In common with a large number of commentators, I find this budget to be a considerable disappointment. Apart from the social welfare increases, which I welcome, there has not been anything of significance in this budget. In many ways it is an exercise in national political deception. It is customary for individuals in opposition to be critical of the budget but I strongly feel that the purpose of yesterday's budget, which is the continuation of a series of economic decisions taken since last October, is to prepare the way for a general election around June and that the Taoiseach and the Cabinet, insofar as they are consulted by him, hope to get to the country before the end of June or the beginning of July so that the deceptive basis on which this budget is formulated will not become apparent.
There is not the slightest indication in the speeches made by the Taoiseach or any other Government speaker of any intention to face up to the real budgetary, public expenditure and revenue problems facing the country. The decisions which have to be taken will of their nature be intensely unpopular, but from reading this hotch-potch of a document there is no evidence of anxiety on the part of the Taoiseach to tell the Irish people the truth about the financial situation of the country.
I have been here for 14 or 15 budgets. As we know, the Taoiseach changed the way the budget was formulated. I gather he had consultations with individual Ministers. The information gathered was then co-ordinated in his office. A whole series of ad hoc decisions were handed over to the Minister for Finance. That Minister got the Estimate drafts for 1981 from various Departments. The Taoiseach was so horrified by these figures — around 15 per cent or 16 per cent increases in non-pay elements — that he sent them back to the Departments to be reduced. These figures were cut again. When they came to the Taoiseach a second time I understand they were sent again to the Departments who were told that the increases must not be more than 3 per cent. That is how we finish up with a 3 per cent increase in the Book of Estimates.
I know how some of the staff in these Departments approach this exercise although I have not spoken to any of them. I am aware of the developments in various Departments when trying to respond to the Taoiseach, who wanted to present and succeeded in presenting a Book of Estimates which was deceptive, providing just enough money to carry on until the middle of 1981. Therefore if the curtains are pulled early in June, we will not have the figures for the first half year and nobody will be able to prove the nonsense that this budget represents. The truth of the Irish revenue and expenditure situation in terms of the current budget is not contained in this document.
I do not fault the Minister for Finance. He was very much a new boy to an old game when he arrived in the Department of Finance late December. This is quite evident from this document if one reads it and tries to pick out any strand of activity in it, whether it is the main stream of thought relating to public borrowing or if it relates to job creation or public expenditure. This is a series of disjointed decisions which are allegedly designed to be a coherent budget strategy.
I listened to the Taoiseach's speech today — and took a copy of his speech to read in the quiet of my room — 30 pages of incredible waffle, delivered by the Taoiseach, who is a very astute, sensible and sane man, 30 pages of bland exortations and observations about the international scene, OECD and so on. Does the Taoiseach intend going to the country in May or June and hope to get away with creating the impression at national level that all is well and that there is no need to worry? From the cursory examination I have made of the budget Estimates and the revenue and expenditure projections for 1981, I think there is a great deal to worry about. It has been argued that the Opposition would be well advised to keep to hell out of Government for the next few years because the position is now so impossible that to put it right political decisions of extraordinary harshness and decisiveness will be required and the Irish people will baulk at such a prospect. There is no joy facing the Opposition in considering this.
Last Tuesday I put down a series of questions to the Minister for Finance about some basic economic indicators and about where this country stood on a series of important economic indices. In Question No. 297 of 27 January I asked if he would state the proportion of public sector borrowing requirements financed externally in respect of the years 1977, 1978, 1979 and 1980. The figures given were: 1977, 37 per cent, 1978, 38 per cent, 1979, 51 per cent and 1980, 60 per cent. In short, the proportion of public sector borrowing requirements which we have borrowed externally rose from 37 per cent to 60 per cent between 1977 and last year. That is not a healthy indicator for an economy trying to recover and to drag its way out of a recession. It is anything but a healthy indicator, no matter how one looks at it.
I asked the Minister for Finance another question on that day, if he would state the extent to which investment was financed from domestic sources in 1977, 1978, 1979 and 1980. I also asked him the estimated extent to which the investment was financed externally for each of those years. The domestic financing for 1978, this is in Question No. 296 of the same date, was £852 million. In 1979 it was £885 million and in 1980 it was £894 million. Bearing in mind the rate of inflation, we see a real drop in terms of domestic financing over that period, in terms of the financing of investment in the public capital programme from domestic sources. Let us take the totals in terms of foreign financing, in 1978 it was £388 million, in 1979 it was £672 million and in 1980 it was £962 million. That is an alarming trend in terms of financing our public capital programme, bearing in mind the relativity of the Irish £ and the enormous repayment problems, both in capital and interest, which we face.
Another indicator, which is of interest is national debt as a percentage of GNP. One has to bear this in mind. In Question No. 295 which I asked last Tuesday, I was told that the national debt as a percentage of GNP for 1977 was 79 per cent. In 1980 it was 83 per cent. In 1979 it was 91 per cent and in 1980 it was 95 per cent. That is the provisional figure for last year. The national debt, as a percentage of GNP for the past four years, has gone up from 79 per cent to 95 per cent. That is the outcome of the domestic budgetary economic management policies of the present Government. There is no denying these facts, they were supplied to me in written reply last Tuesday and, as usual, when replies come in written form, the media, for the most part, ignored them.
I also asked a couple of further interesting questions. In Question No. 293, I asked the Minister if he would state the increase in foreign borrowing in 1978, 1979 and 1980 and the extent to which this increase represented the increase in total debt. He gave me the increase in actual terms. The increase in Exchequer foreign debt for 1978 was £25 million. In 1979 it rocketed to £479 million and in 1980 it rocketed again to £670 million. If you take that as a percentage, the increase in Exchequer foreign debt as a percentage of increase in total debt — in 1978 it was an increase of 3 per cent, in 1979 it was an increase of 35 per cent and, in 1980, of 49 per cent. One does not have to be a junior economist in a most uninformed commercial bank in a backwood economy to know that these are trends which are of major consequence in terms of the domestic budgetary policy of any nation state.
I will quote two more answers and then I will rest my case in terms of the economic indicators. I asked the Minister for Finance, in Question No. 292, the percentage of foreign debt which will fall due for repayment within the next five years. The Minister said that of the Exchequer foreign debt at the end of the last December, 47.7 per cent of the total expressed in Irish £s at current exchange rate will fall due for repayment within the next five years. There is a scenario for any Minister for Finance taking office after the next general election. In the next five years in office he will have to repay no less than 47.7 per cent of the total foreign debt expressed in Irish £s at current exchange rates. That is something which would encourage anybody in Opposition to say "Look, you can have it for another five years, we do not want to be in office because of what the Government have done in the past three or four years". That is a scenario that would be well worth while in some respects.
There is another index which is of interest. I asked in Question No. 290 on last Tuesday the estimated cost of the interest payments and the capital repayments of servicing the external debt in 1980 and 1981. In 1980 the cost of interest repayments was £164 million and the estimate for this year is a staggering £219 million. Ministers can well appreciate the implications of that particular servicing. The cost of repayment of principal in 1980 was £83 million and the cost of principal repayments in 1981 will be £116 million. Therefore, the situation is worsening.
Having outlined these somewhat gloomy economic indicators, because basically they apply to the essential ingredient of economic management, namely the money supply, the debts supply, the external debt ratios of the Irish economy, I come to the situation which faced the Government in this budget. So anxious, if I might make a global statement initially, a Leas-Cheann Comhairle, was the Taoiseach in 1980 to please every single sectional interest of the community, in every conceivable way, and so uncertain was he of his position at that time with Deputy Colley still breathing down his neck on security issues and having failed to give him his loyalty — he has never given him that loyalty; he would not even propose him as Taoiseach, never mind giving him his loyalty — that he handed out £240 million in income tax relief alone last year. He so crucified himself that this year he came naked to the budget table and could only provide a miserable, inadequate £60 million, £40 million of which he had already committed in the national understanding. Therefore he came in here yesterday with a stop of £20 million on income tax.
If one takes the details of the estimates of receipts, non-capital receipts, income tax is estimated at £1,210 million, for 1981. In 1980 it was estimated at £1,014 million, which represents an approximate increase in 1981 of £200 million over last year. I know there are included in that figure directors; contributions but they have not changed very much, that is, tax receipts from company directors and so on. In terms of the 850,000 employees in the country, they will be paying in 1981 — on the estimates provided before the budget — an additional £200 million. The Taoiseach came in and, because he had committed himself to £40 million on the national understanding, he had to deduct that, no option, this was the give-away to get a wage inflationary national understanding. Therefore there were £160 million gone. In addition he gave another £20 million of tax relief in the budget itself. The net outturn is that for 1981 income tax receipts are estimated at £1,150 million which is exactly £140 million more than in 1980. There is in fact no tax relief at all contained in the budget. And there will be a further increment due to the Exchequer from the second phase of the national understanding next June. Naturally that assists buoyancy but is taken into account in the growth of income tax itself.
Is it any wonder that most people last evening were very chagrined, to say the least, when they appreciated that this year the most that anybody earning between £5,000 and £12,000 annually would get was £70 which would hardly pay for the increased price of petrol and the increase in other indirect taxation?
This brings me to the main point I want to make in relation to the strategy of the Taoiseach. Frankly I am not interested in the strategy of the Minister for Finance; he does not have a strategy; he does what he is told on two sides, first of all, by the Taoiseach and, secondly, by the Department of Finance. The officials there tell him what to do because he does not know, he has not had the experience. He has not been even three or four months in the Department to find out what is going on so he is completely dependent on them and their advice. Simply because he was not long enough there he had no opportunity of putting his stamp on budgetary development—and indeed I have great personal regard for him. Being a Minister for Finance in any country is an extremely difficult task. Indeed, it is one Ministry in which I should think one must be up all night for six months before tackling one's first budget and making a personal impact on the situation obtaining. Therefore, for all practical purposes, this is yet another budget of the Taoiseach, Deputy Charles J. Haughey, and we must view it in that light. The light in which we must view it is that the Government, by virtue of their historic manifesto ideology and their approach in successive budgets over the past few years, have circumscribed revenue capacity, have so compressed it into such a narrow revenue context that the whole of the country's tax revenue situation now rests on two or three principal struts. That is a dangerous and inadequate situation. This means also that it will not be possible in this country in the years ahead, no matter what any politician might think about it, to finance national economic development. One cannot finance national economic development in any country if one relies simply on two or three main pivots of taxation, and I shall explain what I mean to the House.
In this country there is yielded from the taxation or revenue side, from customs and excise duties approximately 34 per cent; one-third of all taxation is yielded at that level. This year, on the income tax side, we will be getting approximately 40 per cent, the other bigh plank of revenue income. Then value-added tax yields yet another 20 per cent. I must emphasise that it is quite impossible to run a budget of £4,300 million by depending on three planks of revenue — customs and excise duties comprising 34 per cent, income tax 40 per cent and VAT almost 20 per cent, and no other taxation, because for all practical purposes this Government have abandoned all other forms of taxation, and here again I shall explain what I mean.
For example, what do estate duties really mean at present in terms of Irish revenue tax? I know they loom large in people's minds. People think that estate duties are those millions of pounds that people pay. In this country they constitute. 1 per cent of revenue. For all practical purposes, as a contributor to national revenue, to financing economic and social progress, estate duties are almost irrelevant. Then we must ask ourselves: what is the contribution of capital taxation to national revenue intake? Last year it was. 6 of 1 per cent. Therefore for all practical purposes we do not have a capital taxation structure in this country. In fact we would be better off saying to the unfortunate civil servants in the Department of Finance on the revenue side "There is your redundancy money; will you all go away to the west, buy little cottages for yourselves and have a pension for the rest of your lives"— because .6 of 1 per cent of revenue is, for all practical purposes, irrelevant. We get an income from corporation tax of about 5 per cent. In so far as it has made a contribution it is a valued contribution towards economic and social expenditure. We have had a commotion about agricultural levies. I never heard such a rí-rá about the contributions from agricultural levies as I have heard in the past two or three years. Yet the total contribution from agricultural levies towards the total expenditure on economic and social progress was .2 of 1 per cent. In other words, last year excise duties and customs duties brought in £9 million; income tax brought in £1,000 million; value added tax brought in nearly £500 million. These were the principal ingredients. We got £130 million from corporation tax, roughly 5 per cent.
My fundamental criticism of the Government is that they abolished a wide range of tax options and if one does that one finishes up crucifying oneself trying to get enough money to pay for the current Estimates, and the whole economic strategy in terms of managing the country will go haywire. I do not want to use these terms in any excessive or emotive sense. I am stating what I believe to be the reality. I will give a few examples. We abolished road tax, a £50 million option which has been poured down the drain for the past three years. We abolished rates in toto without batting an eye-lid. This year alone the Exchequer has to find £125 million to recoup local authorities for the abolition of domestic rates. We must remember that these are annual costs and not just once off costs. Every year the money has to be found. We abolished the prospect of some kind of a system of capital taxation to the tune of £20 or £30 million. As a result of all this we are inevitably going to finish up boozing ourselves into keeping the country going by paying customs and excise duty on drink and tobacco, or by paying more and more in income tax, and the spread of taxation around the country imposing and equitable burden on the sections of the community who should be in a position to pay their fair share is increasingly circumscribed and the spread does not exist any longer.
I know that Fianna Fáil came to power saying that they could abolish all those taxes and have no worry, and here we come to the famous recipe of Dr. Martin O'Donoghue — promoted vigorously by the present Taoiseach when he was in office even though he consistently overspent in the Department of Health because he was determined to embarrass the then Minister for Finance, Deputy George Colley, and supported by the rest of the former Cabinet — buoyancy, growth and greater industrial activity. From the competence of people investing in the Irish economy we would have a growth and a buoyancy of revenue from the other taxes, customs and excise, corporation profits tax and value added tax; so big would be the growth that we could abolish all the other taxes.
There was only one complication about the scenario. There was no growth. There was a failure to anticipate that there might be a recession and hence we have the Taoiseach in here with a budget which has no reality in relation to the demands of public expenditure. We have a budget here with a cooked Book of Estimates because we are going to have an election in mid-year. Of course there is a provision for a 3 per cent growth. Anybody in their sane senses, as my own party leader said here this morning, even a child in the street, would know that there is no way whatsoever that the non-pay elements of ordinary public expenditure can be constrained to 3 per cent. I know that as chairman of one of the largest local authorities in the country. Take the construction industry indices affecting the Office of Public Works. In relation to construction projects at the moment, the ordinary mickey mouse order one puts out to get a door put on a garda barracks, the index is running at 24.6 per cent. That is what we have to find in Dublin County Council. The index for road making material is 30 per cent if one wants to fill a pothole on an Irish main road. Yet the Minister allows 3 per cent. That would be swallowed up in the petrol increase alone which will affect the departmental Estimates for travelling in 1981.
Therefore my central point is that the Taoiseach wants to jolly us along, keep us all quiet and happy, go to the Ard-Fheis in a fortnight's time and say that these are the Estimates and that anybody who questions them is impugning integrity of his Civil Service, fine upstanding public servants who would not do a thing like not doing what they are told to bring it down to 3 per cent, and that these are authentic documents. But we said last year, and I particularly said, that there was no way that the country could be run within the constraints imposed on it in the 1980 Book of Estimates. Of course at the end of the year we passed here — and we had to pass because there was not a shilling in the Department of Finance — £240 million of Supplementary Estimates just to keep the country ticking over to the end of the year. I would like to see the faces of the gardaí on Border duty, or the Army out in the Lebanon, or the fellow in the central boiler works in Government Buildings if they were told that their pay cheques could not be issued this week because the Government have put a limit of 3 per cent and a lot of money had been spent on non-pay elements and there was none left for pay. We would not have a strike on our hands; we would have a riot. These estimates have no reality in terms of the effects they will have on Government expenditure. This is a con job which the Taoiseach could not sustain in rational argument.
It was tragic that there was little emphasis in the budget on any effort to review the issues of job maintenance, job protection and job creation. I have seen about 15 budget statements during my time in this House and one could pick out without difficulty the contributions of the different Departments. But if one read through this document one would begin to wonder if there was a Minister called Deputy O'Malley. Is there anything in this document which refers to the Department of Industry, Commerce and Tourism? Apart from a few paragraphs about industrial relations there is nothing obviously from the Department of Labour about schemes for job maintenance, employment subsidies, youth employment and so on. The Taoiseach called in each Minister, told them what they would get in 1981, decided what was to be done and threw them all out. This is not a Cabinet document because the Cabinet cannot get on with one another. There is no input from Deputy Colley, Minister for Energy. Is there any reference, apart from minor references to minor schemes about saving in terms of energy conservation, to the role of the Department of Energy? There is nothing. I am seriously disappointed at the absence of any new proposals or an analysis of the situation having regard to the fact that 200,000 persons are now unemployed.
I would draw the attention of the House to the cost of this development on the unemployment front. In recent weeks a great deal of attention has been focused on unemployment in the UK where 2.419 million people are now unemployed. Many of them are Irish and quite a few of them have come home. We know that, as public representatives who meet Irish people when they return having become unemployed in the UK. A recent parliamentary answer in the House of Commons put the cost to the State of the unemployment of a married man with two children who had been on average earnings, at £6,000. That £6,000 was arrived at by estimating that half of it was lost in revenue and the other half was lost in the cost of benefits which had to be paid to the person. If one takes the rate of pay of the male industrial workers here and the rate of unemployment benefit, the cost to the Exchequer is in the region of £5,000 per annum for a married man with two children. That does not take into account the hardship and the humiliation of people in this position. Not only do the Government have to pay out unemployment benefit or assistance but they must be paid pay related unemployment benefit as well. Where a person is unemployed the State must forego the PAYE return, the PRSI return and unemployed persons also generally become entitled to a medical card which costs money as well. We often tend to forget that. Some of them also are entitled to a reduction in their differential rent. The total cost is probably nearer to £5,500 per annum for the State to maintain an unemployed person. We tend to regard an unemployed person as some one who collects the dole but it is a lot more than that in real terms. We could add on the loss of production, the loss of profits to the company concerned, the loss to industrial growth and the loss to the GNP of the nation. One could add on many more thousands of pounds in that context. It seems inevitable that another 5,000 workers will be on the live register this year. The cost to the community as a whole on those figures would be an additional £30 million per annum. I strongly submit that in the budget estimates produced here for 1981 there is no provision for that kind of increased cost that the community will have to face.
It is disastrous that in that budget statement there is no analysis of the true economic and social cost of unemployment. A lot of work of that nature has been done in the UK. The real problem facing us is how can we spend money to keep workers in jobs and to protect employment, to tide them over a period of recession, with subsidies or employment maintenance schemes so that people do not have to become registered as unemployed. There is no analysis of that in the budget. The Government's approach is an appalling mish-mash of ad hoc decisions with little impact on the true economic position.
There has been criticism of the increased price of alcohol. I drink and so do some of my friends but at the risk of being hit over the head with a pint in a pub I am not unduly worried. Last year we spent £2 million a day every day of the year on booze alone. In 1978 we spent £485 million and in 1979 we spent £570 million on drink. I believe that last year we spent close on £660 million on drink, very nearly £2 million a day. We have a serious alcoholism problem and serious absenteeism from industry arising out of alcoholism. A great many of the problems which public representatives meet are directly attributable to alcoholism. We come across problems in relation to broken families, deserted children, undernourished children, and children who suffer from the absence of a father or a mother on the booze. We know, how easy it is to spend the end of one's working life or social life entertaining one's friends in the pub.
I believe if we have to pay some extra money in order to finance the social and economic development of the country we should not complain a lot. I regard that as a source of revenue which has desirable side effects. I know there are many people who will not like my saying that because the drink lobby behind the counter or in front of it is very strong. I do not oppose that aspect of the budget. I hope the money will be spent on job creation for the unemployed, those who cannot afford the price of a drink. The rest of us should be able to afford customs and excise duties on half of what we spend provided the money goes into job creation.
There are some notable things missing from the budget. I am disturbed at the decision to demand from the business community the payment of one and a half years' tax in 12 months. I do not know where that decision came from. It certainly did not come from the Minister for Industry, Commerce and Tourism. The CII believed that imposition would not be put on industry this year. It is a very bad decision in the middle of a recession to impose that type of taxation levy on the private sector and the manufacturing sector. When Deputy Richie Ryan was Minister for Finance he had many approaches to introduce something like that but he resisted them. He must look like a saint in heaven or the most reasonable man on earth compared with those who would take that type of silly decision. It is extremely difficult to understand.
There should have been some review of the extent to which we would try to encourage Irish people to take holidays in the country. I know it is not a major issue but at the moment we spend £200 million a year of Irish currency taking holidays abroad. There are many people who spend holidays in Tenerife and other places in the sun but this is paid for in Irish currency. For every £10 million spent here, when people take their holidays at home, a thousand jobs are created and kept here. That is an area which should have been examined but like all decisions in relation to economic and social development that kind of decision would be very unpopular.
There is no reference in the public capital programme to any provision for the demands made by NET who have been looking for £90 million to keep 1,400 jobs in existence. I cannot understand why the Government did not take any decision to provide this money for NET. Perhaps we are facing NET No. 2 because it looks as if the decision to provide, at a cost of £200 million, a natural pipeline, for political purposes, from Cork to Dublin, trailing off into Limerick, on to Clonmel, through Kilkenny and on to Dublin will become NET No. 2,. All the reports and all the analyses made in relation to that Government proposal show it to be uneconomic, and unjustified by virtue of strict economic analyses. Even with the demands of the Dublin Gas Company and the people who use gas in Dublin the whole thing looks as if it is a non-starter. The Minister for Energy, who has to show that he is doing something in his Department, has come down in favour of it. I predict it will be NET No. 2 and we do not want that. In the absence of any provision for NET in the capital budget and the decision put into it, which I believe is a wrong one, the budget is unbalanced.
The budget shows that the Taoiseach wants to go to the country as soon as he can. He has not satisfied anybody. The PAYE sector, the farmers and the business community will not thank him for what is in it. His backbenchers will not thank him because of the petrol increase in it. I met enough of the Government backbenchers during the election campaign when they all told me: "He is not just an ordinary politician. He is not an ordinary Minister. He is somebody quite special and capable of taking quite distinctive economic and social decisions." In fact, he has provided to be not much different from the rest of us, a very ordinary politician producing a very mediocre and nondescript budget. Given a couple of months at the job, some of us could do a lot better in terms of economic and social balance and dealing with the realities of the financial situation.
This budget will not make much impact, but it will probably enable the Government to struggle on. With 32 office holders, we now have more Ministers and Ministers of State than we have had in the history of the State. We have never had so many Ministers, Ministers of State and civil servants, and never was so little produced. This Financial Statement shows that, whatever else is happening in the Cabinet, and whatever else is happening at Minister of State level, the ideas are pretty sparse on running the country, managing the economy and getting the State-sponsored sector moving in a rational and coherent way, and the effect on the economic situation is very serious.
