Thursday, 16 February 2012
Finance Bill 2012: Second Stage (Resumed)
Anybody in the jobs market or the wider economy might be wondering what goes on in here and would scratch their heads with incredulity. I have great sympathy for the Ceann Comhairle and the officials. It is unreal.
This Finance Bill relates to the first budget in its entirety from this Government and I am pleased that the main priority has been job creation. I welcome the launch of the action plan for jobs earlier this week and I am particularly pleased with the joined up thinking that will reduce the bureaucracy that business throughout the country must encounter and deal with on a daily basis. We must work with these small businesses to ensure their survival so they can grow and rebuild our country. It is from those micro-businesses that the recovery will come. Many business owners work up to 100 hours per week trying to survive, keep the business viable and provide staff with jobs. We must reward hard work and everybody who gets up in the morning to work will be giving assistance to those out of work in this regard. I welcome measures to assist jobseekers in gaining suitable employment and training. It is essential to give our people the dignity of having a job and bringing a wage home each week to provide for themselves, their families and to help with their communities.
I note that the public is becoming very intolerant of those who target social welfare benefits and do not wish to contribute to society by working for a reward. These are a minority of people but it is a regrettable fact of life that some people seek to maximise those benefits through different methods. The days of achieving or targeting a life on social welfare should come to an end. That is not to take away from the thousands of genuine social welfare recipients who are unable to find work or receive payments under the many schemes in the Department of Social Protection. The public must know that its money funds such efforts, and like those who make false insurance claims, those who target a social welfare lifestyle are taking from the public's pocket.
Up to this point today there is a website that has advertised up to 50 jobs throughout this country of all levels and scales, so there are jobs out there. There is a big disconnect between those receiving welfare and getting training and those who are on the next step. Jobs will not fall into people's lap so they must seek them out. My constituency of Cork South-West is largely dependent on agriculture, tourism and fishing, where the work is hard and rewards are well earned. It is initiative that keeps those communities going, and such efforts must be supported by this Finance Bill. I strongly recommend the measures in this Bill, including those to stimulate the recovery of the property sector and stamp duty measures in the agricultural sector. These are strong initiatives and I support the Finance Bill in that regard.
I am glad to have the opportunity to say a few words on the Finance Bill and welcome its introduction. There are many provisions in the Bill which I strongly support. I listened to much of the debate yesterday evening, with many contributors from the Government and the Opposition. Many in the Opposition who spoke late last night condemned it out of hand and universally failed to point out that one of the key provisions of the budget and this Finance Bill is the removal of the universal social charge from incomes under €10,036, which is a significant positive move by the Government to ensure that those on the lowest incomes are not caught by the universal social charge as it was introduced by the previous Government. I applaud the Minister for that.
There have been some difficulties in implementing the changes to the mortgage interest relief regime, which I support. It was important for the Government to include measures in the budget and the Finance Bill to try to help those who are most exposed to the difficulties in the economy. In this instance, the Government is offering increased mortgage interest relief to those who bought property at the top of the market. That is to be welcomed. We have to ensure the system is able to cope with the implementation of the changes that were announced on budget day.
I echo Deputy Harrington's comments about the changes being made to certain matters relating to property, specifically farm transfers and farm partnerships. Although the overall cost of these measures will be relatively small, they have the potential to have a significant beneficial impact on the agriculture sector, which has done better in recent years than in previous years. There is more confidence in the sector at this time. More young people are considering a future in farming. We need them to get involved. Any small incentives that promote the transfer of land between generations and the development of farm partnerships across the country are to be welcomed. I commend the Minister, Deputy Noonan, for what he announced in the budget in that regard and is enacting in the legislation before the House.
I would like to welcome another initiative that was announced by the Minister on budget day. I refer to the introduction of a foreign earnings deduction that will apply when individuals do business in any of the BRICS countries, which are Brazil, Russia, India, China and South Africa. Any promotion of business links between Ireland and the economies in question, which are among the strongest in the world at present, is to be welcomed. I ask the Minister to consider extending the operation of this initiative to the CIVET countries - Colombia, Indonesia, Vietnam, Egypt and Turkey - in next year's budget. The countries in question, which are just below the rank of the BRICS countries, have reasonably sophisticated financial systems, controlled inflation and a soaring young population. I suppose they are primed to do very well economically in the next few years. If the initiative that is being put in place with regard to the BRICS countries is successful, I do not see any reason it could not be extended over time to assist businesses that operate between Ireland and the tier of countries I have mentioned. When the Minister is reviewing the success of the BRICS initiative, perhaps he will examine the possibility of extending it to the CIVET countries at some future stage.
I welcome the opportunity to speak on the Finance Bill 2012. In welcoming the Bill, I pay tribute to the Minister, Deputy Noonan. Since his appointment as Minister for Finance, he has brought confidence to the country. He has worked hard to stabilise the public finances and, especially, the banking system. The budget he introduced last December was hard but fair. The Minister has echoed that since the budget. There are positive signs that suggest the Irish economy is recovering. When the Minister introduced this Bill in the House on Tuesday evening, he said "we are on track to bring the deficit below 3% of gross domestic product, GDP, by 2015, the banking system has been recapitalised and the economy returned to growth last year". Those signs are very encouraging. When the NTMA sold €3.5 billion of bonds recently, it was the first time private investors bought Government bonds since September 2010. This encouraging development, which increases confidence, was welcomed by the European Commission.
Events in Europe and on the international stage will always present a challenge for the Irish economy. Last Monday, Moody's adjusted its ratings for nine European countries. It is encouraging that Ireland's rate was not adjusted. We are going in the right direction. When one considers the approach Moody's has taken to countries like the UK, Austria, France, Spain and Italy, it is clear the decision not to change Ireland's rating shows the Government has brought confidence back to the economy. It needs to be emphasised that events in Greece last week are totally different from the Irish situation. The Greek Parliament voted in favour of a second bailout, this time worth €130 billion. As a result, it will have to make €3.1 billion in cuts. This is a huge challenge for the Greek Government. I hope it will be able to restore confidence. Equally, I hope the 26 other member states will agree to the bailout. The situation in this country is not the same as that in Greece. We do not have riots, disruption and fires etc.
Although the unemployment rate of 13.5% in this country is high, I believe the measures taken by the Government, including last year's jobs initiative and the recent jobs action plan, when taken in conjunction with the Bill before the House, show that job creation is a top priority for the Government. As I travel around County Clare, it is clear to me that the role of small and medium sized enterprises is extremely important. They play an important role in the local economy and throughout the country. Clearly, small businesses that provide four, five or six jobs represent the cornerstone of the economy. Although the recent unveiling of the action plan was not a jobs announcement, it shows the Government is working with businesses in a different way. We are changing the way we support businesses. This ambitious plan will bring confidence and create a positive vision.
I accept that money is scarce. We have to do much more with less money. It is extremely important that we help small and medium sized enterprises by ensuring they can access credit. We are pursuing the whole idea of a one stop shop. There needs to be less red tape. New initiatives are being undertaken to help the Irish diaspora. We are offering a €4,000 finder's fee to those who attract business to this country. The development capital fund of €150 million will help larger businesses. All of that is important as we try to restore this country's viability, competitiveness and employment levels. There is much more to be done. The Taoiseach has travelled to the United States today to encourage more US investment in this country. It is important to note that 13,000 jobs were created by IDA Ireland last year.
I am pleased to have had an opportunity to speak. I welcome the Finance Bill 2012. I am sorry I did not have more time, as I could have said much more. It is extremely important that there is some positive news.
I welcome the opportunity to speak on the Finance Bill 2012 and give an overview of a few points that are important in the context of the economy. I will speak about where Ireland is at present and what we should do to address the major challenges we face. In the last year, the Government parties have started to appreciate the difficulty of governing in straitened economic times. Before last year's general election, they seemed to be singing a very different tune. We must go beyond that now. We should accept the need to create positivity in Ireland. We need to send a strong message to the international community to the effect that Ireland is capable and willing to introduce difficult measures with a maturity and a belief that it can come out the other side. When we debate these issues in this House, it is important that we are honest about what we can do. We should set out what we expect of the Government, of ourselves as parliamentarians and of the people.
This budget and the legislative measures included in the Bill before the House copperfasten the memorandum of understanding that was signed by the Irish Government and the troika a number of years ago. We are on a collective journey along that pathway. Regardless of whether people have opposed that approach, that is where we are now.
In the context of sovereignty it is highly regrettable that we have outside interference in how we run our affairs and are now benchmarked by an outside agency, which reviews the Government's performance and basically awards it marks to allow the State to access funding for the provision of funding services. The key issue, however, is that were it not for the support provided by the troika, Ireland would not be in a position to provide public services. Those who consistently undermine the agreement and memorandum of understanding must spell out from where they would secure the funding to pay the costs of running hospitals, education facilities, policing and the other public services which depend on the State's ability to access funding from current sources. While all of us want the State to be able to access bond markets as quickly as possible, it would not make sense to re-enter the bond markets at a higher interest rate than is available to us now. We should avail of all opportunities to access funds at the lowest possible interest rate.
The difficulties experienced by the State are magnified across the rest of Europe. The problems of Greece and other countries must be addressed in a European context. I am very disappointed with the European Commission as an institution because it has failed in its basic objective of ensuring cohesion and solidarity within the European Union. The Commission has stood on the sidelines and allowed the Franco-German alliance to run the affairs of Europe. This does not correspond to my belief that the European Union is a group of nations co-operating and acting in solidarity with one other. Unfortunately, Chancellor Merkel and President Sarkozy have undermined the European Commission which, through its silence, has effectively supported the Franco-German alliance. It should have stood up and demonstrated strength when it was most needed.
Most European Union member states have entered into the fiscal compact and agreed a new treaty. We should now explore ways of strengthening the institutions which play an important role in ensuring the Union works. The reason we want it to work is not political or ideological but because we want to provide opportunities and employment for citizens.
The fiscal compact does not go far enough in addressing a fundamental issue, namely, the role of the European Central Bank. The remit of the bank must be extended beyond the requirement to ensure inflation remains at a low rate. Notwithstanding the treaty, we will have to address the role and remit of the European Central Bank and its obligation to stimulate the European economy. In the United Kingdom, for example, the Bank of England is engaged in quantitative easing amounting to €350 billion, whereas the ECB is standing idly by. It will not even enter the bond market to purchase bonds and drive down yields in support of various sovereigns. While we often discuss the European Central Bank in abstract terms, it also has a fundamental impact on the daily lives of citizens.
The Fianna Fáil Party supports the fiscal compact but believes it will not resolve our current difficulties. The compact is akin to drawing up fire protection measures when a house fire breaks out when one must, first and foremost, quench the fire. This European Central Bank must become more proactive in ensuring the eurozone is stabilised. This will involve some form of quantitative easing and support for sovereign bonds to ensure yields stabilise.
It is disturbing to note that the Franco-German alliance was involved in a form of regime change in Greece and Italy, a development in which the European Union was complicit. Whether we like the elected governments of Greece and Italy is not the point. The issue is that these governments were elected by their citizens. Nevertheless, the European Union and Franco-German alliance consistently undermined the heads of various states. This is unacceptable as the European Commission is obligated under the treaties to stand up for small nations and ensure the treaties are honoured and obeyed. In recent times, the treaties have been consistently trampled on.
While I accept that every state and government will pursue its own interests, Germany and France are taking a short-sighted view. If they want to have a cohesive Europe in which countries act in co-operation and solidarity with one another, they have much work to do. They must understand that their current stance of President Sarkozy and Chancellor Merkel is having a corrosive effect on the noble and worthy ideal of a Europe at peace with itself and providing prosperity and opportunities for its citizens. This issue will have to be revisited in the broader context of the debate on a referendum on the proposed treaty, should the Attorney General advise that a referendum is required. I am not sure when she will report to the Government on the matter. If we have a referendum, it is critical that we discuss these issues. They must also be discussed across the eurozone and broader European Union because all the research shows that citizens mistrust the institutions of the European Union and believe they are being governed by unelected elites in Brussels who are far removed from the everyday difficulties they experience. For this reason, it is critical that we have a strong debate on the democratisation of the European institutions, their accountability to the people of Europe and the requirement on them to respect and uphold the various treaties that have been ratified by the member states since the foundation of the European Economic Community. For all these reasons, I would welcome a broader discussion both here and across the European Union.
While I try to remain positive, it is difficult to do so when one reads the Government's action plan on jobs. I do not say this disrespectfully. The Government was elected on the basis of a number of principles. It is an accepted fact that it has deceived the public by reneging on the commitments made prior to the general election. When one considers the commitments made in the programme for Government and its view that jobs are the central tenet of its economic recovery programme one must conclude that the action plan is a shallow document which would have had the same effect had it never been published. It is an aspirational text masquerading as a detailed plan.
In the foreword the Taoiseach states jobs are the central tenet of Government policy. When one reads through the document, however, one finds that it does not live up to expectations in terms of the commitments made both in the foreword and the programme of Government.
We know what is wrong with the country. There is no demand or confidence and credit is not flowing to small and medium sized businesses, as the Minister of State is aware. I was a Minister of State in the same Department and we tried everything to get the banks to lend. They are failing to do so and consistently lying to the Government about how much they are lending. I will offer my full support, which may not amount to much, to the Government if it stands up to the banks. The pillar banks have received billions of euro in support from taxpayers through recapitalisation, yet they refuse to provide credit to small and medium sized businesses, the life blood of the economy. For how much longer will they squirrel away the money provided under the recapitalisation process? We all know they are refusing to lend and using the funding instead to reduce their debt to asset ratio. This is having a devastating impact on the broader economy. The 440,000 people who are unemployed will not be able to return to work, irrespective of Government action plans and commitments, unless the banks are forced to lend to the small and medium business sector to get the economy moving again. The banks and Enterprise Ireland used to provide expert support by assessing the traditional banking methods of a business plan, looking at profit and loss and the accounts of businesses. For many years banks were lending on the asset base rather than on the actual commercial venture. Unfortunately, they have now stopped lending on the asset base and are not getting involved in assessing business plans, even to those with experience. Their principle is to refuse to lend. One can broaden that to the whole mortgage area. As Deputies, we all have stories of people who are being refused mortgages. It is the policy of banks now that before they grant a mortgage they will ask for an evaluation of a house. When that is submitted the banks will claim it is not the genuine worth of the house and will decline to grant the mortgage. Although the claim is mortgage-approved the money cannot be drawn down. That is happening wholesale throughout this country. When Mazars and other consultants eventually examine this they will have to bore down to the basic fact that the banks are telling the Government lies on a continuing basis. I can safely state every Deputy in the House has evidence to show this. Whether by the whip or the carrot, banks must now be forced or encouraged to open up finance and let credit flow.
We talk about seed capital, research and development and investment, which are all credit-dependent. We have a wonderful entrepreneurial instinct in this country. In our small and medium-sized sector there are people who are willing to get up, invest their own money, take risk, roll up their sleeves and get stuck in. They need support now. I acknowledge the good points of this budget in regard to research and development and seed capital, which are critically important. However, we are asking the small and medium-sized sector to respond with one hand tied behind its back because it cannot access credit. This must be addressed.
There are two key issues in respect of trade and inward investment. In the first place, people must have confidence in the country. I welcome every opportunity the Government can take to promote Ireland as a place in which to do business and attract foreign direct investment. Such investment is of critical importance to this country, given the large multinational companies located here and the embryonic spin-offs they create. We can look to our excellence in software. One of the main reasons we have excellent people in this area is the initial establishment of some of these multinationals in the 1980s. That spawned, first, expertise and second, a nucleus built up around those same multinationals that has produced a second generation of the most wonderful and exciting software companies which locate in this country. One need only go up the road to Digital Hub to see what is being achieved. We are internationally recognised as a country which excels in software and design solutions and it is critical that we maintain that reputation. In that regard, those measures in the budget in respect of encouraging and fostering seed capital and investment in research and development are very important.
There is a second issue we must consider. Politics has been played out in its regard for a long time; it has been debated all over the country and there have been protests on the streets. We must put our universities on a sound financial footing. I do not know how we will do this politically because everybody opposes it or promises to oppose it; then they change their mind. Whatever way it can be done, we must protect our universities. If they want to compete and not only keep the brightest students in the country but produce the brightest students in the world, they must have the necessary resources. If universities are starved of resources only one thing will happen - they will drop down the league table. The best and the brightest will not work in them as professors, lecturers and academic researchers; the best and brightest students will not attend them.
That issue must be addressed in the short and medium term because there may be long-term implications for our competitiveness and our ability to attract the best international and multinational companies to this country. The Googles of this world and the other major players in IT and other high-end sectors such as life sciences and medical devices have stated they are having difficulty recruiting at the top end. That is something that must be addressed very quickly. If word goes out that our labour market does not have a pool of the necessary expertise those companies could easily change their view and look elsewhere. We have a wonderful product and a wonderful workforce and there is a critical mass across the various specialties throughout the multinational sector. It is critical to have investment in third level education and the co-operation of third level institutions in linking with businesses and industry, both in research and development and in the establishment of a strong commercialisation of research. We must do a great deal of work in this area.
Recently, I was in Taiwan and attended a university and research facility which applies for five patents a day. These vary from the smallest to the largest but that university churns out the best kind of student and the country has a wonderful international research and development set-up. We must aim at that which means having a stimulus and support for universities, with tax reliefs and vouchers to encourage and foster research and development among companies and universities, and the consequent commercialisation by patent of their ideas into the broader world. If this is not done very soon and this area does not receive continued support another type of signal will be sent out.
If we want to continue to attract the best kind of foreign direct investment we must stand firm and united in this House in regard to our corporation tax rate. This is supported by all parties, which is welcome. When I travelled abroad promoting the country there were times when this was difficult because the commentary would make one believe Ireland was almost as bad as Zimbabwe. We should always be conscious of this. Of course, we can be critical and objective but we must not be inflammatory and try to achieve a political advantage by denigrating the name of this country. We should all be very conscious of this because there is an impact when people speak irresponsibly about Ireland. It resonates across the world in a negative way even as Ministers, Enterprise Ireland, IDA Ireland and ambassadors traipse around the world trying to promote a positive image.
I support this work; I did it myself and it is critically important. As an island nation we will live or die by our exports and the view we should not be out there promoting our country is very short-sighted. We should not try to undermine Enterprise Ireland and IDA Ireland in what they are trying to achieve. I have stated publicly it is important that ministerial trade missions go ahead, even in this difficult and straitened time. We must send a very positive message that this country is open for business, that not alone can it keep its house in order and will go through with the difficult decisions that must be continued in the coming years but, more important, our economy is functioning, our corporation tax is being maintained, we will continue to invest in our universities and turn out the best qualified people and we are a capable and intelligent people. I believe this will attract further foreign investment and we will increase our exports as we have done dramatically in recent times. We must continue to sell a positive message around the world. I am in Opposition and it would be very easy for me to throw scorn and ridicule but our nation's position is a little more serious than that. Ultimately, it is about providing opportunity.
I refer to the discussion on promissory notes and related matters. The Minister for Finance must use every opportunity to try to encourage a broader debate on the role of the European Central Bank. It is critical and central to how Europe will function in the years ahead. There must be more obligation on the ECB, not only to address inflation but to become involved in a stimulative role in encouraging economic growth.
I am sharing time with Deputy Colm Keaveney. I welcome the opportunity to speak on the Finance Bill 2012. It is interesting that we can reflect on the different atmosphere in which the Finance Bill debate is being conducted compared to this time last year when the Finance Bill was debated in the closing days of the last Dáil. Many things have changed since then and political atmosphere and the opportunity for discussion, discourse and debate on these issues has freed up in the year since that politically chaotic situation in this House and in the country. It is important to reflect on that because the atmosphere in which these debates take place is extremely important.
Deputy Kelleher referred to Greece and countries that have far more acute pressures and it is important to reflect on the fact that we can debate in a democratic Parliament where we are free to exchange ideas, views and principles on the main economic and financial policy of the country for the next year. I agreed with much of what Deputy Kelleher had to say and it is welcome that he supported much of the thrust of the Finance Bill. He had points to make about the action plan for jobs but that debate is due to start in one hour's time. I did not know that colleagues would be referring to that document in any detail so I did not bring it with me. That is for this afternoon. Some of the points raised by Deputy Kelleher in respect of incentivising SMEs and that programme of work, some of which he is familiar with because of his involvement as a former Minister of State in that Department, are contained in the action plan for jobs. It is not sufficient to pick up the booklet and say there is nothing in it. It cannot be said that there is nothing in it, which is manifestly untrue, even if Deputy Kelleher wants to argue that it is insufficient or does not go far enough.
Some 11 months ago, a new Government was formed by my party, the Labour Party, and Fine Gael. We talk about the mandate of political parties and the mandate of this Government is a pooled mandate, a combination of the mandate for Fine Gael and the mandate for the Labour Party. We agreed a number of basic important questions in the programme for Government, such as the configuration between tax and public expenditure cuts. We agreed that the deficit had to be reduced within a period of time and agreed to take an aggressive stance on jobs. We considered that actions do not go far enough but it is not true to say the Government sat back and did nothing on the question of jobs. Within a number of months, an initiative was brought forward and the job plan was published this week. People can say that wider questions should be addressed, such as the strategic investment and the searing problem of the availability of credit, which is difficult to address. Certain areas of the economy require the strategic intervention of the State and State money, whether through the proceeds of the partial sale of State assets through NewERA or locating State funds in circumstances where the private sector has pulled back. It happens in every recession that the private sector is found wanting and sometimes the public sector must step in. I do not underestimate the difficulty for the Government in achieving that policy outcome. Money is short, the availability of funding is short and capital programmes had to be cut but we should not abandon it and the Government does not intend to do so. There is a role for stimulus measures to be taken by the State in the period ahead. I agree that the action plan for jobs is a very fine document and contains proposals, plans, objectives and targets that will do a great deal for the creation of jobs but we must go further.
By analogy, the fiscal compact is worthy of support given what it contains but it does not give us all of the answers to the questions we face. It goes no further than what it claims to do, which is to introduce a degree of fiscal discipline within the eurozone. It does not purport to be the solution to all problems. Deputy Kelleher's reflections on the future role of the European Central Bank are well taken but it remains a problem. Whether a national central bank or the novel idea of a European Central Bank, there must be measure of independence for central banks. Whether the Bank of England, the Central Bank of Ireland, central banks in other countries or the European Central Bank, its remit within the economic and monetary policy of an entity such as the eurozone, which is still an experiment, is such that one must guard against it becoming the political plaything of an individual country or even of the European Council. I know Deputy Kelleher is not suggesting that and we must always have a measure of independence for the European Central Bank.
On the point that we have gone so far with the fiscal compact and must go further, there is a looming problem of sovereign debt in Europe. It is not just for this country but for the wider community and it has not been settled. The German emphasis on fiscal discipline is a reality and if the proposals are not inimical to our interests, we should support it. The debate on the role of the European Central Bank, whether it involves euro bonds or addressing sovereign debt across the eurozone, must come to a head and be addressed in the near future.
I look forward to going through the Finance Bill on Committee Stage in the Select Sub-Committee on Finance. It contains many technical proposals, which the Minister flagged in the budget. These include tax incentives, each of which can be justified in its own right in so far as I have had a chance to look at them. However, I agree with people who say we must be on our guard against policy-making based on tax incentives because we have had a bad experience in this area over the past ten or 15 years. Too many of our tax incentives were predicated on incentivising people in respect of property. Now we want to incentivise people into productive activity, such as through the relief on research and development. We should do that but also guard against the possibility that they go too far, go on for too long or are at risk of abuse. The Minister and the Government are alive to it because there are limitations to an economic policy that relies too much on tax incentives in achieving its objectives.
There has been reform in this House but we need to be more involved in the budgetary process as committee members and as Members of the Dáil. The Minister for Public Expenditure and Reform has written to all committees inviting them to take a more active role on budget 2013, particularly the expenditure side. It is vital because the day is gone when we all file in here in December, hear what the Minister has to say and file through the lobbies before leaving. We must be active parliamentarians on these issues. We know the specifics for next year. They are 2.25% and 1.25% in expenditure cuts and tax measures, respectively.
It is not a huge mystery for us to get down to the work of looking at where savings should be made on the expenditure side and on the revenue side. When the Joint Committee on Finance, Public Expenditure and Reform went to Berlin recently to meet members of the German finance committee it was believed, for some reason, by the press in Dublin that we went to conduct some sort of investigation into why there was a leak from the committee. We went for no such reason.
If I found anything embarrassing about that episode it was that there appeared to be a level of discussion in the German Parliament about budgetary options for Ireland prior to there ever being such a debate in this Parliament. That cannot be allowed to happen again. There is a constitutional prerogative that the Minister for Finance introduces a budget to the Parliament for the approval of the Dáil which I respect and understand but there is a lot of room for involvement and input from Members of this House, not just on the expenditure side which will happen through the committees, but also on the revenue side.
I broadly welcome the provisions of the Finance Bill and what it represents. It is a continuation of the process of the onerous task by the Government parties of returning the finances of the State to a sustainable condition while protecting services and tackling the legacy of chronic unemployment left by the last Government. It is also important in terms of our efforts to regain full economic sovereignty and repair our damaged international reputation as a consequence of the previous Administration.
While SARRC provisions contained in the Bill can be difficult to defend from a social justice point of view, in that they grant generous tax breaks to those on very large incomes, they will be justified if, and only if, they lead to the creation of jobs and investment. Similar provisions have been successful in other countries such as France and the Netherlands. Ireland is facing increasing competition for winning significant inward investment from projects across the eurozone and further afield.
We need to reinforce our position as a place to do business and as one of the leading countries in the world for securing inward investment. This measure and others in the Bill underpin the message that Ireland is open for business. The benefits of such schemes are not just the creation of jobs but the transfer of technical and management ability and the building of informal but crucial personal relationships that exist across the global economy.
I have a number of reservations concerning SAARC but I will focus on one. I refer to the restriction on how many days a person partaking of the scheme may be absent from the State and the practicalities and demands around that criteria. It is likely, and probably predictable, that the markets we are trying to attract will of necessity require travel across the globe from this country and such people are likely to breach the criteria set out in the 30 day reference period in the Bill.
There is also the issue of such persons being able to take annual leave. They are entitled to nine bank holidays and 20 days annual leave. That places a difficult restriction on the capacity of the type of person we are trying to attract to be actively involved in the global economy. It would be a shame if such a provision, with the best of intentions set out in the Bill, would combat the potential abuse of the programme and, in effect, make it unattractive. Perhaps the Minister could examine that in the context of progress on the Bill.
It would also be well worthwhile for the Minister to examine SAARC and how it will be judged and benchmarked. It is intended that the programme is due to end on December 2014 and a review of its success should be conducted then, with a view to seeing if it should be extended beyond that reference period. We should also examine whether it was a success in the first instance.
While broadly welcoming the Bill, I would like to comment on what it is missing in the context of some glaring absences. I draw attention to some of the opposition to cuts to services and schemes we heard from both sides of the House in recent weeks. Members of the Labour Party and Fine Gael are trying to have it every way in the dialogue on how to re-establish our finances at a sustainable position.
While some decry many of the cutbacks, they refuse to discuss the possibility of raising income tax or introducing any form of wealth tax, even a temporary one. It is time for some Members in the House to show some maturity and realise that unlike Fianna Fáil, we have the aim of getting the Government working for the people, getting them back to work and protecting services. That will involve supporting measures in the House and Seanad rather than decrying in public meetings that a cut was the fault of someone at Cabinet.
On high earners not paying their fair share, it is unfortunate that the Bill has again failed to tackle the issue of highly paid hospital consultants being able to avoid PRSI elements of their income and availing of exemptions which are not available to ordinary PAYE workers. My colleagues, Deputies Conway and Humphreys, have performed an excellent public service in unearthing the extent of the earnings hospital consultants derive from their access to public assets and the personnel of public hospitals and the value lost to Revenue from the failure to levy PRSI on consultant incomes.
Deputy Conway has pointed out that the abolition of exemptions on the unearned income of all workers and other income streams of those employed in the Civil Service and public service recruited prior to 1995 would yield a total of €74 million in additional PRSI in any one year. A further €62 million in additional PRSI could also be secured from workers' unearned incomes. It is time that this injustice and other similar loopholes be addressed and closed off. This is essential if ordinary workers are to have faith in the fairness of the taxation system. The current arrangements are not and never have been sustainable on a financial or social justice grounds.
While I am on the topic of PRSI, I refer to the difficulties of those who were self-employed but now find themselves out of work following the closure of their businesses. Like many Deputies, every week I see constituents who ran small businesses which generated tax returns, income tax and VAT and which employed many people for years. As a consequence of the failure of the economy such self-employed people find themselves with little or no opportunity to access welfare entitlements.
As the Minister is aware, small and medium enterprises are the backbone of this economy and provide the bulk of employment in our society. We wish to encourage the entrepreneurial environment but we need to provide a safety net for those involved in businesses should they fail to pay personal tax and PRSI contributions, in terms of the business they generate in communities. While not directly appropriate to this Bill, it is an issue that needs to be addressed. It is an issue of fairness. I ask the Minister to contribute some of his effort over the course of the next months to consider self-employed people who are falling through the cracks in society as a consequence of their endeavours to access social welfare.
Like many Deputies, I have followed the developments in Greece and have witnessed the scenes of protest on television. Near anarchy seems to have overtaken the country with the regular deployment of riot police and the use of tear gas. I sympathise with the people of Greece. We are not in any position to engage in any schadenfreude.
However, the contrast between Greece and Ireland is stark. Some Members opposite seem at times to see an opportunity in terms of their political agenda to see Ireland to turn into Greece. I am pleased to say we are doing a good job in keeping social peace in this country and the credit for that belongs to the maturity of the Irish people in recognising the nature of the challenge the Minister has before him. Credit is also due to the political system. Unlike Greece, we have helped maintain peace and order because we have joined together the two largest political parties in the country to engender confidence among the people.
I also acknowledge the work of the social partners. We should consider the benefits of the protection of industrial peace brought about by the Croke Park agreement. Any talk of breaking that agreement should take into account the serious consequences that would follow for this country's reputation internationally in the context of the requirement to secure further foreign direct investment. It is incumbent on all social partners to be responsible at this time and to remember their broader social responsibilities for the future of the country.
Over 12 months ago the current Minister spoke on the Finance Bill of the outgoing Fianna Fáil Government, saying the Bill "contains virtually no proposals to encourage economic growth and job creation and in fact certain provisions of the Bill have a very severe impact on the most vulnerable in society". His opposition to the provisions of the Fianna Fáil Bill were correct, detailed and forceful. Another Minister, Deputy Joan Burton, said, "We have had enough of the tired old mantras, namely, that there is no alternative" and called for a plan B.
It was on that basis that Fine Gael and the Labour Party went to the people. They promised change, they promised a new approach and promised to put the needs of the people to the fore. The actions of this Government to date could be construed as "under new management but business as usual". It is hard to identify a period when parties put forward their manifestoes and then moved so quickly to reverse so many policy positions after entering government.
The decisions taken by this Government have undermined the Irish economy, have without embarrassment continued the bank bailout and have maintained excessive unemployment, increased long-term unemployment and accelerated business closures. There is a severe and significant cost to this policy and our businesses, our main streets, our communities and our young people are paying the cost.
On top of the economic impact the decisions of the Government have undermined the political process. It was not elected to deliver austerity or to continue to hand Irish money over to bankers, bondholders and developers. It was not elected to agree a treaty that would hand over more sovereignty to Europe and then try to sneak it through by denying the people of Ireland their say. It is astounding that the Government only a year in office is already living in fear of the electorate. We now have Ministers mangling the meaning of words by stating that such a referendum would be undemocratic. Such are the contortions of a cornered and confused Fine Gael Party and Labour Party.
We were told that austerity was required to regain our economic sovereignty and build growth but time has laid this rhetoric bare. We were told the bailout was necessary to ensure that credit started to flow around the economy but with time this lie also has become clear. The budget and subsequent Finance Bill are in many ways a declaration of dependence. This Bill will be seen by future generations as the point when the new Government threw off the pretence of the slogan "Yes we can" and started instead with the mantra "No, we cannot do anything else".
The Finance Bill outlines a pathway to a weaker less effective health service, to a threadbare social welfare safety net, to a withered and shrunken capital investment programme and to a third rate education system for a first class generation. The Bill also outlines a pathway to emigration for hundreds of thousands of people in this State, much of it forced and not, as the Minister blundered, "a lifestyle choice".
The worst aspect of this is that many in the Government parties know what is required. They know the damage that this budget and economic policy will do to the country but they do not have the courage to follow their convictions. Government Deputies and Ministers are risk averse. They are weighed down with undue deference to the austerity evangelists in Germany and France. The Government has been captured by the Civil Service and its role is to now front press statements and conferences and let others do the thinking.
Last year in the debate on the Finance Bill, the Minister put down a number of criteria by which the worth of a Finance Bill could be judged. He said that budgetary measures should be "examined politically and socially, and economically proofed so that the social consequences of each proposal are known and we do not enter blindly into proposals that would hurt vulnerable people". This is a common sense and workable proposition but the Minister has not followed his own advice. No proofing of his Bill is evident.
It is clear that the proposals contained in budget and Finance Bill target the most disadvantaged and vulnerable. The cuts to rural schools and education will affect those who are most disadvantaged, following the lead of the last Government. Teachers for the children from the Traveller community were cut, because the thinking was Travellers would not make a big deal about the issue and the settled community would not campaign against it. Special needs assistants were then attacked, along with English as an acquired language teachers and home-school liaison teachers. Now small rural schools and DEIS schools are having resources cut, with career guidance counsellors, who often work with children who can turn to no other adult. Communities are being attacked with the imposition of septic tank charges and household charges, broadcast charges, water charges, increases in VAT and increases in third level fees, part of an attack on the education system in a state that already spends below the OECD average on education.
The Government then has the cheek to spin its desire to build a knowledge economy. It wants to do that but it will not spend any money to do it. At the same time the Government has offered huge tax incentives to property developers through reductions in stamp duty and commercial gains tax holidays and through the SARP scheme offer tax write offs to the highest paid.
In his contribution to the debate on last year's Finance Bill, Deputy Noonan put forward a principle for assessing such a Bill when he state, "The economic consequences of each proposal should be measured to ensure it does not have an adverse effect on growth and job creation and preferably, that it has a positive impact in these areas". Applying these tests to this Finance Bill throws up a number of contradictions. The Government spins job creation and growth on a daily basis but behind the spin there is no substance. The State will spend less than €0.5 billion on all enterprise development agencies while spending €4.3 billion on bailing out banks and their bondholders. This shows clearly where the priorities of the Government really lie.
This week the Government unveiled an action plan for jobs which was free of funds and targets. At the press conference, a confused Taoiseach said there would be 100,000 net jobs created. The Minister of State in the Department of Education and Skills then went on the "Prime Time" programme and was asked how many gross jobs would be necessary to achieve that level of net job creation and he replied 300,000 or 400,000. Which is it? It cannot be both, or if it is both it indicates there is no planning or direction. The Government is skilled in delivering scripted soundbites but when it comes to the detail that makes a difference to the hundreds of thousands of people who are unemployed, it is completely lacking in knowledge.
Since 2009 Enterprise Ireland, the IDA and county enterprise boards have had their funding reduced. The European micro-finance facility has been available since last March and put down €200 million to leverage up to €500 million in order to offer funding to all the states involved so they could channel it to small enterprises. It is shocking that while 11 countries have drawn down their funding, the Irish Government has drawn down none. Bulgaria has managed to draw down funds but this Government sat on its hands. Money from the European globalisation fund is supposed to be spent on unemployed individuals who are at the end of their tether, yet the Government cannot get it together so that these people can be properly trained and educated.
VAT increases will hit low and middle-income earners disproportionately, pushing many into poverty. In addition, there are hundreds of thousands of working poor. People are foregoing meals so that their children can eat. Parents must decide which child can visit the doctor or dentist, while others are selling their cars because they cannot afford petrol. Some people are buying five-gallon drums of heating oil to heat their homes because they cannot fill the oil tank. Meanwhile, the Government increases the VAT rate which will have negative economic consequences.
The struggling retail sector has lost about 50,000 jobs in recent years. That sector was promised an end to upward-only rents, but that has not happened. The Government has decided to create a competitive disadvantage for retailers south of the Border. The Minister says that a 3% VAT rate differential will not make much difference. It will not make a difference for someone earning €170,000 per annum but every penny counts for the thousands of working poor in this State. Similarly, increases in VAT and carbon taxes mean that jobs will be lost, businesses will close and tax receipts will fall. That is nothing new, however, because we have seen exactly the same policies for the last four years, with the same results - tax receipts declining, investment falling and unemployment remaining static or rising.
Last year, 76,000 people left the State, which means that over 1,400 people were forced to emigrate every week. Sinn Féin has said it will try to work with the Government to relieve this situation but the only way to do so is to synchronise VAT levels North and South. The Government has said it cannot do that but it would have a willing ear from Sinn Féin in the administration in the North. The Government's "No, we can't" statement reflects a parochially-minded Administration that lacks ambition.
We welcome some parts of the Finance Bill, which should be enhanced, such as tax incentives for R&D and export supports. However, it is unclear how some businesses - especially ones which are not making a profit - could avail of such incentives in practice. Last year, the Minister said the objectives of the Finance Bill must be to do no harm to growth or creation, yet capital investment will be reduced by €700 million, making 9,000 people unemployed in one fell swoop. The reduction in public services will add an additional 6,000 people to the number of jobs lost. As a result of this Minister's decision, thousands of families will make their way to Australia and Canada where they will settle down. Grandchildren will build relationships with their grandparents via Skype. Thousands of families will be broken due to these decisions.
The budget was good for property speculators who constitute the least productive element in the economy. It reduced stamp duty on commercial property by 4% and gave a seven-year capital gains tax holiday to new commercial property purchases. I challenge the Minister for Finance to detail the cost of these budgetary measures and the exact number of jobs that these tax incentives will create. Will he bring the same level of clear definition that the sound-bite Taoiseach brought to the announcement of 100,000 jobs on Monday?
Despite promises by Fine Gael Deputies in my own county of Meath, the Finance Bill did nothing to reverse the Government's cuts to pensions of former Tara Mines workers. Tara Mines' pensioners had 10% of their annual income cut by the Government in the last so-called jobs initiative through the pension levy. This is symbolic of the deep inequality created by Government policy. On one level, the Government gives property speculators - who were very much at home in the Galway tent - a tax break. On the other hand, it cuts the pensions of those who did dangerous work to the best of their ability in a mine in County Meath. This is central to the inequity involved.
Last week, the Sunday Independent reported that the Government's policies are doubling the amount of tax on individuals earning between €15,000 and €17,500 per year. The next category was from €20,000 to €25,000, which also saw an increase.
They have all been exempted, that is my point. The only section that benefited from the Government's policies were those earning over €2 million and they had a net decrease in tax levels.
In the 1790s, the idea of a progressive tax was introduced by economists. The idea was that the more one was paid, the more one would be taxed. In a liberal democracy people have come to the view that it is a good idea. Nonetheless we have a ridiculous situation where the Government said it will not tax labour, but in fact it is not taxing wealth. Most of the income of low earners goes on spending, so tax increases for them will bring about decreased consumer demand. The Minister for Finance must know that demand is at the centre of our economic problems, yet low and middle income earners are being relentlessly attacked by Fine Gael and Labour Deputies.
There is another way. Speaking on the Finance Bill last year, the then Opposition Member, Deputy Joan Burton said, "The central charge against austerity politics is that it hinders the essential need for growth. Austerity, as the sole component policy, is a naked triumph of ideology over economic pragmatism". However, Labour and Fine Gael Deputies have taken money from those earning between €15,000 and €17,500 per annum and are giving it to people earning over €2 million a year. The facts speak for themselves. That is what the Minister has achieved so far.
I will educate the Deputy on this. He has two ears and one mouth, so he should try to double up on listening.
The truth of the quote is lost on the new Government. My party colleague, Deputy Pearse Doherty, made clear on Tuesday the type of policies we would use in response to the Government.
Jobs and growth are the starting point and the yardstick by which all these decisions must be made. Sinn Féin would not tolerate the transfer of wealth from the people of Ireland to bondholders, bankers and developers. Sinn Féin would invest in job creation, enhancing competitiveness and delivering for today and tomorrow. We would use the National Pensions Reserve Fund-----
-----and asked whether money was available for projects concerning investment in broadband development. This State has the 25th fastest broadband speed out of 27 states in Europe. I asked if it would be possible for this country to draw down 50% of that investment at 1%.
It said it would and that it would be interested in discussing it with me. I had to explain to it that I was not a Government Deputy and was in opposition, and consequently did not have the authority to discuss it. It said it was awaiting a call from the Government on the issue.
There are major funds in private pension companies and these companies could be incentivised to invest in retrofitting and broadband development and infrastructure, yet the Government has no proposal in this regard. Job creation and growth should be at the centre of our EU policy but they are not. We recognise such an approach would require leadership and courage but these obviously do not exist on the Government benches.
The Government parties should return at least to the platform on which they were elected. They should undo their mistakes of the past year and bring forward a Bill that actually means business on jobs, and which does not just comprise soundbites and confusion from the Government Deputies. We would welcome the support of such a Bill. Unfortunately, the Bill before us fails the people and the economy. It also fails the test set by its own author last year.
I welcome the opportunity to speak on this Bill. As I said at the time of the budget, a budget that takes money out of the economy will never be popular. However, our commitment to the public at the time of the last election was that we would regain sovereignty by getting our finances back under control. That requires a complex and difficult two-track approach involving the reduction of spending and simultaneously growing the economy by creating the conditions for sustaining jobs. The latter requires making the economy more competitive by introducing reforms and trying to reduce costs, and by providing for the incentives in the Bill. Already we have seen the progress that has been made. There have been improvements in competitiveness and a return to growth, driven by a surge in exports from our important employment sectors.
I listened over the past two days to the Opposition's contributions. One of its attacks was that the Bill represents a return to failed policy. Nothing could be further from the truth. It actually dismantles many of the measures that were at the root of our economic collapse. More important, it seeks to return us to a successful regime such as that of the late 1990s, when we were competitive, innovative and efficient. At that time, 1,000 jobs per week were added to the economy. Many of the measures in the Bill are aimed at the financial services sector. Approximately 21 measures in this regard provide high-end sustainable jobs.
The Opposition also criticised us by stating the measures in the Bill are minor technical ones. They are but that is the nature of finance Bills. Minor technical measures can have major economic effects. Has the Opposition already forgotten the role of the minor technical property tax measures in bringing this economy to its knees? The most minor of tax measures require intense scrutiny. To think otherwise is to fail to understand what a finance Bill is about. Of necessity, some of the measures are modest but they prioritise jobs, which must be the focus of what we do.
A further criticism of the Bill is that it does nothing for vulnerable people. The best thing we can do for vulnerable people is to provide them with jobs, or provide as many people as possible with jobs so we can return to paying taxes we can afford. That is the focus not only of the budget but also of the Action Plan for Jobs 2012, announced by the Government this week.
Vulnerable people were not forgotten in the budget owing to the measure promised on mortgage interest relief. I very much welcome this. I also welcome the announcement this week by certain lenders that they will now provide negative equity mortgages. This is essential, certainly for the thousands of my constituents with expanding families who are trapped in small apartments. For economic reasons, in addition to social ones, we need a mobile workforce now more than ever.
I welcome again the Minister's allocation of €35 million for mental health services. It is important that this allocation be managed and spent properly in conjunction with the HSE. There are several reasons for this. First, the delivery of mental health services is disjointed. Of vital importance is the immediate appointment of a director of mental health services to ensure the €35 million will be spent on developing the multidisciplinary teams so as to introduce a proper community-based mental health service and reduce reliance on inpatient services. We have the highest requirement for inpatient mental health services in Europe.
Some €25 million was allocated by the former Minister for Health and Children in 2006, and there was a further allocation of €25 million in 2007, but this money was not spent on mental health services. Some 50% of the funding was hived off, and this information was obtained through the Freedom of Information Act by an NGO. Rather than tackling the problem, the then Minister decided not to give further moneys to the service.
It is urgent that the money spent on the National Office for Suicide Prevention be managed, that the increased budget, from the promised €35 million, be managed, and that there be a director for the office. This appointment is vital. I tabled a parliamentary question yesterday on the appointment and was informed by the Minister that it is an issue for the Health Service Executive. I put it to the Minister, and indirectly to the Minister of State, that this is surely a national issue. With 600 people dying from suicide per annum, it is an issue for the Oireachtas and requires departmental accountability. The director of the National Office for Suicide Prevention is required to ensure the office's resources will be spent as effectively and efficiently as possible.
They certainly do not create sustainable jobs but they have the potential to create the environment in which businesses create jobs. Equally, they have had and have the potential to create an environment in which unsustainable economic policies undermine businesses.
Let me dwell on the concept of the one-stop shop. My experience of local authorities and county enterprise boards is that there are the good, the bad and the indifferent. We cannot afford the bad or the indifferent in regard to the one-stop shop; we need to be ruthless in appointing its staff. The staff need to be proactive in offering assistance to enterprises. In 2012, the environment for the retail sector will be really difficult. Those employed in the one-stop shops need to be proactive and to talk to those businesses in difficulty. Many businessmen have not taken a penny out of their businesses in recent years and are teetering on the brink of collapse. It is critical to ensure proactive State supports rather than wait for somebody to arrive with a new idea.
Deputy Keaveney outlined how cheated the aforementioned businessmen are by the social welfare code. They discover that if their businesses fail, in spite of their having provided gainful employment for themselves and their employees, they are left with nothing while the employees are covered by their PRSI contributions. We need to reform the social welfare code to deal with this.
Credit is critical to economic recovery. There is a real danger that our economic recovery will be substantially creditless. Many businesses cannot obtain finance for starting up, development and growth. Working capital has been withdrawn. Notwithstanding that we have invested billions of euro in revenue in the covered institutions, there is no evidence that businesses are being assisted proactively by banks to contribute to economic recovery. There needs to be regular monitoring and dialogue with the covered institutions to ensure they deliver on their side of the bargain.
I welcome aspects of the Finance Bill, especially the extension of mortgage interest relief, the reduction in stamp duty to try to stimulate commercial transactions and the capital gains tax holiday to attract foreign investment in Irish property. I want to speak about the third element. I have spoken to the Minister about it. On Committee Stage, I would like the Minister to consider the possibility of extending the tax holiday to domestic businesses that are just surviving. Sometimes survival is not enough to get credit from lending institutions. Say a business with access to agricultural land sold it to reinvest back into its business. Is there a possibility the capital gains tax on that transaction could be reduced if there is a guarantee the business is reinvesting the moneys released?
I thank those Members who contributed to this debate. Committee Stage will allow us to examine all the Bill's details over several days.
It is somewhat depressing during a debate on a finance Bill to have Opposition spokespersons, one after another, not contribute a single new idea to resolving the country's economic problems. The Fianna Fáil-Sinn Féin Opposition is negative. We know what they are against but we still do not know what they are for. Not one single constructive idea came from the Fianna Fáil-Sinn Féin Opposition.
It took the Republican movement 25 years to wreck the economy in Northern Ireland. Fianna Fáil did the job down here quicker than that and without firing a shot. Both Fianna Fáil and Sinn Féin have wrecked the economies of both parts of the island.
It is probably no wonder they find it hard to come up with constructive ideas when it comes to debating legislation like the Finance Bill.
We have a scattering of socialists in the Opposition who still think, despite the rubble of the Berlin Wall, that socialism is the answer. They should recall two of the countries in bailout programmes were put there by socialist governments. A socialist government in Portugal wrecked its economy. A socialist government in Greece put it in the position in which it finds itself now. However, there was a certain legacy from a centre right party that preceded that government. Again, I did not hear any constructive ideas coming from the socialist Independents. The principle drive in opposition is the Fianna Fáil-Sinn Féin axis, however, and it still has no answers at all.
Regarding the special assignee relief programme, SARP, I would make the point to Deputies Michael McGrath, Pearse Doherty and Catherine Murphy that the production of a cost-benefit analysis for this scheme would involve pure supposition on potential uptake and the knock-on potential for additional job creation. As I have previously indicated, the exemption will be provided for an introductory period of three years until tax year 2014, at which point it will be reviewed. In tandem with our corporation tax rate, this relief will help us to compete for foreign direct investment.
Several Deputies raised linking the relief available under SARP to investment and job creation. I must make it clear this scheme is designed to reduce the costs of businesses in assigning key individuals to the Irish-based operations of their employers by ensuring such individuals are not out of pocket as a result of taking up such an assignment. However, job retention is also a valid policy objective of the scheme.
While Deputies Michael McGrath and Pearse Doherty expressed concerns the relief could be used to assign an individual to wind down a project or business, the requirement that an individual must be assigned for a minimum period of one year for the SARP to apply should protect the Exchequer. Deputy Michael McGrath also suggested the 30-day limit on the amount of time that a qualifying individual under SARP can spend outside the State should be relaxed, which will be examined on Committee Stage.
Deputy Pearse Doherty asked about the model on which SARP was based. It is loosely based on the relief available in the Netherlands. I can assure Deputy Michael McGrath that Irish citizens who are the subject of assignments back in Ireland under SARP will qualify for the scheme provided they have not paid tax in the previous five years in Ireland.
Deputy Nulty referred to the scheme of relief that SARP will replace. I understand there was little take-up of that scheme and, accordingly, it was not helping Ireland to compete for foreign direct investment with other European countries. Deputies Halligan and Clare Daly made points regarding evaluation of the scheme that SARP will replace. That scheme was unsuccessful and there are no data on which to base an evaluation of it.
I noted Deputy Michael McGrath's comments on the foreign earnings deduction. It is only at the end of the tax year that the total number of days spent in the BRICS – Brazil, Russia, India, China and South Africa - countries can be ascertained. However, similar to SARP, it will be introduced on a trial three-year basis. Deputy Sean Fleming suggested the requirement to be present in the relevant countries abroad for ten days in a single trip is too onerous. This condition was also raised by others and I propose to consider the matter on Committee Stage.
The changes to the research and development tax credit scheme were broadly welcomed. However, it was suggested the measure to reward key employees is too restrictive in nature. This is a new measure and I am introducing it on the basis that it will not cost the Exchequer anything. My Department and the Office of the Revenue Commissioners will be monitoring the use of this measure closely.
Deputy Lyons also mentioned the Canadian research and development regime which gives generous tax breaks to the gaming industry in particular. Our research and development scheme is subject to state-aid rules, a restriction to which our Canadian colleagues do not have to adhere.
I thank Deputy Michael McGrath and Deputy Pearse Doherty for broadly welcoming the changes to the universal social charge, USC. As Deputy Pearse Doherty pointed out, the exemption increase from €4,004 to €10,036 will remove some 330,000 income earners from the charge to the USC and will benefit part-time and low paid workers. Deputy Michael McGrath said the move for the USC to a cumulative system would claw-back €11 million more than the exemption would cost. The estimated full year costs and savings from these measures are broadly similar. The important point is the savings made from moving to a cumulative system has allowed me to remove 330,000 low-paid workers from liability to USC and on a cost neutral basis.
Deputy Colreavy welcomed my proposals introducing an enhanced scheme of stock relief for registered farm partnerships. These proposals, part of a range of measures related to farming, reflect the Government's commitment to supporting and facilitating growth and expansion in the key agrifood economic sector.
Deputies Pearse Doherty and McDonald spoke at length about the impact of income tax changes from the previous Government's budgets and Finance Bills. If they consult the 2012 budget book they will see, set out in tables, that families on low and middle incomes do not see any increase in their income tax liability as a result of my budget. I thank Deputy Donohoe for making this very point during the debate. During the election we promised we would not increase income tax and we have kept that promise.
I thank Deputies Michael McGrath, Catherine Murphy and Donohoe for welcoming the mortgage interest relief measures provided for in the budget. Deputy Kevin Humphreys and Deputy Troy felt it was not targeted enough. First, the measure is limited to the four-year period when house prices were at their peak. Second, the measure is limited to first-time buyers who purchased their first property in that particular period. Third, the relief is applied to the interest on the loan and is most effective in the early years of a mortgage when the interest portion of the repayment is at its highest. This measure was promised in the election and the programme for Government. We are fulfilling that promise too.
I thank Deputies Harris, Heather Humphreys and O'Reilly for welcoming the changes to mortgage interest relief and the USC.
I agree with Deputy O'Reilly that the measures being introduced on civil partnership taxation in this Bill are positive in terms of social equality. I promised to introduce these measures during a Seanad debate on the tax implications of the civil partnership legislation and I am fulfilling that commitment.
Deputy Stanley described the removal of the tax exemption for the first 36 days of illness benefit and occupational injury benefit as an attack on the sick. That is simply not the case. The exemption is being removed because in some instances individuals who were in receipt of one of these benefits in addition to being paid by their employers had a higher take home pay than when they were working. This measure is being introduced to deal with absenteeism and the possibility, particularly within the public service, that one could earn more money by taking six weeks off intermittently during the year than by going to work. We cannot allow the tax code to provide for that type of situation.
Deputy Healy mentioned the possibility of introducing a wealth tax and Deputy Donnelly suggested a similar measure. Deputy Healy suggested the potential yield from such a tax could be €10 billion - a big figure. Given that the tax returns for 2010 show that fewer than 5% of all taxpayers had incomes in excess of €100,000 and fewer than 1% of had income over €200,000, the base for a wealth tax on individuals with income over €100,000 is quite small. Capital gains tax and capital acquisitions tax are, in effect, taxes on wealth. This Bill increases the rate of both of these taxes from 25% to 30% to align the rates with the high earners restriction.
Deputy Healy also mentioned tax exiles. This Bill makes provision for the budget announcement that the citizenship condition for the domicile levy should be abolished. I thank Deputy Nash for acknowledging the change to the domicile levy. I also announced in the budget my intention to undertake a public consultation process on our tax residency rules.
Deputy Nulty asked why the National Pensions Reserve Fund could not be used for investment in Ireland. The Government announced the establishment of the strategic investment fund in September 2011. The strategic investment fund will, following appropriate legislative changes to the statutory investment policy of the National Pensions Reserve Fund, channel commercial investment from the NPRF towards productive investment in the Irish economy.
In response to the points raised by Deputy Donnelly on public service pay and increments, my colleague, the Minister for Public Expenditure and Reform, is vigorously pursuing further cost saving measures that are fair, targeted and appropriate across the public service.
In regard to living standards, budget 2012 introduced a package of adjustment measures totalling €3.8 billion. I assure Deputy Donnelly that the Government is aware of the impact these measures are having on the living standards of our citizens but stress that we cannot spend money we do not have.
Deputies Stanley and McConalogue raised the issue of bondholder repayments. This is not an issue for the Finance Bill and the Deputies will be aware that the Government has committed to ensuring there is no forced or coerced involvement by the private sector burden sharing on senior bank paper on Irish sovereign debt without the agreement of the ECB.
Deputies Fleming and O'Donnell raised the matter of availability of cheap alcohol. I acknowledge this is a problem which needs to be addressed and the Minister of State at the Department of Health, Deputy Shortall, is considering a number of options in this regard. Deputy Fleming also referred to the large number of illicit cigarettes available in this country. In 2011 Revenue enforcement officers seized 109 million cigarettes with a retail value of €46 million and 11,158 kg of tobacco with a retail value of €4 million, as well as securing a large number of convictions as a result. Figures to date in 2012 show that 2.6 million cigarettes with a retail value of €1.13 million and 1,572 kg of tobacco with a retail value of €582,000 have been seized, with further convictions secured.
I thank Deputies Phelan and Kevin Humphreys for their support for the measures contained in the Bill to combat revenue offences. In regard to the concerns expressed by a number of Deputies, including Deputies Dooley and Heather Humphreys, the Bill includes specific additional powers for Revenue to investigate serious tax criminality, including oil laundering and cigarette smuggling.
In regard to the VAT issues raised by Deputies Doherty and Fleming, the budgetary increase in the standard VAT rate was part of a general package of revenue raising measures and is in line with the commitments made in the programme for Government and the EU-IMF programme. The €670 million raised by this VAT increase will go some way towards funding other areas of Exchequer expenditure. This 2% VAT increase will not disproportionately affect those who are less well off. The increase in the standard rate of VAT will have no impact on the price of basic food, domestic fuels, children's clothes and shoes or oral medicines and it will not affect the rate of VAT applied to hotel and restaurant services or housing, construction and labour intensive services. Deputies Fleming and Donnelly asked whether the estimates for the VAT increase take into account consumer behaviour. The projections for personal consumption in 2012 on which the VAT forecasts are primarily based take account of the rate changes, along with other factors affecting household spending. I will investigate the issue raised by Deputy Harris regarding VAT on historic houses and gardens.
In regard to the suggestion by Deputies Murphy and Flanagan to ring-fence carbon tax revenue for retrofitting homes, it is the general practice to take an overall view of priorities rather than ring-fence revenues for specific purposes in the context of expenditure decisions, which are of course dependent on Exchequer revenues. In this regard, receipts from taxation, including the carbon tax, are used to fund energy efficiency among other things. The Minister for Communications, Energy and Natural Resources published the affordable energy strategy on 27 November 2011.
I advise Deputy Stanley that the issue of local authority loans is a matter for my colleague, the Minister for the Environment, Community and Local Government. However, I am aware that his Department is preparing updated guidance for local authorities in consultation with the County and City Managers' Association.
I thank the many Deputies who made considered and useful contributions to this debate. A small number of matters are being considered for inclusion on Committee Stage and I look forward to another informed discussion. Consideration will, of course, be given to any constructive suggestions put forward over the course of the debate.
The Dail Divided:
For the motion: 93 (Tom Barry, Pat Breen, Richard Bruton, Joan Burton, Ray Butler, Jerry Buttimer, Catherine Byrne, Eric Byrne, Ciarán Cannon, Joe Carey, Michael Conaghan, Seán Conlan, Paul Connaughton, Ciara Conway, Noel Coonan, Marcella Corcoran Kennedy, Joe Costello, Simon Coveney, Michael Creed, Jim Daly, John Deasy, Jimmy Deenihan, Pat Deering, Regina Doherty, Paschal Donohoe, Andrew Doyle, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Anne Ferris, Frances Fitzgerald, Peter Fitzpatrick, Charles Flanagan, Terence Flanagan, Dominic Hannigan, Noel Harrington, Simon Harris, Martin Heydon, Brendan Howlin, Heather Humphreys, Kevin Humphreys, Derek Keating, Colm Keaveney, Paul Kehoe, Alan Kelly, Seán Kenny, Seán Kyne, Anthony Lawlor, Ciarán Lynch, Kathleen Lynch, John Lyons, Peter Mathews, Michael McCarthy, Nicky McFadden, Dinny McGinley, Joe McHugh, Tony McLoughlin, Olivia Mitchell, Mary Mitchell O'Connor, Michelle Mulherin, Eoghan Murphy, Gerald Nash, Denis Naughten, Dan Neville, Derek Nolan, Michael Noonan, Aodhán Ó Ríordáin, Kieran O'Donnell, Patrick O'Donovan, John O'Mahony, Joe O'Reilly, Jan O'Sullivan, Willie Penrose, John Perry, John Paul Phelan, Pat Rabbitte, James Reilly, Michael Ring, Brendan Ryan, Alan Shatter, Seán Sherlock, Róisín Shortall, Arthur Spring, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Liam Twomey, Leo Varadkar, Jack Wall, Brian Walsh, Alex White)
Against the motion: 45 (Gerry Adams, Richard Boyd Barrett, Tommy Broughan, John Browne, Dara Calleary, Joan Collins, Barry Cowen, Seán Crowe, Clare Daly, Pearse Doherty, Stephen Donnelly, Timmy Dooley, Dessie Ellis, Martin Ferris, Luke Flanagan, Seán Fleming, Tom Fleming, Joe Higgins, Billy Kelleher, Séamus Kirk, Michael Kitt, Michael Lowry, Pádraig MacLochlainn, Micheál Martin, Charlie McConalogue, Mary Lou McDonald, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, Sandra McLellan, Catherine Murphy, Caoimhghín Ó Caoláin, Éamon Ó Cuív, Seán Ó Fearghaíl, Aengus Ó Snodaigh, Willie O'Dea, Maureen O'Sullivan, Thomas Pringle, Shane Ross, Brendan Smith, Brian Stanley, Peadar Tóibín, Robert Troy, Mick Wallace)
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.
Question declared carried.