list of what tax reliefs were being reviewed. They were initially told that such lists could be prepared and would be supplied. They were told subsequently, however, that the information would not be supplied without the Minister's approval. Why is the Minister giving the impression that there is an open examination of all tax reliefs, when it is only a selective review of tax reliefs? The Minister is choosing whether or not that review will determine what reliefs will exist. We can have a wider debate at a time of the Minister's choosing as to which reliefs work and which do not. However, the Minister has chosen not to act. In his last Finance Bill he introduced new tax reliefs and extended the terms of existing tax reliefs without any cost-benefit analysis, so how are we supposed to take him seriously on this issue?
I will tell the Deputy why. As Minister for Finance, I am entitled to introduce a budget and the Finance Bill, which, if enacted by the Oireachtas, becomes law. It is called a democratic mandate. The Deputy may have a different opinion on certain issues. When he has a sufficient mandate he can come over to the Government benches and I will challenge him from the Opposition side. It is called democracy. I do not need a doctorate or a Harvard professor of law to tell me what I should do. I derive my mandate from the people and I take my advice wherever I can find it. I will make my judgments accordingly and I will defend those judgments. We should be able to do so and continue our public discourse in a way that does not challenge anyone's integrity. Otherwise, one can become tired of this stereotypical behaviour which does nothing for public discourse.
What about my original question?
The Deputy majored on the second part of his question. As regards the Deputy's original question, I have just explained that I decide what tax reliefs we will review. I have explained to the Deputy what ones we will review. There are reliefs that are not being reviewed because they were reviewed recently, while others are not subject to formal review in this structured proposal. In budgetary preparations, however, every possible scheme is examined and one makes a judgment on how to shape the budget. That is the position.
Is the Minister saying, "L'État, c'est moi"?
No. It is nonsense to suggest that there is any uisce faoi thalamh. There are issues of confidentiality, systems and a budgetary process which I have a mandate to utilise and protect. I am entitled to do so.
We must move on to Question No. 20.
Our mandate is to challenge
I do not have to tell the Deputy my budget in the month of June.
20 Mr. Bruton asked the Minister for Finance his plans to introduce a new programme for prioritising capital projects; and the measures he is proposing in order that the past deficiencies in project evaluation, in cost overruns and waste will not be repeated in the next five years. [18653/05]
View answerProvision for public capital investment is set out in the five-year rolling multi-annual capital envelope introduced in budget 2004. This multi-annual commitment of resources, which maintains investment at or close to 5% of GNP or around twice the EU average, underlines the Government's priority to capital investment. The relative priority at programme level is set out in the various multi-annual allocations for Departments within the envelope.
Investment in excess of €36 billion, Exchequer capital of €32.6 billion and €3.7 billion in PPP capital will be made available under the capital envelopes over the period 2005-09 to accelerate the provision of infrastructure to support sustainable economic and social development.
As Minister for Finance, my key role is to advise Government on prioritisation of resources at programme level for capital investment purposes and to set the framework within which capital programmes and projects must be appraised and managed by Departments and their agencies. Departments have extensive delegated sanction within this framework for project level appraisal and selection.
I have, with Government approval, progressed the work commenced by my predecessor on the roll-out of capital envelopes, on revising guidelines for the appraisal and management of capital programmes and projects, and on reform of the rules relating to public procurement and public sector contracts. These initiatives are designed to lead to better appraisal and management of capital programmes and projects and to assist the execution of programmes and projects within budget.
The capital envelopes also incorporate a facility to carry over to the following year savings of up to 10% of Voted capital. This feature is also facilitating better planning and management of capital projects and programmes and discouraging any tendency to rush end-of-year spending on inefficient measures.
The move to fixed-price public construction and construction-related contracts, and the shifting of risks to the private contractor, will result in a closer match between tender prices and final project outturn costs. Departments are already reporting evidence of better management of capital projects, notably in the transport area, where projects are being completed ahead of schedule and within budget.
I am disappointed there will not be a new national development plan that would start to prioritise projects in a more coherent way. If the Minister is so happy with the delegated authority he is giving to Departments, will he assure the House that in all the many cases we have seen, these Departments have complied in every respect with his guidelines? For example, in the Kilkenny drainage project we saw an original quote of €13 million rise at design review stage to €24 million. At tender stage it rose to €35 million and on completion it cost €48 million. At each stage it appears the Minister gave his approval. I wonder if the re-evaluations he requires were done.
The Luas project, which was to have been connected and completed in four years at a cost of €450 million, ended up disconnected, taking eight years and costing €800 million. Is the Minister satisfied that these projects are applying the rules set by his Department? In the case of 19 roads projects we found that the costs rose by more than 80%, and the cost overruns for the overall roads programme amounted to nearly €10 billion. I do not share the Minister's assurances that the Departments running these schemes have the capacity to deliver on time and on budget.
It is disheartening to hear that the Minister is not taking serious initiatives to properly prioritise programmes or properly control costs, or to audit the evaluations being delivered. Has he rejected the ESRI proposal for a unit to be set up in the Department to audit these evaluations? Has he rejected the ESRI assessment that the good habits learned when we had EU funds have largely been forgotten within Departments in terms of evaluation cost control and the delivery of results?
The Minister needs to reassess his reply and introduce a system in which the public can have greater confidence, which will deliver value from what he proposes, involving a spend of €60 billion, a huge amount of money, over the next five or six years. If things go wrong, we will have lost a great opportunity.
It has been decided not to proceed as yet with another national development plan — the current plan runs to the end of 2006. The shape the next plan may take is an issue to be considered by Government in due course.
Regarding the figures regularly mentioned, it is pointed out in the report of the Comptroller and Auditor General and the report of the Committee of Public Accounts that the increases in costs can be attributed to the considerable expansion in the scope and number of the projects involved, a high rate of construction industry inflation in the early years of the programme — recognised by the PAC report — and some cost estimation deficiencies prior to 2000. Deputy Bruton mentioned in his statement certain differences of estimation which I am seeking to clarify.
The report of the Comptroller and Auditor General pointed out that in the estimated costs of the national roads programme 1999-2002, the increased costs can be attributed to construction inflation of 40%; changes in the scope of the projects, which added 20% to the cost; project-specific increases on projects with non-standard elements, such as the Dublin Port tunnel, which represented another 24% of the added cost; and the failure to cost certain elements, which added another 16%. That is an accurate reflection of the Comptroller and Auditor General's report on those issues.
The Deputy also asked about cost overruns in individual projects and named some of them. Measures have been taken to strengthen cost estimation and control. The coverage of cost overruns on individual projects contained in the appendix in the recent PSE report relates to projects completed in the years 2000-02 inclusive, and the cost outturns are compared with pre-construction estimates. Original scheme estimates used in the appendix date back in some cases to 1996. The fact that there are different figures relating to all that is not surprising. The explanations are not ones I need to give as they are given in the Comptroller and Auditor General's report and by the PSE.
Deputy Bruton spoke of cost overruns of more than 80%. One can see in the appendix that taking inflation alone — using the Comptroller and Auditor General-derived inflation factors for the period — the cost overrun is not 75% but 18%. I present those figures for the sake of accuracy, in terms of how the Government sees the position compared with the Opposition's view of the matter.
Regarding the question of better cost estimation and control, nobody is implying there were no deficiencies in cost estimation and control in the past. Indeed, regarding the current roads capital programme, we are coming almost from a standing start in terms of new motorway or dual carriageway standards. There is 180 km of dual carriageway at motorway standard, half of the total inter-urban network under way. The Department and the NRA have strengthened the cost estimation and control and procurement procedures. Looking at pages 23 to 30 of the public capital programme for 2005, one can see a significant improvement in terms of cost estimation and outturn costs, as well as some projects coming in under budget and before time. That brings a little balance to this debate and the range of ongoing.assertions.
I revert to the question I asked. Did these Department breach the guidelines issued to them by the Minister? For example, was the failure to cost 16% of the roads projects in breach of those guidelines? Regarding the changes in the scope of projects which accounted, between the non-standard and the standard, for 44% of the increases, did that comply with the Minister's requirements that a re-evaluation of the projects should be done to see if they remained justified at the new cost?
I have seen no evidence of re-evaluation of any projects contained in these programmes. The Minister may see matters differently, but the evidence I see is that these Departments are ignoring on a wholesale basis the guidelines issued by the Minister, while his Department does nothing about the matter. There is no point in the Minister issuing guidelines which look like good practice if the Departments freely feel they do not need to observe them, and ignore requirements like expenditure review initiatives. They ignore their responsibilities.
If the Minister wants to make his mark, he needs to reassert his authority in terms of how these projects are carried out. The Minister's predecessor lost credibility because of how he handled the Punchestown development. He destroyed credibility in the Minister's Department for proper evaluation and control and a proper approach to public spending. The Minister needs to reassert his authority and must do more than he has outlined in his very timid reply.
I do not accept that my reply was timid. I regard it as a reply necessary in the interests of providing some accuracy regarding the assertions made on these matters by the political opposition in recent weeks, and in the interests of bringing some perspective and balance to the debate.
The new cost appraisal guidelines I have introduced since becoming Minister for Finance are being discussed with industry and as far as we are concerned will be in place by the end of this year. In the past, these matters under scrutiny related to price variation clauses and underestimation of land acquisition costs. As the Comptroller and Auditor General's report and the Committee of Public Accounts noted, one can point to specific instances where there were project-specific cost overruns. In the case of the south-eastern motorway, for example, land acquisition costs were cited as being particularly high.
Even when one looks at the outturn costs and takes account of the reviews taking place, involving the NRA or other bodies, the benefits brought by providing a national transport infrastructure for the first time, particularly through our roads programme and the inter-urban network, reflect a rate of return which justifies even the outturn costs of these projects. That is clear. The ESRI has made the point that even considering the outturn costs, a cost benefit is involved.
The ESRI considered nothing on a project basis.
Clarity is sometimes lost in attempting to set out the complexities of the issues for the public to consider in an accurate manner. It is not appropriate to apply project concept costs relating to mid-1990 figures to work done in 2002, 2003 or 2004. Clearly, the outturn costs on the projects involved would be different. Those in households know that in terms of capital works they undertook, there were cost differences. It is not fair to compare apples with oranges.
I accept, as was pointed out in the report of the Comptroller and Auditor General and that of the Committee of Public Accounts, that because we never undertook such a huge capital programme before, deficiencies in cost appraisals arose in the past. The NRA has dealt with those. One can see that the projects coming forward, such as the road developments in Monasterevin, Kildare, Cashel, Limerick, Ballincollig and Youghal, are coming in on time and within budget. The structural problem is also being addressed.
21 Caoimhghín Ó Caoláin asked the Minister for Finance the changes he proposes to make with regard to tax reliefs for the development of private hospital facilities; and if he will make a statement on the matter. [18651/05]
View answerUnder the current scheme of capital allowances available with regard to private hospitals the hospital must have the capacity to afford medical or surgical services all year round, provide a minimum of 70 inpatient beds, outpatient services, operating theatres and on-site diagnostic and therapeutic services and have facilities to provide at least five specialist services, ranging from accident and emergency to oncology and cardiology etc. Section 24 of the Finance Act 2003 extended this relief to private hospitals providing acute services on a day care basis with accommodation for such services of not less than 40 beds.
While the hospital provides services to those patients with private health insurance, 20% of the bed capacity must be available for public patients, and the hospital must provide a discount of at least 10% to the State in respect of the fees to be charged in respect of the treatment of public patients. Rooms used exclusively for the assessment or treatment of patients qualify for the capital allowances and fulfilment of the conditions necessary for qualification for the allowances must be certified annually by the Health Service Executive.
The allowances are subject to a clawback if the building ceases to be a qualifying private hospital within ten years. Capital allowances of 15% per year are available for the first six years with the balance of 10% being written off in year seven.
It should also be noted that the European Commission assessed the scheme of capital allowances for private hospitals under state aid rules. To comply with these rules, the categories of excluded persons outlined in the legislation with regard to private hospitals covers property developers, companies, trusts or those involved in the operation or management of the hospital itself. This provision facilitated a decision by the Commission that the scheme did not represent State aid.
In the context of the review of tax reliefs currently being undertaken by external consultants, I have asked them to review the current scheme of capital allowances for private hospitals. In this regard I will not consider any proposals with regard to private hospitals until the review is complete.
Is the Minister aware that the Tánaiste and Minister for Health and Children, Deputy Harney, recently indicated her interest in extending so-called tax reliefs for private health facilities? Will the Minister share his view on that proposition with the House? Does he agree with Deputy Harney and her penchant towards pouring more money into the private health sector, while we see the public health sector stumble from crisis to crisis? I am interested in the Minister's position on this issue.
Nursing homes are among the private health facilities that have benefited from property based tax reliefs. Age Action recently reported that some €500 million was poured into the private nursing care facility sector since 1997 with the introduction of these reliefs. Will the Minister confirm that figure? Can he also confirm that the owners of the Leas Cross Nursing Home benefited from this lucrative tax relief? Is he aware that those owners have had a chequered relationship with Revenue? These two points are not unrelated.
Will the Minister take the logical position and agree that there is a strengthened case, because of that experience and those facts, for the provision of public moneys directly into State services as against the current trend of more and more supports for the private sector in terms of health care delivery, be it hospitals or the range of other facilities under which these reliefs can apply? If the Minister will not join me in that view — we have teased out some of this before in terms of PPPs etc. — will he agree that any such tax reliefs earmarked for the private health sector should be conditional on strict adherence to the required standards of care for all residents, clients and attendees at these facilities, whether in terms of day care, short period stay or long-term residential care?
It is not true that investment is going into the private sector while the public health sector gets nothing. There is historically unprecedented capital investment going into the public health sector since 1997. Whatever people may suggest about the past, this Administration has arranged for the largest amount of public capital and current investment into the health sector in the history of the State.
The Deputy asked my view on tax reliefs. I will await the outcome of the review so that I will be informed on our current position and then I will decide with colleagues where we go from here, what our priorities should be and what role, if any, private sector investment should play in addition to the role it already plays.
I am anxious to see the maximum possible level of investment in the health service from all sources. I am sure if the Exchequer was limitless, it would put more into the service. We should all consider the availability of access to capital, public and private, for the public good of improving our health service. We should also take into account all aspects of such a proposal and consider all of this carefully. In terms of it being a concept, the idea of private finance initiatives is something in which the new Labour Government has been involved in the United Kingdom, whether in education, health or elsewhere.
We must ensure we do not close off opportunities for further improving the standards of care that can be available to all our patients, including public patients, by deciding that only public capital should be the means by which we can improve services. We should be open to considering what role, if any, private capital may play. We must look at the pros and cons and see what issues arise and how we can deal with them and consider whether we would like to see a tax to such a proposal. My attitude, therefore, is open. I am prepared to consider these matters on the basis of any proposal that comes before me and in the context of the current review.
The issue of private sector investment in nursing homes is separate. I do not have detailed information here and cannot tell the Deputy what tax reliefs related to that nursing home in Swords. To make a general point, I recall from Finance Bill discussions that the availability of tax relief for private nursing home care provided in the region of 11,000, 11,500 or possibly 13,000 more places in the nursing home sector in Ireland since the scheme came into being. These places were in addition to those extra services provided by the public capital programme for the elderly through nursing home care and community nursing units and those created by us having to improve the existing level of care that was available in public facilities. We may not have been happy with these public facilities but the lack was there because we did not have the available resources previously.
This is an area where we need to apply our minds. The point is that the question of resources, improved capital and improved current funding must be allied to a reorganisation of delivery of the services, whether care for the elderly, acute hospital care or community services. Our social partnership programmes leave no doubt that we must all commit ourselves to finding a better means by which we can improve the service delivery mechanism of these services, given the level of resources being applied. Quite apart from the private sector investment into which the Deputy is inquiring, public sector capital and current investment has been unprecedented in the history of the State in recent years.
It is acknowledged that many more places are now available in private care facilities, but the level of public care provision has not kept pace. The Minister signalled in his Budget Statement of last December that he would initiate a review of the various tax incentives. Will he examine each of these closely under each category? Will there be a specific examination of those who have benefited from these reliefs? Will an assessment be made of the return on the public investment? Will the return be compared with the return that would have been achieved if the moneys had been invested in the provision of public facilities, which should be an important aspect of the review? If such a comparison is not made, the review will not be complete and we will not be fully informed.
We all accept that the review, which is welcome, is necessary. I have no difficulty in awaiting the opportunity to engage with the Minister and other people in this House about the detail of the review. I hope it will be finalised sooner rather than later. The Minister and his colleagues have continually lauded and applauded the unprecedented level of investment in the health services, which the Government has had the good fortune to direct since 1997. While I acknowledge the level of investment, I do not detract from the premise I outlined earlier, that our public health services continue to stumble from crisis to crisis. I ask the Minister, rather than depending on the level of investment as a crutch, to take cognisance of the facts of the daily experience of ordinary people and accept that this serious problem needs to be addressed.
I would like to speak about the private assessment of where we stand. The amount of money invested in the public capital investment programme is the amount of capital that the Government believes to be available in the context of its various budgetary requirements, such as the need to maintain growth in competitiveness, job creation and revenue. The Government decides on its priorities across all Departments. Nobody has argued that it is wrong that the Department of Health and Children has been one of the major recipients of capital funding.
When one examines the role of private sector investment in enhancing all sectors of the health service, one has to strike a balance between the potential benefit of such investment to a prospective investor and its possible wider benefit for the community. Such wider benefits can accrue if private capital is invested in areas of social and economic priority, as identified by the Government. Certain schemes are put in place by the Government, from the available Exchequer resources, to enhance and supplement the public capital programme. Demands are placed on Exchequer funds when services are provided across the full gamut of Government activity.
The Government has to make a judgment when striking the balance I have mentioned — it is not an exact science. People can have honest disagreements when making such decisions. When one has the responsibilities of a member of the Government, for example as Minister for Finance, one operates on the basis of one's judgment and one defends one's judgment. I do not expect unanimous approval when the House discusses the decisions I have made. That is too much to expect even when I am right, and I am never 100% right. One has to defend the judgments one makes.
Deputy Ó Caoláin spoke about the state of the health service. I have acknowledged that we need to address some structural issues if we are to deal with some of the difficulties in the service. We should not talk about a status quo plus model as if that would help to bring about visible and incremental improvements in some of the service pressures we have discussed, because that is not the case. Real improvements are taking place. The number of people who have been on a waiting list for over 12 months has decreased significantly. When the Government took office, 45% of adults had to wait more than 12 months for surgery. Some 80% of patients now wait less than 12 months for surgery — 37% of them have to wait for between three and six months and 43% have to wait for between six and 12 months. While I do not suggest that the problem of waiting lists has been solved, the major reduction in waiting times should be acknowledged.
The total number of discharges in 2004 represented an increase of 35% on the figure in 1997. In other words, the throughput has grown by one third. The number of day case patients doubled between 1997 and 2004. The number of consultant posts has increased by almost 50%. I could speak about the increase in numbers of front-line staff, such as speech and language therapists and physiotherapists, who provide real services which offer additional value to citizens.
There is a real shortfall in the speech and language therapy service.
The word "crisis" is probably the most overused word in political debate. I do not suggest that I am unaware of some of the problems which remain. The Tánaiste and Minister for Health and Children has provided increased resources because she is anxious to deal with further issues that need to be addressed. There have been significant improvements in capacity and personnel. I refer to front-line people who are doing good work. Deputy Ó Caoláin and I hear about the problems that exist, but I am sure if he is honest he will admit he has met many people who are happy with the level of service they have received within the health service. Not everyone is genuinely satisfied with the service they have been given, but the number of people who are happy with their experience of the health service is far higher than we are allowed to give credence to in this House.
