Finance Bill, 1978: Second Stage (Resumed).

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

We have to bear in mind the fundamental purpose, within the budget strategy of the Government, of the Finance Bill itself, namely to provide the State with sufficient tax revenue to meet current Government expenditure. It is basically on that criterion that we must assess the effectiveness or otherwise of the Finance Bill this year. On the basis of the 1978 budget the total amount for central Government tax revenue this year is estimated at £1,650 million. The total Government expenditure on current services this year will amount to £2,368 million. This data was made available to us at the time of the budget, and midway through the year it does not seem as though there has been any major divergence as yet from the forecasts of the budget, although it does look as though expenditure on the public national programme will be somewhat less, as it takes longer to get through the bureaucracy.

Listening to the Minister for Health and Social Welfare here today. it was quite evident that the Government next year will certainly face a crisis on public expenditure. When one bears in mind that expenditure on the health service, the social service and education represents about 45 per cent of total Government expenditure, the magnitude of the problems facing the Government in the next budget and certainly in the 1980 budget becomes quite apparent. Therefore, I regard the budget, notwithstanding the electoral promises made by the Fianna Fáil Party to win the general election, as being one of serious irresponsibility, of squandering a major opportunity of getting the central finances of the State on to a more rational basis.

The Government have missed an opportunity of taking radical steps in the reform of Government expenditure. Unfortunately, falling into the besetting sin of politicians, we tend to take short-term expedients, and the Fianna Fáil Party took a very short-term expedient in the budget of this year, and they are faced with a fundamental problem in the middle of 1978 now that the initial preparation is going on in the Government Departments who are now forecasting their expenditure for 1979. They are now slowly sending up to the Department of Finance their estimates of expenditure for next year, and there is no way that next year's Finance Bill can face that problem without massive unpopular and most difficult alternatives. We have the kind of nonsense which is tossed out here by, for example, the Minister for Health and Social Welfare in relation to his proposal that he will bring in next year, 1979, a pay-related system of social insurance and health contributions. Everybody in the Department of Finance and on the Revenue Commissioners' side are aware that they will be damn lucky if they are able to bring it in within another 12 months or even two years after April 1979. I cannot see that dateline being met even in the legislative sense, and the Government's legislative programme at the moment is non-existent, by the middle of next year it certainly will not be very much better. There are alternatives. There is the alternative which the Government will have to face next year of serious increases in the ordinary excise duty, increases in, say, the price of petrol, beer and cigarettes and increases in income tax on a selective basis.

I do not think we should discuss next year's budget on this year's Finance Bill which deals purely with taxation.

I will sum up that aspect of my contribution by saying to the Government that this Finance Bill must be viewed in the context of the overall budgetary strategy of the Government and that that strategy as enunciated in this year's Finance Bill is obviously a very short-term expedient. I foresee major changes in the years ahead, particularly in relation to VAT and in increases in relation to income tax, as being the only prospect of getting out of the financial mess that they are slowly drifting into in terms of public expenditure.

Dealing with some other aspects of the Bill, I suggest that the Finance Bill does not deal with a number of other very real issues. The real issue facing this Dáil concerns the employment question and not the relatively minor palliatives which the Bill contains. The Finance Bill should have been geared towards employment creation and should not have been preoccupied with, for example, the question of the abolition of wealth tax. Inherent in the Bill should have been some aspects of assisting productive investment instead of, for instance, the abolition of tax in respect of farming co-operatives.

(Dublin South-Central): There is a lot more than that in the Bill.

Very little more bearing in mind the needs of the nation. The real political issues are not dealt with. Having been indulging for the past eleven months in what might be called Opposition-watching of the front bench, I doubt the capacity of many members of the Government to come to grips with those problems. There is no serious attempt in the Finance Bill to deal with the serious problem of taxation generally. That is an aspect that I wish to deal with in particular and it is strictly within the rules of the debate of a Finance Bill since there is involved the question of income tax and of taxation generally.

It is self-evident that we need a more just taxation system. The present system has failed to bring about any real equity between the better off and the poorer sections. After ten years experience of this House it is my view that there has been only very little systematic study commissioned by successive Governments for the purpose of determining the real impact of taxation on the different income groups. There has not been laid before the House in any contribution to any Finance Bill an indication of the real benefits accruing to different income groups from social and public expenditure and from taxation provisions. The impact of total taxation on relatively lower-paid workers remains very much regressive. The abolition of rates and of road tax will not diminish that regression in any way. In 1977-78 the net receipts in respect of PAYE totalled £460 million and the estimated receipts last year of income tax payable in respect of farming profits were a mere £14 million. There is massive scope for reform of the general income taxation system. The more I listen to the Minister for Finance, to the Minister for Economic Planning and Development or to any other spokesman on the Fianna Fáil benches the more sceptical I become of their having the courage that is required to deal with the serious issue of income tax. I have no evidence that would lead me to believe that during the lifetime of this Dáil this Government will have the kind of political courage that is necessary to deal with this question. The incidence of taxation—the way in which we gather revenue for public expenditure—is the essence of economic and social planning and no amount of public relations on the part of the Government can obscure the real issue.

There is another aspect that must be borne in mind and that is that many recipients of relatively low incomes, including some social welfare recipients, are liable to income tax. We tend to ignore that situation. Contrary to popular misconceptions and to the blatant prejudices that exist in our community with regard to people in receipt of social welfare payments, many people who are not very much above the poverty line have a liability to income tax. This is an outrageous situation as also is the element of prejudice that exists on the part of some of those who work towards people who are not working. Often there is the attitude that people out of work lack incentive and, consequently, are not deserving of much sympathy. Such prejudice exists among politicians too. However, what is needed is a major and political effort to raise the basic levels of liability for income taxation to levels a good deal in excess of current thresholds so that those in relatively lower income groups will not be unduly penalised.

(Dublin South-Central): This year's Bill seeks to deal with that question.

Not strikingly.

(Dublin South-Central): The Deputy should go back on the record of the previous Government in this respect.

One finds on looking at the overall situation that there was no marked improvement this year. Broadly speaking we are back to the situation as it was about 1970, having regard to inflation and the adjustments that have been made. Between 1969 and 1972 there was only one major adjustment in income tax threshold levels.

That was one in eleven years.

There has been no adjustment in relation to children's allowances.

They do not come within the scope of the Bill.

Certainly, there are income tax provisions in the Bill and in that regard there has been no adjustment in respect of children's allowances since about 1972. Inequality remains.

We must take another area which leaves a gap in the Finance Bill. I had hoped that some consideration would have been given to the escalating prices of building land and that in the Bill there would have been a counterbalancing influence which would have eased the current critical situation. It is obvious that the nation faces a serious housing crisis. Notwithstanding the efforts both of past Governments and of the present Government, there remains an urgent need for more and better houses, especially in the rapidlyexpanding urban areas.

We have a higher marriage rate and younger and larger population. In that situation it is quite staggering that there is no attempt within the framework of the Finance Bill to deal with the huge increase in the cost of building land in recent years. House prices are now going up by something in the region of 2 per cent month and there has been an increase of 20 per cent during the past 12 months. Some building firms are making a lot of money through speculating at the general expense of the community, while their contribution in income tax is relatively low.

The Deputy is getting into the area of housing and this is a matter for another Minister. He is entitled to suggest that there should be some provision in the Finance Bill to control land prices but he may not go outside that. We are dealing only with taxation.

Within the Finance Bill there should be a provision to deal with this matter, something better than simply handing out £1,000 tax free without any effort being made to curb speculation within the house construction sector. This is a matter of serious concern, particularly since inflation generally has come down to around 8 per cent. We wish to stress this point to the House and it must be repeatedly pinpointed by the Opposition during this debate.

The normal expectation is that the Finance Bill would ensure a fairer general distribution of income. I suggest that this Bill does not live up in any way to that prospect. I have recently been reading a study of the distribution of income in Ireland carried out by Brian Nolan, the Central Bank economist. In relation to disposable income, it is very disturbing to see that more than 75 per cent of total household gross income went to 50 per cent of the households in the Republic in 1973, thus leaving less than 25 per cent to be distributed among the other 50 per cent. There are many other startling aspects of that study. It is pointed out that more than 25 per cent of total gross income was taken up by the top 10 per cent of households, while the bottom 10 per cent of households got less than 2 per cent; to be precise, they got 1.5 per cent. That is the kind of analysis which any political party must find most disturbing, certainly in relation to income tax concessions and the other concessions contained in the Finance Bill, particularly the wealth tax. I regret that no effort is being made within the Finance Bill to deal with that situation.

The other major issue in the Finance Bill concerns the wealth tax. I do not think I would be going outside the brief in dealing with it at this stage. Fianna Fáil certainly fulfilled their promise before the general election to abolish the tax, although they have yet to bring in the Bill. I cannot see it passing through this House before the end of this session and probably we will not have the opportunity until before Christmas to formally debate the wealth tax. I regard this provision as being one of the most unfortunate and reactionary provisions ever contained in a Finance Bill.

I recall very well that in the year or two before the Coalition Government came into office there was a tremendous demand for the abolition of estate duty and this demand was founded on very genuine grievances. During the years between 1969 and 1972 a number of people in my constituency who had small or mediumsized businesses or some property, came to me. They were being crippled because of the requirement to pay estate duty. There was a great deal of evidence in the late sixties and early seventies that there were a few large wealthy holders of money who were availing of general avoidance systems. We in the Labour Party listened with sympathy, as did Fine Gael, to these grievances. If we had done absolutely nothing and just kept the existing system of estate duty we would now be drawing in about £25 million a year. We set out on an effort of reform and it was sabotaged right down the line by three or four Front Bench members of Fianna Fáil. When we assumed office we even pointed out to Fianna Fáil that estate duty was levied at rates from 1 per cent on £7,500 to 55 per cent on over £200,000. As an alternative, we went on to introduce a very mild, rather moderate and rather expensively administered wealth tax, which yielded a moderate amount of tax.

All we got for our pains—I suppose all is fair in politics—was a general vituperation from the then Minister for Finance. As I said when I spoke in this debate on the previous occasion, unfortunately Deputy Ryan, then Minister for Finance, was much maligned in his efforts. I recall very well the contribution made by Deputy Fitzpatrick, Cavan-Monaghan, who supported him very strongly. Deputy Fitzpatrick, in a tremendous performance in defence of the Government, said the following at column 2279, Volume 281 of the Official Report of 10 June 1975:

In the light of that let us have a look at the type of tax that is going to ruin this country and chase capital out of it and prevent industrialists from coming in. The threshold of this tax is £70,000 for a single man, £90,000 for a widow and £100,000 for a married couple. The residence and the contents are exempt. Speaking of the kind of people we are talking about, we could put the value of the house and the contents in most cases somewhere between £30,000 and £50,000, certainly in Dublin city. On top of that there is an allowance for each child under the age of 21 of £2,500. Four children. £10,000. That amounts to about £150,000 free gratis and for nothing. Then one pays at the rate of 1 per cent over and above that.

I agreed very much with the contribution of Deputy Fitzpatrick Regrettably the other Deputy Fitzpatrick, then in Opposition, was part of the Fianna Fáil opposition circus and it certainly was a circus at the time. Deputy Fitzpatrick, Cavan-Monaghan, went on to say:

The difference between that and the death duties we are abolishing was that once one was in for anything one was in for all.

He also stated that the National Coalition would replace the system of exemption up to £7,500 existing when Fianna Fáil left office and once and for all would get to grips with estates and death duties.

It is a matter for profound regret that for extremely short-term political expediency Fianna Fáil dived onto a bandwagon of a few hundred people who decided that since they never paid income tax they would not pay wealth tax either. That was a major mistake by Fianna Fáil. Even though it got them a lot of money for their election funds and a lot of support from certain quarters that they would not have got otherwise. It has destroyed for the next three or four years— may be even for all time—any prospect of introducing a rational system of capital taxation. If we had done nothing about the existing system in 1973-74, today we would have an income of £25-£30 million per year without any reform. Instead we set out to reform the system and we finished up literally dismantling it and produced a rational capital taxation structure. At that time many arguments were put forward against reform. the most important being that capital would fly out of the country——

(Dublin South-Central): So it did.

I will come to that point. This is where there is a certain rational ideological dispute between the Government and the Opposition. It appears that at the time in question Fianna Fáil were very happy with the situation where people left this country for the Isle of Man or elsewhere with liquid cash or transferred their cash abroad. They appreciated, understood and even sympathised with those people who acted in that way. I have often wondered what kind of patriotism Fianna Fáil were espousing at that time. People were virtually encouraged to transfer their liquid assets out of the country helter-skelter. Apparently these assets were being used so productively on behalf of the Irish nation and were so tied up in hotels, factories, machinery and other facets of production that the people concerned were able to export the money overnight. That strikes me as extraordinary. A few well-publicised individuals said that if the wealth tax were abolished they would come back and reinvest their money here. One individual engaged in the motor trade——

The Deputy should not mention somebody who can be identified. The Deputy can make his case without mentioning names or identifying people.

I can assure the Chair that I shall not mention names. One individual was quoted extensively in the newspapers denouncing the tax. Apparently he is now going to return to Dublin. He announced he would have a major new industrial plant with details to be announced early in May. He had an interview with Frances O'Rourke of The Irish Press. Needless to remark there has been no such announcement. The person concerned has been sunning himself in Marbella in Spain for the past few years and he will continue doing that. He could not care less about Fianna Fáil and his contribution in terms of productive capital formation is nil.

There have been quite a few of those extraordinary Irish exiles who fled the country. I have many articles here about such people—the Marquis of this and the Earl of that. One individual who praised Fianna Fáil enormously was a former reserve officer of the Royal Hong Kong Police and he subsequently became a Marquis. He has gone back to Hong Kong and has said he really does not intend to come back to County Meath.

Will the Deputy please come back to the Bill?

I am on the Bill.

No. It is in order to suggest that something that is not in the Bill should be put in it; for instance, that wealth tax should be put into the Bill. However, to go into great detail is not in order.

I am dealing with the fact that in his budget speech and in his speech dealing with the Finance Bill the Minister for Finance said repeatedly that urgently needed productive capital funds fled out of the country in 1975 and 1976 and he said we need that money back. I want to find out if it has come back following abolition of the wealth tax.

(Dublin South-Central): It is coming back.

It had better hurry up. We have seen no evidence of it. The debate regarding the wealth tax occupied this House for four months. Members of Fianna Fáil spoke on the matter at great length and it is quite proper and fair that we analyse this massive concern of Fianna Fáil and try to find out where the money has come from.

Fianna Fáil also alleged that the wealth tax would act as a major disincentive to foreign investment. Looking back on the returns for 1976-77 we know that in that period we had the greatest single growth of foreign investment in the history of the State.

(Dublin South-Central): They were not subject to wealth tax.

I am talking about the disincentive effects Fianna Fáil alleged it would have on foreign investment. They said that nobody would come near the country. When we introduced wealth tax we were like Germany, Denmark, Luxembourg, the Netherlands, Austria and Finland but although those countries had a wealth tax Fianna Fáil said that nobody would come near us because we were introducing it.

(Dublin South-Central): The Government at that time said that Britain were to introduce a wealth tax during the following 12 months but it did not come.

Deputy Desmond on the Bill, please.

It has not happened in Britain because there has been a minority Labour Government in office for the past few years. No minority Government, depending on a few esoteric Liberal votes, are likely to introduce a wealth tax. If the British Labour Party had a substantial majority in government they would certainly have brought in a wealth tax. I do not believe they will get the opportunity of introducing it because they will be in severe difficulty even in the next government. One must criticise the specious assumptions of the Fianna Fáil Party that if we abolish this tax the wealthiest sections of the community in the country will generate tremendous growth and new employment and become enmeshed in the employment generation process in the country.

There is no evidence at the moment that such is the outcome from the decision of the Fianna Fáil Party to abolish wealth tax. The evidence is to the contrary. The private sector are now saying that it is not their responsibility to generate employment. They will do their best to make money but they are not responsible for this particular prospect which the Government hold out. There is no evidence to suggest that the wealth tax is a disincentive to industry or to the creation of employment. I hold the contrary view, that the very introduction of this tax shifted resources from less productive areas of the economy to those of more productive potential. On the grounds of social equity there was no justification whatsoever for the decision of the Fianna Fáil Party.

It seems utterly strange to me that the Fianna Fáil Party are now welcoming back those poverty stricken tax exiles from Hong Kong and other places. They must be deeply upset that some of the lords and marquises have decided not to return. The country will get on without them and their peculiar brand of patriotism in running out of the country when they should have stayed here and made their contribution of perhaps £1,000 a year if they had £500,000. If such a person had any tax liability he would probably finish up paying much less than that. Such was the Fianna Fáil pandering for power, that they must get back at any cost, that they dived in at this prospect and they sold their republicanism short or whatever sense of neo-republicanism they had left.

I want to talk about other aspects of income tax and to refer to the lack of any reference in the Finance Bill to banking profits. In relation to the provisions made by the Minister in the Bill I feel that we will have a situation of increasing demand by many sectors of the community and many women will not go out to work and will not have the opportunity, because of the high unemployment rate, of engaging in remunerative employment. We must face the situation of mothers who work in their homes and who do not receive any remuneration other than the children's allowance. We must consider radical reforms in this area. At the last Labour Party conference I suggested one particular reform which did not arouse much interest. I favoured the amalgamation of the children's allowance and the PAYE income tax child's allowance into a direct payment to the mother who works in the home.

This would mean that we would have a mother's allowance, a direct cash payment to the mother. Every married man who fills in an income tax form claims for his wife, gives his wife's name and the names of his children. I believe that that PAYE tax allowance for children should be paid directly to the mother who works in the home. One of the peculiarities of our social structure, which I became aware of in meeting my constituents every Saturday morning and Sunday, is that when the wage earner receives his wages every week he hands over a certain amount of money to his wife. She has to do with that cash payment if she is not engaged in outside employment and just works at home. In addition, she gets the children's allowance every month, which is very meagre. I believe that the income tax allowance given to the wife who remains at home. I have four children and I get an allowance of £960 a year PAYE from my Houses of the Oireachtas salary. My wife works at home. I would not have any great objection to that allowance I get built into my salary cheque each month being paid direct to my wife in the form of a State allowance. It would be more egalitarian, fair and, above all, would meet a situation in society whereby in a substantial number of instances the allowances which the husband receives for his children through the PAYE system—quite a few husbands do not pass it on in terms of ensuring that their families have a sufficient income on which to live—do not go to them.

That is a reform which would not cost money because, presumably, we will have no more reforms of income tax in the next budget. I think we have had the last of any increases in tax allowances in the last budget. Next year we will just be marking time because the Government will not have any money to hand out. Therefore we must devise methods of making the existing system just. I would suggest that as a particular method for consideration by the Minister. I have thought about the matter only in principle. Of course the day-to-day practicalities of the change-over are something which might prove to be an entirely different matter. Nevertheless it is of some considerable importance that at least we think along those lines.

Another aspect of the Finance Bill with which I am concerned is that within its confines no effort has been made whatsoever to come to grips with the situation in relation to the commercial banks. As citizens, particularly those of us with overdrafts, we are acutely aware of the fact that notwithstanding high unemployment, the recession, banking profits did extraordinarily well. I am well aware that under successive Finance Bills a substantial proportion of these profits go back to the Exchequer, for example, in relation to the recent profits announced by Allied Irish Banks when 37 per cent of their profits went back which the husband receives should be in tax; fair enough. Nevertheless there must be some concern about a total cartel situation and uniformity of interest rates in which banking profits have rocketed by 26 per cent in the case of the Bank of Ireland group, up to £43 million in the past accounting year and, in the case of the Allied Irish group by 45 per cent to £35 million.

I believe that, within the Finance Bill, greater control and influence should be exerted, through the Central Bank, on the role of the commercial banks in economic development. We are dealing with a situation in which, whether it be mortgage rates, interest rates—and admittedly we are caught by the constraints of parity with sterling—there is a tremendous reluctance on the part of the Government to ensure that the Central Bank avails of its statutory powers to play a more interventionist role in controlling the behaviour of the commercial banks. I have strong views in that regard. One is faced with a situation in which it is difficult to envisage the commercial banks being controlled and influenced because, as we know, there are commercial directors on the board of the Central Bank, so it is interlocked in a very definite way. But I hold that the statutory role of the Central Bank under the Finance and Central Bank Acts should be the welfare of our people. It has at its disposal a wide range of very powerful monetary instruments particularly in relation to the control of interest rates. Yet I do not believe that the Central Bank has performed to the degree that it could.

The Deputy is certainly getting away from the Bill now. We can discuss banking and taxation but not the whole setup of banking in the country; that is for another time and another measure.

This is where I come to a deficiency inherent in the Finance Bill. The very day on which we are discussing the Finance Bill here, we practically have a mini-budget in relation to interest rates. Since the commercial banks are in a most sensitive position to influence the economy and indeed the management role of the Government, and since their actions can be very much to the detriment of the ordinary worker and consumer I would call for greater State influence over them. I hold strong views on this matter because I do not believe in what I might call elitism in the management of the economy. I do not believe in the empire which is being built up. I have strong views looking back over the years—for example, if one takes the period from 1972 to 1977 our commercial banks were busy building office blocks instead of putting their money into more productive capital formation in this country and the Central Bank did not do anything about it. At the time the Central Bank did have power. I am concerned that we should not have a rash of similar developments here and that, if you like, before the horse escapes once again we should raise the matter in this House even in this very limited way on the Finance Bill.

I might make one or two final points in relation to the Finance Bill itself. The Minister for Finance, in his introductory comments on the Bill, spoke about its role in generating a climate of confidence particularly in private enterprise here. Again I hold the view that his contribution was extremely limited. Indeed the contribution of his party in this area is now so circumscribed that its long-term influence will be extraordinarily small.

We have a situation in which, on the one hand, some members of the Government believe exclusively in a private enterprise economy. Other members of the Government just do not believe that and others still support a view that one should have a mixed economy here. I will give two very brief examples in that regard. We had the statement—which is virtually the whole economic strategy of the Government—last month of the Minister for Economic Planning and Development to the Cork Chamber of Commerce when he said that the whole strategy for development hinges to a great extent on the private sector as there will have to be a progressive reduction in State borrowing.

Sorry, Deputy, it is not relevant to this Bill. It can be raised on the budget debate which is before the House.

I very much beg to differ.

This is purely a taxation measure.

I do not want to engage in any recriminations on this but I want to point out that the Minister for Finance in his opening speech on this Bill dealt quite definitely with this aspect. If the Minister for Finance was in order, in my view the other Members of this House are equally in order. I do not want to delay the House unduly on it. That strategy has been flogged to death by the Minister for Economic Planning and Development.

Then we had the Minister for Health and Social Welfare coming into the House in an entirely different contribution, on 14 February last, when he said that the central argument should be whether, in the modern context, private enterprise can deliver. He had the gravest of doubts about the prospects of private enterprise delivering to that extent under Government strategy. That is the purpose of the Finance Bill—to give this great confidence. We in the Labour Party would favour, by and large, a mixed economy approach. But one cannot see any prospect of full employment unless we have what I describe as a tripod development, a structure in which the public enterprise sector will grow, in which private enterprise will have its place and in which agriculture will simultaneously develop so that with development on three or four different levels more employment will be created.

I am very much taken aback at the continued reliance by the Fianna Fáil Party on the private sector almost exclusively to generate employment. To put it bluntly, the job creation capacity of the private sector is extraordinarily limited. The Minister in his budget asserted that by providing incentives to the private sector more jobs would be created. This is an erroneous assumption. Unlike a number of my colleagues in the Labour Movement who constantly harp on the failure of the private sector to provide full employment I do not make any such fashionable condemnation of that sector because it does not provide jobs. I do not believe its dominant function is to provide full employment. It has never postulated that as its function. I have yet to meet any major figure in the private enterprise sector who says his function is to create jobs. Those engaged in the private sector only adopt that role if it is devolved on them by some Government Ministers and by some in Opposition also. There are some who would devolve such a function exclusively on the private sector. By doing so certain responsibility is escaped and this device has, of course, been massively resorted to by the Fianna Fáil Party.

Most businessmen I have met give a rather low priority to job creation. They maintain that they are engaged in producing goods and services and their main object is to make as much money as they can for themselves and their shareholders. If in that process they create jobs they are delighted to do so. Many of them have a social conscience and give good employment at decent trade union rates of pay, but they do not regard themselves, despite the Fianna Fáil manifesto, as having any responsibity for creating jobs. Most employers in the private sector regard it as their job to employ as few workers as possible with the most efficient possible system of production so that they can export and in that way run their businesses successfully.

This may all seem very simplistic but it is time we faced the reality. It is time we acknowledged the situation, because most businessmen readily acknowledge that if in the process of production they provide more employment that is fine, but it is not their sole motivation in getting involved in the productive process in the first instance. There is perhaps a little double thinking because most businessmen take the view that the State should provide substantial subsidies and tax concessions so that they can maintain employment. I do not particularly dispute that view but we have to be very careful not to set up the proposition that it is the function of private enterprise to manufacture this massive three-stage rocket of the Minister for Finance. I think we are now in the second stage and I suppose we will enter the third stage in next year's budget. If we set up that proposition and it fails we will then have depression. We must use our sense of perspective.

Where exactly does the responsibility lie? In my opinion it lies in a mixed economy. It lies very clearly in the first instance primarily with the Government. It is in the proper day-to-day management of the economy and the Government's capital programme, plus the incentives provided to private enterprise that success lies. It is bound up in a whole range of economic strategy and fiscal policy which provide a proper sense of direction so that private enterprise knows where it is going, the public sector makes its contribution, agriculture makes its contribution and public servants make their contribution. It is in that sense we will have proper political leadership.

A mixed economy is the best suited to this country. I do not believe in the O'Donoghue-Colley private enterprise economy. It is too narrow a prospect for proper economic and social growth. I do not believe—I will be blunt about it—in an exclusively State enterprise orientated economy. There are some who subscribe to this doctrine who would nationalise their mothers-in-law to provide jobs. That is not a sound basis for economic and social progress. It is too narrow. Neither do I believe in an exclusively private enterprise economy, being relied on so massively now by the Minister for Economic Planning and Development. I suggest there is an alternative. It is the alternative of a dynamic mixed economy, admittedly an export oriented economy. I see nothing wrong with a vigorous private enterprise economy. I see nothing wrong in State enterprise, commercial and non-commercial, directly encouraged to expand, get out into the world and prosper. I certainly favour a prosperous and very efficient agricultural sector. That is why I welcome the outcome of the Brussels negotiations. I favour a responsible and healthy building sector and I admit there were incentives in the budget for the construction industry.

These are to me the legs of development and I am gravely concerned because I do not see in a Government 11 months in office any sensitivity towards what I call the development and growth of the State enterprise sector. I have always advocated that there should not be so many commercial constraints on the State enterprise sector. I have never favoured the kind of commercial constraints imposed on the ESB, for instance, by successive Ministers for Finance and Transport and Power.

I should like to see that company expanding on a much more effective basis. There are many other areas of enterprise which other State companies could develop. For example, we now have a vacuum situation in relation to Bord na Móna in the midland peat bog development. They should be encouraged to take off in that area on a substantial development plan.

My advocacy of growth in public sector enterprises is not based on any uncritical acceptance of abstract political views but on the basis that at the moment there is an accepted preoccupation on the part of the Government with the development of private enterprise, and I do not believe that will meet the future needs of the country. If out of conservatism or as a result of pressure from vested interests, Fianna Fáil adhere exclusively to that kind of approach, full employment will not be realised as a target. It will fade like other such pipe dreams and our young people can pack their bags and fade into the night and on to the emigrant ships, and that is not a process I wish to see developing.

I am not under any illusions that in a number of public sector areas there is a sluggish concept of enterprise. Very often there is not a great lot of entrepreneur ability among them: they just drag on from day to day in guaranteed employment. They do their jobs. Therefore I should like to see a new vigour being displayed in that area and being encouraged by the Government.

I have massive reservations about the relevance of this Finance Bill from the point of view of these matters. There have been many major economic developments since the Bill was circulated. There is an important section in the Bill relating to farmer taxation. Since the circulation of the Bill, farm price discussions in Brussels have been concluded and the taxation of certain farm incomes by this Bill must be viewed in that context. I, and I am sure most Deputies, welcome the successful outcome of the protracted Brussels negotiations but I would make a follow-through point, namely, that the benefits of such agricultural supports should not accrue exclusively to any one section of the community, not even the agricultural section. The consumer has the right to benefit. I do not in any way support, nor do the vast majority of my colleagues, any concept of a cheap food policy. I believe our farmers should get the highest possible prices abroad for their produce, but I equally hold the view that having got that money from abroad they should pay their fair share of taxes through the Finance Bill and that some of that taxation should go towards an effective food subsidy system. Whether we subsidise milk, butter or other farm produce from that taxation is a matter of Government strategy.

The Deputy is getting around the Bill in a nice way.

I will conclude my comments on that aspect. There is no provision in the Bill relating to the duty on our oil imports. It seems that the fall-out from the 1974-75 explosion of oil prices no longer has any relevance to the economic strategy of the Government, and this is a matter of serious concern. It is ironic that following the circulation of this Bill the Taoiseach, at the IMI conference in Killarney, drew attention to the fact that the cost of imported energy more than doubled from the point of view of a percentage of GNP between 1973 and 1977, to the extent of £390 million last year. We must contrast that new concern on the part of the Taoiseach —a rather odd concern, to say the least—with the deliberate removal of the tax from motor cars of less than 16 h.p. That decision more than any other since 1973 has helped the consumption of more imported oil here. It has also taken the brakes off the CKD car imports to the continuing detriment of our balance of payments. In that context the Taoiseach's Killarney statement had a hollow ring. It is my belief that in 1979 and 1980 the nation will be picking up the tab for such electoral recklessness. I am acutely aware of that because I come from a constituency that has more cars in it than any other in the country. That was a soft option. It will mean more cars on the road, more petrol being burned, more traffic jams, more Japanese cars——

The Deputy must relate his remarks to taxation.

I have been talking about a measure of taxation which is of grave concern. The car tax situation was flaunted by the Opposition in the general election campaign and it was grabbed by an electorate which will always go for short-term expedients, particularly when there is no appeal to anyone's sense of sacrifice or patriotism. Side by side with that strategy, the Government sanctioned a 20 per cent increase in CIE fares. There are more private cars on the road, less reliance on public transport, more private oil consumption, greater balance of payment deficits. Just imagine CIE getting the £20 million a year which we have frittered away through the abolition of car tax. If CIE got that money one can imagine the impact it would have on our public transport system. My constituency colleague, the Minister for Economic Planning and Development, wrote eloquently about public transport policy in The Irish Times before he was a Deputy. When he went into Government he handed out a piece of Fianna Fáil reality of, what one might call, political opportunism in that regard.

Section 17 reintroduces the general exemptions from tax of agricultural co-operatives. It may sound odd coming from the Labour benches but in my view we took the right decision when we were in power. Electorally, it was a bit mad. It was like the wealth tax: you handed Fianna Fáil a stick with which to whip you round the constituencies, but there is no doubt in my mind that the decision to introduce a tax on agricultural co-operatives was a reasonable and fair decision. That has gone now and the Revenue Commissioners must be having a good laugh at the political parties because they do not know whether they are coming or going with the wealth tax and the agricultural co-operative tax. They have my sympathy.

It is important to point out that most of our agricultural co-operatives are co-operatives in name only. For practical purposes the majority are owned and controlled by the commercial banks. One has only to look at the experience of the Lough Egish Co-operative, to take one example, to see who runs the show. We have the magnificent political fiction—like credit unions, everybody wants to have co-operatives and everybody favours them—that a group of unfortunate, impoverished local shareholders sit around a table and take democratic decisions. As we know the reality is that the commercial banks and many multinational companies exert virtually a controlling interest.

I have always found it strange that the IFA, having been so sensitive to that area of development, never advocated the setting up of an agricultural co-operative bank as a counterbalance to the influence and role of the commercial banks. It was a pity when they had the opportunity, because of the prospects of prosperity for agriculture, that they did not avail of it.

The argument against removing the exemption in the first place was that most of the members of these co-operatives were non-taxable and usually the co-operatives overcame the charge to tax by paying their members an additional dividend on purchases made. In this way quite a few co-operatives ended up with no taxable income and the farmer reinvested the additional dividend in the co-operative. To reintroduce the exemption at this stage, in a situation where the Government are trying on the one hand to bring as many farmers as possible into the tax net and on the other hand are trying to exclude as many as possible under the tax exemptions to co-operatives, is, to say the least, rather contradictory.

An incentive should be given to Irish entrepreneurs. In recent weeks a good deal of reference has been made by many Ministers to the need to secure a switch from imports to Irish products. Time and again the Government have said we needed the equivalent of a shift of 3 per cent total consumer spending with a corresponding shift in industrial spending. The incentives offered are laudable but I have some doubts about their long-term impact.

We are spending about £600,000 on a revamped Buy Irish Campaign. That is a fair slice of taxpayers' money. This campaign is directed at manufacturers, retailers and consumers. As I said, I have some doubt about the effectiveness of that campaign. In my view a more direct incentive of a tax nature must be given to wholesalers and retailers to get them to sell guaranteed Irish products. I do not know to what extent the Government have reviewed the situation whereby they might be offered tax credit. It has been suggested that, if there was an audited verification of increased sales of domestic manufactured goods, as a result one might offer some form of tax credit system over, say a base year. One would need something like that instead of pious exhortations. Having Johnny Giles running across the RTE television screen and putting up guaranteed Irish labels will not have a very big impact on a wholesaler or retailer. The big retailer wants to know what is in it for him if he plugs the selling of Irish products.

The Minister making speeches will not make a very big impact on the wholesaler or retailer in terms of selling Irish goods. To what extent are half-hearted appeals to patriotism, slogans and costly advertising campaigns having any impact in particular on Irish producers? If they have no impact on the retailer or wholesaler under the Finance Bill they are not likely to have very much impact on consumers. I feel there should be a tax incentive of some nature, which of course will have to be in accordance with EEC regulations, whereby a producer, wholesaler or retailer would get a special concession if he was prepared to promote a higher ratio of Irish made products in future. I think that would be successful. It might have a greater impact than the current situation. There should also be more insistence by the Government that the purchasing policy of the State agencies and the State-sponsored bodies be more effectively geared towards domestic products.

I draw the attention of the House to the fact that such is the nature of our employment situation that the measures advocated by Fianna Fáil at this stage are not likely to bring about the growth in the economy and in employment which we all earnestly seek. The Minister for Economic Planning and Development said that we have to achieve the kind of growth rates as, for instance, West Germany, Japan, Cuba or the Soviet Union did and that we could do as well as those countries but that we would have to realise that we could go along the road of West Germany or Japan, on the one hand, or the road of the Soviet Union and Cuba, on the other, that there were really only two options available to us and that there was little doubt about what the people would opt for. There are more than two options. We could have a balanced mixed economy. If that is not appreciated with the present youth unemployment and the prospect of the many thousands of young people coming on the labour market after the summer holidays, the nation could become gravely demoralised. The Government in this Finance Bill and in the forthcoming draft economic plan which presumably will be out next month will have to set out a system for the massive exploitation of our mineral, and our oil and gas resources.

I am afraid the Deputy is trespassing very much on the Chair's tolerance.

The Government will have to set up a system for the exploitation of maritime resources, and peat resources with a new drive by Bord na Móna. There is also an urgent need to exploit forestry resources. The exploitation of all these resources will provide employment. Very little has been said by the Government lately, with regard to the tourist industry which can be exploited. We could also exploit the capacity of the young people to be employed in and to make contributions to the nations of the third world. We could exploit the export of £150 million of live animals every year. There is great potential to exploit growth in agriculture and in the related food-processing industry.

I understood that the Deputy was finishing, but he certainly has not been relevant for the past few minutes.

The Finance Bill is not relevant in relation to employment creation and for that reason I have been very critical of it and of the approach of the Government. On Committee Stage we intend to put down a number of amendments, to rigorously oppose a number of sections and to ensure that the irrelevance of a great many of the so-called concessions in the Bill are exposed as not being effective contributors towards economic and social progress.

In assessing the Bill before us it is useful to look back at the second half of 1977. In the second half of last year the Irish economy grew more than the economy in any other EEC country. According to the OECD report the 3½ per cent growth rate increased to 5 per cent; consumer demand picked up and made a significant contribution to the growth of certain areas of the economy; inflation fell sharply although it is still high and employment increased, by slightly over 6,000 which is above target.

This Bill represents the Government's determination to implement the commitments outlined in the Fianna Fáil manifesto. The Bill includes a number of incentives which have been maligned by the Opposition spokesmen, such as the £1,000 grant, the abolition of car tax for vehicles under 16 horse power and the abolition of rates on private dwellings. These incentives were introduced primarily because that method of collecting revenue for the Exchequer or for local authorities has gone out of date. The amount of money collected from car tax and rates on private dwellings was small and the cost of administration and of collecting the money was prohibitive. The provision of money from the Department of Finance to the Department of the Environment to finance the £1,000 grant scheme has been an unqualified success. The idea had the right mixture of incentive for the private sector of the building industry and in the overall taxation and financial area it is a worthwhile incentive.

The Government have produced a White Paper on national development which sets out in broad terms how the Government see the problems facing the country and the measures necessary to solve them. The budget introduced in February was a further step in the Government's strategy to tackle the serious problems. It was the first opportunity the Government had to create the type of climate necessary to reduce unemployment and to create the confidence which was so badly needed. To a large extent a lot of the problems were inherited from the disastrous mismanagement of the Coalition Government. The major problems are to control prices and inflation and above all to create employment. The Government in this Finance Bill are determined to tackle these problems.

The budget on which this Bill is based provides a sound framework to deal with these problems. As implemented in the budget and dealt with in the Finance Bill, the income tax allowances must surely be recognised, particularly by the Labour Party who are continuously calling for more State involvement. This measure puts money into the pocket of the ordinary worker, and in what better and more positive way can the State assist an individual than by the type of tax concessions being implemented in the Finance Bill?

The signing of the national wage agreement was an indication of the unions' positive recognition of what the Government were doing. It was a tremendous boost for the general view of the country abroad. It showed that there was a positive, constructive and rational view taken of employees' involvement in their place of employment whether private enterprise, semi-State or Government. Right across the broad spectrum of labour a decision had to be made and, while close, it was on the correct side. In accepting the national agreement proposals our labour force helped themselves and in no small way helped the financial situation within the country by providing stability and potential for progress. The tax concessions given, which are well known now, are dealt with in detail in the Finance Bill and will no doubt go on the Statute Book as the positive contribution this budget is making to creating employment and stability.

The fact that the agreement has been widely welcomed in the meantime is an additional indication, if such were needed, of the wisdom and the masterful strategy the Government brought to bear on the negotiations prior to signing. It was a real indication of the Government's involvement and of the seriousness of the decision that had to be made. As a result of the wage agreement there is now a distinct possibility of order and certainty in industrial affairs. Apart from the confidence created in business circles it will also generate increased interest in investors coming to this country, in taking due recognition of increases in wages and the other incentives the Finance Bill introduces in that area of investment.

The Bill provides imaginative incentives to encourage expansion in the private sector. The Minister's opening statement gave the details, but I should like to say that the package as a whole is obviously the type the country needs at present to get the economy moving, to provide the climate for expansion and create the jobs so badly needed to ensure that the recovery which the Government have promised and are actively working for, will be achieved in the lifetime of this Dáil, as is obviously necessary.

Section 7 of the Bill is very commendable and I have no doubt that it will result in a tremendous upsurge in business enterprise and in investment. Section 4 is a further concrete example of the Minister honouring a commitment made prior to assuming office. This section will alleviate the hardship caused by the Coalition's inept measure for assessing employees' motoring benefits in kind. That was a petty and short-sighted measure introduced without thought of the hardships it caused. The realistic provisions of section 4 will ensure that full account is taken of each employee's circumstances and it will positively remove legitimate grievances. During the election campaign I recall a number of people making representations on this issue, pointing out the anomalies created by the previous Minister's abolition of the benefit in kind concession to the individual who was normally paid by salary and had a motor vehicle supplied as part of the equipment necessary to do his job. In the main the individual had to travel the length and breadth of the country. Ninety per cent of those concerned, I could probably say without contradiction, would not be on an hourly rate but on salary and would work additional hours beyond the standard 38-40 per week. Obviously, their situation was anomalous when compared with that of those on hourly rates when they were being taxed on being provided with an item essential to carry out their work. This anomaly was swiftly recognised and positively remedied by the Minister in the Finance Bill.

In the farming area one has only to consider comment from those most concerned to find acceptance of the Minister's intention of collecting tax in this area. Prior to our joining the EEC our farmers were in the vulnerable position of being confined to only one main outlet, the UK market, and the obvious problems that this entailed from time to time. However, income in the farming community is well recorded and recognised as a result of benefits derived from accession to the EEC plus the vast market now available, probably exceeding 250 million people in Britain and on the European mainland. The Minister's financial measures to collect farming taxation represent a fair and constructive approach, reducing rateable valuation. It is a recognition that the farming community, which is now expanding and prospering, will pay its contribution to central funds for the muchneeded redistribution of funds for the many necessary social commitments the Government have.

It is opportune that at the time of the debate on the Finance Bill the Central Bank Report for 1977 should become available. I should like to deal with a number of items referred to in that report although it is possible that they are not that helpful in relation to our financial planning. The Central Bank properly decided to invest £100 million in Government stock. I have read a number of comments about this investment and the reference to the fact that the Central Bank were endeavouring to bolster the Government's finances by purchasing this stock. However, having looked at the external reserves of the Central Bank it is my view that the investment of £100 million in Government stock was a worth-while and positive involvement in financing some of the Government programmes which were dealt with in the White Paper and which are an integral part of the Finance Bill.

What is wrong with the Central Bank purchasing Government Stock in order to provide money for the Department of Finance? The Central Bank buy other Government stock. There is no reason why the Central Bank should not invest in Government stock particularly when one considers that external reserves rose from £1,072 million at the end of January to £1,133 million at the end of February. When one considers those reserves and the Government's financial policies one must come to the conclusion that the affairs of the country are properly geared. In the area of capital inflows and official external reserves there is an item in the report which is not helpful in generating the maximum funds available to the Irish banks for investment here. In connection with this the Central Bank have reintroduced the special 50 per cent deposit requirement on net capital inflows through licensed banks. There may be some justification for a percentage but the re-imposing of the 50 per cent is too much.

In connection with this matter the Central Bank report states:

...the Bank reimposed the special 50 per cent deposit requirement on net capital inflows through licensed banks with reference to the May 1977 bank return date. While there were substantial exempted inflows during the remainder of the year in respect of previously arranged acceptance credits and inflows for large-scale industrial projects, there was no other net inflow through the banks during this period.

Obviously, the Central Bank are concerned about major movements of finance in and out of the country. That is understandable because if one accepts those incomes without some sort of restriction one might be left short of funds rather rapidly. I suggest that 50 per cent is too high and the Minister for Finance should review that percentage with the Central Bank.

The job creation possibilities arising out of the provisions in the Finance Bill can be achieved. In the course of his budget speech the Minister told us that the job creation programme involved the public sector, the building and construction industry and youth employment. The Government are providing funds for AnCO, the IDA, semi-State bodies and other organisations to get on with the task of creating jobs. It is also the Government's intention to create more posts in the Garda Síochána and in the Defence Forces. There has been far too much comment to the effect that the Minister was depending too much on the private sector. It is my view that the budget contains the right financial mix. While there is a great deal of emphasis on the private sector there is also a great deal of involvement and investment in semi-State and Government agencies. The Government are not depending entirely on the private sector to implement their job creation programme which is demanding and ambitious but which must be achieved. I was pleased to see that the Minister had discussions within the public service to ensure that there was the maximum movement in the creation of jobs. The money provided for semi-State organisations for the paying of chief executives and other employees should be looked at in the light of the overall performance of those concerns. It is wrong that the questioning of salaries should be isolated to individual areas. Many of our semi-State concerns are doing a worth-while job and, naturally, their chief executives and other management staff should be paid accordingly.

That is not relevant when discussing the Finance Bill.

Under section 2 the Minister proposes to take constructive action on the movement towards equality in relation to female taxation. This subject has been debated fully and we have all heard comments from various quarters but in the Bill we have the first positive indication of a change in the structure of taxing females. It is now proposed to permit married women to opt for a combined assessment of taxation with their husbands. That is a new freedom and it is my view that all married women will welcome it.

The provisions in section 7 give us another indication of the Minister's anxiety to get individuals involved in the firms where they are employed. In this section the figure of £2,000 has been detailed as acceptable for the acquiring of shares and this measure gives employees working in a public company an opportunity for real participation in that organisation. It is acceptable and desirable within companies that the individuals creating the wealth should now be encouraged by section 7 to be actively involved.

In a company producing good results the figure of £2,000 would give a welcome income to an individual who has contributed over the years to that organisation. Because it is a public company the figures are available, and the individual knows that his or her investment will be soundly based on practical results over the years. It is to be welcomed that the Minister has recognised the reasoning that individuals should have the opportunity of investing in the company to which they have devoted their energies and been dedicated over the years. The figure of £2,000 is realistic in today's monetary terms. Section 7 will find great favour with a number of people.

In section 9, positive action is taken in an area to which a good deal of lip service has been paid in the past. The cross-Border worker taxation arrangements, as outlined in section 9, for the first time create a real incentive and give real encouragement to cross-Border development. There is no doubt that there is a good deal of interchanging of labour along the Border and section 9 recognises this and gives it due attention. It rectifies what has been a positive problem in getting tax assessments from the Revenue Commissioners on both sides of the Border. There were adverse effects on people's finances because of the lack of this provision. Section 9 will find wide favour in that part of the country. There will be a greater utilisation of the committed EEC finance available for cross-Border development. It will smooth that path and is a very welcome measure.

Section 19 which deals with manufacturing companies develops a formula for easy progress in the area of company expansion, with the proviso of an increase in employment. The 3 per cent growth, interlinked with the 25 per cent corporation tax relief and the 19 per cent increase in sales in 1976, is a very neat financial package and gives the small manufacturing organisations some worthwhile relief so that they are not tied up in red tape and Revenue Commission bureaucracy. It is a positive, clear-cut method of assessing growth and increased employment.

In section 19 the onus is fairly and squarely on the companies' auditors. This minimises the necessary paper work and also recognises the reasons why companies should expand and increase employment. That is in direct contradiction to Deputy Desmond's philosophy that there is no real incentive for the private sector to create new jobs. I disagree with Deputy Desmond. I do not know how any private company or semi-State company could prosper financially without creating employment. While we may be in an era of automation and technical advance—and possibly the level of knowledge of the employee may have to be higher—if companies are to earn more finance they must increase output particularly in the manufacturing sector. Naturally that requires additional jobs.

It is totally incorrect to state that the private sector can profit greatly and yet not create new employment. The Revenue Commissioners have a great insight into public and private companies. With the information gained by assessing companies' accounts over the years expertise is developed, and the Minister can readily know how companies are performing and whether they are making excessive profits. Any Minister charged with the responsibility of looking after our financial affairs will give detailed and due recognition to performance in the area of profit making.

Our company taxation provides a fair balance, around 50 per cent. In the Bill there is also potential for relief on the reinvestment of profits which is another indication of the Government's strategy planned, if you like, on the private sector. There is a benefit to the community at large in the job creation area by giving this type of reinvestment relief on company profits. When one tries to identify State investment and State involvement in the private sector, one walks a very tight rope. It needs to be carefully balanced.

In the Finance Bill and in the budget the Minister has balanced the country's finances very intelligently. The private sector has been given the necessary encouragement to invest and expand and create the necessary jobs. The Minister can still collect a satisfactory level of company tax. It is wrong to suggest that the private sector will profit too much from this budget. It will not, and that suggestion should be denied positively in this House.

On 1 February the Minister introduced the budget and dealt in great detail with overall financial policy. Since then, this aspect has been highlighted and it is neither helpful nor factual to over-emphasise the advantages in the budget for the private sector. The job creation programme is outlined in the documents accompanying the Minister's speech detailing 10,000 new jobs in the public sector. If my reading is correct, there will be 3,170 jobs in the building and construction industry of which 1,670 will be direct labour. Here we have a mixture of some 50 per cent new job creation by central or semi-State agencies.

Surely this mix is an acceptable arrangement between State investment and private enterprise. The figure of 50 per cent is satisfactory. There will be major investment in many areas— roads, hospitals, IDA factories and so on. The Minister is to be complimented on recognising the need for rapid development in the building sector, a sector which had slowed down to a snail's pace in the concluding years of the Coalition's term of office.

I am having difficulty in assessing the true unemployment situation in my constituency. The overall unemployment figure is available, yet there has been a great increase in the number of advertisements in the situations vacant column in the daily newspapers. There is a need to study this area in order to determine the balance between the number unemployed and the many organisations seeking staff. While there have been many representations made to me in regard to unemployment in my constituency, it is certainly not the biggest problem. The Minister and some of his colleagues in the Cabinet should discuss ways and means of placing more unemployed people in the newly-created situations.

The youth employment scheme is already under way. In my constituency a number of schemes were proposed for youth employment and some of these schemes are being implemented. The recruitment of 150 first-year construction apprentices by local authorities is desirable. I hope that the finance made available for that scheme will be fully utilised.

The proposed incentives mean that manufacturing industries will have the facility for further investment. The free depreciation which will be available to industrialists for expenditure on new buildings with effect from 2 February is very desirable. This clear-cut financial policy will allow companies to build new premises which will, in turn, create more employment. The financial arrangements for those two schemes and the free depreciation being allowed for new plant and machinery are incentives to industrialists to expand.

Another great aspect of this Bill is that small companies will have their corporation tax thresholds raised from £10,000 to £20,000 and from £15,000 to £35,000, depending on their category. Much has been said of the need to assist small companies. In increasing the tax thresholds for those companies the Minister has given them reason to expand and reinvest.

The assumption of the exchange risk liability by the Exchequer for the Industrial Credit Company with the European Investment Bank is also very desirable. In the past five years nonsterling currencies changed their values rapidly and created burdens for people who were not international financial experts. It had a detrimental effect on companies investing in equipment outside the sterling area as the fluctuations were excessive and threw the investment programmes of small companies into chaos. The recognition of this anomaly by the Minister is a move in the right direction.

The new duty-free facility should assist the sale of Irish products. There is no doubt that the commuters between our two countries will benefit and the output of Irish companies should increase as a result of this positive move.

Much has been said of the abolition of the wealth tax. It has been said that it was unworkable, inefficient and did not justify the reason for introducing it. We recognised the problems in this area and the Minister has taken positive action. The lack of comment from the people who are supposed to be most upset about it may be frustrating for the Opposition. The abolition of this tax has not created complications and we are better off without it.

The taxation of farm incomes has already been dealt with. The amount of finance to be derived from this source —£24 million—is a reasonable contribution, particularly when one considers the need for reinvestment in farming. There must be a balance between the taxation policy and the need for investment in farming. It is hard to assess Deputy Desmond's criticisms of the abolition of tax on co-operatives.

Here is the ideal control arrangement for worker participation in an organisation. The co-operative is the ideal way for everybody involved, the farmer members and the employees, in getting the maximum return for investment. Normally over the past ten years the need for equipment investment in the rapidly expanding co-operatives has utilised the finance produced in the way of profits. If any co-operative was profiteering excessively, naturally those members and the individuals employed were going to get the benefit. If there was a great need for further investment in capital expenditure, naturally the co-operative would invest in that area, and this would create employment. The employment thus created would normally be in the country and away from the highly populated areas. How any Government could justify the taxing of co-operatives is beyond the understanding of this side of the House and the Minister at the first available opportunity has abolished such taxation. This will make a real possibility for these organisations to expand, to create employment and to invest continually in the food processing industry, and this we all agree is highly desirable. Over the years we have had many reports and heard many comments on the need for added value and for further processing. When one wants that sort of expansion, to tax the organisations endeavouring to achieve the maximising of Irish food exportation does not make a lot of sense. In abolishing the tax on co-operatives the Minister for Finance has taken the right decision. A qualification on the abolition of that tax which, is very desirable, although it may not meet with favour from a lot of the processors, is the fact that sales to intervention will not be exempt. This is a positive step towards urging on our co-operatives—and also private enterprise in the food processing area particularly—that they cannot abuse the EEC floor prices guarantee situation by putting their products into intervention. It is up to the co-operatives and the private operators, as the Minister for Agriculture has urged recently, to sell their products other than to intervention. The fact that the Minister has recognised this and has exempted sales to intervention agents is a welcome and progressive step.

Regarding value-added tax, I welcome the provision for the restoration of the 1 per cent recoupment allowed to VAT-registered customers of unregistered farmers in the income tax year 1978-79. The provision for the option of different methods of assessing tax is also welcome. I would like to think that many farmers will opt for the accounts system which will enable them to organise their affairs efficiently and they will see a real return on capital invested and so will get the maximum advantages of the tax system. They will realise that borrowing and reinvestment done constructively with the assistance of their accountants will bring investment and progress into farming.

The Bill should bring about the right financial mix for the private sector, the semi-State organisations and the co-operatives. There is some financial relief for employment-creating agencies. The Minister in balancing the situation has created the environment for job creation which is so much part of the integral plan of our Government.

We are now at the halfway stage of 1978, and the budget and the Finance Bill giving effect to it have already proved that this was the right financial strategy. The private sector have the opportunity of expanding and of contributing their fair share of tax. For the individual there is a purpose in striving to progress and to improve his income because the taxation burden is far lighter than it was under the previous Government. We heard time and time again, particularly in the last two years of the Coalition's term of office, that it was no longer profitable to work. The high taxes were a great disincentive. The number of manufacturing organisations could not get staff to work overtime in food processing which could have increased our exports.

The financial strategy may be criticised from the far side of the House, but the record stands and contradicts the argument now being put forward by members of the Opposition on this Finance Bill. I welcome the measures in it and I believe it will achieve its aims.

I am happy to have an opportunity to speak on the Finance Bill. I was happy also to hear Deputy Lawlor compliment the former Minister for Finance, Deputy Richie Ryan.

He mentioned that the second half of 1977 was indeed very successful.

There was a change of Government.

That was due to the budgetary proposals——

We were on holidays for three months.

That was due to the budgetary proposals which Deputy Ryan brought in last year, but it was good to hear him get credit from that side of the House. Possibly the Deputy did not intend that. It will be interesting to see this time next year whether the Deputy will be saying the same thing about the present finance proposals and the budget we have had. We certainly will not be saying it. We will not be talking about the growth rate of 5 per cent. We will not be talking about general improvement in standards, because what we have before us is not a recipe for success. From listening to the Taoiseach and to the Minister for Economic Planning and Development it is clear that Fianna Fáil are endeavouring now to extricate themselves from the rich promises they made at the time of the last general election. To that extent they are blaming everybody else for the failure to reach their job target. The industrialists are being blamed, as are the trade unions and management. However, I am glad that industry have made it clear that they will not be the whipping boys in the event of the job target not being reached. They are making it clear that they were not the ones who made the projections and the comments. It appears now that the job target set is not attainable.

Reference has been made to the creation of 10,000 jobs in the public sector and to 3,100 jobs in the construction industry but it is interesting to note that more than 11,500 of those jobs would be basically in the public sector. This is not providing the type of employment we need. Nevertheless it is to be welcomed. There is need for a much greater generation of jobs in the private sector. Public sector jobs must be paid for by the taxpayer whereas extra jobs in the private sector mean the generation of industry, of sales and of exports in order to create the capital to pay for those jobs.

I am disappointed that the Government have decided to abolish wealth tax. During the long and protracted debate on that legislation, mass hysteria was generated by people who in the main would never have to pay wealth tax but at the time it was fashionable to object to the legislation, to pretend that perhaps one might be caught in the net. It had a sort of snob value. That kind of propaganda was abetted by Fianna Fáil, that party who like to be known as the party of the people.

Perhaps the people who are really represented by Fianna Fáil are those who took their money from the country in their attaché cases and invested it elsewhere. Those who could liquidate their assets overnight and move out could not have had any stake in the country in the first place and no doubt our economy will prosper without them. While the wealth tax did not result in a great amount of revenue it was important that there was provision for it. It was a radical taxation which might have been introduced a little before time but once it was on the Statute Book the thresholds could have been regulated at any stage in order to make it attractive one way or another. Its removal is another indication that the wealthy and the articulate, though they may be small in number, still have much influence in certain Government circles. Having regard to the future development of our natural resources we are likely to become a wealthy economy and in that situation it would be important to have a wealth tax so as to ensure that in so far as possible the wealth will not fall into the hands of a relatively small number of people but will be distributed as widely and as fairly as possible. That is why it is regrettable that wealth tax is being removed. It was the mechanism by which wealth could be clawed back and distributed equitably.

It was a courageous step on the part of the Government of the day to have introduced wealth tax. Such a move required a commitment but it is sad to find that commitment being discarded now. Is it being discarded because of a promise made during the election campaign and, if so, to whom was that promise made? Was it made to people who financed the campaign of the then Opposition and who are now to be paid back in this way? There has not been any great indignation generally regarding the removal of wealth tax but the reason for this may be that people are not aware of what is involved and have adopted the attitude that since the legislation would not have been likely to affect them anyway, there is no need to protest its removal. That is not the right attitude. However, it is the duty of the Government to govern and not to continue running before the wheels of the better off. That is why I must be harsh with the Government in this regard. No doubt they will herald this move on their part with a fanfare of trumpets and will regard it as being the fulfilment of one of their promises. I would not accept the Government's argument that this tax was the cause of a flow of capital from the country. I contend that only a small amount of capital was taken out of the economy.

As Deputy Desmond said, in the year in which the legislation was introduced there was massive investment from abroad into industry here. If there had not been the type of hysteria that was generated by Fianna Fáil I doubt whether any capital would have been taken out of the country. So much, then, for the patriotism of that party. In order to create a sense of panic they endeavoured to give the impression to the people that all would be affected by the tax. They tried the same tactic with the farmers at the time of the last election in respect of taxation. The removal of the wealth tax is a serious and a retrograde step. They should reconsider their position on this. It does not have to be a harsh measure but it should be left on the Statute Book to claw back money which belongs to the Irish people.

There is reference in the Finance Bill to married women who are working, but there is no reference whatsoever to the housewife who decides to remain at home and rear her family. Such women are the bedrock of our society and they get very little credit. I was glad that Deputy Desmond made the point that the tax allowance for children should be paid directly to the wife, together with the children's allowances. I should like to see the Government showing their commitment by giving an allowance on top of that. This would encourage many married women to remain at home. If a married woman wants to work, she is entitled to do so, but many of them have to go to work for economic reasons and, as a result, their families are neglected. It then becomes a matter of the latch key children. Such children are at risk and it is important to recognise this. If we had taken such steps in the past we might not now have to concern ourselves with places like Loughan House and we might have a more developed society. The fact that there is no increase at all in the amount of the children's allowances highlights the lack of commitment to the home by the Government. They are more concerned about their well-heeled supporters than the ordinary people. It is regrettable that a party who had at one time a reasonably good social commitment have now drifted away from that and tend to judge things purely on expediency. They have conned the people, but the saying is: "If you can fool me once, it is shame on you; fool me twice, shame on me". That is the way it will be. The people will not be conned again.

We are now having to raise taxation and to borrow—literally pledge the nation—to pay for election promises. When the Taoiseach was talking last week he made the point that all available resources, all monetary funds, must be directed towards job creation. It is a pity he did not think of that a year ago when he was prepared to promise this, that and the other in order to gain power. Now Fianna Fáil have power and the chickens are coming home to roost more quickly than I thought they would. The money is not there and they are now looking for scapegoats. Who can they blame? Perhaps they will say people are responsible because they did not respond. Perhaps they will lecture the trade unions and tell them that they should control their members. Perhaps the private sector are not providing enough jobs. That will not wash. The Government were elected to govern and to fulfil the promises which they made.

They promised to remove the rates and they did so. I was in favour of removing rates up to a valuation of £25 or £30, but now people with large houses with a very high valuation are laughing up their sleeves. This is a nice bonanza for them and they are the people who could well afford to pay rates. People living in local authority dwellings whose valuation is not very high got a very small reduction, but the following fortnight their rents were raised. There was no bonanza for them. People who live in large houses could well afford to pay £500 or £600 in rates every year and some of them could cushion it against taxation in some way. They are quite happy because they are getting the benefit of this measure.

Was there any clamour to have car tax removed? I do not think so; it was irresponsible. The Taoiseach is now telling us that we must devote all our resources to job creation and the Minister for Economic Planning and Development talks vaguely about cut-backs and critical reviews of expenditure on health and social welfare services and local authority housing. At whose expense will this critical review be? It will be at the expense of the less well-off in our society, people who have medical cards, people who need educational grants and others who are basically dependent on the State. Social welfare will be reviewed and inner-city housing will be critically reviewed. The well has run dry and these areas must be attacked. Having given money back to those who have, we are now looking around to see how this money can be recouped. It will be recouped from the poorer sections of our society who may not kick up as much noise as the people who were affected by the wealth tax. That is the dishonesty of the package which we have had to tolerate since this Government came into office.

First-time buyers of new houses are now being given the great bonanza of £1,000. Previously they were given money by way of grants as their houses were being built but now, in order to get their £1,000, they must be living in their houses. House prices will increase by 20 per cent; a £10,000 house will cost £12,500 and the grant of £1,000 will be of little help. Within a few months its value has been eroded. The glitter and the glamour has gone from that exercise.

We hear a lot about the construction industry. The National Coalition were not long in power before they started criticising us although we built more houses than any Government. The industry has little to say these days. The building societies are tightening up the money supply and it is almost impossible to get finance from them. A fire brigade action is required here. The Finance Bill has done nothing to help in this area. In my view the banks should be required to lend some of the vast profits they are making in order that people may be able to buy their houses. They do not want to lend money for this purpose because the time factor is too long——

They are doing it.

At 3 per cent interest to their own employees.

I know of a person who has an account in a bank here. He has a good job and he sought a loan of £7,000. He was more or less promised the loan but in the end he was refused. So much for the banks lending money. They can shove up the interest rate by 2 per cent and with one stroke of the pen that means additional millions of pounds for them. Yet they are not prepared to lend money for long periods to people who want to buy their houses and thus have a stake in the future of the country. The Government should direct the banks to help and if they do not help they should impose taxation on them in order to claw back the money. In turn this could be used by way of a revised SDA loan system to help those in need. If money is not available for house purchase the building industry will grind to a halt. The situation is serious and I am surprised there was no reference to it in the Finance Bill. I think the Government thought the situation would right itself. The only thing that will happen is that interest rates will increase substantially and, consequently, the repayments will be higher. This will increase the cost of living and will fuel inflation.

The Government indicated in the White Paper that they will not develop centre city housing to a great degree. Neither have they given any incentive to the private sector to carry out such work. I am rather surprised about that. There is a real and viable proposition here. There are many vacant sites in the inner city areas. They were bought originally for office development but because of the market situation there is a reluctance to build and invest. These sites could be developed for housing and I think the tax mechanism could be used to give an incentive to the developers. In that way we would develop our city in a way that would help people. This matter should be dealt with urgently but the Government have not made any move. I know the building industry would be interested in such a project. The advantage would be twofold; in addition to local authority housing we would have private housing and this would give a good social mix. Also, it would provide much needed employment and enhance our city, thus making it a better place in which to live. However, that would require some kind of social commitment that is lacking in the Government. I suppose my suggestion will fall on deaf ears. I am rather surprised that Fianna Fáil's friends in the building industry have not prompted them to take this course. Perhaps they have but it may be that the Government have not the will to do it.

Since the budget there have been a few mini-budgets. Some people were promised a reduction in the price of the stamp and they got this but a few weeks later there was a Bill before this House to increase the cost of the stamp. So much for the promises made by Fianna Fáil; so much for their concern for the lower income group. Quite recently we had another Bill dealing with an increase in health contributions. That was more money that had to be paid. There was a lot of talk about tax concessions but when all the increases are considered there is very little left. The sum does not work out too well for those for whom we should be most concerned.

We hear a lot of talk about incentives for private industry. Some months ago a youth employment action team was heralded with a great fanfare of trumpets. Many parents concerned about their sons and daughters who have left school had great hopes of this. This employment action team sent in a report last November but we have heard nothing about it since. I am not blaming them. What teeth had they? What role had they? When they talked about apprenticeship AnCO politely told them that was their area. When they talked about industrial development the IDA told told them it was their area. Where is this action team going? Was it just set up as a window dressing exercise to fool the people? One does not play politics with such a serious thing as youth employment but it appears that is what has happened. It is important that we examine the role of the youth employment team before it drifts into oblivion because it has no support.

We hear a lot of talk about the incentives for industry but we do not hear any talk about the creation of good industrial relations. The Minister for Labour recently indicated that worker participation and profit sharing are a worker's right. That is empty talk because one knows what one is told when one seeks one's rights. We must create a climate in this area. The obvious one is incentive. The industrialist must get incentives and the worker must get incentives. Profit sharing and a greater stake within the company the person is working in are good incentives. Incentives for workers should have been provided in the Finance Bill. We must give workers their rights and we must give them the supports to attain their rights.

Deputy Desmond referred to something the Minister for Economic Planning and Development said about us having to go the road of the Japanese, the Germans, the Cubans and the Russians and that it was quite easy to see what road the Irish people would choose. We should consider why the Germans and the Japanese succeeded in industry. I believe they gave incentives and they made it possible with greater worker participation. It is important to give industry incentives. The fact that this is missing from the Finance Bill clearly indicates a lack of commitment from the Government to improving industrial relations.

One cannot legislate for industrial relations and worker participation. One must create the climate for this. It is easy to create the climate once the proper incentives are given to industry, both management and worker side. Management and workers will eventually be seen as one unit with one concern, to achieve greater productivity, greater markets and employment. Talk will not make those things happen. The Government will have to have a blueprint for creating jobs.

I believe that by generating the right type of industrial climate we can ensure that our productivity will rise and as a result we can pay better wages. When one talks to people nowadays about the high cost of meat or butter one is told that we have to pay the EEC prices because that is the going rate. We do not hear anything about EEC wages. We will only get that type of income by increasing productivity, by getting the worker and management together in harmony, the worker having a stake in the profits. I believe that we will then solve a lot of our problems. Irish workers will respond to such a development. They do not like to be treated as units to be used from a particular hour in the morning to a particular hour in the afternoon or evening. They want to be made part of something. They want a sense of responsibility.

We all talk a lot about taxation. I am always aggravated by the plight of social welfare recipients. Take the example of an old age pensioner who, because he was prudent during his working life has a pension. The cumulative effect of that, plus his social welfare benefit takes him into the tax net. This should have been reviewed long ago. Pensions should not be caught for taxation whatsoever and should be outside the net. Even given the amount a prudent person might have saved during his working life his pension should not be taxed. Most pensioners with whom one speaks today, when they receive a bill for income tax, genuinely feel that it is their old age pension that is being taxed. While in theory it is the other side of the coin, as far as they are concerned their old age pension is being taxed. It is time something was done about that. That consideration is long overdue in any type of tax reform that might be introduced. There are arguments for and against, but it is sad that the State, should, like the proverbial Scrooge, penalise old age pensioners at the end of their days, people who through prudence and foresight saved for the rainy day. It is wrong and should be reviewed.

The overall taxation question should be reviewed. We have drifted along with our present income tax code for too long. Evidently it is felt that because it yields the requisite revenue it is not necessary to alter it. It is time we had a radical re-think on the PAYE tax system to see what can be done because it acts as a disincentive in lots of ways to people at work. The Minister of State at the Department of the Taoiseach mentioned that it was a disincentive to people working overtime but that, because of the new tax concessions, now it would not be. That is ridiculous because, by and large, people will continue to pay tax on their basic wage and they will also be taxed on any overtime earnings. I am not advocating that overtime should not be taxed because that would encourage overtime with which I would not altogether go along. I believe that people should not be taxed out of existence. We should examine the whole PAYE tax system to see what can be done to streamline it, making it more equitable and raising substantially the thresholds to take a lot of people in it out because they would be literally on the bread line and yet be paying income tax which, in my opinion was never intended.

On the question of the removal of tax on co-operatives, it rather surprised me that the Government did this because they are always advocating free enterprise. Indeed co-operatives are in competition with free enterprise. The only difference is that if free enterprise makes a profit they pay tax on it whereas co-operatives do not. I have an open mind on the subject. Certainly, coming from a party always advocating free enterprise. I found it rather surprising. With regard to free enterprise or State enterprise, it would appear they really do not know what horse to ride: it apparently depends on the mood and on the day they make a statement.

There is no real impetus in the package before us. The budget of 1977 did have some impetus, which was proved by the performance throughout that year. It will be interesting to see whether this package will have the same effect. I do not think it will. Rather I think what we will be talking about in ensuing months will be the removal of food subsidies, cuts in health, housing and education, increased taxation. Have no doubt about that. All of these things will be to pay for the election gimmickry of last June. It will be a high price to pay but they will not get away with it because we are now dealing with a more sophisticated electorate, with a greater number of non-committed voters who are watching. They will see their standards being eroded, as I believe they will have to be as a result of the noises being made by the Taoiseach and the Minister for Economic Planning and Development. There is no question but that they are softening up the ground, preparing people well in advance for what will happen and that they will bring in these measures hoping that they have prepared the ground sufficiently well. I believe they will not have prepared the ground, that our people will not accept it and will await their opportunity to deal them the blow they deserve for conning people into voting for them last time.

Certainly the chickens have come home to roost much sooner than had been expected. That is a clear indication of how in the year ahead and in the succeeding year they will juggle the books to make ends meet. The only way they can make them meet is to borrow massively again, which I do not believe they will do or will be allowed to do. Rather the World Bank will step in and tell them: "This far and no further. You will not get any more credit from us. Get your own house in order." The only thing they can do then is to cut back on the services about which they are now talking, those that affect the less welloff. This Finance Bill augurs very badly for the future. The deception of last June is now manifesting itself and before very long we will see its real fruits.

Having listened to speeches from both sides of the House for the last couple of hours I am becoming more and more convinced that one must change one's opinions once one crosses the floor of the House. I have listened to all of what Deputy F. O'Brien had to say. I agree with practically everything he said, but I should like to see everything he suggested implemented. I have listened to the condemnation of private enterprise, not exactly condemnation but a suggestion that private enterprise will be unable to do the job and that most of the money which, quite rightly, is going to private enterprise should be allocated to doing more in the public sector. I would agree with that.

However, I should like to point out that as far as I can recollect, the vast majority of semi-State bodies were started by Fianna Fáil. The National Coalition Government, to which the two previous speakers, Deputy Desmond and Deputy Fergus O'Brien belonged, were there for four years and I certainly saw no evidence of the Government stepping in during those four years to help the private sector. I did not see any subsidies offered as incentives to industrialists in order to create more jobs. There was nothing about worker participation.

I am very keen on the co-operative movement. Criticism has been voiced of the Minister removing the tax on co-operatives. When we started the co-operative movement we did not do it in order to make money and I compliment the Minister on removing this iniquitous tax. Any profits made are ploughed back to provide better services for the members. I have a social conscience. I believe the co-operative movement is the only movement imbued with a social conscience. When we were organising I know the nights I spent travelling around at my own expense. In those days the members of the committee had no travelling expenses. The members of the committee today have travelling expenses. They are not, of course, paid. If one had to travel to Dublin one did so at one's own expense.

The co-operative movement has done more than anything else to help the downtrodden. The movement would not survive if it were taxed. The benefits for the members are many. They subscribe a certain amount of share capital. They have a vote. They elect the committee. If all the members do not take an interest that is their own affair. The movement is for the benefit of the ordinary plain people who cannot do things for themselves as individuals because they have not got the capital but can do things for themselves by coming together with other people in similar circumstances. One of the worst mistakes the National Coalition Government made was imposing a tax on co-operatives.

A great deal has been said about the private sector. That sector will reap many benefits under this Bill. Money is also being spent in the public sector. Jobs are being created in education and health and money is being spent on youth employment schemes. The Minister is not concentrating completely on the private sector. He is also considering the public sector. Like Deputy Barry Desmond, I approve of a mixed economy and that is what the budget and this Finance Bill are aiming at.

I agree with practically everything Deputy Fergus O'Brien said but it takes money to implement policies and, during the four years Deputy Fergus O'Brien was on this side of the House, his Government did not do very much to implement all the things he would now like to see implmented. The important questions is: Does the trade union movement want worker participation?

It is a good question.

It is a very good question and it is one to which I would like to get a definite answer. I would like to see workers sharing in profits and having some say in policy but when I asked if that was what they wished I was told they would much prefer to be on the other side of the table and management could mind their own business. That was the answer I got. Like Deputy O'Brien, I believe workers participation would make for better labour relations. Workers should know what profits are made. They should have access to balance sheets. They should know how much is paid in salaries, how much is put aside and how much can be given by way of bonus. I could not find agreement on that in the co-operative movement. It did not work.

Deputy Desmond said the removal of the car tax was no benefit to workers. I can tell him it is of considerable benefit to workers in the west of Ireland, workers who have to travel 30 miles to the industrial estate in Galway. For them cars are a necessity, not a luxury. It is not like Dublin where you have a bus service outside your door. The removal of the car tax was of tremendous benefit to workers.

Debate adjourned.