With the Social Welfare Bill, this Bill will give effect to the changes announced in the budget last February. Since then Fianna Fáil has tried to square an individious circle of its own making. Its response can be summed up as follows: on the one hand, the Government is not spending enough, on the other, it is spending too much, and where will it all end?
I felt a slight twinge of nostalgia earlier this week when Deputy Charlie McCreevy pledged that Fianna Fáil would abolish residential property tax. This is the same party which, from the safety of the Opposition benches in 1985, stated that it was "totally opposed to the system of service charges and on return to office we will abolish those charges". The rest is history. When returned to the Government benches the charges remained largely unaltered until Democratic Left entered Government and obtained not alone tax relief measures, but legislation delimiting the powers of local authorities to arbitrarily disconnect householders for the nonpayment of service charges — so much for Fianna Fáil rhetoric. On ground rent, water charges and now residential property tax, the ambition of the grand abolitionists is matched only by their inaction when in office.
Democratic Left is not against property taxes. On the contrary, the taxation of property above a certain value is a legitimate source of State revenue. Handled properly, property taxes can be a far more effective and equitable method of raising revenue than the traditional system of taxing earned income and work. However, the residential property tax is not a tax on property but on the family home. In recent years the residential property tax saga has been handled with mind boggling incompetence, has militated against Dubliners and, with developments in the property market, it is likely to impact soon on residents in Cork and Limerick. I agree with my colleagues, be they Fianna Fáil, Progressive Democrats, Labour of Fine Gael Deputies, when they highlight the anti-Dublin bias inherent in the property tax as currently constituted. House prices in Dublin rose by 10 per cent in the past six months and by 15 per cent in the six months prior to that. Many modest three bedroom semi-detached houses in Dublin will soon be within the tax threshold.
I would like to see an immediate end to taxation of the family home. However, in proposing to abolish property tax, I note Deputy McCreevy shied away from exploring the need to tax other forms of property. I regret that the Minister did not seize the opportunity this year to subject property tax to radical surgery. I hope this issue will be addressed in next year's budget.
Deputy Cullen adopted a slightly different stance from his rediscovered Fianna Fáil colleagues. While he may have shaken off the Progressive Democrats Whip, like his erstwhile comrades he is unwilling to give Thatcherism a decent burial. Just like the twin ghosts of Christmases past, he and Deputy McDowell linger at the wake muttering wistfully about the good old days when right-wingers everywhere believed in rising tides, floating boats and cabbage patches. I envy Deputies McDowell and Cullen their touching faith in the old recipes. Looking at areas such as those in my constituency where thousands of people have found their boats are beached in the midst of an economic boom I only wish the Progressive Democrats recipe and dream had worked.
Deputy McDowell's contribution was yet another indication of his party's paucity of ideas. He acknowledged that there was nothing new about what he had to say. In refusing to acknowledge the real benefits this Government has brought to those living on social welfare or low pay he retreated into the Thatcherite womb. His message can be summarised as follows: cut taxes, cut spending and abandon the semi-State sector. Most would agree that creed of selfishness is not new. It was tried in America and in Tory Britain and resulted in spiralling poverty levels, reduced services and increased social divisions. Democratic Left is determined to ensure that the Progressive Democrats Party never has a chance to impose its "I'm all right Jack" philosophy on the people.
Unfortunately, in recent years Ireland has had to contend with the modern day phenomenon of "jobless growth". Record levels of jobs were created in 1995 but they tend to pass the long-term unemployed by. The measures promised in the budget and in the Social Welfare Bill and Finance Bill are unashamedly interventionist. We make no apology for that. Intervention is necessary to ensure that all share the benefits of economic growth equally and that the long-term unemployed are brought in from the economic and social margins. The elimination of tax anomalies and poverty traps is vital if people are to be encouraged not only to create jobs but to take up employment. The Social Welfare Bill dealt comprehensively with many of the poverty traps inherent in the social welfare system and the Minister, Deputy De Rossa, is to be congratulated on his innovative measures such as the retention of the child dependant allowance for a period after taking up work and the phased retention of other secondary benefits such as the medical card for those leaving the ranks of the long-term unemployed.
The increase in personal tax allowances and the adjustment in allowances for single parents compliment the measures in the Social Welfare Bill. Deputies opposite have been vocal in their concern, which I share, for the hard-pressed PAYE sector. It has been substantially addressed by the PAYE and PRSI changes in the Bill and by some of the changes made in the Social Welfare Bill. However, they are less vocal on the issue of the ongoing inequities between farmers, the self-employed and PAYE workers. The some Deputies who bemoan the anti-Dublin bias of the residential property tax have been strangely silent with regard to the ongoing feather bedding of this country's rich ranchers. It is an issue few politicians are prepared to tackle head on. Unlike the long-term unemployed eking out a precarious existence in urban blackspots, large farmers are effective, articulate, well-funded and politically well represented in this House.
Those Deputies seeking to make short-term political gain out of the PAYE sector may be interested in some facts. In 1994, income tax paid on farming profits amounted to 1.8 per cent of all income tax receipts. In 1995, the average tax payment made by PAYE workers amounted to a staggering £4,087, nearly three times the average tax take from farmers which stood at £1,031.
As a member of the Committee of Public Accounts I was intrigued to discover that last year 25 random audits were carried out on the self-employed, including farmers. Of these, five or 20 per cent, yielded an additional tax liability. It does not take great mathematical skills to extrapolate these figures for the tax paying population as a whole and to envisage the extra revenue which could be realised were farmers and the self-employed pursued more vigorously by the Revenue.
I welcome the measures in the Finance Bill to consolidate the tax system and to make the revenue collection maze slightly more penetrable for the ordinary citizen. I regret that the area of farm tax was not addressed more rigorously and, indeed, I get the impression that the Bill contains yet more sweeteners for large farmers. I have in mind section 10 which increases by one-third the exemption derived from certain leases of farmland and section 11 which enables stock to be transferred at book rather than market value for the purposes of the EU early retirement scheme. Chapter 11 of the Bill consolidated rather than revisited the myriad measures relating to stock relief.
Democratic Left will support any measures designed to improve living standards for the 23 per cent of farmers who, in 1987, struggled to subsist on household incomes of £5,000 or less. However, our tax system should not be used to further maximise the benefits already derived by large farmers from the plethora of featherbedding schemes.
This Bill, like its 1995 predecessor, represents a substantial improvement for those at the lower end of the income scale. However, it does not go far enough. It addresses some of the ills but not the central planks of our taxation system. A fair tax system should treat all income in the same way. Any exceptions to that should be aimed at securing a few clearly defined objectives: protecting those on lower incomes; redistributing income and encouraging productive enterprise. However, a careful cost benefit analysis of any exceptions should be carried out before they are implemented. A good tax system should strike a careful balance between four objectives which may often appear to be in conflict. It must be fair in the way it collects revenue — it must take similar amounts from people and corporate bodies with similar resources; it must redistribute income wealth and work; it must collect sufficient revenue for the Government to pay for things that are socially necessary and it must serve the economic objective of encouraging enterprise and job creation. Our taxation system falls far short of these objectives. I hope when the working group on the integration of tax and social welfare reports its recommendations will enable us to eliminate some of the present anomalies. Despite the welcome changes introduced in this year's budget, the dole is still more profitable for some people than going to work.
The budget presented this year is the second in a package of three. I am confident that when the Government comes to an end in 18 months' time the remaining poverty traps and disincentives will have been eliminated and the progress already made will have been consolidated.
