Seanad Éireann díospóireacht -
Wednesday, 2 Dec 1998

Vol. 157 No. 10

Budget Statement: Motion.

Mr. Ross

I move:

That Seanad Éireann takes note of the principal features of the Budget and the proposals of the Minister for Finance in his Budget statement.

I welcome the Minister of State and thank him for coming to the House. I know he has just come from the other House where a critical debate is taking place.

My immediate reaction to the budget is mixed — it is very rarely that I have mixed reactions to anything. However in this case I have serious reservations on some scores and welcome it on others. My first question is who wrote the budget? Last year it was quite obvious that the budget was written by the Government, politicians and those who had made commitments in the Programme for Government to various constituencies about tax rates and spending. They were beginning to fulfil a pledge they had made. This year that does not seem so apparent. It seems the content of the budget is a concession to the social partners and not to the people who elected the Government. I was somewhat surprised to see the fleeting reaction just now on television of IBEC and ICTU, which appear to welcome the budget. When both IBEC and ICTU welcome a budget one should be somewhat suspicious.

The Government has not reduced tax rates as it so loudly promised in the Programme for Government and so loudly promised and fulfilled last year. There has been a complete change in emphasis from reducing tax rates to a radical change in the method of estimating people's tax liability and giving people tax allowances. It is very definitely true that in this case the tax focus of the budget is on the lower paid. I am not sure whether this is a good or bad thing, but it is not the purpose or promise made by the Government. What has happened is that the Minister has conceded to the trade unions mostly, which have pushed very hard for concessions for the medium and lower paid at the expense of everybody else.

Mr. O'Toole

The rich in other words.

Mr. Ross

As a result the top rate of tax was not reduced which is a concession to the unions, IBEC and everybody else. For the moment we will leave consideration of whether this is a good or bad thing.

I welcome some of the contents of the budget. The changeover to tax credits is a serious radical rethought. It is a process of education which will assist people in understanding how they are being taxed when they get used of it and which will be far more equitable in the long term. This is fine and any move which is so radical should be welcomed. This is the time when we can afford to do this and when people will accept it as they are getting great concessions in the budget.

There is no doubt that the £581 million which the Minister is giving away is an enormous sum of money which would have been absolutely unheard of some time ago. The way the Minister is giving it away is something we were not promised and I suspect it is dictated by other than political considerations, namely, by a consensus which exists among the social partners. I asked who wrote the budget. I think the Minister said he would refer energy or green taxes, one of the more radical proposals, to the social partners to allow a consensus emerge on how to implement them. I do not see why the so-called social partners should tell the Minister the type of tax he should introduce: this is a matter for the people who elect him, his parliamentary party and the Government.

I am sick and tired of hearing Ministers, Ministers of State and everybody else funking issues by saying they will refer matters to the social partners and come up with a result. Sooner or later the social partners will come up with some sort of result, a consensus which may be very good for them but may not be good for many other people or the country. While some of the practical tactics and strategy are good, the philosophy behind this is doubtful. I would have thought this was the time for the Minister to say he was going to help those who are really out of work, who are genuinely poor or disabled and who have real problems of poverty, and to take money from those who can afford it, if it had to be taken — and that includes those in the upper bracket.

What we have not got is a radical approach to the really poor and underprivileged members of our society. We have some piecemeal giving of certain amounts of money where the greatest pressure has been imposed on the Minister. We do not have initiatives to help the long-term unemployed, the sick or the disabled. There are small amounts of money being distributed in this area, such as £1 million for a homeless shelter in Dublin.

Thankfully we have not had the kind of political gestures with football grounds that we had last year. However, this budget would have been an opportunity to attack queues in the health service or the serious problems among those who are rightly identified as marginalised while others move ahead in a prosperous economy. That has not happened. Those who are already in positions of some strength are being strengthened further, though I say this with some qualifications. A large number of vested interests, because they are so well represented on IBEC, ICTU, the IFA and other bodies, will certainly welcome the budget as there is something in it for everybody who is benefiting from the economy. The problem is that it is very easy to introduce a budget like this, which gives a little bit all round, when one is very prosperous, but there is no foresight for the day when we cannot afford to pay these sorts of sums any longer.

I welcome the Minister's agreement to put over £900 million towards the national debt. That is a tremendously commendable gesture, as he could have done other things with that money. He could have spent it recklessly on infrastructure or other pet projects, but he has not. However, it would have been very courageous of the Minister to say that we now have people who are privileged, secure and well paid at the upper level of society and that there is now an opportunity to tackle the problem there. I refer unapologetically to public service pay.

This would have been the day to introduce a public service pay freeze and to say "no more" to these people. They have secure pensions and are secure for many years to come. I refer to the teachers and all those who surround them. Those are the people who have benefited more than anyone in a permanent way from the Celtic tiger. This was the day to say we are looking after those who do not have that security and that those who have it are going to pay the price. The structural problems in public service pay is a problem we have, as is the underlying problem of increased pay. The Minister said virtually nothing about that. He referred to it at the beginning of his speech when he said, in a very general way, that he was aware of the problems of pay and that those could not go on. However, he went on to keep just within his target of 4 per cent current expenditure, which to me is very high anyway.

This budget has many aspects we can all welcome; its radical approach to taxation is brave. However, it is a missed opportunity to tackle public expenditure. There is no particular effort to do that. The structural problems we have in the public service will come back to haunt us. It is very easy to spend money these days and to keep vested interests happy, as this budget has done. However, people will find that this is the first budget written by the social partners not the Department of Finance or the Minister in question.

Mr. O'Toole

I second the motion. When Senator Ross and I propose and second a motion I often think we should write it in a particular way. It should read "Seanad Éireann welcomes/condemns the following measure". When Senator Ross proposes the motion he can welcome it, and I will condemn it when I second it.

Mrs. A. Doyle

Senator O'Toole disposes.

Mr. Finneran

The unity of the Independents.

Mr. O'Toole

We could then have two amendments: one to eliminate "condemn" and the other to eliminate "welcome". We could vote on them as we go along. I felt I had some problems with the budget until I heard Senator Ross speaking. Now it is getting better and better.

I will begin with a healthily negative point. Spending £1 billion on the national debt was put very well by a person who discussed this with me recently. What would you do if you had £2,000 to pay off your mortgage and you also wanted to have a hip operation? Would you pay off the mortgage and hobble around or would you have the hip operation? Most people would choose the latter. We have missed an opportunity to reinvest that £1 billion. I have felt for a long time that the additional money should be used for infrastructure.

I am committed to the idea put forward by IBEC, who are not brethren of mine in any sense——

Mr. Ross

Rubbish. They are all in it together.

Mr. O'Toole

Can I be protected?

An Cathaoirleach

Senator O'Toole without interruption.

Mr. Ross

This is rubbish, they are co-conspirators.

Mr. O'Toole

The £1 billion would be better spent on the roads to Dingle and Killybegs so that we can get our fish to the continent quickly. It should be spent on the rail line to Tralee, Westport, Sligo and elsewhere as well as the roads in many parts of the country. A dip will come in the economy and we will need our infrastructure to claw our way back out of it. That is where I wanted the money spent. The Minister found it useful to pay off debts, and I suppose that is something we all face at some stage.

However, ten years ago — I speak directly to Senator Ross — when we started out on this process of social partnership which is so despised by the Senator, our debt-GNP ratio was 127 per cent, if not more. It is now in the low fifties. We have the lowest debt-GNP ration of any European state, and we could have kept our money and invested it more wisely in primary education, health or infrastructure instead of paying off £1 billion of the £26 billion or £27 billion we owe to people we do not even know.

One thing the Minister has done in this budget is to redress some of the imbalance in last year's budget. That imbalance was going very much towards the rich. I have said in the last two months that it would be good if, after the budget, people earning £100 a week or less did not have to pay tax or, at least, did not have to pay tax on the first £100 of their income. That has been achieved, and it was the view of IBEC and the ICTU. It was an important thing to deliver.

When Senator Ross asks at whose expense these changes are being made it is, unfortunately, at the expense of the rich, which is sad, and all of us will grieve about that. The social partners are the employers' confederation and industry, the trade unions and their members, farming groups and the voluntary and community pillar. Who is not represented in that group? Some 95 to 97 per cent of the population is represented.

I welcome the improvements for the elderly. Tax credits are an important move forward. The Minister has increased allowances and standard rated them, and they will be called tax credits in next year's budget. He has done so in a way which effectively has not cost money. Whereas those of us who are on the higher rate of taxation may lose out on standard rating, the increase in the PAYE allowance from £800 to £1,000 will be available at the standard rate as opposed to the higher rate which is the case currently. Those of us who pay the higher rate lose out but are compensated by an increase of £4,000 in the lower tax band. People who pay the higher tax rate are no worse off and those on the lower rate are significantly better off.

However, PAYE was introduced to compensate those who pay as they earn as opposed to those who pay at the end of the year. The increase in the allowance is not welcome because it has eroded that advantage. The widening of the lower tax band in order to compensate for the reduction in the effective amount of the PAYE allowance will benefit the self-employed. Therefore, the value of the so-called positive gesture regarding PAYE allowance has been eliminated. People do not lose out in terms of the allowance but in terms of the balance of money collected and what they pay.

I find the proposals on corporation tax hard to accept. The happenings in the banks have been debated in this House, the Lower House and throughout the news media. I have not had time to calculate the figures. What is the value of the gift given to the banks in these proposals? It must be as much as we might hope to take back from them if the current investigations relating to them bear fruit. It has been neutralised by the budget and the banks have been given back anything that will be taken from them.

I also welcome the Minister's commitment to social partnership in issues such as child care. He is in discussions with people involved on how it should best be dealt with. I welcome the reduction in off course betting from 10 to 5 per cent. If that had not been done, it could have wrecked the bookmaking industry because people are able to place bets outside the State. I regret that the levels of BES for individual investors were not increased as sought by many interest groups.

This is a budget that more or less balances itself. It has shown the Government's commitment to social partnership in a year which is crucially important. I regret the marginal recognition of the role of the PAYE sector, which is being eroded, but I welcome the move towards tax credits. It is wise of the Government to try not to do it too quickly but we will not be happy about what has been done for the banks and self-employed, who have gotten a better deal than PAYE workers. Nonetheless, the lower paid and the elderly have done well. These are measures of social inclusion which it would be wrong not to welcome.

Mr. Finneran

I welcome the opportunity to contribute to this debate on budget day. We are facing the new millennium as a proud nation. Since independence successive Governments have nurtured the economy with care and dedication. All of us can recall the past dark days of the economy when Fianna Fáil-led Governments had to take drastic measures to bring it back on track. Unpopular decisions had to be taken at that time and this did not win votes, but those efforts were carried on by successive Governments and have reshaped the entire economic position of the State.

The Minister for Finance rewarded all of us today for the efforts made in the past. We are making rapid progress in reducing the national debt and the unemployment statistics are evidence of this progress. We have seen the most drastic reduction in unemployment in more than 20 years. Interest in Ireland by foreign companies as a place for investment has increased and the economy is being set for the benefit of future generations. It is our responsibility to hand over to our successors a country that is not alone economically sound, but also growing. Compared to a country similar in size and population in the western world, a standard of living has been achieved which is the envy of other nations. We can take our place among the nations of the world. Ireland is the envy of Europe in the way it has handled its economy over the past decade. We can be proud of our record on all matters of social and economic policy. A total of 98,000 jobs have been created this year and we must remember the thousands of young people who returned from abroad. They have taken up employment and enhanced the economy. Our commitment to education has been to the fore. Young people have the chance to receive third level education and people enjoy a health service superior to that experienced by those in other countries of similar size and population.

I am delighted the Minister has corrected the imbalance which exists between the PAYE sector and the self-employed. The budget aims to focus on people with low incomes and to eliminate poverty traps. It will fundamentally reform the tax system so that people most in need can benefit. People will not pay tax on the first £100 they earn; that is a milestone in tax reform. The budget will have a bigger impact on everybody's weekly wage packet than any previous one.

This Fianna Fáil led Government has more than fulfilled its commitments under Partnership 2000. Pension payments will increase by £6 per week and social welfare personal rates, child benefit and family income support thresholds have been increased. There is extra cash for improved mental handicap, physical disability, child care and convalescent care for the elderly. More than 80,000 lower paid workers have been taken out of the tax net and £50 million has been set aside for water and sewerage schemes over three years. There is a £15 million package for farmers and extra unemployment assistance for smallholders. The Minister is to be complimented on £581 million in income tax relief and levies.

A sum of £287 million has been allocated for social inclusion measures. The caring approach of the Minister to the elderly and those in need is very much apparent in the budget. However, discipline must be maintained in the management of the economy and the public finances so that the success of recent years is continued. Unrealistic demands for wage increases or improvement in the public services must be avoided, otherwise, we will put at risk the gains of recent years and undermine successful participation in EMU, which is one of the most significant developments since the foundation of the State. We face into EMU from a position of economic strength, with strong growth, rapid employment creation, low inflation, a balanced budget and a rapidly declining debt ratio.

The launch of the euro presents us with a historic opportunity to build on the economic and social progress we have achieved over recent years, by promoting accelerated economic convergence and integration of the Irish economy with other EU partners. The establishment of the euro will yield significant benefits for the Irish economy as part of the wider European economy. A permanently fixed exchange rate will consolidate gains already achieved through the Single Market. It will enhance overall economic efficiency within the euro area, boosting the sustainable rate of output and employment growth over the medium term.

The broad national consensus on economic and social policy has underlined our competitiveness. In turn, sound fiscal policies have allowed the Government to reduce taxation and increase spending on key social programmes. It is essential that budgetary policy remains on track, the consensus remains strong and significant investment is made to support Ireland's future development. I consider this budget a caring one.

Mrs. A. Doyle

As an Opposition spokesperson on Finance, discussing the budget or the Finance Bill is about as useful as being a eunuch in a harem, with respect to this hallowed Chamber. We cannot amend it, effect change or defeat any of the proposals.

Mr. Finneran

Well then welcome it.

Mrs. A. Doyle

When that is required, I will. It is an area which frustrates me more than many in this Chamber. Notwithstanding that, much can be said on this and I have only eight minutes to collect my thoughts on a budget delivered less than an hour ago so that somewhat reduces our options.

The Minster was in a unique position for two reasons. First, he had a surplus of £1.37 billion to play with. Never before has a Minister for Finance had that luxury. Second, there are only four weeks to EMU, when we cede control of our monetary policy to the European Central Bank. Fiscal or budgetary policy will remain our only policy instrument or weapon. Many questions need to be discussed and debated on this point. For example, if there is a currency crisis in the euro zone, who will be responsible for considering devaluation or revaluation? Individual countries will have ceded control of that to the European Central Bank, but the European Central Bank would not be responsible in a currency crisis. The ECOFIN Ministers would be, not all of them but only those who are from the euro zone within the EU. This area needs teasing out and talking about. I presume we will have a further opportunity when discussing the Finance Bill.

Last week's Book of Estimates and today's budget could end up as an inflationary package. We need more reassurance that the Minister has his finger on this concern. Five hundred and eighty-one million pounds were given away in tax today and there was an £1,000 million increase in spending — in round figures — in the Book of Estimates. That is approximately 8 per cent year on year. Taken with the decrease in interest rates, this could add up to a very inflationary package.

Last week's Book of Estimates showed no evidence of a need to prioritise public spending on specific funding programmes. We should cut back on some and increase others where the need is evident. There was no evidence from the Minister that he understood that.

Fine Gael's policy has been to urge the Minister to counter inflation in many ways, one of which he conceded today. I welcome the raising of the ceiling on contributions to private pension funds which will help soak up consumer demand for spending. It is another option, rather than buying property and general investment in that area. We welcome the raising of the ceiling on contributions to private pension funds, but we urge the Minster, if there is a privatisation programme in 1999, that the shares be offered to the public and not just institutions. That would further help to soak up consumer demand and reduce the risk of inflation. I urge the Minister to consider this seriously.

There is still a major gap between welfare payment and wages across sectors and we do not have affordable child care. There are references to discussions between the various interested groups and representative bodies between now and the Finance Bill and the Social Welfare Bill, but we need to know how child care can be made affordable. That would release many women back into the labour force, particularly in areas where there is currently a shortage. There are women willing and able with skills and experience, but the lack of affordable child care means they cannot take that option. We wait with interest for the Minister to deliver on this area, sooner rather than later.

I welcome the income tax package. The social welfare changes are very disappointing. There were three major changes in the area of income tax. The whole allowance area was standard rated and I welcome the increase in the bands and personal allowances. However it is game ball and what is given with one hand is taken back with the other. Those involved will not be better off; I do not think they will be worse off. I hope I am right in assuming that at this stage.

Levies have been fiddled around with; there is an 0.25 per cent reduction in the total, and the full 2 per cent now goes on the health levy. The move towards tax credits is extremely welcome, as is the fact that no one earning under £100 a week will pay any tax. Our corporation tax rate of 12.5 per cent is under pressure from ECOFIN. I hope the Minister is strong enough to hold out and that commitments given will be honoured. Lafontaine is applying a lot of pressure in this area and it is a cornerstone of our economic policy.

The £6 for an old age pensioner is paltry with a £1.3 billion surplus. There will be great criticism in this area, so much for social inclusion and reducing poverty in our community. The Minister had an opportunity like no other Minister to do something serious about that. Increases of £3 and £4 in child benefit are paltry. There was an increase of £2 for an adult dependant allowance for those on social welfare, and we talk of social inclusion. Let us at least be honest about what we are talking about. As my colleague, Deputy Noonan stated, an old person receives the £6 increase, but £2.50 of that goes on inflation and if he or she is ill and does not have a medical card, another £2.50 goes on drugs as the drug refund scheme has been increased by £12 a month. Effectively £5 of the £6 has been taken from many old age pensioners. They are left with a real net increase on the old-age pension of £1 over and above inflation and health care costs. That is not very generous given the huge budget and Exchequer surplus this Minister had.

Mr. Finneran

If they have medical cards——

Mrs. A. Doyle

I said those who did not have medical cards.

What about ODA and the war on poverty abroad? They have ignored the war on poverty at home. The Minister of State at the Department of Foreign Affairs, Deputy O'Donnell, threatened to resign and then did not. A sum of £300,000 was given to Honduras in the midst of the crisis there in recent weeks and, insult of all insults, we are told that there is £1.3 million left over in the ODA Vote at the end of this year. The Minster effectively misled the House in the shenanigans last week.

Mr. Ryan

Hear, hear.

Mrs. A. Doyle

When we read and had time to absorb what the increases were, we realised this House was misled last week. £1.3 million was left over in the ODA Vote. Who are they codding? We need to be realistic about this.

Mr. Finneran

The Minster did not mislead the House.

Mrs. A. Doyle

There is nothing for the farmers in this budget from the Minister who accused them of hyping up their problem. I tell the Minister for Finance, Deputy McCreevy, to get real and understand that there are poor farmers as well as wealthy farmers but there are far more poor farmers and it is they we are concerned about. They are promised a revamped farmers' dole sometime next April. That is paltry given the tragedy in the farming community among the vast majority of farmers, particularly dry stock farmers, and the year they have had.

There is only £8 million for waiting lists, yet the drug refund scheme will increase the Minister's health budget by £20 million. I broadly welcome the income tax changes, but the health and social welfare areas are a major disappointment from a Minister who had more than any other Minister to address the war on poverty and the lack of social inclusion in our community.

Minister of State at the Department of Finance (Mr. Cullen)

I am delighted to have this opportunity to address the Seanad on the 1999 budget, which the Minister for Finance, Deputy McCreevy, has just finished delivering in Dáil Éireann. While Senators are now aware of the main contents of the Financial Statement delivered by the Minister, I am certain they will welcome the opportunity to comment on it. Budgets do not exist in a vacuum — they are influenced both by the condition of the Irish economy and by what is going on in the European and world economy. I, therefore, intend to begin my statement by outlining briefly what sort of year the Irish economy has had in 1998 and what is expected to happen in 1999.

This is the fifth year in succession the Irish economy has experienced strong growth in both GNP and GDP. In 1998 GDP is expected to increase by 9.5 per cent and GNP to increase by nearly 8.5 per cent. Employment growth is continuing strongly in 1998 and the general Government budget balance was in surplus in 1998, close to 2 per cent of GDP. While the reasons for the strong growth in the Irish economy have been widely debated, there is a general consensus that the following have contributed to this performance: the continued prudent management of the economy which has led to lower interest rates and increased investor and consumer confidence; the consensus approach in successive national agreements with the social partners; the reduction in the debt burden; investment in education and training; strong foreign direct investment; the contribution of EU Structural and Cohesion Funds and reform of tax regimes for individuals and business.

However, I sound a note of caution. The performance of our economy has given rise to heightened expectations of what the Government can achieve. This is reflected in the level of demands for additional expenditure measures and also in the demands for tax cuts and extra tax reliefs. In addition, the performance of the Irish economy is generating certain pressures which, if not dealt with properly, could undermine the recent excellent performance of the economy. These pressures include public sector pay, the tightness of the labour market, increasing house prices, less transfers from the EU in future, the need for further infrastructural investment, slower labour force growth and increased competition both in general and for foreign direct investment. While I am confident we can overcome any problems that emerge in the Irish economy, this can only be achieved if we all pull together rather than in separate directions. We need to ensure we have sufficient resources to meet any challenges in the future, whatever their cause. The conclusions to be drawn from this are clear — we need to adopt more ambitious budgetary targets than have been achieved over the last decade so that we can address our longer term needs from a position of financial strength.

On the basis of taxation and expenditure measures announced by the Minister for Finance, the targets for the 1999 budget are a current budget surplus in excess of almost £2.3 billion; a capital deficit of over £1.4 billion; an Exchequer surplus of £925 million; and a general Government surplus of 1.7 per cent of GDP. Control of public spending and public sector pay will be central to the achievement of the budgetary targets. The Government is committed to ensuring that, over the lifetime of the Government, the growth in net current expenditure will be limited to an annual average increase of 4 per cent.

For the remainder of my statement, I intend to concentrate on the main aims and achievements of the budget. The social inclusion measures are designed to build on what has been committed in recent years. Partnership 2000 committed the Government to spending £525 million over three years for current spending on social inclusion. The actual amount that has been committed over three years will be close to £1 billion. This shows yet again this Government's commitment to ensuring that all parts of society can benefit from the continued strong performance of the Irish economy.

The major social inclusion measures include the following. In general, personal rates of social welfare payments will be increased by £3 per week. The dependants' allowance will increase by £2 per week. Additional increases are being provided for personal rates for those in receipt of short-term unemployment assistance and supplementary welfare allowances, thereby bringing social welfare rates for all categories up to at least the minimum level recommended by the Commission on Social Welfare, which I think will be warmly welcomed by everyone in both Houses.

This year, the personal rate of pensions and related payments is being increased by £6 per week. This follows the significant increases announced last year. We are also increasing the rate of the adult dependants' payment by a further £3 per week. These increases again go a long way towards meeting our promises to the older members of our community. Child benefit will increase by £3 per month for the first and second child, and by £4 per month for the third and each subsequent child.

The carers' scheme is being considerably improved. An extra £200 is being paid each year to recipients as a contribution towards respite care. The scheme is being widened to cover the carers of children in receipt of the domiciliary care allowance. The residency conditions will be relaxed, as will the requirement that the carer must provide full-time care and attention. The family income supplement income thresholds will be increased by £8 per week. A new scheme of unemployment assistance will be introduced for low income farmers. It will have child related income disregards and will assess other income at 80 per cent.

The Government remains committed to reducing the burden of personal taxation. This is being done to reward effort and improve the incentives to work. Including the personal tax package of £581 million announced today, so warmly welcomed by Senator Ross, the total amount provided for reducing personal taxation in the last three years is nearly £1,500 million, a significant improvement on the Partnership 2000 commitment of £900 million.

The major taxation items in the budget included the following. After careful consideration of the matter, the Government has decided to move towards a tax credit system. This year this will involve the standard rating of the basic single and married personal allowances and the PAYE allowance. To ensure there are no losers from the move to standard rating, the standard rate income tax bands are being increased from £10,000 to £14,000 for a single person, and from £20,000 to £28,000 for a married couple. The new standard rated personal allowance for the single person will be increased by £1,050, from £3,150 to £4,200 per annum, and by £2,100, from £6,300 to £8,400 per annum, for married couples. The standard rated PAYE allowance will be increased from £800 to £1,000.

The effect of these changes will be, among other things, to ensure that single people on PAYE will not pay income tax on any earnings under £100 per week. Again, I think all Members of both Houses will welcome this achievement. It means almost 80,000 people will be removed from the tax net and the number of people on the marginal rate tax system facing a marginal rate of tax of 40 per cent will fall from just over 82,000 to just under 24,000, a considerable reduction.

As well as increasing personal rates of the old age pension by a further significant amount, the tax exemption limits for those people aged 65 years of age and over are being unified and substantially increased to £6,500 per annum for single people and to £13,000 per annum for married couples. This will mean married couples aged 65 or over will be exempt from income tax on income up to £250 per week, a tremendous step forward.

The blind persons' allowance is being increased and will continue to be available for a qualifying person at the marginal rate of taxation. Where a taxpayer or his or her spouse is blind, the allowance is being increased from £1,000 to £1,500 per annum. For married couples where both spouses are blind, the allowance is being increased from £2,000 to £3,000 per annum.

The Government is conscious of the growing wish for a recognition of child care needs in the tax system. The question of child care tax relief raises important and complex issues. The Government has discussed this area in some detail and proposes to examine the matter further. In doing so it will take into consideration the recommendations of the Partnership 2000 working group on child care, which is expected to finalise its report shortly. We anxiously await the report. As a means of facilitating and encouraging the supply of child care facilities, the Government has decided that the provision of certain créche facilities by employers will not be subject to a charge of income tax in the hands of employees as a benefit-in-kind. Furthermore, the Finance Bill will provide for capital allowances to allow for the write off of capital expenditure incurred in connection with buildings or premises constructed or used by employers to provide child care facilities for their staff. This capital allowances regime will also extend to providers of child care services generally in the community.

The Government has also decided that the position of those families providing care in the home for a member of the family should be addressed by extending the existing employment of a carer tax allowance. This tax relief, which applies at the taxpayer's marginal rate for expenses up to £8,500 per annum, will be claimable from April next by other family members who employ a carer to look after a totally incapacitated family member. This extension will widen significantly the scope of the relief.

The existing general 25 per cent stock relief for farmers and the special incentive stock relief of 100 per cent for certain young trained farmers are being extended for a further two years to 5 April 2001. I met representatives of Macra na Feirme and I am sure this move will be warmly welcomed because they were very concerned about this issue for young farmers.

The Government is committed to reducing the corporation tax rate to 12.5 per cent on trading income and to 25 per cent on non-trading income from 1 January 2003. This year the standard rate of corporation tax will be reduced from 32 per cent to 28 per cent. The lower 25 per cent rate will remain unchanged but will apply to the first £100,000 of profits rather than the current £50,000.

The Government has also announced that the standard rate of corporation tax will be reduced by 4 per cent in each of the years 2000, 2001, 2002 and by 3.5 per cent in 2003 to give a standard rate of 12.5 per cent. I was surprised at Senator Ross's questioning in this regard because the move towards a single rate of 12.5 per cent had been flagged for some time. I am sure the Senator will agree that this is essential to underpin the economy.

Mrs. A. Doyle

Will Mr. Lafontaine allow us to have our way?

Mr. Cullen

It has already been agreed with the Commission. It is not up for further discussion. I attended an ECOFIN meeting during the week and it was not raised by Mr. Oscar Lafontaine or Mr. Strass-Kahn.

Capital allowances will be provided for the construction of approved "park and ride" facilities in certain urban areas. These will be parking facilities for commuters located at public transport connections to encourage drivers to use public transport closer to the city centre.

Employees whose employers currently pay for their travel passes are liable to income tax on the value of that benefit. However, in the interests of encouraging people to use public transport rather than cars, it has been decided to exempt from taxation the benefit in kind on monthly or annual travel passes received by employees from their employers.

The business expansion scheme is being extended for a further two years to 5 April 2001. The limit of £250,000 on the aggregate amount that a company can raise is being retained. This extension also applies to the seed capital scheme.

To assist with the provision of student accommodation, it has been decided to continue, for a limited period, section 23 relief for rented accommodation to cover the provision of residences for third level students. The accommodation must be located on or near campus facilities.

Vehicle registration tax is being amended in the case of category A cars. The number of bands for category A cars is being increased from the current two bands to three bands and some of the VTR rates on these bands are being increased. There is no increase in the rate of VTR for cars with an engine capacity up to 1400ccs. The rates for cars between 1401 and 2000ccs are being increased by 2.5 per cent to 25 per cent. A new third category for cars with an engine capacity of 2001ccs plus will now have a rate of 30 per cent.

I am sure Senators will agree that the budget introduced by the Minister for Finance, Deputy McCreevy, is innovative. Senators will also agree that the effect of this budget has been to focus the improvements on the disadvantaged and the low paid. These changes, in particular the tax changes, have improved the incentives to work. I am satisfied that the budget is prudent and will help us to meet any future challenges. I commend the budget to the House.

Mr. Quinn

I welcome the debate and the Minister. I have decided to focus on three areas in the budget. Having watched an ice skating competition on television some time ago, I have decided to give marks out of ten to the measures in each area.

I was asked to contribute to a radio programme earlier this week and to outline what I thought the Minister should do in the budget. I said I wanted his decisions to help the lower paid. I also wanted him to focus on educational disadvantage and I wanted to know how he would make the company taxation move to 12.5 per cent work. I feel I am being churlish in picking three areas because the budget contains many good provisions. The Minister has given away many goodies and the budget contains much that is good. Few people would quarrel with any of the spending plans or reliefs proposed by him.

However, the issue is whether the budget meets the three priorities which should be addressed if one takes the longer rather than the shorter term view. The first aspect relates to the lower paid. I have difficulty explaining to people that certain jobs do not exist if they cost too much. I feel I am defending low pay, but I drove past three self-service garages recently. Customers will not pay extra to have their cars filled with petrol by somebody else. The garages decide that the cost of employing somebody to fill tanks with petrol is too much and they switch to self-service. Therefore, those jobs do not exist.

Minimum pay is fine but it does not coax people into work. An increased wage does not apply because the jobs do not exist. Therefore, we must ensure that the unemployed are coaxed into work by creating an attractive gap between what they would receive in social welfare payments and their wages when they are employed. The budget does not go far enough in terms of opening up a real gap between what a person receives in social welfare and from a basic low paid job. I have always had difficulty trying to convince people that many jobs only exist at certain rates of pay. Over a certain point, employers cannot afford to employ people.

We must grasp this notion because jobs are required for the hard core of the unemployed who will never acquire highly valued skills. These people will be always lower paid because they do not have such skills. The first £6,000 should be free of tax and PRSI and the next £4,000 should be taxed at 10 per cent so that a single person would not reach the basic rate until he or she earned over £10,000 or a married couple over £20,000. The budget proposes a higher threshold than £6,000. That is fine but people are immediately on the full basic 24 per cent tax rate with PRSI bringing the total to over 30 per cent. Until the threshold for the basic rate is brought up to £10,000, or £200 a week, for a single person, the unemployed will not be given a fair chance. Employers cannot create the jobs these people need and people will not have an incentive to take them. Therefore, I only give the Minister for Finance four out of ten marks for his measures in this area.

In the long term education is the only way to ensure that everybody takes part in the thriving economy which we hope will continue. This is why educational disadvantage is critical. The current system fails one in six children. The budget does not show an awareness that dealing with educational disadvantage will need massive investment. This investment must span not only education but the areas of social welfare, health, justice and others. It is a community wide issue; it does not only involve schools and teachers. The £19 million figure is a mere drop in the bucket. It is unfortunate the Government has not used this time of relative prosperity to make a decisive start on this problem. The Minister has taken some steps but on the issue of educational disadvantage I am giving him a score of three out of ten.

The third issue on which I am focusing is company taxation. I agree with Senator O'Toole on this issue. The Government plans to reduce company taxation to 12.5 per cent over five years. It had a choice of methods to do that and I believe it chose the wrong one. It decided to lob off 4 per cent each year for everyone. I believe it should have considered the entire raft of companies from big to small and opted to reduce the smallest companies to 12.5 per cent immediately and carry on each year on a staggered basis. The advantage of that would be that big companies would not reap benefits until the last year. I am looking at this from a long-term point of view; jobs will come from small companies employing a small number of extra people. On this issue, my score is zero out of ten.

By my three measurements, the Minister has only done moderately well. I stated that nobody would quarrel with the fact the Minister has given handouts in this budget and has done some things well. When we look back at this budget in years to come we will recognise that, although it did many good things, opportunities were lost in the three specific areas I have outlined. I regret the Minister was not brave enough to focus on these specific areas which would benefit the nation in the long term rather than spreading the benefits across a large number of people now.

Mr. Dardis

It will hardly come as any surprise that I do not agree with Senator Quinn; I give him nulle points. I agree with some of his observations but not with his overall ratings. This is one of the most radical and reforming budgets introduced in Dáil Éireann in many years. In recent budgets, we have seen incrementalism and caution but no radical views on taxes and the manner in which the State's finances should be managed.

The introduction of tax credits marks a fundamental shift in the manner tax will be levied in this State and ensures that by providing allowances at the standard rate, people who enter at the 24 per cent rate receive the same benefits in regard to allowances as people on higher rates of tax. There was a considerable difficulty associated with that; to ensure he catered for people at the lower end of the scale, the Minister had to be careful not to penalise those at the upper end. That could have happened had the Minister not expanded the tax bands significantly, thereby squaring the circle.

I will not go into the details of the allowances and tax bands as they have been comprehensively explained and are on the record of the House. The Progressive Democrats was the only party to include the idea of tax credits in its manifesto prior to the last election. The idea of tax credits was derided as a way to proceed by the prophets of doom in much the same manner they stated the reduction of personal income tax rates would reduce State revenue and would result in services being cut. A few years ago, very few people would have argued that by cutting personal taxes revenue would be increased. I heard the prophets of doom again this evening stating that this budget might have an inflationary effect. They said exactly the same thing 12 months ago when the higher and lower tax rates were reduced by 2 per cent. Yet, inflation has stabilised and fallen. The professional economic pundits never seem to be scrutinised on their prophecies 12 months after making them. Politicians, quite rightly, are frequently held accountable for comments made in the past and professional economists should also be held accountable.

It was stated earlier this evening that European central bankers would be very unhappy with this budget. I welcome that; the more the European central bankers are displeased the better. The point which needs to be emphasised about this budget is that the best way to combat poverty and to assist people locked in social welfare is to offer them a job. In that respect, I agree 100 per cent with Senator Quinn. By ensuring no single person in this country earning less than £100 per week will have to pay any tax, we are creating the incentive to ensure people at the lower end of the scale take up jobs. I know of people in my own area in garages, bars, farms and so on who cannot get people to work for them. People are only prepared to work if they get a certain amount of cash into their hands. There is a wholly unacceptable way to widen this wedge and it is to reduce social welfare payments and increase allowances. I do not believe anyone would advocate such a measure. The Minister is moving us towards a position where it makes absolute sense for people to take up jobs.

There are 93,000 more people in the workforce now than there were 12 months ago. Almost 1.5 million people are working in Ireland and there is net immigration for the first time. That is a measure of the success of the economy, success for which successive Governments can take credit. This budget will accelerate that success and ensure the benefits of growth continue to accrue to those who require it. Pensioners received an extra £5 per week in last year's budget and £6 per week this year. That is more than previous Governments gave over several years.

It would be helpful if we could work out the Opposition's policies. Before the general election the Fine Gael Party advocated cutting tax rates. Now the Fine Gael Leader says they should not be cut and we should deal with them by way of allowances and bands.

Mr. Costello

The Progressive Democrats said they should.

Mr. Dardis

I am very glad Senator Costello has intervened at this juncture because he can explain why the Labour Party when in power reduced income tax rates by 1 per cent over the lifetime of the Government. Last year's budget yielded a reduction of 2 per cent off both rates and a commitment in the Programme for Government to gradually reduce tax rates to 20 per cent and 40 per cent.

Mr. Costello

The tax rates were 20 per cent and 40 per cent. The Senator's party better get moving if this Government is going to last that long.

Mr. Dardis

They were the people who told us that if we did this there would be catastrophe and we would not be able to afford the services which the State must provide for its citizens.

Mr. Costello

The Minister for Finance, Deputy McCreevy, did not make any reductions.

Mr. Dardis

Last week we had the latter day conversion of the Leader of the Labour Party. He previously told us that we could not cut tax rates because it would be anti-social, etc. Today he advocated the reduction of the higher rate from 46 per cent to 42 per cent. He has forgotten the old tax bands and allowances argument. We do not know what the Democratic Left Party want. They probably want to introduce more taxes but we will see what happens when they coalesce with the Labour Party and whether it is the president or the leader who is speaking on behalf of the party.

This budget takes 80,000 people out of the tax net. It ensures that a single person earning less than £100 per week does not have to pay tax. It gives pensioners an extra £6 per week. It ensures that 15,000 older people will come out of the tax net. The Minister for Finance has also increased child benefit and provided a carer's allowance of £200 to contribute towards respite care. From a tax point of view this is the most radical and reforming budget we have seen in a generation and for that the Minister is to be congratulated.

Mr. Costello

I am delighted to hear Senator Dardis praise the budget. I did not notice much of the Progressive Democrats policy in it, if anything there was a bit of Labour policy in terms of tax credits which we have been advocating for some time. The Progressive Democrats have been advocating a reduction in tax rates.

Mr. Dardis

We were the only party to advocate this before the last budget.

Mr. Costello

Unfortunately, the Progressive Democrats got no concessions this time around so they have to reduce rates from 24 per cent down to 20 per cent and 46 per cent down to 40 per cent before the next election, otherwise the Government will not have delivered.

Mr. Dardis

We did say over five budgets. The Senator should not misrepresent my party.

Mr. Costello

The way things are going with the Independents at present the Progressive Democrats might not have too many budgets left. They will have to get working on the Minister for Finance to get their policy introduced.

Mr. Dardis

The Senator will be old and grey before we leave power.

Mr. Costello

This budget was an opportunity of a lifetime for any Government because of a surplus of £1.4 billion. I am afraid the Minister for Finance did take a gamble but he did not do a good job of it. I do not know what his record is like on the race track but his track record in the Dáil has not been great. It is a lost opportunity for a number of reasons. The long-term unemployed received an increase of £3 which is level with inflation. With all the money in the Exchequer the 210,000 long-term unemployed will consider they have had a miserly throw of the dice from this gambling Minister in relation to the return he has given them.

The Minister provided a tax threshold of £100. Unemployed people would love to have £100 in their pockets but they only receive around £75. He should have been more generous to unemployed people as we approach Christmas.

With regard child care concessions, there is nothing for parents who are working or in receipt of social welfare. The Minister said he would examine this in the future when more study had taken place on the matter but parents are begging for some strategy on child care assistance to be put in place, tax relief on the other hand and financial concession for welfare recipients on the other.

The Minister has directed a lot of attention to carers but he still is not allowing any concession for existing social welfare recipients. A person in receipt of social welfare cannot become a carer and get a social welfare allowance. There should have been a graduated level of benefit on top of the social welfare allowance for social welfare recipients who care for elderly parents, relatives, the disabled or handicapped. The Minister will not allow people from outside or adjacent to the family home to receive the carer's allowance. I do not see why we cannot allow friends and neighbours willing to care for people to receive the carer's allowance. It would be much better than putting them into homes and other institutions where they will not receive the same level of care. This was an opportunity for the Minister to do that but he did not take advantage of it.

A miserly £8 million extra has been provided for hospital waiting lists. There are over 40,000 people on waiting lists and this figure is growing every day. The Minister for Health and Children had already saved £32 million on last year's budget and he will continue to make savings. I will wait to see what impact is made on reducing waiting lists in the months to come.

Nothing has been done for education in this budget. Education is still a major problem. We talk about a wonderful education system but it is not all inclusive. There are massive areas of educational disadvantage. What has the Minister done to resolve this issue? What has he done for special needs? Despite a Supreme Court judgment the severely handicapped do not feature in the new education Bill or the budget.

There is only a miserly £3 increase in child benefit. Child benefit would be of great advantage in keeping children in school and parents would be better able to deal with them in the home. We expected some vision in this respect in relation to education and putting together a strategy to deal with educational disadvantage. However, no money has been earmarked for educational disadvantage in the budget.

With regard to housing, we are only getting another miserly 600 new starts even though we have a housing crisis and house prices are spiralling at an enormous rate. The Minister has given us more tax incentives rather than cutting them back. He has also extended the period for which tax incentives will be operational and this will attract more speculators into the market rather than young couples trying to buy their own homes. That is not the way to go about it and this problem will get out of hand. He has dealt with neither public housing nor private housing. This is a very unimaginative budget in that respect and this measure will fuel inflation.

Betting is the Minister's hobby horse and he has reduced off-course betting by 50 per cent. He has also made a prudent provision of £24 million in a full year for the cost of the reduction in off-course betting and he expects this will be a saving. It will not be a saving because it will cost the Exchequer for the Minister to enjoy his off-track and off-course betting.

It has been policy to have a gradual reduction in corporation tax. The standard rate of corporation tax has been reduced from 38 per cent to 32 per cent. However, while doing that we are providing enormous financial benefits to the corporate sector. We must devise a strategy to create clawbacks which will benefit society. There is no social dimension here, despite the wonderful opportunity available to the Minister. When the standard rate is reduced to 12.5 per cent, will he hand all the money involved back to the banks, even though they are making a fortune, and get nothing in return? He has not given any indication of his plans in this regard, other than to mention them.

Mr. Gallagher

Last Thursday we debated overseas development aid. I was not fooled by what the Minister of State at the Department of Foreign Affairs put before us. The link between increasing aid contributions and increasing wealth in the economy was broken. We were told that we were now too rich to meet our commitments having had years of being told we were too poor.

The Minister of State accepted increases over the next three years well below the level of GNP. She abandoned the commitment made by her party and her partners in Government a month after she had threatened to resign if the Government did not increase in the budget next year allocation for overseas development aid.

The Minister of State now has no option but to do the honourable thing and carry out her threat to resign which she made on 5 November. She got no support in Cabinet, not even from her party colleagues; and she was fooled by the Minister for Finance. Despite getting full support from this House, the other House and the overseas development agencies, she has failed. She made the threat to resign, she must do so now.

Ms Cox

This is a Fianna Fáil budget. It is a caring budget which is focused on people on low incomes and eliminating poverty traps.

Mrs. A. Doyle

It is not.

Ms Cox

It fundamentally reforms the tax system so that people in most need will benefit. It will have a bigger impact on everybody's weekly wage than any previous budget. This Fianna Fáil led Government has more than fulfilled its commitments under Partnership 2000. We have increased weekly pension payments by £6 per week while the thresholds for social welfare personal rates, child benefit and family income supplements will also increase. There is extra cash for improvements in the areas of mental handicap, physical disability, child care, convalescent care and care for the elderly. Over 80,000 people will be taken out of the tax net.

As a member of a Government party I stand in a very difficult position in so far as I am like a visitor to a restaurant where the chef has presented an excellent meal except for one thing. I have difficulty raising this issue, but as a woman Member of the Oireachtas it must be said. While the budget has done some of the things on childcare recommended by various studies and while it provides that benefit-in-kind will not be applied to subsidised care, and while it has allowed special capital allowances to child care allowances, I agree with those who say it has not addressed the issue properly. This is not something I am happy about or proud of. It is the one area in what is otherwise an excellent and caring budget that has not been addressed properly.

Female participation in the workforce is the challenge for the future. For many years we have fooled ourselves into believing that men and women in this country are equal. We have not achieved equality, nor are we close to it. There is not true equality for either men or women in Ireland.

Equality means having a freedom of choice and achieving a balance between home and work. It is a balance between men and women and mothers and fathers. Many people believe that equality is a women's issue; it is not. Equality is a men's issue, a family issue, a Government issue and a business issue. It is only when we accept this that we will make any change in this area. That is our challenge.

I call on the Minister to think carefully about next year's budget. I accept the area of child care is very complex and that the introduction of a measure may take from those who stay at home to look after their children. I also accept there is a need to recognise the dual roles that are carried out — the women who stay at home to look after their children and the women who work and need to pay for child care. Ultimately, it is women who pay for child care most of the time.

The Government needs to address this issue in the near future. I call on the Minister to think again about this area. He has compiled a balanced, effective and fair budget. It is the only area on which the Opposition will criticise and make political points. It saddens me that this will become a political issue because it is an issue of equality. I hate to see people using it as a means to criticise the budget.

This is a strong, fair and equitable budget. The only problem is that the Government has not tackled properly the issue of child care. If the Government wishes to address this issue it needs to do so sooner rather than later. The Minister said he is waiting for the report of the Partnership 2000 working group, which has to be finalised. I hope the Government will consider the recommendations of the report before the next budget, will implement the changes that are necessary and that something will be done for the women, men and families of Ireland, for society, for employers who need woman to participate in the workforce and for businesses which need us to continue to make our contribution.

I stand here as a female Member of the Oireachtas. I do not believe there are enough of us and if more women were involved in all aspects of politics, including women with families, we would be looking at a different emphasis in the budget. We would have tackled this issue head on with courage and would have made further changes in this area.

Mr. Coghlan

I was smiling to myself when conjuring up the image of the Minister for Finance skipping along as he whistles a happy tune. The closing remarks of his Budget Statement referred to what we might do regarding the rainy day. However, given what he has done with the betting tax — I do not disagree with it — he might be inclined to have another flutter.

The Minister did not specify the amount that will be set aside to reduce the national debt. I welcome the move to tax credits, although it will not happen for some years. However, the Minister has taken steps in that direction. It will make it much easier to target specific assistance through taxation measures. Given the largess that was available, the budget largely meets expectations.

I welcome the Minster's moves to widen the bands and increase the tax free allowances. This, of course, is a totally altered course when compared to what he did last year. I welcome that change of heart because, by going for the widening of bands as opposed to reducing rates, he has adopted the policy of the Opposition parties and the approach taken when the rainbow coalition was in Government.

The Minister stated that this budget will remove 80,000 taxpayers from the tax net. I wish he had raised the threshold to £120 per week and taken out many more. We must help the lower paid and those starting out in jobs. The Minister could have done more given the circumstances and the amounts which he had to work with. I welcome, however, the measures he is taking because it will assist those on lower and middle incomes.

I am worried about the package for farmers. It is a case of now you see it, now you do not. Nothing has been specified and we have to wait for the social welfare Bill for 1999 before we see the details of the assistance he proposes to offer to them. There is no doubt that smallholders, hill sheep farmers in particular, have suffered hugely adverse consequences this year but we have to wait to see what will be done for them.

I am disappointed with the increases in child benefit and the measures in relation to child care. The Minister has apparently ignored the advice of the expert working group. The social welfare increases barely compensate for inflation. It is not a good budget for the socially excluded. More than 200,000 people are in this category and they have been offered a pittance. Pensioners should have received much more than £9 per week per couple. There is an increase of only £3 per week in old age retirement and invalidity pensions and £2 per week in other social welfare payments. That is an absolute disaster for those who have no other income.

The increase in the PRSI ceiling for businesses is fine for companies which are profitable but it will greatly increase the bills of all companies. There was an extremely hefty increase in VRT. I do not welcome the increase from 22.5 per cent to 30 per cent. I accept the case made for introducing variations but 22.5 per cent was enough for larger cars.

Given the housing situation and the vast number of people on housing waiting lists, we have been offered very little opportunity for new starts in the coming year.

It was agreed that we would have a more detailed look at the budget in a week's time and it is probably too early to pass a comprehensive judgment. Overall, however, I am disappointed with the measures outlined for farmers, particularly the more hard pressed. We must all be disappointed in the package announced for recipients of social welfare. The Government has paid lip service to those who are socially excluded. This budget does nothing for them. I am disappointed for the pensioners. We must await the details of the social welfare Bill to see how farmers, who are trying desperately hard to eke out an existence on the land, will fare. There are good measures in this budget and I welcome them but there are areas where much more was expected and nothing was delivered.

Mr. Bonner

I welcome the Minister to the House on what is an exceptionally good day for the Government following such an excellent budget. The Minister, Deputy McCreevy, arose today in the healthiest financial position of any Minister for Finance in the history of the State. For the first time since 1948, the Minister for Finance was able to introduce a budget with an overall surplus. There was, however, a greater onus upon him to deliver on this occasion than would have been the case had the State finances been in tatters, and he did deliver.

He delivered the Government's commitment to Partnership 2000 which should augur well for future national wage agreements. He delivered a caring budget which brought the socially excluded in from the cold so they could share in the wealth of the economy. He delivered a radical change to the taxation system by commencing a system of credits to replace allowances. This will be seen as a more equitable system which will give all taxpayers the same tax deductions. He acknowledged the contribution of the elderly in the development of our society over the decades leading to the good times which we enjoy today. He realised that it was also pay back time for all categories of the less well off and underprivileged who have suffered through social and educational disadvantage in the past. All taxpayers will pay less and 80,000 people will be removed from the system.

The Minister was criticised last year for what I considered to be a very good budget. One or two issues deflected attention away from the main features of an excellent financial statement. I hope the Minister will be given full credit this year for what he has done in today's budget. Today's budget was one of social inclusion, where those on low pay will benefit more than those on high pay and the vast bulk of resources were allocated to those on lower and middle income.

There are those who will consider that the Minister's strategy is dangerous, that no effort was made to dampen the economy and that he is playing a high risk game. As an accountant by profession, the Minister, Deputy McCreevy, has always acted in a prudent manner and I am confident he will not be caught out on this occasion.

There are those who will suggest that the national debt repayment should have been the Minister's priority. However, with low interest rates, the cost of servicing the national debt has reduced significantly. A reduction of £1 billion would only have reduced interest payments by £100 million. There is a need to make inroads into the debt in the present economic climate but there is a greater need to develop infrastructure for the future. The Minister has done this with a 27 per cent increase in capital expenditure while keeping the increase in current expenditure at 4 per cent.

A substantial increase in capital expenditure has been announced in the areas of health, housing — where there is a £4,500 start this year, an increase of £600 on last year — water and sewerage schemes, particularly rural group water schemes and roads.

I particularly welcome the social welfare increases. An increase of £287 million in a full year is the biggest social welfare package ever introduced. The £6 increase to pensioners, together with the £5 increase announced last year, amounts to an increase of £11 in two years, or 15 per cent, compared to the miserly increases of previous years. There is an increase above inflation for other social welfare recipients. Child benefit allowances have also been increased. Income thresholds for those over 70 years of age will be doubled to determine their eligibility for medical cards.

There has been a fundamental change in the role of carers. I welcome the £200 respite payment and the relaxing of the rules in relation to family members acting as carers without having to live in the same household. The free telephone scheme has been extended to all recipients. Tax claims for expenses up to £8,500 will be allowable to carers. That can be shared among different individuals.

It has been a very difficult year for low income farmers. The Minister announced his intention to revamp the smallholders' unemployment assistance scheme at a cost of £15 million. I am sure when the details are announced the measure will be welcomed and will be regarded as sufficient for those in need. The Minister also reintroduced the control of farmyard pollution scheme and the installation aid scheme.

I welcome the continued reduction in the rate of corporation tax to 28 per cent so that the Government can achieve its objective of a 12.5 per cent rate by the year 2002. I welcome the increase in the threshold for the lower rates from £50,000 to £100,000. This will be eliminated when the 12.5 per cent rate is reached.

An increase of 9 per cent has been announced in the area of education. It has been suggested that the previously announced capitation grant income of £10 per pupil is not sufficient. I remind Members that the present Government increased the capitation fee by 33.5 per cent over the two years it has been in Government and there is more to come. I welcome the commitment to remedial teachers, particularly the increased funding announced for the Association of Children with Learning Difficulties. I lobbied the Minister on this matter. There are 15 workshops throughout the country giving assistance to children who are not receiving proper remedial attention. A small allocation of funding can greatly assist those who are seriously disadvantaged in the education system. For the first time ever the Opposition was silenced in the Dáil when the Minister announced the increase of £581 million. This was not expected.

I welcome many of today's announcements, particularly the increase in the retirement pension allowance for the self-employed, the rural renewal pilot scheme, which I hope will be extended to other areas, and the tax relief on student accommodation. Students experienced many difficulties in Dublin this year in this regard. The measure will also release houses to low paid families who cannot afford new houses.

I welcome the extension of the seaside resort scheme which was to cease in June 1999.

I support Senator Cox's comments on child care. However, there have been changes, particularly in relation to benefit-in-kind, and I know the Minister will give the matter serious consideration in the future.

Changes in VRT are a bit severe given that the Society of the Irish Motor Industry lobbied for a reduction in this area. While this will mean more income for the State, it will have serious repercussions as a result of a lot more imports of lower quality cars from Northern Ireland.

Mr. Norris

This is a mixed budget. I am not partisan or a member of a political party. I welcome certain aspects in the budget but there are a number of aspects I do not welcome.

We were hoodwinked regarding the matter of overseas development aid. Perhaps the Minister was also hoodwinked because she threatened to resign. If one holds up a bank by producing a gun and one is laughed at, one is more or less obliged to pull the trigger, but the Minister failed to pull the trigger. There is a moral obligation on the Minister to resign because it is clear there is nothing in the budget for overseas development aid. We were told to bide our time and note what would happen. There has been a spectacularly mean cut of 1 per cent. We were briefed by Trócaire and other aid agencies and held back when we heard what the Minister had to say in this House on the subject of overseas development aid. Now we find there was nothing in the bag and that this multi-annual budgeting was part of another strategy. I asked specifically if this meant that our contributions would never decrease because it was expressed as part of GNP. I wanted to be reassured that if we went into a nosedive we would still keep up our payments and that it would not be used to cap our contributions. This is not the case and it is a mean and despicable cut.

The Minister should resign, not because she has done anything discreditable but because she has been let down by her colleagues. She is a good, caring and decent Minister but her colleagues did not play fair with her. That is most regrettable, particularly when one looks at the economic factors. Money spent abroad is guaranteed not to create inflationary pressure in the economy. Deputy McCreevy is an extremely decent and amiable man but perhaps he has been infected by this attitude abroad at the moment which is to look after our own first. This is not very Christian. There is a serious problem regarding overseas development aid.

I am glad Senator Bonner mentioned lobbying by the Society of the Irish Motor Industry. I was also lobbied by the society which was looking for a reduction in VRT but instead got an increase. The last line of its statement reads:

We have two choices. We can increase employment and Government revenue and decrease emissions by reducing vehicle registration tax or we can have decreased employment and increased emissions as the used cars from Japan and the UK curve their way to our market. This is the political and fiscal choice.

The Government decided against that.

I have a folder that is as thick as the budget containing statements by different interest groups, which we can discuss in more detail another day. This is a very serious issue involving all voices. The Upper House, where there is a less partisan atmosphere, is the correct context in which these voices pleading for a share of the national cake can most effectively be raised.

I note the Minister has produced a centre for the homeless in Dublin. I applaud this but it is not the entire answer. There must be a greater injection into this area. I know the Minister for State, Deputy Flood, is aware of this because he was involved in this area in the past. Single men find it impossible to get into these homes. I met a man I knew years ago in Grafton Street. He had been a prosperous businessman and fell on hard times. His principal problem was that he had no place to live. I met another man who returned to Ireland because he was given the impression that he would get succour and shelter from his family. When they found out he had full blown AIDS they threw him out. He cannot maintain the correct medical regime in a hostel. This is not good enough. We have money in the kitty and this is what we should be spending it on.

Elderly parents who care for those with mental handicaps are worried. A woman of 81 years, whose 56 year old moderately handicapped daughter lives with her, said to me "I do not want to die until Nora gets placed".

We will return to these matters in detail at a later date.

Mr. Ryan

The Government should be ashamed of itself for freezing overseas development aid, one of the most disgraceful decisions taken by an Irish Government. In the 17 years I have been an intermittent Member of this House, I have never seen such a contrast between economic conditions and stinginess. This shocks people across the political spectrum, whether they are on the Left or the Right. The only correct response to this is for the Minister of State with responsibility for overseas development to resign, which she is honour bound to do.

Let us not get too tangled up in percentage increases for people on social welfare. An increase of £3 or £4 a week is the price of less than two pints in Dublin and just more than the price of 20 cigarettes. The fact that it is 4.4 per cent is not the point — the point is that in this affluent society it is a pathetically small increase on a pathetically small income. We expect a couple on social welfare to live on £115 a week at a time when the Government says the minimum tax free allowance for a single person should be £100 a week. We are saying a single person needs £100 a week to live on and we are offering a couple on flat rate social welfare just £115.

The tragedy is that we could have done better. We do not need a £1 billion surplus every year. It is correct, prudent and sensible to run a surplus — I have never had any problems with that — but we did not need one of that scale. The scale of the surplus is a measure of the conservatism of this Government and of this budget. This budget could have revolutionised the way people live but the Government failed gloriously to do that.

Acting Chairman (Mr. Cregan)

Senator Walsh has two minutes.

Mr. Ross

The Senator is welcome to a couple of minutes of my time if he wishes.

Mr. Walsh

I thank Senator Ross and I hope I can reciprocate at some stage. I welcome the main thrust of the budget. Despite much of what has been said here, it must be recognised that there is a very significant change in income tax in this budget. There is a very strong emphasis on increasing the number of people who will not reach the 46 per cent marginal rate of tax until they have a reasonable level of income, which is good in many ways.

It eliminates many of the poverty traps. However, more importantly, it retains the incentive to work. Many people who moved onto the high rate of tax at £14,000 or £15,000, particularly single people, were finding it was not worth their while to work. Given the growth in the economy and the increasing demands for labour, it is imperative there is an incentive to work and that we encourage people to participate in the work force. This is undoubtedly a step in the right direction. According to my calculations, the changes in the income tax bands and allowances will give an extra £1,400 or £1,500 to someone earning £19,000 or £20,000, which is what many industrial workers earn. That is to be welcomed.

The Minister might examine before the Finance Bill is debated the £250,000 limit on investment in BSE schemes. That limit could be increased to the previous limit of £1 million. Many small businesses are finding that, given falling interest rates, the bureaucracy attached to raising £250,000 makes it unattractive to do so. That scheme has worked well, particularly for small businesses, and we should continue to focus much of our emphasis on that area.

Senator Ross might refer to the area of special investment accounts. Given decreasing interest rates, people earning a reasonable standard of income and who are looking for a savings outlet could be directed to the stock market. If people were attracted to investing in the stock market, it would encourage and develop more business and entrepreneurial flair in our culture generally, which should be welcomed. The increase from 10 to 20 per cent will make special investment accounts unattractive and I do not see the attraction of choosing that investment route over the stock market. Unfortunately, it is the people who are just dipping their toe into that area of investment who will be most affected.

Finally, on a parochial note, I welcome the commemoration initiative in the budget which has made a small start by allocating £200,000. The John F. Kennedy Trust in New Ross has been mentioned as a body which might benefit from that allocation. I hope it will benefit from the full amount because it is undertaking a major financial project and has cashflow difficulties at the moment. This project will have a resonance with all Irish people, particularly the diaspora, many of whose ancestors sailed from these shores in the last century, and who will have an empathy with what is being done in New Ross. I hope this money will be the first of a number of contributions and it will be welcomed by the members of the John F. Kennedy Trust who have worked so assiduously to bring this very good project to fruition.

Mr. Ross

I thank Senators for their contributions. It is impossible to give a detailed verdict on the budget immediately afterwards because the calculations and equations are sometimes very difficult to work out, but the thrust of the budget is very easy to distinguish. All Senators helped to flesh out that process this evening.

I wish to endorse what Senators Norris, Ryan, Costello and Gallagher said about overseas development aid. There is a misconception that those who are in favour of what is pejoratively known as fiscal rectitude also feel that spending of all sorts is wrong, which is not the case. We are talking about human life here, which is the most important thing we will ever be able to give a verdict on or influence.

When one talks about human life overseas and what is happening in the Third World and in Honduras and Nicaragua, everything else sinks into insignificance by comparison. These ridiculously sophisticated arguments which come before us about the relative taxation of those in different tax brackets are pleasant academic arguments. They matter to people, of course, but on the relative scale they are absolutely insignificant when one considers them in the light of the problems of the people in Nicaragua and Honduras.

It is scandalous that we, as one of the richest countries in Europe — and who rightly boast and are proud of this richness — cannot give a decent amount of money to save lives overseas. That is difficult to understand. If anyone wants me to, I can suggest umpteen ways we can make cuts in order to do this, if that is what we have to do. Senator Ryan said that, while the national debt needs to be cut, we do not need to cut it by so much. That is not my view but at least he is making a constructive suggestion.

There is something particularly wrong about arguing the relative merits of who will be a little bit richer when people are dying.

Mr. Norris

And to reduce betting tax.

Mr. Ross

Exactly — such frivolities are unimportant, given the scale of the matters we are speaking about. It is an issue which has emerged today and to which Members on these benches will return.

I congratulate the Minister in terms of the national debt. It is courageous of him and good housekeeping to say that the £900 million left over will go to paying off the debt. The temptation for any politician, including the Minister for Finance, is to tell Europe to stuff it and to tell the central banks in Europe that for the next two or three years he is going to spend his own money as he feels like it and on getting votes for himself and winning the next general election. This is the temptation for any Minister.

In accounting terms it is very easy to produce a surplus. However, this Minister has produced a surplus and has courageously said he will put it aside. There may be a political benefit in doing this, but it is not as immediate as that which the Minister would receive if he spent it on immediate injections of funds into projects which would give him support in political terms. We should congratulate the Minister.

I have mixed feelings about the budget. There are very good things in it. The reduction in corporation tax by 4 per cent each year is particularly commendable and very good for business. On the other hand I do not understand why the Minister was so mealy mouthed about the banks in his Budget Statement. Senator O'Toole, whom I usually use as a litmus test for these matters — when he goes one way I know it is wrong and I go the other — and I agree on the issue of banks. This is an opportunity for the Minister to say the banks have not paid their DIRT——

Mr. Norris

Hear, hear.

Mr. Ross

——and that he is going to take it from them today. I cannot understand why this was not done. I think the pressures being brought to bear on the Minister are not all political. If politicians in this and the other House from all parties had their way the banks would have been made cough up as they can afford to do so and are getting the benefits of the reduction in corporation tax. Why were they not made cough up? I suspect — nobody in the House will agree with me, not that it matters — it is because corporate Ireland, ICTU and IBEC are much stronger than Members of this House either collectively or individually and that they can put greater pressure on the Minister than democratically elected politicians. There is no other reason the Minister did not clobber the banks. These institutions are breaking the law. That was a great disappointment.

There are other disappointments, including the failure to tackle energy or green taxation. This is not just an EU issue and the nettle will have to be grasped. The failure to tackle the problem of property prices and the supply of property, and the inability of young people to buy houses, an issue to which we will return, is also disappointing.

In summary, there are good and bad things in the budget. I am very doubtful about its overall philosophy and thrust and am very, very worried about who wrote it. There are real signs that the budget was written and dictated by those who are not democratically elected.

Question put agreed to.

An Cathaoirleach

When is it proposed to sit again?

Mr. Finneran

At 10.30 a.m. tomorrow.