Dáil Éireann díospóireacht -
Wednesday, 27 Oct 2004

Vol. 591 No. 1

Leaders’ Questions.

Mr. Kenny

Research carried out by my colleague, Deputy Perry, has revealed that thousands of elderly patients in public nursing homes have been illegally charged by this Government since 2001. The situation is that prior to 2001, health boards were legally entitled to seek a contribution from medical card holders in long-term care. In other words, their full eligibility to free inpatient services was reduced and the health board could legally seek a contribution from them. However, for anybody of 70 years or over, the Health (Miscellaneous Provisions) Act 2001 confers full eligibility to free inpatient services. That Act does not allow for eligibility to be diminished or for charges to be levied.

Arising from this information, published today, does the Taoiseach accept that all persons aged 70 years or over in public nursing homes have been illegally charged since 2001? Will he quantify the number of persons affected and the amount of money they have paid over the past three years? For how long have the Department of Health and Children, and successive Ministers, been aware of this illegal charging? Will the Taoiseach arrange that those patients who have been overcharged will be reimbursed from the central Exchequer, rather than from the already seriously overstressed health budget?

The Taoiseach

I will make three points on this issue. The health strategy points out that it is fair that all those in receipt of publicly funded residential long-term care should make some contribution towards accommodation and daily living costs if they can afford to do so, just as they would if they were living in the community. The current position reflects this. For people availing of public long-stay care, charges can be made under two sets of regulations with regard to inpatient services and institutional assistance, where the patient receives shelter and maintenance rather than treatment. Shelter and maintenance is the term used in the regulation. In deciding the amount to be contributed, health boards have regard to the person's individual circumstances. Charges may be waived if, in the opinion of the CEO of the health board, payment would cause undue hardship. Under the Health (Nursing Homes) Act 1990, health boards may pay a subvention to assist a person in meeting the costs of private nursing care. The Department of Health and Children has established a working group to review the operation and administration of the nursing home subvention legislation.

My second point relates to what has been stated by Deputies Kenny, Perry and others and arises from what the Ombudsman said in his final report of 2003. In his view, once people over the age of 70 were given a medical card they were also entitled to nursing home care. In line with the health strategy, the Department of Health and Children is committed to the preparation of new legislation to update and clarify the whole legal framework for eligibility and entitlement in the health services. That arose out of the Ombudsman's report of last year.

The third point is regarding legality and the issues which arise from that, which Deputy Kenny has raised. The Department is in consultation with the Attorney General on that matter and these issues will be addressed in light of the advice given by the Attorney General.

Mr. Kenny

I bring the Taoiseach back to the central point. I did not raise the issue of the principle of payment of a contribution by pensioners in public nursing homes. I raised the question of whether or not, arising from the Act introduced in 2001, this payment is now illegal. It is an illegal payment. The Government, therefore, cannot operate to a different set of rules. When AIB overcharged, the bank was obliged to pay back its customers. There are a number of precedents for repayments in the drugs repayment scheme and the scheme for nursing home payments to families. Does the Taoiseach accept that the phraseology used in the 2001 Act, over which his Government has presided, means that pensioners over the age of 70, to whom medical cards were issued, have been making illegal payments? Between 8,000 and 12,000 such people could be involved and the amount of money involved could be of the order of €100 million.

Does the Taoiseach accept the payment is illegal? If he does, will he make arrangements for the money to be repaid? On 1 June last the Taoiseach said that customers of AIB must be recompensed in respect of payments. Does he accept that these payments are illegal, will he make arrangements for compensation to be paid to the patients and will he report to the Dáil on his analysis and decision in the matter?

The Taoiseach

Deputy Kenny wishes me to deal with the kernel of the issue, and I will do so. That determination will be clear and will be reported to the House by the Minister for Health and Children when the Attorney General gives his advice. That is a legal point which must be clarified and when the clarification is given it will be reported to the House.

In line with the health strategy, since the Ombudsman's report of last year the Department of Health and Children is committed to new legislation to update and clarify the whole legal framework and eligibility for entitlements in the health services.

When I saw the reports of the last few days I asked when we are likely to receive the Attorney General's advice. I have not yet received an answer to that question but we will try to get is as soon as possible.

Mr. Rabbitte

I am sure the Taoiseach's attention has been drawn to the figures released to my colleague, Deputy Burton, in respect of the liability of different categories of taxpayers. They show that 242 persons with incomes between €100,000 and €1 million per year pay no tax at all and that 41 people with incomes in excess of €500,000 per year pay no tax. Is the Taoiseach satisfied that people on the national minimum wage are subject to taxation and are taxed while the super wealthy who earn in excess of €500,000 per year can arrange their affairs so that they are liable for no tax at all?

Does the Taoiseach agree that the response of the tax advice industry is not very compelling? They ask why we should bother when all these schemes will finish in 2006. The Taoiseach will know that we have had announcements like that down the years but that the schemes have never finished. For example, Deputy McCreevy, when presenting the 2003 budget, said, "A series of tax incentives, 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". He went on to say what they were and then he said, "All of these schemes, without exception, are to end on 31 December 2004". He came in the following year with his budget for 2004 and extended them to 31 July 2006.

Does the Taoiseach think the existence of these schemes is justified in all circumstances? Does he intend to extend them again? Does he think it fair, irrespective of the merit of the schemes, that an individual in such a super earning bracket should be capable of reducing his or her tax to zero? Does he think an effective minimum rate of tax, as was proposed yesterday by Deputy Burton, would be fair in a society where persons on the national minimum wage must pay some tax while super high rollers can organise their affairs so that they have, legitimately, no tax liability?

The Taoiseach

I have seen the figures. I saw the contents of Deputy Cowen's reply which said that of 10,828 PAYE income earners of €100,000 or more per annum, 10,741 were liable for tax at a rate of 42%, 40 were liable at a rate of 20% and 47 had a nil net income tax liability. Of 9,240 self-employed people with incomes of more than €100,000, 8,936 were liable for tax at a rate of 42%, 109 were liable at a rate of 20% and 195 had a nil net income tax liability.

My answer to Deputy Rabbitte's question as to whether I think it fair that people play the system to that extent is that I do not. Tax incentives and reliefs are not tax loopholes or avoidance mechanisms in the strict sense. They are introduced by successive Governments to stimulate investment. All Governments have generally introduced or continued various tax reliefs with the aim of stimulating investment and helping employment, particularly in designated regions. From that point of view they serve a useful purpose. They are not intended to be used so cleverly that people pay no tax.

What is the best way of dealing with such avoidance? Deputy Rabbitte and I have read reports of the Revenue Commissioners which state that when there is a minimum tax rate the tax compliance industry will play to that figure and one will find more people at it. I am not in the business so I do not know, but that is what they continually say. It is my view that it is better to take the alternative approach and to limit the tax schemes, shelters and allowances which allow the present position.

There are several reasons why some persons have a nil liability. Tax relief for pension contributions is quite legal. Losses due to capital allowances and business investment is the main reason for tax relief. I have not seen a survey of the people referred to in the Minister's reply but I would bet my bottom dollar that their reliefs arise from capital allowances. That has been the case since the first of these allowances were introduced in 1978. There are also tax breaks such as the business expansion scheme, film and urban renewal reliefs. Such schemes play a big part in stimulating the economy. Still, if people on €100,000 can have a nil liability, I do not believe that is the aim.

The former and current Ministers for Finance have referred to changing or eliminating perhaps not all but as many of these allowances as possible. The Revenue has shown in some of its own figures that the most attractive tax relief measure is the one concerning film production. We remember the furore and lobbying last year about the film production tax relief. Everybody in the country became a supporter of that measure for three weeks before the budget.

Mr. Rabbitte

It is not that somebody earning €100,000 can have a zero tax liability but that somebody on €1 million can. If the Taoiseach agrees with me that it is inequitable, will he take the opportunity in the budget and the finance Bill to do something about it? In answer to a parliamentary question, the former Minister for Finance, Deputy McCreevy, was unable to say what 30 of those schemes would cost the taxpayer. Therefore, we do not know what tax is being forgone or the cost to the taxpayer. He said he could not tell us.

At the same time, however, in response to another parliamentary question tabled by my colleague, Deputy Lynch, it transpired that a pensioner who managed to squirrel together the wherewithal to open a special savings investment account, SSIA, is now being advised by the new Minister for Social and Family Affairs that it will be taken into account for means assessment purposes. Pensioners who worked all their lives on relatively modest salaries and who open SSIAs, which is Government policy, will now find those accounts being taken into account for the purpose of assessing means. On the other hand, somebody earning €1 million can arrange their affairs so that they pay no tax.

I agree with the Taoiseach. I do not say that all the schemes are wrong in all respects. The point I ask the Taoiseach to address is that nobody who invests in or avails of these schemes ought to escape with a zero tax contribution to the Exchequer. Has the Taoiseach a view on the minimum effective tax rate question?

The Taoiseach

Deputy Rabbitte has asked me what will happen concerning this question. The 2003 budget announced the termination of various property investment reliefs which are now being strictly adhered to. The termination date was extended in the Finance Act to provide for an ordinary wind-down of existing schemes to which people were tied contractually, or where they had planning difficulties, and in all the other cases that have been made.

The top 400 earners study carried out by the Revenue Commissioners in 2002, which are the only figures we have, indicates that there was an increasingly effective tax rate of high earners compared with the last year Revenue examined, which was the 1999-2000 period. I am informed that trend has continued. That is because as reliefs, shelters and allowances are being closed off, they cannot be used. It is clear that some high earners continue to achieve substantial reductions in their tax liabilities as a result of these reliefs. As I have already said, the most generous one, which involves the least risk, is the film relief that, rightly or wrongly, we included last year.

The Revenue Commissioners' study indicated that property-based capital allowances continued to be the chief instrument used by high income earners. That has been the case for many years. Most of these allowances will die out at the end of 2006. The issue is being examined by the tax strategy group and will also be examined in the context both of the budget and the finance Bill.

Mr. J. Higgins

An Post employs up to 8,000 workers and is a crucial service reaching every corner of this State. Not only is it crucial for business, it also involves the delivery of millions of items of personal mail, as will be demonstrated in the forthcoming Christmas season. In addition, by common consent, An Post has other crucial dimensions involving both the postal service and a social service in many regional towns, villages and remote parts of the country. The importance of this service is underlined by the fact that when these services are threatened, public representatives, including many Government Deputies, raise a ferocious clamour. Happily, in the past, they have had some success in preserving these services. The problem is, however, that the Government will not fund this crucial service.

In 2002, the Flynn report spoke of considerable financial pressures if the proper level of investment was not forthcoming for the postal service, yet An Post was awarded a paltry €12 million to facilitate some post offices transferring services to an agency basis. One of the worst aspects is that An Post's staff and pensioners are now being called upon to subsidise the service in which the Government will not invest. They have not received increases under Sustaining Progress, including workers earning less than €18,000 per annum and SDS workers who face 274 job losses following a unilateral decision.

It has been revealed in the House today that the Government allows millionaires get away without paying a penny of tax. Since 2001, the Government has robbed the elderly in their nursing home beds, yet now the Taoiseach wants to leave low-paid workers in An Post to pay for the crucial services it provides. All in all, the Taoiseach looks like a neo-liberal embodiment of that harsh warlord in the Christian gospel whose motto was, "To those who have, more will be given and from those who have little, even that will be taken away". I am not posing an industrial relations question to the Taoiseach. I am asking him about his overall investment policy for An Post.

Mr. F. McGrath

Hear, hear.

The Taoiseach

A few years ago, the Flynn report listed several recommendations that are being implemented. If I recall correctly, they were also paid for in terms of staff remuneration and allowances so that the report's recommendations could be undertaken. Over the years, we have taken significant steps to modernise the postal service, including updating its technological automation.

Over the past 18 months, talks have continued between An Post management and trade unions to agree on the full implementation of the Flynn report. I acknowledge that An Post's staff did not receive the payments that were given to everybody else. They did not receive the benchmarking awards as the talks went on because of the company's financial position.

The changes concerning post offices, which involved moving uneconomic entities onto an agency basis, have continued. These discussions are continuing. We all want to see the postal network being maintained but it must be done on an efficient and modern basis. That was the subject of the Flynn report's recommendations, whose implementation is a matter for the management and workers to resolve by agreement.

Mr. J. Higgins

Is An Post and its workers now to be treated in the same way as Aer Lingus which is another publicly-owned company that was milked for advantage when it suited the State and successive Governments and then starved of investment at the same time, with workers obliged to carry the burden through sackings and a deteriorating service and the tax-paying public to suffer the effects of cutbacks? What are the principles under which the Government approaches the postal service? Does the Taoiseach agree there is an important social element in An Post's service and that, therefore, it is not simply a question of the profitability of every single unit or area? If he accepts that, how does he propose to fund it and invest in the service? Does the Taoiseach therefore agree with me that it is scandalous that the workers and pensioners have had to carry the can up to now rather than the Government making necessary fiscal decisions to invest in this crucial service?

The Taoiseach

The answer to the first question is "Yes". If it was not so and that the Government did not see it as a good social service, we would not have continued over the years against considerable competition and opposition, including challenges in Europe over giving An Post large amounts of the social welfare business and any other business we could find, to keep the social element of it and to try to get some kind of economic viability into the service.

I believe the Deputy will acknowledge, as I do, that it is not the fault of An Post workers but that technology has changed the situation for them. They have been losing in excess of 6% on letter post alone based on the last figures I remember when talking to social partners some time ago about the matter. They have also been losing quite substantial parts of their core business in other ways because of texting, e-mailing and other technology. That has undermined to a great degree the viability of the postal service. However, in spite of that in recent years we have invested approximately €100 million in technology infrastructure. Admittedly a large part of that went on the sale of PostGem, its dotcom company, which was re-invested to provide the services. An Post is trading in a difficult position and the Government, board and trade unions need to help it through what is a fundamental change in how people do business in the modern world.