The first major conclusion that may be drawn from the discussions on this Finance Bill and the effects on the economy of previous Bills is the conclusion that seems to be drawn by the Central Bank, and certainly by us on this side of the House, that, despite extraordinarily high borrowing over the past four years or more by this Government, little or no change has taken place in the level of unemployment. The national debt has been increased by a little over two and a half times the debt at the beginning of 1973. This in effect means that the national debt during this year will come to something in the region of £4 billion, that is to say that where all previous Governments from 1922 to 1973 in the servicing of infrastructure area created an overall debt of approximately £1? billion or £1,350 million, the present Government in the following four years have added over £2,500 million to that debt. Where the servicing of that debt annually is now in or around £400,000,000 per year this Government are responsible for something not very short of £300,000,000 per annum in the annual service of debt. I cite that because of the conclusion arrived at earlier.
I believe that the principal justification for the extraordinary gamble in which this Government have been engaged over the past four years has been the endeavour to achieve one of the original 14 points put forward by the two Coalition Parties early in 1973, the reduction of unemployment under a programme of planned economic development. The result that we now see is a level of debt far in excess of what a small State like this can afford. At the same time there is little or no progress in the overall aim put forward by the Government.
The General Review for 1977 of the Central Bank says, and I quote from page 7:
The outturn in 1976 and the prospects for 1977 indicate that the economy is recovering from the recession of earlier years. Very little progress has, however, been made in solving the related problems of inflation and unemployment.
Apart from the disastrous effects of uncontrolled inflation this is the most important critical analysis of this Government's performance. In that period of a little over four years prices of goods are virtually 100 per cent, or just approaching it, higher than the general level of prices when the Coalition Government took office.
I referred to the proposals put forward in the famous 14 points of the Coalition. Point 3 was headed "Stopping the Price Rise". It said that the immediate economic aims of the new Government would be to stabilise prices, halt redundancies and reduce unemployment under a programme of planned economic development. It went on to say that it was essential to control prices if these important economic aims were to be realised and that the Government would, therefore, immediately introduce strict price control. The Government can really be criticised in relation to those three aims in point 3. Comment on the results we are facing today is not necessary.
The Minister talks about creating more jobs without fuelling inflation as if the past four years had never happened, as if inflation had not been fuelled in a significant measure by the Government's financial policy. Almost as if it were an election item, the Minister went on to say that the Government anticipated that over the next few months unemployment will fall below 100,000 for the first time in two and a half years. The Minister must really mean that in the short time before the leaving certificate examinations end because as we know once the school examinations have ended the number of people seeking employment, which will not be available, will be not far short of 40 per cent of the existing level of unemployment as recorded. This very large number of young people coming on the labour market will have little prospect of a job and they cannot have much confidence in this Government's ability to cope with the problem of unemployment.
The Taoiseach recently got great cover out of his forecast of the reduced level of inflation to 13 per cent. One can almost smell an election. This forecast, if it should prove to be anywhere near right, will probably be influenced by a number of factors. The economists believe that one of the factors that might help is the recent drop in interest rates introduced by the Bank of England for its own reasons, the reduced rate being partially followed by the Irish banking system. That fall in inflation, if it takes place, may also be helped by a number of other factors such as some tax remedies, some effort made by the Minister to encourage enterprise, having discouraged it over a period of years during which we pointed out the dangers of the discouragement of enterprise in which the Government were engaged. The Minister has now introduced some measures of relief long after they were needed, and in the opinion of many, because the Government must face an election and put forward some sort of programme to the public.
Deputy Halligan in his eagerness to defend the Minister postulates his new principle that no small country has influence over its own rate of inflation, that it must follow the currency to which it is attached. I agree that Deputy Halligan is partly right but if the argument is to be put forward, that our close connection with the £ is the cause of all our difficulties, then why have we a higher level of inflation than Britain? Whose fault is that? What is being quite obviously overlooked in the theory of our close association with a neighbouring country is the much more important question of motivation of the community towards creating a better economic state of affairs. That sort of motivation must begin with the example set by the political leadership in Government. This Government failed the people when it lost its head over the oil crisis, when over a period the Arabs imposed an increase of 12p per gallon and the Government over the same period imposed an additional 35p in tax. Was this following Britain's lead or was it taking the easy road by cashing in on the oil crisis to evade the consequences of over-borrowing and over-expenditure?
Some Government Deputies do themselves little credit if they close their eyes to the easy way out policies of the National Coalition. Apart from the generating of inflation through over-expenditure, the Government's high taxes on petrol, a tax imposed on a transport industry very unlike that in Britain and in very different social circumstances, played a part in increasing the level of unemployment, increasing wage demands with their consequential additional inflationary effect in the follow-up increases in the price of all goods and services.
The sorry situation of the doubling of prices, the escalation of wages and other costs, arose to a considerable degree from the Government's lack of lead in those earlier years. In his references to taxation the Minister said he wished to sketch the changes "lest eaten bread be forgotten". He went on to suggest that the taxes were fairer than those under the previous regime and much fairer to the typical manager and worker whose performance was crucial to the future of the country. I would not suggest that the tax system of the previous regime was perfect. We all in our own way had criticisms to make from time to time but I wonder if the Minister is really serious when he made the statement I have just referred to. Even a cursory glance at the statistical table issued in connection with the budget indicates that the beneficiaries from tax changes other than in the company area lie in the small and more privileged £8,500 to £20,000 per annum class of our society. One can see from that table that allowing for earned income and so far as the vast bulk of tax paying earners were concerned not only was the eaten bread soon forgotten but they found that with reliefs ranging from £1 to £3 per week they had to pay for the bread having eaten it in rapidly increasing costs, the costs of foodstuffs, transport, postal charges, fuel and telephone charges and other items.
In other words, the increases, following on the budget reliefs and excluding the minority of higher paid categories, outweighed the tax reliefs. The budget really was not good news after all when one came to think about it and experienced the effects of the increases.
When the Minister spoke of a major programme of taxation which he has introduced and included in it the ending of death duties he did not mention their replacement by capital gains and gift taxes, the effect of which we have not properly seen yet but which, almost, though not quite, create an as-you-were situation. Certainly, in the tax area the value so far of some of these new taxes in my opinion has been completely outweighed by the disincentive effect caused by some of the taxes. For example, in the returns for the first four months of this year one finds that corporation taxes showed an increase of £36 million against the first four months of last year and that value-added tax showed a rise of £28 million for the same period as against last year. The item appearing against capital taxes shows that the Exchequer gained £1 million in the first four months of this year as against £1½ million in the first four months of last year. The point I am pressing here is the disincentive effect of some tax measures introduced by the Minister especially having regard to the fact that other countries, presumed to be in a better situation than ourselves and also being governed at the time by Labour governments, such as Britain and Australia, abandoned those kind of taxes for the present. That is what we recommended some years ago to the Minister, not having any fixed ideas against fair taxation. The important aspect as far as we were concerned was the effect on enterprise, the effect on incentive and the benefit that can be obtained from a good incentive policy and I do not think the Government's capital gains tax at a fixed rate of 26 per cent, whether that 26 per cent is levied on a hard worked business run for a lifetime or on the area which Fianna Fáil favour, the speculator's fast profit through buying and selling property at the expense, perhaps, of some less able individual, could possibly be regarded as a fairer tax.
One is driven to wonder what the effect of this tax will be in some years' time, particularly if the Government maintain their inflationary record and do not allow for the effects of inflation in assessing tax. Despite the blunders of his earlier tax Bills, which were avoided by other Governments, it is encouraging to find the Minister saying the Government must be concerned to encourage development anywhere it can increase employment and add to the produced wealth of the nation. During the debates on some of the tax Bills, the Opposition said similar things so often that the Minister must have got them off by heart.
In dealing with the building industry the Minister referred to the stamp duty relief on office buildings. Nowhere can I find in his provisions any hope for young couples who do not qualify for SDA or local authority houses. Surely the Minister must know that, if you are in the 22-year-old to 30-year-old bracket and you are not in the category that can qualify you for public housing, you have little or no hope of being able to acquire a home unless you are in the minority to which I referred earlier, the privileged level of £8,500 to £20,000. I wonder when will the Minister wake up to the fact that inflation, for which he and his Government have a considerable responsibility, has closed the door on the young middle classes so far as house purchase is concerned. It may create a situation similar to that in the past when their only hope lay in emigration to solve their financial problems and to seek better opportunities elsewhere.
Even if the Minister is unaware of the plight of young people who cannot cope with the inflated costs of housing, he ought to take note of recent economic comments on the construction industry. I refer to an article in a paper on Monday last headed "Outlook remains fairly bleak". In the course of the article the commentator says:
Unemployment in the industry continues at a very high level with a reputed 25,000 building workers unemployed. Figures published by the Central Statistics Office last week show that the number of building workers in the private sector unemployed during February was 13% above the average unemployment level in 1975.
These figures seem certain to increase, as firms in the sector continue to lay off workers.
On Friday one firm announced that it was going to make 250 workers, general and administrative, redundant over the next month while redundancies were also announced by other firms on the same day. That firm attributed the redundancies to the continuing depressed state of demand for building materials, and the fact that it could foresee no improvement in the level of building activity in the future. The firm said that the depressed level of demand was evident both in the public and private sectors, though it had been perticularly hard hit "by the severe cut-back in road expenditure in the past two years". Further on the statement indicates that increases already this year suggest that the level of prices in that sector has already increased by 15 per cent. So much for an inflation rate of 13 per cent, if housing prices are already up by 15 per cent in the first four months of this year. The Minister's financial policy as represented in this and previous Bills does not measure up to what our community needs, although I would acknowledge that the latest effort represents some improvement in the area of encouraging incentives.
One of the great dangers which lies in an Opposition revealing their ideas about the economy, as Fianna Fáil did last autumn in their emergency economic package then published, is that the Government may latch on to some of the ideas, perhaps, because the Opposition have created a favourable climate. If, as in the present case, the Government are merely trying to get away from the consequences of their own bad management, and they use some good ideas, but lack the overall confidence which the Opposition would have in their own thinking, they may just succeed in putting the economy in a worse situation than if the Opposition had remained silent. The danger I see is that good ideas can work once but frequently not a second time, and we as a community may run out of options to restore the economy in the way Fianna Fáil proposed in their published economic package.
One of the most questionable things which has occurred this year is the effect the imminence of a general election appears to have had on members of the Government over the past few weeks. The instance mentioned by our party leader this morning of the Minister for Labour publishing his name and photograph in the Press at the taxpayers' expense is one example of how anxious Ministers have become and, I would suggest, a most unpleasant example. In the past few weeks we have heard so much good news that the unfortunate elector who has to decide who the next Government should be may think everything in the garden is rosy. Presumably that is the intention behind some of the recent statements.
Factories seem to be about to spring up all over the country. The Taoiseach says the inflation rate will fall. The Tánaiste is forecasting thousands of jobs. The Minister for Industry and Commerce talked in the United States about £90 million fresh capital for the establishment of new industry. We know that even if things go well and the firms concerned go ahead with their plans in most cases it is unlikely that jobs will be provided before the early eighties. Never mind, it sounds good so long as the voters can be influenced just this once. One can sense the atmosphere of people saying to themselves "Let us think up all the bright promises before we have to go to the country".
However, in the final analysis it is the people who must decide. There is no easy way for an economy, not with promises or rosy pictures to it. The people must be offered a fresh start and this can only be provided by a political leadership that has confidence in its ability, as we have on this side of the House. The motivating force of confidence and a belief in the community's will to master the economy is the spirit that exists here and which appears to be sadly lacking on the Government's side. The people will have to make their choice when the opportunity presents itself, as it will in the very near future.
