Dáil Éireann díospóireacht -
Tuesday, 9 Nov 1999

Vol. 510 No. 3

Private Members' Business. - Income Tax Reform: Motion.

Mr. Noonan

I move:

That Dáil Éireann:

aware of the increasing labour shortages in the economy;

conscious of the deteriorating industrial relations situation in the public sector;

supportive of the re-negotiation of another partnership agreement;

acknowledging that many persons have not benefited from the booming economy,

calls on the Government to announce its commitment to introduce an income tax reform programme which would include the following measures:

the removal of the first £170 of weekly income from income tax;

the extension of the standard rate band to £17,500 in respect of single persons and £35,000 for married persons;

the introduction of a new middle rate of income tax at 35 per cent which would apply to income from £17,500 to £50,000 single, and £35,000 to £100,000 married;

the maintenance of the 46 per cent rate for the top 5 per cent of income tax payers;

the completion of the transfer to tax credits from tax allowances;

the commencement of the integration of the income tax and social welfare systems, and

Dáil Éireann, aware that families with young children need particular care, calls on the Government to increase child benefit to £25 per week per child, for all children under five years of age, and to take steps, as a matter of urgency, which will increase the supply of well-managed, well-regulated, affordable child care facilities.

Fine Gael is committed to social partnership. The industrial peace which has resulted from the various social partnership agreements has made a major contribution to the success of the Irish economy. The widening of the social partnership agreements to include not only pay agreements but agreements on tax reductions, tax reform, improvements in social welfare, health and education and a consensus approach to other social and economic issues has been of great benefit. Fine Gael is particularly committed to Partnership 2000, which we, together with the Labour Party, negotiated when we were last in Government.

Social partnership has widened and deepened the democratic process. The majority of our people now not only have their say on the future of the country when they vote at election time, but they are also represented by one or other of the social partners in the ongoing negotiation process. The inclusion of the voluntary sector and the unemployed has added further to this democratic dimension.

It will be difficult to negotiate a successor to Partnership 2000. Many workers feel that the benefits of the successful economy are passing them by. They believe they are now working harder than ever before for rewards which are not significantly higher than in the past; they complain more about the levels of tax and PRSI than they do about the level of wages; they believe that a small group of people are reaping extravagant rewards from the present economic boom and that an unfair tax system operates to the detriment of the working man and woman.

In primary colours, their perception is correct. I am strongly of the view that the lever which will open the door to a new partnership agreement is a tax reform and reduction package more radical than anything proposed before and certainly more radical than the half-hearted commitment to tax reform in the damp squib published by the Government last week grandiosely entitled An Action Programme for the Millennium. Fine Gael has developed and published a radical tax plan. In tonight's motion we ask Dáil Éireann to call on the Government to commit itself to implement the main elements of that plan. We make this call fully aware that as the sands of time run out for this Government, we on the Opposition benches are likely to inherit the responsibility of implementing any agreement negotiated in the current round of talks with the social partners.

The proposals Fine Gael is putting forward focus on the needs of taxpayers and the needs of the economy, and are founded on a number of principles. First we want to introduce a fair and equitable income tax system, where the burden of income tax is significantly reduced for low paid and middle income taxpayers. A fair share of the resources available to the Exchequer should be given back to those people whose hard work has contributed most to the current prosperity.

We must increase the number of persons available for work. The greatest threat to growing prosperity comes from a shortage of workers. There are vacancies in every sector. The hotel and catering industry has vacancies posted in every town and village in the country. The building industry is competing site by site to bring in skilled workers. The IT sector is running out of workers, especially at the high level end. The financial services sector is also experiencing shortages.

One of the best examples of what is happening has arisen in my constituency, where Dell, which has given good employment for many years, is involved in a major expansion programme. Last week it brought 150 workers from Malaysia. It set up two prayer rooms in the factory so that these workers, who are Muslim in faith, can turn toward Mecca when they are saying their prayers in the plant. The exotic detail gives an impression of the skill shortage and how far the company will go for workers. It is planning to bring in 200 people from the plant in Scotland, which does not have the same level of orders. That is after bussing people from south Kerry, Fermoy, Cork city and north Clare to Limerick city. They have run out of assembly line workers.

The greatest threat now facing our economy – the Minister shares this perception – is that the country is running out of workers. If that happens the boom will not continue. If the country runs out of workers, there are only three sources of additional workers. We must move more people from welfare to work, attract into the labour market those women who are now working at home and include more immigrants in the labour force, whether they are young people who live overseas, those from EU countries availing of the right to freedom of movement or people from even further afield. There are no other options.

The ability to attract workers is sensitive to the tax system. If we remove the low paid from the tax net to ensure they have a living wage, there will be further encouragement to move from welfare to work. By dramatically reducing the number of persons who pay tax at the higher rate, we can also increase the labour force, so that people on low and middle income pay tax at the standard rate only and women who are at home are encouraged to rejoin the labour force. We can also ensure that emigrants who wish to return to work in Ireland are not discouraged from doing so by significantly higher tax regimes than they would experience in the countries where they cur rently work, particularly the United States and Britain.

I will deal now with the proposals Fine Gael is putting forward. Our first proposal is that all those up to the level of the minimum wage should be removed from the tax net completely. Their first £170 of income per week should be exempt. It is invidious that the Government proposes to introduce a minimum wage next year of £4.40 per hour but to tax half of it at the same time. It makes no sense to decide on a policy which says that to give people enough to live, it is necessary to legislate for a minimum wage and then to tax it. I am calculating the minimum wage on the basis of a 39 hour week at £4.40 per hour. The exemption amounts to approximately £170 per week. However, in our progressive tax system I am referring to the removal of the first £170 in income from the tax net for all workers and not only those on the minimum wage. This should be done through increased tax allowances expressed as tax credits and by introducing a new proposal which I call an "earned income tax credit".

For many years, until the last budget, the PAYE allowance stood at £800. Governments were reluctant to raise it above this figure for two reasons. First, it only applied to PAYE workers and if it was significantly enhanced the Minister for Finance could have faced legal action from self-employed persons who would not receive such an allowance. The second reason was that in the allowance system which prevailed if one paid tax at the top rate, 46 per cent, the benefit of an increase in the PAYE allowance would be much more significant than at the standard rate. Governments were also reluctant to increase it because it was introduced in the first instance to allow for the fact that employees incurred expenses going to work and at work and PAYE workers generally pay tax on everything. They did not have the tax avoidance systems or the perks which were enjoyed by taxpayers elsewhere in the economy.

The Minister increased the PAYE allowance in the last budget from £800 to £1,000 and turned it into a tax credit which is only enjoyed at the standard rate. There is great merit in increasing it and Fine Gael proposes an increase to £3,600 to be paid by way of tax credit of £864 for all taxpayers. We also propose that the single person's allowance should be raised by £1,000 and that of married persons by £2,000. The move from the standard rate of tax to the higher rate kicks in at an income level which is much too low. At £14,100 every nurse in Ireland even before the strike, paid tax at the higher rate. Every bus driver in Dublin probably pays tax at the higher rate; they certainly do if they are single. If people are to be encouraged to return to work, especially married women, this must be increased significantly.

When a woman is deciding whether to stay at home or return to work she is only concerned with the higher tax rate because her spouse has already consumed on any reasonable income all the allowances and the entire range of the standard rate band. The effective range of tax for spouses, who are generally women, deciding to go back to work is 46 per cent plus PRSI and its range must be extended dramatically. We propose that it should be extended to £17,500 and £35,000. This figure is not plucked from the air in an arbitrary fashion. The average industrial wage is £15,800 while the average wage is approximately £17,200. The CSO is not as precise with the average wage as it is with the industrial average wage. It is reasonable, looking to the future, that people on the average wage or less should not be liable to the higher rate of tax.

Fine Gael also proposes that a new 35 per cent rate of tax should be introduced. Taking one or two points off the top rate meets the needs of the economy. A new rate of tax is needed to apply to a tranche of income which most people returning from abroad or most women returning to work, if on a joint income, would experience. The new rate should extend to single people earning between £17,500 and £50,000 and married persons earning between £35,000 and £100,000. When these proposals were published, people asked whether the higher rate should apply to people earning an average income of £100,000.

The thinking behind the proposal is that, according to Forfás, there are 190,000 people abroad who would be prepared to return to Ireland. Many of them are single and in their present places of employment they enjoy salaries of between £40,000 and £60,000, especially those who work in the IT and financial services industries. If something serious is to be done about a lower rate of tax, such as a 35 per cent rate, the upper limit must be £50,000 for single persons if we are to attract them back into the economy. As a result of the Murphy case, our interpretation is that figure should be doubled for married persons. The thinking was not to pitch it at £100,000 but the figure is a consequence of pitching it at £50,000 for single people. However, if the figure is any lower than £50,000 for single persons, it will not have the effect of attracting people back from the US or the UK where tax rates are much lower than in Ireland.

Fine Gael also proposes that the integration of the tax and social welfare systems should begin quickly. As a pilot project, the Minister should first try to integrate the family income supplement in the tax system. The full value of certain allowances, such as the incapacitated child allowance, the dependent relative's allowance and the blind person's allowance should be maintained if the Minister changes these to tax credits in the budget. They will have to be raised to the point where at least there is no loss to the recipient. The same applies to exemption limits which must be raised significantly, especially for pensioners.

We also propose that child benefit should be increased. It is the most effective and equitable way of providing families with children with extra income. It should be increased to £25 per week in respect of all children under five years. Fine Gael is conscious that many women who want to return to work are prevented because well regulated, managed and affordable child care is not available. Our proposal to increase child benefit will significantly help families with children under five years.

However, there is also a supply problem which hits all families regardless of their level of income. Even when parents can afford child care, quite frequently the facilities simply are not available. There is a huge shortage of child care places and the Government must also address this problem, not just for the good of children and to facilitate parents, but for the sake of the economy and anyone with an interest in maintaining economic progress. Child care is now not only a family and social issue, but is one of the foremost economic issues facing Ireland because women are driven from the workforce as a result of the unavailability of affordable child care places and Ireland is totally out of line with its European partners.

Fine Gael's tax proposals will cost approximately £2 billion. The child care proposals will cost an additional £225 million and sums of this magnitude are big when one considers them from an historical perspective. However, they can be afforded over the lifetime of a wage agreement which is negotiated on the premise that moderate wage increases are accepted in exchange for strong tax packages and a number of social objectives which can be attained. Everything is relative and the budgets of 1997, 1998 and 1999 spanning two Administrations reduced income tax by £1.5 billion. Despite that reduction income tax receipts increased from £5.22 billion in 1997 to an estimated £6.25 billion for 1999. Not alone did the two Governments give back £1.5 billion, they collected £1 billion extra in income tax alone.

However, what appears to be big is not so when one is dealing with underestimation of buoyancy of income tax year after year. Some £1 billion more is being collected now by way of income tax than was collected three budgets ago, even though £1.5 million has been given back. It is not unreasonable to talk in billions and certainly adoption of our proposals will not eliminate the budget surplus. There will be three budgets over the next two years. Fine Gael in Government would negotiate moderate wage increases in return for a radical tax package along the lines of our proposals.

In its programme for Government, the Government promised that 80 per cent of taxpayers would pay tax at the standard rate only. At the time the promise was made 60 per cent of taxpayers paid at the standard rate but 40 per cent paid at the higher rate. At present 44 per cent pay at the higher rate and 56 pay at the standard rate only. The Government, rather than progressing to deliver on its commitment, has galloped off in the opposite direction. In its new programme for Government, published last week, it has virtually abandoned its position with a new watered-down promise that it will ensure that a large majority of taxpayers will be subject to no more than the standard rate. Will the Minister say what exactly is meant by a large majority of taxpayers, other than that it is a formula of words to welsh on the commitment given in the original programme.

The Government frequently refers to the record tax relief it has delivered in its previous budgets. The amount given – when you look at the outturns – after buoyancy is included at the end of the year, is significantly less than what it appears to be on budget day.

It is worth remembering that the labour force has increased by about 40 per cent in the past five years or so. Consequently the number of taxpayers has increased by about 40 per cent. Any relief which the Minister gives on income tax on 1 December will be spread over about 400,000 additional people above what it was, say, five years ago. When we speak of record tax packages of £700,000 or £700 million, they are records but are spread over a record labour force and the butter is spread much more thinly than it appears. That is why when people are paid in May they are always disappointed with the tax relief in the budget and they will be disappointed again this year. Even if the Minister delivers between £700 million and £800 million they will still be disappointed because of the numbers involved and the Exchequer is taking in more and more proportionately every year. A more radical approach is needed. The taxes system needs to be changed along the lines the motion proposes.

I recommend it to the House.

Mr. Belton

I welcome the opportunity to support the motion and to congratulate Deputy Noonan on his imaginative proposals. It is worth noting that few commentators have opposed Deputy Noonan's document which has been well thought out and costed. It contains practical proposals to deal with present trends.

I presume that a year after the Minister for Finance, Deputy McCreevy, announces the budget on 1 December, we will learn it is so much ahead of target. I often wonder at the reasons for this. I am aware of the upturn in employment and of buoyancy in the economy. Perhaps some of the proposals in the Fine Gael document will continue that trend. People will work if they get the opportunity. On the other hand there is not any Member here who has not had people come to him and say they would like to take on a job but in doing so would lose certain benefits. There is nothing wrong with people having those benefits but when the State takes away the incentive to employment and a contribution to society and the well-being of that person there is something wrong. There is always a cry for people who are on the borderline of poverty etc. who need State benefits and who, for one reason or another, are unable to work but for those who are able and willing to work the State should not place barriers in their way. The proposal that the first £170 of weekly income be exempt from tax is a start and a step in the right direction. I hope the Minister will include those type of proposals in his budget. There must be an incentive to work. Nobody likes paying tax.

On Sunday evening the Tánaiste appeared on television – a preamble to Glenroe – to say that tax would be reduced and that was what she wanted to see in the budget. Is there anybody in Ireland who does not want to see tax reduced in the budget. I have yet to meet someone who does not want a tax reduction but it must be done in a practical way. The Fine Gael party has always stood for a good balance in tax right across the board. This is the opportunity for the Minister to do something positive

I compliment Deputy Noonan. Very few commentators gave a negative response to the document put forward by Fine Gael and Deputy Noonan. I urge the Minister to consider some of its proposals in the budget. I wish the Minister well. I thank him for the rural renewal scheme which is up and running. There is a good response to the scheme in my county and constituency. The Minister resisted the pressure and got it through.

Mr. Stanton

I congratulate my colleague, Deputy Noonan, on bringing this motion before the House. It is an imaginative, radical approach to taxation and is what is needed at this time. Its attractions are the benefits to the economy, which he outlined, all of which are badly needed. We have not ever had so much money in the economy. That has its own dangers, one of the greatest of which is that we are running out of workers. This motion is designed to further stimulate the economy and keep it on track.

I met a couple recently who told me they could not afford to have children because of their high mortgage. They also had a lodger who was helping to pay the mortgage. Child care is extraordinarily expensive. This is a major problem right across the economy. I appeal to the Minister to look at this issue. It is a scandal that many couples cannot afford to have a child. That is serious. That people on a minimum wage should be exempted from taxation is a sensible approach and one with which I agree. We cannot try to attract people into the workplace and say they will be taxed. That definitely makes sense.

There is a notion that on reaching the age of 65 or 66 a person has to retire. Many Members have reached that age and have yet to retire. Older persons should be encouraged to remain on in the workforce a little longer if they so wish. This would help to increase worker numbers. The less that is taken in tax the more that is ploughed back into the economy. This motion is going down that road. The position of widows aged 60 to 66 needs to be looked at. Many are suffering needlessly.

Whenever I am asked in schools what I do in this House I reply that we legislate, raise and spend taxes and call Ministers to account. Most can do so. Taxation is a crucial issue. I commend my colleague, Deputy Noonan, for tabling the motion. The proposals contained therein have been costed and would lead to wage moderation and help to avoid industrial unrest.

Mr. Creed

I compliment my colleague, Deputy Noonan, on bringing forward the motion which is timely in the context of the budget which is due to be announced on 1 December. Many previous holders of his office envy the Minister in terms of the position in which he finds himself. There is Exchequer buoyancy which brings its own difficulties as choices have to be made and priority given to specific projects in distributing the largesse given to us by the workforce. To coin a phrase, it is payback time. The motion outlines practical ways in which we can give workers back as much of their money as possible in a focused way to release some of the blockages and clear the logjams in the economy.

While there is unprecendented Exchequer buoyancy, there are also the serious problems of wage inflation, in the private sector much more so than in the public sector – this is often forgotten – escalating house prices and the lack of child care facilities. The most effective and appropriate way of intervening to resolve these problems without conceding on the issue of percentage wage increases which are often less beneficial to those who need help most, is through the tax system.

On child care, if there was an adequate payment available – the motion proposes that child benefit be increased to £25 per week for all children under five years of age – it would release a significant number of people to participate in the workforce.

As Deputy Stanton said, we are often too quick to cast on the scrapheap people in their late fifties and early sixties who still have a considerable amount to offer the economy. Incentives should be offered to facilitate their return to the workforce. They are probably available in greater numbers than those who might benefit from the increased availability of child care facilities. This should be considered given that measures have been taken in the past to facilitate new entrants to the workforce.

Home ownership is now out of reach of a large number of people who might have been expected to put a roof over their heads. They are placing their names on local authority housing lists with practically no hope of securing accommodation. Exempting the first £170 of weekly income from income tax and focusing tax reductions on where they would deliver maximum benefit by empowering individuals to provide for themselves, be it in housing, health care or education, is the way forward.

These are the challenges facing the Minister. The blueprint presented by Deputy Noonan is well thought out, costed and attainable in the context of the public finances.

Mr. G. Reynolds

The Fine Gael income tax document contains radical proposals as we move towards the new millennium. As my colleague, Deputy Creed, said the Minister is lucky to have so much money available. We, as politicians, and the Government in particular have to look at the issue of financial control in a new and imaginative way.

I agree wholeheartedly with my colleague, Deputy Noonan, that one of the greatest difficulties facing the economy is the labour shortage. This can be dealt with in a number of ways. Employers in the private sector in particular are finding it difficult to attract staff. It is imperative that those on low incomes are looked after. I fully endorse therefore Fine Gael's proposal that the first £170 of weekly income should be tax free.

One of the greatest difficulties facing the economy is the vexed question of public service pay. In the 1980s, as the private sector was not providing sufficient opportunities, many had no choice but to seek employment in the civil and public service. The private sector is now providing opportunities but unable to attract staff. The Government should therefore look seriously at introducing an embargo in the civil and public service to ensure the jobs available in the private sector are filled and thus achieve a balance in both services. In 1975 there were fewer than 1,000 administrators in the Eastern Health Board. Today there are more than 11,000. Is it necessary in a country of this size to have that many? It would be more beneficial to spend the money on frontline staff. This is one of the reasons we have had a nurses' dispute. All political parties will have to look at this issue in a more imaginative way. This includes considering the introduction of an embargo in the civil and public service. People would willingly work in the private sector. Employers are finding it next to impossible to recruit staff.

The lack of child care facilities is another serious problem facing the economy. Deputy Noonan's proposal that child benefit be increased to £25 per week for all children under five years of age is imaginative. Many women working in the home are not in a position to seriously consider entering the workplace as they would be unable to meet the cost of child care services.

Along with my colleague, Deputy Belton, I compliment the Minister on introducing the rural renewal scheme in the County Leitrim. It has been successful and I hope the Minister will extend it to the year 2005.

Minister for Finance (Mr. McCreevy)

I will do that after the next election.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann commends the Government for, its progressive economic policies which have resulted in:

–the achievement of rapid economic and social progress;

–the large increases in employment and the significant fall in unemployment, including long-term unemployment, over the past two years;

–the pursuit of prudent and sensible budgetary policies since 1997 which have responded to the country's immediate needs while preparing for the longer-term, and

–its programme of tax reform which has resulted in:

–reducing the burden of taxation on all taxpayers;

–increasing the incentives to take up work;

–removing large numbers of low-income earners from the tax net altogether;

–reducing the burden of taxation, particularly on the lower paid, the aged and widowed parents;

–initiation of major change towards a more progressive system of tax credits, maintaining and improving our competitiveness,

and calls on the Government to continue its programme of tax reform through an appropriately balanced mix of measures in the next and subsequent Budgets.".

I welcome the contribution to the tax policy debate which this Private Members' motion affords the House. While different sides may disagree on the choices to be made in some tax areas, it is helpful to the debate on important policy issues for Opposition parties to set out clearly where they stand and to seek to have these issues subjected to the scrutiny of this Chamber. This is the role of legislative debate and entirely proper to this House. It helps clarify the objectives that are being sought in the public interest, the range of options available, the choices between different strategies, the role of tax-based versus expenditure-based initiatives and the effect of different options on the equity of the tax system. One area in particular which has benefited from open debate, analysis and reflection has been the child care issue, where, at the expense of some criticism, the Government came to the view last year that the issue raised more complex issues than appeared to be the case to many, and required something other than a series of reactive measures.

I know that Deputies opposite have been careful and constructive in their handling of tax policy proposals and I hope they will regard my response in the same light. I suffer under one major disability in this debate in that it is three weeks to the budget and I cannot, nor would I wish to outline tonight what measures that will contain. I am sure the House will understand if I dwell more on what has been done by the Government and the policies we are committed to, rather than outlining specific measures.

The amended motion before the House calls on the Dáil to support the Government in its economic and budgetary policies which have brought such positive results to this country since we took office in terms of economic and social progress, substantial tax reductions, major tax reform, unprecedented employment creation, the incentive to work and greater equity in the distribution of public resources. Over its remaining term in office, the Government is committed to further substantial measures to strengthen and deepen investment in key areas of the physical, economic and social infrastructure, to further reform the operation of the tax system and to the fair distribution of the fruits of economic growth. This is evident in the policy programme review published by the Government parties last week and will be further evidenced in the National Development Plan to be published next week.

It is an unusual and satisfying task for a Minister for Finance to be able to point to such a record of achievement in such a short time and to be able to say to this House that we delivered in large measure on what was promised in the tax area when we sought a mandate from the electorate, and that in so far as commitments remain to be fulfilled, we are determined to do what can be done to achieve these in our remaining term in office.

The economic success story of this economy in recent years is little short of remarkable. The reasons for this success can be traced to a number of factors working in combination. Some of these are due to decisions taken in the 1960s in the area of education, for example. Others are more recent, including the commitment of successive Governments, and this Government in particular, to fiscal stability, prudent economic and budgetary management, continuing social partnership, investment in ongoing infrastructural needs and targeted reductions in the tax burden.

The continuation of economic and social progress is a key aim of this Government. Any examination of our record over the past two and a half years shows that we are achieving this objective. It is worth noting that between 1997 and the end of this year, GNP is projected to have expanded in volume terms by about a quarter; the numbers in work grew by more than 10 per cent in the two years to March 1999; and as a result the unemployment rate has fallen from 10 per cent in 1997 to its current level of 5.2 per cent. Despite this strong growth, inflation has remained under control and has averaged less than 2 per cent over the period. Meanwhile, the burden of Government debt has been reduced significantly and is now among the lowest in the EU. The Government has also managed to reduce the tax burden while making significant investments in our public services.

The performance of the economy has been better than anyone had forecast. Two years ago, a period of slower growth was forecast by most commentators. Growth rates, however, have shown little sign of easing. Official statistics show that the economy expanded by 9 per cent in 1997 and by more than 8 per cent last year. This is the strongest growth, by some distance, of any EU member.

The improvement in our economic well-being is most in evidence in the jobs market. We have made considerable progress in addressing the economic and social problem that unemployment creates. The Government gave a clear commitment to reduce unemployment in the programme for Government when it came into office in 1997, and we have delivered with the number of people on the live register at its lowest level in 17 years.

The fall in unemployment is mainly due to record jobs growth. The latest data indicate that employment increased by more than 96,000 in the year to May 1999, or by almost 6.5 per cent, bringing the numbers at work to almost 1.6 million – the highest level in the history of the State.

One of the Government's main achievements has been the fall in the number of long-term unemployed. The long-term unemployed rate fell to 2.5 per cent in May 1999, less than half the level it was when this Government was elected. It is clear that more people who were excluded from the labour market are now benefiting from the employment opportunities that exist.

The fall in the unemployment rate is a clear indication of the Government's successful policies. However, the Government is not resting on its laurels. The economic progress of the 1990s has given us a new set of challenges. We set ourselves a new set of objectives in the recently announced Action Plan for the Millennium including, among others, to achieve full employment, and effectively eliminate long-term unemployment; to renew and sustain the social partnership approach which has brought such gains over the past 12 years; to complete a substantial reduction in the income tax burden on the average taxpayer; to diminish substantially the incidence of poverty; to introduce a proper child support system; to provide affordable housing for our population and to ease the transport and other infrastructural bottlenecks through a major public investment programme, including public private partnerships; and to achieve a more balanced regional development.

Labour market developments, in particular, point to a shift in emphasis. We now have to deal with the problems of success. The rapid rate of growth is not without its challenges. An emerging shortage of labour is one of those new problems that we now face. We are all aware of a new phenomenon in Ireland – advertisements in shop windows looking for potential employees. It is not too long ago that such advertisements would have generated a queue of enthusiastic applicants. This is just the most visible sign of the way the labour market has changed, and the current pressures it now contains. These pressures are leading to some wage inflation which, unless addressed, will reduce competitiveness and hinder economic growth. Addressing these problems is one of the key objectives of policy.

This Government has responded with imagination to the changed labour market situation. We have taken a number of important steps to address emerging shortages of labour: a skills advisory group was established to provide policy advice on shortages. On foot of recommendations by this group, the number of places at third level for IT education was increased. Taxation changes in the 1999 budget improved incentives for many of the low paid. These changes removed 80,000 from the tax net and provided an incentive for many more to take up the employment opportunities on offer. We also took steps in the 1999 budget to facilitate and encourage the supply of child care places to meet the growing need for such facilities. Ireland has one of the highest levels of expenditure on active labour market programmes in Europe. These programmes have been focused on reintegrating the long-term unemployed back into the labour market. These programmes have been successful. Our new situation presents a challenge in refocusing the objectives of these initiatives in light of changed circumstances.

Our successful performance to date is testimony to the sound employment policies we have put in place. However, efforts will continue to be made by fiscal and other policy measures to increase the supply of labour. As Deputies are aware, throughout my political life I have drawn attention to the issue of the national debt problem, and the consequences for our economic well-being if the public finances are not managed prudently. In the programme for Government, we gave a commitment to eliminate the Exchequer borrowing requirement and to run a budget surplus. These objectives have already been achieved. In 1998 we achieved a budget surplus of 2.1 per cent of GNP. In my budget last December I aimed for a budget surplus of 1.7 per cent and for a debt-GNP ratio of 52 per cent.

The latest indications suggest that 1999 will be another very good year for the Exchequer. This very buoyant performance indicates that there will be a significant improvement on the budget day target for the Exchequer surplus. At the end of September, the Exchequer surplus for 1999 was forecast to be in the region of £1,700 million, exclusive of receipts from the Telecom Éireann share flotation. In general Government terms, the surplus is expected to be about 3 per cent of GDP compared to a budget day target of 1.7 per cent.

This budgetary performance puts us in a good position to absorb the reduction in EU receipts over the coming years, while addressing the infrastructure and other challenges we face. Likewise, it enables us to prepare now for the longer-term costs associated with the progressive ageing of the population. I am determined to continue with these policies and to resist the calls by some to spend all the fruits of economic growth. By saving now and putting funds aside for future pensions or reducing the burden of debt, we are creating the leeway to meet future pension and health expenditures as the population ages without the difficult budgetary restraint that would otherwise be required. We are also preparing the public finances for the inevitable periods of slower economic growth that lie ahead.

The Labour Party amendment to the motion calls for the abandonment of the 4 per cent ceiling on public spending and its replacement by a higher figure which implies spending the increased tax resources as they come in. I do not intend to pursue this course. The Government owes it to the taxpayer to continue to be prudent in the management of its resources while meeting clear and necessary public spending needs. To spend all now would inevitably create problems later on, and would certainly reduce very considerably the resources available for the sort of tax measures in terms of substantially increasing allowances and widening the standard rate income tax band to £20,000 single and £40,000 married for which that party is calling.

We are all aware that the country's infrastructure must be developed. Economic growth has been much more rapid than anticipated while the population has also grown by more than expected. The strain that economic growth is now putting on our infrastructure is becoming very evident. To put it in simple terms – parts of our public infrastructure are finding it hard to cope leading to congestion, delays and some frustration.

These problems cannot be solved overnight. Planning and building infrastructure takes a long-time. I share the frustration of many with the slow pace of the planning process. However, even with a much improved system, it would take a number of years to develop our infrastructure to the extent required. Increasing expenditure in this area has been one of our key priorities. The facts speak for themselves. Capital expenditure rose by more than 20 per cent in 1998 and in 1999.

However, this increased expenditure has to be maintained and built upon in the years ahead. The National Development Plan will set out our investment plans to 2006. There has been much speculation about the contents of this plan and I do not intend to add further to these varied reports. However, I assure Deputies that they will find the plan is an imaginative and creative response to our infrastructural problems.

As I said earlier, the tax commitments of this Government were clearly set out in the Govern ment programme, An Action Programme for the Millennium, and were restated as recently as last week in our programme review. The Government's strategy is to reduce the burden of taxation so as to reward effort, improve the incentive to take up work and maintain and improve competitiveness. It is a five year strategy. The elements of this strategy in personal taxation are: removal of low paid taxpayers from the tax net altogether; reduction of the current income tax rates; increasing the numbers of taxpayers on the standard rate and moving to a full tax credits system.

Budget 2000 will build on the very substantial progress which has already been made in budget 1998 and budget 1999 through the appropriate mix of tax measures. Our fiscal policies will ensure that the foundations which we have laid for future economic progress and social inclusion will be strengthened and secured.

Partnership 2000 promised total personal tax reductions of £900 million over the three years of the agreement as part of the overall strategy for continued economic and social development underpinned by wage moderation. It also promised increases in after tax income for those on the average industrial wage of up to 14 per cent, or close to 5 per cent each year. In fact, over the period of Partnership 2000, total tax reductions have amounted to £1,500 million, of which £1,100 million was delivered in my two budgets. Over the same period, average tax rates have fallen significantly for all taxpayers. It is estimated that the combined effect of tax reductions and pay increases will give increases in net take home pay over the period of Partnership 2000 of 18 per cent to 21 per cent for most taxpayers between 1997 and the end of 1999.

With the £1.1 billion of tax reductions which I delivered in my two budgets – £517 million in 1998 and £581 million in 1999, I have been able to implement the most significant tax reform measures of any Minister for Finance in the history of the State. I have been able to be in the process of reducing tax rates for everyone. I have taken more than 80,000 taxpayers out of the tax net altogether. I have been able to focus relief on those most vulnerable to financial difficulties – those over 65 who have benefited from up to 40 per cent increases in the elderly person's exemption limit; widowed parents, for whom the bereavement allowance has been increased and the long-term unemployed, through the job assist scheme. I have also started the move to a full tax credits system which ensures a fairer distribution of tax benefits to all taxpayers especially those at the lower end of the income tax scale.

In my first budget, I concentrated on the Government's commitments to rate reductions, reducing both the top and standard rates of tax by 2 per cent to 24 per cent and 46 per cent respectively. I also provided for increases in the personal allowances. In budget 1999, I continued this programme of very substantial tax reform. In my last budget, I placed the main emphasis on reducing the burden of tax on the lower paid so as to further improve the incentive to take up work and improve the position of the less advantaged in the community. Budget 1999 increased personal allowances so that a single person on PAYE does not pay any tax on income below £100 per week. I announced the move to a full tax credits system and I introduced the standard rating of PAYE and personal allowances as the beginning of this process.

Tax credits mean that the value of personal allowances is equalised – it is a fundamental and progressive reform of the tax system. A Partnership 2000 working group has been examining the approaches for standard rating the remaining allowances and in budget 2000, I will announce a timetable for completion of the move to a full tax credits system.

I also cut the rate of capital gains tax to stimulate investment – a policy move which, I read, has caught on on the other side of the Irish sea. I made the first substantive and radical change in the area of pension tax policy to encourage pension provision and to give those saving for pensions greater choice and control over their personal pension packages. Here too I have received expressions of interest from overseas observers regarding the pension initiatives which we have undertaken. In my forthcoming budget I intend to address the areas of CAT and the real issues and concerns shared by many Deputies over the growing imposition created by the incidence of this tax on persons who are by no means wealthy or well off.

I said earlier that it is good to see parties putting specific tax proposals before the House for discussion and analysis. There are common goals and some of these proposals which I share, namely, removing taxpayers from the tax net and widening the standard band to increase the entry point to the 46 per cent rate. I too have reflected on whether an intermediate rate of tax between the standard and higher rate might be a useful policy tool. The particular income tax structure of an intermediate rate between the standard and top rate has an appeal on the face of it. However, it raises the issue of whether there should be a special introductory rate, perhaps 10 per cent, for low earners. However, once we go down that road we will soon have the multi-rate structure of the early 1980s which resulted in six rates in 1983-84 – 25 per cent, 35 per cent, 45 per cent, 55 per cent, 60 per cent and 65 per cent. I prefer to keep matters simple – reduce direct tax rates, put more taxpayers on the standard rate and keep the low paid out of the tax net. Achieving this does not require a new rate structure but a determination to pursue a consistent policy of tax reductions over a continuing period – a determination which this Government has shown its two budgets and on which more will be delivered shortly.

One feature of the Fine Gael proposal for a new intermediate rate of 35 per cent is that it effectively cuts the top rate of tax for nearly all those on 46 per cent very substantially and focuses the gains towards the higher end of the income scale. The Labour Party proposal for a widening of the standard band by over 40 per cent also focuses a large element of gain on the upper end of the income distribution. I hope that this effect of widening the standard band is understood and appreciated by those putting it forward. Whether such measures are the appropriate policy response is a matter ultimately for the electorate. As far as the Government is concerned the options of cutting income tax rates remain on the agenda and the level of the top tax rate is a factor which influences work incentives and labour supply in certain important areas. All the relevant aspects of the income tax system as regards the equity and efficiency of the system will be taken into account in framing the measures I will announce on budget day.

The budget will also set out our response to the child care issue. There are many and conflicting demands on this issue. The Government sought to focus on increasing the supply of child care by its tax initiatives announced last year. There is also a considerable demand for assistance to parents in meeting child care expenses. Some pre-budget submissions call for tax relief for such expenses. Others place the emphasis on increases in child benefit or special taxable payments to parents in addition to child benefit. The House will be aware, thanks to the informed debate of the past year, of the relative merits of tax based measures in focusing relief versus the case for universal type payments which go to all. I am not going to add to the debate except to welcome the greater clarity and common sense which have entered this arena since last year.

Finally, to end on a topic where many will say our recent economic prosperity began, I would like to refer to the issue of social partnership. Deputies will be aware that the Irish Congress of Trade Unions recently voted by an overwhelming majority to enter talks on a new national partnership agreement. The talks have now commenced and the Government, for its part, is determined to make every effort on its side to ensure that an appropriate new agreement is put in place. The overriding consideration for all involved in discussions on a new agreement must be the continuation of sustainable and equitable economic growth and prudent economic management. We are anxious to negotiate a new national programme with the social partners on mutually satisfactory terms. One goal is an assurance that there will be industrial peace in the public service and that the pay provisions of the agreement will be adhered to in practice.

Because of EMU, we no longer have an exchange rate instrument at our disposal with which to influence short run competitiveness. Therefore, incomes across the economy will have to be flexible to handle unexpected developments. Pay determination in the public service has to move away from the very rigid system of relativities that has operated in the past. The Government intends to be creative in seeking solutions to the economic and social issues that we face and supportive in the use of budgetary policy so that we can continue to secure the interests and economic and social well being of all those who work and live in this country. I am happy to commend the amended motion to the House.

Mr. McDowell

Amendment No. 2 reads:

To delete all words after "That Dáil Eireann" and substitute the following:

–aware of the fact that people enter the tax net at too low an income and graduate to the marginal rate too early;

–aware of the existence of poverty and employment traps for low income earners, calls on the Government to announce its commitment in advance of negotiations on a new national agreement to:

–an increase in the proposed national minimum wage to £5 an hour and to the removal of this level on income from the tax net altogether;

–the extension of the standard rate band to £20,000 for single people and £40,000 for married couples; but also mindful of the serious inadequacies in many public services including:

–growing waiting lists in the acute hospital sector;

–an unprecedented housing crisis;

–the failure of the Government to meet its targets for overseas development aid;

–the continuing existence of class sizes in our primary schools in excess of 30 students;

–the inadequate funding of public transport;

–lengthening queues for appointments with legal aid solicitors, amongst other things, calls on the Government to abandon its commitment to a 4 per cent ceiling in public spending increases in favour of a figure commensurate with either the rate of GNP growth as outlined in the NESC report or the projected increase in taxation income, whichever is higher.

Perhaps the greatest charge levelled at politics and politicians is that we are all the same. I do not agree with this charge and will outline why in my contribution. The primary choice in politics is how the State's resources are allocated, how much taxes are levied and what level of services are provided. That question could scarcely be more relevant today when the State's coffers are over-full. The Labour Party's response to that question differs from that of other parties. It is a position which seeks to respond to what we believe to be the most significant problem in society, namely, that the public services provided by the State are increasingly inadequate to meet the needs and reasonable expectations of a 21st century, civilised European society. It is not just our physical infrastructure which has failed to keep pace with recent economic growth, but the care we offer the elderly, people with disabilities and children is not commensurate with one of the wealthiest societies in the world.

The period before Christmas is important in any financial year but it is a good deal more significant this year than most. Negotiations on a successor to Partnership 2000 started today, the Government's spending Estimates for 2000 are to be published later this week, the national plan for the next seven years is finally to be published at the beginning of next week and the ministerial financial statement for next year is set for 1 December. This means that in the next few weeks we will make decisions and choices which will seriously impact on how we run the country over the next few years. In a real sense we will be setting the tone for the new century.

In some ways this debate serves a useful purpose, but in other ways it does nothing of the sort. Its primary and perfectly reasonable purpose is to allow Fine Gael to engage in a bit of populism by promising tax reductions to just about everyone. In a sense it is difficult to blame Fine Gael and I do not blame it. It is not easy for an Opposition party to resist the opportunity to write an imaginary cheque for its target voters with a promise of more to come in the future. That said, and I do not say this in a high and mighty sense, I believe it is a temptation we should resist at this time.

The primary purpose of the Minister in coming to the House is to say as little as possible. We are asked to accept a fairly anodyne string of meaningless clichés because it would be wrong to expect the Minister to say anything else in the three or four weeks before the budget. The Minister knows my views on budget secrecy, which is not something I accept as necessary. It is an antiquated system of budgeting. We cannot say the accountability of the Minister for Finance to the House stops a few weeks after the Finance Act as it apparently does under the current system. Currently the Minister apparently feels he is entitled to avoid all questions on taxation policy and budgetary strategy for the rest of the year on the grounds that he is contemplating what to put in to his next budget. In effect it means the Minister is accountable to the House for a few short months between, roughly, December and February and can then retire to the comfortable closet of the Department which will assiduously help him, despite some improvements in recent years, in maintaining as much silence as possible.

As an example in this regard a few weeks ago I tabled a parliamentary question to the Minister seeking estimates of the yearly implications of spending decisions which had already been announced and published by the Government. I got a slightly convoluted but nonetheless fairly direct response from the Department saying that unfortunately the information could not be put together and in any event it would serve "no useful purpose". I can understand why it might be tedious for the Department to put such information together, but it can hardly say the information is not available. I know the Department monitors actual spending on a month by month basis and I imagine it keeps a very careful eye on the implications year on year of spending decisions. I suspect what really happened was that the Department wanted to get on with the serious business of deciding next year's Estimates and did not really want to engage in the business of public debate. That is a feature of the way in which we deal with spending decisions. The Minister will agree that spending decisions are at least as important as the tax decisions on which we focus so much attention.

I wish to turn to the substance of the debate and, in my short contribution, raise two issues. First, in as much as I can I want to dispel the notion that there is a consensus in the House on budgetary and economic strategy. Second, I want to make the case for increased spending on services.

I will set out the elements of the apparent consensus which my party does not accept. I relate these elements in some way to what the Government announced recently in its renewed programme. First, I do not accept the notion that it is necessarily a good thing to run "a substantial budget surplus", the words which are usually used. This can only be done if we continue to run down public services which are already under funded. Second, I do not accept that the Government's public spending, as defined by the Minister, should be limited to 4 per cent in nominal terms at a time when growth is running at twice that figure and tax revenues are increasing by nearly three times that amount. Third, we should not be seeking to pay off the national debt ahead of time.

I was interested by the element in the programme which, if memory serves me correctly, commits the Government to reducing the debt burden to below 40 per cent of GDP before the end of 2002. I am not quite sure how radical a proposition that is. I understand the current figure is about 58 per cent of GDP, or 52 per cent of GNP according to the figure in the Minister's speech. If one allows for growth of 5 or 6 per cent per year for the next few years, the debt burden, assuming we do not borrow any more, will fall in any event to about 46 or 47 per cent. Therefore, all one has to do is use a few bob from privatis ation receipts and the figure will fall below 40 per cent and I am not sure how much of a difference there is between us on the matter.

Mr. McCreevy

And put money aside for pensions.

Mr. McDowell

I will come to that issue. I am not sure how radical the Government's proposal is, even though on the face of it the figures seem quite stark. We should not seek to pay off the national debt ahead of time. If we continue to pay it off as it falls due we will in any event reduce it very quickly to a low level by EU standards relative to GNP or GDP.

I do not believe we should be seeking to reduce public spending as a percentage of national income to a level below the current rate. Again one can get into all sorts of tortuous comparisons with GNP and GDP. I make this point because the Government's stability programme as submitted last year to the EU Commission commits it to reduce the level of public spending or the level of tax revenue to below 30 per cent of GDP. This is too low and prevents us from making the necessary investment in services.

I do not believe income or other tax reductions can or should continue indefinitely into the future. We tax so we can spend money on maintaining and improving the services on which to a greater or lesser extent we all depend. There are plenty of reasons to reduce tax and in the past there were even more. We look to increasing the incentive to work, to facilitate social partnership and to put more money in people's pockets. However, we should only reduce the tax take and our capacity to spend money on services if we are happy with the state of our public services. We are getting close to the point where we must make a choice on this in real terms.

This provokes the central question of whether we are happy with the state of our public services. Are we happy that waiting lists are as long now as they have been in several decades? Are we happy that many pensioners must pay £20 or more just to see a general practitioner? Are we happy that children often must wait several years for orthodontic treatment? Are we satisfied that services for people with disabilities are still provided largely on a voluntary basis? Are we satisfied that people suffering from mental handicap get the sort of deal from the State which as citizens they are entitled to expect? Are we happy that the care of the elderly and the sick so often falls on volunteers, often family members, who get little enough recognition or financial assistance from the State? I do not think we are happy – certainly my party is not happy and neither are the people I speak to on the streets.

Let us not cod ourselves. Not all these deficiencies can be solved simply by waving a cheque – they cannot all be resolved by money alone. However, very little can be done without money, investment and putting aside the resources of the State for services. There must be a political willingness to make available the resources which will give us, for example, a health service which matches the new found wealth of the country.

In this context the findings of last week's opinion poll in The Irish Times were instructive, if hardly conclusive, in that they challenge the notion that people care only about the money in their pockets or, to be politically correct, their purses. The poll found that 49 per cent of people identified improved services as their first priority while only half that figure – 24 per cent – supported tax cuts as their first priority. The message becomes clearer if one takes note of the fact that a further 15 per cent identified the need to invest in the infrastructure of the State as their first priority. I do not think I can put it much better than Denis Coghlan when he commented on the poll that “Charlie McCreevy has no excuses for not opening the purse strings for social spending”. We will have an opportunity in a few days to find out whether the Minister has taken that advice.

The Labour Party believes that current spending increases should be limited to the rate of increase in GNP, currently running at 7 per cent to 8 per cent, or the rate of increase in tax revenues, whichever is higher. I am not saying that we must spend to the ceiling but that that is the prudent ceiling under which we should operate. There is also a case for some corrective catch up to make up for underfunding in recent years.

There will be an opportunity to debate this at greater length next week when the National Plan is published, but we also believe that capital spending should rise at a quicker rate than appears to be proposed in the National Plan. This can be done without recourse to borrowing even for capital purposes. The Minister is accustomed to attending meetings at European level. I attend meetings of the social democratic spokespersons on finance, most of whom have the advantage of being in government at present. One of the buzz phrases, which the Minister has no doubt encountered, is the so called golden rule under which a country borrows only for capital purposes. That is the criterion to which most of our colleagues in Europe adhere. It is extraordinary to think that it is possible to spend more on current and capital spending and still not resort to borrowing. The Minister might tease out the figures but I assure him that it is the case.

I concentrated most of my contribution on the need to spend more on services. To hold a debate on budgetary strategy which focuses exclusively on taxation is to miss the point. However, I will make a few points about tax. Last year the Government went a long way to introducing a system of tax credits. I complimented the Minister at the time; it was a good and right decision. The Minister said then and has said again this evening that he will seek to complete the process this year. I expect him to do that.

However, it is worth remembering why this has been done. I believe the Minister is on record as having said that the main reason for shifting to tax credits is to provide a framework for equitable changes in taxation into the future. Tax credits are fairer in that one can, if one chooses, give the same benefit to all taxpayers and therefore a proportionately greater benefit to those on lower incomes without having to tinker with the system in a way which nobody understands. In that context, it is surprising, almost perverse, that so much of the focus of debate over recent months has been on rates and bands. It is almost as if last year had not happened.

Mr. McCreevy

I agree with the Deputy.

Mr. McDowell

Stranger things have happened.

Mr. McCreevy

I agree with the Deputy about the recent debate.

Mr. McDowell

Perhaps it reflects on people's lack of understanding of tax credits. It is incumbent on all Members of the House to educate commentators about tax credits.

We should be examining the level of credit. The Labour Party believes that in the next budgetary year we should seek to increase the credit by approximately £500 for each taxpayer. That is £10 per week for a single person and double that amount for a married person with a spouse who is not working. On the face of it, the system should be simple and easily understood. That increase would have the effect of taking many people out of the income tax net. It also reflects the type of deal that will be necessary if there is to be a successor agreement to Partnership 2000.

In future years, we need to consider if credits should be refundable. The Minister will be familiar with the argument for basic income. Once we reach a situation, such as that outlined by Deputy Noonan, where people on the minimum wage are not paying income tax, we should then consider, if we are still in the mode of reducing tax, if people should be refunded because many of them at that stage will not benefit from an increase in the tax credit. I am not arguing that we can afford to do that this or next year but, in the context of where the taxation system is going, if we are in a position within the next five years to make income tax changes and reductions, we should consider making a payment to people by way of a refundable tax credit.

On some of the points raised by Deputy Noonan, I am concerned about the proposal for an intermediate rate of 35 per cent. If such a rate is introduced, only approximately 5 per cent of income taxpayers will continue to pay at the 46 per cent rate. That would significantly impact on the progressivity of the system and that would bother me. Deputy Noonan cast the proposal largely in labour market terms. He offered the example of Dell and spoke about encouraging people on higher incomes to come back to Ireland. He mentioned an income of between £40,000 and £50,000 and twice that for married people as relevant to such people.

I am not persuaded that people in those income groups are not coming back to Ireland because of the tax system. If one asks, one will find that issues such as housing are probably more important than tax. Indeed, tax as a disincentive to work or to work more or to immigrate is becoming less important. It is not unimportant but has become progressively less important in recent years. I agree with the Minister that if one wished to introduce a third rate of tax, an introductory rate of perhaps 10 per cent on the first £3,000 of taxable income would be more attractive. My focus would be on that level of income tax payment rather than on the higher rate.

We tax in order to spend and we spend in order to maintain and improve services. Tax, therefore, is not entirely driven by labour market considerations. Taxes are not, at this stage, the primary issue in the labour market. For the 2.5 per cent of people who are still long-term unemployed, for example, it is probably more important to deal with the disincentives at the lower end of the scale, the point where social welfare and the taxation system come together. In fairness to all parties in the House, significant progress has been made on the integration of taxation and social welfare in recent years. That is where the focus should be in seeking to deal with labour market issues.

We must also deal with the issue of upskilling and ensuring that people will be available to take up the jobs which companies such as Dell offer. Three to five years ago that would not have been a problem. The skilled labour force was available and it was a major consideration for multinational corporations when locating in Ireland. It must be clear in our education and labour market policies that we are seeking to maintain that comparative advantage. There are indications that we are losing it so there must be significant focus on it.

On capital acquisitions tax, I sense that the Minister is sharpening his knife for dealing with capital acquisitions, be it gift or inheritance tax. Inasmuch as the Minister seeks to relieve the burden on people, whatever their relationship to the deceased, who are living in a domestic dwelling and did so for some time before the owner of the house died, he will find sympathy, assistance and support from this side of the House. However, if he is seeking, as he did with capital gains tax, to take a firm knife to the concept of capital taxes and inheritance tax, he will not get our support. The relief must be carefully targeted and if it is, it will be supported. If the Minister seeks to destroy capital acquisitions tax, as he did with capital gains tax, he will not receive the support of the Labour Party.

I understand why the Fine Gael Party pitched the debate in this way. It is seeking to appeal to the self interest of as many people as possible and, given how it has done so, it can hardly go wrong. Rather than seeking to reduce tax by a large measure for a few people or even by a little for many people, it has gone for the easy option of reducing tax by a large measure for many people. On the face of it, it must be a sure fire recipe for success, except that the debate on this is moving on and it should move on.

There is still some scope for tax reductions. We should not be debating how we can put more money into our individual back pockets but how we can create a society and a level of public services that would make us individually and collectively better off.

Debate adjourned.