Kieran O'Donnell (Limerick East, Fine Gael)

When one is considering measures that have moral authority, one must note the reduction in the minimum wage is double the reduction proposed for the Taoiseach. A salary of €214,187 does not compare with the minimum wage of €15,912. The Taoiseach's salary is approximately 13 times the minimum wage.

The annual minimum wage currently amounts to €17,992 if one works a 40-hour week. It is proposed to reduce the hourly rate from €8.65 to €7.65, a reduction of 12%, bringing the annual wage to €15,912. This amounts to a reduction of approximately €40 per week, which is significant to the individuals concerned.

A person on the minimum wage currently pays an income levy but no health contribution or PRSI because of the exemption. The income levy amounts to approximately €360. Recipients of the reduced minimum wage, when brought into effect, will pay an extra €115 per year, resulting in a total of €435.76. It strikes me as illogical that, although one's income is decreasing, one is paying a higher tax. This is because of the universal social charge. The charge should be called the "universal tax charge" because that is all it is. A social charge normally implies a charge for some social service. I would like to know exactly where the money accruing from the so-called universal social charge will go. It is no more than a tax.

Let me make a comparison. Under the current system, a full-time employee on the minimum wage will more than likely not qualify for rent supplement and would have extreme difficulty qualifying for a medical card. Under the proposed system, with its reduced minimum wage, recipients will be earning just under €40 less per week, which amounts to just over €2,000 per annum. There is no incentive for people to work. While the economy must become more competitive, a balance must be struck. The proposal we put forward was more to do with reducing the overall cost to the employer by exempting the lower rate of PRSI for three years to reduce the cost on the employer by approximately €30 on or around the minimum wage.

I would like to hear the Minister's views on it. I hope he will review it. I hope also the Government will see that this measure is draconian and does not make sense. It is illogical because it is reducing the minimum wage while increasing the tax. It is not progressive. Under the universal social charge system, someone earning over €200,000 a year, for example, a proprietary director or someone who is self-employed, is gaining from this budget. That is inconsistent. We must have a progressive tax system. This measure is draconian and regressive and it will put people deeper into the poverty trap.

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