Gerald Nash (Louth, Labour) | Oireachtas source

I am pleased to have an opportunity to speak on the Finance (No. 2) Bill on behalf of the Labour Party. This legislation gives effect to many of the proposals announced in budget 2024 two weeks ago, including the important changes to the corporation tax code, which are the most significant and far-reaching since 1997.

While the finance Bill, by definition, focuses on the taxation changes, many of which were articulated in the budget, it is important that we take a step back and look at budget 2024 in the round. For the first time since 2013, when we said goodbye to the troika, the living standards of the people of Ireland have fallen. We are in a period of polycrisis, involving war, climate catastrophe, an ageing population and the challenge of meeting those costs. We have emerged from a pandemic that exposed the vulnerability of our already stretched public services, especially the health service.

Economic growth is slowing down. Real average annual wage growth out to 2030 is forecast to be 2.2%. At the same time, corporate profits are at record levels, diverging all the time from wage growth. Profits are rising much faster than wages and this is now a structural problem. As the Central Bank has stated, profit-taking has caused most of the domestically sourced inflation we are experiencing, with those on low and modest incomes paying the price. At a time when there is huge demand for more investment in the social wage and in the health, childcare and education services on which we all depend and which should be universal, the Government reached for the lazy option of tax cuts. As the economy slows, the competition between tax and investment will intensify.

This year, the Minister announced spending of €1.3 billion on a personal tax package, which will favour in financial terms the higher income earners, and just over €1 billion on the actual budget 2024 package for those most exposed to rising costs. This will end up stoking inflation and ensuring it lasts longer. Damningly, the pretence that budget 2024 is progressive did not last long. Like last year, once the one-off payments are gone, they are gone. As the ESRI has said, if we look at the permanent changes announced two weeks ago, we will see that they make negligible change to at-risk-of-poverty rates at a time of plenty. The elderly will actually see an increase in their at-risk-of-poverty rate. That is some trick to pull off a time of unprecedented largesse available to the State. This is something that Fianna Fáil would never have stood for in the past. The ESRI has also said that after this Government's four budgets since 2020, households will have lower purchasing power in 2024. If you are poor today, it is more than likely that you will still be poor this time next year.

Budget 2024 told us nothing. It had no vision of how we could make the structural changes needed to our economic and welfare model in order to take as many as possible of the almost 800,000 citizens we have in poverty out of it. It is unforgivable that the Minister and his Cabinet colleagues have contrived to create and sign off on an Estimate for our health service that the Minister knows know fine well, and the Minister for Health has more or less said, is a work of fiction. That charade is not only a two-fingered salute to hardworking health service staff and patients waiting for appointments or for surgery and treatment; it is also a two-fingered salute to the Dáil. In no other supposedly mature and serious democracy would an executive expect a legislature to wave through what amounts to a fraudulent estimate on a critical public service. This is a challenge to parliamentary democracy. If this is to go through on the nod, serious questions will be asked of the Government’s commitment to accountability. It is just not credible and the Dáil should not be expected to pass it. If this kind of charade happened in Westminster, given the state of UK politics, or anywhere else, the Minister responsible would not survive contact with reality. However, that is not the case in Ireland, where our commitment to accountability appears to be selective.

I will turn to the Bill itself, and the personal tax and USC changes proposed in it. One of the most important institutional innovations in recent times to address the scourge of low pay has been the establishment of the Low Pay Commission. At the time of the acceptance of the commission's first recommendation, on the rate of the national minimum wage for 2016, it was accepted that whatever USC and PRSI changes necessary to ensure that workers on the statutory minimum hourly rate would take home as much as possible, or indeed all, of the increase awarded would be made. It is positive to see in Chapter 2 the adjustments that have been made to the USC to ensure this convention continues to hold. This is a measure that the Labour Party established and we continue to support that approach.

The Irish political system is extraordinary in more ways than one. We are unique in that we have some parties describing themselves as being on the left while demanding the abolition of what is, in fact, the single most progressive and fair revenue-raising measure we have without having a serious plan as to how this crucial revenue we use to fund our public services should be replaced. More extraordinary still these are among the same outfits who argue we should get rid of what, at least for the rich, is a minor inconvenience - the minor inconvenience of the local property tax.

The debate on this year's budget kicked off in earnest with three Fine Gael Ministers of State demanding big tax cuts for the better off. They got some of what they wanted with the cut to the 4.5% rate of the USC, changes to credits and the changes to the point at which the 40% rate of income tax is paid, which have benefited the cohorts of higher income earners in real cash terms. This is another case of the Government seeking to buy votes with the voters' own money. As I said earlier, it is the lazy option - this mantra of putting money into people's pockets when all of the polling and our direct personal experience as representatives show that what is actually needed is more significant investment in poorly performing public services. Those are the kinds of breaks which would really give working families the chance they need, not €5, €7.50 or €8 which would hardly buy a sandwich.

Labour, in our costed alternative budget, proposed indexation against wage inflation of both personal tax and USC bands, and credits alongside weekly social welfare rates. That is not inexpensive. All told, taken together, the bill for those complementary measures would come in at around €2 billion a year. However, it would be the mark of a modern sophisticated system of government if we, as a society, settled that this would happen as a matter of course every year and as part of the embedded budget and fiscal planning system. It happens in some of the countries we like to compare ourselves with, so can we not consider that here?

At the very least, I will propose on Committee Stage that a report on indexation would be required to be published each year, possibly with the summer economic statement, detailing the cost of such a move and the mechanics of how it would happen. This is far preferable to having to withstand what I describe as the annual ritual of pre-budget leaks and spinning from Government that might allow the administration of the day to have some control over the news agenda but it is critically also playing with people's lives. That is not fair and there is no dignity in that. Taxation and the distribution of resources are the essence of parliamentary democracy. However, it would be a mark of our maturity if we decided to take this approach instead.

I welcome that the extension of the reduced excise duty on petrol and diesel will remain in place for a number of months. During the debate on the financial resolutions on budget night, we in Labour argued for the extension of that position right up to the budget in October 2024. There is a strong argument for that. Why do I say that? We know that the price of crude oil and fuel more generally is uncertain and will become increasingly uncertain with the current conflagration in the Middle East and the geopolitical problems there. It would be wise for the Minister to review the position and to extend it at least until the budget in October 2024 when we will have a clearer view about making a more certain decision for the future.

I turn to the housing-related measures in the Bill. Access to housing is the single most important civil and workers' rights issue of the day. However, the plant of the Minister, Deputy Darragh O'Brien, is manifestly failing. The numbers speak for themselves. Since its inception homelessness has doubled with almost 13,000 people in homelessness. Rents have risen dramatically and house prices continue to grow. On the spending side, budget 2024 will see no meaningful improvement in the supply of social housing outside the already inadequate targets.

The Minister for Finance would do us all a service by taking the opportunity today to clarify what the Minister, Deputy Darragh O'Brien, meant on budget day when he announced the further €6 billion capitalisation of the Land Development Agency, LDA. There was no mention of that in the speech of the Minister for Finance or in the budget book. What has happened to this? Where will the money come from? In the engagement my party leader, Deputy Bacik, had with the Taoiseach today, it was very unclear as to what the situation with that €6 billion capitalisation is or whether, in fact, it will be €6 billion at all.

At a time when housing is the principal social and economic problem we face, when we look at this Bill, it is incredible that the Government seems to think help to buy, tax breaks for landlords, the disgraceful postponement of the residential zoned land tax, the small increase to the vacant homes tax and a botched attempt at giving some selective cash relief to those paying higher monthly mortgage costs hold the answer to our housing crisis.

Help to buy is a con job and it is supposed to be on the way out. The Government has extended it by yet another year. The evidence against it is absolutely black and white. Of course, it is naturally popular with anyone who wants to buy a new home yet it has served as predicted to put up the price of new homes. The market has simply added the subsidy to the price of the house as predicted and developers cannot believe their luck. It is a downright stupid use of public money. The Government was warned of the deadweight effect by Department of Finance officials time and again as the Minister knows. The deadweight effect, of course, involves State support for market activity that would happen in any case. I believe we have spent over €700 million on help to buy since 2016 or 2017. Mazars reviewed the scheme and suggested that if the Government was continuing with it, it needed to be reformed and targeted. I quote the experts, the consultants paid for by the Department:

The scheme is poorly targeted with respect to incomes, location, house prices and other socioeconomic factors. As a result, it has socially regressive impacts, there is a considerable deadweight associated with [it].

Those are the words of Mazars, not my words or those of anyone else but those of the consultants engaged by the Government to review the scheme. How many times and in how many ways does the Government need to be told to drop this scheme? It has already cost 50% more than forecast with extremely questionable, to put it mildly, social returns, but at a huge financial cost. The Government would be better advised targeting the resources we have at delivering social and affordable homes to those who, at this rate, will never be able to purchase a home in the conventional way, and to focus too on delivering cost rental across the country at scale and where it is needed.

The need for some form of relief for renters is understandable, but the tax relief for landlords is an absolute shocker. Why should landlords be paying less tax than a PAYE worker on their income? As a policy measure, there is no evidence whatsoever that this relief, which will cost well over €150 million next year, will do what the Government claims it wants it to do, namely, to retain small landlords in the market. As a previous speaker said, the respected economist Dr. Barra Roantree said in advance of the budget announcement on his Twitter account that this is maybe the stupidest tax relief of recent times, against stiff competition. This is a Government that specialises in stupid tax reliefs. I am asking the Minister today to publish the advice he received from his own officials in advance of the budget on this move. I think we can say with some certainty that this wheeze would not have found too much favour in Merrion Street. This relief takes some beating. It is an expensive relief that nobody was asking for. We know some landlords are leaving the sector and it is not for the want of small but, taken in the round, expensive and ineffectual tax reliefs worth a few hundred euro a year.

The residential zoned land tax is a policy innovation that was needed a long time ago. Arguably, its motives were in the spirit of the famed Kenny report. It is unconscionable that landowners, some of whom may have been made very rich overnight by the rezoning of land, would get to hoard and leave serviced land undeveloped when homelessness span out of control. In his first budget as Minister for Finance two weeks ago, he announced that the imposition of the levy will be delayed. Who got to the Minister? Who convinced him to delay the imposition of that levy because the explanation for the delay does not stack up?

The Minister should put on the record who got to him, who encouraged him to do that and why, and come up with a convincing explanation as to why this tax is being further delayed. Landowners will now be given multiple chances to dodge this charge before the completion of final maps.

What is the real motivation behind this unacceptable delay? There will be plenty of blame to go around between the Minister and Sinn Féin, which relentlessly pressed him on the need for the return of mortgage interest relief, with at least three separate Dáil motions this year. Our focus, when it comes to the high cost of servicing mortgages for many in difficult situations, should be on assisting those who are getting nailed by credit-servicing firms to move back to the main retail banks. Instead, we have the return of a form of mortgage interest relief with which not even those who are in the target group are all that happy. Once introduced, it would be a brave Minister who would unwind such a relief. Mark my words: I believe we will be here next year discussing this again and whoever is in the Minister's position will decide to extend it again for another year.

We very much welcome the extension of the bank levy. The Minister has explained how it is to be applied and how it was devised, based on the level of deposits held by institutions. However, at any point in his deliberations on the extension of the bank levy did the Minister consider covering other financial institutions that may have significant deposits as well - fintech companies, for example, which are relatively new arrivals to the market but which may have significant deposits and are significant players in the market.

I wish to talk briefly about section 481 film tax relief and the cap. This is a very significant and important measure to support the film industry in Ireland, of which we can all be proud, but I have a basic rule of thumb when it comes to significant tax expenditures: there should be no cash without conditions. This is an important relief, and the introduction of a higher cap is something we welcome in principle, but we should use this subsidy to drive better outcomes in the film and TV industry and improve the collective bargaining arrangements and, therefore, the pay and terms and conditions of those without which we would not have a film industry at all. We will table amendments to the Bill on Committee Stage in two weeks' time.

I will conclude by making some remarks on the part of the legislation that applies to the new Pillar 2-inspired corporation tax regime. This is the single most significant set of changes to our corporation tax system since my colleague, the former Minister for Finance, Ruairi Quinn, legislated for the 12.5% rate in 1997, which came into effect subsequent to that. The 12.5% corporation tax rate was a very significant feature of our national industrial strategy for a very long time and it assisted in transforming our economy, but it is less important now. In more recent times it has become less important than skills, the research and development environment, competitiveness, and our membership of and commitment to the European Union. I called this early, back in 2021, and was criticised by the Government and by Sinn Féin for doing so. Labour said Ireland would and should sign up to the 15% rate. It was not only the moral and ethical thing to do but also important in light of the challenges of the pandemic, the fight against climate change, an ageing society and the digital transition. We needed to make sure that we broadened our tax base, that those who have the most pay the most and that the cost of a better future be spread much more fairly. That is one of the reasons we proposed early that Ireland should move to the 15% rate and sign up to the OECD proposition. Ireland belatedly came to that viewpoint, and I am pleased we did. The world cannot meet the myriad challenges we have in 2023 and beyond through tax competition and by beggaring neighbours in a race to the bottom that is ultimately in nobody's interests. I look forward to examining those provisions in closer detail over the next few weeks and proposing appropriate amendments on Committee Stage.

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