Willie O'Dea (Limerick City, Fianna Fail)

It is strange, to say the least, that a Labour Party Minister was sent in here yesterday to do all the heavy lifting and that the most unpopular of the financial resolutions is also being advocated tonight by a Labour Party Minister. Everyone who has commented on this measure has condemned it in the most trenchant terms possible and Fianna Fáil opposes it absolutely.

I heard the Minister for Finance congratulate himself today on the fact that he was moving towards taxes on consumption, presumably rather than increasing income tax. It is not a question of either-or. We produced a set of proposals that would give the same revenue, without either increasing the top rates of income tax or VAT. Conventional wisdom is that taxes on consumption are less detrimental to employment than increases in income taxes. I agree. However, each case depends on the circumstances. If we look at the circumstances surrounding the Irish economy currently, we quickly appreciate why this proposal is insane. For the 44th successive month in a row, retail sales have fallen. We need to boost the domestic economy. Exports are beginning to falter. If we look at the falling Irish trade balance, we see that export growth is faltering badly. There has never been a time in our history where there has been a greater need - with 450,000 people unemployed and 100 a day emigrating - to stimulate the domestic economy. In these circumstances, an increase in the standard rate of VAT is the last thing this economy needs.

Not only is this proposal economically illiterate, it is also regressive. We have the most progressive income tax system in the civilised world. Value added tax is, by definition, regressive. People who do not have a taxable income cannot avoid having to pay VAT. The poorer a person is, the greater the proportion of his or her income to be paid on VAT. Many wealthier people do not spend their entire income. Therefore, not only is the proposal economically illiterate, it is socially regressive. It has been stated that the items covered by the 21% rate are such things as furniture, white goods, etc. People who do not have a taxable income - the poor - also need refrigerators. I suppose they could get by without television sets, but they should not be expected to in this day and age. Representatives from the Society of St. Vincent de Paul said today that last year they spent millions on helping people purchase furniture which they otherwise could not afford. All of these goods fall into the 21% VAT category. I find it ironic that these items will now be taxable at 23%, whereas value added tax on items such as caviar, smoked salmon and concert tickets is zero rated.

I was delighted today that RTE took the decision on the six o'clock news to highlight my colleague Deputy McGrath's exposure of the synthetic outrage of the Minister for Social Protection, Deputy Joan Burton, last year at the very notion of an increase in value added tax from 21% to 21.5%, but there was not a tittle out of her today when we are talking about a percentage increase four times that. Talk about raising hypocrisy to the level of a crusade.

Without much confidence of being successful, I ask the Tánaiste and the Government to think again about this proposal. I urge them to have a look at our document and see how they can raise the money without further depressing the domestic economy. The job of the Government in these perilous times is to lead us away from the cliff rather than towards it.

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