Budget 2000: Motion.

Mr. O'Toole

I move:

That Seanad Éireann, in welcoming the budget,

acknowledges in particular, the fact that the Minister for Finance has, following intensive discussions and negotiations with the Social Partners including the ICTU, delivered, as promised, a pay and taxation deal which compensates for the erosion of value caused by inflation and which has also delivered the first moiety of the PPF taxation commitments;

notes that the agreement of the Minister to the fast-forwarding of the implementation of the Benchmarking outcomes has been of particular importance to public sector employees including teachers; and

recognises that the flexibility of the PPF Review process in proposing these adjustments will imbue increased confidence among trade unions and the general public in the partnership approach so crucial to economic development and stability.

I welcome the Minister of State to the House to respond to the budget which is being debated currently in the other House. I framed this motion last week in anticipation of a budget on the basis of what would be required. I was quite serious about this matter and made public that I was prepared to table the motion and let it stand or fall on its merits. I also said that if the budget did not deliver on the measures required, I would have no option but to speak and not move the motion.

A large number of issues were riding on this budget, one of which related to the Programme for Prosperity and Fairness. There was a huge commitment in relation to this at the beginning of the year when workers throughout the country were voting and worried about many aspects. A crucial issue was inflation. At many meetings throughout the country this issue was discussed and voted on. Workers in different unions received ballot papers and we told them that, in the event of inflation going out of control, we would trigger a review clause in the PPF. We did precisely that.

I welcome a number of issues in today's budget on the pay and taxation deal. In terms of the taxation deal itself, I sought that the budget would give at least one-third of the commitment under the PPF. The commitment under the PPF was for a 10% tax improvement in the net position of workers, therefore, one-third of that would be just over 3%. I also sought an improvement in taxation to compensate for the erosion of value created by inflation and a pay element in relation to the erosion.

It is important to recognise what was done in the budget. At the time of the PPF agreement, it was expected that inflation would be in the region of between 2.5% and 3% per annum. It is currently 5.5% per annum. Therefore, there was a difference of 3% in the erosion of value. We have now got a deal which includes a pay element of 3%. Effectively, the pay element will compensate for the erosion created this year. There is also a taxation element which is slightly more than 3%, depending on how much is allocated to the PPF. The full PPF requirement, plus in excess of 3%, has been delivered.

The Minister has been as good as his word. The Government has honoured its commitment to us in August and again last month. In a statement on 10 September, in particular, the Taoiseach announced that it was the Government's intention to meet part of the erosion of value created by inflation through tax measures in the budget. This has been delivered. The pay and tax deal which we as trade unionists were negotiating with the Government for the last three or four months has been delivered.

Last June I asked the Government to take action on inflation in three phases, first, to acknowledge there was an erosion of value created by inflation; second, to agree that it would develop a compensation package and, third, that it would enter into negotiations in that regard. It fulfilled its promises and it also indicated its support for changes in respect of pay.

The second part of the motion relates to the fast forwarding of the implementation of the benchmarking outcomes, which is of particular relevance to public sector employees. I refer here to teachers and others. I wish to outline the impetus behind this part of the motion. Under the terms of the PPF, the first payment recommended by the benchmarking review body would not be paid until mid-2003. We made the case that, because of the growth in the economy from an expected 5.6% to approximately 10%, there should also be movement in terms of bringing forward pay rises. We recommended that the way to do so would be through the fast forwarding of benchmarking.

As the budget confirms, the benchmarking outcomes will not be paid until the middle of 2002 but they will have retrospective effect from 1 December 2001. A quarter of the final figure will be paid at that time and, more than likely, at least another quarter will be paid later in 2002. It is important that people, particularly public servants, teachers, etc., are made aware of what this means in terms of the total pay package under the PPF. Until last Monday, the cash terms of the PPF were worth 19.2%. The additional 3% agreed last evening brings the figure up to 22.77%. In addition, two quarters of the benchmarking outcomes must be included in that.

In order to estimate the final percentage pay increase under the PPF one must be both optimistic and pessimistic. To consider matters in a pessimistic light, the worst deal that teachers will obtain under the benchmarking review would be an increase of 10%. If one is optimistic, they could get as much as the 17% or 18% obtained by Members of the Oireachtas. Let us consider what will happen if teachers obtain an average of between 12% and 16%. If they obtain 12%, 3% will be payable from 1 December next year and a further 3% payable the following year. They will, therefore, obtain 6% under benchmarking and 22.77% under the PPF, giving them a total increase of almost 30%. We must make it known that the cash value to teachers of the PPF will be in excess of 30% when its various elements are implemented. I recognise that the demands I made on behalf of teachers and members of other public sector unions for the fast forwarding of benchmarking have been met.

The third part of the motion refers to the adjustments referred to in the first two parts which will "imbue increased confidence". It was crucially important that the social partners – the Government, employers, the trade unions and the voluntary sector – would be able to show that flexibility exists in the programme to allow adjustments to be made. This shows that the part nership process works and that people can have an input.

A great deal of discussion took place earlier in the week about what people knew about the contents of the budget. The Minister for Finance can take credit for the fact that there was full engagement by him and his Department with negotiators representing the employers, the trade unions and the voluntary bodies. He met everybody, we put our cases to him and many of the things we were seeking have been delivered in the budget. Such a process must be followed in the future. Until the other economies in western Europe adopt such a process, they will not achieve proper stability. We have moved matters forward in an extremely effective way. I ask the Government to ensure that the partnership process is protected and that it is allowed filter down to Departments and have an effect on the way they conduct their business.

I do not intend to discuss the exact details of the income tax provisions in the budget. However, I wish to refer to a number of other issues. Some of the non-pay elements of the PPF have been delivered in recent months. One of these is the issue of maternity leave. There was a huge demand from many people for the extension of maternity leave. The Minister announced today that paid maternity leave will be increased from 14 to 18 weeks, which is a major and welcome improvement for pregnant women in the workforce.

I wish to make particular reference to the approach the Minister has taken to child care. I am in favour of many aspects of the Minister's approach but I do not agree with using child benefit to improve people's lot. The Government chose the most expensive yet easiest option and, in view of the difficulties that arose last year in respect of individualisation, I do not blame it for doing so. However, I would have preferred if the Minister had introduced tax rebates or chosen another approach. The elimination of benefit-in-kind for the provision of child care and crèche places for the children of employees as outlined in the budget – I accept that a specific explanation was not provided – is a major step forward and will be welcomed by many people.

I welcome the decision to remove the extraordinary anomaly in the school transport system – this has kept Deputies and Senators busy for many years – whereby a nine year old living two miles from school could not avail of school transport whereas a nine year old living three miles away could do so. When I worked as a school principal I had an argument with a CIE inspector who calculated that a child who was badly in need of transport to school was five yards short of living three miles from the school. To resolve the problem I knocked down the car park wall with a sledgehammer, drove my car inside and told the inspector to measure the distance from there in order to obtain the extra five yards.

Housing policy is an issue of major concern to the trade union movement and many workers. Some months ago I brought to the attention of the Minister an anomaly in the Bacon report which conferred a certain tax benefit on people buying a house but which would be lost if they derived income from letting a room. The only way young people in the UK and other European countries can afford to buy a house is by allowing work colleagues or friends move in and pay some money towards the mortgage. I am delighted with the section of the budget entitled "Rent a Room" which allows this to be done properly and correctly. I assure Members that this will allow more young people to consider buying a house because they will be able to invite a work colleague or friend to share the house, legitimately charge them rent and obtain a tax rebate of up to £6,000.

The extension of the schools psychological service will be widely welcomed and is a crucially important development. For many years I have said that membership of unions such as my union, the INTO, was almost as much a requirement as being a member of a professional body or an accountancy body and that union members should be entitled to tax relief on their subscriptions. I welcome the Minister's commitment to provide a flat rate allowance of £100 at the standard rate of tax in respect of trade union subscriptions.

The anti-inflation measures included in the budget are crucially important. The reduction of 1% in the rate of VAT and the reduction of excise on petrol by 2p will not have a major impact, but it signals that an important step has been taken. Next month's figures will show that the increase in the price of tobacco products from last year's budget will be subsumed which will give a plus of 0.8% while the reductions to which I refer will provide almost another 1%. This means there will be some improvement in the economy at a time when the euro has strengthened and when world fuel prices have stabilised.

The budget is well timed for workers. Our stated expectations have been fulfilled and on that basis I commend this motion to the House.

Mr. Norris

A number of things strike one about this motion. The first is the successful career in prophecy embarked upon by my colleague, Senator Joe O'Toole. This motion, acknowledging concrete facts to be put in the budget, giving the example of benchmarking and being quite specific in certain aspects, was placed on the Order Paper on 1 December while the budget waited to be delivered until 6 December. However, Senator O'Toole is proved to be correct, showing that one should not throw stones at persons who have their own crystal ball.

The motion aroused some controversy and this was, in some ways, a good thing. The matter was reported on the front page of The Irish Times and a number of other newspapers, although in all the references to the motion there was no mention of its distinguished seconder. There are not many occasions on which the proposed deliberations of the Seanad merit such press attention. We are lucky to have a person of Senator O'Toole's eminence and intellect in the Seanad, who occupies such a significant role in the trade union movement and who, outside this House, has been engaged in significant and far reaching discussions with Government. It is not without significance that Senator O'Toole is elected by one of the university constituencies. This is precisely the kind of representation intended on the panels but it is the universities which have presented the House with this opportunity.

In preparing the budget the Minister for Finance, Deputy McCreevy, a remarkable and fascinating personality, was not given entirely free rein. The Cabinet meeting of the other day had all the hallmarks of a successful fire-proofing operation by the Government to ensure that no spectacular false moves were made.

The principal elements of the motion are the pay and taxation deal which compensates for the erosion of value due to inflation. Senator O'Toole has indicated ways in which the Government performed a delicate balancing act by giving money back to the taxpayer while countering the possible inflationary measures. When I was an economically illiterate undergraduate I associated benchmarking with the Ordnance Survey. I now understand it means an attempt to introduce a degree of comparative fairness between different occupations and in that sense it is very welcome. The final element in the motion is the successful survival of this kind of bargaining mechanism between the different elements in society. If we want to see the economy continue to thrive, this is the road along which we must go.

We must also display fairness and a bias towards the least advantaged in our society. This budget does not go quite far enough. I welcome the initiative on homelessness. I have not had the opportunity to read the Budget Statement. I listened to a little of it on the wireless while I was packing – I go abroad tomorrow on Seanad business – and I was struck by the Minister's announcement that the provision for the homeless has been doubled from £20 million to £40 million. This is a very good initiative which is socially positive.

I am glad the road hauliers are being helped by the funding of their principal organisation. I congratulate the Minister on the green element of some of his provisions. These include the encouragement of people to use more environmentally friendly energy sources and the reduction of tax on low sulphur fuels. However, the Minister might examine the question of the brit disc measure recently introduced in the United Kingdom by which Irish haulage companies are expected to pay £10 sterling per day for the privilege of travelling across the road network of the United Kingdom. This is in addition to the vignette, which continental countries operate. The vignette is substantially cheaper than the brit disc and covers most European countries. Some other countries recoup money by an extensive toll system. At the same time foreign lorries, particularly English ones, pay nothing going through this country. The Minister should look at the possibility of introducing a parallel tax so that we get back something from foreign hauliers for their use of our road network.

I am glad to see an improvement in the position of carers. The House debated this issue a couple of weeks ago, prompted by lobbying from the Carers' Association. The Minister has gone some way in meeting the requests made at that time and I am glad an extra 5,000 people will qualify for carer's allowance. This should be welcomed.

The Minister referred to Luas, the transport system, wheelchair accessibility of bus fleets in provincial cities and so on. Why did he make no mention of the metro? Clear and specific funding must be put in place for this. There is no reason why the metro element of the public transport system, which was fought for in this House, should be postponed until 2016. It could be in operation by 2007 or 2008 but if this is to happen proper budgetary allocation must be made now.

There should also be specific provision for speech therapists. There is a dearth of speech therapists and tragic situations have been brought to the attention of the House on the Adjournment.

A substantial amount of money is being made available for sport. I would like to see funding for an ice skating rink. The other day the newspapers gave extensive coverage to a forthcoming ice hockey match in Belfast. In Dublin, the capital city, both ice rinks have closed for commercial reasons. We have people who are extremely adept at this sport and it would be very useful if money were earmarked for it.

I am now waving, possibly in contravention of Standing Orders, some of the submissions I have received regarding the budget and which I do not have time to mention. I have an enormous dossier, containing submissions from the Society of St. Vincent de Paul, the auctioneers and valuers, representatives of the motor industry and so on. I can only imagine the headaches the Minister must have had when putting together the budget. I look forward to making a more extended analysis of its impact on all the areas of concern early in new year.

In the meantime I am happy to second this motion, which shows the relevance of the Seanad. It is a matter of some satisfaction to us on the Independent benches that we have so significant a player among our number. We also have a very excellent representative of the capitalist class, Senator Feargal Quinn, appropriately on my right hand side while Senator O'Toole is on my left.

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

I am grateful for the opportunity to address the Seanad on budget 2001. I thank Senator O'Toole for proposing this motion and compliment the Senator on his foresight, as others have done. Senators heard my colleague, the Minister for Finance, Deputy McCreevy, deliver his Budget Statement in the other House and will welcome the chance to put their comments on the record. However, I was struck by the clarity with which Senator O'Toole spoke. I am happy to present the Government's position with regard to the key points he made and I intend to refer to some of the issues he raised.

The central message is that the Programme for Prosperity and Fairness and partnership works. It has the flexibility to deal with all the issues central to the development of the country with regard to the social partnership. The budget is designed to secure our continued prosperity, to improve our quality of life, to promote a fairer society and to reward work and enterprise through ongoing tax reform. Irish living standards have been raised to the EU average and we can make further progress on this through the sensible management of our economy. However, this is dependent on maintaining a disciplined approach to how we reward ourselves and, in particular, the delivery of the commitments set out in the Programme for Prosperity and Fairness.

Under the agreement reached on Monday night between employers and the ICTU, public service employees will receive an additional pay increase of 2% with effect from 1 April 2001 and a non-pensionable once-off lump sum equal to 1% of basic pay on 1 April 2002. As a result, public service employees will receive ongoing pay increases under the PPF amounting to 18% over 33 months, and nearly 22% in the case of those benefiting from the 3% early settlers agreement, in addition to the once-off lump sum of 1%.

When the PPF was negotiated, public service unions and employers agreed to establish a public service benchmarking body to compare pay and jobs in the public service to those in the private sector. The benchmarking body was established last July and is to report by 30 June 2002. The body's recommendations are to be based on in-depth and comprehensive research and analysis of pay levels across the economy and one of its central tasks will be to situate public service pay levels in an appropriate position by reference to existing pay levels in the rest of the economy.

As a result of last Monday's agreement, one quarter of whatever increases may be recommended by the public service benchmarking body will be implemented with retrospective effect from 1 December 2001, as Senator O'Toole said. The balance will be implemented on a phased basis to be agreed between the parties in discussions which are to commence immediately following receipt of the benchmarking body's report.

The final implementation will take account of the desirability of implementing the benchmarking body's recommendations as speedily as possible after receipt of the report; the level of increases involved; any successor to the PPF which might be agreed between the social partners, or whatever other arrangements may be in place on the expiry of the programme; and the need to respect any links which the benchmarking body might establish between levels of pay and other developments. This represents a significant improvement in the arrangements for implementing the outcome of the benchmarking process. It had been agreed under the PPF that no payment would be made before 1 July 2003.

The importance of these changes is that they have been negotiated within the framework of social partnership and the PPF in particular. The Government has made it clear all along that it cannot countenance claims by any single group outside this framework. I am aware that secondary teachers who are represented by the ASTI have been reluctant to participate in the benchmarking process, although I am not entirely clear why this is so. Their claim is based, at least in part, on a comparison to pay rates in the private sector.

The benchmarking process is designed to examine public service pay and jobs by comparison to the private sector and the benchmarking body will make recommendations thereon. In any event, the agreement to bring forward the effective date for payment of the first phase of any increase which may emerge from benchmarking should be considered very carefully by ASTI members. Parents would find it difficult to understand why the ASTI should not now re-enter the partnership process and avail of the benchmarking mechanism along with the other two teacher unions. Senator O'Toole also referred to maternity leave, the elimination of benefit-in-kind on crèches and school transport. I will refer to these issues later.

Many of the factors which led to a rise in inflation are outside our control. However, we recognise that it has been a cause for concern, particularly for ordinary workers and pensioners.

Mr. J. Doyle

We heard that last year.

Mr. Cullen

The main international economic organisations forecast that inflation will fall substantially next year and beyond. Our estimate is that it should fall to an average of 4.5% next year. Nonetheless, to demonstrate our commitment to tackle inflation, a number of measures will be introduced. These include cuts in indirect taxes, measures to encourage consumers to save rather than to spend and direct tax measures to increase participation in the economy.

The standard rate of VAT will be reduced to 20% from 1 January 2001. The impact that a cut in VAT will have on the retail price of cigarettes will be offset by an adjustment in the excise duty rates on tobacco products to leave retail prices unchanged.

Increases in the price of crude oil and currency fluctuations have caused difficulties for the road haulage sector. The Minister's decision to cut the excise duty on auto diesel by 6p per litre, giving a VAT inclusive reduction of 7.3p, will be welcomed by this important sector of our economy. The reduction will have effect from midnight tonight and, with the 1% VAT reduction, it will give a cumulative tax cut of 7.8p per litre from 1 January. This will also mean a major saving for other diesel users. The excise duty on unleaded petrol will also be reduced by 2p per litre, giving a cumulative VAT inclusive saving of 3p per litre by January next. The full year cost of these VAT and excise measures is £349 million and they will take 0.5% off the consumer price index.

Tax measures are not the only way to tackle inflation. The slowdown in house price inflation this year and the tax measures announced today will lower the rate of inflation next year. We also need to use the tax system to promote saving instead of spending. Incentives have already been put in place for pension saving both through tax changes and by giving savers greater choice and control over their money. The Minister announced measures to encourage medium-term savings in the credit unions today and he is considering extending these to other financial institutions in the Finance Bill.

One of the main aims of the Government is to reward work and enterprise. The amount of tax deducted from our wages is a disincentive to work. We are determined to reduce that disincentive. Our record in tax reform is clear and we have again delivered far in excess of our commitments. Taxpayers will benefit by £1,231 million – almost three times the amount promised under the PPF for this year – from income tax and PRSI measures. These include an increase in the basic personal allowances by £800 single and £1,600 married to £5,500 and £11,000 per annum respectively and by increasing the PAYE allowance from £1,000 to £2,000 per annum. Today's measures will remove 133,000 taxpayers from the tax net.

The measures also include widening the single person standard rate income tax band by £3,000 from £17,000 per annum to £20,000 per annum, with a consequential increase for double earners. The married one-earner band will increase by £1,000 from £28,000 per annum to £29,000 per annum, with transferability of bands between spouses thereby increased also to £29,000. As a result of this band widening, the proportion of income earners on the higher rate will fall to 23%. There is also a reduction in the standard rate and the higher rate of income tax by 2% in each case, that is, from 22% to 20% and from 44% to 42%. This fulfils the election pledge the Government parties gave in relation to income tax rates in the programme for Government.

The contributions ceiling for the self-employed and proprietary directors will be removed and the rate of PRSI for this category reduced to 3%. Most of the additional revenue generated by the removal of the ceiling will come from those on incomes over £100,000 per annum. The ceiling on employee PRSI is being increased to £28,250 per annum, which reflects the normal earnings-related increase. The class A rate for employees is being reduced from 4.5% to 4% at a cost £63 million in a full year. This is another important gain. The ceiling on employer PRSI which is currently £36,600 per employee in this tax year will be removed. This measure will bring in £159 million in PRSI in a full year.

Taken together, the measures on indirect taxation, savings and, most importantly, the significant income tax reductions show the Government's commitment to bringing inflation down. The direct tax measures go further than our commitments under the Programme for Prosperity and Fairness and illustrate our determination to maintain the partnership process, as Senator O'Toole acknowledged. The budget contains many other measures and I will not have time to deal with them all. However, I wish to draw the attention of the House to a few of the measures.

Substantial additional resources will be, rightly, devoted to persons with disability. I am happy to say the living alone allowance will be extended to all recipients of invalidity pension, disability allowance, unemployment supplement and blind persons pension. In addition, up to now only a reduced rate disability allowance was paid where the person's partner is in receipt of a full rate social welfare payment. This limitation will be removed. I am sure that is very much welcomed by everybody.

We are also upgrading transport services for people with physical disability. Some 140 wheelchair accessible buses are due for delivery to Dublin Bus shortly; new wheelchair accessible DART and Arrow rail cars are coming on stream. I am assured that Cork, Limerick, Galway and Waterford will have a fully accessible bus fleet by the end of next year.

Some £28 million extra will be allocated to services for those with intellectual disability next year – £35 million in a full year. This will bring total spending to £450 million next year which represents a very significant improvement in residential, day and respite services. An additional provision will also be made to increase the maximum grants under the disabled persons grant and the essential repairs schemes.

Carers perform a very valuable role in our society, a role which this Government continues to support by its decision to relax the income disregards which apply in relation to the means test for carers allowance. This will allow an additional 5,000 carers to qualify for the allowance as well as helping many current recipients. In addition, the annual respite care payment will be increased to £400 and this will be doubled where a recipient is caring for more than one person.

Up to now, medical expenses relief currently could be claimed in respect of a relative where the claimant qualifies for a dependent relative allowance. In recognition of the problem facing many families, the rules will be amended to allow people to claim such relief where they are paying on behalf of a dependent relative whether they qualify for the dependent relative allowance. Where a person is employed to care for a family member who is incapacitated, a carer's tax allow ance is claimable. The amount allowable will be increased from £8,500 to £10,000 per annum.

The care of our children must be our priority. The Government has decided on the largest ever package of supports for children and their parents. A major programme for supporting child care in all parts of the country has already been put in place. The national development plan includes £250 million for child care and the Government subsequently allocated another £40 million. In the coming year £104 million of this will be spent. Child benefit is widely accepted as the best way to help parents and eliminate child poverty. I am delighted to see such a major increase announced today. Child benefit rates for first and second children are being increased by £25 to £67.50 per month and by £30 to £86 per month for third and subsequent children. The new rates will be brought forward to June which is three months earlier than usual.

Other key elements of our initiative include the following. The period of paid maternity and adoptive leave will be extended by four weeks to 18 weeks and the four week period of unpaid leave will be doubled. As a result of these changes, from early April next, a mother can take up to six months leave in the period surrounding the birth or adoption of her child – a point very forcibly acknowledged by Senator O'Toole as being important.

Foster parents play a vital role providing a home and support to vulnerable children. An additional £9 million is being allocated in the context of restructuring the existing payment and support system. The CAT rules will also be changed to ensure that foster children can inherit from foster parents as if they were a natural parent. The Civil Service child care initiative will be introduced with an allocation of £10 million capital to allow for the provision of up to 15 crèches throughout Ireland over the next two years.

The social welfare package announced today amounts to £850 million in a full year – twice the size of last year's and most increases are being brought forward to next April. The package includes the following. Personal social welfare recipients will receive an extra £8 per week and couples on full rate social welfare payments will receive an increase of at least £15 per week from next April. Income thresholds for the receipt of the family income supplement are being increased by £25 per week from next April. This will result in average payments of £56 per week for existing recipients. The contributory pension for widows aged 66 years and over will be brought up to the same level as the old age contributory pension over the next two years. As a result, the widows in question will receive a special weekly increase of £2.90 bringing the widows contributory pension to £102 – a total increase of £12.90 next year.

We all owe a debt of gratitude to the older members of our community. Much of the success we enjoy today stems from their efforts. This Government has made income support for pen sioners a priority. Pension rates were increased by a total of £18 per week in the last three budgets and today the full personal rate of old age and related pensions is being increased by a further £10 per week. This will bring the rate of old age contributory pension to £106 per week, significantly exceeding our commitment to paying £100 per week to old age pensioners by 2002.

At the same time, 5,000 pensioners are being taken out of the tax net by an increase in the income tax exemption limits by £1,000 for a single person and £2,000 for a married couple. Furthermore, the medical card and the benefits of the social welfare free schemes will be available to all those aged 70 years and over, something I greatly welcome.

Housing continues to be one of this Government's priorities. The measures we have introduced have been designed to improve access to good, affordable housing. Aimed at increasing the supply of housing, these measures are beginning to show results. Housing output increased by 20% since 1997 to 46,500 units last year. The year 2001 will see over £1 billion spent on local authority social and affordable housing. A total of £346 million is being provided in 2001 for investment in water and sewerage services.

Up to now, rent relief allowed for under 55s has been significantly less than for the over 55s. The Government has decided to increase the rent allowable for under 55s by one-third from £750 per annum to £1,000 per annum for a single person and from £1,500 to £2,000 in the case of a married couple. In the case of widowed persons, the rate will be the same as the married rate of relief both for those under 55 and those aged 55 and over. I note the point made by Senator O'Toole. The special rent relief or the special rate for those wanting to rent a room is a very significant move by the Government and is something we would all welcome. I sincerely hope it helps younger couples and people taking out mortgages to find the necessary resources to purchase a home for their families.

The Government is determined to tackle the tragedy of those who find themselves homeless and is providing major funding to improve services in this area. Capital funding is being doubled from £20 million to £40 million over the next five years. This will provide additional accommodation for homeless persons, particularly transitional accommodation to facilitate a move-on process out of emergency accommodation. Local authorities will receive an extra £6 million a year towards increased subventions for hostel accommodation.

On a more general level, we all agree that we need a modern, efficient road network and a public transport system that delivers what the customer demands. That is why over half of the £40 billion national development plan is targeted at infrastructure needs. Over the life of the national development plan £6.3 billion will be spent on roads with £620 million being provided for the national road network in 2001. Over £2.25 billion has been allocated in the national development plan for public transport infrastructure. This will mean a major improvement in service to commuters.

An additional allocation of £11.5 million in 2001 is being provided to address infrastructural deficiencies around the coast. This will assist the fishing industry by upgrading harbour infrastructure and allow for the exploitation of important marine tourism and leisure opportunities. Bord lascaigh Mhara will receive an extra £4 million next year for the development of the sea fisheries sector, including inshore fisheries, deep water species exploratory development, market development and aquaculture.

There are a number of tax measures which I would like to mention. The business expansion scheme was first introduced in 1984. It is a tax based incentive designed to stimulate investment in small unquoted companies. The scheme provides individuals with tax relief for investing in these companies and qualifying companies can raise up to £0.25 million. The companies must be engaged in certain activities such as manufacturing and certain tourism services. The scheme was reviewed in 1998 and amended so as to refocus the relief on to its original intention which was providing capital for smaller start up companies which could find it hard to raise finance elsewhere.

In this year's budget, the Minister has decided to extend the business expansion scheme until the end of 2001. This will provide an opportunity to review the scheme thoroughly to determine how it is operating following the amendments made in 1998. It will also need to be determined whether, in the current economic climate, this scheme can continue to play a useful role.

The Minister also decided that from 6 April next year the county enterprise boards will be able to certify certain activities such as manufacturing, internationally traded services and commercial research and development for the purposes of the business expansion scheme. As the county enterprise boards deal with small start-up companies, this should improve the accessibility of the scheme for such companies.

The standard rate of corporation tax from 1 January 2001 will be 20%. For small and medium sized firms the 12.5% rate applies to the trading income of a company where that trading income does not exceed £50,000 per annum. From 1 January 2001, the ceiling will be increased to £200,000.

The write-off period for the annual wear and tear capital allowance is being reduced from seven years to five years on a straight line basis with effect from 1 January next. It will also apply to business motor vehicles. The car value threshold for both new and second hand cars will be increased to £17,000.

A number of tax measures are being introduced in order to promote investment in farming. Farmers, like other business sectors, will gain from the general increase in the annual capital allowances for investment in plant and machinery from 15% to 20%. The general 25% stock relief and the special 100% stock relief for certain young trained farmers will continue for a further two years from 6 April 2001, subject to conformity with EU state aid rules. The time period will be extended for reinvestment for roll-over relief for capital gains tax purposes where farmland is the subject of a compulsory purchase order for road building. The flat rate of VAT charged by unregistered farmers to registered traders and the associated VAT rate for livestock will be increased to 4.3% from 1 January.

Probate tax will be abolished at a cost of almost £30 million in a full year. This was referred to in the debate here last year. I am glad the Minister has abolished that tax.

The Government is supportive of employee share schemes. Favourable tax treatment is already provided for approved profit sharing schemes, employee share ownership trusts and save as you earn share schemes. This favourable tax treatment is given to encourage share ownership among employees and to encourage greater co-operation at the level of the firm.

The Government, in accordance with provisions in the Programme for Prosperity and Fairness, has established a committee to consider the whole area of employee financial participation, including gain sharing, share option schemes and the existing schemes. The committee is made up of representatives of ICTU, IBEC and the relevant Departments. A considerable amount of work has been done by the committee and the whole area will be considered further in the preparations for the Finance Bill. I very much welcome this. It is something in which I am deeply involved. I am aware of the enormous benefit of such schemes in terms of employees' feeling of ownership in companies and rewards for their very substantial contribution to their profitability. I look forward to the committee's report. I hope it will be as imaginative as some of the schemes being put forward. I am sure the Minister will look closely at this in advance of the Finance Bill.

I was very happy to hear the Taoiseach announce last Monday that, as part of strengthening the partnership process, the national centre for partnership and performance was being established. Through the centre, IBEC and ICTU will develop joint proposals to promote partnership in the workplace and to support and facilitate gain sharing and profit sharing on a voluntary basis.

This budget represents another important step in the implementation of this Government's programme and delivers on the commitments we entered into when we came into office. It has been designed to support and maintain social partnership and reward work and enterprise. It will help secure continued prosperity in the years ahead. It is expected that GNP growth will slow from an estimated 8.6% this year to an average of 6% for the period 2001 to 2003. Employment should grow by about 2.5% annually, with unemployment declining a little further. The Govern ment also intends to run significant budgetary surpluses beyond 2001, in line with economic good sense and with our obligations under the stability and growth pact. We will continue to set aside at least 1% of GNP annually to build up the National Pension Reserve Fund. I agree with Senator O'Toole when he says that the partnership approach is crucial to economic development and stability. This budget supports social partnership. I commend it to the House.

Mr. J. Doyle

I wish to share my time with my colleague, Senator Coghlan.

An Cathaoirleach

Is that agreed? Agreed.

Mr. J. Doyle

When I saw Senator O'Toole's motion last Friday evening I had but one regret – that was that he was not a member of the racing club with which some Members of this House are associated. If he were, we would never back a loser because he seems to have the inside track. To take the racing analogy a little further, the Minister ran rather freely over the budget course last year. When he came to the individualisation fence, he fell badly, and there was a crowd on the plinth outside the Houses telling him where he went wrong.

This year he was on a much tighter rein. I will give him credit for having one hand on the rein himself but to listen to Senator O'Toole one would think he was holding the other rein. The trade unions rightly pointed out that soaring inflation meant that employees saw the value of their pay rise under the Programme for Prosperity and Fairness eroded. For that reason I welcome the measures which have been put in place over the past week to save the PPF. I must warn the Minister, however, that although that will ease some of the problems, it will not be enough to fix all the problems of industrial unrest.

The real threat to our economy is rising inflation. While the Minister for Finance must be applauded for the many tax cuts in his budget, he may have gone too far when one takes into account the state of the economy and the high rate of inflation. Cutting the top rate of tax will prove to be particularly inflationary, giving large gains to the better off and a boost to the overheated housing market. The Minister has failed to convince people that inflation has peaked. He cannot be trusted in this matter. His previous forecasts in relation to inflation have been totally skewed. Last year he forecast that inflation would rise no further than 4%; we saw it rise to 7%. Today he has told us that the rise in inflation will be only 4.5%. The Government has introduced what it calls anti-inflation measures to deal with this problem. With the exception of the reduction in the price of diesel, which I welcome, the rest of these measures are cosmetic. The Minister hopes the 1% reduction in the rate of VAT will be passed on to the consumer and not absorbed in higher retail margins and that if that happens the wisdom of a cut in the rate of VAT will be in doubt. There is, therefore, already a doubt in relation to the anti-inflation package. If inflation cannot be controlled, it will put pressure on wages and prices as we move into the new year. I will be surprised if, within the next 12 months, Senator O'Toole and his colleagues are not back with the social partners to hammer out a further wage increase.

In formulating his budget, the Minister for Finance must have been aware of the ESRI report which shared the view of many economists that tax cuts or increased public spending would increase demand in the economy. This demand would push through into the labour market, resulting in higher wages and consumer prices and, in turn, increased inflation. Together with the strengthening of the euro in the past few weeks, this could have a serious effect on the competitive nature of international markets in the future.

What is more surprising is that, with a budget surplus of £6 billion, social welfare recipients receive an increase of £8 per week. Much has been said about the elimination of poverty in society. I am sure the Society of St. Vincent de Paul and Fr. Healy of CORI will be disappointed at this increase.

There are measures in the budget which I welcome. I welcome the Minister's change of attitude, his death bed conversion, in relation to the credit union movement and the provision of £1 million for housing. I welcome the increases in child benefit and old age pensions, especially the relief for elderly persons – I put myself in that category – where a husband and wife can earn £17,000 tax free.

Mr. Coghlan

Senator O'Toole has been described as something of a soothsayer. I hope his crystal ball will remain in good working order because we need it to continue in good shape for all sorts of reasons which have nothing to do with the racing club. I gather from what he has said that we can feel assured the PPF is safe.

The Minister has said this is his fourth budget in a series of five, but it is probably the last before the next general election.

Miss Quill

God forbid.

Ms Cox

The Senator should go home.

Mr. Coghlan

I am not a soothsayer.

Miss Quill

The Senator is a Kerryman.

Ms Cox

He has been listening to that fairy story being told by Fine Gael.

Mr. Coghlan

There is a very able Kerryman at my back. The Minister had the largest surplus in the history of the State and it could have been seen, therefore, as a giveaway budget. The sudden rise in inflation to more than double the level anticipated and the wage increases set in the PPF, leading to the recent efforts which I hope will be successful, have meant that the Minister's efforts today were geared more at easing discontent than dishing out a really welcome treat. I was informed by a prominent member of the main Government party on the way in here that, given the bruising which the Minister suffered last year as a result of individualisation, this budget had the Taoiseach's fingerprints all over it. Given that the economy is overheating and inflation is rising, there is a danger it could fuel inflation and, despite the Taoiseach's best efforts, matters may not materialise as intended.

The budget has done nothing to mitigate the worst effects of the three Bacon reports. It is a statistical fact that house prices continue to rise. The budget has failed on the housing cost front. I am sure there will be an opportunity to say more about that.

An Cathaoirleach

I ask the Senator to conclude.

Mr. Coghlan

I would appreciate your usual latitude. While the Minister exempted incomes up to £144 from tax, I was disappointed he did not exempt up to the level of the minimum wage. Despite the good measures in this budget in respect of room renting, the abolition of probate tax and some other measures, the truth is that there are potential downsides.

Mr. Finneran

I welcome the Minister of State, Deputy Cullen, to the House.

Mr. J. Doyle

We did not have time to do that.

Mr. Finneran

It does not seem as if a year has passed since I spoke on the last budget but it is my privilege today to address the fourth budget of this Administration. Today the Minister for Finance, Deputy McCreevy, presented to the nation a budget that is caring in nature, especially for those on low incomes. It is the Minister's intention to see through set targets during our term in office and, with one budget remaining, it seems likely he will do so. This will be the first time in the history of the State that any Government has achieved its financial goals.

We are still experiencing a fall in unemployment, which is down to 4%, and the living standards of our people continue to improve. These are clear indicators that our policies are working. Under the leadership of the Taoiseach, the Fianna Fáil Party along with its partner, the Progressive Democrats, has been shown to be a Government with strong policies, never evading its responsibility for the overall financial good of the nation, even when those policies seem unpopular. During our term in office we have nurtured and fed the Celtic tiger to such an extent that Ireland now ranks as one of the fastest growing economies in the western world.

Unfortunately, the downside in growing economies can be a rise in inflation. However, the Minister, Deputy McCreevy, has taken steps to curb this problem. I would rather think that the Celtic snail is an endangered species.

Under this Government the management of the economy is in safe hands. I have no doubt that at the next general election in a year and a half the people will take this into account. It gives me great pleasure on travelling through the length and breadth of the country to view the prosperity of the nation. Young people now have a better opportunity to avail of third level education and senior citizens enjoy a standard of living that was not possible a decade ago.

This is a budget for the elderly, children, carers, workers, those with a disability and those in business. It is all embracing. Elderly persons will receive an increase of £10 in their income, a married couple on a contributory pension will receive £20. Those over 70 years of age will no longer have to worry about a visit to the doctor as they will have a medical card and will receive medication without any cost to themselves. This is a major step forward. As one who worked in the health service for many years I am aware that elderly persons have put off visits to their GP due to the costs involved. This decision by the Minister for Finance is the most progressive step I have witnessed in my ten years in the House as regards attention to the medical needs of the elderly. I compliment him on his initiative in this area.

Children are the future of the nation. Today's decision to increase child benefit by £25 for the first and second child and £30 thereafter is welcome. This is a recognition of the contribution made by mothers, in particular, to whom this benefit is usually paid. We have all been lobbied in the past and particularly in the past 12 months regarding the plight of carers. I have spoken at length on this topic and have always objected to the means test. A married couple can now earn £250 per week before a means test is applied. That is a major step forward. This increase of £100 per week for a married couple will enhance their opportunity to receive carer's allowance. The amount for respite care has been increased to £400 and can be paid where two people are being cared for.

It is vital that incentives are introduced to encourage people to return to work. It has been said, rightly or wrongly, that people will not go out to work because they are better off depending on the social welfare system. That those on low incomes of up to £144 per week will be exempt from tax is a major step forward. As many as 77% of workers will now be on a 20% tax rate. That is a major achievement for this Government. The benefit it will bring to people in employment will be seen over the next 12 months. People will get proper compensation for employment.

We must always take responsibility for the disabled. Over the years disabled people have not been cared for and have been second class citizens, but in recent times their plight has changed dramatically. I welcome today's announcement that the living alone allowance will be extended to everyone in this category.

Transport cost reliefs have received very little attention in the debate on the budget.

Miss Quill

Yes.

Mr. Finneran

This is the most progressive step in the budget. I estimate that a fisherman who uses 15,000 litres of fuel per week or spends eight to ten days at sea will gain up to £1,500 per week as a result of the introduction of today's measure. People in the haulage industry will make comparable gains. This is the most important decision taken in recent times in the interests of industry generally and the transport industry in particular and I compliment the Minister for Finance on it.

I want to comment on many aspects of the budget. This Government has shown itself to be a good manager of the national coffers and innovative in its thinking. It has also shown itself to be the most caring Government that we have had in modern times.

Ms Cox

Hear, hear.

Mr. Glennon

There are to be 750 job losses in that company.

Mr. Quinn

As many as 750 jobs in Swords may be lost in one go. Let us remind ourselves how delicate our economy is and of the responsibility on us and the Minister to make sure he looks after it. We should then see if there are any dangers in that. We have a great deal to thank the Minister for and, as Senator O'Toole said, we have a great deal to congratulate him on.

I want to focus on two areas. I notice that the Minister has abolished the ceiling on PRSI to be paid by employers in respect of high earners, which is currently £36,600. This means there will be a cost to an employer when they wish to attract talent. A lack of talent is a problem in this country. We need to attract talented high earners. Suddenly, the Minister has put a tax of 12%, a higher rate than before, on anyone earning more than £36,900. That is the delicate plant I am talking about. I worry that some of the steps he took today do not look to the future.

The Minister gave a lot away today but we are used to it by now. He showed all of the abandon of a young boy throwing confetti at a wedding. The level of his give-aways is at the highest end of people's expectations. It is almost as if the Minister thumbed his nose at all the people who urged restraint. We should consider exercising some restraint.

I am concerned about the inflationary pressures that Senator Doyle talked about. I will judge this budget by how effectively it diverts people's resources from spending to saving. This was the big challenge faced by the Minister. Political factors directed that he be generous, whereas economic prudence calls for him to put brakes on the economy. Encouraging savings is the obvious way to meet this paradox. That is why, for several months, I urged the Minister, as I always have, to consider introducing quite dramatic incentives for people to save. I looked at his speech and discovered very vague terms. Under current conditions interest rates are lower than the rate of inflation and there is no incentive to save. That is even before taking account of the impact of DIRT.

Mr. J. Doyle

People are losing money.

Mr. Quinn

Yes. It is no wonder that our national savings rate has dropped by almost one-third over the past two years. I have heard very little mention of this and no mention of it in the budget. This means that all of the money released by the Minister today will overheat the economy. Of course we love having more money and welcome it. However, we should look to the future and see where we are going.

I have not been alone in urging the Minister to take the savings route. All kinds of alternative schemes have been suggested and they have the same aim, to make a big gesture to people by giving more of their money back and, for the good of the economy, making them an offer they cannot refuse. I wanted to hear the Minister say there would be savings incentives so generous that people would be encouraged to save rather than spend. I listened to the Minister's speech and waited patiently for him to announce massive savings incentives, but I waited in vain. There was a pittance in the direction of credit union savings. There is a promise to talk with deposit taking institutions before writing the Finance Bill. There is also a clumsy way to jump backwards in the suggestion that the lowering of capital gains tax two years ago is relevant to increasing savings now.

I waited for the big attention grabbing gesture. I was sure the Minister would do something quite dramatic like saying that if a person saves £100 a week rather than spending it they will not have to pay tax on it. I looked for signs that would encourage people to hesitate before rushing to spend their money. Unfortunately, I was disappointed. The triple digits on car registrations in Dublin remind us of the incentives to spend rather than save.

This is a give-away budget. It takes no cognisance of the need for restraint, the need to hold back inflationary pressures or the need to dampen the clearly evident overheating of our economy. In framing the budget the Minister's motto could have been eat, drink and be merry for tomorrow you will certainly regret it.

I am sorry to say that this nation will regret such a lopsided budget and in the medium term it will cost us dear. I love so much of the budget and I congratulate the Minister on many of the things he did. All of the Senators have said the same and I will not repeat what they said.

I talked earlier about a delicate plant. I am a gardener. I planted celery for years but could not succeed in growing it. One day, I read in a gardening book that to plant good celery one should sow the seed in ground prepared two years previously. I suggest the Minister needs to be more of a gardener than he has been tonight. I would like him to think about how he can prepare the ground today to ensure those seeds will flourish in the future.

I look forward to the Finance Bill. The Minister has hinted he is going to do something about savings. I would like to see him do something dramatic in that regard. If he does, the ground might be much healthier in the future and our economy will have a much better chance of surviving.

Miss Quill

In my experience, which goes back a long time, every budget has its own distinct flavour which leaves a taste in the mouth long after the budget details are forgotten. The infamous budget of Ernest Blythe has been referred to. The budget I remember best was that chilly January night when VAT was put on children's shoes. The philosophy underpinning that was that women with small feet might buy children's shoes. As a wearer of a size three and a half shoe, that budget is the one that has lasted longest in my mind. This budget will be remembered for the frantic efforts that are being made to find the hole in the middle of the doughnut – those with that approach have been very vocal this evening.

I do not read this budget as a scatter gun budget. I see it as an exercise underpinned by a very clear philosophy on how the economy must be nurtured, nourished and left in a good condition for the next generation. I also see it as a very caring budget that makes long overdue decent provision for the elderly, children, the disabled and the weaker sections of society. That is the outcome of a well thought out strategy, worked out in conjunction with our social partners, to whom this country owes a great debt of gratitude.

I will refer mainly, although not solely, to the taxation measures introduced in the budget. Cutting tax has been a primary focus of my party since its inception. We argued from the outset that work ought not be to taxed as a luxury. We also identified the fact that if Ireland, a small, open economy, was to remain competitive in an increasingly challenging world, our labour costs had to be kept at a reasonable rate, otherwise, we would price ourselves out of badly needed markets.

The philosophy underpinning these tax cuts is motivated solely by the aim of giving people back some of their own money, which I think is the decent thing to do. However, there is also a deeper and more long-term strategy, which is to protect and preserve jobs. Mention was made this evening of what has happened in Motorola. That is a sharp reminder that industry is very mobile nowadays and what we have today might not necessarily be here tomorrow, unless we take proper measures in relation to wage and tax control to ensure we remain competitive and retain badly needed inward investment to underpin the economy.

There is a very clear philosophy underpinning the tax provisions in this budget. I welcome the fact that 26 points have been taken off tax since 1989, which is highly significant. As a long suffering member of the PAYE tribe, who were crucified at times when other people were paying no tax, I am very glad something is being given back to PAYE workers and that they have some discretion over how they spend some of the money they earn.

This is more than a budget underpinning a brittle economy, that we want to develop and keep strong, and a social partnership that is central to the continuation of this economy. It is about promoting and fostering a healthy society. Measures in the budget, such as the increases in child benefit and the old age pension, will seek to minimise, if not eradicate, poverty and develop a fair and healthy society, where there is not a huge gap between the haves and the have-nots. None of us would like to live in or fashion a society which had such a huge gap; it would not be a healthy place.

I am particularly pleased with the proposal to give medical cards to everyone over 70 in our society. That will make a major difference, particularly in the area of primary health care. I know a number of senior citizens who put off going to a doctor because they cannot afford the fee. I also know a number of elderly citizens, particularly women, who do not get their drugs or medication from the pharmacy because the costs are so high. This measure will make a major difference to their health and lives. It is to be highly commended and I very much welcome it.

I also welcome the increase in old age pensions. It has often been said, and more honoured in the breach than the observance, that this generation of old age pensioners laid the foundations on which our economy rests. It would be a very poor and threadbare society which did not give some measure of gratitude to such people. I am very pleased with the provisions that have been made for the elderly under a series of headings in this budget.

I will not discuss every provision of the budget. We all pick out the pieces which resonate with our own concerns. This is a particularly good budget.

I spoke at the beginning about people who are frantically looking for the hole in the doughnut. Inflation is the new bogeyman. A number of measures announced today are aimed specifically at containing and reducing inflation, as far as it is within our remit to do. When I was praying for the conversion of Russia we heard about reds under the beds. The prophets of doom now talk about inflation. I think we will be able to deal with inflation if we continue along the route of this budget, which I welcome and support.

Mr. Costello

I wish to share my time with Senator O'Meara.

Acting Chairman (Mr. R. Kiely)

Is that agreed? Agreed.

Mr. Costello

I welcome the recent talks that have sought to improve the terms of the social partnership. We warned this time last year that this partnership agreement would run aground because it had not taken into account the obvious and dramatic increase in inflation taking place at that time. Now, at least, some progress has been made to try to deal with the change that has taken place.

The Minister for Finance said at that time that the inflation rate would be 3% and kept repeating that mantra during the year. He has now admitted that it will be in the region of 5.5% or 6%, although he has never accepted the real level of inflation, which is 7%. He is predicting in the budget that it will be 4.5% next year. That is a long way from the benchmark under which the Programme for Prosperity and Fairness was negotiated over 12 months ago. I am not satisfied that the benchmarking, which is due to be in place by 2002, will be adequate to deal with present industrial relations problems. It will not satisfy the ASTI, for example.

With regard to the budget, another year has elapsed but we are not any wiser as to the Minister for Finance's strategy. As much as its predecessor, this budget is skewed in favour of the well off against those at the bottom of the pile. The top rate of income tax has been reduced by a further 2%, from 44% to 42%, which benefits those on higher incomes disproportionately.

Ms Cox

They pay more tax.

Mr. J. Doyle

They can afford it.

Mr. Costello

Anybody who can count will see how those at the higher income levels will benefit disproportionately from the budget. It was made clear on the television news tonight.

Individualisation has been continued which means the single income family will suffer disproportionately in terms of tax take by comparison with the two income family. The discrepancy in terms of taxation at the higher rate will increase to £11,000, where two income families will continue to be taxed at the lower rate up to a combined income of £40,000. Corporation tax will be reduced from 24% to 20%, which will be of major benefit to the business sector.

The national drugs strategy has been allocated a meagre increase of £2 million, despite the massive drugs problem that has never been properly tackled. A sum of £0.75 million has been allocated to deal with disadvantaged primary schools.

I am especially disappointed that there has not been more for homelessness. An allocation of £20 million over five years amounts to £4 million per annum, which is very inadequate considering the scale of the problem. Once again the budget is skewed towards the well off.

Mr. J. Cregan

Tell us some of the positive aspects.

Acting Chairman

Senator Costello, without interruption.

Mr. Costello

We said last year's budget would be inflationary. This budget will be equally inflationary.

Ms O'Meara

The budget has an extraordinary potential to increase the risk of inflation, which is undermining the prosperity that has allowed the Minster for Finance to engage in what can only be termed a spending splurge. It has already been described as such by economic commentators, never mind his political opponents. I am not convinced it is anything other than a pre-election spending splurge to attempt to buy votes. However, the Minister will fail in that regard.

Senator Quill referred to a clear philosophy and well worked out strategy underpinning the budget. I have no doubt it is to get the Government re-elected. She also referred to the importance of generating a healthy society. It should be the aim and determination of any Government in its spending policy, especially at a time of budget surpluses, to create a healthy society. However, that will not be the effect of this budget.

Homelessness is on the increase due to the inflationary effects of the Government's spending policies. Despite our economic success, couples and families on what would have been considered a good income cannot afford to find the money for the inflated price of a first time house. It is virtually impossible for a single person.

Allow Senator Cox to continue without interruption.

Ms Cox

Since I started working I have always believed that if one worked hard one would do well and if one paid one's taxes one would reap the rewards. That is what the budget is doing today.

If we want to judge the budget against quality of life measurements we can point to a safer environment, a better society for children, ourselves and older people and a better distribution of the tax burden. Children, mothers and families will see huge increases in child benefits. I remember when child benefit was £25 per month. It is being increased by £25 per month, or by £30 for the third and fourth children. A family with four children will get £307 per month in child benefit, tax free. One would have to earn between £4,800 and £6,000 per annum to realise that. People do not realise there will be the same increase in 2002 and 2003. By the end of 2003, £117.40 and £146 will be paid directly to the mothers of children.

Paid maternity leave has been increased by four weeks to 18 weeks. An additional eight weeks unpaid leave has also been provided. People joke that eight weeks unpaid leave is not any good. However, an additional eight weeks is worth a lot to any mother who has had a baby and she will not have to worry about entitlements. It is good for any mother to be able to take six months off and then to take additional parental leave if that is her desire. Perhaps the Minister of State might raise with the Minister for Justice, Equality and Law Reform the issue of maternity leave for politicians which has not been addressed. Many people in this House might need it.

Notice has not been taken of the medical expenses. I take credit for the provision in the budget which allows for routine maternity expenses to be written off against tax. This change will be introduced by the Minister in the Finance Bill.

The top rate of tax has been reduced to 42%. A single earner can earn up to £20,000 while paying tax at 20%. The first £144 of earnings per week will be exempt from tax.

We must also look at the initiative of renting a room. People often ask how they can afford to buy a house.

Mr. J. Doyle

We will not be able to afford to buy houses again. That is the trouble.

Acting Chairman

Order, please. Senator Cox, without interruption.

Ms Cox

The room for rent initiative is one of the smartest things the Minister has done. It allows people to benefit from making rooms available in their principal private residence. It allows them to declare the income which can be used for assessment purposes and for paying back mortgages. It also means we are moving into a regulated market and out of the black economy where people paid rent to people who did not declare it. A sum of £6,000 is more than £100 per week. It is a tremendous initiative which I welcome.

VAT has been reduced by 1%. The price of diesel and petrol has also been reduced. Probate tax of 2% has been abolished.

Mr. J. Doyle

It was introduced by Fianna Fáil.

Ms Cox

The carer's grant has been increased by £10 for people over 65 and by £8 for people under 65. The respite grant has been increased to £400 per annum. That will make a huge difference to people. Many people could not believe they received a grant of £300 last year. It meant they could put someone in a nursing home or go away for a weekend to get away from the principal duty of caring. We have increased that grant to £400. These are the initiatives which make a difference to people's quality of life.

Some 450 extra child care assistants will be provided in the primary school system to work with children with special needs. Some £1.75 million will be provided for computer and related equipment for children with special needs.

We are focusing on people with disabilities, carers and older people. Any person over 70 years of age will be automatically entitled to the medical card. They will also get ESB and telephone allowances and a television licence. The disregard for the fuel allowance has been increased from £30 per week to £40 per week. This means more people will receive the fuel allowance. As Senator O'Meara said, that is an important allowance which will now be paid for a number of extra weeks.

An island grant of £10 has also been provided. Last week a member of the Fine Gael party said that Fianna Fáil had reneged on its promises and that it would not introduce this grant. I am glad he has been proved wrong and we have been proved right. We promised this grant and we are now delivering it.

This budget must be measured against people's quality of life. It will lead to an improved quality of life, a fairer society and raised living standards and it will encourage reward, effort and enterprise.

Mr. Caffrey

I wish to share my time with Senator Henry.

Acting Chairman

Is that agreed? Agreed.

Mr. Caffrey

I do not intend to discuss the specifics of this budget. Senator Cox has enunciated most of them and that is the second time this evening we have heard them. I welcome most of the measures in the budget as far as they go. However, the budget is based on the premise that everything will continue exactly as it has done in recent years.

There is a danger inherent in that philosophy because the Celtic tiger economy is riding on the back of the technological revolution. We are vulnerable because we do not have a mix of traditional industry, which other nations have, to cushion us in the event of a collapse in a sector of our economy. If, this time next year, the pendulum swings the other way and the pound is at £1.10 sterling instead of 78p, in what type of competitive position would we find ourselves? The current exchange rate suits our industries.

I spoke recently to a managing director of a company in the west who employs 200 people. However, he is expanding his business in Poland by a further 200 people because our wage structure is too high. We must be careful about that. There was a report this evening that there could be job losses in Motorola. Such developments may snowball if we are not careful. Wage inflation must be contained or we will lose our competitiveness and the premise on which the budget is based will collapse. We must keep people working. I told the Minister for Finance when he was in the House a few months ago that unless people keep working this economy will not keep progressing.

Agriculture is currently on its knees. Where would this country be if we were dependent on the agricultural sector? Could we afford the type of confetti we saw today in terms of the dispersal of money? Many of the measures are well placed but there is no emphasis on saving, which is important. The Minister is adopting a spending philosophy and there is no emphasis on saving. It does not encourage people to save. The Government has lost the message in the belief that things will continue as they have done in the past.

Dr. Henry

I thank Senator Caffrey for sharing his time with me because otherwise I would not have had the opportunity to speak. I welcome all the goodies in the budget which were anticipated. People will not be quite as grateful for them as the Minister thinks because many people expected this to happen. It is good that Senator Quinn said what he did. He spoke about inflation last April and suggested we should debate it on a monthly basis. I wish we had because we might not be in the mess in which we now find ourselves.

I welcome the fact that the Minister has brought the widow's contributory pension up to the same level as the old age contributory pension. I lobbied him on this matter given that women who had to retire from the workforce because of the marriage bar could never reach the right level. I am extremely grateful to the Minister for introducing this measure.

I am pleased in relation to the provision for medical cards for those over 70 years of age. However, I find it extraordinary that every year the number of people in receipt of a medical card decreases. Five years ago, 37% of people had medical cards and this has reduced to 30%. Why did he not increase this on a pro rata basis? The same people are getting medical cards, which is extraordinary. It is all very well to give people increases, but it is extremely difficult if they lose benefits, such as the medical card.

I am pleased DÍON will receive additional money because they do incredible work in England. I am pleased also in regard to the Consumers' Association. Having considered the current BSE problem and how consumers were ignored, it is beneficial to have that organisation as a watchdog. I am pleased that there will be a greater effort to build hostels for the homeless. There should also be hostels for those who leave prison and have nowhere to go because there is a serious problem with re-offending.

Apparently sport is for men only because, except for those who play camogie, there is no money allotted to women's sport. Perhaps the Minister will reconsider this aspect.

There was a recognition that a general decrease in VAT would mean the price of tobacco products would decrease. The Minister has recommended that this can be changed by way of an order. I wish he had managed to get the consumer price index throughout the EU changed so that tobacco could be taken out of the equation and there could be a decent increase in its price. Apparently the price of cigarettes is the only issue which affects young people and I wish the Minister would do something about it.

I wish there had been an increase in third level grants. Having supported individualisation last year, I am pleased this is continuing. I support the child care benefit but I wish the tax relief was given to those who employ individual child minders as this would enhance the status of these people.

Mr. Glennon

I wish to share my time with Senator Chambers.

I congratulate my colleague, Senator O'Toole, on his foresight and initiative. I hope this is something in the north Dublin air, spreading from the south west, and when it gets to the north east of the constituency, things will really take off.

I am sure he will forgive me if I preface my contribution to this debate with an expression of sympathy to his and my neighbours in Swords, 750 of whom received news today that their jobs were no more. This is as a result of the global strategic alliance between Celestica and Motorola, resulting in Motorola being taken over by Celestica. Ironically, Celestica is also based in Swords and, in fact, is almost a next door neighbour of Motorola. The good news is that of the 1,400 employees of Motorola, 750 jobs are being saved. Nevertheless, it is a sad day for Swords when 750 jobs are lost.

This news broke within the last 24 hours. I have had several discussions today with the Tánaiste and there is an attractive severance package in place. However, the only really attractive severance package in this day and age for any employee losing their job is alternative employment. I hope and I am confident given the jobs market, particularly in the IT sector, that it will not be too long before the 750 workers obtain not just their generous severance package, but also the only real compensation of alternative employment.

Having diverted somewhat from Senator O'Toole's motion, I now wish to address it specifically. The motion proposes an acknowledgment that the Minister for Finance following consultations with the social partners has delivered, as promised, a pay and taxation deal which compensates for the erosion of value caused by inflation and which has also delivered the first moiety of the PPF taxation commitments. The legal phrase is res ipsa loquitur, the facts speak for themselves. In light of today's budget, I do not know how anyone could disagree with that aspect.

I wish to contribute in particular to the second part of the motion. It proposes that we note that the agreement of the Minister to the fast-forwarding of the implementation of the benchmarking outcomes has been of particular importance to public sector employees, including teachers. Given the week we have had, which included for me the unhappy experience of receiving an official delegation yesterday of 12 leaving certificate pupils from my home town of Skerries, classmates of my daughter, who were rightly concerned, it is time the ASTI recognised the difficulties it is causing for examination pupils in particular and the manner in which its standing in the community is being diminished as a result of the stance it has taken.

The PPF machinery was tested severely over the last number of months. Its strength came to the fore in the last couple of days. The flexibility which is such an integral part of this agreement, and which for me was the acid test of the agreement, came through with flying colours. It is time the ASTI in particular took on board the lessons of this week, not just of today but of Monday night. The sight of secondary school pupils with examination commitments having to march to Leinster House and to the ASTI offices to access their constitutional right to education highlights a very sad week for that sector. I urge the ASTI to take time out, reflect on all the events of this week and to come back to the consultation table to use the successful machinery which exists.

Mr. Chambers

I welcome the totality of today's budget. This is the benchmark of the work of the PPF and Government. The way in which the budget is set out is a recognition to the Irish people that we have brought ourselves this far and that we are in a position to address the issues and share the prosperity of our nation in a proper and planned manner. It recognises the strengths of the unions, employers, the general public and the whole concept of the PPF.

It is a tremendous document which deals with every sector. It is an investment in the future strength of our economy and it recognises our achievements of the last two or three years. In light of what the previous speaker said in relation to the importance of the Government's relationships within the PPF, it outlines to the ASTI that it must play its part in the prosperity set out in the partnership arrangement. I ask the ASTI to participate in what is considered to be the best way forward for the State.

Previous speakers criticised the lack of commitment to savings. Senator Quinn made a number of strong comments in that regard. In my opinion, the Government will address that matter in the Finance Bill.

The need to recognise the needs of the disadvantaged as part of the PPF is addressed in terms of the investments outlined in the budget. In addition, the budget recognises the work done by those who provide foster care. There are 70 families in County Mayo who care for young people from very disadvantaged backgrounds. These families have made a major commitment and received very little by way of remuneration. The budget recognises their commitment and makes provision to invest in this area in the future.

The budget also recognises the great work done by families who have cared for elderly and young relations. That is an important develop ment. I welcome the removal of the disregards and the means test.

Mr. O'Toole

I thank the Minister of State and the Members who contributed to the debate. Independents' Private Members' time has been used for the past three years to have a debate on the evening of the budget. Prior to that we never had an opportunity to discuss the budget in the House until long after its introduction. I suggest that, with the agreement of the Leader, we should have a longer debate on the budget in the future. Three hours should be set aside to allow Members to make more rounded contributions.

I wish to make a number of points I did not have an opportunity to make earlier. It is tragic to learn of the job loses at Motorola which will have an impact on the lives of people living in north Dublin and on the economy in Swords, the capital of Fingal. I hope that immediate pressure will be exerted to bring alternative employment to the area.

I did not deal with a number of issues in my initial contribution. Two issues with which I should have dealt came to the fore through the machinery of the ICTU and at my union's conference earlier this year. These two issues relate to tax breaks and have particular relevance to the points raised by a number of speakers. The first of these is that emphasis should be placed on people at the lower end of the scale and that the threshold should be raised for those entering the taxation net. In addition, there is the issue of reducing the number of people on the higher rate.

In a recent debate I demanded that the Government should at least commit itself to removing from the tax net everybody either on or below the minimum wage between this budget and next year's budget. I stated that the way to do this would be to increase the threshold to £150 per week this year and increase it further next year. The Minister took some of my advice and has increased the threshold to £144 per week. More importantly, however, he has given a commitment that by the next tax year everyone on or below the minimum wage will be removed from the tax net. Members of the Labour Party have been calling for such a move for some time. We would have liked to see it achieved this year but I recognise the Minister's commitment to doing so by next year.

Last year I made the point that there are great difficulties involved in considering the movement of people in and out of the higher tax band. If one removes people from the tax net altogether, the percentage on the higher band actually increases. The more people are removed, the more difficult it is to obtain an accurate indication of the overall picture.

I had thought that the Opposition would have picked up on the fact that the Minister cleverly referred to the proportion of income earners in his budget speech. I acknowledge, first, that this is a clever piece of manoeuvring but, second, that it is the correct way to proceed. That is the way matters should be dealt with in the future because we will be able to identify the proportion of workers who are outside the tax net, the proportion who are on the lower tax rate and the proportion on the higher tax rate. By obtaining those three figures we will be able to chart people's movement. It is important to note that, after the implementation of the budget, only 23% of income earners will be on the higher tax rate. That is a welcome development.

Senator Ross has referred on a number of occasions to the issue of share options. The Minister indicated in his budget speech that he will listen to the advice of the social partners on whether to include provisions on share options in the Finance Bill. I look forward to hearing the views of Senator Ross and others on that matter at a later date. I agree with the Senator that movement should be made on this issue and I promise to present his point of view to the social partners.

The fact that only 23% of all income earners are on the higher rate of tax and that, by next year, no one earning the minimum wage or below will be in the tax net are two welcome developments. I also welcome the decision to continue to invest 1% of gross national product in the national pensions reserve fund each year. That is good housekeeping and the Minister's actions will be applauded by those who benefit in the years between 2012 to 2020.

I agree with Senator Quinn's point about the need to provide incentives to encourage people to save. However, I cannot suggest a mechanism which will encourage people to save more money. I can suggest many things which would encourage people to move their savings from one product into a more attractive product.

I wish to comment on the suggestion that making extra money available will fuel inflation. I reject that suggestion outright. People should remember that there is already a huge amount of money available in the economy. The budget involves the redistribution of wealth. Since the money is in the economy in any event, giving it to workers or taxpayers will not necessarily fuel inflation. Some of the economists who are quick to comment on the workings of economic models should consider that point. The reality is that a couple who went out and drank four pints on a Saturday night found they could only afford to buy two as a result of inflation. If these people get more money they will simply return to drinking more pints. That will not fuel inflation.

In the 1970s we could not redistribute wealth because we did not have the money to do so. I welcome this redistribution which is good for the economy and for workers.

Question put.

Tá

Callanan, Peter.Cassidy, Donie.Chambers, Frank.Cox, Margaret.Cregan, JohnDardis, John.Farrell, Willie.Finneran, Michael.Fitzgerald, Tom.Gibbons, Jim.Glennon, Jim.Glynn, Camillus.Kett, Tony.

Kiely, Daniel.Kiely, Rory.Leonard, Ann.Lydon, Don.Moylan, Pat.Norris, David.O'Brien, Francis.O'Toole, Joe.Ó Murchú, Labhrás.Ormonde, Ann.Quill, Máirín.Walsh, Jim.

Níl

Burke, Paddy.Caffrey, Ernie.Coghlan, Paul.Connor, John.Coogan, Fintan.Doyle, Joe.Hayes, Tom.

Henry, Mary.McDonagh, Jarlath.O'Dowd, Fergus.O'Meara, Kathleen.Ross, Shane.Taylor-Quinn, Madeleine.

Tellers: Tá, Senators O'Toole and Norris; Níl, Senators Ross and O'Meara.

Question declared carried.

An Cathaoirleach

When is it proposed to sit again?

Mr. Cassidy

Tomorrow at 10.30 a.m.

The Seanad adjourned at 8.25 p.m. until 10.30 a.m. on Thursday, 7 December 2000.

Seanad Éireann díospóireacht - Wednesday, 6 Dec 2000