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Dáil Éireann debate -
Thursday, 6 May 1982

Vol. 334 No. 3

Financial Resolutions, 1982. - Financial Resolution No. 6: General (Resumed).

Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance.)

When I moved the adjournment I was speaking on aspects of the budget which showed that it was a caring one. There are increases for recipients of social welfare, the provision of medical cards for the elderly, and the discrimination against single people in regard to local authority loans was removed. The very important provision of £3,000 mortgage subsidy has been restored.

Agriculture is our single most important industry and, as a rural Deputy, I will never be satisfied that any Minister for Agriculture is doing enough for the industry. I welcome the fact that the 5 per cent cut in the grant under the farm modernisation scheme has been made good. Grants for mobile equipment have been restored to the pre-September 1981 level. I was concerned at a provision brought in by the previous Minister for Agriculture where cattle and sheep numbers were combined in assessing the number of livestock eligible for grant under the headage scheme. I am glad that this has been done away with.

I hope a further review will be carried out on the severely handicapped areas within the disadvantaged areas. My neighbouring county, Mayo, is totally included for increased headage grants but only a small proportion of County Galway is included for the higher rate payment. Reviews have taken place in the past but very few areas of County Galway have been added and I hope the whole county, like Mayo and Leitrim, will be included for payment under the severely handicapped areas.

It is regrettable that the farming community are not getting a fair deal from Britain in that farm prices have not been implemented. It is unfair and unjust that the debate on the British contribution to the EEC is holding up this scheme. An estimate in today's paper puts the loss for farmers at £50 million for the delay to date. Farmers are losing up to £½ million a day with the delay in implementing farm prices. I hope that this lost money — it is indeed lost money to the farming sector — will be made good to them, especially to the farmers in severe financial difficulties. That money should be put into a fund to help farmers who have suffered because of this delay in the agricultural price review. I suppose it can be said also that there was some discrimination against farmers who got approval to do work under the farm modernisation scheme with a reduced grant because this 5 per cent reduction in grants that I spoke of was brought in last September and, obviously, some farmers got approval at a lower rate of grant. I ask the Minister for Agriculture to look at some way of helping any farmer who was unfortunate enough to be approved for work at the lower rate of grant because now we know that the grant is back to its pre-September 1981 level and in all fairness that rate of grant should be applicable to all farmers who were approved from last September.

The one proposal in the budget which seemed to gain unanimous approval amongst what I might call the book public was the decision to take VAT entirely from books. The book public embraces quite a number of people, and one can imagine all the people who are involved in the book industry. I suppose the most important of all would be students, school children and their parents. The decision to remove VAT was very welcome because all through the years the argument has been that VAT on books was a tax on knowledge.

A very good case was made for its removal by the Booksellers' Association of Ireland. In their submission they spoke not only of the tax on knowledge which VAT was but they were very concerned — as I am sure all of us are — at the number of closures of bookshops that took place and the resultant unemployment in the book industry. As a member of the County Galway Libraries' Committee I was concerned that every year it was costing more and more money to stock our libraries. Not only had we the VAT imposition, but as most of our books are bought from Britain we also had to pay extra on account of the exchange rate of sterling. At least now we can do something about VAT, whatever about the exchange rate. The immediate removal of VAT means that a book which cost £5 will be reduced to £4.30. It is amazing to think that a book would be cheaper in this day and age when generally the cost of living is increasing. The decision to take VAT off books was welcomed by teacher organisations, writers, journalists, publishers and printers particularly, librarians and the general book-reading public. I am sure that parents who have children doing examinations this year and in future years — as we are all aware, children doing examinations seem to have a large number of books to study — will be very happy at this news.

I would like to speak for a few moments about the financing of local authorities. One aspect of the budget which did not get much publicity but about which the Minister for Finance tried to do something concerned putting a limit on the statutory demands placed on local authorities. By that I mean that he has tried to do something about the fact that it has been taken for granted up to now that Central Government decide that a certain scheme is to be implemented and that automatically the local authority will be able to administer that scheme. In the light of the various schemes which our local authorities are implementing we must question that assumption. Local authorities at present have quite a large number of services to administer and run. I mention briefly housing, roads, water and sewerage, planning, various amenities to be provided, contributions to agriculture, health and social welfare and even responsibility for the cost of courthouses, higher education grants levy, coroners' inquests and slaughterhouses. They have such varying responsibilities that it is unreasonable to expect that they will administer all these schemes and look after all that is requested of them. For that reason I am glad that the Minister for Finance saw fit in the budget to put an 18 per cent limit on some of these demands.

Up to now it seems that, for example, a demand is presented to the local authority from the OPW for arterial drainage and that demand could be up to 45 per cent. If a rate increase is allowed to the local authority of 15 per cent that is like giving somebody £15 and asking that person to do £45 worth of work. We are all aware that that just could not be done. I question why so many demands are made on the local authorities and I hope that this is the first step towards doing something about these demands. When the Bill for supplementary welfare was going through this House we were told that 60 per cent of the financing would be by the Government and 40 per cent by the local authority. These demands have accumulated over the years to such an extent that Galway County Council are in great difficulty in having to pay over £0.5 million to the Western Health Board. The same is true in regard to the OPW and because of statutory provisions we have no opportunity even to negotiate or discuss these demands.

ACOT was set up with a resultant further demand on the local authority. I point out here in the House that the local authority have no input into ACOT. The same is true regarding the vocational educational demands. There is no room for negotiation there either. However, one of the most unfair demands on the local authority at present is the administration of the higher education grants. The former Minister increased the grants and we are all glad that he did so last year in time for their operation in the new university year. Perhaps he did not realise when increasing the grants that he was putting local authorities into financial trouble because they had to stay in an overdraft situation for over a year. The grants were paid by the councils and repayments came quickly from the Department for the first instalment but the councils did not recoup the second instalment for a year. That situation cannot be allowed to continue and more satisfactory arrangements must be made.

County Councillors are entitled to more recognition for their work than a travelling allowance for attendance at local authority meetings. It is not necessary for me to make a case for them since they have now formed a federation and have met various Ministers in an attempt to get some assistance in their difficult work. They are seeking either a postage allowance or a number of so-called "free" envelopes and some tax allowance in recognition of their work.

The Minister for the Environment has been generous to a number of local authorities. The members of my own local authority will be meeting him shortly and I hope he will be as generous to them as he has been to others.

I wish to draw attention to the inequitable system which operates in relation to the maintenance of courthouses. Local authorities are responsible for this work but when fines are collected they do not go into the coffers of the local authorities but to central Government. This is one area where extra finance could be made available to local authorities.

A number of Deputies have criticised Fianna Fáil for doing away with what they called "tax credits". They do not refer any more to the proposed payment of £9.60 to housewives working at home. I feel sure the majority on this side of the House consider that this scheme was hastily devised and served only to deceive housewives. I have always felt that there should be recognition of the work of full-time housewives and this might be done through the child allowance rather than through an administratively difficult scheme. I welcome the Minister's announcement in regard to family income supplement and his decision to give a double week's payment in September and December for the child dependants of weekly welfare recipients. That is a far more practical way of making a direct payment to housewives.

The problem of unemployment and the need to create more jobs was dealt with by the Minister in his budget speech and by many other speakers. Social welfare abuses were also mentioned and I agree that there is a relationship between the two. However, I cannot accept that social welfare increases are a disincentive to work. I have seen articles about young people not availing of the youth employment scheme but before the budget some young people were being offered only £20 per week on some of these projects. That amount should be increased.

Unemployment is a major problem in the EEC and throughout the world. The latest OECD report gives a projected unemployment figure for 1982 of 28.5 million. We are very good at giving the facts about unemployment while not doing enough to solve the problem.

We must try to attract investment in this country as we have succeeded in doing in the past. I congratulate the Taoiseach on his attempts during his recent visit to the United States when he met business people and put a strong case to them on the need for American investment here. I am also glad that the Minister for Industry and Energy has singled out small industries for special help. In my constituency the operations at Tynagh Mines have now closed down and a large number of skilled adults are seeking employment. I am sure they will be very encouraged by what the Minister has said regarding small industries. I have every sympathy with the IDA in their efforts to attract industry to an area where a factory has failed, because they must ensure that the second enterprise will succeed.

The towns of Loughrea and Ballygar in my constituency have problems in this regard. The Westphalia carpet factory in Loughrea has closed, as has another factory in Ballygar. We must consider the possibility of alternative industry. There is an advance factory in Loughrea and we are hoping a suitable industry can be found.

Amid all the gloom and doom, I am very glad to say that this morning we had a statement from the Minister for Agriculture to say that the future of the sugar factory in Tuam is secured. He met the action committee of the workers this morning and he gave them a commitment to preserve that factory. It employs more than 600 people when in full production. That statement will remove the uncertainty that existed and the cloud that hung over the factory because the previous Government gave it only one year's reprieve. The factory is the major one in the town and it has meant much to the people of Tuam. During the two recent election campaigns I was told on every doorstep of the importance of keeping the factory for the people of Tuam and the surrounding areas. There are more than 600 people unemployed in the town of Tuam and there are 2,500 people unemployed in the greater Tuam area and it would have been catastrophic if the factory were to close.

I do not wish to play politics with this point but it must be said that the previous Government put an embargo on recruitment to the public service. I must be honest and admit that we did not remove that embargo but I understand we are appointing one out of every three vacancies. That is not to say that if there is need in any area of the public service to employ more people we will not do so. When we needed additional teachers the Minister for Education announced that 300 additional teachers would be employed. During the week there were calls from both sides of this House for extra gardaí and I am sure we will agree to provide them if they are needed. The same situation applies with regard to nurses.

I am rather concerned about the letters being sent by the Civil Service Commission to young people looking for employment for the first time. The letters are not satisfactory and do not give an idea of the likely date of appointment. I have here a letter sent to a young man in April 1981 following an interview in November 1980. The post was for executive officer. The letter stated:

You will be called in due course, probably in a few months.

However, in February 1982 he received another letter from the Civil Service Commission stating the following:

It is not possible to say at this stage if a sufficient number of vacancies will arise to enable all those on the panel to be appointed.

That letter was sent many months after the first letter which assured him he would be called in a few months. It is very frustrating for young people to have to wait such a long time before they get definite news regarding appointment. I hope the position will be rectified.

I was glad that the Minister for Health was able to make an additional allocation to the health boards. This has taken some of the strain from them. I was also glad that the Minister for Education has given a commitment to employ an additional 300 teachers. We are told we have the highest pupil-teacher ratio in western Europe and it is only right that we should employ more teachers. Fianna Fáil have restored to parents the right to send their children to school when they are four years if they wish to do so and extra money will be needed in this area. I am glad also that we have a building programme for the schools. The ideal thing would be to replace all prefabricated buildings with the traditional type classrooms and I hope that this can be done. The vocational schools seem to be the cinderella of education. There are too many prefabs in the schools: in fact, many vocational schools have more prefab classrooms than the traditional type classrooms and this makes conditions for teachers and pupils very difficult.

I welcome the decision in the budget to remove VAT from footwear and clothing, which will help the industries in question. We should be in a position to protect our home industries by the imposition of VAT on imports at entry points. Purchasing power will still be maintained. The food subsidies on milk and butter will be of considerable help. The budget will cushion the less well off and it will help the needy and underprivileged.

When the Minister opened the debate on the budget he set out what he regarded as his policy. The first point he made was that unemployment was the greatest problem, particularly in view of our young and fast growing population, a feature unique to this country. He said that the second policy was to bring a proper sense of priority for capital investment into public spending and to bring a businesslike approach into the broad sweep of public policy.

Far from living up to these commitments, I believe the Minister has fallen way short. If anything, he has eroded confidence because of his approach to public spending in the Government sector. For a start, we had a series of capital spending items expanded on a piecemeal basis. Each of them was appealing, such as loans and subsidies to single people, the extra public housing construction, the restoration of IDA re-equipment grants, the restoration of farm grants, inner city renewal and so on. One could go on indefinitely. A good case could be made in favour of each scheme but what was absent was a sense of priority in the way we spend our borrowed money on capital projects. If we are to have a sense of priority in the way we spend our money we must consider competing options and the relative merits of different ways of trying to achieve Government targets. We must consider what our commitment to spend will ultimately mean to the taxpayer by way of increased tax to service the borrowing. It is in the unwillingness to consider options and to allow this House to see the alternatives we could consider that we have fallen down with this budget. This is not the mistake of only this Minister but it has been a mistake when budgeting down the years.

The last Government gave a commitment to plan the nation's finances in a better way and promised to allow this House to consider the alternative options open and the alternative means of financing. Our failure to consider the best use of public spending has grown for a series of reasons. We failed to present to the taxpayer in a unified way what the taxation and spending sides of the budget mean. In the Cabinet we have a series of spending Ministers, all individually clamouring for more money, but there seems to be only one Minister, the Minister for Finance, who is responsible for the taxpayer's side of the calculation. As a result there is a willingness in the Cabinet to cave in on any good case made. There are always worthy causes. There are always people who could do with more assistance, an enterprise which could do with a subsidy or a new project which would revitalise a certain part of the country, but there must also be a willingness to confront the choices that exist and to take account of the taxpayer ultimately having to bear the burden. That is the first reason we have got into this bind — because the Cabinet system puts little emphasis on the too small kitty which is available from which these various desirable schemes have to be chosen.

Another problem in the public sector is that we have an accounting system which persistently focuses on institutions and Departmental Votes but never on the programmes different Departments are undertaking. A Department could have research schemes or direct spending schemes, but we do not get that sort of detail. We do not see the programme over a series of years, seeing the commitment of Government funds and so on. This lack of programme budgeting on a multi-annual basis has been identified as a weakness. I hope when the Government bring out their five-year plan that this will be given prominence. If planning is to make sense the Government should look at their own spending, see how they are achieving their targets and what adjustments have to be made.

The result of our present budgetary procedures have been disastrous in some areas. As I said, every spending proposal that has some attractive features has tended to be sanctioned. We saw that in the recent budget when pressure groups brought a series of subjects to the Minister's attention without exception he adjusted his budget to facilitate them. If the House was told that every time one group was facilitated another had to suffer we would have better and more reasonable debates.

Over the years successive Governments have enthusiastically adopted the notion of free services for all and granting subsidies that do not distinguish between the people who receive them. The result is that we tended to ignore the distributional aspect of the limited amount of spending available to the State. For example, in the educational system if somebody drops out of school at the age of 15, a relatively small sum of about £5,000 has been spent educating him, but the State spends approximately £17,000 educating the person who goes right through to university. I have no doubt that the people who avail of a university education come heavily from the better off sections of the community, the professional and salary classes. Only a tiny proportion of the children of people on a working wage — skilled, semi-skilled and unskilled workers — get a university education. If the arguments for the educational budget had been presented to this House in a more reasoned way I do not think we would have accepted it.

Let us consider free services for all. There is no doubt that where people can get something for nothing there is a far greater demand for it than if a small payment had to be made. Yesterday a study on the health services was published. They said that in the free drug scheme the Government pay every £1 over £12 per month. The result is that there is no incentive on the doctor's side or on the patient's side to limit the amount of drugs used. That is neither logical nor equitable. Ministers from all sides agree that there is over-subscribing and the reason lies in the lack of incentives to economise within the present drug pricing system.

At present maintenance in hospitals is freely available for all. Of the health budget 75 per cent is spent on hospital care. This is exceptional by European standards. In other words, by making a specific area, mainly maintenance in hospitals, free, we have encouraged more people to go to hospital rather than visit their GP and rely on primary medical care, because they know the taxpayer picks up the tab.

It is time for us to re-examine our willingness to provide free services across the board in that fashion. In the coming years, no matter who is in Government, there will be increasing emphasis on trying to get value for money within the public sector. I hope Ministers will focus a great deal of attention on that area. The merit of that is that we can save money without affecting the less well-off sections of the community.

Another failure which has resulted from our accounting system of examining Estimates is the failure to focus on what is to be achieved from public spending, whether it be better health, better education, or better security. We have always focussed on what the Government are spending on particular inputs into these services, namely, extra gardaí, or extra teachers, or extra doctors, or extra medical cards. The emphasis on the inputs into the Government sector has stemmed from the accounting method by which we examine them.

The emphasis on spending for security should not be on how much we are spending on Garda salaries, but whether there are other ways of spending on security which could achieve the results we wish to achieve. There are other ways, apart from increasing the number of gardaí That aspect of spending has not received proper attention in this House from successive Ministers.

There is an inadequate amount of business discipline. The Minister said he wanted to bring a more business-like approach into the public sector. Business disciplines are sadly lacking in the public sector. Take, for example, a large-scale public capital spending project. If that were in the private sector, before it would get any sanction a detailed design and budget would be drawn up. At each stage alternatives would be considered; whether it was the cheapest design, or the best way to carry out the project. When it came up to the board of directors a specific person would carry personal responsibility for the success of that capital project. He would be responsible if there were any over-run in the amount of money budgeted for, and whether the project stayed within the budget.

In numerous projects in recent years that has been sadly lacking in the public sector. Several projects have been budgeted at a much lower cost than turned out to be the case. That was not due just to inflation in money values. They failed to design the project in the way it had to be carried out in the end. They did not put enough study into the design stage of the project. That should not be allowed to continue. The Government should not sanction, as they now do, capital projects on a rough proposal. At the moment it appears that a rough proposal goes to the Cabinet, gets approval in principle, and goes back to the Department dealing with it for a more detailed design. There is no point in improving a project before you look into whether it is the most cost effective way of doing it. I should like the Minister to change the system of approving on the nod substantial capital projects which cost the taxpayer enormous amounts of money either through debt service or direct tax payments.

Another area in which there is not a businesslike management in many spheres of public enterprise is that it does not seem to be anybody's responsibility to prune the day-to-day cost of projects. If we had a keener or a more commercial purchasing policy many of our public enterprises and public authorities could save themselves money. No one is charged specifically to do that, and it does not appear to be worth anyone's while to make the investigations necessary to save money.

We have all seen public sector disciplines being eroded over the past 20 or 30 years. In the fifties, taxation was used to cover current and capital spending. The Government were one of the savers in the economy, withdrawing money from consumption and saving it to provide for other purposes. In the sixties that was eroded to a situation in which the public sector were willing to borrow for capital projects. Now the public sector are willing to borrow virtually for anything at all. That breakdown of discipline has stemmed from the causes I dealt with earlier. It is time to examine the specific causes which underlie the problem rather than aiming at a sort of arithmetical target of balancing the budget over a series of years. We have to look at the more fundamental reasons why spending has been running ahead of taxation. I was disappointed in the Government's philosophy in this sphere since they took office. Since March 9 there has been a series of piece-meal interventions with an eye to political expediency. We have not knuckled down to the problems. Although people admit we are in a financial mess, it seems money can be provided for schemes without any very detailed study what is involved, or why they should go ahead.

I was disappointed yesterday also when the Taoiseach dealt with the new economic plan. He gave very little grounds for hope that it would be very different. He said it would be a sort of general framework against which decisions would be taken. He refused to commit his Government to making a detailed examination of existing programmes, or the setting out of new policies which will have to be set out if targets within that plan are to be achieved. The essence of a plan is not a broad sweep across the economic problems. We all know them by now. If an economic plan is to be produced at considerable expense to the public purse, and if the time of civil servants is to be devoted to drawing up a plan, it should be a good deal more than a discursive discussion on the economic problems. You can pick that up in your daily newspaper any day of the week. That is not what is meant by a Government plan.

I hope the Minister for Finance and the Taoiseach, even at this late stage, even though it is only three months away, will provide something more than the economic plans which were published by Deputy O'Donoghue throughout the four year period when Fianna Fáil were in Government. They did little to achieve greater efficiency or effectiveness in the public sector.

Turning now more specifically to the budget, the greatest single casualty between the two budgets was the tax credit system coupled with the family income supplement. Other speakers have said this is hitting the least well-off people in our society. I know that 65,000 lowly paid people were damaged by this change in policy. It was a regressive change in policy by the incoming Government. I deeply regret it for the reason that it was regressive.

I feel also that this system, namely a sort of tax-free minimum income, which was implicit in what the Coalition were introducing, would have proved a vehicle for far-reaching reforms in the whole of our tax and social welfare systems. At present our systems are bedevilled by a multiple of means-tested public assistance available to people. We have such schemes as differential rents which subsidise council rents depending on the income of the recipient. We have means-tested subsidised housing loans, again dependent on incomes. We have means-tested medical cards and means-tested welfare assistance. All of those are attempts indirectly to support the means of the less well-off in our community. But they do have the very undesirable side effect of creating a poverty trap within which people can be caught, that if one's income rises above a certain limit one is suddenly disqualified from some of one's differential rent subsidy or will be docked for one's unemployment assistance. That is regrettable in many ways in that it fails to encourage people to take jobs if they find that £ for £ their extra income will be docked from them by the Government, or if they find they will be excluded from eligibility for medical cards, differential rents or whatever.

That is a present feature of our economic system. A real disincentive does exist for people on low incomes to better themselves. I think that is what people mean by adverting to the poverty trap, that one is prevented from bettering oneself because one would then lose some of one's benefits. Had we gone ahead with the tax-free minimum income idea implicit in the Coalition's budget gradually we could have dismantled many of those means-tested schemes and their worst features from the point of view of economic incentive. It would have given people a chance that a far greater proportion of the extra income they earned by going out and working would feature in their take-home pay at the end of the week. That is something I regret deeply on top of the fact that the change itself was regressive.

There was then the other element, that had we developed this idea of tax-free minimum incomes, we could have begun to dismantle a series of public spending measures whose real effect was to help the rich rather than the less well off. Without being political about these specific measures there is no doubt, if one takes food subsidies as one example, that although the proportion of spending on food by the less well off is higher, the absolute spending on food by the well off is much greater. Therefore if we are giving a proportional subsidy on food it is the well off who derive greater benefit £ for £ from the taxpayers' pool of resources devoted to this scheme. Although it is a very emotive subject — and I realise fully that in the last election the idea of the removal of food subsidies was roundly rejected by the electorate — to some extent there was a mistaken over-reaction against the removal of food subsidies.

If we could move ahead with the tax-free minimum income idea, giving money directly to the less well off, we could then afford — without any damage to their position — to remove food subsidies from the better off sections who do not really need them. There are a series of spending measures that enter into the same area and where we have been willing to provide subsidies. Ostensibly those have been endeavouring to give greater relief to the less well off but, when one examines the situation, one finds that most of that money has gone to the well off. For example, the tax allowance on mortgage interest was one specific area where that was true. I am glad that the Minister has proceeded with the January budget proposal to restrict that allowance at least for some of the most well off in our community. Often the higher education subventions have been justified on the basis that we must subsidise higher education to give the less well off an opportunity to avail of it. The figures show that approximately 3 per cent only of children from working-class homes avail of those subsidies. Clearly it is not producing the effect that, in equity, we want to achieve from our Government sector.

Those are the reasons underlying my feeling that the Government threw out a most important reform when they removed the proposed change in the tax system. We saw immediately that it added another complication to the system. When the pressure grew with regard to the PRSI they had to introduce another tax allowance which we all know did not benefit the people outside the income tax net; the people still paying PRSI contributions derived no benefit whatsoever from the Government's tax allowance. Under the previous tax credit system and the family income supplement the relief could have gone directly to the benefit of low income families. The Government probably realise at this stage that they made an error in that respect because even on the other side of this House it is contended that the persons they wanted to relieve of the PRSI burden were very often the lower paid rather than the highly paid because there is a ceiling on that scheme.

One feature of the removal of the family income supplement is that the 70,000 people who are lowest paid, who were damaged by that change, are also the people successive Governments have intended to support. Successive Governments have supported joint labour committees who were charged with just one task, which was to endeavour to support the lot of people in low paid occupations. Certainly it throws into some confusion now as to what exactly is the role of joint labour committees — if on the one hand we are going to throw out a method of assisting people in low paid occupations and, on the other, continue from State funding to finance committees charged with that task. In my view it would be a counter-productive operation.

I should like to turn now to the question of employment and of unemployment. There is no doubt that anybody who represents a Dublin constituency — particularly one comprised of a large corporation housing section such as is contained in mine — must realise that there is a youth unemployment crisis. The official statistics tell us that there are approximately 40,000 young people under the age of 25 unemployed. I would say that is an under-estimate because there are many young people who have never had a job and who do not qualify for unemployment benefit. Unless they are in a position to draw unemployment assistance they will not be reflected in those figures. Therefore, the figure of 40,000 is conservative for the number of young people afflicted by unemployment. Its particularly disquieting feature is that unemployment amongst young people is growing faster than amongst the rest of the community. The effects of youth unemployment are devastating and can be seen daily on the streets of Dublin and in homes.

First, you have the simple poverty aspect of it. A single young person who is trying to run a household on his own or support himself in a flat is getting £26 per week unemployment assistance. That is less than one quarter of what his peer who is lucky enough to be in average employment gets. I do not think a person can support himself living on his own in any decent way on £26 per week. It is worthwhile considering the situation in continental Europe for the same type of person. In continental Europe such a person would get 70 to 90 per cent of the pay of an employed person.

I do not suggest that overnight we should move up to European standards in this regard but without doubt there is a situation of poverty among the young unemployed and it is being overlooked. But the economic measure, the poverty aspect, is only one small side of the problem being caused by youth unemployment. The personal effects are just as damaging. The lack of purpose in a person's day and lack of personal fulfilment through not having a job are demoralising. Seeking employment and finding at every hand's turn people asking if the applicant has any employment experience and then being turned away — that is really demoralising for young people. We are sitting on a time bomb if we do not address the problem of youth employment in a more deliberate and structured way. I shall come later to what I suggest should be done in that area.

The final sad feature of youth unemployment is the enormous opportunity cost and the sheer waste of economic and human resources involved. The Government have stated that unemployment is the root problem but far from tackling the problem they have in many cases exacerbated it. That will become apparent when I deal briefly with what I think are the root causes of unemployment among young people. The first is the enormous wedge that has emerged between the cost to the employer of taking on a young person and the take-home pay of that person. For example, somebody earning about £100 gross income will cost his employer about £112 per week while he takes home about £62.50. That is an enormous gap. It costs the employer 80 per cent more to take on the employee than the employee gets in take home pay. That wedge of 80 per cent has grown dramatically in recent years. Twelve years ago it was well below 50 per cent. We are driving a wedge into the possibility of employers giving employment to young people. This emphasises the fiscal problems the country faces. Much of the need to drive this large tax wedge between what the employer pays and what the employee gets is caused by the growing debt service that the taxpayer now has to meet. This aspect of the matter is often overlooked—the disincentive effect for private employers in taking on people.

Another aspect is that it has undermined our wage bargaining system. When that wedge is growing so fast we are in the situation that what the employee demands in pay increases in real terms is far smaller than what the employer has to pay to meet that demand. There is a lack of comprehension in the industrial bargaining sphere if that is going to be the case. It is not a matter for the employer conceding so much and the employee benefiting: there is always this hand coming between them. It is scarcely remarkable that we are running into problems of income policy when that is going on.

The second reason for the enormous growth in youth unemployment is that in many spheres of the service industries particularly, artificial barriers to the entry of young people into employment have been raised. No Government have yet taken this bull by the horns. In many professions there are educational requirements that go far beyond what is needed to perform the job efficiently. There are long periods of training with often irrelevant course work involved during training with no other effect perhaps than to handicap many young people in getting into certain preserves of employment.

There is also the feature of apprenticeship. A young person trying to get certain employment must find a master before he can get in. This is a perfect way of keeping up an "old boy" network because the master will only take on people who are familiar to him. In many professional areas you have licensing restrictions on setting up or on getting custom even if you have the relevant qualifications. This is often underpinned by legal sanctions. In the case of conveyancing of property the solicitors have tied up the right of conveyancing which I believe could be done by quite ordinary lay people who did not have solicitors' qualifications. I do not pick solicitors only; there are many professions where lay technicians could be doing a large proportion of the job but restrictive practices have grown up that are keeping young people out. Restrictive practices in certain professions must be tackled by the Government and by successive governments in coming years.

The third reason behind youth employment problems is that firms are continually substituting capital for labour. I have already dealt with the fact that the cost to firms is higher than the take home pay of employees but there are also the tax incentives and capital grants to encourage companies to substitute capital for labour. In the budget the Government restored re-equipment grants. Admittedly they provided no money for restoring them but they made a commitment to restore them. I do not know how it will be done without money. There is a strong suspicion in my mind that many industries getting money for re-equipment purposes are using it specifically to replace labour. I ask the Minister to consider very carefully whether there is evidence of that. I feel strongly that it is happening and that the re-equipment grant is handicapping young people in their quest for employment by giving an incentive to employers to provide employment for capital rather than workers.

Capital grants are the sole means we have used to encourage enterprise. Again I think this cheapened capital at the cost of labour. These are areas which must be examined if we are to provide better opportunities to tackle youth employment. I am dissappointed to find that the Minister, far from changing that balance, is inclined to push it further in favour of substituting capital for labour.

Debate adjourned.
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