Alice-Mary Higgins (Independent) | Oireachtas source

I welcome the Minister for Finance and Minister of State to the House. In the Minister's speech we saw an acknowledgement of the recent anomaly in the published GDP figures that claimed there had been a 26% growth in the economy. The figure has been roundly mocked and led to unwanted attention on a global level. In the debate since then we have been urged to focus on other figures, such as the consumer spending figure of 4.5%, as being a more real and notable indicator. I note that the Minister for Finance said in his speech, "Given the distortions in the GDP data, I view employment and unemployment data as the best indicator of trends in the economy." I wish to state, while bracketing first an aside that I share the concerns expressed by Sinn Féin on what this means in terms of our relationship with corporations and our international reputation, the fact that false money inflated the figures and that this is mockingly called leprechaun economics, and that moneys such as that turn to ashes in people's pockets, that it is important we address the anomaly, the message it sends internationally and the concrete cost it could have in terms of Ireland's EU contributions.

I will return to the real indicators. I suggest that as well as employment, unemployment, consumer rates and consumer spending we look at figures such as the in-work poverty level in Ireland that stands at 18%. We should also look at the gender pay and pension gap, both of which have widened over recent years. The gender pay gap now stands at 14.4% and the gender pension gap has widened from 35% to 37%. Even though both figures were mentioned in the programme for Government, they were not mentioned in the spring and summer statements. I urge that these indicators, which were discussed in the programme for Government, are reflected as indicators of our economic trends and well-being.

We should also look at the Gini coefficient figures in terms of income and equality. We know that the OECD has found that Ireland has some of the highest levels of income and inequality before social transfers and tax. Global research is available, and not just analysis such as The Spirit Levelbut concrete research from entities such as the IMF. The IMF conducted research in 170 countries over 30 years and found that a 1% increase in income for the 20% on the lowest incomes, that means the bottom quintile, will raise a national economy and an equivalent increase for the wealthiest quintile lowers the economy. We have direct evidence from 170 countries over 30 years that shows a trickle-down approach does not work. It is building and raising the foundation that works. With that in mind, and given the important role that tax and social transfers have had in redressing the balance in Ireland, and it has been acknowledged that this country has redressed the matter considerably, I am concerned that we would do anything to hollow out the income tax base that has done such work in redressing inequalities, especially given that such redress has traditionally been used as a defence when the OECD and others raised the issue of inequality with us.

I was disappointed with a simple line on the second page of the summer economic statement that reads, "Given that personal tax rates in Ireland are too high". Unfortunately, no rationale is given, no argument is made and no case is put forward as to why personal tax rates are too high. If we wish to be taken seriously on a European or global level and show we are serious about our economy, we need to put forward serious economic figures and arguments for a range of taxes rather than allow assumptions to be made and our economic situation to be taken for granted.

I wish to express my concern about income tax. In terms of income tax being too high, I believe it is barely high enough to meet the demographic projected spending on public investment. I would be particularly concerned about proposals to cut USC for higher and middle incomes. I make the plea that when we talk about the economy, we must remember that the median income in Ireland is €28,500, that half of the population earns less than €28,500 and any tax concession in our budgets and economic planning needs to begin by focusing on that half of the population.I note one positive element which is the plan to phase out PAYE tax credits for higher earners. It is a small gesture but there is also a need to address the problem of marginal rate tax reliefs on pensions, which disproportionately benefit higher earners and work against the stated Government goal of closing the gender pension gap.

I also note that while cost-neutral language is thrown around about social housing, and we are told that a cost-neutral solution must be found, we do not hear cost-neutral language concerning tax reliefs. For example, has the change to inheritance tax been tested for cost neutrality? These matters require more rigorous examination and more transparent debate.

I want to focus in particular on responding to the current context of Brexit and the insecurities therein. At this time, we need to maintain our income tax base on a solid and secure foundation as we move forward into a period of uncertainty. Income tax is our greatest counter-cyclical guarantee of continued and sustained revenue. This week, I was frankly alarmed to hear IBEC's proposal on shares and dividends - the idea that stock options and shares might be changed vis-à-vistaxation. That is a dangerous proposal that risks hollowing out our income tax base. For example, someone who might have been paid €200,000 may now be paid €150,000 with €50,000 in stock options, which is a huge drain from our revenue base.

The recent experience of the capital gains tax waiver - an experimental move which, we were told, was a sweetener to invite investors into Ireland - turned out to bring vulture funds upon us. It led to a rapid overheating of the property market and the current housing crisis. We need to be cautious about any measures with such a high potential to distort the core fundamentals of our economy.

In responding to Brexit we should not chase a lowering of standards in the UK, but rather invest in decent wages. In that way we can ensure that the local economy will provide those who purchase in towns and villages across the country with a steady income. One of the best ways to diffuse money emanating from our indigenous goods market is to ensure that people are paid decent wages and thus have money to spend. All the evidence shows that those on lower incomes spend locally.

We should also consider investing internationally, drawing on opportunities not just to chase banks and other financial institutions, but also looking at academic investment. People are drawn to relocate in Ireland by opportunities and the quality of life here. Those relocating to Ireland now are much closer to huge levels of European investment in research and development funding. Our academic institutions could invest in bringing the brightest minds here if they were given the necessary resources directly instead of waiting for the implementation of dubious proposals. The brightest persons would also bring with them a large amount of revenue in terms of potential international research and other funding. Ireland has been punching below its weight on international research and development. That sector requires positive and constructive investment, which has spillover effects on society.

Child care is a key priority which is entirely missing from the summer economic statement. Effectively, it is social infrastructure which is long overdue. It is a key focus in every economic discussion, but it is yet again under-represented in this document.

I support IBEC's proposals on capital investment. Having critiqued one proposal, I do believe IBEC has some solid ground with the idea of examining capital investment. The EU has previously critiqued Ireland's low levels of capital investment. It has pointed out that we are at a dangerous level in this regard. A strong case needs to be made to Europe, therefore, that we need to push forward with capital investment.

It would be welcome if future summer economic statements included the position adopted by Ireland at a European level. All of these discussions are in a European context so it would be useful to know what position Ireland is taking on some of the fiscal pressures. As regards the Europe 2020 goals of smart, sustainable and inclusive growth, we should consider the weighting placed upon them in the semester process versus the weighting on short-term fiscal goals.

I realise that I am short on time, so I will skip a few points.