Dáil debates

Thursday, 23 June 2016

Summer Economic Statement 2016: Statements

 

2:25 pm

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein) | Oireachtas source

Cuirim fáilte roimh an deis seo labhairt ar ráiteas eacnamaíochta an tsamhraidh. Tá an ráiteas againn, sa deireadh thiar thall, agus is féidir linn plé agus scansáil a dhéanamh air. The summer statement indicates boldly in its second paragraph that "decisive policy action means that the public finances are now in a better position". It is important we look at that premise, which could have been the Fine Gael election slogan. That premise was rejected. It is a despicable and mindless rewriting of history, brushing aside the years of needless and painful austerity as somehow worth it. We have already heard talk of the tough decisions, when in reality Labour and Fine Gael simply followed the EU's handbook on how to do austerity. Like all troika governments that followed the handbook, it was booted out of office by the people when they got the chance.

As we all know, growth in the Irish economy has been greatly aided by external conditions, namely, a weak exchange rate, trading partner growth, low oil prices and accommodative monetary policy. There have been bumper corporation tax receipts so far in 2016 but much like 2015, we are still at a loss to explain them. We saw corporation tax coming in at €1.18 billion, some €484 million or 41% ahead of profile. That is not a sustainable basis on which to build a sound economy, no matter how tempting it is to spin it that way. This year, we benefited from a fluke with €1.5 billion extra thanks to the upward revision of Government expenditure in 2015 by reflecting a reclassification of State transactions with AIB. If this accounting exercise had not happened, we would be in big trouble, with overruns in health and elsewhere already. We have seen a Supplementary Estimate only possible as a result of this accounting exercise. This will not happen next year or the year after and then we will see how tight and unreasonable are these fiscal rules.

The main purpose of this statement is to squeeze Fine Gael’s narrative into the fiscal space figures and, luckily for the Government, nobody is disputing the Department of Finance figures this time around. They are what they are. Let us be clear. My party has never supported these fiscal rules and we campaigned against the austerity treaty that brought in these rules. The rules do not allow us the necessary budgetary flexibility to deal with emergencies or pressures in society. They are far too restrictive. At the same time, we have always called for the need to reduce one's deficit, not spending beyond one's means and bringing down the national debt. As Sinn Féin argued, these rules have the potential to cripple our ability to provide services and invest in our infrastructure. Economically and politically, they are bad rules that need to change. As outlined in our manifesto, Sinn Fein would seek support for changes at an EU level and in the shorter term we will work to achieve the type of flexibilities to these rules that have been afforded to other States within the EU. Sinn Féin has been consistent therefore, unlike others, in our approach.

It is heartening to see some of the organisations and politicians in parties who were so vocal in their support for the rules now come around to our position, especially on the need for changes so that investment can be made. It is a bit pitiful that the Minister for Finance - one of the architects of these rules and supported by Fianna Fáil - is now begging the European Commission to change the rules that he helped design and sell to the Irish people in that referendum. Sinn Féin has been proved right. There is a growing consensus that the rules do not work and must be changed significantly. We now have the unedifying spectacle of the Taoiseach writing to the EU looking for a way out of these rules. There have been countless debates, both in this House and in committees and elsewhere, about the need to circumvent the rules by inventing special purpose vehicles that are off-balance sheet. That is just a way around the rules.

The rules allow choices to be made and Sinn Féin argues that until the rules are changed, we will always put forward proposals to comply with them. The choices are there for any Government. As much as Fine Gael and Labour in the past would like to argue that there were no choices, there is always a choice. That is why we in Sinn Féin have produced alternative budgets consistent with the fiscal rules year after year. We have demonstrated very clearly that we are the party which understood the application of these rules.

The net fiscal space is €11.3 billion ofchoices to be made over the next five years. This figure is not set in stone and can be expanded with discretionary tax measures, and in this regard I am glad the Government has taken Sinn Fein's lead on additional taxation measures such as the proposed sugary drinks tax, an increase in excise on tobacco products and the tapering of tax credits for high earners. We called for those in parliamentary questions some years ago. Sinn Féin believes the Government can go further in this regard and central to this is not carrying on with the most reckless tax cut in recent times, namely, around cutting or phasing out of the universal social charge, USC.

The Fine Gael and the Fianna Fáil promise to abolish or severely cut USC is populist and reckless. I welcome Deputy Michael McGrath's earlier comments that abolishing the universal social charge in this Government term is not on, but he is trying to have it both ways. His party wants to abolish USC on incomes up to €80,000, which will cost billions of euro each year. Of course, people on low incomes must be taken out of the USC net, and that is why, from the tax's introduction, Sinn Féin has campaigned to ensure that up to 1 million people are brought out of its net. It is not possible to be a tax-cutting party while promising to make the necessary investment in our economy and to maintain, never mind improve, our health services or provide housing for families who are homeless. It is nonsense to suggest all this can be done at the same time. Now is the time to invest in and repair our economy and not to start the ball rolling on the road to ruin again.

The Minister argues his tax cuts for the better off will be funded by other tax increases and by non-indexation. Non-indexation is already factored into the fiscal space and it has been the policy of the State, for right or wrong, for the past eight to nine years. It is not as if this is a major change that will offset costs. It is pure misrepresentation to present this as offsetting those reckless tax cuts. Likewise, the Revenue Commissioners have unambiguously stated that tax increases on tobacco cannot be relied as a revenue raising tool. Those opposite know this as it is published in black and white. My party supports increases in excise on cigarettes on a systemic basis as part of a health policy but not in trying to find a few extra bob. The mind boggles when I note the assertion in the summer statement that "A broad tax base that ensures financing of public expenditure is crucial", but the Government is intent on taking €2.54 billion out of the tax take by 2021. USC could bring in €5.6 billion by 2021, and it would bring in that amount every year based on non-indexation.

If the Minister does not want to listen to Sinn Féin's arguments regarding not abolishing the USC, not getting rid of this annual tax of €5.6 billion by that year, then he should listen to the European Commission, the Irish Fiscal Advisory Council and the ESRI, all of whom have criticised, in one way or another, the Minister's plans in this regard. The Minister must consider the housing crisis and the hospital waiting lists. Does it appear that we can afford to go without €5.6 billion in tax revenues each year? God help us when the next shock hits, particularly in light of the Minister's constant erosion of the tax base. The Minister of State, Deputy Eoghan Murphy should know this because we dealt with it at the Joint Oireachtas Committee on Finance, Public Expenditure and Reform. The fiscal crisis that hit this State was partly down to the fact that the former Minister, Charlie McCreevy, reduced taxation to an unsustainable level. That is what happened. It was camouflaged by the fact that stamp duty and other property-related taxes were coming in. There will be an economic downturn; there is no doubt about that. The only question relates to its intensity and when it will strike. A big risk in this regard is corporation tax. The summer statement does not give any information regarding the massive increase in corporation tax or the increase in its concentration among large companies. It should have been noted in the summer statement that the concentration of corporation tax receipts has risen, with over 40% of corporation tax paid by just ten companies in 2015. I think it was said that it was 25%, but in fact 40% of corporation tax receipts were paid by ten companies in 2015. That is up from 21% in 2009. In 2015, corporation tax payments from the top ten companies amounted to 6% of total Exchequer tax revenue. That is approximately the same proportion of overall Exchequer tax revenue accounted for by stamp duty in 2007, at the height of the boom.

The Government is just repeating the mistakes of the past. It is staring us in the face. God help us if this goes belly-up. Columns will be written to the effect that it was obvious. It will be stated that ten companies accounted for 40% of corporation tax receipts and the Minister cut one of the most stable forms of taxes, which is on income and which brings in €5.4 billion every year, because this type of unstable tax increase was happening. It is McCreevy stuff, it is wrong and it caused massive problems across Irish society. We have a responsibility in this House to have a proper and informed debate and to point out the risk. The Minister can use terms such as "prudent" and "broad-based" and all the rest, but what he is saying is nonsense. It is nonsense and it is reckless.

The Minister talks the talk with regard to public investment to safeguard our future and he acknowledges that "higher levels of investment are crucial in supporting balanced regional growth, eliminating capacity constraints and enhancing the growth potential of the economy". However, he does not walk the walk. Even taking account of the additional cumulative €5.1 billion capital investment, Ireland will still be among the countries with the lowest level of capital investment in the EU and the planned increases are certainly not transformative. Everybody is saying there is a housing emergency and we want to build more houses but we cannot because we need the European Commission to change the rules and help us to invest. If the Minister decides not to go ahead with his tax-cutting agenda in October's budget to achieve the net effect of providing tax relief amounting to €330 million, he could invest €1.3 billion next year in building houses for the homeless. He could invest that in the services that Deputy McDonald was talking about when she referred to the mother with her child who could not get access to emergency services.

These are the choices both Ministers and the Minister of State are making. That is Cabinet responsibility, folks. They cannot walk around and say "We hear your pain, we feel your pain". They are making these damn choices and they are deciding to sacrifice these individuals and these sectors of society because they think it is more politically beneficial that they cut income tax rates on the false premise that cutting these rates will create jobs. Somehow, the Government is already creating jobs. It claims jobs are being created by the spade load, yet tax rates are still high. The Government cannot have it both ways. The fiscal space allocated to capital investment next year is 6%, yet 33% of it is devoted to tax cuts. That is the priority of this Government. If the Ministers do not want to listen to us, they should listen to IBEC, to the European Commission and, most importantly, to our small and medium-sized enterprises, which are crying out for capital investment. The best way to stave off any economic shock in the future is to ensure we have the investment in our society at this time.

Moving on to current expenditure, the assertion in the programme for Government that there will be an additional spend on public services by 2021 is a clear attempt to pull the wool over the public’s eyes. The expenditure commitment of €6.75 billion is clearly shown as the con job it is in the summer statement, particularly as €2.5 billion of it has already been committed and that the additional spend - if we are to believe the figures - will be just €4.25 billion over five years. Unfortunately, it gets worse. This €4.25 billion does not even give the full picture because the expenditure projections do not make any allowance for inflation. Does the Government really believe the cost of medicine is not going to increase in the next five years? Does it really believe the cost of maintaining schools will not increase in the same period? This is mind-boggling stuff. It does not account for that or for public pay increases beyond 2018 and it understates demographic pressures. The Irish Fiscal Advisory Council recently asserted that a standstill estimate of expenditure, which would maintain the current level of public services and benefits given a full accounting for demographic changes and inflation, would result in an additional €6 billion of public expenditure by 2021. A standstill position means people on social welfare get increases in line with inflation, inflation is built into non-pay issues and pay rises in respect of inflation. What would be left of the fiscal space if that is the case? The answer is there would be €750 million to be spent over five years. That figure is important because it is the real amount of money the Government has in terms of service enhancements or fixing the problems we have in health, education and dealing with all the different pressures.

I will hand over to my colleague, but I look forward to dealing with the idea of a rainy day fund. It will be slush fund for the Government. We will have opportunities to talk about that. We suggested a rainy day fund, but we did not suggest leaving those who are being soaked at this point without the necessary supports and protections from Government. I am sure we will get an opportunity in the coming days to discuss that in more detail.

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