Wednesday, 5 December 2012
Budget 2013: Statements
I thank the Cathaoirleach for this opportunity to come before the Members to make a contribution on budget 2013, which was presented by my colleagues, the Minister, Deputy Howlin, and the Minister, Deputy Noonan, to Dáil Éireann earlier.
As I have said previously in this House, a precondition for balanced economic growth is the sustainability of our public finances and the Government is absolutely determined to ensure this. Despite continuing to meet our targets set out under the EU-IMF programme, Ireland's general government deficit of just over 8% for 2012 is likely to be one of the largest deficits within the EU. If Ireland is to prosper into the future we have to come to terms with the fact that borrowing at such elevated levels is not a viable option and, simply put, must be addressed. Budget 2013 is the next step by the Government towards achieving this aim and ambition.
However, mirroring its predecessor, budget 2013 is not merely about expenditure cuts and increased revenue, it is also about supporting the emerging economic recovery and protecting the most vulnerable in our society. It is fair to say that this budget achieves the core objectives and principles of consolidating a growth-friendly and fair mannered budget. One of the keys to achieving such objectives will be the recovery of the labour market and getting people back to work. The Government has never shirked its responsibilities in addressing the poor state of the labour market. Measures introduced during 2012 such as the action plan for jobs and the Pathways to Work initiatives are aimed at tackling the unprecedented high level of unemployment and seek to complement the various measures introduced in budget 2012 to support employment growth, particularly in the job-rich indigenous sectors. Budget 2013 aims to build upon these foundations by once again putting in place supports to aid key sectors capable of creating and sustaining employment within our economy.
Before addressing the specific measures in budget 2013, I would like to contextualise them by providing the economic and fiscal background against which the budget will play out. Last year, following three successive years of decline, Irish GDP increased by 1.4%, and a second year of modest positive growth is anticipated this year. For next year, the budgetary arithmetic is based on a GDP projection of 1.5%, a figure which is in line with the prevailing consensus.
I realise that for many people in Ireland these figures seem at odds with what they are experiencing in their lives and that such talk of a "return to growth" is not reflected in the difficulties they face in their day to day struggle. The reason for this is that exports are the only engine of growth at present. On the other hand, domestic economic conditions - spending by households, the Government and SMEs - remain weak. Unfortunately, the overhang from the bubble period still lingers, as good, hard-working people struggle to find employment, as families are burdened by debts accumulated during the boom, and as parents are forced to watch their young leave the country to find employment.
There can be no illusions about the gravity of the task facing the Government in addressing these issues but significant progress has been made on a number of fronts. As I mentioned, the exporting sectors are leading the recovery and the strong performance of these sectors during the past few years is a welcome development. Exports of services, in particular, are playing an increasingly vital role, having experienced double digit growth in the first half of this year. Looking at the year as a whole, the Department of Finance is expecting export growth of 3% this year. Furthermore, last year was a record year for inward foreign direct investment and the pipeline for this year remains strong also. I see this as a vote of confidence by the international business community in our economy. The strong export performance and inflows of foreign direct investment have been facilitated by the continued improvements in competitiveness that Ireland has achieved in recent years, as relative reductions in prices and costs continue to bear fruit.
The strong export performance and inflows of foreign direct investment have been facilitated by the continued improvements in competitiveness that Ireland has achieved in recent years as relative reductions in prices and costs continue to bear fruit. This means our balance of payments with the rest of the world is in a very healthy position, with surpluses in each of the past three years, following a decade of deficits. The most recent figures show a surplus of ¤3.2 billion in the second quarter of 2012, representing the largest nominal surplus for Ireland since records began in 1981. Notwithstanding these improvements regarding exports, it is clear the domestic economy is not progressing in the same manner. Although recent data provide some grounds for optimism - with retail sales figures having seen year-on-year increases in each of the past two months and with property prices showing their first signs of stabilisation - domestic economic conditions remain weak.
Let me refer to the labour market. Figures released today by the CSO show an improvement regarding unemployment. The standardised unemployment rate fell for the second consecutive month and stood at 14.6% in November. Nevertheless, despite these encouraging signs, the rate remains unacceptably high. I reassure the House that reducing unemployment remains the key priority for the Government.
On the budgetary position, the Government remains committed to achieving the deficit limits set under the terms of the EU-IMF programme and, in particular, to reducing the deficit to below 3% of GDP by 2015. The target for 2012 was for a deficit of 8.6% and the budgetary documentation confirms an estimated outturn of 8.2%. Therefore, this will be the second successive year in which the target has been more than achieved. I am confident that clear progress is being made. Our international funders and the international community recognise that our deficit, which is currently too high, is coming down and that we are meeting our targets in this regard. Meeting budgetary targets is essential. Ireland's return to the bond markets this year - yields on Government bonds fell significantly over the course of the year - provides a clear and tangible indication that Ireland's efforts are being recognised internationally.
For next year, the Government is targeting a deficit of 7.6% of GDP, a target that requires further consolidation measures worth ¤3.5 billion. While the Government is under no illusion that consolidation of this magnitude could be achieved without having some negative impact on short-term economic growth, budget 2013 has been constructed with the explicit aim of seeking to minimise such an impact. A key facet of this has been the decision, once again, to concentrate the adjustment on the expenditure side according to best practice internationally in order to support job creation and ultimately encourage economic growth. No economy in the world with a deficit such as ours can lower it by pretending more can be done on the tax side than the expenditure side. It simply has not happened internationally and that is why more must be done on the expenditure side than the taxation side. If someone can show me evidence to the contrary I will consider it, but I believe there is no international evidence suggesting the quickest way to resolve a deficit and get an economy working again is by having a more vigorous approach to tax than to expenditure.
While some of the measures may seem unpalatable, all are necessary. Despite the progress made in recent years, the gap between the State's revenue and expenditure remains formidable. Large deficits mean large amounts of borrowing, and devoting an ever-increasing share of revenue to debt servicing is a waste of resources in a time of need for public service provision. This year, it is likely that over 11% of all Government revenue will go towards servicing debt. To put this figure in context, it is close to two-thirds of all the revenue the State will collect in VAT this year. If we are serious about putting the debt ratio on a declining path and regaining our sovereignty, then these measures are essential.
Today, the Minister for Finance, Deputy Noonan, announced the introduction of a ten-point tax reform plan to support the SME sector. ISME stated publicly this evening that this has been the most pro-jobs budget for small businesses. I welcome its assessment given the announcement earlier by the Ministers, Deputy Howlin and Deputy Noonan. The renewed focus on assisting the SME sector is a very welcome step. While growth in the export sector is a strong starting point for a recovery in an open economy such as ours, it is our SMEs that comprise the job-rich sector of the economy. SMEs provide almost 70% of Irish employment. It is our continued support for these businesses that remains the key to addressing the unemployment problem we face. The measures contained in the tax reform plan will, inter alia, aim to increase the accessibility of capital for SMEs, help in boosting international demand for their products and, most important, support the creation of jobs in these sectors.
Long-term unemployment, in particular, remains a problem, with the long-term unemployed now accounting for nearly 60% of the total number unemployed. The development of the Plus One initiative, which aims to encourage employers to hire those who are long-term unemployed, will provide a welcome relief for these individuals. Supplementing this, the Minister also announced a series of measures aimed at supporting job creation in specific job-rich industries. Included are the introduction of a relief from capital gains tax arising on disposals of farm land for restructuring purposes, as well as the extension of the stock reliefs for the agrifood sector announced in budget 2012 and the extension of the film tax relief scheme, which will run to 2020.
Next year, 2013, looks set to be an important year for tourism. The Gathering, although it has drawn criticism from some of the usual suspects, looks set to play a vital role in this regard. The confirmation early today by the Minister for Finance, Deputy Noonan, that the reduced VAT rate of 9% for the tourism sector, introduced last year, is to be maintained will support further this crucial job-rich sector, which is a key part of the service industry.
This budget also sees the introduction of the much-discussed local property tax, which is to commence on 1July 2013. The benefits of a property tax are well stated. Property taxes are shown to be less harmful to economic growth than comparable revenue-generating measures such as income tax. Property taxes are a standard feature of many other countries. They provide a stable income stream and help to reinforce local democratic decision-making by providing a funding base for local authorities. If ever there were a decision recognised as wrong in our political system, it was the decision in 1977 to abolish rates, thus removing a key aspect of revenue-generating power. Everyone accepts that this kind of short-term decision making is ultimately not sustainable where there is a considerable gap between expenditure and taxation revenue. The new property tax is a step in the right direction, not only because it will create a new means of funding but because it will extend the tax base in a radical way. Some 42% of all the taxes we take in are income related. This is no way to generate employment or encourage people to work or move from social welfare benefits to work. So much revenue is taken from the pockets of those who work. Any western European civilised society has within it a property tax to generate the revenue needed for public services and to act as a counterbalance in respect of income tax.
The local property tax has been structured in a fair and progressive manner. Those with the most valuable properties are to pay the most and those who are unable to pay in the current climate will be given the option of a voluntary deferral. The Government has recognised the need for clarity on this matter. Allowing the initial valuations of property to remain valid up to 2016 eliminates a cloud of uncertainty surrounding property tax. As the Minister for Finance said in his statement to the House, in addition to the valuations remaining valid until 2016, the rates of taxation, 0.18% on the first ¤1 million and 0.25% thereafter, will also remain until that year, thus giving some certainty to homeowners.
A key principle underpinning this budget is the need to ensure that the policies we are introducing are equitable and those who can afford to pay a little bit more bear the majority of the burden of adjustment. Budget 2013 has introduced a number of measures with this in mind to protect the most vulnerable in our society. Ireland's income tax system is the most progressive in the EU and a continuation of this fairness in our tax system means reducing reliefs which can be availed of by higher income earners. The Government has announced a number of measures in accordance with this, including the introduction of standard rates of USC to those aged 70 or older who earn ¤60,000 or more.
Other measures of note which will ensure a fair adjustment include increases in the rates of capital acquisitions tax, capital gains tax and DIRT tax. Last year we increased the rate of capital acquisitions tax and capital gains tax from 25% to 30% and this year we are proposing to further increase it to 33%, which is fair in the context of those who are making money in this economy paying a little bit more.
The budget represents the next step forward in terms of correcting the imbalances in the public finances and getting people back to work. It provides clarity and certainty to the people of Ireland and addresses many of the pressing issues facing our economy today. The Minister for Finance made an important point in his speech when he stressed that once this budget is implemented, most of the tax consolidation committed to by the Government will have been completed. We were told this year that the adjustment is at ¤3.5 billion, with ¤1.25 billion on the tax side and ¤2.25 billion on expenditure. The full impact of these taxation measures will mean an adjustment of ¤3 billion next year. Assuming tax increases of ¤1 billion, half of this amount is already catered for by virtue of the taxation measures announced today. There is, therefore, some certainty that what we have done on the taxation side, difficult as it may be for people to accept, is bringing us to the end of an adjustment process which has removed ¤24 billion from the Irish economy since 2008, or ¤27.5 billion after today's budget. The cumulative effect of the next two years will mean that the great majority of the heavy lifting has been done. I know that knowledge does not make it any more palatable for people. I live in the real world, in a real community and in a real housing estate with ordinary people. I am aware of the impact this is having on our community because I am also in the middle of it but this is being done in the fairest way possible. I ask Senators to give the budget a fair wind and to ensure that we stay on the path of recovery. The only way we can create jobs as a small and open trading economy is by putting our public finances in order. I contend that the measures announced in today's budget are another step towards that goal.
I welcome the opportunity to speak on the budget. The Minister of State indicated that ¤24 billion has already been taken out of our economy. I sat where Senator Michael D'Arcy now sits while ¤20 billion of that adjustment was being made and I had to defend the measures that were announced. I know how difficult that position can be. However, I found it a walk in the park to defend some of those cuts when compared with the some of the inhuman approach taken in this budget.
I do not know what horse trading took place in advance of the budget. Kites were flown and there were walkouts and everything else over the weekend but I am sure the Government Whip will ensure that the budget goes through. I hope it does not because it contains measures that are not necessary. Other options were available to them. Having accompanied my party's delegation to meet the troika on a number of occasions, I am aware that the bottom line is what interests its members. The measures contained in this budget are the result of political decisions based on the Government's wishes and internal negotiations. I acknowledge it met its target of ¤3.5 billion in adjustments. We agreed with that target and put forward our own costed alternative budget.
We used the figures made available by the Department of Finance and the troika in the same way as the Government parties could have done prior to the last general election, instead of exhibiting the most blatant example of political delinquency in history. They promised everything to all people and every community around the country, not least to my own constituency of Sligo-Leitrim, only to welch on their promises. This morning I pointed out that the Labour Party's posters stated: "Protect child benefit: vote Labour". We know what happened to that promise.
There were several options for this budget. The options we proposed would have produced a higher tax yield than the Government's without introducing the wrong tax at the wrong time, that is, the property tax.
The poor widow whose large family has left home will be penalised by this Government simply because she needed a larger farmhouse. To add insult to injury, an exemption will be granted to anybody who purchases a house next year. The unlucky ones like me and, I am sure, many others in these Houses and across Ireland who paid some of the ¤5.5 billion taken in stamp duty between 2000 and 2009 will have to front up the tax even though the average cost of houses was closer to ¤400,000 than the current average of ¤157,000.
This is a criminal way to put forward an exemption to this tax. I repeat that the troika did not insist on property tax. It wanted measures that would give an equal outcome. The Minister for Finance has the gall to promote a deferral scheme which will reduce poor people who cannot afford to pay to the equivalent of tax defaulters. They will have to pay half the amount or else face penalties of 4% per annum. Shame on the Government.
If the weekend's battle was clearly lost by both sides, with a gentle walk by the Taoiseach and the Tánaiste, ¤188 was used as the bargaining chip for those earning more than ¤100,000 per annum while the Government dug into people on the ground by wiping out the PRSI allowance of ¤127. That will hit every low income person in the country. Someone who earns ¤20,000 will have to pay out the same ¤264 per annum required from those earning ¤200,000. Where is the fairness in that? Am I missing something? I served with the Minister of State, Deputy Brian Hayes, in this House. If he was writing the budget instead of the four guys who clearly did not listen to their backbenchers, he would not have done that but he will be forced by the Whip to vote for it. How could he do it?
Let me return to the child benefit reduction of ¤10. What happened to the Labour Party's pre-election demands? Its members met the troika beforehand. They knew they did not have to promise hospitals here, roads there and everything else. They knew the cupboard was bare but the Government went around, as I said, in the greatest act of political delinquency since the foundation of the State-----
A sum of ¤18 has been taken off the allowance in respect of third children. I recall the current Minister for Finance, when he was a senior backbench Deputy in opposition, asking "What have you got against third children?" Do Members remember him saying that to the then Minister for Finance? I wondered about his question because I had only two children at the time; now I have three.
All families with three children will have ¤18 less per month. Let me examine the details that are coming, as I speak, from the other House. One hundred Garda stations will be closed. Did the backbenchers know that? Did the Senators know that?
What will the closures do to communities with the resultant increase in crime levels?
Here is a lovely detail. I am sure the old internal party policy committee on fairness gave a lot of consideration to the following. The annual respite grant will be reduced from ¤1,700 to ¤1,375. Hooray for the Government. What great fairness? It is prize-winning stuff. If the Government had introduced the universal social charge of 3% that Fianna Fáil proposed it would have brought in ¤200 million. I put it to the Minister of State that people on high incomes were ready for it. They expected a cut but the Government ignored them. Why? Fine Gael said it would bargain the ¤188 social welfare benefit with the Labour Party but there is no way it would touch its supporters living in the gin and tonic belts. Fine Gael thought it could not allow that in the interest of the people.
There are more issues. It will clearly be more expensive to go to college. It will clearly be more difficult for students to qualify for grants, not to mention the unmitigated disaster that the Minister for Education and Skills has presided over with the introduction of Student Universal Support Ireland, SUSI. We have the kettle calling the pot black because the Minister suggested that the Minister for Health should go. Both of them should go because of their disasters.
I have not even touched on rural Ireland. I wonder what is hidden in the ¤89 million saving which will focus on the suckler cow scheme. Anybody who knows the scheme realises that it is the engine room of the beef industry in this country. I would appreciate leeway on this subject because many speakers from the Opposition will raise it.
Agriculture has taken a beating, particularly in the west of Ireland where the Minister for Public Expenditure and Reform has indicated that about ¤90 million will be taken from the suckler cow scheme, REPS and other measures.
I must defend the ¤20 billion being taken out of the economy. I cannot stand over the discriminatory nature of the budget, which honed in on the elderly, those on middle incomes and those that are least well off. Shame on the Government. Clearly, the Minister of State had nothing to do with it. I have served with him in the House and I know he has a lot more heart than what was shown in the budget.
I am glad Senator MacSharry brought up the kettle calling the pot black. He sat here for years while his party reduced expenditure by ¤20 billion. The Government will reduce it by a further amount. He seems to have forgotten about the day that he sat here when his party reduced the blind allowance and the widow's allowance.
I wish to raise a number of issues. I do not intend to get into a political barney because this is my opportunity to raise issues. Perhaps the Minister of State will raise my issues with the Minister for Finance.
The property tax will bring in ¤500 million. We were told about it and the Taoiseach flagged it months ago. I would go as far as to say that he did so the best part of 12 months ago. I welcome the abolition of the non-principal private residence charge and I welcome the three-and-a-half year fixed rate for the property tax valuation this year. I would like the Minister of State to deliver the following message, which I have delivered directly to the Minister for Finance. It is important to fix the rate at 0.18% for a three-year period. It will give people certainty about the property tax, and they will also know that it will be fixed beyond the next general election.
Our Sinn Féin colleagues have talked a lot about wealth taxes. Unfortunately, there is nobody from the Sinn Féin Party in the House to listen to me. We already have wealth taxes; they are called DIRT tax, capital gains tax and capital acquisitions tax.
On a point of order, from one end of my speech to the other I was harassed by the Opposition, and I object to being told to shut up by anybody. I invite the Senator to withdraw his remark and I seek the protection of the Chair.
We do have wealth taxes, which the Government is increasing from 30% to 33% this year. There is also a capital acquisitions threshold reduction of ¤130 million. That is in conjunction with the property tax, which will bring in over ¤600 million. That is a lot of money coming in.
With regard to pension funds, there are a small number of very wealthy people who will not have the opportunity to put money away. I am talking about putting ¤1,200 per week towards a fund of ¤60,000 fund per annum. While the measure will be difficult for some, it will be a lot more difficult for others.
I have a concern about the PRSI increase, which will bring in around ¤300 million to the Exchequer, as this will have an impact on people's take-home pay. I have always said there is a real difficulty when people in receipt of social welfare get as much as people who are working, particularly the lower paid. I shall outline an example given by the Department of Social Welfare - it is not mine - of two people who are not working and have two children. The net total they will receive in jobseeker's allowance is ¤23,304. I will compare those figures with the budget 2012 analysis by the Department of Finance. Those people would have to pay 17% in tax and earn ¤27,500 before they would receive the same amount of money as somebody in receipt of social welfare payments - just to get the same amount. We know that the average industrial wage here is ¤32,000. This is a real problem which has been exacerbated somewhat by the increase in PRSI. The matter must be examined and something needs to be done. There is not a wide enough gap in earnings between people who work and those who do not.
An increase in alcohol excise will raise ¤180 million, but there has not been much reference to below-cost selling by supermarkets and I want something done about it. The increases in motor tax and VRT have been well flagged.
We were told that social welfare was going to be hammered. A figure of ¤500 million was quoted prior the budget and if one factored it backwards one would calculate that this equates to a 2.5% reduction. That is not being hammered. A reduction of 10% or 20% would be a hammering. Not only did the 2.5% reduction not happen, but there was an increase of ¤150 million, which I support. Nobody wants to see people poor but we must strike a balance.
As I said earlier, a balance must involve people being rewarded. I am keen to see an increase in what is perhaps the most beneficial social welfare payment we have - that is, the family income supplement. It is a superb payment and it works well.
In his final comments, the Minister of State, Deputy Hayes, remarked that the budgets for 2014 and 2015 will each include tax increases of ¤500 million per annum. This will represent a ¤1 billion increase between now and budget 2016, which I welcome. We now have certainly about it. No one wishes to see tax increases but this is the reality of where we are. We are not in charge of our own financial destiny; others dictate the running here. The people who dictate it are from New York and Frankfurt, not from Dublin.
I welcome the Minister of State. I welcome several progressive measures in the budget. The Minister of State has identified them, including the extension of PRSI to non-earned income, changes related to capital acquisitions tax and capital gains tax and the clampdown on sick pay in public service, to which the Minister for Finance, Deputy Noonan, referred as well. I welcome the reforms related to political expenses. For some time my Independent colleagues and I have called for the abolition of the system of unvouched expenses, especially as it relates to the party leader's allowance.
However, the signalled change to tax relief on pension contributions is not a brave move; it is a missed opportunity. It will not produce the more significant savings that would accrue from standardising the rate of tax relief, amounting to ¤700 million. Most important, it will not take effect until 2014 and therefore there will be no savings in 2013. There are no progressive measures on pensions for 2013.
One key aspect of the Government's taxation policy calls into question the reference to the budget overall as fair and progressive inasmuch as such measures are contained in the budget. I am referring to the Government commitment to maintain the corporate tax rate. There is a significant difference between the nominal rate of corporation tax of 12.5% and the effective rate of tax that multinational corporations operating in Ireland actually pay. Due to a variety of tax breaks available to multinational companies, some sources put the effective tax rate for many of them as low as 5% or 6%. These breaks are essentially a form of public spending. The choice to have a low effective corporation tax rate represents a decision to provide subsidies to corporations. I realise my remarks are significantly at odds with the earlier comments of the Minister for Finance, Deputy Noonan. While the 12.5% rate may have been of extraordinary benefit to the Irish economy in the past - I acknowledge as much - its effect is waning.
In the context of a race to the bottom in which other states are cutting their corporation tax rates, we should look to broaden the strengths of our economy beyond a dependence on multinational corporations. Our low corporation tax rate has several negative effects on brand Ireland and the domestic economy. It has the potential to cause real reputational damage. Increasingly, we are being mentioned in the same sentences as genuine tax havens, including the Bahamas and the Cayman Islands, in the international media. Ireland is not a tax haven but it shares some of their worrying features.
We should also be concerned about the medium-term sustainability of our corporation tax model. There are several threats to the competitive edge Ireland has gained from it. There has been movement by Germany, France and the European Union towards creating a common consolidated tax base. It is also true that a downward shift in the corporation tax rate in another major economy - it has been discussed in the United States - could wipe out our advantage overnight. Whether it disappears as a result of the race to the bottom or due to pressure to create a consolidated tax base, this advantage will not last. We should recognise this and begin a discussion on how to wean the economy off our dependence on low corporate tax rates.
This situation is also damaging to the development of small and medium-sized enterprises within Ireland and abroad, in spite of the welcome ten-point plan for SMEs. Large-scale tax avoidance by multinational corporations places small and medium-sized enterprises, which cannot avail of methods such as transfer price manipulation or fixing, at a competitive disadvantage. It also means that SMEs contribute to the maintenance of the public services that sustain their businesses while multinational corporations simply freeload off these public goods.
Low corporation tax rates also have a negative impact on many developing nations as a consequence of transfer pricing through Ireland. These aggressive tax avoidance strategies undermine the tax base of nations in the global south, hampering their development. The point is that we have high public spending on wealthy multinational corporations while putting through a budget that has significant characteristics of austerity and features cutting the deficit by reducing benefits and public services.
I will conclude by referring to one or two of the prime austerity measures in the budget. The first is the reduction in the age of the youngest child of qualifying one-parent families to seven years, at which stage the families no longer receive the one-parent family payment. Coupled with the 2012 budget change that reduced the earnings disregard for one-parent families, it represents a significant and adverse measure. My concerns in this regard are shared by my colleague, Senator van Turnhout. The statistics show that one-parent families experience the highest level of deprivation and poverty but they also suggest that 60% of single parents are working while 20% are engaged in education or training. This demonstrates their fierce desire for economic independence, not dependence. The Government policy evident in the budget will continue to move single parents from the one-parent family payment onto jobseeker's allowance while the youngest child still needs to be cared for by an adult.
The Minister for Social Protection, Deputy Burton, promised that this reform would only come into play if Ireland started to develop a safe, affordable and accessible child care system. I welcome the commitment to a ¤16.5 million investment in child care. However, as my colleague across the room has noted already, there is also a ¤10 reduction in child benefit for every child of rich and poor parents alike. This is not a progressive measure; it disproportionately affects lone parents. It will block the healthy development and well-being of children of lone parents. Savings from this change will amount to ¤136 million, a far cry from the money identified to be invested in child care. It is a regressive approach to cutting child benefit. A choice could have been made for a more equitable two-tier approach or a tax on child benefit. This does not bode well for the most vulnerable families. A single parent said on the news yesterday evening: "If they cut child benefit, I don't really know what I am going to do."
I welcome the Minister of State back to the Chamber. It it good to see him again. I welcome the opportunity to speak on the changes made in the budget today. The first thing we should acknowledge is that the changes made today will certainly have an impact on the lives of our citizens. Of that there is no question.
It is not possible to remove ¤3.5 billion from the economy without causing pain. We should be honest about this and we need not and should not try to hide this unpleasant fact or hide behind any statistic that would camouflage it. The Opposition has a job to do and it is required to do it; that is fair enough. I welcome Senator O'Brien back to the Chamber. I imagine he brings a new-found tranquillity to his benches. He missed the contribution of Senator MacSharry. Had Senator MacSharry delivered his contribution through the medium of dance it could not have been more dramatic.
I could spend my entire eight-minute slot outlining why these adjustments are necessary. Senator O'Brien, being the decent person he is, will acknowledge that these are necessary because of the mess his party made of the economy. However, I will say no more about that.
I will give an honest account and I hope others will do so as well. I note there is no representative from Sinn Féin present. Anyway, Sinn Féin has made certain remarks about its pre-budget submission. At 4.55 p.m. this evening Deputy Mac Lochlainn - Senator O'Brien was not long after him - stated that the pre-budget submission of Sinn Féin was costed by the Department of Finance. He said it this morning on RTE as well. In addition, Senator MacSharry gave the impression that the Fianna Fáil submission had been costed by the Department of Finance.
It is important that the parties place accurate information on the record of the House, and I would welcome clarification on the matter.
Since the beginning of the crisis successive Governments have removed ¤24 billion from the economy. The Minister for Public Enterprise and Reform, Deputy Howlin, has stated that this represents the vast bulk of the total adjustment required.
It is a massive amount of money and represents 85% of what needs to be done. The general Government deficit this year is just below ¤13.5 billion or 8.2% of GDP. While it is still appallingly high, it is well within the parameters of what is required. The primary deficit after the budget is to be reduced by ¤2 billion.
This is a fair budget in which we have protected the most vulnerable in society. Of course, everybody will be worse off after it, but higher earners will contribute more and it is right that they should do so. The Labour Party and everyone present would prefer if none of this was necessary, but it is absolutely impossible to close the gap in the public finances without tackling the bigger spending Departments of Health, Education and Skills and Social Protection. No matter where reductions are made in the various Departments, the cuts will be painful and cause upset and there is no point in denying this. All parties have agreed that a fiscal adjustment of ¤3.5 billion is required to meet the deficit targets up to 2015. All parties have also stated how that is done is a matter of political choice, as Senator Marc MacSharry said. At times of normal budgets it might well be the case that it is a matter of political choice but for a country in a programme, the choices are limited. It must be pointed out - I have no doubt that Senator Darragh O'Brien will read this later - that the troika has stated a measure can be substituted for another if it will raise the same amount of money. However, the same people who point this out usually fail to point to the tiny caveat attached to the end of that sentence, that is, if agreement can be reached with the troika.
I will come to that and I am glad that the Senator is giving me the opportunity to deal with it. This morning it was stated here and outside the House that any money raised in the budget would go towards payment of the promissory notes, but that is incorrect. It is wrong and demonstrates either a misunderstanding or a deliberate attempt to portray something as what it is not. If there was no promissory note to be paid, this budget would still be required and ¤3.5 billion would still have to be taken out of the economy.
I wish to deal with the details of the budget, but I do not think the Cathaoirleach will indulge me as much as he indulged Senator Marc MacSharry. The change in the PRSI system means that people will pay an extra ¤5 a week. While no one likes to see a decrease in entitlements, a fiver a week is not excessive. The measure will bring in about ¤800 million in a full year and make a significant contribution to the Government's attempts to spread the pain across the entire economy. I acknowledge the reduction of ¤10 per month in child benefit and, as Senator Marc MacSharry pointed out to me, my party stated before the general election that it would protect child benefit. We attempted to do so but found it impossible. However, we have offset this by an initiative to provide 6,000 after-school child care places for children in primary school, as well as an additional investment in the school meals programme. I could say a lot about the property tax but an interesting point is that anybody who lives in a house worth ¤100,000 or less will be ¤10 per year better off under the new property tax regime than he or she was under the previous household charge regime. That is a decent enough move. Somebody living in a house worth ¤200,000, around the average for those on middle incomes, will pay ¤306 per year. That is a long way from the forecasts of ¤400, ¤500 and ¤600 from the Opposition benches in recent weeks. Perhaps they might now have the good grace to admit that they got it wrong.
On education, we have managed to protect the pupil-teacher ratio in public schools. I spoke to some teachers at a meeting last night who expressed huge concern about this issue and, to be honest, they were very sceptical about our ability to maintain that ratio. Now that we have done so, I am sure that those involved in the education sector will be happy. It was not possible to do the same in fee paying schools, but in terms of reducing the subsidy to fee paying schools from the public purse, we have done this in a reasonably fair way. The increase in student fees in third level colleges is regrettable and, admittedly, something the Labour Party stated before the general election it would try not to do. We must put up our hands on that one-----
Senator Mark Daly asked if the Government had asked the troika for any deal. The Budget Statement from the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, referred to the sale of State assets and the fact that we could now use the money garnered to invest in structural change and job creation. When the sale of State assets was first mooted, the idea was that the entire amount earned would be used to pay down debt. That has now changed, but we did not shout, roar or howl about it. The Ministers for Finance and Public Expenditure and Reform made a quiet deal with the troika to allow the Government to use some of the money from the sale of State assets to invest in job creation. Perhaps those who are urging our negotiators to conduct their business with a megaphone might reflect on the fact that sometimes a behind the scenes, low key negotiation strategy is more effective.
I wish to share my time with Senator Feargal Quinn.
The relevance of this debate is shown by the fact that for a considerable part of the earlier stages there were six Members present. They have their reasons and I am not blaming my colleagues at all. As we know, the debate will not be covered and only a minority of Senators have a mathematical chance of getting to speak. That is a disgrace. This is a reflective Chamber. For that reason, we should have scheduled this debate for next week and given ourselves time to reflect on the budget and allow everyone who wants to speak to do so.
I wish to speak about charities. I have with me one of several folders which are full of submissions from charities. If I was to mention every single one, my time would be used up. Some years ago members of the Society of St. Vincent de Paul, a marvellous organisation, brought a proposal to me which would have been Exchequer neutral, that is, it would have cost the State nothing to implement but would have been socially beneficial. It has given a lead to several other charities which have also come up with Exchequer neutral ideas that would be socially beneficial. I suggest to the Minister of State that we establish a working group to examine the submissions made with a view to determining whether they would be Exchequer neutral and, if so, adding them into the budget proposals.
Regarding the budget, I give up. At the end of the process we will have taken ¤28 billion out of the economy, while only moving by a figure of 2% in terms of the deficit. It really is Sisyphus rolling the stone up the mountain. Why are we doing this? It is because we have given ourselves away to external forces. We have surrendered. The figure of ¤3.1 billion keeps coming up like on the fruit machines when one gets three lemons, one knows something is happening in the undergrowth. The budget is taking ¤3.1 billion out of the economy and there is the ¤3.1 billion we are going to give away, to be destroyed, in March. The tragedy is that the underlying economy is good. We have a ¤3.1 billion trade surplus. If we did not have this debt, we would be in a much better place and should tell the people concerned to bugger off.
It is appalling to think of what is happening to people. The back to school clothing and footwear allowance is being reduced by ¤50 and we know that 1.8 million people in the country have a disposable income of less than ¤100 per month. The electricity and gas components of the household benefits package are being cut. As people are already unable to pay for fuel, how will vast swathes of the 1.8 million people to whom I referred cope? We are travelling backwards rather than forwards. I wish the Minister of State and his friends well. They are in a very difficult position, but some of the decisions they have made are wrong.
Allowing access to additional voluntary contributions, AVCs, is a clever move and was suggested in this House by Senator Feargal Quinn.
I welcome the fact that the voices of Senator Mary Ann O'Brien and others were listened to in the interest of small businesses and that they will not be compelled as a result of this budget to pay the first tranche of sick benefit to their employees. Entrepreneurs must be protected.
With regard to motor tax-----
In that case, I will just make two points. This shows how ludicrous this whole bloody debate is. It does not matter a damn. It is all bloody fine for people on the other side of the House, who are among the pampered jades of the Taoiseach's nominees. We have heard a number of them say that all the Independents want to be hacked to death when it comes to this or that. I do not. Neither do-----
On a serious point of order, Senator Norris is entirely correct. However, Senator Zappone was not speaking for me when she said that we were prepared to get rid of all allowances and throw them to the wind. She was speaking entirely for herself.
I know it was never going to be easy to take ¤3.5 billion out of the economy. However, in this case the Minister, Deputy Noonan, listened to the voices that said we must prioritise jobs. He spoke about their being the lifeblood of the future. He listened and took a number of steps in that direction. He also recognised the importance of the SMEs and a great number of the steps he has taken will bring improvements in that sector. SMEs are so important that if the Minister is to succeed, it will be because he has encouraged investment in that area. One of the first steps the Minister took in this regard concerns allowing access to a percentage of one's AVC funds. I was one of the voices asking how we could encourage people to invest in Ireland and the Minister has recognised this need in taking this step. This is something that will not be a cost to the Exchequer but will bring in revenue from the investment. My fear is that we have not gone far enough in this area. I am concerned when I see so many lawyers and teachers but not enough grocers running the State. I am aware I am biased in that regard. However, grocers know that sometimes a tax rate can be reduced and income will increase. This has been done before. When Charlie McCreevy reduced the betting tax in a budget from 20% to 10%, everybody howled and said he was looking after his friends in the horse business. He came in the following year and informed us he had taken in far more money at 10% than he had at 20% and was now going to reduce the tax to 5% and take in even more. In France, restaurant tax was reduced to 5.5%, resulting in 35,000 new jobs and an increase of 10% in trade. I mention the restaurant business because the Minister has recognised how tax works in the tourist sector and has not increased taxes.
The Minister has also recognised the importance of the agrifood and film business sectors and is moving in the right direction with regard to these. However, I would like to have seen him take other steps also. I would like to have seen initiatives in the construction area. It would be possible to reduce taxes there and increase income and jobs. I would also like to have seen him do something about upward-only rents, although they may not be his baby. This is an issue the Minister responsible should grasp and do something about.
There is a danger that increasing some taxes, such as the tax on cigarettes - nobody would disagree with increasing the tax on cigarettes, and certainly not Senator Crown - will encourage smuggling and the black economy. There is some evidence that in the past year businesses have been paying less in VAT because people in the black economy do not register for it.
Tourism is a very important sector and I am delighted the Minister has maintained the reduced 9% VAT rate. We must encourage investment in all areas, but particularly in SMEs. The Minister has done that and has taken many steps in the right direction. We will never be pleased that so much money is being removed from the economy, but at least the Minister has been listening.
We should all remember we are in a programme with the EU and IMF and the situation is difficult for everybody, but today we are 85% of the way there and the end is in sight. It was interesting to note that both Ministers, Deputy Noonan and Deputy Howlin, made the point that the end is in sight. However, the situation remains difficult for people. We cannot take ¤3.5 billion from any economy easily, but all the major parties are agreed that it is necessary to do this in order to get our finances back on track. There have been positive signs of recovery recently. The NTMA raised ¤7 billion in the markets and the ESB, Bord Gáis, AIB and Bank of Ireland have all been successful in raising funds. We have not reached the end yet, but within another 12 or 18 months we will be a long way along the road. The record results of the IDA last year were very positive.
I welcome the focus on SMEs in the budget and the various measures announced by the Minister for Finance, Deputy Noonan - particularly his ten-point tax reform plan - and I hope we will have the opportunity to examine that plan in detail in another debate. I also welcome the various initiatives outlined with regard to supporting SMEs. The Credit Review Office has been the subject of much discussion in this House and the fact that the Minister is providing extra resources for it is welcome. The office is working and engaging with SMEs and has been a positive force. I was encouraged to hear members of both ISME and IBEC say in a media interview this afternoon that this was a positive, pro-jobs budget. This is welcome. I do not say this as a Government supporter, but because it is important. The creation of jobs is the only way to get people back working and restore the economy. Therefore, the endorsement from ISME and IBEC is very positive.
The agrifood industry has been mentioned, as well as the tourism sector. The retention of the 9% VAT rate is very important, particularly for 2013 when The Gathering is to take place. That initiative has been successful, with some 3,500 jobs developed, and both the hotel and restaurant sectors have been very supportive of it. With regard to property, some of the initiatives announced last year have been gaining traction. Stamp duty was reduced from 6% to 2% for commercial property and this is showing some benefit. The Minister announced some initiatives in this area, such as real estate investment trusts, to encourage individuals and investors to get involved in investing in commercial properties. NAMA has a fund of ¤2 billion to help with this and with the upgrading of both commercial and residential projects. We need to get to the nub of the property problem and need to ensure that properties under NAMA's remit can be moved onto the open market or developed.
I welcome the Minister's statement with regard to the regeneration of certain areas. In Cork, the docklands have been identified as an area with huge potential.
The regeneration of this area, which is close to the city centre, has not been as successful as the regeneration of other areas in terms of attracting private sector investment. The Minister, Deputy Noonan, acknowledged this factor today. He is hoping to bring forward measures to encourage regeneration projects. We would welcome that because a number of local authorities throughout the country have identified areas that could be regenerated in order to attract investment. We need to do what we can to leverage funding from any possible source.
I welcome the announcement regarding the aviation industry. When the Minister mentioned that the details which were announced for the Shannon Airport area this week could be transferred to other areas, it immediately struck me that the Cork Airport area would be suitable for that type of development.
My time is almost up. I would have liked to have mentioned other areas. I will conclude by asking the Minister of State about the capital gains tax changes, particularly where individual land owners have received compulsory purchase orders from the National Roads Authority. Will the changes in the capital gains tax regime be applied to cases in which that process is already in place? I do not know if the Minister of State can answer that question now. It has cropped up. If the process is in place and the deal has been agreed, will the higher level of capital gains tax apply? I would like some details on that.
There are a couple of positive elements to this budget. I welcome the decision not to increase the level of excise on petrol and diesel. I disagree with what Senator Zappone said about private pension reform. As someone who worked in the industry for 15 years, I believe it is a good thing to cap what one can fund from a private pension without reducing the pension tax relief for most middle income earners.
I do not think we need pension pots of ¤1.2 million anymore. The State cannot afford it. I would be worried about the Government's growth projections for the future. I think hauliers should be happy with the diesel rebate.
We should be straight about the fact that the property tax will crucify Dublin and other urban areas. It was a plank of Labour Party policy that there was to be no decrease in child benefit, but it has rolled over like an old dog that allows its master do whatever he wants by agreeing to a ¤10 decrease in the monthly payment. Fine Gael has rubbed the Labour Party on the belly by agreeing to a mansion tax that will bring in approximately ¤15 million, according to figures I have worked out on the basis of the number of properties I believe to be worth over ¤1 million. I am worried about the property tax.
It is not too late for the Government to have a look at the cut in the back to school allowance, especially in light of the savings to be made. When the ¤10 decrease in child benefit is taken with the ¤50 decrease in this allowance, it is clear that the squeezed middle will be hit in a regressive way. The increase in the third level registration fee and the increase of 3% in the income threshold at which students are eligible for grants will also affect the squeezed middle.
The respite grant is to be cut from ¤1,700 to ¤1,375. I heard the Minister, Deputy Howlin, saying the Government was going to protect all basic social welfare payments. In the next breath, he announced a cut of 25% in jobseeker's benefit, in effect, when he said it will be paid for nine months rather than 12 months. People would have preferred a ¤5 cut across the board as long as they continued to receive it for a further three months.
I agree with Senator Norris that we need to have a full and proper debate on today's announcements. I will speak to the Leader of the House about it tomorrow. The Minister of State has been good enough to attend our debates on a regular basis. After we have looked through the small print of today's budget, we should have a proper and reasoned debate on it. I will ask my colleagues on the Government side of the House to support the call for time to be provided next week for a reasoned debate.
The bottom line for today is that low-income and middle-income earners in urban areas have been absolutely nailed by the Government. I welcome the small number of positive measures in the budget, but the main thing is that people who are paying their taxes and working to live will have to do so even further. It is a regressive budget. We should discuss it next week in the cold light of day, after we have had a chance to go through the positive and negative aspects of it properly. We would be able to have a more informed debate in such circumstances.
I agree with Senator O'Brien that the Leader of the House should accommodate the Opposition by giving us an opportunity to tease out the Government's proposals. Everybody has the right to speak on the budget. The imbalance in the numbers in this House gives us a limited number of opportunities to do so in the time available. I welcome the Minister of State. Of course there are good things in this budget. Every Government has to try to find some sort of balance. I welcome the extension of the section 481 film tax relief scheme. There is a degree of certainty in relation to that. As a member of the Leitrim County Childcare Committee, I welcome the allocation of ¤14 million to increase the number of child care places. I have to say I am sorely disappointed that no reference was made to home help despite all of the lobbying that has been done.
An article in yesterday's edition of The Irish Times, setting out the first-hand experience of carers and those who provide home help in my own part of the country, would have melted the heart of a stone. It happened to involve a group of people in County Sligo. It would make one cry to read their stories in print. The Government claims to be trying to operate in the interests of fairness and equity, but it has made absolutely no reference-----
I appreciate that both parties in government have been lobbied on this, but I ask the Minister of State to try to find some way of alleviating the difficulties to which I refer, perhaps in the context of the Finance Bill. When I met a man in his 80s in a local supermarket last Saturday, he had tears in his eyes as he told me he is now getting half an hour of home help each week, whereas he used to get five such sessions each week. It is absolutely criminal that some of our most vulnerable people - the frail and the elderly who rely heavily on home help at advanced stages in their lives - are being treated in such a manner. Can the Government find some way of making an allocation from a compassionate point of view? I appreciate that this is a matter for the HSE budget. I ask the Minister of State to talk to his colleagues so that some improvement can be made in this regard in the new year.
I welcome the Minister of State. We all know that the task we faced today would have been a difficult one for any Government. Senator MacSharry said that he defended the previous Government when he sat over here. He defended that Government's policies, whereas we are defending a budget that has had to be introduced to clean up after those policies. He must have been confused by the Shakespearean rhetoric that came over him. He portrayed it as being more like a Shakespearean tragedy. I have two sons who are working in London. Fianna Fáil sent them to London. I want them back to work here. Fianna Fáil destroyed the economy. As a result, my sons and other people's sons had to leave Ireland to go to England, America and Australia. I want them back.
If Fianna Fáil had stayed in power for another two years, we would be in a worse position than Greece. The country was destroyed by the Fianna Fáil Government that left office two years ago. If it had been given another two years in office, the mess would have been even worse.
Sinn Féin's obsession with the Labour Party is gratifying because it shows how afraid it is. It reminds me of an old Latin phrase I learned in school. There was a Roman Senator who used to say "Delenda est Carthago", which means "Carthage must be destroyed", at the end of every speech, regardless of whether it was on agriculture, education or the Gods. Sinn Féin must have been reading a great deal of Latin history because it puts the same things into every speech. It constantly suggests that this country would be great only for the Labour Party. I assure Sinn Féin that this budget would have been much more severe only for the Labour Party.
I congratulate the Labour Party and Fine Gael for reaching agreement on it.
The wealth tax proposed by Sinn Féin is the one of the most lazy budgetary proposals. It is taken directly from the French system. I have researched it almost word for word, and all they did was translate it into English.
Second, with regard to the people I talk about, the diaspora who have left this country and set up businesses in New York, California, Britain and Australia, the young people who had the guts to go out there and set up a business, Sinn Féin's contribution to them is to say "If you come back to Ireland, we will tax you on your American assets as well". That is their contribution to the diaspora. They should be ashamed of themselves. They go to New York and get their $500 from the wealthy businessmen in Manhattan. What do they do? They do not give it to the taxpayer; they put it in their back pocket. It goes into the Sinn Féin coffers.
It does not. On a point of order, that is totally out of order. I ask Senator Harte to withdraw that. It is a very personal statement made about the leader of our political party. He has absolutely no evidence to back it up.
I have no problem with that. The point I want to make is that Sinn Féin is talking about taking money from the wealthy in this country yet it is taking money from the wealthy in New York, California and the UK and putting it into the party. That is how close they are to the wealthy. There is no party in this Chamber apart from Sinn Féin that has $500 a night dinners in another country to fund the party.
The Chair might give me some leeway as I was interrupted. Senator MacSharry was about 20 minutes over his time.
The Labour Party contribution to this budget was quite marked, with the Department of Social Protection maintaining social welfare rates and no cuts to education. I commend our Labour Party Ministers for the work they have done and I commend the Minister for Finance and the other Fine Gael Ministers for having a tough budget. I am not proud of this budget but it has to be done. It is short-term pain for long-term gain. It is the next generation, not the next election, we should be worried about.
I will not need that long. The most interesting line of the Minister's speech was at the beginning, when he said Bank of Ireland, AIB and Bord Gáis had all raised funds. I nearly fell off my chair. He did not say what funds, how much the funds were, where they were or how we could get access to them. Perhaps the Minister of State will be able to inform me because I would like to find out what funds he was talking about at AIB and Bank of Ireland. Maybe it was the ¤3.7 billion we gave the banks.
What of the Bord Gáis funds? The gas bills are so high that old people have to live in one room to keep warm. We have raised funds - the funds have come from us, the middle men.
I commend the allocation of ¤17 million to the Department of Children and Youth Affairs. This is extremely important because education and young people are the beginnings of a great country, and that is where the money should go.
With regard to the property tax, a ¤500,000 home will probably cost about ¤900 a year, a ¤400,000 home about ¤700 and a ¤300,000 home about ¤400. Where is that money going and what will it be used for? I have very little faith about its use, although it is one of the greatest cash cows in this budget. If it is to pay the next tranche of unsecured bondholders, there is nothing that can be said about it.
With regard to the Minister of Education and Skills, I will say something quite controversial. I actually do not think he went far enough. Some 27,000 young people in fee-paying schools pay between ¤5,000 and ¤17,000 to be educated at second level yet they baulk at the doors of the DCU and UCD for ¤2,500. University fees should be doubled, if not trebled. Those who can pay them should pay them, and those who cannot should be properly means tested. It may be a controversial thing to say but I believe it is only right.
I was petrified before today's budget, to be honest. While I will not pretend I know the entire detail of it, I believe it is quite a smart budget and it shows the man has drilled down and thought about it. It is clearly a "Get us back to work" budget. The SME emphasis is most welcome. Given how the domestic market has been flat, if we are to get our domestic economy back up and running, we need our SMEs working.
I have just come back from China, where I could see why our exports are thriving and how good a job Enterprise Ireland is doing in China and south-east Asia. It was absolutely vibrant and positive but we need to get that same confidence back into our domestic market. I like to hear of initiatives such as the Plus One initiative, whereby employers will be encouraged to hire one long-term unemployed person.
The diesel rebate is very welcome. How many times have I and others stood up here and spoken about this? This will not just help our hauliers, who have been put at a strong competitive disadvantage by those who were illegally laundering and going abroad to fill up, but it will improve the cost of living for every one of us because transport increases the price of goods, and everything we buy depends on transport and the cost of diesel. At long last, this has been done.
I welcome the extension of section 481, which is good for the film industry and particularly good for Galway, which is a great hub for film. I am delighted because film is about our creativity and our imagination as well as about tourism.
The exemption from property tax for new home buyers from 2013 to 2016 is very smart. We have to help people get in there and get their first home. There has to be some incentive given mortgage interest relief is running out at the end of this month, although I disagree with that.
The measure in regard to pension withdrawals from AVCs is very smart and will put cash flow back into the domestic economy. I like the fact the Minister, Deputy Noonan, is now saying he must focus on the domestic economy.
My main concerns are around the property tax. We need to know a little more about the valuation guidance.
The Minister said "those who own the most valuable properties will pay the most". However, many of those are also the people with the biggest mortgages and the highest negative equity, so this is flawed as a principle. What I would like to hear is whether there will be any measure of the people with very big houses and very big mortgages, and the net income they have left after they have paid their mortgage. Otherwise, we will be driving them up against a wall. I understand the proposal is that they will defer it until they die-----
To sum up, the Minister, Deputy Quinn, has done rather a good job. He made a lot of mistakes last year with the budget but he has learned hugely from that for this year. I want to congratulate him and say I am delighted to see the pupil-teacher ratio has not changed. I do mind it changing in private schools, and I agitated for that. He has done a massive job to save SNAs and resource teachers, and to provide 900 new posts this year to take on board------
It has been a tough budget but there have been some positives. Senator Healy Eames referred to the fact it is very much a pro-jobs budget. Seanad Éireann has been listened to. Some of the issues we have raised here continuously in regard to small business and to job creation measures have been taken into account.
I welcome the 10,000 new places on employment programmes, including 2,500 on Tús, 2,500 on JobBridge, 2,000 on community employment schemes and 3,000 on local authority social employment schemes, which is a new initiative. I welcome that the NPPR will be abolished in 2014. I echo the call made by Senator D'Arcy that the property tax be fixed at 0.18% for the next three years.
I welcome that. I am disappointed that the issue of below-cost sale of alcohol, which Senator Noone and I have raised on many occasions in the House, has not been addressed. I urge the Minister to address it in the Finance Bill.
I welcome the Minister of State. As stated by him in the final sentence of his contribution, the task of restoring the public finances is not an easy one. I would like to make some points in response to the speeches of the Ministers for Finance and Public Expenditure and Reform. We have not yet received the full details on the ten point tax reform plan for enterprise. As such it might be better to leave that issue to next week. As stated by the Minister of State in his speech the banks got us into this trouble. I am concerned about the reference by the Minister for Finance to relief of capital gains on disposal of farm land for three years. We do not want relief of capital gains on disposal of farm land, we want output. I opposed the film industry relief last year. The Minister said in his speech that it was abused yet he has extended it. When I tried to have it voted down I was told that the anomaly by which investors received a disproportion amount of tax relief as opposed to the funds going into production was removed. We tried to save the Government money last year by seeking to have that relief removed. The study was published today but we have not yet had sight of it. Is this the fruits of lobbying, which got us into this mess, or will sound economic benefits ensue from it?
There is also a skirting around with the property sector again. Any commercial property bought between now and end 2013 will be exempt from capital gains tax for at least seven years. The Government should not go there. It is what got us into trouble before. Mention was also made of real estate investment trusts to promote investment in real estate. We need to bring all of these costs down so that, as stated by the Minister of State, the development sector of the Irish economy and exports will gain. I am concerned about the property tax because I do not believe the property market has recovered. NAMA is holding up prices, as is forbearance by the banks and there are houses in ghost estates that have not been sold. What are the real property prices at which people will be paying this tax?
On the expenditure side, I note that the pay bill for 21 of the 40 Departments has increased. Where is the Croke Park Agreement delivering? The budget for the Attorney General's office also increases to 11.6% and the increase in respect of the Office of the Minister for Finance is 16.5%. There is not much austerity in those areas.
There is a 9.2% increase for the Department of Foreign Affairs and Trade.
The budget provides for a 1% increase on interests on deposits and savings, which is unearned income. Much of that income was hard earned. Perhaps the Minister would consider looking at this again in the context of the exemption scheme in relation to post office savings. There may be some people on low income who are trying to do their best with the assistance of their savings. The extension of the PRSI was always a highly regressive tax.
The Minister, Deputy Howlin, referred in his speech to critical infrastructure deficits. I hope there was no lobbying in this regard by the construction industry. Our GDP next year will be approximately 40% lower than stated in the national development plan. I do not know where the infrastructure deficits are when economic activity is so depressed. I plead with the Minister to ensure public private partnerships are analysed so that the taxpayer is not taken to the cleaners. I am uncertain from where the ¤323 million referred to on page 13 will be saved in the health service. Some ¤70 million is to be taken from pharmacists and general practitioners. How many of them are there that it is possible to save ¤70 million in this way? It is also stated in the Minister's speech that better income collection will result in savings of ¤150 million.
I am concerned that the proposed legislation in respect of commercial health insurance does not get the benefits of competition, which could reduce the cost of health for people who have commercial health insurance and in the public sector. The Government appears to be defensive of the State company. We regularly hear in this House of projects such as ¤290 million for railway signals between Lansdowne Road and Howth Junction. What type of signals are being installed? Is anybody evaluating the project? Another project, in relation to rail safety, cost ¤1.6 billion. Evaluation of that project indicated the lives of many animals were saved.
It is important the Government keeps the pressure on the big spending and lobbying Departments, in respect of which we will support it.
I welcome the Minister of State, Deputy Hayes, to the House. There is no doubt that this is an anti-children, anti-family and anti-jobs budget. The Minister of State said in his contribution that all of what is contained in the budget is necessary. However, he failed to outline in detail exactly what is in the budget. I would like to put on record exactly what is in the budget, or at least that of which we are aware because we are still trawling through the detail.
The budget provides for an unfair property tax, which is not linked to ability to pay: a reduction of three months in jobseeker's benefit; reductions in the household benefits package; a reduction in child benefit of at least ¤10 per child; a trebling of prescription charges for medical card holders; reductions in the threshold for the drug payment scheme; the removal of the medical card for some senior citizens; tax on maternity benefit; cuts in the respite grant, which is a cruel cut; a reduction in the allocation of funding to the VECs and other higher education authorities; a reduction in payments to farmers, such as the suckler cow, REPS and early retirement payments; an increase in college registration fees this year, next year and the year after and much more.
This budget does nothing which requires high earners in this State to pay one extra cent in taxation. People who earn more than ¤100,000 per annum and more have not been asked to pay one extra cent in taxes.
Yet, ordinary working people, those who bore the brunt of the last five austerity budgets, are being hit again. The property tax is not linked to ability to pay. The property tax for a family with a home valued at ¤200,000 will be ¤320 per annum.
Property tax in respect of a modest house - most houses in the country are modest - will be ¤320 per annum. I am talking about people who live here, not in Northern Ireland. People are not buying that argument because they know what people in the North are getting.
We will have a situation whereby some people on high incomes will be paying the same amount of property tax as others on low incomes living in a similar house because this tax is not linked to ability to pay. That is grossly unfair.
It is an argument against a property tax which is not linked to ability to pay. Prior to the last election, the Labour Party told the people of this country that there were two red line issues for it, namely, cuts to child benefit and increases in college fees for students. What did it do? It supported increases to college fees and cuts in child benefit. The Labour Party turned its back on the people who voted for it. It has failed to protect those people.
The Minister of State will say that we need this property tax to pay for local services. I was in contact with the city manager in Waterford City Council, the budget of which has been cut by 6%. The Government is slashing the budgets of local authorities, cutting back on their ability to provide services.
The Government is increasing the property tax, an actual tax that will go into a big black hole and will not fund services.
When the Government introduced the household charge it assumed it would sail through and the people would accept it because it was only ¤100. How wrong that was.
I have a final point on the property tax. The Government told people on low incomes they could defer their payment but now it will charge them 4% interest. These are low income earners who will be charged for deferring their payments. Government Members should be ashamed of themselves for bringing a budget to us that will have a disproportionate impact on most lower and middle-income families, and those on welfare who needed to be protected. There was not one cent of a pay cut for politicians, no extra income taxes for higher earners, no wealth tax, no fairness, just more of the same - more of what we got from Fianna Fáil. That is what Fine Gael and the Labour Party have delivered for the people of this country. They should be thoroughly ashamed of themselves.
I am conscious that a number of people wish to contribute to this debate and the Acting Chairman explained that some may not have an opportunity to speak. I will try to keep within four minutes in order to allow in some of my Independent colleagues who may not otherwise have an opportunity.
As the Labour Party spokesperson on children and youth affairs, I am glad to welcome the ¤17.4 million allocated by the Department of Children and Youth Affairs for the youth detention facility at Oberstown.
I was one of those who called for an investigation into the events at St. Patrick's Institute. I believe the incarceration of 17 year olds in that institute is something the nation - and we, as Members of a House of the Oireachtas - should be ashamed of and therefore I welcome this development.
I refer to Senator Cullinane's comments on medical cards. I am aware of people who do not have enough money to send their children to swimming lessons. How can it be right that older people on an income of ¤700 per week for a single person, or a couple on ¤1,400 per week-----
An additional ¤10 million will be allocated to acquiring housing from NAMA for the benefit of those who require social housing, a positive measure in this budget.
I wish to spend my remaining time talking about the residential property tax and will highlight a number of issues about which I have some concerns. Over the years, numerous academics cited the fact that people in this country, particularly older people, own their own homes as one of the measures that prevents poverty in older age. We all agree we need to have a much wider tax network. Can this measure be kept under review during the coming years? There are options for deferral within the proposed measures but for older people their houses are very dear. I have gone into the homes of older people and seen them sitting in front of two-bar electric heaters, although the house may be a mansion. We must be conscious that logic does not always enter into the equation.
There may be an anomaly in the property tax provisions. I refer to appendix B in budget 2013, which states that local authority and social housing will not be exempt from the property tax measures. I would like some clarification on that. If local authorities and voluntary housing bodies must pay property tax on their own housing, the logic is similar to that of robbing Peter to pay Paul. For the voluntary housing bodies this could be an enormous imposition. The Respond housing association, for example, has in the region of 6,000 units. I alert the Minister of State to the fact there may be unintended consequences to this measure.
One third of buy-to-let mortgages in this country are in arrears. I would not like to see this measure forcing up rents. We are already aware of the worsening situation in recent years because of rising rents. The measure should be kept under review.
Budgets should be about fairness and equity, and those who have the most should contribute most to the most vulnerable people in our society. I am afraid this budget does not achieve that. We know from the credit union survey that 1.8 million people have less than ¤100 left at the end of the month, yet we are bringing a property tax down on their heads. In October last year Bill Clinton remarked that Ireland needed to resolve its mortgage issue but we have not done so. Some 27% of people have mortgage arrears or have restructured their mortgages but we are now imposing a property tax on those who are clearly struggling. It is unbelievable that a property tax is being hoisted onto this economy at this time when we have not resolved the mortgage issue, or given our people and our citizens a way to ensure they have a decent standard of living and are able to turn on the heat and feed and clothe their children. The Taoiseach famously said, many moons ago, that it was morally wrong to bring in a property tax. I am sure he is reflecting on that now as many people are calculating the amount of tax they must pay, as well as the cuts to child benefit and the new PRSI contributions. On top of all that there is the property tax, while our mortgage issue gets worse by the hour and the day.
The second home tax has been abolished. That ¤200 plus the ¤100 would have provided ¤300, in any event, but this is a tax on the family home. It is not really a property tax. I worked out a quick calculation when I came into the Chamber. A couple with three young children who have an income of ¤37,000 will have their property worth ¤175,000 valued at ¤316 for property tax; they will be hit by ¤456 on child benefit, and because they are both working they will be hit by ¤540 in PSRI. Effectively, their income will decrease by ¤1,300 per annum, without factoring in some of the other costs in terms of spending cuts and stealth tax increases. Whatever way the budget is dressed up, it means that the lowest income earners in society are going to be hit very hard.
When we talk about the most isolated and vulnerable people in society, generally we are talking about social welfare recipients. However, this is now being turned on its head. The new most vulnerable are the middle income earners, who are being squeezed. A deal was done before the budget. It is now apparent that the deal meant that those on social welfare, which is ¤188 per week, would be protected, but the price of this was that the Government would not go after people who have incomes in excess of ¤100,000.
It was designed to protect what Fine Gael perceived to be its vote base. That is wrong. People with incomes in excess of ¤100,000 per year - there are over 100,000 such individuals - should have been targeted in the budget. However, that opportunity has been missed.
I suggest to the Leader that, if possible, the House should engage in a more reflective debate on the budget prior to Christmas but after the exact details relating to each Department have been made available. I appreciate that time constraints apply this evening, but we would really appreciate the opportunity to discuss the budget in more detail either next week or the week after.
The budget is very positive for business, for which I thank the Minister for Finance. However, as an entrepreneur and an employer, I would be terrified to take on even one new employee. The percentage relating to redundancies used to be 65%, then it was reduced to 15% and now it is zero. This represents a huge risk for people who are self-employed. If their companies come close to going to the wall, the consequences will be dreadful.
I have 120 wonderful workers at my factory and will be going to see them tomorrow. What is being done in respect of PRSI for the low paid is disgraceful. This section of the budget was very lazily thought out. Could the Government not have gone after some of the quangos or bankers' salaries rather than carers' respite grant?
The House should engage in a debate on the Garda. We are demoralising gardaí and have cut down on overtime in order to save ¤60 million. Everyone is watching "Love/Hate" on RTE, but that programme only provides a taste of what is really taking place on the streets.
We are closing down Garda stations. I would like the gardaí on duty outside Leinster House to stop working this evening and we would then see how Members feel about this matter. We must stop demoralising gardaí. Our society is in trouble, a fact that we must recognise.
On a point of order, on the Order of Business this morning we made it clear that the time allotted for this debate was too short. It is obvious that Senators have been obliged to shoehorn their contributions into very brief time slots and that we are not having a proper debate. I call on the Leader to-----
We will leave that up to the public to decide.
This has been a very detailed debate. It is fair to state that if we engage in a more reflective debate at a later date, we can discuss the various issues raised in greater detail. One of the aspects of the budget about which I am most proud - Senator Aideen Hayden referred to this - relates to something on which many of us have been campaigning for many years, namely, the appalling way in which young people, particularly those who offend, are treated. I am delighted - with the Minister for Children and Youth Affairs - to be part of the project due to proceed at Oberstown. This is a good development and shows that even in difficult times, the State can do wonderful things, particularly those which should have done many years ago. In fairness, a former Taoiseach, Mr. Charles Haughey, had a flair for bringing forward imaginative proposals in very difficult times. A couple of examples in this regard are the IFSC and certain projects in Temple Bar. We must all be constructive and creative in circumstances where there is very little money available.
I do not wish to revisit matters to which I referred earlier. However, I take Senator David Norris's point that the dilemma we face is that if we had not made savings of ¤24 billion from 2008 up to this year and we were not making additional savings of ¤3.5 billion in the budget for next year, the position of the country and the economy would be significantly worse. We have confirmed to the international community that the country is going to make a comeback on the basis of having stabilised its public finances. I agree with the Senator that we will not extricate ourselves from our current difficulties unless the issues relating to the promissory notes and the national debt are resolved. We are working day and night in this regard.
We are going to pay, but we are seeking to restructure the promissory notes which are part of the appalling legacy we inherited. There should be no doubt but that the Government is extremely concerned about this matter and that our diplomats and officials across a number of Departments are working on it.
As the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, indicated in the Dáil earlier, in the past three years some ¤2.5 billion has been taken out of the public sector pay and pensions bill. In 2009 the bill was ¤20 billion, which figure has been reduced to ¤17.5 billion. People refer to tens of millions, but look at what we have achieved in the context of the totality of the public sector pay and pensions bill. In three years we have reduced it by ¤2.5 billion.
Not one day's work was lost to such problems. That is an extraordinary achievement by both the people in general and by those in the public sector. I have had the opportunity to address a number of international fora and have been asked how we achieved this without strikes taking place. There is a need to recognise that there has been no industrial rest.
The Minister for Public Expenditure and Reform has told the Lower House that the bill in this regard has to be reduced by a further ¤1 billion in the next three years. This will be very difficult to achieve. Up to now, we have managed to achieve reductions in a climate of industrial peace. Effectively, 30,000 people have been taken out of the public sector. At the same time, 80,000 young people have entered the education system and an additional 400,000 individuals have applied for medical cards. This has all happened at a time when extraordinary demands have been placed on the public service. We often ignore what has been achieved in reducing the numbers employed in the public service and cutting the pay and pensions bill.
No Government wants to reduce child benefit. As stated, I live in an ordinary housing estate in a very nice part of Dublin. I am very proud to live there. I am aware that people who live in the estate have lost their jobs and that the young families are struggling to make ends meet. I must be honest with them, myself and the country that we cannot proceed unless we have a strategy that is going to get us to a better place.
I regularly argue with Senator David Cullinane when I come before the House. I must inform him that it is fundamentally dishonest for any political party, including that which he represents, to state ¤3.5 billion can be taken out of the economy and that no one will be affected. During the general election campaign Sinn Féin stated that it would abolish the universal social charge. In the first Private Members' motion it tabled following the election, it reiterated that it would do this. In his most recent speech Deputy Pearse Doherty confirmed that it was still intent on abolishing the charge. If this was done, we would owe a further ¤4 billion. The Senator attacked Labour Party Senators for what they had said during the general election campaign. However, he must account for himself in this regard. We must end this tomfoolery, as the public is seeking honest solutions. I accept that there are alternatives, but they must at least be credible.
Sinn Féin opposed the increase in VAT from 21% to 23% in the previous budget. Effectively, this brought in an additional ¤500 million to ¤700 million during the current year. During the debate on budget 2012 Senator David Cullinane informed me that Sinn Féin would reduce the amount taken in through VAT. We have actually increased the amount taken in this year, despite the rise in the rate. When I went looking in Sinn Féin's pre-budget submission for its commitment to the people to keep the VAT rate at 21%, I could not find it.
I had also hoped that politicians would stop engaging in tomfoolery, stop keeping up the pretence and instead tell the people the truth. The truth of the matter is that we must reduce the deficit.
Some of the Independent Senators questioned the impact of the budget. We must get money back into the country. As long as the sovereign remains risky - - - - -
- - - none of our public utility companies will attract investment. I think a Senator asked what the budget would mean for the ESB. For the first time in three years the ESB has raised money. It was also the first time the Bank of Ireland had raised more than ¤500 million outside the bank guarantee. Allied Irish Banks also raised ¤300 million outside the guarantee. The great advantage of trying to reduce the deficit is that investment will flow into public utility companies through public private partnership.
That is what we want to achieve, but it will take time to secure investment from them. We live in a highly globalised society and money flows in and out as quickly as one looks at it. No one will invest in the country as long as the sovereign is risky. During the past 12 months people overseas could see Ireland was solving its problems and getting to grips with the public finances. The great advantage is that we can get money to flow into the country.
I accept the criticisms of members. This is a difficult budget, but we have done everything in our power to make it fair, with increases in capital taxation. It is only right and proper that PRSI is being extended to unearned income such as rental income. Some people have very substantial properties and should pay more. People over 70 years who have substantial income should pay a little more in the universal social charge. I very much agree with the point made by Senator Aideen Hayden on the transfer from medical cards to GP only cards for a group who have in excess of ¤60,000 a year on which to live. It is a fair measure. When I made this point three months ago, I was attacked left, right and centre. It is only fair for intergenerational equity that a group who are really struggling, those in their 30s and 40s and out of their mind with worry about debt obtain some relief. This requires that the burden be spread in the fairest way possible. Will we make mistakes? Of course, we will. We will not get everything right in the budget and need to make changes in the fairest way possible to get the country working. The number one priority, as many Senators have reflected, is to create jobs. We must get the domestic economy working again. Exports are flying. I attended an exports conference last week - - - -
On a point of order, a request was made to the Leader of the House to extend the time allowed, but he refused to do so. We are well over time and the Minister of State is still speaking, yet some Senators did not have a chance to contribute.