Tuesday, 13 October 2009
The Governor of the Central Bank made a very significant statement today at the ESRI conference. He said it is necessary to rebalance public spending and taxation by restoring the shares of taxation and spending in GNP to the levels which prevailed in the years running up to the turn of the millennium when the economy was growing along a sustainable path. The ESRI quarterly economic commentary gave very clear guidance with regard to the balance between taxation and spending savings in the upcoming budget. It stated: "There are strong arguments for postponing any significant further tax increases until the worst of the recession is over". Despite this, it clearly points out the growing gap between the Government's budgetary strategy and the advice given by Deputy Richard Bruton over the years in terms of getting the balance right between taxation increases and spending savings.
The most worrying event over the weekend was the approach taken by the Minister for Transport, Deputy Dempsey and the Minister for Communications, Energy and Natural Resources, Deputy Ryan who took on the burdens of the nation and who told us they had agreed a survival programme for Government as distinct from a survival programme for the country. The shambles of the deal that was done last weekend is shown clearly in the fact that we still do not know how much it is going to cost or, if listening to the Minister for Education and Science, Deputy Batt O'Keeffe, whether there is a deal done at all. He is clearly of the view that in respect of third level fees that what was agreed at the weekend is only a temporary little arrangement.
What is the cost of the deal agreed on Saturday between the Green Party and the Government? What taxes will be increased or what services will be cut in order to meet it? I am sure in the 70 hours of discussion chaired by the Minister, Deputy Dempsey, these matters were discussed in some detail. What services will be cut to pay for it?
Anyone with a cursory understanding of the current financial situation in the country will understand we have to operate within the budgetary and financial parameters set out by the Minister for Finance in respect of the budgets he has outlined to date and this will continue to be the case. The Deputy refers to what the Governor of the Central Bank had to say today. We must listen to the advice of the governor take it into account. He made the point he believes a credible convergence path is being embarked upon by Government to deal with the question of closing, over time, the deficit borrowing requirement which has opened up. This has been reconfirmed in the newly agreed programme for Government.
In answer to the Deputy's questions, the priorities and initiatives that will be proceeded with and pursued by the Government, following the recent discussions we have had with our partners in Government, will operate under the same financial parameters which the Minister for Finance has already set out.
The Minister has changed his tune since April of this year when he set out his budgetary parameters. For three days before the weekend we witnessed all the intrigue, hype and tension of the negotiations with allegations and rumours about this, that and the other. Eventually, Ministers Dempsey and Ryan approached the podium to explain to a nation pent up with excitement or terror what this agreement was all about. It is a pity we do not have a cost on this document and I will explain why. On 30 September this year, the Minister, Deputy Gormley, who went on the ferry to Holyhead, stated at a press conference, "You cannot have a document which is not costed. It has to be costed and it will be". The Taoiseach has signed off on a deal, he has them in the lair now for the period ahead.
From our perspective we have carried out a preliminary calculation of the tax implications of this new deal. Based on those estimates, the ordinary family will have to foot an increased tax hike of €2.5 billion. Where will the money come from to pay for the announcements in this new deal? Fine Gael has repeatedly pointed out that no country has ever taxed its way back to prosperity. All the pronouncements that the Minister for Finance has been making since April now seem to be thrown out the window simply to keep the Government on board. What is the calculation of the cost here? Is it €2.5 billion on the tax side? Will the Taoiseach outline who will pay for the 500 extra teachers over three years referred to? Are they to be appointed to the detriment of the appointment of nurses, gardaí and other front line public services that our people so desperately need?
Deputy Kenny is being disingenuous as usual. The fact is the tax initiatives contained in the programme are about rebalancing our tax system to keep taxes on labour as low as possible. They require a good deal of preparatory work and will be implemented over the lifetime of the Government. Some initiatives will be undertaken in that timeline too. It is important to point out the removal of the PRSI ceiling as proposed in the programme does not constitute a new tax. It is proposed to change the existing tax which would be redistributive in effect. The revised programme states the change would be introduced in parallel with the reduction of the temporary income levy. Basically, we are setting out the objectives and direction of tax policy. I would take with a pinch of salt any preliminary costings of the Fine Gael Party.
I wish to ask the Taoiseach about one of the measures included in the renewed programme for Government, that is, the proposal or the intention to introduce or reintroduce water charges. The programme states that it is intended to introduce charging for treated water use on the basis of a basic free allowance provided to each household and then to charge for water in excess of use above that allowance. This would obviously require the metering of water in individual households. Will the Taoiseach indicate if there is any estimate for the cost of metering every house in the country? When the Leas Cheann-Comhairle was Minister for the Environment, Heritage and Local Government, a cost was carried out which at the time amounted to approximately £1 billion. This was the estimated total cost to meter every house in the country. Has any costing been carried out on the metering of every house or dwelling into provide for water charges?
Has any consideration been given to what the basic level of water allowance would be that would apply to each house? How much is it intended would be raised by charging for water?
It is important to point out that advancing the programme for Government commitment requires further detailed consideration over the coming period and a range of important issues must be addressed. No definitive or detailed framework for the implementation of the commitment can be spelled out at this point. The final approach will be the subject of a Government decision on the basis of detailed proposals which must be worked up.
The policy considerations relate to the need for legislation to give effect to a commitment which must be examined. The operational cost for local authorities to provide water and waste water services in 2007 was €680 million and the estimated cost in 2008 was €730 million. A public information campaign may be required to outline the rationale for water metering and how it would be implemented. The Commission on Taxation, which recommended the introduction of domestic water charges, recommended a public information campaign that would explain the rationale for water charges and how they would be introduced. Local authorities will need to gather information on the identity and location of domestic customers and ensure their billing systems are accurate. It will be necessary also to work out an established waiver scheme for low income householders. The development of a water charges waiver system and the necessary implementation arrangements for such a system would require careful consideration.
The whole purpose is to try to provide a prospect where, over time, we can find the means by which we can pay for the provision of water and waste water treatment, which is very considerable, on an annual basis. I do not have the details to hand but the Deputy may ask the line Minister in respect of any particular estimates regarding the provision of water metering in every household if it were proceeded with.
It is also important to refer to the whole question of the waste currently taking place because people are not charged a basic minimum and to the waste because of loss of water in the system, which cost a good deal of money to the taxpayer as it stands. The revised programme refers to introducing charging for treated water use that is fair, that significantly reduces waste and is easily applied. That is the detailed work that must now be proceeded with.
I do not see where it raises money if one must meter every dwelling. The national household survey indicates there are 1.9 million dwellings in the country now. It could cost the guts of €2 billion to meter them. What level of water charge would be necessary to raise money if one has to spend almost €2 billion metering them in the first place and if, as the Taoisech indicated, there will only be a charge after a certain minimum allowance is granted and there is to be a waiver system?
Will the Taoiseach give the House an assurance that the Government will not introduce a flat water charge in advance of metering and in advance of putting in place a minimum water allowance for every household and the waiver system to which he referred? One concern with this proposal is that we could be informed in six or 12 months time that the cost of metering is very high, that there are practical difficulties associated with the allowance and that the Government would go ahead with the introduction of a flat water charge. Will the Taoiseach give the House an assurance that there will not be a flat water charge and that this will not be progressed until the metering is done, the allowances are set and a waiver system is put in place?
Detailed work must now be done to work up and design a scheme that would provide for the attainment of this objective over time. The policy consideration must take account of the fact that in the absence of any incentive or disincentive effect in terms of the use, we see a good deal of water wasted and used disproportionately in certain households compared to others. We must find a means to address this given that last year it cost approximately €730 million to provide water and waste water facilities in the country. That is a significant charge on the taxpayer and on local authorities and we must find a means to address this in a fair and proportionate way and in a way that takes account of variations of circumstance. We must ensure that indiscriminate use regardless of amount by one household vis-À-vis another is something that must be dealt with as a policy matter. It is something that must be examined by the Government, and it will be examined by the Minister. We are outlining in the policy the direction of our intentions.