Deputy Doherty should stop interrupting.

Could we please stop the shouting in the Chamber?

Yes, I will.

There is no need to shout. If one's words are strong enough, one does not need to shout. Nobody needs to shout.

The situation is serious.

Members can make their arguments but they should not shout. It denigrates the Chamber.

I thank the Minister.

The Government is worried about people screaming when we have such a serious situation.

We do not need to shout.

My apologies to Deputy Howlin.

We are well aware of the seriousness of the situation. The Deputy does not need to remind us.

The Government needs to listen.

I ask the Tánaiste not to respond.

Will the Tánaiste name one project that councils would not support? That claim is nonsense.

Excuse me, Deputy Doherty. It is becoming a habit of some Deputies on the Sinn Féin benches to barrack Ministers when they are responding. Members of the public are at home watching proceedings.

We cannot allow the Tánaiste to mislead the Dáil.

I ask Deputies to behave.

Next week's budget will test the Government in a way that previous budgets have not tested it. It is the first budget in more than ten years where it is fair to say there is genuine scope for significant investment in public services. As the Tánaiste knows, public spending here, at 26% of GDP, is low compared with many of our European counterparts. Even if we use GNI* as the criterion, it is 38%, which is well below the European average of 46% of GDP and far below the best performers, the countries we try to emulate in terms of public services, namely, Finland, Denmark or Sweden. There is plenty of scope in the budget to increase the role of the State in meeting people's needs.

Fine Gael and Fianna Fáil have flown a series of kites about tax in recent days. The choice in Tuesday's budget is simple; the Government can either cut taxes or reduce poverty. The Government in particular has been disingenuous in this House. The Taoiseach described the threshold for higher income tax in a way that is not correct. He has been at pains to say that ordinary workers are paying the higher rate of income tax when that is not true. Statistics from the Revenue Commissioners show that a little under one in five - 19% - of those who pay income tax pay any tax at the higher rate. That is an undeniable fact based on Revenue figures.

It is true that single people begin to pay the 40% rate on part of their income above €34,550, but the threshold for married couples is much higher, at up to €69,100. That is why many people on higher salaries do not pay the 40% tax rate. For this reason, it is misleading to suggest that ordinary workers are typically paying the 40% tax rate when we know from Revenue that only 19% of workers are paying at the top rate. The top one fifth cannot be the squeezed middle. Ireland's labour market remains divided between high wage earners and low wage earners. The divide is quite shocking when we look at international statistics. Far too many people are on low pay and insufficient hours. Shockingly, up to one quarter of workers are earning less than what has been defined as the living wage of €11.90 an hour, and none of them can benefit from a cut to the higher rate of tax. I do not expect the Tánaiste to go into the details of the budget but will he confirm that it is still the Government's intention to cut taxes for the top fifth of wage earners rather than reduce the burden on all taxpayers by providing money for services that every citizen enjoys?

I am not going to give a budget speech today for obvious reasons, as Deputy Howlin will understand. As a result of the sacrifices made by so many people and businesses in the past decade, Ireland is in a position to spend nearly €7.5 billion on capital next year. That is an increase of 25% in expenditure on schools, hospitals, roads, social infrastructure and housing, among other things. As a country, we have worked hard to create that possibility and to ensure we can spend more to look after the population in the way that a modern economy should do in terms of societal support.

The choices we make next week will be on the basis of trying to spend in appropriate ways without overspending or overborrowing and in order that we do not start all over again the cycle that we have repeatedly had of moving from boom to bust as Governments overspend when they cannot afford to do so. The Minister for Finance, Deputy Donohoe, will not allow that to happen. What we are doing is maintaining, protecting and preserving a sustainable growth story in the economy that will continue to allow us to put very large sums into projects that are needed throughout the country. We will be able to do that for the first time in many years with appropriate levels of capital spending next year. I hope Deputy Howlin is not suggesting that we should start spending money that we do not have.

In addition, we will have to raise some money to be able to fulfil the demands and pressures that exist. We want to give some relief to middle income earners, the squeezed middle who pay for everything. We are very unusual in the context of the European Union and the OECD that we ask earners to pay at the higher rate of tax when they are earning less than €35,000. That is not normal.

That is not true either.

We managed to give some modest relief to people last year and we hope to do so again this year by moving thresholds in a direction that is slightly closer to international norms.

All of the independent international assessments of the Irish tax system have shown that it is one of the most progressive tax systems in the world. To be fair to Deputy Howlin, he had a part in creating that. We will continue to be progressive, but we must also recognise that many hard-working families on middle incomes are under financial pressure and they also need to be given some level of a break in the budgetary decisions we make.

The Tánaiste is correct that we have a very progressive taxation system and the Labour Party was instrumental in ensuring that it remained progressive in the downtime. However, the base income divide between the rich and poor is manifestly much broader in this country than it is in any of our comparator countries. It is rebalanced somewhat by social transfers through taxation and social welfare. It is shocking, however, that one quarter of workers are earning less than the acceptable living wage of €11.90 an hour. They are the people who will not benefit from any reduction in the higher rate of taxation, which the Tánaiste characterised as applying to the squeezed middle. As I spelled out in detail, that is not the case. In addition, they will not benefit from the services that could be provided if the Government invested adequately in childcare or in increasing supports for people on modest incomes. We will spell out all of that in detail this afternoon. I am not asking the Government to spend money it does not have. On the contrary, I am asking it not to repeat the mistakes of the past by shrinking the tax base. We must maintain the breadth of the tax base so we can have decent social provision in the future. If we have risks such as corporation tax, let us ensure that our tax base is broad enough to endure.

We look forward to seeing Deputy Howlin's proposals. I am sure they will be assessed before final decisions are made from a Government perspective. The Deputy seems to be making accusations that we are not focusing enough on expenditure in areas such as childcare. He should look at the increase in spending on childcare we committed last year and wait and see what will be announced next week. We are talking about spending €3.5 billion more next year than we will spend this year.

Most of that spending is due to demographics.

Deputy Howlin is calling for more expenditure. We are advocating for a modest package for middle income earners-----

One third of workers will not be affected.

------who are moving into the higher tax bracket at very modest incomes, in a way that is consistent with the measures implemented last year. That is what is called balance. We cannot continue to ask the same people to foot the tax bill for the increased spend we hope to deliver. We need a balanced budget which recognises the pressures middle income earners are under and the responsibilities on the Government in delivering an increased spend to alleviate poverty and provide the social supports we must provide. We got the balance right in the last budget and will endeavour to do the same next week.