The Finance Bill, as an instrument of taxation, is concerned with the raising of revenue to give effect to the Government programmes for economic development and the public service. To that extent, no finance or tax Bill can be viewed in isolation. It is the action necessary to fund the necessary services to implement the economic and social programme. The Minister, in introducing Second Stage here, said that these new provisions in this Finance Bill would cost just £2½ million over and above what he had suggested in his budget. He was, thereby, acknowledging the linkage between the purposes of the Finance Bill and the overall Government programme as introduced in a budget.
Looking for the moment at taxation itself, in April 1980, I asked the Commission on Taxation to look at the whole question of taxation generally, and, in particular, to consider three heads — firstly, equity in taxation; secondly, the need to ensure economic and social development, because one could not view taxation in isolation; thirdly, to ensure an adequate tax level. Those three heads were then, and are now, inexplicably interlinked, so that when we consider, either in this House or outside it, levels of taxation we cannot isolate them from the overall level of public service and public service expenditure. Our narrow tax base is one of the reasons why I set up the Commission on Taxation, far too narrow having regard to the level deriving from the PAYE sector — which, incidentally, as I said at that time, is not attributable to the employed worker in the sense in which we normally understand it, something like 20 per cent of PAYE payment coming from the small companies themselves paying PAYE. That said, we have a very narrow tax base, because of which, from time to time, there is considerable impatience. Unfortunately, we do not get the same realistic approach in considering the most effective way of easing the burdens of the taxpayer, which does not necessarily mean spreading the burden more widely. I believe firmly that it is now a question of the ratio between tax and the public service.
There has been a notion here inherited, from the time of great growth in the sixties, that the only question about public service, like salaries, is by what level of increments it increases. We have seen a great advance in public service in a whole range of areas, but the present reality is that people recognise that the question is no longer just by what level of increments public service cost will increase by the service itself, but rather how we can examine the service with a view to minimising the level of taxation. This has become a key issue in the running of the economy and, equally, a key issue in the minds of the public.
In many areas, we have reached the point — and, objectively, most people will agree — of almost a maximum tolerance in relation to the level of tax. For that reason, many of our Departments, and particularly the big spending Departments, must now recognise that their future role cannot be — and, for that matter, never has been — in the interests of lessening the burden of taxation when we introduce Bills such as this, one of administration, of passing out what is made available to them under budget or any other proposals. Any Minister for Finance who can get under control these big spending Departments, Health, Social Welfare and Education, will have gone a long way to getting the budget deficit under control.
I propose to exclude, to a great extent, Education from what I have to say in this area because of the whole need for training in education for employment of our growing population, to which Deputy Mitchell referred. There are elements in some of our services which can be looked at with a view to reducing the burden of taxation, thereby reducing the current budget deficit.
The Department of Health particularly, should insist on not just being a channel of public expenditure. They have an obligation which, speaking from my experience as Minister for Finance, I am not convinced they have always readily accepted. For instance, there is the question of the amount of money which could be saved on the GMS by a system of prescriptions by generic designation in every case, as distinct from label. If doctors prescribe by label, the pharmacist is obliged to give that label, whether it be librium, valium or certain types of drugs. If, on the other hand, a doctor prescribes by type, the pharmacist gives a type which conforms to the standard. In that one area alone, if the regulation could be introduced of conforming to standards, prescriptions by type, we could save considerably more than the Minister is asking for here, which is £2½ million. I am talking about a saving of four times that amount.
There is a way of easing the tax burden. There are countries, some very prosperous, where almost 50 per cent of the population are on GMS medical cards. Is that something which the taxpayer can be asked to provide? Of course, it is right and proper that where farmers transfer the farms to their sons, to encourage effective, productive farming, they be classed then as people of no means and, thereby, qualify for old age non-contributary pensions. Socially and economically, that is a good thing. However, in every case where that happens, must we arrange to provide free medical cards — and I am speaking as one who represents a rural constituency — for parents from relatively comfortable income backgrounds? A saving could be made there. One could look at the custom of taking family income into account and might find some anomalies which exist. The growing irregular expenditure through various health boards could then be dealt with.
There are two very closely interlinked areas not completely relevant to this debate. There is the administration of the services funded by the taxpayer. If we want to relieve him of his burden, we should not just see what we can give him under this Bill. It is time that we looked at the application of the services for which he is paying. Doctors dealing with long-term patients, to guarantee the continuing prescriptions for these patients must invite them back, apparently, every month, thereby adding to the cost of the service. This is purely a matter of administration, control and discussion with the medical profession, but people who have to come back every month sometimes get the impression that they are sick all the time, particularly older people. Most doctors will tell one that this is an area where great costs could be saved. Has anyone failed to notice the level of drug prescriptions and the level of chronic or continued ailment amongst those on the GMS is so much higher than it is among that section of the population who pay for themselves?
I have great concern for those who are genuinely entitled to these benefits, the genuinely old, sick and deprived. They are the ones we must protect. Those are the people the taxpayers are ready to help. But when one sees an imbalance of this kind in terms of the cost of drugs in the GMS in comparison with what the ordinary citizen pays, when one sees a level of illness that is so much higher among those in the GMS system, questions have to be asked. The fact is that the taxpayers who pay for all of this—and those in the PAYE sector pay the heaviest burden—are being asked to fund programmes that those who are charged with implementing are looking at rather loosely.
Let us just look at the original Estimates for health and social welfare last year compared with the Estimates this year. At this point, assuming that there will not be supplementary estimates that will need perhaps further tax proposals, the original Estimate for last year on the health services was £691 million and this year the projected Estimate is £845 million. That is an increase of over 25 per cent already. If we are going to have an incremental growth of that kind in our services so that those who are entitled can be assured of continuing and improving services—and I would like to see increased services in case anybody might interpret me as saying that I am in favour of reducing the level of services for those who are really entitled—we will have to examine the position of those who are not entitled to such benefits. The original Estimate for Social Welfare last year was £476 million. The Estimate that we are now dealing with is £743 million. Those two alone demonstrate that to ease the burden on the taxpayer we will have to look first of all at the way in which the money is spent. The social insurance fund this year cost 30 per cent more to administer than last year. Last year it was about £28 million and it is now about £37 million. Is that level of increase acceptable? Is it meant to be justified by relating it to the amount paid out? Is it to be justified on the basis that if the amounts paid out to individuals are increasing each year somehow the administration costs increase proportionately? Each £10 million that is added on this area and other such areas is going to bring further pressure on any Minister for Finance who comes in here.
We should now consider having really effective services for those who are in need and entitled to them and have a good look at the application of those services. In the application of these services sometimes what is perceived generally to be the case cannot be too far off the mark. There are evidently abuses in the social welfare system. In this State we have an inherited attitude towards the establishment, which perhaps was not too kind to us over the generations. The notion of the citizen has, to a certain extent, been to take whatever one can get from the State. I sense, fortunately, a growing awareness of a new mood. But there has not been an awareness that when one draws what one is not really entitled to one is not just cheating the Revenue Commissioners or the Department of Social Welfare but is cheating one's fellow citizens; one is commiting an act of bad citizenship. Perhaps we have a little to learn of what is involved in bad citizenship, but the basic element is that if those who are not entitled to it draw money they are helping themselves from the worker's pocket and almost ensuring that those who are entitled will not get the benefit of increased services because the budget deficit has gone too high. The budget deficit has definitely gone too high, and to ensure that we can look after our large dependent population we must adopt a firm and strict approach to these services. We have obviously an unusually high dependency ratio. Deputy Mitchell referred to the ratio of the population under 25. It is just over 50 per cent in Ireland, and the average for the rest of the EEC is just over 30 per cent. By definition there is a high dependency area there already. Not all of them are dependent but a very considerable number are dependent in terms of education, preparation for life, opportunity for jobs. That is huge. But at the other end, the old and the sick and the unemployed, it is very considerable. To look after those dependants of different kinds we must guarantee that those who are not dependent but should be contributors will not be allowed to present themselves as being dependent on the taxpayers' contributions.
Some things will emerge if one looks at the patterns of disability benefits. I will go no further than to inquire as to the reason for the difference in the patterns of disability benefits as between men and women. One can accept that there would be some difference for physiological reasons. That may be reasonable. But when one finds quite a distinction in the patterns of disability benefits as between single women and married women one has to wonder why. I will just leave the question there. There is very considerable imbalance between the levels of disability benefit for single women and married women. The pattern of absenteeism among married women is regrettably high, and it is even higher in some of the heavily subsidised semi-State bodies. The facts are there to prove it. This all costs taxpayers money, and these patterns of absenteeism or disability are burdens on the taxpayers and are becoming a mounting problem that any Minister for Finance or any Government will find very difficult to deal with simply in the context of the Finance Bill. The problem must be dealt with for what it is, an abuse and a fraud against fellow citizens.
On the question of the level of unemployment, which has been mentioned so often, perhaps when one is on the Opposition side one likes to blame the Government. I have been on both sides and now find myself on the Government side but not in Government so I can perhaps take a rather special view of it. But we all generally recognise that the level of unemployment in terms of the figures presented is not the true level of unemployment. Most Deputies know that in many parts of the country where we supposedly have high levels of unemployment the fact is that they are not nearly as high as are being registered in the unemployment exchanges, because many people are doing what are called nixers. This could be dealt with by a strengthened inspectorate, but it also calls for an awareness on the part of the citizen.
We have an inherited attitude about informers. Those who communicated with the State to the detriment of their fellow citizens did not earn very much respect but, in a sense, the whole community now needs to become informers for the public good. I would like to see in our community an intolerance of abuses in this area. I am not going to deal only with social welfare in this context because that would give an imbalance but I would like to see an intolerance among the people who contribute to those services on behalf of the citizens who are entitled to those services. I would like to see an intolerance based on self-reliance and self-respect but with respect for those who cannot help themselves. Otherwise we are in great danger of losing the work ethics which are an essential element of our economic well being.
When I set up the Commission on Taxation I asked them specifically, although it was not included in their terms of reference, to look at PRSI as an element of tax contributions, or to at least recognise that it is a contribution taken from gross pay. I very confidently expect that when they bring in the report very shortly they will deal with PRSI in that context. That is very important. That is something most PRSI contributors would welcome. The PRSI fund was intended to be self-financing but because of the increased services and the enhancing value of those services, the feeling grew that it was not enough for employers and employees to contribute, but the State should contribute too. It must be remembered the State is the taxpayer who is complaining about the PRSI level. The taxpayer's contribution to that fund this year is over £210 million. Before we start talking about adjustments, let us recognise that an adjustment, of £45 million will only be possible if further contributions are made by the taxpayers. This is not mentioned in the Finance Bill because the Minister said the money would be found by savings in expenditure. Do not let any taxpayer be under any illusion. If the State is to make a bigger contribution, that money will be coming from the people who are saying they are already paying too much to the State. The Minister said the £45 million PRSI relief will be found by savings on expenditure and I support him fully. There may be a buoyancy element of about £10 million, but he will still have to find £35 million to keep within the budgetary projections.
I confidently hope he will adhere to that discipline, not just for the sake of disciplining himself and his colleagues, but because it will demonstrate that what is required now is a consistency that when we make a commitment our first obligation is to honour that commitment. When introducing my budget in 1980 I made a statement that if we had extra expenditure by way of special pay claims—and we had three in that year, teachers, nurses and gardaí—the only way they could be financed was by extra taxation. I meant what I said and I regret I was not able to introduce a supplementary budget to fulfil that commitment. When we give commitments we must honour them because the time has come when we can no longer avoid acting on them. The difference between the Estimates at the beginning and the end of the year show very clearly that to maintain the current budget deficit we will have to look at the level of public services.
Another element that has to be recognised as a glaring anomaly is that approximately 60 per cent of the current budget goes on pay and 40 per cent on services. If we want to curtail this expenditure this can only be done on the services side because the pay element is already provided for. I agree with many of the views expressed about discipline in the public sector, because this is one way of, first, ensuring that the imbalance is corrected and, second, guaranteeing that the burden on the taxpayer can be minimised.
I am sure when the Commission on Taxation look at this question they will not confine themselves to saying they are introducing a new system of taxes and that we need not worry how much we spend. If they did that they would not be acting in accordance with their terms of reference. They have to look at the overall position to see that the money raised by way of taxes is being effectively applied.
In the Finance Bill, 1980, I introduced income splitting for all married couples, not just those where the wife is working outside the home. The wife who works in the home is evidently a working wife. There are pressures which might make it more encouraging for wives to work at home, and I do not just mean dishwashing in case somebody says I am taking an old-style chauvinist view. I believe the wife at home can make a contribution to society no-one else can, and she can enhance society in a way no man at home can.
I would like to see that area being properly recognised because it might encourage some married women working outside the home to spend all their time at home, thereby releasing some jobs for single women who are at present in a very serious situation. There are some professions, like nursing, where many single girls are unable to get employment or training places. In that profession there are a number of married women working at present. There is nothing wrong with that but when there is a limit on the number of places available I think we should try to introduce other tax inducements for the married couple, such as I introduced in the Finance Act, 1980, which would serve two purposes at the same time.
The Minister in his budget statement and in his second statement on the Finance Bill compares the budget deficit that he projects for this year at £680 million or 5.6 per cent of GNP with the outturn for 1981 of £802 million or 7.9 per cent of GNP. The comparison stands out, but of course there is one significant factor that will be the real comparison, that the projection for 1981 can be adhered to. Otherwise the comparison of a projection with an outturn does not represent a real comparison. I do not question the Minister's determination to adhere to that projection of £680 million but to be able to do that he will need to do several things. Savings on PRSI must be found. Increased VAT returns at the point of entry must also come in as projected to the order of £140 million. The Minister said in his Second Stage speech that by the end of June the deficit should be in the order of 100 per cent of the figure for the year as a whole and this figure should be significantly exceeded by the end of September. The Minister went on to say — and I agree with him — that provided this could be adhered to, the level of revenue from tax in the last quarter must accrue, otherwise we all run the risk of losing credibility.
Any previous Minister for Finance will sympathise with the present Minister because of increases that will come in current expenditure demands. The level of slippage must be contained. The Minister this year will find himself in an unusual position for a Minister for Finance that within this House he will be supported in what he proposes to do, namely adhering to the disciplines he has set out for himself both in his budget statement and in the Finance Bill. The public will also support him because they now recognise very clearly that if he were to do otherwise it would mean that we would be taking more and more of their money to make concessions for other purposes. That is why the Minister has gone in the right direction in setting these firm projections in the Finance Bill. The public will understand that if there are to be any public demands on the public purse then it must come from taxation but I think that limit has already been reached. We should recognise when we come into this House that when we come in here proposing an increase in services of one kind or another that we can only do so in the recognition that we are asking the taxpayer to pay more. We cannot promise better services and at the same time say we intend to reduce taxation.
This Bill makes some adjustments in relation to VAT. When there are different categories there will always be certain anomalies but there are some elements which are included in the general category of house furnishings where the level of VAT is being reduced. Two items, gramophone records and television cabinets are at the lower level of VAT while at the same time, and here I disclose a political and perhaps a personal interest, the ordinary kitchen teapot, frying pan and kettle, provided they are made of aluminium hollowware and cups and saucers are now charged at the 30 per cent rate of VAT. My political interest is that perhaps the only aluminium hollowware company in the country is based in Nenagh. If I were asked to define which were essential and which were luxuries I would come to a conclusion which would not be influenced by my own personal and political association in the area. The level of VAT is reaching a point of maximum intolerance in that it affects sales, the cost of living and inflation but because of the important contribution it makes to the exchequer funds it must be retained. But where there is scope to do so I hope the Revenue Commissioners, in advising the Minister, will not adhere too rigidly to the notion that because you make one adjustment you will have others and may lose money. It is always possible to make adjustments, especially when the consequences of not making them can be very serious for some industries.
In connection with VAT, there is another element that most Deputies are conscious of. That is the number of small traders, who, for one reason or another, find it difficult or impossible to keep their VAT payments or records up to date. Perhaps some are careless and negligent and others have not the capacity to cope with it. One knows that from the diligence of VAT inspectors. I would not like to classify every small trader who is in arrears with VAT as a person who draws benefits to which he is not entitled. I would prefer to see the number of social welfare inspectors increased and perhaps the VAT inspectors being a little bit more tolerant. Most shopkeepers' only interest is in keeping their business going, and many of them are living in constant fear, if not dread, of the consequences of not being up to date with their VAT payments. The balance between spending and collection should be looked at in that context also. I do not think it is impossible to transfer people from one inspectorate to another. I am certainly not advocating an increase in public service employment. I think there is some scope for examining that area also.
One should also look at how the levels of tax allowances are fixed, just say in respect of mortgage repayments. I wish I were convinced that it was done according to a clear, deeply-analysed and considered judgment as to what will be the consequences of coming to a certain figure of allowance. One finds that, for instance, if one looks at the housing market in Ireland particularly in Dublin, it has one characteristic in comparison even with cities with a very high living standard such as that which I recently left, and it is that the level of inflation in house prices in Dublin is far in excess of what one finds generally in other cities, with few exceptions. One should consider to what extent provisions that may have been introduced in Finance Acts and which will be continued in this one contribute to that situation. If we are going to make adjustments of the kind, that interest reliefs on mortgage repayments are going to be increased by way of allowance rather than curtailing them, that in itself can have the consequence of increasing inflation in house prices. It is not the only effect that could accrue; I mention it just in passing as an effect, and one that should be examined. It is also a feature that the Commission on Taxation will consider, I am sure.
The direction set by the Minister in the Finance Bill is the right direction. The important thing is that each of us in whatever role we have here should now recognise that we cannot bring new pressures for new services without realising that it immediately puts the direction off course. It is vital that the Minister be able to adhere to these two commitments, as otherwise the continuing trend that he is now endeavouring to check will not be checked to the extent needed.
The sixties was a period of great growth, great excitement, and those who came into their first employment at that time felt a magnetic pull towards involvement. There was growth internationally and the semi-State sector was one of the major engines of growth at that time. We must now realise that we are in a different climate and perhaps the role of the semi-State sector has changed very considerably. The IDA in the Estimates of this year, have got £142 million. Most Ministers of Finance know that if there is one State body that always got what it sought it was the IDA. We owe them a lot for what they have achieved. That figure represents over 1 per cent of GNP, which is a very considerable amount. In the current international environment I think the trend is now emerging where the real thrust for development cannot be as dependent as hitherto on international investment at considerable cost to taxpayers; it has to depend more on self-help at home in terms of the resources we have here, fisheries, forestry and agriculture, and training and preparation for these programmes. That will mean a great degree of relief to taxpayers and ensure that the Minister will be able to adhere to what is set out in this Finance Bill.