Pearse Doherty (Sinn Fein)

Cuirim fáilte roimh an Aire Stáit agus gabhaim comhgairdeachas leis.

The Government parties in their programme for Government in 2002 claimed, "We will keep the public finances in a healthy condition". Interestingly, no such commitment appears in the new programme for Government. With lower growth projected for the years ahead, the focus needs to be put on what is required to ensure the public finances remain in a healthy condition to enable the State to meet its obligations in the delivery of public services and social protections. It needs to be ensured the Government does not go further down the road of a low tax-low public services model that will inevitably result in the downgrading and dismantling of public services and social protections. The proposed commission on taxation will need to examine these issues in detail and must focus on the need to create a fairer taxation system. The explosion in stealth taxes and charges over recent years will have to be addressed.

Dr. Alan Barrett of the ESRI put forward the view that limited tax increases "would not be economically damaging" and would provide the Minister for Finance with "wriggle room" on the expenditure side in December's budget. Dr. Barrett is right to initiate a debate on these matters because crucial decisions on the direction the State takes must be faced. Government decisions to raise or reduce overall taxation revenue must be made on the basis of what is needed to meet social goals and other spending demands. The reduction in tax receipts as a consequence of the slowdown in the property and construction sectors means the tax base needs to be examined.

A number of key vulnerabilities in the economy were evident in advance of the general election. Chief among these was the implication for tax receipts of a widely predicted decline in the construction and property sectors. The tax strategy papers prepared in advance of the last budget show there was a clear awareness of this within the Department of Finance. The argument made by Sinn Féin in the run-up to the election that the Government could not, with the slowdown in economic growth and the developments in property and construction, afford to cut taxes and maintain, let alone improve, public services has been shown to be correct. The Government was wrong to cut the higher tax rate from 42% to 41% last year. This resulted in high income individuals receiving the largest increases in weekly income as a result of the 2007 budget. It was wrong to promise to cut the top rate by another 1%. I welcome the fact that Dr. Barrett also echoed Sinn Féin's position in saying he was "not entirely convinced" that the proposed reduction in the top rate of income tax from 41% to 40% was the most pressing change required in the tax code, given it is not.

This revenue would be better directed to many other areas, including improving public services and social protections. It is incredible that the Government is proposing to proceed with further cuts and, in particular, the additional cut in the top rate of tax, given a projection for tax collection in 2008 that is €2.2 billion lower than predicted last year on budget day. The Taoiseach still insists the Government will implement its tax and PRSI cutting proposals despite the evidence these are not viable.

Sinn Féin would like a number of specific tax measures to be included in the 2008 budget. We call on the Minister to increase the restrictions on the use of specified tax reliefs to ensure high income individuals pay their fair share of taxation. No high income individual should be able to write off more than 10% of his or her income through such exemptions. Another minimal step that needs to be taken is the standard rating of discretionary tax expenditures, many of which will have to be examined by the commission on taxation to asses whether they play a useful role.

I would like to deal in detail with the proposed cuts in PRSI as there will have far-reaching implications. The main conclusion of the latest actuarial review of the social insurance fund published last week is that the fund's net cash flow position is projected to decline rapidly after 2010 and that the surplus is projected to be exhausted by 2016.

The programme for Government commits to reducing employee PRSI from 4% to 2% and the rate for the self-employed from 3% to 2%. Sinn Féin pointed out when these proposals were first mooted in advance of the election that they were being made without any consideration of whether the social insurance fund was sufficient to meet current and future demands. We highlighted that there were already serious concerns about the adequacy of the fund based on the findings of the first review. The latest review has reinforced these concerns with its finding that contribution rates would have to increase substantially if the fund income was to support the benefits being paid from it into the future.

The situation would be far worse if Fianna Fáil's proposals to cut PRSI contributions were implemented. The fund is set to face additional demands in the immediate term as unemployment is predicted to rise next year from 4% to 5.5%, or an additional 10,000 unemployed. This has significant implications for the social insurance fund and is a further reason the PRSI reductions are a non-runner.

Tighter finances represent a significant test for the Government. Cutbacks in public services — whether obvious, as in budget 2003, or more discreet, as is likely to be the case next year — cannot be tolerated. Neither do we want to see key infrastructural projects under the national development plan being tactically delayed to reduce costs in a given year, with those costs being pushed forward to a future budget. A far more sensible approach would be to borrow for these projects, thus ensuring their early delivery and helping to improve our competitiveness, which is currently negatively impacted by our infrastructural deficiencies.

Members have heard of several instances where increased funding is required for specific infrastructural projects. For example, I have raised on numerous occasions the need for a high-speed dual carriageway from Dublin to Derry. There is also a need to reintroduce rail services in the north west, particularly with a view to closing the loop between Derry and Sligo through a full reopening of the western rail corridor. These are additional projects that should be included in the national development plan and Transport 21.

There is nothing in the pre-budget outlook to indicate the Government is taking action to prevent a recurrence of the disgraceful situation where end of year budget overruns have been overseen by the HSE, with the result that services to patients have been curtailed. The claims by the Minister for Health and Children, Deputy Harney, and the chief executive officer of the HSE, Professor Brendan Drumm, that the so-called saving measures would not and should not impact on patient care have proven to be totally worthless. Even if they believe their own claims, neither the Minister nor Professor Drumm did anything to ensure the so-called savings would not be at the cost of patient care.

The most fundamental issue regarding health spending is not how much is spent but how it is spent. This must be addressed by the Government in the forthcoming budget. If the Government has not already been awakened by the public in recent months to the failings of the health service, I invite Ministers to come to the north west and talk to people there. They should speak to patients in Letterkenny General Hospital who must travel to Dublin for radiotherapy service. They should visit Sligo to assess whether the cost-saving measures are affecting those on the front line of the health service. Their eyes will be opened if they accept my invitation.