Finance Bill, 1982: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time".

Debate resumed on amendment No. 1. 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 PRSI, it does so in such a way as to give maximum benefit to the well-paid, 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 PAYE 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 proposal to reduce tax avoidance through discretionary trusts."

—(Deputy J. Bruton.)

Mr. N. Brennan

I have already spoken about inner city development and welcome the Government's commitment in this matter. I now turn to tax reform. Unhappiness with the tax system has been widespread for many years. Its first manifestation was 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 the latter question first and then deal with the general unfairness 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 insurance stamps. 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 for evasion. The insurance aspect makes even less sense to employers. To them it is a straight pay roll tax, an overhead for the use of labour and an incentive to replace labour with machinery on which there is no tax.

I accept that pay-related benefits were sought for many years by the trade unions to cushion the effects on their members of sudden unemployment, and they would not wish to return to a flat rate benefit. I also know that the complete abolition of PRSI and its incorporation into the general tax scheme would cause problems. We ought, we are told, to retain a broad range of taxes and not be too dependent on a small number of taxes. Some permanent adjustment of the PRSI system is necessary. The concession granted this year is fine as far as it goes but it is extremely complicated and is not a permanent solution. Some more radical changes affecting both the employees and employer contributions are required. An employee's contribution could be regarded as part payment of tax or as an allowance. The high tax on employment which the employer pays should be replaced, preferably by some form of tax on capital which would encourage rather than discourage employment.

All this implies that the Government should abandon the concept of PRSI as insurance and accept the common view of it as a direct tax. I hope this matter has been taken into account by the Commission on Taxation. Their review will be second rate if they consider PRSI solely as insurance and not as a tax.

This leads me to the subject of tax reform. I am encouraged by various leaks of information to believe that the commission will come up with some worthwhile findings, and I urge the Government to implement their recommendations as soon as possible. Too many commissions have found their work on library shelves covered with cobwebs, and seldom has their work reached the Statute Book. As the report is to be available soon, the Minister is correct in not proceeding this year with the changes proposed by the Coalition. Tax reform is urgently needed. A large amount of the total income earned is not declared for tax, partly because of high rates, although for the vast majority of taxpayers this is not the main reason. They evade the payment of tax because they are convinced that others are not paying their fair share and they feel a keen sense of injustice. In this way tax evasion feeds on itself. The more evasion there is thought to be, the more otherwise fair-minded people feel justified in doing their little bit. Tax evasion has grown considerably during the past ten years and in my opinion it is contributing to the weakening of morality in the nation as a whole.

Apart from making the tax burden fairer there must be an effective deterrent to tax evasion. Too often evaders are allowed to pay off the outstanding amounts without extra interest, often in instalments, and no charges are preferred. Although various Ministers for Finance have promised more effective deterrents and stiffer penalities, and some of these have been passed into law, I see little evidence of tax evaders being punished as they should be and there is therefore no example to deter others.

I welcome many of the provisions of the Bill which make the tax system more just and limit possibilities for avoidance or evasion, both of which are fiddles against the man in the street who cannot afford accountants' fees and is not into the "nixer" business. I am glad that business entertainment expenses can no longer be used to reduce a company's tax bill. Entertainment expenses are a scandal and are part of the reason for the high cost of eating out in Dublin. A large part of the turnover in the ritzier joints was being paid for by the tax man.

I am glad also that there is to be a special tax on the profits accruing from the sale of building land. We in the corporation could see massive profits being made with little or no risk, sometimes arising directly from corporation decisions to build houses or provide services in an area. The recent court decision to force local authorities either to give planning permissions or pay penal damages was also quite galling. I am glad that at least some of the profits being made can, even at this late stage, find their way back to the Exchequer. The proposal to tax at realistic levels company cars supplied to employees with sometimes minimal official travel is welcome. I am also in agreement with the tax on bank profits. All these proposals will meet with general agreement among working class people, who are most upset with the present system which appears to give large advantages to the self-employed and the middle classes.

The Coalition Government proposed in their budget to tax short-term social welfare benefits. I will be interested to read what the commission will have to say about this, but I feel that my party would not agree with such a suggestion. To tax short-term social welfare benefits would be wrong and the collection of such a tax would be very difficult. The Coalition's proposal was short sighted, and I am glad the House would not agree to it.

The high rates of short-term benefits may discourage some people from working because their take-home money may be greater on the dole. I accept that there are certain abuses of the system but I do not think that taxing benefits is the answer. However, people should not be better off on the dole than when working. If the Minister is discussing PRSI with the trade unions he might suggest taxing benefits as part of the price for lower contributions or tax free contributions.

I welcome the remainder of the budget proposals. I am glad the Minister has abolished the Coalition's proposal to impose VAT on clothing and to remove food subsidies. It was a national scandal that a Government supported by a Labour Party could introduce such insensitive proposals. Some of the people who framed the budget do not appear to have known the price of a loaf of bread. The budget fell because it was totally unacceptable to the majority of the people, irrespective of their political affiliations. It was an unjust budget which proposed to tax the weakest sections. Food and clothing must be bought by people every day and they cost enough as it is. The Minister is to be complimented on abolishing those two items. A Government who would introduce such provisions are unfit to govern. This revised budget will go a long way towards alleviating poverty and stimulating employment, despite the pedlars of doom and gloom on the other side of the House. We are on the right road now and I look forward to the implementation of the provisions of this Bill in the near future.

Mr. G. Mitchell

I rise to speak in support of the amendment in the name of Deputy Bruton and, in doing so, I want to be as objective as possible given the provocation that has just come from the opposite side of the House. It was interesting to hear Deputy Brennan, speaking allegedly objectively, about the fitness of Deputies on this side to form a Government. I do not want to become involved in any sort of hassle or across the floor sneering. The situation is far too serious for that.

I do not have the benefit of a prepared script such as Deputy Brennan had but I want to raise nevertheless various points which I consider relevant to this Bill, to the amendment and to the needs of those who will be affected by this measure. The reason why this amendment has been tabled is because of the changes that have occurred in this Bill in direct contradiction to the Minister's budget statement, the result of which is to make this Bill totally dissimilar from the budget statement of the Minister delivered in this House only a few weeks ago. We on this side are at a loss to understand how in eight or ten weeks the Minister's budget strategy could have changed so dramatically. We wonder how he could have got the advice of his Government and his civil servants so wrong eight or ten weeks ago.

The purpose of this Bill is to implement the budget statement. Instead of doing that this Bill, containing so many changes, is a separate document altogether almost and has very little relevance in very many areas to the Minister's budget statement, to the objectives he then set himself, objectives he said would have to be achieved. I wonder why the changes have been made. To what pressure groups has the Minister bowed in the interval? I suspect that the bowing in the capital gains tax area has been to the party backers. If there is going to be a constant looking over one's shoulder and changing one's mind every couple of weeks at the behest of party backers in a general election — there may be one very soon—then the Government will not be able to govern the country as it should be governed. Fighting general elections in this democracy should be funded by the state and the sooner we get down to providing funds for that purpose the better it will be. As matters stand Fianna Fáil are too much in the pockets of big business, and therefore answerable to big business, and that is why so many changes have taken place in the Bill now before the House.

When in Government in the years 1973-1977 we introduced in 1975 capital gains tax as part of the general reform of the tax system. The Taoiseach has a reputation as the man who reformed the VAT system. He is also alleged to know a great deal about finance. He has spoken about our VAT legislation. That legislation is no different in principle from that of any other country in Europe. Has he ever really made any fundamental changes to brought in any fundamental reforms? Reforms in the area of taxation were made in the years 1973-1977 when capital gains tax, wealth tax, taxation of farmers, corporation tax and capital acquisition tax were introduced. In that period the whole area of taxation was dealt with properly. Of course then we had the Government which was governing. We had a government which did not have to look over its shoulder all the time.

People are genuinely concerned about the present situation. When we were in Government they did not like some of the taxes we introduced but they took them on the chin. There was very little attempt at real government when the party opposite had a majority of 20 seats in this House. Leadership is not about getting votes but about directing and helping people to achieve what they want to achieve. If the people were given a choice tomorrow I believe they would change their allegiance to those who would not seek office by pandering to the electorate, something which was all too obvious in the last general election. The people are crying out for leadership. There is evidence of that in many areas. Even in Northern Ireland people are now responding to efforts at proper leadership. The sooner we get proper leadership the more we will be respected. The people are waiting for leadership and they will respond to leadership.

We introduced capital gains tax in 1975. The Fianna Fáil Government between 1977-1981 made changes in that legislation which resulted in capital gains tax being practically abolished. They introduced the time scale measure and the multiplier relief which meant the abolition of tax for a large number of people. This enabled those people to make big profits by selling land, shares and so on. They did not have to pay capital gains tax but the man earning £30 a week had to pay PAYE. That is the equity and the justice the people got from Fianna Fáil. In our budget earlier this year we took steps to bring more people back into the capital gains tax net. Fianna Fáil introduced the present measure with the support of the so called Workers Party to enable people to make vast sums because of not having to pay capital gains tax. Our budget proposal was deleted in March and money was given back to those who could well afford to contribute to the running of the country. Further changes still are proposed in this Bill.

All citizens should contribute equitably to taxation. The burden should not rest on the man with a small income, a big family and a mortgage. The sooner steps are taken to bring about a truly equitable system of taxation the sooner will the country move forward in the right direction. There is a patent absence of reality at the moment which results in an unfair burden being placed on the shoulders of the working classes. We must get it across to the wealthy that they will have to contribute their share to the running of the state irrespective of who is in Government.

I welcome the changes in mortgage interest proposals. The Minister has not quite gone back to what we proposed to do in our January budget but he has had second thoughts and he is now proposing to go some of the way towards what we were proposing to do. He has not said how he will pay for this. He has not told us from whence the money will come. Had he left it as it was in our budget in January those burdened with mortgages would have greater relief, a relief which is their due. Everybody knows that the mortgage interest rates are phenomenal. A £15,000 mortgage could cost in the region of £55 per week and about £50 of that would be interest. It is only right that people in that category, particularly those below a certain income, should be given income tax relief. The Minister has gone back to our proposals, but not in the capital gains tax area, to raise funds to pay for this. How is he to pay for this? Where is he to get the £45 million to pay for the changes in PRSI? I welcome those changes, and they are very good, but we provided for the income on the other side of the account in our budget. We set down precisely where the income was coming from and where the expenditure would be, and the tricksters come along and say that we will do this, that and the other. At the end of the year when the books do not balance and the deficit is £1,000 million or whatever the chickens will come home to roost and we will have to answer for it, unless we have an election before then, which is probably what will happen. They will bail out before they are bailed out because no financial management is coming from the Government, as is patently clear to anybody with even the slightest knowledge of finances.

We have in the Taoiseach a very experienced accountant who knows a great deal about dealing with books, and there are many ways of balancing books and showing figures and bringing Estimates before this House which do not reflect the real situation. Take for instance the City of Dublin VEC. When you discount the salary portion of their budget for 1981 not only was their non-salary income less than in 1980 but it was less than had been given in 1979. That is what Fianna Fáil did in 1981. Those figures do not show up in the Estimates, so you leave public bodies short of funds and the Estimates go through the House as if everything was hunky-dory. What happened? The Coalition Government in their budget of September last year had to introduce a Supplementary Estimate to bail the VEC out and ensure that those attending vocational schools and colleges in this city got the necessary funds to enable them to get the education they deserve, and thus kept the system going. We come back to this year, and Fianna Fáil have done it again. The City of Dublin VEC is £2.5 million short even to get by for this year. I do not know whether we will have another Fine Gael or Coalition Government by the end of the year to bail them out, but somebody must bail them out. We cannot continue to cut, because if we want public services we must pay for them and we must provide for them in this House, not providing for them in January and coming along in September saying that we under-provided, when such under-provision occurred not because of mis-calculations but because of deliberate calculations, surely just to show that the finances of the country are better when everybody knows that that is not the position.

People talk about two forms of taxes, progressive and regressive. There are three forms, progressive, proportionate and regressive. Progressive tax is where the percentage of taxation increases as income increases. Regressive tax is the opposite, where a disproportionate amount of tax is taken. This is often referred to as a poll tax because of the way it was used against negroes in the deep South of America. From the way it is used in this country one would think we had a few negroes here, at least in some parts of this city. In other parts there is surely a type of discrimination intended to buy one vote to keep the Government where they are. The third form of taxation is proportionate, where everybody gives a fixed proportion, one-tenth, a tithe or whatever. We are getting further and further away from progressive taxation and we have come back to regressive taxation. The tax provisions in the Fianna Fáil budget compared with our budget in January are without question, regressive. They are taking more income from those who can least afford to contribute and there is no sign of reform. We have started down the road in the opposite direction. Regressive taxation is the order of the day instead of getting back to some form of fair taxation which we all know is required and what all the marches were about. Fianna Fáil have turned their backs on those people and have made changes in the PAYE and PRSI proposals which are regressive and which cause those who can least afford to do so to contribute more.

In the budget in January we on this side of the House had gone for indirect taxation in preference to further PAYE taxation. We had widened the tax bands and introduced the family income supplement to assist those families whose income was below a certain figure. Given the difficulties that we faced at that time, that was a courageous and honest step to take. Given that difficulties of which everybody is now aware had accumulated over the years and had to be dealt with, it was a courageous, fair-minded thing to do at that time, yet even though it reduced the burden on the PAYE taxpayer, the Government decided to scrap all that and to give back funds to the capital gains tax people in the bigger income group and make PAYE people pay further for this. In changing the tax bands we proposed they reduced those bands to make the PAYE earners go back to high rates of tax more quickly and contribute more. I cannot see the justice in that. I do not believe that their budget from start to finish was thought out on the basis of justice, fairness, need or anything objective. It was thought out purely on "What can we get from the House and on what can we con the people and the Workers Party Deputies to get this Bill through?"

The Workers Party described this as a very good budget. Is a good budget one that increases PAYE for the workers? Where are the workers' representatives now?

Mr. Bellew

They are here.

Mr. G. Mitchell

It is time that these people were exposed for what they are. I am sick to the teeth of watching these people being pandered to.

Mr. Bellew

The Deputy is trying to——

An Ceann Comhairle

Deputy, you will have your opportunity to speak. Deputy Mitchell without interruption.

Mr. G. Mitchell

They have supported measures in this House to increase further the PAYE on the workers and to give back funds to the capital gains tax people.

I want to say something about evasion and avoidance. There is very little difference between the two, as Deputy Brennan rightly said. One is the legal way of doing it. If the man in the street could afford accountants' fees he would do it as well. Since it is the wealthy classes who avoid tax, the amount involved is great. It is looked on as being very clever if one can avoid tax.

Tax evasion and avoidance have always been with us. When income tax was first introduced during the Napoleonic wars there was avoidance. It is amusing to think now that at one time a person could be taxed on the number of dogs he owned, or the number of windows in one's house or on hair powder. People used to sell their dogs, block up their windows and stop using hair powder.

We must come to terms with tax evasion and avoidance and deal with it in moral terms. The situation cannot continue where people on low incomes, which are known, are contributing to the running of the State while those whose income is not known are not contributing anything but are living in very good circumstances. Such people live in very big houses and have very big cars. Where does the money come from? In some cases we know that it comes from tax avoidance and evasion. The sooner it is realised that it is not very clever to be a tax evader and that other people have to contribute to keeping evaders where they are the better it will be.

As regards the economic situation in which we find ourselves I should like to rehash my maiden speech which I made on the last Finance Bill. The problems we have now came about between 1977 and 1981 for a number of reasons. I have already said that between 1973 and 1977, the Coalition Government set about governing the country and not everyone liked the way they did it. They took things in hand and brought in tax reforms. When they left office they had brought the inflation rate down to 6¼ per cent. The national debt, which had accumulated over 25 years, was £5,000 million. The current deficit was somewhere in the region of £200 million. Having gone through the first modern recession they came out of it with things pretty well in hand. The country was governed, inflation was down, tax reform was introduced and then there was the general election. Fianna Fáil promised everything and to their amazement they got a 20 seat majority. Then they had to implement the things they promised. The effect of implementing them recklessly meant that by the end of 1981 the national debt had doubled to £10,000 million. Between 1977 and 1981 they had borrowed more than had been borrowed in the previous 25 years. That shoved up inflation and unemployment rose. In the short term of Deputy Haughey as Taoiseach at that time, employment rose by 40 per cent. Hopefully, his reign this time as Taoiseach will be even shorter. We are now paying for the recklessness that went on during 1977 and 1981. We should now be in a position where we should be ready to bounce back in terms of economic recovery. While other countries have started to recover we still have a millstone around our necks. That is where our problem started and it is a problem that is still with us.

In relation to borrowing the Central Bank Report of 31 December 1981 states:

A recovery in the world economy is expected over the next eighteen months..... The coexistence for several years past of high inflation and large public sector and balance of payments deficits — all of which are contributing to the present historically high level of interest rates — will make it harder for Ireland to exploit fully the benefits of international recovery.

There is a millstone around our necks which was placed there by Fianna Fáil and now they have not the gumption to face up to it and try to get the economy in shape, not for the sake of balancing the books but to get back the 80 per cent of our income tax which we pay in interest to foreign bankers. This would help create employment for young people. We have the fastest growing young population in the western world. There is no hope for them unless we take the economy in hand. Fianna Fáil are running away from the problem and the sooner they realise they will not be the largest party for very long because they did not face up to the problems confronting the country, the better for them.

The Central Bank also stated that the large external deficit constituted the principal constraint on our economic target, a point which was stressed consistently by the bank in recent years. Last year, the current balance of payments deficit reached the unprecedented level of £1,300 million, equivalent to 13 per cent of national output. The forecast for 1982 is that an improvement in the trade balance will be offset by higher interest payments on foreign debts, leaving the external deficit at the same absolute level as in 1981 — although somewhat lower as a percentage of nominal GNP. The problem is that no progress is being made. Fianna Fáil brought down our Government in January when we were on the second leg of the correction referred to in the report. They came back and started to talk about boom and bloom as if they could wave a magic wand and this would come about. The only bloom we will ever have is Bloomsday unless we get down seriously to managing the economy.

The Central Bank Report continues:

However, spending associated with high public sector deficits, accompanied and accentuated by excessive incomes increases, have also been major factors behind the growth in the balance-of-payments deficit. Because of their scale, the public sector deficits have had to be financed mainly by substantial foreign borrowing, leading to a level of Government external debt at the end of 1981 of £3,725 million or more than five times greater than in the mid-1970s.

— more than five times greater than in the mid-70s, and that is our external debt only.

Servicing this debt has not only pre-empted a progressively larger share of Government current revenue but has also itself become a major factor contribution to the rise in the external deficits.

The servicing of the debt has now become a major factor in our external deficit. Even the payment of interest on this vast debt built up by Fianna Fáil has become a major factor contributing to our external deficit itself. That simply cannot continue. We know it cannot continue, the people know it cannot continue. Indeed in the first general election of this year the people showed they were prepared, they knew things were bad, they realised that sacrifices had to be made but they were prepared to come to terms with it. Now purely through falsehoods emanating from the far side of the House they are being told that is not necessary at all, that Fianna Fáil will do this and that. Everybody knows a sacrifice must be made in the interests of people generally. It is the job of government to pass legislation and run this country in the interests of the people, not in self-interest. The sooner we get back to that attitude the better and the greater will be the response from the people.

In the Central Bank Report they say that the planned reduction of the current deficit would be the fulcrum of an economic plan. When we introduced our budgets of July and January last we said they formed part of a plan. We said specifically what would be the current deficit at the end of 1982. I think it would have been something in the region of £700 million had we followed the plan we had laid down. We had planned to eliminate that budget deficit over a specific four-year period. Not once from those Government benches, in any speech made whether at the opening of a pig parlour or in this House in introducing a Bill, not once have we been told that there is a specific planned period for the elimination of that deficit. The Central Bank says—as does anybody who knows the situation—that the elimination of the current budget deficit over a specified period is the fulcrum of an economic plan.

It is time that this target was pinned on the Government. If they continue on their present path certainly we shall not have the current deficit at the end of the year they forecast of something in the region of £650 million, or whatever was the figure. But if all the promises they have made at the recent by-election and to the various pressure groups are to be fulfilled and paid for, and the changes in this Finance Bill paid for, then not alone shall we not eliminate the current deficit over a planned period of four years but the deficit will be much larger than was forecast for the end of this year. The Government must have a specified plan for the reduction and eventual elimination of the current budget deficit over a specific period. That is something about which we have heard nothing from them, and it simply must be tackled.

Had our budget of September last not been introduced not alone would the budget deficit this year not have been of the order of £650 million—leaving aside any additional commitments entered into since September last—but the current budget deficit at the end of this year would be of the order of £1,500 million. If one adds to that the promises the Fianna Fáil Government have made in the meantime, without taking any other changes into consideration, then it must be realised that we would be heading for something in the region of a £2,000 million budget deficit at the end of this year. As a result of the changes we brought about in our September budget and intended bringing about in our January budget we were heading for a deficit of £700 million, to be eliminated over a four-year period. God only knows what sort of deficit we are now heading for. Certainly the Minister for Finance does not know. I do not think even the Taoiseach knows, but sooner or later the people will know. I do not know what will be the answer at that point, but we must tackle the problem of our current budget deficit.

The public expect leadership. They know that the day of the promises, carrots and so on is gone. They do not want them; it did not work in the Dublin West By-election and will not work in a general election. People want real leadership. They want opportunities for their children and they are prepared to make sacrifices if done on a fair basis. Let us get down to that real task, the central part of which should be the reduction and eventual elimination of our current budget deficit.

The Central Bank Report says further.

In order to adhere to the original budgetary dispositions, significant extra taxation will have to be imposed (or expenditure reductions effected) to make good this year the revenue forgone through recent tax concessions. In addition, the non-recurring nature of some of this year's revenue will create difficulties for fiscal policy in 1983.

That is putting in formal language what I said earlier, that the promises made and changes effected must be paid for. But where in this Finance Bill are we told the money will come from?

With regard to the non-recurring nature of some of the measures adopted it will be noted that the Government are bringing forward taxation from next year into this year which should have been left to the ensuring year, not merely because it will be needed next year but because people being asked to pay this year on account of the general economic situation, are not in a position to do so. The Fianna Fáil proposal to bring forward corporation tax payments into this year is purely a book-balancing operation placing an enormous burden on companies, particularly small ones. It is threatening employment, adversely affecting cash flows and, in the case of some companies putting them into liquidation. We all are aware of the number of redundancies that have taken place in recent months. It will be interesting to see how many factories will have closed by the end of this year. If we examine the number that closed during the last term of office of Fianna Fáil we shall see that there was a very large increase. The bringing forward of the payment of corporation tax into this year will cause chaos for many companies already experiencing difficulties, companies already finding it difficult to tick over, those endeavouring to shelter from the economic storm and maintain their current employment levels, and will put many of them over the hill with a resultant increase in unemployment. Yet that proposal was brought in here at the stroke of a pen by the Taoiseach. To a great extent also that responsibility lies with the present Minister for Education, Professor O'Donoghue, who contributed so much to the reckless performance between the years 1977 and 1981. The collection of that corporation tax this year is a disastrous proposal. Already we can see that it has raised the white flag vis-á-vis the redundancy race. It will take very little more to cause massive redundancies. We should be encouraging people to take on more employees, eliminating any disincentives existing at present, so that we can provide people with jobs and maintain their employment. But that is not what is happening.

I want to refer to one point made by Deputy N. Brennan with regard to tax on clothes. I believe there are a lot of people who would be prepared to pay VAT on the one or two suits they buy in a year rather than be squeezed in the way they are being squeezed by a combination of PAYE and PRSI. I believe there are a lot of clothes companies who have second thoughts about the wisdom of imposing some form of VAT or indirect taxation as against what has happened. The purchasing power of the consumer has been reduced to such an extent that sales of consumer goods, including clothes, are falling rapidly. Those clothes companies will have cash flow problems to add to their difficulties as a result of corporation tax being brought forward, and they will have to pay higher petrol charges which their competitors in Czechoslovakia and all the other countries will not have to pay, although they will have to pay VAT like everybody else. The 1 per cent VAT on clothes imported will cause a general decline in sales because it will cause a general increase in prices for domestic and imported goods.

I believe if the people in the clothing business, the St. Bernard branch of Fianna Fáil, had looked at this thing objectively and said to themselves: "what is the best thing for our companies in terms of employment and in terms of profitability, cash flow and continuation?" And if they had known that those proposals were the alternatives we were talking about they would have had very serious second thoughts. They are not very good businessmen when they did not see that coming. They have been sold a pup and they have got a lot to answer for. Many of them, who are Fianna Fáil supporters, in any event would benefit in other ways, so the propaganda put out would not be balanced and objective. If they set about an objective analysis they would find, in terms of employment for the people in the industry, in terms of profitability and cash flow and encouragement to keep people employed, what was in the January budget was much better than what has come since. There are many examples that can be given of that.

There are some other aspects of the Finance Bill I want to refer to, such as the changes being made in the proposals put forward by Deputy Bruton in his January budget to tax discretionary trusts, which is another payment back to the party backers. We all know that there should be a tax on discretionary trusts, but it is being eliminated because some wealthy party backers have telephoned somebody, put on pressure and said they will not contribute any more if this is the sort of tax which is to be introduced. The party system, particularly Fianna Fáil, have become dependent on this sort of pressure. I appeal to the Minister for Finance to introduce legislation to finance the party from the State and let there be no apology to anybody for it. It is in the public interest. We should not pay any heed to these self-interest groups who constantly come looking for all sorts of favours and all sorts of special treatment on the basis of lining their pockets.

Fianna Fáil were not always in the sorry state they are in now. At one time they were a good party. They did things, they governed, particularly during the late Sean Lemass's time. They are in a very sorry state now. They have not brought in any real reform anytime they were in Government in the last decade. What has happened to the fighting spirit? What has happened to the moral fibre there used to be in that party?

The bite has gone out of the Fianna Fáil administration. There is nothing in the Finance Bill to give any sort of moral, financial or economic leadership. The amendment put forward by Deputy Bruton should be fully supported. He is to be commended for putting down that motion and he is to be commended for his consistency in being as courageous as he has been. I fully support the amendment and I call on the Government to stop borrowing for day-to-day purposes and day-to-day spending. If the borrowing is for investment purposes which will create employment and give a return that is another thing and there is no objection to it from this side of the House. The objection of this side of the House is to borrowing for day-to-day expenditure. The essence of the amendment is to try to bring back to the Government the economic realities to govern the country as it should be governed. If the Government take the economic needs of the country seriously then they will have to support this amendment. I want to record my full support for the amendment before the House.

Mr. O'Kennedy

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.

Mr. Taylor

I was very glad to hear the previous speaker in his closing remarks referring to the necessity that we should base development of our industrial structure more on home-based industry using native talents available to us. I do not agree with him that this is only a recent situation, that we need not have looked that position in previous decades. That was one of the major mistakes we made. We have relied far too much, in my view, on the entrepreneurial activities of foreigners brought here by the IDA, all too many of whom have taken the loot and gone. Many millions of pounds have been expended by the IDA in bringing in foreign-based industries and factories and too many of these set up operations, created jobs for a while, took the enormous grants and benefits given to them by the IDA and the taxation relief granted to them by successive Governments and continued operations, while it suited them — motivated as they would be entirely by profit motives — and when the occasion arose they either liquidated or went away leaving a hiatus or vacuum of unemployment and misery behind them in Dublin in many cases and in many towns in the country.

That is very regrettable but true. We relied too much on outside firms and not enough on our own resources. That is why I deeply regret that the thrust of the present Government has not been to accept the proposal to set up our own national development corporation and to direct the major funds for investment in industry to that corporation, which would have been locally based, using the skills and enterprise we have in our own people — and we have those skills available and they can and should be called upon.

The Fianna Fáil proposal for a national enterprise agency is but a faint shadow of what is required, inadequately funded, just a showpiece to avoid the key issue that when we need to create jobs — as we do — and when we need to set up industry, call in the outside man or firm and let them see to it rather than gear up and engineer our own resources and people to do it.

We have been very remiss; we have not used the resources available to us in recent years. Our major natural resources have not been exploited in the way required to produce growth and wealth and reduce unemployment. I refer in particular to our main natural resource, the key national resource, the agricultural sphere, particularly the cattle industry. We have really done a disservice to the country in failing to exploit that major natural resource. This has been mentioned many times inside and outside the House. If talk alone were sufficient we would now certainly have a fine downstream industry in cattle. All we have done about it is talk, and we have made no aggressive impact on that industry as a Government, and that has been true of successive Governments over the past decade. We have allowed that natural resource to be exported as a natural resource and allowed others in the UK and elsewhere to exploit it, leaving us with very little to show for it.

The matter has been very well researched. An excellent report on it was produced by the Economic and Social Research Institute in March 1979. I should like to quote from it, and these quotations are as relevant today as they were then, possibly more so. They point out that if present trends continue, the Irish food processing industry by 1990 could be predominantly in the hands of multinational concerns and producing about twice the 1973 output with less than 18 per cent more employees. They say that these trends can be altered only by massive co-ordinated effort of the major factors in the beef and dairy industries or by large direct intervention by the Irish Government. We have had no evidence of any such intervention. All we can see is that the food processing factories, such as they are, are closing down and that the people who work in them are being thrown on to the dole queues as if they were not long enough already. There must be aggressive intervention by our Government not only from the point of view of saving jobs but of adding to the wealth of the country. We are permitting this industry, this basic resource, to proceed as though ours was a primitive or undeveloped economy. The ESRI say that the main reason for the low value added of the Irish food industry is that firms are still using the basic processes that are used in more primitive economies. That is a poor reflection on us after decades of independence. Instead of paying out millions of pounds to the IDA to bring in foreigners to run for a couple of years a Potez or Fieldcrest-type operation, we would be better employed in directing the resources of the Irish taxpayer towards something we can manage ourselves, to operations that will produce jobs for our people and increase wealth for the country.

Successive budgets and the fiscal policy of Finance Acts are being used as a kind of book-keeping operation, an operation to balance the books, without adequate attention being given to the use of fiscal policy as a means of stimulating employment. Every major measure that could be brought up in a Finance Bill should be put on the weighing scales and tested in terms of what effect it would have on employment. In respect of each measure we should ask whether it would have the effect of providing a stimulus towards employment or of causing people to be put out of work. Has the measure concerning VAT at the point of entry, for example, been examined in that light? It seems to me that that measure of taxation will make savage inroads into the liquidity of those firms providing employment and that it will be bound to create further unemployment.

It is not necessary for me to remind the House of the jobs that have been lost in the footwear and textile industries. There are not all that many such industries left. They have closed one after another in the last decade, throwing numbers of people on to the dole queues and increasing the burden of social welfare on the people remaining in employment. We must ask whether sufficient stimulus is being provided in this Finance Bill to ensure that the remaining workers in the declining footwear and textile industries are maintained in employment. Is there any stimulus in the Bill for an increase in employment in those areas? I would like to see some form of encouragement by way of the taxation process that would ensure that those industries producing goods would be afforded some measure of protection against the dumping of imports here both from EEC countries and from third countries. Our industries, particularly those in the textile business, have been subjected to unfair competition from abroad. I wonder whether our representatives and our successive Commissioners in the EEC have been pursuing a sufficiently aggressive policy to protect our interests. We know now that the EEC has not proved to be a panacea. Restrictions are imposed from Brussels as to what we may restrict in the line of imports while imports are coming in in large quantities not only from the EEC but from Asia. This is the type of situation that is causing unemployment and misery to so many of our people. Perhaps we should cease being the most respectable man in Europe and look instead to our own needs and to the urgency of our own situation.

Deputy O'Kennedy talked about the urgent need for the Minister for Finance to adhere to these commitments. Unfortunately, the record of the Government to date in the matter of adhering to commitments leaves much to be desired. Far from adhering to commitments the Government seem to be responding to every pressure group. We had the pressure in respect of the PRSI situation which resulted in a concession of £45 million, and there have been others. I presume that is the sort of thing that Deputy O'Kennedy was referring to. We cannot run the country on that sort of basis. I agree that we must set out on a course of economic development and adhere to that course, but I am afraid that this Government have given every indication of doing the reverse. What can we do to ensure that industry is stimulated and given a base on which it can compete with foreign industry and provide jobs as well as providing the goods that we need here and those that we can export? Something we can do and which is done in other countries, is to consider some of the main cost factors that go into maintaining industry which in turn is so vital in maintaining employment.

An important factor in this context is the cost of energy, mainly oil and, in turn, electricity. I suggest that we give serious consideration to a policy of subsidising the cost of oil and electricity to factories where employment is maintained in order to ensure that those industries will be in a position to operate.

That is done in other countries, and if we fail to do it we will place our main industries at a disadvantage and take away from them their ability to maintain employment and compete abroad. Our energy costs are a vital factor in industry. Our costs are the highest in Europe, and those costs on energy place an almost intolerable burden on every employment centre in the country. The high energy cost content is an obvious disadvantage and, if we were to subsidise the cost, we would make a signal contribution towards the creation and the maintenance of employment.

I know it will be said that the cost of such a subsidy must be met from somewhere. Of course it must, but the actual cost of providing that subsidy initially is not a real outlay and not a real cost because the advantages come back very quickly in another direction. When one subsidises the cost for marginal factories one preserves employment that would otherwise be lost. One keeps in that employment people producing goods, people who would otherwise have to be paid redundancy money or weekly social welfare benefits for an indefinite period. That is the position obtaining at the moment. In addition, when one keeps these people in employment they are producing the goods we require, goods which otherwise would have to be imported, adding to the burden of our foreign exchange and foreign deficits.

Something will have to be done about high interest rates. These have now become almost a matter of course. With the exception of Italy we have the highest interest rates in Europe. These are a deterrent to employment and they must not be allowed to continue. Something will have to be done if we are not to see our unemployment figures rising year after year. These interest rates, like energy costs, result in putting people out of work. I am not exactly sure of how the situation can be remedied. There are difficulties, but some fiscal method will have to be implemented to cushion the effect on industries which are already on the brink of disaster. They are on the verge of going into liquidation or receivership. We have had many industries which were wholly viable for many years. They provided employment and they provided the goods we needed. Too many of them have gone to the wall.

Reference was made this morning to the Clondalkin Paper Mills. These mills are a classic example. At one stage we had six paper mills. We were virtually self-sufficient in the provision of paper. We now have the situation where the last surviving paper mill is facing closure. If it is allowed to go the paper making capacity of the country will be gone for all time because the expertise will disperse and every scrap of paper we use here in this House and elsewhere will have to be imported while those who worked in the mill will be a burden on the Exchequer and therefore on the remaining taxpayers.

The object of the Finance Bill should be to encourage industrial growth, stimulate employment and maintain existing employment. It should also be a measure of equity in the administration of taxation. That equity has been lacking for many years, and its absence has given rise to a great deal of disquiet amongst the general body of taxpayers. We have had marches in the streets of Dublin and in other cities, in many cases with good and sufficient reason. Here I want to make special reference to what one might call the housing subsidy situation. It was touched on by Deputy O'Kennedy, but he did not quite develop the point as I hoped he would.

A major item of Government expenditure comes in the field of housing. A tremendous amount of that money is provided by the taxpayer in different ways. The money is expended in the form of grants to local authorities and to new house buyers. It is also expended in the cost to the Exchequer on the allowances people receive on the interest they pay on their mortgages. This is an aspect upon which I want to touch now, because of the retrograde step taken in this measure whereby the tax allowance system on mortgages has been radically altered in the interval between the Minister's budget statement and the publication of the Finance Bill.

The situation now is that the general body of taxpayers is making a very substantial subsidy to those who, to use the common expression, trade up in the purchase of higher cost houses, because as a result of this measure they will be entitled to set off the entire interest of that traded up mortgage. In effect, that is a subsidy granted by the State to enable those who already have houses to buy larger houses. That subsidy is paid by the general body of taxpayers, many of whom have no houses at all. Those in local authority housing who are working are paying PAYE week after week and thereby contributing to the central tax fund. Those who have no houses at all and little prospect of getting one in the foreseeable future are also subsidising those who are trading up their present houses in order to get bigger and more expensive houses. That situation has been brought about by this Finance Bill. Actually the reverse was the situation in the Minister's budget statement, when a limitation was placed on the income tax on mortgages and not to the actual marginal rate of income tax paid by such a house purchaser. That is a retrograde measure which ought to be removed. A strong case could be made for the abolition altogether of the allowance, but that is another day's work. As a compromise measure the provision for the limitation of such payments to the standard rate was very reasonable in achieving at least some measure of equity in that aspect of the taxation system. There would be a saving of money if that was done. That money could be directed towards the provision of housing for people who have no houses.

The development of our finances over the last decade has produced a situation whereby the level of service in many aspects has been lowered. I refer in particular to the abolition of the rating system of local authorities. That was one of the promises of the Fianna Fáil Government in 1977 and rates were duly abolished, but the people understood from the abolition of rates — as I did — that the moneys which the local authorities had acquired from rates would be made good in full out of central funds by the Government, but that has not happened. The funds made available to the local authorities year by year have in real terms declined, so much so that the level of service that the local authorities are now in a position to supply for people living in their areas is becoming less year on year. Those Deputies who are members of local authorities will be aware of the increased number of complaints coming to them from their constituents regarding the serious deterioration in the level of service being provided by the local authorities up and down the country, and it is going to become seriously worse. If this decline is not arrested in the next five or seven years the whole fabric of local authority administration will become so seriously constrained that it will become difficult to provide a lighting service, a road sweeping service or a bin collection service on anything like the lines we were used to years ago, and if anyone complains about this to the local authorities the stock answer — which means a lot, the key is there — is "We are providing such services as are possible with the resources available" and the resources are no longer available to them in the way they were.

I conclude on the note on which I started, that where we are going wrong and a situation that has brought the country to the condition it is in is that we are using the budget, the Finance Bill and the whole direction of fiscal policy as a book-keeping exercise and not as it should be used in every respect, as a test for the economic development of the country. Every major fiscal measure must be tested and examined with that in view. We must ask if that will raise the tax basis, the wealth basis and the employment basis.

Mr. Leonard

The Minister for Finance on Second Stage of the Finance Bill talked about the principal concern of the Government as achieving a proper balance between reducing borrowing and improving employment. Most speakers touched on those two areas which, in conjunction with taxation, are of great concern at present. It is important with the present rate of interest that borrowing would be reduced or stabilised. The Fianna Fáil Government have always been concerned to provide as much employment as possible. With the number of young people coming on the market at present there is an inherent danger because of the frustration which arises from being without a job. If we cast our minds back we will remember that the cause of wars — certainly the cause of the Second World War — has been mass unemployment in Europe.

Taxation is another very controversial matter. I hope that the report of the Commission on Taxation when published will form the basis of a fairer taxation system. If a fairer taxation system was introduced the Minister for Finance would be in a position to plan well in advance rather than in the way planning is done at present, on a year-to-year basis. It is important that we be enabled to plan on a three to five year basis. No company, private or public, can plan on such a short-term basis as we have. With the increase in unemployment it is time that the semi-State bodies and such bodies as the OPW, country councils and other authorities examine closely whether they can create employment even on a temporary basis. The OPW have a branch at Ardee which each year has taken on 12 or 13 men temporarily for seasonal work. This year we have reached summer and these temporary workers have not received any indication that they will be employed this year. When manufacturing industry is in difficulty and the creation of jobs is difficult also, such bodies should come to the rescue and create employment even on a temporary basis.

The county councils in many areas could bring in temporary staff if they would adjust their programmes in order to achieve this. In concerns such as the semi-State bodies the first to suffer unemployment are their temporary staffs. Last week the Irish Goods Council estimated that 600 million industrial components which are being imported could be manufactured in Ireland. That is ridiculous. The IDA have work to do in this regard. They have the necessary information on market requirements and what can be produced and they have the technology and the ability to train. They should initiate a promotional campaign to have such goods manufactured here. Practically every country has the factory space. The factories are there already built and in some cases for some reason have closed down. Those buildings could be utilised and an examination should be carried out as to the number of industrial components which could be manufactured here.

This Finance Bill contains a number of welcome changes from the original budget proposals. Provision is being made for the continuation for a further year of a scheme introduced in 1979 allowing tax relief on the labour content of expenditure on home repairs or improvements, up to a maximum allowance of £900 for married couples and £450 for single persons. This is a welcome provision, because we look to the building and construction industry to provide more employment and small extensions and renovation works on private residences can generate a lot of work.

The Minister mentioned the special provision for the disposal of small sites up to a limit of £15,000. A person who sells development land for a price not exceeding that figure will be liable under the rules governing capital gains tax rather than under the alternative arrangements. Many people contemplating the sale of sites worth about £10,000 close to towns feared that a large portion of the money would be paid in taxation, and this discouraged them from selling such sites.

It is proposed to raise the annual exemption threshold for capital gains tax to £2,000 for single persons and £4,000 for married couples. This will provide some compensation for the small investor for the substantial increases in capital gains tax, and I welcome the measure.

In February 1979 the EEC Ministers for Agriculture agreed to allocate eight million units of account, approximately £5.5 million, for cross-Border drainage schemes, and the catchments listed were the Blackwater and the Finn-Lackey. It was decided that the details of the proposed schemes should be submitted to the EEC by July 1981 and it was hoped that work would commence shortly afterwards. I kept in touch with the Office of Public Works and was told that the matter was progressing satisfactorily but I now find, 11 months after the expiry of the deadline, that details of the scheme have still not been sent to Brussels for approval. The latest information is that it will be done within months rather than years. The fieldwork and the drawing-board work have been completed and I would hope that the OPW would recruit additional staff so that the schemes would go ahead and be processed in Brussels as soon as possible. This is one of the major schemes to have been suggested since the start of the troubles in 1969. Apart from bringing thousands of acres of farmland into production, it would also create substantial employment and generate much goodwill. I hope the OPW will not delay any longer and will obtain approval for the scheme in Brussels.

Deep concern has been expressed about the imposition of VAT at points of entry. People in my county involved in industries such as footwear, furniture, textiles and light engineering have been very worried about this measure. Over the past month or so, however, the Department and the Revenue Commissioners have clarified the position, and in some cases importers will have up to six weeks to pay this tax. They can also claim on invoices, even if the goods are received on credit and irrespective of whether they have been held in stock or not. The Department claim that abuses and tax evasion will be eliminated by this measure, but I hope they will watch the position closely and make allowances in cases where hardship is being caused.

Other speakers have mentioned abuses in the taxation system and the general cost of administration. An important area where we are making little headway is in the elimination or control of bovine tuberculosis and brucellosis. Cattle are one of our main exports both in processed form and on the hoof. The Department have spent a lot of money on disease eradication. From 1973 to 1981 they spent £43½ million in payments to vets who were involved in the eradication of bovine tuberculosis. Compensation paid to farmers was in excess of £50 million. In the same period in relation to brucellosis vets were paid £16.62 million and farmers were given compensation which amounted to £56½ million. In 1974 the national herd totalled 7.2 million. This was reduced to 6.62 million in 1981. Following the veterinary strike the incidence of TB was high. At that time it was 7.50 per cent, in 1980 it was 2.94 per cent, in 1981, 2.11 per cent and in 1982 to date it has increased to 2.76 per cent. The fact that it has increased since 1981 is a cause for real concern.

In 1973 the number of staff dealing with this problem was 892 and that number was increased to 1,252 in 1982. Such an increase at a time when herd numbers were decreasing is a cause for concern. Many of the staff are located in offices. At a time when computerisation and other aids are available it is hard to justify that number of staff to deal with a reduced national herd number.

My area used to be clear. In the last three years the disease has become rampant. Many herds have been wiped out. Practically all my neighbours have cattle which are coming up as doubtful in the tuberculosis test. Out of a herd of 50 it is not uncommon to have one or two doubtful. People have to decide between disposing of the animals at a low price or keeping them and hoping they will be clear next time. The area of disease eradication must be closely examined. The 30-day test was opposed on different grounds. Despite the test we still have the problem. Not only does it mean that there is a loss of animals but a drop in milk production. It creates a lot of indecision for farmers. They have to decide between keeping animals or selling off perhaps their best stock which they had built up from good sires. The Department are concentrating only now on problem areas.

Inflation is causing a real problem for industry and even for households but nowhere has it as much impact as in farming. Everything is affected by it, fertilisers, diesel, silage making, grain production and so on. This is because there is a great dependence on oil and oil-based products.

Another area which has come in for much discussion is that of grants. I hope these are reviewed and updated.

An Leas-Cheann Comhairle

The Deputy should relate this to the taxation measures before the House.

Mr. Leonard

The time has come for the Department to have a look at introducing grants for lower cost cattle sheds. With the number of cattle which are left out during the winter, and particularly the high percentage we had last year, the Department should examine this situation. It is very hard for farmers who are involved in milk production to get a reasonable return. Many co-operatives have been heavily aided through FEOGA grants. They have the capacity to manufacture much more. I would hope that there would also be efforts made to have the 12 western counties categorised as severely disadvantaged, thereby qualifying for cattle and sheep headage payments. By so doing the national herd would be increased. Probably also it would lead to an increase in milk production.

There was reference earlier to our roads and their structure. It can fairly be said that Fianna Fáil Ministers for the Environment have at all times been concerned to provide as much funds as possible for the improvement of our national primary roads. This will be realised particularly if one draws a comparison between the position under Fianna Fáil and that under the Coalition Government in the mid-seventies when, year after year, they reduced the allocations for roads and during which time we in Monaghan, I think for three years in succession, did not receive any allocation at all for our national primary or secondary roads. We did receive £10 million on one occasion to buy a small tract of land required for realignment.

Perhaps the Minister for the Environment would have the technical staff of his Department check on the expenditure on maintenance of our national primary and secondary roads. Travelling from Monaghan to Dublin, through a number of counties, one cannot help but notice that the roads have not been maintained adequately, particularly at a time when local authorities are in receipt of reasonable allocations for such maintenance. There may well be local authorities in some counties who are not carrying out the necessary maintenance of our national primary and secondary roads. I realise that expenditure on improvements and realignment is proper to another allocation, but the question of maintenance is of the utmost importance. People travelling from Derry or Fermanagh to Dublin use the same roads as we do from Monaghan, and it must be particularly noticeable to them coming off their very good roads. In recent years the structure of our roads has been improved to a large extent, but their maintenance is crucial.

Mr. Creed

I want to make a few general comments on the Finance Bill. There are two areas of major importance with which I want to deal as briefly as possible. However, most of the points I wanted to make have been made already in the discussion to date.

We are discussing this Finance Bill in most unusual circumstances. We had the situation first of the January budget introduced by the Coalition Government and defeated. Then we had another general election, a new Government formed and a new Minister for Finance introducing what he described as an almost similar budget, with a few exceptions, because, he said, time did not permit of the introduction of a budget to the Government's liking. I do not accept that as a valid excuse but I do not want to go into the matter in great detail. We are now in a situation which has led to further confusion about the Finance Bill and indeed confused Members in its discussion. There are some meetings taking place behind closed doors with the Minister for Finance and Members of the Government, with people in a strategic position in this House, so that one never knows what will be included in the Finance Bill by way of amendment at the end of the day. If the Government survive the vote this evening I shall have some comments to make on the next Stage.

I should like to comment briefly on some points made already. I listened this morning to a former Minister for Finance, Deputy O'Kennedy, and found myself agreeing with and supporting a considerable amount of what he had to say without qualification. He seemed to put his finger on the problem. However, there were some points on which I would have to take issue with him. He spoke about our taxation system as having reached saturation point, and of people having become completely intolerant. He was advocating greater tolerance and the broadening of the taxation net, that its base should be broadened. He hoped this was something that would emerge from this report of the Commission on Taxation. That is indeed surprising coming from a Minister of the Government in 1977 whose election manifesto promised certain concessions which began the decline at the root of our present social and economic problems. It was disastrous at that time that the tax base should have been narrowed in order to gain power. However, we are now in a situation in which our people realise the seriousness of the problems confronting us. Deputy O'Kennedy said they were prepared to make sacrifices in order to rectify our very serious economic situation. I believe that is so, but also they expect leadership. I believe also that what some Members on the Government back benches have been saying about promises, deals and so on is true also, that our people will not now respond to the type of demands emanating from this House or the Government in order to implement the necessary corrective measures to tackle our financial difficulties. I believe that to be an absolute fact. Indeed the recent general election, even though it led to a change of government, indicated that quite clearly. The measures proposed in the Bruton budget constituted an honest attempt to rectify that situation.

On the subject of food subsidies, value-added-tax and clothing I would say that the proposal to remove subsidies from clothing was an emotive one on which the present Government played. The whole situation in relation to food subsidies was completely misjudged also, because it must be remembered that they were first introduced in order to cushion people against increased prices resulting from our membership of the EEC. Indeed it was the present Minister for Education, the then Minister for Economic Planning and Development, back in 1977 who proceeded to dismantle those subsidies on food. He said then that food subsidies were never intended as a permanent measure. He said we were in the unfortunate position of having a system under which there was the subsidisation of food which meant the rich as well as the poor were being subsidised and that he believed our taxpayers would not continue to support such a system. It is most extraordinary that some few years later, in order to get back into power, we have the very same Minister advocating their restoration. This is what creates the problem and leads to a situation in which the people will not respond. Indeed it leads to distrust of people in power. It is the Government who should give leadership but when this is not forthcoming people will not respond, and that in turn creates further problems. I believe that our problems are basically those created by politicians with the sole desire of getting into power at any cost. This cannot continue.

I accept also what Deputy O'Kennedy said this morning, that the present abuses of our services must be eliminated. Indeed he was seeking a system under which people would inform on those abusing those services. He was talking about people in receipt of benefit from the State. He said that those services were being abused and the cost was enormous. He said the services could not be expanded because of this and those who were in real need could not get services adequate to deal with their circumstances. I agree with that.

In recent years we have developed a greedier society. We have a society who are demanding more. I believe there is a lack of leadership here. When Deputy Colley was Minister for Finance he introduced the 2 per cent levy on farm produce and the farmers took to the streets. The Government capitulated and as a result of that, PAYE workers took to the streets and the Government appeared to capitulate. People believe that no matter what they demand provided they can use sufficient muscle there will be a capitulation and their demands will be met. I do not believe you can run a Government with that sort of attitude.

I believe it is necessary, when in Government, if it is for the long-term good of the nation and the people, to take unpopular decisions. Sometimes those decisions can be very unpopular. I have only to go back to the 1973-77 Coalition period when unpopular decisions were taken, which we now know were in the best interests of the people. If Government decisions are taken and if pressure from outside the Government and from the people make them change those decisions and accede to the demands of the people who take to the streets, the Government will create great difficulties.

It is not peculiar to any Deputy or any side of the House but the demands and the approaches which will be made within the next couple of months will be very great. This is the time when a new lot of young people come out from secondary school after doing their leaving certificate examination and are looking for jobs in local authorities as clerical officers or clerk typists, in nursing or anything else. This is the time of the year when very concerned parents bring their children to Deputies because they are anxious to find jobs for them but there are no prospects of jobs.

I know the terms governing the discussion do not allow me to go into detail. I will not do so but I feel there are some decisions which could be taken which would alleviate some of those problems. I believe there is no incentive to work now and there is no incentive to save. There are people drawing unemployment assistance — what is commonly known in the country as the dole — who are working and are earning far more money than the people who go out to work and work a full five-day week. This is a tragic situation. People are seeing this happen every day throughout the country.

I believe it is necessary to provide good leadership. The Government have to set the example to highlight those fraudulent activities which are depriving people in need of what they are entitled to. The unemployment figure is now approaching 150,000 although I accept the point made by Deputy O'Kennedy that it is not a true figure and that there are people who are registered as unemployed who are not in fact unemployed.

There is a lot of work which needs to be done throughout the country. Many of our roads are in urgent need of repair. At the same time I cannot see how it is that the Department of Social Welfare can pay out such a large sum of money in my county on unemployment assistance. Surely some of the people on unemployment assistance could be employed repairing our roads and looking after our parks and other amenities. The case was made at Cork County Council that if this money was devoted to the local authorities and if people in receipt of unemployment assistance were employed three days a week we would not have the serious situation we have in relation to roads, water and sanitary services. If there was the will to do something that would not be too popular politically but would in the long-term be in the best interests of the country and the best interests of rectifying our economic situation, some of those people on unemployment assistance could be doing some of this work.

I am sure many Deputies are aware of cases where the father of a family is not working and is not given an incentive to work and that family have not seen anything else during their upbringing except the breadwinner being provided with handouts and unemployment assistance. There is no encouragement to that family to go out and seek jobs. They find their parents are doing as well on unemployment assistance as others who are working. If we want to tackle the problem we have to provide incentives to work and we have to make sure that it is only as a last resort that people will go on unemployment assistance and that it will be provided for them.

I am as critical of the Coalition Government as I am of the Fianna Fáil Government when I talk about the 25 per cent increase in social welfare benefits right across the board. I know there are some recipients of social welfare benefits who could do with more and there are some people who are in difficulty trying to exist on the amount of social welfare they receive. At the same time it was wrong to give a 25 per cent increase to everybody regardless of the type of assistance he or she is in receipt of. There are some people who did very well. Some people who are drawing the 25 per cent increase are working at the same time and are not concerned about the Revenue Commissioners. As a result we have a new poor in our midst. I am sure the Leas-Cheann Comhairle is as aware of this as I am. I am glad the Minister of State at the Department of the Environment is in the House because recently we debated a new house purchase scheme. I know of a number of people who are applying for the purchase of their council houses whose income is between £100 and £120 a week and their repayment in some instances is as high as £55 per week. I do not know how those people will exist. Those are the people I regard as the new poor. It is important that some assistance be provided for them.

It is necessary for us to look occasionally at the direction we are going in economically, our progress, the trends, our objectives and the speed at which we are going towards those objectives. I recently put down a question to the Minister for Finance to try to get from him where we are going and what our position is at the moment. I asked the Minister for Finance if he would give the following information for each of the financial years 1976 to 1981, inclusive and from 1982 to date: (a) the amount borrowed each year by the State, (b) the national debt, and (c) the cost of servicing this debt by way of (1) interest repayments, (2) capital repayments and (3) the amount paid in interest outside the State. The last one is the important one. I do not object to borrowing. It is necessary occasionally. It is sound economic planning to borrow for certain developments. But I criticise the present Government for the level of borrowing in recent years because they have been mostly in power since 1976. We have now reached a dangerous situation. The Minister's reply to my question was that in 1976 Exchequer borrowing was £506 million; the interest payments on the national debt in that year was £268 million; the capital repayments were £244 million; the interest paid outside the State in that year was £66 million. Now we come to 1982. Exchequer borrowing is estimated at £1,693 million — and being familiar with Estimates in this House we can expect that that is an underestimation. The interest payment on the national debt will be £1,300 million.

I will not go into the figures for the years between those years but the trend is gradual and shows the direction we are going in. But the most damaging element is the interest paid outside the State on what we owe, £528 million. If one talks to the general public about budget deficits and borrowing and our indebtedness abroad they sometimes do not understand because they feel it does not affect them directly. I heard Fianna Fáil speakers this morning refer to the necessity to bring the budget deficit under control. We have reached the target mentioned by the Minister in his budget in the first five months of this year. If we could get our people to accept disciplines and make sacrifices to reduce that borrowing what could we do with that money? It would double the farm modernisation scheme grants; it would double the disadvantaged areas scheme grants; it would double the interest subsidy; it would double all old age pensions and orphans' pensions; it would double the grants for private housing and, if my figures are correct, it would even go so far as to build Knock airport.

That is the way we should look at this figure. But there is no determined effort made to bring our borrowing back to manageable proportions and if this goes on we will reach a situation where we will be beyond redemption and will not be masters of our own destiny. I would be the first to support any steps the Minister would take to make sure that this monstrosity will not devour us even though the vast majority of it was created by the Minister's own party. That is the reality and magnitude of the situation. The national debt would pay for the entire Book of Estimates over the next two years. If we continue on these dangerous lines we will end up bankrupt. I ask the Government and the Minister to take note of this trend because there is inherent in the reply given by the Minister an indication of an irresponsible attitude of Ministers for Finance who borrowed because of pressure from groups instead of taking actions which were politically unpopular. I do not know how long any individual or business or enterprise would last if they followed the example set by this Government. The problems we have at the moment were created by the Government and whatever Government are in power will have to tackle those problems.

I said at the outset that I would be brief. I wish to refer to something that was also in the Bruton budget to which I am opposed. There is nothing wrong with introducing proposals in a budget and then changing them in the Finance Bill. This is happening every other day. But this measure is one to which I am opposed and it was supported by the Minister when introduced in the Bruton budget. The measure has to do with the remission of stamp duty for young farmers. Every Deputy must be aware of the views of the law society on this measure. It is discriminatory, it is unfair, and it should be changed. I will be using and have used, with other Deputies, another forum within my own group to ensure that this simple amendment will be tabled and will be supported. I know that the thinking behind this is to give an incentive to every young farmer to be trained. I contend that people with experience who have come up through Macra na Feirme — and I have been very much involved during my time in public life with such people — are active and able young farmers and it is a pity that even before now no incentives were created to encourage them to take over the family farm and, with modern techniques and thinking, do a better job.

In section 85 it is provided:

(4) In this section "qualified person" means a person in respect of whom it is shown to the satisfaction to the Revenue Commissioners——

(a) that he was under the age of 35 years on the date on which the relevant instrument was executed, and

(b) either—

(i) that he is the holder of a certificate issued by—

(I) An Chomhairle Oiliúna Talmhaíochta certifying that he has satisfactorily completed an agricultural training course of a duration of not less than 100 hours, or

(II) the Farm Apprenticeship Board certifying that he has satisfactorily completed the course under the Farmer Apprenticeship Scheme of the Board or the course under the Trainee Farmer Scheme of the Board, or

(III) the Minister for Agriculture or a committee of agriculture established under the Agriculture Act, 1931, being a certificate issued before the 1st day of December, 1980, and certifying that he has satisfactorily completed a course equivalent to that referred to in paragraph (b) (i) (I) of this subsection,

(ii) that he is the holder of a university degree, or equivalent university qualification, in agriculture,

I put it to the House that in rural Ireland today it is common for a farmer to have six or seven children with the eldest usually staying at home to help on the family farm. Every effort is made by the eldest to provide the wherewithal to educate the remainder of the family because only one person, usually the eldest, can inherit the farm. But to qualify for this remission of stamp duty a person must be under the age of 35 on the day of the transfer of the farm to him. A person who is 35 years of age will have spent 15 years or more getting practical experience of the day to day working of the farm and will inherit the know-how and all the techniques from his father who was a farmer before him. In effect he is the person who is working that farm and who has put so much into it. But in this Bill the stamp duty is increased from 1 per cent to 3 per cent for farms worth over £50,000.

Let us take the example of a farm with a value of £150,000, and that is not a very big farm particularly if the Valuation Office or the Revenue Commissioners have to put a value on it. The son who inherits that farm will be paying £4,500 duty. If a son or daughter has an agricultural degree, stamp duty is remitted. That is daft. This situation must be rectified, because it is discriminatory. A simple amendment could be accepted. A new section could be included saying that a person with three to five years practical experience would qualify for this remission. I accept that the Government are trying to ensure every farmer is properly trained but I dispute the definition of "trained farmer" and I will do everything in my power to see that discrimination is eliminated.

A number of speakers mentioned local authorities and housing. I will not go into this in detail, but there has been a great deal of duplication and waste which must be eliminated. For example, the officials of local authorities are paid to collect the road tax which they send to the Department and the Department send the money back to the local authorities to carry out the necessary work. Greater autonomy should be given to the local authorities. That kind of duplication leads to wastage and constant dictation from the Department. I believe local authority officials are better qualified to say where the revenue from the Department should be spent rather than being dictated to by departmental officials.

A great deal has been said about tax evasion and tax avoidance. There is both tax evasion and tax avoidance in most sectors of the community but there are certain categories who cannot avoid or evade tax. They are the people who are becoming the new poor.

I want to mention the building industry. The Coalition Government introduced the new Housing Finance Agency Bill. I do not think it was the greatest Bill introduced since the State was founded, but it provided more money for the building industry and that, in turn, created more jobs. That Bill went through this House, we had a change of Government and that Minister, Deputy Raphael Burke, still has not made money available to operate that scheme. In my local authority, applications for loans under that scheme are being held up. I ask the Minister to take special notice of this matter because this scheme will provide extra jobs which are badly needed.

If this Bill survives the Second Stage I will be raising other points on Committee Stage, because there are many problems involved. This country is facing very serious problems and irrespective of which side of the House we are sitting on we will all be affected by them. I believe what we are doing is a recipe for a revolution, and we must take action soon. This Government have failed to take unpopular decisions which in the long term would be to the advantage of the community. There is no point continuing that kind of policy. Therefore, I support the Fine Gael amendment.

Mr. S. Brennan

I want to start by coming to a practical point which will probably be re-echoed throughout the House today, and will probably be on the minds of many people as they look at Dáil Éireann, and that is that there is a very real possibility of a general election. No matter how we may wish to play politics with the idea that there may be a general election, we have to be realistic enough to know the numbers in this House and to know that tonight, next week or before the autumn, we could be plunged back on the streets looking for votes.

I am one person who would not relish knocking on doors for the third time in a year saying "could I have your vote, please?". They might say we had a Finance Bill which tried to raise funds to run the economy and we did not take the opportunity to enact that legislation to raise those funds and get on with running the country and it would be very difficult to answer those criticisms.

I maintain that the failure of this House to give passage to this Bill will set the country back roughly over £200 million. By the time the new Government is formed, we have all said our pieces on RTE and beaten our ideological breasts and said "you are wrong and we were right", the country could have lost another £200 million. We might look into our crystal balls and look back over the last decade to see who did what and who was responsible for what, but the reality today, 17 June 1982, is that the Finance Bill is before this House, and whether we are totally happy with it — and nobody is totally happy with financial legislation — or mildly happy with it, this country is being given a Finance Bill it has not had for a very long time. I wanted to start by making that point because I feel very strongly about it. The Irish public expect the House to introduce a Finance Bill of some sort, whether we are or are not happy with it. That is a very important point. The alternative is to plunge the country into some kind of financial merry-go-round while we all go back to the streets. Some might misinterpret those comments and say that I am afraid to go to the public for some reason. People without a lot of sympathy might say that, but that is not the reason. The reason is the future of this country and the need to raise revenue to run it for months ahead, rather than indulging in politicking for the third time in a year. Without doubt, this country, like all western countries, is becoming difficult, to manage. It is simple to point to this or that Minister, to this or that party and say "You are to blame. You did not do this", or "You did that", but it is due to a combination of all our actions for many years.

I will now take a quick look at how current expenditure for 1982 is budgeted. Straight away, a number of very important headlines stand out. For example, servicing the public debt in 1982 is estimated to eat up 24 per cent of all current expenditure, whereas income tax collected is estimated to come to 26 per cent of all revenue. The figures are £1,400 million for servicing the public debt and £1,500 million collected in income tax, that is PAYE. We are virtually spending the great bulk of our PAYE payments in servicing the public debt. I am sure that headline has sunk in many times, but it is no harm, in a debate such as this, to show again the actual figures.

As a nation we must, it is hoped by agreement, come to grips with some basic figures, for example, those for the social services. Between just three Departments — Social Welfare, Health and Education — we are spending 42 per cent. If one adds in one or two small Departments, we are spending virtually half of every penny on these Departments' services. That raises all sorts of questions of value for money, cost of services, whether people should pay for some of those services for which they are not now paying and our general philosophy towards the provision of those services. There is no doubting one fact. We cannot, as a nation, continue to provide the volume, quality and level of services which we have been providing. The demands are swelling up. Every T.D. receives those demands every working day of his life. People want more of this and that. They want more nurses, guards, doctors, social welfare benefits, teachers, schools. It is quite clear that no State will ever be able even to attempt to meet a fraction of those demands. One knows, from examining the figures, that it is not physically possible.

Having accepted the reality of not being able to continue to put money into even those three Departments, let us look at some further figures. The dependency rate here is 63 per cent, leaving 34 per cent of our people in the broadly employed area. In that employed area, over a quarter are now working for the State. One comes up with some 750,000 people, who are neither dependent on nor employed by the State. This is out of a total population of 3.3 million. One is asking 750,000 people to sustain the public service — which is fine, because one must have a good, solid sensible public service at an agreed level — but you are also asking that small number of people to maintain 50 per cent of the total State expenditure. The sums just do not add up. We cannot continue with that dependency ratio and that service figure to load more and more taxation on the backs of that small sector who are not State employees and not dependants. That is the golden goose which we tend to kill by heavy State attitudes to the private area and to industry generally.

We must come to grips with the headline of the structure of the population and of the State services. £2 out of every £3 spent here is now spent by the State. The consequent level of taxation needed to sustain that expenditure is a great burden on us. Over the past seven or eight years, employment in the public service has grown by 36,000 people, or 13 per cent. In the manufacturing industry the growth was 7,000 people, amounting to 4 per cent. Again, the gap is widening. We are asking a diminishing group of people to maintain an expanding demand for services from the State. No matter what our politics, attitude or ideology, whether inclined more to the left or to the right, those basic figures must be tackled.

The United States have an inflation rate of 6 per cent, Britain one of 9 per cent and our own at almost double that last figure. This is something which must be tackled urgently. The demand on the State services and the level of dependency are some of the main reasons for our level of inflation.

Overall, on the Finance Bill, I am simply suggesting that the relationship between the money which the State raises and the money which it spends is getting out of proportion and running us into difficulty. It would help to pull aside the curtain and look at another country to see how they manage. For example, the situation in Austria is worth examining. It is a fairly small country with a population of 7½ million. It is dependent to some extent on a very large neighbour, Germany, as we are dependent on ours. It is similar to Ireland in very many other respects, but its economic performance is strikingly different from ours. It is a very open economy, its main trading partner being its German neighbour. Imports and exports each account for 40 per cent of national income. It is heavily dependent on imported energy and raw material, as well as capital goods. Yet, unemployment, although rising slightly, is still only 2 per cent of the workforce. In spite of a growing population of working age, youth unemployment is still extremely low. Inflation, although again rising, is now at a figure of 7 per cent. The external deficit is deteriorating, but is still below 5 per cent of the national income.

The differences between Ireland and a small country like Austria could hardly be more marked. How have they managed to be strikingly more successful in their economic policies than we have? The main reasons undoubtedly are the unique Austrian system of economic planning and economic policy making. This is much wider than just an incomes policy. It is more an agreement between the social partners — labour, business and Government — and the system has a very long history. Austrians from their experience of civil war, political persecutions and foreign occupations, decided to co-operate on the basis of equity. That is what this country will soon have to do, bury the ideological differences and conflicts and solve some of our economic problems on a more consensus basis.

Debate adjourned.

Dáil Éireann debate - Thursday, 17 Jun 1982

Finance Bill, 1982: Second Stage (Resumed).

Dáil Éireann debate -
Thursday, 17 Jun 1982