Finance Bill, 2000 (Certified Money Bill): Second Stage 21st March, 2000 Question proposed: "That the Bill be now read a Second Time." Minister for Finance (Mr. McCreevy): I am very pleased to be here today to put the Finance Bill, 2000, before the Seanad. The Bill gives effect to a very wide range of tax changes that will benefit all taxpayers, reform the tax system,close significant tax loopholes, promote real tax equity and bring a better balance into the application of capital acquisitions tax. I wish to record my appreciation of the informed and careful analysis which Senators give to the Finance Bill each year. This year's Bill contains a number of important changes in the area of CAT and pensions, which were the subject of particular comment by the House when the 1999 Finance Bill was being discussed. I will listen attentively to what Senators have to say over the next two days. The last occasion on which I spoke to the House on tax issues was shortly after the budget, when the debate on the standard rate band proposals was in full swing. I outlined to Senators the full extent of the tax improvements which the budget contained. I will not, therefore, repeat the long list of tax changes which the House welcomed at that time. The debate has moved on and I will come to that in a moment. When I announced the publication of the Bill on 10 February I summarised its main themes as follows: the implementation of budget measures, the introduction of new tax reliefs,the enactment of the Public Accounts Committee's DIRT recommendations, a streamlining of tax administration and the setting of the tax agenda for the new millennium. In addition, a number of important anti-avoidance provisions were included on Committee Stage in the Dáil. For the benefit of the House, I will give a brief outline of the principal provisions of the Bill in its entirety. Sections 2 to 12 of the Bill give effect to the personal tax changes announced at budget time. The main provisions are the reduction in tax rates and the increase in the standard rate tax income band provided for in section 3, the increase in the main personal allowances set out in sections 4 and 5, the doubling and standard rating of various personal allowances in sections 6 to 11 and the introduction of the £3,000 home carer's tax allowance in section 12. The changes being made in these sections continue the major tax reform which the Government introduced last year, that is, the move to tax credits, and introduce a further major reform, namely, the move towards establishing a single standard rate band for each individual taxpayer. Change and reform is not an easy process. This fact should not deter the Houses from doing what is needed. When I addressed the Seanad in December, I set out the cogent case for treating income earners as individuals under the tax code. The Government is convinced that the reform of the tax bands is the way we must proceed to meet the changing conditions in our society. We must recognise the new labour market situation and the fact that in many households both spouses are income earners. The social partners have recently endorsed this policy in the Programme for Prosperity and Fairness.

I have, it seems, opened up a broader debate on family issues, the role of earning and non-earning spouses and the view one has of equitable treatment of different household types. The position one takes on these issues is essentially a policy choice. In a democratic society, this involves an open and constructive debate and, ultimately, boils down to electoral choice. The issue is open to debate but recent opinion polls indicate a far greater support for the proposed changes than one might have deduced from the positions adopted in the immediate post-budget period. Whatever one's position, no one will deny that budget 2000 was a turning point in the evolution of tax policy in this State. Section 12 of the Bill relates to the £3,000 carer's allowance announced by the Government on 8 December for spouses caring for children, the incapacitated and the aged. The section indicates how this allowance will apply. To ensure the allowance works as smoothly as possible, it is proposed to allow for an income disregard where the caring spouse has a limited amount of income of their own, for example, through part-time work. It is also proposed that the allowance will be available where an aged or incapacitated relative resides in the caring spouse's home or is being cared for close by. The allowance can also be retained for one year after the spouse returns to full-time employment. This, and the tapered withdrawal of the allowance when the spouse's income exceeds the income disregard, is designed to ensure the allowance is not suddenly lost when family circumstances change. A number of proposals have been made to extend this allowance to other caring situations and I have stated that I will look at these requests for next year's budget. Sections 13 and 17 set out the changes to standard-rated mortgage interest relief and rent relief announced in the budget. Discussions have commenced between Revenue and the mortgage providers on the introduction of mortgage interest relief deducted at source from April 2001. Similar discussions are being held with the providers of medical insurance on the deduction of tax relief at source from insurance premia. I am hopeful of a satisfactory outcome to these discussions. There are benefits from deduction at source for taxpayers and the State which we must try to garner. Section 15 reduces the reference rate of interest for calculating benefits in kind in respect of home loans. It leave the reference rate unaltered in other cases. Section 16 continues the special exemption from taxation of the unemployment benefit paid to certain systematic short-time workers. This relief was first introduced in 1994. There are, surprisingly, still over 3,000 workers on short-time arrangements for whom the relief continues to be relevant. Section 18 enhances the tax relief available for agreed pay restructuring, where a restructuring is necessary to safeguard the future of the firm. The relief, introduced in 1997, is being extended to 2003. Section 19 restores the application of the tax-relieved seed capital scheme to new traders on the financial futures exchange in the IFSC. Section 21 extends tax relief at the standard rate for post-graduate fees under certain conditions. The relief can be claimed by the person concerned or by his or her parents, guardians or spouse where they pay the fees. This new relief, which will apply at the standard rate of tax, will be available to full-time and part-time post-graduate students and will include distance education courses offered by publicly funded colleges in other EU member states. I am aware of requests to extend this relief to non-EU colleges and to broaden the terms on which tax relief can be claimed. While I can look at these for next year, I am happy that what I have provided in this section is a reasonable response to the demands that have been made for tax relief in this area. I hope the House will accept this view. Section 23 relates to pensions tax relief and builds on the important changes which I introduced in this area with widespread support last year. This gave certain pensioners the option of investing in a continuing fund instead of being forced to convert to an annuity in all cases. This year, section 23 of the Bill, among other things, extends the new pension options to proprietary directors who control more than 5% of the shares in their company - the previous ownership requirement was 20% of share capital. It allows certain individuals whose pension date has passed but who have not yet invested in an annuity to use the new pension options instead. It extends the new arrangements to those using AVCs - additional voluntary contributions - to build up their pension rights and applies gross roll-up tax provisions to the approved retirement funds and approved minimum retirement funds, whereby tax is paid only on payments from the fund. These changes will be welcomed by the House as some of them respond to recommendations put forward in the House last year. Sections 24, 25 and 26 make a number of limited changes to the legislation governing employee share ownership trusts. These amendments were requested following discussions with ICTU during the talks on the Programme for Prosperity and Fairness. Section 27 relates to share options and provides for a deferral of the income tax liability on the exercise of share options until the shares are disposed of, or for seven years, whichever first occurs. This relief is sensible and will do away with the situation where persons may have to sell the shares simply to pay the tax bill, which can be substantial. I have particular views on share option schemes. I recognise their value in incentivising those in the more dynamic and expanding sectors, on which we will rely for growth. At the same time, there are issues of fair play for all employees generally who may wish to avail of tax relieved schemes. A special working group set up under the PPF, on which ICTU, IBEC, the Departments of the Taoiseach, Enterprise, Trade and Employment, the Revenue Commissioners and my Department are represented, is examining these issues for the next budget. It held its first discussion on 16 February last. I expect to put more extensive proposals on share options and other employee incentives through the House next year. Under the income tax provisions section 29 ensures that where under joint assessment the non-assessed spouse is proceeded against for non-payment of tax in respect of their income, this power can be exercised at a delegated level within Revenue or by the Criminal Assets Bureau, where relevant. The term "non-assessable spouse" replaces the reference to wife that has been a feature of the provision since 1958. Sections 30 to 33, which form Chapter 3 of Part I of the Bill, deal with changes to the system of dividend withholding tax which was introduced with effect from 6 April 1999. Last year's Finance Act applied the withholding tax at the standard rate of income tax on dividends paid by Irish companies to certain shareholders. There are detailed rules laid down in the legislation on how and when the tax can be deducted. There are also various exemptions provided for. The Revenue Commissioners have examined how the dividend withholding tax has worked in its first year of operation. They have consulted market operators, Irish company registrars, stockbrokers and custodian banks, here and overseas. As a result, this year's Finance Bill will modify the system to reduce administrative costs, simplify certification procedures, remove unnecessary requirements and extend the range of exemptions from withholding tax to companies resident in tax treaty countries but which are not controlled by Irish residents. These changes will be welcomed by business. The application of a withholding tax is an effective collection mechanism - the yield from dividend withholding tax in 1999-2000 is expected to be £50 million. My 1998 budget forecast was £15 million. From an international perspective, the application of a dividend withholding tax helps to reassure our international colleagues of the integrity of the Irish tax system and assists in defending our corporation tax regime. Sections 37 to 40, inclusive, and 42 to 46, inclusive, deal with changes to the relief for urban renewal, rural renewal, the Custom House Docks area, multi-storey and other car parks, regional airports and certain offshore islands. The House will know that the EU Commission has decided to close the legal proceedings initiated by them in respect of the availability of the double rent and rates reliefs in the Custom House Docks area. This decision means that these two reliefs, which are available for a ten year period, will continue subject to an end date of 31 December 2008 where, either the construction of the building was completed before 1 April 1998, or the construction of the building commenced before 1 April 1998 and the tenant occupation of the completed building commenced before 9 February 1999. In other cases where certain contractual arrangements were in place by 2 December 1998 the two reliefs will continue up to 31 December 2003. The Commission's decision in relation to double rent relief is given legal effect in section 39 of the Bill. Capital allowances for the buildings in the 27 acre and 12 acre sites in the area were approved by the Commission in January 1999. These allowances are unaffected by the Commission's decision on double rent and rates relief. While this matter was brought to a satisfactory conclusion, after a considerable amount of effort on our part, the proceedings themselves bear testimony to the close attention which the Commission is paying under State aids rules to new and existing schemes of tax reliefs under Irish tax law. We now routinely notify all such new schemes to the Commission. I have made this point repeatedly on many occasions, in particular when answering questions on credit unions. The penny has not dropped fully in all quarters but we are being scrutinised closely on all tax changes by the Commission. The Commission has set its face against double rent relief and rates relief which it regards as operating aids to business. The State aid rules do not affect tax relief in relation to residential schemes. However, we must continue to examine carefully whether all such reliefs are needed on a general basis at a time of an ongoing property boom. Section 42 extends the capital allowance regime for regional airports to 31 December 2000 where 50% of the expenditure on the project had been incurred by the end of 1999. The section also extends capital allowances for multi-storey car parks outside of Dublin and Cork to the end of 2002 where 15% of the expenditure on the project is incurred by 30 September 2000. Section 43 provides that a person can qualify for tax relief for construction, conversion and refurbishment of residential accommodation on certain designated islands up to 31 December 1999 where 15% of the total cost of the project was incurred by 30 June 1999, instead of 50% of the cost as currently required. Sections 44 and 45 extend the qualifying periods for the urban and rural renewal schemes until 31 December 2002 and increase the capital allowances in respect of qualifying commercial buildings to 100%. The year one allowance of 50% will apply to both owner occupiers and lessors of qualifying industrial and commercial buildings with the remaining 50% written off at 4% per annum. The legislative provisions for the business tax incentives available under both schemes are being amended with effect from 1 July 1999 in order to comply with the EU Commission's approval of both schemes. Double rent and rates relief will not apply to such schemes as a result of the EU Commission ruling. Sections 41 and 47 close off certain tax loopholes. Section 41 relates to capital allowances for computer software where an over liberal use of the tax regime was being taken by some firms in circumstances where a licence or right to use the software was granted. Section 47 restricts the relief available under the foreign earnings deduction scheme in order to combat the misuse of the scheme which successfully excluded substantial amounts of foreign earnings of certain Irish residents from tax. The scheme is now being refocussed on its original aims - to provide relief to businessmen and employees of companies required to spend significant periods of time abroad each year promoting, selling or marketing their businesses. An overall cap of £25,000 on the amount of income that can be deducted for any one year is being put in place. The scheme requires that the periods spent abroad must be of at least 14 days duration. That is now being reduced to 11 days. This will alleviate some hardship that the two weekends abroad requirement implicit in the 14 days rule may have entailed. Section 48 continues tax relief for film investments for a further five years to 2005 and increases the proportion of the cost of producing a film that can be met from tax relieved investment. Section 49 requires that in order to qualify for tax relief on expenditure on significant buildings and gardens in the future, the property must be open to the public on at least ten weekend days out of the 40 opening days required during the high season. Section 146 later on makes a corresponding change in the rules for CAT relief on a stately house or garden. Section 50 makes a number of changes in relation to relief for gifts to third level institutions. The current legislation allows tax relief at the marginal rate of income tax on donations of at least £1,000 made to certain third level educational institutions in respect of specific projects approved by the Minister for Education and Science in the areas of research, the acquisition of capital equipment, infrastructural development and the provision of facilities in certain areas of skills shortages. Section 50 allows instead for each third level institution to set up an approved development fund to which the donations can be made in respect of the areas specified above, or other such areas as may be approved by the Minister for Education and Science and the Minister for Finance. The section also provides for a reduction in the minimum level of contribution from £1,000 to £250 per annum and for the carry forward of unused tax relief by donors in any one year for a period of three years in total. This Government and its predecessor have been innovative in using the tax system to direct more private resources into education. Provided these reliefs are targeted properly, I see these innovations as good. We can expect to see private donations play a much greater role in the funding of education in the future and I was glad to be able to respond positively to the proposals put forward by the combined heads of the Irish universities which are reflected in this section. Sections 53 to 59, inclusive, and sections 62, 72 and 80, give effect to the new arrangements announced in the budget in respect of the taxation of life assurance and collective investment funds. The purpose of this is to align the domestic market and IFSC tax treatment of these products and to enable the industry to retain its competitive advantage in the provision of such products within the EU. We are moving in the Bill from the traditional UK method of taxing these funds to the system prevalent in the other member states. The changes, which have been discussed in detail with the industry, mean that the proceeds of these investment media will no longer be taxed on an annual basis but will be subject to an exit tax on encashment or maturity. The exit tax will be the standard rate of income tax plus 3%. This method of taxation is referred to as "gross roll-up" as the investment returns are allowed roll up gross each year and are taxed on withdrawal except in the case of non-residents. This is the tax regime which currently applies in the IFSC. The new gross roll-up arrangements will come into effect from 1 April 2000 for new domestic funds and from 1 January 2001 for new domestic life assurance business. The current arrangement of taxation of the fund on an annual basis will continue for existing business at the request of the industry. Existing business will eventually run off, leaving in time only the new system applying to life assurance and collective funds. Section 60 of the Bill increases and restructures the tax relief on capital allowances for farm pollution control in line with the commitments given in the Programme for Prosperity and Fairness. Section 61 introduces a new tax regime for the purchase of milk quotas to support the new quota scheme arrangements to be introduced by the Minister for Agriculture, Food and Rural Development.

Section 63 provides for accelerated capital allowances for expenditure on the construction, refurbishment or extension of child care premises that meet the required standards as set out in the Child Care Act. This accelerated allowance is available to both owners of the child care facilities and also to investors who wish to invest by way of leasing arrangements. The availability of these allowances is an attractive incentive and will assist in increasing the supply of child care places to help ease the current shortage. Section 64 allows for certain rights to use telecom networks to be treated as capital assets for capital allowances purposes and for expenditure on the purchase of those rights to be written off over seven years, or over the life of the agreement to use these rights where this exceeds seven years. The provision of this relief is central to the continued development of the information technology and communications sector in the State. Section 68 of the Bill implements a number of substantive changes to the DIRT audit regime. This provides for Revenue to be able to appoint, at their discretion, specially qualified persons to conduct or to assist with DIRT audits, to report to the PAC on the results of the DIRT "look-back" audit currently under way and to publish the results of this audit. The section also augments the powers of the Revenue to obtain information in the course of a DIRT audit and applies the audit powers to returns made by life assurers and collective funds under the new gross roll-up tax regime just described. The audit by Revenue of the DIRT position of the banks is ongoing and the completion of this audit is a matter for them alone. I understand, however, that their work is well advanced. Section 70, which was inserted on Committee Stage in the Dáil, closes off a significant tax avoidance scheme availed of extensively by certain high income earners, through the use of partnership structures. Various efforts have been made since 1986 to combat the use of partnership structures to avoid income tax by contrived or artificial commercial arrangements. The tax loss to the Exchequer can be substantial and the implications for tax equity can be quite considerable. Put simply, certain very well off individuals can use these schemes to shelter very substantial amounts of income from the 44% income tax rate. As with all changes to tax law of this nature, transitional provisions have been provided for to take account of cases in the pipeline where a sudden change may affect commitments already entered into. Transitional provisions cannot last indefinitely, or for extended periods, but the provisions I have made in the Bill are reasonable - some would say generous. We can go into the details on Committee Stage. Section 73, which was also inserted on Committee Stage in the Dáil, is an anti-avoidance provision to counter a situation where interest payments to financial institutions may be structured so as to provide a timing mismatch and maximise relief to the borrower at the current standard rate of corporation tax. At the same time, the lender is able to have the interest received taxed on an accruals basis over the period of the loan at the reducing standard rate of corporation tax. This facility will no longer be available. As the House will know, the current standard rate is 24%, reducing to 12½% in 2003. Section 74 is a new provision relating to the taxation of the investment income of trade unions. Under current law, such income is exempt from tax where it is used to provide provident benefits to members of the union, e.g. death grants, compensation for members' loss. etc. The existing exemption is being extended to cases where the investment income is used to educate, train or retrain trade union members or their dependants. This is a constructive extension of tax relief to promote socially desirable objectives and was brought to my notice by SIPTU during the PPF discussions. Sections 75 to 84 in Chapter 5 of Part I of the Bill cover other corporation tax changes. These largely deal with the application of the 12½% rate of tax to trading income which does not exceed £50,000 and technical changes to consortium loss relief and to IRNR provisions. Section 82, together with section 34, is designed to facilitate the growth in securitisation of assets business both within the IFSC and in the Irish financial sector in general. Section 83 makes a number of changes to the grant and revocation of taxation certificates to IFSC or Shannon companies and the repeal of provisions allowing the application of special tax rates to particular IFSC or Shannon trading operations. Section 84 exempts the Commission for Electricity Regulation from corporation tax, as is the case with the profits of certain other regulatory bodies in the State. Sections 85 to 88 deal with capital gains tax, enhancing certain aspects of CGT "retirement" relief for over 55s; providing for a more efficient and streamlined tax clearance procedure on sales of newly-constructed houses; and removing certain tax obstacles impacting on the disposition of property following a foreign divorce or legal separation which is recognised in the State. Section 86 applies the 20% CGT rate to gains on the disposal of non-residential development land and section 52 earlier applies a 20% rate of tax to profits from dealing in such land. Both measures are designed to encourage an increase in the supply of land for development. Increased supply is the most effective price control mechanism in these cases, as the various Bacon reports attest. Section 89 deals with the income and corporation tax reliefs for the renewal and improvement of certain towns throughout the State with a population between 500 and 6,000. The relevant selection process to designate these towns in each county is well advanced. This process involves county councils recommending areas where tax incentives ought to be applied to an expert advisory panel which in turn will make recommendations to the Minister for the Environment and Local Government. I will then designate those areas for tax relief which are recommended to me by the Minister for the Environment and Local Government. We borrowed this system from the previous Government and, as I said in the Dáil, it is a good model to copy. This town renewal scheme involves a similar range of reliefs as in the case of the current urban renewal scheme. The scheme will operate from 1 April 2000 to 31 March 2003, subject to EU approval of the business elements of the reliefs. The residential reliefs will, however, apply from 1 April next. The scheme is intended to assist in restoring or improving the built fabric of Irish towns, to promote sensitive local development and to revitalise the centres of small towns. This relief will help redress the decline of some of our smaller towns in rural counties and attract investment from areas of the country that have a plentiful level of investment demand already. Parts II and III of the Bill deal with indirect taxation. Sections 90 to 106 relate to excise duties and sections 107 to 124 to value added tax. The excise duty changes comprise a series of measures which:   1. confirm the budget day increase in tobacco excise duty; the reduction in excise duty on kerosene and the abolition of the travel tax on overseas travel by air or sea; 2. provide that the excise duty rebate for diesel fuel used in buses and trains will be confined to the use of low-sulphur diesel; 3. clarify the application of excise duty exemptions and reduced rates for fuel used in private flying, buses and off-road vehicles; 4. legislate for updated collection procedures in the case of certain court issued licences and apply excise duty and tax clearance requirements to liquor licences issued to the national cultural institutions; 5. provide for the delegation to authorised staff in Revenue of certain decisions in relation to the operation of vehicle registration tax and for the issue of a combined motor vehicle registration document, and 6. close a number of loopholes in relation to the use of mineral oils for automotive purposes. The VAT changes are largely technical, apart from sections 111 and 113 which confirm the increase in the farmer's flat rate of VAT from 4% to 4.2%, as announced in the budget. A number of the other sections close off loopholes, for example, in the reclaiming of VAT on rented holiday accommodation, and restrict the scope for tax planning in claiming VAT input deductions in a number of areas. While the VAT changes in this year's Bill are not extensive, this will not be the case in future years. The EU is actively considering changes to VAT law to modernise and simplify it. It is also seeking to ensure that changes in the business environment which we are seeing through e-commerce, and the increasing private provision of former public services, are adequately catered for in EU VAT law. Part IV of the Bill sets out a number of stamp duty changes. These are mainly technical except for section 126, which continues the relief from stamp duty on transfers of assets to young trained farmers for a further three years. The relief, which up to now has been a two thirds abatement of the relevant duty, is now increased to a full relief arising from the commitment in the Programme for Prosperity and Fairness. Part V of the Bill refers to residential property tax. While RPT was abolished from 5 April 1997, arrears of tax continue to be collected, some £1.5 million or more each year. Section 134 of the Bill provides for an increase in the market value exemption limit to £300,000 from £200,000 in respect of properties which must be tax cleared when they are sold if they exceed this limit. Section 135 absolves any property from tax clearance which the vendor purchased after 5 April 1996, the last valuation date on which RPT was payable. These changes will reduce the administrative burden of tax clearance without jeopardising the collection of arrears. Sections 136 to 153 give effect to a number of major changes in the CAT code, as announced by me in the budget. In addition, there are some further changes which are being made to the operation of business and agricultural relief. The result of these changes overall will be to reduce the impact of CAT on family inheritances in particular, make business and agricultural relief more available and move the basis of gift and inheritance tax from domicile to residence, which is the more general basis of liability in the tax system both here and abroad. These are among the most radical and extensive changes to CAT since its introduction and many of these were signalled in the House last year by the Minister of State at the Department of Education and Science, Deputy O'Dea, on my behalf. Sections 137, 138 and 139 propose to change the basis on which gift tax and inheritance tax is charged on assets situated outside the State from domicile to residence. Under existing tax rules a liability to gift or inheritance tax can arise where either the disponer is domiciled in the State or the property comprised in a gift or inheritance is situated in the State - regardless of the domicile or residence of the disponer. There is no change in this latter property rule. However, the Bill changes the general domicile rule to a residence basis so that a liability to gift or inheritance tax can arise on foreign property where either the disponer or beneficiary is resident or ordinarily resident in the State. A person will not be treated as resident or ordinarily resident in the State for this purpose unless they have been resident in the State for five consecutive tax years. This five year period starts to run from 1 December 1999 and a foreign domiciled person in the State will not be affected by this change until end 2004. The changes apply to gifts or inheritances taken on or after 1 December 1999, except in the case of a gift or inheritance taken under a trust or settlement existing on that date where the present rules will continue to apply. Gifts or inheritances taken prior to 1 December 1999 are unaffected by these changes. Section 140 closes off a loophole in the qualification rules for agricultural relief while section 148 allows a person to qualify for CAT business relief in respect of a farming business which does not qualify for agricultural relief in the case of inheritances taken on or after 10 February 2000 - the day the Bill was published. Section 145 provides for the increases in CAT thresholds in the budget and the introduction of the uniform 20% rate of tax for both gifts and inheritances. It also provides for the aggregation of prior gifts and inheritances only within classes of relationship instead of across classes as at the moment. The current complex aggregation rules can lead to unforeseen tax consequences depending on the sequence in which gifts or inheritances occur. Section 147 increases the threshold for exemption from probate tax to £40,000 as announced in the budget. Sections 149 and 150 remove certain obstacles in the CAT and probate tax code to the recognition of foreign divorce orders. This mirrors the changes made in the Bill in respect of CGT and stamp duty in such cases. Section 151 provides for the new relief of CAT on the family home as promised in the budget. I know this relief will be supported by the House as it responds to a growing concern on the part of many home sharers about the tax consequences of the death of a partner or family member. I have received a large volume of representations on this issue in the last year alone, as have Senators. The final part of the Bill contains a number of miscellaneous but nonetheless important tax measures. Sections 156 and 157 deal with the investment powers of the Post Office Savings Bank and the operation by the National Treasury Management Agency of certain deposit accounts for Exchequer moneys. With regard to section 159, the House will know of the Government's decision last year to partially pre-fund social welfare and public service pension liabilities with annual provisions of 1% of GNP and an allocation from the Telecom Éireann sale proceeds. Interim legislation was passed before Christmas setting up a temporary holding fund for pension allocations and a sum of £3,015 million was paid into the fund before the year end. Section 159 of the Bill will enable me to make further payments of up to £1,850 million into the fund this year. This is slightly above the estimate included in the recent budget, due in part to higher than expected additional receipts from the Telecom Éireann sale. The payments into the temporary fund, which is being managed by the National Treasury Management Agency, are being made pending the introduction of an appropriate statutory framework for the financing, management and investment of State pension funds on a long-term basis. Section 161 deals with donations of heritage items. This provision was introduced in 1995 and allows for the value of certain donations of heritage items to a national heritage institution to be written off against certain tax liabilities of the donor. Each donation must be worth at least £75,000 and be approved by a special selection committee. There is a limit since 1996 of £750,000 on the total amount of gifts which can be tax relieved each year in this way. In response to requests from the Minister for Arts, Heritage, Gaeltacht and the Islands, the Bill increases this limit to £3 million. This relief has been used quite actively since it was brought in and I expect to see its extended use in future years for the State to acquire heritage items for the public benefit. Section 162 provides for certain changes to the legal requirements for the publication of certain details of tax defaulters. Since 1983, the Revenue Commissioners have been required to compile and publish a list of persons on whom either a fine or other penalty has been imposed by the courts or in whose case the Commissioners have accepted a settlement offer in lieu of initiating legal proceedings. Publication is prohibited in certain cases - where the settlement is the result of a voluntary disclosure, where the 1993 tax amnesty applies or where the settlement amount does not exceed £10,000. The list of names of tax defaulters is published on a quarterly basis. The list gives details of the name, address and occupation of the person concerned and the fine or penalty imposed by the courts or the amount of the tax settlement involved.

Section 162 contains a number of changes to tighten up these requirements to ensure that details of settlements are published by the Revenue Commissioners irrespective of whether a fine or penalty has been imposed by a court and irrespective of whether any such fine has already been published by the Revenue Commissioners. The current law has been interpreted as allowing publication of either the outcome of the court action or the settlement, but not both. Section 162 also ensures that in future settlements, details will be published even if the relevant tax penalties have been paid in full. In addition, and more importantly, the published list will now give a brief description of the circumstances relating to the default or evasion, for example whether a case may have arisen out of a specific inquiry or investigation. All these changes take effect for settlements agreed or court fines imposed after the passing of the Act. Section 164 incorporates a number of provisions to facilitate the introduction of consolidated billing by the Revenue Commissioners - the issue of a statement showing a taxpayer's payment or repayment position across a number of tax heads. The section provides that claims for repayment can be set off against outstanding tax liabilities. The Revenue Commissioners are empowered to make regulations specifying the order or sequence in which repayments may be set against tax liabilities. A similar enabling provision will allow for appropriation of a tax payment in a particular order where no specific instructions have been given to the Revenue Commissioners. I am as conscious as anyone else of the need to maintain confidence in the tax system. The measures I have included in this Bill will go a long way to achieve that goal, as well as taking one of the more effective anti-tax evasion measures - that is, to reduce the tax burden to sustainable proportions. Those income earners paying their tax, as good citizens ought, can take it from me that those evading tax will be pursued and that tax due to the State will be collected. I am sure the House will endorse this position. I hope the House has benefited from the extensive outline I have given of the provisions in the Bill. It is substantial tax legislation and I look forward to hearing the views of Senators. I commend the Bill to the House. I wish to point out that the following two minor corrections to the Bill are required. In page 183, line 38, to delete "906(1)" and substitute "906A(1)" and in page 296, line 11, to delete "subsection" and substitute "paragraph". I ask the Cathaoirleach to direct the Clerk of the Seanad to make the corrections under Standing Order 121.   Mr. Doyle: I welcome the Minister for Finance to the House and thank him for introducing the Finance Bill, 2000. The Bill by its very nature is a complex document and the Minister has gone into great detail in explaining each section, for which I am grateful. I recall the Minister's last visit to the House when we had a most interesting debate. I wish to comment on how the Finance Bill will affect the economy. The budget and the Finance Act are two of the most important instruments available to the Government in outlining economic and fiscal policy for the country. It is all the more important given that exchange rate policy is fixed with the euro and interest rates are primarily set by the European Central Bank. When the Minister introduced the budget on 1 December last he had the largest surplus ever available to a Minister for Finance. He could easily have introduced a budget which would have made everyone happy. Instead he decided to introduce a budget which became one of the most controversial of recent times. Since then the Minister has done a number of U-turns. His policy statement on budget day is at variance with the commitments in the Programme for Prosperity and Fairness. For the first time, I see warning signals ahead that all is not well in the Irish economy. I am alarmed by the fact that current public expenditure has increased by over 20%. A Government that does not have a strong policy on public expenditure cannot manage the economy. I am deeply concerned by the rise in inflation. The latest inflation figures show that the annual rate climbed to 4.3% last month, the highest level in a decade. The indications are that inflation is set to rise in the months ahead, certainly exceeding 4.5% and possibly reaching 5%. Most worrying of all is that there is inflation in the economy which is not measured by the consumer price index. There is a continuing rise in house prices and an increase in the cost of services. The other day when I went to buy my newspapers, I discovered they had increased in price. The Racing Post now costs £1.05 - this was not great value last week. The excuse given is that prices have increased because of the strength of sterling. However, I can bet with the Minister that if sterling weakens there will not be a decrease in the price of newspapers. Expansionary budgets are inflationary and inflation makes people poorer. Over Christmas I was reading the autobiography of John Major who had this to say about inflation: "It is an insidious demon, always waiting in the wings, it is dangerous and morally corrosive and it destroys lives. Those who can best protect themselves and even gain from it are often those who have most and the losers are those who have least." The Governor of the Central Bank has warned that if inflation persists at current levels it could lead to a sharp loss in competitiveness. He also warned that the economy is now more vulnerable than ever before to overheating. This was reflected in exceptionally rapid increases in property prices, unprecedented demand for credit, labour shortages and higher inflation in the services sector. He also went on to state that the Republic is now top of the inflation league table in the euro zone. This is due to once-off temporary factors such as the rise in excise duty on cigarettes, higher oil prices and the weakness in the euro. However, there was a strong rise in underlying inflation. There is no doubt that if the Central Bank was still in control of borrowing costs, they would be much higher than at present. Low interest rates have helped to fuel the boom in the housing market and the related rise in borrowing factors which leave the economy somewhat exposed in the event of an international downturn. The advice from Brussels to tighten budgetary policy is not practical. Very significant tax increases or Government spending cuts would be needed to slow the economy. This course of action is neither politically possible or economically desirable. The targeting of tax cuts to the highest paid in the last budget was a terrible mistake. Giving more to lower earners would have provided a smaller boom to demand in areas like the housing market. Government analysts have tried to play down the rise in inflation as a temporary blip and attribute it primarily to rising oil prices and the punitive budget increase in excise duty on tobacco. I do not agree with this analysis because if one makes a closer examination of the consumer price index it shows that while overall inflation in the service area is running at 5.8%, this figure hides a multitude of much higher increases in some more specific areas such as education and training which runs at 11.8%, hospital charges at 9.5% and other services at 15.8%. Economists are also of the opinion that the impact of budgetary tax cuts after April will further fuel consumer spending and inflation. After April we will see whether the stimulus to spending from the budget prompts further pressure on prices. A greater test will come later. However, it will probably take a year or more, unless an adverse shock arises much sooner, to determine whether accelerating inflation trends reflect the beginning of the end of the current boom. The Government must now ensure in so far as it can, although it has not been very convincing to date, that the higher inflation rate is not built into the economy for the long term through a further increase in wages above the rises set down in the national programme. It is essential that the Government controls inflation to avoid a set back to the economy in the coming years. While public borrowing was a dilemma this country had to face in the 1980s, the opposite is now happening. Private borrowing is a real concern for the economy. People are borrowing 20% more this year than last year and this is likely to continue, given the tax cuts in the budget, the amount of salaries agreed in the national programme and the general momentum of the economy as reflected in the 40% increase in new cars purchased in January. It is likely that house prices will increase this year and next year by a substantial amount. This rapid increase in private borrowing must be of concern to the Government and the Minister must indicate how this can be curtailed. Getting back to the Finance Bill, I note the Minister has appeased the stay-at-home spouses who felt they were being discriminated against by the controversial individualisation of income tax bands, to which I will refer on Committee Stage. I am also pleased to note that, as a result of the scale of tax evasion uncovered by the Committee of Public Accounts and the various tribunals, the Minister has given the Revenue Commissioners stronger powers to name and shame tax dodgers. There is also further liberalisation of the options available to pension fund investors on retirement. The Minister revolutionised retirement provisions last year by allowing pension funds to be invested in approved retirement funds or taken as cash lump sums. These reforms were limited to the self-employed and directors who control at least 30% of their company shares. By lowering the threshold to 5% in this year's Finance Bill, the Minister has extended the new retirement options to directors of more widely held companies. The Bill also allows people who made additional voluntary contributions in occupational pension schemes the option of taking retirement funds as cash or transferring to approved retirement funds. This is a progressive step to encourage people to provide for their retirement provision rather than rely on the State. One of the most substantial changes in this year's Finance Bill is the move from domicile to residence as the basis for charging capital acquisitions tax. The move will have widespread consequences in that it will bring within the capital acquisitions tax benefits which would otherwise fall outside the ambit of the Bill. The move to switch the basis of capital acquisitions tax from domicile to residence has, I understand, caused considerable concern among the growing ranks of expatriate executives in Ireland. Their whole estates could come within the scope of Irish gifts and inheritance taxes, but the Minister has taken some of the sting out of the changes in capital acquisitions tax by delaying the implementation of the new regime until 2004. The capital acquisitions tax provisions will apply to expatriates who have lived here for at least five years. There are two issues which have not been addressed in the Finance Bill. The issue of child care must be addressed not only for economic and social reasons but more importantly in the interests of children in a changing society. How we care for children and how they are brought up are issues that must be addressed. The second omission is the failure to deal with the taxation of credit unions in a fair and equitable way, a matter I shall return to on Committee Stage. In my contribution today I have endeavored to put on record my belief that there are definite signs that the economy could be in trouble in the near future. All the warning signals exist, the rise in interest rates, the increase in wages and high inflation rates, at double the European average. If these issues are not addressed quickly Ireland's competitiveness will be eroded. I doubt that the fiscal policy outlined by the Minister to date is sufficient to deal with the problem. For that reason I will oppose a Second Reading of the Bill.   Mr. Finneran: I welcome the Minister, Deputy McCreevy, who was here earlier, and the Minister of State, Deputy Hanafin. I compliment the Minister on the budget and welcome the opportunity to discuss the provisions of the Finance Bill. This Bill is the continuation of good work already done by the Government. In particular I welcome the continuing reduction in taxation. It is estimated that Ireland now has one of the lowest taxation regimes in the world. This is not generally known and we should communicate this abroad. Otherwise, it may be a deterrent for some people in returning to this country. I request the Minister to initiate an information leaflet or campaign to dispel the misleading view. People are fair-minded and appreciate the success we are now enjoying. Opinion polls indicate they associate this success with Fianna Fáil policy and Government policy. It could be said that this is the most generous budget ever. It gives £1 billion in personal tax reductions. It removes 70,000 people from the tax net and takes 125,000 from the top rate of tax. It cuts the standard and high rates of tax by 2% and reforms and simplifies capital acquisitions tax, which is long overdue. It accelerates capital allowances for expenditure for child care premises and puts into effect a new town renewal scheme which will have huge benefits for many rural communities and, hopefully, my own County Roscommon. It provides relief from stamp duty on the transfer of assets to young trained farmers for a further three years. This is widely welcomed by the farming community. That provision has been enhanced in the recent discussions. The Bill is comprehensive and it is not possible to speak in detail on all its sections. I welcome, in particular, the 2% reduction in the standard rate to 22% and the higher rate to 44%. I welcome also the widening of the tax bands for a single person from £14,000 to £17,000 and for two income families to £34,000. These are generous reductions and changes in the tax system and are part of the commitment given in the programme for Government. Everybody is a winner as a result of this budget. The Minister has helped the aged, the blind, the widowed, incapacitated children and dependent relatives, all of whom had their personal standard rate of tax doubled. These are welcome changes which benefit all sections of the community. I welcome also the changes in capital gains tax. Last year there was criticism from the Opposition when the Minister reduced capital gains tax to 20%. Clearly he was right. The Minister has gone further this year and has extended the 20% rate for people who wish to sell land for residential purposes. This is an important move and will help to increase the supply of land for housing. I compliment the Government on its commitment in this area. There will be 22,000 new house starts over the next four years. This is an important measure to address the housing crisis. I wish to highlight section 12 which provides for a £3,000 carer's allowance for spouses who care for children, the incapacitated and the aged. It is recognition by the Minister of those in society who look after these people. This will provide relief for those who wish to stay at home and look after the above. Section 24 provides for an increase in the inheritance tax threshold and a deduction on the uniform 20% rate on gifts and inheritance. It is a good time for the Government, particularly the Minister for Finance. While the public may not give all the credit for the state of the economy to the Minister - I know the Opposition will not - he is entitled to it. I compliment him and give him credit for it. I can safely say that if the economy was doing badly he would certainly get all the blame. As a public representative, the Minister, Deputy McCreevy, has a view on how the economy and the finances should be dealt with. It is only recently that he has been given the opportunity to implement these views. I compliment the Minister on carrying out his duties. It could be said that the budget was formulated against a background of a good economic position. The fuss over the individualisation issue, in which many took part, was a wide issue and took the nation's eyes off the real position of Ireland as a prosperous country. The Finance Bill is the opportunity to implement the provisions of the budget. We can be content that this country has moved to a position where there are large Government surpluses each year and that they are being invested in pension schemes. Rather than deal with matters on a day to day basis the Government has an holistic view of the economic finances. In the 1980s it was said that we had our creditors at the door. Were it not for the strong measures adopted in 1987 by the then Government - in this I include Deputy Dukes who initiated the Tallaght strategy and supported the decisions of the Government - to take a firm hand with the finances, get us ready for the single currency and avail of the opportunities for our further integration into Europe, we would not have been in a position to avail of those opportunities and would not benefit from them today. Last night I was in Dublin Castle at the launch of a book which outlined all the measures taken. The authors are the former Minister for Finance and European Commissioner, Mr. Ray MacSharry and Mr. Pádraic White, former managing director of the IDA. They were supported by far-seeing people in the Department of Finance and the Government, including Mr. Pádraig Ó hUiginn and Mr. Seán Cromien. They were the architects of our present success. The Minister for Finance, Deputy McCreevy, takes an individual approach and his thinking parallels that of the late 1980s. Indeed, he was a public exponent of such ideas at that time. He spoke ad nauseam on radio and television, explaining why it was necessary for the country to reform our finances and prepare for the needs of future generations. Decisions taken at that time with regard to education, our involvement in the EU and other areas of Government spending could not have been implemented without the partnership agreements of those years. Partnership agreements have brought a decorum to the country in the past 12 or 13 years which contrasts with the chaos of the previous seven or eight years. For this we must compliment all the social partners, trade unions, farmers, employers and Government. I am pleased the new agreement is in place and will remain so for the next two years. This agreement will protect workers. It provides for a 25% increase in wages over a three year period. Our present prosperity will not continue if we do not remain competitive. Senator Quinn has spoken about this matter on a number of occasions and I agree with what he says. We cannot take our present prosperity for granted. We must constantly seek new opportunities for our people and make sure we adapt and prepare for new developments at all times. We may face a major shortage of skilled people to deal with new technologies over the next ten years. Newspapers report that 70,000 positions are vacant in Ireland at present. It is hard to believe that so many educated and talented people were forced to emigrate only ten years ago because we did not have positions for them. That is no longer the case but we cannot become complacent. We must continue to focus on what is necessary. This is what the Minister for Finance is doing. He is, furthermore, surrounded by a Cabinet which is also focused on the future. I heard criticism in the House and outside of his provision for pension funds in the future but I compliment the Minister on that measure which represents good housekeeping. The national development plan, the Programme for Prosperity and Fairness and the Finance Bill are all part of an integrated approach to long-term economic management. We can no longer think in terms of the current budget and the Minister is attempting to change our mindset in that regard. People in public life have a responsibility to encourage people to focus on our long-term needs. The Finance Bill is an important further step in our economic development. The late Seán Lemass in 1959 advised that while we had gained partial political independence it was necessary that we work to achieve economic independence. His advice was taken and our economic development is now the envy of Europe. In Dublin Castle last night there were 15 ambassadors and two chargés d'affaires, all extremely interested to know what had brought about the Celtic tiger economy. Those who had been part of the strategy of the late 1980s attempted to explain it and one told us how, at that time, IDA personnel visited more than 2,000 plants in one year to explain that they should invest in this country. This gives an indication of the perseverence of that agency. While other agencies throughout the world distributed fancy literature, Deputy Albert Reynolds, who was Minister for Industry and Commerce at the time, insisted on the use of the personal touch. Mr. Pádraic White, Mr. Kieran McGowan and excellent officials in the Department of Finance played their part in that important development of which we are now so proud. The Finance Bill is a further step in this development and I commend it to the House.   Mr. Quinn: I look at this Bill with a great deal of interest. During the year I spent an evening with Lee Kuan Yeu, senior Minister and founder of Singapore. It was interesting to talk about the success of that little country at the southern tip of Malaysia which carved itself out of nothing 40 years ago. Singapore became a success because of the way its Government and people controlled their economy and ran their own show. It became a leading light among the economies of the world while so many of its neighbours fell apart, and was left almost unscathed by the recent economic difficulties in Asia. This success came about because of what the people of Singapore did with their country and economy during the past 40 years. In Ireland during the 1970s and 1980s, on the other hand, we did not manage our affairs very well. We had the highest rate of emigration, the worst unemployment rate and the worst balance of payments in Europe. We then got things right and find ourselves with this great success story that is the envy of Europe and the rest of the world. Is there a danger that we will now make the mistake that other countries have made or will we be sensible and level-headed in handling success which, according to economists, is a much tougher job than grappling with failure? Almost five months have passed to the day since we discussed the budget. On that occasion I was one of the few - perhaps the only one - to whisper the taboo word "overheating". I was also in a lonely minority when I mentioned the dreaded spectre of inflation, a ghost which many wanted to pretend was not present at our party. Five months on, we have our customary glance at the Finance Bill which presents a useful opportunity to rein in the rhetorical excesses of the Budget Statement and quietly undo some of the mistakes invariably made on budget day. Unfortunately most of the changes are focused on undoing the political mistakes made in December. The economic mistakes which are of greater importance are left untouched. In the intervening months the problem which no one wanted to talk about has become something that no one can refuse to acknowledge. At the beginning of December the writing was on the wall. It is now in the record books. Inflation is no longer a threat, it is a grim reality. Using the EU harmonised measure, at the end of last month it stood at 4.6% and will rise further before reaching its peak, which we all hope it will do some time soon. According to the newspapers today, the gap between Ireland and the rest of Europe is widening. The figure for the rest of Europe is 1.9%. It was expected to be 2%. The fact that the rate of inflation here is more than double the average rate across the European Union is worrisome in itself but what is even more worrying is the speed at which the Irish figure has doubled. It must surely be the fastest take-off of inflation ever seen in the economy. As recently as last June we were basking in a rate of over 1%, which worried nobody. It is now nearly 5% and still rising, which must worry everybody. Most of the increase was outside our control but the biggest risk from here on is that we will take over the generation of inflation. If we do we will be heading for disaster and several elements of the Bill when they take effect next month will pour oil on the flames. The Bill presents a last chance of a sort but it has not been taken. The considerable extra spending power that the Bill will create will push up prices in the areas where they have been rising fastest - services and house prices. The inevitable result will be upward pressure on wages and salaries inside and outside the framework of the Programme for Prosperity and Fairness. That will be the real test for the Government and the nation. If we allow ourselves to be sucked into an inflationary wage spiral, as has happened on several occasions, we will be hitting the Celtic tiger with one killer blow. We will start a process which will overwhelm us as quickly as the prosperity which many now enjoy. Now that we undeniably have sizeable inflation, the conventional wisdom has shifted ground. The real optimists such the Minister for Finance, who has also proved that he is a realist, insist on giving hostages to fortune with gay abandon. "Inflation will peak around 3%" has given way to "Inflation will average 3% for the year". The wording changes slightly in the hope that no one will notice but those who are taking notes will have a field day later this year. The mistake in admitting we have inflation is stating that it does not matter and it will not matter until it is many times worse. These words have been used much recently. Let me look at this argument because it is one of the unquestioned assumptions underlying most of the discussion on this subject. We would all agree that inflation becomes dangerous when it affects our international competitiveness. If we are talking about competitiveness in the sunrise industries which mainly drive the Celtic tiger I agree that there is a cushion of slack in costs, a cushion that the present level of inflation will not take away, but that is not where the slippery slope will begin. The challenge will come somewhere else, in another part of the economy which is also booming as never before - the more traditional, mainly Irish-owned companies which sell mainly into the British market. These firms still provide a large number of jobs in communities where business failures would have a devastating effect on whole areas in rural Ireland. They are in their heyday and it is great to see them grab hold of the opportunity. I am especially pleased that many of them are to be found in the value added food sector on which Senator Dardis keeps an eye and which he and I have always championed, but the cold reality is that these companies are very seriously exposed. Because they are labour intensive their costs will be most affected if inflation drives wage rates skywards. The immediate threat may come from the level of sterling against the euro. Everyone agrees that sterling will not continue at its present rate. It is generally regarded as highly overvalued. It is clear that the pips are beginning to squeak in British manufacturing industry as they cannot sustain for much longer such an uncompetitive exchange rate. People have been saying for so long sterling must come down that it is a bit like the little boy in the story who kept crying wolf. People stopped believing him just as people here have stopped believing that sterling will ever come back to anywhere near where the fundamentals say it should be. What we should remember about the story of the boy and the wolf is that in the end there was a wolf, for which nobody was prepared when he turned up. Will we be surprised in the same way? I hope not, but I fear we will because I do not hear the steps being taken to prepare ourselves for that change from the current position from which we are deriving so much benefit. A sudden fall in sterling coupled with a strong upward pressure on wages could totally undermine in a matter of weeks the competitiveness of those firms, mainly in the traditional industries, which are exposed to the British market. If that should occur, what would happen next is easy to forecast; there will be panic, just as there was when the wolf turned up.

.The last time this happened, towards the end of 1992, the Government threw £50 million at the companies affected in a desperate attempt to keep them afloat and it worked for some of them but not for others. In the economic climate of the time it was just one more bad story but if it happens again, one of the first casualties will be the confidence which is such a driving force across the economy and which has led in many quarters to what can only be described as cockiness. I have talked to some of the younger generation, who have only been around for the past ten years and who have never experienced the bad days or witnessed an economic setback. There is such an air of confidence and cockiness that they believe nothing can go wrong. The impact on them of such a setback would be even greater. My message is that, for reasons outside our control like the level of sterling, we could be faced with a sudden setback in the most vulnerable sectors of the economy. Because of the knock-on effects of such a setback, it should be our responsibility to make the utmost effort to avoid increasing the risks. It is like Singapore, where "in their own hands" was the challenge. Pouring demand into the economy at a time when inflation shows every sign of running away with itself is a perfect example of what we should not be doing. By doing so, we are taking a terrible risk with our new-found prosperity. My earnest prayer is that we will get away with it because the last thing I would wish is to be proved right. I do not want that to happen, but I urge caution. I am concerned about this. I remember that my catechism referred to the seven deadly sins. While I am not sure if I remember all seven of them, one of them was envy, which is part of our problem at present. I remember the days when we were all happy to have bicycles until somebody got a car. Then we were all reasonably happy until somebody got a second car and then we were no longer happy; we wanted a second car too. I remember having a black and white television and we were all happy until somebody on the road got a colour television and then we were no longer happy. All of us are envious. We are thinking of ourselves. We are thinking of what we want because somebody else has got it. We are not thinking of our children or of what will happen if we misbehave to the extent that, through envy, we become greedy enough to look for something which will damage the economy. We will end up where, in a few years or perhaps in a shorter time, we will suddenly find our young people leaving school or third level and emigrating as they did just ten years ago. If that happens, we will have nobody to blame but ourselves. The ball is in our hands, we are in possession. Let us make sure that in what we do with the ball now we will not risk giving it to the opposition or, worse still, kicking it over the boundary line where we will be unable to find it. There are risks in the Bill and we are not keeping our eye closely enough on those risks. We must take steps to make sure we do not throw away the great prosperity and success. I am confident that the Minister is the right man in the job but I have grave doubts about whether he has taken the steps which we need to take to maintain the success story.   Mr. Dardis: I welcome the Minister of State, Deputy Eoin Ryan, to the House on the day when we marked the achievement of another Eoin Ryan, who was Leader of the House, by presenting him with his portrait along with other former Leaders. I commend the Minister for Finance, Deputy McCreevy, on his Second Stage speech and, not surprisingly, I support the Bill. The coalition has passed the halfway mark of its term of office and in that context it is useful to make comparisons between it and the previous Administration, which lasted three years. As the Progressive Democrats-Fianna Fáil Administration has delivered three budgets and the rainbow coalition did the same in its term of office, we can make fair and reasonable comparisons between the budgetary performances of the two Governments. The comparisons are quite stark. The rainbow coalition cut the basic rate of income tax by just 1% and this Administration has cut it by 4%. The rainbow coalition made no change to the higher rate of income tax and this Administration has cut it by 4%. The rainbow coalition increased the threshold at which a single person reached the top rate of tax by just £2,250 and we have increased it by £3,400. The rainbow coalition raised the value of the basic tax allowance for a single person by just £550 and we have raised it by £2,000. It is this last comparison which is particularly significant in that it measures the difference between words and actions. We may leave aside the rates because the parties of the rainbow coalition always argued against rate cuts anyway, but those parties always made great play of their commitment to lower paid workers and their determination to help those who were least well off, and their record of achievement in this area is miserable. Even by the yardstick which they would use of basic allowances and thresholds, they still fall short of the performance of the present Administration. When the rainbow Government left office just over three years ago a single person became liable for income tax at an income of £76.92. It is worth bearing that in mind the next time we hear people who never introduced a national minimum wage calling for that minimum wage to be made tax free. No Government in the history of the State has done more for lower paid workers than the present Administration. We have taken well over 100,000 of them out of the tax net altogether. No Government has done more for people on middle incomes. We have taken over 100,000 of them off the top rate and we are well on target to ensure that less than one in five earners pays tax at the top rate by the time we leave office. It is becoming fashionable in some quarters to say that it is all a matter of resources, that the Government has the money to cut taxes and the previous Government did not, and that misses the point completely. The coalition has raised revenue by reducing taxes and that is worth repeating time and again. That was a central message of the founding fathers of the Progressive Democrats and it was universally stated when the party was founded that if one was to reduce taxes, one would reduce revenue and services and people who are vulnerable would be affected. The reverse has occurred. Where taxes were cut, revenue increased and services and infrastructure improved. We harnessed the incentive power of taxation to reward work, encourage enterprise, stimulate new economic activity and broaden the tax base. The changes in capital gains tax make the point eloquently. The rate was halved and the revenue more than doubled. This gives rise to some rich ironies. The Minister, Deputy McCreevy, has been more successful in screwing more money out of the high rollers than any left-winger and he did it by cutting rates, not by raising them. If, for ideological reasons, any socialist wanted to double the CGT rate and return it to 40%, he or she would have to explain how to make up the income which will be lost to the Exchequer as a result. In recent weeks I heard Deputy McDowell at a meeting of the Committee on Finance and the Public Service speak about the current temptation for people to convert income into capital to avail of the 20% rate of tax.

He said the CGT rate should be raised to prevent this from happening. However, there is another way of looking at this, namely, that the basic income tax rate should be reduced to the CGT rate, which would avoid the transfer of income into capital. At the same committee some people from the National Economic and Social Council stated that they did not wish to see personal rates of tax reduced further, that tax should be maintained at the current rate of GNP. I do not disagree, but I think it can be maintained at the current rate of GNP even given the reduction in rates because of the increased revenue relative to GNP. I was very surprised to hear this suggestion as it was a return to the orthodoxy of the late 1980s which suggested that services would be seriously hit if one were to reduce rates of personal taxation. There is now a fairly widespread acceptance that cutting tax rates creates jobs and recent evidence certainly supports that contention. The number of people at work has surged while the number out of work has plummeted. The view has been put forward from some quarters in recent times that instead of cutting tax rates we should be sharing the wealth. Again, I think people are missing the point. It is the reductions in tax which are enabling us to share the wealth because of the revenue and economic buoyancy created. The figures are self-explanatory. The number of people in employment has risen by almost 270,000 since April 1997, while the level of unemployment has fallen by 70,000 over the same period. The level of long-term unemployment has fallen by 50,000. This latter figure is particularly significant. Every Member is aware that long-term unemployment is one of the major causes of poverty and deprivation in modern society. There were times when a fatalistic acceptance developed, including in this House, that we would never be able to deal with the difficult problem of unemployment, that it was endemic and would always remain with us. However, all of this has changed. Improved incentives and targeted intervention and assistance are helping the long-term unemployed to find their way back into the workforce and are giving them a chance to participate fully in our national prosperity. Long-term unemployment can be completely eliminated within the lifetime of this Administration, and if it achieved nothing else this would be a singular achievement, which I think can be reached and of which it could be justifiably proud. The tax cutting agenda which my party set out in the mid 1980s has now been largely delivered, or certainly will be by the end of the Government's term of office. It is unlikely that we will change course on the taxation front. The Labour Party attacks every cut in the higher rate, but there is no indication that it would ever reverse any of the cuts if it returned to power. By 2002 we can be fairly confident that we will have a tax system based on rates of 20% and 40% with most low earners paying no tax and perhaps only 17% of earners paying at the higher rate. This will be a formidable achievement in terms of tax reform and unbelievable when one thinks of the rates little more than a decade ago.

This begs the question of where we go then, what kind of tax system we want to see in 2010 and what kind of society and economy we want in 2010. Sometimes in politics we do not pay much attention to these questions as they are more medium term than the problems we are accustomed to dealing with on a daily basis. We know that in 2010 we will be competing in a global marketplace for jobs and investment and that capital and people will be more mobile than currently. We will have to be competitive, as Senator Quinn said, if we are to secure the prosperity we have, let alone build on it. What will our future hold? Inflation has been referred to at some length and some things have been said which are erroneous. Within the context of the forecasts of growth currently before us, I do not regard the current level of inflation as desirable, but I do regard it as acceptable. I believe that people who are used to the standard economic models of growth and inflation, which are related to large economies on the Continent, try to apply those standards to a totally different economic situation in Ireland. It is fairly safe to say that economic growth in Ireland over the next decade will not be driven by the traditional industries at which those people look. A pretty good analogy was put to me in terms of the difference between the Irish and German economies. The point was that if everybody in Ireland bought a BMW motorcar, which would be regarded as desirable in some quarters and undesirable in others, it would not have the slightest, or at most very little effect on the Irish or European economy. However, if everybody in Germany bought a BMW motorcar, then it would have an effect on the European economy, and this is part of the difference we are trying to underline. We can safely say that Irish economic growth over the next decade will not be driven by sectors such as textiles, clothing or low level assembly work. It will be driven by computer engineering, software development and biotechnology, but this will only happen if we create and foster a climate in which activities of this kind can thrive. Deputy Noonan said at the Committee on Finance and the Public Service that we are not really a high-tech economy, that we are assembling components and making boxes which could just as easily be made in Singapore or Taiwan. He is correct in this - of course they could - but we have lost most of those industries, such as Seagate, which simply put components together. Leixlip, which is in my constituency, has Hewlett Packard and Intel, high-tech industries which rely on an expert, well educated and well motivated labour force. I remember asking one of the senior managers at Intel why the company located in Ireland, saying that surely from a labour point of view it would have been much better to locate in some low cost labour economy on the far side of the world. He said it would not have been better to do so because the productivity in Ireland is so much better than on the other side of the world. In other words, the unit cost of producing the item is very much lower here because of the expertise and commitment of the Irish workforce, something we must keep before us at all times. The opportunities in the technology, software and biotechnology sectors can continue to be exploited and to offer jobs in very large numbers for our people. Do we want a high wage, high skills, high value economy? If we do, are we prepared to make the tax changes necessary to ensure Ireland can attract and hold the brightest and best of those businesses and provide the incentives required to keep them here? Are we prepared to reward achievement, effort and excellence? Are we prepared to develop a tax regime which would enable us to compete with Silicon Valley, for example, in the market for top quality computer professionals, the type of people who must be available to the industries I have mentioned? Of course, tax is only one component of that equation. Other factors, such as the quality of life, services and infrastructure also come into play. However, if the tax element in the equation is wrong, then the rest will not matter. It is the sine qua non on which all the other elements are based. These are not academic issues. The special low rate of corporation tax on manufacturing and internationally traded services, which we are trying to protect, has been crucial to our economic performance for several years. Our success in attracting foreign investment is positive proof of the incentive power of taxation in the corporate sector. Are we willing to apply the same logic in the field of personal taxation so we can attract not just the best projects but also the best people to Ireland? In recent weeks we have heard repeated calls for people to return to work in Ireland, including from the Taoiseach during his visit to Australia. It is remarkable that we have moved from a situation where our largest export was our people to a point where we now have the capacity to ensure the young people leaving our educational establishments and those on the live register can find jobs. Emigrants who were forced to leave Ireland in recent times can now return here to work. That is one issue on which political and economic debate will focus in the years ahead. This presumes that we retain the right to set our own taxes and the freedom to run the economy as we see fit. Recent interventions by Europe suggest that some people may have other ideas and this issue was also touched on by Senator Quinn. Ireland has benefited enormously from the freedom which Europe has provided. We have gained the freedom to export to the Single Market, which is the largest and most lucrative in the world, to develop a modern transport infrastructure through EU supports and to challenge local monopolies because of our need to adhere to EU competition and liberalisation directives. The European experience for Ireland has been about the freedom of the individual to choose and self-expression and not restrictions on such freedom. In the US, individual states and even cities enjoy the freedom to compete with each other for jobs and investment. Americans recognise that competition is good for the economy and the individual. I hope that Europe learns from the American experience. By all means, there should be rules for the proper ordering of the Single Market, the prevention of abuses of state aids and to ensure fair treatment for all players in the market. However, it should also be ensured that Brussels does not stifle initiative and independence at member state level. The success of Irish economic enterprise should be an example to all and a threat to none. If other states want to emulate the Irish model, that is well and good but there is no problem if they do not. However, it would be a problem if member states were to gang up on each other in order to stop competition. The EU outlaws anti-competitive practices by companies and the same principle should apply to Governments. There is increasing evidence, particularly in the agricultural sector, of a return to national aids and incentives - agricultural communities and food industries within member states are given an edge and common principles with regard to the market are ignored. A successful social and economic model has evolved in Ireland. We embrace both the enterprise economy of the US and the inclusive society of continental Europe. We are making enormous strides as our model delivers the goods. Serious problems must be addressed in areas such as housing, transport and the health services but they can and will be dealt with. We dealt with what seemed to be much more intractable problems 15 years ago, such as unemployment and emigration. By and large, those problems have been solved and others can also be solved. We still have much work to do integrating the tax and social welfare systems. Each has developed separately from the other over several decades. A process of piecemeal change has resulted in a regime of incredible complexity, which is full of contradictions and confusion. The interaction of the tax and welfare systems means that some people can be discouraged from taking up employment and, in certain circumstances, from establishing stable family units. The entire regime is not simple, transparent or logical in many cases. Full and total integration of our tax and welfare systems is desirable. That would provide an opportunity to remove the poverty traps and disincentives which are such a feature of the current system and it would enable us to target resources more accurately to those who need them most. Integrating these systems will be a major undertaking. It will take time and money but we have plenty of both. If a ten year timetable is set, there is no reason a system could not be in place by the end of the decade which would be the envy of the world. Some of the most important building blocks have been laid by the present Administration. Tax credits and the concept of the individualisation of tax bands have been introduced and it is a great pity that Fine Gael is committed to reversing this increasingly popular measure. An opinion poll has highlighted support for individualisation and I am glad that the House approved a Progressive Democrats motion supporting the Minister for Finance in this regard. Progress towards individualisation of welfare payments has been made following the decision to increase adult-dependent allowances in the recent budget. These are significant and far-reaching improvements. They demonstrate that, provided the will is there, great progress can be made in reforming and restructuring our system. However, more can and should be done. I agree with Senator Joe Doyle that a great deal must be done in the area of child care. Ireland is falling behind relatively and it should be a priority for any Government. The carer's tax allowance is welcome but we should get to the point where there is no means testing for carers. Child care should be put to the forefront of the political agenda. Fears have been raised regarding inflation. I do not regard the present level as desirable but it is acceptable in the context of growth. It must also be accepted that inflation has been imported through an increase in oil prices and some has resulted from the tax on tobacco in the budget. Inflation will peak and can be contained. It must be acknowledged that Ireland has an open economy, which is beneficial, but is vulnerable to trends elsewhere and the exchange rate with sterling and the US dollar. However, membership of the euro has helped in this respect as it gives Ireland a certain weighting which is beneficial. Other critical elements relating to inflation are wage restraint and restraint in current Government expenditure. If Ireland does not maintain reasonable limits in terms of wage inflation and current Government spending, which could be debated, problems will be created in addition to those resulting from external factors. Senator Quinn pointed out that some people believe inflation does not matter. I do not share that view but it can be contained at an acceptable level in the context of rapid growth, which will continue for several years according to most economic forecasters. I welcome the changes in residential inheritance tax outlined in the Bill. I have argued about it for many years. It was totally iniquitous that some elderly people who lived in a good house which had been passed on from generation to generation were forced to sell their property because one sibling had died and left it to another. That was unacceptable and no Government found it desirable, no matter how left wing its outlook. I am glad that something radical has been done in this respect. I also welcome the provisions which have been included for capital acquisition transfers of farms but it is also important that individuals can transfer private businesses. They should not have to sell parts of such businesses because of capital taxes. It does not seem logical that a large corporation can carry on without exposure whereas private businesses have acquired a large capital value as a result of the increase in property prices and so on in recent times and could be taxed to the extent that the business must be sold. It is not desirable from an economic point of view, apart altogether from the social point of view. Land supply is another issue and I acknowledge the provisions that have been made in sections 52 and 86 in regard to development land. Many aspects of the legislation are positive, desirable and will have a beneficial effect. Little more than a decade ago, this country faced enormous difficulties. We had to cut back on spending, services and investment. We fought our way out of that trouble by making some very difficult decisions, and we have to recognise the contribution made by former Ministers for Finance on all sides in that regard. We now face new challenges, however, and we need to make major decisions. We need to think big and invest in every aspect of our physical infrastructure. If we do that, we can guarantee for many years to come the continuing success this country has seen in recent years.

.Mr. Coghlan: I welcome the Minister of State at the Department of the Marine and Natural Resources, Deputy Hugh Byrne, to the House and look forward to all the beneficial projects he will assist in the peripheral south-west region in the future. The Minister of State is always welcome in that part of the country. I thank the Minister, Deputy McCreevy, for his overview of the Bill. I hope Senator Dardis is right in terms of his comments about inflation. Mr. Dardis: I am always right. Mr. Coghlan: I would be glad to think he might be right on this occasion, for the good of the country. There is no doubt that aspects of the Bill are to be welcomed. I will begin my contribution on that positive note before I become constructively critical. I welcome section 23, which deals with pension tax changes, and recognise what has been done in this area. Hopefully, this Administration and those in the future will continue to assist people who have given a lifetime of service to the State in whatever capacity. Speaking of pensioners, we are past the time for cutting the retirement age for old age pensioners by at least one year to 64, and I recommend that to the Minister for consideration. I welcome sections 37, 40 and 42 to 46, which deal with urban renewal and other reliefs. Time is of the essence in regard to all of these schemes, although some of them are not timely, for whatever reason. I ask the Minister to examine the cut-off dates in the sections because I believe they should be extended. I know there are certain difficulties involved in that all new schemes have to be notified to the EU Commission - the Minister referred to the fact that our schemes are being closely scrutinised by the Commission - but I hope he is not using that as an excuse for not doing what is right in respect of the time targets he is setting. The cut-off date in respect of the provisions extending capital allowances for multi-storey car parks outside Dublin and Cork to the end of 2002, where 15% of the expenditure on a project is incurred by 30 September 2000, is far too early for provincial towns. Many towns need to identify the proper sites or, in some cases, sites have to be transferred by whatever arrangement from the local authority to private hands to allow for the scheme because a local authority cannot avail of it. For the proper benefit to accrue, therefore, many towns need more time for the appropriate arrangements to be put in place. I plead with the Minister in this regard because many towns are suffering from enormous infrastructural deficit. Most provincial towns need inner relief roads, outer ring roads and so on and, crucially, more centrally located off-street car parking facilities. The cut-off date is far too early for much needed work to be put in place as regards a number of the sites. I note the Minister's comments about the changes in respect of DIRT in section 68 and the comments about the "look-back" audits. As I understand it, the banks will be charged full interest and penalties. We applaud the Minister in regard to his intention to collect all outstanding taxes but is it possible that following his "look-back" audits the customers, as well as the banks, will pay? I would like to hear the Minister comment further in that regard. On section 70, I appreciate the cutbacks the Minister wants to make in respect of some schemes. I may be confused about this but does that apply to the holiday home schemes? Those schemes were badly needed and they rejuvenated many of our holiday resorts. What happened in some cases has been somewhat superfluous but we should not do anything that would alter the commitments entered into. The new urban renewal scheme in section 89 has the potential to be a wonderful scheme covering towns with populations of between 500 and 6,000. It is a welcome boost for the small towns which will be accepted for the scheme. A number of those towns are dilapidated and are crying out for regeneration. From what I understand of the scheme, it will not apply to greenfield or out of town sites, which is only right. The Minister stated that the scheme will operate from 1 April. Will that allow the selection and designation process to be completed? I would like to hear the Minister's comments on that timeframe when he replies. The Minister referred to post office savings. I would like to hear his views on the reason credit unions could not be put at least on a par with the post office savings system. All that is being sought is a fair tax regime. A working group has made recommendations, and the Minister mentioned the EU competition directive. When does he expect to hear from the EU? It is the Minister's intention to ease the tax burden and to increase the State's ability to collect all outstanding taxes. I agree with the increase on cigarettes in the budget but it is a pity the Minister did not impose compensatory reductions in excise. If he had done that, we would not have suffered the increase of 1% in the CPI, which is adding so much to our inflation rate at present. A corresponding reduction in the price of petrol and diesel would have been very much welcomed. The Taoiseach rubbished my party's proposal that the minimum wage level be exempted from tax. I am glad to note that is now a central plank in the Government's policy intentions, which we welcome. The U-turn on the £3,000 allowance since the budget was an exercise in damage limitation which did not go far enough. We need a fair and practical child care package. We are nowhere near getting that matter right. There is a long way to go and I hope the Minister will look further at it in the near future. I listened to a radio programme this morning which dealt with the situation in Finland, which is a model we should strive to introduce here. If we do not, women will not want to have children. There will be a great reduction in the number of children born if we do not provide proper child care facilities. We are trying to get more people into the workplace. Many mothers are anxious to work but there is no incentive to do so. We have a long way to go in that regard. In regard to PRSI and levies, what is the rational for having a limit for employers but not employees? At salaries up to £26,500, employers will pay 12% and the employee 6.5%. At salaries from £26,500 to £36,600, employers will pay 12% and the employee will pay 2%. However, for salaries over £36,600, the employer ceases to pay but the employee must continue to pay. While the Minister omitted to speak about inflation, it was referred to by several speakers, including Senator Dardis. In a very short time, we have gone from the bottom to the top of the European inflation league. That is very disturbing. The underlying rate is 4.2%, which is twice the European average. That is bound to exert further pressure on wages and is already affecting the balloting on the new wage agreement. As the Central Bank has warned, interest rate increases could lead to tax increases. As a result of this, there are serious doubts in the public mind about whether the gains of recent years are being put at risk. Is our economy overheating? I will not repeat the litany of U-turns since the budget. However, all this is affecting confidence. We know how important it is to maintain confidence in our economy if the bubble is not to burst. The Finance Act, 1998, contained 215 pages. The Finance Bill, 2000, as initiated, contained 246 pages. The Bill has been passed by the Dáil and is now receiving its Second Reading in this House. The budget was announced on 1 December 1999 and various financial resolutions were passed on that day. A Finance Bill preliminary list was issued on 21 January in two parts. One part dealt with budget items and the other with items not referred to in the budget. On 8 February 2000 the Finance Bill was published, containing 246 pages. This has now grown to 300 pages. On 29 February, a mere 21 days after the publication of the Finance Bill, 68 pages of amendments were circulated, the vast bulk of which were ministerial amendments. On detailed examination, many of these so-called amendments turned out to be completely new provisions which were never alluded to in any of the earlier three stages, that is, the budget, the preliminary list or the Finance Bill. This is an abuse of the legislative process. No proper consideration could have been given to those amendments at the stage they were introduced. I cannot understand how they could not have been included in the preliminary Finance Bill list or, at the latest, in the Finance Bill as initiated. How can the Minister justify introducing those provisions at that very late stage in the process? I can only conclude there is a conspiracy between the Minister and the tax consulting profession to render the tax code incomprehensible, not only to the public but to Members of the Oireachtas. Perhaps the Minister is being an overly loyal member of the profession from whence he came. He is certainly looking after it very well in all the provisions contained in this measure. No explanatory memorandum was circulated with the Finance Bill amendments. It is fair to say that most Members of the Oireachtas, including the Government, would not have the faintest clue what these amendments meant when they were introduced. One is left with the uncomfortable feeling that there is, perhaps, a deliberate ploy to withhold these amendments until the very latest stage so that they receive the minimum scrutiny. An example of what I have in mind is the proposal to amend an existing section of the tax code, namely section 1013 of the Taxes Consolidation Act, 1997. On a superficial reading, it talks about limited partnerships, video tapes, oil and gas resources and so on. However, in reality it is attempting to eliminate from tax relief a sustained loss by a partner in trade on and from 29 February 2000. This is a provision of extremely far reaching consequences and seeks to change a fundamental part of the tax code that has been in existence since the last century. It has been well accepted that when a person loses money in business he is entitled to a tax deduction. The new provision, if enacted, would mean that where family members contribute capital to a family business partnership, they would not be entitled to any loss relief in the event of the business proving unsuccessful, notwithstanding the fact they had incurred a real trading loss. Senator Bonner, as a practitioner in the field, knows what I am referring to. This amendment first surfaced at an earlier Stage. I am surprised the Minister did not allude to it. This is an abuse of process and a blatant disregard for the responsibilities of the Oireachtas in terms of allowing proper consideration of the legislation it enacts. I cannot understand why it is necessary to introduce some 200 pages of changes to the tax code each year. This is a small country and the size of our tax laws is more relevant to a country 20 times our size. I look forward to hearing the Minister address that serious matter. Mr. Bonner: I welcome the Minister of State at the Department of the Marine and Natural Resources, Deputy Byrne, to the House. Like Senator Coghlan, I thank him for all he is doing for the fishermen and the fishing industry in the north-west and the south-west, as well as the aquaculture and forestry industries. Minister of State at the Department of the Marine and Natural Resources (Mr. Byrne): I have not forgotten the south-east. Mr. Bonner: I know the Minister will look after the south-east anyway. Senator Coghlan commented on the number of amendments. I assure him that the Minister did not listen to our institute, he listened to the members of the Fianna Fáil parliamentary party who instigated some of the changes, particularly those relating to social welfare, which will be before the House next week. I have no difficulty with U-turns if they are for the benefit of the people and the economy. If I have time, I will be suggesting one or two other matters on which I would like to the Minister to do further U-turns. I welcome the changes in the Finance Bill announced by the Government which we are discussing. This Finance Bill is the principal legislation which will bring about the various changes announced in the budget of last December. These changes are sensible and will help lower paid and middle income earners. While the Finance Bill is the key legislative provision which introduces budgetary changes, it is only one economic weapon open to the Government to introduce economic change. Only last November, the Government announced its National Development Plan 2000-2006 which is worth over £40 billion. It is currently being evaluated by the European Commission and will bring about important economic and social changes over the next seven years. It is premised on the belief that we must consolidate and make permanent the economic progress of recent years. The Government will invest substantially in improving our road, water treatment and transport related networks while it will also combat key social problems in our society. A total of £17.6 million has been earmarked under the economic and social infrastructure operational programmes over the next seven years alone. This will help to improve regional and secondary roads in the Border region which is an important prerequisite if new industries are to be located within these areas. I welcome the commitment of this Government to the implementation of regional development programmes countrywide. I also welcome the fact that the IDA, in its annual report published some weeks ago, has earmarked 50% of new greenfield projects to be located within the Objective One region. We must stop the drift of internal migration to the east coast. It is to the benefit of the people on the east coast that regional development takes place in a balanced and structured manner. The result of too many people living on the east coast has been a deterioration in the quality of life for many. We need not look any further than the length of daily traffic queues in the morning or evening faced by those who commute to Dublin city. I am confident that the IDA will reach these policy targets. I hope so because their policies to date have totally neglected the north-west and the west. Substantial infrastructural development must take place in terms of improving the roads, water treatment and transport networks to peripheral areas such as County Donegal. Substantial investment was made this year by the Government through the Department of the Environment and Local Government and the NRA in a road network in County Donegal but our county and regional roads are still neglected. We held our area meetings on the county roads in the last two or three months and while we appreciate that we have received nearly three times as much funding this year compared with three or four years ago, we are still only receiving about 20% of the necessary funding to improve our regional and county roads. We need heavy investment in the road structure. The tourism industry, the main industry which can be developed, will not be of any benefit if the roads are not good enough to entice tourists into the county. We are referring to an all-encompassing package if standards of living for all people living in Ireland are to improve. We cannot consider the Finance Bill in isolation. While it is important legislation, we must look at the changes being brought about by this Bill complementary to the national development plan and the new Programme for Prosperity and Fairness. We are at a crossroads. The average income per capita is now higher than ever. The transition from being the poor mouth of the European Union to shortly becoming the fifth wealthiest nation in the EU has left this Government with tough and challenging choices to make on the direction to be taken by Irish society. We must remember that we have made very sensible economic decisions, particularly over the past 13 years. Since 1987, budgetary restraint has been a core principle of consecutive Government policies and has ensured the economic turnaround in the competitive position of Irish businesses. Wage agreements brought about by means of widespread consultation between the Government, the trade unions and the employer groups have guaranteed that industrial unrest has been minimised. This has ensured that Ireland's appeal as a destination for foreign investment has been broadened and substantially enhanced. Lower borrowing, a reduction of debt to GNP ratio, falling unemployment and now annual growth rates of between 8% and 10% have all played their part in bringing about an economic turnaround. We must hope the partnership approach to wage agreements continues. I hope the Programme for Prosperity and Fairness will be endorsed by the trade unions as it outlines a stable way forward in terms of wage increases amounting to 15% over the next 33 months. The Government has equally recognised that while economic growth is now more widespread than ever, many key social problems remain. While annual growth of 8% to 10% in recent years has certainly improved the quality of lives and increased standards of living for many people, this has not been filtering through to all sectors of society. The national development plan, the Programme for Prosperity and Fairness and the Finance Act are all geared to bring about social changes which will help the less well off in our society. That is why the social content of the budget totalling well over £500 million has ensured that comprehensive and additional social inclusion measures are proceeded with in coming years. The old age contributory pension has been increased by 18% and I am confident that this pension will be well over £100 when the Government leaves office. Central features of the budget were the changes in taxation. It cannot be disputed that £1,000 million given in tax relief far exceeds that of the past three budgets. We have acknowledged the importance of increased tax free allowances, which have been increased by over £1,800 per single person and double that for a married couple over the three budgets of this Government. This compares to a total of only £550 in the three rainbow Government budgets. The tax free allowance now stands at £4,700 which will take 50,000 people out of the tax net. The Government promised the electorate that it would cut taxes, as has been done. A reduction of 4% has taken place on each rate of tax. The higher rate has decreased from 48% to 44% and the lower rate from 26% to 22% since assuming office in 1997. Changing the level of the bands, whereby a person does not have to pay tax at the higher rate until earning over £17,000, will ensure that 125,000 people will not now have to pay tax at the top rates in the coming years. It is fundamentally inequitable that many newcomers to the workforce should have to pay the higher rates of tax while earning below the average industrial wage. The Minister has reduced the top rate and the low rate of tax by 4% in the past two years. In my first speech on the Finance Bill in the Seanad over two years ago, I made the point that fellow cross-Border workers were paying tax at 20% and 40%. I thought it was a wild dream to expect that we would reduce tax rates to anywhere near those figures. I assure the House that with the low rates of tax and the increase in the value of sterling against the punt the employment situation has changed completely. Employees are seeking work in the Republic of Ireland rather than the North, especially those living in Northern Ireland. The widening of the tax free allowances and the establishment of a structure whereby 125,000 people do not have to pay tax at the top rate will certainly reward lower to middle income earners. There is also broad agreement among many political parties on the need to cut corporate tax rates to 12.5% in the coming years. The reduction of corporation tax will also play a part in stimulating business. Revenue from capital gains tax has also been increased from £132 million pounds to £343 million. This is as a result of clearly halving the liability on capital gains which encourages people to take a profit on property gains and re-invest. I support the changes brought about in the capital acquisition tax code. Payment of CAT at 20% is fair and balanced. I also welcome changes which will be brought about in the transfer of a family home and the definitions relating to this issue. There have been too many hardship cases whereby a particular individual, not married to a person who owns a home, has had to pay a huge and unjustifiable tax bill on the death of the property owner. This budget will ensure that taxpayers on average incomes will be between £20 and £30 a week better off. This carries forward the process of radical tax reform promised by this Government on assuming office. There are now only 170,000 people unemployed and the rate of unemployment is below 5%. This is hard to believe, particularly when one considers that in 1987 only 1.1 million people were working while now there are 1.7 million people working in the State. Much has been achieved in the last two to three budgets. The message coming from the Government, and it may have been described as a U-turn, is that it cares more for the lower paid than the previous Government. It also cares for the middle class. Sometimes the middles class are regarded as being affluent. People have referred to the child care issue. Many middle class people are in a difficult financial position. The Minister introduced individualisation this year with the possibility of extending it in future years. Many more lower paid people will be taken out of the tax net. There is also the promise that people on the minimum wage will be taken out of the tax net and that social welfare recipients will get benefits of at least £100.

A fair tax system is a prerequisite for the success of full social partnership. The two tax rates have been reduced by 4% over the past three budgets. The elderly exemption limits have been increased this year. There has also been a doubling and standard rating of allowances for widows, blind people and others. The only thing the Opposition can offer to combat this is a middle rate of tax at 35%. Why did they not introduce these changes while they were in Government? The national development plan is a key element in the Government's strategy for sustainable economic and social development. The sum of £40.6 billion will ensure that we remain competitive and that economic growth is shared more equally at regional level and throughout society. The Government will tackle infrastructural bottlenecks and black spots by using public private partnership. The Government has decided to make provision for the increased social welfare and public service pensions associated with our ageing population in the years ahead. Every year 1% of GNP will be set aside, together with an initial allocation from the Eircom flotation. This has already been done through legislation introduced before Christmas. The Finance Bill and the agreed Programme for Prosperity and Fairness will do a lot to assist those who are socially excluded and deprived. On budget day the Minister announced that £390 million will be provided in a full year compared to £215 million in the Finance Act, 1997. That sum has since been increased to over £500 million. Expenditure in the Department of Social, Community and Family Affairs will be in excess of £5.5 billion, an increase of over 20% on the 1997 figure. The increase in the minimum wage to £5 per hour, the commitment to increase the tax free allowance to the minimum wage and the promise to increase all social welfare payments so that they are above £100 are key elements of the PPF. In the programme for Government a promise was made to provide an old age pension of £100 during the period of this Government. We are nearly there. It has also granted a special additional payment of a bereavement grant of £1,000. There is a new insurance based benefit for people who must take time out to care for their family members who need full-time care. The respite allowance has also been increased from £200 to £300. The free electricity and television licence schemes have been extended to people in receipt of the carer's allowance. I want the Minister to do more in relation to the carer's payments. Perhaps he would increase the disregard amount substantially. Families must provide various levels of care. Where an extreme element of disability is involved a wife must stay at home to do the caring. The husband must then go home after a heavy day in the office and assist his wife. They are house bound except perhaps for getting out once a month. I would like the Minister to examine this type of situation. I am not looking for a full disregard of the means test but I want people who are suffering to receive a benefit. The town renewal scheme is not as good as it should be but I will raise it with the Minister tomorrow, together with other items. As public finances have improved this has been assisted by a progressive and real reform of our tax system. We have lowered the tax burden while we have strengthened the social safety net. These are sensible economic and social changes which should be supported and that is why I urge the Senators to support this Finance Bill. Dr. Henry: May I share my time with Senators Costello and O'Dowd? Acting Chairman (Mr. L. Fitzgerald): Is that agreed? Agreed. Dr. Henry: I will take five minutes and the Senators can divide the rest of the time between them. I hope the Minister will remember that when individualisation was not popular, although it was profitable, I supported his move in that direction when he first introduced the Bill in the House. I welcome individualisation and I want it extended to the social welfare side. Senator Bonner spoke about carers. We need to extend individualisation to carers because at present they are being assessed on the income of another adult. It is most important that we try to tackle this immediately. I would also like to see it extended to single mothers. As all politics is local I am pleased about the changes in tax relief for post-graduate fees. I proposed this measure a few years ago and I am sure the Minister remembered my words and inserted this measure. I am particularly glad that he said part-time and full-time students and anyone involved in distance learning from another EU country can avail of it. That is important because many people are involved in such schemes here. I am glad that the spouse, parent or whoever pays the fees can also claim tax relief at the standard rate. Again because it is local politics, I am delighted that the tax relief on gifts of more than £1,000 to third level institutes have been favourably looked at. This will make a big difference to fundraising. I am glad it is proposed to have the same film investment regime until 2005. It is impossible for such a regime to change yearly because, as the Minister will know, films are planned quite a distance ahead and people need to know the tax implications well in advance. It is good that a few silly things have been changed. There were some problems with and abuse of the foreign earnings deduction scheme. The original plan was that businessmen or women who had to spend a certain amount of money abroad for their business could claim tax relief but they had to spend 14 days abroad. That length of time abroad was not good for family life. Now that time has been reduced to 11 days. This is useful because people were staying abroad for an extra Saturday night for no good reason. It is better that they are in a position to come home to their families. I am glad about the increase in the value of heritage items. A huge amount of articles has been given to the State. This is well worth promoting. I would hope that in a few years' time the level will be far higher than £3 million because there is very good material in this country. It is much better to see it staying here than to see people trying to sell it abroad. It is a very good idea to publish the names of tax defaulters because it makes a difference to people that their names will appear in the newspapers. Mr. Costello: The budget, as distinct from the individual provisions of the Bill, must be seen in the context of what a Minister for Finance and a Government should be trying to do when a country is in surplus with unprecedented levels of wealth being created. It is an obvious opportunity to provide a multi-annual budget which would envisage planning the country's finances some years ahead. In that context it would be possible to see how the surplus wealth could best be used. What quality of life do we wish to create in society in so far as we at last have some control over our finances and economic activity in general? For too long we were at the other end of the scale and never had enough money. We were penny-pinching, trying to make ends meet and going cap-in-hand to Europe to borrow money. Now, however, we are in a position to control our own finances and plan for the future. I am most critical of the budget in that it contained no sense of creating an equitable distribution of wealth. Nor did it contain a vision of where the Minister wants to see our society going in the years ahead. Just before Christmas the Minister for Finance was in this House saying that he was prudent. The Minister of State, Deputy Cullen, followed him, saying that inflation in 1999 was 1.6%. I am worried, however, because as the Minister of State, Deputy Byrne, well knows, the inflation rate for last year was 4.6% and is rising dramatically. The decisions made by the Minister in the national wage agreement have been based on wrong information and an inaccurate perception of the cost of living. The Minister added fuel to the fire by skewing tax reductions in favour of those who are quite well off, rather than those who are not. As a result of the budget, somebody earning £50,000 per annum will receive about four times as much after tax as a person earning £25,000. People on the national minimum wage of £4.40 - although we will not now have it as promised on 1 April - will be paying tax on almost £70 of the £176 they would earn in a 40 hour week. That means that some 200,000 workers will be paying tax when the minimum wage is introduced. Had the Minister for Finance seen fit to take a generous approach towards achieving income equality, he could have taken those on the minimum wage out of the tax net entirely, particularly when one considers that the £5 minimum wage level will not be introduced until 2002. The fact that the budget was skewed in the wrong direction has added fuel to inflation. It should be remembered that well off people will be buying expensive consumer goods in the sterling, dollar and yen economic areas which are not part of the euro zone. We are more vulnerable to inflationary pressures from abroad than any other European country, but the Minister has added to the problem. I will not be at all surprised to see the inflation rate for 2000 well exceeding the 5.5% pay rises offered in the Programme for Prosperity and Fairness. That is a real danger because once it happens the unions will be on the warpath. There will be discontent among workers leading to industrial strife which is the last thing any of us wants to see. We are all in favour of a planned approach to the economy and pay in general, but things will go in the opposite direction because of what has occurred. While not specifically mentioned in the Bill, house prices are mentioned in the Programme for Prosperity and Fairness. In 1998 there was an increase of 32% in the price of houses, while last year saw an increase of 21%. Substantial house price increases are still continuing. Since the Government came to power, house prices in the Dublin area have doubled from an average of £70,000 to £140,000. Rents have also doubled and the number of homeless persons has trebled in the Dublin area. I would like to see much more money being made available in the Bill to deal with the housing crisis. The Programme for Prosperity and Fairness refers to 22,500 local authority houses, but that is only what we are producing at present. I estimate that we need at least 50,000 such houses immediately and we should then provide more to make sure that growing accommodation needs are met. Money should be made available to local authorities for that purpose. The child care provisions in the Bill are a long way short of what the Fianna Fáil manifesto promised in 1997 - that £2,000 in tax relief would be granted to every married couple. Perhaps we will hear more about that when the Minister sums up. The only contribution made was 100% capital allowance for crèches. Nothing was given to hard-pressed married couples with children. What more can one say about credit unions that has not already been said? It is a bit rich for the Minister for Finance to describe the activities of the Irish League of Credit Unions as tax evasion when we heard the Minister himself say that he has avoided - if that is the right word - or evaded paying tax when he is betting. He has had very little to say about Ansbacher accounts and the fat cats who have been putting money abroad in offshore accounts. Yet the smallest savers in the country - the 1.9 million who contribute savings to the credit unions - are the ones the Minister has targeted for a £375 tax relief on dividends. That is outrageous. It is unbelievable that a Minister for Finance could make a statement of that nature. He should be more concerned about community development and the small depositor. He should be encouraging such activity by providing incentives. The whole Bill is about giving tax incentives for urban and rural renewal, offshore islands, airports and car parks, yet the Minister cannot provide an incentive to the credit unions to ensure that people will deposit small amounts with them. If the Minister is concerned about misappropriation in any form, he can provide caveats and other measures to ensure that will not happen. I am not impressed by this legislation. The Minister could have done a better job if he had been interested in providing a level of equality and using the budget and Finance Bill to do so. He got a bad mark from me today, but perhaps he will improve his homework and come up with a better one next time. Mr. Byrne: The Senator does not believe what he is saying. No conviction.

Mr. O'Dowd: The Finance Bill is an index of what the Government proposes to do for the country in the year to come, but to me it is an index of the pain and suffering of the community. Issues are not being tackled in the Finance Bill, particularly in the health area, and it is high time the Government looked at the situation of those on the bottom rung - those who are unemployed, poor and on medical cards. We have a two-tiered health system wherein some can afford to buy the health care they need while others cannot and must wait in pain and suffering. The Government is seriously underfunding the health services and is doing nothing to look after the medical needs of those who cannot afford to pay. It is time the Government changed policy in this area. The scandalous waiting lists in our hospitals are totally unacceptable and are increasing by the thousand. At present there are 39,000 on our acute hospital waiting lists, with many on those lists for over one year. In a newspaper report recently we saw where one person can get a by-pass operation within 12 days, while another person has to wait 18 months - and is still waiting - for surgery he needs just as badly as those who can afford to pay for it. It is time the Government took on board the Fine Gael policy which would provide full-time consultants dedicated solely to working on the public health lists and who would be paid the same as the best paid surgeons in the private sector. I am also concerned by this Government's policy on medical cards. This matter is not being addressed by the Department of Health and Children or this Bill. The proportion of people with medical cards has reduced from 38% when the Government took office to less than 31% now. That is scandalous. There was never so much money in our society, but equally there was never such lack of concern for or interest in those who have least. It is time the medical card limit is increased according to the average industrial wage, not the rate of inflation. We should be increasing the number of people getting health care. I welcome the Government's decision to improve the availability of medical cards to people aged over 70 as of 1 March, but is it not time that young people who must attend school until they are 16 - which is compulsory and rightly so - receive free medical care? It should be an entitlement of every young person in our society to have their health needs met by the State while they are in compulsory education. The Government should do so, but obviously they will not. There is also a scandalous situation relating to mental health services. Thousands of people need treatment, but whether they receive that treatment depends on the health board area, county or community care area they are in. Carlow has a population of 40,000 and the spend on mental health services there is £139 per person per annum. The spend on those services in my county of Louth and the adjoining county of Meath is a scandalously low £37 per head of population. These serious inequalities must be tackled. We need a Government that cares, that acts and that will look after those in our society who are most deserving of care and attention - poor people. The increased inflation in the economy under this Government means this is a further tax on poverty. Those on low incomes will be able to purchase less and less. It is time the Government changed. Naturally, I would like it to change tomorrow, but it must change its health care policies. It is a scandalous waste that money is not being invested where it is really needed - into people's health and, in particular, the health of those who are less well off. Mr. Byrne: The Senator looks very comfortable. I think he will be there a while yet. Mr. Chambers: I wish to share my time with Senator Ross. Acting Chairman (Mr. Glynn): Is that agreed? Agreed. Mr. Chambers: I support the Finance Bill, which is being debated against the background of a very strong economy and very successful Administration. It reflects the changes in our society and takes on board all the important aspects of administration. It deals with the changes necessary for a thriving economy. The Bill introduces new tax reliefs and brings on board the recommendations of the PAC inquiry into DIRT. It also streamlines tax administration and introduces a new tax agenda for 2000. It introduces reductions in tax rates for individuals and also increases the tax rate bands. I have heard concerns expressed by Senators about inflation rates and the economy. When one looks at the economy in relation to inflation rates of 2% and 2.5 % over the last three to four years, combined with a growth rate of anything between 60% and 70 %, one would expect it to have overheated long before this. However, the Government has put its investment into structured economic development and we have a growing working population. As a small businessman I feel the strong growth in the economy will continue in future, but it depends on how we handle matters and on how we, as a people, deal with the extra growth and wealth in the economy. We must not become too greedy and I include myself. There have been fundamental changes in our society and in our work patterns. There is total social change - changes in our family structures and working lives - and that is reflected in the budget. I welcome the reliefs for post-graduate students in section 21. Those are very necessary, as it is difficult for many working people to pay for students who are living away from home. I welcome the fact that students can take advantage of distance education in other EU countries. I also welcome the Minister's statement that he is considering non-EU courses. I hope the Programme for Prosperity and Fairness, a very worthwhile document, is adopted nationally, as it deals with all aspects of our future and sharing our wealth. It deals with disadvantage and other matters that are important in a fair and sharing society. It also recognises share options for employees. This is important because they play a fundamental part in the creation of prosperity and wealth. Section 74 provides trades unions with exemptions from income tax on investments where they invest in training and education for their members. It recognises the importance of the trade union movement in negotiations charting future economic development. It recognises the present needs in dealing with the housing shortage and the problems of a booming economy where it is difficult to obtain serviced land for development. Following the Bacon report, the Minister for the Environment and Local Government recognised the need to reduce taxes from 40% to 20% to allow more land for housing to come on the market. This is to be welcomed together with other initiatives. We are aware of the experience of the previous Government in relation to the seaside resorts scheme. Ministers must take on board the public criticisms of this scheme. However, it provided investment from the centre to rural areas. There may have been criticism in relation to planning, over density, location and so on. It was a very open scheme which created a lot of employment and options for these areas. The Government has learned from this and the initial phase of the new town renewal scheme should give between 150 and 200 towns the opportunity to develop in a planned manner. It might not have all the advantages of the previous scheme but it sets down certain criteria which could be the basis of investment in many of these towns. We will learn from this and the Minister has indicated in previous statements that he is considering other options, while at the same time recognising his responsibilities to the EU and its agreement to the tax incentives. It is important for peripheral rural areas that we learn from these schemes and extend the positive aspects of them. This will play an important role in sharing our economic prosperity and dealing with the survival of disadvantaged communities. In a short time we have become very monetary conscious. The findings of the Committee of Public Accounts and the various tribunals have made us all aware of this. This could do us a lot of harm in losing the competitiveness that should be within our grasp in an era of economic boom and great job prospects for our young people. There seems to be a monetary factor involved in every aspect and we must be careful about going down that road. I welcome the reliefs for farmers and the extension of stamp duty relief for young farmers on the transfer of lands. I welcome the change in capital acquisitions tax for family homes. This is very welcome in a changing society. I welcome the Government's commitment to the provision of £3,015 million for public service pensions and social welfare. This will have a long-term benefit. In relation to the criticism of the health services, I agree that the health service is a measurement of the success of an economy. I am satisfied that under the present Minister there will be substantial changes with the investment programme of £4.2 billion for the health service under the national development plan. Procedures will be introduced and people will have to adjust their circumstances to meet the Government's requirements to deal with the waiting list backlog. I have no doubt the Government will deal with this important issue. In the next couple of years there will be a substantial change in hospital waiting lists and in the acute health services. Sitting suspended at 6.15 p.m. and resumed at 7 p.m.

Mr. Ross: I welcome the Finance Bill not because I agree with all its details but because I agree substantially with the philosophy behind it. The philosophy behind all three of the Minister's budgets and Finance Bills is one of the reasons the economy is in such a good, healthy state. Mr. T. Fitzgerald: We are on a winner here. Mr. Ross: I am consistent. However, I will issue one or two words of warning. Few speakers have disagreed or will disagree with the thrust of the budget. The budget is difficult to tackle because it gives more than it takes. In that case, as Senator Fitzgerald rightly said, there is an element of being on a winner and the Government is riding on a winner on this Celtic success which we are witnessing. I was alarmed at one or two things in the Minister's speech. When speaking about share options he mentioned twice that a special working group set up under the PPF is examining these issues for the next budget. The ICTU, IBEC, the Departments of the Taoiseach and Enterprise, Trade and Employment and the Revenue Commissioners are represented on it and it held its first discussion on 16 February last. I do not care particularly what the ICTU, the IBEC and all those institutions feel about share options, but I care what Members of this and the other House think about share options and finances. Speaking on the issue of individualisation the Minister referred to the fact that individualisation is approved by the ICTU, the IBEC and the social partners. I do not care whether they approve of it. This is an area in which I disagree with the Minister. The reality is that individualisation is undoubtedly not approved of by the majority of parliamentary representatives. There was disapproval when individualisation was introduced. The Government had its eye off the ball. It checked it with the IBEC and the ICTU and because the unions and employers said it was all right it was agreed to. The parliamentary party broke into rebellion and for once the Minister who had his eye off the ball had to retreat and it was a great pity. The reality is, as he said in his speech, individualisation is on. The backbenchers have won a short-term victory by going out on the plinth in the impertinent way they did and getting a £3,000 allowance for stay-at-home wives. Individualisation is coming, courtesy of the IBEC and the ICTU, not courtesy of us. We all know that the Fianna Fáil and Fine Gael parties are opposed to it, and the Labour Party was opposed to it but jumped at it immediately. Given that the ICTU and the IBEC are in favour it, it is all right. That is not the way the country should be governed. The social partners have a role to play as lobby groups but they should not write taxation papers or dictate programmes for fairness and prosperity. The Programme for Prosperity and Fairness is longer than any document I have come across. It is a programme for Government and it will be implemented far more stringently and more closely than the last programme for Government. It is evident in the Finance Bill where the power in this country lies. It does not lie with any of the democratically elected representatives but with the big battalions who trot in and out of Government Buildings and tell Ministers what to do, and Ministers do it. The Programme for Prosperity and Fairness was not debated in the Dáil until it was signed, sealed and delivered, and even then there was not a vote on it. If that is not contempt by the Government for the democratic wishes and the democratic representatives I do not know what is. We do not count. What is worse is that the Cabinet does not count either. The Cabinet is not even told the details of the budget until the day of the Budget Statement because Cabinet members cannot be trusted not to leak them to the press. The budget is decided by the Minister for Finance, the Taoiseach and the Tánaiste. A budget could hardly be announced if those three people did not know about it, but none of the other Ministers can be trusted with the information. However, the budget is checked beforehand with the social partners who have an enormous input into it. It is checked not with the people who represent the electorate but with powerful lobby groups who have a grip on power which is extremely dangerous.

Mr. McCreevy: The budget was not checked with them either. Mr. Ross: Let us say there was signalling and tick-tacking going on. The lobby groups may not have seen the small print but they had an understanding of what was to be announced. I appeal to the Minister, who is an enlightened and fine Minister for Finance, to tackle this democratic deficit. He should address this question himself because the Government as a whole has sacrificed a great deal of power. The last three budgets have been splendid. The Minister's philosophy is very fine. He has steered the economy well. Our prosperity is partly due - we do not know to what extent - to the fine economic policies of the Government. The fact that the Government's policies are unapologetically pro-private enterprise has attracted enormous interest from overseas which has, in turn, produced prosperity in Ireland. Nevertheless, dangers accompany prosperity. No one knows what the future holds for the Irish economy but there are some very ominous straws in the wind. Our inflation rate is 4.4% compared with the European average of 2%. A speaker in a recent debate in this House claimed that this was due to the rise in the price of oil. He first claimed that the price of oil would go down, which it probably will not, and then claimed that this was why our inflation rate is higher than that of our European partners. This is not so, our European partners must pay the same price for oil as we do. Our inflation is partly due to some once-off factors but there is no doubt that inflation in Ireland will continue to be higher than the European average for the foreseeable future. I do not believe we will do anything about this, except hope. We are receiving warnings from independent if unwelcome quarters. It is not simply that foreign investors are reluctant to buy Irish equity stocks because they are sceptical about the Celtic tiger. Only yesterday one of the leading lights in the European Central Bank said that there was undoubtedly a technology bubble in Ireland. He also warned about the pay deal and said he thought it was dangerously high. This poses a danger to competitiveness. A further sign of overheating lies in the 70,000 jobs which cannot be filled. This means that the bubble is bursting, our infrastructure is not adequate and we cannot meet demand. It means that competition for labour will induce higher wage demands and the pay deal will die. There is also the danger of credit in the private sector. Nobody can explain who is borrowing the large amount of money on loan to the private sector, which is rising by 28% per annum. This borrowing represents an amber light for the economy. I cannot explain the high level of borrowing and neither can anyone else. One can only conclude that banks, building societies and other lending institutions are lending money indiscriminately and that no one knows what is going on. I welcome individual measures in the Bill, particularly the enlightened and courageous decision to reduce capital acquisitions tax to 20% and the moves on the family home. These were long overdue although they provoked opposition. I welcome the very limited measures on share options. If employees are to be incentivised, it is vital that share options are given, particularly for high tech companies, and taxed at a rate which is not a disincentive. If we are to compete with overseas technology companies we must offer the same bonuses, incentives and rewards to our young people but we are not doing so at the moment. The Minister has courage and conviction and I am confident he will examine this question again next year. I hope he will do so without the help of a working committee of those who have no democratic mandate to decide the law of the country. I welcome the Finance Bill. Mr. J. Cregan: This year's budget contains positive aspects and incentives in abundance. It is unfortunate, in a budget which gave so much to so many people, that a single measure was criticised so widely. This happened and it cannot be undone. I compliment the Minister on introducing an excellent budget. The budget made sweeping changes in taxation, particularly personal taxation. We have seen a reduction of more than £940 million in personal tax. Almost 50,000 people, including 10,000 old age pensioners, have been removed from the tax net. The percentage of taxpayers paying the top rate of tax has been reduced from 46% to 37% and will be reduced to 17% in 2002. This measure is something all public representatives have demanded for many years and it is to be welcomed. All taxpayers will move to the individual standard band of £28,000 over three years. The single person's band has been raised from £14,000 to £17,000 and to £34,000 for two income couples. The married person's one income band remains at £28,000. The standard rate of personal allowances is increased by £500 for a single person and by £1,000 for a married person. The standard rate is cut from 24% to 22% and the higher rate is cut from 46% to 44%. These are real changes. For too many years successive Governments have tinkered with tax deductions which did not result in real increases in people's pockets. At last we can all share in the Celtic tiger economy. Rent relief for people under 55 is up by 50% and it is doubled and standard rated for those over 55. The health levy threshold is up from £217 to £226 per week. Many other welcome initiatives have been taken and incentives provided. It is important that I mention the overall increase in spending on health services. As a member of a health board for the last ten years I cannot agree with my colleagues opposite who mentioned that health services are seriously underfunded. I would be the first to admit that there are problems which have to be addressed - the Minister indicated strongly in recent weeks that he is prepared to address them - but ample funding is being provided. There is something seriously wrong when a sum of £4.2 billion has to be spent on health services for a population of 3.5 million. It cannot be justifiably said, therefore, that we are not spending enough money on health services. A sum of £4.2 billion should be adequate, if spent properly. I welcome in particular the provision of £35 million in a full year for services for persons with a mental handicap and those who are not fortunate to be able bodied. This will go a long way towards alleviating the problems experienced by the individuals concerned who lobbied long and hard and, when the Minister delivered, were the first to put up their hands to acknowledge what had been done. We are inclined to take too much for granted far too often. When something is looked for and achieved we should always be honest and say, "Well done". I compliment the Minister in that respect. There was reference to mental health services in respect of which the Government and the Department of Health and Children have been criticised. From what is happening in my county about which I know a little we are moving in the right direction in providing mental health services for those who require them within the community in which they live. We have made huge strides and have moved from a position where individuals were locked up in institutions, they were ignored and did not see the light of day to a position where they are being accommodated in the community in which they live. There are improvements in social welfare payments, the largest increases ever granted by a Minister for Finance. Full rate personal payments for all old age related pensions are to increase by £7 per week. All other rates are to increase by £4 per week. Qualified adult allowance is to increase by a minimum £3.80 per week while child benefit is to increase substantially, by £8 per month for the first and second child and £10 for the third and subsequent children. There has been strong lobbying on the provision of child care facilities. I congratulate the Minister on the steps he has taken to acknowledge that dual income families incur enormous expense. Everybody seemed to be looking for these before the budget but were not too thankful when they were announced. I had the opportunity recently to raise the issue of decentralisation on the Adjournment and it would be remiss of me not to mention it again, particularly on a day when I had the opportunity to meet a very fine official in the Minister's Department on behalf of a group in Newcastlewest which is lobbying strongly on the issue. Decentralisation would help to relieve congestion in Dublin and be of huge benefit to small towns. Sections of Departments have been decentralised to Limerick city, Nenagh and Ennis. Mr. T. Hayes: They are all represented by Ministers. Mr. J. Cregan: Newcastlewest has an excellent case. It is situated in a strategic location 25 miles from Limerick. A large number of industrial jobs have been lost in the last three or four years along with Objective One status. While there are hundreds of jobs available in Limerick city and its environs, Newcastlewest and other rural areas have not been so fortunate. Decentralising a section of a Department would be one way of compensating them and would mean much to the economy of the town and nearby towns and villages. In concentrating on decentralisation from Dublin it should not be forgotten that there are further opportunities to decentralise from our larger cities which also suffer from congestion. Decentralisation to the regions from our larger cities would result in promotional opportunities and perhaps lead to a resolution of the recruitment problem. I thank the Minister for introducing what is an excellent Bill which I hope will have a safe passage through the House. Mrs. Taylor-Quinn: I welcome the Minister. Debating the Bill in this House is a waste of time given that the outcome is a foregone conclusion. The fact that we are not in a position to table substantial amendments which would impose a charge on the State makes it that bit more farcical. My sympathy lies with the Minister who was given a rough time following the presentation of the budget six weeks ago. The Finance Bill is the most important Bill introduced in the Oireachtas each year. It lays the foundation stone for the following financial year. Given the surplus available the Minister was in a unique position. It was a matter of deciding where the spoils should be spent. How they have been spent and the underlying wisdom have been the subject of much debate. Not being an economist I am not in a position to make a value judgment, but there is a fundamental issue that needs to be addressed, that is, the manner in which legislation is brought before the Oireachtas. There was a lack of consultation prior to the introduction of the budget. It seems that there has been a tendency in recent years to undermine the basis of this democracy, the first element of which is Cabinet responsibility. It became apparent following the presentation of the budget that there was a lack of consultation within the Cabinet. It appears that it was framed by a sub-committee comprising the Taoiseach, the Tánaiste and the Minister for Finance, seriously undermining the principle of collective Cabinet responsibility enshrined in the Constitution in relation to legislation to be brought before the Oireachtas. This became apparent during the controversy surrounding the inequitable taxation treatment of women working in the home. The Minister has a responsibility to ensure each Minister has an input to the decision making process. The Bill complies with EU directives and regulations, but this undermines the sovereignty of decisions of the State and the Oireachtas. It is something with which we must comply, but nevertheless it undermines, weakens and diminishes the powers of the Government and the responsibilities of the Houses of the Oireachtas.

Much consultation takes place with the social partners. The Programme for Prosperity and Fairness claims it is just that, a programme for prosperity and fairness, and it may be so, but the realities are that the people who had an input into that and who were in a position to consult with the Department of Finance in Merrion Street were the ones with clout who were well organised and able to gain entry. The realities are that the weakest sections of society did not get their noses anywhere near Government Buildings or the front door of the Department of Finance. These are the people who really need to be looked after, the people particularly in the west and in cities and towns where there is still great poverty despite the Celtic tiger. Unfortunately, while the Minister may claim that the spokespersons for the INOU etc. were there to speak for these people, the realities are that these people were not represented adequately and proportionately. That is something which needs to be addressed in future consultation processes. The other issue which arises is that Ireland is now tied to the euro and, therefore, will have limited control over its finances over the next year. Ireland is also tied to the European Central Bank, which has diminished the power of the Central Bank. Ireland's control over its financial destiny has been reduced considerably and we must recognise that fact. That is why this debate is a bit of a charade in a sense because it will lead to nothing at the end of the day. The circumstances where there was a huge surplus of money are unique. The Minister deserves credit for many of his budgetary proposals, but one issue which arose, which Senator Cregan and others addressed, was his failure to give an allowance to married women working at home. The scenario which followed was unfortunate, particularly the number of Fianna Fáil backbenchers who were ferried on to the plinth by the Fianna Fáil press office on instructions from on high. That sort of behaviour, which undermined the Minister, was despicable and dishonourable in the circumstances. Business can be conducted in a far more civilised fashion behind closed doors and that sort of scenario should not be repeated. I sympathise with the Minister in that regard. That did not happen by accident. It was orchestrated by on high and it deserves to be condemned. No democratically elected Minister should be treated like that by the Taoiseach, his fellow Ministers or, indeed, fellow parliamentarians. I hope in future we will not witness such behaviour from senior levels within any party. It is not good for democracy nor does it augur well for the respect and esteem in which public representatives should be held. The Minister addressed the issue and introduced a £1,500 tax free allowance. I suggest that this has caused more difficulties because there is now, again, a glaring inequity. Next year I hope the Minister will address this and bring balance to the issue. This is a small island country and transport is essential for getting goods to the market, whether in mainland Europe or elsewhere throughout the world. Ireland's entire road, port and airport infrastructures are vital to this development. The opportunity was seriously missed in that more funding was not provided for improving the infrastructure, particularly the national secondary roads which lead to major centres of tourism and towns, such as those to which Senator Cregan referred, like Newcastlewest, Kilrush, Ennistymon and Scarriff. We should be enhancing such towns by putting in place infrastructure which would make them more attractive to consideration for decentralisation. If the Minister, Deputy McCreevy, is drafting the budget next year, I would ask him to seriously consider that matter. Surveys show clearly that Ireland is one of the lowest spenders on health services within the EU. It is at the bottom of the list along with Portugal. That is a serious matter. There has been a nurses dispute, yet the amount of funding which has been provided to the health service is not sufficient. There does not seem to be a commitment to increase the spending to a level comparable with the higher spenders at EU level and to provide a service. There is a difficulty in so far as many of the health personnel are emigrating to England, Canada, the US and Australia. They are not leaving because there are no jobs available but because they feel they are not being properly remunerated for the professional services they are providing in the health sector. There is a need for the Minister, the Minister for Health and Children and the Taoiseach to seriously look at this matter and bring the health services up to a par with the rest of the EU, particularly given that the Celtic tiger economy is doing so well by European comparisons. The people who are sick are the most weak and vulnerable, and we should give priority to this sector. It is appalling that the lists of people waiting for heart operations, hip operations and many other operations have continued to grow over the past 18 months. This is totally unacceptable. The divide in the two-tier health system continues to grow. The reality is that a private patient receives preferential treatment. There seems to be no conscious policy to ensure that people on medical cards receive equal treatment. Many people are concerned that there are specialists using the facilities of public hospitals and health boards to deal with their private patients. While the infrastructure has been provided by the health boards, the Minister for Finance, the Minister for Health and Children and the taxpayer, these specialists are using these facilities free of charge. They are in a position to decide that a private patient will get preference to public patients, and that is wrong. There is a need to take on that issue and to ensure fairness and equity as far as the health service is concerned. The consultants are a powerful group in their own right and, therefore, there may be political reluctance to address this issue. However, if we as a people are fair-minded, have a social conscience and believe in natural justice, this matter must be addressed fairly in the interests of the deprived people within the community. There is a huge problem of hidden poverty among the agricultural community. Some years ago a survey showed that 20% of farmers were collecting 80% of European grants, and that situation still pertains, yet the people who most need the assistance are the ones who are getting the least assistance because of the way the system is structured. Given the price of cattle and milk, there is a need to address that issue and bring about equity to help those medium to small farmers who are in difficulties. This would give such farmers a lift which would make their operations viable. Overall there seems to be a lack of cohesion between the Departments to address the major social inequities. There is a huge boom at one end but there is huge social inequity at the other. With a little concentration and focus, this social inequity could be addressed and substantially reduced. Decentralisation is a fundamental social question. It is a matter of deciding whether one wants Dublin to continue to overload. It is overloading to the point of being a most difficult and unpleasant place to reside in terms of the level of traffic congestion. The reality is that I could travel from home to Limerick, a journey of 55 miles, in a shorter time then it would take me to travel from Rathgar to here, a distance of four miles. It takes people in Dublin 4, where Senator Joe Doyle resides, who are spending up to £2 million on residences, at least an hour to get from the city centre to their homes in the evening. Mr. J. Doyle: The quality bus corridors are taking care of that problem. Mrs. Taylor-Quinn: People could have a much better quality and easier pace of life, with much better services and less stress and strain, by moving from the capital to the larger towns around the country. I am sure Senator Tom Fitzgerald would not be reluctant to see decentralisation to Dingle, as I would like to see happen in Kilrush, Ennistymon and Scariff. Mr. T. Fitzgerald: I agree with the Senator. Mrs. Taylor-Quinn: I am sure the Senator concurs with me. There is a social issue in this context. Bringing people to areas where there is a nicer standard of life works better for everybody. The education system works better, and the social problems which arise in relation to congestion in huge estates can be reduced. It would benefit the mental and physical health of people, not to speak of reducing the number of people appearing before the courts as a result of the difficulties which arise in congested areas. This issue should be addressed seriously. The reduction in CGT has been greeted with a variety of views, some castigating the Minister and saying it was awful to reduce the rate from 40% to 20%. I think the Minister was correct to reduce the rate, particularly given the current state of the economy. It is important that it is attractive for people who take on responsibility, who take the gamble, make the investment and the commitment, and work hard for a number of years generating capital and building up a business to be able to sell after a certain length of time if they decide to do so. I think this move is particularly attractive to those with small and medium size enterprises, although it is equally attractive for larger businesses. It is nice that people can get some benefit from their industry and efforts over the years, because these are the people responsible for the Celtic tiger economy and who keep the wheels of the economy turning. Equally, it was right that in difficult times they carried the can, but now that they can be given a break, that break should be given to them. Given that there is so much money in the coffers the issue of privatisation must be examined seriously. Privatising is almost a cult - it is the in thing, the fashion. There are certain areas which should be privatised, but there are others which it is not right to privatise. Airports, for example, are similar to sea ports and major and secondary roads. They are fundamental infrastructural utilities and are vital to the economy. They are the exits through which many of our goods are exported and the gateways for many of our tourists. They are extremely important, therefore, to industry and tourism. I do not know whether the Cabinet addressed this matter at its meeting today - perhaps the Minister will say whether it was discussed in his reply - or whether a decision was made. A privatisation level of 30% will eventually lead to a level of 50%, 60% and 70% which is not in the national interest. I fully support privatisation in other areas, but not in relation to airports and I ask the Minister not to support any privatisation of the airports as they are a key utility in the economy and we must maintain control of them. We had a debate on Objective One and Objective One in transition. Part of the country is in difficulty and needs special funding given that it is not now getting funding from the EU. It is very important that the Minister for Finance addresses this issue. He is aware of where the inequities and imbalances are to be found, within counties and regions, and I appeal to him to address them through national funding.

Mr. T. Hayes: I welcome the Minister to the House. I welcome greatly the economic progress the country has experienced since the 1980s. I want to see that progress benefit all sections of our community. However, one must ask who is really benefiting from this progress. I am concerned with agriculture and rural development and I am very disappointed to note that the amount being invested in agriculture is probably the smallest ever given by a Minister in a budget or Finance Bill. I suggest to the Minister that the Government has shown no acknowledgement of the difficulties facing agriculture. The sector is without doubt going through the most crucial and difficult period it has experienced in the history of the State. Last week we had a constructive discussion on the White Paper on Rural Development - a very good document, the thrust of which I support. It contains some good ideas, but ideas are no good unless they are backed up with money. Everyone in the House agreed on the need for more investment in rural areas, in the towns and villages throughout the country which have had their hearts taken out. We need more investment in sewerage schemes and other infrastructure. The list of villages and towns which need such investment is long and I am very disappointed that a start has not been made in this regard in the Bill. Agriculture is going through a huge sea change. The number of young people staying on the land and going to agricultural colleges has deteriorated rapidly. Rural infrastructure is caving in because people are not staying on the land. Young people no longer want to stay on the land despite the fact that enormous sums of money have been invested through the years in what is our largest industry. We must realise that agriculture is still our biggest employer and with an ageing population the future looks very bleak. I am very concerned at the provisions of the Bill in terms of agriculture. The entire sector needs to be re-examined. Animal breeding and investment in buildings and farm infrastructure must be changed. We live in a time when there are many more part-time farmers. In my area, the heart of south Tipperary, which has probably some of the best farmland in the country, most farmers have off-farm income. The reluctance of young people to stay on the land is frightening and something which we must address. I come from a constituency which has never had a decentralised Government Department. I plead with the Minister to consider south Tipperary as a location for a Department. Mr. J. Cregan: Which town? Mr. T. Hayes: Any Tipperary town will do, whether it is Clonmel, Cashel, Tipperary or Cahir. However, Tipperary is one of the most deprived towns in the area. It has suffered huge job losses over recent years and has not benefited from the Celtic tiger. I implore the Minister to consider it. A major submission has been made to his Department and other Ministers have been lobbied in regard to decentralising to Tipperary town. The benefits for the town would be enormous. It is located near Limerick Junction where one can get a train and be in Dublin in an hour and ten minutes, and it is also near Limerick and Clonmel. There is huge potential in the area and life would be breathed back into the town. Mr. J. Doyle: A Department will be located there. Mr. T. Hayes: I hope the Senator is right. I refer to the old age pension. I was disappointed the Minister did not make the leap in the budget. He is a courageous man and is well known for taking a chance, but he should have faced down his Cabinet colleagues and increased the pension to £100 per week. I acknowledge that he has made a commitment to meet that figure over the coming years but the budget was the time to do it in order to make a mark at the turn of the millennium and acknowledge those who have given so much to building the economy. All of us enjoy the fruits of their labour. Mr. Caffrey: I welcome the Minister. Previous speakers have said that the debate is futile because the die is cast and nothing we say will change anything. There is a sense of sympathy for the Minister's attempts to implement the Bill. His pioneering approach to many fiscal matters has led to some trouble. Nevertheless, he has displayed considerable determination, imagination and initiative in certain areas, which I will address later. The Bill has extended the divide between the rich and poor. It will have social repercussions, which will be highlighted down the line, as more deprived and affluent areas will be in juxtaposition. Inflation is running at an estimated 4.6%. Many commentators are extremely worried and even the President of the European Central Bank referred to Ireland's inflation rate. However, peculiarly, inflation has an up side and in the present climate a rate of 4.5% does not pose a serious problem. Inflation has always benefited the borrower and, consequently, people are borrowing more than ever. Those who obtain mortgages are borrowing at a negative percentage. That is not often acknowledged and the unions are trying to stampede workers into believing that the gains they make as a result of tax cuts and wage increases will be eroded by the increase in inflation, but that is not the case. However, inflation over time can reduce the competitiveness of companies and, eventually, workers could be laid off or made redundant. All of us recall what happened in the 1980s. Most people forget that while a large number of private sector workers were made redundant in the 1980s, teachers and most other public servants kept their jobs. Security of tenure does not seem to be a factor when pay increases and tax cuts are considered. It is valuable, especially given that the Celtic tiger will possibly get hungry. As society evolves certain changes are brought about. At the turn of the 20th century the motor car entered production. Suddenly everyone bought a car and manufacturers popped up all over the world. Eventually all the small manufacturers went out of existence and currently there are a dozen major players globally. A similar scenario will probably develop with new technology companies. Shares in such companies are surging on the Nasdaq, for example, and traditional companies are losing favour. New technology companies are the in thing and their shares are booming. However, history has taught everyone a lesson in regard to such a change. When society evolves as it is currently, such changes take place and they will be reflected in many ways. The downside of inflationary pressures is that companies will eventually lose their competitiveness. The Government's mantra should be "keep people working" because a percentage increase here and there in inflation will not affect the economy if full employment can be maintained. It was reported in a newspaper recently that between 70,000 and 80,000 vacancies cannot be filled. The Minister for Justice, Equality and Law Reform is severe in restricting the entry of immigrants. Some of them have skills which are required here. I had a discussion with a number of young people recently who informed me that many immigrants have considerable skills but we do not seem to realise that. There is a perception that all of them are manual workers and that they would not contribute enormously to the economy. However, the opposite is the case. The question of decentralisation has been referred to by almost every speaker. Everyone wants a Department in their own back yard. I come from Ballina, where part of the Department of the Environment and Local Government has been located for the past ten or 12 years employing 132 people. That has made a tremendous contribution to the local economy but I understand there is a staff of 516 working in the Department in Dublin. We would be delighted to see those people move to Ballina where we can successfully cater for them. If the Government is serious about decentralisation and implements it fairly, not based on ministerial preference, it will greatly boost the local economy. Rural development has been talked about but nothing is happening on the ground in that regard. Senators mentioned transferring Departments to small towns. The benefits 200 people in well paid positions with security of tenure can bring to a small town are amazing. We all know mainstream farming is in serious trouble and this type of initiative can make a major impact on rural development policies if it is properly implemented. In Ballina, there was a surge in the number of new houses built when those people transferred there initially, and that surge is continuing. House prices throughout the country, but especially in the major cities, are reaching critical proportions. One of the reasons is the fact that serviced land is not available in sufficient quantities. Water and sewerage facilities are needed to build an estate but those facilities are not available in many small areas. I have been saying for a long time that the Government should concentrate on smaller schemes in rural areas, clusters of ten or 20 houses, and it should think about alternative arrangements for sewage treatment. There are pilot schemes in operation dealing with reed treatment, a system that can deal with a cluster of up to 20 or 30 houses. We must face up to the reality that at the current rate we will not be able to get sewerage facilities into every village in Ireland in the next 100 years - perhaps we will do it in the next 200 years - but if we examine alternative systems to see how we can build them into the local community, we will be doing something positive. It is all very well throwing out ideas like this but they must be worked on. I commend the Minister for showing considerable strength of character in pursuing his own ideas, despite opposition even from his own party. I know the Opposition's job is to criticise but it is difficult to criticise some of the measures in the budget. This time last year I said in this House that the Minister should reduce capital gains tax on non-development land in the next budget. In certain areas throughout the country, agencies like IDA Ireland, Údarás na Gaeltachta and other semi-State bodies could not purchase land because the seller was faced with the 40% capital gains tax liability. Since that liability has been reduced to its current rate of 20% I have seen land changing hands and IDA Ireland coming into possession of land that it would not get a year ago. This is a worthwhile and useful measure, even though it might be fashionable to condemn measures that result in people gaining money. A block existed whereby unless a person intended to build a house on a piece of land, they could not buy it. In the long term, this measure will possibly reduce land prices both for housing and in the commercial sector. These are the types of ideas which, if put into practice, can achieve results. I will not go into the issue of individualisation and the other areas that have been dealt with ad nauseam since the budget was introduced, except to say that I agree with some of the points made. I want to refer to Knock Airport. I think it was Senator Taylor-Quinn who referred to privatisation. I do not know about that but I do know that small airports like Knock need special incentives to attract industry. Some years ago, Knock was designated as an industrial zone but nothing has happened since then. There is little point in designating an area if nothing happens on the ground. The area around the airport at Knock is not reaching its potential and the Minister and the Government should seriously consider the position. The land is available and the area is zoned. There were some problems in agreeing the redesignation but I believe they were overcome. We need to see something happening. We do not want to see designation on a piece of paper. We want action on the ground. Mr. Burke: I welcome the Minister to the House and compliment him on some aspects of the budget. I agree with many aspects of what is quite a good budget but, as other speakers said, there are some sections in it on which I would take issue with the Minister. Senator Caffrey was correct when he said that one section of the community is getting richer while another is getting poorer. The gap between the poor and the rich is widening at a very fast rate and I ask the Minister to address that in the next budget because the country will face many social issues in the future. I want to address a number of issues in relation to sewerage and roads, some of which have been addressed by previous speakers. I ask the Minister to make more funds available for our national secondary and primary routes. There is no proper national primary route into the county from which I come. One section of the route, from Castlebar towards Charlestown, is complete but work on the rest of the national primary route from Strangford to Longford has not begun. Not enough money is being allocated to national secondary routes. We have more secondary roads in County Mayo than in any other county. However, only £17 million or £18 million is provided annually in the budget for national secondary routes, which play as important a role as the national primary routes. I ask the Minister to address that in the next budget. Our national secondary routes deserve more attention and funding. It can be more difficult to decide how to distribute a budget surplus than to budget for a deficit. However, despite that, an annual surplus of £1 billion is a considerable amount of money. My area has qualified for Objective One status. I will be looking closely at the funding proposed by the Government for this area. While we appreciate that we are entitled to a certain amount of funding from the EU, we will also be asking the Government to pump some of the massive annual surpluses into the most disadvantaged area in the country. Many speakers referred to decentralisation. I will be parochial, as they were, and say that Castlebar has proved itself in this regard and would be suited to further decentralisation. I ask the Minister to move a Department to Castlebar. The Minister should look at our stock market. We are falling far behind other countries in this regard. Even with the massive surpluses we are generating, there seems to be a huge outflow of funds from this country to property in England, Spain and other countries. In addition, many people are investing heavily in the UK and US stock markets. There is something radically wrong if the vast majority of people have no confidence in their own stock market. One can get updates of the UK and US stock markets on television but the Irish stock market is miles behind in this regard. This area should be examined if we are to stop the outflow of investment from this country. The area of refuse disposal and litter has received a lot of attention recently. I ask the Minister to look seriously at decentralising recycling. The Government has privatised companies such as Eircom and the proceeds money should not be put into the Exchequer but should be put into other projects. The Government should examine the area of nationalising recycling. A private company would need to have rocks in its head, so to speak, to engage in recycling because there is no money to be made from it. Everyone who has entered the recycling game has lost a fortune. The Government should look closely at nationalising recycling if we are to tackle our refuse and litter problems. The health system is falling asunder due to lack of funding. I was recently in a town called Peekskill, north of New York city. It has a population of 20,000, which is about the same size as Castlebar. The town's hospital has 350 physicians. There are hardly 350 physicians in Ireland. Mr. Mooney: How many patients did it have? Mr. Burke: It was advertising for patients or clients, depending on what one wants to call them. It is run privately. The issue of hospitals should be looked at more closely. The health service requires substantial further funding. While there are some inefficiencies in the health boards, more funding is urgently needed to change our health system. I welcome elements of the budget. However, we do not agree with some sections, which we will discuss in more detail on Committee Stage. Mr. Norris: I did not intend to speak on the Bill. I have just been speaking at the launch of a development of villas and apartments in Spain, which shows the vitality of the Irish economy. The villas cost about £1.7 million and the smallest apartment costs £380,000. Mr. Burke: Did the Senator buy one? Mr. Norris: I wish I were able to. That is extraordinary and a sign of the growth of the economy. We are lucky to have the Minister in charge because he is not just a ruthless practitioner of what a former Taoiseach called the dismal science of accountancy but he also sees the human side. It is almost an accident that I am speaking on the Bill because I thought I would just be in time to vote. I thank the Minister for taking such a humane view of the issue of inheritance tax, particularly in relation to the family home. I have corresponded with him on this. I was a little concerned whether the phrase "family home" might, in terms of the Constitution, restrict the inheritance rights of people who inherited as part of a duly sanctioned marriage as ordained by church or State. However, I understand this is not the case. The Minister was right to go for individualisation, although he had a politically difficult time doing so. One of the reasons I like him is that he sticks to guns, which he did, although it cannot have been easy. I remember - and it did make me laugh - being in the other Chamber for the Budget Statement and seeing them all almost standing on their seats, cheering and hooraying. About four or five hours later they were all out on the plinth, backtracking like hell. I thought to myself that such are the vicissitudes of political life. However, the Minister tacked into the storm and----- Mr. McCreevy: Multi-seat proportional representation. Mr. Norris: Exactly.

Mr. McCreevy: A good loud shout is enough. Mr. Norris: Exactly. The Minister got through it all. Of course, one would like to see different emphases. If one expresses an opinion on anything in this country, 19 people will disagree, as I know only too well. That is refreshing. No one will agree with every single point of emphasis in a long document such as the budget. I am now reasonably comfortable and at the moment I do not owe the banks money. I am sure that will change next week because I am most uncomfortable living in the black. It is my nature to be in the red and I will have satisfactorily achieved that status again by next week. However, I am reasonably comfortable and my financial circumstances are not easily shaken, although I hope I am not tempting providence. I would have been quite happy to see further emphasis on people who do not have the kind of financial flexibility I do. On the other hand, I sometimes wonder if people in this country, with its Christian Constitution and all the rest, ever read their Bible. There is a parable that is appropriate to all the squawking that went on about the incentives given to allow married women return to work. Everybody got something and was better off and nobody was penalised, although some people got a little bit more. There were yowls and howls as if people were being operated on without an anaesthetic, particularly in the region of their wallet, where people are most sensitive. I wondered if they had ever read the parable of the landowner who started hiring labourers. He started hiring some of them in the morning and he promised them a penny a day. The wages bill was fairly reasonable in those times. Mr. J. Doyle: There was no inflation. Mr. Norris: No inflation there but there was a kind of moral inflation because throughout the day he needed more people and he hired more at lunchtime, then more in the afternoon and more in the evening. He even hired some lucky shower at a quarter to midnight and they stopped work at midnight but received the same money. The people who had been hired in the morning started complaining and the answer was: is the labourer not worthy of his hire? In other words, you should not begrudge. If you contract for something you should be satisfied with what you have got. It is too easy to look over your shoulder and be afraid that somebody else has got more than you have. I do not approve of that attitude in life. Mr. Mooney: It is a national trait. Mr. Norris: I am afraid it may be but we are getting away from it. It is much better to look over your other shoulder and say that you can now see other people who do not have quite as much as you have and that perhaps we ought to share things out a little more rationally. Mr. J. Doyle: It would open up the gates. Mr. Norris: There is the angle. Is that Fine Gael? My goodness, the moral bankruptcy of it. The second greatest accolade I have had in my life was to be called a snob by one of Rupert Murdoch's newspapers, The Sunday Times. It was only exceeded by the day that I was mentioned on the front page and the editorial - it said, "Naughty Norris" on the outside and "Shame on you David". My moral stature nearly went out through the ceiling when I got that accolade. To be denounced by Rupert Murdoch is as good as being a writer in the 1940s when they used to put on the cover of a book:"Banned in Boston". I have been denounced by Mr. Murdoch and I cannot think of anything more refreshing or which I would appreciate more. Someone rang in on air when I was with Mr. Eamon Dunphy last night. This is the kind of begrudgery with which I hope Fine Gael will not be associated. He said that I was a pompous old bag and that I had notions beyond myself and if they put up "them gates I will be down myself with a gang of me friends and I will reef them out of the street". He will get his reply in the Evening Herald on Friday. He is a soul mate of Rupert Murdoch. (Interruptions). Mr. Norris: All I can recommend to him is to send a tape recording of his message to Rupert and I have no doubt Rupert will ensure he receives a regular supply of The Sunday Times which he will find, if there is indoor sanitation in the mudhut in which he obviously lives, when cut into neat, six inch squares and shoved on a rusty nail to be not only practical but absorbent. We have wandered just a little, provoked by my colleagues on this side. Mr. Mooney: The Senator should get back to begrudgery. Mr. Norris: I came to the House to vote with the Government. On balance, although I would have had different emphases, the Minister has done a good, courageous job and is going in the right direction. I hope we do not create this climate of greed and acquisitiveness because nothing will kill the golden calf quicker than that. I remember the late John Kelly talking about cannibal piglets attacking mother Ireland, taking Joyce's image of Ireland as the old sow that ate her farrow. Kelly said we are now at the point where the cannibal piglets have revolted and are devouring their own mother. Let us be careful and prudent so that we do not destroy the benefits that have accrued from the actions not just of this Government, as the Minister is generous enough to acknowledge, but of Governments that have laid down the basis of this prosperity. Sometimes I hear people saying, even the nurses whom I admire enormously, that their job is not a vocation. Let us not be so materialistic that we deny that something is a vocation. I know what they were getting at - they were saying they had been palmed off for so long by using the idea of a vocation - but why should it not be a well-paid job and a vocation? Some of the teachers say their prime objective is to get their salary increase. It should not be so for any of us. We should remember the idea of service. I was a teacher for a while and it is not a job I would recommend to anybody who did not find it a vocation. Nothing will put a person into the booby-hatch quicker than teaching a rebellious group of infants, young people, adolescents or even, as I know to my cost, people in their twenties. I hope we do not become just materialistic. I hope we understand the benefits we are receiving from the prudent policies of the Government. It is a time for good housekeeping and in the next budget I hope the rate of advantage will continue and that we will continue to prosper as a economy. If we had these kind of surpluses - I am a timid, frightened, housewifely sort of person and I occasionally balance my own domestic budget - I would like to see us pay off a little more of the money we owe to international financial sources and so on. It is about £32 billion. We could knock a hole in that in the next five or ten years. It would be wonderful to enter the next decade without this debt hanging over us so that if something does happen to the economy, we are then secure and we can live within our modest means. The Minister has done a good job and I look forward to voting. Minister for Finance (Mr. McCreevy): I am very grateful to all the Senators who contributed to the Second Stage discussion on the Finance Bill. I hope that I can cover in this reply most of the main points which were made. It has always been my long-established and firmly held belief that an economy and a society works better, progresses more readily and shares its resources more willingly in an environment in which the tax burden is kept to a reasonable level. I have consistently sought to put that philosophy into practice by each year reducing significantly the rates and incidence of taxation on the ordinary taxpayer. The one exception I have made has been in the indirect tax area for sound and sustainable reasons to raise revenue for public services. It is no accident, as Senator Dardis pointed out, that the economy has grown so rapidly in the past six years in an environment in which the State has sought to reduce taxation and to reward and incentivise effort. Senator Doyle dealt with the general thrust of the budget and like some other Senators, raised the implications of inflation. Admittedly we have seen a rise in the rate of inflation as measured by the consumer price index. As I have pointed out, the increase is due to particular factors such as the weakness of the euro, the increase in oil prices and the increase in excise duty on tobacco in the budget. The medium-term outlook for the consumer price index is more favourable and inflation will begin to fall in the second half of the year. On the more general macro economic issues, and the EU comments on this issue, I pointed out at ECOFIN, when Ireland's economic performance was being recently reviewed, that the problems we have are ones which we would expect to have after a period of such rapid economic and employment growth as has happened in Ireland over the past six years. In essence these problems are a result of economic success. The Government, however, has substantially increased its investment in high-tech education and training to help ease skill shortages. In addition, a key priority for the Government, in its taxation and other policies, is to further encourage employment opportunities. Increasing both skilled and unskilled labour supply will help to dampen overheating. The tax reductions in budget 2000 are also intended to assist in this process by increasing employment incentives. I am happy that consumer price inflation should remain moderate. While external developments such as higher oil prices and domestic pressures, particularly in non-traded sectors of the economy, together with indirect tax increases on tobacco will add to the consumer price index in 2000, inflation should average around 2.5% over the period 2000 to 2002. Senator Quinn also warned about the dangers of inflation and in particularly the danger of complacency. While I appreciate his caution, it is easy to conceive of circumstances which would be entirely unfavourable but the real issue is the likelihood of this occurrence. I never forecast exchange rate movements - I keep my lip buttoned - but we are pursuing prudent policies which seek to retain the competitiveness of the economy. Tax cuts that help stimulate investment, enterprise and increase the labour supply are of a far different kind from tax cuts that merely stimulate consumption activity.

Senator Doyle referred to the targetting of tax cuts on the higher paid in the budget, as did Senator Costello. I have always had great difficulty with the proposition that a single person earning just over £14,000 and paying 46% tax under the current system is well off or highly paid. A principal defect in our income tax system is the low point at which ordinary workers go onto the higher tax rate. If we did nothing in the budget, 46% of taxpayers would have been on the top tax rate in the next tax year. Such a tax system cannot be defended. What I have done in the budget brings that 46% down to 38% and I will ultimately reduce it to 17% of taxpayers or, more relevantly, 12% of all income earners. This will be achieved by the changes to the standard rate band. I welcome Senator Henry's support for the standard rate band policy. She has spoken in favour of it in the past. I also note her welcome for tax relief on post-graduate fees of which she had been an advocate for some time. Not alone have we lowered tax rates and reduced significantly the numbers on the top rate but the Government has also removed substantial numbers from the tax net. Senator Dardis gave the details of the changes in allowances when he compared this Government's record with that of the previous one. In my previous budgets I acted to remove 175,000 low paid workers from the tax net compared to 38,000 under the previous Government. These are the facts. I welcome the support of Senator Doyle for the pension fund changes in the Bill, which he sees as progressive. As regards his comments on the failure of the Bill to tackle child care, there is further work and discussion to take place under the Programme for Prosperity and Fairness on that issue. In relation to the credit unions and why they are not dealt with in the Bill, my position on this is clear and we can go into further detail on it on Committee Stage. Senator Costello spoke of credit union members as small savers but the tax exemption being sought by the league covers savings of up to £7,000 or more - hardly a small nest egg. I have always made it clear that I regard the direct tax area as the priority for tax reductions. There was some criticism that I increased the tax on cigarettes but did not cut the duties on other items. I note, however, that my counterpart in the UK not only increased excise on cigarettes by 25p per packet today but also increased the duties on petrol and drink - good news for retailers in Border areas. A number of Senators referred to the town renewal scheme and the state of play with the selection process. As far as I am aware it is well advanced but I will check the position for the House before Committee Stage tomorrow. I have not been able to mention all the contributions in this short reply but I will try to deal with some of them when I return to the House. Senator Ross made a number of interesting points. I am aware of his views on the role that the partnership process has played in decision-making in the Irish administrative context. He has held that view for some time. His viewpoint is shared by other people in the country and by some Members of the Oireachtas in that some would perceive it as the putting aside of the elected representative and more decisions being made in the context the employers, trade unions, farmers and other social partners. Senators echoed the comments over the past couple of months made by some commentators with regard to how the budget was dealt with and that Members of the Cabinet did not seem to know about some of the taxation items. I noted on the news last night that my ECOFIN colleague, Mr. Gordon Brown, was going to present his budget and tax changes to his Cabinet colleagues this morning. I would state for the record that what I did with regard to the budget is no different from what any previous Minister for Finance has done, including that of the last Government. It is not unusual that the Minister for Finance would not announce details of his tax changes to his Cabinet colleagues in advance. It has never been done in any other way, here or in the United Kingdom. Senator Ross made a point about share options. On Committee Stage this year and last year I recorded my thinking regarding share options. I am disposed to this area. The Senator will appreciate that this matter is dealt with at some length in the Programme for Prosperity and Fairness. When I announced my budget on 1 December 1999 I said that I hoped this matter could be dealt with in a social partnership context. The budget and the Finance Bill were prepared before the social partnership talks concluded. After the Finance Bill was produced a section was inserted in the PPF stating that share options and gain sharing, including other incentives which can include share options, would be dealt with by a committee. It did not state that the decision would be made by the committee, consisting of ICTU, IBEC and the Departments which the Senator mentioned, but that the matter will be dealt with. The committee met on 16 February but no conclusion could be reached in such a short period of time. It would be an insult if the Minister for Finance were to introduce a share option scheme on Report Stage of the Finance Bill. On Committee and Report Stages in the Dáil I have put on record my belief in the principle of incentivisation, in which share options have played a part in other countries, particularly in the United States and particularly for hi-tech industries. I am sure that when the committee meets it will put forward all of the matters and they can be addressed in next year's budget and Finance Bill. I have said on many occasions, and I said it again during my Second Stage contribution here, that there must be a general equity between all taxpayers. One can readily say that in many aspects of tax legislation incentives are given to one group but not another. There must be a sense of balance. For instance, let us take two people who leave education at the same time, Mary who goes to work in one industry and Joe who starts in another. Joe works in an industry which is part of the hi-tech sector to which I will introduce a share option scheme. Mary who has the same qualifications and the same level of intelligence works in the food industry or in agriculture. They may both earn £500 per week. There must be some equity between Joe who can avail of a share option scheme and pay a low tax rate and Mary who is on the same salary scale but who must pay tax at 46%. We must seek to have a genuine equity. On balance, to grow the economy an attractive share option scheme is necessary. If people do not have incentives there will be no jobs created. The aim of the scheme is to encourage people and industries to come here. I am ideologically disposed to an attractive share option scheme but I stress the issue of equity. I also recognise the argument put forward by the Opposition. It is a judgment call and I do not have any great hang-ups about this issue. Senator Ross also raised a question about the individualisation of the standard rate band. He said that it was approved by the social partners but not by all Members, particularly Members from my party. All I put forward in my speech today was that I noted, despite all the hoo-ha about the budget, that the social partners had approved the principle. I know Senator Henry said she supported it, as she has in the past, even though I was not present for her contribution. What happened after the budget is an interesting commentary about our multi-seat electoral system. I have an honour's degree in this subject, so to speak, because I have been speaking about it since 1983. Over the years I have written many articles and speeches on the subject. I have not read anything about it in recent years. My main objection to multi-seat proportional representation - note that I refer to multi-seat PR because I am not against proportional representation - is the type of decision-making it led to because of the pressures placed on people. There is a debate taking place at present, led by the Minister, Deputy Dempsey, on a new electoral system. I have read with interest what some commentators said about it. I noted what Garret FitzGerald put forward in the 1987 election and I can see all the merits of the issue. My main objection to it has always been the pressures it has placed on decision-making. One must remember that in the 41 constituencies the majority of seats are not decided on the first count, they are decided by lower preferences, which is the great beauty of proportional representation. I have always said there are many pluses to the proportional representation system, but one of the main downsides has been that even a little pressure from a very small group can lead to much bad political decision-making. I must emphasise in regard to individualisation that it is not individualisation of the taxation system but of a standard rate band. Perhaps the term "individualisation" is unfortunate, and it might be better to refer to a single standard rate band. The connotations of individualisation might not be appropriate. Interestingly enough, despite the avalanche of publicity and criticism about the individualisation of the standard rate band, in the first opinion poll published by a national newspaper after the budget, 37% were for it and 36% against, while the balance had no opinion. One would never have gained that impression from the parliamentary party representatives, the newspapers or, in particular, the national broadcasting station. I would say that the figure in favour is a lot higher today. I said many things about my proposals at that time but most of them were drowned out. In fairness, some of the leading trade union figures, people who are not noted as supporters of mine, also came out in favour of it, but they were drowned out as well. The interesting thing is that up to the Murphy judgment there was individualisation of the standard rate band. That position existed until the Government decided otherwise in a budget in the early 1980s. That system was in existence since PAYE began. It was always the case that one received a married allowance and a personal allowance, and whatever amount was taxable was taxed at different rates. There were no double bands and the country did not fall into a moral dung heap. People seem to have forgotten about that but there was little point in trying to make the point in all the recent hullabaloo because people were totally deaf. It proved, however, that despite the avalanche of criticism the majority of people must have been very happy with the system. That proves the way society has changed over the years in any event. Maybe when people are out working they mind their own business. It would have been a brave man or woman who would stand up to defend individualisation because the noise was so intense that most people kept their heads down. Senator Norris referred to the begrudgery aspect of Irish life, which I also referred to on Report Stage in the Dáil. As he rightly pointed out - I tried to point this out during the budget debate and did point it out in more rational terms on Report Stage - nobody lost in the budget. Everybody gained, but the thought that one person might not gain as much as the next man or woman caused a fuss. In recent times I have made a career of giving out about the public service and complaining about pay relativities, and others have also done so, but one must remember that relativities apply not only to the public service. It proves something about ourselves that we can discuss at a later date in another context the fact that some people may be gaining on others was too much for some people to take. I am not saying that all the people who spoke against the proposals for tax individualisation were so motivated. Many were, however, although I am not including politicians in this debate - maybe that is a reflection on ourselves. Senator Cregan and others referred to decentralisation which I am readily aware is an issue on which many Senators and Deputies have commented. In the past year I have received hundreds of representations on the issue and by the middle of the year I hope to be in a position to make some decisions about it. I respect what Senators have said about it making a considerable difference for rural areas. The difference this time is that many people working in Departments might wish to be decentralised for all kinds of reasons, including a better lifestyle and a chance to get an affordable home. Senator Taylor-Quinn referred to capital gains tax and privatisation and Senator Hayes raised a question about agriculture. I was most taken by Senator Caffrey's contribution to the debate which was very interesting. Since I may have missed part of what he said, I will read it in more detail later. Such independent views, however, are not very conducive to being a member of a political party such as mine or the Senator's. If he has not found that out before now, he will do so.