(Dublin West): The Finance Bill following from the budget in December outlines and enshrines the priorities of the Fianna Fáil-Progressive Democrats Government, a Government which rules overwhelmingly on behalf of the wealthy and the corporate sector in our society. This is nowhere more clear than in the hugely favourable tax treatment afforded to corporations and employers in this State. The Minister indicates the groups to which his party is beholden by again this year cutting the rate of corporation tax to 16%. His figures indicate that in a full year he will hand back €329 million to the corporate sector as a result of that tax cut. This is a corporate sector which has enjoyed for several years a massive bonanza in terms of profits beyond its wildest dreams, yet the Minister for Finance gives a further hand-out to a sector which has been hugely favoured over decades by contrast with PAYE workers. As a result of cuts in PRSI he is giving back a further €347 million in a full year to the employers sector. In one fell swoop, the Minister is handing back a massive €676 million to a sector which is already hugely profitable and wealthy. At the same time his corporation and county council colleagues are imposing local service charges on householders. They are increasing the charges that already exist with the cry that local authorities need the funds to maintain or improve services.
The Fianna Fáil Party cannot have it both ways. The Minister, on the one hand, is making great play of cutting the level of personal taxation to PAYE workers while, on the other, his local authority colleagues are taking it back in a dishonest fashion. In the case of the local authority on which I serve, as a result of the actions of the Minister's colleagues in Fianna Fáil, Fine Gael, the Progressive Democrats, the Green Party and some Independents, householders face a local taxation charge of €260 for this year. This is a new charge levied under the guise of an environmental charge, in effect, a bin tax. This is happening throughout the country. Let me say to the Minister that the residents of the greater Dublin area are not at all impressed or taken in by his coming in here on budget day and, with a flourish, making some cuts in personal taxation and taking some low paid people out of the tax net – many more should have been taken out – while at the same time imposing a local tax, through his colleagues at local level, on the very same people. Householders and residents see through this. I hope when the Minister and his colleagues call to people's homes during the general election campaign they will hear this quite clearly.
We have the spectacle, therefore, of the Minister giving back huge amounts to the corporate sector while local authorities chase and relent lessly pursue those who still fund the huge bulk of the taxation system. I understand that dozens of decent householders and taxpayers in Drogheda will be dragged before the courts next week because of their opposition to such a local charge. I would like the Minister to comment on his thinking on local taxation and whether he agrees with the suggestion which seems to be coming from elements within the Department of Finance that a parallel taxation regime under the cover of charges for services to the tune or €600 or €700 per annum may be encouraged by this Administration. Where does the Minister stand on this issue?
On the financing of local authorities, if the €676 million the Minister is putting into the pockets of the rich and super rich in a full tax year were committed to the improvement of local authority services not only would these local taxes not be enacted but the level of services could be hugely improved. On the issue of the environment and waste management, and the putting in place of meaningful and effective measures in terms of reducing waste, recycling programmes and so on, a massive amount could be done with such investment. However, the Minister is putting his political priorities and that minority of society which his party favours before such social considerations.
In his budget speech the Minister lauded the so-called public private partnerships and indicated this is the way the Government will go to fund public infrastructure in the future. The Government has been responsible for the privatisation of more public services than any Government in the history of the State. There have been shameful privatisations where very effective public services, whether small banks that were performing a service or telecom industries, have been handed over to big business, multinational corporations and international capital to become playthings of speculators, with no reference to the common good. There was certainly no reference to the ordinary working people of this country who were badly burned in the case of telecoms, but the Minister plans to continue along these lines, allegedly as a way forward to provide infrastructure for the State in the future.
Perhaps the earliest version of public-private partnership happened some time ago in my constituency in the form of the West Link toll bridge. That particular adventure is turning out to be an unmitigated disaster for the residents of the greater Dublin area, commuters in particular. A private company was given a virtual gold mine across the River Liffey in terms of being allowed to charge a toll. It is currently making huge profits. A further redevelopment and extension of the service are envisaged, part of which may have to be funded by the public purse. However, the private company will continue to rake in a huge amount of funds. On any working day the cost of this example of public-private partnership is that hard-pressed workers trying to get home from work have to sit in queues of cars from the toll bridge over the Liffey back up to Finglas and beyond. The greatest single barrier to traffic in the greater Dublin area is evident from this particular example, which the Minister wants replicated around the country according to his budget speech. I think he wants to create 11 other such developments. He is essentially handing out the risk free sectors of infrastructure to private companies in order that they can make a fortune. This is not the way forward.
Another area of major concern, the effects of which I see every day, is the housing sector. The zig-zag policy of the Government with regard to the private rented sector and the manner in which the so-called investors – speculators in reality – are treated are mind-boggling. One year, disincentives are put in the way of speculators, the next they are removed and new incentives put back. The result of this mishmash is a disaster for tens of thousands of ordinary working people and young people throughout the country waiting on the housing lists. I refer, in particular, to the tens of thousands at the mercy of private landlords – the very speculators who priced the ordinary working people and young people out of the market and now hold them to ransom for rents that one would imagine should be sufficient to rent a castle rather that a modest three bedroom semi-detached house or small apartment in this city. That is the result of the Government's housing policy. Unfortunately, all we have in this particular Finance Bill is a further continuation of the process.
I would like to ask the Minister, in particular, if he will provide any relief for one group of householders currently in a terrible bind with regard to their mortgage repayments. He is probably aware that questions have been addressed to the Minister for the Environment and Local Government in recent times regarding householders who purchased their homes with Housing Finance Agency loans and are now forced to pay a very high interest rate – a cripplingly high interest rate that has given rise, in some cases, to the most incredible anomalies. Will he make some provision in the Bill to overcome this grave difficulty for working people?
One particular household bought a home in 1985 for £26,000. By 1995, although having made all their repayments, the amount outstanding was £37,000 – I am using round figures. By 2001, the amount outstanding was £42,000. The Minister for the Environment and Local Government said in a reply that in this bind there were about 44,000 households, and some more of which he was made aware thereafter, and that it would cost about £11 million to the Exchequer to resolve the problem. Will the Minister make this change and free the people concerned from the shackles in which they are bound due to massively high interest rates? This is really unjust in comparison with the way things are operating.
I heard the Minister refer to a particular body with which I was involved and to which I offered assistance over many years – the Irish Seal Sanctuary. The Department of the Taoiseach promised to be quite helpful in this regard. The sanctuary is providing a very important service for vulnerable wildlife, and was not favoured with a once-off grant in the budget. Will the Minister lend his hand to this very worthwhile project, which is performing a very important function making people sensitive to the needs of vulnerable wildlife and awakening an appreciation of wildlife among young people and wider sections of our society?
Da bhrí sin, mar chríoch, cuireann sé an-díoma orm, mar Theachta ón bPáirtí Sóisialach, an dóigh ina bhfuil an Rialtas tar éis déileáil leis an mbuiséad áirithe seo agus é ag teacht chun cinn leis an mBille Airgeadais seo. Measaim sa mbuiséad agus sa mBille go bhfeicfimid Fianna Fáil agus na Daonlathaigh ag cur chun cinn i ndáiríre nithe atá ar mhaithe leis an mionlach sin inár sochaí a thugann tacaíocht do na páirtithe úd agus gurb iad gnáthduine, lucht PAYE, atá thíos leis an bpolosaí seo. Tá mé ag iarraidh ón Aire gan dul chun cinn leis an ngearradh siar ar cháin do na corporáidí móra ach an t-airgead sin a chur isteach sna húdaráis áitiúla agus deireadh a chur le gearradh siar ar sheirbhísí áitiúla atá de dhíth ar ghnáthdaoine agus lucht íochta PAYE.
Minister for Finance (Mr. McCreevy): I thank the Deputies who contributed to the debate on the Bill yesterday and today. Many comments focused on general economic and budgetary issues. Concern was voiced by Deputy Mitchell that I did not refer to economic circumstances. Deputy Mitchell and others painted an unfavourable picture of the Government's handling of the economy. I am very proud of the record of the Government in successfully managing the Irish economy in its term in office. Between 1997 and 2001 real GDP in Ireland rose at an average rate of 9.7% per annum; Irish income levels and living standards improved significantly; total employment rose by over 300,000; unemployment fell to an estimated average of 4% last year; long-term unemployment has fallen to around 1.2%; and involuntary emigration has been eliminated.
This country's future economic outlook is bright. There is a consensus among economic commentators on this. To secure this future outlook in the longer term, I have taken steps to improve the long-term sustainability of the public finances by putting 1% of GNP by law each year into the National Pensions Reserve Fund on a statutory basis. Deputy McDowell expressed his scepticism and doubts as to whether this provision was necessary and whether we genuinely faced a demographic time bomb. I have no doubt that we must provide now to meet the certain increase in liabilities we will face as the population ages.
Let us consider the facts. There are about 430,000 people aged 65 and over today. Given the numbers now aged 40 and over in our population, we know there will be about 730,000 people aged 65 and over in 2025. The number will be somewhere above 1.1 million in 2050. There are about four workers today for everybody of pension age. The prospect is that there will be fewer than three people at work per person of pension age in 2025. By 2050 there will be fewer than two people at work per person of pension age.
Deputy McDowell need not take my word for it. The EU Economic Policy Committee in its 2001 report on this issue projects that demographic changes will lead to an increase in public spending on pensions in Ireland from 4.6% of GNP in 2000 to 9% in 2050. The National Pension Reserve Fund is a prudent policy, which I believe we should see through to completion for all our sakes. I am concerned to protect the operation of the fund and let it seek the best return on its assets to provide for our future. I believe that is Deputy Mitchell's position too.
Deputy Mitchell claimed that budget 2002 is off the rails on the basis of developments since the budget. On the contrary, the economic outlook has improved since budget time, helped to an extent by the measures in the budget. As far as expenditure and revenue are concerned, it is obviously difficult to make a judgment based on one month's figures. Last year's January revenue figures were very good compared to the outturn for the rest of 2001. This shows the problems in making forecasts on limited data. The forecasts are based as normal on projections regarding economic growth, tax elasticities and changes in tax rates and tax collection procedures. They are not politically inspired as the Deputy sought to make out.
I do not share Deputy Mitchell's characterisation of the Central Bank nor the doubts he expressed over its independence in analysis and views on certain issues. The new legislation on financial regulation is complex but it is being progressed with a view to publishing the Bill this session.
Deputy McDowell paid me the compliment of saying that I have been consistent and coherent in my approach and I thank him for that. However, I have some difficulties in ascertaining a consistency and coherence in some of the criticisms being made of the Government's policies.
Deputies Mitchell, McGrath and others seem to suggest that my changes in income tax have both excessively targeted the better off and not reduced the tax burden. At the same time Fine Gael is suggesting a middle tax rate of 30%, effectively a 12% cut in the top rate of tax, which helps higher income earners.
Deputies McDowell, Rabbitte and Higgins referred to the figures I used which show that over 40% of tax cuts I made since 1997 went on personal allowances and credits which help all taxpayers, especially the lower paid. However, by their reckoning one third of benefits went to those on the higher rate because of the widening of the standard rate band and the reduction in the top rate. In Deputy McDowell's words, those on the highest rate who needed tax relief least benefited most, but whom are we talking about when we mention the higher tax rate and widening the tax bands? We are talking about many middle income earners, workers on the average industrial wage. In 1997, a single person on 89% of the average industrial wage was liable for tax at the higher rate. The Government sought to address that issue and did so successfully. Is Deputy McDowell seriously suggesting that such taxpayers should not have benefited from the tax reform?
Deputy McDowell suggested yesterday that the €223 million which I used to widen the standard rate bands in budget 2002 could have gone the full way to exempt those on the minimum wage from the tax net. The approach which I took in the budget was a reasonable one that sought to make progress on a number of issues within the limits of available resources. I would refer the Deputy to the ESRI analysis of the budget as quoted in The Irish Times, which concluded: “the impact of budget 2002 is highly progressive, favouring those with the lowest incomes”. The Irish Times is not noted for being favourably disposed towards me. That article by the ESRI said the budget was the most socially progressive of the last 15 at least.
In the course of the debate yesterday, Deputy Jim Mitchell made a comment on the effect of the Government's policy of widening the standard rate band. The Deputy suggested that as a result we are now in a position where if one spouse of a two earner married couple were to lose his or her job, the couple would end up paying more income tax. I indicated that this could not happen in so far as our calculations are concerned. Take an example of a two income couple, one spouse with income of €45,000 and the other with income of €24,500, in or around the current average industrial wage. Let us assume also that the couple splits their credits equally so that each has the benefit of a personal and a PAYE credit. The net tax liability of the couple, assuming post-budget 2002 credits and bands, is €12,510. If the spouse with the lower income loses his or her job, there is no income attributable to that spouse on which income tax may be charged. However, the income tax position of the other spouse may not remain the same as before. Instead, that person may avail of a wider standard band – the married one-earner band. He or she may also avail of the married personal tax credit. The net result is that the tax liability of the couple would fall to €7,060. In this example the couple's income drops by 35%, but the net income tax liability drops by 44%. I am prepared to look at the case to which the Deputy referred and, if he would like to send me the details, I will have it examined before Committee Stage.
If the Deputy is referring to the position of married one-income couples relative to married two-income couples on the same income, that is a different question and we have been down that road many times before.
