Ivana Bacik (Labour) | Oireachtas source

I welcome the Minister of State to the House and the opportunity to speak on this important Bill. I am standing in for my colleague, Senator Sherlock, who cannot be here. I promise that I will not mention the VAT rebate scheme, although the Labour Party was disappointed that the Government amended the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2020 earlier today.

Of course, the Finance Bill is an annual occurrence but, as previous speakers stated, its edition this year is set in a very different context as we face the unprecedented twin challenges of Covid and Brexit. I am conscious, as are all Senators, of the knife-edge status of the Brexit talks today. The Bill is very wide-ranging, but it must be read in the context of those challenges, given the serious upheaval of the past ten months. I wish to touch on three specific elements of particular concern to the Labour Party, namely, the taxation of the pandemic unemployment payment, PUP, housing policy and low pay more generally.

First, I wish to acknowledge on behalf of my party that the early decisions made at the start of the pandemic by the then Government to provide income support to workers on a massive scale and to provide the sort of supports that have been spoken about and debated in this House over the past ten months were clearly instrumental in staving off even worse job losses and in keeping firms and businesses afloat. The House has heard very eloquent discussion already this afternoon on the importance of those supports to business. I think all Members should acknowledge the tremendous efforts made by people across Ireland to keep transmission levels down and to keep our society going. There have been unprecedented levels of support for social cohesion and community solidarity which have been so important, much more important than any criminal justice measures could be, in keeping Covid rates down and public health to the forefront. If there is any positive political message from the past ten months, it is that we have seen immense value being placed on public services such as health, education, welfare, as well as the value of social solidarity in itself. That is very important.

In that context, the decision to create the PUP is very welcome, but I wish to turn to the concern of the Labour Party regarding the belated attempt to retroactively apply income tax to the PUP as provided for in section 3 of the Bill. I know we will be able to debate this issue in greater depth on Committee Stage on Friday and I understand that the Minister of State contests the assertion that the provisions of section 3 are not retrospective, but it is difficult to interpret section 3 as having any other meaning. The Bill states that section 3 "shall be deemed to have come into operation on and from 13 March 2020". I have before me a letter sent by Ms Eilis Barry, chief executive of Free Legal Advice Centres, FLAC, to the Minister for Finance, Deputy Donohoe, and dated 4 December. The letter highlights her concern that there is a direct contradiction between the Bill and the provisions of the Social Welfare (Covid-19) (Amendment) Act 2020 which set out that PUP is payable as supplementary welfare allowance, an allowance specifically set out as being exempt from income tax.FLAC has raised concerns regarding this apparently retrospective application and has asked to meet the Minister to discuss these matters further. I raise this issue with the Minister of State to ask that the Government not pursue a retrospective application of income tax on a welfare payment as such a move would be likely to provoke additional anxiety for the many, many people who are already struggling due to the extent of closures and, indeed, the accumulated stress of ten months spent in and out of lockdown. I was very moved by the description of the stress on business owners of being in and out of lockdown, the imposition of restrictions, the uncertainty around when restrictions would be lifted and the extent to which businesses could open. I am conscious that even those businesses that have been able to open are operating at reduced capacity and, therefore, will have immense difficulty in making ends meet. The last thing people need now is an additional hit to their finances.

The Labour Party has concerns about the distributional impact of this retrospective taxing of state supports and the capacity of workers, particularly low-paid workers and young workers, to repay. We should not forget that 84% of people in the arts, entertainment, events and recreation sectors who were in receipt of the PUP in May remain in receipt of it right now. It is clear that these sectors, along with the hospitality sector, were significantly hit and remain deeply impacted. I and my Labour Party colleagues have met many of those who were working or running businesses in those sectors and remain very stressed and anxious about their prospects. I am conscious that there are anomalies. For example, theatres and live drama are still not open even though cinemas are open. There are many whose livelihoods have been badly hit as a result. In the accommodation and food service sectors, 78.8% of those who were in receipt of the PUP in May remain in receipt of it right now. Those under the age of 25 are the most likely to be in receipt of the PUP. These are people who, through no fault of their own, have been without steady work for so much of this year. This measure seems to set a strange new precedent and the Labour Party is very concerned about it, particularly in light of the number of people affected disproportionately in the sectors I mentioned.

In summary, given the fact that in spring and summer people had no reliable information on the tax status of the PUP, and given the stated intention of the payment, which the Labour Party acknowledges was to keep people afloat through difficult times which have not yet ended for many workers, we think it would be grossly unfair to take a decision to retrospectively apply income tax to the payment. I look forward to the response of the Minister of State on that issue.

The second major concern the Labour Party has with the Bill relates to the area of housing policy. There is strong evidence that the housing market remains dysfunctional. There have been concerning reports in the media today that it will take years to meet the level of demand for housing. Subsidies to property developers simply do not work to address the outstanding need for housing. They categorically do not increase the supply of affordable housing. However, the Government seems determined to push forward with subsidies to property developers in the Bill. The Labour Party has serious concerns in particular about the extension of the so-called help-to-buy scheme which may have the unwelcome, unforeseen and perhaps unintended effect of pushing up prices for everyone. We know that for many years Ireland had one of the highest home-ownership rates in western Europe, but the context is very important in that regard. We now see a housing market where the prospect of home ownership, particularly for younger people and younger generations, has never seemed more remote. That is thanks to many years of Government policies aimed at or with the consequence of stimulating demand but which ignored the fundamental problem of supply.

I acknowledge that this is not just a problem of this Government's making. It is the cumulative effect of years of various housing policies of successive Governments. The help-to-buy scheme is particularly egregious in this regard. An independent assessment by the Economic and Social Research Institute, ESRI, found that the scheme was poorly targeted and likely to further fuel the growth in house prices. Research shows that 56% of claims under the scheme were for homes worth more than €300,000 and that 40% of all claims to date have had a loan-to-value ratio of less than 85%. In other words, one could surmise that the help-to-buy scheme subsidises those who already have their deposit saved, while it is, perhaps, not doing enough to help those who are looking for genuinely affordable homes. This is a recurring theme as we survey current Government policy, with its economic focus is on propping up demand and supporting spending.For all that Ministers talk about learning the lessons of a decade ago and of the recession, one might question that assessment given this Bill once again puts funding into solving a problem that does not exist, namely, lack of demand while ignoring the fundamental weakness in our housing market caused and exacerbated by a lack of adequate supply of affordable housing.

The final point of concern is the issue of low pay in this country. The Labour Party strongly believes it was a mistake only to increase the national minimum wage by 10 cent this year and it is a matter of profound regret to us that the Low Pay Commission seems on the point of collapse. Establishing the commission was a high point of our time in government where we sought to take minimum wage policy out of the realm of day to day political pressure. What we did not envisage was that the commission would be used to divert from justified wage increases. We believe the failure to agree a fair increase to the minimum wage at this time is especially worrying considering the broad problem of low pay in our economy due to particular features in our economy, pre-tax income inequalities are among the highest in the OECD, and it is left to our taxation and welfare system, as we all know, to do the heavy lifting in ensuring decent standards of living for a huge number of workers. OECD data tell us nearly a quarter of Irish workers are getting by on low pay, a figure second only to the massively unequal United States. We have an opportunity to close that gap through minimum wage policy. A 10 cent increase absolutely flies in the face of that, particularly in a pandemic when we had the opportunity to show workers our appreciation for how they have gone above and beyond, particularly workers in front-facing sectors, in food services, retailing and so on. We believe it was a missed opportunity and that the minimum wage should have been increased further. It does not seem unreasonable to us to ask that subsidies to the private sector of the very justified supports that were given to those in business through the pandemic would have carried with them basic conditions as to how employees in those sectors are treated, especially in sectors like hospitality where we know that low pay, precarious contracts and low trade union density are endemic problems. It is not good enough in our view to tell low paid workers that they should be grateful to have their jobs. As a country we must do better than that. We think money should be better spent with a much more equitable distribution between workers and employers.

We acknowledge the immense work that has gone into supporting businesses and workers through this pandemic but we have serious concerns with three aspects of the Finance Bill, in particular, namely, a lack of sufficient action on low pay, a lack of sufficient action on housing and our concerns about the taxation of the pandemic unemployment payment, PUP. We have grave doubts that this Finance Bill will deliver for those who most need our support at this difficult time.