Finance Bill, 1981: Second Stage.

I move: "That the Bill be now read a Second Time."

The Finance Bill before this House will provide a statutory basis for taxation measures which I announced in my budget on 28 January, measures which provide for real improvements in income tax allowances, excise duty increases, special tax concessions for farmers and incentives for capital development. Today, I am also introducing changes to facilitate the administration of the taxation system and in so doing reduce the scope for tax evasion and avoidance.

In my Budget Statement I emphasised this Government's concern and commitment to achieving a fairer system of taxation. Taken as a package, the various provisions incorporated in this Bill represent a major step forward in this direction. In the longer term, the Commission on Taxation, established by the Government, are specifically required to recommend changes so as to achieve an equitable rate of taxation for all.

There has been agreement that this debate should extend to general economic matters and I will deal with these later having first outlined the various provisions incorporated under the individual sections of the Bill.

Section 1 provides for increases in the general and age exemption limits announced in the budget. The general exemption limit is increased from £1,700 to £2,000 for single and widowed persons and from £3,400 to £4,000 for married couples. For those aged 65 years or over but under 75 years, the exemption limit is raised from £2,000 to £2,300 for single and widowed persons and from £4,000 to £4,600 for married couples. Revised exemption limits of £2,800 for single and widowed persons and £5,600 for married couples will apply for those aged 75 years or over.

Sections 2 and 3 are also concerned with the budget proposals. They contain provisions to increase the PAYE allowance from £400 to £600; raise the one-parent family allowance from £500 to £650; improve the incapacitated child allowance from £390 to £500; adjust the allowance, from £330 to £500, where a person is employed to take care of an incapacitated taxpayer or his incapacitated spouse; and increase the blind person's allowance from £330 to £400. In the case of married couples, where both spouses are blind, the allowance is raised from £660 to £1,000.

The 35 per cent income tax rate band is also extended by £500 for single and widowed persons and by £1,000 for married couples.

Section 4 ensures that certificates from officials of the Revenue Commissioners will be admissible as prima facie evidence in legal proceedings for the recovery of penalties under the PAYE regulations and section 5 provides a statutory basis for apportioning marginal relief where a married couple elect for separate assessment.

Section 6 confirms that, in certain circumstances, tax must be deducted at the standard rate from payments made to sub-contractors by a person who is not a builder but whose business involves the manufacture, treatment or extraction of construction materials. The purpose of this is to clarify construction and associated activities. The section also counters an avoidance device. Under section 7 the scheme of residence-related relief is extended for a further year and in section 8 the time limits for claiming specified reliefs are extended from one to two years.

Chapter II of the Bill provides for changes in the taxation of farming profits announced in the budget. During the course of my budget speech, I said that technical discussions were taking place between farming organisations and the Revenue Commissioners on the question of income averaging for assessment purposes for farmers. I am pleased to announce that agreement on the details of such a system has been reached and I am now making provision for its statutory implementation. In addition, I propose to provide for the tax exemption of the farming profits of charities.

Section 9 provides for an optional scheme of income averaging for full-time farmers. Under this scheme, tax liability in any year will be assessed on the average of profits for the previous three years. Once a farmer elects for averaging he will be assessed on that basis for a minimum of three years. After that period he may change at any stage. However, tax assessments for the two years preceding the final year of averaging will be subject to review. Section 10 provides for the exemption from income tax of the farming profits of charities with effect from the year 1974-75. Charities engaged in farming have generally been unable to show that they satisfy the existing conditions for exemption of trading profits of charities. I now propose that charities be exempted from tax on their farming profits where such profits are used solely for the purposes of the charity. This means that there will be no liability to tax in the normal course on farming profits of institutions such as schools and hospitals and religious communities.

The system for the payment of income tax by full-time farmers in two instalments which was introduced for 1980-81 is extended to the year 1981-82 under section 11 of the Bill. The first instalment of tax for 1981-82 is payable on 1 October 1981 and the second on 1 January 1982.

Section 12 removes the restriction on stock relief for farmers under which relief is granted on the excess of stock increases over 10 per cent of farming profits. Increases in stock values will now be completely free of tax. Section 13 in chapter III of the Bill, discontinues the resource tax with effect from 6 April 1981.

Chapter IV relates to corporation tax. It contains in section 14 arrangements for bringing forward by three months the date of the second instalment of corporation tax as proposed in the budget. I wish to emphasise again that there is no question of any increase in tax. The change is designed simply to bring the timing of tax payments by companies into line with the arrangements for other traders generally. The remaining section in chapter IV — section 15 — is of a technical nature requiring companies, when making returns of profits to the Revenue Commissioners, to include details of distributions received from other companies. This is necessary for the proper administration of the legislation on closely controlled companies and the 10 per cent rate scheme for manufacturing industry.

The contents of chapter V deal with a variety of different and mainly technical matters common to both income tax and corporation tax. Section 16 exempts from tax payments out of the employers' temporary subvention fund which was set up last year under the terms of the national understanding. Section 17 closes a loophole in relation to tax exemption of income from patented Irish inventions to ensure that, as was the intention of the original legislation, only inventions on which the underlying work is carried out in the State will qualify. In section 18 provision is made for continuation of stock relief for a further year. Section 19 corrects an anomaly in relation to distributions out of export sales relieved income, while section 20 ensures that as regards the tax charge on loans by closely controlled companies to their participators, such companies do not obtain unduly favourable interest treatment where they default on payment.

Chapter VI introduces the measures, outlined in my Budget Statement, to encourage greater private sector investment in capital development. In order to have the immediate effect of stimulating new activity these allowances took effect as from the day after budget day. As with the general proposals for increased participation by the private sector in capital development, these allowances are framed so as to provide investment opportunities for the private sector and at the same time represent reasonable value for the State. They will run for a three-year period and thus allow ample time for them to take full effect and for their impact to be measured.

Deputies will recall that there is a Government commitment in the national understanding for arrangements to encourage rented housing and comprehensive redevelopment by private property funds in major urban areas. In pursuance of this commitment I announced in my Budget Statement that a special new allowance of 100 per cent would be introduced in respect of expenditure on construction of moderate-cost rented residential accommodation. This allowance, which is provided for under section 21 of the Bill, and which will be set-off against rental income, will be available in relation to houses and flats within the size limits already applying to housing grants and in respect of which a certificate of reasonable cost has been granted by the Minister for the Environment. The amount of expenditure allowable will include actual construction cost and site development, though not site acquisition costs. I propose to introduce an amendment on Committee Stage to provide more specific criteria for the moderate cost aspect of this scheme. Section 22 makes the allowance available in respect of expenditure on the conversion of certain existing property into two or more residential units. I am confident that these arrangements will open the way for a big expansion of the rented accommodation sector and will make a very useful contribution to our housing programme.

I said in my Budget Statement that I was considering whether an incentive might be appropriate in relation to the provision by the private sector of multi-storey car-parks, toll roads and bridges. On further examination I believe that such incentives would be worthwhile and they are therefore being incorporated in the Bill. Section 23 provides for a 50 per cent initial allowance and a 4 per cent annual allowance on expenditure on the construction of a multi-storey car-park. This allowance will be available under the normal rules included in the Tax Acts relating to industrial buildings allowances. For the purposes of the allowance a multi-storey car-park must be wholly in use for the provision of car parking facilities for the general public.

Section 24 provides for an allowance of 50 per cent in respect of capital expenditure incurred by a private sector interest as part of an agreement with a road authority for the provision of a toll-road or bridge. The allowance will be offset against the income accruing to the investor from such an agreement.

Section 25 extends the 50 per cent initial allowance to persons leasing industrial buildings to the State-sponsored industrial promotion agencies for onleasing by them to industrial occupants. At present the allowance is only available to persons leasing such buildings direct to industrialists. The expansion of this allowance will, I believe, facilitate private sector investment in the provision of advance factories for industrial use.

Part II of the Bill is concerned with customs and excise matters.

Sections 27 to 32 confirm the budget increases in the excise duties on alcohol, tobacco products, hydrocarbon oils and television sets. These increases are necessary to help to pay for the many improvements announced in the budget. Further changes are also included in these sections. Section 28, for instance, allows for increases in the rebate payable to the smaller manufacturers of tobacco products. Section 29 provides a statutory basis for the Revenue Commissioners to repay excise duty on spirits which become unfit for human consumption. Two further changes are incorporated in section 31. This section ensures that the increased excise duty on road diesel, DERV, will not be imposed on scheduled road passenger services, principally CIE, while also providing for a scheme under which two pence a gallon will be repaid to sea fishermen in respect of duty paid on oil used in their fishing operations.

I announced in the budget that I proposed to extend the excise duty on table waters to squashes and cordials and this change is being made in section 33. The ordinary rate of duty, 37.2 pence a gallon, will apply in cases where the dilution ratio is less than 3½ to 1. Otherwise duty at the rate of 74.4 pence a gallon will apply. The section also increases the rebate rate to manufacturers of table waters. The present rebate is 12.4 pence on the first 20,000 gallons and 6.2 pence on the next 80,000 gallons I am proposing that, with effect from 1 June, a rate of 16 pence a gallon will apply to the first 40,000 gallons of production, and 8 pence a gallon will apply to the next 80,000 gallons of production. This change will be of particular benefit to the smaller manufacturers.

Section 34 reduces the refreshment house licence, from £50 to £10, with effect from 1 April. I am introducing this change in response to requests from small guesthouse owners who are anxious to have the opportunity to serve wine to their guests and who claim that the existing licensing requirements for this purpose are too expensive. Section 35 confirms an order whereby a small rebate of duty on beer was made in 1980 to brewers whose output for the home market did not exceed 175,000 standard barrels of beer in the preceding year.

Sections 36 and 37 are concerned with certain duties on motor vehicles. The budget day Financial Resolution increasing the annual registration charge on cars of 16 horse power and under from £10 to £20 is confirmed. This increase is limited, however, to £16.50 in the case of taxis.

Part III of the Bill contains a number of value-added tax provisions. Section 39 applies the low building rate of 3 per cent, backdated to the commencement of VAT, to prefabricated structures such as garden sheds. In practice these structures have generally been charged at the 3 per cent rate rather than the standard 25 per cent rate, and the proposed new provision will confirm this. Sections 40 and 41 eliminate an unintended anomaly in the VAT legislation relating to the recovery of excess refunds.

Section 42 in Part IV of the Bill deals with the liability to capital acquisitions tax in the case of certain marriage settlements and provides that a grandchild will be deemed to be the child of the disponer in such instances, thereby obtaining a much higher tax threshold. I am introducing this concession in response to requests from the farming and legal bodies who submitted to me that the existing tax provisions impose an undue hardship in some marriage settlement cases.

Part V of the Bill is concerned with stamp duties and provides for the continuation of three stamp duty measures which were implemented by Government orders in 1980. There is provision for changes in the legislation relating to conveyances made by way of sub-purchases in order to prevent the avoidance of duty by the abuse of certain reliefs.

The conditions for the granting of stamp duty exemption for new grant-type houses are amended in order to take account of changes in housing legislation, and the stamp duty increase on cheques from one penny to three pence is being confirmed.

The last part of the Bill, Part VI, contains a number of miscellaneous provisions.

The contents of this Bill clearly show that this Government have a consistent, well defined and fully planned approach to the management of our economy. We must, however, face the fact that we are going through a major international recession. Ireland has one of the most open economies in the world. For us to ignore what is going on in the world outside would be to live in a fool's paradise. It would also be misleading.

The Taoiseach has already informed the House, in his statement on the European Council at Maastricht, of the Community economic outlook as seen by the commission, and of the Government's view on the appropriate policy response.

There is a growing realisation internationally that the successive oil price rises are unlike other temporary setbacks to growth that have occurred over the last thirty years. The price of energy, as a factor of production, has permanently risen to a much higher level. I quote figures here to emphasise how accurate that is. Almost £900 million will be taken out of our economy to pay for oil this year — two-and-a-half times the figure of 1978, more than 12 times the figure of 1973. This is a deflationary factor which we, no more than the other western national countries, have been unable to avoid. It is a factor that we all should remember, its impact and seriousness for our open economy. Economic resources must be redirected to pay the higher bill for the oil we need. Much of the capital stock of industry internationally was built in the days of cheap oil and is now totally out-dated. It must be replaced. These necessary changes cannot be carried through overnight. However, any country which neglects to implement them at least as rapidly as its competitors will compound the damage already suffered. On the other hand, any country investing now to overcome these weaknesses will, when the recession lifts, reap the reward. For the young in particular, whose employment prospects in the years ahead depend on the investment decisions now being taken in the community, it is vital that the right decisions are taken and implemented. Putting them into effect means releasing the necessary finance and physical resources, and this is where the young rely on those already in employment being prepared to exercise restraint in seeking higher incomes.

The policies which this Government are following, and which are reflected in the budget and in the investment plan, make sound economic sense against the present international background and that of our social and economic needs. Their first aim is to support output and employment by offsetting, as far as possible, the impact on the economy of reduced international demand.

While coping with the problems facing us today, this Government are ensuring that our plans for social and economic development in the future are both sound and prudent, a fact recognised by reputable independent economic commentators. Every decision taken by this Government has been positive. Our economic policies have been both bold and imaginative. Without such policies the reality is that the numbers unemployed today would be far greater than they are.

This Government have placed their attacking emphasis on investment. The capital programme provision for this year is up 36 per cent. We are attacking our problems through an unprecedented programme of high investment. The government are very aware of the vital contribution which the private sector can make. For the first time a special effort is being made to encourage and promote private participation in public sector proposals.

The investment plan will provide a major improvement in our infrastructural services such as roads, telecommunications and energy supply. This will be of real benefit to industrial and commercial development and to the community as a whole. That is the reason why the Finance Bill I am at present introducing is specifically designed to include provisions to stimulate and encourage further investment. It will generate activity during its implementation. We will plan over and beyond it. It will help us, as a nation and a community, to avail of the economic upturn, when it takes place later on this year. There are many hopeful signs. It is heartening to note that, despite the severity of the world recession and the unfavourable international conditions, we have succeeded in significantly exceeding the job approvals target of 30,000 in both 1979 and 1980; in 1979 some 34,000 job approvals were registered, while last year 35,600 job approvals were achieved. We are confident that we can attain, if not surpass, the employment objective of an increase of 15,000 for 1981 contained in the second national understanding. The investment plan will result in the direct creation of 10,000 additional jobs in 1981. In particular this will give a powerful boost to the building industry.

We are still a developing economy, and we are coming through this recession with less damage to our economy than other more developed countries. Our policies are beginning to pay dividends and are widely regarded as being so. Most Western European countries enjoyed almost full employment from the fifties on, while we did not. In virtually all of these countries that happy position no longer exists. The increase in unemployment in those countries has been proportionately worse than here. This is particularly noticeable in some of the small European countries, Denmark and Belgium, for example, which, like us, depend heavily on international trade, and have therefore been badly hit by the recession.

In this country the number on the live register fell in the month to end-March. This obviously reflects the fact that the special measures taken by the Government last autumn and the investment plan are having a real effect. The overall improvement in the unemployment situation is also shown by the fall in the numbers on short-time working. I am aware of and am involved with certain areas of activity here which know that there is a gathering momentum of activity in our country at present.

During this recession, our record has been extremely creditable. We have achieved an employment increase significantly greater than the EEC average. This record should give us confidence in the basic strength of our economy and in the policies we are pursuing.

Regarding the current expenditure, we have set ourselves a target of reducing the current deficit this year to 5½ per cent of GNP and we intend to achieve it.

The Exchequer returns for the first quarter of the year were issued last week and some commentators interpreting these have suggested that the budget deficit is running ahead of target. These figures, however, do not represent the expected trend for the year as a whole because there are a number of important factors which did not come into play in the first three months. The pattern of receipts and issues so far is, in fact, generally in line with expectations. On the current expenditure side, 24.1 per cent or less than one quarter of the total amount budgeted for the year has been spent in the first three months. The impact of the revenue measures taken in the budget will not be felt until later in the year. The budget commitment to economies on expenditure will clearly take some time to have effect. The budget emphasised how necessary it is to exercise a rigid control to achieve reduction in borrowing which we require. This will be done.

Pay costs are, of course, of crucial importance and not simply because of their Exchequer implications. At a time of international recession when it is essential for us to improve our competitiveness in world markets, we cannot afford to allow public service pay to increase in a manner totally out of line with what is happening in the private sector. In the budget I allocated an additional £80 million to cover any increases in public service pay and pensions which had not already been provided for in the departmental estimates.

I must repeat my budget request to public sector employees to think carefully in their own and the public interest before pressing claims which they would otherwise consider justified.

Our position on public service pay is clear. That of the Opposition is not. On the one hand they criticise the size of the public service pay bill, while on the other they criticise the Government for not paying more in particular cases. They are constantly seeking increased services for various sections of the community. While they support the demands of a number of pressure groups, they have never once indicated how expenditure to meet these services and demands could be met.

We have recently heard the Opposition claim that the public finances are in chaos and that foreign borrowing is out of control, neither of which is true. However, if the Opposition believe that public borrowing is too high, they should indicate how precisely they propose to reduce it in a period of international recession. All cuts in public spending clearly must have a severe impact on the economy, and it is simply dishonest to say otherwise. Tax increases, be they direct or indirect, are not and cannot be economically neutral.

I rejected explicitly in my budget speech, recourse to direct taxation because such action would represent an economic disincentive of considerable danger at the present time and would be likely to neutralise the beneficial stimulus of the investment plan. The increases in indirect taxes were used almost exclusively to finance improvements in social welfare, but not, may I say, without complaints from those who would regard themselves as advocates of improvements in social services.

Our policy on public service pay is part of our approach to incomes generally. We have recognised for some time that there is a need for a new approach to levels of incomes and to industrial relations in the broader economic and social perspective. This is necessary as pay increases directly affect the economy, and jobs in particular, and also because workers rightly see that pay alone is only one element affecting their standard of living.

That is why this Government first introduced the concept of the national understanding. The Opposition have criticised the national understanding but have failed to suggest any practical alternative. Some Opposition spokesmen have gone so far as to imply that there is some unspecified simple formula by which the Government could ensure agreement with the social partners that increases in incomes should always be exactly in line with the needs of the economy. The true position is not of course so simple. Another Opposition approach is that the Government should provide extra tax concessions and introduce subsidies with a view to influencing wage demands. How is this to be reconciled with their call at the same time for greater tax concessions and for a substantial reduction in the current budget deficit?

I turn now to the situation in agriculture, and in particular to the prices settlement reached in Brussels last week. The effect of this is to increase prices for Ireland by nearly 14 per cent. Furthermore a special package of measures worth £51 million over two years to Irish farmers was secured. The commission is to examine the possibilities for further relieving Irish farmers' income difficulties in particular in the cattle sector, and to bring forward proposals so that the council can take decisions before 15 July 1981. My colleague, the Minister for Agriculture, will be outlining in detail the full package in Thursday's debate.

In the context of expansion it should be noted that the growth forecast for Ireland by the EEC Commission is in marked contrast to the fall in output in all other member states except France and Greece.

Prices in Ireland are heavily influenced by international developments. We cannot buy goods at less than the going international rate, and we cannot expect our producers to sell at home for less than they can obtain abroad. There are no means by which we could escape from the impact of accelerated inflation throughout the industrialised world, largely as a result of the succession of oil price increases in 1979 and 1980. The OECD average inflation rate rose from approximately 8 per cent in 1978 to 10 per cent in 1979 and to 13 per cent in 1980. Last year, energy price rises contributed 4 percentage points to the total increase in prices here at home. A more recent development outside our control has been notably the appreciation of sterling and the dollar.

Inflation, although high at present, is generally accepted as having reached its peak and will fall this year. The OECD and EEC both forecast that inflation will moderate, especially in the second half of the year, compared with last year, while the, EEC average inflation rate is expected to fall to 10½ per cent from last year's 12 per cent.

We have brought this economy through a very difficult period and all the indications show that we are on the right road. Our growth rate this year will be greater than both the EEC and the OECD average. The end of the international recession should, according to the international consensus, come later this year, and our economy, strengthened by the Government's commitment to a high rate of investment so as to increase employment and to raise our infrastructure to the level of our European partners, will be well placed to achieve a further substantial measure of economic and social progress.

I commend this Finance Bill to the House.

In my view and that of my party, the most important matter to which the Government should be addressing itself at present is the very high rate of inflation resulting from the very high rate of increases in prices. The latest published figures show that inflation here in the last 12 months increased by an alarming 21 per cent. This is one of the highest rates of inflation ever achieved here and, to my knowledge, is certainly the present highest in Europe, with the possible exception of Italy. Those figures reveal how stupid — and that is the only word one could use — was the economic strategy adopted by the Government in their most recent budget. The Government themselves have contributed very substantially to the huge increase in prices — 6.2 per cent — over the last three-month period. If that rate were to continue over a full year, we would have a rate of inflation of about 24 per cent, and not the 21 per cent figure now available.

Very much of that very rapid acceleration in prices in the last three months was a direct result of the budget which is incorporated in this Finance Bill. I can demonstrate that all the more clearly by quoting figures for particular types of price increase. The price increase on average is 6.2 per cent, but that on alcoholic drink is well above average at 10.8 per cent and on tobacco is even further above average at 17.7 per cent in the consumer price index in the past three months. They are a direct result of Government action. If the Government feel somewhat unhappy that trade unions and others are now demanding substantial income increases to compensate for the price increases revealed in those latest consumer price figures, they have no one to blame but themselves. They brought this upon themselves by their direct intervention in increasing prices in the most recent budget. If one were seeking to design a budget which would have the effect of increasing pressure for wage increases above and beyond what we can afford as a nation, in terms of increased production, one could do no better than introduce that type of budget, with its emphasis on indirect taxation increases, particularly as regards drink, tobacco and petrol.

The problems which the Government will have with their social partners in holding the line on income increases to the extent that it is essential that we must hold them if we are to maintain our competitiveness internationally, can be attributed almost entirely to the policies contained in the budget which directly increase inflation.

The recently published Government budget figures for revenue and expenditure as in the first three months of the year are completely out of line, even with the extravagant figures intended by the Government in the budget. The Minister, four months after the beginning of the year, now tells us blandly that these figures are as expected. We, in this House, have no way of knowing whether they are or are not expected. The Minister did not tell us at the beginning of the year, at the time of the introduction of the budget, what he expected, so we will not know until the end of the year whether or not this particular distribution of expenditure in the first three months of the year as against the remaining nine months is or is not as he expected. He is asking us to take something on his word without any evidence as to the basis upon which he has been saying that this is what he expected.

If a Minister for Finance expected, as a result of his budget, that in the first three months of the year alone, 40 per cent of the entire deficits of the whole year would occur, that should have been a sufficiently remarkable phenomenon to have been drawn to the attention of the House in the budget statement. He never mentioned at any stage in the budget statement that he expected the deficits to be particularly heavy for the first quarter and now he tells us that he expected it all along. The Minister says that this is due to the change in the dates of payment of certain types of expenditure and so forth. I draw his attention to the fact that there are certain levels of increases in expenditure which have not yet occurred. If his expenditure is already running over target before those expenditures occur, they will be more over target by the end of the year. For instance, there is an additional £111 million provided for social welfare increases which will occur during this year but which have not taken effect at all in the first quarter. The Minister may be able to say that there are special factors which restricted revenue in the first three months and thereby may have increased the deficit, but he should also have mentioned that there are factors which will increase expenditure even further later in the year which were not operative in the first three months of it. Furthermore, there is the provision of £80 million for public service pay increases contained in the budget statement. These also have not occurred in the first three months of the year. They are a further expenditure increase which will occur later in the year. This suggests that, far from the situation improving as regards the gap — as I have said already, 40 per cent of the entire gap for the entire year in the first three months — the evidence would seem to suggest that in the remaining nine months of the year that gap will widen even further, since the Government are able to get their expenditure up so fast even before certain of these expected increases, such as social welfare and public service pay, have occurred at all.

How much out of line the Government finances have gone can be revealed, not so much by comparing this year with last year but by comparing this year with the same period back in 1978 — sufficiently far back that one cannot say that there were exceptional factors obtaining at the beginning of last year which might upset the calculation. By my calculations, three phenomena can be identified in comparing the first three months of 1981 with the first three months of 1978. Repayments of debts by the Government were three times as high in the first three months of this year as in the same period of 1978. To be precise, the issues for the redemption of debt were £914 million in the first three months of 1981, as against £330 million in the first three months of 1978. I got that figure by adding up central fund services and supply services.

Current spending is twice as high as it was in 1978. I got that figure by comparing current spending at £1,199 million for the first three months of 1981 as against £616 million for the first three months of 1978. Debt is up three times and expenditure is up twice, as against the first three months of 1978.

Revenue from taxes for the same period is up by 73 per cent only. It stands at £870 million for the first three months of 1981 as against £501 million for the first three months of 1978. Over the past three years repayments of debt have gone up three times, current spending has gone up twice, but the money coming in to pay all of that has gone up by 73 per cent only. One can see immediately a divergence in the pattern of our finances in a very unfavourable direction.

The Minister may think this is of interest to the Opposition only and that people abroad with whom the Government are dealing have no great interest in these figures and do not really pay much attention to them. I can tell the Minister there are people all over the world, and particularly in the banking community, who are lending money to us and who are watching developments here very closely indeed and are not at all happy with what they are seeing.

I want to quote from a document on European Economic Trends published by the Chemical Bank, a major bank with which perhaps the Minister and his officials are familiar. Relatively recently commenting on the Irish economy at page 42 they said:

The current pattern of economic developments in Ireland is particularly adverse. Real growth is negligible, inflation has accelerated sharply and there has been no improvement in the current account deficit. The primary input into this state of affairs has been the exceptionally expansionary fiscal policy that the current Prime Minister, Mr. Haughey inherited from his predecessor Mr. Lynch. By the time Haughey assumed office in December 1979 the public sector borrowing requirement was running at over 13 per cent of GNP and the current account deficit looked like reaching $1.6 billion for the year. At the same time the Central Bank, operating independently of the government, had imposed a very severe credit squeeze. This severe imbalance between fiscal and monetary policy naturally led to a very unstable economic environment and had a severe negative impact on business confidence.

That is not what the Opposition are saying about the policies of the Government. If it were only the Opposition who were saying that sort of thing, the Government would not worry unduly about it, because that is the sort of language one expects from Opposition parties of whatever colour they may be. When an international bank involved very heavily in lending money to countries like Ireland circulate criticisms like that of the Government in a public document, what are they saying in private to people they are advising about the suitability of Ireland as an investment location? In view of the fact that we are now so heavily dependent on foreign borrowing, we cannot afford to have people making comments like that about us.

At an earlier stage in the report they contrast developments in Ireland with developments in other European countries which are alternative investment locations, or alternative locations to which they could lend money either to the Government or the private sector. At page 3 of the same report they said:

In the case of Spain, Greece and Portugal, superficially their economic performance is very weak compared with the Northern European economies, yet in many cases economic policy-makers in these countries appear to have an appropriate sense of what long-term policy adjustments are necessary. Of the other smaller countries, we expect Austria and Switzerland to continue to display their enviably stable economic performance, removed somewhat from the mainstream of European economic problems. Ireland's economic situation, however, will remain weak.

That is not what I am saying. That was said by the Chemical Bank, a major reputable international bank based in New York and heavily involved in the money markets of the world. That is what they are saying about the way our economy is being managed.

I have no particular love for international bankers. In fact, I would far prefer if we did not have very much to do with them. The fact of the matter is that, as a result of the Government's policies whether we like it or not we have to have a very great deal to do with the international bankers because we owe them so much money. Even to keep the lorry on the road we have to borrow more and more from them. The Government have adopted a deliberate policy of borrowing from foreign banks rather than borrowing at home. When they influence economic trends here to such a great extent, it is a matter for worry that language such as that should be used about Ireland in a published document. As I said, if they are saying that in public, what may they be saying in private about our performance as an economy?

I should like to turn now to the very serious unemployment situation. Much has been made by the Minister for Labour, Deputy Nolan — one does not hear him comment very frequently on unemployment statistics and one might be forgiven if one forgot his name — of the most recent figures, which he claimed showed an improvement. The Government asked the Central Statistics Office to prepare what are known as seasonally adjusted figures for unemployment which show what is really happening and show the underlying trend in unemployment as against the apparently crude figures which because of factors which occur every year may lead to a reduction in unemployment. Indeed, there was a reduction in unemployment in March over February in practically every year, whether things were going well or going badly. Unemployment tends to come down at this time of the year.

To understand what is really happening underneath in our economy, the Government asked the Central Statistics Office to prepare seasonally adjusted figures which set on one side the figures which are special to a particular month and do not really tell us what is happening underneath in the economy, and to produce figures to show what is really happening. Far from the favourable situation adverted to by the Minister for Labour when he broke his monastic silence on this subject, the figures show that in fact on the seasonally adjusted figure unemployment increased substantially in March as against February. The seasonally adjusted figure for unemployment is 123,100 as against 121,300, an increase of 1,800 in the number unemployed.

Perhaps it was a secular silence he broke.

Lest the Government might try to preen themselves on the unemployment figure, it is worth drawing their attention to the fact that this time last year the unemployment figure was 91,600 and it is now 126,000. You can take one month and fiddle around with seasonal figures as much as you like, but there is no gainsaying the fact that in 12 months alone the figure for unemployment increased from 91,600 to 126,000. This shows that their economic policy has gone completely off the rails and is not achieving the objective it was supposed to achieve. In the election manifesto we were promised phased reductions in unemployment by 20,000 in one year, 25,000 the following year, and 30,000 the following year. In accordance with the promises made by the Government about reductions in unemployment, the unemployment figure at the moment should not be 126,000, which it is, but 35,000. The gap between the promise and the performance could not be wider than it is.

There is also a very serious reason for worry about the performance of our balance of payments. The Government promised in their manifesto that they would transfer 3p in every £ from imported goods to home produced goods by introducing a "Buy Irish" campaign which would create 10,000 jobs. In the past four years the very opposite has been happening; we are now spending 3p more on imports and 3p less on home production. The latest figures show very serious grounds for worry in relation to the trade gap.

Perhaps the greatest worry relates to our export performance on the UK market which represents a very substantial portion of Irish exports. One would have expected as a result of the appreciation of sterling against the Irish £ and other EMS currencies that we would have had a greater advantage on the UK market. That is the usual effect of a devaluation in currency. We have not done any better and the Irish Banking Review just published says that despite this appreciation of sterling, Irish manufacturing exports have been losing out instead of gaining in the UK market against continental competitors. The Irish Banking Review says also that the question arises as to whether it will prove possible to maintain the stability of the currency within the EMS in the face of the extremely high level of public sector borrowing, high foreign deficits and high inflation, all of which are substantially higher in proportionate terms than in the case of other EEC countries. That is not the Opposition trying to raise a scare or trying to frighten people into voting for them. Those are the Irish banks commenting on the stability of our currency under the present Government. The Government cannot be very pleased about that. It shows that we are simply not competing as we should.

To improve our economic performance we must have a plan for our economy. The Government have no plan. They are so unable to plan ahead that they cannot even plan three months ahead in relation to revenue figures. They cannot tell us what will happen to Exchequer returns and expenditure over three months. The deficit in the first three months of this year has been exceptionally large. After the event, the Government say that they expected it but they did not predict it in any public statement. It is clear that far from planning four years ahead they cannot even plan three months ahead for Exchequer returns. We must have multi-year planning for Government expenditure. The most important area in which the Government should engage in planning is in regard to their own activities. Almost half of all the activities in this State are the direct responsibility of the Government. This is a radical change from what obtained 15 or 20 years ago. Yet the instruments we use for controlling Government activities through the annual budget debate and the Estimates debate are totally antiquated.

We do not even see the estimates for expenditure for a year until that year has begun. We do not know the Government plans for 1981 until well into 1981 so there is no opportunity for the Dáil to debate them or for adjustments or economies to be made, for planning or so that people will see where the Government are going. The estimates are not presented in time. The Government should present the estimates for the forthcoming year at least in August or September of the previous year so that we can discuss, in advance, ways in which we can make rational changes in relation to levels of taxation and expenditure. That sort of responsible discussion here could be useful to the Government in getting acceptance from the public at large of difficult choices which Governments often have to make. This is prevented by the use of archaic procedures in regard to the estimates.

Would any county council conduct their financial business in such a slipshod fashion? Even the smallest county council will ensure that their members agree the estimates for a year before that year commences. Yet in this Assembly which is in charge of half of the entire GNP, we do not even see the estimates let alone discuss them until the year has commenced. We do not discuss most of them and if we discuss them we do not discuss them until half way through the year and it is impossible to make amendments or changes because Standing Orders of the House specifically preclude any amendments being made to estimates. Some two years ago I sought to get agreement in this House to a change in the estimates procedure and the present Minister for Finance in his capacity as Minister for the Public Service did not entertain these proposals. This is a highly unsatisfactory situation.

We must have at least a four or five-year projection of Government expenditure. At the moment we could have a situation where a scheme could start half way through the year and the provision for the first year might appear to be relatively small but by the time the following year's estimates came to be introduced the amount to be spent on the scheme could be three or four times what it was in the first year. We would have agreed in principle to it in the first year without knowing what it would cost in the long run. Any business would run their financial affairs in a much more responsible fashion.

The lack of control on Government expenditure and the lack of muscle of the Government particularly in dealing with the demands for increases in public sector pay is at the root of our economic problems. It is from that weakness of the Government in this area that all of the inflation pressures in other sections of the economy stem. It is there that the standards are being set. That is the best example of how incapable are the Government in managing their own affairs. In 1980 the total public sector pay costs increased by £300 million and of that only £150 million was due to the normal national understanding which the Government expect everybody else to keep to. The Government can hardly expect a manufacturing industry and other sectors to exercise restraint if they have not the courage to exercise restraint themselves. If the Government set targets for public sector pay in the budget and those have to be breached the Government should be obliged to come in with taxation proposals to pay for whatever further expenditure they have agreed to over and above the budget targets.

In the last four years, instead of doing that, the Government have simply borrowed money to pay for the extra expenditure which they incurred over and above budget targets and which was so large in the last two years as to constitute a total abandonment of the budget targets. Nobody discussed if this was right or wrong. This House was not faced with the decision whether the Government were right or wrong to concede the pay increases or to consider whether they should have held out a little longer. Neither did the community face that choice. If the Government had come to this House with a supplementary budget and told us that an amount of £400 million was needed for increases for the public sector and if they set out the way they proposed to get the money by way of taxes, we could have weighed up the benefits of increased pay for one sector of the economy as against the disadvantages of having to pay extra tax to concede that increase. However, the Government dodged that choice simply by borrowing and we may not catch up with that for two or three years.

Now we are beginning to see the cost of simply borrowing to pay for something that might have been awkward or that was over and above the amount anticipated. In the first quarter of this year the amount that had to be devoted to repayment of debt was three times as much as it was in the first quarter of 1978. As time goes on that figure will increase and the more we have to devote towards repayment of debt the less will be available for other purposes in our economy.

The way national understandings are tackled by the Government must be reformed. Other sectors of the community intimately affected by increases in inflation which result from increases in income under national understandings must have some input to the discussions. For instance, there must be some method by which the farming community which is severely affected by inflation can express their opinion to the Government and to the two sides of industry in the negotiations. At the moment under the method used by the Government — namely, the Employer-Labour Conference — the farming community and the self-employed are totally excluded from any input to the discussions. One might say they have no direct concern in the matter and that they might be destructive in their intervention. But if trade unionists and the Government realised how severely the agricultural depression is affecting the entire economy they would see how essential it is that agriculture and other sectors be involved in such discussions.

We know that the major reason for the current difficulties in agriculture is the fact that the inflation rate and the inflation in costs paid by farmers have been increasing at approximately three times the rate of price increase received by farmers from the EEC. Of course that has meant a dramatic decline in agricultural output and that means fewer jobs. This reduction in the level of job creation resulting directly from agriculture can be attributed in no small measure to the fact that national understandings have not taken agriculture into account. It is not just farmers who are suffering, it is the entire community.

I should like to draw the attention of the House to a survey recently carried out by an economist in Trinity College covering all the agricultural co-operatives and their plans for increasing employment in the next three or four years. The extremely depressing news that emerged from the survey was that none of the co-operatives has any plans for increasing employment in the next three or four years. That shows how serious is the decline in agriculture and it also shows how that decline has spilled over and affected the prospects for people in employment. The Minister should look at the structure of the national understanding to ensure that other interests are brought into the discussions. It is only by getting a consensus involving the entire community that we will have a chance of reducing our inflation rate to a tolerable level.

The greatest worry of people engaged in business about the effects of the Government's economic policy is that if this policy is continued it will lead to a substantial increase in interest rates. There are three ways in which the Government can control our balance of payments situation. They can control it through an incomes policy; but clearly the Government have an incomes policy that is inflationary, that is if they have a policy at all. Secondly, there is the question of fiscal policy, but the Government are not making any effort to control our balance of payments through such a policy because they are consistently budgeting for a deficit. The third way is through a monetary policy, either through restricting the supply of money or making it more expensive.

Because the Government are not trying to tackle the problem through an incomes or fiscal policy, all the burden of maintaining the value of our currency has fallen on monetary policy. There is alarm in the financial community at the substantial divergence between Government expenditure and Government revenue as disclosed in the figures for the first three months which were published recently and this has been reflected in a significant increase in interest rates in the inter-bank market. In the past few days interest rates in that market have risen by one-quarter to one-half a percentage point. Unless the Government do something to show that they are going to improve our performance so far as the balance of payments deficit is concerned, interest rates will continue to be forced up, as has happened already in the inter-bank market. The next step will be an increase in interest rates for ordinary borrowers with the building societies.

It is a common belief in the banking community that this increase is primarily due to the fact that the Government are not controlling the other means whereby our balance of payments position and our currency could be defended. I refer to the absence of a fiscal policy and an incomes policy. All of the weight has to fall on a monetary policy and the result has been an increase in interest rates. I am afraid that situation is likely to continue and there could be very serious problems with regard to the availability of finance at a time when we want people to borrow money. I hope there will be an international recovery in the next two or three years. We want to ensure that our economy is in a position to benefit from that by increasing stocks so that more goods can be sold and by investing in the economy so that we may be able to avail of export markets. It would be nothing short of tragic if that money is not available except at a prohibitively high price simply and solely because the Government have been unable to manage their own finances. The Government are forcing up interest rates for reasons that have nothing whatever to do with general economic performance but are due solely to the failure of the Government to control their finances, and the requirement of Government to grab more and more of the available money simply to finance their own deficits.

That is the difficulty we face, that we could have the potential for a recovery in our economy in the next two years or so but be unable to avail of it because of the heavy burden of Government debt placed in the financial market and, therefore, the high interest rates which much be charged to non-Government borrowers in the event of their seeking money. Therefore it is essential that Government finances be brought back into order on a planned basis, with a reform in the way in which Government finances are dealt with, if we are to provide stability in the money markets and interest rates, so that people who must invest — if we are to avail of whatever international recovery takes place — should get the money to do so. Unfortunately that is not happening at present.

I believe there is another very important service that could be performed for our economy, by the Government presenting an economic plan which would show exactly what was expected so far as Government revenue and the performance of various economic indicators are concerned over the next three or four years. People, foreign banks particularly, would be much more ready to lend us money on favourable terms if they saw they were putting it into a business which was being planned. A country is very much like an individual. If an individual goes into a bank with no plan of where he will get the money to repay his debt over the next four or five years the bank manager will be less likely to let him engage in that debt. But if a country or an individual goes to the bank manager with a plan then they are much more likely to receive a favourable response than they would had they not done so. The absence of any predictions by the Government of the long-run effects of present policies is, in my view, a severe handicap for our economy as far as obtaining the necessary funds, whether for private or public investment, if we are to develop on a continued basis over the next four or five years. To my mind that is one of the most worrying features of our present situation. Indeed, I note that although the Government made reference to the publication of a medium-term plan for the economy — though I doubt that it would be worthy of the name, based on previous performances in this regard — in the budget——

The Deputy has three minutes to conclude.

It is significant that no reference whatever was made to this in the Finance Bill statement of the Minister which dealt with the general economic situation. I am wondering if this is also being postponed in common with perhaps other events which the Government may be inclined now to postpone in the light of adverse factors affecting their performance as well as their popularity.

I will let the Deputy have the full information in my reply.

The Minister is not entitled to say anything, nor should he be invited to do so.

I do not suppose he has been told anyway. The Government and the Minister will have to do a great deal better in the next few months than they have been doing in the last few years if they are to survive.

It is opportune that the House, in the course of the debate on this Bill, will make some further points on the state of the economy because that is the major preoccupation of most citizens — their jobs, the rate of price increases, the cost of housing, the very security of their jobs. Those are the major preoccupations of people up and down the country, farmers for their products, townspeople for the security of their work, whether their jobs will be there this time next year, or young people who do not have jobs and their preoccupation also with economic matters. Therefore it is opportune that the House discusses these matters this week before adjourning for the Easter recess, if that will be the full extent of the duration of the adjournment. We shall have to await some announcement hopefully this weekend on that matter. Indeed it may be a sign of the times in which we live that the Minister for Finance succumbed to some extent to the raising of the political temperature, perhaps in anticipation of this weekend's events, after proceeding through his speech in calm, level tones on the contents of this Bill, which contains very few surprises, apart from the section dealing with allowances for building construction, flats, the possibility of offsetting expenditure there against tax gains. However, having gone through in level voice the main features of the Bill he said:

The contents of this Bill clearly show that this Government have a consistent, well-defined and fully planned approach to the management of our economy.

From there on the Minister displayed curiosity about the Opposition's intentions rather than telling us what he, as Minister for Finance with major economic responsibility, was going to do for the rest of this year. From the figures given out recently, the spending figures of this Government, the Exchequer, for the first few months of this year, we think that perhaps the Minister is not too concerned with the latter months of this year. However, the Minister went on to point out that we were going through a major international recession. He said:

Ireland has one of the most open economies in the world.

I could take that from many people, perhaps from newer Members of the present Government, but not from the Minister for Finance who, in his previous incarnation here in Opposition — when that was one of the consistent themes and speeches of Members of the National Coalition in the latter portion of 1975-76 — rejected that explanation of that influence of that external recession on the performance of the home economy. Of course I accept that ours is an open economy. Obviously, to that extent, we are influenced by what happens in the outside world and markets. But we cannot ignore the fact that decisions, over which we have a great deal of control, have not been taken by the present administration, that mistakes have been made, that the Minister who tells us that this is a small, open economy is a member of a Government which since 1977 — consistently in their behaviour in dealing with fiscal policies — have gone against that analysis of our economy as a small, open one. Since 1977 they have — on their interpretation of Keynes' approach to a recession — gone ahead over-fuelling expectations in the whole economy. Many mistakes have been made by this Government since 1977 on mistaken hypotheses. Certainly they do not appear to have understood the constraints of being a small, open economy. They have got the rhythm of recovery all wrong. As a result of getting this rhythm of recovery all wrong this Government and Minister appear to have lost their way economically. As a Government they appear to be prisoners of the manifesto madness which they adopted in 1977.

Therefore, when the Minister says, hopefully, that we will be in a fit and good condition when we come out of the recession, when the world comes out of the recession, to avail of the opportunities afforded by that improvement all round us, the Minister is whistling against the wind because, on all the evidence available to us, this economy will not be in a good condition to avail of the opportunities open to us by the improving markets in the rest of the world, unlike the situation in 1977. I will be accused here of repeating past policies but, in relation to the Irish economy, there are very few novel turns that can be taken with it. All of us on both sides of the House know that if we are to make employment creation a major priority in the years ahead then hard, difficult decisions will have to be taken, decisions about where our increased allocation of investment should go, decisions about the whole cost of the public sector. All of these are hard decisions for a Government and we have heard precious little here this afternoon from the Minister charged with that responsibility.

In my opinion it is the function of Opposition to point out the flaws in Government strategy, point out where they are failing, point out where, under their electoral mandate — which they alone have in this House to manage the economy — they are failing and for us, at the appropriate time, to present an alternative to the electorate. We are eager to have the opportunity to present a counter programme for the coming year to the electorate. It would, however, be making a mistake regarding the seriousness of our situation if we though there could be any repetition in any election which may be called in the near future of the kind of promises indulged in by Fianna Fáil in the last election manifesto. Our problems are far too serious for that. We are concerned about the major national economic objective of a reduction in unemployment. Therefore, those difficult decisions will have to be made.

The Minister for Labour has broken silence with regard to what he sees as a major turn in our economic fortunes. It shows what straws are grasped at at present as a substitute for correct management of our economic furtunes: we actually grasp at a reduction of 200 in the current unemployment figure to suggest that there has been a turnabout. The trend in unemployment still continues upwards. The fact that there has been a small improvement in temporary job vacancies is responsible for the fall of 200 in the dole numbers. Long term unemployment remains our most serious problem and remains the area in which the Government appear to have failed.

There is a fall in the number of unemployed people registered. It is pathetic that a fall in the unemployment figure of 217 from 126,000 at the end of February is hailed by a Minister in the economic area of the Government as a sign of the long-heralded turnabout in our economy. The most that can be said about the reduction of 200 is that there has been a pause in the rate of increasing job losses and in the rate of deterioration. Nobody in the House concerned about the effects of unemployment in our community, especially the effects of unemployment among our young people, who are the chief sufferers, can doubt that next winter we will see more than 130,000 people registered as unemployed.

We cannot say allowing for seasonal factors, improvements which come at this time of the year, that unemployment is showing any significant improvement. We can certainly say that next winter we will see around 135,000 people out of work. It is too early for rejoicing about an economic turnabout. When one looks at all the indices that show exactly where our economy is going, it can be seen that we have what can most charitably be described as an economy on the rocks. Unemployment affects more than 10 per cent of our labour force. We have an inflation rate of 21 per cent which shows little signs of abating as the year progresses. Economists who have looked at the matter say that the figure will be an average of 19 per cent for the year, which is a slight reduction on last year but is not something to rejoice about.

This year's budget added approximately 4 per cent in the last quarter to our rate of price increases. We know that the reliance of the budget on indirect taxation has triggered off the renegotiation clause in the national understanding. The employers and unions are sparring for another round of violent disagreement, which will not be a very helpful prelude to the last phase of the national understanding. It is anybody's guess what that will be followed by. It must be apparent to anybody who examines the situation that, since the Fianna Fáil Government appear to have given up any attempt at an anti-inflation policy, the unions will find it very difficult by next autumn, when we enter the negotiation season, to get their members' consent to any system of moderate wage increase.

I have already said that there are not many novel avenues of approach open to a Government who are anxious to deal seriously with the matter. But, if the Minister is curious about the details of the economic policy of the Opposition, he could do worse than accept as our approach the need to keep our industrial costs down, the fact that we accept this is an open economy, and that we understand the consequences of Government action. If we are to sell our products on the export market, which can give us the job expansion on which our young people can expect to build some kind of secure future, not the kind of sham job creation of the last few years based on the prognosis of the manifesto but a slower job expansion, which is more secure in the long run, we must keep our industrial costs down. If we are to sell our products on the export market, we must keep our industrial costs near to the level of our trading partners.

When we look at the countries with which we do most trade we find that in 1980 there were seven countries which accounted for almost 80 per cent of our exports. They included the United Kingdom at 42 per cent, West Germany 9.6 per cent, France 7,7 per cent, Netherlands 5.4 per cent, the USA 5.2 per cent, Belgium 5 per cent and Italy 3.1 per cent. The inflation rate in all of those countries does not show the same alarming tendencies as ours. When the markets revive, if we are to export to those countries successfully, our costs must be competitive with the costs of those countries. There is no sign of that occuring at the present time. The Government, instead of attempting to assist the control of industrial costs, have, in their direct budgetary policy, added to those costs, fuelled inflation and made it more difficult for union leaders anxious to arrange for moderate wage settlements.

Unemployment is more than 10 per cent of the labour force, our inflation rate stands at 21 per cent, our growth rate was negative last year, with perhaps a moderate change during this year. Our balance of payments, which shows a deficit, will approach something like £1,300 million, equal to more than 13 per cent of the national income. Our exchequer borrowing requirement is estimated at £1,700 million, which will exceed 17 per cent of the national income. The figures I have mentioned of borrowings can no longer be treated as simply the exaggerated concern of economists, because the average man and woman is beginning to realise the close inter-connection between the cost of servicing much of this type of debt and the level of tax borne by the PAYE sector. One good effect of the tax marches is that it is no longer possible for a Minister for Finance to stand up in the House on budget day and, by shifting the bands here or there and by increasing the allowances, suggest that PAYE earners are better off as a result of the budget. We know that, despite the tinkering with the 35 per cent band, by the end of the year the majority of PAYE earners will be paying more tax, because without indexation and with the constant rise in inflation that would be the net effect. Therefore, the Minister will be collecting more in tax at the end of this year than was the case at the beginning.

There is the situation of a rapid rate of Irish inflation relative to the rate of price escalation in the other EMS countries. In the past an Irish Government might have been able to conceal failure to control our rate of inflation because then our currency did not stand alone and we could hide behind sterling, but that is not possible any longer now that we are in a fixed exchange-rate situation with the countries with which we wish to trade in the EMS. The consequences of this situation will manifest themselves relatively rapidly if we do not deal with this problem of our high inflation rate, a rate made even higher by the lack of decisions on the part of the Government. In the freetrading environment in which we operate our present situation will mean that cheap foreign goods will replace Irish-produced goods in the home market and, obviously, more so in our foreign markets. Consequently, the demand for our goods will be curtailed with the obvious job-loss implications of such a situation.

If the Government add to our difficulties on the inflation front by failing to tackle their own bill for the public sector and if they fail to bring some order into public finances and into their borrowing policy, they will be forced in their taxation policy to add to the rate of inflation. If that trend continues we will find ourselves in the position of not being able to sell our goods successfully on foreign markets or, indeed, on the home market. We can no longer conceal our failure to act in this area. I have referred to both Belgium and Italy in the context of those countries with which we trade. Recently, the Italians, who have a rate of inflation comparable to our own, were forced to devalue. I am not suggesting that such a move is just round the corner for us, but, with Belgium, we now share the doubtful honour of being in the lower section of the EMS. Taking into consideration the numerous crises with which the Belgian Government have been faced recently, some economists think that the day is not far off when the Belgians will be forced to act in respect of their currency. In such a situation our exposed position within the EMS would call for some decision by the Government, that is, if our rate of inflation continues at its present high level. The reduction in the level this year to 18 or 19 per cent is nothing to boast about. That is still a dangerously high figure. It will mean that, when the recession which the Minister is confident about will lift, so far as our trading partners are concerned we will not be in a position to avail of the opportunities that such a situation will offer.

We in general and our industrialists in particular, are attempting to export a greater proportion of our goods to continental Europe. Our EMS membership suggests that that is a logical step; but Britain will continue to be a large customer of ours, if only for geographical reasons. Again, my remarks are related to the primary need in our economic policy to ensure that we have job expansion. A problem with the British market is that the British Prime Minister's policies have resulted in the introduction of very severe deflation in that market and, despite the fact that depreciation of our currency against sterling would suggest that we should be making a real kill in that market, the fact remains that the purchasing power is not there. I endorse the Minister's remarks about ours being a small, open economy, but where I condemn him and his colleagues is that since 1977 they have ignored that fundamental fact. In practice, even since our membership of the EMS, they have not been seen to understand the lesson of the absolute crucial need in the period of EMS membership to control inflation.

Only three months ago the Government added 3 or 4 per cent to our rate of inflation this year. I am not suggesting that they acted in that respect with any great joy. But the problem is that they have been unable to wriggle out of the legacy of the manifesto and, far from their being in a position now as a result of these earlier errors in financial management to be described accurately as being in possession of a plan, this is a Government who have lost their way and who are operating on a day-to-day basis. This is a very bad situation for the country.

Is there not a great irony in the fact that a Government with so large a majority are so lacking in any real control over events in our economy? The reason for this situation is that the Government's major decisions go back to 1977, when the groundwork for most of the major mistakes was laid. Now, in the latter days of this Government, we have an administration who are unable to cope meaningfully with the problems we are facing. In other words, the Government are not presiding over the economy in the sense of going in any definite direction. They are not quite clear where they are going.

In these circumstances we need an industrial policy that will keep our costs down and an incomes policy which is agreed freely, so that when there is some revival in world markets we will be in a position to avail of the opportunity that such an improvement will present. It is fair to ask whether the Government, even in recent months, have made it any easier for union leaders, who perhaps see the need for some kind of incomes policy, to participate in any way in the achievement of such an incomes policy. The decisions taken by the Government and as announced on budget day, far from being seen in isolation from other actions they have taken, should be interconnected. There should be a connection between budgetary decisions and any incomes policy that we wish to see being brought into existence. That was the approach adopted by the administration of which I was a member. Indeed, when necessary we intervened in the area of prices, for example, for a temporary period in order to hold back food price increases. We did that by way of subsidy and in exchange for a moderate wage settlement. There is nothing dated about that approach in economic affairs in a situation in which there are so few options open to us and taking into account our external economic environment. This relationship between budgetary and incomes policy will have to be returned to. But there was no evidence of any such return in this year's budget. Neither is there evidence of any appreciable change in the alarming picture relating to our increasing industrial costs.

What is needed is an anti-inflation policy. If there is to be any chance of moderate wage settlements being agreed this autumn, the Government will need to come clean very soon with the public on the elements of any such policy. They will need to let the public know where they are going to make a start. But in the absence of such a policy or in the event of their failure to convince the unions and PAYE earners in general that they are serious about reducing industrial costs and about controlling inflation, I would see little prospect of unions being induced into another instalment of the national pay agreement after the present one expires, that is if the Government are anxious that there should be a successor to the current national understanding.

The Minister referred to the allowances under section 21 that can be set off against rental income in relation to houses and flats within the size limits already applying to housing grants. He indicates that he will be suggesting further amendments to that section at a later stage. I should like to ask him if he has considered the plight of builders who at present have completed units on hand which they cannot sell. According to the section as drafted there will be an allowance of 100 per cent construction expenditure incurred after January of this year and before 1 April 1984 in the provision of moderate cost rented residential accommodation. I presume that is intended as a fillip to the construction industry but it does not help the builder who already has units completed before the specified date. Does the Minister intend covering that in the amendments he is suggesting?

While I agree that the building industry needs some picking up at present and that it absorbs a good deal of labour perhaps the Minister should also think an allowance should be given to or some deduction made for PAYE earners who are paying for rented accommodation. Surely that possibility should be considered for those who do not own housing property but just pay rent. I should like to hear if the Minister has given any consideration to that sort of step because it seems it would be a useful one. Many thousands of the population including many young married couples find the cost of housing totally prohibitive. They are paying out week by week for pretty highly-priced rented accommodation. Surely some allowance against tax should be given to those thousands of young people, who are kept out of the house market because of the cost, for the amount they pay in rent each week. It seems to be fair to suggest that if the investor — I am not against the idea in section 21 — in such a scheme is permitted an allowance and permitted to make some gain through the tax code for the cost incurred, surely the same or some similar treatment should be given to the person in rented accommodation.

I have already said that the tax allowances in the Bill will not mean that a person concerned will be paying less in tax this year — the reverse, in fact. The alteration of the bands, the increase from four to four-and-a-half, means in effect that with rising inflation the average PAYE earners will be paying more by the year's end. In putting forward this Bill the Minister did not give any hope that he sees any change coming in this spending slippage. His defence of the overspending did not convince me. He did not say this today but when the figures were first released, that the pattern of receipts and issues in the first quarter were generally in line with expectations and consistent with the budgetary approach. We have extraordinary overspending figures, day to day spending on items other than debt services up by 30.4 per cent compared with the first quarter of 1980. This leaves us in the situation that the rate of increase recorded in the overspending so far means that for the remainder of 1981 current expenditure can rise only by something like 10.2 per cent compared with the final nine months of 1980 if we adhere to the targets of the January budget.

The lesson of the overspending would appear to be that according to the Government's own accounts whatever largesse is to be granted in 1981 is apparently to be granted in the first part of the year. All the important figures in the Government's economic management — to call it that — point to a six-month year rather than a 12-month one. There are so many shortfalls in the autumn that it is difficult to see how any Minister for Finance can come here with a straight face and record the situation as it will be this autumn as we face that autumnal round of wage negotiations. Presumably the Minister will be calling on unions and employers to settle for reasonable amounts and he will be doing so in an environment in which inflation will still be going at a rate of 18 or 19 per cent and in which unemployment will again be rising for the winter. The Minister for Labour who hails the 200 reduction in the latest unemployment figures as a turnabout in the economy will presumably be silent at that stage as all the figures suggest a pile-up of unemployment.

In the last four weeks I have been to at least three conferences of young people and the unemployment issue, in their minds at least, is becoming their number one problem. I do not suggest there are easy answers but one essential element of the answer to unemployment is that we must — the Government have a crucial role to play in this regard — keep our costs down at least to the level of our trading partners in the EMS if we are to sell our products in those markets when they revive. That is the only secure basis on which the young people can hope for more jobs in the future. We cannot ordain the activity of the world in which things happen automatically. Economic revival can possibly occur in all the markets in which we trade and we are to some extent dependent on factors outside our control. The depressing thing is that while the Minister makes his appeals for moderation his own actions appear to help very little those seeking these settlements. In that sense I condemn the budgetary stance adopted even in this year's budget which by relying on indirect taxation once more increased inflationary pressure in the economy.

The Minister appears to be confident that we are all set to do well out of the situation when our trading partners emerge from the recession. I doubt it. Our rate of inflation will be in excess of most of them and, fixed as we are now into a determined, set down exchange rate, once there is no immediate danger of devaluation of the IR£, if our inflation rate differs in a marked degree over a long period from that of the other members of the EMS, in the long-term there must be a question mark over the present exchange rate of the IR£. The possible change in Belgium after the Italian devaluation appears to expose us to the predicament if our inflation rate continues at its present high level. By "high" I mean a figure of 18 or 19 per cent. With inflation continuing this year, unemployment over 130,000, little growth, maybe a modest improvement but very little really — negative growth last year and public finances as they are, even the greatest friend of the Government could not pretend that the situation inspires confidence.

Budgetary figures for the second year running appear to be completely out of line. The Estimates produced at budget time appear to be acquiring over the last few years steadily — and this is regrettable — the doubtful validity applying to figures motivated by political factors rather than the objective factors in the economy. Our figures appear to be unacceptably inaccurate over the last few years and what the reasons for this may be I do not know. One can say that the Department of Finance are becoming strangely euphoric and optimistic. I would say that the permanent disposition of the Department of Finance under any Government inclines towards pessimism. There is nothing wrong with that being the prevailing approach in the Department of Finance because pessimism must surely be in the minds of politicians who hear about the facts of our open economy and the constraints which apply in relation to public spending, but we have seen figures presented for the Estimates for the year with a notorious inaccuracy which is increasing of late. It is regrettable, and the spending figures suggest that this year will be no different from what we have seen in recent years. The Government, therefore, are presiding over an economy which at this moment is breaking up ever more with every claim and demand into even more sectional groups, from workers to farmers to business people, each group becoming panicky about their own salvation in our economy, each group becoming less and less confident that an overall approach is coming from the Government. Our debt servicing is becoming a heavier milestone around the neck of the productive sector in industry, our PAYE earners.

With all of these factors it is very doubtful if we can have a successor to the present national understanding. I hope that we will get some clarification of the Government's intention in relation to this. The need is that the Government even at this stage should commence the unpopular task of governing. The uncertainty about their immediate intentions is at this moment acting as a disincentive to invest in certain parts of the economy. However the rumour got out, according to a report in one of the papers, that in the building and construction industry there was to be the possibility of an expansion and an increase in the subsidies for first-time house purchasers from £1,000 to £3,000, there are builders who, I am sure, will have told the Minister that they are finding it difficult to move units on their hands at present because they have a feeling that there will be this improvement, this change in the price structure very shortly. Many other instances could be cited of uncertainty growing up in business and industry generally, all relating to the intentions of the Government who, after all, have nearly 15 months still to run in their natural mandate. Whilst the decision about the naming of a date for an election lies with the Taoiseach as is his constitutional right, he owes it to the country at this stage in terms of the dispelling of uncertainty to name that date. It would be necessary for the Taoiseach to declare whether this Dáil will run almost its natural course or whether we will shortly see its dissolution. We can exaggerate the important of the secrecy surrounding the naming of an election date. As far as I can see the election campaign has been on since the budget this year.

The Deputy has three minutes left.

My final remark is that it becomes necessary, not for political reasons but for the effect it is having on the economy, that the Government should dispel the uncertainty surrounding their election intentions. In the Bill itself the Minister has promised that he will introduce some amendments in the matter of the construction tax concession. I await that with interest because as drafted at present it is a bit vague and subject to some misunderstanding. I note that the Minister indicates that the site acquisition costs will not be covered in this appreciation so far. I would be grateful if he would indicate whether he would give some future consideration to the request I made that some concession be given to the person in rented accommodation who is kept out of the housing market at present because of costs. Many such persons are very young and they are attempting to save for housing finance. Some concession should be made to them on the cost of their own rent.

I understand that this debate on the Finance Bill stretches to financial resolutions and motions, but on this occasion by agreement it can be broadened out to encompass more general economic matters. I propose to deal with some of these more general points because while undoubtedly we are passing through a difficult economic phase at present, not alone here in Ireland but throughout the whole western world, there is a danger that we can be so caught up in the problems of the moment that we fail to place them in a proper perspective and, therefore, fail to provide ourselves with the appropriate analyses and actions that would enable us to make the most rapid possible recovery when the recession does pass its steepest point. It is important to restate what everyone knows, namely that the impact of oil price increases is a major contributor to the present recession internationally, but it is not quite appreciated just how severe that impact has been and why it is so difficult for countries to adapt to this factor.

The normal way of handling any change of prices or volumes between countries internationally would be to say that some countries benefit from the price rise and that means that they will in turn either spend the extra money which they earn from their exports or that that money will be available for lending to other countries who in turn will take it up and use it for various investment or other projects and in that way for the world as a whole on the face of it there is no reason why there should be any recession.

In the particular case of the oil price increases, first in the 1973-74 period, which were severe enough, but secondly and much more substantively in the 1979-80 period, the problem has been the enormous size of the price rises and therefore the enormous scale on which funds have been transferred from the oil importing States in the western world into the hands of the oil exporters. The oil exporting countries have been increasing their spending quite rapidly but not nearly as rapidly as would be necessary to dispose of all this additional money. The balance should then be available for borrowing and this is the case, but the trouble is that the oil importing countries, primarily countries in the western world, would be extremely reluctant to borrow on the scale necessary. Countries in the western world feel, quite correctly, that to borrow hundreds of billions of dollars over a one or two-year period would pose its own problems for their subsequent recovery, not only because of the need to repay the capital but also because the interest charges on debts of that scale would leave them continuing annual problems in their balance of payments positions. Therefore the oil importers have sought to avoid borrowing or to ensure that they borrow only to the minimum extent necessary rather than to the maximum extent which would use up all the available surplus funds of the oil exporters.

That basically explains the recessionary or deflationary gap in the world economy. The amounts of funds available to be borrowed are very much in excess of the sums which anyone want to borrow. There is no shortage of funds but there is a reluctance, for very good economic reasons, to borrow more than is necessary. In that sort of situation one cannot predict exactly how long it will take countries to work their way out of that recessionary gap. They will do it either by suffering a drop in output and employment for as long as is necessary to sustain this recession or they will eventually reduce the surplus money of the oil exporting countries by successful measures to reduce their oil consumption. Unfortunately, while that appears to be a viable possibility in the medium term, and a very desirable movement in the long term, we have no reason to expect that there can be a very rapid switch in the pattern of production in western countries which would enable them to maintain output and employment while at the same time cutting down sufficiently on their imports of oil.

Nevertheless there are some encouraging signs. Some of the latest statistics tell us that by the end of the seventies the western countries were able to achieve a level of output comparable to that of 1973 with a reduction of about 8 per cent in oil requirements. That is a very useful contribution. The expectations are that the eighties will see not only a repetition but a further improvement on that rate of energy conservation and energy substitution, a switch over to non-oil energy sources. But even a 10 per cent or 15 per cent saving is not enough to wipe out this recessionary gap in the world economy. While we can look to energy programmes to make a contribution to easing our problems in the medium term, it would be unrealistic to expect that it will entirely solve the problem. That is why we have a recession and that is why no one is quite sure how long it will last.

Anyone reading The Economist last week would probably have been amused to get a few more lessons in the use of the alphabet. They are now talking about recessions which may be V-shaped, W-shaped or L-shaped. The V-shape indicates the view that having suffered a rapid decline into recession there will also be a rapid climb out of that recession. The V is the most optimistic letter in the alphabet. The exponents of the W theory say that following the decline there will be a weak recovery for a short time, largely associated with people simply restocking after initial rundown, but then there will be a collapse into a secondary recession and it is only after a further period that there will be an upswing into a more sustained recovery. Just how long the squiggles in the middle of the W will last is not quite clear. The most pessimistic letter is, of course, the L where you come down and stay down, just creeping along the bottom of the recessionary trench.

That is a convenient way of summarising the conflicting views between optimistic, moderately cautious and pessimistic. Ultimately no one can say for certain how long the recession will last because that recessionary gap between the surplus funds of the oil exporters and the more modest borrowing appetites of the oil importers remains and will do so for quite some time. Therefore we are into a more speculative series of international moves where every country tries to protect is own position to the maximum extent, which means that it is trying to save its own jobs by exporting unemployment to somebody else. This more competitive international climate, with some tendencies towards protectionist measures on the part of many countries, represents the framework within which we must operate for, perhaps, another couple of years. One consequence of a recession of that severity is that it is very difficult for any nation to be sure exactly how fast economic relationships are changing and, therefore, what the precise impact of the recession will be in any one area of its economy.

Deputy O'Leary mentioned the gap between the budgetary estimates last year and the actual outturn and said how extraordinary this was and how different it was from the experience of earlier years. So it was, but so was the experience of many other countries. I was not quite sure whether at one stage he was about to espouse Mrs. Thatcher's policies. He seemed to be edging cautiously towards them. In the UK there was an apparently tough line on public spending and very rigid control. What happened? The public sector borrowing figure for 1980 was many billions of pounds in excess of the original target set last year by the Chancellor in his budget. In the United States the outturn was tens of billions of dollars out of line with budgetary estimates. Anyone who wishes could set out to dismiss all treasury and financial departments for incompetence, but I suggest that is not the most plausible approach. The most plausible approach is to recognise that the world has been going through a very difficult and complex period with a high degree of shortterm uncertainty. While each administration do their best to estimate what the most likely path will be in the months immediately ahead, no one could say with any degree of confidence that they can be fairly certain about the precise cost and financial relationships that will emerge. It would be nice if it were otherwise and there is no point in pretending to a degree of certainty in these matters which simply does not exist.

So far I have spoken in general terms about the recession and its impact, and what I said is true for many other countries apart from Ireland. In our case we have additional factors which complicate the situation, which can be essentially summarised as follows. We are going through a period of much greater economic and social change than any of our immediate trading partners in the western world. For many years we have had a rapidly growing population and we regarded that as a blessing. We congratulated ourselves for reversing the centuries old trend of emigration, but listening to some Deputies one would think this trend was a curse. This rapidly growing population means we have a rapidly growing labour force. In recent years we have been more successful than ever in increasing employment, but this has not been sufficient to cater for the needs of our rapidly expanding labour force. This means we have an apparent paradox of growing employment and growing unemployment existing side by side. That is a simple way of illustrating the challenge our population changes put before our policy makers.

While absorbing the consequences of this population development, we have had also to take account of other changes. Our industrial structure is changing far more rapidly than that of most trading countries. We are all conscious of the positive side to this in terms of the very successful efforts of the IDA in attracting new industry and we can be encouraged by the way Irish entrepreneurs have been coming forward in recent years. Alongside that we see the very substantial job losses which are taking place in our more traditional older established industries. While a substantial part of those job losses can be associated with the recession and influenced by development in costs in Ireland relative to costs abroad, I want to bring out the point that we are suffering a greater degree of job loss in some of these sectors because of the emergence of industrial sectors in many Third World countries which are now grouped into a category known as the newly industrial countries.

In global terms we should welcome that development. We are looking at countries which today find themselves in circumstances we experienced 50 or 100 years ago. It is right that the more affluent countries of the western world should adopt trading policies which can accommodate the legitimate development aspirations of these poorer nations. But we have to recognise that so far as European trade policies are concerned it means that in many instances Irish industry must bear a greater brunt of the adjustment and therefore must suffer a greater proportion of job losses than industries on the European mainland. That is a point which is very rarely alluded to in discussions inside or outside this House.

I am not putting this forward as an alibi or excuse; I am stating it as a relevant factor which has been operating and will continue to operate for several years. This means we have a more rapid rate of transformation in our industrial structure. We welcome the influx of new industry, but we must not lose sight of the losses we must suffer in our more traditional industries because of these trading policies.

A factor I want to touch on briefly, which reflects these more rapid changes in our industrial and social structures, is the way we had to accommodate a very substantial change in taxation structures and in attitudes towards taxation in the last few years. We have had many discussions inside and outside this House about the taxation of different sectors of the community. I do not have the time to go into the merits and demerits of every point that arose in that debate but it is right to notice one point. The tax changes in the last three or four years, in so far as they affect the level of income taxation and indirect taxation, have favoured the family and married couples. I am thinking of the combination of the income tax changes and the abolition of rates on housing. Alongside that we have transferred a greater share of the tax burden to single people, especially those with few family responsibilities, who account for a greater proportion of spending on things like alcohol, tobacco and various forms of entertainment.

People can make their own judgments as to the social desirability or merits of those changes. I think they were desirable and in the right direction, but we must recognise the pressures which they generate on the part of those who are at the receiving end of these additional tax burdens. This helps to explain some of the pressures and adaptations which have continued in that area.

In the process of shifting some of the burden of taxation from income tax to indirect taxes we have produced an increase in the inflation rate. Opposition Deputies are quite happy to talk about inflation rates of 21 per cent, but I have not heard any of them mention that at least 3 per cent or 4 per cent of that inflation is associated with paying for reductions in the income tax burden on married couples. No one would get a welcome from the trade unions or from any other quarter if one were to turn around tomorrow morning and say that with a stroke of a pen inflation could be reduced by 4 per cent by reversing those tax changes and re-imposing the higher levels of income tax. I do not believe that would be desirable on equity grounds and that is why I made the point that the changes were in the desired direction. Apart from my opinion, does anybody believe that that would get the measure of support from the Opposition, the trade unions or the other groups outside the House? I assure all that it would not. That is part of the problem we face here. I must compress my remarks because I see I have a little more than five minutes left.

The Deputy has eight minutes left.

The selective thinking which can operate in the taxation area also applies to some of our other problems. If we are going to adjust successfully to the impact of these higher oil prices one way in which we can improve our relative position is by bringing our inflation level down to the lowest possible figure. As an important contribution to lowering our inflation rate we should try to get acceptance of an elementary fact of economic life which is that as a nation we cannot compensate ourselves for these higher oil prices. They make us poorer as a nation. The impact of the higher oil prices over the last two years has been to make Ireland poorer by something of the order of 6 per cent. There is no point in every trade unionist, every employee or every organised group saying that they want increases to protect their standard of living as a result of the increased price of oil. One cannot do that. Indeed, the extent that one sets out to protect some sections of the community means that an even greater burden must be placed on the remainder. As we know the Government have increased social welfare benefits by more than the inflation rate so as to ensure that it would not be the most vulnerable and poorest section of the community that would have to bear any of the brunt of a reduction in national living standards.

The corollary of that is that the balance of the population, those at work, selfemployed and so on, must finance an even greater reduction in their living standards. We are talking of a figure probably of the order of magnitude of 8 or 9 per cent. That is one of the reasons why we have a major inflationary problem, one of the reasons why we have so much sustained industrial unrest and it is a problem for which nobody has yet come forward with a successful solution. It is all very well for Opposition Deputies to berate the Government for making what they would regard as excessive pay settlements in response to various claims but I can distinctly recall the same Deputies berating the Government when they did not make the excessive settlements and when instead the community had to suffer the inconvenience, damage and hardship associated with strikes. No matter which tactic is adopted one of the luxuries of Opposition is that they can complain about what the Government have done. Were the Opposition Members on this side of the House they would find themselves faced with exactly the same choice.

The ideal solution is to be able to convince the various groups of these facts of economic life, that higher oil prices have made us poorer, and that the impact of the general international recession makes us poorer still by reducing some of the opportunities for exporting and, therefore, for employment. On top of that the imposition of our own domestic inflation by trying to pay ourselves wage increases in order naively to pretend we can protect our living standards simply aggravates the real reductions because it means a loss of jobs in the trading sector. That factor was well documented by the Confederation of Irish Industry recently and I do not need to develop it.

That is the way we have special factors in Ireland, our population structure, our changing industrial structure, the impact of the tax changes, and they all add up to producing a climate within which we have this selective vision, this selective thinking that in some cases appears almost wilfully to obstruct any progress towards a sensible resolution of what is recognisably a difficult complex economic situation. The House, if it is to carry out its task as representative of the people, should not have from its Members just the standard sort of exchange of political sallies but should debate constructively the possible solutions that are open to us in these circumstances. The Government, for their part, have embarked on this process of trying to produce progress through consensus. That was the rationable for national understandings, a way of trying to bring in to the maximum permissable extent the various groups who would be affected by any changes in policy. That process is capable of much further development and offers a very valid basis for future progress. I have yet to hear any constructive alternative to it being put forward by the Opposition and, therefore, one is regretfully driven to the conclusion that the Opposition position is largely one of just that, of opposing what is done but maintaining diplomatic silence as to what their own alternative behaviour would be.

It is all too easy for Opposition Members to preach doom and gloom continuously but I was very much taken by the former Minister for Economic Planning and Development in relation to his alphabetical index of what is going on. As a person who does not have any experience in the high level of finance it appears to me that the letter he should be talking about is a "Y" and not "W" or "L" because he appeared to be going down without ever attempting to come up. It is fair to say that the vast majority of our people do not understand statistics as presented by various Departments. Very few people can tell one the rate of inflation now as against the figure for this time last year. Very few can tell one the increase in the number of unemployed from month to month or about the volume growth in gross national product. All those statistics presented by different Departments and Ministers appear to give an image that all is well here when, in fact, it is not. The average person can tell one without any doubt that something is radically wrong. If that is the case then something radical must be done to put it right.

This is the year of the disabled here and I have been informed that in China they call it the Year of the Rooster. I have no doubt that in Irish terms, if one changes the political connotations, the chickens will come home to roost this year. Some recent happenings give an indication of the state of the country. We appear to be looking into the crystal ball with a jaundiced eye because the real position is not that which is presented to us. We have had an average inflation rate of more than 18 per cent, 40 per cent higher than that of 1979. The volume growth in GNP in 1980 was zero, the growth in industrial production in 1980 was practically zero. Consumer spending in 1980 was down by 1½ per cent over 1979. Unemployment is in excess of 126,000, well up on last year.

The Exchequer borrowing requirement reached 14½ per cent of GNP against a target of 10½ per cent for 1980. We have a total public sector borrowing requirement of 18 per cent of GNP. To put that in perspective, the total public sector borrowing requirement in the UK is considered too high at 5 per cent of GNP. We have a national debt of something in the region of £9,000 million, more than 100 per cent of GNP. We have a balance of payments deficit of about IR£600 million, but this reflects a fuel importation bill of IR£900 million or thereabouts. On top of all that we have had a drop of 50 per cent in agricultural incomes in the past two years, which has had a disastrous effect on the standard of living of our people.

Therefore, the climate in which the country is living is one of uncontrolled cost escalation in contracting markets and it appears as if things will not change in the near future. As I said earlier, it is easy for an Opposition Deputy to stand up and preach the gospel of gloom and doom constantly. That temptation is very strong in every Opposition Deputy's mind, particularly when we understand that the Taoiseach at any time can decide to go to the country. However, if one is serious about our very serious problems we must realise that cheap publicity gimmicks of their nature cannot be constructive enough to help to bring the country out of the problems it is in.

Our potential for growth and improvement and for general economic health is untapped. There is a capacity for production in the country which has never been fully investigated or brought to light. It lies in our power to attract new industries which many other countries in Europe do not have. We have an exceptionally high level of young people, giving us the youngest labour force in Europe. We also have a level of national investment which is comparatively high. All of these put together, if used properly, could put us in a situation where we would be far safer economically than we are.

A major factor that cannot be ignored is the vast increase in the cost of oil and oil-based products, but this also affects neighbouring countries and our competitors equally hard. That must give us the impression that our situation in the past three years has been the result of mismanagement at home. If that is the case the problem is in our control. The problem probably is there because people have allowed themselves to be deluded and distracted by suggestions that the standard of living can rise dramatically from year to year. However, in successive years we have failed to produce any significant extra resources by comparison with the preceding years. It is like giving a company that has borrowed too much already extra finance: it gives a feeling of well being for the moment, like sniffing cocaine, giving a temporary feeling of well being which very soon wears away.

What is needed is political leadership which would tell the truth to the people of the country about how best to set about achieving goals. These goals include creating jobs for people at present unemployed, and for the 60,000 young people who will complete their education this year, in order to enable them to fulfil their aspirations and achieve their aims and their dreams. These things can be achieved but not without a change in our approach. Radical action must be taken.

The Minister for Finance had arrived at page 17 of his manuscript before he told us something we did not know already. He said that to ignore what is going on in the world outside would be to live in a fool's paradise — it would be misleading. It must be very difficult for a Minister or a Government Deputy to have to stand up at any of the meetings being held throughout the country to try to defend the Government's actions and the results of these actions in the past two or three years. Though the Minister can present a brave face, it is easy to juggle round various statistics and present a reasonable face at a time when things are much worse than we are led to believe. In the Minister's eyes the policies being pursued by the Government make sound economic sense. However, the average person in the street realises that actions by the Government, whether in relation to this country or to neighbouring countries, simply have not worked. Bold and imaginative though these policies are termed in the Minister's speech, they have utterly failed to satisfy the aspirations and the beliefs the people were led to hold in 1977. The Minister said:

There are many hopeful signs. It is heartening to note that, despite the severity of the world recession and the unfavourable international conditions, we have succeeded in significantly exceeding the job approvals target of 30,000 in both 1979 and 1980; in 1979 some 34,000 job approvals were approved, while last year 35,600 job approvals were achieved.

That may be so, but a job approval does not mean that a cheque will issue to the worker in a reasonable time. Indeed the international recession in the last 18 months has only begun to affect the west of Ireland to any great degree. In the past few weeks there have been many factory closures with disastrous results for the social fabric of an entire region that has been ravaged for far too long by the social cancer of emigration.

These closures mean much more than a new industry closing down. They mean the aspirations and beliefs of young people are affected to an extreme degree. Hire purchase payments on their cars cannot be met. Repayments of mortgages in relation to SDA loans cannot be met. The economic health of businesses in many small rural towns is also badly affected. Whether we like it or not, whether the Minister says his policies are bold and imaginative and have been successful, the effect is that more and more young people are joining the dole queues. Radical action must be taken if this very serious situation is to be redressed.

In Connacht at the moment there are something like 14 to 20 advance factories vacant, with a space of 300,000 square feet available for industrialists to come into the region. The work of the IDA down through the years has been magnificent but it has not been matched by Government action. In the west the Wrangler factory has closed. Travenol have made some workers redundant. Galway Concrete have closed down and other factories are in severe financial difficulties. Within 12 months, if this continues, there will be disastrous unemployment, with terrible results for our younger population in particular, who placed their trust in the Government in 1977. They find, despite all the promises, that these things have not materialised. The reason for this is because inflation has gone so high in the past three years. The source of inflation is probably found in the expenditure, tax increases and cuts in food subsidies which the Government have introduced to pay for some of the promises made in their election programme.

The extent of the unrest created by the raising of expectations by the Government, which cannot be fulfilled, is evidenced from the number of unofficial strikes which have taken place in the past two years. These, naturally, undermine the trade union structure and cannot be tackled effectively under present laws. The specific problem of unemployment among young people will have a bearing on the development of our society for years to come. The fact that the programmes which exist at present for the creation of youth employment are uncoordinated and of limited effect, does not help. The fact that unemployment schemes, even of a temporary nature, had to be introduced for young people is an indication of the concern that the Government were forced to show from the realisation of the vast numbers of young people we have in the country.

The Taoiseach, in his first major address to the nation in January 1980, said we had a bright, young, intelligent and well educated population and that their concern and priorities would be his priorities. The speech by the Minister for Finance, indicating the statistics and the bold and imaginative economic policies pursued, does not match in any respect the feeling of a young person who has completed his or her education — to whatever extent that may be — and who now finds that there is no room in a particular employment. Frustration, apathy and cynicism build up against not alone the political system and politicians, but the whole workings of Government. That is something which must not be allowed to continue.

The Minister went on to mention that the Minister for Agriculture had brought back a decent agricultural package from Brussels. That does not tie in with the reactions of the leaders of the farming bodies, the agricultural spokesmen in the Opposition parties or with the ordinary farmer who has to bear the brunt of the collapse of negotiating powers in Brussels. It will have an even deeper consequence for the housewife who will have to pay for the increased cost of her basic foodstuffs, without having food subsidies to fall back on.

The Minister denies the Opposition claim that public finances are in chaos and that foreign borrowing is out of control. He went on to suggest that Opposition Members should put forward their ideas of what should be done in order to rectify these matters. If alternative proposals have to be put forward, it means that something is wrong. One does not have to be a politician or an economist to tell the Minister for Finance, or any member of the Cabinet, that something is radically wrong with finances, because the country has not moved forward to any degree in the last six months, whatever about the period before that. It is not reasonable for a Minister for Finance, the most influential and powerful Minister in any Cabinet, to ask for alternative proposals, least of all from the Opposition. That is not his job. He was appointed to run the finances of the country. He has many economic experts at his disposal. His Government were given a mandate of sorts which they, apparently, cannot now fulfil. The Government should not fall back on the Opposition parties to provide them with alternative proposals. That will not be done by any party in Opposition. We will produce our alternative policies when the right time comes.

The Minister for Agriculture was described recently by a former Minister for Agriculture as an innocent abroad negotiating on behalf of Irish farmers in Brussels. It is a very serious matter to go to Brussels, to accept a package based on words from other Ministers for Agriculture that they will produce a special package for the Irish farmer in July, after the French Presidential elections. We do not know what items are going to be included in this package. We do not know what finance is going to be included in it or what areas of agriculture will be affected by this package. The Minister should have told the officials in Brussels before he went out what exactly he was looking for, what would be the minimum requirement that he would expect. He could have done a much better job on behalf of our farmers, particularly the western farmers who again will feel the heaviest brunt of what has been a terrible failure in negotiation against the other members of the European Community.

The fact that the housewife has now to pay increased prices practically every day of the week brings home to her and to her family the full realisation of the economic policies pursued by the Government. In 1977 the Government said that they would reduce prices by 1 per cent, that they would further reduce prices by 2 per cent in 1978 and that they would further reduce them again by 2 per cent in 1979. This adds up to 5 per cent. Since then one could multiply that by 40 or 50 and one would still not have arrived at the price increases that have taken place. It is ridiculous that a potential Government should say that they would reduce prices, let alone hold them stable, and that we should then find after two and a half years that the price control of even basic foodstuffs has got completely out of hand. This will be brought home to the Government in no uncertain terms by the ordinary people when they have the opportunity to do so.

A newsletter recently produced by the Confederation of Irish Industry indicated that higher inflation means fewer jobs. That is quite true. It is stated in the newsletter that since February 1980 manufacturing output has declined by about 8 per cent and unemployment has increased by about 30,000. That is a very serious indictment of the Government's policies. It is at the core of the feelings of Irish people now, irrespective of what other issues are raised. Irrespective of what attempts are made to raise other issues, the basic fact is that there is dissatisfaction with the Government's economic policies, which have resulted in higher prices and unemployment — a major catastrophe for the people. No matter what brave face is put on the situation by the Minister for Finance, no matter what way the statistics are twisted to suit the Government and no matter what facts are hidden within those statistics, it is evident that there is rampant inflation and a high degree of dissatisfaction with the Government's handling of the economy. Apathy is being bred among many of our people. Unless confidence is restored, we will not have the necessary level of investment to produce the growth we require to bring the country back to where it was before the change of Government in 1977. If even now a real commitment was made by the Government to tackle the problem of inflation, to try to reduce it to single figures, the problems that face the Irish pound as against the other currencies would not be as great. This in turn would lead to increased investment and increased confidence by our industrialists at home. It would also lead to greater opportunities for the IDA to attract further industries into the country and this would reduce the number of people, particularly young people, who face unemployment in the years ahead.

Unemployment has really only started to hit the western seaboard in the last two months. The Government could at least provide some sort of mechanism, either through Údarás na Gaeltachta or through the IDA, so that operations subsidies would come into effect until alternative viable industries could be found for areas where industrialists feel that, due to increased costs or other matters, they just cannot continue providing employment. Many industrialists will now tell us that the long-term life of an industry is seven years and that the medium-term life of industries would be about three years.

Irrespective of all that, the workforce available in the west is second to none. This has been proven in many cases already. The Government, the IDA and Údarás na Gaeltachta owe it to the west to attempt to provide operations subsidies where industrialists and multinational companies decide to close down. This would reduce the pain of having to be made redundant and to face the dole queue and it would provide some sort of reasonable belief in a Government that have lost the confidence of the people, the respect of the people and have, in practically every sense of the word, failed utterly to come up to the mark.

In speaking on this Finance Bill the one feature that comes through very strongly is that it is obviously a Bill which has great concern for the less well of sections of our community. It is obviously designed to ensure that those sections which are undoubtedly vulnerable to the inexorable forces of inflation are protected as far as is humanly possible and, indeed, that their standard of living is not alone maintained but made somewhat better. This comes through very clearly from the various sections in the Bill that provide for a substantial increase in benefits to people who cannot otherwise provide for themselves. In some cases it is 25 per cent, and this is a substantial recognition of the Government's commitment to those people, a practical expression of something concrete being done for the welfare of the less well off sections of our community. At the same time it gives the opportunity to those in business, through the sensible application of taxes, to maintain their businesses at a reasonable level and to expand them, and to the more energetic sections of our community the opportunity to conduct their affairs in an efficient manner and to give them the type of reward that people in business quite rightly expect for themselves.

The budget, therefore, is one of overall concern for all sections of our community. This is in total contrast to the recent statements by the leader of Fine Gael in particular at their recent Ard Fheis. Hidden away in so much of the flowery expositions was the statement that public expenditure would have to be curtailed. This obviously was glossed over and was not gone into in any detail. Nevertheless, it was on record. If this sort of thinking is there at the back of the minds of people who criticise the Government for spending too much on social welfare and not going easily enough on taxes, it demands at this time some explanation from the Opposition, and such an explanation has not been forthcoming.

This raises other questions. It raises the question of the exhortation at that time to transfer votes from Fine Gael to Labour and it also raises the question of the Labour leader's exhortation to transfer Labour votes to Fine Gael. Is the leader of the Labour Party in agreement with the leader of the Fine Gael Party when he says that public expenditure will have to be curtailed? We have not been told anything about this. This is the type of double thinking that we have to put up with in this House and in public about whether a coalition is on or not on and snide remarks that we will have to get the country's finances into order. But there is not a word about how it is going to be done. There is obvious disarray, not only between the Fine Gael and Labour Parties but amongst themselves and how can any Coalition Government succeed with that background? There is the sorry spectacle of candidates in certain Labour areas fighting against each other and the leader of the party worrying whether he will be re-elected to this House or not. Recently we saw a Fine Gael leader coming out in support of abortion and another leader disassociating himself from that stance.

That is not true.

There is total disarray from start to finish. If the parties cannot get themselves organised, how can they get organised to run the country?

That is not true, either.

How can they get their finances organised if they have not even a common stance on a moral issue? That was very forcefully brought home to us during the Coalition period of office when the then Taoiseach voted with Fianna Fáil on a moral issue. The total disarray of thinking is so evident that children in the street are talking about it. How could any sensible person accept that these people can produce cohesive policies and a cohesive form of Government which will benefit all our people?

There is no doubt that we are going through difficult times, in a period of international difficulty. When the last Coalition Government were in power, unemployment conditions here were at least as bad as they are today, at a time when there was international prosperity and when the countries of the world were riding the crest of an economic wave. What happened here? Total chaos and disruption, a series of bankruptcies and liquidations resulting in unemployment, the like of which had not happened before. In spite of the unemployment position today, liquidations and bankruptcies are being kept to the very minimum. Firms are not going out of business. The Government policy of the day is encouraging them to adopt policies of survival, policies to enable them to benefit when things improve.

What about the Wrangler factory?

The basis of the economy is being kept strong. It is not being frittered away as it was under the Coalition Government. I am old enough to remember three Coalition Governments, the first immediately after the late Séan Lemass bought airplanes to fly the Atlantic — the first Constellation planes to be bought in Europe. The Coalition, when they came into power, sold these planes and frittered away landing rights right across the United States and terminal rights in New York which we never got back. That was the legacy of the first Coalition Government. The second Coalition Government said they were going to wipe out unemployment and solve the then existing housing crisis. They did both. They created such a wave of emigration that half way through their term of office there was very little unemployment and at the end of their term of office the demand for houses was so small that there were streets of houses in Ballyfermot with galvanised sheets up against the windows and doors. That is the way they solved the problems of unemployment and lack of housing. That is the history of the first two Coalition Governments.

The history of the third Coalition Government is one of chaos in a world of calm. They created unemployment at that time of an unprecedented level — approximately 120,000 unemployed — when oil was one-twelfth of today's price, when international commodities were so cheap that the cost of raw materials abroad was as nothing in comparision with today's prices. If the last Coalition Government had had to cope with presentday prices and international costs they would have had 600,000 unemployed. There is absolutely no doubt about that. Unemployment would be at least five times higher under the Coalition Government policies. Labour and Fine Gael have consistently shown their complete inability to devise policies capable of facing up to the situation at any time. There is no reason whatsoever for any voter today to expect anything different, for any ordinary person in the street to look to the Opposition parties for any policy which will give any hope whatsoever for an increase in standards of living and of education and better employment prospects. These are the historical facts and, no doubt, that position would continue.

We are told that our finances are in disarray, that our financial policies are totally unwise and unreal. We accept that our finances are in difficulties and that they give cause for concern. We are concerned about them and are acting prudently to manage those finances——

—— to the benefit of our people, not to the benefit of the economists or the men who write little figures in books. We are concerned with people and conduct our financial affairs to the benefit of our people, not those who put little figures in books so that sums will add up in an acceptable way. Let us look at percentage borrowing. This year we are borrowing something like 14 per cent of gross national product. It is agreed that that is unacceptably high.

And it will be higher.

Nevertheless, compare that with what happened during a similar period of Coalition Government, when borrowing was 16 per cent of gross national product. These figures are published in the papers for any man in the street to read.

What about reading the manifesto? Your party said they would bring it down to 8 per cent.

At 16 per cent of gross national product the Coalition Government could only borrow £600 million. Today, our borrowing is unacceptably high, but nevertheless, 14 per cent of today's gross national product is of the order of £1,400 million. What a contrast. This is reflected, not in sterility, stagnation or standstill. It is reflected visibly in new schools, new hospitals, new recruits to the Garda and the teaching profession; in other words, concrete progress to help the young people of this sundered nation of ours. What a total contrast to a similar period in office of the Coalition Government. They were borrowing more, percentagewise, than had been borrowed and to what benefit? Only to the benefit of international bankers to whom they had to go, cap in hand. They could not even pay the existing social services. Deputy McMahon knows that not one acre of building land was bought in County Dublin during any Coalition period in office.

Fianna Fáil supporters took it out of their hands at that stage. They did not then control planning. This is absolute rubbish.

That is not true.

In our period of office we have done nothing but meet people's expectancies and have fulfilled their——

The Deputy has only one minute until we move on to some other matter. He should be allowed to proceed without interruption.

He should have some respect for the truth.

Having respect for the people of this country and——

Is the Deputy inviting me to confirm his lies? He should not do so.

Having respect for the people of this country and no respect for the Opposition because they do not deserve it, at this point in time one can look around any constituency and see the benefits of our enlightened financial administration. One can see the new schools being built in virtually every parish, extensions to those schools, gardaí being recruited to every station and new hospitals being built throughout the country, on a scale unprecedented in our history. Deputies can see the results of this enlightened approach all over the country and of the wise and cautious management of money for the benefit of our people.

Debate adjourned.