Deputy O'Dea has fifty-nine minutes.
Financial Resolutions, 1983. - Financial Resolution No. 14: General (Resumed).
Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance).
Much media comment on the budget over the weekend seemed to concentrate on the performance of the Minister for Finance on television and in the House. Terms such as "professional", "competent", "cool", and "even handed" were used. I hope this House is not concerned with the Minister's demeanour or performance on television. The House and the country are concerned whether what the Minister has done in the budget is suitable in our economic and social circumstances.
I am not one to engage in adversarial politics and I said so in my maiden speech last March. I criticised members of the Opposition coming in merely to criticise Government measures and Government backbenchers coming in to praise measures which they do not in their hearts support. However, having examined the budget in as cool and rational a fashion as I can, I am driven to the conclusion that it is nothing short of a catastrophe.
Mention has been made by Deputy Gene Fitzgerald and others of the ultimate effect this budget will have on the political fortunes of the Labour Party. On every occasion in Irish political history since 1922 that a Coalition Government have run the economy into the ground, one or other of the Coalition parties has suffered at the subsequent election. In 1977 it was the Fine Gael Party which lost seats. On this occasion, due to the massive reorganisation of Fine Gael, the Labour Party will be the losers.
Mr. Joe Higgins of the administrative council of the Labour Party was quoted in one of the weekend newspapers as saying that the draconian penalisation of the PAYE workers and working people in general makes it imperative that Labour break from this Coalition rather than be seen to support such measures. There is the authentic voice of the Labour movement, a movement which is becoming increasingly isolated and remote from the Parliamentary Labour Party.
An editorial last Friday in a national newspaper which is no friend of ours——
Is any newspaper these days?
I did not come into this House to interrupt Deputy Kelly and I ask him to have the manners not to interrupt me.
The following is the quotation:
The Labour Party have been outplayed comprehensively at the budgetary game. Now he [the leader of the Labour Party] and his party are landed with a Fine Gael Budget which they are forced to support. Labour will spend a long time recovering from the effects on its popularity.
I am not going to engage in theatrical gestures asking the Parliamentary Labour Party to support us in the lobbies because I know they will not. Their minds are made up but it is no harm to point out to them the electoral consequences of what they are doing.
I find it impossible to ascertain precisely what the Minister is trying to achieve in the budget. It could be described as a budget of lost opportunities. It does not tackle unemployment or purport to deal with inflation. It has attempted to further deflate an economy which is already flattened. The Minister for Finance told us that last year's deficit was £988 million and that the opening deficit for this year was £956 million with a closing deficit of £897 million. That means a reduction in the deficit of £59 million, a small saving when one considers the almost unbelievable amount of punishment that is being visited on the Irish taxpayer. I should like to remind the Minister for Finance that the reduction of budget deficits is not and cannot be an end in itself.
The twin economic evils which have beset this country are inflation and unemployment. I cannot find anything in the budget that purports to tackle the problem of inflation. In fact, there is much in it that will exacerbate and increase that problem. The CPI will be increased directly by the increase in VAT and indirect taxation generally. The increased rates of tax on wages will give rise to higher wage demands which will, inevitably, give a further twist to the inflationary spiral. In addition, the present unemployment situation will be further aggravated and the Minister has admitted that. The increase in inflation which will result will lead to a decline in competitiveness and that will make it more difficult for Irish manufacturers and producers to sell their goods at home and abroad. That will lead to an increase in unemployment. The increases in VAT will have their own effects on various industries such as the hotel and catering industry and tourism in general. The general increase in tax levels means that consumers will have less money for discretionary expenditure. Consequently, demand for goods and services of all sorts by consumers will drop.
The increase in unemployment to which this will give rise will mean that there will be less money available to the Government for expenditure on employment creation projects. The stated objective of the Minister for Finance to reduce the budget deficit will be achieved only in the short term because the increase in unemployment that will result from his economic proposals will ensure that the draw on the public finances will be aggravated in 12 months' time. Indeed I can foresee unemployment rising to a level where the stability of society will be seriously threatened. In my opinion the Minister should have looked closer at the question of public spending and tax incentives. The problem with regard to Irish Governments in the last ten years is not that they under-taxed the community but that they have over-spent. In the budget the Minister has relied too much on increasing taxes and too little on reducing or controlling expenditure.
I should like to give two examples of Government expenditure that have not in the last 20 years been properly controlled or monitored. In the 1983 public capital programme the Minister missed the point because the return expected from the expenditure incurred will be derisory. The Minister reduced the IDA building programme by £2 million out of a budget of £45 million but at the end of 1982 the IDA held two million square feet of advance factories and planned to add 800,000 square feet more to that. It is difficult to see why the entire programme was not cancelled or at least delayed until the backlog was eliminated. The 4 per cent reduction is only a small gesture.
I find it difficult to understand why the Minister is standing over the proposal to spend an estimated £129 million on extra electricity generating capacity when the present electricity generating capacity is 62 per cent over the peak demand. It is also difficult to understand why the Minister, and former Ministers for Finance, continue to pulversise the Irish taxpayer to feed white elephants. Indeed, not one single white elephant lost one minute's sleep over the budget. The public capital programme has been responsible for the bulk of the borrowings which now take up the entire yield from income tax. In neglecting to seriously examine this and the Government guaranteed borrowings for white elephants, the Minister has had no option but to further punish the people who contribute to the Exchequer by way of taxation. I look forward to the day when we have a Minister for Finance, irrespective of the party he represents, who will honestly and constructively look at the inefficiency in the public capital programme and the guaranteed borrowings of State companies.
We have the highest investment in the public capital programme of any OECD country and the worst investment performance. Inevitably, that leads to savage budgets with taxpayers being robbed to sustain white elephants. Another area of Government spending to which I should like to advert is the health service. It is a cruel paradox that we spend more of our Gross National Product on health services and provide less comprehensive care and coverage than other countries that spend less. That paradox will have to be examined seriously and quickly in view of our economic situation. There is ample evidence to show a misplaced emphasis on hospital and community care. In the last two weeks a senior executive officer of the largest health board in the country said there was little accountability for the large sums spent on voluntary hospitals. There seems to be insufficient information available for us to engage in a rational analysis of the wastage that is occurring in this area.
I have spoken to many people about that matter and I have come to the conclusion that as far as the voluntary hospitals are concerned there are too many hospital beds that are over-used or inefficiently used. There is enormous wastage at every level of our health service which our present monitoring systems have either failed to reveal or revealed inadequately.
The Minister for Health spoke on the budget in the House this morning. I listened carefully to his contribution. I want to tell him that the expenditure on the health services for which his Department are responsible is very bad value for money. The Minister for Finance has taken a great deal of money out of the economy. I contend that he should have done so by looking at Government expenditure. He decided to do it by increasing taxation. Regardless of how he did it, he has failed to encourage anybody to put any money back into the economy.
Various interested bodies such as the Confederation of Irish Industry and the Construction Industry Federation made recommendations to the Minister for changes in the tax laws to give people incentives to invest in the economy and to replace the money the Minister was taking out of it. Not one of those appears in the Budget Statement. If the Government have not got the imagination to formulate incentives for people to invest in our economy they should have the good grace to accept suggestions other people made to them.
There is one aspect of the budget to which I want to refer briefly, that is, the family income supplement. The Minister stated on a number of occasions that the main reason for the introduction of a family income supplement was to overcome the problem where people on low incomes have to pay tax and PRSI and end up almost as badly off or worse off than people on welfare of all sorts. To encourage people to go out to work rather than stay at home and draw welfare, the Minister announced that he is introducing a family income supplement estimated to cost £5 million in the current year.
The previous Fine Gael Minister for Finance, Deputy Bruton, intended to tax short term social welfare benefits to increase the gap between people working in low paid employment and people on welfare. The present Minister baulked at that and decided to reduce the benefits rather than taxing them. This is directly contrary to the proposals made by the Commission on Income Taxation that all income from whatever source should be taxable. I want to make a suggestion to the Minister which would tackle the problem without the necessity to introduce a family income supplement.
In my constituency of Limerick city we have a large number of corporation houses which are extremely badly maintained. We have problems with parks, roadways and footpaths and the Corporation tell us they cannot do this work because they have not got the workmen. Why not ask able-bodied people who are on welfare to contribute a few days a week to the community in some type of public works programme, or at least to assist the local authorities in doing what they are there to do, such as repairing corporation houses, cutting grass, keeping the roads clean, and so on. This would restore their dignity to people who do not wish to be unemployed. It would discourage people who prefer to stay at home and draw social welfare benefits rather than work. It would also have a therapeutic effect. It is said that when people have been idle for a certain length of time they lose the will and the inclination to work.
I want to refer to various individual measures in the budget. On the income tax front there has been no widening of the tax bands. Tax rates remain the same apart from the additional top rate of 65 per cent. Tax free allowances have not been increased. The Minister said the Government intended next year to substitute a system of tax credits along the lines proposed by the former Minister, Deputy Bruton, and to replace the present system of personal allowances. The introduction of tax credits involves a fundamental change in concept. Instead of the taxpayer being seen to be entitled to a certain amount of money tax free, the Government will decide what he should get back by way of tax credits. They will take the money and give it back to him by way of tax credits. There is a danger that if tax rates and the present structure of tax bands remains the same over the next one or two years, the average taxpayer will be handing over 65 per cent or 75 per cent or 80 per cent — at one point in the United Kingdom the top rate went as far as 98 per cent — or anything up to 100 per cent of his income to the Government and getting back whatever they choose to give him by way of tax credits.
Various proposals for tax reforms were suggested in the very comprehensive report of the Commission on Income Taxation. When Deputy Bruton was Minister for Finance he intended to implement some of them in the budget which was defeated in the House. One which springs to mind immediately was the proposal to tax the self-employed and PAYE taxpayers in the same financial year — in other words, to replace the preceding year basis of taxation for the self-employed. There were a number of others mainly in relation to interest.
The Minister, Deputy Dukes, told us it was impossible for him to introduce those measures this year because they need greater study. When Deputy Bruton was Minister 15 months ago he intended to introduce them. If they did not require greater study 15 months ago, why do they need greater study today? Is the Minister suggesting that his predecessor, Deputy Bruton, was introducing those measures without proper consideration?
There is no attempt in the budget to spread the burden of taxation more widely. There is hardly a word in the Minister's long statement about capital taxation. Consequently this Government deserve no marks for making Ireland a fairer place in which to live. The effect of escalating tax rates, particularly on those on the middle income groups, has been to bring about a general change in work attitudes and work practices in the past few years. Everybody seems to agree that the middle income groups should bear the greatest proportion of the burden of increased taxation. It is my contention that the point of diminishing returns has now been passed. It must be borne in mind that all countries are heavily dependent on the middle section of the work force with regard to the whole question of wealth creation.
The Minister also proposes to bring all farmers into the tax net. Broadly speaking, this is in line with the proposals of the Commission on Income Taxation. I agree with the proposals but we must try to avoid a situation where a farmer is not liable for income tax but has to pay an accountant an exorbitant sum of money to prove this to the Revenue Commissioners. I recall when the rateable valuation for tax purposes for farmers was brought down from £50 to £40 the then Minister announced a simplified accounts system for small farmers between £40 and £50 rateable valuation. In several cases the Revenue Commissioners refused to accept those simplified accounts forms which had been completed by the farmers to avoid the cost of going to an accountant. They demanded items such as balance sheets, opening capital statements, etc., which could only be produced by an accountant. The Minister has announced that he is studying the question of introducing simplified accounts forms for what he described as smaller farmers, although he did not define who these are. I hope he will define who they are and that the Revenue Commissioners will accept accounts forms which are going to be prepared for distribution to those farmers.
The major effect in terms of revenue yield from this change will be from part-time farmers who are also working in the PAYE sector and whose rateable valuation is below £20. Any farmer whose rateable valuation is in excess of that sum is contributing to the Exchequer because his personal allowances are reduced. The effect on people in the PAYE sector who also have small farms below £20 rateable valuation means they will be paying income tax at the top rate on their farming income without the benefit of any personal allowances. The Government should ensure that part-time farming is not made so unattractive because of this that a fundamental change in community structures in rural areas will occur.
The mortgage relief in the case of married people has been reduced from £4,800 to £4,000 per annum and in the case of a single person it is reduced from £2,400 to £2,000 per annum. Has any account been taken of the effect this will have on the building industry, coupled with other budgetary measures such as the increase in VAT?
The Minister also announced his intention to increase the levy at present paid by banks. It is not a tax on income, it is a levy on bank profits. It was the previous Government who introduced this bank levy initially. I did not agree with it and I said so privately and publicly in this House last March. To increase the bank levy is only going to increase the problem to which I adverted on that occasion. Because of the need to maintain a liquidity ratio between what the banks retain and what they are allowed to lend to the community, the amount of money available for lending to industry is going to be reduced by a huge amount. I do not have the figures but the reduction is very substantial. This will further exacerbate the employment situation.
The Minister has also announced his intention to introduce a property tax. This is the Labour Party's only discernible input into the budget and it is strange that it remains so vague and ill-defined. There are other forms of wealth, apart from house property, which are not singled out for capital taxation or for the imposition of a levy of 1½ per cent every year. It is difficult to see why house property is the one form of wealth to be singled out. It is possible that the proposal to impose this tax, when it appears in the Finance Bill, may be unconstitutional. Various questions have been raised about it but none of them has been answered yet to anybody's satisfaction. However, I will reserve my position until it appears in the Finance Bill.
One other aspect of the property tax which has not been adverted to is the need that will be imposed on taxpayers to get a professional evaluation of their property because the tax will depend on the value of the property and, in many cases, whether tax is to be paid will depend on the value of the property. The association of valuers estimate that an average professional valuation will cost anything from £120 to £130 plus 23 per cent VAT. This is a situation where the burden on the taxpayer, like the small farmer who will be brought into the tax net for the first time, is going to be increased without any yield to the Exchequer. This cost of professional valuation is a parasitic cost on the taxpayer. It will not yield any revenue to the Exchequer, it is something a householder will be forced to do because of the property tax. The Minister made no reference to indexation for inflation when introducing the property tax. Therefore, in a very short time, if inflation rates continue as they are, the average house will be subject to a property tax. This is tantamount to the re-introduction of rates.
The Minister has also announced proposals to introduce advance corporation tax. The Cement Roadstone Company will be very severely hit by this when they pay their next dividends. Due to the availability of tax relief, some companies do not pay enough corporation tax to cover tax credits. As I understand it, that is why advance corporation tax is being introduced. Apparently, although the Minister does not spell it out clearly, advance corporation tax will be equal to the tax credits attaching to the distributions made by a company in an accounting period, less the amount of the tax credits attaching to any distribution received by the company during that accounting period. All commentators agree that the overall effect of advance corporation tax will be further to reduce corporate liquidity. It is not the company which is in a break-even situation or the company which makes a loss which is going to be penalised, it is the company which makes a profit. The person who is going to be most severely penalised is the shareholder who invested money in the company that makes a profit, a positive disincentive to investment at a time when the Minister is taking substantial sums of money out of the economy.
The budget only purports to tackle one of the country's economic difficulties, the high State borrowing requirement, whilst it ignores all the others. I accept it was necessary to achieve a better balance in the State finances but there is no doubt that it could have been achieved in other ways which would have had a lesser impact on employment, output and inflation. It could have been done in a more sensitive and imaginative manner which would not have damaged the economy to the extent that this budget is inevitably going to do. The budget is too harsh in all the wrong areas. Any beneficial effect on the State's finances will be more than outweighed by the effect on the country's overall economic performance and on personal and corporate confidence. This budget was deliberately and unashamedly constructed to balance the country's books. There was no attempt, or even an indication of an attempt, to reverse the downward spiral of the economy.
I listened with care to most of Deputy O'Dea's speech and I want to make one or two points arising from what he said before he sat down. He said in a tone, temperate enough in terms of decibels but certainly in a scolding tone as will be evident when the speech is printed in the Official Report, that the budget was "deliberately and unashamedly constructed to balance the country's books".
Surely we have arrived at a curious stage in national affairs when it appears to be a matter of shame for a Government to balance the books? I am not saying anything very much out of the way — perhaps it is something that the Deputy in his heart would agree with me about — when I say that the reason we are in such difficulties this year, as we were last year and as we will be next year, is because all attempt to balance the country's books was abandoned, thrown to the winds, during the past ten years. I do not want to engage in adversarial politics any more than the Deputy did, but I must say that I believe a genuine attempt was made in Liam Cosgrave's time, when Richie Ryan was Minister for Finance, to apply the brakes in difficult circumstances. Deputy Bruton made an attempt; and I think in the dying days of the last Fianna Fáil administration an attempt was also made. However, the tendency generally in the past ten or 11 years was not to bother about the books, to show "compassion"— what Deputy Haughey is so strong on — to show a warm heart and to give the soft answer.
That short-term softness is fine for cheap, instant, easily-bought popularity, a quick by-election in one's pocket, but it is bought at the expense of the coming years and future generations. What is wrong with this country — I believe that in his heart Deputy O'Dea will agree with me — is not only that as individuals we want our neighbours to pay for us, but that as a nation we want our posterity to pay for us. As a nation we do not want to pay for ourselves year by year. We want the next decade or even possibly the next century to be stuck with the bill. We refuse to pay for the services we take for granted. We refuse to meet the real cost of the things we demand in health, education, infrastructure and services of all kinds. We borrow; and what that really means is that we are expecting the next generation to pay. We will not feed the monster we have created, so we are allowing it to eat up the hopes and prospects of our children and grandchildren. I call that wicked.
There may be some excuse for a small budget deficit, even on current account, provided it is a once-off operation for which there is some visible reason. The first of the current budget deficits in 1972 was small and venial, and perhaps the same was true in 1973 but most certainly it was not true after the first shock of the oil crisis had subsided and 1977 had arrived. What happened thereafter was that, instead of reining in expenditure at a time when the economy was growing at two or three times the average European rate, Professor O'Donoghue, in the course of his lifelong career to do down Deputy Haughey — both of them now well beyond the reach of ordinary reason and proportion in their approach to political life — advised Fianna Fáil — and his advice was eagerly gobbled up — that the "imaginative", "compassionate" and electorally sucessful way to manage the economy was to spend; to borrow; and to spend and borrow again. This was at a time when every economic commentator — little though they might be disposed to agree with one another or even to like one another — was unanimous that this was the reverse of what was required.
The books remained unbalanced and they got worse. Deputy Haughey's campaign and conspiracy to dig a trench for Deputy Lynch, to push him into it and to cover over the trench finally succeeded in 1979. He made his "state of the nation" appeal on television in 1980 and spoke about the need to moderate expenditure, but he did the opposite.
I do not mean to direct those remarks, which I know I am uttering in a scolding manner, to Deputy O'Dea personally, for whom, like most people on this side, I have a regard. I know he speaks his mind and does not look over his shoulder when he is speaking. Therefore, I tend to believe him and I listen seriously to him even when he says things that are critical of my side. I am sure he will agree that the very thing he apparently was castigating in his final sentence, namely, what he called the "deliberate and unashamed attempt to balance the books", is what might have saved the economy from the present rigours had it been indulged in by the Fianna Fáil Government. While I could not fault much of what he said, he was on a wrong and perverse angle when he advanced that final point.
I must observe also — I do not mean this in respect of Deputy O'Dea particularly but in respect of the contributions so far from the other side — that there is a dreadful degree of confusion. The Deputies on the other side do not seem to know exactly what they want between one side of their party and another, between one end of a speech and another, between one election and another. Deputy O'Dea said he deplored the absence of any serious reference to capital taxation in the Budget Statement of the Minister for Finance apart from the residential property tax. Incidentally, in regard to this I largely share his reservations but I will come back to that. He deplored in general the absence of a reference to capital taxation. I tried to take down what he said, and he seemed to say that this absence of a reference to capital taxation means no move towards making Ireland a place in which one would want to live.
A fairer place to live in.
I will not disagree very much with the Deputy about that. I have always supported the idea of a wealth tax, even at a time when nobody else in my party was willing to do so. Everyone was still smarting after the electoral rebuff in 1977 when that proposal cost us at least six seats. However, I will point out to Deputy O'Dea that that is not the view of the rest of his party, or certainly it was not their view in 1975, 1976 and 1977. Their view was that an economy in the condition of adolescence such as ours needed the injection of wealth. It needed wealth in every shape and form even if some of it was conspicuously displayed in a socially provocative manner. It needed wealth, and the more the better. That was the view of Deputy Colley, at least if he meant what he said, and it was the view of Deputy Vivion de Valera and of Deputy Tom Fitzpatrick who were the three Fianna Fáil Deputies who sustained the greater part of the debates on wealth tax. It was also the view of Deputy O'Malley, Deputy Haughey, Deputy Lynch and all the rest of them.
I hope that a consensus may emerge in this country that would certainly stop far short of any socialist ideology—on the lines that people must apologise for having done well in life, that there is something to be ashamed of in having made a bit of money—but would equally recognise that people to whom God has given enough of what it takes to get that distance owe something, even if only a small sliver of their substance, in social justice towards people to whom God has not given what it takes to make a bit of money. That seems to be an unarguable proposition, but Deputy O'Dea is the first person from that side whom I have heard saying something which appeared to suggest that he shares it and believes in it. Certainly it is not, when we are able to observe it, the view of his party as a whole.
Deputy Haughey spoke as soon as the Minister for Finance had finished last Wednesday. I make every allowance for the fact that a Deputy following a Budget Statement which he has not had a chance to think about is somewhat at a disadvantage. On the other hand, I can see quite clearly from Deputy Haughey's speech —I suppose I would do the same myself—that he had prepared a good deal of it in advance and was going to say it no matter what the budget contained. However, I cannot help observing that for a man who is given a certain amount of credit for being a financial wizard—a wizard who does strange things with his box of tricks—confusion runs right through his speech. For example, he deplores the fact that the Minister's Budget Statement envisaged a deficit which was almost £150 million more than the £750 million which Fianna Fáil had proposed. Almost in the same breath he deplores that no provision is made for public service pay. If the Minister was going to make provision for public service pay—which he did not, it is true—over and above his £897 million deficit he certainly would have been further away from the £750 million to which the Fianna Fáil Party in their last document were committed, but what then would have had to be done to bridge the gap? It could have been bridged by borrowing; but Deputy Haughey in the course of his speech, had some very hard words to say about borrowing. That will come as a surprise, but Deputy Haughey seems to have decided that borrowing is a bad thing and must be cut back, pruned.
How then could that gap have been bridged? Would it not have been that much harder to bridge, had provision been made for an increase in public service pay? "Heavy extra impositions on working families" are also deplored by the Leader of Deputy O'Dea's party. How can he deplore heavy impositions in one breath, and in the next breath repeatedly deplore that the budget deficit is being phased out more slowly than his party had proposed? That does not make sense, unless he has proposals of a concrete kind for very ruthless cuts in public expenditure. I do not know where these cuts in public expenditure can be made.
Deputy O'Dea made some effort to point to areas where in a general way it is possible to say that we are not getting value for money and he instanced the health services. Perhaps he and most Deputies in this House know more about the way the health services function than I do, and I am willing to assume that he is right in what he says about not getting value for the immense investment of public funds. It is all very well to say that, but it is quite a different thing, as he will discover when he finds himself sitting at a Government table, to decide where exactly and how exactly they are going to make a cut. He mentioned a fairly heavy item of investment for extra electricity capacity. I agree that the ESB appear to have at the moment virtually excess capacity, but I take it for granted that that allocation for electricity capacity is related to long-term commitments which have already been entered into, one of them in relation to a plant not very far from his constituency. It is not reasonable, in a case of a really major undertaking such as that, for all work to stop and the flow of money to cease, because that in the end would cost more. Whether it was advisable in the first place to commit oneself to such expansion is quite a separate matter and that could be asked about a number of things. In the case of the coal-burning ESB capacity I think it is advisable. At any rate, it is one thing to talk about phasing out the budget deficit even when, as Deputy Haughey unquestionably is, one is disqualified by one's own past performance from being too up-stage about other people's failures in that regard. It is one thing to talk about it and quite another thing to do it.
During the time of the last National Coalition Government I remember two or three separate gruelling periods when we sat around the table for days on end trying to prune Estimates. I used to become exasperated, impatient and depressed at the sight of Ministers agonising for maybe 20 minutes over saving £50,000 here and £100,000 there, peanuts in national terms, when really the growth of the public service and that alone was the enormous tree or plant or growth, so to speak, which was depriving everything else of light and air. In other words, we—and every Government when they make cuts—were obliged to do small, teasing, annoying things which were painful to those on the receiving end, but no Government seem able to lay the axe to the root of what really is choking us, namely, the apparently unstoppable growth in the public sector. I missed any reference to that in Deputy O'Dea's speech. Maybe other members of his party whom I did not hear have said something about it. It requires not just mention but a sustained public uproar. An isolated outcry is not enough. We will have to have a sustained public uproar about the size of the public sector, and we will never get our finances right until that happens.
I know that people who have vested interests in the industrial relations side of the public sector will be saying that I have added myself to the ranks of the people described by Mr. John Carroll the other day as carrying out a sustained onslaught on those he represented. No one is carrying out an onslaught on any individual or collection of individuals. I am not pointing, and could not point, any finger at any individual or collection of individuals. All I am saying is that looked at globally the phenomenon of public sector growth here is something that we cannot shut our eyes to. We are foostering around pulling weeds here and there at the foot of this tree which is choking the life out of everything all round it.
Let me give an example which I gave last night at a meeting of a professional association. In January 1973, the year I entered the Dáil, there were a little over 40,000 people in the civil service strictly so called, the non-industrial civil service. In January of this year there were 60,500. The State has been here for 60 years; and in ten years the public service has put on 50 per cent in weight. Where is the justification for that? There have been parallel developments, not necessarily in the same percentages, in the health boards, local government and so forth. Where is the justification for an extra 20,000 strictly-so-called civil servants over the last ten years? This is not the age of the quill pen and the Dickensian high stool and desk. This is the age of the electronic revolution which is going to make it possible for banks, insurance companies and every other form of service to shed employment on all sides. I am not advocating shedding employment out of coldness of heart. On the contrary, it is the false warmth, the cheap compassion, the reach-me-down heart-on-the-sleeve of the Fianna Fáil Front Bench which says that "Musha, we should throw out another few £ million here and there to give a few jobs to these and those."
That is what is depriving the children still to come, the unborn that we are supposed to be concerned about, of any hope of a job. We are going to leave them with a millstone around their necks when they are born. They have a right to be born certainly, but they have a right also to be born with a better legacy and inheritance than the debts which we have built up because we have refused to pay our way. That is what is facing them, and the false soft-heartedness of the kind of people whose attitude is, "Musha, throw out another few £ million" is at the bottom of that. A large part of it is focused in the absolutely uncontrolled growth of the public sector, "Jobs, at any price." It is not simply a question of paying public sector salaries. Every extra section and every enlarged section of civil servants have to be housed. As a rule they are very well housed, although not all of them are. The offices have to be heated and lighting has to be provided. Provision has to be made for insurance and for expenses of all kinds. It is not simply a question of salaries. You could probably nearly double the salary increase implied by the extra 20,000 civil servants in order to get the real increase which their presence represents for the State. We are only wasting our time here talking about expenditure cuts, pruning this and that until this problem is tackled. The thing which needs to be gradually pruned is the public service. We are only doing damage by plucking harmless weeds here and there when what is really choking us is something a great deal more formidable.
It seems to me to be really a thing on which the public service owes the country an answer as a body. How is it that, in the age of the computer, the word processor and the electronic labour-saving device, the poor old State is the only organisation that gets nothing from it? How is it that the poor old State is not able to save anything, but on the contrary has to take on more people? It goes without saying it has not economised on the buying of hardware. It has got all the hardware, the word processors are in position, the computers are humming away; but the recruitment of people is going on all the time.
This is a decade in which we had two embargoes on recruitment. There is one still in operation. An embargo sounds fine to the bookkeepers, though it causes a great deal of annoyance at constituency level and at political level. An embargo on public recruitment sounds fine; but when the smoke has cleared away after three years, there are more people in the civil service, not fewer.
I know the expansion of the State's functions over the years must bring with it the necessity for an enlarged personnel. I appreciate that, though I believe it ought to have been more than offset by the so-called electronic revolution. I want to know why that has not happened and why there is not the political will to make it happen. Because, we have not got the political will, children are being made to suffer with school cutbacks, and we have health cutbacks which will affect all kinds of people in all kinds of ways. I do not need to lecture the House about this. The small niggling, teasing economies which are being made on all sides are happening and are constricting the economy in one way or another. Taxation burdens are being placed even on productive sectors, not to speak about the extra burdens on personal income tax. These things are all happening because nobody on either side of the House has summoned up the political will to take the public sector in hand and stop its growth.
I do not advocate what I hear some people advocating, that the public service should "get a taste of redundancy" the same as the private sector, that there should be no such thing in the country as sheltered employment. None of those people is in any sense individually at fault for what has happened. Nobody is faulting any member of the public service for being part of this apparatus. I hope I make it clear that there is no trace, so far as I am concerned, of hostility or animus. There is nothing of that kind in it at all.
But we must form a political will, and, I hope, a political consensus between all sides of the House, that this growth has got to be checked. I hope it can be checked gradually by persisting in an embargo and simply demanding more productivity and making sure we get it. It is easy to say that, and I am not so sure I could deliver it; but I would be aiming at it. It seems to be a pathetic thing that although we are supposed to be the Government of the country, speaking generally — this House is supposedly the major component of the sovereign body of the country — we are not able to make any impression on this problem.
When Deputy Lynch was returned here as Taoiseach in 1977 I listened to him and his acceptance speech was on this subject only. He spoke about almost nothing else apart from the usual inauguratory courtesies, thanking Deputy Cosgrave for handling the administration over, for not having wrecked it and all the rest of it. Apart from that his speech referred to public sector reform, and he spoke two or three times in the course of that short speech about the necessity to form the political will to bring that reform to pass. Mr. Lynch has now left the House, and I believe he has left with a lot of goodwill from all sides. We all wish him well; but he was not able to do it. He did not mobilise the political will. I do not think Deputy Haughey had the wish to mobilise such a political will. I have no doubt that the side I belong to subscribed to the notion of forming that political will; but they do not seem to be able to do it either. I suspect the reason is the old one, that anything which is to be painful and politically difficult would expose Fine Gael to artillery fire from Fianna Fáil and Fianna Fáil to artillery fire from our benches. I believe that is the reason it does not get done. That is a scenario which leaves the people nowhere, as they always remain nowhere when Fine Gael and Fianna Fáil decide that the biggest thing in the country is the issues between them.
With regard to the components of the budget, I heard Deputy O'Dea say that he thought the only discernible input which could be clearly imputed to the Labour Party was a residential property tax. I am on these backbenches for a mixture of fairly simple reasons. The main one was that I was apprehensive about the way the country would go if the Fine Gael Party fell into a pre-disposition to think of its future in terms of permanent Coalition with the Labour Party. That is a mistake for this party, and I did not wish to be associated with forms of political tactics which appear to reflect that disposition. My larger reason was because I think the way politics here is structured, particularly the artificially kept-up conflict between the two sides of a movement which once was one, does an incalculable amount of harm. I was afraid, because of the first of these reasons, that when I saw the budget of the Minister for Finance, it would display a good deal of Labour thinking. I must frankly confess that apprehension has not been realised.
I want to say this in respect of you personally, in courtesy, and I hope in friendship, that what I am saying is not in any way intended in disparagement of the Labour Party or its policy. On the contrary, I have a lot of respect for that party and its policies. I would not lose any sleep if history had left me a member of that party. I believe, because it is a party with its traditions and the necessary directions of its political involvements and the kind of political interests which it must support and stand up for, its input into Government in times like these is likely not to be helpful. That is in no sense intended to be disparaging, as I know you will believe, towards colleagues I respect, value and admire. I feel that the general thrust of a party who think in socialist terms is likely, in the conditions of 1983, not to be helpful. There have been times in the past when it would have been extremely helpful. In the days of Taca and the mohair suits in the middle sixties a Labour element was absolutely vital in this country. The evolution of Opposition politics towards the left was a national necessity. It is a national tragedy that that was just the moment the Labour Party chose to turn their back on Coalition, so that we lost the 1969 election and left the State with another four years of Fianna Fáil Government, including the crisis of 1970. This is a historic tragedy which cannot be reversed, and is water under the bridge.
I mention this only to say that I accept that there are times in people's history when a left-inclining Government is exactly what is needed. It was needed in the middle sixties and perhaps the early seventies. I believe that the Cosgrave-Corish Coalition worked very well, but I have misgivings about how valuable a socialist input is likely to be in the conditions of 1983 when what we need is prudence, retrenchment and old-fashioned housekeeping. These are three phrases that do not trip easily over Labour lips. That is not to their discredit. It is merely the way their ideology is constructed. There will be other times when what I am advocating may be the last thing that the country needs. I accept that, too, but that was one of the reasons for my resigning from the Front Bench.
I was apprehensive about what this budget would contain, but I must admit that it has not measured up to that apprehension. I do not find in it a great deal of Labour ideology, with the exception that Deputy O'Dea mentioned, and which was visible on the Sunday before the Government was formed, when the deal between the party leaders was revealed to us and to the Labour Conference. At the same time, what I say is contradicted by several of the economic commentators whom I observe writing in the papers in terms such as that the virtually total absence of any serious inroads into public expenditure reflects the Labour domination of the Government. Two or three commentators are of the view that the reason for the Government not going further in terms of expenditure cuts is that Labour would not agree. I have told the House where I think the real target for expenditure cuts must be. The only target that makes sense is a progressive reduction in the size of the public service. The Labour Party are being blamed wrongly for having been behind the relatively modest cuts in expenditure which the budget discloses. What expenditure cuts could even Fine Gael, let alone Labour, stand over in addition to those announced already, leaving aside the question of the public service? We have promised cuts in education. As Members of this House we receive letters every day, both in Irish and in English, protesting about these cuts. They have caused a storm of protest. I think I have received more letters in this regard than I have received about the proposal to amend the Constitution. Do these commentators think that the cuts in education should have been more severe? Do they think we did not go far enough in making cuts in the health services? Where are the cuts which even Fine Gael could stomach, let alone promote, but which they were prevented from putting into effect by Labour? I cannot think of any.
There was no Deputy in Fine Gael who was more apprehensive and more sensitive to the likelihood of Labour influence in this budget than I was, but I do not see it in that degree. I cannot see that the relative modesty of the cuts, severe though the complaints are, can be attributed merely to Labour recalcitrance. Even if we had a Government made up totally of Fine Gael members, with enough Fine Gael Deputies to float by ourselves, it would not have been politically possible to have introduced more severe cuts.
We have voters, too. At election time we must go around scrounging votes, knocking on the doors of people of all classes. There is such a concept as a political impossibility for us, too. We do not all get votes from large farmers and the gombeen men who I know are part of the Fianna Fáil mythology. I am not even sure what a gombeen man is but I have a vague idea. I have a mental picture of one wearing a gold watch chain across his waistcoat, but I do not know of any of these people in my constituency. Neither are there any large farmers in the constituency. The three seats we hold there are the result of support from people of all conditions. Therefore, in defence of the Government and of my party generally, though it runs contrary to what I expected, I do not find in the budget any excessive evidence of the Labour Party having imposed an ideology on us in the shape of a prohibition on expenditure cuts.
There is one exception, though this is something to which I object and to which I voiced my objection before the Government was formed; I refer to the question of the residential property tax about which Deputy O'Dea spoke very justly. This may easily be an unworkable tax. The fact that the Minister spoke about it in such general terms on budget day, in terms as general as those in which it was promised in our Programme for Government two months ago, is a sign that the Department of Finance have encountered difficulties in putting the tax into workable shape. I have no inside information on that, but I suspect that the Minister is no further forward now in this respect than he was two months ago. Even if the tax is workable, it is unfair to single out this form of wealth and leave untouched all the other forms. I say that as someone who fought as Government Whip for a wealth tax, and who continued to support it after the rest of my party had abandoned it.
I have no objection to people of substance being asked to shed a little of that substance, not enough to injure them, to seriously harm their business or even perhaps their private existence, but to shed something of that substance year by year as a gesture, if nothing more, to those people who never will have any substance and whose children or grandchildren are not likely to have any wealth either. That is the least that social justice requires. I am not making a song and dance about the excessive burden that this residential property tax will represent. I live in a good house and I have calculated that this new tax will cost me between £500 and £600 per year; but that is probably less than I would be paying in domestic rates if they were still being charged, because at the time they were abolished, I was paying about £300. In other words, I was given a present by the then incoming Fianna Fáil Government of £300 which I neither needed nor wanted, and all in the interest of trying to buy my vote. That was a ludicrous operation so far as I was concerned. The rates had been increasing year by year in fairly steep proportions and in the past six years the rates for the house in which I live would probably have been well over £500. Therefore, I do not regard this new tax as burdensome on me personally, and I am sure that the same can be said for a large number of people; but the point about it is that it is neither fair nor rational. There will be people far better off than me who will be able to avoid it; while there will be people paying it, perhaps not very much of it, who will react in exactly the same way as farmers reacted in 1977 when wealth tax was introduced. They, and people I know who were, like myself, not within an ass's roar of the level at which they would have had to pay wealth tax said that, although they were not being caught by the tax, its introduction was "the thin end of the wedge," the first step towards penalising, in the name of a red ideology, people who had worked, saved and built up substance for themselves.
It is not because of its political effect that I disagree with the residential property tax. It resembles the old schedule A income tax which was abolished 14 years ago. If it is in the Finance Bill, it appears that, so far as anything the Minister said to the contrary is concerned, it is going to be charged on the market value of the house, irrespective of whether the beneficial ownership of that house is entirely vested in the person who lives there. In other words, a man might own a house worth £65,000 or £70,000, and have no other substance in the world — and that is the case with a lot of people who live in my constituency — except his car, and he might not even own that entirely — he might still owe on that expensive house — it might have been his life's ambition to provide a good background for his children and he may have laboured long to get that distance — and still owe half the value of that house on which he is making heavy repayments. Apparently that element is not to be taken into consideration in constructing this tax.
I sincerely hope the Minister will take it into consideration and that the market value will be regarded as the market value less the amount outstanding in respect of the mortgage on the purchase of that house. Even if that is done, it will still not be a fair and rational form of taxation. A person could be a mohair-suited, suede-booted high-living bachelor living in an expensive flat in Blackrock with a view of the sea and costing £60,000 — that would be a very fine flat, and I picked that sum because it is just under the threshold we are discussing. Yet that boulevardier might own a street of houses somewhere else, in which other people live, but he will not be caught by this residential property tax at all. He could be the beneficial owner of the Pembroke Estate and he will not be caught for one penny by this form of tax. He might have very substantial industrial investments, he might have an unlimited income, but because he does not live in the kind of accommodation we are talking about here, he will not have to pay one penny towards this tax.
If I required any final proof that ideology, and nothing but ideology, is what is behind this proposal, it lies in the Minister's enchanting admission that he does not have a notion how much this tax will produce. He said "because of inadequate statistics on the numbers likely to be liable for the new tax, it was not possible to estimate precisely what yield can be expected," but he said, "he was including in the budget arithmetic a provision of £10 million for 1983." That is a nice round sum, but any other round sum would have been just as good, because he does not know how many residences will be liable. That to me is a clear sign that this unfair, irrational and in a real sense anti-social proposal — anti-social in the sense that it will be a replacement of a proper system of capital taxation which I would support — is there merely as a sop to superficial left-wing ideology. I object very strongly to that and intend to exercise the right of being on the back-bench to criticise this proposal in its passage through the House in the Finance Bill.
What the country needs in budgetary matters is the political will to do what is right, in the conditions which the economic climate presents to us, over a period of years. That is unlikely to happen in the context of the confrontation in which the unhappy mí-ádh-ridden evolution of Irish politics has left us. In bad world conditions such as we now encounter, a Government containing a component even of the nicest and most admirable men in the world — I freely apply those adjectives to the Labour Members supporting this Government — is handicapped — although I confess this budget does not show much evidence of such a handicap apart from the residential property tax — if they have to look over their shoulders, politically, at a party which is still somewhat bigger but does not differ from it on any point of economic ideology but which differs from it on the largely forgotten embers of 60 year old issues which are deliberately fanned to keep the differences alive and justify us in drawing our salaries for abusing one another.
I got no pleasure from watching the troubles in the Fianna Fáil Party in the last few weeks. I thought it was a sad thing for the country. I do not admire the Fianna Fáil ethos but I do not suppose they admire mine; that is a secondary thing. But the people have rights which come before our taste in ethos and our prejudices. I thought it sad that the element in that party which I regarded as more reasonable and openminded — Deputy O'Dea appears to be one of them — did not have their way. There are exceptions on both sides and I do not want to be absolute about it. I am not speaking simply about the crude issue of the leadership. Who leads the Fianna Fáil Party is a matter for themselves, and it would be an impertinence for me to try to stuff my views about it down their necks. This element in the Fianna Fáil Party has been silenced, pushed out of sight behind the same old yapping, and "hurroo-for-the-village-go-boy" which has replaced to a great extent any serious critical assessment of what the party stand for and where they are going. That is a great pity; but it is still more pathetic when I read in the morning papers what a respected and well-liked Member of that party, Deputy Faulkner, is reported as saying. Deputy Faulkner is a man of some backbone. He is not easily moved, as we know from his performance at the time of the postal strike a few years ago. At that time he was not very flexible; but inflexibility has, in some respects, a quality of its own. We on this side of the House respect his qualities, and I know he is very highly regarded on the Fianna Fáil side; but my heart sank when I opened the paper and read that he had said he "had always regarded the Fine Gael Party as conservative."
He may have learned that at his parents knees, or perhaps his grandparents, but does he really think that that is a fair or relevant thing to say about the party confronting him here today? Above all, is it worth saying such a thing, when we look at the scale of the problems confronting us, all or many of which arise out of this confrontation which that Deputy, respected though he be, is deliberately trying to keep alive? I am willing to stop sneering at Fianna Fáil "a slightly constitutional party", and to renounce all the other chestnuts in the Fine Gael repertoire of abuse, to put all that on the shelf and forget about it. Perhaps the confrontation has lessened; but it is depressing that a man of Deputy Faulkner's standard should say that we are a conservative party.
I have no doubt that when the State began in 1922 there was reason to describe in that fashion the interests which supported William T. Cosgrave. That would naturally have been the case; and if Mr. de Valera had won the civil war, it would have equally been applicable to those who surrounded him, within a very short time. All the elements in the country who were not particularly interested in politics, had no particular reason either to wish the English ill or well, and no special interest in the Irish language, but merely wished to get ahead in life, keep a roof over their heads, farm their lands, do their business, put their children through school — in other words what I might call the normal self-interested members of the community, those with a stake in the community, who wanted stability and peace and to be allowed to get on with their lives — tended naturally to support the Government that looked like giving them stability. Those elements naturally coalesced around the Government led by William T. Cosgrave. This would equally have been the case had de Valera won the civil war and been faced with the task of constructing this State in the twenties.
To conclude from that that this party is conservative, and to use such an expression in a budget debate in 1983, as Deputy Faulkner did yesterday — a few days after he had been on the losing side in that sorry and bruising confrontation is saddening. This is the party and the only party, along with the Labour Party, which brought the old age pension age successively down to 66 years from 70, which it had been, ever since such a thing as an old age pension was invented, under the Fiánna Fáil Government. It was "Red Richie" who introduced the unmarried mothers' allowance and the allowance for prisoner's wives. What is conservative about that? What is stick-in-the-mud about that? Where is the trace of the gombeen man in that kind of measure? It was the Government led by Liam T. Cosgrave which removed VAT from foodstuffs in 1973. Was that grinding the faces of the poor? Was that a William Martin Murphy operation? They removed VAT from foodstuffs, which the outgoing Fianna Fáil Government said could not be done.
I make every allowance for the fact that Deputy Faulkner is asked by his Whip to go and make a speech. I do not wish to upset or offend him, because I respect him, but it is sad that one of the best of the Fianna Fáil Deputies should still, in the year 1983 when we are surrounded by such horrible problems as 180,000 out of work, many because of the application of policies such as surfaced in 1977, be exchanging language like that across the House.
The current shambles — and I describe it so advisedly — over this constitutional amendment for which both parties are responsible, is the fruit and only the fruit of this idiotic confrontation. We were afraid that the Fianna Fáil Party would tell lies about us, take advantage of us, go around the country whispering that we were "not sound on the issue of abortion". It was on that tone that Deputy Haughey set out in the 1982 November election. Fianna Fáil were afraid that they could not afford to be overtaken in piety by us. That is no way to run a country. I have made my speech on that subject. I do not believe in changing the laws on abortion and I shall do whatever my party decide is wise in order to prevent their being changed, even though I do not see any need for a constitutional amendment. We are in the present situation of having the amendment hung around our necks — I believe unnecessarily, because none of us wants abortion, or has any notion of voting for it, and no Supreme Court judge has any notion of making the present law unconstitutional — because we are afraid of one another, do not trust one another and cannot count on one another to behave responsibly in the national interest when one side is in office and trying to get ahead with a serious job. The people are the ones who suffer from this.
I left the Front Bench and laid down hopes of office, for the moment anyway, in order to try to make that point. I enjoy being a Minister, being in office. I did as good a job as I could, worked as hard as I could and got satisfaction from it. I do not like not being in Government. I would prefer sooner to have a useful job to do, in which I could contribute something to the country, but I have to stand back here in order to say these things. I hope that I shall be there long enough to hear them reciprocated from the Fianna Fáil side.
I have said enough about the budget. The Leas-Cheann Comhairle has been indulgent in letting me wander some distance away from the strict terms of the budget. I wish the Minister great success and, with the reservation which I have expressed about the residential property tax, I recommend the acceptance of the budget to the House.
Deputy Kelly, as always, has been a most interesting and colourful speaker. In his contribution not only has he criticised very much his own party and his Coalition colleagues in the Labour Party, but as we expected, criticised the Fianna Fáil side. He is very concerned that Fianna Fáil should continue as a major political force. I assure the Deputy that he need have no fears in that respect. It may not be too long before we are back on that side of the House, fully exchanging views on opposite sides on that occasion. We will be back, perhaps in a fairly short time, shorter than the Deputy might think.
Deputy Kelly also took very much to task the Labour Party in so far as the residential property tax was concerned. We all accept that, on appearances, the Labour Party have had very little input into this budget. It is absolutely amazing that that party should have contributed to and supported within Cabinet many of the measures in the budget. Their support for some of the measures is beyond all reason and belief. During the past few Dáil sessions I have listened to Labour Party speakers, particularly when they were sitting on the Opposition side. At that time they were the champions of the old age pensioners, the unemployed and welfare recipients. It is fair to ask what has happened now to that concern, now that they find themselves sitting in Government.
This, the Minister's first budget, introduced last week, has been recognised by most experts, particularly economic experts, as a disaster. We all expected and would have accepted a tough budget provided it was seen that the measures taken would contribute in the near future and in a very practical way towards improving the economy. But what we got last week from the Minister for Finance was the work of an accountant, an exercise in bookkeeping which only went towards rectifying figures on the debit and credit sides. One would not think that there are out there 187,000 people unemployed viewing the measures taken in that budget. Indeed the situation as far as unemployment is concerned is worsening. There are many more thousands of workers on the brink of losing their jobs. There are hundreds of companies in serious difficulties at present and on the brink of disaster.
We had hoped this budget would have offered some prospects for those workers and companies but, unfortunately, that was not so. It had been recognised by most groups within the country that business needed a fillip, an injection in these difficult times to maintain employment and, if at all possible, create new jobs. In that respect also the measures introduced by the Minister last week were a dismal failure. Probably it was one of the worst, most unimaginative budgets possible in the circumstances and did nothing whatever for our ailing economy.
The Minister seemed to concentrate exclusively on raising taxation with little or no attempt being made to curtail public expenditure. The effect of this budget will be to raise prices, rendering it more difficult for firms and businesses to trade and compete with, of course, an ultimate effect on employment. It will depress very dramatically the living standards of most people, those in the poorer section and those also in the so-called middle class striving to keep their heads above water. There is no doubt that its effect will be to add to unemployment. At pressent something between 7,000 and 8,000 jobs per month are being lost. Nobody likes to be pessimistic. We all like to look forward in a more positive and optimistic fashion but commentators have forecast that before the end of this year this budget probably will have played a major part in raising unemployment numbers to as high as 250,000. On the surface that may appear a pessimistic viewpoint but one must be practical. Viewing the present situation and the unemployment figures, realising also the number of companies experiencing difficulties, those pessimistic figures are possible.
One wonders whether the Government or the Minister for Finance really understood the seriousness of the problem. The Minister, in introducing such a budget, gave the impression he did not. The word "equity" was mentioned frequently throughout his statement but, in my view, the measures introduced were anything but equitable. Once again the PAYE taxpayers are being caught for approximately £350 million. In real terms an old age pensioner will lose anything up to 10 per cent when one takes into consideration the new tax impositions and increased taxation which will result in higher prices and a higher cost of living generally.
On the other hand many of the measures taken will create a boom for the black economy. The Minister has received deputations, as have all Deputies, particularly from the motor and tourist industries. The motor trade has been hit very badly with additional taxes, duties and value-added tax. Before the election we were promised by Fine Gael that they would strengthen the value of the £ in one's pocket, making our industries more competitive. How on earth can anybody relate that type of aspiration to these budgetary measures? In fact we have had two budgets, one last week and another earlier in January in which something in the region of nearly £200 million was taken from the pocket of the motorist, the man who takes a drink and the smoker.
We have heard a lot in recent times about companies owing taxes but not paying them. I do not hold any brief for any firm or business that retains PAYE deductions and PRSI contributions. Over the weekend I read a statement by Deputy McCartin, with some of whose comments I agree. But I could not go all the way with him because one must remember that deductions, whether they be in respect of PAYE or PRSI, belong to the worker and are passed on to the State. Therefore no firm or business has any right to retain such payments for any length of time. Neither do I hold any brief for those who constantly criticise businesses, accusing them of soaking workers, taxpayers and so on. We must remember that, from a business point of view, we are dealing with people who invest money to create jobs. If we did not have continued investment obviously employment would suffer. As far as taxation is concerned companies, businessmen are being harassed to such an extent that eventually they are bound to say: "What is the point? Why should we continue to invest?" The fact that so many businesses have been closing in recent times is evidence of that fact.
No attempt whatever was made in the budget to spread the tax load or distribute the tax burden more widely. The PAYE worker, who already shoulders a disproportionate share of the burden, received a knock-out punch on this occasion. The Minister took the easy option and it would appear from his statement that there is more to come. It is clear to most people that such measures could very easily lead to serious unrest. Indeed one would be justified in posing the question: where were the Labour Party when all of this was taking place? In the past, and I presume still, the Labour Party called themselves the defenders of the worker. I might quote the following passage from an editorial in The Irish Times of Friday, 11 February 1983:
The Labour Party have been outplayed comprehensively at the budgetary game... Labour's captain, Mr. Dick Spring, bought the dummy pass.
Perhaps that is so, but I doubt very much if the Tánaiste or any Labour Minister would be sufficiently naive to buy that type of dummy. I believe that the Labour Party members were fully aware of the consequences of the measures being taken in this budget, measures penalising the worker and which will certainly destroy any initiative on the part of investors to create more jobs. Furthermore, they are measures which will probably seriously hamper existing employment.
Deputy Kelly spoke about the residential tax which we are told will raise something in the region of £10 million. As Deputy Kelly indicated, the Minister has no idea how much money will be raised from this form of taxation. It is an unjust measure because it will not tax people who have wealth in a just and equitable way. Nobody seems to know how this scheme will be administered but it seems to be the only contribution made to this budget by the Labour Party. It is an ill-devised scheme which will do nothing whatever to generate any additional revenue from those who have wealth.
There is also the silly measure of reducing duty-free liquor imports from 1.5 litres to 1 litre per person and we are told that this will save another £7 million. The number of cigarettes which may be brought in by an individual is reduced from 300 to 200. These examples show how ludicrous and fictitious are the figures in these budget proposals. It is not possible for the Minister to say that the Exchequer will save £7 million through one of these measures. How will it be done? This is Mickey Mouse stuff in comparison with what is happening at the border where container loads of goods are being smuggled daily. The budget proposals will certainly make smuggling more attractive and the incidence will increase. What measures are being taken to prevent it? Jobs are at stake and many legitimate companies who have been paying their taxes are being let down. Individuals living near the Border will certainly take advantage of that situation by purchasing petrol, liquor and cigarettes in the North. This is all very well for the individual but legitimate traders all over the country are deeply concerned at the large-scale smuggling which is costing the Exchequer millions of pounds every year and putting jobs in jeopardy.
The cut of £10.3 million from the Fianna Fáil Estimates for non-capital health expenditure will hit the poor and the elderly and certain schemes, such as the drug refund scheme, will have to be abandoned. Health boards will suffer and I understand they will be left to their own devices to raise money, possibly from the local authorities. The old and the ill will suffer most of all.
There is also to be an additional 1 per cent levy on gross income. This is a cruel imposition on the worker and it is additional to the employment levy introduced last year. The worker is quite justified in asking how this money will be used. How many jobs have been created as a result of the 1 per cent levy imposed last year?
Where is the money going? These are legitimate questions and the workers are entitled to answers and to see the results in terms of jobs created. We are told that this new levy is a temporary measure but when taxation is introduced there is nothing temporary about it. It is 1 per cent this year and perhaps it will be 2 per cent next year. These measures destroy the morale of the worker by taking more and more money from his pocket while he sees nothing for it.
There have been increases across the board in VAT, tax benefit for mortgage interest has been slashed and there are new charges for local services. There have also been increases in motor tax, television licences, petrol, and servicing of cars. Higher PRSI charges are to be announced. I estimate that these increases will cost the average worker up to £20 per week and a person in the higher income bracket with a salary of £20,000 a year will pay an extra £3,000 in tax. A dramatic loss in income is a frightening experience for anyone, be he a labourer or an executive and particularly for the middle income earner who may be in his fifties and trying to bring up his family and pay for their education. It will be virtually impossible for such a person to accept such a huge reduction in living standards. It will obviously affect the man who has a high mortgage or a young married couple in the same position. These are the people who will be affected by these measures.
If one could see a ray of hope at the end of the day as a result of these measures, perhaps they might be accepted, but during his speech the Minister hardly mentioned the problem of unemployment. He expressed regret that we have such large scale unemployment and I think he also indicated that it was a problem affecting the whole Western world. What consolation is that to the Irish worker who is paying more and more in taxation, knowing that no effort whatever appears to have been made by the Government to create an environment which will bring about extra employment and encourage investors to put more capital into employment-generating enterprises? This is the most negative aspect of this budget and it seems to have been a hopeless exercise.
As a result of ever-increasing charges on trade and service industries we will have the inevitable nixers. Those involved are facing a boom and will take away potential turnover from legitimate business people. This is bad at any time but in a recession it will cause greater hardship to business and additional loss of revenue to the Exchequer. We have had abuses in the past and probably we will always have them. Over the years I have listened to Ministers for Finance from all parties using the same old cliché that they were looking at new measures to catch those who were not paying their fair share of tax, but nothing seems to happen. Each year we hear the same pious statements but evasion continues and the legitimate taxpayers are asked to pay more. One must ask the inevitable question, how long can we keep this up? Can we come back next year and introduce further measures to increase tax? I do not think we can. We have reached the end of that road but where do we go from here? That is the most serious prospect facing any Government because we have over-taxed the old reliables.
Before the dissolution of the last Dáil Fianna Fáil published their economic plan, The Way Forward. That plan was reasonably well received and a description such as that in political terms means a lot. It was a constructive and well thought out plan which involved a number of people from different occupations. It had the support and co-operation of economists, banks and trade unionists, set targets for development and detailed where finance could be saved. At the same time it did not propose any further burden on the PAYE taxpayer. The plan envisaged the provision of many new jobs to be brought about by improved competitiveness in industry and more selective investment. It was estimated in the plan that 215,000 new jobs could be provided between now and 1987. That figure was not plucked from the sky but was based on a detailed survey and analysis of what could be done in the overall context of a proper economic plan.
Prior to the election we were aware that Fine Gael or Labour did not have a firm economic plan and last week's budget proved that without doubt. Last week's disastrous exercise has been condemned by many financial commentators because it provides an ideal recipe for higher inflation and will contribute to the closure of many more firms. In the absence of any plan from the Government, The Way Forward should have been accepted in some form. All the details were set out in it and the Government were not justified in dismissing it.
We have a young population and in the region of 35,000 young people leave school each year seeking employment. What prospects have they of getting a job? Taxpayers would be happy to accept harsh budgets if there was a prospect of employment for our young people. Emigration will not solve our problems any more. When we had high unemployment many years ago emigration always helped us. Our young people were able to go abroad and get employment and as long as they were not on the live register our problem was solved. We are in a dilemma with a huge, young and well-educated number on the unemployed list. Many of them will not accept the hopelessness of their situation. Obviously, that provides a breeding ground for social unrest and discontent.
The Government must act responsibly and urgently. We must have a proper plan and a commitment by the Government to create employment for school leavers. In the past much employment was provided by the construction industry but that industry is on its knees. Like many others sectors of the economy it was looking to the Minister for some relief and an injection of capital so that they could at least maintain existing employment. As a result of the budget the volume of output in that industry will decline shortly and revised spending patterns will be reflected in a sharp increase in the industry's jobless. Local authority housing will suffer, leading to a further decline in the activities of the construction industry. Fewer people will be able to afford their own houses and will have to seek local authority houses. As a result of cutbacks local authorities will not be able to build many houses and that will lead to bigger waiting lists.
As a member of Dublin City Council I am aware of the serious housing shortage in the city. Local authorities who are already short of funds have been told that they must raise £65 million but suggestions have not been sent to city or county managers by the Minister for Finance. Additional finance will be needed from now on but I do not know how local authorities can raise that money without introducing further draconian measures on householders. It is possible that it will lead to the reintroduction of rates. The Minister did not mention the question of rates at all. Fianna Fáil abolished the old rating system, one of the most unjust systems ever operated, because it was not based on means. However, from now on local authorities will find themselves in a dilemma, having to meet increased charges with less revenue coming from the Exchequer. Obviously charges will have to be imposed fairly quickly.
Various suggestions have been made about charges for garbage collection, for water, for street cleaning, and so on. It will take time to introduce these types of charges and it will take even longer for the revenue to start flowing into the local authority. In the meantime the services will be seriously affected.
This budget provides no hope for anybody, whether they be business people, the employed or the unemployed, old age pensioners or social welfare recipients. This is the greatest failure of all in the budget. It offers no hope. It has no silver lining. In times of recession it is the role and responsibility of the Government to lead. The Government and the Minister in his budget last week failed appallingly in this respect. People will follow and co-operate if there is a prospect of better times ahead. Unfortunately, there is nothing whatever in the budget to suggest that there will be better times, or that there is any hope of a quick recovery. It will drive people further into recession and make the task of recovery much more difficult if not well high impossible.
The easy options we had in the past are no solutions to economic difficulties. An additional 10p here or 20p there to raise additional finance for the Exchequer is not the answer any more and will not be in the future. It is imperative for the Government to devise new ideas and new economic policies to keep the country going. One of the greatest disappointments in the budget was the failure of the Minister to reshape the cost structure of our State organisations. In private business when you have financial difficulties you have to prune your operation accordingly to get better efficiency at a better cost. State operations should be the same. Radical action is needed, but the will must be there to take the required action.
Far too many people are living off a decreasing number contributing to the State. Failure to deal with this problem is nothing short of downright irresponsibility. The private investor will think twice before pumping more investment or capital into industry. As we all know, that means the loss of additional jobs together with a substantial loss of revenue to the Exchequer.
Over the past number of years budgets introduced by Fianna Fáil Ministers provided approximately 20 per cent to 25 per cent increases for old age pensioners, social welfare recipients, and so on. Those increases contributed in a positive way towards improving the lot of the old and the disadvantaged. I do not think anybody in this House would begrudge that increase in prosperity for our old people who are in the winter of their lives, who worked hard all their lives and contributed to the State as taxpayers. They are entitled to that consideration. It has always been Fianna Fáil policy to give priority to those people. Unfortunately, it would seem to be Fine Gael policy to be niggardly with the old age pensioners.
Deputy Kelly spoke about differences of opinion between Fianna Fáil and Fine Gael going back over the years. I do not want to refer back over 20, 30 or 40 years. That is not being positive. The records show that Fianna Fáil have always been much more thoughtful and constructive in their approach to old age pensioners. The increase of 12 per cent for long-term pensioners is niggardly. Of that I have no doubt. When one considers the obvious increases in the cost of living which will follow very shortly, one realises that the 12 per cent increase will become a reduction over a period. We must not forget that that increase comes into operation in June, whereas in previous budgets it was introduced in April. This is a mean saving at the expense of people who are in a vulnerable position and who cannot defend themselves. They have no organisations or trade unions. This is taking advantage of that section of the community in a very mean way.
On the question of VAT the Minister announced a 5 per cent increase from 18 per cent to 23 per cent and from 30 per cent to 35 per cent. This will cause serious problems for business people as well as private individuals. Last year the Fianna Fáil Minister announced that VAT would be paid at the point of entry. I had grave reservations about that because I felt it represented a serious imposition on legitimate traders and business firms which were giving good employment. Many of those firms had to cut back because they got themselves into financial difficulties as they had to pay out large sums of money for goods they had not yet received. It must be remembered that the trader who has to pay VAT at the point of entry has to stock his goods and sell them. Perhaps he has to give credit to customers or clients. In many cases he might not be paid for three, four, five or six months, if at all. Consequently it is not too difficult to see the serious imposition this has represented to many legitimate business traders.
Most Members of the House will know that such high rates of VAT together with the imposition of VAT at the point of entry has led to increased smuggling and illegal importation. Container loads of goods are coming across the Border in the darkness. There is a system in operation along the Border with a look-out to ensure that the customs officer is not on duty. Many people in business know this is happening. I am quite sure the customs authorities are also aware of what is taking place.
Millions of pounds are being lost to the Exchequer. The illegitimate trader does not pay tax. He may not have the same type of operation as the legitimate trader. This is having very serious effects on the employers and companies who are endeavouring to live within the rules, to pay their taxes regularly and to create and give employment. The Minister must look at this area very seriously. It is not good enough to indicate that the system of payment at the point of entry will be reviewed in 12 months' time. With the new increases in VAT it is urgent that the system introduced last year should be scrapped and the Minister might possibly consider this in the context of the Finance Bill when it is introduced in the House. Our VAT rate is one of the highest in Europe and must be a serious blow to traders, especially those who operate within a reasonable distance of the Border.
We have had the spectacle over the last few months of pictures in newspapers and on television of the thousands of shoppers who are taking trips to Holyhead and the North every weekend. That is money leaving the legitimate trader here, who is giving employment. It is also money leaving the Exchequer because not alone is the Exchequer losing taxation but the lost employment is an additional drain on the social welfare system.
The Minister also announced a £3 million cutback on Garda overtime. Any cutback in Garda pay, overtime or otherwise, will have a serious effect on law and order, particularly in the cities. In Dublin over the last 12 months there has been a huge increase in crime. It is still growing at a very serious rate. Citizens are not safe. Attacks are taking place on young and old people. Homes are being broken into systematically night after night in different areas. In parts of my own constituency, Dublin North Central, it has been reported that five or six houses on the same park or road have been broken into on the same night at the same time. It usually happens between 3 a.m. and 6 a.m. If there is to be less Garda activity due to cutbacks, the crime rate will rise to an appallingly high and unacceptable level. Many residents' groups and associations are already discussing ways and means of forming vigilante groups, and if this happens it will lead to a complete breakdown in law and order as we know it. Any cutback in Garda activities, whether in pay, overtime or equipment, is a totally negative exercise and will only lead to further wanton destruction and cost to the taxpayer in the final analysis. It cannot be justified in those circumstances.
I have briefly mentioned the motor industry. At the end of this year the special import duty imposition, as agreed within the EEC context ten years ago, ceases. I would like to know what the intention of the Minister is at the end of 1983. Does he intend to retain them or to replace these duties in some other form? The motor industry has already suffered terribly. It has given excellent employment over the years but thousands of jobs have been lost, especially in the past 18 months. Car sales are down drastically. The safety aspects of cars is declining because motorists cannot afford to pay for a legitimate service. This is an area that has had taxation imposed on it, year after year, in the same way as the drink and tobacco industry. However, a motor car is not a luxury; it is a necessity for commuting to and from work. Additional costs by way of the capital outlay for a car and extra taxation on petrol are adding very seriously to the burden of the motorist. As a result, there is a further drop in car sales and a loss of jobs in that industry.
The strategy in the budget is wrong. There is nothing constructive in it and it can only cause serious damage to our economy. It will increase unemployment and stifle capital investment. We all agree that the deficit must be reduced and that public finances must be brought under control, but merciless taxation on the worker and on employment is not the answer to those problems.
Since the budget was announced the economic experts, the public and representatives of business have been numbed with shock at the additional high rate of tax increases. There is nothing to indicate that the situation will be any better at the end of this year and that is the worst failure that can be attributed to this budget. It is not too late for the Minister, when introducing the Finance Bill, to review a number of the measures he has taken. Otherwise the creation of full employment will be stifled and we will be back here at the end of this year in a worse mess than we are in at present.
This budget has been criticised by the man in the street. The principal criticism has been that it is the toughest budget ever, draconian, and that the worst effects have not been mitigated. One constituent remarked to me that this budget was worse than anything that Hitler did to the Jews. The interpretation of the budget by the media, the Opposition and the man in the street begs the first question prior to the budget. Do we realise the extent of the crisis we are in? Often, when spokesmen for the Government or the Opposition talk in hundreds of millions of pounds, the average man in the street is lost. The easiest way of expressing our difficulty and the level and extent of our crisis is to say in broad terms that the Government, prior to this budget, were incurring a loss of approximately £3 million per day. Like any household or business, there are limits to the losses that can be sustained. Moreover, this loss is not peculiar to the 1980s. In 1977 approximately 75p in every pound of our principal tax, PAYE, did not provide one hospital bed, did not fill one pothole and did not heat one school. It only paid the interest on the solution to yesterday's problems in terms of central debt service. I understand that prior to the budget the figure this year was 100p in every pound.
The day of reckoning has come and it will not go away. The background to the situation has been identified clearly. First, there was the increase in the price of oil. That money went to the Middle East or to Mexico and it did not return. We compensated ourselves by borrowing in order to maintain our standards of living. Moreover the problem was compounded by the monetary and economic policies of our trading partners. It is not sufficient to say we are a small country. We must look at the economic policies of our trading partners because we must remain competitive. If Britain, our largest trading partner, Germany and America adopt stringent monetary policies we are obliged to follow suit in terms of rationalisation and competitiveness.
The most frightening aspect is that if the Government did not act now, in 1984, 1985 or 1986 we would have a situation where not only all returns from PAYE, excise duties and VAT but nearly all our revenues would go merely to pay back the mortgage we put on our future by not trying to rectify the financial situation. Our creditors, through the IMF, would take the appropriate action regardless of any democratically elected Government here. As a civil service structure they would administer the kind of cuts they would think essential and representations to mitigate the worst effects would not be entertained. Leaving aside the dire financial situation facing the Government, if we consider the overall economy we see the last year 8 per cent of our gross domestic product — £1,000 million — was lost on the trade deficit. That money has gone out of the country on a trade imbalance never to return.
Secondly, private investment, which is the greatest barometer of economic activity, dropped by amounts ranging from 7 per cent to 10 per cent depending on the sector. For 1982 the borrowing figure was £1,945 million. There is no relationship between the growth in output and the level of borrowing and that situation cannot be sustained over a long period. There has been a decline of 4 per cent in our competitiveness with EEC countries. We have had a 14 per cent pay increase for 1982, Germany had a net pay increase of 4½ per cent and Britain 9½ per cent. Yet, we are expected to export competitively to their markets. More than 40,000 people lost their jobs in 1982, an additional 20,000 people were available for work and 349,000 man-days were lost through industrial action and sickness. This is the bottom line so far as our economy is concerned. The people in the corridors of power and in the civil service structures will have to become aware of what is going on in the real economic world. Inevitably, the day of reckoning has come.
What conclusions can we come to? Because of loss of competitiveness we must deflate our economy and we must reduce inflation to come into line with our competitors. While the effects of deflation may mean an increase in unemployment, we must at least make sure that we do not lose further ground. Many politicians have not grasped one of the most fundamental aspects of economic policy. Any growth in the economy cannot be gained efficiently by extra Government expenditure. Whether on the current or the capital side, the thesis that the Government by pumping in more money are adopting the right measure to encourage growth in the economy is fundamentally wrong. It is an essential ingredient but to see it as the basic philosophy is the principal reason we are in our present mess. Growth in the economy and job creation can only be achieved by a net increase in the volume and value of our export sales. Unless we produce more, unless we have more earnings from abroad, we do not owe ourselves any increase. If we do not achieve that growth we do not deserve to preserve our living standards. That is the principal feature that underlines the budget and it must underline the Government's economic policy.
Because successive Governments have not accepted that as an underlying strategy has meant that the Government themselves are the cause of the problem. Whether it is the tourist industry trying to attract overseas revenue, or any sector trying to sell goods and services competitively, the burdens of taxation built into our infrastructural costs are such that the Government have become the problem.
Where do we look for solutions in over-all economic terms and in terms of the approach to be adopted? The principal aspect that must be considered is the question of leadership. For too long we have had too much waffle from too many politicians. The difficulty is that many politicians who made their political careers in the seventies are now in the leadership of the respective political parties and they got there on the promise of a better standard of living and leading people to hope for a better future. Now the political difficulty is that they must explain why that is no longer a reality. The real difficulty is leadership towards moderation, firstly in terms of incomes and secondly in terms of demands on Government services. In terms of incomes policy we cannot compensate ourselves for increases in cost of living to determine a standard of living which we have not earned. A basic economic principle is that that is simply unsustainable. I appreciate that with the high levels of unemployment this reality is dawning on the trade union movement and across every sector of the economy, but unless we take corrective measures now and unless we have the same approach to pay policy as was outlined for social welfare and unless there is no compensation in terms of pay increases for these extra revenues raised, the whole purpose of this budget will be self-defeating. In terms of Government services and current and capital services the Government are going to pump £7,751 million into the economy. I will deal later in detail with the demands on Government services which are unsustainable and which may unfortunately be uncontrollable at this stage.
The second important aspect of any solution is the fact that we must realise, as Deputy Mac Giolla said in this debate, that to balance the books is one side of the argument in terms of repaying our debts; the other is to produce more and to increase one's earnings. We must develop in terms of our natural resources and industry a cohesive production policy. We must co-ordinate the rationale of Telesis. We must integrate the National Development Co-operation venture, the strategic industries that we have and training in primary productive areas, whether for farmers or fishermen, so that young people who are taking over land or entering into careers are equipped sufficiently for them. We must have a cohesive production policy for employment to ensure that we get the best value for money in terms of growth and we must invest money strategically in growth areas on a viable basis. I will come later to the actual employment features of this.
The third solution to our problem lies in considering the major structural defects of the State. How efficient are our monopoly State services? How cost-competitive are the ESB in providing electricity as a basic energy resource for every manufacturing concern? How efficient and cost-competitive with another £23 million are our postal and telecommunications service and our whole transport system? If they are not competitive, if the structures are not efficient, that has a knock-on effect on everyone trying to create employment, to make a profit or to produce more and increase our GDP. If those structures are wrong no amount of efficiency further down the line in manufacturing industry or agriculture can compensate for that fundamental lack of competitiveness. Therefore, we must overcome that structural problem and create a new awareness of efficiency in those public bodies.
The fourth area in relation to a solution of our problem is a greater emphasis in terms of approach and commitment by all in terms of buying Irish goods. I have not got the figures from the Irish Goods Council in relation to what level of expenditure per week would create what number of jobs, but I have a figure from Britain which indicates that if every housewife there spent £8.60 per week more on British goods — the goods indigenous there — that would create in two years a million jobs. That is the level in proportion of the employment loss we are dealing with through people not having the loyalty and commitment to buy and use Irish goods and services.
I will now go into detail in relation to leadership towards moderation of demand on Government services. People have no conception of the seriousness of our situation. The essential aspect of leadership now in Government circles must be towards this moderation. Here we look for leadership from Fianna Fáil, and what do they say? How ironic it is that I was one of the TDs speaking on Government motions in this House who respected aspects of The Way Forward and saw merit in them, but now I am appalled when I consider the credibility of the principal Opposition party, no longer the largest Oireachtas party, and that they voted against the increases in VAT. That is justifiable and I appreciate it, but simultaneously they say through the media and in this House that we have funked the issue of the current budget deficit and that the figure should have been £750 million. If they had not the guts to go ahead with the VAT increases, where in the name of heaven were they to get £350 million? They have not answered, and their credibility in terms of providing the leadership is non-existent. That is the reason we are permanently — or for the next four years at least — on this side of the House.
We must look at the long-term. People may say that they will accept this budget if it is a once-off harsh measure. However, next year's budget may be even harder. The reality is that we have a budget deficit of £900 million this year. To reduce that progressively until 1987, with a drop in buoyancy and so on, we will need to raise extra taxes to the level of somewhere between £275 million and £350 million every year. If we look at what house rates and VAT on clothing and footwear might bring in we will see that we have major problems. It would be wrong for anyone on any side of this House to think that this budget in any way will balance the books. It does not go anywhere near to achieving that.
As a TD I would like to detail in every sector the demands on Government services and the need for leadership in moderation. For example, in my constituency quite reasonably pensioners, widows, the unemployed, the sick, and the handicapped come to me to say that a pay pause of 10 per cent or 12 per cent with the effective cuts in PRSI, short time and so on is a very meagre increase which does not and possibly will not keep pace with the increase in the cost of living. That is a very legitimate point of view. Also I accept the PAYE taxpayers' point of view that a 1 per cent levy, no increase in the tax bands, probably more net payment of PRSI and other increases which will hit them directly in terms of charges for local authority services will leave them worse off. That is a very reasonable argument. Why should they pay more pro rata than persons in other sectors? In my constituency 1,600 families are housed in mobile homes that are leaking or living with in-laws, and we will be building only 100 houses. These people have a genuine case for demanding expenditure to build more houses. The hoteliers have a very genuine case. They are taxed almost out of existence. They want a reduction on VAT which has risen from 18 per cent to 23 per cent. They say that the imposition of VAT on food is almost unconstitutional, that food is a basic necessity and how could we impose this tax on it? Theirs is also a very reasonable case. How can they attract more tourists when they are taxed uncompetitively? My constituency also needs a new hospital, more geriatric beds, and when I see the waiting list I realise that that also is a very reasonable request. The vintners were marching here, and I accept that certain increases in taxes will affect them. With a 10 per cent increase in excise duty on drink, and, say, a corresponding 7 per cent drop in consumption, the Government will still gain from the increase but the publicans are the real losers because their volume is down and therefore their profit is down. This is a very genuine case. All over my constituency I am meeting the ASTI and parents in relation to the £13 million saved in relation to education and in relation to the school transport cuts. I can genuinely see why married couples on unemployment assistance cannot afford to pay for transport services in the junior cycle. I understand that the Petrol Retailers' Association are going on strike because of the penal increases in relation to tax on petrol. The garages wanted a deduction from 18 per cent VAT on workshop repairs to 3 per cent and it has gone to 23 per cent. They have a genuine case.
I met six pensioners over the weekend who have lost their medical cards. They have a genuine case. There are people who have essential items on the GMS for very severe illness and there is £6 million saved there. Those people have a genuine case. In relation to farmers, the IFA are very well organised in my constituency. They have put a very legitimate case for no further capital taxation as there is no corresponding relationship to their ability to pay. We know the story about the resource tax case. They refused to pay it on justifiable grounds and one could accept that. They refused to pay the 2 per cent levy as they said that was inequitable. They refused to pay rates and they went to court over it. One can see they had some reasonable points. We can see the need for industrial and infrastructural development, the need for advance factories. In my constituency we need extra ESB 38KB lines to get heavy industry in there. We need better roads and better telecommunication services. We need an industrial effluent plant to attact heavy industry. We see a situation in relation to terms of employment of VAT at the point of entry. That £140 million should have been taken away altogether and it would have meant that jobs would have been retained.
We had the CIE link between Rosslare and Limerick Junction, a very worthy case. We see CIE fares gone up by 25 per cent. We see pensioners and others who cannot afford to pay water rates. There is no way we are allowed reintroduce house rates. I accept the need for security. We need more gardaí. We have to maintain the Defence Forces. All the arguments I have outlined are legitimate reasons why we should spend more money, take in less taxes because either the expenditure item is so sensitive, needy or the taxation item is simply inequitable, does not relate to the capacity to pay or deprives people of the incentive to work. It is about time that TDs said that we have got such well organised pressure groups in the country that if all their demands were met the Government could close down at 5 o'clock on next Friday evening. The reality is that everyone has such expectations of any Government, despite what political party are in Government, in terms of more expenditure and more relief on the taxation side that two into one simply do not go.
There is a great need in the country for leadership to explain that there are diametrically opposed views which cannot be reconciled, and the leadership role at this point is to tell people they should moderate their demands on Government if they want to have a Government that is democratically elected and not some IMF civil servants who will not listen to anybody. That must be sold by every politician because the most tragic thing about all this is that if we do not face up to our problems, if we have not got the necessary rectitude, the bottom line is — this cannot be said often enough because we need to be sensitive about it — whether it is the IMF, the EEC or the World Bank, nobody owes us a living. Unless we are prepared to arm through an extra volume of trade in our exports we have no right to protect our living standards or Government services. That is unpalatable but it is the truth and has to be sold in terms of leadership and moderation so that we can start to return to the areas in which we can look for the fundamental basis for growth and prosperity again.
As the youngest Member in this House I am not prepared to see budgets that do not make some attempt to resolve the situation because my generation simply cannot and will not pay for the reluctance and inability of this generation to reconcile its financial difficulties. That deals with the criticism that this budget was too harsh. It deals conclusively with the aspect that the Government have no sensitivity in dealing with people's problems. It clearly shows the pressures on the Government, the crisis we are in, the gravity of the financial situation of the Government and the financial state of our economy.
The second criticism that has been levied at this budget is that there is no social planning, no social justice, no light at the end of the tunnel, no economic planning, no long term view about how we will solve our problems. There are a few points I would like to make in relation to this because to some extent one could see the validity for such criticism. To produce a blueprint for the social and economic plan, some way forward that will relieve us of all our problems, it is practically and mentally impossible to do that in eight weeks. The second point is that we had a plan in 1982. We had a plan that went into all aspects of economic activity, that looked at employment, inflation, the terms of trade, cost competitiveness, incomes policy and every facet of the economy, our infrastructural problems, our geographic problems, our trade problems and everything else. The reality is that no amount of planning and no amount of magic will solve this problem. Moreover, for a plan to be realistic you have to set out targets, objectives and you have got to put figures on paper. If we have learned anything in the seventies we have realised in economic and social terms that nothing is static, that everything is changing and evolving and that targets that might have been laid out in The Way Forward in October are no longer simply operative. We must realise that plans are over-rated. Instead of plans, magic blueprints and simplistic solutions to our problems we must look for overall policy objectives and targets which we would like to attain.
There is no way in which we will overcome our problems unless we try to set about the broad objective of trying to create a mecca in the country for greater industrial, agricultural and general production. We cannot do that unless we can create the viable basis whereby people can go to work on a Monday morning, make a profit in their concern and get a reasonable wage out of it. I have outlined already the structural defects in terms of essential cost inputs of electricity, transport and telecommunications that are already way out of line. If we had the leadership that could moderate our demands on Government services, if we could have moderation in incomes policy, if we could thereby bring about an improvement in our overall cost competitiveness, there would be a consequential immediate increase in volume value output in external trade. That is the way we will grow and overcome our problems. Then we will tax the wealth and spread it around sensitively and socially to provide the goods and services in terms of health services and educational services which the country so badly needs.
I say this because the fundamental political principle this party stand for is that we must create the wealth if we are to distribute it. If a Government attempt to distribute first they end up with nothing for anyone as a result of the burden on the productive sector and that means that the economy grinds slowly but surely to a halt. I see no alternative to the remedial action that has been taken in the budget. If we failed to take this necessary action now we would be faced with a situation in which the International Monetary Fund or some of our creditors would take the necessary action. Leaving aside the question of an insolvency situation, let us consider the economic consequences of not taking corrective measures. We would continue to struggle from one recession to the next and into a situation in which there would be so many people in Germany, Switzerland and America who would be owed money by us that we would be forced to devalue our currency. I have my own views about the possible advantages of devaluation but enforced devaluation now would be disastrous for our economy because it would leave us in a vice grip of imported inflation that would rock the very foundation of the economy.
Therefore, we must stand back from these pressures and realise that the Government were elected to govern and not to be pushed around by pressure groups. The Government were not elected to act in a short-term way that would undermine the long-term gains we need to cope with the growth in our population. At very hard times like these there are advantages in approaching in certain ways some aspects of governmental activity. I hope that out of what we are doing will emerge a new awareness of the need to get value for money spent by the Government.
Regardless of who is in office there is always the charge in respect of cuts in any Department that such cuts are insensitive, irresponsible and wrong morally.
We have a situation in which Ministers rely on their record of the extra expenditure they negotiated at the Cabinet table as a result of their commitment to their respective areas. We need a positive policy in overall terms in relation to getting value for money and in this context a policy of privatisation. I can think of two examples whereby we could reduce service costs while the Government basically would continue paying for the services but whereby we would get better value for our money. The first area is that of geriatric care. In some instances beds for geriatrics are costing up to £196 per week. Very few such beds cost less than £100 per week. I assume these costs take into account the capital and maintenance cost of the hospitals as well as the labour costs and so on. Not so long ago I met a newly-formed association concerned with private nursing homes. This was during the period of office of the last Government and this group were beseeching the Government to provide a supplement of £70 per week for geriatric patients being looked after in nursing homes but the Government were refusing to provide the money in respect of certain patients. Some registered nursing homes were in receipt of the supplement but the then Government would not consider paying the supplement in respect of more beds. At the same time there were being considered programmes for extra expenditure on new geriatric hospitals. Continuing also was the expensive administration of the health services through the health boards. One would not need to be an economic genius to realise the cost advantage of £70 per week as against £196 and to realise that if the service could not be provided for that money any loss would be sustained by the owners of the private nursing homes. For too long we have expected the State to act in a direct way.
The other area I am thinking of is that of school transport. It would be cheaper for the Government to pay the parent of each child attending primary school, say, £250 per year towards the cost of transport than to provide the present services, regardless of the new provisions. The bus drivers tell me that because CIE act as agents for the Department of Education, they could provide a service to the parents that would be cheaper while at the same time getting more from the parents than they are getting from CIE. One can only conclude that the bureaucratic, inefficient middle man, CIE, in their present structure are such that there is a basic lack of cost efficiency in the provision of primary school transport. If the boards of management of all primary schools were to find the coaches, engage the drivers and provide the service while we would give them 50 per cent of the total cost, I am convinced that the State would save money and that the parents would have a better service. At least they would not have to worry about being 50 yards on the wrong side of the road or about the distance they live from the school or about the ages of the children and so on. These then are two concrete examples of the sort of improvements I have in mind but, with some thought, I could go through each Department and find areas in which, instead of the State being involved directly in doing jobs or in providing certain services, if the money was spent by way of subcontracting, whether in regard to roads or any other area, we would have cheaper, more efficient and more cost competitive services.
I trust that by reason of the cutbacks there will be a new public awareness, a demand for better value and a lobby on TDs of the kind I outlined earlier for more expenditure and less taxation but for new efficiencies in the various areas. That is positive policy and should be pursued.
While accepting that the budget is a financial matter and is not directly associated with the question of employment policy, the principal tangible aspect in this respect in the budget is the cutting of the IDA grant to the extent of £6 million and the provision of £7 million for the National Development Corporation. One might think that £6 million is a savage cut in respect of the IDA who are under so much pressure in every area to attract more foreign investment, to fill the advance factories and to produce more jobs. While I have enormous respect for the IDA as a structure and for certain personnel within that body, I suggest that this loss of £6 million could be offset by closing down the public relations arm of the Authority. The IDA have become so big, though not as bureaucratic as some other State bodies, that their public relations arm is frighteningly inefficient and politicised, not in a party political way, but politicised in a way aimed at selling themselves, projecting themselves as being the ones who are doing a good job and that if it were not for them industrial manufacturing employment could not be maintained.
In my constituency one factory went into receivership, was liquidated but local representatives and business interests combined to get the company going again. The IDA rescue section were involved, providing a grant of less than £30,000. The company was reorganised under a new name employing 70 per cent of the previous number employed. Six months later the IDA announced through their public relations office that they had saved that factory and but for their intervention jobs would have been lost. The reality of the situation is that if they had not got help from the IDA grant they would have come under the employment incentive scheme, which would have been worth more than £60,000. It would have been better if the IDA had never been involved. Two major concerns were promised for Wexford for the past 18 months but after detailed negotiations, complex financial arrangements and difficulties in the legal area, they pulled out. The IDA are announcing too much and doing too little.
I am not blaming the IDA for the recession or for the difficulties they experience in attracting industries, but they have become so big that it appears one of their principal policy objectives is to defend themselves, which they are doing through sophisticated public relations exercises. Any money that could be diverted from that area and from expensive lunches and large expense accounts would not be a bad thing. I hope the cuts will be in that area and that they will not be felt by a reduction in grant payments to hard-pressed expanding industries.
The National Development Corporation was the fundamental aspect of Fine Gael employment policy prior to the election, and we will all be monitoring its progress. It is vital for this corporation, using IDA personnel and resources, to get involved in the secondary processing of our natural resources, whether it be fish dumped on the piers, or the processing of foodstuffs, or ensuring that we get a reasonable market and employment out of our afforestation programme. It is critical that in these areas we get our act together. If we do not we will be devastated by imports, although in all three instances we have climatic and physical advantages which should put us in a cost competitive position from the start.
In my opinion, apart from the co-operative movement, there is no relationship between the primary producers — farmers, fishermen and foresters — and the people trying to retail those goods. Our products are not being processed or are being exported on the hoof, or fish is being dumped back in the sea. This shows we do not have our act together in these areas. I hope the National Development Corporation will use the State equity to combine the primary producers and processors so that we get full added value and employment potential from these sections. I have made my views on this area known many times and I do not wish to pre-empt anything that might take place when we are dealing with the legislation in this area. The difference between the National Development Corporation and the IDA is that one is grant incentive to private industry and the other is State equity ownership to be injected and developed, to pull out when the firm is making money or when shareholders want to get the majority share-holding, and then the money can be channelled into new industries. The amount of money involved is not important but the National Development Corporation must be involved in businesses which are viable and they must get moving straightaway.
The cutbacks in the Department of Education, particularly those dealing with career guidance, as shown in the Book of Estimates published last November and agreed by this Government, are shortsighted and the Government should review this area. I appreciate that there is no scope in that Department to find this money, but the Youth Employment Agency should take up the full cost of career guidance in primary education. This agency is one of the few, if not the only, State bodies with enough money to the end of this year. That agency has pointed to the post-primary education system as part of a root cause of our employment problem, saying our educational system does not prepare young people for employment and that that might be the direction in which they could move and work in conjunction with the people at present administering the post primary education system.
I do not see any allocation in this budget for a scheme similar to that in Queens University, Belfast, where they have incubator factories. Residential State facilities should be provided for graduates, people who are unemployed, who have experience and want to do something for their country and themselves by creating wealth and employment. There could be a Start Your Own Business Centre run by the Irish Management Institute, AnCO, the IDA or some other State company.
The Minister referred to the task force on employment. I hope the sub-committee will not be at departmental assistant secretary level or departmental secretary level because the wheel will have to turn a great many times before it reaches the industrial level. If a person wants to do something tangible about a task force in my county he goes to the county development team and, instead of having one individual with half a secretary in the county hall, he gets a CTT man and an IIRS man. They provide a localised complete consultancy service on the ground. That effectively will help industry to cater for market changes and work on product development.
We must look at ways of spreading the work load, whether it be lowering of the pension age or job-sharing. The public sector must pilot such a scheme. In any discussion on employment people in politics must be honest enough to say there is no way there will be enough jobs for everyone in the short term, and that we must examine ways of spreading the existing work.
I come now to employment protection. As I have already said, if there is one useful thing that a Dáil committee could do, it would be to examine every redundancy which has taken place in the last three years, to see if there is a common ingredient contributing to so many factories in so many areas going out of business with a consequential serious loss of jobs. One ingredient is cost impediment but another lies in imports. I do not close my eyes to the reality of free trade, of our involvement in the EEC, of the advantages in terms of the common agricultural policy, beef and milk exports and exports of all farm produce — the advantage of obtaining £500 million or £700 million.
There are areas in which we are behind our European competitors in terms of bureaucracy, of technocratic red tape that simply prohibits exports. I give two examples. In my own constituency a manufacturer of ordinary household wire cables cannot export easily into Germany because all the licence application forms are in German and so many standards and regulations have to be applied that it is simply not possible. The position regarding France is worse and Britain now has a new measure for a basic cable standard for which licences costing money have to be obtained. You cannot sell cable on the British market unless you meet this standard. In Ireland, people import too readily, forgetting about the Irish producer. We will have to get our act together very quickly if we want to protect employment and must have regulations acceptable in terms of the EEC. Technical trade barriers must be set up to prohibit our importation of unemployment on a horrendous scale. One example is the milling industry, which subject I raised recently on the Adjournment. Unless we put VAT on flour imports at point of entry ——
The Deputy has less than five minutes left.
—— our milling industry will be devastated.
I dealt with the need for the Government to have a cohesive production and employment policy. When the fine print of this budget is examined, many savage and severe cuts will be seen to affect all sectors of our economy. There will be greater demands for extra expenditure and less taxation, which demands will be irreconcilable. We will have to accept some very painful surgery and must govern so as to ensure that by 1985 or 1986 we will have a fundamental basis for employment creation and for opportunities for our young people. Unless we have that, we do not deserve and cannot obtain any protection of, or increase in, living standards, because we simply will not increase our external trade, or protect our home markets sufficiently.
I commend this budget to the House. In the short-term it is difficult to sell, but in the long-term it will be seen to be nothing less than barely necessary.
It was very interesting to listen to the speeches of the last three contributors. Deputy Kelly of the old school was very sincere and quite entertaining. He is not pleased to be described as a conservative, but if we are not allowed to so describe him, there is no description left for the man. His contribution was very wide ranging and interesting from the political point of view, but it did not contribute very much towards economic thinking.
Deputy Brady was rather negative in his approach. I agree with quite a lot of his criticisms, but examination of the Estimates submitted by the outgoing Government reduces considerably his arguments. His remarks about the reducation in the allocation for local authority services, with which I shall deal, take on a completely different aspect. The Fianna Fáil Estimates for local authorities allocated £43 million less than the Coalition Government. The Deputy's argument against the Government is typical of Fianna Fáil arguments and bears out the very point which Deputy Kelly was making about the ideological similarity between the Fine Gael and Fianna Fáil Parties. As he said, the basic difference is the old Civil War drum. Both have approached the economy in precisely the same manner of cutting back on services and increasing taxation on precisely the same people, as always.
Deputy Yates pointed out how bad things are, how we have overspent and all the bad housekeeping which has resulted in the present dreadful economic situation. He does not ask who overspent, who were the bad housekeepers, or who brought us to this situation. Was it the ordinary citizen who works for a wage or salary, who owns no productive property, who is not involved in and who has not the facility to be involved in any wheeling and dealing and tax evasions? Did the ordinary citizen set up companies, liquidate them, set up a new company, liquidate it, buy villas in Spain or set up property companies, borrowing £30 million from the banks and then going out of business? The ordinary citizen is not involved in any of that wasteful expenditure which has brought us into this situation and was not one of those from whom the taxes were removed when estate duties, rates and wealth tax were abolished back in 1974.
Debate adjourned.