Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I acknowledge that it is different - it is available for all to see on the Fianna Fáil website - particularly in terms of the huge mansion tax it proposed. The Government scheme deals with house purchases of up to €600,000. Fianna Fáil did not go with a €600,000 threshold in its scheme. It is available to individuals regardless of the price of the house. Fianna Fáil's proposal is the ultimate mansion tax in that a person can purchase a new build or an old house for €1 million or €1.5 million and still be able to avail of its version of the scheme. Fianna Fáil rightly makes the point at this late stage in the day that this scheme will push up house prices. The Government plans to put €40 million per year into a scheme that I believe will fuel house prices. Fianna Fáil did not plan to make €40 million or €50 million available: it proposed to make €105 million available, which was more money for investors. It did not want the scheme restricted to first-time buyers. It wanted it to be available to every house purchaser. In the words of many commentators, including the Central Bank and others, the people who benefit from this scheme are the builders, not the buyers. Is it any wonder that Fianna Fáil was proposing a scheme that provided twice as much money, had no upper limit and would have cost the taxpayer €500 million over five years as opposed to the €150 million that the Government scheme will cost. There is a wee bit of honesty needed in this debate. Anybody can check out the Fianna Fáil scheme on its website. The Fianna Fáil scheme would have done the same as the Government scheme but Fianna Fáil would have thrown more cash at it to fuel house prices.

It is two weeks since we listened to the budget announcements. It was too much to hope that in the meantime some sense would have been seen. Then again, this budget was never, in my view, about sense. It was a carve-up and it was about reverting to type, back to the bad old habits. Vision and sense are not words that should ever be used to describe budget 2017 or this Bill. I say that while also acknowledging that there are some things that Sinn Féin called for that are provided for in the Bill and will be, hopefully, passed into law. In terms of what underpins the budget in this Finance Bill, I believe that budget 2017 was a missed opportunity. We could have put the country on the right track but the Government failed to do so. The right track is one on which we would be investing in our public services and infrastructure. Instead, we have an old style budget, merging the two worst instincts of two deeply conservative political parties.

The Finance Bill that has emerged is as expected: regressive and as short-sighted as the budget. In its small print are major tax breaks for a small number of people. What is missing tells the real story. This is one of the most important Bills of the year, of any year, which, as legislators, we all know. It provides us with an opportunity to stop and think and get rid of some bad ideas or ideas that did not work and replace them with good ideas. Abstaining on the Finance Bill is like sitting out an all-Ireland final. We have heard Deputy Micheál Martin say that Fine Gael has gone too right wing. I reject right wing politics and right wing policies. I do not abstain on them. My party rejects ideas that we know will be a disaster for working people. We reject ideas that we know will push up house prices. We do not sit on our hands and we do not just give about these ideas. Sinn Féin opposes, amends and votes on proposals. Fianna Fáil is sitting this one out. It is sitting on its hands and will not oppose what it believes are bad policies that will damage the economy.

The Finance Bill is the time when we get to shout "stop" in terms of law-making. No speeches or rhetoric will stop a right wing Bill or policies that are badly designed. Section 2 deals with the meat of the Bill in that it deals with the cut to the three bands of the USC. The Minister reiterated in his speech that this is about phasing out of the USC. I agree with Deputy Michael McGrath that the abolition of the USC is not desirable or achievable in the lifetime of this Government but Deputy McGrath needs to stand up and say whether Fianna Fáil supports the proposal to cut €2.7 billion from the USC. It is not acceptable to just say that Fianna Fáil does not support the Government but it really wants to go close to where it is. We need a bit of honesty on what the Fianna Fáil Party stands for. Perhaps it has changed its position on this issue. That would be welcome. There is no such thing as a popular tax. There are taxes that are necessary and taxes that are fairer than others. The USC is both. The only reason €330 million is being cut from the USC is because at some point, weeks before the election, a bright spark in Fine Gael printed up posters calling for the abolition of the USC. It flopped as a message, as we know. People could see with their own eyes the issue of homelessness ravaging through our cities and how our health service is struggling on a shoe string. Ultimately, the choice must be between cutting taxes and protecting or improving public services. We are squeezed into an arbitrary fiscal space so we must prioritise. We must make choices. Politics is about making choices. Sinn Féin set out in its alternative budget what in its view those choices should be. We did that by way of a costed budget. We did not sit on the sidelines. Sinn Féin is willing to be questioned on what it stands for. For the first time ever the largest opposition party in this House did not produce an alternative budget. That is unbelievable. Fine Gael has allowed that and it now finds itself in a situation of its own making. As I said, this is only phase one in terms of cuts to the USC. We know that this reduction would have been far more drastic were it not for the fact that Sinn Féin exposed the short-sightedness and recklessness of hacking away at the USC. We will continue to oppose that despite the fact that the benefits in that regard are small. One might think that a €330 million cut is small but the point is that, as the Minister said, this is only part of a plan to abolish the USC over a number of years. We oppose cuts that disproportionately benefit those at the higher end.

As I said earlier, the help-to-buy scheme is a bad idea. It is wrong and we all know it. Every commentator who is worth his or her salt on this issue knows that and has said so. The Central Bank knows it, in my view. Changing the deposit requirement from 20% to 30% did not make it a good idea. Changing the upper threshold from €600,000 to €500,000 or €400,000 will not make it a good idea because this is fundamentally a bad idea. Listening to the Minister trying to defend this in the past couple of weeks has been painful. He has tried to imply that this is a supply-side solution. He has tried to imply that the builders who talked him into this scheme have the national interest at heart. This is a shockingly bad idea that must be stopped and stopped now. Two weeks ago the Minister told us in this House that he had discussed the proposed scheme with the Governor of the Central Bank and that he had agreed that the rebate received under the scheme will be reckoned in full in the calculations of the deposit required to be eligible for a mortgage under the Central Bank's macroprudential rules. The following day he spoke to Sean O'Rourke on the national airwaves.

When asked if the Governor of the Central Bank had misgivings about the scheme, the Minister said "No, he is on side". Now we know how on side the Governor of the Central Bank was. Now we know the only thing the Governor of the Central Bank was actually consulted about was a technical issue as to whether the tax rebate to be provided could be used as part of the deposit under the mortgage lending rules. It is clear from the letter he sent to me and the version he sent to Deputy Michael McGrath that the Governor of the Central Bank did not know the details of this scheme. It is very clear that the Minister did not consult him in line with the commitment in the programme for Government to work with the Central Bank to introduce a help-to-buy scheme. The Governor of the Central Bank rightly points out that in the absence of increased building and development, this scheme could have the impact of pushing up house prices with the benefits going to builders instead of borrowers. This has been stated consistently by many of us.

The Government consciously and carefully tried to mislead the Dáil and the public into believing it had engaged in detail with the Central Bank on the merits of this scheme. We now know that no such thing happened. Is it any wonder? Like any other respected body when asked its opinion on this scheme, the Central Bank has pointed out that it could increase prices and benefits to builders not buyers. Of course, we all know that. As with the "Abolish USC" battle cry, Fine Gael has made commitments which are reckless but it does not have the political courage to back down. Deputy Michael McGrath referred earlier to the Davy report. Davy has made it very clear and the Minister of State should listen to the experts out there. I questioned the Taoiseach last week as to when he was going to listen to the evidence on the scheme. Davy has no axe to grind here, but it issued a report to its investors today in which it has revised house price inflation upwards to 7% in 2017. What does that mean for the average punter out there? It means the person who is thinking about buying a €300,000 house next year will see the price of that house increase to €321,000. Davy does not stop there. It says it will be 6% the year after and 5% the year after that. It points out that one of the factors contributing to this increase is the Government's flawed help-to-buy scheme. The €300,000 house of today will cost €357,000 within the next three years. That is what is happening here. Who is going to benefit? It will be the builders.

The Minister has referred to this as a supply-side solution. Does he think we came down in the last shower? No new building is going to take place for at least the next 18 months which is not already planned. It is impossible. One cannot throw up a house. This scheme lasts for three years yet the benefits are already there for people who bought from 19 July 2016. No new houses that are not already planned will be available for sale for at least a year and a half. If people have to go through the planning process, they will not even be on stream before the scheme has come to its end.

The Minister stood up here and said the Government was going with a loan-to-value ratio of 80% because people with a loan-to-value ratio of less than 80% could obviously afford the deposit and, as such, did not need the help. As a result of the Central Bank's intervention to protect its position, however, the Government has now gone with a loan-to-value ratio of 70%. What does that mean in practice? Somebody who is buying a €400,000 today would need to have a deposit of €58,000 under the Government's macroprudential rules. Under the Government's scheme to provide a €20,000 tax rebate, a person would need a deposit of €120,000 to buy that €400,000 house. As such, he or she already has the deposit anyway. If a person is on a loan-to-value ratio of 70%, that means he or she already has €120,000, which is twice what is required under the Central Bank rules. At a time when we have so many expenditure crises and hear time after time from Minister after Minister that we do not have the resources to deal with long waiting lists for orthodontic treatment, patients on trolleys, a housing and homelessness crisis which is out of control, the number of people, including children, in poverty or to pay our young public sector workers the right wages, why under God is the Government giving €20,000 of the State's money to people who already have a deposit of €120,000? They do not need the support to meet the Central Bank's rules if they can bypass those rules by nearly 100%. It makes no sense and it shows that the proposal is ill thought out and flawed.

I was obviously naive in thinking that we had ended the practice of making policy on the backs of envelopes when Fianna Fáil was kicked out of office. I thought there was going to be a new approach and that we would have evidence-based politics. Where is the analysis? Where is the report that backs up this policy and the expenditure of at least €50 million of our money? It will be at least €50 million because it is a demand issue. If there are more people, it will cost us more money. Where is the report that says this measure will not provide money to individuals who would have purchased new houses anyway and will lead to new building that would not have been provided in any event? That is something that has to be published. I do not believe the Government has that report, but if it does, it should be published before we deal with this on Committee Stage.

On funds and property, I am glad to see the Government has accepted my proposal for a withholding tax on distributions from funds to non-resident investors relating to Irish property investments. It is something for which I have called a number of times. We have spent a lot of time on this in my office where Eolan de Búrca has drilled down into the accounts of some of these qualified investor funds and ICAVs. One can see how blatantly they were boasting. Kennedy Wilson's accounts included the boast that it paid no withholding tax here, 20% on property funds in Britain and 25% on funds in Spain. There was absolutely no tax to be paid on the millions in profit it was making from rental income in Ireland. Other funds' accounts set out how they are the biggest landlords in the State. They have paid absolutely no tax up until now notwithstanding the fact that among their largest tenants is the State itself. It is unbelievable. As such, I welcome the acceptance of my proposal for a 20% withholding tax. I went with 20% because I thought that if the Government was to be persuaded to move on this, that was a figure it could at least start with. However, it has failed to deal with the major issue of large scale tax avoidance by non-resident holders of Irish property through vehicles like qualified investor alternative investment funds and ICAVs. That is because the Government has built into the system a loophole which will allow tax-free gains to be made by non-resident investors when they hold Irish property for more than five years.

The Government has introduced a withholding tax, which is exactly what I wanted, but now it has said that if vehicles or funds hold property for five years, they will not have to pay capital gains tax on the uplift. Given that qualified investor funds and ICAVs are estimated to own approximately €10 billion to €12 billion of Irish property, failing to apply any tax to gains they have made on the vast bulk of that property will result in massive losses to the Exchequer. That is particularly so in light of the exponential uplift we have seen in the value of Irish property holdings over the past number of years. Those funds that bought into the office sector in central Dublin last year saw increases of approximately 22.4% in 2015 alone. There is absolutely no economic justification for allowing non-resident investors to transfer gigantic gains from Irish assets offshore and tax free while ordinary Irish citizens and SMEs pay full Irish taxes. In Dublin, residential property prices have risen by an average of 42% from their lowest point in mid-2012. Outside the capital, the average has been 32% since the end of 2013. The proposed five-year window will allow these funds to leave town tax free. That there is a 20% withholding tax, which we welcome, is the headline. However, because they do not have to pay any capital gains on the huge uplift they are getting, the 20% withholding tax will not apply. That part is completely exempt.

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