Before I call on the Minister for Finance to make his budget statement I wish to remind all Members that none of the confidential information which will be circulated in advance by the Minister to certain Members may be disclosed to anyone until the Minister has revealed it to the House and premature disclosure of this information is considered a serious breach of privilege. I now call on the Minister for Finance.
Financial Resolutions, 1982. - Financial Statement, Budget, March 1982.
Have we established who the certain Members are? Is there to be a wider circulation?
In relation to the matter raised by Deputy Mitchell this morning concerning the provision of the statement of the Minister for Finance to backbenchers, the Minister has decided as a goodwill measure to make copies of his statement available as follows: ten to Fianna Fáil, ten to Fine Gael, five to Labour and one each to Deputies Sherlock, Kemmy and Gregory.
That is discrimination.
It was emphasised this morning that there was a great danger of confidentiality being breached if the statement were given out without limitation. It is a matter for the Minister for Finance and we cannot discuss it now. We discussed it at length this morning.
When can we discuss it?
The Deputy may raise it during his contribution to the debate.
We have been told time and time again that the Minister will look into this matter but nothing has been done about it. I am not raising this simply because the Minister is a member of Fianna Fáil; I raised it also with our own Minister.
The Minister has full responsibility for the secrecy of the contents of his budget statement and it is a matter for him. I suggest that Deputy Mitchell take up the matter with his party.
On the point which has been raised, I have broken with tradition and elaborated enormously on it. I will be taking up the matter later with the Ceann Comhairle and the Committee on Procedure and Privileges.
It is unusual, to say the least, for two budgets to be introduced in Dáil Éireann within two months of each other. This fact alone makes it inescapable that this budget will, in many respects, be similar to that which was presented on 27 January last. In the fortnight available to me, however, I have tried to ensure that while the principal objectives of that budget —to reduce the current budget deficit and the overall Exchequer borrowing requirement—will be met, my budget will help those least able to bear hardship and will achieve its aims in a far less disruptive way. Some of my excise taxation proposals have already been implemented and I shall be asking the Dáil to confirm these today.
MEDIUM-TERM PLANNING
This Government's reappraisal of our economic and financial situation does not, of course, end today. We have already initiated preparation of a plan for the management of the economy over the next four to five years. It will incorporate the policies considered necessary to deal with unemployment, prices, the balance of payments and Government borrowing. Its central objective will be to establish the conditions necessary for sustained growth in employment and I hope to have it completed by June 1982.
BUDGET POLICY
The greatest problem facing this country today is unemployment and policy must have regard to this. If we use the budget simply to achieve financial targets without regard to other consequences, there is a risk of serious damage to the economy. Moreover, given the structure of our tax system and the narrowness of the tax base, such measures can cause sharp increases in the Consumer Price Index. However inescapable this effect, it has in the past created pressure for higher wage increases, leading in turn to still higher inflation. The essence of a successful budgetary policy is to find a balance between the need to keep borrowing as low as possible and the obligation to ensure that all opportunities for economic and social progress are fully exploited.
The Government are, nevertheless, firmly committed to bringing the current deficit under control and gradually eliminating it, but our approach to that objective must be flexible and in tune with underlying developments at home and abroad. Borrowing for capital investment is essential if we are fully to develop the economy and meet the challenge of unemployment. We must provide more and more jobs. We are in the unique position in the European context of having a young and growing population. This is both a challenge and an opportunity. Above all else it imposes an obligation on us to create more employment for the additional numbers entering the labour market.
A proper sense of priorities for capital investment must be established and resources concentrated on projects which will yield a worthwhile return. This does not mean that essential social investment should not proceed, but it does mean that the social returns from such investment must be clear and substantial in order to justify the burden of borrowing that it entails.
Our problems in relation to the public finances are formidable, but not insurmountable. A sustained and businesslike approach across the broad sweep of public policies will, I believe, solve these problems without disruption of the economic and social life of the community and the Government intend to proceed in this fashion.
It is no solution to our problems continually to bemoan the difficulties we face. We must approach the situation in a spirit of confidence and well-founded realistic optimism. If we are to make the progress that is necessary, we must go forward believing that we have the capacity to meet our aspirations.
ECONOMIC DEVELOPMENTS
Before I turn to the details of today's budget, I should like to comment briefly on the economic outlook. Prospects for a modest improvement internationally are good. World oil prices have weakened recently. In the EEC as a whole, inflation has fallen and business expectations have been gradually improving. The EEC Commission believes that an economic recovery is under way in Europe and it should gain momentum as the year progresses.
In Ireland manufacturing output began to recover in August, 1981 and in December was almost 11 per cent higher than a year earlier. Industrial exports in February were up 13 per cent in volume on February 1981. In contast, imports in February showed little volume change over the position a year earlier — indeed, the volume of imports of consumer goods fell. The seasonaly-corrected live register figure for February showed its first fall since last May.
The international upturn should benefit growth and the balance of payments, provided our output is competitive and both the current budget deficit and over-all Government borrowing can be contained.
I will be announcing specific measures to relieve unemployment later. These relate in particular to the building industry, where a significant part of the problem lies and where activity has the added attraction of a relatively low import content. The Government cannot, however, resolve the unemployment problem unaided. Indeed, the benefits of this budget will be eroded if we continue to lose competitiveness. I am, by acting directly on food subsidies, taking action to contain prices. In turn we must look for moderation in pay settlements in all sectors. There are some major settlements yet to be made in the present pay round and it is vital that these are not excessive. It is simply not acceptable that even though the Government moderate price increases by subsidies and impose lower indirect taxes than in the January Budget workers should at the same time insist on obtaining the maximum possible income increases. Unless those who are in employment acknowledge that pressing excessive demands simply means pricing new job-seekers out of employment, we shall make little progress. The fact is that as a nation living standards can only be maintained and improved and employment safeguarded if we all make a contribution to achieving this objective.
The natural concern of parents is the welfare of their children and most are ready to make sacrifices in order to enhance their prospects. At the present time, many parents are understandably concerned about job prospects for their children and I am sure I am echoing their concern in saying that those of us who are already in jobs should do nothing to undermine their legitimate hopes. Our principal aim should be to provide jobs for all our young people who want to work in their own country.
OPENING CURRENT BUDGET POSITION
The opening deficit faced by my predecessor on 27 January was £933 million and he aimed to reduce this to £175 million. Apart from the delays in implementing the budget, the arithmetic must now be adjusted to take account of changes in both expenditure and taxation which I am proposing today. The full details of today's budget are listed in the "Principal Features of the Budget". I would now like to detail the adjustments which are being made to the earlier package.
REVISED EXPENDITURE ALLOCATIONS
SOCIAL WELFARE
The improvements in welfare payments and increases in social insurance contributions announced in January are being given full effect in the Social Welfare Bill 1982, which has already been passed by this House. As a result total welfare payments will increase by, for example, up to
—£16.61 a week for a married couple with three children on disability or unemployment benefit, giving a total weekly flat-rate payment of £82.80,
—£15.06 a week for a widow under 66 years with three children on contributory widow's pension, giving a total weekly figure of £75.10, and
—£14.05 a week for a married couple, under 80 years, on contributory old age pension, giving a total weekly figure of £70.30.
While these improvements are generous in the context of our present financial difficulties, the Government are satisfied that further action is required to address some of the more severe social problems to be found in the community. Briefly, the main additional provisions I am making are as follows:
Double Payment
While I will be detailing my tax proposals at a later stage, I may say at this point that the Government have decided not to proceed with the tax credit proposals in the 27 January budget. The £4 million from the family income supplement thus released will now be re-allocated to provide a double week's payment in September and December for the child dependants of weekly social welfare recipients.
Separated wives and unemployment assistance
I am providing £200,000 in 1982 for the removal of the anomaly whereby married women who are separated from their husbands cannot qualify for unemployment assistance unless they have dependent children.
Accommodation of old people living alone
A special task force will undertake an emergency programme on a national basis to improve the living conditions of old people living alone in insanitary or unfit accommodation. This programme will be financed from a special fund of £1 million.
National Community Development Agency
It has already been announced that the Government have decided to establish a national community development agency. Two million pounds will be provided for this purpose in 1982. As the published Estimates already provide £250,000 for an "Anti-poverty agency" the additional Exchequer cost is £1.75 million.
Medical Cards for Social Welfare old age pensioners
As a further contribution towards those in greater need, the Government have decided that all recipients of social welfare contributory and non-contributory old age pensions will be entitled to medical cards from 1 July next. This concession is estimated to cost £2.2 million in a full year and £1 million in 1982.
Local Services
Support for the level of public services and the implementation of other improvements at local level are seen by the Government to warrant additional allocations under a number of headings. There will be special emphasis on the Dublin area because of the severity of the social problems there.
Health Services and Education Services
I am providing additional Exchequer finance of £10 million in order to ease the financial constraints on the health services. These services will benefit further from £8 million additional buoyancy which has emerged recently in health contribution receipts and it will be possible to divert a further £10 million to hospital services within the revised total allocation. The Exchequer grants to health agencies for health services will thus total £797 million in 1982.
Expenditure on education services in the educational priority areas of urban centres will be increased by £200,000 to offset the particular disadvantages suffered by children in these areas.
Local Authorities' Non-Capital Services
Local authorities will be allowed to allocate 40 per cent of the proceeds of sale of local authority houses to housing maintenance this year. This will produce an extra £6.6 million for this purpose. Prospective savings of the SDA loans scheme will offset any adverse effects on that scheme.
Local authorities will also have available £2.9 million hitherto required as local contributions towards the cost of supplementary welfare allowances and arterial drainage. This will help relieve pressure on local authority finances. Of this sum, £2.3 million will be financed from central funds, the remainder being secured by a marginal reduction in drainage services provided by the Office of Public Works.
Local Authorities' Capital Services
A sum of £1.5 million is being provided for a revolving fund which will enable local authorities to acquire, rehabilitate and sell currently run-down residential properties. The proceeds of sales will be available for the purpose of further acquisitions and renovations and this process will continue indefinitely.
Dublin Corporation Non-Capital Services
Because of particular housing maintenance problems in Dublin city, the Government have decided that the corporation should be enabled to spend a further £750,000 for this purpose. An additional £2.5 million is being made available to the Corporation to increase its workforce from 150 to 500 under the Environmental Improvement Scheme and a special allocation of £20 million is being made to supplement the Corporation's resources for their normal services in 1982.
Dublin Corporation Capital Services
An additional £14 million will be made available to Dublin corporation for house construction, especially for urban renewal purposes. This will bring the corporation's allocation to £76 million for 1982. If additional work this year warrants it, a further allocation up to a maximum of £91 million may be made.
The corporation will also be given £1 million to instal facilities in substandard corporation dwellings which at present lack bathroom facilities. The corporation will be enabled to purchase Shandon Park for general amenity purposes and a sum of £200,000 is being set aside for this.
Dublin Inner City Development Authority
The need for urban renewal is particularly acute in Dublin because of its scale. The Government have decided that a development authority will be established for the inner city with wide-ranging responsibility and a budget of £2 million. There is already a provision of £0.3 million for this general purpose in the Estimates and the balance of £1.7 million will be provided as capital funds. It is envisaged that the lessons learned in Dublin will serve as guidelines for urban renewal programmes in other towns and cities.
An expensive teacher.
Derelict Sites
As a disincentive to dereliction, the Government have decided to introduce a special charge on derelict sites. The precise details of the new charge have yet to be worked out but it will be designed to discourage both the hoarding of property for profit and the resulting urban blight.
Office Developments
I also propose to introduce a special levy on office developments, the proceeds of which would be used directly to finance urban renewal. The accumulation of sites for this kind of development — much of which is let at high rents — is itself a contributory cause of urban blight and it is, therefore, only reasonable that these projects should bear extra taxation which will contribute to maintainance and restoration of the urban environment.
DECENTRALISATION
In October 1980, the Government announced a detailed programme for relocating Government offices. Considerable progress had been made with site acquisition, design-work and planning before we left office. The Minister for the Public Service is now reviewing that programme with a view to getting it under way as soon as possible, in consultation with the staff interests. Sufficient funds are already available in the Estimate for the Office of Public Works to cover expenditure likely to arise this year.
OTHER CURRENT EXPENDITURES
Apart from the foregoing, I am providing for other current expenditure items not in the January budget. Details of these will be found in the "Principal Features of the Budget". Some discharge specific undertakings which this Government gave before assuming office. I might mention in particular a provision of £34.3 million to maintain food subsidies at their existing levels, the restoration of the £3,000 mortgage subsidy for single people at a cost of £1 million in 1982, the provision of £400,000 for improvements in the disadvantaged areas scheme and the provision of an extra £2.5 million for the recruitment and equipment of extra gardaí.
Other expenditures arise from decisions which the Government have taken since assuming office. Among these are some £16 million I am providing for CIE, the bulk of which arises because of the decision to freeze fares for the rest of 1982.
I am also making available £4 million for improvements in the employment incentive scheme. The terms of the scheme, which has been in operation since 1977, are being made more attractive by increasing the rates of premia and lengthening the period for which they may be paid. The weekly premium for adults is being increased from £20 to £30 and the premium for young persons is to increase from £14 to £25. The maximum period during which premia may be paid is being more than doubled, from 24 weeks to 52 weeks. I am consulting the Minister for Labour to see if further improvements to this scheme can be devised which will place in gainful employment more of those who are now unemployed.
A final amendment of current expenditure provisions which I should mention relates to the reduced interest rate scheme for farmers in severe financial difficulties, which will come into operation on 1 April. The State contribution to this scheme will be made mainly through the tax code but some direct Exchequer payments are required. The original provison for these payments was £4 million. This can now be reduced to £1.5 million for this year because of the later starting date.
The net additional non-capital expenditures which I am providing for today bring the total estimate of current spending for the year to £5,949 million. This is 24 per cent above what was actually spent on current services in 1981 and represents a substantial real increase. I am determined that this total will not be exceeded during the course of the year and I will be bringing proposals before the Government to ensure this.
CAPITAL EXPENDITURE
In addition to the capital provisions for local services I have already mentioned, the Government propose to make a number of further changes in the allocations for capital expenditure proposed by the previous Government.
National Enterprise Agency
As already announced, the Government do not intend to proceed with the establishment of the National Development Corporation. Instead, the National Enterprise Agency, which was set up in June 1981, will be developed. The objective of the agency is to provide sustainable employment through the commercial exploitation of new opportunities, especially in advanced technology and native resources. I am providing allocations of £5 million capital and £0.25 million current for the agency in 1982. Ministerial responsibility will rest with the Minister for Industry and Energy.
Whitegate Oil Refinery
Following the agreement to purchase Whitegate Oil Refinery for operation by the Irish National Petroleum Corporation, I am providing £10 million for its purchase, overhaul and start-up costs and for operating costs during the period until the refinery begins trading again. By then the Government expect that the INPC will have been established by statute.
Restoration of SDA loans to single persons
I have already indicated that the £3,000 mortgage subsidy for single people is being restored. I am also restoring their eligibility for SDA loans, at a cost of £2 million this year.
Prisons
An additional sum of £4 million is being provided for prisons. This will mainly cover the cost of planning and works for the Mountjoy Prison complex, Limerick Prison, the proposed security prison in Portlaoise, the proposed women's prison in Wheatfield and the proposed detention centres for juveniles in Wheatfield and Cork.
Clondalkin Paper Mills
The IDA, in collaboration with Fóir Teoranta, are making every effort to organise a restructuring of Clondalkin Paper Mills and discussions are taking place at present with interested parties. Pending developments, it is not possible to make any further disposition, but the question of budgetary provision does not arise at this stage as the IDA and Fóir Teoranta can operate within the overall allocations set for them.
Restoration of IDA re-equipment grants
The previous Government decided to discontinue the IDA's scheme of re-equipment grants, except in so far as the food-processing sector is concerned. In the normal course I would expect firms to upgrade their technology out of existing profits, especially given the generous tax allowances which apply to the replacement investment. In view of the difficult economic environment in which many firms are operating at the moment, however, the Government have decided to restore the re-equipment grants regime with effect from 1 April. The existing provision for the IDA includes a substantial element for re-equipment commitments already undertaken and it is not expected that the restoration will require an increase in the IDA allocation for 1982.
Rescue Package for Bula Ltd
Discussions will shortly get under way with the objective of bringing the Bula mine into operation on the basis of a restructured company. Subject to agreement in principle being reached on the proposed restructuring the State will contribute a loan of up to £1.75 million towards an interim financing package.
Agriculture
Agriculture is still our single most important industry and the setbacks which it has suffered in recent years have had adverse repercussions throughout the economy. In the interests of national economic development the Government attach the greatest importance to ensuring that the stimulus to the farming community to develop and expand is not lost. Accordingly grants under the farm modernisation scheme are being restored from a current date to their pre-September 1981 levels at a cost of £4.0 million in 1982.
The EEC Agricultural Price Review for 1982 has not yet been completed. The Government will continue their best endeavours to ensure that it is completed quickly and with satisfactory results.
Údarás na Gaeltachta
The development of the Gaeltacht depends largely on Údarás na Gaeltachta attracting employment-generating projects for Gaeltacht areas. To this end I am providing an extra £1 million capital.
Connacht Regional Airport
The Government have already indicated that the Connacht regional airport is to be completed. Work on the construction of the airport will continue as planned by the company, which has indicated that it will not require any increase this year in the Exchequer allocation of £4.35 million already provided. The project is being carried out under the technical supervision of a steering committee on which Aer Rianta is represented and is expected to be completed in 1984.
Development of full deep-water berthing facilities at Ringaskiddy, Co. Cork
In recent years there has been heavy State investment in developing Cork Harbour as a location for heavy industry. One facility which has not yet been provided is a new deep-water harbour down-river. I am providing £2 million to enable work to begin on this project in 1982.
Provision for building and construction
In order to make inroads as quickly as possible on the high level of unemployment, I am providing an overall boost to building activity of £50 million. Of this amount £21.7 million is included in expenditure I have already announced in respect of local authorities, including urban renewal schemes, the special fund for accommodation for old people and prison building. I propose to allocate the balance of £28.3 million as follows:—
—An extra £7.8 million is being made available for sanitary services. The main object of this will be the release of a number of urgent major schemes which up to now have been held up for lack of funds.
—The provision of an extra £1 million for the fire services has also been approved, enabling the current programme of improvements to continue.
—An additional £10 million is being provided for road improvements to supplement the existing provision of £70 million. Priority in the allocation of the extra £10 million will be given to the intensification of the existing programme of major improvements to national roads.
—An allocation of £2 million is being made for widening the house improvement grants scheme to provide for repairs to the basic fabric of the house, a provision which should be part of any worthwhile house improvement scheme.
—An allocation of £4.5 million is being made for local authority housing over and above the special allocation of £14 million to Dublin Corporation. The combined effect of these allocations will be to boost considerably the local authority housing programme and give much-needed employment in that sector.
—An addition of £3 million to the capital allocation for Education will allow an acceleration of the second-level school building programme. New projects will include secondary, vocational and community schools.
It is my intention that these allocations should have an immediate effect on building activity and consequently on employment levels in the building sector. The net effect of all of these adjustments is to increase the 1982 Exchequer borrowing requirement for capital purposes by almost £58 million to £1,004 million.
TAXATION
I now turn to the question of taxation. I propose to implement the tax proposals put forward in January, subject to certain changes which I will shortly outline. It would not be practicable at this stage to prepare an alternative tax package for 1982. Before indicating the details of the tax measures, however, I think it necessary to emphasise that our present taxation structure places severe constraints on the freedom of manoeuvre of any Minister for Finance. Our heavy reliance on indirect taxation for revenue purposes, for example, can cause problems for the industries affected because of its impact on the volume of sales. From the Exchequer's viewpoint, if higher taxes lead to diminishing returns, then they simply defeat the purpose for which they are introduced.
This reliance on indirect taxation is, however, the result of past policies which have deliberately exempted or relieved whole sectors of the economy—and many individuals—from the rates of taxation normal in other countries, in the interests of economic development. The limits of this policy are now being approached and it must be accepted that in future the tax net will have to be widened significantly and a higher proportion of tax revenue will have to come from direct taxation. It follows that we must also reassess critically the generous reliefs and allowances which are available at present. The Government are looking forward to the views of the Commission on Taxation on these matters; I understand that a report will be available shortly.
The corollary of widening the tax base is the obligation to develop a more equitable tax system. There is considerable public dissatisfaction with present arrangements and there is general agreement that we need to achieve a fairer distribution of the burden of taxation. A commitment to equity also demands further progress in combatting tax avoidance and tax evasion. There is still a considerable loss of revenue because of these practices and the result is that the honest taxpayer has to contribute substantially more than his fair share.
Income Tax
The Government have decided against changing the present structure of income tax in order to apply tax credits. A switch to tax credits for the next income tax year at this stage would merely give rise to enormous administrative confusion, with little result to show for it.
It is intended, therefore, to continue with the present structure of tax bands and allowances, but changes are being made in order to achieve broadly the same effect for individual taxpayers as under the earlier proposals. As the House is aware the Social Welfare Bill provides for the implementation in full of the improved social welfare children's allowances. The £9.60 weekly payment for spouses who work in the home will not, however, be implemented. The response to this scheme has illustrated clearly that the general public saw no merit in a cumbersome and complex scheme which merely transferred money from one spouse, via the Revenue Commissioners, to the other.
That scheme included a family income supplement estimated to cost £4 million this year. This supplement cannot be operated outside a tax credit system and, as I have already mentioned, I am allocating the money instead to social welfare. Thus, the whole amount set aside in January for income tax improvements is being provided again in this budget and is being applied to achieve substantially the same redistributive effects for lower and middle income groups.
While continuing the present income tax structure, I propose to increase the personal allowance from £1,115 to £1,450 for single persons and from £2,230 to £2,900 in the case of married couples. This represents an increase of 30 per cent. The bands of income taxable at 35 per cent will be reduced to £3,000 in the case of single and widowed persons and to £6,000 in the case of married couples. With these changes, it is possible to achieve substantially the same effect as the tax credit proposals of 27 January, but without any of the complexity which they would have entailed.
The allowance for widowed persons will be increased to £1,950. An additional allowance for one-parent families was introduced in 1979 and now stands at £650. While this allowance has provided valuable relief to these families, I believe that further assistance is necessary. I am, therefore, providing an increase of £300 in the case of a widowed person and an increase of £800 for other single parents. As a result of these changes, widowed parents and single parents will now be in receipt of allowances equivalent to the married allowance. Widows will continue to qualify for the married allowance in the year of bereavement.
I am also improving the exemption limits for those on low incomes. The limit for single and widowed persons will be increased from £2,000 to £2,200 and from £4,000 to £4,400 for married couples Marginal relief will continue for those whose income does not greatly exceed these amounts. These changes will remove about 24,000 low-income taxpayers from liability.
The elderly are a specially-deserving section of the community and I propose to provide income tax relief for them in several ways. In addition to the increase in the age allowance and the tax allowance for rent on private tenancies proposed on 27 January, I am also improving the age exemption limits by £200 for single and widowed persons and by £400 for married couples.
The changes in allowances, exemption limits and rate bands will cost £39 million in 1982 and £61 million in a full year. As a consequence of the change in the income tax reliefs for personal loan interest announced on 27 January, some amendments may also be necessary in the provisions relating to tax relief for preferential loan interest. I am looking at this matter in the context of the Finance Bill.
Taxation of Short-Term Social Welfare Benefits
The Government will not go ahead with the earlier proposal to tax short-term social welfare benefits. Such a tax would impose an unfair burden on many who are unfortunate enough to fall ill or to be made redundant and in any event it would be extremely difficult to administer the tax properly. I have no doubt that there are many cases where the existing provisions encourage absenteeism and reduce the incentive to work, but this does not warrant the general imposition of a tax on those who are in reduced circumstances and have no choice in the matter. The question of reforming the current arrangements will, however, be pursued in other ways.
Private use of a motor-car
A number of changes were proposed on 27 January designed to bring about a more rational approach to the taxation and use of motor-cars. One of these concerned the arrangement under which a director or employee has the private use of a company car. At present, this benefit is completely undervalued for income tax so that what is, in effect, substantial additional remuneration escapes taxation. The exploitation of this tax advantage had become widespread among employees who have little, if any, business travel to do and it is an observable fact that the cars so supplied are bigger and more expensive than the average. Every car, every spare part and every drop of fuel has to be imported and I see no justification for providing unnecessary encouragement to his form of motoring at a time when our balance of payments deficit is giving much cause for concern.
It was proposed in the January budget, as an interim measure, to increase the annual valuation of the use of a motorcar from 12½ per cent to 20 per cent of the cost of the car to the employer. I have taken a fresh look at the problem and I am satisfied that a new approach, based on the value of the benefit of the car to the employee, should be taken. In future, the taxable benefit will be based on a sliding scale related directly to the original market value of the car and varying according to whether the costs involved are borne partially or totally by the employer.
I appreciate that it might be unduly disruptive to make this change in a single step. I propose, therefore, to move in two stages to this new basis. For 1982-83, the taxable benefit will be calculated at half the full rates proposed, while the full rates will come into operation in 1983-84. Since most of these cars are replaced at two or three-year intervals this gives ample time to those concerned to decide their own priorities in the matter. The details of the scales of charge are set out in the "principal Features". These are designed to ensure that those with a substantial business mileage will be fairly treated. In particular, those with a very high business mileage, such as commercial travellers, will be given further relief, which will in effect exempt them from this charge. The yield from this change is expected to be about £2 million in 1982.
Road Tax
I am proposing that the changes in road tax announced in the January Budget will be implemented with effect from 1 May 1982. The details are set out in the "Principal Features". The extra yield is estimated at £10.5 million in 1982 and £15.9 million in a full year.
Insurance Levy
It is proposed also to impose a levy on certain insurance transactions with effect from 1 August. The levy will be at a rate equivalent to 1 per cent and will be imposed on premium income from domestic business excluding medical insurance. It is intended that the levy will be collected as a stamp duty on the basis of quarterly returns from the insurance companies. The yield in 1982 will be £2.25 million and the full year yield will be about £9 million.
Banks' Levy
The levy on the banking sector for 1982 will be £20 million. The details will be published later. I see these levies as a temporary arrangement and I will be considering in due course proposals for the introduction of a new permanent system of taxation of financial institutions when the recommendations of the Commission on Taxation become available.
Payment Dates for Corporation Tax
The due dates for payment of both first and second instalments of corporation tax will be brought forward by three months. In addition, the grace period before interest is charged on tax overdue will be reduced from two months to one. The combined effect will be that the first instalment will be payable not later than seven months after the end of the accounting period and the second instalment seven to 16, rather than the present 11 to 20, months after the end of the accounting period. These changes will bring an additional revenue of £36 million into 1982.
Capital Taxation
I have looked at the proposals for capital taxation made on 27 January and I have decided to make some changes. First, the commencement date for all the capital gains tax proposals will be 26 March, instead of 28 January. Second, the tax treatment of all short-term capital gains will be altered. These gains are akin to income and should be taxed at higher rates than gains made in the longer term. I am proposing, therefore, that gains realised within one year of acquisition will be charged at 60 per cent and gains realised within two or three years of acquisition at 50 per cent. Third, I am increasing the rate of taxation on gains from disposals of development land. In January, it was proposed that such gains, including gains made by companies, would be liable to a special capital gains tax at a rate of 45 per cent, with certain restrictions on the application of indexation relief, roll-over relief and the right to set off losses. I intend to implement these proposals but I will provide that the normal rate will now be 50 per cent instead of 45 per cent. Gains within one year of acquisition will be liable at the new 60 per cent rate for such short-term gains. There will be no change in the proposed 40 per cent rate for compulsory acquisition cases save where the new proposals for taxing short-term gains apply.
The 27 January budget also proposed a special capital acquisitions tax on discretionary trusts. I have considered this approach and have concluded that this would be an insensitive and over-simplified approach to the problem. I am, therefore, asking the Commission on Taxation to make a special examination of this area and to recommend measures.
The delay in implementation of the new capital gains tax proposals together with the deferral of the proposed tax on discretionary trusts will reduce the additional yield from capital taxation for this year from £6.5 million to £2.7 million. This new package, however, will bring in over £11 million extra next year.
Excise Duties
A number of excise duty changes were introduced from 13 March 1982 by Government Orders under the Imposition of Duties Act, 1957, as amended. This mechanism was used to minimise the revenue lost by the delay in implementing the budget and its use was entirely consistent with legislation passed without opposition by the Oireachtas. The main duties involved are alcoholic drinks, tobacco and cars over 16 horsepower. The yield from these changes is estimated at £51.4 million in 1982 and £71.3 million in a full year. The House will today have the opportunity to debate a motion noting these changes.
I propose also to implement the other excise duty changes which were put before the House on 27 January, including a duty-based tax increase of 8p per gallon on petrol, road diesel and liquid petroleum gas used in road vehicles. Which will have immediate effect. These changes will yield £21.1 million in 1982 and £24.7 million in a full year.
The excise duty increase on petrol, road diesel and LPG will take effect from midnight tonight, but increases in the price of petrol must await a new maximum prices order. This will be made by the Minister for Trade, Commerce and Tourism who will determine the implementation date. However, if oil prices decline further during this year, it is my intention to look again at the whole question of the appropriate level or taxation on petrol and other hydrocarbon products.
Value-Added Tax
There will be no VAT imposed on clothing and footwear. The other VAT changes in the 27 January proposals will be implemented, though the date of implementation of the new 18 per cent and 30 per cent VAT rates will now be 1 May 1982 and the extension of VAT to certain services which are at present exempt will now take place on 1 September 1982. Certain professional services provided to farmers and fees on the sale of agricultural land will, however, attract the special low effective VAT rate of 3 per cent. These changes will yield additional revenue of £71.3 million in 1982 and £147.7 million in a full year.
There are, however, two additional changes which I propose. I have been concerned for some time about the application of VAT to books, especially school books. The proposed new rate of 18 per cent would be particularly severe in this area, so I propose to move all books to the zero rate of VAT from 1 May 1982. This will cost £2.5 million in 1982 and £4.9 million in a full year.
VAT on Imports
As was stated in our policy document, VAT is to be imposed on imports at the point of entry. VAT-registered firms may at present, in general, import goods without payment of VAT and account for it subsequently in their normal VAT returns. I propose to change this system to require VAT to be paid at the end of the normal customs duty deferment period, that is on the 15th day of the month following importation. This change will remove the advantage which imports are seen to have over purchases of domestically-produced goods. The change will take effect from 1 September 1982. Details of how it will operate will be included in the Finance Bill.
This change will result in a gain of about £140 million for the Exchequer in 1982, since it will involve earlier payment of VAT. This includes some extra revenue from reducing evasion of VAT on imports and reducing tax losses arising from taxes unpaid in insolvencies. There will also be some gain from a reduction in arrears of VAT. If the change in relation to VAT on imports gives rise to financing difficulties for some firms, then I will look at the possibility of arranging that the Industrial Credit Company could make loan finance available.
Given the desirability of reducing the current budget deficit, the Government had little option but to apply this VAT charge to all imports. Taxation on the "old reliables" has been pushed to the limit and the two main VAT rates are already being increased substantially. The only alternative source of substantial immediate revenue would be income tax increases, which would have borne heavily on the PAYE worker and would be unacceptable to this Government at this time.
Foreign Travel Tax
The proposal by the previous Government to impose a £20 charge on each person leaving the State on a chartered aircraft will not be implemented. This would have discriminated against one form of foreign travel and, in particular, would have had a significant effect on certain disadvantaged groups. It is proposed instead to spread the tax over all travellers, by applying a charge, at the rate of £3 per passenger for air and international sea routes and £2 for cross-channel sea routes, on all air and sea passengers who purchase their ticket in Ireland. Accordingly the tax will not apply to most foreign tourists and business persons visiting the State. The tax will apply from 1 September 1982 and is estimated to yield some £1 million in 1982.
Dating of Budget Changes
A number of the income and capital taxation measures announced on 27 January were to take immediate effect. Where these measures are incorporated in today's Budget, they will now take effect from a current date. It would be inappropriate to backdate their introduction as this would, in effect, correspond to retrospective taxation. The delay in bringing these measures into effect will result in a revenue loss of approximately £2½ million.
NON-TAX REVENUE
Bord Gáis Éireann Surplus Profits
An Bord Gáis Éireann have begun to generate substantial surplus profits. In line with enabling provisions in the Gas Act 1976, arrangements are being made for the transfer to the Exchequer from Bord Gáis in 1982 of £28 million, which will be treated as non-tax revenue. This will in no way inhibit the board's ability to finance adequately their investment programme, including the construction of the Cork-Dublin pipeline.
Other Non-Tax Revenue
As already announced, the increases in Post Office charges included in the January budget are being implemented from 1 April next and will yield £38 million in revenue to the Exchequer in 1982. The decision to maintain a 12 per cent interest rate on Exchequer advances for SDA loans will, however, cost £0.85 million in 1982.
INCREASED TAX BUOYANCY
Arising partly from the delay in implementing the budget, but principally because of the different pattern of taxation involved in today's budget as compared with the original proposals, increased tax buoyancy is estimated at £45 million. The bringing forward of the date of payment of corporation tax, the imposition of VAT on imports at point of entry and the transfer of surplus profits from Bord Gáis Éireann will not materially affect purchasing power in the economy, whereas the removal of food subsidies and the imposition of VAT on clothing and footwear would have had a negative impact on tax buoyancy. Much of the increased expenditure which I have announced will also generate increased taxation. Accordingly the estimate of £45 million for increased tax buoyancy is soundly based.
DEFICIT AND BORROWING REQUIREMENT
The current budget deficit planned in the 27 January budget was £715 million. I have today added £110 million to the expenditure side of the budget. On the revenue side of the budget, the net increase is £146 million which, taking account of the net increase in expenditure of £110 million, results in a current budget deficit of £679 million or 5.6 per cent of GNP. This compares with an outturn for 1981 of £802 million, or 7.9 per cent of GNP.
The overall Exchequer borrowing requirement emerges at £1,683 million as compared with £1,661 million planned in January. This marginal increase in the borrowing requirement is more than justified by the impact on the economy of the additional expenditure involved. At £1,683 million, or 13.9 per cent of GNP, this requirement compares more than favourably with the 1981 outturn of £1,722 million or 16.9 per cent of GNP.
The planned current budget deficit and borrowing requirement represent a significant real improvement on the 1981 outturn and are an earnest of this Government's commitment to bring the public finances under control on a phased basis having regard to the needs of the economy. The improvements in the economy which the budget will allow should generate a sound basis for further progress in this area in the years ahead. The maintenance of progress will, however, require a sustained, businesslike approach across the broad sweep of public policies and the Government intend to apply this. I should like to emphasise that the Government will have to take an extremely restrictive line on all requests for additional expenditure or for further taxation reliefs. The scope for any relaxation of financial discipline simply does not exist.
CONCLUSION
As compared with the proposals of 27 January, today's budget will have a decidedly favourable impact on employment. The removal of VAT from clothing and footwear, the imposition of VAT at the point of import and the maintenance of food subsidies will sustain purchasing power and protect the position of home industries. The increased capital allocations, particularly those for the building industry and local authorities, will give a positive stimulus to employment which will also be helped by the Employment Incentive Scheme. Employment will be a central element in the medium-term plan which is being prepared.
The increases in prices as a result of today's budget will be considerably less than those planned in the January budget. The CPI effect is estimated at 2¾ per cent compared with the 4¾ per cent increase in prices which would have resulted from the January proposals. This will help to lessen inflation and encourage moderation in pay expectations. The balance of payments will also be improved through better export performance and all-round competitiveness. I estimate that, taking into account the budget changes, GDP growth this year will be higher than last year.
This Budget represents a fair balance between controlling the public finances and giving a stimulus to economic activity and employment. The extra taxation is distributed as equitably as possible, with the greater burden being imposed on those who are best able to pay. The generous social welfare changes provide considerable improvements for those who need help most. The budget is, therefore, a sensible response to the present difficult situation. It will create more confidence in this country, both at home and abroad, and it will provide a strong impetus for greater and more stable economic progress.
The immediate task facing the Government is to nurse the economy through the present difficult economic period. While we cannot expect dramatic improvements in the short term, we have every reason to feel confident about the future. Our economy is fundamentally sound and it has the capacity to grow steadily. We have assets such as a young, growing and educated labour force which are the envy of many other countries. We must, however, go forward prudently and we must acknowledge that the correction of our public finances has to be a high priority in the immediate future whether we like it or not. This will require acceptance of the fact that we cannot sustain continuing increases in living standards, irrespective or our national output or productivity. It is on this basis, and not either on false hopes or on exaggerated pessimism, that we can advance with justified confidence in our own abilities to secure a better future for all.
TABLE EXPLANATORY OF AMENDED CURRENT BUDGET 1982
|
Revenue |
£million |
Expenditure |
|||||
|
1. Tax Revenue |
4,036.0 |
1. Debt Service and Other Central Fund Charges |
1,360.0 |
||||
|
2. Non-Tax Revenue |
817.5 |
2. Supply Services (non-capital) |
4,426.6 |
||||
|
4,853.5 |
5,786.6 |
||||||
|
3. Add: Excises imposed from 13 March |
51.4 |
3. Add: 27 January Proposals |
52.3 |
||||
|
4. Add: 25 March Budget |
4. Add: 25 March Budget |
||||||
|
Capital Taxes |
2.7 |
Food subsidies |
34.3 |
||||
|
Stamp Duties |
2.3 |
Additional spending for Gardaí |
2.5 |
||||
|
Bank Levy |
20.0 |
Restore mortgage subsidy for |
|||||
|
Insurance Levy |
2.2 |
single people |
1.0 |
||||
|
Income Tax |
4.0 |
Employment Incentive Scheme |
4.0 |
||||
|
Farm Taxation |
2.7 |
Social Welfare — Double |
|||||
|
VAT |
211.3 |
Payment |
4.0 |
||||
|
Excise Duties |
Medical Cards for Social Welfare |
||||||
|
— hydrocarbon oils |
23.0 |
old age pensioners |
1.0 |
||||
|
— road tax |
10.5 |
National Community Development |
|||||
|
— foreign travel |
1.0 |
Agency |
2.0 |
||||
|
Corporation Tax |
36.0 |
Increased Health allocation |
10.0 |
||||
|
Post Office Revenue |
38.0 |
Other local services |
23.5 |
||||
|
Bord Gáis Revenue |
28.0 |
CIE subsidy |
16.0 |
||||
|
Buoyancy |
45.0 |
426.7 |
PRSI costs |
6.6 |
|||
|
Other |
8.8 |
113.7 |
|||||
|
5. Deduct: |
5. Deduct: |
||||||
|
VAT |
2.5 |
Agriculture |
2.5 |
||||
|
Personal Income Tax |
39.0 |
Pre-school facilities |
1.0 |
||||
|
Farm Taxation |
9.4 |
Other |
0.5 |
4.0 |
109.7 |
||
|
Corporation Tax |
8.0 |
||||||
|
Indirect Taxation |
|||||||
|
— motor vehicle parts |
1.5 |
||||||
|
— other |
0.4 |
||||||
|
Reduction in SDA lending rate |
0.9 |
61.7 |
365.0 |
||||
|
6. Deficit |
678.7 |
||||||
|
5,948.6 |
5,948.6 |
||||||
Department of Finance
25 March 1982
SUMMARY OF CURRENT AND CAPITAL BUDGETS
1981 and 1982
|
1981 |
1982 |
|
|
Provisional Outturn |
Post-Budget Estimate |
|
|
£m |
£m |
|
|
CURRENT BUDGET |
||
|
1. Expenditure |
||
|
(i) Central Fund Services |
1,008 |
1,361 |
|
(ii) Supply Services |
3,767 |
4,588 |
|
4,775 |
5,949 |
|
|
2. Revenue |
||
|
(i) Tax |
3,315 |
4,387 |
|
(ii) Non-Tax |
658 |
883 |
|
3,973 |
5,270 |
|
|
3. Current Budget Deficit |
802 |
679 |
|
CAPITAL BUDGET |
||
|
4. Expenditure |
||
|
(i) Public Capital Programme |
1,784 |
2,088 |
|
(ii) Other (non-programme) |
103 |
123 |
|
1,887 |
2,221 |
|
|
5. Resources |
||
|
(i) Exchequer |
224 |
254 |
|
(ii) Non-Exchequer |
743 |
953 |
|
967 |
1,207 |
|
|
6. Exchequer Borrowing Requirement for Capital Purposes |
920 |
1,004 |
|
7. Total Exchequer Borrowing Requirement (3+6) |
1,722 |
1,683 |
|
8. Total Exchequer Borrowing Requirement as % of GNP (estimate) |
16.9% |
13.9% |
SUMMARY OF CAPITAL BUDGET REQUIREMENTS (INCLUDING CURRENT BUDGET DEFICIT) AND RESOURCES, 1981 OUTTURN AND 1982 ESTIMATE
|
REQUIREMENTS |
£million |
|||
|
1981 |
1982 |
|||
|
January Budget Estimate |
July Budget Estimate |
Provisional Outturn |
Estimate |
|
|
1. Public Capital Programme |
1,798 |
1,850 |
1,784 |
2,088 |
|
2. Non-Programme Outlays |
582 |
866 |
905 |
802 |
|
of which |
||||
|
(a) Exchequer Financed |
||||
|
(i) Current Budget Deficit |
495 |
767 |
802 |
679 |
|
(ii) Miscellaneous |
76 |
88 |
71 |
93 |
|
(b) Non-Exchequer Financed |
11 |
11 |
32 |
30 |
|
3. Total Requirements |
2,380 |
2,716 |
2,689 |
2,890 |
|
RESOURCES |
||||
|
4. Non-Exchequer Resources |
859 |
859 |
743 |
953 |
|
of which |
||||
|
(a) State Bodies |
628 |
628 |
604 |
916 |
|
(b) Local Authorities |
31 |
31 |
29 |
37 |
|
(c) Private Sector Participation |
200 |
200 |
110 |
— |
|
5. Exchequer Internal Resources |
173 |
168 |
169 |
188 |
|
of which |
||||
|
(a) Loan Repayments |
55 |
56 |
57 |
56 |
|
(b) Sinking Funds |
100 |
94 |
94 |
106 |
|
(c) Appropriations-in-Aid |
18 |
18 |
18 |
26 |
|
5. European Regional Development Fund |
52 |
52 |
55 |
66 |
|
7. Exchequer Borrowing |
1,296 |
1,637 |
1,722 |
1,683 |
|
of which |
||||
|
(a) Net sales of domestic securities |
||||
|
(i) to the public |
1,296 |
1,637 |
174 |
1,683 |
|
(ii) to the commercial banks |
120 |
|||
|
(b) Small Savings |
76 |
|||
|
(c) Foreign Borrowing |
1,285 |
|||
|
(d) Miscellaneous |
67 |
|||
|
8. Total Resources |
2,380 |
2,716 |
2,689 |
2,890 |
CURRENT REVENUE 1981 AND 1982
|
1981 |
1982 |
|
|
Outturn |
Post-Budget Estimate |
|
|
£m |
£m |
|
|
Tax Revenue |
||
|
Customs |
58.5 |
68.0 |
|
Excise |
1,060.4 |
1,221.8 |
|
Estate etc. Duties |
2.2 |
1.0 |
|
Capital Taxes |
16.4 |
18.5 |
|
Stamp Duties |
67.4 |
97.2 |
|
Income Tax |
1,243.4 |
1,589.8 |
|
Corporation Tax |
200.0 |
188.0 |
|
Value-Added Tax |
619.9 |
1,084.5 |
|
Resource Tax |
0.6 |
— |
|
Agricultural Levies (EEC) |
6.8 |
8.0 |
|
Motor Vehicle Duties |
38.9 |
70.5 |
|
Youth Employment Levy |
— |
40.0 |
|
Total Tax Revenue |
3,314.5 |
4,387.3 |
|
Non-Tax Revenue |
||
|
Post Office |
282.0 |
393.0 |
|
Other |
376.2 |
489.6 |
|
Total Non-Tax Revenue |
658.2 |
882.6 |
|
Total Current Revenue |
3,972.7 |
5,269.9 |
HOW CURRENT EXPENDITURE WILL BE ALLOCATED AND FINANCED 1982
|
Where current expenditure will go |
How current expenditure will be financed |
||||
|
Item |
£m |
% of total |
Item |
£m |
% of total |
|
Service of Public Debt |
1,424 |
23.9 |
Borrowing |
679 |
11.4 |
|
Interest |
1,300 |
21.8 |
Tax Revenue |
4,387 |
73.8 |
|
Sinking Fund etc. |
124 |
2.1 |
|||
|
Customs |
68 |
1.2 |
|||
|
Social Services |
2,452 |
41.2 |
Excise |
1,222 |
20.5 |
|
Stamp Duties |
97 |
1.6 |
|||
|
Social Welfare |
880 |
14.8 |
Income Tax |
1,590 |
26.7 |
|
Education |
716 |
12.0 |
Corporation Tax |
188 |
3.2 |
|
Health |
856 |
14.4 |
Value-Added Tax |
1,084 |
18.2 |
|
Motor Vehicle Duties |
71 |
1.2 |
|||
|
Youth Employment Levy |
40 |
0.7 |
|||
|
Economic Services |
569 |
9.6 |
Capital and other taxes |
27 |
0.5 |
|
Agriculture |
263 |
4.4 |
Non-Tax Revenue |
883 |
14.8 |
|
Industry & Energy |
130 |
2.2 |
|||
|
Tourism & Transport |
145 |
2.5 |
Post Office |
393 |
6.6 |
|
Forestry & Fisheries |
31 |
0.5 |
Other |
490 |
8.2 |
|
General Services |
847 |
14.2 |
|||
|
Post Office |
242 |
4.0 |
|||
|
Defence & Justice |
451 |
7.6 |
|||
|
Public Service Pensions |
154 |
2.6 |
|||
|
Other Expenditure |
707 |
11.9 |
|||
|
Less Departmental Balances |
(-) 50 |
(-) 0.8 |
|||
|
TOTAL |
5,949 |
100.0 |
5,949 |
100.0 |
The effect of this budget will be to increase pressure for higher interest rates and for the maintenance of higher interest rates by increasing the working capital demands of industry necessitated by industry having to pay extra money this year in the form of advance value-added tax payments and advance corporation profits tax payments. These extra demands are being made in what is wholly an artificial transaction to bring down this year's deficit without taking any account of the effects that will be felt next year when as a result of these measures the deficit will be greater than it is now. This will force additional demands on our banking system and will put at a disadvantage ordinary borrowers who need working capital to expand their industry, who need money for investment or even, perhaps, for building a house.
In addition, this budget renders much worse the situation of low-income people at work. It proposes to abolish one of the most progressive measures introduced in our tax system in recent times. I refer to the family income supplement which provided additional money for people at work. Unfortunately, in the past this State has concerned itself with additional benefits to those out of work while neglecting those at work but who are on low incomes. By withdrawing the family income supplement the Government are taking a step that will hit hard the low-income person at work. This is the most socially regressive piece of tax change that we have had in recent times. It is a step that we will condemn in this House not only today but at every available opportunity in the future.
This budget does not address the basic problem of our economy which is the problem of our public finances being out of control. There is no projection in the budget as to how or when the Government intend to eliminate the current budget deficit. In the budget we introduced we stated clearly that we would eliminate this deficit within a four-year period. That clear statement not only gave confidence to our own people but showed the world at large that we meant business about putting our finances under control. In this budget the Government have simply forgotten about any plan in so far as the deficit is concerned. Indeed, by bringing forward into this year revenue that should be available next year they are taking steps that will increase the current budget deficit this year. There may be some who will ask if that matters to those who have to live from day to day but it is vitally important that people abroad who are lending us money can be confident that we are taking steps to reduce the deficit, not just this year but on a planned basis during a four-to-five year period. If those people see that the deficit is being reduced this year by artificial means they cannot be expected to have the confidence in us that they would have had when there was a clear plan to eliminate the deficit, a plan that fell with the change of Government.
(Interruptions.)
The Deputy, without interruption
I would draw the attention of the House also to the loss that will result so far as low-income families are concerned because of the withdrawal of the family income supplement. A family on an income of £2,000 per year will be £500 per year worse off as a result of this budget while the loss for a family on a £3,000 per year income will be £208 and for a £4,000 income family it will be £83. People at work should be encouraged to stay at work but by withdrawing this income supplement the Government are discouraging people from working. Consistent with this approach the Government have decided to abandon the plans for the taxation of short-term social welfare benefits. Some people may say that this was a measure that was unnecessary but I considered it to have been extremely necessary. I say this because under the present system there are many people who are better off to be out of work than to be at work. It was to tackle that situation and to ensure that everyone in every situation would be better off going out to work that we proposed to introduce a tax on social welfare benefits.
I should like to quote a particular example to illustrate this point. A married man with two children and working in the Office of Public Works who is in receipt of gross pay of £94.68 per week takes home £81.11p but if he were to go on sick leave he would be in receipt of benefits totalling about £30 more than that take home pay.
That is not correct. There is the 85 per cent clause.
We all know that the 85 per cent rule does not work. This is because the Revenue Commissioners do not find it possible to make the calculation in time to operate it. That is not a satisfactory situation. In adopting what I regard as an anti-work budget the Government are taking a step that will do lasting damage to our social and economic structures. That is why the situation must be remedied at the earliest opportunity possible.
It is extremely difficult to find out what the budget is all about. I say this because there are measures here which are concealed by measures in respect of which there is no statement as to whether they are being effected. For instance, if one looks at the table at the back of the budget one finds that under item 3 in the January budget there was a total provision for additional expenditure of £149.8 million. However, in item 3 of this budget which is supposed to cover the expenditure items that have been taken forward into this budget from the January budget, there appears a figure of merely £52.3 million or in other words a disappearance of almost £100 million from the provision for expenditure in the January budget. There is no explanation for this. There may well be an explanation but it would have been no more than courtesy to the House for the Minister to have explained the discrepancy.
Therefore, one is left to speculate as to what may have been cut out on the expenditure side. I look forward to receiving some explanation for such a wide discrepancy but I should not have to look forward to receiving that explanation in the form of the "Principal Features of the Budget". The document in that regard was not made available to me before I began speaking. The Minister should have given information of that sort to the House in his budget statement at a time when it would have been possible for me to digest it and, consequently, be prepared to deal with it in response to the budget speech. In the circumstances I have been put unfairly at a disadvantage and I have no way of knowing whether my question is answered in the statement giving the "Principal Features of the Budget." It would appear to me that a number of important items provided for in the January budget have been abandoned in this budget. First of all there was — if the Minister did not give me the information before I stood up he could hardly expect me to have it in my head when it has not been made available——
Our man stood up last year.
(Interruptions).
For clarification for Deputy Bruton, net figures are used and the £100 million does not arise.
I would have thought the Minister would have had the courtesy to make that information available to me in his speech——
I thought the Deputy would know it.
——so that I could deal with it in my speech. Making it available in a document which I could not possibly read before I stood up here, is unfair to me and does not allow me to make my contribution in a proper fashion.
Cry baby, cry.
The Deputy, without interruption.
Any changes I made in expenditure in either of the budgets I introduced were fully explained in the text. I did not put the Opposition spokesmen, or other Members of the House, at a disadvantage in interpreting those matters. That is something which might be noted by the Minister. It would appear to me that provision has not been made for additional money to look after our national heritage. Money was provided for that purpose in the January budget and it appears to have disappeared.
Anything that was in the Estimates is in.
I will have to proceed by way of question and answer. I should like to ask the Minister, if I may, if provision for the following matters appears in the budget: our heritage, additional money for the Council on the Status of Women, additional money for North-South relations, the ombudsman, additional money for youth, for pre-school facilities, and the horticultural subsidy?
They are all in. The only changes are the ones shown.
Pre-school facilities?
That is mentioned there.
Are pre-school facilities in or not?
It is all there. It is taken out. The figures are in front of the Deputy.
"Taken out"? The Minister for Agriculture said it was in.
The words "pre-school" do not appear anywhere.
In the tables at the end.
Deputy Bruton, without interruption.
I should like to refer in particular to an item in the table explanatory of the budget for non-tax revenue. The figure appears as £817 million. This contains revenue from the Post Office, including additional telephone charges. The Government announced in an advertisement on 16 March increases in telephone charges to take effect from 1 April. It would appear to me that there is some doubt as to whether the Government are capable of introducing these increases from 1 April. In the contract which people sign when they obtain a telephone there is a clause which says that at least one month's notice expiring on the last day of the calendar month following that on which the notice is given will be given to the subscriber of any alteration in the charges for calls made from the apparatus rented by him or in the rental for the apparatus. It would appear to me that to announce on 16 March increases in charges to take effect on 1 April, which is less than a full month in advance of their taking effect, would be a breach of the terms of the contract signed by the telephone subscriber.
Is it not 14 days?
I do not expect the Minister for Finance to give me an instant answer even though he seems to expect me to make instant calculations as to what he means.
(Interruptions.)
When there are any interruptions from this side of the House, a Cheann Comhairle, you step in immediately and yet you allow the other side to say anything they like.
That is incorrect.
A Cheann Comhairle, it is not incorrect.
The Deputy is wrong to say that. I have been calling for order to allow Deputy Bruton to speak without interruption when there were exchanges across the floor from both sides of the House.
I am happy to give the Minister for Finance an adequate opportunity to get an answer for me to my query. I will not insist, as he seems to do in my case, that he should make instant calculations about what he intends since he did not state it in his speech.
I regret the fact that the Government have decided to abandon the provision of £20 million in our budget for the National Development Corporation, and the substitution for it of a much truncated body, namely, a National Enterprise Agency with provision for a mere £5 million. The National Development Corporation had the capacity to do a considerable amount of work in developing new employment opportunities for our people in a manner which private enterprise could not, concerned as it is with a narrower resource base and with not undertaking higher risks which a State-financed body with a wider resource base could undertake.
Many risk ventures at the frontiers of technology would have been undertaken by the National Development Corporation as conceived by the outgoing Government. The abandonment of the National Development Corporation is important this year in that job opportunities which could have been created this year will be lost, and more important still is its symbolic value. It indicates that the Government do not intend to proceed in this general direction to get State enterprise involved in profit-making enterprises on the frontiers of technology to create employment. I very much regret the decision not to make provision for the National Development Corporation. At an early opportunity when positions change in this House, it will be possible to reverse that decision.
I regret also that a number of items in this budget although good in themselves — and they are not matters I should wish to criticise on their merits — such as matters concerning the inner city were introduced into this budget, not as a result of consultations with the responsible authorities such as the health boards, or the corporation, or other local authorities to who this House delegates responsibility for policy-making, but as a result of conversations between one Deputy and another. That by-passes proper local authority channels. We have local authorities such as Dublin Corporation, and we have health boards such as the Eastern Health Board, whose job it is to decide priorities within their own area of competence, priorities in the matters of roads, education, vocational education committees and social services.
To by-pass the local authority structure — local authorities we established in this House to make policies and to allocate budgets within their own areas — is demoralising and in a sense short-circuits proper democratic processes. I do not believe it is good practice for deals of that sort to be implemented in this way. It is far more appropriate that all the people involved on those local authorities should be consulted. They were elected by the public to decide on priorities and they should have the opportunity to decide what should be done within broad allocations given to them by the Government.
I do not believe policy should be made in the name of this House by two Deputies out of the total number in this House. No deal made between them should become a policy which overrides the proper processes which have been established for the making of policy through local authorities such as the health boards and Dublin Corporation. That is not a satisfactory way in which to proceed, and I very much regret it.
We face many problems in this economy. I mentioned one already: the problem of the maintenance of incentives to work. We need to encourage people to work more. I regret certain aspects of the budget which seem to move away from the maintenance of that important incentive. I do not wish to add to what I have already said and which stands on its own.
This was highlighted by the European Community in their recent report on the economies of member countries. We need a massive boost to investment in the re-equipment of our industry, in developing new technologies to ensure that plant in our industries does not become obsolescent and does not place us in a situation in which we lose jobs as a result. I believe this budget, in forcing many of these firms to pay advance value-added-tax this year — and it must be remembered that most our our progressive manufacturing firms are firms which import their raw materials — will push up the cost of these raw materials. At least in the short term it will dramatically increase their cost as a result of the insistence of this Government on charging value-added-tax at an earlier stage than has been the practice heretofore. Furthermore the bringing forward of corporation profits tax payments will put pressure on the working capital requirements of many firms in industry in this country at this time.
The combination of these two measures this year will suck away funds that should be available this year to these firms to invest in increasing their capacity to compete abroad and to create new jobs. These moneys, which should be available for that purpose to protect jobs and to expand job opportunities, instead will have to be used to prop up an artificial current budget deficit in an artificial transaction for one year only in order to give the present Government the opportunity of saying that they brought down the budget deficit to our target. I believe that is a very bad use of national funds. If we have national funds available they should not be used to finance this sort of artificial transaction. Instead they should be used to ensure that our industry is modernised so that jobs can be created. I believe that in that sense, in sucking away funds that should be available for investment, this Budget is anti-investment and hence anti-jobs.
Deputies might like to cast their eye over the explanatory table of the budget in regard to capital taxation and compare the capital taxation provisions in the 1982 Budget of January where there was provision for £6.5 million for capital taxation, with the provision in this Budget where there is only £2.7 million for capital taxation. This is something that perhaps some Deputies who at least supported the nomination of the Taoiseach might cause themselves to ponder upon.
Of course the reason for the difference is the fact that the Government have decided not to proceed with the tax on discretionary trusts which the outgoing Government had proposed. A tax of this type is wholly new and its details will require to be worked out in such a way that it would affect only genuine tax avoidance devices, the genuine tax avoidance use of discretionary trusts. There was no intention, and would be no intention, to impose taxation on discretionary trusts set up for particular family circumstances to which discretionary trusts would normally be approptriate regardless of circumstances. Our intention there solely was to deal with a situation in which discretionary trusts were being used solely for the purpose of avoiding capital acquisitions tax, for no other purpose. Naturally that is something on which we could have elaborated in detail in the Finance Bill.
However, the present Government have abandoned the exercise entirely. They have decided they will kick discretionary trusts out of court altogether into that great escape hatch, the Commission on Taxation. I believe they have lacked courage in so doing. I believe that the area of tax avoidance is not one that should be put on the long finger. There are too many people who have access to expert advice who, as a result, are able to ensure that they do not pay the same taxation on the same transactions as other people who, for lack of means, are unable to obtain the same advice. I believe that this is inequitable. I believe we should do everything we can, within our powers and ingenuity, to stamp out tax evasion of that sort. I believe that the tax on discretionary trusts was dealing with a particularly difficult form of tax avoidance and that the abandonment by the Government of that certainly difficult attempt to deal with a difficult problem is something which shows that they are not serious in tackling this area. Let it be said that we have in this country, and are losing very substantial sums of money as a result, a very large black economy. Some people have estimated the value of the black economy, wherein some people are engaging in activities of which the Revenue Commissioners know nothing, as between £200 million and £500 million.
The result of this tax avoidance or evasion is that other people have to pay very substantial amounts of additional taxation to pay for the people who are avoiding their due share, or who are claiming benefits to which they are not entitled because they are working as well as drawing benefits. As I said in my budget speech I believe it will never be possible to wholly stamp out this practice by legislative means. Ultimately one must depend on moral suasion, on encouraging people by example. I believe the action of the Government on this occasion — in abandoning the attempt to deal with tax avoidance by means of discretionary trusts by people who are quite well off — is very bad example to other people whom we should be trying to persuade not to engage in tax evasion or claim benefits to which they are not entitled. I believe it gives precisely the wrong type of moral lead to this community at this time. It is something which I would be surprised if all of the Deputies who supported Deputy Haughey for Taoiseach would find themselves happy in supporting in this budget.
In summary, my biggest worry about this budget would be as follows: first of all I believe it is a budget which does damage to the incentive to work by abolishing the family income supplement for low-income people at work and by abolishing the proposal to tax social welfare benefits. Secondly, I believe it is a budget that hits investment and will push up interest rates by sucking out money which should be available for investment and for lending to finance artificial transactions in the form of advanced payment of corporation profits tax and value-added tax. Thirdly, it is a budget which does not address the basic problem of getting our finances under control on a phased, planned basis, for two reasons, firstly, because by drawing forward money from next year into this year it actually increases the opening budget deficit for next year and, secondly, because it has abandoned the clear commitment we had in our budget of getting rid of the budget deficity over a stated period of four years; there is in this budget no period, no plan, no future indication of what will happen about the current budget deficit. I believe that does damage to our economy by removing a discipline, removing a sense of leadership by the Government on a planned basis. I regret that that has been done. I hope that the Minister for Finance will avail of an early opportunity to say clearly what are his plans over the next four years for the current budget deficit.
We have heard from the Taoiseach that he intends that an economic plan will be published. I would have thought that one of the items that would be contained in an economic plan would be an indication of what were one's plans, which are matters directly within the control of Government itself. It is all very well for Government planners to be planning other people's affairs. The place where Government planners should start is with their own affairs. One of the prime affairs which is the concern of Government is the size of the current budget deficit and the size of the total Exchequer borrowing requirement. Whereas the previous Government had a clear plan over a four-year period for the elimination of the deficit, there is no plan whatever in this budget for the elimination of the deficit.
These are the measures that cause me the greatest worry in this budget. Regretably I will have to reserve my position on many of the other items because I did not have the opportunity of seeing matters that are in the "Principal Features of the Budget" before I commenced my speech. However, if other opportunities arise, I will avail of them to deal with these matters.
A good budget is one that is part of overall economic and social planning. A good budget is one that is supposed to legislate for a more equitable system of taxation. Another characteristic of a good budget is one that allocates scarce resources for those in greatest need and which eliminates waste and inefficiency in public expenditure programmes. I am sure all would agree that these are the general characteristics of a good budget. Above all, a good budget would have one outstanding characteristic in that it should not shirk from raising by way of taxation essential revenue to pay for public services. On all of these scores the budget of the Taoiseach — again, we see the hand of the Taoiseach behind this budget — fails dismally. Once again we have the perpetual double counting and the perpetual double money in a budget: in other words, now you see it and now you do not.
Let us look at what precisely the Taoiseach and the Minister for Finance have done in relation to the budget. At the end of this document they have postulated a current budget deficit of £679 million. The Minister for Finance on a once-off basis has brought forward £140 million of that into 1982, and not being satisfied with that he has brought forward £36 million of corporation profits tax into 1982. Lo and behold, we emerge with a closing budget deficit for the year of £679 million. Needless to remark as Deputy Haughey well knows, it is virtually a carbon copy of the budget which he wrote for Deputy Gene Fitzgerald in January of last year when Deputy Fitzgerald prognosticated that the estimated current budget deficit——
Is the Deputy talking about Deputy FitzGerald or the Minister, Deputy Fitzgerald?
The then Minister. He said that the estimated current budget deficit was £515 million or 5½ per cent of GNP. We know that despite the budget we introduced in July 1981 the outturn in 1981 was £802 million. Today I submit we have been presented with carbon copy number two. We see yet another cuckoo in full flight. The current budget deficit is not £679 million as proposed here. I submit it is no less than £880 million. I challenge Deputy Haughey and Deputy MacSharry——
I would remind the Deputy——
My apologies.
Yes. I ask the Deputy to address his remarks to the Chair and not invite comments from a Deputy or Minister.
I challenge the Taoiseach and the Minister for Finance — and I commiserate with the public service staff who must serve them — to deny the data I propose to state. The current budget deficit is now stated to be £679 million and one must add to that £36 million of CPT as a non-recurring item. A figure of £45 million is given in respect of buoyancy of revenue. In the alternative budget put forward by Fianna Fáil in the 1982 General Election — the O'Donoghue budget — buoyancy of revenue was then prognosticated at £20 million. Lo and behold, three or four months later it has become £45 million. In charity I will accept the one prognosticated by the Minister for Education and I will deduct £20 million——
The Deputy should be accurate——
Will the Minister kindly refrain from interrupting?
In the interests of accuracy I would like to be quoted accurately.
I have spent seven months in the Department of Finance and I have analysed much of the data put forward in the alternative budget. I submit that the current budget deficit for this year will be at least £870 million. Obviously the Taoiseach and the Minister for Finance were not happy with creating once again a carbon copy of their misguided economic strategy with regard to the handling of public finances. What did they do? They looked after their friends. We all know who are the friends of the Taoiseach. We all know who are the discretionary trust occupiers. What has he done for them? He has come into this House today and has handed over to them £3 million of tax relief. He eliminated the deliberate procedures we brought in. He has given a post-election handout to his friends who approached him in Galway and in various other parts of the country. In one statement in Galway an assurance was given that the discretionary trust provisions proposed by our Government would be withdrawn by him.
We are back on the old merry-goround. I hope that Sinn Féin, the Workers' Party — if they are still here — will decide what way they are going to vote and I hope that Deputy Gregory is fully aware of what is in the budget. This Deputy had his contract signed by the general secretary of a trade union because he could not trust the Taoiseach. I hope he appreciates who will benefit by the £3 million handout. It is for the developers of inner city properties, for the land speculators, for people in County Dublin and in the inner city who can buy agricultural land at £3,000 per acre and flog it overnight on a re-zoning decision at £35,000 per acre as development land and then put the money into a family-controlled discretionary trust. When we introduced discretionary trusts, personally I felt we should have taken a yield of £7 million or £8 million, but the 3 per cent rate was agreed. There were many other exemption segments within that discretionary trust acquisition but we put it in and it should have stayed. It is a public scandal that in this statement brought forward by an allegedly caring Government, a Government who care about food subsidies, who care about children's clothes and footwear——
And unemployment.
And nothing for it.
We will come to that in a few moments. It is ironic that instead we knock off about £6½ million of capital taxation and effectively make the whole situation totally derisory in terms of an effective budget strategy. What do we have instead? There are three lines relating to the famous economic and social plan which we are to see within the next three months to deal with employment. It is mentioned in the first page of the Minister's speech but it is contained in one sentence: "We have already initiated preparation of a plan for the management of the economy over the next four to five years". That is the Government's economic and social planning, their social commitment and what the country will face in the lifetime of this Dáil. I do not believe I am being discourteous to the Taoiseach or disclosing undue confidences but when we met the Leader of the Fianna Fáil Party, who was accompanied by Deputies Tunney and Woods — The Labour Party was represented by Deputies O'Leary and Higgins and myself — we expressed our interest in setting up a stable Government and asked him what he had in mind in terms of an economic and social plan. We did not seek the meeting. We got a quizzical lifting of the eyebrows and a presidential reaction which said: the plan will be brought in; we will be availing of the ERSI, we will have some documents from the NESC and then produce a plan. Perhaps, of course, there would be an input from the Department of Finance.
We are not going to see any economic and social plan because there is not any intention, desire or impetus, as the Minister for Education knows well having had his Department of Economic Planning and Development emasculated, destroyed and thrown up to Earlsfort Terrace, staff and all. We all know that there is not any intention of producing such a plan. At least in the seven months we were in office——
The Deputy's Government were to produce one in four months.
(Cavan-Monaghan): The Minister for Education should not be talking about his plan because it and himself were turfed out by the Taoiseach.
In our short time in office we attempted to set up a basic planning structure here. I must confess that I am wholly derisory in terms of any serious economic intent on the part of Fianna Fáil to introduce a plan. We have great potential here. We have a young and skilled population and potential to develop many sectors of our economy. Agriculture is undeveloped in many areas. Our food processing industry and our export of live cattle are a disgrace, particularly when one considers that 300,000 live cattle went out of the country in the last 17 months. Our semi-State sector, if properly organised, could produce far greater wealth. We also have the relative advantages of the seas of Ireland in terms of mariculture and other future development.
I am not pessimistic about our potential in terms of employment but there is no desire to plan four or five years ahead. So endemic is the short-term expediency of the leader of the Government that I despair, having seen the Summerhill document of massive proposals of expenditure with no relationship to taxation to meet it and when I see the mendacity indulged in in relation to the Irish Commissioner in the EEC in the last 24 hours at a time when we should be building up the common agricultural policy. It is little wonder that politicians here are held in such abject and desperately low esteem by the people.
The Deputy should speak for himself.
They are the realities and we must try to recover from that situation. Worse still, the budget is a "con-job" in terms of hidden expenditure. I have always opposed the misuse and abuse of scarce capital resources in the State while advocating that there must be at all times productive capital formation here. We must ensure that there is development in that direction. Pick any page in the Minister's speech, from Ringaskiddy to Knock, from Castlebar to Whitegate, and what does one find, expenditures which are hidden, controlled and deliberately kept back. Take Whitegate——
The Deputy's Government bought Whitegate.
The Deputy's planning section.
I have no objection to the State owning Whitegate.
We only followed the Deputy's plan.
I will explain that.
I again apeal to Deputy Desmond to resist the temptation of turning the debate into a duologue between himself and any other Member.
(Cavan-Monaghan): Deputy Desmond is making a speech.
Deputy Desmond should address his remarks to the Chair.
(Cavan-Monaghan): He was doing that when he was interrupted by the Taoiseach.
He was not. The Deputy should address his remarks to the Chair.
On a point of order, I hesitate to raise this matter but surely the point of order should be that Deputies should not interrupt another Member who is speaking. It is my distinct recollection that Deputy Desmond was interrupted first.
If that is the Deputy's distinct recollection it is not mine. I am exhorting Deputy Desmond to make his contribution in a fashion which will not encourage anybody to interrupt.
Was Deputy Desmond interrupting the Taoiseach?
That is not a ruling.
I will protect Deputy Desmond, or any other speaker, from interruptions.
Perhaps the Chair's undertaking to protect Deputies and speakers would apply to the several very unworthy personal accusations which Deputy Desmond has made against me in the course of his remarks. Of course, they are par for the course as far as that Deputy is concerned.
I have no desire to make any accusations but, having spent seven months in the Department of Finance, and read the files on the Connacht Regional Airport and the Talbot agreement which I will return to later —
They are not matters for discussion on the budget at this stage. The Deputy should proceed with his contribution.
We will produce a few files too which will destroy some reputations over there.
Produce them.
We will.
(Cavan-Monaghan): Produce them now. More smears.
Threats.
Deputies should produce thoughts that are relevant to the budget statement.
The Opposition do not know what they are talking about. They are afraid of their lives to open their mouths. I am glad to see that they are smiling and that the doom and gloom has gone.
(Cavan-Monaghan): The Minister for Finance is only a puppet on a string with his master beside him.
I am glad to have him as a master. He is not like the master the Deputy had.
I appeal to Deputy Desmond to continue and to address his remarks to the Chair.
I will willingly continue. In mentioning the Whitegate oil refinery I said I had no objection to the State having a refinery and storage capacity in terms of our strategic needs but it is incumbent on all governments to spell out the cost involved. When we talk about such matters we should be aware that it is not just the £10 million referred to in the budget that is involved. A statement has been made available to me that the capital cost in terms of refurbishing will be anything from £45 million to £70 million. A statement has been made to me on good authority that the annual losses could be £20 million.
There has been a further statement made to me that the cost for petrol in addition to the 1p announced by the Minister for Industry and Energy, Deputy Reynolds, would be 10p or alternatively 6p on fuel oil. I have no objection to taking decisions provided we are prepared to be honest about the cost. There is reference in this budget to Clondalkin Paper Mills. It is clouded and deliberately shrouded but the Taoiseach knows and we all know that Clondalkin before it closed was losing and costing the company concerned no less than £210,000 per month, actual loss. There is provision in the budget in relation to Knock Airport which is not supposed to cost any money this year but we know now from the Department of Finance without question that at this point of time the projected end cost in 1984 is £12.68 million. That, I can assure you, is for starters. We must remember that Deputy Haughey made statements that it would not be more than £6 million and that was in January — February 1981.
I could go on, be it either the Tuam factory or Údarás na Gaeltachta promises relating to £5 million of which £1 million is in here; I could go on to the decentralisation proposals in this budget which superficially are to cost nothing in 1982 but which we know if carried through will be not less than — in the finance statements available to the Taoiseach — £7 million. We all know what happened privatisation, the famous £200 million and the fact that ultimately it amounted to £20 million. Taking all the promises made by the Fianna Fáil Party from Ballinfad, to Arigna, to recruitment of additional gardaí there is a massive cloaking of future already committed costs in this budget which makes a mockery of it. We are back to the credibility gap——
Tell us about taxing social welfare benefits.
I shall now give the prognostication: the post-January budget, Exchequer borrowing requirement — £550 million in 1981 for current purposes; £781 million for capital purposes making a total of £1,296 million of borrowing which was then, courtesy of the then Minister for Finance, Deputy Gene Fitzgerald, 13 per cent of GNP. We had the post July budget when we came in as a Government and found that the departmental Estimates were a mockery of either political or any other kind of financial rectitude.
Is that why you attacked social welfare benefits?
You did it in 1979.
(Interruptions.)
Is it in order for the Taoiseach to interrupt Deputy Desmond?
It is not in order for anybody to interrupt anybody and the Chair has given that advice previously. I would ask Deputy Desmond to continue his comments on the budget before us.
I am quite willing to do so if the Taoiseach ceases to interrupt me. We finish up with a budget today where for current purposes in 1982 the post-March budget, £679 million is to be borrowed and a new historic fact — it is the first time in our history that we have reached the four figure mark — £1,004 million for capital purposes, giving a total of £1,683 million for Exchequer borrowing requirements for this year or 13.9 per cent of GNP. I submit that figure is frightfully incorrect; it is underestimated quite deliberately. I submit that the £140 million in that is over-estimated and there are three or four factors mentioned in the Minister's speech which clearly indicate why it is over-estimated. I further submit in regard to the £36 million for CPT not only is the Minister bringing it forward but I suggest it is also over-estimated on the basis of papers I had available to me up to about three or four weeks ago in the Department of Finance. I do not accept the Minister's credibility in that regard.
We did not like the Labour Party on footwear or clothing or on food subsidies.
I should like to ask the Chair if Deputy Gene Fitzgerald is out of order when he deliberately interrupts Deputy Desmond? Would the Chair please take note of that?
Deputy Fitzgerald or anybody who interrupts is out of order. Let me again remind the House that if a Deputy continues to address himself to the Government side or to the Opposition it seems to me he is automatically putting himself in a line where he should be expecting interruptions.
On a point of order, in that respect is the Chair suggesting that speakers on this side of the House should not be involved with the other side in case they upset them?
Deputies on this side of the House should address all remarks through the Chair. Deputy Desmond, to continue.
I wish to make a brief final point in relation to employment. It is a tragedy that at a particular point in our political history when, politicians, Front Bench spokesmen, backbenchers in some cases, are held in such general lack of esteem that this morning for every six workers who went out to work in industry and services another one worker had no job to go to. They deserve more than a £30 million cut in the public capital allocation to State-sponsored bodies. They deserve more in terms of hope than the abandonment of Public Capital Programme provision for the NDC, the slashing by £15 million of public capital moneys in that regard. It is perhaps arguable that these moneys should be retained and if not given to an NDC they should be totally retained in terms of employment.
I can only conclude that we are back to the situation where in 1978 in the manufacturing industries 207,000 were employed and in June 1981 there were precisely 207,000 people employed. There was a growth in employment; an extra 30,000 public servants were employed — 27,600 to be exact. There was no provision in taxation at that point. We borrowed and borrowed and we are now reaching the stage where this year in terms of interest alone, due to foreign banks, as a result of the policy and development of the Fianna Fáil Party in 1980 and 1981, we have to pay out £500 million to the bankers of Germany, Japan and America in repayments. Our Exchequer borrowing requirement has reached that appalling situation. These moneys which we will pay from our own resources this year will create jobs in these other countries, not at home, because neither the Taoiseach nor the Minister for Finance had the guts in this written document to say to the Irish people: "We must pay for job creation out of our own resources, our own taxation, our own contributions and sacrifices in the interests of not putting around the necks of our own children a limitless debt in the decade of 1980." The Taoiseach and the Minister for Finance have much to answer for in coming forward with carbon copy, cuckoo number two, in 1982 of what they did in January 1981.
I call on Deputy Sherlock as the spokesman for the third Opposition Party.
I shall speak very briefly but consider it desirable that I should speak. At the outset, on behalf of my party, we see this as a reasonable, well balanced budget. All we want to do is to give the reasons for that decision.
On 27 January last before the then Minister had concluded his address to the Dáil, it was quite easy for me, as the only Deputy for Sinn Féin the Workers' Party then, to make up my mind. The Minister stated on that occasion that VAT would be imposed on clothing and footwear, that the food subsidies would be removed and that there would be taxation of social welfare payments. For a start, these are now out of the way, which is one great improvement in these budget proposals. Firstly, the commitment of £50 million to the building industry is something which will give a real incentive to the working class people.
Hear, hear.
That will mean jobs in public authority housing. It is only within the last month that a regulation was sent to the local authorities directing their managers to transfer 100 per cent of their revenue accruing from the sale of local authority houses to capital. We all know that that would have meant the end of local authority activity in providing services for the people. I am glad that this situation has now changed and that 40 per cent can be retained by the local authority.
I would like to have seen some reference to the meat and timber industries but, on the question of social welfare, we have increases in social welfare payments. Something which has been a very contentious matter for a long time is eligibility for health services. Contributory and non-contributory pensioners will now have full eligibility for health services, which must be welcomed.
Hear, hear.
We know well that the previous system was totally unjust in assessing the means of an old age pensioner on the basis of the little pension that he or she got from the place of employment.
On the issue of roads, the Minister is increasing by £10 million the amount of capital and has promised major improvements in national roads. I remind the Minister, through the Chair, that there are such things as county roads, our byroads. I am sorry that no reference has been made to changing the system so that the local authority could divert the capital which it receives from the Department to whatever work it sees fit and not to have a situation where the capital allocation for roads must be spent wherever the Department wills. There is a need for change and I sincerely hope this change will be brought about because of the present condition of the county roads. They are dangerous.
On the issue of taxation, we welcome any increase in tax allowances. This is something which comes a little unexpectedly. The proposal to increase the revenue accruing on capital gains, must be welcomed. It does not go far enough, but we accept that there is a commitment to shift the position from indirect taxation to capital gains under the many headings into which I will not now specifically go.
I welcome, also, the commitment to a permanent system of taxation for financial institutions. The ordinary people of this country have been waiting for a shift in the position from indirect taxation to capital, property and wealth taxation. The ordinary people have seen quite clearly that these sections have got away with it while the burden was carried by the ordinary PAYE sector. Another thing which comes unexpectedly again, but is very welcome, knowing well what effect it had, is the removal of the payment of VAT on school books for ordinary working class people.
Hear, hear.
This must be welcomed. There are many things in this budget which are very welcome indeed. It will be seen by the ordinary working class people as a tremendous improvement and benefit. It is nothing more than the people justly deserve.
On the other side, the Minister states that the increased tax buoyancy will bring in £40 million and the bringing forward of the date of payment of corporation tax and the surplus profits of An Bord Gáis — one of our own natural resources for once having revenue accruing from it — are welcome. Not sufficient revenue accrued to the State from Kinsale gas. Nevertheless, it is a very welcome change in the situation. The benefits accruing under this budget will result in a deficit of £679 million and we will be looking at this very carefully. The immediate reaction however, is that it is a reasonably well presented budget and an effort has been made to bring some balance into it.
In accordance with the Order of the House, the Sitting is now suspended for 30 minutes.
Sitting suspended at 5.40 p.m. and resumed at 6.10 p.m.