Kieran O'Donnell (Limerick East, Fine Gael)

I will bring this back to practicalities and we are dealing with section 3. With regard to carer's allowance and payments to blind persons, the disabled and widows, what is the logic behind the cuts? In my dealings with the Minister I have always found him to be a fair and decent man but these actions are illogical.

Deputy Ring made reference to the carers earlier, and we all deal with countless carers in our constituencies. They work in helping elderly parents, a spouse, husband, wife, son or daughter. Invariably, they provide 24-hour care. To qualify for carer's allowance, the work would be extremely onerous and very time consuming. It needs dedication and should come under the concept of vocation. These people save the taxpayer and State significant amounts of money, with the amount quantified at approximately €2.8 billion per year.

Coming back to basics, the Government will take €8 per week from the carer, or €35 per month and €416 per year. That is a significant amount. We can think of the cost in terms of nursing home and hospital expenses and how these are saved. In addition, the sick person is allowed to remain in the home with dignity. I have seen people coming to our office in the constituency and when I visit them in their homes; they are decent and hard-working people who want to look after loved ones. The Government will drive people to a position where they will not be able to afford to do this, and there will be a cost to the State while these people lose dignity.

A widow is effectively operating as a single earner in a home, with many having young children or children in college. In my experience, the group should be one of the more admired because they want to do the best for their children. Their payment has been cut. Children in such families have gone from a position where there were two parents in the house to a position where there is a single parent. With regard to the disability allowance, I have met advocates and those in receipt of the disability allowance, and they want to engage in independent living. The amount of money involved is small but it is similar to the position of the blind person's payment.

I would love to know the Government's logic in cutting these allowances, the cost of which comes to approximately €90 million. What was the logic of putting €3.5 billion of taxpayers' money into the banks without looking for a condition that no bonuses be paid at AIB? I heard the Minister for Finance, Deputy Brian Lenihan, on the radio yesterday being very evasive on bonuses for banks and today it has come into the public domain that a combined sum of €40 million will be paid to more than 2,000 people arising from a time in 2008 when the banking problem was at its peak. What are the bonuses for? This is not a personal attack on the individuals.

The universal social charge should be termed the "universal tax charge". I would like to know exactly what is it supposed to do. It is clearly ill-thought out, as was the income levy. Considering the scheme, there are people who under the health levy were exempt if earning less than €26,000. With the income levy, people on €15,028 were exempt. It is now the case that everybody earning over €4,004 is liable to this tax. Furthermore, the tax benefits the better off, such as those on very high incomes, instead of those on lower incomes.

The minimum wage is to be reduced by €1. The irony is that somebody on the minimum wage working 40 hours a week would earn €17,992 a year, paying €360 a year with the income levy; they would be exempt from the health levy and PRSI. Such people will now earn €15,912 if they work for 40 hours per week but will pay €436 through the universal tax charge. There is something wrong in that case. People on higher incomes, such as those on €200,000, gain on the levies that were being paid. On the old scheme, somebody earning over €175,000 per year earned 11%, with 5% on the health levy and 6% on the income levy. They now pay 7% and if they are self-employed, they pay an extra 1%. They will gain 3% if they earn more than €200,000 per year. There is something wrong in that respect.

This indicates that the Government has not learned anything in its social policy and that it is tailored to the Galway tent. If not, the Government is so incompetent it did not realise the impact of this measure. Somebody on €300,000 per year will be €3,000 better off. A person earning €500,000 per annum is €9,000 better off under the universal tax charge. The calculation is simple: €500,000 minus €200,000 leaves €300,000 and a 3% levy on the latter sum amounts to €9,000. If a person is earning €800,000, the application of the 3% rate on the difference between €800,000 and €200,000 leaves him or her €18,000 better off. I suggest that the Minister re-examine the proposal.

The Minister argues he is trying to encourage people to return to work by reducing the minimum wage. The effect of the budgetary proposals will be that a person on the minimum wage will have less income and will pay more tax. A person working a 40 hour week on the minimum wage earns €346 per week and pays €360 per annum in levies. Under the proposed measures, he or she will earn €306 per week and pay €436 per annum under the so-called universal social charge, which is, effectively, a universal tax charge. Moreover, everyone who earns more than €4,004 will be subject to the tax charge.

The flaw in the current system of income levies is that those earning €26,001 pay 4% on the entire sum while those earning €15,029 pay 2% on the full sum. A similar anomaly is built into the proposed system, with those earning €4,004 being required to pay 2% on the balance up to €10,000.

Having found that the system is not integrated, the Government has proposed to reduce the minimum wage. How will we encourage people to come off social welfare by reducing the earnings of those on the minimum wage and increasing the tax they pay? The Government should have considered the matter from the viewpoint of an employer. If it had done so, it would have concluded that reducing the minimum wage and increasing tax for those who earn the minimum wage creates a disincentive to work. It should have abolished the 8.5% PRSI rate for lower paid workers. As the Minister is aware, the cost of an employee to an employer is gross pay plus the employer PRSI. He should have taken a progressive position.

The universal social charge measure has been rushed.

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