Dáil Éireann debate -
Wednesday, 16 Jun 1971

Vol. 254 No. 10

Finance Bill, 1971: Second Stage (Resumed).

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

Mr. Bruton

The burden of taxation on the people has far exceeded the targets laid down by the Government in both the Second and the Third Programmes for Economic and Social Development. If the Government are serious about economic programming they should make much greater efforts than it would appear have been made to keep within the targets they have laid down for themselves. If the Government want others to aim seriously at the targets, they should make more serious efforts themselves to keep within the targets of taxation they have laid down for themselves.

In the Second Programme the target in regard to taxation was that in 1970 it should take 26.2 per cent of the gross national product. In fact, taxation in 1970 took 31 per cent of the gross national product. The Third Programme projected that taxation should rise from 29 per cent of gross national product in 1968-69 to 31.4 per cent in 1972-73. In fact it had already reached 31 per cent by 1970-71. So, we seem set fair to exceed the Third Programme target for taxation.

A reduction in the rate of growth or, certainly, a cut in taxation can usually take place only if there has been a cut in Government expenditure. I am afraid the public may in effect have been seriously misled into thinking that this year there has been a cut in Government expenditure. At the time of the Budget the words "£67 million cut in Government expenditure" were flashed across the television screen and captioned in the newspapers. The Minister for Finance speaking about Government expenditure said in his Budget Statement—column 697, Volume 253 of the Official Report:

This very substantial reduction, which was not achieved without difficulty, represents the main efforts of my budgetary policy for 1971-72 and

—note this—

is of much greater significance for our economic well-being than the changes I shall announce today.

In fact, there had been no reduction whatever in Government expenditure. Government expenditure was projected to rise by 9½ per cent in 1971-72. All that happened was something which occurs every year. The various Departments in their submissions for funds looked for a total of £797 million and when the haggling was over the Minister granted them £721 million. Obviously the original requests for funds submitted by the Departments were greatly exaggerated. They all asked for more than they expected to get in order to drive the best bargain possible. In effect, what happened was an accounting matter. If the Minister wanted to obtain greater cuts all he had to do was to connive with the various Departments to ask for a little more and in this way he would have even more leeway to make some of the alleged cuts in Government expenditure.

The whole procedure is bogus. The Minister for Finance allowed the people to be misled into thinking that there had been a cut in Government expenditure at a time that expenditure and the burden of taxation is projected to rise by 9½ per cent in 1971-72. If these mythical cuts were as important as has been maintained, the Minister had a duty to this House to spell out what services would be reduced as a result of the reductions and what services would not be available to the community. He did nothing of the kind because he knows that there has not been any cut in Government expenditure and that the burden of taxation will continue to rise.

It is worth noting in what way the revenue derived from taxation in the past eight years has been spent. Since 1964-65 overall taxation has increased by approximately 148 per cent. Of this increase 37 per cent was spent in remuneration for the ever-increasing army of civil servants; 32 per cent was spent in servicing the national debt but only 19.7 per cent went towards social welfare. We are spending more and more on servicing the national debt and in employing more civil servants and less on social welfare. It is important that we see how the revenue derived from taxation is being spent. The low priority for social welfare indicates the Government's priority and concern for social progress.

In regard to income tax, it is interesting to note the section of the community from which the Minister chooses to raise the extra cash. It is not the really well-off; he chooses to take it out of the first £100 of taxable income by removing the concession whereby this amount was taxed at two-thirds the standard rate. It is obvious that the first £100 of taxable income is more important to those on small incomes that to those people with large incomes. The burden of this change on a man earning £100,000 yearly will be no greater than it will be on a man earning £700 a year. This taxation is taking proportionately more from the poorer sections than from the well-off sections. It emphasises the bias in our taxation system against people on low incomes.

It may surprise people to learn that the cost of living in Britain is approximately 10 per cent lower than in this country. In Britain the Supplementary Benefits Commission, who were concerned with maintaining the incomes of the lower paid sections of the community, drew up what they considered minimum income limits to keep people just above the poverty line. In view of our higher cost of living the equivalent figures here would be approximately 10 per cent higher, but we shall consider the figures adopted by the British Government in this regard.

The commission worked out that for a single man the poverty line would be a weekly income of £10 8s. For a married couple living alone, the poverty line was considered to be a weekly income of £14 3s. People in similar categories in Ireland are paying income tax and we are prepared to drive these people further into poverty. In Ireland the tax-free allowance for a single man is only £7 weekly and for a girl it is £6 15s—in contrast to the limit of £10 8s set by the British Commission as the poverty line. In Ireland, in addition to income tax, the person must pay a flat rate social insurance contribution of 78p weekly, which is a form of taxation. In effect, we are taxing people who are already below the poverty line. If that is not bad taxation I do not know what is.

The same situation obtains in regard to the married couple. In Ireland the tax-free allowance for a married couple is £11 per week although it has been established by the Supplementary Benefits Commission in Britain that the poverty line is £14 3s—in other words, £3 of the income of the couple is being taxed. This is unjust taxation.

There have been a number of changes in allowances in the tax code. Sections 6 and 7 make provision for raising the minimum earned income relief from £225 to £250 for married persons and from £125 to £150 for single and widowed people. These allowances only keep pace with the increases which have taken place in the cost of living in the last year. It is worth reminding ourselves that in the last year the cost of living rose by 10 per cent and the allowances are no more than compensation for that increase. We are not giving any effective benefits.

In relation to section 10, the change does not even keep pace with increases in the cost of living. If the allowances were to be kept up to date with the cost of living, a figure of £311 should be substituted for the figure of £303 and the figure of £244 should be substituted for £243.

I should like to refer now to section 9. This section enables an unmarried mother engaged in full time employment or business to claim a housekeeper allowance in respect of a female relative resident with her for the purpose of caring for her child. Why should we insist that she gets a relative to do the housekeeping for her? Why do we not give her the allowance irrespective of whether or not there is a relative available? Why not leave her free? Because of the stigma attaching to unmarried mothers in the past it is possible that relatives might not be prepared to give this service and, in that case, the unmarried mother would be unable to avail of the service because, according to the law, there might be a relative available but the relative might not be prepared to do the job. I hope that this aspect will be examined.

I have referred to the heavy burden of taxation on those below the poverty line. From whence would the money come to compensate for the revenue lost if these people were taken out of the tax net? I suggest the introduction of a capital gains tax. Many people are making money by buying and selling stocks and shares and by buying and selling land. The difference between the price at which they buy and the price at which they sell is not liable to be taxed so long as that buying and selling is not the primary source of income. If one can make capital gains on the sideline those gains will not be taxed so long as that form of activity is not one's primary source of income. These gains constitute a big increase in the incomes of those concerned and, generally speaking, those concerned could well afford to pay tax. I believe these gains should be taxed. They are taxed in Britain. If they were taxed here the revenue netted would be more than enough to remove those under the poverty line from the tax net.

One of the more serious trends in taxation has been the increasingly heavy burden on the productive sectors of our economy. Capital gains are not a productive activity. The burden of taxation on the productive sectors is far too heavy. The most graphic example of this is the 58 per cent company taxation. In Britain it is only 42 per cent. The effect of the tax here may be to induce those with subsidiary firms in this country to close down. There will be a positive monetary incentive to them to move to Britain where they will pay less taxation. This tax hits directly at the employment of a great many Irish workers in sensitive industries. This punitive level of taxation is not only serious for those companies making a useful contribution to production but it is also serious from the point of view of the employment of many Irish workers. The level is far too high.

The Minister attempted rather lamely in his Budget speech to justify this level of company taxation. He said that if a company distributes 40 per cent of its pre-tax profits to its shareholders the rate effectively borne by the Irish company on its profits is not 58 per cent but 44 per cent. In other words, if a company retains its profits and ploughs them back in order to create new jobs and new outlets it will have to pay the full 58 per cent. If, however, it gives its profits out as dividends to shareholders, who may spend those dividends on imported consumption goods, it will have to pay only 44 per cent. This is a positive incentive to the distribution of profits in the form of dividends instead of retaining such profits to finance investment out of the company's own funds. This is the reverse of the way in which the system should operate. It is the reverse of the system in Britain where there is a positive incentive towards the retention of profits for investment instead of spending profits on dividends. The operation of this system may well negative the investment incentives in the Budget since it provides a positive disincentive to people to retain profits and encourages them to be spendthrift in giving these profits away in the form of dividends.

Sections 20, 21, 22 and 23 are concerned basically with improving depreciation facilities available to firms and with the introduction of a new system of investment allowance in designated areas. These are useful incentives but they are being effectively negatived by the high rate of company taxation, which is a disincentive to investment. There is, too, this outmoded distinction between designated and non-designated areas. The system relies on crude county boundaries. Quite often areas in a county may be very much better off although that county is a designated area than are areas in some other county which is not designated. This is obviously unjust. There is need for more flexibility. The counties designated are not always those most in need of designation. I understand the level of income in Clare and Kerry is much higher than the level of income in Laois and Offaly but Laois and Offaly are not dessignated, whereas Kerry and Clare are. The system puts a very severe disincentive on parts of my constituency, like North Meath, and those areas outside the commuter belt which must compete directly for factories with Monaghan and Cavan which are designated areas. This is not fair.

An Leas-Cheann Comhairle

The Deputy seems to be repeating his arguments which is not in order.

Mr. Bruton

The increases in customs and excise duty are very serious. The price of the pint here is, I understand, roughly 1s 6d more than in Britain which is very serious for the tourist trade because the price of drink is something that immediately occurs to a tourist coming here. If a British tourist realises that drink is 1s 6d dearer than the price at home he will be encouraged to go to Scotland rather than to Ireland. In connection with excise duties I should like to point out that the Irish Sea is the only international waterway which is not duty-free due to the policy decision of the Revenue Commissioners. I do not see why tourists going from France to Britain should be able to get duty-free goods on board ship while tourists coming from Britain to Ireland cannot get such facilities. This is a further disincentive to people coming from Britain to Ireland and it is an indication that apparently the Revenue Commissioners have not recognised, although we are independent for 50 years, that the Irish Sea between Britain and Ireland is now an international waterway.

I should like to ask in regard to death duties, is death the best time in the life-cycle of a business——

An Leas-Cheann Comhairle

Again, the Chair must point out to the Deputy that he seems to be repeating his arguments and repetition is not in order.

Mr. Bruton

I should like to ask the Minister how much it would cost to remove stamp duty which at present operates on bills of exchange and cheques. The levying of stamp duty on cheques is an unnecessary annoyance and I imagine the revenue accruing from this is very small. Would the cost of collecting it warrant its removal? I should like to ask the Government to consider the possibility of introducing negative income tax which means that effectively in the area of lower incomes the Revenue Commissioners do not collect money but give it out to those who are particularly badly in need. This has the advantage that you do not need a means test for these benefits because information about the income position of these people is already available in the income tax returns they must make. The information is readily available on which you can pay out money through the income tax structure to people with very low incomes and this would compensate for something to which I referred earlier, the fact that the present system bears particularly heavily on people with low incomes.

I realise there are some difficulties. It would be very important, if such a negative income tax were introduced, to preserve the incentive to people to work rather than stay at home. There is the danger that combining means-tested benefits with the level of income tax there might be a monetary disincentive to certain people at low income levels to work and earn money. In fact, it might be more profitable for them to stay at home and do nothing because of the combination of means-tested benefits from which they would disqualify themselves by earning money and also the fact that they would come into the income tax code while by remaining unemployed they are outside it. We should introduce some form of negative income tax which would preserve an incentive for people to work so that they would not be cut off immediately on going beyond a certain level from supplementary benefits but would be gradually phased out so that at each stage an incentive would still be preserved for them to increase their earnings by undertaking work. That should be considered.

There is a case for the replacement of estate duty by a five-yearly wealth tax. This would be more equitable in that it would not fall on a business at the time of death which, particularly in relation to farming, is a time when the business can least afford to meet such a tax because of the change of management and the resulting disruption. It would be more equitable and economic and more useful. It would not put a great penalty on people at the time of death when they can least afford it.

Any change in the death duty system —and there are such in this Bill— which acts as a disincentive to older members of the farming community to transfer land to younger members is bad.

An Leas-Cheann Comhairle

This has already been discussed by the Deputy.

Mr. Bruton

The provisions in relation to death duty in this Bill are reprehensible. We should try to encourage people to get land early in their lives and work it and not operate the death duty system so as to encourage them to do otherwise. That concludes my remarks.

Mr. Cosgrave

This Finance Bill implements the proposals contained in the Budget and while a number of these provisions are appropriate for discussion on Committee Stage it is important to realise the significance of some of the provisions of the Bill and examine how they compare with what has been the national policy of different governments through the years and especially since the war.

During the past couple of decades the aim of national economic policy has been to attract outside capital and in some cases know-how into Irish industry. That has been well-settled and agreed policy but the proposals enshrined in this Bill supplementing the decision which was enshrined in the Finance (No. 2) Bill of last year appear in practice to go very definitely against that general direction. The provisions of this Bill in a number of sections involve the imposition of substantially higher taxation and the continuance of substantially higher company taxation than at present operates in Britain. The time may have come to review the policy of attracting external capital here and if so it should be reviewed openly and explicitly. We should all know why it is being done and the circumstances in which changes are proposed. The main reason why it was made attractive to foreign investors and foreigners with technical skill and know-how to come here was to provide increased employment, which we succeeded in doing in a great many cases, and expand our economy.

The particular proposals enshrined in this Bill continue, with some changes, the proposals introduced in the supplementary budget of last year which altered the existing rate of company tax to the detriment of Irish companies compared with British companies. It is important to bring before the Government and the country, the effect of that retrograde legislation which means that Irish companies have to pay company tax at the rate of 58 per cent compared with British companies who, as a result of proposals contained in the British Budget which reduced company taxation from 45 per cent to 40 per cent, now only have to pay 40 per cent. The practical effect of this is that Irish companies who have to advertise on television or in the Press, who use their profits in order to expand their businesses, who want to exploit the situation in the interests of maintaining employment or expanding it, have to compete with British companies who may be advertising in magazines or in the Press here and are obliged to pay tax at the rate of 58 per cent compared with the British companies which now have to pay tax at the rate of 40 per cent.

This increase in company tax has been the subject of stringent comments by industrialists, by the Confederation of Irish Industry, by trade groups throughout the country such as chambers of commerce and by the Central Bank itself. In fact, it has recently been commented on in the Irish Banking Review. It is because of our concern at the effect of this type of taxation that both during the Budget debate and this debate yesterday Deputy O'Higgins and other Deputies commented on the matter.

One particular aspect of the proposed legislation which we are now discussing is the introduction of a new type of penal tax incorporated in section 40 of the Finance Bill. I want to direct the attention of the House to this for two reasons. First, we believe it is a bad change in financial and economic policy; and, secondly, it was introduced without being mentioned in the Budget. It was a definite change in proposals and yet the only silent reference to it, and I mean silent, was made in a document circulated to Deputies after the Budget had been read and the word "gift" was included in that document. It is an accepted principle of our economic and financial procedures in this House that any proposed change in legislation is announced specifically in the Budget, but this was surreptitiously done because the Government were afraid of the repercussions and anxious to avoid the comments and criticisms which have since been clearly and emphatically expressed not merely by Deputies but by national organisations such as the NFA, the ICA and other bodies concerned with the anti-social proposals. Indeed, the policy enshrined in this is in direct conflict with the social principles which are referred to as part of the Constitution.

This particular proposal introduces a change in respect of gifts in contemplation of marriage or marriage settlement. The Minister for Finance yesterday said:

The main criticism directed against the proposal is that it is anti-social as it will discourage elderly parents, and farmers in particular, from transferring their property to their children when they marry. I think this criticism is not well founded.

This criticism is well founded. Not many statistics have been produced except the few produced by the Minister. We have not been told from what source they were produced, over what period this was examined, although he does say that there are approximately 1,000 gifts per year.

This proposal follows a proposal introduced in Britain six or seven years ago, which was first introduced here in the 1965 Finance Act. It is a bad change in the law which revised the original three year period and extended it to five years in respect of gifts prior to the death of the transferor. The proposal in this particular Finance Bill changes that position and makes it worse on two grounds. It changes the proposal in respect of gifts in anticipation of marriage and means in the case of farms if there is a change the property cannot be sold for six years. This in my view has been drafted by people with urban mentalities who do not have any knowledge of rural Ireland, who are not familiar with the difficulties and problems of raising money on land. It is impossible to raise money on land except in respect of a direct, outright sale.

This involves two problems. The first problem was introduced in 1965 when the change was made which aggregated insurance policies with the rest of the estate. Prior to that time a person could take out an insurance policy in anticipation of death and provide to some extent for the situation which would arise. Under that Act two dangerous changes were made. It extended the period from three to five years and it introduced for the first time this change in respect of insurance policies. That means there are only two ways of raising money either by selling stock or selling a portion of the land if that is possible and the number of cases in which that is possible is extremely limited.

In any event, it is bad national policy, except in the case of very large holdings, to be breaking them up. It is impossible and is an added burden that should not be placed on future generations to suggest that the property should be mortgaged. This is bad nationally and bad socially and there is no method by which people can raise money on this. It may be possible in certain isolated instances of business but so far as rural Ireland is concerned, so far as farmers, and the majority of them are smallholders, are concerned, there is not any way in which this can be avoided and which will not have serious effects. The really serious aspect of this is that it is an example of an urban mentality dealing with a country that is to a great extent rural and made up of smallholders. This is a change that was introduced partially and only partially in Britain because the proposal in respect of the exemption that is made here was not even attempted by the Labour Government in Britain. The particular adverse consequence of this and the previous legislation that I have mentioned is that it will discourage farmers from handing over their land.

The Minister says, again showing an extraordinary lack of appreciation of the problem, that it would have the opposite effect directly to that suggested by the critics by encouraging farmers to transfer their property. How can a farmer transfer his property unless his children are reared or unless the farm is sufficient to enable him to make adequate alternative arrangements? The Minister should know that the retirement proposals that were introduced by the Land Commission have been largely a failure. The numbers that have availed of them are negligible. The Minister for Lands himself recognises that the scheme has not worked. The scheme in its conception was undoubtedly desirable and was a scheme that had advantages in it but the scheme has not worked. It is only being availed of by a handful. There is not any method whereby a farmer can retire from his land at a certain age. Of course, most people in any walk of life, if they have adequate means or a pension or an income, would be anxious to retire. Farmers would be anxious to do it but it depends on the size of the farms and there are problems involved. If a son is to marry or if he is to be handed over the place and if the parents are still alive they cannot in most houses go into a separate wing or a separate part of the house.

The policy is designed by people who have no real knowledge of rural Ireland, no conception of the economic and social problems involved. It is clearly anti-social. It has been suggested that it is in line with similar legislation in Australia, Canada, New Zealand, the United Kingdom and the United States. Is there any comparison? There is possibly a nominal comparison between conditions in New Zealand and Australia and conditions here. Canada is a wealthy country with vast mineral and other resources. The United States is the wealthiest country in the world. Britain is a highly industrialised country with generations of industrial technique and tradition behind it. We compare conditions here with conditions in these countries. This shows an absolute disregard of the facts, economic and social, and is detrimental to the aims and objectives of national economic and social policy.

Mr. O'Higgins

Hear, hear.

Mr. Cosgrave

I want again to advert to the aspects of the legislation dealing with company taxation. One of the objections I have to this is that we slavishly follow British practice and procedure in the wrong cases and we refuse to follow it when they are moving in the right direction or we take a few years to catch up with what they are doing before we change our legislation. In Britain a farmer or an investor in a family business when death occurs will be faced with a valuation for the purposes of estate duty of 45 per cent less than a family of a similar person in Ireland for the purposes of estate duty. I believe that there is no defence for this, that it represents a disincentive, that it is a discouragement rather than an encouragement. The land is valued for the purposes of estate duty and in many cases the actual cash on the death of a farmer or the head of a family has to come from some provision made in advance in order to pay for the death duties. There is no doubt that the agricultural organisations in this country have themselves expressed serious concern about this proposal. The increased rate of company tax has been met with such universal disapproval that it is recognised by everyone except those who are hidebound by the decision that it was wrongly made. The changes made in the No. 2 Finance Act of last year are continued now without any alteration. This is a serious problem and has been adverted to in a number of comments, including the comments of the Central Bank. The Central Bank say:

The increase in the corporate taxation in the autumn of 1970 is unfavourable to private investors not just because of the disincentive effects of the reduction in after-tax profits but more importantly because it reduces the cash flow out of which companies finance investment.

It goes on to say:

The firms hardest hit by this are those whose position is most vulnerable—the import competing firms.

These are the firms I referred to earlier. It continues:

If private investment is to be maintained it will need to rely more than normally on outside resources and this requires that a reasonable proportion of new credit should be available to the private sector.

This is a comment not of an Opposition Deputy but of the Central Bank.

Another matter that has not been adverted to by the Minister, except in the course of the documents that have been published, is that this Finance Bill is to run until 31st March next. The Minister recently published a White Paper on the proposals for a value added tax in which it was announced that this new tax was to come into effect on 1st January, 1972. I do not know whether there is any significance in the fact that the previous White Paper that was issued by the then Minister for Finance, Deputy Charles J. Haughey, was headed "Added Value Tax" and the one issued by the present Minister changes the description to a value added tax. We all know it is the same tax. The fact is that this tax is to come into operation in Britain in 1973. There is a two year period within which preparation will be made and it is not even certain that the arrangement can be made in time in respect of this tax.

I believe that this is a matter that should be the subject of some comment by the Minister if not in his opening speech certainly in his closing speech. This tax will bring in a great deal more revenue, but, more than that, it will affect, for the first time, livestock sold in marts in this country. It will affect the very articles the export of which we depend on to a great extent.

The discussions that have so far taken place with the livestock interests and with the bloodstock interests, because here, again, it is largely animals sold at public auction, part of our valuable bloodstock trade, show a typically bureaucratical approach. It is giving with one hand and taking back with another. It is impossible for farmers and rearers of bloodstock to disentangle the amount of feed that is put into animals that are sold and the amount put into animals that are retained. Of course, some of them are in separate categories but most of them are part of the farming operation. In fact some of the animals that will be sold are obviously fed at the same time as those that are retained. This is an unrealistic proposal and some people in Revenue with the capacity to understand rural problems, with a realisation of what is involved, should initiate purposeful and realistic discussions on this matter with the interests concerned.

This will affect our export trade and may have a serious impact on the capacity of farmers and bloodstock breeders to produce efficiently and economically. This is a highly competitive trade and one in which, to a great extent because of their own exertions, those involved have had a considerable success. They require encouragement rather than the reverse.

I want to advert to another aspect of this Finance Bill, that is, the phenomenal rise in prices in recent times. The Minister was absolutely silent on the effect of this. I want to direct his attention to the comments that have been made on this in the Irish Banking Review for the March quarter. It refers to the fact that price and cost inflation of the dimension which exists in Ireland at present produces harsh social and economic consequences. It says that those who suffer most are among the more vulnerable groups in society, the poor, the elderly, the weakly organised and those living on fixed incomes. The article goes on to say that it is essential to moderate it. This is also adverted to in the “Credit Advice” from the Central Bank where it is stated that the broad aims of economic policy are taken to be “a reduction in the rate of price increase mainly through a deceleration of the growth in money incomes (an increase of 6 to 7 per cent in prices is expected in 1971-72 as against about 9 per cent in 1970-71).” The first few months of this year have seen an increase, probably the greatest in any comparable period in respect of food, drink and every essential commodity. There is no evidence in this Bill or in the Minister's speech that any proposals are contemplated to deal with this problem.

I want to refer to the effect on one section. Some concessions have been proposed recently for widows and persons who are eligible for contributory pensions. Widows may be eligible on a non-contributory basis with a means test, or on a contributory basis if they qualify on their own stamps or the stamps of their late husbands. Recently there was a discussion in this House on the need—and proposals have been made in this respect—to increase the allowance for deserted wives. There is a distinction here. The position in society of deserted wives and widows is very similar but, if a deserted wife claims a pension, she can only get it on means test. If she has worked for years and has made stamp contributions, she is not eligible to draw a pension. Very often these people are in precisely the same position as widows. The only difference is that, because of their circumstances, some of them were forced to go out to work. Many of them may be in a worse position than widows from many angles. They cannot get—and I believe they should be able to get—the equivalent of a contributory widow's pension if their stamps merit this. This should be attended to in this Finance Bill or in separate legislation.

One of the real social problems is the shortage of housing. Under the added value tax which it is intended to introduce next January, it is proposed for the first time to tax building materials to the extent of 2½ per cent. What is the social or economic sense in a policy of that sort when, at the same time, the Minister for Local Government, a colleague of the Minister for Finance, is expressing his concern for the need to reduce housing costs and announcing proposals to provide low cost housing? On the one hand the Minister for Local Government is endeavouring to provide new methods of building low cost houses and, on the other hand, in a White Paper published by his colleagues, there is a proposal for the first time to impose a tax on building materials. This surely is a contradiction on an essential matter of social as well as national policy. There should be a reconciliation between the two policies and a recognition that the urgent requirement is housing, that the urgent requirement is to facilitate people who wish to get houses, and to acquire them either under the Small Dwellings (Acquisition) Act procedure or from the local authorities.

Another aspect of this rise in prices is the fact that external borrowings being made by the Government are extremely costly. They have been criticised by the Central Bank and also in the bulletin I referred to, the Banking Review, March, 1971, in which it is said that “foreign borrowing has increased substantially and must be reckoned as adding to the pressures of domestic inflation, while the heavy resort to domestic borrowing has affected the flow of savings for private industrial development”. This criticism has been repeated by the Central Bank in a number of comments. It has been repeated in the quarterly review and it has been made by industrialists and others who are seeking funds to invest and who are affected by the very substantial increase in prices.

Another change in this Bill is the raising of the interest rate on tax due from 6 per cent to 9 per cent. This is a phenomenal rise. It is equivalent to an effective rise of 20 per cent in respect of companies in arrears. That is a very serious increase at a time when it is difficult for these companies to get resources and to find the liquid cash to keep business going and provide for the ever-increasing range of costs and outlay that companies have to undertake to equip themselves efficiently and effectively to compete in modern conditions.

Debate adjourned.