Dáil debates

Thursday, 7 May 2015

10:30 am

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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9. To ask the Minister for Finance if any cost-benefit analysis was carried out by his Department in relation to the decision to split tax cuts and public spending increases 50:50 in the next budget, as announced in the spring economic statement; and if he will make a statement on the matter. [17576/15]

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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Has a cost-benefit analysis been done by the Department of Finance regarding the Minister's decision to split tax cuts and public spending increases in a 50:50 ratio in the next budget, which is a change in the previous position of a 60:40 split? Has the Minister done an analysis of the impact this will have on our health and education sectors, on housing policy and on other significant public spending needs?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The spring economic statement, SES, outlines Ireland's medium-term economic and fiscal plan. It demonstrates that our public finances are under control, the economy is growing and continued improvement is forecast in the coming years. In this regard, the SES outlined that fiscal space of the order of €1.2 to €1.5 billion will be available for budget 2016, while still complying with our obligations under the Stability and Growth Pact. Indeed, one of the key purposes of the SES is to provide a basis for debate with relevant stakeholders in the national economic dialogue on how this fiscal space should be best used. The exact quantum available will depend on the composition of measures, changes in the estimated 2015 fiscal outturn, macroeconomic variables, etc.

In general, cost-benefit analyses are more appropriate to individual measures than to overall fiscal strategy. The 50:50 split reflects the strategy of Government to marry the objectives of encouraging economic growth while increasing the resources available to deliver quality public services. With regard to the taxation element, according to the OECD hierarchy of taxes, labour taxes are considered one of the most harmful to economic growth. Therefore, the Government has committed to reducing the tax burden for low and middle income earners as a means of encouraging labour market participation and subsequently economic growth. Given the expenditure reductions over recent years, certain sectors require expenditure increases to accommodate demographic and other demand pressures. For example, given the increase in the number of children of school-going age, the need for additional teachers has become evident. It should be noted that expenditure on education will facilitate a more productive workforce over the longer term which will improve Ireland's potential growth rate.

Similarly, Ireland's investment in capital is operating at a level only just below depreciation. Further investment in capital stock will add to Ireland's growth potential. Budget 2016 will incorporate elements of the capital review to be published this summer and will prioritise projects and deliver value for money. Ultimately, the Government will use the available fiscal space to strike a balance between encouraging economic growth and ensuring that our public services are improving and fit for purpose. The exact measures to be contained in budget 2016 will reflect these objectives.

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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The spring economic statement is a continuation of the flawed policy of diminishing public expenditure and the public sector and shifting wealth away from workers. How will the Government get more teachers, nurses and so on by cutting public spending? I am in favour of a restoration of public spending, but I am also in favour of taxing the wealthy. In the previous answer, the Minister made reference to the fact that there is no wealth there to tax. The Denis O'Briens, the top 1%, have seen their wealth increase dramatically in the last few years. Regarding the impact this will have, the Government is proposing to cut taxes by €650 million to €750 million in the hope of winning the general election. However, it is likely that this would be through tax relief rather than through getting rid of the universal social charge-----

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Could we have the question please?

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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-----and other taxes on workers. Can the Minister clarify that? Is it not more likely that it will benefit the wealthy in society, just as the last budget did, rather than low-paid workers, many of whom are outside the tax net? We have record numbers of low paid workers in Ireland.

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Deputy raises a number of questions. First, she talked about how we were continuing to cut public expenditure. We are not. In the last budget, the Government increased public expenditure. The spring statement states that we will continue to increase public expenditure between now and 2020. We have spelled it out in precise terms for 2016. The Minister for Public Expenditure and Reform, Deputy Howlin, will spend another €750 million on top of what he spent in 2015 on enhancing public services. From 2016 to 2020, the figures provided in the spring statement have built in the extra expenditure, which runs from demographic changes. In other words, the extra teachers, nursing home beds and so on that will be needed because of demographic changes are built into the figures. On top of that, we think we will have space slightly in advance of the precise space identified for the 2016 budget in 2017, 2018, 2019 and 2020. There is no suggestion that we will do anything other than target the incomes of low-paid and middle income people to give them extra relief. There are three personal taxes: USC, income tax and PRSI. Different reliefs affect different cohorts of people. As the Taoiseach announced in this House, we intend to reduce the burden of the universal social charge on taxpayers.

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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With inflation, the increase in spending on public services that the Minister mentioned will actually amount to a decrease of 1% in real terms, according to the estimate of economists. Ireland would have to increase public investment by €2 billion to come up to the EU average. With regard to wealth, 10% of the top earners own 30% of the wealth in this country, while 1% owns 20%. There is, therefore, a massive discrepancy in wealth in this country. From 2006 to 2013, which includes some time under the Minister's watch, taxes on capital have plummeted. There is a conscious policy not to tax those who have wealth and those who control wealth. For example, a 10% increase on the top 10% of earners could bring in €2.6 billion. A 1% increase in corporation tax-----

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Could the Deputy put her question?

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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Should the Minister not be considering that, given that Ireland is now known to be a tax haven? Will we ever see any sort of housing policy-----

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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There are other Deputies waiting. Please finish up.

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Socialist Party)
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-----with the fact that we are going to see a 1% decrease in public spending?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The statistical tables accompanying the spring statement are quite complex and I need guidance through them myself. However, it is not true to say that they indicate a reduction in expenditure. From 2017, 2018, 2019 and 2020-----

Photo of Paul MurphyPaul Murphy (Dublin South West, Socialist Party)
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In real terms.

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The tables for 2017, 2018, 2019 and 2020 are carried forward on the basis of no policy change. That is where one gets the reduction. If there are no policy changes, there will be reductions, but there will be policy changes. The Government has committed to making policy changes and to using the fiscal space that has been identified for each year for extra expenditure to enhance the public services that have been damaged during the recession and to provide extra capital expenditure. The Minister for Public Expenditure and Reform, Deputy Howlin, will announce a public capital programme before the summer. That will also show this. The other issues the Deputy raised are political debating points with which I disagree, but she is quite free to hold those opinions.