Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I understand the points Deputy Doherty is making. However, the Government at the start of its period in office established the constitutional forum, if that is the correct name for it, and it was vested with the responsibility of bringing forward proposals on what changes to the Constitution it thought might be appropriate. The Constitution in its totality was debated and a whole series of proposals for referenda was brought forward, but there was no recommendation on this particular issue. The Government is following the recommendations of the constitutional forum and is not proposing a referendum on this issue.

However, with the excellent chairmanship of the Chairman and the willingness of myself and my officials to be quite flexible in the approach to the debate, while a Deputy in opposition cannot bring an amendment along the lines of what the Deputy suggests, to the point of including it in the finance Bill, there is no prohibition on proposing it and having a full debate on it and its merits. It is worth pointing out that the universal social charge, when it was introduced by my predecessor, the late Brian Lenihan, replaced two levies - the health levy and the income levy. It was not a new tax. It was a replacement for impositions that had been there for many years.

On budget day, I outlined the budget's approach not only to the 2015 budget, but also to the 2016 budget which we hope to introduce in October 2015. I went on to say that if we are back in Government after an election - we are making no assumptions about that - we would continue with a particular approach to personal taxation. The approach is that with the resources available the approach we have taken in this finance Bill will be mirrored in next year's budget. That means we will address the low paid again, through USC. If people do not pay income tax until they get above a level of €16,500, a person can make all the income tax changes he or she likes, but he or she will not reach down to lower income people. However, it is possible to adjust their income and deliver benefits to them through the USC. The majority of the resources available to us have been dedicated to people between roughly €32,000 and €70,000.

They are the people who I would argue have borne the principal portion of the burden. Also, from an economic point of view giving benefits increases the incentive to work and enables additional people to return to work. It also fulfils another objective of the Government, namely, to make it possible for our young people abroad to return to work in Ireland and not be inhibited by very high rates of personal taxation. This is the first year of a phased programme. While we are reasonably confident that we will deliver the second phase of this programme, whether or not we can go beyond that is in the hands of the electorate.

The Deputy has chosen SARP, which we will be discussing later, as an indicator that the thrust of the budget is to reward high income people. It is not. We have deliberately put a cap on the benefits of personal taxation at a gross salary of €70,000. While people on incomes above this amount get a reduction in their USC and income tax they only get it at the same level as the person earning €70,000. As such a person earning a very high salary of €200,000 will get the same break in USC and income tax, and the same relief per week, as the person earning €70,000. It is designed to be fair and equal. I know everybody does not agree with the approach but I ask that they at least acknowledge it. If they are going to attack the budget then they should attack it in terms of the approach taken rather than some other fictional approach.

This budget was not designed to give tax breaks to the wealthy and it does not do so, rather it gives tax breaks to those people who have been defined as the coping classes and the squeezed middle. This is the first time that any Minister has decided to put a salary parameter on what is the squeezed middle. We are identifying these people as those in receipt of incomes ranging from €30,000 plus up to €70,000. That is not to suggest that everybody earning above €70,000 is extremely wealthy. Given that individualisation has been bedded in as part of our tax code the couple working, one of whom probably drops the children to creche or school, following which both of them head off to work thereafter on public transport, or if fortunate enough, in the same car, will have individual caps of €70,000. As Members know, these are couples who form part of the 1.9 million people now at work. They work hard all day, pay a great deal of tax, on return from work look after their children and in the last couple of years seldom got out and had to plan their social occasions carefully. These are the people to whom under this budget I decided to give most of the relief, using the resources I had available. I thought this time last year that I would not have resources available. We were fortunate with how the year went in terms of tax buoyancy. As well as not having to make an additional correction of €2 billion to achieve a deficit of less than 3% we had additional resources as a result of tax increases put in place which we used to deliver some relief.

Without getting into specifics, I propose to mirror this approach next year. Benefits will again be targeted at the low paid, through USC reductions, and the squeezed middle, through USC and income tax reductions, the squeezed middle being defined as people earning up to €70,000. Those earning above €70,000 will get the same relief as those earning €70,000. I do not propose, in respect of those with an additional €230,000 to introduce a 1% cut in the marginal rate, thereby providing additional relief of €2,300, which is what would happen if one rolled the relief upwards. The USC level of 11% was introduced to ensure that the 1% reduction in marginal tax rates, 41% to 40%, is negatived by an increase in USC so that the benefits are flat once one passes €70,000. As a result of the personal tax measures introduced in the budget, which are being implemented in this Finance Bill, every taxpayer paying USC or income tax, or both, will get some relief. If one does a bell curve on this, one will find that the bell curve favours those on very low income and USC and the group earning between €32,000 and €70,000. That is the thinking behind the budget. I have no problem with members attacking the budget or with rigorous debate but I ask that they do not attack it under false colours or on the basis of objectives which I do not have and did not include in the budget or Finance Bill.