Joan Burton (Dublin West, Labour)

The Minister's two predecessors did attend finance committee debates.

I return to the issue of the banks. Put simply, in the run-up to the budget, the Minister for Finance announced a recapitalisation programme that he said would work. For a period of four months, he was confident that recapitalisation would work. The sums involved were €3.5 billion for the Bank of Ireland and €3.5 billion for Allied Irish Banks. Today, on the eve of its meeting tomorrow, AIB announced its bad debt writedown was actually €4.3 billion. I will tell the Minister what that means to ordinary people. It means the €3.5 billion of public money that he took for the recapitalisation of the two banks has been used and is gone. Not only that, AIB requires another €800 million to meet its bad debts this year and acknowledges that this does not take account of the debts that will accrue next year and the year after. We are in a truly terrible position.

The reason for the Government's lack of flexibility is the incredible guarantee of about €440 billion the Minister gave the six covered institutions last September, which hangs like the sword of Damocles over the head of every single taxpayer now and in the future. The Minister has been unable to say whether NAMA provides a mechanism for exiting the guarantee. It has been suggested by people such as Willem Buiter in the Financial Times that it would be possible to exit the guarantee through something like the proposal Deputy Bruton mentioned, but how can we exit it cost free, given that we have given the guarantee? That is the problem. As the banks would tell us, if the guarantee was withdrawn and not renewed, short of nationalisation, the options would be limited. All four parties represented in the Chamber, including Sinn Féin, recognise this dilemma which is at the core of the difficulties. We can do what Willem Buiter says if we welch on the guarantee, but that might put us in the position of Argentina.

We have to talk this out seriously. The Minister and the Taoiseach must acknowledge that Members on the Opposition benches are putting a huge amount of time and effort into trying to think this out and get decent advice. When the Taoiseach quoted Professor Honohan, he chose to do so selectively. I will read what Professor Honohan actually said:

We have brief statements and indications from Government sources and a very brief report from Peter Bacon which, as the Deputy [me] said, does not deal with how NAMA will work. Maybe I am being naive in hoping that at some stage all of this issue will become clear and will be brought out into the open. Transparency is key but it has not happened so far. I share the Deputy's concerns that this will not be done very well.

For what it is worth - my opinion is probably not worth very much - I am not against nationalisation at all costs. We come to the point in our discussion and in our calculations that we are in the territory of 90% State ownership and I do not disagree with that. The question now is whether there is a reason to hesitate to go to 100% ownership or a reason to look for a way of avoiding the 100%.

In his balanced contribution Professor Honohan recognised that the differences between the positions were paper thin.

On the Finance Bill 2009, let me be clear that it is the ordinary family with two parents and two or three children and an income of €40,000 to €90,000 that is bearing the brunt of the Government's mismanagement of the banking crisis. In an answer to a parliamentary question I received this afternoon the Minister acknowledges formally that a single individual earning about €80,000 will have a marginal tax rate of 50% for 2009. This is a combination of income tax at 41%, an income levy of 4% and a health levy of 5%. An individual earning €175,000 or more will have a marginal tax rate of 52% for 2009. This is a combination of income tax at 41%, an income levy of 6% and a health levy of 5%. When tax credits and so on are taken into account, an individual on €80,000 will have an effective average tax rate of 36%. These tax rates have not been seen since the early 1990s.

The Minister should bear in mind that since the early 1990s we have also had an attempt through a Progressive Democrats led taxation strategy to reduce nominal rates of income tax, to increase VAT rates, including the Minister's disastrous increase in the VAT rate to 21.5% in the October budget, and to massively increase direct charges and levies for services originally paid for out of income tax receipts, particularly the direct payments people have to make at the point of use for medical services. We now have a marginal rate of 50% and an average effective tax rate of 36%. These are very high rates. It is extremely problematic in that the Minister also promised to continue an assault on families with children in his next budget.

I want in particular to refer to the Minister's several proposals in regard to families with children which are in the pipeline for his next budget. It is unfortunate he has not been prepared to talk about the impact of his budgetary proposals on families with children. First, as I understand it, he is proposing to possibly introduce an individual house tax of approximately €1,000 on all houses. Second, he is proposing, as I understand it from his budget speech, to either tax or means test child benefit with a view to, in effect, significantly reducing its benefit to people who work in the PAYE sector and who earn between €40,000 and €90,000, whether it is a single income family or double income family. Third, as I understand it, the Minister is proposing to significantly increase the charge for families with children who intend to go to university. He is increasing the registration fee to €1,500 in September, and I understand from the Minister for Education and Science that he is considering various proposals with regard to the reintroduction of fees.

Families at work with two or three children, whether paying an expensive mortgage, on a fixed rate mortgage or with a loan that has gone over the seven year limit, will lose their mortgage interest relief under this budget. As a consequence, such families will suffer a very high impact on their capacity to look after the needs of their children but this has not received enough attention from the Government.

I want to say the following as a woman Deputy. There are very few women in this House who take part in budget debates. Why, whenever there are difficulties in regard to budgetary matters, is the principle of child benefit attacked by the legions of male politicians who form the overwhelming majority in this House? Why is it the first item up for attack? The Minister was true to form in the recent budget in that the first measure that will be up for attack is child benefit.

Let us put aside all the fairy stories, war stories and tales of "dúirt bean liom go ndúirt bean lei" from those who know that when child benefit day comes around, the mothers of Ireland somehow go out and spend it on themselves - they get their hair done, have lunch with a friend or something like that. The reality with regard to child benefit is, I suspect, that of the families who receive it, the rate of abuse is less than 0.1%. For most women who manage child benefit, it is the income over which they actually have control. In some cases, they may be married to somebody who is well-off but that person may not give them much income. They manage child benefit extraordinarily well. It pays for children's clothes, shoes, books, dentistry and, in some cases, families are now starting to save a portion of the child benefit for fees when the children go on to college and third level.

The Minister was wrong when he spoke in his budget speech as though child benefit and families with children were a soft target. If he analysed this, he would find that, going all the way back to when child benefit was introduced, whenever there has been an economic difficulty, the soft touch has been to suggest that all of the Mrs. Millionaires who are in receipt of child benefit would be better off without it. The answer in regard to Mrs. and Mr. Millionaire is that in a fair taxation system they would contribute their fair share of tax so that they could get the one universal benefit this State offers.

We should remember that before child benefit was introduced in the 1940s and 1950s, men, who then comprised the bulk of the workforce, got direct tax allowances in regard to children. The move to child benefit was to direct a payment to families with children and to the caring parent, which was normally, until relatively recently, the mother, most of whom in those days were women who spent their lives in the home taking care of dependent children, and dependent adults in many cases.

It is wrong that the Minister's budget should have floated the boat that child benefit is a soft touch. This issue is extraordinarily important to women in Ireland. I hope we can get more women into this Chamber who can talk about what this area of Government funding means to them and their children, and to the many fathers who have opted to stay at home for some years to parent their children.

I want to ask the Minister in regard to a number of items in the Bill. I want to return to the issue of the Minister's changes in regard to profits on land dealing. On budget day, I raised a related issue, namely, the fact that in the current climate, losses in regard to any trade or profession can be carried forward indefinitely but they can also, in effect, be written back against the tax that has been paid in the current year. This means there is a huge refund bill awaiting the taxpayer in regard to developers and builders which is probably running to a couple of billion euro. Even more importantly, the taxpayer is facing refund demands from the banks, particularly the covered institutions, which also run to huge sums.

On budget day, if I recall correctly, the Minister promised me he would address this issue in the Bill. It seems inconceivable that the taxpayer is spending vast sums of money guaranteeing the banks and putting in recapitalisation funds, and that the whole of the National Pensions Reserve Fund is earmarked for NAMA. When he came before the committee last week, Professor Honohan, while he did not disagree with the IMF and its figure of €24 billion, wondered whether €50 billion was a more appropriate figure for the cost of NAMA. When the Taoiseach is quoting Professor Honohan, he ought to take the trouble to quote him fairly.

I would like to know whether the Minister proposes to introduce a restriction in the Finance Bill that will restrict the writing off of losses, creating vast refunds in respect of developments where we have already given huge tax breaks which meant that many of these developers got a very good deal. It seems we are about to give future refunds and we will pay on the double when the banks write down their loans and carry those loans as losses against whatever they may have paid in the 2007 and 2008 period, because that is the way loss legislation is framed. As the Minister will know, if some of the companies go into liquidation, an even more favourable issue in regard to the recovery of losses can arise. I do not believe the taxpayer should be hit for another hidden couple of billion euro charge as a consequence of the Minister not addressing this loophole.

I have a question to raise about tax exiles. Why did an ordinary family with two children take a significant hit in the budget and persons making capital gains, earning income from other sources or inheriting property were all listed to make a bigger contribution? Given the dire situation facing the economy, people understand if cuts are applied fairly and everyone contributes; this may make the sacrifices they are being asked to make less painful. However, how is it that in both the Budget Statement and the Bill there is no mention of the estimated 6,000 tax exiles - the number estimated by the Revenue Commissioners - and their significant capacity to avoid making a contribution proportionate to the income they earn in this country?

In the same context, I will ask the same question everybody else will ask on the doorsteps about developers and many of the people involved in the business of finance. Where did all the money go and where is all the property? How much of it is overseas? On budget day, the Minister gave an estimate of €80 billion to €90 billion in respect of toxic distressed loans. Did he carry out an examination to ascertain how much of this was collateralised by other assets held overseas? Is he going to conduct an inquiry and follow the overseas collateral that should, rightly, be used to meet the obligations of developers and financiers on their loans here?

I listened with amazement to the Minister's colleague, the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, on a "Questions and Answers" programme a few weeks ago. He suggested NAMA would take over the homes of property and construction developers. This was the Minister hanging tough. As this is a country that has had the Family Home Protection Act in place for a long time, the Minister who is a solicitor must have been just playing to the gallery. Nobody wants to take anybody's home from them. Is Fianna Fáil, having hung out with developers in the past ten years and given them everything they wanted, now sending the Minister for Justice, Equality and Law Reform to appear on "Questions and Answers" to imply we are tougher than anybody else and that we will take people's homes? Let us have a real debate about what the Government intends to do.

Let us return to what has happened in various economies. One of the key issues for the Swedes, the Finns and others around the globe when rescuing their banks was transparency. There is no transparency here. All we get are short statements from the Minister - as there is no debate in the House - and leaks to the newspapers. At first, NAMA was to be a vast agency, but now it is to be a little agency and the loans will stay with the banks to be managed by the bankers who gave the loans and will now manage the recovery of debts. I do not have the foggiest idea of what is to happen because the Minister's briefing of the media suggests one day it is this and another day, the other.

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