Michael McCarthy (Labour)

I welcome the Minister of State, Deputy Sargent, to the House. My opening comments were planned to be directed to the Minister of State, Deputy Martin Mansergh. I was appalled last night to watch "Nightly News with Vincent Browne" and to hear the Minister of State, Deputy Mansergh, defend the budget in the way he did. The practice whereby serving TDs and Senators were in receipt of ministerial pensions was wrong and I am glad the Government has decided to do away with it. If one is a pensioner then by definition one should be retired and be given a pension on leaving the House. When asked by Vincent Browne whether he agreed with the practice, or "codology" as he referred to it, The Minister of State said he agreed with it but that a case could be made for the retention of the Taoiseach's pension while still a serving Member.

I acknowledge the job of Taoiseach is a difficult one with many pressures and that the holder deserves to be well paid and well looked after when he or she has retired. However, it is contradictory, if not sad, for a Minister of State to support the taking of the Christmas bonus from someone who is long-term unemployed or an old-age pensioner while making the case on TV3 for a former Taoiseach and sitting TD to be allowed to retain a pension of €170,000. We need realism in this debate and to suggest political reform was built into the budget is not true. I welcome the symbolic gestures made which we needed to be seen to make in this House. This was symbolism, however, because we know that while the savings made by not paying serving TDs and Senators their pensions will not be significant, the gesture sent out the right signal.

I welcome the decision to halve the allowance paid to the Chairmen of committees and to abolish the allowance paid to Vice Chairmen, convenors and whips. However, the Government should have gone further and abolished at least half the committees. There should be an audit of committees to decide which are essential and then examine the other aspects of parliamentary work that cater for the committees which are unnecessary and a huge burden on the taxpayer. The Government did the right thing in halving the allowance for Chairmen of committees and ending the allowance paid to Vice Chairmen, whips and convenors but the extra step is needed to abolish unnecessary committees.

I have raised this issue on many occasions and other Members on all sides of the House support the points I make. There has been a drastic reduction in the European Central Bank rate recently. The rate is now as near to zero as it ever has been or ever will be. It came down again by 0.25% this day last week. The three types of mortgage to which I will refer are tracker, variable and fixed rate. Tracker mortgages are related to the European Central Bank rate and a reduction will automatically be passed on to those on tracker mortgages, hence the term "tracker mortgage". Those on variable rate mortgages are not necessarily guaranteed a reduction. It is at the discretion of the banks to pass on that discount. Most have passed on the discounts thus far, but I do not believe any reasonable, thinking person would allow discretion to banks, given the nature of the economic mess in which we find ourselves. There is no doubt the banks are responsible for some of that. While some banks have used this discretion, others have not, which is not very supportive of those in unsafe jobs who are paying mortgages. It is not good enough for such people to be dependent on banks' discretion.

Anyone who sought advice from a mortgage adviser in recent years, whether in a bank branch or a building society, would have been advised to enter into a fixed rate mortgage agreement because of the economic climate at the time. That was very good advice because the rates were rising. Now, the rate is as near to zero as it ever has been and those in such agreements are locked in. Some banks are seeking ridiculous amounts of money to allow people to be released from such agreements. In one case, the sum involved is €12,000. It is somewhat like constructive dismissal, whereby the situation is made so unpraticable that the person concerned has no choice. It is a Hobson's choice and one may take it or leave it. It is not financially worthwhile for people to get out of such agreements. Let us bear in mind those on fixed rate mortgages. By definition, the agreements entered into were a reflection of interest rates at the time. Those involved are young couples with families and single people who made such agreements in the past two or three years. They are now repaying mortgages at rates of 4.5%, 4.6% and in excess of 5% in some cases. Such people do not benefit from reductions in the European Central Bank rate.

I have written to the Minister for Finance, Deputy Brian Lenihan, and the finance ombudsman on the matter. Until something is done I will consistently raise the matter of the plight of those with fixed rate mortgages in this House and elsewhere. Let us consider the manner in which the taxpayer has recapitalised and guaranteed the banks. Let us consider the new body, NAMA, the national asset management agency, and the manner in which the taxpayer has supported and bailed out the banks in difficult times. It is not unreasonable to expect some level of quid pro quo. The Government should instruct the banks to let these people out of such agreements. It is the least they could do given the amount of money spent bailing out the banks. Sean FitzPatrick, Michael Fingleton and such people have been living in cloud cuckooland with pensions of €28 million and €1 million bonuses. They have probably benefited more often than a young couple in receipt of benefit from mortgage interest relief. Those who benefited from mortgage relief will no longer benefit after seven years. The arrangements which allowed Fingleton's pension still exist.

I call on the Minister of State, Deputy Sargent, to take the message back to Government to give some element of leverage and to show some sympathy for those locked into fixed rate mortgages. It is not good enough that the issue is not used as a negotiating tool with the banks or that there is not some element of quid pro quo in terms of getting younger people out of very difficult situations. It is no good to say inflation is at an all time low or that the ECB rate is down. Such people are not benefiting in any shape or form. That must be paramount in terms of negotiations with banks and it should be locked into any agreement that the Government makes in respect of NAMA. I will keep raising this issue until such time as there is some movement on it. It is necessary and I say that genuinely for the thousands of hard-pressed couples who are finding it difficult to pay mortgages. Those who have lost jobs are being subjected to the same brutal regime by banks, as are those whose jobs are not guaranteed in future. I call for some consideration for those people.

I believe some of the language in the budget was cleverly disguised to confuse people. The further we move from it, the more we realise the severity of the budget. It will be evident when the dust settles. I quote the deputy leader of the Labour Party and spokesperson on finance, Deputy Joan Burton. On the day the budget was announced, she stated in the Dáil that this was a budget from hell, which is precisely what it represents if one is on a low income or social welfare.

I refer to the health levy which is built into PRSI. The Budget Statement used language which almost disguises what is taking place. Someone earning €75,000 per year pays 2% on the levy, but someone earning €750,000 pays 0.2% of their income on the health levy. Will the Government indicate if that is fair? It is not. Why introduce such flowery confusing language to disguise what is taking place?

As a result of the budget the Christmas bonus will not be granted to the old age pensioner and those who are long-term unemployed. Certain right wing economists and commentators would have us believe that to be on social welfare is the same as getting money for nothing, with a free house and a hand-out as opposed to a hand up, and that it is almost an attraction or something of which to be proud, which is not the case. I have been unemployed and anyone who knows what that is like can testify that it is not very uplifting to join a dole queue.

We have had to listen to nonsense from right wing commentators who seek a 3% hit on the social welfare bill. It was pointed out by the Green Party spokesperson on finance that the social welfare bill is €21 billion. However, what is the cost of bailing out developers and banks? It is €90 billion and NAMA must be established to deal with that. The budget places a very substantial burden on middle and lower income earners, including significant taxes on gross income.

Let us consider the income levy. Last October, I stated that we should be honest in terms of the debate on the budget. The income levy is precisely an increase in income tax. The pension levy is another increase in income tax or a pay cut for public sector workers. Gardaí, teachers, midwives and local authority workers are now expected to finance our way out of this mess, which was created by absolute avarice and greed and lack of regard for the ordinary working individual. The McCreevy and Progressive Democrats era tax policy was comprised of "spin, spend and God will send". Who is paying for that now? The ordinary hard-pressed taxpayer is expected to bail out these blackguards from the mess in which we find ourselves. These cuts with the income levy from last October particularly affect middle income families.

I refer to one statistic although I am conscious that citing statistics can be technical. A couple, one of which is a PAYE income earner, with two children under five years of age, earning €15,500, will lose €1,154 per year. A similar family earning €30,000 will lose €1,680 in this tax year. I was struck by the data which flashed up on the screen when the budget was announced. A person earning €15,000 stands to pay an extra €350 per year because of the income levy, which may appear harmless in print. However, we must be mindful of the affordability of such an individual or family unit to pay that extra €350. It does not sound like a good deal of money if it is taken from someone over a 12-month period, but it is a good deal of money if such a person fails the affordability test. I have no doubt if an affordability test were applied in this regard, we would arrive at this conclusion. There has been an average pay cut of 7% for public servants and a 25% increase in VHI bills.

There is a €1,500 registration fee for third level education and more third level fees are on the horizon. It is a clear, stated target of the Minister for Education and Science to introduce third level fees. The matter deserves long, tedious debate, investigation and research. Let us not rely on dental economists to supply figures to the Government when it must make decisions in this regard. The Labour Party abolished third level fees when Ms. Niamh Bhreathnach was Minister for Education. That was a fundamental legacy of that Government and if the Government of which Mr. Donogh O'Malley was a member took the same line as the present Minister for Education and Science, we would also pay for second level education. Different soundings came from Government prior to the publication of the Budget Statement. There was talk of fairness and balance, closing off tax shelters and targeting tax exiles. However, there was no fairness and balance, apart from the references to it in the speech. There is no way in which one could state that the budget is fair and balanced towards those on lower or middle incomes.

I refer to tax exiles and I have consistently raised this matter. I stress that such people are doing nothing illegal. The current system is the creation of both Houses of the Oireachtas, but it must be changed. It is preposterous that any business person can sell a business, make millions of euro and then register his wife to live in Italy for 183 days to avoid paying a €4 million tax bill. One could not make that up.

A couple with two young children and a mortgage fixed at 4.8% or 5% will face a doubling of the income levy, the pension levy if one or both parents are in the public sector and the withdrawal of the child care supplement, which was worth €2,000 per year. The couple's mortgage interest repayments to the banks, the greedy institutions that nearly collapsed the economy, will be double what they should be were it a question of fairness. Given all of the above and the extra 5 cent on a litre of diesel, while telling other people that they can go to Italy for 181 days so as not to pay their income tax bills is ludicrous. Where does the buck stop? Does the Government have any shame? How can we allow this situation to continue? We are being told the tax shelters will be closed off, but not yet. O Lord make me holy, just not yet.

It is neither fair nor balanced that a review of the tax reliefs has been put on the long finger again. We have heard much about self-administered pension schemes. On Tuesday, the Grinch removed the Christmas bonus from old age pensioners and the long-term unemployed, but he thought nothing of going after a scheme that allowed the Michael Fingletons of this world pensions worth €28 million. Who are they trying to blackguard?

Landlords' mortgage interest relief was only shaved by 25% despite the fact that a full phase out could have saved the Exchequer €500 million. No top rate of tax was applied to high earners. Those earning €200,000, €300,000 and €400,000 per annum will pay proportionally less than a school cleaner, who may only earn €10,000 per year. The banks have been given another bail out, but there is conflicting economic evidence of its cost. This morning, Peter Bacon gave his opinion.

In attacking the poorest and most vulnerable, the early child care supplement has been abolished, but let us not forget that the Government abolished the free book scheme last October. Last Tuesday, it removed another €30 million from the schools building programme. I could count on one hand the number of schools in my constituency on which the Government is spending approximately €500,000 per year for prefabricated buildings, yet there is no long-term investment in decent education infrastructure. The Government has decided that it is fine for people to have pensions of €28 million and to do a Cinderella trick, that is, slipping in and out of the country before midnight as long as air traffic controllers do not spot them.

I welcome the introduction of a preschool year for every child, something for which the Labour Party has campaigned consistently. Since the decision has been made for the wrong reasons, my welcome is cautious. There is little to praise and much to lament in a budget that hits working families, but the decision to replace the child care supplement with a sustainable and sensible system of preschool child care is right. However, a number of questions remain to be answered. A universal system of early child care would cost less than the combined funds currently being spent on the supplement and the separate subvention scheme.

As details of the budget begin to emerge and as the dust settles, it seems the intention is to deliver the scheme through the existing preschool infrastructure. Is there enough capacity? Do we know how many places are required? While some 80,000 children are in this category, is the system capable of delivering on the Government's promise? These questions must be answered.

It is extraordinary that, given our options to save money, we have targeted overseas development aid, ODA. We are discussing the poorest and most vulnerable and disadvantaged people. In the past ten years, various Ministers trotted off to United Nations meetings and gave various commitments, but these were nothing short of lies. We will not reach our ODA target. We are not serious about the protection of children's rights in Third World countries.

The Government has attacked the poorest and most vulnerable, but it has left untouched the tax exiles, the €300 million in tax relief on pensions for the rich, the €10 million in artists' tax exemption, the €400 million in tax relief on non-health sector property-based schemes and the €400 million in tax relief for landlords. Why would any of these be touched when, on Christmas week, a pension could be taken from an old age pensioner and €204 could be taken from someone who is long-term unemployed? It is a full week's amount and 50% of the usual amount received at Christmas. Why would the Government bother chasing landlords or those who can most afford cutbacks when it can harangue, harass and consign to poverty——