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Dáil Éireann díospóireacht -
Wednesday, 3 Dec 1997

Vol. 484 No. 1

Financial Resolutions, 1998. - Financial Statement, Budget 1998.

Before I call the Minister for Finance to make his Budget Statement, I remind Members that the principal features along with the Minister's speech are being circulated to them strictly on condition that the budget measures remain confidential until the Minister announces them in the House. I ask Members to respect the confidentiality of the information being supplied.

Today I have the great privilege of presenting my first budget to Dáil Éireann and the first budget in a series of five of a new Administration. It has been said that those living through radical change rarely appreciate its reality at the time. That is the case when it comes to the budget because we still look at it as we used to in the 1970s and 1980s. In the old model, the Minister for Finance could choose to be Santa Claus or Judge Dredd. He could give a present to everyone in the audience, or he could punish the spenders and give lectures on how everybody had to get a grip. There was high excitement value in the old model and high anticipation with people queuing the day before a budget to fill their petrol tanks or stock up their drinks cabinets. The old model might have made some sense for a small nation and a small economy. The new model makes sense for a member state within the EU, and part of a vast and open economy.

Because we are a member state, part of a vast open economy and committed to the parameters that will take us into the single currency, the surprise element is more or less gone from the budget. It could also be said that by budget day, a Minister for Finance has no money left to spend in that it has all been spent 50 times over by experts in the newspapers over the previous weeks.

The budget should not seek higher TAM ratings than it deserves. A budget used to stick up from the rest of the year the way Mount Everest might stand up in the middle of the Curragh. Those days are gone. Instead of creative gimmickry and lucky bag spending to win votes, today's budget is characterised by three things: control of public spending; correction of tax inequities and overdue acknowledgement of the elderly.

In regard to the control of public spending, I wish to make it clear that I do not believe control of public spending is an end in itself, a virtue of itself. Ruthless cutting of public expenditure in some areas might benefit the economy in the short-term but it would have a lethal long-term effect on individuals and families on the margins. We will not build an Ireland worth living in by deepening social inequalities nor will we maintain social peace and progress in that way. The control of public expenditure in this budget, therefore, walks the very thin line between proper rectitude and punitive rigour.

Building on Economic progress

Ireland has in this decade undergone an economic transformation. I would like to acknowledge the contribution that my predecessors in this office have made in that period. They were supported by the social partners — the trade unions, employers and farmers — as well as the broader community. Irish society has joined together over that decade to forge and sustain a coherent and consistent strategy for economic and social progress. In that period the numbers at work have increased by over 250,000. Our public finances are in much better shape.

There are, however, still many challenges and deficiencies to be faced on the economic and social front and my budget sets out to deal with these. We have to do three things: first, we must ensure that we create the right conditions to sustain strong economic growth so that more people get jobs; second, we must take steps to ensure that any inflationary pressures are contained; third, we must prepare for the problems we face in the decades ahead.

Partnership 2000 and Progress to Date

It is now almost a year since the conclusion of a new agreement between the social partners —Partnership 2000 for Inclusion, Employment and Competitiveness. This included a commitment to personal tax reductions of £900 million on a full year basis over three years and an action programme for social inclusion and equality involving additional expenditure of £525 million, again over three years. Taking account of the 1997 budget and the measures I am proposing today, the overall resource commitment will have been delivered in the first two years of the three year programme.

Action Programme for the Millenium

This Government's programme, An Action Programme for the Millennium, outlines our main fiscal objectives for the next five years. Today's budget addresses these objectives. I am projecting a significant current budget surplus each year to 2000. By the year 2000, Exchequer borrowing will have been eliminated. On a general Government basis, borrowing has already been eliminated. My current spending targets will be achieved. Overall resources will permit me to invest more in vital capital needs. Over the period to the year 2000, Government spending will decline as a proportion of GNP. This budget delivers the resources promised in Partnership 2000 for tax and social inclusion.

Developments in 1997

Nineteen ninety-seven has been the fourth successive year of very strong economic growth. This is once again being translated into substantially higher numbers at work, about 50,000 more this year. At the same time, inflation has remained moderate at around 1.5 per cent. The Exchequer borrowing requirement is expected to be about £280 million or 0.7 per cent of GNP, compared with the budget target of over £600 million. The general Government balance is likely to show a surplus of about 0.4 per cent of GDP. The general Government debt to GDP ratio is likely to fall to 67 per cent.

Budget Strategy

In the separate document, Budget 1998: Economic Background, I have set out in detail the basis for my budgetary strategy and the economic outlook for the next three years. In preparing my budget I had to take account of a number of strategic issues: provide for capital investment, reduce the tax burden, pursue social inclusion, prepare for Economic and Monetary Union, anticipate changes in European Structural Funds, plan for an ageing population and reduce our national debt.

National Debt

As a country we are still deeply in debt. By the end of this year, it is likely to exceed £30,000 million, about £22,000 for every person at work in the country. The interest cost alone will be over £2,300 million. We must free up these resources. Think of the alternative uses we could make of them: increased investment, improved social services or a reduced tax burden. We did not thank earlier Administrations for spending their way into our pockets. Our children would not thank us for spending our way into their pockets. We must not and will not lose control of our finances just because of our strong economic growth.

1998 Budget Targets

On the basis of the taxation and expenditure measures I am announcing today, the targets for the 1998 budget are: a current budget surplus of £1,109 million; a capital deficit of £1,198 million; an Exchequer borrowing requirement of £89 million; and a general Government surplus of 0.3 per cent of GDP. I am also projecting general Government surpluses for 1999 and 2000. The general Government debt ratio will fall from 67 per cent of GDP in 1997 to 58 per cent of GDP in 2000. From the 1999 budget on, our targets will be set in terms of the EU measure, the general Government balance, rather than the Exchequer borrowing requirement or EBR.

Public Service Pay

The public service pay and pensions bill — £5.6 billion — is expected to increase by 6 per cent over 1997 on top of an increase of 10.5 per cent in 1997. This is totally unacceptable. Two main factors are driving up the pay bill; numbers employed and pay rates. In future, all proposals to Government for new or expanded services will specifically identify any implications for the pay bill. The main problem, as far as pay rate increases are concerned, has been cost drift under the local bargaining provisions of the PCW, such as the increases secured by a number of major groups in the health sector. The nurses' settlement alone is adding 1.5 per cent to the pay bill in 1997.

We need to finally put the PCW to rest. It is essential that the remaining PCW local bargaining cases be resolved within the PCW cost norm. The groups concerned cannot expect to follow the higher settlements secured on the basis of certain unique considerations by nurses and a small number of other groups. We must ensure that the efficiency and effectiveness commitments made by public servants in return for local bargaining increases under the PCW are fully honoured.

There must be no repeat under Partnership 2000 of the cost drift under PCW. The 2 per cent limit on local bargaining in Partnership 2000 must be adhered to strictly. The Government has decided to introduce new arrangements which will involve giving each Department an annual allocation to cover the cost of all Partnership 2000 increases, including the 2 per cent local negotiations increase. These allocations will represent the total funding available for all improvements in pay and conditions during the period of the partnership.

There is no point in having national programmes unless we all honour them. The last Government negotiated Partnership 2000 and this Government is committed to implementing its terms. Those who signed up for the pay and industrial peace terms of the agreement must keep their part of the bargain if this Government is to be able to deliver on social inclusion and tax measures while continuing to manage the economy in a balanced and responsible way.

I now want to turn to social inclusion.

Social Inclusion

The continued strong performance of the economy provides the resources for an improvement in the position of the more disadvantaged members of our community. I am confident that the range of measures I am proposing today in social welfare and other social policy programmes will result in solid progress in these areas. These measures are designed to deliver on undertakings aimed at combating disadvantage set out in the Government's programme, make further progress towards meeting the commitments on social inclusion in Partnership 2000, contribute towards the achievement of the strategic aims of the National Anti-Poverty Strategy and continue the reorientation of the social welfare code in a work-friendly direction. A special emphasis is being put on helping older people.

The Government undertook to spend £525 million on social inclusion measures over the three years of Partnership 2000. Last year, £273 million was committed for this purpose. This budget commits a further £282 million in a full year, so that resources which had been promised over three years will now be more than provided over two. This is a concrete expression of this Government's desire to see that economic progress is accompanied by real social advance for those in need and of our commitment to the social partnership process. The social welfare improvements which I will announce will cost £125 million in 1998 and £225 million in a full year. In addition, I will be announcing other social inclusion measures which will cost £39 million in 1998 and £57 million in a full year.

Weekly Welfare Payments

From the first week of June next, I am providing for a real increase in the weekly payment rates for all welfare categories. In general, personal rates will be increased by £3 per week, while qualified adult allowances will rise by 3 per cent. These increases are well above the expected rate of inflation. Moreover, the new rates will be payable for 31 weeks in 1998 compared with 29 weeks in recent years. It is my firm intention that, over the term of office of this Government, the implementation date for budget welfare increases will be brought forward to early April to coincide with the new tax year.

Elderly

Our older citizens have persevered through the bad years, and have done so much to create the boom time in which we live. Not only have they worked in times that were more difficult than the present, they now face old age in a radically changed Ireland, an Ireland busier and less supportive in some ways than the Ireland of earlier days. Older people should be able to face the years after they retire with confidence.

As an indication of the Government's determination to ensure the older members of our society are well provided for, I am pleased to announce that the full personal rate of all old age and related pensions will be increased by £5 per week.

Two pints extra per week.

This will give increases ranging from 6 per cent to almost 7.5 per cent, or at least three times the expected rate of inflation. The weekly pension for a typical elderly contributory couple will rise to almost £140.

I am also raising substantially the tax exemption thresholds which I will refer to under my taxation proposals. This is in line with our election commitments to the elderly and is an unashamed and deliberate targeting of resources.

Commission on Social Welfare Rates

As a result of these measures, the rates for all but two categories will be brought above the minimum rate recommended by the Commission on Social Welfare and the two exceptions will be brought to within 2 per cent of this level. This will increase the living standards of all those dependent on welfare support.

Child Benefit

From September next, child benefit rates are being increased by £1.50 per month for the first and second children and by £3 per month for third and subsequent children. A mother with four children will then receive monthly payments of £147 or almost £34 per week.

Child Benefit — Twins

I have also decided that, from September next, child benefit for twins will be paid at 150 per cent of the usual rate.

The terrible twins.

The family income supplement has long been recognised as an important income support for families in low paid work by ensuring there will be a reward for working as compared with being unemployed. A commitment was given in Partnership 2000 to calculate entitlement to the supplement on a net rather than gross income basis. The first move in that direction was made earlier this year by excluding PRSI contributions and health and employment levies from the calculation.

On this occasion, I am completing this process by removing income tax from the basis of assessment with effect from October next. Moreover, current family income thresholds are being increased by £7 per week from June. As a result, the average weekly payment for existing FIS claimants will rise by £11, to £50.

Where was socialism?

Where did the Government get the money from?

The back to work allowance scheme has been very successful in reintegrating large numbers of the long-term unemployed into employment. I have decided to increase the number of places on this scheme by a further 5,000 to 27,000 in 1998. The area based allowance is also being extended to the entire country.

Other Improvements

As well as the initiatives which I have just announced, I am targeting certain other areas within the social welfare code. I am allocating an additional £1.2 million in 1998 for marriage and child counselling and the family mediation service. I am extending eligibility for the companion travel pass to benefit people over 75 years who are unable to travel alone. I am also providing a free travel pass to all recipients of carer's allowance. Finally, additional grants are being made towards voluntary and community services. A list of these grants is included in the Summary of 1998 Budget Measures. My colleague, the Minister for Social, Community and Family Affairs, will announce full details of these various measures.

Social Welfare Abuse

While the Government has amply demonstrated its readiness to provide support and assistance where it is most required, it is equally determined that spending should only go where it is genuinely needed. The results of a special live register survey published last year gave rise to serious concern regarding the possible extent of fraud in the unemployment payments system. Let me make it clear that we will clamp down on social welfare abuses with renewed vigour. In this way, we can free up greater resources to invest in the genuine social needs at the heart of Partnership 2000.

The Minister should check the Ansbacher accounts as well.

An additional £36.8 million is being allocated for the development of health services in 1998. This, with other technical changes, brings the gross Estimate for the Health and Children Vote to £3.1 billion next year — representing about one fifth of all supply spending. This is £1 billion higher than the 1993 spending figures of £2.1 billion. The 1998 provision is 11 per cent higher than the 1997 figure of £2.8 billion.

I might at this stage mention that £16 million of these new initiatives relate to social inclusion measures, including an extra £7 million for the mentally handicapped; a further £2 million for the elderly; and £1.5 million for psychiatric services both for the elderly and for young people.

Despite a considerable expansion of our child protection services since 1993, under which additional annual expenditure is £45 million, health boards remain under pressure. The budget for child care services in the Health and Children Vote in 1998 will be £8 million higher than in 1997, including £2 million for new developments which I am providing today. In addition, a further £2.2 million is being provided to expand family and community development services on the Social, Community and Family Affairs Vote. This allocation will support the Government's child care programme.

People with Disabilities

Today is European Day for People with Disabilities. I want to underline our commitment to the development of services for people with disabilities. This Government is the first to appoint a Minister of State with special responsibility for disability issues, Deputy Mary Wallace. The Government decided recently to establish the National Disability Authority of Ireland as recommended by the Commission on the Status of People with Disabilities. Today I am glad to be able to allocate, as part of the social inclusion package, a further £3 million for people with physical or sensory disabilities. Further details are set out in the Summary of 1998 Budget Measures.

Community Employment

Community Employment is currently being reviewed in the light of recent labour market developments. Pending the outcome, I have accepted a recommendation of the social partners and agreed, as an interim measure, to make funding available for an additional 1,000 places on the part-time jobs option and 1,000 places on the jobs initiative.

What happened the 25,000 jobs?

U-turn No. 5.

The gross cost of these places will be £11 million in 1998 and £17 million in a full year. Savings in social welfare payments will reduce these costs substantially.

Furthermore, in line with the improved social welfare payments, the allowances payable under community employment will also be increased at a cost of £6 million in 1998, and £10 million in a full year.

Other Social Inclusion Measures

I have set out in the Summary of 1998 Budget Measures a number of other improvements.

OTHER EXPENDITURE MEASURES

The Millennium

The new millennium will be celebrated in a variety of ways in this country and across the world. There are a number of interesting proposals being developed to mark the millennium — for example, the rejuvenation of O'Connell Street, the premier thoroughfare of our capital city. I will consider the possibility of some future contribution to funding suitable projects.

Sport and Tourism

Gaelic games are an integral part of our culture. The GAA is the premier sporting organisation in Ireland and for over one hundred years has been a powerful positive force in fostering our gaelic games. The association has indicated that it intends to press ahead with plans for completing the remaining phases of the Croke Park redevelopment project. The recently completed first phase of the project has been widely admired and there is little doubt that the overall project, when completed, will provide this country with a state of the art sports stadium for the new millennium which will stand comparison with facilities available anywhere else in the world. Accordingly, the Government has decided to support the project by allocating £20 million over a three year period from the surplus revenues of the national lottery. A total of £7 million will be provided in each of the years 1998 and 1999 and the balance in the year 2000.

A further £3 million will be provided for recreational and major sporting facilities, £1.75 million for sports organisations and £3.5 million for tourism marketing initiatives. The details are set out in the Summary of 1998 Budget Measures.

Agriculture

Our agricultural and food industry remains central to the well-being of the economy. Government policy will aim to maximise the contribution which the industry makes to economic growth, exports and the balance of payments, and employment. However, we must plan for this in a policy environment of improved competitiveness and a readiness to embrace structural change under the Common Agricultural Policy. The Government will work closely with agricultural and rural communities in adapting to this changing environment.

Against this background, I am making some additional allocations for agriculture in 1998 including £23 million in funding for headage payments and £3.5 million to discharge outstanding applications for installation aid for young farmers. The details are set out in the budget summary.

Total cost of current and capital expenditure

The expenditure measures I have announced today total £214 million, of which £194 million is current and £20 million capital.

I am confident that these measures will maintain and strengthen the social consensus which has brought Ireland major benefits. In addition, the extra capital spending provided for in the 1998 Estimates will make a significant contribution to improving Ireland's economic prospects.

Controlling Current Spending

When account is taken of the spending measures I have announced today, the percentage increase in net current spending including Central Fund is 3.7 per cent for 1998.

Not true.

The Government is committed to ensuring that, over the lifetime of the Government, the growth in net current expenditure will be limited to an annual average increase of 4 per cent.

Not true.

Controlling public expenditure is a key element of our budgetary and economic policy.

The projected average annual increase in net current expenditure over the three years 1998 to 2000, on a "no-policy-change" basis, is 3.8 per cent, just within the 4 per cent limit.

Not true.

The task of achieving the Government target of containing the growth in current expenditure will be a challenging one. For example, while the projected annual average increase remains within the Government target, the current spending increase in 1999 over 1998 is projected, on the "no-policy-change" basis, to be 4.8 per cent. Accordingly, ensuring that the Government's objectives are met will require continued firm discipline in the control of current spending and, if necessary, corrective action over the lifetime of the Government.

TAXATION.

Income Tax

I now turn to my income tax proposals. The Action Programme for the Millennium makes clear the Government's commitment to reduce the burden of personal taxation in order to reward effort and to improve incentives to work.

The programme sets out specific targets and commitments for tax reductions and reliefs over the period of the Government. It is not possible to do everything in one budget but it is important today to make progress towards the goals we have set ourselves.

I am concerned that this budget should ease pressures in the labour market. Reduced taxes will increase take-home pay and make it more attractive to work. This will help keep the pressures on pay costs and inflation under control.

For that reason I am allocating £517 million in full year costs to the main personal tax reductions.

Tax Evasion

The Government has already made clear its view that tax evasion in any form is totally unacceptable.

What about Ansbacher accounts?

Pursuit of evasion is a demanding and ongoing activity. The Revenue Commissioners have been active in recent years in streamlining their operations to facilitate this effort. A large number of staff have been placed on audit and investigation work. This activity brought in some £133 million in tax receipts in 1996. I know from personal observation, and I am sure the House knows, that Revenue has transformed its whole approach to tax administration in the past decade. This has played a significant part in the increased tax revenues we are now experiencing.

As part of its anti-evasion activity, Revenue has designed and put in place arrangements to secure a more effective prosecution policy for cases of serious evasion. A number of cases have already been reported to the DPP and court proceedings have been initiated.

Following the report of the McCracken tribunal I initiated a review by my Department and the Revenue Commissioners of Revenue's powers for combating evasion. The Moriarty tribunal, in accordance with its terms of reference, will also be looking at certain aspects of this matter.

If additional powers are required and these are shown to be desirable and likely to be effective, I will bring forward the necessary legislation for consideration by the House.

Will it include the Ansbacher accounts?

Tax Shelters

I am also taking action in the budget to reduce the availability of certain tax shelters used in particular by high income earners. Tax incentives have an important role to play in promoting investment in certain sectors. However, this has to be counterbalanced by the need to achieve a more equitable sharing of the tax burden.

Tax Reductions

I will now turn to the main tax package. I am happy to announce that the standard rate of income tax and the higher rate will be reduced by two percentage points in both cases from 6 April next. The new rates will be 24 per cent and 46 per cent respectively. It is the Government's aim to reduce these rates further as resources allow and to achieve a 20 per cent standard rate of income tax over the next few budgets.

The alternative route to achieving a 20 per cent rate would be to introduce a new but limited income tax band at 20 per cent and to widen it in successive budgets. I have decided that the better course is to cut the standard rate of tax until 20 per cent is achieved.

The basic personal allowance is being increased from 6 April 1998 by £250 to £3,150 per annum for single persons and by £500 to £6,300 per annum for married couples.

That is disgraceful. It is miserable.

It is the same as was introduced last year when the rates were not cut.

An increase of £250 per annum will also apply to widowed, single parent and widowed parent allowances.

In addition, in the case of widows with children, the special allowance in the first year after bereavement is being increased from £1,500 to £5,000, and this will be tapered out over five years instead of three years as at present. This will provide substantial relief to widowed families at a time when financial pressures can be at their greatest.

I am also increasing the blind person's allowance to £1,000 per annum and to £2,000 per annum for married couples where both spouses are blind.

The incapacitated child allowance is being increased from £700 to £800 per annum. The maximum allowance for the care of an incapacitated taxpayer or spouse will increase from £7,500 to £8,500 per annum — all of these changes with effect from 6 April next.

I also propose to increase the PRSI weekly allowance of £80 per week in the case of full rate PRSI contributors to £100 per week. The PRSI ceiling applicable to all employees and the selfemployed will increase from £23,200 to £24,200, as already provided for in the expenditure Estimates.

The standard rate income tax band is being widened by £100 for single persons to £10,000 and by £200 for married couples to £20,000 per annum. The general income tax exemption limits for those under 65 are being increased by £100 to £4,100 per annum for single and widowed persons and by £200 to £8,200 per annum for those who are married. The Government is also committed to easing the tax burden on the aged and for that reason the income tax exemption limits for those aged 65 to 74 are being increased by £400 to £5,000 per annum for single and widowed persons and by £800 to £10,000 per annum for married couples. For those aged 75 and over the exemption limits are being increased by £300 to £5,500 per annum for single and widowed persons and by £600 to £11,000 per annum for married couples.

It is my intention ultimately over a number of budgets to have a single exemption limit for all those aged 65 and over. The substantial increases in the age exemption limits for those aged 65 to 74 are significant steps in that direction. The measures I have announced will take over 15,000 persons out of the income tax net who would otherwise have been liable for tax.

In line with the reduction in the standard rate of income tax, the withholding tax on professional services and the standard rate of DIRT tax will also be reduced from 26 per cent to 24 per cent.

The thresholds for the payment of the employment and training levy and the health contribution are being raised by £500 to £10,750 per annum, or from £197 to £207 per week. These income tax and PRSI changes will cost £517 million in a full year.

Tax Credits-Standard Rating

A number of proposals have been made in pre-budget submissions to standard rate some or all income tax allowances and reliefs and to convert these into tax credits at the standard rate. A special group set up under Partnership 2000 has been examining the issue and is preparing a report for the social partners.

While the completion of this report is awaited, the Government is open to considering such a move provided that all the complex issues involved can be fully teased out and the system can be introduced into the tax code in a manageable way.

Childcare

It is not possible to introduce all the new measures one would wish in a single budget. I examined carefully the possibility of a tax relief on childcare at the standard rate of tax but decided not to proceed with it this year.

A Deputy

Another broken promise.

I will review the situation for my next budget in the light of the reports due next year from the Working Group on Childcare set up under Partnership 2000 and from the Household Review Group and the Commission on the Family set up by the previous Government.

Care in the Community

I will also be examining for the next budget the possibility of introducing a new relief for those in the home looking after a family member in need of care. I have asked my Department to set up a working group with the Department of Health and Children and the Department of Social, Community and Family Affairs to consider how to devise a targeted relief at a reasonable cost which will complement health and social welfare policy objectives in this area.

What about the punters?

Cross-Border Workers

I have been concerned for some time about the income tax position of cross-Border workers, that is certain workers who are resident in this State but who travel to work in Northern Ireland. Subject to full consideration of the complex taxation, legal and constitutional issues involved, I intend to bring in a suitable relief in the Finance Bill.

In 1998?

Initiatives to help the Long-Term Unemployed

To assist the long-term unemployed back to work, I am introducing a two part initiative. The first part is a special tax allowance in the first year of employment of £3,000 plus £1,000 for each child for persons unemployed for one year or more who take up a job. The allowance will be tapered down over a three year period.

The second part of the initiative is a double tax deduction for wages for employers who employ the long-term unemployed person. This double deduction can last for a period of up to three years provided the former long-term unemployed person is still employed by them. Participants will retain their secondary benefits. This allowance will be an alternative to other existing back-to-work incentives.

The initiatives will be included in the forthcoming Finance Bill and will operate from 6 April 1998. It is difficult to know how many long-term unemployed people will benefit from these initiatives but I am making a tentative provision for a cost of £1 million in 1998 and £5 million in a full year.

Systematic Short-time Workers and Unemployment Benefit Taxation

I am extending for a further year the special tax relief on unemployment benefit payments to systematic short-time workers introduced in the 1994 Finance Act. There are about 4,000 employees affected by this relief which has been rolled forward each year since 1994.

Business Expansion Scheme

I have decided that from today the aggregate amount that can be raised by a company under the BES will be reduced from £1 million to £250,000. This reduction will achieve a better targeting of the BES relief on smaller companies which find it difficult to raise equity finance from other sources. Transitional provisions will be put in place to cater for BES projects in the pipeline which are well advanced prior to today.

The estimated savings from the refocusing of this scheme are about £20 million in a full year. However, taking into account the proposed transitional arrangements, it is estimated that savings in 1998 will be of the order of £10 million.

Capital Allowances for Buildings (including Hotels)

The availability of enhanced capital allowances for certain buildings is an important tax relief to stimulate investment. However, their availability to passive investors is also a prime factor in certain high income earners being able to reduce their income tax liability by substantial amounts. This effect has become clear in certain cases following a recent review by the Revenue Commissioners of the amount of income tax paid by high income earners. I called on previous occasions in Opposition for measures to ensure that all taxpayers liable to income tax pay an adequate effective rate of tax on their earnings. This is what fair taxation means.

I am, therefore, proposing that on and from today there will be an annual cap of £25,000 on the amount of capital allowances on buildings that an individual taxpayer can claim against nonrental income. This cap will apply to the amount of capital allowances not availed of by the taxpayer as an offset against rental income. The buildings in question are all those on which capital allowances can be claimed including buildings in tax designated areas. This change will not affect owner-occupiers who carry on a business in the building nor will it affect such investment by companies.

In the case of hotels, I propose that — except for the special scheme I will mention later — the capital allowances will be ring-fenced to rental income in the case of individual investors in hotel projects other than where the individual is the person actively carrying on the hotel business.

There will be a special scheme for investment in certain hotels in particular parts of the country where the unrestricted availability of capital allowances to individual investors will continue. The areas I have in mind are counties where there are insufficient hotels of 3 Star or higher standard and where an investment in upgrading such facilities will help spread some of the tourist traffic to those parts of the country which up to now may not have shared fully in the overall increase in tourist numbers.

The counties I propose are the seven contiguous counties of Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo, excluding the designated seaside resorts in those counties. This special scheme will need to be discussed with the EU Commission.

These changes will have effect on and from today, but transitional provisions will apply for projects already in the pipeline. I am also introducing anti-avoidance measures to ensure that the new restrictions cannot be by-passed by groups of essentially passive investors setting themselves up as "trading" partnerships.

Nursing Homes

In order to encourage the provision of extra nursing home places, I am proposing that nursing home buildings registered with the health boards will qualify for capital allowances at 100 per cent over seven years subject to the restrictions mentioned for individual investors.

Details of the new capital allowance regime are set out in the Summary of 1998 Budget Measures. It is estimated that these new capital allowance measures could save up to £20 million in a full year.

Corporation Tax

The House is aware of the particular importance that is attached to corporation tax and its role in promoting the expansion of business and employment in the State. The previous Government announced last May that a single low rate of corporation tax of 12.5 per cent on trading income would be introduced from 2006 in the case of non-manufacturing companies and from 2011 in the case of manufacturing. A rate of 25 per cent would apply to non-trading income. The European Commission was notified accordingly and since then there have been extensive discussions with the Commission on this notification.

Arising from an examination of the issues by the Government, it has been decided to confirm that the rates of 12.5 per cent and 25 per cent will apply.

That is U-turn No. 15.

To achieve these target rates, substantial progress must be made in reducing the standard rate of corporation tax in each budget over the coming years. Accordingly, it has been decided to reduce the standard rate of corporation tax from 36 per cent to 32 per cent and to reduce the rate on the first £50,000 of profits from 28 per cent to 25 per cent from 1 January 1998.

(Dublin West): That is another £100 million for the rich.

I propose to set a timetable for the further reductions needed to reach the 12.5 per cent rate when the current discussions with the Commission have concluded.

The House will be aware of the code of conduct on business taxation which was agreed by the EU member states last Monday in Brussels. This code is designed to curb harmful tax measures. It is not aimed at harmonising corporation tax rates in the Community and will not affect the single low rate of corporation tax.

Tax Credits on Dividends

Given that the standard rate of corporation tax has been reduced substantially in the past few years and will be further reduced in future years, it has been decided that the tax credit attaching to dividends paid by companies will be abolished over a period of two years.

In the ordinary course this credit would reduce as the standard rate of corporation tax is cut but I have decided to accelerate the process. The tax credit rate which will apply from today in the case of dividends paid out of profits taxed at the standard rate will be reduced from approximately one quarter to just under one eighth of the dividend. The rate of advance corporation tax which is equivalent to this credit is being reduced in tandem. My intention is to abolish tax credits and advance corporation tax in respect of all dividends paid after 5 April 1999. The tax treatment of shares taken instead of a cash dividend is also being changed, as outlined in the Summary of 1998 Budget Measures . These changes will yield £24 million in 1998 and £60 million in a full year.

Life Assurers

In line with the reduction in the standard rate of income tax, the tax rate applying to life assurance companies in respect of their policyholders' investments will be reduced from 26 per cent to 24 per cent from 6 April next.

PRSI

It has been decided to increase the threshold below which the lower rate of employer PRSI applies from £260 per week to £270 per week. The overall ceiling on employer PRSI will rise from £27,900 to £29,000 per annum as already provided for in the expenditure estimates. We have many attractions for domestic and foreign business to operate here — the skills of our workers, the "can do" business environment, our membership of the EU, language skills and a determination to succeed. We also need to maintain the tax environment for business to complement these other advantages.

The combined effect of the changes I am making today will help to increase jobs, investment and tax revenue so that we can continue to reduce the tax burden and tax rates on the PAYE sector and on earned income generally.

Special Savings Accounts

I am proposing to increase the 15 per cent rate of tax which applies to special savings accounts to 20 per cent with effect from 6 April 1998. As I said, we are aiming for a 20 per cent standard rate of income tax and it makes sense to move the rate of DIRT on special savings accounts to this rate now. This also helps to correct the imbalance between the tax treatment of deposit interest and other income. The new rate still provides a competitive after-tax return to Irish depositors on their investments.

That is another attack on the old folk.

Special investment accounts which are required to invest over half of their funds in Irish equities will still continue to be subject to 10 per cent tax in respect of income and capital gains. This change will yield £6 million in 1998 and £7.5 million in a full year.

Charities

In response to the clear wishes of the House for a tax measure in recognition of the major contribution the domestic charities make to Irish life, I will be introducing a new tax relief on donations to domestic charities along the lines proposed by the Irish Charities Tax Reform Group.

Why did the Minister not accept our motion?

The new relief will be in respect of donations made by companies on an arm's length basis to eligible charities. The relief will apply to donations of between £250 and £10,000 to any one charity in any one year, subject to an overall limit of £50,000, or 10 per cent of a donor's taxable income, whichever is the lesser amount. Full details of this new relief will be included in the Finance Bill.

Tax Relief for Disadvantaged Schools

Disadvantaged schools are generally situated in economically deprived areas and experience great difficulties in fundraising. I am proposing a new tax relief on personal and corporate donations made to disadvantaged schools which could be used, for example, to provide for computers, additional equipment or book rental schemes. Details of the relief, which will operate from 6 April next, will be incorporated in the Finance Bill. These two new reliefs are estimated to cost just more than £1 million in 1998 and about £4 million in a full year and will take effect after the passing of the Finance Bill.

Car Value Threshold

The car value threshold used for calculating capital allowances in respect of new cars and allowable expenses for all cars used for business purposes will be increased from £15,000 to £15,500 from today.

Capital Gains Tax

For a considerable period of time I have been of the strong view that a reduction in capital gains tax will release pent-up investment funds and create an incentive for the acquisition of further capital assets. This will encourage investment and growth in the future. I have decided, therefore, to reduce the rate of capital gains tax from 40 per cent to 20 per cent except for disposals of development land which will remain taxed at 40 per cent.

The golden circle will be delighted.

I also propose to reduce the current annual allowance of £1,000 single and £2,000 married for capital gains tax to an individual allowance of £500 per annum. The new rate of 20 per cent also means the abolition of the current 26 per cent rate of capital gains tax on disposals of shares in certain small and medium-sized unquoted companies. The reduction in CGT will take effect from today while the reduced allowance will apply from 6 April next. As a prudent accountant, I am allowing for a net cost of £5 million in the first year and £19 million in a full year.

Farmer Taxation

I am proposing a number of improvements in existing reliefs to assist the farming sector. The expenditure limit for the special capital allowance for farm pollution control is being increased from £20,000 to £30,000 with effect from the next income tax year starting on 6 April 1998.

What about the grants?

The current 100 per cent stock relief for young qualifying farmers will apply for four years instead of two years. This change will take effect from the start of the current income tax year. I am also making a change in capital gains tax retirement relief to benefit farmers who lease their land under the early retirement scheme. This measure will come into effect on 6 April next.

In the area of VAT, I propose to increase the flat rate of VAT which may be charged by unregistered farmers on their sales to registered traders from the current 3.3 per cent to 3.6 per cent from 1 March 1998. The farmer flat rate VAT is designed to recoup to farmers the cost of VAT borne on their inputs and the increase will cost the Exchequer just more than £5 million in 1998 and £8 million in a full year. The associated VAT rate for livestock will also increase to 3.6 per cent from the same date.

Capital Acquisitions Tax

For some time I have been concerned about the position of elderly brothers and sisters who share the family home and who, when one of them dies, may face a very large inheritance tax charge on part or all of the family home. This has become a more acute problem with the recent upsurge in house prices. For that reason I have decided to increase the current relief from inheritance tax in such situations from 60 per cent of the value of the family home or £80,000 to 80 per cent of the value or £150,000, whichever is the lesser.

Similar problems can also apply in the case of other close relatives sharing a family home. I have, therefore, decided to create a new relief for situations where the recipient of the family home is a close relative of the deceased owner, that is, nephew, niece or grandchild, and both have been living in the house for at least ten years prior to the inheritance. This new relief will have broadly the same terms as the improved elderly siblings relief. Details of these new and extended reliefs are set out in the Summary of 1998 Budget Measures. These two changes will take effect in the case of inheritances taken on or after today.

Future Pension Provision

As Deputies may be aware, a major study is being carried out by the Pensions Board into the whole pensions area. It is expected that the board will shortly present a report to the Minister for Social, Community and Family Affairs. I am conscious of the various anomalies and discrepancies that exist within the existing tax rules for pension provision, particularly those relating to retirement annuities. I intend, therefore, to examine these rules after the Minister for Social, Community and Family Affairs has considered this forthcoming report.

Designated Seaside Resorts and Car Parks

In response to requests from the areas affected, I will extend the termination date for the scheme of tax reliefs for the 15 designated seaside resorts from 30 June 1998 to 30 June 1999. This extension will apply only for projects in respect of which a local authority can certify that at least 15 per cent of the total cost of the project had been incurred by 30 June 1998. A review is being carried out into the operation and effects of the designated seaside resorts scheme and no decision will be taken about any further extension of the scheme until after this review is completed.

A similar extension of the termination date from 30 June 1998 to 30 June 1999 will also apply, subject to the same conditions, in the case of the tax relief for multi-storey carparks which was introduced in 1995.

Wind Energy

I propose to introduce in the Finance Bill a new relief to encourage corporate investment in certain renewable energy projects such as wind energy and biomass.

The Opposition should benefit from that.

An outline of the proposed relief is contained in the budget summary. Because of our need to reduce emissions and promote environmentally friendly energy sources, it is clearly desirable to provide reasonable financial assistance by way of tax relief to get such projects off the ground.

Rural Renewal

I received a large number of representations from Deputies and other quarters about introducing a new scheme of rural renewal to reinvigorate certain areas of rural Ireland on similar lines to the urban renewal scheme. As Deputies will appreciate, it is impossible to designate all of rural Ireland——

I would not say that.

——and consequently I have decided in the first instance to look carefully at the feasibility of a pilot initiative which would apply in parts of the Upper Shannon region. I hope to have this scheme ready for the Finance Bill, but it will be necessary to discuss it before-hand with the EU Commission.

Indirect Taxes

The taxation of motor vehicles is an important source of revenue which helps to fund vital public services and enables the Government to keep down taxes in other areas. Nonetheless because of the termination of the scrappage scheme on 31 December next, it is reasonable to cushion the impact of this somewhat by a small reduction in vehicle registration tax. I expect these reductions to be reflected fully in dealer prices. I have decided to reduce the rate of VRT on cars from 23.2 per cent at present to 22.5 per cent on vehicles up to 2,500 c.c. and from 29.25 per cent to 28 per cent on vehicles over that threshold, with effect from 1 January 1998.

There are reasons for using the tax system to achieve certain health and environmental policy objectives. I hope in future budgets to develop proposals to further environmental objectives and to achieve other public policy goals.

I propose to increase the VAT inclusive excise duty on cigarettes from midnight tonight by 10 pence per packet of 20, with pro rata increases in other tobacco products. Also from midnight tonight, the VAT inclusive excise duty on leaded petrol and on super unleaded petrol will be increased by 4 pence per litre.

That is outrageous.

Where is the Celtic Tiger now?

Deputy Sheehan has free travel.

I do not propose to change the rate for ordinary unleaded petrol or to change the rate for diesel, which is important to business users.

The net effect of these changes will be to raise £27 million in additional revenue in 1998 and to add 0.2 per cent to the Consumer Price Index. I decided not to increase excise duty on drink.

MEDIUM-TERM BUDGET PROJECTIONS.

Taking account of the measures I have announced today, the general Government surplus is projected to be 0.3 per cent of GDP in 1998, increasing to 0.6 per cent in 1999 and 1.3 per cent in 2000. However, in keeping with the practice introduced by my predecessor, I am including a contingency provision against all budgetary uncertainties of £180 million in 1999 and £450 million in 2000. This is a reserve against unforeseen factors which could impact adversely on the budget over the next three years. On this basis, the general Government surplus is projected at 0.3 per cent of GDP in 1999 and 0.6 per cent of GDP in 2000. As long as current favourable economic conditions apply, my objective will be to achieve a general Government surplus in each of the next three years. In the event of less favourable conditions, the necessary action will be taken to ensure the budgetary requirements of the stability and growth pact are honoured.

FUTURE BUDGETARY PROCESS.

Multi-annual Budgeting — further progress

I will continue and develop the multi-annual presentation of the budget which was begun by my predecessor. I will publish projections showing expenditure by individual ministerial vote group for 1999 and 2000 on a "no-policy-change" basis. The final phase of the move to multi-annual budgeting, as envisaged in Delivering Better Government, would involve the Government making decisions for resource allocation over a three year period covering the main budgetary aggregates of taxation, expenditure and borrowing. This will be a major undertaking. I will consider the implementation of this in the 1999 budget preparations next year.

Improving Public Finance Statements

Many of the statements produced on the public finances are too complex. They are fully understood by only a few experts. I want them to be presented in a way which will be more readily understood by the man or woman in the street.

I will, therefore, appoint a small expert group to bring forward proposals to me on this before the next budget.

Timing of 1999 Budget

This is the first time the budget has been introduced before the beginning of the year to which it relates. It brings us into line with the practice in most of our EU partners. It gives certainty to Government Departments and State agencies on expenditure allocations from an earlier date. I intend to continue this practice.

CONCLUSION.

I have today delivered a budget which runs a significant current budget surplus each year to the year 2000, eliminates Exchequer borrowing over the next three years, projects a general Government surplus for the years ahead and reduces the debt burden. It sets the public finances on a path which will lead our economy to continued solid growth and increased prosperity for all our citizens both now and in the future.

It is a responsible yet caring budget. It rewards effort, delivers major tax reform, promotes social inclusion, provides for our key investment needs and prepares us for the major challenges that lie ahead.

It is a damp squib.

It is a litany.

Where is the PD tax revolution now?

One view of the Irish economy is that a river runs through it. In the 1950s, the water level in that river was low and the flow was sluggish. In the 1990s, the river is in flood, the flow could not be faster and the rising tide is lifting all boats.

Mr. Hayes

Save it for the Ard-Fheis.

The Minister has robbed the poor to help the rich.

That view of the economy is dangerous because it suggests that the economic conditions within which we operate are random, whimsical and outside of our control or influence. That is not true. It is also dangerous because it encourages us to relinquish our responsibility to pull people back from the margins and rescue the people slipping through the meshes of our society.

This Government will not relinquish its responsibilities, nor will it buy into the optimistic but simplistic model of a rising river lifting all boats. A responsible Government sees the economy as having more in common with a canal than a river——

The Robertstown Canal.

——and the Minister for Finance's function is close to that of a lock-keeper bringing the water level up in one area of the waterway, down in another so that boats can safely journey from one end of the canal to the other.

I commend the budget to the House.

The river of no return.

The rising canal lifts all boats.

TABLE EXPLANATORY OF BUDGET, 1998

A.

CURRENT BUDGET

Revenue

£m

£m

Expenditure

£m

£m

1.

Tax Revenue (White Paper)

15,299.0

1.

Central Fund Services

3,403.0

15,299.0

2.

Non-Capital Supply Services (AEV)

10,811.0

2.

Non-Tax Revenue

317.96

Adjust for:

Adjust for:

Net revisions to Estimates

Higher Lottery surplus

12.5

(including PRSI buoyancy, etc.)

-50.7

330.5

10,760.3

3.

Deduct:

3.

Add: Social Inclusion

Income Tax reliefs:

Social Welfare improvements

125.0

—changes in exemption limits, personal allowances, standard tax rate and standard bands

Health Developments

15.8

-274.7

Other

22.1

—other Income Tax concessions

-8.3

-283.0

4.

Contribution Initiatives [impact on Supply spending]:

VAT measures

-5.3

PRSI concessions:

23.0

Corporation Tax measures

-10.8

—Employee

7.0

Capital Tax measures

-6.0

—Employer

2.5

Threshold for Employment & Training Levy

-2.0

Health Contribution

Reduction in VRT

-13.1

32.5

-37.2

5.

Other Health Service development

21.0

4.

Add:

Excise measures

40.3

6.

Miscellaneous

28.2

Other revenue raising measures

44.0

84.3

7.

Estimated Departmental Balances

-20

5.

Net effect on tax revenue of tax and spending changes

103.8

8.

Total Current Expenditure

14,387.9

9.

Current Budget Surplus

1,109

15,497.4

15,497.4

B.

CAPITAL BUDGET DEFICIT

(1,198)

C.

EXCHEQUER BORROWING REQUIREMENT

(89)

D.

GENERAL GOVERNMENT SURPLUS AS A %OF GDP

0.3%

TABLE 1

SUMMARY OF CURRENT AND CAPITAL BUDGETS, 1997 AND 1998 AND PROJECTIONS FOR 1999 AND 2000

1997 Estimated Outturn

1998 Post-Budget Estimate

1999 Projection

2000 Projection

£m

£m

£m

£m

Current Budget

1.

Current Expenditure

(i) Central Fund Services

3,505

3,403

3,571

3,617

(ii) Supply Services

10,367

10,985

11,502

11,922

Total

13,872

14,388

15,073

15,539

2.

Current Revenue

(i) Taxation (see Table 2)

14,158

15,167

16,006

16,925

(ii) Non-Tax

333

330

369

357

Total

14,491

15,497

16,375

17,282

3.

Current Budget Surplus

619

1,109

1,302

1,743

(% of GNP)

1.5%

2.5%

2.7%

3.4%

Capital Budget

4.

Capital Expenditure

(i) Exchequer Capital Programme

1,609

1,946

1,908

1,845

(ii) Other (non-programme)

70

56

63

147

Total

1,679

2,002

1,971

1,992

5.

Capital Resources

Exchequer Capital Resources

782

804

844

985

Total

782

804

844

985

6.

Capital Budget Deficit

(897)

(1,198)

(1,127)

(1,007)

(% of GNP)

-2.2%

-2.7%

-2.4%

-2.0%

7.

Exchequer Borrowing Requirement before contingency

(278)

(89)

175

736

8.

General Contingency Provision

180

450

9.

Exchequer Borrowing Requirement with contingency

(278)

(89)

(5)

286

10.

EBR as % of GNP

before contingency

-0.7%

-0.2%

0.4%

1.4%

including contingency

-0.7%

-0.2%

0.0%

0.6%

11.

GGD as % of GDP

before contingency

0.4%

0.3%

0.6%

1.3%

including contingency

0.4%

0.3%

0.3%

0.6%

GNP Value

40,525

44,325

47,750

51,050

GDP Value

48,700

53,750

55,525

60,025

Notes on Multi-annual Budgetary Projections

The projections for 1999 and 2000 reflect:

1. (a) the full year impact of the measures announced in the 1998 Budget

(b) the cost of maintaining existing levels of service in all other areas

(c) a continuation of current interest and exchange rates.

2. As indicated in the Budget Statement, the overall Partnership 2000 resource commitment in relation to taxation have been delivered in the 1997 and 1998 Budgets. In order to provide a more realistic view of the emerging 1999 and 2000 position a prudent provision has been made (a) under the taxation heading for further possible changes in both 1999 and 2000 in personal taxes costing £250 million in a full year and (b) under the expenditure heading for further possible expenditure costs in both 1999 and 2000 of £120 million in a full year over and above the costs of maintaining the existing level of services.

2. A prudent contingency provision, see line 8 above, is made against factors outside the control of Government that may impact on the Budget but which cannot be foreseen at this stage. Examples are variability in tax buoyancy and exceptional costs arising in areas of public expenditure. While such variations are likely to be both positive and negative, it has been considered appropriate to allow in the projections for a modest negative net impact on the General Government Deficit (GGD) and EBR. It also makes provision for changes arising from proposals in the Action Programme for the Millennium relating to local government (these will also involve a switch between the Exchequer current and capital funding of local authorities; for the purpose of the table presented here, the expenditure totals are based on the existing arrangements).

4. The calculation of the GGD ratio for 1999 and 2000 reflects new measurements of debt service and GDP in 1999 for Maastricht definition purposes. These changes have the effect of adding 0.4% to the GGD calculation in 1999 and 2000.

5. The current and capital expenditure figures shown in each of the years 1997-99 take account of the EU Structural and Cohesion Fund support as provided under the Operational Programmes in the existing Community Support Framework (CSF) 1994-99. For the year 2000 the projections have been prepared on the basis of a technical assumption that, in the case of EU supported programmes, expenditure will remain at the level under the current CSF.

TABLE 2

CURRENT REVENUE 1997 AND 1998

1997 Outturn

1998 Post-Budget Estimate

Percentage Change

£m

£m

Tax Revenue

Customs

180

176

-2.2%

Excise Duties

2,513

2,659

5.8%

Capital Taxes

221

198

-10.4%

Stamp Duties

416

467

12.3%

Income Tax

5,194

5,522

6.3%

Corporation Tax

1,684

1,926

14.4%

Value-Added Tax

3,664

4,017

9.6%

Agricultural Levies (EC)

9

9

0.0%

Employment and Training Levy

177

193

9.0%

Tax Revenue

14,058

15,167

7.9%

Motor Vehicle Duties*

100

Total

14,158

Non-Tax Revenue

333

330

-0.9%

Total Current Revenue

14,491

15,497

6.9%

*Now retained by Local Authorities.

TABLE 3

How Current Expenditure will be Allocated and Financed

Where current expenditure will go

1998 Post-Budget

£m

Percentage of Total Gross Expenditure

1998 Post-Budget

£m

Percentage of Total Revenue

Service of Public Debt

Tax Revenue

Interest

2,310

13.2%

Customs

176

1.1%

Sinking Funds, etc.

286

1.6%

Excise Duties

2,659

17.2%

Capital taxes

198

1.3%

sub-total

2,596

14.8%

Stamp Duties

467

3.0%

Income Tax

5,522

35.6%

Corporation Tax

1,926

12.4%

Economic Services

Value Added Tax

4,017

25.9%

Industry and Labour

632

3.6%

Agriculture Levies

9

0.1%

Agriculture

589

3.4%

Employment and Training

Fisheries, Forestry

53

0.3%

Levy

193

1.2%

Tourism

48

0.3%

sub-total

15,167

97.9%

sub-total

1,322

7.6%

Infrastructure

91

0.5%

Non-Tax Revenue

330

2.1%

Social Services

Health

2,943

16.8%

Total Current Revenue

15,497

100.0%

Education

2,351

13.4%

Social Welfare

4,866

27.8%

Subsidies, etc.

122

0.7%

Current Surplus

(1,109)

sub-total

10,282

58.8%

Security

1,300

7.4%

Other

1,908

10.9%

Gross Expenditure

17,499

100.0%

Departmental Balances

20

Supply Services Receipts

3,091

TOTAL NET EXPENDITURE

14,388

TOTAL REVENUE LESS SURPLUS

14,388

Table 4

Summary of Adjustments to Non-Capital Supply-Services - Net Estimates

Service

1998 Estimates as in White Paper

Adjustments in the Budget

1998 Revised Estimates

£000

£000

£000

1

President's

722

722

2

Oireachtas

33,540

33,450

3

Department of An Taoiseach

10,687

100

10,787

4

Remuneration

128,000

128,000

5

CSO

14,042

14,042

6

Department of Finance

33,662

33,662

7

Superannuation

97,814

97,814

8

Comptroller and Auditor General

3,255

3,255

9

Revenue Commissioners

144,401

144,401

10

Office of Public Works

64,523

64,523

11

State Laboratory

2,860

2,860

12

Secret Service

745

745

13

Attorney General

5,880

5,880

14

DPP

4,459

4,459

15

Valuation and Ordnance Survey

8,145

8,145

16

Civil Service Commission

3,844

3,844

17

Ombudsman

2,138

2,138

18

CSSO

13,319

13,319

19

Justice, Equality and Law Reform

54,562

300

54,862

20

Garda Síochána

466,875

466,875

21

Prisons

132,372

250

132,622

22

Courts

31,559

31,559

23

Land Registry

16,619

16,619

24

Charitable Donations

215

215

25

Environment and Local Government

117,108

1,000

118,108

26

Minister for Education and Science

96,326

1,250

97,576

27

First Level Education

733,989

500

734,489

28

Second Level Education

822,282

2,000

824,282

29

Third Level Education

489,670

489,670

30

Marine and Natural Resources

49,682

49,682

31

Agriculture and Food

311,630

10,000

321,630

32

Public Enterprise

115,343

115,343

33

Health and Children

2,617,400

45,000

2,662,400

34

Enterprise, Trade and Employment

567,601

17,400

585,001

35

Tourism, Sport and Recreation

76,350

6,100

82,450

36

Defence

461,743

461,743

37

Army Pensions

80,885

80,885

38

Foreign Affairs

58,289

58,289

39

International Co- Op.

111,929

111,929

40

Social Community and Family Affairs

2,718,139

109,970

2,828,109

41

An Comhairle Ealaíon

23,000

23,000

42

Arts, Heritage, Gaeltacht and the Islands

83,381

83,381

43

National Gallery

1,999

1,999

Total on expenditure basis

10,810,984

193,870

11,004,854

Less departmental balances

(20,000)

(20,000)

Total on budgetary basis

10,810,984

173,870

10,984,854

Table 4 (a)

Non-Capital Supply Services Projections - 1999 and 2000

Ministerial Group

1999Net

2000Net

£000

£000

1

Taoiseach

24,922

24,043

2

Finance

434,746

436,794

3

Public Enterprise

114,908

115,228

4

Justice, Equality and Law Reform

724,486

747,097

5

Environment and Local Government

120,304

123,682

6

Education and Science

2,273,058

2,344,142

7

Marine and Natural Resources

54,128

55,728

8

Agriculture and Food

334,599

347,715

9

Enterprise, Trade and Employment

611,808

629,870

10

Tourism, Sport and Recreation

84,446

77,536

11

Defence

564,002

566,970

12

Foreign Affairs

171,449

168,519

13

Social, Community and Family Affairs

2,924,063

2,993,860

14

Health and Children

2,794,462

2,898,053

15

Arts, Heritage, Gaeltacht and the Islands

112,839

114,527

16

Remuneration

108,000

108,000

Other Non- Pay (1)

50,000

170,000

Total

11,502,220

11,921,764

(1) In order to provide a realistic view of the emerging 1999 and 2000 position a prudent provision has been made for non-pay possible costs in both of those years.

Table 5

Summary of Adjustments to 1998 Gross Capital Expenditure

Vote No.

Vote

1998 Estimates consistent with White Paper

Adjustments in the Budget

1998 Revised Estimates

£000

£000

£000

5

C. S. O.

436

0

436

6

Finance

1,350

0

1,350

9

Revenue

10,300

0

10,300

10

OPW

49,262

0

49,262

15

Valuation and Ordnance Survey

1,600

0

1,600

19

Justice, Equality and Law Reform

2,702

0

2,702

20

Garda Síochána

15,532

0

15,532

21

Prisons

49,527

0

49,527

22

Courts

8,450

0

8,450

25

Environment

894,932

6,000

900,932

26

Office of Minister for Education

100,647

0

100,647

27

First Level Education

40,364

0

40,364

28

Second Level and Further Education

41,810

0

41,810

29

Third Level and Further Education

41,402

500

41,902

30

Marine and Natural Resources

87,978

0

87,978

31

Agriculture and Food

88,136

3,500

91,636

32

Public Enterprise

24,027

3,000

27,027

33

Health and Children

150,000

-3,000

147,000

34

Enterprise, Trade and Employment

222,328

0

222,328

35

Tourism, Sport and Recreation

7,148

10,000

17,148

36

Defence

12,295

0

12,295

38

Foreign Affairs

1,000

0

1,000

40

Social, Community and Family Affairs

6,500

0

6,500

41

Arts Council

3,000

0

3,000

42

Arts, Heritage, Gaeltacht and the Islands

63,045

250

63,295

43

National Gallery

263

0

263

44

Flood Relief

265

0

256

Total Voted Capital

1,924,290

20,250

1,944,540

Less

Voted Non- Programme Outlays

-2,400

-2,400

Voted Capital Programme

1,921,890

1,942,140

Plus

Exchequer Non-voted PCP (1)

4,252

-800

3,452

Exchequer Public Capital Programme

1,926,142

1,945,592

Plus

Non- Programme Outlays (1)

58,750

-3,000

55,750

Total Exchequer Capital

1,984,892

16,450

2,001,342

Plus

Non- Exchequer Capital

2,397,781

800

2,398,581

Total Capital

4,382,673

17,250

4,399,923

(1) The Capital increase is due to a shift of £3 million from NPO's to Voted Capital in relation to regional airports and a technical adjustment between non-voted Exchequer and non-Exchequer capital.

Table 5 (a)

Voted Capital Projections

Department-Vote

1999

2000

£000

£000

Vote 5. CSO

436

436

Vote 6. Finance

950

400

Vote 9. Revenue

6,290

6,290

Vote 10. Office of Public Works

59,104

55,936

Vote 15. Valuation and Ordnance Survey

1,600

1,7000

Vote 19. Justice, Equality and Law Reform

2,291

1,605

Vote 20. Garda Síochána

10,660

10,851

Vote 21. Prisons

19,984

20,011

Vote 22. Courts

8,085

8,263

Vote 25. Environment and Local Government

940,970

880,618

Vote 26. Office of Minister for Education

75,642

75,617

Vote 27. First Level Education

31,631

26,781

Vote 28. Second Level and Further Education

40,783

40,272

Vote 29. Third Level and Further Education

41,797

40,917

Vote 30. Marine and Natural Resources

96,676

99,402

Vote 31. Agriculture and Food

59,340

51,190

Vote 32. Public Enterprise

32,000

39,018

Vote 33. Health and Children

155,000

165,000

Vote 34. Enterprise, Trade and Employment

226,441

221,422

Vote 35. Tourism, Sport and Recreation

16,486

15,838

Vote 36. Defence

12,595

12,895

Vote 38. Foreign Affairs

1,000

1,000

Vote 40. Social, Community and Family Affairs

5,200

5,000

Vote 41. Arts Council

3,000

3,000

Vote 42. Arts, Heritage, Gaeltacht and the Islands

57,407

58,034

Vote 43. National Gallery

270

275

Vote 44. Flood Relief

15

0

Total (Gross)

1,905,653

1,841,771

The applause from the Government benches reminds me of a scene from a Victorian novel where distant and impoverished relatives are informed they are the beneficiaries of a huge inheritance and applaud the solicitor who reads the will. However, Government backbenchers should remember that the novel usually continues with the dissolute and spendthrift relatives scattering their inheritance to the four winds in as short a time as possible through foolhardy and imprudent action. It is not the Government backbenchers who are the inheritors of the best economic circumstances since Michael Collins was Minister for Finance. It is the Government which has the responsibility for conferring the benefits of a booming economy on the people, of managing the economy so that the very strong growth continues and of removing foreseeable bottlenecks which could bring that growth to a grinding halt.

The economy was booming when the rainbow Government left office at the end of June. Tax buoyancy was at an all time high, unprecedented numbers of people were getting jobs, emigrants were returning home and interest rates were very low. Not only was every economic indicator positive, they were positive to an unprecedented degree.

Until the publication of the Book and Estimates and today's budget, the new Government had made no economic decision of any consequence since it came to power. The favourable position in which the Minister for Finance finds himself is entirely due to the actions of his predecessors. The Minister has a simple job to do in the great relay race towards prosperity. He has to run without dropping the baton and pass it on to his successor. It will not be long before his successor does likewise.

Looking at the opening position, most Deputies thought the Minister could not get it wrong. I am afraid that we are disappointed as are the Minister's backbenchers.

Not at all.

I have never seen a more muted response to a budget since joining this House in 1981. This budget does more than put at risk the progress made towards the success of this country. It is studded with a series of short-term expedient measures at the expense of medium to long-term strategies. It dispenses money with the efficacy of a scatter gun but it fails to identify medium-term objectives and the ways and means to achieve them.

Confidence is a fragile flower. The Minister for Finance has a duty and responsibility to guard and maintain it. The public is not fully convinced this growth phase in the economy will continue. Over the years they have become used to false dawns that fade into misty twilights and boom turning to bust. Somewhere in the backs of their minds they see a Minister for Finance returning from the races, calling into his Department and finding the tiger thrown on the mat outside his office, his eyes rolling in his head, foam coming from his mouth and the Secretary of the Department feeding him with worm powder.

The tiger died on Deputy Bruton.

The Minister must maintain confidence. Neither the public nor the markets are fully convinced about his management. The Minister will maintain confidence if he is prudent, controls public expenditure and has clear medium-term objectives. However, he is spending too much. His tax package is inadequate, unjust and ineffective as an instrument of policy. His social welfare measures are paltry and half-hearted and he has no medium-term plan.

Great opportunities present themselves occasionally in politics when the decisions of individual politicians have a profound effect on the welfare of the nation; the founding of the IDA by Gerard Sweetman; the introduction of free education by Donogh O'Malley; entering the European Union under Jack Lynch; and the signing of the Anglo-Irish Agreement by Dr. Garret Fitzgerald. These are instances which spring to the minds of many Deputies.

The Minister for Finance had an opportunity to make his mark today. It was an opportunity which would lead people to say in the future "it began with McCreevy". It was an opportunity to put his imprint on how this nation will be in the medium-term at the turn of the Millennium. He could have ensured a continuity of the boom and distributed its fruits in a socially just manner so that everyone benefited in accordance with their needs. This would have ensured that the people proceeded towards the future in prosperity and as one nation. We would not be divided, with an increasing underclass but as one nation where, finally, all the children of the nation were cherished equally. Unfortunately, the Minister has failed the test.

The Minister should have met three objectives today. He should have ascertained the facts which underpin the present economic boom and how he could reinforce them. Second, he should have ascertained the foreseeable bottlenecks which can undermine our success and how he could remove them. Third, he should have considered how he could create a fairer society where every person shares in the fruits of growth and where the needs of those who have fallen furthest behind are first addressed.

I read the Minister's speeches from his days in Opposition. It would be unfair to say he does not stand for anything. However, on the basis of the written record, he does not stand for much. Today's speech does not alter my opinion. There is no sign of a Minister for Finance who knows his mind and who intends to put his imprint on the future of the nation.

However, there is one mantra which the Minister made his own in Opposition. He repeated it time and again as the foundation stone of all fiscal policy, the core of his core principles — control of public expenditure. This principle emerged from his speeches in Opposition into the Fianna Fáil election manifesto and thence into the Programme for Government where he committed himself and his Government to confining increases to 4 per cent in current expenditure and 5 per cent on the capital side. He has significantly failed to meet his targets. He is increasing current expenditure by 7 per cent. On the capital side he is throwing caution to the wind and increasing spending by 17.5 per cent.

In its programme, the Government is committed "to limit net current spending growth to 4 per cent which is broadly equivalent to the 2 per cent growth in real terms agreed in Partnership 2000". We can see more clearly what the Minister is at when we look at the figures rather than the percentages. In real terms, the Government is committed to increasing current expenditure by not more than £520 million. Before today's budget, the Minister had increased spending by £900 million. Today's package adds another £250 million or so. Against its commitment to increase public expenditure by, approximately, £520 million, the Minister is increasing it by £1.15 billion. The Minister has not fulfilled his promise. He has abandoned his core principle which he exhorted us to follow when in Opposition. Because the Minister has disguised his intent does not mean that he is a prudent accountant; it means he is a creative accountant.

I do not believe that all expenditure is bad. The Minister's commitment to keeping capital expenditure under 5 per cent was an error. Any independent observer could justify increased capital expenditure on schools and hospitals, which are below standard in many ways, or on the physical infrastructure of the country, which is far behind that of our EU partners.

I am entitled to judge the Minister on his terms, on the principles he sets out and on his commitments. The only policy objective the Minister has clearly identified is the control of public expenditure. If he is to increase that expenditure to provide extra services in one spending area, he should have examined programmes that may have outlived their usefulness in order to achieve compensating cuts. That is how he said it should be done, and that is what he should have done to increase public expenditure by the amount available to him. With the buoyancy of revenue at his disposal, he has three choices. He can spend the money on improving services, many of which in health, education and social welfare need improvement. He can cut the national debt by budgeting for a significant surplus, or he can dedicate the bulk of his resources to tax relief.

There are no other choices. If the Minister opts for extra spending, he reduces the resources available to him for tax concession or reduction of the national debt. If he had stuck to his commitment in the programme for Government, he would have had an additional £700 million at his disposal today for tax relief and debt reduction.

This is an expansionary budget. It is doubtful whether the economy needs anything like the stimulus being provided to maintain the forward movement commenced in the three budgets from Deputy Ruairí Quinn when this side of the House was in Government. This is more like bonfire night than budget night, as the Minister, like an unsupervised youngster, piles more fuel on the fire to see how high the flames will shoot.

It is like the bonfire of the vanities.

This budget reminds me of the expansionary budgets of the late 1970s and the grief of the 1980s when payback time arrived. We must never forget the simple rules of economics. If demand outstrips supply, there are foreseeable consequences, some of which can be severely damaging to the economy. The Minister is spending £1.15 billion more than was spent in 1997 on various Government programmes. This will increase consumer demand significantly. He is injecting £517 million of tax relief in a full year into the economy, which will increase consumer demand even further. Ireland is entering economic and monetary union; the prospect of entry will reduce interest rates by almost 2 per cent in 1998. This will also increase consumer demand.

I am not so much afraid that this expansionary budget will immediately lead to inflation as that it will stimulate growth to a point where the resources of the economy can no longer provide for its own needs. I am particularly concerned with the housing market, the chaotic traffic conditions and the increasing skill shortages in the labour market. This budget will exacerbate the difficulties in all three areas, and I will comment in detail on these later.

I am delighted that the Minister has accepted the decision of the Rainbow Government that the standard rate of corporation tax should be 12.5 per cent. We told him when he attempted to reduce it to 10 per cent that this was foolish and dangerous, and he found this out in Brussels last Monday, when he barely pulled his fingers out of the fire before he got seriously burnt.

However, that is in line with the various U-turns of this Government. Does anyone remember the commitment to mandatory reporting?

Do we have it?

Does anyone remember the commitment to zero tolerance? The only person looking for that is the Minister for Justice, who pleads for tolerance when he explains another mistake to the House. Does anyone remember Deputy Tom Kitt's legislation on Sunday trading? He argued against it like a well-paid barrister when he found himself in Government. What about the Electoral Act? That U-turn occurred last night. It was going to be abandoned.

Quietly.

A combination of Wicklow, Kilgarvan and Donegal seem to have intervened.

A strange mélange.

That is not the real reason. The Government passes the blame to the Independents to give itself cover for another shameless policy U-turn.

Does everyone remember the introductory income tax rate of 20 per cent? That also went today like last year's snow, blown away in a sentence by the Minister: he did not feel it was a great idea, it would not be done now and the standard rate is being reduced in any case. The 10 per cent corporation tax rate is also gone, and a corporation tax rate of 12.5 per cent has been announced. I am delighted the Minister announced this, but he left it very late. The EU are now watching us very closely. A committee was announced last Monday in Brussels through which the European Commission may send agents to see if our tax measures are harmful; that is the result of the Minister and the Tánaiste horsing around with corporation tax. If they had settled for 12.5 per cent, as agreed in June, we would not now have this committee knocking on the door to see if IDA packages are in accordance with EU policy.

Is the 12.5 per cent figure real? Will it be taken away by the committee? The Minister says there will be two rates: a 12.5 per cent standard rate and a higher rate, 28 per cent, for non-trading income. There is no definition of which companies will be at which rate given in the budget. For example, will banking, farming or the retail sector be taxed at the higher rate? The Minister should start to clear up these issues, because the main impetus to job creation in Ireland has been through service industries, not manufacturing. Will the higher rate of tax apply to service industries? This has all the appearance of a rushed announcement. Irons were pulled out of the fire in Brussels at the last minute, and a paragraph without details was stuck in the budget. That is not good enough, but at least the Minister got the rate correct, which might be a reasonable success given he had the assistance of the Tánaiste.

When the Tánaiste spoke on this matter, she suggested that the difference was minimal. An increase from 10 per cent to 12.5 per cent is an increase of 25 per cent. Such an increase at any rate of tax is significant in anyone's book of arithmetic. However, since former Deputy Michael McDowell departed from the Progressive Democrats, they are increasingly becoming the innumerate party.

The budget income tax arrangements are interesting, and the Progressive Democrats' hand can be seen there. Those arrangements are unfair and unjust. Those that have most get most, and the wage earner at the bottom of the scale stays floundering with £3 a week. Deputy Quinn, in last year's budget, gave £393 million in tax and PRSI benefits, which were spread reasonably equitably across the ranges of income. The package today is about £100 million more. Two points off the top rate of tax amounts to £100 million and two points off the standard rate amounts to £100 million. What is the effect of this? One can go through the tables for the different samples of families, single parent and married parent, but in general to the single person on the average industrial wage, it is worth about £8 per week; to a married person with benefits included, it is worth about £6 per week.

At the other end where the tables stop at £50,000 per year the gain is £21-22 per week. A poor person will get £3 per week, the price of a pint of lager and the bus fare home, and the well off person will get £1,200 per year. There are variations depending in the rates of PRSI but in general the bulk of the money was given to improve rates rather than the allowances and the bands. While everybody gains something and those who have a high income gain much, the person on the average industrial wage will wonder what it was all about. That is what they will wonder in the bars around the country tonight.

On capital gains, the Minister decided that certain significant entrepreneurs, who have to go offshore because they cannot realise their capital gains here, should have the rate cut from 40 per cent to 20 per cent. Yet he went on to hammer the small investor by reducing the allowances. This is a rich man's Minister for Finance, at every action he has skewed the tax system in a most unfair fashion.

The Minister should have increased the allowances significantly. A single man or woman starts paying income tax after earning £3,800. After this budget, the best year since 1922, a single man or woman will begin to pay tax after earning another £250. At present the single PAYE worker moves to the 48 per cent band after earning £13,700 gross, which is now being increased by £100. The single person, instead of moving on to the 48 per cent band at £13,700 after 6 April next, will only have to pay at 46 per cent when he earns £3,080.

The problem with the tax system is not that the person on £13,700 has to pay at 46 per cent rather than 48 per cent but that such people and people with significantly larger incomes should not pay at the higher rate but at the standard rate. That position cannot be reached if £300 million out of the £500 million is given towards cutting rates without doing anything with the allowances and £100 million is given towards reducing the bands. That is the net position. It is inequitable and ineffective.

Tax policy is not all about giving back money to taxpayers in the immortal phrase — pay back time. Tax policy is an instrument of fiscal management. There are skill shortages in the economy and unless the Minister takes tranches of people out of the tax net — and not the mere 12,000 mentioned in his statement who will be back again after the first small wage increase — we are facing trouble in a buoyant economy. There is evidence of that in the service industries and notices seeking staff are on display in pubs, hotels etc. everywhere. It is not worth their while working when the tax is paid.

I welcome one item in the Minister's speech, that in future he will calculate family income supplement on net rather than gross income in accordance with the commitment we made when we negotiated Partnership 2000.

I draw the attention of the House to an anomaly which has not been significantly removed on which Deputy Paul McGrath tabled a question. He asked what a man on £230 per week with three children, one earner, in receipt of family income supplement, would have to be given to increase his take home pay. If he was given £10 extra per week he lost 29p, if given £20 extra per week he lost 58p; if given £30 extra per week he lost 65p per week. He had to get £40 extra per week before his take home pay increased by £5.17. If ever there was an example of the State intervening to transfer the resources of the employer to the Exchequer, by-passing the worker whom he was attempting to reward, that is it. The family income supplement is paid only to those persons who if they did not get it would be better off on social welfare. There is not a single iota of tax reform in this budget. There is no attempt to address the issue of marginal rates for the low paid when they get above the exemption limits. There has not been a single attempt to seriously take large tranches of low paid workers out of the tax net. There has not been a single attempt to eliminate welfare and poverty traps and to deal with that complicated interface where family income supplement meets social welfare and tax take. It is no wonder there are signs up all over the town. Is it any wonder every businessman will say he would take on workers but he cannot get them? Is it any wonder we still have almost 250,000 people on various forms of unemployment benefit and assistance? This is not good enough. The Taoiseach knows what I am talking about. He allowed himself to get hijacked by the representatives of the greedy who are his partners in Government. He knows better than anybody how the labour market works. There were enough Members on the Government benches who knew what should be done but in the first year in office he did not have the guts to do it. What will it be like when he gets into tricky political times?

The Deputy should cop himself on.

The gallon of petrol has been increased by 18p.

Rural Ireland, how are you?

If the Government was serious about tax reform and wanted to reduce the marginal rate of tax why allow the 2.25 per cent levies remain intact? The top rate of tax is not 48 per cent. The top rate of tax and the levies is 50.25 per cent. If 1 per cent is removed from the levies it would have affected the lowest paid. Instead, because from a PR point of view and because the marketing people suggest that cutting the top rate and the standard rate, there is a better story to tell, he ignored the allowances and the 2.5 per cent levies. If the Minister really wants to fairly deliver money into the pockets of people where everybody gets a decent shake-out, the most effective way of doing so is through the PAYE allowance and the PRSI allowance.

In his Budget Statement last year, the former Minister for Finance, Deputy Quinn, took a point off the employee rate of PRSI. That is why the tables of benefit in the budget last year were not skewed towards the top end of the earning pyramid but there was an even distribution of benefit.

To think of the budget as simply pay back time, forget that tax management is an instrument of policy that can get a labour market response, and see the things simply in terms of tax reduction, with no attempt at tax reform, is to end up in the position the Minister is in today. Last year Deputy Quinn had £117 million less at his disposal yet, at all income points, he delivered more per week to the ordinary worker. On this occasion the benefits are skewed towards the top.

On social welfare, I do not know whether this is a policy decision or an omission but in the summary outlining the main features of the budget I can find no reference to an increase in child dependant allowances under the various headings. There is a 3 per cent increase across the board in personal and adult dependant allowances. If it is the case that there is no increase in child dependant allowances it is an absolute shame.

The Minister should own up.

It should not be hidden in the detail where it cannot be found. The Minister will appreciate my difficulty as I only received a copy of the main features of the budget as he began to speak.

Last year the Government of which I was a member returned £273 million. In this historic giveaway budget the Government is returning £282 million, a difference of £9 million. The mothers of Ireland will be delighted to receive an extra £1.50 per month or 37.5p per week in child benefit in respect of the first and second child. They will receive an extra 75p per week in respect of the third child. The Government promised to provide tax relief for working mothers so that they would have the money to pay the cre che fees. Having thought about the matter, it no longer thinks it is such a good idea and has dropped it. It is of the view that 37.5p per week will give encouragement to the mother with one child who pushes the husband out of the door having had a cup of coffee and a slice of toast to take the child to the cre che and then rushes to work in a state of stress. It is some tiger.

The Minister is giving old age pensioners an extra £5 per week which is not a significant amount. I presume it is his intention to provide for a similar increase in every budget during the next five years to honour the commitment in the programme for Government to increase old age pensions to £100 over a period of five years. Does the Minister know what a bag of coal costs?

I doubt it.

It costs £6.50.

It is more than they received last year.

Two years ago they received £1.50.

A pint of lager costs £2.25 in Limerick. It is dearer in Dublin. The old man on a pension will now be able to buy two extra pints per week and have 60p for the bus fare home.

It is more than they received from Fine Gael and the Labour Party.

There was a great package last year. I apologise if I am spoiling the party —

I am still waiting for the Deputy to make his point.

The Deputy should tell the truth.

——but I am trying to explain that if the Minister had spent less there would be more money available for tax reliefs and social welfare increases and we would not be engaged in this charade. It seems the benefits are minimal. There is a 3 per cent increase across the board which amounts to little. The old age pensioner is to receive an extra £5 per week and there are minimal increases in child benefit. The intention seems to be to compensate those on social welfare as there is no increase in child dependant allowances.

The Minister devoted half a page to agriculture despite the continuing problem of BSE and the cuts in the Book of Estimates.

It did not merit even one line last year.

He has nodded in the direction of one of our strongest industries at a time when difficulties are being encountered in exporting meat to the United Kingdom through Welsh ports. An extra £23 million is to be provided in headage payments. That would be impressive if £35 million had not been cut in the Book of Estimates last week. A sum of £3.5 million is to be provided in installation aid but there is a sting in the tail. The money is to be used to meet outstanding commitments only despite the commitment given in the programme for Government to restore the scheme. The amount available under the control of farmyard pollution scheme was cut by £30 million in the Book of Estimates. To encourage farmers to participate a little tax relief is provided. The dairy hygiene scheme seems to have been completely closed off. The Minister is not taking the industry seriously.

Except horses.

The agriculture Vote seems to be a calculated insult and the Minister has added insult to injury by pretending to deal with the issues.

I am delighted that more money is being provided for health because the Estimates were inadequate. It is to be spread evenly between child care services and services for older people. I wish the Minister well. There is no mention however of the waiting list initiative about which the Government parties made great play when in Opposition.

What does the Deputy think the money is being used for?

What has happened to the people in need of cardiac operations? What about the people waiting for hip replacements in orthopaedic hospitals? What is to be done about the 30,000 people on waiting lists? There is no money ——

There is, £36.8 million.

Does the Acting Chairman have any intention of calling those women at the back of the House to order?

Deputies.

The Deputy is in trouble.

I was under the impression the Deputy was enjoying the interruptions.

That is Deputies for you.

Acting Chairman

Order, please. The Deputy must be allowed to speak without interruption.

All they need is a ball of wool and knitting needles and they would be properly cast. It is like the last scene in A Tale of Two Cities.

How can Deputy Barnes sit there and defend this? She should let the back of her legs blush.

Acting Chairman

Will Deputy McGennis please allow Deputy Noonan to continue?

Where is the money for the waiting list initiative which was introduced by Deputy Howlin and continued by me? Are we to measure Fianna Fail's commitments by the amount of noise it makes rather than the amount of money it provides?

Bluster.

On education, did somebody finally decide that the Minister, Deputy Martin, had enough soft public relations and cut him out completely? What about the 20,000 people on post-leaving certificate courses who were to receive grants? A sum of £500,000 will be made available for school books in an adjustment to the Estimates. Really there is nothing there at all.

I will return briefly to what I see as the emerging bottlenecks in our economy. This is an extremely expansionary budget introduced at a time when there is a mismatch between supply and demand on the Dublin housing market.

On a point of order, is there a precedent for both the Taoiseach and Minister for Finance being absent from the House while the main Opposition party spokesman on Finance contributes to this debate?

Acting Chairman

That is a matter over which the Chair has no control.

They have to go out and do a spin.

(Interruptions.)

Acting Chairman

Deputies will have an opportunity of contributing later.

I know the Deputy is making an excellent speech but I did not think it was that harmful.

This budget and the forthcoming reduction in interest rates of 2 per cent will further fuel demand in the Dublin housing market. There is nothing in the detail of this budget, or in any Government policy I have heard enunciated which will increase either the supply of houses or of building land in the capital city. If demand continues to rise and supply remains restricted, prices will continue to rise. The entry point into the private housing market in Dublin is now approximately £80,000. Prices will continue to rise and I have no doubt the traditional aspiration of many young persons to own their own homes will become a pipe dream.

Deputies

Hear, hear.

We are facing circumstances in which, say, a nurse, garda, school teacher, middle grade civil servant and people in industry on almost twice the average industrial wage will not be in a position to aspire to owning their own homes. The ambition to own one's own home, especially in the case of young married couples, is one which will not be abandoned lightly by the electorate. Furthermore, very soon the social partnership on which so much of the prosperity we have enjoyed was built will not be maintained unless this problem is addressed. The young will not stand for it and the trade unions will not be able to contain the demands of their younger members because, if they cannot get a supply of houses, they will seek extra income to get into the market for available houses. Unless the Government takes action, this will break Partnership 2000——

Hear, hear.

—— -result in very high wage demands among the lower and middle paid people and in particular high wage demands in the public service with their attendant widespread industrial unrest.

It is very hard to explain to young couples that an aspiration to own one's home, which was the norm for their parents' generation, is no longer an attainable objective for them. The Government will not be forgiven if, having stimulated the demand, it fails to take any action to match that demand with supply.

Deputies

Hear, hear.

Yet, there is not a single provision in this budget which gives a young couple on lower or middle income any hope, in prevailing conditions, of entering the Dublin housing market. It is not solely a Dublin problem, house prices in other cities have also escalated, but the problem is most acute in Dublin. The answer is evident — supply must be increased through extra density, extra building land, accompanied by rapid rail systems so that satellite, suburban, dormitory towns can be developed along with adequate transport facilities. That aspiration so dear to many of our young couples will continue, which means that demand must be met.

That is one of the bottlenecks this expansionary budget will worsen and which, if not addressed, could bring the whole house of cards crashing down around us——

Hear, hear.

——-because it has a human dimension.

Many Asian economies — the first to which the term "tiger" applied — were associated with the other difficulty to which I will draw the attention of the House. One of the first indicators of difficulties facing Asian economies was the increasing growth and consumer demand, cluttering up their roads and choking their cities because they failed to provide the transport infrastructure to service their booming economies. The first signs of a similar crisis facing us — while the Government stands idly by refusing to take strategic decisions — are evident to anybody familiar with traffic flows or the lack of them in Dublin.

However, there is a wider issue than the social discomfort of the populace. The inflow of foreign investment in manufacturing industry is a major contributor to our current prosperity. Ireland is an attractive location for foreign investment. People do business where it is easy and profitable for them to do so; it is as simple as that. When our main roads are dense with traffic, our cities, particularly Dublin, are choked with traffic, when it takes an hour to drive where one could walk in ten minutes, when the container traffic from Dublin port continues to lumber through the city centre, when people's journeys to and from their workplace take unconscionable lengths of time, when it is no longer even easy or profitable to do business in Ireland, the flow of investment ceases.

The best hope of solving Dublin's traffic congestion is to proceed with the Luas project or a variation of it. However, the Government refuses to take a decision. A further evaluation has now been commissioned. Even a special visit by the relevant EU Commissioner to urge the Government to get its act together lest it lose the Structural Funds allocated for that purpose has not succeeded in injecting any sense of urgency into the Minister for Public Enterprise or the Government.

We are all aware of the fury, the ill temper, road rage, all now a feature of our daily lives. Traffic is adding such a stress to the normal inter-course of daily life it is difficult to measure its consequences in personal and social terms and I do not intend to do so now. What concerns me principally is that this extremely expansionary budget will further exacerbate the problem to the point at which not only our traffic but our economy will grind to a halt before this faltering Government takes remedial action. In this context the paltry sum of £1.4 million in the Book of Estimates dedicated to relieve traffic congestion in Dublin must be the ultimate in the book of sick jokes.

With £20 million for Croke Park.

Sports enthusiasts will not be able to reach it.

The third issue to which I draw the attention of the House, which could run our economy into the sandy delta, is the increasing lack of availability of labour. There is nothing in this budget to free up the labour market.

(Interruptions.)

Acting Chairman

Deputy Noonan without interruption.

We are very fortunate to have such a pool of highly skilled people. I do not know whether the Government is familiar with this phenomenon but it has now reached the point at which over the past 12 months, in certain specific skills, pay rates rose by in excess of 20 per cent. It is still fairly specific to certain skills but this economy cannot withstand wage inflation of 20 per cent, and it is spreading.

There is another factor on which I am sure the Industrial Development Authority would be well able to inform Government Ministers: that is, whenever announcements of new factories are made by the Tánaiste, whether in Cork, Waterford, Limerick, Dublin or elsewhere, providing anything between 400 and 600 jobs, they are greeted with great applause by us politicians and equal enthusiasm by the general public. Does the House know what small, indigenous business people say? They say they will lose their key workers to the multinationals which take our skilled pool, and pay them more money. They have to get out into the labour market where there is a shortage of skilled people but if they attempt to retain workers their pay roll costs rise. The Government should talk to the sub-suppliers, usually Irish companies around the country when they will see what is happening in terms of skill shortages. They are not greeting new factory announcements with any enthusiasm because the inflationary pressure is there already and it must be met.

I welcome the package announced by the Minister for Education and Science to improve information technology in schools.

The Deputy is contradicting himself.

On examination of the Book of Estimates, one discovers that while the Minister for Education and Science won that high profile battle accompanied by a big announcement, he lost the other one, particularly when one examines the allocations under the heading for expenditure on industrial technology, information technology equipment, computers and ancillary equipment to third-level colleges and universities where there has been a virtual cut in the amount provided in the Book of Estimates. Is it the secondary schools or the regional technical colleges and the universities? We talk about smoke, mirrors and creative accounting: did anybody examine that £100 million? Are people aware that it includes the cost of training and paying the teachers as well as buying equipment? An item of expenditure that should be on the current side of the budget is hidden as a capital announcement to inflate its impact.

It was welcomed by every educational institution in the country.

It is another example of trickery.

It will get a good headline.

It is another disgraceful piece of nonsense. The skills shortage is emerging at the bottom end of the labour market. There are vacancy signs all over the city and increasingly around the country. Why are 250,000 people unemployed and 100,000s of our people abroad while at the same time there are job vacancies all over the country? Why, according to the most recent figures, did 15,000 people come into the country to take up these jobs? The reason is simple. Fiscal policy has not dealt with the interface between social welfare and taxation and the fact that at certain levels of pay it is not worth working because too much has to be paid in PRSI and tax.

It is difficult to reform tax in fiscally weak times because the trap is that there are winners, who identify their winnings and put them in their pockets, and losers, who become vocal and put on political pressure.

The Deputy should listen to what is being said on television. Commentators are not saying that.

The Minister should show some respect.

He should fill out the spaces in the Shamrock.

The Deputy is making a very cheap comment.

So is the Minister.

It is not difficult to deliver tax reform in a time when there are great resources. Excluding previous expenditure, which should be re-examined, the Minister had £517 million at his disposal and he gave away £300 million in rates. Much of that money should have been dedicated to taking low paid employees out of the tax net and making it worth their while to work. It would mean the low paid were working; that they would begin to pay tax and PRSI as their salaries increased; that they would be off the live register and that they would have dignity and self-fulfilment. They would have their first job and be on their way.

Hear, hear.

This is what the Minister should have done. When Deputy McDowell was advocating these policies in this House, something he did in an impressive manner, he was talking in theory, because no matter what was done there were no jobs. However, the vacancies now exist and this is the time for fiscal intervention in the labour market to facilitate those who want to work and are available for work if they are properly paid.

The Minister has continued what he described as his button-lipped policy on entry to EMU. I do not understand why the Minister will not discuss the currency. The most momentous event in this country over the next 12 months will be our entry to EMU. Announcements will be made in the second week of May and it is clear that we will enter EMU from 1 January 1999. Yet the Minister delivered his first budget speech without even mentioning it. This is extraordinary and he will have to address it shortly because questions are being asked by those familiar with the market.

The central ERM rate is 2.41DM to the IR£1. Yesterday, the IR£ was trading at 2.61DM. If the Minister decides next May that the convergence rate is to be at the central ERM rate — and we do not know any different — it means a devaluation in real terms from today's trading position of between 7 per cent and 8 per cent.

Many people think that because the budget has been introduced before Christmas they will receive the benefit of tax relief by Christmas. However, even though the date of the budget changed, the tax relief will not come into force until after 6 April 1998. Three weeks later the Minister will make an announcement. If he decides the convergence rate will be the central ERM rate, people's spending power in terms of imported goods will be reduced by up to 8 per cent. The population will be very upset by this. The Minister must clearly signal his intentions in terms of convergence. We know we are joining EMU. Fine Gael is pro-Europe and supports entry. We know there will be reductions in interest rates but we do not want currency shocks over the coming six months with interest rates jerking up and down. We want an even and systematic reduction in rates. However, the Minister must make some attempt at managing entry and the announcement of a convergence rate to ensure the high morale of the public is not dissipated by a further lack of planning.

This is the first budget introduced by the Minister. It is very good for those who earn £50,000 per year and relatively good for those earning £30,000 per year. However, for most of us it is a distinctly bad budget. It is unfair, divisive, inequitable, reckless and irresponsible. It points to a Government and a Minister with no coherent policy on management of the economy. It is borne out of party political expediency, intended to keep Fianna Fáil in power and the Progressive Democrats Party alive. In reality, it will do neither.

When I spoke on the Estimates debate last week, I said we would measure the performance of the Minister in several different ways. We will measure him against the expectations he and his party so successfully created last June; against the numerous targets he set for himself; against the effect of the budget on the economy and, in particular, on employment and unemployment. Finally, we will measure the Minister and his budget against the requirements of fairness and equity. We will assess the impact of the budget on those least well off, those dependent on a fixed income, often social welfare, and those who live in communities where the Celtic tiger is little more than a joke.

In 1988 George Bush made a famous and dangerous election pledge when he said: "Read my lips, no new taxes". It was a promise he lived to regret. The 1997 Irish version of George Bush's mantra is the infamous phrase, "It is payback time", used most famously by the Irish Independent the day before polling. The debate that produced that mantra was deliberately engineered by the Fianna Fáil and Progressive Democrats parties for their own political ends.

It is worth casting one's mind back to January 1997 when the Progressive Democrats produced a draft budget for 1997 which bears striking similarities to the budget introduced by the Minister for Finance, Deputy McCreevy. The draft budget promised a reduction of 2 per cent in the upper and standard rates of tax with some increases in PAYE allowances and the exemption limits. In the months following publication of that draft budget, the Progressive Democrats and Fianna Fáil tripped over each other in their enthusiasm to offer ever more substantial bribes to the electorate. In the end they settled on a package mainly skewed to the better off, since these are the people who form the bedrock of the ever diminishing number of Progressive Democrats voters.

The total value of the tax package is £517 million. Of this, almost half is targeted at better off taxpayers and the most profitable companies. It confers little or no benefit on the vast majority of taxpayers. The total value, therefore, to ordinary taxpayers of the Minister's efforts is a mere £280 million. In contrast, the total package introduced by the former Minister, Deputy Quinn, earlier this year was worth nearly £400 million. For whom is this pay back time? Certainly not for the ordinary taxpayer. This Government and this Minister would not be in power had they not deliberately sought to create expectations of pay back time — expectations of serious tax reductions. The better off have got a decent pay-off from the Minister, and no doubt they are suitably grateful, but the ordinary decent people who voted for Fianna Fáil have been betrayed by Minister McCreevy.

In conjunction with his budget today the Minister produced some tax tables setting out the benefit for individual taxpayers of the changes he has introduced. These figures are staggering and the Minister should justify them. On a total income of £9,000, a married couple will benefit to the extent of 1.5 per cent of net income — £127. The percentages increase from there. At £50,000 the percentage increase is 3.6; the actual figure is £1,124. I have never seen such a regressive list of benefits. The richer one is, the more one benefits; the poorer one is, the less one benefits. Indeed, most of the poor hardly benefit at all.

Before I proceed any further I want to make some comments about income tax reductions.

How did the public benefit from the Deputy's party's budget?

Acting Chairman

Deputy McDowell, without interruption.

The Minister should listen to Deputy McDowell.

My party believes reductions in income tax are desirable and necessary. We were party to Partnership 2000, which provides for £1 billion in tax cuts over a three year period. We happily signed up to that agreement and we stand by it, but there was a rationale behind what we proposed and I want to spell that out once again. The first and primary reason for reducing income tax is to smooth the way from welfare to work. The second reason is to remove the poverty traps that exist in the system. It is crazy that someone can be worse off even though their nominal earnings are higher. This comes about, as the Minister knows, through the complicated interaction of gross pay, FIS, exemption limits and the marginal rate. The Minister has done nothing to deal with that. We can justify income tax reductions because ordinary workers took pay increases over the past number of years which were less than the increase in national wealth.

There is economic justification for income tax cuts. We need cuts in income tax to get more people out to work, to reward those at work and to ensure the continuation of social partnership. Unfortunately, this Minister has had scant, if any, regard to the economic justification for income tax cuts. The package he has introduced today is a political, expedient and unfair package.

I want to refer to the higher rate of tax. Forty-eight per cent was not an unusually high marginal rate by European standards, but people in this country on relatively modest rates of pay are paying income tax at a marginal rate of 48 per cent. When my party was in Government it made significant progress in addressing this position. Before today's budget, a married couple with a mortgage and one earner could earn nearly £30,000 before hitting the 48 per cent tax band. Despite all the rhetoric from the Minister and all the guff we have listened to from the Progressive Democrats in particular, the Minister has done almost nothing to broaden that band today. He could have gone a great deal further if he had not chosen to waste resources by reducing the upper rate of tax. The reduction in the upper rate is wasteful, reckless and grossly unfair. It will benefit only a small number of people to any significant degree and these are the people who need it least. It is utterly outrageous that we should go out of our way to target some of the benefits of economic growth at those already benefiting most and who are best able to look after themselves.

As regards people who earn high incomes, less than 10 per cent of taxpayers earn £30,000 or more. Many of those people are professional, self-employed, skilled craftspeople, managers or journalists. They make a decent wage by Irish standards and fair play to them. They work hard, contribute enormously to our society and create jobs for others. They and their families deserve a decent standard of living. I begrudge them not a penny of what they earn. The more people we have earning good wages and contributing to our economy, the better we will all be. Begrudgery does not advance the argument for fairness and the House will not hear any petty-mindedness of that kind from these benches. On the contrary, we require the active participation and contribution of the better off if we are to build on and retain the sense of community which has been a part of Irish society for many years.

I do not want to create an education system for the rich and another for the poor. I do not want to create a health system for the rich and another for the poor. I do not want to see a society where the rich provide for their own pensions and the rest of us depend on social welfare. To avoid a two tier society, we need the acquiescence, if not the support, of the better off in paying for services on which we all depend. Ireland is at heart a genuinely more egalitarian and less selfish society than many others. We can help to maintain that if we seek to create a social consensus. This demands that we win the agreement of those who are better off to the proposition that we must all contribute according to our means and for the ultimate benefit of all. There is and always will be a need for redistribution and the tax system is an essential part of that process.

That brings me back to the 48 per cent rate. It is time to nail some lies. The Minister would have us believe that a single person earning £15,000, £16,000 or £17,000 per year would benefit significantly from the reduction in the upper rate of tax. That is untrue. A single person earning £15,000 per year, all other things being equal, benefits by less than £1 per week from a reduction of 2p in the marginal rate. A single person earning £20,000 per year will benefit by hardly more than the price of a pint from a cut of 2p in the 48p rate. The reason for that is simple: these people pay the upper rate of tax on only a small part of their income. It is only when a person earns a seriously high income, and this is clear from the Minister's tables, that the reduction in the top rate makes any significant difference. The Minister is well aware of that, as is the Tánaiste. That is the reason she proposed it. If that is so, surely it is fairer to be open and honest with people. The Minister should come clean and give up the pretence that this measure is aimed at people on modest incomes. The facts are clear, bald and unpleasant. Only people earning high incomes will benefit in any meaningful way from a reduction in the top rate.

There are other fairer ways in which the Minister could have dealt with the tax system. Had he chosen to put all of his money into increasing allowances to effectively widen the zero rate band, 90 per cent of taxpayers would be better off than they are as a result of the Minister's measures. Increasing personal allowances benefits all taxpayers whether they earn £10,000 or £100,000. The proportionate benefit is greater for those on lower pay and that is only right. It is worth pointing out that, in straight cash terms, high earners gain even more from increases in personal allowances.

If the Minister felt he had to interfere with tax rates, he should have confined himself to the standard rate. This too would have benefited all taxpayers, including those who pay 48 per cent marginal rates. In short, the Minister had a choice. He could have done what was right for the economy and what the social partners, including the representatives of small business, asked him to do. He could have done what was fair, but instead he has chosen a route which is manifestly unfair. He has chosen to target more than a quarter of his total package at a tiny percentage of the population. In doing that, he is risking social partnership and is wasting our money. The most galling part of all this is that he is borrowing money to do it.

The Minister is an accountant by profession. When he spoke from these benches last year he lectured us at great length and with fervour about the importance of sound money, transparent public finances and fiscal rectitude, yet his record over the past five months is in breathtaking contrast to his previous rhetoric. How often did we hear the Minister say we should budget for a surplus in good times so as to provide for a rainy day? Yet, less than three months after taking up office in October of this year, he juggles the Exchequer finances in a way that is deliberately intended to engineer a deficit for 1997. He borrowed money to finance a deficit we need not have had. Had the Minister not fiddled the figures for 1997, the budget introduced by the former Minister, Deputy Quinn, in January of this year would have produced an overall Exchequer surplus of approximately £200 million. Instead we will end up borrowing over £200 million in order to help Minister McCreevy present the figures in a way which suits his peculiar ideological bent. Only the most gullible have been fooled, but the manoeuvre has done no end of damage to the Minister's credibility and the credibility of his economic policy. In a sense there was worse to come.

Having engineered a false deficit in 1997, the Minister is now quite deliberately creating a deficit in 1998. That is being done by a Minister who lectured us long and hard about the need to run a surplus. The same Minister has the gall to come into the House today and tell us that he proposes to borrow money to pay for tax cuts, the primary purpose of which is to keep the Progressive Democrats alive. The Minister's deficit for 1998 is one of the most expensive bailouts ever engineered here. We are being asked to borrow nearly £100 million in a vain attempt to divert the Tánaiste and her colleagues from the route to political oblivion. The Minister has betrayed the ordinary decent Fianna Fáil voter who looked to this day with some sense of expectation, but no doubt a few glasses of bubbly will be drunk in other quarters. Who knows, perhaps the Minister's actions may find an echo of support in some dark distant parts of the Law Library.

Before moving from the issue of income tax, I want to say a few words of warning, and I genuinely mean this in a most constructive sense. We have had growth of nearly 40 per cent since 1992. Inflation is at a very low level, 1.5 per cent according to the Minister's figures today. It is generally accepted that inflation in Ireland is largely generated by imports and seriously affected by the exchange rate. There has so far been little evidence to suggest that the economy is over primed or that we are at risk of an inflationary cycle, but there are warning signs.

In the first weekend of May next year EMU will effectively start. The bilateral exchange rates will be put in place as a preliminary to the final fixing of exchange rates at the end of the year. The Minister has, in his own words, decided to "button his lip" in relation to this debate, but he knows as well as we all do what the current indications are. The chances are that the exchange rates will be fixed next May at or about the current central exchange rates. That is important for Ireland since we are currently the only participating country which is trading at a rate well above the central rate. This morning we were trading more than 20 pfennigs higher than the central rate against the deutschmark. What this means is clear enough. It means that in all likelihood the Irish pound will be devalued against the deutschmark by somewhere in the region of 5 per cent between now and next May and that devaluation will be permanent. It will bring with it a significant risk of imported inflation and the Minister knows that.

At that same time we can reasonably expect a reduction in interest rates. The Bundesbank recently suggested that a decrease of 1 per cent or, perhaps, 2 per cent is likely in Irish rates between now and next May. That, too, is likely to boost spending and to increase the risk of inflationary pressures. Add to all that the tax package introduced today skewed as it is towards the better off and one has the ingredients of a potential disaster.

I do not intend to push the panic button or to be politically expedient about this. It may be that we will come through this unscathed, but for the first time in some years there is a serious gamble. The Minister knows that because he said so in the past. He said exactly that in his contribution to the budget debate last year. He stated:

Over the past couple of years we have experienced growth in excess of 5 per cent while simultaneously increasing .current spending by at least 7 per cent. The Central Bank has signalled that growth in the credit institutions is now growing at an alarming rate and yet, at the same time, it is proposed to reduce taxation. to do all of these things at the same time is inexcusable.

That is what the Minister said last year. What a difference a year makes. It seems that the fiscally prudent Deputy McCreevy of earlier this year has been replaced by the gambler Minister, Deputy McCreevy. The Minister is entitled to gamble with his money, but at the moment he is doing far more than that. He is gambling with the future of our economy.

Regarding corporation tax, the Minister announced today that he intends to breach yet another of the promises made by Fianna Fáil before the last election, a promise which was translated across to the Government's, An Action Programme for the Millennium. That is the promise to introduce a 10 per cent rate of corporation tax before 2005. The background to that is well known and I do not want to spend too much time in that regard. The Government was told at the end of last year that our current differential rates, notably the preferential rate for the IFSC and the 10 per cent manufacturing rate, could not be maintained in the long run as they constituted State aid and were anti-competitive. As a result the then Government announced earlier this year that it would seek to introduce a general corporation tax rate of 12.5 per cent over the next decade. It is no secret that the Labour Party would probably have preferred a slightly higher rate, but we accepted then and we still accept that there is a benefit in getting all-party agreement and in letting companies know well in advance what we intend to do. As a result we supported the Government decision to seek a 12.5 per cent overall rate and we still support that decision.

For some reason best known to himself, the then Deputy McCreevy in Opposition decided to go one step further by committing Fianna Fáil to a 10 per cent rate. That would have been innocent in itself had it not had the undesired and undesirable effect of directing the attention of the EU Commission at our overall corporation tax policy. That is attention we could have well done without. As it happens the then Deputy McCreevy's 10 per cent promise was yet another political promise that has gone the way of so many promises made by the Government.

There are three rates of corporation tax. There is the lower 10 per cent rate, which the Minister must increase although he has given us no intention today of when he intends to do that. The two higher rates must be brought down over time. Ninety per cent of companies pay the lower rate of corporation tax and return net profits of under £50,000. Many of those companies are in the service area and they contribute significantly to employment in the economy. It is right and proper that they should get the primary benefit of the overall reduction in corporation tax. The Minister should have targeted all or most of his resources at reducing this lower rate in the first instance. The upper rate must also be reduced in time, but this could or should have been done more slowly. The truth is that only a very small number of companies, mostly in the financial services sector, benefit hugely from reductions in the upper rate. There is no particularly good or persuasive reason we should seek to benefit those companies. They are the most profitable companies in our economy and they do not need the State to offer them a windfall profit on a plate. We should be considering a means of clawing back some of this money by, for example, reintroducing the bank levy. If we do not do that, we should seek to ensure that those companies that benefit most, be they banks or supermarkets, pass on some of the additional benefit to their customers. Forgive me if I express a certain scepticism in that regard.

The previous Government introduced a PRSI free allowance of £80 per week and the Minister has now increased that to £100. That was a particularly fair way of targeting tax reductions at the low paid, as prior to the change all income, however modest, was subject to PRSI. There is scope for an increase in that allowance and I am pleased the Minister has gone the way he has. However, beyond that it is striking that he has chosen to do very little with PRSI. The social insurance fund is self-sustaining without Government contribution for the first time in many years. In any event, many workers regard PRSI as a simple tax and the Progressive Democrats have been on the record many times as having said that. There was and is much scope for a reduction in the employer and the employee rates of PRSI and it is disappointing the Government has made no progress in this matter.

The previous Government introduced a provision whereby people on low income, currently just under £10,000 a year, do not pay the levies. That, in effect, provides for a two tier system of PRSI on that level. The reform is effective in that it reduces the tax burden on those who earn less than that amount, but there is an anomaly of which the Minister will be well aware. Because people earning just above the threshold pay all the levies on all of their incomes the threshold, in effect, becomes a step which causes problems for those who earn amounts just above the threshold. The Minister should have considered ways to eliminate that step and other similar steps that exist within the system by providing that the levies would be payable only on amounts in excess of the threshold figures.

Our economy is growing at a remarkable rate. Most of us are better off than our fathers or grandfathers and most of us can aspire to an improvement in our standard of living during the course of our lifetime, but that is not true of everyone. Long-term unemployment is still at a stubbornly high figure. There are parts of this country in west Dublin or north Cork where the very fabric of society is falling apart. Long-term unemployment is the norm, housing conditions are terrible and schools are under equipped and staffed by teachers under serious stress. The physical infrastructure and community facilities are poor and, in some cases, non-existent. Drugs are rife and welfare dependency is the order of the day.

When the Labour Party was in Government it sought to address this in a number of different ways. We invested money in schools, in programmes such as Early Start and Breaking the Cycle and we sought to target resources at the disadvantaged. We sought to encourage the partnership boards and we funded a range of measures designed specifically to take people out of long-term unemployment and into work. We belatedly came to grips with the policy challenges of the drugs crisis and moneys were provided which are beginning to make a real difference. Let us be brutally frank about this, our successes were relatively few and many of the problems are still there. It is crystal clear that we need nothing short of a dedicated effort targeted at education, health, unemployment, community facilities, infrastructural development and a range of other things specific to these areas. It is clear that without that effort the chronic problems of those communities will continue.

In many cases, there are community organisations in those areas with which Government can work but serious political commitment and considerable money are needed. The Minister is on record as saying he has no time for the argument about social exclusion or "the cranks that peddle that line". Unfortunately, that philosophy — if philosophy is not too strong a word — clearly permeates his budget. There is nothing in his budget for the poor and little for the unemployed.

To take one example, it has long since been established and accepted that one of the most effective ways of targeting poverty is through child benefit. During our time in Government the Labour Party more than doubled child benefit. Our efforts included two significant increases one of £5 and the other of £7, all of which went directly to mothers. This Minister made no effort to build up on that achievement, providing a puny £1.50 extra per month. He may believe there is a different or more effective way to tackle poverty, but he did not say so today. The impression from all of this is clear — this Minister and Government cares little for the poor and cares an awful lot for the votes of the well off.

I welcome the £5 increase being given to old age pensioners and widows. Let us look at the effect that has had on other welfare benefits and increases provided. A £3 increase in December 1997, in financial circumstances which are a great deal more beneficial, is the same amount provided by Deputy Quinn, as Minister, earlier this year. Why did the Minister not do more? He has given £1,100 to somebody earning £50,000 per annum and yet a person on social welfare is getting a mere £3 extra.

A cogent and reasonable case has been made for an improvement in the carer's allowance. The Minister has done nothing in the budget to help these people. We all know people who spend every hour of the day looking after elderly parents or disabled people. They are getting no breaks from the Celtic Tiger and the Minister's largesse dispensed today. I welcome the fact the Minister has met our commitment in the context of Partnership 2000 to assess FIS on the net income.

We should measure the Minister against his own targets. Perversely and ironically, it is by this measure that he can most easily be seen to have failed. I will look at his targets in sequence. The Minister told us he would limit capital spending year on year to 5 per cent. The Book of Estimates provides for a 17 per cent increase on capital spending and the budget has raised that figure to almost 20 per cent. For what it is worth, the Minister was right to abandon his daft targets but by his standard, he has failed miserably.

The second commitment the Minister gave was not to increase borrowing above £30 billion in times of economic growth. By fiddling the figures this year and by borrowing unnecessarily next year, he has added half a billion pounds to the national debt. This will bring the debt to perilously close to £30 billion, if not slightly higher. The extraordinary element in this target is that the Minister could have chosen to meet it if he had not chosen instead to bale out the Progressive Democrats with tax breaks for its supporters.

The third of the Minister's targets is or rather was the commitment to limit the increase in net current spending to 4 per cent year on year during his tenure of office. The Minister claims he has met this target. This is arrant nonsense and he knows it. He has played with the figures in a way which has not been done since the interfering hand of former Taoiseach, Mr. Haughey, dictated to the Department of Finance in the 1980s. The real net figure is close to 6 per cent, if not higher, and the gross figure is several points higher than that again.

I set out some of my views on public spending in the Estimates debate last week and I do not intend to repeat them. Suffice to say, we badly need to invest in our infrastructure, not least the transport infrastructure of this city. We also need to invest in education to do away with the disgrace of outside toilets in country schools and to provide our children with the skills they need to secure and retain decent jobs when they leave full-time education. We need to spend money on health which reflects itself in an improved service to the patient.

I do not believe in public spending for the sake of it. I said last week that the Left has sometimes given the impression, intentionally or otherwise, that public spending was a good thing in itself, but it is not. Public spending is not always good and private spending is not always bad. Public money has often been wasted and we still do not have a mechanism to ensure we get value for money. We need to look seriously at what we do with taxpayers' money. We need a serious Estimates process where Ministers and civil servants are required to stand up their proposals in public before the money is committed and not six months later.

The Ministers target was daft and irresponsible and was plucked out of the air. It is not related to our capacity to pay and makes no sense. I am glad the Minister shattered his target but nonetheless, it is more than fair to do the Minister the service of judging him by the standard he set for himself. On that standard his budget is a hopeless failure.

The credibility of this Minister is in tatters. How can he ask the Dáil to take him, his Government or his targets seriously when he clearly has difficulty taking himself seriously? He has not only slightly exceeded his targets but has left them and his credibility in shreds on the floor.

It is not only the Minister's targets that have been shelved or shafted today. He also indicated he intends to shelve a number of promises made by the Government prior to the election or in the programme for Government. What now of the much vaunted help for child care? What happened to the commitment to an entry rate of income tax to help the lower paid? What happened to the commitment given to students on PLC's? What happened to the increase in the number of gardaí on the streets? What happened to the special pre-school budget? What happened to the 25,000 place programme to tackle long-term unemployment? The list is long. Perhaps it will be acted on in time but I doubt it. All the indications are that this Minister and Government intend to continue down their merry way ditching promises and betraying trust as they go. They wonder why people are cynical about politicians.

For the first time in many years, we have a choice in the type of society we want to create. We can look to create a society divided between rich and poor, employed and unemployed, urban and rural, young and old or we can look to create a society in which we all have a stake and in which we are all better off, safer and more inter-dependent. Let us be in no doubt but that we are at a cross-roads.

The choices before us can be symbolised by the current boom in apartment building in the capital city. The expansion has often been trumpeted as a symbol of the economic boom and an indication of our prosperous future. It goes unremarked, however, that many of these developments have security arrangements which would put a mediaeval keep to shame. They possess the modern equivalent of drawbridges and moats intended to keep the restless natives out. If this is the social fabric we are intent on creating, I, and my party, want no part of it. We do not believe in exclusion or in mé féinism or that society can function on such a fractured and divisive basis. However, it is this type of society the Minister actively promoted today. It is a society in which the rich look after themselves and where the disadvantaged are cut off and treated as a threat. It is a society which is rotten to the core and which has turned its back on the idea of community.

Sadly, the Minister clearly indicated where he wants to go. This is a rich man's budget. Its overall effect will be to make Ireland a less fair, more unequal place to live. In short, the Minister has made the wrong choices. In some ways he doubt-less thinks that he can do no wrong. Perhaps he is right in terms of his short-term political interests but the bottom line is that in terms of things that really matter, he could have and should have done a great deal better.

The nation awoke this morning to the news on RTÉ that the Minister has more money available to him than any finance Minister in the history of the State. Having inherited this crock of gold from the Rainbow Government, the only question was how would the Minister choose to spend it. Would he use his unexpected bounty to put more people back to work, to take the low paid out of the tax net entirely, to reduce the burden of tax on low to middle income earners, to seriously tackle poverty and transfer resources and the unemployment blackspots? The independent group warned us that the return of a Fianna Fáil-Progressive Democrat Government would mean payback time, but the question was for whom. If one is in the high earning bracket and concerned with capital gains tax, it is not just payback time but kickback time. This is a budget which provides £20 million for Croke Park and £7 million for the mentally handicapped. No less than £315 million of the total tax package is frittered away in rate reductions to mollify the Progressive Democrats and its high earning supporters.

A single earner on £10,000 per annum working as a barman near the Four Courts will gain £4.50 per week. A single earner on £50,000 per annum working inside the Four Courts will gain £20 per week. The married barman on £10,000 will gain £2.50 per week from this budget whereas the married lawyer on £50,000 per annum will gain just less than £22 per week. The married earner on average industrial earnings with two children will gain less than £7 per week whereas the married earner on £50,000 per annum with two children will gain £22 per week.

The Minister, Deputy McCreevy, has defied the consensus painfully won among the different interest groups and economic institutes that the greatest proportion of his bountiful inheritance should go towards dramatically increasing personal tax free allowances and towards widening the standard tax band. A paltry increase of £250 or £500 for married couples is made in personal allowances and a derisory increase of £100 or £200 for married couples is made in the standard rate tax band. This is a pathetic and cruel deception for those in the electorate earning roughly average industrial wages and who supported Fianna Fáil in the recent general election. Meanwhile, the banks and finance houses make another killing on the dramatic reduction in corporation profits tax while the bank porter on £250 per week gets less than a fiver.

I must admit that one distinct advantage in having to listen to the Minister, Deputy McCreevy, read the official budget script this year is that we do not have to listen to the populist old guff he used to come out with in Opposition. Any student wanting an insight into the Minister's homespun philosophy on the economy and society need look no further than his meanderings in response to the budgets of the past three years. The Minister wandered the highways and byways of Irish political history, culture and economic policy without ever betraying what coherent approach, if any, he might pursue were he to replace Deputy Quinn as Minister for Finance. Amidst all the blarney and little homilies and despite his professional status as an accountant, the Minister did not have the slightest compunction about misrepresenting the figures and it is a habit he has not lost as shown in the Book of Estimates. Even the quality of his jokes was very uneven. Reading these speeches now, it is impossible to make head or tail of them. Since the Minister is an intelligent man, maybe this was deliberate on his part.

The record shows that in Opposition Deputy McCreevy was in favour of generating a surplus to help pay back the national debt. He warned it was "an absolute mathematical certainty" that EU transfers would diminish after 1999. He said that the then Minister for Social Welfare "would be far better off targeting a few key areas in social welfare rather than trying to spread the largesse". He falsely claimed the Labour Party and Democratic Left opposed social partnership. He discounted the labour force survey as no more valid "than an opinion poll" in measuring unemployment. He said of the last budget: "The last thing the economy needs at this time is the stimulus this budget will give it". He ranted and raved about how the rainbow Government was overspending. He said if there was any slippage "we would fall outside the EBR needs outlined in the Maastricht Treaty". The Minister for Health and Children, Deputy Cowen, growled an intervention, which I recorded, to underpin the Minister's financial punditry: "It is irresponsible, we will fail the basic test".

The Minister's first test came with the publication of the Book of Estimates where he was to add hugely to the supposed overspending of the rainbow Government by contriving to drag more than £400 million from 1998 into 1997. In other words, the same Deputy who in Opposition was so concerned about overspending in 1997, becomes the Minister who, by manipulating the figures so as to give himself room to manoeuvre in 1998, dramatically increases the 1997 outturn. No doubt with the passage of time the Minister hopes this decision will be attributed to the rainbow Government. In none of his other predictions or prescriptions does the Minister fare any better when his performance today is compared to his ramblings in Opposition. The man who wanted better targeting in Opposition targets the wealthy and treats the rest with a scattergun. If there is any threat now to Maastricht, it does not come from the rainbow Government. This is surely the first time a Minister has pushed out the parameters in order to slash capital gains tax, corporation profits tax and income tax for high earners only.

The Celtic tiger economy is creating a permanent underclass. Excluded from the benefits of economic growth, they are people with redundant, low or no skills. Without more focused investment in training, they are largely unwanted for the kind of jobs created. They are caught in the trap of intergenerational unemployment. FÁS has forecast that 80 per cent of the 280,000 jobs likely to be created in the next six years to 2003 will go either to graduates or to people with qualifications such as those held by post leaving certificate students. Therefore, only 20 per cent can go to people with no or low qualifications.

If this Government had any regard to equity and justice, it would have addressed this phenomenon of endemic long-term unemployment. First, the enormity of the challenge highlights why today's budget should have concentrated on tax reform to encourage, facilitate and make worthwhile people's movement from welfare to work. Second, the Government must face up to the new training challenge. The package recently announced, and to which the Minister referred, addresses the skills shortage, but it is designed for educated young people and, to a lesser extent, to upgrade the skills of people already employed. There is nothing in this package for the mainly middle aged, male, unskilled and alienated long-term unemployed or for those in work who are likely to lose their jobs in the coming year. Notwithstanding recent progress, there are 60,000 people on the live register who have not worked in more than three years and almost as many more who have been out of work for between one and three years.

The training needs of these categories of people, many of whom are clustered in certain urban geographic areas, are distinctly different from the typical training provision. The much improved community employment scheme is not a sufficient response to the training requirements of the long-term unemployed. There is an urgent need for innovation and imagination in the provision of customised training for the long-term unemployed. I thoroughly reject this Government's complacent philosophy that a modest improvement in social welfare rates discharges the State's responsibility to the long-term unemployed. Regrettably, some of the funding channelled by the European Union into education and training is ineffective. Much of the European funding goes into pilot projects and I have no objection to that, but we seem either unable or unwilling to have the results of successful pilot projects mainstreamed.

I will quote one small example from my constituency called the Clondalkin Information Technology Initiative, or CITI. It is a small project which set out to show it is possible to turn young people with low formal educational attainment but a proven aptitude for computer programming into qualified programmers getting well paid jobs in commercial electronics companies. CITI is working, has achieved results and is turning out programmers who are getting jobs. The life chances of the young people going through the project and graduating are being vastly improved. The same can be said of a number of other such innovations, for example, Tramlines in Ballymun. These young people are going from unemployment to work, from no qualifications to being skilled and qualified and being set on career paths which, if they pursue them, will change their lives vastly for the better. The trouble is that, as EU funding runs out — the CITI project regrettably wound up last week — there is no sign of the Government even in today's budget, main-streaming this type of successful pilot project, yet it is accepted throughout Europe that large scale unemployment can only be effectively tackled through investment in education and training.

Further education, including technical education and training, second chance education, retraining and life long learning is critical to building a system and society that can cope with large scale ongoing structural and technical change as is happening in our economy. However, I fear that Government policy makers do not accept this side of the Celtic tiger. They do not accept that cheek by jowl with all good indicators, which the Minister devoted so much time to, is endemic long-term unemployment concentrated in geographic clusters in urban Ireland where people are already trapped in intergenerational unemployment and there is no route out.

If the phenomenon of poverty in society is not tackled now, when will it ever be tackled? I have already recorded the conviction of my party that the most effective route out of poverty is a job. After that, it is incumbent on the Government to look after those who have no job or are unable to work or have retired. The rainbow Government uniquely agreed in Partnership 2000 to allocate £525 million to social inclusion measures, £250 million of which was spent last year. A large proportion of the remaining £275 million should have been spent on urgent social priorities and further pro-employment measures as well as bringing social welfare rates to the levels recommended more than a decade ago by the Commission on Social Welfare.

The cost of achieving the CSW target rate is greatly reduced because of the unprecedented low inflation rate and it is for this reason the Combat Poverty Agency, among others, has drawn our attention to the fact that we will exacerbate the plight of the unemployed and social welfare recipients if we do not link social welfare increases to income rather than inflation.

We are already in a low inflation environment and it is anticipated, in a single currency context, that will continue and if social welfare recipients are to have their bandwagon hitched to the star of inflation whilst every other individual participating in economic activity receives real increases in income then the lot of the marginalised and poor will worsen. I accept a flat rate of increase improves the lot of those at the bottom.

If the Minister were true to his own advice in Opposition to target a few key areas he would have continued the policy of recent years in significantly increasing child benefit. It goes mainly to mothers and, despite its universality, is well targeted to larger, low income families. Since it is universal and untaxed, it does not create or aggravate poverty or unemployment traps. It was for that reason the previous Minister for Social Welfare concentrated on it.

Despite the Minister's brief sojourn at the Department of Social Welfare, where he authored the infamous dirty dozen cuts, we have tried since to develop the social welfare system in the direction of encouraging people to re-enter the workforce. I refer to measures, such as topping up the pay of low paid workers with families, allowing people keep their medical cards for three years after ceasing to be unemployed, enabling people to keep more of their social welfare benefits when they take up part-time or casual work and "incentivising" particular groups, such as lone parents who are under-represented in the workforce.

We also dramatically increased the number of places on community employment and back to work allowance schemes. I hoped for a continuation of this policy and specifically I had anticipated a further expansion of places on CE and BTWA schemes. Instead there will be 5,000 extra places provided on the BTWA scheme. That is grossly inadequate given the scale of the long-term unemployment problem. However, I welcome the Minister honouring the commitment made by the previous Government to shift to calculating FIS on a net income basis. PRSI and pension contributions were removed in last January's budget for calculation purposes. I am glad to see the tax element taken out of FIS in this budget.

On taxation, Democratic Left set out its stall in a document published before the last general election entitled The Bottom Line . is what you take home. Our proposals were focused firmly on lower and middle income groups, the people who for too long have been carrying a burden of income tax disproportionate to their income. Specifically, we committed ourselves to dramatically increasing personal tax-free allowances so that people on very low incomes are freed of all taxes and other statutory deductions and middle income earners get significant relief; to widen the standard rate band so that no one on average industrial earnings pays tax at the higher rate and to reduce the standard rate of tax and increase tax free allowances much faster than the tax exemption limits to help the 123,000 people who pay tax at the 40 per cent marginal relief rate because they are just over the relevant tax exemption limit.

We did not anticipate that, having published the detail of these proposals, they would ultimately get such broad based support from lobby groups and representative organisations of normally contrasting viewpoints. It is most unusual for a Minister for Finance to be confronted with such a consensus embracing trade union and employer organisations, unemployment groups, Church organisations and commentators virtually across the board. All advocate the reform of the tax system along the lines suggested in the Democratic Left paper.

The thrust of tax reform has settled on a consensus in favour of targeting the reliefs on low to middle income earners. In one fashion or another, all political parties, including Fianna Fáil one suspects but excluding the Progressive Democrats, support this approach. Fianna Fáil appears not to support that approach for the majority who have been crippled by paying disproportionately for too long and it has bent the knee to the Progressive Democrats Party and concentrated the preponderant share of the money available in giving tax breaks to high earners.

In terms of the Progressive Democrats Party, it is interesting to note a new development this year where ISME came out in favour of this approach. ISME is an organisation characterised by the SIPTU General Secretary on one occasion as the paramilitary wing of the Progressive Democrats Party and even it has deserted that position because its member companies have recognised the incentive involved in targeting tax relief on the low to middle income sectors so that it acts as an incentive for the low paid to return to the workforce. It is a great pity the Minister failed to persuade the Tánaiste to similarly see the light. This consensus is underwritten by bodies such as the ESRI, TWIG, NESF and NESC. We have not previously experienced such propitious economic and financial circumstances as have been inherited by this Minister and which provide him with such a golden opportunity to respond to this consensus. No previous Finance Minister had available to him both the means and the consensus support on what the priorities should be. To tackle the traps and incentives problems, to improve the position of everyone on low incomes, including pensioners, young people and very low paid workers, and to remove major anomalies from our tax system, it is essential that the Minister significantly increase personal tax free allowances. Instead of grasping the opportunity, the Minister has done little on the key issue of personal allowances, as forecast in the Joint Fianna Fáil-Progressive Democrat statement on personal taxation issued on 4 June 1997. In that statement the two parties clearly presaged what we have this evening, a major disappointment for the people who expected to benefit, and there is a preponderant number of taxpayers on average industrial earnings who expected to benefit from the concentration of resources on personal tax free allowances. Instead it has been frittered away on the rate bands, and the main beneficiaries are those in the £50,000 salary bracket. Whereas those on average industrial earnings will get an increase of less than £5 a week, those in the £50,000 bracket will get £22 or £23 a week.

I will explain what the Minister might have achieved with the bounty available to him had he resolved to create incentives to work and overcome the long-standing structural difficulties between the tax and welfare systems. If the Minister had opted to spend much more of the available money on increasing personal tax free allowances, by £1,000 per annum for a single person and by £2,000 for married couples, it would have cost £308 million next year and £525 million in a full year and 40,000 taxpayers would have been taken out of the tax net compared to the 15,000 the Minister claims will be taken out of the tax net but some of whom, because of the effect of fiscal drag and pay increases, will be back in it anyway. No one on £90 per week, or £165 if married, would be liable to tax, 55,000 taxpayers would drop from the 48 per cent category to the 26 per cent band, everyone paying tax at 26 per cent would get an increase of £5 per week, everyone still paying tax at 48 per cent would get an increase of £9.23 per week, equivalent to a pay increase of over £20 a week at the moment, taxpayers dropping from 48 per cent to 25 per cent would get an additional £4.23 per week and unemployment and poverty traps would be dramatically diminished by a widening of the gap between income from welfare and income from employment. It is that nexus the Minister does not seem to understand. He did not understand it when he was Minister for Social Welfare. He exacerbated it then. Now, as Minister for Finance, he cannot grasp that interaction of the tax and welfare system.

After significantly increasing personal allowances, my party's second priority would be to widen the standard rate band so that no one on average industrial earnings would have to pay tax at the higher rate. At present a single worker with only the personal and PAYE allowances can reach the higher rate of tax at 48 per cent on earnings as low as £13,600 per annum, which is about £262 per week. This is well below average industrial earnings which are just short of £15,000 per annum. It is not acceptable that single workers on this level of pay are subject to tax before PRSI and levies at 48 per cent. Reducing that top rate from 48 per cent by one or two percentage points makes no real difference to the majority of PAYE workers. They need to be kept out of the higher tax rate, and a combination of significant improvement in personal allowances and a widening of the standard tax band would achieve that. Simply cutting the top rate of tax is only of real value to very high earners and of no value to those on low incomes.

Again, I draw the attention of the House to what would have been the effect of the Minister taking his courage in his hands and, in addition to the changes I have proposed on tax free allowances, widening the standard rate band by £1,000 for single persons and twice that for married couples. This would have cost a further £79 million in 1998 or £134 million in a full year and would have meant another 55,000 taxpayers moving from paying at 48 per cent to 26 per cent, thus leaving only 31 per cent of taxpayers on the top rate, which is the objective. It would also have produced a situation where no single person would be liable for the 48 per cent rate before earning £300 a week. Also, the 5 per cent of taxpayers moving down to the 26 per cent rate would have gained a further £4.23 per week.

In summary, the combined effect of doing what virtually everyone has agreed the Minister ought to have done with his inherited bounty would be to take 40,000 workers and pensioners on very low incomes out of the tax net and give them an increase of up to £5 per week. Those still on 26 per cent would get £5 per week; those dropping from 48 per cent to 26 per cent would get £4.23 per week twice, once from the increased tax free allowances and again from the band widening; and the 31 per cent of taxpayers staying at 48 per cent would all get an increase of £9.23 per week.

However, that would not have satisfied the Progressive Democrats, and the Progressive Democrats have to be mollified, whatever the cost. The cost of these proposals that I have outlined, and which had broad support not just in this House but outside the House, would have been £380 million in 1998 and £642 million in a full year. That is not beyond the Minister's reach. It is well within his grasp if we factor in even a quarter of the tax buoyancy experienced last year. The Department of Finance knows well that the predictions again will be a significant underestimation of the tax yield.

Regrettably, the Minister has chosen a different route, a route designed to featherbed the high earners in society, a route calculated to boost the profits of the banks and halve the yield from capital gains tax, a route which means no hope for the long-term unemployed and, not least, a route calculated to infuriate the hard-pressed PAYE sector whose expectations have been dashed and whose mood will not be improved by more of their hard-earned money being transferred to farmers whose contribution to the tax take continues to decline.

I understand I have unlimited time and wish to share some of my time with Deputy Higgins.

I regret that is not possible under the standing order. Only a spokesperson for each of the parties in Opposition may speak now.

I appreciate the difficulties any Minister for Finance must face when drawing up a budget. There are so many competing and conflicting demands that the task can be an unenviable one. However, on this occasion the Minister for Finance is to be envied. We are constantly told the coffers are awash, that we have never had it so good, that never has a Minister enjoyed such latitude on budget day. In this budget the Minister had a real opportunity to assist the long-term stability of the economy and to ensure the increasing and unprecedented prosperity was divided in a socially equitable way. It presented an opportunity to improve people's quality of life as opposed to their standard of living and to create an ecologically sustainable society. Sadly, the budget is a lost opportunity.

The Celtic tiger continues to roar but tigers are an endangered species and the Asian economies with which we are sometimes compared are suffering from a virulent form of feline flu which may yet have international consequences. There are many dangers on the horizon for which we must prepare. The milch cow of European Union funding will decrease to a major extent and our fellow Europeans will no longer tolerate our tax practices which they regard as opposed to fair competition. In this situation, will inward investment continue to be as strong? There are also problems associated with our involvement in EMU now that Britain will not participate in the medium term. These problems have been conveniently glossed over by the establishment political parties but it is time we had a proper and frank debate on them.

The budget fails to address these problems in a meaningful way. It appears we have not learned the lessons of the past. This is the 20th anniversary of the Fianna Fáil give-away budget which did such untold damage to the economy and society. We see the same inclinations in this budget. It is a crude, populist budget which lacks vision and panders to the comfortable voting class, vested interests and paymasters of the establishment parties. It seeks to continue the myth that we have a successful economy. For whom is the economy successful? Is it successful for the 30 per cent of the population who continue to rely on social welfare payments? Is it successful for the long-term unemployed who are surplus to our economic requirements? Is it successful for the beleaguered PAYE worker?

The budget's social welfare package seems on the surface to be very generous, yet when one looks closely at what social welfare recipients will receive, one sees they will be given eventual increases in excess of inflation but below the rate of economic growth, meaning they will slip further behind in the prosperity stakes. The additional expenditure for the elderly is to be particularly welcomed but even the Minister must admit that this sector of our society needs to be given much more before it can even begin to catch up with the wilder excesses of the Celtic tiger.

Likewise, added expenditure on health is needed to deal with the problems created by years of under-investment. The Minister made encouraging noises in relation to child care but it remains to be seen whether the money allocated will deal with the full scale of the problem in this area. These problems are most acutely felt by voluntary groups who lack the resources to fully comply with the Child Care Act. It seems that children are once again seen but not heard in the budget, with the idea of a child tax allowance thrown into the Minister's waste paper basket. Other carers have waited patiently for easier access to social welfare allowances and fairer treatment through the tax system, but what has the Minister offered them? He has offered them a bus pass, and this when the wealthiest sports organisation, the GAA, has been given £20 million. This is a scandalous decision. The Government could not care less about carers.

Cynically cutting the top rate of income tax will, of course, be welcomed by the Progressive Democrats' wealthy but diminishing electoral base. Reducing the top rate of tax by 2 per cent is socially inequitable. Tax allowances have been adjusted only marginally in a way that does little to stop people from being taxed or from moving onto a higher rate of tax at too low a level of income. While the increase in the exemption limit for the payment of PRSI is to be welcomed, a disproportionate amount of the tax wedge is still being borne by low and middle income earners. The Government cannot speak about tax equity or its concern about tax evasion when it has refused to ask the Moriarty tribunal to investigate the Ansbacher accounts.

The Green Party welcomes the concept of a minimum tax liability. However, the Minister's proposals on business taxation are reckless in the extreme and carry the risk of being rejected by the European Commission. Sums based on this political calculation must be thrown open to doubt. The moves in regard to inheritance tax are welcome but the Minister has failed to address the discrepancy which applies to long-term cohabiting couples.

Real tax reform means changing the entire structure of the system, not just an annual updating and juggling of allowances, bands and rates. It means a determination to eliminate the insane traps and anomalies which exist, especially at the cross-roads between the tax and social welfare systems. It means recognising that the world of work has changed radically and devising new and appropriate structures. The case in favour of tax reform has been well made and is widely accepted. If there is not real tax reform now when will we get it? The fate of hundreds of thousands of people has been on hold for years while we have been waiting for the resources to rectify the system.

My party has long advocated the integration of the tax and social welfare systems through a basic income scheme. It is a matter of shame for most of the parties represented in the House that they have to be dragged kicking towards the notion of a basic income for all. As in the case of environmental matters, it has been left to the Green Party to promote this sane and sensible alternative. It is also shameful that research on a basic income and how to introduce it has been left to a body like CORI. However, the work has been done and the blueprint for introducing a basic income scheme has been produced. A basic income scheme is feasible and the resources to fund its introduction over three years are available. Why has such a scheme not been introduced?

The Minister's environmental budget package is insulting in the extreme. There are so many conflicting messages coming from the Minister on environmental issues as to defy belief. He is willing to support alternative energy projects but has reduced vehicle registration tax and added to the growing traffic gridlock in towns and cities. He has increased excise duty on leaded and super unleaded petrol but has ignored diesel which is the most carcinogenic fuel. He has weakened the promise to consider fiscal means to bring about environmental improvements. When it comes to environmental matters the Minister is either very cynical or extremely ignorant.

Why has the Minister not put forward measures to encourage a shift from private car use to public transport? This move could be encouraged through the introduction of differential rates of vehicle registration tax, excise duty and VAT. Such incentives are vital as cars contribute so much extra greenhouse gases. Why are there no proposals to reduce or eliminate direct taxes on insulation for homes? There is huge scope for job creation through improving environmental standards.

I cannot support many of the measures in the budget as they accentuate the shift to the rich. The Government has failed to avail of this rare opportunity to frame a moral budget which benefits the weakest in the community. There are already new budgetary constraints on the horizon which will make it difficult to introduce reforms in the future. The budget is a lost opportunity for us all.

Deputy Higgins (Dublin West) rose.

In accordance with the Order of the House, the sitting will be suspended for 30 minutes.

(Dublin West): Deputy Gormley represents the independent and small party Deputies at Whips' meetings. It was agreed that I would be given some of his time.

The Order of the House is that a spokesperson for the Fine Gael Party, the Labour Party, Democratic Left and the Green Party would be allowed to speak.

I understood that I would speak for 15 minutes and that Deputy Higgins would have five minutes.

There was no provision in the Order for sharing time. The debate was confined to a spokesperson for each of the four parties in Opposition. Under Standing Order 84 a party is defined as having two Members. I regret that it is not possible to allow Deputy Higgins contribute at this stage. However, he will have an opportunity to contribute during the debate on the Financial Resolutions.

(Dublin West): I appreciate that. However, do you envisage that I could be afforded five minutes when the debate resumes at 8.00 p.m.?

There will be an opportunity at that stage for Members to make a contribution, but the contributions must be confined to the Financial Resolutions. There will be an ongoing debate on the budget in the coming days when there will be ample opportunity to speak.

I also wish to address the issue of the budget as presented this afternoon. My position is identical to that of my colleague, Deputy Higgins. It is worth noting that we are regarded as recognised leaders of our respective parties, irrespective of the numerical strength of representation, and I wish to be accorded an opportunity to address the substantive issues of the budget.

I appreciate the point made by Deputy Ó Caoláin, but under the order of the House the debate is confined to the leaders of the four parties to which I referred. In the debate on Financial Resolutions and in the coming days there will be ample opportunity for Members to make a contribution on the Minister's statement.

Sitting suspended at 7.35 p.m. and resumed at 8 p.m.
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