Brian Cowen (Laois-Offaly, Fianna Fail)
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The Finance Bill contains the legislative proposals to implement the tax changes I announced in the budget last December. This year, in addition to the significant improvements in tax credits, allowances and bands, the changes I am bringing forward include a significant measure of reform of the taxation system. A large part of this reform is based on the review of tax schemes I had carried out over the past year. The relevant extensive reports on this were published last month.

This Bill continues and builds on the successful policies of recent years that have delivered a personal tax environment that fosters and supports effort and enterprise. For those on average pay, these policies have delivered one of the lowest tax wedges in the OECD, as well as taking many taxpayers out of the tax net altogether. The provisions of the Bill will also ensure that, from 2007, the small number of high income individuals who up to now have been able to reduce or eliminate their tax liability through the use of tax incentives and reliefs will generally have an average tax rate of about 20% each year. On foot of the Bill, therefore, a higher percentage of the tax take will be paid by high earners; a lesser percentage is being paid by lower earners; the tax changes being implemented favour low income groups; and there are new limits on the use of tax reliefs by the very well off.

I believe this year's Finance Bill will bring about real change and reform of our tax system. The budget on which it is based has been described by the Economic and Social Research Institute as "perhaps the most progressive budget package for many years — poorer households did proportionately better than rich ones". The reforms in the area of tax incentives, pensions tax arrangements, the tax liabilities of high earners and the measures to close off potential tax loopholes are evidence of the Government's commitment to a tax system that is fair and equitable and that underpins the country's continued economic and social progress.

Before outlining the main provisions in the Bill in a moment I wish to highlight for the House the main measures it contains. The Bill proposes the following: to remove all of those on the minimum wage from the tax net; exclude workers on the average industrial wage from the higher tax rate; confirm the restrictions on the use of tax reliefs by high income taxpayers to secure greater equity in the tax system; phase out various existing tax schemes and exemptions and amend other schemes to secure better value for the Exchequer; end the current unfair remittance basis of taxation; continue the stamp duty exemption for young trained farmers for a further three years; increase the tax exemption limits for income from farm leasing for over five years; and extend certain existing reliefs to cover the EU single farm payment entitlement in appropriate circumstances.

The Bill also proposes to introduce a new scheme of tax relief for heritage property donated to the proposed Irish Heritage Trust; provide for the €10,000 income tax disregard for certain persons minding children in their own home as announced in the budget; prevent the use of certain pension investments to cut one's tax bill enormously; increase VAT registration thresholds to help small business; and exempt biofuels from excise duties and reduce excise duties on certain home heating oils, namely, kerosene and LPG. These measures were all announced in the budget.

In addition to these, the Bill proposes to introduce a new initiative aimed at encouraging low income earners who hold SSIA accounts to transfer funds into pension schemes; provide significant improvements in the film tax relief aimed at enhancing Ireland's competitive position as a film location; provide for automatic reporting by financial institutions and Departments of interest and certain other payments made to taxpayers; get more notice and information on certain tax avoidance schemes; ensure that landlords will have to meet their statutory registration requirements as a condition of getting generous tax relief; tighten up the relevant contracts tax to combat fraud and tax evasion; include a range of provisions to facilitate business in maintaining lreland's competitiveness; and close off a series of abusive tax loopholes in the areas of film leasing, transfer of Irish assets into a foreign company, potential misuse on interest relief, capital gains tax and certain corporate VAT reliefs.

I will now deal with some of the main provisions in the Bill in more detail. I will listen carefully to the contributions of Senators and try to respond to the points they make when I reply to the debate.

On income tax, the various income tax measures and reliefs announced in the budget are dealt with in sections 2 to 7. These widen the tax bands and increase various credits, including the basic personal credit and employee tax credit. The effect will be a reduction in average tax rates and the removal of those on the current minimum wage from the tax net.

Section 8 revises the tax relief provisions in respect of local authority waste charges to maintain the value of the relief for taxpayers following the introduction of the pay by use principle. The existing provisions governing the relief require adjustment to take account of the revised charges structure at local level. Section 9 confirms the budget day announcement and Financial Resolution abolishing the loophole whereby relief could be claimed for interest on loans taken out for property speculation with effect from 7 December 2005.

Section 11 links mortgage interest relief on rental properties to the registration requirements of the Private Residential Tenancies Board so as to encourage compliance with the registration requirement. Section 13 confirms the budget day announcement of a childminding relief for individuals minding up to three children in their own home provided the income in question does not exceed €10,000 in the tax year.

Section 14 contains a number of important changes to the tax treatment of pension provision. First, the rate of age-based tax relief applying to all pension products is being increased where the contributor was 55 years or over at any time during the tax year to 35% of net earnings or remuneration for those aged 55 and over and to 40% for those aged 60 and over. This is aimed at incentivising individuals who have underfunded their pension over the years and now wish to improve their position as they approach retirement. The overall benefit limit of two thirds final salary will still apply.

Second, an annual taxable 3% imputed distribution is being applied to the value of assets in approved retirement funds. This will be phased in over a number of years. Third, the maximum tax free lump sum for draw-downs from a pension fund made on or after 7 December 2005 will be €1.25 million. Fourth, a cap is placed on the maximum allowable pension fund on retirement for tax purposes at €5 million or, if higher, the value of the fund on 7 December 2005. Finally, the current annual earnings limit of €254,000 for certain contributions to pension schemes is to be indexed from the tax year 2007 to maintain its value in the future, as will the €5 million and €1.25 million amounts just mentioned.

Section 15 provides for the discontinuance of the remittance basis of taxation with effect from 1 January 2006 in respect of employment income in so far as the employment is exercised in the State. This will ensure that all employees are treated alike in respect of income earned in the State. Section 16 contains a number of provisions which are designed to ensure that tax that should be deducted under the PAYE system is in fact deducted. These provisions deal with the use of intermediaries and non-resident employers, situations where foreign and domestic employment are involved, and the position of mobile workers. Sections 15 and 16 reflect the changed profile of the labour market here as a result of significant and welcome immigration.

Section 17 provides for the measure announced in the budget which will place a limit on the use of tax reliefs by those on high incomes. The measure will ensure that such taxpayers will not be able to use specified tax reliefs to reduce their tax bill in any year below approximately 20%. A full list of the reliefs which are covered is included in the Bill. Broadly, these are the various property based reliefs and other incentive reliefs such as film relief, the business expansion scheme and donations. However, the normal expenses of business, including standard depreciation allowances and losses, will still be allowed in the normal way.

Section 18 provides for a major improvement in the relief for investment in film production. The percentage of expenditure that is eligible for tax relief is being raised to 80% for all films, up from the existing levels of 55% or 66% depending on the film budget. In addition, the ceiling on qualifying expenditure for any one film is being increased from €15 million to €35 million. These changes are subject, as before, to EU Commission approval.

Section 19 increases the annual cap on the amount that can be claimed for expenditure on farm pollution control measures to the lesser of €50,000 or 50% of qualifying expenditure, with effect from 1 January 2006. Section 20 extends the scheme of tax relief for donations to approved bodies to include the donation of publicly quoted securities, which will be treated in much the same way as cash donations of equivalent value.

In line with my Budget Statement, section 22 abolishes the stallion and greyhound tax exemptions from 31 July 2008. Discussions are to take place with the industry and the EU Commission on a replacement scheme.

Section 23 includes the proposed Irish Heritage Trust in the list of approved bodies for the purpose of the tax relief on donations scheme. This will facilitate the trust in building up an endowment fund for the maintenance of its heritage properties. Three other provisions relating to the trust are contained in sections 73, 115 and 122, to which I will turn in due course.

Section 24 amends section 817 of the Taxes Consolidation Act 1997 and is designed to counter certain tax avoidance schemes that involve shareholders taking money out of companies as capital receipts rather than income in order that they can benefit from the lower 20% capital gains tax rate. This change to section 817 will reinforce the original provisions in the light of more recent versions of these avoidance schemes.

Sections 25 to 34, inclusive, set out the termination dates and transitional arrangements with regard to various tax relieved property schemes, the details of which were announced on budget day. Sections 35 to 39, inclusive, deal with capital allowances for private hospitals, psychiatric hospitals, nursing homes and child care facilities. I am extending the clawback period for such facilities from ten to 15 years and what are known as the "tax life" rules will be revised to facilitate investors in transferring their interests to other investors within the 15 year clawback period. These provisions will apply to facilities commencing in use after 1 February 2007.

The tax relief for residential units linked with nursing homes, which was due to expire on 24 March 2007, is being extended to 31 July 2008 on a transitional basis in line with the phasing out of other property incentive schemes. I intend to examine this tax relief in more detail for next year's budget and Finance Bill.

Section 40 amends section 812 of the Taxes Consolidation Act 1997 to ensure that interest on securities, including dividends, remain subject to tax in all cases. Sections 41 and 42 set out requirements for those who wish to invest some or all of their SSIA funds in a pension product. The purpose of this initiative is to encourage holders of special savings incentive accounts, SSIAs, on the lower end of the income scale to provide themselves with improved retirement arrangements by transferring moneys from their SSIA accounts into pensions. A sum of €1 will be added for every €3 transferred from an eligible SSIA account into a personal retirement savings account, PRSA, a retirement annuity contract or an additional voluntary contribution, AVC, subject to a maximum bonus of €2,500. In addition, the exit tax to be paid on the SSIA moneys so transferred into individuals' pension accounts will be refunded.

The scheme is aimed at lower earners and will not be available to taxpayers who pay at a rate of 42%, who already have access to very considerable incentives. This bonus is available for those making additional new contributions to their pension. It should be emphasised that this is a once-off special pensions initiative relating to lower earners with SSIA funds. The wider issues relating to improving global pension coverage as discussed in the recent report of the Pensions Board will be examined by the Government over the coming months.

Section 43 seeks to put beyond doubt the obligation on persons who are resident outside the State to apply relevant contracts tax, RCT, when they operate as building or other relevant contractors in the State. Section 44 amends the law relating to relevant contracts tax which principal contractors are obliged to deduct from payments made to certain subcontractors in the construction, meat processing and forestry areas in order to tighten controls and to discourage fraud and evasion. Applicants for C2 certificates will face more stringent application criteria and the payment limit that Revenue operates for some subcontractors in respect of C2 payments is being put on a statutory basis.

Sections 45 to 47, inclusive, 49, 53 and 107 provide for measures of a substantive, clarificatory and technical nature to assist in the development of the funds industry in Ireland, which is an important part of the international financial services sector. Section 48 amends legislative changes included in the Finance Act 2005 to ensure that the 23% exit tax on the proceeds of a life assurance policy cannot be deferred indefinitely by the continual rolling over of a policy without it becoming chargeable to the tax. While the changes are in response to certain points made to me by the industry, I am determined to ensure that the tax deferral available to investors is kept at reasonable levels and is not deferred indefinitely.

Section 52 amends Chapter 1A of Part 27 of the Taxes Consolidation Act 1997, which deals with the taxation of investment undertakings covered by the "gross roll-up" regime that was introduced in the Finance Act 2000. The amendment clarifies that in common with other companies, securitisation companies which invest in money market funds may receive payments from such funds without the imposition of an exit tax, provided the necessary conditions, such as the completion of a declaration procedure are adhered to.

Section 54 ensures that life assurance companies only benefit from group losses and certain other loss reliefs at the corporation tax rate of 12.5%, as opposed to the standard income tax rate of 20%, which applies for the income and gains of policyholders from such policies. Section 55 is aimed at preventing abuses of the patent income exemption through re-categorising franchise licence fees as patent royalty payments. It also limits the amount of exempt patent royalty distributions that may be made by a company in certain circumstances to the aggregate of its research and development spend over a three year period.

Section 57 removes the requirement to deduct withholding tax on interest paid on quoted registered eurobonds, bringing the treatment of such bonds in line with that of those in bearer form. Section 58 extends the termination date for the ring-fencing of losses and capital allowances in qualifying shipping trades to 2010.

Section 65 is the next major section and gives effect to the budget announcement on the restriction of interest relief under section 247 of the Taxes Consolidation Act 1997 in the context of transactions between related companies. This is an important anti-avoidance measure. However, I appreciate that this section is being used by many firms in a perfectly appropriate way and it is not my intention to cut off genuine use of this section.

Section 66 deals with the research and development tax credit which is just one of the Government's actions in incentivising the development of research and development in Ireland. The section provides that a proportion of expenditure on machinery or plant which is to be used partly for research and development will qualify for the tax credit. Where plant and machinery is included in the incremental spending calculation, but is in dual use, that is, both research and development and production, there will be a proportionate allocation of the expenditure for the purposes of the credit. Section 67 improves the legislation on the taxation of shipping-related profits by providing for a clearer, more streamlined process for applicant companies electing for the tonnage tax regime.

With regard to capital gains tax, section 70 gives effect to the budget proposal that the EU single farm payment entitlement will qualify as an asset for the purposes of the capital gains tax retirement relief, provided the farmer in question fulfils the ten year rule in respect of the ownership and usage of the land which is disposed of at the same time as that entitlement. The section also caters for when a husband and wife are co-owners of land but only one of them becomes a partner in a milk production partnership.

Section 73 deals with relief from capital gains tax on the disposal of certain works of art where prior to the disposal they were on loan to, or displayed in, an approved gallery or museum. The minimum period of loan is being increased from six to ten years and the section is being extended to apply also to such loans made to the proposed Irish Heritage Trust. Section 75 is an anti-avoidance measure dealing with capital gains tax in certain circumstances of a disposal of a chargeable asset to a spouse, a separated spouse or a former spouse. Section 76 and 77 provides that the Revenue Commissioners can obtain information for capital gains tax purposes regarding the issue of shares to the members of a mutual life assurance company or a mutual building society on the occasion of these ceasing to be mutual companies.

Parts 2 and 3 deal with excise duties and VAT. Sections 78 to 91, inclusive, set out a range of changes with regard to excise duties, including confirmation of the budget day reduction in excise duty on kerosene and LPG used for heating, and the reduction of betting duty from 2% to 1% with the industry bearing the liability. In recognition of the environmental issues we face, the House will welcome the large-scale scheme I have provided for in the Bill to promote biofuels. The new scheme will assist biofuels in achieving an initial target of 2% penetration of the transport fuel market by 2008. This relief, when fully operational in 2008, is expected to support the use and production of some 163 million litres of biofuels per year. The scheme will help to limit our dependence on conventional fossil fuels, reduce our CO2 emissions and stimulate activity in the agricultural sector. This is complemented by providing a new vehicle registration tax relief to promote new flexible fuel vehicles and the extension of the existing relief to dual electric or petrol vehicles.

Sections 92 to 101, inclusive, contain a number of important revisions to the VAT code. Sections 95 and 101 confirm the increases in the VAT registration thresholds for small businesses from 1 May 2006. The revised thresholds are €27,500 for services and €55,000 for goods. Sections 94 and 96 amend the VAT Act to provide for the taxation of the private use of deductible and non-deductible business services. Section 95 also contains an anti-avoidance measure designed to strengthen the VAT grouping provisions in order to ensure the related companies are appropriately treated for VAT purposes without loss of tax revenue. Sections 93, 97 and 99 replace the existing rules on the VAT treatment of the supply of a package of services composed of two or more elements which attract VAT at different rates. Sections 98 and 99 provide for the granting of deductibility for VAT incurred on costs associated with the issue of new stocks, shares, debentures and other securities made to raise capital, where that person is entitled to VAT deductibility.

Part 4 of the Bill deals with stamp duties. Section 103 extends to a foster child the stamp duty reliefs available to a natural or an adopted child. Section 104 provides for an amendment to the exemption from stamp duty on any instrument made for the purposes of, or in connection with, the demutualisation of an assurance company which carries on a mutual life business. Section 105 gives effect to the budget announcement extending the exemption from stamp duty for transfers of land to young trained farmers for another three years until 31 December 2008.

Section 106 will exempt from stamp duty donations of publicly-quoted securities to approved bodies that come within the scheme of tax relief for charitable and other donations. Section 109 provides for an exemption from stamp duty on the sale, transfer or other disposition of an EU single farm payment entitlement. Section 110 gives effect to the budget announcement regarding the abolition of companies' capital duty for transactions effected on or after 7 December 2005. Section 111 ensures that where a combined ATM and debit card is used solely as an ATM or debit card, the charge will be €10, whereas if it is used for both functions, the existing €20 charge will apply.

Part 5 of the Bill deals with capital acquisition tax and section 115 is concerned with the clawback of the exemption granted to heritage objects contained in a gift or inheritance if such objects are sold within six years after the valuation date of the gift or inheritance. This clawback does not apply if the objects are sold by private treaty to one of the qualifying bodies referred to in section 77(3) of the Act and the proposed Irish heritage trust is now being added to the list of qualifying bodies. Section 118 gives effect to the budget proposal that the EU single farm payment entitlement will qualify as agricultural property for the purposes of agricultural relief under capital acquisitions tax rules. Where land which qualified for agricultural relief or business relief is disposed of in the period commencing six years after the date of the gift or inheritance and ending ten years after that date, the section provides that the relief granted will be clawed back in respect of the development value of the land at the date of the gift or inheritance.

Section 122 provides a new scheme of tax relief for heritage property donated to the proposed Irish heritage trust as announced in the budget. To qualify for relief, the heritage property will have to be approved by the Minister for the Environment, Heritage and Local Government by reference to the criteria set out in the section. There will be a ceiling of €6 million on the aggregate value of the heritage properties that can be approved in any one year. Allowing the proposed trust to avail of this scheme will be important to its successful launch.

Section 125 and 126 are important tax administration provisions. The first of these will allow the Revenue Commissioners, with the consent of the Minister for Finance, to introduce regulations governing the automatic reporting to the Revenue Commissioners by financial institutions of interest and other profit payments made to customers as well as certain payments made by Departments. The Revenue Commissioners and my Department will consult the financial institutions before implementing this reporting system.

Section 126 addresses the use of tax avoidance schemes by way of a surcharge of 10% on undisclosed transactions that are ultimately determined to be tax avoidance transactions. The surcharge will not apply where full details of the transaction are disclosed in a protective notification process to the Revenue Commissioners within a specified time limit. People who are open about their tax planning arrangements will be able to show them to the Revenue Commissioners and will not be surcharged if the arrangements concerned are later determined to be in breach of anti-avoidance rules.

There are many important provisions in the Bill to stimulate the economy, reward effort and to promote enterprise, while at the same time seeking to safeguard what must be at the core of any proper tax system, which is the fair treatment of all taxpayers by reference to their ability to pay. I hope that Senators agree with these principles and I commend the Bill to the House.

John Paul Phelan (Fine Gael)
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I welcome the Minister and his officials to the House to discuss this Bill. He has provided an exhaustive report of the different sections of the Bill and I welcome many of them. I especially welcome the effort made by the Minister to close a number of loopholes which existed in the tax system and which allowed for potential abuse through tax avoidance. I broadly welcome his actions on pension provision and he has made a step in the right direction in this respect.

At the outset, the Minister spoke about the extension of the film tax relief. I was a member of the Joint Committee on Arts, Sport and Tourism when I first entered the House. The Minister for Finance's immediate predecessor seemed to be steering the Government towards getting rid of the relief, but the current Minister seems to be steering in the opposite direction. Can he enlighten us on the thinking behind that reversal? I agree with him and the improvements in the film tax relief scheme are to be welcomed.

Extremely wealthy people in this country have avoided paying any tax and I welcome the Government's efforts to tackle them. I take a measure of satisfaction from that announcement in the budget, as it was highlighted extensively by the Labour Party and the Fine Gael Party that this anomaly should not be allowed to continue. I am glad the Minister has started a process that will ensure such people will effectively have to pay a 20% rate of tax in the future.

There are aspects of the Bill about which I have reservations. After the 2002 general election, the Government announced that it would begin to remove the remaining property-based tax incentive schemes. This was to happen by 2004, but that was extended to 2006 and it now appears that some of the schemes will be extended further to 2008. I have no problem with the economic theory behind incentive schemes. They were developed for a specific purpose and they often achieved their objectives. However, for the past six or seven years these schemes have been part of the problem rather than part of the solution. At the moment, they are fuelling huge increases in property values across the country. The Government seems to be prevaricating again and is extending some of these reliefs until 2008. A recent report into these schemes on behalf of the Department informed us that €1.6 billion had been foregone to the Exchequer as a result of these property-based schemes, which is a significant amount of money. Following that report, it is clear that action needs to be taken rather than ensuring that these schemes are extended into the future. The problems they are currently causing need to be neutralised and the schemes should be removed completely and as quickly as possible.

Following the publication of the report into the property-based tax schemes, the Minister stated that cost-benefit analyses should be carried out on schemes before they are introduced. Such analyses should be conducted into the schemes for private hospitals and nursing homes. Those schemes serve a purpose and I am not opposed to them on principle, but it is quite apparent that some of those hospitals and nursing homes are not managed in accordance with public health policy. It would be useful to have a cost-benefit analysis of how those schemes are progressing. As I said, I have no political hang-up or objection to tax-based incentive schemes. In future, we must examine other areas of the economy that might benefit from them. It is clear that we have 300,000 people directly involved in construction, currently producing approximately 80,000 housing units per annum. Most people would agree that such a rate is unsustainable. However, if something happened to the construction industry tomorrow, it might have very serious consequences for the rest of the economy, and the Government should consider other areas. We have a serious problem providing transport infrastructure, and the Minister and his officials might usefully examine tax-incentive schemes for road, rail and other types of infrastructure. Anyone who becomes redundant in the property sector could be redeployed in infrastructural projects.

At every opportunity, I have brought up capital gains tax and roll-over relief with the Minister for Finance, Deputy Cowen, and the Minister of State, Deputy Parlon, and I wish to raise them again. It is at the very least inequitable that an unwilling seller of land to the National Roads Authority for road infrastructure should be subject to the full rate of capital gains tax. I recently spoke to a farmer in Kilkenny through whose farm the new Waterford-Dublin route is going. He is losing 20 to 30 acres and his home, but he will be subject to the full rate of capital gains tax, although he is a completely unwilling seller. He will have to find land to replace what he is losing as a result of the road. Since it is being built through his area, all his neighbours will be in the same position, with a knock-on effect seen in the cost of land there. A few years ago, the Government introduced a scheme of roll-over relief that would have addressed the situation where someone is involved in farming or otherwise self-employed. I urge the Minister to act as soon as possible to review the U-turn of a few years ago as it is quite unfair.

In his remarks, the Minister mentioned his initiatives on biofuels. I welcome the budget announcements in the area, but the Government is setting itself the rather miserable target that 2% of the market should be provided by biofuels by 2008. He mentioned a significant impact on the environment but it will not have any impact as the market for fuel is expanding every year and by that date it will certainly be larger than at present. Any 2% of such a market will have a negligible effect.

Perhaps the Minister will be able to address this in his answer, although it is not directly related to the Finance Bill. On the Order of Business, points were raised regarding social partnership. I agree with other speakers on its importance in developing the economy over the last few years. It may have been overstated, but it has been very valuable. I would like to see several issues addressed in the ongoing discussions.

Senator Mansergh and others mentioned outsourcing, and I am not particularly hung up about whether it should be used for driver testing. However, we must ensure in the new partnership deal, if one comes about, that vital Government services can be outsourced. Driver testing was given as an example, and it is a good one. If a backlog emerges in any sector that could be addressed by employing contractors from outside, it should be resolved by contracting out the difficulty in question. That should be addressed regarding social partnership.

I raised the issue of community employment schemes. At present, anyone on such a scheme who is aged over 50 has a three-year cap, after which he or she must leave. In the context of social partnership, I ask that this be reviewed. Community employment schemes provide vital services in rural and urban communities up and down the country, and the harsh reality is that anyone over 50 who is unemployed will find it extremely difficult to re-enter the employment market. The current cap should be removed, and I urge the Minister to do so as soon as possible.

Another issue to which the Minister did not refer but that constantly arises is competitiveness. Our competitiveness has been seriously eroded in the last five or six years in particular, and the Government has played a major role in doing so. Since 2002, there has been an 86% increase in Government charges. Public utility costs have increased by 40%. Gas and electricity charges have gone up much more than in any of our European neighbours. Regarding gas and electricity in particular, we have established a series of regulators, but what are they doing to get a straight answer on why we are seeing such spiralling costs in the economy? I do not believe they are doing enough.

A rather startling statistic is that last year's export performance was the worst since 1974. Not many people commented on it during discussion of the Finance Bill in the other House, and the Minister did not refer to it in his remarks here. It is the third year in a row that we have seen a significant fall in exports, and that is a clear indicator of our problems with competitiveness. Perhaps it might be useful to discuss that at some stage.

There are also serious issues regarding telecommunications and the knock-on effect on competitiveness of our broadband problems. Like other Senators, I have raised it at various intervals regarding the economic outlook. At a time when it looks like Eircom will soon find itself in the hands of an Australian company, there are serious difficulties, particularly in rural areas, with the roll-out of broadband. Large swathes of the country still have no coverage, and we are far and away the worst among European colleagues when it comes to broadband coverage. That will be extremely detrimental to future growth prospects, particularly in regional centres. I ask that the Minister and the Government ensure that something be done to bring greater competition to the market and give rural and provincial areas some level of broadband service.

I welcome many provisions in the Bill, particularly the Minister's efforts to close loopholes. However, significant errors have been made, especially in further extending property-based tax reliefs. I ask the Minister to revisit that as soon as possible.

Martin Mansergh (Fianna Fail)
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I welcome the Minister and his officials. I allowed myself a little smile when I heard reference to competitiveness. While a decline in exports would be something to be concerned about, we have a €30 billion trade surplus, which is significantly more than 15 years ago. I was also intrigued to find an article in Le Monde a few weeks ago, which, without a hint of criticism, described Ireland as "the fiscal champion of Europe". That is a considerable compliment to the way in which the economy has been managed over the past ten to 20 years. We do not merely have a competitive tax system; we have a system that generates significant revenue.

The Minister, in his summary of the Bill, stressed a number of the key features such as the removal of those on the minimum wage from the tax net, the exclusion of workers on the average industrial wage from the higher tax rate and restrictions on high income tax payers. His budgets and Finance Bills have had a corrective, egalitarian tone. For example, the Green Party decision at its conference at the weekend to withdraw proposals to raise income tax and corporation tax was significant. Any party that seriously aspires to Government must accept the economic management argument has been won hands down by the Government. Despite what one may hear from different parties, proof that Sinn Féin is not seriously interested in Government is evidenced by the party maintaining its proposal to increase corporation tax by 5%. I defy Opposition Members to put their fingers on a proposal in the budget or the Finance Bill that can be said to have been inspired by a conversation in the Fianna Fáil tent at the Galway races, even though one hears this cliché about once a week.

The Finance Bill implements the main provisions of the budget, which include an 8.8% increase in the standard rate income tax band and a 17% in the employee tax credit. The Minister deserves credit for his firmness in resisting a great deal of behind the scenes pressure — perhaps the pressure people in theory think is applied in the tent at the Galway races — to modify or withdraw his proposals on the remittance system. He also deserves credit for increasing the allowance for families to employ carers from €30,000 to €50,000. It is expensive to look after old or infirm family members. We receive representations in this regard practically every week and this is an enlightened measure, as is the €10,000 income disregard for child minders. I was a member of the tax strategy group in the 1997-2002 period and this issue was batted backwards and forwards. A disregard of €6,000 rather than €10,000 was mentioned in those days but the nettle was not grasped. Nobody has attacked or criticised the Minister's measure because it is pragmatic and it will genuinely take care of part of the child care problem.

I highly approve of what the Minister has done on pension funds. People will be encouraged even more to make provision for themselves but there will not be an unlimited underwriting by the State of Rolls Royce pension arrangements, which is scandalous, otherwise, beyond a certain point, the State would subsidise multi-million euro pension packages for people who are perfectly capable of looking after themselves.

As part of the tightening up needed regarding the flouting of employment laws, the Minister has included a provision relating to agencies and mobile workers. It could be argued this is a new version of the non-resident accounts of ten or 20 years ago with people trying to find ingenious ways to get around employment laws, minimum wage levels and so on.

The Minister is introducing a limit on reliefs on incomes in excess of €250,000. As the Minister said, it must not be forgotten when people highlight the 20 or 30 people who pay no tax, which is a scandal, that, nonetheless, most income tax is paid by wealthy and well paid people.

Most of the property reliefs made a huge contribution but such reliefs only make economic sense if they are time limited and if they are abolished at a certain point. There is no better time for them to go, as the construction industry is clearly booming. The Minister indicated he will have to consider the utility of a form of incentive for park and ride facilities following expansion in public transport and residential units for older people. In my wider family, I have known people who are in a sheltered environment attached to a medical facility, which gives them freedom and independence. That is a worthwhile form of provision.

The Minister has put a cap on the relief for artists and writers, one of two particularly enlightened measures taken by his predecessor, Charles J. Haughey, in 1969. The regime will still be more favourable than anywhere else, other than countries such as the Bahamas where nobody pays income tax. It is possible that a number of people, probably foreigners, who are earning significant money, may be tempted to look elsewhere.

The Arts Council submission to the Minister contains a proposal for consideration that has merit and it relates to dance compositions. I am not as convinced about screen direction. On the other hand, the relief may be administered too lightly in other areas. Though this may seem disloyal, I do not see why, for example, ministerial memoirs should benefit from artists' tax relief, as that is not why it was devised. The relief should be for people whose main income comes from writing or whose work is clearly creative.

The Minister has been working in close consultation with the Minister for Arts, Sport and Tourism, Deputy O'Donoghue, on film relief. We have played around with the film relief over the past few years and there has been much discussion on the issue in the Joint Committee on Arts, Sport, Tourism, Community, Rural and Gaeltacht Affairs. There is no point in being mealy-mouthed about the relief. We should do it properly or not bother with it at all. It is recognised, even by the Opposition, that the beneficiaries will, inevitably, be relatively wealthy. The question must be asked whether we need to provide relief if we want to have a film industry in this country, and the answer is we do.

I regret the necessity to bring an end to the current form of the stallion tax relief. The Cheltenham races have vindicated the regime built up on that basis over almost 40 years. I looked at a 1935 report in the Oireachtas Library by Mr. Justice Wylie — who is also known in the 1916 context — into the horsebreeding industry which was clearly underdeveloped at that time. Stallion owners used have to pay a schedule D tax.

National heritage provisions have been welcomed. I draw the attention of the Minister to the fact that a full submission has been made to the Minister for the Environment, Heritage and Local Government with regard to heritage houses that are open to the public where the owners have relatively small incomes. If they are on substantial incomes, they can offset expenditure and this is a relatively simple procedure if they adopt the national heritage route. However, this may not suit every family's circumstances. A suggestion was made that investors could get some relief for investing in a heritage house which is not their own. The Minister has the detail on that proposal and I suggest he and his colleague could examine the matter, without prejudice.

I welcome the measure on biofuels. In general, I admire the great improvements in the administration of the tax system. Twenty years ago there were nightmarish aspects to taxes with self-employed people getting vast estimates. I have received a complaint from one practitioner who had difficulty getting through to helplines and this is something that must be examined.

In the context of the Kyoto Protocol, considerable concern has been expressed in the House that it appears rail freight is being completely phased out. Most countries operate modest subsidies in this area and this is something that should be considered in our transport policy.

Senator John Paul Phelan raised the matter of the roll-over of capital gains tax in the agricultural area. I have some sympathy with his case. I have less sympathy with a roll over in the case of land sold in towns and cities. We pay vast sums of money, not to build transport infrastructure but to compensate people for little strips of land. I was in France last week and happened to hear an item on a news programme about Budapest building its first metro line for €800 million. This is a fraction of what is proposed here.

Feargal Quinn (Independent)
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I wish to share my time with Senators Ross and Henry.

Mary Henry (Independent)
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Is that agreed? Agreed.

Feargal Quinn (Independent)
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I examine Finance and other Bills to see whether we are taking the right direction for the long term. I had an interesting meal last month with Elaine Chao, the US Secretary of Labour. She is the first young Asian woman to sit in the US Cabinet. She said that her Department's objective is to create the environment where the private sector can create jobs because it was not the job of those in Cabinet to do so. This is something we do not hear said often or loudly enough. Consider what has happened in France where it was believed it was the Government objective to create jobs. This belief led to dramatic errors such as the 35-hour week. There the Government is trying to claw back through youth employment initiatives and this is presenting problems.

Each year the Finance Bill is an opportunity to stand back and look at how the economy is doing from a long-term perspective. In the past two weeks we have seen two forward-looking and optimistic forecasts, up to 2020. I have a long enough memory to recall 1994 when the ESRI published what then seemed an absurdly optimistic forecast up to the end of the century. As matters turned out, the ESRI erred in that economic results were far better than its forecast. The point I wish to make is that our general readiness not to believe the forecast led us into a trap, the consequences of which we are still paying for today. We did not believe the ESRI forecast and our housing, infrastructure and population were not ready for the even better results.

We must do a better job now. We must consider the forecasts and try to decide whether they are in the right direction. The forecasts have pointed out the direction our economy is likely to take. We must look at them and ask whether the Minister is taking the right steps. In general terms I agree he is.

Theodore Roosevelt said: "In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." I look at the Bill and wonder whether there is a danger the Minister is tending to step back and do almost nothing because there is only a year to an election. I am not saying this is what is happening, but there are many signs that the Minister did not present a dramatic budget.

The failure to make proper plans will be far more costly the next time round. It may well be that we have not judged the situation correctly and that the future has a few tricks in store for which we are not ready. If there is something worse than not planning properly for future growth, it is not planning properly for a downturn. We do not have to look too far back to find ourselves guilty of that. At the height of the millennium boom even the straight-laced mandarins of the Department of Finance seemed to have thrown caution to the wind and I remember how difficult it was for me to make myself heard when I tried to sound a note of caution. The dotcom collapse came and we had some setbacks.

This Minister has in general handled affairs well, but there is a danger that he may pander to some calls such as the one Senator Mansergh mentioned regarding the cap on artists' income. On balance the Minister may have made the right decision. The artists' exemption was a win-win situation. When it was introduced by former Minister for Finance, Mr. Charles Haughey, Ireland did not have any income from artists because if they earned a lot they went abroad. The concept of a zero tax rate on artists' income was sensible and it played well for us in many ways.

We have had a number of innovative proposals in recent years, such as tax incentives for the building of car parks, park and ride facilities and hotel rooms. That was an example of encouraging private enterprise through incentives. Senator Mansergh mentioned private retirement homes, about which I have a query. The Minister for Finance has increased the claw-back period from ten to 15 years, the objective of which is to ensure that property that was built for one purpose is not used for another. However, there could be a danger that the ultimate objective of more nursing homes may fall foul of that change.

We need to plan for an increasingly optimistic future but also for a decline in the market in case the latter happens. We need to plan for a situation in which our economy grows to the extent that economists have been forecasting, while also planning for the opposite eventuality, that our economy is struck by a downturn, driven in part by the ways in which the world changes or by something like bird flu or SARS. We need to plan, regardless of whether the crystal ball gazers are right. The tragedy for this country, which given our recent history is not unlikely, would be if we failed to plan properly for either eventuality. That is the outcome I fear most and the one against which I warn today. The Minister for Finance has taken the right steps but he must be reminded of the danger of going in only one direction.

Shane Ross (Independent)
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I was struck by Senator Mansergh's comments, obviously made from a partisan position, although that does not mean he is wrong, that the economic management of this economy has been sound over a long period. That is a very fair judgment and one which many on this side of the House would share, although we obviously would not agree on every detail of this Finance Bill or on the concessions made to certain vested interests. In general, however, it is an incontrovertibly accepted fact that in the last ten to 12 years, the Irish economy has been run in an extraordinarily successful manner. It is very difficult to find fault with the figures. It is equally difficult to deny the fact because we have performed so well in comparison with our competitors. Presumably, that is the benchmark by which we wish to be judged. It is very easy to say that a great deal of luck was involved or that one or two policies worked very well but if one compares Ireland with any of our European neighbours, its performance has been outstanding.

One might ask why this is so and I agree with Senator Mansergh that it is because the economy has been so well managed during that time, mostly by Fianna Fáil Ministers for Finance. Furthermore, although it might be unpalatable in political terms to mention this, it is a fact of life that while we are fully fledged, paid-up and supposedly loyal members of the European Community, our loyalty in economic terms and the measures taken have been far closer to the economy of the United States of America. That is something which we see in its raw form when the rows break out in Europe about the actions we are taking relating to tax matters. I commend the fact that the previous and current Ministers for Finance and the Taoiseach have stubbornly refused to yield to the pressures from Europe to harmonise taxation in ways which would be damaging to Ireland. It is a measure of the courage and individuality of the last two Governments on this issue that when it came to Ireland's vital national interests, particularly concerning corporation tax, they did not make the concessions the French, Germans and others wanted. That may have been difficult, though not terribly so. It was an area on which they stubbornly refused to give in, resulting in Ireland being the most fiscally successful nation in Europe.

We have an economy which reflects the ideology of a transatlantic nation more so than a European one and thank God for that. Had we followed the European model as closely as our neighbours would have liked, we would have been going down the same sluggish economic road they have been going down for many years. They may be recovering somewhat now, but our growth rate still far outstrips that of the French, Germans and others. We have attracted multinational industry to this country because of our low taxation regime and that is good management. That is what Senator Mansergh would refer to as good management but he would not put it in the same terms as I would do.

Let us welcome the fact that we are now the most globalised economy in Europe, which means that we welcome outside investment unapologetically and do not wrap the green or European flag around ourselves when we are running our economy. We are prepared to say that we are chasing prosperity and are willing to allow outside interests to help us to become prosperous. That is the reality of the Irish economy.

There are contradictory views on this subject, as there are on all economics-related issues. Last week the NCB published a report of dubious responsibility which argued that we will be prosperous, come hell or high water, for the next 15 years. That is a difficult argument to justify because one must anticipate every single unfortunate event and dismiss it as unlikely to happen. That report also maintained that our dependence on multinationals was limited. Another report was released yesterday suggesting exactly the opposite, namely, that we are very dependent on multinationals. We should not be ashamed of the fact that our dependence on multinationals has been partly responsible for our growth and largely responsible for our increased prosperity. The Government should take the credit for welcoming them in and standing up to our European neighbours in that respect.

I regret the fact that the Minister for Finance did not renew the bank levy. It was both a useful and punitive source of revenue. I see no reason taxation should not be used in a penal way to punish those institutions that have deliberately and knowingly broken the law. That is one of the reasons the 1% levy was introduced, if we are to be honest about it. It was politically acceptable and the banks were being punished for breaking the law. When institutions break the law, the individuals within them never pay the price but now it appears that nobody will pay the price. The banks can afford to pay the 1% levy. We should not take our feet of their throats at this point because they continue to abuse their customers in an unacceptable way and their shareholders are well aware of that.

Will the Minister specifically address the privatisation of Aer Lingus? It would be useful if he addressed the privatisation programme he intends to introduce. The State has no business in any of the enterprises in which it is involved. Will the Minister justify why he will raise only €400 million, an absolute pittance, out of the sale of Aer Lingus? Why is the Government going to such lengths to raise so little money on the airline's flotation?

Mary Henry (Independent)
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I want to raise the issue of tax relief schemes which are of benefit to high income earners. The Minister rightly put a stop to those schemes which were causing unjust benefit to very high income earners in allowing them not to pay any income tax. In section 17, the Minister has included those who earn over €250,000 and who give donations to universities, cultural institutions and so forth. The provision will not come into play until 2007. The universities and the National Gallery believe that from then on, few will give money in excess of their income to cultural institutions or even a children's hospital.

The money, however, does no good to the high income earner but is of great value to the institutions to which it is given. The report prepared by the Department of Finance on tax relief on donations to charities recommended the retention of the provision. It rejected the limiting of deductions from such donations. The report stated the evidence to date does not suggest the Exchequer is duly exposed. It continued to recommend that the State should encourage a wider culture of giving.

That culture has started to develop. I am sure that it is an unfortunate oversight that this provision has been included in section 17. I ask the Minister for Finance to rectify it. Universities, the National Gallery and various hospitals are dependent on high value gifts from high earners. The earners get no benefit from it but the institutions gain a great deal.

John Minihan (Progressive Democrats)
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I welcome the Minister of State at the Department of Finance, Deputy Parlon, and his officials.

In my statement to the House on budget day, I referred not just to how it was a demonstration of the right Government choices in action, but also an unambiguous illustration of the approach of the Progressive Democrats. Some Members lazily conclude that the approach of the Progressive Democrats is one focussed, with a tunnel vision, on the economy. It is argued our mantras are "economy first, society second" and "get the economy right; the rest will take care of itself".

The reality is more nuanced than that. To uncover the reality takes a little more inquiry and effort, practices that would serve our opponents better. The Progressive Democrats and the Government see economic policy as an instrument of social justice. Unlike our opponents, we do not deal separately with the economy and society. Unlike our opponents, we do not devise policy on the basis of simplistic choices. It is not a question of policy A being targeted at economic progress, policy B at a specific societal group or challenge, policy C at the environment, and so on.

In shaping our eighth budget with our Government partners, we have again shown our commitment to the Progressive Democrats' central tenet. We believe in a strong, dynamic economy that can deliver for all in society, most particularly the vulnerable. The Finance Bill reflects this approach. If the legislation were drafted by Fine Gael and the Labour Party, with some so-called help from the newly repackaged Green Party, the correct and successful approach would be absent. Lack of experience, clarity, agreement, maturity and freedom to follow the right course would create a finance Bill that would turn the economy back.

The path we chose has delivered a strong, growing and dynamic economy, allowing the hard work of people to deliver the higher living standards they deserve. It is a path that allows improved social provision and the most favourable income tax system in the EU for people on low to medium incomes. As a small island, geographically on the edge of Europe, our prosperity depends on that forward-looking approach. We have succeeded by embracing change and openness, not shutting it out.

The Bill is another solid step forward away from the failed policies of our opponents. Their policies not only failed them but also the country. Their policies delivered 17% unemployment, mass unemployment and mass emigration. In 1991, we passed the 1.1 million employment milestone, and the 1.9 million milestone last year. The sign ahead reads 2 million people employed in 2006, but only if we keep on this progressive path. We cannot afford three or four years of finance Bills drafted by those who want Ireland to rest and re-think.

The extraordinary growth and increased tax revenue that resulted from the Progressive Democrats' approach has increased the resources available for social provision. It has allowed real and substantial increases in social welfare payments, health and education. For example, the old age pension has risen by 67% since 1997. The Finance Bill 2006 not only ensures a fair tax system, but a more successful one. Fairness breeds compliance. Compliance means greater revenue for expenditure on social provision.

Sections 2, 3 and Schedule 1 set out taxation rates and personal reliefs. These demonstrate the fair approach by allowing for increases in personal and PAYE credits. They will see the removal of those on the minimum wage from the tax net. They also provide that those on the average industrial wage will be excluded from the higher tax rate. Both these commendable developments are clear evidence of the Government's determination to keeping tax down on low and modest incomes.

The Bill will restrict the use of tax reliefs by high income earners and introduce greater equity to the tax system. Members opposite should take note of this and refrain from erroneous future pronouncements about the focus of the Progressive Democrats' policy and action. I will not, however, hold my breath. I apologise to Senator McDowell who is taking the brunt of this as the Opposition benches are empty.

Derek McDowell (Labour)
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I am taking the brunt of it.

John Minihan (Progressive Democrats)
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Section 13 represents concrete action on Progressive Democrats' policy to increase child care supply and maximise choice for families. Increased supply will result in decreased costs. This provision inserts a new section into the 1997 Taxes Consolidation Act, a scheme of tax relief for income received from the provision of certain child care services. The €10,000 disregard was a key element of the Progressive Democrats' pre-budget policy. In conjunction with the early child care supplement, it provides a multifaceted and nuanced approach to assist families with child care costs with consideration of the variety of options chosen by parents.

Section 17 provides further evidence of my party's commitment to provide a tax system that both promotes growth and limits the ability of high-income individuals to use tax reliefs. Where a person is a high-income earner, restrictions will be applied to the extent to which specified reliefs can be applied to reduce the individual's tax bill. Such an individual can only use reliefs to reduce his or her tax bill in any one year to 50% of the individual's adjusted income, which is to be welcomed.

I have some concerns, however, regarding how proposed changes could affect substantial investments and capital plans, particularly those that have been made in the expectation that the law on reliefs would not be changed retrospectively. Any small enterprise will be aware that cashflow calculations often make assumptions or attempt to take into account the extent to which profit might be covered by certain reliefs, particularly for bank finance purposes.

In most cases, capital investment takes some time to organise, as does progress through our planning process. I am aware of concern from the hotel trade, for example, that legislative change to schemes designed to attract investment could have a negative impact on individuals who have invested in improving products and services for Irish and international consumers. I would be grateful to hear the Minister's view on this issue.

Section 40 inserts another new provision in the Taxes Consolidation Act 1997. This contains an incentive for SSIA holders on lower incomes to invest some or all of their SSIA funds into a pension product when their SSIA matures. Under the Bill a new pension initiative aimed at lower-income SSIA holders and those with underfunded pensions is to be introduced. Given that research shows that only half of those working who require private pension cover have a pension scheme and that some 50% of these private pensions are totally inadequate, this initiative is particularly commendable.

On a less publicised element of the Bill, I would be interested to hear the Minister's views on the changes to the Taxes Consolidation Act 1997 proposed in sections 47 and 48. Any change that could excessively increase compliance costs and negatively impact on international competitiveness should be handled with caution.

Governments are aware that unduly complex tax calculations can deter investment funds that market investment internationally. They are mindful of the costs of amending systems to cater for complex tax calculations and different treatment for Irish versus EU investments, as they can encourage business to avoid certain investments and/or encourage investment abroad. Irish investors should have maximum choice available to them. I would be grateful if the Minister could today, or at some time in the near future, set out his views on how sections 47 and 48 may impact on the investment sector.

We are continuing on our successful course that fosters enterprise and initiative, drives competition and efficiency, and provides the most generous tax and welfare system for single-income families in the world. That course has meant that in today's lreland we are generating more jobs and have more workers. Some 20 years ago, the challenge was to end the misery of unemployment and emigration as well as ending the cracked policy approach taken by successive left-driven Governments. Today's challenge is, thankfully, very different. It involves sustaining our progress and prosperity, working harder to protect and provide for the vulnerable, reforming public service delivery where necessary, integrating our immigrant workers, and further protecting our environment.

We must still guard against allowing a reversion to the policy approaches of a left-driven Government. This Bill is a step towards that end, as it demonstrates that the Progressive Democrats core belief, namely, that economic development and the provision of employment are the best defenders against poverty, is the right one for all in our society. In this context, I welcome this legislation.

Derek McDowell (Labour)
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It is always my good fortune to have an opportunity to speak after the point where control of the House slips into the hands of the Progressive Democrats following inflammatory comments from Senator Ross, after which he promptly disappears. On more than one occasion this has tempted me down a number of culs-de-sac, most of which I will try to avoid today.

I wish to begin with a nakedly sectarian point of which I was reminded when Senator Mansergh referred to Le Monde— that it would be appropriate today to express our solidarity with French workers and students as they seek to resist the efforts of the Minister of State's confrères in the French Government to undermine the standard of living of young French people.

Martin Mansergh (Fianna Fail)
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There I disagree with the Senator.

Derek McDowell (Labour)
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Let me avoid further culs-de-sac. I want to spend most of my time speaking about what I consider to be the guts of the Bill, which is the manner in which it deals with capital allowances and the special reliefs and incentives that have been in place, in some cases, for 30 or 40 years.

The reports published by the Minister made for fascinating reading. I compliment the Minister for having commissioned the reports and I also compliment those who compiled them. I am sure anyone who has read them will agree that the content, presentation and standard of the internally-produced Department of Finance report was at least as good as the one for which we obviously paid a lot of money to Goodbodys and Indecon. We might bear that in mind in future.

Martin Mansergh (Fianna Fail)
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Hear, hear.

Derek McDowell (Labour)
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We must approach this matter from two angles. One involves what these incentives and reliefs sought to achieve. The other concerns the reason we stood back and examined them at this time, which is their effect on particularly high-earning taxpayers or non-taxpayers in some cases.

I wish to start with the second angle. The scheme that the Minister and the Department have come up with in section 17 is a good one, which has been ingeniously worked out. I have one problem with it in that I am not convinced we should allow a roll-over in the fashion that is set out in the section. That is a quibble, however, and the scheme generally is a good one.

I would counsel against looking even now to produce exceptions. It is always tempting to say that this particular type of investment or donation should not actually be part of the cap. For reasons I perfectly understand, Senator Henry sought to make exactly that case only a short time ago. If we are insisting that high earners must pay at least or approximately 20% in tax annually, then we must adhere to that principle irrespective of the merits of the investment or donation which people might otherwise make. Let us not go down the road of putting in place what I think is a decent provision but then immediately dilute it by making an exception, however reasonable that exception may seem to be.

Looking at it from the other angle, in some sense it is a relief to find that the consultants endorsed the major expenditure, which has been the urban renewal scheme. They said that approximately 74% of the total cost to the Exchequer went in the property-based urban renewal schemes, which is a good thing because all parties in this House supported them. The results are there to be seen in the centre of Dublin where previously there had been a market failure, dereliction and a lack of commercial and construction activity of any kind. It is crystal clear that without the benefit of tax reliefs and incentives that market failure would not have been corrected. Unfortunately, however, as we went through the 1990s and the first few years of this century, we started adding on reliefs, sometimes for no good reason at all or for misguided reasons. That happened sometimes because we thought something was a good idea. Some of those good ideas proved not to be so good, however, while others did not work out.

The two Ministers who were responsible for most of these reliefs — Deputy Quinn and the former Deputy McCreevy — came at the matter from totally different philosophical angles, although the effect was the same. The former Minister for Finance, Deputy Quinn, identified a market failure and decided this was a way the State could become involved in solving it.

The former Deputy and Minister for Finance, Mr. McCreevy, did exactly the opposite. He stated that the private sector should be allowed to sort out this market failure. The end result was exactly the same — we ended up subsidising the private sector to do something we were not prepared to do ourselves. It was a remarkable philosophical difference in that both Ministers could stand by what they did in their own terms without apparently being able to see the other side of the story. We must take a number of measures, including a cost-benefit analysis to know what we seek to achieve. In one way, that is stating the obvious. The Minister of State at the Department of Finance, Deputy Parlon, and the Minister for Finance are blue in the face stating they carry out cost-benefit analyses. We discovered that perhaps this is not the case in one major scheme which will continue, namely the private hospital scheme, as all that is required is HSE certification that the conditions in the Act have been met.

We must ask two preliminary questions before we go any further. The first is whether an area of activity is one in which the State should be involved. Examining the range of incentives provided, we must be careful about getting involved in what I broadly term the commercial sector. With the benefit of hindsight, I cannot see the provision of hotel rooms and holiday cottages as a matter in which the State should have been involved. It was virtually certain that over time the market would have made available those hotel beds in so far as tourists were ready to take them up. We must consider carefully before we go down the commercial or semi-commercial road again.

The second question is whether only the State should take action. The issue of park and ride facilities was mentioned earlier. The argument was made in Dublin five, six or seven years ago that park and ride facilities were required at DART stations and the former Minister for Finance, Mr. McCreevy, introduced a specific section in a Finance Bill to encourage it. It did not work and he subsequently amended it in order that a park and ride facility could include other property developments. It still did not work. We should have asked whether it was in the public interest to have this facility and, if so, either do it directly or finance a local authority or State company to do it.

Another example of where the issue might arise is in the increasing privatisation of leisure facilities. We have fewer and fewer local authority swimming pools. We had community and voluntary facilities, often run by football clubs or the GAA but now a huge number of people are members of gyms. Whether they use them or not is another matter. I am surprised that nobody has come up with the bright idea of giving tax incentives for such leisure facilities. I am sure it will cross the Minister's desk sooner or later. This is exactly what we should not do. We should tell local authorities, as happens in every other country including the UK and Northern Ireland, that they are expected to provide a certain amount of publicly-funded facilities and run them on the basis that they will be available to everybody within the area.

Having answered those preliminary questions and deciding that an area is one in which the market has failed and it is appropriate for the State to get involved, we should then apply the sensible and important criteria mentioned by Goodbodys. They state we should take into account any genuine development potential in an area. Harsh though it may sound, the evidence now suggests that the area covered by the rural renewal scheme in County Leitrim simply did not have the development potential we would have liked. For that simple reason, the scheme did not work. The consultants are clear in stating that no such similar scheme should be contemplated. We must ensure the potential is there to fill the market gap as it appears. The other eight or nine criteria set out by Goodbodys are good and sensible and we should also take them into account.

I will speak specifically on the one major scheme not being terminated, namely the hospital beds scheme. It is by no means clear to me what it seeks to do. However, it seems likely it seeks to make good on the Government's commitment in the health strategy to provide an extra 3,000 beds notwithstanding the large amount of resiling from that commitment during the four or five years since it was made.

I do not have a problem in principle with the notion of providing incentives for the provision of private beds. The important matters are how access to those beds is decided and the standard and nature of care people receive. It is crucial to have joint waiting lists and that people receive access to hospital beds, whether private or public, on the basis of their medical needs and not on the amount of money they have in their back pockets. This is a complicated problem. I am convinced the policy articulated by my party at the last election, namely a universal insurance scheme, is the best way to introduce a market mechanism to give choice while at the same time ensuring access is based on need. That is a debate for another day.

I am genuinely unclear as to where this is going. We seem to be intervening in and interfering with the private-public mix in a way that does not make any sense and is not coherent within the overall health policy of the Government. The Government discusses having consultants on public-only contracts. I presume those consultants would not be facilitated, or working, in private hospitals. The Government seeks to encourage consultants to provide more of their time in public hospitals while at the same time seeking to construct more private beds.

We must go one of two ways. As I stated, I believe access controlled through a health insurance scheme is the best way. However, if we do not do so, we must make a strict delineation between public and private so they exist on two separate levels. Private should mean a facility built and run with private money for profit where people pay for the facility and the treatment they receive.

While I agree with the thrust of the pension provisions in the Bill, they do not go far enough. A few months ago, the Pensions Board produced an interesting report with a number of recommendations, most of which I agree with although they do not go far enough either. My view is that we must provide for compulsory contributions over and above what people now pay through PRSI. A voluntary system will not work because too many people are on too low an income and the choice is too distant for them. Many people will not be in a position to make genuine proper provision in the future.

That aside, we must deal with the scandal of people abusing the provisions introduced for pension provision in order to avoid income and inheritance tax. The Minister sought to do so through introducing caps which are too low. Provision for lump-sum payments of €1.25 million is not necessary. It should be much less than that. We should not tolerate a situation where people can have pensions of up to €5 million which can then accumulate. I assume €5 million is the total cap including accumulation and increase of assets retained in the fund. Those numbers are far too high. While I am not an actuary, I believe a pension fund of that nature allows for an annual annuity of much higher than what people can reasonably claim they need to live. When the PRSI scheme was introduced many years ago, a cap was introduced which is now approximately €40,000. We should go down the same route here. The State should seek to provide assistance on an EET basis to provide for a proper pension. However, beyond a certain level people are well able to look after themselves and do not need tax incentives or benefits.

I agree with what has been done on the artists' exemption scheme. We hope the relatively small number of people, amounting to a couple of dozen, seriously impacted by the measure will stay. If they do not do so it will not be a loss to the Exchequer as they do not pay anything in the first place. I approve of the provisions made.

In the nine or ten years in which I have spoken on Finance Bills, this is the first occasion I have chosen not to mention income or corporation tax. The reason is that after ten or 12 years of changing income and corporation tax rates and a great deal of debate, we must be open and honest and state we have reached a time when no serious party argues for an increase in rates. By any objective examination of where the economy stands, we do not need an increase in tax income to bring about the social progress and improvement in public services for which parties such as mine argue. Choosing to ignore these issues is a signal to the Minister that we will not play that game.

Tom Parlon (Laois-Offaly, Progressive Democrats)
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I thought the Senator was a slow learner.

Derek McDowell (Labour)
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I may change my mind.

Mary White (Fianna Fail)
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I wish to share my time with Senator Fitzgerald.

Rory Kiely (Fianna Fail)
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Is that agreed? Agreed.

Mary White (Fianna Fail)
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This year's Finance Bill will bring about real change and reform of our tax system. The ESRI described the budget on which this Bill is based as "perhaps the most progressive budget package for many years — poorer households did proportionately better than rich ones". Fr. Sean Healy of the Conference of Religious of Ireland, CORI, describes it as a fair budget, looking after those in society who need help. The ESRI and CORI are reputable organisations.

It is Government and Health Service Executive policy to try to keep elderly people at home for as long as possible. For this strategy to work it is vital that the services provided are affordable and dependable. The addition of 13.5% VAT to its cost has a major impact on the affordability of the service. This charge does not apply to home care in the United Kingdom or other EU countries where the service is exempt from VAT. If the service is licensed and regulated the European Commission will not take issue with it.

To keep an old person in a residential home can cost up to €1,000 a week, whereas a professional home care service of three hours a day, five days a week costs less. Many business people and entrepreneurs see an opportunity to provide professional home care services whose staff are properly trained, insured and paid to provide a home care service. It is far better for older people to be in their own homes than to be in residential home care. It is important to do away with this additional 13.5% on the cost of the home carer. This should happen as part of the Tánaiste's plan to keep older people in their own homes. Most of those in residential care do not need to be there full time.

I am happy to have put the issue of child care on the political radar last year. I have been on a mission in recent months to put aging and ageism on the political radar. I held three meetings on this topic in Dublin South-East. At each meeting people cried out for help because they do not want to retire at the age of 65. This mandatory retirement age is discriminatory. Normally we react to EU directives but in this case we should take the initiative, and in the spirit of Council Directive 2000/78/EC, take this upon ourselves. People live longer and are healthier than in the past and many do not want to retire.

In the public sector people must retire at 65. When a person takes up a job in the private sector an obligatory retirement age is set in the employee's contract. The result is that thousands of older people must retire against their wills every year, even though they have the ability to retain their jobs. That is ridiculous for people who are skilled and experienced. Gay Byrne, at 72 years of age, is a perfect example of an older person bringing his skills, experience, and leadership to bear on road safety.

With regard to women, when I got married in 1969 I had to give up my job because I was working in the public sector.

Paddy Burke (Fine Gael)
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Senator White is eating into Senator Fitzgerald's time.

Mary White (Fianna Fail)
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When other people speak everybody is tolerant.

Paddy Burke (Fine Gael)
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I understand the Senator is sharing time.

Mary White (Fianna Fail)
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I am the only one who is pressurised.

Terry Leyden (Fianna Fail)
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It is very unfair.

Mary White (Fianna Fail)
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It is very unfair. I am always being stopped.

Paddy Burke (Fine Gael)
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I understand the Senator is sharing time.

Mary White (Fianna Fail)
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I am. The Leas-Chathaoirleach has just arrived in the Chamber and wants to be gung-ho.

Mr. Charles Haughey introduced free travel for older people and I am putting down a challenge to the Taoiseach to get rid of this discriminatory mandatory regulation that people must retire at the age of 65. It is my pleasure to hand over to Senator Fitzgerald.

Liam Fitzgerald (Fianna Fail)
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I welcome the Minister of State at the Department of Finance, Deputy Parlon, to the House, and thank Senator White for sharing her time with me.

I welcome the Finance Bill which builds on the progress made over the past seven or eight budgets and their respective Finance Bills. Much has been said about planning, evaluation, review, a change of economic circumstance and climate, and how we plan for that. That constant evaluation and reform is also necessary in the tax system. This has been ongoing from the day this Government and its coalition predecessor took office in 1997. The Government has striven to make the tax system fairer and more transparent and to identify and eliminate the devices used by professionals to get around our tax laws. By making the system more transparent and equitable, the aim is to encourage greater compliance among taxpayers in general.

Tax policy must achieve a delicate balance between promoting enterprise and employment for the creation of jobs and providing for, and facilitating the creation of, a better quality of life for everyone. This Government presides over one of the best performing economies in the world. The standard indicators bring that home forcefully, including, the lowest unemployment rate, the 2 million employed, which is a record for the State, the increase in the number of jobs created last year, and the tax system which remains highly competitive and is ranked first for both personal and corporation tax, inflation or investment.

Opposition spokespersons and the media have recently teased out the question of investment in infrastructure. Some say that despite the recent remarkable increase in infrastructural investment which was used to promote economic development, competitiveness and regional balance, we should fast-track it further and borrow more to spend more on infrastructure. That is neither wise nor prudent. The Government's massively increased funding for development reflects an attempt to make up for a significant deficit in this area, which retarded the potential for economic development and job creation. Our economic progress reflects the increase in this respect. The plans for the future are prudent and achievable.

Some speakers referred to capital investment. The Government seeks value for money, is committed to proper management of public spending and is determined to get the best possible return for this. There are many examples to support this.

The Minister announced 12 new measures late last year to increase the efficiency of returns from capital investment. These measures are aimed at eliminating occurrences of wasteful expenditure. Of the most prominent examples, 19 of the 22 major road projects valued above €15 million are on budget and ahead of schedule. That is not to say that everything is perfect. The Minister's actions and decisions late last year are clearly indicative of his appreciation that much more needs to be done to bring about even greater efficiencies, a greater degree of value for money and thereby greater competitiveness.

I did not hear Senator John Paul Phelan speaking so I cannot comment on his contribution but Senator Quinn and others referred to planning for the future. I compliment Senator McDowell for being balanced and positive in his approach. I have served in both Houses since 1981, and if one looks back on the history of Governments through the years and at the planning or lack of it and the rollover of policies, programmes and finances from year to year, any fair-minded or objective observer would have to compliment this Government, the Minister for Finance, the Minister of State, Deputy Parlon, and the Minister's predecessor, Mr. McCreevy.

There is ample evidence of forward planning. I accept it was never more necessary, essential and vital because coming from where we were in the dark times of the 1980s. Our current phenomenal success, both economically and socially, is unsustainable without ongoing evaluation, review, reform and planning. We are frequently reminded we are a very small and open economy and are exposed to changes in the world market over which we have no control. Accordingly, we must play to our strengths at home. There are now fewer manufacturing jobs than there were ten years ago. We have a major reliance on the building industry. Our cost competitiveness has declined, relatively speaking, and we must ensure our inflation rate is lower than in competitor countries. Our dependency ratio is an added factor. These are the main target areas on which the Government has focused and for which it is planning ahead. I compliment the Government on the various, extensive programmes it has set out.

Senator White referred to ageism. The pensions area has been targeted by the Government from an early stage. It might seem trivial to the casual observer but it is very significant in terms of future implications and contingency plans which need to be in place for the ageing profile of our population. The former Minister for Finance, Mr. McCreevy, set up the National Pensions Reserve Fund to take on the burden which will inevitably be placed on State pensions in the next 25 to 30 years. His successor as Minister, Deputy Cowen, and the Minister of State, Deputy Parlon, are taking on a related aspect, the inadequacy of private pension provision by those in employment.

I commend these approaches. It is significant in terms of long-term planning and the implications it will have for the finances of the State. Important basic ground-work and planning has been done. I also commend the measures to close off the loopholes which have been availed of by certain very wealthy people. The figures indicate it is not the great number of dodgers we are led to believe, nevertheless, the few involved have used very clever devices. I commend the Minister for taking on that issue and making firm decisions on it.

Fergal Browne (Fine Gael)
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I welcome the Minister of State and his officials, both in the House and in the antechamber. When we considered the Finance Bill two years ago I was amazed to learn there were so many Department of Finance officials both in the antechamber and in the House. Perhaps it is a reflection on the Seanad that they travel in such numbers.

I was glad I heard the last few minutes of contributions. Senator White reminded me of the typical Fianna Fáil spin. In the budget, the big announcement was about the €1000 child care grant. That has now turned out to be €750, which will be paid only from August next. One cannot blame the public for being cynical when the big fanfare last December was about €1000. People are now being short-changed again, getting €750 instead, and from what I understand they will be lucky to see it in August.

I was glad Senator White also reminded me of the announcement during the budget of the home help packages amounting to €150 million, which we learned a little later was €50 million per year over three years. I am amazed when I hear people on the Government side saying that 29% of people in nursing homes should not be there and should be at home in their own environment. I challenge the Government to prove that and explain to us how many people have now left nursing homes and are being adequately cared for in their own houses. I do not believe the figure of 29% is realisable.

One needs to go through everything the Government says with a fine tooth-comb. My colleague Senator Brian Hayes this week got a reply from the Minister of Finance which showed that more people than ever are now paying the top rate of tax. It is a myth that we have a low-tax Government or economy.

We have also seen major squandering of public money by the Government. A certain amount of arrogance is now creeping into the Government, especially perhaps into the Progressive Democrats. They genuinely think the world cannot go on without them. I saw the Minister for Justice, Equality and Law Reform give that impression on "The Week in Politics" last week, rubbishing any potential partnership down the line with the Green Party. Unfortunately, Senator Minihan has caught the same bug this week. If the Minister of State, Deputy Parlon, is attending his parliamentary party meeting today, he might tell his colleagues in Government that the world was founded without the Progressive Democrats and Fianna Fáil and will go on without them in the future.

Tom Parlon (Laois-Offaly, Progressive Democrats)
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I do not think they would be impressed.

Ann Ormonde (Fianna Fail)
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They are getting on fine without Fine Gael.

Fergal Browne (Fine Gael)
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The State was founded by Cumann na nGael, which laid the foundation stone in very difficult times.

Ann Ormonde (Fianna Fail)
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The Senator should stick to the subject.

Terry Leyden (Fianna Fail)
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The Senator should not forget the Blueshirts.

Fergal Browne (Fine Gael)
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The Blueshirts were there and fought for free speech when others tried to stop them from speaking. That is a different argument. The Government genuinely feels that the Opposition is incapable of running the country.

Tom Parlon (Laois-Offaly, Progressive Democrats)
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It is not only the Government which feels that. The country feels it too.

Fergal Browne (Fine Gael)
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I remind Senator Minihan that in the years 1994-97 we had the first budget surplus, unemployment was consistently falling and the economy was very well managed. There is no point in the Government giving the impression it knows all the answers because it does not. It has regularly squandered public money. The PPARS system was a fiasco and Fine Gael had to highlight that before the Government realised it. Fine Gael also highlighted the nursing homes debacle. The e-voting system, which cost €60 million, collapsed and, of course, nobody resigned or was accountable. Unfortunately the taxpayer had to pick up the tab not only for that but for the ongoing costs and depreciation of the machines.

Tom Parlon (Laois-Offaly, Progressive Democrats)
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Did Senator Browne see the poll on Sunday night?

Fergal Browne (Fine Gael)
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I did. There is a great deal of squandering of public money.

Ann Ormonde (Fianna Fail)
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The Senator should stick to the subject.

Fergal Browne (Fine Gael)
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If the Government had not wasted so much money in the past few years and had managed the economy properly it could now be introducing major tax cuts. Unfortunately, this Government does not seem to realise that money squandered could be tallied with the benefits which it could give to taxpayers, and the improved public services it could fund. Up to €0.5 billion has been spent on the Dublin Port tunnel and the roof is still leaking.

I accept more people have returned to work, but that puts great pressure on the Government to provide better facilities for people. If we go out of our way to encourage more women back into the workforce it is obvious and logical that we must improve child care facilities. The Government has taken steps in that direction but in many cases too late and too slowly.

I came to the House today to speak in particular about the Comerama issue. I am disappointed that in the Finance Bill the Government missed a unique opportunity to rectify a wrong done a number of years ago when the Comerama factory closed. The workers were promised by the Tánaiste and then Minister for Enterprise, Trade and Employment, Deputy Harney, that the new, enhanced redundancy package would apply to them. That was witnessed by Government Deputies as well as by the Opposition. The Finance Bill could rectify the matter but the Government has missed its chance.

I have attended many public meetings in Castlecomer and public demonstrations outside the gates of Leinster House. Deputies McGuinness, Nolan and others have also attended. The Government had the opportunity to rectify the matter but has flunked it. An amendment could have been tabled on Committee Stage of the Finance Bill. Deputies McGuinness and Nolan are members of the Joint Committee on Finance and the Public Service and it is regrettable they did not take the opportunity to table a Government amendment to rectify the wrongdoing.

Ordinary workers in the Castlecomer area are down about €10,000. If they had known they could not avail of the enhanced redundancy package they could have continued working for one extra day per week, and that would have got them into the time period for the new package. Only a small number of workers are involved.

It is disgraceful that a Government could be so arrogant. Many crocodile tears have been shed by Government Deputies. Even Fianna Fáil Deputies said it was the fault of the Tánaiste and Minister for Health and Children, Deputy Harney, and that when a Fianna Fáil Minister came into the Department of Enterprise, Trade and Employment everything would change. What happened was that the Fianna Fáil Minister for Enterprise, Trade and Employment, Deputy Martin, did not acknowledge letters from the group. That is an indication of the arrogance. After the party had a bad result in the local elections in the Castlecomer area one would imagine it would have learned a lesson. The outgoing Fianna Fáil councillor was blamed and unfortunately lost his seat. The Government still does not listen. It had an opportunity in the Finance Bill to table an amendment to rectify the wrongdoing but did not do so.

Will the Minister of State give an indication, for example, in next year's Finance Bill, that the Government would support an amendment? While the House can table a recommendation it is weak in the sense that it cannot amend a money Bill. Perhaps Senator John Paul Phelan and I will table a recommendation from this side of the House and ask the Minister to look at that particular aspect with a view to rectifying the position. Ordinary workers in the Castlecomer area are down €10,000 on a redundancy package. Some of the workers involved received the enhanced redundancy package because they continued to work. The reason they left early was to save a sister plant in Donegal for which they got no reward but were in fact penalised.

We continue to hear from the Government of the huge amount of money in the economy. This problem could be solved with a small amount of money. Some years ago the Tánaiste took a keen interest in the National Sweepstakes and rectified a wrong. This case is similar.

When replying to the debate I ask the Minister to indicate whether his party has learned anything from the local elections? His party is acutely aware of it, given that it cost the PDs a seat in the local elections in Kilkenny. A relation of the Minister of State, Deputy Parlon, stood for the party. Were it not for that issue he would have been elected. Will the Minister of State clarify whether it is intended to address that issue in the Finance Bill and explain why the Government did not avail of the unique opportunity to do so when the Bill was going through Committee Stage in the other House?

Ann Ormonde (Fianna Fail)
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I understand I am sharing time with Senators Leyden and Maurice Hayes.

Paddy Burke (Fine Gael)
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Is that agreed? Agreed.

Ann Ormonde (Fianna Fail)
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That means I have little time.

Fergal Browne (Fine Gael)
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The Senator will have enough.

Ann Ormonde (Fianna Fail)
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I welcome the Minister of State, Deputy Parlon, to the House. I thank and congratulate him and the Government on the Bill and the budget and the hard work that went into their preparation. It is to the credit of the Government that the economy continues to perform so well and the success may well continue for another 12 years.

The Finance Bill is about real change and reform of the tax system. A recent ESRI report said this is one of the most progressive budgets for many years and that poor households will do better than rich households. That is a good line and is one I will remember when I am doing my rounds to show the success of the Government——

Fergal Browne (Fine Gael)
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Will the people believe it?

Ann Ormonde (Fianna Fail)
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Let me add more.

Fergal Browne (Fine Gael)
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Will they believe it?

Paddy Burke (Fine Gael)
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Senator Ormonde to continue without interruption.

Ann Ormonde (Fianna Fail)
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This Bill will remove all those on the minimum wage from the tax net. It will exclude workers on the average industrial wage from the highest tax rate. I have done some thinking on this issue. Let us compare 1997 with 2006. In 1997 the average industrial wage was €19,400 whereas in 2006 it is €32,000, an increase of about €12,000.

Fergal Browne (Fine Gael)
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What was the average price of a house at that time?

Ann Ormonde (Fianna Fail)
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Will the Senator hold on. There is also less tax.

Fergal Browne (Fine Gael)
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Will the Senator be fair and compare like with like? What was the average price of a house at that time?

Paddy Burke (Fine Gael)
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Senator Ormonde, without interruption.

Ann Ormonde (Fianna Fail)
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Income is increasing while tax is reducing. Let me repeat that, income is increasing while tax is reducing. That is a lovely line. I ask Senators not to forget it when they are out and about. It is a nice line to have in one's thinking. It also means one has more money in one's pocket. I could not ask for more than that. Everybody would like to think they have more money in their pockets.

The proposal regarding SSIAs target the lower income group. That the Minister is enticing people to put their money into a pension fund is welcome. They will also get money back. However, a public relations job must be done on this issue. We are not getting across the message on the simple things of a quality of life and more money in one's pocket. When I am out in the evening and having a chat I like to be able to say in simple language that one has more money in one's pocket and that one can put one's SSIA money into a pension fund, particularly if one is below a certain income and can avail of a tax rebate. These are the issues I like to talk about.

In regard to care of the elderly and childminding, one can earn up to €10,000 tax free. These are welcome measures. I could continue to speak on them for the next hour but time does not permit.

Terry Leyden (Fianna Fail)
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I thank Senator Ormonde for sharing time. I wish to share time with Senator Maurice Hayes. I welcome the Minister of State, Deputy Parlon, to the House and the Minister, Deputy Cowen, who was here earlier. I welcome also senior officials from the Department of Finance. That senior officials are present to listen to the views of Senators gives greater recognition to the House. The officials, who are specialists in particular areas, come from different sectors of the Department of Finance.

This is one of the best budgets of the century. The issues were dealt with very favourably. For example, the Shannon tax corridor is being phased out in a reasonable manner. This will allow people to adjust. All sides of the House lobbied the Minister, Deputy Cowen, and he responded extremely well as did the Minister of State, Deputy Parlon, who would have supported it.

The urban renewal scheme has been a phenomenal success. I am not sure whether it can be renewed but I ask that it be reconsidered. There are parts of County Roscommon and elsewhere in need of urban renewal. At present major urban renewal work is taking place in Roscommon town. That scheme was implemented in conjunction with Roscommon County Council, of which I was a member, and the Department of the Environment, Heritage and Local Government, and the areas designated will boost the centre of the town.

I compliment the Minister of State, Deputy Parlon, for pushing the decentralisation programme. All politics is local. That Land Registry is being decentralised to Roscommon town and will be a great boost for the town. Roscommon will become the registry centre of Ireland. If, as I hope, I can have my Registration of Wills Bill passed it will be implemented at the General Register Office in Roscommon. It took many years to bring the General Register Office to Roscommon town. People should be patient in this regard. In 1992, when I was a Deputy——

Joe O'Toole (Independent)
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We were all patient but the Senator made it three years. We said that was too short.

Terry Leyden (Fianna Fail)
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No.

Joe O'Toole (Independent)
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The Senator is the one who was impatient.

Paddy Burke (Fine Gael)
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Senator Leyden to continue without interruption.

Terry Leyden (Fianna Fail)
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It took approximately ten years to decentralise the General Register Office.

Joe O'Toole (Independent)
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That was what I said on the night but everyone disagreed with me.

Terry Leyden (Fianna Fail)
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That is fair enough. I encourage the Government to push ahead with decentralisation. When the General Register Office came it was as welcome as when it was announced and it has meant so much to the town of Roscommon. The Minister of State, Deputy Parlon, was present for the turning of the sod. The office has now been built. I will not dwell on the new road structures.

Great interest has been shown in the issue of private-public development of hospitals. A private hospital located with a public hospital is a good combination.

The Minister responded well to the intensive lobbying on the Shannon tax corridor, the fuel allowances and other aspects of the budget, including biofuels. The announcement yesterday regarding geothermal heating systems that were approved, heat pumps and all the alternative energies encouraged in this budget are welcome. There has never been a more receptive Minister for Finance than this Minister. He listened patiently to Members of the House and others outside it and his budget reflects the care and attention given to it by him and his senior officials. I take this opportunity of congratulating him on the budget. I know the Bill will be passed unanimously by this House.

Maurice Hayes (Independent)
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I am grateful to Senators Ormonde and Leyden for sharing their time with me. Since they got hassled somewhat, perhaps the Leas-Chathaoirleach might consider giving me a minute or two of injury time.

I welcome the Minister to the House and congratulate him not only on this budget but on his stewardship of the economy in recent years, which has provided stability and certainty for business and others and an environment in which growth can take place. That is a wonderful achievement.

I want to deal with the small print in the Bill, especially section 20. I congratulate the Minister on making it possible for people to make donations to charity by way of securities and so on as well as money. That will be hugely important to universities and others but it raises the point of the need for governance in the field of charities. I hope the Minister will give some impetus as a result of this measure to the emergence of a charities Bill, which would provide for transparency and accountability in the provision of accounts by way of a registrar of charities or some sort of control in that field. The responsible bodies are anxious that such a measure would be brought forward. I congratulate the Minister on behalf of the voluntary charities and institutions with which I am involved. It is a courageous and forward-looking measure, as is section 23 providing for the protection of the national heritage.

Joe O'Toole (Independent)
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With the permission of the House I wish to share my time with Senator Ulick Burke.

Paddy Burke (Fine Gael)
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Is that agreed? Agreed.

Joe O'Toole (Independent)
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I welcome the Minister to the House and echo the words of Senator Maurice Hayes. I congratulate the Minister on the budget, a sentiment I expressed on budget night. I particularly welcome the move he made on an issue I raised with him last year, namely, the importance of taking the minimum wage out of the tax net — it was done — and on the issue of child care, which I also raised with him. I recognise the advances that have been made in those two difficult areas. There are many other aspects of the Bill on which I could dwell but it is moving in the right direction. There are areas in which I would like to see more advances. There are aspects with which I am not completely happy and there are suggestions I would like the Minister to take on board.

I want to make a few points which I know have been dealt with in the other House. I am hardly the person the Minister would expect to be making a case for private hospitals but I examined closely the various submissions sent to us and from a business point of view and in view of this, lengthening the capital allowance period from ten to 15 years in section 5 makes it difficult for those institutions to make money. In fairness to them, it is a Government decision that it should be included. I am not sure whether it is a good decision generally but if it is to be included it should be left at ten years in terms of a business plan. They need that small support.

I realise the question of the Arts Council has been raised with the Minister in terms of those issues it has raised with many of us on many occasions over the past year, and I am aware the Minister met with members of the council. I met John McGahern after he met with the Minister and he was thankful on a number of fronts for the hearing they got. The issue was dealt with sensitively. On the last occasion we debated the matter in the House I said the issue should be left as it is but the Minister chose to make some changes. I accept they were done in a sensitive manner which has maintained the integrity of what it was intended to do from the outset. However, the proposal the Arts Council made to the Minister to extend the artists' exemption scheme to other areas like choreography should be done. That is something that might be examined.

I know what the Minister's officials will say when I talk about VAT exemption on certain issues. They will say we hear this every year in respect of education and so on but the question of VAT exemption on supply of goods or expertise to non-profit making events of an artistic nature, which have been so defined, should also be included and I ask the Minister to examine that.

I want to make an important point to the Minister. I realise this is something he and I have touched on many times on a one to one basis but I ask him to consider, when speaking to my good friends sitting behind him, that there is chaos in Europe today. There are problems with transport, health, education and local authorities throughout France. The same is the case throughout the United Kingdom. We have already seen similar incidents earlier this year in Italy, Germany and Belgium. The reason they have not happened here — I said this earlier and I am sorry to be repeating myself — is because of social partnership and benchmarking.

Whatever anybody says about benchmarking, it has delivered stability in the public service. A good example of it was when a colleague from the other side of the House highlighted earlier an issue that he felt social partnership did not cover or deal with adequately. I thought to myself that was just one issue out of all the issues dealt with in social partnership. We have the best strike record in Europe and I ask the Minister to keep that in mind as we go forward.

The Minister might read the Charlemagne column in this week's The Economist with a view to altering the viewpoint and attitude of the Department of Finance towards the teaching profession. I believe he will find it very helpful and it will be a pin-up picture for some of my friends sitting behind the Minister in that it will make life very interesting. I ask the Minister to read and enjoy it.

In my contribution to the debate on last year's Finance Bill I asked the reason we could not get back to the issue of grants for eco-friendly changes to houses. I refer here to micro-generators, wind and water generators, solar panels, geothermal heating and so on. I express my appreciation for the announcement made this year on that issue, which is a progressive step.

I wish to mention another announcement which did not get enough debate. Approximately six months ago I had a row in this House with the Minister for Education and Science on the OECD report on third level education. Attempts at depriving the institutes of technology in doctorate research and the awarding of doctorates was a backward step. I was delighted with the budget announcement of the additional resources and investment in the doctoral area and the requirement that it be spread around the third level institutions. That is the way forward in the future because there should be no absolutes or inflexibilities attaching to this area. That announcement was very welcome.

I will leave the Minister with a progressive thought.

Paddy Burke (Fine Gael)
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The Senator has two minutes remaining if he wishes to share time with Senator Burke.

Joe O'Toole (Independent)
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The Minister has indicated he will give me a minute of his time; I thank him for that. The biggest issues we are facing currently are eco-environmental issues. They were raised over the weekend by the Green Party but we are aware of them. They are issues of dependency on oil and the problem of waste and wasted energy. I end my contribution with this thought. I did some research on this area and looked at west Kerry as an example. The energy needs of all of west Kerry could be catered for with three 1.5 MW output wind generators. They would cater for everything and put something into the grid. Similarly, west Kerry could deal with all its waste. If any community is prepared to look after all its waste and energy needs and feed more back into the grid, those communities should get some reward in the form of a tax break for doing so. It is an opportunity to do something creative and progressive. All politics is local, as the Minister and I know, and every time there is a proposal, whether it is for an incinerator, a wind energy project or whatever, an objection is made but let people buy into this idea. Give them control and responsibility for their own environment and let us look at doing something creative. I ask the Minister to consider that for next year's budget.

The energy regulator has refused to accept for the next two years any more applications for alternative energy connections to the national grid. Rational reasons were given for this decision, although it sounds irrational. I understand the reasons and agree with some, but not all, of them. However, this is not the way forward and we should take steps in this respect. Significant advances in micro-generation have been made. When I was first elected to this House, everyone, including me, thought that we had more or less reached the limit in terms of hydroelectric energy. Now, with the advances in micro-generators, that is no longer the case and smaller rivers and areas can also be developed. However, this would probably require a tax break.

I regard the Minister's proposals to lift excise duties on various forms of biofuels to be positive and progressive. I have spoken to people involved in the industry to inquire why more people and farmers have not become involved in it. The explanation was simple and pertained to a lack of certainty. People require a fixed timescale and someone must state that it is planned to hold the excise duties in this fashion for the next ten years, in order that people can enter the industry at agricultural, supply and product levels.

While I would like to discuss some other issues, I cannot do so. I welcome the Finance Bill and applaud the Minister for many of the advances he has made. I also look forward to hearing his next budget. I ask him to take on board some of the issues I have raised.

Ulick Burke (Fine Gael)
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I thank Senator O'Toole for sharing his time. I welcome the Minister to the House and I welcome many aspects of the Finance Bill and the last budget, in so far as they have reduced the PAYE burden, as well as the tax take in general. In that regard, is it possible to find some mechanism for people who have overpaid their tax? I refer to those who are not particularly vigilant and are not aware that they may have done so. The recent statistics provided by the Department of Finance show that millions of euro, which are properly due to be repaid to the taxpayers, still remain with the Revenue Commissioners.

Over the years, I have often requested that a valuable and worthwhile tax incentive for the upper Shannon region should be extended to the middle and lower Shannon regions. The scheme gave new life to the upper Shannon area, particularly to County Leitrim. It would also give new life to the areas adjoining Lough Derg and particularly to east Galway. The results of a report have shown that the highest percentage of real poverty in Ireland still exists there. I hope the Minister will consider this possibility in the future. If the middle Shannon area was to receive the benefit of the same kick-start which was given to the upper Shannon region, it could lead to development and to an increase in the income of many people there. At present, incomes in the area are low.

In the few minutes which remain to me, I want to raise the question of the introduction of stealth taxes. I refer to increases in electricity bills and increases by local authorities. At present, one of the most pressing issues is that local authorities are introducing increases for services charges, some of which will never be provided by them. While the Minister has provided property-based tax reliefs in the budget, local authorities have clawed them back, particularly in the area of planning, for service charges, parking, amenities and so on. At present, local authorities do not know where to stop and someone in the Government should call a halt to it once and for all.

I also wish to mention the Government's present financing of the Department of Agriculture and Food. Proportionally, this has decreased substantially in recent years. While the single payments that now constitute part of agriculture were to be straightforward and simple, that is not the case. I know this is not part of the Minister's brief, but significant numbers of people are without such contributions thus far this year in respect of last year's payments, and have not yet been paid. Something must be done in this respect, as well as to recognise agriculture to some degree. While it will never again be the primary industry, the present rate of the flight from the land in the Minister's constituency and my adjoining constituency will inevitably lead to a deserted area. I ask the Minister to consider the Government's commitment to agriculture by providing financial support to keep young people on the land. At present, many young people do not consider the installation grant to be worth applying for because of the hassle involved.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I sincerely thank all Members who contributed to the debate. I wish to reply to some of the key points made. As for various comments made by Senator John Paul Phelan on the review of reliefs and incentives, I must point out, by way of background, that I have ordered the review of two dozen tax incentive schemes in the past year to ensure we get value for money. As a result, I propose to phase out or modify many of these incentives. Some are being left in place because they can deliver value for money for the public. These reviews have been published so that members of the public can judge for themselves the actions which the Government is taking and the reasons for those actions. I am pleased with the outcome of this thorough review process.

Senator McDowell made a thoughtful contribution about tax reliefs and their role in stimulating various sectors of the economy. His remarks showed that he had carefully studied the various reports into tax reliefs which were carried out in 2005 and which were acted on by me in the 2006 budget and Finance Bill.

The cost of tax reliefs and the question of who benefits from them is as follows. Page B.23 of the budget 2006 booklet contains a table detailing the destination of tax reliefs. Members will note that of the €10.8 billion in relief for the tax year 2002, the latest year for which figures are available, a sum of €5.6 billion or 52% went on personal tax credits and reliefs, a sum of €3.4 billion or 31% to help fund pensions and savings, and significantly, more than €1 billion or 10% went on capital allowances for traders, including farmers, to ensure their viability and job creation capacity. Those tax credits and reliefs include mortgage interest relief, medical insurance and medical expense relief. Hence, the vast bulk of tax relief each year goes to ordinary taxpayers at all income levels and to sustain business investment and jobs. This point is often forgotten about in this debate.

Senators John Paul Phelan and McDowell have quite rightly pointed out that tax reliefs and incentives can be very effective. Tax incentives have the capacity to deliver economic benefits to our people as a whole. Senator Mansergh also made this point. The evidence for this is there for all to see in the shape of significant developments, regenerations and improvements which have resulted from some of these incentives in Dublin. Examples include the development of the Custom House Docks area, Temple Bar, the successful development of Tallaght town centre and, more recently, the major development of the HARP area in Smithfield, in which more than €200 million was invested between 1999 and 2004. Outside of Dublin, one can point to various urban renewal schemes which have helped to revitalise and transform the inner city areas of Galway and Limerick in particular. It has also worked very well in many other towns.

Tax incentives have a role to play in economic management. It is right to use them at the right time and in the right circumstances. However, as Members on all sides have noted, they can outlive their usefulness. Senator John Paul Phelan has suggested that I should have terminated the various reliefs and incentives immediately. This is not the approach suggested by the consultants. A "soft landing" approach is being adopted in order not to damage our very successful economy.

As for Senator Phelan's call for a cost-benefit analysis of the scheme of relief for the construction of private hospitals and nursing homes, I remind him that the schemes were reviewed by Indecon Economic Consultants as part of the overall review of property tax incentives in 2005. Indecon consulted widely in the course of its review, including consultations with the Department of Health and Children and the Health Service Executive. Its report was published on 6 February 2006 and is available on the Department's website. The consultants recommended that capital allowances for private hospitals and nursing homes should continue.

Private health care is a long-established feature of the system of health care provision in Ireland and acts as a strong complement to the publicly-funded system. Members should consider the number of private nursing places that have been provided under the tax incentive schemes introduced by the former Minister for Finance, Mr. McCreevy. Had the Government not done so, I would hate to think of where our care for the elderly programme, which already has service pressures, would be at present. The Government is committed to exploring fully the scope for the private sector to provide additional capacity in the health system.

The key objective is to provide the required extra capacity, whether this is in the public or private sectors. A number of Government policies support the co-existence of public and private health care such as the designation of private and semi-private beds in public hospitals; income tax relief on private health insurance premiums; income tax relief on medical and dental expenses, including nursing home fees; while the National Treatment Purchase Fund sources capacity in private hospitals for public patients which has greatly decreased waiting times.

The average waiting time for medical procedures was the big issue in health when this Government took office. There are now other service pressures, such as overcrowded accident and emergency departments, with which we must deal. The synergy between public and private health care can work for a greater public good, especially for public patients. The Tánaiste's policy direction to the Health Service Executive to build private hospitals on public sites will free up beds for public patients in public hospitals and is another example of how increased capacity can be created, benefiting public patients and others. The idea that private sector investment excludes a benefit for public patients is patently ridiculous.

I am glad to note the support expressed by Senators for section 17, which contains the measure on the restriction of reliefs. Senator Henry and others referred to the listing of the donations scheme in section 17 which related to the restriction of reliefs. I considered this issue very carefully and discussed it with Opposition spokespersons on Committee Stage of the Bill in the Dáil. Omitting the scheme from the specified reliefs list would reduce the effectiveness of the restriction, the aim of which is to increase the effective tax rate of those on high incomes towards 20%. A tax relief is available for donations, once it is used as part of the 50% availability for tax relief. The suggestion has been made that if people already use that relief for other purposes, they should have the private discretion to provide for further relief for donations. Such a discretion would be differentiated by a person's income at any given time, as opposed to those who do not have that prospect.

I have sympathy for the point, but the focus of this budget has been to bring about a situation where we eliminate the possibility of high-income earners paying no tax at all. Let us deal with that first and let us observe how the specified relief scheme works during the course of the year. I am open to the idea of developing philanthropy and I am aware that there are more and more high-income earners in this country who may be interested in allowing some of their resources to be diverted into areas of public good. Given that the proportion of high-income individuals who will be affected by the restriction is relatively small, the effectiveness of the donations scheme will be unaffected in most cases.

Where relief under the donations scheme has been denied in any one year as a result of the restriction, it can be carried forward to the next year and the following years. In other words, if the 50% limit for relief is used up in one year, it can be availed of again in the following years. It is not a question of people being denied relief, rather it is more like a deferral of the relief in the interest of the equitable principle of people paying tax in any given year. A balance of principles must be achieved.

Senator John Paul Phelan asked me the reason for the changes in film relief. The significant improvements in the section 481 relief for film production were introduced in light of the representations made by the Irish Film Board and supported by the Minister for Arts, Sport and Tourism and his Department. The key argument was that the Irish film industry faced significant challenges from the increasingly competitive international tax environment for film production. Particular significance was placed upon upcoming changes to UK tax legislation. The arguments of the Irish Film Board, supported by the analysis of the Department of Arts, Sport and Tourism, persuaded me that there was a case for improving the relief. Accordingly, I proposed an increase in the overall cap on expenditure that can be raised under section 481 from €15 million to €35 million and increased the existing 55% to 66% limit on the proportion of a film budget that can be raised under section 481 to an overall limit of 80%.

Senator Phelan also questioned the effectiveness of the five-year scheme of targeted excise relief for biofuels with a view to assisting biofuels to achieve an initial target of 2% penetration of the transport fuel market by 2008. I disagree with that view. This is a major expansion of the current two-year pilot scheme. It was sought by the line Department involved and I simply acceded to that request. It is an area we must develop.

Paddy Burke (Fine Gael)
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I am bound by the order of the House to finish at 6 p.m.

Joe O'Toole (Independent)
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On a point of order, I ask the Acting Leader to propose to extend this debate until 6.15 p.m.

Paddy Burke (Fine Gael)
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My hands are tied by the order of the House.

Joe O'Toole (Independent)
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Can the Acting Leader change the order?

Pat Moylan (Fianna Fail)
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It is proposed that the debate be extended until 6.15 p.m.

Paddy Burke (Fine Gael)
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Is that agreed? Agreed.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I wish to deal with the issues that were raised by Members and much work has been done to achieve that.

The relief to which I referred when fully operational in 2008 is expected to support the use and production of around 163 million litres of biofuels per year. This is 20 times the current level of biofuels that is relieved of excise. We are starting from a very small base, but if I bring forward an initiative that increases capacity twenty-fold, it is a just question of building up that capacity to deal with the increase. I also introduced, for a pilot two-year period with effect from 1 January 2006, VRT relief of 50% for new flexible fuel vehicles, that is, vehicles capable of running on both conventional fuel and high-grade biofuels.

Senators Ross and Mansergh recognise the success of this Government in managing the economy. As has been rightly pointed out, our taxation regime regarding personal income tax and business tax has had a significant role in the success of the Irish economy in recent years. Senator Mansergh pointed out that we are at an important stage in our political development when the Green Party has decided that it will not be seeking increases in income tax rates or corporation tax rates. I presume that is not because it wants to get into Government, but because it is the right thing to do.

Our taxation regime has had a significant role in the success of the Irish economy. A low income tax wedge is vitally important for employment because by lowering costs it makes it easier for companies to take on additional employees. This is an important part of Ireland's competitive edge. Senator Quinn suggested a note of caution in future economic planning. The major challenges for the next five years include continuing to achieve high growth, rising living standards and full employment, supporting families and achieving cost-effective and world class public services. These are challenges which the Government will strive to meet. We acknowledge that the job is not complete, but we must work towards it all the time.

The Senator wondered whether we are making the right decisions for the long term and I believe we are doing so. He stated that it was not a dramatic budget. There have been changes in pension relief. Tax changes have helped the low paid and the ESRI stated that this is a most progressive budget in that respect as it has favoured lower income groups more than others.

There have been changes in the rental market and landlords must now register under the Private Tenancies Residential Act 2004 if they are to receive tax relief. A strategic innovation fund of €300 million has been set aside for higher education over the next five years. A significant package has been provided for child care, costing over €1.5 billion. These decisions are right for the long term because they reflect the greater economic participation by women in our society and the need to cater for policy initiatives to deal with that social change.

Long-term decisions have also been made on the National Pensions Reserve Fund. This strategic decision has been examined by my colleagues who are in the midst of pension crises in their own countries within the European Union. Long-term decisions have been taken in other areas, such as the strategic innovation fund and the setting up of the NTMA.

All of those significant, milestone decisions are being taken with a view to the long term. When we hit a bad patch in 2002 during an international recession, the Opposition told us to raid the National Pensions Reserve Fund immediately. The advocates for short-termism were on the Opposition benches rather than the Government side. However, the Government insisted on maintaining the statutory autonomy of the National Pensions Reserve Fund regarding our paying at least 1% of GDP into it annually and enabling it to decide its own investment portfolio within the usual international investment criteria.

All those decisions provide confirmation of our need to look forward to demographic changes over the next ten, 15 or 20 years, thus avoiding the problems and learning the lessons of what has now come about in continental countries, which have a more advanced demographic profile than ours. We have an opportunity to cater for the future by making provision over successive years up to 2055 under the legislation that established the National Pensions Reserve Fund.

I contend that there are strategic decisions, and not only regarding how we have attracted foreign direct investment and achieved the lowest taxation wedge for workers. It has all been done in the context of social partnership, where the macro-economic consensus is followed. One hopes that next year's election will help people see that there is broad macro-economic consensus as a result of the Green Party conference last weekend, and I am sure we will hear the same responsible noises from the Labour Party this weekend.

In Opposition and even Government, people contended that high taxes were the litmus test of commitment to public services. Low rates have increased the overall taxation take, enabling us to make sustainable improvements in public services year-on-year, rather than the boom-and-bust situation that we had previously because we lacked a consistent overall approach. I agree with Senator Quinn's suggestion that it must be the foundation of progress, as well as a benchmark of sustainability.

It reflects the direct experience of Government and how this country's economic affairs have improved, as well as being a measure of our political maturity, that people recognise that if we want to keep 2 million people working rather than 1.2 million, such taxation and fiscal policies best guarantee the prospect. Some Senators have referred to the need for taxation equity in the code. In response, I wish to say that, since 1997, average taxation rates for all categories of taxpayers have decreased significantly. Earners retain a greater proportion of income and take-home pay. Since 1997, a single person on the average industrial wage will have seen his or her pay rise by over €12,600 and a tax bill cut by over €400 per annum against that year. In the same period, the person's average tax rate has dropped by 12% percentage points, from 27% to an effective tax rate of 15%.

A person on the minimum wage and working a standard week no longer pays income tax. That is a third of the current working population, up from a quarter in 1997. A person on the average industrial wage does not pay above the standard rate of 20% on an average working week. Ensuring equity in the taxation system must be among the Government's main objectives. It is important to point out that in 2006, the top 1% of income earners will pay approximately 20% of all income tax collected, compared with 15% before we took office. There is a progression when it comes to ensuring that those on higher wages, the top 1%, pay a greater proportion of tax while those at the lower end either do not pay any tax or do so at a rate they can afford.

As Senator Minihan has pointed out, the Government's commitment to equity is underlined by the rules that I am introducing in this year's Finance Bill aimed at ensuring that taxpayers are unable to use specified reliefs to reduce their tax bill in any year below approximately 20%.

It has been suggested that I did not go far enough in capping pensions, but I do not agree. This Finance Bill contains significant pension reform. From now on, the size of an individual's pension fund will be limited to €5 million, and a tax-free pension lump sum may not exceed €1.25 million. Moneys kept in approved retirement funds, which could hitherto be used to defer tax payments on pension provision, will now be subject to tax on the basis of a notional draw-down from the funds concerned.

The effect will be that an individual can no longer take enormous lump sums tax-free, use tax incentives to build up an unreasonably large fund, or indefinitely defer the payment of tax by holding moneys in approved retirement funds. I am confident that those changes will have the intended impact and create greater equity in pensions tax relief. Regarding general pension provision, the Government will be considering the recently published national pensions review in considering how to move forward in this very complex area.

I thank Senators for their contributions to the debate. I have listened to Senators Brian Hayes and O'Toole since the drafts were prepared, and I will take up the points that they have raised, in addition to the many constructive points made by Senators during this debate, which I always find refreshing compared with that in the Lower House.