Pat Rabbitte (Dublin South West, Labour)

The first point I wish to make is that these measures are likely to have a major deflationary impact. We have to seriously consider in light of the current state of economic activity the implications of that. In the October budget there was an increase of the equivalent of 1.5% of GDP. In February 1% was taken out and now 2% will be taken out over nine months. In other words, the effective total GDP effect will be approximately 5%. International literature indicates that 2% is a heavy hit. In any western economy one cares to consider, 2% is a heavy hit. This is a hit of the order of 5% taken over the year. That is enormous in an economy projected to contract by 8%. When the Minister for Finance went to take out €1.8 billion in taxes, that was more than most sane economists recommended. I sincerely hope we are not around to pay the price for it as the year goes on.

In addition to that, these resolutions are opposed from these benches for the reasons that they pull back the threshold further. It is not only that the levy is being doubled, it is that the resolutions pull back the thresholds further. As a result, they are more punitive on lower paid people and the overall impact is more severe. Add that to the implications of the increase in the PRSI threshold and effectively for most workers the new PRSI threshold means that most of them will be caught in that spiral as well. The reduction in the thresholds at which the levies apply, the doubling of the levies, the increase in the PRSI threshold and the doubling of the health levy added together will have a huge impact on people in the PAYE sector.

There might be some relief in the criticism of the Government if, in fact, it had addressed some of the categories that traditionally had not been paying their fair share. For example, there is a minimum shaving with regard to the reliefs available to landlords. From memory, the estimated take is approximately €90 million as compared to a possible €800 million, so it is tokenism. The Government does not acknowledge the existence of tax exiles, and perhaps there is a certain symmetry in this, seeing that they do not exist in terms of contributing to the cost of running the services in this State. Out of sight, out of mind, they are not referred to or included at all.

If one looks at the effect of the measures today and add them to the effect of the October budget, one sees that extraordinary costs are being imposed on average workers. Somebody on the national wage, say, £15,500, will pay €1,154 per annum. Somebody on €30,000 will pay €1,680. Somebody on €40,000, the modest end of the middle income spectrum, will pay €2,600, or €50 a week more. Somebody on €75,000 will pay just short of €5,000 - €4,842 or €93 per week. These are very savage cuts. Those who wrung their hands and called for more savage measures on the taxation front have got them today. The balance has erred in terms of the amount taken out of the economy in further tax increases. It must inevitably have a further deflationary effect on an economy facing a steep downward trajectory.

The proposal from the Labour Party for a new rate of income tax of 48% for those on incomes of €100,000 and above would be a much fairer way to have addressed it. In making reference to the minimal gesture regarding landlord relief, I notice that, of course, commercial property is entirely excluded. Overall it means that those who are caught in the net are going to be squeezed until the pips squeak while the situation regarding those who are outside the net is for another day - in effect, they must wait for the report of the Commission on Taxation. We are one commission or committee away from facing it now. While we all seem to be agreed in this House that what is required is the broadening of the tax base, like St. Augustine it is a case of, "Not now, Lord", not yet. We tip the forelock towards broadening the tax base, but we inflict the optimum of punishment on that core segment of taxpayers already caught.

As soon as people have an opportunity to reflect on today's figures, they will be in disbelief at what they find, taken together with what they paid following the budget in October, what public servants paid in the pension levy, the 1% levy, now to become 2% and then 4% and with the threshold being brought down. This is a very serious development.

These are the more serious aspects of the resolutions before us. People may hold views with regard to the excise duties or whatever, but these considerations are relatively minor in the context of those before us. There are macroeconomic implications of the take here, which totals almost 5% of GDP in the fiscal year for an economy that is contracting at the rate that ours is. That is a very serious situation, it goes too far and I ask the Taoiseach to acknowledge that.

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