I refer to the provision in the budget for the farming population which falls far short of what was promised and expected. The Government must be seen as anti-farmer and not pro-farmer.
Financial Resolutions, 1998. - Financial Resolution No. 9: General (Resumed).
Debate resumed on the following motion:
THAT it is expedient to amend the law relating to inland revenue (including value-added tax and excise) and to make further provision in connection with finance.
(Minister for Education and Science).
Come off it.
The Minister of State, Deputy Molloy, should look at his record. When I was in Government I heard repeatedly that our Government was anti-farmer.
The Deputy should have applied for the money for headage payments to be negotiated.
The Government dropped a considerable amount of money for headage payments.
It would be helpful if we could proceed with the debate without interruptions.
It is easy to encourage the Minister of State to respond.
The Deputy put his foot in it. Farmers were delighted with what they received yesterday.
I am not aware whether the Progressive Democrats have a policy on agriculture, but let us look at Fianna Fáil's election promises in that regard. Fianna Fáil guaranteed to continue the installation aid scheme, but as soon as it got into office it did away with it. It was expected that provision would be made in the budget but it was not. There was only enough provision to ensure that farmers who have already qualified will be paid. As a result young farmers are totally disillusioned with the Government.
Some months ago when I was on that side of the House, I answered questions about the control of farmyard pollution scheme. Fianna Fáil gave a firm commitment that the necessary financial resources would be provided but, again, there was no mention of it in the budget. The same is true of the dairy hygiene scheme. There is little in the budget for farmers. They know it, and I am sure it will not be long before we see them protesting on the streets again.
The continuation of the resort renewal scheme is a positive move because a number of resorts have not fully capitalised on the scheme. Initially there was a slow take up because it was not properly advertised and, therefore, not understood. There were also problems getting planning permission. I am delighted the scheme has been extended. Now it can reach its full potential in those resorts that have not capitalised on it. However, some of the restrictions relating to capital allowances could affect the scheme. Changes were made last year which tightened it up, and further changes were made this year. Such schemes are sometimes abused. However, if this scheme is to be successful, every incentive must be given to encourage people to invest. Yesterday the Minister for Tourism, Sport and Recreation, Deputy McDaid, promised to carry out a review of the scheme. Either he was not aware at that stage that the scheme would continue or the Minister for Finance kept his cards very close to his chest. Perhaps he would look again at the effects on the scheme of last year's and this year's budgets.
I welcome the provisions relating to the rural renewal scheme. A few weeks ago in a priority question to the Minister for Finance I called for just such a departure. It is the start of what I see as targeted incentives for rural areas. I am personally aware of people living in rural Ireland who have invested in apartments in areas designated for urban renewal in Dublin, Limerick, Cork, etc. The result has been a major outflow of funds from rural areas. If we are serious about preserving rural areas and a rural economy, it is important to provide incentives for people to invest their money in those areas. The Minister did not expand on his proposals and they have yet to be confirmed by the EU Commission. Nevertheless it is a welcome departure and something we on this side of the House fully support.
Apart from indicating the upper Shannon area and how many counties and communities would be involved, the Minister did not say whether the scheme would be area based or project driven. No doubt we will receive the details in due time. I understand it is being run on a pilot basis and I hope it will be extended to other parts of the country, especially where the economy is under pressure because of the closure of small businesses resulting in local villages and towns being denuded of population. This is an initiative I certainly welcome. It was strongly recommended by an expert group which, as junior Minister at the Department of Agriculture, Food and Forestry, I set up to examine the whole area of rural development. I am glad that it is now being tried at least on a pilot basis.
Another promise made by Fianna Fáil before the election related to post-leaving certificate students. The Minister for Education and Science, Deputy Martin, was quoted regularly in the papers promising that if Fianna Fáil was returned to office it would grant aid post-leaving certificate students. We have seen no evidence that this is going to happen. This is another large section of the young population of Ireland who are very disillusioned because of this empty promise. I hope the Ministers of State on the other side of the House will relay what I said to their respective Ministers because this is something that will become very contentious in the near future.
To recapitulate on the budget, it was obviously going to be a good one. Never was a Minister for Finance in a better position to deliver right across the spectrum. However, the taxation provisions in this budget are very much weighted in favour of the upper end of the spectrum rather than the most vulnerable, the unemployed, the low paid and people on medium incomes. People earning £50,000 and over will gain over £1,000 whereas people earning £15,000 will gain up to perhaps £400. That is not good enough. It should be the other way around. The individual on £15,000 should be gaining the £1,000 and the people earning £50,000 — and most of us here are in or near that bracket — should be getting a lot less. Whoever is Minister for Finance next year should right that injustice.
I wish to share my time with the Minister of State, Deputy Molloy.
Is that agreed? Agreed.
I welcome the opportunity to contribute to the debate on the budget introduced yesterday by the Minister for Finance. Everyone is aware at this stage of the principal elements of the budget so I will not repeat what the Minister said. However, it is important to point out the economic background to it.
The budget has been presented against the background of a period of unequalled buoyancy in the domestic economy. The outlook for next year remains favourable. This will be reflected in employment with the number of people at work projected to increase by 48,000. Unemployment is expected to fall by about 15,000 as continued high rates of labour force growth take up a significant proportion of the new jobs created.
The reasons for our continued success story are the subject of considerable interest and discussion at home and abroad. It must be acknowledged that these reasons are complex and interrelated, but that the principal elements include the following: prudent management of the economy, the consensus approach in successive agreements with the social partners, the reduction in the debt burden, an increasing labour force, investment in education and training over a number of decades, strong foreign direct investment, the contribution of EU Structural and Cohesion Funds and reform of tax regimes for individuals and business. The unifying theme of these elements is clear, a focus on policies which deliver long-term benefits. Contrary to criticism in the House, the budget has maintained this longer term focus.
The economic progress to date has been welcome but we need to consolidate and build upon it. The Minister outlined yesterday what we must do to achieve this. We must ensure we create the right conditions to sustain strong economic growth so that more people get jobs, take steps to ensure that any inflationary pressures are contained and prepare for the problems we face in the decades ahead. The Government's main fiscal aims for the next five years, which have already been outlined in An Action Programme for the Millennium, are undoubtedly focused on these objectives.
We are, by any estimate, at the high point of the economic cycle. It is, therefore, not only appropriate but necessary that we avail of this opportunity to run surpluses and reduce the debt burden. Our debt remains high. Running a budget surplus when the economy is doing well as at present is the key to reducing the debt. This will put the economy in the best position to meet the challenges of the future.
It is worth considering the key factors which have influenced the budgetary strategy and the main budgetary provisions announced yesterday. The Government's commitment to Partnership 2000 is clear from this budget. The measures announced yesterday, together with last year's budget, mean that the overall resource commitment to reduce personal taxation by £900 million on a full year basis over three years and to spend £525 million on social inclusion and equality measures over three years will have been largely delivered in the first two years of the three year programme.
As the Minister said, we also face longer term challenges in relation to economic and social developments and these are addressed in this budget. It sets out to create the right conditions to sustain strong economic growth so that more people get jobs and to ensure that inflationary pressures are contained. It also aims to position the public finances to address the investment needs of the economy, the post-2000 Structural Funds situation, long-term demographic changes, the reduction of the national debt, preparation for economic and monetary union, the reduction in the tax burden and social inclusion. I will expand on some of these themes.
The economy has benefited in recent years from substantial EU Structural and Cohesion Funding which has boosted investment and added to the capacity of the economy. The economy still has a major infrastructural deficit and further significant investments must be made to correct it and to provide for the needs of a rapidly growing economy.
Against this background, there are compelling reasons to justify continued Structural Funding in the years beyond 1999, despite the narrowing of the gap in Ireland's per capita income vis-à-vis the EU average on account of recent progress. However, the prospective enlargement of the EU will make other demands on the EU budget and there are also demands for restraint in EU spending. While it is envisaged that EU funds will continue to play a substantial role in financing our investment needs, it is unwise to assume that transfers to this country will remain indefinitely on the scale of the 1990s. We must plan for this eventuality now so that we will ultimately be able to meet more of our investment requirements from our own resources while maintaining the fiscal disciplines of economic and monetary union.
Economic and monetary union is now less than 13 months away. Ireland is well placed to be among the founder members in January 1999. EMU will present enormous challenges and great opportunities. In the run up to monetary union, policy must be geared to continuing to meet all the Maastricht convergence criteria. Under the stability and growth pact member states will be expected to keep their budgetary position close to balance or in surplus in normal economic conditions so as to avoid excessive deficits in periods of low growth or recession. Our current economic conditions are better than normal and the case for running a budget surplus in these circumstances is compelling.
The disciplines of EMU are not a matter for public policy alone. All the social partners and all sectors of the economy must play their part in preparing the ground for Ireland's successful participation in EMU. This will primarily require the maintenance of competitiveness and the flexibility needed to underpin strong sustainable economic and employment growth in an increasingly competitive international business climate.
The budget does not seek to put all the additional resources generated by higher growth into rapid debt reduction. While making substantial further progress on this front, it also allocates resources to the investment needs of the economy, the continued reform of the tax system and the improvement of social services. The clear conclusions to be drawn from consideration of our longer term needs are that it is now appropriate to adopt more ambitious budgetary targets than have been achieved over the last decade.
The targets for the 1998 budget are clearly framed to enable us to address longer term needs from a position of financial strength. They are a current budget surplus of £1.1 billion, a capital deficit of £1.2 billion, an Exchequer borrowing requirement of less than £100 million and a general Government surplus of 0.3 per cent of GDP. Control of public spending will be central to the achievement of the budgetary targets. The Government is committed to ensuring during its lifetime that the growth in net current expenditure will be limited to an annual average increase of 4 per cent. Controlling current expenditure is a key element of our budgetary and economic policy.
The budget adopts a balanced approach which takes account of the need to improve social inclusion measures while, at the same time, keeping control of public spending and creating an environment which encourages business and investment. This is not an end in itself but a means to an end to provide the resources and the employment necessary for the achievement of our social objectives. It is clear from the debate that all sides are agreed that gaining a job is the greatest anti-poverty weapon of all.
I wish to address the approach in this budget to employment and unemployment. The south-east region, which includes my constituency of Waterford, has one of the highest rates of unemployment in the State. The budget does much for the unemployed and as such will benefit those areas of high unemployment. In the first instance, personal payments to the unemployed, in line with other social welfare payments, are to increase by £3 per week, with the payments for qualified adults increasing by 3 per cent. These increases are well in excess of the forecast rate of inflation of 2 per cent. However, the Government is not satisfied with merely improving the lot of the unemployed.
A very unusual situation has developed in the labour market where a scenario of employers who are unable to fill vacancies is juxtaposed with a level of unemployment which is still very high. The Government is aware that the labour shortages which are now evident in certain areas could very quickly lead to major problems and bring our economic success to a premature end. At the same time the Government realises that the unemployed would prefer to return to work and be able to contribute to and benefit from the current buoyancy of the economy.
In order to tackle these two interrelated problems, the Government has put forward a package which will speed up the task of getting the unemployed, particularly the long-term unemployed, into the jobs which are now waiting for them. The back to work allowance scheme, which has been very successful in assisting the long-term unemployed to re-enter the workforce, will be expanded by 5,000 places in 1998, bringing the total on the scheme to 27,000. The community employment scheme is being reviewed in the light of recent labour market developments but, as an interim measure, 1,000 additional places will be provided on the part-time jobs option and a further 1,000 places will be provided on the jobs initiative.
A new two pronged initiative aimed at the long-term unemployed is being introduced as part of the tax package. The first prong will provide a direct benefit to the long-term unemployed person who returns to work in that he or she will receive an additional tax free allowance of £3,000 plus £1,000 for each dependent child. This allowance will continue for three years, being phased out over that period, so long as the person remains in employment. The participant will also retain his or her secondary benefits. This is a very imaginative approach.
The second prong is intended to make it more attractive for employers to hire the long-term unemployed. This allows employers a double tax deduction for a three year period in respect of the wages paid to the former long-term unemployed person. In line with these measures the Government has tackled the poverty trap and the unemployment trap by reducing tax and PRSI at the lower end of the scale and also by the completion of the process of calculating family income supplement on a net basis. This will make lower paid employment more attractive than remaining on the dole.
I wish to refer to the other department under my responsibility, the Office of Public Works. I am pleased to inform the House I have been carrying out a re-evaluation of Office of Public Works' scope of operation in the context of the office's strategic plan. At the core of this process is the establishment of six new business units covering the architectural services, engineering services, project management, property management, property maintenance and procurement. Each business unit will operate independently and will be accountable for its individual range of customers, budgets, costs, targets and performance evaluation. The plan envisages the establishment of commercial management systems to measure the performance of each business unit in comparison with the best practice in the private sector.
The measurement of added value which Office of Public Works delivers in its services over and above the strictly commercial criteria will form part of such a system, as will the redefinition of some of the individual business units with a view to improving efficiency and customer value, the development of customer care and a quality management approach and the development of the office's staff and organisational systems. I am pleased to inform the House substantial progress has been made in this regard. A practice management system has been established for the architectural service and its first accounts are due in 1998. A project management plan for the engineering services division has been completed and a practice management plan is due for completion in 1998. A project management plan for the project management business unit is due to come into operation next year. A review of the procurement operation is due for completion in early 1998. I am fully committed to ensuring these innovative and essential measures will be delivered.
I look forward to keeping the House fully informed of further major developments in 1998 which will reflect the transformation of the Office of Public Works into a customer focused and commercially minded operation. The year 1998 will be a very exciting one for my office in the context of major upcoming projects. As I announced recently, Government approval has been given to proceed with the Leinster House 2000 project which will provide new accommodation for the Oireachtas on the former College of Art site. Other project works for 1998 include the National Library, phase II of the National Museum at Collins Barracks and the redevelopment of the Department of Education site at Marlborough Street as a millennium project.
This budget places us firmly on the road to EMU membership. The emerging budgetary outturn for 1997 is comfortably within the targets contained in the convergence programme 1997 to 1999. The budget is based on a clear strategy which aims to consolidate and build on our current economic success. It will achieve this through a policy of personal tax reductions linked to wage moderation designed to encourage investment and job creation. The budget rewards effort and provides for our key investment needs while also promoting social inclusion. It provides in particular for specific measures to facilitate the return of the long-term unemployed to employment, which has particular relevance in the high unemployment area in Waterford in my constituency. The improving economy will generate more jobs and additional resources for investment and will allow us to make progress in taking care of those who are dependent on the State.
This is the best budget I have seen in my 32 years of membership of this House. I am very proud the partnership Government, my party, the Progressive Democrats, and Fianna Fáil, has proposed this budget to the House. It is a good budget for PAYE workers, pensioners, people with disabilities and the unemployed who are trying to get back into the workforce. For the working people, yesterday's budget provides a real reduction in the burden of income tax. The figures speak for themselves. A married couple with two children and one earner on £11,000 per year will be better off by £10 per week. A married couple with two children and one earner on £13,000 per year will be better off by £12 per week. A single person on the average industrial wage of £15,000 per year will be better off by £8 per week. The two parties in this partnership Government promised real tax reform and we have delivered on that promise.
Yesterday's budget was the best budget ever for pensioners. The increase of £5 per week is the most generous ever and the Government is well on course to achieve its target of £100 per week for non-contributory old age pensioners during the lifetime of this Administration. We substantially increased the special tax relief available to pensioners by raising the exemption limits. We promised a new deal for pensioners and we have delivered on that promise.
The budget recognises the special needs of those with disabilities. An extra £7 million is provided for those with mental handicap and an extra £3 million for those with physical and sensory disabilities. Taking into account the extra money already allocated in the Book of Estimates, total funding for disability will increase substantially in 1998. In addition, the Government is committed to implementing the recommendations of the report of the Commission on the Status of People with Disabilities. We promised a better life for people with disabilities and we are delivering on that promise.
No budget has done more to help unemployed people get back into the workforce. Apart from reducing income tax, we have introduced a whole range of measures, all targeted to benefit the unemployed. There are 5,000 extra places on the back to work scheme, 2,000 extra places on the community employment programme, a special tax allowance for long-term unemployed people who take a job and a special tax break for employers who hire long-term unemployed people. We promised to tackle the issue of unemployment and we are delivering on that promise.
Budget 1998 is a budget for an enterprise society, a budget for an inclusive society. We must promote enterprise if we are to create new jobs, prosperity and opportunities. If we do not promote enterprise we will not have the resources to tackle the problems of social exclusion and marginalisation. This budget will reward work and encourage enterprise. It will underpin Partnership 2000 and ensure the economy maintains its current growth levels for years to come. This is a balanced, fair budget, a budget that seeks to distribute the fruits of economic growth across all sections of society.
In the case of a married couple with two children and one earner on £12,000 per year, the net gain in take home pay, when family income supplement is taken into account, is 5.6 per cent. For a similar couple on £50,000 per year, the net gain in take home pay is 3.6 per cent. The reduction in the higher rate has been part funded by closing off some of the tax shelters which enabled those on very high incomes to reduce their effective tax rate well below 48 per cent.
I appreciate the Opposition must oppose measures, that is its role in a democracy. It should, however, take up some of the criticisms of the budget which it has voiced inside and outside the House in the past 24 hours. Deputy Rabbitte of Democratic Left described the £250 increase in personal tax free allowance as paltry, but that is the same amount by which the Rainbow Government, of which he was a member, increased the allowance in last year's budget. On tax rates, the Government is committed to reducing both rates of income tax. Impressive progress has been made on this front in our first budget, but that approach has been strongly criticised by the Opposition parties. Does that mean the parties of the former Rainbow Coalition are committed to reversing the changes made yesterday? Will they increase the tax rates back to 26 per cent and 48 per cent? If they have the courage of their apparent convictions, that is what they should say they will do. If they think the top rate of tax should be increased to 48 per cent, they should campaign publicly on that platform.
Both Labour and Democratic Left have traditionally taken a principled position on tax issues. I do not agree with their views but I accept their integrity on this subject. In contrast, Fine Gael no longer appears to have a coherent view on tax policy. In September 1996, the party chairman, Deputy Hogan, announced that Fine Gael wanted to cut the basic rate of tax by 2 per cent and the top rate by 3 per cent. Eight months later, during the general election campaign in May, Fine Gael wanted to leave the basic rate unchanged but to cut 3 per cent off the top rate. Six months later, their party spokesperson, Deputy Jim O'Keeffe, stated last Saturday that the party did not want a reduction in either tax rate. It takes some political neck to criticise the Government for cutting tax rates when it campaigned on the same policy six months previously.
Fine Gael has also been highly critical of Government policy on public spending. It claims we are spending too much, but when we give pensioners £5 per week it claims that is not enough. We have given more to pensioners in one year than the Rainbow Government gave them in the three budgets it introduced. Are we spending too much or too little? Fine Gael cannot have it both ways.
Is Fine Gael claiming we should not honour the public service pay commitments it entered into while in Government? Is it saying we should not look after social welfare recipients and give them increases well above the rate of inflation? Is it saying we should not allocate an extra £37 million to health services or spend £10 million on new places on the community employment programme for those who cannot find jobs? If that party really believes public spending is too high, it should have the courage to say where it would make the cutbacks. Otherwise, it lacks political credibility.
Perhaps Fine Gael would like to make those cutbacks in the Department of the Environment. The provision of £453 million for housing in 1998 represents an increase of almost 14 per cent on the estimated expenditure this year and, in particular, reflects the Government's key priority in An Action Programme for the Millennium to a continuing house construction programme by local authorities and voluntary groups. The provision of more than £214 million for the local authority housing programme represents an increase of £40 million, or nearly 23 per cent, on the estimated expenditure for 1997. That will enable local authorities meet commitments on ongoing programmes and fund a programme of 3,900 new starts or acquisitions in 1998 compared with an outturn of about 3,500 in 1997 under the Rainbow Government.
The 1998 provision for local authority housing also includes £20 million for the redevelopment of Ballymun, for which the Rainbow Government provided no funding. That project, including the provision of replacement housing, is estimated to cost £180 million at 1996 prices and to span an eight year period. New housing to replace the existing flat complexes will be the key element in an integrated strategic plan for the social and economic regeneration of Ballymun.
The voluntary housing sector is now a key element of the social housing system, bringing with it many unique and positive features and a more diverse and sophisticated approach to meeting housing needs. I was delighted, therefore, to announce recently significant increases in the level of financial support for a range of social housing measures, including voluntary housing, the shared housing ownership scheme and so on and to secure adequate funding for those improved schemes in 1998.
The main elements in the social housing package include increases ranging from £5,000 to £15,000 per unit in the maximum levels of assistance to voluntary housing bodies under the capital assistance scheme, wider income limits, lower rents, higher unit cost limits and a higher level of ongoing support for voluntary housing under the rental subsidy scheme, increases of up to £15,000 per unit of accommodation in the level of assistance available for voluntary housing schemes on offshore islands and for special grants in major county boroughs, a 50 per cent increase in funding for communal facilities in voluntary housing projects, an increased income limit for the shared ownership scheme, with an increased level of subsidy which will assist shared owners to meet higher house prices, a £5,000 increase in the maximum local authority house purchase loan and an increased income limit. These measures are being implemented in addition to the major increase in funding for the local authority housing programme to which I referred. These changes are significant and I hope they will restore the positive growth momentum which has faltered in the past year or two.
Bearing in mind the lessons of the past, I will do my utmost to ensure the level of assistance available under the schemes remain at a realistic level and are not ignored, as happened since 1995 under the previous Government. I am confident the package will restore reality to the social housing schemes, ensure their expanded use and provide an opportunity for social housing in locations where it had not previously been tempted.
I am also pleased an additional £750,000 was provided in the budget for the Task Force on Special Housing Aid for the Elderly, bringing the 1998 provision for the task force to £5 million, an increase of 21 per cent on the 1997 provision under the rainbow Government. The task force is targeted at meeting the housing needs of elderly persons living alone. Assistance is provided for any works considered necessary to improve their living conditions, which include repairs and improvements to doors, windows and roofs and the provision of water, sewerage and food storage facilities. The scheme is funded by my Department but operated by the health boards, the primary agencies concerned with the well-being of the elderly. They have been able to use the scheme in conjunction with the other services they provide for the elderly, with a minimum of formality and to good effect.
The past 12 months have also seen a number of significant developments in urban renewal, an area for which I have special responsibility. Earlier this year the Government approved the framework for a new scheme along a number of lines. The scheme will come into operation in August next when the qualified extension of the current scheme expires. Under the new scheme, designations will be considered on the basis of integrated area plans prepared for the areas most in need of renewal. Prioritising the areas for which plans should be prepared will be the responsibility of the local authorities at county level. They will also lead the process of preparing plans and consultations with local partners and communities. Integrated area plans will be broadly based and, while they will obviously address issues of physical renewal, they will do so within a broad socio-economic context. As part of those plans local authorities will be required to make a case for the designation of strategic sub-areas. Obviously, this approach to the new scheme will require a significant amount of planning, which is well under way.
Last month I finalised comprehensive guidelines for the new scheme that will assist local authorities in identifying priority areas and in preparing plans for the areas selected. Next week I will hold a seminar for relevant local authority staff to discuss the guidelines and to ensure all those involved are fully briefed on the important differences between the new scheme and previous ones. In the next few weeks I will also discuss incentives for the new scheme with the Minister for Finance in the context of next year's Finance Bill. When the incentives are in place local authorities will be in a position to complete their integrated area plans and submit them for consideration. Once the assessment process has been concluded and decisions on designations have been made, the final pieces of the preparatory jig-saw for the new scheme will have been put in place.
Completing this extensive preparatory process will stand to the new scheme in the long term. It will ensure clarity on the role which physical renewal can play in the wider social and economic renewal of the areas designated. In that way we can secure a better quality of life for those living and working in the areas concerned.
The budget is the first real test of the Government's economic and social priorities. While some of its provisions are welcome, the overall response of most people will be one of disappointment. The Minister has been depicted in various newspapers this morning as a kind of Santa Claus. We all know that in time presents from Santa Claus do not always seem as impressive as on the day they were received and that, even presents from Santa Claus, must be paid for.
I could quote a number of comments in today's newspapers from politicians, trade unionists, economists, poverty activists, religious figures critical of the Minister's approach, but I will pick one from an unlikely source, which honestly and accurately sums up the budget. Mr. Patrick Campbell, group chairman of the Campbell Bewley Group, stated:
In many ways it was a capital-friendly budget and business people will be happy. But there is one thing it has seriously failed to do and that is improve the position of low earners. I think it is a shame for those people.
The budget was produced in unique circumstances and must be judged against that unique background. Never before has a Minister for Finance in his first budget inherited such a favourable financial position from the previous Government. Never before had a Minister to prepare a budget when the Exchequer was literally awash with money and never before has a Minister had so many easy decisions to make.
There is no point in comparing this budget with one five or even one year ago. The economic picture has changed significantly since then. People, especially those at the bottom of the ladder, were entitled to expect that, as a result of the unprecedented economic growth to which they had contributed so much, this budget would have been used to begin the process of redistribution of wealth. Having waited so long they were entitled to believe that the available resources would be directed towards relieving the tax burden on low and middle income earners and significantly improving the position of those dependent on social welfare.
Instead, the Minister has scattered his resources with as much, if not more, going to the well off as to those in need. The top rate of income tax has been cut, corporation tax reduced and capital gains tax slashed, yet more concessions have been introduced for farmers — all measures which, primarily, benefit the relatively well off. It has certainly been pay back time for those who write and dictate the editorial policy of the Irish Independent but for the majority of workers it will be a case of pay as you were.
Over the past 12 months there has been an important debate on the direction that taxation policy should take. The two alternative strategies advanced were to increase the allowances and widen the bands, as advocated by Democratic Left, or to cut the tax rates as proposed by the Progressive Democrats. It is interesting that Deputy Molloy praised the budget. Of course he would do that because, as far as taxation is concerned, it represents the policy of the Progressive Democrats.
As the debate progressed a substantial consensus has emerged supporting the approach advocated by Democratic Left. This not only includes the parties in the Rainbow Government but also the trade union movement, the Combat Poverty Agency, INOU, CORI, NESF and even employer organisations such as IBEC and the Small Firms Association. Deputy Molloy suggested that if one is serious about taxation reform why not propose the reintroduction of the higher tax rates. He knows that this is unrealistic politically. It is not a question of seeking to restore those rates but of seeking to restore the balance between the well off and the less well off. The manner in which tax reforms have been introduced in this budget benefits those who are better off and on higher incomes.
Deputy Molloy produced figures which indicated that, in addition to family income supplement, those on the average industrial wage will gain in the region of 5 per cent. Those on higher incomes of £50,000 would gain about 3 per cent. Of course this is the case. The increase would be less as a percentage of £50,000 than of £15,000. It is misleading to use percentages in this way. The reality is the pound in the pocket. A single person on £9,000 will gain, approximately, £100 per year whereas someone on £50,000 will gain, approximately, £1,000.
The Minister for Finance has chosen to ignore the consensus and has instead gone for the narrow, sectional approach of cutting the rates. During the election campaign we said that, at least, 60 per cent of the available resources should be applied to increasing the personal allowances. Instead, according to my calculations, the Minister has allocated about 26 per cent of the resources available to him for this purpose. Increasing the personal allowances benefits all taxpayers, not just the low paid. However, it delivers the greatest benefit to those on low and middle incomes. It is only when the allowances have been increased and the bands widened that the possibility of reducing the upper rate should be even contemplated.
People argue that the approach proposed by Democratic Left is complicated and that the public can more easily understand a cut in the rate.
Debate adjourned.