Willie O'Dea (Limerick City, Fianna Fail)

Subsequent to the election, the Government produced a very ambitious programme for Government, which made many commitments to improve the lot of people in this country. Of course, the extent to which the Government can meet its commitments is contingent on a successful economy, and that should be obvious to everybody on all sides of this House. The Government decided to strengthen the economy and make sure the economy was in good shape despite the headwinds, volatility and uncertainty we face. It decided to use the first budget to put investment in place so it would be able to deliver, over the course of its lifetime, the improvements outlined in the programme for Government.

I have listened to the budget debate and the debate on the Finance Bill today. All I hear is criticism of the Government to the effect that it has broken all its promises because it did not do in its first budget what it promised to do over five budgets. To me, that is a manifest absurdity. I have heard high-octane vitriol about stuffing money into people's pockets and it being for the rich, the developers, the landlords and whatever else. We live in a democracy in this country. We all want to get elected. Governments have to govern but they also have to get re-elected. Nobody goes out to penalise all the renters in the country. There must be 50 times more renters in this country than landlords, and a lot of the landlords we are accused of supporting are foreign landlords anyway. It is absurd to suggest that any Government in its right political mind would suddenly decide that for all those people who voted us into office and whose votes we will be seeking the next time, we will punish them and give all the benefits to a tiny minority of wealthy people, many of them abroad. That would be political insanity. It is taking the whole thing out of context to make that argument, quite frankly.

The budget was delivered against the backdrop of a whole lot of economic advice from all sources - the ESRI, the Central Bank and so on - that the Government was spending too much. I suppose that argument can validly be made because it is costing almost twice as much to run this country now as it was costing six, seven or eight years ago, which indicates that the subsequent Governments have been investing massively, and that public and State involvement in the economy has increased tremendously over the past decade. The Government was faced with a dilemma. It was advised that it was risky to put more money into an already expanding economy at full throttle. However, it had to take that risk because, with a rising population, challenges like climate change and so on, the infrastructural deficit is so extreme that the economy of the country would grind to a halt if the Government had not decided on massive spending on infrastructure. That is where we are at right now. The projected expenditure on infrastructure in this country will be three times per head of population what it is in Northern Ireland and twice per head of population what it is in the United Kingdom.

Having said all that, nevertheless, I am disappointed with one section of the budget. In deciding to hold back from pouring too much money into the economy, the main victims seem to have been people who pay income tax, whether they are self-employed or employees. I would say to the Minister that there were other options, such as the banks, the vulture funds and so on, as an alternative to punishing the hard-pressed Irish taxpayer. Effectively, what is happening is that tax rates and tax credits are not being increased and are effectively frozen at what they were last year. This means the reintroduction into the Irish economy of the phenomenon that we had during deep recessions of the past, namely, the phenomenon known by economists as fiscal drag. In other words, by not increasing tax allowances and tax credits, and to account for projected increases in wages, you ensure that people's tax is actually increasing. Effectively, what this represents is an increase in income tax.

The corporates and companies in this country, mainly foreign ones, have a very benign tax regime, but the same cannot be said for ordinary taxpayers. They do not live in the same tax nirvana. The Irish income tax system looks simple at first glance, with 20% on a certain amount of income and then 40% on the balance. Of course, nothing in this country is that simple. Those basic rates of income tax are supported by a supporting cast of other charges, such as, for example, the PRSI that has to be paid. Some 14 years have now elapsed since the Government of the day introduced the universal social charge as a temporary measure. It was supposed to be temporary 14 years ago but 14 years further on, it looks to me to be as permanent as the Irish rain or, maybe, the Rose of Tralee. There is no chance of getting rid of it anyway; that is for sure. Of course, from 1 January, workers will have to make a further contribution to the auto-enrolment scheme. Looking at all of those things individually, they all have merit individually. However, it means that for the average Irish taxpayer, there are now four sources of deduction - basic income tax rates and the other three things I mentioned - nibbling away, week in, week out, at their wage packet, like squirrels.

In addition, the Irish taxpayer enters the higher rate of tax, the 40% rate, at a very modest income of €44,000 per annum. That is way out of line with most of our OECD colleagues, or competitors, if we want to call them that. It means, essentially, that for the ordinary secretary, garda, nurse or teacher, half of anything they earn over €44,000 will go in income tax. There are parties in this House who actually want to increase income tax, particularly for higher earners. The reality is that 10% of the top income earners in this country pay 70% of all income tax, USC and PRSI. The top 20% probably pay about 75% or 80% of all income tax, USC and PRSI. The Irish income tax system is steeply progressive.

What I would like the Minister to do when replying to this debate is rededicate himself to the Government's original objective of reducing the burden of income tax on the people who work in this country. That would mean aiming to have a system whereby people did not enter the higher rate of income tax until at least €50,000, or perhaps €55,000, and even at that, they would be behind most of our competitors. I want him to rededicate himself to that and ensure that at the end of the lifetime of this Government, income tax will have reduced rather than increased, if the economic situation permits, of course.

There is one other thing I want to ask the Minister. The reduction in VAT from 13.5% to 9% will benefit all the businesses that are affected. It will benefit them on a yearly basis and they will save so much per year, given the difference between 13.5% and 9%, year in, year out. Unfortunately, those beneficiaries include a number of huge multiples, which I do not think should be benefited in this way, quite honestly. What was the thinking behind including those multiples in the VAT cut? Was consideration given to the idea that perhaps the right thing to do was to reduce the tax based on turnover, so those over a certain turnover would not benefit from the tax reduction? There is a ferocious difference between a small coffee shop or one or two-person hairdressing salon and Burger King or Supermac's.

I would like the Minister to answer that.

The budget, by and large, has been designed to strengthen the economy so that it will be able to meet the commitments in the programme for Government and the commitments that lie ahead, which are very considerable. From that point of view, I applaud various measures in the Finance Bill, such as the improvement in the R&D tax credit which is vital in the age of artificial intelligence. To remind the House, the cuts to VAT, with the exception I mentioned, are about jobs. The concessions for developers who are developing apartments are about creating more homes in the middle of a housing crisis. The concessions on investment are about persuading people who have money to put it into the Irish economy at a time when it badly needs it. That is the reality of this budget. If the Minister and the Government achieve their objectives of strengthening the base of the economy and expanding our infrastructure, I am sure they will be able to meet all the commitments outlined in the programme for Government over the next four years, and possibly go further.

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