Brian Cowen (Laois-Offaly, Fianna Fail)

The amendment before us relates to doubling the home carer credit from €770 to €1,540 in one go. The budget increased it from €770 to €900 as part of an overall programme for Government commitment. Every year Ministers for Finance make certain choices on taxation and expenditure and overall budgetary parameters. While less than in previous years, the personal tax package, including PRSI and health levy changes, amounted to approximately €582 million. The aim of the income tax measures in the budget was to use tax credits and bands to keep low-income earners out of the standard rate band and average rate earners out of the higher rate band as promised in the programme for Government. During the general election campaign, I said that was a matter of higher priority than other tax commitments.

The measures were also focused on assisting the elderly, lone parents, widowed persons and widowed parents, those with a disability and carers. Some 54% of the resources of the personal income tax package were devoted to assisting those categories and the low paid. To provide a doubling of the home carer tax credit as suggested by the Deputy would mean that increases in other income tax credits or reliefs would need to be curtailed or not implemented. As I mentioned on Committee Stage, it is a question of finding the balance and deciding what is fair and reasonable in how we intend proceeding over the course of a Government programme.

The argument can be made all the time — I have listened to the debate. People are talking about the historical situation and the legacy of moving towards individualisation and the changes my predecessor brought about. It was not just about the need to deal with the increasing participation levels in the labour force. That is not the full story, particularly as it relates to the female labour supply. The weakness in our income tax system at that time was how heavily it bore on single people who started to pay tax at a very low rate of income. I believe it was at the equivalent of €84 ten years ago. That was having an impact on job creation and economic activity generally by bearing very heavily on that rate in terms of how the income tax system was structured. There was also the question of double increases to married one-earners and this used up tax resources as we tried to deal with that. So what we did was change the structure.

If we wanted to go back on individualised tax bands we would inevitably raise the relative burden on single earners for a given amount of tax relief. While I accept people may make life choices at different times in their lives, I am not sure we can turn the clock back at this stage. In my view it was right to move towards this system with caution and to recognise there are societal attitudes and situations that need to be taken on board while at the same time ensuring we facilitate participation in the workforce to the maximum extent possible. The differential between the married one-earner band and the upper limit of the married two-earner band impacts on higher incomes only if they are above €44,400. That level of income is 30% greater than the average industrial wage. It is important to stress the current structure of tax bands means that married one-earner couples on average earnings are not affected by the different standard rate bands. That is an important point, from which one can deduce that the Deputy's amendment would do little to help those whose income is below €44,400.

The Government has been devoting much of the available resources to helping those lower down the scale who are less well off. The reason workers on the minimum wage are outside the tax net is precisely that we changed the structure of the bands. If there is nostalgia about the old system, it is clear that, given the entry point at which one would start paying tax, it would be less possible for those on the minimum wage to be outside the tax net because the use of tax expenditure resources would be shifted away from the lower end. The fact that 80% of the workforce pay at the standard rate is an indication of that shift. It is important to make that point. By the same token, the reduction in rates, the broadening of bands and general simplification of the system during the last decade mean that greater disposable income is available to married couples with one earner as well as with two earners on similar incomes, compared to what would have been the case ten years ago. People are bringing home and keeping more of their own money.

The OECD has made the point that Ireland is the only country where, when one takes child benefit payments into account, there is a negative contribution with regard to married couples with one earner and two children. In net terms, they do not pay tax at the effective rate when one takes into account, as Deputy Mansergh said, transfers available in a more equitable fashion through direct provision than through the tax code, restricted to those in a position to pay tax. It is more complicated than the suggestion that those more committed to the home carer credit are, in some sense, more pro-family than I am. I do not accept that suggestion.

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