Tuesday, 25 October 2022
Finance Bill 2022: Second Stage
I move: "That the Bill be now read a Second Time."
We are here today to begin our consideration of the Finance Bill 2022, which will give the necessary legal basis to the decisions announced in the budget and make a number of other necessary changes to tax legislation. This year's Bill sets out the legislative provisions to bring effect to the tax measures announced in budget 2023, which is a cost-of living budget that underlines the Government's commitment to help individuals, families and businesses to deal with the challenge of rising prices. The Bill implements a range of targeted tax changes, including specific measures to support families and businesses and to address the many challenges facing our society, including housing and climate change. It also contains a number of administrative changes to the tax code, reflects recent international developments and seeks to protect and enhance the integrity of our code of taxation. I look forward to bringing this important legislative instrument through the Oireachtas over the coming weeks.
To help families, individuals and businesses deal with the rising cost of living, the Minister for Public Expenditure and Reform, Deputy McGrath, and I have announced a package of one-off measures worth €4.1 billion. They are accompanied by additional budgetary measures for 2023 worth €6.9 billion. This brings the total size of budget 2023 to €11 billion. In addition, there is a further €300 million in public service support measures funded from the National Surplus (Exceptional Contingencies) Reserve Fund. I appreciate these are very significant figures. However, I also appreciate the needs of families and businesses are very significant. The strength in tax revenues, particularly domestic tax revenues, has provided us with the additional means to undertake such a response.
One of the core objective in budget 2023 is to ensure workers do not find themselves in a position where they pay more income tax solely because of inflation. There are many people who work hard but whose earnings push them outside of access to any additional support from the State. We need to help them too. We need to put money back into their pockets. On budget day, therefore, I announced an income tax package to the value of more than €1.1 billion. I am increasing the standard rate cut-off point by €3,200 to €40,000, with proportionate increases for married couples and civil partners.
I am also increasing the main tax credits for personal, employee and earned income credit by €75. I am increasing the home carer tax credit by €100 to support stay-at-home parents. The basic personal tax credit available to married persons and civil partners who are jointly assessed to tax will increase from €3,400 to €3,550. In all other cases, the value of the tax credit will increase from €1,700 to €1,775. The value of the home carer tax credit will be increased from €1,600 to €1,700. The value of both the employee tax credit and earned income tax credit will also increase from €1,700 to €1,775. Where an individual is entitled to both the employee tax credit and the earned income tax credit in the same year of assessment, the aggregate of credits available to him or her under the two provisions will not exceed €1,775. Furthermore, I am increasing the second universal social charge, USC, rate band of 2% from €21,295 to €22,920 in line with the 80 cent per hour increase in the national minimum wage.
Housing continues to be one of the biggest challenges facing the country and a whole-of-government approach is being taken to address this challenge.
In the Finance Bill, a number of provisions will make their contribution to this challenge, including the rental tax credit of €500, changes to the help-to-buy scheme, and changes to the pre-letting expenses regime to assist landlords preparing properties for rent. The introduction of the vacant homes tax and changes to the residential zoned land tax aim to increase the supply of homes for rent and purchase.
Also in the property sector, I am providing for a defective concrete blocks levy to raise some of the funding required for the defective concrete blocks grant scheme. Following the announcement of this levy on budget day and in light of subsequent comment on the measure, I have determined that the rate at which the levy will apply will be halved from the planned 10% to 5%. The move will come into effect on 1 September 2023 as opposed to 3 April 2023. This will allow all parties more time to prepare for its introduction. I have also reduced the range of products to which the levy will apply. This Finance Bill provides that the levy will apply to pouring concrete and concrete blocks under two harmonised EU standards. It will not apply to precast concrete products.
As I have said, the Government appreciates the challenges that businesses are facing with significant increases in electricity and gas costs. These challenges come on top of Brexit and the Covid-19 pandemic with the necessary public health restrictions and closed premises. Therefore, I am introducing a temporary business energy support scheme, TBESS, to provide appropriate support to businesses during the winter months. When I announced the scheme on budget day, it was to apply, at that point, to tax compliant businesses carrying out a case I trade. This has been extended and the Bill provides that it will also apply to those carrying out a case II profession. The scheme will also apply to new businesses, and eligibility for relief in such cases will be calculated using a deemed unit price provided by the Sustainable Energy Authority of Ireland, SEAI. This will be based on data provided by suppliers and the Commission for Regulation of Utilities, CRU. A monthly cap of €10,000 per trade or profession will be applied. However, in certain circumstances qualifying businesses that operate across more than one location and that have multiple meter point reference numbers may qualify for increased relief. In such cases, the monthly cap of €10,000 may be increased to a maximum of €30,000. The scheme falls under the European Commission temporary crisis framework, TCF, and is subject to state aid approval. As I announced on budget day, it is intended the scheme will operate in respect of energy costs relating to the period 1 September 2022 to 28 February 2023. However, pending revision of the TCF, which is expected to occur by the end of this month, it was not possible to provide for an end date to the scheme beyond 31 December 2022. I hope to amend the legislation on Committee Stage to include the 28 February end date after the anticipated amendment of the TCF.
Another regulation under discussion at European level is the agricultural block exemption regulation, ABER. There are a number of budget proposals that are dependent on the outcome of these negotiations. These include the introduction of the provision for accelerated capital allowances for the construction of slurry storage, and the extension of a number of agricultural tax measures due to expire at the end of December 2022. Again, and subject to the outcome of negotiations, I would hope these can be addressed by Committee Stage amendments. The provisions relating to the key employee engagement programme, KEEP, will also be addressed during the passage of the Bill. As I indicated at budget time, the clear intention remains to legislate, through amendments introduced on Committee Stage, so as to provide for the buy-back of KEEP shares by the company from the relevant employee and to raise the lifetime company limit for KEEP shares from €3 million to €6 million.
I now turn to the contents of the Bill itself. It is a substantial Bill, running to more than 200 pages. The first sections deal with income tax items, some of which I discussed earlier. I draw Members’ attention to section 6, which provides for the increase in the small benefit exemption to €1,000 and the increase in the number of vouchers from one to two. Members will recall this measure was introduced by financial resolution on budget night and therefore takes effect in the current tax year.
Section 4 deals with the Covid-19 related lay-off payment. This payment is intended to plug the gap for employees who lost the opportunity to accrue reckonable service due to lay-offs caused by the Covid-19 public health restrictions. Statutory redundancy payments are exempt from income tax, and therefore these Covid-19 related lay-off payments will also be exempt from income tax.
Section 7 extends the benefit-in-kind exemption to cargo bicycles and e-cargo bicycles by increasing the threshold to €3,000. This is a further fulfilment of a commitment in the Programme for Government: Our Shared Future to provide an increased proportionate allowance for e-bikes and cargo bikes. The changes will apply from 1 January 2023.
Deputies will recall that a number of tax exemptions are not currently reported to Revenue. Section 8 provides for the automatic reporting to Revenue in respect of three specific measures that are made without the deduction of tax. These are the remote working daily allowance of €3.20, travel and subsistence expenses and the small benefit exemption to which I referred earlier.
Section 9 gives effect to the budget announcement to increase the standard rate band and a number of tax credits from 1 January 2023.
Section 12 introduces a new €500 tax credit for renters, with each tax-paying tenant in a particular property being eligible for the credit in their own right. The credit is aimed at, and will be only available to, renters who do not receive State housing supports. The credit will also be available in certain circumstances to parents who pay rent on behalf of their student child who is in third level education.
Sections 16 and 17 provide for the taxation and relief rules for the pan-European personal pension product, PEPP, which has been introduced as required under Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019.
Section 20 provides for an exemption of up to €20,000 from income tax for certain profits arising from the production, maintenance and repair of certain musical instruments. These instruments are early Irish harps, Irish lever harps and uilleann pipes.
Section 25 increases the cap on allowable pre-letting expenses from €5,000 to €10,000, and reduces the minimum period for which a property must be vacant from 12 months to 6 months.
Section 34 extends the final date when films can be certified as qualifying for the film corporation tax credit from 31 December 2024 to 31 December 2028. This amendment will be commenced at a future date, subject to EU state aid approval.
Section 37 confirms the budget changes to mineral oil tax rates to come into effect from 12 October 2022, and provides for further rate changes to come into effect from 1 March 2023. The section provides for the extension of reductions in certain mineral oil tax rates which were introduced earlier in 2022. Provision was made in the Finance (Covid-19 and Miscellaneous Provisions) Act 2022 for these rate reductions to be reversed from 12 October 2022. The reversal of these reductions will now be implemented from 1 March 2023.The section also provides for increases in mineral oil tax rates, as set out in Schedule 2 of Finance Act 1999, on auto fuels, effective from 12 October 2022. These rate changes arise from increases in carbon charge rates, as set out in Schedule 2A of Finance Act 1999, which came into effect on 12 October 2022.
Section 38 provides for the budget increases in the rates of tobacco products tax of 50 cent on a pack of 20 cigarettes in the most popular price category, on a VAT-inclusive basis, with pro rataincreases on other tobacco products.
Section 44 provides for the extension of the 9% VAT rate on the supply of electricity and gas until 28 February 2023.
Section 47 provides for the reduction of the flat rate addition for farmers to 5%.
Section 55 provides for the zero rating of VAT on newspapers, including e-newspapers, certain period products, non-oral hormone replacement therapy medicines, non-oral nicotine replacement therapy medicine and automated external defibrillators.
The Bill makes a number of amendments in respect of stamp duty, including clarifying aspects of the higher stamp duty rate of 10% charged where a person acquires 10 or more residential units in any 12-month period.
As I announced in the budget, the bank levy will be extended for a further year and will only apply to those banks that will continue to operate in the Irish market, going forward. This means that the levy is expected to generate in the region of €87 million in 2023.
With regard to capital acquisitions tax, section 65 of the Bill makes a number of amendments to the Act of 2003 to take account of recent amendments to the Succession Act 1965 made by the Birth Information and Tracing Act 2022.
Section 67 provides an exemption from tax for any payments made under the Covid-19 death in service scheme for healthcare workers.
In the miscellaneous provision section of the Bill, section 84 provides for a new vacant home tax, VHT, to be introduced in 2023. The measure aims to increase the supply of homes for rent or purchase, rather than raise revenue. The VHT will be self-assessed and administered by the Revenue Commissioners and will apply to long-term habitable vacant residential property that is subject to local property tax, LPT. The bill will be paid by property owners. A property will be considered vacant for the purposes of the tax if it is occupied for fewer than 30 days in a 12-month period. The first chargeable period will commence on 1 November 2022 and the owners of vacant properties will be required to file a return in November 2023. Payment of the tax will be due on 1 January 2024 at a rate equal to three times the property's base LPT rate. It will be in addition to LPT.
The Bill also provides for a number of exemptions to ensure property owners are not unfairly charged for temporary vacancy arising from genuine reasons. This will include properties recently sold or currently listed for sale or rent, properties vacant due to the occupier's illness or long-term care and properties vacant as a result of significant refurbishment work. The measure seeks to achieve an appropriate balance between incentivising owners of vacant homes to bring their properties back into use and not penalising homeowners for normal, temporary vacancy, with the primary objective of the tax being to change behaviour rather than raise revenue.
Section 86 provides for the defective concrete block levy.
Sections 87 to 90 deal with the temporary business energy support scheme, TBESS, and there are the usual technical amendments and care and management sections.
The Bill sets out the legislative provisions to bring effect to the tax measures announced in the budget. It is a cost-of-living budget that underlines, as I said, the Government's commitment to helping individuals, families and businesses to deal with the rising cost of living and the rising cost of doing business. The Bill implements a range of targeted tax changes, including specific measures to support individuals, families and business. I commend the Bill to the House.
Táim buíoch as an deis seo labhairt ar an Bhille Airgeadais, 2022.
There is no doubt but that our economy and society are faced with another crisis. Following on from the financial crisis, Brexit and a global pandemic, we have been thrust into an energy crisis that threatens living standards and will test the resilience of our economy and society. This is all set against a backdrop of failures in housing and healthcare that continue to test the patience of households, their security and hopes for the future.
Households have seen the largest income shock fuelled by inflation in a generation, resulting in the biggest fall in living standards since the financial crash. While a squeeze on living standards driven by high housing and other costs predated the war in Ukraine, Russia's illegal invasion turbocharged inflation.
The Department of Finance has outlined its expectation that inflation will reach 8.5% this year and 7.1% next year. In real terms, that means that somebody earning a €35,000 salary will see his or her purchasing power drop by more than €5,000 next year compared to last year. That is a significant drop in living standards.
Inflation has been driven by rising energy prices with households having faced a wave of price hikes in the past year and the most recent round of price hikes effective from this month. Sinn Féin argued for a time limited price reduction and cap on household electricity bills for the winter months until February to provide certainty and relief to households. Unfortunately, the Government rejected this proposal, a measure that has been introduced in several other European countries in recent months.
The centrepiece of this Finance Bill to address the cost-of-living crisis is an increase in the entry point to the higher rate of income tax, bringing it to €40,000. A key issue at the heart of any budget decision is whether it is fair and whether it is the best use of taxpayers' money. Sinn Féin called for an income tax package that would cut the lower rates of USC, ensuring the benefit was spread fairly and evenly across households so that high income earners did not benefit more than those on middle and low incomes, as they will do under the Government's proposal. That is the path that was pursued by the Government.
Section 9 of this Bill provides for an increase in the entry point to the higher rate of tax, which will cost more than €800 million but leave more than 2.2 million income earners out in the cold. Some 77% of income earners will not benefit from this measure. Someone with an income of €35,000 will benefit by €191 from changes to income tax and USC while someone with an income of €100,000 will benefit by €831. This, by any measure, is an unfair use of public resources because there was, and is, a fairer way which Sinn Féin has outlined.
I welcome a number of provisions in this Bill. The recent changes made to annex 3 of the VAT directive expanded the list of goods and services which could be reduced to zero rates of VAT from now on. I welcome a number of the provisions in Part 3 of this Bill that will zero rate a number of goods from next year, including automated external defibrillators, certain non-oral medicines and menstrual products. Section 44 extends the reduced 9% rate of VAT applied to electricity and gas from the end of October this year to the end of February next year. This is a measure that Sinn Féin has called for since last year and I welcome the extension.
As households are all too aware, the cost of running a car, travelling to work, visiting sick relatives or filling the tank with home heating oil has risen sharply in recent times. The price of diesel has again shot up to over €2 per litre, while the price of petrol is now over 40% higher than it was last year. Section 37 of this Bill provides for further reduced rates of excise applied to petrol and diesel until the end of February but the Government opposed Sinn Féin's amendments that would have reduced the price of petrol at the pump by a further 15 cent per litre and the price of diesel by 12 cent per litre, bringing it back below the €2 per litre mark. The Government voted against that amendment, denying households much-needed relief in their transport costs and we will again, through this Finance Bill, encourage the Government to do the right thing and reduce the cost of petrol and diesel by the maximum amount allowable under the EU rules, with the suspension of the fuel rebate alongside it.
It is unfortunate that the Government has once again ignored the concern of the one third of households that use home heating oil and have seen its cost increase by 84% in the past year. Instead of using this opportunity to provide these households with relief by reducing the rate of excise which applies to home heating oil, the Government will instead increase the rate again from May, according to this Bill. This is part of the Government's continued drive to increase the cost for households in heating their homes and running their cars through further hikes in carbon taxes, which are regressive and hit those on lower incomes hardest, lone parents and those in rural households. In an era of high inflation, now is the wrong time to increase costs to households and the focus must turn to delivering on the alternatives and supply-side investment that households need.
Turning attention to housing, it is clear that the Government's housing plan is failing dramatically. Housing commencements are again beginning to fall. House prices have smashed the Celtic tiger peak. They rose by more than 12% in the past year, while supply of rental accommodation has collapsed, with rents spiralling and increasing by 12% in the past year.
The average rent right across the State now is nearly €1,500 and in Dublin it is €2,000.
The human reality behind these numbers is one of insecurity, homelessness, desperation and of emigration. Renters hand more of their hard-earned pay packet over to their landlords each year under this Government. College students are sleeping in cars, on sofas, commuting long journeys or deferring their courses because they cannot find accommodation under this Government.
The number of people in homelessness has reached record levels under this Government, while homebuyers continue to be locked out of home ownership.
It is now performing screeching U-turns to contain the fallout of their abject failure by adopting measures that Sinn Féin has been calling for for years and one of them is contained within this Bill. The Government’s U-turn on an eviction ban is a case in point but this measure is needed, and needed now, and should have been introduced quite some time ago.
Having opposed Sinn Féin’s proposal for a tax credit for struggling renters for years on the grounds that it would be a transfer of public money into the pockets of landlords, which are the words of the Minister for Finance, and where the Taoiseach said it would increase rent prices; section 2 of this Bill crafted by the Minister for Finance indeed contains a rent tax credit. I am glad that the Minister is seeing sense but, unfortunately, he is making a balls of it because instead of just doing a U-turn, he is doing what he warned about in the first place, which is putting money into the landlords’ pockets. We needed not just a renters’ tax credit but a ban on rent increases. That was the crucial point in a two-part proposal by Sinn Féin, that is, a renters’ tax credit which would have put a month’s rent back into renters’ pockets - as opposed to the €500 proposed - but ensuring also that landlords would not just jack up prices by having a ban on rent increases.
Perhaps in the future, just like the Government is seeing the light in the ban on evictions and a renters’ tax credit, in a couple of months’ time the Minister might come around to the sensible idea that he also has to have a ban on further rent increases.
The housing crisis is first and foremost driven by the failures to deliver social and affordable housing at scale. Instead, the Government has implemented measures which increase demand, when the demand is already white hot and supply stone cold. As a result of affordability issues in the mortgage and housing market as a result of Government failure, the Central Bank has responded by loosening lending rules, which it admits will pump up further credit into the market, will increase house prices and will risk undermining the resilience of borrowers. It is doing that because of the affordability issues resulting from Government failure.
Section 5 of this Bill provides for an extension of the help-to-buy scheme in its current form for another two years. There are no amendments at all to the scheme, despite warnings from a Department-commissioned report that over half of the successful applicants already had the 10% deposit, and with the level of dead weight associated with this relief averaging 48% since its introduction.
Sinn Féin has called for years for the introduction of a vacant property tax to end the scourge of vacancy and dereliction in the face of an acute housing shortage. Section 48 provides for the long-overdue introduction of a vacant homes tax and while I welcome this U-turn from the Government, it took long enough for it to get here, I have concerns regarding its design and what it omits. By restricting it to properties with a local property tax liability, the Government excludes derelict properties entirely.
The Minister may refer to the derelict site levy but this levy is not working and everybody knows that. In many instances, it is not even being collected and is an issue to which my colleague, Deputy Gould, has brought repeated attention in this Chamber and outside of it. If the vacant homes tax is to bring properties back into use, derelict properties must be addressed. The tax proposed remains unchanged in its rate of charge, regardless of how long the property remains vacant, be it one year, two years or indeed ten years, and I believe there is scope to increase the rate, as the length of time that the property remains vacant increases.
Section 86 of the Bill reaffirms the Government’s plan to press ahead with a flawed and counter-productive defective concrete products levy. In the context of hard costs making up 48% overall of the cost of housing delivery, where the cost of concrete has increased by almost 40% in the past year and with the need to drive down construction costs to accelerate delivery; this levy as designed will directly increase building costs and house prices, which is something, in fairness, the Minister does not deny. This will push up prices for homebuyers, rather than putting the cost on to the profits of the industry itself and on the banks, which will also benefit from the redress scheme. It is time to drop this levy and to go back to the drawing board.
Our domestic exporters and SMEs who provide employment and opportunity across the State face energy costs that threaten their very viability. In advance of the budget, Sinn Féin proposed a suite of measures which would provide them with support, including a scheme which would cover a portion of the increase in their energy bills, with appropriate limits and safeguards in place. Sections 88 to 90, inclusive, provide a temporary business energy support scheme and I welcome the Government's introduction of this scheme to support businesses with rising energy costs. For many, however, this support will not be enough to offset the very significant increases they are seeing.
Having gone through the experience of State supports during the pandemic, there must be a better way to provide enhanced, targeted and tailored support to those who need it most. This scheme as drafted takes no account of profitability or revenue. For instance, the same criteria and limits are applied to the local restaurant or butcher as apply to a highly profitable business with large cash reserves. We need to revisit these sections on Committee Stage to safeguard the viability of our small firms.
I also urge the Minister to learn the lessons from the pandemic to ensure that safeguards are in place in order that highly profitable companies, for example, do not avail of taxpayers’ money by distributing dividends to shareholders.
As my time is up, I will give way now to my colleagues.
As I only have four minutes, I will only focus on one particular measure but I look forward to engagement on Committee Stage.
I want to focus, therefore, on the vacant homes tax. It is something which we have long been calling for and is something which, on the face of it, most people would probably welcome. We know that we have a significant stock of vacant homes, which we can see from just going through our towns, cities and rural areas. These number 166,000 according to the recent census. We know this adds to scarcity but also creates an artificial scarcity of supply, which helps to drive high prices and rents.
We also know that tax schemes for vacant homes has worked well in other countries. It has brought stock back into use while generating revenue to re-invest in vacancy and dereliction. On the face of it then, this measure should be welcome but unfortunately, here the devil is again in the detail. The Government's stated intention is to incentivise those with idle property to bring it into use. But if that is the intention, then why design it in such a way as to make it so avoidable?
Two legal experts have described this tax as “significantly compromised, to the point it could be considered virtue-signalling.” If we have a quick look at it, we can see that the tax is done on a self-assessed basis and that it would not apply to residential properties occupied for more than 30 days in a 12-month period.
But whether this is 30 consecutive days or not is not clear. Would it not be easy for the owner of this property to just say it is a holiday home, that they come and go for more than 30 days of the year, and then, hey presto, the owner is not liable for this tax? By remaining silent, would this still permit a situation where short-term letting could occur and then with the right planning, would the property still not fall liable for this tax? Again, that is not clear.
Nor is it clear how Revenue will be checking tax compliance. Will it use the GeoDirectory data, the latest census or some other method? If we were serious, the first thing I would have expected to see was some big anti-avoidance clause jumping out at me from this particular measure, that is, some big deterrent that said to those thinking of deliberately dodging their tax obligations that there would be serious consequences
There is also the fact that the charge itself is too low and does not increase with each subsequent year. The levy will be approximately 0.3% of the value of the property and does not automatically increase every subsequent year. In France, for example, the rate is 12.5%, which then doubles the following year. When the French introduced their tax in 1998, vacancy fell by 13% over the next four years leading to a significant increase in supply. We should contrast that with what we see here. Accountancy firm Deloitte recently noted that the impact of the Minister's tax measure on increasing supply would at best be "modest” and from looking at this, I can easily see why. We can see from the Revenue forecasts how much tax it expects to generate from this and it is estimating that around €3 million to €4 million will be brought in over the year. If one considers that an average-priced house would pay around €945 per annum, then at the lowest bands of the Revenue's estimate of €3 million raised, this would equate to around 3,200 liable homes.
That is simply not good enough. If this tax was a boat, it would have so many holes in it that it would not be able to sail from Malin Head to Mizen Head. I will seek to thrash that out on Committee Stage.
I thank the Cathaoirleach Gníomhach for the opportunity to say a few words. I only have a few minutes so I will focus on supports for businesses in the face of the energy and cost-of-doing-business crisis. The difficulties Irish businesses are currently facing are felt most acutely by SMEs and family businesses, those that were that were hardest hit during the Covid pandemic. In the main, these are businesses that have really been through the mill over recent years. Their costs have risen across the board. This is for a variety of reasons but is mainly due to increasing energy costs and the impact these have had on inflation. Businesses have tried to remain agile. If the Minister speaks with business owners, he will know, as I do, that many of them are doing their very best. They are trying to adapt to the changes, in some instances by absorbing the increased costs to try to remain competitive. Naturally, this has an impact on SMEs and family businesses whose margins are often very tight. However, in the long run, this may prove to be unsustainable for many.
The temporary business energy support scheme announced on budget day and legislated for here is welcome. Businesses eagerly await its introduction. The legislation indicates that the scheme will go further than was announced on budget day and will include tax-compliant businesses that carry on a trade or profession chargeable under case I or case II of Schedule D, including self-employed individuals, companies and partnerships. The explanatory memorandum says that "Charities and sporting bodies who carry on certain activities which would be chargeable to tax under Case I or II of Schedule D but for an available exemption are also included in the scheme." On this point, will approved housing bodies be eligible to apply for supports? Clarification from the Minister would be very much appreciated. Will energy supports for senior citizens' organisations or other such charities come through the Minister's Department or will they be delivered through another mechanism or Department?
Has the Minister engaged directly with small businesses that are concerned the new scheme will not be enough to help them with their energy costs? Did the Government give any consideration to a targeted scheme to support the maintenance of the employment relationship between worker and employer as a means of supporting affected businesses or is it the case that this move would be beyond the scope of the flexibility that currently exists under EU state aid rules? I ask because many businesses and stakeholders have indicated that in addition to energy costs, costs that have increased due to inflation, including the cost of transport, fuel, stock and insurance, are also causing difficulty.
I thank the Acting Chair for allowing me time to speak on this. If the Minister cannot answer my question, I hope he will be in a position to provide me with a written response. Like me and many others, I believe the Minister was angered to see those companies that came through the Covid pandemic while in receipt of substantial supports to keep them afloat during that crisis subsequently paying out dividends to their shareholders and reporting significant profits. This underlines the need for serious targeted measures to be introduced. Everybody is being impacted to some degree by the cost-of-living and cost-of-doing-business crisis. No household is insulated from it. However, some people will experience it to a different degree than others. There are some businesses that, while viable, are now vulnerable and concerned about having to compete for supports with businesses that are well able to absorb some of those costs. I ask that the Minister give consideration to the amendments that will be put forward on Committee Stage to include more targeted measures.
I am pleased to have the opportunity to speak on the Finance Bill. This legislation gives effect to many of the substantial proposals announced in budget 2023 in late September. This summer saw the longest run-in to a budget in many years at a time of great uncertainty and anxiety. In many ways, budget 2023 flattered to deceive. It is worth remembering that, even with the expenditure of an additional €11 billion between this month and 31 December 2023, this Government will have managed to widen the gap between the rich and the poor by €199. That is not my analysis but the analysis of Social Justice Ireland. We are dealing exclusively with the Finance Bill today but, for completeness, we must look at all of the budget measures in the round.
This is the time of the year when we get to see the political colour of a government's money. It is true that, with €4.1 billion to be spent between now and the end of the year in addition to the resources already committed, many of those who rely upon the State will receive significant once-off cash support to help them through to the end of the year. A lump sum and double payments are a good way of using our social protection system to target money where it is needed most. However, when these once-off measures are gone, they are gone. In early January, when the sugar rush wears off, budget 2023 proper will reveal itself to be what I and independent commentators know it to be, a conservative budget. As the Economic and Social Research Institute, ESRI, has said "Compared to indexing tax and welfare policies in line with inflation since 2020, Budget 2023 leaves households worse off on average." Increases to tax credits and welfare payments that are below forecasted inflation will see many lower-income households experience real-term cuts to their living standards unless there is a repeat of the lump sum, double week and energy credit payments, poorly targeted as they are, in the middle of next year.
These are the facts. In other words, if you are poor today, you are going to be poor this time next year. Budget 2023 is merely designed to get people through the next few months and we will see where we are then. There is no vision as to how to make the structural changes to our economic and welfare model that we need to take as many as possible of the 600,000 people experiencing poverty in this country out of that serious situation. Nobody is claiming that that any budget or government can completely insulate all of our citizens from the worst effects of the cost-of-living crisis but we can do better than budget 2023 has managed.
We are living through an unprecedented time and the only thing of which we are certain is uncertainty. Our best guess is that our economy will continue to grow next year, albeit at a slower rate. Inflation is likely to be at approximately 8% next year. Tax revenues will continue to roll in at high rates, although we cannot and should not take anything for granted. Wages will rise but for lower and middle-income earners in the everyday economy, those wage rises will not come anywhere close to matching the rising costs of energy, rents, mortgage interest rates, transport and food. Against this backdrop, it is frankly inexcusable that core weekly social welfare rates will not go up by the €20 they need to if they are to beat or at least match inflation. The purchasing power of those who are most in need will fall off a cliff. It is absolutely inevitable that we will be back here in February or, more likely, March to debate new spending measures to address these issues. Mark my words; that is going to happen.
When I speak of those most in need, I do not only mean those on social welfare but also those who get up early in the morning and work hard all week. The Finance Bill gives effect to the personal tax changes announced in the budget. Some 67% of the €1.26 billion allocated for personal taxation measures will benefit higher earners only. In order for the proposed tax changes to even have the appearance of being more fair, a decision could have been taken, for example, to taper off credits for those earning in excess of €100,000, clawing back some of the benefit for higher earners. What is the practical effect of these tax changes? Someone with an income of €100,000 will gain approximately €900 a year. However, people earning between €25,000 and €35,000 will gain less than €200. By no definition is that fair. To put this in clear terms, the budget and, by extension, this Bill provide the least for the very large cohort of workers earning between €15 and €20 per hour. That is a fact and it is very hard to reconcile with the rhetoric we often hear from the Tánaiste and others about supporting the squeezed middle. These workers are the very definition of the squeezed middle. I note the changes made with regard to the application of the 2% rate of USC for those on the national minimum wage, which are a good thing, but we should note that PRSI thresholds remain unchanged. This has the effect of slightly increasing the PRSI burden on a full-time minimum wage worker as the reduced rate threshold for those earning less than €424 is not changing. The Labour Party's own analysis shows that, in a worst-case scenario, many minimum wage workers could immediately lose 30% of their increase while those on a full-time wage of €19,000 per annum may lose 35%.
This is simply scandalous. It is unconscionable that the Government, which put so much stock in raising the tax bands for higher earners in budget 2023, could simply disregard this cohort of workers. I ask that the Minister and the Minister for Social Protection take a closer look at that issue in the context of this Bill and the Social Welfare Bill.
On the matter of personal taxation, I again ask the Minister to re-examine the question of tax liabilities for PAYE workers who enjoyed the benefit of the pandemic unemployment payment and the temporary wage subsidy scheme, TWSS. The demands are coming through the door. This could not come at a worse time for working people. It is jarring that the Finance Bill proposes to extend the special assignee relief programme for high rollers moving to Ireland to work with foreign direct investment firms, but someone whose industry was out of action during the first wave of the pandemic or whose employer had to claim the TWSS is left with a tax bill. These earners are likely to be on lower incomes and they are the most exposed to the cost-of-living crisis. I ask the Minister to look again at writing this liability off and absorbing that, especially given the current climate. Approximately 300,000 workers have yet to file tax returns. This amounts to a total of €219 million. Some TWSS beneficiaries are on the hook for up to €2,500. This bill would more than wipe out any benefits they might get from this year's budget.
We very much welcome the expansion of the special benefits exemption scheme. It is positive that, as a result of a resolution in the Dáil on budget night, workers can benefit from that expansion this year. That is covered in section 6.
The next section relates to the benefit-in-kind arrangements for cargo bikes. That is a welcome measure. When considering the question of benefit-in-kind, I ask the Minister to reflect on the timing of imminent changes to the application of benefit-in-kind to company cars. I have received a lot of contact on this matter, as have many Deputies over the last few weeks. If that change proceeds as planned, it will have a very serious impact on the incomes of those who have company cars for their work.
The energy crisis dominates everything these days. It is more than evident that businesses require assistance with their energy costs in order to keep operating and to maintain employment. Section 88 of the Bill provides for the introduction of the TBESS. The State will spend up to €1.2 billion between now and the end of February on the scheme, and it will inevitably have to be extended. In some ways, its poorly targeted nature reminds me of the way in which the domestic energy credit was designed. The local Centra that needs the support will get it but the Facebook data centre is also eligible. That may not happen. It may not be applied for. It would be quite perverse if it was. However I, note that all case I and case II businesses will qualify for the TBESS. If it is legally tricky to exclude energy-hungry data centres from the scheme, for example, then the Government should impose an extra levy of €10 per megawatt hour on their unit cost for electricity. This would more than claw back any benefit gained by any errant data centre that did apply for the scheme. The very idea that they are capable of applying and will be permitted to apply for the scheme does not sit well with people. This is a sector where electricity demand has tripled since 2015. Figures provided to me by the Minister for the Environment, Climate and Communications show that the levy of €10 per megawatt hour could see us claw back €40 million in revenue, which could be used to help domestic businesses and users across the economy and society who need additional support.
While we understand the need for short-term cash injections to help businesses with their energy costs, I have two fears about the operation of the scheme. The TBESS does nothing to help control the overall cost of energy. That is why the Government should push at EU level to cap the price of wholesale gas used to produce electricity. It should use the example provided by Spain, Portugal and elsewhere that appears to be working quite well. The second concern is this. One Louth retailer told me last week that even with the TBESS he is still having to pay €90,000 more this year in energy costs. Jobs will be lost. That €90,000 is the equivalent of three to four full-time jobs in the retail sector. That is why we need also need an energy wage subsidy scheme to keep people in work as the energy crisis hits. It is inevitable that jobs will be lost in the teeth of this crisis. I repeat my consistent appeal for the creation of a new German-style short-time working scheme to address these issues.
As we all know, housing is the single biggest social, and arguably economic, issue facing our country. Housing for All is a failing policy and no amount of spin will change this. It will not meet its targets this year on social housing, affordable housing or even in the development of private housing. There are a combination of housing-related measures in the Bill, all of them well-intentioned on an individual basis. However, they are piecemeal given the extent of the supply problem and the fact that the housing budget announced on budget day will go up by only 1% next year from a capital point of view. Construction inflation has gone up 14% in the past year. This is a real-terms cut in the capacity of the system to build more social and affordable homes. As a result of the very modest measures on the capital side in this budget, fewer public and affordable homes will be built than even under the Minister's inadequate plans.
The vacant homes tax has all the hallmarks of a token tax. In the end it will only apply to a small minority of vacant homes, maybe about 4,000, and the rate at which it is set means it will be relatively easily absorbed. On that basis, it simply will not disincentivise vacancy. A tax of €300 or so a year will not put too many people who have vacant homes off, especially as prices continue to rise, albeit at a slower rate. Let us be honest about that. The most efficient and sustainable way of providing decent housing quickly, addressing the scourge of dereliction and reviving town centres is to bring vacant homes and derelict sites back into use. As a start, the Labour Party proposed in our costed alternative budget a new vacant homes tax, initially set at €500 per unit. That would be open to reconsideration every six months based on how the market responds. This rate and the operation of the system should be kept under frequent review as regards its performance in bringing homes back into use.
The resources generated by the kind of tax the Labour Party is proposing and a new vacant sites levy, coupled with better enforcement of existing derelict sites powers, could then be ring-fenced to allow local authorities to do the job they need to do in maximising their capacity to inspect vacant homes, register vacant sites, compulsorily purchase and transform those properties into habitable homes. Louth County Council did very good job a couple of years ago in bringing many vacant homes into use by using existing powers under its compulsory purchase order capacity, as provided for in law. That can be done but it is not done to a sufficient degree across the country. This is the low-hanging fruit. We should be bringing these homes back into use to ensure people who need homes are housed in an efficient and sustainable way. Sadly, there is no such ambition, or that level of ambition, from the Government to get the simple things on vacancy and dereliction right. All we need to know about that lack of ambition is reflected in this tokenistic vacant homes levy.
Section 6 extends the help to buy relief for a further two years. This is a temporary relief that is starting to look a lot more permanent. We are well aware of the assessments made by independent commentators and analysts, and even by the Department of Public Expenditure and Reform, on the effect of the relief on the market. We are also aware of the view of the ESRI and others that the help to buy scheme has had an inflationary effect on the price of housing. This is not the smartest public policy tool ever invented by any Government but clearly the Government is intent on sticking with it. It is undoubtedly a popular incentive and it is being used. All of the evidence shows that. The Minister is sticking with this proposition and that is reflected in the Bill. It will again be extended. As a critic of the scheme, I will be so bold as to make a suggestion.
Would the Minister consider extending eligibility, with conditions, for access to the scheme for those who may be divorced or who are legally separated? This matter is been raised with me on a number of occasions in recent weeks. In cases of a relationship legally ending, court orders will in many instances have required the sale of a family home. I am sure that conditions could be attached, or the level of aid permitted under the relief scheme could be adapted, to take any financial settlement into account. I have no doubt that the scheme could be altered to take account of this very human reality for many thousands of people.
As the Minister is aware, the new mortgage rules announced last week by the Central Bank have acknowledged this situation. Those who are divorced or legally separated will, from 1 January, now be considered first-time buyers. This is the right thing to do. Perhaps other policies and initiatives could take inspiration from this socially just move that was made by the Central Bank last week.
There are a couple of other issues I would like to cover. The Minister has reviewed his position on the concrete levy. This is a good thing. We are aware that any levy to be introduced in respect of poured concrete will inevitably be added to the price of homes. The Labour Party has argued - and costed in our alternative budget - that we should be examining instead the idea of a 2% tax on the profits of the construction sector. This would minimise the risk of any levy being passed on to first-time buyers. As we understand it, a measure like this has been deployed in the UK. For those construction industry operators who resisted it, restrictions were placed on their ability to trade and obtain planning permission. We need to look at something similar.
Inevitably, there is going to have to be a contribution by the construction sector to deal with the mica redress scheme and the construction defects in people's apartments. We are aware that up to 100,000 apartments are affected. As part of its alternative budget, the Labour Party would have provided €500 million to get a start on the mica redress scheme and on assisting those people who are living in defective apartments to address their needs and begin the resolution works that need to be undertaken.
It is good that the Minister has decided to abolish VAT on newspapers. This is a critical measure to protect the media and the critical role they play in our democracy. The abolition of VAT will help. Unfortunately, however, for many newspaper groups across the country, it may be too little too late. As we speak, local newspaper groups are making staff redundant. This is the case with the predominant newspaper group in my constituency, namely, that which publishes the Drogheda Independent. There are also issues for local radio broadcasters. It is not a matter for the Finance Bill but is strictly a matter for the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, Deputy Catherine Martin. I hope this is something the Minister will consider.
I will make a narrow, parochial appeal. The living city initiative has been in place for several years. It is working reasonably well. It covers the main cities, and it covers Kilkenny also. It continues to exclude larger towns in the country such as Drogheda and Dundalk. Drogheda is an especially historic town with an architectural heritage that needs to be protected. If we are to deal with dereliction and vacancy, the living cities initiative should be extended to towns that are larger than Kilkenny and equally as historic. I hope this is something the Minister will consider in due course.
I look forward to working with the Minister on Committee and Report Stages to enhance and amend the Bill.
I thank the Minister for coming to the House today. I was listening to this debate upstairs before I came down to the Chamber. Over the past few weeks, post budget, there has been a lot of commentary in respect of the decisions that were taken in advance of this Bill. I ask Members to think back 12 or even 24 months and consider the position we were in and the uncertainty presented by Covid. Pre pandemic, we were concerned at what might be happen post Covid. It exemplifies the position of the Government and the decisions that have been taken over the past few years and how difficult they were for taxpayers, for businesses, for employees and for the country. In these debates, we sometimes lose sight of that. To be fair to the Minister for Public Expenditure and Reform, Deputy Michael McGrath, and to the Minister for Finance, the budget presented a number of weeks ago surpassed many people's expectations, if we take into account the past 24 months of Covid and the pandemic.
I will just raise a couple of issues that are close to my heart. The VAT exemption on defibrillators, which will come into effect from 1 January 2023, is an issue on which I campaigned for a long time, even before I came to Dáil Éireann. I lost count of the number of motions I put down at various county council meetings over the years on this matter. I welcome this development. I am aware that a number of community and sporting groups across the State will welcome this initiative.
I must also mention the temporary business energy support scheme. I have listened to the debates on this, and for certain people this scheme will not go far enough. I have listened to those people suggest that it is not going to go far enough, but then they paused and did not progress on to what they would do. While the temporary business energy support scheme might not be enough, and particularly for larger businesses or for larger consumers of energy, I still believe it is an initiative to be welcomed. Once it is up and running it will give some kind of certainty to businesses and give them some clarity as to what they can expect in Government support.
The third issue I wish to mention is the benefit-in-kind. The Minister will be aware that I have been beating the drum about this for a number of weeks now. I am like a broken record. For me, this benefit-in-kind initiative, albeit legislated in the Finance Act 2019, comes down to an issue of timing. When people are facing increasing costs as regards energy and travelling to and from work, I am not sure that early 2023 is the time to be putting it in place. I hope this will be reviewed again in the new year. I will make that call again.
I must also mention the defective concrete products levy. Again, this is an initiative that I had spoken out against over the past number of weeks. I welcome the compromises that have been reached, and I welcome that the levy will be reduced from 10% to 5%. I also welcome the various exemptions that are being considered. Ultimately, however, this is again about timing. We are facing a budgetary surplus this year. I ask the Minister and the Minister for Public Expenditure and Reform to question the timing of this measure. A recent meeting of backbenchers of my party agreed that we understand and agree with the principle behind it. We are not arguing against that, but again it comes down to the crucial aspect of timing.
I congratulate the Minister on the Second Reading of the Finance Bill. The recent budget is very important when we look at the context, as my colleague has said. Twelve months ago, we never imagined that we would be in a position of this kind, whereby not only would we not have a deficit but that we would have a surplus leading into next year. This has given great scope to be able to respond to the challenges that exist. Times are really tough and people need more money in their pockets. The budget will enable us to provide them with that through reductions in tax, increasing the national minimum wage and, where we can, increasing public sector wages. This will give people more money when they need it in order to be able to deal with the increases in their energy bills that are a consequence of the war in Ukraine. It is a significant intervention.
I have heard calls for more to be done. Of course, everybody wants more to be done because we are politicians representing our constituents and this is what we do. If we look at the UK and the installation of yet another new Cabinet, we have learned and seen very clearly the consequences of a different budgetary approach. I refer to a reckless budgetary approach that has no regard for sustainability and that cannot be relied upon by the citizens of that country. Those mistakes have to be fixed very quickly. Although I am sure they will be fixed quickly, they come with huge reputational cost to a country that had built up such a strong reputation over time, notwithstanding our disagreement with it about Brexit. The UK had a strong reputation over time for being a stable political entity and a stable political institution. There is a valid salutary lesson for us in managing our budgetary processes as we have done and in being able to provide for people when they need it, as happened during Covid and as I hope will happen, insofar as is possible, in the context of the rising costs of energy.
I commend the significant tax policy changes. They constitute an important step to give people more of their own money back at this time in an inflationary cycle. It is an important measure to set a tone that we want to do that. We have not been able to do that for many years. It is important that people have discretion about how to spend their money and, particularly at this time, it was important to take a step towards giving more people control over their spending and more tax back. I would like to see that continued into next year, where possible, because people need discretion over their money, particularly middle income workers, who have been hardest hit in many respects. I congratulate the Minister on the Finance Bill.
The test of any budget is whether the lives of the people of the State will be improved as a result. In the context of tax measures, there was a need for a reduction in USC but that was not delivered. We see zero-rating of certain VAT products. That is welcome. Hopefully, the savings will be passed on, most crucially, to workers and to the guests staying there.
In terms of transport, the measures are unfair on those under financial pressure. A further tax increase will affect Kerry residents who have to drive to work or use solid fuel for heating and does little for those least able to pay. Now is not the time to increase costs.
In housing and facilities, we see an increase of 7% in the amount allocated to water services and capital spend is up from €876 million to €932 million. The Right2Water movement was clear on the need to pay for water services from general taxation, something the Government was eventually forced to accept. However, the Government is being dragged kicking and screaming towards Sinn Féin housing policy in circumstances where rents, house prices and homelessness are increasing. The eviction ban is welcome but belated. There is a type of rent tax credit, but we needed a rent increase ban. We also need more social housing to combat the years of austerity.
Some of the programmes behind the overall spending allocation are incredibly important to Kerry's future. One of those is the rural water programme. According to the budget, this additional funding is being made available to support a new programme for water services for villages not on the public network. This is a massive issue in Kerry because many parishes do not enjoy proper wastewater services, access to a public water network or properly treated drinking water. Places like Glenbeigh, Castlegregory, Annascaul and Abbeydorney will not see any new developments of housing - affordable, social or otherwise. An extra €5 million is simply not enough under the scheme.
In addition, there are bodies of water in Kerry suffering from discharges. A recent Environmental Protection Agency report stated that a number of waterways in Kerry face a severe biodiversity challenge, with one third above moderate levels of pollution. This is not good enough and I have called for Irish Water to carry out assessments in Cromane, the Maherees, Tralee Bay, Valentia and the Kenmare River. I welcome the €3 million provided to meet requirements under EU water quality directives but it is not enough. Major capital investment is needed to solve the issue, especially in water treatment plants. I call on the Government to ensure this is completed in Kerry as soon as possible.
I had a conversation with a butcher from Kerry today who said he paid 11 cent per unit of electricity in 2019, 19 cent in 2020 and is currently paying 40 cent per unit. He is paying €4,000 per month and has a skeleton crew working six days per week. Every customer is affected, as are the 30 butchers in his craft butchers' section. What he wants, has asked for and needs is a cap on energy prices. He does not want the type of smart answers we got from the Taoiseach today during Leaders' Questions.
I welcome the opportunity to speak on the Finance Bill. It is always good to have time and space between the announcement of the budget and the consideration of the Finance Bill because it gives an opportunity to clear away some of the fog and spin and to understand exactly the impact of the budget provisions.
One of the most disappointing aspects of budget 2023 is its permanent distributional effects. I have heard more than a few Government Deputies and a couple of Ministers say this is a progressive budget rather than a regressive one. I do not accept that, though there may be enough one-off payments to create the impression that the most vulnerable are being taken care of. There is €500 here and €200 there for certain groups. That is welcome and all very well but one thing is for sure: the permanent effects of budget 2023 will not be progressive. How can they be? An increase of €12 per week for those on social welfare, including pensioners, is about €624 per year for some of the most vulnerable in our society. They are the people who, as the CSO has pointed out, are being worst hit by the cost of living crisis. Contrast that with the benefit of €830 per year for someone earning €100,000 once all the income tax and USC changes are taken into account. How is that progressive? How is it progressive to give energy credits to everyone regardless of housing income or to give an effective double payment of energy credits to anyone sufficiently well-off to own a holiday home?
This budget could have done so much more to target its benefits. There is €500 for recipients of disability loans but no permanent cost of disability payments, something for which people with disabilities have been calling for years. There is a €400 payment for fuel allowance recipients but no permanent increase to the payment, leaving them with great uncertainty for the year ahead. There is €500 for recipients of the working family payment, which is all very well, but there is no extension of the fuel allowance to that group.
These supports are all very well but will not help people in the medium to long term or provide certainty for those who need long-term supports the most. They will not provide sustainable relief to those who can no longer afford the soaring prices for necessities like food, fuel, energy and rent. There are a number of one-off payments for many of those reliant on social welfare but the only people with any certainty for the future are those in the upper income brackets, who can be sure their tax cuts will be there in future years. Apparently, the Government plans to give them even more.
One of the things I found most notable about budget 2023 is the extent to which the Government's income tax cuts went so far beyond what had been flagged in the lead-up. The increase in the standard rate cut-off point is so out of proportion to what current circumstances justify that it can only be explained by ideology. Eight hundred million euro in 2023 on a tax cut that will be of no benefit to anyone earning less than €37,000 per year. This cut will cost more than €1 billion in a full year: this is a change that will only benefit approximately 20% of workers. How can that be fair?
I accept that some indexation of tax bands is warranted to keep the portion of income taxed at the higher rate roughly consistent, but there is little justification for the kind of indexation seen in the previous two budgets. That does not stop Government Deputies trying. In his budget speech, I heard the Minister again pushing the misleading idea that inflation leads to people paying more income tax. It does no such thing. People pay additional tax when they get salary increases. Wage growth has been far lower than general inflation.
How the Government can justify indexation of nearly 9% this year and of more than 13% over the last two budgets when the latest available numbers from the CSO suggest average weekly wages are only increasing at less than 2.5% a year is really beyond me. The Social Democrats proposed a third rate of tax of 43% on incomes above €100,000 but there is no interest from this Government in making any effort to claw back any of that gain from those at the very top. I cannot understand how any Government Deputy can justify a situation, particularly in the present circumstances when so many people are in crisis situations, that there is that level of tax break for the best earning people in this country, that is people earning €100,000. How can there be any justification for giving them a tax break and no effort whatever to create a sense of fairness and to achieve fairness by introducing any kind of clawback?
On energy supports, a failure to target supports is a recurring theme with this Government. Budget 2023's energy supports for households are a further example of this. More than €1 billion in supports has been pledged but households with large incomes will get just as much support as those with small, inadequate incomes. The excuse that it is too complicated to target low and middle income earners just does not wash. What has the Government been doing in almost one year since this kind of energy credit scheme was first proposed? Maybe it could have been excused to have a universal approach at the outset because the priority was to get money to people quickly. But to repeat the same exercise after so much time has passed where a more targeted approach could have been worked out is simply not good enough. If you are earning the minimum wage, you get €600. If you are earning €100,000 you get €600. If you happen to own two homes you get €1,200. The Social Democrats alternative budget proposed a system based on the temporary Covid-19 wage subsidy scheme, TWSS, used during Covid which would have allowed targeted payments to be processed in an efficient manner. It is very disappointing that the Government did not seem to pay any attention to taking this kind of fairer approach.
Another issue around energy is the failure to realise the potential of solar energy. The Government is way behind the curve on this. The grants are much too small and the impact of VAT on solar panels needs to be examined. I will request that a report is commissioned on this and I will move an amendment to that effect on Report Stage.
On business supports, at least it has been figured out how to target resources at the small and medium sized companies that need support to pay their energy bills. The proposed scheme mirrors proposals that my party made in its alternative budget which provided €1 billion for an energy crisis support scheme for business. It is important to remember that unlike the Covid crisis when wages needed to be supported the current crisis necessitates viable but vulnerable businesses being supported in paying their energy bills. The Government must learn the lessons of the mistakes it made in its Covid response to business. It must ensure that companies that avail of this support do not pay dividends to shareholders, do not make staff redundant and if it transpires that they did not need state support to remain profitable, there should be a clawback option. The purpose of this support is job protection. We want to ensure that businesses remain viable and trading. We do not want to inflate profit margins or waste money by handing it to businesses that are clearly unviable.
Turning to housing, as I said some weeks ago immediately after the Ministers’ budget speeches, it is deeply concerning that the Government thinks that its tax on vacant homes is anything close to sufficient. It is, in fact, pathetically low. Three times the level of the local property tax may sound like a serious move until you realise that it amounts to 0.3% of the value of the property. How is that supposed to act as a disincentive to vacancy or dereliction when property prices are rising at multiples of that rate? It reads to me as an astounding statement of indifference to the problem of vacancy and a determination to maintain the status quo. The Social Democrats proposed a 10% tax on vacant homes with exemptions, of course, to be fair to people who have legitimate reasons to have their home empty, such as care or health reasons. We will submit an amendment to this effect.
If the Government is serious about tackling the issue of vacancy it must do much better than this. It needs a penal tax on vacant homes in order to unlock the huge potential that is there, particularly in the context of the housing crisis that we have at the moment. Consider all the commentary on vacancy and dereliction impacting the centre of Dublin and the Dublin Central constituency, the O'Connell Street general area and stretching into the north inner city. The same points apply to the centre of Cork. I had the opportunity to travel around the centre of Cork and see the extent of vacant homes. It is actually immoral at this stage to allow a situation like that in the context of a housing crisis where people are sitting on properties waiting for them to disintegrate and waiting for an opportunity to knock them and replace them with whatever commercial development. It should not be allowed. We need a penal tax that would stop that continuing.
While Fianna Fáil holds the housing brief, recent news that Fine Gael TDs are holding meetings to brainstorm on the housing disaster is surely further evidence of the desperation within the Government and the lack of confidence that even Government TDs have in the Housing for All policy which is dismally failing to meet even its own very anaemic targets. The rhetoric suggests that the Government is taking it seriously; the output does not.
It would be unfair not to acknowledge that there are a number of welcome moves in budget 2023 which will help to reduce the cost of living for those who are struggling. The reductions in childcare fees, the free provision of schoolbooks for primary school pupils and the abolition of inpatient charges in public hospitals our chief among those measures that have to be warmly welcomed, but the overall trend of investment in public services is worrying. As the Social Democrats constantly points out, if you really want to reduce the cost of living and give working people and families, particularly those with young children a break, it makes more sense to use the majority of available resources to invest in better quality public services and social infrastructure. This also requires that investment in public services at the very least keeps up with inflation. However, the Parliamentary Budget Office and the Irish Fiscal Advisory Council have calculated that about an extra €7 billion per year is needed to meet inflationary costs and to allow public services just to stand still. As far as I can see, this budget allocates less than half of that figure. This has huge implications for public services in 2023 and beyond and the impacts will be felt in the further erosion in the availability of vital supports.
It says a lot about this Government's priorities when you consider three key points. First, that the Government was so determined that income tax be indexed in line with inflation, despite there being absolutely no justification for that. Second, that those dependent on social welfare must accept increases well below the level of inflation.
Third, public services will be very negatively impacted because their funding increase is well below inflation also. In fact, as I said a month ago, it seems the overall theme of this budget is erosion of the tax base, with a consequent reduction in the money available for public services over the medium to long term. This just cannot continue.
The Government must chart a course towards the sustainable funding of our public services. We know this country needs more revenue to improve service delivery, look after an ageing population and meet its environmental targets. That is why the Government set up the Commission on Taxation and Welfare. However, having outsourced the job of finding the revenue, we all acknowledge we need to have an independent commission made up of experts from all fields of society. The immediate response from some Ministers to findings that do not fit their ideology has been to politicise and dismiss this work before giving it any proper consideration.
The reason the commission was necessary in the first place was that Fianna Fáil and Fine Gael, in government, have for so long refused to accept the need for revenue to increase as a proportion of national income. Those same parties like to poke fun at the supposedly unsound policies of the left, but independent expert groups, from the Commission on Taxation and Welfare to the Irish Fiscal Advisory Council, have consistently pointed out how these parties are asleep at the wheel when it comes to accepting fiscal realities and future-proofing our finances. Budget 2023 continues this trend. There is no concrete plan to reduce increasing overreliance on corporation tax receipts. There have been no updated costings for Sláintecare in the past five years, despite the inflation in that period. There are no proper costings of planned climate measures and no real ambition in this area. With windfalls being used to fund current spending, this Government has no overall financial plan and, it has to be said, not much credibility.
I have a point on the minimum wage. The Technical Group recommended that the living wage be increased to €13.85 to achieve a socially acceptable standard of living. The poor increase in the budget is widening the gap between what the minimum wage is now and what the living wage needs to be. Again, that is a very regressive move. It is widening the gap between the better-off and those on low pay and dependent on the living wage or minimum wage. The Government is not setting out a clear path to introducing a realistic living wage.
This point also applies to the difficulty we have in recruiting key staff, particularly in home care. The strong recommendation in the report of the Minister of State, Deputy Butler, on this matter is that, at a minimum, the living wage be the standard one. If we are serious about ensuring we have enough home care staff to meet the substantial care needs, we need to include the living wage in the tendering process for home care services.
The budget sounded very good in that it seemed to entail Government largesse. However, when we examine its detail, we see those most in need got least whereas those who are most comfortable and earning the most got long-term, secure increases in their incomes. That is simply not progressive and it certainly is not fair.
I thank the House for the opportunity to contribute to this important debate. I look forward to contributing at more length when the Bill is before the finance committee next month. I welcome the Bill.
When we had statements on the budget, I said it was progressive and welcome. There are many areas in the Bill that will genuinely be of benefit to so many around the country as they face extremely worrying challenges due to the difficult global circumstances, be they associated with Putin’s war in Ukraine, rising energy costs or the many other factors.
There are one or two aspects of the Bill I would like to highlight and on which I ask the Minister to reflect. We might see a little more clarity in the latter Stages before the Bill is finally enacted. The first issue, which has been raised with me quite a number of times by constituents in recent weeks, concerns benefit-in-kind tax on company cars. There may be a discrepancy in this regard. We need to differentiate between those who receive a company car as a gift or bonus, or as recognition in lieu of further payment, and those who receive one because it is an integral part of their job. The latter do not necessarily drive commercial vehicles, vans or jeeps but are on the road. My late father was a rep on the road for 35 years. His car was not a luxury car; it was his office. It was where the old-fashioned car phone was, and the samples were in the boot. It contained the files, contact directory and old-fashioned Filofax that were brought around when meeting customers and clients across all 32 counties of this country.
Regarding those who receive a car as a gift from their employer, there needs to be differentiation. The increase in the tax such people pay on their vehicles is making a huge difference to their bottom line. It is completely undermining any benefits from the budget. A rep I spoke to, who lives in Ballinteer in my constituency, said that to compensate for the tax increase, his salary would need to go up by 15%. That is the difference it makes. Those who travel longer distances, whose area may be all of Leinster, or Dublin and south Leinster, are suffering a lot more than those who may cover only the Dublin metropolitan region or some such region. Their cars are as essential to their jobs as their laptops or desks. Is there some way in the application of the new benefit-in-kind tax that was announced to distinguish between company cars given as perks and cars used for work?
There is another small issue I would like to raise. I do not have a direct ask but want to raise this in the brief amount of speaking time I have because it merits serious consideration. It relates to the proposed changes regarding a benefits tax, including the working from home daily allowance and the payment of travel expenses. Small businesses across the country have raised serious concerns regarding why they were not consulted on these changes. I urge the Minister to see what can be done to engage directly with small businesses and their representative bodies before this Bill is enacted. We all know about the need to support small businesses. In parallel with meeting this need through the Finance Bill, we need to meet it by opening up the training opportunities of our SMEs.
I welcome the opportunity to speak on the Finance Bill, which underpins many of the budget announcements made last month. It is a progressive budget, despite what some commentators would say. It is wide-ranging and well thought out, and it provides immediate support to many people throughout the country when they need it most. It also offers core support for the future. It exemplifies the Government’s approach to how we dealt with the Covid crisis over two years. We support businesses and people in a crisis. We are in a cost-of-living crisis at the moment, and this budget deals with it.
We have a steady and stable Government comprising the only three parties that were willing to form a Government at a most difficult time, during a pandemic, when others ran around the country telling people in Trump-type rallies that they had actually won the election. We resisted the reactionary call from across the benches. The Members opposite wanted us to react with an uncosted and ill-thought-out mini-budget and then try to apply an uncosted energy cap.
We have seen the dire results of that across the water. It just goes to show that it is good to have three parties that work well together and a Minister for Finance and Minister for Public Expenditure and Reform who are willing to take their time and to deliver a budget that will deliver and is delivering for people out there.
I spoke about examples like the lump sum for the fuel allowance, the living alone allowance, the working family payment and the carer’s allowance, the double payment for child benefit and the weekly welfare schemes, and the assistance for students and for their parents. Other items were able to continue through this budget as well, such as the very substantial and significant cuts to transport fares. They are real cost-of-living benefits that accrue to students, younger people and to their parents.
The Minister for Children, Equality, Disability, Integration and Youth, Deputy O'Gorman, introduced a 25% reduction in childcare costs. It is the most significant State intervention in childcare costs in the history of the State, and we will go further next year.
I hear many people across the House criticising the retrofitting scheme. I refer to the comments today of Adrian Joyce, the secretary general of EuroACE and campaign director for Renovate Europe. He described Ireland as Europe's best designed energy renovation programme. The scheme is just starting so I ask members of the Opposition to give it some time because there is an energy crisis and we are delivering. We will roll out the retrofitting scheme.
I will speak briefly on section 84 - the vacant homes tax. I welcome its introduction. It is the first time ever we have had a tax on vacancy, and it is something we must do. We have a lot of vacant houses. The commentary ranges from somewhere between 160,000 to a much lower figure. It is not that simple, clear or straightforward to bring those vacant homes into use. They are not all suitable for accommodation. There are many reasons for vacancy in this country. This is the start of it. I do not think the figure for the vacant homes tax is high enough, but I will seek to introduce amendments on Committee Stage to try to increase it.
There are 166,000 vacant homes in the State. The Government’s plan to tackle this is to bring in a levy of 0.3%. It looks like a joke, but it is so serious that it would be wrong to do so. The Minister has completely failed to tackle vacancy. Once again, Fianna Fáil, Fine Gael and now their partners, the Green Party, cosy up to the vulture funds, the land hoarders and the people who are sitting on homes where people should be living.
In France, for instance, a phased vacant homes tax was introduced, starting at 10% and ending at 15% of the potential annual rent. It resulted in a 13% reduction in vacancy rates in four years. If we were to follow the French example, that would mean more than 21,000 vacant homes would come back into use.
In my constituency of Cork North-Central, there are areas where vacancy is so high that one in 15 homes is vacant. These are homes in the heart of the city and there should be families and people living in them. Now, we are talking about some of these homes being left empty. Some of the homes are owned by local authorities. I know of a family who left a home last December and the house was boarded up this week, ten months later. I knew that house. I was in it. It was a perfect home that a family should have been living in for the past ten months.
I have heard about the vacant homes tax and the Government’s plan in that regard. Does the Minister sincerely think a vacant homes levy of 0.3% will work? It cannot work. It makes no sense. How can we compare that with the 7% derelict sites levy? Less than 0.5% tax is paid for a vacant site but a derelict site is set at 7%. It just shows the complete lack of understanding about it. We need a proper vacant homes tax. We need a carrot-and-stick approach. We must encourage landlords to get those houses into use, and where they do not, we must penalise them to get them to do that. It is being said this is a progressive budget, but there is virtually nothing in the budget when it comes to solving the housing crisis and the homelessness crisis.
The Glashaboy flood relief scheme is ongoing. It has been promised for the past ten years. Glanmire flooded again last weekend, ten years after this was promised. The problem is that when it comes to construction inflation and tendering increases, it has to go back out for tender again. Last year, funds of €14 million were put in place, but because of inflation, the cost has gone up to €17 million. Once again, the scheme has not been delivered. For years this Government has promised flood protection for Glanmire.
There is a lot of stuff to deal with in the Finance Bill. It is a big document. We will no doubt tease through a lot of it in more detail on Committee Stage. It is a telling fact that, faced with an unprecedented cost-of-living crisis and a shocking, disastrous, catastrophic – you just run out of adjectives to describe how bad the housing crisis is – housing crisis, the ESRI and Social Justice Ireland were before the Committee on Budgetary Oversight, of which I am a member, and they stated unequivocally that if we strip out the once-off measures of cash payments, which occur primarily before Christmas, and some of the other once-off measures, the budget is regressive. That is not the left saying that; it is the ESRI and Social Justice Ireland. They were very clear. In real income terms, people on social welfare payments, pensions, students, and workers on average pay and low pay are going to be considerably worse off next year than they were this year. That is the simple inescapable fact. Insofar as the Government responded to that unprecedented cost-of-living and housing crisis, the measures it took – setting aside the once-off measures – were more favourable to the better off. That is the truth about the budget. Most people will be worse off next year. They are paying the price and the Government’s response was to favour the better off on an ongoing basis. It is true that some of the once-off measures will blunt, for a few months, the crippling impact of the energy price hikes and the general rise in inflation. They will blunt it, but overall, they will not compensate for the scale of inflation and the broader rise in the cost of living.
That is happening at the same time when big business is enjoying an absolute bonanza in profits. I do not know if the Minister can give us an update, for example, on corporate profits, because as we know, we do not get the full details of corporate profits until a couple of years after those profits are recorded, but the trajectory on corporate profits is unmistakable and quite frankly staggering in recent years. In 2012, corporate profits were €74 billion. By 2020, corporate profits were €193 billion. That is a staggering increase. Corporate profits have almost trebled. Although we do not have the figures for 2021 and 2022 yet, it would seem clear from the Government’s own projections on corporate tax receipts that this year they will be €20 billion.
In 2020, they were €11 billion. The corporation tax that is coming in is almost doubling, and that can only happen if there has been a further staggering increase in the profits made by corporations. As we know, the bulk of those profits is being made by a few hundred incredibly, staggeringly, obscenely profitable corporations. The 2020 figures show €193 billion in total pre-tax profits and €11 billion paid, which works out at about 6.1% tax paid on their gross, pre-tax trading profits. If we extrapolate from the €20 billion we are estimated to get in receipts this year, that suggests extraordinary increases in profits.
Of course, we know all this. They are the broad, macro figures on dizzying increases in profits but there is a lot of other evidence from particular sectors. In the energy sector, the large energy producers and companies have witnessed staggering profits over the past two years in particular, at precisely the same time when people are being crushed with energy price hikes on an unprecedented scale and when people are experiencing increases in their bills at an unaffordable level. There has been nothing yet, although there have been promises, in terms of windfall taxes to be imposed on the profits of these companies.
I was looking at the figures for Cement Roadstone Holdings. The Government has this misguided notion of bringing in the concrete levy, which will increase the cost of homes for people, instead of taxing the profits of people who are really profiting in the area of concrete, cement, construction materials and so on. I was leafing through CRH's accounts for 2021 and, again, they are just staggering. The earnings per share for 2021 at CRH increased in one year by 130%. There is no cost-of-living crisis for those who own lots of shares in CRH or for the people who own shares in private energy companies. There is no cost-of-living crisis for people who own substantial shares in those corporations that are seeing staggering increases in profits. Other people's misery is generating additional income, profits and dividends for the rich. That is the reality.
In property, again, it is self-evident. I mentioned earlier the Tathony House situation unfolding in Dublin 8. A landlord who inherited from a family member, as I understand it, a 35-unit apartment complex is now evicting all the people in the complex, who received notices to quit last week. Imagine the shock and fear that induces in those families. One person is a nurse in St. James's Hospital, while another happens to be a People Before Profit councillor. They are ordinary working people, now faced with eviction by a landlord who, they have worked out, based on the average rents in that apartment block, must have a rent roll of about €700,000 a year on that property alone, for which one of the residents went so far as to check with the Companies Registration Office the taxes paid and it is recorded that about €69,000 is paid in tax. That is €69,000 on a rent roll of about €700,000. That landlord is doing pretty well but not well enough, it seems, because he now wants to cash in on the increased value of property. As property prices go through the roof, is there a windfall tax, that is, an increased capital gains tax, for all those who bought property from the National Asset Management Agency, NAMA, at the bottom of the market, the sorts of people who are trying to cash in on the extortionate value of property at the moment? No, there was no such tax in the budget, although there should have been because these people have made a stunning fortune from the terrible decisions of the Fine Gael-Labour Party Government of 2011-2016 to unload property assets at a nominal value of about €42 billion, which must be worth three or four times that now, as these people cash in - or cash out - on the enormous capital gains they have accrued, where they have paid little or no tax on the rents they have received. The large, international investors will pay little on their capital gains but they can cash out tax free, with no serious measures to capture some of those incredible windfall gains these people have made.
That is the reality of the inflation, cost-of-living and housing crises. A relatively small cohort of supremely wealthy individuals and corporations are making shocking, obscene profits, that is, a bonanza like we have never seen before, while ordinary people are crushed to the point where they do not how they will pay their bills. They simply cannot sustain the levels of rent being charged, but there are winners in all of this. They are the broad facts and the Government’s budget against that background is, even by the assessment of the ESRI, regressive.
I might outline some of the specific measures in the Bill. I do not support the renter’s tax credit at all, and while I accept Sinn Féin believes in a higher renter’s tax credit, I am afraid I just do not believe in renters’ tax credits as a way to address this problem, whether it is €500, €1,000 or whatever it is, because it is chasing rents that are off the Richter scale. I am sure people will be glad of the €500 or €1,000 but it is a drop in the ocean, it is not dealing with the problem and it is public money ultimately going into the pockets of private landlords. What we need is not something one could include in a Finance Bill but it would be a better way to deal with the problem. As the Minister knows, we have advocated that we introduce proper rent controls whereby we actually control rents and ensure they are set at affordable levels. We believe, and we have put forward a Bill to this effect, that rents should, as a matter of law, amount to no more on average than about 25% of anybody's income. I was reading an interesting paper, of which the Minister might be aware, relating to the income thresholds and the review he carried out. It is incredible. The review he carried out estimates that people in Dublin, for example, are paying about 60% of their income on rent. It is absolutely shocking stuff. Many of those people are not even entitled to social housing or housing assistance payment, HAP, support for the extortionate rents they are paying. Against that background, the €500 renter's tax credit is a joke. It is not going to make any difference and it will be money into the pockets of landlords who are making an absolute fortune.
The only response the Government gives when we suggest serious rent controls that would reduce the cost of rent is to say landlords will exit the market. If that is the case, good. We should take the properties off them. The properties do not have to exit. If landlords want to exit because they want only to follow maximum profit, just buy the properties off them. We have a lot of money, which the Minister has I think mistakenly put into the rainy day fund, totalling €6 billion. Why would we not use that money to expand dramatically the State's stock of public and affordable housing? If we do not do that, we will end up just making cash payments to landlords, whether through the rental accommodation scheme, RAS, HAP, leasing arrangements or renters' credits. We will end up just subsidising extortionate rents and pouring well in excess of €1 billion a year in current expenditure when this credit is added.
That is the thing we cannot afford. When talking about our debt position and our financial position, we cannot afford to allow current expenditure to grow exponentially. The way to deal with that is for the State to have its own social and affordable housing stock on a much better scale than we have now. That capital investment is expensive at the outset but it saves billions over the medium to long term. It begins to generate revenue to the State and, of course, not least, ensures that people who are in what is essentially publicly subsidised housing - the HAP, the RAS and all these things are publicly subsidised - will have security and will not be facing the prospect of eviction but will have affordable housing and social housing. That is the alternative. We will get there eventually.
The Minister should have a read about what they do Finland. In Helsinki, 70% of all the building land is in the hands of the city. They have their own state construction company and 55% of everything that is built is social and affordable housing. What is the point in building stuff that nobody can afford? The State ends up paying for it anyway through RAS, HAP and leasing. It is absolute insanity but it suits the institutional investors, vulture funds, corporate landlords and so on.
The vacant property tax is similarly a joke. It is three times the rate of the LPT. It is not going to disincentivise these people. It is just not enough. The capital gains they are making by sitting on empty property is multiples of that. It is still profitable for these people to sit on an empty property. I have been going on about St. Helen's Court in my area for four years. It is right across the road from me. It literally stares me in the face every day in my office. A vulture fund from the North - not even an international fund - bought it and has, essentially, intimidated three quarters of the tenants out. It has been sitting on 15 empty apartments for three years now and is trying to evict the rest of the tenants. It is profitable for it to do that. We allow and facilitate that. We do not make it absolutely illegal. We do not take the properties off it and house the people on the housing list. We let it do this. It will walk away with massive capital gains when it finally sells that property. It is quite honestly beyond belief.
I want to mention the USC and changes around the minimum wage to ensure this tiny pathetic increase in the minimum wage will not accrue an extra USC. That is fine but the problem is that the level of the minimum wage increase at 80 cent is an absolute joke. I have raised the plight of a fantastic group of workers, that is, private security workers, a number of times. Currently, their employment regulation order, ERO, means their minimum pay is €11.65 per hour. Top Security, which is a company that gets public contracts, is resisting that moving up to €12.50. This is a company that gets public contracts and is making an absolute fortune. We do not do anything about that. The way the Government can cut across that is by increasing the minimum wage to something decent or at least to the level of the minimum wage. The minimum wage now is under €13. In our view, it should be as high as €15 per hour.
I will cover other stuff on Committee Stage but I want to signal to the Minister an issue we have discussed many times, namely, the need to further amend the legislation around section 481 regarding the film tax film tax credit. The various stakeholders of the film industry appeared before the Committee on Budgetary Oversight, of which I am a member. Of course, we had the usual chorus of film producers, contractors, guilds, Screen Ireland and so on saying everything is wonderful and rosy in the garden and we should keep it the way it is. Then, we had representatives from Equity, performers, artists and representatives from the Irish Film Workers Association. The picture they presented was not so rosy. To cut a long story short, Equity said that its members' intellectual property rights, and the equitable remuneration they are supposed to get for the ongoing use of their intellectual property on further performances of movies and so on, are essentially being taken off them by the producers. They are forced into signing contracts where, essentially, they waive the rights to proper remuneration on that. They are getting contracts that are far inferior to what actors and performers get in the UK. Similarly, we heard testimonies from crew who said they had been blacklisted. Dozens of workers were blacklisted out of the industry. They take cases to the Workplace Relations Commission, WRC, about unfair dismissal but the designated activity company, DAC, is the employer, and that DAC no longer exists by the time people get a case to the WRC. The recipients of section 481 who set up the DAC, where the DAC is a wholly-owned subsidiary of those producer companies, say they have nothing to do with those employees. It is an absolute scam. The Minister needs to amend section 481 to make it absolutely clear that the producer company that is the recipient of section 481 is responsible for the employees and is the employer. He needs to make sure there is not a situation where artists, performers and so on are essentially being forced to sign inferior contracts where their rights to their intellectual property, royalties and residuals are essentially being taken off them by producer companies.
I may take advantage of the time. I listened to much of the debate and I think it is important for us to remember what happened on budget day. The Minister for Public Expenditure and Reform, Deputy Michael McGrath, and the Minister for Finance, Deputy Donohoe, put forward an €11 billion package to try to alleviate what we know to be an incredibly difficult period for people in Ireland. We had that €11 billion. That was not borrowed money; that was money that was created by the Irish people. We have used that to protect people as much as is possible from external forces outside of Ireland in terms of inflation and growing energy costs. That situation of €11 billion is very different from many other countries. We should only look across the water where politicians are talking about spending cuts whereas we in this House are talking about an €11 billion package to protect workers and families and their jobs.
We need to draw a line under that because we know populist politics has a cost. By the way, populist politics is not something only used by those on the left - I am not suggesting that it is. However, populist politics across the political spectrum has a cost and when the maths are added up at the end, that cost often falls on ordinary people.
We are talking today about the Finance Bill. We do not talk about much of what was in the Social Welfare Bill. I want to reflect on what the ESRI, said about the budget, however It said many things but, of course, I will pick the quote that is of most advantage. We cannot forget what it said, however. It stated:
The government's approach to insulating households from the rise in energy prices has been effective. Targeted welfare measures combined with universal household energy credits will do more for most households ... than had welfare payments risen in line with inflation this year and next [year].
To me, that says this is a Government that wants to protect people, not a Government that somehow wants to unprogressively punish people. Yes, there are many measures in here for social welfare recipients but there are also measures for working people. I have no shame in defending the increase in the standard tax rates. I would say particularly to employers who are struggling to recruit people that there are measures in this Bill, including one-off special payments that avoid tax, which employers should be applying to workers. There is the increase in bonus payments from one to two and from €500 to €1,000. I will let Deputy Alan Farrell take over the remainder of the time.
Okay, excellent. I could go on but we will discuss it on Committee Stage.
I want to talk about housing. I wish many of the Deputies who talk about housing actually attended the Joint Committee on Housing, Local Government and Heritage because when they say there is nothing in this budget for housing, they are ignoring a €4 billion and a €20 billion package. They are ignoring new models of housing like cost rental, affordable purchase and the rapid increase in social housing.
Many of the things we are doing in housing are being done outside of this budget. We have put in place multi-annual budgets and policies that will extend not just over years but over a decade to the benefit of people who will avail of those homes.
The Deputy was on a roll and I did not want to stop him. I would like to echo what Deputy McAuliffe said. This budget is putting money back into people's pockets through decreases in taxation, the one-off measures and the substantial social welfare increases across the board. It is only possible because of prudent financial management over the last decade and of course, the extraordinary response of the Irish people in jobs and companies up and down the country during the course of the pandemic. That only happened because of the level of support that was provided by the Government over the past three years.
One of the most important aspects of the budget is the elements that have been put in place for one-off supports because of the cost-of-living crisis, such as the €600 being provided over three payments to households for the purposes of supporting them because of rising inflationary elements in energy costs. There is also recognition that those payments will not cover all of the energy increases and that is why the social welfare budget has been increased to include one-off payments, double payments and additional supports. In January of next year, we will see the ninth increase in the minimum wage take effect. That is the ninth increase since my party entered government in March 2011.
We will further invest in An Garda Síochána, keeping our streets safe and following up on commitments we gave to adequately resource our Defence Forces in line with the Commission on the Defence Forces. This is extremely important not just because of the current global environment but also because we want to honour the men and women in uniform and ensure they have the appropriate equipment to deal with the task we set out before them.
In just three minutes it is hard to cover all of the territory but I will focus on three important areas. First is the investment in housing that Deputy McAuliffe closed his contribution on. I echo his remarks about those making comments on housing while ignoring the work that is going on in the background and the increased budget that Department has been given. I note both education Departments and the likes of free school books at primary level, the reduction in and rebate on third level fees, and the increase in the numbers of those who will eligible for the Student Universal Support Ireland, SUSI, grant. Lowering income tax for middle-income workers is a very important aspect of this budget. Whether it is the average, mean or median wage level in the State, the taxation measures will actually support them. Finally, I refer to the importance of the State running a budget surplus when so many around us are not. Investing for the future and ensuring that if there is another hiccup along the road, we are adequately resourced to respond to it is almost as important as the €11 billion in this budget.
The number of vacant homes in this city is really depressing. According to new data from the Central Statistics Office there are 37,000 vacant homes in Dublin alone. That does not count Dublin City Council vacant homes. Within a short distance from here, a Leas-Cheann Comhairle, I could bring you to 50 empty flats that could be used if they were brought back to life. It is painfully clear to all who live in the city and those commuting in and out that many of these homes have been left empty for years. Those years of neglect are dragging back the city and communities they are built in. These vacant and neglected homes are being left empty amid the worst housing crisis the State has ever faced. There are thousands upon thousands of people crying out for the chance to have a home in their community, where they grew up and among their family and friends. Sinn Féin has long called for a vacant homes tax in the face of Government opposition. A vacant homes tax must not exclude derelict property and must apply a rate for long-term vacancy. We need an effective vacant homes tax that will push vacant homes back onto the market.
The Minister with responsibility for sports also announced a €35 million package to help sports clubs over this winter. That is absolutely welcome. It is really important that clubs are supported through this crisis. However, over a month has passed. Clubs are really struggling and waiting for clarity and communication about how this payment will be distributed. One issue that many small local sports clubs, which we all know about, have raised with me is concern around how the scheme will be rolled out. They are concerned that many of the bigger clubs, which are well resourced in terms of professional supports and professional members, will get the bulk of the funds and the smaller, less well resourced clubs will get the crumbs. That is a real worry for a lot of small clubs. Bill are mounting fast for clubs. I understand many clubs are reducing the number of nights they train in order to cut the cost of floodlighting and to reduce their energy bills. I seek clarification on how long it will be before there is communication with the clubs on this fund.
Also connected, last week the heavy rainfall affected many of the grass pitches across the country. Particularly in Dublin, the parks authorities called off a lot of pitches, which means they cannot be played on. That really highlights the under-investment in all-weather sports facilities. We need to ensure investment in them. We need all-weather sports facilities and they are not there. We have grass pitches and all they do is cut the grass on them. They do not manage those pitches.
The Finance Bill, which gives effect to some of the measures arising from the recent budget, is being considered in a number of particular contexts, including the cost-of-living crisis and electricity supply crisis. This year, a huge increase in the cost of energy is an additional cost for those who are already struggling to get by. Even before the recent spike in inflation, Ireland was the one of the most expensive countries in the EU in which to live. Our housing costs are the highest in the EU while the price of goods and services is 40% higher than the average across the EU. Generally speaking, the budget was welcomed by most people and businesses. In my speech on budget day, I acknowledged the Government's efforts to improve the circumstances of the public and the business community.
I wish to raise a number of items specifically relating to sections 84, 86 and 88 of the Bill. First and foremost, section 88 makes provision for the €1.25 billion temporary business energy support scheme, which was originally planned to cover just case I businesses, such as those involved in trade such as shops, hotels and restaurants. I welcome the announcement that the Finance Bill will extend this scope to cover case II businesses also. The fund aims to help mainly small businesses, covering up to 40% of the increase in energy bills, up to €10,000 per month until February. However, the Government has also decided that where a business operates from more than one location, the cap will be increased to a maximum of €30,000 per month. This is good news for some, but not for all. Although these measures are welcome, there are serious concerns being brought to me by businesses in Dundalk that are experiencing sky-rocketing electricity bills. The issue with the new energy support is that it only runs until February, and that date is even subject to EU approval. We are ending our energy support in February and then increasing VAT to 13.5% on the hospitality sector on 1 March. Are we trying to close businesses? This is disappointing and does not give certainty to business owners, especially if they have a hard winter.
Ireland Active; the representative body for leisure centres, gyms, swimming pools and commercial sports facilities in Ireland has stated that the cost of heating pools is resulting in very high bills. In Dundalk alone there are three leisure centres. On top of this, we have some of the biggest call centres that, during Covid, complied with the remote working model. Now, many employees who have been working from home since the pandemic are weighing up their options coming into winter. Many consider it more costly to work from home with the price of oil and gas on the rise, and are considering returning to the office. This is going to cause a lot of problems for the businesses. Some are experiencing a 300% to 400% increase in utility costs. This is going to cause lay-offs in businesses.
When the temporary business energy support scheme is found not to help that much, there will be serious problems. I agree that the electricity measures have provided relief for many households but the hospitality sector is again suffering. This shows the Government is out of touch with hardworking business owners who, after surviving the Covid crisis, are now being crippled by the cost of living. This is the main message I am getting from people in my constituency.
Homelessness is at record levels. People are queuing on the streets for a room. They are being priced out of buying a home and they are paying nearly half their wages in rent. The housing crisis is felt in every part of the country. In my constituency of Louth and in east Meath, there is a severe housing shortage and spiralling rental costs. The latest figures from Daft.ie show the cost of renting in Louth has risen by more than 8% in the past year, with the average rent now at €1,420. Letting agencies have painted a devastating picture of the current rental market, with the shortage of supply hitting people of all ages and walks of life. In Louth and east Meath, the rental crisis is catastrophic, with thousands of people viewing a handful of homes.
I have raised the issue of vacant homes numerous times in the House. I welcome section 84 of the Bill, which introduces a vacant homes tax in order to increase the supply of homes for rent or purchase. The provision will, I hope, encourage the owners of long-term vacant properties that are habitable and are subject to local property tax to bring them back into use. However, it will not apply to derelict or uninhabitable properties. In this time of crisis, we must ensure all houses are fully utilised.
Section 86 introduces provision for a defective concrete product levy, with the intention of raising revenue to contribute towards mica reliefs. Although section 5 extends and enhances the help-to-buy relief for a further two years, this levy will penalise young people trying to build or buy their first home, as well as local authorities trying to build social housing. The burden of the new levy is likely to fall on the residents of new-build homes rather than on the building industry. The Society of Chartered Surveyors Ireland calculates it will add approximately €4,000 to the cost of an average three-bedroom semi-detached house. We need to assess fully the cost implications of this new levy and how it will affect the most vulnerable in our society. As I have mentioned previously, it will have an all-encompassing effect on our economy, including on construction and housing, infrastructure and right across the board to our farming industry.
The Finance Bill and budget are two sides of the same coin. The real test will be their ability to have an impact on people's lives. There are many aspects of the Bill that we must praise. The increase in tax credits, the increase in inclusivity and other aspects need to be acknowledged. However, we are entering into a very volatile period in respect of living costs. The Bill has been neither future-proofed nor rural-proofed. The cost of most items is rising far too quickly. The cost of building homes is increasing swiftly. The cost of lighting and heating homes is rising rapidly. Any benefits people will get from this Bill and the budget will quickly be absorbed by those rising costs. I fear the real danger will be inflation. It is important that the Government recognises this and takes whatever action needs to be taken.
I have several points to make. First, a number of constituents have raised with me the issue of benefit-in-kind adjustments. The writer of one email on the subject said:
Dear Verona, I am writing to you about an issue which is going to affect my ability to feasibly do my job and whether or not I can continue in it. I am a sales rep. In the recent budget, the Government has proposed changes to be made on benefit-in-kind for those with a car provided by their employer. I cannot use a commercial van, so I am going to see a rise of nearly 50% in benefit-in-kind payments annually.
This measure is to incentivise people to use electric cars. I understand that. However, this is currently not practical for a sales rep as I cover a large geographical area and I travel into rural areas where electric vehicle charging points are not available. Additionally, I am under time pressure and do not have the luxury of waiting an hour to charge a vehicle. My car is my office and it is as important and crucial to me as your phone and laptop are to you. It is not a luxury that the company give me and for that reason I strongly urge that you ask the Government to offer a tiered system for those people who use the car in this way, or I will most likely be joining the social welfare system.
My constituents raise some very valid concerns and I urge the Minister to make allowances for them in the implementation of the new policy. I ask that the proposed timelines be delayed or scrapped now that he is aware of the unintended consequences and difficulties they present. Thousands of workers will be hit by a massively increased tax bill as a result of the measure. It does not seem at all fair or equitable. Again, it is the squeezed middle being squeezed to death. Constituents frequently say there seems to be no area of society where the Government is not trying to make life worse for the ordinary working people who are just trying to make ends meet. How can there be such a disconnect?
After a few weeks of a drop, we see fuel prices creeping up again, with diesel currently costing well over €2 per litre at the pumps. Fuel is the common denominator in this crisis. It is responsible for the biggest increase in the cost of living and is, in turn, driving up inflation. Yet, the Government has decided only public service workers will be recognised as incurring cost rises. They are being given a 6.5% pay increase, leaving low- and middle-income earners to suffer on. The Government must remove excise duties on fuel, as I proposed almost a year ago, and it needs to do so now. The Exchequer can afford, on a trial basis, to remove all excise on fuels. It will enable people to afford to do their jobs, particularly in rural Ireland, where there is no meaningful public transport and people have to use their cars. The question for most of those people is not how they will get to work but whether they will go to work. For them, work does not pay and that has to change.
Carers, to give just one example, are leaving their jobs. They get a measly 15 cent per kilometre. It does not pay them to use their car and nor do they receive a stamp towards a pension entitlement. Family carers continue to be means tested for the fuel allowance, which is just cruel. Those in charge and earning a much greater salary failed to comprehend the recruitment and retention crisis in the sector. Being unable to recruit and retain carers means the budget announcement of €11 billion in spending, which Deputy McAuliffe tried to impress upon us, will not be used. There are announcements about increased funding for home care support schemes but that money just does not get spent. Those announcements, like so many others, are just spin announcements.
I asked during my budget speech on housing earlier in the month whether the concrete levy will be applied to the price of concrete inclusive of VAT. That question went unanswered and is still unanswered even though the levy has been halved. The levy should be abandoned, not diminished. It is a sticking plaster being applied to a massive wound. The truth about mica is that those culpable went unregulated. The innocent paid and the Government continues to make them pay with a lifelong levy, just like the one introduced in response to the PMPA insurance crisis more than 40 years ago. It did nothing for insurance only make it more expensive. The competition regulator failed to investigate the insurance market's gouging of customers for years. That gouging continues and, 40 years later, so does the levy.
It is unbelievable that in the middle of possibly the worst housing crisis in the history of the State, the Government decided to increase taxes on house-building. The world looks on in disbelief not because we cannot house our homeless but because this is being done at a time when we are exclaiming to the world that we can take in and house more than 200,000 unfortunate Ukrainian refugees, not having even considered the 10,000 homeless people we had before the war broke out. It would be funny if it were not so tragic. For the sake of our people who are in need of housing supply, will the Minister please rethink raising the money on the mica scheme? Will he try cutting wasteful expenditure on lawsuits arising from incompetent semi-State bodies? An Bord Pleanála would be a good place to start.
There must be further discussion as to the behaviour of the Central Bank in relaxing lending rules by increasing the multiple that may be borrowed to four times applicant's earnings. It is very strange to see lending rules relaxed at a time when the cost of borrowing has increased and people's ability to pay has reduced due to increased costs in so many other areas. It raises the question as to why on earth this move was not made three years ago when houses were more affordable and the ability to make repayments was greater. Relaxing the rules at that time would have helped a lot of people to get on the housing ladder.
Remaining prudent was the excuse used back then, when housing was available at a more affordable price. These policies must have potential first-time buyers tearing their hair out. Everywhere they turn, the arms of the State have conspired to put barriers in their way. Now, when the cost of living is a crisis point, their spending is reduced, and as interest rates rise at a rocketing pace, the regulator sees fit to say "Tally-ho" to prudence, but "buyer beware". I am afraid that that is just another regulator that is about as useful as an ashtray on a motorbike.
I welcome the opportunity to speak on the Finance Bill 2022 and to address some of the queries that have been raised since the budget was announced. The energy supports for households are to be welcomed, but the problem is that there are anomalies in the whole process, and pay-as-you-go customers are not sure how they are going to get the credits or how it is going to work. That must be clarified, as a matter of urgency, in order to ensure that it is clear how people who need the support most can get it. I understand that the changes to the fuel allowance are going to come into effect on 1 January. The problem is that the application process will not begin until after that. There will be people in February, March and April completing their applications for the fuel allowance, and payments will be backdated to January. People are under financial strain and do not need to be waiting for backdated payments.
Another issue that I want to raise concerns students and part-time students who do not qualify for the €1,000 reduction in their fees. It is a mistake to do that. These are young people who have been working or continue to work, are trying to improve their lives, and are paying a lot of money to be educated. We should recognise that they are doing something that is right and correct, and we should encourage them by including them in the scheme for the rebate for students.
On benefit-in-kind, there is a false impression that when a person has a company car or vehicle, he or she is on the gravy train. When I worked in private industry and had a company car, it was a necessity. It was my office. I had my files and everything else in it to allow me to deal with my day-to-day work. I was in different parts of the country, whether Dublin, Galway or wherever, and I needed the car. The problem now is that the Government is trying to differentiate between those with electric cars and those with fossil fuel cars. The Minister of State knows, as he heard last Saturday, that we do not have the infrastructure in this country to support electric cars, particularly in the regions and the west of Ireland. Why are we trying to penalise people who have petrol or diesel cars when they cannot viably operate electric cars because they cannot be confident that they will get them charged when they need to? These are people who are tied to timeframes. It is important that we look at this matter.
Another issue that arises concerns once-off payments. I feel very strongly about the €500 payment that is being made to people with disabilities. Not everybody who has a disability will get the payment. People who were on disability payments and moved over to the old-age pension when they reached the age of 66 will not get this €500. They still have the disability, but because they changed from one category of payment to another because of their age and entitlement to old-age pension, they are going to be excluded from this particular payment. That is wrong. More importantly, the €500 should not be a once-off payment to people with disabilities; it should be the start of a process by which people with disabilities are given enough money to be able to live. Back in 2019, the Government commissioned a report from Indecon. That report pointed out that it cost between €7,800 and €12,000 for people to live with disabilities at that time. The cost of disability was that much. The €500 payment is welcome, but it should be made an annual payment that is increased year on year over the next five to six years in recognition of the fact that people with disabilities have additional costs. It is very important that we look at that. It would make a difference.
There is a lot of talk about housing. I have mentioned the issue previously. The day after the budget, I questioned the concrete block levy. Changes have been made in the sense that the levy has been reduced and the introduction of the levy will be deferred until September. The timing is wrong. It is ill-judged to be even talking about adding more to the cost of construction at this stage. What we should be doing is concentrating on schemes that we have announced that have not actually come into effect. The Croí Cónaithe fund scheme for rural houses was announced at the ploughing championships, but no local authority can deal with it yet because they do not have the paperwork or a directive from a Minister to do so. Let us get real. If we are saying that schemes are in place, let us make sure they are operating from the date on which they are announced, and that the spade work is done on them so we can actually put them into place.
In the north and western region areas there are thousands of houses that are vacant. People are coming to me who want to apply for funding to bring them back into use. All I can tell them is that they will have to wait until the ministerial direction is issued to the local authorities. I also wish to point out that the local authorities may not have the necessary resources and staff to deal with all this additional stuff that is coming into play for them. They need to be supported with additional resources to make sure that these schemes can work. It cannot be like the retrofitting scheme, which was introduced and announced with a fanfare a number of months ago. To date, 69 houses have been retrofitted out of a target of thousands. There is something fundamentally wrong when we have schemes like that. We are not going through the process of thinking these schemes out, putting a plan in place for their implementation and actually testing them to make sure that they will work. There is something amiss. Sometimes what happens is that people have a good idea and it is just put out there. The school transport programme is one such example. We must ensure that whatever we are doing is tried and tested before it is introduced.
I welcome the opportunity to speak on the Finance Bill 2022. I acknowledge the Minister's continued management of our economy, especially in challenging times, which has enabled us to make an €11 billion intervention without borrowing - a substantial achievement - while also placing an additional €2 billion aside this year and a further €4 billion next year in a reserve fund to protect Ireland from shocks in the future. Given the difficult winter that is facing us all, I welcome the progressive measures contained within this Bill, which are designed to ensure that those in society who are most impacted by rising bills and inflationary pressures, along with the squeezed middle, are supported in what is an enormous cost-of-living budget. This Bill has Fine Gael's fingerprints all over it. I also welcome the contributions of the coalition Government partners.
No one across our society has avoided the difficulties posed by rising costs. The Government cannot insulate everyone fully from them. Those difficulties are set to get more acute as we approach the end of the year and the start of the new one. However, €1.2 billion has been allocated for supports to help consumers over this year and next year, which is a hugely important step. Chapter 3 will give rise to a reduction in the amount of tax that workers pay, putting more hard-earned money back into people's pockets, with a fairer income tax package for all. The increase in the standard rate of cut-off for a single person, from €36,800 to €40,000, will certainly assist middle-income workers across the board.
Section 12 sets out a really positive measure that introduces a new tax credit for renters that is worth €500 per renter, and €1,000 for couples. Thankfully, the €500 tax credit will also be extended to parents who pay rent on behalf of their sons and daughters attending third level education, which will also ease their burden.
Section 5 supports our housing policy to extend the help-to-buy scheme for a further two years.
It is an essential step that has already helped over 36,000 householders to date. Of those, 728 have availed of the scheme in Mayo alone, which has assisted those who were finding it difficult to get onto the property ladder.
The announcement of the extension of the tax incentive under section 481 until 2028 is very welcome but there is no extension of the regional uplift programme, which proved valuable in bringing productions outside of the Dublin and Wicklow hubs. The uplift has seen considerable production activities across the country, from Kerry to Donegal. I continue to advocate for its return in some form, especially as my county has an opportunity to benefit.
I join colleagues in asking for further consideration to be given to the impending changes to benefit-in-kind calculations on company vehicles due to come into effect at the start of 2023. Many constituents have contacted me and outlined that the timing and justification for this measure are completely inappropriate, given the cost-of-living pressures through which we are currently going.
This is substantial legislation. I welcome the Finance Bill, of course, which is a detailed and substantial piece of legislation. I will not get to say much about it in my allotted three minutes.
I am sympathetic to the remarks made on various sides of the House about the benefit-in-kind scheme. I do not know if that has been properly thought through. I urge the Minister to look at it again while there is still an opportunity to do so.
I welcome the improvements in the employment incentive investment scheme and the entrepreneur's relief scheme, not because of any desire I might have to make the rich richer but because it is important that we strengthen the indigenous sector. Foreign direct investment has proved a tremendous boon to this country but in view of the uncertain world we now live in, it is very important to build up the indigenous sector, particularly SMEs, so that our tax yields can be future-proofed against whatever is coming down the track.
I welcome the Government's decision to extend the threshold for the higher rate of income tax to €40,000. People in other countries to whom I have spoken are amazed that we come into the highest tax rate at such an early stage. The Irish income tax system has rightly been described as the most progressive in the world. However, I wonder whether, wittingly or unwittingly, we make it a little less progressive through this decision. The difficulty if the threshold is raised from €36,800 to €40,000 is that working people who earn up to €36,800 do not get that particular benefit. I know that some misleading figures have been put around here because many of those people qualify for the working family payment, if they meet the various criteria. Some qualify for more than others. Nevertheless, I am a bit mystified as to why something could not have been done, for example, with USC, to at least narrow the advantage it has given to people who earn a multiple of others who earn less than €36,800 per annum. That should have been done.
I also welcome the extension of the TBESS to professionals. That was a good move. However, I am somewhat amazed it has not been extended to charities. Charities are facing increasing demand, decreasing contributions and increasing costs. Their reserves are depleted after the pandemic. The charity sector is very important. It does an enormous amount of work, particularly in the areas of mental health and disabilities. They assist people with housing, etc. They are also businesses, albeit not for profit. They are facing a perfect storm. Even at this late stage, the Government should look at the notion of extending this particular concession to charities. I do not know how much it would cost. Perhaps the Minister could examine that. I would appreciate it if he would respond specifically to that point when he is replying to this debate.