Paul Murphy (Dublin South West, Anti-Austerity Alliance) | Oireachtas source

The Finance Bill confirms the nature of the budget. It is a right-wing budget written for builders, landlords and the wealthy and to allow Ireland to continue to operate as a tax haven, with only token measures included to try to cover this up. We heard much from the Fianna Fáil Party during budget week and again this week about having a tempering effect on the Fine Gael Party - this is, apparently, what political parties now aspire to, as we saw in the case of the Labour Party in the previous Government - and taking the worst edges off what would have been a very bad budget. We see this in black and white in the Finance Bill which has again been written for the 1% and has Fianna Fáil's fingerprints all over it.

The clearest example of the nature of the Finance Bill is in its approach to housing. It is utterly incoherent on the issue, apart from its one common thread of assisting builders and landlords, as opposed to those in a housing crisis. The Government, finally, gave us figures recently for the numbers of social housing completions this year. With well over 100,000 families on housing waiting lists, 117 social houses have been built directly by local authorities so far this year, with a further 120 built by housing associations. A total of 237 properties have been built this year. These figures come after five years when the previous Government built the lowest number of new houses in the history of the State. We heard promises and commitments over an extended period, not last week or last month, that a new approach would be taken by the Government. We have been promised changes in housing provision for some time, but nothing has been done to provide social housing. This is the only way the crisis will be addressed, yet the budget did not contain anything beyond minimal measures. The additional 1,500 houses provided for are a drop in the ocean.

We should contrast this with the two main thrusts of the Finance Bill, namely, a builder's grant dressed up as a first-time buyer's tax rebate and new tax breaks and an extension of existing tax breaks for landlords. These measures paint an accurate picture of the Government's approach of relying solely on the private sector and the free market and the idea that somehow incentivising them with further profits will resolve the housing crisis. This approach has been tried over and over again and has failed.

From where did the idea of the first-time buyer's tax rebate or builder's grant come? It was instructive to listen to the Minister for Finance speaking on the "Six One" news programme on the day of the budget. When he was asked how he knew the tax rebate would boost supply he stated Mr. Tom Parlon and the Construction Industry Federation had assured him that it would.

He was then asked whether this was not going to drive up prices and put money in the pockets of developers, which it is. He said the building industry, the builders and Tom Parlon in particular had assured him this will be effective and builders will move to build affordable houses. Therefore, the lobby organisation that represents big developers in this country goes to the Government and the Minister, Deputy Noonan, and says it wants a grant transferred via a tax rebate for first-time buyers - a grant to builders - and promises they will not just take it as profits but will actually build more homes, and the Minister Deputy Noonan says it is fine and allocates €50 million to pay for it. It is incredible.

The reality of what will happen is that it will not make any difference to making affordable housing available for people and it will just push up house prices. The high threshold of €600,000 means it will push up house prices more than if it had been capped at a lower rate of, say, €200,000, which is the maximum many workers could afford. An interesting element of this is how, while it is supposedly to incentivise developers to get involved in building new houses on the basis of increasing prices, it is also available for self-build homes up to €600,000. If someone builds a home on their own land or their family's land for €600,000, that is not a new starter home, it is a mansion. It is clearly Fine Gael playing to a certain core constituency.

Davy has already projected - accurately, I would say - that the 5% rebate will add 2% to house prices next year so they will increase by 7% rather than 5%. Even in terms of the new 70% loan to value ratio, the big winners are the builders. To the extent that those who buy homes get any benefit whatsoever, it is massively skewed towards those on higher incomes who, therefore, are able to both afford the higher value homes, up to €400,000 and then going up to €600,000, and have paid enough tax in previous years to benefit from the rebate. Even Colm McCarthy, a right-wing economist, has said that for a joint income, this is at the upper limit of the Irish income distribution, and for a single income, this is a grant to the very highest earners in the country. The core approach of the Government in dealing with the housing crisis is to try to drive up the prices of starter homes. Incidentally, the Minister, Deputy Noonan, bemoaned the fact there are no starter homes whereas, until recently, he was telling us that NAMA was assisting in the building of starter homes in the State. That is the core strategy of the Government.

There was an excellent article by Lorcan Sirr in The Sunday Timeswhere he spoke about the absolute incoherence of the approach of the Government. On the one hand, it is pushing up house prices and helping to make them unaffordable for first-time buyers, and the fact the Government is incentivising this with more tax breaks, while simultaneously handing out first-time buyer rebates, shows how incoherent its policy is. While there are first-time buyer rebates on one side, the other arm of the Government strategy is more tax breaks for landlords that will result in an increase in the buy-to-let sector that will drive up house prices further, therefore putting homes even further out of the reach of people.

Let us take a look at the measures for landlords provided for in the budget. There is an extension of the living city initiative, which was previously only available to owner-occupiers but is now available to landlords. The relief per home is capped but there is no limit on the number of homes for which a landlord can claim the relief, so it has the potential to cost a lot of money. Most importantly, in section 15, full interest deductibility in respect of rented residential property will be restored over a five-year period by way of 5% annual increments. That is a big extension of tax breaks for landlords. It was one of the main demands made by landlord lobby groups to the Committee on Housing and Homelessness and it shows the power of landlord lobbying and the influence of that sector, which is not surprising given more than 20% of Deputies are landlords, so they get a sympathetic ear.

The pretext is that of boosting supply and stopping landlords from exiting the market, which is apparently the big fear. We have argued and it has been confirmed that landlords are not exiting the market despite all the scaremongering to that effect designed to get them extra tax breaks. Actually, as Lorcan Sirr pointed out, the sector has expanded from 319,000 tenancies at the end of last year to 324,000 in mid-2016. The number of landlords also increased in the 20 months to June 2016. The stock of rental properties in Dublin has risen by 54% since the first quarter of 2011. Despite this, the Government is incentivising buy-to-lets again at a time when there is a huge hangover of buy-to-lets in arrears from before the crash, covering up the fact that Ulster Bank has just sold some 2,000 buy-to-lets in long-term arrears to Cerberus vulture fund and AIB is reported to be planning to sell off close to €2 billion worth of buy-to-lets in arrears to other vulture funds.

The 5% increase in relief will not make much difference to people in long-term arrears. Instead, that money would be much better spent in having State-owned banks like AIB write down the buy-to-lets in arrears and take them into public ownership for public housing. Instead, it is standing by while thousands of buy-to-let tenants stand to be evicted.

We have been here before in terms breaks for builders and landlords. Section 23 was obviously part of a smorgasbord of billions of euro of property-related tax breaks that blew up the property bubble and led to a banking and property crash. It did not work in terms of resolving housing needs for ordinary people. It is not going to work now and the same problems are being developed.

The Finance Bill contains tax breaks for businesses and for corporate executives. The context is definitely the post-Brexit scenario and the Government has engaged in a race to the bottom with the City of London in a post-Brexit attempt to attract finance capital and corporate executives, who will add extremely little in terms of real economic activity to this society. There is an extension of the special assignee relief programme to 2020. Section 10, which deals with foreign earnings deductions, a tax break for Irish corporate executives working overseas, has been extended until the end of 2020, with the addition of Colombia and Pakistan as relevant states, and with the number of required days to be spent in a relevant state reduced from 40 to 30.

Section 25 refers to a so-called entrepreneurs relief through a cut in capital gains tax on sales of businesses from 20% to 10%. This is exactly the cut demanded by IBEC, which wanted it cut to 10% in order to explicitly compete with Britain in the context of Brexit. Watch this space, because IBEC also wanted an increase in the lifetime limit from €1 million to €15 million. It was left at €1 million in this budget but the Minister has promised to review it in the future and I would not be surprised if IBEC gets what it wants.

Other tax breaks for the wealthy include section 13, which prevents certain tax avoidance opportunities in regard to personal retirement savings accounts. The question has to be asked why a standard fund threshold is so high at €2 million. It is no wonder the cost of tax reliefs on private pensions runs into billions.

It is also interesting to look at the whittling away of the high income individuals restriction. This was introduced in 2006-07 and tightened in 2011, and is an attempt to reduce the ability of the wealthy to reduce their tax liability to almost nothing through the utilisation of tax breaks. It was designed to ensure there was an effective income tax rate of at least 30% but that has been whittled away by the introduction of new tax reliefs which have not been added to the list of those that are included for the purpose of that calculation. This budget goes even further because, as well as not adding, for example, the special assignee relief programme or the living city initiative, it goes out of its way to take a previously counted tax break off the list in that section 19 takes the employment and investment incentive off the list.

There is a return to government by tax break, through policies that only benefit the rich and misallocate resources away from public services and away from working class people.

11 o’clock

A TASC report from 2012 put it extremely well. It states:

The winners are those who have sufficient funds or borrowing capacity to invest in a tax-incentivised scheme. And the winners are those individuals and companies who know how to exploit our tax rates and tax breaks – those who can pay accountants and tax advisers to save them money.

The losers are the rest of us. The losers are those who lack the income or funds to avail of tax breaks. The losers are those paying more in other taxes, such as VAT, to compensate for the revenue foregone through tax breaks. The losers are those bearing the brunt of public spending cuts imposed to pay for tax breaks: children, the elderly, the sick and the vulnerable.

The same is true once again. To cover it all up, there are tokenistic anti-tax avoidance measures.

The crackdown on section 110 arrangements is to be welcomed but the question to be answered concerns why it is anticipated that so little will be raised from it. The figure is only €50 million although some estimate that, by taking on the section 110 arrangements alone, one could raise at least an extra €1 billion. With regard to section 54, the question remains as to why there are penalty mitigation arrangements for tax defaulters at all.

The other big items - the need to close the double Irish in advance of 2020 and the need to close the knowledge development box - are simply not touched, despite the fact that the closure of the knowledge development box, for example, would result in a gain of almost enough to pay for pay equality for all public sector workers.

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