Wait now until we get this clear, the position, as the Chair understands it—and I just want to be in order—is that Resolution No. 14 was moved last night by the Minister for Finance, and the Leader of the Opposition, Deputy Haughey, moved the adjournment of the debate which means that Deputy Haughey is in possession.
Financial Resolutions, 1983. - Financial Resolution No. 14: General. (Resumed).
I do not see it that way at all. I understand that what we did last night was simply a mechanism to move the debate over to today.
And the leader of the Opposition was to start his speech.
You asked me, a Cheann Comhairle, last night to move the adjournment of the debate but I did not understand that you were thereby indicating that I should speak first this morning.
I think from memory — I am not speaking officially — there is a precedent for a misunderstanding like this having happened before so I will call on Deputy Flynn. Deputy Flynn has one-and-a-half hours.
A Cheann Comhairle, your microphones are extremely bad, you cannot be heard at all.
Like everything else this morning, extremely bad.
Thank you very much indeed, a Cheann Comhairle.
The West's Awake.
As always and, when Ireland lay broken and bleeding, you know what they did, do you not, they sent for the men of the West.
They did not call out the Ringaskiddies.
What an unfortunate, unenlightened and indeed unimaginative response we had from the Government yesterday to our present economic problems with our economy going through perhaps the worst depression it has suffered since the foundation of this State. We were expecting a little more from the Government than that offered as a solution yesterday. There were also the expectations of the general public who were seeking stability, stability in economic measures to be taken, economic measures that would be realistic leading to obtainable objectives.
What have the people been offered in the budget? There are no plans to deal with the economic crisis or to give hope of economic recovery in the short or long term. This budget can be summed up in one sentence as a grab-all-money budget with nothing else to offer. The tragic consequences of this kind of operation is that it will have a detrimental effect on employment. It will deal a fatal blow to international competitors in so far as our export drive is concerned. It will also deal a further blow to the living standards of the people.
There is nothing positive in the budget which would maintain or generate confidence in the industrial or business fields. We initiated the reawakening of confidence before we left office. This was set down in clear unambiguous terms in our document The Way Forward. Unfortunately, the Government did not take what they regarded as the most effective parts of that document and utilise them in the best interest of the country.
No plans have been offered to the people and there is nothing to rejuvenate flagging business interests. No incentives have been offered to business to generate that environment which is so necessary to progress. Manufacturing exporters are reeling under these new impositions. Investors have no hope of getting any worthwhile return. Agricultural development is now set for an all-time low and nobody has expressed any confidence in what has been offered to that sector. Industrial relations will be put under a severe strain.
This is the worst budget ever brought before the House. There is no overall strategy for job creation. The Government have been paying lip service to what they claim is their primary objective of creating new job opportunities for young people. They could have given even a minimum statement as far as strategy for job creation is concerned. There is nothing in the budget to create the conditions necessary for a broadly based economic recovery or what might be conductive to enterprise. Only when industry has the confidence to invest in the economy can we begin a job creation programme which will give some hope to the many thousands of people unemployed.
The deflationary and monetarist policy being followed by the Government — we always felt this was deep-seated in their tradition and attitude — towards the economy will make the unemployment situation worse. Not alone must we look despairingly forward to having 200,000 people unemployed but it is unfortunately confidently expected that the number unemployed will be a quarter of a million, most of whom will be under 25 years of age. They must now see no prospect of ever obtaining a job in their own country. That is what they have been condemned to by the Government's statement yesterday.
The most important aspect of job creation lies in the restoration of competitiveness in the manufacturing sector. There was nothing in the statement to indicate a willingness to restore that competitiveness. Unemployment has been rising rapidly. Everyone is aware of the facts and figures but what prospect can be offered to the unemployed who see no indication of an improvement in the situation over the next five years? Although we should try to avoid this it may come to pass that unemployment will be endemic in the land.
Inflation will increase and will probably be double that of other economies. Our taxation is at the stage of diminishing returns and business confidence is at a critically low level. How can we contemplate competitiveness when we fuel the factors that affect it adversely? There was a great need for a stabilising influence on the economy and on industrial and commercial activity. That has not been provided. This is the first stick which must be laid to the back of this unbelievable Government in taking the unimaginative step they took yesterday. They plunged the economy into deeper recession. Unemployment will be at an all-time high. Competitiveness is gone as far as the export drive is concerned. Living standards will be brought to such a low level that it will no longer be worthwhile contemplating a continued existence in the economy. The reduced disposable income available to the workforce will result in the revenue to the Government being seriously reduced. One would have thought they would have learned from the experience they gleaned last year, but instead they have gone further down that road. The workforce who will see the levels of their disposable income reduced will have to take the necessary opportunities available to them to reverse their situation.
What promotional developments are envisaged by the Government? There is not a single sentence in the statement dealing with the promotion of our economy or exports. They will reduce some of the allocations available to agencies which have been working hard to promote the economy. How do the Government propose to reduce imports? We had a planned programme of import substitution. This is of major importance to the economy and was something which could have provided jobs for young people.
This budget is the unfortunate sorry spectacle that the Government are. They are the Government of all promises and are now turned into a Government devoid of any ideas and obviously divided among themselves on political and social matters. They are incapable of putting together a package which would give a ray of hope or confidence to the people. Where are the incentives which were promised so glibly and liberally in the recent past? There is no word of any new initiatives. Private investment has declined substantially over the past year. We cannot have new jobs without new investment and we cannot have new investment unless there is an incentive to invest. Investment requires risk capital. Who will risk capital in this economy when the Government will not allow that capital to gain even minimum profits to make it worthwhile? They have turned their back on the sources of investment here and have not offered any incentives which would generate the kind of investment which would lead to job creation.
Return on capital will further decline and it has now reached a stage where it is uneconomic for people to invest here. That must surely sound the death knell for job creation and employment. Funds are available to the Government but they are killing the incentives which should be attached to investment. Money is being put into other economies rather than helping our economy. We should be harnessing every penny of investment which is available here for our use and benefit. That is another stick to lay at the back of the Government.
They have destroyed confidence in the building sector and have refused to give the incentives necessary to enable risk capital to be invested here. As regards export marketing let us look at page 11 of the pink document which is loosely being termed as the real budget as far as the working man is concerned. This is quite a devious little trick but unfortunately for the Government it has been latched on to and this document which could be loosely termed the second budget will be looked at very closely.
Under the provision for the Department of Trade, Commerce and Tourism the Government could not even leave the money required by CTT for promotional activities and the development of exports. They applied the scissors and cut back by £1 million, which is a considerable percentage of the total capital vote for CTT. This shows the thinking of the Government towards the marketing of our products. The competitiveness of Irish industry must be restored if we are to maintain existing employment levels and provide any hope of new employment opportunities. The grant aid to the IDA is useless if manufactured products cannot be produced competitively for sale in the world market and the Government failed miserably yesterday to set out a strategy to provide the manufacturing sector with the competitiveness necessary to fulfil their role.
In 1982 about 700 companies went broke and about 470 firms are now on the critical list. Thousands of manufacturing and other companies were waiting yesterday to see what package the Government would produce to enable them to survive. In the light of the budget it is reasonable to expect that not just those 470 companies but thousands of others will join the "no hope" list because of the impositions laid on their backs yesterday. We will inevitably see in the near future the collapse of many hundreds, if not thousands, of companies. The result will be alarming redundancies, putting a further demand on the Exchequer to accommodate those closures and pay various benefits. All this will make it more difficult to meet Exchequer requirements this year.
An essential element of the recovery of the economy was to have been a wage policy but such a policy must now be virtually impossible to achieve and workers will be justified in seeking compensation for these increases and the reduction of their living standards, which were already at a critically low level. Now they face a further reduction without the offer of compensation. That is a formula for industrial relations chaos. We cannot look forward to peace in this area because of the deliberate and unimaginative action of the Government. Ordinary workers have to face hikes in taxes, a new levy on their gross income, service charges by local authorities and increased prices. All these things coming together must put the work force in conflict with the Government. They will be seeking redress and that must bode very poorly for a Government which stated that they wanted virtual wage and price control this year.
Inflation must rise by an alarming figure of between 4.5 per cent and 6 per cent because of what was attempted yesterday. When these increases work through the economy who can say what the inflation rate will be at the end of the year? It will certainly be so far out of line with the inflation rates of the economies with whom we trade that it will seriously jeopardise our opportunities of gaining a toehold in the markets of these economies. It will completely obliterate any goodwill towards our manufacturing sector. This must be the next stick with which to beat the Government, especially when one considers the downward trend of inflation which had been achieved by the Fianna Fáil Government. Inflation was going in the right direction but the Government yesterday by a deliberate policy jacked up that inflation rate and this is admitted by themselves. With an inflation rate of between 16 per cent and 17 per cent how can we hope to compete when the United Kingdom, our biggest market, will have an inflation rate of about 6.5 per cent this year? Among our EEC partners the average rate of inflation is 4 per cent. We are so much out of line now by a deliberate Government policy yesterday that it must put the economy on its knees and virtually bankrupt. To keep our international competitiveness we had to have single figure inflation this year but this hope has now been jettisoned by the Government and they have started a spiral which Fianna Fáil had brought under control. This is a most unfortunate move.
There was no allocation in yesterday's budget for any increase in public sector pay this year and it is obvious that the gauntlet has now been thrown down to the public service unions. The country must face what could well end up as the most seriously disruptive industrial relations situation ever encountered, not just in the public service unions but also in the unions representing the work force generally. The work force is up in arms this morning against this uncaring Government who have taken steps to put them on the road to conflict. What a serious indictment of the Government that must be when they deliberately take steps to alienate the support of the public service unions and the ICTU and bring about a situation where we must contemplate a serious disruptive element in the economy. Had the Government acted wisely and imposed no increases, no indirect taxes and had they a more enlightened taxation package generally our inflation could be kept down to the level enjoyed by our trading partners, to single figures and, perhaps, as low as 6 or 7 per cent. Had that happened we could have maintained our competitiveness, improved our employment prospects and maintained living standards. The Government could have enjoyed peaceful industrial relations in 1983, something we had all hoped they would enjoy. It is essential to have that to maintain our competitiveness and productivity in our manufacturing sector.
It was essential that we had the type of pay policy needed to maintain economic growth, productivity levels and job creation activity in the economy and had the Government taken that enlightened stand we could have achieved those. Who pushed the Government to go in the opposite direction? Had they difficulty within the Cabinet structure? Such divisions are becoming obvious daily and as a result the public have lost confidence in the Government only a short period after they took office. There is no doubt that had the public an opportunity to give their verdict on the attitude of the Government today the Government would fall.
It is pie in the sky for the Government to tell us that they will keep the budget deficit at £900 million. We are all aware that an increase of one per cent in public sector pay averages at about £20 million. Therefore, if 5 per cent which would be regarded as minimal in present circumstances — it would probably be regarded as unacceptable because of the tax hikes and other related increases announced yesterday — is to be paid to public sector employees a further £100 million will be added to the Government's bill. There was no accommodation for that in the figures outlined yesterday. Did the Government hope that by telling those in the public sector that they would not get any increase this year because there was no provision for it that the public service unions would accept that? The chance the Government had of getting public service unions to accept that has been thrown overboard by the huge increases in direct and indirect taxation.
What can we look forward to as far as public sector pay is concerned? We can look forward to an increase of at least 5 per cent, a figure which will add huge sums of money to that required by the Exchequer during the year. There is no estimate for that increase. It is ridiculous to suggest to the people that by a book-keeping exercise yesterday the current budget deficit will be maintained at £900 million. We all know that that is a misleading statement and that the current budget deficit will in the outturn be in excess of £1 billion. The Government have promoted themselves as being all honest on economic matters with the Irish public. I should like to know why they do not tell the public that they have lost control of the current budget deficit and were leaving out certain matters that would have to be attended to later in the year. Why did they not tell the public that if the matter got out of control later they would have to raise taxes again or borrow more money? Is that the way to treat unions who have played their part? Those unions showed how they can play their part in the national interest last autumn by accepting that the economy was in difficulty and that they were prepared to accommodate the Fianna Fáil Government by waiting for the pay increase until later.
The public service unions are being told not to talk about increases this year and that they are not on for their members. They are being told that money is not being provided to accommodate them irrespective of what happens. The Government are saying that if the unions seek more money they will be acting against the national interest and will be forcing them to borrow more. What type of strategy is that for a Government hoping to have a peaceful industrial relations scene this year? It is a formula for conflict and that gauntlet has been thrown down by the Government to all unions. As sure as day follows night, the Government will get their answer and the unions will tell them that that is not government as they understand it or the way to maintain living standards. They will be told that that is not the way to create the environment necessary for competitiveness in the manufacturing sector or the incentives necessary to provide job opportunities for our young people.
What type of industrial development policy have the Government? One would have thought, considering the way Fine Gael when in Opposition attacked the policy strategy outlined in The Way Forward, that the least the Government would have done in their first Budget Statement would be to outline a new development strategy. That was not too much to expect. The Government cannot say that they did not have time. It was suggested that they had the formula already prepared. The country waited for the budget to get an outline of the detail of Government strategy. The only policy the Government have outlined is that there should be an increase in the taxes on hydrocarbon oils, an increase in transport and postal costs, an increase in the PRSI levy and a whole range of other increases without any effort to maintain the unit cost of production at a level which would give us an opportunity of survival in a rapidly diminishing export market.
How can we compete without substantial increases in productivity? Lip service has been paid to a whole range of things as far as the manufacturing industry is concerned, the unit cost of production, wage restraint, better technology, increased productivity, work harder, live longer but get less take home pay. The only strategy the Government have outlined is to shove on bigger taxes and increased charges and put those on the critical list, or the dead list. That is not the way to respond to an electorate that expects stability and a programme to deal with the economic situation and manufacturing difficulties. The national infrastructure is being sabotaged by the budget. Any Government that reduces the allocation for roads by £10 million and withdraws £8 million from sanitary services is not competent. That represents a regressive policy as far as national infrastructure is concerned.
It is stated glibly that we have the worst roads system in Europe. One would have thought that, if the Government were serious about improving the transportation system and improving the opportunities for getting our products out of the country as quickly as possible, thereby reducing transportation costs, rather than reducing the capital expenditure programme on essential infrastructure, they would have increased capital expenditure under this heading. How can regional industrial development progress be achieved without massive improvements in our roads? That is the only way we can reduce our transportation costs in the first instance.
We all know the situation at our ports with enormous delays and traffic jams, and the huge wastage of fuel which accompanies this kind of transportation policy. What is the Government's answer? To reduce the allocation? We have not heard a single word about how financial arrangements might be made to do the job even if the Government could not do it in their capital expenditure programme. Surely they are not so devoid of imagination about the sources of capital available inside and outside the country that they could not at least have made a start in seeking the resources necessary.
Why run away from it? If they were not prepared to accommodate it under their capital expenditure programme, there are other ways of doing it in the private sector. An imaginative programme to improve our infrastructure would have more than repaid the cost of it in the long term. The longer the national infrastructural programme is left aside, the more expensive it becomes, and the greater impact it will have on our unit costs of production and transportation. Eventually it will have to be carried out at an enormously increased cost to the Exchequer.
There is not one single original thought or suggestion in the budget statement. Yesterday, knowing it would be a difficult budget, and accepting that they would have to play their part, people expected that a strategy would be outlined which would show that what was being done was in the national interest and not an effort at national sabotage.
To cut £220 million from the capital expenditure programme requires no imagination. It is an insult to an economist. It is the easiest formula of all. Why not cut £500 million? How could they dream up such a wonderful method of dealing with the economy? They say it will help to reduce borrowing. It was always understood in this House that the capital expenditure programme, if properly utilised, gave a return to the economy. It was always used, and it will always have to be used even if in a diminished form, to provide the job opportunities and infrastructure necessary for the further development of the economy. It was no solution at all. It was an easy formula. It did not take more than three minutes around the Cabinet table to devise the strategy to cut £220 million from the capital expenditure programme.
How many jobs will be lost directly and indirectly because of that policy decision? It is only when it works its way through the economy that we will see its full impact. No economic skills or reforms were shown in adopting that kind of policy. No initiative has been taken by the Government in relation to the capital programme. There has been no original thinking on what might or might not be done by way of introducing new measures into the capital expenditure programme. Surely there was scope there to exercise the minds of the so-called economists who make up the Coalition Government.
When pages 19 to 22 of the pink second budget document are printed, the general public will see that the only formula for economic recovery the Government have is to cut capital expenditure on every heading, thereby worsening seriously job prospects for our people this year. In the midst of all this hardship, with tax hikes and direct and indirect price rises, the Government would have us believe that they will persist with their National Development Corporation. Nobody is fooled. That is the price that had to be paid to keep the Labour Party rump of the Government quiet.
In the recent past they had to do other things to placate them. There was the small expenditure of £1 million in Wicklow to keep the Avoca boys happy. There was another £1 million and a bit a few days ago to make sure that Clondalkin was sown up before the Labour Party went into the lobby with them. The price is being paid all right. It does not matter what we call it. It is a deal which is not in the best interests of the Irish people.
To placate them further the budget statement had to make reference to the National Development Corporation to provide another tier of bureaucracy and duplication of all the existing institutions which have been working well in the interests of this State for so long: the Industrial Development Authority, Córas Tráchtála, the ICC, the ACC and others. If the Government say these organisations have not been doing their jobs properly, or with the efficiency and return of productivity they regard as necessary in the national interest, why do they not set about reorganising them and hand out responsibility to some of the Ministers of State who have nothing else to do and ask them to have a look at their organisation and financial structuring? Are they saying there is something wrong with them? Public funds are involved. Are the corporation to be just another holding company providing another layer of bureaucracy which will be dictating how people should do their jobs if they are not being done to their satisfaction. We have a workforce of 1 million people in this State, reducing every day by 300, and still we need another tier to cater for the organisations which have been doing a good job in our interest over the years.
Will they also have responsibility for the promoting industrial development agencies: the IDA, SFADCo, Údarás na Gaeltachta, the Irish Goods Council and the county development teams? If so, they will have responsibility with less money than was provided by us. The IDA are to have a reduced allocation for their programme. It is down £6 million. What is £6 million I suppose? It was needed by the Government at the time. The allocation to SFADCo, an organisation which everybody says has more than justified its creation, is down by £3 million. Maidir le Údarás na Gaeltachta atá ag obair ar son muintir na Gaeltachta agus ag iarraidh fostaíocht a chur ar fáil do na daoine atá lán-sásta fanacht ina n-áiteanna dúchais féin, áiteanna iargúlta a bhfuil sé fíor-dheacair tionsclóirí a mhealladh chucu, tá milliún go leith punt nó mar sin á bhaint des na deontais atá ag dul chun forbairt na Gaeltachta, ionas nach mbeidh siad in ann leanúint ar aghaidh leis an méid oibre atá acu faoi láthair agus in ann postanna a chur ar fáil atá riachtannach agus na seirbhísí a chur ar fáil atá in easnamh ansin le fada an lá. Sin dearcadh an Rialtais maidir leis an fhadhb atá againne. Mar is eol dúinn, níl morán ama ag an Rialtas faoi láthair maidir le athbheochan na teanga, ach ar a laghad cheap mé go mbeadh sé ar intinn acu fostaíocht agus infheistíocht a chur ar fáil do na daoine sin ach níl sé anseo. All these organisations have, according to commentators, done an exceptionally good job in the promotion of industrial development. Do we need another fancy name to add to the list of organisations catering for about a million people in the workforce? It is just a fancy name for unprofitable investment. There is not a word in that statement about an area that was much more relevant to our situation at present as far as development is concerned. There is nothing wrong in accepting a good idea from another party and I can accept it readily if it is offered.
There are £2 billion worth of imports coming into this country every year under one heading. About £800 million of that goes to the building industry in materials which could be manufactured here with a job creation of somewhere between 30,000 and 40,000 people. It would be worth our while to expend public money in generating the environment and the infrastructure necessary to being about a situation where our manufacturers would produce, at a competitive rate, the substitution of the imports necessary in our economy. It would be a major step forward to make ourselves self-sufficient in every way we can and the only reason we cannot do it is that production costs cannot be kept under control. The Government, by a deliberate act of folly yesterday, took the major step of making it impossible to even contemplate an import substitution programme that would create the necessary jobs. But where else are they going to come from? In a highly technological world, job opportunities are being lost because we are unable to export. At least if we were manufacturing for our own needs, we would have been able to give worthwhile, long-term employment.
There is not a word about better management projects to help our ailing industries. There is not a word about marketing strategy that might be employed by the Government to increase the opportunities of selling our products on the world market. That is the kind of thing people wanted to hear yesterday. They knew they were going to suffer tax hikes but it would have been made a little more palatable by an imaginative statement from the Government. The truth is beginning to dawn on the public — the Government have no strategy and no unity of purpose within their own ranks capable of bringing about either political or economic stability at present. They threw us out——
The people did that.
If the people had an opportunity to vote this morning, the Taoiseach, as he well knows, would have a very short stay in his office. They do not accept that by being forced to accept this budget it will achieve any results. The Government have not given them any hope or confidence. At least we had a detailed programme covering all aspects of the economy. Nobody denies there would have been difficulties in achieving our targets but they were set out in clear, unequivocal terms. They were cast aside at that time by Fine Gael and Labour. Fine Gael said they had a different strategy and that they were not going to see living standards reduced and Labour were saying they were the true socialists of Ireland and would never tolerate a reduction in living standards. They guaranteed to maintain a decent standard of living for the old and those unable to provide for themselves. The shame that will descent on the heads of the Labour Party will leave them decimated at the first electoral test in the future.
With regard to taxation, this Budget Statement is an insult to the electorate. It was promised there would be a restructured tax system and equity for all. What did we get yesterday? We got a list of promises for the future and I presume that was just a further extension of the pay-off to placate the Labour Party and keep them in line, at least for this budget. It is said that the Labour Party have given notice to quit and unless they get everything they demand between now and next budget day, they will not be wobbling through the lobby as they did last night. One only had to look at the faces of the Labour Deputies yesterday, as this monstrous budget unfolded, to realise that what was being done had been forced on them by their masters in office. It was also obvious that the few Labour Deputies on the back benches were going to be setting down the guidelines for continuing support. In the meantime, we had the promise of taxation reform and equity in taxation, despite the fact that in the joint programme for activity agreed by the Coalition, this was all going to happen right away. They had it all ready the last time they were in office, it was only a matter of putting it down in print. Now it is promised some time in the future but, in the meantime, the most draconian measures are being implemented and utilised against the people on the taxation front. There was a statement making big play about tax evasion and how the Government are going to move against tax evaders but we have to openly admit that they are just encouraging further tax evasion.
They are encouraging something else. They are encouraging smuggling at an unbelievable rate. I see the Ceann Comhairle nodding slightly when I mention the word smuggling: he knows the extent of the smuggling racket at this time and what it is doing to the retail trade. That trade is being put seriously out of line with its competitors and it is forcing people in the trade to take certain actions that are totally at variance with what they believe. It is well known how the smuggling racket has grown in the past few years and the Government in a statement have admitted the seriousness of the problem. The retail trade is being virtually put out of business. This budget will encourage the development of more smuggling and will thus destroy the local economies of these six Border counties.
The VAT increases and the levy will be the hardest to bear for ordinary people. It was confidently expected by business that the Government would find an alternative. However, what happened was just an easy economic option like the capital programme. It did not require any imagination to raise the VAT bands and to cut a few hundred million pounds off the capital programme. That kind of option did not require any economic genius. The people seriously believed that the Taoiseach and his economic advisers would find an alternative but what happened was very different. It was the soft option for the Government but the difficult option for the public. The VAT impositions will make life virtually impossible for the ordinary working man. These increases are all-embracing and they must hit living standards that have suffered already on a number of occasions in the past few years. These increases will be the straw that will break the back of the working man.
It will not help by saying that we are the heaviest taxed people in the EEC, perhaps even the heaviest taxed people on earth, but it useful to say that an alternative could have been found. A casual glance at some of the alternatives set out in The Way Forward might have helped the Government and Fianna Fáil would have been big enough to tell the Government they did not mind them pinching their best options. We would be very happy to go along with the Government in an action that was in the national interest. Yesterday our leader said we would be quite happy to accommodate an action even if it meant adopting the strategy of another party. We want to work for the benefit of the nation. The Government are not the only custodians of good ideas and initiatives so far as economic development is concerned. If the Government had wished to deal with some of our problems now something of that nature could have been contemplated and living standards might have been protected.
Life is short enough for most people. They have only one life to live and they want to lead that life with reasonable standards of living and with reasonable prospects for themselves and their families but no such prospect has been given them by the Government. They have no confidence that they can look forward to something better. All they have had from the Government is that their money is needed, that the Government will take it even though they are offering the people nothing and that they will do it again next year irrespective of how much it hurts or how much hardship is caused to ordinary people. That is not a formula for a peaceful settled community. It is a formula for reaction and for people to take decisions we would rather they did not contemplate.
Apart from the living standards of people being affected by the VAT impositions, there is also the question of the impact it will have on the unit cost of production and on our productivity. Is there any hope for our manufacturing industry when the VAT increases have worked their way through the economy? How many thousands of people are the Government prepared to sacrifice? Will they say what they regard as the acceptable number on the dole queue or have they left it open-ended? Has total monetarism taken over in the Government? While I would have expected and accepted that so far as Fine Gael are concerned because it is in the tradition of their economic policy and thinking, it is very difficult to reconcile it with the views expressed so often by the Labour Party. How can the Government say that the Labour Party rump of their Government represent anything so far as the workforce is concerned, when a deliberate stab in the back has been given to existing employment and the possibility of further job creation?
It is not finished there. The litany is endless. The Minister for Finance is supposed to be six foot five-and-a-half inches and is the tallest man in the House, I am six foot four inches and I am the third tallest. How he could keep a straight face yesterday when he unfolded this litany of kicks for the Irish people is hard to credit. He did not try in one single page of his speech to generate confidence or to give hope to those in work, to those out of work or who will be put out of work. The people were offered nothing but a litany of increases and charges.
Then the Government decided to go on a few "specials" which they hoped would placate further the Labour Party. Members of that party are in disgrace with their supporters; they know they will be decimated at the next election and they are trying to survive on the promises of the Fine Gael master in the hope that something may fall from the master's table in the next few years so far as taxation is concerned. What a prospect for a party who profess socialism — pseudo socialists, dominated by the arch conservatives in Fine Gael. Thus they had to do something that was totally alien to the Fine Gael tradition, namely, the imposition of a property tax that was estimated at £10 million this year. It applied to family incomes over £20,000 and houses valued over £65,000 at a rate of 1.5 per cent. I presume that this is a starting figure and when it is necessary to placate the Labour Party further you would jack up the 1.5 per cent and lower the thresholds. It is outlined as the starting point, but this tax is going in the wrong direction and Fine Gael are aware of that because it is neither a tax on income nor is it rates. It is a vicious selective tax to accommodate the party sharing power with them. That is another price for the vote yesterday, a price for the deal and that is what it will be called when all these things are isolated. It will be known as a conservative package and a pseudosocialist package that was put together yesterday to keep the Government in line and keep the boys happy for the day.
That tax will be expensive to administer. Nobody yet can even tell us how it is to be administered. However difficult it is to administer, it will be very easy to evade it. People will have to nominate their own price. There is no outline as to how it is to be done, just the fact that it is on the cards for consideration. Because of the difficulty of the administration of the tax and because of the ease of evading it, the returns must be minimum in the immediate future, and certainly until such time as it is a firmly established part of the tax base the Government will not get their £10 million. Whatever they gain by way of the minimum revenue they will get, they will lose the support of many of the old die-hard, traditional, conservative Fine Gael supporters that they had up to now. This tax is so selective that it will be applied only to the PAYE workers who are paying tax at 60 per cent now. They are being selected by Fine Gael for a minimum return of a proposed £10 million that will not materialise. I predict to the Fine Gael Government that this tax will be divisive and will lead to wholesale manipulation of the system and unorthodox dealings in so far as property is concerned. The Government have made a mistake in that taxation.
The are ominous signs that the normal tax strategy that has been adopted by various Governments over the years has been thrown overboard. It is always understood that the well-off section take the brunt of taxation and that an attempt is made to moderate the effect on the weaker sections of the community. In this Budget Statement there is a dramatic turn away from progressive taxation and the move is now in the other direction. That is seen most clearly in the big heave in the VAT bands. This is based on everyday purchases by all the citizens and it must be said that these new rates are anything but discretionary. They are all-embracing and the hikes in the VAT rates have ramifications throughout the whole system of purchasing, in health, education, transport and leisure. They will fall most heavily on the poorer sections of the community. Nobody, not even the Government, is denying that. The original idea of the VAT system was that it would be all-embracing, and so it is being applied now to the Irish people to lower their living standards and to bring about confusion in the minds of the workforce.
The ultimate coldness of the Government is revealed in the 1 per cent levy. This must be the least compassionate effort ever contemplated by a Government here, and they have the temerity to suggest that it will be a temporary measure of a 1 per cent levy on incomes. There is nothing temporary in the mind and attitude of the Coalition Government regarding the levy. They are trying to establish a base rung in the initial stage of the levy. It is just another extension of income tax except on this occasion it probably will be applied exclusively to the PAYE sector and will permit no allowances whatever. It will be creamed off the top and will hit everybody from the lowest to the highest. It is a vicious tax and that fact will be reflected the first time the people get an opportunity to decide. It is not temporary, and the Government know it. It is a base line being set and when it is necessary to jack up the thresholds and limits we can expect further increases in that little effort. The people will see it as just a way of clouding the income tax system and bringing about a way of getting a more than normal increase in PAYE demand.
In the Principal Features of the Budget the feature which will attract most attention when people get down to analysing precisely what was afoot yesterday by this uncaring Government is the increase in total taxation. I will not quote extensively from that document but I will give one or two examples. Under the heading “Single person taxed under PAYE” for an income of £10,000 the total tax now being taken by the Government is £3,215.20 and the proposed tax as a percentage of total income works out at 32.15. It will be difficult to explain to the PAYE worker why he has to pay one-third of his total income to accommodate a Government who have no strategy, no policy outline to deal with economic difficulties or the revitalising of our economy. I said generously to the Taoiseach this morning that had these increases not been so vicious he could have achieved the aim at which he had directed himself. At least the Irish people expected that he would outline a strategy that would indicate to the general public what precisely the Government propose to do by way of job creation and the maintenance of living standards. The Government deserve to be brought down on the imposition of that levy. They know in their heart of hearts that that is so and that the levy will become one of the focal points for any electoral test that will take place now or in the immediate or even distant future. No Government will get majority support for that kind of all-embracing levy.
The farming community have been vocal on many occasions and I supose everybody expected that there would be a move against them as far as taxation was concerned. Perhaps £47 million will be regarded as a fairly substantial demand from them, but when they get a look at some of the other items contemplated against them, particularly as outlined under "Non-Capital Supply Services, Agriculture/Lands Votes" in the document I had referred to, they will realise just how serious the move against the farming community is. I refer in particular to the smaller farmers in the west although I am not holding any candle for them because this will apply across the board. Their headage grants are to be seriously reduced. The threshold is to be reduced to £3,500 which will render it virtually impossible for anybody with any outside occupation even of a temporary nature to qualify for a headage grant. That grant formed in most cases the basis for development of smaller farmers. It was utilised not often for disposable income as far as the living standard of the family was concerned but to provide the necessary fertilisers and restructuring of the farm system in operation in that part of the country. To move against that is to move against increasing productivity in the farming sector west of the Shannon. That is just typical of what we have come to expect from the Fine Gael-Labour Government as far as the west of Ireland is concerned. The farmers will have to pay for all visits by the Department of Agriculture and ACOT staff in connection with the farm modernisation scheme if any applications are acceptable, although I presume that they will not be since they are to be curtailed also. When money had to be saved, did the advantage lie in taking this kind of step against people trying to develop the economy of the farming and agricultural sector? I doubt it. There is no need for it. Apart altogether from those on unemployment assistance who now have to go to the factual assessment, with reduced headage grants and taxation systems the farming community will realise that this is not a vote of confidence in the future of agriculture. A situation will arise where farmers once again take drastic action, and that is the one thing we wanted to avoid.
That is the kernel which is missing from that Budget Statement yesterday. There was no statement of intent, no statement of incentives that would be provided to increase our productivity, no statement as to how our economy could be better managed and our exports better sold, no talk about keeping the unit cost of production down, no talk about maintaining our competitiveness, no talk about maintaining living standards, no talk about maintaining anything. Surely if you are going to take millions of pounds from the pockets of the people at least you owe it to them to tell them the reason why you are doing this other than for money to pay the Government's day to day expenses.
The local tax is another instance of what will be borne by the ordinary people. This tax will be represented by £65 million now which the local authorities will have to find to meet their current expenses by local charges. I will not say it is rates by another name although everybody is saying that. The point about this is that together with the existing increased charges for VAT, increased direct and indirect taxation and adding to it that the services people have enjoyed free of charge for so long will now be charged for, this will cause serious disruption at local authority level. The collection difficulties are well known to everybody so far as services, even SDA payments, are concerned. It has been difficult in recent times to maintain the repayment of ordinary rates and SDA payments to local authorities. It will be much more difficult to extract sums of money on a continual basis for services that people have enjoyed free of charge for so long.
Small business during the past year has found it very difficult to meet rates demands. Now it will have to meet further charges. The backbone of small towns — the small business — will finally be brought to its knees. The responsibility for that must rest very heavily on the shoulders of the Government. Local authorities will once more be used as tax collectors. This will be resisted by them. The people will be confused in relation to all this. The Government must be vilified for destroying the confidence of the people and for giving them no hope, or a policy statement that would generate enthusiasm in them to reinvest and save in their economy. They have not been given any encouragement to produce in our economy or to take the risk with their capital in our economy, to help promote exports, to keep them competitive and to keep the inflation rate down. The only thing people have been given is a tax demand that was pressed through and brought about because the Labour Party could be placated by a continuing set of promises of things that might happen in the future if they stayed in line.
We have the highest motoring costs in Europe. Our car park charges are the dearest and this must make Ireland the least attractive motoring tourist location in Europe. I cannot see any logic in further killing the motor industry and thereby killing the tourist industry which is in a serious state of collapse and in need of revitalisation. We also know that insurance premiums will go up because this is affected by those new increases. Once the value of cars increases insurance premiums are also increased. The Minister is making the low mileage motorist suffer the greatest. His fixed cost of motoring is now at an intolerable level. Motoring is no longer a luxury, it is a necessity. The low mileage motorist is penalised once again. We must be very concerned about short-cuts that might be taken by the hard-pressed motorist as far as maintenance and servicing is concerned.
Motoring costs have been pushed up intolerably by those latest increases. What a shock it must be this morning for motorists and the motor industry generally, which is almost at the point of collapse. The price of new and secondhand cars has been increased intolerably. Motorists now have to face increased service charges, an increased petrol price and increased motor tax. When the general public realise the full petrol increase we will get reaction from them. It was not increased only by 11p yesterday, there was an increase of 15p early in January so we are talking about an increase of 26p. Further increases are promised this year so that we will have petrol selling at £3 a gallon before the end of 1983. All those increased charges on the motoring public amount to a blitz on motorists and the motoring trade.
Motoring costs are an everyday essential to the ordinary person going about his business. Most garages in certain parts of the country are already on three days a week. Apprenticeships in that trade are non-existent. Many of those people are saying this morning that if the publicans got a little respite by taking to the streets this is a formula for other groups to take to the streets, which is the one thing we should try to avoid. The road haulage industry badly needs revitalisation, re-equipment and a streamlining of its activities to keep our transportation costs at an acceptable level so that our export manufacturing industry can maintain its competitiveness in the world market. What are we doing to it?
As far as Fianna Fáil are concerned this budget saddens us and it also saddens the people in general. It does not offer any hope or confidence for the future. It does not provide any incentive for business or it does not provide any attraction for risk capital to put that money to work in our economy. Above all, it does not offer any job opportunities. The situation we face in the future is totally unacceptable to our young people. As soon as the Government take their courage in their hands, throw off the mantle they have placed over themselves, protected by a now discredited Labour Party, and give the people an opportunity of voicing their opinion about what they think of the Government's attitude yesterday, the better for all of us.
The management of a State's finances should be related to the requirements of its economy. Where an economy is overheated, the Government should be able to use the financial policy weapons at their command to reduce the pressures of excessive demand. By contrast — and this is the problem that faces us today and has faced us indeed for a number of years past — where there is inadequate demand, under-employment of resources, and unemployment of people, the public finances should be in such a condition that it is possible for the State to stimulate demand so as to expand output and employment.
In our case, of course, we are limited in the effectiveness of such action by virtue of the fact that the Irish economy is an open economy. More than half of any increase in demand tends to leak outside the State, increasing the volume of imports more than the volume of demand for domestic products. But while this fact is an obvious constraint on the utilisation of budgetary policy for economic purposes, it does not mean that budgetary policy has no role to play. We in this country cannot afford to find ourselves in a position where the state of our public finances makes it impossible for us to use fiscal policy to the extent that may be justified in the light of the openness of our economy, even to provide a thrust in the direction in which national economic policy should be moving.
Unfortunately, the last few years have seen an increasing divergence between the state of the public finances on the one hand and the needs of the national economy on the other. At no time in the history of this State has the condition of our economy and the level of unemployment required so urgently a stimulus to domestic demand, some part at least of which would benefit domestic output and employment. But, it has also to be said, at no time in the history of the State has the capacity of the Government, through their budget, to secure such an objective been so constrained and so limited as at the present time.
This is simply a reflection on the way our economy has been managed in recent years. I shall not dwell on this point but I cannot ignore it. It is central to the problem that we now face.
Deputy Flynn, from his position of splendid isolation, unsupported by a single Fianna Fáil Deputy, has ignored it. It was the mismanagement of public finances since 1977 that has left us in the position in which, at a time when more than ever before we need to be able to stimulate the economy, we are constrained to do the opposite. The level of overspending is such that we are faced with no alternative but to cut where we should be taking steps to promote economic activity.
At a time when any Government in this country would wish desperately to be in a position to stimulate demand, output and employment, we find ourselves today in a position where the means of achieving these objectives through the budget are not available to us and where by contrast we are constrained to tighten the financial reins at the very moment when everything points to the urgent need for a quite different policy.
The constraint on our freedom of action in this respect is, however, inescapable even if Fianna Fáil are seeking to ignore it. Since July last at least there has been a recognition on both sides of this House, including in this Debate, of just how inescapable these constraints are. The steps taken by our predecessors in Government after the adjournment of the Dáil for the 1982 Summer Recess, taken together with the scale of the expenditure cuts implicit in the Book of Estimates published last November, and the targets for borrowing and the current deficit contained in the document entitled The Way Forward, published last October, all reflect the conviction of our predecessors in office, in the latter half of 1982, whatever they may have felt previously, that there is now open to us no alternative to a reduction in borrowing and in overspending for current purposes.
This is why the conviction exists on both sides of this House that such policies have to be pursued in the face of every possible indication of the need for expansionary rather than contractionary policies. That is why both sides of the House are agreed that the level of borrowing and the scale of our current deficit have reached a level that cannot be sustained without danger to the continuing viability of our public finances.
When the National Coalition Government were elected to office 18 months ago it was already clear that we were approaching the point where the failure to take such action fairly speedily could bring us up against external constraints that would admit of no denial. That was why in Government in July 1981 and again in January 1982 we set about halving the looming current deficit for 1982 and reducing Exchequer Expenditure by a quarter.
The Government that succeeded us in office last March professed then to be unconvinced of the need for such severe measures and they introduced changes in our January budget which had the effect of widening the underlying gap between revenue and expenditure by no less than £170 million. But four short months after that budget was introduced, the harsh reality of what had faced us in Government a year earlier belatedly struck our successors in office.
There is today no disagreement between the two sides of this House on the need to reduce borrowing, and especially foreign borrowing, nor on the need to reduce drastically overspending on current account. There is some difference between us on the scale of the measures needed. Our predecessors in Government, possibly overreacting in the face of the crisis that faced them after four months of pursuing perverse financial policies, came to the conclusion in October last that the current deficit in 1983 must be reduced to 5.5 per cent of GNP —the figure printed in The Way Forward— namely to a figure of around £730 million. This conviction was repeated here yesterday by Deputy Haughey and I understand on television also.
It was the judgment of the parties who came to power last December, before they took over the reins of office, that the policies which our predecessors had belatedly adopted, following the lead we had given in 1981 and in 1982, went somewhat beyond what was absolutely necessary to secure the continuing financial credibility of this State. We believed that these new Fianna Fáil policies took insufficient account of the extent to which our economy was already in a state of severe recession — a condition in which unduly severe measures could be very damaging indeed to the level of demand, output and employment, and of confidence.
In office this Government reviewed the position in the light of advice available to us not merely within the governmental system but also from other sources. The conclusion we came to confirmed our instinctive judgment, made by both parties together while still in Opposition before we had access to the full facts. On the one hand, in line with the view of our predecessors, we concluded that Exchequer borrowing had to be reduced significantly — as a share of GNP cut by one-fifty, to a figure not significantly in excess of £1,700 million. There was and continues to be complete agreement on that figure on both sides of the House. To have relied on a higher borrowing level than this at a time when the world banking system has had to absorb the shocks arising from the difficulties of a number of major borrowers would have been to take risks than no Government could justifiably undertake. On this point there is no divergence between ourselves and the Opposition. The figure they had envisaged for Exchequer borrowing and the figure we have arrived at are effectively identical.
But on the other hand, within that total figure, to which all are agreed we are constrained to adhere, there is some divergence between us as to the proportion of borrowing to be used for capital purposes or to finance the current deficit. The Fianna Fáil scenario envisaged and obviously still envisages Exchequer borrowing for capital purposes to the tune of just over £1 billion — and, as I have already mentioned, they proposed a current budget deficit of about £730 million. Our Government on the other hand have taken the view that to seek to reduce the current budget deficit from almost 8.5 per cent of GNP to 5.5 per cent in a single year, at a time when the economy is in such deep recession, would be to go beyond not merely what is desirable but also what is necessary.
To have achieved such a reduction in the current budget deficit from the starting point implied by the Fianna Fáil strategy, would have required a net increase in taxes and charges of no less than £500 million before allowing for any increases in social welfare. To have achieved such a net increase in taxes and charges would have needed, allowing for the loss of buoyancy involved in deflating the economy to this extent, a gross increase of £700 million — certainly more than £600 million — once again before allowing for social welfare increases.
We know from the Fianna Fáil Book of Estimates the level of expenditure which that party believe should be provided for in this budget. The figures I have just mentioned, therefore, as representing the effect of Fianna Fáil policy — the gap to be bridged on their figures, the basis of their assessment of what the current budget deficit should be—would have had to be secured by increases in taxation and charges. We naturally have no clue as to how Fianna Fáil proposed to raise these sums and so far have had no indication from the Opposition as to the additional impost they might have imposed over and above those that we have had to implement in this budget. It would be appropriate in this debate if Fianna Fáil were to open their minds to us on this subject but I doubt if they will be disposed to do so. They are in a position of total embarrassment and the inconsistencies shown here in their approach is transparent because last night they sought to vote down in this House the increases in VAT and other taxation increases, including the 1 per cent temporary levy.
If they are against those and if they believe the current deficit should be £730 million, how do they think the money should be found? On that basis they are about £350 million short. There is no other way in which that revenue could be raised on that scale outside of VAT and excise duties, which we all agree are at saturation point. There is no other major source of revenue that would raise large sums other than income tax. One is forced inexorably to the conclusion that Fianna Fáil's policy of reducing the deficit to £730 million while not increasing VAT and imposing the temporary levy could only involve an increase of 20 per cent in receipts of income tax, a one-fifth increase in income tax, an enormous increase in the burden on PAYE taxpayers.
If my assessment is incorrect let the Opposition rebut it. Let them tell us how they would find the money on the basis of their Book of Estimates to reduce the deficit to £730. What means would they have adopted? By implication by the way they voted last night there is only one conclusion the people can draw and that is that Fianna Fáil believe it should be done by a massive increase in income tax, increasing the receipts from that source by a further one-fifth, on top of the one-fifth increase in this budget arising from the fiscal drag and the fact that we were not able to change the bands.
I am not saying I believe that is what they would have done; I am saying that is the only logical implication of the stance they have taken in this debate. I do not believe the stance they have taken on this debate represents their true position. I believe that had they been left in Government, in seeking to reduce the deficit to £730 million, they would have had to employ much the same methods we employed and they would have had to go beyond that by increasing income tax as well. I do not believe that in Government, they would have failed to use indirect taxes as we have done. That is the only conclusion one can reach from the logic of their position which they are seeking now in deep embarrassment to avoid.
There may be criticism of this Government for having reduced the capital provision intended by Fianna Fáil by £180 million or 18 per cent. Many of the cuts in capital spending which we have had to make in order to reduce the total level of Exchequer borrowing for capital purposes are distasteful, but the cuts have been carefully selected to have minimum deflationary impact on our economy and are, I believe, much less damaging than would have been the additional taxation required by the Fianna Fáil scenario of a £1 billion Exchequer provision and £730 million current deficit. In selecting the areas in which to impose cuts in capital expenditure the Government have been careful to minimise the impact on productive investment or on critical social investment in areas such as housing where demand and therefore output have been drastically reduced in the past several years.
Moreover, interestingly enough, there are indications that some capital investment funds may go further this year in securing output and employment than last year, that the actual price index in capital investment may be falling rather than rising under pressure of the economic situation. This is exemplified by the fact that some tenders for public works received by the Government in recent months have been down by as much as 10 per cent on the value of the tenders for comparable work last year and, with that trend, the same capital for any given project could yield a bigger return in terms of output and employment. Obviously a squeezing of profit margins is taking place in the construction industry.
A significant proportion of the capital cuts we have effected have been in non-programme outlays, where we have judged it possible to cut back provisions which have non-productive value, while having due regard to the needs of various State enterprises to maintain their financial viability. Other cuts again have been made in areas where a realistic assessment suggests that the capital allocated would not in fact be used. Regrettably, this has been the case in relation to factory building as the demand for new factory space has been greatly depressed by the recession. We already have more than enough advance factories lying empty around the country. Deputy Flynn seemed to think that spending through the IDA and SFADCo should be undertaken for its own sake, irrespective of whether there was any demand for the factories. Having determined that the current deficit should be somewhat higher than Fianna Fáil envisaged but kept below £900 million, the next question facing the Government was how to achieve this through an appropriate combination of expenditure cuts on the one hand and increases in charges and taxes on the other. Here the problem was complicated by the fact that a number of the policy decisions required to validate the Fianna Fáil Book of Estimates in respect of current as well as capital expenditure had not been taken at the time when that Government left office.
While it would be possible to make a criticism of the publication of a Book of Estimates containing figures which in a number of instances were unaccompanied by policy decisions designed to secure the reduction of expenditure to the level in question, we are not disposed to fault our predecessors on this account. No doubt had they remained in office they would have taken the necessary policy decisions although I have to say that in the case of several Votes it is difficult to see how they could have reduced expenditure to the levels provided in the Book of Estimates by any conceivable set of policy decisions, but we have to give them the benefit of the doubt in this respect.
The fact remains that when we came into office we found that capital and current expenditure policy decisions needed to be taken in respect of about £150 million if we were to reduce expenditure to the level provided for in the Book of Estimates published last November. The problem this posed for the new Government was aggravated by virtue of the rapid deterioration in the unemployment situation during the interregnum period. This has made necessary the provision of an additional £31 million to cover anticipated additional payments in respect of unemployment during 1983 over and above the sum provided for this purpose in the November Book of Estimates.
It is interesting, though depressing, to look back six years and see the increase that has taken place in unemployment-related expenditure in the period 1977-83, the period during which Fianna Fáil presided over the destinies of this nation for all but a brief seven months. The figure for 1977 in total was £109 million and it is now £473 million, money which one would like to be able to put to much better use.
Another aggravating factor has been the need to make provision that will allow the local authority overdrafts to be maintained at their present level; our predecessors' decision to allow these overdrafts to rise by a further £20 million was in our view quite unrealistic and would have been unsustainable in practice.
We also had to face the fact that their proposal to require the ESB to pay £35 million in rates could not be sustained because any realistic valuation of the ESB's property yielded a much lower sum. We had, therefore, to make adjustments to the estimates and find additional cuts elsewhere, in these cases where the previous Government's policy decisions were not sustainable.
Our Government also felt it necessary to reverse, of their own accord, certain policy decisions that had been taken by the previous Government with a view to cutting expenditure, most notably the decision to make a charge of £5 per out-patient and casualty visit and to introduce charges in respect of public wards in hospitals, a decision which had been taken by the Government, in particular by the Deputy opposite when Minister, which decision we were not prepared to follow through. In addition, our Government are implementing a commitment, given at the time of the election, to increase payments to farmers for reactor cattle and we are also providing £5 million for the continuation of the EEC special measures schemes for the subsidisation of AI and the purchase of lime — no provision for which had been made by Fianna Fáil, which would have meant that these schemes would have had to terminate and the EEC funds available to supplement our resources would have been left idle and unused in Brussels.
We have, moreover, decided to reverse the Fianna Fáil decision to make no provision for any increase in development aid in the current year. This would have had the effect of actually reducing the share of GNP devoted to this purpose from .22 per cent to .20 per cent. An additional £3 million is being provided for this purpose in order to maintain the momentum of our development aid programme and to maintain the level of expenditure on development aid as a percentage of GNP. The fact that we have been unable to increase the percentage of GNP devoted to this purpose in accordance with our intentions is a source of deep regret to the Government and to myself and the Minister for Foreign Affairs. This is justified only by the exceptional problems of the current year. We have, at least, maintained the percentage and ensured that the programme of aid is not disrupted, as it would have been had the previous Government's policy in this regard been maintained.
In order to reduce current expenditure to a figure close to that in the Book of Estimates in the face of the various provisions listed above, the Government have had to take policy decisions effecting cuts to the tune of over £105 million, the main details of which are set out in the Principal Features of the Budget published immediately after the Budget Statement yesterday. The Government's decisions in respect of these cuts are the subject of legitimate debate. It is open to the Opposition to argue that some of their proposals which we have rejected — such as the imposition of the £5 out-patient and casualty charge, the decision to charge for public wards in hospitals, the reduction in the percentage of GNP devoted to development aid, the failure to provide for the continuation of the EEC special measures, or to provide for increases in reactor payments — are to be preferred to some of the measures we have taken and I look forward to hearing whatever arguments they have to put forward in support of such a thesis. However, if the Opposition are critical of some of the cuts we have made, the onus falls on them to say what reductions in expenditure they would undertake in order to achieve the levels of spending set out in their Book of Estimates. Should they fail to do so, any criticisms they may make of the measures we have taken will be correspondingly lacking in credibility.
The same, of course, is true of any criticisms that may be made of the tax measures that we have undertaken in order to bridge the gap between the level of expenditure set out in the Book of Estimates, with which as a total figure we are in broad agreement, and the budget deficit which we have determined to be the maximum sustainable — that was a figure £165 million higher than the Fianna Fáil figure. The additional taxation, to the tune of over £300 million, which we have found it necessary to raise for this purpose has been spread as equitably as possible, with special emphasis on securing a progressive impact, in the sense of a heavier burden being imposed on better off people in the community and with relief for those at the lower income levels.
This philosophy of equity in the budget, notably absent in a succession of Fianna Fáil budgets which generally distributed to the better off of the community by a series of indefensible measures, is evident in such decisions as the introduction of a new 65 per cent tax rate at levels of income in excess of approximately £24,000 in respect of married couples, in the introduction of a residential property tax payable by people with incomes in excess of £20,000, in the limitation of the duty-free facilities, the benefits of which can accrue only to those well enough off to afford to travel outside the State, in the increase in the higher rate of VAT, which largely affects goods, the purchase of which is concentrated most heavily in the upper income groups and middle income groups, and in the measures we are taking to deal with tax evasion and avoidance — for example, the reduction of the disclosure limit in respect of bank interest. Other measures which we have taken, such as the increase in the 18 per cent VAT rate, are broadly neutral in their effects as between different income groups.
In raising the sum of £300 million in additional taxation, the Government have been influenced by the desirability of maintaining almost intact the special PRSI provision introduced in the Finance Bill last year, as well as the need to introduce, in a different form from that proposed last year, a family income supplement to benefit workers with low incomes, who have hitherto received no benefit, either from income tax concessions or from social welfare benefits, for which they are ineligible because of being at work, often at work with after-tax incomes lower than those which many people who are unemployed or disabled receive through the social welfare system.
These are only some of the socially progressive measures which our Government have undertaken in the context of very tight budgetary restraints. I must also refer to the decision to restore the remedial teacher programme which our predecessors had proposed to cancel, the reactivation of the Combat Poverty Agency and the provision of £½ million to assist a wide range of voluntary organisations carrying out important social work, the activities of which would otherwise have to be curtailed because health boards appeared to have withdrawn support from them in the light of the budgetary constraints imposed upon the Boards by the Book of Estimates in October. Another social provision is the allocation of £1 million to the housing of the elderly.
It is obvious that in present financial circumstances the Government are very limited in what they can do in terms of additional measures to stimulate production. Nevertheless, action has been taken, both in the agricultural sector to which I have already referred, and in respect of export industries, through the remission of the payment of VAT at point of entry in the case of firms 75 per cent or more of whose production is exported.
I regret that it has not been possible to go further than this in the current year and that, in particular, the adverse and very damaging effects on output and employment of our predecessors' unfortunate decision to impose VAT at point of entry cannot be alleviated in respect of firms other than those which I have just mentioned. When wrong decisions are taken, as were taken in March of last year — and it is all too easy for Governments to take such decisions in search of soft options — it is often difficult to put these right again in the short run.
It will be argued that the overall impact of this budget is bound to be, to some degree, deflationary. It is impossible to deny — and I would not attempt to deny — that this will be true in some measure. But the deflationary effect is smaller than, perhaps, many may imagine. The impact of the measures taken in this budget on the growth of GNP, calculated through the model of the economy employed by the Department of Finance and the Central Bank is estimated to be 1½ per cent in 1983. I mention this because, in an article in this morning's Irish Independent, Mr. Brendan Walsh in writing on this subject uses terminology which could lead someone not very familiar with the concepts involved to reach the conclusion that the deflationary impact is somewhat greater. He refers to the overall effects of the budget on the projected current deficit as being a reduction of 2½ per cent of GNP, compared with 2.2 per cent at the end of last year. I think that what he is talking about there is a measurement, as one can see from the table beside it, of the proportion of GNP involved in the budgetary decisions, as distinct from the actual deflationary impact on the economy. I should add that one of the reasons for this relates to the openness of our economy.
A very significant part of the impact of any cuts in expenditure or increases in taxation falls on imports, given that our propensity to import is very high and indeed the margin of propensity to import is well over 50 per cent. As a result, a very large part of the impact of this budget falls on imports rather than on home production, as a result of which it is estimated — again through the model — that our balance of payment deficit will be reduced from an estimated £550 million to £300 million by the budgetary measures announced here yesterday, a £250 million reduction in imports. Of course it would have been preferable had we been able to stimulate growth rather than reduce it, even if only marginally — reducing it to the general level expected within the EEC as a whole during the current year — but this option has been foreclosed because of the policies pursued in recent years which have created the situation in which we now find ourselves with our public finances out of control. I would only add that the policies proposed by Fianna Fáil, involving a further reduction of £165 million in the current deficit would, allowing for their effect on buoyancy, have required something like £210 million of gross additional taxation, leaving aside the question of what taxes they would have used to replace VAT. I am talking here merely of the extra deflationary effect of the Fianna Fáil budget based on the £730 million deficit figure which Deputy Haughey spoke of here and on television also later last evening. Had Fianna Fáil been in office and adhered to the view that the deficit should be reduced to that level — which is still their view as Deputy Haughey has made clear — the deflationary impact would have been significantly greater than in the case of our budget.
This budget has charted the course of the restoration of order in our public finances. The reduction of one-fifth in the level of borrowing as a percentage of GNP is paralleled by a similar reduction of one-fifth in the size of the current deficit, expressed in the same terms. This latter action is in accord with the Government's programme for the elimination of the current deficit over a five-year period.
To have done less than move one-fifth of the way towards this target in the first of the five years would have been most unwise and could have cast doubts upon the sincerity and strength of our commitment to achieve this objective. Indeed no one, either in the press, in the economic world or in the political world on the Opposition benches has suggested that that should have been done. To have done more than we have done in this respect in reducing the deficit, in a year when the economy is in deep recession, would have been very damaging. Therefore I am satisfied that the broad strategy of the budget is correct: that it will, on the one hand, restore confidence in the capacity of an Irish Government to manage the financial affairs of the State and, on the other hand, minimise the negative impact of such measures upon economic growth and employment.
With this budget behind us, we have to turn now to the positive task of promoting the expansion of output and employment by non-budgetary measures. Of primary importance here — I would say indeed of supreme importance — is the restoration and then the maintenance of the competitiveness of Irish goods and services in domestic and external markets.
This is something which will require action by and co-operation between all the interests involved in the process of production. We often seem to place the whole burden for the achievement of competitiveness upon employees, by speaking as if the sole factor determining competitiveness is labour unit costs. This is unhelpful and divisive, and is on that account likely to undermine the very objective of minimising the increase in labour costs.
Management must take its responsibilities also. There are all too many Irish firms in which the factors determining the failure to maintain and improve competitiveness are primarily management factors involving weaknesses in production management, in design or in marketing.
These problems had been identified repeatedly over the last 20 years. In some industries and in many firms they have been partially, perhaps even largely, resolved. In others they have yet to be tackled. The recognition of this reality on the part of all concerned, and in particular on the part of management, is a pre-condition of any real progress towards securing the survival and expansion of such firms.
On the other side of the equation there is, of course, the labour cost factor — a factor of determining importance in the case of firms where labour accounts for a significant proportion of total costs. In no previous year has the importance of restraining the growth of labour costs been as important as in 1983. I believe that there is widespread recognition of this fact amongst trade unions and amongst workers generally. A climate of opinion now exists in which effective leadership in Government, and the bringing together in a new planning framework of all those concerned in the process of production can secure a new impetus for growth in our economy and a sound basis for the halting and reversal of the appallingly rapid rise in unemployment that we have been witnessing in recent months.
With their work on the budget completed, the Government will now be establishing the task force of Ministers to tackle these problems of growth and employment; we will be establishing the National Planning Board which, working in conjunction with the task force, will set up the mechanisms for co-operation and consultation through which we shall rally all those engaged in the productive process in defence of existing jobs and in pursuit of the creation of additional employment.
Our development policy, within the framework of sound public finances, is based on a practical sectoral development approach. The problems and the potentials of sectors differ. In some sectors rapid expansion of output and employment should be possible given the right policies in a climate of expanding demand. In other sectors the overwhelming need may be for rationalisation and consolidation to maintain output and employment. In either case, clear development objectives must be set and agreed on a tripartite basis between Government, trade unions and employers. Only on that basis can we mount the attack on unemployment which our situation demands. We need to make significant improvements in our capacity to produce and sell our goods and services competitively which is the only practicable way to expand employment.
These improvements must embrace our level of scientific and technological application — and there are many weaknesses — our management capacity, our productivity, our design and marketing. In a word, we must be more innovative in every aspect of economic life. We have shown that innovation already in certain areas of our economy. Our capacity to innovate is now greater that it has ever been.
What is, therefore, required is to improve the entire environment for innovation, change and expansion. This will require new directions in State aid and incentives and new attitudes by workers and management. We propose to provide the framework for these developments through tripartite sectoral committees which will provide the bottom layer in our new planning system. Building on the base of the existing sectoral committees, which have concentrated on a certain number of priority sectors, we will rapidly extend this approach to the rest of the economy. We will do this by changing the scale and method of operation of these committees so that more extensive and speedy evaluations can be made right across the economy.
In this way we will build from the ground up, so to speak, an expanding and efficient economy, achieving maximum output and employment.
The plan that will emerge eventually will be built on this, built from the ground up, built on a solid basis of consultations with those actually engaged in the productive process, their assessment of what can be achieved if appropriate policies are pursued both at Government level and at the level of the sector itself. It is on that basis only that any meaningful plan can be produced, as was done in the mid-sixties under the Second Economic Programme. The document recently produced by Fianna Fáil simply plucks figures out of the air and attempts to parade itself as a plan when there are pages in it in which all that is done, paragraph after paragraph, is to say repeatedly it is envisaged that this, that and the other will happen without any effective action being proposed to produce the results thus hoped for. A programme of development can take place only on the basis of a stable, long-term view of the public finances and their evolution. Uncertain fiscal policies can never provide a sound basis for the growth and expansion of the economy. That is why we attach such importance in this budget to putting the public finances on a course which will restore confidence in the economy, on a course the direction of which can be seen so that people can plan ahead knowing the direction in which the Government are moving and the objectives they are seeking to attain.
The whole thrust of Government action in the months ahead will be positive — directed towards the achievement of growth and the creation of employment in this new co-operative framework. I recognise that if we are to achieve a national commitment to securing these objectives we shall need to rally all the political forces to this task. The Government have their particular responsibility in this regard. But it would be neither constructive not patriotic of the Government to seek to undertake this task in isolation from the other political forces represented in this Parliament.
Despite the somewhat negative reaction of the Opposition in relation to the budget we will be seeking their co-operation in the constructive work that lies ahead. We hope to create the opportunities for constructive action across the political divide by speeding the introduction of Dáil reforms that will provide the Opposition with the kind of role which hitherto Oppositions in our Parliament have not been accorded.
It was towards this end that we initiated the debate on Dáil reform which concluded two days ago in this House. The constructive suggestions that came from all benches in that debate will be assessed by the Leader of the House and Minister for Industry and Energy, Deputy Bruton, and taken fully into account in bringing forward to this House proposals for changes in its systems and procedures designed to secure this objective. I hope and believe that the spirit in which we are approaching the discussion of Dáil reform will be reciprocated on the other side of the House.
The quality of the debate on Dáil reform and the contributions made on all sides give some basis for that hope. This debate is not an occasion on which to expect a co-operative approach. It is difficult for that to come about in the strained atmosphere of this occasion. In a reformed Dáil we hope to secure constructive criticism from the Opposition and their full participation in the process of seeking to get us out of the difficulties we now find outselves in as a country.
Reform of the Dáil, and also of the Seanad, must be accompanied by reform of other institutions whose structures and methods have lagged behind the needs of the increasingly demanding requirements of a modern economy. Public service reform is also high on the priority list of this Government as is evidenced by my decision to appoint Deputy John Boland as Minister for the Public Service — the first Cabinet Minister whose responsibilities have been concentrated exclusively on this area. That the public service has served this State well does not need to be stated in this House. The dedication of thousands of public servants has been the essential bedrock on which our State has been built and has developed. From the very start, in the difficult days when there was armed conflict in this State, the civil service was built up to serve the State and successive Governments. This was done in such a manner that when the dramatic change of Government came in 1932 there was a public service available to the new Government in which they could and did have confidence, thus ensuring continuity at that difficult point as our democracy was built slowly and painfully on the ashes of the Civil War. They have never secured the credit which they deserve for the manner in which they have helped to build this State, to protect it against political pressures which have often been directed against the long-term interests of our society from all sides, and to safeguard our democratic system.
The public service itself, conscious of its own deficiencies, is visibly anxious to improve the quality of its contribution to that national effort. The evidence for this is clear to anyone who has had occasion, as I have had over the past quarter of a century, to work closely with public servants in different contexts. It was, after all, the public service itself without encouragement or involvement of politicians which a quarter of a century ago established the Institute of Public Administration with the objective of improving the quality and effectiveness of the work of public servants.
The Department of the Public Service in recent years have been seeking to carry through reforms that will make the whole system more efficient and more cost effective. I know that there are civil servants in that Department and others who have suffered from some sense of frustration at what they feel, with some reason, to have been the lack of sustained political interest in and impetus behind their efforts. I hope that the appointment of a Cabinet Minister responsible for public service reform will rapidly relieve these frustrations and provide all those in the public service who are concerned to work effectively in the national interest with better opportunities of doing so.
I recognise that some of the reforms to be introduced will involve disturbance to traditional practices or administrative arrangements. We shall require the full co-operation of the members of the public service to carry through these reforms. I am confident that given the necessary leadership that co-operation will be forthcoming.
Before turning to what we have to do here in this State to tackle our domestic economic problems, I want for a moment to refer to the external environment which has such a major influence on a small, open economy such as ours. It is a fact that our domestic difficulties have been greatly aggravated by the collapse in world output and trade. As a small, open economy it is of enormous importance to us that the stirrings in economic activity now beginning to manifest themselves internationally do in reality lead to a recovery in demand in the markets to which we sell our goods and services. In all our international contacts we must seek to promote a consensus on the need for the larger and stronger economies, in particular, to take stimulatory action as regards investment and demand. Such stimulatory action is becoming daily more necessary and possible and could, if undertaken in a concerted way and on the necessary scale, run through the world economy just as an electric current brings life to machinery that has fallen idle and silent.
Our Government will be considering in the coming weeks what action we might take internationally — in particular within the European Community — in consultaion with other like-minded trading partners to bring about a greater convergence and concentration of international and Community economic policies — essential if the world economy is to break decisively out of the constraints which at present bind it and thus provide us in our small economy with the impetus needed for economic recovery and reversal of the rise in unemployment.
The scale of the problems which we have to tackle simultaneously so as to set our public finances in order, and to secure economic growth and increased employment, are enormous. When I reflect on just how great these problems are, and anybody in a position of responsibility cannot fail to spend a good deal of time reflecting on them, I am conscious on the one hand of the fact that all too few of our people grasp just how great the challenge is and just how disastrous would be the failure to cope with it, and on the other hand I recognise that by spelling out the full magnitude of what has to be done there is a danger of depressing the faint-hearted. It is a tightrope we have to walk.
But it is time that we all faced the facts which for too long we have chosen to ignore. For almost 20 years it has been evident from the demographic trends that began to emerge in the early sixties that in the last two decades of this century we would be facing an unemployment problem of an unique magnitude for a developed country, with a number of young people coming forward each year seeking employment that would require a growth rate far exceeding anything previously secured in this country — exceeding indeed the growth rates achieved even by the more successful European economies in the post-war quarter of a century of rapid economic expansion. Yet though this was evident almost 20 years ago, we failed to take up the implications of these facts.
Equally it has been evident since the first oil crisis almost ten years ago, that the problem of achieving the kind of growth required to provide employment for the rapidly growing number of young people seeking a chance to work in their own country would be much greater in the decades ahead than anyone would have imagined in the days of cheap energy prior to 1973. Yet these ten years during which we could and should have faced up to the consequences of the first and second oil crises have been largely dissipated in a vain attempt to sustain and improve living standards in the face of a massive transfer of real resources from us, as from other developed countries, to the oil producing states — a vague attempt which is now collapsing around us as we have to face the harsh reality that we cannot continue to live at other people's expense.
Throughout these two decades we have not been slow through many committees and councils — the Committee on Industrial Organisation, the National Industrial and Economic Council, the National Economic and Social Council, amongst others — to identify these problems and many others associated with them, such as the problem of providing adequate infrastructure to keep pace with economic development. But most of the work constructively devoted to identifying these problems, and enshrined in many pointed and pungent reports, has been left to moulder on the bookshelves of Government Departments and, be it said, of political parties.
We have been notably successful in identifying the problems we faced. No one looking at the literature of the last 20 years can doubt our capacity to do so. We have been notably unsuccessful in facing them. The consequent day of reckoning has arrived. Tough decisions can no longer be put off. Realities hitherto ignored must now be faced. All concerned, be they politicians, public servants, employers, workers, farmers, must now take their responsibilities. This involves doing something which hitherto all have been unwilling to face, namely abandoning the unremitting pressure to pursue sectoral vested interests, in favour of a joint effort to pursue the common interest which all of us have hitherto ignored, at great peril to our society.
I would express the hope that today is the last occasion on which the vested interests would express themselves in such narrow terms as one reads in the papers, with each interest complaining that it is not better off as a result of a budget which could not possibly leave people better off, given the task which has to be accomplished in getting our finances in order.
It will be the task of this Dáil to rise to a challenge which has hitherto eluded successive assemblies of representatives of the people. This Government have the responsibility of providing the leadership that will enable this Dáil to fulfil this function and that will inspire people in every walk of life, in every sector of our economy, to set aside for a time at least the pursuit of private interests in favour of the achievement of common goals. Let us set our hands to this work.
If we were at a debating society I would have to give full marks to the Taoiseach for his excellent presentation. He says in part of his speech that the whole thrust of Government action in the months ahead will be positive, directed towards the achievement of growth and the creation of employment in this new co-operative framework. This is mighty stuff but I know that the Taoiseach in this budget is going for zero growth rate and making no provision for the unemployed. Not only is he not providing jobs or giving any hope of that prospect but he is even taking back the few shillings received at present by the unemployed.
As in the case of many of the proposals made by this Coalition Government, this budget as initially presented does not look too bad until one looks in the pink pages and sees what has been left out. One must remember that this is the Taoiseach who sold to the country the £9.60 which he was unable to deliver. This is the Taoiseach who tells us today that he has a special family income supplement for the poor but he knows the great difficulty of delivering it in practical terms. He and many of his friends and associates have told us many times that we have one million poor and here is his contribution. He estimates that 20,000 people will benefit.
People at work.
I had to listen to a lot of rubbish from the Taoiseach and I did so patiently. The least he might do is let me have my say. The one great thing about this House is that a person can say what he thinks and there is no chance of being switched off.
In spite of the fact that we have one million poor, this family income supplement is intended for 20,000 people, mainly those earning between £60 and £70 a week. The cost of this scheme will be £5 million. At the same time we learned that the double week in September and December for the dependents of those who are on social welfare benefits, certainly in the poor category, is being taken away. So the Minister for Finance confirmed last night. The cost of that double week this year, assuming the increase of 10 per cent in social welfare benefits, would be £4.4 million. We have on the one hand £5 million being given to 20,000 people and, on the other hand, £4.4 million being taken away. The extra money was a great help in September when children were starting back to school and it was also very useful at Christmas.
We must consider as well that the 1 per cent levy also applies to all these people. We then find that £4.4 million is being taken back together with the 1 per cent levy which, on the Government's figures, amounts to £0.6 million. This makes a total of £5 million and it is then clear that this amount is being given with one hand and taken back with the other. There is no net gain and we are again faced with the cosmetic approach of this Government. We must also take into account that no increase is being granted in children's allowances and many people will be considerably worse off. VAT rates have been raised on the vast majority of household goods and the Minister even rooted round to find a few more such as coal and other essentials.
Taking all these factors into consideration, one realises that the poor will become very much poorer. This is not surprising because it is really only a sop to the vocal groups who like to talk about the poor but the real hard core of the poor have fared very badly in this budget.
I do not believe the Taoiseach is to be trusted in relation to these areas. He has made various election promises, as have his Labour Party colleagues. We remember the strident words uttered by members of both Labour and Fine Gael when we gave an increase of 25 per cent in three successive years to old age pensioners. We did so not because we thought they should get higher amounts than anybody else but because their base was so low and they needed this kind of increase to keep ahead of the inflation rate. They are getting nothing this year; in fact they are losing. We see that the Coalition partners are untrustworthy in relation to election promises. This is a heartless budget which shows no compassion for the poor or the elderly. It is remote from the ordinary people because the members of this Government, particularly in the Fine Gael Party, are remote from ordinary people. The Taoiseach is out of touch and remote from grass roots' opinion. He does not understand the problems that exist and that is why we need a leader like Deputy Charles Haughey, Leader of the Opposition, a man who has compassion, understanding and can appreciate, poverty, unemployment and real need. That is the fundamental difference between Fianna Fáil, its interests and its leader, and the Government and the Taoiseach. There is no appreciation in the Government of the reality of poverty and that is why we need Deputy Haughey as Leader of our party. He has played that role in our party very well. His concern for the poor and disabled is one of the fundamental policy reasons why Deputy Haughey is so important to our party.
Those who look at the last three budgets introduced by Fianna Fáil will see that the elderly, the handicapped, the disabled, the blind and all genuinely poor people were well cared for. That has stopped now because the Coalition is dominated by Fine Gael and a Taoiseach who does not understand reality. The Taoiseach, an excellent university lecturer, does not understand the reality on the ground but that will be brought home to him in the coming weeks. That is why the country needs a leader with the capacity, ability and interest that Deputy Haughey has in that direction.
The approach of the budget is devious and dishonest. It strikes me that underlying the whole economic approach of the budget—I intend to concentrate on the social welfare and health aspects of it—is the possibility that the Labour Party have been conned. That will be seen in due course. Revenue buoyancy has been expressed as being minus £75 million for 1983, a fairly horrifying prospect. I am aware that the Revenue Commissioners and the Department of Finance have difficulty in getting their figures right and I do not blame them but the Government parties when in Opposition made a great song and dance about such figures. We are living in difficult times and if we do not have a half-yearly budget we are likely to find that there may be more drift than anticipated initially. That happened last year on the revenue side. The expenditure side was well controlled but the revenue side drifted a good deal more than anybody involved expected. Last year revenue buoyancy was set at plus £45 million. When one considers that the budget refers to a figure of minus £75 million one wonders what the Government's strategy is. The former Minister for Finance told us that his budget deficit target would have been somewhere between £750 and £800 million. The Coalition have put forward a figure of £875 million and this has led to great relief in Labour circles and statements that the impact will not be as hard as expected. I have no doubt that they will point out to the media that the situation would have been worse if they had not been in Government. If revenue has been depressed by £100 million I should like to know if the objective is to come out more or less with the same figure ultimately.
If one takes an over-pessimistic figure for buoyancy one can use that as a mechanism to bring about the same degree of deflation that one had in mind initially but in a different way. If one takes that figure in addition to the £220 million reduction in capital outlined in the budget in the Public Capital Programme one finds that it will be highly deflationary. The current budget deficit that Fianna Fáil proposed and the capital budget deficit and the changes that occurred in the budget bear out my argument. The Labour Party have been conned in this respect by the sleight-of-hand we witnessed from the Government previously.
The Taoiseach made much of the health proposals in the budget. The booklet containing the special features of the budget, the extra hidden taxes in addition to those announced by the Minister, deals with health. The figure there will confuse the media greatly and that is being done for a purpose. During Question Time yesterday the Minister for Health tried to suggest that there would be increases but when pressed as to whether the net position would mean an increase or a reduction he replied that he could not say anything about that matter before the budget. We now find that the expenditure decisions taken by the last Government are being reversed and the Government are putting back in £13 million. That is great and it is a matter we will hear a lot about in the future but we will not hear about the expenditure reductions decided by the Government which amount to £23.3 million. The net position is minus £10.3 million for health. More cosmetics, a sleight-of-hand. We will now hear the great PR people selling this £13 million to the public but not mentioning the figure of £23.3 million. The net effect of the budget is that there will be a drop of £10.3 million for health services and the Minister did not indicate that yesterday. If we add a reduction of £2 million on the capital side we find that the overall reduction in the Health Estimate amounts to £12.3 million. Taking a £2 million estimate on the capital side as well, there is a reduction of £12.3 million. During the election the other parties said: "We will do so much. There will be money for health. There will be more money," and so on. In effect, there is £12.3 million less for the health services.
The Taoiseach in his own inimitable style — and I am the first to admit that he has style; he has a wonderful style in doing this — said that what they were doing was quite different from what the Fianna Fáil Government would do. He talked about the terrible £5 scheme for the whole family for a month, excluding medical card holders, and accidents, and the other categories. This was one of the very fine cosmetics introduced as an administrative saving method by the hospitals throughout the country shortly before the election. This gave it a very high profile during the election.
Let us look at what is happening. On page 15 of the pink document, "Principal Features to Budget", we are told that a charge of £5 per out-patient and casualty visit, except GMS patients and emergency ambulance arrivals, is to be introduced. Various other categories are also included. The Taoiseach also intends to scuttle the drugs refund scheme and cut it down to £8 million from £13 million. The drugs refund scheme provides mainly for people who have a long-term illness and who do not have a long-term illness card. This includes asthmatics, people with bronchitis, people with long-term blood pressure, people with long-term heart ailments. Families with two or three members suffering from asthma are in this category.
The Government are tinkering with a scheme which is vital to those people. I accept that it does not apply at some higher income levels. The Taoiseach has said repeatedly that he does not like this scheme, that he thinks money is being given away too easily. Instead of the innocuous and very harmless £5 scheme — because you have to think of some scheme and some way to operate it — he is cutting the drugs refund scheme. Those who depend on that scheme can take warning now that they will face a very severe reduction in the scheme in the coming months. That is a mistake.
I am not trying to justify the £5 scheme because people can try to think of all sorts of schemes. The £5 scheme came from the hospitals themselves. It was not introduced by us because it required legislation. It was mentioned in the estimates as a scheme we might introduce. The hospitals implemented it themselves. It was applied in the West of Ireland very satisfactorily apparently and very effectively in the operation of their services. The Taoiseach and the Minister for Health will have to answer to them. An improvement of 35 per cent in the operation of the service in the North Western Health Board was reported without loss to anyone needing a service.
The PR men sit down in backrooms and say to the Taoiseach: "That scheme has got a great deal of publicity. It has a high profile. We can knock it, and cut back on the drugs refund scheme. Nobody is making too much noise about that." That is where the hardcore of poverty is. The Taoiseach will find that when he gets back to the grassroots. It was a very serious mistake to cut back on the drugs refund scheme. I accept that money has to be found, but switching from the £5 scheme to the drugs refund scheme is a disastrous mistake. In time the Taoiseach will find that out.
The incoming Government are doing a great deal to try to attach all this to the previous Government. In the pink document Subhead H refers to entitlement to medical cards for social welfare pensioners and says it will be on the normal basis of means. That is not an accurate quotation from the record. I kept a copy of the record because it is quite important. The Minister was to revise the criteria for old age pensioners over 66 years of age. We all know that medical cards for contributory and non-contributory social welfare pensioners were introduced as part of the Gregory deal. At the time I recognised that some people with two pensions could receive them. The question of isolating those cases could be dealt with later.
The scheme dealt with the problem of old age pensioners who are marginally over the very low level and who have a much higher need for doctors' attendance. We had a number of proposals to deal with that. To cut out people with second pensions and who might be well off at that level, we were leaving leeway to expand the criteria for those over 66 years of age, taking account of the fact that they needed doctors much more frequently than others and consequently a higher cost was involved. That has not been done here.
It is wrong and false to suggest that we were simply doing away with that. We were meeting the need to rationalise that scheme. That was the intention. It is on the record and I checked it before I came in here this morning. I was committed to it. This should not have been done in the case of old age pensioners over 66 years of age and it certainly should not be attributed to us without improving the criteria in that area which was part of the plan.
Those are some of the points I wanted to make on the health side. There is a great deal to be said on the capital side. We do not yet know where the cutbacks are occurring in the capital programme. We do not know the extent to which the coming five years are still committed in the capital programme. We will have to try to tease that out. As we expected, the health capital programme has been reduced.
The social welfare side is a major element in this budget. It is quite complicated. On page 14 of the "Principal Features of the Budget" we find some of the things which were published earlier with the Estimates and were also included in The Way Forward. There are additions here. One is that the proposed pay-related benefit of 30 per cent will be further reduced to 25 per cent. The high rate of pay-related benefit was being reduced by us from 40 per cent to 30 per cent, and here it is being reduced further, to 25 per cent. We had calculated 30 per cent so that the rate would be reasonable in relation to take-home pay. The reduction from 30 per cent to 25 per cent is purely a money gathering method. That is why it has been introduced.
It is stated in the same document that the pay-related benefit waiting period is to be extended from 12 to 18 days. I do not think anyone has caught on to this yet. It means if you are sick or unemployed, especially if you are in receipt of disability benefit, the first 12 days of sickness do not qualify for pay-related benefit. When you are in receipt of disability benefit the first 12 days do not have a pay-related benefit element added to them. That meant two weeks were excluded from the pay-related benefit. The Government have now increased this to three weeks so you will have to be out sick for three weeks before you come under pay-related benefit. I am surprised at the Labour Party acceding to this because it is going to be very hard on people who are genuinely sick for three weeks or a month. That was no part of our proposals and was never suggested in the past. The income ceiling is being raised from £32 to £36 per week, that is also additional.
I will mention the National Community Development Agency later on because proposals on it are particularly narrow and devious and will put back for some time the provision of this money for the poor for whom it was intended. The Government are also providing £31 million for potentially higher unemployment which means they realise that unemployment will be considerably higher during the year. The Government have accepted that and are making provision for it. These changes in social welfare mean that there is a greater clawback in unemployment, disability, invalidity and maternity benefits from 1 April.
There is no increase in the rate of PRSI in the pink pages. Instead, this Government have, by sleight of hand, introduced a temporary levy which is, in effect, an extra 1 per cent which will be collected on PRSI. Not only does the amount on which PRSI is collected go from £9,500 to £13,000, in addition there is this 1 per cent extra levy. If you take the combination of these two things and their impact on the worker earning £13,000 he will be paying an extra £358 through PRSI or £7 per week. That is on top of taxation he is paying at present. That is why this kind of levy is so punitive because it is calculated on the gross figure and deducted from your net take home pay. That is why it falls so heavily on the PAYE sector and much less heavily on those who are self-employed or farmers. That was proved by the moneys collected under the youth employment agency scheme.
The Minister has said he plans to collect £47 million from the imposition of the 1 per cent levy. He is only planning to get £2 million from the self-employed. Therefore, he is going to get £45 million from the PRSI sector and only £2 million from the self-employed. That is because of the nature of the levy and the way in which it works. I know it is not what the Minister intended and that he would collect more from the other sector if he could, but the reality is that this levy works very efficiently as far as the PAYE sector are concerned but very inefficiently with regard to the other categories. Indeed, he may not even get the £2 million he is hoping for from the self-employed because it is becoming increasingly difficult to get money from that source. That was found to be the case with the health charges. I appreciate the problems which exist but the proposals are inequitable and unhelpful.
We have always tried to make a distinction in favour of long-term social welfare beneficiaries because their position is so critical. However, even short-term social welfare beneficiaries may soon be moving into the long-term category because of unemployment. This year would have been the time to look at the categories within the short-term social welfare. Their position has become particularly acute because they have run out of pay-related benefit and all the other topping up. The Minister should have looked at their position. However, he did not do so, he simply went for the 10 per cent and 12 per cent.
If we look at the old age contributory pension for the persons under 80, we find the increase is £4.85. If they were getting the increase they got last year it would be about £10. That gives an idea of the drop in the scale of increase. There is no justification whatsoever for giving less than 15 per cent, and pushing it back to the end of June. Claiming that is because they got so much more last time under the Fianna Fáil Government is to misrepresent the situation. Members on the other side of the House have made that case repeatedly. Their attitude has been that people did very well on former occasions and that should keep them going now. What they had will be whittled away very quickly and their position will be worsened. The old age pensioner and the widow will be affected adversely because of the budget and that will become very clear in the coming weeks.
The increase given to a widow for a child dependant is £1.15 per week and she will have to manage on that next year. There has been no increase in children's allowances. Obviously the change of mind on the part of the Government with regard to children's allowances is a major one. We know that these allowances here are substantially below allowances in EEC countries and in recent years we attempted to bring them to a more realistic level. We have had considerable success in that regard. What was needed here was to maintain their value and not to allow them to slip back. Unfortunately the gains for families and children achieved in previous years have been lost in this budget.
From the end of June next the disabled persons' maintenance allowance increases by £3.90. The supplementary allowance payable to a blind person who is in receipt of a blind pension goes up by £1.35. The increase for a child dependant of a blind person will be 25p and that is supposed to do for the next year. Of course as the Minister for Finance said, if these people look back they will realise they did well in the past and they can live on that for the present.
Let us consider the position of a single old age contributory pensioner when Fianna Fáil were in office and compare his pension as a percentage of the average industrial wage. In the 1979 budget there was provision for an increase of 16.8 per cent which brought the pension to 24.8 per cent of the average industrial wage. In the 1980 budget, which was the first budget in which I was involved in social welfare, there was a 25 per cent increase which brought the pension to 28 per cent of the average industrial wage. In the 1981 budget there was a 25 per cent increase bringing it to 29.31 per cent of the average industrial wage at the previous December. In 1982 there was another 25 per cent increase bringing the pension to 33 per cent of the average industrial wage. In that period we advanced from 24.8 per cent to 33 per cent of the average industrial wage. That is a measure of the improvement achieved in a period when I was Minister for Social Welfare and Deputy Haughey was Taoiseach. That was the kind of real increase achieved and I want members of the Labour Party to recognise that. When they talk about concern for the poor they should bear in mind the real increase achieved under the recent Fianna Fáil administration for old age pensioners and widows. Now their position has been worsened because of the budget.
With great gusto the Taoiseach referred to the National Community Development Agency. He should be ashamed of his approach to this matter. The Bill was debated and discussed in the House. Last year the Coalition Government provided £250,000 for the poverty agency. Here again we had the strident voices saying we should help the poor and have this wonderful poverty agency, making sure that it is well stigmatised as a poverty agency, and give it £250,000. Fianna Fáil said the agency should be somewhat broader and with more powers and they brought the legislation through the House. I know that Members on all sides realise that an agency is in existence with all the powers it needs. The agency can operate under the direction of the Minister if he considers there are areas which it should cover. I think the Taoiseach has a hang-up about the poverty agency but I have no hang-up about it. I am only interested in practicalities. However, I know that he provided £250,000 last year and we provided £2.25 million. That was a significant cash injection but now the Minister for Finance and the Taoiseach are boasting about taking this back. Of course that will have to be debated at a later stage. The agency has all that it needs to do its work but all the Government can do is to hold up the work that is vital.
The only thing the Government can do is to take away some of the powers of the agency. Of course there is also the question of appointing a board. In the legislation setting up the agency there was a provision that if the incoming Minister wanted certain people on the board he had powers to include them. The question must be asked, why kill this legislation which has provided money to combat poverty and has given it all the necessary facilities. Let us consider the people on the agency. There is Joe McGough as Chairman, also Chairman of Gorta. The Vice Chairman is Tony Downes, Chairman of the National Federation of Social Service Councils. There is Fintan Butler, a staff representative from the National Community Development Agency. That agency had their own elections and appointed their own staff representative. There is also Sr. Brigid Counihan, a community worker from Cork and also from the National Federation of Social Service Councils.
These people are not special political appointees. They are people genuinely involved and dealing with poverty and who have made a substantial contribution. There is also Patrick Doherty, Director of the North Western Centre for Learning and Development in Derry. Perhaps the Taoiseach will come forward with another name from the North of Ireland, but what does it matter? You have someone deeply involved and committed who has written extensively on the subject and has worked extensively in the area. Why not let such people go ahead and do the job? There is Robert Gilligan, Lecturer in the Department of Social Science, UCD and Seán Hegarty, National Secretary of Muintir na Tíre, surely a body who are deeply involved and must be involved in any agency you set up. You have Eddie Lewis in the Department of the Environment, again a nominee of that Department, good, efficient and effective, who could make a worthwhile contribution in that area. Likewise you have Dermot McCarthy of the Department of Health in a similar situation who also could make a valuable contribution. Thomas O'Sullivan from the social services in County Clare, Angela Sexton who is a home health organiser, Malachy Sherlock representing AnCO, Mercy Simms of the Church of Ireland Social Services Committee, Sister Eucharia Twomey, a voluntary social worker from the Mercy Convent, Waterford and Laurence Tuomey from the Council for the Aged and a Vice-President of the Society of Saint Vincent de Paul. All these people are deeply and actively involved and are straining at the leash to get on with the job. They had £2.5 million allocated to them in the Estimates, and what do this Taoiseach and this Minister for Finance do? They set it aside. They say that we must have a narrowly based poverty agency. We must go back to the old cliches. This is a disgraceful performance on the part of the Taoiseach and his Minister for Finance. I do not mind how he constructs the board and whom he puts on it as long as they are actively involved in that area and will make a contribution there. I defy him to say where he will find people who are better involved and equipped to deal with it, but if he has them then let him add them to that board if that is what he wishes to do. Then he can say that this is a promise which he has delivered, and he must deliver some promises these days because there are so many promises that he is not delivering. He is already in difficulty in relation to his promise on the amendment to the Constitution as we saw here yesterday, and we have seen various others in the course of this budget.
It is sad that the Taoiseach takes that action. We will hear a great deal more about it in the House because the new Bill which he will have to propose must come in. As a matter of interest, the proposed poverty agency for which a memorandum had been prepared by the Coalition before we came in was totally involved. Everything that was requested in that poverty agency was included in the National Community Development Agency and that was done by the members of the Department on my behalf. I told them to take everything they wanted to give the organisation a little more power so that they could meet the future and take away the stigma of poverty from the title. A national community development agency would be a positive thing which would tackle the problems in a positive way and would have covered everything that the former Coalition and presumably the present Coalition have in mind. It is a sad day for Ireland when people can allow these cliches, rantings and ravings about the country to have such an impact in an area which should be taken seriously here in this House and which should be getting substantial cash assistance from the House.
Another aspect of this budget which is bad from the point of view of employment is the fact that we find that Córas Tráchtála Teo., the export development, are reduced by £1 million, roads and sanitary services are being cut by £18 million, the Housing Finance Agency and local authority housing are cut by £13 million and Government construction by £12 million, which gives a total reduction of £43 million in the construction industry. That industry, like agriculture, is one of the keys to our economy. If the construction industry slows down — the Minister, Deputy Kavanagh opposite, knows well the function of a construction industry in the economy — what can we expect with the reduction of £43 million investment in that industry? That can only lead to greater unemployment and greater depression for the many young people who want to participate in that industry and who are doing courses of one sort or another with AnCO, work experience and so on and who will be well ready to work in that area. That will cause more poverty and will take very seriously from all the efforts being made to improve the situation of the unemployed.
The budget contains many little mean things. Really they are disgraceful. How did the Government ever allow the reduction in the special marriage allowance in the first year of marriage? It was scandalous to allow whoever put it through to take away this little extra from the tax system for such couples. People with savings, pensioners and others were allowed £70, which is almost a joke anyway, and now that is being reduced to £50. A positive growth-oriented approach would be to do what is being done in Japan and elsewhere where bigger amounts are allowed and they are tied into national plans and programmes.
I remind the Deputy that he has approximately five minutes left.
Thank you, Sir. Now we look at the PRSI allowance. How did the Labour Party agree to the reduction of the £312 by £26 to £286 in the PRSI allowance? The basis of this allowance was an amount which was the equivalent of the pension contribution within the PRSI. If you work out the pension contribution and relate it across you find it is the equivalent of the £312. The Government have departed from the principle. It is not just a reduction of a little bit, it is the breaking of a principle that was involved. The principle was that those who were paying towards a pension through PRSI should be allowed to claim something on tax. Instead of that they were being given a direct allowance here of £312 which was the equivalent of what they were paying for the pension in PRSI. The Minister for Finance has whittled away at it and taken from it. That is another of the little things hidden within this budget.
The impact of VAT on the ordinary working man and on the poor in particular will be astronomical. Everybody at present is missing that point. It is not to say that we might not have had to increase VAT by some percentage, but when you hit the middle rate of VAT you are taking very substantial moneys from the normal family and house hold budget. The yield in a full year is £227 million. The impact of that in real terms on people at home, especially people with families, will be astronomical and will bring many more of these people on to the poverty line. The Minister for Finance says that the CPI will increase by 3.5 per cent and we have also 1.5 per cent from the January package and so a very big increase is building up, a direct increase. We all know that there is a knock-on effect but we never know exactly what the size of it will be.
Overall I think the Taoiseach was somewhat disappointed with the reaction of the Opposition to the budget he has presented, but if he listens to the commentators outside, no matter how you look at what they are saying, they are saying that basically this is a bad budget. It is bad for our economy and people. It does not provide for any growth, it is reducing investment by £220 million, it will not provide more jobs and it will reduce jobs which should be available and, therefore, will produce more unemployment. The Minister for Finance did not put a tooth in it on television last night. He made it quite clear that this is — I hate the word — a kind of Thatcherite budget aimed at getting the books right and let unemployment rise away. That is why this Government are making the extra £31 million available for more unemployed people. That is why our figure is now 187,000 and will be over 200,000 shortly. I am sorry to say that that is the kind of impact the budget will have.
Of course it could have been done in another way. It is a difficult time and difficult things must be done, but I am afraid that the Minister here has deflated the economy too much for our present circumstances and our very large young population. In that sense this budget is a grave disappointment and I believe it will be seen to be so. I ask the Taoiseach and his Ministers to bear in mind that they are now in Government. Let them get on with the job. I will be happy to see them doing so. We will give responsible opposition from this side of the House but they must get on with the job and they should ask to be judged by that and should not have all this PR sleight of hand trying to make it look as if somebody else is still in Government now.
In conclusion, I am disappointed particulary for the elderly, the widows, the social welfare beneficiaries generally but most of all for the many thousands of young people who in this budget can find no hope.
I have to make a few comments about Deputy Woods' contribution, after listening to him for the best part of the last hour. It is incumbent on any spokesman from the Opposition side, when speaking on this budget, to come in here to tell the House and the people exactly what their changes would have been if they were on this side of the House, given the fact that in the document The Way Forward they said the budget deficit would be reduced to £750 million and given the fact that their October Estimates were based on a total figure which was the equivalent of the same Estimates we introduced yesterday. If one takes those two elements of the economic approach to a budget then, undoubtedly, many of the harsh things that had to be done in yesterday's budget would have had to be done by them. I do not believe that people will just accept a criticism of each different change or reduction that one can find in the document and hammer them home here as something that would not have happened if they were sitting on this side of the House. I want to say to subsequent speakers for Fianna Fáil in this debate that they have the obligation to say how they would have carried out their task, with the constraints which they accepted at the general election, which was a welcome sign from the previous approach by Fianna Fáil to budgets in the past.
We have accepted the task in front of us. We have brought in a budget that attempts to tackle the serious economic problems facing the country. That entails difficult decisions. I am glad to say this is the third occasion that a Government I have been a part of have tried to bring reality into our economy. The Evening Herald of 2 February 1983 had two articles on the same page. One of those was written by Mr. Terry McCarthy, who said what he thought the budget was likely to be and the type of budget it would have to be in order to meet the challenges faced by the Government in trying to bring about a fiscal improvement in the state of the economy. He said:
Next Wednesday's budget will be one of the harshest, if not the harshest, in the history of the State. When the Minister for Finance, Mr. Alan Dukes, stands up in the Dáil to deliver the bad news, he will be presenting the first part of the bill to the public for several years of Government over-spending on borrowed money. There will be none of the customary "goodies to give away". Instead, he will begin the process of exacting payment for all the largesse distributed since 1977.
Mr. Terry McCarthy went on to say:
Previous budgets have relied heavily on foreign borrowing to avoid facing up to the harsh realities of the public finances. This time that course is not seen as an option and the figures illustrate why. In 1972 total Exchequer borrowing was a mere £130 million. In the past decade this has grown relentlessly to £1,945 million. As a result the State's annual payments to foreign bankers in interest payments alone now amount to £1,459 million which is equal to the total amount of all income tax paid.
This is the type of situation the Government saw when they came into office last December. It was seen by the Leader of the Opposition in 1980 when he became Taoiseach and everybody expected, after his television broadcast, that he would take action. He did not; he let the country drift on because he had other problems on his plate which were more pressing. This was the situation which Fianna Fáil, give them credit, outlined in their document The Way Forward as one which would have to be tackled and in their October Estimate they appeared to be taking the job in hand.
I say to the Opposition that they should not just come in here, pick out the warts there are in the budget and say they would have done something different or give the impression that something different could have been done, because they know that this type of action was needed now. In the same newspaper the highly respected economist, Mr. Joe Durkan, from the Economic and Social Research Institute said:
Public attitudes, especially those of well-organised pressure groups, are so unrealistic that the country is moving inexorably towards an economic "doomsday".
The doomsday Mr. Durkan speaks of is the day international bankers refuse to lend us any more money. He said:
If that happened it would mean that instead of being able to eliminate the budget deficit in an orderly planned fashion over four or five or even six years the country would be plunged into unimaginable chaos .... The cuts which will have to be made this year will be terrible. Next year it will be as bad. Wage increases of more than 5 per cent will make the doomsday scenario more likely.
People believe there are alternatives to the savage cuts the Government must make. There is no such alternative. Those are two respected gentlemen in their own fields speaking before the budget was brought in. They are accepted by the majority of people who are concerned about the way our economy has been moving.
The Labour Party recognised this when they decided to go into Coalition. They recognised there were twin problems which had to be tackled, the problem of unemployment and the budget finances. In the introduction to the document put before the special delegate conference in Limerick last December, which agreed to a Coalition Government, it was stated:
The unemployment situation with 170,000 unemployed——
We now have to adjust that figure to 187,000 unemployed because the trend, which was set by the previous administration, has continued inexorably up to that figure.
——50,000 of them under 25 years of age and the state of the public finances facing a new Government taking office at the end of 1982 are alarming. Both require firm and decisive action by such a Government. The dual task of halting and reversing the growth of unemployment, while phasing out the current budget deficit poses a greater challenge than any Irish Government has faced domestically since the early years of the State.
The Labour Party were quite aware of the task ahead of them. From the very beginning we, together with our partners in Government, have set about tackling those twin problems. The gravity of the unemployment situation cannot be overstated. The numbers currently out of work, the continuing high level of job losses and the particular problems facing young people seeking a start all represent a human tragedy which is not encompassed in the live register statistics. While this country is obviously affected by the world economic recession it has particular domestic characteristics which greatly exacerbate the problems of unemployment. Our economy has been mismanaged, our foreign debts are massive, our flexibility to cushion the worst effects of recession on our people has been severely curtailed. This situation has arisen through a total absence of proper economic and social planning. The economic strategies pursued in recent years have had at their core nothing more than the pursuit of the politics of popularity. The country, and particularly its young people, are paying a high price for the abdication of a central responsibility of Government in recent years.
There is only one way to reduce unemployment and that is through the creation of self-sustaining jobs which add in a real way to the wealth of the country. Such jobs only materialise in an environment of economic growth. That growth does not come about in a haphazard way. It results from proper economic planning and management. It reflects a concentration on producing those goods and services with greater efficiency and greater cost effectiveness than other countries with which we trade. We have strayed very far from those basics. It is only by reverting to them that we can make a real and lasting impact on our now huge unemployment problem. This Government, as agreed in their programme, propose to do that. The urgency of this task and the importance of its success is put into very sharp relief when we look at the age structure of our population and the numbers to leave the education system in the years ahead.
Ireland's population is growing at about four times the European Community average and the labour force at about twice that average. We have the youngest population in Europe, with 48 per cent under the age of 25 years. The number of school leavers has risen from 50,000 per annum in 1971 to 61,000 in 1981 and is likely to be in the region of 60,000 to 65,000 each year throughout this decade. The number of registered unemployed in the under 25 age group has doubled over the last three years and stood at 57,200 at end of January. A stock cant of many politicians in recent years has been to remind their audiences that our greatest national asset is our young, educated population. That population has in turn the right to expect that their aspirations to lead a worth-while life through contributing to the country's development be respected and given opportunities for realisation. Central to that is the right to real work and vocational opportunity.
During my last term as Minister for Labour I established the Youth Employment Agency. Though not yet a year in operation, I am satisfied that its advent is already having a positive effect in addressing the problems of youth unemployment. There is now better co-ordination of training, work experience and employment schemes for young people; a much greater emphasis is being placed on the particular problems of disadvantaged youth and the longer term unemployed and real progress has been made in assembling a more sophisticated data base than previously existed allowing for the more effective targeting of programmes. A constructive and co-operative relationship exists between the Youth Employment Agency and the direct sponsors of youth schemes.
This year the youth employment levy will yield £77 million as compared with £41 million since its application in April 1982. About 45,000 young people will participate in schemes which will be funded by the levy — the approximate equivalent of the numbers leaving school to join the work force and double the numbers previously catered for on youth schemes. The Youth Employment Agency are encouraging the creation of sustainable employment by community, youth and voluntary organisations. To advance this aspect they will shortly be initiating a youth development officer programme to assist such groups in devising and implementing projects to provide employment. The agency have also the facility to assist in the establishment of co-operative ventures which offer potential for job creation.
The work experience programme, which is financed from levy funds, aims at providing unemployed young people under 25 years of age with practical experience of working life. Since its inception in 1978 the number of participants who succeeded in obtaining employment has been relatively satisfactory and between 9,000 and 10,000 new entrants will spend 26 weeks on a work experience programme in 1983. I am aware that there has been some criticism recently alleging abuses of the scheme and these criticisms are being fully examined. My Department will be participating in a task force established by the Youth Employment Agency to examine the effects which schemes, like the work experience programme, have on the filling of permanent jobs.
The importance of adequate training for our workforce, particularly in recessionary times, is generally accepted. The placement rate of AnCO trainees, which is around 70 per cent, is a clear indication that people with the right skills and proper training have better prospects of obtaining jobs. In recognition of this the funds being made available to AnCO are being significantly increased this year and, with the additional grants available to it from the European Social Fund, AnCO will have a total budget of about £87 million in 1983. This compares with approximately £60 million in 1982. With these increased resources, more than 30,000 people will be trained this year, an increase of 25 per cent on 1982.
I am, of course, conscious of the argument that schemes of the kind I have referred to are relatively short-term in nature and, while they enhance the skills of participants and improve their chances of getting employment, they do not and cannot guarantee all a job on course completion. This must be accepted. The placement rates from the different programmes vary. They assist in facilitating job creation through giving young people training and experience of work and thereby making their recruitment more attractive to potential employers or by facilitating the minority with enterprising skills in creating their own job opportunities. General improvement in job opportunities of a lasting and real nature is dependent on an economy in growth rather than in decline. Only when that turnaround is effected can it be said with meaning that the spectre of unemployment is being tackled effectively. That process has now commenced.
The plight of the long-term unemployed is of particular concern to us all. In 1970 the number registered continuously as unemployed for more than a year accounted for 23.7 per cent of the live register total. By 1981 that proportion had increased to 31 per cent of the live register total. More than half of those who joined the live register in January were over the age of 25. The proportion of persons between the ages of 25 and 44 on the live register who might be classified as long-term unemployed is increasing. In my view, this is an urgent problem and one which merits intensive investigation. It is a problem which will require an innovative and imaginative approach to systems of training and retraining workers who are either unskilled or whose skills have become obsolete due to technological and social change. Long-term unemployment can destroy the morale of the individuals concerned and of their families. No effort will be spared by my Department in regard to the detailed research which is required to identify the proper means of dealing with this problem.
No one can be under any illusion that in the present economic difficulties industrial relations harmony is not of paramount importance. It is essential that the machinery available for the resolution of disputes, both at local and national level, should be utilised to its maximum capacity. Industrial harmony in the workplace is important for the protection of existing employment, the generation of new employment opportunities within firms and the maintenance and improvement of productivity levels. Our efforts to ensure the competitiveness of our products and to regain a competitive edge for our goods on foreign markets underline the importance of good industrial practices at local level.
I do not imagine that the maintenance of industrial peace will be an easy task in the year ahead. I am not suggesting that workers should bury their grievances or that management should be reticent in the exercise of its functions. What will be absolutely necessary though in the present economic climate is the exercise of sensitivity in day-to-day industrial matters.
In 1982, the estimated number of days lost due to industrial disputes was 349,000, which was 87,000 days fewer than in the previous year. It is my belief that greater sensitivity to issues relating to such areas as working conditions and non-pay items, a more flexible approach on the part of workers to management problems and decisions, more open discussion and the sharing of information between both sides in a dispute situation, would avoid many unnecessary and costly strikes.
In the current situation a heavy onus is placed on management, trade union officials and worker representatives to ensure that fair industrial practices are implemented and observed. This is important not only for the health and development of each individual enterprise but for the recovery of the economy as a whole. Where, despite the efforts of all concerned, agreement cannot be reached at local level I would encourage employers and trade unions to make full use of the range of institutions provided by the State to assist in finding a solution.
The Labour Court and its industrial relations service, the Rights Commissioner service and the Employment Appeals Tribunal incorporate between them a considerable degree of expertise. The record of these institutions is one of increasing success in the resolution of disputes which at an earlier stage appeared to the parties involved to be intractable or incapable of being equitably resolved. It is my earnest belief that if this process is observed a further and substantial reduction in the number of days lost through industrial action will take place in 1983.
At this point I feel it is appropriate for me to reaffirm my own policy in regard to industrial disputes. This policy was first outlined in this House in the debate on the supplementary budget in July 1981. In my view, direct intervention by the Minister for Labour in any dispute is counter-productive. Such action serves to undermine commitment to locally agreed procedures and to damage the status of the existing dispute-settling machinery. The function of the Minister in regard to industrial disputes is to encourage full use of the machinery available. My experience in office has confirmed my belief that this is the correct course. I am gratified to note that the policy which I initiated was adhered to by the previous administration during 1982. The effect of this policy is to strengthen and reinforce the confidence of the institutions which the State has provided to resolve dispute situations, a confidence which had been damaged by unwarranted ministerial intervention in the past.
I want now to refer to a phenomenon which has been increasing in its occurrence in recent years. This relates to the difficult and sensitive area of recourse to the civil courts for a remedy in the face of alleged illegal industrial action. I intend to raise this question of ex-parte injunctions and the procedures involved with the employer and trade union representatives in the forthcoming discussions with a view to determining what legislative action may be appropriate in the circumstances. The Report of the Commission of Inquiry on Industrial Relations took the view that such injunctions are granted on the same basis and according to similar criteria in other branches of the law.
Without prejudice to the talks which will take place with the employers and trade unions, it is my considered view that recourse to common law in an industrial relations dispute situation may often have unfortunate repercussions for both the employers and trade unions involved and may ultimately, in a broader perspective, damage the fabric of our industrial relations system. On the other hand, illegal forms of industrial action can never be condoned and it is the special responsibility of trade unions to ensure that the provisions of the law are complied with.
In the longer-term we must look to a comprehensive overhaul of our industrial relations structures and procedures and a legislative programme which will complement the strength of our industrial relations system whilst eliminating many of its inherent defects and weaknesses, will be put forward. Free collective bargaining is central to our industrial relations system and it is in this context that proposals for improvements in that system must be examined.
It is my intention to meet with both sides of industry in the near future to discuss industrial relations generally and to examine the scope which exists for improvement. I would visualise that these discussions will have regard to the recommendations of the report of the Commission of Inquiry on Industrial relations. It is obvious that several adjustments could be made which would increase further the efficiency and effectiveness of our institutions. It is expected that from the discussions with the employers and Trade unions an agreed and accepted programme for reform will emerge involving legislative review and change where necessary, which will have a lasting and beneficial effect on the operation of our industrial relations system. I look forward to the full co-operation of both sides of industry in this important task in the promotion of new laws and the amendment of existing legislation.
Considerable progress was made in regard to labour legislation in the past decade, particularly in the mid-seventies. During my previous period as Minister for Labour I initiated a comprehensive review of several major pieces of social legislation — The Anti-Discrimination (Pay) Act, 1974, Protection of Young Persons (Employment) Act, 1977, Unfair Dismissals Act, 1977, and the Employment Equality Act, 1977. The purpose of the review was to correct some problems which had arisen in the operation of this legislation in consultation with the relevant agencies and authorities.
From a preliminary examination of the equality legislation, I can say that a further substantial piece of amending legislation will be called for, particularly in regard to administration and enforcement procedures.
The thrust of our efforts is to guarantee equality of access to employment and training for women. In the period since the equality legislation was enacted a great deal of progress has been made. Women, employers and trade unions have become more aware of their rights and duties under the legislation. Despite the increased awareness, there has been criticism that the legislation has primarily been of benefit to women who belong to the higher socio-economic groups whilst barely scratching the surface of discrimination in other sectors. While our legislation compares favourably with the provisions enacted in other countries, revision is necessary to ensure that the remaining gaps in equality of pay, conditions and opportunity are bridged and that women are not only made fully aware of their rights and entitlements, but are not deterred from seeking them because of procedural defects in the present law.
The Unfair Dismissals Act, 1977, has been one of the most significant pieces of labour legislation ever enacted. For instance, the number of cases decided by the Employment Appeals Tribunal increased from 151 in 1978 to 754 in 1980 and is still rising. The Act has undoubtedly had an important effect on the number of cases of industrial action arising out of dismissals. The legislation is not without its defects, however, and the opinions of both sides of industry have been sought as to where adjustments should be made to increase the operational efficiency of the Statute. I expect to be in a position to bring amending provisions before the Dáil in the near future.
The 1977 Worker Participation (State Enterprises) Act provided for the involvement of workers in all the affairs discussed at board meetings of seven State companies and gave them the potential for having a real say in fashioning policies adopted. Many pronouncements have been made in the meantime expressing the intention of extending the scope of that Act. To date, unfortunately, no material progress has been made. I indicated, when last in the Department of Labour, that I proposed to extend the scope of worker participation in State companies and thereby encourage private enterprises to reassess the benefits, at first hand, of worker involvement in the affairs of their companies, both at board level and below.
A study commissioned by the European Foundation for the Improvement of Living and Working Conditions, and undertaken by the Irish Productivity Centre, has assessed the impact of the 1977 Act on the State companies to which it currently applies. The findings of that study have clearly demonstrated that the provision of formal structures to facilitate greater worker involvement in the activities of their own companies has provided very real and tangible benefits to the companies themselves, the worker directors and the general work force involved.
Worker participation is sometimes viewed with suspicion by management and it is easy to advance hypothetical reservations against new departures. The reality is, however, that workers have a unique contribution to make towards the betterment of their enterprises, that their involvement has been demonstrated conclusively to have beneficial effects on the companies' industrial relations climate and that it facilitates increased commitment and improved productivity. In these areas there is clearly room for improvement, and the adoption of measures to bring it about, not only in the State sector but throughout Irish industry, must now be given a greater priority than has applied since 1977.
I intend to assess what additional State enterprises should be brought within the ambit of the Worker Participation Act. In selecting those to be included I will have regard to the type of activity being undertaken by companies, to the climate of industrial harmony which currently exists in them and to the potential for improvements through the introduction of worker directors to participate on their boards.
In addition to legislative provision for worker involvement at board level, I would strongly encourage both State and private undertakings to seriously examine the potential benefits of adopting a more open and a more equitable approach to the involvement of their workers in making decisions which will ultimately affect their lives and that of their families. In making advances in this area I will require the support and co-operation of both sides of industry and I look forward to having that co-operation in bringing about an improved climate of co-operation and involvement to the benefit of all.
Deputies will be aware of the proposal of the EEC Commission, commonly known as the Vredeling Directive, to provide for information disclosure to workers employed in multinational companies. The central thrust of the initiative was to secure procedures to ensure that employees of such companies were made aware of developments which had obvious potential for affecting their working conditions and employment prospects. Past experience of multinationals and other companies with complex structures has pointed up the real difficulties for work forces employed in subsidiaries and divorced, often geographically as well as in management terms, from the parent plant where the central decisions are made. In this country we can readily point to examples of the disastrous effects of not only not keeping the work force of the subsidiaries of multinationals informed of developments in the overall affairs of their group, but also of neglecting to take national Governments into their confidence even where high levels of State subvention is involved. Against this background I was alarmed at the approach of Irish MEPs, other than Labour Party MEPs, when the Vredeling proposal was recently discussed in the European Parliament. Only Labour Party MEPs supported the provisions of the Vredeling Directive in the Parliament in co-operation with the Socialist Group there.
The outcome of the European Parliament discussions on the proposal has been to fundamentally weaken what was at the outset a fairly mild Commission proposal. The position is currently being assessed by the Commissioner responsible, Mr. Ivor Richard, and revised proposals will be made to the Council of Social Affairs Ministers, on which I will be representing the Irish Government, in the near future. In the course of those discussions I intend, while appreciating the necessity to protect certain essential tenets of business life such as ensuring the confidentiality of product intelligence, to support the adoption of a Community instrument which is meaningful and beneficial not only to the workers employed in subsidiaries of multinationals but, if objectively assessed, to their employers also.
In conclusion, I would like to say that the Labour Party, as a participant in this Government, are well aware that this budget requires sacrifices from the community as a whole. We have sought, in redressing the very grave economic ills which exist as a result of the profligate policies of previous Fianna Fáil administrations, to give due regard to the plight of those who are among the most disadvantaged in our community, by tackling the basic economic problems which require, as agreed in our Programme for Government, the elimination of the current budget deficit and the reduction of foreign borrowing. We will place the economy in a stable position in which it will be possible to reap the benefits of the upturn in the world economy which, as has been predicted by the IMF, should commence at the end of 1983.
In spite of the difficult decisions which had to be made in the course of the formulation of this budget, I am satisfied that the Labour Party's participation in Government ensures that the interests of the less well off in our society will be protected. I am satisfied that at last an Irish Government are facing up to the economic concerns and problems which confront them and which were neglected by their predecessors. What is more, the Labour Party in Government will continue to ensure that in the process of correcting our economic deficiencies those who have the least capacity to cope will not be allowed to suffer undue hardship.
On a point of information——
No, Deputy, I do not want to appear — I do not like to use the word "smart"— but I do not think there is any such point as a point of information.
On a point of order, on Tuesday, on Question No. 11 I was refused information on the grounds that it would be contrary to established practice to give it. Yet, on Question No. 303 for written reply similar information was requested and was received.
Deputy, first of all, I am at a disadvantage in that I do not know what Question No. 11 is about but, secondly, the Chair has no control over how questions are answered and what information is given. If the Deputy would like to come and make any point to me in my office I will discuss it with him but it is not practical to discuss it here.
I appreciate that, Sir, and I will call to your office.