Feargal Quinn (Independent) | Oireachtas source

The Minister is very welcome.

I was very taken by Senator Gilroy's words in respect of the young man and his four-year old daughter for whom he could buy clothes. His question was what will this do to help that situation. I appreciate the Minister has taken a number of steps to ensure that we move in that direction.

I have been advocating for the release of some pension funds to allow citizens some relief and to get cash flow in the economy. I welcome the move to allow people access to 30% of their additional voluntary contributions. This will help thousands of people who are in trouble. It is a forward-thinking move which will be of benefit to people who need cash now.

I draw attention to a recent article by Mr. Richard Curran in the Sunday Business Post, entitled "How Noonan can encourage spending". In it, he said that if you cannot pay your mortgage or your credit card loan or you simply do not have any money to spend, what good are your pension savings to you? Pensions may be useful for the future but many people are trying to deal with the financial challenges of the present. He also said that. "Such a measure will create an economic stimulus as people would probably spend the money they receive." I am glad the Minister has heeded those views. However, I would like him to allow people to take a certain amount of their AVCs tax free, say, the first ¤10,000 and pay the 41% on the rest. This would encourage more people to access the cash they need. Will the Minister consider an amendment to reflect a small amount, say, ¤2,500? He must realise that people are being crippled by household debt. If a person or an SME could access ¤2,500 tax free tomorrow, they would, perhaps, pay off a credit card debt and several overdue bills and get back on their feet. The possibility of a person starting all over again is very exciting. If a person can do that, then we have set the conditions for them to start their own business, which is what we are all hoping we can encourage. That is what government should be all about, not giving them a job or providing for them, but setting the right conditions for them to make their own way. That is why I urge the Minister to consider an amendment whereby a small port of the AVCs can be accessed tax free.

We should also consider a measure to allow businesses tax free access to pension funds linked to expansion of their businesses or taking on new employees. This could be considered a Government nudge in that it would allow businesses to access cash if they wish to expand. As a business person and what every businesses person will say is that cash is king. Businesses need to get going. If they could access a little more cash it would open up many possibilities. There are savings and there are pensions. I have been involved in Link Finance Limited, in which I declare my interest, because it aims to facilitate peer to peer lending. That is an example of what the private sector is doing to help SMEs. I think the Government can permit businesses to access cash by allowing them some access to pension funds.

People argue that we should not allow any access to pensions but the point I would argue is that the Government has already dipped into people's pension funds with the pension levy. Even the Government's National Pensions Reserve Fund has been used for the short term. Why can an individual or business not access some small portion of them as the Government has done? I stress now is the rainy day. There is no point in opening up pension funds in five years time. We need to allow businesses to survive now by allowing them access to much-needed cash. This could also provide a massive stimulus to our economy.

In 2009, Denmark allowed people to take a portion of their pension funds to cover immediate expenses rather than wait for retirement. Approximately 94% of those who had pensions took out some of their money and the economy was stimulated to the extent that GDP increased by 1.4%. Imagine the benefits if our GDP had a similar rise and the benefit to the SMEs who were able to access cash and expand, or even to survive. The Irish Brokers Association said that allowing people early access to their pensions has the potential to unleash ¤1.5 billion and to get 50,000 distressed borrowers out of financial trouble and it could support 7,300 jobs for a period of three years. If we introduce a similar measure we might free up a portion of the estimated ¤100 million held in voluntary Irish savings to create confidence in the economy. It would have a flow-down effect, not just for persons getting access to some of their pension but it would get people spending again and benefit large parts of the community.

We need to get people spending again. This release of money would be a way to do it. Will the Minister consider this idea in the context of the Bill and even an amendment to it. If we do so, we could support the SME sector even further. I am sure the Minister can see the inherent sense of this simple idea. While I welcome the limited access to the AVCs we could go further by simply allowing SME access to a small portion of cash locked up in pensions. Given that the Bill improves the conditions for research and development tax credit, there are other things we can do. Sweden introduced what is known as the earned income tax credit in 2007. The measure offered strong incentives for lower skilled people to work and marked a fundamental change for Sweden. The so-called earned income tax credit was reinforced in 2008, 2009 and 2010. The stated motive of the reform was to boost employment, in particular, to provide incentives for individuals to go from unemployment to at least part-time work. It has given some lower paid workers the equivalent of a month's extra salary every year. Even the Swedish Finance Minister, Anders Borg, did not expect that his tax cut for the lower paid would increase economic growth so much that it has almost entirely paid for itself. It would be worth the Minister's while having a chat with the Swedish Minister for Fiance. It appears to be a real success story. He did it in 2007 and repeated it in 2008, 2009 and 2010. It is a success story of putting money back into the economy and creating jobs.