Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I listened with interest to the previous speaker. I have sympathy for the argument that nothing comes for free. We tried to explain this during the tenure of the previous Government, but the then Opposition did not seem to get the message. It is important that we all recognise that there are only two sources of funding for State services. One either borrows the money and pay it back with interest or one raises it in taxes. There is no third way; there is no other magic source of money. When I constantly hear people telling me that one does not need to adjust budget expenditure and that one can virtually abolish all taxes, we need to say that is incorrect. I support Deputy Joe O'Reilly in that sense and I am glad to hear about his conversion to this theory in recent times. However, I do not think he has explained his logic about broadening the tax base. I have heard this argument before and it is Department of Finance-speak. The Deputy should understand what he is saying. If he accepts what I accept, namely, that virtually all taxes come from the people and that there is a finite number of people in the country, when one says one is broadening the tax base, one is rejigging it to take money off the same people in different ways. I hear people say on the news that so many people are not in the tax net and do not pay tax. This has been said on radio and Government Deputies repeat it like parrots. It is time people started to think rationally for a change and stopped repeating the mantra. The reality is that when one talks about broadening the tax base, what one means is that people who do not pay income tax will pay tax in another form and that when one takes this into account, those who do pay income tax will pay less.

I was looking at the Government Estimates a few seconds ago. A total of €38 billion has come in in tax, €1 billion ahead of profile, which is great news. I always believed tax receipts would bounce back. I had been making predictions, once I saw traffic getting heavier in the morning, that it was inevitable that they would bounce back. Some €15 billion represents income tax and USC receipts; the other €23 billion represents other taxes. VAT accounts for €10.5 billion; excise duties, €4.3 billion; corporation tax, €4 billion; and property taxes, €1.5 billion. At the end of the day, less than 50% represents income tax. People pay tax on very modest incomes, particularly following the introduction of USC.

What broadening the tax base means is taking from a tax that is objectively based on ability to pay such that the more one has, the more one pays and transferring the burden to different taxes which involve usage which, in most cases, is unavoidable. When one buys, one pays VAT or excise duties, which are often an attack on rural life because in a rural area one needs to buy more petrol, which is one of the big sources of excise duty. The problem with these taxes is that they take no account of ability to pay. Those who put forward the theory that we should broaden the tax base are actually saying we should take from one tax where there is some connection between it and an ability to pay and transfer the burden to citizens at large, regardless of whether they have an ability to pay. No more than the nonsense about free services and having no taxes that we hear all the time, this is equally nonsensical because it is the people who would have to pay.

The Government already knows from surveys that poorer people and those on lower incomes spend a much higher percentage of their wages on services than the well-to-do who tend to put more money aside. Therefore, if there are a lot of taxes on goods and services, porportionately one will pay more of one's income in tax. Therefore, what this argument is about is taxing the poor to benefit the better-off.

The number one argument against this proposition of broadening the tax base is that it is a very fancy exercise and when we defend it, we might as well say, "yes, the Government believes in regression" which is what it has consistently done since it came to power. The ESRI and all other commentators have said its budgets have been regressive because the burden has been shifted from the top to the bottom. I am sure the Minister of State cringed last weekend when we were told that in the budget to be announced next year the top rate of tax would be brought down, rather than trying to roll back the USC, which was only ever meant to a temporary measure. I know how powerless she must feel when she hears such announcements being made ten months ahead because she is not sitting at the Cabinet table.

When I do not understand something in common logic I always suspect I am not being told the full story. Thankfully, the margin of error is in favour of the Government this year and, please God, it will continue that way. Irrespective of what the Government does, it is like a bungy jump. As I noted four years ago, the higher one goes, the bigger one falls but the more one falls, the bigger the bounce. That is happening now because we are out of houses. The internal economy had to pick up because when we are out of houses, we have to build them. Houses require a large amount of native produce. The cement, sand and timber are local. Much of what goes into a house is produced in the State. The biggest cost in building a house is labour and as houses are built we will see a lift in the tax take. It is logic and common sense. I often wonder whether economists get so lost in their academic figures that they do not look at what people are actually doing. Common sense suggests that, like a bungy jump, the greater the tension, the bigger the spring back. That is becoming evident in this year's tax returns. As this spring back happens, it is being reinforced because other sectors are also affected. That was one of the problems during the boom because it is very difficult to stop that oscillation.

In this context, why is the Government going to the trouble of introducing all these Bills and driving many Members on the other side of the House out of their seats for the sake of €140 million net, or only €100 million when one takes account of the transaction costs? That is one tenth of the tax taken this year over and above profile. The Government has €1 billion more than it expected, yet it is in the midst of a huge convulsion that is destroying its own popularity. The Minister of State, Deputy Ann Phelan, must be tearing her hair out wondering what they are doing in the Cabinet. I have been trying to figure that out.

There are a number of possible explanations. The first explanation is that the Government is too proud to say it got it wrong and cannot face the fact that its proposal does not fly. The second is that the gurus in Merrion Street believe that, regardless of how little we take now, in five years' time they will have engineered full cost recovery and the €100 allowance will disappear. I suspect 90% of the public believe this is the thin edge of the wedge. Income tax was similarly introduced in Britain as a temporary expedient during the Napoleonic wars but it has had a long shelf life. From my experience of the corridors of Merrion Street, I think people may be half right in believing it is playing the long game. Once this is introduced, Merrion Street will want to get to full cost recovery.

The third explanation is that it was because of the European Union. I do not think the troika gave a damn about water charges as long as we got the sums right. The agreement we reached with the troika made little mention of water. There was agreement on mortgage interest supplement but the Government had no problem getting rid of that. There were all sorts of other provisions in that document and I do not think the troika cared too much about them as long as the Government got the finances right and could prove that it had made sufficient changes in the economy to be able to pay it back. The troika was simply acting as bankers. I suspect that the people who have a big hang-up about charging for water are in the European Union. I do not refer to the EU as our local banker, the ECB or the IMF because all they wanted were sustainable finances. They would probably argue this is an inefficient tax in any event. I suspect the Taoiseach is under pressure from the European Union to introduce water charges because we all have to dance to the same tune and because it regrets giving us a derogation on charging water. The derogation does not state we cannot charge for water; it states that we do not have to do so. If Europe is sorry for giving us a derogation and is putting the screws on, why does the Taoiseach not say that we have a gun to our backs and are being told by our partners to end the derogation? The answer to that is we have a derogation and they can jump in a river. It is the law. I suspect there were conversations behind the doors to the effect that the Taoiseach ought to straighten up and charge for water because our EU partners believe there should be charges.

They might not be so convinced if they lived in this climate. I guarantee that, where I live, regardless of how much water we waste, we are not even using all the water in Lough Coolin, which is on the top of the mountain behind my house, not to mention Lough Corrib. There is enough water in Lough Corrib to supply the entire country. When we run out of Lough Corrib, we have Lough Mask, Lough Carra and all the other lakes in our area. We are not going to run short of water.

Which of the three theories is right? I think the second and third theories are right. When somebody makes a ridiculous proposition, there is always some reason behind it. Very few people do things that are totally illogical. There is some reason we are not being told.

The people have made it clear that they do not want water charges and they do not trust this or future Governments in this regard. They believe that, sooner or later, pressure will be applied to introduce full cost recovery for water. The water will be funded by charges rather than providing money through the Exchequer, which allows for an ability to pay cause based on income tax. About one and a half months ago, I had a conversation with an 83 year old academic and friend of mine, a man of the people who has been involved in a number of good projects. I refer to an tAthair Michael McGéil, a fine and erudite man whom I respect. Long before the big marches, he came to my house, sat at my kitchen table and said, "Éamon, éist leis na daoine. Níl siad ag glacadh le táillí uisce." He did not make an argument for or against charges; he was simply making the point that, for one reason or another, the people have made it clear, in the only way they could speak given that we are not having a referendum on the issue, that they do not want the charges proposed by the Government. The wise course of action would be to withdraw this Bill and get on with building a proper national network.

The argument that the Government will be able to raise finance on the back of these proposals is nonsense. It is so fractional compared to government finances, it is not worth all the hassle the Government is getting. The sums show that approximately €500 million per year is required, and it would take a while to crank it back up to that figure, which is what the position was when we invested the €0.5 billion. In the greater scheme of things it would not much change the debt to GDP ratio, so that argument falls on its head.

The tragedy is that there are quite good ideas in what the Government is doing. Having a national network of water supply to national standards makes sense, as does rationalising the supply so pipes can be brought over county boundaries. There can be a reservoir in one area with the water being brought to another area under a larger, better quality scheme. That makes a huge amount of sense. I believe in the integrated national network and, as I have said repeatedly, if the water supply had existed as a universal service to everybody when water services were started, as in the case of electricity, it would never have been given to 34 county councils. I accept that, so I buy in to the need for a national network for water supply. Sewerage is different because we will never put sewers throughout the countryside. However, the sensible thing to do is to focus on getting the pipe work right. Let us forget about taking in a few hundred million euro here and giving out a few hundred million there.

Unfortunately, my time is limited so I will conclude on one specific provision. There are many interesting little nuggets in the Bill. One cannot sell Irish Water, but one can sell all the bits of Irish Water. However, we will have a chance to debate that on another day. One provision fascinates me, and I will make a prediction about it in the last few seconds I have to speak. The Bill provides for a water conservation grant. As instituted, it does not conserve anything, but there is a lovely clause in the Bill which states that the Minister can attach any condition to it. For the first year or two, until the Government gets over the next election, there will be no conditions attached to this water conservation grant. It will be a cash grant into the person's pocket. However, I am prepared to bet any amount of money with the Minister - I am not making a political point because I have seen this written by the good people with the long view on many previous occasions - that if that grant exists in five or ten years' time, a person can expect to spend a great deal of money and go through a great deal of hassle to get their water conservation grants. The Government will make it a water conservation grant.

I presume the reason for calling it a "water conservation grant" is to sell it to our European cousins and try to fool them that there is a conservation element. They will bite back in time, because they are good at biting back. In good time they will say that as it is called a water conservation grant, it had better be a water conservation grant. Otherwise, they will rule it out of order and declare it to be a state subsidy for water and therefore not allowable for borrowing purposes.

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