Financial Resolutions, 1997. - Financial Resolution No. 5: General (Resumed).

Thursday, 30 January 1997

Dáil Éireann Debate
Vol. 474 No. 2

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Debate resumed on the following motion:

THAT it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

An Leas-Cheann Comhairle: Information on Joe Jacob  Zoom on Joe Jacob  Deputy Haughey, who moved the adjournment, already indicated that he wishes to share his time with Deputy O'Rourke. There are 30 minutes available to him.

Mr. Haughey: Information on Seán Haughey  Zoom on Seán Haughey  Deputy Sheehan, in his contribution before Question Time, lauded the achievements of the three-party coalition in this budget which he described as one of the most innovative in the history of the State and he went on to say that the Government was doing wonderfully, but the fact is that one of the most successful Governments was the 1987-89 Fianna Fáil Administration which took the decisive action on the public finances which brought about an improvement in Ireland's economic fortunes. It is because of that decisive action, taken by Fianna Fáil in [323] Government without a coalition partner, that we can boost some of the marvellous economic indicators which we read about every day. It is all very well to say that this Government has done a wonderful job with the budget but we must look more closely at history and how we achieved the present state of economic development.

The three party coalition Government is not working. Public and other spending has had to be increased in order to stick the Government of three parties with conflicting ideologies and policies together. That is very unfortunate for future economic development.

As far as the tax measures which were introduced are concerned, in order, again, to keep the three parties satisfied all the promised tax cuts for future years have been brought forward to this year and I do not think we can expect tax reductions in the future. This three party coalition may be working according to Deputy Sheehan, but, unfortunately, it is working at a cost. The conflicting demands within Government from three and not two parties have had to be conceded, Ministers threatened to resign but, at the end of the day, did not do so out of political expendiency and this budget was eventually cobbled together at the expense of increasing public expenditure which will cause many difficulties down the road.

One issue I want to focus on in the short time available to me is the increase in stamp duty on residential property. Obviously, everybody welcomes the abolition of property tax, particularly people living in the greater Dublin area. No doubt it resulted from a discovery made by Labour Party Deputies that the public deeply resents paying property tax and the fact that new found yuppie voters which the Labour Party brought on board had to be accommodated. Despite the fact that the Labour Party fought tooth and nail in Cabinet for a Property tax and other more draconian measures as far as home ownership is concerned, the Government has now come around to the view that the property tax must be abolished. It is another electoral ploy, albeit a welcome and belated one.

However, the increase in stamp duty to 9 per cent from 6 per cent on transfers of certain residential properties valued in excess of £150,000 is most unwelcome. These new proposals are biased against Dublin house buyers and young people in general who are struggling to buy their first house. It will directly affect the average Dublin family. With house prices rising by 15 per cent a year, it will not take more than three or four years for a house worth £100,000 at present to rise above the threshold. It means that a family buying a house costing £175,000 must find over £15,000 on top of the price of the house.

These new measures will also fuel inflation directly by increasing the cost of home purchases. It will also cause price increases within all sectors of the second-hand home market. The new stamp duty rates will discourage home ownership, a tradition [324] in this country which brings many benefits for society. More pressure will also be put on the private rented sector, which is completely under siege particularly in the Dublin city area as the accommodation situation worsens.

The absence of measures to assist first time buyers and the further reductions in mortgage interest relief are an attack on young people and home ownership. The Government refuses to increase the first time buyers' grant of £3,000 which has remained static for three years while the value of a young single person's tax relief on a £50,000 mortgage has halved since 1993-94. It is incorrect to say that money invested in rented accommodation is preferable to house buying. It is clear that the lower level of home ownership in France and the UK has not translated into economic growth as some economists would suggest. In Dublin, young people are unable to afford houses in their neighbourhood due to spiralling house prices which have increased by between 31 and 50 per cent in the last three years. A very real problem is being created for young people who are first time buyers. The stamp duty increase will do nothing to help but on the contrary will worsen the position.

I tabled a question to the Minister for Finance on 17 December 1996, Official Report, volume 473, column 225, as follows:

To ask the Minister for Finance why interest can be paid by the Revenue Commissioners to self-employed taxpayers who have overpaid tax, whereas interest cannot be paid by the Revenue Commissioners to PAYE taxpayers who have overpaid tax; his views on this apparent anomaly; and if he will make a statement on the matter.

The Minister's response was as follows:

...The PAYE system is designed to be self regulating by spreading payments evenly over the year as far as possible so that, as a general rule, significant underpayments are minimised. Hence there is no legislation specifically imposing a charge to interest on underpaid PAYE by individual taxpayers or providing for its payment in cases where tax has been overpaid.

If it comes to light that a PAYE taxpayer has overpaid tax there is no provision for paying interest to that taxpayer. In many cases the sums involved are substantial so far as that taxpayers is concerned. In the interest of fairness and equity this needs to be changed.

The position of the mentally handicapped in our community is serious. There are strong demands for further activity in that area. There are 2,950 mentally handicapped people who do not have access to a service. Some 1,500 have no day service and 1,450 are awaiting residential care. This service is a basic human right. The budget made provision for £10 million in addition to the extra £2 million already provided in the [325] published Estimates towards enhancing further our services for people with mental handicap. Unfortunately much more needs to be done. The State has an obligation to ensure that mentally handicapped people can live full and fruitful lives. We need more positive action in that areas as we are only hitting the tip of the iceberg. The small amounts provided in the budget are unsatisfactory. We need radical reform to ensure these services are provided for some of the most vulnerable in society.

Up to now probably only about £15 million per annum has been provided for youth services. All the agencies working with young people believe this is hopelessly inadequate. The problem of drug addiction is rampant in some of our communities yet we are providing only a miserly £15 million. The Catholic Youth Council and many other groups recommend this should be increased to £30 million, most of this coming from national lottery funding. We need also a radical reappraisal of our youth services, including the funding aspect. There was little or nothing in the Estimate or in the budget to deal with that important matter.

Mrs. O'Rourke: Information on Mary O'Rourke  Zoom on Mary O'Rourke  I am pleased to have the opportunity to speak on the budget. During the past few days like most other Members, I have listened to the debate in my office. It is interesting to note the political hue put on the budget by people from all sides. Clearly there is a growing expectation that we are facing up to an election very soon and it would be useful for all concerned if the date was announced. The Minister of State, Deputy Gilmore, would like to know the date too.

Mr. Gilmore: Information on Eamon Gilmore  Zoom on Eamon Gilmore  15 November.

Mr. Durkan: Information on Bernard Durkan  Zoom on Bernard Durkan  Just before Christmas.

Mrs. O'Rourke: Information on Mary O'Rourke  Zoom on Mary O'Rourke  I could lay any money it will not be as late as November. As sure as Friday follows Thursday if we wait until November ten skeletons will come out of ten separate cupboards. That is the way of political life here whether we like it or not. It would be very interesting in the autumn. However, we will wait and see what will happen.

I listened with great enjoyment to Deputy Sheehan as he studiously and carefully delivered his contribution. No doubt it was to the delight of his constituents in the deepest reaches in County Cork who can hear it on the unique transmitter system which he operates from the Dáil.

Most Members use the budget debate to speak on their own brief or a particular matter in which they are interested. I intend to go back to the mission statement of the IDA about the regionalisation of its policy and the need for jobs outside the major urban centres. At a time of unprecedented economic boom the IDA is announcing 18,000 jobs per year but areas outside Dublin and Kildare are not getting a look in. Of [326] the 17,725 jobs announced by the IDA in 1996, Dublin received 12,559 — 71 per cent; Cork received 1,246 — 7 per cent; Limerick received 1,038 — 6 per cent; Galway received 477 — 3 per cent; Waterford received 301 — 2 per cent, while the rest of Ireland which includes Connacht, Donegal and Clare got 152 — 0.86 per cent and the midlands suffered equally badly. The acting Chairman would say “hear, hear” except that the is precluded from saying so because he is in the Chair.

Not one of the new projects announced by the IDA in 1996 went to the west, with the 152 new jobs coming at three existing projects in Sligo and Roscommon. In 1995, 80 per cent of new overseas industrial projects went to four major cities, Dublin, Cork, Limerick and Galway. By 1996 this had risen to 89 per cent.

When the IDA was established in 1950, following the passing of a Bill in the Houses of the Oireachtas, one of the burning issues of concern was attracting industry to areas outside urban centres. I have read in the Official Report what Deputies from various political parties said. It was a time of an inter-party Government when a Labour Minister, Mr. Morrissey, introduced the Bill. Speaking on Second Stage of the Industrial Development Authority Bill — Official Report of 9 March 1950, volume 119, column 1590 — he said:

In carrying out its functions relating to the establishment of new industries and the expansion of existing industries, the authority is giving and will continue to give special attention to the question of promoting industrial activity outside the main centres of population.

The theme of locating industry outside urban areas was a dominant one throughout that debate in 1949-50. The IDA was set up in 1949 on an interim or ad hoc basis and ratified by legislation the following year, following the massive work done by Sean Lemass who was unfortunately out of office when it was implemented. It is ironic that the issue is back on the agenda 50 years later when one would imagine we should have a developed jobs policy. This mission statement appears to have been forgotten in these modern times.

The ongoing imbalance makes no sense from many perspectives. I welcome the presence of the Minister of State, Deputy Gilmore, who lives in Dublin, and the Minister of State, Deputy Durkan, who lives in County Kildare, but I would prefer to address my remarks to a Minister from a rural area. A national jobs policy which concentrates all developments into a few square miles on the east coast is self-defeating. It also deepens the frustration and sense of hopelessness which permeates the west and many other areas outside Dublin. That sense of hopelessness was particularly palpable in many areas during Christmas. People were told they never had it so good, spending was up, shops were busy and people were buying luxury items in greater quantities. [327] However, that phenomenon was confined to the east coast in many respects. Building shopping trolleys and car boots jammed with goodies were not apparent in rural areas.

One of the by-products of the boom in Dublin is the traffic gridlock. The Taoiseach cannot announce a free-flow operation every day. More people are moving from rural areas or commuting into a city which cannot cope because of its infrastructure. Traffic is choked up not only during peak hours in the morning and evening but throughout the day. The idea of an on-street light rail system in the city centre now seems like a joke. Traffic is so disjointed that if it is decided to build a light rail system people will stay out of the city centre.

Most of the new jobs created in Dublin are going to people from rural areas. Even though 46,000 jobs were created in Dublin during the past four years the unemployment figure for the city has decreased by only 1,000. This is a startling figure when one takes account of the figures I gave earlier for IDA job announcements and realisations in Dublin. Rural people are being crammed into the capital city to fill jobs while Dublin people have to cope with increased traffic, inflated property prices and increasing social problems.

This migration is having a devastating impact on rural areas. Most country towns are denuded of young people until weekends or holidays and rural vibrancy is very much confined to Saturday nights. It is not correct to concentrate all development within a few square miles on the east coast.

Meanwhile the huge investment by the State in providing a countrywide industrial infrastructure of telecommunications, water, roads, sewerage and electricity services goes unreturned. These services are not being fully utilised in many cases. The last massive transche of EU funding was to be used to improve training and education and the physical infrastructure through building bypasses, bridges and sewerage and water schemes. The idea behind this was to enable industrial development to take place in all areas and to provide for a tapering off in the requirement for finance for such projects. I hope we will continue to pitch our tent energetically, so to speak, in seeking funding. We welcome membership of the EU by eastern European countries but we still have some way to go before we catch up with our European partners in terms of infrastructure.

There must be a greater balance in the jobs policy. Many successful international companies with world-wide markets operate successfully and profitably in the west and other areas outside Dublin. Those companies were attracted to locate in these areas during the 1970s when job targets for the regions were set and there was a precise commitment by various Governments to exploit the first mission statement of the IDA. Last Saturday night I attended the annual chamber of commerce dinner dance in Claremorris. The predominant [328] view among people at the dinner dance was that they had lost out and the IDA did not seem to have the same motivation when it came to encouraging enterpreneurs to set up in areas outside Dublin.

Other companies would also set up in the west if the advantages of these areas were highlighted, for example, the potential of a good educated and dedicated workforce, a better quality of life at a lower cost and supportive communities. The mission statement of the IDA and the Department of Enterprise and Employment must be focused on this type of promotion. The wide range of advantages of setting up in rural areas are not being brought to the attention of industrialists.

The IDA's original mission statement is as relevent today as it was 50 years ago. All we need to do is refocus our policy and reset the mission statement. Fianna Fáil in Government will insist on a better geographic distribution of new employment. We will also require the IDA and other State industrial promotion agencies to appear before Oireachtas committees to ensure greater transparency and accountability on matters such as the distribution of employment and grant payments. I do not understand why the IDA cannot come before a committee to explain its policies, funding and message. I am not taking from the fine people who work in the IDA, but there is frustration at the lack of precise information on its activities.

This, like many other issues, was a missed opportunity in a budget which lacked focus. The Minister for Finance fiddled with everything but did nothing substantial for anyone. The budget was particularly disappointing and minimalist for small industries. Despite all his talk about the introduction of special measures for small businesses, the Minister for Finance produced nothing of substance in this area. There is nothing in the budget which encourages and fosters enterprise or rewards risk-takers. The rainbow coalition Government has proven that it is useless at controlling spending. Instead of targeting specific areas, it has adopted a wide canvas approach. This could well lead to overheating and inflationary pressures on the economy.

Last January Democratic Left was very active in promoting a very good idea which Deputy McCreevy and I later included in a document in a different form. It concerned giving special tax incentives to employers who take on employees and sustain that employment, and to deprived urban areas where advance factories are set up and workers employed in them. It was an interesting document produced by the Minister of State, Deputy Rabbitte, two weeks before last year's budget. He said it would be included in that budget but it was not. There was no mention of it this year; it seems to have been taken out of the equation.

Mr. Gilmore: Information on Eamon Gilmore  Zoom on Eamon Gilmore  The Deputy has not noticed that unemployment figures are falling.

[329]Mrs. O'Rourke: Information on Mary O'Rourke  Zoom on Mary O'Rourke  The long-term unemployment figures have not budget and there is little point in the Minister of State saying they have fallen.

Mr. Gilmore: Information on Eamon Gilmore  Zoom on Eamon Gilmore  They have fallen.

Mrs. O'Rourke: Information on Mary O'Rourke  Zoom on Mary O'Rourke  The numbers are there for everybody to see and all commentators talk about the hard core of unemployment. I believe a collective decision was made in Government — perhaps the Minister of State was not part of it — to do nothing about that hard core. A moral dilemma will be created for all of us in politics if we do not recognise that hard core and take measures to deal with it.

We were told 5,000 people would benefit from the Jobstart and Workplace initiatives but the true figure, given in reply to a Dáil question, is 750. The Minister for Enterprise and Employment, who should be given a gold star for good housekeeping, gave back to the Exchequer for the second year in a row some of the special money he was given for tackling long-term unemployment. I am in favour of good housekeeping but the Minister is far too thrifty. That money was to be used for tackling long-term unemployment, yet he handed back £2 million in 1996 and £1,400,000 in 1995 given to him in the budgets for those years.

The Minister for Finance made a passing reference to long-term unemployment in his Budget Statement. Despite the strong economic tide the figures for long-term unemployment did not budget in 1996, and it is an even more searing indictment that the budget documents provided by the Minister indicate that overall unemployment will fall by only 7,000 this year, even less next year and less again the following year. At a time of economic boom the numbers should be decreasing at a faster pace if we are to make any inroads into this problem.

Minister of State at the Department of Social Welfare (Mr. Durkan): Information on Bernard Durkan  Zoom on Bernard Durkan  I am pleased to have this opportunity to contribute to the debate on the 1997 budget. This third budget introduced by the Government shares all the best qualities of its two predecessors. It contains innovation and reform while continuing to ensure that the foundations for the sustained growth of our economy remain rock solid.

As Minister of State at the Department of Social Welfare, I am better placed than many to see at first hand the absolute necessity for ensuring that all sectors of society are enabled to benefit from the success of our economy. In my role as Minister of State I have travelled to all corners of the country to see the work being undertaken by voluntary and community organisations and to meet the people involved. I have seen the positive effects of the money advice and budgetary services offered by my own Department and have heard the concerns of representatives of those who are, for one reason or another, at the margins of our society today. In light of this experience, [330] I am particularly pleased that this budget contains many provisions which are aimed at tackling poverty and social exclusion.

The 1997 budget was framed against a backdrop of a healthy economy which has blossomed under the stewardship of this Government. The economy is expected to grow by more than 5 per cent in 1997, following an equally successful 1996. Substantial numbers of new jobs continue to be created — 50,000 net new jobs last year alone. Inflation averaged 1.9 per cent in 1996 and will remain low in 1997. The health of the economy is beginning to be reflected in the live register, with the December 1996 figure being the lowest December figure recorded for five years.

Given these circumstances, it would have been easy to abandon the careful management of the economy which has brought us this far. There has been much talk recently about “give-away” and “election” budgets, but the Minister for Finance got it right when he said this is not an election budget — it is a budget in an election year. The Government has remained true to its commitment to manage the economy prudently and effectively so that the gains of the past number of years will not be lost.

The healthy economic and fiscal circumstances I have mentioned have enabled the Government to bring forward a budget which strikes the right balance in terms of our social and economic objectives. The reduction in the standard rate of income-tax, the widening of the income tax bands, the increase in personal allowances and tax exemption limits and the reduction in employee PRSI and corporation tax rates will improve the position of workers and employers. These measures provide incentives and rewards for enterpreneurs, employers, employees and the self-employed.

On the other side of the equation there are a range of measures to improve the position of the less well-off in our society. The social welfare elements of the budgets cover a wide areas embracing substantial improvements in the weekly rates of payment. These include innovative reforms such as the introduction of a new sickness allowance and the removal of the final traces of discrimination from the social welfare code; the provision of further substantial support for the voluntary sector; the introduction of enhanced measures designed to ease the transition from unemployment to employment; and a package of measures aimed at improving the position of pensioners and carers.

There are two measures about which I have long been concerned and which I am especially pleased to see included in this year's budget. The introduction of pro-rata pensions is one of the most enlightened measures among all the “good news” items in this year's budget, and one I have sought for a long time both in and out of Government. I raised this issue on numerous occasions in Opposition and my concern about it was and is shared by my colleague, the Minister Deputy [331] De Rossa. For that reason I am particularly pleased it has been included.

Over my period as a public representative, I have come across numberous cases where pensioners have failed by the narrowest of margins to satisfy the average test condition requiring a minimum of 20 contributions over a specific period. In a number of other cases, the fact that insurance contributions were paid a long number of years ago, perhaps in the 1950s and 1960s, has had the effect of disqualifying a pensioners rather than helping him or her to qualify as one would have thought.

The present conditions require a minimum average requirement of 20 contributions over a working lifetime to qualify for the minimum rate of pension. The new arrangements for pro-rata pensions will provide for a pension of 75 per cent of the maximum rate where the yearly average is between 15 and 19 and a pension of 50 per cent of the maximum rate where the yearly average is between 10 and 14. Given that the current minimum rate of pension is 92 per cent of the maximum rate, the rates of pro-rata pension payable are reasonable by reference to the low averages required.

These new arrangements coming into effect in November will be of benefit mainly to people who have had broken or sporadic contribution records over their working lifetime and will go a long way towards restoring confidence and credibility in the PRSI system in so far as pensioners are concerned. It will also be of benefit to women, particularly married women, who worked for a number of years before they married then spent a long period outside of the paid workforce and who may have returned to paid employment in recent years. It will help returned emigrants whose work period abroad cannot be reckoned for pension purposes here and also self-employed people who started their employment before 1988 when PRSI for the self-employed was introduced. I am particularly delighted that the measure is included in this year's budget packet of social welfare improvements.

An important change is being made in the rules relating to requalification for unemployment benefit which will have a substantial beneficial effect on the incomes of many workers, particularly those in atypical employment — casual, part-time and so on. Those workers were precluded from requalifying from unemployment benefit until they had a further 13 PRSI contributions paid after they had exhausted their entitlement to unemployment benefit. As a result, until such time as they acquired the necessary 13 PRSI contributions, they had to have recourse to unemployment assistance which is means-tested and which took account of whatever earnings they had from their casual employment. The method by which those earnings were assessed caused particular difficulties in areas where the volume of casual work available is declining. Many workers were entitled to only a [332] reduced rate of unemployment assistance — or indeed no payment at all — on the basis of projected earnings which had not materialised. This matter was brought to the attention of public representatives by various deputations and I am pleased it was addressed in the budget. Prior to the budget the previous earnings of those applying for social assistance were assessed in such a way that they could not possibly qualify for assistance. The detrimental effects of this measure should have been obvious when it was introduced in 1992.

I have been aware of these difficulties for some time and have had regular meetings with representatives of casual dockers, meat processing workers and part-time firemen with a view to ascertaining what could be done to rectify the problem. At those meetings I undertook to have the Department review the existing arrangements in the context of introducing proposals for consideration in the budget. I am pleased the Government addressed this problem by providing for a restoration to the position which applied prior to 1991 for requalifying for unemployment benefit. This will benefit local economies as well as the workers concerned.

A person can now requalify for unemployment benefit by having the necessary 13 PRSI contributions paid at any time after the 156th day of unemployment. This means that where the 13 requalifying contributions are paid between the 156th day — six months — and the 390th day — 15 months — the claimant can requalify for unemployment benefit immediately after the 390 days have exhausted. Rather than having to have recourse to unemployment assistance, a claimant in those circumstances will requalify for a further 15 months of unemployment benefit.

It is expected that at least 5,000 casual workers, currently receiving reduced rates of unemployment assistance, will benefit by an average of £11 per week under the new arrangement. This change will be provided for in the Social Welfare Bill, 1997, which is expected to be enacted before the end of March. The problems that have beset casual workers, dockers and part-time firemen will be addressed in that Bill.

The new arrangements for requalifying for unemployment benefit, allied to the changes introduced last year for casual workers whereby an unemployed person who works for up to three days a week may, subject to his or her earnings level, qualify for the full rate of unemployment assistance for that week, will improve significantly the quality of life of casual worker, and put an end to the lie that one is better off on social welfare than at work. All our efforts must be directed at ensuring those at works stay at work and those on the live register are given every encouragement and incentive to get back to the workforce.

Another pro-employment measures introduced in the budget relates to the back-to-work allowance scheme. This scheme, which provides social welfare recipients with a reducing level of payment [333] over three years while they re-establish in the active labour force, whether in employment or self-employment, has proven successful. Under the scheme we are providing for an increase of 5,000 places, from 17,000 to 22,000, and approximately 1,000 of the new places will be earmarked for people on disability allowance.

To further enhance the scheme, the technical assistance fund — an important element of the service available to participants — is being doubled from £600,000 to £1.2 million, and a further £500,000 is being provided towards the extension of the loan guarantee fund to enable credit unions to provide low interest loans to recipients of the allowance.

We are also establishing a special fund which will provide financial support for projects aimed at helping the unemployed return to work. Such projects include intensive guidance and training courses for the unemployed. A sum of £300,000 is being allocated for this purpose in 1997. Deputies may recall that one of the measures introduced last year provided for unemployed people returning to work to continue to receive child dependant allowance for a period of 13 weeks. This measure will be extended to additional categories, including community employment participants who move directly into employment or who take up employment under the Jobs Initiative and people who move directly from the live register to work under the Jobs Initiative.

The role of the voluntary and community sectors in enhancing the quality of life for people dependent on social welfare and in enabling them to better their circumstances cannot be undervalued. The Department of Social Welfare has taken a lead for some years in supporting local self-help and community development initiatives. I have been privileged to witness the fruits of these efforts at first hand and I am delighted the budget is providing additional resources, to the tune of £1.3 million, for this sector. This increased provision will bring the total allocation for 1997 for voluntary and community services to approximately £10.7 million.

I will deal briefly with some of the other notable improvements in social welfare announced in the budget. The budget provides for an increase of £3 per week in all the personal payments and an increase of £1.50 per week in all adult dependant allowances. In percentage terms, this means an increase of between 4 per cent and 4.7 per cent for various schemes at a time when inflation is expected to be approximately 2.2 per cent. Some years ago Government could only give increases in line with or below inflation, which did not register a net improvement for the recipient.

The budget also provides for the allocation of resources towards further enhancing the value of child benefit. Following the substantial increases provided for in the past two budgets, the primary concern this year is to target large families who would generally be at greater risk of property. This [334] is being achieved through an increase of £1 per child per month for the first two children and £5 per child for the third and subsequent children. The cumulative effect of increases in child benefit is illustrated by the fact that a three child family will have more than doubled their child benefit in the lifetime of this Government.

The dedication of resources towards child benefit reflects the approach recommended by the Expert Working Group on the Integration of Tax and Social Welfare, whose final report I launched last June. I am pleased the budget also takes account of a number of other recommendations made by that group, notably the improvements in family income supplement and the introduction of a tapered adult dependant allowance. The budget has provided incentives for people to take up employment rather than remain on social welfare. It provides for significant improvements in the family income supplement with a view to increasing a return to work in families with children. The income thresholds governing entitlement to FIS are being increased by £10 at each point. This will give virtually all current recipients an increase of £6 in their weekly payments. FIS entitlements will be determined on the basis of gross earnings, less PRSI contributions, levies and superannuation contributions.

Another crucial reform in the budget relates to the property and unemployment trap which existed because of the way the adult dependant allowance and half of any child dependant allowance is withdrawn once the earnings of the spouse of a claimant exceed £60 per week. The Government has made strides towards stripping disincentives to employment from the social welfare system. The measure being introduced to provide for a trapered adult dependant allowance is a further demonstration of the Government's commitment to ensuring the social welfare system acts as a springboard into employment rather than leaving people with little option but to remain dependant on social welfare.

Many Deputies will be familiar with the negative aspects of current treatment of the earnings of a spouse of a social welfare claimant. For example, where the spouse of a person claiming unemployment benefit earns £60 a week, a £1 increase in the spouse's earning leads to a drop of £38.50 in the weekly rate of unemployment benefit payable. The budget provides for the introduction of a trapered withdrawal of the adult dependant allowance in the case of recipients of unemployment benefit, unemployment assistance, disability benefit, disability allowance and pre-retiremen allowance. This measure is expected to benefit almost 10,000 families in which the dependent spouse of a social welfare recipient is in low paid employment. These families will gain, on average, about £19 per week. We intend to extend these new measures to the other social welfare payment schemes, such as invalidity, retirement, old age and blind pensions, at an early date and to further improve the way in which the tapering operates.

[335] The budget provides for real increases in the living standards of those who depend on social welfare. It provides enhanced supports for families, unemployed people, pensioners, the ill and the disabled. Above all it seeks to ensure that the fruits of our successfully managed and thriving economy are shared by all. The cost of the social welfare improvements in the budget is £114 million this year and £215 million in a full year. These are the largest amounts ever provided in a budget for social welfare. Over the last three budgets the Government has provided almost £590 million for social welfare improvements — a clear commitment to social protection for those who are unable to look after themselves and for those marginalised and excluded from making a full contribution to society.

I listened with interest and scepticism to the contradictory messages from the Opposition parties. On the one hand, I am amused by Fianna Fáil's suggestions that this budget benefits the better off in society. On the other hand, the Progressive Democrats say it is a budget hijacked by the Labour Party and Democratic Left and that they have great pity for Fine Gael's lack of influence on the budget. The budget incorporates the combined wisdom of the three parties in Government and a great measure of the input of each party is reflected in it.

The Minister for Fianance was presented with a unique opportunity this year. He could have followed the calls from the Opposition and gone for a “free for all” budget and injected huge amounts of money into the economy. Such a strategy has been practiced in other jurisdictions with disastrous results. The Progressive Democrats drew a comparision with Germany, although very different economic circumstances exist there. The measures needed in the two economies are totally different, a fact which seems to have escaped the thinking from that quarter.

Debate adjourned.


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