This is the definition section.
Finance (No. 2) Bill, 1981: Committee Stage.
Section 2 provides for an increase in the excise duty and drawback on beer. The rate of duty is increased by £7.381 the standard barrel.
This is the first section of this Bill which imposes penal indirect taxation on the workers and the community at large. I said on Second Stage that any Member of this House who voted for or did not vote against the Financial Resolutions on budget night in July contributed to the downturn in activities and the difficulties imposed in the shop and in the pub. We are now placing this imposition on beer. I also said that all those increases in indirect taxation affect the CPI figure. We are all aware of the damage done by any increase in the CPI figure.
Deputy Reynolds spelled out clearly that there was absolutely no necessity for this budget. I was criticised by the Minister for Finance for saying on Second Stage that it was a propaganda exercise. I submit that it was the greatest propaganda exercise ever perpetrated on the people. It was started in this House before any examination of the books took place. The proof of that is the buoyancy of the revenue returns in September which indicates clearly that we should never have had that budget. It was introduced purely for tactical political purposes, and to blame Fianna Fáil. The blame is now being transferred from Fianna Fáil, because of the breakdown in the national wage agreement, to the civil servants, the public sector, and what have you, or anywhere a finger can be pointed in the interests of political expediency.
I am opposing this increase in the price of beer. I am absolutely opposed to it because of the harm it is doing to the industry.
I want the Minister to spell out clearly the income from beer in the years 1979, 1980 and 1981. I believe we are at the stage of diminishing returns with regard to indirect taxation. I have some sympathy with the Minister for Finance at budget time. The Taoiseach is so concerned about getting publicity that he is saying around this House "Kill that story before it gets to the press". His public image must be right regardless of the reality of the situation. His attitude is that the public are not entitled to know about his shortcomings even though they certainly outnumber his few good points.
I accept that a Minister for Finance has a very narrow base from which to operate in the whole area of taxation in a country and with a population such as ours. Basically there is the matter of indirect taxation and income taxation. There is no doubt that during our time in office we gave the greatest ever benefits to the PAYE sector. However, that does not mean that the PAYE worker is not still carrying an unfair burden. Of course he is. There is also the area of capital taxation. There has to be a more equitable distribution in this area, difficult though that may be in some ways. On later Stages of this Bill we will discuss such areas of taxation. I have a question down to the Minister for Finance about the Commission on Taxation. I do not know if the Minister would like to comment on that now or if he would prefer to wait until Question Time.
The commission are going ahead and I must say I am happy with the work they are doing.
I am very glad to hear that.
The Deputy need not worry about it.
I had certain reasons to worry.
I met the chairman——
Will the Minister state what date he met the chairman?
About two months ago and I want to say publicly that I am pleased with the work of the commission.
I am very glad to hear that. I am sure the Minister is aware that some of his Cabinet colleagues were not anxious to have such a commission.
That is irrelevant.
As the Minister is in such a generous mood, perhaps he will tell the House when it is expected the commission will issue their report?
As the Deputy is aware, this is a matter entirely for the Commission. We are not putting any pressure on them in this matter. I can say that the sooner they report the better but, as the Deputy knows, in the case of an independent commission I am not in a position to put any pressure on them to report at a particular time. That would be in contravention of their independence.
I accept what the Minister has said. Does he expect the report before the January budget?
I do not know.
With regard to the imposition of tax on beer, I wonder if we are at the stage of diminishing returns? Is the Minister facing the January budget having that same narrow base? What are his other options?
If the Deputy wishes to yield I will answer him on that point.
I will give the floor to the Minister after I make some other points. My fear is that we have reached the stage of diminishing returns so far as beer is concerned. There have been two impositions of tax on beer this year, one in January and the other in July and I do not think the latter was necessary. I should like to know the income pattern from such revenue and the quantity of beer sold over the period. I submit we are approaching very closely to the point of diminishing returns and if that is so the Minister is narrowing the base very substantially in the whole area of financial control of the economy.
The Deputy raised two points of substance which I shall answer. First, he referred to revenue buoyancy. I should like to indicate the history of the revenue raised on home-made and imported beers during the past seven or eight years. In 1974 the revenue was approximately £50 million; in 1975 it was £66 million; in 1976 it was £91 million; in 1977 it was £97 million; in 1978 it was £102 million; in 1979 it was £118 million and in 1980 it was £151 million in round figures. For the period January to September 1981 the revenue was £122.13 million. That is an increase of 30 per cent on revenue raised from that source in the same period in 1980. So far as revenue is concerned, it is reasonably buoyant.
We are talking in money terms. Has the Minister comparable volume figures? There can be a growing volume of revenue but that does not say there is not a situation of diminishing returns. We would want to know the situation regarding volume and quantity.
From the point of view of the State the relevant measure of diminishing returns is the revenue received rather than the volume sold.
(Dublin South-Central): That is not so.
That would be a dangerous foundation on which to build.
That is a matter of argument for experts in the incidence of taxation. In 1974 sales amounted to 1,600,000 standard barrels of beer while the figure in 1980 was 1,760,000 standard barrels.
That means that there has not been much of a change even though the population is larger. Therefore, we are in the area of diminishing returns.
(Dublin South-Central): Will the Minister not agree that the increases imposed on beer during the years 1974 to 1980 corresponded with wage increases? In 1980 wages and salaries generally increased by 17 or 18 per cent while increases on beer amounted to 30 per cent. Will the Minister tell the House how that gap will be made up from the point of view of buoyancy in the year 1981-82? There is bound to be a drop in consumption. Has the Minister figures for consumption since the introduction of the July budget? I am sure there is a substantial drop.
There is a two-month deferment on the payment of the duty. I do not have to hand the figures for consumption. I may have them in a moment. The proportion of the retail price represented by duty after the July budget is 48.2 per cent. In March 1976 it was 49.5 per cent and in January 1976 it was 52.7 per cent.
What year was that?
1976. Let me be straightforward about this. I do not see any great sense in pretending that we do not face the problem of diminishing returns with all these duties. In the last two years there has been a slackening in the consumption of beer. In February consumption was 56,000 barrels whereas it reached a provisional estimate of 174,000 barrels in August. It declined slightly to 142,000 barrels in September. The August figure was after the budget but before the VAT increase. There is an uneven pattern of consumption throughout the year. It is not easy to draw any conclusions.
Consumption in September 1981 was substantially greater than it was in September 1980. The Deputy might be interested to know that. Consumption in September 1980 was 135,000 barrels as against 142,000 in September 1981. The consumption of 174,000 barrels in August 1981 was much greater than consumption in August 1980 of 148,000 barrels. In July, before the budget, consumption was less than it was for July 1980, which is hard to understand. It shows these figures are not as helpful or indicative of a trend as one might imagine. It is too early to draw any definitive conclusions on this matter.
In making recommendations to me or any other Minister for Finance the Department are careful about the matter of diminishing returns if one has too big of an increase. The Deputy referred to the narrow tax base. I would have thought that being the party that abolished rates and car tax they contributed in no small way to narrowing the tax base. As politicians we might be pleased with this but as regards balancing the books it has been a regrettable development because the few remaining taxes have to bear a heavy burden. The risk the Deputy referred to of diminishing returns does exist and is aggravated by political promises of one kind or another that narrow the tax base, such as those given during the September 1977 budget.
The Deputy sought to illustrate that the July budget was not necessary on the grounds of the September revenue buoyancy figures. I am informed by the Revenue Commissioners that there was no unexpected level of buoyancy in September and that it was in line with the predictions for the ultimate outturn for revenue for the year. Hence the deficit we anticipated will occur as a result of the July budget. The reason the September figures are higher is that additional revenue was received from purchases made prior to the budget or the increase in VAT. The surge in revenue during the September period is explained by preemptive purchases of goods prior to the budget or the VAT increase and not to any massive surge in revenue. Indeed the Deputy would seem to be making a contrary case. On the one hand, he was saying there was no need for the budget because of the surge in revenue. On the other hand, he is saying we are running into the problem of diminishing returns. We cannot have it both ways. Either there was a necessity for the budget because we were in a poor situation or alternatively the revenue buoyancy situation was good.
That is very weak.
We cannot have it both ways.
The Minister has whetted my appetite to continue the argument. His defence is so weak that he does not believe the position himself. He knows the points I have made are correct. There is no contradiction in what I have said. Both are equally relevant. My colleague, Deputy Fitzpatrick, could tell the Minister more clearly than I because of his knowledge of the business the reason for discrepancies in beer sales in certain months in 1980 and 1981. There are many conditions outside financial costs that affect beer sales and, consequently, revenue. Obviously the problem of diminishing returns is of major concern. As a result of the imposition there has been reduced consumption and people are going to licensed premises half-an-hour or an hour later than they normally would.
During the months of August and September 1981 sales of beer were buoyant because we had the finest August for many years and this situation continued into September. That is the explanation for increased consumption during those months. The Minister must be concerned about diminishing returns. There is no way he can talk about my arguments being contradictory. There are diminishing returns despite occasional factors such as was the case in the months I referred to. That is the argument on one hand. There is nothing contradictory in the argument about buoyancy but the Minister refused to be flushed out at the conclusion of the Second Stage debate last week. He did not reply to Deputy Reynolds in regard to the figures he submitted.
I did not have time to reply because of the hullabaloo created on the other side of the House during the last hour of my speech.
Again, I am being diverted. The hullabaloo was caused by the Minister for the Environment coming into the House, obviously harassed and trying to slip something across. My advice to the Minister is that in trying something like that he should at least succeed.
He succeeded where it mattered.
The Minister did not refer to the figures. Buoyancy could be very substantial by the end of the year. It is worth noting that by the end of September 86 per cent of the projected tax revenue had been collected. In other words, out of a total projection of £3,210 million for the year, £2,777 million had been collected by 30 September whereas the corresponding figures for the previous three years were much lower, the highest being slightly more than 72 per cent. Therefore, we are talking about a substantially increased figure of collection and about a very buoyant tax yield. I am giving these figures again because of the Minister's failure to reply to them last week. Taking into account the Christmas shopping bonanza that is yet to come and the VAT that will accrue from that, let us be generous and say that the figure is 75 per cent in terms of the total tax collected for the year. This leaves a buoyancy of about £260 million. When we consider this figure in the light of extra revenue of about £63 million, and cutbacks of about £113 million, we realise that the budget was totally unnecessary.
The Minister referred to my statement that the narrowness of the tax base was imposing a greater burden in the area of indirect taxation. That is so but I appreciate the Minister saying that our party were the party who abolished what I considered to be the greatest burden of taxation on young married people as well as on many others, that was, rates on houses.
The section deals with excise duty on beer.
The Minister referred to rates on houses. All I will say in that regard is that he is on record as having said during the Donegal by-election campaign that he was committed to the re-imposition of rates on houses.
That one was tried by Fianna Fáil during the election campaign but it made no difference to the outcome.
The Minister for Education has suffered the cold hand of the Finance policies by way of the change in the primary school entry age.
Perhaps the Deputy would confine himself to the question of excise duty on beer.
The Minister should not be carried away solely on the basis of revenue buoyancy figures. Volume is extremely important in this context. With a growing and one would hope, affluent population, one would expect greater volume and, consequently, increased tax yield but that does not mean that there are no other factors involved. This industry is one that provides good employment for a large number of people. For the years 1974 and 1980, the Minister has given us total volume figures of 1.621 million barrels and 1.767 million barrels respectively. These figures show only a marginal difference. The Minister made the point that the rate of duty on beer at the moment, allowing for the increased duty, is not as high as it has been on previous occasions but strangely enough the previous occasions were when Deputy Ryan was Minister for Finance.
That is not strange.
We recall that Deputy Ryan was the one who advised the Government not to go ahead with the £9.60 allowance for stay-at-home wives. The reason he gave was that the payment of this allowance would affect indirect taxation on items such as beer to the extent that the CPI would be increased, that potential revenue would be reduced and that there would be a downturn in activity both in the retail outlets and in manufacturing.
By way of light reading I suggest that Members read the contributions of the then Deputy Bruton to the Finance (No. 1) Bill when it was at Committee Stage. Some of the comments he made then must be embarrassing to him now. We are opposing this section just as we are opposing every other section in the Bill that adds to the imposition of taxes. These additional taxes were unnecessary. I would remind all Members of the House that they have a responsibility in voting. They have a responsibility to ask themselves whether we can afford to increase the price of beer still further. It is a backward step. The buoyant, happy figures that the Minister has given us for August and September will turn out to be most unhappy figures for November and part of December with the possible exception of the Christmas period.
The statements made by the Deputy and his colleague about buoyancy will not be proved correct. He cannot have it both ways. However, I would like to deal with the point made by him and by Deputy Reynolds claiming that the revenue to the end of September was 86 per cent of the anticipated revenue for the year.
I said "projected".
The words mean almost the same thing. This is not correct. Tax revenue for the period to end of September was only 72 per cent of projected revenue for the year. The problem seems to be that the Deputy was including non-tax revenue in his end of September figure for this year and, therefore, was not comparing like with like.
Would the Minister give me the figures, first of all, the projected revenue for the year and, secondly, the total tax revenue collected at 30 September?
The tax revenue collected for the year as a whole——
Contributed for the year as a whole.
Let me give the figures in my own way. I will give the Deputy the figures he wants if he allows me to. There is no attempt at all to cover up anything here. The tax revenue projected, or anticipated, for the year as a whole in the budget was £3.280 million. The amount collected to end of September was——
It was £3,280 million.
£3.280 million. The tax revenue collected——
Surely it was £3,280 million.
Of course, £3,280 million. The tax revenue collected to end of September was £2,365 million. That is 72 per cent, in other words.
Let me finish. On non-tax revenue the projected revenue was £652 million and the non-tax revenue to end of September was £411.5 million. The total of non-tax and tax revenue for the period to end of September was £2,777 million. The projected estimate for the year was £3,932 million. Combining tax and non-tax, the total collected to the end of September was 70.6 per cent of the projection for the whole year, not 86 per cent.
I will come back on that later.
(Dublin South-Central): The Minister mentioned fluctuations as regards withdrawal from bond and various things like that. It is very hard to base it from month to month. As was mentioned, the figures were up on one point and down on another. I can see the reason for that. I have no doubt that on this occasion, as with all budgets, there was a downturn in consumption. Shortly after a budget there is nearly always a downturn which lasts for five, six or eight weeks. On this occasion there is not any doubt about it. Anyone in the trade, especially brewers and distillers, will tell you that the trend this time is continuing down, that there is no upsurge at all in withdrawal from bond or from the breweries. This downturn will continue. I am convinced that when we come to the January budget we will see a drop in sales in the region of 12 per cent on spirits and 6 to 7 per cent on beer. The reasons are obvious. If you look at the economy generally you will see that the purchasing power is not there. You cannot increase the price of a product by 28 to 30 per cent as we are talking about here and as we did in 1980 without increasing purchasing power. That makes common sense. The purchasing power is not there. Wages last year went up 17 to 18 per cent. The Minister here and all the Ministers are speaking about a reasonable wage agreement. If there is to be a reasonable wage agreement, if the wage agreement is in the region of the figures which the Ministers have mentioned, 6 to 7 per cent, you will see a substantial drop in volume within the next six or eight months. The public cannot get the purchasing power. These are the facts of life. We are not keeping up on this occasion as we have done in the past when we matched it with increased salaries to keep the purchasing power. On this occasion we are not matching it. There is a gap of 10 per cent between wages increases and the increase in the price of this product. Other products have increased in price also due to VAT, due to the budget, and that is taking proportionately whatever volume of money is there. Therefore, at the end of this year, if the Minister wishes to get a reasonable wage agreement, we will not be able to keep up the volume as we did in 1980.
Furthermore, we are going out of line as regards attracting tourists. I have not the exact figures here but I would guess that beer alone is 10p dearer here in the South of Ireland than it is in the Six Counties. You can say the same about the UK. If we are to get a real volume of tourism, whether we like it or not we must get it from the UK market. Let us relate the prices in the UK to the prices here. If we are to attract tourists here we will have to take these factors into consideration. Tourism is the second or third greatest industry we have. It spreads money throughout the economy. It is a very useful industry which we should try to promote. However, with this attitude we cannot help in any way to uplift tourism. We have dealt it a savage blow, although there are concessions in the budget for the hotels. Even so, this measure will have a detrimental effect on hoteliers and on the general tourist trade.
One section of the community who will be affected badly at this time are the old. The recreation of the old age pensioner in his failing years was to come out in the morning and have a smoke and a pint of beer. We are putting this completely beyond him. I have sympathy for old age pensioners because they are not able to match the purchasing power which other sections of the community have obtained over the past five or six years. People with strong muscle were able to keep up purchasing power but undoubtedly the old age pensioner is being victimised more and more. Such people really are suffering from the effects of this inflationary spiral. Increased prices on such commodities affect the old age pensioners directly. The Minister may say that we gave them substantial rises, but these rises are more than absorbed by increases in the price of fuel and other commodities which old age pensioners have to pay for. If you check the increase in fuel prices you will see that the old age pensioners are not keeping up with inflation.
If we are to keep on these lines the national wage agreement is of vital importance to all of us. I hope that the Minister will be successful in getting a reasonable national wage agreement.
Can the Minister tell us what effect there will be on the CPI as a result of the imposition on beer and the additional VAT charge?
The CPI effect of the increase of 2 pence a pint, composed of 1.82 pence in excise duty and 0.18 pence in VAT at the 10 per cent rate, was 0.226 per cent. The VAT increase to 15 per cent on 1 September 1981 added 3.5 pence to the price of the pint. The actual amount varied from 3.2 pence to 4 pence depending on the price. The estimated CPI effect of this is 0.395 per cent.
What is the total of the two?
It is 0.621 per cent.
The effect of this section is to increase the main rate of excise duty on spirits by the equivalent of 1.82 pence on a glass of spirits with effect from 22 July 1981. This increase attracted an additional payment of 0.18 pence in VAT at the 10 per cent rate, making the then total increase 2 pence on a glass of spirits.
I fear there will be the same problem here of diminishing returns and I would ask the Minister to give revenue and volume figures. I reiterate my belief that this budget was unnecessary. The additional duty on spirits together with the 50 per cent increase in VAT from 1 September represent a very substantial imposition. Perhaps the Minister would inform us as to the effect on the CPI. The arguments made by any Minister of Finance in defending a position on indirect taxation will not stand up. There are many arguments as to the real drop in volume sales of spirits in the previous year and that argument still continues. There is no doubt that there has been a drop and I believe the situation will worsen. What Deputy Fitzpatrick said in relation to beer is equally relevant to spirits.
I have always supported the concept of centralised bargaining under a national wage agreement and this Government have been careless in their approach to the idea of centralised bargaining. This point is relevant here because of the effect on the CPI and the establishment of a norm. I should like the Minister to tell the House how 9.5 per cent became 6.5 per cent. He knows I am aware how this was achieved but perhaps he would explain it to the House. This must constitute a great breakthrough in mathematics. It was an unbelievable achievement, particularly when the first figure was achieved during a three-week period and the second in 24 hours. We wish to know what the principle is because it will stand out in the history of political advance.
The Deputy should go black to dealing with spirits.
The Minister enjoys the point I am making because he knows that it was quite an achievement. Perhaps the mathematics involved will be explained sometime. There is a move, especially among younger drinkers, away from more traditional spirits such as whiskey towards white spirits. As Minister for Finance I was concerned about imposing additional indirect taxation on spirits because of the fear of diminishing returns and the effect on employment. As the House knows, Irish Distillers did have quite an amount of short-time working. The Minister talks about my arguments being contradictory. Whoever may hold that office, his defences will become more contradictory as time progresses if we continue to depend on the old reliables in the area of indirect taxation. Remember the Minister forms part of a Government with a commitment to a transfer of direct taxation to indirect taxation of, we are told, approximately 8 per cent; there are various figures floating about. In other words within two to three months at the most the Minister will face another problem, that of indirect taxation.
Therefore we must ask ourselves, how far can we go? In beer I believe we are at the stage of diminishing returns. In spirits I suspect we may be in a more serious position. Deputy Fitzpatrick (Dublin South-Central) referred earlier to the importance of achieving a moderate wage increase, something to which we all aspire. However, account must be taken also of the capacity of industry to pay, and the workers' plight and position in relation to changes such as these. Obviously if the increase is too low — as Deputy Fitzpatrick said — it will have a major impact on beer but even more so on spirits. That is why I am pointing out the position to the Minister. For example, has he any room, within the white spirits area and the traditional whiskey, to effect any changes? I am opposed to the imposition of duty. I was concerned earlier this year myself because of the half-time working obtaining in Irish Distillers. They are large employers in the east Cork area and jobs like those are important. Having had little choice available to one — how else was one to raise the necessary capital — and having touched it in January I believe there was no need then to have taken the action in July. Again, we oppose this section.
I am glad the Deputy realises that there is a problem with regard to whiskey. Indeed I am sure he realised it before introducing his January budget when he imposed 12 pence on the glass of whiskey whereas this excise increase imposes a mere two pence. This, combined with the value-added tax increase, brings the total to 9.2 pence.
Perhaps the Minister would repeat what he has just said.
I will, of course. I shall repeat it all. I was surprised at Deputy Fitzgerald talking obviously with some knowledge of the problems of buoyancy and perhaps diminishing returns in the matter of whiskey sales and sales of spirits generally. I am sure he knew that before introducing his budget in January. Yet in that budget he imposed 12 pence on whiskey. He has said just a moment ago that while he did not want to do so — no doubt he did not want to do it — he felt he had to in order to raise the revenue necessary to keep the country going. In that he probably sympathises and understands the position I face and indeed faced in July when I found that even with the 12 pence he had imposed in January, the figures for the likely outturn as far as revenue as against expenditure for 1981 was concerned were completely out of line. However, I had to take action. I was faced with all of the same reluctance in regard to increasing these taxes as I am sure Deputy Gene Fitzgerald felt way back in January.
Unfortunately, as a community, we have not been able to achieve any sort of control on public expenditure. The figures estimated at the beginning of the year of what will be spent simply mean nothing within a few months because of supplementary demands and other increases. That is what happened in the first six months of this year when expenditure went way ahead of what had been anticipated in the January budget figures. Action had to be taken immediately by the incoming Government if we were not to face an altogether intolerable situation by the end of the year which would have had a serious impact on our international credit position on which we, as a major foreign borrower, rely all too much. The effect of the combined increases in the prices of spirits in the July budget is significantly less than the increase imposed by the previous Minister in the January budget.
That was not the question I asked.
That is the question I am answering. The point I am making is that they came to 9.2 pence as against 12 pence in the January budget.
The Deputy asked about the possibility of diminishing returns in the area of whiskey and spirits generally. I must say that there definitely is a problem here. The figures for sales have shown a decline since 1978. In 1978 there was an increase of 13.4 per cent in the consumption of whiskey over the previous year. In 1979 there was a decline of 1.3 per cent.
Is that in volume terms?
Yes. It declined in 1980 to 7.3 per cent. It was against the background of those two declines that the then Minister imposed 12 pence on whiskey in the January 1981 budget. That puts the situation in context.
The Minister will be aware that at that time the Minister would not known——
If the Deputy says he did not know I will accept that. I will go so far as to say he was not in a position to know the figures for the latter few months of 1980 but probably did have those for the first few months. I have the figures for the first nine months of 1981 available to me now. Therefore, the then Minister probably had the figures for the last 10 or 11 months of 1980 available to him when he decided on his 12 pence in the January budget. Therefore the fact that he did not have the December returns does not constitute much of a case for his increase in January. However, in a sense this is a futile argument because we both know the country is in a serious dilemma as far as public finances are concerned. That means doing things we would not otherwise do and which do cause certain problems.
I just want to say that I do not agree with the Minister on the state of public finances. On that point I disagree entirely.
The Deputy may not agree but I think some Members of his party would agree with me in this. I have heard them on radio and television from time to time. In fact Deputy Woods had the goodness to acknowledge that a supplementary budget would be necessary in the second half of 1981 anyway.
He never said——
And I am aware of statements of a similar nature by Deputy O'Malley. The decline in consumption in the first nine months of 1981 in volume terms, was 2.2 per cent on the corresponding nine months of 1980. I have those figures now which illustrate again that the then Minister had fairly substantial figures available to him before imposing his 12 pence on whiskey and other spirits in the January budget. The revenue derived from these sales in the first nine months, January to September, 1981 was 24.6 per cent more than was collected in the same period in 1980 — £83 million as against £66.6 million. The effect of the excise increase of two pence on the CPI at the time of the budget itself was 0.052——
That is the spirit itself.
That is the excise duty only. The value-added tax increase which came into effect on 1 September was 0.169 per cent giving a total of 0.221 per cent of the CPI. The overall estimated effect of this on consumption was to be a drop of 2 per cent.
The Minister has not given any indication of the consumption trend in spirits in the past nine months.
I said there has been a 2.2 per cent drop between January and September. In a period there has been a drop of the difference between 4.425 million litres and 4.326 million litres. I can see the point the Deputy has been making. He is asking us not to over-penalise the whiskey industry. However, the duty is based on alcoholic content and the alcoholic content of white spirits is less than that of whiskey.
Therefore, the duty charged on white spirits is less. If we were to charge the same duty on spirits with less alcoholic content as on whiskey there would be a further distortion and dislocation. I do not think that the excise duty regime could be changed around in that way just to suit public taste, because people are changing from whiskey to white spirits, much to the regret of those of us who are traditional whiskey drinkers.
I suggest that that excise regime should not be too rigid.
It is not rigid. It is simply that you must pay duty on the amount of alcohol in your drink. Therefore, if you charge more duty on vodka with its smaller alcohol content than on whiskey you would be introducing a new discrimination into the tax code which would cause problems. I take the point the Deputy is making.
I do not think there should be a closed mind in regard to the excise regime.
(Dublin South-Central): Would the Minister tell us what is the duty now on a glass of whiskey, VAT included?
It is 81.5p. The total excise duty is 61p.
(Dublin South-Central): What percentage is that of the price of a glass of whiskey?
It is 52.2 per cent of the total retail price. In January 1981 the percentage of excise duty was 54.1. In September 1981 the percentage was down because of increases in the price of whiskey for other reasons.
(Dublin South-Central): Of course the Minister must take into account that there are price variations throughout the country.
I understand these figures are on Dublin bar prices.
(Dublin South-Central): The percentage would be much higher if you took the prices in certain parts of the country.
There would be logistic problems attached to getting prices covering the whole country.
(Dublin South-Central): Therefore, the Minister should not be using the comparison of 54 per cent with 52 per cent. If the Minister took the price in Jury's Hotel, for instance, the percentage would be much lower, probably 40 per cent.
I agree it is arbitrary to take Dublin bar prices but I do not believe the figures would be prepared differently if either Deputy Fitzgerald or Deputy Fitzpatrick were having them prepared. They are not Ballydehob prices where, I understand, you will get the best value in Ireland in a pint.
The effect of this section is to raise the excise duty on tobacco by the equivalent of 3.6p per packet of cigarettes in the most popular categories. That increase attracted an additional 0.4p in VAT, bringing the total increase to 4p on a packet.
All of these sections so far, apart from the definition section, have imposed direct taxation. This section hits the hard pressed cigarette and pipe smoker who are again being asked to bear an extra burden. The duty on pipe smokers for years lost the support of Michael Pat Murphy in the House. Any time there was an increase in tobacco duty he went into detail on it. I am concerned about the effect on employment in the tobacco industry. Because of no-smoking campaigns, the duty on tobacco had reached the point of diminishing returns, and any Minister for Finance would do well to look into that aspect because the probability is that in future there will be a substantial decrease in revenue. Will the Minister tell us the effect of the increase on the popular packet of cigarettes and on the standard 2 oz. plug of tobacco?
On the CPI, or does the Deputy want the actual figures?
On the CPI. The Minister has stated that I knew this in January. This can all be discussed across the House but I should like to know, particularly in view of the Fine Gael programme and the promise to transfer from direct to indirect taxation, what consideration the Minister has given to the proposals in relation to the areas of diminishing returns in the first three areas the Minister mentioned? They are the old reliables and some of the areas that take the brunt of indirect taxation. In the light of the Minister's experience I should like to know what he feels about the suggested 8 per cent impact there could be on the CPI because of the proposal. As the Minister is aware, the advertisements are ready for the £9.60 allowance. I should like the Minister's comments on that. I presume the advertisements will be factual and I hope we will not get the type of high publicity campaign being operated by the Government at present. In other words, I hope we do not get a campaign to project the Taoiseach's image. However, when the Taoiseach makes some statements like he did yesterday they can be seen by the public as being all wrong. The public should be given the true image and not the image that the Taoiseach would like the public to get of him, a new aspect of political life here.
I do not think that has anything to do with tobacco. The Taoiseach does not smoke.
I presume the £9.60 advertisements will be factual and will be issued by the Revenue Commissioners. I presume they will ask wives and husbands what they want to do.
This does not have anything to do with tobacco.
We are discussing indirect taxation and I should like to know when the advertisements will appear and the procedure to be adopted. I am anxious to issue a note of warning to the decent people in the Revenue Commissioners' office in case they get carried away by some of the tactics of the Government. I would not like to see them involved in a public relations campaign without them realising it, the sort of tactic that is employed by the Government. Will the Minister comment on the impact on the CPI?
(Dublin South-Central): I am always confused when duty is imposed on cigarettes because it must arouse a conflict between the Minister for Health and the Minister for Finance. The Minister for Finance, and the Revenue Commissioners rightly are concerned about revenue. They are not concerned about a reduction in the sales of cigarettes. In fact, they want the opposite, they want buoyancy. It is the duty of the Minister for Health, on the other hand, to try to discourage cigarette smoking. I try to do it with my family but I am not always successful. I wonder if a common ground can be found between those conflicting ideas. It is obvious that cigarette smoking is damaging to health. With regard to the increase in the cost of tobacco the only section of the community I am concerned about are the old age pensioners who use hard-pressed tobacco. About 16 years ago I believe there was a special provision for hard-pressed tobacco as against cigarettes. I thought a concession was made then that came down in favour of old age pensioners. Whether we like it or not that is the only luxury many old age pensioners have.
I would prefer to see a man smoking a pipe than cigarettes and we should make provision so that hard-pressed tobacco carries a lesser duty than cigarettes because health experts tell us that pipe smoking is not as detrimental to health as is cigarette smoking. We must bear in mind that there is an industry to be considered. Some basis should be found between the Minister for Finance who wants revenue and, if possible, to increase buoyancy, and the Minister for Health whose duty it is to ensure that cigarette smoking is reduced for the sake of the health of the people. I accept that some people find it impossible to give up cigarette smoking but they should be encouraged to change to pipe smoking. That is my case for making a difference between hard-pressed tobacco and cigarettes. I can understand the complications this would mean for the Revenue Commissioners but it should be possible to differentiate between the revenue for those products. I should like to know the total that the Government take on a packet of 20 cigarettes, including VAT and revenue, and that on an ounce of hard-pressed tobacco.
There is a preferential rate of duty on hard-pressed tobacco and on pipe tobacco.
(Dublin South-Central): Does it carry the same duty?
That was introduced in 1932 as a subsidy for local industry. It has been retained since and it was in the form of a rebate until 1978. When the duties were restructured in that year the rebates were done away with but the effect of it was preserved in the form of a preferential rate of duty. The reason then was that put forward by Deputy Fitzpatrick on this occasion.
(Dublin South-Central): They would be infinitesimal now in comparison to prices. Have they been updated as regards inflation or have they stayed static since?
There is a percentage preference so that unless the duty goes up the percentage ensures that the real benefit is retained.
(Dublin South-Central): Is it very substantial?
It is very hard to make a comparison. Cigarettes are levied on the basis of the number of cigarettes, per 1,000 cigarettes, and cigars and hard-pressed and pipe tobacco generally are levied on the basis of a kilogram. I will give the Deputy a comparison between piped tobacco and cigars which may be indicative. The rate of duty proposed in the budget—it will reflect the previous practice—is £30.699 per kilogram on cigars. The equivalent of cigarette duty in terms of pounds raised per kilogram of cigarettes is: cigarettes, £27.91; cigars, £30.699; Cavendish or negro head, £31.022—they are slim panatellas; hard-pressed tobacco, in contrast, £19.84; other piped tobacco, £24.938 and other smoking or chewing tobacco, £25.906. One can see, therefore, that there is a difference between hard-pressed tobacco at £19.84 and £27.90 for cigarettes.
(Dublin South-Central): Would the Minister favour increasing that?
I will look at that. Deputy Fitzgerald asked about the effect on the CPI. The CPI effect of the budget day increase was 0.216 per cent and the effect of the VAT increase was again 0.216 per cent. The total CPI effect was therefore 0.432 per cent.
Therefore we are now at the stage where we have 1.25 approximately on the three items we have covered already on the CPI. Could the Minister tell me the total revenue expected for this year as a result of the additional imposition?
That is all in the budget table.
I am asking the question now. What is the estimated revenue from these three items prior to the July budget and subsequently? The three items I refer to are tobacco, spirits and beer.
The Deputy should have asked about the other ones when we were dealing with beer. He cannot start coming back and asking questions about sections we have passed. But out of the goodness of my heart I will give him the information.
If the Minister does not wish to give me the information, well and good. I do not want any patronising attitude from any Member of this House. If the Minister wishes to keep that information from me, that is fine.
I have no wish to keep the information from the Deputy. I am just saying that the Deputy should put his questions in order. The additional yield in 1981 is £9.2 million on beer, £4.8 million on spirits and £7.9 million on tobacco, totalling £21.9 million additional revenue in 1981.
(Dublin South-Central): Does that include VAT?
Do these estimates bear any practical relationship with what is actually coming in?
As far as we can anticipate, they do. This is more or less correct. The figures we have at the moment are the figures to the end of September. They are likely to have been distorted by pre-budget purchases or purchases prior to 1 September to avoid the increase in VAT. Deputy Fitzpatrick has agreed with me on that. These month-to-month figures tend to be highly variable. All I can give is the advice I have from the Revenue Commissioners which is that the level of receipt of duty is in line with the target set out in the budget. But one cannot say that with certainty at this stage for the reasons given.
(Dublin South-Central): I asked the Minister what is the total take, including VAT and duty, on the standard packet of cigarettes.
The total take is 65.3p.
(Dublin South-Central): Does that include VAT?
That is including VAT.
The Minister did not reply to a question I asked which is relevant. We have been discussing the area of indirect taxation. We understand that the tax proposals are somewhat modified or increased by the agreed package with the Coalition and will put about 8 per cent on indirect taxation in the coming budget. Would the Minister comment on when the advertisements will appear advising PAYE people that they may, if they wish, apply to have some of their income tax transferred to their wives? Can the Minister offer any information about this rather than being silent and then, when the advertisements appear tomorrow or next week or whenever they appear, leaving himself open to the charge that they appeared without the knowledge of the elected Deputies of this House?
I know from the glint in the Deputy's eye that he is aware he is digressing. I appeal to him to direct his questions to the section being discussed.
If the Chair is charging me with being mischievous in any way——
Those are the Deputy's own words.
Let me explain that I am merely giving the Minister an opportunity to give us this information rather than be faced with charges in this House from us and some of the Independent Deputies — for example, Deputy Kemmy from Limerick — that we were not informed about this point.
Even Ministers are not given the liberty of answering questions that might be put to them unless that question is in accordance with what the Chair deems to be appropriate.
But my colleagues and I would be accommodating if the Minister wished to make a statement on the matter.
With such offer of such accommodation we will dispose of section 4 and move on to section 5.
The effect of this section is to increase the rates of excise duty with effect from 22 July 1981 on an average bottle of wine by amounts varying between the equivalent of 9p and 80p approximately per bottle depending on the alcohol content of the wine. These increases attract an additional payment of VAT on the then obtaining 10 per cent rate and raises the total tax content of a bottle of wine by amounts varying between 10p and 20p a bottle on budget day. As the House is aware, the level of VAT has been increased from 10 per cent to 15 per cent as of 1 September 1981. The resultant increase in revenue in the current financial year is £0.8 million and would be in a full year £1.6 million.
(Dublin South-Central): Is it increased from 9p to 80p?
The increase is per bottle and is dependent on the alcohol content.
(Dublin South-Central): So far as wines are concerned, is it always the strength that one goes by? I know the Revenue Commissioners will go on strength, but where wine is priced in a restaurant or a hotel it is not always the strength that matters but the quality, how it is kept, its age and so on. I am not sure that the Minister will get at the root of the problem with this degree of strength. If the Minister is going to tax stout, the working man's drink, I do not see any reason why he should not tax dear wines in proportion to their price. Anyone who can afford to pay £18 or £20 for a bottle of wine should be taxed proportionately. However, I think the cheaper wine will suffer. I know the Minister is going on the strength — there is probably no other way to work it — but I do not think the very dear wines will be sufficiently taxed, because it will be very hard to define their strength.
The Deputy is correct as far as excise duty is concerned. The amount charged is related solely to the alcoholic content as far as wine is concerned. In so far as excise duty is concerned, there is no special weighting for an expensive wine which is Appellation Contrôlée, which will have a higher price because of that. As far as value-added tax is concerned that is not the case, because that is on a percentage of the price and, obviously, the more expensive wine will bear a higher VAT content. There is also discrimination between sparkling wine, champagnes, in that they have a higher duty content for a given alcoholic content. The duty is significantly more in the case of sparking wines.
What is the effect on the CPI?
The effect on the CPI of the excise duty increases on budget day was 0.02 per cent. On 1 September, VAT was increased to 0.028 per cent, a total of 0.048 per cent.
Is section 5 agreed?
We can discuss it later on.
Ordinarily we do not discuss sections which were dealt with earlier.
The Finance Bill embraces every section on taxation, but the whole swing by the present Government is towards indirect taxation. The most penal impositions are reflected in the CPI and have contributed to the present chaos regarding a national wage agreement.
The Deputy will find himself in difficulties with the Chair if he endeavours to raise something which is relevant to a section which has already been dealt with.
Would the Chair consider the possibility of taking this section paragraph by paragraph? It refers to different items, impositions and reliefs. Could you take the four subsections separately?
For the purpose of debate, there is no inhibition on the Chair in having the discussion dealt with in the fashion you suggest, provided the Deputy understands that the question can only be put in respect of the whole section.
I do not necessarily accept that one should have a rigid structure as suggested by the Deputy but I will do everything I can to accommodate any specific queries he may have.
Deputy Fitzgerald proposed that we should discuss this section subsection by subsection.
As far as I am aware it is an unusual procedure.
Standing Orders states that on Committee Stage the Bill must be dealt with section by section.
On 6 May 1981 the present Minister said he opposed the section, because it had substantially increased the price of petrol used by working people and had also increased the price of diesel oil which in turn, would substantially increase costs in industry. Now the Minister expects the senior Government member from Limerick, Deputy Kemmy, to support the increase in petrol. The Minister had the audacity to make his remarks on 6 May regarding the increase in the price of petrol and today he is sitting coolly in the House expecting support from poor Deputy Kemmy who will be charged with increasing the price of petrol in his home constituency. The Minister also expects other Independent members to support the measure and yet he was not in favour of any increase in May 1981. The turnabouts and twisting of the Government are reaching new proportions. The 9.5 per cent recommendation of the committee on costs and competitiveness, by some major mathematical achievement overnight, was reduced to 6.5 per cent. We will hear of it being the principle of the Minister in the years to come——
I would be very interested in the point you are making if it were relevant to section 6 of the proposed legislation. I must ask the Deputy to direct his thoughts and attention to section 6.
You may not be entirely correct in your ruling because I will quote another interesting snippet from another member of the present Government on 6 May 1981 in relation to the Finance (No. 1) Bill:
The contribution of the increased price of petrol which is essential for getting people to work, has played its part in increasing the cost of living this year. There are many parts, not alone in rural Ireland but in Dublin City, where people going to work must provide their own transport.
Now, who said that? The Tánaiste, Deputy O'Leary, leader of the once proud Labour Party, in this House on 6 May. Without turning a hair, he made that statement a very short time ago and how right he was. Then when they take office one of the first things the Coalition Government hit by indirect taxation is petrol, which is no longer a luxury, but is essential to the people of rural and urban Ireland.
This further imposition by the Government on its own and with the addition of VAT will have an effect on the CPI, which I will want to know from them. The Minister a short time ago, as Finance Opposition spokesman, saw no reason why the then Minister for Finance should not give special tax concessions to the workers travelling to work who use their own transport. The Minister's memory is not so short. He remembers that. Has he now the same sympathy of practical application for these people, seeing that he has increased their travelling problem? His predecessor, Deputy Ryan, came into this House——
A decent man.
——some years back. He does not agree with the present Minister. He has said that their tax promises must be scrapped before the economy is driven mad and places a burden on every worker. What the senior Government Member for Limerick, Deputy Kemmy, has to face in travelling is a burden on him. Deputy Ryan asked if it was possible to give these people this allowance, in November 1974 or 1975, when putting a heavy burden on the people by an increase in the price of petrol. He said then that there were too many cars on the road and that the people living in rural Ireland should use one car for going to work, rather than four.
I remember hearing him that night.
I have no doubt that the Deputy meant it, as a Member of the South Dublin constituency. He would not realise the difficulties which face people in rural Ireland in trying to do just that. He did not see anything wrong in what he said. However, it is not as simple as that. I am sure that there are many workers travelling together in twos, threes and fours, when they live in the same area and work in the same area or workplace.
We will oppose this legislation and in opposing it, I draw attention to what the Minister, then Deputy Bruton said in this House, on 6 May which is:
The taxpayer therefore has to pay the full cost of travelling to work and the increases in the price of petrol introduced by the Government in this budget discourage people from travelling to work and taking up employment within our economy. This is something that has been greeted with very serious reservations by large sections of the public and perhaps it is the one element in the budget which attracted the greatest opprobium from practically everybody in Ireland. We all know the price of petrol has gone up enough as it is as a result of the increased prices imposed by the oil supplying countries. For our Government to come along and increase the prices even more strikes a very heavy blow to the production sectors of our economy.
Now, listen to this.
When accompanied by very high rates of motor insurance—
And this was before the last 25 per cent petrol increase.
—it is something which should not be introduced.
Two-and-a-half months later, that same spokesman introduced the budget which we are now discussing.
May I quote further from what the Tánaiste had to say on 6 May regarding the increase in the price of petrol:
Whatever the Minister may say, he should be in no doubt that this was one of the most unpopular features of the recent budget. It is appropriate that the House should make its opposition to that rather mistaken policy. I understand how it has come about, and at the end of the day the Government's housekeeping arrangements are awry. They were forced in the circumstances to look for revenue in this very undesirable way, considering the effects that this measure has had on the economy.
That was then Deputy Michael O'Leary, now Tánaiste and Minister for Industry and Energy, speaking in the House. Coalition Governments have always had a great capacity to reverse direction, change direction or alter the steering, with no apologies or excuses offered — just a U turn. We oppose this measure very strongly. I do not have to make the argument. I need only quote from the Minister himself who shed crocidile tears for his constituents back in May last. A few months later, those same Members see fit to introduce further increases to hit the worker going to and from his or her workplace, whether urban or rural, to hit industry — as of course it can only do, and very seriously. I heard my colleague, Deputy Woods, make a point in this House on the already hard pressed health estimates and budgets for the health boards, having no extra provision for the increased cost of petrol and so forth. These are just a few of the impacts and impositions of this petrol increase. I have not found it necessary to use arguments, but have quoted from what Deputy Bruton, now Minister for Finance, and Deputy O'Leary, now Tánaiste and Minister for Industry and Energy, said in the first part of this year on Committee Stage of the Finance (No. 1) Bill.
I am struck by the fact that Deputy Fitzgerald could not make his own speech on this subject, but had to rely on arguments produced by me in the past. I suppose, in a sense, that is a back handed compliment for the work which I was doing, that I was able to marshal all the arguments at that time, whereas he could not think of any new ones for this occassion. That does not suggest that the Deputy has been over-industrious in preparing his brief.
The reason this budget was introduced was that the financial provisions of the 1981 budget had gone completely out of line. The expenditure was far greater than that provided in the January 1981 budget by the then Minister for Finance. There would have been no need whatsoever for this increase in the price of petrol or any of the other things if that budget had been a genuine one and if genuine efforts had been made by the then Minister for Finance and his colleagues to ensure the figures for expenditure they agreed to were adhered to. We would not, on taking office last June, have had to introduce a budget with any increases in taxation if the previous Government had done their job properly in last January's budget.
I am sorry to interrupt the Minister but the Chair has been insistent on keeping the minds of Deputies on what is in the section under discussion. I remind the Minister that while reference back may be accepted as part of the case being made it may not widen the scope of what we are discussing here in section 6.
The only point I would like to make is that if remarks quoted in the House are to be made the subject of debate on this occasion it is important that the context in which those remarks were made should also be put on the record of the House so that the people who read the record and listen to the debate will appreciate the true situation. It is only with that in mind that I have referred back. I fully appreciate the point you are making about keeping to the section.
In the course of the budget debate last July I acknowledged quite clearly that I saw a major problem for many motorists when I had to introduce those increases for petrol. I fully concede the problem people going to work face and also the increased charges imposed on them. I have never attempted in any of the discussions on the budget here or elsewhere——
Why did the Minister do this? What about the Minister's insincerity?
Will Deputy Fitzgerald please allow the Minister to proceed?
I have never attempted to minimise the serious adverse effects on the personal budgets of many people this has had. There is no insincerity. I am not trying to pretend that it is otherwise than a serious imposition on the people. There is no substance for the charge being made that this budget and the increased petrol charges involved in it are a propaganda exercise. Both sides of the House know that it is a serious imposition on the people. It is ludicrous to suggest that people would try to seek benefit for themselves by imposing increases of this sort.
It is a long-term investment.
When we were faced with the necessity in July to raise the money that we were faced with raising, because the prospective budget deficit would be in the region of £950 million by the end of this year as against the predicted figure of around £500 million in the January budget, we had to look at all the possible sources of taxation available to us at that time. Income tax cannot be changed in the middle of a year. The income for tax purposes is levied over a whole year and one cannot change rates in a supplementary budget in the middle of a year. That can only be done in an annual budget.
The same goes for most forms of taxation. We were not left with a choice. We had to raise the money by indirect tax if we were to raise any money at all in July to get back to a situation where we would be on some sort of an even keel. We had to turn to all the possible options in the area of indirect taxation. Deputy Fitzgerald and Deputy Fitzpatrick have indicated that there are limits in the matter of diminishing returns to what one can raise by means of tax on beer, cigarettes and VAT. I was forced to the conclusion that I could not raise all that had to be raised to close the gap that had been opened up because the January 1981 budget had not been a genuine one, I had reluctantly to turn to raising a substantial part of the money which had to be raised by means of tax on petrol. I recognised, in making that decision, all of the arguments I made from the other side of the House last May, which Deputy Fitzgerald is now repeating on this occasion. It was with considerable reluctance that I was forced to make the decision I made.
I felt that on balance one had to do something to put our finances in order as a top priority, otherwise the situation we would face by the end of 1981 would be quite intolerable. Our figures would have been so bad, internationally, that we would not be in a position to borrow the money we must borrow abroad if we are to invest in improving the productive capacity of the economy. It is the Government's commitment to continue investment, if necessary to finance it by borrowing abroad, to develop our infrastructure and prospects for employment. It would not be possible to make those borrowings with the confidence of the bankers who are lending us money unless we took action to prevent a situation, which was unfolding when we took office last June, whereby our balance of payments deficit was running completely out of control because of an uncontrolled current budget deficit by the previous Government. It was in that context that I was forced by the realities of the situation to take the action I took in relation to petrol notwithstanding all the points Deputy Fitzgerald has made, the validity of which I recognise as being as valid now as when I spoke those words.
I am opposed to this section. I am consistent in opposing it. When the increase in the price of petrol came in last January's budget I listened to the present Minister for Finance — I will not go over what he said — and his views were my views at that time. In my speech on Second Reading of that Finance Bill I commented on the hardship imposed on people by the increased price of petrol. The case now being made by Deputy Fitzgerald was made by the Minister for Finance when he was on this side of the House. The then Minister for Finance said that the tax was absolutely essential but the present Minister for Finance is now saying that the previous Government did not go far enough to carry us over the 12-month period.
The previous Government did not control expenditure.
They put up the very same case the Minister is now putting up. I said that I thought the increase in the price of petrol imposed at that time was a hardship on certain people. I am speaking about my constituency, which is 30 miles from Galway city. There are many people from my area who are working in Galway city. Their cars are not a luxury. They have to use them to get to work. The increase in the price of petrol imposed in this budget is part of the reason why it is so hard to get a national wage agreement. The cost of travelling to and from work has increased.
Another section of the community adversely affected by any increase in the price of petrol are the small farmers. Their standard of living has been reduced. A tanker collects milk from a large supplier, but the small suppliers in my area have a small tank which they put in the back of the car to bring their milk to the creamery every morning. They have to have a car with a fairly strong horse-power. A car with a low horse-power cannot pull a tanker. A mini-car is of no use to small farmers. The increase in the price of petrol will affect the income of small farmers adversely, and the income of all farmers. Sometimes a farmer takes a beast to the mart in a trailer and he is definitely affected by any increase in the price of petrol.
Petrol price increases affect the worker who has to travel to and from work and the farmer. I do not want to make political propaganda when I say farm income has fallen consistently. Anyone who knows anything about farming knows that. I often wonder how many Deputies know or care a damn about farmers. This increase in the price of petrol will definitely cause hardship to the small farmer.
I am opposed to section 6 for these reasons. I will not talk about some of the other increases on what might be called luxuries. I want to get it across to everybody that a car is no longer a luxury. The inconsistency I see in the statements made by all parties when they are on different sides of the House annoys me. I have always tried to be consistent.
It is becoming a fetish with Government Minister to blame the Fianna Fáil Party for all the ills. As the months go by their arguments are becoming more and more hollow. Regardless of what the Minister said, I cannot see any justification for this massive imposition of tax on energy. No section of the community is immune from this savage tax. Deputy Callanan referred to the small farmer and the small man who has to travel a long distance to work. They are not the only people affected. The employer is also affected seriously by this imposition, the employer upon whom we depend so much as a private enterprise economy.
I am not saying the Minister had the easiest of tasks — no Minister for Finance ever has — but he showed political and economic misjudgement in this imposition. We talk about reducing unemployment and looking after our young people and getting jobs for them, but we will sound very insincere if we drive up the cost of energy and in doing so create more unemployment and put more people on the dole queues.
The margins of most manufacturers and business men are so small that even an increase of 1 per cent can make the difference between continuing in business and going out of business. It has never been my custom in political life to preach doom and gloom, but the Government must wake up to the fact that ultimately this form of taxation is counterproductive. The Minister may say he had to take action in the short term, but this step is counterproductive and we should be more far-seeing. Apart from the value-added tax, about which we will be talking later, this is the most draconian taxation ever introduced by any Government. It is like asking Dracula to treat somebody who is suffering from acute anaemia. It appears to me to be as stupid as that.
I run a small business and I give employment to a certain member of people. Even where you can control a small business and where a small number of people are involved, it is becoming harder and harder to survive. Instead of creating an atmosphere of optimism in the economy, the Government are doing the opposite. If there were a change of Government in the morning there would be an aura of optimism. The essential difference between the Coalition Government and the Fianna Fáil Party is that we have always had confidence in this country. We have been optimistic about the capabilities of the people. In Coalition after Coalition, Ministers make the same mistakes and the same errors.
It is bad enough that we have no real job creation schemes, but people in employment are not protected. They will be at their most vulnerable as a result of the imposition of this tax. The only word to describe their policy is "monetarist", a policy which brings out the worst in capitalism and drives to the wall those who are trying to survive in small businesses. When we examine the benefits versus the liabilities of this form of taxation we cannot doubt that the ultimate economic well-being of the country was seriously affected by the last budget.
The Taoiseach may go around the country at his swashbuckling best and blame Fianna Fáil, but he will have to walk over many economic corpses on the grassy slopes of Ireland. The Government must indoctrinate themselves with the belief that they are in Government and not in Opposition.
I would ask the Deputy as I have asked other contributors to the debate, to direct his remarks more specifically to section 6.
The Chair will appreciate that the point being made by the Deputy refers specifically to the far-reaching effect of the increase in the price of petrol which was so decried by the Minister and his colleague, the Minister for Energy, a few short months age.
When the Deputy introduced it.
Initially Deputy Crowley was making very telling and relevant points, then he began to digress in a fashion which the Chair has not accepted from any other Deputy.
I was trying to show that the Government are tightening the screw in their monetarist policy and that the victims are lying strewn along the grassy slopes of Ireland because of that policy. It is a short-sighted policy. It may bring in money in the short term, but in the long term it will have a serious effect on our whole mode of living. It took a long time to build to the pitch we have reached. I remember the late Seán Lemass——
The Deputy will be in order if he relates his comments to what is proposed in section 6.
It is directly related to it. I do not want to go through the hypocrisy of saying "petrol" in every second sentence.
Actually I do not think the Deputy has mentioned it to date.
What is energy? We are trying to be constructive. Does the Chair want to hamstring us by going through motions that are totally hypocritical? Perhaps the Chair has a different definition of petrol.
The Deputy specifically mentioned the word "petrol" a moment ago. The Chair reminded him that he had not mentioned that word before. Will the Deputy kindly deal with section 6.
I will if the Chair will allow me.
I do not think the Deputy should reflect on the Chair in that manner.
The Chair will look after itself. I am asking Deputy Crowley to proceed with discussion on section 6.
I have been trying to show that the imposition of this tax on petrol and hydrocarbons will seriously affect the economy in the long term. I was about to quote the late Seán Lemass who said "a rising tide lifts all boats". That is relevant to the present situation. If the Government, by the imposition of these taxes and the preaching of gloom and doom, continue in this way they will depress the economy and all the economic boats will sink without trace.
I know that in Opposition it is easy to make cockshots of Ministers and of the Government but I believe that in relation to these taxes the Government have been less than sincere. They have imposed savage taxes and have blamed Fianna Fáil. I am sure this was a propaganda exercise. Perhaps the Minister for Finance was not involved in it but he has to carry out his duties and he is subject to a higher authority. I am very worried about the future economic well-being because people will no longer be able to travel to work. In my constituency many people have to travel long distances to work. When Deputy Ryan was Minister for Finance he said that people should get together and arrange to travel to work in the one car where buses were not available. That is the only way they can afford to travel. Between redundancies, the closure of factories and loss of jobs, even in the service industries, fewer and fewer people will be travelling long distances to work.
A few minutes ago I asked the Minister if expectations or "guesstimates" of income were measuring up in reality and his answer was that they seemed to be, as far as he could judge the situation. I was rather surprised because when we have a situation where unemployment is growing, ultimately the buying power of the population is reduced and as a result the income to the Government will be drastically reduced. Perhaps that has not yet caught up.
Then we come to the farming community. I do not think anyone in the House doubts that if we have an economically viable farming industry all of us will benefit. So much of this economy depends on agriculture for its success that the slightest slowing-down of progress in agriculture can have dramatic consequences for the country. What other way can the farming industry be more seriously undermined than by taxing its basic resource, namely energy? That industry cannot get by without using energy and hydrocarbons in massive quantities.
Deputy Gene Fitzgerald was right when he said many crocodile tears were being shed. Even a person without an economics degree or without third level education is aware that if we tax the energy needed to produce our agricultural goods we will affect to some degree the output of that industry. That is what has happened. I do not see the Minister for Agriculture making any attempt whatever to highlight that fact. The executive of the IFA have been conspicuously silent about the tax. Perhaps it is because their former employee is now Minister for Agriculture that they are so silent. There is no doubt that farmers have been seriously affected by the imposition of this tax. Even farmers who are not in financial trouble are not making decisions about development, about purchasing more machinery or erecting buildings. Many of them believe the Government when they say the country is in such a bad state. The Government are doing themselves a disservice by this continuous harping on the state of the economy.
We have dropped a number of points in international credit rating since this Government took over.
Well, if they keep telling the bankers of the world that this country is not worthy of getting credit——
Will the Deputy tell the House something relevant to section 6 and allow us to proceed with our business?
Is the Chair saying that what I have said is not relevant?
I am very surprised. The Leas-Cheann Comhairle must not have been listening.
The Chair will not take any reference like that from Deputy Crowley or anybody else. The Deputy should appreciate there is a time limit on the legislation we are discussing. Apart from that, on Committee Stage it is relevant to discuss only what is in the section being considered by the House. Accordingly, when a Deputy persists otherwise he is being disorderly.
I do not know why the Chair is picking on me.
I could pick on lighter people.
It is a brave man who would pick on Deputy Crowley.
The Chair is appealing to the Deputy to appreciate that there is a time limit on this debate. We are on section 6. There are other Deputies anxious to contribute and it is important to be relevant if we hope to get through all the sections.
I thought it was relevant to section 6. I was talking about the imposition of tax on petrol and diesel oils. If that is not relevant I do not know what is. I do not want to start an argument with the Chair because that would be counter-productive and there would be no advantage for anyone in it. The Chair has an important duty to perform and I realise how difficult that duty is. I do not want to be the one to make the Chair's job more difficult. However, I am sure the Chair appreciates that I must speak on behalf of the people I represent. I see how they are affected by this tax and the only forum I have in which to make their complaints is the Dáil. If I stray off the line occasionally I am sorry. I will try to be relevant.
Thank you, Deputy. The Deputy should relate his comments specifically to this section.
I have not discussed VAT which is as great an imposition. I confined my remarks solely to energy because that is the basic source by which we create wealth. If we affect that source we will dampen, if not cut, the creation of wealth.
Grand gestures in relation to the economy such as the youth employment scheme and so on are of no use if we do not look after existing industries and keep people in jobs. The imposition of this tax seriously undermines the future employment of thousands of people. The Minister should try to bring in some form of relief. He brought in relief for industry and should do so for the farming community. Their energy costs are escalating. Every job, either directly or indirectly, is related to agriculture and any help the Minister can give to the farming community in subsiding their energy costs would be for the good of the country.
In dealing with section 6, which is very important, I wish to be associated with all the comments made by spokesmen on this side of the House. I could give a full run down on the Minister's statement which he made in May when he was Opposition spokesman dealing with our Finance Bill. I wonder when did he get the great awareness of the situation that he can stand over——
I hope the Deputy will be here for my reply.
It reminds me of the poacher becoming the game-keeper. The Minister is doing a fine job as game-keeper. I do not see any great improvement in society as a result of these impositions. No extra jobs have been created. No part of this fund has been allocated to creating employment in the farming industry. The imposition has had a serious effect on the income of farmers, workers and employers. Any progressive farmer must have a tractor and a car. He must have transport and energy. He must have diesel for his tractor to help harvest crops, go to the creamery and so on. By increasing taxation the Minister has seriously damaged the income of farmers. In industry these increases can be offset against an increase in the price of goods manufactured. People would have a very good case to make because of the increased cost of the transportation of their goods to retailers or outlets. Farmers have no such redress. They cannot go to the mart and ask the auctioneer to get an extra few pounds to compensate for the fact that it was more expensive for them to transport their stock to the mart. An important section of farmers' incomes has been eroded.
As a former spokesman on agriculture and as a practising farmer you should be aware of the serious detrimental effects of your imposition in the budget you brought before the House and which you are trying to justify.
The Deputy should refrain from the use of the word "you" or "yours". He should address the Chair.
My apologies. The Minister did not bring about any improvement in relation to the position of young people who require car insurance. I raised this matter on the Order of Business this morning and asked the Taoiseach had he any proposals to bring forward a Bill. He has not. It is a broken promise because in the Fine Gael election commitment——
We are not discussing the Fine Gael commitment on car insurance on section 6 of this Bill.
Surely that is relevant.
It may not be discussed on this section.
On a point of order, to be fair to the Deputy, the Minister made that point on section 32 of the No. 1 Finance Bill earlier this year.
That is not a point of order. The Chair has decided that car insurance may not be discussed on this section.
The imposition of these duties has not brought about any great social improvement. I do not see any major change. Not one job has been created. If the Minister was able to say that 1p would go towards subsidising car insurance for young people he would have some case to make. There is no justification for the increases imposed. Young people find it impossible to own their own cars due to the cost of petrol and other charges.