Dáil Éireann debate -
Wednesday, 25 Nov 1970

Vol. 249 No. 13

Finance (No. 2) Bill, 1970: Second Stage.

Minister for Finance (Mr. Colley)

I move: "That the Bill be now read a Second Time."

The Bill contains provisions to give statutory effect to the Financial Resolutions agreed to by Dáil Éireann on 28th October, 1970. It also contains two other provisions to which I shall refer later.

Section 1 disallows, for 1970-71 and subsequent years of assessment, the deduction of corporation profits tax in computing company profits for the purposes of income tax. It also disallows foreign taxes for which credit may be allowed under the terms of arrangements concluded with other countries for the avoidance of double taxation.

Section 2 provides for increases, with effect from 1st November 1970, in the rates of duty on private motor vehicles. The increase is about 25 per cent on private cars up to 13 horse-power and on motor cycles; it is up to 33? per cent on private cars exceeding 13 horse-power, subject to a maximum rate of £50.

Sections 3 and 4 relate to the increase from 15 to 20 per cent, with effect from 1st November, 1970, in the wholesale tax rate applicable to articles of a less essential nature such as yachts and other pleasure craft; motor cars, motor cycles, scooters and mopeds; caravans; radio and television sets, radiograms, record players, gramophones and gramophone records.

Sections 5 and 6 are concerned with two matters not dealt with in the Financial Resolutions of 28th October. Section 5 provides for the payment of interest at the rate of 8 per cent per annum on certain Land Bond redemption moneys for the period by which payment will have been delayed due to the closure of the banks. Section 6 enables the Minister for Finance to charge to the Central Fund commitment fees and other expenses involved in making money available for borrowing, as he might require.

I commend the Bill to the House for a Second Reading. The detailed provisions of the Bill are summarised in the explanatory memorandum circulated earlier but I will be glad to deal with any points on which Deputies may require further information or clarification.

Mr. O'Higgins

This Bill, as the House is aware, is the other half of the measure which the House has been discussing during recent days. It is part of a package deal which was so extensively advertised by the Minister and so dramatically and frequently altered and changed by the Minister.

The provisions in this Bill relate exclusively to the financial aspects of the package deal. The Bill as it stands now bears all the marks of the panicky decision-making which marked all the announcements of the Government with regard to the inflationary situation. This is an ill-conceived Bill, hastily contrived. It is part of a policy designed to freeze wages in this country. This is supposed to be a sugar-coating which will sell a wage freeze policy to workers and to the trade union movement. I propose to show that this Bill is of potential danger to everyone in industrial employment in this country. It has been hastily contrived. I do not believe that it has been thought out. It contains elements of danger for many Irish companies who are at the moment providing employment for our people.

One saw recently the collapse of the Hibernian Transport Group. People appreciate the significance of that collapse, not only in relation to those employed in the firms concerned but also in relation to the many people who traded with that group and their subsidiaries, and who sold them services or goods during the last six months. Those people now have received by post, in the last week or so, returned cheques which were drawn on various dates. In one instance a cheque drawn on 14th April last was returned, and in another instance a cheque drawn on 24th April last has now been returned to people who had continued to trade with members of that group in the intervening period. A big industrial collapse of that kind can bring serious dislocation and considerable suffering to people in employment, and to others.

Section 1 of this Bill is potentially dangerous on that account. Section 1, in effect, means that the maximum combined rate of income tax and corporation profits tax is being raised from 50 per cent to 58 per cent in a normal year, that is an increase of 16 per cent. This is being done for the year 1970-71 or for any subsequent year of assessment. Under this proposal, companies face a 16 per cent increase not only in relation to the year 1970-71 but for any subsequent year—for any subsequent year. Apparently this Bill is to be a permanent measure of taxation.

In a Press statement, the Minister referred to normal years. What happens before a normal year arrives? Income tax is necessarily paid in arrears. As corporation profits tax is incurred, it is paid. If this section is passed, a company with an accounting year ending on 30th April, 1969, will be due to pay income tax in January, 1971—next January—although corporation profits tax will have been paid by that company in January, 1970.

In accounts for the trading year ending April, 1969, provision will already have been made for corporation profits tax and income tax at the 50 per cent rate. The same will already have been done in respect of the accounts for 1970. At the moment, in relation to these companies, dividends will have been declared and distributed and all the shareholders will have their statement of accounts. This imposition now comes about in the middle of this trading year, with dividends having been declared, accounts having been stated, and so on.

Each company with an accounting year ending 30th April will find that it has made under-provision for tax of 8 per cent in each year—in 1969 and in 1970. This means that in 1971 each such company has to provide (1) for the new tax of 58 per cent of profits; (2) for 8 per cent in respect of the year 1969 and (3) for 8 per cent in respect of the year 1970. In 1971, a company with an accounting year ending in April will have to face a total tax liability of 74 per cent of their profits. That may be all right for companies with a rising profits situation, a company who are operating in an expanding way and with rising profits— they may be able to ride that particular liability. Unfortunately, many companies—and this is particularly unfortunately so at the moment—have a static profit position and with a static profit position it will be utterly impossible for such companies to provide for a tax liability next year of 74 per cent.

I am not talking about extreme cases. On information I have been given, this 74 per cent liability next year will effect one-quarter of Irish companies. This can only have a disastrous effect on the competitiveness of Irish companies who, increasingly, have to fight for their position in the home market. If they are to face accumulative tax liability next year of 74 per cent, their competitiveness on the home market alone will be greatly jeopardised. Furthermore, the attractiveness of Irish companies, from an investment point of view, is obviously lowered and endangered. The Hibernian Transport Group is only one example. This action by the Government seems utterly unjust and highly dangerous.

At the moment, unfortunately, many companies are finding their profit position faltering, becoming more difficult, under the pressure of a rapid cost inflation. Many Irish companies are face to face with a real battle for survival which I hope they will succeed in winning because I am thinking not merely of shareholders and investors but of those employed and those who depend on the continued competitiveness of their company to provide for future employment.

I wonder was this 74 per cent tax liability planned? I wonder was it thought out, or is this something that has just emerged because of a hasty impulsive ministerial decision to try to sell a package deal that was not well thought out at all? A 74 per cent tax liability on one-quarter of the Irish companies, I can assure the House, will cause absolute bedlam in Irish industrial activities. That is one aspect of this measure, and particularly of section 1. I wish it were the only aspect but unfortunately it is not.

Here we have this imposition put on Irish companies, a taxation of Irish industry, at a time when we are facing the challenge of Europe and all that brings with it. In this measure we are now taxing the one source of future employment for our people. As Deputies will appreciate, every company, every trading company, every company who are in the market, providing employment and producing a product, depend for their ability to expand and create more employment on what they retain out of profits, on their retentions. A company who are doing well by the country, who are looking forward to broad horizons, will retain more and more of their profits and invest them in the company, in expanding their activities and in providing more employment.

That is so axiomatic that there is no need to emphasise it in this House but apparently it must be emphasised to the Government because the importance of this plough-back of profits into industry, while it is recognised in England, is not recognised here. At the moment any English registered company, any British company, who plough back their profits in to their own activities, pay corporation profits tax in England at a reduced rate of 42½ per cent. Here we do not recognise any such distinction. Whether a company plough back their profits, retain some of their profits for future expansion, or distribute all their profits, after taxation, amongst their shareholders, we do not recognise any difference. The same rate of income tax and corporation profits tax applies. No distinction is recognised so that, under this Bill, a company endeavouring to expand, endeavouring to gear themselves for the challenge of Europe and to provide employment for our people, an Irish company, ploughing back their profits, will have to pay tax at the rate of 58 per cent.

What does this mean? Nowadays every market must be fought for and this will be increasingly so. There will be no preserved market for any part of industry, for any company in competition. In the future nobody will be able to say the Irish market is his own particular oyster. We will have Irish companies, under this proposal, paying tax at the rate of 58 per cent and competing against English companies on the Irish market who are only paying tax at the rate of 42½ per cent. That is what this proposal means. We will have our own companies, Irish industry, put in a less competitive position in relation to the Irish market.

I can carry this further. An English company having a preferential rate of corporation profits tax in England of 42½ per cent and retaining their profits for expansion, can use those profits for advertising and can pour millions into television advertising and get away with it because they are using their profits for expansion. That company can put out of business many Irish companies on the home market. That is one of the effects of this ill-considered and stupid piece of legislation.

I do not think this House has ever seen before a measure of this kind which is supposed to be passed because of a long-talked of emergency, a measure in which an Irish Minister for Finance gives to the competitors of Irish companies on the home market an advantage, a stick with which to destroy Irish companies, or certainly embarrass them significantly. That is the second aspect of this measure which I think should be borne in mind by Deputies. First of all, this measure will impose an onerous tax liability next year of 74 per cent on one-quarter of Irish companies. Secondly, it will have the effect of putting expanding British companies which retain their profits and use them for expansion in a strong competitive position in relation to Irish companies.

The third thing is this. This may also cost the Minister for Finance a fair amount of money. Company income tax, I am told, is determined by the place where management and control are exercised. That determines the liability for company income tax. On the other hand corporation profits tax is determined by the place of incorporation so that an English company trading here pay the English rate of corporation profits tax. If they are an expanding company they pay at the rate of 42½ per cent. Up to the moment an Irish company would pay corporation profits tax at the rate of 50 per cent. As I said, income tax is determined where management and control are exercised and corporation profits tax by the place where the company is incorporated.

We know that at the moment many English companies are operating here —I am not quarrelling about that; they are entitled to do so—under Irish subsidiaries. What will they do? Faced with this ill-considered and rather badly thought out piece of legislation these English companies will now be tempted—in fact, I would say they will go far beyond temptation—to start to liquidate their Irish subsidiaries. They will then register a new company in the North of Ireland and in doing that they will achieve a situation in which they will only be liable to income tax at 35 per cent. I have no doubt that any such company that goes for advice will be told to do this and we will have a new situation of the home market being operated by companies registered in the North of Ireland, having a preferential tax rate because of the registration, and operating at a complete advantage here on our own market.

I do not know what thought went into this Finance (No. 2) Bill. Obviously it is a second thought anyway. The Finance (No. 1) Bill was stillborn. It never saw the light of day. Here is the second one and in the very first section there is a proposal which is potentially a danger to the jobs and way of life of thousands and thousands of people. At this moment industrial employment is under considerable threat from the EEC, from what is likely to arise from our entry into Europe. I am not complaining of that. I am stating it to be a fact. Our situation vis-á-vis Europe certainly is not new; it has been with us during the last couple of years. It requires a considerable new dynamism, a considerable new adjustment, a considerable new drive for Irish industry to face up to the challenge which Europe will bring.

When I talk of Irish industry I mean the effective way of employing our people at home. At the moment that threat is there, that danger is there, and I would imagine that there are many German, Swiss and French industrialists who will read—and mind you they will read it—section 1 of our Finance Bill and they will want to know what kind of a daft Government have we in Ireland. Not only will they get grants to come in here but we are going to ensure that Irish companies on the home market will be crippled, will be shackled, will be prevented by our own legislation from competing with them on even terms. The kind of thinking that is involved in this Bill is indicative of a very sick Government that should get out of office as quickly as possible.

Mr. Tully

My sympathy in relation to this mini-budget or whatever one likes to call that which has produced this Bill goes, apart from the Irish people who are suffering, to the people who have the task from the Government, through the Minister, of drawing up legislation to try to enact what they appear to think is the right thing to do. If there could be a more muddled idea of solving problems than the system which they have adopted I should like to know where it is.

We have been debating in the last couple of weeks in this House a so-called Prices and Incomes Bill and we have repeated again and again, and the Minister does not appear to understand the idea, that it mainly aims at keeping down incomes of certain people. It is aimed, for instance, at preventing building trade workers from getting an increase in wages which they were due when their agreement terminated on 30th September. Building workers are hit directly by this Bill, the type of workers who come in from outside the city for the purpose of getting jobs here. The Minister knows quite well that those people will have to pay additional taxes on their cars. He has provided for this. They will have to pay—he contradicted me on this on First Stage and I should like him to repeat that now if he thinks it is still true—when they are buying replacements, additional wholesale tax on them. All this is geared to taking more out of their pockets while at the same time in this House the Minister has a Bill to ensure that they do not get anything to compensate them for it.

Mr. Colley

Anything?

Mr. Tully

Yes, anything. It is rather unfortunate that people like the Minister and other Ministers—there are one or two who are not in this position —feel that if one does not have the money to buy something one writes a cheque. Could I put it across to the Minister that there are people who never saw a cheque in their lives. They get a week's wages into their hands. They or their wives spend that in order to run their households.

If the wages which people were getting up to 1st October last were supposed to be by those who negotiated them, enough to keep them going for that period, and if on the promise that they would from that date get a further increase which would compensate for what was coming along, and the Minister has deliberately ensured that as of now they are not getting that increase—he was particularly anxious here today to try to cover up those who were using a strip of paper before this House as if it were an Act of Parliament—how does he expect those people to pay the additional costs which they have had to pay and will have to pay because of Government muddling?

Mr. Colley

I still do not follow the Deputy's point that they are being precluded from getting anything extra.

Mr. Tully

How much extra have building trade workers got?

Mr. Colley

Since when?

Mr. Tully

Since the wages standstill went on, the Prices and Incomes Bill? Since the last agreement terminated how much have they got?

Mr. Colley

I presume they have got nothing additional.

Mr. Tully

The Minister is making sure they will not get anything additional until he or the Government decide what that percentage will be.

Mr. Colley

Now I understand the Deputy's point. If they have not got it they will not get anything until the Bill is enacted. That depends on the Deputy of course.

Mr. Tully

If the Deputy has his way the Minister can be assured the building trade will get what they are entitled to, enough to live on.

Mr. Colley

If the Deputy keeps talking they will not.

Mr. Tully

I remember a Minister for Local Government who once in the Seanad said that the Labour Party were holding up a Bill to change constituencies. He said to one of our people who had been talking for 20 minutes: "If you would sit down we would get it finished." He sat down and the Minister spoke for six hours and 55 minutes. The Minister for Finance is capable of doing the same thing here and he may have to before he gets some of this legislation through the House.

This type of legislation is apparently aimed at doing something and even the Minister himself does not seem to be terribly clear as to what the results will be. I was talking to a man the other day who earns £25 a week. He asked me if I knew what he had left after paying taxes. I said I supposed £23 or £24. He is a married man with no family. He said that in a lucky week he would have £14. That appeared to me to be ridiculous but he spelt it out for me. He counted the income tax which was deducted, which he could not help, the tax which he pays on his car, the tax on petrol for his car, the turnover tax and the wholesale tax which he pays on certain items and he was able to prove that by the time he finished paying taxes, without any regard to what he might buy, he had £14 left out of £25. I am sure the Minister and the Government do not realise that what they have been doing by putting on tax after tax is having the effect of taxing people out of existence.

Deputy O'Higgins talked about what was happening to industries. I am sure the Minister is aware that recently a deputation representing Irish industry visited each of the three political parties. We could agree with some of the arguments put forward by them; perhaps there were others with which we could not agree, but one case in particular that was made was in relation to a firm which had completed a very big rebuilding job for which the Government gave them a £250,000 grant. The representative of that firm pointed out that because of the change in legislation, what he called retrospective legislation, they were being taxed to the extent of£365,000. He asked if we considered that to be a reasonable approach by any Government. Deputy O'Higgins covered the point very well. If these people had known what was about to happen they would have made provision accordingly, but not knowing it was very unfair from their point of view. Retrospective taxation in itself is unfair. I was surprised to hear the Minister say that he did not know how much this would cost. I am sorry if the Minister thinks I am misrepresenting him.

Mr. Colley

I do not know to what the Deputy is referring.

Mr. Tully

In regard to this question of taxation, the Minister said he did not know how much it would cost. It is my opinion the Minister should know this before imposing the taxation or, at least, his officials should be able to provide him with an exact estimate of what such taxation would bring in and what it would cost those who are being taxed. He should also have a fair idea of the number of industries that would be affected by the taxation. This should be merely a case of simple arithmetic for the people who help him run his Department. I believe that when dealing with matters of this kind the Government must take everything into account.

One of the points made by that deputation was that profits of less than £20,000 should be dealt with in a different way to profits of more than £20,000. This is something which the Minister might take into account because if he considers the matter he must realise that there should be a difference in relation to a firm who made a profit of £20,000, out of which profit they have to make provision for everything necessary for their industry, and a firm who are making a colossal profit, in which case a figure of £20,000 would not matter very much one way or the other.

I am sorry to have to say to the Minister for the second time that this is hasty legislation, legislation that has been introduced without proper attention. My party believe that excess profits must be taxed because they are the proper source from which they are paying revenue, but there must be a difference between taxing the profits of people who have plenty of money and imposing taxation in such a way that people will be prevented from making any profit, with the result that unemployment may be caused.

I still believe that our entry to the EEC is as far away as ever. I do not think Britain will go in and that is why I say that we will not go in either. However, if the Government believe that we will enter the Community, have they considered how this type of taxation will measure up with the taxation within the EEC? Have they considered what type of alteration will have to be made in our type of taxation in order to keep in line with their system? It is possible that this is merely a matter of expediency, that the Government have said "We want something now, tomorrow can look after itself."

There are two other matters of importance, one of which I referred to earlier. That is the increase in the taxation on motor vehicles. This was ill-advised, particularly in the case of people who must maintain cars in order to get to work. There are two different types of people maintaining cars. There are those who can afford to run a car for pleasure—there are not many of those—and there are those who must use a car or other type of vehicle in order to do their work. When this new taxation on motor vehicles was introduced one of my constituents said to me: "I am a road overseer and I am allowed 25s per week to run my car. Would you ask the Minister for Finance how he thinks I could possibly pay extra taxation out of this 25s per week because already this amount does not cover repairs, the cost of petrol and so on?" This is the type of problem which faces the ordinary working man. I fear that when people are framing legislation of this kind they very often deal with the matter as if it were simply a question of a figure in front of them and that that figure does not affect human beings at all. Of course those who will be affected most will be those on a relatively small wage. For that reason, every extra tax imposed will mean a lower standard of living for those people.

During the past couple of days I heard numerous speakers refer to the improvement in the standard of living during the past few years. These speakers do not seem to realise that the standard of living for a lot of people has been attacked and lowered by direct government action. There is also a proposal here to increase the wholesale tax on certain commodities. It is interesting to read what the Minister has included. He has increased the wholesale tax from 15 to 20 per cent in respect of certain goods. At this point I might say that when the turnover tax was introduced, the present Minister for Transport and Power—I cannot remember what ministry he held then; he moves around so much—said that the turnover tax was to cover luxury goods and he listed luxury goods as comprising expensive fur coats, jewels and expensive motor cars. He did not go any further.

What is considered by the Minister for Finance to be luxury goods? He is very careful not to use the phrase "luxury goods" but he has included "motor vehicles designed and constructed for the conveyance of persons by road, but not including vehicles designed and constructed for the carriage of more than 16 persons" and invalid carriages designed for use by invalid or infirm persons. In other words, he is leaving out certain types of mini-buses but he is including motor cycles and scooters. Motor cycles and scooters have become modes of transport for thousands of workers all over the country. Yet the Minister claims that these are luxury goods and as such, should be subject to a 20 per cent wholesale tax. Also included are caravans, including mobile homes. At present, the Minister for Local Government, as well as some other Ministers, are trying to give the impression that they are boosting a campaign for the introduction of a certain type of low-cost home. Again, they do not seem to understand that throughout the length and breadth of this country people who cannot get local authority houses and who cannot afford to provide houses for themselves have been investing in mobile homes which for many of them have become their permanent residences. According to the Minister these mobile homes are to be included in the 20 per cent wholesale tax. Again, there is no provision whatever made for those who have to do that. There is no distinction made between them and the people who buy caravans and hitch them on to the backs of their cars for a holiday. The explanatory memorandum states:

Ships, boats or other vessels designed and constructed for the conveyance of persons and not exceeding 100 tons gross; and sports and pleasure craft of all descriptions including yachts, cabin cruisers, dinghies, canoes, skiffs and racing boats.

Would the Minister, when he is replying, say if, in fact, ordinary fishing boats are included in this. They do not seem to be excluded, so I assume they are included. There are a lot of boats which are used for the conveyance of persons along the coast or on our rivers for fishing. They do not appear to be excluded here. It also states:

Radio and television receiving sets of the domestic or portable type including sets suitable for use in road vehicles.

I would not argue too much about the question of sets used in cars or of television sets but I think ordinary radio sets are in a separate class on their own. Most youngsters nowadays have portable sets of their own and it may be the minister's idea that they should be caught by this tax. This means there will be a heavy impost put on many people who have not got the money to pay this increase. They might not want to watch television and prefer a radio set. This refers particularly to old people living alone. The next point is:

Gramophones, radiograms, record players and gramophone pick-ups. Gramophone records.

I would not object to the increased tax on gramophone records because the young people seem to have nearly all the loose money there is and, perhaps, this would be the right way to get it.

It seems to be the norm in this country, although it did not come off last year, that we have an autumn budget. We seem to have reached the stage where the Minister for Finance at the time is no longer able to estimate for 12 months what is needed to run the country and, therefore, he puts in a quickly thought-up budget, waits until the fall of the season and if there is nothing pending he decides to bring in a second budget which will make up the leeway.

I know the Minister has stated that he is not trying to find all this money in taxation but that he proposes to get £7 million by borrowing. Before this Bill came before the House it should have received a lot more consideration than it got. We have an example here of how this Government have apparently decided the way to do everything is to take the easy way out, to take the short cut on every occasion, and if it falls back you can always take another short cut and see if it will bring you out in the right place. The Minister, now that he has got a rest for a couple of weeks from his Prices and Incomes Bill, should have a look at this legislation which is now before us and see if it represents what he thinks is best for the country because I do not think it does.

We must bear something else in mind. The previous Minister for Finance was Deputy Charles Haughey and he is on record as saying that this budget was unnecessary. Nobody will deny that. I noticed him sitting on the back benches in the House during the last couple of days smiling broadly whenever his successor was getting laced by the Opposition on a particular point. Deputy Colley, as Minister for Finance, is in a peculiar position. He spoke here in his winding up speech on the Second Stage of the Prices and Incomes Bill about a ghost. I want to say to him that there may not be a ghost but there is a shadow following very close behind him. I would place a bet with anybody here that the Minister for Finance who will bring in the next budget, if Fianna Fáil do not do the decent thing and get out of it, will be Deputy Charles Haughey and not Deputy George Colley.

Mr. Cosgrave

I want to supplement some of the comments that have been made on this Bill, which has already been correctly described as the second part of the package deal. Already announcements have been made indicating that some portion of the other side of the package is being relented on and the only part which remains is the part that it is proposed to proceed with in this measure. I want to reiterate what has already been said on the effect of this measure as it is at present framed.

One of the important matters, from the point of view of companies engaged in operating industries, is to try to forecast, as accurately as possible over a period, the economic trend. In modern circumstances while this may be in many ways difficult and involve a great deal of uncertainty, there are certain known facts on which companies make their calculations. This piece of legislation, as it is at present drafted, purports to apply retrospection in respect of the tax arrangement which companies have already made. It is generally agreed by accountants that the calculations that have been made, which have been referred to and publicised in the House and elsewhere, are regarded by those dealing with the accounts of companies as generally applicable to the average company accounts. Though there may be variations of one sort or another, the figures that have been given and the calculations that have been made apply by and large to all companies.

When companies are computing their annual accounts they make provision first for tax. The sum remaining after tax is the provision for profit which is available to the company and is used for the purpose of running the company, including the payment of dividends, if the company are in a position to do so. The effect which this measure will have on companies is that it applies retrospectively, as I understand the position. I have already referred to this as a technical matter which is not as easy to understand or to express in non-technical language.

The provision for current tax is mainly made under two heads, that is, both corporation profits tax and income tax for the fiscal year in which the company's accounting year ends. For instance, a company which accounts to 30th June, 1970, makes provision in its balance sheet for corporation profits tax and income tax for the year commencing on 5th April, 1970. The basis of assessment for corporation profits tax is the profits of the current year. The basis of assessment for income tax is the profits of the preceding year. In the fiscal year commencing on 5th April, 1970, the company's corporation profits tax is assessed on the profits shown in the accounts to 30th June, 1970, while the income tax is assessed on the profits shown in the accounts to 30th June, 1969.

The other provision which it is necessary for a company to make is provision by way of reserves for future taxation. This is the estimated amount of income tax to be paid in the succeeding year, assessed on profits shown in the current year's accounts. In the case of a company accounting to 30th June, 1970, the reserve for future taxation will be the amount of income tax estimated to be payable for the fiscal year ending on 5th April, 1971. The effect—and this is the important point of this legislation—of the proposed disallowance of corporation profits tax in computing a company's profits chargeable to income tax is to invalidate the provision for tax already made in the company's accounts. Indeed a number of companies that have already expressed concern at this have already closed their accounts for the year in question, whether it ended on 30th June or some date in the last few months. Of course the extent of the impact will naturally vary from company to company.

In the case of a company whose accounting year ended on 30th June, 1970, the provision for current taxation, on the proposed change enshrined in this Finance Bill, means that it will be short 8 per cent of its profits, and the reserve for future taxation, unless it is clear that the deduction now proposed to be made will be restored in the year commencing 5th April, 1971 —which appears to be contrary to what the Minister intends—will be reduced by a further 8 per cent. Therefore, when accounts for the year ending 30th June, 1970, are prepared, a sum equal to this 16 per cent must be deducted from the sum which would otherwise be available as profits and the effective profits for the year ending 30th June must be reduced accordingly, unless the deduction is restored in the fiscal year commencing 5th April, 1972. If this is not done, then the accounts for the year ending 30th June, 1971, must include a further 8 per cent in the provision for reserve for future taxation, making a total additional tax inroad upon the effective profits for the year ending 30th June, 1971, of 24 per cent. Therefore, after tax, approximately 27 per cent only of the net profit will be effectively available to the company.

These somewhat technical descriptions of the necessary requirements have also been adverted to by the Confederation of Irish Industry. However, the important thing to consider in this regard is the fact that in this particular year almost every company statement that has been issued indicates a very serious drop in profits—and, indeed, in some cases, in earnings—and almost all companies show a downward trend. A great many of the companies that have published their accounts and had their annual meetings have expressed concern at the export resistance they are finding, at the fact that it is more and more difficult to sell Irish goods abroad because of the increasing competitiveness of their rivals on foreign markets and because of price increases here.

One of the facts about which representatives of industry have expressed concern is that this proposal operates retrospectively and that, in addition to operating retrospectively, according to the phraseology of the Bill, it is intended to continue it. In other words it is not a once-and-for-all operation. It has been argued strenuously and, I think, to considerable effect, that whatever about the sum for which it is proposed to make companies liable on 1st January next—a total sum, I understand, of approximately £3,500,000— there is no justification for continuing this procedure in the light of the economic condition of so many of these companies.

In the course of the other debate, which was the other side of this package deal, I referred to the effect of increased Government spending. The Minister, in replying, more or less scoffed at the content of my remarks to the extent that Government expenditure was by no means a large factor in it. Since then the governor of the Central Bank has expressed very considerable concern at the extent of Government spending. He said there was a 13 per cent increase in 1967-68, a 14 per cent increase in 1968-69, a 17 per cent increase in 1969-70, and a projected 19 per cent increase this year. He went on to describe the Government's high level of spending as a powerful inflationary force in its own right. Industrialists are affected because the Government propose to raise money by taxation but there is no indication, except a vague figure of £7 million, that the Government propose to retrench. In a Budget the size of today's Budget £7 million is a negligible figure. It is made even less realistic because not a single item is listed, except the hope that total expenditure this year will be reduced by £7 million.

It is proposed to cover the £21 million deficit in three ways: by a £7 million saving in Government expenditure; by £5.3 million raised in extra taxation and the taxation of companies; and the remaining £8.5 million is to be raised by borrowing. This is contrary to the advice given by the governor of the Central Bank in his statement last night when he said that borrowing was one of the factors which contributed to an inflationary situation.

The Minister for Local Government this morning announced that efforts were to be made to provide prefabricated houses, giving the illusion that the Government were doing something remarkable about solving the housing problem. Mobile homes and caravans have become fixtures of a permanent nature—and nowhere is it more obvious than in the area adjacent to the city. Indeed, people are lucky to get a mobile home as a form of housing accommodation. It is obviously ill thought out to attempt to raise extra money by taxing items which are in no sense covered by the description of luxuries or non-essentials. When these caravans, or mobile homes as they are called, were used for holiday purposes it was a different matter but nowadays mobile homes are being used as permanent homes by many people.

In its quarterly, half yearly and annual reports the Central Bank expresses concern about public expenditure. People are inclined to treat this as an annual wail or a twice yearly whinge on the part of the Central Bank, but it is notable that when the Central Bank issued guidelines for relaxing credit controls in the middle of the 1965 General Election and, to some extent, prior to last year's election, there was an easing of credit control. This weakens the capacity which a body of that sort should have to express itself clearly and unequivocably to command respect by commenting on the economic and financial position. But, leaving aside one or two exceptions, and while throwing some doubt on the attitude adopted, the Central Bank has expressed strong criticism at the rate of government expenditure. It has expressed grave concern, and has reinforced from an independent position the arguments that we have advanced here that the Government acted in the belief that, as long as public money was being spent it did not matter what it was being spent on, and an illusion of prosperity was created.

The position has changed rapidly and industry is finding it more and more difficult to get capital. The proposal to restrict dividends is likely to have a damaging effect on a company's capacity to raise capital in the immediate future. It has been suggested, with a good deal of force, that there ought to be a different rate of tax in respect of profits distributed by way of dividends and money retained by a company for future expansion and development. It is argued that because it is retained it may be paid out subsequently but it ought to be possible to cover cases of that sort. Some companies have postponed, and even abandoned, future development and expansion because of the rise in tax and the situation created by measures of that kind.

The Confederation of Irish Industry, chambers of commerce and individual representations have made a convincing case which merits reasonable considertion. I believe it is bad to continue this legislation indefinitely. When the Prices and Incomes Bill was first brought in we were told it would expire in December, 1971. So far as the proposal enshrined in this Bill is concerned, section 1 states:

With respect to the computation of income for the purposes of income tax for the year 1970-71 or for any subsequent year ...

it will continue after 31st December, 1971. The Government delayed too long before taking any action to deal with this problem. We need not go into that this evening. It has been stated so often that everybody is aware of it but, when action was taken, it was taken in a manner designed to cause greater difficulties and greater problems for industry and for those employed in it.

This Bill should be withdrawn and discussions should be initiated with the representatives of industry. If it is not withdrawn there should certainly be an undertaking to table amendments to the Bill. It is bad from every point of view that companies should be taxed in the manner proposed in this measure without limitation as to time and with retrospective effect in regard to those companies which have already closed their accounts. I believe that neither part of this alleged package deal was well thought out. Having relented in regard to control of prices and wages, it is nevertheless proposed to continue with the other part of the package deal. Obviously, from that point of view alone, the proposals designed to deal with the economic and inflationary problems that exist have not a realistic flavour about them. What everybody is concerned about is the idea of controlling or limiting price increases and costs in order to retain the real value of money earned. When we look at the percentage increases in Government expenditure, examine the figures that have been given and analyse the known facts, it is obvious that the biggest cause of the present inflationary situation is not external factors, not price increases because of factors outside our control, but is, rather, the substantial increase in Government expenditure, without regard to the effect on the economy as a whole and the inflationary effect of doubling the turnover tax in the first Budget this year.

This package deal does not commend itself because the Government ignored the guidelines laid down in respect of areas over which they had control. Two notable examples are Post Office charges and CIE fares. I believe this measure was hastily thought out. It does not meet the problems. In fact, in many ways, it will aggravate the existing situation both for industry and for those employed in it. So far as the best method of dealing with the situation is concerned it may be that it will be possible to amend this Bill in Committee. It should certainly be made clear then that this proposal will not extend beyond the end of the coming year. It is unwise to make it apply retrospectively in respect of companies which close their accounts on 30th June or in respect of companies which close their accounts either side of that date. The retrospective effect will be bad because of the arrangements made and the commitments already entered into by these companies, the accounts of which were closed on the basis of the existing rate of tax.

Dr. O'Donovan

In spite of the jokes the Minister made at the expense of the Labour Party about our voting against the proposition in regard to corporation profits tax, I have no apology to make for having so voted. There are really two reasons. First of all, when one is in Opposition one's primary duty is to oppose what the Government suggest. That is one's first duty in Opposition and well understood to be so. Apart from that, I do not approve of swinging taxation. The Minister may make any jokes he likes about so-called socialists defending the bloated capitalists, so far as I am concerned. Piling taxation on taxation is a very bad principle. I often amuse myself by trying to calculate how much value one gets nowadays for the expenditure of £1. It all depends on how one spends it. First of all, one deducts the income tax at 5s 3d or 7s in the £ and when one buys a packet of cigarettes and a gallon of petrol and, after that, one finds one has got about 3s or 4s worth of value out of one's £. One is doing well if one gets 7s worth, one-third in real value. I object, therefore, in the strongest possible terms against this kind of thing.

Let us take the amount involved— £3½ million. If one takes an average wage for an average industrial worker at £20 per week or £1,000 per year, this means the employment of 3,500 workers. The employment position has been growing gradually worse all the year. When it is bad in September, October and November it will be very much worse in January, February and March. That is well known. We have the statistics and the history. As the prophet said: "If this can happen in the greenwood what shall happen in the dry?" The dry will be the harsh winds of next March. If I may borrow from the two Fine Gael speakers, is the failure of the Hibernian Transport Group the tip of the iceberg? It seems more appropriate in relation to this matter than it was in its original connotation.

Mr. Colley

I had an idea that was referring to Declan Costello. We will not pursue it.

Dr. O'Donovan

The Minister is talking about somebody coming up. Icebergs do not surface. That is the danger.

Mr. Colley

They can do a great deal of damage though.

Dr. O'Donovan

So far as I recollect of the little physics I did only one-ninth shows above the surface of the water.

Mr. Colley

Something like that.

Dr. O'Donovan

That is why I said this business of the Hibernian Transport Group and its sad fate, obviously as part of an organisation, suggests it put too much faith in computers and also, I suspect, thought: "Now we are a great big fellow and we can do what we like." The trouble is that you can have weak giants as well as weak small people and very often because of their size they are all the weaker.

I do not think that an effective increase of one-sixth in taxation on companies can be regarded as other than a serious matter. It is much the same as raising income tax from 6s to 7s— an increase of one-sixth in this case would be regarded as very serious. There is a great deal to be said for making a differentiation between the amount of taxation that should be paid by a company on moneys that are retained and used for real expenditure—for the acquisition of machinery, buildings, and so on—and on the profits that are retained by the company in the form of money or distributed as dividends.

It was the case until recently that what were called in Germany the "administrative economists" never realised that certain forms of taxation are highly inflationary. The theory was that by taking more money away from people they had less to spend and this led to a deflationary situation. This is the ultimate in nonsense, and I think the Minister's predecessor learned that lesson following his mini-Budget of 1968.

Judging by the nature of complaints made by the Federation of Irish Manufacturers and the Confederation of Irish Industry this form of taxation did not get adequate consideration. I know that everyone does not accept my view—not only on the Minister's side but also my own colleagues—but I came to the conclusion that the Government allowed things to roll along and then suddenly they got the wind up and charged into this without giving the matter adequate consideration. I am referring now to the whole package deal; it was a sudden decision that we were in a bad way and something had to be done.

Deputy Cosgrave pointed out that the governor of the Central Bank last night referred to Government expenditure. I do not agree with Deputy Cosgrave that the Central Bank in its annual report adequately pinpointed this matter. Deputy Cosgrave said this had been done, but I consider the matter was not adequately dealt with and I made this point in my speech on this year's Budget. However, I was delighted to see the governor comment on this matter at this time. Government expenditure this year is up by roughly 20 per cent. We heard with horror about wage increases of 20 and 25 per cent but we must remember that if a man gets such a wage increase he will pay 5 per cent or 7 per cent in income tax, he will pay more by way of social welfare contributions and much more for social insurance stamps. When the Government collect £1 they collect that sum in its entirety and spend that amount but the rest of the community cannot do that. It is only fair to say that an increase of 20 or 25 per cent is an enormous increase but it is not quite equivalent to the increase in Government expenditure in the past year. This is in addition to a gradual escalating rate of expenditure——

Mr. Colley

The Deputy appreciates that there is a correlation between Government expenditure and wages?

Dr. O'Donovan

I do. I am not used to working out coefficients of correlations but it would not be that high; it is probably plus 0.6 or something of that order. Some day I shall take the Book of Estimates and go through each item. I know it is the custom for Government backbenchers to say: "What can we put in its place? What can we take out of the Book of Estimates?". I am not afraid to state what I should take out. I believe it would be possible to take out £50 million out of the £500 million—10 per cent—it would be forgotten in a week and could be done without creating unemployment.

I should like to comment on the increase in wholesale tax in relation to a particular item. The matter was referred to by Deputy Cosgrave and I wish to state that I have prepared an amendment to the Bill. I propose to exclude from the Bill caravans and mobile homes which are required by the owner either for temporary or permanent residence. There is a serious reason for this, especially in the Dublin area. One has only to go out in the direction of the Airport to see the many caravans that are used as permanent homes. At Bray and Shankill there are caravan parks on which people have their permanent homes. On the Naas Road there is a long stretch where the road is wide and I noticed recently that there were many caravans parked on that road. Obviously, the county council have allowed this to happen.

Last week I asked the Minister for Local Government a question but the answer I got was not quite what I expected. I asked the Minister the number of caravans and mobile homes in each local authority area at the most convenient date. The Minister's reply gave the number of emergency-type dwellings, including demountable dwellings, caravans and mobile homes which had been provided to date by local authorities in each area. The largest number was in the Dublin area: Dublin Corporation, 338; Dublin County Council, 46. This was not what I had asked the Minister as I wished to know the number provided by private individuals. It is quite obvious that those figures do not cover the problem in which I was interested. I was interested in the people in those caravans. Presumably the county council turned a blind eye to it in certain cases. There are a number of caravans in each local authority area. I am certain that the Minister did his best to answer the question but he had not got the figures. In many parts of the country the figures are sizeable. In Donegal there are 70 caravans provided by the county council; in Monaghan, 64; in Kerry, 87; and in Cavan, 59. This is not what I was looking for. There must be many hundreds of them in Dublin county. Accordingly, I have prepared an amendment something like this:

To exclude from the operation of the Bill caravans and mobile homes which are shown to the satisfaction of the Revenue Commissioners to have been acquired for temporary or permanent residence by families.

This is the only inexpensive way in which people can get housing accommodation. It is wrong to raise the tax. Such homes should be excluded entirely from tax. That is the purpose of my amendment. People living in those caravans use them as homes.

Complaints have been made by the Confederation of Irish Industry of the difference between the way in which our own companies and subsidiaries of English companies which have been here for a long time are treated as compared with the way in which newcomers are treated. The situation is ludicrous. I do not know what the incoming companies must think of us. They must think we are "softies", judging by the way in which we give grants. If such people make profits on exports they have not got to pay tax at all. They must look in amusement at the way the unfortunate Irish companies and the subsidiaries of the British companies which have been here for a long time are treated, and whose taxation is now increased by one-sixth.

After all this, because of the enormous increase in expenditure, the Minister must raise £7 million by borrowing. If the Minister could raise the money from genuine savings among the people this would not be inflationary. If the Minister raises it and pays the ludicrous rate of 9 per cent, which he paid for the £25 million which he got from the commercial banks last March, on a three-year basis as against the 7½ per cent in the previous October—and I know it was not the Minister personally who did so—this would be a serious situation. The Minister, in answer to my question a few weeks ago, said that that was the going rate which was paid for the moneys. It was paid to the commercial banks for writing up these credits for the Government in their books. This is the really inflationary point. If this £7 million is to be written up in the books of the commercial banks it will add still further to inflation. The problem is being postponed instead of being dealt with. The idea of paying 9 per cent to the commercial banks is deplorable.

This is quite a small Finance Bill. The £5.3 million taken by it is not an enormous figure. For its size, this Bill contains more objectionable measures than any Bill of similar size which has come before the House. Section 6 reads:

Section 54 of the Finance Act, 1970, is hereby amended by the addition of the following subsection:

(4) Expenses incurred by the Minister in arranging that money shall be available for borrowing by him at such time as he may think fit shall be charged on the Central Fund or the growing produce thereof.

I take it that this is another payment to foreigners. I am not aware of any such payments in our community for arranging that money shall be available for borrowing. I presume it is a payment to these Germans from whom we have been borrowing money, or to American or Swiss banks. They get their pound of flesh both ways. Perhaps the Minister would refer to this when replying. We will discuss this on Committee Stage. I do not think the Minister referred to it yet. What exactly is this? Offhand, it seems to me that it is a form of nugatory expenditure, an expenditure which has little or no value.

Dr. FitzGerald

The position in which the economy of the country finds itself at the moment is one of a marked slowing down in economic growth combined with continuing and growing inflation. The latest estimate I have seen of the outturn of the current calendar year is that the growth return has been reduced from 4 per cent to 2½ per cent. Each time during the year that this figure has been revised, whether by the Government or by the Economic and Social Research Institute, it has been further reduced. It may be that the outturn for the year in economic growth will show an even smaller increase than 2½ per cent.

Dr. O'Donovan

There is no real economic growth this year.

Dr. FitzGerald

I suspect that is the case. I cannot prove that. I am prepared to take the latest published figures and to use them for my case on the basis that things may be worse than that, but they certainly will not be better. The fact that we have reached this stage of such slowing-down of economic growth combined with strong inflationary pressures is very disturbing. Although the balance of payments position has not disimproved to any significant degree so far this year, there are special circumstances which account for this. It seems clear that the bank strike, for special reasons and unlike the previous bank strike, has had a deflationary rather than an inflationary impact in terms of the growth of demand. The cement strike, in particular, deflated demand for a good part of the year.

If one looks at the retail sales index and relates the increase in retail sales by comparison with the same months in the previous year, month by month throughout the summer, and takes account of increases in prices in this period, it becomes clear that consumer demand, far from growing, has been in decline. The level of consumer demand has been lower than during the same months in the previous year. This reflects special factors. It is not certain that this position will be maintained with the ending of the bank strike. It may be that even before the end of the bank strike, as at the end of the cement strike, there may have been a recovery in demand. The balance of payments situation has been kept from disimproving further during this period by very special conditions in the economy which I think may not continue.

There are signs, even in the most recent trade figures, of the beginnings of a deterioration. It is too soon to say how far it will go. It probably cannot go very far in the current calendar year because there is only one month left. It may well be that the balance of payments figure for the calendar year, which is the only figure the Government publish, may not show a significantly different figure from last year. One will wait with interest to see whether there is the same conflict as to what the figure is, developed between the different institutions of Government, as developed last year, and which was resolved with honours I suppose. The Central Statistics Office settled for £69 million thereby making their point that the Department of Finance had grossly under-estimated the level of the balance of payments deficit at the £60 million figure. However, they made that nice little gesture to the Department of Finance of keeping the figure in the sixties—£69 something or other million—so as not to down-face the Department of Finance too much by actually putting in the £70 million figure, so that one could say that the margin is the odd £100,000. It may well be that the Central Statistics Office wound it down just a couple of hundred thousand so that it would not appear too glaring a discrepancy and yet they made their point by ending up with a figure which was within a fraction of a million pounds of what they had estimated —£10 million more than what the Department of Finance had estimated.

Whether this unusual phenomenon of the Department of Finance producing their own figures at variance with the actual figures of the Central Statistics Office—the unbiased figures of the Central Statistics Office—will continue I do not know. It is a very disturbing phenomenon. Hitherto they had agreement and there was no attempt made to contest the balance of payments figures produced by the Central Statistics Office until this occasion. Whatever it may be, and without going into the details of the actual figures, it may well be that for this calendar year the balance of payments deficit may not be significantly different from the Central Statistics Office figure for last year. It may not be much higher—it could even be a little lower—but we will have to watch the position very carefully. The calendar year may not show much difference, because there will not have been time by the end of the calendar year for the position to deteriorate, but a deterioration, if it has started— there is some evidence of this—and if it continues, could very quickly, in the early months of next year, lead to a worsening position which would not be so evident because of the failure to publish any kind of current balance of payments figures for the 12-month period ending each quarter.

I recommend to the Minister that he should consider the publication of such figures. There is not much difficulty about estimating them. Indeed, I have myself made such estimates consistently over perhaps the past ten years or so and while one can never be absolutely accurate, because of doubts about the current trends of invisible receipts from tourist income, one can usually arrive at a figure which will be substantiated within a few million pounds by the calendar year figures at the end of the following calendar year. The Government should, in fact, keep us informed of their official estimate of the current level of the balance of payments by publishing these 12 month figures for periods ending in each of the four quarters. Whether they do or not, it is quite possible that we will see a rise in the balance of payments deficit as we move into next year and it is quite possible that the Government may be forced to take further deflationary measures.

It is also unwise to think that the mere action of attempting to secure, and even securing, a wage freeze, if this is done, will of itself halt the inflation of demand — and this does not necessarily follow in the present circumstances — and we could find a continuing rising demand leading to a need for further deflationary measures, cutting our growth rate still further. What is disturbing is that we cut back our growth to 2½ per cent — partly, of course, because of the special factor of the cement strike — without solving the inflationary problems and that we may have to deflate further and reduce our growth further below this figure before the next six months are out. I am not making a firm forecast of that. It is a very difficult situation to forecast. I would not, in fact, be critical of the Minister for being in doubt as to the precise course of action to pursue in the next couple of months until the trend of our economy after the bank strike emerges.

There is one feature of the post-bank strike situation to which I think I have good reason to draw attention, in the interests of preserving confidence. The situation created by the Government has notably disturbed confidence; the confidence of the business community in the Government is shaken by, among other measures, the measures contained in this particular Bill and it is the function of the Opposition to try to maintain confidence. I should just like to say that it is not at all impossible that, as the accounts come to be settled, after the bank strike, the external reserves figure — which is at present at a very high level and which remained at a very high level throughout the bank strike — may fall very sharply. It will fall sharply not because of a sudden deterioration occurring in our external payments position — there may be a gradual deterioration in the months ahead, as I said — but because of the delayed effects of the bank strike and the failure to settle accounts, particularly in relation to the calculation of payments for imports. With a reserve at such an abnormal level, at a level which is not realistic, it is quite possible we may see a very sharp fall in our external reserves.

It is important that people should not panic, that the Government should not panic, that financial opinion should not panic. We have a very high level of external reserves — £300 million approximately — and it is quite likely, particularly at this time of year when the seasonal pressure is on the balance of payments, from now on to the end of the tourist season, that these external reserves may fall by an apparent figure of, say, £50 million. If this happens, it will be due solely to settling-up long overdue accounts, and will really be a reflection of a downward trend that was actually happening throughout the whole of this year but was not showing up in the figures. I think we should not get too excited about it.

However, if, following such a decline in our external reserves, to a realistic level of perhaps £250 million, we face a continuing external payments deficit, a rising external payments deficit and if we should make further inroads in the reduced level of reserves, then I think we should begin to worry. That worry could lead the Government to further deflationary action which could further reduce our growth rate. It is not impossible that we should find ourselves in the position where the economy would grind to a halt. The result of an inflation of the kind and magnitude that we have been having is usually to create a need for deflationary measures of a kind so severe that even in other countries, which perhaps regulate their affairs better than we do, they would lead to a halt in economic growth for a period. It would not be surprising if this should happen here. I do not think we have yet seen the full consequences, in terms of the slowing-down of our economy, of the mismanagement of the economy during the last couple of years. That is the warning I should like to give.

I should like to emphasise again that the mere fall in the reserves as a result of the settlement of affairs at the end of the bank strike should not give rise to concern. It will be the job of all of us, Government and Opposition, to steady opinion if people begin to get alarmed at this. It will be equally our job, if this decline continues thereafter, and if confidence is eroded by such a decline, arising from a continuing and growing balance of payments deficit, to raise this matter and discuss it seriously in this House. It is important that we should not get alarmed by what could be a special phenomenon arising out of the special circumstances of the bank strike.

So much for the present economic position. It is not possible to speak at length about it. Perhaps it is, but I do not think there is much value in speaking at length about it because of the obscurity of the position, but doubts exist about the way in which the economy is going to move in the months ahead. There may be other people who think they know the answer to that; I would not claim to. It seems to me that there are many unknowable factors, new elements in our situation which we have not experienced before. These are the problems of the aftermath of the bank strike, the doubts as to what the effect of the bank strike was on our economy, and therefore what will be the effect of its cessation; the effect of the wage freeze, whether or not it is imposed or voluntarily agreed between the unions and management, the effects of this on our economy, and indeed the effects of events outside our shores which have not hitherto affected us much but which could in the year ahead affect us if the world economic situation deteriorates. All of these are unknowable in their impact. The economic situation in Britain has a bearing on ours. I suppose the best thing we can do at the moment is to hope that the British will inflate their income sufficiently to get us out of our embarrassment and enable us to restore the balance between our labour costs position and theirs, but not so much as to get themselves into the kind of financial crisis that would have long-term repercussions on ours. We must hope that the British manage their economy in a particular way which will suit our requirements, but they probably will not.

I do not think the present approach to the management of the British economy can command much confidence. It is a matter which has disturbed economists and people who comment on financial matters in many walks of life in England and other countries that the new British Government appear to have so little grip on the situation and so little grasp of what should be done.

I should like however to come back — because it is relevant to what we are talking about — to what the Minister for Finance said in his closing speech in the previous debate. He quoted at some length, in what I take it was a complimentary fashion, from some articles of mine. He suggested they meant something slightly different from what they did, but I corrected him on that and I think he accepted the correction. He went on then to make some point, the nature of which I could not be entirely clear on. He seemed to be imputing some inconsistency between the views expressed there and what I said in this House.

I think he is wrong. I have gone to some trouble to maintain a consistent position although, naturally, when writing in one place as an economic commentator and speaking in another place as a politician, one may place a different emphasis, but it would certainly be wrong to be inconsistent in what one says. I think I have been consistent. I think my criticisms of the way in which the Government handled the situation are fair. The Minister made great play of the fact that a good part of my speech was devoted to criticising past mistakes of the Government. He seemed to feel this was an improper activity for an Opposition politician, a curious theory and one rarely put into practice by Fianna Fáil when in Opposition. I make no apology for that.

The Fianna Fáil Government during their 13-year period in office managed our economy with varying degrees of success. Perhaps under easier conditions in the early sixties they managed to keep things on an even keel with considerable success. Over much of that period the economy expanded at a very consistent rate, inflation was kept at bay and prices rose at a not unreasonable pace. I do not think the Minister will find in anything I wrote or said at that time unfair or harsh criticisms of Government policy when it was being successful.

It must be said that since 1964 the whole attitude of the Government has changed. Their approach has changed and their management of the economy has deteriorated sharply. I am not saying this because I entered politics around that time. It is for me a happy coincidence that at the point I entered politics the Government began to mismanage the economy and in a sense made it easier for me to criticise them. Nevertheless, it is an objective fact which there is no difficulty in measuring in terms of price increases and other evidences of inflation that, since 1964-65, the Government's grip on the economy, their grasp of how to run it, has deteriorated.

Indeed, if one were to compare objectively the performance of the Fianna Fáil Government from 1958 to 1963 with their performance since on the economic side — I am not commenting on the social side where there were in the main severe deficiencies in their policies and attitudes which we are entitled to criticise for the whole of this period — one could legitimately think they were two different parties. It is hard to reconcile the performance in the two different periods. I think it is legitimate to make this contrast, to point to the deterioration in the economic management in this period, the failure to predict accurately the trend of events, the failure to control inflation, the growing disregard for the canons of good finance, the growing tendency to lose control of the situation, the lack of concern at the rising trend of wages and incomes, culminating in the critical situation we now find ourselves in.

Whoever is to blame for the situation — and the blame is not solely the Government's — the blame must certainly be shared by the Government in large measure. Although the Minister might like to blame the Opposition he would find it very hard to make the case that we are responsible in any way for this. We have done our best, within the limits imposed on an Opposition party in a democracy, to warn of the dangers ahead, to guide the Government's hand and to put to them the course of action they should adopt. The criticisms we made, whether in our public or private capacity, on the whole were well-founded and constructive throughout this period.

I make no apology — and the Minister seems to think I should — for referring to the Fine Gael policy on prices and incomes. He was critical of this policy because, he said, I have stressed one aspect only, the dividend equalisation tax. I do not want to apologise for that. The point the Minister seems to miss and I am afraid it is a point that seems to have been missed consistently by the Government — and that is why we are in this difficulty — is that if you are to succeed in getting voluntary restraint in wages and salaries — and only voluntary restraint can be of any long-term value; a wage freeze will only help temporarily — you must persuade the workers that their sacrifices will be matched by equal sacrifices elsewhere.

Therefore, the first thing you do is deal with other incomes and then you go to the workers and say: "Now we have shown to you that we are not prepared to allow other groups in the community to benefit from your restraint. Now we call on you for restraint." It was the failure to do that which has led to the present situation. I will not pursue that further because the question of a prices and incomes policy has already been debated, but one cannot discuss the economic situation without making a brief reference to it. I do not want to dwell on it because I dislike repeating myself. I think I am justified in defending the emphasis we have placed on that and in saying that if the Government had listened to what we said, if they had looked seriously at our proposals, if they had not felt obliged to dismiss them because they came from this tainted source, the Opposition, we would not now be in the difficulties we are in at present.

Turning to the question of Government expenditure, the Minister made great play with the usual——

An Leas-Cheann Comhairle

The Chair would remind the Deputy that expenditure is not in question, but taxation.

Dr. FitzGerald

I was not proposing to deal in any detail with expenditure or with any particular kind of expenditure but, in order to discuss intelligently whether these taxes are necessary and whether they are the right taxes, I think I am entitled to make a brief reference to the general level of the failure to control expenditure.

An Leas-Cheann Comhairle

Provided the Deputy does not pursue the question of general expenditure.

Dr. FitzGerald

Certainly not. I merely want to make the point that the Minister criticised the Opposition for not saying what should be cut, a familiar Government ploy to get the country into a mess and then complain that the Opposition does not produce the answer. I should like to turn it around the other way. I should like to ask the Minister what are they cutting. He asked us what would we cut. We are not in government. He is in government. This is relevant to this question of taxation because it is the size of this cut and whether it will be achieved and how it will be achieved that will determine the need for taxation under this Bill.

I should like to ask the Minister to tell the House what he has not yet deigned to mention so far as I am aware. How is this £7 million savings to be found? Let us consider what is involved. It is £7 million in a period of five months or less, because this was announced at the end of October but even to initiate the process of saving money takes at least a matter of weeks and I suppose it is unlikely that such savings could be effected covering more than the period December to March, a four-month period. Of course £7 million in four months is of the order of £20 million a year out of a budget of approximately £400 million current expenditure. We are talking therefore of a cut of 5 per cent in the normal rate of expenditure.

The Minister knows as well as I do — and I think I have heard him stress it in this House — that many aspects of Government expenditure are not amenable to cuts. It is not likely that the Government will propose to cut the salaries of the public service. They did propose to cut increases in these salaries but they dropped that proposal which was a misplaced one from the beginning. The remuneration of the public service and of other groups associated with it such as teachers, the police and the Army, constitutes a very large portion of total Government expenditure. It cannot be cut. There are many other parts of Government expenditure which, in practice, cannot be cut and certainly cannot be cut at this late stage in the year.

I should be interested to hear from the Minister what proportion of Government expenditure is not amenable to cut at this stage. I should not be surprised if the answer he would have to give me would be a half and if it were a half, as much as a half, then in that section of Government expenditure which can be cut, the proposal would involve a 10 per cent cut in expenditure in that area. I hope the Minister follows my arithmetic. Seven million pounds in four months is about £20 million in 12 months and £20 million is 5 per cent of the total budget. Only half the budget can be cut and therefore for the section that has to be cut he is talking about a 10 per cent cut.

If we are going to cut by 10 per cent that half of our expenditure that can be cut, surely this House is entitled to know what these cuts are? When the Minister gaily throws across the House at the Opposition the question "What would you cut?" it is a hypothetical question, a rhetorical question, and it is a question which there is no obligation on us to answer. We are in Opposition. We did not make the mess. We do not know what is feasible and what is not feasible. We have not got the facts. The Government know and apparently the Government decided to cut something like a half of our public current expenditure by something like 10 per cent. They have not told the people what the cuts are. There has not been one word as to what will be cut. Now that seven weeks have elapsed since this announcement was made I ask the Minister when replying to this debate to tell us what will be cut, because if he does not know at this stage what he is going to cut he is not going to cut it. The time taken to implement cuts of this kind is very long.

We have had some hints already of the failure of the Government to meet their obligations to hoteliers. I understood the Minister to say that there is £2.7 million outstanding to hoteliers by Bord Fáilte. If this money is outstanding, is this part of the process of cutting — this postponement of expenditure at the expense of obligation to private individuals who have taken the Government at their word and who believe they will get money that is promised? I ask the Minister to come out frankly and tell us what is to be included in this drastic 10 per cent cut in expenditure over that half of Government expenditure that can be cut. I do not want to dwell on this because the Leas-Cheann Comhairle would not like me to, but I am entitled to ask that question and the Minister is entitled to reply and is, I think, morally obliged to reply.

I turn now to Government borrowing. Part of our problems arise from an excessive rate of growth in Government borrowing. I appreciate that such a criticism is easy coming from the Opposition, just as a criticism of excessive current Government expenditure is easy. However, it must be made. Although everybody in this House is anxious for continued expansion of public investment, although there are few of the objects of public investment of which we would be critical, the fact remains that there are limits to the extent to which it is possible to expand public investment particularly in a situation in which, through the mismanagement of the economy by the Government, economic growth is slowing down. We have managed since 1958 or 1960 to increase significantly the proportion of total national output devoted to investment. They pushed this up from about 12 per cent to well over 20 per cent. However, in recent years this has been done at the expense of a very large external payments deficit financed by an inflow of capital, at least some of which is unstable in character and on which we cannot rely to continue.

We must at this stage consider how we can moderate the growth of Government borrowing. I am not talking of cutting it. This is not necessary — at any rate, as long as the economy is growing. So far the Government have not, despite their mismanagement, prevented some economic growth from occurring. As long as we are able to increase the proportion we save here every year it should be possible to increase the public capital programme in real terms, in constant money terms, at a rate somewhat faster than the growth of national output. Given the rate of price increases as a result of the Government's mismanagement in current money terms, the increase in our public capital programme which can legitimately be permitted in these circumstances is quite significant. But there are limits to it and these limits have been exceeded.

There is no doubt that many of our problems at the moment arise from the excessively rapid growth in the public capital programme and in public borrowing. I concede that there are difficulties in restraining this growth. Yet it is vital that it should be restrained. It is all the more vital when it is the view of this side of the House — I think I am speaking here for the Labour Party as well as for my own party— that there is one aspect of Government investment which we regard as totally inadequate and requiring to be drastically increased. We recognise that if we are going to slow down the growth of the total capital programme and increase drastically investment in housing which must be done, there will have to be a considerable moderation in the growth of other aspects of the capital programme.

How this can be achieved is a matter for the Government. It is not possible for the Opposition to make much in the way of suggestions. I wonder, however, whether the experience we have had and the studies which have been carried out on our industrial development programme do not suggest that the exceptional effectiveness of the tax reliefs and the not so great effectiveness of capital grants — various studies have shown this — that we could slow down the growth of expenditure in the form of industrial grants, which has risen to such enormous heights recently, by relying more on tax reliefs and other measures of this kind at the expense of relatively costly industrial grants.

I wonder, too, whether in the case of tourism if the Minister were to give ground on the repeated proposals by tourist bodies, such as the Irish Hotels Federation, for the extension of the export tax relief to their activities— a suggestion which is entirely logical and which has never been adequately answered by the Revenue Commissioners or by any Minister for Finance —it may not be possible through that mechanism to ease the burden of grants for hotel accommodation. Apparently, this is giving the Minister great trouble at the moment. Should we not rely more on tax reliefs than on grants when the grants are proving such a very heavy burden? It is just a suggestion. The Minister complained that we never suggest how expenditure can be controlled. Within the limits imposed on an Opposition in the democratic system I should like to make that suggestion.

I wonder also whether we may not have gone a bit overboard in the channelling of finance to the private sector through the public sector. A significant portion of the money we borrow as part of the public capital programme is not invested in the public sector, though many people think that is the case. Many people think that the public capital programme means that the Government raise money and invest it in State bodies or activities directly carried out by the Government. Of course most of the money goes in that way, but in the Irish case quite a significant portion of the total sum is simply channelled through this mechanism to the private sector.

The reasons for this were evident in the 1950s and throughout most of the 1960s. There were gaps in the system of private finance. Therefore, in addition to providing finance on favourable terms for projects that seemed to require assistance, it was necessary to supplement the normal channels by providing finance on commercial terms through public channels. I would have thought that this need is less urgent now and that the growing sophistication of the private financial institutions available here might make it less necessary to raise so much money through public borrowing, channelling it to the private sector, thereby increasing the burden of borrowing when Government borrowing is creating such a problem. Something might be done in this area too.

I am sure there are other suggestions one could make but I think that in a situation like this we need to moderate the growth of the capital programme in order to reduce the pressure of borrowing and to release the resources for the massive increase in housing which is necessary and which should certainly be the first priority of the next Government.

It would be wrong of me to dwell on housing but my experience of constituency work has taught me that there is no more urgent problem. There is no issue which makes me so ashamed to live in a country that so neglects its people. It remains an abiding mystery to me why the Fianna Fáil Government have neglected this so much. Even on purely political calculations, even if the people on the Fianna Fáil benches were all hard-hearted monsters who did not care what kind of conditions the people lived in — of course they are not; I am not suggesting that for a moment — political calculations alone would suggest that something should be done. That should be a first charge on the public capital programme and to meet it we should, if necessary, moderate the growth in the public capital programme in other directions.

I come now to the question of taxation. The question arises in the present situation as to how money can be raised. The Government have allowed our finances to get really out of control in the current year. It is surely a shock to everyone to discover that after doubling the turnover tax we end up with a threatened Budget deficit of over £20 million. It must require a very severe degree of mismanagement indeed to end up facing a Budget deficit far larger than anything we have ever experienced. It is two to two and half times the biggest deficit we have had in my memory — after doubling the turnover tax. For a Government to achieve that suggests a quite extraordinary ability at mismanagement because it is such a short time since turnover tax was increased. The Government are going to meet this in some degree by cutting back expenditure, but of course they have left it too late. Instead of cutting back expenditure when the situation first arose — it must have been evident to them before the summer recess— they waited until October so that they were faced with the problem that since it was so late in the financial year, even to save £7 million it was necessary to impose cuts in the region of 10 per cent.

In this situation the Government need to raise extra taxation to cover some of this extra expenditure involved. There was a lot of speculation before the Budget was introduced as to how this was to be done. I cannot help feeling that some of the speculation was inspired because when one notices a certain consistency in the suggestions made as to what the Government would do, one detects a kite in flight and a couple of kites were flown but for some reason or another they were hauled down very quickly. Instead of these kites, some of them not bad kites as tax-flying kites go, we are faced with this measure — which to me is a most retrogressive and dangerous provision — to increase company taxation in a manner which, to a degree, could be highly damaging to our economy, especially at the moment.

There were other alternatives. The Government could have increased direct taxation. Indeed this had been suggested by the Central Bank before the April Budget, and it was suggested also by the Irish Congress of Trade Unions. Surely when these two august bodies were in agreement the Government should have considered seriously doing what they suggested. I am aware that increases in direct taxation have certain disadvantageous effects. The Minister may be aware of a study published recently by Dr. Kieran Kennedy and Mr. Brendan Dowling in the Economic and Social Review which attempts to assess the determinatives of personal savings. It is a very valuable study which succeeds in identifying about eight different factors and measuring their relative importance in constructing a formula from which to forecast the likelihood of savings, giving data on the seven or eight factors which influence savings.

One of the conclusions of that study is that there is some adverse effect through direct taxation on savings and some beneficial effect from indirect taxation on savings. I mention that here because it is very important and only fair that we discuss these matters fully. The Minister may be able to make some kind of case to justify his measures in relation to indirect taxation. I am speaking in terms of turnover tax. Indirect taxation helps savings while direct taxation may damage savings. However, I think that the balance of advantage in the present situation may work in a different direction. I think that the very small — as this article indicates — adverse effect of increasing direct taxation on savings in present circumstances would be more than counterbalanced by the way in which the substitution of an increase in direct taxation for an increase in indirect taxation would have eased the pressure on prices and, consequently, on wages.

It is one thing to take the purist economic view as to what will most help savings. That is fine in the splendid isolation of the ivory tower of the economist but when we get down to the practical problem of running an economy we are faced with all kinds of pressures, faced with people trying to live within their incomes and unable to do so. In that practical situation, the long-term advantage of a marginal improvement in savings cannot be set against the disadvantage if indirect taxation is increased, as was done last April.

The Minister should have had regard to these considerations in either one or both of this year's Budgets. He should have taken account of the possible slight adverse effect on savings and he should have opted for an increase in direct taxation as recommended by the Central Bank and the ICTU.

Another suggestion made was that there would be introduced some kind of capital gains tax. In this regard the Minister may say that such a tax would not yield very much money, at least in the short term. This may be true but in the present circumstances he is hardly in a position to argue as to whether it yields much or little since he needs the money so badly. There is a strong case for this kind of tax, given that it yields some extra money, as it must if properly and fairly designed, because of the obvious inequity of permitting people who make large sums of money by speculation and through capital gains, to escape the tax net so that they can live on those gains while other people must earn their money the hard way and must pay full taxation.

We have a problem in this country because our taxation code in this and in other respects is so inequitable that many people convince themselves they are under no moral obligation to pay any tax and act accordingly where possible. This is a viewpoint that I have never been able to accept. Perhaps this is because of my partly Presbyterian ancestry, but I cannot accept the thesis that because some people do not pay their full share of taxation, there is no moral obligation on anybody to pay. This concept of distributive justice propounded at times to an alarming extent by clergymen is one which I find repulsive. However, the fact is that in Ireland our confidence in the tax system and in our moral obligation to pay tax has been undermined by the way in which some people so evidently manage to evade tax.

Although I do not accept that since there is no capital gains tax people are justified in not paying their income tax, nevertheless, I recognise it as a fact of life that in effect this happens. If one can improve the psychological aspect of taxation by eliminating obvious inequities of this kind, one should do so, especially since in any event, quite apart from the effect of capital gains being tax free, the effect on people's attitudes to each other in society is certainly bad.

It is a belief and a well-founded belief that people who happen to have some money which they speculate and on which they pay no tax not only affects the attitudes of other people but it leaves them envious, disgruntled, it lowers their morale and leaves the whole community less willing and less able to play an effective part in improving the welfare of the community as a whole by helping to expand the economy. It seems to me also on these grounds that the particular type of kite that was flown should have stayed up. I do not know which particular friends of the Government brought it down. Perhaps there were other reasons why it was not proceeded with but it seems to me that it was something that would have been a better answer than that actually arrived at.

I am aware that if I do not suggest where the money should come from the Minister may say my ideas are not constructive, but I do suggest where it should come from. This may be used as propaganda against me at some future date but I will take my chance on that. There are various luxuries that might have been taxed more than they have been. The Minister's sole idea of a luxury is a motor vehicle.

Mr. Tully

A scooter.

Dr. FitzGerald

In this Bill the Minister proposes to increase considerably road taxation and taxation on the purchase price of motor vehicles. I am not opposed to this absolutely. To some degree a car is a luxury. Many people do not have cars yet. However, cars and other private road transport must bear their share of taxation. Nevertheless, a car is by no means a luxury in the present day. Perhaps it is still more of a luxury than a necessity but compared to many other luxuries that the Minister is not keen on taxing, it is not so much of a luxury. I should have liked more emphasis to have been placed on genuine luxuries— luxuries of a kind that the ordinary man in the street or his wife would have no hope whatsoever of buying.

I have made some constructive suggestions which, even in the view of the present Minister, entitle me to criticise his tax proposals. I wish to concentrate my criticism not on the road tax side, although I think that is open to criticism, but on the company taxation side. I regard this as being a wrong approach on the part of the Minister. I suppose if I express the view that company taxation should not be increased in this way, the Minister and some of his minions will accuse me of being on the extreme right wing of Fine Gael and say: "How can such a party cooperate with Labour?" This is not the case at all.

Mr. Colley

It is easy enough because they voted with you on it.

Dr. FitzGerald

We live in a mixed economy in which the livelihood of our people depends on the success of the competitive private enterprise sector as well as the public sector. Those of us who have a very high regard for the public sector and as in Fine Gael in our public enterprise policy, who have put forward concrete and constructive proposals as to how this sector can make a bigger contribution and how it could be relieved of some of the inhibitions which at present prevent it from making a big contribution, are concerned also, and properly, that on the private sector, the bigger sector of the economy, depends the livelihood of our people.

This is true of the Labour Party, who are accused at times of being doctrinaire. They are not doctrinaire on this issue because they know, as we know, that the livelihood of the vast majority of our people depends on the continued success of the private firms in which they are employed. If the Government threaten the prosperity of those firms by tax measures which are dangerous and damaging, we are entitled to criticise them and I am quite prepared to be told it is a right wing criticism. But it is not. It is a criticism which anybody concerned with the success of a mixed economy and with the livelihood of people, which is what we are concerned with in this House, is entitled to make.

These tax proposals are wrong-headed in every respect. The basic concept of placing the main burden of this extra taxation on company taxation is wrong, and the method employed, which involves this element of retrospectiveness, which involves placing an exceptionally heavy burden on the profits of companies in a year when those profits are already squeezed, and in a year in which investments are already declining, is the height of wrong-headedness.

Let me start, however, with the concept itself. It is important in a country like our own, which is in a stage of development behind that of other nearby countries, that the level of company taxation should not be unduly disincentive in effect. Our level of company taxation should be lower than, if possible, and certainly no higher than that of other nearby countries. I do not, perhaps, place as much emphasis as some people on the importance of attracting in masses of foreign capital but it is important at this stage of our development. I will not go overboard about it. I do not think we should build millionaire residences to attract millionaires to come here, but we should make reasonable attempts to ensure that the conditions here are attractive to foreign investment of the kind which can provide good employment for our people.

This means keeping our company tax rate at a reasonable level. I am aware, of course, that many of the foreign investors coming here are doing so to start export industries and they get tax relief, but that is not true of all. There is also foreign investment in domestic industry, in industry orientated towards the domestic scene. Some of this is good and constructive. We also have the problem that if we tax Irish companies in such a way that they are more badly hit than companies in other countries, then Irish investors will invest in foreign companies and not in Irish companies. Therefore, we must be concerned to keep the level of taxation at a reasonable level.

I should like the Minister to tell us how this new 58 per cent rate — I will come to the special effect of it in this particular year — compares with other countries, who are at our stage of development. I have no idea. I am not asking a question that I have stacked up in advance, knowing the answer. I am quite prepared to hear from the Minister that perhaps this rate is more reasonable than I think. I am genuinely asking for information. Let us hear how it compares with the rate in Italy, Spain and other south European countries such as Portugal or with other countries in other parts of the world, like Japan, for example, who are at a stage of economic development where living standards are not dissimilar to here.

I should also be interested to hear how it compares with the highly developed countries near us? Is it now as high as or higher than those countries so as to act as a disincentive to foreigners investing here and to Irish people investing here? I think it is too high but I reserve my judgment on that until I hear from the Minister the figures for the different countries.

My impression is that once you get beyond 50 per cent you get a company tax rate too high for this country. The Minister was wrong-headed to introduce this. I have a feeling the Minister may, in fact, have a queer kind of ideological bias, that on this matter he may be not left of the Labour Party by any means but may be more antipathetic to profits than many members of the Labour Party who may take a more realistic view, as do certain members of this party. His action here in attacking company profits in this way suggests, because it is a measure so out of line with the needs of the country, a degree of bias which I consider is inappropriate in a Minister in his position. I hesitate in any respect to compare him unfavourably with his predecessor. I am not sure that in this respect, perhaps, that his predecessor might not have been wiser although in other respects I should prefer the Minister to his predecessor.

I want now to come to the retrospective effects of this peculiar tax because owing to the methods by which it is applied firms who have already drawn up their accounts will have to find additional sums to pay this tax in respect of accounts already closed and where, in fact, dividends may already have been paid. The effect of this in some cases is that the burden of taxation this year may be as high as 74 per cent. Figures have already been mentioned and I do not want to dwell on this figure because other people have spoken on it.

I should like to give the Minister a couple of practical examples which I have secured. The figures I am giving relate to actual companies but in order to prevent identification of the companies, in each case the figures have been grossed up or down proportionately. All the proportions are correct but the actual sums are X per cent higher or lower than the true cases, and they are true cases. The first one is a firm in the building material sector employing almost 400 people and this is their position. In 1967-68 pre-tax profits were £138,000 and tax £35,000. In 1968-69 the pre-tax profits were £271,000 and tax £80,000. In 1969-70 the pre-tax profits were £317,000 and tax £96,000. As I understand it, if their profits this year turn out to be about £340,000, which is what is likely in relation to the figures I have given, the tax burden they will now have to pay will jump from £96,000 to £146,500. That would mean that the net profit after tax will fall from £221,000 to £193,500, that is, a drop of almost £30,000, or about 14 per cent.

Remember that prices have risen this year by 8 or 9 per cent so that in real terms, in terms of what those net profits will purchase, whether they are distributed in dividends or whether they are used — as I hope they would be — mostly in investment in new equipment and expansion of the firm, their value in real terms will have fallen by something like 25 per cent. That is a pretty serious situation because this is a time when industry needs more than ever to invest. We are now reaching the critical stage of the Free Trade Area Agreement transitional period. From now on we will face the difficulties. It has been easy going to date because the only industry which has been hit by the agreement really has been the clothing industry and taking that industry as a whole, firms have been successful in expanding their exports.

The inroads made into the home market as a result of the Free Trade Area Agreement so far have not had too bad an effect on employment or on the firms concerned, but from now on we are facing the pinch. If firms do not have the money to invest, if they are not in a position to invest, they may face grave difficulties in the years ahead. This is the moment when the Government should be seeing how they can increase the amount available for investment.

I am not suggesting this should necessarily be done by reducing taxation in a way which would allow the amount available for distribution of dividends to increase, but the Government could make special provision for reducing taxation on undistributive profits so as to increase the amount available for investment at this crucial moment. The Government, instead, have squeezed those profits by this extraordinary measure which in the case of the firm I cited will cut the amount available for investment by 25 per cent and perhaps by more than that, because if the dividend is maintained, which firms frequently feel it is necessary to do, when faced with a short-term fall in profits after tax, the cut in the real value of the amount retained may be higher than 25 per cent and perhaps even 30 per cent. This firms will be in the position where it will not be able to compete and carry on with its investment programme and where the future prospects of employment for its existing workers and for the new workers it might employ if it did expand are placed in jeopardy by the Minister's action.

Let us take another example. Let us take the case of a firm in the food, drink and tobacco sector, employing 900 people. Again, the figures here are not the original figures but are grossed up or down by a fixed proportion so as to hide the identity of the firm, but the relationships are all correct. This firm's pre-tax profits in the last few years have been £48,000 in 1967-68, £49,000 in 1968-69, and £56,000 in 1969-70, and it may make about £60,000 in the year ahead. It has paid tax on these profits to the tune of £24,000 and £27,000, respectively. This firm, unlike the other one, is not benefiting from tax reliefs, and therefore the amount of tax it is paying is approximately half of its profits. The previous firm I mentioned, because of enjoying certain tax reliefs, was paying a rate of taxation well below the 50 per cent. If we fail to persuade the Minister to modify this proposal, this firm will have to find in taxation this year not £27,000—I suppose the appropriate figure will be £29,000 or thereabouts of the £60,000—but £43,000, because, in addition to finding £34,800 to pay tax on the £60,000 profits expected this year, it will have to find £3,900 to pay tax on the 1968-69 profits and £4,500 to pay tax on the 1969-70 profits, that is £43,200 altogether. As a result, the amount it will be able to retain as net profit after tax will fall from £30,000 last year to £16,800 this year. That is a remarkable fall for a firm which has increased its profits, not by much but by about the same amount as the price index has risen. In real terms this firm has retained its profits, but they will be virtually halved by the Minister's tax measures, and again because the £16,000 has not the same purchasing power as the same sum of money had last year in terms of the previous year's money values, it is worth only about £15,000.

These are very drastic measures. This firm will have to halt its investment programme at this point. It has only half the resources it had available last year for this purpose. Its plans for investment are disrupted and the prospects of maintaining employment in this firm, which could be threatened in free trade conditions, never mind increasing employment, are seriously jeopardised.

These are facts, not propaganda. Both these examples have been given to me by a reputable industrial organisation and the information has been obtained from the individual firms concerned. They are not imaginary but real examples. The only difference from the reality is that the figures have been moved up or down proportionately to hide the identity of the firms in case the Minister would track them down too easily if he had the exact figures.

The Minister must be asked to look at this again. I do not know if he has given sufficient thought to it. I do not know who thought up this scheme; it was a damn silly scheme to start with. To increase company taxation at this point in time and to do so in the way it is being done is potentially disastrous. There has never been a moment in the history of this country when industrial investment has been more necessary. Industrial investment is in any event threatened because of the economic situation, because of the slowing down of growth, of output, because of the inflation in wages and because of the measures the Minister has taken of not permitting more than 7 per cent wage increases to be taken account of in price increases.

That measure is one which, I think, could be justified in advance as a means of preventing firms increasing wages. It did not, in fact, have that effect, because the pressure on them for higher wages was so great that they took their chance on this; also because the credibility of this Government with industry was such that they simply did not believe the Government would go ahead with it. It just had not the confidence in the Government's willingness to stick to what they said they would do; and in the light of more recent events in connection with this prices and incomes policy, I can see why they did not believe in the Government. Therefore they went ahead and under pressure increased wages, and now these are being disallowed.

I am not commenting on that. Perhaps it is better for the Minister to stand firm and try to restore some credibility in the Government, not just in this Government but in any Government. However, the effect of what the Minister has done there, right or wrong, has been to squeeze company profits artificially by allowing for price increase purposes only part of the actual wage increase at a moment when profits, as anybody who knows anything about Irish company affairs at the present time knows, are being squeezed anyway because of the economic situation, the pressure to increase wages and the other pressures to which companies are subjected.

If one were setting out to ruin Irish industry in the face of free trade, I suppose these are the measures you would adopt. You would, first of all, create an economic crisis, slow down economic growth, create adverse economic conditions, fail to tackle an incomes inflation of a drastic kind, let it drift on and get worse year after year. What would you do next if you wanted to wreck Irish industry? I suppose you would artificially squeeze their profits through the price control mechanism, and finally you would tax them out of existence. If I were an extreme Marxist seeking to wipe out the capitalist system in Ireland and to create such unemployment as would be likely to bring about the kind of revolutionary situation an extreme Marxist might want, I suppose these policies could then be justified. But for them to come from a Government which claims to be a businessman's Government, a Government which, until a few years ago did have the confidence of many businessmen, is plain lunacy.

I think the criticisms we are making are valid, fair and factual ones. The Minister is entitled to cast aside criticisms from time to time. However, the Minister is not entitled to disregard constructive criticisms based on facts, and he knows from his consultations with, for example, the Confederation of Irish Industry, that these are facts. He knows the case they put forward. The facts are in this document here, the News Letter of the Confederation of Irish Industry. I think the Confederation have seen the Minister and that he knows their views. I was at one stage consultant to the Confederation and that inhibited me from speaking in this House, directly on the subject of the interests the Confederation of Irish Industry represented. I am not a consultant to it any longer and I feel free therefore to defend its cause in this instance, because its cause is the cause of employment in this country.

This is a mixed economy and employment depends upon the private sector. Whatever criticisms the Minister, the Labour Party or I may have of the private sector, it needs to be strengthened and needs to invest in order to survive the difficulties that lie ahead. The policy which is having the effect of drastically cutting investment at this crucial moment is a wrong-headed policy. Wherever the money should have come from, if money has to be raised to meet the effects of the Government's extravagance, it should not have come from here. I have suggested other sources. There will be others still. I do not suggest my list is exhaustive. However, the £5 million this is supposed to produce could have been got at much less cost to the jobs of people in this country than through the measures the Minister has adopted.

I ask the Minister, therefore, to reconsider this legislation over the next week or two and to come in with the necessary amendments. Certainly he should consider very seriously whether this kind of taxation should be maintained. Even if when he has thought it over, he insists on imposing this, I suppose you would call it a capital levy on Irish industry—it is a levy on future capital investment in Irish industry—if he thinks it is right to pursue this course regardless of the effects on investment and employment, he should consider this as something to be done once and once only. The measure should be modified in order to limit its impact in the current year. I would prefer him to rearrange his tax proposals so that they would not reduce profits after tax this year. The Minister knows this is right. He has heard the views of the Confederation of Irish Industry and he knows he has gone wrong. Because of his clear anti-profits bias the Minister has taken a wrong turn.

Neither the Minister nor the Government have ever grasped the distinction between the taxation of company profits affecting investment and the taxation of incomes derived from company profits. The only answer the Minister gave to the proposal made from this side of the House for a dividend equalisation tax was to sneer at it and say that is all we had in the way of proposals. That is not an adequate reply. I have answered that earlier within the limits imposed by this debate.

Our proposals recognise two facts: (1) that the future expansions of Irish industry, business and employment depends upon money being available for investment rather than taxing business out of existence; and, (2) that social justice requires the redistribution of income so that the better off people should not be able to increase their incomes when workers have to restrain theirs. I was sure every Deputy would agree with those two premises.

The taxation of industry should be carried out in such a way that the burden placed on companies should not be excessive. We should ensure that those who receive dividends from companies neither secure in purchasing power from that source more than is proper in a socially just society nor are able to secure increases in their income if workers are not to increase theirs because of a voluntary wage restraint or a compulsory wage freeze. That is our policy. It makes economic sense to preserve and expand industry and employment. It shows social justice and provides the foundation for an incomes policy which might command general agreement. All the Government have done is to attack Irish industry at the very time it is most vulnerable and attack its resources for investment at the very moment these resources are most needed, while doing nothing to deal with capital gains or the problem of the growth of incomes of people other than workers. It would be difficult to adopt a policy more likely to cause chaos, distress and social dissension.

The Government, even at this late stage, should listen to what is being said and mend their hand. I suppose it is too late and the Bill will go through. This will be Fianna Fáil's last gasp. It is ironic that the party which came in with a great flourish of trumpets in 1932, with a well-founded policy for the protection of Irish industry, a policy which deserves a great deal of credit for the growth of industry at that time, should go out of office with the unanimous disapproval of Irish industry because of the attitude they have adopted at this crucial moment in the history of Irish industry and the way they have attacked the future survival of Irish industry and the jobs in Irish industry.

Mr. J. Lenehan

It occurs to me that many Deputies were not born at all; they were invented. When they were invented a knob should have been put on them so that they could be turned off just like a wireless.

Mr. Keating

A tap would be more in the Deputy's line.

Mr. J. Lenehan

The Deputy would have flooded out the place. Deputies can keep interrupting but they will get their answers.

A great deal is always said about every Bill which this Government bring in. There was no point in introducing a Prices and Incomes Bill in 1956 because no one could pay wages or salaries and consequently the question of prices hardly arose. In 1956 I could not walk out on to my own street without being pestered by people who wanted housing grants and builders who wanted supplies. Today we are living in an affluent society and we hear the grumbling and grousing.

Mr. P.J. Burke

What year was that, Deputy?

Mr. J. Lenehan

In 1956.

Dr. FitzGerald

It was the year the Deputy changed over.

Mr. J. Lenehan

No wonder I changed over.

Things have changed today. At that time people could not afford to buy stamps even at the low price they were then. I often received letters with no stamps on them and I had to pay double the price. Who is grumbling today? The ordinary worker is not grumbling; it is the well-to-do person who is grumbling. It is the person who has no intention of letting anyone else become even half as well off as he is. These big shots call all kinds of meetings and join different societies ——

Dr. FitzGerald

Like Taca?

Mr. J. Lenehan

Apart from Taca. They become presidents, chairmen, secretaries and treasurers of these various organisations. One can rest assured that the man who talks most about county homes is the person who has no intention of ever being there or ever allowing anyone belonging to him to be there.

I do not know who the Opposition think they are codding, but they are not codding the ordinary people. About 98 per cent of our newspapers are orientated against this Government. About one and a half years ago they threw everything that could be thrown at this Government; they decided they had us easily defeated. When it was all over they found we were like the Catholic Church: we were the strongest crowd in the country. I think we are the second strongest; the Catholic Church is still the strongest.

For the past two years I have heard nothing but ranting and roaring from the Opposition about the need to control prices in an effort allegedly to put this country back on its feet. I went out to the Mater Hospital today and it took me over an hour to get there from Westland Row by using various means of transport including CIE. I am quite sure that all the vehicles I saw on the road were not provided by the St. Vincent de Paul Society. All this traffic is a sign of affluence. Only a rich man grumbles. They say it is a sign of good health to grumble. If one does not grumble about something one will probably get cancer or some other terrible disease which afflicts people who have no reason to grumble. I remember being in the country manager's office in Castlebar when he received a phone call and I heard him say: "I will give a personal guarantee myself" and, replacing the phone, he said to me: "What has the country sunk to when County Mayo is not worth £100?" That was in 1956 and Fianna Fáil did not have control of this country at that time, unfortunately.

Mr. Tully

Whose cheque was it?

Mr. J. Lenehan

It was not mine because I never had a cheque book.

Dr. FitzGerald

Who is guaranteeing Bord Fáilte at the moment—£2.7 million? How does that compare with 1956?

Mr. J. Lenehan

I am a far better economist than the Deputy is, but I do not have time to write. I have to do my business. I was trained as an accountant and an economist. I was not trained in Trinity College or around the streets of this city. Let the Deputy not think he is codding anyone when he comes along blackguarding me. I am not a Mickey Mouse economist, or a fake economist. I have worked hard in my lifetime. I am a lot older than I look and I am a lot older than the deputy. If Deputy FitzGerald wants fun he can have as much of it as he wants here and now.

Dr. FitzGerald

It is worth waiting for.

Mr. J. Lenehan

I was not dragged up. I was reared. I was not invented. I was born. I will not spend an hour talking here. Nobody will have to put a knob on me to turn me off. At least everybody can hear what I am saying and that is more than can be said for a great many Opposition Deputies.

The economic situation is not as reported at all by the Opposition. I read in some paper this morning that Deputy Tom O'Donnell appeared in Arranmore the other night, like the Blessed Virgin appeared, or someone pretended she appeared, down in my country at one time; I presume he never appeared in Arranmore. He probably gave in the yoke to the papers before he left this city, or it was given in for him, and he went down there and told the unfortunate people how badly off they were. Why did he not go to west Limerick and tell the big farmers there, who are too lazy to turn in their beds, even to let their fat wives out, how badly off they are? He did not have to go to Arranmore to see poverty. There is no poverty in Arranmore, there is no poverty in Erris and there is no poverty in Mayo. I want to say that straight off the reel. There is no alternative to this Bill just as there is no alternative to this Government. Surely to God, Labour aligning with the most conservative party in Europe, outside of the Unionists in the north, would provide the most entertaining conglomeration of people, would they not? We certainly would have a beautiful Government.

Mr. P.J. Burke

A shotgun marriage.

Mr. J. Lenehan

A shotgun marriage. More arms will have to be smuggled to get this thing across.

(Interruptions.)

Mr. J. Lenehan

Those Deputies are mad for power but the important point is that it will take them a long time to get us out of the good, soft seats in which we are sitting.

Mr. Tully

It will take a shotgun, I suppose.

Mr. J. Lenehan

I have heard of a lot of funny things being said. Prices are wrong, incomes are wrong. If you had no incomes there would be no need for prices. A Deputy told me this morning that in a certain house in my own area some time ago he saw a photograph of two pigs and the wholesale prices of those pigs in 1916 was £108. If we take the normal run of affairs from that day to this, those pigs would be worth about £200 each today. I do not think pigs have reached that point yet. I am not quite sure as I am not a farmer. I do not think inflation has gone mad. I do not think we are as far off the track as people think.

We have another crowd here shouting for the workers, saying they are not being paid, and so on. I travel 200 miles across this country; I do not just come in by the back door. I have no complaints. I do not get paid for those 200 miles but one of the funny things is, if you take everything into consideration, you find that half of the people do not do any work at all.

An Ceann Comhairle

I am afriad, Deputy, we are getting away from the Finance Bill.

Mr. J. Lenehan

This has something to do, surely, with the Finance Bill.

An Ceann Comhairle

No.

Mr. J. Lenehan

If you take the big farmers in the midlands into consideration, two-thirds of the people do not work.

An Ceann Comhairle

Would the Deputy listen? What is in order is the Government's taxation proposals.

Mr. T.J. Fitzpatrick

(Cavan): But they are taxing motor cars.

An Ceann Comhairle

This is primarily a taxation measure.

Mr. J. Lenehan

Where a man has to use a car to take him to work—a car is as essential today as a bicycle was 30 years ago—he should get some tax concession. The Minister should have a look at that matter again. Where I live people have to travel long distances to work. Concessions should be given in their case.

I should like to draw attention to the massive evasion of taxation at all levels. So far nobody has said anything at all about this. There is massive evasion of all kinds of taxation—income tax, car tax and every other tax. There has been no word at all about that. As far as I know, nothing has been done about it and nothing is being done about it. If everybody paid the taxation he or she should pay there would be no need for this measure. My tax is deducted as it is deducted from all Deputies. It is time some check into evasions was made. I am not now referring to workers. The worker is caught. I am referring to the big shot and there are more big shots in many parts of the country today than there are workers. There are other ways in which savings could be made.

I am always amused by the fact that the more bankrupt the State or semi-State company the more expensive is its annual report. In the last few days we received a report from the ESB, who owe this country about £150 million. They turned out a magnificent document in justification of their existence. At least they provide some kind of services. I have seen even more elaborate reports from other organisations. Instead of having such elaborate reports a simple stencilled report could be produced. This would be just as effective and would mean a substantial saving for the country.

An Ceann Comhairle

Perhaps the Deputy would now deal with the Finance Bill.

Mr. J. Lenehan

If this has not to do with finance I do not know what has. We finance Bord Fáilte who produce the greatest piece of bunkum each year. How anyone can tell the difference between a Scottish £1 note handed in by a person who goes to Scotland to pick potatoes and somebody who comes to stay in an hotel in Donegal or Mayo is beyond me. We are subsidising the people who produce all these facts and figures. I am not saying this against the Government; if the opposition parties were in power they would do the same. It is time somebody called a halt. Tremendous savings could be effected and this Bill would probably not be necessary if this course of action was pursued.

We have a crowd of chancers coming into this country to establish factories. They succeed in getting title to the factory and to the site before they do anything. They get grants, they turn out a Mickey Mouse product and then they clear off. Of course they have a most valuable property which they can always sell.

An Ceann Comhairle

The Deputy should make an effort to come to the Finance Bill. If he wishes to contribute to the debate he should speak on the taxation proposals of the Government. Unless the Deputy comes to the Bill I must ask him to resume his seat.

Mr. J. Lenehan

I remember when the Opposition were in power they had to get £500,000 from Guinness in order to pay the civil servants.

Mr. P.J. Burke

The Deputy still remembers that?

Mr. J. Lenehan

Of course, I do. I was in Fine Gael at that time. I was a member of Fine Gael for about 20 years and during that time they always gave me figures and told me to use them as I wanted.

Mr. P.J. Burke

The Deputy changed his mind about that party.

Mr. J. Lenehan

Once I changed my mind, I changed it properly. No matter what the Opposition Deputies say, this must be the greatest country in the world: financially it must be one of the most sound. I do not think any other modern State could have kept going for seven months during the bank closure. The closure of the banks certainly never caused me any trouble. I know of one instance where a man had not the slightest trouble in getting money. He signed a form, stuck two stamps on it, wrote it out for £20 and bought all he wished. When he was leaving in the evening he gave a bottle of "Red Breast" as a present to the man in the house from whom he had borrowed the £20. That money was obtained under false pretences and the garda are still looking for him.

An Ceann Comhairle

This is all very interesting but it has nothing to do with the Finance Bill. Unless the Deputy speaks on the Bill I must reluctantly ask him to resume his seat.

Mr. J. Lenehan

I shall do so as I do not wish to hold up the people on the opposite side of the House; they will probably speak for the next week. I consider that people in the West of Ireland should get special terms in any Bill, whether it deals with prices and incomes or finance. It might not be a bad idea to use the Shannon as a dividing line. Some years ago in this House I said that we should introduce regulations to make it possible for retired Americans to live in this country without paying any tax on their pensions. I asked that if these people lived in the Gaeltacht areas or in the western counties they should not be taxed. The decision made was that they could live where they liked in the country and would not be taxed. However, that did not bring any benefits to the people in the West of Ireland. Had the decision been made not to tax the pensions of those living west of the Shannon it would have brought some properity to the west. They would have built houses and this would have meant employment, both in the construction of the dwellings and in the staff they might employ. Unfortunately, that did not happen. I consider that in any Bill that some difference should exist as between the west of Ireland and the east of Ireland. The trouble is that civil servants who formulate most of these regulations and who draw up these Bills in many cases have never been out of Dublin. I remember going to the Bord Fáilte offices and asking for the man in charge of tourism in Mayo. I asked him had he ever been in Achill or in Mayo. When he told me he had not been in Achill or in Mayo, I thanked him and said that there was not much point in dealing with him. There should be some differentiation between the way in which the affluent east and the people of the west are treated. No Deputy would dispute that because it is fair and reasonable. We are not cringing or crawling. We are not badly off. We are quite well off in the west but we do not want to see the whole of our population going east.

It is only in connection with the Finance Bill, or a Bill of that type, that a change can be made. I admit freely here that tremendous incentives have been given to the people of the west in order to establish industries, but we are up against a big problem in regard to transport costs. I do not want to labour that point. I would ask that we should be given consideration in a Bill of this kind, and that the people of the west, and particularly those in the poorer areas, should be given some advantage over the people in the eastern area of the country.

Mr. Keating

I rise to make one single observation on this Bill. I wish to refer to company taxation. Our party have repeatedly called for a higher taxation on profits, but I want to elaborate on that a little in the light of circumstances and in the light of what seems to be a change in Government policy in regard to industry. Since we have come to depend so much for our industrial development, job creation and the creation of exports on foreign companies which come here, we have become indifferent to the plight of the native Irish companies. It may seem ironic that a Member of the Labour Party is raising this issue. It is a very real issue, because once the Government can anticipate job creation and export creation on the basis of sophisticated foreign industry, they have apparently become indifferent to the interests of the section of the community which they represented so vociferously 30 years ago.

There is real peril at this time that we will have more bankruptcies which will create more unemployment. Quite apart from the immediate, short-term crisis possibilities, we have the situation where companies which are dependent on export earnings are relatively in a very advantageous position in comparison with companies which are dependent on earnings which come from sales inside Ireland. With company taxation we have the circumstances that moneys which ought to be reinvested in order to create greater productivity and investment per worker, and a more sophisticated and competitive product, are now being taken in taxation. One might legitimately ask of a speaker from this side of the House "How can you reconcile that with the traditional criticism of Government taxation policy, which has been said to be too heavy on companies?" What we need is greater sophistication in the form of our company taxation. I do not pretend to be an expert in this field. There may be solutions which would not come from any political party but from taxation experts in the public service. If we have not got answers we can at least direct these public servants towards the problem.

The problem is this: if necessary investment funds are taken away in taxation jobs will not be safeguarded and the extra jobs which we wish to see created will not be created. We will not have the extra investment which makes a competitive and modern industrial situation. What happens is that our own native-based industries lose in the tug-of-war against the foreign industries which come in. This is a very serious situation for the little bit of industrial and economic sovereignty which remains to us, as well as being a serious situation with regard to employment and the competitiveness of Irish industry. The Labour Party are very keenly interested in this.

I am not trying to suggest exactly what the form of the taxation ought to be. Some very interesting initiative was shown in Britain under the Labour Party in the period after 1945 in such things as a selective employment tax. One has to seek forms of taxation which bear very heavily on profits which are distributed to shareholders, but which give sharp encouragement to companies who want to reinvest those profits either in terms of job creation or in terms of research and development or in terms of developing markets or whatever form of activity makes their product more effective and competitive. We have to look for subtle and delicate forms of company taxation which give great inducement to Irish firms to reinvest rather than distribute. I was interested in the distinction which Deputy Dr. FitzGerald made between the profits of companies on the one hand and the profits distributed by those companies on the other hand.

We are facing a period when Irish companies, without the great leverage of big international companies, are desperately short of capital. We leave them short of capital and guarantee that with every passing year they will be less competitive and less able to offer the level of employment and of wages we want to see them offering. We want a growing complexity in company taxation. We want growing differentiation. We want to get away from a situation which we now have in this Bill which seems to me a very retrograde situation, where moneys which should be put aside for just the sort of constructive investment which every party in this House believes to be necessary have now got to be taken to pay tax. This is not a situation which is advantageous to the growth of our industry. Surely, whatever our political viewpoint, we can have a consensus on this in the House, where we all want to see industrial growth. Although we may see the necessity for bringing in foreign firms, surely we want to see the Irish industries as strong, vigorous, competitive and modern as possible. An effective way to get this is by the design of company taxation. The company taxation in this Bill is completely wrong. It is siphoning off investment funds.

I rose to make this single point and to urge the Minister for Finance to recast the company taxation section, speaking as one who wants heavier taxation on companies in general but who wants differential taxation. If people simply want to distribute profits to shareholders, who by an accident of birth may own shares in a company, we have no sympathy for them. We are concerned about the company who are trying to gather together funds for reinvestment in order to create new jobs and to make themselves more competitive and able to keep up with the rapidly evolving industrial scene, and to get ready for entry into the EEC, assuming that the automatic majority works and that we get into that Community. We are concerned about companies who are trying to accumulate funds to prepare themselves for that situation. We must have a system of taxation which takes cognisance of their difficulties and encourages them to surmount them. This is bad taxation for that precise reason, as I have tried to indicate.

The Minister for Finance said something which seemed to indicate that he appreciates the situation and is aware of all this. I should like to add my voice to those who say "Let us have company taxation and plenty of it", but let us design it in such a way that it bears very heavily on distributed profits and very much less on reinvestment profits. Let us give our native Irish industry, and the people who grew up under the Fianna Fáil policies up to 1958, a fairer crack of the whip. Let us differentiate to their advantage against the foreign companies. Let us not alone guarantee growing job opportunities and exports but let us strengthen the growth of Irish industry.

Let us have a taxation system which encourages productive investment by Irish industrialists. From all sides of the House we make a distinction between Irish industrialists and foreigners who come in. There is time to reconsider and any reconsideration will be welcomed from all sides of the House.

Mr. Cooney

This Bill set out to apply some remedy to the problems which we have, and which are conceded to be problems of inflation. This Bill is about to apply a fiscal remedy by the taxation measures which it proposes. There is a certain limitation on the extent to which such a remedy can be applied or devised. In the Budget Statement earlier in the year it was conceded that the tax position in this country was already such that it did not lend itself very much to expansion. I am speaking about direct taxation. That Budget formally rejected any increase in direct taxation. It sought at that time—and we had a problem of inflation then too—to tackle the problem, but it is quite clear now that not alone did it not tackle it, but it increased and compounded the inflationary pressures within our economy.

The biggest single factor in that regard was the doubling of the turnover tax. It was a lazy Budget. It was a cynical Budget of expediency. It was decided that some social welfare benefits would be distributed. They had to be paid for. The simplest way was to double the turnover tax. The effect on the economy of that was either disregarded or was not considered. It was disregarded that tax, though in theory it applies to all people within the country, applies most heavily to those who spend most. In practice, it bears most heavily on those least able to pay taxation— people on fixed incomes, pensioners, small wage earners. There is no doubt that the man with a wage of £15 a week was spending £10 on necessities —and that is the very minimum. Therefore, he has to pay 10s turnover tax. That 10s is a far heavier burden on that man than on the man who has to pay £50 on a £500 fur coat. This was what was ignored when the turnover tax was doubled.

We are now in the situation where the Government are seeking to impose some other form of fiscal remedy to our current inflation with the object, one presumes, of taking some of the purchasing power out of the economy. We are offered two taxes—corporation profits tax and an increase in wholesale tax. The tax on companies' profits has been dealt with very adequately by Deputy FitzGerald and Deputy Keating. They pointed to the very real danger that it can harm companies who need the profits for justifiable reinvestment rather than distribution.

The wholesale tax, which is increased, is very drastic. The percentage increase is high. One must wonder at the process of decision-making that decided to allow the introduction of this tax. In the Budget statement of April last the Taoiseach, reading the speech on behalf of the then Minister for Finance, said:

The rates of the selective wholesale tax have been increased twice in the past 16 months. The additional sum I need could not be raised from this source without pushing up rates to undesirably high levels with, perhaps, the risk of dangerous side-effects on particular industries, and disturbing seriously the existing patterns of trade.

That was a very firm statement against any further increase in this type of tax. But here, some months afterwards, we are now having this type of tax imposed. It must make one wonder by what process are decisions arrived at now in the Government and by what process decisions were arrived at last April when this Budget was being formulated.

We know there were senior and junior Ministers, although this should not have been so. Obviously, also, some Ministers had inferiority complexes towards other Ministers. That is now apparent from what we learned in the past few months. It would appear that the views of the present Minister for Finance, Deputy Colley, on the effects of wholesale tax are radically and drastically different from those of his predecessor. Whether he offered his views to his predecessor or whether he was invited to offer his views is something we shall never know. We can only assume—because of the differences in status and stature within that Cabinet—that his views were neither offered nor invited. We now have the diametrically opposed remedy offered to this House as compared with the one which was offered to this House in April last.

I suggested here when speaking on the original Finance Bill a type of tax which has not so far been introduced into this country and which to me would seem to be economically and socially justifiable. We all concede that in the present situation the Government have this deficit which they must clear, and that they must do so partly by taxation. The taxation to be levied should do the least harm to the economy and it should be economically and socially justifiable. The two taxes which we have had this year are neither. The turnover tax is socially wrong and the wholesale tax is economically wrong. As I have already stated, quoting from the Budget speech, it can have the risk of dangerous side effects on particular industries and can disturb seriously existing patterns of trade.

There is another type of tax which I advocated here earlier and which I propose to advocate again, that is, a tax on wealth. It is a tax on accumulated wealth in whatever form it may take, whether land, houses, investments, or business. That accumulated wealth is capable of being given a capital value and on that capital value the owner of that wealth should be asked to pay an annual sum to the Exchequer. If he has the wealth he is capable of paying this tax. It is socially right that the person with this wealth should contribute and it is economically right because, taking tax from a person with wealth, will not in any way have an effect on the productive ends of the economy.

It is a tax that can be easily assertained. The Revenue Commissioners already have the means of assertaining, and the means to call for information to enable them to assertain, what wealth any individual in this nation might have. If someone avoided this tax the avoidance could last only for so long because, on the death of that person or his successors ultimately, the avoidance would be discovered when the return of assets would come to be made in due course.

This is not a novel idea because a tax on wealth already exists in Norway, in Denmark, in West Germany and in several States of the United States. In this country because of the small scale of things we may be inclined to say that such a tax could produce no worthwhile return and would not be worth the administrative effort. Again, this is something I do not know, but it is something on which I should like to hear the Minister comment. Has he considered it and, if so, what facts did his consideration elicit?

It would appear from the evidence all around us that there is a considerable number of persons in this country possessed of wealth to such an extent that taxing them would be justifiable and would produce a worthwhile figure. It is difficult to imagine that it would not produce the figure which it is now sought to obtain from the increase in the wholesale tax. I would strongly suggest to the Minister that he should examine this question of a tax on wealth and introduce it, instead of taxes like the turnover tax and the wholesale tax which have bad effects socially, or economically, or both.

It is quite clear from the two Budget Statements we have had so far this year that the limit has been reached within all our present types of taxation: direct taxation by way of income tax, turnover tax and now wholesale tax and corporation profits tax. Even within those limits the ills which have to be cured are a long way from being cured. Some other solution will have to be found. I should like this question of a wealth tax to be investigated and considered as a possible contribution towards achieving that solution.

The solution is to try to cure what is becoming a problem that looks as if it will always be with us: inflation. The idea of the fiscal remedy is, I suppose, to remove some demand for purchasing power from within the economy. Apart from taxation it appears to me that there is another way in which that object could be achieved, that is, by looking at our balance of payments situation. Earlier in the year — again I go back to the Budget Statement — the then Minister said that the balance of payments deficit would have to be kept to a maximum of £50 million. In his statement introducing this Bill the Minister has given it as his opinion that the deficit is now likely to be not far short of £60 million. Earlier in the year we were told that anything over £50 million would have dire consequences for our economy and yet this Bill and the earlier Finance Act of this year did not provide any measures whatever to rectify our balance of payments problem.

The normal and obvious method is curbing of imports. I suggested earlier in the year that there should be precisely this curbing of imports and the Minister at that time replying disagreed on the grounds that to do that would remove necessary raw materials and other sources of production. What I advocated was selective curbing of imports, either on a quantitative basis, or on the basis of selectivity against certain nations with whom we might have been seriously in imbalance. It would be quite wrong to suggest an overall cut in imports right across the board.

Too often solutions to economic ills are provided by measures which are applied uniformly and without regard to the necessities of particular cases. I do not advocate a general curbing of imports but I do advocate a slective curbing of imports. We are quite entitled to do that and we cannot be attacked by any of our trading partners for doing that because under the rules of the International Monetary Fund and the GATT we are entitled, when we have a deficit in our balance of payments, to introduce such controls. There is no sign that any such controls will be introduced or are likely to be introduced and without such controls our balance of payments problem will not solve itself.

Until such time as the Prices and Incomes Bill becomes law, until such time as it begins to bite — if that ever happens — the demands within our economy will continue and they will continue to have to be met by increased imports and our balance of payments problem will get worse. If the selective curbs were imposed the supply to meet that demand would be curtailed and one would hope that that demand might begin to wither and take some of the inflation out of the economy. I cannot understand why no attention is being paid to this question of the balance of payments deficit. Until it was realistically tackled in England with the licensing restrictions the English economy was in a cycle of trouble. It was only when they got their balance of payments under control that all the other benefits began to accrue: inflation began to be held in check and did not have the harmful effect on the economy that it is having here, the unsettling effect it is having on all sectors of our people. To suggest that the problem can be cured by the bits of taxation suggested in this Bill or by a Prices and Incomes Bill which may never be implemented is wishful thinking.

It is psychologically wrong to expect people to take cuts in income or even to force them to take cuts in income because we are a nation of individuals and to try to apply an economic remedy in vacuo is just not on. The way to take purchasing power out of the economy is not to curb incomes. That produces resentment and dissatisfaction. It can produce strikes and strikes, in turn, produce all sorts of evils. It would be psychologically much better to allow income increases perhaps but at the time to introduce a system of compulsory saving. In this way the wage earner would have the psychological satisfaction of an increase in his wage packet but he would not be able to spend all of that increase. Some or all of it, depending on the exigencies of the situation, could be taken by way of compulsory saving to be paid back to that worker at a time when the economic situation would permit. Compulsory saving was introduced in Denmark in 1951 or 1952 and it worked quite succesfully to deal with an inflationary problem and with demands for increases in wages when there was not a corresponding increase in productivity.

Psychologically it is much better to give the person what he is asking. In that way there is no resentment or dissatisfaction. Give it and take it back in the form of saving. The saving will be there when the situation permits it to be returned and in the meantime it can be used by the State.

The Minister in his Statement and his predecessor in his Budget Statement emphasised the importance of voluntary savings. However, it is a well-known fact that people will not voluntarily save and that if an increase in wages is given and prices rise instead of saving the worker will spend his increase. It is only the minority who will save regularly. It is difficult to expect persons with comparatively small incomes to deny themselves the amenities they see available all around them and that they see being achieved and enjoyed by other sectors of the community. It is quite unrealistic to expect such a person to deny himself those amenities and put his surplus money into the Post Office Savings Bank. He is under pressure from his wife, from his family, under the pressure which everybody is under to "keep up with the Joneses." If he has the money he will spend it and give in to those pressures rather than save the money and wait to spend it at some later date when economists tell him the economy is sound and he can now go on a spending spree.

Any talk of large amounts being obtained by savings is unrealistic. It would be easier for the worker if he were given his wage increase and had the satisfaction of knowing that he had got it but that part of it was taken back and kept for him. The purchasing power that is causing the inflation would be removed, the money would be in the hands of the State for investment. With the removal of the purchasing power the prime source of inflation would be removed, productivity might begin to catch up and the real purchasing power of the wages would then be apparent. Then, if the worker, when the economy would have rectified itself requested payment of his accumulated compulsory savings, payment could be made to him. It has been done successfully in Denmark. I cannot say how it could be accomplished administratively but it would seem that when there is involved a system of PAYE and workers generally are on record, so to speak, it could in some way be made complementary to that system of tax collection.

I do not know how the Government can hope to control the present inflationary situation with the measures being implemented so far in the Prices and Incomes and Finance Bills when the banks have been closed since April and when it must be certain that people have taken credit and that the inflationary effects of all that credit are now at work within the economy. It is appalling that the banks were allowed to remain closed for so long: it is particularly appalling when one has regard to the fact that everybody knew what was the economic situation at the time they closed. I do not know how the Government expenditure is to be met because there cannot be available from the banks any credit to the extent that credit will be required because, human nature being as it is, I have no doubt that the credit available for the private sector has been exceeded and has certainly eaten considerably into the credit available for the Government to finance their capital programme.

We are left, then, with the alternative of borrowing from abroad. However, such action has already been condemned. Certainly, it was condemned in the early Budget this year but I do not know if the Minister mentions it in the present statement.

Mr. Colley

I think what I said was that we will reduce foreign borrowing.

Mr. P. Belton

And save £7 million?

Mr. Colley

That is a different question.

Mr. Cooney

In any case, the desire is to keep foreign borrowing as low as possible.

Mr. Colley

Yes.

Mr. Cooney

Since the Government cannot borrow from the banks here because all available credit has been taken up by the private sector, the very difficult situation arises as to where the money will be found. It cannot be found from further direct taxation. That has been ruled out by the earlier Budget this year. It cannot be found by increasing turnover tax because any such action would cause complete chaos. It can possibly be found by widening the application of the wholesale tax but as the earlier Budget statement indicated, this is highly dangerous and might have adverse effects on industries supplying goods that would be subject to that additional tax without any benefit accruing to the Exchequer by way of its application.

I have suggested a wealth tax but, of course, this would take some time to devise and implement and of itself it would hardly produce the sum that is required. Therefore, the position is gloomy and the sad fact is that it has been allowed to reach this gloomy stage when warnings were given by disinterested and knowledgeable persons at intervals during the past number of years and when all of those warnings were ignored.

It would appear that the only criterion applying to economic matters was how will such and such action go down with the public? To some extent, that is still the criterion. When the actual restrictive measures on incomes were announced, there was public outcry so that the measures were withdrawn and replaced by the Prices and Incomes Bill which gives power to impose them. Whether they will be imposed remains to be seen— on past performances they will not. One would hope, however, that even at this stage there would be taken a realistic view of the economy and that in deciding which measures must be devised to deal with the problems, any such measures will be considered on economic grounds and not on the grounds of political expediency.

It is rather frightening to note the drop in the value of the £. In 1965 it was 15s 4d, today it is 12s. If that trend continues, we will end up like Germany after the first world war when they had suitcases full of paper that was of very little value. The pity is that the measures before the House are not in themselves sufficient to halt the inflationary gap because the horse is bolting and the ordinary bridle and bit that would stop a galloping horse will not stop one that has decided to bolt.

One could only hope that the inflationary trend within the economy will become apparent to the community generally and that, consequently, there will be voluntary restraint. In the past there has been no encouragement from the top towards voluntary restraint. I do not wish to be misunderstood but what is needed in this country is some degree of austerity, some indication that there cannot be luxury all the time. This indication must come by positive concept from the trend setters in our community — from the Government, the management of semi-State bodies and people in similarly exalted positions.

Perhaps after such example the general populace might begin to accept the idea that restraint is possible and that restraint is desirable because there will have to be a voluntary acceptance of this concept. That can only be induced by example. It is not possible at this stage to impose it. This Bill and the other Bills with financial implications which we have had cannot impose the type of curbs which are needed to bring our inflation under control. I want to repeat the suggestions which I made, which might assist.

Notice taken that 20 Members were not present; House counted, and 20 Members being present,

Mr. Cooney

There are three points I want to mention to the Minister before I conclude. The first is that he investigate the idea of a wealth tax. I have already indicated it is economically and socially desirable and that it is administratively feasible. The incidence of avoidance or evasion would be small. Deputy Lenehan was worried about the number of people evading income tax. A tax on wealth would be very easy to collect.

Mr. J. Lenehan

I did not say income tax. I said that every type of tax could be evaded.

Mr. Cooney

The next matter I want the Minister to deal with is the balance of payments. If it is dealt with in the way I suggest, that there be a selective restriction on imports, it would go some way towards reducing inflationary pressures. A general restriction on imports could harm production because it could exclude necessary raw materials. I cannot see any objection to a selective restriction. We are entitled to do this without suffering any retaliation from the countries against whom those restrictions might apply.

The third point I would commend to the Minister is that of compulsory savings. It is psychologically much easier to give a person an increase in wages because the person does not feel he is left behind but a percentage of that increase could be taken back in compulsory savings and many advantages would flow from this. This has worked in Denmark, a small country with an economy on about our scale, even though it may be more sophisticated, and there is no reason why it would not work here. The worker would have the satisfaction of getting the increase and the dissatisfaction which is endemic in our society might be diminished or even ended by compulsory savings. The savings would be available for national investment and they would be available to pay back to the worker when the state of the economy allowed it or when a certain amount of time had elapsed.

Mr. P.J. Burke

I must say the last Deputy who is the youngest Deputy in the House, made a very honest contribution.

Mr. Cooney

I am not the youngest. I am the newest.

Mr. P.J. Burke

He is the newest Deputy in the House and I am not above paying him the compliment that he made his contribution in a most gentlemanly way. It was like a breath of fresh air to hear the Deputy speak. We are faced with a national problem here. May I repeat again what I said yesterday in another debate. We have two by-elections on our hands and no Minister for Finance would think it politically wise to introduce tax of any kind at such a time if it were not in the national interest to do so.

Mr. T.J. Fitzpatrick

(Cavan): I do not want to interrupt the Deputy but I will remind him that this measure was introduced before the Dublin South County by-election occurred.

Mr. Colley

We had the other one.

Mr. P. Belton

You thought you were going to win it.

Mr. Colley

We had a fair idea of South County Dublin.

An Leas-Cheann Comhairle

Deputy Burke without interruption.

Mr. P.J. Burke

Is it not nice of Deputy Fitzpatrick to give me legal advice free of charge? He is out on his own. We have to consider this from the national point of view. Perhaps the Deputy is more national than I am, but he is political too. In fact, he might outdo me in politics 100 fold. I ask the Deputy and the House if any Minister for Finance would introduce this measure during two by-elections.

Mr. T.J. Fitzpatrick

(Cavan): Would Deputy Haughey have done it?

An Leas-Cheann Comhairle

Deputy Burke must be permitted to make his own speech.

Mr. P.J. Burke

Would Deputy Fitzpatrick, if he was Minister for Finance, have done it under the same circumstances if the national need did not call for it? The Deputy is too political to answer that now.

Mr. P. Belton

Would the Deputy have done it if he was Minister for Finance?

Mr. P.J. Burke

If the newest Deputy was Minister for Finance and I asked him that question he could not answer either "yes" or "no". He made a very good contribution.

Fianna Fáil are a very live political party. Some people think I know a great deal about politics but after 27 years I am only beginning to learn about it. One of the things I did learn about Fianna Fáil a few years ago was that they always put the interests of the nation before the interests of the party. My colleague, the Minister for Finance, is doing that in the measure he has put before the Dáil. He is doing something not only for our benefit but for the benefit of posterity. The people of Ireland have supported us for many years. They realise our honesty and our sincerity. My County Dublin colleague from the Labour Party who was elected with me the last time does not believe that at all, but he will in a few years time. I would not be too hard on him because you do not learn everything the first or second day you are elected. I certainly learned a little from Deputy Cooney. Let me say that, for the newest Deputy in the House, Deputy Cooney was very sincere in his contribution.

People may ask why Fianna Fáil are bringing in such legislation when two by-elections are pending; why Fianna Fáil do not act like the inter-Party Government in 1950 and 1951, telling the people everything in the garden was rosy, that there was nothing wrong with our economy. None of the Deputies opposite to me now were Members at that time. They were only youngsters. They do not know what went on during that period, but I remember it very distinctly. To think that an old national party like Fianna Fáil, with two by-elections looming, would bring in a Bill like this——

Mr. Tully

It is a shocking Bill; I agree with the Deputy.

Mr. P.J. Burke

Deputy Tully has a cure for all ills.

Mr. Tully

I could not cure the Deputy, all the same.

Mr. P.J. Burke

If the Deputy was faced with the same position, would he have the courage of my colleague, the Minister for Finance, to put the interests of this nation before the interests of his own party?

Mr. Tully

I would not have the hard neck to bring in that Bill.

Mr. P.J. Burke

You cannot underestimate the intelligence of the Irish people. They will discuss this matter and ask themselves why Fianna Fáil are doing this, and then they will say "They are a very honest party. They are putting the interests of Ireland before the interests of the party," and the people of Donegal and South Dublin will vote for us on this account. My Labour colleague will come out with me in County Dublin and we will discuss many things. You could live with him; he is not too bad at all.

Mr. Tully

He is not as bad as some of the Members that went before.

Mr. P.J. Burke

The Lord have mercy on them. I have nothing to say about the dead at all.

Mr. Tully

I am not talking about Seán Dunne. I am talking about Caoimhghin Ó Beoláin.

Mr. P.J. Burke

God bless him, too. I have only one enemy in my life, that is P.J. Burke, and I have not conquered him yet and I never will. However, I am talking nationally now and I think the Minister for Finance is the greatest character of all time. Deputy Colley will go down in history as being one of the most honest and conscientious Ministers for Finance for facing up to the economic position of the country at a time when two by-elections are being fought. The Minister is asking the people to support him in doing something which, in their own interests, must be done. It would be much easier for the Minister to tell the people that he was not going to tax them at all. That would be the greatest political speech the Minister could ever make in his life but it would be a treacherous speech because the Minister would be putting the economy in jeopardy. As Minister for Finance, Deputy Colley is the housekeeper of the nation. The Minister may be misrepresented, but, as Abraham Lincoln once said:

If the end brings me out wrong, ten angels swearing I was right would make no difference. But the decision I am making today is a decision I believe is in the interests of the American nation.

That decision has had repercussions on the western hemisphere today. The United States is a great nation today, able to stand up to eastern Communism. Thanks be to God, we have no Communists in this Dáil.

The Minister will go down in history the same as Abraham Lincoln has gone down in history. The Minister is trying to save employment and correct our balance of payments. If the Minister succeeds in doing this he will have done something very worthwhile.

(Interruptions.)

Mr. P.J. Burke

If the Minister fails to do this he will not really have failed because he has stood up to it. The Minister is putting the interests of the nation before the interests of the Fianna Fáil Party. He is trying to ensure that what happened in 1955, 1956 and 1957 will never happen again. Lloyd George said behind the backs of the Irish plenipotentiaries "We have given them the agricultural south and they will never be able to carry on." We had to depend on the resources of the nation. When I met the Prime Minister of Israel while visiting that country he said that the Irish people were more plentiful in the world than the Jews and if we invested only £5 a year in the prosperity of Ireland it would be the richest country in the world. My old friend, the Lord Mayor of Dublin, was with me on that occasion.

Mr. Cluskey

I always bring a chaplain with me when I go abroad.

Mr. P.J. Burke

The Jews have made a wonderful job of their own country. I know that every Deputy is as national as the hills of old Ireland. I agree it is difficult to stand up and justify taxation of this kind. No one from the Ceann Comhairle down wants to increase taxation. It would be easier for the Minister for Finance to go ahead and say: "I will do nothing in my time; let someone else do it". But if the Minister were to adopt that attitude we would be once more in the very same position we were in 1956-1957 when 100,000 were unemployed.

Mr. Tully

What is the figure now?

Mr. P.J. Burke

I am not now speaking solely against the Labour Party.

Mr. Tully

What is the unemployment figure now, the real figure, as a matter of interest?

Mr. P.J. Burke

God forbid that I would ever see again the unemployment figure we had in 1956 and 1957.

Mr. Tully

The Deputy sees it now.

Mr. P.J. Burke

At least a number of tradesmen who lost their employment then came back later and are still in employment now.

Mr. Cluskey

Do not forget the bag of cement.

Mr. P.J. Burke

I used it last night. What can any Minister do except face up to his responsibilities? What can any Government do except face up to their responsibilities?

Mr. T.J. Fitzpatrick

(Cavan): Once a year!

Mr. P.J. Burke

We are talking about the economic situation. There will be another day on which we can discuss whatever it is the Deputy is interested in. The people are behind the Minister in the decision he has taken. I never yet underestimated the intelligence of any audience in any part of the country, especially in the ecclesiastical area of North Dublin. The people are shrewd. They have the wit to appreciate that Deputy Colley is a great Minister for Finance. We have a great Government. They put the interests of the country before party interests and the people will vote for them in both Donegal and Dublin.

Mr. T.J. Fitzpatrick

(Cavan): In the best traditions of Fianna Fáil, Deputy Burke was not lost for an argument. He was not lost for an argument through the medium of which he could compliment the Minister on the introduction of this Finance (No. 2) Bill, 1970. He had to find some way of making a virtue out of necessity and he decsribed the Minister's action in introducing this second Budget as brave and courteous at a time when there are two by-elections pending. He flogged the argument to death in his own plausible way. He forgot, of course, that the cat was out of the bag and that Dr. Whitaker had gone on television and said that, if something were not done to stem inflation, we would be priced out of the world's markets and jobs would be lost. The cat was out of the bag and the Government were committed before ever poor Deputy Pa O'Donnell, Lord have mercy on him, died.

The Government were committed to these drastic measures before the Dáil reassembled, before the Taoiseach returned from the USA, before the arms trial was over. Remember that the former Minister for Finance, when he was being chaired from the Four Courts, announced that this Budget was unnecessary. Certainly the Minister was well and truly committed to implementing his mini — or should I say maxi — Budget before ever the by-election in Dublin South County became necessary because Mr. Boland resigned his seat rather than endorse by his vote the leadership of the Fianna Fáil Party and the policies being pursued by that party. He had already surrendered a salary of some £4,000 or whatever it is, rather than serve in the Government and he took the unprecedented step subsequently of resigning from this House rather than walk through the "Tá" lobby and thereby express his confidence in the Taoiseach and the members of the Government. The Minister had no knowledge of that when he was committing himself to introducing and piloting this measure through this House.

It is, I think, necessary to put that on the record because Deputy Burke, gracious man that he is, as he says himself, and plausible speaker for the Fianna Fáil Party, used different aids for different purposes at different times to sell his case to the House and to the people and no better man than Deputy Burke to get up and do that.

The fact is that, due to mismanagement of the economy and the failure of the Government to stand up to their responsibilities in May last when the annual Budget was being introduced, the present Minister for Finance, who found himself in the unenviable position of succeeding the former Minister, was compelled to bring in this Bill notwithstanding the two by-elections. That is the reality of the situation. It is not as adduced by Deputy Burke.

As the Minister said, this measure gives statutory effect to the Financial Resolutions passed by the House on 22nd October. It increases corporation profit tax. It also increases wholesale tax from 15 per cent to 20 per cent on a variety of items — on articles, as Deputy Tully pointed out, like small motor cars and small motor-cycles, as well as other modes of conveyance. These are things which, if we accept that we are living in anything approaching an affluent society, have long since ceased to be luxuries because people have to use these modes of conveyance to get to their work.

The Minister for Lands has advocated part-time farmers, men who would be engaged in farming and, at the same time, would hold down a job in industry. These people would have to travel considerable distances to their work and the only way they could do that would be by means of small motor cars or motor cycles. These things will now bear increased taxation.

Many other items have been taxed including radio and television receiving sets. Surely, if people are to be encouraged to live in rural parts, television is no longer a luxury. Gramophones, radiograms, record players— the latter have become very popular— are all taxed under this second Budget. Quite apart from the purchase tax on motor cars the road tax also has been increased considerably and, as a result, motoring is now very expensive. In this age the motor car can no longer be regarded as a luxury; it is a necessity and is part of our way of life. Nowadays a young man thinks he will lose face if he has to confess that he only owns a bicycle.

This Budget, coupled with the Prices and Incomes Bill we have just been discussing, are emergency measures introduced to deal with a drastic situation. They are a reminder of the Department of Supplies during the second world war when a state of emergency existed in this country. They are measures that are justifiable only as a last resort and they could only be introduced by a Government that had the confidence of the people. The provisions of the Finance Bill could only have the support of the people if they genuinely believed that the Government had made an honest attempt to run our country efficiently.

Fianna Fáil call themselves the party of reality but this Government have lost all sense of reality and live in cuckoo-land. They do not appreciate what has happened since the last general election; they think the people are so absent-minded that the events of the past 18 months are now forgotten. In today's Irish Independent under the heading “Taoiseach slashes Coalition”, the Taoiseach said that there were economic difficulties facing the country at present; they were serious and would need a Government with courage and cohesion to overcome them. Has there ever been a Government since the foundation of the State with less cohesion? Has there ever been a Taoiseach with less courage, and I say that with full consideration——

Mr. Colley

But with no regard to the facts.

Mr. T.J. Fitzpatrick

(Cavan): It will only take me a few minutes to put this on the record. The Taoiseach has another part to play in the Fianna Fáil set-up. He is a nice man and is sent around the country to play that role and cover up for the shortcomings of the rest of the party. To listen to Fianna Fáil at present one would think that the eruption and intrigue within the party, the arrest and prosecution of Ministers, the midnight meetings——

An Leas-Cheann Comhairle

The Deputy will appreciate this has nothing to do with the Finance Bill.

Mr. T.J. Fitzpatrick

(Cavan): With respect, Sir, I am making the case that these measures are drastic and that only a Government enjoying the confidence of the people could introduce them. I am seeking to establish that the Government have lost that confidence; they are weak and are not entitled to introduce the measures.

Mr. Colley

The Deputy will have a big problem in making his case. I am sure he is aware of that problem — the record of Fine Gael and Labour in government. That is something the Deputy will not get over.

Mr. T.J. Fitzpatrick

(Cavan): The issue here is not Fine Gael or Labour; it is the record of the Taoiseach and his Government for the last 18 months. That is what is at issue.

Mr. Colley

I know the Deputy does not want me to talk about their record.

Mr. P. Belton

Who is responsible for all this trouble?

Mr. T.J. Fitzpatrick

(Cavan): I will not follow any hares raised by the Minister. There must be a department within Fianna Fáil set up for the purpose of raising hares in order to divert attention from the real issues, namely the record of the Taoiseach and his Ministers, the integrity of the Cabinet and the record of Fianna Fáil in the last 18 months. The Taoiseach, Deputy Lynch, has behaved as a weak and waffling Taoiseach for the last 18 months. He got many warnings at ministerial level about the lowering of standards but he did not take them. He stood over his Ministers and it was only when he was smoked out in this House early in May that he faced up to the situation and sacked the Ministers.

How could a Government, led by such a Taoiseach, hope to convince the people of the necessity for the measures we are now discussing? These measures would be appropriate at a time of national crisis and in most countries they would be introduced only by a reputable Government who could expect the co-operation of the people. We have no such Government. I hope on a later occasion to go into this matter in more detail, to elaborate the case I am making, to point out the warnings that were given by responsible, knowledgeable people in the last 18 months. These warnings were ignored by the Government for political reasons. They could not anticipate the by-elections and, despite what Deputy Burke said, they were committed to introduce these measures notwithstanding the by-elections.

Debate adjourned.