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Budget increases inequality between low paid and high paid - Morgan

7 December, 2006


Sinn Féin Enterprise, Trade and Employment spokesperson Arthur Morgan TD told the Dáil today that the budget 'clearly increases inequality between the low paid and the high paid'. Pointing out that those above the average industrial wage will gain twice as much as those below it he characterised the Budget as one that put high earners first. While welcoming some measures around support for small businesses, Deputy Morgan concluded by attacking government investment in a two-tier health system as Minister Harney's hospital co-location proposal collapses.

Full text follows

Personal taxes

A budget is not about winning elections. It is not even about making everybody happy. Nor might it I say, is it about satisfying the tiny minority of privileged individuals that support the PDs. It should be about understanding what is needed and meeting those needs where possible, and where the revenue is available to do so. It should be about prioritising the least well off, and ensuring that we have high quality accessible public services to meet the needs of the population.

So is that what this budget does? Does it prioritise the least well off? Do those on low and average incomes gain most? Is delivering public services a priority? Does this budget set down a marker in terms of addressing the deficiencies in healthcare and housing? On all of these questions the answers is a resounding NO.

There is quite a bit of smoke and mirrors involved in many aspects of the budget. The Government is attempting to give the impression that it is doing things it is not doing. They would like us to think that those on low incomes are the main beneficiaries of this budget. Yes, there have been increases in the lowest rates of social welfare, in pensions and the minimum wage is being increased. These are all long standing commitments. Commitments made before recent increases in the cost of living. They are therefore not sufficient to keep people out of poverty. Above all these are deserved and overdue increases.

But do top earners deserve the windfall that is the cut in the top rate of income tax -- have they been paying more than their fair share of taxation? I do not think so. The government tries to wrap this measure up and present it to us as 'rewarding work'. Do those who are already more than well rewarded deserve more than hard working people on low and middle incomes?

High income earners will share a €1.25 billion personal tax package. They get the cumulative benefit of the increase in personal tax credits, the benefit of the widening of the standard tax band and are the beneficiaries of the 1% cut in the top rate. High income earners will get the highest increases in the weekly pay as a result of this budget. As IMPACT said yesterday, they are 'three-time winners'. And if that isn't enough the Minister has made a commitment to further cut the top rate next year if returned to government.

As my colleague Deputy Caoimhghín Ó Caoláin said last night a remarkable feature of this budget is that those just below the average industrial wage, people on €30,000 per annum, gain least per week from this budget. They gain €8 per week, compared to gains of at least twice as much for those above €35,000. This is a budget that clearly increases inequality between the low paid and the high paid.

Yes, those on the minimum wage are being taken out of the tax net. But the key question is the rise in the minimum wage. ICTU had argued for €9.03 while Sinn Féin had put forward a proposal for €9.30. The Minimum wage is now to be raised only to €8.65, and it appears that this increase is to be staggered in tow increase, one in January, and one in July.

It is disappointing that the Minister did not increase the restrictions to the use of specified tax reliefs for high income individuals. Restrictions announced as part of last years budget did not go nearly far enough.

Ensuring that high income individuals pay their fair share of taxation demands that these restrictions on use of tax reliefs are significantly increased. No high income individual should be able to write off more than 5-10% of their income through such exemptions. The Minister seems to think he has done enough on this matter -- he has not!

I welcome the introduction of the higher rate health levy of 2.5% for high income individuals -- those on over €100,000. It is an acknowledgment that high income earners are not paying their fair share. Sinn Féin has long argued for the introduction of a higher rate of income tax for earners on or above €100,000. It is surprising that the Minister would choose to increase the health levy for higher income earners while failing to remove the PRSI ceiling. The PRSI ceiling is fundamentally unjust as it means that those above the ceiling pay a smaller proportion of gross income in PRSI than those earning under the ceiling.

The increase in the health levy will raise €34 million a year -- removing the PRSI ceiling would raised €282 million. This money could have augmented the social insurance fund and helped to pay for increase in more significant increase in welfare rates or pensions. It could have been used to ensure better redundancy entitlements for those workers in vulnerable sectors whose jobs are increasingly moving to low cost economies.

The failure to help those being hit by energy price increases

Another astounding feature of this budget is that it fails to help those hurt by rising prices -- low income families who can least absorb these increases. The €4 increase in the fuel allowance was paltry. At a time of unprecedented energy price hikes, those struggling to afford to heat their homes will be shocked by this miniscule increase.

While the Minister announced an increased €20 million for the Greener Homes (Residential Renewable Energy) scheme there were no specific measures to help low income families move to renewable energy systems. Sinn Féin has called for full cost renewable energy grants for those on low incomes. The cost involved in getting renewable energy systems remains prohibitive for those on low incomes while these grants continue to cover only part of the cost.

The Minister announced nothing yesterday regarding the Warmer Homes Scheme -- which provides funding for insulation and other energy efficiency measures in around 2,000 eligible homes each year. Sinn Féin proposed that additional funding to facilitate the scheme meeting the needs of 10,000 homes a year. This would have cost just €8.45million. It would have cut heating costs for low incomes families suffering as a result of ESB and Gas price hikes and cut energy wastage, but the Minister chose to do nothing. There are 62,000 families in this state living in persistent fuel poverty and the Minister had utterly failed these people.

Environmental

Minister Cowen was at pains to give the impression that the environment is a priority for the Government. It is stunt for the Minister to be trying to convince us that the purchase of a further €270 million worth of carbon allowances is an environmental measure. This is a cost that tax payers should not have to bear -- had we acted to cut emissions we would not be forced to purchase these allowances. We should be aiming beyond Kyoto, which merely represents a minimum level with which all states should be complying.

At first the changes in relation to VRT sound promising -- Sinn Fein has long been demanding that VRT be based on emissions output. But what is the Government doing? It is going to engage in a consultation on this. It is not actually going to do anything.

The higher rate of motor tax announced for high emitting vehicles is not going to come in for over a year and then only for vehicles registered after January 2008. Why is the government purposely giving people a year's notice of this measure? It amounts to giving people a year to purchase their SUV and face no penalty in terms of increased motor tax. This is ludicrous.

Business

Lest Sinn Féin be accused of being entirely negative, the Government has done much for small business, for indigenous business in this budget and this is welcome. Sinn Féin has consistently argued for the government to shift the focus from Foreign Direct Investment to supporting the development and expansion of indigenous industry. It is clear that there is a need to develop indigenous industry. The economy has become dangerously over reliant on both, FDI and sectors such a construction, in a way that cannot continue indefinitely. We welcome the increased focus on research and development. The levels of R&D in Irish industry have not been what they should be.

However if the Government was serious about supporting small business, as pretends to be, it would not allow the disgraceful process where the agenda of liberalising the energy market is damaging small business. ESB prices are at present being pushed up to entice others into the market to compete with the ESB. Prices are being pushed up, to bring in competition supposedly to bring prices down. The increases announced by the ESB will hit low income people hardest. The increases demonstrate that the regulator is not upholding its duty to take into account of the needs of rural customers, the disadvantaged and the elderly. The CER is not serving the interest of the people or of business.

Health

Before I conclude I want to make an important point in relation to spending in the health service. The Minister announced record spending of €14.3 billion on health next year. We have had record spending every year during the lifetime of this government but it has failed miserably to deliver efficient and equitable healthcare services to the people. Money is being poured into a two tier system that discriminates against the patient dependent on the public hospital system. The Health Strategy has been binned. The Health Minister's disgraceful private hospital co-location plan is starting to unravel with the news that the proposed hospitals at Letterkenny and Galway will not go ahead. The Government and the HSE cannot agree how many additional hospital beds we need. Public money should be spent in the public system only with equal access for all based on need alone.

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