Alan Shatter (Dublin South, Fine Gael)

There is a degree of equity in the pensions proposal in Financial Resolution No. 9. However, it is interesting that the Government has failed to address certain pensions issues in the budget. There has been a considerable drop in pension values. Government policy over a number of years has been to encourage people to make proper provision for themselves upon retirement. There are pension funds in existence that are worth 20% to 30% less than they were worth this time last year and this creates a particular difficulty for those who are 55 and over who envisage retiring between the ages of 60 and 65. I am surprised the Government has made no special provision for this group.

The focus in the resolution is entirely on recovering tax for the Revenue without addressing the broader social issue of the value of pension funds, the likely medium-term cost to the State of people whose funds are inadequate and the question of what is to happen this month and next month. At the end of this month, the self-employed normally make their tax returns. This month, they will make a supplemental pension payment for the tax year ending in December 2007. They will be making an advance tax payment for the full year 2008 and I understand a pension contribution will be built into this.

The difficulty at present is that, apart from reducing the tax reliefs for making pension payments, no provision has been made to encourage people, even those earning below €150,000, to provide adequately for pensions in the coming year. Any self-employed person, or person in employment with a private pension scheme to which he makes additional contributions, putting money into a pension fund this October or November would do as well to fly to Las Vegas and bet the money at the roulette wheel. No one knows what will happen with regard to the manner of the investment of funds, particularly with reference to stock markets or other types of financial products. There is a particular problem here but there is a yawning silence from the Government on this issue, which I expected would be addressed in the budget.

The issue runs over into what is happening with savings. It is curious that DIRT is being increased from 20% to 23%. My understanding of the purpose of that tax was to ensure that when people had money on deposit, and they fell into the standard rate of tax, the tax would be received by Revenue. It allowed Revenue to keep track of what deposits were in existence. If people fell into the higher rate of income tax, they then had to make up the difference.

If one is paying 23% DIRT and one's tax rate is only 20%, will one be able to reclaim the 3% difference? Is the Minister not creating a new layer of bureaucracy for savers? In the context of the Government trying to encourage saving, is this not a direct discouragement to save in that if one is only on the standard rate of income tax, one will find that one's deposit savings are taxed at a higher rate? Is this basically an admission by Government, if it was honest and referred to the levy as part of the income tax code, that the 1% levy has in practical terms moved the standard rate of tax to 23%? Perhaps it means something different. Does it mean simply that if one has savings, they do not fall into this category? Perhaps this is the explanation for the manner in which this is being dealt with. Does money earned by an individual by way of savings fall into the 1% levy? Will a person pay an extra 1% as well as paying 23%?

The Government would have been more honest if, in the context of the budget publication today, it had truthfully told the general public we are increasing the standard rate of tax to 23%. The Tánaiste should clarify these points.

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