There is a degree of equity in the pensions proposal in Financial Resolution No. 9. However, it is interesting that the Government has failed to address certain pensions issues in the budget. There has been a considerable drop in pension values. Government policy over a number of years has been to encourage people to make proper provision for themselves upon retirement. There are pension funds in existence that are worth 20% to 30% less than they were worth this time last year and this creates a particular difficulty for those who are 55 and over who envisage retiring between the ages of 60 and 65. I am surprised the Government has made no special provision for this group.

The focus in the resolution is entirely on recovering tax for the Revenue without addressing the broader social issue of the value of pension funds, the likely medium-term cost to the State of people whose funds are inadequate and the question of what is to happen this month and next month. At the end of this month, the self-employed normally make their tax returns. This month, they will make a supplemental pension payment for the tax year ending in December 2007. They will be making an advance tax payment for the full year 2008 and I understand a pension contribution will be built into this.

The difficulty at present is that, apart from reducing the tax reliefs for making pension payments, no provision has been made to encourage people, even those earning below €150,000, to provide adequately for pensions in the coming year. Any self-employed person, or person in employment with a private pension scheme to which he makes additional contributions, putting money into a pension fund this October or November would do as well to fly to Las Vegas and bet the money at the roulette wheel. No one knows what will happen with regard to the manner of the investment of funds, particularly with reference to stock markets or other types of financial products. There is a particular problem here but there is a yawning silence from the Government on this issue, which I expected would be addressed in the budget.

The issue runs over into what is happening with savings. It is curious that DIRT is being increased from 20% to 23%. My understanding of the purpose of that tax was to ensure that when people had money on deposit, and they fell into the standard rate of tax, the tax would be received by Revenue. It allowed Revenue to keep track of what deposits were in existence. If people fell into the higher rate of income tax, they then had to make up the difference.

If one is paying 23% DIRT and one's tax rate is only 20%, will one be able to reclaim the 3% difference? Is the Minister not creating a new layer of bureaucracy for savers? In the context of the Government trying to encourage saving, is this not a direct discouragement to save in that if one is only on the standard rate of income tax, one will find that one's deposit savings are taxed at a higher rate? Is this basically an admission by Government, if it was honest and referred to the levy as part of the income tax code, that the 1% levy has in practical terms moved the standard rate of tax to 23%? Perhaps it means something different. Does it mean simply that if one has savings, they do not fall into this category? Perhaps this is the explanation for the manner in which this is being dealt with. Does money earned by an individual by way of savings fall into the 1% levy? Will a person pay an extra 1% as well as paying 23%?

The Government would have been more honest if, in the context of the budget publication today, it had truthfully told the general public we are increasing the standard rate of tax to 23%. The Tánaiste should clarify these points.

It is still less than 26%.

She might also clarify what work has been done by the Department of Finance to indicate the impact this might have on savings.

I do not take issue with Financial Resolution No. 9. It is equitable that the figure is capped at a more reasonable amount than was the case up to now. For many of the reasons Deputy Shatter advanced, it is desirable that people in those circumstances ought to have some incentive to provide for themselves in terms of their pension rights.

It is interesting, though, that the Government has only decided to hit people who are earners or are self-employed in this category of people who would be making accelerated voluntary contributions, AVCs, and so on. There is an entirely separate facility in the tax code to allow, say, a director of a company to put a very substantial amount of money into a pension fund when he or she is nearing retirement. The company gets the benefit of a write-down of corporation tax and an amount of €250,000, or any figure one likes, can be put into the fund. Companies can be engineered to facilitate this practice, yet the Minister does not bother touching this area in any way, although there have been gross abuses. I would be very interested to hear what kind of cost to the Exchequer is estimated to result from the operation of that scheme, which is not touched. I am not taking issue with the changes made in this resolution but I would like to know the answer to this question.

The increase in DIRT is a mean, miserable imposition from what is now turning out to be a very mean, miserable and shocked Government. We had a lecture from the Taoiseach before he departed, something that used not to happen in the time of Mr. Haughey, Mr. Reynolds, Mr. Bruton or Deputy Ahern. The Taoiseach's lecture concerned the 26% rate in the time of the rainbow Government. It would be just as relevant to this debate for me to tell the Tánaiste what happened when Seán McEntee was Minister for Finance. The important point is that during that time there was an exemption, a threshold before one came to be taxed. I assure the Tánaiste that before the Finance Bill goes through this House, the Government will be back with an exemption level for the 1% levy.

To remain on this issue, the Taoiseach's big point before he left the House was that there was a 26% standard rate in the time of the rainbow Government. This Government is now pushing DIRT up to 26%. Why is it doing this? This affects people who, by definition, paid tax before their money was put into some bank or building society. The Government, mysteriously, did not bother to collect it for a large number of years — I know a little about that, and the inquiry concerned yielded €1 billion for the Exchequer, which it took gratefully. Now the Government hikes up the rates to 23% and to 26%. I cannot understand how we can have such a flurry about a former Minister for Finance encouraging people to save, yet here people who have paid their income tax as due will be liable to an additional increase in this regard.

I do not take any issue with the motion on capital gains tax, except that I question the yield. I would like the Minister or the Tánaiste to tell me where the Government proposes to raise this €160 million. Was that the figure?

Is the Deputy referring to DIRT?

No, I am referring to the figure on capital gains tax. There is a figure of €160 million in a full year. I would like to know where the expert advice available to the Government came from. I hope nobody on the opposite side of the House has been playing golf with some dental economist. Where will this €160 million come from?

I do not have time to play golf.

That is a pity. Where will the €160 million come from? Is somebody currently making money on shares or the disposal of property, or on something I do not know about? I would like to hear the Minister or the Tánaiste tell us where those particular figures came from.

The increase for bills of exchange and cheque books is, I suppose, neither here nor there. Some of us still use them. We are sorry if we are not up with the information age. It seems we will pay the price.

I will consider the resolutions in order. I join other Members in supporting Financial Resolution No. 9, which deals with the pensions issue. The previous position was unnecessarily generous to high income earners and a threshold of €150,000 is totally acceptable.

In general, I support all these resolutions. The Government is acting correctly to stabilise the national finances and to do otherwise would be irresponsible. However, there is a duty on me, as a Member of the Dáil, to point out things that may not actually work. My first concern is with regard to Financial Resolution No. 10 and income tax. People are now very flexible with their money. There are many markets throughout Europe and elsewhere where money can be invested, and many ways to invest. The Minister will agree it has always been a policy of every Government to encourage people to save. I am concerned that the more the rate of DIRT is raised, the more people will be disincentivised to save.

Does this measure apply to the post office? If it applies fully to post office savings, then again there is no incentive for people to put money into the post office. There is an argument for encouraging people to put money into a State or semi-State institution. I agree with the point made by Deputy Rabbitte, but he appeared to say that all the money in deposit accounts is earned money, but that is not quite true. There could be money on deposit that is not earned income.

Yes, there could.

Unearned income deserves to be taxed, given the state of the national finances, but this should be a temporary measure. At 20%, DIRT is too high. We should encourage people to save. If we do not, we are encouraging people to consume, to spend their money rather than save it. That is not a good idea.

I wish to make a similar point on capital gains tax. I support the measure on a temporary basis because we have little choice. We all recall that capital gains tax used to be 40% and the former Minister, Charlie McCreevy, reduced it to 20%. When he did that, he hugely increased the tax take from capital gains tax. Similar to the DIRT issue, the more one raises capital gains tax the less people are inclined to take risks or dispose of their property, shares or whatever and one runs the risk that the tax take may go down.

Will the Tánaiste indicate whether the sum of €160 million is in addition to the normal take or if it is the total take from capital gains tax? I agree with what Deputy Rabbitte said. The take on capital gains in the next two or three years will be abysmally low. I think I am correct in saying one can bring forward losses indefinitely. In the past year or 18 months I estimate that tens of thousands, if not hundreds of thousands of people have made large capital losses and they will be bringing them forward. I fear that the take from capital gains will be very small. However, I am not sure the Minister had an option. Given the overall financial circumstances he probably did have to increase the tax, but if the net effect is to decrease the tax take then it might be a self-defeating item.

The rationale for the increase in capital gains tax given in the Budget Statement was a good one. The Minister for Finance specifically outlined that it was to decrease the rate of commercial property stamp duty from 9% to 6%. That is a laudable move because many people were simply not developing properties or buying commercial properties because the 9% rate of stamp duty was absolutely exorbitant. I support the measure in the sense that it has made possible that decrease in stamp duty. I also support it on the basis that it had to be done given the overall state of the national finances.

The capital gains tax increase should be only a temporary one. As soon as economic conditions improve the rate should be reduced to 20% or even less. We all know what a competitive environment there is for capital and if Ireland is not at the edge of the competition there is no future for us.

I wish to raise many issues in the income tax sections but they can wait until we have more time during the debate on the Finance Bill. The pension provision looks reasonable in resolution No. 9. It is difficult to know what provision an elderly person should make for their pension.

An issue arose today with the Minister for Defence, Deputy O'Dea, on nursing home charges and the provision a person should make in the case of his or her being reliant on a pension so as not to be an undue burden on his or her relatives. Nursing home charges cost €60,000 to €70,000 per year in Dublin and €40,000 to €50,000 elsewhere in the country. Up to today's budget, if an individual or family were paying that cost they would have received tax relief at the marginal rate of tax. In other words——

That has not been changed.

I will be very brief. If somebody was paying €60,000 a year — that is not unusual in this city — he or she would expect to get approximately €24,000 back if he or she were taxed at the marginal rate of tax. On the basis of the Government's intent, that would be reduced to €12,000. That is a massive imposition on a vulnerable section of society. The Minister for Defence, Deputy O'Dea, assured me in RTE today — modulated by Miriam O'Callaghan — that this was never the Government's intention and that it would not apply. When I met the Minister for Finance in the corridor this afternoon he assured me there was no intention to do that either. My problem is that when I checked the summary of budget measures I noted on page B.6 under health expenses relief, "Health expenses relief will be granted at the standard rate only from 1 January 2009, with the exception of nursing home expenses which will be standard rated from 1 January 2010." If it was not the Government's intention to do that, how did it get into the summary of the budget? Now that I have it in print in front of me, that what I say will apply from 1 January 2010, can I still accept in good faith — as I did — the commitments of the Minister for Defence, Deputy O'Dea, and the Minister for Finance, Deputy Brian Lenihan? I hope the Tánaiste can give that assurance to the House tonight. Can she explain to me how this got into the summary of the budget if the Government never made the decision?

Two different items in this group of resolutions trouble me. One is the increase in DIRT. No exemption is provided. Most people lodge their savings after tax. What they earn on those savings is not a gift from the Government — it is not a gift from anyone — it is interest made on the basis that a bank has the use of one's money while it is on deposit. One pays tax before the money is deposited. The Government does not add anything to it while it is in the bank and when it comes back out the Government taxes it again, in this instance at 23%. That is outrageous. We are talking about small savers here. Given the recent and current turmoil with the banks, surely we should try to impress on people the need to be responsible with their money? We should be trying to impress on people that one cannot have instant credit for everything and that one should save and make provision for one's needs. This measure will not do that because people simply will not see the benefit of saving.

The notion that one would try to drive people away from using cheque books to using credit cards is beyond me, especially in the current climate. When one writes a cheque and hands it over to someone, it is almost a written statement that one has sufficient money in one's account to cover the cheque. It is a statement of responsibility in regard to finances. Any one of us could walk out the door to find a queue at a bank ATM. It is not called painless money for nothing. One sticks a card into a machine and the money comes out. The transaction is painless. That level of non-thinking withdrawal of cash is now being discouraged. In most countries in Europe it is an offence to write a cheque when one knows one does not have the means to cover it. If one does so in France, for instance, it is illegal to write another cheque for at least 12 months until one becomes responsible for one's deposit account. Surely that is the type of responsibility we need to encourage or is this another measure to ensure banks need not do the paper work they should have been doing all along? It is outrageous that such measures are being introduced which encourage people not to be responsible with their financial affairs.

I refer to Financial Resolution No. 9 dealing with tax relief on pensions. I broadly agree with the approach adopted in this resolution, but I have some questions. That the limit is being introduced is an admission on behalf of the Government and the Pensions Board that the pensions policy pursued in recent years is an utterly failed policy. It facilitated rich people to put by money to ensure their retirement fund would provide them with an income which would keep them in the standard to which they had become accustomed. The policy did little or nothing to ensure people on middle or lower incomes were protected against poverty in their old age. Consider what was happening up to now with tax relief on pensions. There has been an extraordinary system in terms of redistributing wealth upwards to the better off, and it has been extremely regressive.

Consider the most recent figures available. Approximately 6,000 people who earned in excess of €250,000 availed of the maximum possible relief. These people were stashing away almost €50,000 and getting €20,000 in tax relief every year. There is no justification for this whatsoever. People earning more than €250,000 are welcome to do whatever they like to provide for their retirement, but there is no reason why the taxpayer should subsidise them. Such people were being given tax relief of €20,000, which is the equivalent of being handed €20,000 every year and double the State old age pension. It is an intolerable situation and impossible to defend on any grounds of equity.

While I welcome the introduction of the earnings ceiling of €150,000, why did the Government not go further in that regard? The proposals could have saved in excess of €100 million. It could have brought the earnings limit down to €130,000 and saved an extra €56 million. Most people would agree it would have been fair to have an individual earnings limit of €100,000, which is more than generous. The Government could have saved €287 million if it decided to be fair in its approach on pensions. This would have allowed for those on the lowest incomes up to the average industrial wage to be taken out of the tax net in respect of the levy. Instead, the Government has allowed those who are pretty well off, with incomes of more than €100,000 up to €150,000, to continue to get tax relief at the top rate. Rather than touch these people it is now penalising people with very low incomes with the 1% levy.

Earlier I asked the Tánaiste privately if this levy applies to community employment earnings. It would seem from the briefings available that it does apply, which is scandalous. These schemes include people on the very lowest rung of the employment ladder, trying to improve their skills to enable them to enter the open market soon. The Government is now going to tax such people with the 1% levy on the meagre allowances they are paid for community employment schemes. This makes no sense whatsoever and there is no argument for it on equity grounds.

I refer to the stamp duty on cheques and bills of exchange. While many people engage in on-line banking and make electronic payments, we have not reached the stage where the bulk of people make such payments by those means. The facilities do not exist in the community or the commercial sector. For example, if one goes to a builders' providers it is not always possible to make electronic payments. This is an unfair measure, especially for older people who still rely on the use of a cheque book. This is a sneaky way to raise a few bob.

Let us suppose a person has a mortgage and there is a life assurance policy tacked on to that mortgage. Is that person susceptible to the proposed increase vis-à-vis life assurance and investment funds? This would have the net effect of increasing the cost of mortgages for a certain sector. It is proposed that this would yield €13 million per year. I seek clarification on this matter.

I refer to Financial Resolution No. 10 dealing with deposit interest retention tax. This is an extraordinary measure given the emphasis in the past few weeks on the need to encourage savings with the banks, to address the issue of liquidity in the banking system and the measures the Government had to take to address those issues in another arena. A penalty of 3% is being imposed on people for doing the right thing, a disincentive to save. The rate of interest that the unfortunate people will get is very small at present in any event. Will this measure yield €72 million in a full year? Will the Tánaiste, Deputy Coughlan, and the Minister for Defence, Deputy O'Dea, indicate in these straitened times — I realise it is funny and perhaps it is a laughing matter as far as the Government is concerned — how serious the Government is about savings? This is a serious issue.

It is serious.

The Government cannot pretend one week it is concerned about the financial institutions and their solvency and liquidity and then hammer the customer the following week. It is the ordinary consumer who puts a few bob into a savings account in a bank that is being hammered. In case he or she escapes all the other traps the Government has laid, in it comes with the heavy hand and clobbers him or her once more.

I will take some of the questions first. Deputy Rabbitte asked about the estimation of capital gains tax and the approximation of €160 million. This estimate is based on the statistics available which for 2009 is approximately €1.7 billion, for 2010 some €1.5 billion and for 2008 an estimated outturn of €1.7 billion. These are very conservative estimates, based on the forecasts of improvements in the economy and the information available to the Department of Finance and the Minister.

For the record, it was €168 million.

It is €160 million.

It is €168 million, not €106 million.

It is €160 million.

If the Government is going to borrow €13.5 billion next year, what are the improvements in the economy that it foresees?

We will work on some of the other aspects of how we will drive the economy. The Deputy may wish me to provide them and go beyond the aspects of the debate, but I have not time to do this.

It would be interesting to know what the improvements in the economy, to which the Tánaiste refers, will be.

I think, in the main, the majority of people agree with the proposal to reduce the limit to €150,000. If we are to change anything more fundamental, we will do so in the context of the Green Paper on Pensions. The Commission on Taxation is looking at a number of these issues, including the issue of pension provision for directors, which was raised by Deputy Rabbitte. There will be no change in the self-employed pension payment for the year 2007-08. The change relates to next year.

I did not hear the Tánaiste's reply to my query.

I said all of these matters will be examined in the context of the Green Paper on Pensions and the work of the Commission on Taxation. This is a first step. In my view, it is a matter of equity. Having listened to what the Members of the House had to say, I believe they are quite happy with the provisions which have been proposed. On the issue of DIRT——

The Green Paper process has been completed.

Yes.

Proposals were supposed to be made in this budget.

We will implement the Green Paper following further discussions. I have referred to the work of the Commission on Taxation. All of these issues will be taken into consideration during the debate on future pension provision.

We were promised that pension proposals would be made in this budget. The Government has done nothing in that regard.

There has been a move to deal with the issue. The majority of people will accept that the issue has been dealt with. I wish to speak about DIRT. The one thing I believe about DIRT is that it is charged on interest. Therefore, if the interest is low, 23% of low will still be low.

There is no gainsaying that.

Does the Tánaiste think the Government should get any of it?

Of all taxes, it is the one——

23% of nothing is nothing.

Yes. 23% of nothing is nothing.

Should there be no DIRT?

Let her finish.

It is the same in Kildare as it is in Dublin.

The Government should get rid of it if it does not need it.

DIRT is a consumer-friendly tax. One does not have to worry about tax returns, investments or any of that.

That is the first time we have heard that one.

Let her finish.

Certain products are available for small savers. DIRT does not arise in that context. Different types of products are available for small savers.

They only get clobbered a small bit.

Special term accounts are available. In the case of medium-term accounts, the first €480 of interest is exempt from DIRT.

Brilliant.

In the case of long-term accounts, the first €635 of interest is exempt from DIRT. There is also a return on that in the context of the elderly and the incapacitated.

They are lucky to escape.

In the context of the overall taxation measures, I do not think the 23% rate is a retrograde step or should be seen in any way as a disincentive. We are trying to encourage——

It is discouraging saving.

We do not pay it at the top rate anyway. I have to admit I am one of those people who continues to believe in signing cheques. If one uses a cheque book, at least one has some idea of what one has spent.

I hope the Tánaiste's cheques are filled in before they are handed over.

I fill them in.

The Tánaiste learned that from Bertie.

I make sure everything is 100%.

The Tánaiste does not leave the payee blank like some of her colleagues.

That is a matter for another day.

I cannot afford to sign too many cheques now that I have had a reduction in salary.

The Tánaiste does not need to apologise.

The cost of this measure to business was raised by one of the Deputies opposite. I am acutely aware of this issue. The Minister for Finance is considering the introduction of a national payment implementation plan. These issues need to be dealt with. We have done a great deal of work to encourage and facilitate the electronic transfer of funds. Further work needs to be done by banking and lending institutions to facilitate the transfer of moneys from one institution to another. All of these matters will have to be considered in the context of the national pay-out implementation plan. We are trying to encourage the use of cards. As a consequence, there has been a reduction in the stamp duty charges imposed in respect of ATM cards and other debit cards. A balance needs to be struck.

What about Deputy Noonan's question?

Deputy Noonan was right to state the Minister for Finance has clarified the issue. Nursing home expenses will be exempt from the first year of this measure.

They will not be exempt in 2010.

The agreement that has been reached with the Minister for Finance stands. In the context of the marginal rate——

What about 2010?

——it still stands.

The Minister for Finance told me it was entirely exempt.

Yes, it is exempt.

What about 2010?

If one wants to stick to the rules, this has nothing to do with what is being discussed.

Is the section of the budget book quoted by Deputy Noonan wrong?

I understand the Deputy has spoken to the Minister for Finance and received clarity on this matter.

It is in the budget book.

The Minister for Finance can clarify the matter again during further debates on this budget.

We need the Minister to answer the question.

As Deputy Noonan indicated, there is no problem with what the Minister for Finance had to say.

I take it the Tánaiste does not know the answer to the question.

If it is an issue, it is an issue.

Is the book wrong?

There is no indication that it is going to be changed.

I will put the question.

There is no change.

On a point of order, I asked a question.

I am sorry.

Toisc go bhfuil an am a cheadaíodh don díospóireacht seo caite, ní foláir dom an cheist a chur de réir ordú na Dála.

On a point of order——

There cannot be a point of order when I am putting the question.

I asked a question that was not answered.

The time permitted for this debate has expired.

I asked about life assurance attached to mortgages.

The change will affect the savings element only.

I must put the question.

We are still receiving information from the Tánaiste.

I move the following Financial Resolution: