Dáil Éireann díospóireacht -
Wednesday, 27 Mar 1985

Vol. 357 No. 4

Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1985: Motion.

Minister of State at the Department of Health (Mr. Donnellan)

I move:

That Dáil Éireann approves the following regulations in draft—

Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1985

a copy of which regulations in draft was laid before the House on 6th March, 1985.

Subsection (3) of section 9 of the Health Contributions Act, 1979, provides that the Minister for Health may be regulations vary the income ceiling level which, taken in conjunction with the rate of health contributions applicable, determines the maximum amounts of contributions payable in respect of an individual in any particular contribution year.

Dr. O'Hanlon

On a point of order, are there copies of the Minister's speech available?

Mr. Donnellan

There are. Shall I continue or shall I wait until copies are distributed?

An Ceann Comhairle

The Chair has no control over the distribution of documents of this sort but it is usual to have them distributed.

Dr. O'Hanlon

The problem is the difficulty in hearing the Minister while Members are leaving the House.

Mr. Flynn

The Minister is not in particularly good voice this morning.

Mr. Donnellan

I shall begin again if that is what the Deputies wish.

Mr. Haughey

He is much better when dealing with interjections than when dealing with considered statements.

Mr. Donnellan

I repeat. Subsection (3) of section 9 of the Health Contributions Act, 1979, provides that the Minister for Health may by regulations vary the income ceiling level which, taken in conjunction with the rate of health contributions applicable, determines the maximum amounts of contributions payable in respect of an individual in any particular contribution year.

Subsection (5) of section 9 of the Act of 1979 requires that a draft of the proposed regulations shall be laid before each House of the Oireachtas and that the regulations shall not be made until a resolution approving of the draft regulations has been passed by each House. The draft regulations now before the House deal with the income ceiling which, it is proposed, shall apply in relation to the contribution year commencing on 6 April 1985. It is not proposed to vary the rate figure which has remained at 1 per cent since 6 April 1979.

The income ceiling is at present £12,000 and it is proposed to raise this to £13,000 with effect from 6 April, 1985. In determining this, I have taken into account, as required by the Act, the latest information available regarding changes in the average earnings of workers in the transportable goods industries since the last income ceiling figure was adopted. The effect of the increased ceiling is to increase the maximum contribution payable from £120 to £130. However, the increase of £10 will fall to be paid only by persons whose income exceeds £12,000.

It is estimated that raising the ceiling level from £12,000 to £13,000 will result in an increase in the amount of contributions to be collected of approximately £2,000,000 in the contribution year 1985-86. Of the estimated additional income, about £200,000 should arise in the calendar year 1985. The remainder of the additional yield should be paid over in the first quarter of 1986.

I shall be reviewing shortly the income limit for free hospital consultants' services. I am not in a position as yet to say what this limit will be.

The Revenue Commissioners are now responsible for collecting current health contributions from all classes including the farming sector. Health boards remain responsible for the collection of arrears due from the farming sector for periods up to 6 April 1984. The cumulative total of these arrears is now assessed at about £10.5 million. I am most anxious that these arrears and indeed arrears due from other self-employed persons should be collected as soon as possible and help to relieve somewhat the very tight budgetary situation in which we are now. In the case of arrears due to health boards, final demands have been issued in practically all cases and boards are now selecting cases in which proceedings will be taken if the demands are not met.

On 1 June 1984 I introduced regulations providing for an admission charge of £100 in the case of persons seeking inpatient services in public hospitals who have not discharged their liabilities for health contributions. I am satisfied that these regulations were beneficial in inducing defaulters to meet their commitments, but it is not of course possible to quantify the results. Up to 31 January 1985, £6,600 had been collected under the admission charge scheme. This figure is not significant and, in fact, bears an inverse relationship to the fundamental objective of the scheme. I now ask the House to approve of the Health Contributions (Yearly Reckonable Income) (Variation) Regulations, 1985, in draft.

Dr. O'Hanlon

The health contributions have been raised each year but this year we should question whether the ceiling should be raised in view of the reduction in the level of services. The Minister has told us he will collect an extra £2 million this year as a result of raising the ceiling. In the past year there has been a reduction in the level of services, there has been a reduction in the number of staff employed in hospitals, wards have closed down, local cover is not available and I understand that in this city family doctors have stopped telephoning hospitals for beds for their patients because of all the cutbacks. On the community side there is a reduction in the level of service, the dental service has been practically abolished and the sight testing scheme has been abolished in practically every health board area. All of this is causing tremendous hardship for people and I question if it is necessary to increase the health contributions during the current year.

The health contributions are collected with the 1 per cent youth employment levy and the 1 per cent special levy and up to 1984 they were collected by the health boards. The Minister of State will be more aware than the Minister of the chaos that exists in rural Ireland where the farming community are getting demands on the basis of estimated income which often bears absolutely no relationship to their real income. If they get accounts prepared this may cost even more than the demands and they may end up by paying the accountants and also the demand, which in most cases will be reduced after the accounts are prepared.

I am sure the Minister is aware that many farmers whose income is less than £5,000 have to pay the 1 per cent special levy which does not apply to anybody else earning less than £5,000. I wonder if he has consulted with the Minister for Finance about this aspect of collecting the health contributions and the levies? The Minister has complained on many occasions that he has not been able to collect by way of the health contributions the amount due to him. I submit the reason is the chaos that has resulted from the method used to collect health contributions.

Small businesses and farmers in particular are getting arrears demands from the health boards and new demands from the Revenue Commissioners but these bear no relation to each other on the basis of the estimated income of the farming community. We have raised this matter on many occasions in the past two years since we were first told that the Revenue Commissioners would be involved. It is very disappointing that this morning the Minister should tell us the same as we were told last year about the method of collection and the system used. Will he state the position in view of the fact that the Government propose to introduce a land tax? I thought one of the benefits of a land tax to the farming community would be that they would not have to prepare accounts, that their contribution would be based on their acreage or adjusted acreage. They will still have to prepare accounts in order to have their health contributions and the two other levies collected. The Minister should have dealt with this problem because we have raised it in this House on previous occasions.

Will there be a different method of collection next year for the self-employed and the farmers and if they have arrears will they receive demands from the health boards, the Revenue Commissioners or from some other source? It should never have been a function of the health boards to collect this money and they did not benefit from it. The Minister should tell us of his proposals in view of the changed method of collecting tax from the farming community as announced by the Government and as appeared in the document Building on Reality. I am disappointed there has been nothing in the Minister's speech this morning dealing with the matter of collection in 1986.

The Minister should announce this morning the ceiling for benefit. He said that was being reviewed and would be announced in due course. I see no reason why the Minister should not tell us what will be the increase. I know the benefit does not take effect until June but we should be told this morning the ceiling for benefit and what increase the Minister has in mind.

The Minister told us he had collected £6,600 by way of the £100 hospital admission charge. To quote him, he expressed concern that "the figure is not significant and bears an inverse relationship to the fundamental objective of the scheme". One of the reasons the figure is not significant is that many people cannot get into hospital because of ward closures and a reduction in the level of services. I ask the Minister if it is reasonable of him to collect an extra £2 million of tax at a time when there is a serious reduction in the level of services directly as a result of government policy. This not the fault of the health boards. As the Minister of State knows, in his own area they had three or four meetings before they were able to agree on the budget for 1985 and they will still be £2 million or £3 million in deficit at the end of next year. I question if there is justification at this time when we are reducing services to collect another £2 million from those who are liable for health contributions.

Dr. Ormonde

The Minister is proposing to raise the health contribution ceiling from £12,000 to £13,000. Health contributions are levied at 1 per cent on income up to a fixed income ceiling. This means that as from 6 April 1985 the contribution will be 1 per cent of £13,000. Does this mean that for those eligible for hospital services the level will also increase? In his speech the Minister said the matter will be reviewed shortly but from past experience I have no doubt that the eligibility ceiling will also be raised. In other words, a further group will be added to those who are catered for in the general hospital services which are already totally inadequate. We know how these services have suffered during the reign of this Government, and in particular of this Minister for Health. There has been a massive 20 per cent increase in the price of private and semi-private accommodation since last Christmas.

It is now cheaper to stay in the best hotel in Dublin than in any county hospital. Perhaps this is a way around our inadequate hospital building plan. Perhaps the people in Waterford waiting for our hospital should consider renting the Ardee or the Tower Hotel to cater for our patients. Last November the Minister increased the cost of private and semi-private accommodation by 20 per cent, forcing many eligible people who prior to that had opted for VHI cover to go back into the already over-burdened health service, a service ill equipped to cater for the demands placed on it. By raising the ceiling by an additional 8½ per cent the Minister will place a further burden on that service. Pay increases this year have been around 3 per cent so by increasing the eligibility ceiling level to £13,000 the Minister will ensure a marked increase in the numbers availing of the general hospital services. There will be a significant increase in the numbers seeking these services which do not exist by virtue of the health cuts and other economic measures being implemented.

There will be a shortfall of £40 million to the eight health boards this year. In spite of that we are now going to provide less money to run the service and we are introducing legislation which will bring about an increase in the number of people demanding the service. That sort of economic madness will not work. If we are going to increase the demands on the service continually we must provide the funds to run the service. The Government have not done this. I am unhappy that in the midst of the severest of cutbacks and the virtual dismantling of the health service the Minister still has the audacity to increase the charges.

Mr. E. O'Keeffe

The farming sector have been unfairly assessed in relation to this scheme. I would have thought I would have had the sympathy of the Minister of State. Deputy Donnellan, who comes from a rural constituency. The farmers are being assessed before allowances for capital depreciation. We are unique in Europe in assessing farmers in that way. I would ask the Minister to ensure that the scheme is amended. Then we would get the co-operation of the farming community and all arrears would be paid. I understand that numerous meetings have taken place in the Departments of Health and Finance with the farming organisations. I appeal to the Minister to amend this area in the interests of the community. It is giving a wrong impression to the community in general.

Mr. Farrelly

If at all possible, I would like the Minister to consider changing the method of tax assessment on farmers so that their incomes would be taken into account only after repayments and depreciation have been taken into account. We all agree that these assessments are unfair and we would appreciate if something positive could be done in this area this year.

Mr. Donnellan

We shall shortly be reviewing the income limit for free hospital consultant services. In all probability the income limit will be increased so that the same numbers of people will be eligible in the future.

Dr. Ormonde

That is not so; one is an increase of 8½ per cent and the salary increase are only 3 per cent.

Mr. Donnellan

The same numbers of people will be eligible. Both Deputies O'Hanlon and O'Keeffe talked about the farmers and this seems to be where the biggest problem exists in relation to health contributions. From the inception of the health contributions, health boards were responsible for the collection of contributions from farmers. On the introduction of the income related scheme it was not possible to establish the actual income of farmers. Having regard to the fact that the coverage on farmers for income tax purposes was limited, accordingly a notional system of rateable valuation and a multiplier was used to determine farm income for health contribution purposes. In July 1982 the High Court ruled that the RV system of determining liability for agricultural rates was unconstitutional. While the High Court decision did not specifically invalidate the system of assessment for farm income for health contribution purposes, it was felt that cases challenged in the courts were likely to succeed. The relevant regulations were amended in February 1983 to allow health boards assess farm income on a factual basis.

In relation to the procedures adopted by the health boards a revised system of assessment operates on the basis that the Revenue Commissioners supply the health boards with income data on farmers in the income tax net and on farmers not in the tax net but asked to declare their farm income. The health boards issued demands in 1983 and in 1984 for arrears due. Basically because of the poor response to requests for income particulars health boards had no option but to proceed to determine liability using such information as was available in relation to a farmer's income including the income previously determined by health contributions for previous years and the known income level in the area.

The health boards have power under article 18 of the Health Contribution Regulations, 1979 to determine income where the information regarding a person's income is not available or forthcoming. Any farmer who disputes the amount demanded is welcome to supply evidence to the board in support of a contention that the income determined by the board is overstated. Arrears outstanding due to the introduction of the factual assessment system have to be redetermined on a factual basis. It was felt that the simplified procedures should be adopted to avoid farmers having to supply data on actual income for the years in question. Accordingly, farmers were given the option of paying arrears for 1979-80 and 1980-81 on the basis already demanded, on the basis of the RV multiplier. In the case of arrears for 1981-82 and for 1982-83 health boards redetermined liability taking into account any information they had in regard to an individual farmer's income and known farm income in the area. The income previously determined for health contribution purposes was also taken into account.

On 31 January 1985 farmers owed a total £10,625,617 to health boards. About £30,390,662 was owed to the collector general by self-employed persons. Those figures include farming arrears for 1984-85. These amounts were based on initial assessments of the income and cover prevailing since the introduction of the scheme in 1971. It is expected that in many cases the arrears will be reduced considerably. Any criticism of the situation in relation to the self-employed is a matter for the Minister for Finance. Health boards are currently selecting cases, as far as farmers are concerned, in which court proceedings are likely to be taken in the near future. Penalties attached to the health contribution collecting system are as follows: any person who knowingly makes any false statement or conceals any material fact shall be guilty of an offence and liable on summary conviction to a fine not exceeding £500 or, at the discretion of the court, to imprisonment for any term not exceeding 12 months, or both. Where a person fails to pay a health contribution he shall be liable on summary conviction to a fine not exceeding £500. I should like to tell Deputy O'Keeffe that on the basis of the new factual assessment, farmers' incomes are determined on the same basis as that of other self-employed persons. Farm income subject to health contributions is profits from farming activities after deducting expenses such as rent, rates, wages paid out, repairs to machinery and equipment, purchases of seed, fertilisers and so on, business interests and stock relief. Any sum paid towards a superannuation fund is also allowable, but depreciation, including capital allowances such as on plant or equipment, expenditure on construction of fences, roadways, holding yards, drains or land reclamation and expenditure on construction of farm houses or farm buildings may not be offset against profits when determining income for health contribution purposes.

Mr. Haughey

We do not need this rubbish.

Mr. Donnellan

Deputy O'Keeffe asked for an explanation and I am giving it to him.

Mr. Haughey

We can all read books.

Mr. Donnellan

The Deputy will have plenty of time in the afternoon to do all the reading he wants. This expenditure was allowed against income for income tax purposes but failure to do so for contribution purposes has given rise to sustained protests from the farming organisations, particularly the ICMSA, many of whose members have invested heavily in capital projects in recent years. The answer of course is that capital allowances are not offset against income by any other sector of the population for contribution purposes and there is no good reason why any exception should be made in the case of farmers.

Mr. E. O'Keeffe

Is the Minister granting my request?

Mr. Donnellan

I have outlined the position to the Deputy.

Question put and agreed to.