Finance Bill, 1980: Second Stage (Resumed).

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

Mr. Creed

When I reported progress last evening I was dealing with the effects of the recession on the weaker and the more vulnerable sections of the community. I was dealing particularly with the problems in relation to the Department of the Environment and to local authorities. In a recession situation the first to lose their jobs are people such as road workers and others in the lower-paid employments. Although the Minister for Education informed us that there are not to be any cut-backs in his Department we find that there is to be a cut-back in the school transport system. This means that children at both primary and post primary level will be among the first to feel the effects of the recession. Again, we had an assurance from the Minister for Health that there would not be any cut-backs in his Department's activities but the cut-backs in that area in regard to medical cards will hit also the weaker section. All of this is a recipe for disaster. We do not find county managers, county engineers or others in the higher income groups being hit by a recession.

I have been referring to the building industry. Considerable play has been made by the Minister in respect of the subsidisation of building society loans but this subsidisation is very necessary having regard to the savage increases in interest rates recently. People are experiencing much difficulty in meeting their commitments to the building societies. However, there are people who have loans for houses from sources other than the building societies. We have had the situation in the recent past in which the building societies did not meet the demands made on them to provide loans for the building of houses with the result that the people concerned had to go to the banks or insurance companies for accommodation for which they are paying very high interest rates. In these circumstances I would ask the Minister to reconsider the whole situation. The building industry has been hit in a big way in recent months. Indeed, there have been difficulties in that area during the past year arising from the difficulty of getting bridging finance. While those of us in local authorities encourage people to build their own houses and while the loans available are quite attractive for those who qualify for them, there is great difficulty in relation to bridging finance.

The discontinuation of the reconstruction and of the water and sewerage grants has been a severe blow to the building industry. Again in this instance the recession is hitting a section of the community who are not in a position to maintain or to improve their homes in the way that is necessary. For the last year for which records are available, there were approximately 60,000 applicants for these grants. This is an indication of the use that was made of them. The grants were an incentive to people to maintain their houses and to carry out necessary repairs.

While I am speaking about the position of local authorities I should like to refer briefly to the situation in Cork County Council where time and again we have asked for extra finance for road works. In each of the past three years we have taken the decision not to become involved in road improvement works because of the shortage of finance. Instead we are applying the resources we have to maintenance work. We are not in a position to undertake any improvement works and this leaves us in the position of having the worst roads that we have ever had in so far as potholes are concerned. We are not able to do a proper maintenance job because of this shortage of finance. Because the roads are being allowed to deteriorate continuously it is obvious that a sizeable sum of money will be required to redeem the situation, but before any more time elapses I would ask the Minister to give very serious consideration to our plight in this regard.

I ask the Minister to take note of the very serious situation in which we find ourselves. There is a great deal of confusion in regard to farmer taxation. I am confused myself and am glad that the Minister of State is present to reply. Between resource tax, removal of agricultural grants in rates, income tax threshold brought down to £40 valuation, capital acquisitions, inheritance and every form of tax there is extreme confusion. Would the Minister in his reply to this debate please clarify section 24 of this Bill which deals with the threshold and with farmer taxation and income tax in general?

If I recall it correctly that section says in relation to a husband and wife who have farms separately owned and separately occupied that they are not liable to tax and do not come within the threshold if their combined valuations exceeds £40. In layman's language, that is my interpretation of that section. Do I take it from that, that there must be a marital separation of a farming husband and wife, that the wife must live on the farm owned and registered in her name and that the husband must live separately in the farm owned and in his name if they want to avoid paying tax? If that be the case, it is an incentive to marital break-up. There is an Irish joke in the context of marriage, of divorce Irish style. Is this divorce agricultural style?

If it is a case, for example, of a jointly owned holding which exceeds the income tax threshold and according to that section that farming husband and wife are liable for tax, how does this relate to the Murphy case? Is not this absolute discrimination against the farming community? What happens in a situation where there are two holdings which jointly exceed the threshold but those people are living together as man and wife do? Does it not mean, in effect, that they must pay tax? Is there any relevance here to the recent decision of the Supreme Court? The farming community are running to accountants and solicitors, there is fragmentation of farms and efforts are being made to avoid tax, particularly in this year, which is a very bad one.

We need only look at the repercussions of the depression in the agricultural industry. The Minister of State realises this as much as anybody. The latest indication is the reports from the Spring Show which has just ended—the worst Spring Show in ten years from the point of view of sales of machinery, due to confusion of mind of the farming community. There is a great lack of confidence in the industry and farmers do not know what is in store for them. With all the experience that the Department of Finance and the Revenue Commissioners have, there must be a more simplified system of taxation for the farming community. I impress on the Minister for Agriculture, The Minister for Finance and the Government that there must be no steps taken to inhibit the expansion of the industry.

I said something perhaps rather harsh when speaking on the Budget, which I repeat. We owe nothing to the lazy farmer, but the country owes a considerable debt of gratitude to the progressive farmer who uses the resources available to him or her, provides jobs and produces to the maximum. We should bear that in mind. Our present taxation system is hitting the progressive farmer and inhibiting him or her from expanding. We hear so much from the Government about the job situation, that more jobs must be created. However, with all the seasonal advantages that we had last month, there is again an increase in unemployment. The only way in which we can create jobs which are sound economically is in the agricultural industry. Slowly but surely, we are killing the goose that lays the golden eggs.

I am not laying all the blame on the present Government—it appears to be the system of Governments for a long time past but particularly this one after the 1977 General Election—that we can borrow ourselves into prosperity. We cannot. Any business run in the same way as the Government of the day are running the country would be declared bankrupt within a year and the show would have to fold up.

We find that at least 25 per cent of our total revenue this year will go to pay the interest on what we owe, there is rapid inflation and the budget fuelled the fires of inflation with the tax on petrol and other taxations. We constantly appeal to people to tighten their belts because they are living beyond their means. We all know that that is a fact, but we also know that the Government are there to lead, to legislate in the hope that the laws will be obeyed by the people within the State. We are saying to the trade unions today and somebody else tomorrow "You must tighten your belts. Industry will suffer if you do not take less and produce more." At the same time we have a Government which are very irresponsibly living beyond their means, and that is an under-statement. We have a most serious situation.

It would be wrong to say that people did not get concessions from the last budget, which this Finance Bill is putting into effect. Nobody can deny that the PAYE sector got concessions, but unfortunately they had to take to the streets in thousands to demand the attention of the Minister and of the Government to their plight. Everybody believes that protest march was a success because it did attract attention. What prompted them to do it? I shall tell the Minister. A weak Minister for Finance over a year ago introduced farmer taxation of a type which was wrong and should never have been brought in. Any Minister, having introduced something like that, who seeks to retract under pressure, creates a dangerous precedent. The Minister, because of the pressure brought to bear on him by some of his backbenchers and by the farming community, ran for cover, retracted his budget statement and the 2 per cent levy was off. What happened then? We had a similar reaction from the PAYE earners who were successful.

What is happening now? There has not been a provision made in the Finance Bill to deal with any contingencies. The nurses now have a grievance and are demonstrating. The Government will have to meet their demands. Who will be next? I believe it will be the teachers, and there will be a similar situation where they will make their demands because they feel the only way to get anything is to use muscle, take to the streets and pressurise the Government.

Who will follow them? I hope it will not be the Garda, but it looks as if they will follow the teachers. This goes on and on and creates a very difficult situation. I mention this to prove the point I opened on, that it is the weaker sections of the community who suffer because they cannot muster a show of strength, voting power or otherwise, which will attract the attention of the Government to their plight. In every recession the poorer section of the people are the first to suffer.

There is another point I want to make in relation to farmer taxation. No matter in what form money is paid to the central and local exchequer it is regarded as a tax. There is discrimination in relation to the removal of the agricultural grant from the rating system. What is the position in relation to rates on separate holdings? Is there amalgamation? Does the same thing apply as is mentioned in section 24? I would like to have some clarification in relation to those questions.

The threshold is at £40 valuation on a sliding scale to £50 valuation. The income tax of a farmer with a valuation of £42, £43 or £44 is small because it is on a sliding scale. He has to pay only one-fifth of the tax. The farmer who has a valuation of £50 and upwards can claim rates against tax while the farmer with a valuation of £42 will pay double the amount in rates this year that he paid last year. This is £320 more in Cork than he paid last year. This is regarded as tax. There are many people who do not know the position and who use the media to say that farmers are not paying tax, but that is the position as far as the farming industry generally is concerned.

There is also the resource tax which is an added burden on the farming community. The whole system of agricultural tax must be examined and a more simplified and less confused system introduced. The concessions given to social welfare recipients in the budget could be regarded as very generous if we had not to take into consideration the increase in the cost of living. Nobody seems to have control over prices even though we were told in the Fianna Fáil manifesto in 1977 that prices could be controlled. Price increases now are so fast that one can do better by shopping in the morning rather than in the evening because prices are bound to increase between morning and evening. The increases given to social welfare recipients are already eroded by the rapid increase in the cost of living. There is a budget practically every day. One of the root causes of our problems today was the expectations created in 1977, the high hopes given that milk and honey would flow and all that was needed was to get Fianna Fáil into office.

We never had more unrest than we have now. People regarded the removal of car tax as a great attraction when it was first introduced. Those who no longer had to pay tax on their cars felt that at least they were gaining something. The people who were saved that amount of money since 1977 would readily contribute it to a better road network which would certainly reduce their garage bills considerably.

Nobody owes the country a living, nobody owes any of us a living. We are probably all living beyond our means. The Government, who were elected with the biggest majority ever, should give a lead, but they are afraid to take an unpopular decision in case it means a loss of support for them. No Government, here or anywhere else in the world, can run a country by taking popular decisions almost every day in the week so that they will win support from the electorate. If the Government continue as they have done the day of reckoning will come. We are very close to it now. The Government are afraid to take the decisions which are necessary to put the country back on the rails. Approximately 25 per cent of our revenue today goes to pay interest on what we owe. This is being done to keep Fianna Fáil popular with the electorate. I believe this is a recipe for disaster.

Mr. White

I would like to ask a few questions. I hope the Minister will be able to tell us a little bit more about the people in charge of the Central Bank. A lot of our troubles over the last 12 months have been caused by the severe restrictions which the Central Bank have imposed. I am not blaming Government back benchers. It appears to me that the Government, and particularly the Minister for Finance, time and time again say they have no control over the functioning of the Central Bank. If a Minister for Finance has no control over the functioning of the Central Bank I should like to know who has. Surely the Central Bank and the Department of Finance must work hand in hand as far as their policies are concerned. It is very easy for these faceless people responsible to nobody to issue statements on monetary policy, such as that issued in March 1980, when nobody can say whether or not they have done the right or wrong thing. It is indeed serious when the Minister for Finance states that he has no hand or part in it.

Of course, this monetary policy is hitting practically everybody in the country at present, business people, industrialists, private householders, people seeking bridging loans and so on. For 1979 they stated that they would increase bank lending by almost 18 per cent. At that juncture people thought that 18 per cent was fine but it is a bit much when they come along then in March 1980 and tell us that they are reducing the amount that will be loaned in 1980, and that all they are allowing is an increase of 13 per cent. This is particularly serious at a time when practically everybody is predicting an inflation rate of something of the order of 20 per cent by the end of this year. When this inflation rate is taken into account it means that they will be lending 7 per cent less. In turn that means that everybody right across the board must tighten their belts. Regardless of how healthy one's bank account appears at present it is impossible to get any increase on one's overdraft, whether it be for the purpose of house extension, improvements or anything else. If one has had an overdraft of, say, £10,000 for the last two years one cannot get an increase from any bank manager that I am aware of.

Interest rates have never been as high and in the last couple of months have increased from 16 per cent to 18 per cent. Now if one is overdrawn in the bank they are imposing an additional charge of 6 per cent on top of that already high interest rate. That is shown on one's bank statement at present as a surcharge of 6 per cent. I should like the Minister to say, when replying, whether he has checked to ascertain whether or not this is legal. Surely when a person borrows money at a given rate a bank has no authority, without informing the person who has borrowed the money, to impose a surcharge of 6 per cent on top of even the lowest rate of interest, 18 per cent, which would render that person paying interest at 24 per cent on any excess he is allowed. No business or industry, no matter how well run, can afford to pay interest at that rate. I should like the Minister to tell me whether the banks have authority from the Minister for Finance so to do. At least he should inform the House that he has checked with the Central Bank, or these faceless people, to ascertain whether or not they have given authority to the commercial bank to impose this ridiculous surcharge of 6 per cent on top of an already very high overdraft interest rate.

I wonder where this country is going; where the Government are going when it appears they can sanction an overdraft interest rate of 18 per cent which may go even as high as 22 per cent. Surely the Government should have initiated legislation under which the increased profits made by the banks are returned to the Government for spreading amongst the poorer sections of the community. I do not want to labour this point unduly but I should say that at the best of times in this country, the best business cannot get money unless it is subjected to an interest rate of 18 per cent and, then, if they are overdrawn on their authorised overdraft there is a surcharge of 6 per cent imposed. Indeed, if their account is not good, they could be charged interest at a rate as high as 22 per cent, plus the 6 per cent, making it uneconomic for them to progress in the way they should in present circumstances.

It is absolutely ludicrous that, under this present monetary policy, the Irish banks cannot give any extra money to businesses, to industries, the tourist trade, factories or whatever. Yet we can turn around and get what we term foreign money at far cheaper rates. There has to be a catch which might not be as bad as it would appear. The catch is that one borrows at present exchange rates in regard to foreign, EEC money in accordance with the rate of the punt. I know of different business people who can go into their bank manager at present, who do not have to pay 18 per cent and who can get £10,000, £20,000, £30,000 or £50,000 on which, even after the bank has allowed its charges, leaves the applicant with an interest rate of 12¼ per cent. In other words money can be borrowed from our EEC partners at 12¼ per cent while the poor devil at home trying to buy a house, build one or whatever must pay anything between 18 and 22 per cent. There used to be an old saying: how can you buy Killarney? If we do not watch ourselves there will be a lot of foreigners taking over in this country. It is beginning to look that way, with large advertisements in the papers by foreigners looking for hotels and different types of business which they buy with foreign money. These people are buying great wealth in the form of businesses and land here at present.

In the statement on monetary policy issued in March 1980—to which I have referred already—it is said that it will be reviewed as the year progresses. As 1980 progresses I hope it will not be reviewed even more stringently because it is only now people are beginning to feel the pinch. There is absolutely no money to be got from any of the banks that I am aware of for any kind of house improvements, for the purchase of land, houses or the building of houses. We public representatives are discovering that even when constituents have been passed for a housing loan from their local authority and must then get a bridging loan from the bank they discover that their local bank manager cannot give them, say, £5,000, £6,000 or £7,000 for eight, ten or 12 weeks. That is unfortunate for a person endeavouring to do something for his country by building his own home or whatever the enterprise may be. When replying the Minister should tell the House whether or not money is available for bridging loans. If it is not it should be made available to people who have been passed for county council loans. Things have got to a very critical stage.

It is only now that we are beginning to feel the hunger pangs of this recession. Only in the past four months have businesses begun to get bouncing cheques. The beginning of the recession did not hit too badly, but it has begun to really bite now. Manufacturers are being pressed by the banks, the wholesaler is being pressed by the manufacturer, the retailer is pressed by the wholesaler and the ordinary man on the street is pressed by the retailer. It is a vicious circle. There is a lot of anxiety within the business community about bouncing cheques. It is only since April and May of this year that it is becoming obvious to everybody that many firms are in financial difficulties and some are going out of business. Part of the reason for this is the recession.

Under pressure from the bank managers many businesses find that they have not enough capital to carry on. It is ridiculous to have a lessening of control as far as businesses are concerned. It costs something in the region of £7,000 to bring in new jobs, yet jobs are going by the wayside just because businesses have been put under too much pressure too quickly. If a firm is up for sale, with the best will in the world people cannot buy it unless they can borrow the necessary finance, unless of course the person has the ready cash. The flat business in Dublin went through critical times in the last 12 months because money is just not available. We are lucky that we have the ICC and the ACC to look after the farmers and industry, but they can only do so much and even their rates are not very attractive at present.

The Minister should meet the directors of the Central Bank and talk to them with a view to getting more money released to the private sector and in some cases to the public sector so that this recession will not bite further than it is at present. It is not right that the Central Bank should make far reaching decisions without having to be responsible to anybody. The Minister for Finance should accept the responsibility. I am sure the Minister has means at his disposal whereby he can influence the Central Bank to ensure that various sections of the community can be helped.

I would be the last to say that the Finance Bill is wrong in everything it has set out to achieve. It is not. What I am worried about is that we are giving a much needed increase of 20 and 25 per cent to social welfare recipients, and inflation will probably reach 20 per cent in 1980. Perhaps we are just issuing a type of confetti money so that in real terms we will be worse off, not better off, in 1980. Ireland, instead of being one of the cheapest countries in Europe, will become one of the most expensive countries in Europe. This is a cause for great concern. We are gradually pricing ourselves out of the market.

As far as the punt is concerned, even out friends in Northern Ireland do not want to know anything about it. When travelling through Northern Ireland about two weeks ago I went into the post office to get a 10p stamp. I handed the postmistress an Irish pound, she looked at it as though it were Arabian money and refused to accept it. As I had no other money on me she gave me the stamp for luck. In the long term the break with sterling is another barrier which we have erected here. It might be advantageous for Northern Ireland people to come here but it does not encourage anybody in this State to go to Northern Ireland. If we want to buy anything in Northern Ireland we must have sterling. When the break with sterling was made we were told that the punt would maintain its value with sterling, but the Irish punt has dropped by at least 10 per cent. That means that all of our imports will cost us 10 per cent more than they will cost our counterparts in Northern Ireland, and it is estimated that about 60 per cent of all the commodities we use are imported. This aspect should have been looked at in greater detail before we made the break with sterling. At that time I said here that to break the link was not right, that we should build bridges and not break them. It will cost a lot of money to rebuild that bridge and get back on a par with sterling. I hope that when I am talking here in two or three years' time the punt will have risen again. When the punt has gone as low as 87p against sterling, and is now worth 90p against sterling, it is very critical for any industry which has to import a major share of their commodities to function.

There is no doubt that in this Finance Bill the Government are trying to impose more indirect taxation. There are two schools of thought on this. Generally it is a good thing and probably indirect taxation is a better way of collecting money than direct taxation. However, it is only fair that it be pointed out to the public in general that the amount of money that the PAYE workers have saved through this Finance Bill is taken back in the increased taxes on motoring alone. The motoring public will be paying back about £125 million extra and the relief for PAYE workers is £131 million. Therefore, the motorists are practically paying for the PAYE workers. This may sound fine in a place like Dublin, but the people I represent in the furthest part of the north-west and the west coast must have a car to go to their work and even to live.

In the area that I come from there are no trains, the bus service is very limited and most households must have some mode of transport because the nearest town is quite a distance away from them. The people that I am talking about will have to pay so much more and get nothing in return from the Government. Fianna Fáil in their manifesto of three years ago promised that they would take the tax off cars. That sounded very good then and it probably saved the average person who had a car something in the region of £30. In this Finance Bill they have increased the price of petrol by 20p, ten days before they increased it by 10p and about a week after by another 2p. With an increase of 30p on a gallon of petrol it is costing the average motorist possibly £230 per year extra to run his car and instead of saving £30 he is paying out over £200 extra.

The Government are getting away with little points like this in their indirect taxation scheme. The public are beginning to realise that every time they go to the petrol pump and put in £10 or whatever it may be for petrol, now they get only three-quarters of their tank filled for this amount whereas previously it would purchase a tankful. This is one of the smart little provisions that the Minister has introduced in this Finance Bill.

I have mentioned the county that I come from. As far back as March I have been at various meetings there and explained to the small farmers in that area that they would not be getting an increase under the Small Farmers' Assistance Scheme. That was a very good scheme which was introduced some years ago to help the underdeveloped western counties. Under it small farmers were entitled to assistance based on their valuation. The idea behind the scheme was that if it was based on their valuation the small farmers would be encouraged to increase their stock of sheep or cattle and in so doing they would not be penalised. Then the Minister in his budget speech said in very small print, so to speak, that people under the Small Farmers' Assistance Scheme would not now get an increase in the 1980 budget unless they went for assessment. By that he meant that each small farmer has now to report to the local labour exchange and state how many head of stock or what means he has. I do not agree with this. It is wrong because there should be encouragement, particularly of small farmers, to more productivity. We should be encouraging them to improve their land by draining it, to increase their stocks and so on. Once we improve the land, practically everybody benefits in one way or another. This is another form of hidden taxation which has not been made clear to the people. The people in the six western countries are wondering why they have not been given an increase and we have had to tell them that the whole system has been changed. It will be remembered that years ago Fianna Fáil took the dole from single people and there was uproar about it. After four or five weeks they had to restore it. The people that I am talking about now, the small farmers who were getting this assistance, are too small in number to create the same uproar. The Government have taken a backward step in this and I am very disappointed about it.

I cannot stand here without talking briefly about the shocking increases that have taken place, particularly in my own trade, the supermarket trade, in the last 12 months. People who are in that type of trade realise that everyday when the post comes in they have a pile of documents inches thick regarding increases taking place day in and day out in the price of stock. The Minister for Industry Commerce and Tourism, the Minister for Labour and the Minister for Finance have got to work out some kind of policy whereby prices and wages can be better controlled, because these have to be dovetailed. At present England and Ireland are facing an inflation rate in 1980 of probably 20 per cent. The inflation rate of other countries of Europe is in the region of 5, 7, and 10 per cent. There is something drastically wrong. A country is like a business. If either is not being run properly it gets out of hand, and this country is starting to get out of hand. Instead of becoming one of the more attractive countries and cheaper to live in, now we are becoming one of the most expensive countries. For a nation of just over three million people to have an inflation rate of just over 20 per cent is serious. Everybody can say "Well, it cannot be helped". That is not true. We have appointed Ministers and it is the Ministers' responsibility to try to find a formula whereby the shocking inflation rate can be brought back to normal level.

It is not reasonable that some countries in Europe have inflation rates of 5, 6, 7 and 8 per cent while the rate in Britain and Ireland is 20 per cent. It comes back to management. The Government are on that side of the House to manage the affairs of the country just as any business manager is put in charge to manage a business. If the business is not functioning properly there has to be some change in the management and if the affairs of this country are not right there has to be some change in the managers who are running it. The managers of this country are the Ministers on that side of the House. Some decision should be taken even through Fianna Fáil backbenchers. They should arrange these matters. I may be criticised by the next speaker if he does not agree with what I am saying but I am giving the facts. I am delighted that Deputy Briscoe is here and as he is another type of business man he should know his facts and figures also.

Mr. White

No, but there is a certain amount of substance in it. The Deputy can answer that in a few minutes.

An Leas-Cheann Comhairle

I shall be calling Deputy Briscoe next, I presume.

Mr. White

I am delighted to hear him answering for the Minister for Finance. Perhaps he has more knowledge than some people think.

An Leas-Cheann Comhairle

He is not entitled to answer at this stage—later on, perhaps.

Mr. Briscoe

I was trying to help the Deputy by saying that there is no possibility of operating a water tax.

Mr. White

I am delighted that Deputy Briscoe has said publicly that Fianna Fáil are not bringing in any type of water tax.

Many things that were previously available to the public have now gone due to the recession. There is no water and sewerage grant. Reconstruction grants disappeared at the beginning of the year. We had a very sensible central grant whereby anybody who converted from imported fuel to solid local fuel was entitled to a grant. These grants have gone also. There is no increase for people on small farmers assistance schemes. One thing that has mystified me for a long time is that we are importing so much oil and other fuels while we have thousands of acres of bogland. If roads into these boglands were developed probably millions of pounds could be saved particularly if people in smaller towns and cities could cut their own fuel on days like this. It would be good exercise for them and there is splendid air in the bogs. Part of the problem is that there are no roads into thousands of acres of waste land that should be developed.

I realise that Bord na Móna are doing good work in this area but the money given to Bord na Móna should be increased. We should aim at having our own energy resources. The one encouraging thing about the spring of 1980 is hearing rumours of substantial oil finds off the west coast. Both sides of the House hope this is true and that within the next couple of years it will be possible to start processing this oil from the depths of the sea. We had the Minister for Energy on TV or radio recently speaking of the different resources we have, wind and wave and so on, but we have here a resource that we have never really utilised to the full. Even peat briquettes have been on ration for years. Deputy Briscoe, who comes to Donegal on holidays, knows what I am talking about when I say that there are thousands and thousands of acres available, something viable that we should have developed years ago and yet we are not devoting money to it.

As I see it there is no money at present for school building and reconstruction. I have applications for different schools with the Department of Education—two in particular—and I have been told since November last that these are awaiting sanction, in other words, awaiting the sanctioning of money. Between November and now this sanction has not been forthcoming. This seems to be general policy throughout Government Departments; they hold back sanction of anything that costs money as long as possible. Probably the Ministers are told to spend as little money as possible in 1980. It is completely wrong that where schools have been planned to be built with amalgamation due to take place and where the Minister for Education has been approached on numerous occasions he has not found it worth while to sanction these schools. It is part of the recession, probably because the Government have no money.

Recently I asked a question about the number of reconstruction grants and house grants that were behind in payment. The Minister admitted that many of these were behind at present. This is completely wrong. If a young married couple build their own house and are entitled to the £1,000 grant it is wrong that it should take six, eight or nine months after the house is finished completely before the grant is paid. Travelling as I do from Dublin to the West every week I find that many of the roads are in a deplorable state. Everybody must admit that. The longer we put up with the present type of roads the worse it will be in the long run. It will take a massive injection of money to put these roads into proper state of repair for modern traffic. The Government should consider seriously the roads situation in this small country. I will not talk about Dublin because major policy decisions have to be made and new roads have to be built. I am talking particularly about the west and the sorry state of the roads there. County councils have a deplorable lack of money for local improvement schemes. Some councils have been given only £3,000 per councillor for the roads in their area. That would be enough to cover about three small roads only. It is very easy to say we should spend as little money as possible on the roads, but the problem has to be faced sooner or later, and the longer we let the roads deteriorate the worse the problem will be.

I want to speak briefly about the tourist trade. The Minister for Tourism should not make announcements about hotel grants unless the money is available. Last September he announced that a new bedroom grant scheeme would be available for guesthouses and for existing and new hotels. It was only in April that the money became available to Bord Fáilte. When announcements are made the money should be available. Many people are now behind in their building programmes because they were told week in and week out by Bord Fáilte that they were waiting to hear from the Minister. That is completely wrong.

I sincerely hope 1980 will be a good year for the tourist trade, I have my doubts. Last week I was talking to some travel agents and it is amazing how many cancellations have been made by Americans and English people. The reason for the cancellations is twofold. First, there is a recession in America and it is affecting their pockets. Secondly, many tourists who came here in the Spring of this year found it is more expensive to come here than it is to go to Miami, for example. Food is more expensive and accommodation is more expensive. It is almost unbelievable that you can fly to Miami for a fortnight's holiday for about £250. Anybody who stays in a first class hotel in this country will have to pay something similar, without the cost of the air fare and without being guaranteed good weather. We can never guarantee the good weather which can be guaranteed in Miami, or Spain, or elsewhere. We guaranteed people value for money.

There should be some kind of a fuel subsidy to encourage the motoring public to come from Scotland, England and the other EEC countries. Probably what strikes people most coming back to Ireland from abroad is the dirt and the filth and the litter in the hedges and alongside the roads, The Minister for the Environment and the Minister for Tourism should clean up the environment.

Mr. Briscoe

I should like to start on the note on which Deputy White finished in relation to the number of Irish tourists going to America. One could say this shows that our economy may not be as depressed as the American economy. There are probably more Irish people going to the US than there are Americans coming here. I agree our tourist business has been very badly affected by the recession in America and by the high rate of inflation.

I go to Enniskillen quite frequently. I find the people there very generous. I have never experienced any problems changing punts there; that includes the purchase of petrol; they will always take Irish pounds.

As he said in his introductory remarks, the Minister set out to introduce greater equity into the tax system. Indeed he went far beyond what he was required to do as a result of the Supreme Court decision. It was not even a question of doing it with a bad will; he did it in a sense of its being justified. Of course it is always easier for any Government to introduce a change in tax laws when the Supreme Court of the land says they must. It must be remembered also that when people are granted tax relief in certain areas other people will have to take up the slack and pay extra tax but the Minister overcame this problem. At one point I was very concerned that married couples, where one spouse was not working, in most instances, the wife who remained at home to look after the children, would be rendered a second-class citizen. It did not happen that way. Everybody got virtually the same allowance. Some little recognition has been forthcoming from the Opposition of this change effected in our taxation system.

I wish now to make a special plea in regard to one of the changes announced by the Minister. This applies to a widow in the year in which she is bereaved, when the Minister has stated she should now get the same allowance as if she were still married. If her husband happened to die towards the end of a financial year, there might be a couple of months only in which she could avail of the same allowance. Perhaps the Minister could introduce some method under which a widow would be granted the same tax allowance for a full year from the date on which her husband died. In the course of his remarks the Minister said:

(c) allow widows, in the year of bereavement, the married allowance of £2,230 instead of the widowed person's allowance of £1,185.

I would hope that that means for a full year after her partner had passed away.

Another point to which I should like to draw the Minister's attention is that of fuel costs. I am extremely nervous, unhappy, tense and worried about the cost of fuel during next winter for the less-well-off sections of our community. The Taoiseach, when Minister for Health and Social Welfare, introduced the scheme for which we had been pressing for so many years. In fact representations in this respect had been made to Deputy Cluskey when he was Parliamentary Secretary to the Minister for Social Welfare. That was the fuel voucher scheme which replaced the turf voucher so that people could convert it into any form of energy they wished. That has been done and fuel vouchers of £1.50 a week introduced. I believe this will be inadequate for the forthcoming winter. I am sure the Government are aware of this. I would ask the Minister for Finance to keep a very close eye on this matter because heat is as essential to life as is food. Whilst the general increases of 25 per cent announced in the budget are to be welcomed it would be beneficial to the weaker sections of the community if the value of those fuel vouchers could be increased around the month of October, in advance of the severe weather months.

While everybody realises that their disposable income is higher as a result of the tax reliefs granted in the budget, they are endeavouring to reconcile this with the current credit squeeze. I believe we are very fortunate to have had an increase effected in disposable incomes at a time when there is a credit squeeze obtaining. This is something people may not fully appreciate. Had the kind of budget being forecast by many pundits come into being on 27 February last, with no increases in disposable incomes having been granted, possibly this excuse could have been used by the Government on the grounds that we were living beyond our means and when, today, there would be very many more people in difficult circumstances. People should be availing of this extra income to place themselves in a position of relying less on credit. Certainly it has had an effect on my way of life.

Tax on petrol has been referred to by other Deputies. When the Coalition increased the road tax they did so without taking any account of whether a motorist used his car one hour a week, one day a week, or whether he travelled two miles, five miles or 300 or 400 miles a week. I believe that was a most unfair system of taxation. Deputy White said motorist costs then were increased by an average of £30. I would disagree with him. I would contend the increase amounted to something between £40 and £50. Many people contended then that tax should be imposed on petrol itself so that the more one used one's car the more tax one paid. In a sense the Government have been accused of reintroducing that motor tax by imposing a tax on petrol. This has been contended by many Opposition speakers. Of course they are free to say so. They are in opposition. It is their job to criticise and to make the worst of a contention if they can. I would argue that the latest increases were necessary. Certainly I think somewhat more carefully before getting into my car. I never did have much time at weekends. I have even less now but I do not now go around joy-riding at weekends. The signs are there for everyone to see, that there are fewer cars being used than heretofore. We must conserve our petrol. I do not like the price of petrol being the only way we can restrict its import. It favours the wealthy and does not favour the less well off. Nevertheless, it is a necessary inhibitor in its own way.

Cars are being built smaller to use less petrol and that is right. We again, must exercise a certain amount of self-discipline in how we use imported petrol. If you do buy an imported item, you could well be asking the job of somebody working in this country, and we must be conscious of that. We are in the EEC and the EEC markets have as easy an access to us as we have to them. They have access to perhaps 500 million or more people. We have access to a market of 3½ million. We are getting the better of the bargain, in spite of the discontent which is being generated. Deputy White spoke about the high cost of imported goods, costing 10 per cent more. As I said at the beginning, our goods are more than keeping pace with the amount of goods coming in here.

I wish to deal with a couple of points in the Minister's speech. The Government have made it clear that if, by the end of the year, expenditure is cut down we can look forward to a good year in 1981. This, to a large extent, depends on what happens internationally. It depends on what happens in America, in Saudi Arabia, in Iraq, in Iran and the other oil-producing countries. If there is a conflagration out there, and oil supplies are tied up for any length of time we shall be in an unsustainable position. The Government should be complimented—no pun intended—on the energy it has used to find new forms of energy here. There is a lot of exploration going on. Hopes are kept reasonably high, but not too high, that we shall succeed in getting a lucrative find. If we do, then that will prevent the sword of Damocles hanging over our heads in regard to jobs.

The Minister of State referred to the purchasing power and level of income. I emphasise once more that inordinate wage increases can only bring us deep into the mire from which we will have difficulty in extricating ourselves. We must realise that we have to keep in line with our European partners. I was interested to see a figure quoted in a wages settlement in Sweden of 7 per cent, which was considered high by that country's standards. Sweden could be reputedly one of the wealthiest countries in Europe, and if they can keep wage increases down to 7 per cent, why can we not do the same thing? I wonder is there any way in which the trade union movements of the nine member countries of the EEC could come together and work out a common policy in the interests of all the workers of the continent of Europe.

I believe that the next wage agreement, if there is to be one, will be the deciding factor on whether or not we are to survive into the eighties as a Government which can pay its own way. Trade union leadership has always been responsible. There may always have been one or two irresponsible voices which often get on to the radio because that is what they go for, making outrageous statements and demands without any consideration of the ability of the nation to pay. I recently heard one trade union leader referring to a 20 per cent increase target. He could not have been serious. He could not have worked out things so well that he could come to this figure of 20 per cent. Not even the workers that he represents would believe that.

The improvement in the tax bands is welcomed by a great number of people. Last year we saw the PAYE marches which packed a good message into them. The message got through and one year later these marches have stopped. The people have obviously seen the sincerity of the Government's attempts to bring equity into the tax system. It brings great credit on the Government and on all responsible for these marches that the message was recognised and that they were not regarded as a movement to undermine the State or a revolution or anything else. They expressed a genuine grievance. However, some of the people on the marches were not even in the tax bracket and may have found the result of the marches not to their advantage. It has been made disadvantageous for a person to be on the dole. The day when a man can be drinking beside his neighbour having taken home £50 a week and nothing to be paid in tax on it because of unemployment benefit and the man earning £60 and taking home only £49 are gone. There is an incentive to people to work more. If people work overtime the tax man is not going to relieve them of the extra money earned. There had been no incentive for anyone to work overtime. It got to such a level that you could not expect anyone to work except out of patriotism. That is what they were being asked to do and there was no way they would do that. This budget took care of that very effectively.

As a city Deputy, I welcome the improvement in the relationship with the farming community.

I have always said in this House that farmers have been very misrepresented by many spokemen as people who are completely against taxation. Farmers do not have to like taxation but they will accept it if it is fair. They are always willing to pay their fair share. Everyone will scream like hell when being taxed, particularly for the first time. It may be a little disappointing to the Opposition who had hoped to keep the farming organisations active against the Government until the next election. I believe the Government have shown their sincerity and have worked very well to mend the gap between urban and rural people. As a city Deputy, while there are no farmers in Crumlin, I have no hesitation in standing up to say that I feel that the farmers——

Mr. Griffin

How many farmer constituents has the Deputy?

Mr. Briscoe

I remember a man in Crumlin came to me to ask how he could get a loan from the ACC to have a cow in his back garden. I am afraid I failed in my representations. I am not out of touch with farmers because there are plenty of rural Deputies in the House with whom I am in constant contact. While the whole idea of taxation may be unfair and a horrible thing, it has to be faced that there would be serious consequences for a large section of the community if the Government decided to abolish it.

Wage rates in many fields are much higher here than in Great Britain, which has always been acknowledged as a far wealthier country. I will not equate some of the wage rates which have been offered to some of the people on strike lately. It now pays builders here to bring over carpenters and other skilled workmen from Britain, put them up in hotels and have them working for them. A small sub-contractor told me of one company who brought over carpenters from Britain. They were making £300 a week working from 7 o'clock or 8 o'clock in the morning until about 7 o'clock in the evening. They were put up in one of the top class hotels in the centre of Dublin. If the wage rates are attractive people from Britain are very willing to come here to work.

One of the other causes of the shortage of skilled labour has been the high rates of tax. Many of those men have gone working for themselves and done odd jobs. It should be publicised a little bit more how the Government allow people to claim against their income tax for any home repairs which are done. I understand that by next October all those people who had applications in for improvement grants to their homes before the end of January should have their work completed by October or they will not get their grants. This should be publicised to the people who have gone to a lot of trouble to make sure that they had their applications in on time. The man who is a dole dodger, who is working as a contractor for himself, doing jobs in the house, will now have to give receipts for payments he receives from householders for work he has done for them. Those householders can now send the receipts in with their income tax returns. The Minister should see that a little notice is sent out with the income tax return form in future years reminding people of changes in the tax system which they are entitled to avail of. People get the impression that the Revenue Commissioners would rather not tell people what they are entitled to.

The Government have taken steps to control the allowance for business entertainment. Under section 51 they are limiting for tax purposes the deduction allowed in respect of business entertainment expenses to 50 per cent of the amount otherwise allowable. That is very fair. I often wonder what is in the minds of people working in the catering business, particularly waiters, when they see people coming in from large companies and some of the semi-State corporations day after day lunching at the tax-payers expense. This is one of the best ways to build up resentment. The limitation under section 51 may go some way towards creating the climate for more frugal living.

We must give credit to the Minister for Finance for the section dealing with income splitting in the PAYE sector. Perhaps the Minister made virtue out of necessity. However it favours the double income family rather than the average family on £7,000 per annum or less.

When one reflects that last year £732 million were taken in income tax and that this year the Minister hopes to take £977 million in tax, an increase of £245 million, one must ask where is the sleight of hand or where is the fraud in this Bill, with the Minister alleging that he is giving concessions to the PAYE sector but on the other hand hoping to gather in a massive £977 million from the PAYE sector. It is only when one examines the sections of the Bill line by line that one sees the sleight of hand and that a trick was played on the unsuspecting PAYE worker. True the marchers have stopped, but they have not stopped for long because when the people realise the implications of this the tramp of feet of the PAYE workers will be heard again on the streets of Dublin and throughout the major towns.

This Finance Bill shows the utter lack of sensitivity of the Government for the problems of the farming community. One need only meet farmers to note their total lack of confidence. Last year was one of the worst years in farming, as farm incomes dropped in real terms by 28 per cent. This year they expected the Government to be sensitive to that position, but instead section after section of the Bill imposes further levies and tax. Because of this farmers have asked themselves if it is worth being in agriculture. Even if they look to the EEC they see that there also levy after levy is being imposed. I know a number of farmers who have deliberately cut back on production because it is not worth the effort. They say that their contribution to the economy is not appreciated by the Government. Looking through the sections one must agree with them that the Government are totally insensitive to their needs.

They need, above all, an appreciation of their contribution. Because 48 per cent of the total value of our output comes from the agricultural sector and ancillary industries, one must realise the vast contribution of the farming community to the economy. In this Bill the Minister for Finance hopes to take £66 million from the farming community by way of rates, resource tax and levies. About 9,000 extra farmers are being drawn into the income tax code, 36,000 farmers altogether this year will give a figure of £33 million and 13,000 extra farmers will be asked to pay this iniquitous resource tax. All this is at a time when the farming community need an acknowledgement of the vast difficulties they are facing at home and in Europe.

In South Tipperary alone this year 699 farmers with rateable valuations between £40 and £50 will be brought into the income tax net, and 1,125 extra farmers with rateable valuations of £70 or over will have to pay resource tax. In North Tipperary 555 farmers with £40 or £50 valuations have been brought into the tax net and 526 farmers with valuations of £70 or over will have to pay resource tax.

The resource tax is the most inequitous tax of all. It is based on the Griffith poor law valuation system, which is 120 years old. It is unjust to base another resource tax on what is acknowledged by all to be an inequitous form of assessment and it only compounds the situation. I would urge the Minister to have second thoughts on this and not to impose this tax this year having regard to the hardship it would cause to the farming community.

The farming community have agreed and are willing to pay a fair share of taxation and they are complying with the Minister's wishes in trying to arrive at an equitable form of taxation. This resource tax is a further tax on farmers who are already paying income tax and some farmers who are not liable for income tax will still have to pay this resource tax. Farmers were led to believe in the manifesto that the notional system of taxation would be preserved, but this year the Minister said it is to be abolished. The removal of the agricultural grant to farmers with valuations of £60 down to farmers with valuations of £40 is also bad. In South Tipperary 1,170 farmers are involved and in North Tippepary there are 906. These farmers are being penalised. Despite the 10 per cent increase in rates this year they have been brought into the rates system. Money, whether through resource tax, the imposition of rates, income tax levies, is being taken from the farmers and it is money that they badly need to compete with their counterparts in Europe and to avail of the opportunities in the EEC which unhappily are not there to the same extent as when we first entered. The money is needed for buildings, for extra stock, for fertilisers and for getting increased production and it is being siphoned off. The farmers are further penalised by the ever-increasing costs of inputs—fertilisers, fuel and the very high interest charges. If on this fine, sunny morning in May I am pessimistic or gloomy I am only voicing and verbalising what the farmers of Ireland are thinking. They were hoping that in the Finance Bill a Minister sensitive to their needs who would appreciate a contribution to the economy would take these factors into consideration and give them confidence, because of all sections of the community the farmers are prepared to work, and to work seven days a week, and increase output if given encouragement. When they find month after month Bill after Bill being introduced into this House to do the reverse, naturally they become disillusioned and disenchanted. They lack confidence in their agriculture and the whole economy suffers as a consequence.

Also, unfortunately, there is this great rift between the PAYE sector and the farming community which was engendered, not intentionally, by the Government and aggravated by Bills such as this. It is a pity that the two communities, urban and rural, cannot be complementary to each other and work together, because the urban community need producers and the farming community need consumers. The Government should place greater emphasis on healing this division so that the two sections of our community can strive together and avail of the great opportunities within the EEC.

One aspect that I would bring to the notice of the Minister is the payment of grants at all levels. The house improvement grants have been abolished by this Government but some are still outstanding. There are the £1,000 new house grant and the farm modernisation grants. All Deputies of this House have been inundated with constituents complaining that grants are long outstanding and have not been paid. I urge the Minister to speed up the payment of them. It is felt widely at the moment that there is a deliberate policy of finding minimum faults so that inspection after inspection will ensue and the whole process of payment of these grants will be slowed down. Likewise with social welfare recipients, particularly those who are utterly dependent on the weekly social welfare allowance, it must be ensured that these payments are made regularly and processed quickly in order to abolish any worry or strain for these people.

Mr. B. Desmond

There is very little doubt at this stage that our economy faces extremely difficult times ahead. The crucial aspect of that situation will be the extent to which Government financing will be in a position to assist the economy in riding out the recession. Very considerable courage will be required on the part of the Government, and also very considerable skill, if we are to overcome the recession through which we are now ploughing.

At the moment unemployment is increasing by about 1,400 plus per month. I do not want to sound too alarmist, since our country has had recessions before this, but one reads each week of the number of liquidations, voluntary or otherwise, and there is no doubt that job creation, even if it works out this year at 8,000, 9,000 or 10,000, will still leave a net shortfall of 5,000 or 6,000 jobs at the end of this year. All the indications are that way because of the high level of redundancy. Therefore, my submission is that in the summer months the Government may well have to take the strategic decision of introducing a supplementary budget in the autumn, when we come back around the middle of October, because the Finance Bill which we are now debating has not the breadth of approach or the mechanism to deal with that situation.

We may have to have additional taxation in 1980 in order to sustain job maintenance and job protection. That is a pretty miserable choice, and it will be infinitely easy for the Opposition here to denounce the profligate policies of the Fianna Fáil Party in 1977-78-79 which have left the national coffers sparse or empty with no reserve to spend on the rescue side of the IDA and no reserve of cash now to enable Fóir Teoranta to come to the aid in a substantial measure of wide sectors of industry. There is now no money in the National Exchequer to enable the State to face up to the prospect of further public sector pay in the final quarter of 1980. We heard of the £100 million set aside in the budget for increases in public sector pay, and that £100 million is gone—or if it is not gone the nurses' pay settlement when arrived at finally will flush down the remaining expenditure level.

The options open to any Government are harsh and pretty vicious. When political parties create and nourish impossible expectations in an open economy such as ours and then hope to ride out that situation into a succeeding general election, the only hope one has is that the degree of self-deception created will dawn on the electorate and perhaps those who will have the unenviable task of going into government subsequently and trying to restore order to the national Exchequer returns will not be treated too harshly in the following period.

Such is the gravity of our economic situation that the signs are only dimly appreciated. The Government have got themselves into an Exchequer straitjacket by having a very narrow base of taxation, having to face up to substantial increases in public expenditure even with the expenditure cuts that have been put through in the past four or five months which have in some respects been cosmetic. In other respects, they bite fairly tight. Overall, the Government are trying to have it both ways in respect of public expenditure. The prospect is not very encouraging. Whether the Taoiseach, who is the shadow Minister for Finance, is prepared to convey that sense of urgency to the Cabinet so as to enable them to take resolute action we have yet to see. The budget was a bit of a mish-mash and certainly did not face up to many of the harsh options that exist.

These are not just options facing the Government. They face particularly the trade union movement. The Opposition blame the Government. The Government berate the social partners who say it is the Government's responsibility to provide full employment. The private sector deny that they have any great role in job creation. The various pressure groups want what they demand. Nobody accepts responsibility for the fact that everyone, whether in opposition or in government, in the trade union movement, in private or public enterprise, has a direct involvement and responsibility each to the other and there is no way in which these responsibilities can be shuffled off to one another.

Of course that is a famous Irish preoccupation just as in Britain at present where, with the confrontation politics of Mrs. Thatcher, trade unions blame the Prime Minister who, with her blinkered economic approach does not believe in involving the trade unions or indeed the employers to any great extent in economic policy. The result is that there is a perennial prospect of confrontation until the electorate tires of one side or the other. At present there is no indication that they are particularly tired of Margaret Thatcher.

There is a choice in this country and in many respects it is between more employment and higher incomes. That is a pretty stark choice. I am a member of the largest trade union in the country and was a trade union official for a number of years before I went into full-time politics and I think the stark choice now is that everybody, whether public servant employee or employee in some sector of manufacturing industry can enjoy in the next 12 to 18 months substantial increases in living standards—we can even enjoy a 20 per cent increase if it is negotiated—but the logical outcome will be that there will be those of our children and our neighbours' children and those leaving school in 1981 and 1982 who will not get jobs in the public sector and will have to emigrate just as my school pals had to do in 1956 and 1957 when, out of a class of about 30 only eight or nine managed to retain a foothold at home.

The choice facing the Irish people in the next two or three years is either a standard of living that will not improve, a standard which in some respects might relatively decline or some prospect in accepting that situation, of job creation, maintenance of employment and productive growth. It is a pretty miserable choice but there is no other way to get out of a recession. We are particularly vulnerable in regard to a recession because a major sector of our manufacturing output is foreign-owned and controlled. If an American company gets a bad cold in the American recession then the Irish subsidiary can get a bad attack of pneumonia and close down. We are particularly vulnerable to the American recession because of the high American capital investment in the Irish economy. We would be putting our heads in the sand if we refused to face that implication.

Whatever scarce resources we can get out of the economy and set aside for the remainder of this year must be set aside above all for the protection of jobs, assisting redundant workers in terms of training and retraining, assisting companies with serious liquidity problems and companies in regard to exchange rate fluctuations. We do not yet know the full impact of the recession. I hope not, but we may yet have to face in about three or four months' time the prospect of devaluation. That is not a prospect to which any of us would look forward.

If the recession bit deeply and if panic set in, and particularly if the American economic situation was not handled effectively by President Carter—and at the rate he handles his foreign policy he is quite capable of going half mad in terms of domestic policy—the impact on the Irish economy could be quite severe vis-à-vis the dollar. We may face further increased energy prices in September-October—and there are indications that already there are movements in that direction—the Irish pound could come under the most painful pressure, leading to devaluation.

At the moment one cannot prognosticate that this is likely to happen, but it is a contingency we would be quite mad not to take into account in future economic planning. The tragedy is that, with the demise of the Department of Economic Planning and Development, the ignominious burial of its political head, and the litmus paper absorption of its staff into other Government Departments, in terms of economic forecasting for the second half of 1980 the apparatus of forecasting has been subsumed into the pragmatic and almost inscrutable views of the Taoiseach on economic policy. That is disturbing.

I should like to elaborate briefly on the other point I made, namely, that our resources must be conserved to fight unemployment and to maintain employment. The case has been made by the Confederation of Irish Industry that a good deal of our scarce resources, which might necessarily have to come out of a supplementary budget in the autumn, which would not be a give-away budget, would have to be used to help Irish industry which, for the remainder of this year, will have to pay 6 per cent plus in higher interest rates, on average, above any of their competitors within the EMS. It has been suggested that in aggregate that burden on Irish industry accounts for £40 million. I urge continued examination of the matter.

I gather there have been discussions between the Department of Industry, Commerce and Tourism and the Department of Finance about the prospect of exchange risk on foreign borrowings being underwritten. I suppose it is the usual case of Department of Industry, Commerce and Tourism going to the Department of Finance and the Department of Finance saying no. The Department of Industry, Commerce and Tourism lick their wounds and come back again. Again the answer is no. The Central Bank are not very anxious to see such a fund established.

I suggest strongly that there is real merit in the proposal of the Confederation of Irish Industry that exchange risk on foreign borrowings by manufacturing firms should be underwritten to a degree—I am being very careful—and that there should be and could usefully be a fund established in association with the commercial banks, and subject to approval by the Central Bank, without putting our punt at risk and without having it regarded as being at risk by the IMF or the OECD.

There is a case to be made so that industry can obtain funds at the same rate at least as some of their EEC competitors. I recall to the House that a strong view was expressed by the Central Bank that there was a considerable opportunity for Irish manufacturing industry to go abroad and borrow. The fact of the matter is that, in the past three or four months, Irish industry have not gone abroad and have not borrowed abroad. I would be interested to hear the Minister's views on this. They are scared out of their minds of exchange rate risks. If we are to encourage Irish industry to avail of lower interest rates abroad, we will have to give some basic protection to vulnerable firms.

I am always fairly slow about suggesting another subsidy, but this would not be a subsidy, as such, and there might be no net cost to the Exchequer in the long run in relation to such risks and such protection of borrowings. On that basis, the Government might not have to resort to massive cost implications in agreeing to that proposal.

I want to make some further comments on the income tax side of the Finance Bill. A large number of my constituents in south county Dublin were pleased with the income tax relief given, but we should stress very vehemently to the Government that the PAYE workers in the relatively higher incomes undoubtedly gained most from the Finance Bill, 1980. Such workers may well feel it was long over-due that they should so gain. Some were agreeably and substantially surprised that the gain was of such magnitude.

For example, a married couple with one spouse working, with two children and an income of £5,000, made a tax saving of £212, whereas those with an income of £15,000 gained £1,750. Some constituents of mine with a husband and wife working and an aggregate income of £20,000 gained £2,207. With the extra life insurance relief and the subsequent announcement of interest relief up to £4,500, those on higher incomes will gain even more. I accept that there was a valid case for substantial relief, but I question the economic wisdom of the extent of the relief granted.

Many tens of thousands marched in the PAYE demonstration, and while many of them in the higher echelons of income expected substantial relief they did not expect that they would be handed £2,500. They said: "Thank you very much" and went out of the country on a winter holiday. One questions the extent to which this was an egalitarian budget or a budget which had any real impact on the redistribution of income and wealth.

The major point in the budget was that basic personal allowances were not increased. That means that the poorly paid will find themselves back in the taxation net all the more quickly. There were increased personal allowances for the extremely low paid workers but these allowances are not of any great value because of the increases being so small. The Government expect an increase in income yield of more than 30 per cent in 1980 and value added tax is expected to yield an increase of almost 30 per cent, but who is to pay for those increases? Will they be paid for by the self employed? I would submit this will not be the case, although the Government talked about combating evasion and so on, about bringing people up to current year assessment and payment. But, by and large, the real receipts at that level are still rather small. This means that the great mass of PAYE workers and those in the lower middle bands will be the ones to pay the increases generally in income tax.

Many people expect the Labour Party to emphasise the situation in regard to capital taxation but I would submit that, Fianna Fáil having become so doctrinaire and not in any way touching on any aspect of capital taxation, the prospect of any rational yield for Exchequer finances from this form of taxation has been not only eroded but almost put out of existence. For the majority of our people capital taxation is of little interest because it does not affect them directly. But it should be understood that reasonable taxation on capital—and I would not in any way advocate penal taxation in this regard—raises more revenue and this means that the ordinary man in the street pays much less than what he would pay otherwise. In addition, this form of taxation makes for a more fair society to the extent that it assists in the redistribution of wealth, as any Minister for Finance in any of the European countries will testify. Another aspect of this which has appealed to me down through the years is that a reasonable taxation on capital encourages those with capital to become involved in productive investment rather than to leave the capital lying somewhere. Consequently, jobs are created, and the creation of jobs is one of the basic motivating forces of having a reasonable taxation on capital.

Much emphasis has been placed on capital acquisition tax or, in other words, the tax on inheritance. However, that tax has been eased to such a degree that I suspect that the cost involved in its administration is as great as is the yield in terms of revenue. I intend tabling a parliamentary question in the near future to find out whether my suspicion is correct. As a result of the re-gearing of this tax it is now rather slight and one that I would not regard as being effective in terms of tax on inherited wealth.

I shall return now to the question of the alleged motivation behind the budget, namely, to assist towards a further national understanding. I believe strongly that negotiations between the social partners regarding any new national understanding should evolve basically around the issue of employment. Under the current national understanding there has been a shortfall in job creation. There is hardly any trade unionist who would say that this situation is exclusively the responsibility of the Government. The Government are not magicians. They cannot produce jobs out of thin air unless, for instance, we want to have something like 70,000 gardaí and 600,000 civil servants or perhaps if we want to increase the Army by another 15,000, thereby living out of one another's pockets. I approve of the programme of the Government and of the employers in contributing £10 million each to those areas of employment where action was urgently needed. However, I suggest that the figure might be trebled for the year 1980-81 or perhaps increased to as much as £50 million or £60 million and that as a quid pro quo there would be substantial moderation in income increases. It will not be possible to make massive provision for job creation and to protect and maintain employment if there are huge income increases.

In the period ahead when we will continue to have very high interest rates I expect that the financial institutions will again have massive windfall incomes. There is need for much straight talking between the Taoiseach, the Minister for Finance and the commercial financial institutions in order that these institutions might put some of their surpluses into the kind of fund to which I have referred and which was established by a decision of the tripartite committee. That could help by way of direct contribution from them and also by way of direct assistance towards productive employment. I am not one who holds the view that one should nationalise the banks; bring them all in under this magnificent phrase "public control"; bring them into a room and say: now lads, we are running the show; we know what are your total assets; we know what is your total liquidity position, we know what are your total surpluses and, from now on, we will direct the nature of your total entrepreneurial investment and so on. In the nature of our society and mixed economy I do not believe that kind of simplistic approach is possible. Indeed I would even question whether it would be desirable. But I do vehemently hold the view that where those institutions amass very substantial profits, when their contribution to national economic endeavour appears to be to build more and more palatial head offices and branch offices, they could consciously make a far greater contribution to productive capital formation, towards job maintenance and creation. There is no reason in the wide world why they should not. In 1980-81 it would be no undue burden on the commercial banks were they to contribute, say, 20 per cent or 30 per cent of their anticipated declared profits to the tripartite fund to enable direct funding of companies facing exceptional liquidity problems.

That kind of positive contribution on the part of the commercial banks is possible. Indeed I would go further and say that if they were unwilling to do that, then there is a simple taxation remedy—their profits should be taxed on a penal basis. I would strongly suggest that they might not just be able to get out from under it by simply declaring a four, five or even 10 per cent profit on optional activities, because that would be an obvious subterfuge. Certainly one would be able to put the screws in a democratic manner on a more effective basis.

I would urge also that moneys of that nature should be used—a start could be made at present—for intensive economic studies on the development of our indigenous productive resources. I have doubts that the necessary expertise resides in the Department of Finance, or in the Department of the Taoiseach —bearing in mind that the Taoiseach's Department does not even have any economic division which has been one of the constant problems of Irish economic policy down the years; Taoiseachs are like county council chairmen; they leave it to the managers and have little expertise residing within their own offices.

I would suggest that there is a great need at present for a serious economic study to be undertaken on the development of our mineral and food processing resources—some interesting comments have been made recently on the farming side on food marketing propositions. There is need also for a very sharp and thorough examination of our tourist industry, which is dragging along on a high price, confused air fares, not terribly hygienic basis. There is need for very clear Government policy decisions on the natural gas oil exploration situations. Firm decisions are needed in the forestry area and certainly our fishing industry has not been exploited sufficiently. Those are areas with considerable potential for increased employment. I am not that naive to suggest that that kind of study and investment would reap returns overnight. Neither would I be naive enough to suggest that these areas would not require massive capital investment; of course they would; but we must get to work on the deliberate development of our indigenous productive resources. This is an area to which public funds should be allocated substantially.

I believe the Minister for Finance can bring about a substantial moderation in income increases in 1980-81. I believe he can do so if the trade union movement and employers are convinced that the whole thrust of Government economic policy will be on the maintenance of employment, the prevention of redundancies and so on: assisting firms having serious liquidity problems; giving additional funds to Fóir Teoranta and to the IDA rescue services. That is the way in which the trade union movement can be brought around to accepting substantial moderation in 1980-81. If that objecttive should fail then a supplementary budget in October could soften the coughs of a lot of people not prepared to accept that type of entirely constructive approach.

I hope the choices I have outlined will be regarded as reasonably constructive. There is now little financial reserve in our economy—a lot of it has been frittered away—but we have a new Minister for Finance. I have not the slightest doubt but that he will be extremely anxious to make his mark in his own way and be seen to be doing so in relation to his portfolio, in which I wish him well. It is a rather awful year to take up that portfolio, but such is the way of political involvement. I hope he will succeed in convincing the social partners of the moderation about which I have spoken. I hope there will not be massive cut backs in public expenditure, particularly on the social services side, because there is no need for them. I hope further there will be an honouring of outstanding commitments, whether it be Devlin, the nurses' pay or any others. I hope these will go through because, if they do not, we shall only be storing up major problems in 1980-81. It is better to go through with a firm programme now and have moderation in second half of 1980-81. On that basis we may ride through the recession without panic or political acrimony, without further massive demonstrations of a public nature in respect of which a lesson has been learned.

Accordingly I wish the Minister well in implementing the provisions of this Finance Bill although we disagree with the fundamental strategy behind it. We have not been at all happy about that strategy since the publication of the Fianna Fáil manifesto whose residue is now dominating the situation. The quicker it is buried the better. I have not the slightest doubt but that the Minister will be a very good undertaker in that regard.

Mr. Bruton

It is fair to say that we are facing a far more difficult economic situation internationally than most people realise. The underlying cause of this is the oil-induced crisis in energy supplies. Most of the oil which we use comes from politically unstable parts of the world. Supplies can be cut off as a result of unpredictable political developments. Also, the countries in the areas which are producing oil realise that they have a resource which is very, very definitely limited in supply. Because they can only absorb so much revenue from oil in a productive fashion each year, they are tending to push the price up in order to reduce the demand for it in the western economies and in order to ensure that they will have a longer period over which they will be deriving a revenue from oil by not running down their limited resources too quickly.

This means that we face a particularly difficult situation because of all the countries in the European community, we in Ireland rely, to a greater extent, on oil for our energy than any of the other community countries. Therefore, any development in relation to oil causing its price to be increased or supplies to be restrained has a more serious effect on Ireland than it has on any other country. The current international situation is, in my view, more serious for Ireland than it is for almost any other of the European countries.

Against this background, I believe that the Government are pursuing precisely the wrong policies. First of all, they are taking no serious steps to encourage conservation in the use of energy. I give two examples. There should be, by now, a concerted campaign to improve insulation in public buildings, industrial buildings and homes. The Government should be making available substantial grants to people in these categories to insulate their homes. If that were done, there would be a rapid reduction in the consumption of oil but that is not being done.

In order to reduce our long-running dependence on oil, there must be a policy of encouraging greater conservation in housing developments and the avoidance of long distances between home and work. No directive in that direction, that I am aware of has been issued by the Government, either, to assist in conserving energy or in making our country, in the long run, less dependent on externally supplied energy sources. At the same time obviously, and perhaps wisely, a decision is being taken not to proceed with nuclear energy. The effects of these factors and, in particular, the lack of any conservation programme is that we are becoming more, and not less, vulnerable to the difficult external economic situation that exists. At the same time, the Government are increasing their own borrowing abroad. In 1977, the Government borrowed only 37 per cent of all their borrowings from foreign countries. In 1979 over half of all the borrowing undertaken by the Government was from foreign countries.

As we all know, one of the main factors in determining the value of a currency in modern times is the existence or otherwise of substantial energy sources within the area covered by that currency. This is the main reason why the British £ sterling has been particularly strong in recent years. We are the one country which has the greatest dependence on external energy supplies and the least indigenous energy supplies of all the countries in the EMS. This obviously creates a structural, inherent situation in which our currency, and its value, is relatively more vulnerable than the currency of a country which has, within its boundaries substantial indigenous energy sources. Therefore, borrowing abroad by a Government in such circumstances, regardless of the policies which may be being pursued by the Government—and I shall come to those in a moment—renders it inherently more prone to the risk of devaluation. If a Government borrows abroad in substantial quantity, it runs the risk of suffering substantial exchange losses in that situation, in the event that any revaluation of its currency occurs. The Government are taking serious risks at the moment in the very substantial reliance they are placing on foreign borrowing to finance their own domestic programme. If this domestic programme were concerned solely with improving the productive infrastructure of the economy, there might be some justification. In fact, the Government are spending a great deal of money in boosting, not investment in productive infrastructure but simple consumption. Most of this consumer spending is now being used on imports.

Last year we had one of the worst balance of payments deficits on record, £745 million. We spent £745 million abroad as a country more than we sold abroad. That contrasts markedly with the position in 1978, when there was a deficit of merely £165 million. Last year's deficit was four times that of the previous year.

The best forecasts to which I have access suggest that the deficit this year will be £750 million, as bad as last year. There may be an improvement in the volume position as far as exports and imports are concerned, but the terms of trade have moved against us because of the increase in the price of oil and our heavy oil imports. In cash terms, our deficit this year will, I believe, be as large as it was last year. That is something which we simply cannot sustain.

The results of that have been that the Irish external reserves have fallen very seriously. External reserves are measured in terms of cover for imports. In January 1979 we had cover for almost four months imports—three and three-quarter months. In January 1980 our external reserves have fallen to the extent that we had then only two-and-a-half months' cover for imports. I understand that the situation in April is no better than it was in January 1980. We are just about as bad as we ever were.

This situation has been a direct result of Government policies. The Government have chosen to push money out into the economy, not in the form of production and investment but in the form of handouts to taxpayers, particularly well favoured ones, and to others who have tended to use those handouts to purchase imported goods. I believe that in pursuing this type of policy in the absence of any serious measures for energy conservation we are making our economy increasingly vulnerable, month by month, to a predictable and obvious international situation of great danger.

I do not believe we can over-estimate the danger. Iranian oil supplies have become very difficult to obtain. Nobody can say that the Gulf States are safe. They are seriously under-populated. There are heavy concentrations of people to the north of them who may well be casting covetous eyes on the vast oil wealth of the Gulf States. If developments occurred where, even without the Gulf States being actually taken over but their access to the west being sealed, the results for the European economy would be disastrous because they rely so much on oil. The results for our economy would be cataclysmic because we rely so much more on oil than any of the European economies. Yet we continue to promote an energy expensive consumer boom by deliberate Government policy against all sensible advice and predictions as to the vulnerability of our economy.

Our situation is becoming worse on the employment front. There has been a consistent rise in the number of people signing on or unemployed every month since May 1979. There was no growth in our economy in the latter half of 1979. It is evident that there has been no growth in the first months of this year either. There has been some improvement in the level of imports in the first months of this year, but this has been purchased at the cost of substantial reductions in the importation of machinery for further production and no reduction whatever in the importation of consumer goods.

We have been concerned in this debate with discussing the White Paper on the economy presented by the Government last January. It would be unwise of any of us to speak without making some reference to this White Paper, however much the Minister for Finance may wish to forget it. The most notable thing about the White Paper is its great vagueness. There was a clear progression in the various papers published by the Government. The first one contained a lot of specific ideas, aspirations and a lot of things which would be done. The second one contained less and the latest one, the one we are now discussing, contains no specific ideas but a lot of generalisations of a pious character. There has been a retreat from the first paper, which contained something which could be described as economic planning, to the final one, which contains nothing that can be described as economic planning.

We are discussing a paper which does not set out the policy of the Minister for Finance but the policy of the entire Government. There has been a three-day debate on this paper but not a single Minister or Minister of State chose to contribute to the debate to discuss any of the issues contained in the White Paper. The Minister for Finance in his contribution did not make any specific reference to the White Paper either. Although this is supposed to be a debate on the White Paper nobody from the Government side, who is in a position to speak for the Government, was allowed to contribute to the debate.

I would like to make a couple of reference to specific provisions in the Finance Bill. I welcome the increases in the blind persons' allowance and the housekeepers' allowance. I have been campaigning for those things in every Finance Bill since Fianna Fáil came back into power. Those people have been neglected. The allowances were allowed to fall far below the rate of increase in inflation. I am glad that at last something is being done about that. I hope the Minister will undertake to review those allowances every year and not allow a situation to develop, as occurred in the past, when the allowances were allowed to remain at the same level for 15 or 20 years without being changed.

The Government in their taxation policy this year made substantial concessions to most taxpayers. There are substantial concessions in the Finance Bill for industry and for married PAYE taxpayers. In contrast to this their attitude to agriculture has been to increase substantially their burden of taxation. What is the reason for this? There is no ground on the basis of the performance in agriculture in 1979 for saying the agricultural community deserve to have substantial additional taxation imposed on them. It is commonly accepted by people on all sides of the House, when one takes interest payments into account, that farm incomes actually fell in 1979. To come along against that background and say that the appropriate response from the Government to a sector whose incomes have fallen is to increase their burden of taxation is to turn equity on its head. The result of this decline in income combined with the Government's approach to taxation will be disastrous.

The Government approach is not based on any appreciation of the difficulties or on an analysis of the situation in agriculture. It is simply based on the wish to pander to the feeling of people outside agriculture that farmers are not paying their share. The Government have not analysed the situation to discover whether or not farmers are paying their share. If enough people outside agriculture feel that farmers are not paying their share that is good enough for the Government. The Government's job was not to govern but to respond to prejudice and feeling outside of the sector concerned. The Minister in his speech referred to a feeling that farmers were not paying their share. He did not say that he believed that farmers were not paying their share. The Minister stood back Pontius Pilate-like and said he knew nothing about it but if enough people said that farmers were not paying their share he would do what they wanted regardless.

A serious situation has developed as a result of the Government's policies, This year sales of fertilisers are down significantly, and sales of potash and phosphate needed to develop the long run fertility of the soil are down about 15 per cent this year already. This will damage fertility and production in agriculture over a period of 4 to 5 years. Machinery sales are also down, and the use of feed for cattle is down by as much as 20 per cent this year as against last year. The result is that supplies of milk to creameries which had been rising in previous years sometimes by as much as 15 per cent per annum have increased by no more than a ½ per cent this year over last year. Unfortunately co-operatives engaged in the processing of milk had invested substantial sums of money on the assumption that milk supplies would continue to rise at the rate of 7 or 8 per cent at least. These co-operatives are simultaneously seriously affected by the high interest rates. It has been estimated that on average a co-operative society usually has about twice as much borrowing for a given level of output as a private enterprise firm in the same business because of the capital structures associated with co-operatives. Co-operatives having put substantial sums of money into the development of facilities now find themselves with reduced supplies and much higher interest rates for their borrowings. At the same time as a result of a Government agreement made in January they find that the market for cheddar cheese which they had been hoping to develop in the UK has been seriously damaged, because the agreement allowed permanent access for New Zealand cheese to the UK indefinitely. That agreement did not receive much publicity, but co-operatives are now told that their markets will be taken away and that they will have to diversify and invest more money in producing other products which will be saleable on the consumer market. They will not be able to get the money to do this unless they get significant increases in their supplies. Yet the Government are pursuing policies which will have the direct effect of reducing supplies.

As a result of this budget the farmer is being asked to pay more than his fair share. This is so particularly in respect of smaller farmers. Big farmers, notwithstanding the fact that they may have to pay resource tax, can get the full benefit from the generous concessions given by the Government whereby rates can be offset as a payment of income tax. Big farmers, because they have bigger incomes, can also benefit from the generous concessions in respect of married persons working on the land. Although they are paying somewhat more in respect of rates, resource tax and income tax than their PAYE counterpart that is an inequity which is not serious.

The man with a 100 acre farm earning about £10,000 per annum would pay about 19 per cent more in tax than the equivalent PAYE worker with a £10,000 income. In the case of a small farmer vis-á-vis the equivalent PAYE worker the position is much more serious. A farmer with a land valuation of £30 earning about £3,000 a year and married with two children would pay £121 in rates but would pay no income tax. The equivalent PAYE person with two children and the same income would pay no tax. The farmer with a £40 valuation and earning about £4,000 a year would pay approximately £494 in tax, of which £484 would be rates and £10 would be income tax. The equivalent PAYE person would have a total income tax bill of £245. The small farmer paying £494 would pay twice the amount of income tax and rates as the PAYE person on the same income. The farmer with a £50 valuation earning £5,000 would pay £605 in rates and £271 in income tax, giving him a total tax burden of £876, whereas the equivalent PAYE worker would pay £495 in income tax. Again the farmer would be paying substantially more than the equivalent PAYE worker.

These are average figures taken from the Farm Management Survey of the Agricultural Institute. They are not figures that I have invented. I know it is not popular to make this case, and I know that farmers are a small sector of the community electorally. In my constituency, as in any other, farmers are in a minority, but people do not realise the reality of these figures although they can be substantiated completely on the basis of actual tax liabilities and actual average incomes. Yet the Minister did not take the trouble, before he decided that the farmers were paying less than their fair share, to look into figures such as this. It was good enough for him that the great Irish public thought that the farmers were paying less than their fair share. Once they thought that, that was enough for Deputy O'Kennedy and he was not concerned with the truth in this. Perhaps now he will inquire more carefully into the income and tax position of the various sectors of the community and perhaps he will be able to remedy the situation in his coming budget.

The case has been made that the resource tax proposed for Agriculture is unconstitutional. This case has been made by Deputy Gibbons of the Minister's party. The Minister and others may have thought that this was mere special pleading by Deputy Gibbons, perhaps an indication of irritation felt by him at some recent political developments, and that he used the word "unconstitutional" loosely without having given much thought to it. I do not know whether he did and I did not discuss the matter with him. There is significant argument for saying that under Article 40 of the Constitution this tax is unconstitutional on the ground that all citizens are supposed to be equal before the law, yet this resource tax is being levied on some property holders, not all. It is not a wealth tax. If it were a wealth tax it would be levied on all forms of property and there would be no question of it being discriminatory and contrary to the provisions of Article 40. No, it is a resource tax levied on one particular——

Mr. O'Kennedy

Deputy Barry said that it is a wealth tax.

Mr. P. Barry

It is exactly the same point. It is a tax on the wealth of one category of people and not on everybody. I made that point very clearly.

Mr. Bruton

It is a wealth tax but not a comprehensive wealth tax. It is a selective and discriminatory wealth tax. If the Minister would like us to call the resource tax a wealth tax we will do so. This discriminatory wealth tax called a resource tax by the present Government is levied on a particular section of the community. Article 40.1 of the Constitution says:

All people shall, as human persons, be held equal before the law.

——but qualifies that as follows:

This shall not be held to mean that the State shall not in its enactments have due regard to differences of capacity, physical and moral, and of social function.

The question is whether a farmer has a greater capacity, physical or moral, to pay a wealth tax than other holders of wealth. If farmers do not have a greater physical and moral capacity to pay wealth tax than other holders of wealth, then there is no constitutional ground for the resource tax, unless one can argue that because of their social function in the countryside they should have a resource tax imposed on them, and that their social function of providing food is somehow less beneficial than the social function of other wealth holders who may have huge bank accounts or large investments in urban property and are providing a more beneficial social function and should be exempt from the Government wealth tax, whereas farmers are performing a less beneficial social function and should be liable for the tax. On the ground that it is repugnant to Article 40 of the Constitution this tax is unconstitutional.

In support of my submission I quote the judgment in the case of de Búrca versus Attorney General in relation to jury service in a similar situation where jury service was restricted to a certain category of property holders, not to all property holders, only to owners of rated property. It was found by the majority in the court that this provision of the Juries Act was unconstitutional because it discriminated between different categories of property holders. I quote the relevant extract from the decision in this case and I urge the Minister and any others who may be interested to examine it:

... if service be regarded as a duty these provisions mean that the obligation to discharge this duty is confined to a particular section of citizens not because they are property owners, but because they have a particular interest in a particular type of property. Without question, this is not holding all citizens as human persons to be equal before the law. I cannot see that this discrimination can be excused or condoned by the second sentence of Article 40.1. This is not a question of having regard to differences of capacity, physical or moral, or of social functions...

The resource tax proposed on agriculture would appear to be simply a question of an arbitrary tax being imposed on one section of the community, one type of wealth holder, while exempting other types of wealth holders. In terms of the income of the wealth holders who hold agricultural land by comparison with the wealth holders who hold other forms of wealth of equivalent value, the income that the other holders of wealth derive from their wealth is substantially greater than that derived by the section upon whom this tax is being levied.

Having said that about the resource tax, I believe that the greatest injustice in this budget is not the resource tax as far as farmers are concerned, but the imposition of increased rates on a much smaller category of farmers, those between £30 and £60 valuation. They are suffering a far greater relative inequity than the larger farmer is.

In the few minutes that remain to me I would like to refer to the position in relation to tax relief for interest payments. I welcome the fact that the limit has been raised, but there is one point that I ask the Minister to look at between now and Report Stage. It should not cost him very much to meet the case that I am going to make. Under the provisions of the Bill once a person becomes either a widow or widower the amount of relief of interest payment that that person can claim reverts immediately to the single rate as if the person was single. If I buy a house and I am not married it is perfectly legitimate not to give me the same rate as a married person whould get and to treat me as a single person. However, if I am married and become widowed and have bought a larger house, perhaps to house a family, and have entered into larger interest payments than normally I would have entered into as a single person buying a house which would be suitable to my station, then to say to me as a widower that my tax relief for interest payments must be reduced to exactly the same level as would obtain in the case of a single person is, in my view, very unjust. I do not think it would cost the Minister very much to make some allowance for widowed people, certainly below a certain age. You could have situations of widowed people who perhaps would be using the interest for a third or fourth house when they were very well off and might become widowed late in life. That might not be the same problem. In the case of a person widowed at a relatively young age the Minister should be able to do something.

The Minister has allowed husbands and wives to be treated separately in respect of all other provisions except the provision in respect of the threshold for tax for the farming community. Would he have another look at this to see if it is, in fact, in line with the provisions of the Supreme Court decision? I am inclined to believe that even though he makes a genuflection in that direction the changes he has made do not comply in full with the Supreme Court decision.

Generally speaking, the Finance Bill and the underlying economic policy do not take account of the serious situation in which we now find ourselves. They do not recognise our great dependence on imports of energy and the political vulnerability of those supplies and the need to adopt a concerted campaign to improve energy conservation and increase our independent energy supplies. We need to restructure our economy radically to give us that required degree of independence, and there is no sign in any of the measures adopted by the Government that they either realise the seriousness of the situation or have taken any steps to improve our difficult position.

Minister for Finance (Mr. O'Kennedy)

Obviously, a number of points of detail have been made on this Stage of a Bill which by definition is concerned with detail, but within an overall comprehensive framework as an expression of Government policy as contained in the budget. I have taken note of many of the points of detail and will refer to some of them now. Many others will obviously arise in the course of the Committee Stage. To an extent, I am at some disadvantage in regard to some of the points of detail that may have been made this morning before I came into the House in that I have not yet had an opportunity of studying them. Before dealing with replies generally I can put on the record as fact replies to some of the points made by Deputy Bruton. Then I shall deal in a reasonable sequence with the other issues that have emerged in the debate.

Deputy Bruton expressed concern about the fact that the Government seemed to be borrowing money to boost consumption and not to promote productive investment in infrastructure. That is a reasonably accurate report of what he said. He was understandably critical of that. If that were the case, Deputy Bruton would be vindicated and probably I would make a criticism of such a policy in perhaps even stronger terms than Deputy Bruton. Fortunately from my point of view, and unfortunately for the case being made by Deputy Bruton, the facts are very much the other way. Here I will rely on the facts and let the analysis follow. We can come back on other aspects of it later.

The proportion of the capital programme which was devoted to infrastructure development this year increased from 29 per cent last year to 33 per cent this year. A second fact is that there has been a 28 per cent increase in the provision for the telecommunications programme as evidence of our awareness of the importance and significance of infrastructure in a multinational annual employment projection programme. The third fact is—and each of these flies completely in the face of Deputy Bruton's interpretation of the budget—that 42 per cent of the capital programme this year is devoted to improving the productive capacity of the economy. Those facts speak for themselves—res ipsa loquitur—it is not that they are emerging now for the first time. Even the most superficial analysis of the budget statement and of the figures accompanying that statement would clearly demonstrate that to be the case. Were it otherwise the Government and I would justifiably stand accused of the charge Deputy Bruton has levelled against us, but unfortunately for him, on the facts his case does not stand up. Having said that, I do not think I can further strengthen my case than to reply as the lawyer did when faced with all the constitutional arguments and text books and asked what his position was. He replied: “I rely on the merits of the case”. That was it. I am doing the same thing here.

Unfortunately, I was not here for Deputy Desmond's contribution, but my colleague, Minister of State Deputy Calleary, has indicated to me that it was a very informed and constructive analysis, a very comprehensive review, and I think I owe it to him, as I have indicated to him, to study the statement he made in the House in full, touching as it did particularly on incomes policies, on the general cohesion and understanding required between the various partners and the contribution which each of the social partners can make, and I gather he also suggested various other institutions not directly involved in that particular forum such as the financial institutions. I shall certainly study in detail the remarks of Deputy Desmond and all the other Deputies so as to have an opportunity of analysing them and acting on them or making proposals on foot of them to the extent possible at this stage.

The Finance Bill, as such, is in large part a restatement in statutory terms of the budget proposals. It affords an opportunity also to introduce further changes in tax legislation and to improve administrative arrangements for the collection of revenue. In so far as this debate always applies itself even at Second Stage to analysis and criticism of the Bill I confined myself in opening the debate to explaining at considerable length—which I thought would be the most useful thing to do—how it was that the various sections in the Bill were geared to implement the budget provisions. I thought that would be helpful to Deputies, but I have been criticised since on more than one occasion, I gather, by Opposition spokesmen for making no reference to the White Paper.

Deputy Bruton said this morning if I quote him correctly, that this was supposed to be a debate on the White Paper. It was not supposed to be a debate on the White Paper. It was supposed to be what it is, a debate on the Second Stage of the Finance Bill in which appropriate references could be made to the White Paper. To the extent that my first obligation was to explain to the House how this Bill was implementing the budget proposals, I endeavoured to discharge that obligation. To the extent that it is also my obligation to comment on the White Paper, I will do that later in my speech.

Mr. Bruton

When it is too late for us to comment on what the Minister says

Mr. O'Kennedy

There will be many other opportunities for the Deputy to comment. If the test of democracy were to be who gets the last word, democracy would not function. The real test is not who wins the argument, because the argument is never won, but that people should put their position on the record. I will do so and the argument will continue, and the obligations will continue as well.

Before I turn to the contents of the Bill I should like to refer specifically to the question of incomes. Deputy O'Leary was critical of me for, as he said, setting a record with appeals for moderation of income. I do not suppose any Minister with responsibility for finance and economic planning should apologise for that. We are all agreed that income levels are a crucial factor in determining our ability in this economy to make progress. Deputy O'Leary suggested that in the new economic order success or failure in the control of incomes may be of far greater significance than any budgetary measures or any Finance Bill introduced here. I agree with Deputy O'Leary. With that argument in mind it is incumbent on me to put the realities before the parties and before the House. If I am to be accused of making too many appeals, or putting before the House the facts as I perceive them from the information available to me, I stand accused readily, if not even convicted.

We are all very conscious of the fact that without moderation in incomes we lose ground to our competitors, and particularly our competitors who exercise moderation. That is especially true of any economy such as ours which is by definition the most open economy in Western Europe in every sense of the word. It follows that the level of responsibility in our incomes expectation must be a major factor in determining our capacity to compete with these other economies where income moderation is being exercised. I gave some examples in the course of my opening speech.

We have, and I have particularly, responsibility to emphasise this reality. Sometimes I think that, while geographically we are an island, we do not tend to want to think of the realities which affect us in the area where we are not an island, namely, economically speaking. These realities are there to be seen and recognised by anyone who chooses to look at them. They can be ignored by those who wish to do so but, if we ignore them, we do so at our peril. As Minister for Finance, I am not prepared to do that.

It is open to the Deputy to imply that I am reflecting on the trade union movement, which I am not doing. I am criticising any exercise which involves numbers of that order which could not be based on an accurate analysis and assessment.

A number of Deputies suggested that the Government were making a virtue of necessity in introducing income splitting and that we had no option but to do so as a consequence of the Supreme Court decision. Many Deputies went so far as to say that we were doing little more than implementing that decision. That is not the case. The formal judgment which was handed down related specifically and deliberately to earned income. In a full year the cost would be of the order of £80 to £90 million. Sometimes people repeat a distortion in the hope that an impression will be made and the public mind confused. No purpose is served in doing that. It is important that everybody should be able to analyse the realities and come to their own conclusions.

The Supreme Court made a judgment on the issue as presented to them. That is their constitutional function. In discharging my function as Minister for Finance, if I did not take the course I took, perhaps I could be accused of discrimination against the one-income family. For that reason I decided to propose to the Government that we should make a radical and major change by introducing income splitting for married couples. This results in very substantial improvements in take-home pay for very many people.

That factor must be taken into account in determining the level of incomes for this year. Obviously it provides an increase in real incomes for the vast majority of taxpayers. We are in an internationally high inflationary situation and it is vitally important that our actions should not further aggravate the serious situation in which we find ourselves. On the contrary the level of incomes should be such as to enable us to provide adequate employment—that is vitally important—and real income security. I am sorry Deputy L'Estrange did not have an opportunity to make a formal contribution. It is more difficult to make a formal contribution. That requires a bit of study. It is much easier to get up on somebody else's back and make comments.

Mr. L'Estrange

I only said they sacked the poor man who was trying to provide employment.

Mr. Nolan

Deputy Cosgrave was sacked too.

Mr. O'Kennedy

The important thing is that rather than aggravating the serious situation in which we find ourselves because of increasing international inflation, we should ensure that we minimise the impact and guarantee real income security, adequate employment, which is an essential element of the policies of all Governments, and adequate protection and one should use the word, assistance for the old, the sick and the disabled. There is not anybody there to represent those people in negotiations—nobody negotiates on their behalf.

I should like to say at this stage that I have been impressed by the awareness shown by the ICTU of the problems of those people each year in their pre-budget submissions. They have shown praiseworthy concern for that sector. I would point out that I have acted on that concern in a major way in the budget this year. Therefore, it is reasonable that I should suggest to the ICTU that the alternative to any action taken by them or any other group which would in any way adversely affect the position of that sector for whom the ICTU have expressed concern—if we have to, for instance, boost the public sector pay bill—the cost of that must be recouped from what is not a bottomless pool at the expense inevitably of the classes for whom we are all concerned. Otherwise there would have to be increased taxation on all classes, and we all appreciate that already the incidence of taxation is, to say the least of it, high enough. Even in terms only of the immediate impact on the weaker sections and on taxpayers generally, one can reasonably suggest that income restraint is very desirable.

I should like to turn to another area dealt with by Deputy Barry. He spoke of the budget promoting inflation in an already highly inflationary situation, and he repeated exaggerated claims about the budget's effect on the CPI. A number of factors must be considered here. First of all, unfortunately the income tax concessions given are not taken account of in the CPI. Even if we made far greater income tax concessions they would not appear in the CPI, even though for a significant number of families the tax concessions will contribute to an increase in real income which will more than offset the increase in indirect taxes.

Incidentally, when one talks about the unprecedented savage increase in the CPI as Deputy Barry did, I should like to remind the House and Deputy Barry that the suggested increase in the CPI of 3.8 per cent is not unprecedented. In 1976 particularly, the impact of indirect taxation imposed by the budget represented an increase of 4½ per cent on the CPI. Deputy Barry was a member of that Government, and let me remind him that indirect taxation increases in 1976 were not balanced by any major direct tax concessions of the nature we are introducing in this Bill. People are free to change their minds, but sometimes we find people changing their opinions coincident with a change in their position in the House.

Mr. L'Estrange

The Minister is the last man to talk about that. He changed his opinion the night before.

An Ceann Comhairle

The Deputy has come into the House to upset the Minister's concluding statement.

Mr. O'Kennedy

The only concern I have about Deputy L'Estrange's contributions, if one might call them that, is that they take from the time I have to reply.

Mr. P. Barry

What about overseas development?

Mr. O'Kennedy

I do not recall the Deputy having mentioned that in his contribution, but if he likes we can and will deal with it. The Deputy should not mind if I address myself to the points he actually made. Of the CPI increase of 3.8 per cent the increased taxes on cigarettes and tobacco account for 2.3 per cent. This must be taken into consideration by those who say that the budget and the Finance Bill this year let inflation run riot. I would remind Deputies that the CPI is related to price increases of articles and not in any way to the level of consumption following price increases. If I had imposed increases in excise duty on whiskey in this budget that would inevitably have led to a diminution in consumption, that diminution would not be reflected by a reduction in the CPI which would keep going up pari passu even though consumption was dropping.

Therefore, when we talk about inflation and incomes generally, we should appreciate that if that is the way in which increases are to be judged it is not a complete or an accurate assessment of all the elements involved in terms of real income or inflation.

Deputy Barry criticised the increase of 5p per gallon on industrial fuel oil, and he said that people had spoken about the effect of this on industry. He spoke of the savage approach we are taking to industry at a time when industry is in considerable difficulty. I realise that this will have some effect on industrial costs as on industrial costs in our partner countries. In all of this one must strike a balance. The reaction from the business community as I mentioned in my reply to the budget debate, can be judged from comments in what one would regard as representative magazines. One must look at the favourable environment that has been maintained and created here by the Government in terms of tax concessions particularly the new 10 per cent corporation rates which will be effective next year, the level of grant aid that is being applied here by comparison with elsewhere. I do not think anyone can suggest that industries are being ignored here. I do not think that anybody can say that by deliberate decision this Government are making it more difficult for our industries to compete effectively. I appreciate that certain developments in interest rates have damaging effects on the cost of credit to industry, but to the extent that we can, we have tried to cushion that by way of exchange rate guarantees to the ICC as we have done for the help of farming in relation to the ACC, but I could not ask taxpayers to finance across the board subventions in this whole area simply as a cushion against the realities which are affecting not just our country but many others as well.

One of the constant themes put across was that the budget discriminated against those on low incomes. I am not saying that my proposals in the budget completely solve the problems of the less privileged sector of the community. However, it can be fairly said that it made a very significant step in that direction. I was conscious in framing the budget of the fact that single and widowed persons and low-income families would derive little or no immediate benefit from the Supreme Court decision on the taxation of married couples or from income splitting. For that reason the Bill provides a range of reliefs which will be of assistance for these categories—restructuring the rate bands, the special PAYE allowance of £400, the doubling of the one-parent family allowance, improved personal allowances for widows in the year of a bereavement and the exemption limits. The exemption limits are so significant, though I realise that inflation can erode them, that they will initially, and constantly throughout the year, remove 83,000 taxpayers from liability to tax. Every Minister for Finance—I am no different from the others in this respect—always referred to numbers in the tax net being reduced. This is the biggest number that has ever been removed and many of them will stay outside the net until their income levels increase significantly.

A young single person earning £2,000 per annum—this is not a special pleading case because obviously income splitting provides particular benefits for married persons—will obtain a reduction of over 45 per cent in his or her income tax liability for this year. If he is earning £3,000 the percentage reduction will be over 23 per cent. At the lower income level a married man with three children would have his liability reduced by 30 per cent if he was earning between £4,000 and £5,000 a year and by 21 per cent if he was earning £6,000. Anyone can pick out a figure here or there but, if one looks at the whole range of figures at the lower income level, they will see that this has been the consistent pattern at that level and gives the lie to the suggestion that this budget took no account of the situation of the less well off.

The consequences of income splitting are that when it is applied to married couples who have been paying a higher rate of tax, in money terms if not as a proportion of the tax they have paid they will benefit more than those on lower incomes. Why? It is because the allowances are allowances against the rate of tax they were paying and to the extent that one is giving allowances it will apply there. As a proportion of tax liability it would be less than the relief for those in lower income groups. Frankly, this is one of the inevitable consequences of income splitting. It is not good enough for people to say they are in favour of that principle, as I gather Deputies are and then say they do not accept the consequences of the application of it. If Deputy FitzGerald or Deputy Barry in their wisdom can suggest a basis on which to have income splitting as a principle applied consistently which does not have some of the consequences they complain about I would be very glad to be further enlightened. The balance has been very carefully met in favour of the lower income groups.

I should like to refer to farmer taxation which concerned a number of Deputies, particularly Deputy Bruton. He made a very sweeping statement when he said that this budget made substantial concessions for the married PAYE taxpayer but the treatment of farmers was in sharp contrast with the treatment of married PAYE taxpayers.

Mr. L'Estrange

Hear, hear.

Mr. O'Kennedy

I am sure he will be reassured to know that Deputy L'Estrange has supported him in his usual fashion.

Mr. L'Estrange

He is quite correct.

Mr. O'Kennedy

In our discussions with farm leaders, they realised that the consequences of income splitting proposals have at least as beneficial an impact on the liability of farmers to taxation as they have on any other section in our community.

I said "at least" because, as anyone who knows the social pattern in Ireland will recognise, perhaps of all elements in our society that is the element where a wife generally does work at home and does not have a separate income. It is ignoring the reality to say that these concessions were geared at everyone else, as Deputy Bruton said this morning, but not at the farmers who, by contrast, got a very bad deal. It is important that it should be recognised that that is not the case. Farm leaders recognised it but, for one reason or another, the Opposition do not choose to recognise it. I am glad the views they have represented are not the views of the farm leaders.

Mr. L'Estrange

Time will tell.

Mr. O'Kennedy

The Deputy will have some job persuading them.

Mr. L'Estrange

The Minister will have a bigger one.

Mr. O'Kennedy

The reality speaks the other way. The debate has concentrated on the resource tax. We indicated that we will examine it in the light of the yield from farm taxation generally. We are not going for a predetermined yield from farm income tax this year but, as Minister for Finance, I have an obligation to that sector as I have to every other to estimate what that yield will be and I have done so in the budget. In the light of the returns to the revenue of farm taxation we will review the package with a view to hopefully terminating the resource tax in the light of the operations and yield from it.

I recognise that last year's farm income was considerably less than the farming or national community would wish it to be. For that reason, the revenue returns this year will reflect that drop. At the same time I deny any suggestion that what I or the Government are doing is simply on the basis, as Deputy Bruton said, of being affected by the prejudice of people outside agriculture who are against it and of giving in to Seán Citizen even though Seán Citizen is wrong in this case. Since I assumed this responsibility I have been concerned to engage in private, effective and useful discussions and have been concerned at the fact that, for some time, farm organisations and trade union representatives or spokesmen, not always representative spokesmen but en masse or otherwise, were expressing strong antagonistic attitudes towards each other. If I am encouraged by anything it is that that pattern has stopped. It is in some little way a consequence of the private discussions we have had which in many ways, can reassure both trade unions and farmers.

Everyone must recognise that that has been a significant consequence of the budget decisions and, as I have indicated, I will be introducing new proposals on Committee Stage which will further reflect our awareness of the need to promote investment in agriculture while, at the same time, ensuring that agriculture, like every other sector, makes a reasonable contribution. I am not interested in coming to a decision as to what we should do because another sector think farmers are not paying enough.

I am much more concerned to see all sectors react in a cohesive way. If they did this and saw their inter-dependence on each other, the Government would be in a position to maintain that balance. I am not saying that anything has been achieved at this stage, but our discussions with both elements have been positive and have been carried out on a mutual basis of understanding. These discussions have led in many cases to amendments I shall introduce to the Finance Bill but they will not in any way cut across any principles.

Ahern, Bertie.
Ahern, Kit.
Allen, Lorcan.
Andrews, David.
Andrews, Niall.
Aylward, Liam.
Barrett, Sylvester.
Brady, Vincent.
Briscoe, Ben.
Browne, Seán.
Burke, Raphael P.
Callanan, John.
Calleary, Seán.
Cogan, Barry.
Colley, George.
Collins, Gerard.
Conaghan, Hugh.
Connolly, Gerard.
Cowen, Bernard.
Crinion, Brendan.
Daly, Brendan.
Davern, Noel.
de Valera, Sile.
de Valera, Vivion.
Faulkner, Pádraig.
Filgate, Eddie.
Fitzsimons, James N.
Fox, Christopher J.
French, Seán.
Geoghegan Quinn, Máire.
Haughey, Charles J.
Herbert, Michael.
Hussey, Thomas.
Keegan, Seán.
Kenneally, William.
Killeen, Tim.
Lalor, Patrick J.
Lawlor, Liam.
Lemass, Eileen.
Lenihan, Brian.
Leonard, Jimmy.
Leonard, Tom.
Leyden, Terry.
MacSharry, Ray.
Meaney, Tom.
Molloy, Robert.
Moore, Seán.
Murphy, Ciarán P.
Nolan, Tom.
Noonan, Michael.
O'Hanlon, Rory.
O'Kennedy, Michael.
O'Malley, Desmond.
Power, Paddy.
Reynolds, Albert.
Walsh, Joe.
Walsh, Seán.
Wilson, John P.

Níl

Barry, Myra.
Barry, Peter.
Barry, Richard.
Belton, Luke.
Bermingham, Joseph.
Boland, John.
Bruton, John.
Burke, Joan.
Burke, Liam.
Cluskey, Frank.
Conlan, John F.
Cosgrave, Liam.
Cosgrave, Michael J.
Creed, Donal.
Crotty, Kieran.
Deasy, Martin A.
Desmond, Barry.
Donegan, Patrick S.
FitzGerald, Garret.
Griffin, Brendan.
Harte, Patrick D.
Hegarty, Paddy.
Horgan, John.
Kavanagh, Liam.
Kelly, John.
L'Estrange, Gerry.
Mannion, John M.
Murphy, Michael P.
O'Brien, Fergus.
O'Brien, William.
O'Donnell, Tom.
O'Keeffe, Jim.
O'Toole, Paddy.
Pattison, Séamus.
Quinn, Ruairí.
Taylor, Frank.
Timmins, Godfrey.
Treacy, Seán.
Tully, James.
White, James.

Tellers: Tá, Deputies Moore and Briscoe; Níl, Deputies L'Estrange and B. Desmond.

Question declared carried.

An Ceann Comhairle

Date for Committee Stage?

Mr. P. Barry

In the absence of the Government, may I say that it has been arranged between the Whips for Tuesday week—the Tuesday after the Whit weekend—3 June?

Committee Stage ordered for Tuesday, 3 June 1980.

Dáil Éireann debate - Thursday, 15 May 1980

Finance Bill, 1980: Second Stage (Resumed).

Tá

Níl

Dáil Éireann debate -
Thursday, 15 May 1980