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22 February 2001 Edition

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McCreevy strikes again

ROBBIE MacGABHANN dicusses Dublin Finance minister Charlie McCreevy's latest financial strokes, all weighted significantly against the low paid

What is it about Charlie McCreevy? Just when you think he might be lying low and perhaps licking his wounds or learning from experience he bounds forward and strikes back. Last week's debacle of being censured by the EU Commission is just one case in point. McCreevy shrugged off this bruising and damaging encounter and walked straight into another.

For the Irish worker the negative aspect of McCreevy striking back is that when he takes action it is usually to line the pockets of the wealthy at the expense of the rest of the public.

Late last week, fresh from Brussels, Minster McCreevy was back in Dublin to launch the 2001 Finance Bill. This annual piece of legislation is the natural consequence of the previous year's budget and usually contains the enabling pieces of legislation to make the budget provisions a reality.

The gap of almost three months leaves enough time to either ride out whatever negative comments there were about the tax and financial provisions at budget time and also leaves ministers with a bit of leeway to tinker with the more crowd pleasing aspects of the budget proposals.

This year's finance bill includes two early Easter eggs for the high earners and wealthy in 26-County society. The provisions on Capital Gains Tax (CGT) and the new Special Incentives Saving Scheme will benefit the `haves' in our society much more than the `have nots'.

Cutting CGT is nothing new to McCreevy. He halved the tax from 40% to 20% in his early years in office. This is a tax on people who own assets that accrue value. The change in value, called the capital gains, between purchase and sale is taxed.

One particular asset that has accrued huge increases in value in recent years is land zoned for development, especially housing. An added dimension to this increase in land values was the belief that many developers and house builders in Dublin had been accruing land banks over the last ten years or more. In a period when there was huge demand for houses, these developers had been slowly drip feeding development land onto the housing market to capitalise on ever increasing house prices and ever greater profits for them.

The coalition government had proposed to remedy this problem by imposing a 60% capital gains tax on any land designated for residential development. The tax would not come into force until April 2002. This would give those holding the land over a year to sell it, reap the benefits of a significant, sorry huge, increase in value and only pay 20% tax on the profit.

This would expand the amount of land available for building into the market and help increase the amount of houses built while also leading to a slowdown in house price rises. Now all land sales will only incur a 20% CGT no matter when they are sold.

The idea for the tax had originally come from the first Bacon report on the housing crisis commissioned by the government. There was no need to implement the proposal, said Minister McCreevy, as the threat of the tax was enough. There was enough building land now coming on stream.

The decision has been criticised by the Economic and Social Research Institute while Martin Walsh, Head of Lending at the EBS, believes that there has been only been a small increase in zoned building land coming onto the market.

Surely it is too early to tell and what was there to lose from having the tax on the statute book?

McCreevy's other trick this week was to announce a new saving scheme where if you save from £10 to £200 a month in a special savings scheme the government will add in an extra 25% of the value of your monthly savings. At the end of a five-year period you pay tax of 23% on the interest, while getting your lump sum, the 25% kick back from the government and of course the rest of the interest on your savings.

The idea behind this scheme is to draw some of the consumer spending power out of the economy. However it will only benefit those who have money to save. There are literally tens of thousands of Irish families subsisting on low wages and welfare supplements to whom the whole notion of saving is a pipe dream. McCreevy's scheme is another knock back to the low paid.

Low paid workers do not benefit from mortgage relief, or private pension relief, or VHI tax relief, or low CGT, and now they won't benefit from the new special incentives saving scheme. How many of them though will have to pay the new spate of service charges being introduced around the state?

Once again Charlie McCreevy has shown that it really is one law for the rich.

MacManus appointed Euro spokesperson

Mayor of Sligo, Sean MacManus, has been appointed Sinn Féin's spokesperson on European Affairs, including neutrality. Aengus Ó Snodaigh, party representative in Dublin South Central, has been appointed Campaign Director on the Treaty of Nice referendum.

MacManus said: ``The Nice Treaty will entirely change the economic, political and military face of Europe by moving us closer to an EU super state.

``It is time for the government to come clean on the role of the EU in Irish affairs and hold a referendum on the Treaty of Nice and the issue of Irish neutrality.''

ESB blackouts

Power cuts could be coming to the 26 Counties. The ESB has warned that the electricity network will have to operate without a safe margin of reserve capacity by the end of the year. The reason behind the potential blackouts is the failure to build new power stations over the last few years of rapid economic growth.

Now the ESB believes that a £500 million investment is needed, but EU demands for `liberalisation', privatisation to you and me, mean that no new power stations will be completed until 2003.

It seems that privatisation plans have begun to damage the state's electricity infrastructure even before it has been sold off.

Central Bank

Charlie McCreevy and Mary Harney, the coalition's dynamic duo, announced a new central bank and financial services authority this week. Harney described it as a ``radical and innovative'' structure. It is designed to protect consumers' interests.

Maybe it hasn't occurred to our superheroes that the best way to protect consumer interests in the banking sector would be for the state to own and run a vibrant public sector bank where the people get the profits, but maybe that's too obvious a path for the free market crusaders.

Wage claims

Claims for higher wages are often dismissed on the basis that we have to protect our international competitiveness. This threat has been used regularly to deny Irish workers adequate wages.

How does it square though with a new Pay in Europe report that shows wages in the 26 Counties are now the 13th highest in Europe compared to 8th highest last year?

An Phoblacht
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Dublin 1