Michael D'Arcy (Wexford, Fine Gael)

It is not much pleasure to be here debating these reductions - these cuts. I have a concern about the creation of a poverty trap and while that trap was created previously, this budget will copperfasten it. We must examine the cumulative effect of the reduction in the minimum wage from €8.65 to €7.65 together with the introduction of the universal social charge, which is a penal tax. The Government should stop calling these measures charges or levies - they are taxes. In addition, there has been a widening of the bands and a reduction in the tax credits. The poverty trap will be exposed badly because this budget will shove people onto social welfare payments.

If one multiplies the minimum wage of €7.65 by 40 hours a day, it comes to a little more than €300 a week, and if one multiplies that figure by 52, in terms of the number of weeks in a year, it works out at a little under €16,000. The reality is that the universal social charge kicks in at the higher rate of 7% on an income of €16,016. The 40-hour a week minimum wage payment calculates at a little over or under €100. If a person on the minimum wage works 40 hours a week, he or she will pay the charge at the rate of 4%. Those are the numbers. If that person works 40 hours and 15 minutes a week, that will bring the person into the 7% bracket in terms of the charge in respect of all of his or her moneys. This is a poverty trap. A family with two children - according to the social welfare documents we received yesterday - taking account of child benefits payments, will receive €24,000, which is €500 a week. People on lower wages will have a choice of whether to stay at home or go to work. The reality is they will stay at home and claim social welfare payments because they will get more money. That is a poverty trap which cannot be allowed to continue.

Considering the numbers, we see that people paying taxes may not continue to do so as a result. If we keep expanding tax bands and reducing credits, more people will fall into the poverty trap. There are two choices for the future; the decision to reduce the minimum wage can be reversed so the minimum wage remains higher or social welfare payments can be cut. Given these choices, this was not a smart decision.

Before the budget I pursued some officials in the Department of Finance and the Secretary General of one of the Departments, asking if they had analysed the long-term effects of these reductions in their budgets. They had not. I put the matter to the Minister for Finance and he stated that his Department had done so, but it has not. We are finding that the analysis has not been done. They have put together an exercise in addition, multiplication and division, calculating how savings are made. They have stored significant problems for the future as cuts in programmes will have far greater costs down the line for children who will not get attention in education or children who fall through the cracks and end up in the justice system.

The reductions are being made here and they seem the obvious places but the analysis has not been done so as to ensure we make reductions in the right areas rather than areas which amount to cheap options. These reductions will cost much more in the future and anybody paying taxes in ten or 20 years will see this regressive budget as a disaster.

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