Tuesday, 8 October 2019
Budget 2020: Statements
We do not have the largest portion of low-paid employees of any country in the EU. I am just giving the numbers. People start to pay income tax at closer to €18,000, and they do so at 20%, which is a very reasonable rate. The amount of tax paid on incomes up to €35,000 is very low, which is also appropriate. What the Taoiseach wanted to do and what I have always wanted to do since I came into the Department of Finance is for people to be able to earn more money and pay less tax. I have said it so many times here that we are a really unusual jurisdiction where people on below the average industrial wage pay the higher rate of tax. Very few jurisdictions do that. The solution to that is allowing people to earn more and pay the lower rate of tax because too many people with below average salaries are really stretched, do not get the benefit of social protection payments and must pay for just about everything. They are the working middle. Those are the people to whom the Taoiseach of our country wants to give tax breaks. I know the Senator does not want to hear that but those are the facts and I agree with that 100%. As a party that puts itself forward as a party of the left, Sinn Féin should not be against that either. I am very pleased with the increase in medical card limits.
The increase in carbon tax from €20 per tonne to €26 per tonne will be on automotive diesel and petrol from tonight. We will vote on it later. One of the things the Department of Finance hates is anything being ring-fenced. This increase is ring-fenced. Previous carbon taxes were tax-raising measures that were not ring-fenced and went into the general pot to pay for what needed to be paid for. This is ring-fenced for people suffering from fuel poverty. The €90 million that comes in will go back out in initiatives like the building of greenways. This is additional spend beyond what was already allocated in previous capital spends. This is to change how people operate. Again, this is what we have said we are doing - a €6 increase per year to take it up to €80 per tonne by 2030. Whoever comes into Government after us can change it and the way they can do so is a vote in Dáil Éireann so they can increase or decrease it. We believe this is the appropriate way to do it without having too significant an impact on Ireland Inc. and urban and rural Ireland.
I want to pull up people who say how appalling it is about rural Ireland and how rural Ireland will be destroyed by this. Senator Conway-Walsh raised that issue. It will be €1 for a tank of diesel or petrol - 60 to 70 litres. Depending on the car, a tank of diesel can do about 1,000 km. Multiplying 1,000 km by however many number of weeks gives tens of euro of an increase on a fill of diesel per annum - just €20 or €30 per annum. That does not destroy rural Ireland and Senators should not say that it does because there are enough people talking down rural Ireland. Rural Ireland is under significant pressure in some areas but is thriving in others. Some towns are doing better than others. I live in rural Ireland. I live down a country lane so I live in the places the Senators are talking about. I also support the construction of rural houses, including one-off housing,100%. Not everyone supports one-off housing and there is a move away from a dispersed population but I support it. However, people should not expect the Government to ensure that there is a bus outside their house or to provide their water or sewerage if they choose to live in rural Ireland. I want to be very clear about that. If people choose to live in the countryside, it will be more expensive and most people know and accept that. Most people in rural Ireland choose to do so rather than live in an urban setting or housing estate and those are the facts as well. We cannot fund everything. We have a very dispersed population.
Regarding the point about tax avoidance, real estate investment trusts, REITs, and Irish real estate funds, IREFs, I have had a good look at this. The resolutions will be before the Dáil later on before close of business this evening. The Sinn Féin budget proposed that €35 million would be raised from these REITs and IREFs. This budget is bringing in €80 million so it is over twice the amount mentioned by Sinn Féin. I am sure Sinn Féin Members will applaud and thank me afterwards for bringing in twice as much money as Sinn Féin said should have been raised. Upon analysis, in the main, we are satisfied with how REITs are working. There are about four REITs in the country while there are about 148 IREFs. We are not satisfied with how IREFs are operating so we are closing the mechanism. The REITs concern compliance while the IREFs concern anti-tax avoidance, so we are going to close the mechanism and ensure that this does not happen.
I said earlier that we have a wealth tax.We also have capital acquisitions tax, capital gains tax and stamp duty receipts, which amount to a combined total of €2 billion or €3 billion per year. We have a lot of wealth taxes, although perhaps the Senator does not want to acknowledge that. To put it in context, we will spend in the region of €62 billion in the year and the wealth taxes amount to approximately €3 billion in their totality.
On Brexit, the figures are startling. We have a budget allocation of €2.9 billion for 2020. A large amount, some €1.2 billion, would be required in the event of no deal. Potentially, we will have to borrow that money if things badly wrong. That is movement one. Movement two is that we can go beyond that, but only if it is required. Movement three is that if borrowing begins to become expensive, we can potentially dip into the rainy day fund. Those are the three movements that may be required if Brexit is a calamity, which could happen, although hopefully it will not. We are focused on ensuring that we support the people who require it. A figure that is important, and one I want Senators to leave with following this debate, is that, potentially, if this goes badly wrong, we could lose tens of thousands of jobs. I emphasise that the word I am using is "potentially" and I am not stating that those jobs will be lost. For every 10,000 jobs we lose, it will cost the Exchequer €100 million. That is the thought process we have to adopt right now. It is not a pleasant place to be. When I listen to the music outside Leinster House today, I remember budgets from previous times where we could hear the protests outside. The one thing that is the hardest to do is to get people back to work when they lose their jobs. The indignity of not working is something that will always stay with me in my period in politics as a result of the period in which we saw people lose their jobs. We are counting the potential loss of tens of thousands of jobs in the worst-case scenario. People should not underestimate the threat Brexit could have for the Irish economy and Irish society. They should not take having 2.3 million people at work for granted. We cannot be complacent.
The diesel rebate scheme cost €3.5 million last year. We expect it to cost €5 million this year. It is a cost for business and it just gets passed on if it becomes too expensive. Our objective is to try to help business and keep it going as best we can so that we can keep people in employment, which is crucial.
Stamp duty is moving from 6% to 7.5%. The figures were pretty buoyant last year and we feel this is an area in which we need to get back to the full amount. With regard to land purchases, agricultural land is expensive. Stamp duty is increasing to 7.5% but the agricultural tax reliefs give farmers the opportunity to rent land. The farmer renting the land has a wonderful opportunity to get up to a certain amount tax free. The figure is over €30,000 for more than ten years and €30,000 up to ten years, as I understand it, and both are tax free. The farmer does not have to buy land, although I know they do so because I am a farmer. However, it is very expensive and it ranges from €7,000 to €17,000 per acre. On occasion, very expensive land costs €27,000 per acre. There is going to be an increase in stamp duty. The transitional arrangements from two years ago still apply, so, if a contract was in place to be fulfilled, that will apply at the lower rate of 6% rather than 7.5%. The tax-free allowance is a very good way for farmers to consolidate, and the consolidation period for agriculture is also a benefit.
The carbon tax will apply to agricultural diesel but it is not hugely expensive. I touched on the move away from peat harvesting, which is appropriate. There is very little we can do about the An Bord Pleanála decision regarding Shannonbridge. We want to have a just transition. It is a major challenge for areas that are non-clean in the context of climate change. Burning peat and coal is non-clean. Moneypoint is an issue and there is also an issue in the midlands. However, we want to give people the opportunity to retool and reskill and we want to get them into different sectors. We do not want people to lose the dignity of work. That is why we are funding some of these measures out of the carbon tax.
The 1 million home help hours are very beneficial. Will this initiative clear the backlog? No, it will not. Unfortunately, we are not in a position to clear every backlog in this budget, and that is just the fact of where matters stand.
With regard to Senator Ó Ríordáin's point, I believe we are all centrists in these Chambers. There are very few of the hard left or hard right, and I am glad of that. The Senator stated that we should cut poverty, not taxes. We are doing that. The very largest expenditure in this calendar year is that relating to social protection, which is bigger than the budget. That is a redistribution of wealth. I made the point, when I was sitting where Senator O'Donnell is now, that at the lowest point, when we were bringing in €11 billion per year in income tax, we were still paying out €21 billion in social protection payments, which was appropriate in order to cut poverty. We are still paying out over €21 billion for the social protection budget and that is appropriate.
The largest payout is in respect of old age pensions. Senator Craughwell had a bit of a go at us and stated that we are a bit mean in not giving people a fiver. A fiver across the board amounts to €360 million, which is half of what was available in the pot for the whole year. Although I am repeating myself, I reiterate that, given the year that is in it, the space just is not there to be able to do it. The pension is €248.30, which is at the higher level in the European Union. I believe in the old age pension for people who are getting older and who do not have the opportunity to continue working, depending on their age and the state of their health. The old age pension costs over €6 billion, which is the largest amount of expenditure in the State.
In terms of education, we improved class sizes in previous budgets. Most speakers agreed with that. However, sometimes, we just come to a natural end and we cannot just keep reducing class sizes. My criticism of DEIS is that it is a very unscientific method whereby some schools got status dating back 15 or 20 years when it was first introduced. Effectively, whoever was in power meant some got DEIS status, which means much lower pupil-teacher ratios. That was wrong. There are some areas that do not require DEIS dating back by up to 20 years, and there are others that badly require DEIS. People will have heard me talk about DEIS before. The school at Riverchapel, which is now the fifth largest town in Wexford, requires DEIS status and does not have it. While the teachers, the principal and the staff get on with it and do an absolutely magnificent job in that school, they should have DEIS status and they should have a reduced pupil-teacher ratio, whereas there are other schools in the county which really do not require it.
On the minimum wage being deferred, again, given the year that is in it, and while I am sorry, I have to point out there were no tax reductions, inflation is very low and, in the wider scheme of things, the minimum wage going upwards impacts on employment and employers. A huge number of employers only two staff or fewer. When the minimum wage increases, it impacts on those employers' profitability. Many of them are not profitable and a large number of them are the first people who take no wages. That is a fact. We cannot always continue as we have done. I want the minimum wage to increase in order that people can have comfortable wages and are not scraping by.That is my political philosophy.
The threshold for medical card income will increase by €50 for one person and €150 for a couple. The Acting Chairman pushed for this, and I am glad it has been acted on. The health budget has gone up by 7%. I have touched on the living alone allowance.
I refer to Shannon Airport and balanced regional development. Some people think all the jobs are coming to Dublin. It is the opposite: the majority of jobs are going to regional Ireland. I very strongly support this. Regionalisation is a core aspect of the new strategy for financial services. We have had a huge number of announcements in this regard. I spoke to Martin Shanahan recently about the IDA jobs announcements. Nobody is interested in pointing out that over 50% of our jobs are going to regional Ireland. There is no coverage or take-up of this because it is not a new story, but it is very much a success story that these jobs are going all over the country. We should not shy away from this.
I do not have details on University Hospital Limerick.
Senator Craughwell asked me for very specific details about the defence budget. I do not have those answers. He said we were a bit mean not to increase the social protection payments by another €5 across the board. The money was not there. Doing that would cost €360 million. It would have amounted to over half of what was available, going back to the summer economic statement.
To respond to Senator McDowell, we touched on the housing budget. We now have the largest ever housing budget. I am not sure it is the case that the Department of Communications, Climate Action and Environment interferes with local authorities. I think we could streamline the process even more, but the procurement rules for expenditure and funding are European rules. We must abide by them. Regarding the need for the Land Development Agency legislation to be passed, I am all in favour of the passing of legislation that will have a real benefit, and the agency will have a real benefit if we can get the legislation through.
To respond to Senator Devine, again, the health budget is up 7% to €18.2 billion, the largest amount ever. Medical agency staff play an important role within that. A figure that people should remember is the current budget for the year, which is €61.9 billion. When wages, salaries and pensions are taken out of that, the figure is reduced by €23 billion. Therefore, almost 40% of what is spent goes to wages. It is amazing we are able to do anything else when one considers the quantity of funds that comes out of the pot to fund current wages and pensions. The pay agreements are in place, and we have a good structure in place to deal with these matters, but it is expensive.
The National Treatment Purchase Fund does a good job. Nobody who has undergone a treatment on the fund complains after having had the opportunity to have his or her ailment treated.
There was a small increase in mental health spending. It has been a year of small increases. Senator Devine also spoke about the carbon tax. A bag of coal will increase by 72 cent from May. That is what the carbon tax increase will amount to. To put this into context, the carbon tax is-----