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Dáil Éireann díospóireacht -
Wednesday, 4 Dec 2002

Vol. 558 No. 5

Financial Resolutions, 2002. - Budget Statement, 2002.

Before calling on the Minister for Finance, I remind Deputies that the budget documents being circulated remain confidential until the Minister has announced them and should not be taken from the House if a Member leaves before the Minister concludes his statement.

Over the past five years, the budgets I introduced helped to secure the most sustained period of investment and growth in the history of our country. The over-riding objective of this budget is to consolidate those gains which we delivered in recent years and to provide the foundation for future growth.

Our policies have ensured the end of the era of mass unemployment and emigration. We implemented a major step-up in the funding of our public services to help them to catch up and develop. We also introduced major tax and social welfare packages to the benefit of all in our society.

To those who want to know where the resources generated in recent years have gone, the answer is clear. They are providing more health services, higher pensions, smaller class sizes and improving the living standards of both taxpayers and social welfare recipients alike.

Today's budget has been framed in very different circumstances from those of previous years. On budget day last year, I published detailed projections for 2003 and 2004 which signalled projected deficits for each of those years. Since then, the situation has become more difficult because of the unexpected continued weakness of the international economy. In exactly the same way as every other government in Europe, we are now faced with clear budgetary pressures.

In the past, we in this country chose to ignore the unfavourable economic reality and went ahead with policies we could not afford. All that those policies delivered, however, was rising budget deficits and higher unemployment. They provided no solution to our economic problems.

There are those who want us to forget the lessons of the past. They want me to announce major spending increases, irrespective of the economic situation. However, my view is that the responsible policy is to take a moderate route and to take the necessary decisions now so that we ensure growth in the medium term. That is why my budget has been developed within a three-year framework.

Budget ObjectivesThis budget has three key objectives: protecting the weaker sections of society, investing in the future to position ourselves for a return to better growth levels and securing stable public finances to safeguard the gains we have already made. These are three core objectives to achieve the vision for Irish society which the Government and the social partners have. They are also central to the conclusions reached by the National Economic and Social Council in its recent strategy report.

These are sound and achievable goals. They are right in themselves and right for the times we are now facing. They lay the foundations for renewed economic and budgetary progress by setting the fiscal framework for the next three years. They also put in place a framework within which discussions on a successor to the PPF can be based. Social partnership has played a key role in the story of our success so far. The Government is keen that it should continue to play the same role in this more difficult environment. The Government will be fair in determining where the pluses and minuses fall. The aim is to support those areas of critical importance to overall economic and social progress. In the new situation, we also need to be more flexible and innovative in how we generate, allocate and manage resources.

Economic OutlookThis time last year, I underlined the unusual degree of uncertainty surrounding the economic outlook. The pick-up then expected in the major world economies in the second half of 2002 did not happen. As a result, our growth in GNP terms, at an estimated 1.8% this year, has been well below target. As in other countries, the slower than expected growth has had an adverse impact on our budgetary position.

The short-term prospects for the international economy are not good. This year's budget is presented in the middle of a substantial international economic slowdown. The best that can be expected now is a global upturn in the second half of 2003. Next year, the euro area economy is expected to grow by 1.8% and that of the United States by 2.3%. Ireland is part of a common currency area where average inflation is not far above 2%. We must get our inflation rate down close to that level as soon as possible, otherwise we risk losing out on jobs.

We have lost competitiveness in the past few years. Our priority must be to halt this slide and regain our position. Competitiveness creates jobs and wealth, and generates the resources needed to build the sort of society we all want.

There are significant downside risks to all economic projections at this time. The difficulties in the Middle East, the continued question marks about a recovery in the information and communication technology sector and possible sharp exchange rate movements are but some of the more obvious ones.

Growth in Ireland next year will be modest. The range of commentators' forecasts for 2003 is far narrower than last year, centring around 3% and 4% GDP growth. At this stage, my estimate for GDP growth next year is 3%, with prospects improving as we move into 2004 and 2005. GNP growth next year is projected at 2%. We cannot now expect to be approaching our potential GDP growth rate until some time in 2004 at the earliest.

Employment is expected to grow next year by 11,000, with unemployment at around 5%. On the assumption of unchanged interest and exchange rates, and taking account of changes in this budget, consumer price inflation will be 4.8% and, depending on wage cost factors, should be on a downward trend. If we get our cost base under control, we can expect to see inflation come down significantly by 2005.

Full details of the economic projections underlying the budget are included in the EU Stability Programme Update published with the budget today. This update will be assessed by the European Commission in the new year in accordance with the Stability and Growth Pact and the accounting norms applied by Eurostat, the Commission's statistical agency.

Budgetary ProjectionsThe 2003 budgetary targets are subject to the same risks I outlined earlier. These targets are as follows: an increase in gross spending on public services of 5.7%, bringing it to a total of €38,015 million; a current budget surplus of €3,685 million; a capital budget deficit of €5,554 million; an Exchequer deficit of €1,869 million, including a release of €250 million from the capital services redemption account to meet interest costs on the national debt; a general Government deficit of €885 million or 0.7% of GDP; and a debt ratio of 34% of GDP, the second lowest in the European Union.

Position in 2004 and 2005In present circumstances, we have no choice but to move our expenditure, pay and cost levels onto a lower growth trajectory. Even by doing that we are facing the prospect of having to borrow more than €3 billion in 2004 and again in 2005. The position is that in 2004 and 2005 we will face a large and continuing Exchequer borrowing requirement and a general Government deficit of around 1.2% of GDP, which will require us to continue to take the necessary corrective action.

Public Service PayAs the House is aware, talks on a new national pay agreement and on the implementation of the recommendations of the public service benchmarking body are currently under way. Any such agreement would have to deal with the issues highlighted in the benchmarking body's report, including the need for real change. If there is a new agreement, one cost that will arise is in respect of the first phase increase under benchmarking. Under the terms of the Programme for Prosperity and Fairness, this would be due to be paid with effect from 1 December 2001. The cost of this to the end of 2003, including arrears, is €565 million and I am providing for same.

There are a number of other pay and pay-related issues which are currently being dealt with in various processes. I do not intend to prejudge the outcome of any of these individual issues, but I consider it sensible to make a global provision of €50 million in respect of the totality of these issues.

The growth in the public service pay bill has to be contained. One factor in achieving this is restraint in relation to the level of pay increases and the Government is making its position clear in the national pay talks. The other main factor driving the rise in the pay bill is the growth in public service numbers. These have risen by about 50,000 over the past five years. As a first step, the Government has decided that numbers employed across all sectors of the public service are to be capped at their present authorised levels with immediate effect. In addition, the Government has decided that there will be a reduction of 5,000 in those numbers over the next three years.

Public SpendingThis Government is committed to spending such public resources as can be made available to provide for the welfare of our people. We have shown that commitment in the past and we will continue to do so in the future. When we had the extra resources we used them to provide much-needed additional public services, and rightly so.

We have achieved a lot in this respect since 1997, as the increase in spending between 1997 and 2003 shows. In that period, total gross spending, capital and current, will have increased from under €19 billion to over €38 billion, an increase of 102%.

In that time, total health spending will have risen by €5.2 billion to €8.9 billion; total education spending will have risen by €2.5 billion to €5.6 billion; social welfare spending will have increased by €4.5 billion to €10.2 billion; and spending on infrastructure will have increased by €2 billion to nearly €5.6 billion.

The Government is continuing to provide substantial funding in 2003 for those key priority areas. As everyone knows, we must keep our spending consistent with the available resources. There is a limited pool of such resources. This means that we must prioritise, and if one sector receives more, others must receive less.

The Report of the Independent Estimates Review Committee, which I am publishing today, was of considerable assistance to the Government in prioritising our spending choices for 2003. Ultimately, however, the decisions underpinning the expenditure Estimates were taken by the Government.

The committee highlighted the limitations associated with a one year focus on expenditure planning. It recommended that a further review of expenditure should be undertaken by my Department immediately after Budget 2003 with a focus on expenditure in 2004 and 2005. I agree fully with this recommendation and my Department will initiate such a review in January 2003.

Additional SpendingI expect voted public expenditure to come in on, or close to, target in 2002. Including the social welfare package outlined, I am today providing an additional €1.3 billion in gross spending in 2003. Taking account of the spending set out in the Estimates last month, this means that total gross spending on public services next year will be €2 billion above the estimated 2002 outturn, an increase of 5.7%. This means that since 1997, this Government will have more than doubled total gross expenditure on public services to €38,015 million.

Public ServicesWhatever deficiencies exist in relation to the quality and quantity of our public services, money alone is clearly not the answer. There is scope for securing better value for money through more effective control and management of public expenditure. Every euro saved is a euro available to spend on hospital patients, our children's education and our roads.

The Government has recently agreed a number of improvements to the financial management systems which will be introduced from the beginning of 2003. I will briefly refer to some of them. To facilitate a more informed assessment of emerging spending trends, we will publish the monthly spending profiles submitted by Departments at the start of the year. We will also publish corresponding information from the Revenue Commissioners on monthly tax revenue profiles for 2003. Ministers and their management committees will be required to manage strictly within the allocations given to them. I will continue to submit monthly expenditure management reports to Government, reporting on overall spending and revenue trends. Improvements will be made in risk assessment measures and contingency planning to cater for unforeseen pressures which may emerge as the year progresses. Spending on demand-led schemes will be managed effectively, as is required in all other spending programmes. I am introducing revised arrangements for managing capital spending.

The financial management system will provide incentives for Departments to improve efficiency and cost-effectiveness. For example, where Departments secure savings as a result of specific efficiency measures or steps they have taken to curtail a programme, these savings should, as a general rule, be available for other high priority programmes within the same Department. These measures will encourage public service managers to achieve greater efficiency in the management of public expenditure, to the benefit of all.

Infrastructure – Capital SpendingThe economy has developed substantially in recent years. The number at work has increased by more than 370,000 over the last five years. Our infrastructure needs to catch up. In the national development plan we outlined our vision for the development of the infrastructure required by a modern, dynamic society. We are already making good progress on this. Our existing public spending rate on capital, at 5% of GNP, is nearly double that of the European Union generally.

The Government has accorded top priority to investment in economic and social infrastructure. We have more than delivered on our financial commitments to this priority in the national development plan. In the first three years of the plan the Exchequer has invested almost €9 billion in this area, almost €1 billion more than the original commitment. This represents a massive acceleration over pre-plan levels of investment. Unfortunately, cost increases have impacted adversely on output and timescale, but the plan is continuing to fund projects of unprecedented size, especially in the key area of transport.

The Government remains committed to the infrastructure investment strategy in the plan and welcomes the continuing broad political and social partner endorsement of this strategy. In recognition of the key importance of the national roads programme, I am today allocating an additional €209 million to the programme for 2003. This means that next year the Exchequer will be investing €1.25 billion in the roads programme.

The Government is also anxious to explore more radical and innovative approaches to the funding and delivery of the roads programme, including, in particular, the scope for greater private sector investment and potential ways of remunerating this investment. A working group, chaired by the Department of Transport, has been established to examine all options in this regard and report to the Cabinet committee on infrastructure by 31 January 2003. I propose to examine the scope for introducing a multi-annual funding envelope for the programme in the light of the report.

Public Private PartnershipsTo help ensure public infrastructural projects are financed in a cost effective manner, I have brought forward legislation to establish the National Development Finance Agency under the aegis of the NTMA. The new body will advise State authorities in relation to the optimal financing mechanisms for infrastructural projects and ensure private sector finance is used where it is most effective. I hope to have the agency operational early in the new year which will help to promote the public-private partnership concept.

Public-private partnerships are making a significant contribution to delivering priority infrastructural projects under the national development plan. A milestone in their development will be passed in the near future when the first motorway PPP contract is signed. The various PPP national roads projects will incorporate substantial private finance and real tolls will generate a stream of revenue that will contribute to meeting the cost of this vital infrastructure. Public-private partnerships are also being developed in other sectors, including education, the Luas operator and environmental services.

Social InclusionOne of the key objectives of this budget is protecting the weaker sections of society. We committed ourselves in An Agreed Programme for Government to implementing a wide range of social inclusion policies aimed at supporting the most vulnerable in society. Specifically, we are committed within the lifetime of the Government to reducing consistent poverty to below 2% of households and progressing the revised national anti-poverty strategy, with its ambitious targets, across a broad range of areas. Since the Government first came into office in 1997 we have significantly reduced consistent poverty and improved living standards to the benefit of all groups in society. Today's budget will consolidate the progress made over several years.

This year the greater pressures on public finances will obviously affect my spending proposals, but nevertheless, I aim, with this social inclusion package, to direct resources to those most in need.

Social WelfareToday's social welfare improvements will cost €530 million in a full year. This will bring the gross allocation for the Department of Social and Family Affairs next year to €10.2 billion. As a result of the improvements I will announce today, social welfare expenditure in 2003 will be €4.5 billion higher than it was in 1997, an increase of almost 80%. Even in these more difficult circumstances the cost of the social welfare increases this year will be twice what it was in 1997.

Dormant Accounts FundThe social inclusion area will also benefit next year from the first disbursement of funds from the dormant accounts fund which will be established using unclaimed dormant account moneys from financial institutions. The funds disbursed will be spent on charitable and community projects, with a particular focus on children with learning disabilities.

Old Age PensionsToday I am increasing the full personal rate of old age and related pensions by €10 per week. This will bring the old age contributory pension to €157.30 per week and the old age non-contributory pension to €144 per week. This is a first step towards An Agreed Programme for Government commitment to increase the State pension to €200 per week. The rate of payment for old age pensioners will, by 2003, have increased by 59% over the rate payable in 1997. This is well ahead of inflation and represents an enormous improvement in the living standards of our older citizens.

Widows and WidowersIn line with the targeted increases provided in my last two budgets, today I am providing a further special increase in the weekly rate of the widow's and widower's contributory pension for those aged 66 years and over to bring the rate of payment closer to that of the old age contributory pension. Accordingly, the weekly rate of payment in 2003 for the widow's and widower's contributory pension will rise by €11, bringing the payment rate to €155.80 per week, and €162.20 per week for those aged 80 years or over.

What about those aged under 65 years?

Child Benefit

In budget 2001 I announced the Government's intention to allocate over €1.27 billion in increased child benefit over a three year period. As I said at the time, our central objective is to support parents in whatever choices they make in looking after their children. Child benefit is an important financial support for families with dependent children and a key instrument for tackling child poverty. We achieved two thirds of the planned increase in the last two budgets. However, in the current budgetary circumstances it is not possible to complete the Government's plans this year. I am now announcing an additional €105 million in a full year to increase child benefit further. This will see child benefit rates increase by €8 per month for first and second children to €125.60, and by €10 per month for third and subsequent children bringing the new rate to €157.30. I intend to complete the planned increase in child benefit in 2004 and 2005.

Other Social Welfare MeasuresThe Summary of Budget Measures contains a range of other social welfare improvements, the full details of which will be announced by the Minister for Social and Family Affairs. These measures include an increase of a minimum of €6 per week in the full-rate social welfare payments other than those to which I have already referred. Proportionate increases will be paid for all persons in receipt of reduced rates. There will also be an increase of €17 per week in the family income supplement income thresholds; an increase in the weekly income disregards for means assessment of the carer's allowance scheme; a doubling of the hearing aid grant, payable under the medical appliance scheme, to €700; an increase of €30 in the rate of the back-to-school clothing and footwear allowance paid in respect of each child aged 12 years or more, bringing it to €150; an extension of the free telephone allowance to persons aged 70 years or over who reside in nursing homes and have their own telephone account; and a further increase in the annual respite care grant provided to carers, bringing it to €735 per annum. The effective payment dates for all increases in 2003 will be the same as this year.

Taxation.Many factors combined to produce the high rate of economic growth in the past ten years. Some of these were not permanent, such as the strong labour force growth. Others should have a longer-lasting effect, such as our investment in education.

One factor in our economic success has undoubtedly been the lowering of the direct tax burden on enterprise and labour which this Government brought about. This lower direct tax environment is as much an investment in our future as the resources we are putting into building up human and physical capital.

Demands have been made for income tax rates to be increased, or for the reductions in corporation tax already provided for to be delayed or postponed. The Government is convinced that this would be a short-sighted and misplaced policy. It would put in doubt our ability to regain our medium-term growth potential and handicap our development agencies in attracting and retaining foreign direct investment. I do not plan to adopt this course.

Personal Taxation.The reform of the direct tax system and the reduction in the personal tax burden, which this Government delivered in the last three budgets, was substantial by any standards. In these budgets we have more than delivered on our commitment in relation to net take-home pay in the Programme for Prosperity and Fairness. The figures are there to demonstrate this. This year I propose to make only a limited number of changes to the personal tax system. These measures, which will have a total cost of €186 million in a full year, are as follows.

Employee Tax Credit.I am increasing the employee tax credit, formerly known as the PAYE allowance, by €140 from €660 to €800 per annum.

You broke your heart, Charlie.

This will increase the entry point to the income tax system from €209 per week to €223 per week for employees, which is 90% of the current minimum wage.

Age Exemption Limits.I also propose to increase the annual income tax exemption limits for those aged 65 and over from €13,000 single and €26,000 married to €15,000 single and €30,000 married, respectively.

Mortgage Interest Relief.The Government is also increasing the mortgage tax relief available to first-time buyers. The current annual ceiling on the amount of interest that can be allowed will be raised—

(Interruptions).

Allow the Minister without interruption.

—by over one quarter from €3,175 single and €6,350 married to €4,000 and €8,000, respectively. In addition, the period for which the relief is available will be extended from the current five years to seven years in all. Some 45,000 first-time buyers will benefit from these changes.

Numbers in Tax Net.These increases in tax credits, exemption limits and mortgage interest relief combined will take 37,400 taxpayers out of the tax net. One third of these taxpayers are aged 65 or over.

Employee Pension Contributions.As part of the process of increasing the equity of tax reliefs, I am introducing an annual cap on the pension contributions made by employees, as already applies for the self-employed.

Benefit-in-KindWhen an employer remunerates an employee by way of benefit-in-kind, this falls outside of the PRSI and health levy nets for both employer and employee. I propose to apply the PAYE, PRSI and health levy systems directly to such benefits from 1 January 2004. This will raise up to €83 million in a full year.

Indirect Taxes.It is usual in each budget to seek a contribution to the funding of the Exchequer from indirect taxes. This budget is no different. Accordingly, I propose to increase VAT and excise duty.

VAT.The 12.5% lower rate of VAT will be increased to 13.5%. This measure will take effect from 1 January 2003.

Excise Duty.I propose to increase the VAT-inclusive excise duty on cigarettes and other tobacco products by the equivalent of 50 cent per packet of 20 cigarettes. I am also increasing the VAT-inclusive excise duty on spirits by 20 cent per standard measure. The VAT-inclusive excise duty rate on spirit-based ready-to-drink products or “alcopops” is being raised by 35 cent per bottle, to align the rate with that on spirits. The VAT-inclusive excise duty on diesel will be increased by three cent per litre. These excise duty increases are to take effect from midnight tonight.

VRT.I propose to make a small but significant change to VRT bands. At present, a VRT rate of 25% applies to cars with engine sizes from 1401cc to 2000cc and a rate of 30% applies for cars of 2001cc and over. From 1 January 2003, the 30% rate will apply to all cars of 1901cc and over.

CPI Effects.These increases in indirect taxes will raise €535 million in a full year and will add 0.85% to the consumer price index.

Carbon Energy Tax.We have international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. For this reason, the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004. Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction.

Business Taxes.The business tax environment here has been a notable contributor to our economic success in the past. This has been due not just to the tax regime itself, but also to a stable policy environment. I intend to continue to pursue that approach, but nonetheless I feel it is appropriate in present circumstances to seek an equitable balance in raising revenue from all sectors of the community.

What about the stallions?

I see this as a fair and reasonable demand in view of the prosperity secured by many parts of business and commerce during the past few years.

Financial Institutions.The Government proposes to raise a revenue contribution from the financial sector of €100 million per annum for three years. This will be done by means of a levy on financial institutions, calculated by reference to the amount of tax payable by them in 2001 on deposit interest. Full details of this measure will be set out in the Finance Bill. The financial sector has proved its dynamism and business ability when given the chance. It is not unreasonable to see some of their good fortune applied to assisting the public finances.

Capital Allowances for Plant and Machinery, including Motor Vehicles.At present, capital allowances for plant and machinery, including motor vehicles, allow a write-off for tax purposes over a five year period. I propose to extend this period to eight years as and from today. This will involve a cash-flow gain to the Exchequer in each of the next seven years, ranging from €20 million in 2003 to nearly €315 million at the maximum in 2007. This is a base-broadening move and helps to maintain low corporation tax rates.

Payment of Corporation Tax.I propose to simplify the current corporation tax pay and file arrangements by ensuring that a company must pay the balance of tax it owes within nine months of the end of the accounting period in question. This will reduce the number of necessary contacts with Revenue and will raise a once-off €16 million in 2003.

Stamp Duty.Non-Residential Property.

No changes have been made to the rates of stamp duty on commercial property since 1990. I propose to increase from today the current rates of stamp duty on non-residential property and to amend the valuation bands to which they apply. The full details of the changes are set out in the summary of budget measures. They involve the introduction of additional rates of 7% to 9% depending on the value of the property concerned. This change will raise €158 million in a full year.

Other Stamp Duty Changes.I am increasing the stamp duty on cheques from 8 cents to 15 cents per cheque, and the stamp duty on credit cards from €19 to €40 per annum. I also propose to increase the stamp duty on ATM cards from €6.25 to €10 per annum and to introduce a stamp duty of €10 per annum on laser cards. The stamp duty on combined ATM and laser cards will be €20 per annum. These changes take effect from midnight tonight and will raise €52 million in a full year.

Young Trained Farmers' ExemptionIn the stamp duty area, I am also continuing for a further three years the existing exemption for the transfer of land to young trained farmers.

CAPITAL GAINS TAX

Payment DatesAt present capital gains tax is payable on a preceding year basis. The Finance Bill will provide that in future a preliminary tax payment will be made by 31 October each year in respect of gains made up to 30 September in that tax year. Tax due on gains made over the remainder of that tax year will be paid by the following 31 January. This will result in an estimated once-off gain of €250 million for the Exchequer in 2003. In making this move we will be putting CGT on a similar footing to other tax charges.

Roll-over Relief and Loan NotesIt is proposed that no roll-over relief will be allowed for any purpose on capital gains arising from disposals on and from today. Also, it will no longer be possible to defer capital gains tax on share disposals by taking the proceeds in the form of loan notes.

Indexation for CGTIn addition, indexation of the base for computation of capital gains will only be allowed to be calculated up to 31 December 2002.

All these reliefs and allowances made sense when the CGT rates were 40% and 60%. These base-broadening changes will bring in about €20 million in 2003 and about €100 million in a full year.

They will not even miss it.

RELIEFS AND TAX INCENTIVES

General

Reliefs narrow the tax base. A widened tax base is the price that must be paid to keep tax rates low. It is a price worth paying. All tax reliefs, therefore, must be subject to ongoing review.

The business sector and investors have been much assisted by schemes of special tax reliefs. These have played an important role in many areas and in the development of certain business sectors. I am a supporter of properly-focused, clearly defined, specific reliefs which can encourage the development of goods and services, including public services, which might otherwise not be provided, or where provided, are too little or too late. I have, accordingly, in the past introduced several reliefs. On the other hand, I have also substantially capped certain reliefs and taken strong action in relation to various tax avoidance schemes. I am continuing this approach by closing a number of loopholes today, as I will explain later.

A study by the Revenue Commissioners indicates that capital allowances on buildings continue to be the chief instrument used by high income earners to reduce their taxable income by substantial amounts. I acted on similar research in the 1998 budget by capping the amount of capital allowances on buildings that could be set off against non-rental income.

While later research indicates an increase in the effective tax rate of high earners, some of them continue to achieve substantial reductions in their tax liability as a result of reliefs. I will place a copy of this latest research in the Library, as I did with the previous study. Having examined the position, I have decided to make the following changes to a number of reliefs in this year's budget.

Deadlines for Certain Tax Incentives SchemesA series of tax incentive schemes, many of them involving capital allowances, have been extended in the past for a number of years and several are due to expire on 31 December 2004. The list is set out in the summary of budget measures and includes urban renewal, rural renewal and car parks reliefs. These schemes were introduced over the years to provide a development incentive for the areas or activities in question. All these schemes, without exception, are to end on 31 December 2004. As part of this process, I am bringing forward to 31 December 2004 both the termination date for film relief from 5 April 2005 and that for student accommodation relief from 30 September 2005. Given the current and prospective budgetary position, the existing demand for property investment and the desire to improve equity in the tax system, there is no justification for a continuation of these reliefs beyond 2004.

Capital Allowances for Hotels and Holiday HomesTo assist in broadening the tax base, I am also reducing the special capital allowance for hotels. They are currently written off over seven years and I am changing this to 25 years, the same period as applies to general industrial buildings. I am also abolishing capital allowances for holiday homes.

Closing Tax LoopholesI have no doubt that one effect of terminating existing tax reliefs will be to sharpen the creative wit of tax avoidance experts. The summary of budget measures gives details of the anti-avoidance measures in capital gains tax and income tax which I am taking with effect from today. These measures will protect the revenue base going forward.

One particular change will ensure that those going temporarily off-shore to avoid capital gains tax liability will no longer be able to use the loophole in question. I will continue to act quickly to close down tax avoidance schemes as they come to my attention.

CONCLUSION

Today's budget has been planned within a three-year framework. In the 1970s and 1980s our country ended up in an unsustainable situation because of the wrong budgetary policies. Governments refused to respond to challenges as they arose. They chose short-term solutions which caused long-term problems. This Government will not make the same mistake. The people know and understand the need for the policies I have announced today. This budget is a prudent and planned response to the impact of the continued international downturn on our public finances.

Today I have provided a stable framework for our public finances going forward; strengthened our productive capacity, which is critical for future growth; ensured that the business sector makes an appropriate contribution to the public finances, and safeguarded the position of those on social welfare and those on low incomes.

This is a budget rooted in a vision of an Ireland which values stability as the necessary base for advancing the welfare of all its people. It is a budget which avoids the mistakes of the past—

That the Minister made himself.

—and provides the foundation for renewed growth and development.

This is a balanced and fair budget, which responds properly to the international downturn by preventing the huge deficits of the past, but also by making sure that important areas like social welfare pensions and health are prioritised in difficult times. This is a budget which will protect our long-term future and secure the welfare of all sections of our society. I commend the budget to the House.

It is a cruel twist of fate that today is the day Jim Mitchell was buried. Just 12 months ago, Jim stood in this place and responded to the budget presented by the Government. Jim was a man of great heart, formidable courage, immense energy and of simple faith. He threw his many talents into the pursuit of fairness and accountability in this House. He set a standard which others must strive to follow and I hope that when the tributes are paid to him next week, we will have the chance to pay sincere sympathy to his family, Patsy and the children.

I now turn to today's budget. This budget is genetically flawed. Its genesis is in a fraudulent vision which was sold relentlessly in the run up to the general election. "Much done, more to do"– that was the slogan which was like a garland festooned everywhere one went. It was a reckless project designed with one thing in mind – to secure power again for those opposite. It was a project of self-preservation which resulted in spending growing at ten times the rate of growth of revenue generated by the Minister. However, this was all in the interests of the few and not in the interests of the public. Politically for this Government, this deception has been a political blunder on an enormous scale. It undermined the moral authority of this Government before it even started on its path of so-called reform.

This Government has for the most myopic reasons ensured that the truth about the reckless project in which we are engaged did not come out. That is why people feel angry, annoyed and frustrated. They know they were conned in the budget which resulted from two years of reckless spending. Ireland is not in economic crisis. The crisis we have today is a crisis of competence on the part of the Government. It is a crisis born of sloppy and unprofessional leadership in Government, of decisions driven by personal ego rather than the national interest. We are not in recession today. We have economic growth that is the pride of Europe but it suits the Government to say that some great meltdown has resulted in what is before us – the most niggardly budget we have ever seen.

Today's budget is a culmination of an about-face since the general election. It is ordinary people – those who drive our buses, who check in at the supermarket, who teach our children and who nurse us when we are ill – who are going to have to pay in spades in this budget. They are paying for the recklessness of the Government as it sought to secure power for the future.

We see in the budget a follow-on to what we have seen all summer. People are being made pay with a higher cost of living. They have had to pay more for college fees, for medication, for local authority rents, for VHI, for hospital beds, for casualty charges, for everything one can think of. Today we find that the Minister for Finance is asking them to pay in excises an amount that will add over 3% to consumer prices. This is a scandal. The Government said it would protect us from the rip offs of unscrupulous traders during the euro changeover. Far from it, it has added its own fuel to the fire. It has got in enthusiastically on the job of fuelling price increases and damaging our competitiveness.

It is ordinary people who will pay these prices. Ministers may smile at the excises on old reliables but these will have to be paid out of budgets that are already tightened trying to pay for child care or housing, by people already negotiating a daily struggle to keep their lives afloat. That is the snake oil that came from the Government's "a lot done, more to do" slogan.

In income tax, the Government, by failing to index basic allowances and credits, has robbed the people of €300 million. That is €250 for every household in the country just wiped out by a failure to index income tax. Again it will be the ordinary people at the bottom of the pile trying to pay for their daily struggle who will carry this can.

I have heard the backbenchers say that their campaign on housing has been rewarded and that the attack on the first-time buyer is going to be reversed. What we see, however, is that a couple are going to get a benefit of €330 in cash. A single first-time buyer will get just half of that. This will be spread over seven years, so the total even at the end of that period is a mere €2,000. Compare that to the first-time buyer's grant of €3,800 that was washed away at one blow. This is the most niggardly recompense.

Cast your mind back to just one year ago to what the Government did to squeeze out first-time buyers. It allowed those who wanted to invest in property to use not only the stamp duty which gave them €12,000 but also allowed them interest worth €4,200. We now have a situation where compared to the single first-time buyer, the investor will get seven times as much interest concession and a concession on stamp duty.

We all know the consequence of this. The first-time buyers who are already only getting one out of every five new houses are going to be squeezed out even further. This was a sham response to a genuine protest of people who felt abused by the abolition of the first-time buyer's grant. That is only the start of it. The Government has increased VAT by 1%. That is €2,000 that will be asked for from every first-time buyer. It has gone from the abolition of a grant of €3,800 to another €2,000 being taken from first-time buyers. This was cynical—

Hear, hear. Where are the backbenchers now? They are very quiet.

It was a cynical attempt to pretend there was a response. The people are going to pay not only in terms of the money that is going out of their pockets as inflation forges ahead under the influence of this Government but also in terms of the perverse cutbacks we have seen again in this budget and in the Estimates that preceded it. In housing, health and among carers, people will be squeezed by these cutbacks.

We see it even more today in the changes the Minister has made in his Estimates. When you strip away the Estimates you find that the public pay bill is going to go up by 11%. Social welfare will also go up but by very little. The remaining non-pay element that goes to lubricate services and give to people the crumbs and scraps that fall from the Government table is being increased by just 1.5%. We are going to see the ludicrous situation later this year of administrators administering schemes with no money to spend. We will see social workers with no petrol allowances to visit the people who need their care. We will see expensive hospital beds closed even though the doctors and other staff are there as they will not be able to afford to keep them running. That is the consequence of the sort of slide rule cutbacks this Government has introduced and made its hallmark.

This is the product of the "a lot done, more to do" model. People will also pay in another way. They will pay with their jobs. The Minister for Finance is today adding to economic costs, adding to pressures on prices and wages and adding to the pressures of congestion and delay on our streets. He continues to cut his capital budget. His derisory provision on the capital side will be wiped out by the VAT increase. A provision of just €200 million will be well wiped out by the VAT increase on construction products.

What we will see once again is projects slowed down to a crawl and greater congestion. We already know from a survey on behalf of small businesses that it takes longer to deliver a parcel across Dublin than any other city in Europe. It is rivalled by only one other city – Calcutta. That is the environment this Government has created for people trying to do business in this city and country. We are going to see more job losses.

In a small open economy the one thing you cannot afford to do is damage competitiveness. In this budget we see an assault on competitiveness with higher prices, extra charges and less investment. The message is very clear. It is going to get tougher for people trying to do business. This was going to be a tough budget because of the reckless spending that preceded it. What is remarkable, however, is that the personal pet schemes of the Minister for Finance have not been touched. Some €517 million will be paid next year into the SSIA scheme. How can the Minister for Finance ask the lowest paid in our community to accept that there will be no increase in their tax credits and 3% extra inflation while at the same time he is going to protect those who can afford to save in these schemes? Where is the justice or equity in that?

It is not justice or equity that is inspiring this but pride and ego. That is where this Government has gone so badly wrong. There is €1,300 million being stashed in the Minister for Finance's great pension fund. I agree with the principle of the pension fund. I am glad it was put in place. I do not agree, however, that at a time of serious bottlenecks in our infrastructure we should be using €1,300 million of taxpayer's money, most of it borrowed this year, in order to invest in the stock exchanges of New York and Japan. Perhaps that will protect employment in New York or Japan but it will certainly cost jobs here among the people for whom the Minister for Finance is supposed to be caring.

This budget is a massive disappointment right across the scale. The Minister deserves no plaudits for donning his new-found zeal for fiscal rectitude. It has come too late. He had 17 months of a run up to the general election and two election budgets. During that time spending ran ahead at 50%. In May this year before the election was called spending was running ahead at 15%. The Minister was spending ten times what was being generated in revenue. That was the time when we relied on him to call a halt and to say, as he well knew, that the consequences of this sort of reckless spending would be that the weak and the poorest would suffer. In his reaction to a budget introduced by a former Minister for Finance, Deputy Quinn, in 1997, he said that he knew when spending went wrong it was the weakest and the poorest in our community who suffered. They were depending on him to call a halt, to rein in the Taoiseach and his Ministers who were relentlessly pursuing their electoral goals.

Despite having built his political reputation on his criticism of Charlie Haughey and the reckless spending of the 1980s, when the Minister's courage came to be tested he was found wanting. He could not respond. He could not face down those around him who wanted to put electoral gain ahead of the national interest. People before politics is the slogan. This was politics before people. Today the people are being made to pay.

Ireland has become a tougher, meaner and darker place. Our suicide rate tells as much. The opportunity to relieve escalating stress in our lives over the past five years was missed. The opportunity to implement basic values such as prudence, fairness, respect and community was neglected. Such values did not inspire decision making. Priorities were misplaced. Power was praised. The screaming need for reform was ignored at a time of great opportunity. Queuing and congestion replaced proper planning in crucial areas of public life. We wait for buses, trains and a seat, never mind a trolley, in a casualty department. Caring has been devalued.

It is crucial that we now strongly assert a different approach. We must build stronger standards of accountability. We must confront interests that are frustrating progress. We must protect opportunity in education. We must ensure solidarity in times of need. We must reach beyond the boundaries of bureaucracy and focus on the elements that make a strong social fabric.

If we sleepwalk through this budget – already we can see those on the backbenches of Fianna Fáil who will sleepwalk through it – we will fail because we are following tired prescriptions. We need to wake up. We need to remember that we represent those people who will be hurt today – first-time buyers, those who are in accident and emergency departments crammed like sardines while awaiting care, the carers of this country who will see the small supports that were to come to them cut back.

There are other ways of dealing with public service reform. We can get value for money if we are determined to do so. That is what will inspire Fine Gael over the coming years as we oppose this Government.

It will need some inspiration.

We need to ensure that ordinary people are given a decent standard of service. Having spent 50% more, it is appalling that nothing was delivered and no value was achieved. That is what we must stand up against. If we call ourselves a parliament and a democracy, we must say, "stop, this must not go on. This is not the way to deal with the people." It is time for a radical change.

This time last year the Minister for Finance boasted of the five chapters of his first book. He might name them, "how I blew the crock of gold at the end of the rainbow."

A Deputy

Or, "how I blew the rainbow".

He inherited an economy where borrowing was falling and employment levels were growing at a rate of 1,000 a week. He has turned that around and borrowing is now rising. How was that done? He turned a surplus of €4,800 million, which he had only two years ago, into the deficit we face today of €800 million on general Government spending or €1,800 million in the Exchequer borrowing requirement, the measure he prefers to use when it suits his case.

No doubt the Minister is searching for a name for his next volume. The volume could well be titled "Dr. Jeckyll and Mr. Hyde". Dr. Jeckyll had much to say in the run up to the election. Hospital waiting lists were to be ended in two years. Another 200,000 people were to get medical cards. First-time buyers were to be protected from being squeezed by investors. All this was set out in the Fianna Fáil manifesto. A website was set up to show how children in substandard schools would have their problems resolved. Some 2,000 extra gardaí were to take to the streets. The glossy €10 billion health strategy was to be immediately and systematically implemented. Consumers were to be protected from the euro rip-off. Child benefit was to be increased by €31.80 per month. Where did all this go? What we have seen today is the other side. We have seen Mr. Hyde who has banished all sign of that benign doctor who promised us much done and more to do.

Ireland has become one of the richest countries in the world. This Government had an unprecedented opportunity to get to grips with serious reform, but instead reform was an early casualty in its approach to dealing with the public service. Instead it invested in the art of spin. It spent money, but where was the value for it? That it ignored. The procedures for controlling spending were allowed rust over. The Taoiseach and the Ministers present failed to maintain even the minimum standards of prudence in relation to public spending. The basic principles, cost accurately, carefully identify the benefits, plan efficient delivery, monitor and spend the outcomes, were abandoned, nowhere more so than in the Taoiseach's pet project, Stadium Ireland, which cost us €400 million alone. However, he was not outdone, there were plenty of Ministers vying with him to produce their own follies.

We are one of the richest countries in the world, yet we cannot care for the carer, the early school leaver, the homeless, the low paid in bedsits or a young couple struggling with the cost of child care and housing. The Minister said when we had it, we spent it, but these groups were not on the list of beneficiaries.

These are the choices that betray the Ahern-Harney Government. Deputy Ned O'Keeffe had the courage to speak the reality that everyone must realise, that such choices betray the heart of Fianna Fáil and how it had changed. It is no longer the party that cares for people in need but the party who cares for those in privilege. That is the sad realisation that is presented to us today.

Budget 2003 is full of lazy answers. It makes the punters pay. It imposes crude, sly cutbacks and perpetuates wrong priorities in tax policy. This Government's tax priorities were wrong from the start. The Minister set his priorities for tax much more by his career as a tax accountant seeking to help clients shelter from tax liability than by his national responsibility to ensure fairness and equity. The opportunities to shelter money were piled one quickly upon the other – halving the capital gains tax, and the dramatic increase in the amounts that people could put into pension funds. All these measures were aimed at those at the top end. Most dramatic of all was the switch in the basis for taxation from domicile to residency which allowed people who could bed and breakfast outside the State for 183 days to get away scot free and not pay any tax. The Minister is belatedly closing one of those loopholes in the area of capital gains tax but only after one notable investor has gone away with €50 million in terms of tax avoided by using these schemes.

This system, created by the Minister, allows the super rich to quickly and easily wash out all tax liability for capital gains, income tax and even capital acquisitions tax by bequeathing it to their children without any tax being paid. This is the type of thinking that spawned the special savings accounts. It was intended to spread the largesse far and wide and in an election year it had to be spread wider than just to the privileged few. Where were the priorities in this?

A different approach has been meted out today to the ordinary people within the tax code. Spouses who work in the home were disenfranchised and they continue to be so today. Over a number of years there was an opportunity to create a tax regime that would encourage participation in the labour force and support affordable child care so that women could make choices. They could perhaps take a couple of years out to look after their child and return to work thereafter. That could have been supported. There could have been support for child care and for those options. Instead, the Minister's approach was to conscript people into the labour force by narrowing their options and failing to recognise home caring as a valid pursuit.

Low income earners are the biggest casualty today. The Minister boasted that he has again increased the number of people outside the tax net. This is an irony. The Minister deserves praise for introducing a tax credit system. The system had great potential to improve the way tax benefits were spread. However, what has happened since tax credits were introduced four years ago? The personal tax credit, which was to be the vehicle to spread the benefits more fairly, has not been increased in real terms in four budgets. The increases were less than the increases in inflation in the same period. The €4.5 billion of tax benefit was crowded into the top end of the tax schedule. Those at the bottom got nothing. This was an opportunity, a system with real potential, that was spurned.

The Minister tells us he is wonderful because 36% of the low paid are outside the tax net. He does not tell us what income these people have. They are on tiny incomes of less than €10,000 per year. These are not incomes that will support a proper home. The Minister's concessions are bogus.

Nowhere has the damaging social consequences of the Government's priorities been more clear than in the housing market. Twelve months ago investors in the housing market got the boost of a 12% cut in stamp duty on an average house and their interest concessions were returned. This year first-time buyers have lost. What was the Government's big idea for the housing market? It was affordable housing. Four years later, how many houses has that system produced? The total is 534. That is the magnificent achievement of the affordable housing scheme after four years.

It is not surprising that housing lists have doubled and that rents in the private sector have increased by 44%. Hidden in the Estimates, however, is an assault on the poorest of the poor. Today the Minister is providing that the poorest people on social welfare, those on supplementary welfare and in receipt of a rent supplement, are to have €4.38 taken from them with one stroke of a pen. The Minister tried to boast that he is giving €6 to people at the bottom of the scale but for those dependent on rent supplement, €4.38 is already wiped out. They will be asked to live on an increase of just €1 and a few odd cent at a time when inflation is being increased by the Minister's activities.

Furthermore, the Minister has decided they will be denied any rental support if they cannot find a property for a single person costing less than €107 per week. If the rent is more than €107, they will not get a cent towards it. In the case of a married couple with a child, if the rent is more than €220 per week, they will not receive a rent supplement. What are the priorities in this Government's housing policies?

Today the Minister made provision for benchmarking. Benchmarking was designed as a political cop out. The reason benchmarking was pushed outside this agreement and into the next one was to avoid confronting the difficult issues of reform in the public service before the general election. It was a political compromise which was cobbled together to keep Ministers away from awkward decisions. We now see the result. Benchmarking was a process with great potential. It was an opportunity to look at public services in a new way and to benchmark best practice, to look at what was happening in the private sector, to look not just at rewards but at how public services are and could be organised and to look at what could be achieved to bring our public service up to best standards.

However, that was not to be. The concept of looking at best practice was quickly discarded. A great fanfare was made of the work done on rewards and comparators before the awards were announced. The taxpayer, who will be asked to pay €565 million, and the public service worker, who felt undervalued by these increases, are not to see how they were put together. What type of process was it? Where was the fairness, equity or drive for reform in a process that was buried in this way? This was a political move to try to bury a difficult issue. This was where the Government had to and should have focused its efforts over the past five years. It should have looked at how public services could be reformed and how we could change the way services are delivered to get better value and better services. Instead, the age old system was allowed to crank on in secrecy. Now we are told this money will be paid but the Minister has not told us what changes in public service delivery will be negotiated to ensure we see real value from the benchmarking process.

Benchmarking is only the most visible manifestation of a system that has gone wrong where public service reform is concerned. The public service has not been able to deliver the standards we need because of ministerial intervention and lack of ministerial leadership. Look at the national development plan. This was to be the pride and glory of the Government. It is now running two years behind schedule and 62% over cost. It is a shambles. There will be more congestion, more difficulties for business and for commuters and a lower quality of life as a result of the stop go approach adopted by the Government.

We have not seen a determination to apply policies consistently and fairly. The Government has taken the wrong turn on virtually every serious area of public policy. The health sector will probably suffer most. This year the provision will result in the closure of hospital beds. There was an opportunity to reform public services. This was a period in which they could expand. They did expand by over 30,000 people but these people did not go into the front line. They went into administration. The Government, having received a recommendation that the number of health boards should be reduced to five, increased the number to 11. This year, hospital beds were closed but patients were flown out of the country for much more expensive care. Where is the logic in that?

Where is the logic in deciding that 200,000 people who should have had access to primary care and are at the poorest end of the income scale are to be denied it while others, people over 70 years of age, are stocking up with their medicines before going to their apartments in Spain? Where is the sense in that? We have skimped on primary care and made access to it more expensive with the result that more people have been piled into the difficult, expensive and chaotic hospital system. This was not a Government that recognised priorities and sought to deliver them. It did the easy thing and responded to the latest lobby.

We need to look afresh at the partnership process. It has stood us well in years gone by but there are limits to what consensus can achieve and we need to recognise that. It has slowed down necessary reform, shelved devolution and responsibility being passed down within the public service, given priority to producers over consumers and distorted reform in key markets. These are some of the key consequences. Due to its excessive focus on the workplace it neglected policies that helped create connected lives and we are paying for that in the type of development we have seen.

It is time the House reasserted its authority over the way public spending is managed and run. We in Fine Gael believe it is time for a fiscal responsibility code where there would be explicit disclosure of multi-annual costings of new initiatives and immediate revelation of the first signs that a budget is going off target. Every euro spent on the public capital programme should be firmly linked to the delivery of identifiable work on projects within a specified timetable.

There is a need for a permanent better value for money commission with resources to accelerate re-organisation and innovation and to ring-fence revenue from bailing out the type of overspending we have seen in the past two years. We want to see serious exercises within the public service in benchmarking against best practice throughout the world. We want to see independent supervised evaluations of the quality of public spending under the aegis of much stronger Oireachtas committees. These are the type of changes needed if we are to face up to our responsibilities in this House.

Unfortunately, what we have seen today is a budget whose seeds were sown in 2000. The Ahern-Harney Government found the solution to the Boston-Berlin dilemma, namely, offering the prospect of Boston-style taxes and Berlin-style spending standards. The Minister for Finance endorsed the project. It was party time. In 17 months, spending was increased so rapidly that the Government merrily burst through every target the Dáil had set for it. Every sport was to have a world-class facility. The health strategy was to make us the envy of the world. A new metro would make congestion a thing of the past. Expensive launches, lavish models, finger food receptions and photo-calls were the mark of the day. We are paying a heavy price for that. Those who have had to wait at the end of the line for public services are paying the price.

What rankles with people is the way the truth was concealed from them. Last year, the Estimates revealed no evidence of what was going to happen on the spending side. When budget day dawned, a latent Exchequer deficit was looming, but this had to be concealed at all costs. The Minister found the classic smoke and mirrors solution. He raided every piggy bank he could find and sold off the family silver. We are paying for that now. Those piggy banks are empty and the family silver is gone. The Minister has brought forward new taxes to try to cover the difficulties he has this year. He is robbing next year to pay this year, just as he robbed this year to pay last year. These are the approaches the Minister has adopted.

What will rankle with people and will last as the legacy of the Government is the assurances he gave to and contempt with which he treated those who criticised what was happening. It is worth remembering the famous letter the Minister issued to the then Fine Gael leader, Deputy Noonan, on 13 May in the run-up to the election. The letter stated:

I can confirm that there are no significant overruns projected and no cutbacks whatsoever are being planned, secretly or otherwise . . . In relation to revenue, I'm sure you also welcome the recent strong rebound of our economy from the effects of the global downturn. In terms of employment, exports, industrial activity, consumer confidence, retail sales, housing demand and foreign direct investment, all of the key indicators have recently improved considerably. The latest tax returns confirm the return to growth. . . As such, our overall budgetary projections remain the same as published.

I can also confirm that we will not be repeating the very real cutbacks implemented by you and the then Minister for Finance in 1997 on the funding for waiting lists and health capital funding. I am proud that over my five years as Minister for Finance I have never resorted to the cutbacks which you implemented.

What strange words from the Minister for Finance who seeks plaudits from the financial community for what he has done today in savagely cutting back spending and piling up charges on people.

Did the Deputy listen to his speech?

The outturn is as projected.

These are the Minister's words.

And the outturn is as projected.

This budget is like mackerel in moonshine. Its full of shine but stinks to high heaven.

That is rhetoric.

The Deputy's glass is always dark.

The shine will be for the financial writers who will say the Minister has restored his credibility and is back on the route to financial rectitude. However, the smell and stink will come to those who depend on public services and expect to receive care when they need it.

The Minister for Foreign Affairs rarely touches base with us, and the odd time he appears, he does not realise what is happening.

I am here more often than the Deputy's brother.

We are seeing today the product of the slogan that got Fianna Fáil into Government. We are seeing cutbacks, extra charges and costs—

There are more Labour Party Members present than Fine Gael Members.

The Minister for Justice, Equality and Law Reform presided over this budget as well.

A Deputy

He said they could not be trusted and he was right.

Where was the Minister when all this was happening?

(Interruptions).

An Leas-Cheann Comhairle

Order, please.

The binge of the last two years has had a serious effect on the long-term competitiveness of the economy. We are seeing it today in the budget with higher costs, inflation and people not being compensated for the losses they have suffered. We have seen it in cutbacks in vital infrastructure. People will pay with their jobs and this will be the legacy of the Minister for Finance. Instead of prudently managing us out of the crisis we are in, which is not an economic crisis but a crisis of Government competence, he has slammed on the brakes.

It is not those who are comfortably bedded into their seats such as the Minister and his colleagues but those with no seatbelts who will go out through the glass. That is when we will see the hardship that will be borne during the course of the next year by ordinary people who will not forget that the budget has betrayed everything that was promised.

I suppose stallions and their owners can sleep easily tonight after the lobbyists visited the House last week and the week before. They certainly showed the people on community employment schemes how to lobby. They got what they wanted.

Let us perform some simple arithmetic on the budget. Some €186 million has been given in personal tax changes by the Minister but he has taken back €83 million in the PRSI levy attached to benefits-in-kind and €52 million in additional stamp duty on cheques and credit cards. This adds up to €135 million. That is even before he has raised cigarette, drink and petrol prices and increased the standard rate of VAT from 12.5% to 13.5%. The people who will pay for the budget are the ordinary taxpayers. Closing tax loopholes will save some €10 million. We are terribly impressed.

This is a shameful budget. It is socially irresponsible, mean spirited and small-minded. It is a budget of promises broken and hopes betrayed. The Minister has betrayed all the most vulnerable groups in society. There has never been a budget with so little in it to meet the needs of those on the margins of society. Even in much harder times than this, Governments made investments in housing, health, education and disability services specifically aimed at shielding those most in need from the worst effects of retrenchment. There is nothing whatever for them here. Those on the lowest rate of social welfare will get 30 cent a week over and above the Minister's projected rate of inflation. Higher inflation next year will consume €5.70 of the €6 increase in the lower social welfare payments.

The increase in child benefit the Minister has implemented is almost exactly one quarter of what the Government has promised. The term "child care" is not mentioned anywhere in the 100 page document the Minister gave us. He had the gall to say he was protecting the least well off in his budget, but that is a lie. His budget is an attack on the least well off.

Perhaps the most shameful feature of the budget is the reintroduction of the concept of charity where children with disability are concerned. Last year there was the Supreme Court case for Jamie Sinnott. This year the Minister has to depend on the dormant account funds to give additional money to those with a disability. That is a disgraceful policy development. This is a budget devoid of compassion, without ambition, and lacking in courage. It reflects only too well the character of the Government which produced it.

The Government was formed 182 days ago, almost six months to the day. This has been a half year of political betrayal, dishonesty, incompetence and broken promises, capped by today's dismal budget. In 182 days the Minister has effectively brought forward three budgets. There was a mini-budget of harsh price increases and the first cutbacks, brought forward almost before the votes in the general election were counted. This was followed by one of the most draconian Books of Estimates we have seen for years and today we have this latest threadbare offering. All three have something in common. They speak volumes about the dishonesty of a Government which knew how bad things were when it campaigned on a vision of continued growth and development. They tell us everything we need to know about the incompetence of a Minister who has frittered away many of the social and economic gains we could have put in place.

Much has been made of the number of times the Government has broken its word, but there is a more fundamental point, a more serious charge to be levelled at it. It offered a promise of a better future to this generation of voters, families and children everywhere. However in six short months of economic mismanagement, incompetence and downright dishonesty it has stolen the promise back from this generation. This budget, only six months into its second term, is a political swindle. The paltry compensation for first-time house buyers is only the proof of its dishonesty. The grandstanding of Fianna Fáil backbenchers produced nothing.

The budget is worse even than that. The mini-budget, the Estimates and the dreary litany of today have something else in common. All three attack families and eat into the resources available for those coping with the stresses and strains of economic difficulty. All three make the future look bleaker. The Minister may be aware of the play in the Gate Theatre, an adaptation of "A Christmas Carol." I would not wish to cast him as Ebenezer Scrooge, but there are three ghosts in this budget. There is the ghost of Christmas past, reminding us of the great opportunities open to the Minister during the boom and how he blew the lot. The ghost of Christmas future shows us the bleak prospects for the economy and future jobs, when this country grinds to a halt because of lack of vision, lack of proper planning and lack of appropriate investment. There is the ghost of Christmas present, with paltry social welfare increases, substandard schools, no new medical cards, no health strategy and waiting lists for health and disability services growing scandalously longer.

I watched the Minister's colleagues and backbenchers during his speech. I could see, as all of us could, that this was no longer a man who inspired confidence or trust. They know in their heart of hearts he has let them down. I wonder if they, like the rest of us, get the impression in this budget of a rather subdued and slightly bewildered Minister. The swagger of recent years is gone. This is a man who just can't see how it has all gone so badly wrong. It went wrong because his management was wrong. His policies were wrong. His forecasts were wrong. His mean-spirited philosophy is wrong and, above all, his priorities are wrong. Will he apologise and give us an act of contrition? We have as much chance as James Gogarty had of getting a receipt from Ray Burke.

The Minister, with his Fianna Fáil backbenchers, would like us to believe we are in a budgetary mess solely because there are international difficulties. I do not believe this, nor does anybody else. It is time to stop blaming external factors such as the downturn in America and Germany. It is time to start recognising that our difficulties have been greatly compounded by the Minister's misguided management. The result is that families will suffer. Across the country tonight thousands are following the budget coverage and asking what it means for them. It is a slap in the face for families who want the best for their children and are prepared to make sacrifices for them. They will pay for the incompetence of the Government.

This budget is a three part package aimed at making families pay for the mess created by the Minister and his Government colleagues. The first part of the package produced a range of extra charges: a 17% increase in VHI charges; a 69% increase in third level registration charges; an increase in charges for drugs from €53 to €70, with the final €5 added only last night; a 26% increase in charges for casualty visits; a 13.5% increase in ESB bills; and an effective 14% increase in bus and rail fares. After today there is more to come: increases in energy costs, local authority rents and service charges. These are all inevitable outcomes of the Minister's squeeze.

What of the cutbacks, in addition to the charges? Even before we got to the Book of Estimates, there were shameful cuts in aid to the developing world. There was a demand from the Minister that he wanted to see real cuts in services across all Departments. The result in the Book of Estimates was an all-out attack on public services, schools, hospitals, housing, transport and the basic needs of families.

It was a blatant and cynical abandonment of Fianna Fáil's specific election promises. While it promised 2,000 additional gardaí, it has cut the number on the streets. I invite the Minister to come to Blanchardstown some time. There is nothing here to help prevent crime. It promised 200,000 additional medical cards, but will deliver none. It promised modern schools for all our children, but is delivering cuts in the building programme. It promised thousands of extra hospital beds and a permanent end to waiting lists within two years, but there has been no delivery and we are still waiting.

Let me now turn to the health service in the light of what the Minister has had to tell us today. The January sales can have a special offer this year: a free copy of the Government's health strategy with every woolly jumper. After today the Government will not be able to give away copies of the strategy.

The continuing battle between the Minister and his colleague in the Department of Health and Children represents a sort of contest between beauty and the beast. The contempt of the Minister for the health service always wins and families who are suffering always lose. This was to be the budget in which there would be a huge extension of eligibility for medical cards. Patients were also promised they would not have to wait as long. Families have been deceived by the Minister for Health and Children and the Taoiseach while the Minister sat quietly waiting for the general election to pass. They also deceived families promised that waiting lists would be eliminated in two years. The country is counting the days, even if the Minister is not. In a rich country like ours it should not be too much to ask that people be able to go to the doctor without having to worry unduly about the cost of the visit or the prescription, that when someone needs emergency medical treatment, he or she should be seen promptly in a casualty department which does not resemble a war zone and that when someone requires an operation, he or she does not wait in pain for years. These simple demands remain the stuff of fantasy for far too many.

We live in a society where health care is provided on a two tier basis. Medical cards are generally only available to those on very low incomes, those who cannot afford private care wait for years for simple procedures while many young couples who do not have medical cards have to think hard before taking a sick child to a doctor. No matter what one's income is, should one be unlucky enough to find oneself in a casualty department, one will learn very quickly what is meant by the crisis in the health service.

The Fianna Fáil Party promised to solve all this. The national health strategy was a bedrock of its election campaign. We now know it never intended to implement it. One only needs to look at the Book of Estimates. The health strategy promised €7,700 million in additional capital spending on the health service over the next ten years. The step-down beds, extra hospital beds and all the other facilities are vital, no matter how one chooses to reform the health service.

The Fianna Fáil Party promised to deliver the necessary funding. At election time it pledged an additional €1,102 million in health capital funding in 2003 alone. How much did the Minister deliver in the Book of Estimates? The answer is an unbelievable €3.8 million, leaving a shortfall on that single promise of more than €1 billion. Today's budget, which changes nothing, proves that the health strategy was a con job from day one. The Book of Estimates left no doubt as to its true status. Today's third chapter reinforces the Minister for Health and Children's abject, hopeless defeat in the battle for funding. He has been defeated by a Minister trenchantly opposed to the whole concept of social medicine.

It is the Government's job to manage, not to whinge. When funding of a strategy falls victim to a stop-go policy, it makes a nonsense of planning. There is no long-term capacity, no commitment to phase in improvements, no means to measure progress and no way to sustain morale among staff in the health service. What will staff make of the 5,000 proposed cutbacks over the next couple of years? In my constituency the Northern Area Health Board's expenditure on new administrative facilities is astonishing. How will the cuts be applied? Will they occur right across the board resulting in the loss of even more doctors, nurses and frontline staff? The budget is a disgrace in relation to health.

Deputies

Hear, hear.

The Government's approach to education funding is disquieting. Lurking behind all the weasel talk of targeting benefits is the dark shadow of means-testing and the intention to reintroduce fees and charges and make education, once again, a privilege, rather than a right. After all, these are the political parties which took a mother all the way to the Supreme Court to establish that her autistic son had no right to lifelong learning. These are the political parties which today, in the midst of our affluence, preside over a primary school system that is simply not delivering.

Hundreds of primary schools require extensive refurbishment. The Government admits this and Fianna Fáil backbenchers can recite the list by heart. This is the reason it established an elaborate system of deception about different lists in the year running up to the general election. The object of the exercise was to create the illusion of progress. The Book of Estimates and the Budget Statement tell a different story. The capital funds allocated offer nothing but longer than ever waiting times and shameful neglect. Very young children and their teachers must make do with substandard and, in many cases, appalling facilities.

The position on schools in new areas is just as disturbing. The Government makes grandiose spatial plans, but will not guarantee the provision of new schools in the locations it chooses as development zones. I will cite just one example which lies adjacent to Clonee, right beside the Minister's constituency. As a result of one of the Bacon reports, this area was zoned as a special development zone and construction is proceeding apace with thousands of new homes already built and a further 5,000 planned. When Fingal County Council established a broad based, inter-party, inter-agency committee to examine the needs of the new area, it asked the Department of Education and Science to appoint a representative to sit on the steering committee for the new area. How did the Department respond? It refused.

There is no commitment to meet the demand for additional schools which must inevitably arise when homes are built in such numbers in a very short time. The shredding of the primary schools capital programme in the Book of Estimates can only confirm the misgivings of families in these new development areas that they, too, will have to wait.

As the Minister spoke, I waited for him to pull back from the slowdown in third level capital and research funding he announced a few weeks ago. I was sure wiser counsels would prevail in the meantime. I waited in vain. We have slowly started to build a research and development culture in our learning institutions. In fairness, I acknowledge the Government encouraged this process in its first term. Slowly, a framework has evolved in most of our universities and colleges. Now, astonishingly, the Minister appears to want to strangle his own creation in its infancy. I warn him this cannot be turned on and off like a tap. Once damaged, it will not be easy to put it together again; neither will the reputation of the country be readily rebuilt when the Government chooses to dismantle the capacity of our advanced educational institutions to serve the knowledge economy through research and development. How will foreign investors react in these circumstances?

I detect a nasty piece of political subterfuge in the severely reduced allocation to third level education. The Minister for Education and Science, Deputy Dempsey, has decided to get his way on third level fees by hook or by crook. We will shortly see the reintroduction of fees, either directly or through the back door by way of further registration or other charges. I understand the expert group is this afternoon in the process of recommending an increase in third level registration fees of €1,000 per year.

I now turn to social welfare. The social welfare increases in the budget are paltry. While everybody will welcome the additional €10 per week for the principal old age pensioner of a couple, the increase of €6 for other social welfare recipients will amount to a net gain of 30 cent per week for some of the poorest in society. There is a simple and basic point about social welfare which the Government refuses to acknowledge. Unless social welfare payments are increased in line with wages, the poor will fall behind everyone else. It is not rocket science, but the Government refuses to recognise it. It simply does not want to acknowledge the truth about its record over the past five years. It has systematically favoured the rich at every turn.

Let us look at the facts. The ESRI has analysed the record of this Government over the past five budgets. It has compared the percentage increase in incomes resulting from tax and social welfare changes for the poorest 20% of the population with that of the richest 20%. The top 20% has gained, in percentage terms, four and a half times more than the poorest 20% from the Government's actions. That is a measure of how the Government distributes resources. That is a measure of its priorities.

The Minister says that budgets are about choices. We know what his choices are. He has chosen to favour the rich. In its pre-budget submission, the Society of St. Vincent de Paul called for an increase in social welfare rates of at least 9%. This would mean increasing the lowest social welfare payment to €130 per week. The Combat Poverty Agency called for a 7.5% increase. The increases which the Government has delivered today fall far short of these minimal recommendations. They barely cover the Minister's forecast for the rate of inflation. As I said before, the net gain to people on the lowest rates of social welfare in one of the richest economies in the world, will be 30 cent per week.

It is shameful.

His scandalous VAT increase, particularly in the standard rate, will hit the poor hardest. When we were students the higher rate used to be called the luxury rate. This will increase the cost of gas, electricity and fuel, items on which people with lower incomes have to spend a disproportionate amount.

The Government has made much of its target for social welfare payments included in the new national anti-poverty strategy. This sets a target for the lowest social welfare payments of €150, in 2002 terms, to be achieved by 2007. This target itself is inadequate, because it provides no guarantee that social welfare rates will keep pace with earnings. If the Government is to achieve even this target, it has to provide for significant increases in social welfare, over and above the rate of inflation. The Minister has not done that. In fact, a 9% increase this year would have been the minimum required to keep faith with that commitment. Once again, the ink is hardly dry on yet another promise, before it has been abandoned. The national anti-poverty strategy can now join the national health strategy and the national development plan in the dustbin.

The Government seems to enjoy nothing better than spending years on end and piles of taxpayers money drawing up glossy strategies. I heard the Minister refer in his speech to the setting up of another board to look at carbon taxes. Members of the Fianna Fáil party will be fighting to get on that board.

They are big on Kyoto.

Maybe they will get a trip there as well. However, what about the carers? When will the Government wake up and realise the huge contribution that carers make to this country, and the financial pressures they are under? I know this is a cause close to the hearts of most traditional Fianna Fáil Members. When will the Government finally abolish the means test for the carer's allowance? Not in this budget, which treats carers with condescension and contempt.

Deputies

Hear, hear.

It was Deputy McCreevy who promised to increase child benefit by €95 per week over three years, with more for larger families. We must bear in mind that some 50% of families who have more than five children live on a social welfare income. Poverty among larger families is quite exceptional in this country. He said, at the time, that this increase would help all parents with the costs of caring for their children. He also said it would "represent a major move towards achieving the goal of ending child poverty in this country".

Let us be clear, this was never about child care. If the Government cared about child care it would have done something serious about it long ago. It is so inept that it cannot even spend the money it sets aside for child care. The Minister can look in vain at his colleagues and wonder where the money is gone. What about the child care proposals for poor communities that have not even been able to get off the ground because people are literally bogged down in files of application several feet high. The Tánaiste knows what I am talking about. The levels of bureaucracy created by the Government is truly amazing when it comes to poor people. Its child care policies are pathetic. They are piecemeal and they are ineffective.

We welcome the proposed increases in child benefit, because it will help to tackle child poverty. Everyone knows that this was really to do with winning votes for Fianna Fáil in the general election, but we still supported the measure last year. Once the Minister is safely back in office, the promise on the increase he had made has been abandoned. One measure for children, which I wanted to see introduced, is a school breakfast programme in disadvantaged areas. I saw one in operation recently in one school in my constituency where staff report a much greater level of attention and discipline directly due to this initiative. The Minister should respond to the commitment and dedication of the people who run these schemes by introducing a national programme. It has been costed at a modest €15 million, yet the Minister provided a derisory €2 million. What are we supposed to say to that.

The Minister is fond of saying that his job is to make choices based on priorities. His approach to taxation tells a clear tale of the Minister's priorities. For five years, during the boom times, he lowered taxes on high incomes and on capital gains. He also lowered taxes on profits. In contrast, at the lowest end of the income scale, he has made only the most tepid moves to lift the tax burden on workers who earn the basic minimum wage. Now, when things are not so good, he places the burden of his incompetence on families. Today, we get higher excise duties, stealth taxes imposed by not indexing bands and more people paying at the top rate of tax. There is nothing here for the low paid but there is a clear signal of other public charges and tolls in the pipeline.

As I said earlier, consumer price inflation is by far the highest in the EU and twice the average for the EU as a whole. The Minister is adding to the problem by increasing charges for everything he can think of. He has added 0.85% to the consumer price index as a direct result of this budget. He says that additional excise duties make the price of cigarettes reflect the damage to the smoker's health and the public cost of medical treatment for tobacco related illness. The Labour Party supports the excise duty increase on cigarettes. I want an assurance from the Minister and the Minister for Justice, Equality and Law Reform that there will be a sustained crackdown on illegal cigarette sales by criminal elements. Apart from the large loss of revenue involved, these provide scope, now as in the past, for consolidating criminal empires. I know this from my constituency and the Taoiseach and Tánaiste know it from theirs. Customs officers and the Garda must be deployed to tackle these crime empires.

Why has the Minister not even made an effort to have cigarettes removed from the consumer price index? While he pays lip service to this issue, it remains the case that every time he raises the price of tobacco, he increases pressure on the poorest families. The same is true of his increase in VAT on fuel. In fact, what is missing entirely from this budget is any serious measure to repair the impact these excise increases will have on the consumer price index. For months now we have listened to increase after increase feeding into the index. The college registration increases being one case in point, and the excise increases today being another. We know that these price increases will impact most heavily on the poorest in our society. Once again, the most vulnerable will suffer for the Minister's incompetence.

The Minister has left himself no choice, because of the way he has managed Government revenue in recent years, without properly counting the cost. In his hurry to cut taxes for the rich and to open up tax shelters for his friends, he has completely miscalculated the effects of his policies. Would we really be seeing the increases in taxes and charges in this rolling budget of the past six months, if he had got his sums right in recent years?

For weeks we have been fed selective leaks that tax shelters would take a decisive hit. If one believed the Taoiseach's assurances to his backbenchers, our high income rollers would be trembling in anticipation of this budget. That has not happened and, as the Minister stated, there will be a saving of €10 million in his budget summary. Our tax system has become impossibly twisted by these shelters and by the ease with which wealthy interests can locate offshore. They now have to do so for five years rather than three years in regard to capital gains. That is a big change. They can live here for as long as they like with no serious exposure to taxation. "Ansbacher Man" can sleep easily after this budget.

One windfall that helped the Minister in his bookkeeping is the €34 million obtained by the Revenue from companies brought into the limelight at the Flood tribunal but the ordinary taxpayer might well ask how it is that companies with significant construction activity had escaped for so long with returns that bore no realistic relationship with the scale of their operations. This is similar to those specific cases highlighted by the Comptroller and Auditor General recently. A property investor with a large portfolio of buildings, a luxurious house and car still managed to return derisory income statements and got away with it.

The budget is asking families to pay more, while too many in our society still get away without paying their fair share. There is no adjustment to tax bands. The Minister has proposed the least he can get away with and, once again, he has done practically nothing for those on the legal minimum wage. There is a solemn commitment to the social partners to increase the basic tax credit to the level of the minimum wage in this budget but he has only gone to 90%. He has welshed again on this promise and these low wage earners will suffer the double impact of reduced spending power and taxation.

I am disappointed the Minister has not adopted a sensible suggestion from the National Economic and Social Council that he should claw back for the public benefit the windfall gains that will accrue to certain owners and developers directly from the State's own investment programme. The national spatial strategy and the roads and rail programmes all have the potential to dramatically increase the value of large parcels of land. These arise directly from public decisions and investment. Are we to sit on our hands while, once again, huge profits are made through rezoning and development?

If the community at large is to benefit from these measures, we need a form of windfall tax on gains made from buying and selling land for development purposes.

Deputies

Hear, hear.

It is also high time that the Minister came to grips with the issue of eco-taxes and through the establishment of another committee, as he has suggested. The plastic bag levy was a worthwhile gesture but no more than that. The core environmental issues include greenhouse gas emissions, air quality, water quality and waste management. Another budget has come and gone with no sign that the Minister has given serious thought to these issues. He has held the portfolio for longer than anyone and has had more opportunity to take effective measures in this area, not as a means to increase overall revenue but as responsible public policy. Now we have the Kyoto committee for Fianna Fáil.

I turn to the matter of capital spending. While families are being made to pay more, the Minister persists in significantly reducing the rate of cor poration tax this year. Was this truly necessary? Could corporate Ireland not have been asked to wait until next year? Children in run down schools have been asked to wait, but not the corporate sector. In moving this year to the 12.5% corporation tax rate, the Minister is giving a present of €305 million to the richest companies in Ireland. The levy on financial institutions is a pretty small clawback by comparison.

We have been told the 12.5% rate is essential to attracting foreign industry but it is not and, in any event, how is any foreign investor going to take Ireland seriously, if they cannot get in and out of its capital city from the airport in a reasonable time, get workers to their factories and transport their goods to market? They will turn around and get back on a plane and take their investment plans with them. Not even our astonishingly favourable corporation tax rates will overcome the scepticism of a mobile international investor when faced with a congested road and outdated rail network.

That message must have gotten home to the Government in the wake of its ill judged reductions in the public capital programme announced in the Book of Estimates. The sense of dismay was apparent in every sector. The Minister for Enterprise, Trade and Employment, Deputy Harney, got an earful even from her hosts at the Thanksgiving lunch of the US Chamber of Commerce. They told her all about the infrastructural deficit. They expressed what is evident to everyone but the Minister.

One well regarded international competitiveness index pushed Ireland down from 11th to 24th place. As a country, we must invest in our own future, yet there is a major funding gap in terms of delivering on the Government's own plans. A recent study suggests that as much as €9 billion in additional funds will be required. In last year's budget, the Minister predicted that capital spending in 2003 would amount to €6.1 billion or 5.5% of GNP. The additional capital spending in today's budget is paltry. He has been trying to cut back on capital spending since he was re-elected. This is sheer economic lunacy. Now that the economy is in a slowdown, it is precisely the time to increase investment.

When the boom was at its height, the Government invested money in infrastructure and saw a great deal of it eaten up by high construction prices. Now the construction industry has slowed down dramatically, and prices in that sector have stabilised. The Government is, therefore, in an ideal position to push ahead with investment. It has taken years to get some projects to the point where they are ready for work to commence. Suddenly the Government is saying, "Stop, there will be years more of delays because we won't spend the money." Unless the Government gets its act together on public investment, this country faces a bleak economic future.

We have a Minister for Finance who betrays a stunning lack of confidence in the outlook for his own country. He cuts investment and insists on shovelling money into a pension fund, which will not be invested in the country's infrastructure and which is losing money hand over fist on international stock markets. The reputation the Government acquired for economic management is in tatters. The budget is basically a long confession of failure and incompetence.

What kind of Minister for Finance persuades 1.2 million people to put money into special savings accounts, without knowing what he can afford to pay out? In any other country, that level of incompetence would have seen the Minister out of a job long since.

Deputies

Hear, hear.

Despite all the spin he has done nothing to curtail the cost of SSIAs. At this stage he cannot calculate the cost. The reality is the Minister's record is one of cynical and dogmatic incompetence. At the height of the boom, he stoked up the economy, pouring scorn on those who counselled otherwise. The result is that the economy overheated. We have higher levels of inflation and redundancy than were necessary. To add insult to injury, he is cutting back on public expenditure and raising taxes at precisely the time the economy is at a low point. It is the complete opposite of sensible economic management.

Anyone with even a passing knowledge of economics knows that the Government should not try to accentuate the economic cycle. I do not say that it should try to actively spend its way out of recession. because that also will not work. The Minister should adopt a sustained and sustainable course, particularly where investment in infrastructure is concerned.

Fianna Fáil does not manage the economy for the good of the people but for the good of Fianna Fáil. Let us not forget that in his first year in office this Minister kept public spending tight, as he built up his electoral war chest. Then spending gradually increased until the pre-election spending splurge started in 2001. The same process has begun again. As soon as the election was over they went back to the hair shirt. This budget is about building up the war chest for the next election.

Fianna Fáil wants us to believe the myth that this austerity is somehow necessary. So we are getting all this nonsense about not going back to the 1980s as though the crisis of the 1980s was not a Fianna Fáil creation. These cuts are not necessary. This year we will again run a substantial current budget surplus, so there is plenty of room for improvements in public services.

The sheer scale of our capital programme and our infrastructural deficit means it makes sense to borrow to fund projects that will provide us with a return over decades to come. As late as last week, this reality was very publicly recognised by the EU Commission when it proposed making changes to the stability and growth pact. Debate on the stability pact has been going on in Europe for months but the Minister for Finance does not seem to notice. Instead, he has been sitting at home, ignoring this vital debate and muttering nonsense about only spending it when you have it. It is as though the Nice referendum never happened. Once again, the Government is back to its old trick of ignoring what is going on in Europe and failing to engage in debates of vital importance to this country. Of course, this Minister is ideologically opposed to public borrowing because he is ideologically opposed to public services and investment.

Ireland is one of the richest countries in the world. We can afford decent public services, to treat people with decency and dignity and to invest in our future. We certainly cannot afford not to invest. Our new wealth should be the basis on which we offer the promise of a better life for every citizen, and we should deliver on that promise. To do so requires vision, ambition and courage but none of these can be found in this miserable budget.

For that reason, what is now clear to everyone are the two things we cannot afford. We cannot afford this Government, and we can no longer afford this Minister for Finance.

Here we are again on our annual visit to Charlie's Christmas grotto where hopes are raised and expectations are dashed by a promoter who absconds with our aspirations. It is hard to know whether the Minister for Finance is acting intentionally or whether he believes that what he presents to us and says in this House is the truth.

The Minister's budgetary objectives of last year were to develop infrastructure, improve public services, promote equity, encourage enterprise and investment, sustain fiscal policy, safeguard the vulnerable, prioritise needs and invest in the future. On each of these grounds the Minister and the Government have failed miserably.

The Minister has been engaged in the "Enronisation" of the national accounts. This budget repeats the trick of last year of front loading receipts and dipping into secondary accounts to present the best possible gloss on the national figures. However, this time instead of pretending there is no deficit he has to admit that there is a deficit of at least €900 million. Given the way he got last year's figures so badly wrong we can anticipate that those figures will rise further.

The Minister has introduced a number of measures that are nothing less than taxation by stealth. By not touching the personal tax credit or tax bands he has told every income tax payer that the amount of tax he or she pays will increase by at least the rate of inflation next year. He has introduced a number of indirect tax increases, which will have a secondary effect. The most pernicious of these is the 1% increase on VAT, which is an additional tax on labour, goods and services and, once again, will affect those who have least. This makes a further nonsense of the Government's pretence to being concerned with the idea of equity.

The pretence continues with the pantomime surrounding the idea of house buyers being encouraged by the Government. Having got rid of the first-time home buyer's grant the resultant saving of €38 million has been met by the sum of between €6 and €8 from the mortgage interest tax relief for first-time buyers. This itself has been eaten away by the 1% increase in VAT. The Government and the Minister are more concerned with perception than reality.

The Government talks about capital infrastructure and yet is reducing the amount to be spent next year by 1.5%. It hopes to meet the shortfall by a further reliance on public private partnerships, a system of funding that we know costs more in the long run, benefits those who already support the Government parties and does not provide the infrastructure we need in the way we need it. The experience of our near neighbour shows how fraudulent public private partnerships are and our limited experience of them in this country show they do not represent a response. Once again the Government is ignoring its responsibilities.

The Minister for Finance, Deputy McCreevy, again uses smoke and mirrors to pretend that tax loopholes are being closed. Other than a tinkering around with the capital allowances, which is welcome in itself, the Minister does not propose to close any tax loophole in the next fiscal year. He even suggests that all existing loopholes should continue until the end of 2004. The Minister talked about the need to share the burden and the risk which comes from changed budgetary circumstances. The Green Party asks where in the budget or in the Book of Estimates has the Minister asked that any of that burden be shared by him, his party, his supporters or those who have benefited from six budgets which have overwhelmingly benefited the better off? How can the Minister talk of equity when, after his five previous budgets the difference between someone earning more than €50,000 per year and those who are dependent on social welfare has increased by €12,000? What kind of society has 14,000 earners in the top bracket earning the same as 250,000 earners in the bottom bracket? Where is the equity or the response? This is a Minister who talks the talk but acts otherwise.

The Minister seems to have retracted his undertaking to provide additional funding for the roads programme. There is no doubt that some infrastructure projects, such as bypasses, some road improvements and consistent improvements on secondary roads are needed. However, the roads programme which the Minister wants to see supported and which will benefit his supporters in the construction industry is one which is not required because it will produce a road capacity the country does not need. This has been ascertained by studies previously done by the Department of Transport.

It is two and a half times the health budget.

The much maligned and long neglected national development plan spoke of a ratio in transport infrastructure by which roads would get €2 for every €1 spent on public transport. That ratio is now €3 for roads to €1 for public transport at a time when most public transport infrastructure projects have been frozen.

The social welfare increases in the budget are derisory and insulting. The increases range from the lowest which are no more than the rate of inflation to a high of 8% for pensioners. These increases will be eaten into by the inflation which will result from the indirect tax increases in the budget, which will bring our inflation to three times the European average.

The Minister and the Government pride themselves on budgetary prudence. The Tánaiste has already commented on the fact that this is a prudent budget. I am sorry that she, the Taoiseach and the Minister for Finance are absent from the Chamber.

Complete contempt. The Minister walked out.

I particularly miss the absence of the Minister for everything else. Where is the Minister for Justice, Equality and Law Reform? He seemed to have enough comments on the budget before it was announced. I suspect he wrote it himself and that he is now outside telling every media organ in the State what effect he has had on it. If he wants to boast about the effect of the pernicious demagogue party, let him do so, but let him do so in the knowledge that the Ireland he represents is not the Ireland that the vast majority of people live in.

Hear, hear.

It is not the Ireland that has benefited from the tax reductions that Deputy McCreevy has introduced in the last five budgets. It is the Ireland suffering from the spending cuts introduced in the Book of Estimates, a series of cuts that constitute nothing less than an attack on the very ideas of society and community. We now live, because of Government policies and priorities, not so much in a society but in an economy that is ordered to the benefit of a select few.

Carbon tax was mentioned. The paragraph in the Minister's budget speech in this respect is the exact same paragraph he has had in it since 1999. Every year we are to have a committee to examine the economic and competitive effects of carbon tax on the economy, despite the fact that the ESRI has done many studies on the likely effects. The National Economic and Social Council has endorsed the tax as an instrument that will have a good effect, not only in terms of the environment but in terms of the economy. There would be a short-term financial benefit, just as we have had from the plastic bags levy. In the long-term, we would be avoiding the costs that the Government is still unwilling to accept will result from the fact that we have already exceeded our carbon emission levels. We will have exceeded them by a likely factor of ten by 2010.

In overall terms, this budget talks about the wrong priorities, and it is from a Minister who has always talked about the wrong priorities. However, I think he is being hoisted on his own petard today. The examples within the budget document talk about the effects of taxation on particular sets of married couples. Take the example of Duncan and Mary. Duncan is a technician earning €40,000 per annum while his wife Mary works at home. They will be better off by the tune of €95 per year, something in the region of €1.85 per week.

Maura and Pádraig have passed away.

Much lamented. At the same time, John and Stephanie – we seem to be very much in middle-class suburbia in the Department of Finance—

That is the McDowell influence.

John is a garda earning €35,000 per year and Stephanie is employed as a solicitor earning €45,000 per year. They will gain €223. Again, this is the effect of another of the Minister's pet projects – individualisation – and there is no attempt to balance the playing pitch. It is also interesting to note that the incomes of both these couples are such that neither could afford to buy a new house in the Ireland of today.

Correct.

The average house price has now exceeded €200,000 and is €230,000 in the greater Dublin area. The equivalent price in the UK is €170,000. Where is the examination of this profiteering? Where is the attempt to look for a windfall tax? Where is the challenge of the supporters of the party and the parties opposite? There will be none because those who pay the price are those who do not participate in the electoral process and who do not support the Government parties. Once one has such a set of skewed priorities, one will have the unbalanced Ireland that we have.

The Minister was famous, in another incarnation, for being responsible for a dirty dozen in terms of social welfare cuts. A similar dirty dozen has been highlighted by the SIPTU newsletter Liberty. It refers to the effects of the Minister's policy in terms of home buyers, the decision in relation to the drugs refund scheme, overall spending in terms of the health service, which is running below the rate of inflation, and education cuts, not only in terms of the built infrastructure but in light of the fact that to better and improve oneself in Ireland is a matter of how one can pay for it. Today's society is no longer about who one knows but about what one can afford. That is Deputy McCreevy's Ireland.

Deputy McCreevy has spoken about having a three year budgetary strategy. I bless his confidence in being able to come into this House again to produce another set of what I consider to be fraudulent figures. He has done this for five budgets too many already. If the Government, particularly the Taoiseach, wants to restore confidence in the management of the public finances and get back on track in terms of economic development, it should note that Deputy McCreevy's confidence in himself is ill-founded. Then the confidence we need to have in terms of the future of this country can be restored.

I commend Deputy Boyle on his contribution. This budget must shock and anger everyone who seeks a society of equals on this island. Only seven months have passed since the general election. That was the Minister's last outing as "Champagne Charlie". The bubbly was still flowing and the sky was the limit. Four days before the election he told the people, "I can confirm that there are no significant overruns projected and no cutbacks whatsoever are being planned, secretly or otherwise." Clearly, it is a long, long way from May to December. It is also a long way from Fianna Fáil and PD promises before the election to the reality of this budget.

The Minister, Deputy McCreevy, in his address here 12 months ago talked about his books and the final chapter in his first book. However, is this really the first chapter in his second book, as he so haughtily declared here just 12 months ago, or could it be the last chapter in his single and sorry tome on the steps to be taken to reward the well-to-do while at the same time dropping just enough crumbs to mute enough people among the masses who yearn for economic justice?

The dictionary will introduce a new word, as it is quite entitled to do –"McCreevyism". It will be defined as rewarding one's friends from the toil of others while maintaining the pretence that one cares for all. Deputy McCreevy will enter the dictionary just like other notable figures in Irish history, such as Boycott, and on the wider diaspora scene, to our shame, McCarthy. We still have no explanation why the Minister promised no cuts in the middle of May and his Department proposed cuts of the order of €900 million a few weeks later. It could only be because of massive incompetence or massive deception.

Today the deception is exposed. The Fianna Fáil election manifesto, the programme for Government, the national development plan and the so-called national health strategy have been thrown into the incinerator, and the national spatial strategy might as well be the national space exploration strategy.

The publication of the Book of Estimates caused widespread and justifiable anger throughout the State and the budget just presented by the Minister for Finance will surely deepen that anger. Before the budget we had already seen the axing of the first-time home buyer's grant, the reneging on the promise to extend the medical card entitlement to a further 200,000 people, the cut in the school building programme, the social housing cuts, the shortfall in the health budget and the cutting of 5,000 community employment places.

In relation to the Minister for Transport's portfolio, we are looking at a 9% increase, although the 9% claim is up for question, in relation to public transport costs. A possible €43 increase in the television licence will be introduced and only last evening we heard of the second increase in the ceiling limit in the drugs refund scheme which has been increased by €5 to €70.

All of this represents a damning indictment of this Government's approach to the needs of ordinary citizens. This budget has confirmed the cuts I have already outlined and it has imposed even more penalties on many deserving people who had every justification to expect that the Minister, Deputy McCreevy, would deliver a very different message today.

This budget follows five years of squandered opportunities in every budget presented by this Minister for Finance. There is still unprecedented wealth in this economy, yet the Government has failed to harness that wealth in a planned way to benefit all citizens. We face these difficulties not simply because of the shortfall in the public finances which arose in 2002 but from mismanagement and the squandering of the unique opportunities of the past five years.

The Minister, Deputy McCreevy, looked after the wealthy in all his budgets and he has done it again. Those on lower incomes have been left behind once more. This budget represents the Minister's footprint in the telling sands of our economic history.

Before the general election Fianna Fáil made two promises it has now reneged upon in the most blatant manner. There were others, but two stand out in particular. It promised to end hospital waiting lists in two years. It did not even bother including that in its programme for Government. It was dumped as soon as the polls closed. This week, at my own local authority, Monaghan County Council, one of the Minister for Transport's colleagues, having listened to criticism of his party's dumping of the so-called national health strategy and the general election health commitments, responded with surprising honesty by saying, "But that was before the general election". One can imagine the reaction of colleagues in the chamber. I will tell the Minister who I am talking about later, although I have no doubt the Ceann Comhairle will be able to tell him who this person is.

The outgoing Government promised to extend the medical card to a further 200,000 people. That was signalled before the last budget over 12 months ago. That promise has been reneged on for the second time.

The low paid fare worst in this budget in terms of our health services because the Government has not provided the resources required. For a better health service, we need both resources and reform. It is often said that throwing money alone at it is not the answer. The national health strategy was a fudge. It does not tackle our grossly inequitable two-tier system, nor does it reform, but even the positive aspects of that strategy are now thwarted by the lack of resources. As signalled in the Book of Estimates, this budget does not keep the health services in line with medical inflation and those are the figures by which it must be judged.

The wealth and resources exist in the economy to extend medical card entitlement. That is not just a broken and forgotten election promise of 2002. This was a legitimate expectation of tens of thousands of families throughout the Twenty-six Counties and during the Celtic tiger years, and it is a right to which they are entitled. It is a disgrace that in 2002, after the most prosperous period in the history of this economy, it is still wealth that determines the standard of health, and the standard of access to health services, for our people.

If the Minister, as he claims, is interested in value for money, why did he and his colleague, the Minister for Health and Children, not initiate an immediate value for money assessment of the national treatment purchase fund? This stop-gap measure sponsored by the Progressive Democrats is subsidising the private health system. While they are at it, they could assess the overall cost of subsiding the private health care operators in public hospitals.

This Government has broken its promise to parents who find themselves just over the income limit for the medical card and who must continue to struggle to scrape the money together to bring their children to the doctor.

We need progressive tax reform. The recent report of the Revenue Commissioners showed that over 22,000 people in this State earn more than €100,000 per annum. Many of those also benefit from the many tax avoidance schemes that exist. The most recent National Economic and Social Council report expressed its concern at "the highly complex system of tax reliefs and the lack of any clear principles in the evolution of these reliefs".

The Minister has yet to spell out which of these he proposes to address. Even after he does what he has allegedly committed himself to doing today, the wealthy will still have their loopholes. The Minister should have created, as my colleagues and I argued in our pre-budget submission to him, a new 50% band for income in excess of €100,000. It is not too late to undertake to carry out a necessary review of all aspects of taxation – who is paying, who is not – and to follow it through with the necessary reforms to ensure we have an equitable tax system, something that has been called for by the NESC.

The Minister has made a range of adjustments in tax reliefs. In doing so, he has all but admitted that these were inequitable and benefited the better off. Why did it take him five years to make these adjustments? It is because now, with the public finances in a tighter position, they have become an embarrassment and even the Minister has had to address them. He could have removed many more, however, as part of a major review and reform, as I have already stated.

The Government has failed to take the lower paid out of the tax net as promised. People on the minimum wage are still taxed. The earning limit is €223 per week, in other words 10% of all those earning below the minimum wage remain within the tax net, only 90% being excluded. That is a damning figure. People earning below the minimum wage are still in the tax net. That is a startling fact that will not be ignored.

Income tax changes in this budget have again benefited the better off disproportionately. A married couple with two children and one income gain €144 per week, while the same family on €130,000 gain €269.

The Minister is relying on widespread and sweeping VAT changes to raise extra revenue. These changes will have a massive knock-on effect and they take no regard of income. Once again, they will hit those on lower incomes who will feel the increase in the cost of living, and a whole range of costs and charges will affect them. The increase in the lower rate of VAT, from 12.5% to 13.5%, will impact on housing and services. There is no realisation of how this will affect ordinary people. The resulting increase in inflation will be accentuated by the 3 cent increase in duty on a litre of diesel. All goods and services are delivered by transportation on the questionable roads infrastructure. The increased costs will not be absorbed by those in the transport industry or those engaged in manufacturing or the delivery of services. They will be met by consumers. It is another blow.

The outrageous abolition of the first time buyer's grant, signalled some weeks ago, is accentuated by the increase in the lower rate of VAT, which will add thousands of euro to the cost of new homes. This is a fraud. The mortgage relief increases for first time buyers will not disguise the fact that people are being penalised at every other level.

The Government has reneged on its commitment to a three stage implementation of increases in child benefit costing €1.27 billion. The former Minister for Social, Community and Family Affairs said in 2000, when the first increase was implemented, that there would be similar increases in 2002 and 2003. That promise has not been honoured. The Government has engaged in treachery and the electorate will not have it.

I am grateful that my section of the Technical Group has facilitated a response by me to the Budget Statement. As I represent the Socialist Party I do not necessarily speak for other members of the group, but all members will have the opportunity in the ensuing debate to express their views.

The budget is a continuation of a process, in train for a decade and a half, of distributing the wealth in society between the various classes, between on the one hand the majority, comprising working people and on the other hand, the minority, comprising the privileged owners of capital and finance. In 1987, wages and salaries of workers amounted to 59% of GDP while the profits and rents taken by the minority amounted to 41%. Fourteen years later, in 2001, the amount going to the workers had fallen to 46% of GDP while profit and rents had risen to 54%. There has been a huge shift in resources from the majority of working people to the minority who benefit from profits, rents and dividends.

This change reflects the philosophy of the Fianna Fáil and Progressive Democrats Government. The Minister for Finance is a conscious right wing politician who has set out, deliberately and with cold calculation in this budget, to continue the trend of shifting resources to the capitalist minority away from social services and working people. Last year he reduced corporation tax from 20% to 16%, at an annual cost of €329 million. He also reduced employer's pay related social insurance contributions by €340 million in a year. The combination of these two figures amounted to €676 million last year. The further reduction in corporation tax announced in the budget means that an additional €305 million will be taken from the tax net and given to the corporations. With the changes announced last year this means that every year from here on, just under €1 billion will be taken from the social fund, which should be allocated to services and to fund the needs of the majority, and given to the minority, who cannot believe the profits they made over several years in the days of huge economic growth.

The treatment of the corporate sector should be contrasted with that meted out to ordinary working people. Take those who have been hoping to purchase a home and put a roof over their heads, a basic human right. The abolition of the first time buyer's grant was a cruel blow by the Government, reflecting the heartlessness of the right wing ideologues who drive policy. For five and a half years they have done virtually nothing while speculators and developers have profiteered outrageously by doubling and trebling the price of a home to working people and in making massive profits. At the same time workers' wages have been pegged under the misnamed partnership agreements.

I have no doubt that many of the speculators who have been let rip have contributed to Fianna Fáil. However, the Minister's response was to injure the first time buyer with the abolition of the first time buyer's grant. In the budget he insulted them. The effect of the so-called increase in mortgage tax relief for them amounts to between €10 and €12 per month. They could not buy a doorbell with it, which is perhaps as well for the sake of the Fianna Fáil and Progressive Democrats candidates, who in a year and a half will be seeking votes. The increase in the lower rate of VAT will add at least €2,000 to the price of the average home. These combined measures effectively amount to a further take from young people as they attempt to purchase a home.

Nothing has been done to alleviate the plight of those depending on private landlords. A significant section of the landlord class now rack-rent with a vengeance that would put their landed counterparts in the 19th century to shame. A mass movement led by Michael Davitt was needed to sort them out. A modest three bedroom home in a working class suburb now commands a rent of €1,500 month, yet no relief is available to the sector.

However, there is continued relief for those who have been privileged to live under the tax shelters and who have been protected for decades by successive Governments. Over the past five years I have repeatedly raised in this House the scandal of the stud farm industry, which has escaped any kind of substantial taxation. I was going to suggest that the stallions in Kildare would sleep easy in their stalls tonight, but they probably will not sleep because they will be disturbed by their millionaire owners celebrating another budget which has not laid a finger on them. No doubt the champagne will flow late into the night in tribute to their Minister who has protected them once again. We have the spectacle of a single horse in a prestigious stud farm, perhaps Sadlers Wells, earning €250 every time it covers a mare, one animal earning €20 million, at a conservative guess, in a year. In the prestigious stud, Coolmore, where there are dozens of such horses, hundreds of millions of euro must be earned with not a cent paid in taxation.

Every morning, working class women from Dublin west and from working class communities in cities and towns, in the black winter morning long before dawn, drag themselves from their beds and make an often long trek to offices and factories to clean them before the day staff arrive. They do this to earn some money in order to maintain their families. Every cent they earn is taxable and if they earn the minimum wage they will still qualify for PAYE as the Minister has refused to remove them from the net in today's budget.

There is a double whammy suffered by PAYE workers. The owners of these tax-free stud farms are tax exiles in many cases. They are millionaires who fly in at the weekend in their private jets from their luxury retreats in Barbados or Switzerland or wherever. They fly by helicopter to their tax-free stud farms, swan around at prestigious horse races with often a Taoiseach or a Minister for Finance tugging at their arm. They will often show up at their favourite charity event because they all have favourite charities; it makes them look quite good. If they paid their taxes we would get ten, 20 or 30 times more for necessary services than their so-called charitable endeavours earn. The reality is they continue to be protected by this Government.

Successive Governments have dealt shamefully with the funding of local authorities. In the 1980s there were savage cutbacks and in 1983 there was the double cross of the possibility of local authorities raising service charges for water and refuse as a parallel tier of local taxation again hitting PAYE workers. Happily the outraged among the PAYE sector and their demonstration of people power in the 1990s forced the abolition of the hated water tax. That was an important reform because otherwise we would now have a parallel tier of taxation with charges of perhaps €100 per year for the average family or household. The Minister for Finance would like that.

As a result of the cutbacks in real terms in spending on the local government fund, we have new pressures on local authorities to raise charges. Bin taxes are going through the roof. Be warned, I say to the Government. There is a movement of mass opposition in Dublin which is spreading and will intensify if this pressure continues.

There are all kinds of extra taxes under different guises which have been imposed today on working people. The charge on bank cards, the tax on drink and cigarettes, are all extra ways to soak more from working class people. Let us not pretend that they are imposed for health reasons.

There are resources in this society but we have a Government and a system which considers those resources untouchable because they belong to the most privileged layer. We have a Government that preaches prudence and care with public funds but it hands over our fabulous natural wealth in the Corrib gas field to multi-nationals without a single cent being charged in royalties. Yet students at a difficult time in their lives are hit with registration fees in an attempt to bring back full fees. This budget is saturated with the right wing values of capitalism, with the class interests of capitalism which Fianna Fáil and the Progressive Democrats represent. It is saturated with the values of globalisation and favouritism for the very powerful. Working people should resist it. Leaders of trade unions who have been too cosy in their dealings with the bosses and the Government should be forced to resist it so that we get back the amount of wealth that has been transferred from working people to the super wealthy. There will be no return to the 1980s and the programme of cutbacks of that time.

I counterpose to the rich person's philosophy of Fianna Fáil and Fine Gael a society that is democratically owned, controlled and managed, where the resources are for the benefit of all, not for the tiny minority. In that democratic socialist society, as I see it, we can have dignity, equality and enough for everybody.

Sa mbuiséad seo chímid arís fealsúnacht na heite deise i bhFianna Fáil agus na Daonlathaí. Claonann an Rialtas i dtreo an mhionlaigh is saibhre agus is cumhachtaí, i dtreo na gcomhlachtaí móra agus le cúig bhliain anuas tá na socruithe céanna déanta ag an Rialtas – saibhreas an mhionlaigh seo a mhéadú agus é a thógáint ón ghnáthdhuine.

Tá sé in am deireadh a chur leis, seasamh suas in aghaidh an Rialtais seo agus in aghaidh fealsúnachta de chuid na heite deise a bhaineann leis. Tá sé in am don lucht oibre, daoine óga agus mic léinn a theacht le chéile chun cur in aghaidh an Rialtais seo agus fealsúnacht, polasaithe agus stráitéis eacnamaíochta de shaghas eile a chur ina áit.

Sitting suspended at 6.40 p.m. and resumed at 7.10 p.m.
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