Brendan Howlin (Wexford, Labour) | Oireachtas source

Next week's budget will test the Government in a way that previous budgets have not tested it. It is the first budget in more than ten years where it is fair to say there is genuine scope for significant investment in public services. As the Tánaiste knows, public spending here, at 26% of GDP, is low compared with many of our European counterparts. Even if we use GNI* as the criterion, it is 38%, which is well below the European average of 46% of GDP and far below the best performers, the countries we try to emulate in terms of public services, namely, Finland, Denmark or Sweden. There is plenty of scope in the budget to increase the role of the State in meeting people's needs.

Fine Gael and Fianna Fáil have flown a series of kites about tax in recent days. The choice in Tuesday's budget is simple; the Government can either cut taxes or reduce poverty. The Government in particular has been disingenuous in this House. The Taoiseach described the threshold for higher income tax in a way that is not correct. He has been at pains to say that ordinary workers are paying the higher rate of income tax when that is not true. Statistics from the Revenue Commissioners show that a little under one in five - 19% - of those who pay income tax pay any tax at the higher rate. That is an undeniable fact based on Revenue figures.

It is true that single people begin to pay the 40% rate on part of their income above €34,550, but the threshold for married couples is much higher, at up to €69,100. That is why many people on higher salaries do not pay the 40% tax rate. For this reason, it is misleading to suggest that ordinary workers are typically paying the 40% tax rate when we know from Revenue that only 19% of workers are paying at the top rate. The top one fifth cannot be the squeezed middle. Ireland's labour market remains divided between high wage earners and low wage earners. The divide is quite shocking when we look at international statistics. Far too many people are on low pay and insufficient hours. Shockingly, up to one quarter of workers are earning less than what has been defined as the living wage of €11.90 an hour, and none of them can benefit from a cut to the higher rate of tax. I do not expect the Tánaiste to go into the details of the budget but will he confirm that it is still the Government's intention to cut taxes for the top fifth of wage earners rather than reduce the burden on all taxpayers by providing money for services that every citizen enjoys?

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