Financial Resolutions, 1979. - Financial Resolution No. 8: General (Resumed). – Dáil Éireann (21st Dáil) – Thursday, 8 Feb 1979

Financial Resolutions, 1979. - Financial Resolution No. 8: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(Minister for Economic Planning and Development).

Dr. FitzGerald

I want to start very briefly by saying that there are some things in this budget which are to be welcomed but this will not be the tenor of my speech. It will not take me long to say what they are but it is right that we should say that there are certain things in the budget which I believe all sides of the House will welcome. There is the increase in public service widows' pensions, which will bring them up to the position which they should have and which I believe all sides of the House are committed to their having. There is the easing of the means test for War of Independence veterans, something which we all will welcome. There is the extra aid to the Arts and the £250 for one-parent families, although one may regret that the amount is so small given the scale of the sums which are being thrown around in this budget but at least something is being done and the Government deserve credit for that. Finally, a small technical point, the revised provision for taxing radios and record players to limit trade diversion because of cross Border traffic. This is a technical change but one which will assist in maintaining a more normal pattern of trade in Border areas than has been the case hitherto.

Those are small things which add up to £3,500,000 out of a total of £2,776 million, that is .15 per cent of the budget. I have to criticise the remaining 99.85 per cent of the budget. We could discuss this budget at the level of the fantasy world the Government are living in, a world in which the economic growth generated by the National Coalition, which attained 5¾ per cent in 1977, was maintained throughout last year and allegedly will continue this year without any special boost or help in Government action. We could remain in a fantasy world of 5 per cent inflation rates, 6½ per cent to 7 per cent growth rates, with investment rising at 15 per cent, figures which have been given to us by the Government in recent times. That is where the Government have remained in what one has to describe—I trust you will not regard me as disrespectful in doing so—as the Martin-George cloud cuckoo land. One might almost be convinced by the budget speech that they believe their own figures. I say almost because there are give away, tell-tale figures in this speech which show they do not in fact believe their own figures but have not yet had the courage to admit as much.

We in this House cannot deal in fantasies; we have to deal in realities. The real world we face today is a less cosy one. It is one in which the Central Bank tells us that growth has been declining since the middle of last year and that in fact the short-lived consumption boom which Fianna Fáil imposed on top of the solidly based growth achieved by the National Coalition—and they achieved this inflation when they were bringing down the level of borrowing—came to a sudden sharp end within a year of their coming into office. The economy is sliding down a slippery slope of declining growth. I quote from the Central Bank bulletin:

There is some evidence that the economy reached a plateau at mid-1978; In other words, there may have been a pause in growth in the second half of 1978.

We know what the words "some evidence that" and "may have been" mean in a Central Bank report published immediately before the budget. Such statements cannot be made quite as bluntly as at other times. While the Central Bank pursues its duty by drawing attention to important phenomena in the hope that the Government would pay some attention to the facts it does so using soft words to cloud the harshness of the facts but not to obscure them. The Central Bank continues:

The main component of domestic demand, private consumer expenditure, appears to have reached a peak in the second quarter and to have fallen from that level in the subsequent quarter. Investment in building and construction, another major component of domestic demand, also seems to have slowed after the second quarter and ... may have actually declined in the fourth quarter. Foreign demand, as reflected in industrial exports, was not very buoyant throughout the year and industrial exports failed to increase in value terms in the third quarter.

I will return later to this question of imports and exports and to the sudden turn around that occurred in our trading pattern in the middle of last year and to which too little attention has been given by commentators:

Industrial output expanded rapidly in the first half of 1978 but declined in the third quarter. Growth in imports ... tapered off in the fourth quarter.

The Central Bank goes on to say that the marked slowing of growth in the second half of 1978 has implications for 1979, implications which we did not hear anything about here yesterday, and with regard to which this budget takes no relevant action. The Central Bank goes on to say that there seems little reason to expect growth to recommence, at least at the rapid rate experienced in the first half of 1978. It says on the domestic side there is no scope for general demand expansion and sums up with the words:

On the whole, the outlook for 1979 does not seem to be quite as bright as the actual performance in 1978.

The Central Bank has a tradition, according to my analyses of past reports, of giving forecasts on the future trend of the economy in quantitative terms except immediately before the budget when it does not put it into figures because it does not want any contradiction to arise between itself and the Government at that time. In no year has this self-restraint on the part of the Central Bank been as significant as this year because, frankly, normally the Government entering into a budget are making an assessment of the economic situation and are trying to react globally to it as best they can for the sake of the country. Unfortunately this Government, their hands tied by the ham-handed way in which they entered into Government with a manifesto committing them to a course of action bound to produce illusory short term results, have lost the freedom of action in managing this economy in the way it needs to be managed and have therefore lost the capability of ensuring continued growth and, in these circumstances, the Central Bank's comments are highly significant in the absence of any particular forecast for the year ahead. They are particularly significant, more so, perhaps, than in an ordinary year when the difference in the projections might not be great.

The real world is also one in which the OECD tells us that because of this decline since mid-1978 the growth in our economy in 1979 will be only 4 per cent. It is only in the most unusual circumstances that the OECD flatly contradicts what its member governments say. Usually it shades its comments so as not to be too critical. We all know the talks that go on between finance officials in the OECD to try to bridge disagreements, to soften any asperities and to ensure that whatever comes out in the OECD report is not going to conflict too flagrantly with the government of the day and the officials of the OECD, within the limits of what they can honestly do, to endeavour to avoid embarrassing unduly individual governments. I know of no case so far as this country is concerned, though I have seen it happen in the case of other countries, where the OECD has so flatly, flagrantly and totally contradicted the projections of a member government at the crucial point of the year when the government is bringing in a budget as on this occasion and I have been following these reports now for over 20 years. I have followed the careful use of language and one often has to read a long way between the lines to find out what they are saying in criticism of a government. I have never known a case where the divergence between OECD figures and the figures that were put forward by a government have been as great as in this instance.

We find also that the Economic and Social Research Institute, the independent agency whose job it is to give impartial forecasts of economic developments here, likewise tells us that growth in 1979 will be 4 per cent, a figure incidentally which has built into it the £70 million of the EMS money which is not at the moment built into this budget.

But the Ministers for Finance and Economic Planning and Development —and they have said this several times in the last few days—say that they have been more right than these other bodies last year and that so they shall be this year. I was following a radio interview of the Minister for Economic Planning and Development last evening when I, unfortunately, was interrupted by the division bells, and he was taking this line that others have been mistaken previously; they had been right and, of course, this year again they would be right and others would be wrong. Let us look at the facts because that is a legend that I would not want to have perpetuated because it simply is not true.

It is a fact that for the year 1978 the Government and these bodies, the OECD and the ESRI and the Central Bank, did not differ that much about the outcome. The Government said that GNP would be 7 per cent; these three bodies said it would be 5½ to 6 per cent. We now know that, despite Government attempts to cover up the facts, the growth last year was nearer to what these bodies said, between 5¾ and 6¼ per cent it now appears, than to the Government's 7 per cent but in so far as there was a difference between them last year—and the difference was not great—it was these bodies who were right and the Government who were wrong, contrary to the statements of the Ministers for Finance and Economic Planning and Development. We know also that whereas the Government forecast 7 per cent inflation to the end of 1978 all of these bodies forecast 8 per cent and we know that the figure—and all are agreed on this because it is now on the record—was 8 per cent. The figure for the 12 months ended November was 7.9 per cent. In a reply in this House the other day the forecast was given from the Government benches of a 2¼ per cent rise in the quarter to February and when one tacks that on and turns it into a figure for the 12 months ended February one gets about 8.7 per cent. So the end of December figure is going to lie somewhere between 7.9 per cent and 8.7 per cent, I would say, about 8¼ per cent as against the Government's forecast of 7 per cent. Here again these other bodies were accurate in their forecasts of inflation and the Government were wrong, not by a large margin but in so far as anybody was right, it was the independent bodies and in so far as there was an error, it was a Government error. I am not making much of this because the differences were stretched but it is simply false for the Government to claim they have been more accurate than these three independent bodies when they were, by a certain margin, less accurate. They are, therefore, not convincing when they say this year that they are going to be right with figures that are totally different from the figures offered by the other three bodies in question.

These differences between the Government and these other bodies do not relate only to growth rates. There are also wide differences in inflation forecasts. The Government are still claiming, though their own budget figures make a nonsense of this, that inflation up to the end of 1979 will be 5 per cent, given they were starting with over 8 per cent and given the figure I suppose the year as a whole, year on year of about 6½ per cent, to use economists' jargon. The OECD tells us that inflation this year will rise to 9 per cent and the ESRI says it will increase to 10 per cent whereas the Government say it is going to fall to 5 per cent, though their own budget contradicts this flatly because the Government have been forced, by the arithmetic of budget making, to expose their own inflation figures as fraudulent.

In this instance the Government have been forced by the arithmetic of budget-making and because of their own commitments to indicate that they were reducing borrowing to 10½ per cent of GNP. They were forced to tell us what their GNP figure is for next year when they told us that their borrowing of £779 million would be 10½ per cent of GNP and one does not need to be a great arithmetician to arrive at their forecast for GNP next year at £7,400 million. That is a 17 per cent increase on the 1978 GNP of £6,300 million. In this budget, therefore, the Government are forecasting a GNP increase of 17 per cent.

How much of that is going to economic growth? The OECD and the ESRI say 4 per cent. Let us leave that aside for the moment. For the purpose of this calculation, let us take the Government's figures at their face value. Let us say the Government are right about a 6½ per cent volume of growth. Where does the rest of the 17 per cent come from? It is, of course, straight inflation. The Government's forecast of GNP for 1979 is £7,400 million, and directly implicit in their statement is that £779 million in borrowing is 10½ per cent of GNP. That statement implies an inflation rate of 10 per cent next year—the figures cannot be interpreted in any other way. This is by a Government claiming to be thinking of bringing inflation down to 5 per cent, implying an average of 6½ per cent over the year as a whole.

So the Government's figures make nonsense of their claim to be bringing down inflation. Deputies may recall that inflation for the 12 months which ended in May last was just over 6 per cent. It had come down to that figure 12 months after the change of Government because of the policies which had been pursued by the National Coalition and because of the extra boost given by this Government in regard to motor car taxation which, I think, amounted to 0.4 per cent, if I remember correctly—in other words, if this Government had not acted, inflation would have been 6½ per cent in the 12 months ended last May.

What is inflation now? I mentioned already that the Government have admitted a figure in the current quarter of 2¼ per cent. That is before a budget which will add the best part of that figure to inflation, never mind the recurring increases in prices day by day. By the Government's own admission, in the 12 months ending in February of this year it will be about 8.7 per cent, and immediately after this budget it will be about 9 per cent. Therefore, in nine months the inflation rate will have been pushed up from about 6 per cent to something around 9 per cent—I think just above that figure, the Government say just below it.

I could go on with these contradictions. There is also the Government's claim that investment rose by 15 per cent last year. That is a nonsensical figure. The OECD, the Central Bank and ESRI all contradict it, giving figures of 11 to 12 per cent. The Government are living in a fantasy world 18 months after the Fianna Fáil wedding party is over.

Here for the first time in the history of the State Ministers are presenting to the Dáil figures which are not just shaded up or down by a margin of optimism or pessimism in the direction of the Government's wishful thinking. All Governments have tended to put their own gloss, to a small margin, on figures. They have all gone through the process of arguing with the civil service to try to convince them that figures could be a little bit higher, or a little bit lower, in regard to inflation, and consequently the figures that come out are marginally different from what the experts, left to themselves, would have given. But the margin by which politicians in the presentation of figures for budgets and other economic purposes, have distorted the data given to them by experts has been minimal, has never gone beyond, in my experience either in Government or Opposition, a margin of legitimate doubt that must arise in making these assessments.

But here for the first time we have figures, the true figures, the figures with which the Government were presented by their advisers, grossly distorted and falsified to the point of absurdity and self-contradiction on a scale which makes me ashamed to be part of our political system. I must say that in Government one of the things I took some pride in was the kind of working relationship between Ministers and civil servants. I joined in discussions on domestic economic matters with civil servants, and when we were trying to make estimates of what the future of unemployment would be, what future growth would be, we had arguments and discussions, and if I could put forward a valid case for saying why the unemployment figure would fall by a certain number, and if by intellectual argument I could convince them that was something they had overlooked, they were ready to modify their figures. But if I could not out-argue them, I loyally accepted their figures. That also was the attitude of my colleague, Deputy Richie Ryan, and of all our Ministers—we accepted that the figures to be put to the nation must be ones that the experts stood over and that they must not be distortions of the true figures. We accepted that basically the country must be told the truth.

This is the first time in my recollection that we have departed from that. Government documents bearing the Government's imprint have turned out to be no better than party political papers, ones that have no credibility. That reflects on our credibility at home and internationally. Let us remember that other countries, too, go through the same process, whose governments want to put a favourable gloss on things: they, too, have similar practices of not distorting figures, not giving them more than a small gloss of optimism or pessimism and in regard to which the experts can say at the end: "There is a margin of doubt here and you could be right about it."

Here we are producing figures which will go out to the international forum and which everybody who gets them, OECD, EEC, IMS, knows are false. Our international credibility is affected by that sort of performance. They are figures from what are derisively described occasionally—why the fruit in question should be so discredited I do not know—as banana republics. No one expects that kind of behaviour or that kind of non-credibility to arise in relation to a country of our standing. All sorts of domestic or international credibility have been thrown to the winds, and regardless of the consequences the Government are throwing fantasy figures around like confetti. This is highly dangerous to our economic future because by refusing to face the fact that growth is falling by more than one-third, from 6 per cent to 4 per cent, that inflation is rising from the 6.1 per cent of the year ended last May to 10 per cent in 1979, and that investment is falling, not increasing—it had never reached the growth rate of 15 per cent that the Government dreamt up—the Government have created a budget that bears no relation to our economic needs.

It is a budget for emigration, nothing less. In that connection, could we have an end to the data on which emigration is produced? In this House some months ago we were given figures by the Taoiseach for the estimate of emigration in the year ended February 1978. He rightly said that the figures were estimates of net emigration. They were based on the net outbound passenger movements by sea and air, a technique which I developed in the fifties and which has been widely used since. The Taoiseach said quite rightly then these net outbound passenger movements had been shown to exaggerate slightly the ultimate net emigration figures. The net emigration is usually about two-thirds of the net outgoing passenger figures. We cannot be sure of the figures accurately until the next census figures are issued, but that it a fair relationship.

For the periods ending January-February, June usually, and October-November, where there are not distortions of tourist traffic affecting the net flows, it has been shown—and I have followed these figures month by month since the fifties—that the net outbound passenger figures give a good indication of the trend of emigration. The sum of yearly figures in a five-year inter-censal period usually add up to what the net emigration has been.

Minister for Fisheries and Forestry (Mr. Lenihan)

What is the inter-censal period at present?

Dr. FitzGerald

That process has been interrupted, not because of the implication of the Minister's clever remark, but because of the fact that since February 1977 there has not emerged any figure in respect of net passenger movement by air. The excuse of the Aer Lingus strike is given for this but are we to believe that our national airline with 5,000 or 6,000 employees are incapable of sending passenger returns to the Central Statistics Office during a period of a whole year, that nobody has bothered to ask Aer Lingus for those figures? I worked with that company for 12 years. I submitted those figures. In those days we not only returned the figures but had them published route by route, month by month, inbound and outbound. That practice was discontinued sometime afterwards on the basis, allegedly, that it was giving away too much information to our competitors but the net passenger movement figure by sea and air has always been published with an arrears of a couple of months. They are now 12 months in arrears. Consequently, we do not know what the net emigration has been and the Government are very happy that we are ignorant in this regard. Until the figures are published we cannot measure emigration beyond February of last year at which time the figures showed a net outbound flow of 11,000 in the 12 months ended February 1978. As the Taoiseach has suggested, if we reduce that figure by a third we get a net figure of between 7,000 and 8,000. But what has happened since then? If we had the figures to June, a 12-month period for which we usually have very reliable data which is sometimes but only rarely distorted by the differential flows of holidaymakers, we would know the true trend of emigration during 1978, the first full year of Fianna Fáil administration, but these figures are not available. For the first time that I can recall since I started noting these figures in 1956 there is not any data on which to estimate net emigration. That is no coincidence.

The Taoiseach has responsibility for the Central Statistics Office and even if the figures are unfavourable to the Government he should ensure that they are received from Aer Lingus and are published up to date so that the country may know the figure for net emigration. I am not suggesting that there is a conscious suppression, that the Taoiseach has received the figures and after examining them quietly has said they should not be published, but I am suggesting that he is neglecting his duty in regard to the Central Statistics Office in allowing the continued failure to publish the figures. For all I know these figures may show an improvement although I do not expect that to be the case but one way or the other we are entitled to have them.

I say that this is a budget for emigration despite all the pages of the Minister's speech devoted to employment schemes, down to additions of 50 staff here or 70 staff somewhere else or indeed as they are now described, not as jobs but as man-years because so many of them involve merely bringing in young people for a period of nine weeks and laying them off again after they have completed some such task as the cleaning up of a community centre. I will say this for the budget: where the short-time employment figures occur, they are converted into man-years. That is one bit of honesty at least. We can calculate just how many extra jobs the Government propose to create in the public service. If one digs deep enough—and not every commentator has done this because some of them have been taking figures at face value—one can find out just how many extra jobs there are in the public service.

I am saying that this is a budget for emigration. I know, as everybody else who has the slightest knowledge of our economy knows, that during the past 20 years, taken as a whole, the 4 per cent growth rate that we have been achieving on and off, taking one year with another since 1961, gives no net increase in employment. It is only if growth rises above that level that there is an increase in employment because output per worker increases by that amount. With a 4 per cent growth rate there is approximately a 4 per cent increase in labour productivity and, consequently, no extra jobs.

It has become evident in recent times and is shown by the recent White Paper that output per worker has been rising more rapidly than this recently. The figure given in the White Paper is 5.3 per cent. Having regard to the pace of the technological revolution that is under way here as elsewhere there is no reason to expect the rate of growth of output to fall below 5 per cent either now or in the foreseable future. Therefore, a 4 per cent growth rate means 1 per cent less in terms of jobs. That is what this country is now moving towards and it is a situation that the budget fails in any way to alleviate. It is only if we can keep our growth rate greater than 5 per cent which, laudably, has been the aim of Government policy but not carried through in the budget, that we can hope for more real jobs, not mickey mouse arrangements to give young people nine weeks' work cleaning up a community centre.

The Government should have faced the reality of the spurious consumer boom, most of which was of benefit to producers in other countries exporting consumer goods to Ireland, especially the manufacturers of cars who must regard us as the softest sell anywhere in that as a country in a world economic situation that is not favourable outside the oil producing countries, we were willing to go on a spending spree, encouraged financially by the Government, to buy 105,000 new cars in 1978. What help was that to Irish industry? We know there are people in the assembly industry but the figure is held. All the extra cars were imported assembled cars. We know there have to be people to unload them at the docks and that there are people involved in their distribution and selling. There are some jobs there but the number of jobs involved in importing and distributing cars by comparison with the cost to the country of this huge number of new cars, is the one main result of the Government's policy. The relationship between the employment given and the cost to the country and to the balance of payments situation is totally disproportionate. That is where Fianna Fáil's policies have led us. This consumer boom involves primarily the importation of consumer goods.

During a previous debate I illustrated that far from the "Buy Irish" or the "Guaranteed Irish" campaigns increasing the share of goods purchased at home, what has been happening is that the import content of our consumption has been rising rapidly. The last time I calculated it, the increase was of the order of 3 per cent in less than a year whereas the Government have talked about reducing it by 3 per cent. Instead during their first nine months in office there was an increase of this order. This resulted from their encouraging the purchase of the kind of consumer goods which necessarily are imported or of which a very large part of their content is imported. The Government should have faced the reality that that consumption boom has been and gone and that our growth rate is declining below the level necessary to sustain existing employment, not to mention increasing employment. Indirectly the Government have admitted in the budget figures that we now face again a double inflation figure and a rise in income that threatens the competitiveness of our whole economy.

Are the Government aware of the way that exports and imports have been moving since the middle of last year? Are they aware of the traumatic change round that occurred in the relationship between exports and imports last year and are they aware of the threatened disposals to our economy? They have not said anything so far that would indicate any awareness on their part of these matters but I shall give the facts to the House.

In the first half of last year, that was, in the carry-over period from the National Coalition, exports were booming. They were rising in volume by 20 per cent compared with the first half of the previous year, while imports were growing more modestly at 12½ per cent in the first half of 1977. At that stage the re-stocking process following the consumer boom had not begun. In the second half of 1978 this favourable trend was reversed totally. Export growth fell from 20 per cent to 8 per cent in volume terms while import growth rocketed from 12½ per cent to 20 per cent in volume terms.

Is the Minister for Finance aware of this? Do they ever do any of their economic homework or do they ever think of looking at the first page of the economic surveys for 1977-1979, which is published every month, many of the tables of which merit the immediate study and analysis of anybody concerned with the running of the country? When I get it every month I go through it and do my calculations month by month in the different series to see where we are going, and that is where we are going. There are volume figures given for imports and exports up to October. It is possible to calculate the November and December figures easily enough because of the relative stability of import and export prices. The volume figures for those months can be estimated within a very narrow margin of error. If one does that, that is the picture one gets—a drastic and disastrous drop in export growth rate from 20 per cent to 8 per cent and, equally disturbing, an increase in the import growth rate from 12½ per cent to 20 per cent.

Whereas for the first half of the year we still had the carry-over from the National Coalition—the export growth rate exceeded the import growth rate by seven points—in the second half of the year the import growth rate exceeded the export growth rate by 12 points and was running at two and a half times the rate of exports. That is the way we have been running. That is how we are coming into the current year and how the balance of payments is shaping up at present. All the data that has been published so far about what happened in the year 1978, taken as a whole, is an averaging of those two totally different and opposite trends. The one that matters to us is the one at the end of the year. We started this year in that kind of shape. This is a highly dangerous trend. Attention needs to be directed to it and action needs to be taken designed to moderate it.

These are not the only figures the Government have seen fit to ignore. They have ignored the fact that in the third quarter of 1978, industrial output, seasonally adjusted, fell by 3 per cent, an annual rate of decline of 11½ per cent. In the fourth quarter of the year there may have been some recovery and I am not suggesting there will be a decline of 11½ per cent in industrial output over the 12 months from last June. That decline in the third quarter was a warning sign.

What has this budget done to boost our economy again, to get growth up from the sluggish 4 per cent to which it is now moving down to the kind of figure that would yield a continued growth in employment and a further fall in unemployment? Incidentally, unemployment figures for the latest 12 month period—now that we are over the Christmas rush we have figures that are realistic—show a reduction of only 11,500 after adjusting for the additional number of women on the live register. What did Fianna Fáil promise? They promised a reduction of 20,000 in the numbers out of work in 1978. What did they deliver? We have the figure now from the earlier January figures—11,500, barely half the reduction in numbers out of work that they promised. No amount of trying to twist the figures around and pretend that when they said reductions in numbers out of work they meant an increase in the numbers at work explains this away.

The net increase in the numbers in employment of 17,000 has no statistical basis. There are no statistical series published for end year employment. They do not exist in this country. Any such figures produced by ministerial estimates are unverifiable now or in the future by any Central Statistics Office figure because there is no such figure, and only figures from the CSO bear a mark of authenticity. Only from that body do we get figures that cannot be argued with, never mind argued about. They are completely immune even from the process of discussion between civil servants and Ministers which occurs in Departments. There are no figures for employment for the end of the year. That is why the Government can throw figures around and say gaily that there was an increase of 17,000 in the numbers in employment, the biggest increase ever. They know it could never be disproved; there will never be any figure issued. Even in five years' time there will still be no figure for the 12 months ended December 1978. That is a figure which can easily be produced because it can never be verified. This is one of the great finds of this Government—there are all kinds of new figures they can invent. Nobody can ever prove they are wrong and there is no problem as the Minister, from his smile, clearly indicates.

This budget's main contribution to changing the economic situation lies in its impact on inflation, not on growth. As if the situation were not already dangerous enough, with inflation rates of 9 to 10 per cent forecast by independent observers even before the budget, the Government have added a further 2 to 2½ per cent to inflation by reducing food subsidies by £20 million and increasing expenditure taxes by £37½ million. I do not have the precise effect of that but my estimate is that the effect of it will be over 2 per cent of the cost of living. I am basing that on the Government's own figures on what the food subsidy removal effect would be. Given that further boost to inflation, which was not taken into account by those outside bodies in making their estimate of 9 to 10 per cent inflation in 1979, it is clear that the Government will have great difficulty in keeping us to the low level of the 10 per cent double figure inflation. We are moving upwards now, not just to 10 per cent but beyond that, because of the Government's directly inflationary policies of reducing food subsidies, putting up the price of food and other commodities which are taxed in this budget.

Not alone have the Government directly caused inflation by adding to price increases at a time when independent observers had forecast 9 to 10 per cent, but they have aroused inflationary expectations by putting into the budget the sum of £75 million for extra remuneration for the public service over and above the figures in the Book of Estimates which, if I recall them correctly, includes provision for the 2 per cent final stage of the last wage round. As the public service pay agreement in the vast majority of cases terminates on 31 May, this £75 million relates to that proportion of the public service pay bill which falls in the last seven months of the year. In the budget speech the Minister gave the bill as £1,020 million. Seven-twelfths of that is approximately £600 million. There is provision in this budget to increase public service pay by 12½ per cent—that is what the figure of £75 million means—from 1 June in addition to the 2 per cent added on 1 March. By publishing these figures and having them in the budget the Government are showing that they expect and are encouraging an average increase of 12½ per cent in public service pay after 1 June on top of the 2 per cent which is grossly inflationary and makes nonsense of their talk of wage restraint.

I know the Government face a problem about what to put into the budget for public service pay. We faced this problem when we were in Government. It is unwise to put in a figure which shows your hand in advance. It is unwise to put in a figure which invites trade unions to start bidding at 12½ per cent and upwards. A more modest provision should be put into the budget and whatever shortfall that may lead to between that and the likely outcome can be cushioned by putting in slightly less optimistic figures than would otherwise be done on revenue buoyancy. That is the way Governments have normally handled these matters. This Government has mishandled this very seriously. The provision for 12½ per cent increase in public service pay is all the more inflationary because there are now signs that, because of the Government's known weakness in this matter, the unions in the private sector, for the first time in many years, are inclined to hold off until public sector settlements are reached. This year, uniquely in my recollection—it may have happened a decade or more ago on some occasion which I cannot recall offhand—certainly for the first time for very many years, public service payments may set the pattern for the private sector. The public service payments envisaged by the Government add up to 14½ per cent between the 2 per cent in March and the 12½ per cent provided for in June.

The inflationary character of this budget is seen also in its revenue buoyancy figures. Overall revenue from taxation, at unchanged tax rates, in the pre-budget statement is shown as rising by 21 per cent which, given the increase of 6½ per cent in the volume of GNP which the Government still pretend to expect—even accepting that figure— implies a very high inflation rate, indeed, even allowing for buoyancy of revenue in income tax which arises through people moving into new income tax bands. The pre-budget income tax receipt estimate of £222 million, an increase of 36 per cent, is so high that some have been tempted to wonder whether it is a misprint for a figure of £122 million. I must admit when I saw the figure I totted down the column to see whether it was a printing error, because a 36 per cent increase in revenue from income tax implies the kind of runaway inflation which would be terrifying in any country. However, I understand from careful calculation, the figure is consistent with an expectation that incomes will rise by at least 16 per cent this year. That 16 per cent, in turn, is not that far out of line with the 14½ per cent provision the Government have made for the public sector.

I note in passing that Ken O'Brien in The Irish Times today said that the income tax buoyancy figure is £50 million too high. Other economists have put it at £60 million. There is no doubt whatever that this figure has been grossly inflated and once again it has been inflated by an amount beyond the tolerable margin of optimism or pessimism which a government may show in putting figures into the budget statement. There is a certain margin within which there can be legitimate disagreement and legitimate argument, but that figure goes beyond what is legitimate. It is not an honest figure for revenue buoyancy.

That Fianna Fáil within 18 months of coming into office could have so reversed the downward trend of income increases which, let us recall, under the National Coalition and in the immediate aftermath of their period in office was brought down from 30 per cent income increases in mid-1975 to 13 per cent in early 1978, that they could have reversed the downward trend of prices which we brought down from 25 per cent in mid-1975, at the height of the oil crisis, to 6 per cent in the period ended May last—½ per cent of which is creditable to Fianna Fáil; let us be fair—that they could have reversed the upturn in economic growth which the National Coalition had achieved to almost 6 per cent in 1977, and could have succeeded within 18 months in pushing it down towards 4 per cent in the current year, is an appalling condemnation of the mistaken and arrogant policies of that party.

At no stage did we set out to get at the small farmer. The action we took related to farmers who had incomes and who were well able to pay income tax and should have been paying it. This Government have followed on with further measures in that connection. We having broken the ice, and the water having become a little more tepid since we broke through the ice, the Government were willing to push their toes in a little deeper on the income tax side. Fair enough. It was up to them to decide the appropriate amount and extent to which they should do that. They can make their own judgement on it. I will not criticise their judgement particularly although I could do so. I could make arguments of one kind or another but I can leave that to the farmers' lobby. They are well able to look after themselves.

What I am concerned about are the really poor small farmers. I do not think people outside the poorer parts of the country have any concept of how low their incomes are. I have not got up-to-date figures, but I can recall that the last time I looked at figures in this area they related to the late sixties, and I was looking at them in connection with the EEC referendum. They would have been figures for the 1968-69 period, ten years ago I admit, and a lot has happened since then. I found a significant minority of farmers, running into some tens of thousands, had incomes at that time which went as low as £3.50 a week. I was shocked. I did not think there were such incomes in the country, but they existed. Of course those incomes are higher today. With farm prices and EEC membership, nobody is at that level today.

Those farmers might now have £12 to £15 a week, or something like that, from agriculture. They may or may not also have the dole, depending upon the extent to which the Minister for Social Welfare has sent his inspectors down to root them out. They may be forced to do other work for part of the year. Some of them, because of their age or their isolation, are not in a position to supplement their incomes. These people living on incomes which even by the standards of the urban poor are miserably low, regardless of how low their incomes are, will have to pay an agricultural levy. It is a poll tax reintroduced into this country by the Government.

Mr. E. Collins

It is regressive.

Dr. FitzGerald

It is totally regressive and it is to be condemned.

Mr. E. Collins

It is irrespective of any profit or profitable market existing.

The Taoiseach

The only person who interrupted was one of the Deputy's own party.

Dr. FitzGerald

If Deputy Collins has further useful points perhaps he will pass them along on a paper and avoid disturbing the Leas-Cheann Comhairle. It is perfectly true that the levy will have to be paid by people who may have no net farm income. Another thing I discovered going through these figures is that there are a significant number of farms which simply make losses. Out of these losses the farmers will have to pay the levy apparently, apart from a small farmer who has a small income from his farm and is living at subsistence level.

What about the social welfare increases now to be paid only once a year? The excuse for that was that the rate of inflation had been brought down so low that they did not need the twice yearly increases. They are getting it up again so fast now that we will need them again pretty soon. The Government should begin to think what they will do for social welfare beneficiaries next October when we will see what the cost of living will be after the actions taken in this budget.

The increase given for the so-called long-term groups of 16 per cent falls short of the 18 per cent increase in average earnings which the Central Bank reported for 1978. Even for that long-term group, their position relative to the ordinary worker is further disimproved. As for those who get the 12 per cent increase, it is significantly disimproved. The amount Fianna Fáil propose to pay to the old age pensioner and the widow in 1978 will be barely one-sixth of the average adult industrial wage at the end of 1978. The average adult industrial wage at the end of 1977 was £80 a week. On the basis of the Central Bank estimate of the increase in average earnings by the end of 1978 it must have been about £95 a week. What Fianna Fáil are now proposing to pay the old age pensioner and the widow is barely one-sixth of that figure. In this budget, as in the last budget, they have allowed these groups to fall further behind the rest of the community. Instead of trying to improve their lot, instead of trying to help them to catch up with the average worker, who is six times better off than them, all this Government have done is let them fall further behind. The shortfall in their relative position is not as sharp this time as in the last budget but it is all part of the Fianna Fáil policy: the poor are to get poorer and the rich are to get richer.

What about the Government's ideas for celebrating the Year of the Child? They have a great scheme to take back, through reducing the children's allowances in the income tax code, all but 1p per month of the increases in children's allowances for third and later children. Somebody was talking about this before I came down to the House. They said: "Do you realise that parents will be able to celebrate the birthdays of third and extra children by buying a half-pint of beer and by sharing it. It will cost 12p for that." That is how parents will celebrate the birthdays of their third and later children.

This is to be the year of the two-child family. There are no incentives to think in terms of having even a third child although, demographically, the country needs families of at least three if we are going to survive and not become like many countries in Europe, countries with a net decline in population. We have not reached that point yet. We have some distance to go despite the decline in fertility, but this is not the point. Surely fertility is falling fast enough already. There was a drop of 6 per cent in the single year 1975, and a fall of a quarter despite the temporary impact of Humanae Vitae for three years in the 11 years from 1964 to 1975. Surely the size of the average Irish family is being foreshortened enough without adding extra disincentives. This part of the budget is a sick joke. It seems to belong more to the Minister for Health's area of current legislative activity than to that of the Minister for Finance. It could be described as a contraceptive budget.

The large family of more than two is not the only target for the Government's social disapproval. The small farmers were not to escape no matter how few cows, pigs or sheep they have. The discrimination that exists against people who dare to get married and establish a household still continues. There is no relief in this budget for the married householder, the only ones to be taxed as householders rather than on an individual basis. Only if they do not enter into the contract of marriage do they avoid taxation. As I have said in a recent speech, the numbers doing just that is rising at a remarkable rate. The fact is that each year there are 4,000 people who, in the ordinary way, going by the patterns of the past, given the number in the age group available for marriage, would be getting married and they are not getting married. There are many reasons for that: the economic recession, unemployment, new trends and mores in the country. It is not the job of Parliament to give an extra push along that road. The time has come to accept that we are in a situation where the continued discrimination against marriage is dangerous. There was a time when you could get away with it because marriage was the only way in which people normally lived together in a household as man and wife. That is not the case today. An increasing number of young people are thinking in different terms. We have a duty not to give them an excuse or an incentive to do so; not to say to them “As long as you live together without getting married the State will see that you are not taxed too much. If you get married we will really tax you”. There is enough of a trend in that direction in the country without encouraging it further. It is not our job as politicians to get unduly involved in these matters of social mores. We have duties and responsibilities to consider. Is the impact of our policies encouraging undesirable trends in our society or are they encouraging desirable trends? We cannot continue the kind of discrimination against marriage which hitherto we got away with. It may have been unjust but it did not have much effect on how people behaved. At this stage it is beginning to affect the way people behave and it is time that it was rethought.

The Government have sought to buy popularity with limited reductions in income tax. The amounts are insufficient to be of any real assistance in the negotiation of a rational and reasonable incomes agreement of which the Government seem to have given up all hope, anyway, judging by their provision for 12½ per cent increases in the public sector. They may hope that this will see them through the local and European elections, leaving any really bad news until after that. But even this calculation if made, may not prove justified because the public will quickly observe that a tax increase of £57.2 million is almost twice the tax reduction of £31.7 million. In arriving at that figure I discounted the £5 million in the budget for stock relief as this merely continues an existing provision for which, apparently, the Government forgot to provide funds in the Estimates. The Government will not find that the net impact of a budget which increases taxes as much as it reduces them will be of much help to them in the elections.

I have already referred to the general impact of the budget—lack of impact, I should say—on employment. It is more likely to fall than to rise with a growth rate of 4 per cent for the economy. I want to refer now in more detail to the question of jobs in the public sector. The biggest "con trick" the Government have perpetrated is to fool a lot of people, even some parts of the media, into thinking that they are doing a great job in expanding the public service. They are providing some additional posts, but let us add them up. Let us look at the actual figures in the budget and see what they add up to. I have been through them carefully. Apparently, the estimates provided for 2,500 more people in the civil service—1,250 in teaching, 550 in the health service and 1,000 in State-sponsored bodies. They provided funds to employ 5,250 extra people. What did the budget add to this? It added 700 in Posts and Telegraphs and the Revenue Commissioners, 500 in the Garda, 250 in environmental improvement schemes—I am not quite sure whether to include these in public sector employment or not, but I am giving the Government the benefit of the doubt—the equivalent of 250 man years, 275 man years on road works, 75 man years on additional temporary youth employment, 50 adult education officers and 70 child care assistants. The total is 1,920. If you add together what is in the Book of Estimates and what is in the budget you get 7,170 additional jobs in the public sector.

Does the Taoiseach know what was the average increase in the size of the public sector during the period when the National Coalition were in office and when, for a period, a freeze on employment was operated on a fairly tight basis? A freeze is never absolute because it always makes provision for special cases where it would be grossly uneconomic not to employ extra people to, for example, collect taxes. The average increase in employment in the public sector during the period of the National Coalition was 7,000 a year. That is the normal increase required, even tightly controlling it and even freezing it. The Government are only offering 7,170 jobs and they are making a noise about it as if a great bonanza of additional jobs was being provided. All they are doing is doing what we did in a period of a freeze. If I have missed any figure I would be glad if the Taoiseach or somebody would tell me what it is. The public service employment creation programme is a total fraud. It is simply the ordinary expansion of the public service to meet ordinary needs and being dressed up to look as if it involved something new.

In conclusion, I want to sum up. The budget is fraudulent in regard to the revenue figures on which it is based. It is inflationary in its effects and in its assumptions. It is damaging to the cause of wage restraint. It does nothing to get the economy accelerating again after the downturn which inevitably followed Fianna Fáil's initial splurge of consumption—oriented, import-creating spending. The budget is irrelevent to the country's needs. It may look well and may make good headlines today, but the net effect on the economy is that it does nothing to get us out of the difficulty we are in. Fianna Fáil launched a very short-lived boom—it did not survive more than 12 months. Within 12 months the steady growth that we had built up has been destroyed; within 12 months, as the Central Bank has told us, the economy is on the downturn and as the OECD, the ESRI and other bodies have told us, we are moving towards a growth rate of 4 per cent which will not even sustain existing employment and there is not a damn thing in the budget to do anything about it.

An Leas-Cheann Comhairle

Deputy Cluskey.

Mr. Cluskey

I must have been misinformed. I understood from the Whips that the Taoiseach was to speak next.

The Taoiseach

If the Deputy is being short-taken I shall go in now.

Mr. Cluskey

No, no.

An Leas-Cheann Comhairle

The position here has been that it is usual to call the two Opposition leaders. The Taoiseach will be called next and then we will revert to the one from each side as we have been doing normally.

The Taoiseach

The Chair passed me a note to that effect and I acquiesced. I assumed it was normal practice.

An Leas-Cheann Comhairle

It has been. I have heard of no arrangement between the Whips. If there is, I will call the Taoiseach, if Deputy Cluskey wants——

Mr. Cluskey

I am at a—not quite the same, but similar—disadvantage because I heard of no arrangement between the Chair and the Taoiseach until the Chair called my name. However, speaking on the White Paper on Wednesday 31 January, as reported at column 169 of the Official Report I made the following statement in relation to what was then the forthcoming budget and I think it is worth quoting:

I do not see the year ahead as being one that will give any comfort to the Fianna Fáil Government nor will it give comfort to any other section of the people. By their policies Fianna Fáil have ensured that 1979 will be remembered not for the launching of a plan for the attainment of full employment but a year in which the sectional interests they have fuelled will give full vent to their feelings and all sections of the community will be the losers as a result.

I went on to say:

... there is a possibility of retrieving that situation and that possibility will present itself in this House this day week. There are two proposals which could be put forward in the budget that could salvage the situation, but I do not have much confidence that the necessary wisdom resides individually or collectively in the Cabinet to take advantage of that last chance and to come here in next week's budget with proposals that could possibly marshal, if not all, at least the majority of our people behind the kind of commitment and sacrifice that are undoubtedly necessary for the attainment of full employment. I believe that if proposals which are shown to be just are put to the people and if the sacrifices to be made are seen to be fair and equitable, the people are capable of making that commitment. In my view the policies pursued by this Government have caused very serious sectional divisions within our national community and I have very little confidence that this day week they will take the last chance to salvage the situation.

Unfortunately, that prediction of mine regarding my lack of confidence in the Government availing of the opportunity presented by the budget to introduce some kind of equity and fairness into our society and indeed give them some chance of attaining the very desirable goal of full employment that they have set has been borne out. In that speech I went on to say that we now had as the third national aim of Fianna Fáil the attainment of full employment. I said I thought it would come to the same fruition as their other two national aims, national unity and the restoration of the Irish language. In the case of those two national aims that one heard about for many years from Fianna Fáil the same vital ingredient was missing and it is also missing in what they have now declared to be their third national aim. That ingredient is an appreciation and understanding that in order to achieve a national aim you must mobilise the goodwill of the majority. In the case of the other two national aims and in the case of their third national aim they have done precisely the reverse. They have in regard to the Irish language, and they have in the past in regard to national unity, and they have now in regard to the attainment of full employment, alienated sections of the community which were vital to the achievement of any of those national aims.

In listening here yesterday to the Minister for Finance presenting the budget and seeing the proposals put forward by him against the background of what Fianna Fáil had set out in June 1977 to do to attain full employment, one felt somewhat stunned because if ever a vital section of the community was not only alienated but provoked into reacting it was the organised workers by the proposals on PAYE, the reform of our tax system and the provisions made for social welfare payments.

This is called the budget. In fact, what we are discussing today is the second of what will undoubtedly be three budgets in this year of 1979 and if one is to take seriously the statement of the Minister for Economic Planning and Development, Professor O'Donoghue, last night in a radio programme with myself, we can anticipate that 1979 will go down as the year of four budgets because he indicated last night that there will possibly be another one.

We had the first budget at the very beginning of the year when several vital decisions were made by the Government in regard to cutbacks. To mention a few of them, I refer to the £22 million cutback in relation to food subsidies: the £2.7 million in relation to the subvention to CIE and the effect that those things had on the lower and social welfare classes and also on some people who up to now have been described as the middle income group, plus another, a cutback in the allocation to the Department of Social Welfare of no less than £15 million.

Last winter an announcement was made in the Estimates for that Department. A sum almost equal to half of what was provided in the Estimates in the budget yesterday had been cut back from that account. That is two budgets. In April the Minister for Health and Social Welfare will come in and introduce the pay-related contributions for workers that in fact will be used as a third budget and he will be acting as a tax collector by the introduction of the pay-related system.

According to the Minister for Economic Planning and Development last night on Radio Telefís Éireann there is a distinct possibility of a fourth budget. I claimed on the day before the budget that we could expect another budget in the autumn. When I made that statement I believed it, but I did not believe that I would get a Minister of the present Government to agree with me as the Minister for Economic Planning and Development did on the radio last night.

With regard to the publication of the Estimates and the balancing of accounts as presented by this Government over the last few weeks, some economists have expressed some doubt as to the validity of the figures given to the Irish people. Economists who wish to maintain their political objectivity and neutrality tend to put things in rather mild terms and they would not use the terms that I as a politician would use in describing the transactions of a Government any more than the Central Bank would. They would phrase them in a different way, but the message is the same. The message is quite clear. Even in today's The Irish Press, which is not generally regarded as hostile to the Government, on the financial page you will see a heading, “Economists doubtful on revenue, debt sums”. What that headline is saying is that the accounts that have been presented to the Irish people by this Government are fraudulent; they are distorted and untrue. Were they to be presented by a private or public company I have no doubt that the manner in which they were calculated and presented would attract the very active interest of the Fraud Squad. We saw here yesterday an exercise that one would not have thought possible in the extension of the social injustice that prevails in this country. I refer to the levy that was put on the farming community.

I intend to spend a considerable amount of time on social welfare. I worked under Deputy Corish in the Department of Social Welfare when he was Minister there. Under his direction we managed to make very considerable advances in that Department. We managed over an economically very difficult four-and-a-half years to alleviate—no more than that—the misery and poverty of tens of thousands of our people and it is very difficult, to say the least, not to feel extremely angry to see that advance—it was not spectacular but it was an advance—not only wiped out within 18 months but the plight of those people made more miserable and desperate by the activities, decisions and polices of the present Government.

The budget was meant—or should have been meant—to do a number of things. One thing that one would expect a budget to do would be to try to extend the amount of money or gain in national terms and distribute that gain somewhat equitably amongst the various sections of our community, and it is also meant to further the policies being pursued by any Government. This budget was meant to do three things, as I understand it. I am not sure about the social justice element; I do not know if that was intended, but it definitely was not done. The budget was, we are told, meant to try to create a climate in which it would be possible to have some agreement, formal or informal, on restraint by organised workers in the demands they would make. The organised trade union movement made their conditions for the budget in the creation of such a climate very clearly known, not only to the present Government but also to the general public. Two of the conditions that they made were (1) that as far as PAYE was concerned the burden on the PAYE taxpayer had become intolerable and relief of a minimum of £100 million would have to be given to that category of taxpayer, and (2) they said it was necessary, even to stand still, for an across-the-board increase of 20 per cent for social welfare recipients. Quite obviously, neither of these things happened. If we look at what happened first of all on the PAYE front, we will see that the Minister for Finance last week calculated that, without any change whatsoever but because of buoyancy and so forth in this present financial year, PAYE would contribute in excess of an additional £200 million to the Exchequer. The Minister came in here yesterday and, in order to create the kind of climate where you could talk to organised workers along the lines of possible restraint in wage claims, he made a concession—if one could call it such—amounting to £27 million. The reality of that is that for every £8 that he is going to get from them this year, before any adjustment was made he was prepared to give them £1 back.

So far as social welfare is concerned we had a cynical—this is even too weak a word—attempt to give the impression to the Irish people, the media and to this House that some real advance was to be made in improving the living standards of social welfare recipients and people in the lower income group. Last Tuesday during the course of an exchange at Question Time the Taoiseach said that Fianna Fáil had always looked after the poor. He said their record in this respect was one of which they could be proud. They may not be his exact words but he was claiming credit for Fianna Fáil's record in relation to the poor and their social welfare commitment to them.

I will tell the Taoiseach, if he does not know already, about Fianna Fáil's record and their commitment to the poor and where it has led us. It has led us in an Irish society, in a European country—not in a Third World country that cannot at the moment pull itself up by its own boot straps—in a country that is rated the sixteenth wealthiest country in the world by international standards, to a situation where 20 per cent of our population are living in poverty. The percentage is probably higher at the moment and it is there because of the kind of commitment of the Fianna Fáil Party and Fianna Fáil governments to the poor during the years.

Yesterday they clearly demonstrated the kind of concern they have for those people. We saw an extension of the difference between the haves and the have-nots in our society. Talking about the poor, about the haves and the have-nots, may be regarded by some as cliches or statistics that do not really matter but they matter to a lot of Irish men, women and children for whom this Government have a direct responsibility. The Government have not discharged that responsibility in the past and it is quite clear from the provisions in the budget with regard to social welfare that they have no intention of discharging it now.

It is worth while looking at what has happened with regard to social welfare recipients and the lower paid workers. Last week when we asked for a debate on food subsidies in Government time—something we still have not got—the Taoiseach told us that the Government would compensate adequately not only social welfare recipients but also lower paid workers for the removal of food subsidies. We saw how they were compensated yesterday.

Let us consider the PAYE concessions, if one could call them that, and see what they mean exactly to a non-married worker. They mean an increase of 42p per week. For a married couple with no children the concessions mean an increase of £2.12 per week and for a married couple with three children they mean an increase of £2.42. Therefore, the value of a child in the Year of the Child, at least so far as Fianna Fáil and the tax code are concerned, is 10p per week per child.

This morning I heard the following comment from a young married man with four children, an ordinary working man earning a reasonable wage. There was a member of the Fianna Fáil Party, a public representative, present when he made the statement. He said, "So far as the children's allowances are concerned—and I have four children—after allowing for the increase in the price of milk it has meant for me 2½ per week". The man said they get five pints of milk a day and when allowance is made for the increase in the price of milk because of the removal of the food subsidies by the Government and for the increase in the children's allowances announced yesterday by the Minister for Finance, it meant that in this Year of the Child Fianna Fáil's regard for a family with four children amounted to 2½p per week.

Minister of State at the Department of the Public Service (Mr. MacSharry)

It was possible to get a calf for that amount in the Coalition's time in office.

Mr. Cluskey

Probably the Minister was in the position that he had one to sell, and still is in that position. I am talking of people who cannot buy the produce of a cow. That was the commitment and the adequate compensation that the Taoiseach spoke about last week when he tried to justify the removal of the food subsidies.

There has been misrepresentation of the position with regard to job creation. Can someone tell me what are the actual figures of jobs that have not only been created—they create jobs by writing down a figure on paper—but jobs filled in the public service? I do not know how the general public find the situation but certainly I am confused. I am confused for the following reasons. In the White Paper we were told that in the public service 12,000 jobs were created. Yesterday the Minister for Finance told the House that 10,500 jobs were created in the public service and last night on the radio the Minister for Economic Planning and Development told us that approximately 8,000 jobs were created in the public service. If one considers the different and contradictory claims made by Ministers with regard to the job creation programme and the achievement of the job creation target, the more cynical and the more disbelieving the Members of this House and the general public have become of figures presented by Fianna Fáil Ministers. It is both sad and dangerous for Ministers of any Government to misuse the positions they have been entrusted with by the Irish electorate by giving what they know to be inaccurate figures in relation to such a vital matter as job creation.

In relation to the Department of Social Welfare, from my experience I know how the Department works. I know that it is normal to have conflicting views between what the Department of Social Welfare wants for the expansion of that Department and what the Minister for Finance will give. I know that all Ministers sitting around a Cabinet table will be competing for their allocation for their particular Department. Over the last 18 months, a Department that had become important during the Coalition's term of office, a Department that had been making a genuine contribution towards alleviating poverty and misery in our society, has under the Minister for Social Welfare, Deputy Haughey, been totally neglected and downgraded as far as Government priorities are concerned. Conflicts between the Department of Social Welfare, who wish to expand and to enhance the standard of living of the people for which the Department are responsible, and between the Minister for Finance is quite normal; but when that situation is aggravated by competition and antagonism between the holder of the office of the Minister for Finance and the holder of the office of the Minister for Social Welfare, neither of these people suffers the consequences of that antagonism and personal rivalry: the tens of thousands of people that the Minister for Social Welfare's Department are responsible for are the people who suffer.

Over the last 18 months there has been a complete wiping out of the progress that was made in these Departments in hard economic circumstances. Accompanied by neglect of the people for whom the Department are responsible we had a PRO operation that would have been amusing if one did not realise the serious consequences of the emphasis on self-promotion and the neglect of ministerial responsibility that lay behind that campaign. I do not care about internal difficulties within the Fianna Fáil Party; I do not care what personal antagonisms there may be between the various members of the Fianna Fáil Party; but when that spills over and contributes to the neglect of between 20 per cent and 25 per cent of our people who live in poverty and misery it is time to call a halt. The personal ambitions of any Minister or TD cannot and should not take precedence over his responsibility for the furtherance of the interests of the people.

The last available figures show that in the region of 20 per cent of people are living in poverty. Has any member of the Cabinet or Minister of State mentioned the word "poverty" in public since June 1977? We tried, under extremely difficult circumstances, to at least focus public attention and awaken public conscience with regard to such people living within our Christian society. We managed to do that to some extent but the good we achieved has been wiped out by the Government in the last 18 months.

The PRO exercise of getting Fianna Fáil TDs, Senators and party hacks to jog around Merrion Square is a poor substitute for a commitment to the responsibility which Fianna Fáil have the privilege of having on behalf of the Irish people. It is a poor substitute for a genuine use of what some people claim to be the alleged talents and political brilliance of the Minister for Social Welfare who has not given any visible sign in the last 18 months of his responsibility to social welfare recipients. If I were Minister for Social Welfare in a country where a percentage of people live in poverty and I had the Estimate of my Department cut by £15 million on the basis of £5 million being saved by way of an unprecedented witch-hunt against the same people—those who are forced to live in poverty because of our present economic system and who are, by implication, being told by the Government that they are poor through their own fault—I would do no less than resign. I would resign sooner than be a party to that type of approach towards the people I was elected to represent.

We have sought a proper application and change in the tax code here. We have pointed out that the burden being placed on PAYE payers was becoming and has become intolerable but we were accused of wanting to bash the farmers. We were accused of being members of a party that was anti-farmer. That accusation was extended to the operation of the CAP. We have all heard the misleading statements from Fianna Fáil people, from the Taoiseach down, trying to imply that the Labour Party internationally and on the European scene through our association with the Socialist groups, were trying to undermine the CAP. Everybody knows that that is not true and that we have defended the operation of the present CAP policy. We have done so because we recognise that it is in the national interest and because it is the only way that there has been some transfer of the resources of the richer parts of the Community to this country. We will continue to say that there is a responsibility on the Government to ensure that the fruits of that transfer of resources through the operation of the CAP are equitably distributed within our national boundaries. That is a responsibility the Government have failed to live up to and one we will continue to remind them of.

We are not asking the Government to tax farmers as farmers; we are asking them to tax people in accordance with their income, irrespective of whether they are farmers, carpenters, builders' labourers or plasterers. We want everybody, based on their income, to make their fair and equitable contribution towards the running of the country and not simply because they are farmers. Yesterday something happened which I would not have thought possible because I did not think there was any way the Government could extend their operation of social injustice to the farming community. They did so yesterday with their 2 per cent levy. We condemn that levy because it is an extension of social injustice. That levy will ensure that thousands of farmers who have not got the income of an industrial worker and who would not be subject to tax if they were in any other occupation because of their low income must pay the same levy as the rancher, 2 per cent. One would have thought it impossible because of the inequity that exists in the taxation and social welfare codes to introduce a further blatant injustice against a section of our people but it has happened. That levy is an injustice.

A national wage agreement appears to be the cornerstone of the whole economic policy of Fianna Fáil but nobody can deny that the budget, and the policies pursued by the Government in the last few weeks, will seriously undermine their own economic policies and put our future development in jeopardy. Full employment is a new concept, a new aspiration, of the soldiers of destiny but it is not a new aspiration of the Labour Party. We advocated genuine economic and social planning over the years but now Fianna Fáil are paying lip service to this policy; they are recognising it as being not only desirable but necessary. The Labour Party believe in genuine economic and social planning and development. We do not believe that economic growth for its own sake is worth bothering about. Economic growth that will benefit the people and that goes hand in hand with social development is an aim worth pursuing, and this party have always been committed to it.

One of the real dangers of the nonsense of this cynical exercise that has been engaged in by the Government is that people may become totally disillusioned about the possibility of achieving full employment. We believe this is achievable, and we have believed it for many years, but it is only achievable if we can get the commitment of the people, if we can marshall all sections of the people towards its attainment. This aim will not be attained by the policies of this Government. We believe there is a growing realisation among the electorate that full employment and social equity are attainable, but they are only attainable by the socialist policies which this party have been advocating over the years. Those policies are available in print and can be examined, criticised and assessed.

Many people on both sides of this House have social consciences, but a social conscience without the political will and commitment to pass the necessary legislation to give it concrete effect is as useful as a hole in the head. The Irish people are beginning to realise that and I am sure they will give this party the necessary electoral support to put genuine economic and social planning into effect, planning that will command the respect and commitment of the majority of the people. As long as the Government follow their present policies, the attainment of full employment, desirable though it is, will not be achieved in the foreseeable future.

The Taoiseach

Unlike Deputy Cluskey I prefer to range more broadly over the budget and its implications, to see the budget for what it is intended to be, not to deal with any one part of the economy or one section of the community, but, in so far as Government policy can influence it, to ensure the general economic, social and cultural progress of the country as a whole.

This is a comprehensive budget which deliberately deals with all aspects of our economy and all sectors of our community. It is a balanced budget, not in the sense that figures balance but in the sense that there is a clear and fair attempt to do justice to all sections of the community. In approaching the budget the Government have certain options and certain choices. The budget itself is an act of choice.

Public expenditure runs at about 50p of every pound of national output: that is the equivalent of the gross amount of public expenditure. The range of choice the Government have is vast, and the consequences for the entire nation, for good or ill, are equally wide-ranging. We can use public revenue to cater for the underprivileged, as we are bound to do and as we are willing to do, but the question arises: can we devote it to that one purpose alone?

As I indicated in my opening remarks, we have to be comprehensive in what the budget seeks to attain and encompass. We can use it for investment to improve our roads and telecommunications systems, to make our agriculture and industry more efficient, to build up our schools, hospitals and social infrastructure; but would anybody seriously argue that the entire capacity of the State should be devoted only to that purpose?

Our taxation system must encourage initiative but can the State forego the revenue with so many other needs pressing on us? The tax system must be equitable as between the different categories of taxpayers and between one taxpayer and another. Here, again, a decision on the allocation of public expenditures and revenues is involved.

Finally, we must get balance and stability into our public finances. This is necessary irrespective of any decisions on the European Monetary System. Within that system the need for balance and stability will be even more critical and necessary; and the choice between cutting expenditure and increasing revenue is crucial to achieving the necessary balance. I am not suggesting that these objectives fall neatly within the budgetary framework. Indeed, action in areas far removed from the budget is necessary for their attainment. The budget can deal with State revenues and expenditure but it does not pretend to produce a solution in these other areas—some financial, some legal, some on incomes and some in the course of ordinary straightforward human contacts and dealings.

There is one further reservation I would like to mention. Special interest groups like trade union and farmer and employer organisations tend to see a variety of objectives. I do not criticise them for this. This is their purpose and function. In the immediate aftermath of the budget we have seen all those interests expressing varying degrees of satisfaction, disappointment and desires for more benefits for their particular sector. That is what they are there for. But these demands all concentrate on Government and the resulting pressures for the simultaneous attainment of conflicting ideals can be fundamentally destablishing. Wish lists are not necessarily consistent and rarely is all they contain capable of realisation at the same time.

A Government cannot spend vast extra sums of money on welfare, reduce taxation, increase capital spending, provide the conditions for full employment and produce a balanced budget. They must choose, and the course they select cannot of its nature meet the wishes of all who seek public attention. The Government must be guided by what they see as the fundamental economic objective of the Irish people: and this they now see as the creation of full employment in our society. This was the guiding motivation in the manifesto we issued before the last election, indeed as far back as 1976 when we first produced the framework of that manifesto. We can safely say—without in any way denigrating the other demands—all these other demands are subservient because, once full employment is attained, all the other demands can be met, in time and in different degrees.

Then the question arises: how does the present budget contribute to that aim within the framework of the choice I have mentioned? I shall deal with welfare first because it is in this area those who are foolish enough to ignore the facts often think it well to attack this Government's record. Those who do so often seek to connect our approach to welfare with our approach to taxation policy. Let me emphasise here that the changes we have made in the taxation system were made to remove some of the most ludicrous anomalies. As one of the poorest countries in Europe we tried to operate a system of capital taxation, the effect of which was to drive abroad the capital for investment of which this country was so obviously starved: or to the extent that it did not drive this capital away, almost guaranteed its non-use in productive investment, the proceeds of which could be confiscated in taxes. When we were arguing against the wealth tax and some of those other capital taxes introduced by the last Government we pointed to the fact that many people who otherwise would have capital to invest were driven away or people invested it in building up treasure troves in residential houses of no advantage to anybody but themselves and their progeny. Admittedly at that time—and in fairness to the last Government—increases in welfare were paid, paid largely, let me repeat, because of the savings that accrued to the Government by reason of our membership of the European Economic Community and therefore by reason of the ability of the Government to divert the moneys that would be paid otherwise in subsidising agriculture to social welfare payments. At that time welfare was indeed eating up a continually growing proportion of our resources.

The Chair cannot allow this.

The Taoiseach

I have quoted figures and the Deputy can instruct one of his colleagues to produce figures in refutation of mine.

(Interruptions.)

An Leas-Cheann Comhairle

The Taoiseach, without interruption.

The Taoiseach

Deputy Cluskey has already spoken. He is suffering under the delusion that only he ever came to the rescue of social welfare recipients in the country. There is, of course, as indicated by the Tánaiste yesterday, one area where substantially larger increases are being given. I refer, of course, to children's allowances where the monthly rate for the first child is being increased by as much as 52 per cent and that for the second child by 34 per cent. Where there are two children in a family the percentage increase for the combined allowances will be 41 per cent, while for a family with three qualifying children the rise will be 29 per cent. As Deputies are aware, these allowances are now paid, in most cases, directly to the mother of the children. I will give credit to Deputy Cluskey here because this change occurred in his time, but I do not think that the fathers in our society were so selfish as to drink all the children's allowances. That might have happened in very few cases. These increases will make up to families, particularly those on lower incomes, some of the loss which years of neglect to change the level of State support for children have caused.

I want to pause a moment in drawing attention to the welfare improvements in the budget to stress again the importance of getting inflation down further and keeping it down for the benefit of those in receipt of the various payments to which I am referring. Over the past two weeks there have been quite a number of interviews on radio and TV with people whose position cries out for improvement. One noteworthy feature was the way in which so many of those interviewed referred to the effects of rising prices on their ability to cope.

The Irish Congress of Trade Unions sought an increase of 20 per cent in rates of welfare payments. Unfortunately we were unable to go as far as they asked, although in relation to the long-term benefits going to those whose disadvantage is of a permanent nature, we have gone reasonably close to their suggestion. I want to put it to the leaders of Congress and to the members of the affiliated unions that by the way in which they exercise a sense of responsibility they can do as much, if not more, to improve the position of the less well-off in our society by helping to abate price rises.

I mention the Irish Congress of Trade Unions simply because they put forward a specific figure, but I want to stress that the same applies to all groups in our country who in their economic position and incomes enjoy at least reasonable comfort. It is not the absolute percentage of the increase which matters—whether it be 20 per cent or 50 per cent or 12 per cent or 16 per cent—but the difference between these figures and the rate of inflation. All can contribute to those on welfare by themselves showing moderation. The real increase is what really matters, what at the end of the day the people on social welfare can buy. I suggest they can buy more now, as I have indicated in the figures I have produced, than they were able to buy in the four years of Coalition Government.

Deputy FitzGerald referred to the fact that now we are only giving increases once a year. In one year, of course, the Coalition introduced increases in the month of October but largely because they had to do it, realising that the amount of increases they had given in their earlier budget in January or February was totally inadequate having regard to the rate of inflation, to which the Government themselves contributed, at least with regard to 50 per cent of it. That no longer applies. Now we have inflation reduced to one-third of what it was at that particular time.

Of course, it remains the responsibility of the Government, acting on behalf of the community as a whole, to translate into action, through the budget, the solidarity and concern of people for those who, due to circumstances outside their own control, require financial assistance. I have mentioned the percentage increases in rates of payment. Deputies have the notes setting out the principal features of the budget and these include all the changes in rates of payment and other changes in the social welfare sphere. I invite Deputies to read the yellow pages they were given because they very succinctly, clearly and accurately and, let me say, without any cooking of figures, set out what the real advantages are for people under this budget.

Perhaps I could give some examples of how people in various circumstances will benefit. At present, a person in receipt of a non-contributory old age pension who is under 80 and who has an adult dependant under pension age gets £20.35 a week. This will go up by £3.30 a week to £23.65. A widow or a deserted wife with four children currently receives a maximum of £31.60 weekly. She will now receive an increase of £5.00 a week bringing her maximum entitlement to £36.60. I am not suggesting by any means that these are spectacular increases but, on the other hand, they are more than adequate to compensate their recipients for the reduction in the consumer subsidies.

I want to refer here to the decision to reduce those subsidies. The most up-to-date assessment is that the effect of the reduction on the consumer price index will be under 0.7 per cent, that is less than three-fourths of 1 per cent. I suggest that the real increases now given, having regard to the reduced rate of inflation, will more than offset that very small increase in the consumer price index.

The increases in rates of payment amply fulfil the commitment I gave shortly after the reduction in food subsidies to compensate those on low incomes and welfare. Here I would attach particular significance to the increases in children's allowances. The changes in tax bands and in income tax allowances will serve the same purpose for those on low incomes who are not in receipt of welfare payments. I would like to say here again that, taking the £30 million approximately by way of relief in income tax for PAYE earners, added to the £70 million made available in the last budget, that is a very significant increase in tax allowances and, therefore, a very significant increase in the net income of ordinary PAYE workers. I believe that these are effective ways of helping the less well-off and are greatly preferable to continuing subsidies which served a particular purpose at a particular time but which are completely indiscriminate in their effects and have outlived their usefulness. Here again may I remind the House that food subsidies, as has been proved time and time again, do not go only to help the less well-off; they go to help people who are in no way dependent on them and who do not need food subsidies.

There have been times when the introduction of food subsidies has been necessary. We have seen occasions for that during the last war and during the recession of 1974-75, during which time incidentally we, as the party in opposition, asked the Government to introduce temporary food subsidies to offset this very high and rather sudden increase in inflation. The Government, unfortunately, did not implement our suggestion until about six months after the suggestion was made. We suggested it in the autumn of 1974 and it was implemented in the June budget of 1975. I acknowledge that there are exceptional times when food subsidies are necessary but by and large it is far better, rather than to burden the taxpayer generally, both the poor and the well-off taxpayer, with the payment of money for food subsidies, to divert the money to those people who really need assistance and that money is best diverted through the social welfare system.

The action we have taken is totally in line with one of the guiding principles of our action in this sphere which I enunciated on this occasion last year. I said that the Government had an obligation to tackle the situation in which people in comfortable circumstances are supported through the welfare system by their fellows, many of whom are in worse circumstances than those benefiting. The measures we have taken in relation to children's allowances and child tax allowances provide a further illustration of our approach of concentrating on improving as much as we can the position of those who should really benefit from State welfare measures.

Before I depart from this, and since Deputy Cluskey has again challenged my figures, I have here a table indicating the real net increase in social welfare payments in the two periods 1967 to 1973, 1973 to 1977 and in 1978. The net real increase in the year 1967 to 1973, taking 1967 as the date here, was 4.7 per cent. The net real increase in the four years for which Deputy Cluskey and the Coalition were responsible for social welfare payments was 2.4 per cent, almost exactly half the real increase in the five or six preceding years. The real increase in 1978 was 7 per cent.

Mr. Cluskey

Those figures are as factual as the other figures the Taoiseach was producing.

The Taoiseach

This is almost three times as much as the real increase in the four years 1973 to 1976.

Mr. Horgan

We are talking about annual increases.

The Taoiseach

These changes do not bring out the full contribution made by the Government towards the improvement of the lot of those on low incomes. Last year, despite what Deputy Garret FitzGerald said this morning, the net increase in new jobs created was 17,000, the highest number ever recorded. Deputy FitzGerald sought to challenge these figures because the figures for the net passenger movement was not completely brought up to date, to some extent because of the Aer Lingus strike last year. He accused me of being neglectful of my duty in this respect. As he admitted himself this morning, I stated early on when I was using the figures in relation to the net passenger movement, that they were inaccurate—at best they were estimates—and in most cases the outturn was an exaggeration of what the figures were. However, he having accused me of being neglectful as the Minister responsible for the Central Statistics Office, I would like to remind the Coalition again that it was their deliberate decision not to have a 1976 census that caused any difficulties that now obtain in this area.

The present budget seeks to underpin and expand on the progress that we have made over the last year-and-a-half. It provides for one of the greatest increases ever in the level of public capital spending. I do not necessarily consider this sort of increase as a good thing in itself. With public expenditure generally at its present high level, increases are not necessarily beneficial. Often they substitute for spending which would have occurred anyway. The State simply takes money from individuals and organisations and spends it for them and State intervention in this way does not inevitably produce economic or social advance. There is not necessarily any increase in investment, only an increase in the State's direction of spending. The capital budget this year was framed especially with these considerations in mind. Its essential object is to increase investment or to provide the conditions in which that increase can take place. Approximately 69 per cent of the public capital programme is going on agriculture, industry and infrastructure. A further £250 million is being provided for investment in housing, schools, hospitals and other social equipment. On top of this we have provided £20 million extra in current expenditure largely for the creation of jobs in the public sector and for young people. Here again, Deputy FitzGerald this morning tended to decry that expenditure. He spoke about mickey-mouse jobs. Admittedly there are short-term jobs in our programme especially for young people who either never had the prospect of getting a job or would not have the prospect of getting a job or, having had the prospect of getting a job, would at least need in advance some work experience. That is worth-while expenditure and certainly so in present circumstances. Rarely has there been such a shift in emphasis in the direction of public revenues and expenditure towards creating the conditions in which employment can be created and sustained.

As a proportion of notional output taxation here is about the average for the EEC. It does not take an excessive proportion in the aggregate. However, when the incidence of taxation is examined a different picture emerges. Here let me be quite frank in saying that those liable to tax on incomes pay on a comparatively low level of income a comparatively high level of tax, that is, in comparison with other EEC countries. This discrepancy is not due to an excessive amount of State revenue being levied from indirect taxes. It is due, in no small measure, to the high incidence of tax on one section of the population and a correspondingly low incidence on others, for example, agriculture accounts for approximately 18 per cent of national output but the proportion of income tax and rates paid by those engaged in agriculture lies somewhere around the figure of 2 or 3 per cent. The Government have no desire to levy an unfair proportion of tax on any individual or section in the population but the present imbalance obviously creates a situation which cannot be allowed to continue. The budget proposals to increase the level of farming taxation are a step in the direction of equity. It is not intended to deprive agriculture of resources needed for investment. Indeed the whole purpose of our efforts is to support and encourage investment in every sector.

Similarly, the Government are determined that the self-employed and other persons outside the PAYE system should pay their fair share of the taxes used to support the facilities which make the society in which they live possible.

The Tánaiste described yesterday the broad lines of a campaign, including the allocation of a substantial number of additional staff, to tackle tax evasion more effectively. I want to stress that this campaign will be prosecuted vigorously. Those who engage in this malpractice deserve the censure and condemnation of all. It is quite unacceptable that those in the PAYE system, whose total incomes are in the vast majority of cases known down to the last penny and taxed proportionately, should have to carry a greater burden than is properly theirs, due to the ability of persons outside the net, often very well-to-do, to break the law and evade making their proportionate contribution to financing public expenditure.

At this point, even though in this august assembly here I am a voice in the wilderness, I must say once again that we sitting in this Chamber also contribute to PAYE. We are not immune to taxation. People often say it is all very well for those in Leinster House to impose taxation or to give allowances when they go scot free themselves. Every man and woman sitting in this House pay tax in the same way as the ordinary PAYE contributor.

Incidentally, doubts have been expressed in a number of quarters about the pre-budget estimate that income tax receipts in the coming financial year would show an increase of 37 per cent. There have been even suggestions that the Government were engaged in what has been described as "creative accountancy". I want to say that these allegations are totally without foundation. The position is that the elasticity of income tax receipts has meant a continuous increase in recent years, terminating in the high level recorded last year. The Government are confident that with the continuation of last year's economic circumstances the elasticity of income tax receipts will again remain at a high level in 1979.

The budget launches the second phase of the Government's policy for public finance, as foreshadowed in the Green Paper last summer and confirmed in the White Paper we debated last week. We clearly indicated that in the second phase the percentage of GNP represented by the Exchequer borrowing requirement would be reduced. We envisaged a reduction in the proportion of national resources devoted to Government spending, an increase in the proportion of Exchequer resources devoted to improving the productive capacity of the economy and the phasing out of Exchequer borrowing for non-capital purposes, without sacrificing social objectives.

We have started to carry these intentions into effect. The total public expenditure, current and capital, for which we have budgeted represents a reduction, admittedly a small one, in the share of GNP to be taken by such expenditure. Within the total, capital expenditure shows a rise of 22 per cent against a rise of less than 15 per cent for current expenditure or 12 per cent if debt service is excluded from such expenditure. The current budget deficit has fallen from 6.3 per cent of GNP to 3.9 per cent. Satisfactory though that fall is, we cannot be complacent. We have a long way to go to put our public finances on a fully satisfactory footing. But we have made a good start and we fully intend to continue to the end of this particular road.

Five years ago, in 1973-74, the cost of debt service was approximately 19 per cent of the yield of taxation and other State revenues. The corresponding figure for 1978 was approximately 25 per cent. In other words, one pound in four of the revenue from taxation and other sources is absorbed by debt service. These figures do not take into account the return from the investments financed by the borrowing or, indeed, the effect on the economy generally of the projects financed by that borrowing. However, the trend they reveal is disturbing. If it were continued, then, obviously, an ever increasing proportion of State revenues could be absorbed by the necessity to pay off past debt—or the State would create conditions of economic instability in which any progress would be impossible. These are the factors behind the Government's determination to reduce the level of public sector borrowing from just under 13 per cent of gross national product to 10½ per cent in 1979. The effects on revenue costs will become apparent in future years, when the added freedom of budgetary choice will be an additional element helping the Minister for Finance in tackling our economic problems.

It can be said that none of the approaches in the present budget has gone far enough to satisfy all sections. Some will say that we have not committed sufficient capital to provide an infrastructure of the standard required in modern conditions. Others will say that the provision for welfare is insufficient. It can be argued that the changes in taxation do not go far enough. All of these arguments go back to the central point that I mentioned earlier. This budget represents the choice made by the Government from a variety of options open to them.

The choice is based, first, on equity, and more than equity for those on low incomes. It is based on the need to expand and modernise our agriculture, industry and infrastructure. And it is based on the need to recast the taxation system so as to achieve a fairer distribution of the burden without, at the same time, destroying initiative. But, above all, it is based on the need to create the conditions for full employment in our society. Those who have been called on to contribute, whether they be farmers or other taxpayers, are those best in the position to do so. At least they have work, sources of income.

It is in this spirit that I should like to see the present budget taken up. It is only part of a picture. The other part will be painted in by what happens in relation to incomes generally. The budget is dominated by the need to create employment. It can have that effect. We can create 25,000 extra jobs next year and the year after that and the year after that again, if necessary. But in order to achieve that aim, we must have the co-operation of those who at present are at work. It is not only in relation to the budget that choice applies. People in employment, if they are not in vulnerable industries or services, have the choice of pushing ahead with claims for improved pay and conditions. Some of these claims may be justified. I do not question that. They may be due to years of inaction or other causes. However, there are other claims for which it is difficult to see the justification. What is essential is that any general level of increase to apply at or soon after the termination of the present wage agreement should not be such as to drive up again our rates of inflation and make the expansion of employment, or indeed the maintenance of present levels of employment, impossible. As the Tánaiste said yesterday, nobody wants to go down that road again.

The Government, as part of their general duty to the people of this country, will take any necessary action to ensure that these consequences are avoided and, for the common good, policies leading to the objectives I have mentioned will be followed. That is the purpose of this budget and it is with these intentions that it is framed. But there is a responsibility on those in other groups to help in achieving these objectives, which all agree are essential to the progress, indeed the survival, of this nation.

To sum up, then, as I opened, the budget is well balanced in its broader context. It is easy for the Government party to laud it unduly and there is always a tendency for the Opposition to criticise it extravagantly and, indeed, unfairly. Now that the initial comments, favourable or otherwise, have been made I invite fair-minded people to consider the budget objectively overall. I think they will find in it three main elements. First, there are practical policies and reasonably substantial support for the Government's main priority of job creation. There is a fairly generous increase—and I make no greater claim than that for it—in social welfare payments, with a special increase of up to 16 per cent for long-term recipients such as widows and pensioners, while there is even a higher average increase of 28 per cent in respect of children's allowances. There is also in the budget the continuing process of rendering the tax system more equitable and of giving further relief where the incidence of tax bears more heavily—for example, on PAYE payers—and in bringing farmers nearer to the stage where, as they say themselves, and to this extent there is credit due to them, they will be paying their fair share of income taxation. Then, there is the overall strategy of continuing our attack, which so far has been singularly successful, on inflation, of creating a climate for continued economic growth and of encouraging private enterprise while engaging at the same time, where necessary, in direct State activity.

It has been said time and again that our success or failure will depend on how much we as a society demand for the services we render. Inevitably, if we try to take out of a machine more than it is able to give, we will run it down. Most of us here have experience of running-in a car. If we drive it too hard the engine will seize up and stop. We may have set off with the intention of reaching our destination a little sooner, of being there before the other fellow, but we can end up either by not arriving at all or by arriving much too late. In the matter of pay we can all be subjective about our entitlements. It is natural for any one person or group to ask for a little more for what they do, to ask for what they think they are worth and to say that in the end the extra cost will not be very much; but the extra cost would be great if the level of undue increases is spread among other groups. On the other hand, one group will claim to have a special case. Here again subjectivity can distort judgment with the result that every case would become a special case. I admit that anomalies can exist but there is machinery for dealing with such situations. We have the means of resolving in an orderly way any problem that can arise in the industrial sphere, but in any area in which the machinery may be inadequate the Government are anxious to improve it in consultation with the interests involved.

I appeal for an orderly approach to current pay-increase demands. In the absence of such an approach we could have a disintegrated free-for-all with the strongest doing best and with the weakest being left behind. However, it is now accepted widely that we all lose out in such a situation. We are a small island country, but no person or group within it can claim solely to be an island. We are all interdependent whether we be industrial workers, farmers, self-employed or whether we belong to any other group. If we try to take advantage one over the other we may win in the short-term, but we gain that short-term advantage at our own peril and in the long run at the peril of the nation. Apart from political or sectional affiliations this is the spirit in which I should like the people generally to approach the budget, a budget which is a genuine attempt to effect fair play among all sections of the community. It is a genuine attempt to proceed towards the goal of full employment, a goal that we believe is attainable. The budget is an attempt to improve the lot of every one of our citizens.

Mr. R. Ryan

It is very difficult to identify the Taoiseach we have just heard with the then Leader of the Opposition who, in 1977, said to the nation that there was no limitation whatever to Government expenditure and that if Fianna Fáil were returned to power the people would get everything they asked for. No sooner were that party returned to office than the Taoiseach changed his attitude and began a campaign of emphasising that there were limits to public expenditure. As I have said about the same gentleman in relation to what is now known historically as the arms crisis, either he knew or ought to have known what was going on. Either he knew or ought to have known in 1977 that there were limits to what the taxpayer could afford to give to Government and that, consequently, there were limits to Government expenditure.

We are told now that for 1979 there is to be no more than a 5 per cent increase in personal income. How stupid can a Government be to plan for what they know to be unattainable on the basis of all historic experience? How useless is the planning exercise and how futile is the appointment of a Minister for Economic Planning and Development if plans are produced that are not capable of achievement? It is argued that the Government are on course and that all they set out to achieve has been achieved. That is rubbish.

Mr. T.J. Fitzpatrick

(Dublin South-Central): What happened last year?

Mr. R. Ryan

Last year the Government, having issued a plan on the basis of a 5 per cent wage increase, allowed an 18 per cent income increase to arise and it was only because of the difference between the 5 and the 18—which, for the benefit of those people opposite who can juggle with figures but who cannot understand children's mathematics, is 13— on the basis of a 13 per cent difference in wages the Government were able to finance their grossly inflated and utterly irresponsible public expenditure programme last year. Far from being on course, they are widely off course.

It is interesting to hear that there is agreement between the trade union representatives and the FUE in identifying the cause of the present crazy situation in industrial relations. Both parties say that the reason for the difficulties in this area arose out of the circumstances in which the National Wage Agreement of 1978 came into existence. What were those circumstances? The trade unions were negotiating with the employers as they had done in previous years and naturally the unions were asking for more than would be likely to be available, but all compromise went out the door on the day after the 1978 budget which I described then as being a very wrong budget. The following day, when there was a meeting of the Employer-Labour Conference, the trade union members said there was then no possibility of selling compromise having regard to the Government's budget performance which suggested that there was no limit to the amount of public money available. Today our workers will say that if the Government have enough money to enable them to abolish wealth tax, if they have enough money to give to American and to foreign investors who put their money into highly questionable investments such as the Irish Trust Bank, if there is money for that kind of foolish and inequitable policy, there must be money for workers, their wives and children.

I was interested to note both in the budget speech and in the Taoiseach's remarks today that it has at last dawned on them that there is more to economic policy than statistics. There is human interest and human response. We are here primarily as politicians not as economists. While I was very sorry when I arrived in this House 20 years ago this year to hear so little economics spoken, I am equally disappointed nowadays to hear so much economics spoken and so little politics, taking politics in its real sense of being human response and human organisation. The White Paper, the Green Paper and all the other coloured papers, manifestos and so on that Fianna Fáil produced have little or no regard to the responses of ordinary people to Government proposals and behaviour.

This budget puts tax back on food. This budget diminishes State aid to the child. This budget shoves up living costs across the board. This budget aggravates the already sour industrial relations atmosphere. This budget, like last year's budget, has public borrowing much too high.

The grossly inadequate Government proposals in relation to income tax have, as any reasonable person could have foreseen, soured the already difficult industrial relations atmosphere. The Government, on their estimates, propose to take £222 million extra in income tax in 1979. I am prepared for this purpose to accept their figure as accurate. I will question it later on but that is the basis of their proposal. They are taking 37 per cent extra in income tax in 1979. That was the original estimate. Yesterday they had the temerity in that situation to offer only £27 million back. The most inexpert and inexperienced politician would know that that simply is not on as a contribution to cooling the industrial relations situation or to cooling wage demands.

I know from the responsibilities I had as Minister for Finance that there are difficulties. If you want revenue to discharge many public services you must collect it. There is also a disinclination on the part of people to pay tax. The time has come to do justice to the income tax payer. The precedent was established last year for the indexation of taxation to the consumer price index. We are now in an utterly ridiculous and indefensible situation that under the capital gains tax legislation, as amended by Fianna Fáil, owners of capital will now get an increase in the amount of their capital gains which will be ignored for tax purposes because the price of beer, whiskey and tobacco went up yesterday.

Mr. Horgan

An emasculation of an amendment.

Mr. R. Ryan

There are a whole variety of elements in the consumer price index which have nothing whatever to do with the value of capital but last year, under the capital gains tax amending legislation, those who are subjected to capital gains tax can get an allowance against their capital gains. That is only a side issue. What is now important is that in our tax law we have recognised the need to index tax allowances to the consumer price index. Therefore, when the Finance Bill comes before this House Fine Gael will propose an amendment to the law so that, in future, all income tax allowances will be indexed in relation to the cost of living. That will stop any future Minister for Finance in any government from financing his requirements by failing to give to income tax payers adequate compensation for movements in living costs. This has been done in a number of other countries. Sometimes pressure was put on governments which made it impossible for them to fulfil their statutory obligations but in such cases the governments had to come into Parliament and justify a temporary departure from that discipline.

We are now in a situation where 87 per cent of total income tax revenue comes from the PAYE earners who never see the money. It is taken from their pay packets before they have them in their hands. It is morally necessary and required by equity that income tax allowances be indexed. If they were now to be indexed on the basis of the allowances of 1978 and 1979 it would not compensate for the erosion in allowances which has taken place for many years past. I must point out that when my colleagues and I were in government, in four successive budgets we adjusted the personal allowances on income tax to take account of increases in the consumer price index. That contrasts in an extraordinary way with the conduct of our predecessors who, for 16 years in government, adjusted the personal income tax allowances only once and that was in the year before they were pushed out of office. The result is that they increased the number of income tax payers from 150,000 people to 750,000 people in a matter of 16 years. It is clear from the way in which the figures have been fiddled that it is the Government's intention to return to that kind of situation, to tax people by stealth, to leave the allowances more or less the same or, as happened yesterday, to marginally increase the allowances but to take them back in another form. The only way that can be stopped is by indexing the income tax allowances. If it is not done now the taxpayers will grow poorer and poorer as they are forced to finance the Fianna Fáil electoral machine of 1981 or 1982.

I will now deal with the utterly indefensible 2 per cent levy on agricultural products. As far as I understand it, it appears that the 2 per cent levy will apply only to Irish agricultural products, that is, to foodstuffs produced by Irish farmers on Irish land and giving employment in Ireland. They will not apply to imported foodstuffs. We are now taking the anti-Irish step of taxing food produced in Ireland and allowing food from elsewhere to compete unfairly against Irish food. The shops are already full of British biscuits and cakes and food from many other countries. It is appalling that shops should have so much of their shelf space occupied by foodstuffs produced elsewhere which can be produced here. Now we have the Government stepping in to impose a tax upon Irish food production which will not apply to foodstuffs produced elsewhere.

The National Coalition Government removed VAT from food. It was a retrograde step in the first instance ever to tax food. We heard the Taoiseach this morning—and I am sure we will hear many other Fianna Fáil speakers during this debate—arguing that Fianna Fáil have always had a great social conscience, and so on. The only government here who ever taxed foodstuffs were the Fianna Fáil Government. It was not simply a question of taxing caviare. All foodstuffs were taxed by Fianna Fáil when they imposed VAT. We removed it, but eaten bread is soon forgotten and I do not think we got much thanks for doing so. If Fianna Fáil had not been put out of office between 1973 and 1977, the cost of living would be 6.7 per cent higher today than it is, and it is high enough.

We removed VAT and, for the first time in about 15 years, people were not required to pay tax on the necessaries of life. Now that tax is going back on. Let there be no illusions about this. If there is a 2 per cent levy on foodstuffs at the point at which the produce leaves the farmer, that 2 per cent will be passed on to the consumer as sure as night follows day. Yet the Government have the temerity in 1979 to talk of a 5 per cent increase in living costs. By the removal of the subsidies, and by the taxes they imposed yesterday, they have already increased the cost of living by 2 per cent. Now they are proposing a new 2 per cent levy on foodstuffs, making up 4 per cent of the 5 per cent they are forecasting, and that is before the impact of what I believe will be a wage explosion in 1979, which I will not criticise as being irresponsible. It will arise out of understandable anger on the part of the workers against the Government who have denied social justice to the people and who apparently are not concerned to spread the tax burden according to the ability of people to carry it.

What does this 2 per cent levy mean? It means, for instance, that the ingredients for every cake or loaf of bread made in bakeries or our own homes, milk, flour, sugar and eggs, will have 2 per cent added to their cost. Why does the levy arise? Because the Government lack the guts to bring in an appropriate system of farm taxation. Once again they are trying to do it in a clouded, confused way so that people will not really understand or appreciate what is happening. The reality is—and I am sure of this; I do not think anyone can deny it—that the 2 per cent levy they are imposing will work to the disadvantage of every consumer in Ireland. It will add 2 per cent to the food costs of families. It will operate to the disadvantage of Irish food producers.

We removed taxation from food six years ago. Fianna Fáil, true to their previous performance, are reimposing it. I notice that the Minister for Finance yesterday and the Taoiseach today attempted to claim that in the various adjustments they were making to children's allowances the Government were providing compensation for the abolition of one-third of the food subsidies last January. Of course they are not. Every family had to carry the full cost of the removal of the food subsidies without any relief from the Government, unless they happened to be recipients of social welfare, from 1 January to 31 March. That is quite a considerable burden.

Every morning eight or nine bottles of milk are left on my doorstep. As I pass them I think how fortunate I am that I am able to pay for them even at the increased price. But my heart goes out to the parents of large families with small means who must be forced to reduce their food and milk purchases. By the time Fianna Fáil have completed their declared programme. 24p will be added to the price of a pound of butter and 7p or 8p will be added to the price of a bottle of milk. People should not think I am exaggerating. I am not. I am understating the position.

During the last general election campaign, when we reminded people that on a previous occasion Fianna Fáil said they would not interfere with the food subsidies but did. Fianna Fáil said on television, the radio and in the newspapers that it was an unfair allegation, and that they would not interfere with the food subsidies. They were still wet behind the ears in government when they declared they would abolish them. Now that they have abolished one-third of them, I expect they will carry on with it. We now face the prospect of the total abolition of food subsidies over the next two years. Having regard to their previous performance, at the end we may expect that VAT will be imposed on food. I prophesy that VAT will be imposed on foodstuffs by Fianna Fáil. They did it before and they will do it again. They abolished food subsidies before and they are doing it again. Fianna Fáil are consistent in their anti-social behaviour.

The Government are forecasting a 5 per cent inflation rate in 1979. They have already injected 4 per cent into that. They have also undertaken to abolish more subsidies. On the basis of previous experience we may assume they will then impose VAT on food. I am also prepared to forecast that Fianna Fáil will say: "We will not reimpose VAT on food". Of what value is such a statement? They said 18 months ago that they would not abolish the food subsidies, but they did. We may be sure that the stronger and more vehement the denial from Fianna Fáil, the stronger is the certainty that they will do the very opposite to what they said.

It is little comfort to us in 1979, the Year of the Child, to see a democratic Government in Europe taking steps against children. It is appalling that alone among the member states of the European Community, Ireland has failed so far to take the steps necessary to ratify the United Nations Convention against racial discrimination, and has also failed to take the steps necessary to ratify the United Nations Economic and Social Rights Charter. I admit that the National Coalition Government have some responsibility in this matter. We also failed to do it, but there were immense economic pressures when we were in government which do not apply to our successors.

It is not a good record for Ireland. I am not suggesting for one moment that in Ireland there is any lack of dedication to the United Nations Economic and Social Rights Charter. I am not suggesting for one moment that there is racial discrimination in Ireland. One of the reasons why there is not is that we have so few races other than our own on the island. Be that as it may, we have not even taken the statutory steps necessary to comply with our obligations under these United Nations Charters.

On top of that appalling situation, we are now declaring ourselves in Ireland under Fianna Fáil dictation as being less than considerate of the position of the child. It appals me to see that the clever and so confused 1979 adjustments being made by the Minister for Finance and by Fianna Fáil are bringing about a situation in which State support for children is much less than it was in 1976. I will take 1976 as a base year because it was a year of difficulty for us and for other countries, a year of appalling economic recession and financial problems for us and for the world. In 1979 the value of the tax concessions in relation to children and expenditure on education is to be £400 per child. If that was increased to 1976 values the figure would be £560. What a way to recognise the Year of the Child. As Minister for Finance in 1976 I was disappointed that it was not possible to give a higher rate of tax allowance for children. Now that we have had this enormous growth that Fianna Fáil are boasting about, now that the world recession is over and serious problems no longer exist, we are not assisting families at an adequate level. Children are being regarded as a burden and not deserving of State aid.

The Government have been claiming great achievements in the growth rate in 1978. Any country could have produced the same, or better, results if it had borrowed 13 per cent of its GNP, 13 per cent of the value of its annual production. I am not a dictator and have less inclination to be one. If I was a dictator I would forbid the use by economists or anybody else of this false phrase "growth rate". What growth is there in our economy when our imports of consumer items increased by 30 per cent last year? That is not growth. It may help the economy of France if we import more brandy and it may help the economy of Taiwan if we import more shirts, but it will not help us.

The Government sought power on the basis of a 3 per cent per annum increase in the Irish produced element of consumption, that we would replace imports at a rate of 3 per cent per annum. Instead of achieving that rate we have gone ten times in the other direction. The Government are now in the extraordinary position of being 11 times wrong yet they have the temerity to advertise that as an indication of our growth rate in 1978. I am sufficiently long in this House and sufficiently mature to realise that the problems of Ireland are far beyond any questions of rivalry between political parties. I do not give a damn who rules so long as the country is properly run. It is pathetic that we wasted our resources in 1978 and inflated the economy far beyond its capacity to benefit. The result was that we imported much more in 1978 than we needed. As Deputy FitzGerald said today, we imported cars from all over the world. Most of the cars that were bought last year were imported.

When I was Minister for Finance I was faulted as being a miserable so-and-so who did not believe in people enjoying themselves, who was restricting expenditure and so on. I did what I believed in and I can live with that. That applies to my colleagues in the Labour Party and in Fine Gael. We did what we believed was right. We were right. Even in the years of recession we had a shorter and less difficult time than any other country in the developed world. The increase in unemployment was less here. We brought this country back on course in a shorter time than any other country in the EEC. It is now recognised that we were back on course in the middle of 1976. The so-called great achievements of Fianna Fáil since they assumed office are 85 per cent or 95 per cent attributable to the policy decisions of the National Coalition. Anything that has happened since is only putting the froth on the top of the pint and not really adding to the volume of economic benefit.

In 1978 we spent too much and much of what we spent we had not earned. In 1979 we face a situation in which the world economy is again on the decline. As I said earlier, the 1978 budget was as wrong as it could possibly be. We grossly inflated the economy beyond its capacity to benefit. The result of this is that we have built-in double inflation figures. Inflation in 1979 will be in double figures for a variety of reasons, most of them domestic and some of them international. We should have had a carefully pruned budget in 1978. Had we had such a budget we would have achieved even greater employment.

Below the surface today there is immense unease. Everybody knew that the 1978 bonanza was too good to be true, that it could not last. That led to a situation in which people were holding back on investment. The Government claim that there was an investment rate of 15 per cent in 1978; most certainly there was not and such investment as took place took place as a result of industries that were contracted for before the change of Government in 1977. Towards the end of 1978 there has been a serious and continuous fall-off in the rate of investment and as a result we cannot in 1979 anticipate the same rate of investment.

To come to the economic forecasts for 1979, I realise that to some extent I am running against the fashionable current. The easiest thing for a politician to do is to sing with the chorus. From the personal point of view the worst thing to do is to stand back and say: "They are really out of tune with reality." The economic forecasts for 1979 indicate that there will be a drop in the growth rate in the United States, a drop in the growth rate in Japan and—in relation to Ireland this is very significant—a drop in the growth rate in Britain. Also in 1979, on the basis of objective forecasts, there will be an increase in the rate of increase in the consumer price index in the United States, Japan and Germany. I quote those countries because they have a significant impact on the world economy.

I argued last year that we were misspending at the wrong time resources which the National Coalition Government left to their successors. All resources we left were not used up last year because of the emergence on the economic scene of the European monetary system as a result of which I believe people thought quite foolishly that—and I have said this before publicly and to anybody who consulted me privately—the Irish pound was going to increase in value as against the pound sterling. Anybody with any "savvy" knows that in the long run the Irish pound is of less value than the British pound. It was not so in 1975 or in 1976 or in 1977 when we were in Government. At that stage, we had a massive inflow of money into the country which I believe was based on a realistic evaluation of the situation.

People have become drunk with this extraordinarily artificial figure of the growth rate and have been looking at the Irish growth rate and saying that it has been wonderful. We should realise that if the Germans, for instance, in 1978 had a 13 per cent of GNP borrowing by the Government the growth rate in Germany in that year would have been an explosive 34 per cent. It is very easy to be the great spender, to get a great reputation of being generous and so on but when the day of reckoning comes there will not be many friends around. I believe that is the situation towards which Ireland is drifting. We were great spenders in 1978 mainly due to the money which the National Coalition left to their successors—because it cannot be said that we left the country in a difficult financial situation. It is often alleged against me, and I must accept it, that we left the country in a too healthy state to our successors but, to be honest we did think we would come back into Government. Most of that money was dissipated in 1978 which was not the year in which we should have been inflating the Irish economy. Even if there had not been the adjustment which Fianna Fáil made in public expenditure the growth rate in Ireland in 1978 would have been at least 5 per cent which would have been much higher than in any other EEC country and would have been a sustainable level of growth. The year 1978 saw an increase in the growth rate of the economy of most countries in the world. In 1979 when the graph is turning down we are not in a position to reflate the Irish economy. It would have been much more sensible in the long run to have had a smaller injection of public expenditure in 1978 which would have enabled us to give an injection in 1979.

The truth is that if you look at yesterday's budget it does nothing for anybody. I wonder why the Minister took the better part of two hours speaking on it. It is a yo-yo budget. The ball was going up and down but it was always back in his hand at the end of his firmly held string. What the Lord George gave he took away——

Mr. Horgan

——and charged us for the privilege.

Mr. R. Ryan

Yes. It would have been much better and less confusing for the ordinary individual to have left things as they were. One can imagine the immense increase in the workload in administration as a result of this budget. I know that the outside view is: "So what—if the civil servants have to work harder, it is high time that they did." On the other hand, I am concerned about it and I was concerned about it as Minister because we were bringing in very substantial, fundamental changes in taxation in relation to income tax, capital tax and so on and I realised that by getting rid of a system which in relation to capital taxes was then nearly 100 years old we were going to build up a new workload, but I decided it was worth while because of the greater equity we were building into the system, and because we were getting rid of scandalous tax evasion operations and tax avoidance operations. Avoidance is legitimate but parliamentarians ought to limit anti-social tax avoidance. At least we were doing something worth while. But this budget imposes, I would say, about 100 different mathematical and statistical calculations on the Revenue Commissioners and even with the help of a computer they will find it difficult to do the work.

This brings me to a point which I think I should emphasise. I have been very disappointed that the introduction of a computer to the public service has not brought about a more significant reduction in the number of people employed therein. I have no antipathy whatsoever to the public service. Ireland is very well served indeed by very loyal and hard-working public servants. Unfortunately, they are often at the receiving end of the music hall representation of the public servant drinking four or five cups of tea a day, but that is not true. We are certainly well served at the level of policy formulation and of application of the decisions of Parliament. However, a large number of changes were rightly made in this country in recent years, imposing a colossal burden on the public service and they have not been adequately rewarded for it. Unfortunately, the public service operates under a pay system of the pyramid type where if you pay people at the top for the work they are undertaking you have to pay everybody else a percentage of that. I am not trying to minimise the difficulties of trying to rearrange the whole system, which is more than can be said of the contribution yesterday of the Minister for Finance. He spoke briefly about reforming the public service, and I never heard such a load of tripe, with all due respect to him.

The other element which is not reducible in current expenditure is debt servicing, and debt servicing next year is exploding. I do not disagree with these targets but I do not see them being achieved. You, Sir, quite properly will stop me from accusing Ministers of dishonesty, but they must be out of their blooming minds to be offering such figures. If they believe in them they should not be in government.

In relation to education I emphasise that the present capitation grants are outdated. I was very disappointed yesterday that there was not an announcement of a worth-while increase, or any increase, in the capitation grants. They, like the income tax rate, ought to be adjusted automatically each year in keeping with inflation. We ought to adjust all these things in keeping with inflation and then the Minister could produce a realistic budget of the kind that any business person would produce. If we had that we might get people prepared to cool their individual demands. We pretend that things can operate in isolation. It is high time for us to have a worth-while increase in capitation grants, otherwise we are really diminishing the value of the children of the nation and of the people involved in education. Even though as Minister I will admit that I did not do all I wanted for education, I was, unfortunately, Minister in the depths of a world recession. As parliamentarians we ought to vote for a worth-while State subsidisation for the cost of maintaining and decorating schools. At present there are many really worth-while school buildings that are beginning to be shabby. You start off by being shabby and then you crumble. The State has an obligation to provide worth-while aid in this field, and I hope that we will see a significant contribution. I suspect from what was announced yesterday that the Minister for Education realises that there is need to do something in the educational sphere, though, God knows, in relation to the education budget which is £370 million, it was really the end when the Minister for Finance took some minutes in the middle of his statement to say that he was giving another £2 million to a total education budget of £370 million. The pressure is going to come on this year for a substantial increase in capitation grants. It should be respected by the Government, otherwise we should not pretend that we have free education in the primary and secondary field.

In the moments left to me I want to deal with a couple of very pressing matters. The first is housing costs. I am not going to go into the Government's appalling record on housing. As an ordinary Deputy I have seen more and more people coming to me every week because they are unable to get accommodation in local authority housing, and these are people of small or nearly no means. What are the Government going to do about the scandalous—there is no other way to describe them without using obscene language—housing costs? They have risen 30 per cent in the last year, yet in the same year building material costs have either declined in many cases or the rate of increase has been less than it has been for the last six years. While housing costs have risen by 30 per cent the wages of a skilled man in the building industry rose by only 10.6 per cent and that of an unskilled man by only 8 per cent. If we had a Government with any sense of social conscience or economic understanding they would ask why was everything going so wrong. They would ask why is there a 30 per cent increase in housing prices when materials are rising by about 3 or 4 per cent, where wages are rising by only 10.6 per cent for the skilled and 8 per cent for the unskilled. I suspect the Minister of State knows I am emphasising a point that requires investigation and correction.

I wish now to deal with the question of employment maintenance schemes. I am concerned about this as an Irishman and as a European. All member states of the EEC have various schemes of subsidisation of employment. To some extent—I do not say this with any joy but I think it is something we must look at—it is due to the fact that in Europe we have raced ahead too fast with social legislation and this had led us to a situation where the machine is calculated by the employer as cheaper than the individual. This is something we must look at in relation to our State aids for investment and so on. It is bad if it leads to a situation where employers everywhere may prefer the machine to the individual.

I should like to know from the Minister in his reply what are his hopes and expectations in relation to employment schemes generally in the EEC. All member states are now operating employment support schemes but I suspect they are not, in fact, producing additional employment. I look at the Irish situation and I do not say this in any sense of hostility to the firms concerned. When we were in government we introduced the employment incentive scheme which offered £20 a week to employers who increased their workforce. That has given jobs to approximately 12,500 employees. Our successors in government introduced what they called the employment maintenance scheme. I am not saying this in any sense of hostility but I raise it as a serious doubt. That scheme offers £5 a week to employers in what are called "exposed" industries. We are told it covers 30,000 employees but it covers, without regard to the difficulties of any industry, everyone in clothing, footwear and textiles. Some of the firms that have obtained this benefit have a very high profit. I am all in favour of profit. I am not for one moment saying that profit is a dirty word. In government I believed in it and I asserted the right of people, and the need for people, to earn profits. However, we have now a situation in which firms with a 40 per cent to 60 per cent increase in their profits are obtaining from central government funds £250,000 to £500,000 a year. There is no evidence that their production would fall if the money was not available. When money is scarce I think it is wrong to hand it out in that way.

I suggest that we should tackle the problem in this way. We should attack the European Community for allowing the nine member states to have all these "cod" systems of employment promotion. Poor Ireland is now trying to compete with rich France and Germany and comparatively rich Britain in the area of employment subsidy. I do not want anyone to think I am not in favour of increasing employment but Ireland cannot possibly compete with State subsidies paid by richer countries. I have argued personally, and have also argued with my colleagues in the Christian Democratic group in the European Parliament, for an assessment on the European level of all these aids to employment. We are offering £5 in relation to employment maintenance as against £20 in Britain. We cannot afford any more but the way we are spending the money is wrong.

This budget fails to meet the realities of the Irish situation. This budget is not in keeping with our requirements. It will lead to greater industrial unrest, to a greater increase in the cost of living and to a substantial deflation of the Irish economy.

Mr. Moore

I wish to congratulate the Minister for Finance on the budget. I am very pleased that he has given a 16 per cent increase in social welfare payments. This is what a budget should be about. If we show sufficient concern for the weaker sections of the community the people will accept taxation.

We are all in this together. The Taoiseach has mentioned that everyone in this House pays PAYE tax. Therefore, any undue burden in this area or any relief given is felt by us. We must consider how the blind pensioner, the old age pensioner or the person who is infirm will fare under this budget. The Minister has had great consideration for them. I am not being complacent. I am not saying that the pensioner has got enough but I say that the Minister has shown that the care and welfare of the weaker section is uppermost in the mind of the Government. They have put this consideration into practical effect by giving the increase I mentioned.

I know that other sections of the community have major problems but the Minister has tried, so far as our resources permit, to revitalise the economy generally in order to create more wealth. This can be distributed throughout the economy. There is a grave problem in the inner city area of Dublin. This is not uncommon in large cities. For some reason the centres of many large cities such as London or New York have had the same kind of problems but on a larger scale. The Minister has set aside funds to revitalise the centre of Dublin city, to deal with the social problem arising from bad housing and to replace bad housing with modern houses.

Debate adjourned.

Dáil Éireann debate - Thursday, 8 Feb 1979

Financial Resolutions, 1979. - Financial Resolution No. 8: General (Resumed).

An Leas-Cheann Comharle

Dáil Éireann debate -
Thursday, 8 Feb 1979