Barry Cowen (Offaly, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak on the Finance Bill 2018. At the outset, it is worth reminding ourselves what the passing of the Finance Bill means. Along with the Social Welfare Bill, it ensures financial stability over the next 12 months. Indeed, it was with that same purpose that Fianna Fáil approached discussions for this third budget under the confidence and supply arrangement. As in 2016 in the aftermath of the election we recognised that Ireland needed political stability to properly face a more politically unstable world. If we were to have the instability that Sinn Féin crave we, as a country, would be in no position to have our voices heard in Brexit negotiations. There would be nobody to articulate the Irish perspective on this crucial period in European history. I am left questioning whether this is its preferred position as it fails to take responsibility in the Northern Ireland Assembly, fails to take responsibility in Westminster and fails to take responsibility here, as in 2016.

Fianna Fáil does not shirk its responsibility. This budget was certainly not one that we would have written and it is fair to say it is not one we wholly agree with, but it is one where we had an impact, an effect and delivered a change in direction. This budget has followed the previous two budgets in that it is broadly progressive. Under this budget, the burden is lightened for those less well off. This is as it should be and it stands in stark contrast to the successive regressive budgets imposed under the last Government that were so decisively rejected in the election of 2016.

Core to that progressivity and consequently to the confidence and supply arrangement is the principle that available Exchequer funds should be split two to one in favour of investment in vital public services over tax cuts. The reality has been that for the last two budgets the ratio has been closer to three to one and this budget has been more like four to one. This is a far cry from the budget of 2016 which was opportunistic in nature and designed to woo the electorate. The electorate was having none of it for it knew the country was crying out for investment in public services and that the recovery was not being felt by all.

From a fiscal perspective, the situation has undoubtedly improved but it would be a huge mistake to assume we are out of the woods. Key vulnerabilities exist. We are still running a deficit despite where the economy is in the business cycle which is a risky strategy by any measure. Two thirds of the adjustments required were put in place by the last Fianna Fáil Government. Ever since, the final third has proved elusive for this Government. We are still projected to borrow money next year to pay for the services the public requires despite the fast pace of economic growth and the extraordinary explosion on corporation tax receipts.

It is for this reason that Fianna FáiI called for the establishment of the rainy day fund. I welcome the legislation published earlier today and we will engage constructively to ensure the legislation gets through efficiently. When the next downturn comes, we do not want to see tax increases and cuts in public services to be the only option on the table. We do not want to be in a position where the Government of the day raids private pensions. A sound fiscal policy based on balanced budgets and an appropriately funded rainy day fund will offer flexibility in those future circumstances.

There are those in this House who offer an alternative - spend more and ignore all the economists and economic commentators by not establishing a rainy day fund. With a national debt of over €200 billion, nearly €43,000 per household this is downright irresponsible. What would Sinn Féin and the Labour Party do in the event of a downturn? Would they turn to the international markets? This week we have seen the market reaction to Italy’s policy. Would they run to Europe for help again? I fear this would fall on deaf ears. Unquestionably, their policy to borrow more now and to leave no fiscal buffer whatsoever would leave Ireland hugely exposed. Put simply, they would have to raise taxes and cut spending. This, in effect, is what they are calling for.

Brexit continues to be the most serious challenge Ireland faces. The prolonged political turmoil and the political uncertainty that has come with it remains a dark shadow over Ireland’s economic prospects. We are now almost five months from Brexit and yet we are no clearer on whether an agreement will be reached and what that agreement will entail. We support the Government in their negotiations and we hope the best deal possible can be achieved come March 2019. It is critical that a hard border is not established on this island and that the Good Friday Agreement is protected. However, I have serious concerns about the Government’s readiness at home and it would be remiss of me and my party to simply ignore them.

The Government deceived itself and others that the backstop was guaranteed and that Northern Ireland would be protected. Instead of engaging with opposite numbers in the UK and Northern Ireland, the Government chose to go on an all-out spin offensive.

The result has left Ireland and Irish businesses dangerously exposed. We now know that only a third of the required customs officials will be operating by 29 March 2019. This is based on a transitional arrangement which is growing more unlikely by the day. The Government will not tell us exactly how many officials will be needed if a no-deal Brexit were to become a reality. Businesses up and down the country are crying out for support but the Government has failed to hear them. We regularly hear announcements about Brexit support schemes, but precious little follows. For the much lauded Brexit loan scheme only ten companies have reached the sanction at finance provider stage. Only 127 companies have availed of the "Be Prepared" grants from Enterprise Ireland, and 160 have received Intertrade Ireland’s Brexit readiness vouchers. Only 47 market discovery grants have been issued by Enterprise Ireland, and most shockingly of all, given the vulnerability of the agri-food sector, the low-cost loan scheme for farmers and fishermen, announced last year, has not even been established. It shows that the Government is not supporting business. It has announced many initiatives and we acknowledge that, but those schemes have failed to deliver any significant impact. The schemes that do get established are overly burdensome and complex. Many businesses simply do not have the resources or the time to apply for them. The Government needs to address this matter urgently.

While Fianna Fáil entered into the confidence and supply arrangement to provide stability it would be a lie and it would be disingenuous to suggest that it has been plain sailing. The crises in housing and health continue to be stains on our society, with thousands of people homeless, including children, and tens of thousands lying on hospital waiting lists. Housing is the key test for this budget and this Government. Instead of focussing on glossy reports and fancy announcements the Government simply needs to build social and affordable housing. The dire record of Fine Gael on the provision of adequate affordable housing for citizens must be put right. Now is the time for real ambition and genuine delivery. The €60 million announced to tackle the homelessness crisis is welcome, but is belated. We should not have to wait until almost 4,000 children are homeless before action is taken. Local authorities must be given far more autonomy to build social housing. The cutting of red tape should help in that regard. Young people aspiring to settle down and have kids are finding it harder and harder to get on the housing ladder. The €100 million fund for the building of affordable housing will help, but as always with this Government, implementation is key.

Turning to the Finance Bill, it is regrettable and short-sighted that we have seen little movement on private landlords. They are leaving the market in their droves; some 2,000 were lost this year alone, meaning at least 2,000 houses are lost to the system at a time of grave urgency and crisis. There is no move in this Bill on mortgage interest relief for landlords who facilitate long-term leases. I will engage with the Government to bring in such amendments at Committee Stage.

On health, we welcome the further funding given to the National Treatment Purchase Fund, but it must be said that it is modest when compared to the crisis we face. As public expenditure spokesperson I have to highlight the long-term funding issues facing the health Vote. For the past number of years we have seen the HSE demand extra funding to stand still, a fraction of that amount being offered on budget day, followed by overspending the following year and a subsequent supplemental payment for health at the end of the year. This carousel approach to budgeting will have a detrimental impact on the state of our health services for decades to come. The Sláintecare report sets out a sustainable pathway forward for our public health service, yet the Government has failed to give it the backing it needs. Without financial foundation I fear the Sláintecare report will not do what it says on the tin.

The confidence and supply arrangement clearly states that cuts to the universal social charge ought to be directed at low and middle income earners. This was in recognition that low and middle income earners were not feeling the recovery the Government was telling them was happening. The changes made this year are modest but when added together to the changes in the previous two budgets they are more significant. I acknowledge that without indexing our tax system almost 80,000 workers will face a natural tax increase next year. The marginal band needs to be changed in recognition of that fact. However, the increases in the home carer and earned income tax credit could be more generous. Progress has been made, but I feel it is time that the self-employed are given an equal credit to PAYE workers in recognition of the risk they take. I would prefer to see a €2,000 home carer’s credit in recognition of the huge services they provide to children and those living with disabilities. The income tax changes taken together are modest but they are necessary to keep our tax system competitive.

Keeping our competitiveness in mind, our small businesses and enterprises need far more support. I have spoken already about how exposed our SMEs are to the impacts of Brexit. There are similar problems when it comes to enterprise taxes. There has been no movement yet again on capital gains tax, CGT, for entrepreneurs. Our CGT rate of 33% is far in excess of our main competitors, so much so that businesses and SMEs are struggling to get the credit and finance they require to grow and create jobs. The take up of the employment incentive and investment scheme, EIIS, and the key employee engagement programme, KEEP, has fallen far short of where it needs to be. I welcome the changes in the Finance Bill in this regard, but I wonder if these changes tackle the complexity of these schemes. We commit to working with the members of the Committee on Finance, Public Expenditure and Reform, and Taoiseach, to make sure that the changes we make to the KEEP and EIIS schemes help in that regard. I welcome the extension of the tax relief for start-up companies until the end of 2021.

I must take the opportunity to highlight the lack of movement on the exit tax both in the budget and the Finance Bill. Typically the deposit interest retention tax, DIRT, rate was linked to the exit tax rate on the early extraction of pension funds. While I understand and acknowledge the need for an exit tax I do believe it is unfair to overly tax such extractions, especially when money is needed for serious health expenses for an individual or loved one. I urge the Minister to look at this and at the very least to equalise the exit tax with DIRT.

The Minister announced on budget day that he was increasing the betting tax from 1% to 2% on amounts wagered in the State and that the betting duty on the commission earned by betting intermediaries will be increased from 15% to 25%. Healthy gambling is enjoyed by thousands of people around the country, but it would be wrong to ignore the fact that gambling addiction is a serious blight on our society. In this light I encourage the Government to look at independent bookmakers who will be put under real pressure because of this change. The Government’s failure to deal with problem gambling and its delay in bringing in any meaningful regulation in this regard must be addressed. The gambling control Bill passed way back in 2013 has yet to be implemented. If this Government is serious about problem gambling it would put the right regulation in place to tackle the problem.

Climate change is the challenge of our generation. Ireland cannot relinquish its responsibility in this regard. We signed up to the Paris Agreement and are accountable to European regulations. Sadly, this Government will see the targets outlined in both missed by quite a long way. It is shameful that the national development plan was not climate proofed before it was published. I am disappointed that the Government has not done more work on carbon tax. In the context of imminent announcements from Bord na Móna on the progress made on its decarbonisation programme and job losses in the midlands region which will affect families and whole communities, the Government cannot sit on its hands and do nothing. I have written to the Taoiseach about this matter, requesting that he set up a just, sustainable forum for the area, funded from the carbon tax take and possibly by funding from the EU, which can distribute funds where over 500 jobs are lost in a region, to help and assist the stakeholders involved and the communities affected, the representatives of those communities and the relevant Departments. We have to ensure that there are alternatives, that innovation and enterprise is rewarded and that those regions have a future in a decarbonised world via the provision of alternative forms of energy, which the midlands has been synonymous with for many years. While I acknowledge that increasing carbon tax would essentially increase the cost of motoring, we cannot simply ignore it. We need to agree a path forward similar to Sláintecare on how to address this fundamental challenge. The benefit in kind extension for electric vehicles and the charging of those vehicles is welcome. However, I must ask the Minister why a cap of €50,000 on the original market value was put in place. The only viable electric cars on the market currently are expensive by their very nature and I fear that this change will leave many with no alternative but to get rid of their electric vehicles.

The mortgage arrears crisis continues to be a major issue facing thousands of families across the country.

Banks in response to pressure from the ECB are selling their distressed loans to vulture funds. The Government seems to think this is the only solution to the mortgage arrears crisis. Nothing could be further from the truth. Banks should not be outsourcing their dirty work to vultures. Instead, they should be working through their loan books.

Fianna Fáil has been particularly active in this regard. Our Bill to establish a mortgage resolution office still requires a money message from the Government. This Bill would remove the bank veto. We introduced legislation to regulate vulture funds. I acknowledge the Government's support for this Bill and the work done by officials in the Department of Finance. My point, however, is that there is not simply one solution to mortgage arrears. By putting in place modern and fair laws to deal with mortgage arrears, we will provide sustainable solutions to genuine arrears cases leaving strategic defaulters at the mercy of the courts.

The Government has done precious little when it comes to high mortgage interest rates. Its response has been the same as always, the market will sort it out. The market, however, has not sorted it. Irish customers pay higher interest rates than Greek customers. I refuse to believe an Irish mortgage is more risky than a Greek mortgage. Caps have been imposed in many eurozone countries and the sky has not fallen in. No progress has been made to ban cash-back offers, which serve to only cloud the judgment of customers.

No movement has been made to better enable credit unions, either individually or collectively, to enter the mortgage market to introduce much-needed competition in this area. An Post is planning to enter the market, which is to be welcomed, but I fear this will be to the detriment of the credit union sector. No movement has been made in establishing special purpose vehicles to enable the credit union movement to invest in social and affordable housing. The Government has relinquished all responsibility for such an initiative, apart from allowing them to create their own vehicles as one credit union body is in the process of doing. Credit unions offer essential services to local communities in towns and villages across the country. Their viability and future is paramount to vibrant communities. Many of these credit unions will fail, however, if they are not allowed to lend on a longer more profitable basis. This will be yet another blow to rural Ireland.

The explosion of corporation tax receipts, while positive in the short term, represents an ever increasing risk to the Exchequer. If just a handful of major companies change their structures and move activity and assets out of Ireland, the State will lose billions of euro in tax revenue. On another front, we have to be prepared to protect our 12.5% corporation tax rate. We must resist European efforts to establish a digital tax and a common consolidated corporate tax base proposal. However, we must engage and co-operate with both our European and OECD colleagues to ensure there is fair and transparent global tax regime whereby companies cannot hide tax revenue in tax havens. In this context, I welcome our co-operation with the base erosion and profit shifting, BEPS, process. I acknowledge the changes made in this Finance Bill in this regard.

My colleague, Deputy Michael McGrath, has consistently highlighted the significant issues facing the Tax Appeals Commission and the backlog in appeals. An open and transparent tax appeals regime is crucial for businesses. We need a consistent and fair tax system. It is vital the issues in the Tax Appeals Commission are tackled and the backlog is reduced.

In increasing the VAT rate for the tourism sector, the Government put many companies around the country under pressure. While Dublin-based hotels are booming, the same cannot be said for many outside the city. I urge the Government to look at supports for that sector to ensure these VAT changes do not represent the death knell for these smaller establishments.

Fianna Fáil has honoured its side of the confidence and supply arrangement. We will not vote for this budget but we will facilitate its passage. This budget is fairer because of confidence and supply and the influence that Fianna Fáil has had on it. We need action now from the Government in the area of housing and health, as well as no more spin but real action. We will engage constructively on Committee Stage with all Members in order to tackle some of the issues outlined. We look forward to bringing forward amendments and discussing them and others on Committee Stage in order that we arrive at a conclusion which will have the effect we desire for our State.

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