Joan Burton (Dublin West, Labour)

Section 13 does not address the questions raised by either the Labour Party or Fine Gael. It provides for a review by the Minister. I am sure that, as a competent Minister, he reviews all sources of revenue available to the State on an annual basis for the budget. However, the review provided for in section 13 has no status. If the Minister decides to outsource it, presumably it will be through the creation of another little quango to ensure the Minister will be at arm's length from any decision-making. It would probably end up as part of the bad habits of governance that have built up during the two recent Fianna Fáil-led Administrations.

It is unfortunate the Minister has failed to address the arguments in favour of a sunset clause. Public servants facing this levy are entitled to have an indication from the Minister as to how long it is proposed to have it in place. From his reply, it sounds as if this will be a permanent fixture, just as income tax was temporary for various wars but never removed. Once introduced, this levy will be in place forever. The purpose of the sunset clause would be to provide for a debating mechanism in the House.

Regarding the ideology behind the pension levy, having wasted the whole summer when he took office and not having addressed the serious emerging economic issues, the Minister brought forward an emergency budget. Many braced themselves at the time that they would have to pay more in tax but they were quite surprised that nothing much happened in the emergency budget. Now, the Minister is undertaking this pension levy, with the income levy, in order that he can claim income tax, particularly for those in the PAYE sector, is not rising. However, with the way the levies are structured, the 1% income levy is equivalent to between 2% and 3% on the top rate of tax. In effect, the 41% tax rate has moved to 44%. For public sector workers, the net increase in tax rates for those earning under €35,000 is between 4.5% and 5%. Therefore, their basic rate of tax has gone up from 20% to 24%.

For people paying at the upper tax rates who earn over €35,000, the net after-tax charge will be approximately 7% for those who work in the public service. This means they will be paying income tax at 48% rather than 41%. There will then be approximately three percentage points that will apply in respect of the 1% income tax levy. Consequently, workers in the public service will be paying, in effect and at a little over 50%, the top rate of income tax. Would it not be much more honest for the Minister to state he is increasing income tax? There is no other explanation for what he is doing.

Most of the money that will accrue under the levy will be used by the banks. As far as we can discern, it will not be used to sustain vital public services. It is not hypothecated or earmarked. If public servants knew that this money would be invested in schools or hospitals, they might perhaps have a different attitude to the levy. However, that is not the position. Therefore, most public servants are of the view that they are being singled out to pay for what has occurred in the banks, particularly Anglo Irish Bank. The Minister decided — wrongly — that the latter was systemic and had to be saved, even at the expense of the two major banks which are most certainly systemic in the context of the creation and retention of jobs and the extension of credit in the economy.

The Minister made a mistake when he introduced the bank guarantee scheme. On Private Members' business last night he pretty much acknowledged this by stating being an early mover in respect of banking reform was not necessarily the wisest move. However, I recall him and the Taoiseach coming before the House to inform Members that their early and absolute move in respect of the guarantee scheme was extremely clever. With hindsight, that move now appears to be the equivalent of Georgia invading Russia, namely, not very clever at all. The introduction of the guarantee scheme got up the noses of those in international markets because it was done in the absence of consultation or collaboration. The public finances are in their current state partly as a result of the decisions made by the Minister. We still do not know the background to them.

Through their representative trade unions, public service workers have repeatedly stated they are not unwilling to share part of the burden. However, they want to be informed that others will also share that burden. The others to whom I refer in this regard are the very wealthy, those who are tax exiles, people who have availed of the huge number of tax breaks designed to aid the construction sector and the elite group of 15 to 100 customers of Anglo Irish Bank who are uniquely privileged in having had an entire tax code written for them. The Minister's failure to introduce a sunset clause will not assist industrial relations with the public service unions. We do not want the country to return to a period of strikes and industrial unrest.

The Minister should be able to find a way to find the money he is seeking in a more honest manner. He should also deal more honestly with the public sector and not make those who work in it the scapegoats for the failures of the bankers.

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