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Dáil Éireann debate -
Tuesday, 10 May 1977

Vol. 299 No. 4

Finance Bill, 1977: Second Stage.

I move: "That the Bill be now read a Second Time."

This year, the Government's fifth year in office, I am privileged to introduce our sixth Finance Bill. Together with five tax reform Bills it represents the culmination of a major programme of changing our tax system for the better.

The tax reliefs and fiscal incentives of the 1977 budget and Finance Bill have been made possible only because the Government persisted with their taxation reform programme despite the negative criticism of those who urged that the time was not ripe for change. Timidity seldom creates anything worthwhile. In the 1977 incentive budget and in this 1977 encouragement Finance Bill the nation as a whole is reaping the reward of the Government's firmness of purpose in building a more equitable tax system.

Not for one moment do we infer that there is not room for further improvement of the tax code. There is, but such improvement as may be desirable will now be feasible because we have greatly improved the tax base. As it forms the background to this year's Finance Bill, I will briefly sketch what has been achieved, lest eaten bread be forgotten.

The Government have created a structure of taxes on income, profits and capital which is much fairer than the regime which operated up to 1973 and in particular much fairer to the typical manager and worker whose performance is crucial for the future of the country.

It is a precept of our political beliefs, and a view which most reasonable people would accept, that people in similar circumstances should pay similar amounts of taxation. When we assumed office one could find groups of people in similar economic circumstances who paid enormously different amounts of taxation. An industrial manager, for instance, might have been paying income tax at a rate of 80 per cent. Another person with a similar income but operating through avoidance devices and tax havens might have paid no tax whatever. A large farmer with similar net income need have paid no tax whatsoever without resorting to tax havens. Yet a fourth person might have had similar income through capital gains and yet paid no tax. Indeed, the tax bills of many small and medium income-earners were greater than the tax burden of some people with substantial incomes and property.

Since 1973 that situation has been radically altered. While it cannot be said now, or probably can never be said in future, that people in the same circumstances pay precisely the same tax, nevertheless the differences in treatment are now much less extreme. The highest personal tax rate will now be 60 per cent. The farming profits of the larger farmers have been brought into the tax net and so have capital gains. The wealth tax has ensured that those who have large fortunes make an appropriate contribution to the Exchequer. Confiscatory death duties which ruined many farming and business families have been abolished and value-added taxes have been removed from foodstuffs, clothing, footwear and a number of other essential items.

To encourage business enterprise the Government are reducing corporate taxation by 10 per cent. This incentive disposition towards private enterprise contrasts extremely favourably with the hostile attitude of our predecessors who imposed a 58 per cent tax rate on companies. The new corporation tax rate of 45 per cent maximum will be most helpful to business.

Taking our whole period of Government it will be seen that the various tax changes which we have made form a logical pattern whose objective is to obtain a fair contribution from all classes in society to the cost of running the State while at the same time providing the maximum encouragement for enterprise. We pledge ourselves to maintain this objective.

One of the main features of the budget, and of this Bill, relates to the changes in the personal tax structure, which will benefit every individual taxpayer in the country. These changes are also, of course, one of the two major elements in the pay increase/tax cut package which is the basis of the national wage agreement now in operation. By allowing after-tax incomes to rise faster than pre-tax incomes during 1977, the package enables a balance to be struck between the need for industry to improve competitiveness and the entirely reasonable desire of people to maintain their standard of living. Thus, a combination of national agreement increases and tax cuts will in a typical case, increase after-tax earnings by about 10 per cent. This mix of wage increases and tax cuts in the agreement will contribute towards restricting the rate of price-inflation and thereby prove more beneficial to everybody in terms of purchasing power.

Our present economic position is very relevant to this debate. Statistical data which has become available since budget time confirm that the momentum of economic recovery is improving. Production, employment, exports, home sales and investment have been on the increase since last summer and the latest Confederation of Irish Industry and Economic and Social Research Institute surveys show an expectation of continuing growth on these fronts.

Demand for imported materials for further production and for producers' capital goods, such as machinery and equipment, continues at a very high level indicating a continuing recovery in investment activity.

While overall output is now well above pre-recession peak the level of employment in Ireland as elsewhere in Europe has not recovered to the same extent. In part, this reflects the customary lag between a recovery in output and increase in employment. But it is also symptomatic of the stubbornness with which unemployment in most countries is persisting even with the ending of the recession. This was one of the problems which concerned the eight leaders who met at last weekend's economic summit. I deliberately said "eight" as Europe, as such, was present even if our French friends preferred to pretend otherwise.

While Ireland's performance both last year and this year was and is above the average of both EEC countries and OECD countries, it still falls short of what is necessary to eradicate the waste of resources which unemployment represents. New grant-aided, export-oriented, tax-exempted, IDA-assisted industries have produced most of the growth in industrial employment and output in the past. In passing, it is fair to recall that the parties which comprise this Government, when in power at other times, took the policy initiative which made this industrial growth possible.

As my colleagues in Government and I have repeatedly pointed out, the most urgent task facing our nation is to create more jobs without fuelling inflation. It is noteworthy that last week-end's summit meeting of western industrial leaders gave first priority to this goal. A sensible world approach to the problem of unemployment will certainly help us but we will also have to implement uniquely Irish solutions as well.

Government and private businesses are allies with different but complementary functions, sharing a common interest in the welfare of society. The Government must be concerned to encourage developments anywhere which can increase employment and add to the produced wealth of the nation.

It has become clear that traditional long established businesses catering in the main for the home market and not hitherto enjoying tax reliefs commensurate with those enjoyed by modern manufacturing industries producing for the export market ought to be helped by an improved tax climate. As I emphasised in my budget statement, the Government recognise the need to make investment attractive by making it profitable. This is the way to encourage private investment. That is why the 50 per cent corporation tax rate will under this Bill fall to 45 per cent and the 40 per cent rate will fall to 35 per cent applicable to profits made after 1st January of this year.

To reward manufacturing firms which make a special effort to expand employment and production the Bill uniquely provides—in Chapter IV—for a special reduced corporation tax rate of 25 per cent for the three years 1977 to 1979 for manufacturing companies which increase by appropriate amounts their employment and production. This year the targets are 3 per cent for employment and 5 per cent for output. I will deal more fully with this matter when I come to the relevant sections but I would like to emphasise that any company which exceeds those targets this year will not be disadvantaged—for purposes of qualifying for the relief in 1978 and 1979—by reason of having surpassed the qualifying minimum targets prescribed for 1977. In other words, for firms which could press ahead in 1977 with expansion in excess of the 1977 targets, there would be no question of advantage arising from a policy of restricting 1977 growth to the minimum levels required to qualify for the special tax relief.

The question may be asked—why should building and construction not be eligible for the special relief to which I have been referring? The 25 per cent rate is intended to benefit primarily manufacturing industries catering for the home market, which have not benefited from the export tax relief, and also firms that have exhausted such relief. It is hoped that such manufacturing firms will be stimulated by the incentive to make extra efforts at expansion of output and employment. The beneficial effects of such stimulus of cause should have a general impact, including having an impact on the building and construction industry.

The building and construction industry will benefit from the stamp duty concession for office building, the reduction in the main rates of corporation tax and the large provision for this industry in the public capital programme. Building and construction takes place in response to the demands of and to meet the needs of other sectors. It will therefore benefit from the general stimulus to the economy from the Budget measures.

Throughout the recession more reliance than would be appropriate in normal times had to be put on public spending to maintain economic activity. With the recession behind us it is essential that we make a two-pronged attack from both the public and private sectors on our economic problems.

From April, 1973 to the end of 1976, total public spending increased by 143 per cent and public capital programme expenditure by 119 per cent over 1972-73 levels. Allowing for inflation, this meant a real increase of about 19 per cent in total expenditure and about 12 per cent in capital expenditure. If account is taken of increased finance provided in recent years from commercial sources for house-purchase as a result of Government initiatives, the increase in capital spending is about 15 per cent. The significant expansion of the public capital programme in recent years, and especially in 1974 and 1975, was a major factor in maintaining investment activity at a high level at a time when private sector capital formation actually declined.

The 1977 budget gave a further stimulus of 22 per cent—about 5 per cent in real terms—to the public capital programme which has immense spin-off benefits for the private sector. This stimulus, together with the taxation reductions and special incentives of the Finance Bill, will give private investment the best boost imaginable. Many firms have acknowledged that, as a consequence of the improved tax climate, they have increased or will soon increase their investment plans. It is clear therefore that the Government's policies have evoked a positive response and that great economic benefits will flow from them not merely in 1977 but at an even faster pace over the next few years.

The EEC as a whole expects unemployment to rise this year. There are only three exceptions to this discouraging picture—Ireland, Germany and Holland. With the growing momentum of our economy we anticipate that our unemployment figures will over the next few months fall below the 100,000 mark for the first time in two-and-a-half years. Our aim is to strive to reduce the number of unemployed even more dramatically.

We are still unfortunately influenced by imported inflation but domestic inflationary influences on incomes and fiscal fronts are now under better control. In two deliberate ways the Government are this year making a contribution to easing the rate of inflation. Not only have we eased personal and corporation taxes but we have avoided any indirect tax increases. Secondly, we have provided substantial additional subsidies on foodstuffs. As a consequence of the VAT reliefs and subsidies on essentials inflation is running 3½ percentage points less than it otherwise would be. By the year's end, provided all sectors act with prudence, we should have our inflation rate below 13 per cent and be moving towards single digit inflation next year. This is a development from which all will gain.

The annual loss in public revenues resulting from the income and corporation tax cuts is of the order of £100 million, a large amount of money by any test. If the path of lower taxation is to be followed with the beneficial result that personal initiative and business enterprise will be encouraged, it will be necessary to maintain control of public expenditure. The air is full nowadays of calls for more public expenditure for diverse purposes, some meritorious, others not. One common thread running through the demands of the would-be big spenders is the total absence of any indication as to where the money is to come from.

Taxpayers would be well advised in their own interests to be distrustful of those who would freely spend money which only the taxpayer can supply. If electors support grandiose expenditure proposals, they will have only themselves to blame if tax rates rise again to pay for them. This course does not commend itself to this Government who want to see the tax concessions of the 1977 budget retained and improved upon. A careful balance will therefore have to be maintained to preserve a sensible level of public expenditure and a tolerable level of taxation.

I now turn to some provisions in the Bill which appear to call for separate mention on this stage of the Bill. As Deputies are already in possession of an explanatory memorandum I will not weary them by unnecessary detail.

Section 1 provides, on a permanent basis, that the amount of the income tax allowance given to a taxpayer in respect of a dependent relative will not be reduced on account of budgetary increases in the relative's non-contributory old age pension. This will avoid the need to make specific provision to secure such result in future whenever the relative's pension may be increased.

Section 7 is designed to improve the financial situation of less well-off pensioners and of others over 65 on low incomes. Indeed, it provides greater relief than I indicated at budget time. It provides that an individual entitled to the income tax age allowance will not be subject to tax where his income is less than £1,000 if he is single, or £1,800 if married. These exemption limits are such as to ensure that a person entitled to the age allowance will be free of tax if his only income is a social welfare pension or income of the same amount from a source other than social welfare. Indeed, the levels at which the limits are fixed will also allow many pensioners to have some amount of other income without attracting a tax liability.

In the case of persons with incomes slightly greater than the limits mentioned there will be "marginal relief" so as to reduce the tax payable to one half of the excess of total income over the relevant exemption limit.

The introduction of the exemption limits should remove many pensioners from the tax net and the application of "marginal relief" should reduce the tax burden substantially for many more. In all, some 10,000 pensioners —those least well off—will benefit. I might also mention that the Government's intention is that these limits be revised in future in line with increases in the amounts of social welfare pensions.

Section 8 is designed to close a loophole which has come to notice in earlier legislation intended to prevent the abuse of the export tax reliefs provisions.

The Minister for Agriculture and I have had discussions with the farming organisations on measures relating to the taxation of farming profits. Having carefully considered their views, and bearing in mind the exhortations of the EEC that farming profits be taxed, the recommendations of the National Economic and Social Council and the interests of the general body of taxpayers, the Government decided that the main scheme announced in the budget should stand with certain modifications. These concern the dates for payment of tax, the deduction for wages and the method of assessing the tax liability of traders and professional people who own farm land. These modifications are in keeping with the Government's aim of collecting a fair share of tax from farm profits without inhibiting the development of farming.

The dates for payment of tax will be 1st September and 1st January— as for other Schedule D taxpayers. This means that tax on farming profits will be paid in respect of the income tax year in two instalments, instead of in one as earlier proposed. A deduction from notional income will be given, with a view to stimulating employment, in respect of wages paid to employees registered for PAYE and social welfare purposes. The farming profits of those landholders who have another trade or profession will be assessed to tax in the same way as their trading or professional income, that is, on the basis of accounts related to the preceding year.

As only half of the proposed tax on farming profits will not be collectable in the calendar year 1977 the yield in 1977 will be about £15 million to £16 million. As the balance will be payable in the income tax year 1977-78 the ultimate revenue yield less the £4 million cost of the labour concession previously mentioned will be comparable to that originally envisaged.

Section 10 removes the rateable valuation threshold of £50 which applied to landholders who also carry on a trade or profession. Landholders who carry on a trade or profession on a self-employed basis will now be liable for income tax on their farming profits, regardless of the rateable valuation of the land. Some confusion has arisen over this. I therefore want once again to emphasize that an employee who owns land will not be affected by this section.

Let me explain the distinction between the two categories. Apart from full-time farmers there are two other groups of farmers for tax purposes. One group comprises persons with land who are engaged in a trade or profession on a self-employed basis. In the second group are persons with farm land who do not have a trade or profession but have non-farming income, for example, from employment off the farm.

Persons in the first group will be liable for income tax on their farming profits regardless of the rateable valuation of the land. Persons in the second group will not be liable for income tax on their farming profits unless the rateable valuations of the land is £75 or more. However, since 1974, such persons have had their personal allowances reduced by up to one-half where the rateable valuation of the land exceeds £20. This provision, which applies only where the farming profits are exempt from income tax, remains unchanged.

Section 11 provides for marginal relief for farmers with rateable valuations between £75 and £84. A farmer who has a rateable valuation of £75 will pay only 1/10th of his full liability with £76 rateable valuation 2/10ths and so on up to 10/10ths at £84 rateable valuation. The effect of this section is that, of 170,000 farmers in the country, only some 12,500 will be liable to the full tax.

Section 12 provides that farmers— other than those who carry on another trade or profession—are to be charged to tax on the basis of a notional income calculated by applying a multiplier of 65 to each £1 of rateable valuation. The reasonableness of this multiplier can be judged by the fact that, allowing for the deductions from notional income, the full-value multiplier based on 1976 incomes would be about 88 and, based on 1977 incomes, would be in the region of 110. Furthermore, deductions will be allowed from notional income in respect of rates on land and wages paid to employees who are registered for PAYE and social welfare purposes. The normal personal reliefs, including that for interest payment up to £2,000 will also apply. Taxpayers who opt for actual accounts will, of course, be entitled in due course to the deductions for higher interest payments and other business expenses if incurred.

Section 12 also provides for appeals against the notional assessment. A farmer who appeals may present accounts related either to the preceding year or to the current year.

Section 13 outlines the procedure for appeals against the notional assessment. The amount payable on 1st September, 1977 will be one-half of the tax on farm profits as notionally assessed. However, if a taxpayer appeals against the notional assessment he may, in relation to the second instalment of tax payable on 1st January, 1978, specify the amount of tax he thinks should be payable on the basis of accounts and, pending determination of the appeal, pay only that amount. If the amount of tax paid in the two instalment is lower than the tax assessed but is 80 per cent or more of the amount determined on appeal, no interest charge will arise. If, on appeal, the taxpayer in question is shown to have paid too much tax, the excess will be refunded promptly with interest.

Section 14 provides for free depreciation of capital expenditure incurred on or after 6th April, 1977 on the construction of fences, roadways, holding yards or drains or on land reclamation. This provision applies where a farmer's income is determined on the basis of accounts.

Chapter III implements the budget proposals for a reduction of 5 percentage points in both the 50 per cent and 40 per cent rates of corporation tax and for an increase of £5,000 in the tax thresholds for small companies. In addition to the foregoing, I am providing in this Bill for a similar reduction in the 35 per cent rate of corporation tax which applies to building society income and also to the interest on housing loans made by banks under approved schemes as well as to income of the Agricultural Credit Corporation and certain public utility companies.

Sections 16 and 19 provide for certain consequential changes necessary as a result of the reduction in the rates of corporation tax. In order to maintain the effective rate of tax on companies' capital gains at 26 per cent, section 16 makes appropriate adjustments to the present formula, contained in section 13 of the Corporation Tax Act, 1976, for charging a portion of the chargeable gains at the main corporation tax rate, 45 per cent. Section 19 provides for the rate of relief which will be allowable in the new situation to companies in respect of certain losses and capital allowances carried forward for tax purposes from pre-corporation tax days.

I now return to Chapter IV which makes provision for the novel incentive for manufacturing industry, which I announced in the budget, of a special reduced rate of corporation tax of 25 per cent for the three years 1977 to 1979.

Detailed discussions have been held with representatives of manufacturing industry since the budget and the fullest consideration has been given to the many points raised. Because of the originality of the incentive, the Government have decided to outline the basic framework of the incentive and to fix the production and employment targets only for 1977 at this stage, leaving the targets and other details required for 1978 and 1979 to be fixed in due course in the light of experience in the interim and of actual and prospective developments in the economy.

For 1977, the required increase in production, to be measured in terms of the volume of goods sold, is 5 per cent above the 1976 level and the required increase in employment, to be measured by reference to changes in the number of employment contributions made under the Social Welfare Acts, is 3 per cent above the 1976 level. As I have already indicated, when the 1978 and 1979 conditions for the special relief are being framed, an appropriate provision will be included in respect of companies which will have not merely attained the 1977 qualifying targets but will have surpassed those levels.

We believe these are realistic targets which I am satisfied are attainable in present circumstances by manufacturers who are prepared to make the necessary efforts to earn this very substantial reduction in tax on their profits. We are very encouraged by the reception which manufacturers have given to these proposals. Indeed the Government's package of personal taxation reliefs and company tax incentives has generated a positive air of confidence in business circles. We feel sure that business generally is making new efforts to boost output and employment.

I might mention that provision is not being made in this Bill as regards the rate of tax credit which will apply to distributions made by companies which will have benefited from the reductions in corporation tax provided by these chapters; this matter will arise for attention and will be appropriately dealt with next year when distributions will fall to be made out of 1977 profits.

Chapter V which has some capital gains tax provisions gives special concessions to certain unit trusts and unit-holders in relation to their capital gains tax liability. The concessions take account of the particular conditions which apply to the operations of unit trusts and are designed to avoid any element of double taxation of such trusts.

The effect of sections 33 and 35 is to reduce from 26 per cent to 13 per cent the capital gains tax rate charged on gains made by a registered unit trust and to provide similarly for gains made by a unit-holder of that trust. The ultimate tax take will therefore be 26 per cent as intended. Section 34 exempts units held by an assurance company in a unit trust from capital gains tax, the tax being chargeable only on the gains made by the trust involved.

Section 43, and Part V of the First Schedule, provide for the grant of stock relief for a further year. As I mentioned in my budget statement, this relief will not be recoverable from beneficiaries except where stock values decrease or where a trade ceases to be liable to Irish tax. I also mentioned that as the scheme of stock relief is essentially of a simple nature it is necessary to provide certain safeguards against abuse. These safeguards which are contained in the First Schedule include a measure to prevent the creation of artificial repayment claims through the interaction of the provisions relating to stock relief, losses and capital allowances. They also counter the possibility of a trader claiming relief in respect of increased stock levels which have already been relieved.

Section 45 provides for the reduction of the rebate payable to brewers using home-roasted, home-flaked or home-malted cereals from £2 per standard barrel to £1 per standard barrel, while section 46 provides for a reduction in the rate of drawback on beer, with effect from 1st September, 1977. These adjustments arise out of our EEC Treaty obligations, but section 44 introduces a measure of compensatory relief for brewers and distillers. It substitutes a flat annual duty of £50 on their licences in lieu of the existing, and more onerous, scales of duty based on their output.

Section 47 provides for the refund of the stamp duty paid on certain office building contracts if the office building is completed by 31st December, 1978. This concession should provide a rapid boost to employment in this sector of the construction industry.

Section 48 is aimed at the promotion of the fine arts. It enables the Alfred Beit Foundation to receive transfers of property from Sir Alfred and Lady Beit without incurring a liability to pay stamp duty on the transfer. I should like to take this opportunity to pay tribute to Sir Alfred and Lady Beit and to thank them for the magnificent gift they propose to transfer to the foundation. The gift will consist of Russborough House, 250 acres of surrounding land and the proceeds of the sale of a further 240 acres of land. They will also make available to the foundation on loan the contents of the house with the exception of some small items. Included in the contents is the art collection which is world-renowned and is regarded as one of the most valuable in private hands anywhere in the world.

Section 50 exempts from wealth tax certain private non-trading companies which have control of trading companies. At present private non-trading companies are exempt when they are merely holding companies for a trading company, and the main purpose of section 50 is to make them exempt when they are holding companies for individuals who control trading companies. This provision is designed to exempt genuine commercial arrangements from the impact of wealth tax.

Section 51 enables unilateral relief from double wealth taxation to be given where double wealth taxation arrangements have not yet been concluded with other States.

Finally, I might refer to some provisions which relate to a number of taxes. Section 36 makes provision to ensure that a child adopted under the Adoption Acts, 1952 and 1976, will be regarded as a "child" for the purpose of tax legislation. No problem has arisen in this connection but I consider it better to put the matter beyond doubt. Section 53 relates to an individual who donates property to the State and leaves the State to become resident elsewhere. The section provides that visits to the State by such an individual to advise on the management of the property will be disregarded for tax purposes.

This covers the main provisions of the Bill. The various sections will, of course, be dealt with in detail on Committee Stage but if further information is required at this stage I shall endeavour to answer any queries raised when I am replying to the debate. I commend the Bill to the House.

This Bill represents the measures proposed by the Government to implement their economic policy, if they have any, and the Bill must be judged as such. It contains some measures which are moving in the right direction but not nearly far enough, and the question immediately arises as to why these measures are being proposed only now despite repeated urgings from this side to adopt measures of this kind.

I refer particularly to measures designed to reduce the tax burden and the cost of goods produced at home. It is an obvious and simple fact, but one that seems to have been grasped only now by the Government, that if the cost of goods produced here goes up and beyond those of our competitors, the inevitable consequence is not only increased prices at home but increased unemployment as workers lose their jobs because goods cannot be sold. It is a simple straightforward process which for years we have been urging on the Minister for Finance but which he has failed to grasp.

One is unfortunately bound to view even the moves in this direction contained in the Bill as a process forced on the Government by political expediency and not by the Minister's understanding of the fundamental economic facts involved in what I have outlined. However, in so far as they go they are welcome but they are not by any means sufficient. They do not go nearly as far as we have advocated nor do they effectively reduce the cost increases of Irish goods to anything like the extent they could have done. This question of the cost of Irish goods is a vital matter not only in the way I have outlined, but also because whatever economic indicators the Minister may wish to refer to, as far as the ordinary person is concerned he or she will believe that there is some improvement taking place when he or she sees some evidence of a real slow-down in inflation, some evidence of an effort being made to prevent price increases galloping on as they have been doing in the past few years.

The record of the Government in regard to prices is disastrous and, indeed, disgraceful. They went before the public at the last general election proclaiming that they were going to halt the price rise, to stabilise prices. They did not say they were going to do that provided external forces did not prevent them. There were no qualifications. At that time price increases were laid at the door of the Fianna Fáil Government and nobody else. No sooner were the National Coalition in office than the excuses started to come and we have been hearing them ad nauseam ever since. Last week we heard the same story from the Taoiseach and he again trotted out the increase in the price of oil. It is important that the people should understand what the Arabs did to the price of oil and what the National Coalition did to it. The Arabs put on 12p to a gallon of petrol while the Minister for Finance, and his colleagues, put on 35p. That is a measure of their concern with the impact of the energy crisis on our economy.

Since this Government came to office prices have practically doubled. Of course, we have never suggested that this country, or any Government here, are not subjected to economic forces that they cannot control. Because of the open nature of our economy we will, we have been and we always will be subject to external forces which will affect prices. Anybody who would deny that is deluding himself. When the Minister for Finance and his colleagues were in Opposition they were slow to talk in those terms. They pretended and tried to fool people into believing that no such factors existed and that the whole question of price increases was under the control of the Government. That has not been heard from this Opposition because we know what the problems are. We have not tried to fool the people about them. We have endeavoured to point out to the Government repeatedly the folly of the Government deliberately increasing the prices of almost everything in sight.

Last year's budget alone, quite apart from the other things the Government did outside of it, added one quarter of our inflation, 5 percentage points. The budget of the previous January added between 4 and 5 percentage points and that is quite apart from other increases imposed by the Government outside the budgets. We repeatedly pointed out to the Minister that this was crazy, that it was not alone inflicting enormous hardship on our people who were trying to keep up with prices but was costing thousands of jobs. However, the Minister and his colleagues would not listen and now, when finally they have begun to see the light and a connection between taxes and pay and the overall necessity to co-relate these, it is trumpeted forth today by the Minister as a great achievement by the Government. All it represents is a monument to the—I was going to say ignorance; I do not know whether it was ignorance —crass stupidity of the Government and what they have inflicted on our people in the last few years. A substantial part of the price rises our people had inflicted on them were not imposed by the Arabs, were not caused by imported inflation but were caused directly by the Minister for Finance, and his colleagues, and that is an indisputable fact.

The consequence of that in regard to jobs has been catastrophic and then the Minister gives us a diatribe on the Government's great achievements in reform of the taxation system. He trots out once more the hoary old chestnut that people in similar circumstances should pay similar amounts of taxation. I have dealt with this repeatedly and the Minister keeps coming back to it. He does not mean one word of it and that is what I have pointed out. When I pointed this out in detail and as to why he did not he got annoyed and the Taoiseach came in to assure the country that the Minister did not really mean what he said. If the Minister means what he says, then export tax relief is about to be abolished. If it is not abolished, people in similar circumstances with similar incomes will not pay similar amounts of taxation. That is a simple fact and the Minister should stop trotting out these silly clichés when he does not mean them. If he does mean them he should say so and not have the Taoiseach coming in to deny that he means them as soon as he says them.

The Minister referred to the capital gains tax but he did not refer to the fact that the capital gains tax system which he introduced is one which favours the speculator, the fellow who makes the quick buck, and treats him the same as the man who spends years building up a business and then sells it hoping to retire on the proceeds. The Minister did not indicate the impact capital gains tax has already made and will increasingly make in the future on ordinary people in agriculture and outside it. Many of them do not realise it yet but I foretell that within the next 10 years if that system is allowed to remain there will be a revolution here. People do not realise what is being done to ordinary people. The public attitude to capital gains tax was that it should be imposed on speculators but the doctrinaire approach to capital gains tax introduced by this Minister applies it the same way across the board to speculators as to the ordinary man or woman making his or her living in the ordinary way. This country will rue the day that happened.

The Minister talks about people who have large fortunes making appropriate contributions to the Exchequer under the wealth tax but was he joking? The return from the wealth tax is derisory and the Minister has not yet told us, although we have asked, what the cost of administering the wealth tax is. Does the wealth tax represent anything more in real terms than a gesture to theorists who are resisted by people with common sense in the Labour Government in Britain, in Australia and in many other richer and better developed countries than this? The system is not working, but it must be costing the Exchequer as much as or possibly even more than it is bringing in. It is certainly engaging the activities of a number of very highly qualified civil servants in the Revenue Commissioners who could be far better employed for the benefit of the Exchequer. I do not believe these kind of gestures are the stuff of good government. The Minister referred to the 58 per cent tax rate on companies imposed under Fianna Fáil and which, of course, was reduced subsequently.

We told them they were wrong to impose it, which they acknowledged later.

What the Minister did not say was the context in which it was imposed. I am not surprised he did not. It is worth recalling briefly the context in which it was done. We then had a government who had a prices and incomes policy, unlike the present Government, and who were prepared to accept political odium in order to have it implemented and who turned around the situation in the economy which was then developing as a result of external forces. That Government recognised we could not control external forces and, therefore, the obligation on us to control internal forces was all the greater. That Government did not shirk their duty. We tried to encourage a voluntary pay agreement between the trade unions and employers, and we produced a package across the board, including company profits, so that people could be assured the pressure would not be applied on one section of the community only.

It so happened that, as a result of the effort then made, and the legislation then introduced and passed at its Second Stage, we had the first national pay agreement. The economic consequences of the action of that Government in relation to the bringing about of a national pay agreement, and the overall economic consequences of what was done at that time, have not been fully recognised, yet, I suggest. They will be recognised more and more when people compare that performance with the performance of this Government who have no policy on prices, and no policy on incomes, and who on occasion talk very loudly but, when it comes to the crunch, will run away as this Government have frequently done, and allow inflation to run riot, and prices to go virtually through the roof, not only because of their misguided taxation policy, but also because of their lack of any policy on prices and incomes, and their lack of backbone to stand up and enforce what they believe to be correct.

We are all paying a very high price for that lack of backbone and lack of policy on the part of this Coalition Government. I am sometimes amazed —I should not be by now, but I still am—at the manifest misuse of words by the Minister for Finance. Perhaps I should not blame him unduly because virtually the same thing was done last week by the Taoiseach. To give an example, today the Minister said:

By allowing after-tax incomes to rise faster than pre-tax incomes during 1977, the package enables a balance to be struck between the need for industry to improve competitiveness and the entirely reasonable desire of people to maintain their standard of living.

Any reasonable person reading that would assume what the Minister was saying that people were going to maintain their standard of living under this arrangement. The next sentence reads:

Thus, a combination of national agreement increases and tax cuts will, in a typical case, increase after-tax earnings by about 10 per cent.

The Minister and the Taoiseach have said inflation this year is expected to be in the region of 13 per cent. I will be dealing with that later. Even assuming that to be correct, on the face of it in the typical case there will be a gap between inflation at 13 per cent and an increase in after-tax earnings at about 10 per cent. Can anybody describe that as maintaining the standard of living? The truth is, this year the workers of this country will suffer a substantial cut in their standard of living, more substantial than is indicated by the Minister's figures. They will do so at a time when the Minister and his colleagues are telling us "Everything is going well. All the economic indicators are good. Things are looking up."

They will discover later in the year just what the consequences are of this fall in their real standard of living. If one wants to speculate about the date of the general election, that is as good a pointer as any as to when it will be. It will be later in the year before the fall in the standard of living is really discovered, but it is a fact. The fact that people have to suffer this substantial drop in their standard of living is caused at least partially by the past policies of this Government. Apart from prices, the man in the street will believe we are getting over the economic recession when he sees some substantial improvement in the unemployment position, not a seasonal improvement.

For some years past we have had to live with appalling unemployment, the extent of which is not known precisely to anybody. The registered unemployed who even at this time of the year are running in the region of 114,000, do not include any girls who are seeking employment who have not been employed before, and practically none of the boys in the same position. There are other categories who do not appear on the register either. A very conservative estimate of the number of young people who will be seeking employment and who will not be on the register this year after the examinations is 60,000. I am almost certain it will be substantially more.

In these circumstances what is being done? True, measures designed to reduce taxes and encourage investment are the right measures, but the Minister will have to explain what was wrong with those measures when we were urging them over the past few years. Furthermore he has to explain why he is relying only on these measures. Is this not an emergency? Does the Minister accept that our unemployment situation has now reached emergency proportions? If it has, are there not steps open to the State outside dependence on the private sector, are there not methods open to the State by which a start can be made on tackling this emergency unemployment situation?

I do not say that proper measures designed to encourage the private sector will not bear fruit in relation to employment. On the contrary, I believe they will. If we are to tackle this problem that is where the effort will come from but we can be sure that it will make little impact in the short term. The State can make an impact in the short term.

However, there is no sign in this Bill or in the policies outlined by the Minister of any real consciousness of this or of the extent of the crisis. It is true that now and again we hear about the need for an economic plan. There are few who would disagree with the need for that plan, especially if we are to tackle the emergency situation. Eventually the Government's Green Paper was issued and it said this was the first necessity, but where is the plan? We have had talk about it year after year but there is no plan and there will not be any. There cannot be a plan from this Government because they cannot agree on the basic fundamental features of any such plan.

As the Government argue among themselves and fail to introduce and implement such a plan more and more of our young people are finding themselves without hope and more and more parents are despairing of what will happen to their children. They are concerned about what will happen not only to their future economic well-being; they know that their characters may be distorted for the rest of their lives if this problem is not tackled quickly.

This Government will not tackle the problem. They carry out a little cosmetic exercise here and there but any real consciousness that this is an emergency and needs to be tackled does not exist within the Government. When I say it does not exist, perhaps I should qualify that. I cannot know that for certain but I know that by their actions they have acted as people who are not conscious of the enormous emergency we are facing.

Another panacea for our ills was trotted out recently, namely, a State development corporation. Apparently this was going to solve all our problems. It was of such major importance that at the last annual conference of the Labour Party the Tánaiste and leader of that party told the delegates that it would be a condition of Labour joining in another coalition that there would be a State development corporation. I must confess that as spelled out by the Tánaiste and other members of his party, I would be less sanguine about its effect on our economic crisis but at any rate it is clear the Labour Party regard it as of great importance.

Then what happened? The usual feed was given to the news media so that in one weekend we read that the Taoiseach and the Tánaiste in separate speeches were going to announce to the public that the project was to be undertaken. This would be evidence of the fact that negotiations between the two parties had taken place and that they had agreed on the programme for another coalition. It did not work like that. The Taoiseach went to Killarney and dwelt at some length on the problems attaching to the concept of a State development corporation. He said that the central problem was fitting it in with all the existing State agencies. He made it clear that already there had been fierce opposition engendered among some of the existing State agencies who, not unreasonably I suppose, said they were doing the job and they asked for evidence that the State development corporation would do it better. The Taoiseach outlined in detail the various arguments on this score.

In case anybody did not get his message, he said that in any event it would need legislation and that there would not be such legislation before the summer; in fact it was most unlikely that we would have such legislation in the present Dáil. Given the fact that the Tánaiste had publicly committed himself to the project as a condition for his party joining with Fine Gael in a coalition, the language of the Taoiseach is those circumstances was as clear as daylight. He was saying that in no way would Fine Gael agree to it. Of course, he did not rule out the possibility of some kind of formula being trumped up that would not mean anything.

Only last weekend the Tánaiste said the Labour Party would fight the coming election as a committed member of the Coalition. That was interesting. It looks as though Fine Gael have got the Labour Party where they got them before in previous coalitions; to quote a former Deputy and a former leader of Fine Gael "it looks as though the Labour Party are going to be as quiet as mice". They can make all the sounds they like in public but when it comes to the crunch they have got nowhere on what was supposed to be a basic condition of their joining a coalition. I refer to that simply because it was advanced as one of the panaceas for curing our economic ills. However, there is no sign of it in this Bill, there was no sign of it in the budget or in any statement from a member of the Government as part of their economic policy.

We have to come back to earth and deal with the problems we are really facing, not with these airy-fairy concepts which are no more than that if they have no chance of being implemented. If we want to come back to earth with something of a bang, we might do worse than consider what the Government have done in regard to the borrowing situation. The national debt outstanding at the end of this year will exceed £4 billion——

The Deputy and his party are telling us to borrow more.

We mean for productive purposes. I will not disappoint the Minister; I will come to that. The net interest on this debt will absorb more than one-fifth of total tax revenue and a substantial part of the external public debt will fall due for repayment in the next couple of years.

What the Minister was really talking about was whether the borrowing was used productively. I would like to quote from the Irish Banking Review of March, 1977, page 4, where they say:

The improvement in the public finances in 1976 has to be placed in the context of the exceptional rise in public spending, borrowing, and related debt service charges, which had taken place over the previous three years. By 1976 total public spending as a proportion of GNP had reached 55 per cent, as compared with 40 per cent in 1972/ 73. Over this same period, the National Debt has grown from about 9 per cent to 20 per cent of GNP.

The Minister might like to listen to this.

Despite a doubling of total Government spending in the three years up to 1975, there had occurred no corresponding rise in employment, and very little rise in the National Product.

These trends in the public finances over the period in question are insupportable in the light of the problems which have developed in the economy at large. The ostensible purpose of the massive rise in the public expenditures has been to protect employment and living standards against the impact of the world recession. The effect of the policy in achieving its avowed objectives has been minimal, if not actually negative. With the exception of 1976, real growth over the previous three years was negligible. Inflation rose at a considerably faster rate in Ireland than in other European countries. Employment showed no expansion, so that the anticipated effect on job protection was not achieved.

That is not my version of it although I agree and have said something similar on several occasions. That is the assessment of the Irish Banking Review.

This raises a very serious question. The country is now saddled with an enormous amount of debt. The cost of servicing that debt has become a major item in our budget. The room to manoeuvre for this or any succeeding Government will be considerably restricted because of the amount of money that will have to be paid every year to service this debt. That would be tolerable if we had something worthwhile to show for this borrowing, but, as pointed out in that article, we do not. Despite this massive borrowing and massive commitment of future generations our unemployment and inflation rates are worse than those of our competitors who did not engage in this enormous borrowing. That is another reality with which we are faced, with which the policy supposedly being implemented by the Government and partially implemented in this Bill has to cope.

One bright sign on the horizon is the drop in interest rates. That will obviously help our whole economy and, indeed help the Exchequer. It is very welcome and will I believe contribute to a reduction in the cost of Irish goods and, therefore, will help the maintenance and creation of employment. We should not regard it as something that can be relied on in the longer term because the reduction in interest rates is primarily due to the fact that the £ having dropped so substantially, has steadied plus the fact that the demand for credit in Britain is considerably less than is available.

That is a bit ominous because it indicates that the trading outlook for our exports in our main export market is not all that bright. On the other hand, if it becomes brighter and there is a bigger demand for credit in Britain we may take it as almost certain that the interest rates will go up but I hope not to the inordinate levels they have been at recently. They will certainly go up from what they are at the moment. Although the reduction in interest rates is welcome, we should not count on it as an indication of something which will make any long-term contribution to the improvement in our economic situation.

We have had various forecasts by the Minister and others. The situation is becoming something of a joke now with the general public because the rate at which inflation is expected to occur in 1977 is dropping steadily. The nearer we get to a general election the lower the amount of the forecast. In fact, one would get the impression that the inflation rate for this year is dropping like a stone. On the other hand, the prospects for the creation of jobs seem to be going up and up like a kite. Do members of the Government think that this is fooling anybody? Do they not know they are simply breeding cynicism by this performance? The Minister said that the inflation rate would be slightly under 13 per cent but no effort has been made by him or the Taoiseach, who referred to it a week ago, to show on what it is based, to explain the changes which have taken place in the past one and half months or two months which would reduce it to that figure from the rate at which it was being calculated by the Government, that is 15 per cent. Indeed, to have any credibility at all, the Minister would want to explain why the Government's forecasts in previous years have been consistently under-estimated.

I do not claim to have any tremendous expertise in this area or anything like the Minister has available to him in the way of economic data but I can claim that I have been consistently much more accurate in forecasting the inflation rate than the Minister has. If he has any doubt about that, he might like to look at the debate on the Finance Bill in April last year when I said that the inflation rate would be about 20 per cent. As the Minister knows, it was 20.6 per cent. That is not what the Minister was saying. He will find similar more accurate forecasts from this side of the House in previous years.

Since I do not have available to me the same kind of information and data the Minister has and since I do not claim any particular expertise in this area, the question arises: why have the Government's projections of inflation been consistently low? What can we think of their lowering over a period of six to eight weeks the projected inflation rate from 15 per cent to 13 per cent when 15 per cent was probably, on past performance, an under-estimate anyway? What can we think but that the election is very close? That is all the value there is to be attached to that kind of forecast when it is not accompanied by one iota of information or evidence to back it up.

When we consider the carry-on in regard to the creation of jobs we are entitled to question the seriousness of the announcements that we hear on this subject from time to time. I question in particular the seriousness of any government that come before the House and announce a special programme of job creation costing £55 million when that very government failed to spend £52 million on the capital programme in the previous year, the major area in which job creation is within the control of government. One cannot accept the bona fides of a Government who behave in that way. One's doubts are not diminished when one has regard to the blatant misappropriation of the taxpayers' money by the Minister for Labour for the purpose of self-projection. I refer to his photograph and a facsimile of his signature accompanying advertisements which carry the following statement: “I will pay you £20 for every person you employ”.

There is a matter to which the Minister has referred previously, which is referred to also in the Green Paper and in relation to which there was some objection by the Tánaiste and some of his colleagues but in respect of which the Minister for Finance re-affirmed subsequently his position. I refer to a matter for which there is no provision in the Bill but which was referred to in the Green Paper as circular transfers. I wonder whether the Minister recalls this. I am sure he remembers that after the Tánaiste had been saying that there was no way in which the change the Minister was talking about would be made, the Minister replied that it was intended to go ahead with the change. However, that change is not provided for in the Bill before us. There is no provision for the abolition of children's allowances or of free school transport or similar items lumped together under the heading of circular transfers.

There was never such a proposal.

The election must surely be very close at hand.

The Deputy knows well what I was talking about then.

Let us get this straight. Did the Green Paper propose the examination of the question of circular transfers?

Yes. We are doing that.

Did not the Minister for Finance spell out in a speech what he meant by these circular transfers and did he not include children's allowances and free school transport?

The Deputy is being mischievous because he expects the election to come at the time he wants it.

The record speaks for itself. If the Minister did not refer to the abolition of the benefits I have mentioned, what was the Tánaiste denying? Was he denying something that the Minister did not say?

He was answering a mischievous parliamentary question.

I thought he was denying a speech made by the Minister for Finance. I could be wrong but most people were of the same opinion and still are. However, unfortunately for the Tánaiste he, as a member of the Government, had approved this change when he approved the Green Paper which included that paragraph dealing with circular transfers. The Minister for Finance, subsequent to the Tánaiste disclaimer, re-affirmed in the House that he was going ahead with the changes. Therefore, although the Coalition will endeavour to keep this matter quiet between now and election time, let everybody know that the Minister is re-affirming the intention of the Coalition and will implement it if they are returned to office. In other words, in that eventuality both children's allowances and the free school transport service will be abolished.

The rates of income tax proposed in the Bill are an improvement, both from the point of view of the individual taxpayer and of the economy in general but they do not go far enough. This is a matter on which we can go into in more detail on Committee Stage. All I shall say about it now is that it appears that the hope of the individual taxpayer returning to the position in real terms that he held when Fianna Fáil were in office seems to have faded beyond the horizon. So much slippage has occurred since then that it does not seem possible to envisage a return to the position in which the taxpayer found himself after the 1972 budget. Consequently, let us not be carried away by what is being done. The fact is that we are not even remotely keeping up with inflation in these proposals.

There are a number of matters other than the question of the general economy that I wish to refer to. In his speech the Minister said and I quote:

As my colleagues in Government and I have repeatedly pointed out, the most urgent task facing our nation is to create more jobs without fuelling inflation.

I am amazed continually at the nerve of the Minister. He can come here and say something like that while sounding and looking as if he means it. Is it that he can close his mind to what has happened, to what he has done in the past? The Government have caused the loss of thousands of jobs and with almost every budget they have introduced, they have directly fuelled inflation. Yet the Minister can come in and make such a statement and, in addition, subscribe to it since he went on to say:

It is noteworthy that last weekend's summit meeting of Western industrial leaders gave first priority to this goal.

The summit was not needed to give this aim an air of respectability. It already was respectable but the problem was that our Government did nothing to achieve it. Rather, they did the opposite.

I do not wish to go into a great deal of detail in regard to the various sections of the Bill but there are some queries I wish to raise at this stage. The Minister may recall that during the budget debate I raised a number of questions, most of which he did not deal with at the time but, promised to deal with in the Finance Bill. While one or two of the points have been dealt with in the Bill, most of them have not been referred to either in the Bill or in the Minister's introductory speech.

I shall refer briefly to some of these points in order to remind the Minister of them. The first relates to the tax allowances for children and other dependants. The income limit for certain dependent relatives will now automatically be the amount of the old age pension payable to persons of more than 80 years old but nothing is proposed for the amount allowed for tax relief in these cases. The allowances for children and dependants should be increased by at least the same proportion as the personal allowance for a single, widowed or married person and, in addition, I suggest the income limit for a child should be increased from the figure of £80. If the Minister will not make these changes and one can presume, since he has not these proposals in the Bill, that he will not, I would ask him to give his reasons for not doing so.

Another matter I referred to and sought the Minister's reaction on was the question of business cars and the restrictions on expenses. Capital allowances, renewal allowances, hiring and even running expenses are restricted by reference to a car costing £3,500. It is very difficult to see how the Exchequer can benefit from this legislation. It is causing a considerable amount of frustration and it is making the administration of income tax much more difficult than it need be, and all apparently with little or no benefit to the State. I put that point of view to the Minister on the conclusion of the budget debate and I would ask him to comment on that point as to what value there really is in this for the Exchequer.

Another matter I referred to is the question of the assessment of benefit in kind from the use of cars provided by an employer. Now the income minimum of £1,500 for employees other than directors was brought in in 1958 and there is still no change proposed in it. I understand that in the Finance Bill in Britain it is proposed to exclude from the definition of director those with no material interest in the company and who are full-time working directors. More importantly, from 1978-79 the level of pay qualifying a person as higher paid is raised from £5,000 to £7,500.

Our wage structure is closely comparable with that of Britain and I would suggest that it is not unreasonable after nearly 20 years of treating an employee on £1,500 a year as higher paid that we should accept now the fact that inflation has pushed the wage structure beyond the point where we should apply special and restrictive tax treatment to a person earning only £1,500 a year. This rigid adherence to this figure is causing considerable difficulty and annoyance in a number of business circles and I am not referring here to the bosses or the bosses only but to the employees as well. It certainly means unnecessary work for the staff of the Revenue Commissioners.

We have also then this question of what I think can be described as the harsh and unreasonable minimum charges imposed last year, namely, the £300 or 15 per cent of the cost of the car. I think they merit reconsideration. In the budget debate I asked what benefits accrued to the Revenue from that provision measured against the cost of administration and so far we have not had an answer to that question.

The Minister may also recall that in the budget debate I suggested that a loan for house purchase deserves special treatment as, indeed, it gets in Britain, but there is no provision in this Bill about that and I would like the Minister to tell the House why he opposes giving a concession in this regard to young married couples to help them in the purchase of their homes.

I would like also to remind the Minister that he undertook in this House to review the threshold limits in the various capital taxes each year. I think it is time the Minister told us the outcome of that review. As I indicated earlier, the Minister so far does not seem to have been able to indicate the yields from each separate item of the capital taxes and the respective costs of administration. I think we should be entitled to that information. It should certainly be available before the Minister starts talking about the capital taxes in the way he did when he introduced this Bill.

There is a provision in section 3 about which I am somewhat concerned. The explanatory memorandum refers to section 3 as making a technical amendment necessitated by the passing on 31st March, 1976, of the Corporation Tax Act, 1976. In the first place, why was this amendment not included as were a number of other amendments in that Act? Secondly, why is the amendment to take effect from 31st March, 1976? I do not want to go into the drafting of this at this stage but, on the face of it, it appears to be retrospective legislation and I think that the Minister is obliged to give his reasons for having the amendment operate from 31st March, 1976. Is it possible some case has come up and the existing provision has been found defective in dealing with it?

In section 28—that is the chapter dealing with the treatment of certain manufacturing companies given the 25 per cent charge to corporation tax— provision is made to counteract tax avoidance, and I presume primarily in claims for the 25 per cent charge, by using the device of artificial prices. The provision is in the context of the buyer and seller company associated through the control of one over the other. In any relieving provision it is of course acceptable that there must be anti-avoidance provisions to prevent abuse of the relief but in this section a general anti-avoidance provision is slipped in by stating that the provision applies "for any purpose of the Tax Acts (including this Chapter)". It would be unreasonable, I think, to accept that such an important general provision would merit open treatment but, when it is inserted where it is, it could easily pass unnoticed especially under the pressure of business in this House and I am asking the Minister now to explain why he agrees to what was obviously originally intended as a specific measure related to the 25 per cent corporation tax provision being extended to a general provision applying to many closely associated relationships, and not only company with company but also company with some person other than a company.

I would suggest that, if there is to be this general provision, it would be much better to have it out in the open and make it subject to full debate and not hide it away in a set of sections applying to a special situation where its discovery is purely fortuitous. There is also a section which gives exemption from stamp duty on transfer of property by Sir Alfred and Lady Beit. Why has this to be a specific revision in relation to the Beit foundation? Would it not have been better to make a general provision for any person who is willing to establish a foundation for the advancement of education in fine arts in Ireland? Does Ireland in this context include Northern Ireland? Another special section, section 53, deals with what appears to be a very particular case, but in contrast with section 48 the person is not named. Why the different approach in the two sections? Is there any reason why the person concerned in section 53 should not be named as in the case of the Beits in section 48?

The Minister said that the various income tax changes would provide an incentive to effort. For those in middle management the incentive is not going to be very great. For instance, to a married man with two children and an income of £7,000 to £8,000 a year these tax changes will be worth about £5 a week. This is not a tremendous incentive to somebody earning that kind of money, especially when you consider that people like him who are provided with cars for travelling are dealt with very harshly under other provisions and that they are also under considerable disability in relation to borrowing for the purchase of their homes.

On the taxation of farmers, there is no doubt that the notional system has a number of defects but it also has advantages. It provides an incentive in relation to which I am about to quote.

I will give the source of the quotation in a moment:

. . . This provides an incentive to progressive farmers in that income in excess of the notional income is retained free of tax and is, therefore, available in full for reinvestment. The notional system is also warranted by the inadequacy of the accounts kept by farmers in general at present. It is, therefore, capable of providing a surer and faster return to the Exchequer than the accounts system.

Some people might be surprised to know that the source of that quotation is the budget speech of the Minister for Finance in the Official Report, Volume 296, columns 261 and 262. For the reasons the Minister has set out there, we on this side of the House are quite prepared to agree to the retention of the notional system on an optional basis. The Minister there has spelt out very good reasons why this should be done. He contradicts himself when he talks about extending it for only a year or so.

In his budget statement the Minister indicated that it was not proposed to make any allowance in respect of wages paid by farmers assessed on the notional system. As far as we are concerned that was a crazy approach and I am glad that the Minister, under pressure presumably, has changed. I say "crazy" because I was talking earlier about the crisis in employment in this country and about the lack of any evidence in the performance of the Government of consciousness of the extent of the crisis. Here is a very good example.

In the circumstances in which we are today it behoves the Government to do anything they can to maintain any job that can be maintained or to create any job that can be created. Therefore, to provide that farmers on the notional system would not be allowed the cost of the wages they pay is not the action of a Government who have any consciousness of their duty in regard to the creation of employment. The Government's belated conversion in this regard is welcome but the mentality behind the original provision as spelled out in the budget speech is very serious and should not be ignored by anybody who is trying to assess the approach of this Government to the problem of unemployment.

In allowing the deduction in respect of wages the provision applies to wages of permanent workers but the Minister should tell us what the reasoning is as regards temporary or seasonal workers and why payments to such people should not be allowed. This again is on the principle that anything that can be done by the Government to maintain or create jobs should be done and the Government should not do things or make provisions in this Bill which would have the effect of discouraging the creation of jobs, even temporary or seasonal jobs.

On the general provisions on corporation tax the normal rate for 1977 is to be 45 per cent and there is provision for small companies to have a new rate of 35 per cent and the threshold is to be increased from £5,000 to £10,000. I would like the Minister to consider that profits of £20,000 can hardly be regarded as very big for a trading company. Would the Minister consider whether the threshold should not be put up to that figure of £20,000 and so give a considerable boost to companies engaged in small enterprises, to the kind of company we need to encourage very badly? Perhaps the Minister could indicate whether, if such an increase in threshold were to be given, it would entail any significant loss of revenue. If it would not, I strongly urge on the Minister that it should be done.

The provision in the Bill in regard to the special 25 per cent rate for manufacturing companies is welcome, but if industry is to avail of the relief and plan ahead and if the economy as a whole is to get the benefit of the provision, there must be reasonable certainty for a reasonable period ahead. There will not be encouragement for a long-term investment in new plant and machinery if the relief is for only a short period of three years or possibly even less, when it could happen through some chance occurrence that the relief would be lost because output cannot be maintained at an increased level over the 1976 output. Regard should be made to the practical problems of business and the time lag between the installation of new plant, the training of additional workers and the achievement of increased output.

I have some concern about the method used to calculate the volume of sales in section 25; to say the very least, it is vague and uncertain. An adjustment of actual sales for 1977 is to be made by reference to—and I quote from the section:

. . . the average of the prices . . . in 1976. It is fairly well accepted as a maxim that the drafting in taxation measures should be as exact as possible; even when relief is involved there should be exactness. I would invite the Minister to say what information will be required of claimants. I would invite him to show us in some detail how the average of prices is to be ascertained.

There are quite a number of other questions of a practical nature that arise. Certainly they will be exercising the minds of industrialists hoping to avail of the relief in this section. If I outline some of the questions that arise and the Minister can deal even with some of them when replying it will avoid not alone going into them on Committee Stage but hopefully, will enable people making plans for expansion to make them with a greater degree of certainty. First of all, when it comes to relief for 1978, will 1976 remain the standard year? The Minister, from what he said in his introduction, I think was saying "yes" to that but I am not absolutely clear. Could a company which got relief for 1977 be charged at normal rates for 1978 even though, through circumstances beyond its control—for instance, falling markets, competition or a strike—it did not increase output? Is the imputation rate to remain at 35 per cent for cases charged at 25 per cent? Will the word "manufacture" be given the same meaning as for export sales relief and will it include such operations as these—fish produced in the State on a fish farm, cultivated mushrooms grown in the State, printing of books or greeting cards, shipbuilding and repair and engineering services in connection with chemical, civil, electrical or mechanical engineering works?

I was going to ask why is the construction debarred from relief but the Minister purported to reply to that in his statement so I shall not pursue it until Committee Stage. Why is the hotel industry excluded? If the trade was carried on only for a few days in 1976 will the volume of sales and employment be taken for those few days as if it were a full year?

There is provision made for continuity where a company succeeds a company but is there any provision for continuity when a company succeeds to a business which has been carried on by an individual or a partnership? There is provision for apportionment for transfer of part of a trade. In that event the apportionment is to be determined by what the Revenue Commissioners consider just. What guidelines will be laid down for the Revenue Commissioners in that respect? For example, will the apportionment be on a volume or sales basis? Where it is necessary to apply section 23, for the corresponding part of a standard year, how will apportionment of the sales and employment be made? Will it be necessary to take actual sales and employment in the corresponding part of the standard year? Will a company which has not got a trade at 31st December, 1976—that is, apart from the case deemed to have a trade under section 26—be entitled to relief? Will all companies which commence a new trade after 31st December, 1976 be debarred from relief? What is the philosophical or economic thinking behind the requirement both of an increase in employment and in production? As the Minister knows export tax relief when introduced originally applied to sales only. It was considered —and I think borne out in fact—that the increase in sales would automatically produce an increase in employment. I am not opposing the provisions but I should like to know the thinking behind the application of both tests. I am sure the Minister is aware that considerable complications can ensue, which we can go into on Committee Stage, but these would be reduced considerably if the test related to the one or the other as distinct from applying to both employment and production.

Another matter in respect of which clarification would be welcome is how widely or narrowly would be interpreted the reference to employees engaged directly or indirectly. For instance, if output is increased, in many cases office and administrative staff will have to be increased. Will the increase in numbers employed in the office be accepted as an increase in qualifying employment?

There are a number of other matters that arise on this section. I shall not pursue them further but I hope the Minister will deal with these and any other points that strike him when replying, because the greater clarification there can be of this provision the better, and the sooner it can be done the better. If we are to reap benefit from this provision, then we should make it as clear as possible, as soon as possible, so that people can get cracking in claiming the benefit.

I notice the provision in sections 34 and 35 in connection with the treatment of unit trusts for capital gains tax purposes. I recall that I had misgivings about the provisions of, I think it was, sections 31 and 32 of the Capital Gains Tax Bill when it was before the House. I think Deputy O'Malley also expressed doubts about the treatment in that section. Why has the Minister left it until now to propose the changes giving the exemption in section 34 and the half rate in section 35 instead of doing so when that Bill was being put through the Dáil, particularly when the matter was questioned from this side of the House and his attention drawn to it? I wonder if the Minister is aware whether any unit trust business was lost to the country in the last two years because of the full charge of 26 per cent. Has he re-examined the stringent conditions imposed in section 32 (2) of the Capital Gains Tax Act and repeated in this Bill? Does he propose to give a credit for the 13 per cent borne by the unit trust against the charge made on a unit holder when he makes a gain on the disposal of units?

The explanatory memorandum and the Minister's introductory speech today make a passing reference to the extended meaning of the word "child" in section 36. The Minister might indicate the relevant tax provisions to which this extended meaning is being applied and he might also tell us why the extension is being made. Is it an anti-avoidance measure and if so in what respect has abuse been caused by the omission of step child or adopted child from the category of child as previously interpreted? For all I know in some cases it may be a relieving measure but the Minister should tell us what is behind it. The explanatory memorandum is totally uninformative on this section. It does not help Deputies trying to understand what is involved. Is this section intended to be retrospective or is it only to operate from the date of the passing of the Bill?

I welcome the special relief for the first year of operation of the new double taxation agreement with the UK. I wonder what other items of income will it apply to besides dividends and remuneration? Can the Minister say if a similar problem arises for 1976-1977 in the reverse situation, for example, income arising here to a resident in the UK, whether the British propose to provide a similar measure of relief? I would also like an explanation of subsections (3) and (4) of section 39? The Minister may prefer to leave this to the Committee Stage but an explanation would help in understanding the Bill.

There are a number of questions arising on the provisions in regard to stock relief. I am sure the Minister has been receiving representations in this regard and I invite him, when replying, to clarify the situation as far as possible. I have quite a number of questions which I will not put at this stage because it might simply waste time if the Minister intends to clarify the position when replying. If the Minister does not intend to clarify the position, we will have a number of questions on Committee Stage.

This, like all Finance Bills contains a number of very detailed technical provisions which are quite difficult for anybody but the experts to understand. At this stage it is not possible to go into them in detail. I have touched on some of them but there are other matters to which I wish to refer.

The Minister referring to farmer taxation in his budget speech on 26th January, in Volume 296, column 263 of the Official Report said:

Holders of farm land who, or whose spouses, are also engaged in another trade or profession are at present liable to income tax on their farming profits if the rateable valuation of their land is over £50. Moreover, they are assessed on the basis of submitted accounts only; they are not given the option of the notional system. The Finance Bill will contain a provision to abolish the £50 threshold and to make such persons liable on their farming profits regardless of the valuation of the land. Assessment will be on the same notional basis and tax will be payable on the same day as in the case of farmers occupying land with a rateable valuation of £75 or more.

On the face of the Bill, it would appear that the Minister is going back on that statement and that such people can only be assessed on the accounts basis and will not have the notional basis open to them. That may be a misinterpretation. It may not be what the Minister intended. If the Minister's intention is to ensure that they have the notional system available to them, perhaps he would say that. If on the other hand, the Minister is reversing what he said on budget day, the very least he owes the House is an explanation as to why he is departing from what he said. The Minister has gone back on another item in farmers' taxation in regard to the date of payment. I thought that the Minister's announcement in the budget about the payment of full tax on the 1st of September was crazy. So it has turned out and the Minister has reverted to the far more sensible provision of making farmers in such circumstances liable the same as other Schedule D taxpayers on the same dates. I referred to the fact that wages are now going to be allowed as a deduction in certain circumstances but I notice that there is no change in regard to rates. As we have already said, we on this side of the House believe that farmers should not be liable both for rates and income tax and provision should be made in the income tax provisions so that that will not come about.

Section 47 relates to refund of stamp duty paid on contracts for office building. The definition of the word "contract" seems to include the fact that stamp duty has been paid. Where the contract is not yet signed, where, for example, the contract is to be signed tomorrow I presume it is not intended to charge stamp duty. If that is the intention where is this provided for in the section? It appears only to provide for a case where duty has been paid. Perhaps the Minister could explain how it is proposed to deal with this or if it is an oversight in the drafting, perhaps the Minister could have it attended to. In general, this Finance Bill is very inadequate for the job that has to be done given the state of our economy. Some of the steps taken in it designed to reduce the tax burden and to encourage investment and, therefore, job creation and initiative are welcome as far as they go, but they do not go nearly far enough having regard to the enormous problems the economy is facing.

Even though we can accept that some of the measures taken even belatedly go in the right direction, we cannot say with any confidence, and I do not believe the Minister can, that the measures enshrined in the Bill represent anything like the all-out attack on our economic crisis that is required at this time. This kind of Bill might solve some of the problems which we have been outlining from time to time but it is not a comprehensive measure to solve our difficulties. If our ideas had been adopted, the Government would not have been led into a position where they originally proposed not to allow for tax purposes the cost of wages paid to agricultural workers. No Government serious about unemployment would ever have introduced a thing like that.

Therefore, we can only accept that the Bill is a very poor measure in so far as it relates to the problems facing us. It represents a belated change of heart by the Coalition which has resulted in the Government half-heartedly taking up some of the ideas we have been consistently putting forward. I suppose we must be greateful that some of them have been taken up, even half-heartedly. Clearly, the requirements of our economy and of our people, particularly our young people, are such that a Government with the record of this one, a Government that at this late stage are half-heartedly tinkering with the problem, cannot give any hope for the future.

Fortunately, the opportunity for the people to do something about that cannot now be long delayed and we look forward to them being given that opportunity and in the course of assessing the situation when given that opportunity, the half-heartedly belated nature of some of the measures in this Bill will be a factor the people will bear in mind.

The most important single statement in the Minister's introductory speech was "our present economic position is very relevant to this debate". It is inevitable that all Deputies who contribute to the debate will refer to the existing economic situation. It is further inevitable that each Deputy will have his own gloss, personal or party, to put on the existing economic situation. Listening to Deputy Colley, at times I thought we had been transported forward in time, that we were in the middle of a general election campaign listening to a party political broadcast, and not a particularly good one, I may add.

The Minister in the course of his speech spelled out the Government's position and their policy fairly and comprehensively without too much exaggeration or gloss. The central point in the Bill, particularly the income tax provisions, is that they are intimately linked with the national pay agreement and can only be viewed and analysed in that context and in no other. This applies to other provisions in the Bill and brings us back to the point from which the Bill has got to be viewed in the context of the economic position.

Deputy Colley followed the Minister's observation fairly broadly but if it was the opening of a Fianna Fáil general election campaign it was particularly lacklustre, particularly in relation to inflation. At the beginning of this session we discussed the international convention in relation to the Bretton Woods Agreement. Then I thought that Deputy Colley, the Minister, and other Members of the House were ad idem on the causes of inflation. I found Deputy Colley's contribution today to represent an extreme departure from his position on that day and an unwilling one for purely political party reasons. I had thought the position was fairly well understood and accepted during the Bretton Woods Bill debate, that there was an inflexible relationship between exchange rates and the rate of inflation —that, talked about domestically, generated inflation was a nonsense.

It is a nonsense. Therefore, to talk of a quarter or one-third or a half of our inflation being imposed by the Government is nonsense, no matter who happens to be in office. Deputy Colley did that consistently throughout his speech. A statistical fact which cannot be contested in respect of our own inflation is that since this Government took office the rate of inflation here and in the UK has been virtually identical, as I said on the Bretton Woods debate. I would wager that for any time series that one could choose one would find that the relationship between the Irish and the British rates of inflation is inseparable. Somebody pointed out recently that if one went back to the end of the Second World War that relationship still holds if one compares our consumer price index and the British retail price index.

Therefore, Deputy Colley's analysis is theoretically suspect although it might have certain political attractions. Despite the illogicality of the position —I think Deputy Colley understands it is illogical—it goes a little further particularly when the position was that they criticised the raising of Government revenue. In the past, Fianna Fáil condemned the Government for the introduction of budget deficits on the ground that they were inflationary because of their size. The reaction to last year's budget—on previous occasions I quoted excerpts from Fianna Fáil speeches—was that it was inflationary, yet, at the same time, they similarly criticised cutbacks in Government expenditure, in Government services and the high rates of personal taxation. Then to cap off this pyramid of illogicality, they criticised measures to raise Government revenue. The level of Government expenditure, of Government revenue and, therefore, the level of taxation and the size of the deficit are all irredeemably interrelated. One cannot attack a Government on all four; perhaps, on three but not on all four.

The position has to be accepted, whether one is debating a relatively non-partisan Bill such as that dealing with the Bretton Woods Agreement or whether one is debating a Bill of high political content, such as this Finance Bill, that there can be no escape from a high inflation regime for so long as we maintain the exchange rate linkage with the United Kingdom.

I do not accept that until we have full employment. I would settle for it then.

That was a depressing interjection by Deputy Colley. On the occasion of the previous debate I thought he had reached a contrary conclusion but now I am assured that that is not the case. We are in an international situation where high inflation in linked with high rates of unemployment. For the first time these two apparently contradictory phenomena are now linked and exist simultaneously. A lot of economic analysis has not yet come to terms with that fact and many politicians who are influenced by these economists have not accepted it either. We are in a situation where we have high rates of inflation and high rates of unemployment and it is my belief that in the current Irish context we are not going to escape from high rates of inflation for so long as we maintain the exchange rates linkage with Britain. Much of the talk about incomes policy and of the possibility of that incomes policy reducing the rates of inflation, such as are adverted to by the Minister in his speech, are hoping for the impossible to happen unless there is this fundamental change in policy.

By way of buttressing up my criticism of the analysis of the previous speaker I should like to make reference to his comment on interest rates in the United Kingdom. It is perfectly true that interest rates in the United Kingdom are falling as of the moment and it is also true that because we have no independent interest rates system that our interest rates are falling. It is equally true that this is an advantage for us and, certainly, in terms of economic development it could not have come at a better time. It has certainly stimulated confidence in the economy but that is not something which anybody has created here. That is simply the result of external phenomena over which we have no control and, therefore, for which we should claim no credit. Deputy Colley is wrong in his analysis as to why it has happened. He is wrong because he does not understand the nature of the problem. He said that interest rates are falling because sterling has stabilised and because demand for credit in the United Kingdom is low but that is not so. It is true that sterling has stabilised because of the apparent resolution of the sterling balances problem but it is also true that the Bank of England is now engaged in what is known in the trade as a "dirty float". In other words, the Bank of England is now affecting the British sterling rate by intervention in the market. It is also true that it is now part of British policy to consciously keep the £ somewhere in the region of £1.73 or £1.74 in terms of dollars on the basis that this gives Britain a competitive advantage in terms of world trade.

In order to do that the Bank of England, to prevent excess demand for sterling happening—that is a new phenomenon now—has had to drop the interest rates. They had to do so in order to make sterling less attractive. That is why interest rates are dropping and not because demand for credit in the United Kingdom is low. It is because foreign demand for sterling is high. Sterling at present is undervalued. I do not believe that sterling is going to stay at its current levels for the duration of the year because of political events, not because of economic events but it is true to say that at the moment, as economists in The Sunday Times recently pointed out, sterling is over-valued and is being kept at this over-valuation because of a drop in British interest rates. I find it depressing that the major economic spokesman for the Opposition does not understand that analysis and misunderstands is so profoundly. He offers himself as part of an alternative Government which would purport to govern this country wisely. That is a particularly frightening and appalling situation.

I have made the point consistently that one cannot have independence in the area of prices and of incomes for so long as one forswears economic sovereignty by maintaining this exchange position. Those who believe that by the measures contained in this Bill we can influence the rate of inflation and of economic growth substantially should ask themselves this question: why is it by comparison with other small countries, such as Austria, that our economy is not performing or behaving as well as might be expected? Why can an Austrian parliamentarian tell me that the Austrian economy has a rate of 1½ per cent unemployment and 6 per cent inflation? The reason for that is obvious. It is because the Austrian economy is linked with the German economy in virtually the same way as we are linked with Britain. It so happens that the German economy has low rates of unemployment and low rates of inflation. If we were to ally ourselves with a similar type of economic regime, I believe the same benefits would accrue to us, not immediately and not without a great deal of difficulty but, certainly, eventually. Nobody who offers comment on this aspect of economic performance of inflation and unemployment, can escape the fact that other small economies in Europe are performing much better because they are linked with the centrally strong economy in Europe, Germany, rather than being linked with the weakest and most decadent economy in the whole system which is that of the United Kingdom.

I agree that in the context of the current economic situation we have to have resort to economic planning, a point which was made by the last speaker. I agree that the word "planning" was employed by him, that it is employed by lecturers in the IMI, employed by many contributors to the recent IMI conference, is employed even by spokesmen of the IFA and is, certainly, common political parlance at the moment. There seems to be one thing on which there seems to be agreement cutting across parties and across economic interests and that is that we should have a plan and that there should be planning. For the second time in two weeks I wish to advise the House to listen carefully to the admonition of Professor Ryan at the close of the IMI conference when he asked what exactly and precisely do we mean by planning. It is a word that has an Alice in Wonderland twist about it. It means what everybody means it to mean but that does not mean that there is any agreement between us. The Government cannot be criticised for a lack of planning by a party which was never and is not now committed to planning. They introduced here and abandoned a system of programming. They are still wedded to a system of programming which, essentially, is the creation of market conditions under which private enterprise can flourish and in which profit can be maximised with the minimum amount of risk. That is not planning in my definition or in the definition of most people who take the system seriously.

Planning is a conscious direction of the economy towards politically predetermined goals. It involves the control of investment not only sectorally but geographically as well. It involves the creation of institutions to do this, and it involves the political will to take decisions which on occasions may go contrary to the market. I do not believe there is anybody in Fianna Fáil committed to planning in that context. There never was and there never will be, apart from all their pretensions on certain occasions to be socialists with a small "s" or Populists with a large "P".

We need planning of the type I have referred to because of the general economic situation in the world to which the Minister referred, because of the current high rate of unemployment which obviously is his central concern, and because of the very serious population increase which is an unique phenomenon for us now. As a corollary to planning and as an integral part of it, we require the State development corporation which was referred to derisively by Deputy Colley. Quite frankly, I did not expect the debate to take the twist it did during that part of his contribution. Since it has, it is well that it should be answered.

Deputy Colley invoked the name of my party leader, Deputy Corish, and referred to his speech at the annual conference in Limerick last November and to his speeches last weekend in Wexford. He was engaging in another non sequitur. It seems to be a predilection of Fianna Fáil spokesmen to go in for the non sequitur, but this was the biggest. There will be a State development corporation should it be the good fortune of the economy that Members of this side of the House will have charge of running it after the next general election. It will be meaningful and it will be positive. Nobody on this side of the House will be fobbed off by a Mickey Mouse creation called a national development corporation or a State development corporation simply for public relations purposes.

With a shortfall of 15,000 to 20,000 jobs each year, there can be no ideological opposition to a state development corporation and no institutional opposition to it either, if people are serious about solving the unemployment problem and in supporting the type of measures included in this Bill which, worthy as they are, will not solve the problem in its entirety. There will be a State development corporation which will be as positive and as meaningful as was spelled out by the Tánaiste in Limerick and which in time will do the job, that is, give every young man and every young woman the possibility and the opportunity of gainful employment at home.

Just as I am confident of that because I know the close co-operation there is between the two parties who comprise the Government, I am also confident that there is a welcome in my party, and in the labour movement generally, for the specific measure contained in this Bill in respect of corporation profits tax which is designed to create increased employment. I welcome the fact that corporation profits tax has been reduced to 45 per cent from the 50 per cent level, and to 35 per cent from the 45 per cent level. I do so on a purely pragmatic basis because we are operating a market economy and I want to see it operating as effectively and as efficiently as possible especially in the provision of employment.

I welcome the fact that this measure relates to manufacturing industry. If we are to have any sustained and consistent growth, it must be on the basis of growth in the manufacturing sector. It is right that this aspect of the economy should be singled out for a special measure of this type. It is very significant that, since the budget was introduced, nobody inside the labour movement has criticised that provision on any ideological grounds. Quite the contrary, it has been welcomed as a very positive and imaginative departure by the Government in attempting to stimulate economic growth.

I would add this by way of criticism. It is a criticism not of the general principle in the Bill but of its application. It is indefensible that corporation profits tax should be cut for banks, particularly when they operate in a monopoly position inside the economy, and particularly when we have seen in the past week a bank reporting a profit of £35 million. I have often felt the banks should be in a special position in the economy, in that they should be subject to a special rate of corporation profits tax higher than that which prevails generally in the rest of the economy, because of their monopoly position. In this case, unwittingly the Government are rewarding a monopoly position by a reduction in the rate of corporation profits tax. That is regrettable.

It is regrettable, too, that oil companies should benefit from the application of this provision, not because I believe they are guilty of all the misdemeanours of which they are often suspected, but because they too are in a monopoly position, which can only be described as an iron monopoly around the neck of every western economy, a monopoly in which they are in collusion with the oil producers and are partly, if not wholly, responsible for the current crisis out of which they have profited enormously.

I have one last reservation to my welcome for this provision. It is that the reduction in corporation profits tax should not apply to mining companies. One of the most courageous things this Government did was to bring the mining companies back within the ambit of the corporation profits tax system. I should not like us now unwittingly to relieve some of the burden we placed on them then.

One of the most controversial features of the budget was the provision to extend income tax to farmers to such an extent that it was anticipated £35 million would be gathered into the Exchequer in the course of the current year. There was a great deal of opposition which was expected and which was as vocal as one might have expected. It persisted and obviously was a little more successful than one might have anticipated.

In the measures contained in this Bill it is now evident that the Exchequer will lose about £19 million to £20 million out of the yield anticipated at the time of the budget. The Minister said that in 1977 the yield will be about £15 million to £16 million. That was because of the phasing of the payments coupled with the relief for wages paid to employees which is about £4 million. It could be argued that the matter might have been resolved by a different phasing of payments within the context of the calendar year 1977, which is also the Exchequer year, and done in such a way that there might have been no loss to the Exchequer. If there is now £20 million, which was not foreseen at the beginning of the year, available to the Exchequer, or if the Government are now willing to increase the deficit by £20 million beyond that laid down at the beginning of the year in the budget statement, I suggest there were equally good ways if not better ways of deploying that £20 million.

For example, the general public will conclude that it might have been more profitable to have diverted some of that £20 million towards cushioning the effect of the CIE price increases that were announced shortly after the budget. This is particularly the case given the fact that only 12,500 farmers out of 170,000 were liable to full tax. That is an extraordinary small number and I would point out that full tax is as it is defined in the Bill. It does not mean full tax if one resorts to the multiplier or in the context of one's income. The Minister said that the multiplier of 65 should be compared to an actual multiplier of 110 if 1977 farm incomes are taken into account. Even full tax on a notional basis under this Bill is somewhere in the region of 58 per cent of what it should be. Many other members of the community would wish that they could benefit from and enjoy the same advantages as the 12,500 farmers who will be liable to full tax.

I am not against the notional system for the reasons the Minister gave originally when introducing the budget and which were quoted by Deputy Colley. However, I am certainly against it when the multiplier which is going to be levied on average is less than what it should be on average because that gives a double bonus to the efficient. I am not saying the efficient should not have a bonus, but they certainly should not have a double bonus.

In the first place, they have a bonus which is theirs as a right because they are efficient and, in the second place, they have a double bonus because the multiplier is below the average. Those who are efficient are above the average and they are entitled to the difference between them and the average but the multiplier which we have at the moment is pitched well below the average. Even the inefficient by resorting to the multiplier can have a bonus under the system as it is operating at the moment. I do not think it was intended that the system should work in that way. The greatest push towards efficiency would be a universal resort to accounts. While making points that might be construed as critical of the farming community, in the last three or four years the agricultural industry has increased at a rate that is well beyond the historic average which existed during the time of the previous Government and which compares reasonably well with the increase in productivity in industry.

I should like to enter a special welcome for section 7 under which an individual on an age basis will be entitled to an income tax allowance of £1,000 if single and £1,800 if married. This will allow many pensioners to have a second pension without attracting tax liability. In addition, those who have tax liability will be given marginal relief and will reduce the tax payable by a half. This was one of the items in the budget where the Government could be accused of hiding their light under a bushel—not a quality one expects from politicians. On this occasion the Government were unnecessarily reticent and modest about their achievement. It is a significant and wide-ranging achievement in terms of social implications.

There has been a great deal of justifiable resentment among pensioners who have contributed during their lives to social insurance towards their pensions and who may have a second pension or a small modest source of income and who finds that the two sources are added together and taxed. This has happened while others who had the means of avoiding tax, people far wealthier than they, were able to escape their liability. Section 7 goes a great deal of distance in removing the pernicious anomaly that existed. The best compliment paid to this section was that offered by the pensioners' association recently when they publicly commented on section 7 following publication of the Bill.

I welcome also the income tax reliefs contained in the Bill but with the admonition that the real value must be safeguarded. In this Bill we are not talking about tax reliefs in isolation. We are talking about tax reliefs in the context of the national wage agreement. People are talking about their after-tax pay, as the Minister mentioned, in the context of money increases under the national wage agreement and income tax reliefs under this Bill which are linked together to bring about an increase in the order of 10 per cent.

This link was a valuable extension of our policy in the area of incomes and it should not be damaged. We should not let this happen by immediate price rises in the semi-State sector, such as those which occurred after the budget, particularly when some of the increases were obviously decided on in the preparation of the budget. For example, the CIE subsidy is clearly a matter of budgetary policy especially as it relates to the size of the deficit. These price increases placed an unnecessary strain on the system which this Bill attempts to create: that increases will be made up of two parts, namely, money increases under the national wage agreement allied to income tax concessions offered by the Government in the budget. I can well understand the concern that was expressed in trade union circles that price increases could damage future confidence in national pay agreements. It would be very unwise of any Government not to pay heed to those voices because it could mean that if the unease were sufficiently widespread we could damage the prospect of a continuation of this most rational system which we laboriously created last year. It was one of the crowning achievements of this Government in the area of economic policy.

This brings me back to the point which I have made consistently in the past. We need not simply a national wage agreement: we need an annual national economic agreement to encompass pay, income tax, corporation profits tax, prices, welfare, profits, investment and jobs in one composite, inter-related package. This would make the budget and this Bill an integral part of our national economic plan. If we take this Bill out of context and if we permit other things to happen in the economy which appear to be operating contrary to the intent of the Bill we will damage the whole edifice we have laboriously created. That has tended to happen in the last few months since the budget. We should have resort to a national economic agreement of which the budget would be an integral part because we need planning. If we need planning in the long run we certainly need it in the short run also. One cannot take the budget out of a planning context and one cannot remove the Finance Bill and treat it the same as any other Bill. It can only be seen in the very words I used at the beginning of my speech within the context of the economic position. If we are eventually to have a national plan and if we are to have movement towards full employment we need a national consensus to take the very serious and difficult economic decisions which lie ahead of us particularly in regard to income moderation.

I have said before that one cannot ask people to be moderate in terms of incomes expectation when they believe their incomes are already moderate enough and especially when they can see no relationship between their moderation and increase in employment. There will be no other way to get increases in investment and, therefore, increases in employment except to have moderation not only in income expectations but in actual income increases. There is no other way to get that moderation except on the basis of national consensus which in turn is based on a national plan which people readily understand and where they see the relevance of their contribution. They are being asked at the moment to make a contribution to something which they simply do not understand and for that reason many of them are not willing to make it. We cannot have a national plan in a democratic society which does not involve the people and their fullest possible consent. You cannot have it on the basis of coercion or on the basis of statutory controls and, therefore, you cannot have income policies which rely on statutory controls or which rely on coercion with any possibility of that lasting more than a year or two without the whole system breaking down.

We see now in the United Kingdom where the incomes policy is about to fly apart because people do not understand the relationship between their own expected moderation and the rate of unemployment which is increasing rather than coming down. A plan must be by consent. An integral part of that consent is the budget and an integral part of it happens to be this Bill. The Minister and the Government would be unwise if they did not take into account that what they do in the budget has spill-over effects for some months afterwards and that every measure must be taken to ensure that nothing can happen in the economy which will damage the continuation of the agreement and the possibility of its repetition.

I want to make a comment on the Government's budgetary policy over the last four years. One does not have to say that this is likely to be the last opportunity that one will have for so doing or the Minister in his opening speech in any way reviewed his period as Minister for Finance and the achievements of previous Finance Bills. The most significant achievement of the budgetary policy was the general thrust of the budgets in the development of economic policy specifically in relation to current budget deficits. Current budget deficiting in the country arrived very late in the day, probably later than in any comparable economy. Deputy Colley read from the Irish Banking Review a critique of current budgetary policy in relation to the deficits. He should have remembered the words of a very famous economist who visited our shores and who spoke yesterday, Professor Kenneth Galbraith who wrote a famous essay, “How Keynes came to America”. He makes the point that possibly for the first time the Central Bank assisted in bringing about a revolution. In fact, the Keynesian ideas were to a great extent imported into American official policy through that mechanism. He made the point that it was a unique event and that one should not expect it to be repeated in the future.

That admonition should have applied to the commercial banks possibly even more so. They are not known as the repositories of revolutionary thought. They are certainly not very often in the vanguard of advanced planning or advanced thinking and certainly in this instance they are somewhat in the rearguard of conservative thinking. I regard the recourse which the Government have had to current budget deficits of the order which were secured, particularly the last three budgets to have been at the core of their economic policy, to have been very courageous within the context of their time and to have set a precedent which will be followed by other Governments in the future when they believe the necessity exists.

We broke out of an ideological strait-jacket which was imposed on the country and which caused irreparable damage not only economically but socially as well. They helped to create a situation where the IMI conference at their close last week could be told by Mr. Ian Morrissey, their president, that there never was a situation in the country where there was greater opportunity for investment or more capital available for investment and never was there a situation where in respect of business at least the ball, to quote his words, was at their feet. He warned business that they had asked for many things from the Government that they were given in the budget and that have been placed in the legislative framework in the context of this Bill. He said that having got what they had asked for they had better produce the goods because if they did not somebody else would.

That was a worthy warning which should be commented on for two reasons, firstly, because it reflects the note of confidence which exists in Irish business circles today notwithstanding what the Opposition spokesman on Finance had to say about the current economic situation. Private business is buoyant and confident. Secondly, because it shows that the Government have been prepared to take the very necessary steps of dealing to a great extent with the serious employment situation.

The Minister quoted one other fact in his speech which I hope will be given some prominence and which for me is the central message of hope in his speech—a forecast that in this year unemployment would fall below 100,000. He referred to the fact that a recent EEC document commented that only in Germany, Holland and Ireland was unemployment expected to fall this year. There is one thing in common about those three countries. Germany, Holland and Ireland happen to have a Labour Party in Coalition and I do not think that happens to be a coincidence.

One would imagine, listening to the speech just made, that we have no economic setback at all. Our economic situation appears to promise nothing but disaster. Something has to be done to improve the present situation. The Government do not appear to have any cure for the ills which our people are suffering or to have any policy to bring us out of the atrocious mess we are in at the moment. We now have the situation whereby Dublin business firms are hawking their material around the country in an effort to reduce their stocks and to pull in their lines. The unemployment situation in the building industry has been brought about by the massive increases which Cement Limited were allowed to impose. The recent returns for that firm showed a profit for the year of £11 million. Subsequent to the publication of that report, further increases were imposed. One can only regard this situation as a form of Government taxation since the Exchequer must have netted about £6 million in taxation from the overall figure. When we add to this amount the amount that is collected by way of ordinary taxes and VAT from sales of this very basic material, we realise how much these increases mean to the Government in terms of revenue. The aim should have been to keep cement prices at a minimum so that the people engaged in the building industry could be maintained and further jobs created. The situation that is developing augurs badly for the future of our country. These price increases have been decried by people in the construction industry. All of this must bring home to the Government the serious inroads that are being made into our assets.

One wonders whether this Government are capable of ever realising the folly of their actions. They were handed over a wonderful economy. During our last year in office we were forced to raise taxation in order to improve our cattle herds and to subsidise butter. In that year we found it necessary to raise £120 million in taxes. That amount was available to the Coalition as was also the £78 million from the Common Market, giving them what might be described as a gift of £200 million to begin with but instead of putting that money into the creation of jobs, that have been the aim of Fianna Fáil, it was tossed around without there being any regard to the increase in population or to the large numbers of young people who were leaving school but for whom no jobs were available. The Government's course has been disastrous, so much so that they have been forced to resort to borrowing at premium rates. Because of having to guarantee repayment in dollars, the interest rate instead of being 11½ per cent is nearer to 24 per cent in terms of sterling today. That is the price we are paying for having had this Government in office. They have allowed British imports to arrive in this country from the sweat industries of Korea, China and Shanghai, while there were textile and shoe factories closing down at home on a massive scale and causing the loss of about 24,000 jobs. This situation can be attributed, too, to the Government having allowed an increasing proportion of our productive interests to be transferred back to Britain. For instance, our agricultural produce which should have been directed to the other Common Market countries where there are hard currencies, was transferred to Britain while that country succeeded in shipping our cattle to the Continent, with the animals in many cases arriving on the Continent only a week after they had arrived in Britain. Britain, in this way, got the hard currency she needed while she repaid us by sending us commodities that had been imported from the sweat labour countries and which were sold to us at prices three times greater than those at which the goods had been purchased.

We have heard talk about the setting up of public boards for the purpose of promoting employment but what is really needed is an agency to examine the question of the direction of our exports and also an agency that would review the general situation of the economy. We have a great nation and a great people but we are not being given the opportunity to put our resources to the maximum use. In this regard I have spoken many times about the need to develop to a greater extent our native resources. I have appealed on many occasions for money to be made available for the development of our bogland and bog roads. This is an area of industry that could be expanded so as to give more employment. This year alone it would be possible to employ 20,000 people on a part-time basis along the west coast if the bogs had been developed. The provision of more of the small portable machines that are in operation in Kerry, and to some extent in Clare, would allow us to produce a fuel that is excellent, which is cheaper and which compares favourably with coal, for instance. In addition this would save us some much needed hard currency with which we could buy necessary quantities of oil. Even at this late hour I appeal once again to the Minister to consider this matter. This development is necessary if we are to save our nation.

Much publicity has been given recently to the vast amount of money necessary for the development of our fishing industry but there is no indication of any effort being made in this regard. I do not know whether it is a shortage of money on the part of the Government but wherever the money is found it must be found quickly. We need injections of money in our harbours. Most of them are antiquated. The piers are high and dry. Massive investment is needed. One of the finest harbours in western Europe is practically landlocked. I refer to the harbour at Valentia. A sum of £5 million to £6 million must be invested in our harbours and piers so that we can take full advantage of them.

The fishing industry has a vast potential. Norway, with the same population as we have and only five months of the year maximum fishing season, has an export of £600 million whereas we have only £26 million with a fishing season that lasts pretty well throughout the whole year. The more boats we can put out along the west coast the less need we will have for protection services. Between catching the fish and processing it we could provide enough employment to keep all our young people at home.

There is a rumour that the Government intend to withdraw the dole from the small farmers. Indeed, the Labour Party in Limerick were ranting and roaring that this system of subsidy must go. One speaker talked about the subsidy that had to be paid to CIE. I state categorically that it is a small farmer's dole which has helped to produce the vast agricultural export we have today. It has enabled them to maintain their families, improve and increase their livestock and fertilise their land to give an increased output. If this subsidy is withdrawn they will be pushed back into the position they were in for years. At least 74 per cent of landholders are under £20 valuation. Something around 62 per cent are under £12 valuation. Above the 74 per cent you have the bigger farmers with assets of £500,000 or £1 million, taking land values today into consideration. These are not concerned with producing the maximum from their land because they do not need to produce the maximum in order to make their living. It is the smallholders who are producing the vast bulk of our agricultural exports. They are the saviours of the country. Every £ earned from a native product is worth £5 ultimately whereas industrial exports are based on imported raw materials and produce nothing like the same returns. A figure of £2,000 million industrial exports leaves eventually only about £300 million in the country. The opposite happens in the case of agricultural exports. Those who denigrate our small farmers want to turn the clock back and halt the forward march. I have no hesitation in decrying trade unionists who denigrate our small farmers, the people who are doing a wonderful job to keep the country going in its hour of need.

I heard a Labour Party Deputy speaking about the allowances in the budget for the worker. When you take the worker with £30 a week and subtract the increase in the stamp from the alleged concession he ends up with a measly £17 or £18 over the year whereas the man with £10,000 a year gets over £400. One begins to wonder whom it is Labour are representing. They are certainly not representing the lower paid worker. No doubt they influenced the Minister if it is their policy to give more to the man who has most and less to the man who has least. If that is their policy then they do not represent the worker in any part of the country. I have had doubts for many years about their general policy. Their policy seems to be "I'm all right, Jack" and the rest do not matter. This is the policy Labour would now appear to have. There are many unemployed today and many young people facing a bleak future with no prospect of employment. There is no longer any outlet for them across the water.

It is these policies that brought about the state of affairs which has bedevilled the forward march of our nation today. Repayments this year amount to something like £360 million. If we had not to repay that and if we had it instead for the begetting of jobs massive employment would be created and, we would be trying to get people back from England, America and other places to take up work here.

Kerry County Council have 1,400 houses to build for their workers and no money for the purpose. When we were in office we had to try to keep our cattle herds and build up their health and so provide the exports which we have today which keep the economy going. We had not the opportunity that this Government have had to promote building. The biggest employer of labour is the building industry and it is sad that that industry has to be eased down now. The Kerry county manager gave sanction for the building of a number of houses last March but three weeks afterwards he had to call a halt because the necessary money was not forthcoming.

When shall we see a change in this situation? When shall we see a future with hope for our business people particularly who are trying to retract at the moment because of the infall in our economy? If this depression is not halted it will bring despondency from which the nation will take years to recover. This Government must prepare a policy which must show clearly that they can create the type of employment that will lift our people out of the rut they are in. With the approaching general election the promise of a big influx from America is not the answer. The "live horse and you will get grass" situation is something that the people will no longer accept.

We have our turf and our fisheries. We must make a very big effort to develop these industries because by doing so we can create 150,000 or 200,000 jobs in ten years. During the last war the turf and the fishery industries kept our people employed, not through the efforts of the Government, but because these commodities fetched high prices.

If something is not done soon our youth when they reach the age of 17 or 18 and have no jobs will take to the streets and create a situation which nobody wants. Youth with plenty of energy and no proper outlet for it will resort to force of a type which we do not want. This must be obvious to the Government.

I spoke earlier about the export of our cattle. British landowners come over here and purchase our ageing cattle if they can get them, and the older the better. They hold them for 12 months and thereafter get a subsidy of about £56 per animal, if my information is correct. They have to hold them for two months. They come across at the end of two months and purchase our beef cattle and ship them over to Germany and other parts of Europe, a day or two afterwards collecting this subsidy, and above all earning the hard currency we need so much. We should try to get our cattle and our other agricultural exports into Europe and thus get this hard currency instead of making a present of it to Britain and having to take the depleted £ which is of very little use in the outside world today and which we seem to have in abundance.

Again I stress the importance of a vigorous turf production effort which can produce a world of wealth in hard currency and above all can give much needed employment. Also vast inductions into our fishery harbours are necessary if we are to install the type of piers and modern equipment which we need.

Debate adjourned.
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