(Dublin Central): During the past month and also during the past few days I have listened to speeches from members of the Government telling us about the recovery of the economy. I can see no basis for this. My view is shared by the majority of the people. I would attach far more sincerity to many of the speeches made by Ministers during the past few weeks if the Taoiseach and they had spelt out the disastrous state of the economy as they did before Christmas. The Taoiseach and the Minister for Finance told us then that we were in dire circumstances. Does anybody believe that it is possible to draft a Finance Bill and change the picture in less than six months? We know that turning the tide on a declining economy takes a long time, and it is not done by drafting a Finance Bill and putting certain proposals in it.
We had the same type of comments after the budget was introduced last January. We were told what a magnificent budget it was. About a month later we saw the true picture and the general reaction of the public. We saw the angry response from the middle wage earner group regarding the tax concessions. I do not believe the public will accept what we are now being told. I am convinced that this Finance Bill was drafted with a general election in view. We should look back on the 1976 budget and see the massive tax increases which were introduced then. Those proved unnecessary. The Minister completely over-budgeted the financial requirements in 1976. This had a detrimental effect on the economy in 1976. If there was a realistic assessment of the financial requirements in the 1976 budget this would have played a considerable part in keeping our inflation rate down during that year.
The Minister for Finance in 1976 budgeted for a deficit of £327 million which he said he required during that year. He increased taxation which added 4 per cent to the cost of living. I do not believe there is any sincerity in this year's Finance Bill or that it contains any measures to boost the economy. Deputy Byrne referred to the Central Bank report with regard to the projections and achievements in relation to our growth during 1977. He did not say that their report spells out the disastrous state of our finances today.
The speeches we have heard during the past month are leading up to a general election. Anybody who looks at the reality of the situation realises that there is no substance in those claims. If we look around us we can see escalating prices every day. Mothers and fathers see that their children have no hope of employment. The report of the annual general meeting of Roadstone Limited gives a fair indication of whether or not our economy has expanded. The Government are trying to pin their hopes on a slight up-swing, which is only 50 per cent of what is required if we are to make any impact on the disastrous state of the economy. It is misleading and could be damaging in the long run to say that we are out of our troubles. We are far from an up-swing. I believe, when we have to face further increases in the price of goods later in the year, that any advantage we have gained will be eroded.
The Minister announced taxation concessions in the budget and he also mentioned them in his speech on this Stage of the Finance Bill. Those do not apply to the public at large. I am not decrying the concessions which are given to certain categories. If we ask somebody in the middle income group what is contained in the tax concessions for him he will tell you in no uncertain fashion after seeing the national wage agreement negotiated and taken in conjunction with the reduction in respect of the middle income group, that this represents a substantial decrease in his standard of living. Therefore, it is totally misleading to endeavour to create the impression that we have overcome these difficulties. I suppose the Government cannot be blamed for endeavouring shortly before an election to use every means possible to project this false image. It is part of politics but I would fault the Government for taking this line to the extreme so that it could be damaging generally to the whole economy. There is no point in trying to deceive people by bestowing on them short-term benefits. Nobody is blind to the reality of the situation. The situation would be different if the benefits that have been given were given on the basis of long-term planning and if there was a step-by-step plan as to how they could be maintained and expanded.
We need only recall the speeches of the Taoiseach and the Minister for Finance before Christmas last in which they told us of the dire straits of our economy and impressed upon us the need for much stringency. These warnings were issued only a short time before the budget but in January the Minister found that he had a deficit of £126 million less than he budgeted for in 1976. Of course, he knew when he was making those pre-Christmas speeches that this surplus would be available. However, I put little value on the concept of current budgets. Despite this deficit of £126 million less than was budgeted for in the previous 12 months, there was a current deficit of £200 million.
I wonder how many people realise that the benefits that have been bestowed on them during the past four years will have to be paid for dearly in the future. It is frightening to read the report of the Central Bank and to realise exactly the state of the country's finances. When we compare the national debt and our GNP with that of any other country in Europe we know whether we are in a position to expand. All the economic plans or national development corporations in the world are of no use if the money is not available to implement them. We have incurred debts of the order of £4 billion. Since this Government have come to office the increase in the national debt has been of the order of 70 per cent. On current accounts alone the deficit has been £800 million. There is no evidence of how this money is to be paid.
We now find that of the total taxes going into the Exchequer £1 in every £5 must go to servicing that debt according to the report of the Central Bank. There is no indication at all that this will cease or that the Minister will not come in here next January— God forbid that he should be there— with another current deficit, building up the national debt still further. Our people should be told honestly that our finances are in the most disastrous state since the foundation of the State. The Central Bank pointed to that fact several times in their report.
There are two factors which inhibit expansion of business; firstly, if one cannot get the money with which to expand and, secondly, if one goes too far without the capacity to repay. That is common logic. That is the situation in which we now find ourselves, that we have borrowed without our capacity to repay. We should have been concentrating on generating wealth in the last four years within our economy without having to go to foreign sources to borrow. As time develops I can see that pressure will build up with regard to the sources of finance for the creation of new jobs. I do not believe that the great policies expounded by Deputy Halligan and others like him regarding national development corporations can in any way remedy our present economic situation. Were such structures developed today, I would assume they would be financed by Government money but I do not see for a moment where the Government could possibly get such finance because they are at the very limit of their borrowing capacity.
Even were the Government to come out and say before the general election that they have agreed on the establishment of such a national development corporation, what would it mean? I do not believe they would be channelling any private funds into it. There is room in our economy for both the private and public sectors— one can be complementary to the other —but we must not come down in favour of one sector saying that they will solve all our problems. When one speaks of a national development corporation, one needs to be thinking in the region of £500 million or £1,000 million if such were to make any impact at all on the creation of new industries. How would such resources be found bearing in mind the present national debt? If anything, the trend will be reversed within the next few years because many of these short term loans will mature in that period. I read somewhere recently that something in the region of £400 million will be maturing in the very near future. Apart from servicing the national debt—which this year will probably cost £440 million—the country will be called upon to repay some of those short term loans which will place added strain on our finances and in turn will inhibit any hope of the Government in their own right generating the adequate employment some Members of this House seem to think possible. If they fail in that respect, they will have to depend more than ever in the future on the private sector for the encouragement of industrial development.
If we are to achieve the requisite expansion in manufacturing, we will have to have a considerable inflow of foreign capital. We must be realistic about that. When one examines our whole financial structure one realises that there is no way that can be avoided. I am sure nobody in this House would contradict me when I say that we have not the financial resources available to us to create adequate employment at present. Up to the mid-1980s we must generate practically 30,000 new jobs annually to meet our target. During the past four or five years there has been no increase at all in employment in the industrial sector. It would be much better to tell our people the true situation and the challenges they will have to meet in the late 1970s and 1980s if we are to solve the problem.
When one reads reports of the Central Bank one must ask oneself where the money will be found for the creation of the number of jobs required. Deputy Byrne thought the figures were misleading. I believe the figures given today are accurate and realistic— indeed, that they will deteriorate further. We are all aware of the concern of parents today with children sitting the leaving certificate. I meet them in my constituency every day of the week. They come to me. They are concerned as are we all. There is nothing more demoralising for a young boy or girl of 18 to 20 years than to have to walk around our streets aimlessly. Such must have a detrimental effect on their future if they are unfortunate enough to find themselves in that position for a number of years after leaving school.
I do not believe for one moment that this Finance Bill can deal with this crisis. The neglect set in over the past four or five years when we allowed this to happen. When we left office anybody could have made such predictions. We had negotiated our entry into the EEC where there was a potential market of 300 million people. Practical plans should have been developed then for the expansion of our manufacturing and industrial bases. We knew we would be meeting competition. Everybody was aware that certain redundancies would take place. Positive steps should have been taken then to counteract that and in an endeavour to generate as many new jobs as would be necessary. We omitted to do so then with the consequences of the past four years—allowing inflation to go unchecked—which is a price many of our people will be paying for the next ten years. That damage will be shown up in the whole of our economic structure in regard to our unit costs, the encouragement of foreign manufacturers here. In fact, the whole picture of our industrial development was tarnished during that time and will not be redressed within a short period.
At that juncture also we had a Government that came into office with a lot of short-term policies and ideologies. Going back six or seven years I remember when we had policies put forward perhaps every 12 months by people such as the present Minister for Foreign Affairs. Those people came into Government with certain short term policies and ideologies but when they attained office they realised the facts of life. It must be remembered that it is very easy to write such high-falutin ideologies and say: When we get into Government these will be the policies we will pursue.
They did pursue some of them with disastrous consequences. I refer to the capital taxation package. That was one of their ideologies. I do not believe that has made any contribution whatsoever to our economic recovery or, indeed, to the distribution of wealth. One does not distribute wealth merely by taking it from one man and channelling it into the Exchequer. If one wants to distribute wealth, distribute shares or the profitability within a company and give equity to its workers. Certainly channelling it into the Exchequer to service national debts does not equate to the fair distribution of wealth at all. There are better ways than that of equating incomes of various people and of achieving some fair distribution of the country's wealth. When we get back in power we will devise schemes for the fair distribution of wealth at the same time making a major contribution to our economic expansion.
I should like to see employees of any company being given the opportunity of taking shares in that company. Such could be brought about by some reduction in taxation for an employer and for employees who would be prepared, instead of seeking rises, to be given an opportunity of investing in that company. This is how the wealth of the country will be distributed. The poor will never be made richer by making the rich poorer. That concept has never worked and it never will. Profit sharing and distribution of assets will come eventually and when an employee knows that the company is his own and that he will get a share from it at the end of the year he will give of his best. People who hold shares in a company, even though they are not the employer, are happy to support their company's product.
We must try to give people security. In the past it was held that nothing mattered but wages and more wages. Nothing is further from the truth. The average person today has other priorities and security is the first one. When an employee has an interest in his place of work and in the job he is doing he will be the best protector of the industry that employs him. This does not apply to the same extent in the public sector but I am talking about the private sector.
Many businessmen are coming around to this concept because they believe that it will bring the maximum return from their employees. Employees should be informed of future policy and the development of the company because these things affect them. We may say that the employer has his capital in the business but capital is no good without labour. The one complements the other. I hope that this type of communication between employer and employee will develop more and more. Over the years the old fight was going on for the cost of living and the standard of living and these are two different things altogether. If we adopt the policy I am suggesting and the Government set up the framework to encourage this, we will be going in the right direction. As time goes on enlightened companies will take steps to adopt this policy if the proper structures are made available and if they do they will reap benefits.
The Government can play their part through, for instance, the national wage agreement. Thousands of people will be only too delighted to know that they have an investment in their place of employment. Drawing a salary alone is not enough with inflation as it has been for the past four years. Four years ago £1,000 or £2,000 would have paid for a deposit on a house. That amount of money today is worth only 50 per cent of its former value. Many young people have suffered frustration due to that situation. They may have wage increases of 20 per cent to 25 per cent, but any savings they may have had in the past four years have been reduced in value. There is no hedge against inflation for these people. For the man who was fortunate enough to have property investments in agriculture or other things the trend was in the opposite direction. He made money by inflation. We all know what happens where extreme inflation is concerned. The rich get richer and the poor get poorer.
What is the situation regarding pensioners on fixed incomes? The person who about four years ago left the public service with two or three years' gratuity and put it into national saving at a return of 7 or 8 per cent today finds that his assets are 50 per cent less in value than they were four years ago. That is not fair. It is legalised robbery by the State. There is no effort made to index those savings. If the inflationary tendency continues, we may find ourselves in the position of one of the South American countries where all the people drew out their savings because inflation ran at 50 per cent or 60 per cent. They wrecked the whole economy and one cannot blame them. At least if people spend money as they get it they get something for it. Imagine the economic chaos if people here drew out all their savings.
I have met young couples who have found that after the last three or four years of sparing on both sides they were back to square one where their deposit was concerned. The price of houses has escalated and the deposits raised 50 per cent or 60 per cent and they could not keep up savings to meet that. Such people have nothing to thank the present administration for. This Government will be remembered for their failure to tackle inflation. We hear about industrialists, farmers, and people who are doing well but we do not hear very much about the many people who are not doing well. This negative way of saving which we have whereby people must put their money in the Post Office or into building societies and leave it there with no growth will have to be changed. There must be come national investment trust where people can invest and see their investments grow so that at then end of four or five years they can be assured that not alone will they draw out the amount which they put in but they would be given sufficient to cover for inflation plus interest.
We should have national investment trusts covering various companies so that people could buy on the stock exchange. Very few people know anything about investing on the stock exchange. I do not see any reason why a man who saves £500 a year cannot put this into an industry or business. In this country we seem to channel our money into building societies or into the post office. The money invested in the post office is taken up by the Government to service the national debt and for unproductive purposes. It is my conviction that money invested could be used more usefully.
In the budget the Minister made certain proposals regarding the reduction of corporation tax and these are to be welcomed. We should support any measure that encourages employers to take on additional staff. I welcome the 25 per cent reduction in corporation profits tax for expansion of business. The question is, will it work?
The rate of 5 per cent for expansion of business and the 3 per cent increase in employment may not be of much benefit to many companies, especially those dealing with the export market. It will apply only to companies selling on the home market. It will not be of great significance to a company who have suffered a loss in the last three or four years because they can bring that forward for income tax relief.
The employment scheme will not benefit companies who have staff on a part-time basis because the Bill states that only new employment will be considered. These factors can outweigh the benefit of the reduction in corporation profits tax and the employment bonus. I am not sure that subsidising labour will work in the long term; it is a short, interim step. Manufacturers will only take on staff if they require them and if their business is expanding. The fact that they will get a £20 or a £10 subsidy will not prove a great attraction unless they need staff. This is especially so with regard to school leavers because the cost of the insurance stamp must be deducted. Another question arises with regard to the length of time the employer will have to keep on the staff. I was talking to an employer recently about the reliefs proposed by the Minister and he told me they would have to be considered in conjunction with the Unfair Dismissals Bill.
I doubt if the incentives now proposed will be of any great value although I hope they will prove successful. Something more positive is needed. We know that there are 130,000 people unemployed. Nobody has a realistic figure with regard to the number of school leavers and young girls who are unemployed. Thousands of young girls who left school last year have still not got employment.
The Confederation of Irish Industry are not so optimistic as the Central Bank about our industrial expansion. I think they have been more practical in their assessment of the situation. The great euphoria about this expansion is not shared by them. There may have been one or two speakers who were optimistic in their approach at the IMI Conference in Killarney— the Taoiseach was present and probably they did not wish to be unkind— but most of them were limited in their expressions of confidence.
Yesterday the Taoiseach attended a luncheon given by the Confederation of Irish Industry but I do not think he convinced members that we were coming to the end of the crisis. I wonder if it was necessary for him to take six of the senior Ministers to that luncheon? Did he think that would change the attitude of the members of the Confederation? I want to tell him the answer is no. Six Ministers were at that luncheon yesterday but in other years it was left to the Minister for Finance. Such nonsense.
