Before the adjournment I was dealing with the Government proposal for 100 per cent tax allowance for expenditure on rented housing accommodation and multi-storey car parks. I indicated my total opposition to this proposal because its effect would be that people of substantial means would be free of tax for ten to 12 years. It seems entirely wrong that we should allow people, who have already accumulated sufficient of the world's wealth over and above their current needs, to avoid any taxation for ten to 12 years, provided they put that accumulated wealth into a particular type of investment. There are many other ways in which investment can be encouraged. As a society, we have been wrong to leave the law in such a way that building housing accommodation to rent has been discouraged. The way to correct that is to amend the landlord and tenant law to remove disincentives. It is not to give a near total tax exemption to people with substantial wealth who invest it for a particular purpose. No matter what that purpose might be, any exemption will develop a new corps of protected people, a new elite, who can amass even greater wealth while the worker is obliged, week in and week out, to surrender a percentage of his pay package before he brings home the balance to support his wife and children.
Fianna Fáil propose in accordance with their policy of making the rich richer and the poor poorer allowing people of substantial wealth to become even wealthier by a tax exemption for ten to 12 years. They did it for those engaged in mining by the outrageous policy of 20 years tax exemption in respect of profit from minig when our natural resources were being extracted and exported. They allowed the 20 years exemption so that in most cases the mines would have expired before the end of the period of exemption. We were abused for curing that.
We also introduced a capital gains tax and a Fianna Fáil Ard-Fheis voted against it. We introduced it because we said it was wrong that people with substantial wealth should by investing that wealth in assets which could earn a capital gain, avoid paying tax on such gains. We were vilified for changing the law. We did it and I am glad that Fianna Fáil did not have the temerity to interfere with that particular tax.
This new privilege which Fianna Fáil will confer on people of substantial wealth who build housing accommodation of a certain type and who build multi-storey car parks runs against the whole principle of equity in taxation. Have the Government no feeling for the sense of indignation of the ordinary taxpayers about how inequitable the tax code is? Since they got into power they abolished wealth tax and now they are proposing a new benefit for the wealthy in this particular tax exemption for ten to 12 years. How can they expect people to be reasonable in their demands when that Government's primary concern seems to be people of substantial means and their last interest appears to be the people with no means of avoiding the crushing burden of income tax?
One of our greatest difficulties is in industrial relations and in cooling the expectation people have for increases in remuneration which are not related to increases in productivity. Most of the pressure for pay increases comes from an understandable effort by people to compensate themselves for increases in living costs which have already arisen. A very large share of increases in costs has been caused by the Government's grossly inflationary programme. The Government have acknowledged the need for moderation in income expectations. The Taoiseach went to the mountain of Montrose in January 1980 to preach on T.V. moderation in incomes. We have similar exhortations to the plebs delivered by Ministers when they are the principal guests at sumptuous dinners. They use those occasions in order to preach to their underlings that they ought to accept moderation. But when the Government have an opportunity by their own actions to cool the pay scene, they do the reverse.
This budget will add at least 3½ per cent to living costs with the result that the Government are ensuring confrontation between employers and trade unions later this year. As a result of the Government's deliberate policy, the cost of living between last May and February of this year will rise by more than 10 per cent. Do the Government forget what they pushed into the national understanding? I must admit that the title "understanding" almost sticks in my throat. If ever there was a misnomer it is that. Both the first and second so called "understandings" are the greatest misunderstanding of the economic needs of the country. There is provision in the understanding Mark II that if the cost of living rises beyond 10 per cent between May last year and February this year there must be a related increase in pay; or at least talks about it, which is the same thing. The Government have insured that this further wage increase must now be given. We can now anticipate that, if we have not gone to the country before then, the Government will be pushing for yet another reckless settlement of wage demands within a matter of three or four months. That will all be in an effort to bide time between now and the next general election.
There are those who like to pretend that the debasement of the IR£ against sterling is attributable solely to North Sea oil. That is an assumption I want to demolish. Today one must pay IR£1.35 in order to buy £1 sterling. We have seen a devaluation of the IR£ in less than two years by 27 per cent. The IR£ is struggling within the European Monetary System. It should be appreciated that whatever position it is maintaining within that system is due in part to the protective mechanism of that system which supports the IR£ when it gets into trouble. It must also be remembered that the IR£ today is being protected by most sophisticated and detailed controls on currency movements. There is no other European currency controlled as rigidly as the IR£. The other currencies within the EMS are floating freely but, uniquely, because we sought and were given permission to do so, the IR£ is controlled by and subject to most detailed and onerous supervision by the Central Bank. Were it not for those controls which are artificially holding the value of the IR£ within the EMS I believe we would now be in the situation where our pound would be worth half the value of the British pound. In other words, one would have to pay IR£2 in order to purchase £1 sterling.
Unless this nation comes to its economic senses, it is likely that our European partners will say enough is enough; we have supported you for too long at an artificially high rate within the EMS. We are not prepared to do this any longer and you must therefore devalue the Irish pound. If our pound was to be devalued in accordance with our economic behaviour its value would be about half that of the British pound. Currency devaluations arise directly in relation to a country's economic performance. When one looks at the appalling misbehaviour of our economic managers that is to say our Government, one can see that the present value of the Irish pound would not be warranted were market forces operating.
Money is more than a medium of exchange. It is more than a symbol to ease the purchase of goods and services. Money is a store of value. It cannot be said that the Irish pound is a good store of value when everything that could debase the currency is running at full steam at present.
Government borrowing will, I believe this year reach well in excess of 16 per cent although the Minister said it will reach only 13 per cent. All independent commentators say it will be 16 per cent as long as there is no slippage. If we get slippage in expenditure on the scale of the last two years Government borrowing this year will amount to 20 per cent of GNP or more than five times the borrowing rate of any other European country. When one gets to a 20 per cent borrowing rate one is really scraping the bottom of the financial barrel to such an extent that the international financial world will most certainly question Ireland's credit rating. In 1979 the Government overshot their own borrowing targets by £230 million. Last year they overshot their borrowing target by £321 million. In this year when many expenditures in the Estimates have been savagely and unrealistically cut, when there are pressures building up for greater wage increases to compensate for inflation that has occurred or is anticipated I consider it inevitable that before the end of the year their overshoot of their own targets will be between £400 million and £500 million. Those words can be quoted against me if I am wrong but if those calculations are right and if the Government do not achieve their target of getting £200 million from the private sector towards their capital programme we will certainly achieve a borrowing in excess of 20 per cent of GNP. That means that Ireland's currency will be further debased in the international financial markets.
When our rate of inflation this year is likely to be at least as much as it was in 1980, 18½ to 20 per cent, our currency will be very shaky internationally. With our balance of trade the worst in Europe — it is temporarily improving for the wrong reason, because we are suffering from a depression — it is likely to go to a totally unacceptable level when the depression bottoms out and then our currency will be in real trouble.
The ultimate value of any currency is that which world market forces fix. It is not what we think our pound is worth; it is other people's evaluation of our pound which decides whether people are prepared to accept Irish pounds for the goods and services they have to sell to us. The truth is that the IR£ is in dire trouble. Our European partners are impatient about the mismanagement of the Irish economy by our Government. I know they are sorely disappointed that in the 1981 budget the Government failed to take any corrective steps towards an improvement of the economy.
I know any corrective steps will not be easy or popular. I know people are also cynical about politicians and do not expect displays of courage from them. But there are those, thank God, still left in Irish politics who have as strong a commitment today as the day they entered politics to do the right thing for the country. The Government have a massive majority. They can do anything they wish because they have the political muscle in the Dáil to do so. They have culpably failed to take any corrective measure for the Irish economy and Irish society. That leads me to believe that the country is facing a serious catastrophe. Better than running to the country now would be for the Government to use the 16 months left in this Dáil to take the measures they know are necessary to put the country on a right footing. If they fail to do that they will not have any right to seek another mandate from the Irish people because they would be running away from their responsibility, a responsibility which, I say with all modesty, they are in a better position to discharge having a much greater majority than any Government which may be elected in the next general election. Of course it is quite possible that the frustrated and angry citizens, disappointed that the promises made by the Government have not been honoured, worried that the situation now is at a catastrophic level, may decide to give our side of the House a considerable majority. I would hope that if we were to be in power, with or without a massive majority, we would act with a greater sense of responsibility than the most irresponsible Government we have over there.
There have been occasions in the past when no attention was given to economic matters and when political or emotive interests were regarded as being more important than the economic facts of life. That day has thankfully gone. But there are many who consider themselves responsible economically if they mumble economic jargon. It is possible that some members of the Government or some individuals in public life think they are being serious and wise when they use a few economic terms but economic responsibility requires a lot more than that. It requires right decisions, even if they are unpopular.
I decided to avoid the detailed arithmetic of the budget because a number of other contributors dealt with that. However, there is one point which is symptomatic of the gross inaccuracies in the figures underlying the budget, so inaccurate that nobody, even an adherent of Fianna Fáil could take seriously the figures put before the House. The figures for post office arrears are, to say the least, dubious. Last year we were told with great solemnity by the then Minister for Finance, Mr. O'Kennedy, that the arrears due to the Department of Posts and Telegraphs were £100 million. His successor told us only £33 million had been collected. On the Government's own figures there are £67 million outstanding from last year. Yet we are told that as of now the amount outstanding is £41 million. Presumably some arrears arose during 1980 so the figure of £41 million contains arrears that arose in that year. I leave that aside for the moment even though it is a factor that must be taken into account. If there was £67 million outstanding on 31 December 1980 how is it that on 1 January 1981 it was reduced to £41 million? Where has the other £26 million gone? Has it simply been written off and what has happened in respect of arrears due in 1980? Taking just one figure out of the budget one finds an inaccuracy of between £30 and £40 million.
The budget arithmetic this year is also somewhat misleading in that it takes into account £66 million corporation tax which, as I pointed out, will probably not be collected anyway because the possibility of corporations or companies in 1981 maintaining a level of profits similar to that of earlier years is non-existent and the Government know that. Even if there was not a reluctance on the part of the companies to pay the tax, the reality is that they are not in a position to earn sufficient to yield an additional tax of £66 million in 1981. Assuming that it is collected it shows how much greater the imbalance will be in the Exchequer figures for 1981, because advancing the payment date is a once off operation.
I say with considerable pain and regret that Irish public life is being debased by the standards set by the Government and that the standards of objectivity and accuracy for which the Department of Finance have always been known are now thrown into doubt not by any action, decision or advice of permanent civil servants in that Department but as a result of outlandish and irresponsible interpretations made by the Government on foot of the advice given to them.
I am saddened that such has happened. There is an urgent need to change the Government so that once again there will be in office political heads of Departments who will have sufficient responsibility to tell the people only the truth no matter how awkward or embarrassing the figures may be. I contrast the situation now with what it was in 1977. In 1977 nobody questioned the budget figures. No independent commentators were saying that the Government were not moving in the right direction. It was accepted that we were reducing Government borrowing and that our objectives over a three year period to cut out the current deficit was the correct policy. It was accepted that the Government finances were in good order. Not even our political opponents challenged that for a moment. The only criticism they had to offer was that we were too prudent, too wise, too careful and were not spending enough. When we were following that prudent policy employment was increasing, the cost of living was coming down, Government borrowing was falling, interest rates were falling, more houses were being built, there was an atmosphere of confidence and investment was rising all the time so that the highest peak of investment was achieved in 1977. Never was a Government handed over a country with all the economic and social indicators pointing in the right direction. Now all the indicators are pointing in the wrong direction. It cannot be said that this is solely attributable to world affairs. The malignant world forces in 1981 are less than they were in 1974-76 when we were in office. Notwithstanding a totally different environment the present Government have an abysmal record of failure.
The situation in relation to the Irish timber industry is symptomatic of the Government's performance. We have the ludricous situation where Ireland is exporting forestry thinnings to the tune of 25,000 tons a year selling at £1 per ton. If we were to do no more than burn timber we should be burning Irish timber instead of exporting it at £1 per ton. We import coal and slack at £80 a ton. We re-export slack at £14 a ton instead of using it ourselves. By using slack on fires we could save on coal. We are selling off timber at £1 a ton instead of devising ways of ensuring the distribution of forestry thinnings as fuel, if for no productive purpose. It seems to be totally crazy economics. The reason we are doing it is because the Government shoved up manufacturing costs and fuel costs used in industry to such a level that three of the four wood processing companies had to close down at a time when there is a greater need than ever for increasing the housing stock. Our young population is on the increase to such a level that the housing output will have to reach 40,000 houses a year if young people are to be housed as soon as they want to marry. In that situation it is incredible that we should have permitted manufacturing costs to become so out of line with the rest of the world that three of our wood processing mills with ample supplies of Irish timber had to close down. They closed down as a direct consequence of the Government's inflationary policies which have driven so many industries into liquidation and bankruptcy. We seem to have lost our economic sanity. We truly do not understand the future social needs of this country.
Therefore it seems to me that the sooner this Government use the majority they have to rule properly, the better. But if they are not prepared to use that majority — and I am sorry to see that many commentators seem to accept that because there will be an election within the next 16 months the Government cannot act responsibly — that is a very worrying position indeed, that people think that a Government with a substantial and safe majority cannot be expected to rule properly. What has happened to this country that democracy has become so irresponsible that Governments are not expected to do the right thing because they have to face the electorate? It means this, it seems to me, that the Government know they have misled the people and they hope the people are ignorant of their mistakes. Collective action if taken now would expose their failure. I would not like myself to be in a Government which was elected or sustained by popular ignorance. But the Government seem to want to keep the people ignorant of the true facts. Admittedly, there have been a few feeble attempts to discuss facts, but then the Government have acted in a manner totally contrary to the advice they had given previously.
The national misunderstanding of 1981 is perhaps a classical monument to the Government's duplicity because the Government forced that unsound misunderstanding on the employers of the country, who knew the facts and who told the Government they were not in a position to pay its terms. The Taoiseach himself personally intervened to force that misunderstanding on employers, knowing that the outcome would be less employment and a higher inflation. The Government are leading the country to ruin as they try to conceal reality from the people.
