I have listened with considerable interest to many of the contributions to the debate, not least to that from Deputy Callanan. Sometimes I think he is in the wrong political party and if I did not think it would compromise his rise to fame in the ranks of Fianna Fáil I might invite him to cross the floor of the House. However, I take some consolation from the fact that Deputy Callanan could hardly be further physically from the Fianna Fáil front bench and still be in a position to speak—he is that far away from it.
I share some of Deputy Callanan's criticisms of this Bill but I would go further than him in many respects. When one looks at this Bill overall it has a depressing and perhaps even a terrifying aspect. Its financial implications are alarming and its social implications are deeply disturbing. I believe it to be a Bill that has been put together in a lazy and crude way and one which is almost guaranteed to be socially regressive.
It illustrates also very nicely a major problem in politics, that is, the difference between electoral strategy and economic strategy. Any student of politics who is in any doubt as to the importance of the difference between electoral strategy and economic strategy could do no better than to compare the electoral strategy of the Government with their present economic strategy. Part of the problem is that it creates major problems for a conscientious Opposition. Of course, the main problem created for the Opposition is that they are now the Opposition and not the Government, but that is water under the bridge and we will not go into that. There are subsidiary problems that are just as real. Is it the duty of an Opposition who have been defeated in a general election on the basis of promises and fiscal policy which they knew to be economically unsound to insist after the election on the full implementation of this fiscal policy regardless of its effects on the economy and on the social structure of the country? I believe the time has come to say "halt". It is appropriate for me as a member of the Opposition and speaking on this Finance Bill to ask the Government seriously to consider whether they would not admit the possibility that their electoral strategy was economically and socially disastrous and that they would do better to abandon some of the concessions and other items in the Finance Bill for the sake of the economy, society and the country generally rather than to rush headlong into it and to expect our foreign bailsmen to pay for it.
In contrast to any socially progressive task, this Finance Bill is plundering the future to pay for the past. The past it is paying for is the past 12 months and I suspect that the future it is plundering will go far beyond the term of office of the present Government. It is socially far more responsible to tax the present to pay for the future but there is not a lot of evidence that the Government are prepared to do that in the Finance Bill. Of course taxation is at the heart of politics. It applies transfers between individuals, different social groupings and institutional groupings. In this Finance Bill we are transferring money out of the present and the future to pay for the past.
The first aspect of it to which I should like to pay some detailed attention is the question of taxation of the farming community and of farming co-operatives, to which Deputy Callanan paid such attention. I take his point that in the early days of the farming co-operatives, and perhaps even now in some cases, the co-operatives were genuine self-help organisations that ran on a shoestring and that were encouraged by the voluntary efforts of people like Deputy Callanan to create genuine self-help structures for the farming community. However, that day is long past for any farming co-operative. There are now different kinds of farming co-operatives and some of them are very big business indeed. It is absurd to say that just because a particular big business happens to be an agricultural business that its success should not be taxed modestly. The tax on farming co-operatives was modest indeed. I am not aware of any farming co-operative who have gone bust because of the tax put on them by the previous administration. The removal of this tax by the Government was unnecessary. It is the type of gesture to the farming community that they do not need. They are now very much wealthier than they were when we joined the EEC but that does not by any manner of means say that all farmers are much wealthier. Deputy Callanan said that almost one-third of them have cash incomes of under £2,000 a year. That is a dreadful situation for anybody interested in social progress.
On 23 May I asked the Minister for Finance the number of farmers paying income tax in each of the last four years and if he would express those figures as a percentage of the total number of farmers in each year. The reply to Question No. 91, which was tabled in the Official Report, gave me the information that in 1978-79 there were approximately 170,000 farmers, there were 26,000 farmers assessed for tax on their farming profits and these amounted to 15.3 per cent of all farmers. Deputy Callanan will be as aware as I am that the money which has gone into agriculture since we joined the Common Market has been as evenly distributed within the farming community as money which has gone into any other sector, perhaps even less equally distributed than in many other sections in the community.
We should not lose sight of the fact that this overall prosperity of the farming community can conceal the very real crisis which agriculture in Ireland is facing. If we look at the structure of the ownership of agriculture in Ireland and the distribution of income in the agricultural sector we can very easily come to the conclusion that in industrial terms Irish agriculture is in the situation of a company which is ripe for a take-over. That kind of situation does not need concessions to the wealthier 15.3 per cent of Irish farmers and it does not need the window dressing of the removal of the tax on farming co-operatives; it needs a much more subtle and sophisticated analysis. Over 62 per cent of all the farms in the country are under 50 acres. Many of those are still struggling to keep their heads above water.
Dr. Jim Frawley, who lectures in the rural sociology department at the economics and rural welfare research centre of An Foras Talúntais has estimated that in 1972 only 15 per cent of farmers had an education beyond the primary level and only about 1 per cent have been to agricultural colleges. The reference is to an article in The Irish Times of 18 March 1978. This imbalance in the agricultural sector must be terrifying for anybody who has the future of our agricultural community genuinely at heart. I doubt if the tax concessions to the farmers in this Finance Bill, which are almost double in percentage terms to the tax concessions to PAYE workers, will have any real effect in meeting the substantial structural and economic problems of the farming industry. The removal of the wealth tax will not add one jot to the need to find a solution to those problems, I suspect that not even the wealth tax produced a great deal from the farming community.
A married farmer with four children under the wealth tax who had, for example, agricultural land and buildings valued at £120,000, stock valued at £30,000, farm machinery valued at £10,000 and perhaps a loan of £15,000 would have been liable for not more than £10 a week in wealth tax. How does that compare with a net total of £145,000? What will he do with the £10 a week he will get from the abolition of wealth tax? What use will it be to approximately 15 per cent of the farmers with the tiny acreage I have already described?
When Deputy Lawlor spoke about the removal of the tax on the farming co-operatives he made the argument that this was necessary because there was a need to provide jobs especially in the western areas. There is a need to provide jobs everywhere, not least in the western areas. The fact is that over the last few years the employment situation in what used to be called the underdeveloped parts of Ireland has improved at a much faster rate than the employment situation on the the employment situation on the populous east coast. Perhaps this redress of the balance was necessary. It is now true to say that as far as unemployment is concerned it is double in the eastern crisis area and the urban areas and not those parts in the midlands and the west where they have managed with some success to build a mixed economy based partly on agriculture and partly on industry.
The concessions given in this Bill will have to be paid for. There is a considerable dearth of information about who will pay for them and when. At the Fianna Fáil Ard-Fheis the Minister for Economic Planning and Development, who was defending the very high level of Government borrowing, which is being used to pay in a short term for this particular package said, as reported in The Irish Times of February 1978:
They had been criticised for increasing the level of borrowing but, he said, the increase in borrowing represented a cost on the economy of only £20 million a year—an amount that could be raised through taxation by adding 6p to the price of a packet of cigarettes.
That was a very clever debating point. We could meet our extra borrowing requirements by adding 6p to the price of a packet of cigarettes. When we come in here to debate the Finance Bill do we find 6p put on the packet of cigarettes? We do not. We do not find even the 3p on the packet of cigarettes, which would have yielded the same amount as the removal of the wealth tax has left us short. It is one thing to talk about how easy it is to put 6p on the packet of cigarettes but it is another thing to come in to the House with a Finance Bill, which has no such tax proposals at all and which is simply giving concessions today and hoping to pay for them tomorrow.
The problem is that the situation is no longer that of the sixties in which the spread of taxation as a fiscal drag caused by inflation enabled Governments, particularly Fianna Fáil Governments, to finance a whole series of reasonably progressive social schemes. The situation now is that we are topping out of a mini-recovery. This is the most dangerous time to expect to pay for these concessions out of borrowing rather than out of taxation. One of the key questions about taxation is that the Fianna Fáil Party and economic policy have always banked on the belief that wage and salary earners are ready and willing to accept unequal shares of an improving economy and that the tax system can be adjusted accordingly. But if the economy is not always improving or growing people are much less willing to accept unequal shares on the way down. It is then that these chickens will be coming home to roost.
In his introductory speech the Minister pointed out that the budget was designed to give a stimulus to activity in 1978 and set the economy on a course designed to achieve our medium-term targets. He argued also that, combined with the income tax concessions provided for in this Bill, the national wage agreement guarantees significant increases in real income. I shall be talking later about whether any really significant increases are taking place and where precisely they are concentrated. But when the Minister speaks about the budget as something designed to set the economy on course for achieving medium-term targets it is obvious that the main target he had in mind was the job target. It is ironic to see how rapidly, after that speech had been made or how closely in context with it, public scepticism was expressed about the ability of the economy to meet the medium-term targets which the Minister is so confident we will meet.
A survey carried out in Business and Finance magazine and reported in The Irish Times on 5 May 1978 gave evidence of a general opinion that, according to the survey, the inflation rate is likely to rise and not fall, current job targets will not be achieved—only 9.4 per cent thought they would—and a growth figure of 5 to 6 per cent for the year was felt to be more realistic than the projected 7 per cent. This survey covered 32 chief executives whose companies represent a turnover of £2,000 million and employ some 30,000 people. These are the people who are being asked to deliver in response to the concessions being announced in this Finance Bill. These are the people who are saying already that they are not sure they will be able to do what is being expected of them.
On the employment problem I must refer to a speech given by the Minister for Economic Planning and Development to a meeting in Clare some time earlier this month and reported in the Clare Champion on 12 May 1978. According to this speech the Minister said that the number out of work was down 7,000 since they took over. That speech was made on 12 May 1978. If the Minister believes that the Government met their initial target by reducing unemployment by 5,000 by the end of last year, he is saying it is down only 2,000 from the end of last year to 12 May 1978. In fact, as we all know, the claim by the Government was that they had reduced unemployment by 5,700 by the end of the year. Therefore, subtract 5,700 from 7,000 and one gets a net total of 1,300 reduction in unemployment from the end of last year to 12 May 1978. We really must have more sense, consistency and honesty about these figures. The really terrifying thing about this speech is contained in the last paragraph where the Minister said that we had to throw away all the reasonable answers and press ahead with the unreasonable ones that will get us the necessary solutions in the earliest possible time. I have no idea what the Minister for Economic Planning and Development thinks are reasonable or unreasonable solutions but it is becoming rather obvious that this Finance Bill is an essential ingredient in the unreasonable solutions which he feels should be adapted and adopted to solve our problems.
Barely was the ink on the Finance Bill dry before the Taoiseach gave stern warning that public investment in areas not directly associated with job creation—no doubt including such areas as health and social welfare, these key areas for social progress— might have to mark time, if not even do worse than mark time while there was more investment in the jobproducing area. To have this speech made at the same time that the Finance Bill was introduced in Dáil Éireann is rather like going to a restaurant and having the bill presented with one's soup. We are now being told what are the goodies but we are being told in advance also what a socially regressive price we are being asked to pay for them.
There have been a number of very interesting contributions from the other side of the House on this Bill and I should like to refer to them briefly. There were those of Deputy L. Lawlor, Deputy Callanan and Deputy Woods. Deputy L. Lawlor, in Volume 306, column 1088, of the Official Report suggested:
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....
That is an example of the kind of over-simplification which gets politics a bad name because it does not put the same amount of money by any means into the pockets of all ordinary workers. In the Fianna Fáil economic and fiscal strategy some workers are more equal than others. In this Finance Bill they are more equal than others if they happen to have no children. I do not know whether this aspect of the Finance Bill is a deliberate antinatalist policy on the part of Fianna Fáil to explain the delay in producing legislation in other areas. I imagine it is merely a part of what I have described already as a lazy and crude approach to fiscal problems needing a much more fundamental and radical reappraisal.
Deputy Woods made a very interesting speech which is reported in Volume 306, column 889 of the Official Report where he says:
I have heard various people say in this House, particularly people who believe in socialism and the more extreme Left view, that we should nationalise everything.
With all due respect to Deputy Woods he is referring here to people, in the plural, but the only person he goes on to quote is Deputy Dr. Noel Browne. If Deputy Woods has evidence that there are more people in this House who have the simplistic belief that the answer to all our economic problems is to nationalise everything he should have the courage to name them and not try to hang this kind of label around the necks of people whose approach to financial and fiscal problems is considerably more sophisticated and responsible than that of the present Government. We are now in a pluralist society, one hopes, and we do not have to entertain this cheap and inaccurate remark which, by implication, damns everybody on this side of the House from myself to Deputy Oliver J. Flanagan because it fails to distinguish between us.
Deputy Woods at column 890 said that for the married couple to be given double the single person's allowance constituted an enormous step forward and a very brave one on the part of the Minister for Finance who has to foot the Bill ultimately and make such provision. The only bill, of course, that the Minister for Finance ever has to foot is a political one. It is not an economic one and I have no doubt that, when that bill is presented in due course, the Minister will find himself with insufficient resources to meet it.
More interesting than either of these two points in Deputy Wood's speech was the following:
I should like to see attention given to the question of children's allowances and the possibility of increasing them. I appreciate it is not a simple matter. With the enormous benefits given by way of income tax reliefs this is not something that can be readily done right across the board. But I would ask the Minister to look very carefully at this problem and to review it to see how children's allowances might be improved in the medium term, particularly in the case of those who depend so much on them. I need not specify who they are. They are people whose incomes will not rise to the same extent as other incomes do. They are people who, because of the number of children they have, are dependent to a great extent on these allowances.
Deputy Woods's analysis of the problems which are being caused and will be caused by the failure to increase children's allowances is a fairly soft one, as befits someone speaking from that side of the House, but he has put his finger on one of the major problems in this Finance Bill, one which is so large that I am surprised the Minister did not notice it in advance or did not even make a cosmetic attempt to shield himself from criticism on it. I refer to this extraordinarily strong bias against the family. I shall come back to this later but, in the meantime, I should like to turn now to one or two of the provisions in the Bill.
One point which I do not think has been raised yet relates to section 1 which provides that, in the case of life insurance policies taken out after 1 February the fraction of qualifying premium allowable as a reduction for income tax purposes will be one-half whereas in the case of policies taken out with Irish companies after 21 May 1953 but before 2 February 1978 twothirds of the qualifying premium will continue to be allowed as a deduction. My understanding of the rationale behind this provision is that it is necessitated by various forms of harmonisation within the EEC. It is permissible, however, to look at the particular form of harmonisation that has taken place.
In the past Irish companies had a somewhat privileged position. Premiums on policies taken out with Irish companies could be allowable against income tax to the amount of two-thirds whereas premiums paid to companies outside Ireland were not so favourably considered. What we have now is not a generalised levelling up but rather a cutting down to size of Irish companies. It would be very interesting if the Minister would give us some indication of the cost implications in terms of revenue foregone by levelling up the other companies to the Irish level instead of levelling down the Irish companies to the level formerly enjoyed by the non-Irish companies.
There is another aspect of this which I believe the Minister may not have taken into account and which he will certainly have to take into account later because there will undoubtedly be pressure about it. I refer to the fact that there are many insurance policies which are used as collateral for house purchase and, if the Minister is serious in encouraging house purchase, in encouraging the building industry and providing jobs therein, he should not be making moves which will reduce the attractiveness of that kind of insurance policy. While on the question of insurance policies it should be pointed out to the Minister that Irish insurance companies have certainly a moral, if not always a legal, obligation to invest premium income in Ireland. On balance, they are far more likely to invest in Ireland in Irish industry and jobs than they are to invest outside but, in this Bill, we have this particular section which militates against the likelihood that they will continue to expand their investment in Irish industry at the same rate.
Section 3 and Part I of the First Schedule remove the cash limits which apply to the amount of premiums for retirement annuities payable by persons in self-employment or wholly nonpensionable employment which qualify for tax relief. This is an interesting concession, though not necessarily a large one. In a recent answer to a Parliamentary Question about the number in the self-employed category earning particular sums it was interesting to see that there is a general scale under which the higher up you go in the income bracket the fewer there are who are self-employed. When you get over the £5,000 per annum level the number of self-employed suddenly shoots up.
I once had the experience, and I would recommend it to any practising politician, of collecting for my political party outside a church in a particularly well-off area in my constituency. It was a couple of days after the previous National Coalition Government budget had been introduced and in that budget there was a modest increase in the amount of premiums allowable as a set-off against income tax. One constituent of mine—he was not a constituent then but I am glad to say he is now—came up to me and pressed paper money into my collection box with an expression of great delight at this unexpected and generous decision by the National Coalition Government. I believe the concessions given in that budget by that Government in respect of this kind of relief were adequate and extending them further in the way the Minister is doing now does nothing for employment and everything for self-interest.
We should have, as has often been said, a national pension scheme. The Government are committed to introducing it. If we had a real commitment of this kind on the part of the Government we would need less of this very large concession to people who are already among the wealthy members of our community. The concessions given in the last budget introduced by the National Coalition Government were, I believe, adequate and fair and were seen as such by those who hoped to benefit.
Section 4, which has attracted a certain amount of attention on both sides of the House, relates to the use of cars on official business by people who have cars as part of their employment. This is the section which actually repeals the National Coalition's legislation on benefit in kind for cars. As the House knows, the Coalition brought in legislation stating that the minimum benefit in kind should be 15 per cent of the cost of the car provided. I think a cash sum of about £300 was mentioned. This proviso gave rise to a lot of dissension, especially among commercial travellers, and there was a good deal of argument that it should be changed and repealed. This is what is now being done.
Even the National Coalition's legislation, which may have been open to criticism, did not put a very heavy premium on the private use of a car by somebody who had a car as part of his employment. Prior to the introduction of the legislation by the National Coalition, the benefit in kind was negotiated between the employee and the Inspector of Taxes. This section now restores the old position. If the Government are honest, they will accept that neither of these systems has proved to be satisfactory in the past to either party.
The Labour Government in the United Kingdom brought in legislation which puts specific benefit on cars of different sizes. The amount of the benefit depends on the extent to which the car is genuinely used in business. For example, a commercial traveller would be considered to have obtained a smaller benefit from the same car than the company accountant who had clearly driven fewer business miles during the year.
There is a possibility of framing sensitive, discriminatory legislation which will take into account the real problems of the self-employed and the commercial traveller, and ensure that people who are already very well off do not get very substantial increases in effective disposable income by perks of this kind. I gather the cost of this concession is estimated at approximately £2 million. Of course, some people will benefit more than others. It will obviously benefit our friend the commercial traveller, and good luck to him. I do not envy anybody who has to spend so much time in his car driving around the country, selling the products of our factories, and helping to create employment.
It may not benefit him one half as much or one quarter as much as it will benefit his company accountant, his company secretary, his company director, who is or ought to be on a far higher marginal rate of tax.
Nor will the section benefit at all the kind of people about whom Deputy Callanan waxed eloquent, the people in west Galway or east Galway who have to sit into a car and drive 20, 30 or 40 miles to work each day. They have benefited from the removal of car tax. That much is true, but they certainly will not benefit from this. Who will argue which is the more important: that a company director should have the free use of a very large and expensive car as part of a hidden subsidy to his salary, and be now given some kind of benefit from it by this Government, or that two, three or four people who have to club together to buy some kind of an old banger in east Galway to travel 30 or 40 miles to work should not get any benefit at all from this section? It is the old problem: to him who hath shall be given, and from him who hath little even that little which he hath shall be taken away. The cost of this small section dealing with benefits in kind adds up to about £2 million, and its social implications are derisory.
I should like to turn now to that general section of the report relating to the benefits and concessions which are being extended to companies in an attempt to get them to improve and increase their employment quota for the years ahead. In this respect we are talking mainly about company taxation, about relief for manufacturing companies. The Finance Bill gives legislative effect to the changes outlined in the budget speech and also extends the relief to companies which commenced to trade after 31 December 1976. For 1977 the original targets of a 3 per cent increase in employee social welfare contributions and a 5 per cent volume, increase in output over 1976 applied, but companies would qualify for the output test if the 1977 sales were 19 per cent more in cash terms than the 1976 sales. For 1978, a company will qualify for the 25 per cent tax rate if its employee social welfare contributions are 6 per cent more than in 1976 or, if it so elects, 3 per cent more than in 1977. There is no output test.
I would ask the House to concentrate on the provisions for 1978. A company will qualify for the preferential rate if its employee social welfare contributions are 6 per cent more than in 1976 or 3 per cent more than in 1977. This is small enough in all conscience. It accepts that a company will not only have to maintain but probably improve its profit margins, its ratio of profit to employee, and it will allow a company to make more profits of this kind and at the same time reduce its taxation. It says there will be no output test whatsoever. At the end of the year I will be very interested to find out how many companies have been in a position to take advantage of this concession. I anticipate that, even with relatively modest inflation and relatively modest productivity, a huge number of companies will be able to claim this concession without substantially increasing their employment and at the same time very largely increasing their profitability.
How likely are companies to put their money into jobs? We have some guide from the performance of companies in the past, and it is not a very hopeful one for the Minister. The spring 1978 edition of Trade Union
Information, and excellent publication which I recommend to the House, points out that, in relation first of all to 28 public companies which reported in the second half of 1977, the total amount paid in dividends by the companies rose by 34 per cent while retained profits showed an increase of only 16 per cent. Directors' remuneration rose by 15 per cent.
Translated into ordinary language for the benefit of such common men as may be amongst us, this means that reinvestment, retained profits, were barely as much up on the previous year as the money the directors put into their own pockets and less than half of what was paid out in dividends to shareholders. We see what the companies' priorities are. I do not blame them. They are in business to make money for themselves, for their directors, for their shareholders. Therefore, it is inevitable that the huge bulk of their profits will go to their shareholders and that they will reinvest only as much as they fell is absolutely essential to ensure the continued existence and increased profitability of their companies.
The same publication, dealing with the 95 public companies, excluding the banking groups who reported in 1977, notes that dividends paid by the 95 companies were increased by 31 per cent and retained profits rose by 22 per cent. The increase in directors' remuneration was 18 per cent. In other words, when we look at the whole year and at these 95 public companies we see a marginal increase in the amount of reinvestment almost matched by an increase in directors' remuneration and a very slight overall decrease in the amount paid out in dividends. The increase in the amount paid out in dividends is a steady 10 per cent or more higher than the increase in the amount set aside for reinvestment, that means in the amount set aside for jobs.
It is already obvious that the private sector is not at all happy with being cast in the role of fairy godmother to wave the magic wand over the very ugly infant that is this Government's fiscal policy. On the 9 May 1978 the CII, according to The Irish Times, called for an increased effort on the part of both Government and business to raise the capital intensity of industry so that competitiveness will be improved and jobs created. I like the line “and jobs created”. That is the saviour. Their hierarchical values are, first of all, raise the capital intensity of industry; secondly, improve competitiveness; thirdly, if you are lucky, jobs will be created.
If I were Minister for Finance I would regard that as a slap in the face to my employment policy. At the same time the Minister for Finance must recognise that job creation in private industry is not the essence of private industry. We in the Labour Party have never believed it was. We in the Labour Party would find it difficult to blame private industry for not meeting the target that we do not believe they can meet, that we do not believe they are structurally equipped to meet— that massive target of job creation which was demanded by the Government and offered to the private sector with the series of bribes contained in this Bill.
Private industry has not been slow to indicate its own concern. In The Irish Times of Monday, 1 May 1978, appropriately on May Day, Mr. Ronnie Hoffman writes:
To a businessman, the creation of new jobs might be the happy byproduct of expansion and development. A businessman employs people to produce things or services. Within reason, the fewer the people and the more they produce, the better. Profit lies in the direction indicated by the cost-effectiveness curve. Job creation outside these parameters can lead only to financial trouble.
Further on in the same article, he writes:
No one who works for privatelyowned, financially motivated business can honestly declare an interest in job creation except as an integral part of profit creation.
Another journalist, even more colourful in his language, Mr. Hugh Munro, writes in Hibernia of 11 May:
Factories are built because their owners want to make products, not because their owners want to make jobs. If they have any sense, if they are the kind of owners we need to see around,...
His "we" excludes me, I hasten to add,
they want to make as much as possible of product with as little as possible job content. People who build factories to give employment are not business men; they are philanthropists.
That is the authentic voice of capitalism and of Irish capitalism at that. We on these benches find ourselves in the unusual position of coming in here to defend the private sector against the charges that are being laid at its door by the Government in its fiscal policy.
It is certainly true that profit creates jobs. We do not deny that. What is also true, and the truth of this is not widely recognised and has never been recognised by Fianna Fáil, is that it never creates enough jobs. If we had the safety valve of emigration this would not matter so much. But anybody who believes not just that private industry and its profitability will create jobs but enough jobs is flying in the face of every aspect of recent Irish economic history that any of us is in any way familiar with.
While we are talking about industry, let us ask ourselves who pays the cost of these jobs. There is a section in this Finance Bill which allows industries to claim against tax liability the amount of money they have to spend on pollution control. Deputy Ruairí Quinn has waxed eloquent on this and I do not propose to repeat what he said or to go into it in any detail, except to point out that this is a classic example of the way in which the invisible social costs of capalist commodity production are rising immeasurably and are being passed on in prices and taxes to people who can least afford to pay them. It is because they are passed on to people who can least afford to pay for them— the working people of this country, by and large—that we have such an outcry about wages. People are insisting on higher wage levels. It is the only way they know how to claw back some of the ground which they have lost to the price and tax policy which is inevitable under our present private industry system.
There are one or two other sections which are important in connection with company legislation and to which I should like to refer briefly. One of them is section 7, which allows unrestricted interest relief to any individual in respect of borrowings made to enable him to acquire shares in a private trading company in which he is engaged either as a full-time employee or in a part-time capacity. The section also allows interest relief up to a maximum amount of £2,000 to any individual in respect of borrowings made to enable him to acquire shares in a public trading company of which he is a full-time employee or a full-time director.
This section is universal in the way that it is framed. We all know that it cannot be universal in the way in which it is taken up. Anybody who suggests that this section will be of the slightest use to a shop floor employee in a major industrial undertaking needs his head examined. We all know who it will be of use to. It will be of use to people who have credit-worthiness —people who can afford to borrow and who, being able to afford to borrow and having the credit-worthiness of the banks and other financial institutions, can increase their own financial income at comparatively little risk to themselves and at somebody else's expense. This is a section which allows the directors of companies to increase their holdings in companies. While one would like to think that the money would be used for investment in companies, we have no guarantee that this will be so.
I should now like to turn to the personal taxation package of this Finance Bill. It is here that the Bill is open to its most serious criticism. We have been told that the total amount of money being given by way of personal tax concessions in the Bill is of the order of £63 million. The punters are always amazed at figures with strings of noughts on them. There are a lot of noughts in £63 million and that is a lot of money, but the question now is not whether £63 million is enough or too little or too much. I accept for the purpose of argument that this £63 million is all that can be applied in personal tax reliefs this year, but I am asking why the Government chose to distribute this £63 million so unevenly across the population. They chose the crudest possible way and the most socially regressive way of giving away £63 million. I do not know how Departments of Finance work, I do not know how accountants work, but I would think it extraordinary if the Minister and the Government when making their decision on the distribution of this £63 million did not have a number of options before them some at least of which would have steered the concessions towards the poorer and weaker sections of our community and the people with families. If they had such options they rejected them in favour of this crude mechanism which will put much more money where money already is. This is the inevitable result of simply increasing individual personal allowances. It means that people who earn more get more.
It is not inevitable that it be done this way. It can be done in other ways which are socially progressive. The same amount of money could be pumped into the economy and into the kind of purchasing that produces jobs in Ireland. It could be done in a socially valid way and not in a way that is socially lazy and irresponsible. It would have been much more complicated, but nevertheless a much more socially progressive approach not merely first of all to distribute that £63 million so that it affected the lower income groups proportionately more, but also to change the bands on which rates of income tax become payable. As an alternative the Government could have changed the bands at which rates of income tax became payable and also could have increased children's allowances. These mechanisms are not difficult. They have an enormous social implication. If the Government considered these options, they rejected them. If they did not consider them, they ought to be ashamed of themselves. Fundamentally they have chosen the lazy way out because they have given a disproportionately high amount of this £63 million to people who are already comparatively well off. That is the very grave danger of underwriting patterns of consumption that do less and less for Irish industry and more and more for the industry of other parts of the world.
In The Irish Times of 2 May 1978 in an article entitled The Good Times, Mr. Colm Boland describes in an impressionistic way some of our current spending patterns, and I quote:
With the average price of a new car now gone well over the £3,000 mark, new car buying would appear to have ascended into the luxury spending category.
I have just bought a car, the most expensive car I have ever bought in my life and I paid £1,600 for it. I do not know where the money is coming from, but it is perfectly obvious where it is going. The money spent on cars is not being spent on Irish industry. It is being spent on imported products which need imported oil in order to run. There is of course a domestic element in the motor industry and it is not very substantial in general terms, but it is substantial in terms of the total amount of money which we spend on oil imports and on the imports of motor vehicles. I quote again from the same article:
Foreign holiday bookings too have taken a leap this year. Crossing their fingers in hope that the Aer Lingus strike will be settled soon, travel agents are predicting a hefty 25 per cent increase in package holidays from Ireland this year.
How much of this money is staying in the country? How much of it is going to the good trade unionists of the Costa del Sol, God bless them, of Greece and of other places? All this money is going out of the country. The Government's consumer boom is taking place in the Datsun factories, in the Spanish hotels and places like that. The article says further on:
Reflecting the same trend has been the relative upsurge since last year in demand for credit to fund purchases of the more expensive household items such as freezers and fridges, vacuum cleaners, washing machines with double glazing and home improvements and extensions on the increase as well.
This is not a scientific article and I doubt whether its author would claim scientific validity for it. However, it does give reasonable and literate expression to what we on this side of the House have been saying, that this is the wrong kind of boost to consumer expenditure which does nothing for Irish industry and everything for the industry of some of our competitors. Even in the area of expensive household domestic appliances it is as likely that we will be subsidising our British competitors as that we will be subsidising our own firms and their employees.
In evaluating the tax savings which the Government say will be made on the budget under this Finance Bill, we first of all have to look at the rates of tax people are paying before we can determine what is their increase in take-home pay. Increases in take-home pay are what count. Because the higher the income the higher the rate of tax charged, it follows that the higher your income is the greater is the value to you of these increases in the personal allowance. For example a married man gets an increase of £630 out of this Bill. If his taxable income is in the first band, up to £500, he will take home an extra £126. If his income is in the second band he will take home and extra £157; if it is in the third band he will take home an extra £220; in the fourth band an extra £283; in the fifth band an extra £315. In the £7,000 plus bracket he will take home £378 extra. This is the money that is being put not into our economy but into the economy of our competitors and into foreign trading interests.
It is clear from the example I have given that the Minister's proposals put almost £400 a year into the pockets of married men with £7,000 of taxable income. When we consider that a married man with a couple of children buying his own house and likely to have about £4,000, if he is lucky, in personal allowances, it is probable that his gross income is of the order of £11,000 per year which by the time it has been taxed will be about £7,000. Therefore, we can say that generally the Finance Bill will mean an increase of £7.27 per week for married couples with annual incomes of more than £11,000 gross. This compares with a budget increase of only £2.55 per week for a couple of old age pensioners. Had the distribution of these concessions been directed in the other way—if the benefit had been given to social welfare recipients, to old age pensioners and to the unemployed, not only would the distribution have been more progressive socially but it would have been far more likely to have been more spent on Irish-produced would have been far more likely to have been spent on Irish-produced goods and services because the pattern of our consumption shows that the lower down the income range the more likely is it that spending will be on basic essentials. By and large we produced basic essentials more cheaply than we can import them. These basic essentials form a large part of the overall consumption and expenditure pattern of the poorer groups.
As the Minister will no doubt argue, the percentage increase for those in the higher income bands will be lower but we must not allow ourselves to be baffled by percentages. The percentage tax saving on the income enjoyed by a married man with two children and a wife who is not working is 100 per cent on an income of £2,000 whereas the saving on a £20,000 income would be only 4 per cent. These are dramatic figures. They illustrate the social concern and responsibility of the Minister but let us examine the cash figures involved. The 100 per cent saving for the man earning £2,000 a year amounts to only £84 while the 4 per cent saving for the man earning £20,000 amounts to £378. We must not ignore the reality behind the percentage figures which are used as a smokescreen to conceal the social and cash effect of these changes. As any husband or housewife knows, what counts is the money that is taken home, not gross income. If one wishes to argue about percentages what happens in this kind of situation is that the higher up the income scale a married man goes, the greater is the saving in terms of income.
When we look at this Finance Bill it is essential that we keep our analysis in terms of money as distinct from terms of income. A 100 per cent increase of nothing is still no increase but the most alarming, depressing and cynical aspect of the Bill is its impact on family income and on family finances. Section 5 which provides for tax relief makes no provision for any increase in personal reliefs in respect of children. The effect of this omission needs to be spelled out. It means that a married man with no children or whose children are working qualifies for exactly the same tax relief as a married man with five, eight or even ten children and there are still families in Ireland in which there are ten children. When we remember also that for the first time in six years the social welfare provision of the last budget did not increase children's allowances, we are entitled to ask what have the Government or what has the Minister against children or against Irish families that they should treat them in this extraordinary fashion? Is it not worth while spending money on families, on children? If increases can be given for children the £63 million I have talked about already could have been redistributed in favour of families and of larger families particularly.
It is inescapable that by structuring the tax concessions in the manner proposed in this Bill the Minister has given money basically to those who need it least, those with the highest incomes and with the smallest families. Nothing the Minister may say can convince me that the situation is otherwise. The situation must be emphasised in order to underline the anti-social implications of this Bill. If the people with families and on low incomes who are being discriminated against positively in the Bill were to realise what is being taken from them and what is being offered to those who do not need the concessions, their opinions and comments might be almost unprintable. It is our job on this side of the House and particularly on these benches to ensure that this vicious anti-social equation is explained fully to the people during the remainder of this year and indeed during the coming four years also.
There is another aspect of the Bill which is almost equally regressive in its impact on individual and family welfare. I refer to the limiting of the personal tax reliefs in respect of widows to the same level as applies to single people, that is, £200. In this way the personal relief for a widow is only £70 more than for a single person. This injustice has not been tackled to any degree. The irony of it is that in 1977-78 a single person's allowance was £665 while the allowance for a widow was £735. Both categories are now being allowed the same level of increase despite the fact that the system to which the equal amount is to be applied recognises the need for a differential between an allowance for a widow and an allowance for a single person. The differential still exists but it is being reduced to £70 and will not be of any real advantage to the widows concerned. If, for example, the tax-free allowance for widows were to be increased at the rate for a married couple, one of whom was working, it should have increased by £419 rather than by £200.
We should be comparing here not merely individuals but families. A married couple with only one of the partners working will qualify for an additional tax-free allowance of £630 while a widowed person, regardless of whether he or she has family responsibilities, will qualify for an increased allowance of only £200. Therefore, one kind of family is being discriminated against and this is the kind of family who are least well able to bear the shock of price increases and financial stringencies of one kind or another.
I am trying in this part of my speech to illustrate for the benefit of the Minister the way in which his concessions savagely discriminate against some kinds of families and particularly against single parent families. Not all single parent families are those of unmarried mothers, despite what the opponents of social welfare schemes would have us believe. There are families maintained by widows and widowers and by deserted wives and deserted husbands. There has been no thinking out of the consequences for the family of this series of tax concessions.
I will illustrate the point more graphically by giving two examples. Let us take the case of a married couple with three children who are both earning and whose total income amounts to £6,000 and, secondly, a widow also earning £6,000 who has three children. The married couple will pay £987 tax on their income of £6,000, while the widow will pay £1,345 tax on the same income. This is a particularly gross anomaly. The Minister instead of discriminating against single parent families in this way should have been thinking of discriminating in favour of them such as by the introduction of a single parent family allowance. This has been done in the UK.
What other help is given to a person looking after a single parent family? The answer is none. There is an allowance of £165, which is given to a widow or widower who employs someone to look after his or her children. This allowance was not increased in the budget and therefore it does not feature in the Finance Bill. It is important to recognise that this housekeeper allowance, as it is called, also applies to deserted wives and husbands. It is the easiest possible case to make that this allowance should have been increased. At present it does not even cover the cost of the employer contribution to the social welfare stamp. The Minister could not have done more to encourage people who are often in desperate financial straits to break the law by not stamping the card of someone whom they may employ in this menial position.
In the 1973 Budget the National Coalition Government did away with the employee's part of the contribution to the social welfare stamp of the employee of a widow who was looking after her children. This is the direction in which we should be moving. Where someone is employed to look after the children of single parent families, there should be no obligation on the employee or on the employer to stamp a card, while at the same time we should ensure that such employment is considered insurable so that people may benefit from the State social welfare system if they have been employed in this capacity. I can think of few areas in which a comparatively small financial concession would do more to increase employment.
There is an overall problem to which I would ask the Minister to pay some attention. It is the extent to which these concessions really amount to concessions and whether the real burden of taxation on some wage earners may be expected to increase. When they were in Opposition the present Government made considerable play of the necessity, as they saw it, to index tax allowances of all sorts —allowances for income tax, wealth tax, capital gains tax and capital acquisitions tax. The present Minister was particularly strong on this point when in Opposition.
I have my difficulties about indexation, but certainly it is undeniable that this formed a major part of the strategy of the then Opposition. There was even an extraordinary statement in the speech by the Taoiseach to the Fianna Fáil Ard-Fheis which was reported in The Irish Times on 20 February 1978 as follows:
The goal should be a country where money can keep its value; where £1 this year buys the same amount as £1 last year. That is the norm for a healthy economy.
If that is the norm for a healthy economy, I should be glad if the Minister would point out any healthy economy in the world, with the possible exception of Cambodia where they have achieved this amazing feat by apparently abolishing money altogether. If the Taoiseach is proposing a Cambodian solution for our economic problems, the House would prefer him to be more open about it. Of course, he is not doing that. He is just committing a financial and economic solecism. The problem about the £1 in the pocket this year and in the pocket next year maintaining its value is based on the assumption that one does not need any more £s in one's pocket, but there are very many people in our society who do need more £s in their pockets. If one rigidly adheres to indexation, one not only freezes tax liability but also freezes social expenditure in real terms, preventing the possibility of the sort of redistribution of income which is supposed to be brought about by a taxation system.
If the Government were to be consistent, this first Finance Bill of theirs should have limited the increase from income tax receipts to the same level as the increase in prices. If we accept that in 1978 the rate of inflation will be about 8 per cent, then in order to be consistent with their position in Opposition Fianna Fáil should at least have restricted the growth in income tax revenue to 8 per cent during the financial year 1978. The concessions given in section 5 of the Bill fail to do this and we could argue that the level of personal reliefs does not keep pace with inflation. Perhaps the budget increases the burden of income tax on some people.
According to the 1978 pre-budget estimate, income tax revenue would be about £664 million. This would amount to a 21 per cent increase on 1977. On the other hand, the concessions announced in this Finance Bill add up to only £70 million, which is approximately an increase of 14 per cent. If the Minister was determined to finish up with an increase of revenue of 8 per cent, then he should have given concessions amounting to £100 million and, since he gave back only £70 million, it is clear that for some reason £30 million has been kept for the Exchequer, while at the same time the Minister has been pretending that he has been giving real cuts in the level of income tax. If that £30 million had been given to social services, to health, social welfare or education, we might not be complaining too much, but it is not being given to these areas. I suspect that it is being used simply to reduce the size of the deficit. It may be argued by the Minister in his reply that there is autonomous growth in tax revenue, and this is true; but we are being asked to believe that the autonomous growth in the tax revenue in the coming year will amount to some £30 million. That strains credulity to the maximum possible extent.
What happened to indexation? Where has that £30 million gone or more appropriately, where is it coming from? The situation is further confused by a paragraph on page 14 in the report of the Central Bank on the national economy which said that taxes on personal income were forecast to rise by approximately the same rate as the increase in personal incomes. It went on to say that the effect of increasing personal income tax allowances in the budget is to halt the growth over recent years in the share of taxation in personal income.
I would ask the Minister to reconcile that with the figures and with his policy on indexation. I suspect that the real thing that has happened is that the ostensible concessions given in this Bill are going to be swallowed up. They are only concessions if all other things are equal. They are only concessions if the person who is expected to enjoy them is paying the same rate of tax before and after he gets them. The Minister and the Government have not changed by as much as one iota the bands of income. There is a very real possibility that because of rising incomes many people will be put into a higher tax bracket and that this increase—the £30 million more which the Minister is going to take out of the system above what might be expected under indexation—will come from an increase in the average rate of tax. If that is the case these are not concessions and perhaps even represent a charge on some sections of the community and almost definitely on those sections of the community which are least will able to afford them.
There is one particularly controversial aspect of the tax concessions, and that relates to the question of tax concessions for married people. The Minister has made much play of anomalies here and asked the Labour Party to state whether they support the creation of further anomalies in the tax system. From his attitude one would think he cannot stand any unfairness in the tax system at all. The situation which he affects to be worried about—one is that there is a greater tax on the single income family for a given income than for a two income family—is merely an inevitable reflection of a system in which every worker, except the wife, is given a tax free allowance, a set of rate bands, against which the income in a given year is taxed.
If the Minister really thinks it is so terrible that a husband and a wife on £5,000 a year each should get more take home pay than a husband on £10,000 a year, I should like to hear his views on some of the other anomalies which he continues to enjoy in the tax system. For example, there are two couples saving to be married. One couple earning £5,000 each and the other earning £3,000 and £7,000 will have different tax bills. A man earning £3,000 and £7,000 in two successive years will pay more tax than his neighbour earning £5,000 in one year and £5,000 the next.
The Minister's solution to the heavy tax bill paid by the working wife, without creating unfairness towards the non-working wife, is to accord her husband, along with the two income families, an extra set of rate bands. Here it can be argued he departs fairly radically from the present system where each person earning an income receives a basic tax free allowance and one set of rate bands with extra allowances for extra dependants, whether they be wives, children or relatives, but in no circumstances an extra set of rate bands. By doing this he is creating a special category of dependant, the nonearning wife, who is worth an extra set of rate bands. The problem about this is that any other type of dependant, who instead of being able to look after a house might be old, frail, young or helpless, will not contribute a claim for such an extra set of rate bands.
There has been a great deal of controversy about the Minister's proposals about taxing married couples who work. One is at the least interested to see that in this Bill he is providing some kind of solution to a problem to which in a letter to The Irish Times of 9 February 1978 he claimed not to know the answer. I am delighted that at least partial wisdom has come the Minister's way.
