Enda Kenny (Mayo, Fine Gael)
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If one walks down any street in the country one meets unemployed people, students, housewives, small business people and shopkeepers. These people all want to live in a country where they can go about their business as best they can within the rule of law. The Government has introduced a savage and blunt instrument. For the first time, every person who earns a bob is drawn into the tax net.

The point was made earlier today that we have moved from having a €6 billion surplus to a €15 billion deficit inside two years, which is staggering. The Government has shown no imagination or initiative in the budget to give hope and opportunity to business, small business, retailers and young people and to collect this money — after borrowing €11 billion — it has introduced a sledge hammer to crucify every person who shows initiative by taking a part-time job for three or five hours and earns €2, €10 or €20.

The Government has brought every person into this. In the past, Fianna Fáil always had some modicum of care for people earning low wages and would tell those earning below €25,000 or €30,000 that it would protect them and we were told in the run up to this budget that the vulnerable would be protected. In any town in the country or in any part of Dublin a woman who works five or six hours stacking shelves in a supermarket at the weekend because she wants a few bob to buy material for her family or children will have to pay the 1% levy introduced in this budget. After exhaustive conversations at the social partnership talks, low-wage earners were given 0.5% of a pay increase only to have it wiped out entirely by this 1% levy. The Government has used a savage and crude economic instrument to do down every single person who shows any initiative. Most particularly, those who will feel this most are those in the low-wage earning group who go out of their way to find some little job by which they can raise a few extra quid. The Government has pointed the finger at them, telling them they must pay for the way it has mismanaged the economy and wasted hundreds of millions of euro. Now that the Government is flailing around in desperation, it finds an instrument to bring in €1.18 billion in the year.

Those who are able-bodied and high earners will also take the hit. However, for the middle-income and low-income groups, this levy will nail them to an economic cross. This, and all the other stealth taxes and increases in charges that have been introduced in the budget, will make Ireland in 2009 a most unhappy place for people to live in. The levy is savage, crude, blunt and way over the top. It smacks of complete desperation from a Government that has shown no initiative, inspiration or hope in this budget.

The mortgage interest relief measurem, with which I do not object, speaks for itself. The increase in specified rates for preferential home and other loans is simply another revenue raising mechanism which I will not support.

Ruairi Quinn (Dublin South East, Labour)
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I am surprised that despite all the leaked briefings to the newspapers we have this regressive measure of taxation. I am particularly surprised it comes from the Taoiseach who has had three years' experience in Merrion Street and has lost no opportunity since he took office to announce his republican values and ideals and his commitment to equality of treatment. This levy is the most unequal treatment of income earners we have seen in recent decades. It smacks of the most extraordinary residue of the dying corpse of the Progressive Democrats, of which I thought we had seen the end.

Illustrative cases on how the income tax changes will affect taxpayers are listed in the Budget Statement. The first case is that of Gary, a single factory worker, and his daughter Gabby. One feels that they should be jumping for joy because, while money is taken from them by the levy, they are shown to be still better off. That undermines the donation that was given to them in the first place.

We know the spin doctors suggested not to touch tax rates but introduce a levy on income. They suggested not to create spin around perceptions of taxation rates but introduce a measure which was introduced before. We did it together in government in 1993 when Deputy Bertie Ahern was Minister for Finance. While that levy, to bridge a gap, was 1%, it was only for one year. Those were different times with different circumstances. We are now in a structurally different set of economic circumstances with revenue and expenditure.

The various illustrative cases listed in pages C.19 to C.23 in the Budget Statement suggest taking money out of one pocket and leaving some in the other. It is less than what was originally decided by the Oireachtas as to what these people needed in the first instance. However, they are expected to feel grateful because they are better off. Whatever else the levy does, it confronts the Taoiseach's professions of commitment to republican egalitarianism. They are torn asunder by this measure.

In one year the levy will bring in €1.1 billion, much needed because of the gaps that have occurred in the tax yield. I am not arguing with the Government's need for a revenue take. However, what would be the equivalent of loading that levy on the 20% and 41% tax rates? What figures did the Government look at when it decided to apply the levy across the board? It is difficult for us on this side of the House to evaluate the full nature of the decision made since we do not know the quantitative nature of the alternatives. What are the administrative implications of taxing an extra 600,000 people who are not in the tax net? On which agency's shoulders does that burden fall? Are the IT and other collection mechanisms in place to deal with this?

John O'Donoghue (Kerry South, Ceann Comhairle)
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Before I call on Deputy Michael Mulcahy, as several Members are offering to contribute, I ask Members to follow the example of Deputies Enda Kenny and Ruairí Quinn in being concise and to the point. This will allow us to get through everyone who wishes to speak.

Michael Mulcahy (Dublin South Central, Fianna Fail)
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It is unpalatable to the community at large when taxation has to be increased, no more so than in the case of this levy. On balance, however, it is a fair compromise given the other provisions in the budget and the need to raise revenue. Will the Taoiseach confirm the figures the levy will raise in revenue?

People are prepared to contribute to raising revenue but I would temper that by saying they will want to see reform of the public sector as part of that equation, with which I know the Taoiseach agrees. We will deal with the abolition of 41 State agencies later in the debate.

Leo Varadkar (Dublin West, Fine Gael)
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It is not 41 State agencies.

Michael Mulcahy (Dublin South Central, Fianna Fail)
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I also support resolution No. 2 which provides a good re-balancing for the first-time house buyer. I am glad this and other measures have been targeted at the housing sector. Despite the problems in the construction sector, from my experience there is still much demand for houses, both local authority and private. Will the Taoiseach ensure the local authority scheme is closely monitored so that as many people as possible can get into it?

Pat Rabbitte (Dublin South West, Labour)
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The very fact that this levy is entirely lacking in discrimination is my main reason for opposing resolution No. 1. Some 660,000 people were exempt from income tax before today. They will now be brought into the tax net within the remit of this 1% levy without any discrimination, discernment or regard to their conditions. It is not simply a 1% levy for high earners and middle-income earners. It includes those on the minimum wage, the casual and part-time worker and those who were previously never in the tax net.

The Government long boasted about its objective to affect the marginal rate at only 20% of taxpayers. That has never been achieved. We used to hammer away at that on the benches and the Department of Finance changed the system of calculating those in the marginal rate. The band rates broadly broke down to about one third in each rate. Now, up to 660,000 people will be liable under this levy. That is the major objection to the levy.

This is a nightmare budget that focuses merely on where revenue can be raised. Everything that moves has been taxed. Earlier, a colleague asked me what we were going to say about the resolutions. I said we would be supporting some of them and vehemently opposing others. He said, "You must be mad; can you imagine what Fianna Fáil would do to you if you had won the election?"

Enda Kenny (Mayo, Fine Gael)
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It is a somewhat sobering thought.

Pat Rabbitte (Dublin South West, Labour)
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It was a question that caused me to reflect.

Ruairi Quinn (Dublin South East, Labour)
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Do not ask the Ceann Comhairle. He is conflicted.

Pat Rabbitte (Dublin South West, Labour)
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I can only imagine the Ministers, Deputies O'Dea, Dermot Ahern and the rest, if the country had been plunged into this nightmare when they were in opposition. The enormous figures are frightening — a general Government deficit of over €12 billion and the debt equity ratio rising to 43%. How could we have been plunged into such a hole? How could there have been such a transformation after the Taoiseach personally, as Minister for Finance, brought in four budgets? Yet, we have ended up in this cul-de-sac. I join my colleague, Deputy Quinn, and others in opposing this crude method of levying money on the poorest people with the lowest incomes. There is no exemption. It does not start from an income of €50,000. There is a tiered structure at the top for people on very high earnings, from €100,000 upwards, but casual or part-time workers and low earners generally will be hit. That cannot be justified and is not in keeping with the protestations by the Taoiseach and the Minister for Finance to look after people at the bottom of the ladder.

Alan Shatter (Dublin South, Fine Gael)
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I will confine my remarks to the first financial resolution. This levy, which could be properly described as Lenihan's levy, is the most dishonest aspect of the budget. It is described as a levy merely as a fig leaf to maintain the pretence that tax rates are not being increased. If the Government had any real integrity and was not interested in a sleight of hand public relations exercise, it would raise additional taxation in an honest and open way. As Deputy Quinn and others said, it would examine the 41% rate or the 20% standard rate and would in an honest and considered way bring a measure before the House. I am not saying I would support that either, but at least there would be some thought process attached to it and some sensible judgment would be made with regard to the affordability of a tax increase for those confronted by it. However, a fig leaf is maintained that we have not changed tax rates, we have only introduced a levy. I am sure Government spokespeople on radio and television will defend the fact that tax rates have remained the same, but this is a piece of nonsense.

This is a regressive measure. I watched the Minister for Finance on the "Six One News" this evening describing this as progressive taxation. This 1% levy applies to everybody across the community. Perhaps we should explore that a little further. Are we going to send tax inspectors into all schools, including primary schools, to check out whether children are doing part-time work for a couple of hours in their local newsagents or cutting the neighbour's lawn once a week? Do we now expect every post-primary student to make a tax return? How are we going to inquire into such matters? As a 14 year old in a family that had very little income, I can recall doing a newspaper round in my school days. I got up at 6 a.m. to deliver newspapers around the local estate where I lived and earned spare pocket money by doing so. Even in those days such work did not fall into the tax net. If any young schoolboys are doing newspaper rounds today, however, they will have to contribute financially for the mess the Government has created.

It is extraordinary that the Minister for Finance and the Taoiseach, who have had an involvement in the new national partnership deal, can introduce a 1% levy right across the board, having agreed an extra 0.5% tax reduction for the low paid. It is a grossly dishonest way to deal with the social partners. Fine Gael has set out its platform for a different approach. This levy will hit people who cannot afford to pay it and who should not be brought into the tax net. The labyrinthine bureaucratic structure that will now have to be created to collect this levy may well result in a substantial portion of it simply being flushed away in administration. By imposing this levy and other charges, the Government has done exactly what should not be done in an economy facing recession. A central objective of the budget should have been to protect jobs and ensure that small businesses do not close under financial pressure from reduced consumer spending. However, this provision and the budget generally takes more money out of the economy at a time when it needs to be stimulated and when people seek reassurances that they will have reasonable funds left available to them. This levy is essentially the wrong way to go. It is inequitable taxation.

At a time when the Progressive Democrats are going out of business, we are not just reversing the tax policy, which the Government has stood by in two successive elections and the Progressive Democrats proclaimed as being central to their policies, but are doing it in an unprecedented manner. I do not believe this is a once-off levy or one that we will see for one or two years.

John O'Donoghue (Kerry South, Ceann Comhairle)
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There is no way the Deputy's colleague can contribute unless he concludes.

Alan Shatter (Dublin South, Fine Gael)
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I will conclude on this point. The 1% levy is misconceived. The Government should examine how it will impact on young people, including children, earning small sums of money to make ends meet in circumstances where no one could have envisaged they would fall into the tax net. Nonetheless, they will now be brought into the net by this levy.

John O'Donoghue (Kerry South, Ceann Comhairle)
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I call Deputy Varadkar and remind him that the Taoiseach must get an opportunity to reply.

Leo Varadkar (Dublin West, Fine Gael)
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I will be quick and will also confine my remarks to the first resolution. In the days coming up to this budget, I thought we were being prepared by spin for bad news, but I did not realise that an income levy like this would be increased. I am shocked by the fact that the Government has gone for what Deputy Shatter accurately called the Lenihan levy. The suggestion from Ministers is that we are being given unpalatable medicine for a sick economy and somehow it will get better. This budget is not medicine, however, it is pure poison. The tax hikes will depress demand, reduce consumer spending and plunge us deeper into recession. That is what the Government is also doing with capital spending and it is proposing to increase the deficit from 5.5% of GDP to 6%.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy must deal with the financial resolutions.

Leo Varadkar (Dublin West, Fine Gael)
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Dealing specifically with the income levy, it seems to go against all the canons of taxation. It will cost a lot to administer and will bring 600,000 poor people into the tax net, which is socially unjust. The comments of trade unions were interesting, with ICTU suggesting this decision may, in itself, scupper the national pay deal. It was led to believe that low-paid workers would receive a 0.5% increase, but they will get a 0.5% cut. That is because they will now be eligible for taxation while before the budget they were not. There were other options. First, the Government could have taken the Fine Gael route of introducing a pay freeze for everyone earning over €50,000. That would have brought in approximately €600 million and the Minister would not have had to do this. It is ironic that it appears the pay deal may go down anyway. The Minister had that choice but he did not do it.

There is another alternative, which the Minister probably still has tonight. I should not really speak for both parties, but I think that most Members on this side of the House would prefer that the Minister would not opt for this regressive attack on the poor and that he would instead increase the standard rate of income tax to 21% and increase the higher rate to 43%. It would have the same effect, there would be less administrative costs and it would at least be socially just. Perhaps the opportunity still exists for the Minister to withdraw this proposal and to increase the standard and higher rates of income tax instead. If he must increase taxes, he should do it that way rather than introduce this levy. He should not attack the poor and vulnerable in the way he has done.

Michael Ring (Mayo, Fine Gael)
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I want to make a brief comment. I really cannot understand Fianna Fáil. My memory of today's budget is of Members on the Government side going back to their constituencies this weekend. It is of seeing them up there clapping today while people were being robbed.

I ask the Taoiseach a simple question. Why did the Government not impose the levy on incomes over €100,000? If he wanted, he could have imposed a 2% or 3% levy on those earning €200,000, €300,000 or €400,000. There are earners of such incomes.

The Government is attacking the most vulnerable in society. It is attacking the poor, the middle classes who are not entitled to medical cards and have to pay for hospital services, doctors and everything else. This evening I had a telephone call from a woman who has four children. She told me she did not think she would be able to live in this country any longer, that she had been taxed out of the country today.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy must stay on the resolution.

Michael Ring (Mayo, Fine Gael)
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That is a disgrace. The Government should have targeted the people on €100,000 plus who could afford to pay the money instead of attacking the poor who did not pay tax in the past and are now in the tax net, and the middle classes who are already being squeezed. They are letting the super rich away with it again. Why did the Government not go for those on €100,000 plus and impose a 2% or 3% levy on the people who could afford it, instead of hitting the poor, the weak and the sick?

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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The Taoiseach promised in advance of the budget to protect the most vulnerable in Irish society, but any read of it will tell one that he has not done that. He has not lived up to that claim and that promise. An income levy of 1% is being introduced. I would not argue with the introduction of a 2% levy on incomes over €100,000, but the 1% levy applies across the board irrespective of whether one earns €10,000 or €90,000. I wonder has any calculation been carried out in terms of the cost of administration of imposing such a levy on those on the lowest incomes who are not in the tax net at present and should not be. I fail to understand the thinking behind it. Why was a threshold not introduced? It could be commensurate with those at least within the tax brackets. Those on the lowest level of income, who are, indeed, within the tax net, should also have been excluded.

This measure is very regressive and punitive. It is discouraging of people even though it may, in low income terms, apply in small terms. This is my question. Why did the Minister introduce it in this way? Did he give any serious consideration to it because I warrant, in the lowest income levels, that this will cost more to implement than it will reap. It will have another dilatory and destabilising effect on already hard-pressed people in the lowest income areas.

As we are dealing with a group of resolutions, on the second financial resolution, where mortgage interest relief for non-first-time buyers is to be decreased from 20% to 15%, many of these families are suffering under the raft of measures in terms of cutbacks and increases that the Government has built into this budget. They are dependent on their home. They are mortgage payers and that is a further punitive hit that they will face in terms of a 25% reduction in their entitlement to mortgage interest relief. We cannot accept that glibly without comment. It is a very punitive measure and I do not believe that it was justifiable.

Eamon Gilmore (Dún Laoghaire, Labour)
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I think I understand why the Government has done this. The Government has capsized the economy and found itself in a position where it must increase tax. Having sold itself to the Irish people as a tax-cutting party and a tax-cutting Government, however, it cannot use the "T" word. Therefore, it is bringing in a new tax and calling it a levy. This is a new tax. It is a dishonest and a regressive tax. It is dishonest because the Minister will not say that it is a tax and it is regressive because it applies across the board. The people on the lowest incomes will end up paying this 1% levy.

When one thinks about it, in the context of the pay deal that has just been negotiated, the local authority road worker on a low level of pay who is told, under the pay agreement, to take a pay pause until next September or October, is now, in effect, having his pay cut by 1% as a result of this levy. It applies, not on a graduated basis but to everything, from the first euro he earns to the little bit of work he does on overtime.

If the Government had wanted to increase taxation, it should have introduced a proposal that was honest, stated that it was taxation and introduced it on a graduated basis, but it has not done that. It wants to live the lie that it is a tax-cutting Government while at the same time applying what is a new tax to the lowest levels of pay.

Bernard Durkan (Kildare North, Fine Gael)
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Like Deputy Ring, I was amazed at the reaction from Government backbenchers. In other years I put it down to the fact that the budget speech took place close to Christmas and that they were a little delirious in anticipation of Santa Claus, but this year there is no excuse for that. The only thing I can put it down to this time is that they do not realise the full impact of what they are doing.

This levy sets aside the boast of the Government every year at budget time that many people were taken out of the tax net. They are now put back into it again — well, truly and firmly. A widow on €35,000 or €40,000, for example, would receive a widow's pension but would have part-time work to supplement it. Obviously, the widow's pension will not be hit with this levy but the employment will be. It is extraordinary that such a person could be hammered in this way.

I will not go down through the new names given to the victims in the budget speech. However, one of the matters that comes to mind is that at the same time this hit takes place on that vulnerable sector of the community, they may have one or two children due to go to university and if they are on income of over €43,000, they will receive no higher education maintenance grant so they will be hit in that way.

I do not think Government backbenchers fully understand how close to the margins that group in society are living at present. In addition, some of these same people have an excessive mortgage and are experiencing extreme difficulty in paying it. They are getting no relief there whatsoever as the measure will be broadly Exchequer neutral. The group in this income area is being clobbered. They may have thought they would get relief from this budget, but they are getting nothing. They are just getting it in the teeth.

It is extraordinary that a group of people who previously carried the weight of responsibility, who worked hard, who tried to put bread on the table, to provide themselves with a home in difficult circumstances, will now be affected by a levy that is totally indiscriminate in that it affects everybody.

I am appalled, not only at the reaction of the backbenchers who stood up and applauded when the budget speech was over. I wonder will they stand up and applaud in their constituencies in the next few weeks. I hope they will take responsibility for their actions here and beyond.

Seán Sherlock (Cork East, Labour)
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In reference to the Minister's speech, particularly where he dealt with the principles of taxation, he said the imposition of taxes must be fair and equitable and that a higher rate must apply to those on higher incomes. That sounds familiar in that it reads exactly like my old leaving certificate economics Folens textbook and whoever wrote that probably did the leaving certificate around the same time as myself. However, I always understood from my leaving certificate economics that taxation should be progressive, not regressive. In this instance, the 1% levy is regressive. Those on the margins and people who predominantly probably voted for Fianna Fáil are being punished for their loyalty. They are the people who did not benefit extensively during the boom years. Instead, they went out every day to do as they always did and now they are being punished. It is the wrong strategy and a regressive measure. When one takes account of the increases in VAT and other increases in the cost of living, it will have a negative impact on their real income. The real incomes of those in the low income bracket will be severely affected and for that reason we oppose this measure.

Arthur Morgan (Louth, Sinn Fein)
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Will the 1% levy effectively scupper the social partnership deal? Under the terms of the deal, low income earners were awarded an 8.5% increase. That is now gone, and they will effectively pay double that in the levy. Can the Taoiseach confirm that low income earners will have to pay this levy when they are not even eligible to pay tax? It appears that people who are not in the tax net at present will have to pay this levy. It is, therefore, a significant penalty for them. Perhaps the Taoiseach would clarify this point.

Resolution No. 2 is welcome at first glance. It is good for first-time home owners to get some relief. However, I have a difficulty with it. There are people who bought small apartments or so-called starter homes who now have children on the way or growing children and need more space. Is it fair to exclude that category of people, who are not trading up for flash Harry purposes to impress the neighbours but out of necessity due to changes in their families? Does the Taoiseach accept this is grossly unfair to that category of people?

While the increase in mortgage interest relief for first-time buyers is welcome, will the Taoiseach address the anomaly that exists for low income home owners under the shared ownership scheme? I can offer the example, about which I had a phone call some moments ago, of a woman who is getting no tax relief on the proportion of her home that is owned by the local authority and rented to her. In fact, she is paying approximately €485 per month for the rental share in addition to the repayment of the mortgage she has taken out. Will that rental payment under the shared ownership scheme be included for the purpose of tax relief?

Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister for Finance stated today that 34% of earners are not paying income tax. Of the €815 million which it is hoped to raise with this measure in 2009, can the Taoiseach give a breakdown of how much will be received from people who are not paying tax at present, people earning less than €100,000 per annum and people who are earning €100,000 and more per annum?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not accept the contention that this is a regressive tax. It is a progressive tax. The reason is that it is based on gross income. If one were to apply this simply to rates, people would have the benefit of access to various allowances and shelters before they would have to pay the 42% rate. Paying on gross income means that where one's income is higher, one pays a higher amount. It is not correct to state in that sense that it is a regressive tax; it is progressive. The amount one pays depends on the amount of income one earns.

Pat Rabbitte (Dublin South West, Labour)
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That argument would only stand if there was an exemption or threshold.

Brian Cowen (Laois-Offaly, Fianna Fail)
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No. I will come to that point. The next point made was that it applies to all income. It is clear in the financial resolution that the levy is a tax on income. There is nothing dishonest about it — it is a tax on gross income.

Alan Shatter (Dublin South, Fine Gael)
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Why tax a child doing a newspaper round?

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach without interruption.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have listened with respect to everybody. A number of points were made and I wish to reply to them in order to have an informed debate.

With regard to the fact that it applies to all income, the Opposition Deputies, when they were members of the Government, had no problem imposing 26% tax rates on people's incomes once an exemption equivalent to €95 was passed.

Enda Kenny (Mayo, Fine Gael)
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That was over a decade ago.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Yes, that is correct.

Enda Kenny (Mayo, Fine Gael)
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They were different times. The tax rates are reduced.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I will put this in perspective. Over the last decade, as the Deputies have admitted, there has been a huge improvement in reducing the tax burden on people with these incomes. Members have spoken about this levy applying to people on low incomes, but I am making the point, which is a fair political point, that the Opposition Members when they were in Government regarded 26%, which was then the standard rate, as appropriate for people on these incomes in the past.

Enda Kenny (Mayo, Fine Gael)
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That is no justification for introducing this charge.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I listened attentively to the Deputy's points so perhaps he will allow me to make mine. These people are being charged a levy of 1% of their income. In terms of the tax burden that applied ten years ago when the Opposition Members were in office, this levy is one twenty-sixth of that burden.

Ruairi Quinn (Dublin South East, Labour)
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Not so.

Brian Cowen (Laois-Offaly, Fianna Fail)
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That is the situation.

Ruairi Quinn (Dublin South East, Labour)
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It is totally incorrect.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Before we took office, there were less than 300,000 people outside the tax net; now, there are 800,000. There are 500,000 people, therefore, who are now outside the tax net, who used to pay 26% tax under the Opposition Members' regime. With regard to the progression we have made, I accept we are introducing a levy of 1% on those incomes. That is against a background where we progressively, and using our republican egalitarianism, took those people from a tax burden of 26% imposed by the rainbow Government——

Enda Kenny (Mayo, Fine Gael)
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The home help will now be taxed.

Brian Cowen (Laois-Offaly, Fianna Fail)
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——out of the tax net altogether. Now, due to the extraordinary situation in which we find ourselves, we are seeking a 1% contribution from those incomes. That is the position.

Deputy Quinn asked what would be the position if this was done through tax rates. It would be necessary to apply 1% extra to the standard rate and 2% extra to the higher rate. However, if one opted for putting 1% on the standard rate and 2% on the higher rate, people would have allowances and tax breaks available to them so the amount of income eligible for the extra 1% or 2% would be far less.

Ruairi Quinn (Dublin South East, Labour)
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What would the percentage on both rates of taxation have to be to get the same amount of revenue?

Brian Cowen (Laois-Offaly, Fianna Fail)
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It would be 1% on the standard rate and 2% on the higher rate and that is before sheltering the money and assuming people did not shelter it. The benefit of the levy is that a person on €200,000 or €150,000 per annum will pay 1% up to €100,100 and 2% for the amount above that. They cannot make deductions in the normal way. That is the reason it is a more progressive tax. It gets the maximum amount from that level of income than would be the case if one opted for the rates route.

The second point is that the 500,000 people Fianna Fáil took out of the tax net are to be subject to a tax burden of 1%, which is one twenty-sixth of the burden the Opposition felt appropriate just ten years ago.

On Deputy Ring's suggestion that one should impose a levy of 2% or 3% on those paying tax at the higher rate, this would not produce the money required.

Enda Kenny (Mayo, Fine Gael)
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Would taxing the 33,000 millionaires not produce it?

Brian Cowen (Laois-Offaly, Fianna Fail)
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To accept the Deputy's proposal, a 10% income levy would have to be charged in respect of all those earning over €100,000, in addition to their existing tax commitment at the rate of 41%. The Deputy made a fair point and I am explaining that this rate would have to be charged on those incomes to obtain the same revenue that is to accrue through the Government's method. To be fair to Deputy Quinn, he was not arguing about this because we are here to decide the best way to collect the amount of money required. Having listened to Deputies, I believe my approach is better.

On the imposition of the 1% levy on those who have heretofore not been in the income tax net, it is fair to say, with a view to getting the full picture, that successive Governments have used other mechanisms to alleviate the burden on people in this category. For working families, including lone-parent families, the availability of the family income supplement has been outstanding in ensuring the provision of direct supports to families who require them. The income limit applying to one child is €500, while it is €570 for the second child and €655 for the third. As we all know, the eligibility for family income supplement is such that one receives 60% of the difference between what one is earning and the limit pertaining to the size of the relevant family unit. For example, a person earning €300 per week would receive 60% of the difference between this sum and the sum pertaining to the size of the relevant family unit. If a lone-parent had one child, he or she would receive 60% of the difference between €300 and €500 as a result of the change in this budget. This would be part of their income.

I accept we are imposing the 1% levy but, to obtain a full picture, as one must in respect of any budget, one must ascertain the income position for any given person. The families to whom I have referred would be better off even with the imposition of the levy. Furthermore, all families eligible for a family income supplement earning up to €30,000 per year would be better off even with the 1% levy. We are including the 1% levy in the manner described to ensure those at the higher end of the scale will pay on gross income without the benefit of a tax shelter or the benefit of allowances.

The full picture, unlike that being portrayed, is that we are imposing a 1% levy across all income brackets according to a simple concept. By making the family income supplement changes for all eligible working families, those families are better off, even with the imposition of the 1% levy. That is taking care of the situation.

Alan Shatter (Dublin South, Fine Gael)
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On one level, the Government takes from them——

Brian Cowen (Laois-Offaly, Fianna Fail)
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Deputy Shatter should note it is not a concept he might be too well acquainted with.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Time is very limited.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The one point I can make about this Administration is that its record on reducing the tax burden for low-paid workers is better than that of any other.

Tommy Broughan (Dublin North East, Labour)
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Not tonight.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I include tonight. Deputy Broughan was not present for the earlier part of the discussion. He supported an Administration under which 500,000 of those in the lower income bracket used to pay tax at the rate of 26% on any income over the €95 equivalent.

Ruairi Quinn (Dublin South East, Labour)
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The Taoiseach is wrong.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I refer to the Rainbow coalition. The Deputy walked out of a good Administration and went into a bad one and lost the election after it. Does he remember that? In fairness to Deputy Broughan, he supported neither of them; he was in and out half the time.

The serious point being made——

Michael D Higgins (Galway West, Labour)
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Who was Minister for Finance at that time? It was Deputy Bertie Ahern.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I did not hear that. Deputy Higgins can contribute in a minute — I am sure his comment was a good one.

I am glad to say the average industrial wage has increased by €14,500 since that period. The amount of tax people are paying, even in spite of this increase, is €400 less than when Deputy Quinn was collecting tax as Minister for Finance in the Rainbow Government.

Alan Shatter (Dublin South, Fine Gael)
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Why are we not clearing up the mess that Fianna Fáil——

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am just making these points——

Alan Shatter (Dublin South, Fine Gael)
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It is like "Back to the Future".

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am outlining the specific reason for introducing the levy, the full position for those on low incomes, what the relative position was for them and why we have been making so much progress and, I am proud to say, taking the low paid out of the tax net. With the extraordinary circumstances that now exist, it is true that a 1% levy is being introduced, but it is one twenty-sixth of the burden that the Members opposite believed to be appropriate when they were in charge of the income tax system.