It is a very odd Government to have had this very relieving and helpful news for people with medical cards but which forgot to relay that news. That means the Government must be close to breaking up. I always thought Fianna Fáil worked on the Margaret Thatcher principle of telling them you will tell them, telling them and then telling them you told them. Fianna Fáil is in a fair old "state of chassis" if what the Minister outlined — that the party decided this on Tuesday but it slipped its members' minds to tell very scared people with medical cards that there would be some reduction in the burden — actually occurred.
To cut to the chase, for people on middle and higher incomes, the universal social charge means that the health and income levies previously paid will be combined in the charge. For many people there is not much difference and as we know, for self-employed people there is a significant potential gain. The cumulative levy they would pay is below what would be paid with health and income levies.
We want a detailed impact assessment of the social and economic impact on the categories of people I have outlined who are badly affected. These are the widows, people on medical cards and those who earn less than €26,000 per annum. We want a fair and balanced system. Yesterday the Minister transferred some of the burden to people who are self-employed and earning over €100,000, which is a way to rebalance the issue. It takes in people with a very high level of income.
That is very similar to the Labour Party proposal that people on very high incomes — individuals on over €100,000 per year and a couple on over €200,000 per year — would contribute proportionately more. That differed from the approach of other parties. Fine Gael suggested the hit should be balanced through social welfare cuts, at a rate of €6 per week for three years, whereas Fianna Fáil condemned the Labour Party for suggesting the approach but did not say how it would act. The Minister's actions yesterday strike a balance so that less of a burden falls on people with low incomes, with more of a burden falling on those who earn above €100,000 per year. The Minister did not mention it would affect couples who earn over €200,000, which is the Labour Party position. The Minister's amendment relates to an individual tax unit, which includes a couple, unless I am mistaken in what was put down yesterday.
The Minister has much more to do in order to help relieve the burden on people who find themselves landed with this very unexpectedly and without warning. It is taking a very large chunk out of wage packets and the proposal of the Labour Party is to relieve it.
As we are debating a number of amendments, amendment No. 17 deals with bank bonuses. I welcome the amendment and I am very relieved that although we had much political discussion — with proposals from the Labour Party and others — on taxing bank bonuses, we were brushed off repeatedly and told it was not possible. It seems that the way the new universal social charge is structured, it is much easier to achieve a result through this mechanism. The Labour Party will support this proposal.
In the case of bank bonuses over €20,000, a universal social charge of 45% will be applied. Taking the basic rate of income tax at 41%, with PRSI at 4%, an additional 45% universal social charge will bring the total deduction to the 90% mark. That is how I understand it and the Minister might indicate if this is correct. I welcome the measure because the bonus culture is part of what destroyed our banks.
Like tax breaks, the bonus culture gave rise to a climate of irrational greed in the country, where structures like banks — some of them a hundred years old — were turned around by their own actions and risk-taking because senior executives could make millions in annual pay through bonuses by selling products and ignoring risk. Years ago when people were selling in ordinary commercial companies, it was always part of general controls for salesman bonuses to be clawed back if sales were inflated by selling to risky or bankrupt customers. In that case, the bonuses were not paid out. This is a standard feature of the operation of many private firms.
While I am pleased that this amendment has been introduced, I would still like to know if any Hercules Poirot or Ms Marple in the Department has found out what really happened to the Bank of Ireland bonuses. These have become one of the final mysteries of the Thirtieth Dáil given that this is probably the last full working day in respect of legislation.
I understand the measures will not apply to bonuses below €20,000. This is a welcome decision as many bank employees work in call centres and receive a low basic salary. As with salespeople, their basic pay can be as low as €10,000 or €15,000, with a bonus paid at the end of the year to bring their final salary up to the average industrial wage. I am pleased the Minister has given specific consideration to the position of low level bank employees who work for modest basic salaries, including those employed on a shift basis in call centres handling queries. A number of companies, including some of the banks, operate the European and US system of paying ordinary staff a bonus equivalent to an extra month's pay. This is sometimes referred to as the 13th month and the payment is generally modest for low and moderately paid staff.
While there is nothing wrong with operating a bonus system as an incentive to work harder, the extreme bonuses offered by banks to senior executives formed part of the risk culture that drove the banks and our economy into the ditch. Unfortunately, the Fianna Fáil Party, during its 13 year reign in government, was blind to this, although its early coalition partners, the Progressive Democrats, positively encouraged this type of greed. One of the party's political mantras was that greed is good, as Gordon Gekko used to say in the film "Wall Street".
The Labour Party supports amendment No. 17. Does the Minister agree that a review is needed of the economic and social impact of the introduction of the universal social charge on people on incomes below €26,000, including widows, widowers and medical card holders? It is essential that consideration be given to the severe difficulty such persons will face. Under the legislation, someone on a social welfare contributory pension will not be affected by the charge, whereas a person on a small State or private pension who does not qualify for a contributory or non-contributory old age pension will be subject to its full rigours. For this reason alone, it is necessary to carry out a careful examination of the impact of the universal social charge on vulnerable older people on low incomes before the charge proceeds.