Gerald Nash (Louth, Labour)

I am pleased to speak on the Finance Bill. It gives effect to many of the announcements made in the budget two short weeks ago. If we needed any convincing that budget 2025 was all about the pending election, budget 2026, a bare budget for working people, and the associated Finance Bill prove the point beyond any doubt. This time last year, billions in once-off payments were thrown around in a transparent attempt to buy votes with our own money.

There is little sign of support for struggling citizens today. The election might be over, but the cost-of-living crisis of recent years certainly is not. In fact, it has taken on a permanence that is dangerous to social cohesion and the promise of social mobility and progress that hard work used to offer in our society. For far too many people who work hard for a living, there is simply too much month at the end of the money. We have rising grocery costs, high energy prices – we are in the top three in Europe – a housing disaster that will have a long tail when it comes to its social and economic impact on citizens, and child poverty levels that challenge the rich country story we tell ourselves. All of this comes at a time of record corporation tax receipts and numbers of people at work. For the first time in this State's short history, we have had a decade or more of sustained economic growth. It is not a want of resources that is holding us back. Rather, it is an absence of vision, sclerotic delivery and a failure to better use the money we have.

As I said on budget day, this was a budget for burger barons and big builders, all made true in this Bill. This is a case of "Show me your budget and I will show you my priorities". Wider society and the real economy have no shortage of problems. In the Bill, the Government has picked a side. A mumbled election promise to the hospitality sector has been prioritised over meaningful progress on taking children out of poverty or providing some tax relief for working people in the middle of the cost-of-living crisis. There is a further narrowing of the tax base against a backdrop of constant reminders about the vulnerability of the very taxes we are relying on to run and develop the country into a truly rich republic.

There is little or nothing in the Bill that indicates that the Government is prepared to bite the bullet and prepare the ground to raise more revenue from more diverse sources as the threat to our corporation tax and from the demographic and climate challenges really hits home in the coming years.

This is all against the backdrop of Ireland running a deficit once the windfall corporation tax receipts are excluded. According to the work of the Parliamentary Budget Office, PBO, in its post-budget analysis, there was a total of €434.2 million announced on budget day in revenue-raising measures, with a full-year cost of nearly €2.3 billion of tax cuts assessed over a full year of implementation. This is some distance from the €1.3 billion announced on Friday and, as the PBO said today at the Committee on Budgetary Oversight, more costly than first appears.

Before I turn to the Bill itself, I wish to draw attention to the Economic and Social Research Institute's, ESRI's assessment of the budget, and it is stark. It said the fiscal stance is loose, the macroeconomy is not in need of Government support and that there is a "reliance on unpredictable corporation tax receipts" to fund spending and this is "a vulnerability". The pre-budget warnings went on to be ignored again and, as the Minister will know, this cannot continue. The thing that is about to be confirmed and nailed down in this Finance Bill and in the social welfare Bill shortly is the negative impact of budget 2026 on the finances of hundreds of thousands of households across Ireland next year. Thanks to budget 2026, there will be an average 2% income loss across households next year. The big losers will be low-income households who can ill-afford what will be for them a 2.5% drop in their incomes in 2026. In fact, when we factor in the loss of the once-off payments, this is the cohort that is most exposed with the withdrawal of temporary measures and budget and tax spending changes. This will lead to a 4.1% loss for them. We might compare this to a minuscule loss of 0.3% for higher-income households. This Bill, along with other shortcomings in the 7 October budget, sees low- and middle-income citizens, frankly, left up the creek as costs rise and show no signs of stabilising or coming down. Of course, these losses will be exacerbated for working families next year with the decision to freeze tax bands and credits, and the Minister has explained why that is the case.

In a comprehensive Bill, I want to limit my comments to two or three areas, that is, the taxation choices made by Government as proposed in this Bill, the impact on working people and the measures proposed in the Bill on housing more broadly. In the first instance, I will refer to section 2. The only positive adjustment made to the personal tax code for PAYE workers is the change made to the universal social charge, USC. This pushes the 2% ceiling up to take account of the welcome 65 cent increase to the hourly rate of the national minimum wage as was proposed by the Low Pay Commission. This is not a new or novel departure. The Minister will know that I set that precedent back in 2015 in the context of the first report for the Low Pay Commission. It is positive that the principle of doing this is still respected. It is important that work always pays. It is important also to ensure that as much as possible of the increase due to national minimum wage workers goes directly into their pockets. That is a good thing. Beyond this, however, there are nothing but effective tax rises next year due to the refusal and failure to do indexation. As the Minister knows, wages are set to grow by an average of almost 4% next year, and with no changes to PAYE rates or thresholds, more people will pay VAT at the higher rate. This runs counter to, for example, the Fine Gael manifesto pledge.

Simply put, if we are to get to a point where nobody earning less than €54,000 per year will pay the higher rate of tax, which is the direction of travel we thought the country was going, that is an adjustment now of an average €2,500 per year at an eye-watering €1 billion-plus per annum through the rest of the lifetime of this Government. That looks increasingly unlikely in truth. Therefore, the net effect of all this is that the Exchequer will probably collect €1 billion-plus more income tax next year merely as a result of the modest pay hikes workers expect to experience next year. Department of Finance data suggests this means that workers, for example, on €50,000 will pay half of their expected pay rise in tax, meaning in real terms that they will probably be paying just shy of another €1,000 next year compared to this year. This will, without a shadow of a doubt, lead to another consequence that the Minister may be concerned about given that this particular budget was framed as a pro-enterprise budget, and there are some pro-enterprise initiatives in it. It will lead to markedly increased demands for pay increases as the real value of wages is allowed in so many cases to fall.

It is my view, and I have argued this time and again, that we should legislate to provide some form of automatic indexation to our personal taxation system on an annual basis and that we should do the same in terms of specific core weekly social welfare rates. I believe this would be the mark of a mature country. It would provide some certainty for working people, businesses and the Exchequer. We could then have an informed debate each year about the meat and drink of sustainable taxation and spending outside of that. That should be where politics goes.

The Government may indeed argue that the decision not to index for next year is a countercyclical policy decision, in that it by extension sees the tax base broaden. Of course, it does, but it would be an easier point to make if the bizarre and in my view poorly conceived procyclical policy decision, that is, the reduced 9% VAT rate for the hospitality sector, was not made and legislated for in this Bill. The simple fact is that this cut, with a full-year cost of just south of €700 million, comes at the expense of a form of tax indexation for working people. They were the choices put starkly.

I note that unlike some other tax measures in this Bill, there is no sunset provision out to 2030 on the 9% VAT rate like some other provisions. Make no mistake; this cut will remain in for the lifetime of this Government, and there will be little change out of a cumulative €3 billion by the time the next election comes. There is simply no case whatsoever in my view for this tax cut. What is more, the lobbyists who were arguing for it were not long in showing their ingratitude on budget day. They said it should be brought in straight away, not in July. I said on budget day that the only people who think that this is a good idea appear to be the Tánaiste, the Minister, Deputy Burke, and the people in the Restaurants Association of Ireland. The Minister knows full well that this will not be passed on. It will not improve the pay and terms and conditions of people working in the sector. The Minister will recall the first 9% VAT cut that was introduced in 2011 in a very different environment. It was a procyclical stimulus that created demand and added jobs at a time when 15% of our people were employed. There is no case whatsoever for an expensive tax break for a sector that is adding jobs and where there are more openings than closures taking place. The Minister with responsibility for enterprise has to know this. It is time that key data was produced, supported by the Companies Registration Office, CRO, on the reality of life in a sector where there is always churn. Mark my words, this will provide only an artificial lifeline to some businesses that will momentarily see their bottom line improve, while about 40% of the benefit will go to the likes of McDonalds and Supermacs. This is a bad policy - I think the Minister knows this - and it will in my view come back to haunt the Government parties.

This is the second most significant private sector employer and, therefore, it is important. Instead of this bonkers relief, the Minister should do what we in the Labour Party suggested, which is to set up, for example, a specialist body to support the industry to become sustainable and to professionalise it and to assist all businesses that are encountering problems with high energy costs, and maybe consider reforming and modernising what is an anachronistic and Victorian commercial rate system that bears little relationship to the reality of doing business in 2025.

We are told that housing is the key priority for Government. If this was the case, the much-trumpeted new housing plan would have been published weeks before a budget that would have introduced some serious-minded innovations to help build the homes people need. The decision to reduce the VAT on apartments to 9% without asking anything of developers in return is a sign of a Government and a housing Minister who will literally try anything to shift the dial on housing, and it shows a Government that is, frankly, out of ideas. I said before that so serious is the housing disaster, we in the Labour Party are prepared to consider any imaginative innovation that has a chance of working to boost supply and, indeed, any measures in our tax system that could be responsibly used to promote that. With the stroke of an unsteady pen, however, this Government has decided to forgo an annual €390 million to give big builders a tax cut and ask precisely nothing of them in return and with no social conditions whatsoever attached.

There is nothing on affordable homes, and nothing on cost rental. It means that since midnight on budget day, developers have been making an extra 4% on apartment sales, and that is on apartments that were already built, and not adding a single unit to supply.

As with the hospitality VAT rate reduction, there are no conditions and nothing stopping developers from simply pocketing the saving. That generous bonus is on top of what is believed to be a 15% to 20% margin that developers already appear to be making on apartments in cities. I have said before and will repeat now that the Government has no problem with welfare as long as it is for big builders and burger barons.

In the area of housing, the Government seems wedded to a suite of policies that have proven to be a failure. Its latest sop to developers is also doomed to failure. House prices and rents continue to rise. Evictions and homelessness continue to rise. The bank balances of big developers continue to do rise, as do the share prices enjoyed by institutional investors. The Government is caught in a housing doom spiral and needs to change course. The new reduced 9% VAT rate on apartment sales will not apply to approved housing bodies that are engaged in forward purchasing arrangements, which will create a price anomaly in the market. We in Labour have been of this view. It has been borne out by comments from Grant Thornton that the Minister would have read in The Irish Timeslast week. As Labour TDs, we have been contacted by active developers in our constituencies who have been telling us about this. We knew that this was the situation but they have explained the situation to us in clear terms and the impact this will have in creating a two-tier market and on approved housing bodies in the context of their importance in the provision of certain forms of supply. Grant Thornton stated that the exclusion of approved housing bodies "will have inequitable impact, especially for those housing bodies who have entered into forward-funding agreements at the behest of the Government."

As the Government knows, because it has turned its back on direct State construction at scale, a very large number of social housing units are delivered by private developers as turnkey projects when a local authority or approved housing body enters a forward purchasing arrangement with a private developer. I can safely say, and the Cathaoirleach Gníomhach, Deputy McGreehan, will know that practically every apartment development in my hometown of Drogheda in recent years started off as a private initiative but has ended its journey in the hands of an approved housing body. We need to be careful about how we proceed in this regard. The exclusion of approved housing bodies from benefiting from the VAT rate cut is a serious role of the dice and may have the effect of disincentivising the building of apartments for social use at scale, leading to potentially fewer apartments in total across the market.

This flies in the face of what now appears to be a very broadly defined social policy. The term "social policy" had to be deployed in the Bill to give effect to this cut under the terms of the VAT directive. It is another wrong-headed policy, another gift for developers and another poorly thought-out measure, where there is very little evidence, if any at all, to suggest that additional homes would be brought forward. There is no evidence to suggest that this would work. I look forward to seeing the advice from the Departments of Finance and housing ahead of this decision having been made. As the Department of Finance admits, there is no obligation on developers to pass on the VAT reduction to home buyers. Should the Government ever decide to revert to the 13.5% rate post 2030, we know that developers will have got used to their juicy bonus and are certain to pass on the hike, leading to even higher apartment prices down the line.

Such measures are all, it seems, designed to give certainty to developers over at least a five-year horizon out to 2030, but the only certainty we get from the decision to extend help to buy by another five years at least is that it will keep inducing higher house prices. From the Department officials to the people at Mazars, those who were charged with reviewing the scheme a short few years ago said the same thing, namely that it has a deadweight effect on the market and is fuelling house price inflation. It does not take a genius to work out that developers have simply added the total benefit of the tax relief to the price of homes. There is no evidence anywhere to suggest that this economically illiterate scheme has helped to build a single extra house that would not have been built anyway. The scheme should be given a decent burial, with the money saved used instead to invest in proper affordable housing. Of course, there are those who are waiting to buy homes of their own who are more than likely renting. While we of course welcome the extension of the renter's credit, it is concerning that the rate of the relief will stay the same. This is all the more surprising in a market where rents are only going one way, which is up.

The scourge of vacancy and dereliction blights every village, town and city in Ireland. I have long argued before it hit the mainstream that the Revenue Commissioners should be given the job of collecting the derelict sites levy. The Minister will recall that when the household charge became the local property tax, compliance rates shot up because the tax was now being collected by the Revenue Commissioners, with all that that entails. Levies charged by councils are routinely ignored. The fact that some properties find their way onto the register in the first place often sees that decision being challenged by the courts. If you are a property business owner, you must have deep pockets if you can afford to preside over a situation where a vacant property that is not in use is not working for your business. Every business owner needs to sweat every asset that they have. If it is the case that you are allowing your properties to become derelict and vacant, you must have deep pockets. This is a form of extreme antisocial behaviour. Those who are responsible must be hit hard in the pocket. It is the only language they understand. The job of collecting that levy, which will now be rebranded as a tax, will go to Revenue, but, of course, the matter is not dealt with in this Bill. It was announced on budget day, and my understanding is that it will go live in 2027. That is another year wasted, which is a year that we can ill afford as the housing crisis becomes worse.

For several years, I have sought to amend the living city initiative on Committee Stage of Finance Bills to expand its coverage to Drogheda and Dundalk. The Department has finally taken note of this and it is welcome that the living cities initiative will be extended from 2027 to cover Ireland's two largest towns, Drogheda and Dundalk. We could go further. It is the first extension to other urban areas in many years, as the Minister will know. As he will also know, dereliction and vacancy is not confined to regional development centres under the national planning framework. This is how the selection appeared to be made. I understand the logic but we may need to do more. For example, could we not consider ensuring that this anti-dereliction and vacancy initiative is extended to towns with populations of more than 20,000. That would make sense and I believe we should tease that out on Committee Stage.

I look forward to working with the Minister in amending the legislation to improve it on Committee Stage in two short weeks. It is an extensive Bill. We have limited time here to discuss all the areas we would like to cover. As I say, I look forward to working with the Minister on Committee Stage. We in Labour will be tabling many amendments to the legislation at that point.

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