Deputy Gene Fitzgerald is in possession and has 22 minutes left.
Economic Situation: Statements (Resumed).
I outlined earlier the unemployment problems generally and also within my own region. This Government have an obligation during these very difficult times, yet every step taken by them in the area of employment is negative. I referred earlier to the cutback in the capital expenditure programme. What we need is an injection of political faith by the Government which will give encouragement to the community to overcome their problems.
The Taoiseach has already been approached by a deputation from Cork and given a full briefing by the harbour commissioners regarding the urgent necessity and desirability in the interests of the industrial survival of Cork of providing the money necessary for the deep water berth.
Deputy Mac Giolla spoke of the hoped for oil find off our shore. I hope it is a commercial find but I worry about references to the possibility of the oil being piped to Milford Haven. I demand an assurance from the Government that if this find is commercial the oil will be piped to our own State refining company in Whitegate, which is only 27 miles from the area of the oil find. If the oil is brought in by tanker there is a danger that there will not be a permanent link with the refinery. An act of political faith of this kind is badly needed in the Cork area.
There has also been reference in the course of the debate to the timber industry and it is to be regretted that the enterprise in Fermoy has had to close with the loss of 75 jobs in Fermoy and approximately 75 jobs in the forests. This is the kind of indigenous industry on which we should be concentrating more and more. This Government, since they took office, have failed to take one positive step forward in that area. The Cabinet sub-committee are remarkably silent. We have heard nothing from the task force or the Youth Employment Agency. The cost of unemployment has been allowed to continue rising. I can cite the case of an employer in my own city where 48 per cent of every pound generated goes into tax of some shape or form, VAT, PAYE, PRSI, postage, telephone charges and so on. What is left is supposed to cope with wages, material costs, etc. That situation cannot be allowed to continue.
In the presence of the Minister for Finance, I welcome the sympathy expressed by his colleague, Deputy John Bruton, at Question Time today when I asked him about the urgency of providing assistance to existing Cork industries. They are big employers, intensive industries, who, because of the very depressed situation, are suffering severely and finding it difficult to continue with their work force. I welcome the fact that the Minister will allow us to bring any such case to the attention of his Minister of State and I sincerely hope the Minister for Finance will express the same sympathy and will support Deputy Eddie Collins when we make the necessary information available to him.
At election time, Fine Gael said they would halt and reverse the trend of unemployment. The Labour Party said they would be a voice to be heard in Government. My God, what a voice. It is a whisper and who has heard it or when has it been heard last? When have we heard from a Labour spokesman for the Cork area regarding the dreadful unemployment there? It proves how empty the promises were and how the U-turns were taken.
Up to now I thought no Government could ever be superior to the Coalition Government of 1973-1977 in the area of press relations. I thought they had all the answers but they are only a pale shadow by comparison with these brilliant people. There is no doubt that the money which the Minister for Finance makes available for paying to the various agencies which they employed was paid to those who worked and contributed to the election of the Fine Gael Party. They did well, they got good appointments and contracts——
That is pure pretence.
They are doing an excellent job.
The Minister is on his own today, his colleagues have abandoned him.
Deputy Daly should allow Deputy Fitzgerald to continue.
I think I am hurting the Minister. He cannot deny that he spent a lot of money that we would prefer to see spent on more deserving projects.
It is obvious that someone in RTE, and I am very anxious to find out who, is now operating as Fine Gael election agent. As a member of this House I resent the patronage being offered by a State-sponsored station in recent times. I would have no hesitation in saying, even outside the House, that they are being manipulated by people in high places. On Thursday night there was a so-called programme which was a party political broadcast. Then the Fine Gael Ard Fheis was covered. Of course that was understandable and would be given to any party. It is acceptable. On Sunday we had an appearance by Justin Keating, a former Coalition Minister, in his usual spot. On Monday we had a member of the Labour Party, Senator Robinson, and we also had the Minister of State, Deputy Nuala Fennell, appearing on a programme. On Tuesday we had the Minister for Education who performed very well and today, I understand, we had Mrs. Bonneti who is a possible candidate in a forthcoming by-election. I am not sure who will be appearing tomorrow. The Minister had his turn recently and, obviously, before the week is out we will have many more.
They are very interesting people.
I have met several irate people recently who are dissatisfied with the bias shown by RTE and say that the only cure is not to pay their television licences. I certainly do not approve of that and I condemn it but I had quite a number of telephone calls over the weekend pointing out that that is the only language that RTE understand. RTE must realise that we are the biggest party with the greatest volume of support in the country and that it will not be too long before we are back in Government. I am glad to be a Member of the Joint Committee on State-sponsored Bodies and perhaps I will be able to question them on that subject in the near future.
We have to take every possible step to preserve existing jobs. I have always believed that too much lip service has been paid to the buy Irish and sell Irish campaigns. This Government appears to have no commitment to such a campaign and I urge that, within reason, they support any measures to protect our own products. I appreciate the dangers and difficulties of protectionism and the harm it could do but there are areas where we can help in a big way. For example in my city there is dumping of British newspapers. It is startling to learn that a well known English newspaper is now taking second place in sales in Cork city. For many reasons, that is a frightening situation. However, the reasons for it are obvious because it is being dumped at a price. When all of the factors are taken into consideration it is being sold a lot cheaper than in the UK. That serious situation must be faced up to. We must remember that it could have a serious impact on jobs and we cannot afford to lose any more jobs in Cork or anywhere else. The Minister should have the matter investigated by one of his many Ministers of State. He should investigate this matter rather than going to London to make the speeches he is not permitted to make at home. Those he makes in London are unusual in that there is a different slant to them. He would be better employed investigating matters at home such as the dumping of newspapers. Another serious repercussion could be a take-over of our newspaper industry by foreign concerns. This question should be examined as a matter of urgency.
The construction industry is experiencing its worst recession, even taking the fifties into consideration. At least 50 per cent of that workforce do not have a permanent job and prospects are not good. The only hope is for an improvement in the capital budget programme. We cannot be sure what the work situation will be in 1984 and that is one of the reasons why I condemn off-the-top-of-the-head comments by the Taoiseach. There is no doubt that academics have an important role to play in life but statements by academics who do not have experience of the hard facts of managerial life can be dangerous. It was wrong for the Taoiseach to pluck a figure like £500 million out of the air and then argue later that he did not say £500 million but a figure of the order of £500 million. The figure does not make much difference because the Taoiseach's statement tended to depress, undermine confidence and prevent the creation of some extra jobs. People will not be inclined to create employment until they see where the cuts amounting to £500 million will be made. I have heard rumours to the effect that cuts will occur at Moneypoint although commitments have been made in regard to the third phase of that project which is probably the only worthwhile heavy construction project in progress at present. I do not have to stress in the House the need to preserve our skilled work force until we reach better times.
The Government seem to have a new laissez faire approach to industrial relations. Strikes, disputes and threats of disputes are widespread and nobody appears to care to any great extent. We have a seven-week-old strike in Industrial Gases — a matter mentioned last night — and the consequences for that industry could be horrific because many jobs are threatened. I accept that the area of industrial relations is not an easy one and progress cannot be achieved in it overnight. Deputy Kelly, in the course of his contribution, made an important point about lecturing workers. The Coalition Government from 1973-77 not only created an air of doom and gloom, as is happening at present, but they lectured to many people. This morning we had some more lecturing from the Labour Party leader, a new role for such a person, who told us what we should be doing and how.
We need leadership and an injection of faith by the Government. We need the same type of patriotism that was shown before, patriotism in the workplace where we all work together in the interests of the country and our young population. This year we did not have sufficient places in our third level institutions for our young people and we do not have jobs for them. However, they represent our greatest asset and must not be neglected or misused. Conditions may not be as comfortable as they were some years ago but the national consideration should be paramount in the workplace. The Government have preached about financial rectitude and told us of the importance of getting the books right but they have failed in that regard and that was highlighted by our leader, Deputy Haughey, this morning. The press relations that have been working for the Government are wearing very thin and will not last much longer because people are beginning to ask questions. A year has passed since the Coalition came to power and the unemployment trend has not been halted, let alone reversed. The voice of Labour has dropped to a faint whisper and there is little joy or expectation from the Government. We need leadership and the Government must alter their course. I appeal to the Government to place the creation of employment at the top of their list of priorities. We do not need lip service. The Government should investigate the best way to preserve the many jobs placed in jeopardy because of the downturn in economic activity. They should ensure that the balance of expenditure is in the right direction and see to it that costly, and often wasteful, social welfare payments are directed in a more positive and productive way for our future.
The Government welcome this debate on the current economic situation. We should know what Members feel about the situation facing us and what answers they believe should be given to our problems. I am bound to say on the last point that we may have to wait for a long time because no answers or specific suggestions have been put forward. All we are faced with from the Opposition is a denial of a plan they put forward in November last and presented as being the way forward, the way out of our difficulties. It has now been ignominiously jettisoned. We have a repetition of proposals made many years ago which the party in Opposition had an opportunity of trying out while in Government but which, for their own good reasons, decided not to do so. On that point I give them credit for having some sense but I do not see why the rest of the country should be subjected to these fairy tales from Fianna Fáil in Opposition when even they would not dare to perpetrate those nonsenses while in Government.
Debate on our economic situation in the House should be more than a recital of proposal and counter proposal, a series of attacks and replies. It should be an occasion to examine the fundamental basis of the Government's approach, the approach of the House and our people to the improvement of the welfare of our people in the circumstances which face us. To do this we must look at the whole situation and not just at discreet separate pieces of it. I believe that the debate on our economic problems here has suffered greatly from a general tendency to concentrate on specific parts of the problem and a failure to take a wider view of the needs that face us and of our ability to meet them.
This creates an illness, a disease that I call the "single issue syndrome", public attention being seized by those who concentrate on specific issues or specific sectors. They put forward with skill, conviction and a great deal of persuasion, and mostly in good faith, measures to deal with the problems as they see them. We have all heard such cases being made. In fact, many of us made those cases ourselves. In their own terms these cases may be sustainable and produce the benefits that are claimed for them. The difficulty is that when they are all added together they produce a combination of requirements for support of different kinds from the Exchequer which is unsustainable. That is a major difficulty we have in economic debates. Even in this House it is extremely difficult to get people to put the various pieces together, to look at the overall picture, and to judge each of the separate measures that are being defended or promoted in the light of what the overall picture indicates we can do, of what can be afforded and the combined effects of the different measures being defended. Much of the disappointment and disenchantment with our economic and political system stem from this single-issue approach to our problems.
The Minister is scaring the wits out of his backbenchers.
They are not rallying behind him.
We should have a House to hear the Minister.
The Deputy does not like the trend of my remarks. He is trying to create a diversionary tactic. However, he will hear the rest of it.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
Much of the difficulty we experience today in responding to the problems which face us arises directly from an excessive inclination in past years to respond separately to the separate demands which were made without enough attention having been paid to the overall framework of action or to the relationship between the different measures taken. This unco-ordinated response to separate and often conflicting demands has given rise to an unrealistic expectation that such demands can all be met simultaneously. It has given rise to expectations about real income levels which cannot be sustained by a country in our situation. We must break away from that kind of approach to economic debate. We must focus on our real, fundamental requirements and agree on the measures to meet those requirements which are realistically within our capacity.
I want to make it quite clear that the central concern of Government policy is employment. In recent years we in this country, in common with most other countries, have experienced a dramatic increase in the level of unemployment. However, our difficulties have been greatly compounded by demographic factors and by the signal failure of policies and attitudes to adjust to the fundamental change in the economic order that was brought about by the recession in the period 1979 to 1982.
We have now 193,000 people out of work. Each year a further 20,000 people come on to our labour force and this rate of growth is likely to continue into the medium-term. This has profound implications for economic and social policy here and for the choices we have to make in those areas. For example, it means we must create 20,000 new jobs each year before we can even begin to make any attack on the total level of unemployment. That is a rate of job creation we have never been able to sustain over any period. If we are to deal with the problem it means we will have to change fundamentally the attitudes we take to economic and social policy and decision-taking.
The enormity of the task facing us can be gauged from our performance in recent years. From the middle of April 1979 to the middle of April 1982 the number of new jobs created in industry and private services exceeded job losses in those sectors by only 2,000 annually.
I see the Minister's script has arrived.
I shall speak slowly when I am not reading from the script and, if necessary, I will signal that in advance for the Deputy.
The Deputy has the script now.
I appreciate that. I want to point out to the Deputy that he may hear some things that are not in the script. Sometimes I tend to get carried away by my concern to explain things in the greatest possible detail to Deputy Fitzgerald. I know he takes most of his opinions from the newspapers and since they are often inaccurate I wish to make sure we will not suffer from that disability here. I know the Deputy is very suspicious of the media in general.
No, in particular.
He spent some time a few minutes ago explaining to us about the conspiracy he sees in the media, not even to misrepresent his party but simply not to represent them at all. I am concerned to make sure that in reading and listening to me today the Deputy will have all the information he needs to react.
As I pointed out, from mid-April 1979 to mid-April 1982 the number of new jobs created in industry and private services exceeded job losses in those sectors by only 2,000 annually. Taking account of the labour force growth and the outflow from agriculture — and excluding the public sector contribution — there was an annual shortfall of some 28,000 in the rate of private sector job creation required to prevent unemployment increasing. In manufacturing industry, which should be the main source of new jobs, there was a net loss of more than 24,000 jobs over the three years of 1980 to 1982 with estimated job creation of over 55,000 being more than offset by estimated job losses of nearly 80,000.
The striking feature of these statistics is the extent of the haemorrhage of jobs. If we had managed to preserve existing manufacturing employment since 1979 our success in creating jobs would have ensured that the rise in the numbers out of work during the recession would have been far fewer. This underlines the vital importance for the future of directing our collective actions at creating all the conditions necessary to improve every aspect of our competitiveness.
I point out these figures not to make any particular point about Governments that may or may not have been in office during that period but to underline what is far more important than any political argument in this House, namely, the simple fact that our population structure means that in order to get within any kind of striking distance of reducing unemployment we have to create 20,000 new jobs each year. That is something that should inform all our decisions on economic policy, social policy, taxation policy and on all the other individual desirable items which all of us tend to promote from time to time as being desirable in order to make social and economic progress.
There are other elements in our population structure which emphasise the vital urgency of the approach which I have been setting out here. We have the fastest growing population in Western Europe. Our rate of natural increase is 1¼ per cent per year and from recollection I can think of only two western countries, one being Yugoslavia and the other Turkey, where there is anything like that rate of net population increase in a given year. We also have the youngest population in Western Europe and we have the highest dependency ratio. For every three people at work there are four other people either under the age of 15 or over the age of 65. This situation creates its own problems in terms of the demands on the public purse and, therefore, on the taxpayer. It further underlines the crucial importance of job creation for us because if we do not raise the numbers in the active age groups who are gainfully employed those who are at work simply will not be able to support the continuation, even at present levels, of the wide range of public services which have come to be expected from government, not to speak of any improvement in the volume, range or the quality of these services.
I do not think that we are sufficiently aware of the dramatic implications of this situation. These implications are many, and a few examples will illustrate their magnitude. The increase in our population creates inevitably an extra demand for educational facilities. It creates extra demands on our health services. It creates an extra requirement for investment in housing, whether publicly or privately provided. It creates extra demand for sanitary services and for transport infrastructures. It is clear that these extra demands must be met to some degree, either from public or from private resources. The very act of meeting these demands, however, pre-empts our ability to meet other demands which are not directly connected with those demographic trends. Thus, the level at which we decide to meet these demands and the balance in our response between public and private provision are questions which ultimately affect our ability to devote resources to other uses.
There is a clear need for a new national consensus on the ordering of our priorities. Without such a consensus, we will have division and dissatisfaction, and judging by our experience in recent years, an allocation of resources out of time with our fundamental needs.
This Government are determined to bring about the necessary consensus, both through realistic discussions in this House and with the social partners, and through the development of the process of medium-term planning. Consensus-building and effective planning both require, however, that we start from a solid base. That base must be stability and control in the public finances. In fact our public expenditure, fed by the increasing demands of a rapidly mounting burden of debt, has now reached the enormous total of over two-thirds of our GNP, with current expenditure equivalent to over half our GNP. This puts us rather high in the "big spenders" league, substantially above countries such as Germany and the UK which have higher GNP per capita than we have.
There would be nothing inherently wrong with a high level of public expenditure if, as a community, we were willing to accept the inevitable consequences, namely a high level of taxation, lower personal disposable incomes and a reduced level of private provision of goods and services. They go together operating within the constraints of a given level of GNP. The problem in our case seems to be that we want an ever-increasing level of publicly provided goods and services, lower taxation and higher personal disposable incomes. The huge gap between current revenue and current expenditure is a direct result of attempts to secure these three objectives simultaneously.
We have seen in the last few years just how disappointing efforts to meet those three objectives simultaneously have been because we do not attain the objective of lower taxation, we do not attain the objective of higher personal disposable incomes and we do not attain the objective sought after by many of an increased level of public provision of goods and services. An attempt to meet these three objectives at the same time inevitably gives rise to a failure to meet any one of them and, therefore, the kind of dissatisfaction that we find today among our community. This House and all of us in it owe it to our communities to explain why that should be the case and to inform our own actions and their expectations accordingly.
There have been many complaints during the past year about the level which taxation has now reached in this country. Many people feel that we have already gone too far in that direction and that the point of diminishing returns has been reached or even passed in some areas.
Our tax rates are undoubtedly high. International comparisons show that we are above the average for OECD countries in terms of taxation as a percentage of GDP, despite the fact that our per capita GDP is lower than that in most of these countries. The situation is aggravated by the narrowness of our tax base, which requires very high rates of tax in particular areas. To give an example, the fact that we prefer to maintain a zero rate of VAT on a large area of consumer expenditure means that the other VAT rates must be correspondingly higher. If all goods and services were taxed at one common rate, that rate could be as low as about 14 per cent.
On the income tax front, the wide range of allowances and reliefs available reduces the tax base and requires higher rates to achieve a given yield. For example, loan interest relief means that the Exchequer will forego over £80 million in this tax year; the child income tax allowance will reduce tax revenue by over £30 million. There are extensive reliefs also for businesses — the export sales relief scheme reduced tax liability by over £100 million in 1981-82, and capital allowances for buildings, plant and machinery are together of a similar order of magnitude.
There are calls for more reliefs and reduced taxation in other areas. Yet, collectively, we all want public expenditure maintained, or even increased, although individually we might be prepared to countenance cuts in areas which do not impinge on our own particular interests. The fact of the matter is that as a result of deliberate choices we have narrowed the tax base and yet continue to expect a level of public provision that is more in accordance with what the tax base would be if we had not restricted it in the way we have.
These moulds of perception will simply have to be broken because we are faced with the objective imperative of reducing Government borrowing. The necessity for such action should be evident to anybody who makes a serious attempt to analyse our situation. In 1972-73, the Exchequer borrowing requirement, covering the current budget deficit and the capital borrowing requirement, amounted to 5.8 per cent of GNP. It reached 17.1 per cent in 1981, and this year will be between 13 per cent and 13½ per cent of GNP.
The current budget deficit, which came to 0.26 per cent of GNP in 1972-73, has risen in all but three years of that period and this year will amount to about 6¾ per cent of our GNP. During that period borrowing and its consequences have created a growing problem not just for Governments but for the whole community and, in a very real way, for every taxpayer. By the end of this year our total national debt will be some £15,500 million — over £4,500 for every citizen of this country. The service of Exchequer debt will cost some £1,700 million this year, or about 32 per cent of total tax revenue.
In the absence of corrective action our total debt and our debt service commitments would continue to grow, eating further and further into our current resources and leaving less and less room for manoeuvre in relation to our fundamental requirements. We cannot allow this to happen. Our concern with corrective action is directly inspired by our desire to be able to respond to our real problems today and to be able to plan properly for what we know will face us in the foreseeable future.
In this connection I cannot stress too much the fact that we know that facing us in the years immediately ahead is an increase of 20,000 every year in the number of people looking for jobs. We know that they are there and that there will be 20,000 extra next year and another 20,000 the following year and another 20,000 the year after that. I go back to the point I made earlier: that we must provide employment for those people before we can start to reduce our current level of unemployment. That is why it is important for us to get control of the public finances. That is why it is important to reduce our debt servicing commitment. In effect, this means getting back control of the resources we will have in 1984, 1985 and 1986 to deal with the problems and requirements we will have to face in those years.
As I have said, every citizen, every taxpayer, is involved directly in this problem. The prospects for real relief in the overall weight of taxation depend directly on getting the problem of borrowing under control. This year we have made a start on that road, and we will continue to follow that course.
As I pointed out in my budget statement last February, the origins of this dilemma go back about ten years. Following the massive oil price increase in 1973, we followed the option of maintaining our standard of living by recourse to borrowing rather than adjusting to the reality of the transfer of real resources to the oil producers. Some efforts were made to redress the situation in the mid-seventies but these were reversed in 1978, despite the relatively favourable economic conditions at the time. Following the second oil shock of 1979-80, and despite budgets which gave the impression that action was being taken, we actually increased our level of borrowing further. As a direct result of these failures of policy, we are now in the position of having little or no room for manoeuvre at a time when we most need it. That is a situation that no Government should contemplate with anything other than a firm determination to get ourselves out of it as quickly as we can.
What is perhaps the most disturbing feature of those years was that, when the present leader of the Opposition became Taoiseach, he diagnosed the problem correctly — Deputy Fitzgerald's problems did not seem to exist then — and went on television to address the nation about the state of the nation's finances. He said, correctly, that "we are living beyond our means", that "we have been borrowing enormous amounts of money, borrowing at a rate which just cannot continue" and that "we will have to cut down on Government spending". But what did he do about it? Current expenditure in 1980 and 1981 increased by 28 per cent each year, the highest rate of increase ever recorded here. The Exchequer borrowing requirement increased by over three percentage points of GNP, reaching the highest level recorded of 17 per cent. If we had not taken action in the supplementary budget in July 1981, when we took office, the EBR for that year would have been even higher. It was the reversal of the trend in the public finances in 1978 and the inability of the current Leader of the Opposition to implement the policies which he recognised to be necessary which landed us with the massive problem which we face today.
As I said, we made a start on remedying the position in our July 1981 supplementary budget. In 1982, the overall Exchequer borrowing requirement was at least kept slightly lower as a percentage of GNP than in 1981, though the current budget deficit still rose to its highest ever level of 8½ per cent of GNP. In 1983, however, the apparently inexorable worsening in the public finances, inexorable as it had been up to then, has been decisively halted and reversed, an achievement which the EEC Commission has commended in its recently released Annual Economic Report for 1983-84. It is a significant indication of our careful monitoring of the budget position that this year, for the first time in five years, the actual current budget deficit for the first nine months of the year was below the original budget target for the year as a whole. This year, for the first time since 1978, the final outturn will be close to the original budget targets. It will also be the first time since 1977 that a significant reduction in the Exchequer borrowing requirement will have been achieved.
These are important indicators not only that we want to get the public finances under control but, more importantly, that we are able to set targets and stick reasonably closely to them. This will re-assure our foreign and domestic creditors that they can rely on this Government to achieve their stated aims.
There has been a lot of discussion during the past year about whether the balance between revenue and expenditure measures in the 1983 budget was the most appropriate. Undoubtedly the main emphasis in that budget was on increasing revenue, and I readily accept that the level of some particular taxes is now very high. But the House is aware also that there was significant action on the expenditure side. The rate of increase in current expenditure was kept far below that achieved for over a decade. In fact, one must go back as far as 1967-68 to find an increase as low as the 13½ per cent which is emerging for 1983. I might add that the figure in itself is not a particular cause of satisfaction; it is the trend that is important. The figure in itself is even less a cause of satisfaction when I recall that the weight of debt service that we must deal with this year means, as I said in my budget statement last February, that in a year when the object of public policy should be to act in a counter-cyclical way, we have not the room to do it as a direct result of what has gone on in the previous five years, if not more.
Given the faster increase in debt service costs due to the high borrowings in 1982 and the increased take-up of certain services due to demographic and other factors, restricting the overall rate of increase in current expenditure to 13½ per cent was in itself an achievement. It stops the strong upward trend in current expenditure as a percentage of GNP. More importantly, it is a step towards reducing the escalation of debt and of debt service costs. It is a step towards regaining control of our own resources, for use to the benefit of our own people.
This adjustment is a difficult process, but the House can be assured that there will be an honest and systematic rethinking of national priorities — priorities which became blurred if not indistinguishable in the years when the cost of delivering services rocketed and when every sectional demand was converted into new and expanded expenditure programmes, without any regard to the willingness or capacity of ordinary taxpayers to pay for them either in the short or the long run.
These, then, are the realities of our situation and they have been confirmed by the EEC Commission. Anybody who pretends differently is doing grave injustice to our community and to future generations. That goes in particular for those who are now suggesting that some unspecified reflationary measures would be appropriate. There is, in fact, no alternative to adhering to our current policies. They are the policies which carry with them the best chance of ultimate success and we have already seen them create the basis for this success.
Within the framework of these policies the Government are, of course, prepared and anxious to assess the balance between different measures in order to ensure the maximum positive economic impact.
Apart from the decisive stabilisation of the public finances, the improvement in our balance of payments has been little short of dramatic. In spite of corrective measures in 1981, the balance of payments deficit soared to a peacetime record level of 13½ per cent of GNP leading to heavy losses of reserves which had to be made good by borrowing. This year, we expect the balance of payments deficit to be under 3 per cent of GNP. Our trade figures for the first nine months of 1983 confirm this improvement. In this period, the gap between our merchandise exports and merchandise imports was £380 million, a reduction of £609 million, or over 60 per cent on the corresponding period in 1982.
The trends in the public finances and external payments are regarded universally as the two most important indicators of the soundness of a country's policies and, therefore, of its credit-worthiness. We have recently benefited from our achievements in these areas by successfully floating substantial loans on the US and UK markets, despite the continuing international financial uncertainty. In case anybody on the other side of the House might find some apparent inconsistency between that remark and my satisfaction at having been able to raise those loans and what I said earlier about our total borrowing requirements, I would make it very clear that the borrowing requirements of 1983 and the level of our borrowing for 1984 will be entirely consistent with the overall objectives that I have set out that we must achieve in order to give ourselves the leeway to respond next year and in future years to the problems as we meet them in those years.
Our success in controlling inflation is no less impressive than our achievements on other fronts. Inflation ran at an annual average rate of 17 per cent between the years 1979-82. We have reduced this substantially. The consumer price index in the year to mid-August 1983 rose by 10 per cent. If we exclude the effects of increased indirect taxation which the Government were obliged to introduce to control the public finances, the underlying inflation rate is now well into single figures.
During the course of his remarks this morning, Deputy Haughey made a reference to inflation and made the point that, in fact, inflation seems to be accelerating. I am not sure how he does his sums, but to my mind a reduction in the rate of inflation from 17 per cent in 1982 to 10 per cent, or 11 per cent which is the range that it will turn out for the year of 1983 is, in my book and in the kind of arithmetic which I have been taught and which I have used, indeed, a reduction in the rate of inflation. The underlying rate of inflation, as I have said, which we adjust for indirect taxes is well down into single digits and that is progress on that front which no amount of fancy arithmetic is going to gainsay.
We are proud of our record so far in reducing inflation. We are determined to reduce it even further to the low levels now prevailing in the stronger industrialised countries. The achievement of low single-digit inflation is a key element in our overall strategy for restoring competitiveness and for restoring the dynamism necessary to get the economy moving again on a path which will enable us make substantial progress towards reducing unemployment.
Productive investment and, therefore, job creation are encouraged by the existence of a favourable interest rate structure. We must do all in our power to ensure that our domestic economy is well placed to take full advantage of any favourable international trends in interest rates. There are occasions when events outside our control, other than a change in the trend of international interest rates, can have a significant short-term effect on domestic interest rates. One such occasion was the period immediately before and immediately after the realignment of currencies within the European Monetary System which took place last March. The money market pressures associated with that realignment led to a temporary increase in associated bank interest rates but this increase was fully reversed by 1 July last for all borrowers.
By the third quarter of this year, it was clear that the corrective measures which the Government took at budget time were paying dividends, particularly in the form of the much reduced balance of payments deficit which I have already mentioned. These policies made it possible for the associated banks further to reduce their interest rates by up to 1¼ percentage points with effect from close of business on 23 September last. This reduction brought associated bank interest rates down to their lowest level since 1978.
I welcome this reduction in interest rates as, indeed, does everybody connected with business or the provision of employment here and I hope that it will lead to an increase in the level of productive investment without which we could not hope to create the jobs needed to solve our unemployment problem. Government policy is designed to ensure that domestic interest rates can be reduced as quickly as possible to a level consistent with a balanced economy and the level of international interest rates. Therefore, as we restore financial balance to the economy over the coming years, we will be creating a climate which should allow a level of domestic interest rates below that which would otherwise prevail. For the moment, the scope for further reductions in interest rates is mainly dependent on a resumption of the downward trend in international interest rates.
The marked improvement in our balance of payments deficit this year has also facilitated a significant increase in our official external reserves. At 30 September last these reserves stood at £1,914 million, an increase of £320 million on their end of 1982 level of £1,594 million. At this level, our official external reserves are the equivalent of well over one-quarter of the estimated cost of our merchandise imports for the whole of 1983. We are now in a position where we are better insured by the level of our external reserves than we have been for many years.
An aspect of the turn-around in our balance of payments which deserves special mention in looking at the domestic economy is the performance of industrial exports. Last year, despite world recession, these exports rose by almost 11 per cent in volume terms. So far this year, they have equalled that achievement and it is reflected to a considerable extent in the trend in manufacturing output so far. In the period from January to July last, manufacturing output rose by 5 per cent on the corresponding period of 1982. I must say that I derive an extra degree of satisfaction from this statistic because, after I had pointed to the growth in manufacturing output in the course of the Adjournment Debate in this House on I July last, I was accused of playing fast and loose with the figures. I am glad to be able to say that my objective assessment of the situation at that time has been borne out by subsequent developments. I might also point out, in passing, that if anybody is playing fast and loose with figures it must be he who today sees the change from 17 per cent in 1982 to 11 per cent in 1983 as an increase, or something going in the wrong direction. I stick to my guns.
These heartening trends in industrial output and exports are an indication of what we can achieve when world recovery gathers momentum. So far, the base of the renewed growth in output is a narrow one, although it is widening. But if we act to secure it, there is no reason why the recovery now under way in certain sectors of industry could not be quickly extended and accelerated to embrace all aspects of economic activity. We would then achieve a dramatic improvement in the employment and investment situation.
The opportunities open to us are expanding with the recovery in the world economy which is now becoming increasingly evident. Recently, I attended the annual general meeting of the IMF in Washington and was struck by the mood of cautious optimism about the world economy which had replaced the gloom that was prevalent a year earlier. The consensus at that meeting was that, for most of the major economies, the recovery phase has set in. There are, of course, doubts about the sustainability of the recovery, particularly as many of the difficulties which prolonged the recession have yet to be resolved. However, it is clear that there is a widening appreciation among the major trading countries of the world of the degree of interdependence between all of our economies. A recession, in fact, is something which to the analytical observer will bring home that fact very quickly. I am confident that that increased appreciation of our interdependence will assist us in having economic policies in major trading countries cast in a mould which will allow us to benefit from the expansion in their activities. That in itself should tend to support the recovery which is now emerging.
I should like to turn to some of the statements made earlier in the debate. I have mentioned one or two of them. The Leader of the Opposition said that practically every indicator points downwards. I cannot see how he can possibly sustain that kind of remark in view of the factors which I have been outlining. This year we had a net improvement in the level of manufacturing output. We had an extremely good performance this year in the level of industrial exports.
The gentlemen and ladies on the benches opposite often accuse people on this side of the House of doom and gloom. They excel any performance of doom and gloom there has ever been when, in the face of a pick-up in manufacturing output and exports and an improvement in our balance of payments situation of the kind I have outlined, they can see indicators pointing in the wrong direction. They are indulging their long-standing talent for looking the other way and not seeing what is going on in our economy.
Deputy Haughey also said the fall in the balance of payments deficit reflects a decline in economic acitvity. He is partly right, but it also reflects an improvement in our export performance. I should like to draw attention to some of the things pointed out in the quarterly report of the Central Bank published today in relation to our balance of payments deficit. I should like, if I may, to read a passage from it——
Briefly.
——which will illustrate what I am saying. It has very important implications for the way we manage economic policy from here on. On page 6 they say:
The position in relation to the balance-of-payments deficit, while undoubtedly encouraging at present, is partly dependent on certain factors which could well be transient. The deficit will begin to deteriorate again as imports resume a more normal relationship with domestic demand; as the latter expands, partly as a result of a reversal of the recent rise in the savings ratio; and as oil and other commodity prices respond to international economic recovery. The resumption in foreign investment in Ireland, which it is hoped will accompany the international upturn, while ultimately beneficial to the economy, will provide an immediate boost to imports.
I wanted to quote that because it is very relevant to our situation and to the course of our policy from here on. The paragraph concludes as follows:
There remains, therefore, an underlying balance-of-payments problem and a corresponding need on that account to persevere in the process of restructuring the economy on a more competitive basis.
I should like to quote one more passage from page 7 of the same report which is relevant to this debate.
Will it be the Minister's last quotation?
It will. The second paragraph on page 7 reads:
Restoring balance to the public finances is not an end in itself.
I could have written this passage myself, but I have not got the pleasure of working for the Central Bank. It goes on:
It is a necessary means of avoiding the pre-emption of resources that would otherwise be available in future for employment in both the public and private sectors.
That will be my concluding reflection. I have been concerned today and for the past ten months to point out that balance in our public finances is not something we seek for the sake of elegance of presentation or for any accounting reasons. Fundamentally we need it to get our hands free so that year to year we can deal with the problems which arise. I have pointed out the one the Government believe to be the most pressing of all.
The Minister should please conclude.
I am arriving at finality. We must make sure that we do not follow a path of current expenditure, current consumption and not very selective capital investment which would very seriously endanger our ability to provide employment for our young people. I submit to the House that that was tried from 1977 until 1982, with a short interruption in 1981 and the early part of 1982. That policy has failed and has put us into the difficult position we are in today. We will not continue that kind of policy because that is not what the country expects from us.
I listened to the Tánaiste's opening statement this morning and to the Minister for Finance just now, and I regret to say I do not see much cause for hope. The Government's policies have failed over the past year. We have high taxation and a rate of VAT which is doing damage to one of our major industries, the tourist industry, and to many businesses in the Border areas in particular. We still have a high level of borrowing. To hear the truth from those in positions of responsibility would give confidence to people outside. It is important that the people should be told the truth about borrowing.
Borrowing started in 1973 on a high scale and reached as high as 16½ per cent of our GNP in 1975. It did not start with Fianna Fáil Governments. It was started by the Coalition Government in 1973 on an unprecedented scale. The Minister told us inflation was going down and he took pride in his contribution to bringing it down. On page 8 of the Central Bank Quarterly Bulletin published this morning it is stated:
The reduction in the rate of inflation which had been taking place since early 1982 ceased and, indeed, the rate has begun to rise again.
They project 11 per cent inflation by the end of the year. There is nothing about single figures and nothing about inflation coming down. They say that inflation, which had begun to come down when Fianna Fáil were in office, is now rising again. I contend that is a direct result of the policies pursued by this Government.
This morning the Construction Industry Federation made a submission to members of this House. They said the most alarming feature is the prospect for the proximate future and that all the indicators point to further decline unless there is a change in Government policy. Nobody can suggest that they are here on the Opposition benches making those statements which the Minister for Finance is not prepared to accept.
Many people have no confidence in the Government. Many of them are unable to meet their commitments as a result of the Government's policies. We are told disposable income is down by 3 per cent. Members of local authorities are well aware of the unprecedented number of people who are unable to meet their repayments to local authorities. The policy the Government embarked on has done nothing to deal with the problems they set out to deal with. The Taoiseach made it clear earlier this year that the policies they were pursuing were diametrically opposed to those necessary to create jobs and to create employment. At column 841, Volume 342, of the Official Report of 11 May 1983 the Taoiseach said:
The fourth factor affecting our employment situation has been the deterioration in our public finances. Given the scale of unemployment and the fact that much, but not all, of it is determined by external events, government should, in the face of the resulting crisis, seek to alleviate the problem by reducing taxes, stimulating domestic growth and creating employment opportunities where there is necessary infrastructural work to be done, whether it be road building, housing, the construction of schools, the development of telecommunications and so on. No Irish Government, whoever they might be, can at this time take such action on an adequate scale because the public finances are in such disorder that the maintenance of public solvency requires action diametrically opposed to that which the employment situation demands.
In fairness to the Taoiseach, he made it clear that at that time the creation of employment was far down on his list of priorities. We contend that the creation of employment should be the first priority of Government.
The Minister for Finance spoke about lower bank interest rates and said he hoped they would lead to productive investments. The first thing people need for productive investment is confidence in the Government. I regret to say the people do not have confidence in this Government not only because of the policies being pursued but because they are reading all the time about disagreements between the parties which make up the Coalition Government.
Consumer spending is down. The Central Bank Report this morning stated that the fall in the volume of domestic demand in 1983 was estimated to be somewhat greater than previously expected and that the volume of both investment activity and consumer spending, the main components of domestic demand, are now expected to fall back to the lowest level for several years. When the Minister was quoting from the Central Bank Report he seemed to have overlooked that paragraph.
Since this Government took office the unemployment rate has increased by 33,000. In September 1982 there were 169,000 people unemployed and in September 1983 there are 193,000 unemployed. We are now facing the winter months when we can expect those figures to rise even higher. In May 1983 when the Taoiseach told us the policies he was pursuing were diametrically opposite to those needed to create jobs, we had 15 per cent of the civilian working population unemployed, the highest percentage in Europe.
There are more than 20,000 young people coming on the labour market every year. Nothing we heard today from the Government benches will instil any confidence in the Government. The Tánaiste recognised the seriousness of the unemployment situation, the serious socio-economic implications and the serious social problems created for those unfortunate enough not to be able to find work, but he offered no real solution.
Government policies have contributed in many ways to the fact that jobs are not available. Manufacturers, those in business and those who might set up businesses are deterred by high taxation, high rates of PRSI and the number of levies charged. They are afraid to take the opportunity to start up a business or to employ more people.
Deputy Haughey said this morning and on another occasion that there should be a reflationary policy. He suggested that the rates of duty on such items as spirits, petrol and electrical goods should be reduced. He was criticised for that by the Taoiseach on an earlier occasion and he was criticised here this morning. If one lived north of the Boyne in any of the Border counties one would realise how right he was. There are people living in the Border areas who have not bought a gallon of petrol on this side of the Border since the last budget. If one crosses the Border one will see many motorists from the Republic queueing at the petrol stations. Whiskey sales have decreased 60 per cent in the Border areas since 1981. It is estimated that as a result of electrical goods being bought in the Six Counties £50 million is lost to the State, apart altogether from the money lost to the business houses in the Border towns.
All the towns along the Border are feeling the economic depression. In County Monaghan in December 1982 64,900 gallons of petrol were sold on the forecourts of garages and in April 1983 that figure had dropped to 19,100 gallons. That is an indication of the effects of this Governments' taxation policy on business on this side of the Border and in loss of revenue to the State. Deputy Haughey was right when he said that if petrol were the same price on both sides of the Border it would no longer be attractive for people to cross the Border so often because when they are in the Six Counties they purchase many more goods. It is estimated by the Border traders, from Donegal to Louth, that £150 million in revenue is lost to the State as a result of cross-Border trade.
One of the reasons that no action is taken to correct this situation is that, for the first time in the history of the State, there is no Minister from a Border constituency at the Cabinet table. I am sure that you yourself, a Cheann Comhairle, when you were a Minister in previous Governments made many contributions concerning the special problems obtaining along the Border. Not having that input at the Cabinet table has resulted in a very serious situation not only for the economy of the Border counties but for the State itself in high loss of revenue.
We heard at the Fine Gael Ard Fheis at the weekend that the Government had reduced VAT on hotel charges. But it must be remembered that it was the present Government who increased the rate of VAT from 18 per cent to 23 per cent and two months later reduced VAT on hotel accommodation to 18 per cent — in other words, it was their own 5 per cent they reduced after two months when they saw how wrong they were. But they did not reduce the rate of VAT to 18 per cent on the cost of food in hotels. The tourist and hotel industry is suffering not alone from the high rate of VAT but also from the high rate of duty on petrol and spirits.
The Government's record in the health field has nothing to recommend it in almost 12 months since assuming office. The House will remember that last year the outgoing Government fell as a result of a vote of confidence brought about because of the removal of 900 items from the general medical services prescribing list. The present parties in Government promised that they would review those 900 items, which they did. The result of that review was not to restore those 900 items to the general medical services prescribing list but rather to add another 274 items to the list of drugs not allowed under the general medical services. In their deliberations at Barretstown in the third week of July this year the Minister for Health stated that he hoped to save another £13 million on the current Estimate for Health in 1983. By way of parliamentary question I asked him how he proposed to save those £13 million. The answer I received, on 19 October, was that the savings on the Health Vote were to be achieved by a combination of the following: buoyancy in receipts from health contributions, collection of arrears of health contributions from farmers and extra receipts under EEC regulations. To the extent that these measures fall short of the overall savings to be achieved it was stated that other adjustments in the Health Vote would be necessary. At this stage of the year the general consensus in the country is that receipts from health contributions will fall short of the amount the Minister expected to collect. It appears that before the end of the year there may be even further hardship imposed on those dependent on the health services.
The Government's hospital policy shows no sensitivity whatever to the needs of people, particularly those in rural areas. For example, at present there is a situation in Bantry in which the Government, through the Southern Health Board, have closed the maternity unit in the hospital there and women are being asked to travel instead to a hospital 110 miles away. That illustrates a total lack of sensitivity to the needs of such people. One does not have to advance any other argument, because to suggest that a maternity hospital facility some 110 miles away is satisfactory is ludicrous. There are no circumstances, economic or otherwise, under which one could justify that type of decision.
Then there is the situation in Dundalk Hospital where there is a very active maternity unit and where the county surgeon retired. He was a product of older times when the county physician and surgeon acted together to run an obstetric unit. That is unacceptable in 1983. Again, the Minister has refused to appoint an obstetrician to Dundalk Hospital.
There is also the situation in our own constituency, a Cheann Comhairle, in which for no good reason whatever the hospital in Cavan has not been proceeded with. The Minister asked the health board to close the adjoining hospital in Monaghan — to arrange to have it closed and sold — and that that would not take place for perhaps five or even ten years until the Cavan Hospital was built. That letter was issued on 9 June last. That was the first anybody heard of it.
The Chair is reluctant to interrupt the Deputy at this stage, but the Deputy is aware that he is getting into an area which is the subject of court action and therefore comes under the sub judice rule.
I shall not develop the argument except to say that it is very difficult to understand the Minister's action because the tenders for Cavan Hospital had already been invited at that time when the Minister took that decision. I might say also, and I am sure it will not prejudice the court action——
The Chair does not want to be put in the position in which he may be told that he allowed one Deputy to develop and discuss this matter and will not allow another Deputy raise it in another manner. I would be pleased if the Deputy would leave the subject.
I might say a word about the administration of affairs by the Minister when he called a health board on three occasions to Dublin to discuss a hospital issue. It must be unprecedented in the public service that any Minister would——
In the opinion of the Chair that would be more a matter for an Estimates debate rather than one on the current economic situation.
I raise it merely to indicate the type of bungling going on with this Government, which I believe to be the root cause of the problems obtaining in our economy.
I might move on to the area of social welfare where the same thing applies — promises from the Government, promises of a family income supplement made so often by the Taoiseach himself and by various Ministers. We were promised we would have it in September but, again at the meeting in Barretstown, we were told that it would not be forthcoming until the end of the year.
In a debate on the economy it is reasonable to draw attention to the difficulties people are experiencing because politics is all about people. A caring Government should be concerned with people and their problems. Five million pounds was allocated for the family income supplement scheme last February. If even that amount had been divided among the 120,000 families, each would have got only £4.89 per week, not a lot of money in these difficult times. But the Government were not able to manage even that: they postponed it until, they say, the end of the year. At the moment we have no indication that it will be paid at the end of the year.
Children are a low priority with the Government. There has not been an increase in children's allowances to compensate for the difficult situation that exists. This year people were not paid the dependants' allowances in September, which had been allocated in previous years to help parents to get their children back to school. With rising costs and school bus charges it was more necessary this year than ever before.
I appeal to all members of the Government, but particularly the Minister for Social Welfare, to allocate a double allowance to each social welfare recipient next Christmas as has been the practice for a number of years. It must be remembered that this year the increases in social welfare benefits were less than at any time in the past five or six years recipients received only 12 per cent and 10 per cent respectively in benefits and assistance. The increases were over a nine-month period, not a 12-month period as in the past. The Government have a responsibility to ensure that at least at Christmas these people will be able to enjoy a little extra as in previous years. In response to pressure from the House before the recess, the Minister increased some unemployment assistance by 5 per cent from the beginning of October but that, on top of the earlier 10 per cent, brought the increase up to only 8¼ per cent in a 12-month period. We were told this morning by the Central Bank that inflation will be 11 per cent by the end of the year.
The plight of small farmers on the west coast is a matter of serious concern. They live in very poor circumstances because of their totally uneconomic holdings. In the Social Welfare Bill this year the Government abolished the notional system of assessment in respect of small farmers. One does not have to be a social welfare officer and to go to west Donegal to see the difficulties being suffered by small farmers. Those people, on very poor land, have raised the finest families this country has seen. In 1966 Fianna Fáil, in Government, introduced the notional system of assessment to ensure that those smallholders would have a little supplementary income to help them to stay on their farms and to rear their families. These supplementary benefits also ensured that they would not be discouraged from increasing production, because if such people had increased their production their cases would have been re-investigated and their supplementary incomes decreased. The present Government have been using as an excuse the High Court ruling on PLV to abolish the notional system. If the PLV system was unconstitutional, surely there were other ways the Government could have used to pay unemployment assistance to those small farmers.
In reply to a question in the House recently the Minister stated that 906 people have ceased to be entitled to any unemployment assistance as a result of this decision, and 1,213 people had their payments reduced. This has happened since the February budget, and many of those people will have had their incomes assessed at a time when their incomes were at their highest because many of them have a few cows and were sending milk to the creameries. In the winter months they will not have milk to send to the creameries and now they will face new difficulties.
We appeal to the Government to show their concern and ensure that as many as possible will stay on smallholdings, that they can survive there and rear their families, as they did in the past. But today we have not heard anything worthwhile offered to the people outside who have lost confidence, particularly the unemployed, the young people coming on the labour market for the first time. I appeal to the Government to be more caring and to create employment so that unemployment figures will be reduced in the coming months. The Government have a responsibility as well to those who depend on social welfare for their existence.
I will start with a little story which might bring some relevance to the Opposition benches. About this time last year they proposed for 1983 that the desirable current budget deficit would be 5.5 per cent of GNP. That would mean a figure of about £730 million. What source did such a draconian proposal come from? Was it from a savage Department of Finance memo, from an insensitive Fine Gael Minister sounding off his own private personal viewpoint, or even Deputy John Kelly? It was not. Such a draconian proposal for the 1983 current budget deficit came from the Fianna Fáil The Way Forward, which clearly laid down that the current budget deficit for 1983 would be £165 million less than the Government target in February this year. It is interesting to look at the documentation. The Book of Estimates published last November shows that what was required when the sum was added up was extra taxation, when you include buoyancy, of £250 million.
Here we see again the party of the hurler on the ditch, the party of incompatible exhortations in relation to the economy. They agree that borrowing must be reduced and that the Exchequer borrowing requirement must be kept within confines, yet they look for reductions in taxation. They wish to reflate the economy but do not wish to have any cuts in expenditure. These are totally irreconcilable suggestions. Their proposals and their policies not only lack any lustre but also lack any credibility.
We have seen the inconsistencies and the U-turns since 1979 and this makes it very hard to stomach verbiage such as we heard this morning from the Leader of the Opposition. He blamed everything on the Government and failed to identify the international recession as a major factor, something he would readily have identified were he on this side of the House. He also failed to identify our unique dependency ratio of approximately 70 per cent and the fact that 48 per cent of our population are under 25 years of age and, more significantly, 31 per cent are under 15 years of age. He failed to mention that we inherited a legacy of a national debt of £15.5 billion and that debt service this year will amount to £1,700 million. He omitted to mention that we have been in office for only ten months and failed to recall that inflation in that short period has dropped from 17 per cent to 11 per cent, that interest rates have dropped by 4.5 per cent and that we have achieved the most moderate pay settlement in the Public Service during the past four or five years, despite higher settlements in the private sector.
There is also the specific development initiated by the Government towards Dáil and Public Service reform, the establishment of the Planning Board and the sectoral committees, all of which will be adjudged in the future. Deputy Haughey also failed to acknowledge that for the first time in four years Government finances are under control and that what we say is what we mean in terms of the budget deficit. We are not consulting ourselves out of existence or being muddled into a consensus which results in avoiding the issues which must be tackled.
Every speaker I have heard has referred to the problem of unemployment, now standing at 200,000 or 16 per cent of the work force. In October 1979 the figure was 82,600 or 6.1 per cent. At present the average rate of unemployment in the EEC is 10 per cent. We need to create 30,000 jobs per annum to stand still at an unemployment rate of about 15 per cent. To revert to the level of the mid-seventies we would have to create 40,000 jobs per annum.
Before suggesting the methods that should be adopted to deal with this problem, we should look at some of the deceptive policies and short-term expedients adopted by Fianna Fáil. Between 1977 and 1981 Public and Civil Service recruitment amounted to 24,000 people. Our local health board employed people for whom real jobs were not available and subsequently their role and responsibilities have had to be teased out. Is this a solution to our unemployment problem? The tax increases which were necessary to pay for these newly created jobs caused an equal number of job losses in other sectors. In this time of deep recession the Government cannot pursue a policy that will allow investment because of the expenditure needed as a result of this recruitment. We are trying to sustain the unsustainable because we cannot get rid of these people.
Fianna Fáil were very keen on the expansion and creation of industries in the semi-State sector. In 1982 total losses in this sector amounted to £700 million. Only two semi-State bodies, Irish Life and the ICC, are making any profit. CIE, NET, Irish Shipping, Irish Steel and the Sugar Company are all making a loss. We hear from the Opposition benches, now empty, that we should re-open Clondalkin Paper Mills. Would they put their own money into it? It is because we have moved so far away from this criterion that we have created jobs just for the sake of jobs and ignored the real world.
Fianna Fáil also say that we should reflate the economy. There are two standard ways of doing this, either by increasing spending in the capital or current programme or by giving tax reliefs which will give a stimulus to the economy. The reality is that 50p in every £ released into the economy will be spent on imported products, creating economic growth in other countries.
Another Fianna Fáil policy is to pump the construction industry. Nobody can deny that this sector has suffered more than any other in this recession. What kind of construction do we want to encourage? In the industrial area we already have three million square feet lying idle in advance factories. Yet we have requests to the construction industry to put more money into bricks and mortar that will only add to our long-term debt and for which there will be no immediate use, given the amount of spare capacity. What of the housing sector? At present the greatest inhibiting factor is that the subvention under the differential rents scheme is such that so much money is being swallowed up in paying for houses already built that we cannot provide housing for young people. By pumping barometers of the economy such as the construction industry or the services area we are only tackling the symptoms rather than the root cause of the problem. Our economic and fiscal policies are designed to eliminate the root causes of the problem, as opposed to tinkering with the symptoms as suggested by Fianna Fáil.
It behoves me now to suggest policies which will bear fruit. We must create an environment for private investment, given that employment can be sustained through viable and profitable production. You cannot go very far down the road without stating where the problems are to date. Our electricity is 40 per cent dearer than the European average, telecommunication charges are 30 per cent dearer than the European average, we have seen the IRFU and the Sugar Company when they want to post large numbers of letters going to the North where a stamp only costs 12 pence. Those with telex machines and sister companies in Britain find it cheaper to telex the message across and to relay it to the British office rather than to send it direct from here. The essential cost inputs to production are out of line.
When we get down to analysing how to solve this problem we will need a ruthless reappraisal of the State service sector. Are they self-serving or serving the exposed sector of the economy which may not be able to pass on the charges to their customers? Are we more concerned about the long-term employment which they serve or the employment within those sectors? I suggest that we must analyse the cause and effect of these semi-State bodies. We must ask if a monopoly is the best role for these State services? Could anyone else in the private sector do a better, more efficient and cheaper job? No number of consultants' reports will say anything else — we must look seriously at the privatisation of our infrastructure and our semi-State bodies because they are under such pressure now that we cannot attempt to effect a transition whereby we would try to create the kind of climate which would attract internationally mobile investment that we so desperately need. If I had a vision, or if the Government had a long term objective, it would be that we should try to create a mecca for international mobile investment at whatever criteria they set down, whether it is more flexible labour legislation or a private, efficient infrastructure.
Bank rates are the other crippling factor which no business can get away from. Interest rates are affected by three basic factors, firstly, supply and demand, that is the number of investors and the number of people wishing to borrow money; secondly, the current inflation rate which is 12 per cent. People investing their money are at least entitled to 12 per cent so that they do not lose money. The third factor is international free market rates. This is a classic example of getting to the root causes as opposed to the symptoms. The Government's economic policies which have caused deflation have helped to meet that second objective. Moreover, by reducing our Exchequer borrowing requirement we have slackened the demand on the money markets and now we are able to avail of the overall reduction in international interest rates and we can now meet them. We do not have to shore up our currency with external reserves and put ourselves in a position where we have to maintain artificially high interest rates because the fundamental aspect of Government fiscal policies are out of line. We have corrected that and we have seen a 4½ per cent or 5 per cent drop in interest rates subsequently.
I should like to see specific improvements which would help in relation to employment. There is no doubt that the tax which is most inhibiting the development of the industrial sector is VAT at the point of importation. However, we must be realistic about this. The Government are not in a position to write off £140 million of tax revenue. The Confederation of Irish Industry, the FUE or representatives of business should renegotiate with the Revenue Commissioners and the Government in relation to this matter which is really a loan from industry to the Government of £140 million. Let us do away with red tape. Let us be blunt and frank and raise a loan from industry and work out a mechanism whereby we would pay it and do away with all the red tape at the ports. If we cannot go along with that, we must realise that some people who are importing raw materials do not know whether their cargo will come into Rosslare, Greenore, Cork, Dún Laoghaire or Dublin and they have to run around like lunatics with bank drafts to try to accommodate whatever VAT office is dealing with it. There should at least be one central office in which to lodge a bank draft which will cover any cargo importation and which would greatly help industrialists.
In relation to import penetration, there needs to be a vast improvement in the State purchasing mechanisms. I understand from business associates that there was something like £360 million in contracts for goods and services bought by the State and the semi-State sector in 1982 that are directly available from Irish manufacturers. I wish to quote the case of a firm in my own constituency, Dalton Tag Supplies, who have serviced the British Ministry of Agriculture and the French Ministry of Agriculture and have been successful in obtaining many international contracts for ear tags. They tendered to the Department of Agriculture but some British contractor got the contract instead. There is no discreet mechanism through the State purchasing systems to give Irish people a fair chance. That must be changed. Furthermore, there is a need to cop on in terms of technical trade barriers. Yet again in my constituency I know a company that produce household electrical cables. They had £326,000 worth of business in Northern Ireland which was cut off over-night through the implementation of a BASEC standard by the British authorities which completely outlawed, in a technical way, their products. The quality of the wires had to be of a BASEC standard, they protected their own producers and suppliers by this standard. We have an IMEC standard here, through the IIRS. We must implement this in such a way so as not to contravene any principles of free trade or any aspects of our Community involvement. We must do it in a way which is effective and which matches that of our partners.
I should like to welcome the enterprise grant scheme which has not yet been finalised or agreed but I understand from the Department of Labour that grants will be paid to those who are unemployed and who have creative talents which are going to waste at present. I hope the Youth Employment Agency will meet the needs of young, unemployed people and that the Department of Labour will cater for the needs of the long-term unemployed sector. In this desperate time of unemployment I cannot see why the environment and improvement schemes cannot be re-organised in such a way as to provide emergency employment schemes. We have many needs for physical developments; we need urban renewal. In rural areas there is a need for the development of heritage parks or other tourist amenities. The environmental improvement scheme should be reorganised — at present 60 per cent of the cost must be put up — to provide jobs in unemployment black spots. It should apply to areas where the unemployment rate exceeds 16 per cent of the work force. Those on assistance should be paid the rate of benefit and given their stamps. That is the only way they will get off the bottom rung of the subsistence ladder.
There is an urgent need to tackle the redistribution of our work load. In terms of job sharing — not work sharing — we should split the hours, the wages and taxation. There should be a special incentive to reduce PRSI without loss of entitlements. Part-time work suits many people but they are forced to retain their employment on a full-time basis. We can meet the needs of those seeking employment and those anxious to do part-time work if we reduce PRSI for those on job sharing. In many cases job sharing would be an added benefit to employers. We should invoke a special taxation clause whereby lump sums and gratuities on retirement which are not subject to tax at present will be taxed on a sliding scale after an employee reaches 60 years of age. At 60 people should be entitled to take their money and go tax free. Thereafter there should be a rising scale of taxation on the lump sum and the routine tax on pensions. That would encourage people to retire early and take up part-time work for voluntary organisations and so on. We must remember that we have twice the number of young people entering the labour market as there are retiring and we must do something about that.
In productive terms exports are the key to our future. In a free trading concept we must improve our marketing if we are to increase our wealth and raise our standard of living instead of the Government falsely pumping it. We must have competitive export credit finance. I was shocked to hear from one of the largest industrial engineering firms about Government facilities for export credit finance. At present there are HP arrangements for a purchaser abroad who is buying a product. The rate at present is 12 per cent while France and other countries are quoting 8 per cent. We must get our act together in regard to exports. I have discussed the matter with the Minister for Trade, Commerce and Tourism, Deputy Cluskey, and I hope the White Paper on Industry will contain a plan for competitive export credit finance.
We should employ unemployed graduates and send them to specific firms to promote exports in China, Greece and other parts of the world. We should not rule out, as Tony O'Reilly said about quality sales, the brand name idea. We should not be afraid to get the best and pay certain people £1 million to promote a certain product on the export market. Our products, such as Baileys Irish Cream, are excellent but we do not have the international markets for them.
I am Chairman of the new Joint Committee on Small Businesses and in the course of any debates the House may have on the economy I intend to refer to its activities. No sector of our economy has been crucified as much or had its feathers plucked so often as the small business community. We need a major shift in attitude towards them. I should like to give the House some examples of the way they are being screwed. On taxation I should like to point out that the creation of one job in the Revenue Commissioners creates ten jobs in industry because they have to keep pace with the mass of red tape related to PAYE, PRSI and VAT returns. If we create one job in the industrial engineering sector we create one in the service sector but not so in regard to tax collection. The reality is that the whole system in relation to a simplified tax regime is out of control and has led to additional costs for this unpaid third party who acts between the employee and the Revenue Commissioners. A substantial change is needed in that sphere.
I should like to refer to the trade union movement. At local branch level they go to the wealthiest businesses, the most viable and profitable ones employing many people, and extract an increase of about 12 per cent and that figure is sought from all small businesses even though they may not be able to keep pace. We need a shift in attitudes towards small businesses who, leaving aside the public service, provide 90 per cent of the jobs here. In terms of costs such as bank charges, electricity and telecommunications charges, the big business concerns are able to negotiate special deals whether they involve EIB money, relief for special use of electricity or other matters. Small business concerns must be given a new deal to take account of their problems.
The first action of the new joint committee was to invite submissions from the public or organisations wishing to make a contribution to the development of the small business sector in our economy. I hope people will respond to that request and will view the joint committee as a focal point to which they can address their grievances, problems, suggestions and proposals. I hope we can be a lobbying power greater than any specific interest group. I hope the proposal of the association for small firms for the establishment of a small firms investment corporation to provide equity or venture capital will be accepted. Such a corporation should review the existing loan schemes which are very tight for small business men. There should be some rationalisation and co-ordination of the 27 State agencies that relate to the business sector. They should be enveloped into county development teams or into a one-stop agency operating through an agency such as the IDA. Something will have to be done so that business men can carry out their dealings at one centre and not spend a lot of their time chasing officials. I hope the new joint committee plays an important part in the development of that sector of our economy.
I should like to stress the need for an indigenous development plan. In the area of the IDA and industrial investment we have got our act together in terms of industrial policy. There are certain contradictions in our economic policy, capital gains tax, capital grants, PRSI and subsidised wages, but our industrial policy is in order. However, in the area of fisheries, forestry and agriculture we have not got our act together. There is no co-ordination between the primary producers, the multi-nationals and the retailers, and that has led to problems of continuous supply, quality control and economies of scale. That is why we have seen so many failures in this sector. If a national development corporation is to have any role it should be to look at the area of indigenous development, exploiting to the full the potential of our natural resources and utilising them in a planned way to overcome gluts and scarcities of items such as potatoes, fruit and vegetables, fish and so on. We should work in a co-ordinated way to ensure the full development of our natural indigenous sector.
I should like to welcome the initiation by the Youth Employment Agency of the community and youth enterprise programme. This is the first time the agency has moved away from training and the overcoming of the transition of young people from school to work. It is now the intention of the agency to go further and try to create jobs. This type of self help attitude is what we need and I wish that programme well.
During the summer there have been two very important developments in relation to our economy. One was a positive development and one was verging on disaster: the latter was the super-levy and the former was the oil find. I wish to make a few comments on both matters.
There is a consensus in this House and in the country on the reasons we entered the EEC. We entered the Community on the basis of three underlying principles that are now being torn up. They were: free trade — we have seen what we have lost in terms of imports of industrial products; open competition in any sector among all member states; and the development of the poorer regions. The super-levy runs counter to all those principles. There is no way any Irish Government or anyone in the country could attempt to say it was fair.
If we say that our payment of the levy would be £100 million — I have seen forecasts of £120 million — our contribution to the levy would be 10 per cent of the total. That percentage from a country that produces only 4.5 per cent of total milk production in the EEC is most iniquitous and unfair. Even the suggestion of this proposal on 28 July means that the future of 17,000 jobs in the dairying and beef processing sectors will be put in jeopardy, that 50 per cent of family farms which are the backbone of rural Ireland will be put in jeopardy because of their dependence on milk or beef. Moreover, this proposal takes no account of the latent human misery of people who, since 1981, either have changed their method of farming from dry stock or tillage to dairying or whose herds have been annihilated by TB or brucellosis and whose output decreased but subsequently improved on the 1981 base or those who have increased their output and production. What future is there for those people if the levy of 70p in the gallon is imposed over and above the 1981 quota?
The Government must adopt the attitude through diplomatic initiatives or whatever political means are open to them to get to the root causes of the problem. They are the importation of fats and oils which are producing the surplus and an effort to deal with the milk factories in Denmark and Holland. The cows in those countries never see the light of day: they are fed on concentrated imported foods that are adding to the balance of payments problems of the Community in general. There has been no attempt to tackle that aspect.
The Government must look for a derogation on the basis that this can be applicable to us only when we reach a certain quota per cow per annum — let it be 1,000 gallons per cow per annum — or a quota that is equivalent to the EEC average. That is the only way we can get parity. It is the only way to ensure the development of the poorer regions of the Community and ensure that we have free trade and open competition. I commend the Government on their attitude to date. It is very simple to say that we use the veto but we must get an increase from 1 per cent to 1.4 per cent of VAT own resources. We cannot be simplistic about the matter. It is a matter of vital national interest and is non-negotiable.
The oil find is basically good news but a few factors have been overlooked. From the indications to date there is nothing to suggest that the find is anything more significant in cash terms than the Kinsale gas find. While we welcome that contribution to the economy, it has not solved all our problems. We should temper any great expectations with that kind of realism. We can learn a salutary lesson from the Kinsale gas find. The last thing we should do with our oil is to give it at a cheap rate to certain sections of the economy who then lose money on the project. We should exploit it to its maximum cash potential and use the cash thereafter as opposed to propping up NET in Cork.
If the find is small, a total of 40 or 50 million barrels, that would have a production flow level of only 14,000 barrels per day. Given that our national requirement is 90,000 barrels per day, a small find might not be commercially viable and would not be significant or solve our problems. However, if it was a medium size find, between 150 million or 200 million barrels, there would be reason for optimism in relation to our balance of payments and to our revenue sources. We should not follow the road of Mexico or Norway where they ended up with a debt-ridden economy, where all their revenues created by the oil find have been repaid to foreign bankers and where they have ended up with no extra production from their natural resources or their manufacturing base. Neither should we do what Britain did and basically use the money to pay the dole with a lower degree of net manufacturing output.
We have two options. We can go for higher rates of taxation, as was done in Norway, that will spread out the life of the oil find and its exploration or we can be less punitive in terms of taxation and ensure that the maximum exploration work goes ahead and that the oil is brought ashore. I do not see this oil find as a bonanza for Whitegate. I define Whitegate as a machine where you put in £10 notes and £9 comes out. Whitegate is run down and it needs extensive modernisation if it is to have a meaningful role in relation to our oil find. In the final analysis, we must use the money in a conservative and effective way to ensure that we do not pay it back to foreign bankers, having had a good time before we ever get the oil. Our one objective should be to build up our manufacturing base.
I wish to reiterate the statements made in this debate and at the Ard-Fheis last weekend by members of the Government in relation to hope and confidence. Members of this House know that people outside who are trying to make a living, to create employment and to expand their businesses, realise the extent of our problems. However, we are starting to see a glimmer of hope at the end of the tunnel. I do not say this from a party political point of view but on the basis of statistical information. If we take the most crude method of determining our development in terms of our trade balance, the money that goes out of the country and the money that comes in, a trade deficit last year of £1 billion now looks like being a deficit in the region of £300 to £400 million. That is progress and is a most welcome indication in relation to our living standards.
I have deliberately refrained from giving the Government party bit about public finances because Members of this House have heard detailed arguments from the various Ministers concerned. Since 1981 we have reached half-way towards our target in rectifying our public finances. I believe the 1984 budget will be the last of the tough budgets. If we maintain the attitude in relation to getting value for money in respect of every penny of State expenditure, getting more efficient results from our semi-State sector and getting equality in our taxation code, then I see every opportunity for development and reverting back to a capital growth. We can then take off on a path of sustainable growth, not short-term expediencies or gimmicks, and we can take part in the international recovery that is now evident in the US and Japan.
I am glad of the opportunity to speak on this economic debate. It gives me an opportunity to dwell on a few matters in relation to the economy. There is very little confidence among the business community throughout the country. This has been caused by a number of factors affecting the economy, mainly the high level of taxation which is now forced on such companies. People are questioning how the large amount of taxation business are paying is spent. Employees in companies are affected by this as well as those who pay PAYE. The burden of PAYE taxation is very great at the moment.
I want to refer to the employment levies and special levies that have been imposed. I have a number of questions to ask in respect of these. Is the money being collected spent prudently? There seems to be a clash between the Youth Employment Agency and AnCO in relation to certain types of work. The Youth Employment Programme has not got off the ground. It is being passed from one officer to a senior officer to the assistant manager and then to the general manager. All the projects go through about ten different people before we see them in operation on the ground. That is red tape at its worst and very little progress, if any, has been made in regard to this.
The Youth Employment Agency expressed some views on that recently. If my interpretation is correct, they were not very happy with the direction they were going. They possibly thought their hands were tied. This will have to be looked into. People have those levies deducted from their wages. They believed when those levies were imposed that the money would be put to good use and would create employment for young people, but this has not happened. Many of my colleagues in the House will agree with me on that.
There seems to be overlapping between AnCO and the Youth Employment Agency. I believe that, if that can be unravelled, it will be in the best interests of the community. AnCO supply labour for many of the projects, but in only a very few cases do they supply the materials. They should look into the question of supplying materials for those projects. They are in a very favourable position in relation to buying materials. If AnCO were purchasing large quantities of materials I believe they would be able to buy them at a competitive price.
At the end of last year the Minister for the Environment, in reply to a question about housing, stated that there would be 30,000 new starts this year, but that has not happened. I believe this year that the total number of houses which will be completed, between local authority housing and private housing will be around 22,000. That is a drop on the number erected in previous years and it shows the effect the recession is having on the economy.
I want to say a few words about our roads. There has to be a change of direction in relation to the grants allocated at the beginning of the year to each local authority. Part of the money allocated is earmarked for major road networks. The members of the local authorities or the corporations have not any say about how that money should be spent. I was taking a look at that when I was in the Department. As far as I know, the rules laid down by the Department of Finance are that money which comes from the EEC Regional Fund has to go for projects on the road network better known as the major regional roads. There has been a grave deterioration in other roads, secondary and third class roads. These roads do not qualify for any EEC grants but for what are known as block road grants, which come from the local authorities' own funds, and some minor grants from the Department of the Environment. The whole situation in regard to the financial allocation to local authorities for roads must be reappraised. The local authorities should have more say in the handling of this finance so that some of these roads which have deteriorated can be attended to. This is becoming a major problem. Of course, one problem in regard to this is the high cost of maintaining those roads and carrying out work on them.
Another question I would like to pose is: are we getting good value for the moneys we are spending on the road network? Sometimes I have the view that we could get better value for our money — taxpayer's money — if some jobs were given out by local authorities to contractors who would be able to quote highly competitively for carrying out this type of work. I have looked into this. In case any road workers in any of the local authorities would be worried about it, I can tell them that it would not create a loss of jobs in any of the local authorities that I know of. In regard to removing bad bends on roads and other major works of this nature we should consider whether private contractors should be given an opportunity to tender and we can see how their prices would compare with what holds at present. I am not satisfied that we are getting good value for the money we spend on such works. We must see where projects can be carried out more cheaply for the taxpayer. It could mean possibly that additional money would be available for other roads in an area.
Some local authorities hire very expensive machinery and plant at very high rates. Some of this plant is hired at an hourly rate on the usual quotations given to local authorities. The question is: are we getting value for the money paid in respect of that? I do not believe that we are in a good many places. This matter should be investigated also. I would be anxious that local authorities would not hire any plant for which they have not use on at least every day of the week. I have seen operations where a laden lorry would leave an area and would be away for some time while the machinery hired would be idle until the lorry came back. The company, however, would have to be paid for the hire of the machinery. I do not intend to be hard on local authorities when I say that in a time of tight financial constraints on them this matter should be looked into. We must not merely blame the high cost of the worker's wages. The management end of the local authorities should be investigated also to ensure that the money is well spent and that machinery hired by the local authorities is not idle.
In regard to private investment, some people have the view that the State can provide all the jobs. On many occasions people have told me that it is the duty of the State to provide employment and everything else. I do not read the situation in that way. There must be a mixture with private investment, the Government of the day and all the other State bodies involved. Overheads and costs in industry are very high. Of course, taxation is extremely high also and it is most alarming to note that from 1 January to 30 September approximately 500 companies have closed or gone into liquidation. That number is frightening considering the very big loss of jobs entailed. These companies have closed, possibly through marketing difficulties, not being able to compete, high levels of taxation, and they have been caught up also in some industrial disputes. On the European and foreign market today there is no charity. Where we have contracts we must be able to supply our goods in a proper manner, at a competitive price and, above all, be able to deliver on the day promised. If there are delays because of disputes and other difficulties, the people abroad who are purchasing these goods will ask questions in regard to the timetable and our fulfilment of our contracts. If contracts are not being met, other companies, mainly outside this country, will be very quick to seize the opportunity to gain those contracts.
I do not wish to be hard on employers, trade unions or employees. It is a three-way process. In case anybody thinks I am anti-trade union, I was a trade union member for a great number of years before coming into this House and involved in negotiation, so I have a fair idea about how they operate. All avenues should be explored before workers decide to down tools and walk out. Many workers have told me that they never recovered from a certain dispute. All involved must negotiate. If there is a walk-out or a work to rule or problems of demarcation, those who are purchasing, whether at home or abroad, may find that the terms of the contract are not being followed. Employers, workers and trade unions must think carefully, because lack of co-operation between them is having a severe effect on industry. I want to drive it home that lost orders are almost impossible to get back.
At the turn of the eighties we were experiencing a number of demarcation disputes; but, as I said earlier, I do not want to lay the blame on any one sector. No dispute should take place which ends in a walk-out unless there is a secret ballot. It is not good enough to down tools over some very minor issue and perhaps stay out for a couple of days. Investors coming into the country are beginning to ask questions. They want to know how we are behaving and managing our affairs. We will have to look into the situation and be careful about our actions. The effects of such action can be far reaching, not alone on the economy but on one's job and on the company involved.
I admit that companies should be a little more frank. In my own constituency some companies inform their employees every month, some by letter, how the company is operating and the situation regarding orders. It is very good for morale to know that the orders are coming in and that the company is going fairly well. Their managers on the floor talk to the workers, giving them down-to-earth information about their problems. This has worked very well in the companies about which I know. The workers then know where they stand. There may be a cursory mention of a company in the morning news and an announcement that information has come, through a leaked document, that they are going to close one of their subsidiary companies. That is not the correct procedure. Directors and management should inform the workers about what is happening. This will boost morale and help greatly to bring about better relations. There would not then be so much working to rule or so many disputes concerning demarcation, all matters which affect orders and the future of the company as well as the future prospects of the employees.
Our small industries have worked very well. I am talking about those with ten, 20 and 30 employees. I am very pleased with their operations. The Shannon Free Airport Development Company, better known as SFADCo, are doing very good work in my own constituency and in the Munster area, which is very gratifying. I thank those involved in small industries in the IDA and SFADCo for all the co-operation and help given by them down the years. I am very pleased with the way in which they meet their clients and those who have a project in mind and are interested in setting up small industries. SFADCo have done a very good job in building small units in many areas where the IDA do not feel obliged to operate. SFADCo have moved into small villages. A small factory in these areas means a lot to the people. I highly commend them on that.
I want to talk about something which is having a very bad effect on the hotel industry which has been giving good employment over a number of years, that is, the high rate of VAT. Hotels are operating under very severe pressures. They are going through very difficult times with high costs. In many cases hotels are not catering for the ordinary people with their menus and their prices.
Some hotels are providing economy lunches, but more have become very expensive. They provide silverware, but they charge high prices. That is not on for the ordinary person irrespective of what his employment is. The hotels cannot blame everybody else for the difficulties they run into. They must take a share of the blame themselves. They will have to re-organise to meet the ordinary day to day demand and provide lunches at a nominal cost.
Overnight charges in hotels are open to question. I have strong views on this. They say their charges must be high because of the cost of electricity and staff. Possibly if they lowered their charges they might do more business. In many hotels bed occupancy has gone down. In the past couple of months it has gone down further. Leaving out Dublin, Cork and other major centres, there are idle beds in many provincial towns and, because of that, they should look at their charges.
Cleanliness in our restaurants is also open to question. The owners seem to think anything is good enough for the people. That is not on. They should ensure that everything is presented in a proper manner.
I regret to say that I can see nothing bright on the horizon for the immediate future. Next year will be a very difficult year for industry. If some of the Government's plans are put into operation, they will have a devastating effect on employment. There is a lack of business confidence and investment confidence. Investors are wondering what will happen. They wonder what the attitude of the Labour Party in Government will be to future capital taxation.
Will the Labour Party pin the Fine Gael Party into a corner and say: "Go after the investor and screw him. Nail him down as you never nailed him down before"? Some of the Labour Party members of the Coalition Government have grave reservations about certain things that are happening. It is only right that they should have those reservations. If the Labour Party screw the people who are investing, they will ask many questions before they extend a factory or consider any extension. They will wonder if they do expand will they be caught for more taxation. Company taxation is extremely high.
Levies are being deducted from PAYE workers. They do not mind paying those levies provided the money is put to good use, and provided it is not bogged down in bureaucracy, with ten people handling it before it arrives at a project to create a job. AnCO and the Youth Employment Agency are providing work for young people for three, four or five months. Then they are let go and a new lot of people are taken in. I question the wisdom of that. I do not like the way bureaucracy is spending the money. There is a clash of opinion between AnCO and the Youth Employment Agency about who should do what. The Youth Employment Agency are not happy about the way the scheme is operating. I heard them saying that at different interviews. That has to be looked into also because the people paying these levies will be, and have been, asking what is happening with this money. An enormous amount of money has been collected. I am open to correction but I think by the end of the financial year about £60 million will have been collected from one levy. People want to know how that money is being spent. I am not happy with the way the scheme is operating. Some say it is going through teething problems. That may be, but the sooner they are resolved the better.
As regards business investment there will have to be a new emphasis. I would be very interested to see the white paper or the green paper, I do not know what colour it will be——
We are making it red.
——the Government are bringing out very shortly. I hope it will spell out a policy on industrial investment and will tell us the line the Government will take. It must be attractive because if it is not, people will have more questions to ask. The Government task force have been in operation for some time but when we ask when the report will be issued, we are told it will issue "shortly". "Shortly" can mean anything. Sometimes we are told it will be issued "in the future" or "in the near future". That could be next year. There is no timetable as far as I know, but I hope in the near future we will know what the Government have in mind to deal with job creation and the industrial programme.
I would like to deal with farming. If the levy is brought in, it will have a very detrimental effect on the economy and on the agricultural community. What I fear most is the Government getting into what I call a bartering situation, where export premiums, grants and so on are bartered one against the other. I want to warn the Government against being drawn into that trap. Many Deputies spoke at length about this levy but I do not intend to go into it in more detail.
I would like to refer briefly to horticultural marketing. We have fallen down completely on this matter. So far we have been unable to co-ordinate properly the farming organisations, growers, suppliers and others. I am not blaming this Government for that because many Governments and farming organisations have failed to make progress in the marketing and preparation of horticultural produce. In my view, it is a shame to see carrots from Denmark being sold in our shops because carrots can be grown here. The housewife buys a bag of potatoes, big ones on the top and the smaller ones on the bottom. You can fool her once but you cannot fool her a second time, because she knows what is right.
A lot needs to be done in this area of grading and marketing. I believe this could be done at very little expense. We should grow our own produce, make the necessary preparations and set up a board of good people to look into this matter. This would bring about a great improvement in the present situation. As I said our horticulturalists can produce our own food but we have not been able to package our goods to the best advantage and then sell them on the home market.
I have only 12 minutes to say all I want to.
The Deputy will have some time tomorrow morning.
Unfortunately I cannot be here tomorrow because I will be deputising for the Mayor of Limerick.
I welcome this debate coming as it does simultaneously with the preparation of the departmental Estimates for next year's budget. If we are to debate this matter seriously it behoves all of us not to insult our people, especially the young, by pretending there are easy answers to the present difficulties. At present I am involved in discussions with the socialist group in Europe drawing up a programme to combat unemployment. It is interesting to meet these people and to learn from all the Common Market countries that nobody has the answer to the unemployment problems facing Europe — governments, trade unions or farming organisations.
At present there are about 30 million people idle in Europe. In this country 29,000 people in the 18 to 25 age group are registered as unemployed. This is the biggest problem I see facing us. The effect of unemployment on personal and family relationships, where people become demoralised, is becoming one of our major social problems. It is important that people would not become despondent; they should try to become involved in socially useful activities. It is equally important that young people would not feel they are being exploited or ripped off by some unscrupulous employers who are abusing the £30 training scheme grant made available for this purpose.
Naturally, I am aware that the fact that these young people can gain experience is of tremendous benefit. I was approached by the fathers of some young girls recently who felt that the young people had become very sour because they seemed to be exploited by the managements concerned and felt that the companies should be asked to supplement the contribution of the State. It is bad enough to be unemployed and be there on a temporary basis only without feeling that one is being abused by what I might describe as unscrupulous employers.
If we as a people are to retain our nerve and confidence it is vital that the Government give leadership in the whole area of the provision of a plan for employment. In that context I welcome what the Tánaiste had to say in his statement this morning. It is imperative that a national plan for the economy, as envisaged by the task force, should spell out realistic targets. Employment must be our first concern. In this regard the small and medium-sized industries programme offers the best hope for the future. I am involved with the Socialist Group in drawing up a strategy for employment. The statistics that emerge are very interesting and show that the SMEs, the small and medium-sized enterprises, as a sector have done better than any other in the economy, not alone here but throughout Europe, in fending off the effects of the present recession.
There are 11 million small and medium-sized enterprises in Europe employing some 30 million people and comprising 60 per cent of the Community work force. In other words, 60 per cent of the EEC community is employed in small companies comprising 90 per cent of Community firms. In this country, in spite of the sharp fall-off in the number of job approvals by the IDA in small industries, the level in the small, grant-aided firms was maintained last year at the same level as the preceding year, as was shown in the 1982 IDA report on small firms published on the 4th of this month. The numbers employed in small industries here at the end of 1982, at 28,700, was the same as at the end of the preceding year. SFADCo, which were given responsibility for job creation in this field of activity, indicated in their annual report for 1982 that they were pleased that the small industries programme had maintained the momentum of the previous four years. In spite of the fact that they faced the most testing economic conditions since the thirties, the same pattern of survival has prevailed in this area throughout Europe.
We should look much more closely at what the Telesis Report had to say. I doubt that it would now be possible for the IDA or SFADCo people to attract large labour-intensive industries here. It is now realised by everybody that the days of large companies coming in here are over. We must now turn in on ourselves in the best possible way by deploying our resources to the optimum advantage of our people. There is real need to train people in the necessary skills to move into the small industries area. This area provides employment that is flexible and adaptable and has a crucial role to play in revitalising the economy, in improving the employment situation and boosting competitiveness in the technological innovative area. In this latter context the Plassy Technological Park in Limerick and the micro-electronics application centre there have a major contribution to make in providing training and facilities to avail of the opportunities offered by changing technologies especially in the information and data-processing areas. Apart from all that, the small and medium-sized enterprises have a tremendous role to play in the area of import substitution which, it has been estimated costs this country something in the region of £1,000 million per year, goods that we could produce at home.
Turning to the more traditional areas of employment, I am convinced that the Government should set about making optimum use of any hydrocarbon finds off the Waterford coast. While it is, as yet, too early to say definitely that the finds in oil and gas are of sufficient commercial quality or quantity, it is not unreasonable to assume that the present hopeful signs will be justified. That being so, the Government should set about meeting the country's multiple needs in the areas of employment, housing, roads and land drainage. With these oil and gas finds as our collatoral we should set about borrowing to undertake major programmes in house-building needed to meet the demands of an expanding young population. We should develop a new roads programme, which could be funded by an additional levy on petrol to be used exclusively for road-building purposes and which would not suffer the fate of the Road Fund robbed by successive Governments for every other purpose but that for which it was intended.
Equally, there is an unanswerable case to be made for commencing land drainage schemes throughout the country. I understand there is a difference of opinion at present between the economists in the Department of Finance and those in the Office of Public Works on the feasibility of such land drainage schemes. If that is so, it should be made known to the public. I side with the Office of Public Works' people that such schemes are self-financing, with no cost to the Exchequer in terms of balance of payments problems. It is a scandal that in my constituency of East Limerick there are tens of thousands of acres flooded each year by the Mulcaire, and this in the heartland of some of the finest pasture land in Europe. Its value would be increased by £15 million in 1982 terms were it drained. The Drainage Act of 1946 has established a ranking order for these drainage schemes which means that some rivers might not be finished for 30 years. The present desperate unemployment situation warrants desperate and imaginative measures if the country is to be put on its feet. I would propose that every river in the country requiring drainage would form part of a national drainage scheme and that they should be drained as part of a concurrent national programme. If the State is to put public money into land the taxpayer must get a full return on the money invested. That is the policy of the Labour Party. Professor Tom Rafftery of UCC, who has done so much for agriculture here, estimates that our total agricultural production could be doubled with the right policies. The whole thrust of our funding policy for agriculture should be to make land available to young people.
There is grave need for revitalisation of the housing programme in order to revitalise the building industry, which Professor Milton Friedman has identified — I do not often quote that gentleman — as the greatest reflationary agent in a downtrodden economy such as ours at present.
Another area we should be examining very seriously is that of co-operative development. The Danes have led the world in this regard. They have none of the resources we have. Yet they have achieved the position in which they are tenth in the world in terms of gross national product. I call on the Government as part of their overall programme to introduce an equitable tax structure in order to bring efficiency to the public sector and so that the taxpayers will get value for money.
The previous speaker referred to the capitalist-run industries which provide so much employment. I would remind him that his leader was rebuffed in no uncertain manner by the FUE when he said it was not the function of private enterprise to create jobs but to make profit.
Debate adjourned.