Arthur Morgan (Louth, Sinn Fein)

In its programme for Government in 2002, the Government claimed "We will keep the public finances in a healthy condition". Interestingly, no such commitment appears in the new programme for Government, which is an interesting omission. With lower growth projected for the years ahead, the focus now needs to be put on what is required to ensure that public finances are kept in a healthy condition to enable the State to meet its obligations in terms of the delivery of public services and social protections.

We need to ensure that we do not go further down the road of a low tax and low public services model that will inevitably result in the downgrading and dismantling of public services and social protections. The proposed commission on taxation must examine these issues in detail and focus on the need to create a fairer taxation system. The explosion in stealth taxes and charges in recent years must be addressed.

Yesterday, Dr. Alan Barrett of the ESRI put forward the view that limited tax increases "would not be economically damaging" and would provide the Minister for Finance with "wriggle room" on the expenditure side in December's budget. Dr. Barrett is right to initiate a debate on these matters because we now face crucial decisions on the direction this State is taking. Government decisions to raise or reduce overall taxation revenue must be made on the basis of what is needed to meet social goals and other spending demands. The reduction in tax receipts as a consequence of the slowdown in the property and construction sector means that the tax base needs to be looked at.

Key vulnerability in the economy was evident in advance of the general election. Chief among these was the implication for tax receipts of a widely predicted decline in the construction and property sectors. The tax strategy papers prepared in advance of the last budget show that there was a clear awareness of this within the Department of Finance. The argument made by Sinn Féin in the run-up to the election, that with the slowdown in economic growth and the developments in property and construction, the Government cannot afford to cut taxes and maintain, let alone improve public services, has been shown to be correct.

The Government was wrong to cut the higher tax rate from 42% to 41% last year. This resulted in high-income individuals getting the highest increases in weekly income as a result of budget 2007. It was wrong to promise to cut the top rate by another 1% this year. I welcome the fact that Dr. Barrett also echoed Sinn Féin's position in saying that he was "not entirely convinced" that the proposed reduction in the top rate of income tax from 41% to 40% was the most pressing change required in the tax code. Of course, it is not the most pressing change. There are many other places where this revenue would be better directed, including improving public services and social protections. It is incredible that the Government is now proposing to proceed with further cuts and, in particular, the additional cut in the top rate of tax, given a projection for tax collection in 2008 which is €2.2 billion lower than that predicted last year at budget time. This morning, the Taoiseach in this House was still insisting that the Government will implement its tax and PRSI-cutting proposals despite the evidence that these are not viable.

Sinn Féin would like to see a number of specific tax measures included in budget 2008. We are calling on the Minister to increase the restrictions on the use of specified tax reliefs to ensure that high-income individuals pay their fair share of taxation. No high-income individual should be able to write off more than 5% or, at best, 10% of their income through such exemptions. Another minimal step that needs to be taken is the standard rating of discretionary tax expenditures, many of which will have to be examined by the commission on taxation to assess whether they play any useful role.

I will deal in some detail with the proposed cuts in PRSI as they have far-reaching implications. The main conclusion of the latest actuarial review of the social insurance fund published last week is that the fund's net cash-flow position is projected to decline rapidly after 2010 and that the surplus is projected to be exhausted by 2016. The programme for Government commits the Government to cutting employee PRSI from 4% to 2% and cutting PRSI for the self-employed from 3% to 2%. When these proposals were first mooted in advance of the election, my party pointed out that they were being made without any consideration as to whether the social insurance fund was sufficient to meet current and future demands.

Sinn Féin highlighted the fact that there were already serious concerns about the adequacy of the social insurance fund based on the findings of the first actuarial review. The latest review has reinforced these concerns and has found that contribution rates would need to increase substantially if the fund's income is to be adequate to support the benefits being paid from the fund going forward. The situation would be much worse if the Fianna Fáil proposals to cut PRSI contributions were implemented. The fund is set to face additional demands in the immediate term as unemployment is predicted to rise next year from 4.5% to 5.5% — that is about another 10,000 people. This has significant implications for the social insurance fund and is a further reason the PRSI cuts are a non-runner.

Tighter finances will be a real test of this Government. Cutbacks in public services — either obvious cutbacks such as those in budget 2003 or more discreet cutbacks, as is more likely to be the case this time around — cannot be tolerated. Neither do we want to see key infrastructural projects under the national development plan tactically delayed to reduce costs in a given year, with those costs being pushed forward to a future budget. A much more sensible approach would be to borrow for these projects and ensure their early delivery to help improve our competitiveness, which is currently negatively impacted by our infrastructure deficiencies.

On the health issue, there is nothing in this pre-budget outlook to show that the Government is doing anything to avoid the disgraceful situation where end-of-year budget over-runs have seen the HSE imposing cuts in services to patients. The claims by the Minister for Health and Children, Deputy Harney and the chief executive officer of the HSE, Professor Brendan Drumm, that the so-called saving measures would not and should not affect patient care have proved to be totally worthless. Even if they believed their claims in the first place, neither the Minister nor Professor Drumm did anything to ensure that the so-called savings would not be at the cost of patient care.

In my region, the latest fallout from HSE cuts is that there will be no elective surgery in Louth County Hospital in Dundalk in December. All of the staff will be employed there. The nurses will be there and the administrative staff will be on hand, as will all of the surgeons so where are the savings? We have already seen medical and general surgical elective work postponed at Our Lady's Hospital in Navan and the planned closure of its orthopaedic unit for an entire month. Up to eight operations per day have had to be cancelled at Cavan General Hospital and many patients requiring rehabilitation after serious accidents and-or major surgery are being denied admission to the National Rehabilitation Hospital in Dún Laoghaire because of these cutbacks — so much for the commitments from the Minister and Professor Drumm.

The most fundamental issue regarding health spending is not how much is spent but how it is spent. I hope Government backbenchers will appreciate the crisis in the health service and raise their voices to demand a better, more caring service. We see that the easiest option is exercised at all times by the Government in respect of health services. The savings are minuscule because, as I pointed out, professional and administrative staff must still be on hand. The knock-on effect of more people on waiting lists resulting from the closure of facilities will take until early summer to clear. People who need these elective procedures will still need them in January, February or March of next year. The waiting list for such procedures will lengthen or else those patients will be diverted for treatment under the National Treatment Purchase Fund, in which case private hospitals will pick up the tab. These procedures will still have to be paid for. Where are the savings in that arrangement? It does not make sense. I ask the Government backbenchers to raise their voices with the Minister for Health and Children and other Cabinet members to ensure that this daftness does not continue.

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