Dáil Éireann debate -
Tuesday, 13 Mar 1979

Vol. 312 No. 8

Food Subsidies Removal: Motion.

Minister for Finance (Mr. Colley)

I move:

That Dáil Éireann notes that the decision to phase out food subsidies was taken in the light of the fact that such subsidies benefit all consumers regardless of their income and welcomes the generous increases in social welfare payments announced in the Budget which will more than compensate the less well-off sections of the community for the increase in the price of the items concerned resulting from the subsidy reductions.

I should like to recall for Members the circumstances in which the consumer subsidies were introduced by the National Coalition Government in the Supplementary Budget of June 1975. By doing this I hope to make our present policy in this regard less open to misunderstanding or deliberate distortion.

Mr. E. Collins

On a point of order, are copies of the Minister's speech being circulated?

Mr. Colley

No. I am reading from notes, but I shall be referring to matters that are not in these notes. To put the situation briefly, in 1975 the economy seemed to be adrift and out of control. Inflation in that year reached a record average of 20.9 per cent. Indeed, in the second quarter of that year the rate of inflation was no less than 24.5 per cent. We were in the middle of a recession and the package of consumer subsidies was introduced for the purpose of reducing the rise in the consumer price index by 4 percentage points in an attempt to restrain pay claims and to create conditions conducive to an increase in employment. The contrast with the present situation could not be more marked. The average rate of inflation for 1978 was 7.6 per cent. During 1978 the Government's job creation programme exceeded its target and by the end of the year some 24,533 jobs had been created of which 22,491 had been taken up. Account must be taken also of the increase from £10 to £14 which the Government made in the weekly premium payable in respect of school leavers under the employment incentive scheme and the effect this had in supporting new jobs. In 1978, 10,410 new jobs were supported. This was 7,712 more than in 1977. In total the Government's job-creation programmes since our return to office have resulted in more than 25,000 extra jobs.

Our target for 1979 is also ambitious. It is to reduce by 25,000 the numbers out of work. With this target in mind a sum of £20 million was provided in the recent budget to support employment creation and maintenance in the economy. That was in addition to the provision made already in the estimate for 1979. In the light of the contrast between the situation in 1975 and that obtaining now, it can be seen that our policy on food subsidies is the proper policy. Our policy was explained in the Green Paper, Development for Full Employment. It is that while subsidies are useful in moderating inflationary pressures it is not envisaged that they will become a permanent feature. At the same time they should not be discontinued abruptly because that would give a noticeable boost to inflation.

In present circumstances when inflation is under control, when unemployment is being tackled successfully and when it is necessary to reduce the burden of State borrowing, it makes more sense for the Government to begin a gradual phased withdrawal of subsidies which operate as indiscriminate subsidies for the rich and for the poor alike. It is far more appropriate to apply the resources directly to schemes such as job creation programmes and the giving of direct assistance to those in need rather than to spend the money on cushioning people from reality.

As inflation is reduced the need for subsidies is lessened. I would draw the attention of the House to a statement made by the then Taoiseach when the subsidies were introduced. I quote from the column 2159 of the Official Report for 27 June 1975:

Our aim must be to reduce the rate of inflation to a single-digit figure within a reasonably short period and thus to bring about a situation where subsidies will no longer be necessary. No one believes that subsidies are a desirable method of dealing with a situation. They are justified in very exceptional and limited circumstances. It has been repeatedly said that they have many and substantial drawbacks. They are a wasteful way of helping those in need because they apply equally to everyone. They involve a substantial increase in public expenditure when its size and financing are already exerting their own inflationary pressures. They increase the proportion of public expenditure devoted to current consumption rather than to investment. In this way, they are, in the long term, inimical to employment. But in the conditions of today, which are unique in our country's history, the Government are convinced that subsidies are essential to begin to get the rate of price increases down.

That is a very interesting quotation. I do not recall any of the Deputies opposite, in particular Deputy Garret FitzGerald, Deputy Frank Cluskey—each of whom have put their names to the motions deploring what the Government have done—Deputy John Kelly, Deputy Barry Desmond or Deputy Mark Clinton—who are present—objecting to or dissenting from that statement by the then Taoiseach. While that statement is interesting it is one with which I would not quarrel. Deputies will recall that at the time when the subsidies were introduced we on the Opposition benches had been urging the Government to introduce such subsidies for some time. Not only did we agree with the introduction of them but we said and complained that they should have been introduced earlier because of the raging inflation then—I have already given the relevant figures.

People tend to forget too easily and too quickly what the situation was. Imagine a situation in which, as we had at that time, in the second quarter of 1975, inflation was running at a rate of 24.5 per cent and for the year as a whole we had an inflation rate of 20.9 per cent. That is the kind of situation in which those subsidies were introduced. Let us look at what the then Taoiseach said and from which nobody dissented, at least none of the people who are now complaining. He said:

Our aim must be to reduce the rate of inflation to a single-digit figure within a reasonably short period and thus to bring about a situation where subsidies will no longer be necessary.

The year 1978 produced a single-digit figure for inflation, the very circumstances laid down by the former Taoiseach, and agreed to by the Deputies now complaining, under which subsidies should be removed. The former Taoiseach continued:

No one believes that subsidies are a desirable method of dealing with a situation. They are justified in very exceptional and limited circumstances.

God knows the circumstances then were exceptional and I hope they never occur again. The former Taoiseach went on:

It has been repeatedly said that they have many and substantial drawbacks. They are a wasteful way of helping those in need because they apply equally to everyone.

That is self-evident; they help the rich as much as the poor. Indeed, they may help the rich more than the poor. The former Taoiseach continued:

They involve a substantial increase in public expenditure when its size and financing are already exerting their own inflationary pressures.

They were, and are to some extent, doing the same today. The former Taoiseach said that they increase the proportion of public expenditure devoted to current consumption rather than to investment. Deputies will be aware that one of the basic strategies of this year's budget was to switch from current to capital expenditure. The former Taoiseach added:

In this way, they are, in the long term, inimical to employment.

He was right in saying that. The Government are putting so much stress, effort and resources into the creation of employment that it follows as night the day that the right course is to reduce the subsidies on a phased basis and devote the resources thus taken from current expenditure to job creation while at the same time ensuring that the less well-off sections of our community do not suffer.

I do not think there could be a better exposition of the position in regard to the subsidies than the quotation I have given from the former Taoiseach, Deputy Cosgrave. I should like to repeat that that exposition was not objected to or dissented from by any of the Deputies whose names have been put to the motions before the House complaining about the partial reduction in subsidies made by the Government. It is the fundamental policy of the Government that the root cause of our problems, rather than the symptoms, should be tackled and hence the policy to reduce inflation and increase employment. The subsidy reductions which were recently brought into effect had a relatively slight impact on the Consumer Price Index, about 0.7 per cent. That took place at a time when inflation, in comparison with the situation in 1975, was well under control.

It is our policy to safeguard the interests of the less well-off members of our community. During 1977 the Government ensured that social welfare recipients had a share in the general improvement in disposable incomes and living standards through the year-on-year average increase of more than 14 per cent in the value of social welfare payments. It will be recalled that the average rate of inflation in 1978 was 7.6 per cent and that before the recent budget the Minister for Social Welfare announced, as an interim measure pending the adjustments of social welfare rates in the budget, that the EEC butter scheme vouchers would be increased from 17½p to 45p for February and March. The Minister also directed that community welfare officers, in administering the supplementary welfare allowance, should take the effects of the reduction in the subsidies into account.

In line with our policy of protecting the less well-off sections of our community and ensuring that they continue to share in our growing economic prosperity, I announced further substantial improvements in social welfare payments in the budget, a general increase of 12 per cent in the weekly rates of short-term social welfare payments and of 16 per cent for long-term recipients and their dependants. In relation to social welfare there is a myth that is regularly propagated from the other side of the House, that the Coalition were the people who looked after social welfare recipients.

Fianna Fáil are alleged to be the party for the rich, that they have not bothered about the poor but what are the facts? The facts are that between 1967 and 1973, when we were in office, the real value of the contributory old age pension went up by 5.7 per cent a year; the real value of the flat rate unemployment benefit went up annually by over 6 per cent in the same period. What happened in the Coalition years between 1973 and 1977? In those years, the value of the old age pension rose by 2.1 per cent yearly and unemployment benefit by 1.6 per cent. That gives some measure of the reality of what has been done by the respective sides of this House in regard to social welfare payments.

Mr. Clinton

What about the reduction in the qualifying age for the old age pension?

Mr. Colley

What about it?

Mr. Clinton

Did that make any difference?

Mr. Colley

We are talking here about what was done in real terms in the value of social welfare for recipients. The fact is that the Coalition's record is one of which they should be ashamed. What has happened since we came back to office? Since 1978 the old age pension and unemployment benefits have been improving in value by about 6 per cent yearly in real terms. That is three times better than the Coalition, despite all their talk about their concern for the poor and our alleged lack of concern for them and our alleged concern for the rich. There is a reason for all that, which I will not go into now. We know what it means to generate growth in the economy so that we can ensure that people, particularly people on social welfare, can benefit from this kind of growth.

It is obvious that the social welfare payment increases of the kind announced in this year's budget will more than compensate the recipients for the effects of the reduction in the food subsidies. In addition to the increases in social welfare payments, I also announced in the budget changes in the personal income tax allowances. These changes, combined with the social welfare children's allowances, will be sufficient to more than compensate all families, whether large or small, for the increases in food prices resulting from the partial removal of the subsidies.

In regard to income tax, it is no harm to have a quick look at what happened under the Coalition. Take the years 1974-75, 1975-76, 1976-77 and 1977-78—I am excluding 1973-74 because the whole basis of the income tax assessment was changed and it is not possible to make valid comparisons. Take those years in respect of which the Coalition prescribed the income tax rate and compare them with what has happened in the last two budgets since Fianna Fáil came back to office. Under the Coalition for those four years, the increase in cash terms for the single person was £165, an increase of 33 per cent, and since we came back in our two budgets the increased was £450,67 per cent. Under the Coalition the widow's allowance was increased by £185,33 per cent, and under Fianna Fáil it was £450,61 per cent. Under the Coalition, in the case of the married allowance, the increase was £300,37 per cent, and under Fianna Fáil it was £1,130,102 per cent. For a single person earning £5,000, under our two budgets, there has been a saving of £92.50 because of the increases in the income tax allowances. For a married couple with two children there has been a saving of £315.10; in addition such a couple get another £31.20 from the increases in the social welfare children's allowances. Whether we are talking about people depending on social welfare or about the lower paid who are liable for tax, clearly under Fianna Fáil an effort has been made to assist them. This effort, compared with what was done by the Coalition, looks tremendous. We would like it to be better than it is but compared with what was done by the Coalition, we can throw our chests out and be proud of what was done.

Given the very much more substantial increases in tax allowances under this Government as compared with the Coalition, I have to ask this question: where were all these people who are now calling for strikes about the tax situation two years ago when the Coalition introduced in the budget proposals to tax farmers which would produce a yield of £35 million and within a short time changed them to reduce that yield by £20 million to £15 million, and got nothing in return? Where were these people who are calling for strikes then?

Mr. Kelly

Is the Minister saying that——

Mr. Colley

Was it that their friends were in office? Was that the trouble?

Mr. Kelly

Is the——

Mr. B. Desmond

Deputy Kelly, leave him alone——

An Leas-Cheann Comhairle

The Minister has only ten minutes left.

Mr. Kelly

When I hear material like this I think it is a pity that the rest of the Minister's party are not here to listen to what he has to say.

An Leas-Cheann Comhairle

Is the Deputy calling for a quorum?

Mr. Kelly

Yes, the Minister is making very serious charges.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. Colley

It is regrettable that Deputies opposite who talk so loudly about their interest in food subsidies find themselves unable to be present. I know Deputy Kelly was a bit offended at what I was saying, so I will not go back over all of it. I will briefly recapitulate. I was pointing out that the record of the Coalition Government as compared with that of Fianna Fáil in regard to social welfare is miserable. I gave the figures in regard to tax allowances and the record of the Fianna Fáil Government is vastly superior to that of the Coalition. Two years ago the Coalition dropped £20 million from their estimated receipts from farming taxation and gave very much smaller increases in personal allowances. How is it that people were not then shouting for a strike? I wanted to know if some of the people calling for a strike were friends of the people over there.

Mr. Kelly

They trusted the Government then. That is the difference.

Mr. Colley

Deputy Kelly did not like that and he called for a count. When the subsidies were introduced——

Mr. B. Desmond

Charlie told his cumann members——

An Leas-Cheann Comhairle

The Minister has only a few minutes left.

Mr. Colley

I quoted the then Taoiseach, Deputy Liam Cosgrave, in spelling out the position as to the circumstances in which subsidies were needed and the circumstances in which they should be taken away. Not one of the Deputies opposite objected to what he said. When they now put their names to motions objecting to what this Government have done, we may take it either that they have changed their minds or, perhaps, that they do not mean what they are saying. That is a possibility one has to take into account.

We have demonstrably looked after the people on social welfare and the lower paid in regard to both children's allowances and tax allowances to ensure that they are more than compensated for the increase in food prices as a result of this change. We have devoted the money saved to job creation, which is our primary objective, and in the process we have been taking from the better off. One of the big objections to food subsidies pointed out by the then Taoiseach was that they benefit the well-off as well as the poor. In these circumstances, the case for what we have done is more than tenable and I would suggest that Deputies opposite have already subscribed to it. We had to tell them to put on subsidies when inflation was nearly 25 per cent a year. We are now phasing them out in such a way that we are not damaging the interests of people on social welfare or the lower paid.

In the light of the facts and in the light of what the then Taoiseach said when subsidies were introduced, Deputies opposite are well advised to stay out of the House and not come in here pretending to be concerned about the partial reduction in food subsidies. We know where they stand on this and their lack of concern about this matter is clearly demonstrated by their inability or unwillingness to keep a House for a matter which they wish to have discussed.

Mr. B. Desmond

For the past few months, ever since the pre-Christmas present from the Fianna Fáil Party to the electorate concerning the price of basic foodstuffs, the Government have sought to avoid a division in this House on their decision to phase out food subsidies. Such has been the nature of the motions tabled that inevitably, with a 21-day Dáil sitting period involved, the Government have to face the music. It will be interesting to know how many Fianna Fáil Deputies will cross through the lobbies today without pairs. It will be interesting to know how they will defend that division record when they go to the polls in the local elections and the Euro elections in twelve weeks' time.

As every elector will recall next May, the present Government, trapped by a philosophical and ideological attitude to the management of the finances of the State, which is a kind of Irish version of the Sir Keith Joseph cum Margaret Thatcher type ideology espoused particularly by the two Ministers opposite, decided during the Christmas recess to increase the price of milk and butter from 1 January and the cost of flour and bread from 8 January. From 1 January butter cost an extra 8p, making it 70p a pound, an all-time record. The price of milk rose by 2p to 11½p per pint. From 8 January flour cost an extra 3p per kilo and bread rose by 1p and 2p according to loaf size following increases allowed by the National Prices Commission.

That is the start of the phasing out of food subsidies and I would remind this House and the Fianna Fáil Party that in nine months' time, if they do not see sense in the meantime, they are apparently committed to a further massive increase in the price of bread, butter and milk. The increase in the price of butter will be at least 10p per pound and within a matter of 18 months or two years we will be facing a period when the public will pay £1 for a pound of butter.

Minister for Economic Planning and Development (Professor O'Donoghue)

Could the Deputy produce some evidence to support these wild allegations?

Mr. B. Desmond

There is no indication that the Government have decided it should be a once-off increase. The indication is that this is the first phase of the policy for the total elimination of food subsidies. I will be very interested to hear—and the people of Ireland will be enthralled to hear—that the Government do not intend to have the second phase in nine months' time. If that is so, it would be most interesting to hear from the Government of a new decision.

Professor O'Donoghue

The Deputy specifically mentioned an increase in the price of butter of 10p next year, the price reaching £1 per pound within two years. I invite the Deputy to produce some evidence.

Mr. B. Desmond

There is a balance of subsidy remaining and as yet there is no indication from the Government as to the precise amount of the increase intended in January 1980. We are quite entitled to assume that in the normal phasing out there would be an additional 10p in the price of butter from next January. I would be delighted to hear that the figure is to be less.

Mr. Colley

The Deputy is a little confused. It was his Taoiseach who said that if we got inflation down to single digit figures we could get rid of food subsidies.

Mr. B. Desmond

I have half an hour.

Mr. Colley

That was what his Taoiseach said and that is what he supported——

An Leas-Cheann Comhairle

Deputy Desmond without interruption.

Mr. Clinton

I understand the Minister's embarrassment.

Mr. Colley

I had a lot of interruption when I was speaking and, before I was speaking, the time had been deliberately abridged by Deputies opposite. If they want consideration they should give it.

An Leas-Cheann Comhairle

Deputy Desmond, without interruption.

Mr. B. Desmond

At a most critical juncture in the prospect of the resumption of very sensitive, tenuous and difficult negotiations between the trade union movement and the Government in January 1979, when we were hoping and striving for a rational, reasonable and moderate increase in pay with the prospect of another national pay agreement, the ground was cut from under us by an irresponsible and stupid Government decision involving not more than a miserable 1½ per cent of total current Government expenditure.

Professor O'Donoghue

The Deputy should get his figures right.

Mr. B. Desmond

I asked——

Professor O'Donoghue

Stick to the facts.

An Leas-Cheann Comhairle

The Minister will be replying. Deputy Desmond to continue.

Mr. B. Desmond

The Minister will have his opportunity.

Professor O'Donoghue

It is untrue to say that there could have been negotiations on a wage agreement in January because the trade union conference in November rejected the proposal.

Mr. B. Desmond

I do not intend to engage in repartee on this but if the Government had not been sitting on their behinds in January and February that consequence would not have arisen.

Professor O'Donoghue

In November.

Mr. B. Desmond

The decision to abolish subsidies was made in January 1979. That is the first effect of that decision. The second effect has been to increase the financial burden on the lower and middle income groups. I will deal with the suggestion by the Minister for Finance that, relatively speaking, the rich benefit as much as the poor. The third effect of this ridiculous decision is that it has given a spurt, particularly in relation to the food index side of the consumer price index, back to the double digit inflation prospect for 1979, which the Minister for Finance asserted could not happen. It is happening now. The figures will be out next Thursday and will be there for all to see. We are going back to 11 and 12 per cent for 1979. In so far as it has contributed 1 per cent to the overall index and 2½ per cent on the food index side, the decision to abolish food subsidies has been partly responsible for the return to double figure inflation.

The Minister for Finance and the Taoiseach have repeatedly asserted that the subsidies would only add .7 or .8 per cent of 1 per cent to the consumer price index. This completely dodges the important fact that this year's reduction will add 2½ per cent to the food group of the index in a situation where already, from mid-November 1977 to mid-November 1978, the food section of the consumer price index has gone up by no less than 11½ per cent. The CPI figure for mid-February 1979, which is due out next Thursday, will clearly prove how savagely regressive the current policy of Fianna Fáil is in relation to food prices.

It is an interesting and useful exercise to find out exactly what impact these substantially increased prices are likely to have. Our main source of information on what foods people buy, and in what quantities, is the household budget survey. This is undertaken on an annual sample basis covering urban areas only. The latest information available is for 1976. This gives the expenditure of households on most food items, their incomes and so on. The published statistics give this information broken down in various different ways, for example by social group, income level and size of household.

It is important to look at the social groups. They are defined by employment and, roughly speaking, groups 1 and 2 comprise the richer households while groups 3, 4 and 5 are the poorer ones. Group 6 are mainly agricultural workers, farmers and unknown persons. This group is ill-defined in the survey. The data—this completely refutes the point made by the Minister for Finance—clearly shows that expenditure on bread, milk and butter, as a percentage of total food expenditure, is comparatively low for high income groups and is comparatively high for social groups 3, 4, 5 and 6. Social welfare payments are an important source of income for the social groups I mentioned. These groups spend 18 to 20 per cent more of housekeeping money on bread, butter and milk than the other groups. I refute and denounce as being socially, statistically and any other way, utterly wrong for the Minister for Economic Planning and Development and the Minister for Finance to say that the rich benefit as much as the poor from food subsidies. Therefore, it is time they went. There is no truth——

Professor O'Donoghue

Quote the amount of money spent on food.

Mr. B. Desmond

If one goes through the household budget, the National Prices Commission's reports and particularly the excellent work done on expenditure relative to the household budget survey, one will see that it is proved in the November report that groups 3, 4 and 5 spend between 18 and 20 per cent more on bread, butter and milk than do groups 1 and 2.

Turning to food expenditure analysed at income level, the pattern is even clearer. The low income groups spend a much higher proportion of their food expenditure on bread, butter and milk than do the rich. The variation is from 13.86 per cent for those on incomes of more than £150 a week to 23 per cent for those on incomes of under £15 a week. Apart from one person families, mainly the elderly living alone, the proportion of food expenditure devoted to bread, butter and milk rises steadily as family size increases. As explained, the household budget survey gives details of money spent on food in 1976. It is possible—I have done the exercise myself—if one takes the 1976 figures and uses the NPC material on prices which has been published since 1976, to calculate the food items purchased by the various family sizes. This dramatically reinforces the importance of bread, butter and milk in the diets of the relative family groups.

The evidence, which is available to the Government, is overwhelming. The disadvantaged groups—those in poorer employment, those on low incomes, those with large families and the elderly living alone, spend a greater proportion of total food expenditure on bread, butter and milk than do the rich. It is also a fact that these same disadvantaged groups spend more of their total incomes on food than do the rich. The overall impact of increases in bread, butter and milk is much greater on these groups. These are the facts and they must be recorded unequivocably before we deal with the arguments why they should be abolished.

There appear to be four main arguments in support of the policy to increase basic food prices. The first argument, which can only be described as a right-wing capitalist argument—I use that phrase deliberately because there is an ideological gulf between ourselves and the Government—is that the economy works very well when left in private hands and that the distortions which food subsidies are supposed to bring about must be removed. If this argument is to be applied, it should be applied consistently and rigorously. In our type of mixed economy there are more fundamental and basic distortions than food subsidies. Why should the argument not be applied to the EEC's Common Agricultural Policy? That policy is based on the concept of subsidies. When it comes to a lousy 1.5 per cent of national expenditure, we have to abolish subsidies. The logic stands on its head. Why not abolish the distortion in relation to capital grants to the IDA? Why not abolish the subsidy in relation to rates? Why not abolish the subsidy in relation to car tax? I could quote other aspects of fiscal policy ad nauseam. The Minister knows that his arguments that subsidies distort does not apply to the other aspects of the financial management of the economy.

The second argument, which I have already dealt with, is that food subsidies are indiscriminate. The indiscriminate aspect of certain subsidies in certain circumstances has a degree of validity, but it is not accurate to apply that argument to our food consumption patterns. Our food consumption pattern is rigid, particularly in relation to butter. People do not readily substitute margarine for butter when the price of butter increases. The decision of the Coalition to introduce the subsidies was a progressive measure because it helped the poor more than it helped the rich. The removal of the subsidies will affect the poor more than the rich.

The other argument put forward by the Minister was that the removal of the subsidies would have relatively little effect on the CPI. The Minister says it could be 5 per cent. Deputy Dr. FitzGerald, more correctly, says it will be 11 per cent. It is about time we studied the composition of the CPI. When the Government were about to make that decision the CPI was calculated on the basis of an average family of 4.043 persons, with a gross income of £78 per week. The CPI was calculated in that way in 1976 and the Minister has been working on these data. The average family spends less on bread, butter and milk than do poorer families so that the impact on the CPI of the abolition of subsidies understates the actual effect of these charges on the poor and on large families. The recent collection of data in February 1979 showed the full impact on the CPI. The Minister should do further work on this and he will see the validity of my comment.

The fourth argument put forward by the Minister at the Fianna Fáil Ard Fheis, before he was faded out, is that social welfare recipients will be recompensed. My mother, who has a contributory widow's pension, ruefully remarked to me, "It is all very well for you but I am paying more for my milk and butter from 1 January and will get nothing from George Colley until 5 April." Prices increased on 1 January and, as yet, there has been no recompense. The Coalition gave increases in October and April and phased them throughout the year. We caused administrative difficulties and spent a great amount of money in a time of inflation. It is not good enough to say to these people that they will get 12½ per cent next April when the increases apply since January.

In addition, there is international evidence to show that the poor, especially the elderly and those with large families, have conservative eating habits. They will not be able to adapt to the price increases by substituting margarine for butter. As we know, there is no cheaper substitute for bread and there is no substitute for milk. A reduction in the consumption of these basic items by the elderly could lead to an inadequate diet. I have great respect for the tenacity and courage which the Minister for Economic Planning and Development has shown on many occasions in relation to many social issues. In the White Paper the Minister said:

It is essential that information be available about the redistributive effect of all public expenditure and taxation policies before any adequate judgement can be made on the social aspects of these programmes.

What do they do? They ignore their own prescription. The Minister ignored it and rushed in to abolish food subsidies and grab a miserable £60 million in that way in the context of a budget well in excess of £200,000 million.

The Minister did not analyse the effects, and it does not require Paul Tansey or anybody else to do that: he did not have to go to the nutritional experts or to the personnel of the Prices Commission, or to those who worked on the household budget survey, to realise the realistic effects of food subsidy abolition on the poorer sections of the community. The range of organisations who have opposed the Government on this issue is impressive. We have the IFA, the IAOS, the ITGWU, the ICTU and, to their credit, Fine Gael, who issued a fine statement within 24 hours of the abolition. There were the Labour Party and the Society of Saint Vincent de Paul. Every responsible body in the country have opposed this stupid decision. Among all the journalists, I could find only one who supported the Government, Paul Tansey of The Irish Times who said the Labour Party were being emotive on this issue. According to him the subsidies had absorbed money needed to create jobs.

In my remaining three minutes let me examine that. Let me ask the Minister rhetorically how creative of jobs was the decision of the Cabinet to hand back £3 million of taxpayers' money to a couple hundred depositors, many of them speculative, of the Irish Trust Bank? How creative of jobs was the decision to make a gift of £10 million each year to 1,500 individuals who were liable for wealth tax, 77 of whom, as I discovered in a reply to a parliamentary question last week, have incomes of more than £500,000 each? How creative of jobs, and how selective, was car tax relief amounting to £27 million a year? How creative of jobs and how selective was house rates relief of £80 million a year? How job creative and how selective was car tax relief and relief on house mortgages and on bank overdrafts to the tune of tens of millions of pounds every year? How job creative is the Exchequer relief and subsidies on pension schemes and on medical schemes at a cost of tens of millions of pounds per year?

All these reliefs given by Fianna Fáil have one outstanding characteristic. Generally, none of them is enjoyed by the poor, the unemployed, the low income people, the elderly, the pensioners, the large families. I will put it bluntly to the Minister that one does not have to be an academic economist from Trinity College to understand that the relatively poor of the community are the most deprived by Fianna Fáil policy.

There is a lot of anti-intellectualism in public life, and this is an issue on which the Fianna Fáil economists would be well advised to go back to the drawing board and not to impose additional expenditure on the ordinary people so that we will not have situations like that of last Sunday when we had a massive PAYE protest march in Dublin—a clear indication of public opinion on this crucial issue. It is time Fianna Fáil faced up to a vote in the Dáil on the abolition of food subsidies.

Mr. Kelly

I often have had occasion to ask rhetorically when speaking here on subjects like this in the last six months—it did not get really bad until then—whether the Government have their feet on the ground at all, whether they are in touch with reality, and I had the same strong instinct when I heard the Minister for Finance speaking here an hour ago, because from beginning to end of his speech he did not once refer to the broad picture of the economic problems which face the country and on which I have heard him speak on many occasions, as well as the Minister sitting opposite.

The Minister for Finance today did not once refer to the aims of what he called the strategy of his party—he calls it "strategy" when he is not calling it the party's philosophy, if you do not mind. He never once referred to the background of the terrible, apparently chronic, unemployment, and of almost uncontrollable inflation, a pattern into which we seem to be sinking despite the best efforts of any kind of a Government. He did not refer to the matters closely connected with those, namely, that Irish goods should remain competitive, that we do not price ourselves out of markets, that we do not pay ourselves more than we are earning, that we do not advance or yield to excessive or extravagant wage demands. He did not refer to that maze of problems which at other times represent a topic which Ministers are only too keen to lecture us on.

It is against that background that we must consider this matter. Deputy Desmond has dealt with the consumer aspect of it and Deputy O'Toole will be dealing with it later—the human individual level which is a subject all by itself but which I will just touch on in passing.

I am asking the House to consider the impact of this issue on what must be the object of any Government, no matter from which party, in the kind of conditions which are common in the western world and particularly virulent here in the 1970s, namely, apparently incurable unemployment allied with apparently chronic inflation dangers, exacerbated every now and then by outside events of which we have no control. The Minister today did not say a word about any of these things. Instead, what we got from him, in the limpest speech I have ever heard from him, was a pitiful quotation from the former Taoiseach's speech four years ago at the time when the subsidies were first introduced.

Minister for Economic Planning and Development (Professor O'Donoghue)

Did the Deputy say "a pitiful quotation"?

Mr. Kelly

It was pitiful of him to quote it. It could not be said that the quotation itself was intended to be held up to ridicule by the Minister for Finance because he said he agreed with it. However, I regard it as pitiful debating ploy on his part to go back four years to quote what the then Taoiseach said at a time when we were just coming to grips, indeed only beginning to realise what had hit the world in the shape of the crisis which followed the oil price explosion and the commodity shortage. Deputy Colley quoted that with his favourite combination of smile and sneer with which the House is so familiar. He quoted Deputy Liam Cosgrave at great length. He made the point that Deputy Cosgrave had said that food subsidies should be resorted to only as an exceptional measure in times of great difficulty, at a time when, as Deputy Cosgrave then said, we were aiming to get inflation back to single figures.

Inflation is only momentarily back to single figures, as the Minister opposite well knows, but as soon as the mid-February figures become available it is likely it will be back in double figures again. The Minister for Economic Planning and Development has given forecasts in public which show that he expects inflation this year to be back solidly in double figures by the end of the year, if not sooner.

Professor O'Donoghue

I have not.

Mr. Kelly

The Minister has done that.

Professor O'Donoghue

Would the Deputy like to quote me?

Mr. Kelly

Even on the basis of the quotation from Deputy Liam Cosgrave, I regard the Government's assumption, if the Minister for Finance reflects it, that we are now permanently and firmly back in single figures, as a crazy assumption. It is not the only crazy thing associated with the removal of the food subsidies. We are aiming at a situation in which we are trying to have moderate wage increases. They have said repeatedly and they have been right in saying it, that that is the single most important milestone on the way towards full employment, if there can be such a thing, and a stable cost of living. It is the single most important factor, but what does this measure do to conduce to it? It does nothing; in fact it goes in the opposite direction altogether. If the Minister was setting out to construct a strategy which would guarantee dissatisfaction, intransigence, unreasonableness and extravagance in making demands on the part of the wage-earning sections, this is the way he would go about it. If I were asked in the abstract how to construct a governmental strategy that would guarantee that I would have wage-earners out in the streets in tens of thousands; that there would be claims from the public sector for increases not one of which was below 25 per cent and some as high as 50 per cent and that, whatever we settled for, it would not be in single figures; that there would be throughout the economy persistent and chronic dissatisfaction and discontent and the absence of the very attitudes, approaches and mentalities that the Government are calling for, this is the strategy I would adopt.

I do not want to offend the Minister personally. On the personal level I have a genuine regard for him, but when I find himself and his Government, whom I believe he has the considerable honour of leading in matters of this kind, conducting their affairs in such a way that their strategy is sending them further and further away from that stated objective, he reminds me of a figure like the scientist in "The Muppet Show", Dr. Bunsen and his experiments. They never work, as can be seen within a very short time and it is not at the expense of Dr. Bunsen, who is still looking out through his rimless spectacles, that they have not worked and have left everybody in the laboratory worse off than when he started, but at the expense of his wretched assistants. That does not faze Dr. Bunsen; he is back again next week with another plan which produces equally negative results.

Professor O'Donoghue

It was nice to know that the Deputy has the leisure to see this. When is he on?

Mr. Kelly

I do not mean to offend the Minister. I sometimes regret that so much of the bitterness has gone out of public life here because occasionally I find it hard to speak as I really think for fear of hurting someone on the far side for whom I have a genuine regard.

Professor O'Donoghue

I promise not to be hurt. Please feel free.

Mr. Kelly

However, when I find a measure of this kind defended by the Minister for Finance by reference to a speech made by the last Taoiseach four years ago, I ask myself if he has his feet on the ground at all. Does he realise where this is tending in regard to the Government's general economic policies, strategies and philosophy, if I may use a word with which they mantle themselves from time to time? Going back to 1975 as the Minister for Finance does, let me remind the House that food subsidies in those days were only part of a packet. In those days the then Government introduced that packet in order to knock four percentage points off the CPI and the rest of that package included the removal of VAT from clothing, footwear, electricity and gas, and the institution of the employment premium scheme.

Professor O'Donoghue

The Deputy should finish the package. It also included a surcharge on income tax. They put up income tax by 10 per cent.

Mr. Kelly

I am coming to income tax in a moment. The measures I have mentioned, with the exception of the last one, were intended to and largely did knock four percentage points off the CPI, and that measure was related by the then Minister for Finance to the necessity for achieving the industrial peace and the wage settlements and moderate wage demands at which he was then aiming.

Professor O'Donoghue

And income tax was up by ten per cent.

Mr. Kelly

If the Government are so convinced in their Dr. Bunsen-like alienation from reality that we are now back permanently with single-figure inflation and that we have industrial peace when in the conditions all around us we see only the opposite of that, can we expect now that we are going to get back VAT on electricity, gas, clothing and footwear? These were all parts of the very same measure. I do not want to be raising a dishonest scare if that is not the Government's intention, but where do they draw the line? Where is the philosophical distinction which allows them to knock the food subsidies off but will enable them—although they have not said so—to keep the favourable treatment of clothing, footwear, electricity and gas?

Of course inflation is lower in 1979 than it was in 1975, though it is absolutely untrue that we are back permanently into a condition where special measures may be necessary in order to get people to accept situations which they are far less ready to accept now that they were four years ago when the National Coalition were in office.

Let me say in parentheses that perhaps I over-reacted to the Minister for Finance an hour ago when he spoke about what he thought was a sinister connection between the calls for strikes and the fact that the party to which I belong and Deputy Desmond's party are now in Opposition, and almost said that we were fomenting that unrest. I remind him that in the term of the 20th Dáil there was a very prominent Senator, whom we are not allowed to name, who was nominally at one stage and perhaps still is a member of the Labour Party, who was a thorn in the side of the National Coalition Government, notwithstanding that he was one of their nominees. Although he obviously felt no bond of loyalty to the then Taoiseach, Deputy Cosgrave, and the rest of his Government, he did not find it necessary to go to the lengths to which they are now being driven, and neither did the rest of the members of his union. Does the Minister opposite or the Minister for Finance honestly believe that any one of the party to which I belong was behind the demonstration on Sunday last? I cannot speak for the Labour Party, but I do not believe that that party by themselves or any of their members would have been capable of organising the demonstrations which were seen last Sunday.

Does the Minister know the kind of world he is living in? The kind of world which the Fianna Fáil Party have created is one which is not going to change any more. They have created expectations and mentalities in people which are not going to change even if the Fianna Fáil Party disappear tomorrow from those benches and into thin air. Whatever Government come after them will have to deal with those attitudes and mentalities which their way of running the country has produced.

Professor O'Donoghue

We can change people's attitudes once but never again, apparently.

Mr. Kelly

People's attitudes tend to evolve in the same direction and it is difficult to turn them back on their tracks. As men go, the Minister is a good man, honourable, honest and so forth, but he stood over the election promises which his party made in order to get into office. I am not sure that he did not invent most of them, and he has now left himself in a situation in which there is industrial action along the lines, for example, that dustmen will not collect dustbins in wet weather. That is not just something for people in the bars of golf clubs to laugh at; it is a solid symptom of the way the world is moving. We are moving into an age in which people will not do unpleasant jobs. It is not seen to be like that in the rest of the EEC countries because there the unpleasant jobs are done by Turks, Slavs and Greeks who are only too pleased to do any kind of job. The natives of the developed north-western European countries will not do unpleasant jobs. I will not lecture them for not doing them, because I would not wish to do them myself, nor would I lecture them for excessive wage demands. I would feel that they were being unreasonable if I were part of a Government who have struggled, even at the cost of votes and of seats as we did, to achieve a measure of social justice by taxing and by being seen to lean on all sections equally, even the sections who supported us. I certainly will not lecture dustmen, postmen, linesmen, telegraph clerks, telephonists or any other branch of the public service or the private sector about being excessive, extravagant, selfish, greedy. These words are used by Senator Mulcahy and other people in the Minister's party. People are selfish and greedy because they want another £7 or £8 a week—or let it be £17 or £18 a week extra.

There is no word at all about the people Deputy Desmond mentioned who are allowed to walk off with their wealth tax unimpaired and are given 80 per cent of capital gains tax. What attitude does the Minister expect from people who in all their lives will never make a capital gain or accumulate enough to bring them within an ass's roar of the wealth tax bracket? Indeed, 50 of them put together would not come within an ass's roar of it. What kind of temper does he expect them to show when they are lectured by people in dinner-jackets about their greed and selfishness? What do they think when they are lectured by people who think that the time is ripe to rationalise the fiscal situation by withdrawing the food subsidies? What kind of temper does he expect them to show? Is it right and seemly for him to be pettish when they get out on the streets in tens of thousands and demonstrate about tax?

Does the Minister see no connection between the demonstration seen last Sunday and two of the Government's fiscal measures over the last two-and-a half months (1) the removal of the food subsidies and (2) the cowardly bungling in regard to the farmers tax? Does he expect no reaction from them? Does he think the people of Dublin and the people of Limerick who live in the immense housing estates put up by the public authorities are marionettes, that they will dance to the tune of a ministerial speech about philosophy, about how we must all pull together? What is there in it for them to co-operate? Perhaps they will get a real 2 per cent or 3 per cent per annum on their real standard of living. What is that compared to which they see others getting away with?

That is the psychological background which the Minister is dealing with. Let him not sneer—I know he will not do that as he is too intelligent to do that—at the psychology of people because that is what it is all about. There was a time when people were very glad to have any kind of job at all, to have a couple of meals a day, to be able to feed their children, to be able to dress them even if it was only in clothes cast off down through three or four generations. Many people in this House come from such families. There was a time when people would have thought it wicked to look for increases of 50 per cent and possibly put their employers out of business by doing this. They would have thought it wicked to talk of terms of equality. They would have accepted that God had destined us for a certain place on the globe and that it was being ungrateful to Him, apart from everything else, to look for something better. Those days are gone and any Government who do not face up to those realities are not doing their job.

The motion proposed by the Minister for Finance today was substantially based on the idea that those subsidies were discriminatory. I grant that they were but how discriminatory were they? What is the degree of the discrimination? I have heard both Ministers talk about rich and poor as if those were quantitatively speaking, roughly equal sections of the population. That is a fallacy which I am sure the Minister runs across in his study of statistics and in other fields. I am sure there is a name for it.

The rich and the poor are two categories but in the context we are discussing, the kind of people who will feel in their weekly budget the removal of food subsidies, the kind of people who will have to adjust their budgets to suit it, who will be asked by their wives to cough up more of their weekly or monthly cheques in order to accommodate it, are not the same in size as the class of the rich. That class is perhaps 500 times larger than the rich class.

I do not regard myself as poorly off but I have to watch a weekly budget and my wife has to watch her weekly budget. The removal of food subsidies, any type of thing which shoves up the price of food, is instantly reflected in the budgetary arrangements of the family. That goes for people who are well into the middle or upper earning categories. The kind of people who will not notice the absence of food subsidies are very few. The people who were out demonstrating last Sunday in their tens of thousands include many people who are in what the Minister would probably regard, if one were to slice society right down the middle numerically, as well into the upper half of that bracket. That does not stop them from feeling, rightly or wrongly, that they are suffering by the withdrawal of food subsidies. It will not stop them from incorporating in their wage demands an element which will take that into account.

Let us look at it from the Government's housekeeping point of view. I have not checked this and I will very gladly accept the Minister's estimate if I am wrong. I have heard it accepted as being an axiom that 1 per cent increase in public service pay adds about £10 million to the Government's annual wage bill. We need not argue about fractions of 1 per cent. Perhaps the Minister will let me away with assuming for a moment that the present reduction, which is worth approximately £21 million to the Exchequer, in the food subsidies will add 1 per cent—I think I heard the last speaker say .7 per cent——

Professor O'Donoghue

It is .75 per cent.

Mr. Kelly

Let me call it 1 per cent for the moment. If that 1 per cent is then transmitted into an additional point in the public sector wage demands the Government will find themselves being asked to pay out another £10 million by the public sector alone. Let it be only three-fourths of a percentage point, that is still £7,500,000. What advantage to them is that if in that single item they will have to restore £7,500,000, less whatever tax they retain out of the £21 million which they are saving in not paying the subsidies.

These are elements in this which seem to me to lie absolutely on the surface and I simply cannot see that the Government are achieving anything by this. I cannot see that there is a solid advantage for them. I can see every possible kind of disadvantage. If the Government were to go out of their way to make things as difficult as possible for themselves and for the Government that comes after them, if they were to go out of their way to make things difficult for the whole conception of Government, the whole conception of there being an element in the State which could steer the economy, in which the people had some confidence, with which they would co-operate while trusting them, they could not be going about it more effectively than they are doing by removing food subsidies in combination with their other measures, the cowardly bungling of the farmers' levy proposal, the removal of the wealth tax and the handing back of four-fifths of capital gains taxation. Those are considerations which would weigh very heavily with me in regard to what the Government are doing. On all sides, even on sides which are not very sympathetic to the worker, the PAYE worker or anybody else, it was immediately recognised that by this measure the Government were making things more difficult for themselves in regard to their stated objectives.

I want to conclude by making a suggestion to the forces in our society which are suddenly on the Government's side, some of whom showed something less than tact in the vulgar jubilation with which they greeted some of the Government's fiscal measures earlier in their term of office. That side of society have thrown up in the form of a group of well-intentioned industrialists a body called Response from Industry. It is intended to act as a kind of vigilante Fóir Teoranta. I believe it is intended to act as a kind of week-end economic fireman to take over jobs for which the official agencies are too cumbersome to deal with. I suggest to those obviously well-meaning people that the real response we want from industry, which should be forthcoming, because those people are all obviously on christian-name terms with the Government and are well able to ring them up, probably have their direct line numbers and can talk to them like a Dutch uncle, is that they would take the Government by the scruff of the neck and tell them that their fiscal measures, in particular the one we are talking about today, are tending to not only undermine the efforts of the responsible industry group but to make it impossible to achieve the overall targets to which the Government are committed. Obviously, what is said from these benches bounces off the Government like water from a duck's back.

It is incredible that an experienced Minister like the Minister for Finance could be capable of such a shallow reaction as to reply that he believed the industrial unrest and the call for strikes and so on has been fomented from these benches. That incredibly shallow reaction shows that he, the Minister opposite and the rest of the Government, particularly those with any interest in this, need to be told by people they trust—obviously they do not trust us—that they are going about their job in the wrong way.

It is all very well to give all kinds of assistance to industry. The Government have done the right thing in regard to a 10 per cent overall corporation profits tax. That move will be helpful to industry. The Government can also be given credit for some other moves, some initiated by the Coalition Government but carried on by Fianna Fáil. This Government have done some positive things for industry, but they could do more. All the Government's efforts will come to nothing because of their fiscal policy and their general approach which allows people to believe, rightly or wrongly, that they are favouring the rich at the expense of the poor, that they are indifferent to the problems of the poor and to the problems of people who are not poor but who feel they are being discriminated against. The best response we could get from industry would be if they told the Government that they have gone too far in favouring the wealthy and that, unless they are to bring the house down on industry, they will have to reverse their policies, and refrain from any further dismantling of the food subsidies or any other subsidies until inflation is permanently back in single figures, until industrial relations are more peaceful and until the unemployment situation gets down to a tolerable level—and it is at least 65,000 or 70,000 jobs away from being that at the moment.

Minister for Social Welfare (Mr. Haughey)

I understand that the time at my disposal is very limited.

An Leas-Cheann Comhairle

I am calling the Labour speaker to reply at 5.30 p.m.

Mr. B. Desmond

I have no objection to ten minutes.

Mr. Haughey

Ten minutes will do me perfectly.

Mr. B. Desmond

I mean that the Minister may have ten minutes of my time if he wishes.

An Leas-Cheann Comhairle

The Deputy has already spoken.

Mr. Haughey

My contribution to the discussion on the removal of the food subsidies will be very limited. Most people recognise that food subsidies, as such, are, to put it mildly, a blunt instrument so far as social policy is concerned. They are wasteful and indiscriminate in that they are not selective. If I, as Minister for Social Welfare, were given a specific sum for welfare purposes I would not use it or any substantial portion of it in the form of food subsidies. This is a valid point in this connection.

When the Government took the decision to reduce food subsidies they were very conscious, as was I, as Minister for Social Welfare, of the fact that this would fall heavily on the weaker sections of the community. I do not make that statement lightly. I can advance some arguments which indicate the Government's concern for the situation that would arise as a result of the reduction of food subsidies. I can point to action we took to try to soften the impact on the weaker sections. As most Deputies interested in this area know, since October 1978 there was a 17½p per pound subsidy on two pounds of butter per month for people on social assistance and their dependants. That was of some assistance to them, although complaints were made that the butter subsidy was restricted to the assistance classes. I explained on previous occasions that that restriction was not the fault of the national Government but was a condition laid down by the EEC. We have been approaching the Community for some time now with a view to getting this butter subsidy extended to the contributory classes as well, but unfortunately without success so far.

When food subsidies were reduced on 1 January we sought for some expedient to ameliorate the effect on assistance classes and this butter subsidy offered an immediate line of action, which we took. We provided that the coupons for February and March, the two months which had to elapse before the increase in the rates in the budget could come into effect, would be increased considerably in value. The reduction in the food subsidies would have resulted in an increase of 8p a pound for butter in the shops. If we increased the butter vouchers from 17½p to 29½p, we would have compensated for that reduction. However, we recognised that we had this readily available means at our disposal, so we used it to cushion the effects of the removal of the subsidy on other things such as milk and flour. Instead of just increasing the value of each butter voucher to 29½p we increased it to 45p. So far as the assistance classes were concerned, that gave immediate amelioration for the increase in foodstuffs caused by the reduction in the food subsidy. About a half a million people in the assistance classes are affected by this. We recognised that that was only a very temporary expedient which would tide a very limited section of the community over until the increased rates would come into effect.

Looking at the effect of the reduction in the food subsidies we can broadly speaking, identify two sectors to whom particular attention had been given: the social welfare recipients and the lower income families.

An Leas-Cheann Comhairle

I must interrupt the Minister for a moment. At 5.30 p.m. under today's order the Chair is supposed to call the final speaker from the Labour Party. As there is no final speaker at the moment the Minister can continue.

Mr. B. Desmond

I am the final speaker.

An Leas-Cheann Comhairle

The Deputy cannot speak twice on the motion. Only the person who moves the motion can reply to the motion under the Standing Orders of the House. The Minister can continue until a Labour speaker comes in.

Mr. B. Desmond

I had agreed to give Deputy Haughey ten minutes of my time.

An Leas-Cheann Comhairle

I am explaining to Deputy Desmond that he is not entitled to take part in the debate again. The Minister to continue.

Mr. Haughey

I will take about five more minutes. We can identify two sectors of the community on which a reduction in food subsidies would have an impact. One, social welfare recipients generally, and the other, lower income families. In fixing the new rates which will come into operation in April next, we had due regard to the very serious effect of a reduction in food subsidies on these sectors.

As the House knows, social welfare benefit rates will be increased by 16 per cent in the case of longer term benefits and 12 per cent in the case of shorter term benefits. As figures, those rates mean nothing unless they are related to the movement in the cost of living for the persons concerned. In the Budget Statement the Minister for Finance indicated that, whereas it was thought that the cost of living increase was running around 8 or 9 per cent, it was hoped and projected that it would fall to about 5 per cent towards the end of the year. If the present rate of somewhere around 8 or 9 per cent falls to 5 per cent towards the end of the year, social welfare recipients should do reasonably well during 1979. Most people will accept that.

If there is an increase of 12 per cent in the case of the short term benefit and if the rate of increase in the cost of living index is somewhere in the region of the target, there will be scope in the increase in rates to provide some element of improvement in standards for recipients. Talking on the budget I said these rates were not as generous as everybody would have wished. On the other hand, I think they were better than most people expected in all the circumstances. Looked at against the background of the movement in the cost of living they can be accepted as reasonable.

The increase in social welfare benefit rates is only one aspect of the matter. There is a large sector of the community on whom they would have no real influence, or a very minimal influence, that is, lower income families and people with large families. The Government looked at their situation carefully and sympathetically and decided the best possible way of giving some easement to these families, and counteracting the effect of the reduction in the subsidies, was through the children's allowance scheme. Admittedly, there was another argument for doing something about children's allowances this year, which was that they had not been touched for some time. Most people would agree that some increase in children's allowances was called for at any rate.

There are two aspects about the increases in children's allowances to which I should like to direct the attention of the House in the context of this discussion. The first is the size of the increases. By any normal standards they are very substantial increases. The percentages are 52 for the first child, 34 for the second child and 13.4 for all other children. That means that, in a four child family, the children's allowance will now amount to £20 per month as against £16.10 at present. That is an increase of 24 per cent which, if we want to look at nothing else, can certainly be regarded as reasonable compensation for the increased cost of food stuffs for these families.

There is another important aspect of children's allowances. As Deputies know, up to now changes in children's allowances took effect in July in any year. The normal procedure was that increases would be announced in the budget, the administrative arrangements would be made, and the increased allowances would be paid from July on. That was the standard practice. This year the Government were particularly alert to the fact that the reduction in the food subsidies would bear heavily on lower income families and directed me very specifically to have the increases in children's allowances paid at the earliest possible date. They indicated that the date from which they wished to see them paid was 1 April.

I will finish on this point. In the Department of Social Welfare we were able to meet the Government's wishes in this regard. This is the first time it has ever been done and it represents a major administrative achievement on the part of the Department of Social Welfare. We have the co-operation of the Department of Posts and Telegraphs and post offices throughout the country. The books for April, May and June will have the old rates expressed on their faces, but the post offices will pay the new rates. I am glad to have this opportunity to put everybody on notice that as and from 1 April, even though the books in the possession of the mothers will show the old rates, the post offices will pay the new rates on those books.

I accept that from the point of view of the sections of the community for whom I have particular responsibility anything in the nature of a reduction in food subsidies is undesirable and unwelcome. I cannot deny that, but I want to say that, in taking their decision to reduce the food subsidies the Government were conscious of their obligation to do everything they could in the short term and in the longer term to cushion the social welfare classes and the smaller income families against the effect of that reduction.

Mr. Cluskey

We in this party have been seeking a debate on the Government's decision to remove the food subsidies for some considerable time. Following persistent questioning in the House, the Taoiseach decided reluctantly to give Government time for such a discussion. Last week we had to pursue him rather vigorously for an indication when the discussion would take place. One can readily understand the Taoiseach's reluctance to have a discussion in the House culminating in a vote placing his back-benchers and even the members of his Government in a position in which tonight they will walk through these lobbies and by that action allow the removal of the food subsidies.

An attempt was made to have the food subsidies removed during the Christmas Recess. It was a typical Fianna Fáil ploy—this incredibly unjust and insensitive decision, insensitive in regard to its effects not only on social welfare recipients but on lower paid workers and on workers not so badly paid but who would be required to support and feed large families. Possibly it was one of the most anti-children acts committed by any Government over a long number of years and was done in what has been declared to be the International Year of the Child. Make no mistake about it, the partial removal of food subsidies, because there are two more stages to come according to the White Paper published by the Minister now present——

Professor O'Donoghue

Where does it say two more stages?

Mr. Cluskey

——and the effects it will have on a large number of children in our community apparently is not known by the members of the present Government. Indeed it could not be known by anybody who will walk through these lobbies this evening to condone and approve an act which will have such detrimental effects on the lives of so many in our society. I say that because it is an established fact that in Irish society today at least 20 per cent are living below the poverty line. Indeed, within that 20 per cent there are tens of thousands of children who even before the removal of the food subsidies were not adequately fed. This act by this Government will ensure that many more thousands of children will go to bed hungry at night, and I do not say that lightly.

I have said in this House before that, fortunately, we do not have the dramatic picture of a child starving—big staring eyes, in a face in which one can see the bones, and the swollen little belly. But we do have such children in this Christian community. We do have such children within a quarter of a mile of this House. I can bring any Member of this House, and particularly any member of this Cabinet, within a quarter of a mile from where I am now standing to houses where children are going to bed hungry at night and going to school hungry in the morning. This is happening day after day. They can look forward to the same tomorrow, next week, next month and next year.

The removal of the food subsidies has to be viewed also against the background of another action by the same Government. They removed the wealth tax. The partial removal of the food subsidies will save the Exchequer approximately £22 million. They have a long way to go, because there are two more bites to come. Had the wealth tax been allowed to obtain at this point in the current year it would have yielded the Exchequer approximately £25 million. It astounds any civilised person, irrespective of his political persuasions, that 15 men elected by the Irish electorate could sit around a table—they are governing a society with a minimum 20 per cent of its population living below the poverty line—and make a deliberate, considered decision to remove a tax on the millionaire classes in our society, approximately 5,000 people. Indeed, it astounds one even further that the same 15 men should deliberately, after reasonable consideration, make another decision to remove food subsidies, the effects of which will be felt, not by 5,000 people but by tens of thousands of men, women and particularly children in our society. Its effect will be that they in this Christian society will go to bed even a little hungrier.

We have heard the Minister for Health and Social Welfare try to justify the act by saying that recipients of social welfare were cushioned against it by the increases provided in the budget. Even Fianna Fáil must be getting the feedback as to its effects, because not only has the Minister for Health and Social Welfare come into the House trying to justify it in relation to his Department but the Taoiseach, speaking on television at their annual Árd Fhéis, spent a considerable amount of time trying to justify the removal of food subsidies by endeavouring to distort what had happened in the Department of Social Welfare since this Government came into office and what had happened in that Department under the previous administration. There is no way that that can be distorted.

Professor O'Donoghue

Could the Deputy quote distortion?

Mr. Cluskey

The facts are that the progress made in those four-and-a-half years, in a time of very severe economic crisis, was more than had been made in that Department by successive Fianna Fáil Governments over a long period of years. If we compare what happened in those four-and-a-half years to what has happened since June 1977, that Department has again, unfortunately, been relegated to the very end of Fianna Fáil's priority list. The Government never allowed that Department to play its rightful role in Irish society as an arm of the Government. It did emerge to play its rightful role between 1973 and 1977 but it has now been put back into the pigeon hole. When every other Department is looked after in budgetary affairs the residue goes to social welfare under this administration because this administration have always believed—and probably rightly so—that there are no votes in social welfare so why should they give it priority. That is their estimation of the situation. It may be the correct one in political terms. How correct is it in a society that calls itself Christian?

We were told that the removal of the food subsidies and also the decision to discontinue the October increase in social welfare was justified because they were introduced at a time of very high inflation. They were indeed but we are now back in a situation where inflation is again becoming an issue; we have again reached a stage when we are back into double figures as far as inflation is concerned. It was clearly indicated last week by the Prices Commission that when the official index is published, some time this week, I understand, we can expect the overall percentage to be approximately 11 per cent. But if one looks at the figure concerning food it will run to approximately 14 or 15 per cent and not 11 per cent. That is the inflation rate so far as food is concerned and as far as the lower paid, social welfare recipients, people of middle income with large families are concerned because they spend up to 40 per cent of their disposable income on food.

The present Government have tried to justify this action by saying food subsidies are an across-the-board measure affecting everybody in the same way. They try to insinuate that they can remove food subsidies and channel the money saved into social welfare payments and to the lower income group. They may have tried to insinuate that but there is no evidence that they have done it. In fact the evidence is to the contrary. If one looks at the increase in social welfare payments in the budget it will be found that they have just about compensated the social welfare recipient for the increase in the price of food because of inflation. This will not be paid out until the beginning of April, and under this administration before those people—widows, old age pensioners, deserted wives, unmarried mothers, the disabled, the unemployed, the whole range—have any further adjustment in their income it will be April 1980. Did they participate in the growth that the Minister is so proud of, whether it is 5.8 per cent, according to the Central Bank, or 7 per cent, according to the Minister? It is an academic exercise as far as they are concerned because they did not and will not participate in it.

I understand there is a time limit.

An Leas-Cheann Comhairle

The Deputy has five minutes. I must call the Fine Gael speaker at 6 o'clock.

Mr. Cluskey

I regret that I have only five minutes but I will try to use it. There are two things I would like to refer to in the five minutes. The Minister for Health and Social Welfare spoke about the marvellous increase in children's allowances that were introduced in the budget. I am going to make a factual statement with regard to this marvellous increase in children's allowances. It came from a man I know who has four children of school-going age. He did this calculation on the increase of children's allowances that the Minister was talking about and, by coincidence, he falls into the category that the Minister was talking about; he has four children. This man told me that, taking into consideration the children's allowances and the removal of the food subsidies, in the case of milk of which he uses five pints per day, at the end of the month he is left with 2½p to the good. That does not take into account the removal of the subsidies on other items of food so that myth is exploded.

But there is another more serious aspect to the removal of the food subsidies and the removal of the wealth tax and the whole policy being pursued by this Government. Everyone here has heard of the legendary Robin Hood. He was alleged to have robbed the rich to feed the poor. This Government is actually engaging in robbing the poor to buttress the rich. There is an even more serious aspect to it. We have seen or read or heard on the radio and television that there was an exchange yesterday between the Taoiseach, Deputy Lynch, and the British Prime Minister, Mr. James Callaghan, at the Summit in Paris. This is what I would regard as a well-staged explosion with regard to the operation of the Common Agricultural Policy. The CAP is a very serious national issue for this country and the operation of the CAP is the only way that there will be, as far as we can see in the immediate future, a transfer of resources from the richer parts of the community to the poorer parts.

This Government have not been able to make any progress with regard to the operation of the regional policy or the social policy and the only substantial benefit we have from membership is through the operation of the CAP. But by the action of this Government in removing the food subsidies the will of the Irish people to continue the operation of the CAP is being undermined. If the Government do not concern themselves about proper and fair redistribution of the money when it reaches this country they will seriously undermine the will of a large section of the Irish people in supporting the CAP. That is a grave responsibility and the Government are, by their action, dividing this country into an urban-rural entity. That development, which they are contributing to day after day, will have a very serious consequences for all of Irish society. This party has and will continue to support the CAP but we will also continue to demand that our national Government ensure that there is a proper redistribution of the benefits derived by the country from the operation of the CAP.

Mr. O'Toole

I am glad to have the opportunity of discussing this Government motion concerning the removal of food subsidies and also the Government's declaration that that action can be justified because of increased social welfare benefits. I have heard people from the Fianna Fáil Party, both inside and outside this House, boasting that it was they who pressed the National Coalition Government into introducing food subsidies in 1975. Nobody has denied them their moment of glory, other than pointing out that the National Coalition had ideas of their own possibly to do the same thing.

The shock with which many people received the news during a Bank Holiday weekend that £22 million was being withdrawn cannot be over-emphasised. The Minister now present has stated that food subsidies are introduced at a time of rising inflation and lowering of living standards and they are dismantled and removed when the reverse is true, when inflation decreases and living standards rise. That is fine and true in theory but in the present circumstances we must ask the question if it was the right thing to do. We must ask is now the appropriate time to do this. Are all the conditions fulfilled in order to bear out the Minister's theory? I do not think so. I would agree fully with him if his theory could be said to be true today in practical terms having regard to all the circumstances he mentioned on many occasions.

In their election manifesto in the section dealing with prices, Fianna Fáil said that the Government's policy would be directed towards discouraging increased costs of prices in all areas where the Government have control or influence. Fianna Fáil committed that promise to paper but now, 18 months later, we find that as a direct result of their own intervention the party who gave that promise are now increasing the prices of food items. That is a true statement.

As far back as February 1978, in a debate on the control of prices, I mentioned to the Minister for Industry, Commerce and Energy that it was rumoured that some form of removal of food subsidies was in the offing and the Minister assured me that my sources were inaccurate, that the information I had was wrong and that such allegations sounded "hollow". I do not know if he was in touch with his colleagues in Government but a few months later, in June 1978, we had the Green Paper which intimated for the first time the intention of the Government to dismantle food subsidies and this was reiterated in the White Paper in December 1978. We had the first budget of 1979 on the first day of 1979. That took back nearly £22 million, nearly as much as the Government handed out in the form of car tax remissions in order to purchase votes.

The reaction of the electorate to Fianna Fáil was a very generous one, generous to the extent that the Government are now sitting with a 20-seat majority. Yet the gratitude of the Government appears to have waned in that the Government now feel obliged to take back something that was given for a particular purpose. They have taken it back in a way that will hurt those least able to fight their corner.

Much has been said about the social welfare increases. I could not but be amused when the Minister for Health and Social Welfare found himself having to speak in a debate in which he had no notion of speaking because as far as I could gather he was very vague and uncertain. He was not at all sure of himself when he threw out a few figures with regard to the economy. For example, in a very casual way he mentioned an inflation rate of 5 per cent—the famous or perhaps what will turn out to be the in-famous 5 per cent mentioned by the Minister for Finance in his budget statement as being the level of inflation that we will have by the end of the year. The Minister for Health was not too sure whether that rate of inflation would obtain by the end of 1979. He made a very weak case for the increases given to social welfare recipients and he admitted they were not of the order he would have liked to see given.

The Minister also said in regard to the EEC subsidies—and the present subsidies are borne in part by EEC money—something that I think from my information is incorrect in that such subsidies, according to EEC regulations are confined to assistance classes. I am sure the Minister will correct me if I am wrong, but as far as I can recollect one of his colleagues asked a question in the European Parliament sometime since Christmas and was told that this was a matter for the discretion of the national government. Therefore, according to my information and the answer given in the European Parliament these subsidies are not confined to assistance classes as it would seem the Minister wishes to impress on us.

The Minister for Finance spoke of the circumstances in which subsidies were first introduced and told us of inflation rates being very high. That is correct. The resulting increase we are told is something in the region of three-quarters of 1 per cent, 0.7 or 0.75 per cent on the CPI. While that is a true figure calculated as we calculate these things for CPI purposes, it has no significance for many thousands of people for whom that figure does not cater. It is an overall figure. If you ask the old age pensioner living alone, the unemployed person, Group V, shall we say in the social ladder, according to the household budget survey, what it will mean to him and his family, you are not talking of 0.75 but of 2.75 or perhaps more in certain circumstances. Taking just two classes out of the household budget survey, Social Group I—these are 1976 figures, the latest we have—with an income of £85 per week, expenditure on food for that family runs to £23.50, roughly 27.5 per cent while in Social Group V, with an income of £49.80, expenditure on food is £18.90, which works out roughly at 38 per cent of total income spent on food. The difference there is very large. There is a 50 per cent increase in the percentage spent on food in the lower income group. For that type of family, people with that type of income, we are talking of a very heavy burden being placed on them as a result of the withdrawal of the food subsidies on what are very basic foods.

Doing a very quick calculation on price increases over five different basic items, bread, butter, sugar, cheese and milk in the past 18 months, from July 1977 to January 1979, we find that bread has increased by 13½ per cent and that the average increase in the five items is 31 per cent. That must be a very severe imposition on people who use these basic foods more than the so-called middle or upper income groups. These people cannot afford to pay £2 per pound for meat, people who probably have not eaten meat for the past two or three years except on very special occasions. Yet, the substitute foods which they ought to be using are now being increased in price, not through any outside agency, not through demands for compensation for increased production costs but by the Government in order to get in a miserable £22 million.

That means, again based on the 1976 household budget survey figures, that in my own county this year the Government will be taking in around £750,000 or saving that amount in food subsidies alone. That is £.75 million in County Mayo, where there is high unemployment and very poor land. This is the type of punitive exercise we have here. I would not mind if the conditions to which the Minister himself has referred on many occasions were present which would justify the withdrawal of subsidies.

The concept of subsidies is very well founded, but what the Minister does not normally quote when he is theorising on these matters is that a further reason for the introduction of food subsidies in 1975—apart from the obvious one of reducing inflation—was to keep pace with EEC controlled price rises in agricultural produce. It is well known and accepted that since 1973, since we joined the EEC, those who have benefited most are those engaged in farming. Comparatively speaking they have benefited most, but they started from a very low base. The result of that benefit to them was substantial increases in agricultural products for which both farming and non-farming communities have to pay and the urban dweller, without any substantial benefit from EEC membership, is also being asked to pay that high price. This was a further reason for food subsidies in 1975—to try to even out the disparity which resulted from benefits accruing to the agricultural section and not accruing to the urban section. Would the Minister not agree that the same type of situation obtains now? Nothing has changed in that regard. The urban dweller is still paying the price but not getting any great advantage. At least subsidies helped to soften that blow and allowed urban dwellers some relief for the very substantial increases that came about through the Common Agricultural Policy. The 5 per cent referred to in a half-hearted sort of way by the Minister for Health and Social Welfare would not appear to be very realistic in the light of the withdrawal of these subsidies and also in view of what is happening in regard to prices with, for example, an increase due tomorrow in the cost of fuel. This increase will permeate the whole economy.

Professor O'Donoghue

By how much?

Mr. O'Toole

I shall be hoping to hear that from the Minister during his contribution because I have neither the time nor the back-up service that would permit me to calculate the extent of the overall effects of this increase.

Professor O'Donoghue

But the Deputy is giving the impression that it will be a big increase.

Mr. O'Toole

The Minister will accept that there will be an increase.

Professor O'Donoghue

The Deputy is conjuring up a vision of tremendous hardship.

Mr. O'Toole

On 8 February, in the course of his speech on the budget, the Taoiseach said that subsidies have outlived their usefulness. I should like to ask the Minister who is accusing me of conjuring up cases of hardship if what the Taoiseach said is true and to tell me also whether he is prepared to make such a statement to the 83,000 widows and their dependants, to the 217,000 old age pensioners and to the 7,000 unmarried mothers and their dependants. I do not think that the Minister would be able to convince these people that food subsidies have lost their usefulness. On 14 January the Minister for Economic Planning and Development was quoted as saying that in many cases it is the poor, the old and the unemployed who are hurt——

Professor O'Donoghue

By what?

Mr. O'Toole

I am quoting from The Irish Times of that date, but the Minister was not referring to food subsidies. He was referring to industrial action. To that extent I agree with what he says. These are fine sentiments in regard to strikes but if the Minister is to be consistent and logical he must admit that the people to whom he was referring—the poor, the weak and the old who, generally speaking, are not in a position to march in their thousands through the streets of this city by way of protest—are hurt also by the removal of food subsidies. This action on the part of the Government must cause hardship to these people.

The Minister for Health and Social Welfare, caught off balance, tried to make a case for the Government's action on the basis of the increases being made available to social welfare recipients but we all know that the level of these increases is not sufficient. First in this area of the abolition of food subsidies, there was removed entirely the subsidy of almost £1 million on cheese. For many people cheese had become a basic food, a substitute for meat, but cheese, too, is now too expensive. Then there was the partial removal of the subsidy on town gas and then we had warnings of the removal of these other subsidies on bread, milk, butter and flour. We would also like to know how soon the Government expect to phase in the remainder of their programme to remove subsidies completely. This word "phased" has been used in the White Paper and in the Green Paper. The phasing has begun. Is it a question of one-third, one-third, one-third and, if so, when is the second-third to be brought into effect?

Many people are not aware that when the policies of the White Paper have been implemented, even without any increase in production costs, wage increases and so on, there remains a subsidy of 5½p on a large loaf of bread, that there remains a subsidy of 2½p on a kilo of flour despite the fact that the subsidy on a kilo of flour was reduced by 2p in January. At that time there was granted an increase in the price of bread, but that increase was not on the basis of the reduction of the subsidy. It related to production costs. Therefore, we have yet to experience the effects of the removal of that part of the subsidy on flour. There remains a subsidy of 2½p on a pint of milk and of 20p per pound on butter. These are large subsidies and the people should be told the proposals the Government have for the phased removal of the subsidies. We are fast approaching the day when butter will cost £1 per pound. I understand it now costs 69½p and when we take into account the 20p subsidy that is involved and also whatever increase may arise as a result of whatever arrangements the Minister may succeed in reaching with the unions, it is not difficult to visualise a situation in the not too distant future when butter will be costing £1 per pound.

The statement from the Taoiseach that subsidies had outlived their usefulness is strange but it is worth repeating because to many thousands of people this is not the case. Indeed, in many cases food subsidies spell the difference between having and not having some of these items that are basic to subsistence. The Government should defer until further notice any move towards the removal of further increases, at least until such time as inflation figures have been stabilised because as the Minister knows when we are talking of the three-month period, mid-November to mid-February, we are talking of 3 or 3½ per cent which brings us well into double figures. The withdrawal of these subsidies so far has been on the basis of a 7.8 per cent inflation. Is the Minister going to fly in the face of reality and continue on, because it is in the White Paper, on the basis that it has to be done irrespective of the level of inflation which will confront our consumers in the not too distant future.

Minister for Economic Planning and Development (Professor O'Donoghue)

The difference between the two sides of the House has been clearly illustrated by the contributions we have heard this afternoon. Opposition speakers, rightly from their point of view, want to concentrate solely on the question of the reduction in the food subsidies. I should like to emphasise the word "reduction" because a few speakers, intentionally or otherwise, frequently referred to the removal of the subsidies but no such removal has taken place; there has been a reduction in the level of subsidy. Some speakers have concentrated solely on that reduction and ignored the other changes that are taking place in the economy or, in those cases where they have allowed that there may have been appropriate offsetting changes, as in social welfare benefits, they tried to denigrate or minimise the importance of those consequential changes. The motion before the House emphasises that the change in the level of subsidy is geared to a conscious policy and recognises that a group could suffer from a reduction in subsidies, people with small incomes, were that the only action taken. The Government have set out consciously to ensure that the living standards of people with small incomes are protected and, I am happy to say, improved.

There is no commitment to further reductions in food subsidies at this time; no further changes are planned or have been decided on already in secret or anywhere else. I note that a group, acting in the name of Fine Gael, were trying to claim that we were already committed to the phasing out of the subsidies over the next two years. No such decision has been taken or is contemplated. Deputy Desmond tried to conjure up the same sort of notion and managed to work up the prospect that there would be a reduction in the subsidy on butter of 10p and that within two years the price of butter would be in excess of £1 per lb. I cannot find any basis in any statement by any member of the Government that would substantiate such remarks nor can I find any reference in any of the relevant papers or documents.

Mr. Kelly

Does that mean that the Minister is undertaking that that will not happen?

Professor O'Donoghue

No. I was about to say that as is normally the case with budgets, budgetary policies and financial matters generally, financial decisions are taken in the light of circumstances prevailing in that year.

Mr. Kelly

Of what value is the Minister's assurance?

An Ceann Comhairle

Order, we are not going to have a debate across the House.

Mr. Kelly

This Minister interrupted speakers on this side of the House repeatedly.

Professor O'Donoghue

I do not mind the Deputy interrupting me because I am willing to answer the questions, state and clarify my position, unlike Opposition speakers. I have a position and that is more than I can say for you lot.

Mr. Kelly

The Minister likes questions from the class.

Mr. B. Desmond

May us lot ask a question? The Minister has stated that this is the first phase of reductions and I should like to know if there will be a second phase?

Professor O'Donoghue

The normal plan would be that they should be phased out in appropriate circumstances over a period of years and that is what has been stated. A reduction over a period of years, taking account of the circumstances of the years, is not a statement that could lead the Deputy, or any other Member, to claim 10p on butter next year and that butter will cost more than £1 per lb within two years.

Mr. Kelly

Of what use are these assurances that the Minister is giving us if the Government have all their options up their sleeves?

Professor O'Donoghue

I am not trying to indicate what the content of next year's budget will be but I am setting out to deny allegations made by Opposition speakers who claim to have some knowledge or insight or purport to be able to interpret what will or will not happen.

An Ceann Comhairle

The Minister has but half an hour of which five minutes have already elapsed and he should be allowed to proceed without interruption.

Mr. Kelly

Some of the most instructive political speeches are made in this House.

Professor O'Donoghue

And the Deputy is hoping for a few pearls of wisdom. We are talking about a reduction in the subsidies of a defined amount and pointing out that we should relate those changes in subsidy arrangements to the reasons for them. In the course of his opening remarks the Tánaiste pointed out that at the time of the introduction of the subsidies the then Taoiseach set out the reason for their introduction and the circumstances in which the removal of those subsidies would be justified. We supported the introduction of the subsidies and we also support the rationale for their subsequent phasing out when circumstances permit.

It is interesting to note that Deputy O'Toole did not dissent from that viewpoint. Unlike speakers from the Labour Party he felt that in the appropriate circumstances subsidies could be phased out.

Mr. O'Toole

Provided the circumstances are right.

Professor O'Donoghue

The Deputy appears to be supporting the circumstances to which I referred, namely increases in living standards and reduction in inflation while the speakers on behalf of the Labour Party sought to convey the impression that they would wish to see subsidies as a permanent feature of the economy. Yet again this is an illustration of what would happen were the country to have the misfortune to be governed still by the combination of those parties. We have heard evidence today that they would not be able to agree on the direction in which their policies should point.

Mr. O'Toole

That is not very relevant.

Mr. Kelly

The Minister should not narrow his own options in case he has to cross the floor of the House some day.

Professor O'Donoghue

Reference was made to the fact that because households with smaller incomes spend a greater proportion of their income on food the reduction bears far heavier on them, that wealthier families do not derive as much benefit from subsidies as do poorer families. Deputy Desmond quoted some percentages to illustrate this point and on previous occasions the Leader of his party attempted a similar argument. Taking household expenditure in 1976 it seems that the two bottom categories of income spend something like 43 or 44 per cent of their income on food as against about half that percentage for the higher income groups—it was only about 24 per cent in those cases. If one picks out the three items in question, milk, flour and butter, one gets an even more dramatic emphasis. For the two bottom categories of income the percentage spent on those three items was between 6 and 7 per cent while for the higher income groups it was between 2 and 3 per cent. If you take the extremes, the bottom income category 7 per cent, and the top category, 2 per cent, that gives a ratio of three and a half times as much in percentage terms.

The point I repeatedly tried to get them to comment on, and which they refrained from commenting on, was how much was being spent on these items and how much benefit was accruing to each household. The answer is that the low income family spent one-fourth of the amount on those three items, as did the better off families, and it goes up in a steadily ascending pattern. If you take the subsidies on milk, flour and butter, the absolute amount for a household in the upper income group is four times as much as the absolute amount of subsidy going to the smallest income family, and the absolute amounts progress steadily for each group. We could get into separate discussions as to the number of households in each category, but that is not important today.

Mr. Kelly

It is very important.

Professor O'Donoghue

The important point is that for the households in the bottom income categories the reduction in subsidies affect them by amounts of the order of 20p to 25p a week and at the top of the scale the difference can be of the order of between 80p to £1. What we should be talking about is the size of the impact on families in different circumstances with different incomes and the size of the amount needed to compensate them.

Mr. Kelly

Would the people at the top of the Minister's scale, the people who were on the streets last Sunday, not still be in the PAYE category? Should we not be talking about them?

Professor O'Donoghue

I propose to deal with the PAYE and other categories later. The people at the bottom of the scale are primarily dependent on social welfare. We set out to ensure that the increases in social welfare benefits represented an improvement in the real level of benefit for these people.

Mr. O'Toole

They have lost three months.

Professor O'Donoghue

Even if we allow for the carry over from last year they are still better off.

Deputy Cluskey said the Taoiseach in trying to justify a record in this area had distorted the figures. I invited him to spell out the nature of any such distortion and he declined to do so. If he wishes to come in at any other time and spell out those distortions, we will be delighted to hear them. I repeat that the facts as set out by the Taoiseach are that prior to 1973 the real improvement in the value of social welfare benefits was of the order of 5½ to 6 per cent a year. During the four-and-a-half years under the Coalition the real improvement was of the order of 2.1 per cent for some categories and 1.6 per cent for others—that was the marvellous improvement. That was the period when we had to have two increases a year, a basic increase in April and a supplementary increase in October. Why? Because inflation was so terrible that the benefits these people were receiving would have fallen if we had tried to wait for 12 months. Thank God that does not happen any more. During the 12-month period April 1978 to date, the real value of benefits did not fall. That is a very important basic point.

We must relate the size of the increases in social welfare benefits to the size of the increases in prices that are taking place. Because of the substantial reduction in the level of inflation the real value of social welfare benefits is again happily improving at a level that had been recorded during previous Fianna Fáil Governments namely, increases in real terms of 5 to 6 per cent last year and this year. That is three times as good as the increases which occurred during the Coalition's term of office. Increases in social welfare benefits were designed to ensure that people dependent on them were compensated for any reduction in subsidies and that they were given an opportunity to derive some share of the increased living standards which are becoming available throughout the community as a whole.

Deputy Kelly referred to the people in the PAYE net. Raising this point enables me to deal with the relevance of children's allowance improvements and also with the nature of the other tax changes that have taken place. The other category most affected by a reduction in subsidies would be large families with small incomes, the lower paid workers. The improvement in children's allowances was cast in the form it was to ensure that the amount accruing to all those families would at least equal the reduction in the subsidies and that has been the case. I will not digress to pursue the spurious illustration Deputy Cluskey tried to introduce in that area. I will simply state that the adjustment in children's allowances was sufficient to compensate for the increased cost to the families in the lower income groups. Higher up the income scale they were not so adjusted, because the increases in children's allowances were offset by changes in the income tax area.

Taking the changes in the income tax area and the other changes in taxation arrangements in 1978 and this year, I can now pick up the spurious argument that we have been obsessed with the need to pander to the wealthy in our society and that we are ignoring the needs of the poor. That is simply not true. One of the reasons why some of the tax changes last year and this year were geared towards middle and upper income groups was because that was the way in which the pressure on incomes had developed in recent years. Let us look at what happened in the course of the various national wage agreements between 1970 and 1978. These figures have been quoted a number of times recently and it is no harm to repeat them and place them in their proper context. The overall increase in prices during that eight year period was of the order of 164 per cent. A £15 wage in 1970, would correspond to a wage of £46 last November, an increase of 211 per cent, almost 50 per cent greater than the increase in prices. A £20 wage in 1970 has increased to £56, an increase of 180 per cent or 16 points beyond the price rise.

Moving up the scale, a person who had a wage of £30 in 1970 received an increase up to £75 in 1978, and that represents an increase of 151 per cent or a shortfall of 13 points against the price rise. By the time we reach the case of someone earning £50 in 1970 the drop is 38 per cent in real terms. Had a person received only the basic increases under the national wage agreements, the higher up the scale the smaller was the increase received. For a person with above average earnings, the pay rise would have failed to keep pace with inflation.

On previous occasions I have complimented Deputy O'Leary on being the only Minister for Labour who negotiated agreements under which trade union members were invited to accept reduction in living standards. Whatever about the willingness or otherwise of people to accept such reductions in the short term for a variety of reasons, clearly it would be unrealistic to expect them to go on accepting such reductions in a period of rapid growth, rising living standards and improving opportunities. For that reason it was clearly appropriate that tax changes should have been geared in the last two years——

Mr. Kelly

These are not the concessions we are complaining about.

Professor O'Donoghue

I presume the Deputy is complaining about the wealth tax.

Mr. Kelly

We are complaining about people who make so much money that they do not know their weekly income.

An Ceann Comhairle

The Minister to continue without interruption.

Professor O'Donoghue

I will come to the wealth tax in a moment. I am moving up the scale. If the Deputy would stop interrupting I could deal with points more fully.

These tax changes were geared to ensuring that the relative situation of different groups was restored, that the poorer sections were protected and that their living standards were not reduced.

Why did we remove the wealth tax? The Opposition latch on to this question. Deputy Cluskey pointed out that we were pandering to 5,000 wealthy people and said there were no votes in improving social welfare. How naïve, ridiculous and absurd can he get? He invites us to believe that something of the order of one million people who benefit from social welfare are not influenced by what happens to them.

Mr. B. Desmond

There is a lot of national collection in the wealth tax.

Professor O'Donoghue

We are invited to believe that Fianna Fáil are so out of touch with reality that they will rush after 5,000 voters and ignore the wishes of one million. I would be delighted to know of anything in the records which would lead one to that conclusion. The expressed wishes of the people clearly demonstrate that we are far more in touch with the wishes of the people and are far more capable of meeting those wishes than the speakers from the smallest of the three parties in the House.

Mr. Kelly

Is that an answer?

An Ceann Comhairle

Order.

Professor O'Donoghue

I now come to the abolition of the wealth tax. Ireland is a developing country trying to encourage the accumulation of wealth and investment by its own people and by outside investors who would wish to help us in our development effort. We had the extraordinary situation where we were seeking to encourage this investment yet at the same time saying: "No Irish person need apply. Foreign investors are welcome and will not be taxed, but misguided Irish people who want to invest in their own country will be punished with a penal tax." This penal tax had the effect of seriously damaging and reducing the level of investment and, therefore, the employment opportunities open to the Irish people.

Mr. Kelly

Has that ever been proved? All these things are in vain if industrial relations——

An Ceann Comhairle

Order.

Professor O'Donoghue

I and other members of my party have set out, inside and outside this House, the reasons for the abolition of the wealth tax and invited anyone on the other side of the House to put up a logical case for its re-introduction. I have never heard such a case argued. I have been treated to miscellaneous amounts of political flak and waffle but I have never heard a serious, rational case put forward, inside or outside this House, in favour of the wealth tax.

Mr. Kelly

The Minister's own employees are looking for its re-introduction.

Professor O'Donoghue

We make no apologies for giving the necessary emphasis and priority to investment and the creation of employment because these are the major needs at this time.

Mr. Kelly

And industrial peace, which the abolition of the wealth tax directly threatens.

Professor O'Donoghue

The reduction in subsidies was carried out in a manner designed to ensure that people in the social welfare categories dependent on these benefits could enjoy some improvement in their real standard of living, unlike the miserable changes which took place during the Coalition era. Secondly, changes in other areas such as children's allowances, income tax and other forms of taxation were designed to ensure that other groups in the community could protect their living standards without having to press for excessive income increases. The abolition of the wealth tax was designed to promote investment and employment and, therefore, to protect the long-term prospects for all our living standards, those of rich and poor alike.

The notion that one can at random levy any sort of taxation or introduce legislation or other changes which can hinder and restrict development while parading one's social conscience as a justification is short-sighted, misguided and ultimately had government. We have set out in these areas to emphasise the importance of relating what happens in one field to what happens in another. It is misguided, short-sighted, wrong and inaccurate to deal with subsidies in isolation. They must be related to what is happening in other areas of Government spending and taxation. We have sought to extend that concept in tackling problems in the area of incomes and industrial relations. That is why the Taoiseach and other Ministers are proposing the notion of developing a national understanding with the trade unions, employers, farmers and other groups that will enable a sufficient degree of understanding and consensus to emerge in these areas. I have not time to pursue that point, but I emphasise that this is the way forward. It is important to relate behaviour and action in one area to what is happening in other sectors and not blindly to pursue change in one area as though it had no bearing on other parts of the economy.

I do not believe the Opposition's heart was in this motion, despite their clamour and rush for debate. We had a sorry spectacle this afternoon. Deputy Kelly managed to totter through his half-hour without, to the best of my knowledge, getting to any of the substantive issues involved. Deputy O'Toole made the point that he would agree with the removal of food subsidies in the appropriate circumstances, but he was careful to avoid any discussion as to what were or were not appropriate circumstances. How are we to view the Labour Party, who are supposed to have been really clamouring for this debate and were to have a momentous inquiry and campaign in which they would champion the underprivileged and the poor? What happened? We had Deputy Desmond leading for them and managing to introduce a few dubious and not very helpful statistics which I suggested needed correction. There was not even a second speaker for the Labour Party. There was an apologetic and hurried exit to see if somebody could be drummed up. Unfortunately, the Leader of their party was in the House and was able to——

Mr. B. Desmond

By agreement. We gave time for Deputy Haughey to speak.

Professor O'Donoghue

The Deputy was glad to give it because there was nobody there. Had another speaker been called on——

Mr. Kelly

Deputy Haughey found himself in a very unpopular situation——

An Ceann Comhairle

Order.

Professor O'Donoghue

That is the measure of the great anxiety and concern which is felt on that side of the House for the changes that are taking place. What more eloquent verdict could be delivered on their performance than their own behaviour in the House today?

Mr. Kelly

What is the procedure in regard to voting on the various motions which are being discussed simultaneously.

An Ceann Comhairle

I will put the first question now.

Mr. Kelly

In the event of the question being defeated?

An Ceann Comhairle

I will put the motion then.

Mr. Kelly

What will happen to the Fine Gael amendment?

An Ceann Comhairle

I will put 10 and 11 separately for formal decision.

Mr. B. Desmond

What about 12 and 13?

An Ceann Comhairle

Twelve and 13 are identical with 10 and 11.

Mr. B. Desmond

Are they being co-joined?

An Ceann Comhairle

Decisions on the first two will cover Nos. 12 and 13.

Question put: "That the words proposed to be deleted stand."

The Dáil divided: Tá, 56; Níl, 41.

Tá

• Ahern, Bertie.
• Ahern, Kit.
• Allen, Lorcan.
• Aylward, Liam.
• Barrett, Sylvester.
• Brady, Gerard.
• Browne, Seán.
• Callanan, John.
• Calleary, Seán.
• Cogan, Barry.
• Colley, George.
• Conaghan, Hugh.
• Connolly, Gerard.
• Cowen, Bernard.
• Cronin, Jerry.
• Daly, Brendan.
• Davern, Noel.
• de Valera, Vivion.
• Doherty, Seán.
• Fahey, Jackie.
• Farrell, Joe.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzpatrick, Tom. (Dublin South-Central).
• Fitzsimons, James N.
• Fox, Christopher J.
• French, Seán.
• Gallagher, Dennis.
• Gallagher, James.
• Gibbons, Jim.
• Haughey, Charles J.
• Hussey, Thomas.
• Keegan, Seán.
• Killeen, Tim.
• Killilea, Mark.
• Lalor, Patrick J.
• Lawlor, Liam.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leonard, Tom.
• Leyden, Terry.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Molloy, Robert.
• Moore, Seán.
• Noonan, Michael.
• O'Connor, Timothy C.
• O'Donoghue, Martin.
• O'Hanlon, Rory.
• O'Leary, John.
• Reynolds, Albert.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

Níl

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Bermingham, Joseph.
• Boland, John.
• Browne, Noël.
• Cosgrave, Liam.
• Creed, Donal.
• Crotty, Kieran.
• D'Arcy, Michael J.
• Desmond, Barry.
• Desmond, Eileen.
• Enright, Thomas W.
• FitzGerald, Garret.
• Fitzpatrick, Tom. (Cavan-Monaghan).
• Flanagan, Oliver J.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Horgan, John.
• Keating, Michael.
• Bruton, John.
• Clinton, Mark.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Corish, Brendan.
• Kelly, John.
• Kenny, Enda.
• Lipper, Mick.
• McMahon, Larry.
• Mitchell, Jim.
• O'Connell, John.
• O'Donnell, Tom.
• O'Leary, Michael.
• Quinn, Ruairí.
• Ryan, John J.
• Taylor, Frank.
• Timmins, Godfrey.
• Treacy, Seán.
• Tully, James.

Tellers: Tá, Deputies P. Lalor and L. Lawlor; Nil, Deputies B. Desmond and Creed.

Question declared carried.

Amendment declared lost.

Question put: "That the motion be argeed to."

The Dáil divided: Tá, 55; Nil, 40.

Tá

• Ahern Bertie.
• Ahern, Kit.
• Allen, Lorcan.
• Aylward, Liam.
• Barrett, Sylvester.
• Brady, Gerard.
• Browne, Seán.
• Callanan, John.
• Calleary, Seán.
• Cogan, Barry.
• Colley, George.
• Conaghan, Hugh.
• Connolly, Gerard.
• Cowen, Bernard.
• Cronin, Jerry.
• Daly, Brendan.
• Davern, Noel.
• de Valera, Vivion.
• Doherty, Seán.
• Fahey, Jackie.
• Farrell, Joe.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzpatrick, Tom. (Dublin South-Central).
• Fitzsimons, James N.
• Fox, Christopher J.
• French, Seán.
• Gallagher, Dennis.
• Gallagher, James.
• Haughey, Charles J.
• Hussey, Thomas.
• Keegan, Seán.
• Killeen, Tim.
• Killilea, Mark.
• Lalor, Patrick J.
• Lawlor, Liam.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leonard, Tom.
• Leyden, Terry.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Molloy, Robert.
• Moore, Seán.
• Noonan, Michael.
• O'Connor, Timothy C.
• O'Donoghue, Martin.
• O'Hanlon, Rory.
• O'Leary, John.
• Reynolds, Albert.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

Níl

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Bermingham, Joseph.
• Boland, John.
• Bruton, John.
• Clinton, Mark.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Corish, Brendan.
• Cosgrave, Liam.
• Creed, Donal.
• Kelly, John.
• Kenny, Enda.
• Lipper, Mick.
• McMahon, Larry.
• Mitchell, Jim.
• O'Connell, John.
• O'Donnell, Tom.
• Crotty, Kieran.
• D'Arcy, Michael J.
• Desmond, Barry.
• Desmond, Eileen.
• Enright, Thomas W.
• FitzGerald, Garret.
• Fitzpatrick, Tom. (Cavan-Monaghan).
• Flanagan, Oliver J.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Horgan, John.
• Keating, Michael.
• O'Leary, Michael.
• Quinn, Ruairí.
• Ryan, John J.
• Taylor, Frank.
• Timmins, Godfrey.
• Treacy, Seán.
• Tully, James.

Tellers: Tá, Deputies P. Lalor and L. Lawlor; Nil, Deputies B. Desmond and Creed.

Question declared carried.