Last night I was developing the point that this budget is, in my opinion, a recipe for economic disaster in the immediate future as well as in the years ahead. I itemised the increases in a vast range of goods and services. To illustrate the point I will quote from the Cork Examiner of today's date. The heading reads “Land Rover tax rise riles farmers”:
The directive from the Minister for Local Government, Mr. Tully, to Local Authorities, spelling out in detail the increased rate of road tax to apply to Land Rovers and certain other tractors from June 1 was severely criticised by the Irish Farmers' Association.
Mr. Seamus McCann, secretary of the IFA's Industrial and Transport Section, said: This 20-fold increase in road tax, together with the removal of the subsidy on Potash a few weeks ago, is going to severely erode the advantage of EEC membership for our farmers.
These regressive measures will slow-up the development in agriculture, contrary to the accepted opinion of all—the Government included—of the need to invest in this, our major industry, so that we can maximise the nation's return from our membership of the EEC.
This is typical of the feeling of the country at large and the public in general are beginning to feel the sting in the tail of the budget.
The Minister in his budget statement, under budgetary policy 1973-74, said:
I must first of all have regard to the high rate of unemployment which must be reduced.
Immediately following that, he said:
Our second major economic task is to slow down the continuing high rate of price increase, for economic no less than social reasons.
While reducing the unemployment figure is not only desirable but absolutely essential, the result of this budget will be to increase rather than decrease unemployment. As a result of tax impositions there will be an increase in production costs. Because of that and increased value-added tax the end product will be dearer and that will result in a slowing down of the sale of the particular goods. The slowing down in sales must inevitably affect employment and the only result will be a reduction in the employment content in industry.
Following on increases in prices there will be a consequential demand for higher wages from industrial and other workers. Value-added tax will be taken off food from 1st September, but the tax has been increased dramatically on a whole range of other items, some of which I itemised last night, and the increases in the prices of these items will demand a compensatory increase in wages. A further increase in wages will increase production costs. Increased production costs will inevitably lead to a slowing down of production and a slowing down of production will inevitably mean unemployment.
The tourist industry will be affected by this budget. Because of our geographical position we suffer from a lack of sunshine and we have, therefore, to offer tourists other attractions, such as the traditional hospitality of our people, the beauty of our countryside and special amenity interests such as fishing, golfing and shooting. We must encourage tourists from outside. We must also encourage our own nationals to holiday in their own country. What do we find in this budget? We find overall increases in the prices of those items in which one becomes involved on one's normal holiday. There is an increase of value-added tax in the case of hotels. Value-added tax on meals will go up from 5.26 to 6.75, an increase of 20 per cent. There is an increase of 1p on the pint. A man on holiday, who wants to be sociable, may take a small one, in which case he will have to pay an extra 3p per glass.
It is indicative of the inflationary times in which we live that we are inclined to look at 3p of an increase as a small one, but when we look at the value in old money we find that there is an increase of 7d in the price of a glass of whiskey or a glass of brandy. The point was made that it is better to take VAT off food and put extra tax on whiskey and brandy. It is not as simple as that. These increases affect the tourist industry. The prices we are asking for food, drink and bed-nights in our hotels are affected. This budget increases the costs to the hotelier who passes them on to the holiday makers.
Postage charges have also increased. When an English tourist writes to a hotelier the hotelier must post him a brochure and a receipt for any deposit he gets. There may be other correspondence between the potential tourist and the hotelier and the postage on these items has increased, so there will be an increase in cost to the tourist. Telephone charges have also increased, resulting in an increase in overheads to the hotelier. These increases will have to be passed on to the tourists.
There is an increase in VAT on furniture, furnishings and cleaning materials. All these items are used by the hotel trade and also by public houses, restaurants and other establishments connected with the tourist industry. The budget is far-reaching in its effects, far beyond what is immediately observed by a cursory glance at the Minister's statement. In the months ahead the effects of the budget will be noticed by the Irish public.
There is an increase also in VAT on petrol and other commodities. This will result in a demand by CIE for increased fares and charges. We have already had the spectacle of the National Prices Commission submitting a report recommending an increase in fares, and this has been turned down by the Minister for Industry and Commerce. The Minister said that he was not rejecting it but merely passing it on to the Minister for Transport and Power for consideration. This shows that the Coalition Government are passing problems from the Labour Party to the Fine Gael Party, hoping that the blame will shift. The increases in VAT will affect the running costs of organisations such as CIE. Further increases will be demanded by such organisations.
Last night I mentioned briefly the car assembly industry and the effect of this budget on the employment in that industry. In the budget the VAT on motor cars and motor cycles was increased from 30.26 per cent to 36.75 per cent. This is a massive increase. There is a rise also in car tax and in petrol prices. All these rises are hitting the potential growth of the car assembly industry and the motor trade in general. If there is a fall in the sale of cars, how will the Minister attain the first objective which he set out in his budget speech? The Minister must have regard for the high rate of unemployment. This must be reduced. The Minister must do everything in his power to protect and encourage the motor assembly industry. This industry must now suffer this crippling blow imposed by the budget on 16th May.
Other speakers mentioned the number of workers who use cars to get from their homes to their places of employment. This is particularly relevant in my constituency of North County Dublin. Some of the towns in my constituency could be described as dormitory towns. People travel from places like Malahide to the centre of the city each day. The Minister has increased their everyday expenses by these massive increases in car prices, car tax and petrol costs. The middle-income group are being badly hit. The Minister has given them no relief. The Minister has left the earned income relief exactly as it was before the budget at a time when many people were expecting him to do the big thing on this occasion and to give a reasonable and justified increase in earned income relief. Instead of improving the situation for these workers the Minister has pulled the mat from under them.
The increases in the prices of cars and petrol affect business firms of all kinds. How can a firm with one traveller on the road cope with the extra charges for that traveller's car, car tax and petrol costs? The Minister is doing all in his power to discourage any expansion whatever in the manufacturing and service sectors of industry.
Last night I discussed briefly the effect the budget will have on newspapers, magazines and journals. I would like to expand on that. In rural Ireland the local newspaper plays a very important role. It has been the traditional medium whereby local information is given to the people of the area. It contains information about local dances and auctions. It carries local advertisements and reports of local court cases. All items of local interest are reported in such papers. Trade magazines and journals are of interest to a certain number of people but they are vital for spreading important information. The national newspapers' costs have also been increased by the budget. There is now an increase in VAT on newspapers from 5.26 per cent to 6.75 per cent which is 20 per cent.
There are also the increased telephone charges to the newspaper world and we all know the amount of business that is done by the newspaper industry on the telephone. There are the increased postal charges. There is the increase in the purchase price of trucks for the distribution of newspapers, the increase in car tax and the increase in the price of petrol because of VAT. All these things are hitting at a very important sector, the fourth estate. I should like the Minister, if he is not firmly committed to this, to think again about what is involved here for the Press, both local and national.
The Minister has given some very desirable and very welcome increases in social welfare and nobody in this House begrudges one penny of what he has given. However, I regret the niggardly way in which he has withdrawn some concessions. He has given with one hand and taken back with two or three other hands which I did not realise he had. He has, for example, increased postal charges. On letters, post cards and printed paper there is a minimum increase of 1p. It does not seem a lot of money unless you relate it to, for example, a mother living in the west of Ireland, an old age pensioner with, perhaps, a half dozen sons and daughters working in Dublin, working in England and other parts of the world. She will want to correspond with them and a penny on each letter will mean a lot to her. The increase in telephone charges hits especially the people who have not got the use of private telephones. Coin box local calls have gone up by a penny to threepence which is a 50 per cent increase. For those with private telephones the increase is from 1.66 pence to 2 pence. This will affect the business community and every other section. On top of all this the Minister is increasing the rental charge by a £1 per quarter.
I should like to refer now to the issue of earned income relief. The Minister not only has not given an increase but has actually damaged this section of the community who are attempting to improve their lot. If you look at the figure and allow for the loss in the value of money you will see that he is damaging even further the hopes of the workers in this country.
The Minister has given some relief in rates. This was one of the major planks of the coalition parties at the time of the general election. I think he should give complete waiver of rates in the case of buildings used as community centres. It seems to me to be an anomaly to have a local community attempting to raise funds for the construction and running of a community hall and much of the money which they raise by voluntary effort taken by local authorities as rates. It is undesirable and something at which the Minister should look straight away.
Much has been made of the stamp duty concession. The Minister is reducing the scale and this is very desirable but let us not go overboard about it because most young couples getting married buy homes which are in the State grant bracket, in other words under 1,250 square feet in area. They are entitled to rates relief and do not have to pay stamp duty so the stamp duty concession should be viewed in perspective. I would like to see further assistance being given to young couples anxious to buy their own homes and it would be a help to them if the Minister would increase the earned income relief. This would assist young couples to save for their own homes instead of always taking the money from their pockets.
The decision of the Minister to remove exemption from income tax for bank interest is a retrograde step. In his statement he said he had decided that the best course would be to confine the exemption to deposits in the Post Office Savings Bank and Trustee Banks which, he said, are the main thrift institutions of the State, and to remove it from the banking institutions. Obviously, the Minister knows the great benefits that can accrue to the country by the stimulation of savings. One of the prime aims of the Government, therefore, should be to encourage savings. We all know that money deposited in savings accounts can be lent by the banks both to the public and the private sectors. Some years ago a decision similar to the one proposed was made by the then Minister for Finance on the advice of his officials at that time. Steps were taken in subsequent budgets to try to redress the damage that had resulted from that decision but, despite that, in his first budget, the present Minister is removing entirely the benefit from deposits in the banks. In time we will regret this step because the backbone of the Irish financial institutions has always been the banks which in the various towns in the country are referred to as the domestic banks. The farming community, in particular, have always had a firm faith in the banking institutions. By his decision, the Minister is eroding further the confidence of the community in the banking institutions. This is a retrograde step. I doubt whether he believes that the moneys transferred from banks will be lodged in the Post Office.
The economy depends to a great extent on the private sector as well as on the building, the manufacturing and the service industries as well as many others. The Government's decision in respect of interest on savings will result in their removing £60 million for their own needs from the domestic banks. This is money that is necessary for the expansion of the private sector but which will not now be available. There are two decisions involved here. The first is the taking up by the Government of £60 million of the money available while the other is the chasing from the banks of every £ that is on deposit in them. To take £60 million out of our economy in one year while at the same time damaging the banking institutions by removing this money will have the effect of damaging seriously the possibilities for the expansion of our industrial sector. If this happens the hope of the Minister of a reduction in the unemployment figure, which is the hope of each one of us, will not be realised.
I have studied the budget thoroughly but I cannot see in it much hope for that desired decrease in the unemployment figure because the Minister has done nothing to stimulate the economy. As well as removing money from the private sector, he is increasing prices and the rates of value-added tax. He is also damaging our tourist industry and the proposals will do serious damage to the economy.
In conclusion, I would remind the Minister that this budget is a recipe for economic disaster in the years ahead so that once again Fianna Fáil, after the next general election, will have to spend the first few years of their term in office endeavouring to recover the wasted years of Coalition mismanagement.