Before we adjourned discussion of this Bill I was proposing amendment No. 7. As I said at the time, while there may be some objections from a technical point of view to its wording it is clear, on its face, what it seeks to achieve. What it seeks to achieve is to build into the Finance Bill a provision whereby the various tax allowances and personal allowances provided in the Bill would automatically be adjusted each year so that they would be increased by the same percentage as the percentage increase in the cost of living in the 12 months preceding the beginning of the new tax year. This has, of course, the effect that what would be done would be merely compensating for an increase in the cost of living the previous year. I acknowledge freely that is a defect but it is probably about the best we can do in the circumstances because I would imagine that to provide, for instance, that there would be an adjustment, say, every quarter with the consumer price index figure coming out, would prove to be totally impossible of administration for the Revenue Commissioners. I assume that is so, at any rate, and on that assumption I have proposed this amendment.
It may well be argued that we, on this side of the House, when we were in Government did not introduce a proposal of this kind and indeed maybe on some occasions might have resisted a suggestion of this kind. However, it is important to realise that the situation now is totally different from any situation we have ever experienced before. I say that because of the raging inflation from which we are suffering. I do not know whether it is generally realised that the increase in the cost of living this year between February and May was at an annual rate of 24 per cent. In other words, if it continued for the year the increase in the cost of living would be 24 per cent. We have never experienced anything like this before, and consequently whatever arguments may have been made for or against this idea in the past they are totally irrelevant because we are now dealing with a new situation. In that situation it is clear that without a provision such as is proposed in this amendment increases in allowances provided for in this Bill will be eroded by the time of the next Finance Bill.
Furthermore, past experience shows that there is a historic tendency in regard to allowances of this kind, and indeed various other kinds of ceilings that are placed on allowances and different things in Finance Bills, to adjust them regularly. It does not matter what good intention the Minister might have in that regard, there is no guarantee that this will be done.
In the circumstances of the present raging inflation it seems to me that equity demands that we should have a provision of this kind in the Bill, but there is more than equity involved though that is the first consideration. The other thing that is involved is that providing built-in adjustment in the allowances in relation to increases in the cost of living one can go some way to ensure that wage earners do not feel a total sense of oppression by the income tax system which they are tending to feel now seeing the rate at which prices are increasing and seeing that the increases announced in the budget and not yet implemented will, when implemented, be in the view of most taxpayers inadequate to compensate for what has happened. I have demonstrated on another occasion that they are quite inadequate even to restore the position to what it was under Fianna Fáil in the 1972 budget.
The special circumstances which I believe make this proposition a very urgent and essential measure are the circumstances in which we have this raging inflation such as we have never before experienced. This new situation requires a new approach. I know the acceptance of this amendment would present certain difficulties to the Minister for Finance, but I do not believe that the difficulties would be insuperable. Certainly I do not believe they would be such as to justify not providing in this way for some degree of equity and some degree of acceptability in our income tax system.
One of the side effects of accepting this amendment would be, of course, to impose on the Government and on any Government which would be in power a greater degree of discipline than is at present imposed in their budgeting arrangements. I do not believe that is a bad thing, particularly in the case of the present Government, who have shown themselves in the two budgets they have introduced to be totally undisciplined in their approach to the management of the economic affairs of this State.
I do not wish to elaborate on that I have elaborated on it in relation to both budgets and I am merely referring to it now to illustrate that the introduction of a certain degree of discipline, which would be consequential on the acceptance of this amendment, would not be a bad thing at all so far as this Government are concerned. Furthermore, I believe, whatever the theoritical view may be, that the practical effect of the adoption of this amendment would not be a loss to the Exchequer but rather a net gain, because I also believe that the fact that taxpayers knew that their income tax allowances would automatically be adjusted in relation to the cost of living would tend very much to assist in avoiding excessive claims for compensation in the form of wage increases which people make, quite legitimately in my view, where they are in a situation of raging inflation with no guarantee that they can protect themselves against it or catch up with it. While this would not be the whole answer it would certainly be a step on the road to making it possible to expect reasonably that there would be fair wage claims rather than excessive wage claims, which in turn simply fuel inflation and make the position worse. It would be a step on the road to combating that problem, which is a major one in the economy. For all of these reasons I hope the Minister will find it possible to accept this amendment.