Michael Noonan (Limerick East, Fine Gael)

I wish to comment on the income levy and whether it is fair and equitable. A number of issues come together in this regard, including the doubling of the levy across all ranges of income and the change in the thresholds so that taxpayers who formerly paid 1% are now paying 4% once they earn more than €75,000. Add to these the health levy and the new arrangements for PRSI whereby the ceiling has increased from €50,000 to €75,000, and those who earn between €75,000 and €100,000 will suffer a heavy blow. Budgets present difficulties where separate measures impact on one group of taxpayers in particular.

The Taoiseach has been haunted by the spectre of individualisation, which was introduced by the former Minister for Finance, Mr. McCreevy. Under this budget, a family with one income of approximately €80,000 will be hit harder than a family on two incomes coming to the same amount because of the residual impact of individualisation. The tables provided by the Department of Finance do not provide comparative figures in this regard but I estimate the difference as being in the region of €2,500. It makes no sense under the principles of equity that two partners who each earn €40,000 should pay so much less than a family which is reliant on a single income of €80,000. One might ask why the non-earning spouse does not get a job but that option is no longer available. A family in which one spouse has been made redundant may therefore be hammered to the extent of paying €2,500 more than a dual income couple.

A married couple with no children on a single income will lose €1,500 on €50,000 or €3,092 at €75,000 excluding the health levy or PRSI. However, a married couple on one income with two children would lose €2,500 on €50,000 or just over €4,000 at €80,000. How is it equitable that a couple with two children should pay €1,000 more than a couple with no children?

This problem arose on foot of several separate decisions impacting on a specific income range. The new threshold of €75,000 for the 4% levy had a particular impact. This is not equitable by any standard. I cannot see how it can be argued that a dual income couple should pay considerably less than a single income couple on the same income. I acknowledge this is a consequence of individualisation but the issue was raised previously. I suggest this is an ideological issue given that it could be argued that mothers who decide to work in the home should not be penalised.

I do not know how the quirk has arisen in respect of increased taxes for couples with children but I presume it pertains to variations in the way payments are made to children through the social welfare code. It is an extremely serious issue, however.

On the general issue of affordability, it is reasonable to assume that the more one earns, the more one should pay. However, I believe a level should be set below which people should not pay anything because they are hit so often they simply cannot live on their incomes. It is not equitable to take a couple of hundred euro from people who are on the breadline. I do not believe the exemption limits are low enough and suggest that the appropriate level is approximately €25,000.

I am aware the Taoiseach went to inordinate lengths to proof the budget politically but the past nine months saw correction measures in July, a budget in October and the pension levy in January. To take one example, a school principle earning €80,000 paid a 1% levy last October, a 9% gross public service pension levy and now the original 1% levy is raised to 4%. This will have a devastating impact.

If there was a purpose to this devastation one might agree to it but the budget fails to set out an overarching plan that might inspire confidence in the Government either at home or abroad. The Minister did very well in the first three pages of his statement and I concurred with the six principles he set out as the basis for the budget. He had a shot at correcting the fiscal problems and he has announced his intention to do something about the banks in the coming weeks. However, he did nothing to address the principles of competitiveness and jobs and little in regard to equity. I cannot recall the sixth principle because it passed me by. If these principles had been followed through, the budget would have presented a coherent plan to deal with our problems between now and 2013. That is what the country needed, but given the way it is positioned now I do not think it will stand up to analysis.

This is a confusing budget to deal with from an Opposition viewpoint because at times the Minister's speech referred to savings in 2009, while at other times it referred to savings between 2009 and 2010, or between 2009 and 2011. Therefore it was very hard to compare like with like and to distinguish between the one-year effect or how it would play out over the Government plan that has been mapped out.

I appreciate the Government's difficulty and I do not want to score political points. The magnitude of the figures the Government is dealing with has not been appreciated publicly in the media. The Minister claimed today that he was taking out €3.75 billion in nine months. The 12-month effect of that is around €5 billion. One must also allow for negative buoyancy. The money one takes on an income levy is not available to be spent in the shops, so there is a reduction in excise and VAT. When the finance advisors were factoring that in, the gross take for 12 months must be somewhere between €6.5 billion and €7 billion, which is serious money.

It must be agreed that this is the biggest fiscal correction ever attempted by an Irish Government since the foundation of the State, both in real and percentage terms. I do not underestimate the difficulty of the task before the Government because while it is presented as a take of €3.25 billion, one must hit a lot higher and harder in gross terms over 12 months. However, the Taoiseach should have set that out from the outset, saying this is our difficulty, this is what we are trying to do, this is the magnitude of the problem and this is the extent of the hit over 12 months. In my estimation, the Taoiseach's job today - apart from the detail - was to establish his own credibility, so that people would say, "It was dreadful but at least we think they might be able to deal with the problem". If people said "Yes" to that at home and abroad then there would be confidence again for people to start doing things in this economy, and there would be confidence abroad to lend to Ireland. I do not believe he has measured up to it, although I hope he has done so because we all live in the same country and none of us wants to go down the tubes in some collective political paroxysm. I hope the budget measures are received positively internationally.

What was said about the banks was badly presented and it has frightened people. Once the Minister wrote €80 billion to €90 billion of impaired assets into his script, that became the figure for which taxpayers would be exposed in the vox pop. We know that is not the figure, however. Those of us who have examined the background literature - there is not much of it - know that this will be heavily discounted. As soon as one puts €80 billion or €90 billion out as a figure there is a big problem. Even if it is discounted by 50% there is still a very big problem in terms of the Irish taxpayer underpinning impaired debts in the banking system to the tune of €45 billion.

Many of the Taoiseach's Deputies and Ministers will be knocking on doors in connection with the local elections, as we will ourselves. I know he will get cross when I say this, and it is probably unfair to him, but there is a public perception that he is so closely allied to the developer classes in the country that he will bail them out through a banking system, and that the purpose of his bank rescue is to bail out his developer friends. I do not share that view, but I am telling the Taoiseach that he has a problem in convincing the public that is not the case.

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