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Dáil Éireann debate -
Thursday, 10 Jun 1982

Vol. 335 No. 7

Finance Bill, 1982: Second Stage (Resumed)

Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:—
"Dáil Éireann declines to give the Bill a Second Reading on the grounds of social justice and economic responsibility, and in particular because—
(a) in departing significantly from the terms of the Budget as outlined in the Financial Statement by the Minister for Finance in March, 1982, it confers concessions solely on the relatively well off, while giving no equivalent concessions to the low-paid as was proposed in the Family Income Supplement provisions of the Budget presented to the House in January, 1982,
(b) in granting concessions in regard to P.R.S.I., it does so in such a way as to give maximum benefit to the wellpaid, and little or no benefit to the low paid,
(c) it aggravates national economic difficulties by measures, in regard to payments in advance of Value-Added Tax and Corporation Tax, which will cause losses of jobs in many vulnerable businesses, and will worsen the national budgetary situation for 1983 by using up revenue that would otherwise be available in that year, and
(d) it does not provide for any long-term reform of the P.A.Y.E. system as was contained in the proposal for the introduction of a system of tax credits in the January Budget, while it fails to seek other sources of revenue by abandoning any proposals to reduce tax avoidance through discretionary trusts”.
—(Deputy J. Bruton)

(Kildare): Before the adjournment for Question Time I said that the Finance Bill is the base on which we can build a better future for the country and for our people. Possibly, it will alleviate certain ills which are bothering many people at the moment, particularly the lack of incentive to work, unemployment and the inequities in the taxation system. I said earlier that we have a particular problem in relation to social welfare. Compared with other developing countries Ireland has an unduly high proportion of its population either under or over the productive age span, and of those in the productive age span, 150,000 are unemployed and almost 300,000 are in the public service. This means that a small proportion of the population is called on to support the others. For that reason the special tax free allowance of £312 to people who pay full PRSI rates will narrow the gap between employers in and outside the public service. That is a welcome step.

The most worrying aspect about unemployment is the number of young people who are not working. The highest proportion of the unemployed are young people, and we have 42,000 people sitting for leaving certificates of whom 30,000 will be coming on the job market and 25 per cent will go on to third level education. Those young people are educated, willing to work and to play their parts for a better future here and every effort to provide jobs for them should be encouraged. Efforts made by the Tánaiste and the Government should be applauded, whether it be employment incentive schemes, work experience programmes or youth employment schemes.

If we do not provide jobs for our young people I shudder to think of the consequences in five or ten years. The majority of our people appreciate the problems youth unemployment can cause. Apart from the demoralising effect on the young people, it gives rise to crime, vandalism, drug taking and many other ills. Therefore, all responsible people will welcome the 1 per cent element in PRSI because it will help to reduce the number of unemployed young people in particular.

We all agree that successive policies to combat unemployment depend to a considerable extent on active co-operation between workers, employers and the Government, and we should try to achieve sustained non-inflationary growth as a basis for returning to full employment. We should try to achieve labour market flexibility in the light of rapid changes in technological areas, and the more equitable distribution of employment opportunities. We might also look at the possibility of redistributing working time without increasing production costs thereby. We hope the Finance Bill will help to reduce unemployment and the problems caused by it.

I suppose it is in order to refer to housing and to loans to provide houses for our people. Lack of housing is a terrible problem, and the provision of loans is very important, particularly for those who want to build their own houses. I am glad to see the restoration of the £1,000 grants and the mortgage subsidies for single people. That will have a spin-off effect which will help the building industry.

In regard to the Housing Finance Agency loans, I hope the Minister concerned will modify the scheme because it will pose problems for young people. The memorandum on it is anything but good. It does not mention any of the problems that the loan can cause because after five to eight years young people will not be able to buy secondhand houses or bigger type houses, and this will mean problems for the building industry. Therefore we should advise the use of these loans with caution. In supporting the Finance Bill I regard it as a positive step towards solving our problems and bringing confidence back to the private sector which is imperative if we are to realise the potential we know we have.

In my short time in politics I have not seen a Finance Bill introduced in a time of greater economic uncertainty. I can go back four or five years and I think this Finance Bill is before us at a time of the greatest instability. Therefore, in the next few minutes I will try to pinpoint why this great uncertainty exists.

Everywhere you go these days, it does not matter which sphere or profession you are in, you meet uncertainty. The people seem to have their own expert views on why this should be. They blame inflation, crippling interest rates and a spiralling unemployment rate. We also have grave worker dissatisfaction. It seems to me there is great sectional bitterness. Particularly in the past two years, it has appeared that sectional interests are getting greedier by the hour. Factories are being closed at an unprecedented rate and we have the farming community, including agricultural workers, virtually on their knees because of crippling repayments and low incomes.

It is against that uncertain background that we are discussing the Finance Bill. What relevance has this Bill to the problems I have outlined? Can we say this Bill will bring any hope, joy or comfort to an unemployed father of a large family, to a farmer who has over-borrowed, to a hard-pressed PAYE worker, to the mother of a young family or to the thousands of young people taking their leaving certificates? Can we say the Finance Bill will bring a glow of joy to local authorities because they will get more money into the coffers? Will this Finance Bill solve the financial problems, or go part of the way to doing so, of local authorities in any part of the country, bar one in a certain part of Dublin?

One cannot say, having seen the budget or the Finance Bill, that local authorities will be able to build more or better roads, that group water schemes will be initiated or even that council employees can look forward to a full year of employment. Most important of all, will this Bill give people the will to work, a most important factor in social recovery anywhere? Will it give back to Irish people their reputation for giving an honest day's work for an honest day's pay? Will it create a genuine redistribution of wealth between the haves and the have nots? Will this Finance Bill change the social welfare system whereby a man who works for three days a week and draws the dole for the remainder of the week is far better off in the end than the man who works a full week? We know, listening to Deputy Brady a few moments ago and other speakers over the last few months on all sides of the House, that this particular thing is wrong. We have the problem pinpointed but we do not seem to be able to tackle it. The man who has to go out to work for five or six days a week cannot be too happy with his neighbour who has more money at the end of the week for doing half as much work. Would it not be the normal thing for the Government of the day to ensure that this loophole is closed? We seem, for some strange reason to shy away from this problem. The previous Government tried to close that loophole, but we know the result of the election. It appeared in the run-up to the general election that Fianna Fáil would drop the particular provision we had. If we are serious about the recovery of our economy it is points like that that should be acted on.

I believe the Finance Bill we are discussing will not give the type of commitment, comfort and future we would like. I vividly remember, on the night the previous Dáil was dissolved, that the Taoiseach, who was then Leader of the Opposition, told the nation he was prepared to lead a Government who would be a strong Government, that they would go ahead with the policies which are necessary to steer the nation away from national bankruptcy. I remember on that occasion and in the following weeks there was a lot of talk about the budget deficit and that, basically, the intention of the then Leader of the Opposition was to ensure there was no slippage from the type of deficit the Coalition Government were budgeting for. Fianna Fáil proposed to restore credibility to politics, industry, agriculture and tourism.

It is difficult at the best of times to do this type of thing. I want to place it on the record that I do not believe it is something which can be done by anyone overnight. It is important to make a genuine start in the right direction. However, the Government, with the budget and the Finance Bill we are now discussing, have done exactly what the last Fianna Fáil Government did as well. It appears to me that it is popularity at all costs and the acid test appears to be that it is not exactly what is done but what is seen to be done that counts, so long as whatever measures being brought in are greeted in a popular way. Every sensible person in the country knows that it is the Government's job to legislate for the common good and that this can be introduced by checks and balances that are deemed necessary at the time.

I do not believe there is any sense of balance in the Finance Bill as there was not in the previous Fianna Fáil Administration. I assumed the Government would hold the line on the budget deficit. It was evident in the television chat shows leading up to the election that this was something both Administrations had almost in common with each other. It appeared that a certain level of deficit for the 1982-83 period was justifiable and anything above that would not be in the national interest. I believed at the time that the then Leader of the Opposition and his party would have stuck to that line. However, it was not until the Finance Bill was published that the same old story was seen to be on the rounds again. Fianna Fáil gave a commitment to the electorate that they would carry out certain things which were absolutely necessary.

When the PRSI contributions were increased there was naturally an outcry from a lot of people who were finding it very difficult to live. The answer Fianna Fáil had, within a few days of any type of opposition to this on the street, was a £45 million subsidy against this cost. That brought relief to a lot of people but it did not answer the question where we will get the money from. I have listened attentively to a number of speakers on this Bill and during the budget debate but I am unaware of where that £45 million will come from. Where will it be levied? Will we borrow that again? This is the question a lot of people in the Dublin West constituency answered in a very positive way. Most of them were net beneficiaries under the £45 million. Anybody who gets relief will be thankful for it, but it is true to say that people realise we are in a very bad financial mess and, no matter what Government are in power, if they decide to give relief they must be absolutely clear and spell out for the electorate where they will get the money.

It appears that the philosophy of this Government, as was the case with the previous Fianna Fáil Government, is to plan one thing and execute another. This is very dangerous because at best it can be seen as a cynical exercise. Look at the Gregory deal. This was something on which the Taoiseach and a few of his supporters spent weeks pleading and playing a cat and mouse game with an Independent Deputy up and down the backstreets of Dublin until finally a certain deal was made. As far as the inner city of Dublin is concerned I am sure that any money spent on it is money well spent. I accept that it is past time something was done about it.

I was a member of a deputation from Galway County Council, who have very serious problems with finance, and we were told that there was nothing that could alleviate our problems. It appears, whether one is a Fianna Fáil TD or a Fine Gael TD, that the Government's distribution of the resources is not fair because we are not getting our share of the cake. I assume most of the other 27 county councils in Ireland are thinking on the same lines. I believe that makes for poor government. It certainly makes a very bad headline. I cannot understand in a party like the Government party, who have always boasted they have a crosssection of people in their party, how that would be allowed to happen because you cannot decide, for one reason or another, to pump the entire resources of a year into one area. It is very important that the redistribution of the resources should equalise the imbalance that is obvious because of this Bill. Deputy Brady mentioned the importance of paying ioans to single people. I agree with that. I never believed that this should have been withdrawn by the previous Government and I said so publicly on a number of occasions. However, now that single people are entitled to loans, the money is running out. In the county council with which I deal, if applications are to be met in a reasonable way we will have many problems before the end of the year. I would have thought that if we change the structures whereby single people were entitled to local authority loans, the necessary, vital and important aspect would be to match it with extra finance.

Contributory and non-contributory old age pensioners over the age of 66 will now automatically qualify for medical cards. This is to be welcomed, but as far as I am aware, only £2 million have been allocated for it. This means there will be a huge shortfall at the end of the year in so far as this matter is concerned.

One of the most disturbing aspects of the Finance Bill was the decision by the Government to impose VAT at the point of importation of goods. People involved in industry say this is the most severe measure which has been introduced for a long time. The tragedy is that it is hitting our importers and industralists on a very wide range of products. By virtue of the fact that we are getting this VAT six months earlier than we would normally the Government will collect additional revenue as planned. You do not have to be an expert to know that when the first six months period is up, VAT will only come into the same degree and at the same speed as it would normally come. This should be spelled out in great detail. The VAT on point of importation will be paid only once. We brought forward a colossal sum of money on the basis that it would be forthcoming all the time. It will not. It is directly related to the amount of imports at all times but this year we are getting it six to 12 months earlier. What will we do next year? Will we have to borrow it? When we try to balance our books there will be a huge shortfall. I hoped that this type of under-the-counter accountancy would not have been brought into Government. I firmly believed that a genuine attempt would be made to cure our economic ills. Much had been made of some of the provisions of the Coalition Government and there was a hue and cry about VAT on footwear and clothes. No one would like to pay that but who knows over the next six months what every citizen will be asked to pay? If there is a dramatic slippage in the budget deficit — and some people say we have come to it already — when the books are calculated at the end of the year we might be facing the same problems we faced 12 months ago. We will then have nothing to fall back on and that is why I have grave misgivings about this Bill. It has not, cannot and will not solve the problems.

If we look at agriculture, one sees that the Government have divorced themselves from the problems that have beset our farmers. No other section of the community suffered as much in the last three years. Their incomes halved but, unfortunately, many farmers borrowed very heavily and found they had not enough money to live on if they were to honour their commitments and repayments to the ACC and the banks. It was accepted that something would have to be done and Deputy Dukes and Deputy D'Arcy spent long hours trying to negotiate a deal whereby a rescue package would be put together to help farmers. They met with opposition and I assume the present Minister is also meeting opposition. This was really a three-concerned contest between the Government, the Department of Agriculture and the banks. Everybody came out well from the deal except the farmers. When the rescue package was finally announced it appeared that the banks won the day and that their interests were very well protected. I am very disappointed at the progress which has been made by all the rescue agencies in so far as they relate to agriculture.

The House should note the interest subsidies schemes that are being currently implemented. If this subsidy is not given quickly to farmers, at the end of the year the 5 per cent national interest subsidy will be of little use to anybody. I cannot understand why farmers will not benefit from this immediately. I understand that there are very stringent qualifications——

An Leas-Ceann Comhairle

I am sorry to interrupt you but could I encourage you to go back to some of the taxation provisions in the Finance Bill?

I am sorry I was wandering away from the subject but I thought that it was relevant.

I cannot see the relevance. With the exception of someone making a maiden speech I have been at pains to remind Deputies that we are required to discuss the taxation measures which are proposed in the Bill or to suggest others that might be in the Bill. The Chair has given the opportunity to people to establish the base from which they can move into this area but I ask the Deputy to concentrate more on the actual provisions of the Bill.

I hope that the subsidy scheme will be paid quickly. At this stage I wish to deal with the provision regarding stamp duty. A problem seems to have arisen here in that a certain category of young farmers will be exempt from the stamp duty arrangements that existed heretofore. Basically that meant that transfer of a family farm from a parent to a son or daughter qualified for 1 per cent stamp duty but in its own way this has contributed to many problems over the years regarding the inheritance of Irish farms. The former Government proposed that a certain type of farmer should be eligible for a free transfer and I still think that was a good proposal.

In the Finance Bill there are three categories of farmers to whom the provision will apply. The first category concerns the son or daughter who must be under 35 years of age. The second provision is that they have some recognised agricultural college training, whether they be a degree-or diploma-holder in agriculture, whether they have completed the 100-hours EEC course in agriculture or have some certificate from a committee of agriculture or the CAO that they had completed some course. I should like to see that provision extended. If a farmer has spent a number of years in a responsible position in Macra Na Feirme or if he ran a good farming operation with his father, I believe he should qualify. One could argue that certain people could be highly qualified technically, might even have a degree in agriculture, but that would not mean that they were good farmers. Account must be taken of the ability of the farmer to make a decent living on the farm for himself and his family. It might be argued in certain parts of the west that the limit of 35 years is too low, that where there is late inheritance a farmer aged 40 would be regarded as a young farmer. It might be said that to extend the age limit to 40 years would help the process of inheritance.

There is one worrying aspect about the stamp duty proposal in that transfers from father to son will be at the rate of 3 per cent and not 1 per cent as heretofore. This will create many problems for farming families. If one takes land values, even at their present depressed level, at £1,000 per acre and if one takes the example of a farm of 50 acres, under the 1 per cent levy the amount would be £500 but when this Bill becomes law it will be £1,500. On next Stage I hope we will take a closer look at this provision. It is well known that were it not for the qualifying age limit of 66 years for an old age pension there would be very little inheritance or transfer of land from father to son. There will be little progress on any farm unless the young people on the farm are given the necessary authority and responsibility to manage it. Vitality and youth are important and I am afraid that this particular aspect of the Bill will do more harm than good. I agree that many young farmers will benefit but I still ask that the 3 per cent figure be considered again as it will penalise unduly many families.

This Bill will not go any way towards solving the huge problems that have been referred to by speakers in this debate. It will not motivate Irish people in the way that is needed. The trends evident in the Finance Bill are not trends I like to see. I am deeply disappointed at the situations that have developed which have led us into our present position. We are not sure about the amount of the budget deficit. This Finance Bill will not encourage people to believe that this is a good country in which to live. It will not encourage them to believe we are striving for youth employment and that we are prepared to redistribute what we have to ensure that others get a reasonable bite of the cherry. I hope to have more to say on the Bill on Committee Stage. This Bill is not acceptable to the House and that is why we have tabled our amendments.

I shall make my comments under three headings: the economic climate, the proposals for investment in central Dublin and the question of tax reform. This Bill is about the creation of confidence in the business community, among the young and in society as a whole. This State was founded on the philosophy of self-reliance, on Sinn Féin, but it is now in danger of foundering on the rocks of cynicism, selfishness and pessimism. Pessimism about our ability to tackle our problems is rife. Economic commentators and journalists, and politicans on the other side of the House thrive on it. Whoever, in the 19th century, christened economics as the dismal science must have known Deputies FitzGerald and Bruton in another life. I have heard more doom and gloom preached in the last year than at any time since 1957 when Deputy Bruton was in short trousers and a previous Coalition despaired of their ability to solve the country's problems and adopted draconian measures to get the books right. Fianna Fáil got the country out of that crisis. They had to restore confidence again in the mid-seventies after another Coalition had lost their way. Incidentially, the EEC economic and political commentators who write about our 1977 manifesto have conveniently forgotten the times in which it was written, the failures of the Coalition Government of the time, the despair of the business community, the flight of capital and the radical turnaround of fortunes which occurred immediately on Fianna Fáil's return to office. There was rapid growth for two years which was only halted by the onset of the international recession which, alas, is still with us.

But while there are problems in the economy it is not right that a Government, in trying to solve them, should sow doubts about the viability of the economy or the currency or our national capacity to provide our own solutions to our own problems. This, the last and thankfully short-lived Government, did to such a degree that initiative and enterprise were discouraged and national confidence was damaged. That is treason on a smaller scale. No captain, going out on the field, doubts his team's ability to win.

Yet, the captain went on an on about problems and said nothing about opportunities. Their Minister's budget speech contained not a word about prospects for growth in the economy this year or next or of the impact which the budget itself would have on these.

I was glad to see that in a recent speech to business leaders in Limerick the chief executive of the ESB tackled the problems of Ireland, its woes, its doleful news and darkened skies. He listed achievements — an end to emigration, greatly improved standards of living, improved housing, health and education services, an enlarged industrial base and modernisation of our agriculture. He also sketched out for the business men present the necessity for a positive approach which would take courage from our achievements and generate a national pride. The least our generation can do is to provide opportunities.

There is one particular telling paragraph in his speech I want to quote:

The glass is half-empty or half-full depending on how you look at it. The half-empty viewers have the stage at present and they have so exaggerated the political, social and economic shortcomings of our society that our national confidence is shaken to the point that we have lost, almost, the will, the determination to tackle our problems with hope of solving them. I see the glass half-full.

A Ceann Comhairle, I could not agree more. The knockers, the doom peddlers, have had more than enough column inches. The budget introduced by the Minister, Deputy MacSharry, has shown that problems could be solved without harsh measures such as the removal of food subsidies, taxing of children's clothes and social welfare benefits. The Fianna Fáil Government would show in the coming months in their economic plan how to overcome and profit from adversity and would provide the positive approach demanded by the ESB's chief executive.

I turn now to the development of the inner city which has been made possible by the decisions of the Government. As a city councillor for many years I was very fully aware of the problems of the inner city and painfully aware of the lack of resources of the corporation to deal with it. Parts of our capital city were and are unmatched for dirt and ugliness this side of the Iron Curtain. I was ashamed as a city councillor of our inability to tackle these problems better because of the shortages of cash and the slowness of the compulsory acquisition procedures. I did go on record, however, and made myself unpopular in certain quarters, by suggesting that the priorities within the corporation budget were mistaken, that moneys voted for all sorts of esoteric purposes would have been better devoted to housing.

I make no apology for saying that these new capital allocations should have been made to Dublin Corporation years ago or for saying that the need of Dublin, this nation's capital, are greater than that of any other part of the country. I want to put it on record, however, that Fianna Fáil's concern for the development of Dublin and its inner city in particular is not new. We alone of the political parties prepared a special manifesto for the local elections in 1979 on Dublin and its problems. Sadly we have never had enough members elected to the councils in the Dublin area to have our policies implemented and it has required Government intervention to ensure proper development of the city.

I want to quote from that manifesto:

Dublin requires an additional programme of work and effort appropriate to its status as the capital city... The condition of central Dublin demands action.... The decay caused by planning blight must be halted by clear and public decisions on Dublin's future living patterns.... The time has come for a positive investment of resources in Dublin as the country's capital city.

I do not accept people from around the country and other Deputies saying that Dublin should not get this injection. Dublin is your city as much as it is mine. It is the show-piece of the nation. It is the shop window of the nation for visitors coming here and I make no apologies for saying that we should not be afraid to look into it. I see, as I speak here today, 2,000 acres of derelict sites. Those must be tackled and developed. Even if this injection of money into this city does nothing more than that it will be serving this city well.

Deputy Gregory is not alone in his concern for Dublin's inner city or in his emphasis on housing as a priority. We in Fianna Fáil share these concerns and I was very glad with the outcome. It means extra houses in the inner city where all the infrastructure, such as shops and schools and so on, is already there. It means 500 new jobs in areas where the father, the grandfather and the great-grandfather never had a job. Those are the problems we must face up to today rather than being parochial and saying Limerick and Cork and other places have the same needs. They have not got the same needs. One-third of the population of this country are resident in this city and its suburbs. One-third of the problems of this country are in this city and its suburbs. The fact is that this city is yours as much as it is mine. It is your capital city. You come up here to football matches, for jobs. People come up from the country to stay here. It is no use coming along——

I would ask the Deputy to refrain from using the word "you" lest it be thought——

I appreciate that.

Also, the Chair has given ample opportunity to speakers to lay the foundation, as it were, or to prepare the fire that they were going to light when they would come to the provisions of the Finance Bill and I am anticipating that you will be more relevant in a few minutes time.

There is, however, one item of detail I would ask the Taoiseach to have another look at. The 1979 manifesto I already quoted from places great emphasis on constructing new roads, on re-directing traffic away from residential areas which were never designed to cater for present day traffic and on limiting the flow of heavy industrial traffic through the city centre. In pursuance of this policy the Fianna Fáil members of Dublin Corporation fought long and hard to get some agreement on a plan which would channel traffic for Dublin port away from the city centre and residential areas. We met with the most extraordinary and obstinate opposition from Fine Gael and Labour who were not prepared to take the long-term correct decision for the development of the city in the hope of gaining short-term political advantage. They even opposed the building of the slip road from Clontarf to East Wall where there were no houses to be knocked down. When the press are looking, in the future, for examples of political decisions taken for short-term gains, I suggest they look at the Coalition's voting record on these issues. I am slightly worried that the road development schemes I am talking about will be delayed or postponed in the present circumstances.

I turn now to the question of tax reform. Unhappiness with the tax system has been widespread for many years. Its first manifestations were the clamour for the reduction and eventual abolition of domestic rates. Since then we have had the PAYE tax marches and more recently demonstrations against PRSI. I will deal with this latter question first and then go on to discuss the general fairness of the tax system.

In the minds of civil servants who operate it, PRSI may be an insurance scheme. Indeed, the insurance aspect of it may have been widely understood and accepted by workers when it was first introduced or in its earlier form of the insurance stamp. However, I do not believe that most workers now regard PRSI as an insurance scheme. To most of them it is just another tax, levied at quite high rates with little possibility of evasion. The insurance aspect makes even less sense to employers. To them it is a straight payroll tax, an overhead for the use of labour and an incentive to replace labour with machines on which there is no tax.

Debate adjourned.
The Dáil adjourned at 5 p.m. until 10.30 a.m. on Friday, 11 June 1982.