Before calling on the Minister for Finance I want to issue my usual reminder that the Principal Features, along with the Minister's speech, are being circulated strictly on condition that the budgetary measures remain confidential until the Minister has announced them in the House. I ask everyone in the Chamber to respect the confidentiality of the information being supplied to them.
Financial Resolutions, 2000. - Budget Statement, 2000.
I am pleased to present my fourth budget to the House. In doing so I will outline my proposals for the coming year. I will also set out the goals and targets which we will achieve next year in the fifth budget of this Administration – the last before the general election.
RECORD OF ACHIEVEMENT
When this Government took office in June 1997, we set out clearly what we intended to do. Our record since then is one of significant achievement. Because of our policies and performance, 250,000 jobs have been created in the economy and more than 100,000 people have been taken off the live register. This has brought our unemployment rate from 10% in 1997 to below 4%, a record low. We have improved our public services with significant investment. Overall spending on the health service has increased by 86%, or £2.3 billion, and funding for education has increased by 67% or £1.4 billion. The weekly take home pay of the average single industrial worker has increased by £60, when tax reductions and wage increases are taken into account. There are many more that I could mention, but by any yardstick this Government's achievements have been impressive. This budget will build on that success. It will set the scene for continued progress in achieving a prosperous and fair society.
BUDGET OBJECTIVES
This budget has four basic objectives: to manage our economy to secure our continued prosperity; to improve our quality of life; to promote a fairer society; and to reward work and enterprise through ongoing tax reform.
In meeting these key objectives, the Government recognises the role of the Programme for Prosperity and Fairness. This budget focuses very much on the appropriate response to inflation. In framing my budget, I have taken the views of the social partners into consideration, particularly their views on inflation, living standards and child care.
The budgetary targets and goals are based on the over-riding need to keep our economy competitive and on the need to ensure that this is reflected in our approach to how we reward ourselves. In particular, the budgetary targets are dependent on the delivery of the commitments, including the industrial peace commitments which were underlined and strengthened in the recent agreement negotiated with the social partners. If this scenario is departed from, our ability to achieve these goals will be jeopardised. The competitiveness upon which our growth is based will disappear and we will be in danger of heading back to the days of significant unemployment and emigration. The budget depends for its success on respect for, and adherence to, the terms of the PPF.
ECONOMIC MANAGEMENT TO SECURE CONTINUED PROSPERITY
Economic and Budgetary TargetsThe first major objective of this budget is to secure the basis for continued prosperity in the years ahead. We have already seen living standards raised to the EU average. We can make further progress on this through the sensible management of our economy.
The budget is framed against the prospect of strong, but moderating, economic growth. I expect growth to slow from an estimated 8.6% in GNP terms this year to an average of 6% in 2001 to 2003. Employment should grow by about 2.5% annually, with unemployment declining a little further. Full details of the economic projections underlying the budget are included in the Stability Programme Update, which I am publishing today.
If these economic prospects are realised, living standards will be towards the top in the EU. Achieving this, however, is conditional on implementing the disciplined approach to wage developments provided for in the PPF, which has just recently been confirmed by the social partners.
This strong economic performance means an expected Exchequer surplus in 2000 of £2,478 million. This is after taking account of an increase of £178 million in the assets of the capital services redemption account. This surplus will be used to reduce our national debt, thereby cutting the burden of future interest payments and allowing room for lower taxes and better services in years to come. The general Government balance for 2000, as defined for EU purposes, will show a surplus of about 4.7% of GDP.
Taking account of the measures I am announcing today, the budget targets for 2001 are as follows: a general Government surplus of £3,900 million or 4.3 per cent of GDP; an Exchequer surplus of £2,538 million, including a release of £400 million from the capital services redemption account to meet interest costs on the national debt; a current budget surplus of £6,145 million; a capital budget deficit of £3,607 million; and a debt to GDP ratio of 33 per cent.
The increase in 2001, post-budget, in net current spending as defined in the context of the Government parties' document, An Action Programme for the Millennium, will be 6.6%. This is the annual average increase in 2001 over the 1997 outturn. This figure includes provision for the agreement between employers and the Irish Congress of Trade Unions on an adjustment to the terms of the Programme for Prosperity and Fairness, and takes account of the £400 million I referred to earlier. The Government decided that an increase beyond the target 4% limit was justified to make more rapid progress in key social spending areas and to help secure industrial peace.
The Government also intends to run significant budgetary surpluses beyond 2001, reflecting economic good sense and our obligations under the stability and growth pact. A general Government surplus of 3.8% of GDP is foreseen in 2002 and 4.6% in 2003, with the debt ratio falling from about 39% in 2000 to 24% by 2003 and falling also in absolute terms this year and next.
The EU Council of Agriculture Ministers agreed on 4 December a package of measures to deal with BSE and its impact on the beef market. There is no reliable estimate of what the cost to the Exchequer might be and I am, therefore, making no provision for it in my budget.
We will continue to allocate at least 1% of GNP annually to build up the national pension reserve fund which will be formally established early in the new year. The decision to establish the fund represents a sound and far-seeing approach to budgetary planning. The amount in the fund already stands at over £5 billion.
Today's budget reinforces the basis for economic growth and social progress over the period ahead, by continuing the responsible management of the public finances which has characterised the Government's term of office to date.
Today's budget also reinforces the basis for progress. It does so by improving the attractiveness of work and enterprise through further reform of the tax system and by ensuring, through a high priority for investment, that infrastructural pressures do not inhibit growth. However, future prosperity depends to a large extent on the recent commitments entered into by the social partners being honoured. We should not fool ourselves into thinking we can continue on the path of economic and social progress if we lose our disciplined approach.
Public Service PayThe agreement reached on Monday night between employers, the Government and the ICTU provides for a pay adjustment of 2% with effect from 1 April 2001 and a non-pensionable lump sum equal to 1% of annual pay on 1 April 2002. As a result, public service employees will receive ongoing pay increases under the PPF amounting to 18% over 33 months and nearly 22% in the case of those benefiting from the 3% early settlers' agreement, in addition to the once-off lump sum of 1%.
It has also been agreed that one quarter of whatever increases may be recommended by the public service benchmarking body, which is to report by 30 June 2002, will be implemented with retrospective effect from 1 December 2001. The balance will be implemented on a phased basis to be agreed between the parties in discussions which are to commence immediately following receipt of the benchmarking body's report. This represents a very significant improvement in the arrangements for implementing the outcome of the benchmarking process.
These improvements highlight the benefits which can be achieved by working within the PPF framework. The Government has made it clear that it cannot countenance claims by any single group outside the PPF framework and the benchmarking process for which it provides.
Anti-Inflation PackageThe Government is in no doubt that the recent increase in inflation is a key challenge, though largely not of our making. Last summer we announced measures to address domestically-generated inflation. We, like others, expect that the inflation rate will fall next year. This should happen as the effects of recent oil price and exchange rate developments and other once-off factors unwind. However, as indicated to the social partners at that time, I am determined to take some additional specific measures to reduce our inflation rate. That is why today I am announcing a further anti-inflation package. This package consists of: first, direct tax measures to increase participation in the economy; second, cuts in indirect taxes to bring down the CPI and ease transport costs; and, third, measures to encourage consumers to save rather than to spend. The estimated inflation rate for 2001 will average 4.5%.
Indirect TaxationTo reinforce our commitment to counter inflation, I am announcing a cut in the standard rate of VAT of one percentage point, reducing it to 20% from 1 January 2001. This cut in VAT also reflects the valid concerns expressed about this country's competitive position in an age of e-commerce where differences in VAT rates between different trading partners will influence how successful we are in exploiting this new means of commerce.
The Government expects to see the VAT reductions passed on to the consumer and not absorbed in higher retail margins. If this does not occur, the wisdom of further VAT cuts will be placed in doubt. We will be monitoring the situation and I hope consumers will be vigilant in seeing that the VAT reduction is passed on to them.
I am conscious that a cut in VAT would reduce the retail price of cigarettes. I will, therefore, be adjusting the excise duty on tobacco to offset the VAT reduction and leave retail prices of tobacco unchanged. A number of calls have been made for tobacco to be excluded in calculating our inflation rate. I see merit in this proposition and I have asked my Department to examine the issue further with the Central Statistics Office.
Road HauliersI propose to cut the excise duty on auto-diesel by 6p per litre to just above the EU minimum rate, giving a VAT inclusive reduction of 7.3p per litre from midnight tonight. With the 1% VAT reduction in January, this will mean a cumulative tax reduction of 7.8p per litre in the new year on average auto-diesel prices. This will be of significant benefit to the haulage sector and to diesel users generally. The cut will ultimately feed through to the retail prices of all goods and services.
I am anxious to encourage the use of lowsulphur diesel for environmental reasons. While the current excise reduction of 6p will apply to all diesel for the present, I propose that in the future this lower rate will apply to low-sulphur diesel only. Such a differentiation in excise rates requires EU approval which my Department will be seeking in the near future.
A number of non-tax measures to help the haulage sector are being undertaken. These include a significant increase of the Department of Public Enterprise's capacity to regulate and develop the road haulage industry. I am also providing additional funding for the Irish Road Haulage Association to enhance its professional service to its members.
Unleaded PetrolI propose also to cut the excise duty on unleaded petrol by 2p per litre from midnight tonight, giving an immediate VAT inclusive reduction of 2.4p per litre in the price at the pump. With the VAT reduction of 1% in January this will mean an ultimate tax reduction of 3p per litre.
Hybrid Engine TechnologyI am concerned also to encourage the use of the new hybrid engine technology in motor vehicles so as to help reduce emissions and conserve energy. I intend to provide in the Finance Bill that, for a period of two years, purchasers of any new vehicles fitted with hybrid engines would have 50% of the VRT which was paid refunded to them, on application to the Revenue Commissioners.
CPI ImpactThe full year cost of all VAT and excise measures is £349 million and, if passed on in full, will reduce the Consumer Price Index by 0.5%.
Savings MeasuresReducing inflation also means influencing the inflationary psychology. We need, therefore, a further weapon in our hands and this involves using the tax system to encourage consumers to save rather than spend, to create real wealth rather than to consume.
I have already acted, to the discomfort of some, by cutting taxes on capital accumulation, by incentivising pension saving both through tax changes and by giving savers a greater choice and control over their nest eggs. Some of these measures were criticised at the time. The rationale behind them is now apparent. In the case of capital gains tax, the rate cut has brought the yield to about £600 million in this year alone – in 1997 the yield was £132 million.
Credit UnionsI was approached by the Irish League of Credit Unions recently regarding the taxation of credit union interest and dividends.
I am sure the Minister was.
The league suggested a basis for a solution which meant that:
–all credit union shareholders would have the option of maintaining the current tax status of their shareholdings;
–interest on credit union deposits would be subject to DIRT at 20 per cent;
–a new option would be provided for credit union shareholders to place shares in special credit union savings accounts which would be subject to DIRT at 20 per cent and
–for members who placed their shares in new medium-term accounts for a minimum period of either three years or five years, a tax exemption would apply to the first £375 or £500 of dividend income per annum, respectively.
The league has written to me stating that it has consulted widely within the movement and it is satisfied that there is a general acceptance of the proposals by the credit union movement. It has asked me to proceed with them in the budget.
Surrender.
Accordingly, I propose to legislate for this arrangement in the Finance Bill. The full details of the credit union scheme are set out in the summary of budget measures.
Other Deposit-Taking InstitutionsI believe that the proposal to encourage medium-term savings by allowing a measure of tax free income is a useful one in the current economic climate and I would propose that it be extended to all other relevant deposit taking institutions. This will be discussed with the institutions concerned before the Finance Bill. I will also consider suggestions for further savings innovations before the Bill is enacted.
Life Assurance I am also making two changes in the taxation arrangements for life assurance products. First, I am abolishing from 1 January next, the stamp duty of 0.1% on the value of life assurance policies. The annual cost to the Exchequer will be £20 million. Second, I am applying the same rate of tax to both Irish and certain foreign life assurance savings products. Further details are contained in the summary of budget measures. I will outline further general tax changes later in this statement.
IMPROVING QUALITY OF LIFE
In order to improve the quality of life of all Irish people, the Government is taking action on three fronts:
by developing the physical infrastructure;
by improving the standard of, and access to, public services and
by taking a major initiative in relation to child support.
IMPROVING THE PHYSICAL INFRASTRUCTURE
This Government is improving our quality of life by enhancing our physical infrastructure. That is why almost £22 billion of the £40 billion national development plan is targeted at infrastructure needs. Exchequer capital spending will be increased next year by 23% over the 2000 Estimate to more than £4 billion. Overall by next year, Exchequer capital spending will have increased by 150 per cent since 1997.
It is vital that the infrastructure programme of £22 billion in the plan is delivered in a cost effective and timely fashion. The Cabinet Sub-Committee on Infrastructure and Public Private Partnerships is actively engaged in this area and has already overseen the introduction of a number of initiatives to better assist efficient and effective delivery of key infrastructure projects.
RoadsWe have set aside £6.3 billion for roads in the NDP. A total of £620 million is being provided for national road improvements in 2001, an increase of 26% on this year. This increase will facilitate further substantial upgrading of the network in line with plan commitments. We are also providing funding in the NDP for a special programme to facilitate non-national roads schemes supporting residential and other developments.
Public Transport The NDP includes a provision of just over £2.25 billion for public transport infrastructure. This reflects a substantial increase on previous levels and will significantly enhance our public transport services. Total public capital programme spending in this area next year will be £420 million.
Make sure the Minister for Public Enterprise knows about it.
The Deputy's party never put a penny into it.
This investment will ensure that projects in the NDP are progressed, including the Luas in Dublin and the railway safety programme nationwide.
HousingThis Government has put in place a broad range of measures to increase the supply of housing. Next year we will spend just over £1 billion in total on local authority social and affordable housing. We have seen clear positive results from the measures introduced. Housing output increased by 20% since 1997 to 46,500 housing starts last year. Average house price increases for the third quarter of 2000 are well down. Average prices for new houses in Dublin decreased in the third quarter by 2.3% on the previous quarter.
A total of £346 million is being provided in 2001 for investment in water and sewerage ser vices. I can also announce today that I am providing an additional £1.5 million for the housing management initiative which will improve the estate management of local authority housing.
Harbour InfrastructureI am announcing today a significant programme of capital works, with an additional allocation of £11.5 million in 2001, to address infrastructural deficiencies around the coast which will promote socio-economic well being in peripheral coastal regions. This additional funding will assist the fishing industry by upgrading harbour infrastructure and allow for the exploitation of important marine tourism and leisure opportunities.
I am also allocating an additional £4 million expenditure in 2001 to an Bord Iascaigh Mhara for the development of the sea fisheries sector.
IMPROVING THE STANDARD OF SERVICES
This Government has increased substantially the amounts spent on public services to improve standards. Taking account of the additional expenditure I am announcing today, by next year we will have increased net voted current spending by over 55% since 1997. This significant injection of funds goes a long way to ensuring that we have the resources needed to provide public services which are effective, efficient and of a high standard.
EducationWe are committed to maintaining and improving all levels of our education system. Our actions have put this commitment into practice. This Government has invested heavily in our education system at all levels. The total spend provided in the Estimates for Education in 1997 was £2,111 million. The Estimates published last month will provide £3,524 million, up 67% in four years.
School TransportI am today providing for a number of improvements to the school transport system, the main element of which is the introduction of a standard two mile qualifying distance for all primary children.
Will the taxi drivers drive the buses?
This replaces the three mile eligibility threshold for primary children over ten years of age which has stood since the inception of the scheme. The other improvements to the scheme are listed in the summary of budget measures, as are a number of other improvements which I am funding in the education sector.
Health ServicesI have drawn attention on a number of occasions to the extraordinary rate of increase in health spending.
I regularly hear claims despite this increase that the health services suffer from under-funding. Let me give some of the plain facts which refute this. Current numbers employed in the health services stand at some 80,000 compared to less than 59,000 in 1990. There are now 540,000 admissions to in-patient care every year, and day cases have doubled since 1992 to 300,000 annually. There are also about 2 million outpatient attendances and 1.25 million accident and emergency visits.
In the expenditure Estimates last month I provided for gross expenditure of £5,015 million in 2001 in the Health and Children Vote. A Supplementary Estimate for 2000, which I have approved, will require that figure to be increased by a further £89 million. I am today announcing a further increase of £195 million, which will bring the total for 2001 to £5,299 million. The contrast with the 1997 Estimate of £2,754 million speaks for itself.
This development funding covers a wide range of health programmes, including services for older people, physical and intellectual disability, child welfare and mental health. Acute hospital services will receive extra funding for a number of priority measures, including waiting lists, bed capacity and the cancer strategy. Full details are set out in the summary of budget measures.
Addressing health problems, and indeed all aspects of public expenditure, is not simply a matter of additional resources. We must assure ourselves that we are getting the best value from existing expenditure. Consultants were appointed last May to carry out a comprehensive value for money audit of the health services. I look forward to their recommendations in the spring on the development of a management information system for the health services. For the same reason, the management reforms in the Civil Service will place a greater emphasis on the outputs achieved by public spending programmes than has been the practice to date.
Medical Cards for Older PeopleIn my 1999 budget, I announced that the income limits for medical cards for people aged 70 years or over would be doubled over three years, commencing in 1999. That process will be completed next March, and it is now proposed to take the next step. I am pleased to announce that, from 1 July 2001, entitlement to the medical card is being extended to all those aged 70 years or over.
What about people on £95 a week?
Other services for older people are also being improved. I am providing an additional £23 million to develop a range of services in community support and to increase the provision for nursing home subventions.
Intellectual DisabilityThe Government gave a commitment in 1999 to meet the identified needs of those with intellectual disability within a three year timeframe. A great deal of progress had been made, with substantial additional service funding up to the end of 1999, but the level of unmet need remained unacceptably high and we were determined to address the issue. In last year's budget, I commenced the process by allocating significant extra funds to enhance the overall level of residential, day and respite services throughout the country. This year, I am providing an extra £28 million for the coming year, and £35 million in a full year to help meet our targets. This will bring the overall level of spending on these services to about £450 million next year.
Other Services for the DisabledI will refer later to improvements in social welfare services for the disabled. Last June, the Government completed the mainstreaming of the disability services of the National Rehabilitation Board into the relevant Departments and agencies and additional resources have been allocated to bodies such as FÁS, Comhairle and the national educational psychological service for next year to enable them to carry out their added responsibilities.
In addition, the Government is making very considerable progress in upgrading transport services for the benefit of this group; a further 140 wheelchair-accessible buses are due for delivery to Dublin Bus in the coming months; new wheelchair-accessible DART and Arrow rail cars are being commissioned; and by the end of next year it is expected that Cork, Limerick, Galway and Waterford will have fully wheelchair-accessible bus fleets. I am also increasing the maximum grant under the disabled person's housing grant scheme.
Screening for Breast and Cervical CancerPilot programmes for breast screening and cervical screening have already begun. Because of the complexity of the screening process and the crucial need to meet quality assurance requirements, it is necessary to proceed on a phased basis. We must also, of course, ensure that treatment capacity is in place to address the new cases that will inevitably be identified. To secure these objectives, I am providing an additional £1.5 million to the breast screening-treatment programme next year. Our aim is to ensure that women at risk will have an entitlement to free screening throughout the State.
Hospital cancer services are also being given priority, with an extra £13.5 million next year, rising to £24.5 million in a full year.
CHILDREN
In the PPF, we recognised the importance of policies to support children and family-friendly life. The Government and society values the role of those working in the home who are looking after others. Today I am announcing a major initiative in relation to children which goes well beyond what the PPF would have involved. The measures which I will now outline amount to the largest ever package of supports for children and their parents. Last month, we published Ireland's first ever national children's strategy. This strategy has been welcomed both here and abroad as marking a major move forward in public policy.
Child CareThe Government has put in place a wide range of measures to increase the supply of child care places in all parts of the country. The national development plan includes £250 million for child care and the Government subsequently allocated a further £40 million for this purpose. To facilitate early action, this spending is being front-loaded through the allocation of £104 million in the Estimates for next year.
There is a very substantial increase in the allocation to the lead Department, Justice, Equality and Law Reform, from £20 million this year to £74 million next year for the expansion of the programmes already in place: capital grants for commercial crèches and for community-based child care facilities; staffing grants for community-based projects; and a national childminders' initiative. The balance of the £104 million allocation is for a number of Departments to fund: the use of spare classrooms for child care; a national after-school initiative; child care employment grants; and the provision of child care in local authority developments.
Child SupportThe House will be well aware of the great diversity of views that are held in relation to addressing the child care issue. The Government's core objective is to provide support which will offer real choice to parents and will benefit all our children. This we can do through child benefit. I am pleased to announce, therefore, that the child benefit rates for first and second children are being increased by £25 to £67.50 per month and by £30 to £86 per month for third and subsequent children. The new rates will be payable from next June, which is three months earlier than usual. This increase of over 50% in current payment rates marks the first step in a three year programme.
At the end of this process, an additional £1 billion will have been invested directly in our children's wellbeing. Child benefit monthly payments will stand at £117.50 and £146, well beyond the PPF commitments. This will mean up to £90 per month extra for each child at the end of three years. By then, a family with four children will be receiving the equivalent of over £120 per week in child benefit support.
Fairly modest.
This unprecedented increase will help all parents with the costs of caring for their children and will represent a major move towards achieving the goal of ending child poverty in this country.
Maternity Protection and Parental LeaveThe Government's An Action Programme for the Millennium committed us to improve maternity protection legislation as a key component in the development of equality for women. In that regard, I am today announcing a four week extension of the period of paid maternity and adoptive leave to 18 weeks at an estimated cost of about £20 million in a full year. In addition, the period of unpaid leave will be doubled from its current level to eight weeks. This means that, from early April next, a mother can take up to six months leave in the period around the birth or adoption of her child. During the coming year, it is proposed to advance the promised review of the parental leave legislation with a view to the improvement of the arrangements in this area.
Employers and Child CareIn previous budgets I introduced a number of changes to tax law aimed at encouraging the increased supply of child care facilities and these are having an effect. The exemption from benefit-in-kind for employer-provided child care should also help supply. I will, however, be discussing with employer bodies how the rules for this scheme might be modified to secure further increased provision of child care facilities at a reasonable tax cost to the Exchequer.
In addition, the Government is conscious of its responsibilities as the largest employer in the country. I am, therefore, providing for the introduction of a major Civil Service child care initiative. This entails establishing crèches for the children of those working in Departments. It is also the intention to pursue this approach in the context of the decentralisation policy.
I am allocating £10 million capital over two years to allow for the provision of 15 Civil Service crèches over the next two years. I intend that other public service employers would also adopt a similar approach in this area.
Child Care Support StructuresTo increase the level of practical supports for child care providers and to underpin a greater emphasis on the quality of provision, I am providing for the recruitment of additional child care support staff throughout the health board system at a full year cost of £1.2 million to operate a voluntary notification system for childminders. Additional funding is being allocated to FÁS for the training of extra child care workers.
Foster CareThe Government recognises the immense contribution to society made by families which offer a home and support to vulnerable children through fostering. I am, therefore, providing an additional £9 million in the context of restructuring the existing payments and support systems. I am also amending the capital acquisitions tax rules to give foster children similar rights to other children.
SportSport can play an important role in combating social exclusion and in personal and community development. To meet the plans of the Irish Sports Council, the Government intends to double the council's annual budget over the next four years to £20 million. As a first step, I am now allocating an extra £2.5 million next year to the Football Association of Ireland and the other relevant sports governing bodies. The details are set out in the summary of budget measures. In addition, I am providing a further £2.5 million to encourage greater under-age participation in major field sports and £0.5 million for the promotion of a healthy and active lifestyle among older people.
Drugs The Government is committed to combating drug addiction. On this occasion, I am providing an additional £2 million for the national drugs strategy, over and above the £15 million already allocated in the Estimates. This funding will ensure that the new action plans emanating from those areas worst affected by the drug problem can be put in place as soon as they are ready. I am adding £5 million to the Health and Children Vote for the expansion of the drug treatment and rehabilitation services. In addition, I am allocating £10 million over the next three years for the accommodation requirements of community based projects, starting with £3 million next year. The additional funding confirms the Government's continued commitment to the national drugs strategy and will provide an important impetus for the new strategy which will be launched in the new year.
A FAIRER SOCIETY
The third aim for this budget is to promote a fairer society. This is one of the Government's core objectives and one of the aims of the PPF. The social inclusion agenda of the Programme for Prosperity and Fairness sets out the key objectives and necessary actions to achieve a fairer and more inclusive Ireland, through expending an additional £1.5 billion over three years on social inclusion.
Opportunity to Work through TrainingIn a fair society everyone should have the opportunity to work and to acquire work skills through training. The national development plan includes £10 billion, or one quarter of its funds, for employment and human resources programmes. By next year the Government will have increased spending on training to £220 million – almost 65% higher than in 1997. We will have also increased the numbers of apprentices being trained by almost five times to 25,000. The National Training Fund which I announced in the budget last year will play its part in this. This innovative measure allows the State and employers to work together in this area.
Social WelfareToday's social welfare improvements will cost an estimated £850 million in a full year. The 1997 budget equivalent was £215 million. Last year's figure was £400 million.
Payment DateI am keeping the promise made in my first budget to bring forward the payment date for weekly social welfare increases to coincide with the beginning of the tax year. In 1997 the weekly social welfare increases were paid in June. The 2001 increases will be paid in April, the beginning of the income tax year, which is four weeks earlier than in 2000. Moreover, I have already decided that, from 2002, the increases will apply from January when the tax and calendar years are being aligned.
Older People/Old Age PensionsThis Government has made income support for pensioners a priority. Pension rates were increased by a total of £18 per week in my first three budgets. Today, I am increasing the full personal rate of old age and related pensions by a further £10 per week or by up to 11.5%. This will bring the rate of the old age contributory pension to £106 per week. In addition, in an initiative which will be of major benefit to pensioner couples, I am beginning a phased increase in the qualified adult allowance for those aged 66 years and over to bring them up to the old age non-contributory pension rate. As a result of these changes, a full rate old age contributory pensioner couple, both aged 66 or over, will receive an increase of £25 per week next year, bringing their combined weekly payment to £185.60, or £52.20 per week more than in 1997. No one can say that this Government does not recognise and appreciate the part played by the workers of yesterday in laying the foundation for so much of our current economic success.
Social Welfare Weekly Payments and Qualified Adult Allowances Social welfare recipients will have their living standards protected and improved by the increase of £8 per week, which I am announcing. This is double the increase paid in 2000 and is equivalent to 10.5% on the lowest rates. Last year, I signalled that the qualified adult allowance would, in general, be increased over a three year period to 70% of the personal rate. In the second stage of this move, these allowances will be increased by a minimum of £7 per week. Thus, from next April, couples on full rate social welfare payments will receive an increase of at least £15 per week. Families with children will also benefit from the very considerable child benefit improvements which I have already announced.
Incentives and Employment SupportsIn order to maintain the incentive to work, the income thresholds for the family income supplement are being increased by £25 per week from next April. This will result in average payments of £56 per week for existing recipients. A range of extensions and improvements are also being made to various employment support schemes designed to facilitate the ending of welfare dependency among disadvantaged groups.
WidowsUp to this, the contributory pension for widows aged 66 years and over has been lower than the old age contributory pension rate. I have decided to eliminate this gap over a two year period commencing next year. As a result, the widows in question will receive a special weekly increase bringing the widows contributory pension to £102 – a total increase next year of £12.90.
DisabilityPersons with disability deserve particular consideration. Accordingly, I am extending eligibility for the living alone allowance to all qualifying recipients of invalidity pension, disability allowance, unemployability supplement and blind persons pension. As a special measure, I am also removing the limitation whereby only a reduced rate disability allowance is paid where the person's partner is in receipt of any other social welfare payment.
Free SchemesLast year, the social welfare free schemes were made available to all those aged 75 years and over irrespective of income or household composition. I am now extending such availability to all those aged 70 years and over from next May. More than 40,000 households are expected to benefit from this change. Those over 70 will also benefit from the medical card changes already announced.
Fuel AllowanceI am extending by three weeks the period during which the fuel allowance is payable. From now on, the allowance will be payable from the first week in October until late April.
It should be all year round. It would not buy a bale of briquettes.
Payments for the current winter will continue for an extra two weeks.
CarersIn recognition of the important role they perform, recent budgets have contained many improvements in the supports available to carers. On this occasion, I propose to grant a very significant relaxation in the income disregards which apply in relation to the means test for carer's allowance. Details of this change are outlined in the summary of budget measures. This will increase the numbers who will qualify for the allowance by some 5,000 as well as benefiting many current recipients. In addition, the annual respite care payment will be increased to £400, with a double payment applying where a recipient is caring for more than one person.
Other Social Welfare ImprovementsThe summary also contains a range of other social welfare improvements, full details of which will be announced by my colleague the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern.
HomelessnessThe Government is determined to tackle the problem of homelessness in a concerted and coherent manner. Capital funding is being doubled from £20 million to £40 million over the next five years to provide additional accommodation for homeless persons, particularly transitional accommodation to facilitate moving out of emergency accommodation. An additional £6 million current funding a year is being made available to local authorities to fund increased subventions for hostel accommodation.
TAX REFORM
The fourth and final objective of this budget is to reward work and enterprise by continuing our programme of tax reform.
Income Tax Tax reform is also a matter of fairness. I have in my first three budgets made radical reforms to the whole tax system. I have made the income tax system inherently fairer by introducing tax credits. I have cut tax rates to improve the incentive to work and contribute to the development of the economy. I have removed substantial numbers from the top tax rate and, for the first time in many years, ensured single earners on the average industrial wage and others on modest incomes no longer face the top rate of income tax.
I have also radically improved the position of the lower paid in the tax system. To listen to some commentators, one would believe that all the gains from tax reform have accrued to those they like to call high earners. Let me set the record straight. The Government's achievements in assisting the low paid in the tax system are second to none. In the past three years I have removed 176,000 low income earners from the tax net; cut the burden on the lower paid in half; reduced the tax rate on the low paid in many cases by up to 10 percentage points or more, and done far more than in many other advanced economies in cutting taxes on single and married earners on low and middle earnings.
These facts are recognised by international commentators. A recent European Commission report praised our progress in this regard, which is ahead of most other countries. I have pursued a consistent and balanced course and delivered on what the electorate was promised.
In this budget I will follow the path laid out and marked clearly in advance by me. The personal tax reductions I am about to announce will benefit taxpayers by £1,231 million or nearly three times the amount we promised under the PPF for this year. I am happy to be able to do this and to acknowledge the policy input of the social partners in this regard.
Before announcing the details, I should remind the House that the next tax year will be a short one running from 6 April to 31 December 2001 to accommodate the introduction of the calendar-based tax year from 1 January 2002. In addition, we will complete the move to tax credits. The changes, which I will give in terms of full year amounts for the sake of comparison with this tax year, must be converted into nine month equivalents. The relevant details are set out in the tables in the Summary of 2001 Budget Measures. The tables also give amounts in euro. As the House will be aware, euro notes and coins—
It will never wash in Limerick, Willie.
—will come into circulation from 1 January 2002.
Increases in Tax AllowancesSince the Government came into office we have increased the entry point to the income tax system from £77 per week to £110 per week. I am proposing to increase this entry point to £144 per week by increasing the basic personal allowances by £800 for a single person and £1,600 for a married couple to £5,500 and £11,000 per annum, respectively, and by increasing the PAYE allowance from £1,000 to £2,000 per annum. These measures and those for the aged which I will come to shortly, will remove 133,000 taxpayers from the tax net. This is more than three-quarters of the total who were exempted in the past three years.
What does Deputy Rabbitte think of that?
Good.
The Government intends in the next budget to increase the entry point towards the level of the minimum wage, thereby removing up to a further 150,000 taxpayers from the net.
It is the same people each year.
I will come to that, Deputy.
That is what one calls an economic boom.
(Interruptions.)
A Deputy
The Russians are coming.
I am afraid that we will have to come back to that disease. The Deputy must have been Minister for Agriculture, Food and Rural Development at the time.
Widening the Standard BandThe Government set out—
(Interruptions.)
It is an established fact. The Minister should ask the people sitting beside him.
—to reduce the number of taxpayers on the higher rate of income tax. Many of these taxpayers are earning incomes just above the average industrial wage. These are hardly the wealthier part of our community, for whom high marginal tax rates are usually reserved. I have decided, accordingly, to widen the single person standard rate income tax band by £3,000 from £17,000 per annum to £20,000 per annum, with consequential increases for double earners.
Steady as you go.
The married one-earner band will increase by £1,000 from £28,000 per annum to £29,000 per annum, with transferability of bands between spouses thereby increased also to £29,000.
What does that mean?
This process of widening the standard rate band will be pursued in future budgets. As a result of this band-widening, the proportion of income earners on the higher rate will fall to 23%.
Income Tax RatesThe marginal rate at which tax is paid has an effect on the incentive to work. Clearly, we should seek to reduce the disincentive effect of tax rates in a manner that includes all taxpayers, more than 500,000 of whom now pay tax at the higher rate. The Government has decided, therefore, to reduce the standard rate and the higher rate of income tax by 2 percentage points in each case, that is, from 22% to 20%
Well done, Mary, but God help the poor.
—and from 44% to 42%.
Distribution of Income EarnersAs a result of these changes, the percentage of income earners in the tax exempt category will be 38%, those on marginal relief will represent less than 1% and those on the standard rate and top rate 39% and 23%, respectively. For the benefit of Deputy Yates, there will, therefore, be 668,000 persons in the tax system who will be exempt from paying tax altogether.
Reform of PRSI and LeviesIn my last budget I announced that it was my intention to address the whole area of PRSI and levies in my next budget to see if I could rationalise the current complex structure of different allowances, thresholds, rates and ceilings. As a first step in this reform, I propose to make a number of changes this year. Apart from employer PRSI, which I will come to later, the changes relate to the self-employed and full-rate employee categories.
The Government has decided that the PRSI income ceiling for the self-employed and proprietary directors should be removed and that the contribution rate for this category should be reduced from 5% to 3%. We are also abolishing the PRSI free allowance of £1,040 per annum for the self-employed and reducing the minimum payment to £200 per annum. Most of the additional revenue from removing the ceiling comes from those earning £100,000 per annum or more. Allowing for the reduction in the rate on existing contributions and other adjustments, the net yield from the changes is £21 million in a full year.
The ceiling for employee PRSI contributions is being increased from £26,500 to £28,250 per annum, which reflects the normal earnings-related increase as was assumed in the Estimates. In addition, I have decided to reduce the Class A contribution rate paid by most employees from 4.5% to 4%. This will cost some £63 million in a full year.
Total CostThe full year cost of these personal tax and PRSI changes in this budget is £1,231 million, of which £540 million represents changes to allowances, £278 million to bands, £371 million to rates, and £42 million to PRSI.
Increases in Disposable EarningsThe Government has ensured that through social partnership, workers living standards have been raised substantially. Compared with last year, a single worker on the estimated average industrial wage has £1,602 more in his or her pocket in a full year due to wage increases and tax reductions in my last budget. This overall increase represents a 13% increase for that workers disposable earnings on last year. This is more than double the average inflation rate this year of 5.5%.
After todays budget, this worker next year will not only receive a further 5.5% from the second phase of the PPF, and an additional 2% as a result of the adjustments agreed on 4 December, but will benefit from tax reductions in this budget to give a total increase in disposable income next year of 13.5%.
Tax Relief for the ElderlyThe Government is committed to reducing the tax burden on the elderly. I am therefore increas ing the income tax exemption limits by £1,000 for a single person and £2,000 for a married couple. This means that since I took office the exemption limits for the aged have been increased by up to 85%.
Planning for Future Care NeedsIn line with what I have done on pension reform, I also favour providing tax relief at the standard rate for premia on insurance products geared at providing for future care needs, with any stream of income in the future being taxable. Discussions will take place with the insurance industry before the Finance Bill to see if we can develop an appropriate scheme to provide for such specific and ring-fenced products. This will also contribute to the overall strategy of encouraging savings and providing for real future needs.
Medical Expenses ReliefMedical expenses relief currently can be claimed only in respect of a relative where the claimant qualifies for a dependent relative allowance. I will be changing the rules to allow people to claim medical expenses relief where they are paying on behalf of a dependent relative whether they qualify for the dependent relative allowance. I am also removing the existing restriction on relief for routine maternity care. Where a person is employed to care for a family member who is incapacitated, a carer's allowance is claimable. The amount allowable was last increased to £8,500 in budget 1998. I propose to increase it to £10,000 per annum.
Corporation TaxAs part of the move to a single standard corporation tax rate of 12.5%, the rate of corporation tax which will apply from 1 January 2001 will be 20% on trading income as provided for in the Finance Act, 1999. Last year in order to assist small and medium sized firms, I decided that the prospective 12.5% rate of tax should apply from 1 January 2000 to the trading income of a company where that trading income does not exceed £50,000 per annum. I propose to increase this ceiling from 1 January 2001 to £200,000 trading income per annum. This means that only just over 13% of companies liable for tax will now pay at the standard rate. The total cost of both changes is £214 million in a full year.
Stock Valuation at Discontinuance of TradingI have recently been informed of a tax avoidance scheme based on a loophole in relation to valuation of stock at discontinuance of trading. The 2001 Finance Bill will contain provisions aimed at closing off this loophole with effect on and from today. The details of these provisions are contained in the summary of budget measures.
Capital AllowancesCapital allowances for plant and machinery apply on a straight line basis over a seven year time period. I now propose to reduce this to five years from 1 January next. Motor vehicles have historically been excluded from the seven year straight line system. They will now be included in the five year straight line system. The car value threshold for both new and secondhand cars will also be increased to £17,000. This move will benefit the business sector as a whole including the self employed sector. It will result in a substantial cash flow loss to the Exchequer of up to £140 million in the next few years.
Employer PRSIThe employer PRSI contribution ceiling now stands at £36,600 and was assumed to increase to £39,000 in the Estimates. In line with the reform of the self-employed ceiling which has already been mentioned, the Government has decided that this ceiling should be abolished. Over and above the Estimates decision, this measure will bring in £159 million in PRSI in a full year as well as an additional £10 million for the national training fund.
No big applause for that.
This initiative must be seen in the context of the substantial reduction in business taxation in this—
A nice sting in the tail.
There will be some questions to answer there.
—and earlier budgets.
Social Insurance FundThanks to the strong economic performance of recent years and the reforms proposed, the social insurance fund is in a healthy financial situation; moreover, on the basis of current forecasts, this position is projected to strengthen further in the immediate years ahead. It is important, of course, that the fund's surplus should be used to best advantage, having regard to emerging demands and the overall interests of its contributors. Accordingly, I propose, in consultation with the Minister for Social, Community and Family Affairs, to have an early examination of possible strategies in this regard.
BES and Seed Capital SchemeThe business expansion and seed capital schemes are due to lapse on 5 April 2001. I propose to renew these schemes to the end of 2001 while a review is carried out by the Department of Enterprise, Trade and Employment on their continued effectiveness. I also propose to recognise county enterprise boards for the purpose of certifying suitable projects under the schemes.
Farmer TaxationTurning to farmer taxation, I am proposing a number of tax incentives in this area which are aimed at promoting increased farm investment. First, farmers like other business sectors will gain from the general increase in the annual capital allowances for investment in plant and machinery from 15% to 20%. Second, I am proposing to renew both the general 25% stock relief and the special 100% stock relief for certain young trained farmers for a further two years from 6 April 2001, subject to conformity with EU State aid rules. Third, I am extending the time period for reinvestment for roll over relief for capital gains tax purposes, where farmland is the subject of a compulsory purchase order for road building. The details are contained in the summary of budget measures. Finally, the flat rate of VAT charged by unregistered farmers to registered traders and the associated VAT rate for livestock will be increased to 4.3% from 1 January.
Probate TaxProbate tax was introduced in 1993 as a limited revenue raising measure to compensate for the low yield from taxes on capital generally. I have always held it to be an invidious tax, penalising small legacies unduly. Over the years its scope was narrowed because of its wide and sometimes harsh effect. I increased the exemption threshold last year from £10,000 to £40,000 but this year I have decided to abolish the tax fully at a cost of almost £30 million in a full year to the Exchequer.
Rented Sector ReliefsA commission was established last year to examine the rented housing sector and to make recommendations to improve its operation. The Government is considering the report of the commission and its recommendations will be examined for the Finance Bill.
Rent a RoomThere are many homes where the possibility exists of spare accommodation being rented out. A barrier is often the fact that such income is taxable. I am providing that gross rental income of up to £6,000 per annum from the provision of residential accommodation in a person's principal private residence will be exempt from tax. Where an individual claims this relief, mortgage interest relief, the capital gains tax relief on one's principal private residence and the stamp duty relief on owner occupied residences will continue to apply.
Rent ReliefI am conscious of the impact on some tenants of the increasing cost of rent.
Is the Minister taking in lodgers himself?
Currently, rent relief allowed for under 55s is significantly less than for the over 55s. I am therefore increasing the rent allowable for under 55s from £750 per annum to £1,000 per annum for a single person and from £1,500 to £2,000 in the case of a married couple. In the case of widowed persons I will be increasing the rate of relief for widowed persons to the married rate in all cases.
Trade UnionsI have received strong representations from ICTU and individual trade unions for tax relief on trade union subscriptions. Having considered the case and in recognition of the role of trade unions I propose to provide a flat rate allowance of £100 at the standard rate of tax in respect of trade union subscriptions. The sum of £100 is roughly the amount most members pay each year.
Gainsharing, Profit Sharing and Share OptionsGiving employees a stake in their company or organisation's future is an important way of recognising and rewarding work and effort. There are a number of schemes already applying in this area. A consultative committee established under the PPF has been examining the potential for encouraging gainsharing, profit sharing and share option schemes by the provision of favourable tax treatment and I will give careful consideration to the outcome of these discussions in that context. I will consider these matters further for the Finance Bill.
Major Changes in Tax AdministrationThis is a time of major change in tax administration. By April next, the changeover to the more equitable system of tax credits will be completed and the process of moving the income tax year into line with the calendar year will begin. Of course, from January 2002, all taxes will be paid in euro.
I would like at this point to pay my own personal compliment to the management and staff of the Revenue Commissioners at all levels who managed under great pressure and with little advance notice to implement the major reforms of the income tax system which I have made over the past two years. The dedication and expertise of the Revenue Commissioners in coping with this challenge is highly commendable.
Other Taxation MeasuresI have further measures in mind to rationalise the tax system.
Will the Minister not thank Deputy Jim Mitchell?
Tax reliefs on the payment of fees for education courses are somewhat complex, all with their own rules. I propose to amalgamate and expand the four reliefs that relate to third level education. Full details will be in the Finance Bill.
In the context of rationalising existing tax reliefs, I will also examine before the Finance Bill the myriad of tax reliefs for donations of various types to different causes to see if we can come up with a more sensible and coherent system to encourage more gifts for genuinely good causes. A number of further tax measures not specifically mentioned in my statement are set out in the summary of budget measures.
In the popular television series, "Yes Minister"—
A Deputy
What about "Bull Island"?
—the loyal civil servant, Sir Humphrey, often advised his political master as follows: "To be precise, many things may be done, but nothing must ever be done for the first time." It will scarcely surprise that I do not subscribe to this political maxim.
This Government is delivering on what it promised the electorate in 1997.
(Interruptions.)
Order, please.
We are also delivering on our commitments in the PPF. The measures I have announced today will improve the quality of life of all our people. They will lead to a fairer society, with opportunity for all. They will raise living standards for all, and encourage and reward effort and enterprise. This budget supports social partnership. It takes significant action to combat inflation. It continues this Government's programme of tax reform. It contains the largest ever package of supports for children and their parents.
Deputies
Hear, hear.
This is budget number four in a series of five for this Fianna Fáil-Progressive Democrats Government.
(Interruptions.)
It is another stage in the implementation of this Government's programme. My next budget will complete our programme so that Ireland continues into the 21st century as a prosperous, fair and caring nation.
I commend this budget to the House.
Deputies
Hear, hear.
That was the only sincere cheer of the day.
The only thing missing is a Mexican wave.
TABLE 1
Summary of Current and Capital Budgets, 2000 and 2001 and Projections for 2002 and 2003
|
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
|
|
Current Budget |
£m |
£m |
£m |
£m |
|
Current Expenditure |
||||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
15,104 |
17,407 |
19,195 |
20,438 |
|
Non-voted (Central Fund expenditure) |
3,131 |
2,680 |
2,686 |
2,866 |
|
Expenditure from Social Insurance Fund |
2,475 |
2,782 |
3,003 |
3,142 |
|
Gross Current Expenditure |
20,710 |
22,869 |
24,884 |
26,446 |
|
less Appropriations-in-aid (including PRSI)Note 2 |
(4,148) |
(4,472) |
(4,683) |
(4,866) |
|
less Departmental BalancesNote 3 |
(129) |
(20) |
– |
– |
|
Net Current ExpenditureTables 4 and 4a |
16,434 |
18,377 |
20,201 |
21,579 |
|
Current Receipts |
||||
|
Tax RevenueTable 2 |
21,492 |
23,990 |
26,440 |
29,100 |
|
Non-Tax RevenueTable 2 |
440 |
532 |
538 |
547 |
|
Total Current Receipts |
21,932 |
24,522 |
26,977 |
29,647 |
|
Current Budget Surplus |
5,498 |
6,145 |
6,777 |
8,068 |
|
Capital Budget |
||||
|
Capital Expenditure |
||||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
3,133 |
4,046 |
4,553 |
4,366 |
|
Non-voted (Expenditure under legislation) |
200 |
118 |
100 |
100 |
|
Pre-funding of future pension liabilitiesNote 4 |
1,850 |
765 |
839 |
912 |
|
less Appropriations-in-aidNote 2 |
(72) |
(104) |
(77) |
(68) |
|
Net Capital ExpenditureTables 5 and 5a |
5,111 |
4,826 |
5,415 |
5,309 |
|
Capital ResourcesNote 5 |
2,091 |
1,219 |
871 |
654 |
|
Capital Budget Balance |
(3,020) |
(3,607) |
(4,545) |
(4,656) |
|
General Contingency ProvisionNote 6 |
– |
– |
(400) |
(900) |
|
Exchequer SurplusNote 7 |
2,478 |
2,538 |
1,832 |
2,512 |
|
General Government SurplusNote 8 |
3,800 |
3,900 |
3,795 |
5,100 |
|
GG Surplus as % of GDPNote 8 |
4.7% |
4.3% |
3.8% |
4.6% |
|
GDP Value (ESA 95 basis)Note 8 |
80,625 |
91,750 |
101,025 |
110,050 |
Note that figures may not add due to rounding
Notes to Table 1Note 1.The projections reflect:
(a)the impact of the measures announced in Budget 2001;
(b)technical provisions under the expenditure and tax headings for possible future budgets, with full year costs of £1.3 billion in 2002 and £1.2 billion in 2003 in respect of changes in tax and gross current expenditure which include the changes indicated in Budget 2001 for those years. The level of these changes will be subject to review in light of emerging economic conditions.
(c)unchanged interest rates;
(d)the cost of reducing Corporation Tax rates by 4 percentage points in 2002 and 3.5 percentage points in 2003;
(e)a decrease in Capital Services Redemption Account assets of £400 million in 2001 and £230 million in 2002. The estimate for the 2000 outturn for non-voted current expenditure includes a payment of £178 million into the Capital Services Redemption Account in 2000.
Note 2.Appropriations-in-Aid are Departmental receipts which, with the approval of the Dáil, may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund. Details of gross voted Departmental expenditure are contained in the Estimates for Public Services. PRSI receipts accrue to the Social Insurance Fund.
Note 3.Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year.
Note 4.This includes the annual set-aside of at least 1% of GNP for the pre-funding of part of the future cost of social welfare and public service pensions and in addition, receipts arising in 2000 from the sale of Telecom Eireann which were assigned to pre-funding.
Note 5.The 2000 figure excludes the repayment of a loan of £100 million by the Insurance Compensation Fund. This loan was made to the Insurance Compensation Fund in 1985 for a 15 year term.
Note 6.This is a contingency provision against all budgetary costs which cannot be quantified at this stage.
Note 7.The 2000 outturn estimates are identical to the White Paper figures except in the case of (1) Tax Revenue which is £8 million lower due to the change in Excise receipts as a consequence of the Budget changes and (2) an outturn for voted capital which is £39 million lower than the White Paper figure.
Note 8.The figures for GDP and GGB values are the ESA 95 equivalent.
Measurement of Expenditure Increases
Net Current Expenditure
With the introduction of the new Local Government Fund in 1999, £244 million is included in the 2001 Estimates which is not included in 1998 and earlier years. To allow a proper assessment of the annual average increase in current expenditure, £244 million must be removed from the 2001 figures.
|
1997Outturn£m |
2001Estimate£m |
Annual Averageincrease |
|
|
Central Fund |
3,691 |
2,680 |
7.7% |
|
Net Voted Departmental Expenditure |
10,335 |
15,697 |
11.0% |
|
Total Net Current Expenditure |
14,026 |
18,377 |
7.0% |
|
Less |
|||
|
Local Government Fund |
244 |
||
|
Total Net Current Expenditure (adjusted) |
14,026 |
18,133 |
6.6% |
TABLE 2
Current Receipts 2000 to 2003
|
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
|
|
£m |
£m |
£m |
£m |
|
|
Tax Revenue |
||||
|
Customs |
163 |
181 |
189 |
198 |
|
Excise Duties (a) |
3,439 |
3,760 |
4,116 |
4,398 |
|
Capital Taxes |
814 |
942 |
892 |
1,139 |
|
Stamp Duties |
887 |
1,005 |
1,072 |
1,107 |
|
Income Tax |
7,273 |
7,780 |
8,461 |
9,258 |
|
Corporation Tax |
3,007 |
3,388 |
3,912 |
4,466 |
|
Value-Added Tax |
5,889 |
6,924 |
7,790 |
8,526 |
|
Agricultural Levies (EU) |
9 |
9 |
9 |
9 |
|
Employment and Training Levy |
11 |
1 |
– |
– |
|
Tax Receipts |
21,492 |
23,990 |
26,440 |
29,100 |
|
Non-Tax Revenue |
||||
|
Central Bank – Surplus Income |
170 |
259 |
259 |
259 |
|
National Lottery Surplus |
134 |
126 |
128 |
132 |
|
Interest on Loans & Dividends |
56 |
52 |
53 |
55 |
|
Other Receipts |
82 |
95 |
98 |
101 |
|
Total Non-Tax Revenue |
440 |
532 |
538 |
547 |
|
Total Current Receipts |
21,932 |
24,522 |
26,977 |
29,647 |
(a)The 2000 outturn reflects a deduction of £8 million from the White Paper figure which is the net impact in 2000 of the changes to Excise Duties made on 7 December 2000.
TABLE 3
How gross current expenditure will be allocated
|
2001 Post-Budget |
£m |
£m |
Percentage of Total Gross Expenditure |
|
Service of National Debt |
|||
|
Interest (a) |
1,707 |
7.3% |
|
|
Sinking Funds |
377 |
1.6% |
|
|
Other debt management expenses |
26 |
0.1% |
|
|
2,109 |
9.1% |
||
|
EU Budget Contribution |
940 |
||
|
Economic Services |
|||
|
Industry and Labour |
809 |
3.5% |
|
|
Agriculture |
814 |
3.5% |
|
|
Fisheries, Forestry |
83 |
0.4% |
|
|
Tourism |
78 |
0.3% |
|
|
1,784 |
7.7% |
||
|
Infrastructure |
87 |
0.4% |
|
|
Social Services |
|||
|
Health |
4,980 |
21.4% |
|
|
Education |
3,278 |
14.1% |
|
|
Social Welfare |
6,154 |
26.4% |
|
|
Subsidies, etc. |
217 |
0.9% |
|
|
14,629 |
62.9% |
||
|
Security |
1,795 |
7.7% |
|
|
Other |
1,925 |
8.3% |
|
|
Gross Expenditure |
23,269 |
100.0% |
Note that figures may not add due to rounding.
(f2>a)Of the £2,109 million cost of servicing the National Debt in 2001, £1,709m will be met from the Exchequer and £400m will be met by reducing the assets of the Capital Services Redemption Account.
TABLE 4
Summary of Adjustments to 2001 Net Current Expenditure
|
Vote No. |
Vote |
2001Estimates on Pre-Budget basis (a) |
Adjustmentsin theBudget |
2001RevisedEstimates |
|
£000 |
£000 |
£000 |
||
|
1 |
President's Establishment |
1,343 |
– |
1,343 |
|
2 |
Houses of the Oireachtas and the European Parliament |
42,669 |
– |
42,669 |
|
3 |
Department of the Taoiseach |
22,109 |
– |
22,109 |
|
4 |
Ordnance Survey Ireland |
7,330 |
– |
7,330 |
|
5 |
Central Statistics Office |
40,415 |
– |
40,415 |
|
6 |
Office of the Minister for Finance |
80,862 |
– |
80,862 |
|
7 |
Superannuation and Retired Allowances |
125,756 |
– |
125,756 |
|
8 |
Office of the Comptroller and Auditor General |
4,307 |
– |
4,307 |
|
9 |
Office of the Revenue Commissioners |
194,105 |
– |
194,105 |
|
10 |
Office of Public Works |
93,715 |
– |
93,715 |
|
11 |
State Laboratory |
4,110 |
– |
4,110 |
|
12 |
Secret Service |
735 |
– |
735 |
|
13 |
Office of the Attorney General |
8,105 |
– |
8,105 |
|
14 |
Office of the Director of Public Prosecutions |
12,160 |
– |
12,160 |
|
15 |
Valuation Office |
5,429 |
– |
5,429 |
|
16 |
Civil Service Commission |
8,129 |
– |
8,129 |
|
17 |
Office of the Ombudsman |
2,972 |
– |
2,972 |
|
18 |
Office of the Chief State Solicitor |
20,663 |
– |
20,663 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
161,253 |
400 |
161,653 |
|
20 |
Garda Síochána |
655,514 |
150 |
655,664 |
|
21 |
Prisons |
190,900 |
– |
190,900 |
|
22 |
Courts Service |
39,935 |
– |
39,935 |
|
23 |
Land Registry and Registry of Deeds |
21,116 |
– |
21,116 |
|
24 |
Charitable Donations and Bequests |
303 |
– |
303 |
|
25 |
Environment and Local Government |
475,444 |
1,540 |
476,984 |
|
26 |
Office of the Minister for Education and Science |
192,352 |
2,850 |
195,202 |
|
27 |
First Level Education |
967,623 |
1,050 |
968,673 |
|
28 |
Second Level and Further Education |
1,120,740 |
6,100 |
1,126,840 |
|
29 |
Third Level and Further Education |
813,267 |
– |
813,267 |
|
30 |
Marine and Natural Resources |
74,065 |
4,000 |
78,065 |
|
31 |
Agriculture, Food and Rural Development |
518,596 |
235 |
518,831 |
|
32 |
Public Enterprise |
197,575 |
300 |
197,875 |
|
33 |
Health and Children |
3,929,079 |
256,553 |
4,185,632 |
|
34 |
Enterprise, Trade and Employment |
632,642 |
10,980 |
643,622 |
|
35 |
Tourism, Sport and Recreation |
124,520 |
20,000 |
144,520 |
|
36 |
Defence |
566,056 |
– |
566,056 |
|
37 |
Army Pensions |
97,422 |
– |
97,422 |
|
38 |
Foreign Affairs |
94,838 |
200 |
95,038 |
|
39 |
International Co-operation |
188,402 |
– |
188,402 |
|
40 |
Social, Community and Family Affairs |
2,945,486 |
383,680 |
3,329,166 |
|
41 |
An Chomhairle Ealaíon |
32,500 |
– |
32.500 |
|
42 |
An Roinn Ealaíon, Oidhreachta, Gaeltachta agus Oileán |
122,441 |
1,500 |
123,941 |
|
43 |
National Gallery |
3,999 |
– |
3,999 |
|
Administrative Budget Carryover |
– |
16,200 |
16,200 |
|
|
Increases in Remuneration and Pensions (b) |
– |
170,000 |
170,000 |
|
|
Total Net Voted Expenditure (b) |
14,840,982 |
875,738 |
15,716,720 |
|
|
Less |
Departmental Balances (c) |
– |
-20,000 |
-20,000 |
|
Exchequer Payments Towards voted Expenditure (d) |
14,840,982 |
855,738 |
15,696,720 |
|
|
Plus |
Non-Voted Current Expenditure (i.e. Central Fund) |
2,680,000 |
– |
2,680,000 |
|
Net Current Expenditure |
17,520,982 |
855,738 |
18,376,720 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)This is a global provision to cover the cost in 2001 of the adjustment to the pay terms of the PPF agreed on 4 December and the craft analogue review.
(c)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
(d)Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year end and are carried forward to be used in the next year.
TABLE 4 (a)
Current Expenditure Projections – 2002 and 2003
|
Ministerial Group |
2002Net |
2003Net |
|
£000 |
£000 |
|
|
1 Taoiseach |
47,319 |
54,111 |
|
2 Finance |
636,770 |
653,165 |
|
3 Public Enterprise |
196,004 |
195,305 |
|
4 Justice, Equality and Law Reform |
1,090,063 |
1,114,031 |
|
5 Environment and Local Government |
498,926 |
512,117 |
|
6 Education and Science |
3,405,877 |
3,542,054 |
|
7 Marine and natural Resources |
82,067 |
83,655 |
|
8 Agriculture, Food and Rural Development |
587,025 |
605,557 |
|
9 Enterprise, Trade and Employment |
724,818 |
770,745 |
|
10 Tourism, Sport and Recreation |
161,466 |
170,736 |
|
11 Defence |
661,545 |
689,372 |
|
12 Foreign Affairs |
391,337 |
441,834 |
|
13 Social, Community and Family Affairs |
3,678,400 |
3,798,100 |
|
14 Health and Children |
4,691,501 |
5,163,979 |
|
15 An Roinn Ealaíon, Oidhreachta, Gaeltachta agus Oileán |
164,828 |
167,351 |
|
Unallocated Current Expenditure (a) |
497,000 |
751,000 |
|
Total Voted Expenditure |
17,514,946 |
18,713,112 |
|
plus Non-voted Current Expenditure (i.e. Central Fund) |
2,685,700 |
2,866,100 |
|
Net Current Expenditure |
20,200,646 |
21,579,212 |
(a)This heading includes the 2002 and 2003 costs of the adjustment to the pay terms of the PPF agreed on 4 December 2000 and the craft analogue review in addition to a provision for non-pay costs in those years.
TABLE 5
Summary of Adjustments to 2001 Capital Expenditure
|
VoteNo. |
Vote |
2001Estimates onPre-Budgetbasis (a) |
Adjustments inthe Budget |
2001RevisedEstimates |
|
£000 |
£000 |
£000 |
||
|
3 |
Department of the Taoiseach |
22,001 |
22,001 |
|
|
4 |
Ordnance Survey Ireland |
1,850 |
1,850 |
|
|
5 |
Central Statistics Office |
2,613 |
2,613 |
|
|
6 |
Office of the Minister for Finance |
52,188 |
5,000 |
57,188 |
|
9 |
Office of the Revenue Commissioners |
9,558 |
9,558 |
|
|
10 |
Office of Public Works |
225,800 |
2,200 |
228,000 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
39,482 |
39,482 |
|
|
20 |
Garda Síochána |
25,396 |
25,396 |
|
|
21 |
Prisons |
37,134 |
200 |
37,334 |
|
22 |
Courts Service |
22,634 |
22,634 |
|
|
25 |
Environment and Local Government |
1,789,957 |
6,500 |
1,796,457 |
|
26 |
Office of the Minister for Education and Science |
28,661 |
1,000 |
29,661 |
|
27 |
First Level Education |
102,500 |
1,750 |
104,250 |
|
28 |
Second Level and Further Education |
125,300 |
3,000 |
128,300 |
|
29 |
Third Level and Further Education |
173,670 |
400 |
174,070 |
|
30 |
Marine and Natural Resources |
91,621 |
11,500 |
103,121 |
|
31 |
Agriculture, Food and Rural Development |
64,760 |
64,760 |
|
|
32 |
Public Enterprise |
318,400 |
318,400 |
|
|
33 |
Health and Children |
285,000 |
300 |
285,300 |
|
34 |
Enterprise, Trade and Employment |
219,589 |
2,250 |
221,839 |
|
35 |
Tourism, Sport and Recreation |
101,339 |
3,745 |
105,144 |
|
36 |
Defence |
44,190 |
44,190 |
|
|
38 |
Foreign Affairs |
3,793 |
3,793 |
|
|
40 |
Social, Community and Family Affairs |
7,200 |
7,200 |
|
|
41 |
An Chomhairle Ealaíon |
4,000 |
4,000 |
|
|
42 |
An Roinn Ealaíon Oidhreachta, Gaeltachta agus Oileán |
102,439 |
340 |
102,779 |
|
43 |
National Gallery |
3,200 |
3,200 |
|
|
44 |
Flood Relief |
250 |
250 |
|
|
Total Net Voted Capital (b) |
3,904,585 |
38,185 |
3,942,770 |
|
|
Plus |
Non-voted Exchequer Capital |
117,900 |
117,900 |
|
|
Plus |
Pre-funding of future pension liabilities |
765,000 |
765,000 |
|
|
Total expenditure |
4,787,485 |
38,185 |
4,825,670 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
TABLE 5 (a)
Capital Expenditure Projections – 2002 and 2003
|
Vote No. |
Vote |
2002Net |
2003Net |
|
£000 |
£000 |
||
|
3 |
Department of the Taoiseach |
9,500 |
5,500 |
|
4 |
Ordnance Survey Ireland |
1,620 |
1,620 |
|
5 |
Central Statistics Office |
587 |
587 |
|
6 |
Office of the Minister for Finance |
69,173 |
54,589 |
|
9 |
Office of the Revenue Commissioners |
7,000 |
7,000 |
|
10. |
Office of Public Works |
240,850 |
208,263 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
15,288 |
24,115 |
|
20 |
Garda Síochána |
13,739 |
10,862 |
|
21 |
Prisons |
39,834 |
41,555 |
|
22 |
Courts Service |
19,846 |
21,033 |
|
25 |
Environment and Local Government |
2,212,570 |
2,152,519 |
|
26 |
Office of the Minister for Education and Science |
25,100 |
26,545 |
|
27 |
First Level Education |
92,546 |
73,770 |
|
28 |
Second Level and Further Education |
110,400 |
75,000 |
|
29 |
Third Level and Further Education |
213,000 |
184,440 |
|
30 |
Marine and Natural Resources |
90,569 |
82,466 |
|
31 |
Agriculture, Food and Rural Development |
79,171 |
82,172 |
|
32 |
Public Enterprise |
371,591 |
255,553 |
|
33 |
Health and Children |
336,600 |
422,700 |
|
34 |
Enterprise, Trade and Employment |
261,478 |
284,026 |
|
35 |
Tourism, Sport and Recreation |
124,846 |
129,269 |
|
36 |
Defence |
18,845 |
21,945 |
|
38 |
Foreign Affairs |
3,793 |
3,793 |
|
40 |
Social, Community and Family Affairs |
6,575 |
4,175 |
|
41 |
An Chomhairle Ealaíon |
4,000 |
4,000 |
|
42 |
An Roinn Ealaíon Oidhreachta, Gaeltachta agus Oileán |
106,812 |
119,679 |
|
43 |
National Gallery |
750 |
750 |
|
Total Voted Net Capital (a) |
4,476,083 |
4,297,926 |
|
|
Plus |
Non-voted Exchequer Capital |
100,000 |
100,000 |
|
Plus |
Pre-funding of future pension liabilities |
839,250 |
911,500 |
|
Total Capital Expenditure |
5,415,333 |
5,309,426 |
(a)The above figures for 2002 and 2003 are National Prices Commission projections of the post-Budget 2000 figures (as set out in Table 5) and are consistent with the Exchequer Capital expenditure portion of the allocations in the National Development Plan 2000-2006.
TABLE 6
Explanation of net difference between Exchequer Surplus and General Government Surplus
The Exchequer Surplus is the traditional domestic budgetary aggregate which measures Central Government's net surplus or borrowing position. It is the difference between total receipts into and total expenditure out of the Exchequer Account of the Central Fund.
The General Government Balance (GGB) measures fiscal performance of all arms of Government, i.e. Central Government, Local Authorities, Health Boards, Vocational Education Committees and non-commercial State sponsored bodies, as well as Funds such as the Social Insurance Fund which are managed by Central Government Departments. It thus provides an assessment of the fiscal performance of a more complete "government" sector.
The GGB does not reflect the position of commercial State sponsored bodies as these agencies are classified as being outside the General Government Sector.
The GGB is calculated in accordance with ESA95, a consistent standard developed by the EU to facilitate budgetary comparisons between EU Member States in accordance with their obligations under the Maastricht Treaty.
Details of the variation between the Exchequer Balance and the GGB are set out in the table below.
|
Data are in IR£ million |
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
|
Exchequer Surplus |
2,478 |
2,538 |
1,832 |
2,512 |
|
Interest adjustments (a) |
258 |
330 |
282 |
17 |
|
Exclude equity and loan transactions (b) |
1,249 |
74 |
85 |
85 |
|
Net (Borrowing)/Surplus of non-commercial State sponsored bodies |
1 |
3 |
– |
– |
|
Adjustments for Transactions between the Exchequer and Government Departments/Offices and Extra-Budgetary Funds (c) |
11 |
9 |
30 |
30 |
|
Impact of the Temporary Holding Fund in 2000 and 2001 (d) |
2,035 |
975 |
||
|
Impact of the National Pensions Reserve Fund in 2002 and 2003 (d) |
1,070 |
1,159 |
||
|
Accrual Adjustments (e) |
63 |
201 |
257 |
284 |
|
Net (Borrowing)/Surplus of Central Government |
3,573 |
3,452 |
2,992 |
4,053 |
|
Net Surplus of the Social Insurance Fund |
341 |
454 |
803 |
1,047 |
|
Net (Borrowing)/Surplus of Local Authorities |
114 |
6 |
– |
– |
|
General Government Surplus |
3,800 |
3,900 |
3,795 |
5,100 |
|
Net Difference between Exchequer Surplus and GG Surplus |
1,322 |
1,362 |
1,963 |
2,588 |
(a)This adjustment reflects the requirement, under ESA95 rules, that changes in the assets of the Capital Services Redemption Account and capital gains or losses on foreign exchange contracts, swaps, etc., should be excluded from the interest to be recorded for the purpose of calculating the GGB.
(b)Equity and loan transactions are excluded from the GGB on the basis that they affect the composition but not the level of assets and liabilities. The proceeds from the sale of shares in Eircom (formerly Telecom Éireann) does not affect the GGB as this is treated as a financial transaction under ESA conventions and is not counted as income of the General Government Sector.
(c)Transfers between units within the General Government Sector do not affect the GGB.
(d)The Temporary Holding Fund and the National Pensions Reserve Fund (to be established in 2001) are part of the General Government Sector and transactions within the Sector do not impact on the GGB. These figures include the contributions paid from the Exchequer and a provision for interest earnings by the funds.
(e)This adjustment is required in respect of certain transactions recorded on an accruals basis in calculating the GGB. The main adjustments are in respect of Value Added Tax receipts and Departmental Balances.
TABLE 7
EXPLANATORY TABLE OF BUDGET, 2001 (a)
|
CURRENT BUDGET |
|||
|
Revenue |
£m |
£m |
£m |
|
Pre-Budget Tax Revenue |
24,450 |
||
|
Deduct:Income Tax reliefs: |
|||
|
–changes in exemption limits, personal allowances, standard tax rate and standard bands |
700 |
||
|
–other Income Tax concessions |
28 |
727 |
|
|
VAT measures |
157 |
||
|
Corporation Tax measures |
8 |
||
|
Capital Tax measures |
15 |
||
|
Stamp Duty measures |
20 |
||
|
Excise measures |
155 |
354 |
|
|
Impact of change to Income Tax Calendar year |
119 |
||
|
Change to relief-at-source to Medical Insurance |
50 |
169 |
|
|
Net effect on tax projections of tax and spendingchanges (b) |
791 |
||
|
Post-Budget Tax Revenue |
23,990 |
||
|
Non-Tax Revenue |
532 |
||
|
Post-Budget Current Revenue |
24,522 |
||
|
Expenditure |
£m |
£m |
£m |
|
Pre-Budget Voted expenditure [per Estimates for the Public Services (Abridged Version)] |
14,841 |
||
|
Adjust for: |
|||
|
Net revisions to Estimates (c) |
62 |
||
|
Add:Impact of Social Inclusion Measures |
|||
|
Social Welfare improvements (d) |
384 |
||
|
Health Developments |
181 |
||
|
Education and Science |
10 |
||
|
Other |
9 |
583 |
|
|
Impact of Non Social Inclusion Measures |
|||
|
Adjustment to pay terms of PPF |
170 |
||
|
Health Developments |
14 |
||
|
Miscellaneous |
47 |
230 |
|
|
Estimated Departmental Balances (e) |
20 |
||
|
Voted Expenditure on post-Budget basis |
15,697 |
||
|
Pre-Budget non-voted (Central Fund)expenditure as shown in the White Paper |
3,080 |
||
|
Deduct: Reduction in Capital Services Redemption |
|||
|
Account Assets |
400 |
2,680 |
|
|
Total Current Expenditure on post-Budget basis |
18,377 |
CURRENT BUDGET SURPLUS6,145
CAPITAL BUDGET DEFICIT(3,607)
EXCHEQUER SURPLUS2,538
(a)This table shows the effects of the implementation of the Budget day measures on the pre-Budgetary position shown in the White Paper on Receipts and Expenditure.
(b)The Budget Measures have an impact on the economy with changes in consumption and investment patterns etc. leading to estimated additional tax buoyancy of £791 million.
(c)This figure reflects the technical adjustments to the Health and Children Vote.
(d)The full Department of Social, Community and Family Affairs expenditure in respect of the social welfare package in this Budget is £850 million. In the year 2001, the total gross cost of the package is £587 million of which £384 million is funded from the Exchequer and £203 million is met from the Social Insurance Fund.
(e)Departmental balances are those amounts issued from the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year. They have no effect on Departmental spending which is governed by the allocation in the Estimates for Public Services.
TABLE A
TREND IN THE CURRENT BUDGET SURPLUS/(DEFICIT)
THE EXCHEQUER SURPLUS/(DEFICIT)
GENERAL GOVERNMENT SURPLUS/(DEFICIT) 1997-2000
|
Year |
CurrentBudgetBalance |
£m |
% ofGNP |
ExchequerBalance |
£m |
% ofGNP |
GeneralGovernmentBalance |
£m |
% ofGDP |
|
1977 |
(201) |
(3.6) |
(545) |
(9.7) |
– |
– |
|||
|
1978 |
(397) |
(6.0) |
(810) |
(12.3) |
– |
– |
|||
|
1979 |
(522) |
(6.3) |
1,009 |
(13.1) |
– |
– |
|||
|
1980 |
(547) |
(6.0) |
(1,217) |
(13.4) |
– |
– |
|||
|
1981 |
(802) |
(7.3) |
(1,722) |
(15.7) |
– |
– |
|||
|
1982 |
(988) |
(7.9) |
(1,945) |
(15.5) |
– |
– |
|||
|
1983 |
(960) |
(7.0) |
(1,756) |
(12.8) |
– |
– |
|||
|
1984 |
(1,039) |
(7.0) |
(1,825) |
(12.2) |
– |
– |
|||
|
1985 |
(1,284) |
(8.0) |
(2,015) |
(12.6) |
– |
– |
|||
|
1986 |
(1,395) |
(7.9) |
(2,145) |
(12.1) |
– |
– |
|||
|
1987 |
(1,180) |
(6.2) |
(1,786) |
(9.4) |
(1,811) |
(8.6) |
|||
|
1988 (a) |
(317) |
(1.6) |
(619) |
(3.1) |
(1,020) |
(4.5) |
|||
|
1989 |
(263) |
(1.1) |
(479) |
(2.2) |
(449) |
(1.8) |
|||
|
1990 |
(152) |
(0.6) |
(462) |
(1.8) |
(631) |
(2.2) |
|||
|
1991 (b) |
(298) |
(1.1) |
(499) |
(1.9) |
(685) |
(2.3) |
|||
|
1992 |
(446) |
(1.6) |
(713) |
(2.5) |
(752) |
(2.4) |
|||
|
1993 |
(379) |
(1.2) |
(690) |
(2.3) |
(771) |
(2.2) |
|||
|
1994 |
15 |
0.0 |
(672) |
(2.0) |
(609) |
(1.6) |
|||
|
1995 |
(362) |
(1.0) |
(627) |
(1.7) |
(899) |
(2.1) |
|||
|
1996 |
292 |
0.7 |
(436) |
(1.1) |
(117) |
(0.2) |
|||
|
1996 |
292 |
0.7 |
(436) |
(1.1) |
(193) |
(0.4) |
|||
|
1997 |
604 |
1.3 |
(235) |
(0.5) |
374 |
0.7 |
|||
|
1998 |
2,091 |
3.9 |
747 |
1.4 |
1,251 |
2.1 |
|||
|
1999 |
3,439 |
5.8 |
1,192 |
2.0 |
1,470 |
2.1 |
|||
|
2000* |
5,498 |
8.1 |
2,478 |
3.7 |
3,800 |
4.7 |
|||
|
2001** |
6,145 |
8.0 |
2,538 |
3.3 |
3,900 |
4.3 |
Note
Figures are on an ESA 79 basis to 1996 and on an ESA 95 basis thereafter
Parentheses denote deficit in a particular year
*Provisional Outturn.
**Post-Budget Estimate.
(a)Inclusive of receipts of £450 million under the tax incentive scheme (amnesty).
(b)The Current Budget position and Exchequer position are exclusive of £270 million proceeds from flotation of Irish Life. All proceeds of the sales of State equity are excluded from the General Government position.
TABLE B
TREND IN NATIONAL DEBT AND GENERAL GOVERNMENT DEBT
|
Year |
Total National Debt |
£m |
% of GNP |
General Government Debt (a) |
£m |
% of GDP |
|
1977 |
4,229 |
75.2 |
– |
– |
||
|
1978 |
5,167 |
78.6 |
– |
– |
||
|
1979 |
6,540 |
85.0 |
– |
– |
||
|
1980 |
7,896 |
87.0 |
– |
– |
||
|
1981 |
10,195 |
93.2 |
– |
– |
||
|
1982 |
11,669 |
92.9 |
– |
– |
||
|
1983 |
14,392 |
104.8 |
– |
– |
||
|
1984 |
16,821 |
112.8 |
– |
– |
||
|
1985 |
18,502 |
115.6 |
– |
– |
||
|
1986 |
21,611 |
122.2 |
– |
– |
||
|
1987 |
23,694 |
125.0 |
– |
– |
||
|
1988 |
24,611 |
122.7 |
– |
– |
||
|
1989 |
24,828 |
111.9 |
– |
– |
||
|
1990 |
25,083 |
99.0 |
26,802 |
93.7 |
||
|
1991 |
25,378 |
95.9 |
28,218 |
95.1 |
||
|
1992 |
26,344 |
94.1 |
29,026 |
92.1 |
||
|
1993 |
28,357 |
93.3 |
32,718 |
96.1 |
||
|
1994 |
29,227 |
88.8 |
33,132 |
90.5 |
||
|
1995 |
30,209 |
82.3 |
34,410 |
83.1 |
||
|
1996 |
29,912 |
73.9 |
33,917 |
74.3 |
||
|
1997 |
30,689 |
66.1 |
34,342 |
65.1 |
||
|
1998 |
29,541 |
55.5 |
33,295 |
55.0 |
||
|
1999 |
31,383 |
53.1 |
34,621 |
50.1 |
(a) ESA 95 basis from 1990
The General Government Debt essentially includes the cumulative gross debt of the local authorities and the non-commercial state sponsored bodies as well as nearly all of the National Debt measured on a gross basis. It excludes Central Government liabilities to institutions classified within the General Government sector; these are included in the National Debt.
It should be noted that the National Debt is calculated net of domestic and foreign liquid assets whereas the General Government Debt is calculated on a gross basis. The debt of the commercial state bodies is excluded from both National Debt and General Government Debt.
The Finance Accounts for each year contain a detailed breakdown of the National Debt.
TABLE C
TREND IN SERVICE OF NATIONAL DEBT AS A % OF NET CURRENT EXPENDITURE
AND AS A % OF OVERALL TAXATION
|
Year |
Service of National Debt£m |
Service of National Debt |
As a % ofNet Current Expenditure (a) |
As a % of Tax Revenue (b) |
|
1977 |
334 |
17.1 |
22.5 |
|
|
1978 |
418 |
17.3 |
24.2 |
|
|
1979 |
514 |
17.7 |
25.6 |
|
|
1980 |
661 |
17.9 |
25.2 |
|
|
1981 |
885 |
18.5 |
26.7 |
|
|
1982 |
1,249 |
21.2 |
30.8 |
|
|
1983 |
1,456 |
21.8 |
31.1 |
|
|
1984 |
1,705 |
24.5 |
32.1 |
|
|
1985 |
1,967 |
25.8 |
35.2 |
|
|
1986 |
1,989 |
24.5 |
32.6 |
|
|
1987 |
2,118 |
25.4 |
32.6 |
|
|
1988 (c) |
2,141 |
26.6 |
31.2 |
|
|
1989 |
2,141 |
26.7 |
28.8 |
|
|
1990 |
2,300 |
27.3 |
29.1 |
|
|
1991 |
2,351 |
25.9 |
28.2 |
|
|
1992 |
2,355 |
24.0 |
26.4 |
|
|
1993 |
2,390 |
22.7 |
24.8 |
|
|
1994 |
2,227 |
19.9 |
21.0 |
|
|
1995 |
2,405 |
19.9 |
21.3 |
|
|
1996 |
2,360 |
18.6 |
18.8 |
|
|
1997 |
2,755 |
19.6 |
19.3 |
|
|
1998 |
2,559 |
17.8 |
15.9 |
|
|
1999 |
2,512 |
16.2 |
13.5 |
|
|
2000* |
2,242 |
13.6 |
10.4 |
|
|
2001** |
2,109 |
11.5 |
8.8 |
*Provisional Outturn.
**Post-Budget Estimate.
(a) Current expenditure is measured on a net basis as in Table 4.
(b) PRSI receipts are not included in Tax Revenue.
(c) The 1988 figures exclude the exceptional once-off receipts of £450 million under the tax incentive scheme (amnesty).
TABLE 1
Summary of Current and Capital Budgets, 2000 and 2001 and Projections for 2002 and 2003
|
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
|
|
Current Budget |
m |
m |
m |
m |
|
Current Expenditure |
0 |
0 |
||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
19,178 |
22,102 |
24,373 |
25,951 |
|
Non-voted (Central Fund expenditure) |
3,976 |
3,403 |
3,410 |
3,639 |
|
Expenditure from Social Insurance Fund |
3,143 |
3,533 |
3,814 |
3,989 |
|
Gross Current Expenditure |
26,296 |
29,038 |
31,596 |
33,579 |
|
less Appropriations-in-aid (including PRSI)Note 2 |
(5,267) |
(5,679) |
(5,947) |
(6,179) |
|
less Departmental BalancesNote 3 |
(163) |
(25) |
(0) |
(0) |
|
Net Current ExpenditureTables 4 and 4a |
20,867 |
23,334 |
25,650 |
27,400 |
|
Current Receipts |
||||
|
Tax RevenueTable 2 |
27,289 |
30,461 |
33,572 |
36,950 |
|
Non-Tax RevenueTable 2 |
559 |
675 |
683 |
694 |
|
Total Current Receipts |
27,848 |
31,136 |
34,254 |
37,644 |
|
Current Budget Surplus |
6,981 |
7,803 |
8,605 |
10,244 |
|
Capital Budget |
||||
|
Capital Expenditure |
||||
|
Gross Voted (Departmental Expenditure Voted by Dáil) |
3,979 |
5,138 |
5,781 |
5,543 |
|
Non-voted (Expenditure under legislation) |
254 |
150 |
127 |
127 |
|
Pre-funding of future pension liabilitiesNote 4 |
2,349 |
971 |
1,066 |
1,157 |
|
less Appropriations-in-aidNote 2 |
(92) |
(131) |
(97) |
(86) |
|
Net Capital ExpenditureTables 5 and 5a |
6,490 |
6,127 |
6,876 |
6,742 |
|
Capital ResourcesNote 5 |
2,656 |
1,547 |
1,105 |
830 |
|
Capital Budget Balance |
(3,834) |
(4,580) |
(5,771) |
(5,912) |
|
General Contingency ProvisionNote 6 |
(0) |
(0) |
(508) |
(1,143) |
|
Exchequer SurplusNote 7 |
3,147 |
3,222 |
2,326 |
3,189 |
|
General Government SurplusNote 8 |
4,825 |
4,952 |
4,819 |
6,476 |
|
GG Surplus as % of GDPNote 8 |
4.7% |
4.3% |
3.8% |
4.6% |
|
GDP Value (ESA 95 basis)Note 8 |
102,373 |
116,498 |
128,275 |
139,735 |
Note that figures may not add due to rounding.
Notes to Table 1Note 1.The projections reflect:
(a)the impact of the measures announced in Budget 2001;
(b)technical provisions under the expenditure and tax headings for possible future budgets, with full year costs of 1.7 billion in 2002 and 1.5 billion in 2003 in respect of changes in tax and gross current expenditure which include the changes indicated in Budget 2001 for those years. The level of these changes will be subject to review in light of emerging future economic conditions.
(c)unchanged interest rates;
(d)the cost of reducing Corporation Tax rates by 4 percentage points in 2002 and 3.5 percentage points in 2003;
(e)a decrease in Capital Services Redemption Account assets of 508 million in 2001 and £292 million in 2002. The estimate for the 2000 outturn for non-voted current expenditure includes a payment of 226 million into the Capital Services Redemption Account in 2000.
Note 2.Appropriations-in-Aid are Departmental receipts which, with the approval of the Dáil, may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund. Details of gross voted Departmental expenditure are contained in the Estimates for Public Services. PRSI receipts accrue to the Social Insurance Fund.
Note 3.Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year.
Note 4.This includes the annual set-aside of at least 1% of GNP for the pre-funding of part of the future cost of social welfare and public service pensions and in addition, receipts arising in 2000 from the sale of Telecom Éireann which were assigned to pre-funding.
Note 5.The 2000 figure excludes the repayment of a loan of 127 million by the Insurance Compensation Fund. This loan was made to the Insurance Compensation Fund in 1985 for a 15 year term.
Note 6.This is a contingency provision against all budgetary costs which cannot be quantified at this stage.
Note 7.The 2000 outturn estimates are identical to the White Paper figures except in the case of (1) Tax Revenue which is 10 million lower due to the change in Excise receipts as a consequence of the Budget changes and (2) an outturn for voted capital which is 49 million lower than the White Paper figure.
Note 8.The figures for GDP and GGB values are the ESA 95 equivalent.
Measurement of Expenditure Increases
Net Current Expenditure
With the introduction of the new Local Government Fund in 1999, 310 million is included in the 2001 Estimates which is not included in 1998 and earlier years. To allow a proper assessment of the annual average increase in current expenditure, 310 million must be removed from the 2001 figures.
|
1997Outturnm |
2001Estimatem |
Annual Averageincrease |
|
|
Central Fund |
4,687 |
3,403 |
7.7% |
|
Net Voted Departmental Expenditure |
13,123 |
19,931 |
11.0% |
|
Total Net Current Expenditure |
17,809 |
23,334 |
7.0% |
|
Less |
|||
|
Local Government Fund |
310 |
||
|
Total Net Current Expenditure (adjusted) |
17,809 |
23,024 |
6.6% |
TABLE 2
Current Receipts 2000 to 2003
|
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
||
|
m |
m |
m |
m |
||
|
Tax Revenue |
|||||
|
Customs |
207 |
230 |
240 |
251 |
|
|
Excise Duties (a) |
4,367 |
4,774 |
5,227 |
5,584 |
|
|
Capital Taxes |
1,034 |
1,196 |
1,132 |
1,446 |
|
|
Stamp Duties |
1,126 |
1,276 |
1,361 |
1,406 |
|
|
Income Tax |
9,234 |
9,879 |
10,743 |
11,755 |
|
|
Corporation Tax |
3,818 |
4,302 |
4,967 |
5,670 |
|
|
Value-Added Tax |
7,477 |
8,792 |
9,891 |
10,826 |
|
|
Agricultural Levies (EU) |
11 |
11 |
11 |
11 |
|
|
Employment and Training Levy |
14 |
1 |
0 |
0 |
|
|
Tax Receipts |
27,289 |
30,461 |
33,572 |
36,950 |
|
|
Non-Tax Revenue |
|||||
|
Central Bank – Surplus Income |
215 |
329 |
329 |
329 |
|
|
National Lottery Surplus |
170 |
160 |
162 |
167 |
|
|
Interest on Loans & Dividends |
70 |
65 |
67 |
70 |
|
|
Other Receipts |
103 |
121 |
124 |
128 |
|
|
Total Non-Tax Revenue |
559 |
675 |
683 |
694 |
|
|
Total Current Receipts |
27,848 |
31,136 |
34,254 |
37,644 |
(a)The 2000 outturn figure reflects a deduction of EUR10 million from the White Paper figure which is the net impact in 2000 of the changes to Excise Duties made on the 7 December 2000.
TABLE 3
How gross current expenditure will be allocated
|
2001 Post-Budget |
m |
m |
Percentage of Total Gross Expenditure |
|
|
Service of National Debt |
||||
|
Interest (a) |
2,167 |
7.3% |
||
|
Sinking Funds |
478 |
1.6% |
||
|
Other debt management expenses |
33 |
0.1% |
||
|
2,678 |
9.1% |
|||
|
Economic Services |
||||
|
Industry and Labour |
1027 |
3.5% |
||
|
Agriculture |
1034 |
3.5% |
||
|
Fisheries, Forestry |
105 |
0.4% |
||
|
Tourism |
99 |
0.3% |
||
|
2,265 |
7.7% |
|||
|
Infrastructure |
110 |
0.4% |
||
|
Social Services |
||||
|
Health |
6,323 |
21.4% |
||
|
Education |
4,162 |
14.1% |
||
|
Social Welfare |
7,814 |
26.4% |
||
|
Subsidies, etc. |
276 |
0.9% |
||
|
18,575 |
62.9% |
|||
|
Security |
2,279 |
7.7% |
||
|
Other |
2,444 |
8.3% |
||
|
Gross Expenditure |
29,546 |
100.0% |
Note that figures may not add due to rounding.
(a) EUR 508m of the cost of servicing the national debt will be met by reducing the assets of the Capital Services Redemption Account.
TABLE 4
Summary of Adjustments to 2001 Net Current Expenditure
|
Vote No. |
Vote |
2001Estimates on Pre-Budget basis (a) |
Adjustmentsin theBudget |
2001RevisedEstimates |
|
000s |
000s |
000s |
||
|
1 |
President's Establishment |
1,705 |
– |
1,705 |
|
2 |
Houses of the Oireachtas and the European Parliament |
54,178 |
– |
54,178 |
|
3 |
Department of the Taoiseach |
28,073 |
– |
28,073 |
|
4 |
Ordnance Survey Ireland |
9,307 |
– |
9,307 |
|
5 |
Central Statistics Office |
51,316 |
– |
51,316 |
|
6 |
Office of the Minister for Finance |
102,674 |
– |
102,674 |
|
7 |
Superannuation and Retired Allowances |
159,677 |
– |
159,677 |
|
8 |
Office of the Comptroller and Auditor General |
5,469 |
– |
5,469 |
|
9 |
Office of the Revenue Commissioners |
246,463 |
– |
246,463 |
|
10 |
Office of Public Works |
118,994 |
– |
118,994 |
|
11 |
State Laboratory |
5,219 |
– |
5,219 |
|
12 |
Secret Service |
933 |
– |
933 |
|
13 |
Office of the Attorney General |
10,291 |
– |
10,291 |
|
14 |
Office of the Director of Public Prosecutions |
15,440 |
– |
15,440 |
|
15 |
Valuation Office |
6,893 |
– |
6,893 |
|
16 |
Civil Service Commission |
10,322 |
– |
10,322 |
|
17 |
Office of the Ombudsman |
3,774 |
– |
3,774 |
|
18 |
Chief State Solicitor's Office |
26,237 |
– |
26,237 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
204,749 |
508 |
205,257 |
|
20 |
Garda Sochána |
832,331 |
190 |
832,522 |
|
21 |
Prisons |
242,393 |
– |
242,393 |
|
22 |
Courts |
50,707 |
– |
50,707 |
|
23 |
Land Registry and Registry of Deeds |
26,812 |
– |
26,812 |
|
24 |
Charitable Donations and Bequests |
385 |
– |
385 |
|
25 |
Environment and Local Government |
603,689 |
1,955 |
605,645 |
|
26 |
Office of the Minister for Education and Science |
244,237 |
3,619 |
247,855 |
|
27 |
First Level Education |
1,228,628 |
1,333 |
1,229,961 |
|
28 |
Second Level and Further Education |
1,423,046 |
7,745 |
1,430,792 |
|
29 |
Third Level and Further Education |
1,032,636 |
– |
1,032,636 |
|
30 |
Marine and Natural Resources |
94,043 |
5,079 |
99,122 |
|
31 |
Agriculture, Food and Rural Development |
658,481 |
298 |
658,779 |
|
32 |
Public Enterprise |
250,869 |
381 |
251,249 |
|
33 |
Health and Children |
4,988,901 |
325,755 |
5,314,656 |
|
34 |
Enterprise, Trade and Employment |
803,290 |
13,942 |
817,231 |
|
35 |
Tourism, Sport and Recreation |
158,108 |
25,395 |
183,503 |
|
36 |
Defence |
718,743 |
– |
718,743 |
|
37 |
Army Pensions |
123,700 |
– |
123,700 |
|
38 |
Foreign Affairs |
120,419 |
254 |
120,673 |
|
39 |
International Co-operation |
239,221 |
– |
239,221 |
|
40 |
Social, Community and Family Affairs |
3,739,996 |
487,173 |
4,227,169 |
|
41 |
An Comhairle Ealaon |
41,266 |
– |
41,266 |
|
42 |
An Roinn Ealaon, Oidhreachta, Gaeltachta agus Oileáin |
155,468 |
1,905 |
157,373 |
|
43 |
National Gallery |
5,078 |
– |
5,078 |
|
Administrative Budget Carryover |
– |
20,570 |
20,570 |
|
|
Increases in Remuneration and Pensions (b) |
– |
215,855 |
215,855 |
|
|
Total Net Voted Expenditure |
18,844,160 |
1,111,958 |
19,956,118 |
|
|
Less |
Departmental Balances (c) |
– |
-25,395 |
-25,395 |
|
Exchequer Payments Towards Voted Expenditure (d) |
18,844,160 |
1,086,563 |
19,930,723 |
|
|
Plus |
Non-Voted Current Expenditure (i.e. Central Fund) |
3,402,898 |
– |
3,402,898 |
|
Net Current Expenditure |
22,247,058 |
1,086,563 |
23,333,621 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)This is a global provision to cover the cost in 2001 of the adjustment to the pay terms of the PPF agreed on 4 December and the craft analogue review.
(c)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
(d)Departmental balances are those amounts issued from the Exchequer Account of the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year.
TABLE 4 (a)
Current Expenditure Projections – 2002 and 2003
|
Ministerial Group |
2001Net |
2002Net |
|
000s |
000s |
|
|
1 Taoiseach |
60,083 |
68,707 |
|
2 Finance |
808,531 |
829,348 |
|
3 Public Enterprise |
248,874 |
247,986 |
|
4 Justice, Equality and Law Reform |
1,384,094 |
1,414,528 |
|
5 Environment and Local Government |
633,505 |
650,254 |
|
6 Education and Science |
4,324,572 |
4,497,481 |
|
7 Marine and Natural Resources |
104,204 |
106,220 |
|
8 Agriculture, Food and Rural Development |
745,368 |
768,899 |
|
9 Enterprise, Trade and Employment |
920,329 |
978,644 |
|
10 Tourism, Sport and Recreation |
205,020 |
216,790 |
|
11 Defence |
839,989 |
875,322 |
|
12 Foreign Affairs |
496,895 |
561,013 |
|
13 Social, Community and Family Affairs |
4,670,605 |
4,822,592 |
|
14 Health and Children |
5,956,977 |
6,556,901 |
|
15 An Roinn Ealaíon, Oidhreachta, Gaeltachta agus Oileáin |
209,288 |
212,492 |
|
Unallocated Current Expenditure (a) |
631,060 |
3953,573 |
|
Total Voted Expenditure |
22,239,394 |
23,760,751 |
|
Plus Non-Voted Current Expenditure (i.e. Central Fund) |
3,410,136 |
3,639,196 |
|
Net Current Expenditure |
25,649,529 |
27,399,947 |
(a)This heading includes the 2002 and 2003 costs of the adjustment to the pay terms of the PPF agreed on 4 December 2000 and the craft analogue review in addition to a provision for non-pay costs in those years.
TABLE 5
Summary of Adjustments to 2001 Capital Expenditure
|
VoteNo. |
Vote |
2001Estimates onPre-Budgetbasis (a) |
Adjustments inthe Budget |
2001RevisedEstimates |
|
000s |
000s |
000s |
||
|
3 |
Department of the Taoiseach |
27,936 |
0 |
27,936 |
|
4 |
Ordnance Survey Ireland |
2,349 |
0 |
2,349 |
|
5 |
Central Statistics Office |
3,318 |
0 |
3,318 |
|
6 |
Office of the Minister for Finance |
66,265 |
6,349 |
72,614 |
|
9 |
Office of the Revenue Commissioners |
12,136 |
0 |
12,136 |
|
10 |
Office of Public Works |
286,707 |
2,793 |
289,500 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
50,132 |
0 |
50,132 |
|
20 |
Garda Síochána |
32,246 |
0 |
32,246 |
|
21 |
Prisons |
47,150 |
254 |
47,404 |
|
22 |
Courts Service |
28,739 |
0 |
28,739 |
|
25 |
Environment and Local Government |
2,272,777 |
8,253 |
2,281,030 |
|
26 |
Office of the Minister for Education and Science |
36,392 |
1,270 |
37,662 |
|
27 |
First Level Education |
130,148 |
2,222 |
132,370 |
|
28 |
Second Level and Further Education |
159,098 |
3,809 |
162,907 |
|
29 |
Third Level and Further Education |
220,515 |
508 |
221,023 |
|
30 |
Marine and Natural Resources |
116,335 |
14,602 |
130,937 |
|
31 |
Agriculture, Food and Rural Development |
82,228 |
0 |
82,228 |
|
32 |
Public Enterprise |
404,285 |
0 |
404,285 |
|
33 |
Health and Children |
361,875 |
381 |
362,256 |
|
34 |
Enterprise, Trade and Employment |
278,821 |
2,857 |
281,677 |
|
35 |
Tourism, Sport and Recreation |
128,750 |
4,755 |
133,505 |
|
36 |
Defence |
56,110 |
0 |
56,110 |
|
38 |
Foreign Affairs |
4,816 |
0 |
4,816 |
|
40 |
Social, Community and Family Affairs |
9,142 |
0 |
9,142 |
|
41 |
An Comhairle Ealaíon |
5,079 |
0 |
5,079 |
|
42 |
An Roinn Ealaíon, Oidhreachta, Gaeltachta agus Oileáin |
130,071 |
432 |
130,502 |
|
43 |
National Gallery |
4,063 |
0 |
4,063 |
|
44 |
Flood Relief |
317 |
0 |
317 |
|
Total Net Voted Capital (b) |
4,957,800 |
48,485 |
5,006,285 |
|
|
Plus |
Non-voted Exchequer Capital |
149,702 |
0 |
149,702 |
|
Plus |
Pre-funding of future pension liabilities |
971,350 |
0 |
971,350 |
|
Total expenditure |
6,078,852 |
48,485 |
6,127,337 |
(a)As shown in the White Paper on Receipts and Expenditure.
(b)Departmental expenditure is net of Appropriations-in-Aid. These are Departmental receipts which with the agreement of the Dáil may be retained by a Department or Office to offset expenses instead of being paid into the Exchequer Account of the Central Fund.
TABLE 5 (a)
Capital Expenditure Projections – 2002 and 2003
|
Vote No. |
Vote |
2002Net |
2003Net |
|
000s |
000s |
||
|
3 |
Department of the Taoiseach |
12,063 |
6,984 |
|
4 |
Ordnance Survey Ireland |
2,057 |
2,057 |
|
5 |
Central Statistics Office |
745 |
745 |
|
6 |
Office of the Minister for Finance |
87,832 |
69,314 |
|
9 |
Office of the Revenue Commissioners |
8,888 |
8,888 |
|
10 |
Office of Public Works |
305,816 |
264,439 |
|
19 |
Office of the Minister for Justice, Equality and Law Reform |
19,412 |
30,620 |
|
20 |
Garda Síochána |
17,445 |
13,792 |
|
21 |
Prisons |
50,579 |
52,764 |
|
22 |
Courts Service |
25,199 |
26,706 |
|
25 |
Environment and Local Government |
2,809,384 |
2,733,135 |
|
26 |
Office of the Minister for Education and Science |
31,870 |
33,705 |
|
27 |
First Level Education |
117,509 |
93,669 |
|
28 |
Second Level and Further Education |
140,179 |
95,230 |
|
29 |
Third Level and Further Education |
270,454 |
234,190 |
|
30 |
Marine and Natural Resources |
114,999 |
104,710 |
|
31 |
Agriculture, Food and Rural Development |
100,526 |
104,337 |
|
32 |
Public Enterprise |
471,823 |
324,485 |
|
33 |
Health and Children |
427,394 |
536,718 |
|
34 |
Enterprise, Trade and Employment |
332,009 |
360,639 |
|
35 |
Tourism, Sport and Recreation |
158,522 |
164,138 |
|
36 |
Defence |
23,928 |
27,864 |
|
38 |
Foreign Affairs |
4,816 |
4,816 |
|
40 |
Social, Community and Family Affairs |
8,349 |
5,301 |
|
41 |
An Comhairle Ealaíon |
5,079 |
5,079 |
|
42 |
An Roinn Ealaíon Oidhreachta, Gaeltachta agus Oileáin |
135,623 |
151,961 |
|
43 |
National Gallery |
952 |
952 |
|
Total Voted Net Capital (a) |
5,683,453 |
5,457,240 |
|
|
Plus |
Non-voted Exchequer Capital |
126,974 |
126,974 |
|
Plus |
Pre-funding of future pension liabilities |
1,065,628 |
1,157,366 |
|
Total Capital Expenditure |
6,876,055 |
6,741,580 |
(a)The above figures for 2002 and 2003 are National Prices Commission projections of the post-Budget 2000 figures (as set out in Table 5) and are consistent with the Exchequer Capital expenditure portion of the allocations in the National Development Plan 2000-2006. It is expected that other non-Exchequer sources of finance (e.g. PPP) will be available to finance NDP. It is anticipated that PPP spending will be accelerated in 2003.
Table 6
Explanation of net difference between Exchequer Surplus and General Government Surplus
The Exchequer Surplus is the traditional domestic budgetary aggregate which measures Central Government's net surplus or borrowing position. It is the difference between total receipts into and total expenditure out of the Exchequer Account of the Central Fund.
The General Government Balance (GGB) measures fiscal performance of all arms of Government, i.e. Central Government, Local Authorities, Health Boards, Vocational Education Committees and non-commercial State sponsored bodies, as well as Funds such as the Social Insurance Fund which are managed by Central Government Departments. It thus provides an accurate assessment of the fiscal performance of a more complete "government" sector.
The GGB does not reflect the position of commercial State sponsored bodies as these agencies are classified as being outside the General Government Sector.
The GGB is calculated in accordance with ESA95, a consistent standard, developed by the EU to facilitate budgetary comparisons between EU Member States in accordance with their obligations under the Maastricht Treaty.
Details of the variation between the Exchequer Balance and the GGB are set out in the table below.
|
Data are in million euros |
2000EstimatedOutturn |
2001Post-BudgetEstimate |
2002Projection |
2003Projection |
|
Exchequer Surplus |
3,147 |
3,222 |
2,326 |
3,189 |
|
Interest adjustments (a) |
328 |
419 |
358 |
22 |
|
Exclude equity and loan transactions (b) |
1,586 |
94 |
108 |
108 |
|
Net (Borrowing)/Surplus of non-commercial State sponsored bodies |
1 |
4 |
– |
– |
|
Adjustments for Transactions between the Exchequer and Government Departments/Offices and Extra-Budgetary Funds (c) |
14 |
11 |
38 |
38 |
|
Impact of the Temporary Holding Fund in 2000 and 2001 (d) |
2,584 |
1,238 |
0 |
0 |
|
Impact of the National Pensions Reserve Fund in 2002 and 2003 (d) |
– |
– |
1,359 |
1,472 |
|
Accrual Adjustments (e) |
80 |
255 |
326 |
361 |
|
Net (Borrowing)/Surplus of Central Government |
4,537 |
4,383 |
3,799 |
5,146 |
|
Net Surplus of the Social Insurance Fund |
433 |
576 |
1,020 |
1,329 |
|
Net (Borrowing)/Surplus of Local Authorities |
145 |
8 |
– |
– |
|
General Government Surplus |
4,825 |
4,952 |
4,819 |
6,476 |
|
Net Difference between Exchequer Surplus and GGSurplus |
1,679 |
1,729 |
2,492 |
3,286 |
(a)This adjustment reflects the requirement, under ESA95 rules, that changes in the assets of the Capital Services Redemption Account and capital gains or losses on foreign exchange contracts, swaps, etc, should be excluded from the interest to be recorded for the purpose of calculating the GGB.
(b)Equity and loan transactions are excluded from the GGB on the basis that they affect the composition but not the level of assets and liabilities. The proceeds from the sale of shares in Eircom (formerly Telecom Eireann) does not affect the GGB as this is treated as a financial transaction under ESA conventions and is not counted as income of the General Government Sector.
(c)Transfers between units within the General Government Sector do not affect the GGB.
(d)The Temporary Holding Fund and the National Pensions Reserve Fund (to be established in 2001) are part of the General Government Sector and transactions within the Sector do not impact on the GGB. These figures include the contributions paid from the Exchequer and a provision for interest earnings by the funds.
(e)This adjustment is required in respect of certain transactions recorded on an accruals basis in calculating the GGB. The main adjustments are in respect of Value Added Tax receipts and Departmental Balances.
TABLE 7
EXPLANATORY TABLE OF BUDGET, 2001 (a)
|
CURRENT BUDGET |
|||
|
Revenue |
000 |
000 |
000 |
|
Pre-Budget Tax Revenue |
31,045 |
||
|
Deduct:Income Tax reliefs: |
|||
|
–changes in exemption limits, personal allowances, standard tax rate and standard bands |
888 |
||
|
–other Income Tax concessions |
35 |
923 |
|
|
VAT measures: |
199 |
||
|
Corporation Tax measures: |
10 |
||
|
Capital Tax measures: |
19 |
||
|
Stamp Duty measures: |
25 |
||
|
Excise measures: |
197 |
450 |
|
|
Impact of change to Income Tax Calendar year |
151 |
||
|
Change to relief-at-source to Medical Insurance |
63 |
215 |
|
|
Net effect on tax projections of tax and spendingchanges (b) |
1,004 |
||
|
Post-Budget Tax Revenue |
30,461 |
||
|
Non-Tax Revenue |
675 |
||
|
Post-Budget Current Revenue |
31,136 |
||
|
Expenditure |
000 |
000 |
000 |
|
Pre-Budget Voted expenditure [per Estimates for the Public Services (Abridged Version)] |
18,844.2 |
||
|
Adjust for: |
|||
|
Net revisions to Estimates (c) |
79.2 |
||
|
Add:Impact of Social Inclusion Measures |
|||
|
Social Welfare improvements (d) |
487.2 |
||
|
Health Developments |
229.2 |
||
|
Education and Science |
12.7 |
||
|
Other |
11.4 |
740.5 |
|
|
Impact of Non Social Inclusion Measures |
|||
|
Adjustment to pay terms of PPF |
215.9 |
||
|
Health Developments |
17.3 |
||
|
Miscellaneous |
59.0 |
292.2 |
|
|
Estimated Departmental Balances (e) |
24.5 |
||
|
Voted Expenditure on post-Budget basis |
19,930.7 |
||
|
Pre-Budget non-voted (Central Fund)expenditure as shown in the White Paper |
3,910.8 |
||
|
Deduct: Reduction in Capital Services Redemption |
|||
|
Account Assets |
507.9 |
3,402.9 |
|
|
Total Current Expenditure on post-Budget basis |
23,333.6 |
CURRENT BUDGET SURPLUS7,802
CAPITAL BUDGET DEFICIT(4,580)
EXCHEQUER SURPLUS3,222
(a)This table shows the effects of the implementation of the Budget day measures on the pre-Budgetary position shown in the White Paper on Receipts and Expenditure.
(b)The Budget Measures have an impact on the economy with changes in consumption and investment patterns etc. leading to estimated additional tax buoyancy of 1,004million.
(c)This figure reflects the technical adjustments to the Health and Children Vote.
(d)The full Department of Social, Community and Family Affairs expenditure in respect of the social welfare package in this Budget is 1,079 million. In the year 2001, the total gross cost of the package is 745 million of which 488 million is funded from the Exchequer and 258 million is met from the Social Insurance Fund.
(e)Departmental balances are those amounts issued from the Central Fund for Departmental spending in one year which remain unspent at year-end and are carried forward to be used in the next year. They have no effect on Departmental spending which is governed by the allocation in the Estimates for Public Service.
TABLE A
TREND IN THE CURRENT BUDGET SURPLUS/(DEFICIT)
THE EXCHEQUER SURPLUS/(DEFICIT)
GENERAL GOVERNMENT SURPLUS/DEFICIT 1977-2000
|
Year |
CurrentBudget Balance |
m |
% ofGNP |
ExchequerBalance |
m |
% ofGNP |
GeneralGovernment Balance |
m |
% ofGDP |
|
1977 |
(255) |
(3.6) |
(692) |
(9.7) |
– |
– |
|||
|
1978 |
(504) |
(6.0) |
(1,028) |
(12.3) |
– |
– |
|||
|
1979 |
(663) |
(6.3) |
(1,281) |
(13.1) |
– |
– |
|||
|
1980 |
(695) |
(6.0) |
(1,545) |
(13.4) |
– |
– |
|||
|
1981 |
(1,018) |
(7.3) |
(2,186) |
(15.7) |
– |
– |
|||
|
1982 |
(1,255) |
(7.9) |
(2,470) |
(15.5) |
– |
– |
|||
|
1983 |
(1,219) |
(7.0) |
(2,230) |
(12.8) |
– |
– |
|||
|
1984 |
(1,319) |
(7.0) |
(2,317) |
(12.2) |
– |
– |
|||
|
1985 |
(1,630) |
(8.0) |
(2,559) |
(12.6) |
– |
– |
|||
|
1986 |
(1,771) |
(7.9) |
(2,724) |
(12.1) |
– |
– |
|||
|
1987 |
(1,498) |
(6.2) |
(2,268) |
(9.4) |
(2,299) |
(8.6) |
|||
|
1988 (a) |
(403) |
(1.6) |
(786) |
(3.1) |
(1,295) |
(4.5) |
|||
|
1989 |
(334) |
(1.1) |
(608) |
(2.2) |
(570) |
(1.8) |
|||
|
1990 |
(193) |
(0.6) |
(587) |
(1.8) |
(801) |
(2.2) |
|||
|
1991 (b) |
(378) |
(1.1) |
(634) |
(1.9) |
(870) |
(2.3) |
|||
|
1992 |
(566) |
(1.6) |
(905) |
(2.5) |
(955) |
(2.4) |
|||
|
1993 |
(481) |
(1.2) |
(876) |
(2.3) |
(979) |
(2.2) |
|||
|
1994 |
19 |
0.0 |
(853) |
(2.0) |
(773) |
(1.6) |
|||
|
1995 |
(460) |
(1.0) |
(796) |
(1.7) |
(1,141) |
(2.1) |
|||
|
1996 |
371 |
0.7 |
(554) |
(1.1) |
(149) |
(0.2) |
|||
|
1996 |
371 |
0.7 |
(554) |
(1.1) |
(245) |
(0.4) |
|||
|
1997 |
767 |
1.3 |
(298) |
(0.5) |
475 |
0.7 |
|||
|
1998 |
2,655 |
3.9 |
948 |
1.4 |
1,588 |
2.1 |
|||
|
1999 |
4,367 |
5.8 |
1,514 |
2.0 |
1,867 |
2.1 |
|||
|
2000* |
6,981 |
8.1 |
3,147 |
3.7 |
4,825 |
4.7 |
|||
|
2001** |
7,803 |
8.0 |
3,222 |
3.3 |
4,952 |
4.3 |
NotesFigures are on an ESA 79 basis to 1996 and on an ESA 95 basis thereafter.
Parentheses denote deficit in a particular year
*Projected Outturn.
**Post Budget Estimate.
(a) Inclusive of receipts of 571 million under the tax incentive scheme (amnesty).
(b)The Current Budget position and Exchequer position are exclusive of 343 million proceeds from flotation of Irish Life. All proceeds of the sales of State equity are excluded from the General Government position.
TABLE B
TREND IN NATIONAL DEBT AND GENERAL GOVERNMENT DEBT
|
Year |
Total National Debt |
m |
% of GNP |
General Government Debt (a) |
m |
% of GDP |
|
1977 |
5,370 |
75.2 |
– |
– |
||
|
1978 |
6,561 |
78.6 |
– |
– |
||
|
1979 |
8,304 |
85.0 |
– |
– |
||
|
1980 |
10,026 |
87.0 |
– |
– |
||
|
1981 |
12,945 |
93.2 |
– |
– |
||
|
1982 |
14,817 |
92.9 |
– |
– |
||
|
1983 |
18,274 |
104.8 |
– |
– |
||
|
1984 |
21,358 |
112.8 |
– |
– |
||
|
1985 |
23,493 |
115.6 |
– |
– |
||
|
1986 |
27,440 |
122.2 |
– |
– |
||
|
1987 |
30,085 |
125.0 |
||||
|
1988 |
31,250 |
122.7 |
– |
– |
||
|
1989 |
31,525 |
111.9 |
– |
– |
||
|
1990 |
31,849 |
99.0 |
34,032 |
93.7 |
||
|
1991 |
32,223 |
95.9 |
35,829 |
95.1 |
||
|
1992 |
33,450 |
94.1 |
36,855 |
92.1 |
||
|
1993 |
36,006 |
93.3 |
41,543 |
96.1 |
||
|
1994 |
37,111 |
88.8 |
42,069 |
90.5 |
||
|
1995 |
38,358 |
82.3 |
43,692 |
83.1 |
||
|
1996 |
37,980 |
73.9 |
43,066 |
74.3 |
||
|
1997 |
38,967 |
66.1 |
43,605 |
65.1 |
||
|
1998 |
37,509 |
55.5 |
42,276 |
55.0 |
||
|
1999 |
39,848 |
53.1 |
43,960 |
50.1 |
(a)ESA 95 basis from 1990.
The General Government Debt essentially includes the cumulative gross debt of the local authorities and the non-commercial State sponsored bodies as well as nearly all of the National Debt measured on a gross basis. It excludes Central Government liabilities to institutions classified within the General Government sector; these are included in the National Debt.
It should be noted that National Debt is calculated net of domestic and foreign liquid assets whereas the General Government Debt is calculated on a gross basis. The debt of the commercial State bodies is excluded from both National Debt and General Government Debt.
The Finance Accounts for each year contains a detailed breakdown of the National Debt.
TABLE C
Trend in Service of National Debt as a percentage of net current expenditure and as a percentage of overall taxation
|
Year |
Service of NationalDebt |
Service of National Debt |
As a % ofNet CurrentExpenditure (a) |
As a % of TaxRevenue (b) |
|
1977 |
424 |
17.1 |
22.5 |
|
|
1978 |
531 |
17.3 |
24.2 |
|
|
1979 |
653 |
17.7 |
25.6 |
|
|
1980 |
839 |
17.9 |
25.2 |
|
|
1981 |
1,124 |
18.5 |
26.7 |
|
|
1982 |
1,586 |
21.2 |
30.8 |
|
|
1983 |
1,849 |
21.8 |
31.1 |
|
|
1984 |
2,165 |
24.5 |
32.1 |
|
|
1985 |
2,498 |
25.8 |
35.2 |
|
|
1986 |
2,526 |
24.5 |
32.6 |
|
|
1987 |
2,689 |
25.4 |
32.6 |
|
|
1988 (c) |
2,719 |
26.6 |
31.2 |
|
|
1989 |
2,719 |
26.7 |
28.8 |
|
|
1990 |
2,920 |
27.3 |
29.1 |
|
|
1991 |
2,985 |
25.9 |
28.2 |
|
|
1992 |
2,990 |
24.0 |
26.4 |
|
|
1993 |
3,035 |
22.7 |
24.8 |
|
|
1994 |
2,828 |
19.9 |
21.0 |
|
|
1995 |
3,054 |
19.9 |
21.3 |
|
|
1996 |
2,997 |
18.6 |
18.8 |
|
|
1997 |
3,498 |
19.6 |
19.3 |
|
|
1998 |
3,249 |
17.8 |
15.9 |
|
|
1999* |
3,190 |
16.2 |
13.5 |
|
|
2000** |
2,847 |
13.6 |
10.4 |
|
|
2001 |
2,678 |
11.5 |
8.8 |
|
*Provisional Outturn.
**Post-Budget Estimate.
(a) Current expenditure is measured on a net basis as in Table 4.
(b) PRSI receipts are not included in Tax Revenue.
(c) The 1988 figures exclude the exceptional once-off receipts of 571 million under the tax incentive scheme (amnesty).
Deputy Michael Noonan.
(Interruptions.)
Please allow Deputy Noonan to speak.
Many of us think the leaks were more interesting than the budget. They certainly went farther. Many people listening to the Minister on radio or watching him on television know that when Governments run surpluses, they take in more in taxation than they need for the day to day spending to run the country. What most people will say after hearing the Minister is that they are getting back some of their own, they are getting back some of the taxes they paid already—
(Interruptions.)
They will consider that they are getting back what the Government took from them and that will be the end of the matter.
I appreciate this is a difficult day for the Minister for Finance. After last year's disaster, I know backbenchers were already booking their places on the plinth. They should not cancel the book ings just yet. I am a little sorry for the Minister because he has to stand here today and deliver a budget which does not have any of his hallmarks. It is quite clear that it is only partially the work of the Minister. This budget, because of last year's disaster, has been constructed by a committee. The social partners have ridden shotgun on the Minister and this has all the signs of a budget designed by a committee with no underlying fiscal policy. Somebody said once that a camel was a horse designed by a committee. This is a camel of a budget with bumps and lumps on it but no fundamental fiscal policy underpinning it.
Deputies
Hear, hear.
It goes faster than the snail.
I could tell the House jokes about the snail too.
(Interruptions.)
Order, please.
Why are Fianna Fáil backbenchers like snails?
(Interruptions.)
Allow Deputy Noonan to speak without interruption.
They are slow and crawly and they leave a trail, pulling in their horns when there is trouble. They are a little slimey on occasions.
This is quite clearly a budget designed by a committee. I am genuinely sorry for the Minister because whether one liked his budgets previously, one could say this was a man with a fiscal view and a view of how the nation should be run. None of that comes through in this budget. Apart from the social partners riding shotgun, the ministerial colleagues also ran the metal detector over the budget to ensure there were not any landmines. The spin coming out from Government Buildings was they had the Minister for Finance almost under house arrest. The Government Whip was let in occasionally with the bread and water or the bowl of thin gruel. Occasionally also, the Tánaiste smuggled in a food parcel.
Salad nicoise.
This is what one calls slug over substance.
Truffles from Provence or some such tack like that. The Government colleagues did not do a great job because in riding the Minister so tight and putting him on such a tight rein, they have not eliminated every mistake. There are some landmines still in this budget but the biggest problem of all is the danger that it is a booby-trap which will blow the prosperity of the economy up in the air.
Government now no longer controls fundamental policy. No Government can raise interest rates any more, that is done in Frankfurt. No Government can arrange exchange rates any more, that is done abroad also. The last policy left to Governments in this jurisdiction is fiscal and there is no fiscal policy apparent in this budget. The economy is overheating, everybody knows that now. This budget, together with the Book of Estimates and the other recent spending announcements, put our prosperity at risk. The Government today and in the Book of Estimates has injected about £4.5 billion of extra demand which will fuel inflation and also the twin of inflation, the congestion with which we are all so familiar.
This Minister's reputation was built a decade ago. He was a prudent manager who advocated expenditure controls. He advocated fiscal prudence when other distinguished luminaries of the school of '87, such as Mr. Haughey and Mr. Burke, were letting it all hang out. This man from the backbenches said we should control expenditure and he was right at the time. When he was spokesman on this side of the House, he insisted that a commitment went into Fianna Fáil's pro gramme, and to the programme for Government, that expenditure would be held at 4% per annum. If that had been fulfilled, total expenditure at the end of 2001 would have been 17% higher than on election day. On the basis of the Book of Estimates, it is not 17% higher than on election day, it is 43.6% higher than on election day and that does not take into account the additional expenditure announcements made today. It is a pity to see a man who built his reputation on fiscal prudence being reduced to a type of Santa Claus figure dispensing largesse without any underlying policy with various elements of the budget contradicting other elements of it. We know from our experience in this House over the past 12 months that the economy is almost at full production. We know what has occurred with inflation and that we are now at four times the European average, almost at 7%. We also know the consequences of that because our citizens have decided to take back in wages what has been eroded by inflation. That is why there are no teachers in the schools, the trains do not run and why Dublin Airport is closed down so frequently. That is why there are six separate industrial disputes in Aer Lingus and three separate industrial disputes in Iarnród Éireann. In spite of the best efforts of partnership, the Minister failed on Monday night to tie the ASTI into his recent solution and the TUI voted 4:1 for industrial action.
Inflation causes industrial chaos and the Minister has today sown the seeds for further industrial chaos. Inflation and congestion are effectively two sides of the same coin. We see what is happening on the streets of all our cities and on the DART which is reminiscent of the train service between Delhi and Calcutta. Nothing is working in this country any more and much of that is due to the congestion caused by Government spending. The Minister is over-stimulating an economy which is running at full tilt.
We have virtually full employment and there is very little which can be done in terms of fiscal policy to get more people into the workforce. The most recent labour force survey shows that in the 12 months up to September, approximately 40,000 fewer people took up employment this year than last year. This is also a form of inflation. That is why it is impossible to get nurses and junior doctors in the Dublin hospitals. That is why people cannot get an electrician to fix a faulty plug. That is why it is impossible to get someone to build an extension to one's home. That is why one cannot get a plumber to fix a leaky pipe. More than anything else, it is why house prices continue to escalate, with only 20% of taxpaying citizens in the housing market. Some 80% of our sons and daughters expect to be housed in public housing or not at all. They certainly will not be in a position to own their own homes.
Inflation is working its way through the domestic economy which no longer has the capacity to deliver. What does the Minister think an additional £4.5 billion will do to demand when the domestic capacity does not exist to deliver it? The Minister has a facile theory on this to the effect that we are part of the great EU market and there is nothing which cannot be imported at consumer level if sufficient demand exists. That is not the issue. The issue is not what we can import in terms of consumer goods, the issue is congestion in the domestic economy.
Leaving aside the Government's capacity to spend – with a commitment to confine spending to 17% but ending up with 43.6% for openers, we cannot doubt the Minister's capacity to spend – I question the quality of that spending although I do not doubt the Minister's capacity to spend the additional £4.5 billion. According to the Minister's figures, the health budget has increased by 75% since this Government was elected, but the service has worsened.
The Minister is a bad manager.
We have a new phenomenon in the Irish health service, imported from Disneyland, where people now have to queue to join the queue.
No real evaluation of Government expenditure has been carried out. I questioned the Minister last week about the 370 expenditure programmes of which only 50 have been evaluated in some way, issues such as prison transport, canal usage and Irish aid to Ethiopia. In the health services, dental health and intellectual disability have been evaluated. What about the work of the acute hospitals? What about the crisis work in emergency departments? The Minister is throwing money at the problem without carrying out any structural reform. The expenditure of a huge amount of money is overheating the economy, causing inflation and industrial chaos. The more the Minister spends, the worse the situation becomes because he is creating the very congestion which defeats his own solutions. That is the fundamental difficulty with what the Minister has been doing and he has aggravated that further today.
Members will be familiar with the statistical analysis of taxation, particularly income taxation, published by the Revenue Commissioners and circulated to them last week. They may not, however, be familiar with the NCB evaluation of that analysis which states:
The overall income tax burden has not been cut to any significant extent in the last ten years. The proportion of aggregate income paid in tax remained at roughly 21% between the 1990-01 tax year and the 2000-01 tax year. Income tax changes have just offset the tendency for the average tax rate to rise as the progressive tax system pushes taxpayers into or further into the higher rate band as income rises. The money amount of tax cuts required to keep the average tax rate unchanged rises each year and would need about £0.25 billion in the upcoming budget just to stand still.
The NCB commentary on Revenue's statistical analysis has not been contradicted. We do not index bands and allowances, as happens in the UK, so there is always a distortion on budget day which seems to indicate that people are receiving big reliefs. However, if one indexes at a 7% inflation rate, the result will be different. That explains why taxpayers are so delighted the week after the budget but are not remotely delighted in the second week of April when they get the money in their pay packets. The Minister has spent in the region of £1.2 billion today but, according to NCB's evaluation which has not been contradicted, the first £0.75 billion is merely money required to stand still. People will realise they are really only getting back their own money and the budget will not be the big election winner the Minister thinks it will.
I note that the Tánaiste was successful in one policy aspect. Arising from the committee system which gave rise to this budget, the Tánaiste succeeded in cutting the top rate of tax from 44% to 42%. I question the wisdom of that. People on the minimum wage currently enter the tax net at £110 per week. The Minister has been dragged kicking and screaming by Fine Gael, Labour and the social partners to completely exempt many people on less than the minimum wage from the tax net with the result that people will now enter the tax net at £144. Had the Minister not cut the top tax rate, he could have increased that by a further £10 per week. Who needs the money more, people on a wage of £150 or £160 per week or people on an annual salary of £50,000, £60,000 or £70,000? If one examines the examples outlined in the Budget Statement, one can see that this budget displays the same old fault of the Minister's previous budgets, namely, that the more people earn, the more they get. The gap between the rich and the poor continues to increase. I blame the Minister and his soul mate, the Tánaiste, for this misguided policy. The social partners dragged the Minister back to some level of moderation in respect of low paid people but the benefits are still distorted.
The Minister has persisted with individualisation in this budget. While I admire his courage, this requires some explanation. A one income family will enter the top tax rate after £29,000 when the budget provisions come into effect whereas a two income family will enter the top rate after £40,000. There is an £11,000 gap there which, at 22%, is a relatively wide gap.
That is correct.
The Minister is clamping down.
The Minister's metal detecting colleagues missed out on one small aspect of the budget of which I am sure the Minister is aware. When he decided to move people on the minimum wage up to £145 before they enter the tax net, he did not do so solely through the use of personal allowances for cost reasons. He did it through a combination of personal and PAYE allowances. The PAYE allowance is only paid to people in employment so the additional £1,000 PAYE allowance is doubled for those people. As it is completely wiped out of the tax net, that £1,000 is taxable at 44% rather than 22%. In the most extreme case, for a couple with an income of £29,000 who do not have dependants and are not in receipt of the £3,000 allowance the Minister introduced as a corrective measure last year, the tax advantage is about £60 per week in cash. If the Minister can justify a difference of £60 per week between families with the same kinds of expenses and outgoings, he will have to explain it again to the lads who went on to the plinth last year because he has no corrective measures this year.
That is their social policy.
It will be in next year's budget.
I am not talking about a tax credit of £60 per week but hard cash. If someone has a dependant and there is only one income earner in the family who receives the £3,000 allowance, the difference is between £32,000 and £40,000, which is £8,000 at 22% and another £1,000 on the PAYE allowance. There is a double tap on it. Those on the committee who only looked at their own input forgot to cross-match. There is the basis for the same row as the Minister had last year on the combination of the two.
Fine Gael believes the total minimum wage should be exempt from tax. We were first on that base early last year and we are still committed to it. In Government with suitable colleagues and partners we will fulfil that commitment and it will be our priority when we implement tax policies next year.
It will already have been done.
It will hardly be the Tánaiste.
One never knows, even the Tánaiste could have a Pauline conversion. People who are interested in this budget will look at three items, did it do anything to make housing affordable, did it do anything to help pay for having children minded when parents are at work and did it do anything on income tax relief?
I see very little about child care. The child benefit increases are welcome. It is a policy to which we have been committed for a long time and to which the rainbow Government was committed. Our flag was nailed firmly to that mast a long time ago and we continue that commitment. We are in favour of big increases in child benefit. However, we see child benefit as an anti-poverty measure. The latest studies show that the incidence of poverty has reduced with the boom and rather than 15% of families being in poverty it is now 10%. Poverty is highest among that 10% of families where there is a greater number of children. We are committed to supporting children and the measures taken in regard to child benefit. When we change sides in the House early next year we will do more than what the Minister has promised.
The Minister did nothing for child care. Many young couples living in the far-flung suburbs of our cities, particularly in Dublin, will ask where are the child care measures. Fine Gael carried out a survey in different parts of this city, and depending on whether you had informal child care or a fully regulated system and creche, the weekly cost of child care ranged between £70 and £120 per week. If there were two children it was £200 per week on average. It is the same in Limerick. That is a lot of money after tax. It is over £10,000 per year after tax.
The Deputy is contradicting himself.
That is exactly why we are giving them more money.
If that is so, the Tánaiste's arithmetic is not up to the test. One hundred pounds a month does not compensate for a payment of £100 per week. It will benefit people, but very marginally. It is way below expectations. Not only is there a problem with paying for child care but there is a problem getting places in the first instance. One of the most disgraceful cons perpetrated on couples in need of child care are the announcements made by the Government in the last budget. The Minister announced that he would invest almost £50 million to provide child care places, £23 million of which was for local programmes. Does the Government know the drawdown on that at the end of the year? It is £57,000.
Deputies
Shame.
The Government is throwing money at problems in PR and public announcements but it does not have the confidence to see that it is spent adequately. After spending £57,000 out of £23 million the Minister had the nerve to announce another £26 million in October. Why would he not do so when he was not spending anything? It is a great game.
Zero – zero tolerance.
If one looks at the capital spend across the Departments, including that of the Tánaiste, and what was voted last year, one will see that the money voted was not spent. The Government is throwing money at problems. It has no structural reform. Once an announcement is made and the spin doctors have it, it is goodbye, that is not our job anymore.
(Interruptions.)
A Deputy
That is why they need the spin doctors.
Nothing is being done on the supply side. While child benefit is important we see it as an anti-poverty measure and a family support measure. We do not see it as an answer to the child care problem. It will haunt the Government because it is the same people who are put to the pin of their collar to pay extraordinarily high mortgages who have to pay extraordinarily high child care costs. They are being hammered on the tax side as well.
As regards social welfare, we expected that pensions would be increased to over £100 per week. That was well flagged. It will be appreciated and we welcome it. On the generality of welfare increases, the increase is £8 per week. Those who have been following this debate among the social partners and in the wider public know that three figures were quoted. The minimum to cover inflation, especially when payments are being introduced in April this year, with child benefit being introduced in June, is £8. Organisations such as the Society of St. Vincent de Paul, which would be familiar with the amount needed to live and the costs incurred by people reliant on welfare, had in mind a figure of £10. The fourth pillar of partnership led by CORI, people like Fr. Seán Healy and Sr. Brigid, were talking in terms of £14. If this was the budget where the Minister for Social, Family and Community Affairs was going to attack poverty, if this was going to be the great leap forward in terms of social inclusion, it has not happened. The £8 is at the bottom of the range of expectations. It comes in at the bottom of the demand.
If the Government cannot launch the necessary attack on poverty at a time of unprecedented surpluses, when will it do it? When will it happen? Are we back to the position where Labour must wait, as one of the Minister's illustrious predecessors said? Is it a question of the poor always waiting? Eight pounds will not satisfy anyone and I would lay money that if people from the fourth pillar of partnership are commenting on it on radio or television, they will say exactly what I am saying.
It is over £1.14 per day.
The health services are a sorry mess. We have heard a series of PR type announcements. The Minister for Health and Children is a nice man. He leads a charmed existence. He was very popular when he was Minister for Education and Science. Then the Minister, Deputy Woods, was appointed and he brought in a senior civil servant to evaluate that Department. He found the practices there reminiscent of coal mining in Victorian England. He has now moved to the Department of Health and Children and we have another series of PR announcements, and we got more of them again today. Of course, when he goes to Nemo Rangers they will say it will be great to have the medical card at 70 years of age, but what about single people on £95 per week who cannot get a medical card or a hus band and wife on £135 per week, or a husband, wife and two children on £167 per week who cannot get a medical card? They pay their taxes and have to pay their doctor, spend £42 on drugs and cannot get a place in hospital if they need one because the Administration which has increased health expenditure by 75% has increased waiting lists so that people are now waiting longer than ever for ordinary surgical interventions. We will have more PR, spin and smiles and more bedside manners, but we will still have a Dickensian health system at a time when Ireland has never been richer and when we boast about having the greatest growth rates among OECD countries. This is a disgraceful performance.
I remind the Minister that the Fine Gael health policy contains a commitment to giving medical cards to people at 65 years of age. Why should everybody on a pension not have a medical card? Why should they have to wait until they are 70? Like our colleagues in the Labour Party, we are also committed to abolishing the two-tier system and giving the advantages of private medicine to everybody through a universal social insurance scheme and to gearing up the health services so they can deliver. Money thrown at problems has never worked and will not work now.
I am glad the Minister reduced the VAT rate by 1%. In our pre-budget submission we proposed a reduction of 2%, but we should be thankful for small mercies. I accept the Minister's point about e-commerce. If our standard rate of VAT is in excess of the European average, it is futile to try to sell things on the Internet as the rate of VAT in the country of sale is that which applies, not the rate of VAT in the purchaser's country, with some exceptions.
I hope the reduction in VAT will be passed on. The VAT and excise reduction, according to the Minister, will reduce the CPI by 0.5% if it is passed on, but will it be passed on? This morning my colleague, Deputy Owen, briefed me on the disastrous state of the Competition Authority, with many vacancies which the Tánaiste did not bother filling. How does the Government expect the Competition Authority to work, or the Director of Consumer Affairs, whose office has failed over the years to put any order on forecourts or petrol pumps? This could go straight to the profit margin and threats that this will be the last reduction will not be listened to by multinational companies which now sell the bulk of petrol and diesel in Ireland.
I am glad the Minister moved to aid hauliers. It is right to reduce excise on diesel for hauliers given the obnoxious disc which non-nationals must display on UK roads, which costs Irish hauliers £1,500. I hope the Minister will also move to give them capital allowances on their depots and that he will move on the tax treatment of certain allowances, which is very important.
I welcome the abolition of probate tax. It was a nasty tax which had to be paid by the poorest people, very often when a parent died and often on the family home. This nasty tax was intro duced by the current Taoiseach when he was Minister for Finance in 1993. Many people were hurt by it and before the Minister claims too much credit for its abolition he should consider allowing people who were hurt to claim back what they paid. Then we might have a progressive measure in terms of probate tax.
Regarding corporation tax, it is sufficient to say that what was put in place by Deputy John Bruton and Deputy Quinn in their discussions in Brussels is still in place. We will be moving to a universal standard rate of corporation tax of 12.5%, and we welcome the further instalment which has been delivered in this regard.
I am surprised that the ordinary decent farmers got such short shrift. Of all the crises facing us, that in farming, particularly beef farming, is an absolute disaster. There is no suggestion that the Government is aware of the disastrous situation. Had Ministers attended a meeting last night in Abbeyleix or the scheduled meeting for Tullamore they would know very quickly the extent of the disaster. There is nothing in terms of income support for decent honest farmers who see their livelihood being taken away from them, who complied with every regulation from Brussels in terms of cleanliness, hygiene and quality control and who have been misled by the Government and badly led by certain members of the Administration in the areas of food safety and food quality. The VAT rebate has been increased from 4.2% to 4.3%, but that is hardly a big deal. It will hardly delight farmers or result in parties being held in parish halls in my constituency to celebrate a reduction in VAT of 0.1% as they see their livelihood and that of their children going down the drain.
The Minister has finally made peace with the credit unions. Like Neville Chamberlain, when he finally met the credit unions the Minister was waving a piece of paper saying "Peace in our time". I hope the Minister delivers on what he has said. He has made a half commitment that the same regime will apply to other financial institutions. We will wait and see – I presume his legal advice was that he would be crucified in Brussels if he favoured credit unions above other financial institutions.
The budget is very disappointing. It lacks an underlying fiscal policy. There is a feeling of an economy still roaring forward but being guided by a Government that has gone adrift, a Government which knows how to spend money but does not know how to spend it effectively, a Government with no values. We see the way women are being treated by the Government, which illustrates the underlying thinking, if any thinking exists. Women are being conscripted into the labour force through the individualisation proposals and the increase in the PAYE allowance. Those who stay at home are being treated as a different type of woman. Fine Gael believes that women should have choice and should not be conscripted into the labour force. The tax regime should encourage their participation in the labour force and we should have an affordable child care system which ensures their children can be looked after to the best possible standard while they are at work. We would like a situation in which women can make choices and would not feel they are trapped in a job. For example, we would like a woman who decided to have a baby to be able to take a year or two out—
Hear, hear.
— or take a year off to support the family when a son or daughter is doing the leaving certificate. Women should be able to move in and out of the labour force. The same regime should apply to men, but not putting too fine a point on it, we are basically talking about women, although it is politically correct to talk about spouses. None of these values comes through in the budget. There is a bad attitude in the budget where people are just seen as units in the taxation system.
Yes, that is correct.
People are seen as economic men and economic women and there is no such thing as society. The budget is Thatcherite in its attitude. Even though the Minister had more money to spend this year than last year and even though he spent more, he has fallen into the same traps. This is a soulless, valueless Administration.
The Government is in its fourth year. It has failed to do anything about the cost of housing. The Minister of State, Deputy Molloy, and the Minister, Deputy Dempsey, would have been described very well if that irate shareholder who criticised the Minister, Deputy O'Rourke, had applied his criticism to them. They are like weedkiller. Everything they touch withers. After three Bacon reports the price of houses continue to rise. I was given an example of the housing situation by a parliamentary colleague today. A house in a housing estate located between Bray and Greystones cost £86,000 in 1997. When the last of the houses in that development were sold two years later, they cost £120,000. Those houses were on the same stretch of land and built by the same builder. One was sold last week for £205,000, a three bed-roomed semi-detached house in a nice location a bit out of town. The report on taxation, to which I referred previously, also includes a section on housing. It is said that £35,000 joint income is the minimum required to get into the market. Only 20% of those who wish to can get into the market. There is a housing disaster, a traffic disaster, a public transport disaster and industrial chaos. I am waiting for the grave diggers to go out. It is about the only group the Government has not yet aggravated, but it is well on its way to doing so.
Do not rule it out.
People are bedevilled by crime. The latest example is a person convicted of a murder this week who had been released from prison on a day's leave. That is zero tolerance.
This Administration has no relationship with the ethical standards one would expect in a national parliament. I am not talking about Mr. Haughey and Mr. Burke. We all know the names. They are still in the Fianna Fáil Parliamentary Party. If it is illegal, one loses the Whip and if it is not illegal, nothing really happens, but when it comes to standards, ethics, good example and leading the people, this Administration is not at the races.
The farming crisis is the greatest crisis to hit this economy. When all is said and done about the financial services, the IT industry and everything else, in bad times we will still rely on the food industry and on the goodwill of the family farmer and the farming community, yet there is nothing in the budget for them.
If we were to apply a quality of life criteria to the Budget, what could anyone say? Despite all the money that will be spent, one would have to admit, even the Taoiseach's backbenchers would have to do so, that the quality of life next year will be worse than it is this year because money is being pumped into an economy that does not have the capacity to take it. The Government is not reforming the economy at a structural level to enable it to take the spend. Services get worse, we all get more frustrated and the Government is amazed it is not getting better value for money. It is clear why it is not getting value for money. The problem with this Administration is that it is too cute by half. It thinks it has purchased half the electorate and conned the other half, but it has forgotten the long memory of the Irish electorate. They are waiting in the long grass for the Taoiseach. His intention to hide from them for as long as he can is a very prudent decision.
It is a hard auld job, Michael; fair play to you.
I love you too, Taoiseach.
It gives me no pleasure to say it, but today is a defining moment in the life of our nation for all the wrong reasons. I genuinely believe that when the history of these times is written, this will be seen to be the moment when we blew it, when personal greed was elevated above the public good and we poured oil on an already blazing fire.
Just as Nigel Lawson sabotaged the boom in 1980s Britain, so too the Minister, Deputy McCreevy, has done much the same in much the same way in Ireland of the 21st century. The Minister's budget is little more than an invitation to party. Champagne Charlie rides again. I enjoy a party as much as the next man, and most of us do, but we all know that a bad hangover follows a major binge. I will wager with anyone in this House that within a year we will all be paying the price, irrespective of whether we have been invited to the Minister's party.
The economy is already slowing down and that is no bad thing, but today the Minister has immeasurably increased the possibility that the economy will crash land rather than slow to a level of growth that is sustainable into the future. As ever, not everybody has been invited to the Minister's party.
For much of the past month, the newspapers have been full of quotes and leaks from Ministers, notably the Taoiseach, that the tax measures of this year's budget would favour people on low and middle incomes. We were told that the Minister, Deputy McCreevy, had learned the lesson from last year. We were told there would be no cock ups, no scrubs, that he was on a leash, that the leopard had changed his spots, Ministers were even betting on it. They were wrong. The leopard has not changed his spots. Today's budget is a mirror image of last year's. It is shamefully unfair. It gives by far the greatest benefit to the better off. It extends the discrimination against one income families to a degree and in a way that most people would have considered impossible following last year's fiasco. Far from learning the lessons of last year, the Minister has given us a repeat performance.
Last year he took two points off the top rate of tax, this year he has taken another two points off the top rate of tax. Last year he took two points off the standard rate, this year he has taken a further two points off the standard rate. Last year he started the process of individualisation, this year he has extended it even further, though remarkably one could scour the Minister's speech and not see the word or even the figures but they are very much there. They are there in an enhanced form.
Last year's budget was the most divisive in living memory and this year's is no better. For weeks we have been told that the Taoiseach was resisting a reduction in the higher rate of tax because he did not want the budget to be seen as a give-away to the rich. It is not difficult to see why the Taoiseach would want to put out this story, but one would need to be pretty naive to have bought the spin. The implication was simple and not very subtle. We are being asked to believe that all this rich man's stuff was to do with the Minister for Finance and his soulmates, the Progressive Democrats, and nothing to do with the Taoiseach, the man of the people. We are being asked to believe the Taoiseach had no control over his Minister's budget, not just last year but in 1997 as well, though I suspect the Taoiseach is more than happy to take credit for the more progressive budget in 1998. It is nonsense. A budget cannot happen without the explicit say-so and close involvement of the Taoiseach, and the current Taoiseach is as responsible as the Minister, Deputy McCreevy, for what has happened over the past four years. Let me make this point as forcibly as I can one more time. A reduction in the upper rate of tax is of no benefit whatever to two-thirds of taxpayers and it is worth very little to the majority of the rest.
The Deputy's party recommended a reduction of four points two years ago.
Reducing tax rates in itself favours the better off. It is no coincidence that the Progressive Democrats prefer this route to reduce taxation. By my calculations since 1989, everything else being equal, reductions in the tax rates have benefited the well off at the expense of somebody on an average industrial wage – nearly 8% for a person on £10,000 in 1989 but over 13% for a person on £100,000. It goes without saying that the reduction in the upper rate is worth nothing to someone earning the average industrial wage or less, but many people in traditional middle class jobs also gain nothing. For example, a school teacher on starting salary of £20,000 would not benefit by one penny from the reduction in the upper rate, nor would a garda or most of the people working in the many call centres that have blossomed here recently. Even a single person on £30,000 stands to gain less than £100 a year from the reductions in the 44% rate announced today. The truth is that only people on large salaries stand to gain in any significant way from what the Minister has done with the top rate.
The Taoiseach told "The Week In Politics" on 8 August that he had no difficulty with what he called high earners in our society paying 44%. This cannot be his view any longer, although it is difficult to see what has happened between then and now. Where the Taoiseach is confused or confusing, Deputy McCreevy is more straightforward: he is an old-fashioned Tory or perhaps a new-fangled Tory. He does not believe in a progressive tax system. He simply does not believe that taxpayers should pay according to their means. I am not altogether sure that the Minister believes in the need to raise taxes at all. Nobody believes in tax for the sake of it but most of us accept that taxation is needed to fund those services which go to make up a civilised society. We know too that we get what we pay for but one of these days the Minister will doubtless tell us there is no such thing as society.
Two years ago the Minister introduced a series of tax credits and I congratulated him at the time but I am beginning to wonder why he bothered, as he has allowed the system to wither on the vine ever since. True, he has dedicated approximately £300 million today to increasing the personal tax credit but if he had put every penny spent on tax reductions today into tax credits, as the Taoiseach knows, he would have produced a much fairer result than what is before us. Tax credits were introduced to allow the Department and the Government to reduce tax by a flat amount for each taxpayer. This gives benefit to everyone but a proportionately higher benefit to those on low and middle incomes. The lower one's taxable income the better proportion of relief one receives. This is why the Labour Party has been advocating channelling reductions in tax in that way for several years.
I emphasise this point because it is not just the poor or the low paid who are being screwed or ignored by the Minister. The average worker and middle class professional is also getting less than a fair shake. It is not just the bottom 10% or 20% who are getting a raw deal; fully three quarters of us have cause to complain about the way Fianna Fáil has divided up the larger cake it has available today.
I am rather more sanguine about the reduction in the standard rate. It is not a particularly fair way to reduce tax but neither is it as spectacularly unfair as reducing the top rate. The more one earns the more one benefits from the rate reduction but at least there is a ceiling beyond which the benefit is equal. There is a particular problem we should be aware of in going down this road, however; if we reduce the standard rate of tax we also reduce the value of the tax credit. Before today a personal tax free allowance of £1,000 converted into a tax reduction of £220. After today the same personal allowance is worth only £200. This has the perverse effect for someone in a part time job, earning £6,000 or £7,000 per year, of making them worse off as a result of the reduction in the standard rate of tax if that measure is taken alone. In fairness, that loss is wiped out by the increase in the tax credit but the increase is worth significantly less than it appears at face value.
My party leader famously said that we had failed to get across our message in relation to tax equity during the 1997 general election and he was right. There is a simplicity to reducing headline rates but it is a simplicity that politicians with any concept of fairness and social justice should reject. Sadly, there seem to be few of those in this Government. The lesson is simple and is one I thought the Government had learnt two years ago: tax credits are the way to go. For many, changes in tax rates provide little more than the illusion of tax reform.
Last year the Minister began the process of what he himself called individualisation. It caused a furore, not least on the Fianna Fáil back benches, and the Minister later produced what he called balancing measures. Overall, the fiasco helped to fuel this year's inflation even further. Despite that furore, the Minister, to be fair, said that the only thing he regretted was the use of the word "individualisation" and if one scours this document one will not find that word in it. His only other regret was that his backbenchers did not have the gumption to keep their mouths shut while he got on with the job.
This year the Minister has gone further. A married couple with two incomes can now earn up to £40,000 before hitting the higher rate of tax while a couple on one income can earn only £29,000 before the 42% rate kicks in. Incidentally, I cannot understand why he increased the £28,000 limit to £29,000. It is at the very least a fig leaf and seems to be totally meaningless. This process is objectionable on two grounds: first, it is an outrageously unfair way to reduce tax. An ESF report published a few days ago revealed that almost all of the benefit of the individualisation done last year benefited the top 20% of income earners. This year an even greater percentage of the benefit will go to an even smaller number of well-off taxpayers. The total cost of completing the Minister's project, as he set out last year, is £600 million and fully five sixths of taxpayers will not gain a penny from the process.
What is equally disturbing about this project is what it tells us about the Government's attitude to parenting, caring for children and the institution of the family. Since the early 1980s the Irish tax code has underpinned marriage and the family. A married couple with one income got more or less the same tax breaks and allowances as a married couple with two incomes. The primary effect of this was to allow one partner, usually though not always the woman, to take time off, usually to look after children, without suffering a complete collapse in income as a result.
It is not the business of the State to tell lone parents or married women or men with children whether or not they should go out to work. That is their business and their choice. The business of the State is to allow them that choice and until now our tax system has facilitated that but not any more. Fianna Fáil and the Progressive Democrats have now made that choice for them and from now on women will be heavily penalised if they take time off work to look after their children and fewer young parents will be able to choose to stay at home, usually only for a couple of years while the child is young. For the Government the needs of the labour market come first and the needs of society barely register at all.
This budget, as Deputy Noonan said, opens up a new era of discrimination against one income couples. Last year the Minister gave us individualisation for the middle classes. This year he has extended the process to everyone else by starting the process of individualising the tax credits. I have been arguing for some time that we should take the first £200 of income out of the income tax net in the case of a single person and twice that, £400, in the case of a married couple. The Minister said he has gone some distance towards meeting that target and in a manner of speaking he has. However, he has done so in a way that further discriminates against home-makers. The £1,000 PAYE allowance is available only to PAYE workers, which is fair enough, and extending it sounds great. However, unlike the rest of the personal allowances, it is not transferable between spouses, so what we have is an increase in the tax credit on the cheap to pay for tax breaks for the rich, together with a dollop of poor man's individualisation. The big losers yet again are the one income families, the unfortu nate men and women who want to take a few years off to take care of their children.
It is time the Government came clean on this issue. When the Minister started the individualisation of the standard rate band last year many people eventually gave him a fool's pardon. It was seen as a mistake or a gaffe but we now know it was nothing of the kind. It was a deliberate strategy to force one parent out to work and to direct more money into the pockets of the better off. We need to know where all this is going. Does the Minister intend to finish the job he started last year? Last year he told us it was going to be a three year project while today he refers to completing it in future budgets, so clearly he is not going to hold to the timetable he set out last year. Does he intend to individualise all the personal allowances, for example, just as he has begun to do with the standard rate band?
What is wrong with couples with children taking a few years off to look after those children? It is not as if the Minister is providing adequate child care places. Is he afraid that many of them may not return to the labour market? I would not worry unduly, as his Administration's disastrous housing policy, which has led to astronomical mortgages, has already taken care of that. I am reminded that at least some members of Fianna Fáil opposed divorce in the 1980s on the grounds that we should look to support the institution of marriage rather than providing for marriage breakdown. Now some of the same people are actively dismantling one of the very few means by which the State gave active support to marriage and parenting. How they square the two is beyond me.
The Minister, Deputy McCreevy, has delivered what most of us suspect is his last budget, and we can now clearly appreciate his legacy and that of the Government. The NESF pointed out last week that income distribution in Ireland is among the most unequal in Europe. The Combat Poverty Agency reiterated the same point this week. Relative poverty has increased dramatically during his time in office. The top 20% of income earners have enjoyed a bonanza at the expense of the rest of the population. It is fair to say that the boom which started in 1994 has continued apace, but the Minister has ensured, through his changes in the tax system, that the bulk of the benefit has gone into the back pockets of those who needed it least. I do not suppose that any of this would upset the Minister, but those of us who see the tax system as a means of addressing inequality and injustice have every reason to bitterly regret the day the Minister crossed the threshold of Merrion Street.
I said at the start of my contribution that this budget signals the beginning of the end of the so-called Celtic tiger. Maybe it is not for Opposition Members to criticise measures which may enjoy a bit of short-term popularity, but we are in this House to do more than just court short-term popularity, and I intend to call it as I see it. Inflation now stands at 6.8%, inflation in domestic services is several points higher than that and house price inflation is off the scale. Some of it is externally generated but an increasing share is home made. Today's package is certain to lead to a further increase in inflation, not just in prices but also in wages. If this is combined with a change in the external environment, for example, an increase in the value of the euro, we could very quickly lose competitiveness and everything that flows from that.
The Minister knows all that. Indeed, in the past he has prided himself on being hawkish on these issues. For three years he stuck to what I always considered to be a bizarre strategy of limiting spending increases to an annual increase of 4%. Soon after the election in 1997, he said that ensuring increases remained at that level was an exact science. This year though he has gone for three times that – nearly 12% – and follows it up with tax reductions on a scale which virtually independent expertise considers to be off the wall. He is priming the pump at a time when the well is about to overflow. To continue the metaphor I mentioned at the start of my contribution, he is throwing oil on an already blazing fire and it should surprise no one if it blows up in our collective faces.
Earlier this year, the ESRI and others predicted that the Minister's policies would fuel inflation. They were characterised as left wing "pinkos", something which I think the Minister regards as less than a compliment. The European Commission and other independent experts got the same treatment, but if we strip away the rhetoric it is clear that the left wing "pinkos" were right, and there is every reason to think we will be right again.
The Minister has also provided for a reduction in VAT of one point off the top rate. The move is inoffensive in so far as it goes, but it is ludicrous to suggest that it will have anything other than a very short-term effect on inflation, if that. It is worth looking at the top rate of VAT. It is made up principally of goods which already attract excise, mostly goods which are in the discretionary area. It is made up of drink, motor cars, tobacco and cigarettes. Do we seriously believe that reducing VAT by one point, from 21% to 20%, on, for example, the price of a pint will dent inflation in any serious way? Can it possibly be called a serious anti-inflationary focus, to use the phrase we have heard from Government in recent weeks? I doubt it. Does a once-off reduction of 0.4% or 0.5% in the CPI, presuming that it is passed on, amount to an anti-inflationary strategy, an anti-inflationary focus? I do not think so. We might just reduce the price of the pint by 2p or 3p until the publicans find some reason to put it back on, and we are abandoning any effort to dissuade young people from smoking cigarettes.
The Minister seeks to take credit for his indirect tax measures. He also seeks to take some plaudits for the fact that he has abandoned his short-lived effort to dissuade people from smoking, but strangely enough he makes no effort to assess the increase in inflation which will surely flow from the other measures he has taken today. The Minister raised spending by nearly £3 billion in the Estimates. He has pumped a further £1.2 billion into the economy in tax reductions aimed at those who already have large amounts of disposable income, and the social welfare package is worth about another billion pounds, so in total we are talking about in the region of £5 billion extra pumped into the economy. Is the Minister seriously asking us to believe that none of this will impact upon inflation?
A few months before he came to office in 1997, Deputy McCreevy in opposition excoriated my party leader, Deputy Quinn, then Minister for Finance, about the inflationary effects of his budget. The size of the reductions involved at that stage was £400 million, yet the same Minister, Deputy McCreevy, would have us believe that injecting £5,000 million pounds into an economy will have apparently no inflationary effect whatever. It is difficult to avoid the conclusion that the Minister for Finance, or perhaps some of his officials, have taken leave of their collective senses. We have done well in recent years in avoiding a serious bout of inflationary pressure but what the Minister is doing today is pushing our luck too far.
The Minister will say that the Labour Party has been arguing for a programme of investment in services, which would also entail public spending, and he is right, but unlike them we were prepared to limit our demands to reduce taxation, although the people on low and middle incomes whom we sought to target would have done as well from the package we announced as they have from the Government's package.
Our fiscal policy has only a passing similarity to Fianna Fail's recent efforts. For a start it is costed and set out carefully over a three year period. It is also careful, not reckless. We have argued for a sustained programme over three to four years to bring about measurable and sustained improvements in services. Fianna Fáil, on the other hand, is spending for one reason and one reason only – to get re-elected. Does Fianna Fáil really think that the people are fools? For three and a half years it studiously ignored the problems with the health service, the homeless children on our streets, the ever-growing numbers of people on the local authority housing waiting lists and the needs of carers. For three years it ignored underfunded services which were crying out for investment and now, a few months before an election, it loosens the purse strings as if by magic and expects us to take it seriously. The 2001 Estimates published some weeks ago have nothing to do with the interests or the needs of the country and everything to do with the electoral needs of Fianna Fáil.
Fianna Fáil believes in being all things to all men. It does not believe in choices and certainly not in hard choices. By contrast, we in the Labour Party believe in being straight with people. We believe that the time has come to change direction, to change our priorities. We can continue to channel the fruits of growth into our back pockets or we can invest in the services on which we all depend.
I want to stress the word "all". For generations we provided services for those who could not pay for them. Public provision was as much about charity as it was about citizens' rights but now is the time to move on. Now we can afford to design and fund services which everyone, regardless of income, will be happy and proud to use.
We need a public service, a health service which guarantees equal access for all and excellence in service. We need to provide a public transport service for everyone, not just for those who do not have or cannot afford a car. The State should provide recreation facilities everywhere, not just in areas where the private sector refuses to go. We should work in close co-operation with the private sector but ultimately the responsibility lies with the State to see to it that our citizens get the standard of service to which they are entitled.
The Labour Party has made it clear that we want to see greater investment in services and that this will entail more public investment. We want higher public spending because we want to improve the quality of life of our citizens. We want targeted initiatives combining public investment, structural reform and rigorous evaluation because we know that if we want stable, non-inflationary growth, we have to increase the productive capacity of the economy. In the first instance that means tackling the bottlenecks which are so obvious to all. It means easing traffic congestion, providing child care facilities and facilitating people who want to work, whether they already live here or come here from overseas.
When we talk about infrastructure we are not only talking about roads, airports and fibre optic cables. We need to invest in these areas, but we also need to invest in people. The new economy is a knowledge-based one and this means we must invest in education from the cradle to the grave. Investing in people entails more than education and training. It is also about providing health care, housing and social services. This provision is necessary if people are to stay in Ireland, develop themselves and, in turn, develop the economy. This cannot be done by cutting tax. Putting money into the pockets of the better off is fine on budget day, but it is not of much use if one has a disabled child or one has to bring an elderly parent to hospital. One cannot skip the accident and emergency queue because the Tánaiste, Deputy Harney, cut the top rate of tax.
The Tánaiste seems to believe that the economic success of the future is ensured by following the formulas of the past. Not for the first time, she is wrong. The choice between private consumption and public investment is at the heart of the choice posed by the Tánaiste a few weeks ago. She stated, without apology, that she felt closer and more comfortable with American free market capitalism than the European social model. I know I speak for all members of my party when I reject that view with all the forces at our collective command.
For many years Fianna Fáil was an enthusiastic supporter of EU membership, but there are worrying signs that may be changing. The Minister for Arts, Heritage, Gaeltacht and the Islands gave a jingoistic speech in Boston recently when she seemed to say that the obligations of membership had become a little tiresome now that the money is running out. Until very recently the Taoiseach was ominously silent on the issue and he still has not publicly rebuked the Minister for what she said.
It is as well to acknowledge that the question of Boston or Berlin is not a choice in any real sense of the word for many of us. For many of us, particularly younger people, the question of European identity is a matter of fact and not a matter of choice. I am a Dubliner, Irish and European. There is no conflict in these layers of identity and I do not see how there ever could be. I never want to go back to the insular backward-looking definition of Irishness which was the prevailing theology on this island until a generation or so ago. Many of us have embraced the fact that we are equal citizens of a multi-cultural Europe and we will continue to do so even after the Germans have stopped paying for the roads.
My party will support the European political project come what may, but this is not to say we are indifferent to the sort of Europe we have, far from it. It is important for the Labour Party that the Union is more than just a free market. It is important that it is a Union where citizens have human and social rights which can be vindicated even in the teeth of international capitalism. It is important to us that workers cannot be fired at will, that parents have a legal right to parental leave when their children are born and that the health and safety of workers is guaranteed by law. The Tánaiste may regard these rights as unnecessary regulation, but we regard them as an important statement of the sort of society in which we live.
For too long we have asked pensioners to live on much too little. Approximately 60% of pensioners have no means of support other than a State pension. Many others live off occupational pensions which are not as generous as they should be. I include in that category many former employees of semi-State bodies. For many years we found it difficult to afford the increases needed to bring the pension up to a decent level, but that has now changed. We have the resources to make a substantial increase in pensions, not just for old age pensioners but for everyone, including widows, people on invalidity, blind people etc. who are long-term dependent on the State for a living. In many cases these are the people who built the boom we are enjoying but they have no independent means of benefiting from the healthy state of the economy. They do not benefit from tax cuts and cannot go out and earn an extra few bob in the labour market.
Last year the Minister had the money to raise the pension to £100 per week. Shamefully, he held back so as to delay the increase until a few months before the election. Today he has raised it to £106 per week. I welcome this as far as it goes, but he should have gone a good deal further. A few weeks ago my party indicated that it would seek to increase the pension to £120 per week in the event of being returned to office at some point during the next year. I reiterate that commitment. The clock will be ticking from 1 January on that increase. As a precondition for entry into Government we will insist that the increase is backdated to 1 January 2001. A once-off increase in pensions is good but it is not good enough. We need a mechanism for benchmarking, not just the old age pension but all social welfare payments. We also need a mechanism for deciding on future increases. The Labour Party will set out its proposals in that regard in the coming months.
The really big losers during the past year are the people who depend on social welfare payments other than pensions and pensioners under the age of 66. These people got a miserly increase of just £4 in last year's budget. Much of this was eaten away by local authority differential rents long before inflation kicked in. It is a simple undeniable fact that social welfare recipients are significantly worse off in every possible way as a result of the meagrely rise in last year's budget and the bout of inflation which followed it.
This was a deliberate decision of Government at that time. Even at the time of last year's budget the Government was projecting a rise in average incomes of 6% while giving social welfare recipients less than that. In other words, it was a deliberate decision of Government last year to make people who depend on social welfare relatively poorer than they already were. To make up for this, a weekly increase of at least £10 was needed before today. We must look at the Minister's announcement of £8 per week in that context. It remains that the poorest of the poor will get relatively poorer over the next year, and this will happen because of a deliberate decision of the Government.
Child care must be the single biggest failure of the Government. It has been clear for years that female participation in the workforce has been increasing and that child care facilities are inadequate and simply non-existent in some areas. It has also been obvious for years that nothing short of Government intervention would sort out the problem, yet the Government has done nothing about this issue. We have had reports, interdepartmental groups and studies, promises and recommendations, but virtually no action. Action is required to address this issue on at least two levels: first, and most importantly, we must address the issue of supply and, second, we must deal with affordability. Needless to say, the two issues are inextricably linked – if one sorts out the supply side the likelihood is that affordability will look after itself.
Before I go any further I acknowledge one straightforward and important fact. The majority of parents, particularly mothers, would prefer to have as much time off as possible to look after their children. This choice should be underpinned by the tax system. Instead the Minister has decided to do exactly the opposite since his individualisation measures are designed to coerce many mothers out to work. Flexible work practices and improved maternity and paternity leave would also help parents to spend time with their children. It would be churlish of me not to welcome the extension of maternity leave announced by the Minister today.
The second option for many parents is to leave their children with a relative or neighbour. Sometimes this involves payment and other times it does not. One way or the other, we should seek to ensure that a person who looks after one or two children is favourably treated by the tax system. In this context, we could provide that the first £70 or £75 of income from this source would be exempt from tax, provided the individual concerned was not engaged in the business of child minding. We should not, in our anxiety to provide for a well regulated standard of child care, impede the informal arrangements many parents prefer.
Last year the Minister announced capital allowances for investment in child care facilities. Earlier this year the Government announced £50 million in capital grants, much of it aimed at the voluntary and private sectors. As Deputy Noonan said, these amounts have been repeated in the Estimates as most of the money was not spent. These schemes have come late in the day and, in fairness, it is too early to make a complete judgment as to their effectiveness. However, it has to be said that the early signs are not encouraging and the take-up has been slow.
I have no problem with these measures in principle, but the almost total reliance on the private and voluntary sectors cannot solve the problem of supply and certainly will not deal with the issue of affordability. Let us think of it in simple terms. If we insist, as we should, on a minimum ratio of one child care worker to each three or four children, it will take a weekly charge of £80 or £100 to ensure that person earns a half decent wage, and this is too much for many parents, especially if they have more than one child. This can be dealt with by giving parents a subsidy towards child care costs and in the short term there is little alternative but to do so. However, a more acceptable long-term solution would be for the State, through the health boards, local authorities or, perhaps, the Department of Education and Science, to pick up part of or all the salaries of qualified child care workers.
Essentially what is needed is for the State to take responsibility for ensuring the facilities are available, whether by way of crèches, playgroups, pre-school facilities or montessori schools. This can be done by providing support for the voluntary and private sector through capi tal grants and salary subsidies but direct provision will also be needed. Our ultimate aim should be to provide for a seamless transition from care through pre-school to formal education.
The Minister announced a significant increase in child benefit, which I welcome. The payment is made directly to mothers and all the studies suggest it is well used and goes some way towards defraying the cost of bringing up children. Even before today the Minster was committed under the PPF to raise the level of benefit to £100 per child, but I am glad, nonetheless, he has gone a considerable way to meeting that commitment.
However, it is wrong to suggest the increase in child benefit will address the child care issue. Not one extra place will be created as a result of the increase in child benefit. Likewise, the increase in no way impacts on the affordability of child care. An extra £6 or £7 in child benefit, however welcome, is of little use if it costs £80 or more to have one's child cared for. The Minister should have taken his courage in his hands and made a targeted payment towards the cost of caring for young children. The fact that he has not done so means that the issue remains to be addressed on another day.
The Government's national development plan was announced with great fanfare just over a year ago. While those of us in Opposition may differ in terms of detail there is a consensus in the House that the plan must be delivered in good time, but there are already worrying signs that this will not happen. Construction costs have spiralled and it is a certainty that all the major projects set out in the plan cannot be delivered within budget. Government will be required to provide more money or to take action to keep costs within limits.
We have had the opportunity to discuss this matter in the House in the recent past and there is no doubt we will come back to it in the near future, but I want to mention one issue in particular where the abject failure of the Government is stark, that is the business of providing a decent public transport system in Dublin. Driving in Dublin has become a nightmare. Those of us who live or work in the city know that travelling from one part of it to another by car is a frustrating experience at just about any time of the day. Most of us acknowledge that the only solution to this problem is public transport and urgent action is needed now.
The Government has lead us through a myriad of reports, consultative processes, recommendations and inter-party wrangling and the end result is little short of pathetic. In three years it has delivered three QBCs, a few dozen extra buses on the streets of Dublin and a DART service to Malahide and Greystones which runs approximately once every two hours. There is little prospect of any improvement in the near future. The Government talks about metros, Luas, PPPs and so on, but there is no sign of anything happening on the ground.
I am not a fan of the recent plan produced by the DTO, but it is a good deal better than most of what went before. The Government and other authorities, therefore, should take the bull by the horns and make it happen. The citizens of Dublin are entitled to nothing less.
A few months ago the Department of the Environment and Local Government set out its proposals in the national climate change strategy. The report is full of very worthy stuff. It is long on aspiration but a good deal shorter when it comes to specifics. In the context of today's budget, I examined the section on taxation.
The statement begins with full-blooded support for the notion of eco taxes, without any hint that excise duty would be reduced on petrol, but then it goes on to deal with "Integration with Overall Economic and Taxation Policy". Most importantly, the report states that emissions taxation will be introduced "in the context of acceptance by the social partners and will be put in place from 2002 on a phased incremental basis and in a manner that takes account of national economic, social and environmental objectives".
It is absolutely clear that the Government does not have the remotest intention of doing anything about our Kyoto obligations and it should be honest enough to say so publicly. It is not good enough that the Minister for the Environment and Local Government delivers one message when he strides the world stage while the Minister for Finance and his Department do their level best to ensure nothing happens. The Department is very good at ensuring nothing happens.
Three years ago the Government promised us a tax on plastic bags, but that has not been introduced. A year ago the Minister for Finance announced a BIK charge on parking in Dublin city centre, but that has not been introduced. It is difficult to think of a single environmental measure taken by the Government which was not imposed by Brussels and financed wholly or largely by European funds.
I do not pretend that meeting the Kyoto targets will be easy but it is made all the more difficult because politicians of all parties have connived in spreading the notion that clean air can be achieved painlessly, without cost, without any change in our lifestyles and without any impact on economic growth. This issue will not go away. It is here for the foreseeable future and it is one of those issues which needs an all-party approach and, ideally, a consensus. One way or other a dose of honesty would be a good start. It is time for the Government to say what it means and mean what it says. At the moment it is doing neither.
I take this opportunity to restate the support of the Labour Party for the so-called Tobin tax. This is a well worked out idea intended above all to bring some stability to international capital markets and its merits are obvious. We all know there are real difficulties in implementing something such as this, which depends on a high level of international co-operation, but we are happy to work with like-minded parties and individuals to establish whether a way can be found around it. Many of our sister parties in the EU have taken a similar position and we will be happy to work with them in dealing with the matter.
The Minister for Finance is a man who likes to trumpet his own consistency. He is given to starting every second sentence with the words "I have always believed". He has always believed that the Fianna Fáil manifesto of 1977 was wrong. He prides himself as one of the few in Fianna Fáil who opposed it at the time. However, what the Minister has done today puts 1977 in the halfpenny place. Having preached fiscal prudence for decades the Minister, in the autumn of his political career, has dramatically reversed everything he ever believed in so as to court electoral favour. He will live to regret the day, if he does not already do so.
He is in the spring of his career.
The Minister is a gambling man. Today he is gambling, not with his own money but with the nation's future. We all hope he gets lucky but he knows better than most that if somebody else was standing in his place looking for odds he would give very long odds indeed.
Cuirim fáilte roimh an seans seo labhairt ar cáinfhaisnéis 2001. The Green Party operates by the principle of thinking globally and acting locally. In other words, the welfare of each individual in society depends ultimately on the well-being of the life support systems on which all of us depend. The Minister either chooses to ignore this reality or is forced by more selfish interests to reject it.
Ghandi coined the principle, "There is enough for everyone's need, but not for everyone's greed". This planet has a total productive area which works out at approximately two hectares per person. Allowing 12% to protect the rest of the species in the world, a suspiciously modest figure emanating from the World Commission on Environment and Development, we are left with 1.7 hectares per head available for human use. When the Government came to office in 1997 the average human ecological footprint was already 35% bigger than nature could regenerate on a continual basis and was growing quickly. In that year in the sustainable development strategy for Ireland prepared by the Government, UCD's environmental institute used four measures of domestic consumption, namely, fossil fuels, built-up land, food and forestry, to arrive at an Irish ecological footprint of 2.38 hectares per person or a total of 86,325 square kilometres, about 1.25 times the size of the State.
The rapid expansion in Ireland's footprint should surprise no one. It is part of a global trend but also special to the velvet spur of the Celtic tiger ravenous for imported resources. What has kept our footprint relatively small in the past has been our low population density and high percentage of productive agricultural land, a ratio now in rapid change. The sprawl of buildings and roads across farmland, the soaring importation of building materials and fuel, the demand for new machinery, cars and computers and acquisitions such as the largest trawler in the world all add to the cost of energy and the pollution we pile up in other countries as well as our own. Even our productive agriculture is heavily subsidised ecologically in fossil fuels, fertilisers and remedies for pollution.
The new forestry targets, the imported wind turbines, the plans for wave power and the new natural gas supply could help eventually to shrink our national ecological footprint by a toe or two. However, habits of affluent consumption in an island of such narrow manufacturing resources could have us in hot pursuit of the seven hectare ecological footprints of places such as Iceland and Singapore.
Not only is Ireland becoming less sufficient in terms of wasting energy and failing the most vulnerable people, Irish reliance on exports to long haul destinations means our economy is now more vulnerable than ever to a worldwide rise in oil prices. The OECD has warned us once again that a slump in our economy is approaching. The advice from the OECD, to remove disincentives to boosting labour supply and improve energy efficiency, are in line with the Green Party pre-budget submission. By ignoring this advice, the Government is turning the Celtic tiger into a Celtic ostrich.
The Minister's speech is a classic example of ostrich thinking. The magazine, The Economist, hardly a radical journal, realised back in 1989 that GDP and GNP alone are misleading measurements. No one is surprised that GDP and GNP are increasing but, in green terms, this is a result of selling the family silver – companies such as Eircom – and burning bits of the house as fuel, indicated by our reliance on oil which is greater than ever.
However, the index of sustainable economic welfare has been decreasing since 1974 – the Minister made no reference to that – in terms of gridlock and transport, which have been well discussed already in the House, energy inefficiency, Ireland being second from the bottom of the list of developed countries in that regard, our Kyoto obligations in tatters and waste, which is rising at more than 4% each year with no meaningful measures to minimise it and, as was mentioned, plastic bags still going unhindered and untaxed, in spite of Government promises.
There is also the cost of TB eradication over the years, which has been a scandal. The Minister mentioned dealing with BSE, but he will not say what is the cost. The sky is the limit. I predict that, in future, in biopatenting of life there will be another open-ended cheque when the effects of that begin to be felt in the long term.
Anyone unfortunate enough to be struck down by illness or injury will know and understand how the Fordham index of social health is also deteriorating and has been since 1974. Again, it is no surprise that the Minister did not mention that measurement.
Giving medical cards to all those over 70 sounds wonderful to Government backbenchers and there will be many who will be offered peace of mind, but it is no guarantee of treatment. Primary health care is suffering as vacancies for medical and nursing staff remain unfilled. I know, for example, the town of Balbriggan is losing night time doctor's services as doctors rationalise and retreat to Drogheda. How is a medical card holder of 70 years of age to get to the Cottage Hospital in Drogheda from Balbriggan and surrounding areas in north County Dublin at 2 a.m.? That medical card is about as useful to that person as it would be in a game of patience.
Hospital facilities in Tallaght Hospital cannot handle the demands for treatment. My brother, who is seriously ill and is a VHI contributor, spent a second day yesterday on a trolley in a corridor, while others were left on chairs. His drip was suspended from a coat hanger. I was told Tallaght Hospital has 100 fewer beds than the three hospitals it replaced. Clearly a medical card is cold comfort to many people facing that service. The Minister omitted to tell the Dáil that Ireland spends less than the GNP EU average on health.
Naturally additional allocations to services are to be welcomed, but they are cold comfort to those who see others prosper while their lives become more vulnerable and stressful. As a rapporteur on the Committee on Education and Science report on school transport, I welcome the measure from the Minister to reduce the three mile limit eligibility rule to two miles. However, he did not go further and, for example, give an allocation to adult escorts on buses, to buses needing to be renewed, to increase the capacity of buses so that each secondary pupil can have a seat, or to install safety belts for all pupils.
The reality of the budget is that, as it does not address the problem of teacher shortages, resulting teacher mobility means teachers will be attracted away from disadvantaged schools to teach in more comfortable school environments. The Minister can then perform the most bizarre of political tricks. He can announce allocations of additional resources for hundreds, even thousands, of new positions safe in the knowledge that, given the inadequate payscales for teachers, the vacancies are certain not to be filled and the budget allocation will remain as safe as gold in Fort Knox.
In the area of child care, again we are disappointed with the Government ignoring the enormous need for community based crèches by confining its allocation of funds to Civil Service workplaces. Obviously any improvement is welcome but, on the other hand, work mobility is a reality and is being encouraged, so focusing solely on workplace crèche facilities is a recipe for insecurity for children as well as their parents.
Many of those parents will be sadly disappointed, especially the majority of the public sector and those in "yellow pack" jobs in the private sector, when they see a missed opportunity to take those on minimum wages out of the tax net. The cost of decreasing the top rate of tax by 2%, if used instead to increase personal allowances, would have removed practically all minimum wage earners from the tax net.
The Minister, Deputy McCreevy, has, in reality, again widened the gap between two income families and stay at home parents. He has increased the standard rate band for two income married families by £6,000, yet he only increased it for one income married families by £1,000 and did nothing for stay at home parents. He has widened the gap considerably for parents who wish to care for their children at home. The child benefit increases are of no benefit as all families will receive the same increase.
On social welfare, although old age pensions and social welfare payments are increased by 10%, the cumulative effect over the past three years means that, because of extremely high inflation figures, social welfare recipients have not had the proportionate increase given to wage earners. In the wake of the failed Hague conference on greenhouse gases and the floods and storms and the threat of their continuing devastation, the reduction in excise duty on fuel sends out the wrong message because it will increase greenhouse gas emissions and gridlock and has not been matched by proportionate supports for public transport.
Is the Government aware that buses and trains are not stopping at bus stops and in towns due to overcrowding and that towns like mine are growing from 11,000 to 40,000 in population? Where are the incentives to take up and create local employment? The Minister, Deputy McCreevy, has made little or no use of economic instruments to address pollution and transport issues. The Government refuses to introduce the necessary fiscal measures to rescue our deteriorating environment and health.
Overall, good economic growth should not impoverish one, yet the Government's policies have increased our dependence on energy consumption and have created gridlock. We have created a waste management crisis and a crisis in our health and education systems. The Green Party calls for a system of economic measurement which provides quality of life and health indicators. Sadly, the Government has squandered its largesse, like a drug addict, addicted to fossil fuel consumption and growth for the sake of growth in a finite system. The Government has hitched the country to the chariot of globalisation, but this cannot be sustained. I appeal for a change in a sustainable direction based on regional self-reliance. This and future generations will depend upon such a change.
Sitting suspended at 7 p.m. and resumed at 7.30 p.m.