Richard Bruton (Dublin North Central, Fine Gael)

That is the background to the Finance Bill. People look on this country as one with a tremendously successful economy which has yielded extraordinary wealth to the Government. However, we have not achieved what should have been achieved and this will be the core issue on which we will go to the country in the election. Much money has been spent, but too much has been left undone. People will look at the alternatives and decide whether we should have another five or ten years of what we have had or whether it is time to look afresh at the appetite for change.

Unfortunately, the Bill comes from the same stable as so many before it. It is disappointing on many fronts. It reinforces the strong bias against families, which is contrary to the sort of social policy we should see; it fails to square up to the environmental challenge, the urgency of which we become more aware daily; and it continues to glide along with public spending which is growing 50% faster than the growth of national income. It does so on the basis of an increasing dependence on a property boom which we all know is unsustainable. The main problem is the Bill does not address fundamental issues at this time of great opportunity.

I would like to develop some of these themes, beginning with the issue of families and the way in which we inadvertently, not just through the finance and tax system, pursue policies that make life difficult for them. If families at work want to put a child into child care, even if they put all of their child benefit and the new under-six payment into child care, they will still have to meet another €145 per week. The cost of that in gross income is €13,500. Therefore, they must find that amount for each child in child care. If a family has two children, the cost of that child care wipes out the entire industrial wage.

As a result of this, people have to opt out of the workforce for a few years to care for their children at home, but the result is they are penalised further tax-wise, first by losing the PAYE tax credit, a whammy of €990 or approximately €1,000, and then up to €5,250 as a result of the individualisation bands. What sort of policy is it that has the effect that if people decide to opt out of work for a few years to engage in home care, they are penalised to that level? This inadvertently creates an environment where parents find it hard to cope. It is even deeper than this. If people separate, the tax system decides they should have four tax credits, whereas if they stay together, they should have two. If they happen to cohabit, are not married and only one is working, they are reduced to just one tax credit. Some crazy concepts underpin the way we treat families.

The situation is similar in other sectors, for example, housing. Many families now have to go into private rented accommodation. Why is it we decide these families only deserve €14 a week of total subvention support towards their housing expenses, while someone in a council tenancy gets 40 or 50 times this amount? Similarly, someone out of work would get 40 or 50 times, while someone purchasing a home gets five or six times that amount. Why do we apply these significant distinctions to the many families forced to go into private rented accommodation? We must focus more clearly on what we want to do to support families and this should inspire our tax and welfare system.

Let us look too at the welfare system. Many of the means tests, for example for higher education grants, medical cards etc., do not take account of the fact that two people trying to cope on one income have higher expenses. This fact is airbrushed out of the equation. However, that is the reality. We want to promote a family policy where people stay together and share the responsibilities of rearing families, but we promote the very opposite through our welfare and tax codes. We must get our minds around this and deal with the challenge to create a successful environment for parents. We see ever increasing problems of young people going astray in various ways and to deal with this we must try and support family policy in a more coherent way. Tax and welfare policy can contribute to this.

Environmental strategy is another area needing attention. If we look honestly at the Government record, we see the Government has failed to push the need to change if we are to comply with the Kyoto Protocol and use scarce resources more effectively. We have a most dysfunctional planning strategy which has continued. We continually force development further into green spaces leaving people with long commutes and areas without any traffic infrastructure support. This pattern has been passed as coherent development in the past, particularly in the past decade when we have built 500,000 extra homes and increased our housing stock by 50%. This was a significant opportunity to lay out or cement a coherent way of using resources, but it was let pass. We did not reform the planning system, impose the proper building standards on those homes or try to create compact systems of development.

The strategic development zone, SDZ, proposal was the right way forward, but as far as I know, Adamstown is the only area where the system has been applied. This is only one case out of 500,000 houses. This is not good enough and does not demonstrate coherent, joined-up thinking. There is scope within the tax code, even in one Finance Bill, to be more ambitious about trying to promote sound decisions about the type and location of houses etc. Development levies, VRT and other such duties could be used as levers to encourage this. Stamp duty could provide an opportunity when houses change hands to do something about energy standards in houses. We could create vehicles that would promote the sort of change we need, but this has not been high on the agenda.

I am baffled that we do not have an interconnector. I was spokesman on energy many years ago when the issue of an interconnector to the United Kingdom or beyond was mooted in order to open our electricity system to the use of more alternative sources and to provide a more efficient and competitive electricity system. Here we are, a decade on and billions spent on infrastructure, but the opportunity to achieve that core element, which should have been part of a strong environmental change in trying to achieve more balanced use of energy where we would be more reliant on renewable sources, has been missed.

We must have much more strategic thinking in government on these challenges, but we come in here and deal with the issues piecemeal. The Finance Bill results from all the various financial pressures and from the input of accountants and lobbyists, but it does not create a strategic picture about how we treat families or the environment. We have unwittingly created in recent years a bonanza in property revenue where approximately €100,000 plus from every new house built goes to the Exchequer. Stamp duty on an average house in Dublin is €41,000. For an apartment, the figure is now €30,000. Massive sums are being borrowed in the private sector. Everyone is aghast at how people could get themselves so deeply into debt, and the Central Bank has been wringing its hands. Let us not forget that at least €100,000 goes to the Exchequer for every new house built in Dublin, with another €41,000 if it is second-hand. The figures are obviously lower in other parts of the country. Even first-time buyers are putting in a great deal, and in Dublin they pay €33,000, even after the Minister for Finance's reform.

Stamp duty receipts have trebled in the last four years. The Central Bank is worried that borrowers are fuelling spending, and one cannot escape the fact that the level of Government spending seen in the last five years will not be sustainable in the longer term. One cannot increase spending 50 times faster than the growth in the economy other than for very short periods such as at present, with a massive property boom allowing such largesse in the absence of tax rises.

That is not a sustainable basis on which to build spending programmes, and we must return to a much tougher value-for-money approach to squeeze value from public spending. When one invests new resources, one gets real targets delivered. That is at the heart of the programme that the Labour Party and we have put together, The Buck Stops Here, in which we try to set out how we might squeeze extra value from public spending. In that manner, even in a more constrained environment such as we face in future, we can deliver in those key areas in which people have been so disappointed.

I will make some more specific points about the Bill. I know the tourism scheme concerns the midlands, and the Minister for Finance, coming from the area, will understand its benefits. I agree we need better tourism products; except in certain regions, we do not need much more accommodation. I cannot see that the lessons of the past have been internalised by those who designed the scheme. We were told that the first thing to do when introducing such a scheme is to assess its cost and benefits. There is no mention of what the cost or benefits might be, however, despite it being a prerequisite. It was at the core of all the consultants' reports, which were a foot thick. They looked back at such schemes, and after many years of their operation, found that we had procured only small benefits and that the cost of tax reliefs had been excessive. We had not designed or thought them through at the beginning.

I am disappointed there has been no attempt at a cost-benefit analysis of this tourism scheme, which may be wonderful for all I know since I do not know the area. However, I do not see any such attempt. One thing that has been taken on board is the need for certification, but we have not yet been told what the eligibility criteria will be. Somewhere in the Bill it states that they must have regard to a great many factors. Having to have regard to something is not a very rigorous test criterion, and we must beef that up.

Before we vote this through, we should see very firm criteria set out in order that we know exactly what will be included. We cannot leave that question to some large group established afterwards by a Minister for Arts, Sport and Tourism who, with the best will in the world, will wish to use the scheme to maximise investment. He will not think of the taxpayers or the benefit-to-cost ratio. For him, it is a tool given him by the Minister for Finance that he intends to pump for everything possible; anyone else in his position would do the same.

We must see such controls put in place, since this is the last time we will see the Bill, and the relief will continue for seven or eight years. Many of us present will no longer be in the Dáil at a time when the benefits are still accruing. We must take a more rigorous approach, since it is taxpayers' money rather than funds from some pool separate from what we spend on health, for example. We are deciding that tourism projects in certain areas are more important than investment in plant and machinery in a factory or in an industrial building. We are deciding that certain things are more desirable than others and that we will use taxpayers' money to make them happen. We must take that rather more seriously than hitherto. I am not saying that the pattern has been such, and I have always recognised the benefits of what the Minister has done. However, he has allowed cost-benefit analyses to slip into the past, when he must instead carry them into the future with equal rigour. That is missing, although it should be part of such schemes.

I am still concerned at the level of tax write-offs that we allow certain individuals who can manage the various schemes. The Minister for Finance is increasing the threshold for the business expansion scheme which is probably among the better examples in that it is based on risk rather than property. However, the Minister still allows someone, depending on his or her age, to put up to €100,000 into a pension scheme, with a tax subsidy of €40,000 or so provided on that pension each year. Then the person receives €250,000 from various reliefs if his or her tax affairs are managed properly. It is only thereafter that certain caps begin to take effect.

It all ends up with such people paying tax at a rate of 20%. If they are over the €500,000 mark, the Minister says they will pay 20%. Let us not forget that an ordinary person pays 41% on income earned above a threshold of €34,000. That is the reality, and these schemes would have to be extremely good to justify some paying 41% after €34,000 and others 20% on €500,000. That is the structure we have allowed, however, and the financial caps should be set at much lower levels than at present. The Minister did not introduce proper restrictions on such schemes. It is very hard to justify why someone on €34,000 should pay the same marginal tax rate as a multimillionaire, and certain such millionaires will be asked to pay tax at only 20%. It ought to be dealt with in a more clearcut fashion than in the vehicle invented last year as a first step.

I will take some credit for reclaimed tax. There is growing momentum on the part of the Department of Finance, Revenue and the Minister to take seriously reimbursing those who have overpaid. In a back-of-the-envelope calculation, I estimated that the total was €350 million a year for each of the four years on which one may reclaim money. That is a great deal, worth some €1.5 billion in total.

The Minister should ask Revenue to conduct a study, since it has access to the full figures for money spent on medication, doctors and fees. From its own returns, it could tell the Minister how much ought to attract tax relief. While there is now a welcome commitment to opening tax relief at source, there are still signs of niggardliness in how it is approached. For example, the Minister is leaving intact the €125 figure as a hand-trip on medical expenses claims. It is designed to do nothing other than cut the number of people making such claims.

The Minister should forget about the €125 and simply make medical expenses tax-allowable. That would be much more clearcut, and one would not then have to depend on people applying. The tax-relief-at-source vehicle is much more effective, but it has not been implemented. He has consolidated the limits from €250 and €125 to a single €125 instead of simply abolishing it as he should have done.

Another matter thrown into sharp relief is the limit on retrospection. People who have overpaid tax may reclaim it only for the preceding four years. That minimisation is a running sore, the Minister having decided to reduce it from ten years. The Statute of Limitations period has been reduced to four years. He has underlined that sore point by saying that only three months after they make the claim may they accrue any interest on money owed them for many years. I am not arguing that we should have limitless retrospection, with interest paid. The Revenue Commissioners regard it as a great concession to move from six months to three but it seems that the clock should start to tick straightaway.

There has been much debate about the business expansion scheme and the Irish Congress of Trade Unions is of the view that it is the wrong way to go. I would be better disposed to it as it tends to involve genuine risk capital. Successive Ministers tried to weed out the mortgage-based investment that was low risk and one might instinctively think this ought to involve higher risk capital. Some €16 million has passed through the BES, with €1.2 million in seed capital. It is not a huge amount and probably worth it. To be consistent, we ought to see a cost-benefit analysis. It was not assessed in the Department's last batch of investments and I have not seen any cost-benefit assessment. Nevertheless, we are deciding to significantly expand it. I note from the Department's website that a survey was carried out, but this concerned beneficiaries. It was not exactly a rigorous cost-benefit analysis in which the views of beneficiaries were sought.

There is interesting information on those who benefited from the scheme such as many start-up companies. It is disappointing that many of them were not involved in exporting, with 44% not exporting anything. I believed the scheme would involve more leading edge exporting activity but this does not appear so.

An element which could act as a warning to taxpayers is that 90% of companies report that investors are satisfied or very satisfied with the returns. This suggests the number who are dissatisfied is very small. Perhaps the risk involved is not great and the scheme is not getting to the areas of capital shortages for start-up and developmental companies. The returns for investors appear to be very comfortable; a very low number of investors are going wrong. The effort involved in making a proper assessment of the scheme, in the same way as others, would be repaid.

We need to hear from the Minister's Department on patent income relief. This avenue was opened up last year but the Minister was very agnostic in the end, deciding to do nothing. Nothing appears to be coming from official circles on what will happen. I also have concerns about the different ceilings for individuals who have earned income compared to those with rental income who appear to be able to roll money over into other schemes one after the other, yet individuals with earned income have sharp caps to deal with of approximately €31,000. I find it hard to understand why much more generous terms of relief should be offered in these schemes for persons who have rental income as opposed to those who earn. This issue should be considered.

The Government is still redefining the goalposts on what was actually promised in the last general election, which intrigues me. There was an absolutely clear promise that 80% of the population would only be paying at the 20% tax rate, which implied that 20% of the population would pay at the higher rate of 42%, as it was, now 41%. The Department has come up with the new idea of effective rates of tax and the Minister is pretending that this is what was promised. There were no references to effective rates of tax in the Fianna Fáil or joint manifesto. This is purely a post-hoc rationalising of the failure to honour one of the key promises made to taxpayers. The people will not be taken in, although this is now rolled out of the word processor every time the Minister makes a speech. It comes very high in the litany of achievements and amounts spent under the NDP, etc.

The Government has the unique distinction of increasing taxes in proportion to GNP faster than any of its predecessors. For a Government which talks about keeping taxes down, it may be surprising. It is not so surprising, however, when one takes into account the spending side of the equation.

I look forward to the debate on Committee Stage. Thankfully, the Bill is shorter than some of its predecessors. This takes into consideration the times pressure on some of the individuals who will have to listen to the debate on Committee Stage, the Minister most of all. I will not be supporting the Bill.

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