Oireachtas Joint and Select Committees
Thursday, 10 November 2022
Select Committee on Finance, Public Expenditure and Reform, and Taoiseach
Finance Bill 2022: Committee Stage
Apologies have been received from an Cathaoirleach, Deputy McGuinness. I welcome members and any viewers who may be watching the proceedings on Oireachtas TV of the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach.
I welcome the Minister and his officials, as well as the members to the sitting. Turning to the notice on privilege, members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. Parliamentary privilege is considered to apply to the utterances of members participating online in a committee meeting when their participation is from the parliamentary precincts. For this purpose, the parliamentary precincts are considered to be the accommodation assigned to the member in the Leinster House complex or its vicinity, another location in Leinster House or Leinster House 2000. Please note that members may participate remotely in proceedings held in public only from the locations listed above, as privilege for their utterances only applies when participating from those locations. It is also important to note that members must be physically present to participate in the committee. In other words, they cannot vote from their online location.
I welcome the Minister for Finance, Deputy Donohoe, and his officials. The format of the meeting and its timetable is as follows. To provide for the smooth running of the meeting, any members acting in substitution for a member of the committee should formally notify the clerk now, if they have not already done so. Divisions will be taken as they arise. Members attending this meeting in accordance with Standing Order 106(3) should be aware that pursuant to that standing order, he or she may move his or her amendment and request a division but cannot participate in the voting on the amendment. This applied to members attending this committee in accordance with the standing order, that is, Deputies who are not members of this committee. It is proposed that we end the meeting at 4 p.m.
I move amendment No. 1:
In page 9, between lines 18 and 19, to insert the following: “Reports
2.Within 3 months of the passing of this Act, the Minister shall lay a report before the Dáil, on the cost to the exchequer of abolishing the USC and replacing it with a High Income Social Charge of 10 per cent on all earnings over €90,000.”.
Once upon a time, Fine Gael was for the abolition of the universal social charge, USC, because the party recognised that it was an austerity tax introduced following the economic collapse in 2008. It was a hefty burden and imposition placed on ordinary workers to pay for an economic and financial crisis that was not their fault. The Government has since abandoned, or at least Fine Gael has, the commitment to get rid of the USC. It is something that, justifiably, still provokes much anger among ordinary workers, because they are still paying what is, in effect, an austerity tax. It is our view, therefore, that the USC should go for those earning less than €100,000 annually. We have long held this position.
We do believe that we must pay for these things. We are very financially prudent on the socialist left and we believe that if something is going to cost the State revenue by reducing the tax burden on ordinary workers, then it must be paid for in some other way. We believe it should be paid for by introducing a higher-income social charge on those earning more than €100,000, as well as other measures that we proposed in our alternative budget. These included the introduction of new taxation bands for those earning more than €100,000. This is how the deficiency in lost revenue could be fairly paid for. Earning more than €100,000 is a major privilege. Our view is that people earning this kind of money, and more, should pay a higher tax contribution to alleviate the burden on ordinary workers, who are still suffering as a result of the introduction of the USC. It is even more the case now, obviously, with the cost-of-living crisis people are facing.
I will conclude by remarking on one point that is not directly relevant to this legislation but that is relevant in the round because any tax measure must be related to tax equity and fairness in the tax system. It is interesting to note that income tax receipts amount to €30 billion in revenue, I think. I think it is the biggest tax receipt the Government has. I do not know what total income earnings are because I did not have time to fish out that figure. It is considerably less than, for example, total corporate earnings in any given year, but the tax contribution of the corporations is much less than €30 billion. Income earners pay €30 billion in tax, but the Government is projecting there will be €20 billion in tax revenue from corporations, even though the corporate sector earns much more in gross earnings.
In other words, and to cut a long story short, workers earn less and pay more in tax, whereas corporations earn much more and pay less in tax, overall in the round. This is wrong as well. Often, the beneficiaries of big corporate profits are precisely these high earners who get additional income from what they may derive from having shares in companies and so on and so forth. We are trying to redress the imbalance in this regard by alleviating the tax burden on ordinary workers and replace it with higher taxes on the highest earners, as well as through the introduction of a whole range of other measures that we propose to try to redistribute wealth through the tax system and to close the gap between ordinary workers and the very rich in our society. This is the logic of our proposed amendment and we think this should be examined in a report by the Government.
I thank Deputy Boyd Barrett. I thank the committee in advance for its work and co-operation in dealing with this important legislation. I recall the similar amendments brought forward during last year's Finance Bill. We discussed many of the issues the Deputy has just touched on and I am pleased to do so again in the context of this Bill because important political matters are at stake here.
Some of the issues I will address in my response to the Deputy refer to the Exchequer costs of the proposal, what it would mean for the maintenance of our tax base and the effects a change like this could have on the competitiveness of our tax code and the competitiveness of our country overall. Regarding the proposal submitted by the People Before Profit Deputies to abolish the USC, it is estimated that this would cost approximately €5 billion in a full year. This suggestion to replace the USC with a high-income social charge of 10% on all earnings over €90,000 would yield approximately €2 billion in a full year. There would, therefore, be a shortfall in the region of €3 billion. In fact, it is estimated that it would be necessary to place an additional charge of around 26% on all earnings over €90,000 to raise an equivalent level of revenue for the proposal to be cost neutral to the Exchequer.
Turning to the Rural Independent Group’s proposal to abolish the USC for those earning less than €70,000 and replace it with a national solidarity tax on the incomes of those earning over €150,000 per year, I note that the Deputies have not specified the rate of the new tax that would apply under this proposal. It is estimated, however, that the removal of the application of the USC on all incomes below €70,000, as suggested, would cost in the region of €1.84 billion in a full year.
Assuming no other policy changes to the structure of the charges, it is likely that if the new tax took the form of a new USC rate for those earning more than €150,000, it would need to be as high as 24% for PAYE workers and 27% for self-employed income earners in order to raise the same level of revenue for the Exchequer and ensure this is a cost-neutral proposal. However, these estimations do not take account of any change that could result from the significant increase in the marginal rates of taxation. By way of example, this proposal would have the effect of increasing the top marginal tax rates from 52% to 68% and 55% to 71% for PAYE and self-employed income earners, respectively. As the Deputies will appreciate, high marginal tax rates could also cause harm to our international competitiveness. The considerable progress that has been made in recent years in attracting foreign direct investment to our country cannot be taken for granted, particularly given the challenges in the international arena that confront us at present.
Furthermore, abolishing the USC in its entirety or exempting those earning up to €70,000 per year would considerably erode the tax base. Ireland has one of the most progressive personal income tax systems, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. Deputies will recall that during the economic crisis, it reached a point where 45% of all income earners were exempt from income tax. That was unsustainable. It placed an unfair burden on those earners who were contributing to the income tax base and exposed the vulnerability of the income tax system to economic shocks. It is my view that a broad-based, progressive income tax system is appropriate.
I note that Deputies have also suggested raising money from companies whose net profits are in excess of €1.5 million per year. This could have serious consequences for the competitiveness of our corporation tax regime. It is worth acknowledging that a very large number of domestic Irish companies would come into the tax bracket. More broadly, our corporate tax regime has been built on certainty and predictability for multinational companies that have made Ireland their home. It is important to point out that these enterprises support our economy with high-value jobs. Also, as members are aware, these international companies provide substantial tax revenues across all tax heads, including income taxes, which are critical to the provision of public services and our capital investment.
To impose additional levies on corporate profits would involve increased complexity and would change the attractiveness of our corporate tax offering. It is impossible to accurately predict the effect that changes to the rate would have on the behaviour and decisions of large, multinational or domestic companies. This uncertainty prevents a reliable estimate being made of any yield that might accrue to the Exchequer. While it is possible that imposing such a levy could lead to theoretical gains, particularly in the short term, it could also potentially lead to lower levels of economic activity and to companies passing the additional tax burden onto their staff, customers, suppliers and investors.
The Rural Independent Group is calling for a report to be produced after the Act has been implemented so we can examine it and produce a report on how we would lessen the impact on lower paid workers and try to get more balance for higher paid workers. We have a figure of more than €150,000 in this regard. I do not think there is anything damaging to our European competitors or any of the other aspects pointed out by the Minister in having a report and an examination of how we go about this. There must be some mechanism so we can have room for manoeuvre.
It is the same with regard to the taxation of companies earning profits in excess of €1.5 million. All we ask for is that after three months of the Finance Bill being enacted, we have a report laid before us so we can discuss and debate it. Every year, motions are tabled to get rid of the USC, which we were promised would be temporary. This was also the case with the insurance levy all those years ago for PMPA. We know what happens. We are looking to unearth the minutiae to determine why we cannot do so. It is not simply a case of saying that we cannot do so and then going away home until next year when it will not happen either. We want to have a bit of wriggle room for people who are savagely impacted by the cost of living and have carbon taxes on top of everything else they had already this year.
We met the ESB yesterday. It is one of the energy companies and a company for which I have great respect. It told us that despite the profits it has made, it is not allowed by the regulator, European law or Irish law to do anything to help the people in desperate need. We need to be able to have explanations and in-depth analysis of the reasons we cannot change the system. It is not a case that we just take it or leave it. There must be some flexibility or room for manoeuvre. If there is not, we need the report to explain why not. Surely it is the job of the Department and the officials to explain why it has to be the same.
We tabled a motion to get rid of the USC and it did not happen. We want a report laid before the House within three months of the legislation being enacted, which will probably be in four months' time. If it is delayed, that is fine but we want a report and we want to discuss and debate it and try to get a better understanding. We want it explained to the people why they have to pay this tax when they were told it would be temporary but it is not. We want to look after those most hard hit who are the lower paid. We describe as well paid those who earn more than €150,000. They should be expected to pay more. We are not trying to hunt away foreign direct investment. We are not being reckless. We are asking for a report and an examination and nothing else to see whether we can make some progress.
I do not support either of the amendments. Our position on the USC is well laid out. More lower income earners need to be taken out of the tax bracket and we will table amendments on Report Stage on this. It would also be a better way to provide a tax break for workers and would not do what the Minister has done, namely, exclude the large number of almost three quarters of income earners from the benefit of the most costly part of the Government's tax package.
Given that there is a debate on the two amendments that have been tabled, I will speak on them. I heard what the Minister said about the cost of this being €5 billion. I agree with him because that is exactly the charge I put to him when he campaigned to abolish the USC. Will the Minister inform the committee on whether he campaigned to abolish the USC? Did he acknowledge at that time that it was an emergency measure? Where was he going to get the €5 billion when he abolished the USC as he promised?
The Labour Party does not support either of the amendments for the same reason we outlined this time last year when discussing very similar amendments. As the Minister noted, the USC raises a significant amount of revenue to be spent on the public services on which we all depend. Those on low and middle incomes especially depend on quality public services. There is an onus, of course, on anybody who is proposing to abolish the USC or to adapt or amend the way in which it works to identify ways in which that gap could be plugged. I appreciate that Deputy Boyd Barrett has made efforts to do so in the amendment he has tabled.
The USC is the very definition of a progressive tax. There are very few hiding places for money in terms of the USC. This is one of the good and positive aspects of it. There is no doubt that it is an imposition on working people. This is clear. I do not want to use the word "burden" and I never use it with regard to tax but efforts have been made over the years to reduce the cost, if we can describe it as such, for working people. Earlier in the Chamber we had a discussion in response to a question I tabled on the PRSI threshold that applies to workers on the national minimum wage. Efforts have been made over the years to reduce the USC for the very lowest paid in our society.
That is the right thing to do. We will not support this amendment. In fact, the best way to support working people who are in difficult circumstances is to use the resources we have, and can generate in a vibrant economy, to invest in the public services on which we all depend.
I will reply to the Minister's point in response to our suggestion of a higher income social charge to replace revenues from the USC, which People Before Profit believes should be abolished because it was an austerity tax and an unfair imposition on workers that has massively increased the tax burden on ordinary workers ever since it was introduced. Notwithstanding some reductions and tweaks, the tax contribution of ordinary workers jumped significantly as a result of the USC. That burden is overwhelmingly carried by ordinary workers. We want to remove that burden but we need to replace it.
As I said, and I will make it clear to the Minister, we are not only proposing a higher income social charge in order to replace those revenues. In our alternative budget, we also argue for additional tax bands for those who earn in excess of €100,000, as well as the higher income social charge. The Minister may have read our proposal. In fairness, I think he reads our budget submissions. We propose to make up the €2.5 billion gap there would be after we introduce the higher income social charge by having four new bands on those higher earners. These are a 50% rate on earnings between €100,000 and €150,000, 55% on those earning €150,000 to €200,000, 60% on earnings between €200,000 and €275,000, and 65% on earnings more than €275,000, which would raise an additional €2.5 billion. That is how we intend to do it. Our alternative budget also goes into a whole range of other measures to target the wealth and income of the very highest earners, as well as increasing the tax contribution of the major corporations. For our part at least, we fully intend to balance the books but redistribute the tax burden in order to create greater equity in the tax system and to reduce the gap between rich and poor. I wanted to say that for the record.
I will point out that there is also a significant inequity. The elephant in the room is the huge gap between the tax contribution ordinary workers make relative to the income they earn, as against the tax contribution corporations make relative to the income they earn. There is a huge gap. The Minister has projected €20 billion in corporate tax receipts this year. I know he does not have all the figures and they are delayed by a year or so, but insofar as he is able to project €20 billion in corporate tax receipts for 2022, I am curious to know, and I assume he has a projected figure for, what the gross trading profits were that he extrapolated from for 2022. The last available figures indicate that those profits were €193 billion up to 2020, which was a massive jump of approximately 140% over the past decade. Presumably, the Minister had some sort of projected figure for what gross, pre-tax trading profits were that could lead him to project €20 billion in corporate tax receipts. What he will find, however, if he does have that figure, is that the gross pre-tax earnings of corporations dwarf the total amount of income earned by ordinary workers. The tax contribution of corporations is €20 billion whereas the tax contribution of workers in terms of their income is €30 billion.
To put it simply, workers, collectively, earn less and pay more than corporations by a very considerable margin. It just seems like basic fairness and justice that the cleaner who works at Google should not pay more, proportionately, of her income in tax than the shareholders in the corporation that is making extortionate profits. That is what tax justice means to me and that is the logic behind our proposals.
I thank the Deputies for their questions. I will begin with the Deputies who spoke first and will come to Deputy Boyd Barrett shortly.
I accept that Deputy Mattie McGrath is simply looking for a report on these matters. The reason I am not in a position to agree to his amendment is the issues he is calling for a report on are covered every year in the tax strategy group papers. We already do a lot of this work. We publish the matters the Deputy referred to nearly every year, including the future of income tax and the USC. That work is done by that group in an open way for the Deputy and others to consider. The reason I believe a report in the Finance Bill is not appropriate is not only because it repeats work we have already done. I also do not want to give an indication that these are policy measures I am considering implementing. I believe that would harm our economy. I have heard the Deputy speak very positively about the number of international employers located in his constituency that employ his constituents. In my view, if we give an indication that there was going to be an increase in personal tax for incomes above a certain level, I am convinced that would affect our ability to keep those jobs in Ireland. I see the level of competition that goes on between our peers, IDA Ireland, and other governments for the investment we have in Ireland. A change in tax as proposed by the Deputy would harm that. To give an indication that we are considering doing that in a Finance Bill, is not the right signal to send out.
As Deputy Doherty well knows, I campaigned in 2016 to abolish the USC. I may well have described it as an emergency tax at that point. What has happened to lead me to the view I now have is the degree to which the world has changed. I held the view in 2016 and 2017 that we would go back to a degree of economic and political normality. I did not think we would move into a world in which Brexit was going to happen and that we would see such changes in global and American politics. That has made me even more aware that small, open economies like Ireland's have to able to balance their books. Therefore, the policies I now advocate are appropriate in a world that has changed. On what I advocated six years ago as to how abolition of the USC would be paid for, one of the main ways in which we thought it could be paid for at that time was through additional growth that would happen within our economy. I will not now bank on additional growth to pay for structural changes, such as the abolition of the USC, because of the volatile and changing world we are in.
I agree with Deputy Nash's point regarding the USC being a progressive part of our tax code. It is why, in the different budgets I have done, I have made some changes to the USC but not very significant or big ones. I now accept it is an important way in which we collect tax. We will need it in the future, with the many pressures our economy and tax revenues now face.
On Deputy Boyd Barrett's point, I will see if my officials in the course of consideration of the Finance Bill have a forecast for gross trading profits. If we have it, we will share it with him. I want to return to the point he made regarding the disparity between tax paid by low-income earners and the level of tax multinational companies are paying. I will not comment on any individual company because I do not know what level of tax it pays and it would not be appropriate for me to pick it out.
Let us imagine we are in a world, which I believe we will be in shortly, where the average rate of tax for companies worth more than €750 million is 15%, because we are part of implementing an OECD agreement. I will share some figures regarding the balance between the taxation on income and the taxation on capital, which relates to the point the Deputy is making about the cleaner. Let us say the cleaner he is referring to is on €25,000 and he or she is a single person. The average level of tax to be paid on €25,000 in 2023 would be 11.3%. If the cleaner is in a company that is subject to the full implementation of the OECD arrangement, and if it is implemented in the way is currently written, the company the cleaner works for will, on average, pay tax of 15%. That is the difference.
I did say that is if the OECD agreement is fully implemented. Even in our current tax code, the average level of tax large corporate employers pay in Ireland is between 10% and 11%. The difference between taxation on capital and labour and profit on labour, for those on low incomes, is not as big as the Deputy would argue it to be. I read the Deputy's budget submissions - he knows I do - and I always recognise that in a static world, the figures add up. They do, in fairness to him. I am not sure if my recognising this does the credibility of the proposals harm or good but they do add up. Where he and I completely differ is that he thinks we can implement these measures without having other knock-on effects. I believe they will, which in turn would mean collecting less tax overall. I am absolutely convinced that the measures the Deputy is proposing, and I say this with respect because I respect his intentions in these matters, would have a harmful effect on our economy. We would lose jobs and be a poorer country as a result of them and ultimately collect less tax revenue. That is why I have a different view on these matters to the Deputy's good self.
I will not go into the example the Minister gave about corporation tax and income tax. Obviously one is on profits and the other is on income and not the turnover of the company.
I want to focus on the issue of USC. As I said, I do not support these amendments but I must take the Minister up on his commentary suggesting that he abandoned this policy. This was described by Fine Gael as the most important policy commitment it was giving the Irish electorate in the run-up to the 2016 general election. That is what Fine Gael argued. We all remember the posters of Leo Varadkar holding up signs saying "Abolish the USC". The Minister tweeted about it himself. It was the number one commitment. This was just a couple of years after the economy crashed, the IMF was here, and we learned the lessons of the Charlie McCreevy era about whittling down our tax base. That is when the Minister's party came up with this completely and utterly populist policy to get rid of €5 billion worth of tax. Not once, in any shred of paper, did he actually show how that would be accounted for.
The reason I take this up is because the Minister and his party were wrong and they were right to do a U-turn on it. They were right to abandon it. Within a year of the election the Minister abandoned that and that was the right position. As we said at the very start, despite the fact that people would love to see reductions in taxes, you cannot get rid of €5 billion of a stable tax base and think you are just going to magic it up somewhere else, or, as the Minister said, hope for growth. That is the definition of populism.
The way Fine Gael tried to get off its main commitment to the electorate in the 2016 election and erase people's memories of its members carrying these billboards about abolishing USC was by saying it would merge the USC with PRSI. Is that completely abandoned as well? The Minister got Cabinet approval and officials spent time, effort and State resources carrying out an assessment of that. That commitment was given by Leo Varadkar at the party's Ard-Fheis. Is that commitment gone or is it still under active consideration?
I will deal with the different points that have been put to me. First, I did say that corporate tax is a tax on profit. I said that and made that clear. I stand over what I said. Looking at the average level of tax on income versus the average level of tax on profit, because of changes that have taken place in our tax code, the average level of tax large companies are paying on their profit is ahead of the average income tax low-income workers are paying. That is my argument and I think it is an important argument of equity. I want to go back to Deputy Boyd Barrett's point. If the cleaner he referred to is earning €20,000, the average income tax the cleaner pays is 5.6%. On average, large companies pay corporate tax that is a multiple of that. That is the way it should be. I stand by that argument and I have made clear that corporate tax is paid on profit.
Deputy Doherty's spoke about commitments we gave in 2016 and 2017. I am happy to debate this with him. He gave a commitment to an energy price cap a few weeks ago and I do not hear him talk about that any more.
I do not hear the Deputy talk about it any more. We can go through the debate we had earlier in the Dáil about his party's alternative budget, which has magically appeared on its website since we last spoke.
The reality is that it was not there. I am not going to demean the dignity of this committee by having to pick up my phone and show pictures of what the website was like before I made my point and what it was like after, but the Deputy knows there is a difference and I know what his party has done. He should not talk to me about the difference between what I said in 2016 or 2017 when I cannot even find out what he said a few weeks ago. Do not make that point to me.
Actually, the Deputy is right. I take that back. I should not have said that. The Deputy is fully entitled to make the point and I regret saying that to him. I respect the committee and the contributions that are made. What I will not take back is the point that the Deputy is talking about what I said in 2016 and 2017 when this morning I could not find what he said a few weeks ago. I will not take that back. If the Deputy wants, I can compare what Sinn Féin's website was like this morning and what it is like now. That is the difference.
Regarding USC, I have explained why that is not a policy I have implemented. I had hoped it would be possible to get a degree of integration between PRSI and USC but it turned out that could not be done in a simple or clear way. I acknowledge that. I have been before this committee on that report and explained why. What I have done instead, particularly within this budget, is tried to achieve the aim I outlined in 2018 or 2019 of ensuring somebody on an average wage does not pay the higher rate of income tax. With the exception of Covid and Brexit, when I did not make any changes to tax, I have implemented that ambition step by step. I have done it in a way that is affordable and I have done it inside the parameters that I committed to in different budgets.
I will bring in Deputy Boyd Barrett and Deputy Doherty again. I will then bring this to a halt as quickly as possible because we cannot keep repeating the same thing over and over without making progress.
That is a fair point. Largely, the discussion has been aired. I do not think our proposals are in any sense magicking money out of the air. We think it is entirely legitimate and justified to replace the USC, which was an austerity tax. Commitments were given to replace it, which is still a reason for very considerable anger among ordinary workers who saw their tax burden increase very significantly. That is a fact. The amount of tax paid by ordinary workers dramatically increased on foot of the USC. It still significantly dwarfs the tax contribution of corporations in the total amount paid. That is also a fact.
I contest what the Minister said about the percentage that corporations are paying in tax. I am curious to see the projections for 2022 if the Minister can provide them. The most recent figures, which are those for 2020, show €193 billion pre-tax profit for corporations, while the total of corporation tax paid was €11.833 billion. That equals 6.1%, not 10%, 11% or 12.5%. As the Minister knows, there are myriad tax reliefs available. The Committee on Budgetary Oversight is examining those reliefs at the moment. I call it the shadow budget of tax reliefs, credits and breaks from which corporations benefit. Those are never properly examined or listed in the budget documents. They roll over, year after year. Some of those arrangements may be justified but many of them are not. Some of those arrangements are never properly examined in respect of what benefit they are serving or what objective they are realising. One dramatic example in this year's budget to which I have pointed is the shocking increase in intra-group transactions. Single tax relief in the amount of €35 billion. It is, as we all know, about profit shifting. It is about one subsidiary of a big IT company charging another subsidiary whatever it wants to charge for the use of its own intellectual property. That allows such companies to shift their profits. We all know that is the case.
The Minister says that adopting our proposals would scare the horses and do untold economic damage and so on. Some of us challenged the double Irish loophole, which was the previous mechanism through which many of these profits were shifted, and that was closed eventually. Did that closure have a disastrous impact on the amount of tax revenue collected? The situation was quite the opposite. When the double Irish loophole was closed, the tax revenue to the State from the corporate sector increased. It was a part of a more general move across the world that the Minister is not taking into account. There is a growing awareness that these multinationals are making obscene profits and that there is a problem with this at many different levels. We are seeing one possible fallout from that in all the redundancies that are being made at the moment. Elon Musk, a man driven by ego and greed, can just decide that thousands of people are going to lose their jobs. That is the price we pay for letting these companies get that rich and for whole economies to be dependent on them. There is a long-term price to be paid, as well as the growing and gross inequality in the distribution of the world's wealth. Unless that is addressed in a serious way, there will be far more untold consequences.
I do not think we should give corporations all these tax breaks and reliefs. We should make them pay a minimum effective rate on their pre-tax trading profits. Before they get any reliefs, deductions or allowances, they should pay at least the 15%. I would go higher, frankly, but that would be the minimum I would suggest. They are not paying anywhere near that level of tax. The taxable profit is far less than the pre-tax profits because of all the reliefs, allowances and deductions they can make. They can effectively write their own tax bills. Our tax code allows for that. The situation for corporations is in stark contrast to that for, say, a cleaner who cannot do the same thing.
The Nevin Economic Research Institute, NERI, conducted a study on wages last year that might be worth looking into. These are the things that could be looked at in these kind of reports. The NERI study suggested that the gap between the lowest percentile of workers in this country in the context of earnings and the highest percentile is far greater than in any of the other high-income European countries. There is a very considerable difference. The gap is approximately twice the size of the gap in Sweden and some of the other Nordic countries. It is even greater than countries such as the UK and Germany. There is excessive inequity between the lowest and highest earners in this country and that needs to be addressed.
I will reply to the Minister. We value foreign direct investment, FDI, jobs in south Tipperary and west Waterford. Merck has been there for 50 years and there are other FDI companies that we also value. The statement that we cannot even have a report or express our thoughts on a report in case companies flood out of the country is, frankly, beneath the level of debate required. That is not a fact, as we saw with the closure of the double Irish loophole. Governments resisted calls for its closure for years, as Deputy Boyd Barrett alluded to. I mean no disrespect whatsoever to the officials, but I wonder are they so deep in the bunkers of the Department of Finance that they do not want anyone looking at them. One would have to be a peeping Tom to get in. They are minding all these secrets and ideas that cannot be allowed out.
I have another example of things that are beneath the Minister's office. The Rural Independent Group requested a meeting with him to present our budget submission. He refused point blank to meet us. We made several such requests. We are a group of six Deputies elected by the people. We went to great effort to put together our pre-budget submission. The proposal for a meeting met a point blank refusal. Before the Minister responds to tell me otherwise, I know he offered a joint meeting involving the Regional Independent Group and us. The Regional Independents did not want that and we did not want it. We got no meeting because the Regional Independent Group did not want us at its meeting. One can understand that because we are two completely separate groups. We were closed off from the Department of Finance. I have fond memories of attending meetings with the former Minister for Finance, the late Brian Lenihan, God rest him, and others. However, the Department must now be in a bunker-like mentality if we cannot even discuss something or give an indication of ideas about anything because there may be spies watching from the Merrion Hotel to see who is going in or what is happening. It is farcical to say that a report could not be done because a certain opinion might be expressed or that is contents might be misinterpreted as an indication of what might happen in next year's budget. That does not cut it with me. It is reprehensible that the Minister did not meet us, as a group, in advance of the budget.
The Government's main promise in the 2016 election campaign was the populist promise to abolish the USC at a cost of €5 billion. That has gone. The merger with PRSI, which was argued for by the Tánaiste, Deputy Varadkar, was to reduce taxation but it has gone as well. The Tánaiste, who is the Minister's party leader, has a habit of making announcements. He announced the removal of €5 billion in tax, which has since been abandoned. He announced the merger of PRSI with the USC, which has also been abandoned. He has now announced a 30% tax rate, the cost of which, according to a reply to a parliamentary question I received from the Minister, will be €1.72 billion. Is that still on the cards? Where will that €1.72 billion be made up? The Minister's officials have recognised that it will not benefit low- and middle-income earners but that it will benefit those who pay at a higher rate, which is approximately 24% of workers. That €1.72 billion is the cost of the latest measure outlined by the Tánaiste. I do not know if the Tánaiste runs these things past the Minister before he makes these commitments. Is that tax rate still on the table? Is the Government going to proceed with it? Is it going to introduce a 30% tax rate? If so, where will the €1.72 billion come from each year?
In response to Deputy Doherty, as I made clear on budget day, the Government has committed to an evaluation of the idea of a 30% rate and given an indication as to the point next year by which we aim to have that work done.
We are doing that because it is a way of delivering the indexation of our tax code. However, it is not in line with what we have done over the past few budgets. Therefore, I made clear on budget day that while I believe it has considerable merit and would give us the opportunity to concentrate available resources on middle-income workers, it needs further work. I referred on budget day to evaluating how it would fit in with the rest of our tax code. That is something the Government is committed to doing. I believe it is a good idea. As I said on budget day, the Government will evaluate it and make a decision next year.
On Deputy Boyd Barrett’s remarks, I am aware that we are going to have this debate as we go through the corporate tax element of the Finance Bill. Fundamentally, the Deputy and I differ in that he sees every relief as an opportunity to avoid paying tax whereas I believe all the reliefs contained in our tax code are legitimate ways of recognising either investment within our country or how large global companies are structured in a way that provides employment in our country. We should always be open to reviewing reliefs and assessing where we stand. We have done a lot of that work through the OECD. Unlike the Deputy, I believe a relief that recognises the trading structure of big global companies and facilitates them in providing employment in Ireland is appropriate. This is what other developed economies and all our competitors do. I respectfully say to the Deputy again that I fundamentally believe the kinds of changes he is proposing would have a big impact on our economy. I do not believe they would lead to an increase in tax revenue. In fact, I believe they would lead to the opposite over time.
Deputy Mattie McGrath is right that I did not meet him. He has not had a good word to say about anything I have done or any budget I have produced for years. In meeting him, what chance would I have of his group ever agreeing to vote for a budget? That is the truth. If I discussed it with the Deputy-----
As I have been very happy to do, I have met many other Deputies in the context of budget votes to determine whether I could gain their support. However, as I said to the Vice Chairman, Deputy Mattie McGrath, despite his best efforts-----
I am happy to meet other Deputies who are going to approach what we are doing in a fair-minded, open way. We have made the resources of the Department available to Deputies for the development of alternative budget proposals and to help with their work, and that will continue.
On the Deputy’s focus on the bowels of the Department, I am not sure what he is referring to. All the work he is asking for is published in the tax strategy group papers, which are published every year and of which many Deputies around this table make good use in getting ready for the budget.
Obviously, the section brings the universal social charge into line with the increase to the minimum wage. The increase to the minimum wage is 7.6%. It is not even in line with inflation, or the hyperinflation we have at this point. The Minister will have seen other member states move with greater ambition than the Government. Germany, for example, has increased its minimum wage this year from €10.45 to €12 per hour. This is a 15% increase. The section is in line with an increase to the minimum wage that is not sufficient for low-paid employees. That is the reality. I encourage the Minister to consider what some of his counterparts are doing in other areas. We are aware that all wages are relative in terms of the cost of living and spending power. Before this crisis, Ireland was paying the most for electricity before taxation in Europe. The crisis has only made it worse. We were paying the most for childcare in Europe, and we have some of the highest mortgage payments, although it is evening out now. Nowhere can beat us in terms of rents. It is just crazy what has happened in this city. It has got to a point where it is no longer a housing issue. Rents in this city are now causing education and health issues. This is a complete and utter catastrophe. The point I am making on all this is that the minimum wage has not increased sufficiently, and the section gives effect to the tax changes to the minimum wage.
I will cite an instance of that because it is always worth thinking about real people. Private security workers have become very active around their low pay. The committee will be aware of an employer - I probably cannot mention him but his name is well out there - who is trying to block a very minimal pay increase for private security workers. The current minimum level of their pay is below €12 per hour. The increase they would get under the employment regulation order, ERO, would bring it very slightly over €12, but only marginally. When we consider what private security workers did for this country during Covid, and what they do every day, we see that they are an example of the hidden heroes who did not get much air play during Covid. They provide security on public transport, at hospitals, for lots of public buildings, and in a whole range of other areas including supermarkets. They are on absolutely pitifully low pay. We could help them by providing for a dramatic increase. We could overcome the attempt by their employers to block the miserable little pay increase they were supposed to get under an ERO - and we could save the private security workers all of this campaigning - by having a fairly dramatic increase of the minimum wage to a living wage. Our view is that it should go to at least €15 per hour. The Minister will probably think that is going way too far. I would say it is the minimum people need these days to be able to survive and sustain themselves, and even at that they will be struggling. At the very least, it should be increased to the official level of the living wage. All of the words about the rewards we were going to give to workers when we realised how important they were during Covid are meaningless if we do not increase the minimum wage to some kind of actual living wage. This needs to be far in excess of what we have done with the minimum wage increase, which is fairly derisory, if we are honest, against the background of the current cost-of-living and rental crises. I put this to the Minister. I give a particular shout-out to the security workers in Unite who are campaigning around these issues and insisting that they should be paid decent pay for the work they do.
Gabhaim buíochas leis an Aire agus lena gcomhghleacaithe a tháinig isteach chuig an gcoiste inniu. The Deputies have raised an interesting point. We are discussing people who are on very low wages. As an Teachta Boyd Barrett has pointed out, those who worked on the front line during the Covid pandemic provided services and took care of things when many of us were told to stay at home to protect ourselves and others from the global pandemic, and were able to do so.
There are workers who are still waiting for the pandemic bonus. Many of them were here this week and met with a number of different representatives in the audiovisual room. I had met with them previously in Galway University Hospital. They still do not have clarity on the issue. I refer, for example, to the security people who did security in our hospitals during the pandemic. They still do not have clarity around when they will get the pandemic payment. These people are on very low wages.
I agree with the two previous speakers that we need to look at the minimum wage. It is worth noting that many of these workers are still waiting on that €1,000. Obviously that payment would make a significant difference for them given their very low wages, but it is also a matter of respect for them at this point. Given that we are discussing these matters, this is also important to mention.
I organised the meeting at which Deputy Farrell was present. It speaks volumes that contract cleaners and security guards who worked right throughout the pandemic on the front line in our hospitals, and who put themselves at risk, had to take time out of work to attend a meeting in Leinster House with their union to drive home the reality of life for them. It is disgraceful that they have yet to be paid by the HSE, enabled by the Minister for Health, and to have access to a payment for which they are eligible. This speaks volumes about the bureaucracy and how the bureaucracy does not serve the interests of all citizens. It is important that a signal is sent that this money, for which they are eligible, will be paid before Christmas. They have waited long enough.
Deputies Doherty and Boyd Barrett raised important points on issues that are close to my heart, as the Minister will know. It is extraordinary that every time an ERO or sectoral employment order agreement is signed off by a Minister, one or another rogue company decides not to comply with the national law. Such companies decide to march up to the superior courts, in the first instance to challenge a decision of the Minister to sign an order that has been done in compliance with the law, or in the second instance to challenge the architecture of legislation that has been endorsed and approved by this Oireachtas, the previous Oireachtas or indeed the one before that in line with principles that have been in place in this country since the foundation of State, and in fact before it, that promote the idea of decency in the workplace.
The ERO for the security industry, which was signed by the Minister of State, Deputy English a couple of months ago, has had an injunction served on it by an organisation that was involved in the joint labour committee process. Opportunism does not describe it - it is quite disgraceful. I ask the Minister to use his good offices as Minister for Finance to intervene with his colleagues to establish if the State will challenge the substance of the case that is being taken by that particular security company. I also make the point that the injunction itself should have been challenged. It appears to me that the injunction is not being challenged by the Department of Enterprise, Trade and Employment. It is a separate matter and I only mention this because it was referred to by colleagues previously.
Any increase in the national minimum wage is welcome. We have had an established process since 2015 to examine what the rate of the national minimum wage should be. I note from media reports that the Tánaiste appears to have brought a memo to the Cabinet yesterday in relation to the evolution of the minimum wage and the transformation of the national minimum wage into what the Tánaiste would describe as a living wage. There are different arguments as to what constitutes or comprises a living wage. The Irish State and the Government have decided to pitch the living wage at 60% of hourly median income. In fact, the norm across the European Union is 66%. That being said, the Low Pay Commission report has said very clearly that in time the living wage may evolve to being 66% of median hourly income, and that prospect is being held out. That is important. We cannot, however, have a rebranding of the national minimum wage. It must be a real living wage that meets people's basic needs and wants. This is not about luxuries: it is about basic needs and wants so that people can live with some dignity in this society. To be frank, there is a lot of cheerleading going on about how great it is that we are moving towards a living wage. It cannot simply be a rebranding. The reality is that we are moving towards higher rates of national minimum pay because of the looming EU directive on minimum wage. It is as simple as that.
There is a requirement to do that. It is not as if there has been some Pauline conversion in the Government. That being said, I welcome the commitment and I do not for one minute suggest that there is not a commitment across Government, even though we will differ on the direction of travel and so on. Any commitment to improved pay and conditions for working people is important. We cannot have simply a rebranding of the minimum wage; it has to matter.
I support what the previous Deputies said. It is horrible what is happening with the rogue industries and rogue operators that are in this. In general, they are very well mannered and well operated. There are some great operators and excellent staff. They did and are coming to the fore. For instance, our hospitals could not and cannot function without them. Unfortunately, they are needed for security and everything else, which is a recent phenomenon. They also provide security on public transport and everywhere, including public Government buildings. They are on such a paltry sum and are not getting due recognition and they did not get it in the budget either. I want to support them.
I compliment them on actually holding that briefing. Unfortunately, I was late and when I got there it was finished. There are many people in my constituency who do great work and work for good companies and good employers. However, there are rogue areas that need to be dealt with. The authority looking after them is in Tipperary town, but I have met with them because there are rogue elements. They do not have proper attire, proper numbers, identification or anything else. However, that is for another day. We need to support them. Also, the retained fire officers need to be supported.
It beggars belief that these people who operated throughout Covid, and many HSE staff as well, still have not gotten the €1,000 they were promised. We stood up and clapped for them in the Dáil. It is only six and half weeks from Christmas. It is just unthinkable that it is bureaucracy or something else that is holding it up so that they cannot get the money they are entitled to get and worked so hard for at a time when there was fear and many of us were at home. They put their heads on the line, went out, shouldered up, manned and womaned up, and did their work and they are entitled to be paid for it. It is appalling that in the sectors of security, as I said, retained firemen and HSE attendants and some nurses as well in nursing homes still have not got it.
Regarding this section, there is huge disappointment in the music industry that there was not something they went to bat for, mainly for small bands of one or two people. Across the industry and certainly in the case of smaller musicians, people had a horrid time throughout Covid and are finding it difficult to get back up on their feet, notwithstanding the schemes that were there, which they accept and appreciate. However, we are now in a different era and things have changed. We have the second highest VAT rate in Europe. People expected that they would get recognition with lower VAT rate in the budget, but they did not.
I thank the Deputies for the points they raised and thank Deputy Farrell for coming in on this matter. I absolutely appreciate that the minimum wage makes a very important difference to many people within our society. I know the argument is sometimes put forward that the number of people who are on the minimum wage is comparatively small within our economy and by moving the minimum wage up it has a positive impact on the wage levels above us, thus delivering a wider benefit to more workers. However, we have 165,000 people who are on the minimum wage in this country. That is a lot of workers who are working hard for what is a minimum income. The Government, in its decisions on the minimum wage, has to accept a recommendation that gets the balance right between trying to support those who are on low income and recognising that their employers at times are also facing challenging circumstances. We also have to be aware of the viability of those employers, particularly employers in the service sector that employ many people. The Low Pay Commission tries to get that balance right and recognise it. Therefore, the Government accepted a recommendation that came from them of 80 cent per hour, increasing it to €11.30.
Some Deputies make the point that in other countries that increase may look larger. However, one has to see it in the context of the cost of living within the Irish economy. That being said, as the Tánaiste has recognised, we acknowledge that for those 165,000 of our fellow citizens who are on this income, it is particularly tough at the moment with the rising cost of living. That is why there is an interdepartmental group in place to consider this very matter, the concept of the living wage and the relationship between the two of them. This is something that the Tánaiste’s Department is currently considering. However, the actual level of the increase that Deputies are referring to now is not a matter for a Finance Bill, as all Deputies know. I accept that they are raising the general point here.
On the availability of the pandemic payment, I will pass the views of colleagues onto the Minister for Health. They have raised this with me on a number of occasions. I understand that the majority of those who were eligible for the pandemic payment have been paid and the payments have been processed. That was my understanding. In an effort to recognise the value of these payments and the contribution these workers have made to the economy, in last year’s Finance Bill we made the decision, with the support of the committee, to exempt the pandemic payment from income tax. We recognise the importance of this payment and the desire for it to be worth as much as possible to those who are receiving it. However, the issue of people not having received the payment is clearly still a very live one. I noticed that Deputies, particularly Deputy Nash, commented on the eligibility of some of the workers; Deputy Nash made the point it appears they are entitled to the payment.
I am not as across the detail of that as the Minister for Health and those who are involved in the payment are, but I will certainly raise that matter and see whether I can offer assistance in dealing with it. I know there are some who believe they should be eligible but are not, but I am not aware and cannot give an informed answer to the point that Deputy Nash just made a moment ago.
We must proceed. We have 164 amendments, and at the present rate of progress, we will probably get to them by Christmas Eve; I am not relishing the prospect of being here on Christmas Eve. We should all try to do our best here. We will try to give everybody an opportunity to speak. In order to do that, we have to move on. Within section 2, the proposal was that a new section be inserted and the amendment is withdrawn. I queried whether there would be a vote but there was not. The section stands.
I move amendment No. 2:
In page 10, between lines 10 and 11, to insert the following:
“Report on abolition and replacement of Universal Social Charge3.The Minister shall, within three months of the passing of this Act, produce a report on abolishing the Universal Social Charge for all those earning less than €70,000 per year and replacing it with a National Solidarity Tax on the incomes of those earning in excess of €150,000 per year and on the profits of companies whose net profits exceed €1,500,000 per year.”.
I move amendment No. 3:
In page 10, between lines 12 and 13, to insert the following:
“Report on the treatment of construction defect levies 3. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the design and cost of a scheme for the granting of tax credits in respect of—(a) payments within the previous 15 years made by an owner-occupier to his or her owners’ management company (within the meaning of the Multi-Unit Development Act 2011) on foot of a levy imposed to remedy any construction defect in the multi-unit development concerned, andwhere “construction defect” means any defect arising from the design of, or workmanship or materials used in the construction of, the development or dwelling concerned.”.
(b) costs directly incurred within the previous 15 years by an owner-occupier of a dwelling to remedy any construction defect in the dwelling concerned,
This amendment relates to those living in defective apartments. This is an issue with which the committee, the Minister and, indeed, the entire Oireachtas will be familiar. In order to be helpful, I will read the amendment into the record as I believe it is important to do so. It relates to the report on the treatment of construction defect levies. It proposes that the Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the design and cost of a scheme for the granting of tax credits in respect of (a) payments within the previous 15 years made by an owner-occupier to his or her owners’ management company on foot of a levy imposed to remedy any construction defect in the multi-unit development concerned; and (b) costs directly incurred within the previous 15 years by an owner-occupier of a dwelling to remedy any construction defect in the dwelling concerned, where "construction defect" means any defect arising from the design of, or workmanship or materials used in the construction of, the development or dwelling concerned. The amendment is self-explanatory.
By way of context, the Labour Party proposed a similar amendment last year. The difference between that discussion and the discussion we are about to have is that we can now rely on some of the recommendations of the working group report that was published in July. We know the report is very clear in several respects. It states the Government should provide financial support to owners who have paid, or are paying, remediation levies, be it through their management company or by taking on personal responsibility for works to avoid moral hazard. There is also the question of equity and fairness in the treatment of those who own their apartment and landlords, which I will come to later.
The Minister will be aware, from his constituency work and in representing the interests of those living in apartments with construction defects, of fire safety and general structural risks, as well as the investment people have made in recent years to make sure they can remediate and mitigate some of the risks that exist. This involves a substantial financial outlay. Given what we know from the working group report, the last thing anyone wants is for a discontinuation of works that have already been undertaken. There is a real risk in that regard.
This has been going on for far too long and we need clarity on what kind of financial support the Government will make available to apartment owners to assist them in addressing and remediating the defects in their apartments. There is a moral hazard question in that, which the Minister will be aware of, and on which the working group is clear. It is a significant question and it needs to be addressed.
On the equity and fairness, I acknowledge the Tánaiste's comments in the Dáil on 14 July in response to a question posed by my colleague, the Labour Party leader, Deputy Bacik. He said: "It would be unfair if those who have made a contribution already did not get any State support while those who did not or could not did." We can all agree that the Tánaiste is correct in this regard. On the principle of equity, landlords can claim back business expenses if they have invested in or remediated any properties they own. That same kind of financial support and assistance does not apply to ordinary owner-occupiers living in their apartments who are fearful of the risk to them, their family and their property.
This amendment seeks to concentrate minds and calls on the Department of Finance and the Department of Housing, Local Government and Heritage to focus on the granting of tax credits to those who have already paid to have remediation work done on their apartments, and that work is ongoing, and to ensure that any costs directly incurred over the past 15 years are addressed through some mechanism. We propose a mechanism whereby tax credits could be applied for work that was done over the past 15 years.
The last thing we want to see is a lack of clarity and more uncertainty, which has been a problem. Otherwise, we will see the stalling of fire safety remediation works. We do not want that to become widespread because of the inherent health and safety risks involved.
I welcome this amendment from Deputy Nash. Sinn Féin's housing spokesperson, Deputy Ó Broin, has put forward similar proposals in terms of those who are impacted as a result of defects, which are concentrated around Dublin and urban areas. There is also the defective block issue, which we will discuss later when we talk about the levies. I will contain my comments to multi-unit developments and apartments in general.
A working group has been established, which has applied its own criteria in terms of defects. I welcome the amendment. Construction defects need to be better defined because it is not just about defective workmanship. The intention in this amendment relates to fire safety, water ingress, structural issues, and so on. As we consider all of this, we must look at how we deal with those who, through no fault of their own, with safety concerns for themselves and their family were forced to take out loans or borrow money to do repairs or patch-up jobs in their apartments.
This amendment calls for the provision of a report. It would be timely, if not overdue, that officials and Revenue examine what this means and how it could be applied. It is not something that will be straightforward because works would be carried out where receipts and proof would be difficult to obtain. I am not sure if there are past examples from which we can learn or some from other jurisdictions. A comprehensive report about this needs to be done.
There is an issue of fairness. These people and future Governments are and will be cleaning up the mess of the lack of regulation in this sector. The people who bought their homes or apartments, in Donegal or Dublin, should not be paying the price for the cowboy, cavalier attitude that was allowed to persist at the time of the Celtic tiger, which was pointed out to Government at the time. Therefore, it is within that rationale that the Government has a responsibility to step in as it allowed and facilitated this to happen.
As we look towards remediation for work that will be carried forward, I am sure there will be schemes there and hopefully it will be more straightforward and not as tortuous as the process we have for the defective blocks, which is still not adequate. We are still waiting for that scheme to be published one year after the Minister and Government promised it. Indeed, the Government forced us to rush through the legislation before the summer because there was such an urgency. Now we are in the mouth of Christmas and these poor families are waiting. What is happening is bloody ridiculous. It is absolute torture. I am not just talking about Donegal. It is impossible for anybody to understand families having to live in those houses. What is happening in Donegal is ridiculous. These houses are not safe and something will happen. It has been going on for far too long. On this issue there must be a scheme for those who have not had the defects addressed and for those who have. This is the intention behind Deputy Nash's amendment. We need to make sure there is some recourse for them also. Options being explored would be really good. I support Deputy Nash's amendment.
I would say the Department of Finance has a very particular responsibility to the residents and owners of apartment complexes that have fire or other building defects, and where the costs they potentially face are very significant indeed. They bear no responsibility whatsoever for the costs and defects affecting the apartments. Why do I say that? Previous Ministers for Finance - I acknowledge that it was before the time of the Minister, Deputy Donohoe - had given very significant tax breaks and tax incentives to encourage the property madness that was the Celtic tiger. One feature of that gold rush to make money in property was the abandoning of proper standards and building controls. Consequently, it is a fair assessment to say that almost anything that was built in the Celtic tiger period, not just multi-unit but especially multi-unit complexes and big estates, are very likely to be suffering from fire defects, lack of proper fire breaks between apartments in multi-unit complexes and between houses, other structural defects and failures to apply proper building control standards. I would say we are talking about tens of thousands of units, and many of the people affected do not even know. All of the property incentives put in place by previous Ministers for Finance were very much part of that . In this regard, I believe that the Department has a particular responsibility to assist the people affected by all of this.
Just like the families affected by the mica issue, who are asking for 100% redress by the State for damage to their homes that was not their fault, all those affected by failures to put in proper fire breaksand implement proper building fire controls, and by other building defects affecting their homes, should get redress. The responsibility of the Department of Finance also goes beyond that, certainly in respect of one case that I have raised with the Minister. Indeed, I suspect there may be quite possibly more, because many of the residential developments - estates or multiunit complexes - that are likely to be or known to be affected by these building defects may have been handed over to NAMA, which is a creature of the Department of Finance.
Carrickmines Green is one such example of that. Indeed I have submitted questions to the Minister on it and I have raised the issue in the Dáil on a number of occasions. At the end of this month NAMA is taking the residents and owners of Carrickmines Green to court because they do not want to sign documents or leases. The Department should be aware of the details I have submitted. I do not expect the Minister to know all the details now. NAMA is trying to put pressure on these owners and residents in Carrickmines Green who cannot sell their homes. They cannot get insurance or it costs an absolute fortune to get insurance. The cost has gone up exponentially because there are not proper fire breaks in the whole place. They are living in an unsafe building, but it has been taken over by NAMA's receivers and the receivers are now taking them to court because the receivers want the right to sell some of the units, even though they have not been remediated. NAMA's receivers will not remediate the people still living there and will not pay for the remediation to put in the fire breaks. They expect the residents and owners to do it, but they also want to put pressure on the same people to sign documents so that the receivers can sell other units which also have not been remediated. It is very questionable, to my mind, among other things. There is a slight caveat in that the details of this are complex, but I have submitted them. The residents' appeal to the Minister, very specifically in this regard, is to tell NAMA to tell its receivers to stop treating people who have building defects in their homes, through no fault of their own, in this scandalous fashion. It is outrageous. It is particularly outrageous because in other developments where NAMA was in some way involved, remediation was paid for. There is not even consistency in this regard. It is very shoddy treatment. I suspect the Minister is going to tell me that NAMA has its own mandate, it is not up to him and the receivers are acting on behalf of NAMA. I do not really accept that. I had many problems, from the beginning, with NAMA's mandate. NAMA is a creature of the Department of Finance. It seems to be that there should be intervention from the Minister for Finance with NAMA to say that it must treat these people properly. If receivers are involved, NAMA effectively therefore owns these places, and it should remediate. It should not be putting pressure and bullying the residents and owners in this way. It should be offering remediation.
I want to put that to the Minister as well as generally supporting Deputy Nash's proposal for a report in this area, which in my opinion should lead to a position of 100% redress for all those affected. It is a matter of urgency because, of course, there are many people out there who probably do not even know that the places they are living in are not safe. Some of them have discovered that. There was a very nice man who passed away a few years ago called Noel Manning. He was a fire expert. I remember him taking me to an estate on the north side of Dublin, which I will not name here. He had arranged with some of the people who lived out there to show me the defects. He was trying to blow the whistle at the time on the extent of defects in estates, from a fire safety point of view. The defects were not just in this estate; he had seen them everywhere and he was trying to blow the whistle. I raised some of the issues in the Dáil over the years. He said this stuff was rampant. In everything that was being built during this period, there were no proper fire breaks, the standards were inadequate, and the standards were not, in any event, applied. It was just absolute cowboy stuff. There was a gold rush to build stuff as quickly as possible regardless of proper standards. If they have not already discovered it, there are a lot of people out there who will discover that they are facing very big bills as a result of all this. I support Deputy Nash's proposal, but I also have a specific ask that the Department of Finance should see its responsibility for the reasons I have outlined. I also ask that it intervenes with NAMA, where it has involvement in this through ownership of estates or anything it has in its hands, or where receivers are acting on its behalf, to insist that it should not be treating people in this way. It certainly should not be taking them to court. It should be financing the remediation of these people's homes.
I thank the Deputies for the points they have raised. I will deal with the general issues that have been raised overall, then I will come back to the specific matter that was raised by Deputy Boyd Barrett in his intervention, some of which I have already dealt with in the answer to a parliamentary question that I provided to the Deputy.
In February 2021 the Minister for Housing, Local Government and Heritage established an independent working group to examine defects in housing in line with the programme for Government commitment. The Department of Finance was represented on this group. We contributed to discussions, but as noted in the report, we did not take a position on the final recommendations within the report as it is due to be considered by Government. That report was presented to the Minister for Housing, Local Government and Heritage on 28 July. It sets out ten recommendations in relation to the process of the remediation of defects. In relation to funding options, the report provides commentary and four options for consideration by Government. Taxation measures are but one possible approach. However, the working group concluded that further consideration should be given to how tax options might operate in relation to each tenure type. The taxation options presented include references to income tax relief and local property tax relief. However, the report states that any support must be considered in the context of Department of Finance tax expenditure guidelines. These guidelines state that any policy proposal which involves tax expenditures should only occur in limited circumstances, for example, where there are demonstrable market failures. In particular, a tax-based incentive should only be considered where it would be more efficient than a direct expenditure intervention. It is clear, from the working group's report, that the process of remediation is likely to take many years to complete, and that appropriate actions will need to be prioritised. It is also clear from the report that further work needs to be undertaken to assess the relative merits of each funding option, particularly as the estimated potential costs of remediation are so substantial, ranging from approximately €1.56 billion to €2.5 billion. In the circumstances, a report as sought, focusing on a tax-based approach to funding remediation actions, would be premature at this point, which is why I am not in a position to accept the amendment on this important matter.
In relation to the specific matter that has been raised by Deputy Boyd Barrett and the properties that he has referred to in Carrickmines, I am advised that the receiver, in his capacity as an agent of the developer and without any legal obligation or requirement to do so, has carried out substantial remediation works to the development that is funded NAMA, certification of which has been provided to the local authority. I also understand there is substantial litigation on the way with regard to this property and NAMA is not party to the litigation so it is not appropriate for NAMA or me to interfere with this ongoing legal case.
The Deputy is aware that I am not in a position to give direction to NAMA regarding how it handles a matter like this. I have to respect the independence of NAMA and its board and how issues like this are dealt with. I am sure that those who are involved in dealing with this case on behalf of NAMA are aware of the human issues Deputy Boyd Barrett has referred to. A general issue that came up in the interventions from Deputies was that of tax reliefs and comparing this with the tax reliefs that are available to landlords. However, it should be noted that for the tax reliefs that are available to landlords for remediation works, the costs of them are generally deducted when the property is disposed of and are therefore set against capital gains tax. The current operation of how remediation works are dealt with by landlords operates based on when the property is disposed of but overall a lot more work needs to be done on what the best option is for funding the response that is needed. It is for that purpose that accepting an amendment to the Finance Bill 2022 at this time would not be appropriate because it would give a preference to one of those options versus other ones when there is still a lot more work we need to do. I assess that we need to do that quickly.
I thank the Minister for his wide-ranging response. What I discern from it - the Minister can correct me if I am wrong - is that he and Government accept the principle that there are recommendations in the report on financial support for those who are affected. If the Minister is not accepting the amendment, which has been put forward in good faith to try to move this pressing and urgent question on, I ask him to tell me directly what he plans to do. What is the nature of the work that the Department of Finance and the Department of Housing, Local Government and Heritage plan to do over the next short period of time to address all of these questions? These are very pressing questions. When does the Minister expect that a decision will be made, with those who represent the interests of those who are living in defective apartments? When will there be some conclusion to this process? The Minister will accept that people have waited a long time for some clarity on this.
I have never accepted the argument about the independence of NAMA. The mandate of NAMA was set by Government and by legislation and Government can change that mandate. On other matters, I long thought it should change that mandate but this issue is a very big one and everybody acknowledges that. It is not certain precisely how we would go about giving redress to people; it could be through tax credits for example. I am more for direct expenditure than tax credits. It still merits making a report and that is why I support what Deputy Nash is trying to do with this amendment. We need to examine very quickly how we will ensure that there is 100% redress for people who have dangerous fire defects to their homes, water ingress problems and other structural building defects which will cost a lot to remediate. We must do this to prevent people from failing to get insurance at all or from having to pay extortionate insurance premiums. It would also pose serious difficulties for people being able to sell the homes they have paid for. These are serious issues that are blighting the lives of a lot of people. There are a lot of people who do not know they have these issues but who will find out at some point. We should start to go out proactively and find these places and find out where else is likely to be affected. I suspect the numbers will be pretty staggering when we find out because these builders were let run riot during a certain period in this country.
Where NAMA is involved there should be a specific Government mandating of it to ensure that NAMA or anybody acting on behalf of it has specific instructions on the way they behave and what they are trying to do. In his answer the Minister said that NAMA has to obtain the best achievable financial return from its acquired assets. That is one of the phrases he used in his response to me. I hope that is not interpreted by NAMA as absolving it from putting money into ensuring that the places from which it is trying to get a return are safe, that it does not want to pay the costs of making them safe because it would eat into its ability to get the best financial return. That would be outrageous if that were the case. In the same way we charged NAMA - not enough but to some degree - with ensuring a certain amount of social and affordable housing would be delivered. We said that notwithstanding NAMA's overall imperative to get a good financial return we wanted it to identify a certain amount of social housing. That was part of its mandate. It should be part of its mandate to ensure the proper treatment of people where they have acquired properties and are in this situation. Those people should be treated properly and NAMA should be responsible for the remediation necessary of those houses.
The Minister may have an update, which is very recent because some of the things he said were not in the previous reply. I take that on board but it would be highly surprising to me if the remediation the Minister suggested is full-scale remediation of the building defects because there would be no court case if that was the case. The reason the residents were not willing to sign some sort of release that NAMA's receivers were looking for them to sign is because that was their only leverage on NAMA to finance the remediation of the defects in their buildings. That is why there is a court case. They were holding out on financing the remediation, even though, and this is where the inconsistency comes in, in other neighbouring estates close by, for some reason there had been remediation and it had been financed. Why they were holding out in this case I do not know. Perhaps it is inconsistency between the receivers but that should not be allowed to happen.
I ask the Minister to look into this a bit more and to look into it with NAMA to see what can be done to make sure these residents are not being put through the ringer or forced into court unnecessarily. I ask that NAMA would have an overall approach of saying that if it has acquired a property or the loans attached to it then it will make sure that remediation is done and paid for and that the residents are not put on the hook for it.
I thank Deputies Nash and Boyd Barrett for bringing those matters forward. The State will have to respond to the issues that have been identified in the report, just as we have played a significant role in trying to help those families that have been afflicted by the awful consequences of mica being present in their homes. However, the Government has not yet decided how we will do that. At this point I cannot give Deputy Nash an indication on when that will be concluded but I know work is under way on it. The Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, has a working group in place that is evaluating and teasing out the recommendations he has received and my Department is present in that working group.
I am pretty sure that the Minister only met some of the groups that are involved in this in the past week or two weeks and he updated them on the work. I see that the Deputy is nodding so I think I have got that right.
I do appreciate that people want a quick outcome and that many of them are really worried about the future of their homes. The issue is being moved along as quickly as it can be. These are hugely complex matters with, yet again, huge amounts of money on which the State must make a decision.
I am very much aware of the debate that we have just had on mica, and all of the issues that developed and generated. Unfortunately, these are issues that we must confront again in terms of apartment defects. My Department has a presence on the working group that is evaluating the different recommendations that have been brought forward. We will play a constructive role in trying to bring this work to a close because I know of people who are being directly affected by it myself and I am very much aware of the stress and difficulty that they are facing. My officials have informed me that the timeline to complete the evaluation work is the end of this year. So the aim is that the Minister will have received the report from the working group. That will give him an assessment of the options that were recommended to him, and maybe provide some guidance on how we can bring this work, and this matter, to a better place.
On the general point that Deputy Boyd Barrett raised with me regarding changing the mandate of NAMA and my playing a role within it, I am afraid on this particular matter I very respectfully disagree with Deputy Boyd Barrett. I really believe that even in the most difficult of circumstances, such as this particular issue, it is a very slippery slope for allowing the Minister to be involved in issuing directions or being involved in particular commercial decisions. I do not believe that there is actually anything that would merit that happening. It believe that it is far better if these matters are dealt with independently by an independent board given the huge amounts of money and conflicting interests that are at stake that NAMA has to manage. That being said, as I said to Deputy Nash a moment ago, the work that is trying to move this difficult project forward should be complete and shared with the Minister by the end of the year.
I move amendment No. 4:
In page 10, between lines 12 and 13, to insert the following:
“Report on the treatment of cohabitants under the Taxes Acts 3.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the treatment of cohabitants under the Taxes Acts with regard to the differences in the taxation of a married couple and a cohabiting couple.”.
I will be brief as the Minister is familiar with the arguments. My amendment concerns the tax treatment of cohabiting couples and is an issue that I raised last year. As we know, there are implications for cohabiting couples, so couples who are not married or are not civil partners, in the context of the tax code. I am sure that the Minister will be familiar with the social welfare implications as well and the work that my colleague, Deputy Alan Kelly, has done on this, and the recent court case on the pension entitlements for widows and widowers. This is a very complex policy area and a complex area of law. My preference would have been, as I said last year, that the Tax and Welfare Commission might have looked at this issue. I had it in my own submission, so to the best of my recollection, I asked the commission to look at the matter but it decided not to do so. I ask the Minister to consider my amendment. I ask him to consider what options may be available to us in terms of the tax code and the social welfare system, albeit that that system is not an issue for the Minister present. However, this is certainly an issue for the tax code in terms of the 300 cohabiting couples in terms of the Taxes Act respecting and understanding the diversity of family formation in modern society.
I recall our debate on this matter last year. Deputy Nash has made a very interesting proposal. In today's society an increasing number of couples opt to not get married for a variety of reasons. Of course we also had a situation where there was a period when people found it more difficult to get married as a result of Covid-19. I think that this amendment is interesting enough for consideration especially given where we are, as a society, in terms of marriage. In times gone by the majority of couples did decide to get married but not anymore and I am interested in this proposal in the amendment.
In situations where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a separate and unconnected individual. Because they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to the other.
As the Deputy will be aware, the tax treatment of couples was reviewed and considered as part of the 2020 tax strategy group process. The income tax paper of that year included an overview of the tax treatment of couples and outlined the rationale for the different treatment between married couples, civil partnerships and cohabiting couples.
The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General of 1980. The decision was based on Article 41.3.1° of the Constitution where the State pledges to protect the institution of marriage. The decision held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income. The decision led to the current income tax treatment of married couples that is in operation today and the constitutional protection of Article 41.3.1° does not extend to non-married couples.
To the extent that there are differences in the tax treatment of the different categories of couples, such differences arise from the objective of dealing with different types of circumstances while at the same time respecting the constitutional requirements to recognise the institution of marriage. Cohabitants do not have the same legal rights and obligations as a married couple or a couple in a civil partnership which is why they are not accorded similar tax treatment to couples who have a civil status that is recognised in law as such. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social policy in relation to such couples.
It should be noted that from a practical perspective it would be very difficult to administer a regime for cohabitants which would be the same as that for married couples or civil partners. Married couples and civil partners have a verifiable official confirmation of their status. It would be difficult, intrusive and time consuming to confirm declarations by individuals that they are actually cohabiting. It would also be difficult to establish when cohabitation started or ceased. There would also be legal issues with regard to connected persons. To counter tax avoidance, connected persons are frequently defined through the various Tax Acts. The definitions extend to relatives and children of spouses and civil partners, and this would be very difficult to prove and enforce in respect of persons connected with a cohabiting couple where the couple have no legal recognition.
There may be an advantage in tax legislation for married couples and civil partners in the context of the extended rate band and the ability to transfer tax credits. However, the legal status for married couples has wider consequences from a tax perspective, both for them and for persons connected with them. The difference in tax treatment for married couples is not confined to income tax. It is a feature of other tax heads, such as capital acquisition taxes. Therefore, any changes in tax treatment could only be considered in the broader context of the tax system and future social policy development, given that the legal status of married couples has wider consequences than from a tax perspective. Accordingly, I am not in a position to accept the amendment.
I thank the Minister. One issue which often comes up at my clinics and which has happened to relatives of mine is that where people happen to lose employment, when they apply for social welfare, their cohabiting partners are included in the analysis. That concerns me because it can be difficult for people who are economically reliant on a partner when they want or need to leave that person. I ask the Minister why cohabiting partners are included when it comes to social welfare but not when it comes to tax reliefs. Is the Minister aware of tax relief being treated in this way in any other jurisdiction? People are considered a unit when it comes to social welfare but not when it comes to tax relief.
In response to the Deputy's point, in practical terms, that is the case. It begins and ends when somebody is alive. As we know from the recent court case, people cannot claim a widow's or widower's pension if their long-standing partner passes away. The Labour Party brought a Bill before the Seanad to try to amend the social welfare rules on the widow's contributory pension in order to try to capture the reality of that practical, everyday problem that more people will experience in the future. I accept and said in my earlier remarks that this is a complex area. Society has changed, and it is inevitable that social policy will change. I respect and understand the Murphy case. That should not prevent us from accepting the reality that society has changed and will continue to evolve. The diversity of family formations is here to stay. This should not stop us from carrying out a detailed examination of the issue and how we may need to reform our tax codes in the future. It will not be today or tomorrow, but we need to prepare for it and accept that we need to prepare for it.
I understand the reason for the difference that Deputy Farrell has referred to is that there was Supreme Court case, Hyland v. Minister for Social Welfare, that has led to a change in the treatment of non-married cohabiting couples in the social welfare code. I understand that the court ruled that it was unconstitutional for the total income that a married couple received in social welfare benefits to be less than the couple would have received if they were not married and cohabiting. The current treatment of married and cohabiting couples in the welfare system has to be in line with this judgment. I accept the fair point that Deputy Farrell made, which is that there appears to be an inconsistency between how this matter is treated from the point of view of tax policy and the social welfare issue that we have just raised. I will ask my officials to prepare a note for the committee on that matter and will furnish that to the committee before Report Stage. The key difference, as I understand it, is between the Hyland case on social welfare policy and the Murphy case on tax policy. I will come back to the committee and explain why the maintenance of this approach is sustainable. I have little doubt that if it was not sustainable, it would have been tested in some way, given that the Hyland court hearing was in 1989 and the Murphy case was in 1980. I will come back to the committee with a note on that before Report Stage.
I agree with Deputy Nash's point that the diversity of family life is far greater and that it is changing as our country evolves. I understand that we had 1.2 million families in the State on the census night in April 2016. At that point, there were 76,715 couples who were cohabiting without children and a further 75,587 cohabiting with children, so there are just over 150,000 overall, or well over 10%. They represent a sizable number of citizens in the State. I believe that the State's policy development in this area is firstly a matter for social policy, with tax policy to follow in its wake. As I said, I will come back to the committee with the issue that both Deputies referred to regarding the perceived difference between social welfare policy and tax policy.
This section relates to the incorrect birth registration payment. The ordering of the amendments was confusing.
We support the insertion of this new section to facilitate this payment but we have serious concerns that this ex gratiapayment, along with the flawed Birth Information and Tracing Act, could be used as a means to avoid further interrogation of Ireland's illegal birth registration. In March, Sinn Féin called on the Minister to implement the recommendations of Professor Conor O'Mahony's outstanding exposé into illegal birth registrations. In 2019, an independent review of a sample of records held by Tusla and the Adoption Authority of Ireland found that up to 20,000 adoption records could potentially relate to cases of illegal birth registration, including the use of false names or false dates of birth, the absence of valid consent to adoption and profiteering from adoptions.
An independent review of a sample of records held by Tusla and the Adoption Authority of Ireland found that up to 20,000 adoption records could potentially relate to cases of illegal birth registration, including the use of false names or false dates of birth, the absence of valid consent to adoption and profiteering from adoptions. Professor O'Mahony's report was quite damning and recommended the establishment of a truth commission on adoption, claiming illegal birth registrations were not an isolated practice. He found that the State was aware of the practice of illegal birth registration for decades. St. Patrick's Guild admitted to the practice as far back as 1992. However, any action taken was ad hoc, piecemeal and significantly delayed.
Will the Minister initiate a thorough investigation in the form of a non-statutory State inquiry into illegal adoptions to determine the scale of illegal adoptions given that the actions taken to date have fallen far short in terms of remedying this egregious violation of people's human and identity rights?
I wish to clarify who is eligible for the payment to which the section of the Finance Bill refers. From the briefing I received from the Department of Children, Equality, Disability, Integration and Youth, I understand that individuals with a confirmed incorrect birth registration as of 30 September 2022 are eligible for this payment. In most cases Tusla has confirmed the incorrect registration with documentary evidence in the files of St. Patrick's Guild. However, in a limited number of cases an incorrect registration has been confirmed by other means. It is not proposed that the scheme would be available to birth or social parents and in addition it is not proposed that the scheme would be available to any cases of illegal birth registration that Tusla confirms after 30 September 2022. However, should Tusla confirm additional cases of illegal birth registrations after the enactment date of the Birth Information and Tracing Bill 2022, the Minister may review this cut-off date.
Deputy Mairéad Farrell made reference to important matters that have surrounded the adoption of this legislation. The issues she is referring to are very much outside my remit as Minister for Finance. They are matters that are being dealt with by the Minister, Deputy O'Gorman. I know he has taken very seriously the different issues surrounding this very difficult phase in our history and tried to bring forward legislation the Government believes is balanced, appropriate and fair. The matters the Deputy has referred to sit with the Minister, Deputy O'Gorman, rather than with me. I have no doubt he and his Department are aware of the issues the Deputy has raised. This particular part of the Finance Bill just deals with the taxation of the one-off payments and seeks to offer some recognition of the hurt caused by ensuring that they would be provided for in the way this Bill intends.
The Minister is proposing a specific tax exemption on the one-off payment for people where there was an illegal or incorrect registration. Does it have an end date? I ask the Minister to repeat that date. He said it was subject to possible review if further illegal adoptions were revealed after that date. I think he gave a date of the end of this year. I ask him to repeat that date.
It deals with income tax, USC and PRSI. The nature of the payment, who receives it and over what time are not matters contained in the Finance Bill or matters for which I have individual responsibility in the Finance Bill. Of course, I have such responsibility collectively as a member of Government. I understand that in the original legislation that provides the framework for these payments, the payment is not available to cases of incorrect birth registration confirmed by Tusla after 30 September 2022. As I have said, should they be confirmed after the enactment of the Bill, the Minister may review the cut-off date.
Yes, it will. We are simply making clear that we are providing the legal framework that when the payments are made, they will be exempt from income tax, USC and PRSI. If the Minister for Children, Equality, Disability, Integration and Youth were to decide that another cohort deserved payments beyond 30 September 2022, those would also be tax free.
From the Finance Bill point of view that is fine. The exemption will continue. It seems very odd to have a date at the end of September 2022 for deciding who is eligible for the ex gratia payment. It is very likely that some people will discover that there were illegal birth registrations after that date. The Birth Information and Tracing Bill is only really happening now and many people still do not have all their information and records and will not know whether they might have been the subject of an illegal birth registration. It is clearly not the direct responsibility of the Minister for Finance. However, it does not make any sense. I accept the Minister has put a caveat on it, but that seems entirely arbitrary. It does not seem to make any sense that he would set that date. Surely anybody who is found to be at any point - certainly in the next couple of years or so - the subject of an illegal birth registration should be entitled to thatex gratia payment. I understand, at least, that the section in the Finance Bill does not have a cut-off date.
In fairness, the Minister for Children, Equality, Disability, Integration and Youth is also making clear that the Minister has the ability to review the cut-off date. I do not have the detail with me today regarding the justification for that date, but it is clear that it can be reviewed. I offer full assurance to members of the committee regarding how this issue is being dealt with in the Finance Bill. Section 3(2) states:
A qualifying payment made to a qualifying individual which is made on or after 1 January 2023 shall be exempt from income tax and shall not be reckoned in computing the total income of the qualifying individual for the purposes of the Income Tax Acts.
We set a start date of 1 January next. There is no end date.
I move amendment No. 5:
In page 11, line 6, after “section 19” to insert “or 32”.
Section 4 provides for an exemption from income tax for the Covid-related layoff payment, which is a payment to employees who were made redundant and who lost the opportunity to accrue reckonable service due to layoffs caused by the public health restrictions during the period 13 March 2020 to 31 January 2022. This payment is intended to plug the gap in the statutory redundancy payment. As statutory redundancy payments are exempt from income tax under section 203 of the Taxes Consolidation Act 1997, it is appropriate that the Covid-related layoff payment is also exempt. Section 4 also removes some obsolete references from section 203 of the Taxes Consolidation Act 1997 to tidy up the legislation. However, the draft provision, as set out in the Bill, was drawn too tightly and, as such, inadvertently narrowed the scope of the income tax exemption. The amendment addresses the matter.
Do we know how much money has been paid out under the scheme? I know it is not the Minister's Department that has the information. I also accept that the amendment relates to a tax exemption. As a matter of interest, however, does he know how much was paid out under the Covid-related layoff payment scheme and precisely what were the conditions of entitlement for the payment? The reason I am asking is partly because it was something the Debenhams workers were asking about. As the Minister will be aware, those workers were laid off during that period and had a long battle. They got nothing from the company and were only entitled to statutory redundancy pay, which, if I understand it, is exempt from tax. Is that right? The Minister is proposing that the Covid-related layoff payment also be exempt from tax. I am just curious, because it is something that the Debenhams workers have been looking at in the context of whether they could access it.
I will deal with the Deputy's three questions. The statutory payment is tax-exempt. On the eligibility criteria, the payment will apply to workers who have been made redundant or who will be made redundant in the next three years and who lost the opportunity to accrue reckonable service due to layoffs caused by the Covid-19 restrictions from 13 March 2020 to 31 January 2022. The amount an eligible worker will receive will depend on the length of time for which he or she was laid off due to Covid-19 restrictions before the date he or she was made redundant. The calculation for the period of a layoff is based on existing redundancy provisions. On those who have accessed it and how much has been paid out, up to 30 September 2022 we had received 2,342 applications, of which 2,262 had been processed. The total amount of money that has been released under the scheme is €901,846, and €10 million was allocated for the operation of the scheme.
Yes, but as I said, it is available across the next three years. It could be the case that there are people who are yet to be made redundant. When they are made redundant their entitlements will have been reduced due to the impact of the Covid restrictions, so that amount could yet be drawn down in the time ahead. Of course, it is a demand-led scheme. The costing of these things can sometimes be a challenge. I imagine the difference between the €901,000 and the €10 million is the result of the fact that it can still be drawn for a number of years.
We are up against time here. We are due to conclude our deliberations in 15 minutes. I hope we can dispose of the section. This section involves an extension of the help-to-buy scheme. I will not revisit it, but there has been a debate on the scheme, its impact in pushing up house prices and the desperation of people out there who will grab with both hands anything to help them to avoid being locked out of housing. In July, Mazars was commissioned by the Department of Finance to complete a review of the scheme. Mazars report contained a number of findings, but none of them is reflected in the Finance Bill. Why is that? This is a very expensive measure. It has cost €603 million. I would argue that this measure is a testament to the Government's failure to deal with the housing crisis. It is a man-made disaster and emergency because policies have allowed house prices to increase dramatically. The Finance Bill will lead to house prices increasing further. If the matter was not so serious, we could laugh about it. However, it is very serious. Many people are locked out of the market and others can no longer dream of owning their own homes. House prices have continued to spiral out of the reach of ordinary workers. As a result, drastic measures have been introduced in the last number of years to provide taxpayers' money to help people, and even with that, there is still a sense of hopelessness there. One of the things that has been mentioned by the Parliamentary Budget Office, PBO, is that this will push up house prices. The Mazars report states very clearly that there is a dead weight - I hate that term - which means that the majority of the money we are spending, which is the equivalent of €200 million per annum, is going to people who do not need it to purchase their own homes. That is bizarre.
The Minister challenged me earlier on about where the money would come from. Why are we providing €100 million to people the Department's independent report says do not need this money to fulfil the policy objective of being able to get a mortgage for their own home? That is going to increase. The report called on the Minister to increase the loan-to-value ratio, but he has not done so. It also called for a number of other measures, which do not appear to have been taken in the Bill. I do not know whether or not this is an ideological issue.
The Government does not know what to do in respect of housing. Everything spirals in the wrong direction, so all the Government can try to do is to provide money to taxpayers to be able to get them onto the housing ladder, despite the fact that the majority of that money is not going to taxpayers who actually need it to get onto the property ladder. Those are not my words; they are the words of the independent report. The report also states that the relief is availed of, on average, by households in higher earnings brackets. The report makes a number of recommendations, including that the loan to value should be increased to 80% from the current 70%. There are serious issues with the scheme. It is a pity that the question was not asked a few years ago when the scheme was introduced. Where is the measurement? When the Government introduces Finance Bills and we discuss them, in some cases we are trying to provide support and in others we are trying to raise revenue.
Some of it is trying to spur on activity and lead to behavioural changes.
How high will the Minister allow house prices to go? I appreciate he has only a number of weeks left in his position assuming his plans work out, but how far will prices have to rise before the penny drops with him that he has done something wrong here? He has been sitting at the Cabinet table for whatever period and he has allowed house prices to increase to eye-watering levels. He has allowed the Celtic tiger peaks, which we thought we would never again see, to be surpassed in 2022. Rents in this city amount to more than €2,000 and 4,000 children will go to sleep tonight in emergency accommodation, and that is not even the biggest issue. The scars, the effects and the trauma those families are going through and will carry with them are real and tangible.
This is a man-made problem, and I put it to the Minister, although it is not personal, that he is at the helm of creating this crisis in housing. The section before us is a testament to his failure to get housing under control and to the fact the Government continues to miss the targets, which are abysmally low. All that, along with rolling out the red carpet to investors and vulture funds, which are pushing up house prices for ordinary families, has come together to create this situation that is a nightmare and catastrophe for ordinary people who are trying to own or rent their own home, or for people who just want a safe roof over their head. The Government is about to see something that is far bigger than housing because this is going to impact across the spectrum, such as on education and health. What is happening is an unmitigated disaster that is a testament to the Government's policies.
It has ignored the expert advice, but it has been doing that for years. Where is this going to end? The Minister cannot just come to this committee every year with policies that push up prices. It is not just us in the Opposition pointing this out; some of the most senior officials from the Minister's Department have indicated that these policies will push up house prices. The defective concrete products levy will push up house prices, as will the shared equity scheme and the help-to-buy scheme, as the Parliamentary Budget Office, PBO, has predicted. The Minister cannot just ignore that and say we need to give taxpayers' money to people who do not need it to purchase their own homes.
If I came before the finance committee and told people, as the Mazars report suggests, that €100 million, or 53.3% of this support, will go to people who do not need it to own their own home, I would expect my colleagues in the committee to run me out of here, but the Minister does this every year. That is €100 million of taxpayer expenditure while, at the same time, so many areas are starved of necessary resources. Indeed, it would be far better to put that money into building homes at affordable prices. It is so frustrating that this is the case.
It is difficult to understand the commitment of the Minister and the Government to the help-to-buy scheme, because it is not just the political Opposition that has been critical of it but pretty much every mainstream economist and economic thinktank. Just about everybody is saying this does not make any sense and that it will contribute to house price inflation. Like Deputy Doherty, I hate the term "deadweight", one of these technocratic phrases that are thrown around without people knowing what they mean in many cases. In any event, the money is not really getting to the people who need it, and it is difficult to understand the Minister's commitment to it.
People are caught in an absolutely desperate position between, on the one hand, rents that are off the Richter scale - my area is especially blighted with this, given rents there are the highest of anywhere in the country, with average figures, which increase every month at this point, running at about €2,500 a month - and, on the other hand, taking a risk of buying a house for in excess of €600,000 in my area, where house prices are also among the highest anywhere in the country. This applies even to the affordable housing. I cannot wait until we see the figures for affordable houses in my area because they are, effectively, just a discount on the market price.
Even in places such as Cherrywood, where the State has put a lot of money into the largest residential development in the entire State, we still do not know, years after lots of local infrastructure housing activation fund, LIHAF, funding has gone in, how much affordable housing we are getting and how much it will cost because we cannot square the circle with the level of house prices in the area. Any discount, even a substantial one, on those kinds of market prices is still going to be totally unaffordable, and that is for the "affordable" housing where the State has put in a lot of money to finance infrastructure and so on.
That is the background. The problem is house prices, the cost of housing. Taking steps that encourage people to get onto the ladder for mortgaging themselves up to the hilt for house prices that are off the wall echoes the madness that led to the most recent crash. When we add to that interest rates beginning to rise and expected to continue rising, these are the ingredients with which we could see a shocking repeat of what went before, with all the consequences that would entail. What has to be done, and all resources and tax measures need to be applied to this, is that we bring down the cost of housing. Anything that is not doing that or, worse, that is driving up the cost of housing is a mistake, even if people in their desperation think this is a way for them to get onto the ladder. The question is whether they are going to be caught, as so many people were the last time, with-----
I will just make three points in response to the issues raised, and I will confine them to what was said about the help-to-buy scheme before I get onto broader housing issues. The total proportion of house transactions, for the last year I have available to me, 2021, that were covered by help-to-buy was approximately 13%, up from 12.7% in 2020. I do not accept that a scheme that covers such a minority of the total number of house purchases and transactions within the State has the inflationary effect the Deputies claimed.
In regard to the Mazars report that was brought forward, which Deputies referred to, they are correct. I have taken a stance different from some of the recommendations in the report, but they omitted to point out that the report recommended the scheme be continued for a further two years. On the issue of pricing, the report states, "There is not definitive evidence that [help-to-buy] pushed up the price of new houses". On the impact of output, it states, "As a demand side impact [it] did not appear to have much impact on prices". With regard to supply, it states, "The data analysis in this regard is inconclusive, although the output of certain types of houses – 3 bed semis in particular – did increase and some areas likely experienced higher output than they would otherwise have seen". The report does not say there is definitive evidence the scheme has had an impact on pricing, although it does indicate that there is some evidence it could have had an impact on supply.
As for the points made about deadweight, I accept that the need to include self-builds and to allow those who build their own homes to access help-to-buy means there is an element of deadweight associated with the scheme. However, the Deputies opposite me are saying they would not give any support to the 5,477 people who bought their own homes this year, the vast majority of whom are not on the affordable purchase schemes, which are only growing, because they would remove help-to-buy. The Deputies' view is that those 5,477 people and the 7,673 people who received help from help-to-buy in building up their deposits should not have received that support and that this scheme should not be in place. I differ with the Deputies on that. It has been a long-standing feature of the Irish tax code or expenditure policy for many years that some help is provided in the purchase of one's first home. The design of any scheme - and I have considered alternatives to help-to-buy for many years - will have pros and cons. I believe it is appropriate that we look to offer help to somebody buying his or her first home. I do not accept that a scheme that influences 13% of transactions has the kind of inflationary effect the Deputies allege.
To be clear, it is absolutely not my intention, nor is it an explicit aim of the Government's housing policy, to drive up property prices. I accept that prices have been going up, but we are trying to moderate them and to bring them down through increased supply of homes. It is worth acknowledging that in the 12 months up to September of this year, close to 28,000 homes or units were completed, which is one third higher than the figure for the same period a year ago.
I wish to indicate that I may bring forward some amendments in this area on Report Stage.
We reserve the right to bring back on Report Stage all the amendments we have tabled.
The Minister did not respond to the point that 53% of the support under the scheme is going to people who do not need it. The Minister intends to end the scheme. At least, that is what he tells us. What he does is extend it here every time, despite the advice he gets from officials and independent advisers.
The Minister flagged amendments on Report Stage. I do not know what those are but, in line with the timeframe and the practice that has always been there, I ask in respect of any amendments on Report Stage, given the technical nature of the legislation, that the speaking notes be supplied to members of the committee. In fairness, the Minister has always facilitated that.