Gerald Nash (Louth, Labour)

I move amendment No. 2:

In page 8, between lines 13 and 14, to insert the following:

"Report on taxation and cost of indexation 4. The Minister and the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation shall include in their Summer Economic Statement in each year a report setting out the estimated cost to the Exchequer of adjusting—

(a) tax rate bands and tax credits and allowances in relation to income tax, and

(b) benefits and allowances payable under the Social Welfare Acts,

to reflect any changes in the All Items Consumer Price Index numbers published by the Central Statistics Office in the 12 months before the date of the Statement.".

As discussed in reference to the previous amendment, middle-income workers, especially those who expect to receive modest pay increases of 3%, 4% or 5%, will, in effect, see tax rises next year because of the failure of the Government in the context of October's budget and the provisions in this Bill to index tax bands and credits to accommodate and take into account those pay increases. As outlined, commitments were made by the Tánaiste in the context of the general election campaign 12 months ago. Indeed, there are references in the programme for Government to the ambition to introduce indexation for working people over the next few years.

The reality is that because there is no form of indexation in the Finance Bill, there will, in effect, be tax increases for a whole swathe of middle-income workers next year. In the context of the cost-of-living crisis we are experiencing, it will be a particularly challenging year for those workers. The reality is that if the Government, during the next four years, is to meet the commitments it made previously, it will require a very significant amount of heavy lifting in budget 2027 and beyond. That is if it does what it committed to do, which is to move to index tax bands and credits incrementally over the next few years.

Of course, budgets and Finance Bills, and politics more generally, are about choices. With the limited resources available to the Government this year in the taxation space, it decided, in its wisdom, to introduce an untargeted VAT rate cut for the hospitality sector. That particular cut will disproportionately benefit larger organisations operating in this country. The Government further decided, in its wisdom, to introduce VAT cuts that would have a substantial cost to the Exchequer and would involve a very large wealth transfer from working people to the developer sector. Those cuts, the Government hopes and says without necessarily any evidence to back it up, are designed to boost apartment supply and the viability of the sector. We all know they are about boosting the bottom line of development companies.

In recent years, I have, for good reason, made the proposal set out in my amendment No. 2. It is a responsible proposition. Some of the countries against which we like to compare ourselves have automatic systems of indexation built into their systems of governance and financial planning. Indexation is done routinely and annually. What is also done routinely is indexation of social welfare payments. If we commit to indexation in the context of the tax system, the corollary must be that we do the same when it comes to core weekly social welfare rates to ensure nobody is left behind. I have listed the countries that do this routinely on Committee Stage and in other forums. They do so on the basis that it gives certainty to governments, workers and employers. The budget in October was marketed by the Government as a pro-business budget. What will happen next year, as a result of the Government's failure to implement indexation this year, is we will see increased wage demands on the very same employers it says it wants to support. That will be the reality.

I have requested this measure time and again. I did it again this year on Committee Stage and am doing so now on Report Stage. My proposal is that the best mechanism for setting out a commitment to indexation is the summer economic statement. If there is another mechanism to do it, I am all ears. I am open to persuasion on that. Indexation would give certainty to workers and the economic planning systems in this country. It also would ensure that, every year, when we engage in the process in the run-up to the budget and then get to debate the budget, we would be doing two things, namely, indexing tax bands and rates and indexing social welfare rates.

Then, we would have a genuine discussion and open public debate in this House about how we raise revenue to provide the resources we need to expand our public services. We would also then have a genuine discourse about other priorities in terms of taxation, tax and spending, accepting that indexation would be done as a matter of course in the context of the personal tax system for PAYE workers and social welfare, which is an area I accept the Minister is not responsible for. It is a point worth making that when we index tax, we should also, from the point of view of social and economic equity, index core social welfare weekly rates.

See this speech in context