It is important that it should be recognised that the people who set the pattern and created the expectation, and who showed no discipline or restraint in their policy statements, in their attitudes, and in their spending, were the Government who are now complanning about the unreasonable demands of the public. There may be evidence to substantiate what the Minister said. One of the saddest things about the state of our country at the moment is that the morale which is so vital, the sense of community responsibility, the sense of spontaneous restraint in the national interest, are not as forthcoming as they should be because leadership in that direction is not being given by the Government. Therein lies the real failure of the Government over the past three years, not just a failure to deal with these problems but a failure which can be more clearly seen in the terrible contributions they have made towards aggravating the problems the country is now obviously facing.
Could I just remind the House that this inflation against which the Minister, on his own admission, took his first steps in June, 1975, had been seen and recognised by his colleague, the Minister for Industry and Commerce, much earlier. Two years ago the Minister for Industry and Commerce told us we were in a raging tempest of international inflation. It is not today or yesterday this problem arose. It has been there for a considerable time, fuelled to a considerable extent by the Government's own high-flying proposals and clear lack of any sense of direction or programme.
One looks to a budget for a number of factors. There are certain essential elements. Tax revenue is a crucial element. Much higher in the order of consideration should be a programme towards which tax expenditure will be directed. Such a programme must be clearly stated. Budgetary policy is not just a matter of telling us how serious things are or how rampant inflation is, hiding behind world problems and so on, and then saying taxation must be raised and the net spread as widely as possible and showing zeal in attacking tax evaders and so on. That is not enough. But that is the impression most people have of this budget and the Government's reaction towards our crushing problems. What is really disconcerting is that the Government do not put all this in context and follow from budget to budget a consistent programme for economic and social development. If such a programme does not exist—it certainly does not exist in this Government's policies or, rather, lack of them— then there is, of course, no direction the country can follow. There is no lead given. Above all, there is no restraint on the Government by way of judgment on their targets and standards. If they do not clearly set the targets and the standards, they cannot be judged.
How this Government have enjoyed not being judged over the last couple of years. I remember once when Fianna Fáil were in Government a supplementary budget had to be introduced. There were howls of rage as if something dreadful had been done. That supplementary budget was exceptional. Under this Government budgets are no longer exceptional. The Minister has made it quite clear that we can expect another budget later this year if his hopeful prophecies are not realised. We need more than hope. We need direction and confidence. The cliché was "A-budget-a-day government" and we have had a series of increases in Post Office charges, in ESB charges, in petrol and so on outside of the budget altogether. Why should the Government restrict themselves to being answerable once a year on an annual budget? Why should they restrict the free spending programme? It is much easier to raise money or borrow it as one needs it.
Does not every businessman, every farmer, every worker and every housewife know it is much easier but, equally, they know that, while it is easier to go along and just get the money when they need it, they also know that that is the sure path to disaster. It is certainly not responsible. The ordinary businessman must at the beginning of each year set his targets and then go to his bank manager. He must explain fully to his bank manager how much he will need and what the outcome of his investment will be. That is a natural discipline one has to apply in ordinary life. This Government ignores that discipline completely. They tell us we must be responsible and, if we criticise, they say we are irresponsible, particularly when we argue people should not respond to them even though there is so little to respond to. Psychologically this is one of the great failures of the Government.
I honestly would not be too worried if I thought the only effect of the Government's action would be that in a year or two things will improve, even though in the interim we have had a bad time. That would not worry me if I thought the morale of the country had been sustained during that year or two. What is needed is a sense of determination in response to programmes. That determination showed itself many times during Fianna Fáil governments. If that most vital policy were preserved intact what is happening now would not be so disconcerting. The Minister says a certain unreasonable public attitude is increasing. I have to accept that, unfortunately, as an unpalatable fact. It is a disaster. Apart from torpedoing our economic policies the Government have undermined national morale. Until such time as they produce programmes that can be followed and policies we can understand, together with a sense of direction so that we will know where we are going, there can be no improvement. All the Government are doing is making confusion worse confounded. The public are sidetracked on issues not in the national interest and the more the Government dissipate energies the more they undermine public morale.
The best that can be said for this budget is that there was nothing in it for us. That is about the kindest thing people have said about it. We had doom and gloom presented to us in chronic orchestration, which was only natural because the voices could not be in harmony since there were two different elements involved. All of us expected severe tax impositions. We were told we would be facing a maelstrom of problems and somehow or another, having been told that, the budget did not seem all that bad. We were meant to be relieved. Taxes were not as heavy as had been anticipated. But there was no new plan, no direction, no confidence, no programme designed to lead the people out of recession, out of the collapse of morale in which we are all floundering around in confusion. This worries me. Had taxation been raised to help the building industry, for instance, more employment would have been generated thereby ensuring more people would pay tax, to say nothing of lessening the burden on the smaller and diminishing numbers in employment at the moment.
Even in the Budget which was meant to take down inflation there have been proposals, one in particular, widely recognised now to be an injection of the virus of inflation. That was the proposal relating to the increases on petrol and motor car tax. We have all told the Minister that the reality of life around the country is such that this meant for most people in employment who travel about ten miles to work a day in a 12-horse power car an increase of about £3 a week. They were being told to exercise restraint. It is impossible to think that a Minister could overlook that. Whatever might be imposed on what we recognise as non-essentials—and there is a limit to what we can take—for example with spirits I think, frankly, people were surprised that the tax on them was not a little more. There might have been another few million pounds there. With cigarettes we are in a delicate area because of consumer resistance. I could cut down on cigarettes; I could probably avoid drinking any spirits; but I certainly could not avoid the consequences of the increased car tax and petrol increases unless I stopped doing my work. If that is true of me it is certainly true of a large number of people in employment around the country who have to travel on an average ten miles to and from their work every day.
The Minister must know that in that alone surely he is fuelling inflation. Surely the Minister must be consistent when he calls for wage restraint. He talked about introducing the tax-free index. When people hear of "tax-free" they always assume there is some new allowance coming. But, in effect, what the Minister is doing, is increasing the cost of living, which will rise because of the VAT increases in this budget. It is significant that they will not be taken into account in any negotiations relating to the wage agreements arising out of the increases in the consumer index. That is being a little bit unrealistic. Take the case of a man who has to pay three pounds a week more for his car and a fair bit more, because of the other increases in the VAT rates, maybe resulting in an average increase of £5 a week. The Minister says "Ah, yes, but this we ignore". Is that being realistic? Can you ignore reality? That is the reality that so many people are questioning. Why has this tax been necessary? Because the Government have by their policies been the major agent of our ever-reducing employment in the private sector. This, of course, must give rise to an increase in social welfare benefits, which in turn must give rise to an ever-increasing tax burden on those who are fortunate enough to remain in employment. Those are simple consequences which flow one from the other.
It is interesting to take some points the Minister gave on this tax position in the course of his speech. It is interesting to know, for instance, that at the moment about 5 per cent of the tax revenue comes from limited companies. For a different purpose he introduced the contrast with the position in 1960-61. Those were the good days of Fianna Fáil, which had confidence in itself and had the confidence of the public. The position then was that 31 per cent of income tax was contributed by limited liability companies compared with 5 per cent now. The point the Minister was making was that now it is time to bridge that gap, that these companies, who are now apparently getting away without paying their fair share, would now pay a greater share. However in 1960-61 companies bore over 31 per cent of income tax. Last year their share had shrunk to about 5 per cent. Is it because of taxation provisions that the share had shrunk to 5 per cent? I do not think tax provisions have made so much difference. If their share had shrunk to 5 per cent it means clearly that the payment of people under PAYE has increased dramatically in the same period.
Surely the Minister should examine the state of these industries so that he can bring them back to the situation they enjoyed in 1960-61. With increased output, increased economic activity and increased profit—and that is not a bad word—they would get back to a situation in which they would be paying a much higher share than 5 per cent of the national tax revenue. That is not done by simply increasing the taxation on them. Life is not as simple as that. What they need above all else is encouragement, inducement and an opportunity to ensure that they can expand in a way that they certainly have not in the last couple of years.
By increasing taxation you simply diminish output, thereby imposing a greater burden on the direct income tax payers.
An interesting thing arises. The Minister talks about the restraints and the huge increases we have experienced in the last few years. We must not forget the particular gem contained on page 6 of the typescript of the Minister's speech but that is not appropriate at the moment. The Minister talks about income increases on the scale that we have suddenly experienced over the last two or three years. I quote:
A consequence of that is equally clear. For the rest of this decade there is no scope without the risk of recreating inflation on a most damaging scale for income increases on the scale that we have suddenly experienced over the past two or three years.
A strange coincidence—the past two or three years were the two or three years in which this Government were in office. Were all the income increases just due to the fact that people suddenly became unreasonable where previously they were reasonable or suddenly unreasonable expectations and demands were made where previously they were reasonable? Was it not due to a very considerable extent to the fact that, when this Government came in, in the first flush of euphoria and enthusiasm they threw it around in their very first budget, like snuff at a wake, to the extent that those of us who had been in Government and who were preparing for a stringent budget could not believe where the Government were getting it in that first budget of 1973? Quite seriously, we just could not believe it. I remember the euphoria around this House and in the refreshment rooms of this House on the day of that first budget. It was rather different from the reaction to this budget. On the day of the 1973 budget Government Deputies were applauding the Government and themselves on a fantastic budget. They were saying, "We knew we could do it and we did it". We have all been paying the price in the meantime, and it was a considerable price, in the increase in demands over the last two or three years on the scale we have, as the Minister says, suddenly experienced.
The Minister has acknowledged now that public expenditure has grown to over 50 per cent of our GNP. One could say: "Cut back on expenditure in the public sector." That seems to be fine if one could do it and it is not that easy. Obviously, in order to reduce the percentage you must increase output in the private sector dramatically. The public sector will continue to grow. Any legislation that is introduced in itself gives rise to increasing administration. That is inevitable. The public sector has within itself the capacity to continue to grow and in order to reduce the percentage one must ensure that the private sector will grow at least at the same rate. That 50 per cent is the highest in Europe. It is alarmingly high. If we were a full-blown socialist state it would be fine. We can hardly be called that. I do not think the Taoiseach would recognise himself as being a socialist Prime Minister. We are not. If we were there might be some justification for this high percentage. We are still free enterprise, as the Parliamentary Secretary to the Taoiseach has so fiercely reasserted. Nonetheless, we find this situation that the public sector has gone ahead to that extent. That, cannot easily be solved by cutting back on the public sector. But a good start, even in the public sector, would be if the Ministers were to go back to the personnel limitations in their own offices that we had when we were in Government. It would be some example.
It cannot be denied that since they came into Government the staffs in their own personal offices have increased of the order of 25 per cent to 30 per cent and we heard what the Minister for Labour was providing for himself today. If they have increased staff in their offices, that means increasing staff down along the line to service the staff in the Ministers' offices. That would be an example. The major thing would be to show in this budget some real crash programme for development, for agriculture and above all else in private industry and in the housing sector.
I would say once again that the Government have never been prepared to accept the effects that their tax proposals have had on the enthusiasm and determination of our investing public, our self-employed people and industrialists. They have been very significant. I am not and this party are not in any way against the principle of a wealth tax; but we believe—and in this we are being realistic—that such a tax can only be introduced at a time, first of all, when the yield from it will be significant: it is not; it was not worth all the argument. Secondly, and over and above that only when the country can support it to the point that you know in introducing it you will not restrict or limit the capacity for expansion in the country. I believe and everyone I talk to believes that this tax has had a very significant effect in undermining investment confidence in the country.
The Government and all of us are paying the price for the Government's popular promises before the last election. These promises were ill-conceived and hastily presented. The Government should have recognised that the thing to do was to get the private sector under way and not to penalise it in the way they are doing. The restrictions which they have introduced mean that people do not consider it worthwhile to fill in the forms from the Revenue Commissioners. It is undermining confidence. If these people on whom we depend were given their head to continue doing what they did in the past, there would be a much bigger proportion of GNP coming from the private sector. We could have again the atmosphere that prevailed in the sixties when under Fianna Fáil leadership the people felt motivated.
The people who paid the price for these popular promises are not the wealthy people who we were told would pay the price. The wealthy people can hide their money, as many of them have done. They can go away. It is the unemployed who are in the first line of battle. The others can retreat from the battlefield. Those in the first line of battle are falling like ninepins. As they fall, the fewer there are in employment and the more there are unemployed. The figure is increasing all the time. Unfortunately, even in my own constituency over the last week I have had evidence of established industries being affected. The meat factory in Roscrea is certainly an established industry. There are cases of established industries making 60 or 70 employees redundant. As that happens those who are getting their just entitlement under social welfare, pay-related and unemployment benefit will be drawing on fewer and fewer who are paying.
What is missing is any sense of a national programme, any sense of direction, any clear indication to any sector that this is where our money is going. We were told, for instance, that expenditure on social welfare has trebled. That is fine, but one cannot talk of a social welfare programme on its own. The expenditure may be quadrupled as unemployment increases and pay-related benefit increases. The expenditure has to increase. It is running pell-mell. It has gone out of control. The Government may boast next year that it has quadrupled. That is hardly a matter for boasting. That should be a matter of concern and self-criticism but it is here as being an indication of the Government's commitment to their social programme which we have in the absence of any national overall programme. The Minister referred to the Anti-Discrimination (Pay) Act in his speech and he said:
The Government have, therefore, decided that the Anti-Discrimination (Pay) Act, 1974, should be amended to allow industries to defer equal pay if it should lead to loss of jobs. Sex discrimination in public service pay rates is being eliminated with effect from 31st December, 1975, at a cost of £2.5 million in 1976. This action completely fulfills our EEC obligations and fully conforms with the provisions of the Anti-Discrimination (Pay) Act, 1974.
Is it any wonder, when they can be so wrong in something that was so obvious, that the Minister can only express hope rather than confidence? There is only one way that a Government can discharge their responsibilities. It is not what they give the public. It is certainly not what they give in social welfare. That is the very antithesis of what a Government's attitude should be. It is what the Government motivate the public to do for themselves.
This happened previously in the history of this country. We had it in the days of the Economic War where the people suffered for a principle because they knew they were laying the basis, the foundation, of our infant industries and our future development programmes. We had the 1960s when there was a real economic take-off because people felt the sense of confidence and determination. All of that is lacking now.
When the Government excused themselves in relation to the worst recession which has hit the western world, one thing should be remembered. The 1950s, were really the last years of industrial development here. Then we were in recession and we were the only country in Europe in recession because all other countries at that time were lifting themselves from their knees after the trials and sufferings they had gone through during the war period. We were receding. Our young people, like now, were out of employment. This undermined the morale of the people for years. It is under way again.
The short term effects of this budget and the Government's policy are bad, but the long term effects on our national morale are far worse. I do not believe that the Government know how to cure it. When I spoke on the budget two years ago I said it would be worthwhile if we anticipated the Government members' qualification for pensions, paying them off then, and we would be well rid of them. Even if the Taoiseach were to call a general election tomorrow they have qualified as of now because by the time the new Government would come into office they would have had their three years.
