Gabhaim buíochas leis an Leas-Cheann Comhairle. I welcome the opportunity to speak on the Finance (No. 2) Bill and discuss some of the tax changes provided for in budget 2024. It is now three weeks to the day since the budget was announced and, in that time, it has become even more obvious just how short of ambition this Government actually is. Budget 2024 is basically the same approach as in 2023 with an emphasis on short-term measures rather than lasting structural change. Like last year, one of the most disappointing aspects of the budget is its permanent distributional impact.
The permanent effects of this budget are skewed towards the better off. Once-off payments may create the impression that the most vulnerable are being taken care of but what happens when these payments dry up? Some one-off payments were undoubtedly required for the most vulnerable but there can be no justification for universal one-off payments because high earners, like those of us in this House, for example, and many others outside, do not need another energy credit. In fact, we never did and I drew attention to that last year.
The Government is portraying this budget as a progressive budget but that is not exactly true. It depends on how one interprets the data and it is important that we have a closer look at that. The day after the budget the Taoiseach stood where the Minister is now and referred to a chart on page 12 of the Department of Finance’s Budget Quality of Life Assessment. That chart portrays changes in weekly household disposable income by income decile and it goes from decile one up to decile ten. According to this chart, which the Taoiseach was boasting about, households in the bottom 10% of income will be on average 4.7% better off as a result of budget 2024, while households in the top 10% will be only 1.5% better off. The Taoiseach claimed that this is evidence of a progressive budget and it certainly looked good on the face of it. But one does not have to be a statistician to go and have a quick look on the Central Statistics Office, CSO’s, website to see what household incomes are in the top and bottom deciles and see what the benefits are to different groups in cash terms.
That is the critical thing. We deal in cash terms not in percentages. When we go to pay our bills, it is in cash terms, as it is when we buy something. When we are trying to make ends meet, it is in cash terms and not in percentage terms. Using the CSO’s numbers for weekly incomes last year, one can see that the real gap, the cash gap between the top and the bottom, will grow thanks to Budget 2024. When we look at the average figures, the average income of those in the lowest decile is €250 per week and the average of the highest decile is €4,700 per week.
If I were to be kind to the Taoiseach’s argument, by looking at the very top of decile one, and the very bottom of decile ten, it is still clear that the top decile benefited, in cash terms, by more than twice as much as the bottom decile. As I have said, looking at the averages within those deciles, it looks even less favourable to the Taoiseach’s argument because we know, of course, that 4.7% of €250 is an awful lot less than 1.5% of €4,700. I have to ask the Minister what his assessment of that table is and if he would accept that it somewhat misrepresents the actual impact of budget 2024. That is exactly what the numbers look like when one looks behind the spin.
Disturbingly also, I read that Social Justice Ireland calculates that the gap between the bottom and the middle will grow in 2024, despite the temporary once-off measures. It is a very sad state of affair,s and I wonder if the Minister would agree, when the poor in society are falling further behind, not just the richest, but dropping further back from the middle too. I would very much welcome his response to those points.
On the question of tax cuts, one of the most notable aspects of this budget is the further erosion of our tax base. Once again, the Government has designed a tax package which reduces the overall tax take and disproportionally benefits the better off as well. We may have a new Minister for Finance but we still have the same old approach to tax, which is the more one earns, the more one gets from this Government. Fine Gael’s fixation with tax cuts seems to be shared by all in government these days.
In our alternative budget we put forward a tax package that was fair and proportional. We accepted that some indexation of tax bands in line with wage inflation was warranted but we also acknowledged that gains for high-income earners must be clawed back. Again, just as in respect of the energy credits, I do not believe that there is any case whatsoever for Members of this House, and many people outside who earn an awful lot more than people in this House, to get any tax break from the budget. Given the scale of the problems which exist in this country with the underfunding of disability and mental health services, the underfunding of social care and of education where it is not remotely close to being genuinely free, how can the Government defend a situation where there are cash payments and tax breaks going to us here in this House and to many people outside?
That is why the Social Democrats proposed a third rate of tax at 43% on incomes above €100,000. Not only would this third rate of tax stop the benefit of indexation going to top earners, but it would also make the income tax system more progressive. It is regrettable that the Minister did that and I would like to hear him defending the situation where people earning very high salaries, in excess of €100,000 - why he felt there was any justification for people in those income brackets - got energy credits, cash payments and tax breaks in the budget.
I would be very interested to hear the Minister's justification for that.
The Social Democrats also proposed two income tax credits totalling €450 per year. While I welcome the increase of €100 provided for in this Bill, it is really disappointing that the figure is so low. Our alternative budget also proposed that the two main income tax credits would be made refundable to help tackle the problem of those on very low incomes who are often termed the working poor. Such a move would allow low-income workers who do not earn enough to use their full credits to have the unused portion refunded.
The other disappointing aspect of the Government’s tax package is the realisation of its obsession with cutting USC. In advance of the budget, the Social Democrats were criticised for saying we would not cut USC. After all the talk, to what did this 0.5% USC cut really amount? For households earning €25,000, this cut gave them a sum total of €10 extra per year. Again, let us look at the regressive nature of what the Minister has done. A household on an income of €70,000 will benefit to the tune of €235, which is 23 times higher than the amount by which a low-income household will benefit. What was all the fuss about, especially from the Fine Gael Ministers of State? Does the Minister really think this is a progressive move? The Government needs to accept that Ireland is already a low-tax economy. That may not suit the narrative or ideology of some of the Minister's colleagues, but the reality is that when temporary corporation tax receipts are removed from the structural balance, then, regardless of how it is measured, Ireland has among the lowest revenue takes across of all the taxation systems in western Europe. This is part of the reason that the scale and quality of our public services falls well short of what is considered the norm among more advanced economies in western Europe. On budget day, I quoted Danny McCoy from IBEC saying we did not need tax cuts. He said what this country needed was substantial numbers of additional public services in order to provide the kind of public services that a developed, modern, wealthy country should be able to expect. We are so out of line with the rest of Europe in the standard of our public services. At this stage, even IBEC is telling the Government what it needs to do. Unfortunately, it seems to have ignored that.
An ageing population, commitments to future spending increases and various infrastructure deficits mean there is a need for significant future revenue increases. The Minister has been warned of that fact by a number of agencies, yet he seems to have ignored it again. This was being pointed out long before the Commission on Taxation and Welfare published its report, a key message of which was that Ireland faces major fiscal sustainability challenges, and that over time, the overall level of taxation as a share of national income will have to increase. Budget 2024 is just further proof that the Government still has not acknowledged that an increase in Ireland’s overall level of taxation will undoubtedly be needed in the years to come. It is a question of how rather than if this will happen. This budget ignores that reality. Instead of bolstering our tax base, the Government eroded it. Even just to maintain the current levels of public services, more revenue would need to be collected, not to mention badly needed improvements in our services.
I will make a few points on the tax credits for renters and landlords. Regarding housing, this budget just represents a continuation of the Government’s failed approach to housing. The only new idea is a tax relief for landlords. Even for this Government, this is a clear display of its strange priorities. There is no basis for this tax relief. The claim that landlords are fleeing the market has been debunked by CSO data. According to the census, between 2016 and 2022, the number of privately rented homes grew by 7%. The narrative spun by lobbyists and parroted by the Government simply does not match the data, and yet an estimated €160 million will be spent on this measure next year. This money should have gone to the people who are paying record rents, not to the landlords charging record rents. The only welcome aspect of this relief is that it will be dependent on the landlord having tax clearance and complying with local property tax and Residential Tenancies Board registration requirements, although this is still far from a justification for this unnecessary tax break. Should there not have been this requirement for landlords to comply with the law anyway? While the €250 increase in the renter’s tax credit is welcome, it falls far short of what is needed in real terms. Since the Government took office, rents have reached record highs. The average rent nationally is almost €1,800 a month, which is 10.7% higher than last year. That is more than €21,500 a year. In Dublin, the average rent is over €2,300 a month, which is a staggering €27,600 annually. Yet, somehow the Government looks at these skyrocketing rents and concludes it is the landlords who need the biggest dig-out. The renter’s tax credit should have also been accompanied by measures which ensured it was not gobbled up by rent increases and inflation, such as stronger rent regulation and a three-year rent freeze.
Regarding mortgage interest relief, section 13 provides for mortgage interest relief, a Government scheme that appears to be full of holes and that has the potential to be hugely divisive for mortgage holders. There does not appear to have been any attempt to target the measure to those in mortgage distress. Instead, it is estimated that the scheme will be available to 165,000 mortgage holders. Many of these customers availed of very low rates in the previous decade and some simply do not require assistance. Other notable exclusions include those who fixed their rates before July 2022; those who will be coming off fixed rates in the coming months; and first-time buyers who do not qualify for any Government supports. In addition, where is the support for the estimated 85,000 mortgage holders who are currently customers of vulture funds? We know European Central Bank, ECB, rate hikes are being added to those customers' mortgages, which already had artificially high rates of around 4% and 4.5%. This means those mortgage holders in that unfortunate position, are forced to pay rates of up to 8% or 9% and that is just entirely unsustainable. These customers are being fleeced by vulture funds while the Government and the regulator essentially look on. Relief is to be available for outstanding mortgages of up to €500,000. If a customers has a remaining mortgage of up €500,000, he or she can avail of this scheme. It appear there are no restrictions on people claiming this relief, neither in terms of their incomes or indeed the original price of the home they have bought. It just does not make any sense and in time will prove to be very divisive.
The budget sees a continuation of the Government's over-reliance on subsidies, with an extension of the help to buy scheme until December 2025. Analysis has shown that this scheme disproportionately supports higher income earners to purchase high-cost homes.
In our fully costed budget we proposed that the Government needs to abolish the €400 million in subsidies for developers. Instead, this money should have been allocated to building more affordable homes. Budget 2024 continues to throw millions of euro at developers despite all the evidence that this approach has been disastrous. For example, analysis by Orla Hegarty shows that the introduction of the shared equity scheme has driven up house prices. Within 12 months of its introduction, the scheme pushed up the price of newly built houses in west Dublin by €92,000 per year. BNP Paribas has pointed out that new-build house prices in Ireland are increasing at 18 times the rate of second-hand homes. Rather than taking steps to drive down the unsustainable cost of housing, the Government continues to provide subsidies for incredibly high house prices instead of tackling the root cause. In terms of vacancy, there is a pathetic increase in the vacant homes tax, which is unlikely to unlock the potential of the large number of vacant homes.
I simply cannot fathom why the climate and nature fund will not be in place until 2026. We are in the middle of a climate crisis. We should be investing now and not waiting for three years. Ireland could have tapped into the great potential for wind energy. This could be done now by investing in an offshore wind energy fund. Rather than doing this we see the can being kicked down the road yet again.
I acknowledge there are some small measures in the budget that are to be welcomed but fundamentally the big measures, especially on taxation, will result in a less fair country and this is the wrong direction to go.
