Dáil debates

Wednesday, 10 February 2010

Finance Bill 2010: Second Stage (Resumed)

 

4:00 pm

Photo of Michael MoynihanMichael Moynihan (Cork North West, Fianna Fail)

I welcome the opportunity to speak on this Bill. There are a number of issues in the Bill and in the wider scope of finance to which I wish to refer. On the points raised by Deputy O'Mahony on agriculture and farming, there is no doubt there is a huge issue regarding farming incomes and the incomes of rural people in general. On the banks and the announcement yesterday of closures, when competition came into the sector and banks from outside the sector were setting up here, we all welcomed the reduction in interest rates, the terms and freely available credit which was coming on stream. There is a parallel to be examined regarding agriculture.

Multiples have come into the country and are delivering hugely reduced consumer prices. There is a lot of competition between the multiples regarding the price of produce on the shelves. At the same time, a fair price is not being given to the primary producer, farmer or processor. The country will face a major problem if we do not face up to that now, even if what we have to do is unpopular. In five or six years' time it will be a huge issue. Some of the multiples are currently showing profits in excess of €90 billion, which is almost twice what it costs to run Ireland. That is made on the backs of primary producers and small processors throughout this country. It is an issue which needs to be addressed.

Discussions are taking place regarding what should be done at European level. The issue also has to be tackled at national level because, while we all welcome the reduction in prices, it should not happen as a result of the decimation of what was once a very proud indigenous industry and which is still one of the main employers in the country. It must be examined in a serious and coherent way.

In recent months we have been given information from the stock market and stock brokers about the miss-selling of products to people, in particular to those who are vulnerable. Media attention was drawn to the effect of this and some matters are before the courts as people have taken cases. It is something which has to be examined. One case which has come to my attention in recent months concerns a client who is 75 years of age who had been sold a 26 year investment by one of the major stockbrokers in this country. The person concerned would have had to wait until she was 101 years of age before she could recover any of the money she had invested.

We hear that the stock market or our old friend, the Financial Regulator, is in charge of such practices but these are issues on which we need to zone in because they affect many people. From an examination of the press cuttings in recent weeks concerning small financial institutions and individuals taking cases regarding the miss-selling of products, one can only conclude that this will become a major issue for us.

On the Finance Bill, the Minister, in his speech on 9 December, reduced excise duty on beer and cider. At that time he made the point that he expected a reduction in prices from manufacturers and wholesalers and he would increase excise if that was not forthcoming. To date, nothing has happened and it is something which would be very worthwhile for the Government and the Minister to monitor because it is an important issue. If any direction given by the Minister in terms of excise or taxes is not matched by the industry, we must examine the matter.

The Finance Bill gives legislative order to the provisions of the budget. There is no doubt it was a tough and difficult budget in terms of spending cuts and so forth. There are a number of issues in the budget and Finance Bill which have to be welcomed, are far-seeing and should give us welcome relief. The extension of mortgage interest relief for qualifying homeowners who are entitled to it was due to end in 2010 but they will continue to qualify at the applicable rate until the end of 2017. Qualifying loans taken out before 31 December 2011 will continue to get relief at the current rates until the end of 2017. Transition measures are also provided for qualifying loans taken out after December 2011 and in 2012 the relief will be provided at reduced rates for the duration. Mortgage interest relief will be abolished entirely for the tax year 2018 and subsequent years.

The introduction of the domiciliary levy of €200,000 on all Irish domiciliary individuals who are Irish citizens will ensure that wealthy Irish domiciled individuals make a contribution to the State during these times of economic and fiscal difficulty. The contribution of wealthy people is a point which has been argued in this House on numerous occasions and this measure is recognition that the issue needs to be tackled. The levy will apply to wealthy Irish domiciled individuals with Irish-located capital greater than €5 million, worldwide income in excess of €1 million and all Irish income liability taxed less than €200,000. Persons liable for this levy will have to pay it regardless of whether they live or are tax resident here. The increase in the effective income tax rate paid by those subject to the restriction in reliefs for horizontal measured taxpayers availing of specific reliefs will now become subject to the restricted rather than adjusted income levy of €125,000 rather than €200,000.

These are some of the measures.

Some commentators have spoken in recent days about the worthwhile initiatives in the Finance Bill which are intended to try to generate foreign investment into this country. Since the foundation of the State we have benefited enormously from foreign direct investment. We provided a very worthwhile arrangement within our taxation system that encourages foreign direct investment. We also put in place a very educated workforce which has been to the benefit of Irish society over the years. Our education system has stood the test of time although in the future there must be new innovative education programmes. However, the system has encouraged investors and this Bill goes a long way towards ensuring there will be further encouragement. Many commentators broadly welcomed the Finance Bill and it is encouraging to note that even in these very difficult times it was welcomed.

Speaking in a broader sense, this time last year we saw the collapse of the financial markets and the banks and all the subsequent difficulties. We saw the short-sightedness in the way banking was dealt with. We must now look to our indigenous industries that have stood the Irish economy very well over the years. We have to consider foreign direct investment and ensure we have an attractive economy into which to invite people. I believe we are doing that. We must be very careful to ensure that message goes out at all times. That is our encouragement for the future.

We must accept also that we are in hugely difficult times and that people throughout the country are suffering severe financial hardship because of loss of employment, from advice given to them in recent years or because of family circumstances and other reasons. Many politicians on all sides of this House are in constant contact with community welfare officers regarding their constituents, particularly in recent months. They will know of people who unfortunately lost their employment but perhaps had a redundancy payment or some other savings which got them through. However, I have seen people across the desks from politicians or with welfare officers who are in great financial difficulty because their commitments still exist. These are people with young families or with young adults going on to third level education. We must be very mindful of this.

Last week regulations were introduced regarding mortgages and so forth. I believe there are new regulations in respect of what credit unions can do. Credit unions have always provided extra money for people, in both urban and rural Ireland, and have been the backbone in providing funding in difficult times. However, there was need for the new directives and I hope they will be signed shortly as a statutory instrument. These will allow the credit unions to reorganise loans and repayments for people, some of whom are in great difficulty in this regard.

I wish to make a very strong point concerning the Finance Bill. Many people have asked whether anybody foresaw the collapse in the financial system. A very large amount of money was freely available from banks and foreign banks introduced competition by coming into this country and competing with indigenous banks. Everybody had a race to the bottom. I firmly believe that if corrective action is not taken in respect of the food industry and what the multiples are doing, not only in this country but throughout the developed world, we will have the same situation in agriculture and the food processing industry in the not very distant future within three to five years. There is a drive or race to the bottom to get the cheapest price possible for the goods on the shelf and to have the cheapest possible product. This drives margins down further for the primary producer, the farmer, and the indigenous processors we have always known in this country. Over-regulation has come into play in the meat industry, especially in the beef processing industry, with the closing of smaller abattoirs.

This issue is probably too wide to be dealt with within an individual state because it extends across the European Union. Governments must take corrective action in this regard and take away power from the multiples regarding what they are doing at present where there is bulk buying on a grand scale. If we do not take away their powers we will end up with a desperately serious situation. The fear is that our agriculture will end up in the same situation as the financial sector. I do not say that as a scaremongering tactic but firmly believe it. Decisions have been taken at all levels with regard to agriculture and food production and the prices given to the primary producer which have eliminated a great raft of our own people who worked in that sector. During the past 20 years it was always said that big was beautiful, particularly in agriculture, and that it was right to take away many of the processors. However, it has led to a lack of indigenous processing.

I firmly believe that governments, both at national and European level, must take corrective action in regard to this issue and the power of individual multiple companies. These companies have profits in excess of €90 billion, nearly twice what it costs to run Ireland Incorporated and they must be checked. How Ireland stood up to the British empire is famed in song and story but there are empires across the world at present that are driving our primary producers and small industries into the ground, in both urban and rural Ireland. This will continue unless corrective action is taken. Although we may all believe in the Common Agricultural Policy and the moneys made available to the farming community to support them in producing food for reasons of food security, if we do not return to the basics of paying these people a proper price for their product we will end up in a very serious situation.

These are the three points I wish to make in respect of the Finance Bill. My primary point concerns agriculture and our relationship with the multiples. The second is the need to look at the way the stock market and stockbrokers have been regulated and the products they sold, especially to vulnerable people. I outlined the case of one person in her 70s. She was sold a 26 year product which would come to fruition some time around her 100th birthday. Some €180,000 was put into that scheme and she was left with nothing except a house. That business must be looked at in a very serious way. The regulator and the stock market find it very easy to kick it from one to the other.

Third, I welcome the initiatives in the Finance Bill regarding attracting foreign direct investment. We used to be very good at attracting such investment because of the initiatives of Governments of all parties throughout the years. We must continue to do that and must continue to have an educated workforce irrespective of the difficulties facing the country at present. We must ensure we have that system in place for Ireland to go forward.

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