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Dáil Éireann debate -
Wednesday, 7 Apr 1976

Vol. 289 No. 8

Finance Bill, 1976: Second Stage (Resumed).

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

When I moved the adjournment of the debate I was dealing with the effects this Bill and the budget will have on tourism, our second largest industry. One noteworthy effect is the extraordinary increase imposed on the price of drink, in particular, beer. I understand that at Question Time there was some disagreement as to exactly how much it was.

It is worth referring to the Minister's speech this morning to point out what the figures are. In the budget, the Minister increased the price of beer by 6p. There was another increase of 4p approved by the Minister for Industry and Commerce. That makes a total of 10p. The result of this—apart from the effects it must inevitably have on our very depressed tourist trade—is that publicans throughout the country have estimated that their turnover has dropped by between 20 and 40 per cent. This is not a temporary drop as happened on previous occasions when the price of drink was increased, but appears to be levelling out at an unusually high level. This level is so high that many publicans are now in the unhappy position of having to contemplate letting go staff who have been employed for a number of years.

This is another example of what Deputy Colley described as the Minister's irrationality in his failure to see the consequences of what he is doing. One of the social consequences of the Minister's action is that the humble pint of stout is considerably dearer than whiskey, although the reverse was always the case up to the last budget. As a result, many young people who drank beer rather than spirits are reversing the process. I do not think I need go into detail of what the consequences of that reversal can be. They can have serious long-term medical and social consequences particularly for young people. This is a matter of very considerable importance.

These brutal increases in direct taxation imposed on the various commodities about which I have spoken raise the problem of whether the Minister for Finance will end up with less money than he would have got if he had not increased the prices. In certain spheres at least there is a decided possibility that this will be so. The total returns in many areas are now less than if there had been no increase in these taxes.

I spoke earlier about the increase in VAT and the main 6.75 per cent rate, on which there was a 47 per cent increase. That contrasts very starkly with what happened in Britain yesterday, where the higher rate of VAT, 25 per cent, much lower than our higher rate, was halved to 12½ per cent. That was not done by the Socialist Chancellor in Britain without good reason. He believed it was necessary to do that in order to stimulate the economy. He believed it was necessary to try to curb inflation and to try to stimulate growth in demand and in the economy generally. He understood that above all other people and institutions, the one which has the greatest duty to try to prevent the further fuelling of inflation is the Government. The British Government made their contribution to try to keep prices down. They made a major contribution towards reducing prices. Again I would ask the House to contrast what was done yesterday by Mr. Healey with the totally opposite approach of our Minister for Finance. Not alone did he make no effort to maintain prices or reduce them, but across the board he increased very substantially the price of virtually every commodity.

Deputy Colley dealt this morning with the question of a pay pause or a possible national wage agreement. He pointed out the difficulties that are created for the unions and the workers in approaching any such arrangement. It is fair to say that, if the Government had gone out of their way to make sure there would be no pay pause or no national wage agreement, they could not have succeeded better than they did by increasing the cost to the average citizen of virtually every commodity, as they did in the budget and as they are doing now in this Finance Bill. If for some reason the Government decided they did not want a pay pause and wage restraint and they wanted a free for all, the best way of going about achieving that is what they did in the budget and what they are doing in this Bill. While some of them are talking about a pay pause, income restraint and all the rest of it, they are putting this Bill before the House to try to make permanent the various increases they imposed in the budget.

It is very difficult to know what exactly the attitude of the Government is in relation to pay and its control because we had the Taoiseach and the Minister for Finance telling us in one week that controls were necessary, that there could be no increases in pay in 1976 and the following week we had the Minister for Labour telling us there was no question of any statutory pay pause, that there could not be controls and that there would have to be voluntary agreement. Those statements are totally contradictory but they are made by members of the Government within a week of each other. They cannot be reconciled. One can only assume that there are diametrically opposed views held within the Government.

This morning on the Order of Business Deputy Fitzgerald inquired from the Minister for Labour what it was proposed to do with item No. 17 on today's Order Paper, the Anti-Discrimination (Pay) (Amendment) Bill, 1975, which proposes to repeal the necessity for equal pay for women, which was introduced and passed in this House in 1974. The Minister for Labour made some sort of sneering remark that he did not believe there was any confusion in relation to the matter. It is no harm to remind him, as he seems to overlook the fact, that the law of the land at the moment decrees—it has never been repealed— that equal pay for men and women for equal work applies throughout our entire economy, both in the private and public sectors. It is open to any woman who is not being paid equal pay to go to the courts and enforce that Act. It is beyond me how the Minister for Labour can suggest that there is no confusion in this situation when the policy of the Government apparently is to repeal at least in part this legislation and to substitute for it some new concept they have of married people being paid at a higher rate than single people.

The Deputy seems to be deviating from the Finance Bill proper.

I accept that I have deviated to some extent but I am sure the Chair will appreciate that the whole question of the economy, which finds its legislative expression in the Finance Bill, is of necessity bound up to a very great extent with the whole question of pay and an increase or otherwise during this year. It is apparently the view of the trade unions, and the overwhelming view of their members, that because of the increases in taxation, particularly in direct taxation, imposed in the budget and proposed to be legislated in this Bill, they cannot be expected to agree to the wage freeze they were asked for some weeks ago by the Taoiseach and the Minister for Finance.

I, quite honestly, cannot blame them. This party are very conscious of the paramount importance of restraint in income in the whole economy this year. I suggest to the House that even though the necessity and the tremendous importance of income restraint this year are vital the Government have done all they can to destroy any possibility of it being agreed to by loading on huge increases in the cost of everyday commodities. If proof was needed it is that there is a 7.3 per cent increase in the consumer price index up to the middle of February, which does not take account of the very substantial increases in VAT which came into operation on 1st March, and which will be reflected in the consumer price index next quarter.

There is one body, and one only, which must take the blame if there is no reasonable national wage agreement and if there is no pay pause, which seems very unlikely. They are the Government, who went out of their way to increase costs and prices to such an extent that the possibility of the kind of things the Taoiseach and the Minister for Finance are looking for being agreed to has become very remote indeed.

I mentioned earlier today the rates of personal taxation in this country and I quoted figures which show that Ireland has the second highest rate of personal taxation—it is second only to the United Kingdom—throughout the EEC and, indeed, what one might call the western world. We are not a great deal behind the United Kingdom and we are miles ahead of the third country in that list. It is quite clear from the increase of 10 per cent in income tax, which was imposed last year, and which it is proposed, in one of the sections on income tax in this Bill, to reimpose this year, that we will remain very close to the top of the league so far as rates of personal tax are concerned. I wish the Government would realise that there is a tremendous disincentive not just to industrialists or those who might be engaged in trying to establish industry but to the ordinary worker in any factory or any other business. The more work you do now and the more you earn the less you are getting and the more futile the whole exercise becomes. The Government, instead of again increasing all rates of income tax, except the bottom one, by 10 per cent, as is proposed in this Bill, should be decreasing those rates by 10 per cent to try to generate in the economy once more a willingness to work, a feeling that it is worth while working and that there is an incentive to increase productivity.

The attitude of business generally to this malaise which afflicts the country at present was very well expressed the other day by the chairman of CCT, Mr. Colm Barnes who is not just a private citizen speaking of his own feelings or difficulties but speaking as chairman of a major semi-State body who are doing what they can to try to promote the export of Irish manufactured goods. I want to quote briefly some of what he said, as reported in The Irish Times of the 30th March last:

Enterpreneurs see the present political climate in Ireland as “hostile to business” and have turned their attention to investing in other countries “where they are more appreciated”. This he said is a “sad and serious state”. The industrial sector he stressed, “has been subjected to a battering of the most damaging kind”.

He goes on at some length to elaborate on those statements in greater detail but I will not detain the House with his elaboration, which bears out the conclusions he came to. A statement like that from the chairman of an important semi-State body dealing with exports of Irish-manufactured goods is extremely serious. A man in his position would not say the kind of things I have quoted unless the position was extremely precarious in his view and in the view of his associates. Unfortunately there is no doubt that he is right. The speech was delivered on 29th March and I have not seen anyone contradicting it or endeavouring to suggest that Mr. Barnes was wrong. It is evident he was not wrong in what he said and it is a serious matter that the present political climate in Ireland is hostile to business and that our entrepreneurs and industrialists have turned their attention to investing in other countries where they are more appreciated.

What hope have we of getting out of the situation where there are nearly 120,000 people registered as unemployed and where there are tens of thousands more unemployed whose names do not appear on the register because they left school in the last year? What hope have we of getting out of the terrible situation we are in when, in the words of the chairman of an important semi-State body, industrialists are getting out of the country to places where, as he put it, they are more appreciated? They are getting out of a country where the present political climate is hostile towards those who seek to improve the lot of tens of thousands of unemployed. The chairman of that organisation described the entire business as sad and serious and he was not exaggerating or overstating the position.

Fianna Fáil believe that until people are given the incentive to extend businesses and to establish new industries there is little hope for the many thousands who are on the list of unemployed. It is worth adverting to the views on this matter and to the figures given by the Managing Director of the IDA, Mr. Michael J. Killeen, in a speech he made last Sunday and which was reported in the newspapers on Monday, 5th April. He stated that last year 14,500 new industrial jobs were created but later in his speech he said that a total of 27,300 industrial jobs were lost last year through factory closures and layoffs. The net loss, therefore, in industrial manufacturing jobs last year was more than 13,000.

We are facing a problem in this country, as has been stated by Professor Walshe of the ESRI and by other people, including Senator Halligan. We have to create a net 30,000 new jobs each year between now and 1986 if we are to reduce our unemployment rate to 4 per cent. The target that is being suggested as desirable is not to do away with unemployment; that is regarded as far too pious a hope and far too impossible an achievement. All we are being asked now by a number of commentators who are being realistic about the matter is to seek to reduce our unemployment figure from its present level of 9½ per cent or 10 per cent to 4 per cent. We are told we will have to create 30,000 net new jobs each year between now and 1986 to do that. That figure does not mean just creation of 30,000 jobs; it means 30,000 created after deducting all job losses. We have made a very bad start on this because we were minus 13,000 jobs last year. That simply increases the 30,000 figure we must achieve.

It is not often remembered that at the end of 1971 and the beginning of 1972 emigration ceased from this country and immigration began and for the first time since obtaining independence we have to cater not for a static or a falling population but for one that is growing, and the projections of which are that it will grow very substantially in the next ten years. I do not want to be pessimistic about it but I have the most grave doubts about our ability to achieve even the limited targets set out. I am certain that the policies that have resulted in a net loss of more than 20,000 jobs in the last two years rather than the creation of new jobs will never achieve these objectives, limited though they may be. If one ponders on these figures and on the problems that will face the country because of the growth in population in the next ten years, quite honestly one becomes somewhat pessimistic about our prospects.

Fianna Fáil believe that we must create incentives for people at all levels in industry and in business, not alone those who take the risks of establishing and maintaining an industry but of those who work in industry. The attitude of many people now is that it does not greatly matter whether they have employment. I am frequently told by some of these people that they are better off to be unemployed because they do not have to pay income tax, they are entitled to a medical card and they do not have to pay social welfare contributions. It is unfortunate that the kind of climate of opinion created by the Government in the last few years is producing this kind of result and while that climate is fostered, as it is by the Government, we will not get out of our present situation.

We hear from Government speakers that although we are in serious difficulty so is everyone else. I should like to endeavour to nail that lie once and for all. Outside of Britain—and thank goodness Britain seems to have done something major yesterday to solve her problems—the terrible despondency and recession in which this country has laboured for the past two years does not repeat itself in other countries. Recently I was in Switzerland and they told me about their economic difficulties, particularly with regard to inflation which they regarded as their most serious difficulty. In 1975 it was between 4 and 4½ per cent and this they regarded as unacceptably high. I smiled politely at their problem and said that if we could get our inflation rate down to 4 or 4½ per cent we would be making very considerable progress. I said we had an inflation rate that was 20 per cent or more in the last couple of years. Therefore, to suggest that the rest of the world is in serious difficulty, that we are just simply a part of that and that we are no worse off than anyone else is to suggest something that most patently is not true. As late as this morning we heard the Minister for Finance talk about the difficulties created for this country by the increase in oil prices, and in particular by the increase in petrol prices.

Of all the huge increases in petrol prices imposed here in the past two-and-a-half years, the great bulk of them were not imposed by OPEC or the Arabs or the producers but by our Minister for Finance. It is rather disturbing to compare the price of petrol here with the price in the USA where the bulk of their supplies must now be imported and they are subject to much the same difficulties as we are. The retail price of petrol in America is approximately one-third of what it is here and they regard that as being unacceptably high. Is it any wonder that tourists coming here from America or elsewhere regard the prices of essential commodities as incredibly high, so much so that they are not encouraged to come back?

Section 32 proposes to impose, in conjunction with the Corporation Tax Act just passed, ordinary company or corporation tax on the co-operatives. Deputy Colley dealt in some detail with this matter this morning and I shall not go into the same detail, but I want to make some comments. A week or so ago I attended a meeting organised by the IFA in Limerick, the first meeting of the IFA that I had the privilege of attending. It was noteworthy that the only Deputies present were Fianna Fáil Deputies, although every Deputy in the North Munster region was invited. This was much commented on by those present. The sense of outrage expressed by the farmers present and by those associated with various co-operatives was quite extraordinary. I had never before heard such anger expressed about financial proposals.

Figures were given to us of the financial position of some of Munster's largest co-operatives. The Golden Vale Co-operative, which has 10,000 members and which recently because of its serious financial situation had to fire 450 of its workers, most of them in Limerick and Clare, owed the bank, we were informed, a sum in excess of £14 million. It is heavily over-borrowed and heavily under capitalised from its own shareholders and any reserves it might have. It is in a serious financial position. As far as I could see, the main reason why it was able to continue notwithstanding its incredibly heavy borrowing is because there was no taxation on any surplus it might make—it is not making any surplus now. The banks' prospects of repayment, obviously, were considered better than would be the case with an ordinary commercial company and for that reason they did not squeeze as hard as they might in the case of a private concern. There is every reason to believe that the banks' attitude will change as a result of proposals in this Bill. What then will be the future of that co-operative?

We are told that Mitchelstown, happily a more successful concern than Golden Vale, has borrowed from the banks to the extent of £9 million. I did not get the figure for Ballyclough but I understand they have borrowed heavily also. A major part of the security for that borrowing has been, up to now, the exemption of these co-operatives from taxation. What their position, that of their suppliers and members and particularly that of their workers will be after this proposal is put through, I do not know. As I said 450 workers were fired from Golden Vale in February. How many more will be fired from this and the other co-operatives when this Bill is passed, I do not know.

Deputy Colley suggested this morning that the Minister for Finance, in view of remarks he made in his opening speech, might have second thoughts about his proposals. I hope and pray this is so. Apparently, he says in one breath that the Government are adamant and resolved to go ahead with the proposals and in another later that the Government are looking at certain aspects of proposals that have been put to them. In regard to any changes the Minister may introduce on the Committee Stage in relation to this proposal arising out of pressure put on him, I should like him to clarify either then, or preferably when replying to this debate, the position of co-operatives in particular and of all producers in general in relation to sales into intervention.

I had a long debate on this point with the Minister for Finance in the Special Committee on the Corporation Tax Bill. The Minister had seven advisers with him and it was not possible to get from him or from them a definite answer as to how sales into intervention stood in relation to export tax relief. The general gist of what I could gather is that sales into intervention, as such, do not qualify for export tax relief; but if the commodity is moved abroad and there is certainty that it will not physically come back to this country, the Revenue Commissioners could, in their goodness, regard that as an export sale. If this tax is imposed on co-operatives it is absolutely vital that they should qualify for export tax relief on everything they sell into intervention and that is the bulk of their production.

There are at least three co-operatives engaged in the export of meat in a big way and many more are selling milk products in the form of butter, cheese or powder. In many cases the only way in which they can sell these goods abroad is by selling them direct into intervention. The EEC take over the entire responsibility for them and they are no longer the responsibility of this country. If this tax is to be imposed—and this party strongly believe it should not be—notwithstanding the views of 165,000 farmers in the co-operative movement, it is vital that sales into intervention should qualify for export tax relief, because it is the only chance these co-operatives have of surviving under conditions created for them by the imposition of this taxation.

It seems that the Minister, and the Revenue Commissioners, seek to make a distinction between sales into intervention where the goods are held in cold storage here and sales into intervention where the goods are held in Britain or on the Continent in cold storage. I do not think the Minister or the Revenue Commissioners are entitled to make that distinction. It is purely arbitrary as far as the producer is concerned as to whether his product happens to go abroad or is kept here after it is sold to the EEC and they have taken over responsibility for it. A product produced on a certain day will go into intervention in Dublin or Cork or wherever there happens to be an empty cold store but if that store is full and another farmer or co-op produces a similar product he has to send it to Britain. Why should one qualify, as the Minister suggests, for export tax relief and another not? It is purely arbitrary and if that is the way it will operate it will be extremely unfair.

The latter part of the Bill deals in great detail with new proposals for motor tax. Firstly, it establishes the vast increase in tax, as if the motorist was not already sufficiently hard hit with petrol at 88.3p per gallon and having to pay very high insurance. Before this increase motor tax was already higher than in any other country in Europe. In spite of those things the Minister imposed huge further increases.

Section 79 provides that none of the additional money which will be raised by these greatly increased rates of taxation will go into the Road Fund; it will go into the normal Exchequer. It will not be used for the benefit of motorists or for the improvement of our road system. One would have thought that that was a hard enough imposition on the motorist but we also have in this Bill—I do not think it was mentioned in the budget speech—about 15 sections designed, as the Minister puts it, to prevent evasion of road tax. Anti-avoidance is the most important function in the Minister's life but the lengths to which the Minister goes in these 15 sections on road tax to prevent evasion or avoidance are ridiculous.

As yet, the public are not aware what is in these sections but I am sure that when they become aware there will be a public outcry. I will be disappointed if there is not such an outcry because the provisions in those sections are monstrous. It is proposed that whether one uses a car or not one is continuously liable for tax on it. In order to get out of having to pay tax on a car that one is not using one must go to most incredible lengths which most people are not in a position to go to. One must show that the car was unusable during the period it was not taxed. That applies even if one keeps it locked up in one's own garage. The people will be horrified when they realise the full extent of this.

I am always amused when I see in Bills produced nowadays a side note on a section stating "onus of proof on defence". It is worth noting that as far as the registration authorities are concerned their certificate is evidence and proof of everything unless the defendant can prove the contrary to be so. The onus is put entirely on the defendant. It is a question of the ordinary motorist having to prove his innocence. It is worth noting also that the fines in respect of any offence to do with motor taxation are increased to a maximum £100. This is apart from the fines for the nonpayment of tax. One of the offences which is re-enacted here and which now carries the maximum fine of £100 is that of not displaying a tax disc. I draw attention to the fact that there is a distinction between the offence of not displaying a tax disc and the one of not paying tax. If one does not display the tax disc—many people have paid tax but do not display the disc because their children tore the disc off the windscreen—one is liable to a fine not exceeding £100 for that totally trivial offence. Some people may not have any control at all over that matter.

The most serious aspect of it all affects the many people who do not use their cars for part of the year mainly because they cannot afford to. In many cases they prefer to use them during the summer only. Accordingly, they do not tax them for the winter months. Unless these people go to tremendous lengths to show that the car was unusable during the winter they have to tax it for the entire year and the tax they are now called upon to pay in many cases is approximately double what it was up to February of this year. The road tax paid by motorists up to February was substantially more than it was in Britain or any other European country. In some European countries no road tax is payable at all and motorists pay a fee to get a licence plate each year.

I have only dealt with some of the matters in the Bill. On Committee Stage all matters will be dealt with in detail and it is not appropriate that they should be dealt with now. The overall effect of this Bill seems to be that it will further damage an already seriously damaged economy. One would have thought that after all the destruction carried out by the Government on our economy over the past three years they would have at last learned their lesson. However, instead of learning their lesson, instead of doing things which are so patently necessary to be done, they are doing the opposite. They are fuelling inflation by increasing prices and while they are increasing prices they are, almost in the same breath, asking workers to agree to a wage freeze. It is an incredible contradiction. It is not a policy because every line of it contradicts every other line. What is said on Monday is contradicted on Tuesday and what is said on Tuesday is contradicted by what is done on Wednesday. This Bill adds further to that confusion and to the gradual and inevitable destruction of our economy. The great majority of our people have come to realise, particularly in the last three months, that every day longer the Government remain in office the repairing of the damage becomes that much more difficult, and the duty of the Government now, to the country and to its future, is to say: "All right, we have failed, we will get out and let the job of repair begin".

There are many important discussions taking place on the question of employer-labour agreement, but that cannot possibly be taking up the time of more than two or three members of the Government. Allowing for the odd member of the Government who may be on his way to or from some other part of the world and the few Deputies who are not well, I work out a tally of 66 Deputies, including Ministers and Parliamentary Secretaries, who are available to come in to support the Minister for Finance. So far, I have not seen any except the Parliamentary Secretary now standing in for the Minister since 10.30 a.m.

The problem they may have is that they find it impossible to come in to support the Minister with their hearts even though they will have to do so with their feet. It is an indication to me that there is a lesser regard for Parliament as a democratic institution. It is a great pity there have not been any Government Deputies here since 10.30 a.m.

It is topical to refer to the budget introduced yesterday in Britain but I do not propose to deal with it at any great length. I have not studied it very deeply and I regard it as being the business of Britain, even though we are closely linked with the British economy. One of the notable changes in it is in regard to VAT. Last January the rate of VAT on luxury goods in Britain was 25 per cent. Here it was almost 50 per cent greater, and in the January budget the Minister for Finance increased it by a further 10 per cent. We now have a situation in which the VAT rate on luxury goods in Britain is 12½ per cent and here it is three times as great.

Side by side with that, we have a situation in which the highest level of tax on income existing in Europe applies here, and I say that despite the fact that Deputy O'Malley a few minutes ago excluded Britain. The rate of tax in Britain is higher than ours but the threshold before reaching the top level in Britain is almost double that applicable here. Inevitably, this all has its effect on the generation of wealth, of prosperity and the creation of work; and yet the Minister for Finance in this House last January had the nerve to say we must rely on the private sector more than the public sector.

Our rate of inflation for the first quarter of this year is the highest we have reached so far and yet for 1975 we had a net fall in our GNP of 3 per cent. That brings me to comments made outside this party by concerned individuals. Deputy O'Malley quoted what was said by the chairman of Coras Tráchtála. Others representing public bodies have commented along similar lines and one of the most noticeable recently was the Director General of FUE. Prior to the talks that took place a few weeks ago he was asked what was the main cause of employer-labour problems and he said it was the Government's fiscal policy. Nobody in the position of a responsible businessman will make a comment of that kind, which would appear to be political but is not, unless he is absolutely satisfied that it is correct.

I do not know how a responsible Opposition can alert public opinion to the serious consequences of Government policy as we have seen it. Perhaps one of the best illustrations would be to compare the inflation rate for West Germany for the whole of 1975, 5¼ per cent, with the rise in the cost-of-living index here for the first three months of this year, 7.3 per cent. An illustration of the difference in approach to the creation of employment lies in the interesting fact that the rate of tax here on enterprise at its top level is 75p in the £. In West Germany it is 45p.

To return to the increase in the cost-of-living index this year, we have been accustomed to hearing Ministers explaining away the difficulties of the last year or two by saying outside sources are mainly responsible. Speaking in January last the Leader of this party, referring to the fresh taxes imposed then and now being enacted in this Bill, estimated that they would increase the index figure by 5.8 per cent, and we were not including the recent increase in value-added tax, a follow-up of the budget. Therefore our current increase in inflation—a rate that should apply to a full year, not to a quarter—is not due to the increase in the price of oil or to any external source but to additional taxes imposed by the Minister for Finance to provide a necessary revenue return to justify further borrowing. This year I hope we will not hear any more from any of the Ministers who customarily sit on the benches opposite, particularly the Ministers for Finance and Industry and Commerce, justifying the situation on the grounds that external causes created our problems.

In regard to our financial situation, our position, vis-à-vis the EEC, which has been discussed here already by some speakers, is of considerable importance. The EEC has come under fire in recent times, not as might have been expected from the Opposition but from some Government speakers. The most recent attack was by the Minister for Foreign Affairs a few days ago on the grounds that the better-off EEC members were not providing sufficient money in the regional and industrial spheres.

The Minister for Foreign Affairs may be justified in levelling that criticism but it is only right that we should put on record the financial facts of our position vis-à-vis the EEC. These facts are that in 1975 we received from the Community a total of £119 million in grants, that is free money, what we used to call in the old days “money from America”. At the same time we received £19 million in loans through the EEC, from the European Investment Bank, at low rates of interest. To that must be added the saving in agricultural export subsidies we would have had to pay were we not members of the EEC—a figure I find impossible to calculate. Without that sum of approximately an additional £50 million from the EEC, where would this Government be, who have got themselves into such a financial tangle.

In recent weeks I doubt if there is any Deputy on this side of the House who has not been stopped in the streets and on public transport as I have been, by people I never met, asking me: "When, in the name of God, are you going to get this crowd out?" The usual comment is: "I voted for them, but never again. For goodness sake get them out as soon as you can before they bankrupt the country". Apparently that has been the prevailing feeling in recent months on the part of those who are prepared to talk. The only reply I have been able to give is: "You are the people who decide who will be the Government and you have got to decide when the next election comes".

Does the Deputy not appreciate that the people spoke in a number of by-elections since the last general election? Would he not agree that they have reaffirmed their belief that this Government should continue in power?

I can answer the Parliamentary Secretary. I have said that the people who have spoken to me have done so during the past couple of months. I do not deny the results of the west Mayo by-election. It is possible that the people of west Mayo were not conscious of the real consequences of Government policy when they were voting.

In west Mayo thousands were paid out under the scheme but nothing was paid in the Parliamentary Secretary's own county to his neighbours. The Government are buying popularity under EEC membership.

West Mayo received no greater concession than any other place.

Deputy Brugha is in possession.

With Arab money.

I do not mind the Parliamentary Secretary interrupting me. I am simply pointing out what I believe to be the case now, particularly in this city, compared with what may have been believed last November by the electorate of west Mayo who at that stage may not have been as conscious of the shortcomings of the Government as are the public now.

In relation to the Finance Bill the real test of financial policy in an enterprise economy is: will it encourage enterprise thereby increasing production and employment? I believe the overall result of this Bill and its predecessors will be discouragement of enterprise, falling employment and at the same time increased expenditure and some employment in the public sector, another area that produces no real wealth. The only areas of employment of real value to a community are industry, particularly small industries, business enterprises and farming. I would make some exception in relation to certain semi-State companies such as NET, Ceimicí Teoranta, Bord na Móna and the Sugar Company.

The Minister mentioned the question of deferred tax allowances to enable companies to carry forward a balance of increased cost of stock so that they might survive. There may be some benefit here to some mammoth companies doing quite well anyway, as one can see from published returns in the newspapers. Perhaps it is because of their very size that some of these large companies do so well. In regard to the Minister's deferred tax proposal, there are many hundreds of small companies which have been virtually brought to their knees already through inflation, by the increasing money cost of stock, and who can entertain little hope of being helped by a deferred tax system.

Deferment of tax is only of value to a small business if it has made a profit. That must be contrasted with the situation of small industries and small businesses. The Minister mentioned the cost of £3,500 per job of new jobs created. The IDA would be unable to create these new jobs or to encourage industry to come in unless they were able to give the exceptional tax free incentives that are available to foreign companies set up here and also grants. In contrast with the £3,500 per job a very small part of that would have been necessary to save many of the jobs that have been lost, if the Minister had devised a means whereby the increased cost of stock could be carried either by special loans or some other system. We have an extraordinary situation where the IDA is paying £3,500 per job created and at the same time the State is losing, through social welfare and unemployment, approximately £1,500 per annum per job lost. It is clear that only a small amount per job of capital against inflation could have saved many thousands of jobs that have been lost in the past 18 months. Fourteen thousand five hundred jobs were created last year and 27,300 jobs were lost. It would be much cheaper to have retained many of those jobs in industry. The Minister has not dealt with this problem.

This Bill does not offer any hope to the people involved in small industries at present. The Opposition have been criticised and I expect that at the end of this debate they will again be criticised for criticising the Minister's financial policy but the fact is that the Minister and the Government have created their own problems. If the Minister looks at the details of the budgets for the past few years he will find that the Opposition's criticisms were valid and that the warnings that were then given have been proved true—warnings about inflation, the effects of over-borrowing and over-expenditure in non-productive areas. It is true that you cannot put an old head on young shoulders. The people have to suffer the consequences of the luxury of teaching the Minister for Finance and his colleagues something about economics. This country is now paying for the inexperience of the Minister and his colleagues and for the political naïveté of the two Coalition elements. In the end the bills have to be paid. No individual can last for more than a few weeks if he spends more than he has earned. Unfortunately a Government can afford to spend for a considerable time more than it has earned but eventually the chickens come home. The Minister said earlier that Ireland is facing a situation not of its own making. I would submit that the situation is largely of this Government's making because of their fiscal policy and because the Minister and his colleagues had no idea of what was going on.

They had, however, considerable success in the public relations area. Huge debts and overspending have been presented as efforts to maintain employment and to create buoyancy. The results of these efforts to create buoyancy have been an unemployment total standing at 116,000 and ever mounting debt. We probably have not seen the end of it. In January last year when introducing his budget, the Minister spoke of an estimated deficit of £125 million. At the end of 1975 in the published figures was an overall deficit of £259 million, well over double the estimated deficit. A bank would not tolerate this from a private individual. The Government have failed to lead and to give good example in this area of finance. In 1975 they were borrowing virtually to pay for consumption, while the national output was falling and at the same time the State's salaries and wages were rising.

Whatever country you live in, if you have an understanding of economics, you know you cannot have rising wages unless there is rising production in other words, unless the GNP is rising. If you do not have that, the only result is inflation and less employment. I submit that Ireland at the moment is probably getting the worst of both worlds. Living as we do on the edge of enterprise Europe our pseudo-socialists in Labour and, to some extent in Fine Gael are giving us a form of half-baked socialism, borrowing to please the voter, and this is being done in a semi-free economy where the discipline of true socialism does not exist because under the form of socialism functioning in other parts of the world the State controls salaries, wages and prices, and trade unions have a community function in place of an industrial bargaining role. In free countries everyone has to compromise and make sacrifices for the common good. Under socialism carried to its logical conclusion all have to conform because they have no choice.

One of the outstanding examples of a bad fiscal policy in a country of this size is the increase in the tax on cars, petrol and car hire. These increases are for the purpose of raising revenue in the easiest way possible. The Minister for Finance, when he was questioned on this in relation to the budget, admitted this. The purpose is to pay for Government expenditure without regard for the social and disemployment consequences. Hardly one penny of these increased taxes can be seen as directed towards growth and development in the economy. Mark you, I would justify increased taxes of this kind if that were the purpose but not one penny can be seen as going towards the original purpose of a tax on cars, which was the Road Fund.

The consequences of the increase in the price of petrol are not yet calculable. When the Minister spoke about these taxes he referred to what he described as areas of choice. I would like to know where the area of choice is for the motorist who has to have a car to travel to his job because public transport is not available. I would like to know where the area of choice is for doctors, veterinary surgeons, for religious, for teachers or for farmers. In the increased tax on transport, an area in which the Minister was sure of getting his millions, there are two direct consequences, namely, further disemployment or a demand for increased wages to pay for the additional cost of transport.

I would concede that, when the Minister speaks of areas of choice, he is correct when talking about drink— some people believe it is a necessity; the Deputy sitting on my left does not touch it so he would not regard it as a necessity. Smoking is probably an area of choice. So far as tourists are concerned they have a choice because they do not have to come in here and spend their money here.

There is a new feature in this Finance Bill. The Minister has conceived the idea that, because there are so many car tax dodgers, the right way to deal with the problem is to tax all cars for the entire year irrespective of whether or not they are in use. This is the lazy man's way of going about the job. If there are 40,000 tax evaders using cars as the Minister stated, at a cost of £4 million a year it is the Minister and the servants of the State who are responsible for failure in dealing with that position. The Minister said there were 40,000 prosecutions last year. I believe this provision is an injustice against the hardworking, thrifty head of a family who is able by some effort to provide a car for, perhaps, three months during the summer, or even six months, to take his family out. Now, in order to catch the tax evader, the Minister will make him pay for that car for the full year irrespective of whether or not he can afford to use it. This is bound to have its social consequence. If he has not got a car and if public transport is not available, there is very little he can do for his family during the holiday period. He will certainly have a sense of grievance and a good reason for getting shut of the car altogether thereby depriving himself and his family of a very valuable social amenity.

Other Deputies have spoken of the record of borrowing and deficit. It is frightening to think that in the first 50 years of the life of this State the total amount of national debt up to 31st December, 1972, was £1,259 million and that in the period from 1st April, 1973, to the end of this year the increase in the national debt is estimated to be in excess of £3,000 million and in the current year the estimated net deficit on expenditure, according to the Minister, will be £327 million.

In the past the Minister spoke of three vital requirements. The first was to reduce price inflation. This was a promise the Coalition made three years ago. Look where we are now. One of the means adopted to do this was to over-borrow which, itself, caused inflation. The authorities I quote for this, apart from ourselves, are the Central Bank and the EEC, who advised us against this policy. The correct means of handling a borrowing policy is to keep borrowing within a reasonable percentage of overall expenditure. The second requirement was to give priority to safeguarding employment. As I said before, I believe the Minister has been justifying a deficit on these grounds and, at the same time, unemployment has increased. The third requirement was to limit the growth of public expenditure. The Government are only now beginning to pull back after a great deal of damage has been done. One of the reasons the Minister was compelled to pull back is because it would not have been possible to borrow the £150 million the EEC sanctioned recently if State expenditure were not curbed.

In his budget speech the Minister said that we must rely on private enterprise even more than on the public sector. I agree with him but I wonder if he is using the kind of phraseology which finds public approval but is not acting on it. With the increased taxes in many areas there has not been any dynamic or dramatic proposal to inject into the private area the necessary funds to help develop that area and reduce unemployment. Additional taxation would be justifiable for this purpose and for this purpose only. At best, the high level of spending and taxation have caused inflation, reduced living standards, kept some people in jobs but by inflation reduced employment in the private sector, the real productive creator of wealth.

I recall in 1972 the Minister for Finance, then spokesman for Finance, speaking on the Finance Bill of the previous Administration—or was it the Minister for Foreign Affairs?

I was spokesman for Finance then.

The quotation I have in front of me is that the Finance spokesman——

Which Minister?

I am quoting from what the Finance spokesman said—it is down to the present Minister for Foreign Affairs. He said that the Fianna Fáil budget in 1972 was reckless and the Government were spending more than they could afford, while calling on everybody else to do the opposite. It may not have been said by Deputy G. FitzGerald, because this quotation was given to me and I do not have the reference. Since the doubt has arisen, I will check it.

We are both in doubt.

The Finance Bill is a useful means for measuring the level of incentive—or lack of it—to create prosperity and provide employment for the increasing number of people coming off the land and young people leaving school who need employment, being provided by the Government in office. The provision of jobs and means of making a livelihood are the primary responsibilities of Governments, in addition to providing day-to-day Government. This is not being done under this Bill. Judged in the light of the present needs of our economy and of our people, and the need for a vigorous enterprise in expansion, this Finance Bill, like previous Coalition Finance Bills, fails to encourage what is necessary; indeed, it does the reverse. In my view, the Minister and the Government are going backwards and bringing the economy with them.

As a result of the Coalition's fiscal policy we have now arrived at a new situation. Continuous failure by the Government to provide incentives and the leadership that will encourage expansion and prosperity—together with their appalling record of borrowing and non-productive public expenditure, thereby encouraging inflation —have, I believe, destroyed the confidence of the community in this Administration. That confidence, which is essential to progress in our economy, can only be restored by a change to an Administration that in the past proved their ability to give leadership and inspire confidence. In the fifties and sixties that Administration showed a record of positive progress and growth in the economy. The sooner the electorate get the opportunity to vote for that new Administration the better for this country and its future, and particularly for those leaving school who will need jobs.

Inevitably in a debate of this kind, the picture of the economy, its prospects and progress as seen from the Opposition benches must be somewhat different from how it is presented from the Government benches.

Deputy Brugha in the latter end of his speech was, I felt, being selective. The picture he drew is one of unremitting gloom which does not reflect the reality of our situation. There are a number of aspects of our economic situation today and of the way in which it is moving as a result of Government policies that are encouraging, but are not getting as much attention as they should. Perhaps it is the fault of this side of the House for not bringing out these aspects of the situation. I am not suggesting for a moment that we do not face great economic difficulties; of course we do. I do not want to diminish the difficulties we face or the very serious inflationary problems we have had, their impact on Government finances and Government taxation policies. In all these areas, the world economic situation and its overflow effects on us, have had adverse effects which are undoubted and grave.

The question we must ask ourselves is this. Within the context of the world situation, in which we are in the lee, and very closely linked to the British economy, has our performance, in comparison with that of other countries and in the light of our close links with the British economy with all its weaknesses, been as bad as the Opposition say, or has it perhaps, in a number of respects, been somewhat better? At this stage we can see some signs of recovery here which reflect, perhaps in part, the beginnings of a recovery in other parts of the world, but which significantly reflect the impact of Government policies. If we look, for example, at the situation with regard to prices and wages it is by no means as gloomy as the Opposition suggest. The fact is that as a result of the measures taken by the budget in June last year, the increase that took place in prices in the second six months of last year was only 2 per cent. Of course, we have had in the last prices figure a bigger increase, partly because it reflects the impact of a budget and the indirect tax increases in the budget, to which I shall return, and partly because of other factors which have given a bit of a boost to prices at that point. Nonetheless, to have achieved in the second half of 1975 a price increase as low as 2 per cent is, I think, without parallel in western Europe. I cannot, offhand, think of any country in other parts of the world which has a similar achievement to its credit and because this was closely linked to the renegotiation of the national wage round in which we secured the co-operation of the trade unions, which is of vital importance in these matters, the increase in wages over this period has been only 2.8 per cent. It has to be said that that followed a period when there was very rapid wage inflation and the impact of the previous national wage agreement and its closing stages on wages and costs was very great indeed.

We suffered in the first half of 1975 from a very high rate of inflation but since then, both in terms of prices and wages in the second half of last year, the performance of this country was by any standards exemplary. The result has been that taking the last 12 months, taking the good with the bad, taking the bad period in the early part of 1975 and the good period in the second half, our inflation rate has been notably lower than that in the United Kingdom. The figures for the 12 months to February show a 16 per cent rate of growth in prices here. That is a drop of more than a third of the figure for the nine months earlier. It compares with the United Kingdom figure of 23 per cent. Those figures include the impact of indirect taxes in the different budgets. If you exclude them, the comparisons in some respects are even more favourable.

Some economic commentators have recently been talking as if this 16 per cent increase in consumer prices is a measure of our competitiveness in world markets. This is not the case because this reflects the increase to consumers in the cost of an average package of goods they buy, including the tax increases in the recent budget. That is not a measure of industrial costs. I have not got a precise measure of industrial costs ready to hand but given the fact that during the second half of last year, when the increase in wages was 2.8 per cent and even allowing for the heavy increase in import prices, the increase in industrial costs must have been something much nearer to 10 per cent than to 16 per cent over the last 12 months. One might measure it, perhaps, very crudely—it would be a crude measurement and, perhaps, one that would exaggerate it somewhat— by taking the consumer price increase over this period, exclusive of taxes. That would work out at approximately 12½ per cent. That is not an accurate measure of the increase in industrial costs which are influenced by things other than consumer prices but it is probably a figure of a similar order of magnitude, although, perhaps, the true figure for industrial costs increase over the year is somewhat lower. My guess is that it would be between 10 per cent and 12 per cent but I have not got the precise figures and I have not done the calculations necessary to give the House something which I would regard as authoritative. Certainly the figure 16 per cent increase in the consumer price index is no measure at all of the increase in industrial costs, which has been very much lower.

That is in terms of our own currency but for reasons outside our control our currency linked to sterling has been depreciating and has depreciated by about 7½ per cent over the last couple of weeks alone. In terms of competitiveness vis-à-vis Britain undoubtedly our position has markedly improved. The consumer price index figure gives one a good measurement of that but it is not a true measurement of industrial costs differences. Certainly in the past 12 months our industrial costs have risen much less than in Britain and our competitiveness vis-à-vis Britain has certainly improved.

When one looks at the position vis-à-vis the rest of the world the combination of the devaluation effect which, of course, is equal and identical in the case of Ireland and Britain, with the lower domestic industrial costs increase here our competitiveness in terms of selling to countries outside Britain must have moved at a rate which bears favourable comparison with almost any country. Again, I have not the precise figures but it is very hard to see how, given the combination of the devaluation effect and our significantly better domestic cost increase in the case of the United Kingdom, our competitive position could not have improved very much over this period. It has improved in relation to other countries where costs have arisen more sharply.

We are now getting the first results of this in the recovery in manufactured exports of which there are already signs in the first couple of months of this year, a harbinger I hope of a significant improvement during the rest of the year. Figures can be very misleading and one must interpret them carefully but the reality behind the figures is more favourable than would appear at first sight. Of course, this is only part of the story because it is not just what has happened that matters but what will happen. The achievements of this period, during which prices have kept down and wages have risen by a very small amount, indeed, in response to the small price increases, are capable of being destroyed if we fail to reach a satisfactory outcome in the negotiations currently in progress. I hope and believe that we will reach such an outcome. The importance for employment is so great and so evident that the trade unions, with their great sense of responsibility in relation to matters of employment, are, I am convinced, anxious to find a solution which, on the one hand, will meet the legitimate needs, requirements and desires of their members and, on the other hand, will ensure the safeguarding of employment.

With the achievements of the second half of last year behind us, in terms of improved competitiveness, reduction in the rate of costs and prices, we are now in a position to take real advantage of this and to come through this year with a significant improvement in the employment situation if we can now negotiate, or if there can now be agreed, by one method or another, increases in wages which will be moderate and appropriate to the needs of our employment situation. This must be our hope. I know that the Opposition share the Government's hope in this respect and would wish those negotiations to succeed and would wish them well.

The unemployment situation has been significantly less unfavourable than people have made out. Of course, it grew very sharply, alarmingly and tragically during much of 1975, from the autumn of 1974 to the autumn of 1975. The increase was much less in percentage terms than in most other countries. In fact, it is hard to find any other country where the percentage increase in unemployment during this critical period was as low as here. Nonetheless, because our unemployment started at a high level, and has always been at a high level, even a low percentage increase relative to other countries is a big increase in real terms. It is big in terms of the number of percentage points and it raises unemployment to a disturbingly high level. We should not attempt to disguise that fact. That is central to all our policies. It must be the central preoccupation of the Government, the Opposition, trade unions and employers alike.

During the winter months, while you get the usual seasonal increase in unemployment, followed by a seasonal decrease which we have had in the last month or six weeks, the underlying trend of unemployment in this period has not by any means been unfavourable. I have not got an accurate figure for the end of March period. When we have that it may show some slight adjustment but basically over the period from September to March seasonally adjusted figures will show virtually no increase in unemployment. I think the increase over six months would be no more than 2 per cent and I am not convinced it is necessarily quite as high as that. The big push in the growth of unemployment occurred between the autumn of 1974 and 1975. Since September, 1975, there has been no significant increase in the underlying trend of unemployment measured in seasonally adjusted figures. That is an achievement that has not been matched in every country. It is true that in some countries unemployment has begun to fall but it is by no means universal. For a country whose growth in employment in terms of percentage increase was as low as ours, to have reached the point where unemployment virtually ceased to rise as early as September, 1975, well in advance of the general world recovery, is itself an achievement and one that reflects on the success of the Government's management of the economy in very difficult circumstances.

Since the middle of last year our performance in wages, prices, unemployment and in competitiveness has been remarkably good in extremely difficult circumstances. We have recovered a good deal of the ground lost in the period before then because of the impact which the previous national wage round made on our costs, because of the impact of the world economic crisis and the vast increase in import prices on our costs. Much of the ground has been recovered and a firm basis has been laid on which we can build, in co-operation with the trade unions, with a view to securing a significant improvement in the employment situation in the 12 months ahead.

The budget must be seen against this background. Of course, any budget is open to criticism because necessarily a budget involves making choices, choices of policies and, so far as taxes have to be made, it involves choices between taxes. There is no infallible guide to this and any Government may take a different view to that of another Government. Any commentator may legitimately have a different view from another commentator regarding what is best to do. I am sure if I were in Opposition I could make criticisms of the balance of this budget and probably I would do so. It is the job of the Opposition to seek out any chinks there may be.

Basically, one has to face the fact that choices have to be made. There are only two arguments of a broad kind that the Opposition can use. They can say they would have handled the budget differently or they can say they would not have got into the position from which we started when we framed the budget. The latter is always a much safer kind of argument and I think I may have used it myself. However, I do not think one can let the matter rest at that because one would have to consider what exactly Fianna Fáil would have done or not have done had they been in Government last year. There are only a limited number of key things they could have done, different from what the Government have done, that would have affected significantly the starting point for the budget. I will list them and if the Opposition want to add to the list I should be glad to accept any appropriate interruptions to that effect.

It seems to me that the kind of action they might have taken would be, first, to reject last year's national wage agreement. Arguably that might have been done. Because of the way prices went and the measure of indexation involved, the agreement turned out to be extremely costly. They could make a case for having refused to participate in it and allowed a free-for-all. Even with hindsight, I think the balance of advantage lay with accepting the agreement although I must say that aspects of the agreement were formulated in a manner that seemed to take inadequate account of the particular needs of the public sector. However, that is another day's work. I wonder if Fianna Fáil are really saying that we should have rejected the agreement last year?

They could also say they would have accepted the agreement but that they simply would not have paid the increases under the agreement or under the various arbitration awards to the public service. If we had not paid those awards and increases our budgetary position would have been enormously better coming into the present year. A large part of our problems derived from the carry-over effect of national wage rounds and of special negotiations with the public sector and to the ordinary incremental system which is a feature of the public sector that is not widely matched in the private sector. The cumulative effect of these was to face us with the burden of additional expenditure last year, which, leaving everything else on one side, vastly exceeded the buoyancy of revenue.

There was also an increase in debt service because of the situation in the previous year which also absorbed the whole of the buoyancy of revenue. Therefore, the buoyancy was absorbed twice over by these two items. The Opposition could say that they would not have paid the public service pay claims, although I have not heard them say that. It is arguable that it was unwise to take on these obligations and to have entered into the agreements. On the whole I think the Government were right to honour the agreements and not to attempt to break them at that time. I doubt if we would have had public support for a move of that kind and to my knowledge the Opposition have not suggested it. It does not seem a way they would have taken to avoid starting from where we started.

Would they have cut back further Government services? Perhaps they might. In the current year we cut significantly non-pay services where it could be done without affecting employment. The Opposition may argue they would have done this somewhat earlier. However, I have not heard them argue that with any specificity, that is, I have not heard them say what they would have cut last year that we have not cut this year. If anything they are complaining about the cuts we have made rather than suggesting they should have been made earlier.

They could argue, perhaps, that they would not have increased social welfare payments. Much that has been said from the Opposition benches about social welfare carries with it a remarkably right-wing tinge that is somewhat anomalous for a party which historically played a significant role, particularly in the thirties, in radically improving social welfare. Is it the case that these hints from the Opposition benches regarding excessive social welfare payments mean they would not have increased old age pensions and widows pensions as we did, that they would not have introduced the new services for unmarried mothers, for prisoners' wives, for spinsters aged 58 years and over? Is this what they are saying? If it is, in honesty they should say it more bluntly and openly than they have done up to now.

Unless the Opposition say we should have done, and that they would have done, some or all of these things, or perhaps something else I have not thought of, we must accept that if the Government were right in not doing them—and that is my contention—we started in a budget situation where there was a very large gap that had to be bridged. The Opposition have criticised the level of borrowing and clearly they are not suggesting we should have borrowed more. Rather they seem to be suggesting we should have borrowed less. In view of the deficit situation we faced, if we were to borrow no more than we borrowed, that would involve increases in taxation and cuts in non-pay services that do not involve employment elements and this we have undertaken.

Of course, we could have chosen to cut somewhat different things. The Opposition may have a point in their criticisms of the cuts we have made because these are matters of choice. However, a responsible Opposition would require that in suggesting that certain things should not have been cut, or that we should have borrowed less, that the alternative cuts should be sketched in. If, on the other hand, it is felt that these cuts are acceptable, the question arises regarding taxation. Is it the Opposition's contention that we should have cut more and increased taxation to a lesser extent, or that we should have cut less and increased taxation to a greater extent? There seems to be a certain ambivalence on the Opposition benches between these two alternatives.

I think that the cuts we made were very significant. On the whole they were well-judged and they managed to do something that I do not recall any other Government doing for a long time past, namely, to hold down in real terms slightly below the previous year's level the cost of non-pay services in real terms. That is a real, difficult and painful achievement and to do it without cutting into services that give employment is extremely difficult. The range of manoeuvre of Governments is small, as was said by one or two of the heads of Government at the recent European Council meeting. The actual margin any Government can play with is small because most Government expenditure is pre-empted by commitments that cannot be changed.

On the taxation side we were left with the situation where, having made the cuts and feeling we could not cut further without affecting employment, we had to find £100 million in taxation. Again, the Opposition may have criticism regarding the package of taxation. I think they should be more specific in their criticisms. The choice lay broadly between direct and indirect taxation. A case can be made for more direct taxation, for saying that the right thing to do would have been to increase income tax by increasing the present surcharges or by some other means and not to have increased indirect taxes as much. If that had been done, we would not have had the same increase in the consumer price index. It would have looked better and would certainly have left us less open to criticism about the rate of increase in the consumer price index from the Opposition. But would it have been the right thing to do, given that direct tax, income tax had been increased by the surcharge in the previous year? Would it have been wise to increase them further? It would be interesting to hear the Opposition on that, to hear if they think that is what we should have done, that we should have raised the bulk of the £100 million by increasing income tax. A very respectable argument could be made for that and I would listen attentively if the Opposition were to make that argument. We chose indirect taxation and tried to pick those items which would, first, produce the necessary yield and, secondly, be least painful. We do not claim that they are not painful, that all of them are mere luxuries—far from it. It was not possible to raise the kind of money required by taxing what are rightly or wrongly regarded as luxuries, drink and tobacco.

It was also necessary to increase VAT and the tax on petrol. The money could not have been raised if his had not been done. If the Opposition feel that the particular package we chose was not the best, they are entitled to say so and, perhaps, have a duty to tell us what their package would have been. A debate on those lines would be useful and enlightening. But, perhaps, it is not in the tradition of the House to debate the budget in that way and, perhaps, it is unreasonable to expect that the Opposition would meet all these issues head on. It may be wiser for them— perhaps Oppositions always tend to do this—to dance around the surface hitting here and there but never actually putting forward a consistent counter thesis which, if it were to be consistent and add up to a budget that would bridge the gaps involved, might be a very unpopular alternative.

Just as the Opposition are entitled to dance across the surface of the water like a dragonfly in this way we are entitled to point out the inadequacy of that sort of criticism and to put forward the thesis that we could not easily, without great pain and damage to the economy, have avoided finding ourselves in the position in which we were in formulating this budget and that in that position the overall balance of the budget is about right and that we have heard no arguments to suggest that it should have been different, arguments putting forward a cohesive, consistent counter-thesis.

In those circumstances, I believe the budget was broadly appropriate to the needs of the situation which I wish had been otherwise. Certainly, the condition of the world's economies today and the situation in which Britain and ourselves have been left is one which nobody would wish to face, one we never thought we would face and one which I hope we shall never face again.

I spoke of the progress we made in the second half of last year and of our hopes that this progress can be maintained by close co-operation between trade unions and employers and that the discussions now going on will lead to some constructive outcome. That this is very necessary is quite evident and was brought home very much to all of us at the European Council meeting last week. There has been much criticism of that meeting for not producing any concrete results, and this is broadly valid. Some of us did not expect it to produce very concrete results and we are correspondingly not so disappointed. Given that we did not expect much from it, I was favourably impressed by the quality of the economic discussion.

When we met in Rome in December there was some discussion on the economic and social situation which I found thoroughly depressing and in certain respects rather boring. Nothing was said that seemed to do more than skim the surface of reality. This time people were talking about real issues and there was serious discussion. I do not suggest that everybody had turned over a new leaf and that all were converts to united Community action to solve our problems—there is a very long way to go before that point is reached—but at least there was a real discussion and I think everybody there felt the better of it.

It was interesting to see how people responded to it, how when some heads of Government put very forcibly the economic realities, the others accepted them, uncomfortable as they were. There was no attempt by people to avoid their responsibilities. The British and Italian economies and our own, so clearly linked to Britain, are the three which are, in present circumstances, least well placed and have the highest rates of inflation. I think the reaction of the leaders of these Governments was constructive and positive. There was acceptance that we have a big task ahead. We must get our inflation rates down in harmony with those of other member countries if we are not to find ourselves in a perpetual losing race, incomes and employment losing ground and finding ourselves left behind in a way which will threaten the future of the Community eventually, its solidarity and the benefits— great as they have been—that we have secured by our membership.

The onus is on the countries that have high inflation rates to take the necessary action; the onus is on the others to help us—as, indeed has been done by conceding the Community loan—and by adopting economic policies that will be more reflationary and less concerned with building of vast reserves for individual countries and more concerned with achieving economic growth in the whole Community. The onus is on us to play our part and although our inflation rate has been reduced now to a level so much below that of Britain, it is still far too high and still well above the rates of countries such as France where they have found themselves unable to keep their currency in the Snake. It is about three times the inflation rate of Germany. The German Chancellor was able to tell us that wage increases in Germany in the year ahead would be of the order of 5½ or 6 per cent—including certain fringe benefits, 6 per cent. That is what we are up against. Either we compete with that and get our inflation rates down to this sort of level or we find ourselves with Britain in a perpetual state of devaluation, perpetually having our prices pushed up by the price of imported goods rising because of devaluation and never able to catch up.

We have our chance now. The basis was laid by what was done in the second half of last year. If the negotiations now produce a good result, it may be possible for us to begin to come out of these difficulties and lay the foundation for the kind of economic growth needed in the years ahead if we are ever to get unemployment down to the level that people here would regard as acceptable. That is not easy. It is not just a question of getting through the crisis and at the end of it finding ourselves in a better position than before. If anything, when the crisis is over we and the other European countries will all find ourselves with a higher rate of structural unemployment. We will find that many workers who in that vivid phrase have been shaken out of various industries in this crisis will not find employment. The level of unemployment in a boom condition two years hence may be much higher in every country than it was previously. There is a technological revolution problem which we have not yet faced which may mean radical changes in policies here and elsewhere. These things must be faced and can be faced if we can get through our difficulties at this stage.

If we can agree on a solution to the problem of incomes in the year ahead, then we have the chance to build on that foundation and try to tackle the problem of structural unemployment. It will not be solved in one or two years. It will not be solved in the lifetime of this Government. The next Government—I believe it will be us— will be lucky if they have it substantially resolved at the end of a further term of office. It is a long-term problem. With our relatively high birth rate and the increasing number of people coming on the labour market in the years ahead, the problem will be more difficult than elsewhere and that has to be faced. We have a much higher dependency ratio and every worker has to support many more dependants than workers in other countries. That is a major problem.

We have the problem which Deputy de Valera's father was always conscious of, the problem of a republic faced with demand for imperial standards, because we were part of the United Kingdom at one time. In the nineteenth century that cost us money, we subsidised them but, in the early years of this century, the balance was switched a little. We left at a time when we could do so without any great loss to our economy, without having to give up massive subsidies. We got out in time but, nevertheless, the demonstration effect, because of the transparency of our economy with that of Britain, remains and our people have come to expect the living standards, the social service standards and the standards of every kind of service and facility they see in neighbouring Britain. Britain, by European standards, is not a rich country but it is sufficiently richer than us to create pressures on us to achieve standards which at our present levels of output we cannot attain.

We must face the reality that we cannot have under every heading the same kind of standards as exist in other countries nearby at this stage of our development. To seek to achieve this would be to wreck our economy and our prospects of ever catching up. Those prospects exist. This country has a development potential, the ability to grow at a rate as fast as and faster than most of the other member states. Given half a chance it will do so but it will require a difficult and tough period during which there will be no easy let up in the efforts we have to make and the constraints and disciplines we have to accept if we are going to achieve that objective. That all lies ahead of us.

The present problems are the wage negotiations and the sorting out of incomes, coping with structural unemployment and building up to a growth rate that will equal and excel that of our neighbours so that we may catch up with them in material standards. If we do I hope we will put the extra resources to good use and not fritter them away on even higher standards and personal material consumption. That is not what we need the money for. We need it for our poor, to raise standards of education, for cultural and social purposes and not just to buy more material goods. In that also a lead must be given. What I have said there is also in keeping with some of the things Deputy de Valera's father used say from time to time.

I should like to ask the Minister a number of questions by way of clarification. The Minister used the phrase, "real terms". I should like to know what he meant by that term.

"Real terms" is the taking out of the price increase element so that one is getting a real measurement of the volume of increase of goods or services and the purchasing power of money.

Taking out the total price increase?

Yes. That may differ. The price increase for capital goods may be different from current goods.

It makes no distinction between tax increase and total inflation increase?

It depends on what we are talking about. "Real terms" means taking the total price increase.

The Minister did not deal with the criticism of the Council of Ministers by the Commission in regard to the spending of the Community's funds. Some members of the Commission criticised the Council of Ministers for their handling of Community funds. Would the Minister care to comment on that criticism? I only heard of this in the last 24 hours and, perhaps, the Minister is not aware of it.

I am not aware of any recent criticism.

I would have expected the Minister, in intervening in this debate, to have dealt with the financial implications of the EEC conditions attaching to their loan which is a very big part of the financial picture at present on which the Minister has challenged us.

I did not deal with that because when I was asked a question about this by another Opposition Deputy last week I gave a detailed answer. Naturally, I did not wish to go over the whole ground again today. I made the point last week that these conditions represented the Government's own policy determination as to what is necessary to be done. The Commission were glad to accept the Government's own policy formulation and policy decisions as adequate disciplines of constraints for our economy. Therefore, the conditions posed no problems for us because the origin of them was on our side rather than on the Commission's side. That is the burden of the reply I gave last week.

I do not think I would be misquoting the Minister if I said that he stated the onus was on countries with high inflation to take corrective action and the onus on others was to help.

Indeed, and the loan represents part of the help. Our efforts to get inflation down and to cut back on the amount of Government borrowing over a period of years are all part of the self discipline we must impose on ourselves and which the Community, naturally, accepts as being the right policy for us to pursue.

As the years go by, we listen to bigger financial talk; we hear talk of hundreds of millions and thousands of millions but we must recognise that we are a small country of a little more than three million souls. It is confusing for people to read about growth rate and increased employment all over Europe and compare that to the millions we are spending here. The ordinary person is worried how all these things affect him and how the country is being run. There is a lack of confidence in the Government and the people think we are going in the wrong direction. Government policies are not geared in the right direction and in many cases they have no policies at all. Our people are flabbergasted when they hear about the millions we are borrowing and are worried when they see how much it will cost to service our national debt. They expected this budget would provide employment and reduce the dole queues. Emigration has almost come to a standstill and it should be remembered that it was under a Fianna Fáil Government we had the first population increase here for many years. We do not know whether the population is going up or down at present because we did not have a census.

We have been told it would cost too much money to have a census. Many people say the Government are not willing to have a census because they would find out whether the people are better off or worse off. They are afraid the answer would be completely against the Government. We have been told it would cost £1.5 million to have a census. I expected the Minister for Finance to refer to this when introducing the Bill because the Finance Bill should be all about laying plans based on the present position. If a census had been held we would know what the position is and that is essential because the habits of our people are changing very quickly these days.

A Finance Bill is an instrument through which we should be able to discuss policy. The Minister for Foreign Affairs spoke at length on many matters and he trotted out figure after figure. He had a very quickly prepared script as a result of Deputy Brugha commenting on the fact that nobody from the Government side had spoken. He was articulate as usual but like other Government spokesmen he just asked us what we would propose in present circumstances. We said some years ago the Coalition Government would not work and the correctness of that is evident to all. They have had a go and it is backward we have been going as a nation. The Minister for Foreign Affairs told us we are close to recovery. I heard that from Government speakers at the end of 1974 when they told us the depression was ending and that the good days were coming shortly. In fact things have become worse.

The Minister for Foreign Affairs sits at the same Cabinet table as the Tánaiste and surely he heard what he had to say at a reception at Cork Airport last weekend. The Tánaiste said the bubble had burst. We all know that, but the point is he is second in command in the Government. He said nobody could expect a return to the living standards of the sixties. We have had other Government speakers saying our people are better off and that they should be thankful to them. The Tánaiste made a similar statement at his annual conference and he got a standing ovation for it. He would not get it now. He and the Minister for Finance seem to be at loggerheads as to what the future holds for us.

Our people had been looking forward to getting good health services, better social welfare benefits, better education for our children and a good agricultural policy. The budget and this Bill have failed lamentably in all these fields. All the extra taxation the Government have put on is causing further unemployment and it is hard to understand why the Government do not see this. They have got at the agricultural community to whom we owe so much as a nation. Our national debt is running at £3,000 million and it is costing £320 million to service it each year. When we left office after 50 years of native Government the national debt was only £130 million. Now we have this massive borrowing with no hope of paying it back. This year it is intended to borrow £679 million.

A Government spokesman said recently to friends of mine that the Government would keep going until October, 1977, which I doubt, and that they would by then have discovered gas and oil riches off our coasts to pay for better social welfare benefits and so on.

It has been called the third mortgage.

There is no talk about providing work for people who are genuinely willing and able to do it. There is no incentive in this Bill for the thrifty, the people who would like to put away a little nest egg for the rainy day. There is no money left in their pockets after they have paid anything up to 48p in the £ in income tax. This Bill provides no incentive to save. A couple of years ago the Minister for Finance got rid of the £70 per person allowed as bank interest or dividends from investment. The bank managers at that time said it would cause millions of pounds belonging to small investors to leave the country and the Minister and his colleagues thought better of it and reversed the decision.

My suggestion is that people should be allowed to enjoy the tax free interest on at least £4,500 saved and put into a bank or otherwise invested. Money is still leaving the country today. The Minister for Finance should know that. The Minister for Justice says he is aware of it from his colleagues in the legal profession who have people coming to them asking where they should invest their money in order not to pay tax on the dividends. If that limit were raised to £4,500 or £6,000, small investors would invest their money here. Many of them would then obtain loans, build houses, buy extras, thereby creating employment. There is no incentive in that direction at present. I refer to the thrifty person who wants to build up a nest-egg for the rainy day. It would also enable young people to save money for their own homes. Budgets or Government speakers never seem to refer now to the person who genuinely wants work or to be thrifty. They are completely nailed from one Finance Bill to another.

All this raising of money can lead to many strange situations, the most dangerous of which is that the people from whom we borrow could take over control of this country. For example, the EEC laid down very stringent conditions for our last loan from them and they are now telling us what to do. If we continue along those lines, we will lose control of our own destiny and management of our own affairs. That would be the end of this country as a nation—it would be mortgaged completely whether to the EEC, the Arab nations or any others.

It is no fun nowadays for young married people rearing families with the financial weight already around their necks. In this country it was always acknowledged that a child was born with original sin. Now they have this financial sin. I do not think a person and a couple of sponsors will get rid of the second one. Such children know, when they go to school, or get their first job, the State will have to take back so much money from them expended during the years they were still in the cradle. I have a young family myself and that is how I see it. In this Finance Bill I notice that there is no increase at all granted in respect of children's allowances. Does the Minister imply that all fathers and mothers are wealthy enough to provide for their own children? Certainly, they are not. It costs a lot of money nowadays to rear a family and nourish them properly. There should have been an increase in the children's allowances, to be paid to the mother of the family, which is now the law, in order to keep pace with inflation and the cost of living.

In budget speeches—and I listened to the Minister for Foreign Affairs— newspaper articles and so on there is always the comment made that wage increases are the cause of inflation one way or another. It is quite obvious that wage increases are not the cause of inflation at present. The last document we received about the increase in the cost of living showed that it had risen by 7.3 per cent in the last quarter. If that rate continues over the year as a whole, then our rate of inflation will run at approximately 29 per cent or 30 per cent, a shocking increase. There have not been great increases in wages as the Minister for Foreign Affairs stated. Yet there has been a huge increase in the cost of living. Is it not obvious that, despite what anybody may say about outside influence, the State, the budget and the Finance Bill now under discussion are responsible for the greater part of that 7.3 per cent. The budget, in the way in which it will operate, will account for at least a 3 per cent or 4 per cent rise in the cost of living. Therefore, there is no point in maintaining that if workers get an increase in wages they are to blame. Who can blame workers or anybody else seeking an increase when the State itself puts up the cost of living? Government Ministers come in here with nicely prepared speeches. They have ways and means of telling one that they are beating inflation and, with another turn of the hand, the Minister for Finance arrives, putting up the cost of living by 3 per cent or 4 per cent. Therefore, they are operating in opposite directions.

With the permission of the Chair, I should like to refer to many things mentioned in the Minister's brief. Firstly, he said he was changing the style of the brief, which is no harm. The Minister said he hoped we would regard it as both a compliment to our intelligence and literacy and a worth-while saving of parliamentary time. But I have noticed in all such briefs that there is a plug put in, the Government of the day pretending they are doing something great for which the people should be down on their knees thanking them, whereas the opposite is, in fact, taking place.

Discussing taxation the Minister said:

The discussion of the annual budget in terms of millions has little impact upon the individual and family considerations of each taxpayer. I would, therefore, like to illustrate the type of benefits which the typical family of parents and three children enjoy in return for payment for taxation in Ireland.

Firstly, he says that that family will benefit to the extent of £750 annually.

The Minister is concealing a very important factor in that, which is that those three children—if they are now teenagers having completed their leaving certificate and qualified for a higher education grant; if their father holds only what would be considered now a fair job—will not qualify for higher education grants at universities. That is the case in every local authority dealing with such grants because there has been no increase in the qualifying limit, as far as I am aware, since we left office. Again, as far as I am aware, if one earns over £1,600 and has one child, one does not qualify for such grants at present. We made several efforts to get the Minister for Education to approach the Minister for Finance to increase those limits. Again, in respect of those three children in that category—if they live any distance from a university and have to stay in digs—it will cost £1,000 each per annum by the time books, digs, lectures and so on will have been paid. The Minister might at least raise the qualifying limit in line with inflation. I know the Leas-Cheann Comhairle, who is familiar with the operations of local authorities, would not disagree with anybody who made such a claim to the Minister for Finance through the Minister for Education. It is all right for somebody not affected to read such a brief and say: "Gosh, they are coming out well."

Then there is the protection of the person and property from wrong-doers which, in the case of that family with three children, will benefit to the extent of £150, annually. I do not know how that has been calculated. God knows, there are more bank and train robberies at present than there ever were in the history of the State, at a time when we are supposed to have law and order. I regret to have to record this but I feel that the problems of the Garda Síochána—financial and so on— have got something to do with it, in the way they are deployed. I know their strength has been increased. The Minister for Justice is present and I wish him the best of luck in any efforts he makes to rectify the situation. The point is that it goes on and on. We were told that there was a Government coming into power that would respect law and order. No person can be safe travelling from one destination to another. I know it is a big problem but it is still shocking to read the newspapers and learn of all the robberies that are taking place daily.

In relation to the health services it has been stated that every family benefits to the amount of £400 annually, but there has been an awful drawback and cut-down in those services. In any country there should be health services so that each citizen can live as long as possible and not die a day earlier for the want of proper medical care. Money has not been released to the health boards for transport for the handicapped and mentally retarded which they have enjoyed for many years. I think these children are entitled to that right. They have no one to talk for them or to defend them. It is sad for any parent who has a retarded or handicapped child to wonder what is going to happen after he or she dies. I would like the Government to say they are entitled as a right to the transport and the services that they had heretofore. I do not care what taxation the Minister will bring in to provide this, we will all support it.

I do not want to interrupt the Deputy but as I see it this is a matter of taxation.

There is a great problem in regard to employment in the industrial and agriculture sectors. There has been a great exodus of workers from the land. That has happened all over the world. It does not cost the State much to provide a job when it comes to agriculture. The Minister stated that it costs an average of £3,500 to provide an industrial job. The way we are taxing some of our firms is contributing to the numbers unemployed. There is no point in blaming the EEC for all this unemployment. We have a lot to do with it. Member nations can lay down rules and regulations in relation to value-added tax they put on certain goods. When the price of petrol was raised in December, 1974 the Minister said that he wanted it to be the same price as it was in Britain. If he did, he was forgetting at that time that value-added tax on many goods in Britain, especially for goods produced from wool, was 8 per cent. In this country it is 20 per cent. That 20 per cent is now a very great burden on the few plants we have which are making woollen products.

The Minister met a representative of those factories and they impressed on him the burden which the State is adding to their cost when they go to sell on the market.

There are 250 people employed in that industry at the moment and if it closes those people will become unemployed, the wool will have to be sold abroad and it will probably come back to us in some processed form or maybe not at all. It is a native material and I would ask the Minister to reduce the value-added tax on woollen products from 20 per cent to 6 per cent. I know he will make a case that if he reduces that, he will also be reducing the amount which he has to recover from imported goods of similar design. Surely it is better to keep those people at work and to process our own raw material than to keep up the high rate of value-added tax on the product and then pay unemployment benefit, pay-related benefit and redundancy to the 250 people involved and add to the long dole queues which we see at present.

The case has been made not alone by Fianna Fáil but by members of the Government parties that the Minister should make an order giving this concession to that trade. The point I want to make is that the Government do not really have to go by what is happening in other countries, they should take their own line and put on their own rates of taxation. That was never more relevant than in the matter of value-added tax. It has been mentioned that we are not taking proper steps to preserve jobs in many fields. Last year in the agriculture sector we lost a great opportunity for further subsidising the price of fertilisers. If that were done it would keep over 700 men in work in the factories. There would be more fertiliser used. There would have been more agricultural produce this year if this had been done. We had a terrible year in agriculture. While we discuss the EEC we have to bear in mind that fertiliser is subsidised on a very small scale in this country. I could see no reason why last year that subsidy could not have been greatly increased. When this Government took office they took away the first subsidies without any directive from Brussels or elsewhere. It is often up to the member states to sort out their own affairs and they have the right to put their own levels of tax and subsidies on certain items.

This Finance Bill will be opposed by my party and opposed very much in many fields. It it unfair and unjust to tax further the agricultural community at this time. I am not making a case that no one should pay income tax. It is accepted by everybody that income tax has to be paid and all sections of the community have to pay a fair and equitable share. It has to be paid on profits and real income. Farm organisations have accepted that and any reasonable citizen will accept it.

Referring to the notional taxation in operation on agricultural holdings of over £100 PLV the Minister said he had an agreement with the IFA in February, 1975, that they would go over the whole question and he received the report too late to include it in the budget. Today he referred to the fragmentation of holdings over £100 PLV. There may be fragmentation for very genuine reasons. There may be fragmentation for the purpose of avoiding tax. The changes here are designed to ensure that people cannot form limited companies or practice other forms of tax evasion. It is very obvious the Minister intends to lift the £100 PLV and move further down within a short time. That was in the recommendations he got but he made no reference to it today. When he comes to reply I would like him to refer to this taxation on a notional basis on valuation and put on record what he intends to do. Many people expect a statement from him on this matter.

Speaking of fragmentation, a farmer may decide to divide his farm for the benefit of his sons. I understand that this kind of division is subject to the consent of the Land Commission. Will it also now be subject to the Minister for Finance and the Department of Finance? Who will have the final say? Will the Land Commission give the go ahead and, if they do, can the Minister for Finance do anything about it? Who is the supreme authority? I believe the Land Commission should have the last word. The position is not too clear and farmers are anxious that it should be cleared up. It may be a sale of land or it may be subdivision. Can the Minister for Finance object? That is something I want the Minister to clarify. Is this the thin end of the wedge and are the Minister and the Department of Finance taking over from the Land Commission?

With regard to taxing the profits of co-operative societies, it is rather interesting to watch the development of a campaign. Yesterday the Parliamentary Secretary to the Minister for Education said the intention was to get rid of road co-ops. This is building up the case so that people will come to believe that there is something wrong going on and what the Minister proposes is right and proper. Road co-ops are not registered. Statements like the Parliamentary Secretary's just a day before the Finance Bill are ill-timed and do no good. There are people who do not understand what is involved. The Minister's intention is to catch the profits made by agricultural or fishery co-operatives.

Urban dwellers may not understand that if a co-operative goes into general goods or acts as a builders' provider it is taxed in the same way as any limited company. Even the sale of butter is taxed. Profits on sales at the end of the year are subject to tax. I take it the Minister is trying to sell the idea that he is doing the right thing and it is time to nail these fellow who had an unfair advantage over the small shopkeeper. Remember, the profits of co-operatives are limited.

The co-operative movement has been in operation for quite some time. It evolved out of farmers and fishermen being unable to make a living and, not alone that, but they were exploited by big firms, mostly foreign based firms. They decided to form co-operatives. Their history is a proud one. People came together locally to sponsor their own society and keep out the big man who would gobble them up. They were entitled to profits but, if this Minister for Finance gets his way, there will be no more profits and no advantage one way or the other. Nobody gets rich in a co-operative society. The Leas-Cheann Comhairle represents a rural constituency and he knows the position.

Agriculture is the backbone of our economy and now the Minister decides to tax it to the hilt. We have had meetings with co-operative societies over the last few months and they have given us some very interesting facts. I was at one meeting in my own area. There were Fine Gael Deputies there but there was no one representing the Labour Party, the party that is supposed to defend the worker and the small farmers. That party seems to have gone to roost. We asked that co-operative society what percentage of their business was non-agricultural. They told us only 2½ per cent of the business came under that heading and the other 97½ per cent was confined to agricultural activities. They had a mart, an AI station and they were dealing in milk and processing milk. It is not a struggling society but they made it quite plain that, if they are not allowed to build up a fund, they will not be able to carry on other projects. I know the Minister will tell them to pay up and have no profit at all. There was never a society worth its salt who did not build up a financial reserve. Many companies have gone to the wall because they were not able to build up a financial reserve.

If the co-operative societies get grants from the IDA or the EEC I want the Minister to state categorically if they will be incorporated in the year's workings. If they show a profit, 50 per cent go to the State. This, in effect, means that 50 per cent of the grants received go back to the State. The Minister may say that they should pay out all their money and go to the bank to raise any other money they need to advance their business, and that the interest on that money will be allowed against their profits, but that is a very bad situation to be in. Are the Government driving people to thinking that it is wrong to be thrifty: "Spend all the money in your pocket and raise more money the next day. It does not matter how you repay what you borrow."

I object strongly to this brutal tax which is being imposed on agricultural and fishery co-operative societies. The fishery co-ops need all the help they can get. I am not from a coastal area but even to me it is obvious that we lag far behind other countries. Our fish catches are very low and it is hard to understand why we have not developed this industry more. Countries with less coastline than Ireland have catches far in excess of ours, sometimes even 100 times more.

If those co-operatives are not helped, what will happen? Foreign companies with large amounts of money behind them will take over and the locals will not be able to organise and fight their cause. As I said, I and Government Deputies attended a meeting recently. They promised to go to the Minister and ask him to do what he could. I have not heard one word from them since. That is one of the strongest reasons why I will vote against this Bill. If the Government Deputies vote for it, they will be turning their backs on what they said, although when asked what they would do if it came to a vote they said they would vote for the Government. Does the Minister not want to listen to the pleading of these people? They know what they are talking about because they represent the rural areas.

Ireland is mostly a rural country. As such we have advantages in the EEC and we should be developing them. We have the best climate to produce agricultural products and we should take advantage of that. We should be helping these people, not hindering them.

The Minister did a disservice to the agricultural community when he took away the special VAT, the 1 per cent credit paid to people who produce agricultural goods. The Irish housewife is faced with an enormous increase in the price of butter. It is hard to fathom how the Minister's mind works. When he raised the price of petrol by 15p in December, 1974, he said one of his reasons was to make people fit and to make petrol the same price here as it was in Britain and Northern Ireland. Why then did he not do the same with the price of butter? The price of butter here at the moment is very high.

The price of milk to the producer this year will not be more than it was 12 months ago, due partly to rising costs which the industry has to bear and partly to the budget. Previously when a man sold milk, for every £100 he got £1 credit. The credit came by special value-added tax. In this budget the Minister gobbled up that 1 per cent. That meant that the man selling milk is already down 1 per cent. Costs will catch up with him and take away another 1 or 2 per cent and he will finish up with the same price he got last year, despite the fact that costs have increased, feeding stuffs and fertilisers are very dear and rates are higher than last year. It is hard to visualise just how much money is involved in this area.

At the meeting to which I referred earlier we asked leading questions. What would the drop of 1 per cent mean to suppliers? They said that the suppliers would be receiving £220,000 less than in 1975. That means that the State has taken this money. This 1 per cent was paid last year for agricultural goods when the rate was running at 6.75 per cent. With the introduction of this budget, the rate has risen to 10 per cent. If the Minister had not changed it, instead of £101 it would now be £101.5. The Minister has taken £220,000 from one co-operative society. I wonder how much he has taken from the whole country? In my view, this is a very mean way to collect money.

We also asked what the 3p on heavy fuel oil would mean to that society. They use 400 million gallons of that oil, and it will come to £120,000. The suppliers will also have to meet that extra expense. What will the increase in social welfare contributions mean to the society? That will come to a startling £88,000. Thus the State has collected nearly £500,000 from that society.

Everybody who buys a pound of butter should realise that although he is paying more for it now, the man who produces it is not getting anything extra in 1976 than he got in 1975. That is a sad state of affairs. The seller may make a little money when he sells his calves because calf prices are better now than last year, but they are not being discussed in the budget. Where do the Labour and Fine Gael Deputies stand on this? We will know when it comes to a vote. We thought they might have some influence with the Minister but it is obvious that they do not. The Minister is on the way to destroying the last dominant elements in the economy—the agricultural community and the co-operative societies. I will discuss the co-operative societies at length on Committee Stage.

I do not know what to say about this Government. If they see any business going well, they immediately tax it to the hilt and this creates unemployment. There is great speculation at the moment that the price of the pint of beer and stout will be reduced by 3p. A huge increase went on the price of the pint as a result of the budget. I suppose it was the first time in our history that we ever saw the price of the pint dearer than the price of a half glass of whiskey. The Government changed, as far as I remember in 1948, over the price of the pint. There was an outcry by the Labour Party at that time about the working man's pint. They said that the rich man could drink brandy, champagne, or whatever he liked, but they would back up the worker and see to it that the pint was available to him at a reasonable price he could afford to pay. The price of the pint has now become unreasonable. I did not think I would see the day when three workers could walk into a bar for three pints and they would get no change out of a £1. They have to add part of another £1 to pay for them.

There is a decline in the volume of business done in bars but I am directing my remarks to the increase in the cost of the pint. A pint is nourishment to many people. Many a worker has a snack and a pint. It is not a luxury in the true sense of the word. Whoever advises the Minister did a bad job in counselling him to put such a huge impost on the pint. This will probably result in less taxation coming into the coffers of the Minister for Finance than if he left the tax at the lower rate.

It is traditional in Ireland during Lent for people to give up drinking. I believe they are well off it now because of the increased cost. I read in the paper that an offer has been made by the Minister to the vintners that he will take the 3p off if the brewers take off a penny and the trade take off a penny. It is very hard to see the trade taking off the penny because they have much heavier overheads to meet. The rates on their premises have become very high. Bars in this city have to pay huge rates. The Minister has raised the taxation much too high and he has done great harm to the workers who enjoyed their pint at the weekend and also those who enjoyed it every day of their lives.

At this time when we are talking about importing foreign oil, when we are searching for oil off our coast and when the cost of fuel is so dear, we should have some scheme to develop our bogs. The vast majority of the roads going into the bogs are in a very bad state of repair. There has been no big scheme to repair them. The Minister should set aside some sum of money to do this work. The turf in our bogs would be cut by thousands of people if they could get access to them. The Minister apparently is not prepared to help in the repair of bog roads.

This Bill is being discussed at a time when local authorities all over the country do not know how they can carry on. We have heard a lot of talk about road tax. People pay their road tax to the local authorities who send the money to the Minister for Local Government. There has been a huge increase in motor taxation. People want to know what percentage of the road tax collected will go back to the various local authorities for the upkeep, maintenance and improvement of roads generally. We are being asked in this Bill to make this huge increase in road tax law and we are being asked to discuss the matter. A sum of £3.45 million was collected from the two local authorities in Cork, the city and the county, last year. We believe that this year between £5½ million and £6 million will be collected. What percentage of that sum will go back to those local authorities to help them out?

I am sorry to interrupt the Deputy but matters pertaining to the expenditure of such moneys would be more appropriate to the Estimate for Local Government.

I respect your ruling but there is reference to taxation of cars in the Bill.

The expenditure of the moneys collected is essentially a Local Government matter.

I am asking the Minister for Finance what percentage of that money he will give to the Minister for Local Government to spend on the roads. The increase in car taxation is a penal imposition. The increase in the cost of petrol is putting up costs for the man who uses his car to get to work. The cost of taxing his car is putting his costs up further. We have the Government talking about a pay pause but when one puts the two things together it is impossible to get them to meet in any agreeable way.

The State are responsible for the huge increase in taxation on petrol and also for taxing motor vehicles in general. A person who uses a car to get to work or just uses it for his family at the weekend has a car of 10 hp, 12 hp or 13 hp. If he has a 12 hp car it will cost him £72 to tax it. Now we find, whether or not that person uses his car, he has to pay that tax. This is something new in the Finance Bill. The onus is now put on the county council to collect the money. In the case of an untaxed car before this it was a garda who had to find out who was driving the car, summons that person and bring him to the local court. Now it is the county council who have to sue. If a person does not tax his car within 14 days, the county council have the right under civil law to bring him to court. The onus is on the person to prove that it is taxed. The onus is not on the council to prove it is untaxed. We all thought that a man was innocent until he was proved guilty but there is a proviso in this Bill that whether or not a person uses his car he must pay tax on it.

The Minister should include a provision to cover genuine cases of hardship—the person who may not be able to tax for a quarter of a year, a half year or, perhaps, a full year. Take, for example, a woman whose husband dies, who is unable to drive a car and keeps it for over a year until her son or daughter is old enough to drive it. Surely the Minister will not say that woman should have to pay tax on the car which is idle. I have no mercy for people who deliberately fail to tax their cars or insure them. I believe we do not deal hard enough with insurance cases. I am concerned about the hardship cases. This is the time for the Minister to introduce provisions to cover such cases. As far as I can see, it is stated in the Bill that one must nearly take a car asunder, that it must be rendered useless, before the Minister is willing to accept that one does not have to pay tax on the vehicle.

There is also the situation of the young man who may lose his job but who wishes to hold on to his car because it may be vital for him to have transport if he gets employment in the next few months. What is contained in the Bill means that such a person should take the car apart and render it unfit for use.

I would ask the Minister to consider cases of hardship and to make special allowances. Nobody has any pity for the person who does not tax his car. The wording states that the owner of the vehicle will be liable for road tax whether or not he uses the vehicle. It seems to be regarded in much the same way as a television licence but I do not think there is any comparison. A 13 hp car will cost £78 per annum for road tax and this cannot be compared with the cost of a television licence. The Minister said that the county councils and the local authorities would do the summonsing, that they would make the people prove they had paid their tax. There is no clause that they are innocent until they are proved guilty.

I have been disappointed with regard to the road grants but I am told that discussion of that matter is not appropriate on this occasion. The local authorities are in a bad financial state with regard to house building this year. The people can find no hope in this Finance Bill that we will get out of our present bad situation. The Minister for Foreign Affairs may talk about the happy outlook for us but he should think of what the Tánaiste said. The latter told us that the bubble had burst and that we will never go back to the high living standards of the sixties. Fianna Fáil were in Government at that time.

The Minister for Foreign Affairs asked what would Fianna Fáil do in the present situation. When Fianna Fáil were in power he criticised us. He has had his fling but it has been a complete failure and the only answer is a change of Government with the people who helped this country to prosperity in the past in power once again. I wish the Government would stop raising smokescreens. Instead of talking about what is happening abroad or attacking the hierarchy, they should get down to the job of governing the country.

Traditionally the budget was an annual statement by the Minister for Finance regarding the economy and the direction in which he was guiding it during the coming year. However, since the Coalition Government came to power we have had two or three budgets every year. We had the classic experience in December, 1974, where the Minister increased petrol by 15p per gallon just two weeks before the January budget.

Unfortunately the budget for this year and the Finance Bill we are discussing do nothing for the twin problems we face, namely, rising unemployment—currently at a figure of approximately 116,000—and massive inflation. When the budget was introduced spokesmen on this side of the House pointed out that it would cause a massive rise in inflation and they have been proved right. The figures produced last week show that we have experienced an inflation rate of 7.3 per cent in the last three months.

At the same time one section of the Government is asking the workers to agree to a pay pause, another section is saying they will not ask the workers to agree to a pay pause and the Minister for Finance is bringing in measures that cause an inflationary rate of 7.3 per cent in three months. Can the Government seriously expect the people to accept a pay pause while inflation is running at such a high rate? It is physically impossible and it is too much for any Government to expect people to stomach at this time. I cannot see the Government having a success with the unions in view of the policies the Government are following.

Let us examine this Finance Bill and compare it to the budget introduced in Britain yesterday by Mr. Healey. Then we can see just how sick is the budget and this Finance Bill. Traditionally our economies have moved together and as one improved so would the other. Now we have the situation where the projected inflation rate here for the next 12 months is 18 per cent or higher while the projected rate in Britain is around 10 per cent. This will hit our exports, our tourist trade and every section of the economy.

Not only are the Government bankrupt financially but they are bankrupt of ideas about how we might get out of our present situation. The one element missing is confidence among the people in the future of the country. This confidence was always evident when Fianna Fáil were in power, particularly during the sixties and the early seventies. There was substantial confidence in the ability of the Government to conduct the financial affairs of the country for the betterment of the people. However, this confidence is completely lacking in the present regime. It is common knowledge that the banks have substantial sums in their vaults which they cannot give away for investment purposes. Where investment is dropping, where the industrial base is tightening and where there is increasing unemployment, it is time for the Government to resign. It is time to allow a single-party Government, Fianna Fáil, to do the job. They will revive the confidence that was there when they were in office before.

Debate adjourned.