Finance Bill, 1970: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

We are now again discussing the record taxation imposed in this Finance Bill. Despite the promises made by Fianna Fáil so often in the past to reduce taxation, the people are now being ground down by increased and increasing taxation both national and local. A dwindling population is being asked this year to foot a bill of £450 million for the national Exchequer plus another £50 million in local taxation, making £500 million in all being imposed on the people by the Government which down through the years, especially when they were in Opposition, promised to reduce taxation.

Indeed, the present Fianna Fáil Government are like all Fianna Fáil Governments. With sponge-like efficiency they suck money from all our people. It can truthfully be said that the cruel taxation in this Finance Bill is imposing an additional burden of £20 million on an already over-taxed community. Turnover tax has been increased from 2½ per cent to 5 per cent. Despite statements made by Fianna Fáil in the past about their concern for the poor, this taxation falls on food, fuel, clothes and all the necessaries of life.

Immediately after the Budget was introduced, we pointed out that it would increase prices by from 12 to 15 per cent. Now I think our estimate was a bit low because the cost of insurance was increased by 17½-20 per cent and this morning, due to increased wages brought about by the increased turnover tax, the price of newspapers was increased by 25-33 per cent.

The increase in the turnover tax has led to an increase in the cost of living which affects every housewife in the country. CIE bus fares have been increased and this affects the workers in the city and throughout the country. The price of gas has increased. Radio and television licence fees have been increased by 20 per cent. All these increases are due to gross negligence on the part of an incompetent, arrogant and, we may say, corrupt Government.

The taxation proposals in the Finance Bill are an extraordinary conglomeration of imposts throughout the social range. If one were to list all the taxes and describe them as a system conceived in the Egypt of the Pharaohs, that would be fairly credible. It is inconceivable that any streamlined modern nation could hope to achieve anything under such a dead-weight of duties, taxes and levies. Each Minister for Finance seems to be inclined to follow the same well-worn path.

In the interests of efficiency it is time that we tabulated the cost of collection of the multitude of taxes. We should make a start towards bringing our system of taxation into line with the taxation system in the EEC. Instead of doubling the turnover tax an effort should have been made in the Budget to prepare the country for EEC entry by, for example, the gradual introduction of an added value tax. There is need for a restructuring and a condensation of our taxation system. Now is the time for the Minister to make a start.

There is nothing so confusing in an economy as a diversity of taxes affecting every conceivable activity of society as is the case here. The cost of collecting this multitude of taxes is very high. The most enduring monument any Minister for Finance might aspire to leave behind him would be a rationalisation of taxes, a diminution in their numbers, and a system of operation showing clearly their effects on the economy.

There is an old saying that a new broom sweeps clean and we are entitled to ask Deputy Colley what he, as the present Minister for Finance, is doing in relation to our financial structure to prepare us for entry into the EEC? We all know that after a marathon negotiating session in Brussels the Six reached agreement on how to finance the Community. These decisions will affect us when we enter the EEC. They ensure that after 1975 the Community will have its own revenue independent of national contributions. A complex formula was evolved whereby the Six will gradually pay into a common fund all customs duties on imports from non-member countries. They also agreed that part of the revenue from the added value tax to be levied in the Community after 1972 will be paid into this fund. They further agreed that the levies on food imports which they already pay will be put into the common farm fund. Those decisions are important to all applicant countries, especially Ireland, with our complex system of taxes. We are entitled to ask the Minister what he is doing about our financial system to prepare us for entry into the Community.

When looking at the European situation today we have to admit that the overall economic position has improved but it leaves no room for complacency. I believe care is needed in planning our national investments and our financial system. There is no scope for extravagance in Government taxation but we have had this for a number of years despite the promises made by Fianna Fáil in the past. It is time the Government took the people into their confidence and told them the truth. They were fooled before the general election in 1965 and they were fooled again last year about our financial position. According to Fianna Fáil we are always around the corner, we are always breasting the hill but financially we never seem to be able to get across it.

This country has had three bouts of stop-go policy from Fianna Fáil in the past ten years. That has been very bad for the country because what is needed today is stability in prices and stability in taxation so that industrialists and farmers can plan for the difficult times which will lie ahead when we join the EEC. Having listened to the Minister for Finance answer questions in the House both yesterday and today I think Fianna Fáil are about to replace the mink wrap they produced last year to win the general election with a hair shirt with bristles on it. It is only right to say that as long as Fianna Fáil misgovernment continues there is no end in sight to the unpopular measures which they, or some other Government, may have to take to avoid the downhill road towards bankruptcy.

I claim that the Government, fighting and squabbling among themselves, are more interested in keeping themselves in power than they are in looking after the economy. It is a case of Nero fiddling while Rome burns. They seem to be completely engaged in trying to keep together and not letting the boat sink. The people are interested in the financial stability and the future of this country. The time has come when the Government should devote more of their time and energy to putting the economy on the proper road. I am afraid there will be a downhill rush towards bankruptcy if the Government do not do something to right the economy. We all know the Government have made many fatal mistakes in the past few years—I shall not deal with those at the present time—but they have made fatal mistakes about our economy by telling the people that they have never had it so good. We know they painted those rosy pictures in order to get themselves back into power. The moment they were returned to power things changed. This has happened on many occasions under Fianna Fáil.

Because Fianna Fáil do not have their priorities right there are two built-in weaknesses evident in every Fianna Fáil period of expansion. The first is the effect of the boom on our balance of payments position and the second is the problem of incomes and inflation. The danger signals are already flashing in respect of both. The Minister for Health, Deputy Childers, speaks about inflation at every opportunity he can, but other members of the Government appear to be silent about our balance of payments position. Certainly the signals are red; they are danger signals.

The Chair would point out to the Deputy that this is not an economic debate on which we might discuss bankruptcy, prices and so on.

Yes, but we are asking the people to subscribe this £450 million because the Government have not done their duty down through the years. My argument is that if the Government had read the signs in time the people would not now be called upon to bear this huge burden. The aim of every Government should be to increase exports by their financial policy in order to provide a larger national cake so that all sections of our community, through less taxation, could get bigger slices of that larger national cake. This is only possible through good government, less taxation and voluntarily getting management, workers and all concerned to co-operate with each other.

The danger signals were there for the Government to read. In 1968 we had a £52 million deficit in our balance of payments; in 1969 it was £60 million; and this year it is expected to be £90 million. We are entitled to ask how long the Government can go on like this. As far as our balance of payments position is concerned, while exports have increased reasonably well imports are now beginning to rise much more sharply than exports. I think the nation will have to pay a further price for the Government's general election Budget which was simply an election gambit. Prices are rising every month and, in the words of the Tánaiste, inflation is rampant with the result that the rich are becoming richer and the poor poorer and speculators and racketeers can make money.

What economic forecasts are at the Taoiseach's disposal when the situation can so alter from year to year? If we believe what Fianna Fáil tell us the situation certainly has altered. Last March we had gloom, despondency and despair and an appeal from the then Minister for Finance, Deputy Haughey, to tighten our belts. Workers were asked to work harder and not to make demands. Ministers were to accept a 14 per cent cut in salary in the national interest. I think the Taoiseach and the then Minister for Finance went on television and radio to make this appeal. Yet, two months afterwards they completely changed horses crossing the stream—there is no joke intended; they did not fall off. In May 1969 we had an inflationary Budget, the Government completely ignoring everything they had said two months earlier.

The people are entitled to stable Government but I suppose we cannot expect that at present. The people should not be fooled by the Government as they have been fooled in the past by foolish promises. Many people are worried about the huge national debt, about recent price increases and other increases which are pricing our exports out of overseas markets. Other people are annoyed about the demand for a shorter working week and the fact that many people are not prepared to give an honest day's work for an honest day's pay. That mentality is appearing in this country. I do not know who or what is to blame for it.

Fianna Fáil.

Perhaps, we should take a lesson from countries like Germany which was humiliated and on its knees after the war but which today is one of the richest countries and largest exporters in the world. I think that was done through efficiency and hard work by all concerned, the lead having been given by management. Neither the Taoiseach nor any Minister has stated bluntly the full facts of our present economic situation. Only one member of the Government mentioned it, the Tánaiste. We are experiencing an inflationary situation which, if not arrested by the combined efforts of the Government and the entire community, may easily assume crisis proportions. For too long the Taoiseach was attempting to coat an unpalatable pill with sugar. If we are to avoid increasing taxation every year to create a bigger national cake we must have co-operation between farmers, industry and workers. The Government should remember that the fundamentals of national economy are no different from personal household or business economy. The same rules apply and cannot be broken with impunity. The rake's progress of buying more than we have the means to pay for has an inevitable end. We seem to be going in that direction and we are entitled to ask what the Minister for Finance intends to do about it.

We are buying too much abroad and selling too little and that is our major problem. The high standard of living and high pay packets to which we all believe our people are entitled depend on our exporting more than we import. This we are not doing today. It is, therefore, the duty of the Government to bring about stability and not to place any further burden on our exporters, farmers or industrialists or any other section. Most of our ills are due to the Government's inflationary policy blindly pursued in last year's general election and in the Budget of 1969 in order to win the election. In fact, the Government have pursued an openly inflationary policy for the past five or six years. The evils that would ensure were pointed out on many occasions on this side of the House but the warnings were disregarded.

Small shopkeepers, business people and small farmers and those living on fixed incomes are heavily and unfairly penalised by the turnover tax which has now been increased to 5 per cent. The Government are making a grievous error in believing that a person's taxable capacity can be measured by the fact that he can find the money required. Rates are a good example. If a small farmer is unable to pay his rates he may sell cattle in order to do so but that is bad for the economy. The shopkeepers are unpaid tax collectors at present. The present economic conditions, of an ever-rising cost of living, a bank strike and various other strikes, delay and uncertainty for business, industry and construction projects, all emphasise the need for a properly planned economy and a social programme and, above all, an incomes policy. We have no proper Government planning of capital schemes and no proper order of priorities. It is time the Government made an extra effort to produce results in this direction.

It is a serious thing for our workers that we are pricing ourselves out of the market. It is due to the increased taxation imposed in this Finance Bill, to the fact that people are being asked to pay £450 million this year. If this policy continues our industries will not be able to hold their own even in the Irish market when tariffs are almost abolished in the next year or two. If that happens we are on the road to economic disaster. It is time we had a national campaign to bring this warning home to everybody. Such a campaign should be launched immediately; otherwise we shall be slowly but surely committing hara-kiri. People in business in this city will tell you today that many of our products are priced out of the Irish market. It is the Government's duty to give a lead and to control the economy, balancing one factor against another. Only the Government know all the facts about our economy and it is their duty to help the people to get full advantage from the taxation imposed in the present Budget.

The more we look at the history of the past few months the more we realise that the Government are in chaos and do not seem to be able to give the lead required. If the economy is to remain viable in the years ahead, the difficult years ahead when we enter the EEC, the Government must lead. It must persuade employers and, indeed, unions to accept changes in their own and in the national interest. We can no longer afford to allow irresponsibility to masquerade as an exercise in democratic liberty. If the ordinary household lives within its resources it prospers. It is likewise with the nation; if it lives beyond its resources it is in a parlous situation, as we are today.

The greatest danger facing the economy is that we have not a Taoiseach or a Government firmly in power. The Government's mismanagement is directly responsible for a great many of our economic problems. It is responsible for this huge impost of £450 million taxation on our people. This decline in our situation was caused by a deliberate decision to place party interests above national needs. The consequences of this reckless decision are now a cause of concern to certain members of the Government if not to all members. It should be pointed out to the Minister for Finance and to the Government that the people are concerned, that we in the Opposition are gravely concerned about economic and social conditions in Ireland today and are completely dissatisfied with the Government's handling of our affairs. If Fianna Fáil are to speak for Ireland in our negotiations for EEC membership, then their tarnished authority needs to be refurbished by an appeal to the people. If they cannot secure that mandate, then the right to speak for the people must pass to others.

Our present financial position is due to the fact that Ministers did not pay heed to the state of the economy. We now know they were engaged in other affairs. The Fianna Fáil Cabinet is squabbling; the Fianna Fáil Party is divided. What we want is an administration in which the people can have faith. We urgently need a reduction of wasteful Government expenditure. We certainly need reform of our archaic taxation system, placing more emphasis on saving, on increasing exports and on baking a greater national cake.

The Dáil have been presented with many Finance Bills in the past but I personally do not know of any Finance Bill which was of such a lazy, indolent character as this measure. In the past some effort was made to tax luxury goods. In this measure there is simply one device, the device of increasing turnover tax from 2½ per cent to 5 per cent, with no endeavour to place the burden of taxation on the shoulders of those best able to bear it, or to ensure some semblance of justice in the matter of taxation.

Any Minister or Government should appreciate that to double turnover tax was to throw an incendiary bomb into an already highly explosive situation. At a time when workers were being asked to show restraint in respect of wage demands, this was a most irresponsible act and undid all the good which responsible trade union officials had achieved in inculcating into their members a sense of responsibility and retraint.

The deceit of the Budget was appalling. There was the pretence that to increase social welfare benefits was sufficient to salve the conscience of the Government. There was the pretence that nothing had been increased in the Budget, and then the shock and dismay a few days afterwards when all the essentials of life, all the commodities and utensils one has to use every day, were increased out of all proportion, and these increases are continuing week in and week out. Our price control system has been an obvious failure. There is no one to cry stop in respect of price increases.

The result is that in the past 18 months there has been an increase of 16 per cent in the price of foodstuffs alone. The wage increases which have been secured in the twelfth round are being rapidly eroded, and the worker cannot be blamed for looking to another round to try to maintain living standards. The twelfth round wage increase averaged £3 10s to £4 a week and by various devices of direct and indirect taxation these increases were quickly dissipated. Before the worker took home his wage packet there were deductions of 7s in the £ made in respect of income tax. There were also increases in his social welfare contributions. Because of the application of the differential or graded rent system, a further one-seventh of that increase had to be handed over to the rent man. Between these three devices almost 50 per cent of the wage increase disappeared.

The unfortunate housewife then had to go in some trepidation to the grocer's shop where she found that not only had goods been increased through the turnover tax but they had been increased by 7½ per cent, 10 per cent or 12 per cent. There was no one to hinder anyone from charging virtually what he liked in respect of foodstuffs, drink, vegetables, tobacco, petrol, footwear, clothing and, indeed, everything. In such a situation instead of there being any appreciable improvement in living standards the living standards of working-class people have worsened especially in recent months. Because of high prices, of wages chasing prices and prices chasing wages in a vicious circle, this country has become an intolerable place for ordinary working-class families to live in. Each pay day presents the housewife with a shocking problem, the problem of trying to make ends meet.

While the Minister for Finance is not responsible for introducing this Budget, this utterly lazy and irresponsible Budget, he is very largely responsible—and great blame attaches to him for this—for allowing this grave inflationary situation to occur and for his obvious condoning of price increases without making any effective intervention. As the then Minister for Industry and Commerce, Deputy George Colley seemed to have been very largely concerned with the sanctity of the profit motive. Certainly he gave full rein and liberty to the profiteers, the exploiters and the extortioners to operate in the country and to rob the ordinary people. He must know that he has made life miserable for countless thousands of families. Leaving aside the economic situation, and a standing army of some 70,000 unemployed. I want to assert that many families have given up trying to live or to exist here even with frugal standards.

In my constituency I have had many young men and girls coming to me for references so that they can go abroad but, even apart from that, I have witnessed the sad spectatcle of whole families in my town, and in other towns in my constituency, going to England. These people told me that they had given up in despair because of the prospect that faced them of not only trying to live in the country but of trying to rear their children in this kind of economic situation. The weight of income tax and the weight of direct and indirect taxation is higher in this country than in any other country in western Europe. A renowned economist who has carried out very considerable research work into the matter has assured me that in regard to income tax alone the ordinary worker, say in the £1,000 a year bracket, is paying six times more in income tax now than he did in 1939.

We have strife in the land in the north-eastern territory of the country; we have political crises in the south. We are not going to advert to these things. All I can say is that the Fianna Fáil Cabinet have been so taken up with matters of internal strife that they have been unable to devote their time and energies to the more important problem of grappling effectively with the state of our economy. I know of no other reason why we should have such a display of utter disregard for the manner in which the country is being run into political and economic chaos.

In these circumstances it is no wonder that there is a yawning gap in our balance of payments, a serious inflationary tendency, spiralling costs and a fall-away in tourism this year. This fall-away in tourism is attributable in very large measure to the high cost of living in this country and not to the political crisis north or south of the border. The way in which the Government have extracted revenue from alleged luxuries—the smoke and drink —has a bad effect on tourism. Tourists pay particular regard to these things. The costs of these items impress or depress them. Tourists have been very depresed by the price of drink, cigaretes, tobacco and petrol in this country. That is why so many tourists are refusing to return to this country.

In speaking on the Finance Bill I wish to refer to income tax. We are not ungrateful for the very minor reliefs provided in the Bill, but they fall far short of what is required for the evolution of a fair income tax code. None of us objects to paying income tax. We realise that income tax is an essential feature of our economy and is the means of raising revenue for the maintenance of essential services. We are entitled to maintain that income tax should be apportioned fairly. I contend that the working-class people are the main producers of the money provided in income tax. They labour under terrible difficulty under the existing income tax code. Income tax is becoming an intolerable burden on them and the reliefs provided in the Bill do not ease the burden appreciably.

I had the responsibility of attending an important trade union conference recently. I was very surprised at the indignation expressed there in respect of the income tax code, especially PAYE, which systematically, week in and week out, extracts large amounts of money from the wages of working-class people. It has been mentioned many times that the high rate of income tax is having a bad effect on incentive schemes. To my knowledge, it is disrupting many excellent incentive schemes designed to achieve greater productivity. Men and women cannot be expected to work hard and to avail of the incentive schemes if, at the end of the week, they have to hand over their hard-earned money to the income tax collector.

Many of us supported the idea of PAYE. I was an enthusiastic supporter of the idea because I felt it was desirable that there should be a system whereby working-class people would pay their income tax on a weekly basis. They would know their entitlement to earned income allowance. They would know the amount to be extracted weekly from their wages. It would be, relatively, painless extraction. It would avoid the situation whereby annual demands were made on individual persons for large amounts of money which they were unable to pay. These demands caused great embarrassment and hardship because large amounts of income tax had to be paid over a relatively short period of time. Watching the operation of PAYE over the past ten years, we have come to the conclusion that the whole intention has been more than frustrated by the Government. The PAYE system had been operating for upwards of eight years without any appreciable amendment. No regard was had to the steep increase in the cost of living and the fall in the value of money. The rate of personal allowances was maintained; the rate of marriage allowances was maintained; there was no change in the allowance for dependent relatives. This was clearly unfair.

The proposals in the Finance Bill do nothing to remove the flagrant anomalies in the application of PAYE. There are no allowances for essential and normal expenses such as the provision of a car. A car is essential nowadays to get to and from work. It is costly to purchase and maintain a car. In the higher executive bracket—the mohair-suited class—there are travel allowances under the income tax code. The working classes get no such allowance. This is unfair. There is heavy outlay, especially on hire purchase terms, for motor cycles, or scooters. The Minister should take cognisance of the heavy expenditure by granting an appropriate allowances for travel to and from work.

There is no allowance under the income tax code in respect of a housekeeper employed by a single man or a widower. Unless the housekeeper is engaged for the purpose of caring for children, no allowance is made under the income tax code in respect of her wages. I am aware of an acute case of hardship where a father, who is a widower, and a son are paying a lady £5 a week to care for them in respect of their washing, cleaning and cooking. They have informed the Revenue Commissioners about this and have substantiated this fact, but still no housekeeper allowance was granted to them because the care of children was not involved. This is patently unjust.

No lodging allowance is available under the income tax code. There are cases where people, because of the nature of their work, are obliged to rent flats or stay in lodgings and, at the same time, maintain their homes. I know of people who work for State companies who have to do this, which means there is a heavy burden of expense on them. However, no allowance is made in respect of such expenditure.

There is the anomaly that the agricultural worker must pay income tax for every £ he earns in excess of £6 10s or £7 per week. He is expected to be full of vitality and enthusiasm, to work long hours every day of the week. In fact, he is the main producer of the agricultural wealth of this country. He is burdened with this heavy taxation and gets no concession while, at the same time, his employer is exempt from payment of tax. In a situation where people with relatively small pensions, such as retired county council workers and the like, are obliged to pay tax I do not think a case can be made for exempting anyone else who can and should pay tax.

There are many people who contrive to escape the net of PAYE. There are the professional classes who can earn by way of a fee for an hour's professional work as much money as the ordinary worker will get for a week's work. It is difficult for the Revenue Commissioners to assess precisely the large amounts of money such people earn. There are other categories in the community who go scotfree as regards payment of tax. If all people were obliged to pay tax in accordance with their earnings the overall burden would be much less and would be applied equitably.

The Minister is now seeking to track down certain categories for payment of tax. He mentions the sub-contractor, the person whom he calls "the lumper". While I like to conform to good trade unionism and have been concerned about the practice of "lumping" or sub-contracting for some time, I say to the Minister that these are not the only people who have been getting away with non-payment of tax. There are many other categories of persons who should have been mentioned by the Minister and it is significant that the persons referred to here are the ordinary workers of the trades group in the building industry. If they were getting some kind of concession, it must be realised that they have made a tremendous contribution to the economy and to the solution of one of our greatest social evils, namely, the housing problem. While I contend that all who can should pay income tax, the fact that this category is specifically mentioned will not help the housing drive. It may result in many of the people concerned staying in England, where they have gone as a result of the 21-week cement strike. Even if they come home, this will have the effect of increasing still further the cost of housing.

I mentioned the anomaly of the farm labourer paying income tax. In view of the great scarcity of farm labour in this country we should do something to encourage these people to stay on the land, especially the more expert of them, and I would not thank the Minister for including in this Bill some kind of bounty, either by way of grant, subsidy or pension scheme, for the farm labourers. By reason of their magnificent contribution to Irish agriculture, in justice they should share in the colossal subsidy provided for agriculture and ways and means should be found to assist them. When grants are made available for cow byres, pig houses, the calf heifer scheme and so on, we should not forget the problems involved for the agricultural workers and we should see to it that they share in the State aid lavished on agriculture.

In a situation where we need urgently to increase production, I am asking the Minister to have regard to the reliefs needed in respect of PAYE so that Irish workers may be encouraged to give of their best skills and energy and to utilise all the incentive schemes available to increase productivity. If the Government show a recognition of their problem, the working class in this country will respond and we shall have the upsurge in effort and productivity we all desire.

The Finance Bill makes provision for an increase in turnover tax from 2½ per cent to 5 per cent. However, that simple device written in by a simple stroke of the pen has done untold harm and has had serious repercussions. It has given two Irish Ministers for Finance the lazy indolent way out. We now have a situation whereby no serious effort is being made by the Irish Government to ensure that taxation falls squarely on the shoulders of those best able to bear it. No deep thought or consideration has been given to other ways of raising required revenue.

When turnover tax was first introduced, Deputy Brian Lenihan stated and has stated several times since then that this tax would only apply to luxury goods such as fur coats, jewellery and costly limousines but we find that this vicious system of taxation applies to everything with the rather ironic exception that while it applies to medicines for Christians medicines for animals are exempted. Unless we have responsibility once more in government. I contend that our country is heading for serious disaster. I shall not advert to matters appertaining to the EEC because we shall have an opportunity of speaking on that matter but if some regard is not had to the present situation in respect of the cost of living, it would be far better than we be taken over by some outside organisation that would deal with matters affecting our people in a more responsible and a more humane and Christian fashion.

I think it was Edmund Burke who said that no man was wise enough to tax and to please at the same time. This is very true because no matter what form of taxation is brought in, it will be criticised. There is nothing wrong with that but what I find hypocritical is that a member of the Labour Party, the alleged socialist party, should come in there and criticise the Budget because of its increased taxation while not once, within my hearing at any rate, referring to the benefits that were granted to the needy sections of our people.

I said you salved your conscience with a pittance to social welfare beneficiaries.

My conscience and the conscience of the Government are clear on this but I do not think the Deputy's conscience is clear. If it is, it is an indication of faulty thinking. For as long as Fianna Fáil are in power and have been in power they have always aimed at social justice through the application of prudent policy. This Budget is in keeping with that policy. The Government had the courage to increase taxation so as to raise the £20 million that would be paid to those most in need, to the widow, the retarded child and the family generally. Therefore, there is no point in a Labour speaker talking about the Budget while not mentioning the benefits that have accrued from that Budget.

On a point of order, there is nothing in the Bill pertaining to social welfare benefits.

The Deputy must not have read the Bill.

I understand that a Social Welfare Bill is to be introduced.

The speaker on the other side has talked about everything under the sun except the benefits under the Budget.

Through the Chair, that is understandable. Any Government who claim to be conscious of the needs of the less well off sections of the community must direct their whole policy towards relieving these sections. Deputy Treacy said he understood that the turnover tax would be placed on fur coats and limousines. Relatively speaking, very few fur coats or limousines are sold so that it would not pay us very well to tax only those goods.

It was Deputy Brian Lenihan who said that.

Since the Deputy is so anxious about what the Minister for Transport and Power said, perhaps he will tell us of some other means by which we could have raised £20 million without increasing turnover tax? There is no good talking in an airy-fairy fashion about raising revenue without increasing taxation. We must face the facts of economics. Even in the socialist countries where the word "profit" is a dirty word, the laws of economics must be obeyed and there must be taxes in order to give relief in other areas. The Labour Party must face this fact. This was all trotted out before the last election but we saw the result.

Would the Deputy like to have it trotted out again?

Any time the Deputy wishes.

In the confident hope of the moment.

I recall the time when, after balancing the Budget, the people on my left managed by tremendous economic diligence, to give 10d a week to the old age pensioners but Fianna Fáil, being a prudent Government, can give benefits which, while they are not adequate, are generous. It is only when our GNP is great enough that we will be able to give these people what we would wish to give.

Deputy Treacy mentioned "lumpers". I do not know whether he is for or against the building trade. Why are they there? They are there because there is over-employment in the building trade. Deputy Treacy talked about emigration. There is certainly no emigration of building workers. One cannot get enough of them. Indeed, we had to launch a drive in Britain to bring back building workers.

The building industry has been static for the last six months.

I do not know whether or not Deputy Treacy is serious. Building has been static because there was a strike. There was a hold-up in cement supplies. We have a very buoyant building industry. I regard that industry as the national barometer: if the building industry is doing well the economy is doing well. There is a tremendous demand for houses. Thanks to Government policy, we have been able to finance the building drive. We have ensured that there is employment for the workers and houses for our people. If we did not have a stable Government and a buoyant economy we could not have done these things. There is full employment in the building trade. So great is the employment that I do not believe the building trade could take on any more work.

I have some reservations about the increased allowance in the case of married women who go out to work. I appreciate the fact that some married women, unfortunately, have to go out to work. I should like to see every married woman staying at home. In the affluent countries wives go out to work for pin money, and their going out to work has created a dreadful social problem of juvenile delinquency. We should not blindly follow the example set by more affluent countries. It would be much better to ensure that the father of a family had an adequate wage to ensure for himself and his family a proper standard of living. There should be no need for a wife and mother to go out to work to bring in more money. There are homes where wives must work to augment their husband's earnings. Of course, widows must go out to work. Again, this is something we should strive to put an end to; we should have a proper social system which would enable a widow to rear her family without her having to go out to work. We should direct our thinking towards that rather than towards giving extra relief for married women who work.

There is no need for many women to be unemployed. Every day there are advertisements for women workers. There is a shortage of female labour and, from that point of view, I can see the wisdom of the Minister's decision to increase the allowance. In so far as it will attract women to industry it is a good thing but, taking the situation over all, I do not think it is desirable. Perhaps, next year the Minister might bear this in mind in preparing his Budget and remedy the situation by increasing the income taxation relief given to the husband.

The Minister had to find the money for increased social welfare benefits and benefits to agriculture. He did that in the best possible way. One Opposition speaker tried to give an alternate method of raising the £20 million required; he got as far as £4 million and then he stopped. Taxation must be increased to provide for increased benefits. No one likes taxation.

Next year I should like the Minister to extend to urban areas a relief given to rural areas two or three years ago when certain types of agricultural land were derated. There are urban dwellers —widows and others—who find rates an intolerable burden. These people should get the same relief that the small farmer gets. That would be equity.

Do not come across the Shannon with that policy.

Fianna Fáil policy is just as successful west of the Shannon as it is east of the Shannon.

More emigration.

There are more on the dole over there.

My suggestion would be worth considering. The Minister might extend the relief given to the small farmer to certain types of urban dweller.

From the point of view of the arts, the Minister gave certain reliefs last year. I suggest our theatres should be subsidised. Under last year's Budget there was a fine imposed on certain office buildings. I do not know how that has worked. I suggest that the Minister in his next Budget might consider requiring the builder of an office block to pay a subsidy on a dwelling house in proportion to the number of square feet in the block. In Italy, and in other countries, a developer is required to have some kind of work of art incorporated in his office block. This helps the artist. In each new office block the artist has painted a picture or, if he is a sculptor, he has done some sculpture. Perhaps, I have a plebeian mind but I feel that housing is more important. Office developers would not feel the cost of paying for four or five houses to every office block, not merely beside the office block but in any part of the city or country. I am sure the developers in many cases would be delighted to do this. It would help the housing drive and would also allow the office block developers to play a full part in the provision of houses.

Finally, I want to compliment the Minister and the Government on the Budget proposals. I hope that some day the Opposition will explain to me how increased benefits can be given to the blind, the widows, children, the old people, how houses can be provided and how agriculture can be helped by higher subsidies without increased taxation. I said before that Edmund Burke once said that no man was wise enough to tax and to please at the same time. I hope the Opposition will get wise to the pitiful arguments they put forward here. I would ask the Labour Party especially, who are always talking about their concern for the old and the infirm, when they criticise the Budget to at least mention the benefits given in it.

There was no paper money at the time of Edmund Burke.

The recent consumer price index shows very clearly the inflationary effect of the Budget and the proposals included in the relevant sections of this Finance Bill will give statutory effect to those inflationary price changes which have been aggravated and increased by the increase in the turnover tax. When the increased in turnover tax was first announced in the Budget statement it was passed off by some commentators as not having any effect. They came to this conclusion after listening to the statement and being familiar with budgetary practice here over the years that when a specific item such as petrol, tobacco and beer, was taxed its price went up the following day. Those of us who appreciated the significance of the changes in the Budget expressed our concern at the time. The recent consumer price index indicates that there has been a very substantial rise in prices. Some of those increases, of course, were not caused solely by the Budget but a whole range of goods included in the consumer price index has been affected by it, particularly ordinary household items and those covered by the turnover tax which increased the rate from 2½ per cent to 5 per cent.

The method employed in increasing taxation had only one simple advantage to commend it to the Minister for Finance and the Government. It raked in at one swoop a substantially increased revenue yield but it ignored the precise warnings given by a variety of bodies, particularly by the NIEC on which is represented Government Departments, trade unions, employers' representatives and so on. Specific warnings were given against any action which would aggravate or increase consumer prices or in any way add to the inflationary situation.

Last week the Minister for Finance in the course of some observations on the debate on the White Paper on the EEC referred to the NIEC reports. One of the most notable features of those reports is the fact that they are virtually ignored by the Government. No effort has been made to put their recommendations in respect of the economy into operation. Those reports have been appearing over a number of years and have dealt with different aspects of the economy in general and occasionally with specific and special problems. Report No. 28 issued just before the Budget this year, adverted to certain special problems, particularly the need for a voluntary prices and incomes policy, the adoption of guidelines, the establishment of a new employer-employee body, a developed labour court, a fair trade commission and a prices and incomes committee to co-ordinate the work.

The report mentioned that it would take some time to operate those bodies. One obvious criticism is that if all those recommendations were put into operation there would likely be a multiplicity of bodies. Why do the public not take those recommendations seriously? They cannot be taken seriously because the Government ignore them. In April two specific statements were issued by the then Minister for Industry and Commerce. They were published in theIrish Press on the 14th April in one case and a few days earlier in the other. One referred to bread prices and said that a bread increase plea was being deferred. The other carried the headline “Standstill on beer prices. Colley to investigate”. Deputies recall—although many things have happened since and some Deputies' memories may be short—that this heading: “Standstill on beer prices” was published on the 14th April, which was polling day, as far as I remember, in the two by-elections which were then pending, but the immediate effect of this Budget was to increase the tax on bread, beer and petrol.

No one knows what happened to the investigation that was being undertaken. No announcement has been published of the results of that investigation or the action the Minister for Industry and Commerce took in regard to it. What is certain, however, is that the price of bread has increased, the price of beer has increased, the price of petrol has increased, the price of every item bought by any average householder has increased, not because, in these cases, of a change in that period of time in the import price levels, but because of the deliberate Government action that was taken through the Budget to raise the turnover tax by an additional 2½ per cent. That is the situation that has developed.

The public will look askance at governments urging that the NIEC reports be adopted when their own actions refute and deny the very recommendations made in these reports. This NIEC report that reviewed the economy in 1969 and the prospects for 1970 stated—and this is not Opposition propaganda; this is not some statement made by an Opposition spokesman—at paragraph 15:

The magnitude of the increases in consumer prices which could occur this year is alarming. If it materialised, it could seriously damage competitiveness and therefore put many existing jobs in jeopardy and erode one of the basic conditions for the future growth in output and employment.

It went on to say, and this is the really significant thing and this is the aspect of the matter that has given concern to Deputies and to social workers:

It could create new social tensions because many social categories could not be adequately insulated from its effects.

In other words, if the price of bread, beer, tobacco, medicines, if the price of every essential commodity that people have to buy, increases at the rate at which this publication said it could, the magnitude of the increases in consumer prices which could occur this year is alarming.

What is the first public information that would indicate the changes that have occurred in recent months? The group index numbers at mid-May, 1970 show that food at a base of 100 in mid-November, 1968, now stands at 116.3; alcoholic drinks, 117.7; tobacco, 108.6; clothing, 110.7; fuel and light, 111.4; housing, 112.2; durable household goods, 114.1; other goods, 115 and transport, 112.2; services and related expenditure, 112.5; The change between February of this year and May of this year reflects an increase of 4.5 points. These are the items that affect the ordinary household. Nobody suggests that they should entirely be left aside but, for the moment, exclude tobacco and exclude, to a considerable extent, some aspects of drink. In respect of food, clothing, fuel, light and household durables, we have a situation about which this commentary in the NIEC report expresses concern. It went on to express concern at the dangers that were likely to arise if wages and salaries and unit costs in this country increased to such an extent that our relative competitiveness with Britain—our main competitor— worsened. Comparing the consumer price rises it went on to say:

After two years unit wage costs had dropped here compared to Britain. In 1969 the indices published recently confirmed that the trend has been continued. In 1969 unit wage costs in Irish industry rose appreciably faster than in Britain.

It then compared, from the OECD economic indicators of March of this year, the percentage increase in unit wage costs in Irish mining and other manufacturing sectors and in roughly comparable sectors in certain European countries. These indicators showed, between the third quarter of 1968 to 1969, the following figures: in Ireland they rose by 11.53 per cent; United Kingdom, 3.45; France, 1.28; Germany, 1.91 and Italy, 7.45. So that, of the countries taken for the OECD economic indicators, our competitiveness relative to those countries had worsened. That is so in relation particularly to the country with which we do our largest volume of trade but involved also are the other countries mentioned.

The Minister for Industry and Commerce, in the course of his announcement earlier this year, said that prices were being investigated. We now see the results of that investigation and how hollow was the claim about the price surveillance policy and the action taken by the Department in respect of these items. But, in addition to that, a variety of other factors have increased substantially in price: bus fares; transport charges. One of the things that have been responsible but not entirely responsible for a worsening of the position is prices charged in hotels and restaurants. All of these have been aggravated by reason of the turnover tax. The community cannot believe the warnings and admonitions given by Ministers because Ministers themselves do not honour their own undertakings and have reneged on the statements made. Only two months ago it was publicly announced that price increases had been deferred; that a bread price increase had been deferred; that a standstill had been put on beer prices. So much has happened in two months that Deputies and the public may have forgotten that these two announcements were made on the eve of the then pending by-election.

Again, in respect of the recent rise in bus fares and train fares only portion of the cost is being borne at present. The remainder has been deferred, either to be met by an increased subsidy to CIE or to be passed on to the travelling public at a later date.

In that regard, it is time the House realised the completely unfair and inequitable system that applies in respect of the subsidy for school transport. At present children attending secondary schools outside the three mile limit get free transport. In other areas—this applies particularly to Dublin and to the areas adjacent to it, like Dún, Laoghaire—a number of children, who because of the overcrowding in schools are obliged to travel longer distances than might be necessary if they could get admission to the school nearest to them, have now found that because of the withdrawal of the subsidy the concession that was given of one-third of the adult fare has been abolished. Not merely are they paying more but the increase in respect of children is more than the increase in respect of adults. I have heard of cases in my constituency and elsewhere in the city where the adult fare was ninepence and was increased to tenpence and the concession for children was threepence and now the children's fare has gone up to five-pence. Some of the children who are not getting the concession have to attend the primary portion of a particular secondary school if they are ultimately to get places in that particular school. I believe this is an aspect of the effect of the change in the Budget that should be dealt with.

One of the problems that have arisen in respect of the tourist trade is the rise in prices here at a time when the British have restored the larger travel allowance. It should be made abundantly clear from this House and in whatever publicity statements can be made in the House that tourists will be welcome in this country, that they will be safe irrespective of what the irresponsible behaviour of either the Fianna Fáil Government or the Fianna Fáil Party may be, that there is no danger to tourists coming to this country, that the attractions here are as good as they have ever been and that every possible step that can be taken by hoteliers and guesthouse owners will be taken to encourage tourists to come here and to make their stay happy and contended. It is important for the whole economy to attract as many tourists as possible and to ensure that they are convinced that in coming here they will be welcome and safe. Undoubtedly the effect of the Budget changes, the increase in the cost of petrol, the effect of the turnover tax has raised prices in hotels and raised prices in respect of tourists as well as in respect of our own people.

I agree with the view that has been expressed that some conscious effort should be made to deal with the particular problem of those living on fixed incomes who got very little relief in the Budget. Some form of rates remission should be introduced because the present scheme of granting relief in respect of pensioners and others, as adopted by the local authorities, has not been a great success. Some specific scheme, comparable to the relief on agricultural land, in respect of small traders and others living on fixed incomes should be introduced. Small traders have to meet the enormous problems created for them not merely by competition from larger units such as supermarkets but also the particular personal problems created for them by the effect of the turnover tax.

One of the aspects that were dealt with in the NIEC report was the fact that, if policies that provided some form of regulating arrangements for a stable growth in money incomes, prices and costs were not adopted and if the growth rates which had prevailed and had manifested themselves in the indices they referred to, and which I have mentioned, continued here, then a number of problems would arise for this country and its balance of payments. They stated that the strain on the economy would be such that Irish exports could lose their buoyancy and if domestic inflation continued to such an extent that economic expansion was accompanied by rising external deficits and a cost and price level out of line with that which the economy could sustain, then stop-go policies would continue. They went on to say that this was, however, not inevitable, that it could be avoided by the operation of fiscal and monetary policies to create an economic climate in which the creation of an effective incomes and prices policy would become a manageable task.

These recommendations were ignored in the context of the taxation policy adopted in the Budget in which a blanket increase of what, in practice, has meant more than 2½ per cent over and above the existing tax was applied. When the turnover tax was initially introduced it was fixed at 2½ per cent. The universal experience at that time was that in virtually no instance was it as low as 2½ per cent and that the actual effect was substantially higher— a minimum of 3 per cent. At this time when the NIEC reports to which I have referred, when the Central Bank, when the Associated Chambers of Commerce, when trade union organisations, when every responsible organised group in the community had recommended specific action in regard to aspects of the economy, the policy adopted in the Budget was directly in conflict with and directly negative in its effects on the recommendations made by these organisations.

The effect of this is already shown in the very substantial rise in prices, the rise in the cost of things that I have mentioned and the cumulative effect of all these on the whole structure of the economy. The position is aggravated still further by specific instances of special increases in items such as insurance—not merely car insurance but insurance policies generally—in respect of items such as the substantial rise in the price of cement announced yesterday which must affect substantially building costs. As a result of action taken in the Budget a considerable price increase was placed on items the purchase of which cannot be postponed and this has substantially raised prices generally.

The specific items dealt with in the sections of the Finance Bill cover not merely the taxes introduced in the Budget but a number of other matters as well. I want at this stage to refer to some of them, although others will be dealt with in greater detail on Committee Stage.

One of the matters which was referred to in the course of this debate, and which was substantially altered to the detriment of people generally in the 1965 Finance Act, was the law relating to death duties. Under the change which was made in 1965, insurance policies taken out to deal with the problem of death duties were aggregated with the rest of the estate for the first time. A person liable for death duties was not then assessed on what it had been the practice in the past to assess him on but on an aggregation of the assets and the insurance policy.

So far as I can understand the position here—and this is a particularly complicated aspects of death duties and taxation generally—particularly rich people can avoid this in many ways. For one reason, if for no other, they can pay for legal and accountancy advice to enable them to make dispositions and so lighten to a certain extent its effectiveness. Death duties have to be considered from two angles. It is important that family concerns, whether they are farms or businesses, should be enabled to continue to operate. They are there not merely for the benefit of the individual family but also for the benefit of the nation.

We have slavishly adopted the system that operates in Britain in this regard with a slight modification in respect of children. A person who dies and leaves a widow only is in the same position here as in Britain. In every other country about which I have been able to get information allowance is made for the children or the family or the descendants of the person. In this country, as a result of the change that was made in 1965, death duties and an insurance policy to meet them are aggregated and duty is paid on the total of the whole value of the estate.

On the other aspect I think it would be an advantage if we had a system of death duties under which some arrangement could be made that would attract wealthy persons to this country. There is a general realisation now that any idea of soaking the rich or extracting from people who come here the maximum rate of death duties is not wise either nationally or otherwise. If we could attract to this country people who were prepared to come and reside here for one reason or another, bring their money and establish an industry or give employment in it or in projects like stud farms, there would be an advantage to the community. A system should be adopted under which some alleviation could be granted in respect of finance or capital brought in for development and a set-off allowed over a period of years in respect of death duties.

Alternatively, some arrangement should be adopted under which people who transferred their assets to this country would get some concession and, of course, the same provision should be allowed to apply to our own people. The advantages to the community and to the economy generally would be considerable. As I understand the position at the moment, there is a more favourable situation in respect of people of considerable wealth than in respect of the average farmer or businessman who wishes to make an arrangement to ensure that the business or farm will continue to operate without his family having to mortgage it or dispose of some of the assets to meet the demand which will fall due in respect of death duties.

The proposed change in section 19 dealing with what are known as "lumpers" in respect of contractors has already been referred to in this debate. I think it is generally agreed that if tax is being avoided in this way the matter should be dealt with. At the same time, the arrangement under which this system operates should be taken into account. It provides advantages not only for the people concerned but from the community point of view because it makes it possible to be more efficient and to have a pool of skills.

I understand that the British Finance Act allowed a respite of a period of a year for people in this business to make arrangements under which it would be possible for them not only to come to terms with the provisions of the Act but also to settle up their affairs. There might well be an advantage here. The announcement by the Minister for Labour that skilled workers in Britain were being sought and asked to return here for specially skilled traders and operations was referred to recently. I understand that one of the risks inherent in the present situation is that, if this section goes through as it stands, no respite is given and some of the skilled workers may find themselves disemployed and may actually emigrate.

The bulk of the building in this country is carried out by small builders and I think there is general recognition that the recent cement strike and the prevailing bank dispute created considerable difficulties for many of them. In many cases their financial positions were by no means adequate to meet the demands they had to meet, and many of them found it extremely difficult to carry on. I believe the small builders should be assisted as much as possible. They build houses as advantageously as is possible for them to do so for a great many people in the community. Particularly in a year in which we have had a protracted cement strike, a prolonged closing of the banks, consideration should be given to at least allowing a period or respite before the whole operation of the terms of section 19 is put into effect.

Section 19 deals with the relatively modern phenomenon of industrial estates. Factories have been constructed by developers at the Kill o' the Grange industrial estate, Dún Laoghaire. I know of one firm which holds a factory on a 200 year lease subject to a nominal rent plus a certain figure per year for estate maintenance. The building company from whom the occupiers hold the tenancy of the factory hold the freehold outright. Because the firm which occupies the factory acquired it on a long lease subject to a nominal ground rent they are deprived of the benefit of the retroactive amendment of the law which has now been effected. The industrial buildings allowance amounts to 20 per cent of expenditure on the construction of a factory, allowed in the year in which the expenditure is incurred. When this particular relief was originally introduced industrial estates to a great extent were unheard of and the fact that the allowances were restricted to amounts spent on construction caused no hardship because in almost all cases the firm constructing the building owned it. As the law stands at present the purchasers of what are known as readymade factories in industrial estates have been denied the allowance and the Revenue Commissioners have been obliged to insist that such purchases did not constitute expenditure on actual construction. While this may legally be the correct view it certainly is not in accordance with the spirit of the legislation which is aimed at the encouragement of industry generally. I propose to deal with this specific aspect of the legislation again on the Committee Stage.

There is a provision made under section 18—this section has to be taken with section 5—of the Finance Bill for schemes known as instalment saving schemes. I would like the Minister when he is replying to give us some idea of the type of schemes involved because as I understand it some of the schemes will be State schemes. Concern has been expressed that the schemes might be limited to State schemes and I would therefore like to hear from the Minister what type of schemes he has in mind. I should also like the Minister to indicate to whom representations in respect of the schemes should be made.

One of the arrangments which the revenue authorities operate is that where special cases of hardship arise the legal code is not strictly enforced to the extent that inspectors of taxes are allowed to administer it in a reasonable way. Special cases are often referred to the commissioner and experience has shown that in many cases a satisfactory solution can be found. This arrangement has resulted in the growth of a number of recognised, although unpublished, extra-statutory concessions. Because they are unpublished, some professional tax advisers are aware of them but others are not. It has been suggested to me that the practice adopted in Britain of publishing these extra-statutory concessions might also be adopted here.

The provision in respect of foreigners, to which I have referred, is particularly restricted. In Britain a system operates whereby in the case of a person who works full-time in a trade, profession, vocation, office or employment, provided that no part of that work is carried on within the United Kingdom, the question of whether or not the person is resident is decided without regard to the existence of a place of abode in Britain for his use. It has been suggested to me that the same procedure might be adopted here. Similar legislation would not result in any loss of revenue; it would in fact attract people in the same way as the recommendation in respect of death duties would.

Under the present law if a man effects a family income benefit policy and dies in the early years of that policy his widow will be faced with considerable estate duty liability and may be forced to commute part of the proceeds to pay the duty. It is desirable to amend legislation so that the proceeds of insurance or other policies would be exempt from estate duty but instead would be liable to income tax or surtax. This is a defect in the 1965 Act which has had a bad effect on the economy generally and should be amended as soon as possible.

Another aspect of this Bill that I want to mention is one I have dealt with here before but which has been highlighted by the recent announcement about the increased price of newspapers. About a year and a half ago the question was raised with the then Minister for Finance of the effect of the turnover tax and wholesale tax on newspapers and the adverse position these taxes put newspapers invis-à-vis other news media like television and radio. At that time the Dublin Newspaper Managers' Committee and the Provincial Newspapers Association made representation and had a meeting with the Minister for Finance. The recent announcement that the price of newspapers is to be increased brings this matter again to the forefront. The present taxation on newspapers and newsprint is most unfair. As I understand from the representations made by the associations this particular type of tax on newspapers is not applicable anywhere in Europe or in the United States. No matter how much people may be influenced by other news media the advantage of newspapers from the national point of view and also from the point of view of those directly and indirectly employed in the newspaper industry is very considerable.

I believe this tax is most unfair and that there is not, by any means, a large volume of revenue from it. The Minister for Finance should consult with the associations concerned, the proprietors of the newspapers, either the Dublin Managers' Committee or the Provincial Newspapers Association, concerning the effect of the turnover and wholesale tax and see if it is possible to devise a scheme that will more equitably take cognisance of the particular problems of newspapers and the very substantial increases in prices that are now being made and the general importance to the community of ensuring that newspapers are enabled to continue without the added burdens involved in this. Not merely is it a national advantage to have both daily and provincial papers, from the point of view of news and advertising and so on, but the employment provided in the industry is considerable. This problem was considered 18 months ago and nothing happened about it. Now with the increase in the turnover tax the position of the newspapers has further worsened.

In connection with the Finance Bill it may be appropriate to refer to the proposed retirement of the chairman of the Revenue Commissioners, Mr. Seán Réamonn. I think it is right publicly to express appreciation of this distinguished and courteous public servant and to wish him a happy retirement. He has performed his duties in a manner which not merely reflected credit on himself but, despite the criticisms which are often levelled at tax collectors, the sympathetic and understanding manner in which Mr. Réamonn and the other officers in his Department met particular problems merits the appreciation of the community.

Other matters arising in regard to this Bill are of a more detailed character and I think can be deferred until the Committee Stage when it will be possible to deal with individual sections. I have mentioned specific matters at this stage so that it will be possible to have them considered before the Committee Stage with a view to having amendments made.

In considering the Finance Bill one is inevitably driven to the conclusion that one must contrast very critically the content of this Bill with the consensus of opinion throughout 1969-70 and, indeed, one might say throughout the second half of the 1960s. One must contrast Government strategy with the general consensus of economic criteria laid before this House by the National Industrial Economic Council, by the Department of Finance itself, if I may separate it from the Government, and by the Central Bank. The conclusion of any same observer reading the admonitions of these authoritative national bodies must be eminently unfavourable towards the Government.

The major sin of omission in this Finance Bill is that it attacks inflation in a very marginal way: it deals with the crisis of rising prices in this country in a most ineffective way. It reminds us of the speeches of the Taoiseach and the Minister for Finance attacking inflation with rather strong words but in a completely ineffective manner in practice. Therefore, I classify this Finance Bill as being singularly unimaginative and a rather discredited piece of general budgetary taxation strategy in the early 1970s. As far as I am concerned, and as far as the Labour Party are concerned, it certainly does not, in our opinion, reflect in any way the alleged dynamic Cabinet leadership which we were offered in the last general election campaign, the dynamic, innovating, taxation-reforming Government presenting its first Finance Bill of the 1970s.

I am afraid that anybody hoping to see evidence of that in this Finance Bill must find Dáil Éireann these days a rather dreary place. When all is said and done the Finance Bill is the most important single, political indicator of the well-being of the economy. It is important that it should contain something more than marginal taxation changes, marginal apart from the turnover tax change which is substantial. Apart from that it gives very little indication of the intentions of the Government in the year ahead. It gives no indication whatever of the general objectives of Cabinet thinking for the 1970s or of what sort of society they wish to see evolving in the country in the 1970s, nor does it give any indication generally of how it proposes to manage the economy more effectively in the 1970s. This, the greatest single weapon in the armoury of any Government of a reforming nature in any nation, the Finance Bill, is a rather damp squib in terms of the Fianna Fáil aspirations for the 1970s.

I think the deficiencies in it have been placed before usad nauseam and do not require a great deal of repetition on my part. Last year the then Minister for Finance, Deputy Haughey, chose to ignore to a great extent the danger signals in the economy coming up to the middle of 1969, largely for the narrow, political purposes of his own party and for the narrow, political advantage of the Fianna Fáil Party in the general election. The NIEC in a rather terse, quiet comment made the statement that disappointingly little was achieved in the course of 1969. This was one of the more off-beat comments of the NIEC with its tongue in its cheek in a reference to trading and inflationary problems.

As a consequence of this a great deal more would be required, it appears, in the future in terms of credit restrictions when the banks get back to normal and when the Government exercise imagination in ensuring that the parties remain in constant negotiation. When we find ourselves with increased taxation, credit restrictions and so on, all of which could be at the expense of employment and growth, then I think we can say that we now know what the Taoiseach had in his mind in the last Budget Statement. We now know why that statement in many respects was so poor. We know of the general impact and the impact on tourism, the impact on exports, the impact on economic growth and on employment. As a result of this policy of the Government, economic growth has been delayed; it has been blunted and slowed down and the efforts of Irish manufacturers to hold on to the export markets which they won with such strenuous efforts in the 1960s cannot but be placed in grave danger by the present rate of general inflation in the economy.

It is the living standards of the wage and salary earner in the urban areas, whether he is a white collar or a blue collar worker, which suffer most when an economic recession in manufacturing industries sets in or when the economic situation worsens. Rising costs and the rocketing of prices—a rocketing of prices which bears no relation to the admittedly substantial increases in wages—threaten to stunt the growth of employment which was taking place in our economy and certainly have substantially lessened the expansion of real incomes and halted the improvement in living standards. Wage and salary increases over the past 20 years have been cancelled out by increased prices. They have been cancelled out by the failure of successive Governments to institute an effective, rigorous system of price surveillance or price control that would, not with an authoritarian overtone but in a free democratic society, ensure that if a manufacturer, wholesaler or retailer marks up a 40 per cent or 20 per cent increase he is doing it not in the narrow interest of escalating suddenly his own profit margin but merely to reflect the actual increases in wage costs, the actual increases in import prices.

The situation with which the Government have confronted us is a rather serious one, has dramatically affected our ability to export and has increased the problems of our entry into the Common Market.

There is not much point in quoting the recommendations of the NIEC report in regard to a prices and incomes policy and in regard to inflation.

However, let me say this much in respect of the recommendations contained in that report, now some five or six months old, that almost nothing has been done by way of remedying the critical economic situation with which we are faced. There was a clear-cut request from the NIEC, notwithstanding the reservations of the FUE representatives and the representatives of the Federation of Irish Industries, to bring profits within the ambit of a prices and incomes policy, so that adequate information would be published in respect of the aggregate profits of both public and private companies and of unincorporated firms in the various sectors of the economy. The NIEC agreed that where profits were not available as a matter of public information workers in those industries would feel that they could not be normal participators in production or, to use the more catholic term in the NIEC report, "full partners in production". Very little has been done by the Government in that regard, notwithstanding the NIEC request which was supported by the trade unions.

There was a further recommendation by the NIEC that the Government should ensure that services related to and directly involved in manufacturing, that public services and other services allied to the transportable goods industries, should not make a packet out of inflation; that legal services, auctioneering services, building services, services related to electricity, gas, water supplies and so on, a whole range of services, are completely sheltered from external competition and should be the subject of more rigorous Government scrutiny and investigation. I quote what the NIEC report says in relation to professional services:

In many professions the fee structure is anarchic with little evidence of adaptation to changes in the work being done. Moreover the charging of fees on a percentage basis may result in unjustifiably large increases in fee income by reference to changes in the effort required or the work done or to changes in the income of other groups.

They go on to recommend investigation of inflation in this area. That was completely ignored by the Government. The NIEC also recommended— and the Labour Party have repeatedly stated this in the House—that there was a need for effective price surveillance, and I quote:

...active price surveillance along the lines suggested by providing some safeguard against excessive prices or price increases helps to moderate claims for increases in contractural incomes.

Is it any wonder that in relation to contractual incomes or collective bargaining we have seen increases of a magnitude which would have been beyond our comprehension a few years ago and which are not worth a great deal today due to the complete spiralling, almost out of control, of price increases, so that many people are not that much better off than they were before. Admittedly, as the Minister for Finance, Deputy Colley, blandly announces, inflation is a European phenomenon. However, in Ireland over the past seven years there has been inflation in the region of 40 per cent in terms of consumer prices, whereas in Belgium it has been about two-thirds of that, in France about two-thirds also, in Germany almost half the inflationary impact in terms of increases in consumer prices we have in this country. In the United Kingdom where they have had very substantial wage increases, particularly in the past six months, prices have been contained due to the strenuous efforts of the Labour Government although they were not particularly thanked for that in the last election.

The Deputy's remarks would perhaps be more appropriate to a general economic debate, and may I ask him to return to the Finance Bill?

I bow to your ruling, Sir, and I would therefore come to the general proposition contained in the statement of the Minister for Finance on the Budget, that as far as he is concerned the only necessity at present in regard to developing the general well-being of the economy is that there should be some general changes in income tax and that as far as we are concerned he would have performed his functions as Minister by making them. I would point out, in regard to the income tax changes contained in the statement, that wage and salary earners hand back a very substantial portion of the wage increases which they obtained from the current increase, or indeed, from any wage increase.

When the cold light of day shines, in the latter half of this year, on the PAYE dockets of wage and salary earners, or workers in the public service, they will find that the relief obtained through this Finance Bill was by no manner of means as great as they expected. The precise relief for a low income worker is roughly of the order of 5s a week and that is rather cold consolation for him. Admittedly, the level of income tax which he would have to pay because of the current wage increases would not be that great. However, I would point out to the Minister that within the last ten years income tax revenue from wage and salary earners has altered dramatically. Looking at this one sector alone, that of the wage and salary earner, we find that in 1959-60 the income tax collected was £7.6 million while in 1969-70 it jumped to £57 million, a 650 per cent increase. There is no doubt that if the industrial worker is getting substantial wage increases these days he is paying back more than his fair share in general income taxation to cater for those in greater need in the community. Indeed, the details of the estimates of receipts arising from this Finance Bill, taking the income tax situation as a whole, show that for 1968-69 the estimate was around £90 million while for the year 1970-71 it was estimated at £110½ million. In any economy in terms of relative changes this is a very substantial upward adjustment.

There is, therefore, a very urgent need on the part of the Minister and the Government to think again of what was tentatively suggested by the Taoiseach in the original Budget statement —which I am sure has been completely ignored by the Minister since then—of taking a step towards the reinvestigation and analysis of the role of taxation generally in the economy with a view to broadening the base of taxation. So far as I am concerned such a step is long overdue. While we are all slightly cynical about the benefits that can be derived from commissions on this, that or the other, I do feel, in regard to the changes in the direct taxation structure which have occurred, that the setting up again of the commission on income tax is long overdue. The commission should take a keen look at recent Finance Acts with a view to further, more democratic, more egalitarian changes in the taxation strategy of the Government. This is urgently necessary in respect of the Bill now before the House.

There is a real need that the Minister for Finance should not present the House with a repetition of this Bill in 1970-71. One bad Bill before the House in 1970 is quite enough. I would hope that next year the Finance Bill would contain substantial changes which would benefit the low income groups in our industrial labour force. One becomes rather cynical when one sees the energies and minds of political parties in this House being regarded in, one might say, an insulting manner by the Minister in respect of a presentation before the Dáil.

I find it impossible to explain to rank and file industrial workers what is involved in financial legislation. I recall quite vividly trying to explain to workers in County Kildare, who had returned to work after a strike in Asbestos which lasted 21 or 22 weeks, the intricacies of financial legislation. I got a very curt reply that it is all very well for us in this House and for the Ministers but that as far as industrial workers were concerned they had incomes varying from £15, at the lowest end, to £25 a week on which to rear and educate their families. Fifteen pounds in that area would hardly cover the normal upkeep of a rather battered racehorse for one week, or, indeed, a couple of greyhounds. These are the reactions one inevitably gets from the failure of this House to try to develop a better form of society through financial legislation. It is the kind of reaction which certainly brings one back to reality in relation to the Finance Bill and it illustrates the failure to implement a normal prices and incomes policy. The Finance Bill does not reflect such a policy at all.

I am not naïve enough as a trade unionist, as one directly involved in such policies, to suggest that the trade unionist or the worker on the factory floor would be immune from the pressures reflected in a Finance Bill if an effective prices and incomes policy were in operation.

If that kind of development came about I am afraid it would be reflected in our Finance Bill. We, in the Labour Party, would act in a constructive and helpful manner in order to put our economy back into a position of relative competitiveness, because otherwise I am afraid that those who are shouting about entry into the Common Market on the 1st January, 1973, on the basis that negotiations will last that long, will realise that the 1971 Finance Bill is not likely to be of very much assistance when and if this particular step is taken. These are my views on the Finance Bill. I put them to the House for consideration.

I consider the Finance Bill to be the Budget in action. In considering the Finance Bill we must see how the Budget suggestions would be achieved through it and why they would have to be achieved. The Budget recognises that the most critical thing facing the economy at the moment is the rate of inflation. We must examine how the Finance Bill, as the budgetary weapon, tackles this problem. We must look at the problem to see the cause of inflation and then how this Bill proposes to remedy or remove those causes.

The chief cause of inflation is the rise in money incomes. Allied to this is Government spending and expenditure by the private banks. In the background there is the balance of payments problem. The balance of payments is paradoxically both the cause and effect of inflation. It is recognised that the chief cause of inflation must be the rise in money incomes. The Budget and the Finance Bill do not deal adequately with this problem. In fact, they exacerbate the problem. The chief tax imposed by this Bill is the turnover tax which has been doubled. That is an indiscriminate tax which falls on all sections of the community, including the sections least able to bear taxation. It falls on the rich man and on the poor man and the theory is that the rich man, who spends more, pays more in tax. That theory is perfectly correct. The rich man will spend more because proportionately he is able to do so. The effect of the tax on the poor man is far greater than it is on the rich man even though the rich man spends more money. That is where this tax falls down. This tax increase will contribute to inflation in so far as inflation is represented by rising wages. It increases the demands by the workers for more money to meet the increased prices caused by this tax. We are in a vicious circle. I am disappointed that the Finance Bill does not make any effort to get us out of the circle. It speeds and increases the process.

If a prices and incomes policy is to be operated, as has been recommended in no uncertain terms by all the economic commentators, and if such a policy is to be implemented, its implementation is seriously prejudiced by this Bill because of the type of tax it imposes. In my view, we need something to curb prices, but curbing, when it comes, will not work because we are dealing with individual firms and individual groups of workers and different considerations apply in different parts of the country, and different considerations apply even in different industries in the same part of the country. This hope for an effective prices and incomes policy, which will do what it is supposed to do and curb inflation, is not realisable. If employers were benevolent enough and if workers were sophisticated enough to voluntarily restrain their profits and their wages we might have the necessary curb. I do not think it would be fair or realistic to expect that that would happen in a free economy. It just cannot happen. Joint boards of management and workers and prices commissions may have some effect, but in the ultimate they will not achieve stability in prices and incomes because the proposal to curb prices and incomes is against human nature and against the businessman's competitive instinct to curb prices and profits. It is in the worker's nature to seek increases. It is in us all to seek to keep up with the Joneses. That psychological trait will assert itself and overcome any imposed policy of restraint, even a restraint by agreement, because an agreement cannot reach out to embrace every section of the community and all employers and employees in all parts of the community and in all industries.

I have no doubt whatever but that a prices and incomes policy cannot be effective in restraining prices and incomes. Even for those on the Government side who might argue that it is our only hope, it is a contradiction to bring in a Bill containing as its chief measure the doubling of the turnover tax which affects the incomes of the very people it wants to restrain in their demands for increased incomes. It will reduce the purchasing power and the workers will want to compensate for that reduction by increased wages. It is a phenomenon that when one gets increased wages, the ordinary citizen will cut his rate of saving rather than his consumption. That is only human nature.

Government spending is not dealt with in this Bill at all except in so far as is relevant to the income produced for the Government by the increased tax. Government spending, because so much of it is involved in public works, cannot be curbed to any significant extent in the coming year because of the effects of the cement strike and the increased prices resulting from the settlement of that strike. There will be repercussions right through the economy. Every one of these repercussions will heighten the inflationary forces already at work and make them worse.

There is only one way to curb inflation and that is to impose restrictions on imports. The alternatives are policies of "stop-go" or deflation. The policy of "stop-go" has been tried in this country and for many years it was the policy in Britain. While the two economies, because of the difference in scale, are not strictly comparable, they are both free capitalist societies and, unfortunately, we are a reflection of the British economy. "Stop-go" was a dismal failure in England; deflation was a dismal failure both in this country and in England. It was remarked by the economist Keynes in 1931 that in order to curb inflation anyone who prefers deflation to direct restriction of imports isnon compos mentis.

We should take a lesson from the success of the British Government in sorting out their economic problems when they imposed restrictions on imports. Within a very short time those restrictions had a corrective effect on the balance of payments. The balance of payments is a critical factor in any inflationary situation. It may be argued that it would not suit us to attack imports because of our size and our consequent vulnerability in the context of our European neighbours.

Very often these fears are unfounded because under the rules of the IMF and the GATT, restrictions on imports, whether by way of deposit, as in Britain, or quantitative restrictions are permissible when the country imposing those restrictions is in deficit, as we are at the moment. If we took our courage in our hands and tackled the problem in the way I have suggested we could rectify the situation very quickly and simply and without the consequences that must follow from any other solution which must be necessarily deflationary. I should prefer to have our present inflationary situation rather than be subjected to deflation. Deflation is bad for the morale of the country; it inhibits progress and effort and, while inflation may be euphoric and false in that sense, nevertheless there is a better atmosphere in an inflationary situation than in a situation of deflation.

Our position with regard to the balance of payments would be much worse were it not for the fact that much foreign money has come into this country through the new banking firms now operating here. While this money appears to leave our balance of payments situation somewhat better than it might have been, the availability of this money tends to increase and worsen the inflationary situation within the country. This money has not been sent here to lie idle; it has been sent to earn interest and the only way it can do this is by letting it out into the Irish economy. The greater the amount of such money that is made available, the greater is the amount of non-public spending and another factor in the inflationary cycle gets a boost.

Apropos of this foreign money, it has been suggested that we should ease our estate duty provisions in order to attract money into this country. However, is this type of money really desirable? I do not think our economy would be able to absorb large-scale injections of foreign capital. Our economy is not sophisticated enough to handle such money and, in any event, we must not forget that such money is sent here for a purpose. People often have in mind the situation obtaining in Switzerland, but they are inclined to forget that that country has a long banking tradition of a highly sophisticated character. Also, there are innumerable firms in Switzerland generating investment all over Europe. Anyone considering the situation in this country must admit that we are not geared to accept foreign money in such quantities or for such purposes. It will be a long time before anyone can refer to the "Gnomes of Dublin" doing the harm the "Gnomes of Zurich" have done. I should not like to see any easing of our estate duty laws purely for the purpose of attracting wealthy, cynical continentals to invest their money here for a soft deal.

We have to solve our balance of payments problems without the artificial help that this kind of money gives. The only way to solve our problems and to overcome the inflationary effects of the tax imposed by this Bill is to impose restrictions on imports. We cannot be penalised for doing that because we are entitled to do it under the rules of the GATT and the IMF. It may be suggested that to adopt such a course when our negotiations with the Common Market are commencing could prejudice our position and throw suspicion on our readiness to join the EEC. I do not accept such an objection because Great Britain, in the same negotiating position as this country, used precisely those weapons in the last 18 months and with singular success. The fact that we are a small country should not inhibit us from adopting a course that is beneficial for us even though it might be unpopular with our continental neighbours. Possibly the fact that our country is small might lead the continental states to disregard our action but, in any event, I do not think they could take any punitive action because they would then be in breach of international agreements.

There are quite startling imbalances in our trade with other countries. With Germany there is an imbalance of £32 million; we spent £4 million importing motor cars which appears senseless having regard to our economic situation. We have an imbalance of £1 million with Hong Kong to whom we gave £200,000 for artificial flowers and articles of human hair. These are articles which some people may consider to be necessary and desirable, but I do not think that our economic situation justifies their importation. Again, with Czechoslovakia, we have a huge imbalance; also with Denmark. I would have no inhibitions whatever in having selective restriction on imports from the countries with whom we are seriously imbalanced.

Hear, hear.

If measures of that nature were taken the situation would rectify itself in a very short time.

It certainly would. You would have them over on the next plane.

It has been suggested that the turnover tax imposed in the Budget is a good tax in the sense that it is broad-based and there has been some criticism of our taxation structure previously in the sense that it is narrowly based to the extent that a comparatively small portion of the community pay income tax. It has been suggested that there must be some way of curing this imbalance in our taxation structure so that a greater portion of population would be caught in the tax net.

That is acceptable to an extent and in theory but it is completely unacceptable when the people whom it is proposed would be caught in the tax net are possibly people who are not in a position or who should not be asked to pay income tax, people on fixed incomes, pensioners and others. I cannot accept the argument that by broadening the tax structure these people would have to pay income tax. We know that there must be taxation to finance Government spending but I would look to the section of the community who are best able to pay tax. I would look to the people of wealth in the country, those people who are inclined to say that this is a poor nation, that there is no wealth here by comparison with other countries in Europe. I could not accept that. During the past couple of decades there has been an accumulation of wealth in the hands of a substantial number of people here. In order to raise Government income, I would rather that people of wealth be taxed than that there should be an indiscriminate tax, such as the turnover tax.

Many people may be horrified to hear this but what I would suggest is that the Government would seriously consider the imposition of a tax on wealth. I make no apology for making such a suggestion for the reason that I would rather see wealthy people paying tax than see poor people being taxed. This is not a novel idea. Such a tax has been in operation in Sweden since 1960. There is a wealth tax in operation in Norway, in Denmark, in West Germany, in Holland and even in several States in that king of capitalism, the USA.

A wealth tax is one that should be easily collected because the numbers who will be paying such tax would not be very great but, at the same time, they would be great enough to produce a worthwhile income. It would be easily ascertainable. Market value would provide the basis for assessment and returns at market value could be collected on death. Furthermore, it could be collected or detected on sale of property. To my way of thinking, a tax on wealth would be socially desirable and would be much more suitable economically than an indiscriminate tax such as the turnover tax which must, of necessity, fall on all sections and on all goods.

If anyone thought that a tax on wealth would be a curb on ambition or on incentive, he could be compensated to some extent perhaps by raising the surtax limit so that increased income at a lesser rate of tax might be achievable by our tycoons. If they wished to avoid accumulating wealth, there could possibly be exemption which would enable them to reinvest their increased income in such a manner as would benefit the economy generally in the first place and which, in the second place, would benefit their own particular enterprise.

The only alternative that I can see for the Government to increase the amount of income to carry out their programmes is for them to go back to taxation of income. It is generally realised that that tax is at such a level that if it is increased any more it will become punitive. It is for that reason that I suggest an investigation into the possibilities of imposing a wealth tax. The Revenue Commissioners have enough information on their files to allow them to assess how suitable such a tax would be and to assess how much it might be estimated to yield. They could examine its operation in the countries where it is already in operation.

We are now forced to consider such a tax and I cannot see any social argument against it. If a person has accumulated wealth I see no reason why a proportion of that wealth should not go back to the Exchequer for the benefit of the community as a whole and so that the burden on the poorer sections of the community might be eased. It is only proper and Christian-like that that should happen.

I disagree entirely with what is proposed in this Bill. Everybody is being subjected to an indiscriminate tax which applies to most goods. Turnover tax as a method of raising necessary taxation might be less unacceptable if the exemptions already contained in that code were extended, either in terms of persons affected or in terms of goods affected. I understand that there are exemptions already for items used in connection with agriculture and certain services are exempt, but in a business which sells items that are subject to the tax as well as items that are exempt from the tax, I do not think there has been any great difficulty in segregating the two types of goods and in arriving at the assessable turnover.

The exemption should be extended to cover foodstuffs and medicines, articles of necessity which have to be purchased. It is the tax on these things which falls most heavily proportionately on the poorer section of the community and a great deal of the injustices caused by this tax could be avoided if these articles were exempted from its operation. Such exemption would add point to the argument that this tax bears heavily on those who spend most because heavy spenders on non-essential items would find themselves paying a considerable amount of tax, and nobody could object to that, while heavy spenders on essential goods, workers with large families, would find their essential foodstuffs and medicines exempted from tax. An alternative exemption would be to exempt certain classes from the operation of the tax. That might lead to administration difficulties; people would have to be certified as being exempt and produce that certification to the trader. I could see difficulties in investigating claims for exemption. The other exemption would be an extension of an exemption already in existence and, from that point of view, it would be administratively possible and socially most desirable.

We are all anxious to see an economic recovery because the present economic situation is making living difficult. It is cumulative in its damaging effects. Inflation will price our exports out of competitiveness. It will raise the cost of living here and, in doing so, it will seriously damage our tourist trade. I do not want to be regarded as preaching gloom for gloom's sake, but the tourist trade this year is well down. I formed that opinion from speaking to people in the tourist business. The Director General of Bord Fáilte has said that the season is reasonably good. I think he is speaking euphemistically. I am not now speaking of the package deal tourist. I am speaking of the ordinary tourist who makes his own arrangements. He is not coming, not through any fear of the critical situation but because of the cost of living. The former is a factor which has, no doubt, diminished the package tours. There has been a drastic fall in package tours. The ordinary tourist is inhibited by the cost of living. This Bill does not tackle that problem; it merely emphasises and exaggerates it. We are fast pricing ourselves out of the European tourist market. That kind of money is most acceptable because it is earned. If our balance of payments is to be improved by bringing in foreign money, then that is the only type of foreign money I consider acceptable.

Even at this stage I suggest that consideration be given to providing for further exemptions designed to ease the burden of the cost of living. It is vitally important that the cost of living be controlled. If it is not controlled immense harm will be done and going into Europe will not cure that harm. Our position will, in fact, be weakened. The curing of inflation is not a difficult operation. It does not involve intricate deflationary action. It can be done in two ways: (1) by controlling imports and (2) avoiding indiscriminate taxation, taxation which leads to a demand for an increase in wages, an increase which, in turn, leads to a demand for increased prices. The vicious circle starts all over again. Indiscriminate taxation could be replaced by a selective tax, a wealth tax on that section of the community which is able to pay and should pay. If the ability to pay is there there should be no hesitation whatsoever in making those who are able to pay pay.

Deputy O'Hara rose.

I understood I was to get in at eight o'clock at the conclusion of Deputy Cooney's speech, but I am willing to give way to Deputy O'Hara if he wishes to speak.

I thank the Minister. I agree entirely with the view expressed by the leader of my Party, Deputy Cosgrave, here this evening. This kind of turnover tax is bound to have serious repercussions. Already the effects of this tax are being felt. They will be felt most severely by the poor people, whether they be in Dublin, in my own county or in any other part of the country. We were told when the turnover tax was first imposed by the Minister for Finance that it would be the type of tax, being broadly based, which would not be felt severely by any section of the community. Many people, who did not support the Fianna Fáil Government, felt at the time that it was so broadly based it would not have serious ill effects. Even business people at that time said to me, and no doubt to others, that it appeared to them that if it were only left at that figure it would not be too hard to cope with. I felt at the time, and this has been proved now, that a day would come when further use would be made of that type of tax and that it would be increased by 50 per cent or perhaps 100 per cent, as has happened in this case.

The most recent imposition of turnover tax has shocked many traders and many of their customers as well. Since the increase when they go to their local shops or supermarkets they find that there is a penny on this, twopence on that and threepence on something else. The cost of living on those people has gone up at a rate which they never thought it would. Prior to the imposition of this tax we had many strikes and many labour troubles. Since its imposition that situation has been further aggravated. During the cement strike, which lasted for so long, there was wholesale unemployment all over the country not only in that industry but in industries which depend for their existence on cement. Some contractors were prevented from carrying out their contracts. Workers who were employed by those contractors were unemployed and were forced to draw unemployment benefit, if they were eligible for it.

As I said at the outset, it is the poorer sections of the community, whether they be in Dublin or Mayo, who are the real sufferers. It is also true to say that many of the traders throughout the country were not distinguished for their bookkeeping. This is a small country and a small economy. People, particularly down the country, had the habit of going to their local shops for a bottle of milk or some other small item early in the day. They would tell their local shopkeeper they would return later. The shopkeeper gave them the goods because he knew they would come back. He did not make any entry for the items which he took from his shop or from his store. There was this sort of relaxed atmosphere between the customer and the trader.

When the turnover tax was originally imposed many small shopkeepers were not geared to cope with the additional bookkeeping which was involved in order to keep a complete record of their transactions. Instructions were issued to inspectors to go around the country and carry out an examination of shopkeepers' books to find out what method of bookkeeping they engaged in or what way they kept their records. I must say, in passing, that I have heard complimentary remarks passed about the officials who carry out this work. From my information those inspectors have always been courteous and where some records were not up to date or were not to their satisfaction they gave a chance to the people to put their books in order. They assured the people concerned they would be back in a week or two. They came back in many concerned they would be back in a week or two. They came back in many instances. When the amount of turnover tax payable was added up some of those traders found they had an alleged debt of £50, £100, £200 or even in some cases £1,000.

We know at the present time that competition is very keen. It is so keen in some lines that some of those traders were forced to cut their prices and leave themselves very small, if any, profit. They now find themselves unable to meet this debt imposed on them by the Department of Finance. They now find themselves in queer street. It is amazing the number of such people who are in this position today. The only breathing space for those people is the fact that the banks are closed. When the banks open God only knows what will happen to them. At Question Time today many Deputies were concerned about when the banks would open but I knew there were many traders around the country who hope they will not open for a long time. I hope they will open at the earliest possible opportunity in the interests of the economy of the country. That is a strange situation which has arisen. We know once the Government make up their minds to impose a tax it will be imposed. I would ask the Minister to go easy with those people and to accept payment of this turnover tax by small instalments if at all possible.

I know the Government themselves may be hard pressed for money. It is my personal opinion that they are. However, they should appreciate that many of these traders had not the modern methods of bookkeeping which some of their wealthier neighbours had, and for that reason difficulty has arisen.

Undoubtedly, there has been an increase in the cost of living due to increased taxation on practically all the items used in the home. Sometimes the increase is far beyond 5 per cent. There is a variation of 2d and 3d in the price of stout and beer as between this city and the country. Quite a number of people seem to be getting away with murder in their charges. In some cases they refer to the turnover tax as justification for demanding exorbitant prices from their customers. Certainly that is going on in this city.

Deputy Cooney and others spoke about tourism. Up to this year, tourists were coming to Achill, the Sligo region, areas such as Leitrim and the whole of the western seaboard stretching down to Kerry and Killarney. County Kerry has enjoyed an established tourist business for many years. We in the West of Ireland were in the process of improving our position and tourism was bringing great benefits and increased prosperity to that region. The increased cost of the various commodities needed in hotels, guesthouses, farm guesthouses and all these types of places, is bound to have an adverse effect by way of increased charges to tourists. That will tend to depress our tourist industry. I was told recently by a hairdresser that one of his customers, the driver of a CIE tour bus, told him that they are driving these buses through the West of Ireland with 15 to 20 vacant seats whereas last year the buses were packed. Despite what the Director of Bord Fáilte says about our tourist prospects this season, I disagree with his optimism. A decline in tourism will adversely affect the overall economy. The tourist industry was one of our best money-spinners. There is no better market in the world in which to dispose of our agricultural produce than the tables of our hotels and boarding-houses. The position is quite serious. Even at this late hour, the Government should give some concessions in order to alleviate the cost of food and other items.

Will our present economic set-up encourage our people to save? Can we honestly tell people that it is highly advisable for them to save? Consider the position of a man who took out an insurance policy for some thousands of pounds 20 or 25 years ago. The sum was fairly substantial then but, with the fall in money values, when the policy matures within the next few years the person who saved his money through insurance premiums will find that the purchasing power of his hardearned money has diminished. How can the Minister for Finance in any country where this situation has arisen recommend people to save?

The former Minister for Finance prior to an election a few years ago went on radio and on television to warn the people that we were travelling along that road. It is unfortunate that at that time he did not stick to his guns. He had warned our people and I believe our people had taken the warning seriously as I took it seriously but because there was an election pending we had an about-turn and a short time later the same Minister for Finance said that everything in the garden was rosy and told us to forget about the crisis he had announced a short time before. When a person in the high office of Minister for Finance behaves in that way how can we pay attention to people in responsible offices? That conduct is doing immense harm and it is regrettable that it has gone on. It is too bad for us all that it has.

Twice weekly on radio and on television we are told to deposit money in the post office. How can our people save in the light of the knowledge they have and can obtain from older people? How can they deposit money in the post office and feel it is a good investment when it can be truthfully argued that every year they leave the money there it will become less valuable and its purchasing power will diminish? In this Parliament we hear foolish advice given to our people to save. I cannot understand how sensible people would make the case that we have not got these inflationary tendencies when it must be patently clear to everybody that these tendencies are operating and will continue to operate while we pursue our present policies. I am convinced that we in this country have been following the wrong road for many years past.

Today I had a question addressed to the Minister for Agriculture on lime deficiency in the land of Ireland. The lime deficiency must be in the region of 20 million tons judging by the vague information he gave me. There are also serious potash and phosphate deficiencies in our land.

I am afraid this is getting away from the Finance Bill.

There should be subsidies made available to our farmers to help them to improve their land by drainage and the application of lime or phosphate.

The Deputy will appreciate that expenditure is not in question at present. We are dealing with taxation.

Yes, but the Minister will argue and Deputy Seán Moore pointed out to us this evening that the taxation which is being levied on our people is being put to very useful purpuses. I have great respect for Deputy Seán Moore who is a good, honest, decent type of Deputy though I would not agree with all his statements. He speaks as a Dublin Deputy and I hold my own views in relation to country matters. He advocated a policy of more housing for Dublin. That was the main theme of his speech. I can understand that he is vitally concerned about this problem and indeed has shown a great interest in it down through the years. I am sure he would gladly do anything he could to help to house his constituents in the city. If I say a few words in passing on how money which is collected in taxation could be used to the best advantage I submit that it is hardly completely out of order and perhaps you will overlook it.

We have inflation. We have had prolonged strikes and it is difficult to say how these strikes will affect us. This country has gone through many difficulties and trials through the years and suffered many hardships. It has survived British rule for hundreds of years. It has survived every sort of tyranny. We must brace ourselves for the attack again in view of the fact that the Minister for Finance in this most recent imposition is digging so deeply into our pockets to finance the various schemes the Government run, to finance the various Departments and projects. I am of the opinion that in many spheres there is not much regard to the manner in which money is being spent. I am convinced that when it is a State or semi-State Department which has control of the spending of our finances they are not as keen on seeing that that money is used efficiently as a private citizen would be when using his own money.

I appeal to the Minister to go easy with those traders who have found themselves in difficulties because of the most recent imposition. It is not easy for them to find the hard cash at this time to pay arrears that may have been assessed by inspectors from his Department. I would ask him to give them time to go into their accounts as carefully as they can and to try to ease the blow for them. They are certainly worried at this time. I, as a public representative, have advised people at all times to make sure they meet their commitments from month to month and never to allow payments to accumulate. Some people took my advice and have thanked me for it. Other people were not in a position to do that. They may not have been in a financial position to employ the additional staff. They may not have had the expertise to deal with the bookkeeping and to make up accurately what was due. I am pleading with the Minister and his officials to make it as easy as possible for these people. They gave me good service down through the years. They gave credit to their poorer neighbours to help them rear their families and it would be too bad if, as a result of this increased turnover tax, these people were put out of business.

A Leas-Cheann Comhairle, this debate on the Second Stage of the Finance Bill, 1970 has, as you know, ranged far and wide. I do not think it will be possible for me to deal with all the points raised. Indeed, in connection with some of them I do not think I ought to try to follow them up because, without undue disrespect to the Deputies concerned, some of the points do not seem to me to be worth following up. There were, however, a number of quite important points raised and I propose to try to deal with the ones of most general interest and also the ones that were commonly raised by a number of Deputies. Perhaps I should start by saying a few words about the general economic situation as I see it at the moment.

I referred today, in replying to questions, to some of the steps which have been taken by the Government during the course of the year in dealing with the economic situation as it was developing. It is, as yet, too early to draw a firm conclusion about the effects of those measures which were taken on both the fiscal and the monetary front to damp down the demand pressures which are in the economy at present.

However, a favourable development has been the improvement in the external accounts so far this year. Our exports have been buoyant. In the first five months they were 20 per cent higher than in the first five months of last year. Our imports, on the other hand, increased by 12 per cent. The import excess was £6 million less than in the corresponding period last year. The external reserves position continues to be quite strong. Making adjustments for certain changes in definition, our external reserves rose by about £1 million between December, 1969, and April, 1970, and by about £28 million between April, 1969, and April, 1970.

If the more favourable trend in the external trading position continues during the year a balance of payments deficit below that of 1969 and close to the target figure of £50 million, which I mentioned in concluding the Budget debate, would be achieved. This aspect of the economy is certainly heartening and gives no undue cause for alarm but, as we all know, a very diquieting feature of our economy has been that the trend in consumption expenditure, as indicated by the volume of retail sales, the turnover tax receipts and new motor car registrations, was particularly buoyant in the early months of this year.

Special factors contributed to this upsurge and there are some signs of a levelling off in the trend. However, it will require very careful watching. As has been repeatedly stressed in recent months by the Government, the greatest danger facing the economy stems from excessive wage claims. According as wage demands in excess of productivity are translated into actual awards, the wage price spiral, of which many Deputies have spoken, is set in motion. Our domestic expenditure rises rapidly as this happens and this, of course, leads to large price increases and a very significant increase in our imports.

Of course, again as I indicated today I think in response to a question, we in Ireland are not alone in suffering from inflationary pressures but we cannot hope to maintain our competitive position in our export markets if our prices are rising faster than those of other European countries. To put it in a more positive way, it can be said that we have at present a golden opportunity to strengthen our external competitiveness and to increase our employment at home, if we can persuade ourselves to exercise restraint in our income demands and in mentioning income demands, I am not referring only to what is commonly covered under the heading of wages. I am talking about income demands.

The Government have shown their determination to achieve this objective. I will be referring later in more detail to some of the steps the Government have taken but, at the moment, I want to refer again to the action which the Government took very promptly to establish the new employer-labour conference designed to translate the NIEC guidelines into terms which would be operationally useful in detailed negotiations on wages and salaries and would generally provide a forum for discussion and review of developments in money incomes and prices.

However, in the final analysis, the essential ingredient for success is the co-operation and the good sense of all sections of the community. I know some Deputies have said this is an unrealistic hope and that, human nature being what it is, it just will not happen. They may be right. I hope they are not. I do not think we have exhausted all the resources available to us. I do not think we have, as yet, demonstrated clearly to our people what is involved and, in particular, I do not think we have demonstrated what the alternative is. However, I dealt with this in some detail in this House in the recent past and I do not propose to go over all that ground again.

I want to convey to the House that basically our economy is in a very strong position to forge ahead, provided the wage price spiral can be avoided. The various measures already taken by the Government should be sufficient to ease the demand pressures over the coming months, provided again that there is moderation in seeking increases in incomes. I want to assure the House that there will be no complacency on the part of the Government in regard to this situation. The trends in the economy are being kept constantly under review and, if the need arises for further remedial action, that action will be taken.

Quite a number of Deputies who spoke in this debate suggested that the Government have taken no steps to deal with the problem of growing inflation and, indeed, that the Budget itself contributed to inflation. I dealt with those arguments in some detail and, I hope, refuted them when I was replying to the Budget debate but, as my remarks on that occasion would appear to have been ignored by some Deputies on the other side of the House, I should like, for their benefit, to outline again the steps which the Government have, in fact, taken to deal with this admittedly very serious and growing problem in our economy.

First of all I should like to reiterate, but from a different angle, what I said a moment ago. Basically our economy is healthy and sound. Our growth record in recent years represented a striking achievement and compares very favourably with that achieved by any other country in that period. In particular, there have been rapid increases in industrial production, encouraged by the various policy incentives provided by the Government and prominent amongst these is of course, the export tax relief. The resultant record increase last year in the number of new jobs in industry bears striking witness to the success of that policy. It is against that background that I want to set out for the benefit of Opposition Deputies the steps which have been taken by the Government to combat inflation.

First, in January last more severe hire purchase restrictions were introduced covering a wider range of goods than had hitherto been covered. In fact, I think it is true to say that the restrictions introduced in January were the most severe yet introduced into this country. Secondly, credit restraint was continued in the present year. While we cannot say precisely how the credit guidelines have been affected by the banks closure certain indications point to the conclusion that credit has not expanded as fast during the present closure as during the 1966 strike. Thirdly, the rate of expansion in the capital programme was moderated fairly substantially in the current year. Every economy was made in current expenditure consistent with economic growth and improvement of essential services to the community. Finally, not alone was the Budget balanced but we provided in advance a sum of £10 million for contingencies in respect of public service pay increases likely to arise during the course of the year.

I shall at this point deal with some of the suggestions made by Deputy Cooney a short time ago. He said he just did not believe that an incomes and prices policy could work, because of human nature. He seemed to think the problem was fairly easy of solution. His main method of solving the problem was to apply restrictions on imports. He made the point that we are entitled under our international agreements to impose such restrictions. That is true but we are not entitled to impose them on the basis that he thought we could. He talked about applying restrictions on imports on a selected basis through countries with which we have an imbalance in our trade. It is true we can do this in the case of certain countries, notably the countries of Eastern Europe. Legislation was enacted by the Dáil a few years ago to enable us to do this but we are not entitled to apply import restrictions on a selective basis, as between one country and another, in relation to members of the GATT which covers a very wide range of countries. Naturally, I am not prepared in advance to rule out any action that we might take but I should like the House to understand that action in relation to the restriction of imports is not quite as simple and straightforward as it looks.

It is in relation to balance of payments difficulties. There is an escape clause.

I am not talking about the difficulties internationally; they are not worrying me at all. I am talking about the effects on our own economy. Deputy Cooney ruled out completely any approach on the basis of deflation. What he does not realise is that if we were to apply restrictions on imports on any widespread basis that is exactly what would happen because a very high percentage of our industries are dependent on imported raw materials or semi-processed materials. Any restrictions on imports on a widespread basis which really bit into the problem would correspondingly bite into the good health of our industries and throw many thousands of people out of work which would immediately induce a deflationary cycle.

The problem is particularly acute in this country as compared with many of our neighbours because of the nature of our trade, the fact that to an extent greater than almost any other country in the world we are dependent on foreign trade both import and export. For that reason restrictions on imports do not present any easy solution to our difficulties. I think Deputy Cooney quoted a figure which I am sure is right—I am not standing over it, I am merely quoting what he said —that our imports from Germany amount to £4 million in respect of motor cars. He asked why we did not restrict such imports when we have a balance of payments problem. To the best of my knowledge that figure is correct and it relates to the import of knocked-down vehicles which are assembled here. The moment we prevented the importation of these knocked-down vehicles we would throw many people out of work. I am taking this merely as an example but the same is true over a very wide range. The moment people are put out of work they go on to unemployment benefit, some of them emigrate, the shopkeepers who are supplying them get into difficulties and so the cycle goes. It is not an easy solution to the problem simply to restrict imports. Having said that, I am not precluding the possibility of such action being taken if it should be necessary. I am merely pointing out that the consequences of any such action can be quite serious.

The increase in the turnover tax has been vehemently and at times bitterly criticised by members of the Opposition.

And by members of the Minister's own Party.

But members of the Opposition have not come up with any viable alternatives for raising the revenue necessary to give effect to the very desirable social and other effects of the Budget, objectives which were not quarrelled with on any side of the House.

We would be out of order.

The devotion of Deputy O'Donovan to staying within the rules of order is most edifying but not convincing.

One of the most persistent suggestions made, however, was that we ought to introduce a capital gains tax. I agree this tax on the face of it has a great deal of attraction. It particularly attracts those of us who have not any great capital and perhaps may be secretly or subconsciously tempted by envy or some other low motive to "have a go" at other people's capital. Let us have a look at it in a little more detail. The question of a capital gains tax was examined by the Commission on Income Taxation and their conclusion was that they had no option but to recommend against its introduction in this country in our circumstances in view of the grave disadvantages associated with such a tax as a disincentive in regard to savings and investment in economic growth. None of the countries mentioned here as having such a tax has a similar economic situation to our own. The major and most important factor for us in our economy is growth.

Would it not have been a better tax than one on "lump" jobs?

In the absence of growth this economy has not much hope and certainly the people would have no hope. So therefore the policy of this party over the years has been consistently directed towards growth. The basic objection to a capital gains tax at our stage of economic development is that it would inhibit growth. But there are further factors involved. All the indications are that the yield from a capital gains tax would not be substantial. If we judge by the yield from the tax in a very highly industrialised and wealthy country like Britain it is clear that the yield would be quite small. I understand that in Britain the yield from the capital gains tax is less than 1 per cent of the total tax yield. It must be remembered that we do tax profits from dealings in stocks, shares and securities in the hands of persons whose business is dealing in such property and, similarly, in the case of people whose business is dealing in and development of land. When I say it is their business, as I understand it, this is fairly narrowly interpreated by the Revenue Commissioners and while you may have one transaction and not be taxed on it, if you have another I think you really have to argue to avoid taxation.

The Minister should discuss that with his predecessor. Would he not consider £3½ million worth looking after, even at 1 per cent?

That is in Britain.

One per cent here.

That is in Britain which is so much more wealthly and where, in proportion, the amount of capital gain available to tax is far greater.

That is what the Minister thinks. He should consider a few farms. He did not pick up the tips yet. He has not gone through the files.

Others have suggested increasing our income tax but far from wishing to increase income tax, which now falls on a comparatively small section of the community and hits persons with low incomes, the Government were satisfied that the time had come when some relief from income tax should be afforded and it was for this reason that the reliefs by way of minimum earned income relief and reduced rate of tax were provided for in this year's Budget.

As regards the taxes on drink, tobacco, petrol and oil we are already overdependent on the yield from these and it is clearly desirable that we should move towards a broader base of taxation as represented by the turnover tax. These other considerations apart, greater reliance on the turnover tax would facilitate our change over to the system of added value tax required by membership of the EEC and would avoid grave dislocation in our tax system which would otherwise come about if we had to make a radical change to a value added tax system in a short space of time.

Incidentally, in connection with the added value tax, a matter which was referred to in this debate on a number of occasions, I want to say that no decision has yet been taken by the Government about its introduction. However, an assurance was given in the Budget statement that adequate consultation with the parties concerned would take place before the introduction of such a tax to ensure that the system evolved would be fully understood so that the people concerned with its operation would be facilitated as far as possible within the framework of the tax. If it is decided to introduce the added value tax a public announcement will be made and the necessary consultations will take place immediately following such announcement. I repeat that such a decision has not yet been taken.

Would it be fair to ask the Minister if he thinks at this stage it would be additional to the existing taxes or a substitute?

I can tell the Deputy now. What is envisaged is that if it is introduced it will be in substitution for turnover and wholesale taxes and not in addition to them.

The percentage required will be fairly high? It will go down the whole range of operations?

It goes through every stage of operations from manufacture to retail. I should also like to refer to the suggestion made by some Deputies that the proposed increase in turnover tax in this Bill was introduced without regard to the welfare of the less well off members of the community. This is not so. This year's Budget set aside more than £6½ million by way of increased social welfare benefits and pensions and these reliefs, which have been universally welcomed, will help the income position of those who are most vulnerable to the pressures created by inflation. A further £7½ million has been allocated in the Budget to relieve the income tax burden. This is of major significance to those with small incomes. Some 50,000 income tax payers will be removed from the income tax net and the incidence on many others will be eased.

In regard to the plea made by Deputy O'Hara about small traders and the trouble they may have with turnover tax and demands from Revenue, I remind him that when it was introduced special provision was made to exempt small traders. Under this Bill we are increasing that exemption so that, by and large, traders who are concerned with this tax are not the very small traders Deputy O'Hara very effectively described in his speech but people who are in a somewhat bigger way of business.

They are not too big. They have big overdrafts.

In regards to death duties, I wish to point out that these are a form of tax on capital. Deputy O'Higgins made some criticism of our system of death duties and he said that the impact is the same for the single person without dependants as for a married person with dependants, but I think he overlooked the fact that in 1965 we introduced a system of abatements of estate duty in respect of widows and dependant children. Subsequently, these abatements were considerably extended and now apply to estates up to £100,000. For example, an estate of £25,000 left to a widow with five children attracts no duty here whereas an estate of this value attracts duty of £4,125 in Britain and £2,875 in the Six Counties, irrespective of whether it is left to dependants or not. I think ours is a unique system of abatement and that the Deputy failed to take account of it when comparing rates of duty here with those operating in the north and in Britain.

The general effect of these abatements is that even where the rate of duty is higher here than in Britain or in the north the actual duty payable is lower on estates passing to a widow with dependant children. Relative positions, of course, may be affected in certain cases by a special relief that applies in the United Kingdom in respect of agricultural land. I understand that the special rate for agricultural land there is 55 per cent of the rate which applies to the remainder of the estate.

Deputy O'Higgins proposed that we should adopt a similar arrangement despite the fact that a short time afterwards in his speech he accused us of always copying the British in tax matters. However, in making this proposal the Deputy chose to ignore the very important fact that farmers here are exempt from income tax on their farm profits while in Britain they are fully taxed. This is more advantageous to them than a partial relief from estate duty. There is the further point that if we introduced this relief we would, as has happened in Britain, be providing a loophole for evasion of duty by wealthy people who are not engaged in agriculture in the normal way and, incidentally, we would be adding to the pressure on the price of land.

A number of Deputies suggested that if our death duty rates on larger estates were reduced many wealthy people would settle in this country and that we would benefit by substantial capital inflow. I should perhaps remind them that in 1961 we reduced the rate of duty on estates exceeding £100,000 from 53 per cent to 40 per cent, that is, half of the British rate, in the hope of achieving this result, I understand. However, I do not think the results justified the hopes that were expressed by Deputies who suggested this in the course of the debate.

Deputy Garret FitzGerald said that an annual tax on capital would be a more equitable system of taxation than death duties and would be far less open to avoidance. This question of introducing an annual tax on capital was also considered by the Commission on Income Taxation in their Third Report. They were of the opinion that, despite many strong theoretical arguments in favour of such a tax, the arguments against it were much too formidable to justify its introduction here even on an experimental basis. I do not propose to go into those arguments, but anyone who is interested can find them in the Third Report of that commission.

Some Deputies expressed concern about section 17 dealing with "lumpers." From what I have heard I think there is some misunderstanding about the purpose of this section, which provides for tax deductions to be made in certain circumstances by contractors from payments to sub-contractors. What is involved is, first of all, transactions connected with the construction industry; and, secondly, that the only people who will be affected by this are sub-contractors in the construction industry who have not in the past been on the books of the Revenue Commissioners, or do not now undertake to furnish accounts. Nobody else has any problem. They will get their certificates from the Revenue Commissioners without difficulty.

The Minister talks of a tax on incentive.

Apart from the amount of tax that may be involved in this— and obviously we cannot know because there is evasion—there is the point that it has become established now and if something is not done about it more and more people will avail of this method of avoiding tax. The people concerned also avoid contributing to——

Social welfare.

Yes, social welfare.

The Minister's colleague should look after that.

They also get away with murder with regard to differential rents, and there are other things they get away with.

In regard to the "lumpers", are these the people who are meant to be "on the grip", as the phrase goes?

Some are much bigger than the kind of people the Deputy may have in mind; some are small, but the vast majority of even what are known as "lumpers" pay their tax and there is no problem with them. However, there are some who do not and they are the only people who are affected by this section.

If the Minister catches them he is a better man than I am.

I am hopeful.

They are probably more responsible than the Deputy.

The Deputy would not know anything about that. Responsibility and the new Deputy do not run well together. I have heard him saying certain things during his time in this House, including references to brandy drinkers in Ballyfermot.

I think Deputy Sherwin is quite capable of looking after his constituents in Ballyfermot.

We shall tell you that after the next election.

This section will in no circumstances be used to enforce the collection of arrears of tax due by sub-contractors, whether the tax is already assessed or is shown to be due in respect of past years. Some fear has been expressed that it might be used for that purpose, but there are no grounds for that fear.

Deputy Tully said there had been delays in the issue of tax-free certificates under PAYE and that employees often find themselves burdened with excessive tax deductions for a time. The returns of income and claims for allowances are required by law to be made within 21 days of the date on which the returns are issued, which is normally 6th April. The tax-free certificates for the ensuring year are based on these returns and are issued in the following January, that is, some months before the next tax year begins. In almost every case that has been investigated where this complaint has been made, the delay has been been investigated where this complaint found to be due to the failure on the part of the taxpayer to submit a return of income and a claim for allowances to the inspector of taxes. There may be some exceptions to this, but the vast majority of them have been found to be due to this. We cannot do anything for the people who will not help themselves in that way.

Deputy Tully also said there was delay in the application of tax reliefs announced in the Budget, and there is some substance in this complaint. However, as a result of the improved reliefs given in the Budget—and they were substantial and widespread—it was necessary to revise the tax-free allowances in almost every case. Obviously this could not be done until after the Budget announcement. The work has now been substantially completed and the vast bulk of the amended certificates have been issued. As I say, the complaint arises because of the widespread nature of the allowances given in the Budget.

A remission of £3 6s 8d to everyone paying income tax, including people paying surtax.

Deputy Dr. O'Donovan found it difficult to reconcile the White Paper estimated yield of £23 million from a 2½ per cent turnover tax with the Budget estimate of £20 million from the tax increase. The explanation is quite simple. Turnover tax is accounted for by traders on a monthly basis. It is not paid over to the Revenue Commissioners until the month following that in which the taxable receipts are received. The tax increases here under the Budget became effective on 1st May, 1970. Therefore the Exchequer would not benefit from the increase until the month of June and will collect only ten months tax at the higher rate in the financial year 1970-71. I trust the Deputy is satisfied with that.

It is a partial explanation anyway.

Deputy FitzGerald spoke of the turnover tax and indicated that he favoured a tax at the wholesale stage instead. If the sales tax system were extended to the wholesale stage——

Was it the added value tax he was speaking about?

No. Eventually he spoke about an added value tax going only as far as the wholesale stage, which amazed me because this is not on and because he is so much in touch with Europe—and I say this seriously and not in a derogatory way—I thought he would have known that the EEC Council recently acknowledged the need to include the retail trade in the field of the application of the added value tax which is to be introduced in all of the member states of the EEC. I want to point out that if his suggestion were adopted it would have a number of weaknesses and disadvantages. Because of the mark-up arrangement the retail prices would be somewhat inflated. Unless a higher rate of tax were struck there would be a loss of revenue since the retail mark-up would escape the tax net.

Furthermore, hairdressers, launderers, hotels, beauty parlours and the like, would be outside the scope of the wholesale tax and, therefore, the base would be much narrower and a much higher rate would have to be applied in order to get the same yield. Similarly, many items of consumption, for instance, agricultural produce, passing through the shops would not be caught by a tax at the wholesale stage only. For all of these and for other reasons the suggestion is quite impracticable.

Deputy Cosgrave asked for details of the new contractual savings scheme. Preparations for the introduction of this scheme are well advanced and it is intended to bring it into operation on 1st September next. The details would probably be more appropriate for the Committee Stage and I propose to give those details at that time. Deputy O'Hara referred to the whole question of savings and suggested that it was unrealistic to tell people they ought to save in an inflationary situation. Well, I think this depends on the savings schemes in operation. I see his point, of course, but I would suggest that there are two factors which should be taken into consideration. One is the nature of the savings scheme and the one we propose to introduce, of which some details have already been given, is quite attractive despite inflation for those who leave their savings in to provide substantial capital gains free of tax. Furthermore with the substantially increased affluence in this country, and there is substantially increased affluence, many people are concerned to ensure that in the event, say, of illness, or of a daughter getting married or something like that, their whole economic situation will not be disrupted and for that reason they want to have some money set aside, if only for that kind of situation. Therefore, while they are conscious of the danger of inflation eroding their savings if they are offered a scheme which would counteract that many people do want to save and would be encouraged to save in those circumstances.

I was referring particularly to long-term life insurance.

Yes. Deputy FitzGerald claimed in the course of the debate that the estimates presented in the Budget are not what they appear to be and that, in fact, there is a built-in deficit in the Budget figures. Now I want to deny this categorically.

So well you can.

Let me deal with it on both sides. He talked about the revenue buoyancy. If in any year the estimate of revenue turns out to have been on the low side it is because of the difficulties involved in forecasting the tax base. For instance, last year the GNP growth rate in current terms was somewhat bigger than expected, as was the rate of increase in incomes and prices. This year if revenue should fall short of expectations it will be mainly because prices and incomes rose only moderately and less than projected. If that happens I do not think anybody is going to be disappointed or feel there is cause for alarm. On the expenditure side, the estimates were drawn up on as realistic a basis as was possible at the time. On many occasions in the past an allowance for errors of estimation in the form of a deduction from the total figure for expenditure was made. Last year £2 million was deducted for errors of estimation and in the preceding year £4 million was deducted for that purpose. However, in this year's Budget——

Was there not a special reason for only £2 million being taken into account last year?

Listen to the next point. This year's Budget has no deduction for errors of estimation.

Was the Minister not also earmarking that for the public service sector?

Hold on. In addition to not providing for errors of estimation and making a deduction, we have also provided a figure of £10 million in advance as a contingency against the claim for the public service pay. Now, on that basis it is quite unreasonable, unrealistic and without foundation to suggest that there is a built-in deliberate deficit in the Budget.

Of course, there is. You will have a whopping big surplus because of the increase in wages and salaries.

Actually we cannot win, can we?

No, you cannot win.

(Interruptions.)

You will win again this year.

Fianna Fáil cannot win.

Fine Gael will win, was that what we heard?

"Fine Gael will win and Fianna Fáil cannot win."

That is right.

(Interruptions.)

Change, change. Jackboot.

Will Deputies allow the Minister to make his speech?

Are you trying to give your backbenchers blood plasma?

If the Labour Party could be as happy with their backbenchers as we are they would be here.

You will want to check behind you.

(Interruptions.)

I will come back to these matters. I want to refer to another matter raised by Deputy Treacy today. He talked about failure of price control, exploitation and profiteering and the fact that I, as Minister for Industry and Commerce, had gone along with all of this and with the idea of the sacredness of profits. He used extraordinarily——

Accurate.

——exaggerated words. I do not think he could have meant them exactly as he said them but what I think he was trying to convey was, allowing for the exaggeration, that there were gross and exorbitant profits being made by industries and that no effort was made to control them or to control prices. I dealt with this before but I suppose it is worth saying it again. My experience as Minister for Industry and Commerce in examining these things was, quite frankly, that too many of our industries were operating on dangerously low margins of profit and that we continued to make them do so—and, in fact, reduced their margin of profit on some occasions— when it was somewhat doubtful whether we were justified in doing it having regard to the long-term prospects of the company and of their workers. However, this was done and what I want to get at really is that I cannot see any point or any sense in Deputies saying the kind of thing which Deputy Treacy said.

If somebody says on the one hand that increased prices are due solely to excessive wage demands and on the other hand that excessive wage demands are occasioned solely by increased prices they are just not telling the truth. The truth does not lie in either of those two fields, it is in between, and until we are prepared to be honest and to say, not just to ourselves but to all of our constituents, that there is a close relationship between income increases, wage increases in particular, and increased prices we are going to get nowhere in combating inflation. Until we recognise this, get people to recognise it, that if one goes too far the other will go too far, the spiral starts and you will never catch up, and that it is in the interests in particular of the weaker sections of the community that we should stop this spiral. The stronger sections of the community and the better-off people can manage to cushion themselves against the effects of inflation. The poorer sections of the people living on pensions and on social welfare benefits suffer most. They are dependent solely on what we can do for them in the annual Budget to protect them against inflation.

It is not good enough for Deputies to suggest that the sole cause of increased prices is excessive wage claims. It is even more misleading to suggest that increased prices are the sole cause of the wage claims and that as long as prices keep going up wages will keep going up ahead of them. It has been proved by our experience—and it works out mathematically—that the extent to which increases in wages exceed productivity automatically produces that much of an increase in prices. But you do not catch up on it. This is the kernel of our problem. I repeat what I said at the beginning. We have a strong and healthy economy. The indications in regard to our balance of payments which was, and is, to some extent, a cause of concern and something which must be watched closely, are that there is a fairly substantial improvement in that area.

The Minister was watching it closely last year. Look at how it turned out.

It is not true that there is a fairly substantial improvement. That is not true.

Unfortunately neither of the Deputies was in the House when I gave the details.

(Interruptions.)

The Minister finished up on a red herring, talking about wages and prices.

Was the Deputy not listening when I dealt with that? Did the Deputy hear what I said of having experience as Minister for Industry and Commerce with a number of industries having dangerously low margins of profit?

That does not stop a number of them having excessively high profits.

I am not aware of any such industries.

The CIO report said there was defective management, bad machinery and a bad export drive.

Of course there is defective management. This is not anything new. We have been providing training and grants but do not tell us that is the cause——

Do not blame the worker. How can he determine output if he has no say in management?

Deputy Dr. Browne has such a narrow view of the situation that he probably does not realise he is grossly misrepresenting what was in the CIO report.

The Minister is on two sides.

The Government must be concerned with all sections of the community and this party have always been concerned with all sections of the community. We are all things to the Irish people, not like the people on the Opposition benches. I want to deal finally with the theme which occurred frequently with Deputies on the other side of the House in this debate.

Wait now for the Wolfe Tone bit.

The Deputy said that this country was in the most dire circumstances and that they had no hope for the future. I think I am quoting Deputy L'Estrange who said that the Cabinet was squabbling among themselves and that there was no hope because we did not carry any credibility. I have news for Deputy L'Estrange. Actually, I do not think it is news for him because Deputy L'Estrange knows that there was never a more united Cabinet in this country.

(Interruptions).

And there is no crisis. Words have lost their meaning.

I repeat it: there was never a more united Cabinet in this country than the present one.

(Interruptions.)

There is no crisis.

I want to tell the House that this Government are going to stay in office for the normal length of time and that they are being supported solidly by the party behind them and I want to remind the Deputies——

By the parties behind them.

I cannot count the number of parties on the Opposition benches. When they represent themselves as an alternative to Fianna Fáil the Deputies over there gloss over quickly on what they are united. Members of the Fine Gael Party were propounding directly opposing views on basic fundamental economic theories in this debate. The confusion between Fine Gael and Labour was not as big as it was between some statements which we heard from the Fine Gael people.

(Interruptions.)

The statements were diametrically opposite and diametrically opposite views were expressed from the Labour benches.

This is not relevant to the Finance Bill.

It is as relevant as some of the things we heard from the benches opposite. It is not unreasonable when one spends a long time listening to this kind of talk to give a little back.

We are listening. Fianna Fáil would not listen.

I want to remind the Deputies opposite that many times in the past they have thought that Fianna Fáil was finished.

That is true.

I will not go back too far. I will go back to when Eamon de Valera retired from active politics——

Do not bring the President into the politics of today.

On a point of order, should the Minister not refer to the President properly?

There has been no order here since the Minister began to speak. Order should obtain on both sides of the House.

On a point of order, may I ask if it is proper to refer to the President by his ordinary name?

If I was out of order in that way, I apologise. I referred to the President and I used the phrase I did because I was speaking of the situation as it was when he retired. When President de Valera retired from active politics the parties on the Opposition benches thought Fianna Fáil was finished.

(Cavan): It took the Fianna Fáil Deputies somewhat longer to gut each other than we thought. Gerald Boland had not spoken.

We have been hearing about all the splits over the years. We had a referendum in which the Government proposals were heavily defeated and every day the Opposition Deputies were telling us about how soon they were going to be on the Government benches, but the people did not want them and when the Opposition get the next opportunity, when they are dragged before the people as they will be in about four years time——

Deputy Haughey is waiting to get the Minister out. Deputy Blaney and Deputy Boland are waiting.

Let me tell Deputy Cosgrave that, if the position of the country with regard to negotiations were not as it is now, I would be using every ounce of influence I have to have us go to the country because we would come back with at least 80 seats and the Opposition know that. The calls for a general election are made in the confident hope that we will not accede to them. Do not push us too far.

(Interruptions.)

When we go before the people again the Opposition will once more be shown that the people of the country know the value of the Fine Gael Party and the Labour Party that they are reasonably good as Opposition parties but they do not want them on the Government benches and they will not have them over here on these benches. One of the factors——

Where is the party of reality and the party of stability now? Where are Deputies Haughey, Blaney and Boland?

——in securing that result will be this Finance Bill.

With the indulgence of the Chair, may I ask the Minister a question?

The Deputy is entitled to put a question.

Having regard to the situation obtaining in the tourist industry—for which the former Ministers have some responsibility—and the fact that investment in industry will be much lower in the next year as a result of the conduct of the former Ministers, and bearing in mind that our balance of payments was supported by certain payments made for purchase of property here, how does the Minister hope to rectify the balance of payments situation and put the economy on a right footing? How will he ensure that people will not be subjected to another very severe credit squeeze?

As I indicated earlier, it is unfortunate that Deputy Donegan was unable to be present for the earlier part of my speech. However, he can read it in the Official Report and get the answer there.

Question put.
The Dáil divided: Tá, 68; Níl, 59.

  • Aiken, Frank.
  • Allen, Lorcan.
  • Andrews, David.
  • Barrett, Sylvester.
  • Blaney, Neil.
  • Boylan, Terence.
  • Brady, Philip A.
  • Brennan, Joseph.
  • Brennan, Paudge.
  • Briscoe, Ben.
  • Brosnan, Seán.
  • Browne, Patrick.
  • Browne, Seán.
  • Burke, Patrick J.
  • Carter, Frank.
  • Carty, Michael.
  • Colley, George.
  • Collins, Gerard.
  • Connolly, Gerard C
  • Cowen, Bernard.
  • Cronin, Jerry.
  • Crowley, Flor.
  • Cunningham, Liam.
  • Davern, Noel.
  • de Valera, Vivion.
  • Dowling, Joe.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • Fitzpatrick, Tom (Dublin Central).
  • Flanagan, Seán.
  • Foley, Desmond.
  • Forde, Paddy.
  • French, Seán.
  • Gallagher, James.
  • Geoghegan, John.
  • Gibbons, Hugh.
  • Gibbons, James.
  • Gogan, Richard P.
  • Healy, Augustine A.
  • Herbert, Michael.
  • Hillery, Patrick J.
  • Hilliard, Michael.
  • Hussey, Thomas.
  • Kenneally, William.
  • Kitt, Michael F.
  • Lalor, Patrick J.
  • Lemass, Noel T.
  • Lenihan, Brian.
  • Loughnane, William A.
  • Lynch, Celia.
  • Lynch, John.
  • McEllistrim, Thomas.
  • MacSharry, Ray.
  • Meaney, Thomas.
  • Molloy, Robert.
  • Moore, Seán.
  • Nolan, Thomas.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Des.
  • Power, Patrick.
  • Sheridan, Joseph.
  • Sherwin, Seán.
  • Smith, Michael.
  • Smith, Patrick.
  • Timmons, Eugene.
  • Tunney, Jim.
  • Wyse, Pearse.

Níl

  • Barry, Peter.
  • Barry, Richard.
  • Begley, Michael.
  • Belton, Luke.
  • Browne, Noel.
  • Bruton, John.
  • Burke, Joan.
  • Burke, Liam.
  • Burke, Richard.
  • Byrne, Hugh.
  • Clinton, Mark A.
  • Conlan, John F.
  • Coogan, Fintan.
  • Coonely, Patrick M.
  • Corish, Brendan.
  • Cosgrave, Liam.
  • Cott, Gerard.
  • Creed, Donal.
  • Crotty, Kieran.
  • Cruise-O'Brien, Conor.
  • Desmond, Barry.
  • Dockrell, Henry P.
  • Dockrell, Maurice E.
  • O'Donovan, John.
  • O'Hara, Thomas.
  • O'Higgins, Thomas F.
  • O'Leary, Michael.
  • O'Reilly, Paddy.
  • O'Sullivan, John L.
  • Pattison, Séamus.
  • Donegan, Patrick S.
  • Donnellan, John.
  • Dunne, Thomas.
  • Enright, Thomas W.
  • Esmonde, Sir Anthony C.
  • Finn, Martin.
  • Fitzpatrick, Tom (Cavan).
  • Flanagan, Oliver J.
  • Fox, Billy.
  • Governey, Desmond.
  • Harte, Patrick D.
  • Hogan, Patrick.
  • Hogan O'Higgins, Brigid.
  • Jones, Denis F.
  • Kavanagh, Liam.
  • Keating, Justin.
  • Kenny, Henry.
  • L'Estrange, Gerald.
  • Lynch, Gerard.
  • Malone, Patrick.
  • O'Connell, John F.
  • O'Donnell, Patrick.
  • O'Donnell, Tom.
  • Ryan, Richie.
  • Taylor, Francis.
  • Thornley, David.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Tully, James.
Tellers: Tá Deputies Andrews and Meaney; Níl, Deputies R. Burke and M. O'Leary.
Question declared carried.

Tuesday Next.

It has been suggested through the Fianna Fáil Whip that Tuesday, 14th July, might be suitable.

The fact that it is ordered for next week does not necessarily mean that it cannot be put back.

Tuesday week.

All right, Tuesday, 14th, July, 1970.

What about the EEC debate? It will not conclude this week.

It will go on as long as is necessary. It will go on without restriction as to time, as arranged, unless some other arrangement is come to in the meantime.

It will not be interrupted by the Committee Stage of the Finance Bill?

It might be if it is not over by then.

Now we know where the coalition is.

Committee Stage ordered for Tuesday, 14th July, 1970.