Dáil Éireann debate -
Wednesday, 12 Mar 1980

Vol. 318 No. 10

Financial Resolutions, 1980 . - Financial Resolution No. 19: General (Resumed).

Debate resumed on the following motion:

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

—(Minister for Finance).

Mr. Callanan

When I moved the adjournment last Thursday evening I had been trying to give an objective assessment of the budget. I had been critical where I thought constructive criticism was needed and I had given credit where credit was due. One thing that I said on Thursday is very relevant, that is, that unfortunately budgets are not looked at objectively. Judgment of them depends on which side of the House one is. That was patent yesterday on the Social Welfare Bill but not with all Deputies. Some Deputies on the far side of the House gave credit for the huge increases given in social welfare but others saw nothing at all good in the budget. This is the type of thing which the ordinary people do not think much of. The budget gave huge increases in social welfare and I give credit to the Deputies on the other side who acknowledged that. Yesterday I was astonished to hear the Leader of the Labour Party say that he could see nothing at all in the Social Welfare Bill. With the unprecedented increases in social welfare which we have been given I could not understand that.

I have objections to that Bill. I did not hear any mention yesterday of the question of increases of income and the old age pension. A person with an income of £6 in 1979 should not be debarred from getting the full pension, but that has been the law and neither the Coalition nor the present Government have changed that. I have appealed to have it changed. I also made an appeal on the Social Welfare Bill regarding the prescribed relative's allowance. At present it is given when a relative is bedridden or an invalid, and I appeal that that allowance be given across the board to enable people to keep their relatives at home where they want to die.

Regarding social welfare I want to contradict a statement which has been bandied around County Galway in connection with small farmers. Prominent members of the Opposition are going around the country saying that in this budget small farmers have to go on a factual income and if they object they will be made to do so. Nothing is further from the truth. The Minister for Social Welfare said yesterday that the rate of unemployment and assistance paid to smallholders who opt for the notional system of assessment will be maintained at their 1979 level. The Minister for Social Welfare said yesterday also when he introduced Second Stage of the Social Welfare Bill:

In the case of smallholders in certain disadvantaged areas, means for unemployment assistance purposes may be assessed notionally by reference to land valuation, where the valuation is £20 or less. In these cases, special rates of unemployment assistance are payable. This is a concession having regard both to the present levels of farm incomes and the means test for unemployment assistance generally.

Therefore, if you are on the notional system you do not get an increase but it is optional for farmers who think that the notional system is hard on them to apply to go on the factual income basis. Those who go on to that will get the increase but as far as I know out of thousands and thousands of small farmers only about 3,000 or 4,000 in the west of Ireland who have very low valuations will remain on the notional system. I emphasise that. I do not want certain prominent Senators going around telling the small farmers of County Galway and the west of Ireland that the small farmer social welfare is finished and that they must go on the factual income. This has been pasted across the papers in the west. Both the Minister for Finance and the Minister for Social Welfare mentioned it in their speeches and, unless I misinterpreted them, these statements are untrue. Deputy Bruton mentioned that there should be an increase in this but did not say what has been said in the west and what has been bandied about in all the newspapers: that people would have to go on factual income.

Mr. Bruton

Their income is still being frozen although the cost of living is going up.

An Ceann Comhairle

Order.

Mr. Callanan

The Deputy mentioned yesterday that the multiplier should be raised. I believe in facts.

Mr. Bruton

They should be treated the same as everybody else.

Mr. Callanan

It was terrible to take up the local paper last week and see the headlines. The front pages of the Connaught Tribune reported a prominent Senator in the west as saying that all small farmers would be now forced on to factual income. The headlines said that farmers' dole was being phased out. The factual income system does not suit a number of small farmers with under £40 valuations who may have a few sidelines. Deputy Bruton has a point in that their social welfare just might be increased. But I want the facts and they are that there is no question of small farmers being forced to go on factual income. That Senator must have been sadly misinformed and his statement was untrue. I make factual statements and I would like to hear the same from the other side. In fairness, Deputy Bruton made no untrue statement, but I would ask him to ask his party in the west to work on facts in relation to the question of small farmers social welfare.

All this so-called worry about the small farmer just annoys me. I remember a time when I could not go to a meeting without people saying that we had the country ruined with the dole. Now these people are crying crocodile tears for the small farmers. We were the first to introduce the small farmer social welfare and at the time we were accused of vote catching. This system was continued by the Coalition Government, but it was Fianna Fáil who introduced it and Fianna Fáil have no notion of doing away with this.

Deputy Bruton suggested that it would be more realistic to increase the multiplier. If the multiplier is increased certain people in receipt of social welfare will be brought out of the net, or else they can be put on factual income. The farmers at present on the notional system know quite well what factual income means; it means that the inspector will inspect their incomes as he does for old age pensioners. If farmers with large families think that they will do better on the factual income system I would warn them not to be too quick to change because they might find themselves worse off than not having an increase in the notional system.

I heard a lot of talk about this being an executive budget. We know it is an executive budget. Every increase given over the last six years was given to executives and nobody from the trade union movement objected to percentage increases only myself in the Dáil. I heard nobody except Deputy Dr. O'Connell and Deputy Bermingham objecting. Of course when increases and allowances are given on a percentage basis, executives will get the most. The people speaking for the workers are executives themselves and that is why they do not object to it. It is the system that is wrong. It is annoying to hear people say that it is an executive budget. Who wants to change it? What socialist will stand up and say that he wants to change it? I want to change it and have been lobbying for change over the last 12 years. I always maintained that increases should be given on a headage rate across the board because the cost of living does not go up any higher for the man earning £20,000 per annum than for the man earning about £4,000. My criticism of the budget is that it is inclined to give too much to the higher income group but this is being given according to a system.

There are two types of PAYE workers and they should be classified separately. There is the ordinary PAYE worker who gets paid on a Saturday night and then there are company directors and ourselves. We all pay as we earn. It is not fair to say that the PAYE sector, meaning the ordinary workers, are paying the most taxation.

Last Thursday I referred to the whole question of farmer taxation and to farming in general. I am not keen on resource tax or on the 2 per cent levy. I am not keen on any tax that is not an income tax. The Taoiseach said that the resource tax was a temporary measure, but until taxation is evened out and people know who will be taxed all the taxation due will not come from farmers. I agree with taxation on accounts. A lot of people are talking about a new system of taxation. I would really like to know of a taxation system that is fairer than taxation on income. A purchase tax will hit the really poor. If a person is making an income he ought to pay tax on it. Therefore, I am all for tax on accounts where if one has a profit one pays tax and if not one does not pay.

One of the nice things in the budget is that people with valuations of from £40 to £49 will have a simple form of tax form to fill in. I cannot understand why a simple form cannot be used by everybody. A small farmer with six children with a valuation of, say, £40.10 is not in a position to pay a couple of hundred pounds to an accountant to prove that he is not taxable. That is why the present accounts system is objectionable to the small farmer. A simplified accounts system for farmers with valuations between £40 and £49 is something that should be looked into. If we accept a simplified form of accounts it will be in our interests because the large farmer or businessman can pay an accountant who would be able to fix things so as to get a lot more relief than an ordinary simple man could get using a simple form of accounts. Such a farmer would seek the assistance of an accountant because it would pay him to do so but I am concerned about the farmers with small holdings.

I do not agree with the decision to assess on valuation because valuations vary greatly throughout the country. For instance, in one county land may be valued as low as half a crown per acre while elsewhere in that county it may be £1.50 per statute acre. In my view all tax and reliefs should be based on the adjusted acre. How does one arrive at the number of adjusted acres? Farmers who apply for a grant must specify on the application form the number of adjusted acres. It is the job of instructors to ascertain the number of adjusted acres. A farmer may have 100 acres of poor land but the number of adjusted acres on that holding may only amount to 30. The number of adjusted acres is usually less than the total acreage of a farm. I know people who live along the banks of the Shannon between Ballinasloe and Shannon Airport whose land is flooded for almost six months of the year. That land carries a valuation of £1.50 per statute acre which means that those farmers may now be brought into the tax net and are likely to lose their agricultural grant. I know farmers in my county whose land carries a valuation of half a crown per acre but have up to 100 friesian cows and, as a result of the low valuation, are not in the tax bracket. That is an indication of how unreal this system is. That is one constructive criticism I must make about the budget.

The Government have done a reasonably good job in distributing the proceeds of the national cake. Those who look for everything from the Exchequer feel that the Government should act as a fairy godmother and that the national cake falls from the sky. The adjustment in the capital acquisitions tax was not considered enough and, with the reduction in the price of land, it might have been higher but it is an improvement. I agree that Fianna Fáil lost an election in 1973 mainly because the National Coalition promised to remove death duties. However, death duties were replaced by the National Coalition with three new taxes. It was pointed out to me eight months ago that the previous Government in introducing capital acquisitions tax imposed a worse duty. I am aware that farming organisations are not satisfied with the budget adjustment in relation to capital acquisitions tax but the movement upwards is an indication of the Government's concern. The Government do not want to cripple any person who inherits land. When we were considering the Bill under which capital acquisitions tax was introduced I pointed out that small farmers in the west of Ireland would suffer. I pointed out that because of the low yield from such holdings most of the farmers in the west did not marry and left their land to nephews and nieces. Unless the nephew or niece lived on or worked the farm for at least five years prior to inheriting it they had to sell the land because the tax was so high. Such people should be catered for under that code. A lot of farmers forget that that tax system was introduced by the National Coalition.

There has been a lot of talk about the decision to reduce the allowance on machinery to 30 per cent per year but there was little talk about the fact that income splitting will alter the tax band for many farmers. Farmers who were in the 35p in the £ tax band may now avail of the income splitting system with the result that they will be in the 25p in the £ band. People should be made aware of that. We have all been made aware of the disadvantages of the budget but the advantages have not been highlighted. It cannot be said now that our farmers are getting away with murder. The budget has been slightly hard on them. There are other reasons for the decision to reduce the allowance on machinery. In my view we are over-mechanised. Many farmers change their tractors too often simply because they can put the purchase of a new one against their income tax. We must also consider that a lot of those tractors must be imported and that affects our balance of payments. Another important factor is that farmers, in order to purchase tractors, must borrow money. That is being done at a time when capital is badly needed for other matters. It must be borne in mind that other projects such as land project work and the erection of buildings is excluded and farmers can claim the same allowance for such work as before. I have sympathy for small farmers who were unable to do any development work on their holdings in recent years. Such farmers have only been in a position in the last three years to make progress and could not purchase machinery until last year. Those farmers will be sore about the decision in the budget but it is not as bad as it appears.

A farmer with a valuation of £40.10, a wife and six children who was not in the tax bracket up to now will lose his agricultural grant. His rates will double. That farmer has a grievance because he cannot put that against income tax which he does not pay. Some years ago I was accused of throwing water on what was described as a good directive from the EEC, Directive 159. When that directive was introduced I stressed that it was weighted heavily against small farmers but now a lot of large farmers who did not do too badly up to now are crying out against it. I congratulate Deputy Bruton for raising this matter recently. Those in the development farmer category and who brought up their stock levels are getting nice cheques now in the form of 1978 guidance payments. The small farmer has never been able to avail of these payments. In his case, after he had been classified by an inspector from the Department, his entitlement would be 30 per cent grant and in some cases, because the estimate was not updated sufficiently to allow for inflation, grants of only 25 per cent were paid. There was no plan so far as the small farmer was concerned whereas if he were in the development category he would receive guidance payments and help to buy machinery.

I recall hearing Professor Sheehy say on a radio programme that it was regrettable that 80 per cent of farmers were excluded from the development category during the three good years preceding 1979. I regarded Directive 159 which was biased against the small farmer as an intermediate scheme. The farmers' organisations referred to it as a predevelopment scheme. It was immaterial to me what it was called. My concern was that there be some national scheme on the lines of the old small farmer incentive scheme under which a farmer, if he failed to improve his situation from year to year, did not get the grants. That scheme was discontinued on the bringing in of Directive 159. It was a very good scheme and was brought in by Fianna Fáil. However, it was most regrettable that in the three good years to which I have referred those small farmers who made efforts to develop qualified only for a miserable 30 per cent or less in some cases in respect of the cost of buildings. It appears as if the powers that be in the EEC have no intention of changing Directive 159. Despite this situation something should be done to help the small farmer. Many of these people with holdings of 35 or 40 acres and who have gone into milk production during the past three years are experiencing great difficulty in regard to the provision of the necessary accommodation for their cows. If the cows are not taken off the land during winter because of lack of the necessary buildings in which to accommodate them, it is not possible to make two cuts of silage but the minimum cost of a building for the accommodation of, say, 20 cows is between £10,000 and £11,000. Great credit is due to the small farmers for the good work they have done despite their receiving only very poor assistance from the EEC.

I could continue to speak on farming matters during the few minutes remaining to me but there are a few other matters to which I should like to refer. We do not hear so much now about unemployment. This Government are determined to create as much employment as possible and in that respect they have been very successful during the past two-and-a-half years. It is not as difficult to find work now as was the case then. What concerns a young person now on taking up employment is not his gross earnings but the actual amount he will take home with the result that, perhaps, the Government are not given their due credit for having created the job in the first place.

I was very pleased to hear the Taoiseach say that there would be set up machinery aimed at stopping the rot in regard to trade disputes. Strikes are very costly to an economy. The Post Office strike was very serious from the point of view of our economy. In order to avoid such disputes there should be machinery whereby a decision in respect of a claim from workers for an increase in pay should be given within two months of the claim being made. This would have the effect of stopping the rot from setting in in an industry. In my town of Ballinasloe, of which I am very proud, there are three factories but there has never been a strike at any of those industries. I attribute this happy situation to the good industrial relations that exist between management and staff. If we consider some of the industries in which there have been a series of strikes we find that very often not all the fault was on the part of the workers. Just as a politician who fails to keep in touch with the grassroots is not likely to remain long in politics, management who are above the heads of the workers and who fail to consult with their workers, usually find themselves in difficulty in regard to industrial relations.

We are all somewhat disappointed that the housing reconstruction grants are being discontinued but we must realise that the loans have been increased substantially. The question of the income limit and the improvement in that regard has been dealt with already.

As I said during my opening remarks, energy is the most important matter facing us. The Minister for Energy has a mammoth task ahead. There are a few points to which I should like him to give consideration. I refer to small areas of bogland which would not be of any use so far as development by Bord na Móna is concerned but which could be used by local people if the necessary drainage were carried out and if access to them by road were made possible. There is in existence the local improvements scheme but because there are so many small roads leading into farms and which are badly in need of improvement, the moneys available from this scheme are diverted almost totally to this work leaving very little for the development of bog roads. While there should be as much development as possible by Bord na Móna, attention should be paid also to the small bogs so that many of the people now buying turf produced by the board would be in a position to provide themselves with fuel. In this way a substantial proportion of the demand on Bord na Móna would be eliminated and their products made available for more important purposes. But people will not be encouraged to cut turf if the bogs concerned are inaccessible or badly in need of drainage work.

The budget is very good in the circumstances. Indeed, it was not expected to be nearly as good as it is. I assume that the next speaker will be Deputy Bruton. I have listened to Deputy Bruton here from time to time and he has been consistent always in his criticism. I have not known him to be over-critical except, perhaps, when he is expressing his personal views.

I am convinced that if a Deputy is sincere in his criticism the public, realising that, will give him credit for it, but they are fed up with this type of politician. When two opposing politicians appear on television before they say a word everybody knows they will disagree. The neutral observer will turn off his set or switch to another channel. If the politicians gave credit where it was due and then made constructive criticisms the public would listen to them.

I could talk on this budget for two hours, particularly on farming because I know a little about it. I hope I have been constructive. This is a good budget. We gain over the Opposition because we are involved at grass roots level. If our ship goes off course the grass roots will tell us to get the ship back on the straight and narrow. Fianna Fáil are doing that. Of course we all know the oil crisis occurred when the Opposition were in power but they did nothing about it. We are doing something about it. This budget will be hard enough but it is in the interests of the country.

Mr. Bruton

I want to thank Deputy Callanan for his kind remarks which I can reciprocate on the double so far as his objectivity is concerned. I want to criticise this budget as being damaging to our economy on four major grounds. First, it will immediately aggravate the credit squeeze for productive industry and agriculture because the extra Government debt needed to finance the budget will squeeze out private borrowers from the money market and force the Central Bank into setting much severer credit restrictions for this year than either the 18 per cent which obtained last year or what they would have done if the budget had not been as much a deficit budget as it is.

Secondly, by increasing the taxes on consumer goods this budget will push up the consumer price index by an amount which is certainly open to dispute, but by a substantial amount. In that way, it will precipitate another inflationary wage round in the latter part of the year. It is worth mentioning that the present national understanding will run out at the end of August. This wage push generated by the Government will worsen our competitiveness abroad, which is already seriously undermined as evidenced in a very bad balance of payments situation.

Thirdly, the Government, by failing to rein in Government credit and spending, will worsen an already very bad external reserve situation and our balance of payments situation, which is also already very bad. I intend to give figures to illustrate the extreme seriousness of our external reserves and balance of payments situations. This worsening of the situation by the deliberate policy decision of the Government in this budget will seriously increase the risk that either or both of the following things will happen: there will be an enforced devaluation of our punt within the European Monetary System and/or the take-over of the running of our economy by what one might describe as the international receiver. We are all familiar with the responsibilities of a receiver, but the international receiver is the International Monetary Fund. The result of the profligate financial policies of this Government over the last three years may be that the international receiver, the IMF, will move into our Department of Finance, as they did in Britain, Denmark and Italy at various times in the recent past. The cuts that will have to be made then in Government spending will be far more drastic and indiscriminate than they would have been if we had taken the action ourselves in time and on a gradual basis.

Fortunately, because the actual budget introduced in February is so different from the belt-tightening which was predicted by the Taoiseach in his January address to the nation on television when he told us we were living beyond our means and because the budget is so different in its content and in the amount of borrowing that it implied from what he said was necessary scarcely a month previously, it will cause a serious fall in something which is already very scarce, namely, public faith in the words politicians utter as being the truth. In his January address the Taoiseach cried wolf and in the budget he tried to pretend there was no wolf at the door. By doing that he will have less credibility the next time he goes on television to tell us a serious situation exists. The people will not believe him because they will say he went on television in January saying serious belt-tightening was necessary but he did not do it in February. They will not believe he will do it next time and all he says will be considered as mere words.

This devaluation of public confidence in politicians' words is something that will affect not only this Taoiseach but the Taoiseach of any party because the public tend to see politicians as a collective group. If one politician is seen not to be sincere and not to act in accordance with his convictions, people will tend to believe other politicians are the same. If Deputy Garret FitzGerald finds himself in a year's time as Taoiseach and having to go on television to tell the people something along the lines the present Taoiseach told them in January but because those January predictions were not matched in the February budget it will be all the more difficult for Deputy FitzGerald to convince the people. All politicians will find that their words are no longer trusted.

Mr. MacSharry

The Fine Gael spokesmen have been saying belts have been tightened too much.

Mr. Bruton

I would like to refer to agriculture. I propose to demonstrate that in general, as a result of this budget, farmers of all sizes who are in the tax net—over £40 valuation—will this year be paying more than their fair share of tax. In other words, they will be paying more tax on a given income than a PAYE worker with the same income, and that is not fair. Secondly, I will demonstrate that smaller farmers, those between £40 and £60 valuation, will this year face a far bigger increase in their tax load, notwithstanding the resource tax, than will larger farmers. Thirdly, I will demonstrate that the small intensive farmer—a 50-acre farmer with a valuation of £40 producing about 50 per cent above the average level of intensity of production—will be especially hard hit. In 1980 his taxation will be increased six times over the amount of taxation he would have paid in 1979.

Given that farmers who are in the tax net are paying much more than their fair share of taxation, I will demonstrate that there is no justification whatever for the introduction of a resource tax in the interests of equity, which had already been achieved and over-achieved without such a tax. To introduce a resource tax was to pile injustice on top of injustice.

I wish to illustrate a point about my first allegation regarding the national debt. In 1977 the national debt represented 79 per cent of our gross national product; in 1979 it jumped to 88 per cent and at that rate our national debt within a year or two will be equal to our gross national product. The Government owe about £6,500 million, or more than £2,000 for every man, woman and child in the country and an increasing share of that money is owed abroad. Regarding public borrowing by the Government financed externally, in 1977 37 per cent was borrowed abroad while in 1979 that figure had increased to 51 per cent. In other words, more than half of every £ borrowed by the Government is borrowed abroad. This year the Government must pay £150 million in interest payments alone on money borrowed abroad and this amount is equivalent to 5p in the £ on the basic rate of income tax. If that money did not have to be paid abroad we could reduce income tax by 5p in the £.

Last year the Government and the Central Bank imposed an 18 per cent limit on private sector borrowing. They said to businessmen, farmers and people directly involved in productive activity generating wealth and jobs that they would not be allowed to increase their borrowing by more than 18 per cent. What happened to Government borrowing? It increased by 24 per cent and Government activity is not nearly as productive by any measure as private sector activity, yet the Government insist that the private sector should be limited to 18 per cent while they themselves will not submit to any such limits.

External reserves have fallen drastically, that is, the money which must be used to pay for imports in foreign currency. At the beginning of 1979 our external reserves were enough to cover the value of 3¾ months imports. By the end of 1979 and at the beginning of 1980 this had fallen to 2½ months cover. External reserves at the beginning of 1979 were £12,000 million and they are now down to around £9,000 million. There has been a drastic fall of almost one-quarter in one year. Everybody on the money markets of the world is aware of this and is watching. If this trend continues we simply will not be able to pay for imports to this country. The balance of payments deficit, that is the amount we are paying out of this country for imports as against the amount we are getting in for exports, has worsened and that is one of the main reasons for the fall in our external reserves. The balance of payments deficit in 1979 was £800 million as against £165 million in 1978. In other words, the balance of payments deficit has increased by about five or six times in one year.

According to the Central Bank Report it seems unlikely that this deficit will be significantly reduced, if at all, this year unless corrective measures are taken. The Government document on the economic background to the budget is in marked contrast to the actual budget and suggests that the advice which the Minister for Finance was getting from his officials was very different from the contents of the Budget. This document stated that on certain reasonable assumptions about the behaviour of savings and stock building the balance of payments deficit should be higher in 1980 than in 1979. We already have a situation where external reserves have fallen dramatically and the balance of payments deficit is several times larger than last year. The Department of Finance say that the situation will be even worse in 1980, yet no corrective action was taken by the Government to improve the situation.

The position of our currency has not improved during the past year. Since March 1979 the trend line for the IR£ within the EMS has been consistently downwards. This is inevitable in a country with a massive balance of payments deficit, falling external reserves and a rate of inflation which is in some cases three times as high as that of other countries with which our currency is supposed to be linked. It is impossible for our currency to maintain its value indefinitely within the EMS. What is the likely consequence of this sort of development?

The Government claim in the budget to have reduced the borrowing requirement. I believe this is basically a fraudulent claim for five basic reasons. First, this year's revenue is artificially boosted by £100 million which is brought forward as a result of the postal strike of last year, money properly attributable to 1979 which will be collected in 1980. The effect of this money on the revenue side is, artificially, to make things look better. Secondly, £33 million is being brought in this year by making the self-employed pay earlier but in a full year, in 1981, that money will not be an addition to the overall revenue situation. Thirdly, the money in taxation on spirits has been brought forward and that adds a further £9 million in artificial revenue. It is not long-run revenue. Fourthly, the Government have reduced their own contribution to the capital budget but maintained the level of the capital budget by telling public bodies, semi-State bodies and local authorities that they will not borrow for them. The Government can apparently reduce the amount of their borrowing but the overall amount will remain the same because semi-State bodies who are guaranteed by the State will be borrowing to make up the difference.

All this means that the reduction in Government borrowing is unreal because it does not include local authorities and semi-State companies. Another point is that the full cost of social welfare improvements will not be borne this year whereas a large proportion of the revenue from increased contributions will be received. Therefore the situation this year is only artificially better than it is in reality. An example is the children's allowances. The increases will not be given until July but the reduction in the tax allowance will occur in April, making the financial situation in this respect better from the revenue point of view.

I have said that the credit squeeze will be worsened. That will be so for two reasons. The first is that the Central Bank will realise that if they are to protect the value of the punt they will have to restrict the money flow to the private sector. I have explained that the Government borrowing picture is not real. In fact the Government are increasing their spending and if the overall level of spending is to be reduced in order to keep imports down and regularise the balance of payments situation, the Central Bank must ensure that spending in the private sector will be cut. Therefore, there must be a serious credit squeeze.

The second way in which the credit situation will be worsened in regard to private business and agriculture is that when the Central Bank are setting credit guidelines for private borrowing, local authorities and semi-State bodies will be included in the 15 per cent limit. Therefore, if the Government tell those bodies to increase their borrowing, those bodies will be squeezing out people in the private sector because they will be borrowing out of the restricted credit available for private sector borrowing.

Another matter that will affect our financial situation is that the Government are not spending productively. For the first time in many years half of every £1 spent out of the current budget will be spent on paying salaries, not on productive investment to assist agriculture and industry, or on the purchase of land to enlarge smallholdings, but to maintain staff levels in the public service. The Government are giving a very bad example by increasing their manpower by five extra Ministers of State.

What are the likely results of all this? At present the Government seem to be able to borrow abroad with relative ease. But even one international banker could begin to analyse the picture underlying our situation and if the Government apply for a loan next year that one banker could scratch his head and say he wants a study done of the Irish ecenomy, of the balance of payments situation, our external reserves, our comparative rate of inflation, just to make sure we would be able to repay the money. The bank would send out its man to do the job and if he goes back with the information that our balance of payments is appreciably worse than in countries competing with us on the international money market the bank will say that because of the danger of not getting its money back it would have to increase its rate of interest to compensate for the risk. However, that is the least ominous possibility.

A worse possibility is that the bank might start to circulate information to the effect that it does not think Ireland would be able to pay back the money at all under our present system and the bank might report us to the IMF who would then say, "They should not be given any money at all". Or the IMF might say, "We will give you the money but in return we will send a man into your Department of Finance and he will operate as Minister for Finance to see that you will run the country exactly as we tell you. If we say that you must cut down in the public service you will have to do it".

That is something we thought could not happen in holy Ireland. But it has happened elsewhere—in Britain, in Denmark and in Italy. If our external reserves are run down from 3¾ months cover to 2½ months cover in a single year and if our balance of payments deficit is quintupling in one year we cannot avoid a situation which would force the IMF to send a receiver to the Department of Finance to tell the Minister, Deputy O'Kennedy, what he must do, and no amount of sweet talk will dissuade the international receiver from doing his job.

Another possibility, which none wishes to contemplate, is that if our external reserves continue to be run down at the present rate we will not be able to maintain the value of the punt vis-à-vis the other EMS currencies. If our reserves able to maintain the value of the punt within the EMS, whether we like it or not. We must remember that no longer are we linked with sterling, no longer will we be able to hide behind the British £. Our creditors will be ruthless and there will have to be a devaluation of our punt. That would have many serious effects. First of all, it would cause immense hardship to businesses and to the Government trying to borrow abroad.

In a situation in which the Government are increasing their level of borrowing abroad from 37 per cent of their total borrowing in 1977 to 51 per cent this year and at the same time running spendthrift economic policies which are undermining the value of the punt, they are cutting their throats. If our punt is devalued we will have to repay the debts we borrowed abroad on the double because our punt will no longer be worth as much in repayment of those debts as it was prior to devaluation taking place.

The same will obtain for private industry. Our banks and private industry at the moment, in order to evade the credit squeeze, are being encouraged to borrow abroad. If the punt is devalued they also will suffer those massive exchange risks. The primary objective of the Government's economic policy at the moment should be to maintain the value of our punt because the consequences of not doing so will be very grave indeed for our economy. As well as the immediate effects I have illustrated on Government finances and on private business finances, it will start us on the slippery slope. We will slide slowly down into relative poverty in Europe. We will be seen internationally as the poor man of Europe, as a country in which is not worth investing. They will likely be able to say, "You cannot be sure they will even be able to maintain the value of their own currency". If we once devalue within the EMS we will no longer have the same creditworthiness as we have had in the past. I believe that the devaluation of our punt is something we must avoid at all costs.

I find it amazing that the Government, particularly after the Taoiseach's address to the nation in January, came in with a budget which relied so much on borrowing. I predict that the amount the Government will borrow this year will be even larger than the amount they borrowed last year. In 1979 the Government had all the good intentions about their budget as they had this year. In 1979 the then Minister for Finance said he would reduce borrowing requirements and that the current budget deficit would be kept at £288 million. What happened? At the end of 1979 the current budget was not £288 million but £520 million. This year the Minister for Finance tells us that the current budget deficit will be £355 million, a lot more than the £288 million which his predecessor predicted in 1979. It is likely that the actual deficit will be just as much in excess of the £335 million set this year as the £520 million, which actually occurred last year, was in excess of the £288 million which was predicted by the former Minister for Finance. There is no reason to believe that the situation will be any better.

It is worth noting that for salary increases in the public service the provision is nearly £100 million to cover special increases which may occur—we all know there are a lot of them in the pipeline—and the cost in 1980 of a new national understanding, which is to cover four months of the year. One-third of the year is to be covered by a new national understanding. If that is all to come out of £100 million it will have to be a very restricted national understanding that will be negotiated to start in September of this year. The Government by increasing the cost of living so dramatically in the budget and increasing indirect taxes are almost ensuring that the national understanding which will be negotiated this year will be an inflationary one, will be far larger than it would otherwise have been if we had not this budget. The situation in which only £100 million is provided to cover special increases in the public service and the new national understanding will simply not be maintained. The situation in 1980 will be the same as it was in 1979 when the Government predicted a deficit of £288 million and ended up with a deficit of almost twice that amount.

I would now like to refer to the position of agriculture in our economy. It seems very unusual that the Government chose 1980 as the year in which they would dramatically increase the tax load of the farming community, particularly that of smaller farmers. This year the farmers face a very difficult situation. Their incomes have fallen. The Minister for Agriculture estimated that the income increases would fall by about 3 per cent. The situation is far worse than the Minister's figure disclosed because his figures do not take account of the interest cost being borne by farmers. It is estimated that 20 per cent of a farmer's income at the moment is actually absorbed in the repayment of debts which he has incurred. We can subtract 20 per cent of any figure for income which is given. The Minister's figures took no account of the fact that farmers have interest payments to meet, which are exceptionally large this year because of the high interest payments.

I believe the reduction in farmers' incomes in actual cash terms in 1979 was as much as 20 per cent. Farmers this year are caught in the price net of the EEC. They are getting price increases set in Brussels based on the German rate of inflation which is about 5 or 6 per cent. They are getting the same increases as the German farmers but the Irish farmers have to pay increases in costs of 16 per cent, 17 per cent and 20 per cent. We are losing out because our rate of inflation is far higher than the rate of inflation on the Continent of Europe. We are getting far less from any price increases granted in Brussels, which are set on an overall European basis, than are the people in the economies of Europe.

This is also the year in which the super levy was proposed and this is the year the Government chose to introduce this dramatic increase in the taxation of the farming community. What are the reasons for this? Our only source of information in relation to this is what the Minister for Finance said in the budget. He said that taxpayers generally have felt that the amount of tax paid by farmers was less than was justified by reference to farm incomes. The Minister did not say whether he believed that farmers were not paying their fair share of tax. He did not say that, because he could be contradicted. He had to rely on the "gut" feeling of the man in the street, which the Minister accepted, whether it was right or wrong. The people in the street felt that the farmers were not paying enough and that the Minister would get it from them. The Minister decided he would get the money from farmers not because they were not paying their fair share but because people felt they were not paying their fair share. He went on later to say that it is in the interest of the farming community that farmers pay and be seen to pay their fair share of tax from the incomes which they have.

In that budget he proceeded to introduce a tax which bears no relation whatever to the incomes of farmers, namely a resource tax and an increase in rates for smaller farmers. If a farmer is losing money he will still pay the resource tax. If a farmer with between £40 and £60 valuation is losing money he will still pay the doubling of his rates brought about by the budget.

If a farmer with a valuation of between £40 and £50 is losing money he will still pay the doubling of his rates brought about by this budget. Yet the Minister justified this introduction of taxes, which bears no relation to income, by saying that it was in the interests of the farmers that they be seen to be paying their fair share of taxes on the income they have. The Minister at no stage told us that he thought they were not paying their fair share because he had not the courage to do it and he is not a man noted for his courage.

I would like to illustrate the points I have made about why the farmer is paying far more than his fair share of tax. First I will take the example of a farmer with a valuation of £40. Such a farmer, taking farm income statistics, would have an average income of £4,000. Out of that £4,000 that farmer, who is married with two children, would pay the following taxes in 1980: £484 in rates and about £10 in incomes tax. His total tax load will be £494. That will be an increase of 149 per cent on what he paid last year; last year he would only have paid a total of £198 in rates. How does the PAYE person with £4,000 compare? The farmer with £4,000 will be paying £494 mostly in rates; the PAYE person with a similar income will be paying £245. In other words the farmer will be paying more than twice as much as the PAYE person with the same income and that is a farmer who is paying hardly any income tax and no resource tax. On rates alone he is paying more than twice as much as the equivalent PAYE person. I intend to give these statistics to the Minister at the end of the debate if he wants them to use in discussions with his colleagues, because evidently he did not have them up to now.

Let us take the example of a farmer with a valuation of £50. He would be earning on average £5,000 a year, taking income statistics. He will pay £605 in rates and £271 in income tax, bringing him to a total tax load of £876, which will be an increase of £555 or 73 per cent on what he paid last year. How does the PAYE person compare? The PAYE person with an income of £5,000 will pay £495 as against £876 for the farmer. The farmer will pay 77 per cent more than the equivalent PAYE person.

Let us take the example of a larger farmer with a valuation of £100 who would be earning about £10,000 a year. He will pay £1,210 in rates, £350 in resource tax and £1,108 in income tax, giving him a total tax load of £2,668. The PAYE person with the same income of £10,000 will pay £2,243. In other words, the farmer will be paying £425 more or 19 per cent more.

The surprising thing to emerge from these statistics—and the PAYE person at all levels of income is paying less—is that the gap between what the smaller farmer pays on his small income and what the PAYE person pays on his small income is far greater than that between the larger farmer and an equivalent PAYE person. So, relatively speaking, the small farmer is losing far more than the large farmer vis-à-vis the PAYE sector. But all farmers, including larger farmers, will pay more tax this year as a result of this budget than equivalent PAYE people in a year in which farm incomes have fallen, in a year in which one of the major reasons for the balance of payments crisis we face here, and which has dire consequences for us, is the fall in agricultural production. If agricultural exports had been up to the 1978 level in 1979 we would not have half the problems we had this year. In a year when a fall off in agricultural production and exports has contributed to a very serious economic situation here the Government come along and increase the taxation on agriculture. Could any economic policy be more haywire than that? At a time when lack of agricultural production is causing problems for our economy the Government load on more tax on the agricultural sector. I really think that the Minister for Agriculture did not make the best of the arguments he must have had with his colleagues over this budget because if he had and if he had sought these figures, which could easily have been obtained, he would have done a lot better in the Cabinet discussions about taxation.

Minister for Agriculture (Mr. MacSharry)

The farmers are happy anyway——

Mr. Bruton

Those are words that I certainly will remember.

Mr. MacSharry

——on the basis of the figures the Deputy has given.

Mr. Bruton

I am very interested to hear the Minister say that the farmers are happy. I will remind the farmers that he said it.

Mr. MacSharry

I am sure, being a rabble rouser, that the Deputy will.

Mr. Kelly

I heard that the Minister had to run from the same rabble last week.

Mr. Bruton

The Minister should not interrupt when there is a time limit.

An Leas-Cheann Comhairle

Both the Minister and Deputy Kelly should restrain themselves. The Deputy has about ten minutes to conclude.

Mr. Bruton

I would further point out that this year, in which the taxation load on the farming community has been increased to a level where they are now paying more than equivalent PAYE people, is the third successive year in which Government spending has also been reduced as far as agriculture is concerned. In 1979 the amount available to the Department of Agriculture was cut by £7 million in cash terms, which in real terms, given the rate of inflation, was a cut of about £40 million. In 1980 another cut of £7 million is administered. Indeed, the Department of Agriculture last year—and I think again this year—was the only Government Department whose available money was cut in cash terms.

In the three successive years in which money for the Department of Agriculture has been cut there was an 80 per cent increase in the amount of money available to the Department of Industry and Commerce. A Government that can cut agricultural spending and increase industrial spending by 80 per cent is a Government clearly demonstrating where their economic priorities lie. This Government's economic priorities certainly do not lie in agriculture if they can cut agricultural spending to that extent while increasing industrial spending by 80 per cent over three years. This year the cut is worst of all because it comes in a year when farmers have done very badly. There might have been some justification last year for restricting Government spending on the grounds that farmers' incomes in 1978 had been relatively good, but in 1979 farmers incomes plunged and to come along at the end of 1979 and administer further cuts is very unjust.

Where have the cuts taken place? There is a cut of £2 million in the amount available for arterial drainage. Notwithstanding the fact that the Government committed themselves in an agreement with the EEC to increase the amount of arterial drainage taking place under an accelerated programme in the west, they come along this year and cut the amount of money they are spending on this scheme. That is a breach of faith with the EEC and with the farmers in the west. In addition, the first thing that needs to be done with newly drained land is to fertilise it. Much of the land in the west which is in need of draining has a very high level of acidity so lime must be put on it. The Government cut out the lime subsidy in the west. If ever there was a false economy it was to cut out the lime subsidy in a year in which we are trying to encourage drainage.

The Government cut the amount of money available for the disadvantaged areas scheme by £1.5 million and they cut the amount of money available to the farm modernisation scheme to £3 million below what would be needed to maintain last year's level of activity taking account of the rate of inflation. Obviously the Government hope there will be fewer cattle on the land to draw headage payments under the scheme and they expect fewer farmers to invest in buildings and in the other items that would require grants under the farm modernisation scheme. Why else did they cut the amount available under both of the schemes if they did not expect and hope that farmers would claim less? The Government are budgeting on a downturn in agricultural activity as evidenced in the reduced provisions under the schemes.

The Government have made a cutback in the retirement scheme for farmers. The amount they made available suggests they will not maintain pensions under that scheme in line with other pension increases granted in the budget. How much did the Land Commission receive to buy land? They got £10—ten measly notes to buy land in 1980—yet an extra £1 million was voted by the Government for additional salary costs in the Land Commission. What are all the civil servants going to do if they cannot buy land? They are given £10 to buy land and an extra £1 million to pay themselves, to sit twiddling their thumbs doing nothing. Could anything be more ridiculous?

The Government have cut the amount of money available to the CBF—the beef promotion agency. They did this at a time when it is clearly recognised that we must sell our beef more aggressively if we are to make the necessary improvements. There was a clear understanding among farmers that a levy was being imposed on beef sold at marts and factories in order that extra money could be made available to the CBF on the understanding that the Government would maintain the value of their contribution, but at the first opportunity the Government cut in half the amount of money they are making available.

Mr. MacSharry

There was no such understanding.

Mr. Bruton

There was. Many people have been led to believe that married couples are doing well in the budget. I should like to give an illustration to show that the opposite is the case. Let us take the case of a married couple where the husband is on PAYE and the wife is not working. They have two children and must pay £1,500 in mortgage repayments. Assuming that incomes rise this year by about 20 per cent—a reasonable assumption—the deduction from that couple who have an income of £7,000 per year will be £1,473 as against £1,063 in 1977—an increase of more than £400 in tax. The proportion of their income taken in tax will increase from 15.2 per cent in 1979 to 17.5 per cent in 1980. The fact that married couples will pay more tax this year has been demonstrated fully in an article by Paul Tansey in The Irish Times. In cases of families with an income of £5,000 or £10,000 per year where both spouses are working, a higher proportion of their income will be taken in tax and social insurance contributions than was the case last year. According to the analysis carried out by Paul Tansey, the only case where a married couple will be better off is where their joint income is £20,000. Where a man is earning £12,000 and his wife £8,000 they will have their tax reduced but households with an income of £5,000, £7,000 or £10,000 will pay increased taxation. This will be done to ensure that less tax is demanded from a couple with a joint income of £20,000. My heart really bleeds for the people about whom the Government are concerned. If people have an income of £20,000 a year, I do not think they need a tax cut and certainly not at the expense of people on incomes of £5,000, £7,000 or £10,000.

Where else have this Government of energy conservation raised revenue? If we do not want people to use cars, the obvious thing to do is to encourage them to use bicycles. Yet in the budget one of the luxuries on which VAT was increased was in respect of bicycles. This was done by a Government who tell people to leave their cars at home and use a bicycle. They also increased tax on furniture and furnishings. Anyone with a house must furnish it—he or she will need a chair, a table, a bed, an armchair. These items are not luxuries. However, the Government have increased the rate of VAT on beds and on other items of furniture. That is no way to raise revenue. This increase will have a particularly bad effect in my constituency because it relies heavily on the furniture and furnishing industry. People involved in the business are losing out on the home market because of the way VAT operates. People who import furniture do not have to pay VAT immediately but the person selling furniture in a factory must pay the tax immediately. The furniture and carpet industries in Navan will suffer an additional competitive disadvantage because of the increase in VAT. The possibility of selling Irish-made furniture will be worsened as a result of the budget.

I should like to give the House some more information about the many items on which VAT will be increased. They include bathroom fittings, bicycles, blankets, building materials, carpets, clocks, floor coverings, educational supplies to schools. An additional rate of tax will be imposed on detergents—something that even the poorest housewife must use every week. Yet, it is regarded as a luxury by the Government and carries increased tax.

The resource tax on farmers is particularly unjust because there is no guarantee that the rate of payment or the coverage of the tax will not be increased at any time in the future. I did not believe the Taoiseach when he said this was a temporary measure. That statement by him was a piece of window dressing to get him through the year and perhaps it was done for electoral purposes. I have indicated already that farmers are paying more than their share. If the tax is really a temporary measure, the Government should withdraw it once and for all.

Minister for Agriculture (Mr. MacSharry)

Faced with the current difficult economic climate and the need to put the State's finances on a sounder footing the Government's approach to this year's Budget was on the twin bases of equity and growth inducement. This approach involved a number of aims—to spread the burden of taxation more fairly, to improve the social services and welfare benefits and to preserve and improve the conditions for the expansion of production and for increased employment. In view of the importance of external trading to Ireland, the economic situation in the outside world has a major impact on activity here. There is a continuing recession in the industrialised and developed world and we as a trading nation cannot hope to insulate ourselves entirely against the consequences. The effects of the energy price increases over the past year will, undoubtedly, influence conditions here during 1980. But we should not adopt a pessimistic attitude and fail to do what we ourselves can and should do to exploit the opportunities open to us to continue the growth in prosperity which was so striking during the seventies.

The budget is part of the Government's strategy aimed at providing the conditions for the growth and expansion of the economy. In the case of agriculture, it is aimed at ensuring the continued well-being and development of the industry. In view of the key role which agriculture plays in our economy the Government were at pains to ensure that farming would be encouraged to develop and expand. Of course, the Government could have taken the easy way out. We could have avoided the less pleasant aspects of the budget and have borrowed more. But this would have solved nothing.

Mr. Bruton

It did not solve anything as it is.

Mr. MacSharry

Indeed, in the longer term, it would have led to higher inflation, with rapid erosion of the value of the pay packet. It would have led to higher interest rates, making things more difficult for those wishing to invest and expand, and perhaps forcing to the wall persons and enterprises who have already borrowed heavily. Such a course would really have benefited no one. The Government decided to face up to their responsibilities, to put State financing on a sounder basis, but in doing this to ensure that the productive sectors would continue to have the opportunity and the incentive to grow.

The proof of this lies in the fact that, in spite of the general economic and financial difficulties which we face, the Government have provided extra money for agriculture this year. The combined Estimates for agriculture and lands for 1980 amount to over £205 million as compared with about £197 million in 1979. This is in addition to the very large sums which we get from the EEC under the common agricultural policy.

Mr. Bruton

Would it be possible for the Minister to furnish us with a copy of his speech?

Mr. MacSharry

I am referring to the notes in front of me as I am entitled to do.

Mr. Bruton

I think there is something in Standing Orders——

An Leas-Cheann Comhairle

The Minister is entitled to read his speech under Standing Orders.

Mr. Kelly

Of course he is, but it is usual where the Minister reads his speech that Deputies on the other side on the Front Bench are provided with a copy of it.

An Leas-Cheann Comhairle

The Chair has no responsibility in that matter.

Mr. Kelly

Nobody has any objection to a Minister reading his speech; it is done every day, but it is also the practice every day for Deputies to get copies of the speech.

An Leas-Cheann Comhairle

If the Minister has copies he should make them available, but if he has not there is nothing the Chair can do.

Mr. Bruton

The Minister for Labour, Deputy G. Fitzgerald, made his speech available.

Mr. Kelly

I do not want to offend the Minister. He may think that I have something against him.

Mr. MacSharry

The Deputy continues trying to do so but he does not succeed.

Mr. Kelly

If the Minister is pretending that what is in front of him is merely notes that he is referring to and that he is speaking otherwise quite freely, he is making a farce of the procedure.

An Leas-Cheann Comhairle

The Minister is entitled to read his speech——

Mr. Kelly

But it is usual to provide copies of it.

Mr. MacSharry

May I continue?

Mr. Bruton

Is the Minister prepared to make copies available?

Mr. MacSharry

When I have the speech delivered. There are notes on it, additions to it and subtractions from it that are not in the form of a speech——

An Leas-Cheann Comhairle

The Chair would point out that the ruling down the years on this matter is that it is a matter for the Minister to decide whether he should circulate copies of his speech to Members. It is not a matter for the Chair as to the persons who receive copies of speeches. That ruling has been given on numerous occasions.

Mr. Kelly

Nobody has any objection to the Minister reading his speech. I merely want to make the point that in those circumstances it is usual to distribute copies of it.

An Leas-Cheann Comhairle

Have we copies of it? Very well, that is fair enough.

Mr. MacSharry

I had not copies of it.

Mr. Kelly

The Minister should not pretend that he is merely reading from notes if we are getting a copy of his speech.

Mr. MacSharry

Deputies are getting a copy of a speech.

Mr. Kelly

What speech are we getting a copy of?

An Leas-Cheann Comhairle

Please allow the Minister to continue.

Mr. Kelly

I do not know what he is reading.

An Leas-Cheann Comhairle

Deputy Kelly should not always be interrupting. He is a long time here now and he should understand the rulings of the House.

Mr. MacSharry

The Deputy has this cynical approach to everything, to which we are well accustomed.

An Leas-Cheann Comhairle

The Chair does not like cynical approaches.

Mr. MacSharry

Last year, we got well over £400 million from FEOGA, the Community's agricultural fund. I am sometimes surprised that the huge extent of these receipts is not fully appreciated by many people. Some Opposition speakers seem to think that the only assistance that agriculture gets is the amount provided by the Exchequer. In fact, last year agriculture got from FEOGA roughly twice what it got from the Exchequer. And, of course, these sums do not take account of the EEC advantages in the form of higher market prices and assured market outlets. These benefits were among the main reasons for joining the EEC in the first instance.

So far as the EEC is concerned, there are a number of proposals under discussion in Brussels at present which will provide us with additional aid in the future. In particular I might mention the revision of the structural directives, which, of course, deal particularly with the Farm Modernisation and disadvantaged Areas Schemes, and the new Western Development Package which contains detailed measures to develop the western counties with substantial aid from Europe. And also, of course, there are the farm price negotiations. While it is not possible to predict how the various negotiations will eventually turn out, we can say with confidence that they will definitely result in more EEC funds for our farming industry. The price proposals that are before the Council of Ministers are roughly on the lines of 2 per cent to 3 per cent increases. Naturally we would like to see greater increases but I think in the circumstances existing in Europe at present, it is unlikely that the 7.9 per cent requested by COPA will be conceded.

I would like to say at this stage that I am heartened by the recent discussions in the Council of Ministers relating to what is commonly known as the super levy on milk. Deputies will be aware of my strong opposition to this proposal by the Commission. At last week's meeting of the Council of Ministers I was glad to find that a number of other States are equally opposed to this super levy.

I am hopeful that when the negotiations on the price and anti-surplus proposals are complete we will not be afflicted by this super levy. In the meantime I will maintain my opposition to it. At present we face some formidable problems in the EEC, particularly in regard to milk, sugar and beef. I am sure the House is aware of the proposals to suspend intervention for four-and-a-half months, which would have very damaging effects on our cattle and beef trade. I am sure Deputies are aware also of the proposals to reduce the sugar quotas. These are problems about which we are very much concerned. I can assure the House that we are tackling them resolutely and have made clear our opposition and determination to resist any measures that may fundamentally damage the development of our agricultural industry.

In recent times the common agricultural policy has been subjected to ever-increasing pressures and criticisms by people who, unfortunately, have not the interests of agriculture at heart. These criticisms are often motivated by other reasons. I should like to assure our farmers that the Government are determined to resist these pressures and fight for the maintenance and preservation of the principles and mechanisms of the common agricultural policy. Therefore, I would urge our farmers to have confidence in themselves and in the future of their industry.

Between the Government's financial provisions and the FEOGA transfers our agriculture has had, and will continue to have, a massive injection of resources for further development and expansion. This year extra money is being provided by the Exchequer for animal disease eradication. We have doubled the money for brucellosis to £15 million as compared with approximately £7 million spent in 1979. An extra £1.4 million has been allocated for bovine tuberculosis eradication. These allocations can leave no doubt about the extent of this Government's commitment to disease eradication. We recognise fully that this is work demanding top priority. The amount being provided for the hardship fund this year will leave more available in the fund than we spent last year or the year before. As regards general disease control we had extra expenditure in 1979 on payments to farmers arising from the discovery of leukosis in a small number of herds. Happily the disease has now been contained and, if the recent pattern of clear tests is maintained, it should be possible to lift restrictions on a number of herds by the end of the year. Therefore, compensation payments to herdowners are expected to be substantially lower this year. I should like to avail of this opportunity to appeal to all involved, farmers, their organisations and the veterinary profession, to treat this disease problem with the same priority as do the Government. We are living on borrowed time. We must make massive progress in regard to this very serious problem in the shortest possible time.

In order that the new organisation for agricultural training and advisory services, AnCOT, can become fully effective as soon as possible, extra funds are being provided in this year's budget. I am sure that the board of AnCOT, which represents farmers and rural organisations, will be making a major impact on farm development in the coming year. Additional funds are also being provided for the further development of agricultural research.

On the capital investment side— which embraces the farm modernisation scheme and the western drainage scheme— we are providing £36,500,000 as compared with just over £34 million last year. This means more money for farmers to improve and develop their holdings. Contrary to what Deputy Bruton said—that there was a drop in actual funds being provided for these services—it can be seen from those figures and those published in the Book of Estimates that there has been an increase. I would urge farmers to take full advantage of these schemes. They are there to help the farming community improve their incomes through increased production and efficiency.

Of course agriculture, like other sectors, has had to make its contribution to the overall Government effort to control State spending and get our national finances in order. However, in this exercise, we were most careful to ensure that the basic interests and future development of agriculture would not be impaired. Some of the savings made have been criticised but these criticisms arise from misunderstandings in a number of cases. For example, less money is provided for the agriculture and veterinary faculties at the universities this year simply because extensive new building programmes which have been going on there are now virtually complete. In the case of CBF we introduced last year a statutory contribution for that body. As a result CBF will in fact have considerably more funds this year to carry out their expanded functions. They will have an estimated £1.2 million of a budget compared with £642,000 last year. It is unjustifiable for anybody to get up here and say—as did Deputy Bruton today—that the allocation to CBF was cut when in effect, with the Excheque contribution and the statutory contribution provided last year, the money for expenditure in 1980 is doubled. Whatever way one wishes to look at it this is a very substantial increase for CBF.

In other areas we took steps to deploy the limited funds available to the best advantage. Thus, while we have terminated the lime transport subsidy for the western region, we reintroduced the mountain lamb extension scheme which is, of course, of special importance to hill sheep farmers in our disadvantaged areas.

As regards the disadvantaged area scheme, some Opposition Deputies have tried to convey the impression that the relatively small change in the amount provided this year means a reduction in the level of headage payments. This is simply not true; no reduction is envisaged in the level of these payments. The reduction in the total sum provided is due to the fact that in 1978 and 1979 extra money was spent by my Department in speeding up payments to farmers. Happily these arrears have now been largely cleared and so a smaller amount is needed this year to meet the commitments.

On the Land Commission side another false notion is being propagated by the Opposition. It has been alleged that a token sum only has been allocated for land purchase this year. This shows a lamentable lack of knowledge about the operations of the Land Commission. When I heard Deputy Bruton talk here and from what I read of what he had to say in other places, that the Land Commission had £10 with which to carry out their activities for 1980 it became obvious to me that he did not really know how the Land Commission or the land bond proposals operate. Of course, land acquired by the Land Commission is normally paid for in land bonds. In fact I shall shortly be introducing legislation in this House to increase the amount of bonds which may be issued by £25 million, a long way from the £10 bandied about by Deputy Bruton in this House and elsewhere. So much for his criticism.

Also on the agricultural side we provide for subsidies on milk and dairy produce. Despite the reduced total there is no change in the rate of subsidy as compared with 1979. The extra amount spent last year was largely to cover the carryover commitments from 1978 and so we can manage this year on less. As far as the consumer is concerned every pint of milk carries a subsidy of 1½p and every pound of butter carries a subsidy of almost 27p. Even with the contribution from FEOGA towards the butter subsidy these are a heavy burden on the Exchequer. The Government recognise that they are important especially to the lower income groups and larger families. Despite great pressure on financial resources this year the subsidies have been maintained unchanged.

As regards farmer taxation, provisions announced in the budget have two basic aims. The first is to move towards the position where the farming sector pays its fair share of the overall tax burden, a position which farmers and their representatives have declared themselves willing to accept. The second aim is to encourage the future growth and development of agriculture. This is done by maintaining the more important investment allowances for land improvement and farm buildings and by the universal application of the accounts system. This will ensure that each farmer in the taxation net will only pay the tax appropriate to his actual taxable income earned. Any farmer whose income net of appropriate allowances and deductions does not reach the taxable bracket will not pay any income tax. This will mean that many farmers who have to fill up tax returns will not have to pay anything at the end of the day. Provision is also made whereby any farmer entering the tax net for the first time this year can have the option of presenting the current year's accounts rather than the normal previous year's accounts if this is to his advantage. Taxable farmers will have all the advantages of the PAYE sector, such as income splitting, widening of the bands and so on contrary to the distorted picture put forward by Deputy Bruton this morning.

In order to facilitate and encourage family farm transfers the Government have decided to increase the upper limit of the special agricultural relief under the capital acquisitions tax system from £100,000 to £150,000 thereby directly relieving transfer problems caused by the rise in land prices. This now means that farms that are being transferred from father to son must be worth more than £300,000 before they are liable for tax. The recent decline in land prices will increase the value of this concession. The transfer of family farms from one generation to the next is a sensitive issue, and indeed is a very personal matter. The Government are fully aware of the sensitivity, and we in turn have responded by according this concession of a substantial increase in the special agricultural relief on inheritance tax. I am sure it is a concession that will be widely appreciated throughout the country.

Many of the criticisms of the effects of the inheritance tax on the development of farming have been totally misleading. Since the capital acquisitions tax was introduced in its present form almost five years ago, there have been only three cases of children of farmers who have paid this tax. I do not see how anyone can claim that three cases in five years represents a threat to the future of the family farm, or that the problem is one of increasing magnitude, as it was represented to me by various deputations a couple of weeks ago.

As regards the resource tax Deputies will now be familiar with the announcement by the Taoiseach last Wednesday that this tax on larger and better off farmers was a short-term feature of the tax system. However, it is a necessary feature in the interim period until the accounts system achieves its objective of ensuring that farmers contribute a fair and equitable share of taxation on their profits.

In looking at this budget farmers and their leaders have perhaps taken a onesided, negative and selfish viewpoint of it. Nobody likes to have to pay tax and so everyone criticises those aspects of a budget which penalise himself or herself. We hear far less about the budget changes which confer benefits or advantages. The farmers' representatives do not appear to see the good points in this budget. At any rate they do not highlight them. I have already mentioned the liberal concession on inheritance tax. We should not forget that the 2 per cent levy has gone. Those farmers already on accounts and those entering for the first time are going to benefit from the very generous income tax concessions. Without doubt this will reduce the income tax of farmers already within the tax net assuming they maintain the same level of income. The Taoiseach has made clear the Government's position on the resource tax. Taken together these arrangements add up to a very reasonable package.

It is interesting to note that while there are approximately 150,000 farmers in the country as a whole, only 36,000 of these are now within the income tax net. Furthermore, only those farmers in that 36,000 who make a profit over and above the various allowances will be paying any income tax. It must be emphasised particularly to farmers coming within the income tax net for the first time that unless their profits are high enough they have nothing to worry about from the tax man. This is the situation that applies to taxpayers generally throughout the country, and it is one that will now apply to the farming community.

I wish to repudiate the false notion that taxation of farmers will inhibit greater investment and increased production. I am sure the opponents of agriculture would like to see it that way. This is not the case with any other sector subject to tax nor is it the case with farming. As I already emphasised, farmers within the tax net will only pay tax if they make a taxable profit. The generous capital allowances will encourage increased investment of a genuine nature in land development and farm buildings as this will reduce the incidence of tax, and on this basis will encourage greater genuine investment on the farm, leading to greater production which will benefit the farmer, the economy and our balance of payments.

Experience over recent years has shown that a certain number of farmers have been using the system of capital allowances to avoid tax. They have purchased expensive machinery in excess of their real needs. Such purchases had the added disadvantage of contributing to our balance of payments problems as almost all of the machinery was imported. It is not in the interests of the nation that the Government should tolerate tax avoidance along these lines which also had a detrimental effect on our balance of payments. It was, therefore, necessary to restrict this form of capital allowance. However, the machinery purchases will still qualify for full tax relief but over a longer period. This will allow farmers to invest in machinery in a genuine way to meet all of their requirements.

If assessed unemotionally this budget must be regarded as a very reasonable package for the farming community. It provides a clear basis on which to plan for increased production and profits over the coming years and I, as Minister for Agriculture, will be ensuring that the necessary conditions for this will be maintained.

The Government have demonstrated their confidence by the increased financial resources being provided for agricultural progress and development. We went to great pains, not just to avoid impairment of aid, but rather to improve the essential elements of Government assistance for the expansion of Irish agriculture. We have done this in the interests not only of the farming sector but of the nation as a whole, because if agriculture is not progressing the whole process of national economic advance would be seriously hampered.

I am confident that, given normal weather conditions, we shall see a significant upturn in net agricultural output this year. There should be a return to more normal usage of farm inputs, particularly feeding stuffs, as compared with the high usage which we had in 1979 because of the unfavourable weather conditions. The result should be a sharp recovery in net farm output. With an expected higher level of cattle disposals in 1980, agricultural exports should resume their upward trend. The overall effect should be a significant increase in farm incomes; in this regard the Economic and Social Research Institute has recently forecast an income increase of 13 per cent. We cannot expect more than modest price increases from Brussels, and this means that productive efficiency will be the key to future farming profitability and expansion. I am confident that our farmers, working in partnership with the Government, will rise to the challenge ahead and will make the eighties a decade of further progress for Irish agriculture.

The foundations for this progress in agriculture, and in the economy as a whole, have been laid in the recent budget. It has provided the kind of economic environment in which there is an incentive for the agricultural community to expand and develop their enterprises. This is in the interests of farmers themselves and, at the same time, to the benefit of the wider national community in general, which depends so greatly on the prosperity of the agricultural sector.

Mr. Kelly

I do not intend any discourtesy to the Minister for Finance when I say that I propose entirely to ignore his own budget speech and to concentrate instead on the speech made in the present budget debate by his party leader who, of course, as is well known, speaks through Deputy O'Kennedy. It must be said in Deputy O'Kennedy's favour that he never pretended to any financial or economic expertise in the days before he was promoted into that job. He must be regarded consequently as the merest mouthpiece. During an earlier stage of the complex budget debates I used a simile drawn from the bible which offended the Leas-Cheann Comhairle. I am not going to harp on it again, but the old trick of Jacob in trying to impose on his father by wearing a rough skin and hoping that the old blind man would mistake him for Esau is not entirely out of place when we see that what is being spoken here through the mouth of Deputy O'Kennedy is in fact the plan—if it can be called a plan—of his leader.

In the speech made here by his leader on 5 March, just a week ago, the budget was described as having been produced in a combination of factors which amounted to being "the most difficult that any Minister has had to face in this country in modern times". I shall accept that statement; I believe it is true. The budget was produced in the most difficult combination of circumstances that certainly a Government has faced for some years, but that is produced and offered to this House as being, in some way a mitigating factor or an excuse, a background against which a lenient judgment must be invited of the disagreeable and unacceptable parts of the budget. It is not that at all. In my view the combination of factors which are the most difficult for many years are very largely the product of the prodigality and recklessness of the Government itself. It does not lie in the mouth of any Member on the far side, from the Head of the Government down, to plead difficult factors in respect of this budget when those factors are the product of their own poor governmental performance.

That performance rests on foundations which were laid before the General Election of 1977, when promises were made in regard to remission of various forms of taxation which ensured that any Government, no matter what Government, left in the situation of implementing those promises would be in difficulties. Revenue was recklessly thrown away merely to buy votes. Motor taxation, which was not a source of grievance to anybody, because it had never crossed anybody's mind to demand its abolition, was flung away as a sop to the motorist, particularly the younger motorist, who saw himself in that way as having £50 or £60 extra in his hand and could be induced, because perhaps he was not old enough to have formed any strong political convictions, to vote for Fianna Fáil for that reason. The rates were thrown away at one fell swoop, not in three handfuls as the National Coalition Government had proposed—although I am not entirely convinced that we were right in that proposal of getting rid of them at all; we did propose to do it, but not in one fell swoop; some responsibility, some sense of proportion remained with that Government—Fianna Fáil did it in one fell swoop, and they abolished wealth tax at one fell swoop, and went on then to deprive themselves of 80 per cent of capital gains tax. It was absolutely certain that fiscal measures of that type were of an inexcusable, unforgivable dimension and were bound to cause fiscal difficulties in the following years.

In order to make up the slack in the State's finances which the abandonment of those sources of revenue caused, the Government were obliged to resort to extremely heavy borrowing. It is true, and must be said in favour of Deputy O'Donoghue, that he did not conceal that from the electorate beforehand, although the electorate do not mind too much about the politics of borrowing; they are not concerned too much when the borrowing is merely to relieve the grievances which they themselves are experiencing. It is true that Deputy O'Donoghue did anticipate borrowing 13 per cent of GNP in the first full year of the Government in which he hoped to be. That was more or less the figure which the State did then borrow. However, the figure which he gave for 1979 was exceeded the following year by more than 3 per cent or 4 per cent and the figure which he gave for 1980 is also going to be heavily exceeded this year, notwithstanding that Deputy O'Donoghue himself said that those figures which he outlined for 1980 and 1981 represented unsustainable levels of borrowing, a level of borrowing which in the long term would be unsustainable and which could not be exceeded.

I have computed the degree to which the failure of the Government to keep to their own self-imposed borrowing limits has added to the national debt. In 1979 the extent of borrowing requirement instead of being 10½ per cent, which was originally projected, was 13.7 per cent, while in 1980, instead of being the 8 per cent as originally projected, it is now going to be—and we shall be lucky if it does not go further during the year—almost 10½ per cent, 10.4 per cent. The difference in 1979 in pound notes was £236 million. That is not a total borrowing, that is the difference between the level of borrowing which the Government originally planned and the level of borrowing, to which, in the end, they have had to resort. If you inflate that by 15 per cent so as to bring it up into terms of the 1980 pound note, the figure is £271 million. The 1980 figure is £207 million of an excess over and above what was originally projected. That is an excess borrowing, even over the high levels which were projected by Deputy O'Donoghue in 1977 of £478 million or—I shall not be accused of going too far when I say this—within spitting distance of about £.5 billion—and that is not just for borrowing. It is £.5 billion of borrowing over and above the borrowing which the Government were committed to by their 1977 election promise.

Naturally, a Government who do that cannot but be in difficulties. Naturally, a Government who do that cannot but find themselves in a combination of factors which the leader has described as the most difficult that any Government have had to face for many years. It is perfectly obvious that that is how they are going to end up. In the speech to which I have just referred we were told that the cost of servicing the public debt at the point which it has reached now is, in a full year, £666 million. These figures become astronomical and one cannot grasp or digest them, but, in plain terms for the ordinary citizen, that means that for every man, woman and child in this country £200 a year is being paid out in interest on the public debt. The State is engaged in paying £200 for every man, woman and child in the country, not to repay the capital, not to invest in further development but merely to keep down the payments due on the public debt.

That is a fantastic situation and naturally, unavoidably and necessarily a Government who lead themselves into that situation are going to be in difficulties. Far from pleading those difficulties in extenuation of unpopular measures in their budget, they should be apologising for having created these difficulties in the first place and apologising doubly for having done so in order merely to win votes.

That expansion of the public debt of course has had to continue this year in order to pay for some of the budget concessions but these are not the only things it has to pay for. It is also paying for a reckless expansion in the public service. Last week in the debate on the Ministers and Secretaries Bill I gave figures which I hope the Leas-Cheann Comhairle will allow me to repeat in a different setting. In regard to the expansion of the public service since the National Coalition left office—the National Coalition became unpopular for a variety of reasons and one of the reasons we made few friends was that we imposed an embargo on recruitment into the public service—the Minister for Labour and the Public Service said that that embargo had been responsible for several jobs being left undone; but that embargo meant that when we left office the civil service contained 48,600 people and no more. It now contains 53,800, that is 5,200 more. If you compute what it must cost to pay these civil servants, to house them, to heat them, to pay their travel expenses, you come out with a figure well in excess of £50 million. It could not be less than that. That is reckless public spending. It is a reckless investment, not in anything of a capital nature or anything wealth-producing but in jobs for jobs' sake. Deputy Haughey told us the other day that he does not believe in reckless expansion of public employment like that, he does not believe in simply adding persons to the public payroll. He said, and I quote from the Official Report of 5 March 1980, column 1311, Volume 318:

There is no real advantage in simply adding persons on to the public payroll, particularly if the expenditure has to be financed by borrowing.

This is the latest in the long series of examples of Deputy Haughey pretending a wisdom which his record disentitles him to claim. One week before the dissolution of the 20th Dáil, on 17 May 1977 he said in the Debate on the Second Stage of the Finance Bill that he agreed entirely with a report which had come recently from the ESRI in which the creation of jobs merely to put people into employment was advocated. He said, and I quote from the Official Report, column 921, Volume 299:

Geary and Dempsey go on to suggest that the problem of unemployment should be tackled by a special works programme whose main objective would not be economic but to put people to work,..... This is exactly in line with what we have been proposing. I personally suggested well over a year ago that £100 million should be diverted from the public capital programme into a jobs for jobs' sake programme.

That is Deputy Haughey on 17 May 1977.

An Leas-Cheann Comhairle

The Taoiseach, please.

Mr. Kelly

A jobs-for-jobs'-sake programme. Now he tells us calmly that he is against simply adding people to the public payroll. Where is the consistency there? Naturally I do not expect any and I do not know if the Minister opposite does, or cares, but perhaps there are people outside the House who have some regard for his economic know-how who may think him a genius.

Mr. Tunney

Is the Deputy a genius?

Mr. Kelly

Where is the consistency there? Where is the common sense in it? Where is the honesty?

Mr. Tunney

Is the Deputy asking that there should not be any expansion in the civil service under any circumstance?

Mr. Kelly

I have said many times before that there is the equivalent of three Army divisions in the civil service with lines of communication troops, support troops, entertainers, cooks and every possible ancillary organisation. That is far too big for a country like this. We have an Army corps of civil servants. There are too many of them and instead of recruiting more the Government should be interested in getting value out of those they have. Of course that is not popular. It means supervision, watching what is going on, making sure that people are there turning in a full week's work for which they are being paid. It means doing things which are unpopular and which will even cost votes. Naturally, Fianna Fáil will run a mile from anything like that. It is far easier simply to recruit people recklessly by the thousand. Since we left office 5,200 jobs have been created in the civil service alone, and 8,000 new jobs under the health boards.

Mr. Tunney

You were doing nothing in Government.

Mr. Kelly

There are more people in the employment of the health boards today than there were in the entire civil service in 1955 or 1960. That cannot be justified. That is a luxury which this State cannot afford. I agree with the speech made here this day last week in which it is stated that we cannot simply add people to the public payroll. Every one of these has to be carried on the backs of four or five or six wealth-producing citizens in some other occupation, because it is from the revenue which they provide that those salaries and overheads come. If Deputy Tunney thinks he is going to walk me into a corner by pressuring me into saying that the civil service should not be expanded. I say that it should not be expanded. It is too big already and he can post me up all over the country as saying that and a lot of citizens will agree with me.

Mr. Tunney

If the Deputy wants Coalition stagnation he can have it. It is not good enough for me.

Mr. Kelly

Stagnation my eye, with the public debt twice the size it was when we left office.

An Leas-Cheann Comhairle

Deputy Kelly will make his own speech.

Mr. Kelly

In the middle of March, when it should be falling, unemployment is getting near the 100,000 barrier again. When did unemployment last jump in the way that it did last week, at this time of the year before? This is the time of the year in which the peak should have been passed.

Mr. Tunney

It was 130,000 when the Deputy was in office.

Mr. Kelly

I am glad Deputy Tunney mentioned this because the case which was being made then in large print during the election was that those numbers did not state the true dimensions of unemployment and that the true dimensions were 150,000. That is the number who were unemployed in our time. Now a different suggestion is being made, most recently by Deputy O'Malley, Minister for Industry, Commerce and Tourism, that the registered figures overstate unemployment. I have no animosity against Deputy O'Malley, and much less now than I had once. I consider him a reasonably straightforward blunt person and certainly a man with a manner which does not easily make friends. Deputy O'Malley seriously suggested that perhaps those registered figures overstated the problem and that there were parts of the country in which there was nearly full employment, where employers could not get people to work. It is a curious thing that when we are in the figures are not large enough to reflect the real problem, but when Fianna Fáil are in the figures overstate the problem. Even Deputy Tunney, with his verbal skill, will see that there is an inescapable dilemma there.

The Leader of Deputy Tunney's Government believes in jobs for jobs' sake and said so in 1977. Either himself or one of his colleagues said that even if they were paying men to dig holes and fill them up again it would be better than having them unemployed. Naturally, no private employer would pay a man to do that and therefore the State must. I will not take that from that man or any of his Government, all of whom if they serve under him have flawed pedigrees——

An Leas-Cheann Comhairle

Deputy Kelly should not use that phrase again. That type of insinuation should not be made.

Mr. Kelly

I am using it in a purely political sense.

An Leas-Cheann Comhairle

When Deputy Kelly talks of a flawed pedigree it is not a political charge.

Mr. Kelly

I intend it as that.

An Leas-Cheann Comhairle

It is a personal charge.

Mr. Kelly

I do not mean it as that.

An Leas-Cheann Comhairle

I know, but that is the way it is coming across.

Mr. Kelly

I do not intend it that way and I never understood anybody to intend it that way. I regard the Head of the Government as being unsuited to his post and the same doubt falls on anybody who accepts office from him. If I change my mind about the Taoiseach I will be open minded enough to admit it here, if I am still here. I will not take from the Taoiseach or his Government the suggestion, against the background of that speech in May 1977, that the public service has been in some way allowed to grow too big, that they are not responsible and that other are somehow responsible. I cannot see any expansion of functions or services to account for the huge growth. Some Departments will not answer the phones, some had a fairly easy six months last year because of the postal strike, and the telephone service is worse than ever. What are all these extra people doing? This comes from a Government which was led until last December by a man whose acceptance speech in July 1977 put reform of the public service in the forefront of his objectives. The then Taoiseach said it needed political will; he did not have much political will and his successor clearly has not much political will. Far from the public being sure that they are getting value for money, far from productivity being visibly improved, we are just getting more jobs which the public have to carry on their backs. In my other job I suppose I could be said to be a beneficiary of that expansion. In a sense somebody with an academic post like mine could be said to be a luxury which others have to carry. I acknowledge that and admit that anyone working in a position such as mine is in a position of great privilege; but still the State is carrying burdens which are beyond its strength in regard to public employment.

Speakers from the other side said that we were being ungenerous in failing to acknowledge the social welfare and other improvements. I acknowledge that there are improvements, although in the depths of the recession, in the greatest possible economic and fiscal constriction, we always made it a clear priority that, year after year, social welfare benefits, long term and short term, would at least keep pace with inflation. The short term benefits have been increased by 20 per cent, which will not keep pace with inflation. The inflation rate will not go up to 25 per cent, although I am sure it will reach 20 per cent, so the long term 25 per cent increase is a handsome increase. However, it will barely keep pace with inflation and leave the recipients a shade better off. If they are a shade better off I will not be so begrudging as to deny it.

We have been accused of not acknowledging these things and trying to look to the potential effect of the budget on the future. That is the whole point of a budget debate. The budget is to set the course of the economy for the next year. What has happened in order to pay for these improvements on the social welfare and PAYE scene—even though, as the leader of my party said, the improvements under PAYE have been far too heavily tilted in favour of the people who need it less, and inflation this year will run away with virtually all of that—is that borrowing has got to a huge level and there are cuts of every possible kind—for example, in the grants to local authorities. All one has to do in regard to seeing the situation in local authorities is to look at the roads. I have lived here all my life with the exception of a few years here and there and I have never seen the roads in such bad condition. They are in a condition that one would have expected to see in the Balkans before the First World War. The former Deputy Paddy Burke made a bit of a joke of it in this House when he said that when the Coalition Government left office there was not enough money in the public Exchequer to pay for a bag of cement. This Government do not even have enough money to fill in a pothole. I drove to the airport twice in the past week, and by the time I got there on each occasion I was nearly car sick from the sensation of driving over the roads, which are in an incredible condition. Deputy Haughey calmly told us last week that the severe winter of 1978-79 and all the rain we had afterwards were to blame. We had a hard winter in 1978-79 but we had a harder winter in 1962-63 and the roads were not nearly as bad.

(Interruptions.)

Mr. Kelly

That Deputy need not talk. I drove in his constituency last month and I nearly had to be dug out of a hole in the road. I thought I would not get through to Ratoath.

Mr. Fitzsimons

The roads were not carrying the traffic in 1962-63 that they are carrying today.

Mr. Kelly

That traffic paid motor tax which took care of the roads.

Mr. Fitzsimons

That is not true.

An Leas-Cheann Comhairle

We will be along to Deputy Fitzsimons in a moment. Deputy Kelly, through the Chair.

Mr. Kelly

The Deputy would be well advised to go back to his constituency and look after the roads. The Deputy's county is one of the worst, and he should go back and look after it.

An Leas-Cheann Comhairle

Get off the roads for a moment, Deputy Fitzsimons, please.

Mr. Kelly

The housing repair grants have been scrapped, the school building programme has been curtailed, the job creation programme, such as it was, has been cut down.

I stated at the outset that I would not mention Deputy O'Kennedy but I find I am obliged to do so now. The Minister for Finance when Opposition spokesman on Foreign Affairs took a lot of trouble with his contributions and I listened to him with a good deal of respect and interest. I felt his contributions were good and for the most part I agreed with him except when he got on to the subject of the fishery limits in which he displayed the same dishonesty as the rest of his party, willing to lay down their lives for the 50-mile limit as long as it embarrassed the Coalition but flinging it away cynically as soon as they got into power. They sabotaged it when they assumed office. With the exception of his performance on fisheries I had a lot of time for Deputy O'Kennedy's contributions. One theme he hammered more than enough was that, no matter what came or went, or what budget constraints operated on a Government or the difficulties they might find themselves in, one thing which was not negotiable in his eyes was the bilateral overseas development aid programme. He felt that, no matter what came or went, we had a duty to the black men, the yellow men and their children, starving, suffering and emaciated without any prospect of jobs or a decent standard of living.

I supported every word Deputy O'Kennedy said on those occasions, and I believe he meant what he said, but he is such a small boy in the Government that he was not able to stick up for the ODA programme. The Government have left themselves with so little room to manoeuvre that the black and yellow babies went out the window. The real contribution by us in bilateral aid this year will actually be down for the first time ever. There was never a bilateral aid programme until one was introduced by the National Coalition. If Deputy FitzGerald, the leader of my Party, left politics tomorrow, his most shining contribution to this country's public life would, in my eyes, be the initiation of the bilateral aid programme for people in underdeveloped countries. There was never such a thing here until he started it and, fair play to Fianna Fáil, they did not block it or criticise it. In fact, they supported it once it had started. What happened when they took office? It got the usual increase in 1978-79, but this year it did not. It must be remembered that this year the budget was presented by a Member who when in Opposition felt this was the one thing which should be non-negotiable, was sacrosanct and should not be touched. He always believed the programme should not be touched and that there should be a steady progression of increase in it until it reached what is regarded as an internationally acceptable level in terms of percentage of GNP.

That is only a selection of the things we have had to endure. We have had cut-backs in services, benefits and subsidies in order to pay for the reliefs the budget contains. All those represent difficulties which the ordinary people will feel. They are also part of the complex of unprecedented difficulties referred to last week.

Another thing which happened in order to pay for the reliefs which the budget contains is the range of increases in indirect taxation. While others may complain about increases in taxation on tobacco and drink I will not do so, because it is true that in terms of the number of minutes or hours one has to work to buy a bottle of whiskey drink is probably cheaper now in those terms than it was 20 years ago. It can stand an increase in taxation and had we been in office I would have been in favour of putting up the price of cigarettes and drink. I believe many of my party would have been in favour of that also. However, the increase in the price of petrol is fantastic. It makes me feel that there is no hand at the rudder of the Government, that there is no real stability or unified will or interest in the Government in seeing how the country is progressing. That increase will work its way through every item on which the CPI is compiled.

I am not a professional economist or in the business of forecasting whether it will mean a 4 or 6 per cent increase by mid-May, a matter which is an issue between the leader of my party and the leader of Deputy Tunney's party, but the increases will not be seen by that time. Further increases will be working through the economy in consequence of that rise for the rest of the year. It will have a ripple effect. When the stone is dropped in, the biggest and most powerful ripples are the ones nearest the point of entry; but the ripples keep going for a considerable time and, eventually, though they are diminishing in effect, reach the edge of the pond. That will be the effect of an increase in a commodity which is an element in every item of goods and services. Oil is needed for transportation and manufacturing, notably in the manufacture of electricity, and as an item in the bill of CIE. We will have a bigger number of applications dropping on the desk of the Minister for Industry and Commerce in consequence of that rise, which undoubtedly will seriously aggravate inflation. That also is a consequence of what I was complaining about earlier with regard to throwing away sources of revenue and excessive borrowing.

If Fianna Fáil are still in Government this time next year—God forbid—the Finance Minister will be bleating about the extra percentage points as being something beyond his control—but they can be seen now to be within his control. That fiscal measure which will net so many millions of pounds has been made necessary because the cupboard is bare. It is a fiscal measure which we can now predict—even the leader of Deputy Tunney's party admits this—will add visible percentage points to the inflation rate. An industrial worker living in Deputy's O'Toole's constituency—that area comes to mind because the Deputy is sitting beside me—who works at the Asahi plant and lives in Belmullet, or 30 miles in the opposite direction, will have to add an extra £3 or £4 per week to his petrol bill. Does anybody think a worker could absorb that and offer it up? He will not. That £3 or £4 will be fed into the notional floor from which his wage demand this year will be launched. In other words, there is a viable percentage element in whatever national wage agreement is reached which is attributable to the oil price increase and nothing else.

Great play was made of the fact that in 1974 when the oil crisis first broke Deputy Richie Ryan put 15p on to the price of a gallon of petrol. The increase in the budget is only one of a range of increase and it should not be forgotten that 20p is something about the same order as the 1974 increase. This year it is one of a number of increases which will all prove to be inflationary.

Mr. Tunney

There was a greater percentage increase in 1974. The Deputy was about to say that but he withdrew.

Mr. Kelly

I would not think so; it was of the same order but at least it was by itself. The increase in this budget is only part of a general package of additions which collectively will be extremely inflationary. The promised increases, the dimensions of which were not announced in the budget, in regard to social welfare contributions and postal and telephone charges, to be effective from 1 May, are not in that calculation. What effect will they have on inflation? It should be remembered that those things are not being forced on us by outside conditions; the Government have brought them on us because they left themselves short of revenue. They have borrowed beyond the point which was wise. They borrowed beyond the point at which a Danish Finance Minister last year resigned in despair when he found his Government were over-extending themselves. The consequences of their doing that are that they have been forced into these measures which are clearly inflationary and which are sure to increase wage demands beyond the stage of tolerability.

There was a time when a Minister for Finance was able beforehand to put forward a figure in respect of a wage demand that could be accepted as reasonable. In the small print of the Fianna Fáil Manifesto there was a reference to an assumption of a wage increase of 5 per cent in the following wage round. One never hears nowadays of a 5 per cent wage increase: 50 per cent would be more likely to be the figure. The progression more often than not is as follows: 5 per cent becomes suddenly "of the order of 5 per cent". The "order of 5 per cent" then becomes a single figure increase and that, in turn, becomes something below what the journalists refer to as a "psychological 10 per cent barrier". This brings us into approximate double figures, but these are the progressions by which the lines are shortened.

Like any Government, we had to take some unpopular steps while we were in office. In 1976 and 1977 we succeeded in securing reasonable wage settlements, settlements which subsequently were acknowledged as being reasonable and which were praised by Professor O'Donoghue as being responsible for the very healthy growth in industrial output and in the general recovery from the recession of those two years. Professor O'Donoghue had the honesty to say——

An Leas-Cheann Comhairle

The Deputy should refer to the person concerned as Deputy O'Donoghue.

Mr. Kelly

I am sorry. We do not need to accumulate all those titles. Deputy O'Donoghue had the honesty to say, as reported in print in a Foreign Affairs Bulletin, that the recovery, which was underway and which in fact had progressed far by then, and that the improvement in industrial output and export earnings were due to those reasonable wage settlements. However, there was a price to be paid for those reasonable settlements and we paid that price by taking steps that were unpopular, but this Government do not like the idea of being unpopular. They have not succeeded in achieving reasonable settlements or in holding the parties to those settlements even to the terms to which they agreed. With that lamentable background they produce a package of measures of which the budget is only the pinnacle because before the budget there were some measures introduced that were essentially budgetary and we are to have more to follow in terms of increases in postal charges, of social welfare contributions and so on. What is produced is a package of measures going back to about the end of last year and which will have the effect of driving up wage demands with the consequent effects on employment, on export competiveness and so on. Last week I got a bit of a laugh from listening to the speech of the leader of Deputy Tunney's party—

Mr. Tunney

He is the Taoiseach of the country and should be referred to as the Taoiseach.

An Leas-Cheann Comhairle

The Deputy should use the proper titles in all cases.

Mr. Tunney

He should refer to the Taoiseach as the Taoiseach.

Mr. Kelly

As I have said before, for four-and-a-half years I sat here and endured sneers about `the real Taoiseach" but I am not prepared to take lectures from people who thought that in that way they could make fun of Liam Cosgrave. I am not prepared to take from them lectures on propriety as to how I speak. Liam Cosgrave is worth 20 of the people opposite and I am including the Front Bench. He had guts. He was not a pre-packed market-tested product that could be sold. There was taste to him.

An Leas-Cheann Comhairle

I have reminded the Deputy that he should use the appropriate titles. Deputy Cosgrave should be referred to as Deputy Cosgrave.

Mr. Kelly

Deputy Cosgrave was belittled here persistently by the use of the expression "the real Taoiseach" by way of reference to another Deputy. I am not prepared to take lectures from the party who were responsible for that gibe.

Mr. Tunney

I was not responsible for it.

Mr. Kelly

Not that either Deputy Cosgrave nor I would be so foolish as to expect an apology for such sneers, but if and when I hear some expression of regret on that account, I shall think twice about the way I speak.

Mr. Tunney

The Deputy is very small minded.

Mr. Kelly

It is easy to talk now to the real Taoiseach for whom a trap was dug and into which he was shoved and covered up.

Mr. L. Lawlor

Obviously, panic is setting in on the other side.

Mr. Kelly

This budget is the clearest sign possible of the panic on the part of the Government.

An Leas-Cheann Comhairle

These references to people who are exTaoiseachs are out of order.

Mr. Tunney

For the past half hour the Deputy has been attacking the civil servants.

Mr. Kelly

It was said and believed generally in the Government party that Deputy Colley had been rather wet and wobbling in regard to farmer taxation last year, that he had enraged everybody by promising to impose a levy on farmers. When the farming voice came through loud and strong the then Minister for Finance retreated and this brought the PAYE people out on the streets in jigging time.

The man whose speech I have been quoting was foremost, according to reports, in referring to Deputy Colley as being wet for that performance. There was an announcement during the budget speech by the Minister for Finance about a resource tax. But there was not a word then that this resource tax would be a temporary measure, that it was to be only a transient feature of the fiscal landscape but we heard last week from the person I am quoting and this morning from the Minister for Agriculture that the resource tax is not to be a permanent feature of our taxation structure. Is that not a climb down as contemptible as anything done by Deputy Colley? Is it not doing a Colley on this occasion? Those Deputies up there are sitting on some of the fattest farms in Ireland.

An Leas-Cheann Comhairle

The Chair must insist that Members of the House be referred to by their proper titles. This is a standing order of the House.

Mr. Kelly

Both Deputies Lalor and Fitzsimons got the message from the farmers about the resource tax. Now we hear that this is not to be a permanent tax. Indeed, if we are lucky it need not be even a temporary tax. Is this not doing the Colley act? Let us not have any pretensions as to the strong arm and the clear clean profile of pragmatic government from a man who within three months of assuming office has done something that is as bad as anything ever done by Deputy Colley and which naturally has switched off not only the farmers but the other sectors also. However, the Minister will learn the hard way. He will learn that that is not the way to conciliate people. It reminds us of the fable of the old man and his ass, the man who could not please anyone.

I would find it difficult to advise this Government financially or economically but if we were to find ourselves in government tomorrow we would have to pick up the pieces and decide what could be done about a public debt which is monstrous compared with anything we left behind. We would have to decide what should be done about the servicing of that debt which is taking up a share of the public revenue that is staggering by comparison with what the situation was when we left office. We would have to decide what should be done regarding the trade deficit which has broken one psychological barrier after another.

Business suspended at 1.30 p.m. and resumed at 2.30 p.m.