Dáil Éireann debate -
Tuesday, 21 Jul 1981

Vol. 329 No. 5

Financial Resolutions, 1981 (Resumed): - Financial Resolution No. 2: Excise—Beer.

Minister for Finance (Mr. Bruton)

I move:

(1) THAT in this Resolution—

"the Order of 1975" means the Imposition of Duties (No. 221) (Excise Duties) Order, 1975 (S.I. No. 307 of 1975);

"the Act of 1981" means the Finance Act, 1981 (No. 16 of 1981).

(2) THAT the duty of excise on beer imposed by paragraph 7(1) of the Order of 1975 shall be charged, levied and paid, as on and from the 22nd day of July, 1981, at the rate of £119.647 for, in the case of all beer brewed within the State, every 36 gallons of worts of a specific gravity of 1,055 degrees, and, in the case of all imported beer, every 36 gallons of beer of which the worts were before fermentation of a specific gravity of 1,055 degrees, in lieu of the rate mentioned in section 31(1) of the Act of 1981.

(3) THAT, subject to paragraph 5 of the Imposition of Duties (No. 250) (Beer) Order, 1981 (S.I. No. 10 of 1981), the drawback on beer provided for in paragraph 7(3) of the Order of 1975 shall, as respects beer on which it is shown, to the satisfaction of the Revenue Commissioners, that duty at the rate mentioned in paragraph (2) of this Resolution has been paid, be calculated, according to the original specific gravity of the beer, at the rate of £119.647 on every 36 gallons of beer of which the original specific gravity was 1,055 degrees.

(4) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Mr. Bruton

The effect of this Resolution is to immediately increase the excise duty on beer by the equivalent of 1.82p on the pint of average gravity. This increase will attract an additional payment of .18p VAT at the 10 per cent rate making a total tax increase straight away of 2p on the pint. The resultant increase in revenue in the current financial year will amount to approximately £5.3 million or £14.5 million in a full year. As a result of the increase in VAT as from 1 September there will be a further increase in the price of this commodity.

Mr. Gene Fitzgerald

The Deputy and his party vehemently opposed the increase in the January budget and I would like to know how this turn about can be explained. What contribution will this make to the increase in the CPI? The Minister says that the extra revenue expected to be raised this year is £5.3 million. In the budget statement today the Minister also said that revenue, with the exception of Post Office charges, was buoyant. That can be attributed possibly to Fianna Fáil policies in Government. Is the revenue already there from beer in line? The Minister claimed that an increase would have a huge impact on employment in the beer and spirits industry last January. Can he say what impact this increase will have? Is the Minister aware of the plans in Guinnesses' brewery to drop about 2,100 jobs over a period? Is the Minister not fearful that in view of the approach in this budget, its inflationary impact on the old reliables, the enormous imposition of VAT and the number of items affected by it, the imposition on the housewife and the motorist, any further pressure on beer will further affect employment in the industry? Were such things taken into consideration when this budget was being formulated?

If the Minister's figure of £14.5 million in 1982 and £5.3 million in the current year is correct — I take it that 1.82p will be applied now and the VAT content will go on from 1 September — this is due to Fianna Fáil policies and it is a rather buoyant figure. The Minister is well aware that his Government have already given a sizeable increase in the price of the pint of the beer. What increase will now go on in the public house for a pint? Will it be 2p, 1.8p or does somebody gain the advantage between now and 1 September of the difference between the two?

Mr. Bruton

It will be 2p straight away as indicated.

Mr. Gene Fitzgerald

Will somebody gain the benefits of the VAT content?

Mr. Bruton

No, the increase based on the 10 per cent VAT which is the rate of VAT applying now and when the excise duty comes into effect. Adding together the excise duty increase of 1.82p and the additional payment arising pro rata from the application of the 10 per cent VAT rate to an increased total price brings the amount to 1.82p plus 0.18p which is 2p. The Deputy wished to know if there had been a decline in the consumption of beer as a result of the increases he introduced and if the revenue buoyancy figures which he had projected had been maintained. There has not been a significant decline in the consumption of beer and the revenue projections have been maintained.

Mr. Gene Fitzgerald

The Minister is attributing to me something that I did not say.

Mr. Bruton

The effect on the CPI will be an increase of .226 per cent. That is a relatively modest increase in the price of this product having regard to the many increases in times when money was more valuable than it is today.

Mr. Gene Fitzgerald

In isolation that may be true.

Mr. Bruton

The Deputy referred to the position of certain breweries which are facing difficulties and I assure the Deputy that these were considered before we decided on this increase. I have been advised that the problems being faced in the brewery which the Deputy had in mind are not attributable to the levels of excise duty which we inherited or which we are now introducing but that they relate to rationalisations being undertaken in the brewery in question for reasons which it would not be proper for me to divulge if I could. The problems are not as a result of excise duty.

Mr. Gene Fitzgerald

Am I correct in saying that the increases the Minister is imposing today are 2p on a pint of beer and 2p on a glass of spirits?

Mr. Bruton

The next resolution has to do with spirits and we will deal with that then.

Mr. Gene Fitzgerald

I appreciate that, but, as it relates to the Financial Resolution before us, surely the Minister is aware, as most politicians would be, that in drinking terms half a glass of whiskey and a pint are compared as a drink unit in any pub. The effect of what the Minister is doing here today is being weighted in favour of spirits and against the pint. In other words, effectively, from the point of view of a drink unit price in the publichouse or at the hotel counter, he is imposing 2p on the pint and only 1p on the half glass of spirits, which is the comparable drink. Is the Minister not aware that that imbalance has been of particular concern to all breweries in this country because of a substantial drop in consumption of beer and stout when it happened in the past? He is now helping to contribute to a continued differential between those two drinks. Why did the Minister not take that into consideration? I am sure the employees and management of those breweries, who have so many problems, would be very interested to know. It is basically in the interests of equity that drink units that compare in drinking terms in publichouses should be increased at about the same level.

Mr. Bruton

Although there has been, as the Deputy correctly points out, in recent budgets a one-for-one relationship between the increase in the excise duty on the pint and the increase on the——

Mr. Gene Fitzgerald

I think my predecessor restored that balance——

Mr. Bruton

What I am really saying is that the Deputy is correct in what he was saying about this balance being adhered to in the past. But that balance is not actually justified in full by the relative alcohol content of the two, the half one and the pint of stout or beer. It may interest the Deputy to know that there is .038 pints of pure alcohol in a pint of beer whereas there is the equivalent of .025 pints of alcohol in the half one. There-fore, there is a slightly greater alcoholic content in beer, comparing the pint and the half one. I am merely making that point for the record. Therefore, in terms of alcoholic content this one-for-one relationship is not exact.

However, that is not the real reason for what we have done on this occasion. The reason is — perhaps the Deputy and the House might suspect — that spirits have proven to be more price sensitive. It has been the experience that past increases in spirits, on the half one, on the basis of equivalence with the pint of stout have proven to have a much more deflationary effect on the consumption of spirits than an equivalent increase in the price of the pint has on the consumption of pints. There is a worry in the Department of Finance, in the Revenue Commissioners and indeed in the Department of Industry and Commerce, which is concerned with the distilling industry, that an increase on this occasion of exactly the same amount on the half one as is being imposed on a pint of beer would have serious effects for the distilling industry. Therefore, we have chosen to implement an increase which is——

Mr. Gene Fitzgerald

Sorry, but——

Mr. Bruton

Perhaps I will meet the Deputy's request if he will allow me finish. The discrimination to which he referred has been implemented on this occasion. However, I would point out to the Deputy that when the effect of the total increase imposed in this budget— this includes not just the immediate increase in excise duties but also the consequential increase as at 1 September arising from the general increase in the 10 per cent VAT rate to 15 per cent, which applies to both spirits and beer — is taken into account the increase in beer will be 5.5p as against 8.5p for a full glass of whiskey. Therefore, the gap will not be quite as wide when one has the final result of the budget as at 1 September as it is now in respect of the excise duties alone.

Mr. Gene Fitzgerald

So the real increase in the price of the pint of beer in today's budget from 1 September effectively is 5.5p.

Mr. Bruton

That is what I said in my Budget Statement, between 5p and 6p.

Mr. Gene Fitzgerald

What effect has that on the consumer price index?

Mr. Bruton

Beer?

Mr. Gene Fitzgerald

No, the 5.5p on the consumer price index?

Mr. Haughey

He does not care.

Mr. Bruton

The original figure I gave, .226, relates to the immediate increase.

Mr. O'Malley

Tell us what is the effect of the 6p.

Mr. Bruton

The increase will be substantially larger than that, about .5. I will get the figure for the effect on the consumer price index for the Deputy.

Mr. O'Malley

It will be .6.

Mr. Colley

The omission by the Minister is a very significant and damaging one. He does not know what will be the effect on the consumer price index of the increase he is proposing on beer. That is what he has just told the House. I am sure the same position applies in regard to spirits and probably to tobacco and a number of other items. He just does not know. He has not got the figures and, had he even looked at them they would be available to him now. It is very surprising to say the least — and I am putting it mildly when I say that — that the Minister does not know that figure. One thing that is quite clear is that the figure he gave us in regard to the effect of this budget on the consumer price index is a wrong figure. That is one thing that is clear. One does not know, but one assumes, that in giving us a figure of 3 percentage points he did not include the effect of adding the VAT increases on 1 September——

Mr. Bruton

I did.

Mr. Colley

On these items, including these items?

Mr. Bruton

Yes.

Mr. Colley

Well, if he did, I doubt very much if he included the effect, when those increases are imposed on 1 September, of the mark-up that is charged in the shops and, in this case, in public houses: what effect the mark-up will have when that is added in and on all the other items on the consumer price index. I venture to suggest that the figure the Minister gave us of 3 per cent will turn out to be quite inadequate in comparison with the real figure of the imposition on the consumer price index. This mark-up effect is of very considerable importance not alone in relation to these items but perhaps more importantly to an item we will be dealing with later, that is the increase in the value-added tax. Of course it is a factor for which the Minister does not — and I do not blame him for this, he has good precedent for it — accept responsibility, if you like, as far as the——

Mr. Bruton

I am sure the Deputy did not either.

Mr. Colley

No, that is what I am saying, there is a very good precedent for it. The point is that the effect on the consumer price index is the most important factor to be judged in regard to many aspects of this budget in relation to its effect on the economy. It is not the only aspect. Certainly if the effect of this budget on the consumer price index is anything like I suspect it will be, then this budget will turn out to be disastrous. We are dealing here with a resolution which illustrates this point very well. The response of the Minister to the question put to him by Deputy G. Fitzgerald illustrates, I am afraid, that the Minister and the Government, in preparing this budget, did not know or did not care what effect it would have on the consumer price index, a vital matter as far as the future of our whole economy is concerned, a vital matter as far as the effect on wages, on wage claims, on social welfare recipients and on a whole host of other things. As far as they are all concerned this is vital and the Minister does not know or does not care what is the figure.

Mr. Bruton

In order to allay the Deputy's fears I can tell him that the effect on the CPI of the full increase, including the increase in VAT, will come to .622 in respect of beer. I am sure the Deputy realises that the figures for the CPI, which are given in respect of tax increases in the budget, reflect only the increase in prices resulting from the increases in taxation. I am sure the Deputy is also aware that the Minister for Industry, Commerce and Tourism and the National Prices Commission have at their disposal a means for guarding against any unwarranted increases in prices by the retailers of those products which exceed that justified by the tax increases. If other increases occur for other reasons, such as an increase in brewers' costs or in publicans' costs, those are examined by the National Prices Commission and sanctions are given as an entirely independent exercise which has nothing whatsoever to do with increases in excise duties. The figure for the CPI which I gave in regard to the tax increases, 3 per cent, the total effect of the tax increases in the budget, reflects the full increase, including the immediate excise increases and increases in VAT.

Mr. O'Malley

Is the Minister aware that the margin at retail level on beer is between 30 per cent and 40 per cent and in some cases it goes as high as 42 per cent? Is he aware of that the passing on of the additional margin is more or less automatic where substantial increases in duty of the kind envisaged here are proposed and the true increase in the pint of beer is not 6p, as has been implied by the Minister, but at the very minimum is 8p and if they are to maintain their full margin it is 8½p? As I know from bitter experience, where you have halfpennies you always have to round them up. The actual increase here that will be paid by the consumer is likely to be 9p a pint on stout. The CPI effect of 9p a pint on stout is between .9 per cent and 1 per cent on the CPI for beer alone. This is only one of eight Financial Resolutions here today. The figure here is 1 per cent for this commodity alone and not .22 per cent which the Minister tried to fob off on the House at an earlier stage in reply to a question by Deputy Fitzgerald. Would it not be more honest for the Minister to stand up and say that the increase in the price of beer on 1 September will be between 8p and 9p and that the CPI effect is between .9 per cent and 1 per cent?

Mr. Bruton

If the Deputy thinks that what he has described will happen he must have very little confidence in the arrangements for the control of drink prices, which were within his charge for four years and which he handed on to this Government. As the Deputy should be aware, there is a standstill order, which was introduced by his predecessor, in regard to prices of alcohol and the increases are sanctioned on the basis of that standstill order and expressed in pennies per pint. If, instead of increasing the price by a specified number of pennies per pint, depending on the decision of the National Prices Commission in a particular instance, publicans were to impose a percentage increase across the board of 30 per cent or 40 per cent — I am surprised at the Deputy talking about 30 per cent or 40 per cent increase as if he did not know, even though this was his specific responsibility for four years——

Mr. O'Malley

I said it was between 30 per cent and 40 per cent. When the Deputy is a bit longer in office he will learn a few of those things.

Mr. Bruton

If this increase were applied on the basis the Deputy indicates it will, it would in fact be in contravention of the provisions of the standstill order. If this happened during the period when the Deputy was in charge of price control, it would have been in breach of the law. I am surprised if the Deputy was aware that this happened that he did not take any action about it. We will rigorously enforce the rules in regard to retail price increases and we will enforce the retail drink prices standstill order in full as it states in law. We will not allow 30 per cent, 40 per cent or 50 per cent increases in the prices.

Mr. O'Malley

Perhaps the most charitable thing to do with that unfortunate Minister is to remain silent about him. God help him, he has a lot to learn. I believe quite a number of people will be interested in what the Minister has said. The effect of what he has said is that there is now a standstill order in which there will be no allowance for margins by retailers, publicans or otherwise, and they will get all this duty, additional cost and consequential working capital requirements thrown on them but no allowance is made for their margins. That is not the way the commercial system works. However he may think in his pristine innocence he might like it to work, the fact is that on 1 September next the price of the pint will go up by between 8p and 9p retail to the consumer. The Minister can take it from my experience that they usually tend to go to the higher rather than lower figure. This means that the increase in price, which is directly attributable to the duty increases the Minister is now proposing, is 9p a pint or virtually 1 per cent on the CPI.

Mr. Bruton

I am surprised at the Deputy's approach to this matter. The Deputy should be aware that an increase in the margins of publicans is an entirely separate matter and the National Prices Commission, before allowing an increase in margins, will have to be satisfied that those are justified. That is the position as it now applies. There may well be no increase in margins at this particular time but that will be decided on by the Department of Industry, Commerce and Tourism in consultation with the National Prices Commission if it is justified by figures furnished by those engaged in the trade.

Mr. Colley

What about today's increases?

Mr. Bruton

Those figures relate to increases in excise duties.

Mr. Raphael Burke

With regard to the Minister's answers to the questions put by my colleagues and in the light of the experience of Deputy O'Malley which I will take as being accurate rather than the Minister's contribution, and taking a figure again of around 8p to 9p of an increase from 1 September next would the Minister care to reconsider his comments to the beer drinkers that the increase being imposed today is a relatively modest one on the pint of beer? Many of the electorate who voted for this Government at a time of promises, incentives and benefits will have reason to reconsider their decision of June last in the light of today's budget impositions and the subsequent and consequent increase that the licensed trade will require. It is not an increase in margins — when I mention the licensed trade — it is a percentage increase on the figures that are being mentioned. There is talk of about 6p here and they will wish to continue with their existing margins if not wanting increased margins. Even on their existing margins the figure given by Deputy O'Malley of 8p to 9p is correct. Would the Minister care to comment on his statement that this is a relatively modest increase on beer drinkers?

Mr. Bruton

It is a valid description of the increase itself as being modest. On the items or in the financial circumstances or in circumstances where money was plentiful this increase might be described as more than modest but in the very serious financial circumstances requiring the raising of revenue I believe the increase certainly is a relatively modest one. In relation to the increase in January there was an increase of 6p in the pint but contrary to the information given by various opposition Deputies there was at that time no authorised increase in margins. If an increase in margins took place it was unauthorised and should not be spoken of in such terms as have been used by the people who were responsible at that time.

Mr. Fitzpatrick

(Dublin South-Central): Could the Minister state what is the exact take now by the Government after today's increases, the 2p and the 15 per cent increase in the pint of stout?

Mr. Bruton

The resultant increase in revenue from the two increases, the immediate excise and the VAT in the current year is £5.3 million.

Mr. Fitzpatrick

(Dublin South-Central): What is the exact take per pint of stout?

Mr. Bruton

That is a different question. The position is that the increase in revenue is £5.3 million in 1981 and £14.5 million in a full year.

Mr. O'Malley

Answer the question he asked.

Mr. Bruton

The total revenue taken from a pint of beer.

An Leas-Cheann Comhairle

Perhaps we should dispose of one question at a time.

Mr. Gene Fitzgerald

It is a related one, in fact.

An Leas-Cheann Comhairle

The Chair has listened with interest to various theories of relativity but we should bear in mind that we have six other resolutions to complete by 10.30 p.m. and I think we should confine ourselves to specific details in respect of Resolution No. 2.

Mr. Gene Fitzgerald

I shall obey your ruling but I want to come back to that question.

Mr. Bruton

The answer to Deputy Fitzpatrick's question is 36.5p. This is the total take in excise duty, both existing excise duty and existing VAT and the full effect of the new increase and new VAT as a result of this budget. That is the total take.

Mr. Gene Fitzgerald

That includes the 15 per cent?

Mr. Bruton

Yes.

Mr. Gene Fitzgerald

When the Minister began his reply to Deputy Fitzpatrick he said that the total take this year from the 2p increase plus VAT was £5.3 million. That was not my understanding of the position as he presented it earlier today.

Mr. Bruton

Sorry.

Mr. Gene Fitzgerald

I am right. I thought that. So the increase has gone from 31p to 36.5p between the two taxes.

Mr. Nolan

We are not very concerned about whether sparkling wine or champagne is increased by 10p or 20p per bottle because we do not look on products of that kind as what we would call the working man's drink, but we are very concerned that we have had two or three increases on the pint in the past year. We had one in our own budget earlier; we had one to give extra profit to the vintners and now we have this extra tax. For the Minister to say a few moments ago in reply to a question from Deputy O'Malley that he could put a price freeze on the pint is ridiculous. I am not a vintner but Deputy Fitzpatrick who spoke a few moments ago is from Dublin and is a publican and he realises that publicans and others in running their businesses may have to borrow money for stocks and must meet their costs. No matter what the Minister says here, the publicans therefore will come to him with a request for an increase to keep up their margin of profit. It has been said here back as far as the time of Eamonn de Valera and the foundation of the State that 1p or 2p on the pint is very important for the person who is working and who may take a pint with a sandwich at midday or on his way home from work. Consequently, while we are not very concerned about wine or champagne we are very concerned about the increase on the pint.

An Leas-Cheann Comhairle

The Chair feels that the question might now be put.

Deputies

No.

Mr. Gene Fitzgerald

In relation to what we have now heard as a result of further questioning of the Minister I want to go back to my earlier question about the margin of difference between what are regarded as the two normal drinks, the pint and the half glass of spirits. While I know it relates to the next resolution the basic question I now want to ask is this: we are told that the real minimum increase in tax on the pint is 5.5p bringing it up to the figure to which Deputy O'Malley referred, probably 9p. In excise terms we have 5.5p between the two increases. I now ask what is the increase per glass of spirits. I accept that I am going on to the next resolution but I want to raise a point I mentioned earlier in connection with the difference between the 2p and the 2p per glass on spirits. We are now getting down to the real figures involved and the real figure in the case of the pint of beer or stout is 5.5p revenue duty plus all the additions. I want to know the real increase on the glass of spirits — the 2p per glass plus the 50 per cent increase in VAT.

The Taoiseach

The overall increase in the price of spirits, equivalent to the 5.5p in the case of beer, will be 8.5p per glass. That is a combination of the excise duty increase and the VAT increase when the two have been imposed next September. There is a budget increase of 2p now and a VAT increase of 6.5p making 8.5p in total.

Mr. Gene Fitzgerald

The real increase in the price of spirits is 4.25p per half glass or 8.5p per glass. Since there is no way in which one can charge 4.25p the increase will be 5p before the retail margin arises. We shall come to that later. So, we see here a 5.5p or 6p increase on the pint of beer or stout and a 4.25p increase on the equivalent drink in spirits, a half glass of spirits. The margin is substantially weighted in favour of spirits as against the pint.

The Taoiseach

There are several questions involved. In general there has been a tendency to maintain a relationship between the two but it has not been maintained consistently. There is 50 per cent more pure alcohol in the pint than in the half one and the traditional relationship between the two drinks is not soundly based in terms of alcoholic content. There is also the fact that the glass of spirits was taxed an additional 16p in 1980 while only 6p was imposed on the pint and this somewhat disturbed the relationship. Taking those factors into account, what is being done now is reasonable in re-establishing a relationship that is broadly appropriate. It cannot be refined to an exact figure but the factors that I have mentioned explain why there is not on this occasion an exact relationship between the two drinks.

Mr. Gene Fitzgerald

Obviously the Taoiseach is not familiar with the problem to which I have referred. The balance between the two drinks was not upset in 1980 — it was restored. In this exercise it is proposed to put an additional 6p on the pint and 5p on the half glass of spirits. What is being done will be to the detriment of the brewing industry. From what we have read recently in newspapers, it appears there are problems in that industry in Dublin and other brewers elsewhere also have their own difficulties.

The Taoiseach

The Deputy is concerned about the effects on the industries that are involved. In those circumstances he will want to take into account the fact that spirits are much more price sensitive than beer. If an equivalent amount were put on both drinks, on past experience the impact on consumption would be considerably greater on spirits. In terms of the impact on the industry the increases we have proposed — they are not what the Deputy mentioned but are 4.25p and 5.5p respectively — will have roughly an equivalent effect on both sectors of the industry, as far as one can judge. This is not an area in which one can be absolutely precise but it should have a broadly similar effect.

Mr. Gene Fitzgerald

Of course one way to redress the balance is to allow only a 1p increase on the pint and 2p on the glass of spirits. That would solve the problem for the Government.

The Taoiseach

Unfortunately it would not solve the problems left by the former Government.

Mr. N. Andrews

Now that the Taoiseach has sent the Minister for Finance scurrying out of the House to do his homework, rather belatedly, we discover that we will now have to pay £1 for the pint. In view of the meagre increase of 5 per cent in some cases and 3 per cent in others to social welfare recipients, will the Taoiseach not accept that a hardship will be imposed on old people who regard the pint as part of their life and recreation? Will the Taoiseach not accept that this is a savage blow in view of the low level of increase given in respect of social welfare benefits? The Taoiseach said that there was 50 per cent more pure alcohol in the pint as compared with a glass of spirits. That is total nonsense. The working man, after a hard day's work, follows the traditional pattern of drinking a pint of Guinness or Murphy. In public houses and hotels families gather once a week or once a fortnight to have a drink and perhaps listen to music. Here we have the Coalition coming along with a most savage increase on the price of the pint disregarding, as they have done in the budget, the lower paid workers and the old age pensioners. They have even threatened to impose more increases in the future. I urge the Taoiseach to reconsider this imposition as a matter of compassion. I know he is a compassionate man. What is being done here will encourage people to drink spirits rather than beer and this will be counter-productive to the campaign being carried out by the Department of Health. When one considers the meagre increase granted to social welfare recipients and contrasts that with the savage increase proposed here, which will affect the poor more than the rich, it is conclusive proof that the Government will never change their spots.

The Taoiseach

In accordance with custom, the Minister for Finance has left the House in order to broadcast on radio and record a broadcast for television. Previous Ministers are familiar with this custom, even though the Deputy may not be familiar with it. The Deputy referred to the increase as "savage". How does he describe the increases in taxation on beer in the budgets of 1980 and 1981 introduced by his Government?

Mr. N. Andrews

At that time we increased social welfare payments at a rate far in excess of 5 per cent; in some cases we granted increases of 25 per cent.

The Taoiseach

That is precisely the answer I expected from the Deputy. He is attempting to obscure the fact that, while we are increasing the tax element in the pint by 5.5p, in the last budget his Government imposed an increase of 6p and in the previous budget they increased it by 6.2p. The increase now proposed is less than that imposed on either of those occasions. I admit that this is a supplementary budget and is not in the same category. The former Government abolished October increases for social welfare recipients — one of their first actions on entering office was to abolish that innovation introduced by us.

Mr. Colley

October increases are a way of saving money.

The Taoiseach

This supplementary budget was necessitated by the economic situation. The increase in taxation on beer is less than what was proposed in the last two normal budgets. When one considers the overall balance of taxation, with the rather heavier impost on motorists, for example, the old age pensioner who drinks a pint of beer is rather less severely affected by the budget.

Old age pensioners do not have cars and do not have to pay for petrol, road tax and so on. The budget has a greater impact on people who are in the category of car ownership. The cost of living increase for old age pensioners will be less than the overall average cost of living increase in the budget including the increase in the cost of the pint. Far from being savage as far as that category are concerned it is more considerate. The description of the amount as savage could only be made by someone who either wants to forget or does not know the size of the increase imposed in two successive budgets by the Government he supported.

Mr. Lenihan

I am glad the Taoiseach is here because he is the person who is supposed to be taking an overview of the economy. It is clear from the discussion that on beer alone we are talking about a 1 per cent increase in the CPI. Spirits will add another 1 per cent. In a later financial resolution we will be dealing with a 5 per cent overall increase in VAT. How does this square with the statement made by the Minister that the full effect of the tax increases will be approximately 3 per cent? It is clear that that 3 per cent is not correct and is totally out of focus with the overall effect that these resolutions, nine in all, will have in regard to the CPI.

One real achievement of outstanding weight and importance as far as the economy was concerned was in the area of labour and industrial relations and the rapport we had between trade unions and employers which led to the conclusion of the recent successful national understanding. This understanding will come forward for further negotiation before the end of the year. The CPI will be used as the criteria for pay claims. What effect will the budget have on our economy and pay claims? It will jeopardise the highly sensitive edifice of labour relations built by the last Government and formulated in the last national understanding which has brought a high degree of industrial peace.

Neither the Taoiseach nor the Minister for Finance has taken into account this all-important aspect, so much so that some minutes ago we had the spectacle of the Minister for Finance being unable to give the correct figure for the increase in the CPI attributable to the increase in beer. At first he gave a wrong figure which did not relate to the VAT increase. After discussion with his officials we worked out from him that it would be .62 per cent. As Deputy O'Malley pointed out, when one considers the mark up in prices claimed by the trade, one is talking about a figure much nearer .8 per cent or .9 per cent. These are the realities. The whole thrust of this resolution and others is towards substantially increased indirect taxation which will be written into the CPI and used in pay claims. It will trigger off the undesirable effects arising from that through the public sector and the economy. It will lead to a dangerous situation for the Government in the negotiation of the national understanding. It will put it into serious jeopardy. This is the course upon which this Government have embarked. The person responsible is the Taoiseach who should be taking this aspect of industrial relations into account if we are to make real progress towards the enhancement of productivity and national growth. This resolution is part of the Government's running away from the central necessity of a government to ensure that there are no built-in inflationary pressures that will be written into the CPI and translated from that into pay demands which will cause trouble as far as concluding a successful national understanding is concerned.

The Taoiseach

The Deputy has a nerve to accuse us of running away from reality. What happened to us is that we have run into the reality the Deputy was running away from. That is the whole problem. I did not hear the Deputy express such sentiments or weep crocodile tears about the impact of the national understanding when his Government on two successive occasions introduced a tax on beer higher than this one. His remarks in that regard cannot be taken seriously.

The increase in the cost of living arising from the tax in the dual form of the VAT and budget increase is .62 per cent as has been stated. The Deputy started by saying it would be 1 per cent and later rounded it to .85 per cent. The overall impact on the CPI of the increase on spirits through the budget and VAT increases will be of the order of .22 per cent, lest anyone be taken in by the Minister's figures. It is grossly irresponsible — I am sorry, I mean the Deputy——

Mr. Colley

It is confusing us too.

The Taoiseach

The overlap in titles is something we all experience for some time on both sides of the House. The Deputy has a nerve to put forward these proposals when he was so silent in regard to increases of a similar nature in the case of his own Government.

Mr. Haughey

Which the Taoiseach voted against, of course.

The Taoiseach

Yes, at that time. We were not faced then with what the Government have done to the country in the past six months, the full extent of which has now come to light.

An Leas-Cheann Comhairle

The Chair would remind the House that we are straying to some extent from the terms of Resolution No. 2. It appears we are straying into what might be regarded as comment suitable to the General Resolution debate. I remind the House that Resolutions Nos. 1 to 8 will be taken before 10.30 p.m. and ask that we confine ourselves to elucidating in respect of Resolution No. 2 before the House.

Mr. Gene Fitzgerald

I should like to preface my remarks by asking the Taoiseach to stop this political reacting and at least for once appear to be responsible and in the Taoiseach's seat running the country. If the Taoiseach wants to play the political game let him stand aside and we will run the country and have no hesitation in doing it properly.

Deputy Andrews referred to the 5.5 plus increase on the pint of stout. It will be 8p or 9p. That is the position. The Deputy referred to social welfare increases of 3 or 5 per cent. The Taoiseach, in a most unsustainable way, said it was our Government who did away with the October increases. The October increases are the greatest gimmick in economic and political terms. What it basically meant was that the old age pensioners and other social welfare recipients did not get their due entitlement at the normal time of the year. Some of it was deferred until a later date. A new dimendion is being added this year. There is 5 per cent for certain recipients and 3 per cent for others. As Deputy Lenihan has said, while officially the increase in the CPI officially is only 0.622, when all the inevitable rounding-up is taken account of plus the margin, the increase will be almost 1 per cent.

The Taoiseach talks glibly about national understandings. I remember clearly his contribution to the last budget debate when he shed crocodile tears about our imposition of indirect taxation, about our fuelling inflation and about how we were damaging the national understanding. He talked of how we were fuelling wage demands and said that we should be compensating those people whose standard of living was being eroded. Has there ever been so much done in such a short time? The Taoiseach seems to have accepted the advice of the newspapers to paint the picture as black as possible but I can assure him that nobody believes him, that the people know he is playing a purely political game.

Let us turn now to the lower paid worker. There is some miserly recompense for the social welfare recipients but there is nothing for the lower paid worker. Instead, for him as well as for the social welfare recipient, there is the imposition of an extra 2p on the pint immediately plus a further increase of 3.5 per cent on 1 September, plus the margins, all of which combined will, as Deputy O'Malley said, be likely to bring the increase in the price of the pint to between 8p and 9p by 1 October next. We have a duty to point out the extent to which inflation will be fuelled by the resolutions before us. In a very naive way the Taoiseach says that the increases being imposed by way of this supplementary budget are less than the increases imposed either in January 1981 or in February 1980. But in mid-year terms, the increases we are discussing today are extremely inflationary coming as they are at a time when the current national understanding is drawing to a close and when the increases in social welfare benefits are being postponed for some months.

Mr. Liam Fitzgerald

Ba mhian liom ceist a chur ar an Taoiseach faoi cheisteanna a chuir Teachtaí eile chuige.

When previous Deputies put to the Taoiseach questions relating to inequities, to discriminatory measures against certain sections of the population, the Taoiseach took up one issue that was raised by Deputy Andrews. That was the one concerned with the old age pensioners and he tried to justify the increase in that respect. However, in fairness, if he acknowledges the almost 1 per cent increases that is being provided for here, he must acknowledge also that such increases are not justifiable. Scant justice is being done to the human needs of the worker, human needs which today are a very much in the form of recreation after a hard day's work. I am talking about the recreation of being able to have a pint of beer or a small one. Perhaps the Taoiseach would explain for the benefit of those people why he chose to hit them so hard by way of these measures.

Mr. McCreevy

I have purely a statistical question to put to the Taoiseach, a question to which his officials may have the reply to hand. It is my personal opinion that the volume of drink consumed has been decreasing as a result of increased prices, especially in the past couple of years. Has any calculation been made in the budget figures to take account of a decrease in consumption as a result of these increases? Are there any figures in this regard in respect of the past couple of years? Successive Governments have chosen to increase the excise duty on alcoholic drink in their budgets and in the past the reaction of the public tended to be that it did not matter too much so long as the brewers continued to brew the drink. I am of the opinion that that situation has changed and that with each additional increase in the price of drink, the volume of consumption decreases. Is it possible that we are reaching the point of diminishing returns in this regard?

The Taoiseach

I should like first to go back to the point harped on by Deputies today, that is, the alleged automatic effect on margins. It is irresponsible of Deputies opposite to suggest that an increase in the duty should or could in any way justify of itself an increase in the margins. An increase in margins is justified by reference to the overall costs incurred by those concerned in the trade.

Mr. Colley

That is right.

The Taoiseach

It is not justified by the actual increase in the price.

Mr. Colley

Does the Taoiseach not realise the effect of what he is doing?

The Taoiseach

There is no relationship in time and if one looks back to see what happened following increases in the price of beer in the last couple of years, one finds that there were increases in margins which were conceded by the Minister for Industry and Commerce of the day, but these increases were at a timelag so far removed from the tax increases as to have no direct relationship with them. In one instance the increase in margins occurred in October following the February budget while in another case they occurred in July following a January budget. Therefore, the question of margins is irrelevant. It is irresponsible to introduce it and to be suggesting to the publicans that in some way they ought to be seeking an increase in margins because of this increase in excise. That is not the way of a responsible Opposition. The facts do not warrant the claim being made. What we are talking about here is an increase in the price of beer involving, taking the two increases together, an effective 0.63 increase in the cost of living, and any attempt to suggest that the figure is greater than that is false.

On the question of the impact on consumption, I am advised that it is not likely that the increases in beer prices arising immediately on the passing of this resolution will have any measurable effect on consumption but the further increase in VAT in September — somewhat of greater magnitude and coming not very long after the excise increase — could have some effect on consumption. It is not possible statistically to calculate this accurately.

Fifteen years ago I was engaged in this kind of exercise in relation to beer and spirits when I was acting as a consultant. Taking advantage of the most expert economic advice then available, it was not possible to arrive with any certainty at any particular effect on consumption of an increase in price. All one could say — and I gather this has been confirmed by more recent work — is that the consumption of spirits is more likely to be affected by a price increase. The price usually associated with beer is low, and the impact of the increase we are proposing, together with the change in VAT, on the consumption of beer, as far as can be calculated, is expected to be less than 1 per cent. I give the figure to the Deputy for what it is worth, realising that precision in this area is not possible. I say that from experience in my own work 15 years ago and from the technical work done since then.

Mr. N. Andrews

I should like briefly to refer to the Minister's speech today. Referring to the increase in the price in beer, he said that the tax increase, together with the VAT change, would make for a total price increase of 5p to 6p on the pint. I suggest it has been established clearly that that is not accurate. Whether it is or not, I want to underscore the miserly social welfare improvements to be given to recipients. For instance, the under-80 contributory old age retirement pension is to be increased by £1.55. We are now faced with a £1 pint of beer, but the increase for old age contributory pension for a person of more than 80 years will be only £1.65.

I want to ask the Labour Deputies who have helped to compose this Coalition patchwork, and the socialist Independent Deputies, how can they justify as socialists voting for this resolution? I say this particularly to the socialist Independents. This resolution is anti-worker, anti-people. It lacks compassion or any sense of fair dealing. Therefore, will the Taoiseach now re-consider this imposition, which, as I said earlier, is savage from the point of view of working people. I make a special plea to Deputy Sherlock and to the other socialist Members to vote against this.

Mr. B. Desmond

Deputy Andrews intervened with some opportunism——

Mr. N. Andrews

I could not better the Deputy's opportunism.

Mr. B. Desmond

I am constrained to quote, for the benefit of Deputy Andrews, from column 492 of the Official Report for 28 January 1981. A certain Government had then increased the price of spirits by 12p a glass and beer by 6p a pint. The defender on that occasion said, and perhaps we may then discover who he was:

To get the sort of revenue required these days you have to tax things which are in fairly popular usage. Of course, the obvious things to tax are beer, spirits and wine. These are things which people are going to consume anyway and, therefore, it is almost axiomatic that, if you want to get the sort of revenue you need to pay for the various State services in a modern community, you are almost inevitably driven to taxing tobacco, beer and spirits to some extent.

I will give a further quotation and then it may be possible for Deputy Andrews to identify the speaker:

I am rejecting the argument that we should not put on these taxes because drink, in our circumstances, is very moderately used and that it is unfair to do so for that reason. I base my case for these Resolutions on the one simple premise, that is, drink, alcohol, beer, whiskey, wine, these things are good old reliable revenue producers.

The same Deputy, then on this side of the House, went on:

We feel that the people who will be paying these extra taxes for their beer and spirits will understand and appreciate that they are going to a very sound social purpose, and bear with them, perhaps not cheerfully, but at least willingly.

Who said that? The same Deputy went on when some comments had been made about the effects on the trade union movement:

Surely Deputies opposite, as I have done over the past 12 months or two years, see from time to time in our newspapers and our media consistent reports of seminars which give staggering figures for the amount the Irish community spends on drink in any year. These figures of the amount that we, as a community, spend on drink are frequently highlighted in the most dramatic terms in our newspapers and media. Do Deputies opposite say that that is not so?

Finally he said:

Is it not also true that the Irish trade union movement has found it necessary to institute programmes designed to cut down absenteeism in Irish industry because of alcoholism? Is that not so? Do the Deputies opposite say that that is not true? I know it is true because I am in very close touch with the trade union movement about this matter.

An Leas-Cheann Comhairle

I urge the Deputy to resist any temptation or invitation he may feel he has to stray away from Resolution No. 2.

Mr. B. Desmond

I will give a final quotation:

This revenue is being raised, and the money raised will be used to pay social welfare benefits, to pay for the things that the Minister for Finance has provided for in this budget for the poor, the weaker under-privileged sections of our community. That is what the taxes are being put on for and that is the purpose for which the money is being used.

That Deputy, none other than Charles J. Haughey, the then Taoiseach, said:

We know there is a great ritualistic exercise gone through before every budget. There are particular people in the community who orchestrate a whole chorus before the budget, proving that if the thing in which they are involved is taxed, ruin will follow. One can recognise it. The same pattern is followed every year. People try to frighten the Government off imposing taxes on their particular area by a whole orchestrated chorus of propaganda. We had it in a big measure this year. Very large sectors of the community set out to establish before the budget is introduced that their particular sector must be left alone because, if not, total ruin and disaster would follow.

What Deputy Haughey had to say in January last about Irish Distillers down in Midleton I would not dare to say if I had been on this side. He said that the distillers could go out and get export markets and that they would do very well. They have been doing enormously well thanks to the strictures of Deputy Haughey.

I say to our new colleagues in the House, my Cork colleague, Deputy Sherlock, not to pay whit of attention to the special pleadings which he will hear, perhaps from both sides of the House, least of all from Deputies who last year increased the price of whiskey by 12p per glass and the pint of beer by 6p. That Government left us with an addition to the balance of payments deficit of £450 million more than they told us about. At least in relation to the price of spirits, the civil servants cannot be blamed because the Fianna Fáil Government got their figures wrong in relation to the cost of living. At least the people know that the price of beer and spirits is being put up. They know the amount and there will be no confidence trick on that issue.

Mr. Haughey

That may be all very impressive were it not for the fact that Deputy Desmond omits to say that most of what I said at that time related to the additional taxation on spirits. We have already indicated that on this occasion we are not opposing the additional taxation on spirits.

Mr. N. Andrews

Deputy Desmond quoted the then Taoiseach quite extensively but he failed to mention that social welfare recipients received quite a considerable increase. What we have here today is the most paltry increase since long ago beyond my recall when a Member of this House who was Minister for Social Welfare reduced social welfare by a shilling. I am saying to Deputy Sherlock and the other socialist Members of this House that they have a lot to answer for in this budget, and I am saying to the Labour Party that not only has the carpet been pulled out from under them on the left by Sinn Féin the Workers Party, but Fine Gael are working on it damn hard too.

The Taoiseach

That has not much to do with beer.

Mr. Colley

Maybe it has.

Question put.

The Dáil divided: Tá, 82; Nil, 79.

Tá

• Alderman Dublin Bay-Rockall Loftus, Sean D.
• Allen, Bernard.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bermingham, Joseph.
• Birmingham, George.
• Boland, John.
• Bruton, John.
• Burke, Dick.
• Burke, Liam.
• Byrne, Hugh.
• (Dublin North-West).
• Collins, Edward.
• Conlon, John F.
• Connaughton, Paul.
• Connor, John.
• Cooney, Patrick M.
• Corish, Brendan.
• Cosgrave, Liam T.
• Cosgrave, Michael J.
• Coveney, Hugh.
• Creed, Donal.
• Crotty, Keiran.
• Crowley, Frank.
• D'Arcy, Michael J.
• Deasy, Martin A.
• Desmond, Barry.
• Desmond, Eileen.
• Nealon, Ted.
• Noonan, Michael.
• (Limerick East).
• O'Brien, Fergus.
• O'Brien, William.
• O'Donnell, Tom.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Donnellan, John F.
• Dukes, Alan M.
• Durkan, Bernard J.
• Enright, Thomas W.
• Farrelly, John V.
• Fennell, Nuala.
• FitzGerald, Garret.
• Fitzpatrick, Tom.
• (Cavan-Monaghan).
• Flaherty, Mary.
• Flanagan, Oliver J.
• Fleming, Brian.
• Glenn, Alice.
• Governey, Desmond.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Higgins, Michael D.
• Kavanagh, Liam.
• Keating, Michael.
• Kelly, John.
• Kemmy, Jim.
• Kenny, Enda.
• L'Estrange, Gerry.
• McCartin, John J.
• McMahon, Larry.
• Markey, Bernard.
• Mitchell, Gay.
• Mitchell, Jim.
• Molony, David.
• Moynihan, Michael.
• Ryan, John J.
• Ryan Richie.
• Shatter, Alan.
• Sheehan, Patrick J.
• Spring, Dick.
• Taylor, Madeleine.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Treacy, Seán.
• Tully, James.
• White, James.
• Yates, Ivan.

Níl

• Acheson, Carrie.
• Ahern, Bertie.
• Allen, Lorcan.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Blaney, Neil T.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Paudge.
• Brennan, Seamus.
• Briscoe, Ben.
• Burke, Raphael P.
• Byrne, Hugh (Wexford).
• Callanan, John.
• Calleary, Seán.
• Clohessy, Peadar.
• Colley, George.
• Collins, Gerard.
• Conaghan, Hugh.
• Connolly, Gerard.
• Coughlan, Clement.
• Cowen, Bernard.
• Crinion, Brendan,.
• Crowley, Flor.
• Daly, Brendan.
• Doherty, Seán.
• Ellis, John.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Filgate, Eddie.
• Fitzgerald, Gene.
• Fitzgerald, Liam.
• Fitzpatrick, Tom (Dublin South-Central).
• Fitzsimons, Jim.
• Flynn, Pádraig.
• Foley, Denis.
• French, Seán.
• Gallagher, Denis.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Charles J.
• Hyland, Liam.
• Joyce, Carey.
• Keegan, Seán.
• Kenneally, William.
• Killilea, Mark.
• Kitt, Michael P.
• Lemass, Eileen.
• Lenihan, Brian.
• Leyden, Terry.
• Loughnane, William.
• Lyons, Denis.
• McCarthy, Seán.
• McCreevy, Charlie.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Moore, Seán.
• Morley, P.J.
• Murphy, Ciarán P.
• Nolan, Tom.
• Noonan, Michael J. (Limerick West).
• O'Donoghue, Martin.
• O'Hanlon Rory.
• O'Leary, John.
• O'Malley, Desmond.
• Power, Paddy.
• Reynolds, Albert.
• Smith, Michael.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael J.
• Wyse, Pearse.

Tellers: Tá, Deputies L'Estrange and Mervyn Taylor; Níl, Deputies Moore and Briscoe.

Question declared carried.