Joan Burton (Dublin West, Labour) | Oireachtas source

I said on budget day it was much ado about nothing because it is a very modest budget. People will be relieved that taxes are not rising. At the same time, the tax increases that have been brought in, while welcome by individuals, make very little difference in the greater scheme of things. I do not know if the Minister has read the ESRI analysis which contains a verdict that by the end of 2018 the effect of the budget will be to lead to small losses in income at all levels because it fails to index bands and allowances and gives quite small levels of taxation. I will take the Fianna Fáil argument for its budgets of 2009 and 2010, which it claimed were progressive, as an example. They were progressive in the mechanical and mathematical sense that when one makes 330,000 people unemployed, they lose their earned income and most, if not all of them, go on social welfare. They then move down to a social welfare income. Therefore, in Fianna Fáil's mathematical model, 330,000 people losing their job results in a progressive budget. Try telling that to the poor Greeks and those in other countries. The ESRI analysis of the budget is very important. I am glad about the social welfare increases for 2018, which follow on from the increases in 2016 and 2017.

In terms of tax justice as a concept, what we want is a balance in taxation that results in a tax system that is effective, fair and sufficient to achieve the tax levels necessary for the kind of investment and service levels that we want to see, particularly in health, housing, education and social protection. In social protection, we need pay related social insurance sufficient to continue to fund adequate pensions in retirement. The recent Social Insurance Fund report that was only published last week - I am not quite sure what the delay in publishing it was - and which was carried out by KPMG, tells the story that we cannot continue to fund the Social Insurance Fund in a way that will meet people's pension and retirement expectations unless we ensure it is sufficiently funded. The Minister will know as a former Government colleague that, as Minister for Social Protection, I fought very strongly to successfully resist the demands the troika imposed on Ireland in terms of the social welfare cuts it wanted at the outset. When I met the troika and others, including some people from the Minister's Department, everybody wanted cuts in the weekly rate of pension payments to pensioners. I am happy to say I resisted it and my colleagues in that Government supported me. There were no cuts to the core weekly payment whereas under Fianna Fáil, the core weekly payment was cut in two tranches by €16.40 a week for all payments, including unemployment, disability, carers and blind pension payments. They are cuts that even at this point in time, notwithstanding Fianna Fáil support through the confidence and supply arrangements, are yet to be fully restored. The critical problem that the previous Government and I faced was that by the time Fianna Fáil left office, there was a hole in the Social Insurance Fund that amounted to €2.8 billion. By the time that Government left office, it was back in surplus to the tune of about €200 million. The Minister might confirm that this year, the surplus will be somewhere in the region of €1 billion. Next year it could possibly double if employment and growth levels continue as we expect.

Every year that I was Minister for Social Protection, I had to find an extra €200 million to fund the new pensioners coming into the system. The actuarial report on the Social Insurance Fund shows that figure rising to €220 million per year. It is a big burden and a large amount for any Minister for Finance to find. It is so important to social cohesion in Ireland that, collectively, all the parties in this House should contribute to maintaining a very solid pension system whereby the people working in this generation fund the retirement pensions of the people in retirement and, in turn, the later generations working will fund the pensions of the people currently paying into the system when they retire. It is only possible to do that if the funding is maintained at an adequate level.

We will get an opportunity to discuss this on Committee Stage. The Bill makes a number of proposals on taxpayer information and the information that can be obtained from employers in respect of their payment of PAYE, PRSI and so on. I would be very confident that this will subject to the appropriate data protection requirements which may arise. It is also to allow us to work towards what is sometimes called a real-time system of information and data.

I want to make one plea to the Minister. He should not go down the road of the UK system of universal credits. When I was Minister, I looked not only at the UK system, which in a lot of its manifestations is pretty cruel on people on social welfare, but also at the systems in Sweden, Norway and Austria. Universal credit has all but broken the British social welfare model, which dates back to the 1930s and 1940s, because, particularly for people on very low incomes, universal credit simply cannot be dealt with in a sufficiently timely way in order to prevent depriving people on very low incomes of stoppages in their payments for six weeks, eight weeks or even longer at a time. The UK Minister responsible for this has been doing it on a trial basis. The outcome of the trial has been extremely disappointing. If people in the Department of Finance are considering offering the British model in Ireland, I would seriously caution that we should not do it. I accept that it would be very desirable to move to an IT system with real-time information. We have a very strong legislative underpinning of social welfare entitlements. For people who qualify, either by contribution or based on a means assessment, we can then deal with them directly. The UK is trying to combine the tax and social insurance systems and this is resulting in the people at the bottom of the ladder losing out in a very worrying way.

In the North of Ireland, social welfare payments are significantly lower than in the Republic. If people in the UK have additional accommodation, charges are levied through the bedroom tax. The impact of this can be extremely cruel. I would like an assurance from the Minister that all the parties in the Dáil would work to maintain the Irish system and the funding relating to it, and not go down the road the UK has chosen. Most UK politicians of any party will say that they wish they never did this because they have damaged their system in such a way that if it is repairable, such repair will take decades.

I welcome the move to get more information to taxpayers on a real-time basis and the other improvements in the system and records which hopefully will also make it easier for employers to deal with.

I raised the banks' tax losses with the Minister last year, as I have done on many occasions. The reason the tax losses of the banks are now relevant is that the banks are now making profits. When companies are making losses, nobody is interested in tax losses because they have no taxable income. Now that we have banks with significant taxable income, I recommend to the Minister a system I suggested to the late Brian Lenihan when he was Minister for Finance and which he accepted, namely, to provide for a minimum effective corporation tax rate or to restrict the use of the losses. Losses have a legitimate function where companies lose for a couple of years but then get back into profitability. However, the level of losses built up by the banks in Ireland is extraordinary. The Revenue Commissioners gave me details of this, which I published almost two years ago. We again need to get agreement that it is wrong that a bank could make €700 million in profit but end up - here and now, when the country needs resources - making no contribution in corporation tax. I think that is folly. It is a slightly academic argument when banks are losing money and, therefore, have no taxable profits in any event. However, once they come into profit, these losses potentially mean that they can wipe out their tax bills for many years. That is unfair on ordinary taxpayers, including ordinary business taxpayers who never got the kind of bailout afforded to the banks. Irish taxpayers, including public servants, paid dearly in contributing to that bailout. The banks may have factored this in as a form of off-balance-sheet asset. We will get an opportunity to discuss this more on Committee Stage and there are several ways of doing it. We should introduce a minimum effective tax rate or limit the amount of losses banks can use in any one year.

On the banks and the tracker scandal, when the Governor of the Central Bank, Professor Lane, appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, to some extent he put his hands up and said, "What can I do?" There is a divided responsibility there. On the one hand, there is the need to try to have functioning banks for a vibrant economy. On the other hand, the banks have not bothered to deny that they have treated people in a very harsh and despicable way at a time when individuals have been incredibly vulnerable and terrified, particularly of losing their family homes. Pretty well all the banks have behaved in the same way. I acknowledge that AIB was probably the first to provide a specific unit and, therefore, that it has addressed far more cases than any of the other institutions. Perhaps that is because it is publicly-owned. The European Central Bank may need to examine this matter.

It does not have a direct responsibility but confidence in the banking system is a function of fairness and equity in the system. It is not to be subject to a cartel of seven, eight, ten, 11 or 12 banks acting together in an extremely onerous manner towards ordinary customers of the banks. We also know that the interest rates charged by the Irish banks are very high. The Minister might be able to explain why they should be as high. By and large, they are one to three points higher than their European equivalents. For hard-pressed families and businesses, that is an enormous extra premium and charge they have to pay in this country. The Irish authorities may be able to deal with some of this but we now have European supervision of banks and it may require the European supervisory authorities to come in and examine what has happened. Within the Irish banking system traditionally, consumer protection and information have been bottom of the list in terms of the objectives of the banking system. Given the scandal that has happened and the suffering experienced by many people with some having lost their homes and businesses - the Minister suggested in his conversations with the banks' executives that they should have made the principal repayments of the excess payments people made by Christmas - I believe there will also have to be some redress for what people have suffered. The banks are experts at long-fingering everything. The Minister must set them a timeline and a specific objective for what they have to do. The banks were happy to have their hand out when they crashed and to take every cent that the taxpayer had to offer, but they are like the person who lends one an umbrella on a sunny day but the umbrella vanishes when the rain comes down. That is the way they act. There was a term always in use in America regarding the banks, that the people in banking on Wall Street used to characterise themselves as the masters of the universe. We have a set of bankers in Ireland who see themselves as masters of this particular universe-island of Ireland. It is not good enough. I encourage the Minister, in every way, to sort them out. If the Department, the Central Bank or Minister do not seek to influence them now that the economy is in recovery - much of this was different when things were very bleak and black and the banks were trying to get out of the hole they had put themselves into - and if we do not get a handle on this, it is not impossible that it could come to pass that they would drive us all into the ground again. They have to understand that they cannot treat people, citizens of this country and their customers with the kind of disdain that they do. I also believe it will help us to sort the issue of restrictive credit that is choking off and stopping an adequate supply of new housing coming forward. We also have to address the interest rates in that regard.

Notwithstanding the developments with the house building agency, we also have to find better mechanisms to encourage more local authorities to build social housing at a rate much faster than that to which they have currently committed. We need to consider as a matter of urgency the question of how we tax land. I have no difficulty in the reduction in the seven-year period to encourage more land supply. In the context of where we are at, that is certainly worthwhile. We will have to examine the issue of the taxation of land. In my constituency one does not get much in the line of a three or four-bedroom house below €400,000 - that is the price for a three-bedroom house on a fairly restricted site.

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