Seanad debates

Wednesday, 30 September 2015

Pre-Budget Outlook: Statements

 

10:30 am

Photo of Michael D'ArcyMichael D'Arcy (Fine Gael) | Oireachtas source

I thank those in the Fine Gael group who covered my absence during the recent banking inquiry. I also offer my heartiest thanks to Jimmy Harte for his work here. I have not had an opportunity to do that and I wish him and his family well in his retirement.

The entry point for USC was €4,000, but we brought that up to €12,000, which is a big increase. Practically everybody paid USC at one stage but in the past two budgets 500,000 people have been taken out of it. That is not bringing us back to the days when 40% of people paid no income tax - as I read recently in an article by the late Dr. Garret FitzGerald - and we wondered how our taxes collapsed. It was not too difficult to see how that happened.

I support the dialogue with the community pillars. One of the things this Government has done well, and the Minister must be given credit for it, is that in the main there have not been strikes. People bought into the plan, some of which we inherited, as must be acknowledged, and the alterations this Government made to it.I do not support electioneering on budgets. There is always a price to pay in the future. It happened in the 1970s with the Lynch Government, and we know what happened with the banking collapse and everything since then. One of the figures I was flabbergasted about was that voted expenditure from these Houses, which was less than €19 billion in 1997, had risen one decade later to €63 million. And we wonder how our economy collapsed. While the banking sector contributed, it did not account for all of it. The fall in the tax take when the downturn came was the primary cause. At one stage, we had a deficit of €23.7 billion - not quite €2 billion per month, but very close to it. This puts it in the context of the per annum situation. Anglo Irish Bank will have cost us €30 billion in its entirety, and one year's deficit was close to the same figure.

I fully support the restoration of moneys to the public by way of tax reductions, if possible, by removing people from the USC net and lowering the tax bands. Given that the public - nobody else - paid for all of it, we must give back to people the opportunity to have a standard of living that they accept. The Irish people are the reason we are back on target to reach a normalised cycle. The Minister referred to the Financial Emergency Measures in the Public Interest Acts, and we all remember passing the Acts in both Houses and scratching our heads wondering whether it was doable. It was doable and it has been done, and the public is entitled to something back.

I have always been clear, and the Minister has heard me say it several times, that there must be a reward to work. The data is available to show there is a very small gap between those on lower pay and those in receipt of social welfare payments. The gap is the reward for working. The solution is not to impoverish people by further slashing welfare rates but to allow people to earn more money and pay less tax. We are trying to do this by the means mentioned earlier, and it must happen.

There are issues - I will not say "crises" - that are coming down the tracks very loudly and clearly. We cannot ignore housing affordability. While there is much discussion about the crisis in the housing sector, there is very little discussion about the affordability crisis. This morning, I heard on the radio that it costs six times the average wage to buy a property in Dublin and five times the average wage in the country, which is well outside international norms. The ratio outside Dublin is much more alarming, given that there are higher pay rates in Dublin than down the country. It is a criticism that while some would say Dublin is recovering, the rural areas are slower to catch up. Will the Minister examine the housing affordability crisis? I am concerned about it.

The self-employed kept going through thick and thin during the recession. If it is possible, perhaps over a number of years, to ensure that the self-employed are on the same rates as the employed, I would fully support it. It has been flagged several times and it is on the radar. Sometimes, it is easier to avoid the hard choices.

The Minister mentioned DEIS, which was originally calculated in 2004, pushing towards 12 years ago. For some reason, some very obvious areas were excluded from having DEIS status. For example, our constituency, Courtown-Riverchapel, which the Minister knows well, is an area of urban disadvantage that should be on the same level as other DEIS schools but is not. Although it is a difficult one to grasp coming into an election, it should be done. The area requires the same pupil-teacher ratios and advantages that exist in DEIS schools.

County Wexford does not do well regarding IDA jobs. This is a fair criticism and I accept my portion of the blame for it. I was very disappointed last February that Wexford received none of the IDA's regional funding. The IDA has four acres of land in County Wexford, which is not good enough for a county of our size. There should be more focus and we should be more strategic about what can be done. I do not want to eat anybody else's sandwiches, only to ensure that what should be available for our county is available. The situation is a mistake and should be addressed.

Senator MacSharry made a claim about the higher-paid. I have always tried to be fair to the previous Administration, which implemented much of the plan in late 2010 under the then Minister for Finance, the late Brian Lenihan. It was clear, at the time, that those on higher pay would pay more, which we all supported. According to the OECD, our income tax system is the most progressive in the OECD, which I support. Those who earn more pay more. However, there comes a time when one cannot keep taxing a smaller number of people and thinking it will fill the hole in the nation's finances. The Fine Gael view is the fair view that somebody who is earning more pays more, but we cannot keep pushing those rates up because it will result in diminishing returns. I support the very progressive position the Minister took last year by increasing the entry point into the higher rate of income tax, which is 40%, from €32,800. In our English-speaking neighbours east and west, the UK and the US, one can earn approximately 20% and 35% more, respectively, before incurring the higher rate. The major issue with the tax system is that one is subject to the higher rate far too early. When a couple merges two €40,000 salaries, we can call them "high earners," but I do not believe they are fabulously wealthy.

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