Thursday, 2 December 2004
Dáil Eireann Debate
The Taoiseach: Yesterday’s budget presented by the Minister for Finance is a budget for real social inclusion. It shows how a strong economy can be coupled with real social advance. Wealth cannot be taken as a given. It has to be continuously generated and renewed. When it is, the State can play its role in redistribution in order to foster the stability and social cohesion that are so necessary to underpin growing prosperity.
There are four main headlines: the consolidation of rapid economic progress on a sound non-inflationary basis, which supports a further net growth in jobs; a major rolling programme of multi-annual investment in essential physical and social infrastructure; a marked improvement in social services, with an emphasis on helping those at a disadvantage, particularly people suffering from disabilities; and making the tax system fairer for those on low and average incomes.
Our economic performance has been by any measure outstanding. We have come through a difficult period in good order. Unemployment, to the astonishment of many economic commentators, remained below 5%. The danger of rising inflation was brought under control with the help of the social partners. However, it is still the case that the level of costs we now have leaves us with little margin for error.
The public finances are in excellent order. Revenue has exceeded target by an estimated €2.3 billion, thanks to higher growth and effective tax collection. Rarely, if ever, has an outgoing Minister for Finance been able to leave his successor a more positive legacy. I pay full tribute to the outstanding contribution, which was to the benefit of us all and which will long be remembered, of Charlie McCreevy during his years in the office of Minister for Finance.
By any standards, a general Government debt-GDP ratio of 30%, the second lowest after Luxembourg in the eurozone, and a projected general Government deficit of only 0.8% of GDP, after an unexpected surplus of equivalent proportions this year, is robustly healthy. Many of our EU partners would dearly love to be in even half as comfortable a position. We can look forward to GNP growth in 2005 of the order of 5%, an average inflation rate of 2.5% and a continued increase in employment of approximately 35,000.
From a longer term perspective, the gains have been enormous and have been sustained. Since 1997, employment in Ireland has grown by a phenomenal one third or well over 400,000 additional jobs. That achievement is closely connected to our success in attracting overseas investment. We have moved from only 40th place in the international ranking for overseas investment in the 1994-96 period, to a remarkable fourth place today. Ireland was unique among OECD states for attracting increased inward investment last year. Recent growth has also been generated by rising demand in the domestic economy.
Our strong performance resumed this year, despite international conditions. Employment grew, with 43,000 new jobs in the 12 months to last May. This represents growth of 2.4% and reflects GDP growth well in excess of the European average. Ireland is growing at twice the average for the euro area. As a result, instead of contemplating cutbacks, we are able to continue to develop our public services and invest heavily in our infrastructure without further tax increases.
We are investing almost 5% of GNP in transport, roads, housing, schools and health care. This is twice the European average for public investment. Across the full range of public spending, the resources made available by economic growth will enable us to increase public spending up to three times the European average, without compromising our fiscal stability or adding to inflationary pressure. Most sensible people will accept that a 9% increase in gross public spending in 2005 is close to the maximum consistent with financial prudence and is as much as we can manage in one year. The underspending this year is also a factor in magnifying the apparent increase. Solid sustained progress will deliver infinitely better results for everyone than stop-go policies caused by impatience and trying to do too much too quickly. Even where there are undoubted needs to be met, improvements in capacity and facilities have to be phased in.
We all recognise the importance of economic consistency and stability for confidence and investment. We have avoided as far as possible placing extra burdens on employers, employees or the farming community. We have targeted those factors which will secure our living standards and competitiveness into the future, for example, investment in high value-added industries, such as pharmaceuticals and the software sector. We have incentivised and invested heavily in research and development to underpin higher value-added activity across the economy.
We have encouraged unprecedented output from the housing sector. We are well advanced in the process of transforming our road and public transport networks, the benefits of which are now coming on stream thick and fast. This has delivered real gains for the whole of society. It has been made possible in large measure by the very fruitful social partnership arrangements, which have seen a strong measure of agreement between the Government, employers, trade unions, farming organisations and the community and voluntary sector. They have recognised, as has the Government, that only strong and sustainable growth, facilitated by a consistent policy framework, will generate the resources required to address our social and developmental needs. There is no credible alternative, or foreign model, to the hybrid one that we have developed here in recent years, tailored to the needs of our situation.
The resources made available in the Book of Estimates for the development of public services are a vindication of our approach. Without repeating the main points made by the Minister for Finance and other colleagues regarding the details of increased provision, it is worth recalling the scale of additional allocations. There is an increase of €915 million or 9% for health and an increase of €530 million or 8% for education. Total expenditure on health, education and social welfare now accounts for a little over two thirds of current spending.
The value of social inclusion measures announced yesterday exceeds the cost of the income tax measures by almost €200 million. Such a focus continues a clear and consistent trend that began the day I first led Fianna Fáil and the Progressive Democrats into Government. If anyone doubts that, I suggest they compare the level of employment and unemployment in 1997 with that today. They should compare the level of pensions and child benefit and the substantial real increases in welfare payments. We are long past the time when social welfare payments were pitched around the rate of inflation, be it to compensate for the year past or the year to come, which resulted ten years ago in a miserly £1.80 increase in old age pensions, as part of an exercise in so-called socialism that excluded the old. The economic and social outcomes demonstrate beyond doubt that social progress and competitiveness gains can be pursued in mutually reinforcing ways.
Our tax strategy has been one of the important ingredients in this success story. Since 1997, approximately €6 billion has been applied to reducing the burden of taxation. That has been achieved in such a way that €20 billion has been generated in additional day-to-day spending and a further €4 billion for additional public investment. This additional revenue has been generated at the same time as the average tax rate for nearly all PAYE workers has been falling year on year.
The total tax levied on the average industrial wage has fallen from 27% in 1997 to just under 17% following yesterday’s budget. This reducing burden has been implemented with a clear eye on the distributive impact. The share of the income tax yield from those on or below average industrial earnings has fallen from over 14% in 1997 to less than 6% in 2005, following the budget. Our decision that those on the minimum wage will be fully outside the tax net as a result of the budget measures represents a landmark development. Through the confidence generated by the strong commitment of the Government to maintain our existing standard corporation tax rate, as well as a capital tax regime that generates activity, we can continue to maximise our revenue from these sources, while maintaining a low tax burden on those on modest incomes.
The measures contained in the budget mean that we have met the expectations of the social partners that there would be significant real increases in take-home pay, when the combination of tax and pay changes under Sustaining Progress are taken together. Together with the anti-inflationary strategy on indirect taxes in this budget, we are creating the conditions for moderate wage growth in the period ahead. This is of real assistance to employment.
The personal taxation tables in this year’s budget booklet speak for themselves. They show a focus on equity. They show the benefits of tax relief concentrated on low and middle income earners, and on the largest segments of the workforce. This is a budget for hard working citizens, both men and women, and it continues a trend since 1997 of falling average tax rates.
Equity in the tax system is a legitimate concern of compliant taxpayers. An extremely vigorous pursuit of tax evasion is taking place, which yielded an extra €650 million in the Exchequer this year and will yield an expected €200 million, at least, in the coming year. It is not acceptable that even a few of the wealthiest who live here and use public services like the rest of us are able to arrange their affairs as to pay no income tax contribution whatsoever.
Many reliefs and exemptions are of benefit to a large number of taxpayers, such as mortgage interest relief and exemption of the family home from tax. Yet many property incentives have been instrumental in transforming the physical appearance of our towns and cities and tackling dereliction. Most of them will expire in the next two years and the tax base will be broadened as a result over time. Where incentives are unlimited and open-ended, they are clearly open to question. It is important that Ireland remains a home to success in many different fields and an attractive place for capturing mobile investment and enterprise.
I regard housing policy as particularly important. We have had significant success in increasing housing output to close to 80,000 housing units this year. There are genuine concerns about affordability for young buyers. The modifications in stamp duty applied to second-hand housing purchased by first-time buyers as well as the increase in rent relief on private accommodation are intended to ease housing costs for those likely to be most affected.
The Minister for the Environment, Heritage and Local Government is determined to give new impetus to the social and affordable housing programme, as provided for in the Estimates, and will seek the active co-operation of local authorities in overcoming, in some cases, the hesitation of builders.
A particular emphasis in this year’s budget is on the most disadvantaged individuals and families in our society. In its totality, it is a powerful statement of commitment to the welfare of those in greatest need. The benefits of the changes are targeted at those on the lowest income levels, whether at work or dependent on State support. Our ability to compete in the labour market will be strengthened by recognising that a competitive economy is the essential enabler for an inclusive and cohesive society based on full employment or the nearest approximation to it.
Over the past eight years, the Government has directed huge efforts and resources towards the less well-off. The introduction of the national minimum wage and the achievement of close on full employment testify to policies that are targeted centrally at the care and welfare of our people. While clearly great progress has been made, I have always acknowledged that not everyone has benefited in full measure from the growing national prosperity. That is why a clear focus on interventions in favour of the most needy permeates this budget.
I am very proud of our achievements on child benefit and old age pensions. Building incrementally on the significant increases of more than 270% since 1997 until yesterday, child benefit will rise by €10 per month for the first and second child and €12 for the third child and subsequent children, bringing the respective totals to €141.60 and €177.30, which are close to target.
We have an equal concern too for the older generation. All our budgets since 1997 have included measures to improve the income and situation of those on pensions. At the last general election we promised to increase the State pension to €200 per week. Last year’s budget provided for a €10 per week increase while this year’s budget provides for a further €12 rise, showing clearly that we will deliver on this commitment. There is another substantial rise in the level of tax-exempt income for pensioners, up to €33,000 for a married couple. The issue of medical cards to all those over 70 years was to ensure that they would have peace of mind, without having to worry about the possibility of rising and unquantifiable medical expenses. Major progress has been made on a number of fronts over a short period.
A particular effort has been made in this budget to address the needs of those on the lowest rates of social welfare. They have seen real increases in recent years somewhat below those of others. The increase of €14 per week, four times the expected rate of inflation and a rise of 10%, is a significant step to enable recipients to live life with dignity, in line with our commitments under the national anti-poverty strategy and Sustaining Progress.
Some valid concerns expressed last year regarding particular social welfare changes, for example, rent supplement and funding of crèches, have been addressed by the Minister for Social and Family Affairs, Deputy Brennan.
The impression has been given in some quarters that nothing has been done for carers. Carer’s allowance increases by €14. The income disregard has also been raised, together with a €1,000 increase in the respite care grant, from which 9,000 new recipients will benefit.
Among the most vulnerable in our society are persons with a disability. We reached a watershed in Ireland’s response to the needs of our citizens with disabilities when the Government launched the national disability strategy last September. A comprehensive legislative programme was announced to give practical effect to the needs of those with disabilities. The Disability Bill provides for the objective assessment of need and statements of service entitlements. The Comhairle (Amendment) Bill provides for an independent advocacy service. The six outline sectoral plans demonstrate how public policy and services will enhance the quality of life of those with disabilities in a number of critical areas of everyday life.
The resources of €2.5 billion being allocated next year for disability specific services represent an 11% increase on the 2004 figure. This shows the Government’s commitment to providing high quality services and supports for people with disabilities. In the health sector, extra funding and more than 1,000 new front line staff will be used for services covering intellectual disability, physical and sensory disability, mental health and adapted accommodation. Provision will also be made for teachers and assistants for special needs pupils and special school transport schemes. The budget has gone beyond this unprecedented level of increased expenditure by putting in place a multi-annual current and capital programme for high priority disability support services.
The new framework emulates the highly successful approach announced in the previous budget regarding capital expenditure. However, uniquely, it also extends to current spending, reflecting the Government’s determination to achieve long awaited real and lasting improvements in the lives of people with disabilities and their families. This commitment of €900 million cumulative total funding over the period 2006-09 will provide greater funding certainty into the future. It will allow for greater flexibility in the spending of resources and facilitate and encourage more effective outcomes. Above all, it will inject a new sense of confidence and urgency into national policy in its entirety regarding the provision of care and support for those with a disability. The new framework is an enlightened and compassionate move. It gives a robust financial underpinning to the provisions in the Disability Bill.
It has long been my view that a competitive economy can be a powerful enabler of greater social justice and a just and caring society can be a powerful source of competitiveness. That broad philosophy, as distinct from any narrow ideology, forms the heart of our social partnership model. Improving national competitiveness, in the context of our euro zone membership, is a heightened challenge demanding special vigilance. Maintaining our relative position and promoting improvement are about more than growing business and trade, important though they are, they are also about protecting jobs, providing increased financial security for families and promoting price stability.
The framing of this year’s budget was guided by such core aims. First, the budget maintains a sustainable balance between expenditure growth and revenue growth. Second, the taxation measures will assist non-inflationary economic expansion. Third, the investment commitments already announced, especially on infrastructure and high value activity such as research and development, will continue the priority objective of raising innovation and competitiveness.
This time last year the Government introduced multi-annual agreements on capital spending. That approach has worked well, especially in the management and planning of large-scale investment programmes. For next year alone the cash available for investment, at almost €6.3 billion, will be 20% more than what has been actually spent this year.
The 2005-09 capital envelope provision of €36.3 billion and the proposal to move to a ten-year envelope for transport mean that in the areas of transport, communications, education and the environment, Ireland will continue to move rapidly beyond the redress of serious infrastructure deficit trends towards the achievement of world class facilities. The baseline can always be adjusted upwards, as happened in this budget, if economic and financial circumstances allow.
The House will have noted with approval the clear commitment to decentralisation, underpinned by a €70 million provision next year, mainly for office accommodation, in order that a real start can be made. The budget also contains a number of modest but practical and important measures to assist farmers and the business community. The 12.5% rate of corporation tax, which stood at 50% for non-exporting firms less than 20 years ago, will be maintained by the Government.
Commentators at home and abroad continue to look with some awe and much perplexity at the changing Ireland. Huge progress is evident through the length and breadth of the country. I am proud of what this Government has achieved so far in its one and a half terms. I am glad the stage is now set for major incremental progress next year on the economic and social fronts. Particularly gratifying is the confidence and optimism of our people about the future of this economy and society and our quality of life. In that regard, there is no doubt but that the Government’s strategy, reflected in eight budgets since 1997, has played a central and indispensable part.
I know people will see that this budget represents major progress towards fulfilling our contract with them, as set out in the programme for Government. I congratulate the Minister for Finance, Deputy Cowen, on his first inspired budget, one which is guided towards greater social justice, higher household prosperity and enhanced national competitiveness but still rooted in sound public finances. This is social justice in practice, making a real difference to all our lives.
Mr. Kenny: The presentation of any budget based on Government economic policy should contain one fundamental fact, namely, that it is based on a sound value system. It should be clearly understood the proceeds of taxation are the people’s money which the Government holds in trust on their behalf. There should never be an instance or action by Government which clearly indicates, by word and deed, that it treats the public finances as if they were the private resources of a party to be used to achieve party political ends. This has been the code of practice adopted by the Government in a number of instances, in keeping with its basic ethics of getting into and staying in power.
People have a right to expect the Government will discharge its duty and maintain trust fairly and competently and, in so doing, treat people with respect and properly honour commitments entered into. There are times when the needs of people and political objectives and requirements coincide. While this happens in a number of cases, it does not happen all the time in the presentation of the 2005 budget.
This budget presentation is predicated on the political needs of the Government, not on the social needs of the people or the economic needs of the country. It is neither socialist nor left-wing and it is not about caring and sharing. Its philosophy is expediency alone. It is driven by the necessity to respond to the verdict of the people on 11 June 2004. It is, at best, a catch-up budget; a reluctant and rueful effort to address gross Government generated inequality and finally share some of the benefits of our economic success with those who have needed them most and felt them least for the past seven years.
I am pleased for those who have the promise of a little comfort as we approach Christmas. I am pleased for the mothers who, according to aid agencies, deprive themselves of food in order that their children will not be disappointed by Santa’s largesse. I am pleased for people with a disability who are often painted as having the potential to ruin the economy by having the temerity to ask what the rest of us take for granted. I am pleased for hard working people on the minimum wage, whose low earnings do not reflect the contribution they make to the economy and our society. However, their removal from tax liability will be offset by rising stealth taxes and increased service charges. I refer particularly to pensioners who appear to be treated differently from all other categories of social welfare recipients by receiving a lower raise, even though they helped to make this country what it is against all the odds.
Mr. Kenny: I want to accept the offer made by the Minister of Finance yesterday to have an open and consultative forum about the process of budget presentation. I say this because the basic principle of Fine Gael policy on the public finances will be to radically alter the annual budget and the way in which it is presented. This would involve the establishment of an institutional and legal framework to give concrete expression to the idea that the Government acts on the people’s behalf in the disbursement of their hard earned taxation receipts.
It should be the absolute right of taxpayers to know procedures are in place to ensure they get real value for their hard earned euro. These procedures should involve open evaluation of all major expenditure programmes through debates in the Oireachtas prior to the vote upon the budget. The public relations charade that surrounds the publication of the annual Book of Estimates, the budget and the Finance Bill is no substitute for a parliamentary procedure which provides for a thorough and rigorous debate of the spending and tax options facing the Government. If I recognise the Minister’s comments yesterday as a genuine conversion to doing business better in the way this is presented to the House and the country, then I welcome his statement. In so far as ideas or initiatives have been brought forward, Deputy Bruton has outlined a method of dealing with them in his document, Who Cares?
The Government has set a forecast of average growth rates of 5.3% and 8.4% in GDP and GNP over the period 2005-07. The European Commission forecasts euro area growth of an average 2.1% this year. Employment is expected to grow by an average of 1.6%, with unemployment averaging 4.5% in the same period. We do not know, nor can we estimate accurately, the influence of external events, including the strength of the dollar and sterling, the rise or fall in the price of oil and the consequences of global conflicts or actions by terrorists. These are unknown quantities but all have the capacity to seriously impact on the country’s economic performance.
Fine Gael does not doubt the strength of the economy and does not underestimate the importance of a low corporation tax rate of 12.5% which must be defended. It completely understands the importance of a low personal tax regime. After all, these were the ingredients provided by the rainbow Government between 1994 and 1997 which created the circumstances which attracted phenomenal outside investment, creating hundreds of thousands of jobs from which the Celtic tiger evolved. However, this economic strength was generated by the workers and entrepreneurs of Ireland, not just by the hand of the Government. It is those workers and entrepreneurs who deserve the plaudits for our economic strength today.
Despite this strength, the budget has still failed to measure up in a whole range of critical areas which include health reform and the delivery of best services; roads investment; child care, in respect of which there were no imaginative proposals for assistance or relief; the inability to deal with crime and its causes; benchmarking; overseas development aid; decentralisation; competitiveness and the Lisbon Agenda; personal taxation; the provision of social housing; the pressures on family life and the economic and social consequences for the future, as well the provision of real educational advantage.
The budget is disappointing for the PAYE worker. The non-indexation of the tax bands in recent years required their broadening by 10%, yet the Minister has only seen fit to provide for a 5% increase. This means that 50% of all taxpayers will continue to pay tax at the highest rate. The person on the average industrial wage continues to be equated with those on much more significant earnings and will pay at the top rate of 42%. Taxpayers on the minimum wage will now be exempt from taxation, which is a welcome trend. However, they will find themselves back in the taxation bracket next April when increases in the minimum wage take effect.
The overall tax cost to the Exchequer and the Government will only be of the order of €250 million, or less than 1% of total tax revenue. This means that a married couple with two children, earning €43,000, will have an increase in income of €1,188 per annum, or a little over €20 per week. The single mechanic with a daughter, earning €24,000, will have an increase in income of €350, or less than €7 per week. However, these increases will be swallowed up by a whole range of stealth taxes and increased charges coming down the track, because with a 1% increase in assistance to local authorities, it will not be possible for them to provide services commensurate with people’s wishes and in respect of the tax revenue that they pay. This will only become apparent when estimates are concluded by local authorities and claims for increased charges from State or semi-State agencies have either been agreed or allowed.
The Minister has allowed for a review of tax shelters. This is to be welcomed, although it follows from a point where tax shelters, as instruments of investment, have been allowed to continue without review for many years. Tax breaks were introduced by various Governments. I share the Minister’s view that they are designed to stimulate investment but for a particular purpose. Each may have success or failure attached. It is right and proper that every individual makes a contribution to the State. However, in the manner of this announcement, individuals have another year to finalise arrangements, depending on which breaks they avail of. Deputy Bruton has pointed to this situation in recent years and consistently called for change. The review of the schemes and their proposed closure should also examine regulations covering those living in tax exile. I previously called for a new form of patriotism with regard to this issue. Those who continue to live in this country and pay tax, despite high earnings, contribute to and demonstrate such patriotism.
Yesterday evening the Tánaiste commented that the review was not designed to disrupt investment in vital sectors of the economy. We will see what emerges. However, the Revenue Commissioners appear to have difficulty in analysing many of these systems, as evidenced by their inability to give any information to the Joint Committee on Finance and the Public Service. I hope the reveiw will be carried out thoroughly and completely within the next 52 weeks. However, in his Budget Statement the Minister for Finance said it might be late next year before the review regarding stallions and greyhounds was completed. It remains to be seen whether sufficient direction will be given in order that it will be included in next year’s budget.
While these tax breaks have been in place for some time, their examination within the next 12 months does not represent a sudden conversion by the Government. The Minister for Finance, Deputy Cowen, sat at the same table as his predecessor, former Deputy McCreevy. The Government of the past seven years allowed these breaks to continue without any analysis, review or flow of information with regard to who could avail of them. There is a case to be made for artists, a number of whom I met recently with Deputy Deenihan and many of whom do not earn a taxable income in the first instance, as evidenced by the number of applications to the Arts Council which is unable to significantly address claims from them for assistance in respect of their standard of living.
Any special tax allowance scheme should be treated as a spending proposal. A tax shelter or break, as an instrument of investment, represents money forgone by the Government and the Exchequer. Before it is approved, a scheme should be subject to the same rigorous and thorough examination as any other spending proposal. If a system is approved, it should be able to produce evidence on a regular basis of what is happening under it.
The social welfare increases are welcome but will be eroded by stealth charges and increased service charges such as gas, electricity, postage, refuse collection charges, etc. The increase in child benefit to €141.60 does not reach the Government’s own target of €150 by 2005 and there is no increase in child dependant allowance. There will still be more than 120,000 carers in the community who get no recognition and assistance for the love, care and attention they show their kin and the massive savings they make to the State. Deputy Paul McGrath pointed to a statement issued yesterday by the Minister for Social and Family Affairs who now claims to be Minister for the poor.
The Taoiseach said the respite care grant was available to 9,000 persons. In the document detailing the main social welfare improvements the relevant paragraph refers to respite care grant being extended to all carers providing full-time care for an older person or a person with disability, regardless of means, subject to certain employment-related conditions. Does this mean the 100,000 carers in the community can now avail of the grant? If so, why is a figure of €8 million only included in the budget? If this is the case, I welcome it. It is difficult to appreciate the commitment and dedication of the 100,000 persons concerned who receive no recognition or assistance from the State but provide a massive saving by caring for family members. The Minister for Social and Family Affairs must clarify and confirm that what is written in the document is true and that those who provide full-time care for an older person or a person with a disability are now entitled to the respite care grant, regardless of means. I hope it is true and that the Minister clarifies the matter when he holds his press conference. It would be of genuine benefit to many.
The Taoiseach said the day he led Fianna Fáil and the Progressive Democrats into government that one of the areas of concern was the 16 savage cuts imposed by the Government on various recipients of social welfare payments. After Deputy Brennan took a stand having been dismissed from the Department of Transport, he reluctantly went to the Department of Social and Family Affairs. It must be an embarrassment to the Minister for Agriculture and Food, Deputy Coughlan, to find Deputy Brennan at the same table at which they both sat in a previous Administration and imposed the 16 savage cuts which he now says he is in the process of reversing. However, there is precious little evidence in the Budget Statement that this is actually happening.
There is nothing in the budget which deals with the sensitive and critical issue of child care which now costs more than a mortgage. Many families are paying over €1,000 per month. At a public meeting in Lucan a woman stood up and said she got her two children up at 6.15 a.m. each day, dressed them in the car, spent 40 minutes driving to the creche and that it took 50 minutes thereafter to get to work. If there is a crash, a traffic jam or the weather is bad, life is not just difficult, it is chaotic. She said everybody was stressed out and emotionally and physically shattered by the weekend. She also said she did not speak only for herself but for 600,000 more people. This results in serious social pressure on families forced by rising house prices to commute longer distances to Dublin far from their family support systems. The Government has failed to address the issue of child care costs, a critical issue in many thousands of households throughout the country. It is an issue which the Minister for Finance could take up and on which he could set out a series of imaginative and innovative proposals. Other countries, some more than others, deal successfully with this issue. While the Government, given the demographic situation and explosion in the population of the greater Dublin region and throughout the country, has failed up to now to address this situation which affects thousands of families and children, it must do so from now on.
Files relating to the provision of crèches for community places have been on the desk of the Minister for Justice, Equality and Law Reform for eight to ten weeks. Though they were to be signed off on during the first week of November we have not yet seen sight of them. It may be they will be announced as a good news litany.
Mr. Kenny: Yes. The perception of parents is that many of these fine facilities will provide low cost child care places. However, the hidden factor down the track is that these community crèches for which people have worked hard will be rated by local authorities and will have impositions on them for water and other services provided. The perceived cost of a child care place at a reasonable rate will be considerably increased when such charges are imposed.
The Government will grab any innovative ideas thought up by Members of this House. That is what happens when a government becomes jaded, tired and lacking in imagination. Before the local elections, Fine Gael put forward three proposals to assist first-time buyers. The first was the abolition of stamp duty for first-time buyers of second-hand houses up to a limit of €400,000. As was pointed out, no stamp duty will now be paid on properties of up to €317,000. However, beyond that a first-time buyer will pay approximately €10,000 in stamp duty on a second-hand dwelling costing €320,000, and on a house costing €400,000 the charge will be approximately €24,000. There should be a much softer phasing in of that provision otherwise it will give rise to falsification of valuation and will result in under-the-counter payments again seeing the light of day. The Fianna Fáil-Progressive Democrats Government obviously saw value in some of Fine Gael’s three-part programme to assist first-time buyers.
The second proposal suggested the setting up of a specific SSIA-type scheme to assist first-time buyers in putting together a deposit for a house. The third was a front-end loading of mortgage interest relief for the first seven years when payments are at their highest. I support the Taoiseach’s remarks in Sligo last year that there should be more houses built in rural Ireland. While there was no legal basis for that comment, the then Minister for the Environment, Heritage and Local Government had guidelines drafted for one-off rural housing. Unfortunately, while they were prepared by civil servants, the Minister never read them. There are now more than 100,000 observations on the matter which has not yet been finalised.
Members of this House from all parties and none believe that people should be permitted, within reason and with a degree of common sense to build in rural or provincial Ireland. A fundamental criteria that has not been addressed by Government, which has been in office long enough to have dealt with the matter, is not just the issue of size, nature of structure or view, but phosphorous effluent from septic tanks. I do not understand why, if it was possible by scientific means to put a man on the Moon many years ago, the Government has not invested sufficiently in research in this area to allow us to, once and for all, adopt a system to deal with phosphorous effluent to ensure it is not a source of environmental argument or disruption in any shape or form. Science has advanced to the point where this is eminently feasible.
It is not good enough that people returning from places such as Boston, England and so on are unable, because of our problems with phosphorous effluent, to build on land which has been in their family for generations. Despite the fact that there are proprietary facilities of one kind or other, this fundamental issue has not been addressed. It should be addressed taking into account the concerns of young people, particularly those in rural and provincial Ireland where housing remains cheaper than in many of the major urban areas.
I do not agree with the Minister for Finance that the disability sector did not have the capacity to lobby politicians. I recall seeing people in wheelchairs outside the gates of Leinster House on many occasions.
Mr. Kenny: I recall many people from the disability sector coming into the House on many occasions to put their case. The Minister for Finance, Deputy Cowen, sat beside his predecessor, Mr. McCreevy, and the Taoiseach for the past seven years while these claims were ignored. I welcome the Minister’s change of heart or the revelation in Cabinet that the disability sector should receive real funding in the form of an envelope of money from 2006 to 2009, the political effect of which will be that some time in 2006, 2007 or before, there will be a general election at which time the Government or any alternative could do no worse than provide that envelope. The cheque is in the post in that the disability sector has been given a commitment of €900 million for the period 2006-09, though many of the Government’s commitments have not been honoured.
Mr. Kenny: I understand that vetting certificates are required in respect of people with a disability and that many vacancies within that sector have not been filled. One of the serious impositions to employing a person from the disability sector is in obtaining a certificate of vetting from a person working with him or her. That matter needs to be addressed. If there are to be 1,000 extra personnel working within the disability sector, that fundamental release mechanism of validity and eligibility needs to be dealt with.
Taxation and spending have more than doubled in recent years. Borrowing for next year, for the second year in nine years, will be up. People are prepared to pay taxes for commensurate public services but they are not getting them. The Fine Gael Party was wrongly criticised when on the issue of benchmarking it said that one should receive performance, understanding and value for money. I recently visited the neurosurgical unit at Beaumont Hospital where I spoke to a young nurse. She said that while there were 24 patients in the ward at the time and that all was calm and serene, in an instant the ward could become an emergency situation with brain haemorrhage or stroke patients. She also said that the nurses working in the unit, no more than those working in the intensive care unit of the Our Lady’s Hospital for Sick Children in Crumlin, live in a high pressure and stressful situation every day. If they make a mistake, someone dies. The same goes for teachers in seriously disadvantaged areas. The Fine Gael Party’s proposal for equity recognition would have helped the benchmarking process greatly. It would not mean across the board payments to everybody but be based on the performance, nature and specific requirements of the job.
The same applies to universities. Third level institutions are the harbours from which the fleet of expert people for the next generation will sail. While some allocations were made to this sector, serious difficulties are now encountered in third level institutions. Many young science graduates from abroad would come to Ireland to engage in research, development and innovation. However, the laboratories and universities do not have the capacity to deal with them. While Science Foundation Ireland is doing a great job in attracting persons of academic brilliance and research ability, the structure within which it works is inadequate and underfunded. The Minister for Education and Science has said there will be no return to third level fees, which my party supports. However, the financial structures of universities and third level colleges of education need to be addressed. A serious problem is building up in this sector.
The benchmarking process, which the Fine Gael Party was criticised for its comments on, is typified by the situation in Aer Lingus. Mr. Willie Walsh and his management team, who are all public servants, were given a specific remit to turn around an ailing loss-making airline. They succeeded although the brief was not easy when working with various interests such as workers, management and unions. However, for political expediency, the Taoiseach and his Government shafted the management team. Allegations were made that their proposal to shift the company on was based on avarice, which was not reflected in the Goldman Sachs report. If these persons were working in the private sector, they would be highly regarded and remunerated for the specific task they implemented. I know there are difficulties associated with the airline. However, this typifies the underlying philosophy of the Government of getting and staying in power. This Government cannot be trusted to do the job in the public interest.
I listened to the Taoiseach at the UN summit in Johannesburg where, in the full glare of international publicity, he spoke for the Irish people on overseas development aid. As a nation, we felt proud that on the issue of the world’s poor, we could show political leadership. However, the Taoiseach reneged on that commitment and broke his word. In the eyes of the world, statements from the Government cannot be trusted. It is appalling when we, as one country, could do so much more for the world’s impoverished. In research in the health area, of the 1,400 entities produced in recent years, only ten have real relevance to Third World countries where poverty, malaria and AIDS are rife. Of these ten, only two are related to the human condition. The Taoiseach could provide real leadership in a European sense by addressing the issues that really affect the causes of malnutrition and disease in the Third World, especially when the other OECD nations have gone over the hill and far away, so to speak, from what is happening in the Third World.
The budget will make an impact with some people, similar to a new toy. The perception will be that it can do wonderful things, but the gloss will come off it quickly. The initial reaction of a sense of happiness will give way to reality as cost increases take effect in the new year. The fundamental question is, can the Government be relied upon to reform and deliver? Based on its record to date, the answer is in the negative.
The Government did not keep its word on hospital beds, waiting lists, medical cards, school buildings or class sizes. The Minister for Education and Science described the latter as a noble aspiration. The Government did not keep its word on Garda numbers, crime figures, the implementation of justice, infrastructure, the cost of living, the provision of housing or the elimination of anti-social behaviour and its serious social consequences. Why now should people believe the Government? How can the Taoiseach proclaim to the nation that in the next two years, all will change as a new caring and sharing revelation has hit the Government? In Department after Department, portfolio after portfolio, the Government has failed to spend last year’s allocated moneys. If a hospital could not be built last May, how can the Government build it now? How can the Tánaiste, on the day before the Budget Statement, support the private hospital sector? While it is welcome to those who can afford it, Loughlinstown and Monaghan hospitals will be closed under the guise of the Hanly report.
The Government leopard has not changed its spots but has woken up to the fact that it is being hunted by the electorate waiting in the long grass. The people who have had this Government inflicted upon them for the last seven years will take that leopard out of circulation as soon as the opportunity arises.
Mr. Rabbitte: The damage done to the fabric of society by seven McCreevy budgets is very deep. It is only when one sees the attempts by the Minister for Finance, Deputy Cowen, in yesterday’s budget speech to begin repairing that damage that one realises how deep it is. It is untenable to argue that the divisions opened in society can be laid solely at the door of the former Deputy Charlie McCreevy. Fianna Fáil and the Progressive Democrats enthusiastically participated in and boasted about each of his budgets. The depth of the damage they have done is to be seen in the elements of yesterday’s budget that can only be described as representing the brass neck of Fianna Fáil, which for once has outweighed the cold heart of the Progressive Democrats
I do not deny that there are aspects of yesterday’s budget that I support. Neither do I wish to imply that the Minister for Finance, Deputy Cowen, was not making a serious effort to repair damage in some initiatives he took. I will give him the benefit of the doubt. I believe he is in part genuinely motivated by a more traditional republican position than that which motivated his former colleague and a deeper belief in fairness and equality.
Unlike his boss, I have yet to hear the Minister, Deputy Cowen, label himself a socialist. In any event, he has a long way to go before he could make such a claim on the basis of the evidence he presented to us yesterday. The savage 16 social welfare cuts best exemplify the point. While I do not deny that the changes announced to some of the cuts yesterday were welcome, they must be genuine rather than merely cosmetic. The savage 16 cuts were never necessary but were a classic illustration of the Government’s heartlessness. It is wrong of the Taoiseach to say the cuts have been reversed. Of the 16, six have been amended, two have been partially reversed and eight remain untouched. There has been a partial change to the cut in the dietary scheme which the Taoiseach contended in this House several times had never been necessary. The amendment of the dietary, widow and crèche cuts constitute minimal change.
There is a classic Fianna Fáil brazenness about the ease with which the Government has changed tack. Groucho Marx said: “These are my principles, and if you don’t like them, well, I have others.” He also said: “The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.” It is fairly clear which Marx the Taoiseach has been reading in his conversion to socialism. Its brazenness ought to remind us of how often the Government has changed direction during its seven years in office. We must remember the recklessness of 2001 and 2002 when taxpayers’ money was scattered far and wide to win votes and we were told by Champagne Charlie to party on. I heard the Government referred to on the news on RTE last night as the “new, caring, sharing coalition”. I remembered as I heard those words that this is the same Government which turned its back on the poor during most of its first term.
The Government promised the sun, moon and stars to the poor in the run-up to the 2002 general election and immediately broke every one of its promises when the election was over. The Government promised decentralisation to every town and village in its preparations for the European elections but has now abandoned the programme almost in its entirety. Perhaps it is just as well because the programme did not involve decentralisation, which the country genuinely needs, but rather a dispersal of civil servants for local partisan advantage. While it is clear from the details of the budget, the Minister for Finance failed to point out in his statement yesterday that he has been forced to allocate €680 million over the next few years to finance the capital costs of decentralisation. That sum alone would provide every primary schoolchild who does not have one with a warm, modern classroom in which to learn. Such provision would do far more for the towns of the future than the fanciful promises made by the former Minister, Mr. McCreevy, last year.
The constant change of tack reminds us that this is the Government of Deputy McDowell, an economic liberal, and the Taoiseach, a socialist. No one can be expected to believe what they say if it is not nailed down. We are told this is a budget with a heart, yet it ignores the crisis in our accident and emergency departments. The budget ignores homelessness and child poverty and refuses to confront any of the vested interests which benefit to such a significant extent from tax shelters. The budget is entirely silent on the growing child care crisis faced by thousands of young families.
While we should by all means praise those aspects of the budget which deserve praise, we should not be blinded by spin. It represents the bare minimum of what could have been done. The Minister benefited from €2.3 billion more than was projected in tax extracted from ordinary people. I do not know if it is the case that the Department of Finance deliberately made a cautious estimate or, as is more likely, people found themselves paying a great deal more tax than they anticipated. Despite a €2.3 billion overshoot, the Minister for Finance managed to return only €1.1 billion to the people. That represents the modest minimum which could have been done.
While the budget’s social welfare package is no more than reasonable, the tax package is far below what could reasonably have been expected. While everyone on these benches welcomes the removal from the tax net of people on the national minimum wage, ordinary income earners have been given very little relief. This morning’s newspapers bear out the remarks of my colleague, Deputy Burton, last night when she drew attention to those earning in the region of €30,000 to €35,000 who will get very little out of the budget. There is a cruel deception for those being taxed at the top or marginal rate in the way the figures have been presented. As set out in the Budget Statement, the figures seek to give the impression that fewer people are being taxed at the marginal rate than last year. This was accomplished by projecting ahead the number of people paying at the marginal rate on the basis that no changes would have been made now.
The figures as set out in a reply to a parliamentary question tabled by Deputy Burton are different. The table in the Budget Statement forecasts the number of income earners on the basis of what income growth would have been had no budget been introduced. The table suggests 685,000 people would be paying at the higher rate whereas after this budget it is 633,000. According to the reply to Deputy Burton, the real number paying at the higher rate at the end of last year was 614,000. In fact, more people are paying at the top rate than were before the budget. How that escaped the eagle-eyed commentators, most of whom are leading the cheers for the Government this morning, I cannot understand. The Government promised it would leave only 20% of income earners in the top band, which is a long way from the figures as outlined.
We must not forget that yesterday’s budget was motivated by more than simple concern for the damage done to our social fabric over the last seven years. As Deputy Kenny said, it was also motivated by the reaction of Fianna Fáil to the anger and contempt its representatives met in the local and European election campaigns and by the message the Government received from even the most dyed-in-the-wool activists that they were no longer prepared to watch the Progressive Democrats tail wagging the Fianna Fáil dog. Those dyed-in-the-wool activists, with whom I have sympathy, are genuinely unaware that the third generation Fianna Fáil politicians have become more Progressive Democrats than Progressive Democrats members themselves.
The Taoiseach fondly imagines that Fianna Fáil is what he calls “the real workers’ party”. The Taoiseach is wallowing in nostalgia. The only appropriate home for ordinary Fianna Fáil voters in 2005 is the Labour Party.
A Minister for Justice, Equality and Law Reform who arrogantly and continuously proclaims his contempt for the concept of equality, and a set of Fianna Fáil intellectual hangers-on who were either unable or unwilling to confront that dogma, were some of the potent ingredients that have driven economic and budgetary policy for several years. That economic policy is built on a lie. The lie is that the Government is committed to low tax, giving people more choice about what to do with their own money and getting the State off people’s backs.
The Government is not, and never has been, committed to low tax. It is committed to low tax or, where possible, no tax for the rich. To finance that policy, it has consciously and deliberately set out to shift the burden of taxation from direct to indirect, and hidden and other forms of taxation. It has sought throughout its period in office, by using those means, to shift the burden of taxation away from higher-income individuals and families on to lower-income families.
Yesterday’s belated but welcome alleviation for people on the national minimum wage should not divert attention from the very minimalist improvement for lower to middle income earners. The consequence is clear to see. No matter what the Minister tried to do yesterday, he did not succeed in taking modest income people out of the higher tax band. At the same time, he was unable to confront even one of the many tax shelters that favour the rich.
We would be concerned that the review promised will go on behind closed doors. The Taoiseach has conceded now that we have to review these incentives, shelters, schemes and so on, and the headlines this morning were very favourable to him, warning that there are no more hiding places. That is a year away, however, and a year is a long time.
In an article published recently by my colleague, Deputy Burton, she set out the reason this process ought to take place in public and that we ought to reinstitute the taxation commission and ensure that its work is conducted transparently because there is a necessity for us to monitor and assess the value of these schemes as they progress. There may have been a time when some of these schemes generated badly needed economic activity. Some of them helped to regenerate some of our urban areas and some of them are socially desirable, but some of them are not. Some of them have outlived their usefulness and others ought not have been set up in the first place. This review, if it is serious, ought not go on behind closed doors.
A year or so ago the former Minister, Mr. McCreevy, announced grandly, in publishing the Finance Bill 2003 and after widespread public complaint, that he would change the law to require the beneficiaries of tax breaks in respect of stallion fees to begin to make returns to the Revenue — not to be taxed but to make returns. It is an extraordinary country that the Constitution allows some of us not to make tax returns. That was done, presumably, to enable the Revenue begin gathering data on the amount of tax foregone as a result of the tax-free status of stallion fees. Naturally, however, that exercise could not possibly begin before 1 January 2004 and, naturally, it has still not been possible to publish data that would give us an indication of the efficacy of that tax break. We should remember that when we listen to the Taoiseach telling us that the game is up for people who use tax breaks exclusively to avoid paying tax entirely on very large incomes.
There would not have been any focus on this issue, and no reference in the Minister’s speech, had we not forced the information out of Government in the first place. It has known for a very long time about the freeloading millionaires. It had access to published and unpublished information from the Revenue and tax strategy groups. It was not the Government that highlighted this issue, and it is only because Deputy Burton and others have campaigned on it that it has been forced to recognise that it is a problem causing widespread disquiet among compliant taxpayers.
As Deputy Burton pointed out yesterday, however, the stallion fees represent only one of more than 33 totally uncosted tax breaks from which the super-rich in Ireland benefit. There are perhaps 100 such tax shelters altogether, and we do not even know what a significant proportion of them cost. We ought not to forget that a number of them were created by stealth in the past few years, sneaked into the Finance Act as a last-minute amendment, and in some cases never even debated in this House. How can anyone argue that it is reasonable to ask this House to legislate for tax incentives and that we are expected to do so without knowing, even approximately, the cost of the incentives involved?
Despite the amount of information at his disposal, all the Minister could do yesterday was announce yet another review. No action is proposed, despite overwhelming evidence of the totally skewed nature of our taxation system. I cannot remember the number of times, and in how many budget speeches, the Minister’s predecessor said he would shut off the loopholes. When I listened to the Minister yesterday, I reminded myself not to hold my breath.
Let us look at the contrast between the treatment of the freeloaders and the treatment of hard-working families. I referred a moment ago to the inability of the Minister to remove modest income earners from the higher tax bracket. It is important to put the figures on the record. For a year we have been pointing out that 52% of the people paying income tax are paying at the higher or marginal rate of 42%. The failure to index tax bands in not one but two budgets has meant that this has resulted in the biggest stealth tax of them all. According to figures supplied by the Minister for Finance on 4 November, that represents 614,000 taxpayers. According to yesterday’s budget, however, the number of income tax payers paying at the higher rate next year will be 633,740, an increase of just under 20,000. I do not know how the Minister for Justice, Equality and Law Reform will live with that because every time his attention is drawn to it he becomes incandescent with indignation, as only he can. I do not know how the Progressive Democrats will live with this, and I am glad their leader is in the Department of Health and Children because they will need counselling after they appreciate what happened yesterday.
By way of contrast, the Minister has taken people on the minimum wage out of the tax net. That is welcome but by the end of next year, most of them will be paying tax again. He has given reasonable increases in social welfare across the board. That is welcome too but at least some of the people who depend on social welfare will lose their medical cards as a result and many of them will face higher rents and utility charges, and higher stealth taxes across the board. The Government gives and the Government takes away again.
If one needs proof of that assertion, even the most cursory glance at the stealth taxes and increased charges which have been introduced since the last election provides it. As we know, the real impact of these stealth taxes is borne most heavily by those on low incomes, particularly those just above the qualification thresholds for the various social welfare payments.
Consider the stealth taxes in the health sector, for example. A Government which promised in 2002 to make health care more accessible and more affordable for all has hammered health consumers with a range of increased charges for the most essential and basic health services. In 2002, when the Government came to office, the drug refund threshold for prescription drugs was €53 per month or a maximum of €636 in one calendar year. Today, the monthly threshold is €85, a 37% increase in two years. The impact of this stealth tax on low income families and those who will get the new yellow pack doctor visit cards is they will pay up to €384 extra per year for prescription drugs. Low income large families, who are marginally above the income limit for a medical card or even the yellow pack card, will pay hundreds of euro extra for drugs but the Government tells those who will get free GP care that they can go to their GPs for what the Tánaiste refers to as reassurance.
When the Government came to office in 2002, the cost of paying a visit to accident and emergency without a letter of referral from a general practitioner was €31. It is currently €55, almost a doubling of this charge in just two years. This is a particularly heartless stealth tax. It is a punitive imposition on people with a medical emergency who may be in pain or suffering and who need urgent assistance. The cost of spending a night in a public hospital bed has jumped by 32% since the last election. A ten-night stay in hospital will cost a public patient €550, if one is fortunate enough to get a bed, a chair or a recliner. Medical insurance has spiralled under the Government. Insurers have stated they will further increase their charges following the announcement last week that a private bed will cost 25% more. VHI rates have doubled since 1997. What the Government gives with one hand it takes away with the other.
The Government should ask the ordinary household on an average weekly income if it believes it is living in a low tax economy. Such households have been pummelled by major increases in utility bills, all of which have been sanctioned by Government. ESB first-time connection charges have increased by €200. ESB bills increased by 14% in 2002, 8% in 2003 and 6% in 2004 and they will increase by 9% shortly. Eircom line rental charges have increased by 6.3%. VAT on fuel and other goods and services went up by 1% in budget 2003. The television licence has increased by €45 since 2002 to €152. Gas bills are up 9.1% since February 2003 and will increase again by 11%.
Which, of all the areas, has the Government decided to ignore? Why has a Minister for Finance, apparently determined to make amends to the people most ignored by his predecessor, decided to ignore people who struggle to keep a roof over their heads? The thousands of people on housing waiting lists, most of whom are there as a result of Government policy over more than seven years, have been largely ignored in the budget. While there is some good news for first-time buyers and people living in private rented accommodation, people who cannot afford their own accommodation have been told there is no place for them in the new republic. We know that, long as the waiting lists are, they are often not long enough to include people who are entirely homeless. They too will have to wait for another year.
The failure to improve eligibility for the carer’s allowance in a meaningful way is a shocking blow for the tens of thousands of carers who do not qualify for the allowance. There is a modest, but nevertheless welcome, increase in the respite care grant but this will only affect about 9,000 new recipients. There are 150,000 carers, probably more, and most have no respite payment or support. It is appalling that the Minister has made only puny adjustments to the qualification criteria for the carer’s allowance — a €20 increase in the income disregard. The vast majority of carers will continue to get no adequate social provision from the Government as a result of the budget.
The Government has failed to increase child benefit for the third successive year in accordance with its election promise of 2002. Child benefit will increase by €10 when it would have taken €18 to keep the Government’s pre-election promise in this area. What about children, especially children in poverty? Why was it not possible, surrounded by money as the Minister is, to do even a little more? This is the third year in a row the Government has failed to meet its commitments on child benefit. The complete failure to improve child dependency rates in a time of plenty will mean few of the 90,000 children estimated to live in poverty and hunger in Ireland will see new hope.
The decision to ignore the need for increases in back-to-school allowances will mean that a small but important instrument for breaking through the cycle of poverty will continue to be seriously underfunded. I refer to the sheet circulated by the Minister for Social and Family Affairs regarding the “savage 16” cuts. It is remarkable that the money and budgeting advice service, which does such good work, has been given a once-off allocation of €700,000 for the relief of distress nationally. That would not make much of an impact in my constituency or the Taoiseach’s. However, this once-off allocation is being made in a country that is coming down with money and against the background of the annual report of the Society of St. Vincent de Paul, which highlights that it dispensed €32 million last year and had more callers this year than last year and more last year than the previous year. Whatever about the performance of the economy, only €700,000 is allocated to MABS for the relief of distress nationally.
The same is true when it comes to child care and early childhood education and development. Increasingly, this issue lies at the heart of our social and economic development. There are thousands of families forced to live on social welfare because there is no other choice. The path back to work or the choice of completing an education is blocked by the cost of child care and, in too many cases, by its quality, yet the Government has absolutely nothing to say about it. The failure to develop a proper national child care and early education policy, which guarantees affordable and high standard quality of care and development, ought to have been a central goal of policy in a rich country looking to the future. It will instead go down as one of the Government’s greatest failures.
I welcome the proposed disability funding. I acknowledge this is an area in which the Minister for Finance has a good track record. The track record of every one of his colleagues in this area has, however, been shameful. We have had years of lip service and neglect, and promise after promise has been broken. The plan that the Minister for Finance put in place when he was in the Department of Health was abandoned the moment he left. For that reason, if for no other, people with disabilities are right to demand that they should be given a key role in the planning that must go into the development of services from this point on. Distributing largesse to service providers, without accountability or guarantee that the money will be focused where it is most needed, is not good enough. I call on the Minister to ensure that there will be central co-ordination of the development of proper services and the building of much needed capacity in the education and caring therapies and that people with disabilities will be involved in the co-ordination.
The Minister is wrong to make the claim that the Government is acting only because people with disabilities and their families are unable to make the case for themselves, as Deputy Kenny stated. The Minister should have acknowledged the guts with which many hundreds of people in the disability movement have campaigned and lobbied for years for this recognition. If they had no political clout, it was because they had been dealing with a Government that had to be forced to listen.
The absence of any commitment to meaningful statutory measures, as evidenced by the shameful Disability Bill, means that the disability lobby must not go away. A multi-annual package looks great on paper. Delivery will demand constant pressure and involvement. Now is the time to make people with disabilities full partners in the development of policy and practice.
I cannot conclude before referring to one other promise that I had hoped the Minister would return to yesterday. This was made by the Taoiseach to the poor of the world and which was broken on publication of the Book of Estimates. It is one thing for the Taoiseach to make promises on his behalf and that of his party to the people because, when he fails to deliver, as he has so frequently failed, the people can eventually hold him to account. However, when he made a promise to the United Nations millennium assembly to increase overseas development aid to 0.7% of gross national product, he did so not on his behalf or that of Fianna Fáil, but on behalf of the Government and the people. He has already enjoyed the benefits of that promise. He has been feted throughout the world by world leaders and rock stars alike. He has lectured other world leaders in Johannesburg on how they should follow suit. He also won a resounding victory in his campaign for election to the UN Security Council on the back of the ODA promise. Now, with scarcely a blush and no apology, he has reneged on the promise made on behalf of every Member of this House and every citizen to the poorest people in the world, the hundreds of millions in Africa who live on less than a dollar a day and who lack education or even the most basic health care. I do not believe that the Irish people hold the concept of truth in such contempt. I do not believe that the Irish diplomats who go shamefaced to their work every day in the knowledge that the promises they made have been broken by others hold the notion of truth so cheaply.
The budget should have contained an allocation of additional funding and a real commitment to legislate so that future ODA payments would be automatically calculated and paid into an ODA fund in a manner akin to the procedure with the national pensions reserve fund. The fact that it did not do so ought to be one of the things of which this Government should be most deeply ashamed. This is, however, a Government that knows no shame. It is capable of facing in as many different directions as the clock on the Shandon tower in Cork, a clock that was known for years as the four-faced liar. It is a Government capable of changing policy at a whim.
For that reason and despite the good points of the budget, I reiterate what my colleague, Deputy Burton, said yesterday. I am not amused by the Taoiseach persisting in the fairytale of his socialism on radio this morning and saying that he is different from the other socialists here who would wreck the economy, who are opposed to business and would destroy our prosperity. The last socialist I recall having the opportunity to wreck the economy was my colleague, Deputy Quinn. He handed over to the Taoiseach an economy that was creating 55,000 jobs a year, more than 1,000 jobs a week, and growing at 9.7%. Despite this, the Taoiseach has gone on public radio and given interviews that said he inherited an economy with no growth. The growth figure for 1997 was 9.7% and 55,000 jobs a year were being created. Inflation was also lower than in the average European country. If that is wrecking the economy, I would like us to get back to that position because the economy was on a more even keel and we had a fairer society than the one the Taoiseach has created over the past seven and a half years.
As Deputy Burton said, this is a Government of goodies, not of strategy. It is a search for popularity rather than the development of a vision. This is an election budget and, for my part, the election it is meant to influence cannot come soon enough.
I notice the Taoiseach was out early this morning throwing shapes at the multi-million euro tax dodgers in our midst, only 12 hours after he and the Minister for Finance had merrily waved them on with their tax-dodging activities for another 12 months. What is the real policy of this Government with regard to the tax-dodging activities of the very wealthy? For almost eight years the Taoiseach has stood over the policy and argued against me when I demanded closure of tax-dodging loopholes. He defended them and more or less argued that these people had to be bribed to stay in this country and be good enough to create jobs.
The Minister for Finance has announced a review of certain tax exemptions, but will that review include those multi-millionaires who jet and helicopter their way from tax exile to tug the Taoiseach’s sleeve when, like an Arabian prince, he sets up his tent at the Galway races each year? Will it include those patriotic exiles who love their country so much they connive to be out of it for half of the year to save a fortune in taxes which, if they did pay, would assist our health services and provide badly needed investment in hard-hit communities and other areas of social investment? These patriots front appeals to the public for the most deserving of charities, but if they stayed and paid their taxes instead, the charities might not be needed because funding would be there for them.
The Taoiseach was out again this morning proclaiming his left-wing credentials. Like a born-again evangelical, he cannot hide his new-found light under a bushel. He must keep taking it out to show us. I regret that he has left the Chamber because I had one or two further questions to put to him. As the House knows, two weeks ago he badly failed the test I set him. I noted with interest that the right-wing republican Senator McCain, friend of George Bush, thanked the Taoiseach publicly this morning for his assistance with the imperialist invasion of Iraq, in particular the use of Shannon Airport, a most unsocialist act.
The Taoiseach’s new version of socialism is that multinational corporations and the rich create wealth and he can then take crumbs from their table to distribute to the huddled masses. The lesson I wanted to give the Taoiseach to end this controversy and his claims is that it is the labour by the hands and brains of working people, and only that, that creates wealth. That labour adds value that produces goods and services. Billionaire shareholders can sit forever and a day atop their corporate towers of concrete and glass, but they will not make a penny if the workers do not show up to create the surplus value which they then make off with in the form of profits. I recommend to the Taoiseach that he should read a simple but illuminating pamphlet, of its time but of great relevance today, entitled Socialism Made Easy by the great James Connolly. As he put it, workers do not want the crumbs, they want the bakery so that its produce can be equally available and used for the benefit of all.
Can we draw a line under the Taoiseach’s claim of socialism? We know his caper in going native was induced by an uprising of the people last June. Obviously, the great man decided he should walk among them for a period. I suggest to him that he has had his walk on the wild side. Like anyone who takes temporary flight from reality, it was probably an exhilarating experience, but the Taoiseach must acknowledge that, as Prime Minister, his and the Government’s main role has been and is to keep the State as a safe haven for world capitalism, one from which the transnational corporations have repatriated a breathtaking €150 billion in the seven and a half years since the Taoiseach came to power with Fianna Fáil and the Progressive Democrats.
In view of his record, we cannot take seriously the claims of the Taoiseach in regard to closing tax loopholes. If I am not mistaken, he pioneered the infamous 1993 tax amnesty which not only multimillionaires and business people, but also crooks and criminals were able to avail of under a shroud of complete secrecy.
Predictably, the bulk of comment and analysis following yesterday’s budget got tied up in the myriad of details involved. Unfortunately, the budget was treated in the press this morning more or less as a stand-alone entity. This cannot be done. This is the eighth budget by this Fianna Fáil-Progressive Democrats coalition Government and comes after seven and a half years in Government. We have to consider its impact and what flows from it in the context of overall Government policy.
This has been one of the most right-wing Governments in the history of the State and in terms of its economic policies has been by far the most right-wing. The Government has implemented policies based on the right-wing neo-liberal philosophy being pushed by governments all over Europe at the present time at the behest of the lobby groups formed by the major multinational corporations based inside and outside the European Union.
The Government has ruled primarily for the very wealthy elite in society. Unfortunately, it is not publicised and sufficient research is not done. In 1987, when the Taoiseach’s mentor, Charles Haughey, was in power, the fraud of so-called social partnership was introduced. If we examine what has happened to the wealth of our society in the meantime, the proportion of wealth created in the State going to the workers has reduced considerably while the proportion going to profits, interest and rent of the capitalist and landlord minority has hugely increased. There is no question whatsoever about that.
The protestations of the Taoiseach to protect Aer Lingus and its workers could easily mislead us. The Government has privatised more public enterprises than any Government in the history of the State. Irish Ferries workers have been forced out on strike today because the company wants to replace their permanent jobs with low paid yellow pack labour drawn from groups most vulnerable to exploitation. This has been made possible by the policies of the Government. In addition, post office workers are forced to take industrial action to protect the future of their jobs.
The Government wants to be commended for removing stamp duty from secondhand homes. An example was given of a secondhand home worth €250,000 where the stamp duty would amount to €7,500. Surely the most salient point here is that that home would have only cost €60,000 when the Government came to power seven and a half years ago. It was because of unbridled profiteering by speculators, which the Government refused to lift a finger to stop, that that home is now four times the price.
The Government has now come up with this glass of eyewash of removing stamp duty to pretend it is sympathetic to those who are priced out of a home. It is obvious what will happen, the speculators and auctioneers will engineer a rise in house prices to soak up the €7,500 for their own profits, as happened previously. A radical socialist would go to the heart of the matter; stop the source of profiteering, which is speculation on building land, bring land into public land banks and let it out for building on the basis of proper prices being charged for housing.
The Government stands over a wide array of stealth taxes that are inflicted on ordinary working people. The bin tax in Dublin is one of the most staggering examples of this. It has increased from €195 a year to a potential €340. As has been said in regard to child care, there is no recognition of the stark reality of life for tens of thousands of parents on the treadmill of trying to make their mortgage payments by working all hours of the day and night. No assistance has been provided for such people.
It is clear from the statement by the Minister for Finance that the Government is helpless in the teeth of the forces of the world capitalist economy. It is entirely dependent on its vagaries and on the international investors and financial speculators. The Government has increased the dependency of the economy on this sector in recent years by its dependence on foreign direct investment.
The US economy and the current growth of the Chinese economy is dragging the world economy along. The US economy is based on unprecedented levels of deficits in the federal budget and in its balance of payments with the world as well as unsustainable private and public borrowing. There are signs that China’s property investment bubble is reaching its limits. When the inevitable shock comes in the next few years, the Fianna Fáil-Progressive Democrats Government will be helpless and then the workers, social welfare recipients and the disabled will be called upon to pay.
We will only resolve our problems when we change the focus of that system and its production to people, not for the profit of a minority, end the obscene spending on armaments and other measures that genuine democratic socialism would envisage.
Caithfear an buiséad so a chur i gcomhthéacs na seacht gcinn a chuaigh roimhe. Tá an Rialtas imeasc na rialtais is mó ar an eite dheis ariamh. Is í an fhealsúnacht chaipitlí nua-liobrálach atá mar bhunús le polasaithe eacnamaíochta an Rialtais agus ní sháraíonn an buiséad a cuireadh os ár gcomhair inné tada de sin.
Mr. Sargent: Ba mhaith liom buíochas a ghabháil leis an Teachta Seosamh Ó hUiginn as a chuid ama a roinnt liom. The media, in some quarters, have described the Minister for Finance as some kind of Santa Claus but I do not think the Minister, in fairness, would describe himself in those terms. Going by his speech yesterday, he likes to think of himself rather as a driver of the economy.
To use that analogy, he is somebody who is mainly driving with his eye on the rear-view mirror. He sees the victims that have been created by the former Minister, Mr. McCreevy, and is focusing on the elastoplast approach to trying to minimise the outrage that has been caused by previous budgets.
He is also driving a vehicle with a sticker over the fuel gauge. That is apparent from his reference to the fact that last December few would have predicted that oil prices would reach $50 dollars per barrel. To be honest, many people predicted they would reach that level. It appears the Government is demonstrating bodhar Uí Laoire, an inability to hear or see the evidence on the wall. Not only does this budget demonstrate a lack of imagination and courage, but also an absence of strategy, other than electoral strategy. One might wonder if there was an election around the corner, given the type of presentation we had yesterday but this is a very short-term strategy.
The Minister for Finance was in a favourable position and could have done quite an amount. As one would expect, a number of economists mentioned to me that the budget had done nothing for any environmental concerns, although it was surprising to hear it from them. One economist said the Government has no strategy on the environment, with which I could only agree. The Acting Chairman, Deputy Glennon, shares my interest in developing a marine conservation centre for Ireland at a capital cost of €1.9 million, it being the only coastal country in the EU which does not have one, but nothing was announced in the budget. Perhaps no news is good news and something is pending but this demonstrates that the Government has done nothing from an environmental point of view to meet even the most minimal and basic requirements.
However, this is not just about environmental concerns, rather it is about the Government’s fundamental blindness in economic planning. I hope members of the Government attended the lectures in Trinity College last Monday and the Oireachtas joint committee on Tuesday to hear the UK editor of Petroleum Review, Chris Skrebowski, make it very clear why oil is costing $50 per barrel and is rising because 70% of oil production comes from oil fields which are more than 30 years old and 85% of all known reserves are already in production. In the past three years, ten of the largest oil companies have discovered oil worth $4 billion globally at a cost of $8 billion. We are clearly dealing with oil depletion of a real and serious nature. He also talked about future oil supply decreasing over the next ten years in a measurable way. In 2003, he saw supply increasing against demand by 3.8%, this year the figure is down to 3.3%; in 2005, 1.7% to 2.1%; in 2006, 2% to 2.5%; in 2007, 1.8% to 2.5%; in 2008, 0.3% to 0.4%; and in 2009, 0.4% to 0.5%. In 2010, he sees negative growth being possible and, after that, we are dealing with a peak and very high oil and energy costs. That might be seen as what the Minister would describe as an external global factor; a terrible pity about which we can do nothing. However, the reality is that we are more vulnerable thanks to this Government.
The EU average per capita oil consumption is 13.1 barrels; the use of oil in Ireland is 15.5 barrels per capita. In India, the figure is 0.9 barrel. We have become so dependent and so limited in our short-term options that the Government is sentencing this country to enormous dislocation and hardship in spite of all the so-called “Inchydoney talk”, which counts for very little in the face of the global scenario, to which Ireland is very vulnerable.
Do we have a Government at all? It seems to be more a PR agency which puts a friendly face on the unbridled and unethical profiteering of a number of what the Taoiseach refers to as “vested interest”, which the Government is very good at representing. The result is that we are told not to question the illegal war in Iraq because that might upset some people. We are told not to question land speculation because that is the system me have; to accept the growing numbers of homeless people and the situation in which the very rich pay no tax; and to accept the oil dependency issue as if it is some type of external issue about which we can do nothing. All of these issues require the Government to provide a level of leadership which we do not have.
There is nothing in the budget for suppliers of alternative energy. Some 130 wind projects cannot get connected which demonstrates a huge indifference to the concerns of entrepreneurs who want to make a go of taking us out of our oil dependency problem. Perhaps that is no surprise given that the Minister for Finance regards peat as a sustainable fuel source. I hope he is around for the next 10,000 years to see it restored to the bogs because I do not expect myself or many others to be.
There has been a welcome increase, which it would be churlish not to acknowledge, in tax credits and the widening of the standard rate band. However, the change in the standard rate band is long overdue. It falls short of index-linking and leaves those on the average industrial wage paying tax at 42%, which is not just unfair, it is unjust and yet the Government stands over it.
Nowhere is the Government’s lack of courage and imagination more evident than in its taxation measures. If a person does not earn enough to use up his or her full tax credits, he or she does not benefit fully from the changes introduced. This means that a substantial group of people is being left behind in this budget. The Green Party calls for refundable tax credits, whereby the part of the tax credit that an employee does not benefit from is refunded to him or her by the State. This would increase the incentive for the unemployed to take up work.
The Government is now without any real strategy following the carbon tax promise it made. It has no real strategy on climate change and taxpayers will be exposed to massive fines because of the Government’s failure to curb the growth in emissions. It has deliberately ignored the recommendations of the ESRI, which concluded that a carbon tax could have a positive effect on the economy. Furthermore, papers released by the Government’s green taxation group, in response to a freedom of information request, clearly undermine the argument put by former Minister for Finance, Mr. McCreevy, that a carbon tax could not be introduced because of its effects on poorer householders. These papers clearly indicate that a carbon tax was and is an opportunity to raise revenue, which can be targeted at the less well-off.
The Environmental Protection Agency, Combat Poverty and other groups have, like the Green party, expressed their disappointment at the Government’s U-turn on carbon tax. Professor Frank Convery of Sustainable Energy Ireland recently claimed that Mr. McCreevy underestimated the potential impact of carbon tax by a factor three. Where is the Government’s planning other than in political expediency? The Government should take its national and international responsibilities seriously and introduce a carbon tax at €20 per tonne of CO2 produced. On the basis of current emission levels, the tax would raise €410 million in revenue. This revenue could be used to reduce PRSI contributions of those employees and employers, to reduce VAT and to increase social welfare provision. We hear much talk about “poverty proofing” but it is a meaningless term unless it is also based on energy-proofing because our rising costs in energy will be felt more by people who are living in draughty old houses and are more disadvantaged. They need to be looked after, given that energy costs will rise regardless of Government policy.
The Taoiseach said that those who benefit from Irish society must be asked to contribute to it but he has not done much to bring that about. That reality has come home, even though the Taoiseach claims the game is up for people who are not paying tax who are very wealthy. However, why are there no simple measures such as a maximum tax relief limit of, say, €200,000? That proposal was staring the Minister for Finance in the face and could have been provided for. This would have meant that at least he was not just talking bogus blather by saying the game is up and so on, which the media seems to have accepted unquestioningly in some quarters. Property reliefs are socially and economically unjustifiable. Last year, the richest 400 people in the country received €68 million in tax reliefs by investing in hotels, car parks and other properties. IBEC has estimated the cost of just one of these property relief schemes at €700 million, not annually but over a five to six year period. In 2004, when these tax breaks were scheduled to end, the Government decided to extend them until 2006.
The same applies to the bloodstock industry which is not a fledgling industry, although most of these tax reliefs are in place to assist such industries. It does not need to be subsidised by the taxpayer; it is well able to stand on its own four legs, as it were. This is particularly the case given the large sums earned by individuals involved in it.
There is no provision for the many areas that require support if we are to get out of the oil dependency cul-de-sac we are in. There is no provision for tax incentives for organic food production, recycling schemes or green energy schemes, including the production of biofuels.
With regard to child care, the increases fall far short of the Government’s 2005 commitments. There is a paltry increase in family income supplement. We join the Dublin Chamber of Commerce in highlighting the fact that child care has substantially been ignored. We are, as a result, storing up health problems for workers and social problems for our children and the overall economy.
We welcome the reduction in stamp duty for first-time buyers of secondhand residences but the real acid test will be whether we will embrace the energy performance in buildings directive. This could be costly into the future because the Government is trying to manage without taking any courageous steps.
Yesterday was World AIDS Day. In a case of adding insult to injury, the brass neck of the Government was demonstrated by the fact that it could introduce a budget on World AIDS Day and still cut overseas development aid from its promised level.
Caoimhghín Ó Caoláin: No Government in the history of the State had the opportunities to create real change available to this Fianna Fáil-Progressive Democrats coalition Government since 1997. The Minister for Finance, Deputy Cowen’s first budget is a tacit admission that these opportunities were deliberately spurned and that McCreevy economics massively favoured the property speculators, the high flyers and the wealthy who were facilitated in refusing to pay their fair share to this society. However, has anything really changed?
Last June the electorate gave Fianna Fáil a sharp lesson and that party, with its characteristic political astuteness, realised that the people were sick of the McCreevy approach and that something would have to be done. It was time for a new image. “Champagne Charlie” was shown the door and we had the longest running Cabinet reshuffle in history from which the Taoiseach emerged in his light red anorak and proclaimed himself a socialist.
That is the political background to budget 2005. I have no hesitation in welcoming many of the measures announced yesterday, a number of which were demands that Sinn Féin had raised, not this year or last year but for the past seven years and in eight pre-budget submissions which I presented up to and including budget 2005. The economic background to the budget is a buoyant and successful economy with a growth rate of over 5% and increased employment. For a decade the economy has experienced record growth. Government revenues were never higher. Tax receipts have consistently exceeded forecasts — up 15% during 2004.
The social background, however, paints a different picture. The scandal is that gross inequalities have persisted in an affluent economy. It is totally unacceptable that, after the years of prosperity presided over by the Government, approximately 20% of the population of the State live in poverty and have incomes so far below the average that they endure economic hardship. This is not a time, therefore, for throwing big bouquets at the Minister and the Government. Belatedly, some measures are being taken to address inequity but we should be much further ahead. In fact, we should be seven years further on.
I welcome the social welfare increases, a number of which are substantial. At the same time they are on top of a low base of welfare rates which will still see people struggling on a weekly basis. Child benefit has been increased by €10 and €12 per month which is disappointing. It is disgraceful that nothing has been done to improve child dependant allowance. The value of the allowance has decreased by 25% since it was frozen in 1994. This shows a clear lack of priority in the budget for the needs of children.
In its pre-budget submission Sinn Féin called for a range of comprehensive measures, both budgetary and legislative, to address the massive deficit in the provision of child care. We saw increased child benefit and CDA as essential measures to help parents with child care costs. The Minister has failed to appreciate this need. The increased allocation for the equal opportunities child care programme is welcome. However, the dependence on this programme to meet child care needs is not sustainable. There will be a need for more affordable and accessible places.
The Estimates extended medical cards to a further 30,000 people but that is still 170,000 short of what was promised before the general election. There are over 100,000 fewer with medical cards than when the Government took office in 1997. Yesterday, budget day, in reply to a Dáil question from me, the Tánaiste and Minister for Health and Children, Deputy Harney, stated that while the general practitioner only card would cost approximately €250 per year, the cost per year of the full medical card was €1,000. The revelation that the general practitioner only medical card is one quarter of the cost of the real medical card adds a dose of reality to the hype over the budget.
Hospital charges and medicine costs have already been increased by the Government in order that on health the Government is giving with one hand and taking away with the other. While the extension of free GP services to many more people will be welcome, the Government should not try to fool people into thinking that they are getting the full value of the general medical services scheme. They will still bear the heavy cost of medicines which, together with hospital attendances, represent three quarters of the value of the medical card. Let it not be forgotten that the Progressive Democrats promised in 2002 that they would “ensure income eligibility criteria would at least keep pace with movements in incomes”. That has not happened, even after the Estimates and yesterday’s budget.
On taxation, the removal of those on and below the minimum wage from the tax net is welcome. Again, however, it is something that should and could have been done long ago by the former Minister, former Deputy McCreevy. The Government’s tax cuts between 1997 and 2002 saw only 5% of budget tax cuts benefits go to the bottom 20% of earners. We are living with the legacy of McCreevy and yesterday represented a catch up rather than a radical shift in direction.
For years Sinn Féin has been calling for a comprehensive review of the wide range of property based tax reliefs and the closing of those through which wealthy corporations and individuals are being allowed to avoid paying their fair share of tax. The Minister promised a review yesterday but did not close off any of the tax dodges for which the Government is responsible such as the tax giveaways for holiday home developments, hotels, multi-storey car parks, sports injury clinics, which benefit wealthy speculators. We will probably never know how much has been lost to the public finances through these scams because the Government has never carried out a cost benefit analysis of the huge range of such allowances. The former Minister, former Deputy McCreevy, was unable to outline their cost to the Exchequer in a series of questions I put to him during his tenure in office.
The Minister staunchly defended the 12.5% corporation tax rate. However, the banks and other institutions which have ripped off the public are major beneficiaries of this low rate. The Minister should have considered hitting them with a special tax and ring-fenced it for disadvantaged communities.
The Minister received plaudits from the Government benches for the reduction in stamp duty for first-time buyers of second-hand properties. Again, this was long overdue and welcome but what will be done to ensure the benefit is enjoyed by the buyers? Last night, as any Member who watched the television coverage or heard the radio interviews will have noted, the auctioneers’ and valuers’ representatives were already saying the reduction would be eaten up by increased house prices. That is surely an argument for the regulation of the price of housing, something the Government has steadfastly refused to countenance. Similarly, there is increased tax relief for tenants in private rented accommodation but if nothing is done to control rents, they will continue to rise and this tax relief will amount to a subsidy to rack-renting landlords.
The measures for people with disabilities are welcome. Their implementation will need to be monitored carefully, especially against the failure, yet again, of the Government to deliver rights based disability legislation. We do not know how much of this new funding will be swallowed up by the Government’s proposed cumbersome bureaucracy that will be introduced as a consequence of the flawed Disability Bill.
The budget shows that the Taoiseach’s commitment to the UN target on overseas development aid was no more sincere than his recent conversion to socialism. The reality is that there has been an ODA freeze ever since he made that promise. We are allegedly the fourth wealthiest state in the world. While other European states give in excess of 1% of gross national product to ODA, however, we will not even give 0.5%. The Government failure to honour this commitment brings shame on the country. Sinn Féin calls for the introduction of legislation to ring-fence 0.7% of GNP for future budgets.
For the first time under the Government, provision is being made for a net increase in defence spending of over €41 million. This is despite prior denials by two Ministers for Defence that EU military commitments would result in spending increases. It would appear that they have been caught out in respect of this matter.
The budget is deceptive, particularly as regards specific equality measures. Apparent increases in equality programmes barely cover the rate of inflation, much less compensate for the deep cuts of the past two years. For example, the additional 10% spending on the status of people with disabilities measures cannot compensate for cuts of 44% inflicted in 2003 and 19% in 2004. The 3% increase for the National Consultative Council on Racism and Interculturalism cannot compensate for the 63% cut in 2003. The national action plan on racism, which was cut by 63% in 2003 and by 76% in last year’s budget, appears to have been completely eliminated. The Minister for Justice, Equality and Law Reform apparently has no plans to replace the citizen Traveller programme that he has already shut down. While equality monitoring appears to get a substantial 41% increase, the reality is that this does not even come close to restoring the levels of funding that obtained prior to the 48% and 18% cuts in 2003 and 2004, respectively.
With regard to agriculture, it has emerged that the stock relief for young farmers will only apply to those who have already received their training certificate and, therefore, means nothing to those entering the sector at present. The measures involve trivial amounts. The measures announced under farm pollution control are unlikely to offset the extra costs incurred by compliance with the nitrates directive, especially if the proposal to impose extra storage capacity on counties Monaghan and Cavan is accepted. The budget fails to address the most important aspect of farming as it faces the challenges of the reformed Common Agricultural Policy. That, as we have pointed out in respect of the cuts in Teagasc and as was stated last week by the former director of that organisation, Professor Liam Downey, is for a well funded national research capability to enable Irish agriculture to move into new areas of production that will boost farm incomes and the contribution of agriculture to an expanded domestic processing sector.
Overall, the budget clearly indicates that there will be no planned general election in 2005. We have agreement on that. However, one can never anticipate the vagaries of politics. The Minister for Finance, Deputy Cowen, will undoubtedly introduce at least one further budget before the Taoiseach considers his options. I encourage the Minister to pay particular attention to the needs of children and to child care provision well in advance of the budget for 2006. He must recognise that this is a key sector which, without question, demands his early address. I encourage him to pay particular attention to the pre-budget submission with which I and my colleagues provided him well in advance of yesterday’s budget. The presentation therein clearly directs him on how, in the most advantageous way, the needs of so many families in our society can be addressed. The families to which I refer struggle to provide for their children and give them a sense that the future offers them equal opportunities with all others in society. Until we reach the point where all children feel that the future offers them bright prospects in terms of reaching their natural potential as citizens in our society, we will continue to fail in our responsibilities.
While our proposal will not offer an immediate panacea to all our problems, it represents an investment in the future that the Minister cannot ignore. I encourage him to consider sincerely the area to which I refer in advance of the budget for 2006 because it is within his gift to take action in respect of it.
Minister for Social and Family Affairs (Mr. Brennan): The budget set out to achieve one prime objective, namely, to tackle disadvantage by substantially increasing and boosting the rates of welfare entitlements for those on lower incomes in particular. It also set out to close the gap between those on lower income levels and those higher up on the income ladder. It is aimed at lifting those who are most vulnerable, those struggling on the margins and those for whom my Department is the last safety net if they are to avoid descending into hardship and poverty. The budget has delivered on that objective. Even the most sceptical must admit that it will help to raise those boats the rising economic tide left behind.
The facts speak for themselves. The increases in rates of payment and supports and the changes to the social welfare code announced yesterday will deliver record improvements for the 1.5 million people who every week benefit directly from the entitlements they receive from the Department of Social and Family Affairs. These entitlements are for children, the elderly, widows, people with disabilities, those who are unemployed, sick or injured, those who are caring for their loved ones or parenting alone and for many others who are in need of that social welfare safety net. The total allocation for social welfare expenditure next year is a staggering €12.25 billion, an all-time high and an increase of almost 9% over this year’s figure. That is double what was being spent on welfare in 1997. The increases in rates average over 8%, which is more than three times the rate of inflation.
Mr. Brennan: Overall, when account is taken of the social welfare provision recently made in the Abridged Estimates Volume and of the sums being transferred to my colleagues, the Minister for the Environment, Heritage and Local Government, in respect of the new rental accommodation scheme, and the Minister for Community, Rural and Gaeltacht Affairs, for the rural social scheme, the total additional provision being made for social welfare related schemes next year will exceed €1 billion.
The budget for 2005 delivers substantial increases and improvements in welfare entitlements and supports, namely, a €14 per week special increase for those in receipt of lower rates of payment; a €12 weekly increase in pensions resulting in new rates of between €166 and €179; an increase in child benefit rates by €10 for the lower and €12 for the higher giving increased allowances of €141.60 and €177.30 — a fourfold increase in this area in ten years; an increase in the respite care grant of €165 to €1,000 and an extension to include up to 10,000 additional carers; the extension of the entitlement to a transitional 25% weekly rate of disability allowance to all persons resident in institutional-residential settings; the highest ever increase in thresholds for family income supplement with a rise of €39 per week; a change in the capital assessment for welfare recipients, with the first €20,000 of savings being disregarded, the figure prior to the budget being €12,600——
Mr. Brennan: ——which for old age pensioners will rise to over €27,000 and double that for a couple; an increase in maternity benefit from 70% to 75% of reckonable earnings; and an increase of €14 per week to €165.60 in minimum rate of maternity benefit and adoptive benefit.
One of my first public engagements as Minister for Social and Family Affairs was to preside over the annual pre-budget forum which was attended by nearly 30 groups actively engaged in providing services to and protecting the interests of the vulnerable and needy in society. At that event, I invited the representatives of the organisations present to meet me individually so that I could hear their concerns and get to know them better. Since then, I have managed to meet more than half those groups and I intend to meet the remainder in the coming weeks. These meetings have been an intense learning experience for me and have given me a deeper insight into the reality of life for too many people in the land of the Celtic tiger.
We have come a long way. We have achieved a lot but, as the cliché goes, there is much more to do before this is truly a fair and inclusive society. I have reflected long and hard on the views put to me by the various representative and voluntary bodies that I have met and I have taken their recommendations into account in framing my budget proposals. I do not expect that everyone will be totally satisfied with what is being done, but all will have to agree that substantial progress is being made. I assure them that I will continue to do what I can to develop a social welfare system which is responsive to people’s needs and provides an adequate level of income to those dependent on it.
Three broad priorities underpin the social welfare package in this budget: first, to make significant progress on delivering the commitments in An Agreed Programme for Government and the Sustaining Progress social partnership agreement relating to child benefit, pensions and other rates of social welfare payments; second, to make a real difference to those at risk of poverty, especially families, the unemployed and those unable to work because of age or disability, both in terms of income and in other supports given to them via the social welfare system; and, third, to recognise the contribution being made by carers and the demands on them. As a result of budget 2005, all those aged 66 or over will be €12 a week better off than they are at present, with weekly rates of €166 for the non-contributory pension and €179.30 for contributory pensioners with effect from next January.
Mr. Brennan: I will deal with that point later. We are on target towards achieving the Government’s objective of having the basic State pension at €200 a week by 2007 and remain committed to doing so.
On this occasion, all others who are not on the higher pension rates will receive a further €2 a week bringing the total increase in these payments to €14 a week. This is almost four times more than the projected rate of inflation for next year and will bring the lowest rate to €148.80 from January. These increases will apply to a wide range of schemes, including those relating to unemployment, disability, caring and lone parenting. In framing these proposals, I was especially mindful of the fact that many in these groups are at risk of consistent poverty and of the target in the national anti-poverty strategy to achieve a rate of €150 per week in 2002 terms by 2007, for the lowest social welfare rates. By targeting those on the lowest rate of social welfare payments, this budget will make a significant contribution towards achieving the overriding NAPS objective of reducing consistent poverty to 2% and if possible eliminating it altogether by 2007.
We are also making substantial progress towards completing the programme of child benefit increases. The increases given are significant and I am determined to ensure that the programme will be completed in next year’s budget. The revised rate of child income support, combining child benefit and child dependant allowance, amounts to over 33% of the lowest social welfare rate, thus ensuring that we continue to meet the NAPS target in this regard.
Several groups urged me to reverse current policy on child income support by increasing the level of child dependant allowances on the grounds that these payments are made only to recipients of social welfare and consequently are targeted directly at those most at risk of poverty. I considered these arguments carefully but concluded that child benefit remains the most appropriate vehicle for tackling child poverty. Since 1994, successive Governments have held the rate of child dependant allowances constant while concentrating resources for child income support on the child benefit scheme. As a result of this budget, child benefit will account for over 66% of child income support while in 1994 it constituted approximately 30%. There are sound reasons for this policy. Child benefit is neutral vis-à-vis the employment status of the child’s parents and does not contribute to poverty traps, whereas the loss of child dependant allowances by social welfare recipients on taking up employment can act as a disincentive to availing of work opportunities.
Mr. Brennan: I will argue that point with the Deputy. As a near universal payment which is not taxable and is not assessed as means for other secondary benefits, child benefit is more effective than child dependant allowance as a child income support mechanism when account is taken of these incentive issues. Successive Governments, not just this shade of Government, were of the same view.
As part of the Sustaining Progress special initiative on ending child poverty, the National Economic and Social Council has been asked to undertake an in-depth examination of child income support arrangements with a view to developing a second-tier payment targeted at low income families which, by combining family income supplement and CDAs, would have a neutral impact on employment options. It is appropriate to await the outcome of that study before changing the current policy on child income support.
The increases in the rates of payment and child benefit will make a decisive and lasting impact on the lives of many people. For example, a non-earning couple with children will see an average increase in their disposable income of over €31 a week. A range of other measures are being taken in this budget which will directly benefit families and improve the quality of life of children. This is an appropriate way of marking the close of the tenth anniversary of UN International Year of the Family.
The family income supplement, which is paid to parents working in low pay employment, is being increased by an unprecedented €39 a week, at a full year cost of €15.53 million. This will result in an increase of €23.40 per week for most of the 14,000 families receiving the payment and will make about another 2,600 families eligible for it. The family income supplement is an important scheme because by encouraging people to enter and remain in the labour force it not only gives them an adequate income but also puts them on the road to economic independence and enhances their human dignity.
Another family related measure concerns one of the policy measure introduced in last year’s Estimates announcements. I refer to the payment of half-rate CDAs to recipients of unemployment, disability, injury and related benefits where the spouse or partner has gross weekly income in excess of €300. Having reviewed the measure, I have decided to increase the threshold to €350 a week.
One family type which is particularly at risk of poverty is the family headed up by a lone parent. At over 11%, Ireland has one of the highest proportions of lone parent families within the EU. Almost a quarter of such households live in consistent poverty and over 40% of such families are deemed to be at risk of poverty, chiefly because of their dependence on social welfare payments. It is generally accepted that one of the most effective routes out of poverty for people in the active age groups is through paid employment. However, a relatively low proportion of lone parents are in employment in Ireland, compared to other countries.
Mr. Brennan: It is a big issue and I look forward to a good discussion on it because it needs to be addressed. One of the main objectives of the one-parent family payment is to assist lone parents in overcoming the obstacles they may face in taking up employment or training opportunities and to encourage them to return to employment instead of remaining dependent on social welfare payments. The scheme has not been reviewed for some years. I am committed to reviewing the income support arrangements for lone parents as a priority. As the Deputy says, there are many issues to be addressed. The review will be informed by recent reports and emerging analysis in this area, such as the OECD study entitled, Babies and Bosses, published late last year. In view of this pending review, I consider that it would be premature to make any changes in the income disregards for the scheme in this budget. However, I have decided to reintroduce the transitional half-rate payment to recipients of one-parent family payment when they take up employment earning more than €293 per week or increase their existing earnings above that level.
Mr. Brennan: It is now changed. Members of the House may recall that the abolition of this transitional payment was another one of the policy measures introduced last year. The half-rate payment will be payable for a period of six months, instead of the year which previously applied. Lone parents will, of course, continue to be eligible to apply for family income supplement which is the mainstream in-work benefit available to parents working in low income employment.
A budget change of interest to mothers concerns the minimum payment of maternity benefit which is being increased by €14 a week to €165.60. The rate of maternity benefit is also being increased from 70% to 75% of reckonable weekly earnings. This is the first instalment of the increase agreed with the social partners in the mid-term review of Sustaining Progress. Family members will also benefit from the abolition of the assessment of benefit and privilege for recipients of unemployment assistance aged 26, who are living in the family home with their parents.
I am pleased to be in a position to provide an additional €3.63 million to the Family Support Agency so that it can develop its services and enhance the support it gives to a range of organisations. Some €2 million of this amount will go towards the development of 12 new family resource centres next year, bringing the total number of such facilities across the country to 89. I am very impressed by the work being done in the family resource centres that I have visited since becoming Minister. I am impressed by the marriage and family counselling agencies. They will also benefit from the enhanced funding being provided to the agency in this budget.
I turn to a topic which I know is of concern to many members of the public and Members of the House. I refer to the position of the many people who care for elderly, sick or disabled relatives in their homes. I have met several groups representative of carers, the elderly and people with disabilities since becoming Minister for Social and Family Affairs. I have been struck by the commitment of family carers and their need for our support for their difficult yet worthwhile work which benefits society as a whole.
I have also given careful consideration to the recommendations of the report on carers prepared by the Oireachtas Joint Committee on Social and Family Affairs. These recommendations and my meetings with family carers were to the forefront of my mind when devising a package of supports for carers. In addition, my officials are finalising an in-house review of the carer’s payments made by the Department and its draft recommendations were considered with regard to the budget measures.
The carer’s allowance and carer’s benefit are being significantly increased by €14 a week to €153.60 and €163.70 a week, respectively, at a total full year cost of €17.2 million. In addition, I am delighted to announce a range of improvements in the supports for carers which will give almost another €17 million a year to this important sector.
I will outline briefly how this money will be spent. According to the Joint Committee on Social and Family Affairs, the greatest need identified by family carers is for a break from caring for respite. My meetings with carers’ representative groups reinforced this view. My response is threefold. First, from June next year, in accordance with the Government’s commitment in the programme for Government to introduce significant increases in the value of the respite care grant, I am increasing the amount of the grant from €835 to €1,000 annually. Second, I am extending the annual respite care grant to all carers who are providing full-time care to a person who needs such care, subject to employment related conditions. I have asked my officials to consider the operational arrangements which will be necessary to implement this proposal.
Subject to detailed consideration, the following categories of persons will be eligible for the respite care grant: recipients of carer’s allowance and carer’s benefit will continue to receive the grant at the new, higher level; recipients of other social welfare payments, for example, widow’s pensions, old age pensions and one parent family payment, who are also carers; and carers not currently receiving payment from my Department who are providing full-time care.
The following criteria will probably apply: the carer must be providing full-time care to a person who is in need of such care for a specified period, which will probably be six months; as is the case with recipients of carer’s allowance, a full-time carer must not be engaged in employment for more than ten hours per week; and those who are on unemployment payments will be excluded since they are required to be available for and actively seeking full-time work.
These improvements in the conditions applying to the respite care grant will result in an additional 9,200 full-time carers receiving the grant for the first time. A total of almost 33,000 full-time carers will receive the respite care grant of €1,000 next year.
My third change to the scheme of respite care grant is to pay a grant in respect of each person receiving care. This means that a carer who is providing care for more than two people will receive a grant in respect of each person for whom he or she is caring. I am doing this to recognise the particular challenges faced by carers who are caring for several people.
Where the means test for carer’s allowance is concerned, I am increasing the weekly income disregards by €20 to €270 for a single person and by €40 to €540 for a couple. This means that a couple with two children can earn up to €30,700 and receive the maximum rate of carer’s allowance, while the same couple can earn up to €49,200 and receive the minimum rate of carer’s allowance, free travel, the household benefits package of free schemes and the respite care grant.
With regard to carer’s benefit, one of the conditions attached to this scheme is that while the carer may work for up to ten hours per week, he or she may not earn more than €150 per week. I intend to improve this aspect of the scheme by increasing this income ceiling from €150 to €270 per week. This measure will allow those carers who are in a position to work for up to ten hours per week to earn extra income and, equally important, it will keep the carer in touch with his or her workplace.
Another condition attached to the scheme is that the applicant must have been engaged in full-time paid employment as an employed contributor for the three month period immediately prior to claiming carer’s benefit. I am abolishing this condition to simplify the qualifying conditions for the scheme and make it easier for carers to qualify.
This budget is a manifestation of the Government’s commitment to carers and for the eighth successive budget, the vital work being undertaken by family carers continues to be recognised in a meaningful way. We know our work on behalf of carers is not finished. I will continue to take note of the recommendations of the Joint Committee on Social and Family Affairs and the views and opinions of carers’ representative organisations. I want to build on the improvements which will be made over the coming year and I will continue to work with my colleague, the Tánaiste and Minister for Health and Children, on behalf of family carers.
I will say a few words about the social welfare measures being introduced in this budget which will benefit people with disabilities. I am happy to confirm that €1 million is being provided to Comhairle so that it can begin the preparatory work towards the setting up of a personal advocacy service for persons with disabilities. Deputies will recall that this service forms a key element of the Government’s national disability strategy and that the Comhairle (Amendment) Bill introduced last September will provide the necessary statutory basis for the service. When it is established, people with disabilities will be entitled to a personal advocate who will assist, support and represent them in applying for and obtaining a social service and in pursuing any right of review or appeal in connection with that service. Comhairle has been preparing for the introduction of the new personal advocacy service for some time. Last July, it published a report by Goodbody Economic Consultants which set out clear options on how the new personal advocacy service might be structured and operated. The funding being provided will enable this work to commence.
I am also happy to announce that a decisive step is being taken towards the removal of the current anomaly whereby people with disabilities who were resident in a health board institution prior to August 1999 are not entitled to receive the disability allowance as long as they continue to reside in an institution. This has a long and tangled history which is too complex to go into today but it dates back to the variety of arrangements which applied under the old disabled person’s maintenance allowance scheme which was administered by the health boards. My Department assumed responsibility for this scheme in 1996 and since then the various arrangements have been consolidated into a single payment, the disability allowance, payable to persons suffering from an injury, illness or disability which prevents them from engaging in normal employment.
The only exception to this position concerns persons with intellectual or physical disabilities resident in an institution before 1999, who were not eligible for the old disabled person’s maintenance grant. Some of these people receive a personal allowance or pocket money of varying amounts from the health board or institution in which they reside, while others do not. Organisations representing people with disabilities have argued that this arrangement is inequitable and does not respect the dignity of the people concerned. I fully concur with that view.
In the 2003 budget, it was announced that my Department would take over responsibility for payment of the personal allowances where they exist and consolidate them into a standard amount. Since then, considerable progress has been made by my Department, with the assistance of the Department of Health and Children and the health boards, in identifying the people affected by this anomaly and ascertaining what payments, if any, they receive. As a result of this work, it is now clear that it is possible to move beyond simply standardising the current personal allowances, to making the people in question eligible for the disability allowance as a matter of right, subject only to the same conditions as apply to others. A number of complex practical and administrative issues remain to be resolved with the Department of Health and Children and the health boards such as the determination, as appropriate, of what proportion of the allowance could be retained by the institution as a contribution towards the residence care and maintenance and the need to avoid duplication of funding.
However, as an interim measure, a payment of €35 a week will be payable to the 2,400 persons with disabilities who are affected by the current anomaly, with effect from next June. It is my intention to progress the outstanding issues as a priority so that all persons with disabilities can become entitled, as soon as possible, to the full rate of disability allowance irrespective of their residential status.
The Government is committed to encouraging a regular savings culture among the population in general. As part of this strategy, the innovative special savings investment accounts were introduced in 2001. These accounts have been opened by a large number of people, including many pensioners and other social welfare recipients. I want to ensure that the social welfare means testing arrangements do not act as a disincentive to claimants to become savers or harshly penalise those who have been regular savers in the past. In this regard, I am introducing significant improvements to the current means testing provisions. From June next, the first €20,000 of savings will be disregarded, an increase of €7,300. This enhanced disregard applies to all capital regardless of where it is held in an SSIA, a credit union, a post office or any other account with a bank or other financial institution. The new arrangements will mean that a single non-contributory pensioner can have savings of up to €27,600 and still qualify for a pension at the maximum rate. This figure is doubled in the case of a pensioner couple.
I want to address some of the other policy measures introduced in the 2004 Estimates which have been the subject of controversy since then. As Deputies will be aware, I have conducted a review of these measures to assess their impact on people. As a result of this review, I have concluded that while the measures were introduced for valid reasons, it is now appropriate to reverse some of them and ease others.
Five of the measures related to rent supplement which is payable under the supplementary welfare scheme. In the course of my review, I carefully considered the report published in September by the social partners’ working group on rent supplement established under Sustaining Progress. I have also listened carefully to the views expressed by my colleagues in the House, the social partners and the voluntary groups and others I have met since becoming Minister for Social and Family Affairs.
I agree with the conclusion reached by the social partners working group that the rent supplement measures do not have any significant adverse impact in themselves. The measures are not the reason people on low incomes with housing needs find themselves in difficult circumstances. The Government has agreed a range of new rental assistance arrangements. Improved social housing arrangements form an important element of these initiatives. In that regard, I am glad to announce that I have transferred €19 million in funding from the rent supplement scheme to local authorities as an initial measure to enable them to put in place long-term housing solutions to meet the needs of people who would otherwise rely on rent supplement on a long-term basis.
Under the new arrangements, the housing authorities will implement measures to ensure adequate access for rent supplement claimants to long-term accommodation, including social housing where appropriate.
Where a new applicant or an existing recipient of rent supplement is likely to need housing assistance on a long-term basis, he or she will be referred to the relevant local authority for an assessment of housing assistance need and the most appropriate social housing response will be provided. In addition, each local authority will progressively assume responsibility for accommodating long-term rent supplement recipients.
The new rental accommodation scheme will begin in Dublin, Limerick and Galway city councils, South Dublin, Donegal, Offaly, Westmeath county councils and Drogheda Town Council. Work in the remaining local authorities will begin before the end of 2005. This initiative is the first step in what will be a radical transformation of the supports provided in this area, putting them on a more sound, sustainable basis and providing a better outcome for the tenants concerned. In the meantime, rent supplement has a role to play and will continue to be available to those who need it. People must show that they have a housing need in order to qualify and be a genuine and deserving case. I am determined that there will be no delay with the assessments.
There is also scope for improvement in the six month rule, the purpose of which was to enable rent supplement to be paid to people not on local authority housing lists but who had been renting for six months or more. This benefits bona fide tenants who can no longer afford their rent because of a change of circumstances such as illness or unemployment. The point has been made that six months is an arbitrary limit which could disadvantage a person who becomes ill or unemployed within six months of renting. I, therefore, announced changes yesterday.
Another of last year’s measures withdrew rent supplement from people who refused two housing offers from their local authority. I have now increased this to three offers. In the circumstances, I am easing this measure in order that the supplement can be paid to genuine cases.
A further measure related to the treatment of those in full-time employment to whom rent supplement and all other types of supplementary welfare allowance are not payable. This has been a feature of the scheme since it was established in 1977 and ensures the supplementary welfare allowance does not become a mechanism for supporting unsustainably low wages or unreasonably high rents. If those in full-time employment were eligible for SWA rent supplement, it would put upward pressure on rents because landlords would no longer have to consider affordability when setting rents.
Last year’s measure extended the full-time employment exclusion to spouses and partners of tenants. While I have every sympathy for those in this position, people in full-time employment who cannot afford to pay a market rent require a social housing solution, not a social welfare payment.
I accept the recommendation in the report of the social partners working group that the measures should continue to be monitored and evaluated. As a separate measure, I have decided to increase the income disregard in the means test for entitlement to rent and mortgage interest supplement by €10, from €50 to €60 a week at a total cost of €1.5 million.
The discontinuation of the MABS supplement gave rise to savings of €700,000 this year. Removing these supplements was fully justified and increasing the funding of the MABS service itself is a more appropriate way of providing support for people with debt problems. I have already provided an additional €1.22 million in the abridged Estimates for the service. I now intend to redirect the saving of €700,000 arising from last year’s measure to it to enable it to make further improvements in its services. I am granting a further sum of €300,000 to provide total additional funding of €1 million for MABS in the budget.
I have decided to make €2.3 million available to provide supports in the crèche supplement. I am consulting the Minister for Health and Children and the Minister for Justice, Equality and Law Reform on further reforms. This will ensure further changes in the crèche supplement.
I have also decided to make an additional €2 million available to improve the diet supplement arrangements. This more than offsets the savings of €1 million arising from last year’s measure in this area.
Another measure introduced last year was an increase from six months to 15 in the qualification period for access to the back to education allowance. I have also made changes in this respect. I have increased the allowance from €254 to €400.
The budget represents the largest ever spend on social welfare, with an increase of 8.8%. I have raised the spending of the Department to €12.2 billion, compared to last year’s figure of €11.2 billion. Spending has doubled since 1997. It represents three and a half times the expected rate of inflation. Some 1.5 million people directly and indirectly receive benefits from my Department in the budget. The increase in child benefit will be completed next year but even now it represents a fourfold increase. I have substantially changed nine of the 16 measures effected last year, with particular emphasis on rent, crèche and diet supplements. I will continue to keep these operations under review and deal with the remaining six or seven measures as soon as it is practicable to do so.
I thank the House for allowing me to address these issues. This is my first budget as Minister for Social and Family Affairs. In the short period available to me, I did not have the opportunity to take on some of the issues I would have liked, some of them mentioned by the Opposition and some by various groups. However, I will now take them on in order that we can complete them in the next budget.
I am delighted to have the opportunity of speaking on the budget. I am glad the Minister for Social and Family Affairs, Deputy Brennan, has spoken before me. I compliment him on his achievement in his new job in such a short time. He has shown himself to be somebody who is prepared to listen, takes account of what the various groups are saying to him and takes action on this. However, there are a few points I would like to make.
When the Minister was giving €14 increases across the board in social welfare payments, why did he not give it to old age pensioners? Why should old age pensioners not qualify for the same level of increase as everyone else? They are very vulnerable and the people who made this country what it is. They are now in their twilight years and should be looked after. It is unbelievable to renege on them in this way.
I compliment the Minister on the issue of carers. The respite care grant announcements are very worthwhile. I read the three explanations given and they will be crucial in determining how the grants are administered. The Minister has stated carers who will receive the respite payment are those not currently receiving any payment from his Department and who are providing full-time care. The social welfare briefing document on the budget, under the heading “Carers”, states the respite care grant will be extended to all carers providing full-time care for an older person or a person with a disability, regardless of means, subject to certain employment related conditions. It is stated on page B12 of the budget document that entitlement to the respite care grant will be extended to persons providing full-time care and attention who are otherwise not working over ten hours per week or who are in receipt of an unemployment payment. Having read these statements carefully, everyone should be of the opinion that they deal with carers who are not receiving any payment from the Department of Social and Family Affairs.
The Carers’ Association informs us that there are around 140,000 carers, of whom 22,000 receive some recognition from the Department by way of payment. There are, therefore, around 100,000 who receive nothing. If we are to take the three statements at face value, it seems absolutely clear that the Minister intends to provide the respite care grant for the 100,000 who are not receiving anything. If that is the case, his costing is completely out of sync because he has allocated a sum of around €8 million which implies that around 8,000 will receive the grant. The Carers Association stated that there are approximately 100,000 people doing this job without reward. The Minister must interpret what he put on paper and he must not bring in restrictions based on allocation of funds.
It is remarkable the Minister is not prepared to move on the issue of child dependant allowance. These payments have been in place since 1994 and have not been changed since then. Groups, organisations and reports have repeatedly stated the matter should be looked into. It was stated that the allowance was a disincentive to employment. However, that is not the case when one takes into account the back to work allowances, of which the child dependant allowance was a part. The allowance was an incentive because one carried through a proportion of one’s child dependant allowance, be it 75%, 50% or 20%, over a period. It helped boost the payment one got in addition to one’s work payment. Back to work allowances removed the disincentive to work. How can we justify three different rates of child dependant allowance of €16, €19 and €21 depending on the amount parents earn? That is ridiculous and must be abolished.
The Government sat around the Cabinet table last year and agreed to introduce 16 savage cuts. It must have been a source of huge embarrassment to the Minister, Deputy Coughlan, to hear the Minister for Social and Family Affairs, Deputy Brennan, on the news last night saying he would amend nine of the 16 cuts. The Minister, Deputy Coughlan, was forced to push them through and now virtually the same Cabinet is changing them. Fair play to the Minister, Deputy Brennan, for achieving this. We take our hats off to him. However, he has not reversed nine of the cuts. He has amended some of them and watered them down.
The Minister of State, Deputy Killeen, spoke glowingly about the back to work allowance. It worked tremendously well and was extremely helpful. The qualifying period of six months was changed to 15 months under last year’s dreadful cutbacks. The Minister has now changed it back to 12 months. Why not change it to six months? It was a successful scheme so why did the Minister not complete it? We could examine other schemes also.
The half payment for lone parents was abolished last year. The Minister has reversed that decision, but instead of changing the period back to 12 months he has decided on six months. A relatively small group of people who lost that payment last year because of the cutbacks will feel aggrieved that they lost what they consider a reasonably substantial sum of money. Will the Minister ensure those people will be reimbursed the money they lost? There was a relatively small number of cases, but they are all deserving. Those people thought they would get that payment when they took up employment.
The Minister promised he would look at the issue of lone parents and rent allowance. It is unacceptable that a lone parent who makes the effort to work will have a euro-per-euro reduction in their rent allowance. It takes away the incentive to work. The Minister should look into the matter and speak to the people involved.
I welcome the increase in the capital disregard from €12,700 to €20,000. It is a sensible measure, and I congratulate the Minister. It will make a major difference. Will the Minister ensure that limit also applies to nursing home subvention? Elderly people like to have a little nest egg for funeral costs. It aggrieves them that their capital must be less than €12,700 to qualify for nursing home subvention. The Minister should ensure the threshold carries through.
I would like to make a few other points, although I am conscious of the remaining time. We welcome the increases in capital spending announced by the Government. With regard to the capital package available for schools this year, there was a substantial underspend, particularly in the primary sector. The envelope arrangement means that 10% of that is carried forward. Will that cover the amount of money that has not been spent? If it does, that is fine. It will carry forward. Will we get an assurance that the money not spent in primary schools will carry though to be spent in primary schools next year and added on to capital expenditure there? Let us not put the money into the education budget and spend it elsewhere. It was originally allocated for primary schools and should be carried through. Can we have clarification on that, perhaps from the Minister for Finance? I ask the same with regard to secondary schools.
In the middle of his budget speech, the Minister made a bland statement about there being no increase in VAT. Why did he not make decreases? He put up VAT on new houses last year, adding substantially to their cost and to all building work. Why did he not do something about VAT with regard to the tourism industry? By international standards our VAT rates on food and accommodation are very high. Our tourism industry is floundering so why was something not done?
I want to briefly speak about taxation. I am disappointed tax bands were not widened to keep pace with what has happened over the past couple of years. The increase of 5% in the widening of the tax band is not sufficient to keep pace with wage increases. People on modest incomes will still go into the top rate of tax.
We must look at the issue of individualisation. Two families with two children each can live side by side, one family with one income, the other with two, and it is ridiculous that we penalise the single income family to the tune of €7,000 because only one of them works. Is it fair to treat families in such a way? It is a great penalty to impose on a family. It is totally out of proportion and should be changed rapidly.
Will the Minister for Finance tell us what are micro-breweries and why are we so anxious to give money back into the drinks trade when there is a problem with the amount of drink consumed? Where are these micro-breweries?
Mr. Allen: The budget repays to the public some of the money extracted from it since 2002. I do not have time in the ten minutes available to me to detail one by one the 34 stealth taxes imposed on the public since the 2002 election. However, the most recent ones contained in the 2005 Estimates are: the threshold for the drugs refund scheme is up to €85; the cost of accident and emergency visits is up €10 to €55 and of inpatient stays up €10 to €55. They are the latest examples of serious stealth taxes. I am amused when I hear Ministers on radio and television speak of the low tax economy. The people are taxed left, right and centre, through the 34 stealth taxes imposed since 2002.
I forecast that even though old age pensioners will receive a €12 increase in their pensions in a few months time, most it will have been eroded before then because local authorities, for example, will be forced as a result of the measly increase — effectively a reduction — in their allocations to increase rents by approximately half the amount by which old age pensions have been increased. People will once again be hammered by a major increase in their weekly rent payments.
The increase in hospital charges will have the knock-on effect of increasing VHI subscriptions. We have also heard bus fares in urban areas are set to rise in January or February. Even though the Government is projecting a caring image, in reality it is only repaying people what it has taken from them in recent years. In effect, many of the increases will be wiped out before they are implemented.
I forecast two years ago in this House that there would be an electoral cycle in our economic policy, that there would be a squeeze for the first two years and then a loosening of the purse strings in the years immediately before a general election. I hope the people will have long memories and remember the unnecessary pain and suffering to which they were subjected as a result of the Government’s political expediency. This is budget No. 1 in the campaign to re-elect the Fianna Fáil element of the Government which is planning to be in government on its own the next time round. Effectively, the budget has made the Progressive Democrats redundant in the political scheme of things.
I pay tribute to Deputy O’Donnell who has championed the cause of overseas development aid for many years. It must be a source of great disappointment to her that the Taoiseach and the Fianna Fáil element of the Government reneged on the September 2000 promise to some of the world’s poorest peoples that Ireland would meet the United Nations target of 0.7% of GNP by 2007. This commitment to be met over a seven year period was arguably one of the most important international contracts entered into by the State in recent times. Furthermore, this promise displayed Ireland as a country of vision, ready to lead by example and show that poverty could and should be tackled by all wealthy countries. However, four years later this promise is in tatters and our international credibility on the issue of aid is, I regret to say, damaged.
Historically, Ireland has always been a generous country. Even when we lacked resources, we were generous with our people who travelled the world as missionaries and aid workers. When Live Aid was organised in the 1980s, the Irish people gave more per capita than any other country in the world which makes it even more galling that the Government has so casually cast off a promise made on our behalf to people who need our help.
Overseas aid is not an abstract concept. It is the most practical way in which the people, through the Government, can assist those who need help most. Right now, more than 1.3 billion people around the global live in severe poverty; 800 million do not have enough food, while 500 million are chronically malnourished. Of the 23 million people with HIV-AIDS, more than 93% live in the developing world. Shockingly, more than two million children have died in armed conflict during the past decade. These are the people who need the help and support of wealthy countries like Ireland.
Ireland’s commitment to meet the target for overseas aid was made before the United Nations four years ago and has been restated many times since, most recently in meetings with the Secretary General of the United Nations at the National Forum on Europe. However, this has all come to nothing with the announcement that only up to 0.5% will be given in aid by 2007. Furthermore, the Government has not indicated if a new date has been set to achieve the 0.7% level. Since the last general election, the public has become used to the sight of the Government breaking promises. However, the decision to renege on overseas development aid commitments confirms that the Government can break promises internationally as well as nationally. It is a scandal that the poorest of the poor are being treated in this way simply because they will have no vote in the next general election.
The Minister for Finance said he had entered into an agreement with the Minister for Foreign Affairs to limit overseas development aid to 0.5% — the figure I am now using — far below the stated target. Where were the Progressive Democrats during these discussions? Has each and every one of them decided to disregard the protests of former Minister of State, Deputy O’Donnell, who has frequently spoken in favour of meeting the target? Given that the original decision to meet the United Nations target was taken by the Government, has the revised schedule been put to the Cabinet for a vote?
Ireland has new wealth and a new found confidence in dealing with the major international issues of our time. We have a role and a responsibility to assert ourselves in issues that affect the lives and livelihoods of millions around the globe. The millennium development goals set out a platform for the radical improvement of people’s lives, yet as time passes progress towards meeting them is slow. Our commitment to overseas development aid meant that we at least were beginning to take our global responsibilities seriously.
The Government stance on the issue of overseas development aid could have served as a beacon to other countries to follow our example. Instead, we have abandoned a promise made to the world’s poorest. This should be a matter for shame and embarrassment on an international scale. It took the Government only two weeks to break the promise it made during the Estimates debate. It has today confirmed that, far from reaching the UN target of 0.7% of national income in overseas aid by 2007, it will only reach the figure of 0.43%, €100 million short of its revised plan to reach 0.5% by 2007 as announced by the Minister for Finance only two weeks ago.
Members will be aware that yesterday was World AIDS Day. In a world in which more than 8,000 people die every day from AIDS today’s announcement by the Government represents a shameful breach of faith with the world's poorest. The Government’s three year spending plans in official development assistance were as follows: €535 million in 2005, €600 million in 2006 and €655 million in 2007. The GNP figures announced in yesterday’s budget were €122 billion in 2004, €132 billion in 2005, €142 billion in 2006 and €153 billion in 2007. This illustrates that the 2007 figure will be 0.43% of gross national product, €100 million short of the GNP figure promised two weeks ago by the Minister for Finance. Was the original rollback and the breach of promise two weeks ago a Cabinet decision? I want to know as this affects the poorest of the poor and the voiceless in the world.
The benefits announced in yesterday’s Budget Statement will quickly be rolled back. The poorest of the poor, who were hopeful yesterday of some relief in their daily struggle to make ends meet, will soon see the reality with demands from local authorities for increased rents and refuse charges. With the privatisation of refuse collection in many areas, the waiver system has been abolished. A cold and hard-hearted approach is taken by the private waste collectors to the elderly, the ill and those on low incomes. If one does not pay up, one’s refuse will not be collected. In 2005, reality will dawn on people that all that glisters is not gold and the sharp end of the budget will hit people hard in 2005.
Mr. Deenihan: The tourism industry is facing real and pressing threats to its long-term viability, growth and development. While Members are familiar with the importance of the tourism industry, it is worthwhile to outline the size and scale of tourism enterprises and employment. The tourism sector provides 140,000 jobs in the country while the Exchequer benefits from the generation of €2.3 billion annually. For every euro spent by a tourist in Ireland, 52 cent is returned to the Exchequer in taxes. There is no doubt that the tourism industry is vital to many areas and that we should take steps to underpin the growth and development of the sector.
However, nothing in this budget will go any way towards meeting the real challenges the industry is facing. Doing business in Ireland is expensive, and those in the tourism industry have already come through years of inflation at double the rate of their European competitors. Coupled with inflation, Government-driven stealth charges and taxes have seen dramatic increases in the cost of food and drink, insurance, ESB and gas bills, VAT and other costs on the industry. For example, Ireland has the second highest VAT rate in the eurozone for hotel accommodation and eating out. Furthermore, wine excise duty is the highest in the euro zone, while spirit excise duty trails only Sweden and Finland within the EU. Beer excise duty is the second highest among our EU counterparts and seven times the level in France and Greece. These rates and duties have a real impact on Ireland’s attractiveness as a destination for international tourism.
We are already seeing worrying trends in the tourism sector. September 2004 saw a drop of more than 6% in the numbers of tourists coming to Ireland from the UK, compared with 2003. In the same month, trips to Ireland by residents of other European countries fell by over 7%. To compound difficulties, bed nights are down from hotels to bed and breakfast houses. These figures illustrate the difficulties that the tourist industry is facing. These are a warning shot across the bows for the Government which has stood idly by and allowed Ireland to lose competitiveness as a tourist destination.
Ireland is the third most expensive country in the EU for goods and services. A basket of food costing €100 in Ireland will only cost €82 in the UK. Of the 16,000 small to medium enterprises in the tourism industry, the smaller players in the sector, such as family-run bed and breakfast houses and small guesthouses, are being hit hard. The budget could have made substantive changes to underpin the future growth and development of the sector in the coming year. The industry operates under certain VAT disadvantages. Ireland is the only EU member state with a VAT rate in excess of 10% that does not allow for the reclamation of this tax on business expenses incurred on hotel and restaurant charges. There was an expectation in the hotel industry that a reclamation provision would be put in place in this budget. I will table an amendment to the Finance Bill to put this into effect.
This is just one example of a situation where our competitors are more attractive locations for business related tourism. International business tourism is worth €40 billion, yet we are not capitalising on this. It is not helped by the factors I have outlined and the lack of an international conference centre. The conference centre proposed by the Government is very important to this sector of the industry. The conference trade is already worth €50 million, which could be increased if the potential were tapped.
Inflation is still an issue for the sector. While inflationary pressures are not at the same level as in recent years, Irish inflation is still above the eurozone average and 1.1% higher than in the UK. Coupled with the 12.7% increase in local service charges, many in the industry struggle to keep their heads above water. Bewley’s cafés may have closed this week but there will be other examples of such closures over the year because of a lack of Government intervention.
Ms O’Donnell: I wish to share time with the Minister for Community, Rural and Gaeltacht Affairs, Éamon Ó Cuív, and the Minister of State at the Department of Community, Rural and Gaeltacht Affairs, Deputy Noel Ahern.
Ms O’Donnell: This is the third budget of the Progressive Democrats-Fianna Fáil Government, formed after the 2002 election. Combined with the Estimates announced on 19 November, this budget represents an important milestone in fulfilling the commitments we made in An Agreed Programme for Government. This is chapter three in a five-chapter story and, given the progress we have made to date, I am confident that our citizens can look forward to a happy ending.
The fundamental philosophy underlying An Agreed Programme for Government is that, while maintaining a stable fiscal framework, a low tax regime on work and enterprise, high levels of employment can be generated. In turn, this provides the resources to spend on the social needs of our society. A successful economy is an instrument of social justice. The budget and Estimates for 2005 reflect this philosophy and give it practical effect. The budget is designed to underpin and sustain the remarkable performance in recent years when, even in the depths of a global downturn, unemployment remained below 5%. It will do this by taking a prudent approach to borrowing while prioritising expenditure on health, education, welfare and security and continuing the high level of investment in infrastructure.
In 2005, economic growth will be 5%, employment will be up by 35,000 while inflation will be 2.5%. Ireland’s growth rate will be the highest in the EU at double the average and employment will continue to grow while inflation remains close to the EU average. At the same time, borrowing will be modest and our national debt as a proportion of income will be the second lowest in the EU.
The Government has a proud record of reducing the tax burden on work and enterprise. We have nothing to apologise for in this regard. We have ensured, for example through the introduction of tax credits, that those on lower incomes have benefited most. The Tánaiste, when Minister for Enterprise, Trade and Employment, introduced the minimum wage. It has been our party’s objective since then to exempt those on it from the tax net. Yesterday, we did that. In 2005, a person on average industrial earnings will pay tax and PRSI of under 17% compared with over 27% in 1997. A single person earning €30,000 in 1997 paid €11,000 in tax and PRSI. Next year, he or she will pay only €4,800. That is a saving of €6,300 in tax at a time when average earnings are up by approximately 80%.
The budget removes thousands of people from the higher tax bracket by increasing the standard rate bands. While I would have liked to go further, this is chapter 3 in a five chapter story. Significant widening of the bands will have to be a major feature of the next two chapters. During his speech on the budget, the Minister for Finance undertook to review the tax incentives which have enabled many high-income earners to avoid paying tax altogether. I welcome this undertaking. The fundamental Progressive Democrats position on taxation has been that there should be low tax rates on a broad base. The proposed review is totally in keeping with that philosophy. We must recognise, however, that many of the schemes were introduced for good reasons and were successful. It is disingenuous to label them all negatively after the event. What we require from the review is an outcome which achieves the correct balance between necessary incentives and the fundamental principle that citizens in a republic should contribute to the provision of public services.
The impressive level of economic growth allows us to make real progress towards meeting our commitments in An Agreed Programme for Government. My party has always made a strong commitment to looking after the elderly and I am glad it has always more than honoured its promises in this area. Increasing the old age pension to €179.30 per week in the budget puts us well on track to meeting our target of a pension of at least €200 a week by 2007. The €14 per week basic increase in social welfare payments, which brings them to €148 per week for a single person, is significant and welcome.
By its nature, the Progressive Democrats is a reforming party. The budget provides funds to underwrite a major agenda of health reform which will be driven by the Tánaiste. We are investing substantial additional public moneys in this area while encouraging the private sector to come forward with investment to complement Exchequer spending. We have always believed in the power of innovation and enterprise in the public and private areas. We want to use the power of incentives to achieve the social and economic progress to which our citizens are entitled. The Progressive Democrats Party aims for high-quality employment, a world-class health service, lifelong education and an innovative and enterprising economy.
Everyone agrees that the allocation of €2.8 billion to address disability in 2005 is a powerful statement of solidarity with the long-neglected sector populated by people with disabilities and those who care for them. The budget makes provision for an additional €60 million capital allocation to help us build up disability services in health next year. I welcome especially the cumulative €900 million multi-annual programme of investment in disability services from 2006 to 2009, mainly in the health sector. The multi-annual package will provide the Tánaiste and other Ministers with a predictable level of funding to put in place new services to give practical effect to the rights outlined in the Disability Bill. The funding will enable us to take the actions which have been sought by families of people with disabilities going back many years. These include the provision of 4,500 more residential and respite places, the transfer of 600 persons with intellectual disability from psychiatric hospitals and other inappropriate settings and the provision of 1.2 million extra hours of home support and personal assistance as well as 400 new places in community-based mental health facilities.
The Progressive Democrats Party was the first to propose the carer’s allowance. Carer’s benefit and carer’s respite care grant were introduced while the Progressive Democrats Party was in Government with Fianna Fáil. Substantial extra support is provided for carers in this year’s budget. The respite grant will be increased from €835 to €1,000 while carer’s allowance is increased by 10%.
While the budget makes real progress towards achieving the objectives set out in the programme for Government, I must mention one area in which a target has, sadly, not been honoured. Members will know which area I intend to discuss. Our aim of reaching the UN overseas development aid target of 0.7% of GNP by 2007 represented a real test of our commitment to help the poorest of the poor. While I welcome the commitment to spend €1.8 billion over the next three years, which introduces predictability and good planning into the overseas development aid programme, it must be viewed as the minimum, baseline contribution. I and others in the House who care deeply about our commitment to the poorest of the poor will continue to advocate the provision of additional funding over the next two years to bring us closer to the long sought after target. The advocacy of the target has never been politically and electorally motivated. It is the right thing to do. There is broad support among politicians, the social partners and the wider public for Ireland to express solidarity with the poorest of the poor and to act as a leader in this field.
The budget demonstrates that the Government is in no way changing course. Budgetary provisions recognise that impressive growth can only be fostered through low taxes on work and enterprise. It recognises that such growth is the only reliable engine of social progress. During this morning’s debate, I noticed Opposition Deputies trawling for negatives and being reduced to speculating as to who won and lost in the budget. It is clear to me and to any objective observer that the country won. The budget is fair and balanced. Our people will continue to win as we implement our ambitious programme for Government.
One must start from a fundamental position. Opposition parties call constantly for greater expenditure, but there can be no further expenditure in the absence of continuous growth in the economy. As a Government, we must first ensure the stability which creates the conditions for growth. If one wants to encourage foreign investment, one must be able to project to the world the stability which is so vital to our success. It was made very clear yesterday that in examining our performance one must compare Ireland with its international competitors. Our economy is growing at twice the average EU rate. By any measure, the performance of the Government over the last seven to eight years has been spectacular.
One’s second task in framing a budget is to determine how much money one has to spend. One cannot spend because one wants to, but must spend in a manner which makes it possible to sustain the growth one is talking about. We have taken the prudent view. While there have been years when tax revenues have exceeded expectations, the budget continues to be framed on the basis of the premise that we will grow much faster than our EU neighbours. Were we to predict even faster growth than we have, there would be serious criticism from commentators and international financial analysts as well as from the Opposition. While we all hope the revenue targets for next year will be exceeded, it would be very foolish in the fickle world in which we live to base policy on that expectation.
As it has nothing else to say, the Opposition repeats its mantra on stealth taxes. It is accepted in the commercial world that prices rise every year. The Opposition always tells us that commercially traded semi-State services should operate efficiently in the real world. It is a fact of the real world that prices increase as inflation takes its toll. It is disingenuous, therefore, of the Opposition to pretend that these prices should not increase. The services for which we pay are getting more expensive. We have moved far from the idea that we can dispose of refuse by dumping it in a big hole in the ground. There are now many extra costs associated with the disposal of refuse which have to be passed on.
We also have to look at the situation in its totality. By any fair analysis, this is a low tax country. If one examines all the services and charges, one will find that compared to competitor countries we have a very low tax rate for the individual.
It is true that on average the amount of tax being paid by everybody has increased dramatically in the past ten years but in that regard there is a massaging of the figures. People are paying more tax. I am paying considerably more than I was ten years ago but I am also earning much more. A huge number of extra people in the economy are working, a large number of whom are on considerably higher wages than heretofore. An analysis will show that a Fine Gael led Government was in power when the last rise in basic taxation rates was introduced, bringing the highest rate of tax up to 65%.
We now have stability in the tax system with historically low rates of 20% and 42%. For many years the low rate of tax — the equivalent of the 20% rate — was 35%. It is, therefore, disingenuous of the Opposition to try to twist the issue.
It is also important to remember that people like the money to come from the centre. There is resistance to local taxation. There was resistance to paying local water charges and rates. I understand this and, particularly in the case of rates, felt it was justifiable but if we want to impose taxes on private homes, which is acceptable, they have to be raised some other way. We do this through indirect taxes. If we want to run a country, this will have to be done.
That leads me to the next issue which I always find difficult to square. Every week in this House motions are tabled by the Opposition calling for more expenditure but it never tells us how it will raise the revenue. It never tells us how it will pay for all the promises made week in, week out about what it intends to do if it gets into government. On the other hand, it tells us all the taxes and charges should be abolished but it knows and I know——
Éamon Ó Cuív: ——which is to persuade the people, on the one hand, that there should be much lower taxation and, on the other, that there should be much higher expenditure. As it knows, neither of these positions can be squared against the other. It is time a responsible attitude was taken towards the public finances and that we stopped trying to pretend to the people that the State gets its money anywhere but from the people. If the people want more services, they have to pay for them. The Government has to find a balance between what it should raise in taxation and the services it can provide.
An aspect of society I have always valued highly is that traditionally — I am aware some Opposition spokespersons do not agree with this — we have a high house ownership ratio. I have always believed this is one of the greatest social goods because people who own their own houses believe they have a stake in society.
Éamon Ó Cuív: No. For example, a check of the policies of the Labour Party will show it did not want anybody to be allowed build within one kilometre of the sea. On the west coast where I live, that would cause major problems because most of the people live on coastal strips.
Éamon Ó Cuív: The people of Knock know it is happening. Decentralisation will happen. I admit we might have put too short a timeframe on it. In many things I have done I have found that timescales do not always work but the entire 10,000 will decentralise. It will be done in phases over a relatively short period.
It was interesting yesterday to hear the criticism from the back benches of the Deputy’s own party that we had provided €900 million for buildings in terms of decentralisation. His own party does not know where it stands on the issue. Every week——
Éamon Ó Cuív: What the Deputies will find, much to their disappointment, is that by the time of the next general election, decentralisation will be seen to be a reality. We will have done a great deal to help young people buy their own houses in a cost effective way. We have built more houses than any previous Government and will have done a great deal, between social welfare payments and tax, to leave the less well-off in a much stronger position than when we came into power.
Minister of State at the Department of the Environment, Heritage and Local Government (Mr. N. Ahern): Housing is a key priority for the Government. Evidence of this is the decision to increase the capital envelope available to the Department of the Environment, Heritage and Local Government by an additional €50 million in yesterday’s budget. When this is added to the 6% increase in the Estimates and the €40 million carry-over, the extra money will allow an expansion of the local authority and voluntary housing programme next year. In fact, the capital envelope announced yesterday means that over the next four years to 2009, €6,000 million will be made available for social and affordable housing, a considerable sum by any yardstick which will allow for considerable expansion of the programme.
Great progress has been made in recent years. In seven years 42,000 new social houses have been built, either in the local authority or the voluntary co-operative sector. Each year the needs of approximately 13,000 families on local authority waiting lists are being met by new build, vacancies or some of the other incentive schemes. Earlier this year we announced the development of new five year action plans by local authorities which will allow for maximum output and value for money to be achieved through effective planning and prioritisation.
One of the main projects the extra money announced yesterday will allow for is the increase in the local authority programme to 500 new starts. This is in addition to the work being done in the voluntary and co-operative housing sector. The increased provision will also allow for greater investment in regeneration of run-down local authority estates in the inner city and suburbs of Dublin, Cork and Limerick. A great deal of work is being done and this funding will allow us to do more.
Next year will be the first full year of the local authority central heating installation programme, which was announced last July. Most local authorities, with a few exceptions, made a pitch for such a programme and approximately €12 million was allocated for the remaining months of 2004. That has become a popular scheme, based on feedback from public representatives and others.
Substantial growth is anticipated in affordable housing over the coming years and a significant number of houses are due to come on stream under the Part 5 and Sustaining Progress initiatives. Together with the existing schemes, approximately 11,000 affordable units will be provided in the next three years. A special task force was recently set up to address housing in Dublin and it comprises the managers of the four Dublin local authorities with input from other local authorities in the greater Dublin region. These affordable schemes are of benefit to low and modest income households and they help greatly to meet their needs.
Fundamentally, the Government has placed major emphasis on housing supply and it is expected more than 75,000 units will be built, which is a significant increase. Only ten years ago the number of units built annually was 22,000 houses. A great deal is being done in the housing area. The reduction in stamp duty for first-time buyers of second-hand houses will greatly help and it will complement the other measures taken in the past few years such as mortgage relief and site subsidies. These initiatives are targeted at those most in need.
I am also pleased with the budget allocation for the Department of Community, Rural and Gaeltacht Affairs. Funding to tackle the drugs problem has been increased by 18% to €31.5 million, which confirms the Government’s commitment to communities that have a major drugs problem. The funding will allow us to develop and consolidate the valuable work being done through the local drugs task forces and the young people’s facilities and services fund. In addition, it will allow us to resource and support a number of new drugs initiatives through the regional drugs task forces, which have been set up. They represent an important part of the Government’s ongoing response to the problems of drug misuse. These task forces are working on regional plans, which they will submit over the next few months. We hope the plans will be resourced, financed and rolled as 2005 progresses.
The funding I have secured for next year will ensure a number of these initiatives are implemented. They will deal with different aspects of the drugs strategy such as prevention, education and treatment. Funding will also be provided for a number of new measures, which have been introduced to tackle the growing cocaine problem. In addition, a number of new capital programmes are planned for 2005 through the task forces and the young people’s facilities and services fund. Several premises for drugs projects and large scale community or youth facilities have been built under these schemes and a number of others will come on stream next year in Bray, Clondalkin and Tallaght.
The community development allocation has been increased by 8%. The number of projects sanctioned under the initiative recently increased from 175 to 185, with another five projects at an advanced stage of negotiation. Over the past 15 months, community development projects have been approved for 25 more disadvantaged communities. The aim of the projects is to core fund community development so that locally based responses to the needs of those experiencing social exclusion and poverty in their communities can be developed. A great deal of good work is being done and it is significant that an additional 25 communities received approval when funds were tight.
The allocation will also allow us to increase the spend on the scheme of community support for older people. Funding for the scheme has also increased by 8% and the allocations under next year’s programme will be made shortly. The number of applications under the scheme had decreased in recent years but there has been renewed interest this year because the scheme has been extended to cover smoke alarms. Community groups normally only provide alarm pendants, security lighting and locks and, as a consequence, the number of applications has increased.
This was a good budget and the resources provided in the areas for which I am responsible will allow for the significant expansion of programmes. The stamp duty reduction is also a significant move. There was a great deal of hullabaloo in the House two years following the abolition of the first-time buyer’s grant but more than €20 million is being spent annually on site subsidies, which are granted to people in a particular income bracket. This funding is much more focused. I am pleased with the moneys allocated to my areas of responsibility in both Departments and I expect to meet my plans and the needs of the people next year.
I refer to the comments made by the Minister for Community, Rural and Gaeltacht Affairs. A chameleon is a well-known lizard and it is remarkable because it has the ability to change colour. Members of the Cabinet have been attempting to copy this lizard, and their success rate has varied, with the Taoiseach being the best chameleon. He has received the most publicity but other Cabinet members are trying hard to become little chameleons of the Fianna Fáil Party.
The Minister for Community, Rural and Gaeltacht Affairs completely ignored decentralisation. Last year at a meeting of the Oireachtas Joint Committee on Finance and the Public Service, the Minister of State at the Department of Finance told us the allocation of €20 million provided in the budget would be adequate to get the ball rolling on decentralisation. On the first anniversary of the announcement of the process, the figure has increased to €800 million but the number of civil servants involved has reduced from 10,000 to 3,300. The Government should explain this to the public rather than stating that the Opposition opposes decentralisation. The Government is getting a harsh dose of reality and that is what we were trying to explain during the debates on decentralisation. I hope the Department of the Environment, Heritage and Local Government will relocate to County Wexford and that another building will not be constructed to delude the locals into thinking the Department is coming. I hope there will be civil servants in the building before the next election but I will not hold my breath.
Most individuals or families, whether they earn €20,000, €50,000 or €70,000, will only receive increases of between 1% and 2% as a result of the budget. The low paid, those on less than €400 per week, must rely on not having to pay the health levy. Any small increase in their wages will wipe out any gains they might have made in the budget. These figures were published by the Government. Much of the benefit for those earning €50,000 will come from the increase in child benefit, but they will get little real increase in take home pay as a result of changes in tax.
People who have been removed from the tax net may end up back in it next April when they receive an increase in the minimum wage. We welcome their removal from the tax net because they have now reached the same lofty heights as numerous millionaires in this country who have enjoyed the benefits of paying no tax for a number of years, an issue to which I will return later. However, it is becoming obvious that although people have received increases of between €10 and €14, there will be no real benefit and stealth taxes are a genuine fact of life.
This Government has moved away from a policy of direct taxation. However, because it has not controlled public health spending and adopted control of Government excessive waste of taxpayers money, it has been forced to increase indirect taxation. As we know, when we increase indirect taxation, for example VAT which at 21% is one of the highest levels in Europe, and foist all these extra costs on consumers, whether through electricity or home heating oil charges etc., we erode any increases they get in their wages. Therefore, they see little improvement in their lives. Indirect taxation of this type also affects the poorest and most vulnerable in society. There is no way around that, but Department of Finance officials could explain it better than I can.
The increase for the disability sector is welcome. However, it is regrettable that the Minister in his speech yesterday implied that lobbying from the primary care and acute hospital sectors was the reason the disability sector was left out for the past seven years. That is an insult to the groups and families that have been campaigning hard for disability services over past years. We have had one failed attempt to get a disability Bill through the House. The second Disability Bill is now going through, but many of the disability groups are unhappy with it. While we welcome the budget provisions in this regard, it is time the Government recognised the importance of disability services.
The poor treatment of the disability sector is a complete contrast to how the Government has treated tax shelters over the past number of years. I have two years’ experience of serving on the Joint Committee on Finance and the Public Service where the issue of tax shelters has been raised on many occasions. The committee tried to find out from the former Minister for Finance, Mr. McCreevy, how many people benefited from tax shelters. We still do not know, and probably will never know, whether it is 500, 1,000 or 5,000 people who have benefited from the numerous tax shelters and convenient property development schemes that have been allowed in the past seven years.
Many of the individuals involved will have earned from between €50 million and €500 million from lax tax shelters they have availed of for property speculation. Perhaps many of them have been solid supporters of this Government. It is natural that anybody getting that sort of largesse from Government would be supportive. Many of the schemes have been allowed continue long after their usefulness to the economy. That is a disgrace.
No matter what has been said, there has been much hypocrisy with regard to the tax shelters and what the Government will do about them. The Taoiseach was back on “Morning Ireland” today saying how unhappy he is about them. There is a bit of playing the chameleon in this regard. The Taoiseach knows well that tax shelters have been around for years and the former Minister for Finance’s attitude towards them. Mr. McCreevy’s attitude was that they would all go or all stay, but he was inclined to let them all stay. The issue arose during numerous debates on the Finance Bill in the past two years. The only concession Mr. McCreevy made was that beginning next year there will be a box on the tax return form which people will tick if they benefit from a tax shelter. People will not have to declare how much they made but will simply tick the box to say they have benefited.
The Taoiseach and the Minister for Finance have said they will have a review of the shelters. They will check it out and will discuss the issue for budget 2005. If they examine what Mr. McCreevy said two years ago, they will see most of the tax shelters are due for review in 2006 or 2007. In other words although they may expire in 2006 or 2007, the Government will review them in 2005, despite the fact they have existed since 1997 or 1998. This is hypocrisy and the sort of Government nonsense to which we must listen despite what Ministers say today.
We should also examine a number of problems in the economy as has been suggested more by those outside than inside the House. The tax take from the industries that made the Celtic tiger has stopped growing and many of these industries are regressing. The big tax take from which the Government currently benefits comes from the building industry and stealth taxes. If the situation developing in the economy is that the engines driving the economy, the multinationals in this instance, are leaving, we should be made aware of it. The indication is that there are tough economic times ahead in a couple of years.
Many of these industries appear to be leaving Ireland because they feel we are uncompetitive. We have a highly educated workforce and young people, but so do the Czech Republic and Poland. Many in the Czech Republic also speak good English and that is why many industries are moving east rather than staying here. The Government should examine its policy to see if it is killing the Celtic tiger.
The drive and innovation of a number of people made the Celtic tiger. Many of those of whom I have been critical who have benefited from tax shelters and made from €50 million to €500 million in the past seven years have made their gains by riding on the back of the Celtic tiger and by speculating on land prices and restricting supply. This happened and people were driven to try to buy houses wherever they could.
Most of us were fortunate enough to hold onto the Celtic tiger’s tail. We managed to buy our houses and establish our careers before rip-off Ireland came into play. However, what about young people, the Celtic tiger cubs? Where do they stand? For example, let us look at the first-time buyer’s stamp duty relief granted in the budget. A person buying a house for €220,000 will benefit to the tune of approximately €12,000. On last night’s news auctioneers were more or less saying that they would try to push up the price of houses in order to get their take of this €12,000. That is what will happen.
In 1994 when I was entering the workplace a person could buy a house for approximately €80,000. That house would now cost approximately €350,000 to €400,000. I do not believe anybody starting off on the same level at which I started could afford that, despite what is said about low taxes. Low taxes made a difference for the first couple of years as house prices increased but they no longer make a difference. Wages have not kept pace and the low tax environment has been overtaken by increased stealth taxes. Many people cannot afford to buy the houses we managed to buy in 1994. That displays a failure of Government to look after the next generation whose job it is to maintain the Celtic tiger. There are many dark clouds on the horizon which this Government has not taken on board.
The poor and most vulnerable have always been neglected by Fianna Fáil. They only receive the crumbs from the Celtic tiger’s table. Many of the figures thrown out in the budget are for such small amounts that they will not make up the difference in the increased costs many households will face over the next 12 months.
Unfortunately for the Fianna Fáil-Progressive Democrats Government many middle class people also feel abused by Government policy. Most households have two people working. This has been seen as a bonus by Government which is forcing both parents to get out and work and keep the economy going. Where does that leave people? People are more stressed and they have huge problems with regard to child minding. Children are now being dropped off to childminders at 7.30 a.m. and 8 a.m. and they are not collected until 7.30 p.m. or 8 p.m. because people have to commute long distances on congested roads. Both parents are forced to work to pay the mortgage and child care costs are prohibitive. Are people happier because they are all at work? People are becoming more stressed and less able to cope with life due to Government policy in recent years.
Things become even worse when one adds in the increases in rip-off Government charges. I do not accept the validity of any Minister’s claim that stealth taxes are not being imposed. There has been an enormous increase in the cost of living and our competitiveness has declined, as has been acknowledged by independent external reports. We can see this for ourselves when we travel abroad. In Prague, one can get a weekend travel pass for buses and trams costing €7 for four days but a single trip on the bus from Stillorgan into town will cost €1.50. One can travel all over Prague at weekends for the same cost as three or four bus trips in Dublin. The public transport service there is extremely efficient. That is part of what we are talking about and we need to face up to the reality that these are the people we are competing against.
Why are the health services in such a mess? It is regularly said that there has been a tripling in funding to the health services yet the Government has avoided answering the question of where the €11 billion is being spent. Where is the wastage occurring, given that services have not greatly improved? What has gone wrong and why do we have a health service that is not functioning as well as we expect? The Government should answer these questions, not trot out old figures comparing expenditure in 1997 with today.
In case the Minister did not notice, funding for mental health services has been reduced and there has been an abandonment of funding for primary care. I do not know what will become of the acute hospital sector, as no increase in funding has been made to improve services in that sector.
Mr. Naughten: I welcome the opportunity to speak on the budget. While the Minister for Finance talked the talk yesterday in regard to agriculture, in reality there was very little that was positive in the detailed proposals to which he alluded during the budget debate. If we are to be realistic about agriculture, it is critical that we achieve a viable farming sector. Agriculture is facing significant challenges at present, which, sadly, yesterday’s budget failed to address, namely CAP reform, the WTO negotiations which will conclude next year and the impending nitrates action programme. Very little was done to address any of those issues which are vital to the future of agriculture.
This is not surprising when one looks at the Department of Agriculture and Food’s budget for 2004. Only 60% of the budget in the area of research and training has been spent to date. In the REPS programme only 58% of the budget has been spent and in the area of agricultural development, which is critically important both in terms of the farm waste management programme and the dairy hygiene budgets, there is only a 44% spend to date. This is a damning indictment of the Department of Agriculture and Food and the Government.
Since 1995, farm incomes are down by a whopping 22%, which is over one fifth. The average farm income in 2003 was just over €15,000. The president of the IFA, who was obviously hoodwinked, went on television yesterday and welcomed the budget. If he had an opportunity to look at the detail in regard to it, he would not have welcomed it.
A progressive one-income farmer earning €30,000 per annum with two children has benefited from the budget to the tune of less than €6 per week. That is the benefit such a farmer has got out of this budget that was announced and welcomed with such fanfare yesterday. In a two-income farm household with total earnings of €30,000, with two children, the benefit is just over €13 per week. A single farmer earning just over the average income, with €16,000 per annum, has been generously given just over €1 a week in the budget.
When one takes those paltry increases, which are not even in line with some of the budget’s social welfare increases, in conjunction with the proposed increases in bin charges, water charges, ESB, telephone and fuel costs then one can clearly see many of these people will be big losers in regard to the budget. That is not taking into consideration the fact that agricultural inflation is currently running at approximately 6%. The farming organisations that welcomed the budget last night need to think again in regard to it. The Minister for Agriculture and Food needs to look carefully at these proposals because they do not benefit the agricultural community which is facing significant challenges in the coming years.
A number of people welcomed the changes made to stamp duty in regard to the swapping of land. Some people are sadly under the misconception that it also applies to the purchase and sale of land, which it does not. It is purely for land swaps, which is a small element of the total farmland transactions that take place each year. In reality, the proposal the Minister brought forward yesterday will do very little for farm consolidation. Over 30% of farms here consist of four or more parcels of land which leads to inefficiencies and the problem will not be resolved by this proposal.
The issue of roll-over relief has again been ignored. When the Minister of State, Deputy Parlon, was president of the IFA, he negotiated a very positive deal on compulsory land purchase. The State has the right to force farmers to sell land to it for the construction of motorways. However, when Deputy Parlon was appointed as Minister of State at the Department of Finance, he overturned that decision. Farmers are now being taxed even though they are being forced to sell land to the State.
The budget has done very little for them and while the Minister referred yesterday to the need for consolidation in regard to farm development, the reality is that he did very little to encourage it. It is farcical for the Minister to talk about addressing the issue of consolidation when he has not addressed the issue of roll-over relief, especially in regard to farmers who are forced to sell their land.
The Minister made some changes in regard to the control of farmyard pollution, which is a small but positive step. However, it will not do a great deal for many hard-pressed farmers who have the nitrate-gun being put to their heads. Since the Government came to office in 1997, it has failed to take any action on the nitrates directive and has only done so when forced to by the European Commission. The country has been designated even though State-sponsored studies clearly show that in some counties the biggest single polluter is not farmers and agricultural practice but the Department of the Environment, Heritage and Local Government and local authorities. The Government stated that it would make the case for the 250 kgs of nitrates per hectare limit but it has reduced it to 170 kgs and is seeking derogations. There are no guarantees that the Government will be able to achieve this target, judging by the indications from Brussels at present. The responsibility for this lies with the Government, which has delayed and dragged its heels on this issue. At the same time, the paltry excuse of €4 million in a full financial year is the benefit that will accrue to farmers in this regard.
I had hoped the Minister would increase the control of farmyard pollution grants, in line with the Brosnan recommendations, to 60%, and 75% in disadvantaged areas, especially for the four counties along the Border which will be severely restricted by the proposals on the storage of slurry. On top of that, many intensive farms will have to dramatically reduce the stocking rates, even with slurry storage, to achieve the guidelines which are laid down or are proposed in regard to the nitrates directive. I had also hoped the Minister would increase the ceiling to €100,000 in regard to the dairy hygiene scheme and the farm waste management scheme. That was not done, yet people have been saying this is a good budget for agriculture.
The averaging over three years of the FEOGA direct payment schemes is a step in the right direction but, sadly, it will affect only a number of farmers. Full-time farmers will benefit from the scheme but many of those who have an off-farm income will not. Sadly, because of what the Government has done in recent years in agriculture and the fact that decoupled payments will be introduced in the new year, many farmers will now be looking for off-farm incomes to try to supplement their basic income from agriculture. Moreover, many of them will be taxed to the hilt on their decoupled payments which they will receive later next year. I am disappointed that the early retirement scheme was not index-linked as recommended, which even the Minister of State, Deputy Tim O’Malley, believes is crazy.
Mr. Hayes: I am glad of the opportunity to say a few words on this budget. Many comments have been made in the past few hours and yesterday, but it is very difficult to sum up the Budget Statement. However, I would sum it up as being a cute budget, with one eye on the economy and another on the general election in a couple of years’ time. Nonetheless, it is a budget of missed opportunities.
In the context of Deputy Naughten’s comments, a huge PR exercise has been undertaken in regard to taxation in agriculture. The accelerated tax relief on farm pollution in the context of the EU nitrates directives is welcome. However, the stamp duty relief for the exchange of farm land among farmers for the purpose of consolidation is very misleading because it cannot benefit many people. Only a small number of farmers are involved in this type of land exchange and this provision will not have any major effect. A real opportunity has been lost in this budget.
The agriculture scene has changed recently and the direct payments, which were agreed and have been provided for, are now the order of the day. It is worrying to consider what will happen to agriculture in the next few years. Yesterday’s Budget Statement was an opportunity to make money available to promote our food industry. Ireland has lost out hugely on the promotion of our food. Foot and mouth disease and BSE created difficulties which have given our food products a bad name on the world food market, particularly the European market. That matter must be addressed. It is not viable for people to stay working on the land. We missed a golden chance yesterday to put in place a structured programme to develop our agriculture industry.
The House heard earlier about worries in regard to industry, which can be volatile and can move to other parts of the world where wages are lower. That is an issue with which this economy must contend. We refer a great deal to stealth taxes. In this regard, very little extra finance has been made available to local authorities. Local authority members from all parties will be in a very difficult position when they try to strike rates in the next few weeks because they are not sufficiently financed. The increases in stealth taxes such as planning charges, water charges and other taxes which have been introduced by various local authorities are driving up the cost of living. It is unfair to run local authorities in such a fashion. The Government has played a trick by imposing taxes locally, which makes it extremely difficult for local authorities to work.
No Government should be proud that it has given just €12 to pensioners who have contributed so much to an economy which we all acknowledge is performing well and in which there is more wealth than some years ago.
Minister for Transport (Mr. Cullen): The provision of a ten year envelope for transport infrastructure in the 2005 budget provides the flexibility, resources and framework to complete the transformation of our country’s transport infrastructure. The new ten year envelope is a radical departure in forward budgeting designed to deliver a state-of-the-art transport system by 2014. The Minister for Finance has done his part and I look forward to doing mine. Investment in transport is different from that in other areas. It involves long and detailed planning and extended completion times. Yesterday’s announcement by my colleague, the Minister for Finance, recognises these differences and gives us the flexibility to respond to them.
More than €7 billion of Exchequer funds will have been invested in the transport system in the period 1999-2004. On the national roads side, more than €5 billion has been invested in improving the reliability of the road transport system by upgrading major inter-urban routes to motorway or high quality dual carriageway standard, removing major bottlenecks, remedying capacity deficiencies and reducing journey times. On the public transport side, the rail network has been upgraded and redeveloped following a number of years of under-investment.
In regard to the period 2005-09, the multi-annual financial agreement between my Department and the Department of Finance provides an allocation of €10.2 billion, including €900 million from the private sector for investment in roads, public transport and regional airports. Of the €2.5 billion which is available for public transport in the period to 2008, €1.3 billion is for the greater Dublin area, with the balance for the regions.
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