Tuesday, 6 December 2011
Dáil Éireann Debate
Minister for Finance (Deputy Michael Noonan): Some minor amendments were made to the published draft of the speech so I will circulate a new copy to Members of the House, in the interests of being exact.
On this day 90 years ago, 6 December 1921, the Treaty was signed. The Treaty restored Ireland’s sovereignty which for so long had been lost. In the last days of the Treaty negotiations, the British conceded fiscal autonomy to Ireland. This, as Dick Mulcahy said, “Gave Ireland back her purse”.
I am afraid the Fianna Fáil-Green Party Government gave the purse away again this time last year as fiscal autonomy was conceded to the IMF and the European authorities. After a decade of disastrous decisions the building bubble burst and a Government which was riven with dissension could no longer find anyone to lend money to it, so it was forced to turn to the IMF and the European authorities to provide funding.
The people of Ireland have paid a very high price for this mismanagement of the economy. Personal wealth has been destroyed, thousands of people are sinking into poverty, emigration has returned and unemployment is far too high. The task of this Government is to regain control over Ireland’s fiscal and economic policies, to grow the economy again and to get people back to work. Those that have lost their jobs and young people who cannot get jobs have suffered most. The primary purpose of this budget is to support the creation of jobs in the short term, the medium term and the long term.
On 25 February 2011, the Irish people spoke and delivered a resounding mandate to Fine Gael and Labour. The mandate is to set the economy back on the road to recovery and to get people back to work. The new Government has made a strong start. We have restored political stability and have successfully renegotiated many of the conditions of the EU-IMF programme. We have restored Ireland’s reputation abroad, a reputation which was so severely damaged by the last Government. We have restored Ireland’s international credibility and all serious international commentators now believe that Ireland’s longer term position is sustainable and that with prudent management over the next four years we will get over our difficulties.
As a small country with an open economy, the crisis in the eurozone has a profound effect on our economic prospects. We are committed to playing a full part in resolving this crisis, so that the benefit of the common currency will continue for Ireland.
In spite of uncertainty, a gradual recovery has begun to take hold. Next year, the Department of Finance is forecasting an increase of 1.3% in the volume of GDP with around a 2.5% increase in nominal GDP, which is the primary driver for revenue growth. All forecasters agree that growth will be significantly stronger in 2013 and subsequent years. This growth is driven by the exporting sector, both international and indigenous.
Much of Ireland’s growth at present can be attributed to the attractiveness of Ireland for inward investment. The corporate tax rate of 12.5% and our place in Europe are central to this. We made a commitment in the programme for Government to maintain the 12.5% rate and we will do so.
Deputy Michael Noonan: The Government has successfully protected this rate even under international pressure, given our fiscal state. The Government successfully negotiated a reduction of €10 billion in the interest rate margin that was far bigger than originally offered and the Taoiseach made no concession on the corporate tax rate in the course of those negotiations.
Deputy Michael Noonan: While the package of attractions for inward investment has been very successful, I believe with some adjustments more jobs can be created. As part of that strategy, I will introduce a special assignee relief programme. This will allow multinational and indigenous companies to attract key people to Ireland so as to create more jobs and to facilitate the development and expansion of businesses in Ireland.
After consultation with the Tánaiste, Deputy Eamon Gilmore, I am also introducing a foreign earnings deduction to further support our export drive by aiding companies seeking to expand into emerging markets. This targeted deduction will apply where an individual spends 60 days a year developing markets for Ireland in Brazil, Russia, India, China or South Africa, the so called, BRICS countries. I will be giving details of these and additional measures in the Finance Bill.
The international financial services industry in Ireland has been one of the great export success stories of the last 20 years. The sector employs more than 30,000 people and contributes over €1 billion in tax to the Exchequer. However, financial services are highly mobile and we must compete within a global market to ensure that the sector in Ireland continues to grow. Our commitment to the sector has been re-affirmed in the five year strategy for the industry which was launched by the Taoiseach in July this year. I intend to introduce a package of measures in the Finance Bill to support the continued success of the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry.
Export growth from the multinational sector is not sufficient to drive the full economic recovery we are seeking. The domestic sector will be the real engine for job creation across the country. Already, indigenous companies in certain sectors are expanding and growing their operations. The Government will support and enhance their efforts through targeted measures for the SME sector.
In addition to the loan guarantee fund and micro-finance fund announced by the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, I am announcing that the first €100,000 of research and development expenditure of all companies will be allowed on a volume basis for the purpose of the research and development tax credit; the outsourcing arrangements for research and development purposes will be improved in a targeted manner to allow the greater of the existing percentage arrangement or €100,000; companies will have the option to use some portion of the research and development credit to reward key employees who have been involved in the development of research and development; the corporate tax exemption for new start-up companies is being extended for the next three years and will be available for companies that commence trading in 2012, 2013 and 2014; and as already announced, smaller companies will also be able to avail of the planned foreign earnings deduction where they plan to expand their export markets into the BRICS countries. I believe that these targeted measures will provide a stimulus for SMEs as they seek to develop, grow and expand their markets.
Deputies will also be aware that the employment and investment incentive is in operation since 25 November last. This incentive assists in raising risk capital for firms operating in more sectors of the economy than was previously allowed under the business expansion scheme. Other job creation measures will also be examined with a view to their inclusion in the Finance Bill.
Active, energetic and profitable farming is fundamental to the agrifood sector. Irish food is now a world brand leader, and when milk quotas end in 2015 and as food prices are maintained or increased, we want Irish farmers to produce more to supply the emerging markets, where there is significant and growing demand for Irish food.
The food industry must be supported by efficient and progressive primary producers. I wish to encourage the transfer of farms to the next generation of farmers. Many young people from farming families were attracted off the land by the rewards of the building industry, but they are now returning to the family farm. The agricultural colleges are full and many young men and women now see their future in farming.
Later in my speech I will be announcing significant reductions in the rate of stamp duty on the transfer of commercial property. The new rate will also apply to farmland and the present relief for transfers to close relatives will continue to apply.
Deputy Michael Noonan: I am also modifying retirement relief from capital gains tax so that it better incentivises the timely transfers of farms and businesses before the current owners reach the age of 66. The approach is in keeping with the policy of my colleague the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, of encouraging timely transfer of farm assets and improving the age profile of farming. Full details of these measures will be in the Finance Bill.
There is a growing acceptance that greater use of the farm partnership model can not only help to increase scale, but can also help to develop the sector’s skill set through attracting more new entrants to the sector. To encourage farm partnership formation, I am introducing an enhanced 50% stock relief for all registered farm partnerships and a 100% stock relief for certain young trained farmers forming such partnerships. Subject to clearance with the European Commission under state aid rules, these reliefs will be made available until December 2015.
The creation of a second reduced rate of VAT of 9% and halving the rate of employer’s PRSI on jobs with earnings up to €356 per week in the jobs initiative has boosted tourism and stimulated employment. The 9% rate of VAT will also apply to open farms which otherwise would be subject to a higher rate.
It is interesting to note, that the latest live register figures show that 125,000 people leftthe live register to take up employment this year up to the end of October. This shows how fluid the labour market is and also the difficulty with attempting to assign the creation of new jobs to specific initiatives. However, the tourism and hospitality industry believe that the jobs initiative has been very effective in generating additional business.
The Government was disappointed earlier this year when Aer Lingus and Ryanair were unwilling to provide additional flights to Ireland in exchange for the abolition of the air travel tax. This offer is still on the table and while the Government appreciates the contribution to the Irish economy being made by the main carriers, we want them to bring additional tourists into the country and we are prepared to negotiate a new mandate.
At the Global Irish Forum held in Dublin Castle earlier this year, it was announced that 2013 would be the year of the gathering, a year long programme of festivals, events and other gatherings designed to encourage the global Irish to visit Ireland in 2013 and to increase tourist numbers by 325,000. A special allocation will be made in the Revised Estimates Volume early in the New Year and it will be launched on St. Patrick’s Day.
All the measures I am announcing for the different sectors of the economy have one objective: to stimulate additional economic growth and to create additional jobs. As well as introducing policies to assist growth, we must also address the constraints on growth. The situation in the property sector at present represents a significant drag on growth throughout the country.
When the development and construction bubble burst, the consequences were dire. A sector which amounted to around 20% of GDP has been reduced this year to around 5%. A massive hole was made in the Government finances through the loss of stamp duty, VAT, income tax, PRSI and capital gains tax. Even worse, the previous Government neglected the imploding construction sector, which has lost 164,000 jobs since the first half of 2007. We cannot restore all of these jobs and the industry will never go back to 20% of GDP. However, we can create the right conditions for construction employment to return to normal sustainable levels.
The absence of activity in the property market and the decline in house values are having a negative effect on the domestic economy. When the value of family homes is going down, even those with good incomes and without debt, tend to save rather than spend or invest, and consumer sentiment, albeit improving of late, will be affected by this.
All successful economies have a strong construction and development sector and a sustainable property sector. The Government has already announced a multiannual capital budget of €17 billion and I am now announcing the following measures to restore some confidence and to renew activity in the construction, development and property sectors.
The stamp duty rate for commercial property transfers will be reduced from the current top rate of 6% to a flat rate of 2% on all amounts from midnight tonight in respect of all non-residential property, including farmland as well as commercial and industrial buildings. Bringing down the cost of acquiring commercial property will have a positive effect on the property sector and indirectly on jobs in construction and related activities. The current stamp duty arrangements for residential property will continue to apply with 1% on transactions up to and including €1 million and 2% thereafter.
I am also introducing a capital gains tax incentive for property purchased between midnight tonight and the end of 2013. If a property is bought during this period and held for at least seven years, the gain attributable to that seven year holding period will be relieved from capital gains tax.
I am fully aware of the difficulties that upward only rent reviews are causing for some businesses. Despite exhaustive work in recent months by my colleague the Minister for Justice, Equality and Defence, Deputy Alan Shatter, including the preparation of draft legislation, it has not proved possible to develop a targeted scheme to tackle this issue that would not be vulnerable to legal challenge or require compensation to be paid to landlords. I do not believe the Opposition would want us to compensate landlords for any losses in their rent.
This is a matter of particular interest to NAMA which must deal with the problems caused by upward only rent reviews which apply to NAMA properties. NAMA advises me that it has a policy guidance for dealing with tenants’ difficulties arising from upward only rent reviews, which it has agreed to publish today. The NAMA policy guidance provides an opportunity for NAMA to approve rent reductions where it can be shown that rents are in excess of the current market levels and viability is threatened. The policy also provides for the appointment of an independent valuation of market rent where necessary. NAMA has also advised me that where a tenant is not getting satisfaction in negotiations with his NAMA landlord, he can contact NAMA directly and it assures us that any queries will be dealt with speedily. I welcome NAMA’s realistic approach to this difficult issue. Now that NAMA has acquired €74 billion worth of property, it can be seen this arrangement will have widespread implications.
The Government is committed to helping address the problems faced by those who bought homes at the height of the property boom, between 2004 and 2008. Therefore, I am going to fulfil the commitment in the programme for Government to increase the rate of mortgage interest relief to 30% for first time buyers who took out their first mortgage in that period.
I also confirm the decision made by my predecessor that mortgage interest relief will no longer be available to house purchasers who purchase after the end of 2012 and will be fully abolished from 2018. For those who wish to buy a home in 2012, I am providing today that: first time buyers will get mortgage interest relief at a rate of 25%, rather than the 15% proposed by the previous Government; and non-first time buyers will benefit from relief at 15% rather than the reduced rate of 10% proposed by the last Government. Any young couples listening to me who are thinking of buying a home will have increased mortgage interest relief if they purchase in 2012 ——
Turning to those in mortgage difficulty, the Government is acutely aware of the increasing financial stress that some households are facing arising from difficulty in meeting their mortgage commitments. It was for this reason that the Government took the significant decision to establish a group to consider further necessary actions and to report within a very short time frame. The Government is now progressing with the implementation of the group’s recommendations as well as assessing other approaches as suggested by Deputies, Senators and by interest groups who made submissions. I expect to make a formal announcement on the next steps shortly.
As part of this Government’s determination to develop a fairer tax code, legacy property reliefs must be reduced. My Department has undertaken an economic impact assessment of the measures proposed by the previous Government. It is quite clear that these proposals were unworkable and would have done significant and lasting damage to an already distressed property market, creating real difficulties for many ordinary people. This report is being finalised and will be published with the Finance Bill.
The report also highlights the vulnerability of small investors to insolvency if they lose these reliefs, a finding backed up by recent research from the Central Bank that shows high levels of negative equity and arrears in the buy-to-let mortgage sector. Therefore, I have decided not to proceed with the proposals put forward by the previous Government in last year’s budget. The report concludes that reliefs to small scale investors should not be restricted but that there is scope for larger investors to contribute more. The Government also believes that large scale investors in property that attracts tax reliefs can and should make more of a contribution.  Therefore, in the interests of fairness, a property relief surcharge of 5% will be imposed on investors with an annual gross income more than €100,000. This will apply on the amount of income sheltered by property reliefs in a given year. Reliefs in section 23 type investments will not be terminated or otherwise restricted for investors with an annual gross income under €100,000 as these are at the greatest risk of insolvency.
Investors in accelerated capital allowance schemes will no longer be able to use any capital allowance beyond the tax life of the particular scheme where that tax life ends after 1 January 2015. Where the tax life of a scheme has ended before 1 January 2015, no carry forward of allowances into 2015 will be allowed. The delayed implementation of this measure gives individuals time to adjust. Full details will be in the Finance Bill.
As NAMA has completed its loan acquisition phase and is now concentrating fully on the active management of the assets under its care, the NAMA board, with my agreement, asked Michael Geoghegan, a former CEO of HSBC, to review NAMA and report his findings to me. His report was generally positive but arising from it, I am establishing an advisory group to advise me on NAMA’s strategy and its capacity to deliver on that strategy through property disposal and the ongoing management of assets. In making appointments to the NAMA board, the advisory group will help me identify candidates with entrepreneurial and property skills. Recommendations will also be provided by the group on strategies for NAMA to attract international capital to Ireland and to provide advice in respect of lessons to be learned from asset management agencies in other countries. I will issue a direction order to NAMA under section 14 of the National Asset Management Agency Act 2009 setting out the work of the advisory group and requiring NAMA to facilitate its operation.
A strong and vibrant banking sector is vital to our recovery and to any growing economy. Credit is the lifeblood of the economy and without adequate credit availability, businesses will find it difficult to maintain the jobs they have, let alone create new jobs. Also, without sufficient credit, it will not be possible for the property market to stabilise.
Since taking office, the Government has completed a large scale restructuring of the banking sector, in which the two largest institutions will function as universal pillar banks. The more problematic institutions have been ring-fenced into a single entity. These restructured and recapitalised banks must now serve the different sectors of the economy. We have set the two pillar banks ambitious SME lending targets of €3 billion each this year, €3.5 billion each next year and €4 billion each in 2013. By making this credit available we are supporting increased activity in a key sector for job creation. The banks must also make mortgage credit available to allow people to avail of the mortgage interest relief incentives announced.
The medium-term fiscal statement set out the Government’s policies on budgetary reform and the path to sustainable public finances, both of which are essential for the creation of jobs. In the light of the revenue and expenditure figures for November and the other information that has come to hand, my Department now estimates that the general Government deficit for this year will be 10.1% of GDP. This is lower than the 10.6% required by the EU-IMF programme. The general Government deficit target for 2012 is 8.6% of GDP. No matter what happens in the wider eurozone, Ireland needs to restore sustainability to its public finances. If the eurozone crisis recedes, we will be among the best placed to grow quickly, as evidenced by the European Commission’s growth forecasts. If the eurozone crisis persists, it is equally important for the State to reduce its dependence on borrowing.
To continue to improve the sustainability of the public finances, we need €3.8 billion of additional fiscal consolidation in 2012. The Minister for Public Expenditure and Reform, Deputy Brendan Howlin, set out the €750 million capital expenditure consolidation on 10 November and yesterday set out how the €1.45 billion current expenditure consolidation would be implemented. In regard to the €1.6 billion revenue consolidation required in 2012, the full year effect of measures already introduced is €600 million, which means that I am announcing additional new tax measures today worth €1 billion approximately.
Deputy Michael Noonan: That is the key issue for this budget. I want to make it clear that there will be no increase in income tax in this budget. In case there is any doubt, there will be no increases in rates, no narrowing of bands and no reductions in personal tax credits. Wages and salaries in January will be no lower than in December; therefore, people will continue to have discretion on how they spend their income.
Deputy Michael Noonan: If one looks at the supporting documents and at the tables of income for different families and people in different family situations, one will find that we have achieved a first. If one looks across different families and partnerships, one will see the income from their wages and salaries will be exactly the same. I do not think that has ever happened before in a budget.
The Government has very carefully considered the options open to it. We must find €1 billion and there are options. There are five main sources of taxes — corporation tax, income tax, VAT, excise and capital taxes. Everybody knows that under the EU-IMF programme, expenditure has to decrease and taxes have to increase. Direct taxes such as income tax and PRSI have abiggerimpact on jobs than indirect taxes. If one taxes something, one usually gets less of it and income tax and PRSI are taxes on jobs. Indirect taxes have a lower impact on economic growth and jobs. That is why the bulk of the adjustments being made in this budget will be through increases in VAT and capital taxes.
The Opposition has already criticised this approach, but it should make clear in its replies to the budget what its alternatives are. Is it suggesting income tax should be increased or that we should welch on our commitment that the 12.5% corporation tax rate is sacrosanct?
The majority of revenue adjustments to date have been achieved through increases in direct taxation. The marginal rate of taxation on income is now 52% for PAYE workers and 55% for the self-employed. The OECD has concluded that Ireland has the most progressive tax system of the EU members of its organisation and revenue records show that the top 5% of income earners pay 44% of income tax. When the marginal rates of tax are very high, jobs are lost. Indirect taxes have a less adverse impact on employment. That is why in this budget indirect taxes rather than taxes on income are being increased. That does not mean that the wealthy should not carry the principal burden of tax. The minimum effective tax restriction on high earners is designed to ensure this by imposing a minimum effective income tax rate of 30% for those subject to the full restriction. In addition, they are obliged to pay 4% in PRSI and up to 10% in the universal social charge, bringing the minimum effective rate to 44%. This is a major and entirely justifiable change from the situation that prevailed a short number of years ago when a small number of them paid no income tax at all. Reports from the Revenue Commissioners indicate that the restriction is working. I will keep this restriction under review and may return to the topic in budget 2013, depending on the conclusions of a forthcoming Revenue report.
I refer to another fairness measure we are introducing today. When the Government was planning this budget, it decided that it had to create jobs but that it had to be fair. It has two primary objectives. As a fairness measure, we have reviewed the impact of the universal social charge and I am pleased to announce that today I am proposing changes to the charge that will help the low-paid, part-time and seasonal workers in labour intensive areas such as the hospitality sector and farming. From 1 January 2012, the exemption level will be raised from €4,004 to €10,036.
The Revenue Commissioners will collect the universal social charge on a cumulative basis next year, thereby reducing the risks of over or underpayment of the charge. This will offset the costs of the very positive change made for the lower paid.
The previous Government agreed with the IMF and the European authorities to increase VAT by 2% — 1% in 2013 and 1% in 2014. In the interests of giving certainty, we are bringing these increases forward to 2012. During the lifetime of the Government we will not increase the standard rate of VAT beyond the 23% being announced today. That is another commitment in the programme for Government we intend to fulfil.
Other European countries have tended to place the burden of fiscal correction on indirect taxes rather than income tax. At this point, 20 of the 27 EU member states have increased VAT in the past four years and further increases are being considered by several member states. It should be borne in mind when people debate this sensitive issue that most food, children clothes, oral medicines and other goods and services will remain at the zero VAT rate.
Deputy Michael Noonan: The 9% rate introduced in the jobs initiative for certain services and the 13.5% rate that applies to home heating oil, residential housing, general repairs and maintenance works will remain the same. When the Opposition is scaremongering the elderly about not being able to fill the oil tank for central heating, it would want to remember that the rate of VAT which applies to central heating fuel is 13.5%, not 21% as certain Deputies opposite have claimed.
Deputy Michael Noonan: For the majority of the past 20 years the VAT differential between the Republic and Northern Ireland has been 3.5% and it was as high as 6.5% as recently as 2009. After the increase I am announcing, the differential will not be 3.5%, it will be 3%. On this basis, I do not expect any increase in cross-Border shopping as a result of the VAT increase.
Some opponents of the VAT change — experts in mental arithmetic — claim that the increase will cost households €500 per annum on average. I am informed that this calculation is incorrect, as they have not taken into account the fact that business contributes significantly——
Deputy Michael Noonan: I am introducing a number of measures that will meet that objective. I am increasing the current rate of capital acquisitions tax from 25% to 30%; increasing capital gains tax from 25% to 30%; reducing the group A tax free threshold for capital acquisitions tax from €332,084 to €250,000; increasing DIRT from 27% to 30%, as we do not need to incentivise savings when the savings ratio has reached a phenomenal 14%; broadening the base for PRSI through the removal of the remaining 50% employer PRSI relief on employee pensions, therein following the example of the Government last year, which removed the first tranche; and further broadening the base for PRSI to cover rental, investment and other forms of income. I will introduce this measure, but it will not become effective until 2013, as we need some time to prepare. We are also increasing the rate of notional distribution on the highest value approved retirement funds, ARFs, and similar products to 6%. When the pension levy was introduced, many Members of the Opposition argued that this should have been done. It will be introduced via the finance Bill. We are increasing the rate of tax on the transfer of an ARF on someone’s death to a child over 21 years from 20% to 30%, which is intended to bring all capital taxes into line at the 30% rate.
I am abolishing the citizenship condition for payment of the domicile levy so as to ensure tax exiles cannot avoid it by renouncing their citizenship. I intend to keep the contentious issue of the tax treatment of tax exiles under constant review.
I propose to increase the carbon tax on fossil fuels introduced in budget 2010 from the equivalent of €15 per tonne to €20 per tonne. The increase will be applied to petrol and auto diesel from midnight. However, in view of the impact this increase will have on home heating costs during the winter months, the increase on other fuels will not take effect until May 2012. This increase is half of that proposed in the previous Government’s four year plan for budget 2012. Since I am not going to apply the carbon tax to solid fuels, there will be no increases in the case of peat or coal, be it a bale of briquettes, a bag of blocks, etc.
Deputy Michael Noonan: Consistent with our promise in the programme for Government, I am allowing farmers a double income tax deduction for increased costs arising from the change in carbon tax. Farmers will also be significant beneficiaries of the reduction in the universal social charge.
A measure that will benefit businesses is a reduction in the VAT rate on district heating from 21% to 13.5%. This will bring district heating into line with the majority of heating supplies. I am also amending the VAT refund order for farm construction to provide that farmers may claim a refund on wind turbines purchased from 1 January 2012.
Owing to the changes in pension tax relief adopted in last year’s budget and the Finance Act 2011 and the pension fund levy required to fund the jobs initiative, the pensions sector will make a sizeable contribution of approximately €750 million to the Exchequer in 2012. Although the EU-IMF programme commits us to move to standard rate relief on pension contributions, I do not propose to do this or make changes to the existing marginal rate relief at this time. However, the incentive regime for supplementary pension provision will need to be reformed to make the system sustainable and more equitable in the long term. My Department and the Revenue Commissioners will work with the various stakeholders during the next year to develop a workable solution. This will include consultation on whether and to what degree pension funds might invest more in Ireland than abroad, as advocated by one of our leading trade unions.
Deputy Michael Noonan: To protect vulnerable groups in society, it is proposed to provide a waiver for those on mortgage interest supplement and those residing in certain categories of unfinished housing estates.
Deputy Michael Noonan: There have been significant reductions in revenues from VRT and motor tax as a result of, among other factors, the consumer movement towards buying cleaner and cheaper cars. I am initiating a consultation process with the motor industry and other interested parties to commence in early 2012 to review options for the improvement in VRT and motor tax revenues in future years. In the meantime, however, the Minister will make provision for an increase in motor tax effective from 1 January 2012. This will generate additional income of some €47 million in 2012 to be used for Exchequer deficit reduction purposes.
I propose to have my Department engage in a consultation process with the motor industry with a view to putting in place an export refund scheme that would allow for a refund of VRT contained in a vehicle on the permanent export of the vehicle to another member state. This would restore a balance to the sector in the context of the number of imported cars. This would also be beneficial to the Exchequer and the environment through the displacement of used cars with new or less polluting cars.
Absenteeism is a problem in the public and private sectors. One provision in the tax code may incentivise workers to absent themselves from work — where the employer makes up the balance of their pay, they may have more take home pay than if they were at work.
Deputy Michael Noonan: Therefore, I am removing the existing tax exemption for the first 36 days of illness benefit and occupational injury benefit in order that this incentive to absenteeism is removed. The Minister for Social Protection, Deputy Joan Burton, will in 2012 introduce proposals to deal with absenteeism in the public and private sectors. She will engage in discussions with all interested parties and invite submissions from the public with a view to introducing a range of proposals.
Deputy Michael Noonan: Excise duty on a packet of 20 cigarettes is being increased by 25 cent from midnight. This increase will be applied to other tobacco products on a pro rata basis at the same time.
While the VAT increase will apply to alcohol, I am not increasing excise on alcohol. There has been much discussion on the issue of low cost alcohol products being sold in off-licences, particularly supermarkets. I am aware of the social and health consequences of the availability of very cheap alcohol leading to the abuse of alcohol, particularly by young people. The Minister of State at the Department of Health, Deputy Róisín Shortall, has developed a paper on the causes and consequences of alcohol abuse and in early 2012 will legislate to deal with the issues identified, including the low cost of alcohol sold in off-licences and supermarkets.
Deputy Michael Noonan: The next provision is one for the non-Puritan Members of the Opposition. I will introduce legislation to facilitate the extension of betting duty on remote betting and the introduction of betting intermediaries duty——
The core message of this Government is to get Ireland working again. It is the unifying goal of the new Fine Gael-Labour coalition Government. Last year, I said that the then Government had learned nothing and forgotten nothing. Twice in a generation, reckless spending on the back of irresponsible politics has landed our country in a fiscal crisis.
In my time in politics, I have experienced many economic downturns. In previous recessions the policy position was to get the country back to where it was before the recession began. There is no point in following that approach now. If we go back to where we were before it all began we will be back in the bubble economy when Ministers held a naïve belief that all of us could become wealthy by selling property to each other——
Deputy Michael Noonan: ——and in their hubris, the captains and kings of the development industry advised citizens of other countries on easy ways to get rich. If we need a role model it should be the economy of the mid to late 1990s where over 600,000 jobs were created and growth was based on competitiveness, high educational standards, a credit flow from the banks to enterprise and hard work.
Deputy Michael Noonan: This Government will not repeat the mistakes of the past. We are changing the way politics works to make it more transparent, more accountable and designed to secure the best outcome for the Irish people.
We are implementing our programme for Government commitments to improve the terms of the EU-IMF programme. This is a work in progress but our results to date include a reduction in the penal interest rate margin on the bailout package, which is worth a reduction of €10 billion in the burden of debt; the creation of jobs through the introduction of the jobs initiative——
Deputy Michael Noonan: The budget changes the economic strategy of the previous Government to put a much greater focus on growth and employment. It balances the need to restore confidence in Ireland’s fiscal position with the key objective of supporting economic growth that delivers jobs.
In conclusion, I would like to associate myself with the comments made by my colleague the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, yesterday about the late Brian Lenihan. Brian Lenihan had, as Minister for Finance, a most difficult task, which he fulfilled with great courage and dignity. Go ndéanfaidh Dia trócaire ar a anam. I commend this budget to the House.
Deputy Michael McGrath: I thank the Minister for Finance for his comments about our late colleague, Brian Lenihan, and I want to honour the memory of my predecessor as Fianna Fáil finance spokesperson, former deputy leader of our party and the man who, as Minister for Finance, introduced the last budget one year ago tomorrow. We can all agree that Brian’s patriotism and courage in the face of the greatest possible adversity remains an inspiration to all of us as we confront together the country’s enormous difficulties.
Today is not about the Government versus the Opposition. All of us have the privilege of being elected Members of Dáil Éireann and it is our duty to put the Irish people ahead of any narrow party political interests. I have no doubt we share the same fundamental objectives for this country — to bring about economic recovery, to improve the quality of life of our citizens and to give them hope during this dark economic period. It is our common purpose to make this country the best it can possibly be.
Today is the day Fine Gael and Labour accept the responsibility that comes with being in power. The Government can no longer hide behind the actions or decisions of the previous Government. When this Government came into office in March, the budget for the year had already been passed for them despite their trenchant opposition to it. Fine Gael and Labour had no major budgetary decisions to make until this week. From now on, they will be judged on the actions of the Government, their political choices and the result they bring for our people. Over the past two days, the Government has made known its political choices. Let us be clear that, difficult as the circumstances were, the Government had choices. It was working within the framework of the EU-IMF deal but, in the words of the Minister for Finance, Deputy Michael Noonan, speaking at the end of the last quarterly review by the troika in October, “the troika made it clear that they had no difficulty in substituting one fiscal measure for another with an equal value”. Let there be no equivocation on this point. The decisions laid before this House yesterday and today are the decisions of Fine Gael and Labour and nobody else. The EU and IMF did not tell this Government to cut child benefit for third and subsequent children, the EU and IMF did not tell this Government to increase the drug payments scheme threshold to €132 per month for hard-pressed working families, the EU and IMF did not tell this Government to cut the fuel allowance to vulnerable, elderly people by six weeks——
Deputy Michael McGrath: ——and the EU and IMF did not tell the Government to breach its self-imposed pay cap for special advisers to the tune of €35,000. These were political choices made by Fine Gael and the Labour Party. Fianna Fáil has committed itself to a positive approach to opposition. We will not oppose measures for the sake of it, nor have we done so. If we agree with what the Government is doing, we will support it. If we disagree, we will oppose it and put forward what we believe is a credible and realistic alternative. I regret that this was not the approach of Fine Gael and the Labour Party in opposition. Their approach was utterly cynical. Measures that were obviously necessary for this country were opposed tooth and nail by Fine Gael in opposition. Much of the Opposition rhetoric, not to mention reckless election promises, are now coming home to roost. While in opposition and during the election, Fine Gael and Labour gave the Irish people the distinct impression that there would be an easier and softer way of tackling our problems. Now that those parties have shown their hand, the Irish people have been left bitterly disappointed.
Deputy Michael McGrath: Various people who now sit around the Cabinet table have described this country as being banjaxed, as an economic corpse and as a country in a pawn shop. As a true republican party, we will not adopt such a negative, self-serving, corrosive style of opposition.
Deputy Michael McGrath: I know that Government Deputies would rather there were no Opposition Members in this House but there is an Opposition. We may be small in number but we will make our voices heard, increasingly so from now on. We will call it as we see it but we will never portray this country in a light that is unfair or that will undermine the efforts to improve life for our people. This is a great country going through an extraordinarily difficult period in its economic history but come through it, I have no doubt, we will. The Irish people have endured a great deal over the past three years. Successive budgets have forced more and more sacrifice on them and many people are struggling to get by on a day-to-day basis. People are worried about providing for their children today and what the future will bring those children tomorrow. High levels of unemployment and forced emigration have re-emerged as an unwelcome feature in every community across the country. Many families will spend this Christmas without loved ones, with young Irish men and women working as far away as Australia, the US and Canada. Their absence and their aspiration for a future here must be given expression in this House today.
Deputy Michael McGrath: Over the coming days, people will come to terms with the detail of the cuts and taxation measures announced yesterday and today. They will find many unpleasant surprises buried in the detail of the announcements that have been made, including social welfare rate cuts. For example, for pensioners with less than an average of 48 weeks’ contributions per year — basically anyone who left the workforce for any period of time, including mothers who spent time at home to mind children — will now be deprived of a pension, as was made clear in the statement yesterday. Disgracefully, for widows, the Minister is increasing the number of years contributions——
Deputy Michael McGrath: The Government is increasing the number of years contributions required to qualify for a widow’s pension from three years to ten years. One-parent family payment is also being cut by bringing the qualifying age of a child to seven. These are rate cuts; they can be dressed up whatever way the Government wants but they are what they are and the people will know it when they get their welfare payments.
Deputy Michael McGrath: The Government pretends that rates are being maintained but for many welfare claimants, weekly income will be substantially cut. In the cold light of day, and I hope the Minister reflects on this, there are some measures that should be reconsidered. The cuts the Minister is imposing on young people with disabilities are deeply unfair.
Deputy Michael McGrath: It is a heartless and cruel cut. Cutting up to €88 per week from young people going on disability allowance, some of whom have severe and profound disabilities, is totally unnecessary and should be reversed.
Deputy Michael McGrath: The Minister certainly has the backbenchers to drown us out, he has the numbers to bulldoze through whatever measures he wants; he does not need the support of Fianna Fáil or anyone else in Opposition but for the sake of the €7 million saved with this cut, he should have a second look.
In education, the changes announced will effectively mean some schools will no longer provide guidance counselling services for students. If they do, they will see an increase in the pupil-teacher ratio. At a time when young people are under huge pressure to perform in school and to conform with their peers, often the school guidance counsellor is the safety net that prevents a personal problem from escalating even further. With youth mental health and suicide a growing problem for our young people, this is a cut that could come at a high personal price for many.
Education is a core value of our party. As a country, given the direction our economy is heading, having a postgraduate qualification is becoming increasingly necessary for our graduates. The cuts planned in postgraduate education are socially regressive and economically counterproductive. These changes will mean in a great many cases that a son or daughter of a widow, a carer or someone from a low income family will no longer have the option of pursuing postgraduate education. This is not right. Education is a gateway to a better future, for individuals and for the country.
Deputy Michael McGrath: ——will save a miserly €15 million. Postgraduate education should not be the preserve of the wealthy and if the Minister goes ahead with these cuts, that is exactly what the outcome will be. When that information is placed alongside the report in today’s The Irish Times that there are 200 people in the third level sector earning €150,000 and more, with 100 of them earning more than €200,000, where is the fairness?
Deputy Michael McGrath: On coming into office nine months ago, this Government asked to be judged on its success in tackling the jobs crisis. If it succeeds, I and my party will be the first to congratulate it. The retention of existing jobs and the creation of new jobs must be the number one priority for all of us. We can all accept that making inroads into Ireland’s unemployment rate will help to solve so many other problems, as the Tánaiste so regularly pointed out in opposition. It would reduce our social welfare bill, improve our income tax take and increase the disposable income households have. It would be the most painless way of reducing our budget deficit and getting our economy back on track.
On entering office, the Taoiseach promised a jobs budget within 100 days in Government. He delivered a jobs initiative in May that was funded by a raid on private pension savings. I regret that the initiative has so far failed to deliver.
The Government pointed to increased tourism numbers in 2011. There is evidence of that and we welcome it. That increase is compared to the exceptionally low base in 2010 and the signs of recovery in tourism were evident before the VAT reduction took effect in July.
Today’s budget fails to give any meaningful hope to those looking for a job. The Minister outlined some measures to give a boost to job creation, and we welcome those in so far as they go, particularly the changes for research and development. We included those in our budget submission. The Minister announced again the loan guarantee fund and the microfinance fund, along with some measures to companies that wish to export to the emerging economies. Those measures are welcome but they are limited. I expected enterprise, job creation and targeted initiatives would be at the centre of the budget and such measures are sadly lacking. There are no targets and there is no timetable for delivery and long gone is the talk of 100,000 new jobs. When I look at the detail of the document put before us today in the stability and growth update, net employment is expected to fall slightly next year by 0.2% with unemployment averaging 14.1% in 2012. The Government is effectively saying there will be no discernible improvement in the employment situation in 2012. That will be a major disappointment for many people looking for a job.
I am glad the Minister read our budget proposals on the universal social charge and the changes being introduced to exempt many part-time, casual and seasonal workers. That is a step in the right direction. I am sure Government backbenchers will agree that it is a modest change to a charge Fine Gael and Labour railed against from the Opposition benches last year. I am sure he will not seek to spin this change out of all proportion because the truth is that for anyone working full-time, it makes no difference, while for those earning less than €10,000 there can be a saving of up to €4 per week but that saving has been more than wiped out for anyone relying on any welfare benefit by the changes announced yesterday.
Deputy Michael McGrath: If we look at the combined effect of the changes announced yesterday and today, when we examine the figures closely, the people who will be hardest hit are working families with children and families dependent on welfare. If we take two examples we can see this. A working family with four children over the course of a year will lose €432 child benefit and while we can quibble about the exact amount, they will lose about €300 to €400 in VAT at least. On the drugs payment scheme they will pay an extra €144 and an extra €100 for the household charge. For motor tax, excise duty and carbon tax they will lose at a minimum another €100. If they are fortunate enough to have private health insurance, the VHI has said there will be a 50% increase in the premium arising from the measures announced yesterday. For a family of six people, a typical One Plus plan is about €2,000 so we can add another €1,000 for that. For such a working family irrespective of its income, the total cost of these budget measures is approximately €2,176. Let us take a second example of a family with three children aged three, eight and 14, where the parents paid income tax for years but where the principal earner lost his or her job at the start of the recession——
Deputy Michael McGrath: ——and the family now relies on mortgage interest supplement to heat the family home. They will lose €228 on child benefit. They will lose €120 on fuel allowance. For the youngest child they will lose €200 on the back to school allowance and for the two older children they will lose €105 between them. With much less disposable income the VAT increase will cost them approximately €250 — I am sure the Department of Finance officials will not disagree with that. Motor taxation, carbon tax and excise duty increases will cost them a minimum of €100, which is a very conservative figure. Critically in their case, as a family relying on mortgage interest supplement, the Government imposed a savage cut yesterday, reducing the budget for mortgage interest supplement by approximately a third and increasing the minimum contribution from €24 per week to €35 per week. That will cost that family €572 in a year. That is €1,575 for a family entirely dependent on welfare. That is the net effect of the budget introduced yesterday and today. These are just two examples of families already hard hit by the recession.
It would be unrealistic for me or anyone else on this side of the House to think that those people and other families would be unaffected by the budget — we are not that naïve. The major flaw in this budget is that its impact is not progressive — in fact it is a highly regressive budget. It is also socially regressive because of the choices the Minister has made. The token 5% surcharge on income that is sheltered by the reliefs is a pretty poor compromise for the Labour Party to make given the way it made hay when sitting on the Opposition benches and calling for the immediate abolition of all the property-related tax reliefs. If that is all it managed to negotiate in government, it does not say much for its clout in government.
Deputy Michael McGrath: It is all very well to tell people the Government is not increasing their income tax and not cutting their basic welfare rates, but that is cold comfort to families already struggling to get by and they realise the impact the budget will have on them. These families will certainly not take the advice of the Minister for Transport, Tourism and Sport, Deputy Varadkar, and book a holiday any time soon on the back of this budget.
On the broader economic picture, the detail of today’s document again reveals that the Government has downgraded its growth forecast for 2012. It has only been approximately three weeks since it came out with the medium-term fiscal statement proclaiming that growth in the economy would be 1.6%. The Minister’s speech and the accompanying detailed document now state that growth is forecast to be 1.3%, which does not inspire much confidence. Three weeks after coming out with the much heralded four-year plan, the medium-term fiscal statement, the Government has already downgraded the growth forecast for 2012 to 1.3%. It is correct that 1.6% was almost certainly too optimistic and I sincerely hope the 1.3% growth it has now forecast is achieved and exceeded.
With each passing day since that announcement in November the Government’s forecast for growth looked increasingly optimistic and out of line with the views of a range of independent commentators. We all know that consumption in the domestic economy continues to contract — the Government’s stability and growth update forecasts that to continue in 2012. Consumer sentiment is weak and the extra money the budget will take out of people’s pockets will make matters worse. While we hope the ECB will further reduce interest rates later this week — which the Government should demand be passed on to personal and business customers — on all other fronts the omens for consumer confidence have deteriorated in recent months and 2012 will, at best, be another fragile year for the domestic economy.
Our exports reached record levels this year and have the potential to bring us back to significant economic growth. Multinational companies operating in Ireland and many Irish businesses have performed remarkably well in the export sector. However, the risks we face are stark. Our ambitions for an export-led recovery are now under serious threat from the ongoing eurozone debt and financial crisis and its impact across the globe. Our main trading partner, the UK, has dramatically downgraded its growth forecast for 2012 from 2.5% of GDP to 0.7%. The European Commission has downgraded its forecast for the eurozone economy for next year from 1.8% to 0.5%. Others predict that the eurozone could slip back into recession. In simple terms, if there is less demand among our main trading partners for the goods and services we produce, our exports will suffer and it will act as a drag on economic growth.
In its quarterly economic commentary, published last week the ESRI downgraded Ireland’s growth forecast to just 0.9% for next year and forecast a contraction in GNP. The OECD took a similar outlook at just 1%. I am glad the Minister has come to the realisation that 1.6% was an outlier and has come back into line somewhat with other forecasts for the Irish economy for 2012. It may still prove to be too optimistic, but I hope it does not.
The 9% increase in income tax receipts the Minister forecast for 2012 before he even stood up in the House today appears ambitious even taking into account the carry-over effect from last year’s budget on which he relies. As the Minister is well aware, the last three months’ Exchequer returns have shown a significant deterioration in tax receipts. In November alone those receipts were €337 million off target and the White Paper on expenditure and receipt shows that the full-year tax take is estimated to be €700 million below target. This is even after it is flattered by the mid-year raid on private pensions yielding approximately €460 million. The Minister has pointed out many times that for every 1% of economic growth that is not achieved, the impact on the Exchequer is approximately €800 million. If 1% is taken off the growth for next year, the impact on the Exchequer finances and the targets in this budget will be very clear indeed.
When the political commitments made by Fine Gael and Labour, and the 2012 budget strategy outlined yesterday and today are taken into account, it is clear the Government has left itself very little room for manoeuvre for its remaining four years in office. On the main four income headings, it has used all its headroom in VAT in the first year by front-loading the 2% increase and capping the rate at 23%. It has committed to no income tax increases over the lifetime of the Government, although I note that is somewhat diluted in the text of the Minister’s speech in which he commits to no income tax increases in 2012. However, we can only take him at his word that there will be no income tax increases over the lifetime of the Government. We all agree that the corporation tax rate should not be increased and we can also agree that there is a limit to the amount of excise that can be put on a litre of petrol or a pint of beer.
On the expenditure side, the Government has ruled out any reductions in welfare rates in the next four years’ budgets as well as yesterday’s even though it has slipped in a few by the backdoor. It appears to be committed to the Croke Park Agreement to 2014. Therefore it has left very little room on either the revenue or expenditure side should its growth forecasts prove to be too optimistic. Without question it has made the easier political choices in this budget. However, I am not so sure it will have the same luxury in the coming years. The sobering news for all the Government backbenchers is that far from this being the hardest budget the Government will need to introduce, it may well prove to have been the easiest.
Deputy Michael McGrath: Since coming to power the Government’s strategy has been to look for easy targets to raise tax revenue — ideally once it believes people will not notice. It raided private pensions for €460 million, but because people do not see it coming out of their disposable income the Government felt it would get away with it. It is now focusing on VAT, hoping people will not notice that either. The Minister may be trying to pass this off as simply an increase in tax on luxury items, but many everyday items on which families rely will increase in price as a result of this VAT increase, including such basic items as mobile and land line phone calls, adult clothing and footwear, car park charges, detergents, petrol, diesel, oil, prams, shampoo, soap and toothpaste, which are hardly luxury items.
Deputy Michael McGrath: When news of the VAT increase leaked in the German Bundestag the Minister was quick to put out his analysis that it would have a greater impact on the better off. However, the distribution effects of VAT in Ireland were examined by the ESRI in a paper published as recently as July. The results were unambiguous.
The Minister said a few months ago that what we need is for people to start buying again. I would have expected Government policy to underpin that objective. The Government has instead done the opposite.
Deputy Michael McGrath: A 2% increase in VAT is a mistake at this time. I accept it is included in the EU-IMF deal for 2013 and 2014 but the Government has chosen to front-load it at a time when the domestic economy is at its weakest. At a time when exports are facing a challenging environment, there was a need for positive emphasis on the domestic economy but the Government decided to do the opposite.
Deputy Michael McGrath: Yes. The Minister also confirmed in that reply that such a projection takes no account whatsoever of any reduction in demand brought about by an increase in VAT. The Minister has many economists at his disposal in the Department of Finance. Surely one of them told him that if he increased prices, demand would reduce. A basic economic principle is price elasticity of demand. I am not going to exaggerate and say that this will result in a negative yield. Of course it will not. However, I do not believe this 2% increase in VAT will result in an additional €670 million to the Exchequer. I am shocked that the Department of Finance has allowed that to get through.
Let us take one example. Car sales have gone into decline since the end of the scrappage scheme in June. Figures released on Friday by the motor industry show that car sales in November were down 50% on those for the same month last year. The 2% VAT increase will add €300 to the cost of an average family car. The State collects considerable revenue from car sales in terms of VAT and VRT. The Minister may find that not alone will VAT returns be depressed but other forms of tax such as VRT may suffer a knock-on effect as people adjust their spending patterns on the basis of this VAT increase.
We need to consider what will be the impact of the VAT change on customers in the Border region. I am not prone to exaggeration and will not suggest, as did many of the Minister’s colleagues when on this side of the House, that increasing VAT will send everyone over the Border to shop. However, I do listen to those close to the ground. For example, the Derry Chamber of Commerce is celebrating the Government’s decision to increase our VAT by 2%. It is adamant that this will result in more people going across the Border to shop. The Dundalk Chamber of Commerce also makes the same point. It believes its businesses will be hammered because of the VAT increase here. Where borderline decisions are to be made on purchases, people will go over the Border. Not alone will they purchase that particular item but they will do other shopping too, resulting in a loss to the Exchequer.
The Minister has often made the point that the euro-sterling exchange rate is also an influence on cross-Border shopping, which I accept. While that exchange rate may be favourable now, a weakness in the pattern of the exchange rate on the sterling side will have a major impact on us. A combination of the VAT increase and an adverse movement in the exchange rate could exacerbate the problem. The Minister is aware that VAT is way under profile. The latest Exchequer returns put it at €464 million compared with profile, which is not fully explained by the reduction in VAT announced in the jobs initiative.
The difference between what was said by Members of the Government parties when in opposition and now when they are in government is incredible. The Minister for Jobs, Enterprise and Innovation, Deputy Bruton, for whom I have great respect, said in opposition, in response to a 0.5% increase in VAT by the late Brian Lenihan: “The Minister has made decisions today that will threaten to turn a recession into a depression.” The Minister for Social Protection, Deputy Burton, who I regret is prone to exaggeration said: “the Minister is proposing to increase VAT by 0.5% to an astronomical 21.5% ... one of the highest rates in Europe”, which she said would send “shoppers scurrying over the Border to queue in ASDA in Enniskillen and Sainsburys in Newry.” I would love to know what she thinks about increasing VAT to 23%.
Deputy Michael McGrath: We believe the Government’s decision to impose a levy on private pension funds was deeply unfair. The Government is in effect raiding the private savings of Irish citizens. This measure runs contrary to the long-established principle of all Governments to encourage people to save prudently for their retirement. It was a sneaky levy. The Minister said it is a levy on the industry yet the Government voted down an amendment put forward by this side of the House which would have forced the industry to absorb the levy and not pass it on to pensioners by way of reduced benefits or to workers by way of increased contributions. The Government voted down that amendment.
Deputy Michael McGrath: The levy is being passed on to pensioners by way of benefit cuts. We have all heard the Tara Mines story. Many others will emerge in the weeks and months ahead. Existing workers are being asked to pay additional contributions to make up the shortfall. We know by way of freedom of information that this decision was made against the advice of the Pensions Board and officials and that the Minister for Social Protection wrote to the Minister advising against doing it.
I am highly sceptical of the Government’s promise to end the levy in four years time. I hope it sticks to its promise. We all know what happens to levies like this, namely, they become embedded in the system. The Exchequer becomes dependent on the revenue and the link which was so clear at the beginning between this levy and the funding of the jobs initiative will become blurred with the levy remaining in perpetuity. I hope I am wrong. Let us wait and see.
Fianna Fáil proposes that instead of imposing this levy the Government should put in place an investment stimulus of at least €5.6 billion over the next four years. The Government’s pension fund levy should be ended and replaced with a mandatory investment by pension funds of 4% over four years in the strategic investment fund announced by the Government in September.
Deputy Michael McGrath: This would be an investment of €700 million per annum and could be supplemented with an equivalent annual investment from the remaining discretionary portfolio in the National Pensions Reserve Fund. This would offer a long-term cashflow benefit to private pensions funds while stimulating economic activity and developing the infrastructure capacity of the State. Such a fund could also be open to regular savers, as in the case of the national solidarity bond.
Deputy Michael McGrath: I expected the Government to put enterprise and jobs at the centre of the budget announcements made yesterday and today. Sadly, I was disappointed. We must ensure that enterprise is at the heart of every Government decision. While we must continue to attract foreign direct investment, small and medium-sized Irish businesses will lead recovery in the Irish economy. We need to give them every possible assistance. We need an appeals mechanism based on economic circumstances to limit the burden of local authority rates. We need a significant enhancement of supports for small businesses. Fianna Fáil proposed in its pre-budget document a doubling of the modest budget available to city and county enterprise boards.
I believe that the Government should convene an economic advisory council to complement the work of the fiscal council. The economic advisory council should comprise a broad range of representatives from the private sector to advise Government on enterprise and wider economic policy. Membership of such a council could be drawn from key sectors of the economy, including SMEs, financial services and the export sector such as the agrifood industry. The steps taken since 2008 have resulted in a marked improvement in our competitiveness. The European Commission forecasts that by 2012 Ireland’s competitiveness will have improved by 14%, the largest in the European Union. This progress must be continued.
We need as a country to encourage and reward rather than penalise people who take the risk of becoming self employed. As a means of encouraging entrepreneurship, the State should consider the introduction of a voluntary PRSI scheme for the self-employed so that, similar to other PAYE workers, when they lose their jobs they can claim jobseeker’s benefit and other welfare benefits. The current system is a deterrent to anyone thinking of starting a new business. The Minister has finally brought clarity to the issue of upward-only rent reviews, although not the clarity expected or promised to retailers. When upward-only rent reviews were ended for new leases, both the Labour Party and Fine Gael were absolutely adamant that there would be no problem with doing the same for existing leases. For nine months Members have been told the Minister for Justice and Equality is consulting the Attorney General. I had intended to ask how long did it take for the Attorney General to tell the Government whether a measure was constitutional.
Deputy Michael McGrath: Presumably, that answer has been given. Today the Government has raised the white flag on the issue of upward-only rent reviews. The uncertainty it allowed to develop in the past nine months created a vacuum in the commercial property sector.
Deputy Michael McGrath: Retailers did not know where they stood and investors were not able to make investment decisions because they had no solid basis for calculating a rental yield. This was the legacy of the Government’s decision on this measure for nine months——
Deputy Michael McGrath: I had intended to ask the Minister to end the uncertainty and draw a line under the issue one way or another because this is what retailers and those who invest in property have been seeking for months. The line has been drawn under it, but it also has been drawn firmly under another broken promise by Fine Gael and the Labour Party.
Deputy Michael McGrath: On the €100 household charge, the Bill has been published by the Minister for the Environment, Community and Local Government, Deputy Phil Hogan. However, it raises more questions than answers. In the detail of the document accompanying the Minister for Finance’s statement today, I note the site valuation-based tax is now not proposed to come into effect until 2014. Consequently, it appears as though a flat rate tax will be levied on households for at least two years and the Government’s capacity to deliver on this measure within that period remains to be seen. People really want to know where this charge is headed. Does the Government plan to increase it next year? I am sure the Taoiseach will agree that it is not fair or equitable to have in place a flat rate tax over a prolonged period, whereby someone living on Ailesbury Road will pay the same charge as someone living in a two bedroom apartment in Dublin city centre who is in negative equity of €200,000. The level of exemptions and waivers set out in the aforementioned legislation is miserly. The Government is also asking widows, carers, the disabled, pensioners, those in mortgage arrears and negative equity to pay this household charge.
Deputy Michael McGrath: This is a socially regressive budget. Its impact will be felt hardest by low and middle income families with children, young people with disabilities, vulnerable elderly people and students trying to chart a better future. The Government had the option of closing loopholes, a measure that was promised, and targeting higher income earners. Instead, it has played its trump card by increasing VAT in the first year of its five year life. This is despite the clear evidence of the weakness of the domestic economy. The tens of thousands of families in mortgage arrears will find nothing in today’s announcement that will help them. People outside medical card guidelines who take out medical insurance will be hit with massive premium increases. The 448,600 people on the live register are being told that unemployment will increase.
The real flaw in this budget is its inherent lack of fairness. The people know cuts must be made and that taxes must be increased and are willing to accept them if they are fair. Unfortunately, as the measures announced today and yesterday are rolled out in the weeks ahead, that basic test of fairness will not be achieved. The real measure of this budget and the Government’s economic strategy will be whether real inroads are made in the months ahead in reducing unemployment. I am sure all Deputies, despite their differences, can agree on that much.
Deputy Pearse Doherty: Last February a huge majority of the electorate voted for change. They voted for an end to the failed policies of Fianna Fáil and the politics of the Green Party. They voted for a new approach to the economy, unemployment, the banks, public services and political reform. Moreover, they voted for an end to political cronyism. They wanted change, fairness and equality. Most of all, they want hope tomorrow will be better than yesterday.
In the nine months since Fine Gael and the Labour Party took office, they have broken promise after promise. They have slowly but steadily dashed the hopes of the people who put their faith in them. Across the State, despite the litany of broken promises, people were still holding out for good news. They still were yearning for hope the Government’s budget announcements this week would make tomorrow better than yesterday. While I have no desire to come to the Chamber and criticise, having listened to the Taoiseach’s ministerial colleague, Deputy Brendan Howlin, yesterday and the speech today of the Minister for Finance, Deputy Michael Noonan, I am left with no other option. People want solutions. They do not want shouting from the sidelines. They want a plan. A few weeks ago my party submitted to the Department of Finance a costed pre-budget submission. It was a document full of choices, which set out a route to recovery. The Government took some of our advice and backed down on some cuts. In addition, it went after the public health budget subsidising private health care. However, it did not go far enough.
History will judge the Government badly, as it has made all the wrong choices. Never has a Government promised so much and delivered so little. After this budget, the Taoiseach cannot stand up in the Chamber and claim it is all Fianna Fáil’s fault. He cannot wring his hands and say there was no option and that the Government was obliged to do this. This is its budget and these are its choices.
Tá daoine ina suí sa bhaile a thug tacaíocht do bhur gcuid páirtithe. Tá siad ag éisteacht leis an gcáinfhaisnéis seo. D’éist siad leis an méid a bhí le rá ag an Aire, an Teachta Howlin, inné.  Tá siad ag iarraidh a fháil amach cén difríocht a rinne an toghchán i Mí Feabhra seo caite. Is cinnte gur tháinig athrú ar na páirtithe sa Rialtas, ach níor tháinig athrú ar bith ar pholasaithe an Rialtais. Nuair a chuaigh na céadta míle daoine chuig na botháin vótaíochta, ní hamháin go raibh siad ag iarraidh deireadh a chur le ré Fhianna Fáil, ach bhí siad ag iarraidh deireadh a chur leis na polasaithe lochtacha a bhíá chur i bhfeidhm ag Fianna Fáil freisin. Cad a chuala siad inniu agus inné? Chuala siad Fine Gael agus an Lucht Oibre ag cur na polasaithe lochtacha sin i bhfeidhm go huile is go hiomlán.
People who watched the Budget Statement will be numbed by its effect as they add up the total loss of income from the Minister’s stealth charges and spending cuts. They have had two days of bad news of cuts and taxes mounted on top of one another with no regard as to how they are meant to pay for any of it. Ordinary families have been crying out for fairness. The Taoiseach and the Minister told Members repeatedly that, if anything, this budget would be fair. In his State broadcast last Sunday night the Taoiseach told the people they had not caused the crisis. Today, however, the Government is making every single person pay for it. Is this the fairness the Minister had in mind? I refer to a fairness that gives Anglo Irish Bank €3.1 billion of taxpayers’ money every year while 500,000 people cry out for investment in jobs. This is a fairness that allows the Taoiseach, the Tánaiste and the Minister for Finance to earn €200,000, €184,000 and €169,000, respectively, per year, while ordinary working families are struggling to make ends meet. Of course, the Government is not going after the high earners in this budget. Last year the Minister for Finance was in receipt of a ministerial pension on top of his Dáil salary. The Taoiseach is aware of this because last year, when he still was an Opposition Deputy on this side of the House, he was in receipt of a ministerial pension. Although the Government now talks about how it will change everything, its members engaged in such practises in opposition only 12 months ago.
Deputy Pearse Doherty: Had Sinn Féin not put these payments on the agenda, sitting Deputies would still be in receipt of them. The Taoiseach did not go after the high earners in this budget because he and his colleagues are the high earners. Times are tough but they are not tough for the Government or its political cronies.
Deputy Pearse Doherty: ——what happened to those who caused the crisis? What does the budget say to them — the bankers, the developers and the politicians who were there at the time of the crash? Where is the fairness in the budget for them? We know that 22 of the top 50 Anglo Irish executives who were there at the time of the collapse are still in their positions. Nineteen of them earn more than €175,000 a year, paid for from the public purse. We know that the former taoisigh, Bertie Ahern and Brian Cowen, are on pensions, after the Government’s reduction in them, of €147,000 per year.
Deputy Pearse Doherty: While the Government is increasing taxes on ordinary working families, Ministers, junior Ministers and officeholders are still able to claim an unvouched tax write-down of up to €3,500 to have their laundry done when they stay in Dublin hotels.
Deputy Pearse Doherty: That is the type of fairness the Government wants to introduce in this budget. If this is the Taoiseach’s and the Minister’s idea of fairness, it is a very skewed sense of fairness.
Deputy Pearse Doherty: They were of the most vicious nature. The Government went after children, the disabled, lone parents, widows and carers. These were its five target groups. It spun a line about protecting social welfare payments — about not cutting the basic unemployment rate. All the while the Government was cutting the extra child benefit rates, multiple birth grants, abolishing disability benefits for those under 18 years of age and slashing it almost in half for young people. It attacked lone parents on multiple fronts, going after widow and widower pensions, cutting the back to education allowance, slashing the fuel allowance and going after carers. That is just one small element of what the Government did in one Department. The Government deceived the Irish people in its cuts savings. It claimed, for example, that social welfare cuts would amount to €475 million, but that is just for 2012. In a full year social welfare cuts will amount to €811 million, the education cuts will amount to €316 million and health cuts will amount to €837 million. I note that the Minister is nodding his head, but this book says that the full year effect of the health cuts will be €797 million. At least I know now what to buy the Taoiseach and the Minister for Finance for Christmas because they cannot do the sums. They are €40 million out in their sums in this book and the book that was presented yesterday.
Deputy Pearse Doherty: We demand that €40 million back. We will give them a calculator at Christmas or maybe they are just continuing with the Kevin Cardiff school of economics with €3.6 billion here and €40 million in health cuts there; sure what the hell; it does not make a difference.
Tá gach páirtí istigh anseo ag rá go bhfuil siad i bhfabhar na Gaeltachta agus na Gaeilge. Ní leor briathra breátha agus caint gan ghníomh. Tá sé ríshoiléir anois nach bhfuil ar siúl ag an Rialtas ach cur i gcéill agus bréaga. Tá gearradh siar de 10% déanta ar bhuiséad na Gaeltachta. Tá an Ghaeltacht faoi ionsaí, tá Oifig an Choimisinéara Teanga le dúnadh ag an Rialtas, níl sé chun cead a thabhairt toghchán a reáchtáil fá choinne bhord Údarás na Gaeltachta úr a thoghadh agus táísliú céime tugtha don Údarás. Níl go leor maoiniúá chur ar fáil chun poist a chruthú agus a chaomhnú sa Ghaeltacht agus tá an straitéis 20 bliain caite ar leataobh ag an Rialtas. Beidh na impleachtaí marfacha seo uilig ag titim ar mhuintir na Gaeltachta agus todhchaí na Gaeilge sa tír seo go hiomlán. Ní leor sin ar chor ar bith.
The biggest cut yesterday was in people’s expectations because there is no hope offered in this budget to the growing numbers of working poor, to the struggling middle income families or to the most vulnerable in society. There is no vision for business, no economic thinking that adds up. This is not what people signed up for; it is not what they wanted when they voted for change. Today, people who are already struggling are being told they will have to pay more stealth taxes, a household charge and higher VAT, motor taxes, fuel and excise costs. Rural dwellers are being discriminated against. They are being told that they will have to pay septic tank charges and we know that water charges and property taxes are on the way for all.
The Minister, Deputy Noonan, announced €1 billion in new taxes today and there was some applause for going after wealth. I am glad about some of the measures that were introduced and I will deal with them in more specific detail later. However, let us deal with the four main stealth charges. They are motor tax, the full year effect of which will yield €46 million, the household charge which will yield €160 million, the increase in VAT which will yield €670 million and the carbon tax which will yield €109 million, which together add up to €985 million. Those are the measures from which the Government will get €1 billion in new taxes — stealth taxes that affect the most vulnerable in the most indiscriminate way. However, people are also being told that none of these taxes will go towards public services. Health, education and welfare will all suffer under this Government. The Taoiseach is increasing taxes to continue the failed banking policy of Fianna Fáil.
Yesterday we heard the Government cut €2.2 billion from public spending. Next year our debt servicing costs will increase by €2.6 billion. The Taoiseach should be honest with the people and tell them where their money is going. He should also be honest and explain that all the Government’s cuts and taxes will not work. The Exchequer deficit remains large because instead of directing our resources into creating jobs and growing the economy, the Government has nearly spent it all on bailing out the banks and it is continuing along that failed path. Let us be clear about the position because the Government cannot blame it all on Fianna Fáil. Since Fine Gael and the Labour Party took office in March of this year, the Government has pumped a staggering €20.7 billion of our money into the banks, including €3.1 billion into Anglo Irish Bank, and it will make a further such payment on 31 March next year, the year after and each year after that up until 2025.
Deputy Pearse Doherty: The reckless economic policies pursued by Fianna Fáil during the boom created the economic crisis. The years of austerity and bank bailouts that it followed deepened the crisis. Now the continuation of these same policies by Fine Gael and the Labour Party will only serve to make matters worse.
Across the country people will have watched the Minister deliver his budget speech today and they will be growing increasingly despondent. They will feel angry, hurt and badly let down. I appeal directly to every one of them — the people who want change and voted for it last February, and to every person who feels we deserve better — and I want every person contemplating emigration, or who is at his or her lowest, or feels there is no light at the end of this tunnel to know that real change is still possible and that there are people in this State who believe in, and have a vision of, a better, fairer Ireland and, with their help, can make this a better country.
There are better choices despite the fact that Fine Gael and the Labour Party decided not to take them in this budget. Sinn Féin has championed the alternative. It has argued that the priority in this budget should have been investment in jobs. We argued against spending cuts and pointed out that the tax system needed to be overhauled and the wealthy had to pay their fair share. I advise the Taoiseach and the Minister that no wealthy person ever died from having to pay more taxes. However, the cuts the Minister inflicted on health services and social welfare payments yesterday will mean the difference between life and death. Some 5,000 people die prematurely every year in this State because of inequality in areas such as health. Up to 2,000 people die each winter due to the cold. How many more people will die from fuel poverty or inadequate access to health care following the Government’s cuts? As if the cuts were not bad enough, today it heaped more pain on people with its stealth taxes — the VAT rise, the carbon tax and the household charge.
Undoubtedly, Ireland needs to stabilise its finances. We need to return to the bond markets as soon as possible and Sinn Féin is of the opinion that the sooner the better we get out of this mess so that we can get back our sovereignty, but where we differ with this and the previous Government is over the best and fastest way to do that. I am firmly of the view that continuing with Fianna Fáil’s failed banking policy will not help our chances of recovery. I am joined in this view by economists of the left, centre and right. It is hard to find somebody bar Fine Gael, the Labour Party, Fianna Fáil, the ECB and banks who think it is unjustifiable to put €3.1 billion into Anglo Irish Bank or to continue to repay the unguaranteed bondholders in full but that is what the Government is doing. It has already fully recapitalised the banks while the rest of Europe waits to see if the EFSF or ECB will pick up the tab for them. Bailing out banks and bondholders while asking the sick, the elderly and children to pick up the tab is shameful. Leaving aside the banking crisis, we have a structural deficit that must be reduced. In our pre-budget submission we set out a package of measures that would close the deficit, starting with a figure of €3.5 billion in new measures in 2012. This would bring the deficit to 8.3% of GDP when implemented alongside our proposed €7 billion stimulus package. We propose this stimulus package could be funded from what remains of the National Pension Reserve Fund and by partial investment from the European Investment Bank.
Our approach to economic recovery is far more comprehensive than the Government’s deficit focus strategy. The Government believes it can cut its way out of the recession, but this was tried by Fianna Fáil and it completely and utterly failed; €20.6 billion of unfair taxes and cuts later, has the Government not learned the lesson? If cuts and flat taxes worked, the deficit would have closed by now.
The fact that the budget is predicated on a set of growth figures for next year which have already been reviewed downwards by observers means the budgetary adjustment will not have its desired effect. I am sure the Minister is blushing at the fact that after huge anticipation a few days ago about what the growth rates would be in 2012 he came to the Chamber today and downgraded the rates by 0.3%. Is the Government making this up as it goes along?
Deputy Pearse Doherty: The domestic economy is on its knees. People’s spending power has been demolished and today the Government has added to the mess by cutting it more. Less money in people’s pockets means less money in tills, and less money in tills means fewer jobs. It is a vicious cycle, which is why we proposed measures such as a wealth tax, a third rate of income tax on earned income over €100,000 and abolishing the universal social charge.
The Government has set itself numerical targets which cannot be reached because it does not factor in the effects its bad policy has on economic activity. I want to deal with some of the specifics of these bad policy measures. I do not know whether I am the only person in the State who remembers the five point plan. Does the Taoiseach remember it?
Deputy Pearse Doherty: Today 444,000 people are on the live register, which is 9,500 more than when the Government took office. We cannot count all the people who have emigrated or those who are not eligible for welfare assistance such as the self-employed, for whom no safety net is provided.
Deputy Pearse Doherty: ——but if he listens, he might learn something. A total of 54,000 have emigrated since he took office. I want to tell him what emigration is really like. Emigration will mean empty chairs at the dinner table this Christmas; it means grandparents never seeing their grandchildren and families and communities being devastated. Has the Taoiseach walked through any of our third level campuses recently?
Deputy Pearse Doherty: How does the Taoiseach tell the parents of these children the reason he is driving them out of the State and he has prioritised private bank bondholders over the future of Irish schoolchildren?
Tá a fhios ag an Taoiseach nach dtiocfaidh cuid mhór de na daoine seo ar ais go dtí an tír seo choíche. Ní bheidh an deis sin acu. Tá daoine inniu sna Stáit Aontaithe, san Astráil agus i dtíortha eile agus ní thiocfaidh siad ar ais go dtí an tír seo go deo. Ní scéal úr é seo. Tharla sé roimhe seo. Chonaic muid an rud céanna sna 1950í agus 1960í, agus arís sna 1980í.
Deputy Pearse Doherty: Bhí ar m’athair agus mo mháthair an tír seo a fhágáil agus imeacht go hAlbain, an áit ina rugadh mé fhéin, mo dheartháireacha agus mo dheirfiúracha. Bhí an t-ádh linn go raibh deis againn teacht abhaile go hÉirinn i ndiaidh 20 bliain thar lear. Ní raibh an deis chéanna ag go leor daoine eile. Níor éirigh go maith le go leor daoine nuair a d’fhág siad an tír seo. D’obair said go dícheallach, chuir siad airgead i leataobh le haghaidh a gcuid teaghlaigh agus chuidigh siad leis an tír. Nuair a tháinig amanna crua, chaill siad a gcuid post agus a lóistín agus bhí orthu cónaí ar na sráideanna. Tá a fhios ag an Taoiseach go bhfuil siad fós le feiceáil ar fud na bailte móra i Sasana. Is mór an náire é don Taoiseach gur fhógair an Rialtas inné go bhfuil €1.3 milliún le baint as na daoine a d’fhág an tír sna 1950í agus 1960í, agus atá ar an ngannchuid i Londain inniu. Is mór an náire é daoibh.
The Taoiseach gives a good talk on jobs, but strip away the rhetoric and take it down to the bone and there is nothing there. He might have got away with this in the first few days and weeks of government, but now it is wearing thin. Yesterday he cut the capital budget by €750 million.
Deputy Pearse Doherty: Enterprise Ireland’s budget was cut and the Government went after disposable income. Today the VAT rate and fuel prices have been raised. Taoiseach, you are actively trying to cut jobs.
Deputy Pearse Doherty: The 2% hike in VAT will see more businesses put under strain from diminishing consumer spending and more of them will go to the wall. The vicious cycle began by Fianna Fáil and the Green Party of relying on indirect taxation is being continued under the watch of the Government. Not only will this measure be tough for business and jobs, it will disproportionately affect lower income earners who pay more of their income in VAT. The €670 million it is stated this figure will bring in is less than what Sinn Féin proposes to bring in through a wealth tax. We propose to bring in €800 million.
The Government talks about tough choices, but it is not tough to go after a spending tax. It is tough to go after wealth, the vested interests and change the status quo. France has the luxury of wealthy individuals appealing to the government to tax them more, just to be patriotic. In Ireland the wealthiest in society stand behind the Government and ask for the most vulnerable to be taxed more and the Government acquiesces.
The VAT rate rise announced today is a mistake. The Minister knows this because it is the argument he made in opposition. This is not to mention the impact the VAT rate rise will have on already struggling Border towns, including in my home county of Donegal. Increasing VAT in the hope it will generate enough cash to reduce the deficit is absolute nonsense. By its nature, it will have a diminishing effect on returns as people spend less. We can already see this happening as VAT returns have collapsed this year. What the Government is doing is attempting to run just to stand still.
I listened to Fianna Fáil speak about the unjustifiable nature of increasing VAT, but let us be clear: the only difference between Fianna Fáil’s VAT plans and those of the Government is 12 months. Fianna Fáil also saw VAT as an easy option. It also drove hard-pressed retailers in Border counties to the wall. It pushed up the cost of living for ordinary people and is no more interested in saving jobs than the Government.
Deputy Pearse Doherty: The Government’s attacks on education will do little to help the knowledge economy. The State cannot come out of the crisis without the tools to do so. These tools include a well trained and well educated workforce. By making education the preserve of the elite and allowing an opportunity only for those who can afford it, the Government is not ensuring a workforce for the future. This is what it has done through cuts to capitation grants and in funding for higher education bodies. It has also increased fees by €250, about which I am sure the students are delighted——
Deputy Pearse Doherty: It is also abolishing maintenance grants for postgraduate students. The Government is pulling down the shutters on the futures of thousands of young men and women not lucky enough to be born into a wealthy family. In this day and age, in a First World country, I do not know how anyone can stand over this. This is a mantra that is meant to distract people while the Government is holding them upside down and shaking the spare coins out of their pockets with its VAT increases, household charges, water charges and other stealth taxes.
We have proposed the abolition of the universal social charge, to be replaced with the income levy, with the lower rate reduced to 1%, while reintroducing the health levy. This would mean that everyone earning under €75,000 would be better off under Sinn Féin’s direct taxation proposals. The Government has failed to do that today. It would also mean 500,000 people being taken out of the tax net.
The Government has claimed that people will come out of this budget with the same take home pay. What it does not say, however, is that when they get home with their pay packets, they will be fleeced by higher bills, charges, stealth taxes and a range of other measures aimed at reducing their disposable income.
The Minister for Finance has announced a tinkering with the universal social charge. I welcome the fact that he has ensured that those earning less than €193 per week will be exempt from the universal social charge. However, does the Taoiseach think it is fair that people earning €193 or €194 a week are still paying this unjust charge? There were 514,000 more people brought into the tax net as a result of the universal social charge. The measures announced today will leave 184,000 of them still in the tax net. These people are paying a regressive charge that is not only damaging their quality of life, but also economic activity in terms of consumption.
To have lifted everyone earning under €15,000 out of the universal social charge would have cost €120 million. Taking everyone out from under the minimum wage would have cost €170 million. Sinn Féin would have abolished it, but even this measure would have been fairer than what the Government has done today.
We look at tax in a different way. We go after wealth, tax breaks and loopholes. Reducing the pension ceiling and capping or standardising pension reliefs would bring in €550 million alone. Halving mortgage interest for landlords would bring in €400 million. The changes that we proposed to capital acquisitions tax and capital gains tax would bring in €360 million. This is a strategy that increases revenue without damaging the wider economy.
Flat rate taxes are regressive. The Labour Party seems to have mixed up the definitions of “regressive” and “progressive” since its election manifesto, so I will simplify it for the party. Regressive taxes are unfair and not as productive. If they look it up in the dictionary, they will find it beside property taxes.
Nowhere is the Minister for Finance’s political choice to go after the socially and economically vulnerable more stark than in his decision to levy a flat rate regressive tax on households. A household charge is a stealth tax. The way he has levied it will hit those struggling the hardest. Regardless of income or property size, everyone will pay €100. A family with three children, a mortgage of €1,000 a month, and mounting energy and food bills will pay €100. A wealthy individual, however, who is living in a valuable home with no mortgage, will also pay €100. Perhaps the Taoiseach can tell me how this measure is fair.
Some government party Members will say it is only €100. They will say that because they have simply no idea what €100 means for a family that is already on the breadline. Add that €100 to increased bills, increase travel costs and cuts in income, as announced yesterday, and we will see what it starts to mean and how it adds up. It is only €100 this year but we know from the programme for Government and the memorandum of understanding that Fianna Fáil negotiated that it is to increase year on year.
What is more distressing is that the Minister for Finance is levying this charge on people, many of whom are in mortgage distress. These people took out huge mortgages, at high interest rates in some cases, and paid massive sums in stamp duty just to own a home. The Minister has done little or nothing for the 100,000 households in mortgage distress. Today he has said he expects them to pay the Government a €100 household charge on top of their bills. It is neither right nor fair.
The Minister has lined up stealth taxes in this budget but I wonder if he has given any thought to their effects. Take motor tax, for example. I know from my own county of Donegal — and it is the same right across rural Ireland, including the west — that people are dependent on cars for transport. We do not have trains in Donegal or public transport networks like other regions. People need their cars to get to work, drop their children to school, take care of relatives and go to the shops. They need their cars to get from A to B. That is thanks to the legacy of bad transport planning by previous governments, which ignored the west. None the less, the Minister has increased motor tax and, in addition, fuel is going to go up. We also know that there is a proposal to examine VRT, resulting more motor taxes when the report comes back next year. Therefore, the driver of a mid-range car can expect a €46 increase in motor tax, and people are angry about it. People in County Donegal will ask whether they are expected to pay €46 more given the roads on which they are travelling, but they already pay €46 nearly every second week to have their shock absorbers fixed due to the potholes. Incidentally, these potholes will not be repaired because the Minister has cut €750 million from the capital budget.
The changes to capital acquisitions tax and capital gains tax do not go far enough. Yesterday, the Government attacked child benefit to save €70 million in a full year. When I heard about these cuts I was reminded that last year, Deputy Joan Burton told this House when Fianna Fáil cut child benefit that it was a reflection of how few women were in government and how little power women had. As she is now in government, the Minister for Social Protection, Deputy Burton, could have gone to her Cabinet and explained that an increase in capital gains tax to 40% would have raised €195 million. In addition, reducing all the capital acquisitions tax thresholds by 25%, while increasing the rate to 35%, would have raised €165 million. In today’s Budget Statement, however, the Minister for Finance has allowed capital gains tax exemptions. If the Minister for Social Protection had been able to convince the Cabinet of the need for these measures, she would have saved the cut to child benefit. She could then have rightly declared that she, as a woman, had wielded considerable political power.
The Minister for Finance has failed to deal with the legacy of Fianna Fáil property reliefs which drove the bubble. He has extended a capital gains holiday for people who choose, once again, to speculate in the property market. He has cut stamp duty for non-residential property from 6% to 2% from midnight. His attitude to property should be compared with his attitude yesterday to young, severely disabled people, whom he told he valued half as much as the day before. He is the same as Fianna Fáil Ministers he condemned last year. He will protect high earners whom he fears will become insolvent, but he will go after the most vulnerable and tell them that he has no choice. He is trying to create speculation in the property market yet again but will not deal with upward-only rent reviews which are destroying businesses and killing jobs. Not dealing with upward-only rent reviews means the State will pay €10 million in rent. The State rents properties that are locked in to upward-only rent reviews totalling €58 million. As late as this morning, the Taoiseach told us that matter was under review. Did the Minister for Finance not give him a copy of his script before the Taoiseach took the Order of Business?
Deputy Pearse Doherty: The Taoiseach talks about jobs. I got a message from someone in my own constituency who said he was closing up and jobs would be lost because of upward-only rent reviews. The Taoiseach will probably say that there is nothing he can do about it, but does he know that the Department of Agriculture, Food and the Marine is applying the upward-only rent review? That Department is putting that person and others out of a job. Regardless of any legal advice, this State has individuals and businesses tied into upward-only rent reviews. I have a full list of them in my office and will pass them on to the Taoiseach if he wants.
There are 100,000 families in serious mortgage distress, but where is the fairness for them in this budget? Almost 70 families are falling into serious mortgage distress every single day. While repossession rates have been low in comparison with other countries, that will not last forever. Some 1,048 families have lost their homes in the last two years, which is 1,048 repossessions too many. Without Government action this number will increase.
The Fine Gael-Labour programme for Government included clear promises on mortgage distress. They promised to direct mortgage providers in receipt of State support to cut their costs, yet today mortgages are more costly than when the Government took office. They promised to make greater use of mortgage interest supplement to support families who cannot meet their mortgage payments. Yesterday, however, the Minister for Public Expenditure and Reform, Deputy Howlin, announced a cut of €22.5 million to this benefit and increased the personal contribution for struggling home owners by up to €572 per year. Despite all the promises made during the election and in the programme for Government, Fine Gael and Labour are now taking the same minimalist approach that was taken by Fianna Fáil. Across the State, thousands of families face sleepless nights wondering how they will pay their mortgage bill next month. They will be faced with choosing between falling into mortgage arrears or buying their children presents for Christmas. They will have watched the budget speech, searching for something that would give them hope, and they will have been bitterly disappointed. They will ask a simple question: if the Government could find €20.7 billion for the banks since taking office, why could it not find anything for them? If it is so easy to bail out the banks comprehensively, why can the Government not provide any support to families at risk of losing their homes?
As it did following the publication of the Keane report in October, the Government has left struggling home owners at the mercy of the banks and saddled tens of thousands of home owners with decades of unsustainable debt. It could have chosen a different course and looked to prioritise maintaining the family home. It could have sought appropriate alternatives to ensure debt sustainability and found a way to ensure that the burden of mortgage distress is shared fairly between the borrowers and lenders.
The approach of the Minister for Finance, Deputy Noonan, in increasing mortgage interest relief to 30% for first-time buyers who purchased homes between 2004 and 2008 demonstrates that he does not understand the magnitude of the problem. This is the wrong approach as it will assist some but leave many others in continued distress. It is arbitrary, discriminatory and not enough. What about the family which bought a home before 2004, the family which needed to upgrade because of an increase in family size and the family which relocated in search of work? Does this measure assist these struggling mortgage holders? No, it does not.
I am very conscious that the Government has produced the budget we are debating against a backdrop of an intensifying European crisis that could have far-reaching implications for the future of Ireland and for the eurozone. My party leader and I have asked the Government on numerous occasions whether there is a contingency plan in place for dealing with any eventualities arising from the euro crisis. We know other Governments, including the French and Germans, have been developing such plans. Even investment firms in this city are developing such plans and have passed them on to their customers. Nevertheless, each time we raise this issue in the House the Taoiseach tells us he has every confidence in European partners and their ability to stabilise the crisis.
Deputy Pearse Doherty: Nobody believes the Taoiseach; not the public, the markets nor this House. I urge the Taoiseach to bring the Opposition parties into Government Buildings to discuss this issue, in confidence if required.
Deputy Pearse Doherty: The Government must urgently reassure the public that it is taking this crisis seriously and preparing for all scenarios. The events unfolding in Europe are frightening people. Agreements are being reached between powerful EU member states and Ireland is not even represented at the table. Last week the Taoiseach said clearly he was against further treaty change but this morning, the Tánaiste, Deputy Eamon Gilmore, stated that the Government was open to negotiation on treaty change. Where does the Government stand on the issue? Does it support enshrining austerity and recession-inducing budgetary policy into EU treaty law? Does it support giving the European Court of Justice a say in policing member state budgets? Does it support the transfer of fiscal powers from this House to the EU institutions?
Deputy Pearse Doherty: Does it support ruling out any private sector involvement in burden sharing in dealing with the currency crisis? I ask these questions because these are the key elements of the proposals that Nicolas Sarkozy and Angela Merkel will bring to the EU crisis summit on Friday. These are the demands they will be making. More importantly, these are proposals that will consign this State and its people to a decade of crippling austerity. If agreed this weekend, they will have negative consequences for employment, debt and reducing the deficit. In short, they will undermine everything the Government is claiming to have achieved with this week’s disastrous budget.
What will be the Government’s bottom line in the crisis summit this weekend and does it even have one? What price is the Government willing to accept in exchange for wearing the economic straitjacket being proposed by Sarkozy and Merkel? Will the Taoiseach return from the summit like Albert Reynolds did in 1992 with a bag full of euro gold, hoping the electorate will be bedazzled into accepting treaty changes with long-term and damaging consequences for Ireland and the eurozone? Will this Government agree to changes in the hope of avoiding a referendum, using technical legal arguments to avoid giving the people their say? Some 90 years ago today, one of the Minister for Finance’s predecessors signed a treaty that had far-reaching and negative consequences for the Irish people. Let us hope the Taoiseach does not come back to Ireland after this summit having made the same mistake.
The Government has been softening up the Irish people for months, telling them it had to deliver this budget and it had no other choices. It raised the spectre of the troika and the memorandum of understanding, which the Government indicated it would renegotiate, on every occasion to defend its own economic agenda.
Deputy Pearse Doherty: There were choices to be made this week and my party’s pre-budget submission set them out. Our submission chose not to go after ordinary families but to invest in growth and jobs. It chose to cut the high earners in the public sector and tax those who could afford it. The Government claims it could not have implemented such choices but that is untrue. Members of my party have met representatives of the troika and they told us they would accept such choices as long as the main budgetary targets are met.
All of these choices damage the economy and will damage people’s families. Last night a homeless man was found dead in Dublin and it is suspected he died from hypothermia. Does that move the Taoiseach? He is a member of a Government that allows people to die of cold on the streets. Every year after the budget, since I have been elected to the Seanad and Dáil, I leave Leinster House by the Kildare Street entrance. Every Deputy and Senator will know there are two places where homeless people sleep that are within sight of the plinth. I walk past those homeless people and wonder if the budget has changed their life in any way. The answer is always “No”.
Deputy Pearse Doherty: With this budget the Taoiseach and his Government are exposed. The Irish people sat in judgment of Fianna Fáil and I promise the Taoiseach they will judge Fine Gael and Labour the same way.
Deputy Mick Wallace: I am not sure what people expected from the budget of today and yesterday, but there was a mixture of hope and fear. There is much anger out there and people are not very happy about how things are. It is very difficult for many people, and those people have many reasons to be angry. The recession is getting deeper for many and unemployment is at a very high level, especially for young people. Many parents are demoralised because it is impossible for children to get jobs. People are also still angry about the excesses of bankers and the manner in which the banking crisis became a crisis for everybody, including those people who may not be let in the front door of a bank.
What makes people most angry is that the level of inequality in our society has not been challenged. This is hard to take for many people. Poverty is relative and when making comparisons, we would look at what others have against what we have or our kids have. People think there cannot be poor in a country where most people have mobile phones and televisions. However, it is not like that. I would rather be poor in La Paz in Bolivia than poor in Dublin.
Europe plays a big part in all our dealings. Ms. Merkel and Mr. Sarkozy seem to be calling the shots more and more. They are now talking about a compromise not a solution. Some people want the ECB to be a lender of last resort while others want European sovereign bonds, neither of which the Germans want. What the Germans want appears to be lifelong austerity for us. They would like us all to be Germans now. That would involve a very different life for us. We will probably never get our economy back on an even footing but then we would not have to make anything because we could buy everything from the Germans anyway because they make many things. They are the second largest exporters in the world after China.
There has been a huge transfer of power. This country joined the EU with the belief that it was joining a family of nations and that we would be treated well in the group. We expected fairness. The principle was that the strong would help the weaker. The truth is that for many years money came into this country that provided a huge boost. Admittedly, we had to give away our most valuable asset in the fishing industry. It was one of the main things we gave up. A great deal of money came in that helped to drive this country into the 21st century but more and more the benefits have disappeared. Not only are we now facing a situation where the financial markets seem to be making the decisions, but we also have a serious democratic deficit. Decisions are being made for us and we have no say in the matter. Italy and Greece are governed by people who were not elected. Spain is being governed by a party that got fewer votes than the number of abstentions and spoiled votes, so great is the anger in Spain. We no longer expect a democratic right from the great rulers of Europe.
If anyone thinks that the financial markets will act in the interests of the common good then he or she should think again because that is not the way they work. They are very good at organising the movement of goods and the transfer and exchange of goods across Europe and the world but they are not quite as good at training workers, creating infrastructure, protecting the environment, and regulating themselves. They would not be good at looking after the most vulnerable in society. We should not depend on them so much. I am not fond of what Europe is offering and I am less fond of what it seems to be about to offer in the near future. Finance should be a servant to society not the master of it.
I voted “No” to the Nice treaty and I voted “No” to the Lisbon treaty, even though I am very pro-European. I would never describe myself as a Nationalist; I describe myself as a European, even though I would also say I am Irish. One of the things that frightened me about the Nice and Lisbon treaties was the inroads they allowed for large corporations to seriously affect how we run our country. The driving philosophy is neoliberalism and at its core is to put the maximum power one can into the hands of the fewest people who control wealth. They like to control resources, production and services. They function best in so-called democratic countries where elections are held on a regular basis. Sadly, politicians are influenced by people in power and people with money. The elected politicians elect the legislature and it makes the decisions. A good example from the past 20 years is when Mr. Tony Blair got elected in 1997 in London. Murdoch’s newspapers came out on the morning of the election and called on people to vote Labour. The first measure Labour brought into parliament was one which allowed Murdoch a €50 million reduction in his tax bill that year in Britain. One must pay for favours. That is nothing new to any of us.
Unfortunately, the people who most need our help do not have much influence with the powers that make decisions. If one comes from Darndale, one would probably find it difficult to get a meeting with a Deputy, let alone have a decision made in one’s favour. The people of Darndale probably need our help more than most. I am concerned about where we are going. Part of the EU agenda with its neoliberal slant is for our postal service to be opened to competition that can be cherry-picked by private organisations and for that reason we are closing post offices around the country. We are closing Army barracks and forcing people to drive further to work. We are starting to close Garda stations. Small pubs in rural areas are closing. Now we are going to close nursing homes. One could ask what it will be like to live in this country in ten years’ time if we keep going this way.
I know there are no easy answers to how one runs a country. I do not like all the different ways the Government sought to find the required €3.8 billion. It must be difficult for old people to hear their fuel allowance is being cut. Parents who are trying to get their children to school are being told that back to school allowances are being cut. We have seen what is happening in health and education. There is huge undermining of the real values in society.
Deputy Mick Wallace: Mr. Albert Einstein, the philosopher and mathematician, said the human being is both solitary and social. As a solitary being he looks after his best interests, himself and his nearest of kin, and tries to develop his innate abilities and survive the best way he can. As a social being he develops a caring approach to other people. He develops an interest in his neighbour and cares about how his neighbour is. If his neighbour feels pain he feels pain too.
A human being realises his fulfilment only when he engages in society and cares about his fellow man. This budget does not tackle the inequalities that are rampant in our society. It does not show care. We must change.
The people expect much of Members of the Oireachtas. They do not want the banks to make decisions for them. They would not like the Europeans to make their decisions for them either. They would like us to run this country, to represent them, to behave in an ethical manner and to give a damn.
Deputy Richard Boyd Barrett: As is traditional in the worst of Irish politics, the Government tried to be clever with the budget. There may have been a few smug smiles as the Minister announced tokens to make the budget look as if it was fairer, but they were just tokens, or tricks of the eye.
The budget, as announced yesterday and today, is cruel and stupid. The Government made a cold and calculated decision to attack the poor, the young, the vulnerable and struggling families to protect bankers and the super-wealthy. It is as simple and as obscene as that.
It is immoral that any Government would choose to attack children, schools, young people, students, lone parents, the disabled and families dependent on rent allowance. If one were to put together a comprehensive list of the most vulnerable sectors of society to attack them, one could not do a more shameful and vindictive job than the Government has done in this budget.
To hit the allowances of young disabled people is obscene. To hit the elderly and the poor who depend on the fuel allowance will mean the difference between life and death for some of those people this winter. That is not rhetoric, as the Minister knows. There were nearly 2,000 winter-related deaths among the elderly last year. The cut in the fuel allowance means more people will die. To cut the capitation grant for schools by 6% between now and 2015 is shameful when we hear pious words about children being our future and investing in education. To hit lone parents, when every study shows that lone parents in our society suffer disproportionately from poverty, is shameful. The change in the income disregard makes a mockery of the Government’s claim to want to incentivise work. It is a direct disincentive to lone parents to work and another measure which will drive children into poverty, when child poverty is rising.
To hit rent allowance is a headline social welfare cut, despite all the Government assertions that it is not hitting headline social welfare payments. For 96,000 people in receipt of rent allowance, most of whom have lost their jobs through no fault of their own, that is a nasty regressive cut which will drive more people into poverty. To hit students with higher registration fees and to cut grants makes a mockery of all the talk about a knowledge economy. Hundreds, if not thousands, of students from less well-off and struggling families will be forced out of third level education as a result of that. To hit back-to-school clothing and footwear allowances and back-to-education allowances means hitting the poor and the vulnerable.
Let us not forget about the slaughter of jobs. The Government slogan was “jobs and fairness”, but one of the few concrete measures in the jobs area is to ratchet up the massacre of public sector jobs. Fianna Fáil said 17,000 jobs would go in the public sector. That was bad enough. The programme for Government promised that 25,000 jobs would be cut. Another trick has been played, the two figures have been added together and the figure will now be 37,000. That will mean a collapse of vital services. Already, 6,000 people have gone from the health services and another 7,000 will go by 2015. It is dishonest for a Government to pretend there is not a direct relationship between the agenda of cutting jobs and the closure of accident and emergency units, public nursing homes and local hospital services.
It is outrageous but not surprising that Fine Gael would mount such an attack on the poor, the vulnerable, working people and public services, but it is beyond belief that the Labour Party would put its name to such cruel and senseless measures as these. Out of a total of €1.4 billion in spending cuts announced by the Minister for Public Expenditure and Reform yesterday, €811 million were directed at the poor and the vulnerable. Do Labour Party Deputies, and the Labour Party Minister who is in the Chamber, believe they would have been elected and be sitting here now if they had told the people before the election that they were contemplating such vicious measures directed at the disabled, the young, lone parents and poor families? They know they would not. They posed as champions of the less well-off, got their votes on that basis and, in double quick time, stabbed the people who voted for them in the backs. They should be ashamed of themselves.
Having savaged the poor and vulnerable with cuts yesterday, we moved today to another round of unjust and senseless attacks in the form of regressive taxes and charges. The bulk of what the Government proposed today, notwithstanding a few tokens, are taxes on ordinary working people which will further hit their incomes. The household charge will raise €160 million, VAT increases of €500 million and excise duties of €178 million. The bulk of this revenue will come from ordinary families.
The household charge, a poll tax, is a regressive stealth charge. It is shameful and more of the same stuff. Our taxation system is one that says it is acceptable for people on low and middle incomes to pay the same as multimillionaires. Is that right, is it just or is it about equality? It is not. It is part of an agenda that will lead to the increase of those charges and the introduction of water charges in the coming years.
The increases in VAT are stupid and regressive. They will depress demand further and put more pressure on the tens of thousands of small businesses who are hanging on for dear life and trying to stay in business. The increased VAT will further depress demand and mean that poor families with limited and declining incomes will buy less in the shops. Not only is it unfair and unjust, it probably will not raise one single cent. The Government can increase VAT and hope to raise extra revenue when an economy is growing, but when it is declining and incomes are contracting, people spend less. Therefore, the Government will get nothing back from this measure which will just hit at the poor.
The proposed changes in motor tax make a mockery of all previous assertions about incentivising people in seeking to have a low carbon economy. They increase motor tax for people who accepted the word of previous Governments that they were serious about moving to a low carbon economy. The Government is now ratcheting up these taxes again. The increase in the carbon tax means increases in the price of oil and gas for home heating for the poor and less well-off, which following the fuel allowance cuts will lead to more winter deaths and greater suffering for the elderly, the least well-off and the vulnerable in society. It is pathetic that the Government has tried to gloss over this by saying this will not happen until May next year; therefore, we will not have more deaths this winter but will have more at the end of 2012 and 2013.
When the Government is faced with such criticism from this side of the House, it wrings its hands and states it does not like this any more than we do and that it wishes it did not have to do it. It states it hurts it as much as it hurts us, but that it has no choice and that there is no alternative. Of course, there are alternatives. There are choices, as the Government knows well. Next year and for the following ten years some €3 billion will be paid into the toxic casino bank that is Anglo Irish Bank. An estimated €10 billion will be paid in interest repayments next year on the debts run up by developers, bankers and bondholders. These are the same developers that the Government, via NAMA, is paying €200,000 a year or to whom it is paying hundreds of millions to lease properties such as the National Convention Centre or the NTMA building, or they are the bankrupt landlords and developers to whom it plans to pay more public money to lease their properties and put them back in business, or they are the poor banking executives who must survive on a meagre salary of €500,000 a year. These same bank executives preside over banks that are stuffed with public money but which continue to starve the economy of the credit it needs and continue to screw mortgage holders to the wall.
There are alternatives, but the Government chooses not to take them. It should stop paying off the bondholders and propping up toxic casino banks, whether in Ireland or elsewhere in Europe. It should cancel the debt, as it is not ours. However, it states that if it does this, there will be no money in ATMs because the European Union will cut us loose. Perhaps the Taoiseach and the Minister have not noticed that the Union is in bits and that its strategy is failing. Even its beloved markets no longer believe it and they are downgrading it and the likelihood of it being able to pay off its debts. They can see what anybody can see, that austerity is crippling the European economy, which means that growth projections for this economy and across Europe are falling. This means we cannot pay back the debts. Why, therefore, do we slavishly submit to the diktats of the markets and the troika?
There is a simple alternative, namely, to tax the wealthy, but this is something the Government resolutely refuses to do. As we set out in our pre-budget submission, the CSO — perhaps the Government will rubbish its figures also — has stated the top 5% of the population has €220 billion in personal wealth. We suggest the Government should take just €10 billion from them. This is an emergency. If everybody else can be attacked in it, why can we not just impose a 5% wealth tax on the people in question? We propose a 50% tax on all incomes over €100,000, a 60% tax on incomes over €150,000 and a 70% tax on incomes over €200,000. The Government’s figures which we believe are conservative indicate this would raise €1.1 billion. Why do we not take the properties from the bankrupt NAMA developers and put them in the hands of local authorities and begin a major social housing construction programme in order that we would no longer pay out €500 million a year in rent supplements to private landlords? In turn, that would generate approximately €300 million or €400 million in rental revenue. That action alone which could be accomplished in one year would save €750 million for the State.
The choice the Government has made is to protect the rich and attack the vulnerable in society. We say there is an alternative, but it seems that when governments fail, it takes people power of the sort seen in Greece, Portugal and elsewhere to bring that alternative to pass.
Deputy Shane Ross: There are elements of the budget which everybody in the House will welcome such as the universal social charge tax relief, income tax stability, research and development relief and mortgage interest relief, which mark a genuine effort by the Government to give some solace to people who are afflicted or vulnerable. I sometimes, but rarely, sympathise with the plight of the Government because, as it has stated regularly, with more than an element of truth, it has found itself in an economic hole which it is true it has inherited. The problem is that having landed in that hole, it seems to have taken to it and be as happy as a pig in the unmentionable commodity mentioned by Deputy Mattie McGrath in the House a short time ago.
The Government appears to have taken on the mantle of the conservative policies of Fianna Fáil and others and addressed it with relish. It seems that what Deputy Boyd Barrett has said is true, that the diktat is coming from elsewhere; it is not just coming from the Department of Finance, as is traditionally the case, or the last Government or the European Union. A series of strong, external forces are dictating internal policy to a degree that is totally unacceptable.
There are alternatives. While I do not agree with the one suggested by Deputy Boyd Barrett, there are several others. This is a conservative budget ad nauseam. A predecessor of the Taoiseach, Mr. Liam Cosgrave, said that when one was in a hole, one should stop digging. That is the policy the Taoiseach should have adopted. He should have addressed the issues in a far more radical way and not taken the old traditional routes which may — I do not believe they will — get us out of the hole to which he refers so frequently.
What is lacking in the budget more than anything is vision. I heard the Taoiseach say in his broadcast the other night that he wanted to see Ireland retrieve its sovereignty by 2015. It seems that is the last thing it will achieve in 2015 because this budget will take us on to a series of budgets which will lead us into what we will see agreed this weekend, a form of fiscal unity. We are going to be under the hammer of the troika for a few years, but we will then face fiscal unity which is, by definition, a sacrifice of economic sovereignty and independence. That is where we are headed, but let us not aspire to it but move directly in the opposite direction. What I would like to have heard from the Minister today was that he had a vision of where we would be when his series of budgets was completed in 2015 or 2016.
Deputy Shane Ross: That is true because there was no vision. There was no idea of where we would be after two or three austerity budgets. What we do know is this: we know the budget deficit will be 3% of GDP and that we will still be in the eurozone, if the Minister gets his way. We also know — I agree with my friends on these benches on this point — that unemployment will still be at an unacceptable level. According to the Department of Finance’s forecasts, it will be at the level of 12% in 2015. What does that say about the Government’s jobs policy? It is hot air. Jobs will not be created by this budget, except in a tiny way. Everything being done in the budget and in other measures is peripheral. It makes a good impression. The impression the Minister gave today with this budget was very positive and very clever. All the good things were in front. Yesterday, the Minister for Public Expenditure and Reform, Deputy Howlin, produced a lot more of the negative things. When one actually examines them, the reality is that very few jobs will be created. The Department of Finance says that also, and its figures do not really take into account any flood of emigration which is almost certain to happen.
The vision we see here will include educational standards going down because of cuts in education and third level education not being open to everybody because of the measures introduced yesterday, but nevertheless the budget deficit will still be 3% of GDP and we will still be part of the euro. That really is an extraordinary aspiration. If the standard of living is to go down, unemployment is to go up and educational standards are to fall, we will still be able to say the budget deficit will be 3% of GDP.
I wonder whether it will be because one of the most significant things today — it was referred to by Deputy Pearse Doherty — was that the Minister very quietly demoted and reduced his predictions for growth next year. From being above 2% at one stage, it went down to 1.6% in October and to 1.3% today. That is a very high figure because the figure from the ESRI the other day was 0.9% and the figure from the OECD was 1%. The Department of Finance, for reasons which are difficult to explain, consistently produces optimistic figures on the growth side. That is obviously convenient if one is trying to sell and produce a budget of this sort but it means that somewhere down the line, in the next two or three budgets, the austerity will be greater again and greater than predicted.
This budget depends not only on growth rates which are much higher than this but on the continuing boom in exports. That is extraordinarily optimistic also. It is fair to say that the main outlets for our exports are either in recession or are heading for recession. The United Kingdom is undoubtedly heading for recession while the best prediction for the euro area is 0.3%. That is not a particularly optimistic outlet. Admittedly, the United States may expand in the next two years but the other main outlets for our exports are in recession. To hold out the prospect that somehow we as a nation will successfully and uniquely export to nations which are in recession is really living in economic cloud-cuckoo-land. That is the main difficulty with this budget. The growth figure is wildly optimistic and the export projections on which it is built are also wildly optimistic.
I do not believe we are heading for a situation in 2015 which the Minister could paint today. In reality, this budget takes us on a road to poverty, destitution and a standard of living which is unacceptable and which he could not spell out in his budget today because if he had done so, it would have been very difficult for the Labour Party backbenchers to accept.
There are measures which could have been taken. I do not wish to be negative but I do not understand what has happened to the apparent cull of the quangos. The rhetoric about the quangos before the election — I do not wish to score political points but this is very important — was extraordinarily strong, populist, realistic and practical. Does the Taoiseach remember the Fine Gael document, entitled Streamlining Government? I will not remind him of things which are embarrassing because I do not believe that is politics and it is not useful. However, it is useful to remind him of a few things in it. There was a determination and theme in it which talked about cutting costs. It talked about the 2,200 directors of quangos and about removing them. It also talked in fine rhetoric about Ireland having become the land of 1,000 quangos.
Deputy Shane Ross: Now, in a great flurry, we are talking about a reduction of only 50. Some of those are merely mergers, not to mention the ones created. The reduction in the number of quangos will be minuscule. However, there are opportunities here, which I could outline to the Taoiseach and about which I have talked in the House, to reduce the number of quangos to under 100 and the number of directors of quangos to certainly well under current 2,200. That would at least be a symbol of the Taoiseach’s determination to cut out the waste in this budget.
This is conventional economics on a level which is depressing because it is leading us to a situation which will only make the fundamental economic indicators much worse than they were. There are no new big ideas in this budget and I am very depressed that it is happening in the same week the Taoiseach will go to Europe to sort out a much bigger problem.
I suggest the Taoiseach goes to Europe not overshadowed by Brussels, that he puts the fundamental problem behind this budget on the agenda, that is, the Irish debt, and that he looks for a write-off of the Irish debt. I want the Taoiseach to spoil the party. I do not want him to go to Europe and be some sort of lap-dog to the big powers. I want him to say he is Irish, we are in trouble, which they landed us in, and that he is going to spoil their party unless the write-off of the debt is not only on the agenda but is achieved. If that is done, this budget will, thankfully, be irrelevant and the Taoiseach will be able to come back next week and say the future is brighter and that he will produce a better budget for the Irish people.
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