Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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3. To ask the Minister for Finance his plans to make changes to the budget 2015 proposals, particularly in view of the considerable public outrage concerning the cumulative impact of direct and indirect taxes on low- and middle-income families imposed over recent years; and if he will make a statement on the matter. [42042/14]

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The weekend's protests were not the result of communication problems; they were really an elemental outburst of rage, not only against water charges but also against six years of unfairness, stealth taxes and cuts. Much of the anger is centred on the cumulative impact not only of direct taxation but also of indirect taxation and charges. If the Government is listening to what the people expressed on the streets at the weekend, as it says it is, will it do something about the cumulative impact of all the measures that drove so many people onto the streets?

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for his question. The period from 2008 to the present saw one of the largest and longest periods of fiscal adjustment in the history of the State. The budget deficit in 2011, when the Government came to power, was unacceptably large and unsustainable, at an underlying level of 8.6% of GDP. In budget 2015, I set a deficit target for 2015 of 2.7% of GDP. Reflecting this progress in reducing the deficit, our debt burden is now firmly on a downward trajectory, with forecasts indicating that it will fall below 100% of GDP after 2017. Reflecting these improvements, our credit rating has seen repeated upward revisions by ratings agencies.

A consolidation of such scale necessarily resulted in a drop in living standards for all citizens of this country. Despite the enormous challenge of such an adjustment, the Government has ensured that the richest in society bore their fair share of the burden and that the poor and most vulnerable were protected as far as was possible.

The latest research from the ESRI on the distributional impacts of budgets for the period 2009 to 2015 shows that the top quintile bore the largest burden of income tax and welfare changes over the period, with income losses of approximately 13% to 14%. The impacts on those in lower quintiles were all in the region of 10%. This reflects the Government's firm commitment to make sure those who could afford to pay the most did so.

Analysis published in the budget book shows gains to all household types from budget 2015. For example, a single earner on an annual income of €25,000 will gain €174 per annum; a married one-earner couple on €35,000 will gain €174; and a married one-earner couple with two children on €55,000 will gain €626 per year. These gains reflect the Government's commitment to helping those on lower and middle incomes.

Analysis of the taxation measures in the budget based on the ESRI SWITCH tax-benefit model indicates that all household deciles will gain from the income tax measures in budget 2015. Some of these gains arise from the increase in the exemption threshold for the universal social charge, USC, which had the effect of removing lower-income people from liability for the charge. This is second time the Government has done this. This means that all individuals with income below €12,012 will be entirely exempt from the USC. The Government also reduced the lower USC rates and increased the thresholds, delivering further benefits to those on lower incomes and ensuring fairness. At the same time, the benefits for any individual from the income tax package were capped by introducing a new higher rate of USC for high-income individuals, thus maintaining the progressivity of the system and ensuring that those on high incomes did not benefit over and above what is fair.

Additional information not given on the floor of the House

These changes occur against the backdrop of Ireland's having one of the most progressive income tax systems in the OECD.

Cognisant of the effect of indirect taxes on living standards, especially for those on lower incomes, this budget contained limited changes to indirect taxes. The increase in excise on cigarettes is motivated by the negative health outcomes of smoking, and the main increase in indirect tax revenue resulted from a technical change whereby VAT is charged for cross-Border EU telecommunications, broadcasting and electronically supplied services.

The tax measures outlined are designed not only to extend the recovery across the economy but also to strengthen the recovery for the future. These reductions in tax have the effect of increasing the reward from employment. They lower the cost of employing people, which will help create jobs. Indications from the ESRI HERMES macroeconomic model show that up to 15,000 jobs could be created from the reductions in labour taxation when the full effect of the tax reforms that will be introduced over the next three years is evident.

As a result of the decisions made by the Government and the emphasis we have placed on minimising the negative effects on economic growth from fiscal consolidation, our country is now in recovery. My Department is forecasting growth of 4.7% of GDP in 2014 and 3.9% in 2015. On a no-policy-change basis, my Department would have forecast GDP growth in 2015 of 3.6%, but as a result of the measures outlined in the budget this has been increased to 3.9%. It is clear from the analysis demonstrating the positive distributional and growth impacts of budget 2015 that it does not need the changes the Deputy suggests.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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That response really demonstrates how the Minister just does not get it. He does not understand why people went out on the streets at the weekend. I will just throw his own figures back at him. Somebody earning €17,000, as mentioned by the Minister, got €173 back in the budget. Somebody earning €120,000 got €687 back, according to the budget document. The latter got almost five times more than people on the lowest incomes.

Even if water charges are pitched at the figure mentioned yesterday by the Minister for Social Protection, Deputy Burton - namely, €200, which figure I doubt and which already seems to be causing great controversy in the Government - it would more than wipe out what the Government is giving back to the individual on €17,000. The person on €120,000, however, will be more than able to manage. Therefore, how can the Minister seriously say to me and, more important, the people of this country that this is fair and progressive? When the Minister adds to it the impact of rising bus fares and electricity prices, property tax, public service charges and all the other taxes and charges that disproportionately hit the less well off, can he not understand that there is nothing progressive about the way in which he is managing taxes and that tax justice is the issue at stake? He is not dealing with it in a fair way.

Michael Noonan (Limerick City, Fine Gael)
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In reply to the Deputy, I would like to make three points. As stated, we have had the greatest fiscal adjustment in the history of the State. When we went into government at the start of 2011, the deficit was over €22 billion. At the end of next year it will be less than €5 billion if our budget comes in on target. This shows the extent of the adjustment.

Second, while one can have many anecdotes in these debates, one's argument must be evidence-based to establish the true position. The strongest piece of evidence is the ESRI's research. The ESRI states that those in the highest income quintile were subject to the biggest adjustments, in the order of 13% to 14%. Other quintiles were subject to an adjustment, or a loss of income, of approximately 10%. Therefore, the evidence contradicts what the Deputy is saying.

There is another very fundamental fact about giving relief by reducing taxes and the USC. Those who pay most obviously have greater scope for benefiting if tax rates come down, and those who pay very little tax do not have the same potential to benefit. For example, somebody on €17,000 pays less than €600 per year in tax and USC, while somebody on €70,000, where I capped it, pays just short of €25,000. Obviously, if the pool is €25,000 as against €600, the potential when one adjusts for higher gains obviously goes with the higher income.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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This is the problem with statistics. The Minister knows what they say about statistics. It just does not reflect the human reality that people are facing. That is what was expressed at the weekend.

The OECD found last week that Ireland, out of 41 countries in the OECD, was 37th, or near the bottom of the league table, in terms of child poverty. Since 2008, child poverty has increased far more here than in almost every other country in Europe bar Latvia, Greece and Iceland. Other countries, even in the teeth of recession and adjustment, have improved with regard to child poverty. Here we have gone from 18% child poverty to 28.6%. Is that not the clearest evidence that, despite all the statistics the Minister throws around, the adverse measures he has been introducing in recent years disproportionately affect those on the lowest incomes? That is why people are on the streets expressing their rage. The Minister has to listen.

Michael Noonan (Limerick City, Fine Gael)
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If we are to develop policy according to an evidence base, then all evidence is relevant, and what the Deputy cites needs to be taken into account by people forming policies. However, the point I am making is that the worst-off people did not bear the sole burden. Everybody suffered because the level of adjustment necessary was enormous. It was unprecedented historically.

I have said previously that the people who suffered the most were those who had lost their jobs. Regardless of whether their previous incomes were high or low, those who were out of work were most hit by the recession and most at risk of moving into poverty. The second group that suffered comprised those who were forced to emigrate. I do not refer to people who had jobs here who emigrated voluntarily but to individuals who, owing to economic circumstances, decided they had no choice other than to seek employment elsewhere. That is what we are trying to repair. The repair job is going very well, thank God. We have the highest growth rates in Europe. We also have the highest level of job creation in Europe and are eliminating our deficit. We will have a balanced budget in a year or two. Things are going well, but the repair job will continue. I am not claiming we have the finished article; rather, I am saying we are well on the way to recovery. We have to start looking again at societal issues, rather than just at the economy. We need to ask ourselves questions about the kind of country in which we want to live, the values the country should have and the manner in which we should look after the vulnerable. All of these are valid policy issues as the economy grows.