Dáil Éireann debate -
Wednesday, 22 Jul 1981

Vol. 329 No. 6

Financial Resolutions, 1981. - Financial Resolution No. 9: General (resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(Minister for Finance).

Mr. Haughey

This package of taxation measures, this considerable transfer of the burden of taxation from the direct to the indirect sector, is clearly an application of monetarist doctrine. Apart from the specific measures of taxation now being imposed, there were a number of references and suggestions throughout the budget speech yesterday which clearly indicate a monetarist approach by the Government. There are references to savings by Government Departments, hospital and prescription charges, the drug refund scheme, the public service, pay and recruitment in the public service, social welfare benefits acting as disincentives, and over a wide area there are ominous indications that a deflationary philosophy now rules. Let all those supporting the Government be warned and clearly understand that this penal budget in all its implications for the poorer and weaker sections of the community is only the start. It is a pointer to the uncaring, harsh monetarist road we will follow unless something happens to bring about a change of course.

This budget will reduce growth, increase unemployment and inflation and lead to a significant drop in living standards for the working family, especially the lower paid, while doing very little to reduce borrowing or the current budget deficit which it is supposed to achieve. It is clearly deflationary. Lest anyone think that my claim that the budget is deflationary in its impact is not well founded, let me refer such a person to the clear statement in the budget arithmetic which takes £20 million off revenue buoyancy to cater for the impact of the budgetary measures. In other words on its own face and its own arithmetic, the budget clearly implies that it is defaltionary in its overall impact.

Let me remind the House that the Labour Party promised in their programme that "a policy of deflation must be resisted as it will simply lead to more unemployment". Where are the authors of that Labour Party document today? They are presiding over and taking responsibility for the introduction of deflationary monetarist policies for Ireland which will affect almost all working people. The same document stated that "social welfare recipients must be guaranteed real increases in incomes". Those on unemployment and disability benefit will suffer a guaranteed real drop in incomes as a result of the budget. I hope we will hear from those Labour Party spokesmen who were so eloquent in the past at pleading the case of social welfare recipients and lower paid families during the course of the debate and that they will be able to reconcile for us the clear unequivocal statement in their election manifesto with what they introduced and supported here yesterday.

This Government have no mandate to establish such monetarist policies as they embarked on. We made it clear through our election campaign that we rejected monetarism and deflationary policies as inappropriate to our circumstances. We emerged from the election as the largest single party with the endorsement of nearly half the electorate. Our policy of productive investment had by far the greatest volume of support from the electorate. No substantial segment of the electorate voted for the sort of policies these far-reaching proposals introduced yesterday represent. There is no electoral mandate for them. In imposing these measures the Government are acting in an authoritarian manner and against the general view of the electorate fully and clearly expressed in the election last month.

Apart from the election verdict, anyone taking an interest in politics would have been entitled to assume that what happened here yesterday could not possibly have occurred under a Government led by Deputy Garret FitzGerald. As late as April 1981 when he was asked about taxation he said, as reported in a magazine article, that he would hope that increases in taxation would be limited to the purposes of helping agriculture and industry and some other areas which involve relatively minor sums of money rather than using increases in taxation as a means of reducing the budget deficit. That, the Taoiseach said, would be a last resort to be used only after we had failed to achieve buoyancy and then failed to cut expense. There is nothing in that about the books being in a worse condition than the people on the opposite side expected them to be.

The Taoiseach

How could there have been?

Mr. Haughey

At the time in April 1981 Fine Gael and their friendly commentators were preaching the message of gloom and doom, that message that we had so much of yesterday and also all last week. Monetarism is a harsh, uncaring economic policy. It puts book-keeping before people.

Deputies

Hear, hear.

Mr. Haughey

Monetarism takes no account of the social degradation, of the waste of human talent and potential, of the hardship and misery that unemployment involves. On the contrary — and I hope this message will be accepted by those on the Labour benches — monetarism uses unemployment as a weapon of economic management. In its operation monetarism can have the most serious consequences. We have seen this happen elsewhere. It alienates people from Government and Government from people, leading to widespread social unrest, riots and disruption. I have heard it said that on any occasion when the policies of that American economist who was the high priest of monetarism were actually put into effect, the troops were on the streets within a very short time. I used to think that was humorous exaggeration but looking at what is happening across the water, I am not so sure.

We have had a massive campaign in the media for the purpose of conditioning the public into accepting these deflationary monetarist policies. The great lie is now being disseminated that there is a budget deficit of £950 million. There is nothing of the sort. I was particularly distressed for the sake of Deputy Sherlock who, when taking part with me in a television programme, allowed himself to fall publicly for this piece of deceptive propaganda. The budget deficit for the first six months of this year is £457 million. That is the only definite figure available to us at this time of the year. All the rest is projection and conjecture. It is dishonest and misleading to put forward this figure of £950 million at this stage in the year as if it were a realised fact. The deficit is described in the recent Government White Paper only as something which is emerging. I should like to draw the attention of Deputies to the tables that have been issued in connection with the budget and where for the first time an exotic type of column of figures appears which is headed "Emerging Position".

Mr. Wilson

Old Moore's Almanac.

Mr. Haughey

I have been in this House for a considerable time and I have studied many budgetary tables pertaining to budgetary statements but this is the first time that I have ever found a budgetary table headed, "Emerging Position". There is something new all the time. That particular Government White Paper needs to be carefully scrutinised and assessed. One leader writer raised the question recently of an apparent change of heart by the Department of Finance. I submit that he or she was right to do so but the explanation is to be found in the nature of the White Paper as published. On previous occasions a White Paper of that sort would have represented an objective and impartial assessment of a given situation by experts in the Department of Finance. On this occasion it is clear that the White Paper is no such document, that on the contrary it has a high input of a political nature which could have emanated only from the Government.

This current spate of criticism of our handling of the nation's finance is both reckless and unjustified. It is reckless because charges of serious disorder in our finances and an accusation of economic chaos seriously undermines confidence in our economy, damages our prospects and discourages investment and enterprise. All of this criticism is clearly directed towards giving some credibility to the Government's extraordinary decision to transfer a major share of the tax burden from direct to indirect taxes. The propaganda campaign in the media has been at an unprecedented level. There have been sensational headlines, reports of roundthe-clock Cabinet meetings, state of the nation broadcasts and so on. All these and more have been availed of to stampede public opinion.

Is this a good approach to Government? Is it honest Government? I never have denied the seriousness of our economic difficulties and the depth of the economic recession which prevails throughout the world and in which we have had to conduct our affairs. I continually stressed this in many of my speeches as Taoiseach. For the Government to pretend now after the election that they were not aware of the economic situation is simply not credible. In speech after speech they claimed to know that our economic and financial difficulties were much greater than they appeared. Long before the election campaign was announced the Taoiseach made a number of speeches attacking our public finances, attacking even our credit rating in the financial markets and claiming that it was only a matter of time before the IMF would have to intervene in our affairs. How can he claim now that he did not know how bad the situation was? According to his speeches of the last 12 months matters could not have been worse.

We disagree fundamentally with this Government not only in their assessment of the present state of the economy but, even more important, on the course of action they are now undertaking. We have claimed consistently and we still claim that during the past 18 months we succeeded in bringing this small economy of ours through the worst international recession of modern times relatively safely and in far better shape than most of our European neighbours. Do none of these commentators ever look around the world outside when they complain about the state of our economy and try to make some comparisons? Do they ever look at the situation in Northern Ireland, in Great Britain or on the European mainland and see the levels of unemployment prevailing in such places combined with the absence of any form of growth? I reject completely the charge that the economy has been mismanaged. That charge has been made for political motives but unfortunately it carries the risk of jeopardising confidence in our economy.

Let us consider the facts about the present state of our economy. Despite the depth and the intensity of the current world recession our economy is basically in good shape and well poised to take advantage of an upturn in the world economy. This year in Ireland, alone among the countries of Europe, we will achieve a growth rate of approximately 2 per cent. Even the Government in their White Paper and all the commentators agree on that. Our currency has maintained its position in the EMS. Inflation was coming down. Unemployment had stabilised and the figures were showing signs of decreasing as a result of the record number of jobs that were being created.

We have protected the living standards of our people to the greatest possible extent and we have managed to give a real improvement to those in receipt of social welfare benefits. Our job creation programme was proceeding at a highly satisfactory rate and we were creating about 40,000 new jobs this year. Agriculture was recovering. Our massive investment plan of £1.7 billion was proceeding on target. Already the results of that investment programme were beginning to appear in an improving infrastructure, better energy and telecommunications facilities, roads, transport and more schools, hospitals and housing. Industrial relations have been very good this year. There was no major disruption of the public services. Does all that represent a picture of an economy in chaos as we are now told?

We are criticised principally for the size of the budget deficit. All those Coalition commentators who are busy decrying the size of the current deficit seem to have forgotten completely that the biggest ever budget deficit as a percentage of GNP was in 1975 under the last Coalition Government. While borrowing should, of course, be concentrated in the greatest possible extent of productive investment, the need to counteract a savage recession and to maintain employment and public services required us as a Government to tolerate a deficit if serious disruption of the economy and hardship to ordinary men and women were to be avoided. The time to reduce the budget deficit is when the economy improves so that it can be done smoothly and gradually without causing undue hardship. The reaction of the present Government at this stage, half-way through the year, is a premature panic reaction which will undermine confidence and set back seriously the recovery which was just beginning to emerge.

In our view, the most serious omission in the Government's proposals is the absence of any action or proposal for action in regard to unemployment or provision for unemployment. The opposite is the case and the whole thrust of the measures is towards unemployment. Let us look first of all at the world prospects with regard to employment. According to the OECD Economic Outlook for July 1981 the unemployment rate for the OECD area has increased to 6.6 per cent of its labour force in the second half of 1980. The total number of unemployed in the area in 1980 was 21.5 million people and that is expected to increase to 24.5 million in 1981 and to not less than 26 million in 1982.

It is hardly the right time for us to bring in measures which can only damage employment prospects here further. I advise the Government before going too far down this monetarist road to look at the situation in the UK. Unemployment there is reaching crisis proportions as reflected in social unrest all over the country. It is approaching the 3 million mark — I believe 2.8 million is the latest figure. The prospects are for a total of 3.5 to 4 million within the next 12 months. So much for the deployment of deflationary monetarist policies when an international economic recession is in force. To what purpose is all that unemployment and all that incredible waste of resources taking place in the UK? The ostensible reason was to cut the public sector borrowing requirements. That is what they call it over there. Of course, what has happened is that with the additional cost of all the unemployment benefits they had to pay and all the other social benefits added to the cost the whole monetary strategy in the last few years in the UK has been an abject, total failure.

There is no doubt that the only final and real result of deflationary policies is that people are put out of jobs. In a word, this new monetarist approach which we are adopting here will have disastrous implications for employment, particularly for youth employment. Government policies should be judged on their impact on employment and I believe that in that regard monetarism contains within itself the seed of its own destruction.

Our approach to our economic management at this time as we emerge from the recession is completely different from that which this Government have chosen. In this connection I would like to direct the attention of Deputies to two independent assessments of our economy. The first is that contained in the recent OECD Economic Outlook report which I have just referred to. In that report it is stated — and I acknowledge that there is some implied criticism of our Government in this — that much of the recent inflation is accounted for by recent indirect tax increases. Now the Government are determined to exacerbate this not merely by putting up indirect taxes for a second time this year but by putting them up sharply again next January to implement their income tax package. The report states on page 107 that on the basis of an assumed neutral budgetary stance through to 1982 the OECD expect GNP growth of 1¾ per cent this year and 2½ per cent next year. We now know that the Government's budgetary position is not going to be neutral but will be deflationary so that progress of the sort envisaged in that OECD report is just not going to happen.

With regard to our balance of payments deficit, which apparently is engendering such alarm on the opposite benches, the report says, and I quote from page 107:

In view of the prospective revival in external markets from mid-1981 onwards, exports should increase strongly next year and, with lower inflation, household incomes may permit resumed growth in consumption outlays.

They predict that inflation would increase to 13 per cent next year and exports recover to reduce the external deficit to 10.5 per cent of GNP.

That, perhaps, is not the most optimistic economic scenario one could think of, nevertheless it is a clear indication that we are emerging from the recession according to the OECD experts and this certainly is not the time to set us back again by the introduction of deflationary economic policies. When we were in Government investment was a key, central element of our economic policy because investment today means jobs tomorrow. Our Government stressed repeatedly the need for more investment given the present stage of development of the Irish economy. In the section in that report headed "Raising potential and reducing unemployment" the OECD said and I quote from page 11:

Boosting investment in physical and human capital must be a key incentive of economic policy in most countries to assure both the more vigorous expansion of productive potential and the creation of adequate new employment opportunities. Such an expansion may however be difficult to achieve in circumstances of relatively weak demand growth and hence limited pressure on existing productive capacity.

That is what we in Fianna Fáil believe and that is what we tried to put into practice. In that OECD report is a clear affirmation of the policies we were following. Our aim was to increase our productive investment so as to be in a position to profit from the cyclical recovery in world markets and to get on to the growth path again.

It is interesting to see that from Ottawa has emerged a communication which now, at last, puts the achievement of growth and employment on a par with the need to reduce inflation. For some of the participants in that conference that is a major turn-around and something which we must all welcome. That is the sort of situation, the pursuance of a policy of productive investment, that would have obtained assuming that our Fianna Fáil policies had been continued. There is no hint from the OECD economic experts that drastic budgetary action is called for, rather the contrary. The general optimistic view of our shorter and longer term prospects is taken and it is taken also in another economic comment. The US business outlook which was reported in The Irish Times on 16 July last foresees rapid economic growth in Ireland in the mid-eighties and a decline in inflation to under 10 per cent. It foresees even more dramatic improvements than the OECD experts in our balance of payments with the deficit dropping from 13 to 7 per cent of GNP.

None of these had suggested that drastic Government action was either necessary or desirable to achieve these aims. We do not dispute the need for prudent management of the economy. We do not see the need for this major political manoeuvre which was engaged in yesterday. In every financial year of course there are some budget over-runs. One could say it is an inevitable element in Government finances. As far as I can remember, it has happened under every Government. It is not possible to declare some established Government service bankrupt half way through the year because the Estimate has been exceeded. That is never the way things are managed.

Our view is that it will take time to tackle the problem of these budgetary excesses and make the necessary adjustments in the annual budget so as not to upset confidence. We do not accept the needs for the burdens which were placed on our citizens yesterday. It is no consolation for taxpayers to be told that the cost of living increases now will be compensated for next April by the Government's income tax plan. In the meantime their standards of living are going to be clearly and positively reduced. I want to pose this question to the Deputies and to the public — what guarantee have we that they will be able to make these changes even next April without further impositions of indirect taxation? If they do introduce the income tax package, and that is becoming increasingly doubtful, they will need further indirect taxes to pay for the changes in income tax. What is really happening is that there is a levy on incomes, a cut in incomes and not, as we were led to believe throughout the general election campaign, a cut in income tax.

It is legitimate to ask the Government about capital taxation. The Minister for Finance, in reply to Deputy Sherlock yesterday, said that changes in capital taxation were a very serious matter, very complex and would need great and careful preparation and would take some time to introduce. Why could the changes in indirect taxation, changes which social welfare recipients in the lower paid worker families will have to bear, not have been delayed until this complex measure of capital taxation was introduced? In the interests of fair play, why could the two measures not have been brought in at the same time? It is somewhat surprising that the Government now state that they have to give a lot of thought, care and preparation to the changes in capital taxation when we were led to believe, before and during the election campaign and leading up to the performance in the Gaiety Theatre, that it was all cut and dried. The Government, particularly the Fine Gael Party and the Taoiseach, knew exactly what they were going to do when it came to increasing VAT on the necessities of life for social welfare recipients and working class people. They did it immediately. Now, apparently, they do not know what they are going to do about capital taxes.

This Government should be ashamed of what they are doing in regard to social welfare. The increase of 5 per cent in the case of old age pensioners will, I am certain, not be sufficient to keep pace with the increase in the cost of living which is going to follow inevitably, from yesterday's taxation. Even the most optimistic of us does not think that ultimately the increase in the cost of living index is going to settle at anywhere near 5 per cent. Whatever about the old age pensioner and the 5 per cent, what are we to think of this miserable, derisory 3 per cent they are giving to the rest of the social welfare classes? I remember very clearly when I was over there different Ministers being berated, especially from the Labour Party benches, because I brought in increases of 12½ per cent and 15 per cent from time to time. I was accused of being miserly and making inadequate provision for the poor and weaker sections of the community. Now the Government, on their own figures and their own estimates, are going to shove up the cost of living by something in the region of 5 per cent, giving 3 per cent to the broad mass of social welfare recipients. It has a tinge of the old Paddy McGilligan taking a shilling off the old age pensioners. That sort of mentality is beginning to emerge tentatively from the Government. Could they not even have given the 5 per cent across the board? What sort of book-keeping economics is this, cutting social welfare recipients from 5 per cent to 3 per cent?

What are we to say about the £9.60 for the housewife in the home? If there was one predominant feature about the election campaign it was the fact that Fine Gael canvassers and after Mass speakers made it crystal clear to the public and to the housewife that it was a simple matter of returning Fine Gael to government and the following Monday the envelopes would start popping in through the letterboxes. That was in the official literature, in advertisments and the manifesto. There was no provision made about when this £9.60 was to be paid. When you took the combined effect of the Fine Gael canvassers on the doorsteps and the after Mass speakers—I think the Minister, Deputy Cooney, was one of them whom I would quote if I could get the record right—every housewife was led to believe if she voted in a certain way and returned Fine Gael to government, the following week, not next April, not next December or Christmas, but the following week, the £9.60 in little envelopes would start arriving in. What has happened? Not alone does the little envelope with the £9.60 not arrive on the Monday but we have this serious fraud perpetrated by the Government. These same housewives are going to have considerable increases in household items inflicted upon them from now until next April. All they are told at this stage is—live horse and you will get grass, do not mind these price impositions for the moment, bear with them, put up with the decline in your standard of living. Next April all will be well. We will see.

There is one aspect of the Minister's statement yesterday that the House should take very careful note of, that is the reference to the public service. It seems that the public service is being singled out for special criticism and contumely. We had indications yesterday that the Government have accepted the argument put forward that the source of all our economic ills is the public service and the remuneration of the public service. I want to assure the Government that we will resist, with every means in our power, any attack upon our public service.

Mr. Power

Hear hear.

Mr. Haughey

It is all very well to talk in vague, general terms about the public service. However, Deputies should understand about whom they are talking when they talk about the public service. They are talking about the Garda who have to go out, very often in dangerous, difficult circumstances, and protect and look after us. They are talking about the Army, the soldiers to whom we must turn from time to time to rescue us from some difficult situation. They are talking about the teachers who look after the youngsters in our schools. These are all public servants. Are they to be singled out for some special income regime which will not be applicable to the rest of the community?

I want to mention two sectors of the public service of which I have particular recent knowledge and they are both perhaps, at different ends of the scale. I refer to the experts at the higher levels of the public service who work unremittingly, day in day out—a seven day week, if necessary—to whom time means nothing, to supply us politicians, us Government Ministers with the material we need, the facts and figures and briefs. I do not think that anybody in that catagory in the public service could possibly be regarded as being overpaid for the dedicated, devoted work which they do now and always have done and the high standards of integrity which they have always maintained.

Mr. Power

Hear, hear.

Mr. Haughey

I want now to mention another sector of the public service. When I was Minister for Social Welfare, I had special knowledge of the younger, lower echelon of that Department, young people responsible for the very complex difficult administration of our social welfare services. Through no fault of theirs there were considerable complications in the administration of that Department and serious backlogs and delays. Those young civil servants can not be regarded by anybody as highly paid. They work with dedication and commitment, week in week out, overtime all through the week, very often working at week-ends to try to make sure that the work of the Department is effectively discharged. When people talk about the public service and when this Government are directing their attention with particular malevolence to the public service, they should keep those two sectors in mind, because they are the only two which come to my mind immediately. However, they are typical of the general level of service, commitment, and dedication which we are lucky enough to have prevailing throughout our public service.

All our economists are agreed that income restraint and industrial peace are essential for economic development and sustained economic growth. Yesterday's measures will certainly not help to create the right climate for either of those two objectives. They will have the opposite effect: they will deliberately add to inflation and in that way make no economic sense at this time.

From the balance of payments point of view the competitiveness of our exports is all-important. The budgetary policies of yesterday will certainly lead to higher production costs and this is going to impair our ability to export. When we were in office we were constantly attacked about the CPI. We strove to the best of our ability to keep down the prices of goods and services—not just the price of goods in the shops but the price of the essential services, the public services, which the ordinary man and woman have to have resort to. We succeeded to some extent in maintaining some stability over the broad spectrum of prices through food subsidies and other methods. The Government have made a serious strategic economic mistake in abandoning that policy of ours and on the other hand, clearly introducing measures which are going to shove up prices and have the effect of triggering wage and salary demands, with very serious implications for industrial relations, and which are undoubtedly in the long term going to have serious implications for our competitiveness and capacity to export.

We are broadly opposing the measures which the Government are bringing forward and in particular are we opposing the approach and philosophy which lie behind them. Had we remained in office expenditure would have been carefully and prudently monitored and restrained for the rest of this year, but there would have been no budget until January and we would already be preparing a way for a new national understanding. Precisely because we recognised the seriousness of the recession, we believe that this is the wrong moment to cut back investment, increase indirect taxation and to trigger off inflation.

The Government's approach to our present problems must be regarded as being dictated by political motives and certainly cannot inspire anybody with confidence in the integrity of their approach to our economic affairs. I do not wish to be uncharitable to a new Government, but it would not be unfair to say that their performance so far has been erratic. I hope, for the country's sake, that a better performance or, failing that, a better Government will not be too long delayed.

I would now like to look at some of the arithmetic of this budget. First of all there is the whole question of the budget deficit and the impact that these measures are supposed to have on it. I suggest to the House that there is a great credibility gap opening up here. Persistent attempts were made to condition us to accept that there was a major crisis in our public finances. If that were so, might we not have expected some major radical attempt to reduce the deficit? If the Government were serious in the propaganda attempt which they undertook to condition us to these measures, I do not think we could have expected the Government to undertake additional optional expenditures. If the public finances were in such a serious state, would we have expected the Government to undertake additional expenditures on the current side?

I suggest also that when one takes the pluses and the minuses into account, the overall impact on the budget deficit does not justify all the paraphernalia of a supplementary budget. It certainly does not justify the serious dislocation and hardship which it will cause on such a widespread scale throughout our community. I cannot see that the actual final residual effect on the budgetary finances this year will impress any of those institutions for the benefit of whom our economy is apparently going to be managed in the future.

Now, I want to try to analyse some of the budgetary arithmetic to the best of my ability and would hope that the Minister would take particular account of the sums which I am going to do and, if possible, reply to them at some stage during this debate.

Mr. Donnellan

I hope that they are better than the Deputy's January ones.

Mr. Haughey

I want to suggest that the net effect on the current side of everything which was done yesterday, all the crushing imposition on the motorist, all the increase in VAT for the ordinary family and housewife, all the price increases which will come, was to reduce the budget deficit by £12 million only when at the same time the Government were trying to create a scare and panic about some alleged budget deficit of £950 million. If my figures are right — and I challenge the Government in due course to contradict them — all that exercise gone through yesterday will make a minimal change of £12 million on the current side.

I arrive at that £12 million in the following way. Extra tax levied in yesterday's budget came to £77 million. From that the Government deducted the £20 million to which I have already referred as arising from the deflationary effects of their budgetary measures, and they took off another £10 million for a shortfall in Post Office receipts. From the £77 million we deduct £30 million, leaving net extra revenue of £47 million. Immediately they undertook £35 million of extra current expenditure. From the £47 million of additional taxation which is coming in on the current side we take off £35 million extra expenditure and we are left with this minimal figure of £12 million. I hope the motorists and housewives will be duly elated at the fact that all these impositions which were put on them yesterday resulted in a budget deficit for the rest of this year being reduced by £12 million.

I could give similar figures on the capital side but I do not think in a debate of this kind it is advisable to go into too many details. I hope the figures I have given have been understood and I would be grateful if somebody on the Government benches could prove I am wrong. If I am not wrong, despite all the panicmongering and the scare-mongering about this budget deficit of £915 million we are facing and all the conjecture and projections for 1982, all that emerges from yesterday's budget is a reduction in the current budget deficit of £12 million. There is some evidence available that this Government are going to play favourites in their approach to our economic affairs. There are a number of little indicators emerging to that effect and my colleagues will elaborate on them as this debate unfolds. At this stage I would like to draw attention to one thing which strikes me as being peculiar.

There was a fair amount of pressure from the farming organisations for a reduction in the VAT levied on the contracts of agricultural contractors. The Government have decided to reduce VAT on agricultural contractor work to 3 per cent. Far be it from me to oppose that or to decry that in any way. If the farming community and agricultural contractors can succeed in having their VAT reduced by 3 per cent by this Government the best of luck to them. We are not going to make a song or dance about it or oppose it in any way, we will just note it carefully. We also note carefully that on the other side of the coin school books are going to have a 50 per cent increase in VAT. I ask the House to decide between these two proposals for which the Labour Party and the Independent Deputy, Deputy Kemmy, voted. They voted to reduce the VAT payable by agricultural contractors to 3 per cent and, at the same time, to increase the VAT on schoolbooks, newspapers and periodicals by 50 per cent. That is just one indicator.

I am not taking sides in this matter nor am I opposing or criticising the farming community and the agricultural contractors who serve them for achieving this easement in their position. I merely wanted to point out that anomaly in the proposals that came before us yesterday and to ask if it does not indicate in some way that this Government have their own particular preferences and that the financial and economic affairs of the country will not always be administered on the basis of some objective standard of fair play and a balance of interest.

At no time in the circumstances of any nation will you ever get a professional economist who will not prophesy disaster and demand deflationary measures being introduced. I do not think I have ever yet come across a professional economist who, given an analysis of a situation said: "All is well. There is no need for deflationary measures. There is no need for income restraint. There is no need to cut back investment. Proceed. Carry on." Economics is a dismal science.

Mr. Flor Crowley

We have a dismal Taoiseach.

Mr. Haughey

Advice from economists is nearly always the same. May I interject here for a moment? Before we left office Deputy Wilson and I met the presidents of the universities who complained about the disastrous state of their financial affairs and, of course, they were looking for more money. I do not know how they are going to fare under this Government and the cutbacks in public expenditure which will be inflicted all round. We discussed the matter with them. I felt like asking them why they did not get the trained, professional, academic economists on their staff — who can tell us how to run the country — to tell them how to run their universities so that they would not have to come to the Government looking for more money from the hardpressed taxpayer, but I did not. Better, wiser and more humane counsel prevailed. Neither Deputy Wilson nor I made that suggestion.

Both professional economists and the Government are ignoring two crucial central facts in our economic and social situation which do not apply to practically any other country in Europe. This budget makes the tragic mistake of applying to our country remedies which might be appropriate in economies which have reached a much higher level of economic development than we have and have a much different economic structure because we are not a fully developed economy. We have a second factor of importance in our situation — we have a young, growing, expanding population. These two factors make us a different case. These two factors mean that orthodox, economic remedies which can, and perhaps should, be applied in other cases are not appropriate to our circumstances. That is the main central criticism I make of yesterday's budget.

Policies which might be appropriate to the highly developed economies of the golden triangle of Europe are not appropriate in our circumstances. They have no relevance here. We need economic growth. Our young population have to be provided for. Our young population need jobs, schools, houses, hospitals, all the social amenities and facilities that other European economies are already oversupplied with. We still have to provide them in increasing measure for our young population. Ours is an underdeveloped economy and the standard of our infrastructure is below European levels. If we are to compete with our partners in the EEC we must build up our economic infrastructure. We need productive investment. Deflation, cut-backs and reductions in Government expenditure are not appropriate in our present circumstances, no matter what the economic advisers may suggest.

Economic growth is a tender plant; it is not something which is easily come by. It needs encouragement and planning and can very easily be impeded and set back. My assessment of the economy is that we were just beginning to emerge from the recession, that there were here and there some not very significant but positive indications that we were getting back to growth and development and that the recession was beginning to fade. If this is the case the last things we need at this stage are deflationary policies or monetarism. In this budget we may be making a very serious mistake from which it will take us a long time to recover, if we ever do so. Our circumstances dictate that we should have growth and development, production and investment. Whatever about any other period in our economic history, this is not the time to undertake deflationary monetarist policies.

I regret that we were not able yesterday to mobilise enough parliamentary support to reject this budget and the measures brought forward by the Minister for Finance because I believe they represent a serious set-back for economic growth and development and social progress.

The Tánaiste

I confess to being somewhat puzzled by the contribution of the former Taoiseach, now Leader of the Opposition. What is this debate about? It is the analysis of the former Taoiseach that the measures we decided to undertake were not necessary or were premature. It is his view that the economy was on the mend and recovery was in sight. Is it credible that a Government such as this with a very small majority would embark on unpopular measures if we did not believe in their necessity? We are politicians who rely on the popular mandate. We are not motivated by malice but, having looked at the situation, we felt that these were the minimum measures necessary. The former Taoiseach says they were not necessary, that the timing was all wrong, that the economy was on the mend. If we are to believe his account, there was wise and sagacious leadership over the past four years, certainly over the past 18 months, which meant that we were in sight, if not of the promised land, certainly of the turn about in the Irish economy.

If the rescue was in sight and recovery on the way, why did the former Taoiseach leave these benches? Why did he leave the mandate given to him? It was not the strength of Opposition rhetoric. It was not the case put here day after day that some measures were necessary. He had a majority almost larger than the Labour Party at its present strength. Why then did he leave a full 12 months before the expiration of his term of office, when all the encouraging signs he now sees were before his eyes? That is the mystery and the real credibility gap in this debate. There is no answer to it. On the evidence of his contribution there was no need for him to scuttle to the country. I hope that mystery will be cleared up during the course of this debate. To paraphrase a colleague of Deputy Haughey, there was no problem, the economy was on the mend, it was a good Government with a secure majority and there would not be an election until June of next year.

The reasons for the Government's decision to take action have already been explained. We found public finances in a shambles and it was clear that if we did not take corrective action external agents would act for us. There is a determination on the part of the Government to take the necessary decisions to put our affairs in order and to create a framework for all our citizens—workers, farmers and taxpayers—to make their contribution to getting the economy underway again. This supposedly erratic Government have been criticised with an air of authority by the former Taoiseach. But, despite such criticism, it is a clear indication of the determination of the Government that within three weeks of taking office we have reached a wide range of decisions on essential expenditure cuts, on tax changes and policy modifications. These decisions had been avoided and postponed by the previous Government. If such measures had been taken in good time and if that Government had acted with the full strength which their mandate allowed, the economy would not now be in such a precarious situation.

It is normal for any Government to have expectations of putting their own programme into effect at the first opportunity. When we took stock of our position, however, it became clear that fundamental and effective actions were immediately called for to bring public finances under control, to halt the catastrophic decline in our balance of payments and restore public confidence in the Government's ability to govern. Outside the ranks of the Opposition, nobody seriously doubts that our economy is in serious difficulties. No one seriously questions the fact that corrective action must be taken in relation to our public finances. The incontestable figures published last week support this view. The former Taoiseach unworthily impugned the accuracy of those figures yesterday, suggesting that they were perhaps less than neutral in the calculations they were based on. I give an undertaking that during the lifetime of this Government there will be no fiddling with official reports and when a White Paper is issued it will be an impartial assessment of the situation. There will be no doctoring of the books. Both the Opposition and the Government could begin to realise that this will be the state of affairs from now on.

The conclusions drawn by the Government are reflected in the budget proposals. The difficulties facing the economy did not arise overnight. Ever since the rapid build-up of oil prices in 1979 triggered off a world-wide recession, it was evident that our economy, being particularly open to international trends, would be seriously affected and measures would have to be taken to mitigate the blow.

The signs of trouble have been there for some time. Unemployment has increased sharply, the rate of inflation has remained persistently high, the level of Government financial deficits and the balance of payments has worsened at a rate which would quickly bring about a total loss of confidence in the economic future of the country. Remedial action to deal with these problems either was not taken, was too timid to achieve positive results or was offset by other decisions aimed at softening the impact of worsening economic circumstances on particular sectors. This was the situation we inherited.

While it is necessary to avoid measures with a harsh deflationary effect which would sharply reduce living standards and economic activity and bring about short-term job losses, it is extremely risky to defer action or not to take any action at all until the point was reached where the fundamental soundness of the economy was called into question. This would be a catastrophic situation where unemployment, inflation and exchange values would get totally out of control and in the longer term the damage to the economy, to employment and living standards would be far worse than anything we have experienced so far.

These measures were undertaken in the belief that it was better for this Government to take remedial action than that foreigners or lending institutions outside of our country should take much rougher action at a time not of our choosing. While there are some indications of a modest recovery in international economies taking place in the near future, it is not possible to see any sustainable improvement in Ireland's economic performance until we have brought about a significant improvement in the balance of payments, in the current budget deficit and public sector borrowing requirements and in the international competitiveness of Irish products. Our measures are aimed primarily at rectifying the imbalances in public finances and external payments and paving the way for improved performance in the industrial sector of the economy which is the key to our future prospects in terms of creating and maintaining jobs and earning exports at a level that will sustain our currency value and maintain and improve our standard of living.

It has been said before, and no one acted on it, that if we are to survive as stable society we have to end our excessive dependence on borrowing for meeting everyday expenditure. We have to become more competitive and we have to be able to exploit market opportunities for goods and services abroad in an expanding international economy and to withstand competition from imports on our own markets. We cannot achieve this on the basis of an imbalance in our public finances and external payments, with borrowing being misapplied for longterm productive investment projects. It will not be possible to achieve a balance in our payments overnight but a start has to be made in this budget. The longer term steps necessary are spelled out in the Government's programme and will form the basis of future policy and action. No new Government would have chosen these steps as the first decisive steps in dealing with the economy but the choice is not ours and these remedial steps are necessary.

The need for this budget stems directly from the lack of action by the last Government to control our public finances. These criteria determined the kind of action we took. In our examination of the decisions on public expenditure our essential objective at all times was to reduce day-to-day expenditure and capital spending on non-productive purposes so that it would be possible to achieve the maximum sustainable increase in the funds available for investment in the preservation of existing jobs and the creation of new jobs.

Our first priority then is action which will mean more jobs, especially for young people. This clearly means making more funds available for productive investment. It also means achieving improved levels of competitiveness and new arrangements especially those associated with the Youth Employment Agency necessary to ensure that new jobs go to young people. When I talk about improved competitiveness it is not simply in terms of pay increases although they are a part of it. Many other factors are generally ignored by people who talk of the necessity of keeping our competitiveness to a standard so that our goods can be sold on export markets. They concentrate solely on the pay element. They ignore such factors as general management, marketing strategy, financial control and industrial relations within firms so as to avoid industrial disputes which benefit no one. These factors are germane to the question of preserving our competitiveness in products on which future job opportunities depend.

The Government's joint programme makes clear our belief in planning in a longer term context. As the programme states, the main objective of planning must be the achievement of such economic expansion as will ensure our employment needs. Central to that planning process will be positive help from the Government to improve our general managerial capacity, to ensure that we have the marketing ability to seek out the new sales opportunities that will enable Irish firms to return to operating at their full potential, to streamline private financial structures so that their funds are channelled into new investment and to bring about an industrial relations system where employers and workers know clearly and accept current economic reality and avoid wasteful and costly industrial disputes that serve nobody's best interests. These so-called non-pay aspects of overall competitiveness are, on the basis of recent studies, just as important as the pay aspects. Improvements in this area must go hand in hand if we are to protect existing jobs and create new jobs for the numbers of young people looking for these jobs.

The Government are especially conscious of the need to ensure that public as well as private enterprises play their full role in creating jobs. My party, by policy and otherwise, are committed to expanding the State sector. We made no secret of our belief that there must be creative use of the State sector in developing the economy, because we believe that that system is the best from the point of view of the community and also because a properly running State sector is a bulwark against growing foreign intervention and control of the Irish economy. But in this Government we say also that there must be a full role for private enterprise in developing the economy. We see a partnership between private and State enterprise, all devoted to the primary national economic objective of providing the maximum number of jobs for our young people in the future.

The Government's joint programme provides for the setting up of a National Development Corporation to hold the State's shares in existing commercial public enterprises and to engage in new projects to provide productive employment. That National Development Corporation will aim at stimulating and mobilising enterprise in the public sector, at eliminating inefficiency where it exists and at restructuring where justified public firms, all in the interests of providing more jobs.

The basic purpose of the corporation will be to stimulate and mobilise entrepreneurial capacity in State enterprises, to eliminate inefficiencies, to re-structure commercial enterprises where justified and to provide access to funds on a basis that ensures fair and equal competition with the private sector; to hold the State's shares in existing public enterprises which have commercial objectives; to engage in new projects with the objective of productive employment creation particularly in potential growth sectors of the economy either on its own or in joint ventures with other public, private or co-operative enterprises. The corporation will act as the commercial vehicle, where appropriate, for projects involving productive employment originating inside the public sector.

It is envisaged that the initial equity capital for restructuring and new projects will amount to £200 million to be taken up over a period of years and that a borrowing limitation of £500 million will apply. The wide range of functions envisaged for this National Development Corporation and the level of Exchequer finance proposed mean that the most appropriate way to provide for its establishment will be through legislation. It is my intention to have the necessary preparatory work completed as soon as possible to be ready for the Dáil to pass the necessary legislation on resumption later this year.

This Government are especially conscious of the need to supplement existing jobs and they propose new general job creation measures with a special programme aimed specifically at the acute problem of youth unemployment. The Youth Employment Agency we promised will therefore be established immediately to integrate existing schemes and radically extend them to provide up to 20,000 young people who have been without employment for at least six months with employment in environmental improvement schemes, in community youth work or in voluntary social or community organisational work. I do not pretend, nor do the Government, that the best efforts of the Youth Employment Agency will be adequate to meet the size of the challenge before us in providing our young people with jobs. The surest way of providing a sufficiency of jobs in the future is to bring our public finances into order, ensuring that we protect our currency against the danger of deflation —and that danger would have been there had we not taken action — and generally to put our economic house in order so that a climate of enterprise, a partnership between the State and private areas, can be created, with the entire community united in making that national economic objective of maximising employment opportunity. It is a large challenge, a very difficult one to meet. It will not be overcome in the next year or the year after but we must make the necessary start.

It was timely that the Central Statistics Office published recently the first of a new series of analyses of the live register which showed that in mid-April of last year the total numbers on the register for a continuous period of over six months, aged up to 24, was almost 7,000, when we remember that many young unemployed people do not register, that the total number on the register increased by over 31,000 between end April 1980 and end June 1981 and when we remember also the number of young people who leave school.

In this budget we have had to increase taxes. To fund the Youth Employment Agency a levy of 1 per cent on incomes will be necessary. I believe that all will accept that as a national priority we owe it to our young, growing population to provide the funds necessary to finance job creation and training for them.

In the budget a range of indirect taxes was necessary. The joint programme of the Government made it clear that the increases in these taxes and charges would be introduced. The fact that the position of our public finances was undermining the stability of the economy at an alarming rate meant that taxes had to be increased now to avoid enforced deflation of the economy at a later stage. I believe that the vast majority of our people will understand that firm and timely action now is far preferable to an uncontrolled drift into a situation in which Ireland's future as an independent economy would be threatened. That reality must be underlined, that there was such a threat, that that action has not been taken by our predecessors, though they had ample political muscle to take that action. That is in stark contrast with their recognition now, from the convenience of the Opposition benches, that economic recovery was under way. As announced here this morning by the former Taoiseach, there was no problem, the economy was on the mend, within months complete recovery would have taken place, the action being taken by us was over hasty; I think "premature" was the label the former Taoiseach put on it yesterday evening. He does not believe the overturn on our public finances would have been as large as the people on the dismal side, the economists, had predicted. For all these reasons we hope in the course of this debate to hear why the former Taoiseach and Government deserted these benches a full 12 months before their term of office had expired. If all those encouraging signs were there and evident to them this week presumably the same signs were evident to them in May when they decided to go to the country seeking a renewal of their mandate. Why they did that when the political situation in this House did not so require them to do so, when those encouraging economic signs were there, we hope to learn in this debate.

We do not deny that the measures we have taken will have an adverse effect on the price index — in the short-term that will be the case — but I believe the real courage of this Government will be justified by the restoration of the overall economic strength of this country, by the return to production at near or normal levels of capacity, that improved competitiveness will come about, that jobs will be saved, that the economy being put on a sounder footing gives us a better platform from which to advance into the future.

We have also taken measures to ensure that the welfare sections in our community will be protected against any indirect tax charges that have occurred. The former Taoiseach made great play of the fact that these are very small increases but they are October increases. We are committed as a Government to proceeding on a real improvement over the years ahead for all in the welfare category in our community, for the less privileged, for the poor in our society who unfortunately are with us in very large numbers. One of the actions of this Government will be — the previous Government had decided to abandon them — to reinstall the poverty committees, to admit, and there is no shame in admitting, that Irish society has not solved the problem of poverty, admit that it is another challenge that must be faced. We will have restored this autumn the twice yearly treatment of the welfare problem in our community. It was abandoned by the previous Government and restored by us this year. In the January budget of next year we will continue on the real improvement of the welfare groups in our community.

In our joint programme we are committed to returning to the path we followed between 1973 and 1977. We are committed to reducing the old age pension qualifying age in our period in office. We have had a lot of lip service paid to the question of the less privileged in our community by the people opposite this morning and probably will have throughout this debate. But this Government, in which the Labour Party are sharing with Fine Gael, are committed to continuing the advance, interrupted in recent years, in removing the sore of poverty from our society.

It will not be accomplished overnight, but at least it is a good beginning that as a Government we are not ashamed to admit there is poverty in Irish society, not ashamed to admit that it will need conscious political treatment to rule out the inequalities responsible for that poverty in Irish society and to realise that it will not be settled on the basis of yearly handouts, with politicians expecting praise simply because they have done the right thing, based on the consumer price index, for a particular needy group at a particular point of the year. We must tackle this matter scientifically. We must go to the root causes of poverty in Irish society. That will be the programme that the Labour Party in Government will be committed to in our period in office. It is in the joint programme and both parties are determined that we will do all we can to eliminate poverty in the years ahead. We do not adhere to the philosophy that the elimination of poverty must await the achievement of economic prosperity. We do not go for that kind of pacing in Irish society. As far as we are concerned, hand in hand, with an improvement in our material prospects, month by month, year by year, there must be a parallel advance in the elimination of poverty from Irish society.

It is not easy for any Government, least of all a Government with a majority as slender as this one and so short a period in office, to impose the kind of measures we felt were necessary. I hope our example will be noted and that even our opponents in their heart of hearts — Deputy McCreevy already has done so publicly and perhaps others also—will agree with us. I am prepared to think there are many responsible Deputies in the Opposition party who were in the last Government, who know the facts, who may play at rhetoric in this debate and say this measure was not necessary, but who in fact agree that it is necessary. We know that you spent many long months looking at the mess in our public finances. We do not know the reason you did not take any action. We do not know if there is an association between your calling an early election and some political problems in your own party. We do not know the reason for this, but we know you spent many months looking at this problem.

You did not take any action but you certainly examined the problem. We know that many of you opposite who have experience of Government who know the facts——

An Leas-Comhairle

The Tánaiste should not directly address the Deputies opposite.

The Tánaiste

I was speaking in the biblical fashion. There are many Deputies opposite who know that the facts of the situation merited serious action. I understand the dialectic of opposition and Government in this House, that there is the necessity to oppose all the way. That is the philosophy in which the House conducts its affairs. I leave it to others to know if it is the wisest method of conducting the national affairs at this time, but that has been the tradition in this House and, from what we heard this morning, will continue to be the tradition as long as the present Leader of the Opposition retains that office in the party opposite. There are many Deputies in the Opposition party who know that our national situation required this corrective action. Many of them are perhaps relieved that they did not have to take that action but recognise that it had to be taken.

It was not easy for us. I hope some example will be taken from this. I hope that the Deputies opposite will be big enough to admit in public—perhaps not in this debate but as the months go on—that this measure was necessary and that, even though they may have done it this way or that way, in general the thrust of these measures was necessary. I am convinced that, when the outcome in terms of control of our public finances, restoration of strength to our economy and the creation of new jobs becomes clearer, the Irish people, and especially those without jobs, will appreciate the need for the kind of measures we were forced to take.

The industrial sector will continue to be the mainspring for growth in the economy—it is the area where there is most scope and where our hopes for the future really lie. Despite a tremendous effort to expand industry, through financial and fiscal incentives, education and training courses to provide skilled labour and management, the performance of industry as a whole has tapered off in 1980 and actually fell for the first time in many years. The growth in output of new industries has been more than offset by declining production in traditional industries. This is shown up in our external trading figures.

Despite the best efforts of the IDA, the contraction in labour and the growing redundancies in traditional industries have more than cancelled the gains we have made in grant-aided industry over the last few years. The volume of imports has grown over the past five years at a more rapid rate and from a much higher base than the volume of exports. Import prices have run well ahead of export prices. The fact of the import prices running well ahead of export prices is illustrative of the tremendous pressure on Irish manufactured industry from foreign competition and the adverse effect it is having on our economic performance and employment prospects.

The measures taken by the Government to alleviate some of the pressures on industry are intended to provide a breathing space for industry to come to grips with these immediate problems. The other measures affecting industry in the Government's programme will be brought into effect as soon as possible and will help to bring about an improvement in the competitive position of industry. The anti-inflation programme, personal taxation proposals and improvements in industrial relations are all relevant in this context. Beyond this, it is necessary for industry itself to see that, through investment, up-to-date technology, efficient management and work practices, competition, foreign competition especially, can be withstood and market opportunities exploited.

In broad terms and looking to the future, I am confident that industry once more can be made an aggressive dynamic sector of our economy. The new industry sector is growing and becoming a dominant part of overall performance. This is despite the poor performance of traditional industry. Special measures will have to be taken to look at that situation. The new sector of industry which gives us great confidence for the future is in chemicals, engineering and electronics. All these areas give us hope of a better technological and secure base for improving employment in the future.

In looking at the financial demands facing this Government, particularly large provisions are being sought for large capital investments by the Exchequer in State companies not only in the industrial sector but also in transport and agriculture. These industries are among the biggest enterprises in our economy. Many of these are under severe financial pressure arising out of the economic situation, but also arising from a lack of capitalisation stretching back over many years. The Government will take the necessary measures to meet absolutely essential financial needs and a provision of £12 million has been made for this purpose.

The cost of energy to manufacturing industry will be alleviated by the reduction of 2½ per gallon in fuel oil excise duty from next December and there is provision in the Vote for Energy for financial aid to industries which have suffered from particularly severe cost increases arising from the fuel oil excise duty.

In the short period since I assumed responsibility for energy I have been reviewing the progress made towards achievement of energy policies and considering how these relate to the objectives which this Government consider appropriate in the field of energy.

There is very little argument about the broad thrust of energy policy. The rapid escalation in oil prices, which arose from the change of regime in Iran and the subsequent outbreak of war between that country and Iraq, imposed severe strains on the economies of all oil importing countries. Since we have been so heavily dependent on imported oil for a large part of our energy requirements, this impact has been particularly severe on us in relation to costs for industry, transportation, the domestic sector, commerce and so forth but also in relation to our balance of payments. It is therefore a matter of national prudence, which in my view properly transcends political divisions, that policy should be pursued which would mitigate to the extent possible the adverse effects of these external influences.

I will be particulary concerned with efforts to ensure the most effective use of energy supplies available; to promote the maximum production and the use of indigenous energy resources; to encourage diversification of fuel use so as to be less dependent on a single imported commodity, oil; and to take the initial steps in securing a greater degree of control and security as regards oil procurement on a national basis. In the coming months I will be reviewing these measures in considerable detail in consultation with the State bodies operating in the energy sector and I will be introducing such new initiatives as appear to me to be appropriate and necessary.

I will be seeking a wider and more effective utilisation of our natural gas reserves which represent an increasingly valuable national resource. I am in the course of reviewing the progress made in relation to the construction of a pipeline from Cork to the Dublin area and also as regards the preparations necessary in Dublin to take delivery of this gas. This is a major project. It is of the greatest importance not simply in relation to the supply of gas to Dublin but because it has much wider national implications. The very size and importance of this project will impose on me the obligation to study it very thoroughly, to satisfy myself that the progress achieved to date is compatible with my objectives and to see what new measures may be necessary to ensure the maximisation of the potential which this resource has in relation to national economic and social development.

I have been able to have only a general briefing on the very important area of offshore exploration and minerals. This, too, is an area to which I intend to devote very particular attention. It looks as if it will be a very busy and very interesting drilling season. I expect to see eight wells drilled in offshore Ireland this year. Five of these wells will be drilled in the Porcupine Basin. While it has already been established that the Porcupine is an oilbearing basin, further drilling is necessary to determine whether the basin contains commercial accumulations of hydrocarbons. The wells being drilled there this year should enable us to build up considerably our picture of the basin's potential. The Slyne Trough will be drilled for the first time and drilling is resumed in the Fasnet and the Celtic Sea. There is also a very high level of seismic activity this year in preparation for the new licensing round which is planned for later this year.

I have not yet had the chance to study in precise detail the matters which this will entail but I can say that it will be one of my primary objectives to secure the most effective and rapid exploration of our offshore prospects that may prove practicable.

It is generally accepted that the frequent and sharp increases which trebled oil prices in 1979 and 1980 contributed in large part to the downturn in international economic activity. Although there has been a welcome respite in the ability of oil-producing countries to increase oil prices we have to contend with another factor which is now pushing up oil prices. That is the improving value of the dollar against other currencies. As a result, oil prices are now costing this country one-third more than they were in the early autumn of last year. As a result of increased producer prices and exchange rate changes our energy import bill which has gone up from under £380 million in 1978 to over £800 million in 1980 is likely to reach £1 billion in 1981.

The oil supply situation is not at present unsatisfactory but, nevertheless, the future has many problems in store. In particular there is the problem of renewed hostilities between Iran and Iraq; the question of Saudi Arabia's long-term production policy which remains uncertain; and estimates of oil demand may turn out to have been under-estimated. Consequently a return to difficult market conditions cannot be ruled out.

The situation we are in is very serious and that explains why the Government were forced to take these measures. Had we not taken them the future of our economy would have been that much more bleak and precarious, and the employment of all would be at risk. The Government believe that the measures now being taken and the further measures outlined in their programme which will be implemented in due course will bring back a sound basis for future development. The next two years will be difficult years but we believe if a government are to be identified by giving leadership to face problems as they are recognised, the problems of those years will be successfully overcome.

There are hopes of some recovery in the major industrial economies. An easing of international interest rates and monetary policies could lead to more stability in exchange rates and an expansion of international trade. For the time being the availability of oil seems fairly certain and the level of prices reasonably stable as long as stocks remain high and demand depressed.

Overcoming our domestic economic obstacles so as to resume a healthy and balanced growth pattern will be a slow process and must be carefully phased over the next two or three years. During that period it is important to get our primary producers, whether farmers or industrialists, managers or workers to a point where confidence is restored and the level of investment is increased once more and a sustained growth in employment, particularly for our growing young population, is being achieved.

We have attempted in this budget, which is the start of a phased programme to improve public finances, to gradually eliminate, not in a sudden or deflationary manner which would precipitate more unemployment but in a planned way, Government borrowing for current purposes. We have begun on a phased basis to wind down our dangerous balance of payments deficit and the extremely high level of foreign borrowing. The purpose of this and other measures is to protect employment. When the former Taoiseach castigates these measures as monetarist, one wonders — we have it on his own word that he does not listen to economists because he regards them as too gloomy, whereas he, like the late Hubert Humphrey, apparently pursues the politics of happiness — whether he wants to know the true meaning of monetarism, because by no stretch of the imagination could our measures be accurately described as coming under the label monetarism, that weapon used by the Prime Minister of the neighbouring island on the backs of the unemployed, attempting to bring the cost of labour down and limiting the supply of money and by such means hoping that constraints will be introduced in the economy. That has not been our objective in these measures which were forced on us by the state in which we found public finances.

The current deficit would have been £950 million by the end of this year, with the opening deficit for next year being at £1,500 million, had we taken no corrective action, had we taken the implicit advice of the former Taoiseach here this morning, who said there was no need for any action to be taken until next January. I am proud that we took our decision however unpopular it was. Was there not a choice — if one could call it that — for this Government to sit here mute of malice, take our summer holidays and come back in the late autumn with a worsening economic situation? We could have waited like lambs for the slaughter until we faced the £1,500 million opening deficit next year. We had that "choice", if that is the choice the former Taoiseach suggests we should have made.

The former Taoiseach shows great cynicism about the public memory. He aspired to the mantle of a senior economic statesman here today — the leader of his people cast out by their ingratitude, but here he was still gallantly giving advice in opposition. He was declaring that there was no problem. What an inconsistency it was. He says we acted prematurely, that we had got it wrong.

Mr. Lenihan

He was not ham acting.

The Tánaiste

I do not know what kind of acting it was. He was silent when I asked him why he was over there; he is over there by his own decision. The Deputy is over there by his decision.

Mr. Kelly

He is far more impressive over there than he was over here. He has found his true vocation at last.

An Leas-Cheann Comhairle

Could I ask the House to allow the Minister to proceed without interruption?

Mr. Kelly

As an economic watchdog, he is now performing well.

An Leas-Cheann Comhairle

Let us proceed with the debate in an orderly fashion and leave the histrionics out of it.

The Tánaiste

When the former Taoiseach attempts to don the mantle of senior economic statesman he is forgetting, or is hoping we will forget, his own real life role quite recently as Taoiseach when he presided over a Government for 18 months that permitted our public finances to fall apart.

No Member of this House has had longer experience than Deputy Haughey of the management of our economic affairs. No Member came to the office of Taoiseach with greater experience of different ministries or with a more carefully prepared apprenticeship for the highest office. Yet, for whatever reason — time alone will tell — from the moment he assumed the office of Taoiseach his management of our economic affairs was marked by uncertainty, indecision and hesitation. The Leader of the Opposition has many friends in the public relations world. He may not like economists but apparently he finds the company of advertising agents and PRO experts more invigorating — certainly not as dismal as economists. This man in the Lemass mould was a veritable Hamlet, incapable of taking any decisions. With all the power a 20-seat majority gave him, he resorted to slogans to defend his failure to act. He said he was not a Thatcherite, he was not a monetarist, but all the time the problems of growing disorder in our public finances became worse until finally he scuttled to the country to look for a mandate because he did not have the guts to deal with the problems facing him and his 20-seat majority Government.

We come to the point where a Government with a tiny majority have moved to take action. We know that the Leader of the Opposition and his party were aware of the facts of the situation. We have been looking at the books for more than ten days and what we know now was known also to the party opposite but so great was the fear of the Leader of the Opposition to take the necessary measures that he ran to the country for a mandate 12 months before his Government's term of office expired.

I mention the motes in the eye of the Leader of the Opposition not to discredit him but to point out that his record when on these benches deprives him of the necessary credentials to criticise any action taken by this Government. His cynicism for the public memory is so great he could speak without the slighest recognition of any inconsistency on his part when making his speech in this debate. Obviously he believes what the public relations experts tell him is reality. Our actions are designed to salvage a desperate situation. They were made necessary by the facts of that situation inherited by us. Our public finances would remain the shambles we found them if we did not take action. The people opposite claim to be republicans. Apparently for them being a republican simply has political connotations. In fact, classical republicanism always had a very strong economic side but apparently there is scant sympathy by the people opposite for the philosophy of republicanism in its economic manifestation.

At any rate, we acted. Whatever the unpopularity we believe our actions were necessary in the situation inherited by us. Since the current budget deficit has risen to unprecedented levels it was necessary to take action. We believe that in so acting we have secured a base for better progress in the future. Of course, any Government taking action will need as much co-operation as possible to ensure there is a united effort in the country. We were anxious to ensure that the burden of paying for clearing up the financial mess we inherited should be shared as equitably as possible. That is why social welfare benefits are being increased by 3 per cent and why the price of basic food items has been frozen through additional subsidies.

A subsidy of £5 million has been given in respect of bread. The Minister acted earlier this month to provide a further subsidy to ensure there was no increase in the price of bread following the recommendation made by the National Prices Commission to grant an increase.

The Minister for Finance has announced an additional levy of £5 million on bank profits. We believe the banks have suffered less from the recession than other areas of the corporate sector. With the Government committed to maintaining corporation tax in the manufacturing sector at the existing rate, we felt an additional levy on the profits of the banks was justified. In addition, certain charges on the use of cheques have been increased and a charge has been introduced on the use of credit cards. As the Minister said yesterday, measures to increase the yield of capital taxes are being considered. Legislation in this area is complex and we want to take wise steps.

We face a few difficult years. However, yesterday's measures are the first step on the road to regaining control over critical areas of the economy. This is a two-party Government. The Labour Party are an integral part of the Government in carrying out the joint programme agreed by the two parties. That programme can give us in the full period of the life of this Parliament a Government responsible in dealing with the economic problems but also reflecting the traditional and social commitment of the Labour Party towards the working people. We do not need any sermons on social morality from the people opposite. We do not need any lectures on why more capital taxation was not introduced.

When the people opposite were in Government they thought they would gain the respect of the country by avoiding all measures that smacked of responsible management of our economic affairs. They lacked the traditional excuse of a Government who shirk action in such an area in that they had a very strong majority. They went to the country before their term in office had expired. The conclusion is inescapable that they lacked the courage to take the action which they knew was necessary. Now we have the paradox of a Government with a very small majority taking the necessary action. We are not under any illusion that our measures in the short-term will be popular but we are confident that what we have done will put the economy on a strong footing. The Labour Party are strongly committed to Irishmen and women managing the affairs of the country. If the verbal republicanism of the people opposite brought about a situation where in our economic affairs we were being put in hock to an increasing extent to foreign bankers, the Labour Party in Government were anxious to wind down that process. Today we are taking the steps to show our seriousness in that regard.

Mr. Lenihan

It is evident from the last speech why a substantial minority of the Labour Party voted against participation in a Coalition Government. The chief protagonist of Coalition Government has just spoken and it is quite clear that that substantial minority was broadly representative of the vital element of the Labour Party, which is the trade union movement.

Mr. J. Ryan

And Deputy Charlie McCreevy.

Mr. Lenihan

The trade union movement opposed Coalition participation by the Labour Party but were overborne at the Labour conference by a majority, not a heavy one, led by Deputies such as Deputy O'Leary and others who were interested primarily in spreading patronage among Labour Party Deputies to the unfortunate detriment of the Labour and trade union movements. The speech we have just heard from Deputy O'Leary is typical of the opportunist attitude that prevailed against the strong minority advice of the Irish trade union movement, with which we had the pleasure as a Government to co-operate on many planes in the formulation of the successful national understanding that has stood us in excellent stead in the past two years.

Mr. Kelly

You were not very successful——

An Leas-Cheann Comhairle

The Chair would remind Deputy Kelly that he will be treated here no differently from any other Member.

Mr. Kelly

But I have heard Deputy Lenihan knocking——

An Leas-Cheann Comhairle

Will Deputy Kelly please obey the Chair? The Chair will take no excuses. I will treat you the same as any other Member. The Deputy will please allow the business to proceed in an orderly fashion. Deputy Lenihan.

Mr. Kelly

So much for cut and thrust.

An Leas-Cheann Comhairle

Would Minister Kelly please obey the Chair?

Mr. Lenihan

One sees in the statement of the Minister for Finance yesterday the monetarist policy that has pervaded the policy of Fine Gael before and since the election. Deputy O'Leary may talk at length about the importance of the public sector, of youth employment, of capital expenditure, but when I look through the speech of the Minister for Finance relating to capital expenditure, unemployment and the public sector and the numbers employed there, I see that public sector employment is to be cut. It is spelled out in the Minister's speech that the numbers are to be frozen at the level obtaining on 21 July 1981. That is a positive, definite Government decision written into the document.

How, therefore, can Deputy O'Leary with forked tongue, speaking as Tánaiste, come in here and commit himself publicly to a policy of expansion in capital investment in State and semi-State organisations? Only a few minutes ago he made a specific commitment to a National Development Corporation. He spoke in terms of investing £200 million immediately, with a borrowing commitment of £500 million in a National Development Corporation. Is there any mention of it in the document read to us yesterday by the Minister for Finance? Yesterday the Minister for Finance made a specific commitment to freeze the numbers employed in the public service.

Yet Deputy O'Leary today spoke gaily about giving a major State corporation nearly £1,000 million to expand. How, whom to employ, where to employ them? The fact is there is a real dichotomy between the deflationary monetarist policies adumbrated in this document published by the Fine Gael Minister for Finance yesterday and the sort of loose rhetoric we heard here this morning from the Tánaiste when he was paying lip service to some of the elements of the Labour Party. In practical terms there was no real philosophical input from Deputy O'Leary, though he made the ritual obesance to some of the sacred cows of the Left, one of which is a National Development Corporation.

There is no mention of the National Development Corporation in the hard-faced document issued by the Minister for Finance. There is no mention in it of the £200 million which Deputy O'Leary wants immediately for the National Development Corporation.

An Leas-Cheann Comhairle

Would Deputy Lenihan refer to him as the Tánaiste?

Mr. Lenihan

There is no mention in yesterday's document of the £200 million to be made available immediately for a National Development Corporation or of the £500 million for a loan capital structure for it. The Tánaiste also paid homage to job creation, particularly among young people. That is desirable objective to which we all subscribe. I fully agree with the Tánaiste and everybody here who appreciates the importance of job creation for young people. The fact of our expanding young population with 50 per cent of our people. under 25 years, should propel us and motivate us to introduce policies of job creation among our youth.

Indeed this is precisely the area in which Fianna Fáil invested the major share of public capital. The IDA were fully financed and were on a steady track of creating 40,000 new jobs this year, as they did last year and which they hoped to provide next year. They were on a two-year planning track ahead, geared to provide 40,000 new jobs in each succeeding year.

Yet the Minister for Finance has decided, as his contribution to the Tánaiste's welcome endeavour in terms of lip contribution to job creation, that the one positive contribution in this field will be that the numbers employed in the public service will be frozen at the level of employment that existed there yesterday. That is the only reference to employment in the public service in the document of the Minister for Finance. The Tánaiste today spoke of the need to continue capital expenditure, but the Minister for Finance yesterday was entirely negative in that area. There is this reference to capital expenditure in the speech of the Minister for Finance:

Nevertheless, during this year there is evidence that, if nothing is done, the amount actually spent will in many areas be much more than was provided for in the 1981 Public Capital Programme. The Government have therefore taken steps to ensure that the Exchequer commitments will be maintained at or around the level provided for in the January budget.

In other words, capital expenditure is to be frozen as well as employment in the public sector. Our capital expenditure commitments were running ahead of what we provided for in the January budget this year. That was a welcome development because it is only by the expansion of capital investment, public and private, that one can absorb the employment that is so essential, particularly for the well-being of our young people.

The expansion of investment and investment growth are essential for the provision of employment. That is basic, real economics. As the Government we did not in any way restrain or hold back in regard to the expansion of the public programme.

The document issued by the Minister for Finance yesterday criticises us by implication in that respect. It states:

A contingency provision of £70 million was made in the January budget for the additional requirements outside of the Public Capital Programme for loans and share capital for certain semi-State bodies.

This is an area dear to the heart of the Minister for Energy and dear to the ethos of the Labour Party: the importance of providing capital for semi-State bodies like the National Development Corporation. The document goes on:

Potential demands on this provision could amount to about £217 million.

This was an excess but it was a desirable excess in areas which required expansion: Aer Lingus, CIE, the ESB and any of the semi-State corporations we want to see expanding and making an input into Irish society, investing and providing growth and employment. Because the potential demands would be about £217 million instead of £70 million, this is regarded as negative rather than positive. In their latest Victorian draconian language, which is far removed from the windy rhetoric of the Tánaiste the document went on to say:

The Government have reviewed these demands carefully and have concluded that, in present financial circumstances, these demands must be confined within a total of £82 million;

In other words, where the semi-State sector required investment funds, not for current expenditure but for capital purposes, where the best of our semi-State companies require £217 million, they will be confined to £82 million.

Mr. Kelly

Fianna Fáil did not even buy a bus for CIE in four years, or a railway carriage.

Mr. Lenihan

The £135 million which is required urgently by the elite of the investors in our society and in our economy to expand and provide employment and to gear up their enterprises and their operations will not be made available to them. They will be confined to £82 million as spelled out in the final paragraph on page 17 of this document. That is all there is in regard to employment for young people or older people, for investment, or growth, or expansion. That is all there is in relation to employment and capital investment to provide for growth in the public and the semi-public sectors.

There is to be a freeze in the numbers employed in the public service. No more are to be taken on. That is the type of situation we faced when we came back to office after the last Coalition Government. The then draconian Minister for Finance, Deputy Ryan, also imposed a freeze on recruitment to the public service prior to 1977. Our first act as a government to which I was proud to belong was to thaw that freeze and to allow recruitment to the public service and the semi-State sector. We are back to this draconian, Victorian philosophy again, and the numbers to be employed are to be frozen as of July of this year.

There is not just a freeze in regard to capital expenditure, but there is also to be a positive curtailment on capital expenditure in the semi-State service. A virtue is made of this. That is all there is in this document about employment and capital investment: a freeze on the numbers to be employed and a curtailment on capital expenditure. That is the contribution to employment in this document. There is no point in the Tánaiste coming in here with his rhetoric this morning as if this document did not exist, and as if the Minister for Finance did not read out this document in this House. This is the policy document we are considering. We are not considering the Tánaiste talking off the top of his head. We will be voting on this document and the proposals in it relating to our economy, the proposals spelled out in the Financial Statement of the Minister for Finance. The Minister for Energy came in here with a forked tongue presentation totally unrelated to the realities as spelled out here yesterday by the Minister for Finance.

The Tánaiste waxed eloquent in paying tribute to another of the gods, or idols, or totem poles of the Labour party: how they feel about social welfare and the need to improve social welfare payments. We are the party of social welfare in this House. We have always gone way ahead of the cost of living index figure in our assessment and preparation of increases under the various social welfare headings.

Mr. Kelly

Who reduced the old age pension age? Who brought in allowances for prisoners' wives and unmarried mothers?

Mr. Lenihan

Recent Fianna Fáil budgets showed a consistent 25 per cent annual rise in social welfare payments, particularly for old people and widows. In this document a 5 per cent increase is proposed for old age pensioners and a miserly 3 per cent increase under other headings to operate from 1 October. Some of the figures would make one weep. The blue document we received yesterday sets out the various increases in weekly rates of social insurance. In 1981 would you believe that there are increases from October amounting to .05p? That is one shilling in old money. On page 3 of the blue document it is stated that the supplementary allowance payable to blind persons over 21 who are in receipt of a blind pension will be .05p for each of the first two dependent children, and for each subsequent child the increase will be .05p.

In this day and age it is a rather sad commentary that anybody would write that into a document. Apart from the morality of it and the gross lack of charity, the very fact of going through the whole administrative rigmarole of administering an increase of one shilling under any social welfare heading today defies description. A virtue is made of that by the Tánaiste here today.

I am not being selective because I will take another heading under which .15p is given. That is a little better. It is still 15p and no means substantial in respect of unemployment assistance and supplementary allowance recipients for their children. Children appear to get a bad hammering under these proposals because they get only 15p each. It is not as bad as .05p. There is an elaborate table with increases of 5p, 10p or 15p. The overall average is 3 per cent for everything except old age pensions. That is supposed to cope with the inflation which is written into the document by the increase in VAT on a whole range of items. There is the audacious claim that the CPI will be contained within 3 per cent. Every item which is in the area of VAT is going up by five percentage points and with that percolating across the whole spectrum of the economy how can it be contained in a CPI increase of three points? That is apart from the increases in the financial resolutions on beer, spirits, cigarettes and petrol. The 3 per cent figure must be fraudulent. On any casual assessment one is talking about 5 per cent or 6 per cent at a minimum. Old age pensioners and other social welfare recipients will be contained within 3 to 5 per cent.

The Government have embarked on a very dangerous economic policy because it is deflationary in the sense of capital investment and employment and inflationary by imposing regressive tax across the board which hits the cost of living. The Minister for Finance and the Government have managed to contrive to have the worst of both worlds. The economic package is also deflationary in the sense of curtailment of public investment and freezing jobs in the public service and inflationary by jacking up the cost of living particularly in regard to VAT. That is a regressive form of taxation and a levy which hits everything with no regard for a person's income or social position. The Government are heading for disaster. The package is negative on two accounts and they have contrived to be both deflationary and inflationary at once.

Mr. Kelly

It is some trick.

Mr. Lenihan

Indeed it is.

Mr. Kelly

Can the Deputy explain that? I tried to understand it last night.

An Leas-Cheann Comhairle

The Chair would remind Deputy Kelly that he should allow Deputy Lenihan to proceed. If Deputy Lenihan did not with such apparent relish address himself to Deputy Kelly the Chair might find it easier to carry on business in an orderly fashion.

Mr. Kelly

The Chair is taking half the fun out of the House.

Mr. Corish

Why did the Opposition go to the country?

Mr. Lenihan

Deputy Kelly is naturally provocative, likeable, attractive, pleasant to joust with and verbal fencing is one of his specialities.

Mr. Kelly

The Deputy is the most disarming rogue in the business.

Mr. Corish

It is because the Deputy has no problems.

Mr. Kelly

One might as well try to sink a cork by throwing stones at it as embarrass or induce some shame——

An Leas-Cheann Comhairle

The Chair is not interested in any Kellyisms. The Minister will accept that and accept that he must allow Deputy Lenihan to proceed. Otherwise the Chair will have to consider what action would be appropriate in respect of Deputy Kelly.

Mr. Moore

Ask him to leave the House.

An Leas-Cheann Comhairle

The Chair will not do that but will ask him to allow Deputy Lenihan to proceed with his contribution.

Mr. Lenihan

The Government have moved along the wrong road. It is basically a curtailment of the capital programme which will lead to unemployment, freezing of the numbers employed in the public service which will be deflationary and lead to reduction in employment. On the other hand the increase in VAT coupled with the other increases in the Financial Resolutions will increase the CPI by 5 per cent or 6 per cent. This is the worst of both worlds where the Government are deflationary on the capital side and inflationary on the tax side. That is my thesis and it is water-tight in respect——

Mr. Kelly

The Deputy is unsinkable anyway.

Mr. Lenihan

Deputy Corish mentioned the question of having an election. In all democracies elections have taken place every four years. Five years is the statutory maximum but four years is the normal. The previous Coalition did a four-year stint and Deputy Cosgrave decided to have an election. Deputy Haughey did the same thing. It is a Taoiseach's privilege and it is sensible. Otherwise one walks into all kinds of pressures coming up to the last day on which a Government can continue in office. I cannot understand the brouhaha made about it by the Deputy.

There is an important aspect which concerns the future development of our economy and society and that is keeping industrial and labour relations on an even keel. One of the real successes of the last Government under Deputy Haughey as Taoiseach — he made it an issue within days of becoming Taoiseach — was the handling of the whole area of industrial relations. The co-operation that existed between the last Government and the Irish Congress of Trade Unions, the framing of the two national understandings and the framing of the next one which we would have done successfully, has meant that this year has been the most trouble free as far as industrial action was concerned. The only serious strike we had happened within days of the Coalition coming into power and they have refrained from handling it in any way. They have run away from it. I refer to the bus dispute in Dublin.

Our thrust in Government was to recognise that we could have all the plans and development corporations in the world but unless there is co-operation between the social partners and the Government, one will not have success in economic expansion and social progress. That is a basic thesis which we made a policy priority. In the past few years we moved from a confrontation position vis-à-vis the trade union movement to one of co-operation. National understandings were introduced and a wider perspective given to talks other than the normal pay dimension which traditionally had been the basis for talks. We brought in employment policies, tax policies and social welfare policies. There were fruitful exchanges between the Government and the unions and we had considerable success in that endeavour.

Now we have an inequitable form of tax measures that will jeopardise that national understanding. The negotiations in respect of a new national understanding will have to be conducted during the next few months but we have the Government telling the trade union movement that the cost of living is being jacked up by direct Government action. I estimate that the increase at the end of the day will be of the order of 5 to 6 per cent. That will have to be taken into account, as will the cost of living index, in the preparation of any new national understanding. What the Government are doing in jeopardising the national understanding is the most sinister part of the package we are discussing here today. There is no hope of achieving the progress we all wish for unless there is co-operation with the social partners — the employers, the workers and, in particular, the trade union movement.

One example of the credibility of the Government in this respect is the Employment Guarantee Fund. I note that there are a number of questions tabled to the Minister for Finance in this regard. Last week we passed the legislation covering this fund. Legislation was prepared by us on foot of the second last national understanding. Last year the employers, the trade unions and the Government set up a tripartite fund whereby £20 million was made available and distributed throughout the country for agreed employment projects and for agreed community developments such as the erection of sports and recreational complexes. As a Government we showed our bona fides in that respect by allocating £10 million, on foot of the last national understanding, to the Employment Guarantee Fund. The new Government introduced the Bill establishing the fund for this year and the legislation has been put through. Now there are questions on the Order Paper asking if the money is being spent, asking what is happening in regard to the £10 million that we decided would be the Government's input into the fund.

There is no point in talking here, as the Minister for Energy talked, in high flowing rhetoric about the need to enhance job creation projects and to develop them if the one positive job-creation project that emerged from the first of the national understandings — the establishment of this tripartite fund in which employers, Government and trade unions would make their contribution — is not being put into effect. We allocated our share of the fund — £10 million, which represented 50 per cent of the total — long before the election. In that way we were keeping our word to the trade union movement. We await the replies to the questions tabled for today in regard to this fund.

What is happening in relation to this fund will be evidence of the reality of the bona fides of the Government in this whole area of employment. Already there is curtailment in terms of capital investment and a freeze in the area of employment in the public service but what is happening in regard to the Employment Guarantee Fund will indicate whether the Government are cooperating with the trade unions and with the employers regarding the implementation of the fund for this year.

I do not intend to use my full time during this debate. The points are self-evident and patent. The Government are travelling along a negative road that will lead to unemployment and to a national recession on top of an international recession. They will compound and worsen the situation by adopting the kind of measures that are being put forward in this financial package.

There is a world recession and there has been one for the past two years. We have no control over such a situation but our policy in regard to that recession was adumbrated by our Leader at various summit meetings within the Community, and this policy is, as he said this morning, being adopted at last by the major industrialised nations at the Ottawa conference. That is a policy which does not pursue restriction in a period of recession, which is not negative during such a time but positive and expansionist. In order to be positive and expansionist in a period of recession certain decisions have to be taken in regard to balance of payments and to budgetary deficits. One must live with these matters. In a democracy a society should not be run on the basis of accountancy criteria or of strict banking criteria, nor should a recession be made worse by pursuing negative monetarist policies. Instead an economy should expand at such a time and should provide the infrastructure to prepare itself for coming out of recession and into a period, we hope, of expansion and stability.

The policies being pursued by the Government, particularly those policies outlined yesterday by the Minister for Finance, will only compound and worsen the problem. There is a very clear distinction to be made between the approach which we consistently adopted and the approach being adopted now by the Government parties.

Our policy was positive, deliberate and planned, there was no question of drifting into a balance-of-payments deficit or into budgetary deficits. This distinguishes us from Fine Gael who are a party of conservative reactionists, and the Labour Party have walked into it by joining with them on this occasion.

Mr. Kelly

Fianna Fáil have walked the country into it.

Mr. Lenihan

We made a conscious decision not to allow ourselves to be stampeded by budgetary or balance-of-payments deficits.

Mr. Kelly

The Deputy should not worry about that now.

Mr. Lenihan

We did not pursue the sort of policies being followed by the Conservative Prime Minister in the neighbouring island.

Mr. Kelly

Each year Fianna Fáil exceeded their forecast by several points.

Acting Chairman (Mr. D. Gallagher)

The Minister will have the opportunity of making his contribution. He should refrain from interrupting continuously.

Mr. Kelly

The Deputy is being very provocative.

Mr. Lenihan

I am glad the Minister made that point. We refused to follow the negative restrictive policies being pursued by the British Prime Minister, policies which she claimed to be following as a matter of virtue. We decided that in the Irish situation a different and more positive remedy was required and that remedy was to maintain a rate of expansion and to build up our infrastructure so as to be ready to move forward at the end of the recession. As our Leader said this morning that decision was based on one consideration that distinguishes us from any other nation within the Community. That is our expanding population. We are the only country within the Community to have such a preponderance of young people within an expanding population, and that very factor made our position totally different, totally sui generis and gave us a case to be examined on its own merits. Our point of view was seen by the bankers and by the economists of Europe and we had no difficulty whatever about raising the necessary funds, not only from the European Investment Bank but from other sources available to Community institutions, for expansion and development. That very problem of having such a large proportion of the population made up of young people is our strength as a country. Any positive economist will recognise that. It would be only a negative accountancy economist who would see the situation otherwise. It is to our positive advantage that we have this reservoir of talent and ability in our young people. It is a challenge to us to raise the necessary funds to expand training and educational facilities so as to enable these young people to make a worthwhile contribution to Irish society.

In this document there is talk about curtailment of public expenditure to which I referred earlier and the Department of Education is one of the Departments singled out and specified in this document as an appropriate area for curtailing public expenditure. We do not have half enough money for our education and training requirements and we were enabled to get some moneys from the EEC by way of direct grants from some of the institutions and by way of loan from other institutions. We had no difficulty during our tenure of office in obtaining these moneys for the very reasons I have mentioned and the arguments I have advanced: that they recognised that Ireland had a particular case by reason of this enriching element of young people in our society.

The people in the EEC and its institutions looked at this in a positive way because they and any positive economist could see that one of the weaknesses in many of our EEC partner countries is this very strength of ours. They have a declining population, reducing birth figures and a preponderance of older people and, therefore, inevitably in time there will be less productivity, less creativity, less expansion in Community countries going in that direction. This great asset of ours is there to be tapped and it can be tapped only by expanding State investment, by providing an environment for the expansion of private investment and by a positive policy of growth. That policy, if pursued, can sometimes run counter to the sacred cows of balance of payments and budgetary accounting. If one has to make the choice between having a budget deficit on the one hand and expansion in the area that I have mentioned on the other hand, I will all the time in Government — I hope to be back again — opt for investment in expansion and development as against some sacred adherence to balancing payments or budget accounts.

Mr. Kelly

Why then bother balancing payments? Why have such a thing as a budget?

Mr. Lenihan

I am talking fundamental philosophy and economics and I am measuring the Minister as to where he stands and telling him where I and my party stand. We will never go in for the sort of politics and economics that now appear to dominate Fine Gael thinking and, unfortunately, they have brought my good friends in the Labour Party with them. I salute the substantial minority in the Labour Party who refused at their post-election conference to go along with this Coalition nonsense. These men who formed that substantial minority were representative of the most responsible elements in the Labour movement. They were the leaders of the trade union movement who are opposed to Coalition, and rightly so.

Mr. Kelly

They would not agree with the Deputy's political philosophy.

Mr. Lenihan

They participated with us in the formulation of national understandings. They saw that we understood their problem on the level of concluding national understandings and that we had a positive approach to the overall economic development and investment growth that they saw as essential for the future of this country. The partnership between the last Government and the Irish trade union movement was the most fulfilling and rewarding from the national point of view of any such partnership between Government and non-governmental agencies in the history of this State and will be seen to have been such. I hope from the point of view of the country that that policy is pursued with vigour and that they do not stand away from problems in this area. It is difficult, thorny, sensitive and delicate but it is a long policy of co-operation and partnership and it shows the social partners in our community that Governments can make progress in the future.

To the majority in this House it does not matter a tráithnín, as the former Deputy Dillon used to say, because the majority in this House can get you nothing and nowhere unless you find an acceptance and acceptability from the various social partners in our community. That is the essence of modern democracy. It is shared responsibility. It is not just a majority who may reside in this House who provide the Government. That is not the end of the story. The responsibility for problems and their solutions must be shared with other people who have a contribution to make in our community, particularly in terms of our society and modern society generally. That includes predominantly and most important of all the trade union movement.

Mr. Kelly

The Deputy's thesis amounts to abandoning responsibility.

Mr. Lenihan

I have sought to keep the matter on the rails in this debate. From time to time we have had fruitful exchanges with Deputy Kelly. I have no wish to have exchanges with him other than fruitful ones and I am seeking only to give some basic advice, some words of wisdom. The important thing today is to remember co-operation and that we in this House are not a repository of all the wisdom within our community. There is a lot of wisdom outside and we must co-operate with it, tap it, work with it for the overall benefit of the community as a whole. It is only in that that progress can be made.

Mr. Kemmy

I have been waiting here to speak for the last three hours. I do not know what sort of parliamentary tic-tac you are operating.

Mr. Kelly

Both these Deputies were here before me and I do not mind, Acting Chairman, if you want to call on them——

Acting Chairman (Mr. D. Gallagher)

If the Minister is giving way to Deputy Kemmy——

Mr. Kelly

——on the basis that they were both here before I was in the House.

Mr. Kemmy

If there is some other basis on which one can get in that you, Sir, can tell me about after my waiting three hours, I would like to hear it. Do you want me to wait six hours or nine hours? That would be grossly unfair. I intend to speak in this House because I have waited long enough. I am glad that the Minister is bowing to fair play and democracy but you should have done likewise if you were a democrat.

Acting Chairman

There is a precedent if the Minister wants to offer at this stage.

Mr. Kemmy

I am not going to be over-awed by precedents here in the House.

Acting Chairman

There is a precedent of the House and no Fine Gael speaker has taken part in the debate up to now. I am sure that Deputy Kemmy will have an opportunity of getting in on the debate before it closes.

Mr. Kemmy

I intend to get in now. I did not make the precedents you are talking about and I intend challenging precedents in this House.

Mr. Sherlock

Ar an cheist chéanna, I would like to know as well if I will have an opportunity of getting in later on. I appreciate that the Minister has now given way to Deputy Kemmy but I would like some indication that I will get a chance later and how soon that will be.

Acting Chairman

You will appreciate that there has been no speaker from the Fine Gael Party, the main Government Party, apart from the Minister for Finance on the Budget speech itself.

Mr. Sherlock

I would be perfectly satisfied if you would say that I will get my chance to speak after the Minister. I will not be speaking for long.

Acting Chairman

We are taking note of who are offering in the debate and I am sure you will get an opportunity of coming in on it at some stage. I am not the Ceann Comhairle or the Leas-Cheann Comhairle and I will be here for just a short period. I am sure that you will be facilitated. If the Minister is giving way to Deputy Kemmy we will continue with the debate.

Mr. Kemmy

You came under fire on this as you have just stepped into the Chair and I am sorry that the Ceann Comhairle or Leas-Cheann Comhairle did not take the brunt of the fire. We will have to examine some of these precedents in the House because in the cause of commonsense and practicality they will have to be discarded as far as I am concerned.

As an Independent Deputy I was invited by Deputy Haughey, the former Taoiseach, to justify my support for the Government's budget in divisions last night. I was taunted repeatedly by another Member of the Fianna Fáil Party, Deputy Gene Fitzgerald, to give my reasons for supporting the Government's budget. Deputy Fitzgerald has left the chamber but I have no fears in responding to his challenge and giving my reasons for supporting the budget at divisions last night. The choice which confronted all Deputies in this House, and especially the Independent Deputies, was to support the Coalition Government in their dealing with the economic crisis before the country or to return to Fianna Fáil's economic policies which were responsible for creating the present economic crisis in the first place. The cupboard is bare. A vote for Fianna Fáil at present would be a vote of approval for the present economic mess.

I see that in simple terms; I have no reason to revise it, there is no third choice for me as a socialist Deputy. I regret this, but there is nothing I can do about it. Given the political realities I have outlined, while I have reservations about the budget, which is far from ideal, I have decided to support the Coalition budget on this occasion. I have no illusions about why my vote has been given, nor have I any illusions about the nature of this budget. I have no apologies to make for my voting decision last night. I have no intention of allowing myself to be cast in the role of apologist for the Coalition in giving my support for the budget on these votes. I did not come to the House to abstain or to sit on the fence. It would be easy to do this but I intend to vote and to speak on every possible occasion. As someone who holds the balance of power, I do not intend to hold the Government to ransom. I do not intend to cry wolf on every division. I am very familiar with the parable about the boy and the wolf and how nobody took him seriously when he called wolf too often. The support I give to the Government will be conditional. If a time comes when I must withdraw that support I will tell the Taoiseach openly my reason for doing so. I will also tell him in private if necessary. I do not intend to be mealy-mouthed about my support for the Government's budget. I have no intention of wringing my hands in horror in public and having a public crisis of conscience on any occasion when there is a vote. We had enough histrionics and theatricals from the Fianna Fáil benches last night. They are a luxury I cannot afford.

There are some features of the budget which I find unwelcome. Indirect taxation is a speedy means of bringing money to the Exchequer. However, it is basically an indiscriminate and blunt instrument for achieving this objective and hits hardest at the lower income sections of the community. The 50 per cent increase in VAT is going to make life even more difficult for those sections of the public to which I have referred. We heard a good deal this morning about the implications of VAT on school books. If Deputy Haughey and the Fianna Fáil Government were so concerned about VAT on school books why did they not take it off in the last four years? Why come along now and throw their hands in the air in horror at this increase? The increase is distasteful and unwelcome but Deputy Haughey had ample opportunity for removing that VAT when he had a majority of 20 Deputies in the House and was in a strong position to do so. He was the Napoleon of Irish politics. I am disappointed that the Minister, Deputy Bruton, did not show some ingenuity in going after both forms of taxation and that he had to rely on the old reliable standby of indirect taxation. I hope the 50 per cent increase in VAT is an emergency measure designed to correct the present economic decline and that it will be abolished when the economy is again in good shape. I am also disappointed that the Minister did not use his powers to go after tax evaders and the hidden wealth in our society.

The £5 million taxation on the banks is welcome but this figure could be multiplied ten times over. Any one of the major banking chains could have given £5 million and not have missed it from their profits. I see no reason why the banks should not contribute to job creation by channelling some of their vast profits into job creation programmes. The leaders of our main political parties have close liaison with the banks; they are not going to bite the hand that feeds them. Nevertheless, the £5 million is a welcome innovation. It is the thin end of the wedge and I intend to push that wedge as far as possible because, in my talks with the three party leaders, I mentioned this as being a positive way forward. It shows some indication of the will of the Government to go after these profits.

We have a lot of wealthy bloodstock breeders in the area I come from, the Golden Vale. I do not know how much it takes to keep a race horse but I am sure it costs as much as to keep a family. Racing is called the sport of kings. I do not know much about it as I have never been to a race meeting in my life.

Mr. Gene Fitzgerald

The racing industry keeps 9,000 people at work.

Mr. Kemmy

It does, but the people who own race horses should contribute on the same lines as PAYE workers who cannot afford to keep a pigeon, a cat or a dog. The PAYE workers are paying through the nose and carrying the whole economy on their backs. There is no reason why a person paying PAYE should be crippled by taxation while a bloodstock breeder can get off scot-free.

I regret the reintroduction of car tax and the increase in the price of petrol. These measures will cause hardship and distress to many people. The tax evasions I have mentioned must be tackled by the Government. Wealthy farmers, professional and business people have all kinds of loopholes and devices for avoiding taxation.

The increases in the costs of beer and spirits will also prove unpopular and will bring the price of alcohol here out of line with the prices in many other countries. We heard a great deal from Deputy Lenihan about industrial relations under the last Government. He did not refer to the Post Office strike in 1979, which dragged on for a very long time. It had disastrous effects on the economy and also on the workers in the Post Office. He had very selective views on industrial relations. I urge the Government to continue consultations with the trade union movement. Unless they have their backing and support there is no future for any Government. It is important to preserve whatever relationship exists, to build on it and to consult at all levels with the Irish Congress of Trade Unions.

Unemployment figures under the last Government were the highest in the history of the State. No Fianna Fáil speaker mentioned that. I am somewhat disappointed that the youth employment scheme is not being brought in immediately. I would like to see it starting tomorrow to offset whatever losses will occur in the public sector. I agree with one thing Deputy Lenihan said. I do not regard the teeming population of intelligent, articulate young people coming on to the labour market from schools and colleges as being a problem. It is a challenge because they represent great potential in our society, if their industry and energy can be channelled into something positive. It is good that we have so many young, idealistic people. We must have work for them because, unless we industrialise with foreign and native industry, there is no future for us. People have been leaving the land since 1840. There is no way they will go back to the land. We must have industry on two levels, to take people who are leaving the land now and also to cater for a growing population. We must have full employment. Otherwise the country will sink. We have also seen that, while Mrs. Margaret Thatcher did manage to control the British economy and found some economic solutions to her problems, in terms of human solutions her policies were disastrous. Her chickens are now coming home to roost. There is now civil disorder, violence and vandalism in British society which up to then had been regarded as one of the most undisturbed and placid societies in the world. There will be a similar risk of violence in our society if thousands of young people are thrown on to the dole queue, as Mrs. Thatcher did in the United Kingdom. We should learn from her mistake.

I want to give the House my impressions, as a new Deputy, on certain procedures which I have seen in operation. The voting procedure here is outmoded, cumbersome and inefficient. It does not make sense and is a throwback to some other time. It could be streamlined and improved.

Acting Chairman (Mr. Griffin)

That is a matter for the Committee on Procedure and Privileges. It is not a matter for this debate. I would ask the Deputy to confine himself to the debate.

Mr. Kemmy

The fact that there were so many divisions brought that to my mind. I am glad your friend in front of you is prompting you in this area but I will leave the subject now.

Acting Chairman

Excuse me, Deputy. We all have a job to do here. It is this man's job to inform me on procedure. This is my first time taking the Chair and I resent the Deputy's references to prompting. I do the job which I am asked to do. I have been quite liberal with the Deputy. Since the Deputy stood up to speak he has dealt with matters which are completely irrelevant as far as the present debate is concerned. I have not interfered. I would ask the Deputy to keep to the resolution which is before the House.

Mr. Kemmy

I shall make no more references to that. Cliches have a place in Irish politics and we heard lots of cliches here last night about penal and draconian measures. We need a new set of cliches in terms of budgetary matters. I watched the performance of the front bench members of Fianna Fáil last night during the divisions. It appeared to me some sort of Greek chorus of moaning and groaning, a ritualistic reaction to the budget debate. It was a pity that the Opposition members had to respond to budget proposals without having time to peruse them. An adjournment at a time like that would be a good thing, to enable the members of the Opposition to have an opportunity of studying the document and so speaking in a more precise way on the resumption of business. I had great sympathy with Deputy Gene Fitzgerald when he attempted to speak last night without having had an opportunity of perusing the documents before the House. He was endeavouring to anticipate what would emerge in the budget proposals. His speech was vacuous and long-winded and served no useful purpose. There is a case for a reform of Dáil procedures in that regard, to have an hour's adjournment to give all Deputies a chance of studying the budget proposals more precisely.

In this Greek chorus Deputy Gene Fitzgerald was cast in a mock heroic role for which he was totally unsuited. He would have been more suited to a melodramatic, murder in the Red Barn type of play, bordering on the farcical.

Mr. Power

It would seem that the Red Barn would suit the Deputy speaking a lot better.

Mr. Kemmy

It had no place in this House. The court jester's role was played by Deputy Flor Crowley, who came to the House for that purpose. It was not a useful debate on an important national item like the budget. Certainly nobody in the public gallery could have been impressed by that performance. We owe it to our people to have a more positive and meaningful Opposition to speak about details which are real, not imaginary, and not to indulge in long-winded waffle, as occurred last night. A lot of time was wasted in this ritualistic, Pavlovian response. There was no real debate last night, it was more of a conditioned response from the people on the Fianna Fáil side of the House. If there are to be real budget debates in the future, the Estimates should be taken first. Some sort of debate would develop from that. I hope the Minister is listening to this because at the moment the cart is being put before the horse in terms of voting first and having the debate afterwards.

Minister for Industry, Commerce and Tourism (Mr. Kelly)

I do not want to make a fuss, but the Acting Chairman has just come in to replace another temporary Chairman. The latter told me that I could give way to an Independent Member because he was here longer than I was. However, I think I was next on the list, with respect to the Deputies opposite. No member of the Fine Gael Party has spoken here yet this morning and it is now 25 minutes to two.

Mr. Sherlock

I agree. The Minister did concede to Deputy Kemmy at that time. I made the point that I have been sitting here since 10.30 a.m. I would ask that the Minister be given a chance to speak now. I make the point, also, that my speech will be very short, ten to 15 minutes long.

Mr. Kelly

Thank you, Deputy.

Mr. Flynn

There is a practice in the House that rules do come into operation and that, if a Minister or any speaker gives way, he gives way as well in his place of order. If any Minister or Deputy on the Government benches decides to give way to an Independent Member, I presume he also loses his place in the queue and the next speaker should be an Opposition Deputy. I am claiming proper order here.

Mr. Kelly

I would point out that if Deputy Flynn wishes to speak, he will be the third Fianna Fáil speaker this morning. My party have not yet put up a single speaker.

Mr. Flynn

I appreciate the Minister's point of view. He should have taken his place and spoken before Deputy Kemmy. He chose, by his own right, for whatever reason he thought fit, to allow Deputy Kemmy to take his place.

Mr. Kelly

No, Sir.

Mr. Flynn

If that is the case, the next turn goes to the Opposition benches. I am claiming my place there.

Acting Chairman

Before the temporary Chairman left the Chair, I asked him for instructions. He told me that Deputy Power would be next in turn after Deputy Kemmy, I call on Deputy Power, if he wishes to speak.

Mr. Kelly

I will not delay the House any longer but I hope that the disproportion which is now emerging between the parties will be observed, if there is any discretion left to the Chair, later in the debate — either today or tomorrow. The situation now is that, assuming that Deputy Flynn were to speak for, say, 25 minutes or some other length of time, by two o'clock no one from my party would yet have spoken.

Mr. Sherlock

I just want to say ——

Acting Chairman

Deputy Power does not wish to speak, so it is the turn of the Minister to speak.

Mr. Sherlock

I want to make my point now. I have been elected ——

Acting Chairman

On a point of order, yes Deputy.

Mr. Sherlock

Yes, on a point of order, Since 10.30 a.m. I have been waiting to speak. I have seen the tactics of Fianna Fáil members waiting outside and coming in. Deputy Power has just arrived on the Opposition benches and I do not accept that he should speak. As a public representative and a Deputy for a Cork constituency, I am entitled to speak here. I do not know why the procedure, which I understood was agreed, has not been proceeded with. I understand the Minister, Deputy Kelly, was entitled to speak. Because the point was made that Deputy Kemmy had been here for some time, as well, the Minister gave way to him, as I understand it, for that period of time.

Mr. Kemmy

That is so.

Mr. Sherlock

It was accepted that the Minister was resuming his position. It did not mean that he was losing his place in the queue.

Mr. Flynn

It should be pointed out that the normal practice has always been that a speaker may stay outside and come into the House when he is due to be called.

Mr. Sherlock

I watched the Fianna Fáil Members yesterday evening. Reference was made to Deputy Gene Fitzgerald. He was talking for one good hour of good time here. He spoke about nothing, but got one good hour to do it, from the Ceann Comhairle who was present at the time.

Mr. Flynn

I understand agreement has been reached between the Whips on the order of speakers. If a speaker chooses to give way to somebody else, he loses his place.

Mr. Kelly

The agreement between the Whips can only affect the parties concerned. I have frequently given way in the previous Dáil and the Dáil before that to Independents who were not regarded by the Whips when they were reaching agreement between the main parties, but I never understood that to mean that I would be not one but three speakers behind.

Mr. Moore

May I point out that agreement was reached between the Whips of the main parties and I have a list of speakers.

Acting Chairman

May I have it?

Mr. Kelly

The list agreed between Deputy Moore and the Minister of State at the Department of the Taoiseach, Deputy L'Estrange, will bind us. But if either side chooses to let in an Independent — and I have always thought Independents are insufficiently regarded in the arrangements of the House — that should not mean that the party as such have to drop a place. If a Fianna Fáil Deputy speaks now it means half the day has gone and this party have not yet put in a speaker.

Mr. Moore

We intend to adhere to the agreement drawn up between the Whips.

Mr. Kelly

Fianna Fáil would be getting a speaker out of turn. The speaker before Deputy Kemmy was Deputy Lenihan.

Mr. Power

On a point of clarification, my name was mentioned and it was said I had come into the House recently. I came into the chamber to show deference to the Independent speaker and to allow Deputy Lenihan to leave. I did not indicate that I wished to speak but I was under the impression a Fianna Fáil speaker would be next. We are the official Opposition and when a Deputy who supports the Government speaks, I understood an Opposition Deputy would speak next.

Mr. Sherlock

Is the Deputy saying I do not have the right to speak? I want to know now, because I am going to speak. I have been sitting here since 10.30 this morning. Yesterday evening the Opposition spoke for a long time, but I will be satisfied if somebody can tell me when and after whom I can speak.

Acting Chairman

Deputy Sherlock will get his turn to speak.

Mr. Flynn

It should be pointed out to Deputy Sherlock that yesterday we were discussing the Financial Resolutions and anybody could participate. What we are talking about now is a budget debate, the rota for which has been agreed between the Whips. I do not know if Independent speakers were included——

Mr. Kelly

They were not.

Mr. Flynn

—— but if the Minister chooses to give way to an Independent, surely he is not claiming his place now?

Acting Chairman

I am calling on Deputy Power to speak, if he wishes, if not, I am calling the Minister.

Mr. Power

How can the Chair decide if I came into this House for the purpose of making a speech? My impression is that, if a Fianna Fáil speaker is to contribute, it is not for the Chair to decide who he should be, but the Fianna Fáil Party should decide.

Mr. Sherlock

That seems to indicate that——

Acting Chairman

The previous occupant of the Chair gave me Deputy Power as the next speaker. I am calling on him to speak now if he wishes. If not, I will call the Minister.

Mr. Sherlock

Does this mean that for the Dáil session we will have one Government speaker and one Opposition speaker and the Independents will not——

Acting Chairman

Deputy Sherlock will get his turn to speak.

Mr. Moore

With respect, may I point out that the Chair would be wrong to suggest that. I do not want to deprive Deputy Sherlock of his right to speak, but I want to point out that we are adhering to the agreement and the Government should make time available for the Independents.

Acting Chairman

I am calling Deputy Power. If he does not wish to speak, I am calling the Minister.

Mr. Flynn

On a point of order, is it normal practice for the Chair to be given a list of the names of the people who will represent a party in a debate?

Acting Chairman

To my knowledge, yes.

Mr. Flynn

I do not think so. I understand time has been made available to the Opposition to provide speakers and we will provide the speakers we wish.

Mr. Moore

I propose to send for the Ceann Comhairle to adjudicate on the matter.

Mr. Kelly

I would be ashamed to be part of such a childish row. If it will make the gentleman happy, but on the understanding that the Chair will exercise a discretion in our favour if any leeway arises, I will give way to whichever Fianna Fáil Deputy wishes to speak.

Mr. Sherlock

I want to know if I will be given an opportunity to speak. Could I be given an idea when that will be? In my view this is a right to which I am entitled, irrespective of any agreement made between the Government and Opposition parties. I can see how things are going and I can see that I will be pushed out again.

Acting Chairman

I cannot say exactly when Deputy Sherlock will be called on but in the course of the evening he will be permitted to speak.

Mr. Sherlock

If this agreement between the Whips continues, the Acting Chairman will not be in the Chair and I want to know now when——

Acting Chairman

I am not in a position to tell you that as of now.

Mr. Kelly

As a general observation, I do not thing it would be any harm if the five Independent Deputies were to appoint an informal liaison officer to meet the party Whips because the kind of agreement Deputy Moore is talking about binds Fianna Fáil, Fine Gael and the Labour Parties, but how can it bind Independents?

Mr. Sherlock

I fully agree.

Mr. Marvyn Taylor

It was part of the agreement between the Whips that Independent speakers could intersperse from time to time.

Mr. Kelly

But not necessarily at our expense.

Acting Chairman

The relevant ruling is as follows—Independent Members get their turn in relation to their numbers as against parties.

Mr. Moore

We are not trying to deprive Independents of their right to speak.

Acting Chairman

I call on Deputy Flynn if he wishes to speak.

Mr. Sherlock

Do I take it that early this afternoon I will be given a chance to speak?

Acting Chairman

I cannot guarantee it, but I presume you will be permitted to speak later this afternoon.

Mr. Moore

We do not oppose the Deputy.

Mr. Flynn

Far be it from me to interfere with the rights of any individual to address this House at any time, but it is important to point out that there is a procedure which has always been adhered to by the Fianna Fáil Party and we will continue to do so. When we get a notice from the Whips that an Opposition speaker may make his contribution at a certain time, say 2.30 p.m., and if he arrives at 2.25 p.m. he should then be given the opportunity to speak. I am stating my position.

This is a political budget. In no way can it be called an economic budget. There are many inherent weaknesses in it but the most devastating is the fact that it will lead to a much higher rate of inflation. The normal result of higher inflation has always been an increase in unemployment. It appears that this Government have shown very little regard for the level of unemployment. They spent the last 18 months to two years daily decrying the level of unemployment and now that they have what could be regarded as a reasonable opportunity to do something about this they chose to disregard it.

They start out on a policy which can only lead to further escalation of unemployment figures and to total disenchantment of the younger people, whom they chose to champion during their election campaign. During that campaign they made great play of the fact that half our population was under 25 years and they guaranteed them a place in the sun. They guaranteed the people leaving school an opportunity to get jobs and to do something useful with their lives. At their first oportunity to do something they embark on a policy that can only lead to increased unemployment. That is the message coming from the country today.

There is no doubt but that this can lead to further undesirable results and can give rise to great frustration among the younger people in the community. This will inevitably lead to violence in many forms, as can be seen from the experience in other countries where similar policies have been adopted. The blame for such a situation will be placed squarely at the feet of the Coalition Government because of their monetarist policies. The UK Government tried to cure inflation overnight by total control of the money supply and this has resulted in enormous unemployment. When we examine that situation we can readily understand the stresses and strains that similar policies will put on job opportunities for our people.

In the past those who could not obtain suitable work here could seek employment in Britain. This opportunity has now been cut off and we must maintain our own population at home. The policies now being followed by the Government can lead only to a severe increase in the unemployment figures. Such is the view of commentators on the effects of this budget. I foresee nothing but trouble.

Our attitude during the past 18 months or two years was to pump the economy during the recessionary period so as to provide the necessary means for the take-off when the upturn comes in the world economy. It was our opinion that it would be necessary to have a certain amount of pullback in the future but not now. The result of Fianna Fáil policy was to maintain levels of employment and growth in order best to weather the economic storms and benefit from the upturn at the end of the recession, hopefully next year.

This mini-budget will depress business confidence and adversely affect job creation. No further job oportunities will be available in the public service and the Government will be relying on the private sector to provide the necessary employment. How can they expect such a policy to be a success when they have made such vicious assaults on the source of economic growth in the private sector by savage increases affecting all sectors of the community? They have dealt a blow to the private sector in spite of the fact that it has experienced very tough conditions recently.

Someone said that this budget would lead us to be a sober nation of pedestrians mostly on the dole. I support sobriety, but if we are all drawing the dole nobody will be able to afford anything else. This budget represents a cruel deception by Fine Gael. They have savagely attacked the basic essentials. Probably the budget's worst feature is the increase in VAT, which will result in a slowdown in business, especially in the private sector, and will automatically effect a reduction in living standards. This will affect the whole community, not just those who are unfortunate enough to be unemployed. It is not a matter of tightening one's belt for a month or two in the hope of further economic growth enabling previous standards to be retrieved. This is just the start of the demands which will be made on the community at large.

These cuts in living standards will result in disappointments and frustrations. There has always been the hope, especially among the people of the west, that young people would be able to avail of worthwhile job opportunities in the public service. It is fair to say that the public service get their best brains from the west, but the Government are now cutting off these job opportunities. Large numbers of young people from the west took up employment in the civil service, in the Garda and teaching and related professions. From now on there will be no further recruitment. This is a further indication of what the Coalition Government feel about people from the west. They showed it in no uncertain fashion in the distribution of ministerial portfolios and this is obviously a continuation in that people from the west will suffer most. However, they are resilient and have the necessary stamina to deal with this matter. In due course they will give their answer to the Fine Gael party. The Labour Party do not have any Dáil representation in my area and are not expected to have such representation in the foreseeable future.

Mr. Kelly

What about Deputy Higgins?

Mr. Flynn

I understand that Deputy Higgins comes from County Galway. I happen to come from County Mayo.

Mr. Kelly

I thought Galway was in the west.

Mr. Flynn

It is an integral part of the west. It is also a fair indication of how much the Coalition Government think of the quality of Deputy Higgins when they could not even find him a place here despite the fact that he is Chairman of the Labour group. I presume the Labour Party have their own difficulties but I will not dwell on them here.

(Interruptions.)

Mr. Flynn

There is no doubt that Deputy Higgins' attitude and policies are divorced from the current policies of the Coalition Government and so he could not be entertained.

Mr. Kelly

The Deputy was so desperate for a job that he pulled down his former Taoiseach——

(Interruptions.)

Mr. Flynn

Only one person, the Minister opposite, is interrupting and it is unbecoming for a man of his stature.

Acting Chairman

I suggest that we return to the budget debate.

Mr. Flynn

The professor is a very good debater in his own right, a man of some talent and it is a pity to see him reduced to barracking one whom I am sure he regards as being less than himself. It is unbecoming of the Minister.

Acting Chairman

Deputy Flynn on the budget, please.

(Interruptions.)

Mr. Flynn

I see that the point hurts.

Mr. Kelly

It is a poor thing to get a job through treachery.

Mr. Flynn

The effect of increasing excise duty has not been adequately spelled out as far as the motor industry is concerned. The greatest sufferers will be the car assembly industry and the motor industry generally. Other related industries will also be badly affected. They are in tough times at the moment but the indications are that they will immediately go on short time. I do not see why the Labour Party, who have continually stressed the need to maintain and create jobs, can decide to put these people on short time and inevitably to put them out of work. This policy will remove many skilled people from the Irish scene and it removes opportunities for apprentices to gain experience in this field. The Government's policy amounts to a vote of no confidence in the motor industry. There has been a savage attack on the motorist and on the motor industry. The rule of thumb used in that trade is that this kind of increase in excise can be run off at about 8 per cent on the list price which means that an ordinary car costing about £5,000 will increase by about £400. That is not the end of it, because when one adds on the 5 per cent VAT increase in September, the increase will be in the region of £650 to £700 which is a total increase of about 13.2 per cent. A car is not now regarded as a luxury. This savage increase will have a detrimental effect on the motor industry. Coupled with the £2.20 per gallon of petrol which the poor unfortunate motorists will have to pay, plus the road tax, it is a cruel deliberate deception by Fine Gael to draw fire on the motor industry.

For the Minister to suggest in his budget that this industry could bear this kind of burden suggests that he is not fully aware of how people regard motor cars. The vast majority of people use their cars daily to get to and from work so these increases are a continuing burden. A car is not a discretionary expenditure any more, it is mandatory. To seek out this area for harsh treatment shows a lack of caring on the part of the Coalition. The half smirk with which the Minister announced this savage increase indicates a coldness towards the ordinary people. Maybe the Government are so divorced from the wishes and the needs of the people that they saw it as a fitting way to get money. When the Minister was asked a question yesterday evening in relation to the savage attack on petrol, he said that it was a good way to get money. Was that the way in which it was decided? Did they just pick out a few things irrespective of who would be hurt? Their criteria was just the quickest way to get money, which suggests a cold, calculating attitude towards a section of the community. It is not a just way in which to provide the money for the Government. This is a rushed budget and we know why. They are trying to discredit as far as possible the outgoing administration because if they waited for a while there would be no credibility to that argument and there would be revolution in the streets against this savage demand.

I congratulate the Coalition on a good campaign, on the effectiveness of that public relations exercise in trying to get the people to believe that there was a terrible situation to be dealt with. Figures were picked out of the hat, no figures that could be substantiated by statistics but figures that were suggested would be the end result at the end of the year or next year some time.

Mr. Kelly

Every independent commentator took the same view.

Mr. Flynn

This was used to sow seeds in the minds of the general public——

Mr. Kelly

Name one independent commentator who disagrees with me.

Mr. Flynn

——that there was something wrong. The truth is that things were not that bad at all so it was necessary to follow through on that policy to get this cash to pay for some of the wild schemes which they hope to provide next year, schemes which will never develop. To get a few "quid" in now their policy has been live horse and get grass later on, so that they could provide a few goodies next year if at all possible and so that they could then run to the country and say: Well, we are giving you a good budget now is the time to repay us, forget what we did last July.

The people of this country are no longer so gullible. They recognise fully that there is no need for these drastic measures at this point in time. I would suggest to the Minister for Industry, Commerce and Tourism sitting opposite that he take a walk home this evening — although I understand that is what he likes to do rather than use the State car — and meet some of his ordinary constituents, taxpayers, and ask them whether they think it was necessary to impose such taxes on the motor car and that related industry at this time, when I bet he will be given the right answer. Of course it is hoped that by doing it now quickly, going into the recess period, it will be forgotten by the end of the year. But they can rest assured that it is the intention of the Fianna Fáil Party to ensure that it is not forgotten. We will be taking every course open to us to remind the general public that this is a far cry from what they could have expected had they continued with Fianna Fáil in government. However, that is the way it goes.

One might have expected that, if they were going to savage the motor industry to the degree they have, at the same time they would have provided an adequate public transport system to facilitate those people who can no longer afford to take out their car, who can no longer afford the tax on it. Formerly when there was tax on cars people had to find this finance every quarter or half year. They are being asked to find that finance again. There-fore quite a large number of them will not be able to use their motor vehicles to the extent they would like. Quite a number may decide not to use them at all. In those circumstances it would be the responsibility of the Government to provide an efficient transport system which, as far as city dwellers are concerned, means a reasonable bus service. But is it not strange that nothing has been done by the Coalition Government to resolve the current drastic situation so far as the buses are concerned throughout the country? The first day the Dáil resumed a Private Notice Question was put down to the Minister for Transport as to what he and his colleague, the Minister for Labour, were doing about it. The Minister for Transport did not even appear to know that the Minister for Labour was sitting next to him. Of course they are not in the same party and it is not as easy to be in communication with somebody who is of a different political persuasion. I understand that it is difficult. It might even be difficult to know the location of that person's office, especially if they are not on talking terms.

One would expect that when the Government meet, the two parties sit around the same table; at least we hope they are all there, and that it might have been possible to arrange some kind of meeting between the Ministers for Transport and Labour and that perhaps jointly or separately they would have taken some initiative.

They are being called upon by all concerned, the unions, the workers, everybody to please do something for them: there is so little between us, could we have ministerial intervention? How can one have ministerial intervention when one Minister is not on the same political wave length as the other? One of them should have taken the initiative. Not one thing has been done. Neither do we hear any public statements about what they are doing. We are told only: do not say anything because matters are at a delicate stage of negotiation. We know that old trick — what negotiations? Are the people of the country not entitled to know what efforts are being made today, what efforts were made yesterday, to resolve the bus strike? Have people become so flattened in their attitude towards this Government that they accept the leth-argy of these two Ministers? That cannot be said of the previous Administration who made every effort, who grasped every opportunity and who dealt with any crisis flashpoint immediately. That is why there were no stoppages.

Mr. Kelly

What about the Post Office strike? Did Deputy Pádraig Faulkner talk to the Post Office workers?

Mr. Flynn

The Minister should be quiet there and not get upset again. He should keep his blood pressure down.

Mr. Kelly

The Deputy knows quite well that Deputy Pádraig Faulkner never spoke to the workers.

Mr. Flynn

That was always the attitude when I was attached to the Department of Transport and that of the former Minister for Transport ——

Mr. Kelly

The Deputy was the fifth wheel on the coach in the Department of Transport.

Mr. Flynn

——that these things were laid down in advance. If a flashpoint arose it was looked at, dealt with, and if there was a necessity to negotiate with somebody, whether it was unions, workers or others, that was done. That is the way to defuse a situation.

Mr. Kelly

It is a pity the Deputy did not tell Deputy Pádraig Faulkner that.

Mr. Flynn

It is obvious the Government cannot maintain control. They have thrown in the towel as far as the provision of a public transport service is concerned. That would be bad enough in normal circumstances but when they have thrown in the towel after the imposition of a savage set of increases like those imposed on the motorist, that is bordering on total irresponsibility on their part. They should take the option open to them, throw in the towel altogether, go back to the country and see what answer they will get.

This is a typical example of bad administration on behalf of the Coalition Government — the way in which they are now dealing with and continuing to look at our transport system. Then they expect the innocent people to pay these savage increases in petrol, in tax on their cars, pay 13.2 per cent extra on changing their cars, with motor industry workers being put out of employment, retailers being put out of business and skilled craftsmen also out of jobs. Surely there were a few pounds to be got by imposing a fairly decent tax on the bicycle considering that there are now more bicycles being used in this city than at any time in the past ten years. I understand from importers and retailers of bicycles that the industry is booming, and certainly it will continue to do so while the Coalition Government remain in office. However, no doubt they will find tandems for their final rally. There is no doubt in my mind that inflation is self perpetuating. What was done yesterday will add approximately 6 per cent to the inflation rate.

What will the Government say to union negotiators when the truth of that statement is borne out? Union negotiators will see it as a total erosion of the purchasing power of their members' wages. The natural and normal thing for any union worth its salt or regarding themselves as a decent negotiating body will be to seek redress. Therefore they will seek an extra 6 per cent to compensate their members for their loss of living standards and purchasing power imposed in one fell swoop here yesterday. But of course they have been given due notice by the Government that their claims will not be entertained. Therefore in effect the Government are saying that they are throwing out the negotiating process, that it is not going to be on this year. Is that not a formula for unrest? Is that not a formula for distrust between management, unions and Government? Is that not the way in which to create friction and division between Government and people and people and Government and the representatives of the work force? That is a sure way of bringing about a situation of uncontrolled unrest within the trade union movement? Who would blame them for seeking an adjustment on behalf of their members in an effort to maintain their present standard of living?

Neither is it just a question of the unions. What about the manufacturers? They were attacked on all fronts yesterday. They see rising costs now because of the VAT situation, the fuel situation and a whole range of additional costs they must bear. It has been recognised that there are both large and small companies in this country keeping themselves barely on the margin hoping to weather the economic storm and the recessionary period. What does this measure do? It puts them below the wave. Now they will see their small profits being further depressed. They must seek to compensate themselves in order to stay alive. They must increase their prices to compensate for this savage attack on them. They must increase them to satisfy the demands which will be made on them on behalf of the union members working in their factories. The unions will get their way because that will be conceded by the Government. The manufacturers will have to increase their price levels and their unit costs of production to satisfy the union demands.

We will see the spiral of increases again as far as manufacturers are concerned. Overall production costs will go up. That will destroy our competitiveness as far as our export markets are concerned. This subsequently affects the balance of payments situation so instead of the Government curing the financial situation they will worsen the balance of payments situation even further. In the long run, increased unit costs will lead to further unemployment, they will harm our competitiveness on the export markets and will result in further closures of manufacturing industries, which have been just on the margin for the last year or two.

I am concerned about the small business concerns as well as the large manufacturing industries. Some of the small businesses are not concerned with export business. After the Fianna Fáil budget earlier this year they were able to plan their programme for 12 months ahead. They were able to plan their production levels and their employment levels. They knew where they were going for the 12 months and it was possible for them to review their position and make the necessary financial arrangements.

All that has changed now with the Fine Gael deflationary budget. Now they have to go back again to their drawing boards. I spoke to some small business concerns engaged in service industries and manufacturing industries and they told me that they have to go back now and renegotiate with their friendly bank managers to see if they can get the necessary finance to tide them over the further interference with their businesses. Will their bank managers be as friendly as they used to be? How can they be when this Coalition Government have decided to single them out as well for a little treatment? What has been dreamt up for them is the start of a pattern. It was necessary to ask the banks to put their hands in their pockets and support this ailing Government because it was part of the Labour policy enunciated during the election campaign that something would have to be done to get their hands on the savings of the ordinary people which were lodged in the banking institutions. As a sop to the Labour Party they decided they would start on this. They will get a few million pounds this year but there is no problem, once the pattern is set, in raising it from £5 million to £50 million. The banking institutions are looking very cautiously today at the package introduced yesterday because they see in it a change of attitude from traditional Government dealings with them. They see this as the first effort in support of the smoked salmon socialists who are now part of the Coalition Government, to create a situation where in the end the financial institutions will become——

Acting Chairman

I should like to remind the Deputy that he has five minutes to conclude.

Mr. Flynn

Will I be resuming after Question Time?

Acting Chairman

No.

Mr. Flynn

I take it you are not giving me the time which elapsed while you were discussing the matter with Deputy Sherlock?

Acting Chairman

The agreed time for the Deputy is 2.30 p.m. and he will do that.

Mr. Flynn

I must refer to something which affects people in the west to a great degree and for which the Coalition Government showed no regard at all yesterday. I refer to the tourist industry. The only result of the savage attack by both VAT and motor increases in the budget is that there will have to be massive increases in hotel prices. This will make the tourist industry very noncompetitive. The budget has done everything possible to hit any area which was bringing in money. The tourist industry has always been of great importance to the people in the west. Tourists need a car to get there. The Government are making it impossible for the tourist industry to survive. They certainly deserve the result they got in the west. This will be renewed the first time the Government have the courage to go back and ask for a mandate.

The situation in relation to the budget is like the treatment given to a patient in hospital. The Government are killing the patient by an over-surgical desire. This is not the way to treat the patient. The way to treat the patient is to allow him to get a little stronger before he is given further surgery. It is obvious to me there was certainly need to create the new post of Minister for Poverty. I presume the terms of reference of that particular office will be to combat the Minister for Hardship in what he has been doing for the last two days and what he will do in the future.

The Government have not yet stated if they will continue their commitment to the approval of the capital requirements outlined by the previous Government. Is it true that every Department have been ringing around and giving the instruction not to sign any contract, that it is going on the long finger. When the general public become aware of that they will give their answer to the Government. We hope, perhaps sometime next year, that the benefits of the policy enunciated during the election compaign by the Labour Party and Fine Gael will come to pass but the people are sceptical that that will ever happen.

The Coalition parties by seducing the females of the country to sell themselves for £9.60 per week and then not deliver on the goods is expecting the women of this country to take too much. Who will benefit has not yet been spelled out but the list of those who will not benefit is so long that it appears to me that just a few females attached to some of the Members of the opposite side may be the lucky ones. Certainly, I suppose they will support their own.

We are disappointed that the promises regarding taxation are not being honoured. Even the simple promise of increased children's allowances that was bandied about at every hall door on the basis that it was not something in the future but something that would be done as soon as they got the opportunity — which meant getting into the corridors of power — has not been fulfilled. They are there now and their first act is to bring in a package that can be regarded only as the first of a number of savage blows on the people. If they have not killed the patient they are about to do so before next April but hopefully the people will get an opportunity before then to show what they think of this first effort in deflationary monetary policy.

Mr. Kelly

I move the adjournment of the debate.

Debate adjourned.