The first Deputy on the Opposition side to mention the recession was Deputy O'Brien. Listening to and reading the Opposition speeches on the budget, one is struck by the thought that most of them have forgotten the fact that there is a severe international recession and that Ireland as a very small nation depending to a great extent on external trade has suffered severely because of that recession. It was nice to hear Deputy O'Brien mentioning that there is a recession. While his contribution was delivered with sincerity it shows the malaise of the Opposition.
In the short time during which he spoke this morning Deputy O'Brien suggested that Limerick should have better roads, new hospitals, extra doctors, a Government office where land could be registered. While admitting that the social welfare concessions in the budget were reasonable, he felt they were not good enough. He felt there should be extra pay for the Garda and quite a number of other individuals. He criticised the Government for borrowing too much, as he said.
Reading the speeches made in the budget debate by the Opposition spokesmen one could be forgiven for wondering if they are living in Disneyland. They have succeeded in pushing the international recession into the back of their minds. They spoke as if the world economy was as buoyant as it was in 1977-78. They forgot the truly enormous impact oil prices have made on the fortunes and economies of some of the world's strongest countries. They have wrapped themselves in a cocoon of make-believe and self-delusion, forgetting the realities of life and allowing fantasy to replace thought and planning.
I should like to with some of the comments made by Deputy Bruton and Deputy FitzGerald. The main theme of the Fine Gael speeches was to suggest (1) the Government have not spent enough; (2) the Government have spent so much that they have to borrow excessively; and (3) the figures presented in the budget were fiddled. In their speeches they were all things to all men. On the one hand they were critical of Government expenditure and, on the other hand, they were loud in their demands for more expenditure.
Most Opposition Deputies who have spoken so far expressed the view that sufficient funds have not been provided for the various Government Departments. Deputy Bruton said the budget is bad for employment and does nothing for agriculture. He and Deputy FitzGerald said there is nothing at all in the budget for the PAYE taxpayer. Deputy Bruton said that Government strategy "in every measure it set itself has been a complete and abject failure". He was highly critical of pay in the public service. This theme was carried on by Deputy FitzGerald in his budget contribution the next day.
One can find excuses for Deputy Bruton and sympathise with the position in which he found himself having been promoted only recently to the position of spokesman on Finance. It is hard to accept that the speech made by Deputy FitzGerald was a serious one having regard to his reputation as an economist. His comments were selective, inaccurate and contradictory. For example, he suggested that this budget does nothing for married couples without children in the £3,000 to £6,000 income bracket. This is a grossly inaccurate and misleading statement. It is not true and it backs up his own admission that he did not have time to do the calculations.
Perhaps I might set the record straight on that point. Married couples whose income does not exceed £4,000 are being completely exempted from income tax with marginal relief over that figure. A married couple without children, where the wife is not earning, will pay £300 tax on an income of £4,500. This represents a considerable saving, contrary to what Deputy FitzGerald said. It is approximately a reduction in tax of more than 35 per cent as compared to 1980-81 and this can hardly be described as small and inconsequential. Neither can I accept the claim of the Leader of the Opposition in this context that the 1980 budget left taxpayers with under £10,000 income worse off. That claim is wrong, based on inaccurate measures of the cost of living effect of the budget and the impact of the indirect tax changes on lower income households.
The 1980 budget had substantial tax gains of greater or lesser magnitude for virtually all groups. Exemption limits were introduced for those on low incomes. Income splitting was introduced for all married couples. Reference by Deputy FitzGerald to the large tax gains accruing to a man with £50,000 a year is an implied criticism based on an extreme example of the tax redistribution inherent in income splitting and must be seen as a criticism of the practicalities of income splitting. Can one be for the principle but against the central and inevitable consequence?
The introduction of income splitting was a major improvement for married couples and in addition the expansion of the rate bands this year and last year has given considerable relief to many taxpayers. Over the past two years the basic allowances granted to PAYE taxpayers has been increased by over 53 per cent for single persons and by about 25 per cent for married persons. The income tax concessions in the budget — most of these will go to the PAYE taxpayer — will cost more than £60 million this year and more than £90 million in a full year.
Great emphisis has been placed by the main Opposition spokesmen on what has been described by them as a penal blow to business. The only evidence they have produced in support of this accusation is that businessmen must pay one-and-a-half years tax this year in a single year. All that is in question is a bringing forward of the tax payment date for companies who have enjoyed a privileged position because of the exceptionally lengthy period allowed to them up to now for payment. There is no question of an increase in the amount of tax payable nor in the rate of tax. If a PAYE taxpayer must meet his obligation immediately and payment dates are brought forward for schedule D taxpayers generally, surely it is only appropriate that companies should be required to pay tax within a reasonable period. At most the advancement of the payment date will involve businesses in a financing cost of approximately £3 million on which interist relief can be claimed. The corporation tax burden on manufacturing is particularly light so that this sector is likely to be the least affected by the change. The Opposition, by their stance on this issue, pay lip service to the claims that they are looking for equality in the taxation system.
It is odd that while, on the one hand, the Opposition have expressed concern for business there is criticism that the 100 per cent allowance in respect of expenditure for moderate cost rented accommodation is unduly generous. Again this is a contradiction in terms. There is a serious shortage of rented accommodation, particularly in major centres of population. A substantial allowance is called for in order to provide the necessary boost to meet present needs. The Government will monitor the operation of the scheme and review it at the end of three years as indicated in the budget speech.
The extension of the 50 per cent initial allowance to lessors leasing to the IDA for sub-letting to industrial users will encourage private investment in advance factories outside of Cork and Dublin. The efforts of the IDA to date to provide such investment on the basis of the existing arrangements have been hampered by the reduced security of private investment in factory buildings outside of our two major cities due to the absence of an active market in industrial property. I am sure the scheme will lead to the provision of advance factories and buildings outside of major centres and this is to be welcomed.
Deputy FitzGerald claimed that privatisation would be more expensive than borrowing. As the instruments to be used in the privatisation funding are not yet finalised and would probably be of a different nature from fixed interest securities it is premature to speculate on costings. The Government are determined that the terms of privatisation will represent reasonable value for the State. The claim that on a full year basis the current budget deficit would be £651 million, bringing it to a higher level of GNP than the 1980 level, is another example of juggling and selectivity engaged in by the Opposition because even they must be aware that each year's budget has its own carry-over effect into the following year. Some years this carry-over will contribute to increasing the deficit and in other years to reducing it. A multiplicity of other factors such as tax buoyancy, unemployment and price trends will affect the opening budget position for 1982. The figures included in the recent budget only relate to 1981 as is the normal practice. It is premature to project the 1982 budget figures. The Government will have to review the current deficit position for 1982 when planning the 1982 budget and will take the appropriate steps at that stage to continue their policy of reducing the current deficit.
It has been suggested by Deputies Bruton, FitzGerald and others that the expenditure estimates and provisions in the Estimates volume are inadequate and that the outturn will far exceed the provisions. They pointed to what they termed a number of absurdities in the Estimates volume. Inquiry about the basis for the figures would have shown the reduction in the postal services provision in the Department's Votes which occurs in 1981, to be due to the fact that most Departments have credits for previous years due to them from the Department of Posts and Telegraphs. These credits arise mainly because of the effect of the postal dispute in 1979 when the services were curtailed by the estimated amounts and these were paid for accounting reasons. It was not possible to take account of these credits in 1980.
In particular there is a reduction of almost £1.6 million in the estimated cost of postage by the Office of the Revenue Commissioners due to credits in previous years and there are also reductions in the estimated costs of other services provided by the Post Office which are due to credits. The estimate for 1981 for telephones shows an increase over 1980 to take account of increased telephone charges. The reduced provision for Army and Navy stores arises from exceptional or non-recurring expenditure in 1980 — for example, the £3.4 million on aircraft, £6.3 million on final deliveries of fishery patrol vessels and advance payments on new ships. No comparable expenditure is anticipated in 1981.
The extraordinary increases to which Deputy FitzGerald referred in appropriations-in-aid can also be easily explained. In the main these extra receipts will come from abroad, from the EEC, including recoupment in respect of road and sanitary services projects being undertaken under the FEOGA aid scheme for the west, from the United Nations in respect of our involvement with UNIFIL and from the United Kingdom in respect of the special premium on our exports of beef there. Far from being increased charges adding to the cost of living, as alleged by Deputies, these are largely extra receipts emanating from outside the country. These examples should be adequate to illustrate the invalidity of the comments made by Deputy FitzGerald in this area and I shall not take up the time of the House dealing with all of the items he mentioned.
It was suggested that reference to the increase in official external reserves in 1980 demonstrated that the Government were trying to hide the fact that we have a large balance of payments deficit. The increase in reserves is a fact and there is no reason that the Government should not acknowledge the fact. It indicates that the balance of payments deficit was financed and that reserves were restored to something better than their 1979 total in monetary terms. In terms of import cover the end-of-year position was approximately three months, better than the 2.4 months cover at the end of 1979. The Government recognise that balance of payments deficits on the scale experienced in the past two years are too high. The policies enunciated in the budget statement of reducing and gradually eliminating the Exchequer deficit on current account and re-orientating capital expenditure are designed to contribute to a major improvement in our external balance over a period of years. While Deputy FitzGerald was correct in stating that the 1980 budget put up the CPI by 3.8 per cent, this did not show in the quarterly CPI figures until mid-May and the average year-on-year inflation effect was 2.9 per cent only. It is this average year-on-year effect that is referred to in the economic background to the budget.
I might deal with another allegation made by Deputy FitzGerald, that is, that the employment figures mentioned in the economic background to the budget were phoney. This is totally incorrect. For example, the Deputy quoted a figure of 10,000 as being the increase in the labour force between April 1980 and April 1981. It is difficult to monitor labour force changes because of the migration and participation rate factors but, on the basis of the latest CSO estimates, it is clear that increases in the labour force in recent years have been well over 10,000. For example, between April 1979 and April 1980 the CSO estimate this increase to have been 18,000. As to the contention made that services employment declined during 1980, the CSO estimate that services employment increased by 14,000 between April 1979 and April 1980 and by 19,000 on average during the previous two years. Therefore it is reasonable to assume that services employment increased during 1980 as a whole in the light of that trend.
Deputies FitzGerald and Bruton were very taken up with the Taoiseach's speech in Ennis in August last. They implied that the Taoiseach gave a misleading figure to the public in that speech. They should acknowledge that five months have passed since that speech was made and that much has changed in the intervening period. The Taoiseach's reference to the balance of payments situation as having been stabilised was mentioned. The deficit is likely to have been approximately the same as in 1979. It is true that a change in pattern was seen towards the end of the year which caused the estimates of the deficit to be revised upwards by all commentators but this was due largely to substantial increases in the importation of capital goods, above all, raw materials, both indicative of economic recovery. May I say that the balance of payments deficit still dropped as a percentage of GNP from 10 per cent in 1979 to 9 per cent in 1980. I might mention also that Ireland had the largest export growth in the EEC, 6 per cent as compared with an average of 3.5 per cent. The Taoiseach's statement in August that the 1980 budget targets were being adhered to generally was correct at that time. Subsequently it became clear that the recession was continuing and having an even greater impact on our economy than anticipated. Accordingly the Government decided to relax the tight limits on spending so as to sustain the momentum of the economy and provide employment. A large part of the additional expenditure was directed to the public capital programme. Overall the bulk of the additional expenditure, capital and current, constituted deliberate and considered departures from budgetary policy designed to meet the needs of the emerging economic situation.
Some of the comments made, particularly by Deputy FitzGerald, were selective. Apparently he by-passed the social welfare provisions, making no comment on them at all. One of the principal objectives of this budget is to improve the living standards of the less-well-off members of our society and there has been almost universal approval of the social welfare increases provided for in the budget. Even the Opposition have acknowledged that the Government have fulfilled their commitment to keeping social welfare payments in line with the increase in the cost of living. The increases provided for in the budget bring about a real improvement in the living standards of the less-well-off in our community. It is recognised and appreciated by most that people on long-term payments, those on pensions, widows pensions, invalidity pensions and so on require special attention in the social welfare context. With this in mind the Government have once again given an increase of 25 per cent to people receiving those benefits. Therefore, in real terms, these people have gained. The Minister for Health and Social Welfare has dealt fully with these provisions and, as most Deputies in the House have acknowledged and welcomed them, I shall not pursue this matter any further.
One of the greatest criticisms made by Deputies FitzGerald and Bruton was that the budget was deficient in that it did not provide adequate improvements for certain sections of the community, such as farmers, PAYE taxpayers and the business community. No effort has been made to explain how the additional resources might be found to provide for greater improvements. On the contrary, the case has been made that there will in fact be a shortage of resources to match the commitment given in the budget and that the borrowing provisions will be exceeded. It would be useful to know where additional funds to match the greater concessions will come from if we are not, on the one hand, to resort to further borrowing and if, on the other hand, in keeping with the concern of the Opposition, we do not want to raise the cost of living index by further increases in direct taxation. What Aladdin's lamp will Fine Gael or the other members of the Opposition rub? What will they summon up to reconcile the unreconcilable?
I listened for a while to Deputy Bermingham speaking on Tuesday. He made certain suggestions. He admitted, however, that these suggestions would cost money. One cannot give something without paying for it either by taxation or borrowing. He was honest in stating that he did not know where the money would come from. The Fine Gael spokesmen, have, on the other hand, glibly criticised the alleged shortfalls without even considering where the extra finance would come from. Perhaps they are still following the deliberate leak that came some years ago, the suggestion of the total abolition of income tax and its replacement by a purchase tax in some form or other. If so, perhaps they would tell us the details and let the people judge what form of taxation they feel is best.
I come now to the criticism that has been made of the growth of the nonindustrial civil service. The Government are also anxious to ensure that the State and the taxpayer get value for money. The Minister stated in introducing the budget:
The sheer size of the public sector and the amount of finance required to sustain it suggest that there is considerable opportunity for saving by rationalising its programmes, administrative machinery and structures, staffing and systems. An interdepartmental task force is being established to make a critical appraisal of the scope for such action and to draw up proposals, as a matter of urgency, to achieve savings this year of at least £25 million on the Estimates figures. On the basis that these savings will be identified and implemented, I am making a deduction of £25 million from the budget expenditure.
Between 1971 and 1979 the census showed that the population grew from 2.978 million to 3.368 million, an increase of 13 per cent. Any increased population requires an increase in the numbers of people needed to administer the public service, particularly in the case of personal type services, even if there is no increase in the level of service provided. The greater part of the increase between 1970 and 1980, however, is accounted for by new services and increases in the level of existing services.
In telecommunications, while arrangements are being made to establish the new telecommunications board, the aim of bringing our services up to the European level is being vigorously pursued and new installations last year were at a record level. This could not have been done without additional trained staff and the policy of recruiting and training extra technical staff is now beginning to pay off. In the area of social welfare there are numerous improvements and innovations in benefit schemes. But the major innovation with substantial staffing consequences was the move to payment of social welfare benefits on a fully pay-related basis. At the same time the volume of employment-related legislation in the decade has required a consequential increase in staff in the Department of Labour.
New schemes of aid to agriculture required additional staff and of course our entry to the European Economic Community, while producing substantial benefits, also meant that extra staff had to be employed. It may be of some interest to note that the direct increase in numbers in EEC work was about 1,400, of whom 700 were in the Department of Agriculture and about 200 and 150 in the Office of the Revenue Commissioners and in the Department of Industry, Commerce and Tourism. The Department of Foreign Affairs had also to expand to meet EEC needs and representations abroad generally and these developments were encouraged by all recent administrations.
Other services are similarly expanding. The Department of the Environment grew to meet housing, environmental and infrastructural needs. Industrial and commercial development and consumer affairs required more staff in the Department of Industry, Commerce and Tourism and the new Department of Energy was created to meet the current difficulties. The Department of Justice grew to deal with law reform, to provide a welfare service and, through the Land Registry, to provide improvement in registration of title and facilities for the purchase of ground rents. The Ordnance Survey section has been strengthened to map the whole country. Education and youth and sports services have been expanded. It is unfortunate that the security situation caused a large increase in numbers not only in the security services but also in administration in the Departments of Justice and Defence. The relative increase in the prison service was over 300 per cent. But all will agree that there is no escaping the need for this increase albeit the fact that it was mentioned in a different way by Deputy O'Brien some time ago.
The increase in the civil service represents a general increase in standards of service in this community. I understand the EEC have been doing some work on social indicators. While conclusions have not yet emerged I have no doubt that the improvement in services that I have mentioned will be substantial on any scale that might be devised to measure social progress.
Support services for all these programmes also require more staff. Computerisation is one such service where the greatest increase in staff has been in the Office of the Revenue Commissioners. If we are to have an expansion of activity in the public service it is going to cost money and we must have more staff to collect the increased revenue required for the various services including those which many Opposition spokesmen, even since the budget debate, have been looking for.
Again, while Deputies Bruton and FitzGerald have been very forthright in their criticism of the special increases which have been made, one must treat this criticism with a certain cynicism and remind them that during the negotiations with the teachers, nurses and other groups they led the Opposition clamour for what they at the time called just claims, even to organising a debate on health matters in this House to coincide with the nurses' march to Leinster House. Will they now renege on the findings and recommendations of the various commissions set up to investigate claims or are they now saying that conciliation and arbitration findings should be ignored? I feel that the concern now shown about the cost of special increases is in sharp contrast to the tones adopted by Opposition spokesmen, particularly Fine Gael speakers, in the debate I referred to. These same people who now complain about the cost of these claims were very vociferous in their comments and requests and indeed demands for extra and special payments for quite a number of bodies.
Having said that I come to the question of the Exchequer pay bill, that is the pay of civil servants, teachers, gardaí, the Defence Forces and the employees in the health areas, together with amounts included in subventions to certain State bodies and the universities. This year's budget provision is £1,860 million, an increase of 19.6 per cent over last year's outturn which, in turn, was up 34 per cent on 1979. The size of the increase and the overall cost of the Exchequer pay bill are causes of very great concern to the Government. This is particularly so just now when we are grappling with the problems of recession, high inflation and unemployment.
Against this background, it is all the more disturbing to observe that the level and number of claims which are being submitted by unions show little sign that those concerned appreciate the need for the most rigorous restraint if the risk of major danger to the economy and to the Government's finances is to be avoided. Indeed settlement of some claims seems merely to spark off a series of new claims from other grades or categories which leads to a massive ultimate increase in costs. All of these groups have received in full the general increases under the national pay agreements and almost all of them have already received at least one special increase over the past two years or so. Bearing in mind the element of security enjoyed by public sector workers by comparison with other employees it is not unreasonable for the taxpayer, and the Government on his behalf, to question seriously the extent and timing of these claims. At a time when so many workers in the private sector are faced with a loss of employment and radical cuts in income and living standards, it is reasonable to ask public sector workers to accept in the national interest the over-riding need for restraining their pay demands and for tempering their expectations by reference to the realities of the economic situation. Unless they do so taxation must be increased and/or services reduced.
In case it is felt that I am overemphasising this matter, I would draw Members' attention to the fact that the Minister for Finance, in his budget speech, revealed that the cost to the Exchequer, over the past two years, of special increases exceeded the cost of the basic increases under the agreements. This fact raises serious questions for the whole future of national pay agreements — questions which all concerned should consider carefully and urgently. It is obviously impossible to justify a situation in which the cost of what should, by definition, be exceptional increases exceeds the cost of the basic increases under the agreements. When the time comes to review arrangements at national level, this will clearly be a key issue to be dealt with.
Coupled with the need to moderate the rate of growth of the Exchequer pay bill is the need to maintain real industrial peace. Essentially this means a willingness by all concerned to implement fully the peace provisions of the national understanding and to make proper use of existing machinery, such as the Labour Court or agreed domestic procedures, to settle disputes. While neither employers nor workers can escape responsibility for ensuring industrial peace, a particularly heavy responsibility must, in the nature of things, rest on union leaders to be seen to exercise effective leadership in this area and on employers to react quickly and urgently to what are legitimate grievances.
There have been Opposition accusations that the budget has done nothing for employment or to promote employment. The Government's investment plan will, it is estimated, result in higher direct employment of about 10,000 most of which will be in building and construction. The indirect employment created will be substantial also and in the longer term, the improvements in our basic infrastructure which will result from this plan will make a significant contribution to increasing the number of productive jobs in manufacturing and elsewhere.
The investment plan is, of course, complemented by the Government's programme for the decentralisation of Government offices to 12 provincial centres with a broad geographical spread. This programme — involving as it does the relocation of over 3,000 jobs and a large scale investment in office accommodation — will have a significant effect in the short-term on employment in the building and ancillary industries. In the longer term it will contribute to a more balanced development of the economy on a regional basis. I am hopeful that the Government's lead in locating service-type employment outside Dublin will be taken up by employers generally. Experience has shown that organisations can operate efficiently and effectively in regional centres and the attraction that Dublin hitherto had for service-type organisations will diminish as our plans for improving the infrastructural and telecommunications systems yield fruit.
I am glad to report that very considerable progress is being made with the decentralisation programme. A multi-discipline team set up by the Office of Public Works to look after site acquisition, planning and design went into action immediately after the programme was announced. I am very pleased with the progress they have made so far and I am confident that the target set by the Government of getting actual construction underway as soon as possible during 1981 will be met. Preliminary discussions have been held with the staff interests and on-going consultations on matters of concern to them will be held as the programme progresses. Their support and co-operation in this major programme is to be welcomed. I thank them sincerely for it and look forward to this continuing.
Sites have been inspected in all the locations and negotiations are in progress for site acquisitions. I wish to acknowledge the great help being given to the Office of Public Works by local authorities and other bodies.
I was in the House when Deputy Boland spoke. He suggested that the Government were yielding to the politics of pressure. The party of which he is a member have a long history and a deep knowledge of how to use the politics of pressure and their recent attempts to obtain signatures from farmers is a supreme example of inviting the politics of pressure.
Because the Minister for Agriculture will deal with the provisions and aids in the budget for agriculture later, I will not detain the House by referring to them in detail. It was claimed that little attention was paid to farmers in this budget. The provision of £35 million in aid in the budget cannot be viewed in isolation. It must be taken as the latest in a series of measures which commenced last year to help farmers cope with their difficulties. Last year a substantial amount of supplementary assistance was made available to the farming community from the national Exchequer.
Forty million pounds was provided in 1980 in supplementary grants. Cattle and beef cow grants under the disadvantaged areas scheme were doubled. An extra £28 million in grant moneys under the farm modernisation scheme was paid to farmers bringing the total paid in the year to just £60 million — nearly twice the amount paid in the previous year. The second moiety of rates for farmers in the £40-60 RV bracket was waived completely, while local authorities were instructed to adopt an understanding attitude in relation to all other farmers who were having temporary problems with rates payments in 1980. The Government also authorised borrowing abroad by the ACC and the associated Banks totalling £100 million for on-lending to farmers at concessionary rates, for which the exchange rate guarantee element was borne by the Exchequer.
As the Minister for Finance said in the course of his budget statement, the Government are hopeful that the position of farmers will be further improved as a consequence of the negotiations under way at present with the EEC.
Any Government in a budget must balance the expectations of many different interests and groups with the reality of finding and providing the finance for these provisions. Taking the economic realities here, and throughout the world, into consideration the Minister, and the Government have achieved in the budget a fair balance between the need and expectations of our people, between the need to stimulate the economy, maintain and provide and promote employment, provide for the less well-off and reduce the balance of payments deficit. This will come to be recognised in the near future.
