Finance (No. 2) Bill, 1981: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. Gene Fitzgerald

Yesterday afternoon I pointed out at length why the budget in July was disastrous and said that in the three months since then all Members of this House have had the opportunity of feeling the impact and of seeing the turndown in activities in every city, town and village. They have seen the hardships created for the less privileged, the old age and widowed pensioners. The pittance they got was of so little help to them that their plight has been worsened considerably this winter. I explained the position about the discrepancy between the minimum 22 per cent inflation now likely to be the CPI figure. The commissioner's task is impossible because of the fuelling of inflation by the Government. That commission originally arrived at a figure of 9.5 per cent which by some means or other, which I am still not clear about, was brought down by deliberate interference by a Government who did not like the 9.5 per cent to 6.5 per cent leaving a difference between the minimum CPI figure of 22 per cent and that figure of 6.5 per cent of 15.5 per cent. This created a very difficult situation in regard to the pay talks which are reported to have broken down on Tuesday.

The silence and inactivity of the Government and the Ministers, many of whom were so vocal in Opposition, is surprising. Where do those talks go from here? All of us in this House have said how important centralised bargaining and national wage agreements have been. We have had them for 11 years now whether by way of the national agreement as it was or by way of the national understanding concept introduced by Fianna Fáil. All of us are wondering what is the next move. The Taoiseach refused to be drawn on it in this House earlier this week. But he must face this responsibility.

I fear that this budget has done and is doing tremendous harm to the national wage agreement talks. Let me repeat again that the worker, the farmer and the less privileged in our society are affected by this budget. I mentioned the widow who got 85p and the orphan who got 5p per week from a Government that pays lip service to the elimination of poverty. Already in this period and during their last period in government they created so much extra poverty in our community. Then the Minister for Finance, in banner headlines, provides £100,000 to combat poverty. These are the little pittances paid to social welfare recipients.

We are opposing this Bill because it puts an intolerable burden of taxation on our community and because it will cause a down-turn in industrial activity and thus a loss of employment. This Government have so little commitment to job creation and job protection that one of our State boards was free to issue new instructions to some of our other State boards that when receivers are being appointed in any companies with the involvement of State agencies — ICC, Fóir Teoranta and others — the ESB would first have to be paid. Yet the Tánaiste, the Minister in that Department, is the leader of the once proud Labour Party. This action shows no commitment because all of us know that this has been a problem when such things happen. I do not wish to see receivership but inevitably there must be some. I suggest to the Minister responsible that this instruction be withdrawn. If that is the attitude of our State boards, they are obviously more concerned about a hard line Government concerned with monetorist and tough, hardline economic policies than they are about people in a time of growing population with so many under the age of 25. We cannot talk about comparing like with like and compare ourselves with our European partners because ours is the only country in which the population is growing.

We are opposing the Bill for all those reasons. Each and every Member of this House will have to examine what has been happening since these measures were imposed. Prices are rising. The 50 per cent VAT increase was the most penal of all, covering every item from the luxury goods in the higher bracket to the essential commodities such as personal clothing, footwear and essential foodstuffs. One could say that almost all the other commodities covered by that whole 10 per cent band are essential in most homes and include school books for children and sweets which they are surely entitled to. So I say to those who have tried to purge their public conscience by blaming Fianna Fáil for this position to say that they are new here too and they are being used. When Deputy Kemmy faces his voters in Limerick city and county he will be the man who supported the budget and Bills in this House that led to the huge VAT increase. He will be known in Limerick city as "Mr. Rising Prices". He will have to see whether or not he can continue the courtship of the Taoiseach long enough to withstand the undoubted political harm that will be done to him. He has probably felt the wind already and this is why he is determined that he will stay, voting in the lobby on any action. But on Committee Stage he will have a better chance of going through, in detail, many of the items I mentioned last night. I look forward to that Committee Stage debate and would ask the Minister to reply to some of the questions I posed last night.

Mr. R. Ryan

I am appalled that the former Minister for Finance who left this country in a state of bankruptcy should have the audacity to make a speech such as that made by Deputy Gene Fitzgerald this morning and last night. It was a speech which, like his policies, was full of inconsistencies. He said, in one of his more emphatic phrases, that the country could not afford the cost of the Government policies. Most of the rest of his speech was devoted to demanding additional public expenditure. It is that kind of inconsistency in Fianna Fáil policies which threw the Government debts from £1,000 million to over £9,000 million in ten years. It is only six years since I was chastised for allowing foreign borrowing to be at £362 million; now it is over £3,000 million.

When Fianna Fáil left office the State owed over £9,000 million, obliging taxpayers to pay 11p out of every £ of tax to foreign bankers to service existing debt. From that 11p paid to foreign bankers not a penny tax refund is received by the Exchequer. The greatest calamity of all is that nearly 50 per cent of this irresponsible borrowing between 1978 and 1981 was in current expenditure, fuelling the flames of inflation which are now doing such terrible havoc to our economy and to the social standards of all our people, particularly the poorest of the poor.

The first and most effective solemn warning about the disastrous direction of our economy was given by Deputy Charles Haughey as Taoiseach when in January 1980 in a riveting television broadcast he pointed out the enormous intolerable Government debt and warned that we could not continue in that direction. He quickly swallowed his own words. He forced everybody in the country to ignore his televised warning. He intervened in national wage negotiations to order pay increases which were beyond the capacity of the country to pay, irrespective of the damage being done or the jobs lost as a consequence of his irresponsibility. His actions were completely contrary to what he said in his television broadcast. In several other ways the Government, in making overgenerous settlements with teachers and other sections who were pressing for relatively excessive pay rises, spurned the advice of independent arbitrators by exceeding what they had awarded. That was an irresponsible Government who had the one objective of courting short-term popularity with the intention of winning an election.

That kind of thing has to stop. If it does not stop the serious crisis which is now upon us will be a crisis of a more devastating dimension and the pain and suffering will be much greater than any difficulties experienced by anybody at the present time. There are those who say that it is unwise for a politician to speak as I am speaking. I prefer wisdom to popularity. If one does not learn anything else in this House it is to be hoped that with experience people will learn some wisdom and will regard it as their patriotic duty to draw attention on the basis of experience to the dangerous direction of the economy. It is because of a failure by many people — I include all parties in this censure — to give sufficient attention to this duty that we have built up in the community far greater expectations than we can possibly service. Although the resources of other countries are greater than ours, the expectations of other people are not as great; we have the least resources, the greatest expectations and the greatest number of dependants per income earner. Not only did the previous Government leave the country enormous debts but they left commitments for which there was no money. For instance, there was a shortfall in the Department of Health of nearly 10 per cent in the cost of running the hospital services in 1981. The hardpressed new Government, finding that the coffers were bare were, however, forced to make adjustments to the budget to find £44 million to keep the hospitals open. There are similar serious deficits in housing and education because the budget was so badly prepared last January.

There are only two explanations for last January's budget. It was dishonest or it was incompetent. There is no other explanation for a budget where a deficit rose in a matter of six months by over £500 million from £350 million to nearly £900 million. We never had the like of it before and I pray God we never have the like of it again. At times of world difficulty a Government ought to consider using economic policies to reflate domestically to compensate for recession abroad. The tragedy at present is that we have misspent our resources in the last four-and-a-half years. As a consequence we do not now have the means to boost our economy to protect it from the effects of a world recession. The fault for that lies with Fianna Fáil, who over-borrowed and over-spent when the world economy was healthy. Fianna Fáil over-spent, we fuelled our inflation, we over-borrowed, and put our whole international financial credibility in doubt. Now, when we need to use reflationary weapons we are unable to use them because we have deprived ourselves of the means of doing so. That is a direct consequence of Fianna Fáil policies.

No amount of demonstrations, marches, strikes, protests or petitions will produce the money which so many interests are at present demanding. A responsibility lies on every person in public life to indicate that these demands cannot be met until, first of all, we reduce the considerable deficit in the Government's finances. Our standard of living is 10 per cent higher than what we are in a position to pay for. In those circumstances, if our standard of living has to be reduced by 10 per cent, so be it. It will not be the end of the world. If it is not done soon, the situation will get out of hand and, instead of a 10 per cent reduction, it will mean that a 15 per cent or even a 20 per cent cut in living standards will have to be applied in four or five years' time. That is the reality.

We cannot run away from reality any longer. If we do the dole queues will become longer, the number of young people unable to get work will get greater, the number of industries closing down will multiply, the number of bankruptcies will increase, Irish exports will fall and imports will increase as our producers of agricultural and industrial goods find they are unable to compete even in the Irish market. No amount of agitation, no amount of conflict, no expression of discontent can change those realities. We should be thankful, whatever about the political consequences to the parties involved, that we now have a Government of two parties who have the courage to face these realities, to expose them to the people and to point out that unless the disastrous trends in our economy are quickly reversed, even greater misery will be suffered by the people.

Our problem as we see it today is a serious one with over 100,000 unemployed. It will become much worse over the next decade unless we face another reality. Our population is rising by about 43,000 people per year. Within a decade we will have nearly another 500,000 mouths to feed.

The labour force is growing by about 50,000 people per year. Unless these people are to escape to emigrant ships to swell the numbers of unemployed in other countries — an unlikely development — we will have to provide employment for these additional people as well as for the 100,000 plus already unemployed. That is the extent of the problem facing us and we will not solve it if those of us who have an income live 10 per cent beyond our means because that will not provide sustainable employment. That is a reality which we should face with gladness. We should be glad to have this potential for an increased population and work force. It means a larger number of happier families living in Ireland. That potential can be realised only if policies are pursued which enable us to give employment to these young people.

We have become so accustomed to inflation that we appear to be incapable of anticipating the possibility of it falling. The truth is, inflation is a twin of democracy; at times the more virile a democracy the greater is the tendency towards inflation, but it is an evil. Unless inflation is tackled seriously it will not be possible to tackle the curse of unemployment. Inflation is the cause of much unemployment and, whether we like to admit it or not, inflation in many cases is related to what we pay ourselves in wages.

We cannot run away from the consequences of another reality. In the past five years the unit wage cost in manufacturing industry rose in Germany by 13 per cent, in the Netherlands by 30 per cent, in Belgium by 37 per cent, in Denmark by 41 per cent and in Ireland by 74 per cent. It is impossible to sell goods and services to other countries if our unit wage costs increase at a rate three or four times greater than the wage costs in the markets into which we wish to sell.

Much of the wage increases here arose because of Government over-expenditure which in turn fuels inflation. If the Government now intend, as they do quite clearly, to reduce the level of their expenditure, to reduce the pace of increase of such expenditure, they will reduce the inflation rate here. Therefore, it will lead to a reduction in unit wage costs and increase the possibility of more jobs in Ireland. It may not appear directly as a consequence of reductions in the current budget but inevitably it will be a consequence if the Government persist in their policy of reducing rather than increasing Government expenditure.

We have seen the consequences of massive increases in Government expenditure. They are to be seen in serious unemployment and in an inability on the part of the Government to reflate the economy. It is also to be seen in the second highest rate of inflation in the European Community. Unless we are brave enough to correct that trend the situation will not merely remain as bad as it is, but will get infinitely worse.

In his statement in July the Minister for Finance returned to a theme which he has advanced during the years, that there should be greater publicity in relation to Government expenditure and, related to that publicity, greater accountability. He told us it was his hope to publish the Departmental Estimates in November of this year. Today is 22 October and I hope the Minister in his reply will return to this theme and indicate how soon he expects to be in a position to publish the Estimates.

Possibly the Minister may be in some difficulty because the big spending Departments — practically every Department except the Department of Finance — would not want the public to see the demands they are making on the Department of Finance. The big spending Departments seem to think they will only be loved if they spend more. The ambition of virtually every political head of the spending Departments is to boast each year that he has successfully extracted more money from the Exchequer in order to spend it on various programmes of his Department. It is about time we began to glorify Ministers who have the courage to cut expenditure in their Departments. We hear many speeches, including the one from Deputy Gene Fitzgerald, of vilification against people in public office who succeed in reducing expenditure and in effecting cuts. That should be a worthy objective and the long-suffering taxpayer should be encouraged to praise those who effect cuts, not to eulogise those who boast about the quantity of their expenditure.

There are many programmes in Departments that were introduced decades ago that are not related to real needs today. It is high time they were identified and abolished. If we leave inefficient programmes in existence, unsuited to the requirements of the day and the demands of tomorrow, we will not be able to get Government expenditure under control. Even if the Minister for Finance has not got the individual consent of other Ministers to publish Departmental Estimates, I say to him he should publish them and be damned. Then the people would see who were their real enemies. They would see who were the Departments whose conception of success is only to spend more. When the Estimates are published they should be submitted to an all-party committee of this House for examination so that individual Deputies and each party would be involved in finding some way of reducing public expenditure. I should like to see that committee open to the media so that they could report who are the big spenders, who are the irresponsible people who want to spend more and more but who are not prepared to face up to the consequences of their demands. There might then be a little less cynicism and insincerity at budget time in relation to taxes that have to be imposed to meet the demands of the spending Departments and those who are unwilling to make cuts when they are necessary.

We have been anxiously watching the national pay negotiations. The most regrettable aspect so far is apparently an inability on the part of some organisations to face up to reality. In a situation where Government finances are in gross deficit, where 30 per cent of all tax has to be spent on paying the cost of debts already incurred, when we are 10 per cent in deficit one year after another, there is no room for reductions in the overall rate of taxation.

In that situation there is no room either for additional Government expenditure on spending schemes. That is the reality. Unless there is a sense of the realism of that, there is no point in endeavouring to produce a national wage agreement which ignores those realities. The country cannot afford a national wage agreement of the kind imposed upon it last year by the then Taoiseach, Deputy Haughey. That is out of the question. That was a knife in the back to the Irish economy to make things appear to be all right until after the general election. We cannot afford an agreement of that kind. I hope the Government will resist the temptation of a repeat performance.

A failure of national wage agreement talks would not be the worst calamity. Much worse would be an extravagant settlement which would be taken by some sections as the base line which would then be topped up until it started a new spiral right across the country, and we would have extravagance upon extravagance and, at the end of the day, everybody would be worse off and not better off.

When I was Minister for Finance I made an attempt to get agreement to what had been the practice at different times in some countries — I am not saying it was always maintained indefinitely — to the omission from the consumer price index for wage indexation purposes of increases in tax on such unnecessary commodities as drink and tobacco and, in certain circumstances, possibly petrol. I still advocate that. It is the essence of hyprocrisy to say, as some people would argue, as spokesmen for some organisations would argue with their hearts upon their sleeves, that they are in favour of increases in social welfare payments and so on and that nobody minds paying for them, and as soon as you impose taxes on such items as drink and tobacco to pay for those increases they demand total compensation in the wage structure for those taxes.

It is insincere to declare a readiness to pay tax to look after old age pensioners and then demand total compensation for a consumer price index which includes excise tax on drink and tobacco. That is insincere and there is no other way of describing it. In a crisis situation, in the grave economic circumstances in which we now find ourselves, the least that can be expected is agreement for, I would suggest, a period of three years to the exclusion of tax on drink and tobacco from the consumer price index where it is taken into account in fixing wages.

Uniquely in this Finance Bill there is a proposal for a tax on banks. It is a small amount of tax, £5 million. Just as income tax was introduced to pay for the Napoleonic Wars, I suspect that this tax, once introduced, will be increased in the future.

Mr. Kemmy

I hope so.

Mr. R. Ryan

It is the thin end of the wedge. Banks are easy game. You can develop emotional support from people against the heinous profits of the banks. If you tax the profits of banks as is now proposed, the cost of that tax will percolate down to the smallest depositor. If the tax now being initiated is increased, it is the users of the banks who will pay. Money is as fluid as water. Like water, money will find its own level. Money cannot be contained in a tank in Ireland sealed off from the money markets of the world. If we build new costs into the Irish banking system, those costs will have to be borne by Irish bank users. In the main, those are Irish men and women of comparatively small means.

I acknowledge that it is popular to suggest a tax on banks. I am not at all sure it is the right thing to do, particularly at a time when banking and money costs are at an historically high level. To add to that level by the introduction of a special bank tax at this time seems to me to be unwise. It is not generally known, but it should be known, that a substantial slice of Irish-owned banks was in danger of being taken over by foreign banks within the past decade because the profits of the Irish banks sector were not high enough.

If you have high inflation you must have high bank profits in order that the capital of the banks can be kept at a level commensurate with the banks' liabilities and obligations. If banks profits are not sufficiently high to meet that basic element of sound finance, the banks are in jeopardy. People who advocate the taxation of Irish banking profits should take care to examine the whole structure and should be profoundly cautious not to take any step which would lead to a situation in which Irish banks could be bought out by foreign banking institutions.

Under EEC regulations we are not in a position, as we used to be, to keep Irish banks in Irish hands. The only way in which we can maintain banking ownership and independence and a sense of real Irish involvement in the Irish banking world is by keeping Irish-owned banks in a healthy condition.

Mr. B. Desmond

I wonder if the Deputy read all of section 16 (8)?

The Government, wisely, I believe, restored tax on motor cars. Our roads are the worst in Europe. For this period of temporary lunacy during which the taxation on cars was alleged to have been abolished — although it was called a registration fee instead nonetheless it was significantly reduced — we had the temerity to ask the European Community for funds to improve Irish roads. I heard it argued at committees of the European Parliament that a country which professed to be so poor it could not build roads to better standards was not a country deserving of support if it did not impose taxes on motor cars.

Of course anybody can argue in relation to that and any other tax that it is hard on the people who have to pay tax. It is a disappointment for anybody to have to pay tax, of course it is but, nonetheless, if we want better roads we will have to be willing to pay for them. As I argued yesterday with the Minister for the Environment — and was glad to get his report — if we want to improve a very simple but necessary thing such as our road signs then we ought to pay the cost of so doing. Therefore I put in a special plea that some of the not insignificant revenue of, I think, £28 million which will be yielded from car tax, would be used in order to bring our road signs up to a level necessary for the internal combustion age. As the Minister for the Enrironment very properly pointed out yesterday, most of the road signs are so small and erected at such a height they were obviously intended for a man sitting on top of a cock of hay; or a high cart with wooden wheels five or six feet in diameter. They are wholly unsuited in this day and age. In an urban area it causes confusion. One has only to go to College Green and one will find that the signs are two and a half feet by nine inches and are supposed to help us and our friends from abroad to find our way out of the morass and confusion of Dublin city traffic. It is high time we tackled this problem seriously.

I wish to conclude by referring to a tax adjustment which, while not in this Bill, is being debated and is one of the issues which will have to be resolved within the next year. We all welcome the proposal to reduce the lower rates of income tax and make adjustments in the bands in keeping with the value of money today. One of the proposed changes will not make any contribution to the family budget. It is simply an adjustment of an individual's or family income which is being made by the State. I refer to the proposal to transfer from one spouse to the other who stays at home a tax benefit of £9.60 a week. I am not enamoured by this idea. I speak as a Christian Democrat who considers that individual and family responsibility is a very important concept. Family and individual rights and responsibilities should be safeguarded and not be lightly interfered with by the State. They should not be interfered with unnecessarily. The State has no responsibility to redistribute family income unless there is clear evidence that the earner of the family income is neglectful of his responsibilities.

——and issue hundreds of cheques in the post weekly in order to remedy such a situation. It is not the remedy. The mean husband will deduct £9.60 or any other sum that may be fixed in future. I know it is well intentioned but it is a misunderstanding of the situation. It will not achieve the objective intended and will generate a massive amount of unnecessary bureaucratic activity.

If the cost is greater than originally intended the implementation of the idea should be postponed at least until such time as the Government's finances are in a healthier state. There are more urgent reforms to be made than this which will cause as much vexation as it will bring relief. In many cases it is possible that the husband may not be spending £9.60 on himself for personal pleasure but if this sum is given to the other spouse by the State it may be assumed that it is pocket money and money to be used for the pleasure and beautification of the recipient and for no other purpose.

Mr. B. Desmond

That is a terribly reactionary attitude.

Mr. R. Ryan

If that be so, the average——

An Leas-Cheann Comhairle

Deputy Ryan should resist the helpful interruptions he is getting from the Minister of State.

Mr. B. Desmond

It is fascinating. It is certainly a Christian Democratic view.

Mr. R. Ryan

An income earner could insist that if £9.60 is to be reserved for the pleasure and beautification of the other spouse he should receive £9.60 for personal spending money. They could enter into National Pay Agreement negotiations. A person could say "I am now directed by the State as to the manner in which I spend my income. We cannot proceed with this idea without it having inflationary consequences.

"Red Richie" has been called reactionary. He has been called an extreme socialist. I do not mind what I am called. I still walk in the middle. The epithets are meaningless. This morning there was a proposal from the Leader of the Opposition that the House have a special debate to deal with the criticism levelled at the former Minister for Foreign Affairs and which Deputy Haughey considered to be inaccurate. I was tempted to intervene and ask if we might have a debate on what was a highly personalised, inaccurate and undeserved tribute paid to me during the past few days by the same gentleman and by Deputy Colley.

Mr. B. Desmond

They were giving the Deputy the kiss of death.

Mr. R. Ryan

It is not the duty of the State to redistribute income within a family. I am not sure as to what the practice is now in the Defence Forces but in the past there was serious opposition to the practice whereby a soldier received only a certain amount of his pay while the remainder was paid to his wife. That practice was considered to be demeaning and offensive to the income earner. The concept of the State redistributing income in a family is offensive to Irish families. It represents an upper middleclass assumption that there is such hostility between married couples that there is an obligation on the State to intervene.

I do not believe that to be the situation but even if it were the proposal by the Government would not do anything to solve the problem. However, this is not a matter for this Bill and, consequently, I thank the Chair for allowing me to mention it. It would not be undesirable to postpone that measure at this time. In the Government's significant package of PAYE tax reforms the main reforms are those that will give relief to taxpayers and their families. The adjustment I have been talking about will not give any extra money to any family. It is an unnecessary intervention by the State in the distribution of family incomes.

Dr. Woods

I am reluctant to intervene in the debate that has been taking place on the other side of the House, a debate that is both interesting and enlightening in that it indicates how uneasy the marriage is over there and in directions in which people might not have anticipated. I admire Deputy Ryan for his forthright views. He is always seen clearly to be what he is. He claims to be in the middle but from some of his remarks this morning I consider him to be a little more to the right side of the middle.

This Bill implements the July budget. I have been reading the Official Report in order to refresh my memory on what we said about that budget at the time. It was a bad budget. It was unnecessary. In addition it exaggerated problems and displayed an over-reaction in terms of the harshness of its remedies. This can be seen clearly from the way in which that budget is affecting the economy and in particular the working-class people and those generally in the lower income groups. The measures that have been taken by the Coalition are inequitable as will be realised more as time goes on. The PAYE sector are bearing increasingly the brunt of those measures. The shift to indirect taxation, a move that Deputy Ryan has abhorred, and the possible burden that this will place on the lower income groups is creating intolerable conditions already for those people. The effect of this burden has been dramatic in so far as the lower-paid workers and social welfare recipients are concerned. Many people have approached me in great distress because of their financial circumstances resulting from the impositions of the Government. The Minister for Finance tried to convince us that the impact on inflation of the Government's measures would be about 3 per cent, though he admitted that he was not taking into consideration the effect that would result from industry and commerce. He regarded that as the responsibility of another Minister. We find that the inflation rate has increased from 17 per cent to 23 per cent and that it may even reach the 25 per cent level.

It was obvious also that the steps being taken would damage the efforts being made in the area of wage moderation. Such moderation was required in our circumstances but we did not need the kind of approach that has been adopted by the Government in putting forward, under the guidance of the three wise men, a norm of 6½ per cent and suggesting that in a situation of a 22 per cent inflation rate the ordinary working person should take this kind of cut. That is not feasible. The national wage talks are in serious difficulty. Deputy Ryan referred to the importance of these talks but he expressed surprise that in present circumstances anyone should seek increases greater than the norm. I find his reasoning very hard to follow, though I can understand those who are well-paid adopting that attitude. I cannot understand it when it is applied to those living either at or below the breadline. Because of the inflation level it will be necessary that reasonable increases in incomes be granted, but these increases must be sufficient to meet at least in major part the kinds of increases faced by householders.

We felt also that these measures which were taken would increase job losses and lead to an overall increase in unemployment when our unemployment levels were already seriously high and had to be one of our major priorities. All these effects are showing very clearly now after a relatively short time, but one effect which is showing even more crystal clearly than others is the fact that, above all this, the Coalition have failed to show any concern for the social effect of their financial measures. I will come back to that in greater detail later. The increases which they introduced were derisory and insulting and have been seen as such by the old age pensioners, widows, handicapped and those who depend so clearly on us. I mix and meet with quite a number of these people and I know how they are feeling the pinch at this time. They are looking forward to a very bleak period over the coming months. The economists and financial gurus who drew up the plans for the Coalition were not concerned with the human cost of the measures they were taking with the inevitable job losses and poverty which would ensue.

In reference to the speech of the Minister for Finance yesterday when he went back on the line he took in July at budget time, his introduction was a repeat of the same kind of diatribe, trying to use the former Government for the purpose of imposing the taxes which he is now imposing in this Bill. I tell the Coalition Government to stop whingeing and crying. They are the Government now. They must go on and manage the economy. Whoever is there has to manage the economy manfully and get on with the job and stop having innumerable press conferences and releases and shocks to divert attention from the real problem. It is their job. We did the job. We did the job when we were there and I am prepared to stand up with Deputy Ryan or, anybody else in relation to health and social welfare services. This Government have made a major attempt to blacken their predecessors. A lot of what they say is about credibility, about who will believe them, about whom they can make believe the thesis which they are putting forward. The Government proposition is that the former Government had the economy in such a terrible state that only the very harsh measures which have to be introduced now could put things right and, therefore, we have all to accept these terribly harsh measures while they get on with the job of putting the economy back on its feet sometime in the future. This is their thesis. In order to sell this line of irresponsibility in relation to the previous Government they have used massive and highly sophisticated propaganda which in the short term was highly successful. However, people have memories and are not fooled quite as easily as the Government think. It is easy to be smart and to use the whizz-kids and the "with it" people in the short term to project any concept if it is done in a sufficiently sophisticated and professional way. They were very successful in the way in which they sold this package, this idea.

It is interesting to consider the time scale. I have been surprised at people who have forgotten this time scale so quickly. Before the election what were Fianna Fáil preaching to the electorate? We put forward a programme for the eighties. We told the people that if we were to protect jobs and those in a weaker position in our society then we must be particularly prudent in the things we undertake and do. That was all spelled out in our policy before the last election. What did Fine Gael offer in their policy? Take a look at it. They promised literally profligate spending if you took the measures which they were suggesting. Anything they heard the people wanted they said they were going to give them. They did not in all instances say when, but they promised this Utopian tax era and measures of all kinds. That was all before the election. After the election on the day on which the Taoiseach took office, immediately, within a matter of minutes, he said that the country was in a terrible state and, of course, it was all the fault of the previous Government; we could not do any of these things, we would have to raise a lot of cash to do them and so on. There is a difference between the before-election period and the post-election period.

I want to make a point that was brought out in the budget debate. If you look at the figures which the Minister for Finance was talking about it will be seen that the net effect on the current side in 1981 of the budget and of the measures involved here was to reduce the deficit by £12 million. Of course, additional current expenditure of £35 million was involved in the taxes raised in this year. The extra taxes brought in £77 million. There was a deduction, due to the deflationary effect, of £20 million and a shortfall in the Post Office receipts anticipated of £10 million, leaving a net £47 million. Extra current expenditure proposed for which these measures are brought in now was £35 million in this year. The net effect of all this was a contribution of £12 million which went towards reducing the deficit. Now the Taoiseach and the Minister for Finance have us all talking about multimillions and the wonderful job they are doing in setting up theoretical figures and then deducting them to get back to some sort of wonderful achievement. However, if you look at the financial provisions you will find that they will reduce the deficit in real terms by £12 million. The whole exercise was first and foremost to project a deficit of £947 million by creating the worst possible situation that could arise for the second half of the year. They did this by doubling any of the problems which had occurred in the first half of the year. They did this by doubling any of the problems which had occurred in the first half, and by assuming that there would be no action by the Government in power — whichever Government they were — in relation to the second half of the year on the figures for the first half.

That was revised to £787 million and the reduction claimed was £160 million. These figures included also the CIE and ESB increases which were regarded by the Minister for Finance as a subsidy which would have to be provided for the whole year to make up the amounts required here. That also was quite fallacious because it was never intended that there should be such a subsidy. I will come back to the ESB figures because they are one example of figures outside the civil service which can be seen clearly by anyone who wants to see honestly what the situation is and what the Minister for Finance did and why he is levying these charges now in this Finance Bill. The ESB case is a classical example from outside of the haste and lack of consideration and the mistake which was made — it was a mistake at the time.

Why so much activity in all this Finance Bill and in all the changes proposed and so on with so little gain from the whole lot? The normal half-year measures would have achieved the reductions and controls which were really necessary because the real purpose of this budget and these financial measures is to provide an advance budget for 1982. There is no question about that. The VAT provisions that we are talking about in this Bill will provide £188 million.

They are the Minister's own figures when he was questioned after the budget. These measures are about providing the kind of money which the Government feel will be required to implement some of their election promises. There are other charges also which are astronomical because the Government got their figures wrong in the first instance. They know now from information received from the Department of Finance that their figures and estimates prior to the election were wrong and that they have to raise very much more, one way or another, to meet the programme which they have in mind.

There are all sorts of variations in the figures which have been thrown up. When Deputy Gene Fitzgerald was Minister for Finance in this year he set out to have a budget deficit of £515 million. We all knew that the budget deficit on the previous year had been higher than that; it was about £545 million. He set out to cut back to £515 million. This was a very thorough and searching attack by the Minister for Finance and his officials on the operation of all Departments. There was nothing easy about that because Departments have to make that procedure work daily. The services which people need have to be provided. That target budget deficit was £445 million at that time, because unemployment was very much higher than expected. The second half of the year would have to involve corrections to keep the budget deficit within a reasonable level. On 2 July the present Minister for Finance, Deputy Bruton, said the deficit would be £865 million at the end of the year and the Taoiseach, in his pre-budget broadcast, said it would be £950 million. Since then he has mentioned various other figures, The Central Bank and the ESRI talk about a figure in the region of £790 million.

Of course we can all be very hung up on these figures. I remember Deputy Martin O'Donoghue doing figures on national income. He went back over a number of years and gave a figure they talked about in the year. Everybody got very excited about this figure, which is what you were intended to do at the time. A good statistician can do this if he presents figures in the right way. However, it transpired at the end of the next year, when many more details were known, that the figure was somewhat different and when the final figure came in it was considerably different. Nobody referred to the fact that we had got terribly excited and we probably cut back on social welfare, although the figures we had were only estimates, even figures which at the end of the year were not exact because of the vast complex which an economy is.

We also had varying figures thrown up in relation to Government borrowing. The Taoiseach said it would be £2,000 million. The Central Bank said it would be £1,500 million and the ESRI said it would be £1,650 million. It is a question of playing about with figures and one can see from that that the Taoiseach put his estimate very high. The Taoiseach said that the balance of payments deficit would be £1,500 million. The ESRI said it would be £1,400 million, the Central Bank said it would be £1,375 million and Deputy Gene Fitzgerald predicted £1,300 million. The August figures indicate £1,300 million.

I would like to refer to the Estimates for Social Welfare and Health since they have been mentioned by some Deputies, more or less gleefully trying to indicate that there was something wrong in this area. I want to assure the House that the most thorough work was done, especially in the area of health. With regard to social welfare, you are very much dependent on the numbers of people who are unemployed and that is outside the scope of the Department of Social Welfare. The unemployment estimate for 1980 was 86,000. The outturn in 1980 was 104,000 average. Of course there is a pattern of high unemployment at certain times of the year and lower unemployment at other times. The Department have to work on some sort of average for the year. The estimate for 1981 was 105,000 that was put in as an average which would be the same as or slightly more unemployed than in 1980. In addition, allowance was made for the fact that there was a £17,000 million programme which would provide a certain number of jobs and this was taken into calculations at that time.

The depression from October to April last year was the deepest we have ever experienced. It was experienced internationally as well as here. The numbers on short-time and redundancies, despite record job creations, were higher than anticipated. This led to increased costs for social welfare, which is something you have to face each year depending on the progress of that year. That is the figure which has been talked of by the Minister for Finance, again making an assumption of what is going to happen for the rest of the year.

The health cuts which were proposed by the Department of Finance last year were particularly severe. We had to analyse them and see how they could be implemented. There are things which can be done in the short term and things which can be done in the longer term. Any manager will recognise that fact. A good manager will try to find a balance between these two things which will not cause undue disruption. As a result of the studies which were done at that time, we cut our estimate fairly severely and, subsequently, we were asked to trim these figures further, which we made an effort to do. In the Department of Health you are dependent on eventualities, the cost of drugs and the rate of inflation, because there are so many people employed and there is such a high turn-over in commodities. You are dependent on the birth rate, which is fairly high at present, and that means a whole lot of additional costs.

In March and April we had debates with the health boards about the outturn for the year and, as a result of that, we come up with the fact that we estimated, because of the rate of inflation and other eventualities, that we would need a further £44 million as a supplementary at the end of the year to continue on prudent management. That is very much like a 5 per cent supplementary, whereas Deputy Ryan spoke about a supplementary of 10 per cent. It was our duty to put to the Government that position and the consequences if this requirement were not met. Taking the overall figures and the numbers of patients in hospitals and health boards involved, it was a very reasonable fluctuation.

One must bear in mind that we also carried out, after in-depth analysis, very searching economies throughout the health services in 1980. We introduced considerable energy savings and also met the adjustments for the nurses' and other wages which followed the review body and Labour Court recommendations. We met the chairmen and CEOs of the health boards and I thank them for their co-operation. They worked particularly hard in conjunction with the secretary and financial officers of the Department of Health who are extremely capable people. They are amongst the best public servants whom I have come across and I have met many. I certainly deny any suggestion that they are not on top of the job and are not doing their job particularly well. I found them to be exceptionally high class, dedicated and effective public servants.

We must also take into consideration that the health services were inadequate, due to years of neglect. If anyone does not believe that, I can take him or her to visit some of our older hospitals and mental institutions. These measures and demands had to be met and also we have a growth of population, expectation of much higher standards, greater usage of the health services, better care for the old and the mentally handicapped, for accident cases and also new techniques and the development of our community services. One had the strain of all these demands working against the desire to economise and meet the overall national situation regarding possible economies.

A standstill budget at prudent management was worked out after very extensive work. We advised the Government at that stage that further immediate savings would involve very considerable reductions in staff and curtailment of services. We also pointed out that, in the longer term, savings could be made, for instance in relation to drugs and staff re-allocation on which we had studies made, some of which were done and others which could take place over a time, and an examination was taking place of the general medical services. In this context, a very thorough and balanced short-term job was done on the health services. If measures are taken to cut below these levels there will be very serious curtailment of health services generally. One can see some of this curtailment surfacing already in that certain services have been suspended altogether and others are in very dire straits. Unless a balanced approach is taken to this problem there will be very serious disruption in that whole area.

I will now make some points in relation to the economic situation generally and refer specifically to the Report of the Committee on Costs and Competitiveness of the three wise men. They are much criticised for the figure they produce but one must consider their terms of reference, which were limited to the appropriate rate of domestic cost increases during a stipulated period consistent with sustaining the competitiveness of the economy at home and abroad. The terms of reference were specifically related to competitiveness and have no wider brief in that sense. They have produced some very valuable and interesting information, which is relevant to this Bill.

The Taoiseach is trying to make out that his tax package will benefit the lower paid. It will, in fact, leave the lower paid much worse off. The study shows that the last Coalition Government in providing information on their period of office quoted from a paper by Rottman and Hanna of the Economic and Social Research Institute entitled "Fiscal Welfare and Inflation—Winners and Losers", published in October 1981, as follows:

In the face of rising incomes and inflation, neither the tax system in its basic form or the specific modifications introduced since 1973 (up to 1978) apparently acted in a manner systematically that reduced income inequalities across class categories.

The predominant impression is of a tax system that did more to retain relativities than it did to provide redistribution.

This study shows that the last Coalition Government did nothing to improve the lot of the lower paid or of those on social welfare, to bring about a better redistribution of income.

The three wise men also provided some valuable information on the economic and social progress made between 1977 and 1980. The index of real take-home pay increased by 13½ percentage points for married males on below average incomes in the manufacturing industry. The real take-home pay increased by 30 percentage points for single women on below average incomes, whereas the real take-home pay of married men on above average incomes rose by only 8 percentage points. Taking the period during which Fianna Fáil were in office, this report shows an increase of 13½ per cent on lower as against 8 per cent on higher incomes and, for single women, who were generally in a very deprived stage relative to the rest of the population, the increase was 30 percentage points. Who, therefore, cares for those on lower incomes? I say that Fianna Fáil can be seen to care and to have implemented policies to put that care into practice.

The report also shows—and again this is relevant to the point made here by the Minister for Finance—that the current budget deficit and Exchequer borrowing-for 1981 is at a level comparable with that in 1975 at the height of the last recession. What I am quoting is not Fianna Fáil jargon or information. We are dealing with credibility and saying what the situation is. The deficit was 7 per cent of gross national product in 1975 and 7.9 per cent in 1981, and borrowing was 16.2 per cent in 1975 and 16.5 per cent in 1981. It is important to bear in mind that the crisis in 1975 was not by any means as serious, even from the point of view of oil price increases, as during the 1979-80 period. The price of oil went up from about 8 dollars a barrel to about 22 dollars a barrel in 1979, or nearly trebled. At the end of 1974 that was a big shock to everyone because it was the first time we had to face this situation. We thought the situation was stable but in 1979-80 we were faced with a far greater increase which had to be absorbed and that affected all the world economies.

The last Coalition Government did not go around preaching economic catastrophe in 1975 if immediate remedial action were not taken. They recognised, as we recognised, that at a time of severe recession it is inevitable that the deficit and borrowing will rise somewhat. Experience in Britain showed that rising unemployment was a result of deflationary policies.

The comparative trends in earnings were referred to repeatedly by Deputy R. Ryan and others. They should be seen in perspective. Table 3.2 of that study showed that since 1978 Irish hourly earnings in European units of account increased by 37 per cent compared with 51 per cent in the United Kingdom, 13 per cent in Germany and 27 per cent in France. Are we to be ashamed that there are signs that our wage levels might be catching up with our European partners? Is that not the aim of the convergence to which the Minister for Foreign Affairs and the Taoiseach are committed? The NESC report showed our per capita income is, on the most favourable interpretation, only 60 per cent of the EEC average. Are we going to try to close that gap gradually, or do we simply brand any success a decline in competitiveness?

It is very easy to quote figures out of context and to lead people off on other lines, usually for an ulterior motive, but ultimately there are seen in their proper perspective. This is something we must face up to. The fact is that our wage levels were very low, and I refer particularly to the public service sector. Between 1977-81 there was a 10 per cent real rise in income. This was earned by positive growth rates of 5 per cent to 7 per cent in 1977-81 and 1 per cent to 2 per cent in 1979-81. The Government now say this gain must be wiped out because we are living 10 per cent beyond our means. These income gains were earned and I do not believe the people will voluntarily allow them to be taken away.

Deputy R. Ryan was particularly strong on the point of removing the 10 per cent gain, in real terms, which had been made. He said that, if we must reduce our living standards by 10 per cent, so be it. Let the financial wizards slash in whatever direction they like but whose living standards will be reduced? Not those with the higher incomes or those who can protect themselves in a variety of ways. Those most likely to be affected are the pensioners, widows, the lower paid and those employed in the public service. What about the ESB in this context? Should they not be affected by this 10 per cent reduction? They are being given a 25 per cent increase for the domestic product and a 29 per cent increase for the industrial product.

The report of the three wise men is relevant to this debate. These measures are being taken because the situation is so bad: we have to be competitive and cut back in a variety of areas. It also shows up one of the myths fostered by the Government pandering to popular prejudice. It shows that there have not been excessive increases in the public service pay, that real income per employee in manufacturing industry rose by 40 per cent over the seventies while pay in public and private services up to 1981 rose by 30 per cent. The income of employees in public administration on the other hand, rose by only 20 per cent. Why did the civil servants do so badly? There was a catastrophic fall in their real income between 1975 and 1977. They were made to pay for the measures taken by the Government of the day—another Coalition Government—while the real incomes of all other sectors rose. There was a steep rise in public administration incomes in 1979 while incomes in other sectors were levelling off, but this still left the public servants with half the real income increases of the other sectors over the decade.

An Leas-Cheann Comhairle

The Deputy will appreciate that, while reference to these matters may be regarded as having some relevance, there will be other opportunities where they could be discussed at greater length.

Dr. Woods

With the measures being introduced in this Bill it appears that once again civil servants will be victimised by the Coalition Government because they belong to one of the few groups who come directly within the Government's power.

As I said, the measures being taken in this Bill are grossly inequitable, if we take them in combination with the other measures outlined in the budget — health charges, the 1 per cent levy, the levy of 3.75 per cent above £8,500 and the increase in VAT from 10 per cent to 15 per cent. Taking the health charges and the levy together the total PAYE sector will contribute £127 million, the self-employed £6.9 million and the farmers £7.2 million. It is admitted that there will be some shortfall in these figures because of the difficulty in collecting from the self-employed and the farmers. Given the difficult situation farmers are facing, it is obvious that there will be difficulty in collecting this tax. Assuming all this money can be collected and taking into account the effect of the 3.75 per cent levy above £8,500, which only applies to the PAYE sector, about 95 per cent of the contribution will come from the PAYE sector. That is not a particularly broad base. I am sorry Deputy Kemmy is not here to hear the size of the imposition falling on the PAYE sector. Out of approximately £347 millions about £314 millions will come from the PAYE sector. In my view these levies are a form of income tax surcharge and, if one looks at the way they are applied, one will realise that this is a very complex way of imposing an income tax surcharge of from 8 per cent to 14 per cent. The Government could have said that they were imposing a surcharge depending on the level of income but they choose instead to introduce this complex arrangement in an effort to cover up the fact that tax surcharges are being imposed.

The Taoiseach and the Minister for Finance exaggerated the economic difficulties and over-reacted in their remedies. The principal burden of the recession is now being transferred to families. Since Fianna Fáil left office the mortgage rate has risen from 13.15 per cent to 16.25 per cent, adding £40 per month to repayments on a £20,000 mortgage. In such circumstances the Government have seen fit to remove the mortgage subsidy. Speaking on a radio programme last week the Minister of State concerned said he felt there were other priorities and that there was no great need for the subsidy at these levels. There is a suggestion that the rate may go to 18 per cent and in that event the situation would be examined to see if it would be desirable to reintroduce the subsidy. Matters are already extremely serious and a further increase would be disastrous. This problem greatly affects families in their budgeting and their plight should be eased by the Government even at this stage by the application of the subsidy.

The increase in the price of electricity is particularly important in relation to the credibility of this Government. They have allowed the ESB to increase prices from 1 October. In their report published at the end of April the National Prices Commission recommended an increase of 12.3 per cent but the then Government questioned the recommended increase in the fuel variation surcharge of over 50 per cent and said that the figures should be examined. The National Prices Commission questioned it to some extent themselves and wanted the matter looked into further; nevertheless they agreed to an increase of 12.3 per cent. We felt then that oil prices appeared to be stabilising and that the question should be examined to see if the 12.3 per cent increase was required. On coming into office the Coalition decided immediately to increase the basic price by 12 per cent and the fuel variation charge by 80 per cent, giving an overall increase of 25 per cent. This was totally unjustified.

The accounts of the ESB have since been published and show that they made a profit of £6.3 million in the year ended 31 March. They set aside £26 million for depreciation and an additional £26 million for amortisation. "Amortisation" is one of the more confusing terms, but essentially it is a tax on users for future electricity. This system has been seen by the ESB as an entitlement within the meaning of their Act and, while it has been debated from time to time, it has not been seriously contested, although it is necessary for them to make that reference in their accounts each year because of concern expressed about it. Their accounts this year show a cash flow of £58 million, and the Minister for Finance, notwithstanding that fact, has granted them an extra £100 million. The effect on consumers will be disastrous. In 1977-78 the ESB had a cash flow of £40 million, in 1978-79 £27.7 million, 1979-80 £34 million and this year £58 million. It must be concluded that their cash flow this year is the strongest for many years and in such circumstances the price increase which has been introduced is totally unjustified. I believe that this will be seen to be the case and the ESB will be somewhat embarrassed by the increase they have been allowed.

In their report published on 12 September they stated that they expected the price to drop in February. The Irish Press of that date stated that the possibility of a drop in electricity prices early next year was raised by an ESB spokesman following an announcement of a £6.3 million profit for the board in their last financial year. This profit of £6.3 million is only a small part of the financial health of the organisation. As predicted by Fianna Fáil, oil prices have been far more stable and the ESB will have an embarrassment of income. Even with the publication of the report the PR man stepped in and said there could be a drop in prices in February. Why, then, the surcharge which has been imposed by the Minister for at least a year? It is obviously wrong and should be dropped. An increase of 12.3 per cent would more than meet the requirements of the ESB. The implications of the increase which has been granted are very serious. It will affect the Estimates of all Departments, especially those which expend most money. Hospitals and institutions will have to spend more on heating, as well as coping with other cutbacks.

This increase was a rash action by the Minister. He said that because Fianna Fáil had not allowed the ESB to increase prices earlier he would allow them to recoup what they might have lost and this is why he allowed an increase of 25 per cent rather than 12.3 per cent. It was an extraordinarily rash propaganda-based statement. It will be seen historically to have been just that — a clear example of distortion of facts and figures by this Taoiseach and this Minister for Finance.

These actions, of course, are forerunners of the type of finance they will have to raise next year if they are to honour the promises in their manifesto. It means an increase of about £3 a week for the average family, but what will the effect be on industry? Last week I had contact with an industry in Dublin which employs 470 people. Their ESB bill is £1.25 million a year. In a debate with me on a television programme the Minister for Finance said that perhaps I had a point, and he promised to look at it. He even promised a commission to inquire into it. The Minister for Finance is responsible for the day-to-day management economy. He is in the driving seat now and, as I have said to him, he must manage the day-to-day economy of the country. That is his job.

What will he do? What will he do to relieve that company which employs 470 people? What will he do about its ESB bill of £1.25 million a year? He has set out to increase the ESB take from industry by 29 per cent. What are industries like the one I have cited to do? They have already had substantial redundancies. They are on a two weeks on, two weeks off system. The Minister's action is a rash, propaganda-based action and this will be seen historically to have been the case. I am putting that on the records of the house and I describe it as being dreadfully wrong.

The cost of electricity runs through most of our activities. Among other things, this will increase the costs of the Department of Health and this in turn will set off a new problem to be added to the existing pressures for economies there. The action in respect of ESB charges will affect the entire country.

The Minister's action seems to have stopped virtually all purchasing by the Stationery Office. Deputies used to be given folders in which to collect our queries about problems of constituents, but now we cannot get them. They are rationed. We might be given five or ten now and then. I do not blame the staff in Leinster House. They are doing all they can, but they know the Stationery Office will not supply them with materials for us to operate as Deputies on behalf of our constituents. That is a particularly undemocratic action on the part of the Government because it hampers the Opposition. If anybody cares to visit my office I can show him that I have not got folders in which to keep my queries and my constituency correspondence generally. It did not happen before the Coalition came into being and began their cutbacks.

That is only a small part of it. We will have to find some way to get over that; we will either have to buy or borrow folders. This is the Coalition's way to put the Opposition under pressure. It is an example of what the Coalition have been doing. It is an example of the pressure being put on Irish companies who had geared themselves to meet the challenges of the future, at the request very often of the Department of Industry and Commerce. Many of those companies had improved their standards so that they can now do work of a standard that can match anything to be found in Europe. They are now facing massive redundancies, particularly the general printing industry. Some of them possibly are facing closures. It is important that we get these problems out into the open and discuss them. It is too easy for the Government's propaganda machine to hide the seriousness of the actions being taken. It is too late to rescue many of those industries. The situation in the Stationery Office is an example of how our native printing industry is being savaged by the Government's approach. It is disgraceful because the printing industry has a lot to give to the country and it is bad business to cut them off without any concern for their place in our future economy.

There has been a 50 per cent increase in VAT generally, covering 60 per cent of commodities. They do not include luxuries. As Deputy Gene Fitzgerald said, if you take out the luxuries and the exempted items, the 50 per cent VAT increase covers the majority of commodities. It must be inflationary and it will be particularly severe on households and families. We cannot get over that. That is what the Minister is doing in this Finance Bill. As many Deputies have said and as the newspapers have told us, it hits school books particularly, and I will give examples shortly. It has hit medicines, medical equipment, dental bills, diagnostic reagents, and a wide range of machinery. It would require substantial allowances to offset the impact of the VAT increase on such items from the point of view of the health services, but we will come to that on another day.

When the budget was being debated earlier in the year, I asked the Minister for Finance to consider registering boards of management for the purpose of recouping VAT. This would encourage local involvement in particular schools and sectors. I hope that in his reply the Minister will say something about this, whether he thinks it would be a worthwhile contribution to the area of education. We appreciate there is an allocation of free books to schools but there has been a real reduction of 30 per cent in that allocation. I am sorry Deputy Kemmy is not listening to me now. If a school happens to be at the very bottom of the scale and it is using the free book allocation — a school must be very low down in the scale to get such an allocation — it is suffering a 30 per cent reduction effectively in that allocation. That is because of two things, the fact that more people have to apply because their circumstances have been worsened by the Government and, secondly, the effects of the VAT increase on the cost of books. The combined effect is 30 per cent. That is the reality school managers must face and that arises from the financial measures introduced by the Government who tell us we must accept them without question.

The great advantage to the Government of this ten to 15 per cent increase in the VAT rate is not the few million pounds it will bring in this year to the Government but the £188 million it will bring in next year. That is a lot of tax revenue and that is the main interest the Government have in that VAT increase. It is an extraordinarily savage increase on the main area of household goods and items used by families in day-to-day living. In the budget in January, as part of their contribution to the International Year for the Disabled Fianna Fáil removed VAT from aids used by disabled people. There was some debate later as to what would be covered but the spirit and the intention of this House, and of the Fianna Fáil Government, was to remove VAT from the genuine cases involved. A lot of the items covered were very straight forward ones such as wheelchairs and items of equipment for the blind and the deaf. Now we have cases such as that reported in last Sunday's Sunday Press of a 26-year-old Waterford girl, Carol Grant, who is paralysed from the shoulders down but was forced to pay £812 VAT on a machine which was imported from England. That machine enables her to perform such basic functions as switching on and off lights, the radio and television, open doors, draw curtains, use the telephone and operate an intercom system. The equipment, known as a POSSUM environmental control system, may be regarded as a luxury for those in their full health but surely it is not beyond the compassion of the Minister and the Department of Finance to extend that genuine exemption to persons, such as the one I have mentioned, who can genuinely benefit from such equipment.

Surely, it is not beyond the wit of those senior officials in Revenue, and the Department of Finance, to devise a way in which the spirit of the House can be implemented. If some modification is required to existing legislation it should be included in the Bill before the House. We should not continue to use such stone-age heartless approaches to genuine, deserving cases. I hope the Minister will consider that request in the context of the present discussions and inform the House that he is able to do this without legislative amendments, or, if necessary, make the amendments needed in this Bill.

I do not intend to dwell at any length on the savage increase imposed on motorists. Deputy Richie Ryan carried on with his usual line of so be it and said that he did not particularly like the removal of car tax. He seemed to take great delight in the fact that it was reimposed. He has inherited a successor Deputy Bruton, who, like himself, when speaking at budget time takes pleasure in reimposing such measures. In fact, one could detect a little vindictiveness in his tone. However, the overall effect on the motorist is crippling. We must bear in mind also the increases in insurance premiums allowed by the Government. The Government questioned the PMPA application but the others, which were of the order of 40 or 44 per cent, were allowed to pass. The PMPA application was questioned and an increase of 20 to 25 per cent granted. What about the companies who must face these increases? That was not raised when consideration was given to the increase in car insurance. Firms must face the car tax, the increase in the price of insurance premiums and the many increases in the price of petrol. Petrol prices have been pushed up by 15p or 16p recently. In fact, people have lost sight of the price of petrol since the Coalition came to office. We must bear in mind that an increase in the price of petrol is a serious matter. I am aware of a firm in Dungarvan which has a vacancy for a tradesman but although there are unemployed tradesmen in Waterford, 30 miles away,— the cost of petrol in that case at a rate of two gallons per day would run to between £20 and £25 per week — the vacancy cannot be filled. There is a point where the tax on petrol has a negative effect on the economy as a whole and employment prospects.

In addition to the measures I have mentioned we have also the ESB surcharge, the increase in CIE fares, the increase in hospital charges and the extra prescription charges. We are also aware that increased charges in the drug refund scheme apply from 1 August. We have been told that savings and cuts are to be made in many Departments including the Departments of Justice, the Environment, Education and Health and that the number of employees in those Departments must not exceed the numbers employed on 21 July last. That can have some ridiculous effects. If one takes the team in a hospital operating on a patient it is not possible to carry out such an operation successfully without each member of that team being present. I hope those responsible for the measures being imposed willy-nilly throughout the health services do not find themselves short of an anaesthetist in the event of an emergency. I am sure the Minister, like the rest of us, would like to be oblivious of what is going on until an operation is completed. I have had a case such as that reported to me recently. This is an indication of the ridiculous way things can be applied down the line if there is not an acceptance of the function of management at supervisory, middle and senior management levels, throughout the whole service. There has to be an accommodation. We had many meetings with the helpers and hospital people to try to find this kind of accommodation and to try to sensibly apply the economies which had to be applied last years and in the first half of this year. Without that approach things are going to be extremely difficult.

I have received representations from the South Eastern Health Board area concerning a particular physciatric hospital in Kilkenny where, in view of the embargo on increasing the numbers in the public service issued on 21 July 1981, there is no immediate prospect of increasing the domestic staff on the wards in St. Canice's Hospital and the people there will have to wait until the position is changed before any improvement can be made. In this case the situation is exceptionally bad. That is the way the Coalition look after everybody so wonderfully. If they are going to look after people they have to put money with that looking after. The propaganda just blows away in the wind. It is very easy to hire a few specialists to do a nice job of propaganda. But ultimately the real question is whether they will deliver the goods on the ground. Will they alleviate hardship where it exists or will they just increase that hardship with the kind of imposition that is being made by the Minister? We will know a lot more about that in a couple of months because it looks as if things are going to be extremely bad.

Of course, as I said initially, the whole area of social welfare and the lack of care for the social aspect is one of the great deficiencies in the financial provisions of this Government. We were told that from 1 October the widow would get an increase of 85p a week to meet all the increases we have talked about here; for the first two children she gets 25p a week each, and for the other children she gets 25p. I would call that a lollipop increase. It would buy perhaps one good sized lollipop. I was talking to a young child who said it would only buy an ice cream. That is the kind of insult which this Government are handing out to those who are on lower incomes and in greatest need.

If one happens to be on disability benefit or unemployment benefit one is getting an extra personal increase of 75p a week and, for the first two children, 20p a week each; if one happens to have more than two children only 15p a week can be spared. Some very interesting features arise, but basically what is happening here is that the gains which were made under Fianna Fáil are being systematically eroded. While the Minister of State for poverty attempts to create an image of concern, Deputy John Kelly, the Minister for Trade, Commerce and Tourism represents the truer voice of the Coalition as can be clearly seen from the policies which are being pursued at the moment. The recent statements of the Government Ministers have been intended to consolidate the policy of the Minister for Finance of the survival of the fittest. That is the policy that is being implemented here. It is not in the centre as Deputy Ryan seems to think. As he spoke, it was very hard to see where the centre was, although I know that we have not got great extremes here. But Deputy Ryan was speaking of the harshness of some of these impositions here, saying that if we have to reduce everybody's standards by 10 per cent let it be done, and various other statements like that. But Deputy Kelly's attack on the welfare state is based on a number of biased misconceptions. First, those of welfare benefits contributed 80 per cent of the annual cost and approximately 20 per cent is contributed by the State, depending on the time of the year and the number unemployed. Second, the Minister's midsummer panic budget was directly responsible for a 5 to 6 per cent increase in the consumer price index and that is now reflected in prices. There are further price increases still to come.

In the meantime he has offered the old age pensioners a pittance. The derisory 3 per cent for widows and the unemployed is clearly seen as a sop to the Labour Party to sell the whole concept of Coalition. In fairness to them, they probably did not think much about the implications and the effects of that in reality. But it shows the haste with which this uneasy alliance was convened and that the homework on the figures was not done by people that one would assume to have been interested in the lot of the less well-off. For example, how much was given to the elderly living alone? They were given 10p. It would not even buy an ice cream. In one case the increase was 5p. A blind pensioner over 21 who has two to there children got an increase in the allowance for a child dependant of 5p a week — I hope Deputy Kemmy takes a note of this — to offset all these terrible increases that we are seeing here and the others that are still to come, to offset the ESB charges, the CIE charges and the charges on school books and all the items used in the house.

That is disgraceful. It shows a desperate lack of consideration and it highlights the fact that this sop was thrown in and was never thought out by Fine Gael when the deal was done. They were not thinking about the poor people they claimed to be so concerned about. They were only thinking about selling the package and putting it across, with Labour saying that they would have to have something for the poor and the Taoiseach saying that he would give them 5 per cent for the old age pensioner and 3 per cent for all the others and that it sounded like a reasonable package to sell. It cannot have been any other way because I honestly do not believe that Deputy Michael O'Leary, Tánaiste and Minister could have condoned that kind of increase. I do not believe that members of the Labour Party would condone that kind of increase for a blind pensioner over 21 or the other increases that are there. It certainly is a very sad reflection on this Coalition Government.

I am saying those things now in the hope that when the Coalition Government come along to the grandiose budget of next year they will show a little more concern for the elderly, the disadvantaged, the handicapped and the poorer sections of our society. No matter how much we progress if we do not look after those people we have gained nothing for ourselves or the country. The one shilling off the old age pensions is still the mentality on the far side of the House. The only problem now is that the Labour Party are tied in with them, which must be very embarrassing for them when they meet the people. When they meet Labour supporters they are certainly very embarrassed at what is happening. The people on social welfare benefit and assistance will need a 30 per cent increase if they are to maintain the standards set by Fianna Fáil. Even when times were bad — and Fianna Fáil took a lot of abuse from the Government side of the House when they were in Opposition — we gave the old age pensioner, the widow and the long-term beneficiary a 20 per cent increase in two successive years. We gave them £144 million in the last budget, a very substantial sum, despite the very difficult economic circumstances.

We also gave something to those people on whom they are commenting a lot at the moment. We gave them a double week at Christmas. The Minister for Finance should tell us now if he will give the double week to the old age pensioners and those on long-term benefits this Christmas. If they needed this last year they will need it twice as much this year. The Minister would need to give a special grant-in-aid to the Society of St. Vincent De Paul, because from what I hear they cannot keep up with the demands for money for real hardship. Those are the realities of the high-flown ideas thrown out here by the Minister for Finance. We are likely to end up very soon with the old concept they had in America, "Buddy, can you spare a dime?" Why is this? How can we so quickly get back to those circumstances? How can a Coalition Government of Fine Gael and Labour come to this so quickly? I believe the reason is because the Labour Party have been gobbled up by the Fine Gael Party. I believe everybody outside the House realises that. It is a bit like "Jaws" on television. The Taoiseach has gobbled up the Tánaiste and the rest of the Labour Party. Now they are paid off and they have to keep quiet and stay in line or the whole thing falls apart.

The people who are implementing those policies are people who have not known a poor day, certainly for a long time, and do not know the problems facing the poor section of the community as they come up to Christmas. They must be remote economists who are away from realities. I know they have been referred to as the "Donnybrook set" but that is not fair to all of Donnybrook. It certainly conjures up a concept of being reasonably removed from the harsh realities of the problems of the moment. They must also be many of the captains of management and industry for they are preaching at us every day, like Deputy R. Ryan was this morning: "It has to be done. It has to be harsh. You have to take it". Even the very small drop which might occur in their incomes will have a negligible effect on their operations and lifestyle. Nevertheless, they are daily propounding those very biased theories from their particular orientated background. I do not have to name those people. One only has to turn on the television set and one hears about them. Anybody with commonsense can identify them, what they are at and how they are succeeding and convincing the Minister for Finance and the Taoiseach to go along their line, which is so severe on the less well-off in our society. Will the Minister for Finance tell us if the social welfare beneficiaries will be held to the 6½ per cent norm and what is the purpose of this norm in relation to social welfare? Most of the things we feared earlier on in relation to the norms and the approaches to be taken by the Coalition have come true. I believe the social welfare recipients will need something nearer to 30 per cent if they are to stay where they are and hold on to the new position they had achieved under the Fianna Fáil Government.

I would like to refer very briefly to the free fuel scheme, which has had difficulties in getting off the ground this year. Last year we increased it on two occasions to £3 and extended the scheme to cover an additional 56,000 people. I thought the Coalition Government, who are so concerned about the elderly and those living alone during the cold winter months, might have done something imaginative in relation to this scheme. Fianna Fáil had broadened the scheme throughout the country and had covered all the health boards and introduced the voucher which gave the options. We increased the cost of the scheme considerably last year. We did this because we felt it was very desirable. I suggested before this years' scheme was due to commence that the £3 voucher should be increased to £5, the price of a bag of coal, but the Government settled for £4, which was not a very imaginative increase. The Government did not introduce any extensions to this scheme. They gave the absolute minimum possible in the circumstances.

The Government have sold the country out internationally. It is extraordinary the way in which it was done and that a Government could be so irresponsible as to set about that task. They told the world we were bankrupt. It was not sufficient to criticise the Opposition in the normal way or to say that the economy was basically sound, which is what most Irish men would say in any event. They could have said that the economy was basically sound but the previous Government were such bad managers that they had things in a mess and the new Government had to put things right. But that was not enough. They set about telling the world something that was essentially untrue, namely, that Ireland was bankrupt and they convinced themselves of this. The increase to the ESB is an example. The increase came up for review before the election and because it was held up for good reasons they assumed it was done for political reasons. The Government convinced themselves they should move rapidly and they increased the charge from 12.3 per cent to 25 per cent.

They succeeded in convincing the public and some of the media that Ireland was bankrupt and, as a result, we are facing Christmas with unemployment at a record level, with widespread poverty and with families suffering intensely under all the pressures that have been created. They managed to con a certain number of housewives with regard to the £9.60 tax credit from their husbands but now the Government are trying to find the money to pay for it. Apart from the administrative costs they also entered into a commitment in the "Gaiety Theatre Document" to pay it to those to whom it would not normally be due as a tax credit.

In a question in this House to the Minister for Finance I asked him to elaborate on that. He merely said it would be paid and that the whole matter had to be gone into. I presume it is creating considerable difficulty for the Government. If it is the case that our tax system is inequitable. now and if we begin to pay this benefit to people not liable for tax we may find that the system becomes totally inequitable. Taking into account the 250,000 wives who would not be due the allowance from their husbands' tax, the cost of this is estimated at £140 million. That is if all wives are included but the question remains whether farmers' wives, the wives' of old age pensioners and of blind persons and widows will be included. These matters must be clarified. Nevertheless, the Government put this whole proposal before the population without making clear that it would cost a tremendous amount in taxation of one kind or another, most of which it appears will come from indirect taxation.

Students were also conned. Before the election they were told they would get grants but now it appears that does not apply to those in college. They got an increase of 30 per cent in respect of college fees but many difficulties were created for families who are trying to put their children through third level education.

In all the approach of the Government with regard to financial measures has been quite disastrous. It is having adverse effects on the economy and especially on those who are less well off. I am opposed to this Bill because it is based on a false thesis. I contend that the economy was, and still is even at this stage, fundamentally sound. I disagree with what the Coalition Ministers have been saying on this matter.

The Bill proposes to raise taxes next year to pay for election promises made by the Coalition before the last election and which they grossly underestimated. An example of this is the amount of £188 million that will be taken from the population next year in respect of VAT. At the time of the budget we predicted it would have disastrous effects and people who have now overcome their initial shellshock are becoming aware of the true situation. The cost of living has jumped as a result of the measures taken by the Government and unemployment is increasing. The increase given to the ESB will not help because businesses and companies cannot afford to pay this extra charge in present circumstances and I do not see any reason why they should have to do so. Mortgages have a profound effect on household budgets but the rate has increased from 13.15 per cent to 16.25 per cent and there are fears of further increases. The increases given to old age pensioners, widows and other beneficiaries have been systematically eroded by the derisory increases introduced from 1 October.

The Government's policies are regressive and their taxation proposals will impinge most strongly on those with lower incomes. We will have an opportunity later to talk about the general tax package in the next budget. I think we will see in that instance that the whole mix is quite disastrous and will have adverse effects. It will be especially bad for employees and those on lower incomes. The tax package of the Government is a recipe for economic disaster and for the creation of widespread poverty and inequality and that will become obvious from now on. I do not think people fully realise the extent of the health charges and other increases that have yet to come.

I should like the Minister to clarify a few points. Does he intend to give the double week pension at Christmas to old age pensioners? At this time last year the recipients knew they would get the double allowance and the whole process of preparing for it was under way. It is time they were told what will be the position with regard to this matter so that they may plan accordingly. Further, will the Minister say if the 6½ per cent increase which is said to be the norm will be applied to social welfare beneficiaries? Will the 10 per cent reduction in living standards which the Minister has said all of us must accept be applied to those on social welfare?

I am in favour of doing away with abuses. While in office we did a fair deal to introduce systems which would be useful in that regard. I know certain short-term and long-term savings can be made. We made some of them. We can give the figures. I am talking mainly about the actual levels of payments to beneficiaries to whom they are genuinely due. Is the 6½ per cent norm to be applied to them? Is their standard of living to be reduced by 10 per cent, as the Minister has suggested all standards are to be reduced? Is the Minister suggesting that people he can control directly, public servants, social welfare beneficiaries, and anyone else who comes directly under the control of the Minister for Finance, must take these cuts while the self-employed, people in companies or business people will not be controlled and we will have a repeat of what happened in the periods of office of the previous Coalition Government when public servants and social welfare beneficiaries fell behind? When we took office we had to try to catch up and bring those people close to the level at which the rest of the community were operating.

In effect the Minister is using these people to solve the problems instead of using the higher management the Government are supposed to have, and have, at their disposal. Management means making use of all the resources, not just the poor social welfare beneficiaries, and not just people who are caught in a corner somewhere and cannot do very much squealing. We must use all the resources of our wealth and our management ability, which is one of our most critical resources, probably the most critical and importance resource.

Will the Minister use a broader management approach, or will he continue to depress social welfare beneficiaries and public servants with the pay controls he is planning to introduce? Will he revoke the ESB surcharge which he applied so hastily? I do not ask that tongue in cheek. Unless the ESB do some very rapid spending, the Minister will be shown up very badly in due course with the kind of money he is extracting from the population, from industry and from business with this 25 per cent increase.

Will he restore the mortgage subsidy to reduce the 16.25 per cent interest charge which householders have to carry at present? Will he undertake to allow public service workers to share equitably in wage increases and not have a repetition of what happened during the period of office of the previous Coalition Government? Will he take a more human view of the removal of value-added tax for the benefit of the disabled and specifically in the case which has been brought in detail to the notice of the Department of Finance and the Revenue Commissioners. At the conclusion of this debate will he state specifically what he intends to do about that case, and the way in which he will approach the disabled and the handicapped in his interpretation of that measure?

This is the International Year of the Disabled. At the beginning of the year we brought in an initial programme costing a total of £6 million, if I remember correctly, involving a wide variety of measures. We said that by the end of the year we would have another look at the situation when the report of the committee for the International Year of the Disabled was available and that in the light of that report we would consider what other changes might be made. As a very clear earnest of our good-will, we introduced measures costing £6 million at the beginning of the year. It is now time to have a review at the end of the year. I am sure the committee for the International Year of the Disabled will have their report ready or nearly ready by now. I hope the Minister will consider what further measures will be suitable. Those are my comments on the Bill, which I oppose very seriously and strongly.

Mr. Shatter

As this is my first contribution to a debate of this nature, I will start by saying that what I had to listen to from Deputy Woods and Deputy Gene Fitzgerald explains to me why the country's finances are in the state they are in. It is clear that, in Government and in Opposition, Deputies opposite fail to develop any coherent economic or social policy. That failure is evident from the level of the contributions made to date by them in this debate.

The contribution by Deputy Woods was instructive. It now appears that it is being acknowledged by Fianna Fáil that the budget introduced by them in January last was unrealistic and that the estimated budget deficit of £515 million was also wrong. Deputy Woods admitted that correction was required in the second half of the year, that corrective budgetary measures were necessary. This is the first occasion on which we have had an admission that, if Fianna Fáil had been returned to office in the June election, they would have introduced an October budget. That admission strikes at the heart of the type of comments made by Members of that party on the budgetary measures introduced in June, many of which are now part and parcel of the Bill before the House.

We are told by Deputy Gene Fitzgerald and by the former Taoiseach, Deputy Haughey, that these financial measures were not necessary, that they were a mere propaganda exercise, and that they were introduced as a matter of political expediency. Possibly I am native; I am wet behind the ears as a politician. I am still learning the trade. I have not yet heard how a Government can court popularity by imposing taxes. That appears to be what is being suggested by Deputies opposite. Everyone in the House recognises that the imposition of direct or indirect taxation is not popular. Nobody likes to do it. With the country facing the type of financial disaster this Government inherited, failure to introduce the type of measures now being introduced would have resulted in national bankruptcy.

We were told that the estimated budget deficit in January last was £515 million. It is now generally acknowledged that, but for the change of direction adopted by this Government, we would have been talking about a budget deficit in the region of £900 million or £950 million. That has not been refuted by Deputies on the other side of the House. Figures are being thrown around, as Deputy Woods said — some people say £800 million, some people say £850 million. This Government's estimate when they assumed office, was that it would be £950 million. But be it the lower figure of £800 million or the higher one of £950 million, either is substantially greater than that originally envisaged by the previous Minister. Deputy Woods and other members of his party referring to figures considerably higher than those originally budgeted for by the former Minister for Finance is a clear acknowledgment that the type of action this Government have taken was necessary.

This discussion is what I would regard to some extent as being the caricature way in which we deal with and debate our political affairs in this House. No sensible alternative measures have been proposed by members on the other side to remedy the financial situation obtaining. We have had contradictory comments that indicate either a total lack of understanding of economics or a basic disregard of any endeavour to give people outside this House a view of what is possible, what can be done by Governments.

We were told by Deputy Gene Fitzgerald yesterday that it was acknowledged by Members on the other side that there was a need to reduce foreign borrowing requirements. This, he said, would be done at a slower rate. He questioned whether the type of remedial action taken by this Government was necessary and suggested that they were panicking. Deputy Gene Fitzgerald made those remarks, suggesting that his party would seek means to reduce the levels of foreign borrowing while at the same time encouraging the Government to increase jobs in the public sector. In other words he was suggesting that we should continue with the type of nonsensical economic policy in which the former administration engaged. Nobody disagrees with foreign borrowing if it is done to create jobs of a productive nature, jobs out of which eventually the debts incurred will be repaid. Apparently the jobs that members opposite want created are those in the non-productive sector, in other words, we should continue to borrow for non-productive investment. The policy of borrowing for non-productive investment for the day-to-day running of the country has contributed to the difficult financial circumstances in which we now find ourselves.

Deputy Woods acknowledged the reality of the situation. He referred to the tremendous problem of unemployment which stood at 130,000 when his Government were in office, and has not changed greatly since. He referred to the fact also that poverty is widespread in the community. Is he suggesting that all has changed in four months, that this was not the position in May or June last? Is he suggesting that suddenly there has been a great increase in poverty? Is he suggesting that the policies of this Government have suddenly produced a massive increase in unemployment? He knows that to be nonsense. Yet, he is prepared to make some smart political point that bears no real relationship to dealing with the economic situation as we find it, in the hope that the electorate can be conned into believing that the difficulties we now experience are the responsibility of this Government. It needs to be emphasised and stated quite clearly that the difficulties in which we now find ourselves are due solely to the failure of the previous administration to tackle in a realistic way the economic difficulties facing this country, indeed their failure to produce some form of coherent, economic and social policy. I emphasise social policy in this context because I believe that for far too long we have dealt with our economic and social affairs in a narrow way and have failed to have regard to the fact that coherent and inter-related policies are required to deal with both those areas.

When we talk about the national debt what does it mean? To people outside this House realistically it does not mean a great deal. What they are interested in, on a day-to-day basis, is whether the wage packet they receive is sufficient to meet the needs and expenses of themselves and their families. We need to set on the record clearly the manner in which the national debt was increased by the previous administration. In January 1977 the national debt stood at £3,600 million. In June 1981 it stood at £8,843 million. Is that responsible economic planning even taking into account changes in monetary values and external factors? A proportion of that national debt was created for one reason and one reason alone, to permit Government Departments under the previous administration in their final 12 months in office, to spend moneys they did not have so as to bring about an electoral result Fianna Fáil hoped would mean their continuing in government after the last election. The effect of the national debt is that, as at 30 June 1981, the equivalent of £7,690 is owed by each working person in this country. At some stage we must pay for that. It appears that all the Members opposite can do is suggest that we continue with more of the same policies, that we must continue to borrow and to hell with the consequences, indeed to hell with the consequences for the new generation coming up. It is fortunate the electorate saw through that type of approach. It is extremely peculiar and indictative of the failure of the party opposite to come to terms with their position as it is today that they are trying still to sell a line of thought already rejected and which has clearly been shown by economic commentators to have no relevance to the present situation. The previous Government, to some extent, could be described as the economic cowboys of the western world. The Members opposite are continuing along that line — economic cowboys engaged in verbal showdowns in this House based on no real understanding of economic policies or of the financial circumstances in which we find ourselves, economic cowboys who suggest that we should continue to rustle in foreign banking markets for funds to service the day-to-day running of the State without having regard to the type of interest payments the State would be tied to paying back to these banks for many years.

It has been said that we have a good credit rating abroad. There are plenty of individuals in Ireland who have good credit ratings with banks but does that mean they must continue to borrow? Does it mean, for example, that if we have a good credit rating we can borrow away until eventually the IMF or some other outside agency will come in and say: well, you had a fine credit rating, you had grand security, now we will put you into bankruptcy and realise our security to get our money back. Good credit ratings do not mean that people or governments must automatically borrow. The time has come when Members opposite must begin to come to terms with the reality of the problems we face, must do something they have considently failed to do, both in Government and in opposition — not merely in this context but in the context now of the discussion that has arisen in relation to the Constitution — that is, they must show leadership. It is time for people to be honest, for politicians to be honest with the electorate who vote them into office. It is no longer a viable proposition for politicians of any party, for their party political again to try to fool the electrorate into believing that things are not as they are. I listened to some of the criticisms from Members opposite in relation to the Government's performance to date. I find them very difficult to take seriously. We have been told the Government are paying lip service to eliminsting poverty. It has been said that this Government have no real social concern. Members opposite and their party never developed a sensible or adequate social policy.

The increases in social welfare payments this autumn are being criticised. What Deputy Woods omitted to mention was the fact that the regular autumn increases introduceded by the previous Coalition Government were discontinued by his Government. Their concern for social welfare receipents and those on the poverty line was never shown at any stage when they were in Government. There are other areas which clearly indicate this, for example in the supplementary welfare appeals system or supplementary welfare scheme which provide emergency welfare payments for those in need. The previous Government failed to introduce a proper appeal system for those who could have been entitled to supplementary allowances to enable them to appeal decisions made by community welfare officers refusing them supplementary welfare allowances. The whole supplimentary allowance scheme was debased by the previous administration. Rather than reforming the old home assistance scheme which was administered with a type of poor law mentality we returned to what was effectively the home assistance scheme under another name. Is that concern for the poorer sections of the community?

Deputy Woods derided the amount made available to combat poverty, £100,000. What was the record of his Department? The combat poverty scheme was abolished. He has no grounds for criticising the action of the Government to receive effectively a scheme his Department sought to abolish.

We have had crocodile tears shed for wives and mothers. We had derisory comments made about the intention to introduce a payment of £9.60 for wives and mothers or spouses who stay at home. What was the former administration's concern in this area? The former Government were pulled screaming through the courts to try to bring about a taxation situation where wives were treated on an equal basis with single people and where families were treated in the income tax areas in an identical way to the one in which single people were treated. The former administration refused to give equitable income tax relief to married couples and discriminated against them to ensure their income levels were kept below that experienced by two single people living together. The only way that situation was resolved was by court proceedings which forced the former Government to provide an income splitting arrangement to assist married couples and ensure they were taxed in an equal position with single people. Where was the concern for the working wife or the wife and mother at home? There was none at all until the matter had been litigated through the courts.

Reference was made to the amount of money paid to children under the social welfare system. What was the previous administration's record in this area? In successive budgets they reduced the children's taxation allowance from £240 to £218 and then to £195 which is the amount at which it presently stands. If children's tax allowance had kept pace with inflation it should today stand at £330-£340 per child and not the £195 which the previous administration reduced it to. Was there any compensation for this reduction? No. Effectively what was done was that the monthly children's allowance was increased in accordance with the cost of living but at no stage was any compensation paid to married couples with children for the decrease in the tax allowance they got. Successive budgets of the previous administration were anti-family and showed no concern for the poorer sections of the community. They did not remove discriminations that existed. They sought to place married couples with children in greater financial difficulty than married couples without children, a policy I find totally inexplicable. So much for the social concern exhibited by Members opposite.

How did Members opposite finally deal with the taxation provisions when they were forced by the courts to end discrimination against married couples? They passed the Finance Act, 1980 which contains provisions in sections 21 and 22 which are probably unconstitutional and may at some stage be challenged in the courts. They sought to ensure that the unconstitutional tax the court said the State could no longer seek was taken from married couples for all tax years up to April 1980. Members opposite have not an honourable record in this area and have no basis for making the type of criticism they have both yesterday and today and in the debate that took place in July.

Deputy Ryan expressed a view on the £9.60 tax credit to be introduced. I should like to put on record that I do not agree with that view. The tax credit the Government intend to introduce in the next Finance Bill is a recognition of the role and status of a woman in the home or a spouse in the home as it will apply as much to the wife as to the husband. It is a recognition long overdue and has been welcomed by many people. It is not, as has been suggested, an insult to marriage or to the family. It will not affect family life other than in the sense that it will give a married woman in the home a form of independent income. Nobody is saying it is a large sum or an adequate one but it is a start at giving the type of recognition that should have been given in this area many years ago. In my experience of dealing with marital problems and family difficulties, the fact that this sum will come on a regular basis to the wife will afford some assistance to her. It will not solve the problems but will place her in a position where she has some independent form of finance coming in on a regular basis.

Until the previous Coalition Government changed the position in 1974, children's allowance payments were made to husbands. They are now paid to wives. There was a demand in those days that these should automatically go to the wife because they would place her in a situation where she had some control over a portion of the family's finances, albeit not a very large sum, but it was recognising a principle and a principle which I consider deserves proper and full recognition.

Regarding the present economic difficulties the question is not merely one of changing tax provisions. It is not a question only of reducing State involvement or of trying in some way to reduce the capital expenditure of the State. Rather, the question involves dealing with the financial crisis and this requires a degree of co-operation and understanding within the community. It requires remedial action not only in the context of the Government taking measures but in the context of a recognition outside this House of the problems we are facing.

The situation requires a response from the social partners. I have no wish to become involved in the difficulties being experienced in the area of the talks on a new national understanding but these discussions should be broadly based. The old historical approach of the unions in these areas requires some modification. The history of trade unionism both in this country and in others has been effectively a struggle to establish the right to represent workers. Traditionally the role of the trade unions was to ensure that the worker got a full and proper weekly wage for his work. The unions provided a degree of protection for employees that they would not have had otherwise. This was particularly important in times when we did not have such legislation as the unfair dismissals legislation. It is accepted that the unions have a role to play in the development of the economic process and in the context of employment and of the fixing of wage prices. They exercise a degree of power and responsibility.

The time has come for all of us to realise that negotiations such as those taking place now cannot be concerned solely with the level of wages to be paid to any individual or with what type of national wage increases there should be. In the context of recent national understandings there has been an attempt to go outside this area.

An Leas-Cheann Comhairle

The Chair is reluctant to interrupt but while the matters to which the Deputy is referring are peripheral considerations, they are not correctly within the ambit of this debate which ideally should refer to the taxation measures proposed.

Mr. Shatter

I am merely dealing with points that have been raised both by Deputy Woods and by Deputy Gene Fitzegerald and which relate to an area which is relevant to our economic situation. This, in turn, is the prime reason for this Bill. Still within the realm of the role played both by the unions and by the employers in negotiating any wage agreement is the question of the effect that wage rises would have on inflation and on price rises and, in consequence, the effect of such rises on unemployment. In reality there are few people to represent the unemployed. It is the job of the Government to ensure that economic conditions are created which contribute to the creation of jobs and they must try to deal with the great problem in this area. The negotiations concerning a new wage agreement will have a large bearing on the way in which this difficult question is tackled in the coming months. The only point I wish to make in this regard, and it is a point that is relevant to the whole sphere of our economic problems, is that the time has come when a degree of responsibility should be shown in this area. I am not suggesting that wage increases are the sole contributory factor. It must be acknowledged that a responsible approach in this area can contribute to the sorting out of some of our unemployment problems. If we are to have large wage increases in the coming year there will be an exacerbation of the difficulties.

In relation to some of the particulars of the increases there is one item on which I share the views of Deputy Ryan. I have never been happy about the VAT rates that are applied in respect of school and educational books but I do not think it is realistic to separate the various books and say that some are for educational purposes and, consequently, should be subjected to different VAT rates. However, there is a need, not in the context of this Bill, but as soon as possible, to review this whole question again. If I am correct, under EEC regulations there must be some level of VAT on books. We should consider seriously the possibility of fixing special rates for them and thereby reducing the burden on those affected and a very large burden is being imposed on families in terms of expenditure on books for educational purposes, especially where there are four to six school-going children.

In the overall context of social welfare recipients — and these were referred to in much detail by Deputy Woods — I hope that when the reforms are being introduced in this area the Minister will consider the possibility of changing the system of categorisation. I realise this is not something that can be done overnight. The present system provides for allowances for deserted wives, for the wives of prisoners and for a whole series of such allowances, most of which provide for an identical sum of money but which create all sorts of anomalies and difficulties. Allowances such as those could be replaced effectively by a single-parent form of allowance. I make this suggestion in the light of the many cases I have encountered of people suffering severe financial difficulties in these difficult times as a result of the anomalies in the system. Because of these anomalies many people find themselves depending on supplementary welfare allowances instead of being able to avail of the increases in payments that they would otherwise have been granted.

We have heard about the need to protect wives, about the need for a deserted wife's allowance. A fair number of husbands find themselves left alone by their wives who have deserted them when the marriage has broken down and they are left with young dependent children. I have come across more than one case of a husband in this situation with three, four or five children dependent on him. He has to bring up his children himself and his wages from his employment have placed him in circumstances where he cannot afford to pay a child-minder or anyone of this description and he has given up his employment and taken on social welfare payments as his sole form of income. Husbands in this situation are entitled to social welfare allowance. There is no such thing as a deserted husband's allowance. The Minister for Social Welfare should look at this and consider it seriously. If we had a single parent's allowance it would deal with that problem and it should be possible to introduce a form of allowance in this area at some time in the future.

It is clear that the Government have been forced by the existing economic situation to take the measures they have taken. If rates of indirect taxation are increased it is natural and obvious that such action will have an effect on the CPI and the cost of living. Deputy Gene Fitzgerald and Deputy Woods have made much of this, as if it were a new discovery that if you increase indirect taxation the cost of living index is going to go up. It is implicit from what they are saying that the previous Administration never really did this and were not responsible for it. That that is arrant nonsense is shown by the most recent report produced by the OECD in July 1981, the OECD Economic Outlook, which examines the state of the economy in each of the member states of the OECD. With reference to the Irish economy and the performance of this country in 1980 on the question of the increase in inflation during that period it is stated on page 106 of that report:

Much of the acceleration in inflation, to over 18 per cent, was accounted for by indirect taxes, notably on fuels.

Tá go leor raite ag mo chara thuas. Ba cheart dó suí síos, mar a deir an Leas-Cheann Comhairle, agus lig dom. Ní mór dom ar dtús comhghairdeas a dhéanamh leis an Aire Airgeadais—níl sé anseo faoi láthair — as ucht a phósta. Sin deireadh leis an chomhghairdeas uaimse ar aon nós.

I condemn the proposals in the Finance Bill now before the House. The Finance Bill to give effect to the supplementary budget as introduced by the new Government during their first few days in office represents the implementation of the first stage of Government economic planning. Stage is the operative word because it came from the Gaiety Theatre. The Government should stop tinkering with the economy because these proposals will have a disasterous effect.

From 1948 to 1951 the Coalition Government said that their problems were due to the Korean war. From 1954 to 1957 they blamed Nasser and the Suez canal and from 1973 to 1977 they blamed the Arabs. They are now running out of people to blame so now they are blaming Fianna Fáil for all their problems. That is the history of their record.

In pre-election propaganda Fine Gael and the Labour Party indicated proposals that were at great variance with one another. People who happened to be looking at television at 2.30 a.m. When votes were being counted throughout constituences saw a man telling us that the Fine Gael package given to the electorate was, in his opinion, inoperative. He regretted that he had not said so when he was speaking on television a week before that. He claimed that, maybe if he had said so, the Labour Party might have done better in the election. The youngest child at school would have known in May or June of this year that this country, like many other western countries, was experiencing a recession. These promises, commitments or policies—call them what you like—in the reckoning of the economists, would cost £800 million. We all knew that there was no £800 million lying around to put the Fine Gael proposals and promises into effect. There was the famous statement by the Taoiseach when he came back after a very short adjournment of the House that the books were even worse than he thought they were. The whole country knew he had not time to read the headlines in the paper, never mind go through books of State. This £800 million or more had to be collected somehow and somebody had to take responsibility for it when it was not there. They said the cupboard was bare and brought in the supplementary budget. The supplementary budget was brought in to gather sufficient moneys so that a more favourable budget would be introduced in January and so that some of the promises and commitments could be implemented in that budget.

It must be said that the Government are on a very sticky wicket and were from the very beginning. These proposals in the budget to which we are now being asked to give approval were the worst form of compromise between two parties that could have come from anywhere—even the Gaiety Theatre. I agree with the comments and sentiments of Deputy Ryan on the £9.60 which was promised to stay at home wives. Many people thought the £9.60 was going to be given by the State or maybe by Fine Gael but the Government did not indicate that it was to come out of the husbands pocket. With the rise in costs and VAT I wonder will the Government index-link that £9.60 when it is paid next April?

I would like to pay special attention to a part of the service industry which particularly affects me in my private capacity, the motor trade. I would like to recall for some of my Cork Deputy friends—two of them are in the House at present—the breakfast we had on 26 June with the management and working representatives of Henry Ford in Cork. The purpose of the calling together of the re-elected and newly elected TDs for the two constituencies of Cork North Central and South Central was to make them aware of the situation as it pertained at that time in the motor industry, competition, etc. I was there that morning. There was no Government formed at that time but each one in turn indicated they would be keeping in mind the situation regarding the motor trade. Commitments were made. I hope all of us will go back to Henry Ford some day and discuss with the management and workers the effects of this supplementary budget introduced by the Government. It has done so much harm to the production and the service end of the motor trade. There have been increases in excise duty. Ten per cent VAT has risen to 15 per cent—that is a massive increase of 50 per cent. The price of all commodities used in the service industry are listed on page 90 of the VAT publication. The list includes tyres, tubes, spare parts, all part of the motor trade service industry. The imposition of that value-added tax is having detrimental effects on that industry. Not since 1957 have I noted such damage being done to the trades people employed in the motor service industry.

Debate adjourned.

Dáil Éireann debate - Thursday, 22 Oct 1981

Finance (No. 2) Bill, 1981: Second Stage (Resumed).

Dáil Éireann debate -
Thursday, 22 Oct 1981