Dáil Éireann debate -
Thursday, 26 Jan 1984

Vol. 347 No. 5

Financial Resolutions, 1984. - Financial Resolution No. 11: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(Minister for Finance).

Mr. Reynolds

Last night when we finished on the budget debate we asked a very important question of the Minister for Finance to clarify the situation in that, in his budget speech, he said that the receipts from the 1 per cent levy in this year were £40 million. Yet, as Deputy MacSharry correctly pointed out, when one goes to the budget figures themselves a figure of £74 million is taken in. We asked a very reasonable question, a reasonable explanation as to what was the situation. The Minister for Finance attempted, in the first instance, to say that the £40 million represented nine months' revenue. Yet when he thought for a second time and he took a pro rata increase on that, he realised that that would bring him up to only approximately £53 million. Therefore, we still asked for an explanation of the £74 million. The Minister for Finance received a second note from his advisers. I do not know what was in that second note but it certainly did not please him anyway because it caused consternation between his four advisers who were there. The end result was that 12 midnight came and you drew down the curtain. Deputy MacSharry asked that an explanation be given to the House this morning to allow a proper debate to take place on the budget, and more especially on the current budget deficit, so that we would know which figure we were talking about. What is the correct figure? Is the House to be misled? How can the Minister for Finance say one thing in his speech while the budget arithmetic says another? We asked again here this morning and had to proceed under protest because we were given no explanation whatsoever of it. I can only assume that it is another sleight of hand presentation of which there are quite a few in this budget. This is in stark contrast with the sort of Government we were promised by the Taoiseach of the day, not in the last general election, nor even in the one before but in the last three general elections.

Before getting on to the budget one could reasonably ask a few direct questions of the Taoiseach and I am glad to see that he is in the House. I am merely re-echoing the sentiments and calls of people up and down this country, north, south, east and west, when they say: "Oh, Taoiseach what happened to the promise and the dream, the promise by yourself, your party, when you came together with the Labour Party, a promise of strong Government, of stable Government, a promise of honest Government and of open Government?" What happened the dream, a dream that was dreamt by thousands of people but more especially the young people up and down the country who saw his coming on the Irish political scene as a potential Taoiseach, as a new Messiah, the man who had the answers to everything? Indeed I have heard him named as the economic pope of the Irish nation.

The Taoiseach

I never heard that one.

Mr. Reynolds

That is a new one; the Taoiseach should put it in his book because it has been very relevant since he assumed office, the economic hope, the pope who in a very short time has become fallible. He is not the infallible economic guru this country was led to believe.

The Taoiseach

Gubu or guru?

Mr. Reynolds

That is another one; we borrowed that one from them. He did not prove to be what many people thought he was and in a very short time the people have realised differently. If strong government means a crisis at practically every Government meeting that takes place, a crisis not every day or every week but, over the last few months, every hour of the day, than if that is what strong government means the word "strong" warrants a different meaning in the dictionary.

We have had a charade from various Ministers of the Government, indeed from various Ministers within the same parties in Government, on the part of various Ministers of State in the same Departments as their Ministers and vice versa with regard to Labour, Ministers who time and time again came out making totally different statements as to what they felt Government policy should be doing. If that were a Fianna Fáil Administration, we would be run out of office by economic commentators, by the editorial writers and everybody else and they would be right. They would contend that there was total instability. If one cannot have it within the Cabinet room and around the Cabinet table, there is little chance one has of governing this country in times of very difficult financial situations? Nobody will deny that. I would be the last person to deny it. The Government have failed to deliver on their promises. The excuse for the failure of their first budget is that they were too short a time in office. They were in office for nine months then and, subsequently, Fianna Fáil were expected to do everything in nine months. I am glad the Coalition Government have had the opportunity to introduce two budgets and I hope they will be there to introduce a few more because it will finally nail the lie that they have the answer to everything. Last year, the Minister for Finance said he had not much opportunity for innovation and new approaches but that they would be addressing themselves to every single aspect of the economy throughout the year and that we could all look forward to a real Coalition budget in January 1984. Well, that budget has come and we know what happened.

I put it to the Taoiseach that any government worth their salt would put that budget together in two ordinary Cabinet meetings. What did we get? Starting last summer we had the meeting in Barrettstown Castle, not just to review expenditure in mid-year but to focus their minds and attention on their plans for 1984, to look at Departmental Estimates and to set their priorities. That was laudable but the result was the same as that of the many sojourns that took place in recent months — you changed the current budget deficit figure you had, you say you were not going to make it so you increased it——

An Ceann Comhairle

I do not like to interrupt the Deputy but please use the third person.

Mr. Reynolds

I thought the "messiah" was different from everybody else. However, I am delighted to comply. The Taoiseach——

The Taoiseach

The Deputy can address the Chair as "thou".

Mr. Reynolds

Anyway, they got down to discussing the Estimates and it took five months to produce them. The Estimates finally appeared in December and it was obvious that the Government could not agree among themselves as to what they should or should not do. We were told they were not final Estimates and that we could expect more cuts on budget day. Lo and behold, when budget day came, there were no more cuts in spending, in fact there is more spending and the best that I can say about the budget is that it has no relevance whatsoever to the economic situation or to the problems facing us at present. It was cobbled together for naked, political expediency. I could even describe it as a lasso to corral Deputy Frank Cluskey back into the fold along with some of his party. It is also a lasso to corral Deputy Spring and whatever members of the Labour Party support him at this stage.

An Ceann Comhairle

He is the Tánaiste.

Mr. Reynolds

It is easy to mistake who is the real leader of the Labour Party at present. Over the next three or four months it will become abundantly clear who will be the leader of the Labour Party. Perhaps we will get more information on that after the conference in April at Limerick.

The Taoiseach, the Minister for Finance and the majority of the members of the Government have said often enough, inside and outside this House, what the problems of the economy are. Their analysis was correct but the prescription that the learned doctor has prescribed many times has failed to cure our ills. Everybody had been convinced that the Government which came in on a ticket of financial rectitude were doing just that. People are still-convinced and it is time that they were given a few straight facts they can understand so that they will no longer be confused by statistics and percentages which mean nothing to them. The Taoiseach and the Minister for Finance are better than anybody else at confusing people with statistics and percentages. They throw figures around like snuff at a wake. Very few people are on their wavelength regarding the real position of the economy. The ordinary people should not be under-estimated. You can fool some of the people some of the time but you cannot fool all the people all the time. It is time we looked at this policy of financial rectitude to see what success it has brought the country. Have we gone anywhere along the road we are supposed to have travelled over the last year or so? Many people are convinced that the Government are doing a great job and that they are not borrowing any money. They think that the hardships they have to endure are worthwhile because we are getting out of the wood. The Taoiseach has said, time and time again, that there is light at the end of the tunnel. Is the Taoiseach convinced that the light is not a train coming the other way?

Deputy MacSharry asked a question here last Tuesday about the national debt for 1982, 1983 and the estimate for 1984. The Minister for Finance replied that the national debt at 31 December 1982 was £12.8 billion and was estimated to have been £15.7 billion approximately at 31 December 1983. That is an increase of £2,900 million in the national debt after the first year in office of the Government. The Minister was not prepared to project figures of the national debt for a variety of reasons and he regretted that he was not in a position to give a figure for the end of 1984. That increase in the first year of the Government represents an increase of about 22 per cent. This time next year we will probably see that the national debt for 1984 had increased by between 40 per cent and 50 per cent in the first two years of Coalition Government — if they last that long and I hope they do if only to blow this myth sky high. This Government have been trying to convince everybody that we are on the road to financial rectitude and that we are getting somewhere, but those are the facts of life. Those are the facts the ordinary people understand and it is time this myth was exploded.

The recent Central Bank report blew another myth sky high. They said the borrowing over the last ten or 12 years was the responsibility of consecutive Governments and that it was time we got down to solving the problems and stopped trying to apportion blame. The 208,000 unemployed are not interested in that sort of argument but they are interested in honest facts and figures. I hope they get the message. Then they will know exactly what the position is after one year of Coalition Government and, even more important, what, if anything, we have to show for all the money we had to borrow. The ordinary people entrusted the reins of government to the Coalition parties and they are entitled to ask what we got for the extra £2,900 million national debt. When they look at this budget they will see a figure of almost £9 billion in which they will not in any way share. Yet, they get calls from this House about what they should and should not do. They are beginning to ask what value we are getting for this money and if there are any people here who are capable of managing our affairs. This Government said they had the answers and know that financial rectitude is the answer but still they try to con the people into believing that they are not borrowing any money. I am not saying the Coalition ever said that, but that is the perception abroad, and it is time that myth was exploded.

Another big issue on which this Government prided themselves was the current budget deficit. Do not tell the people in the streets about percentages, GNP and so on; they understand simple figures. What are they? The current budget deficit this Government set themselves last year was £870 million. During the year they went a little off the rails, but we do not know by how much. Instead of taking the decisive, unpopular decisions which they always said they would take in the interests of this nation, they changed the figure to £960 million. They upped the figure because it was easier than taking hard decisions and becoming more unpopular. The adjusted provisional outturn on the summary of current and capital budget for 1983 was £1,085 million, the highest in the history of the State. What is the budget deficit for 1984? It will be £1,089 million, an even higher figure, the highest current budget deficit this country has ever seen. We are getting these figures from a Government who preached that when they came to power their first priority would be a reduction of the current budget deficit because taxation could not be reduced until this was done — I agree — and progress, development and investment could not take off while we had to borrow so much money to meet our day-to-day expenses. As I said, next year's figure is estimated at £1,089 million but who knows, when things get tough later in the year or when the Labour Party come under extreme pressure in the aftermath of their Limerick conference next April, that we will not see a repetition of Barrettstown Castle, when the figure will be increased again.

Those are simple facts and figures the people understand and it is time politicians in general stopped misleading the people. These are Government figures; they are not fabricated. They were produced by the Government's own people and the current budget deficit was presented here yesterday. Time and again our economic problems were analysed. We have had so many consultants' and committees' reports that they must be filling almost every State office in Dublin. Everybody knows what the problems are. The Government know. They said Fianna Fáil could never take the proper decisions but if the country elected them they would put everything right. They were elected and we all see what they have done in the first 12 months in office, and we saw from yesterday's budget what they intend to do in the next 12 months. As I said earlier, I hope this Government will be in power long enough for the people to remember their actions for the rest of this century. Let the facts speak for themselves.

The Irish people are losing confidence in their Governments because they are not being given all the facts. This was clearly reflected in recent opinion polls. The best opinion poll in recent months was the Dublin North-Central by-election. Fine Gael got a jolt they did not expect but everybody knew what would happen to the Labour Party. That was one of the reasons why proper decisions were not taken in this budget and another was that the Labour Party would not agree to many of the things the Fine Gael felt should be done. Sometimes one wonders if they were at the table when some of these decisions were made, or perhaps they were so corralled by an attack from The Workers' Party on the one side, an attack by Deputy Cluskey from the centre, and an oncoming assault from Limerick looming up in April, that they buried their heads and said they would make the best of it and hope things would come right. That may be their philosophy. I do not know. It is none of my business.

It is my business to ask about the days, the nights, the hours, the amount of Government time, ministerial time, executive time and official time spent in crisis Cabinet meetings about the budget, about the Estimates, about what the economic and political options were. They were all being looked at and analysed and brought back again, with this budget as the end result. It is well known that Labour said no to what the Fine Gael Party wanted to do, and Fine Gael said no to what the Labour Party wanted to do. I do not know how many hours they spent on this, but I have a fair idea. At the end of the day they found out all the things they could not do, and very little they could do.

Three or four months ago the Taoiseach said £500 million would have to be cut from spending this year. The Labour Party said they could not have that. The next statement to emanate from Government Buildings was that the £500 million was to be taken from the demands by the various Departments to the Minister for Finance. Those of us who have been in Government know that all Departments put in beefed-up estimates to the Minister for Finance. That is the reality. They feel that, if they do not look for enough, they will be left short.

We then end up with a supposed saving of £411 million, but all it is doing is cutting down on the departmental estimates. That is like me going into a bank manager and asking him for £50,000 knowing that, being the sort of bank manager he is, he will not give me £50,000. He will try to cut me down. In the heel of the hunt I wind up with £30,000. That is what I was looking for in the first instance, and that is what I expected to get. What sort of a fool would the bank manager think I was if I said to him: "I have done a good day's work for you. I have saved you £20,000 of your own money"? Yet we are told all this money is being saved.

The reality is that current spending was up by 13½ per cent in 1983 and is budgeted to go up by 10½ per cent in 1984, by a Government who are trying to convince the people that they will reduce spending. When will the Irish people get an opportunity to express their views on how they have been misled and how their finances and their affairs are being managed? I do not know, but the sooner the better. We all know what the result will be. If that is the way they intend to govern in the future with that sort of information being disseminated, it is our job as a constructive Opposition to point out the facts.

The Taoiseach and the Minister for Finance know the proper solution to our economic problems. They know they have to reduce day-to-day spending. As I have said, day-to-day spending went up by 13½ per cent in 1983 and is budgeted to go up by 10½ per cent in 1984. The Government go for the soft options by letting current spending increase and reducing capital expenditure to try to bring the figures closer. By doing that they are ensuring that there will be less and less employment, that more people will be out of work and that the dole queues will be longer. They try to bundle the figures together at the end of the day to show they are reducing expenditure.

A Cheann Comhairle, if your wife or my wife ran her household budget in the same way as the Government are running the national budget, her bank manager would call her in and say: "Stop the rot. Your overdraft is climbing every day. It is time you lived within your means". The Government are not prepared to take the unpopular decisions people believed they would take. Over the past few years they were brainwashed into thinking Fine Gael always put the nation first and Fine Gael second. It is quite clear that, in putting together this budget and the last budget, Fine Gael put Fine Gael first and the nation second.

The Labour Party always wrestle with their conscience about problems like this. When we count how many of them have the Mercs and the perks, it is easy to see they will continue to wrestle with their conscience, sell out the soul of the Labour Party and stay there at whatever cost. At the end of the day the Labour Party always win the fight with their own conscience. We cannot afford this type of management of our economy.

The Taoiseach knows day-to-day expenditure should be reduced. That is the only way to get down taxation, the only way to get investment going again. Capital expenditure should be kept up on the basis that it is invested properly to give us the proper return. We learned from the Government recently that they want an immediate commercial return of 4 or 5 per cent over the normal returns. There are infrastructure projects which need to be tackled and will have to be tackled some day. They might as well be dealt with now, rather than having 208,000 people on the dole while we borrow £1,000 million to pay for their unemployment benefit. The young people cannot understand that type of economic philosophy. They cannot understand that, while so many things need to be done, while there are so many infrastructure improvements to be made, after a large investment by the State and their parents in their education, they are being left in the dole queue. They cannot figure out that philosophy.

It is quite clear that yesterday's budget will have the same effect as the budget produced this time last year. It will contribute to a rise in unemployment. It will do nothing to stimulate investment. It does not suggest to the taxpayer that he will get a fair deal. Yesterday it was broadcast to the four corners that there was great relief in the budget for the PAYE sector. I know 15,000 people were taken out of the lower income bracket but 56,000 people were put into the 35 per cent bracket.

Many people will not believe what the real outcome for them will be today or tomorrow but they will believe it when they got their first pay packet after those supposed income tax reliefs have been introduced. Anybody earning £6,000, £7,000, £8,000, £9,000, £10,000, £11,000 or £12,000 a year, with a wife and two children, will find that the princely sum of the increase in his pay packet from all these marvellous reliefs being dished out here will be approximately 86p a week. Out of all that he will have to pay 6p more per gallon of petrol and 8 per cent VAT on any clothes he wants to buy for himself or for his children aged over ten years or approximately ten years. I do not know what is meant by "approximately". Does it mean nine, 11 or 12 years of age? Are we to have a birth certificate and an identity card in order to buy clothes for a child in Switzers or any other shop in Grafton Street?

The Taoiseach

The Deputy cannot even read the Financial Resolution.

Mr. Reynolds

The word "approximately" was used in the Minister's speech.

The Taoiseach

It does not say that in the Financial Resolution.

Mr. Reynolds

I have a copy of the budget a speech and I can give the Taoiseach a spare copy. The idea about the shoes was a bit foolish the last time.

The Taoiseach

It was Fianna Fáil's proposal two years ago.

Mr. Reynolds

The Taoiseach must be getting somewhat annoyed about birth certificates having to be produced. We remember the stupid gaffe about the shoes and this proposal could be equally stupid.

The Taoiseach

It cannot be too bad if Fianna Fáil suggested it.

Mr. Reynolds

It is rather unusual, to say the least, to have to ask the Taoiseach to stop interrupting me. Maybe he is afraid I will go on to say in relation to birth certificates that it will be all right for some people over there because the Taoiseach has a man who can fix the right dates on birth certificates.

I have mentioned the person who will be getting relief of 86p per week. The Government talk about equity in taxation. If we consider the man earning £20,000 or £30,000 per year we see that he will benefit much more than the man earning between £6,000 and £12,000 per year. This is a Government of which the Labour Party are part and who are supposed to have a social conscience. That social conscience has been buried for quite a long time and the reality is coming to the surface.

This budget will be seen as a failure because it fails to recognise the real problems of the economy. The major problem is unemployment. There are one or two instances in which the word "unemployment" appears in the Minister's speech, but there is no concern expressed about the state of unemployment and not a single action to deal with it. That is the biggest failure of this budget. It will do nothing to stimulate investment in order to bring about growth in the economy. Another failure is that it will do nothing to restore the incentive to work harder for the PAYE taxpayer or the manager who is earning £30,000 or £40,000 per year. The politics of envy have crept into this country and this is reflected in the budget. The same mistakes which have characterised Coalition Governments through the years are being repeated. The construction industry is on the floor. It suffered a steep decline in 1983 and will sink even lower in 1984. One out of every two people in the construction industry is now out of work. The ratio is probably 1:3 when one considers those firms which depend on the construction industry, such as electrical firms, plumbing firms, builders' suppliers and distributors. This is the industry where an injection of money will give the quickest return in terms of employment and general benefit to the overall economy. Very few requirements of the building industry are imported. Native materials are used and money in circulation among the building work force would give a badly needed boost to the economy. The Government are not interested, yet many infrastructural developments are needed. We are wasting our manpower and our financial resources in paying people to sign on for the dole. The average amount being paid out by the way of dole differs very little from the average industrial wage.

I had hoped for some new thinking in this budget. There are supposed to be plenty of brains among those opposite but I see no evidence of them in the budget. The Government have produced the old solutions which have failed this economy. Why have we not had some new thinking? Another opportunity has been missed. I had thought that the Government would have seen fit to declare an unemployment emergency. There are now 208,000 people unemployed and it is mounting up to an emergency. The Government have conceded in various statements that the number of unemployed will increase this year by 25,000 or 30,000. This is an admission of defeat. This is the way to depress and demoralise the people in the coming year and we could be sowing the seeds of future problems.

The Taoiseach interrupted me a short time ago when I was talking about the 8 per cent VAT on clothing. Clothing for children up to the age of approximately ten years will be excluded and will continue to be zero-rated. I did say "approximately".

The Taoiseach

I referred to the Financial Resolution, which the Deputy has not read.

Mr. Reynolds

In the Budget Statement yesterday the Minister for Finance said that he would get £40 million from the 1 per cent levy but when we looked at the Financial Resolution it was £74 million. We asked for clarification on that this morning but we did not get it. The Taoiseach referred to the other document but the point is we do not know which one to believe.

The Taoiseach

I will be answering the question about the £40 million shortly and will expose the Deputy's ignorance further.

Mr. Reynolds

I said that "approximately ten years of age" was in the statement and the Taoiseach said it was not.

The Taoiseach

I referred the Deputy to the Financial Resolution for a precise definition of age ten.

Mr. Reynolds

We will be only too delighted to see how it works out in practice. Will we have to bring their birth certificate around with us or an identity card? What will happen in the case of a big child of ten being taken for a 12 year old? Of all the crazy ideas the Government have come up with this is the craziest.

The Taoiseach

If the Deputy had read the Financial Resolution he would know the answer.

Mr. Reynolds

They are hitting an industry which lost 10,000 jobs in the last ten years. It is a labour intensive industry and needs all the support and help it can get. For a long time it competed unsuccessfully with cheap imports. It was beginning to come back into its own and it was hit slam bang in the face with 8 per cent VAT. What will happen? They will have to start all over again and try to compete with cheaper imports from Taiwan and elsewhere. There are already 5,000 jobs hanging in the balance and I would not be surprised if this tipped them over the edge. That is what the Government are doing for industry.

I do not like to bore the House again by asking if the Government have any policy on unemployment at all, but it is an important question. Has the Fine Gael-Labour Programme for Government been scrapped? Has it been relegated to the waste paper basket? According to the Government they would halt and reverse the trend in unemployment. We had a task force of Ministers sometime last year but we never heard from them. It was to be chaired by the Taoiseach but we do not know if they ever met or produced anything. We were told that the National Planning Board would report last September. They have not yet reported. We are now told they will report in April but we do not know if they will. However, the real answer to unemployment was to be the National Development Corporation. This was the real beaut coming from the Labour Party and reluctantly accepted by Fine Gael. In the budget last year £7 million was allocated for it and £3 million for the National Enterprise Agency. Despite the fact that unemployment rose by 28,000 last year all that money remained unspent at the end of the year.

Time and again I raised the question of how the National Development Corporation would be brought into being and was told that legislation had to be prepared. I put it again on the record that if the Government were sincere or serious about it the corporation could be brought into being any day as a limited company under the Companies Act. The Taoiseach will probably say that is not the way they do business, but there are a few State companies which were set up in that way. The Irish National Petroleum Corporation operates that way. I am not saying that I agree with the National Development Corporation. The same job could be done by the National Enterprise Agency if anyone was seriously interested in operating it. The same paltry sum has been allocated for the corporation for 1984 and this time next year we will probably be asking what happened. Was the Department too busy to prepare legislation for it? I ask the Taoiseach to come clean and tell us what will happen.

In the Programme for Government it was stated that the equity capital and borrowing limitation of the corporation would be related to the flow of new projects and investments undertaken by the corporation itself as well as to the needs of existing State enterprises for funds for additional productive investment and for necessary financial restriction. Priority in the capital programme would be given to new projects to be undertaken by the NDC and initial equity capital for new projects envisaged was £200 million to be taken up over a period of years with a borrowing limitation of £500 million. The Labour Party seem to have forgotten all about that, but that is something for them to come to grips with. If the Government want to stay on that road they are welcome to do so but it is not what the unemployed expect from them.

Where is the White Paper on Industrial Policy? Last July I put a question to the Taoiseach about it but he was not able to give me the information without checking the record. I understand that since he is a very busy man. He said it was before the Government and would be out shortly. We know of the arguments and various ideological approaches to this within the Government from time to time. However, after the departure of Deputy Cluskey I thought we might see the White Paper before Christmas. What happened? The Government let us know in their own inimitable way. There was a leak of the full document. RTE did two programmes on it. On the day after it appeared on RTE a spokesman from the Department said it had not gone before the Government. On the programme we saw various aspects of the document and time after time we could read: "It has been decided" that this or that will be done. One side of the Government said it had not gone to the Government while the document stated that decisions had been taken. I was part of a Government on two occasions and no Minister can issue a White Paper saying the Government have decided this and that if they do not have the document. What are we supposed to believe? Life gets more complicated and difficult. I can only accept that there was such a head-on collision between Deputies Bruton and Cluskey on the different aspects of the industrial White Paper that someone looking after his image in the public arena said: "Let us let out the White Paper. This is what I want in it and if at the end of the day the Government alter the decisions I believe are right, history will record me as having put my views down and it was the Government that changed them". There is a lot of this going on in the Government. Ministers are worried about their own image. I will not deny that we were not when we were Ministers but we were never able to develop the technique of the Coalition Ministers successfully. I would have been caught had I tried it, but these Ministers are dab hands.

While the country lingers on in an unemployment crisis we have this messing taking place with Ministers more concerned about their image in public than about governing the country. The Government have told us that exports in 1983 were very strong, and we were delighted to hear that news, but if they were not strong I do not know where we would be today. If one examines the position one will see that those exports came from two areas of industry, pharmaceutical and electronics — two of the latest industrial sectors to develop here. We are all proud of the way they have performed and I hope their export markets will be stronger in 1984. However, many of the increases are short-term because they are the result of IDA plants coming into full production. In 1983 we did not have many announcements of new industries. That is a serious matter. In the House last week the Minister responsible admitted that the IDA did not have anything in the pipeline. I sympathise with the Government that international investment has, by and large, dried up. However, when I hear people talking about the recession lifting and that automatically we will get out of our troubles I cannot help thinking that they are living in cloud cuckoo land. We need to develop our own industrial base. We can no longer rely on international investment to do it for us. We must look at our own strengths and weaknesses and build on those strengths and remedy our weaknesses.

Our strengths lie in the development of our natural resources, forestry and fisheries. I am aware that the Minister of State responsible is interested in those areas; but until he grabs his Department by the scruff of the neck and decides on his policy, and not the policy being pursued by civil servants in key positions, we will not get any benefit from our forests. One of the most stupid decisions ever taken was the one to close the Scarriff factory. I am aware that the factory was not doing well a couple of years ago and did not produce good products but it was closed after they had developed new products and succeeded in capturing 50 per cent of the Irish market. A report published this week was to the effect the factory should be supported. It is possible that the Minister responsible reached his decision on the basis of the information available then but it was not commercial information. The decision to close was not in the national interest and that is why I urge the Minister of State to prepare his own policies and get on with the job.

I urge the Minister of State to adopt a similar attitude in regard to the fishing industry. Countries with a developed fishing industry have a jobs ratio of 1.5 or 1.9 but in Ireland it is less than a 1.1 ratio. We are not doing anything about that and we prefer to wait until foreign investment comes in to do it for us. Foreign investment will not do anything for us in the future and the sooner we realise that the better. Our greatest raw material of all is in agriculture, but there were very few references to that industry in the budget speech and the Minister put a few things back costing a few million pounds. They were not in the Estimates but, obviously, the Minister was under pressure to put them back. It is an insult to the farming community to treat them in that fashion particularly when the greatest potential for the country lies in that area. We have our own raw materials and we are turning out good food technologists and agricultural graduates but they are left idle. We should be investing money in developing new products.

I welcome any foreign investment that can be obtained by the IDA or anybody else, but if the IDA are aware of the position they are not spelling it out. Has any job target been set by the IDA for 1984? I do not think one has. A strategic ten year plan was produced in 1982 by the IDA before I left Government, but it has not seen the light of day since because the Government cannot agree on an industrial policy. We cannot allow a good professional organisation such as the IDA to get away from setting objectives and maintaining them. Fianna Fáil cannot allow the Government to continue aimlessely without any objectives. The old saying that, if one does not know where one is going any road will get one there, applies to the Government. The budget introduced yesterday is a repetition of the 1983 budget. It will have the same fall-out effects, create more unemployment and will not give any relief to taxpayers. I understand that 56,000 taxpayers will now go into a higher tax bracket and that £663 million will be taken out of the economy in increased taxation this year. The Government do not have any concern for investment or rewarding risk-takers. Like many people, the Government continue on aimlessly. If any corporate entity had a managing director and board of directors that developed its business on lines similar to the way the Government are moving it would be out of business very quickly.

We need more business acumen and more attention to getting value for money. Nobody can deny that waste occurs in Government Departments. I saw it when I was Minister and I worked hard to eliminate it. The Estimate I prepared for 1983 was down 2.14 per cent on the 1982 outturn and that had been reduced in mid-July by Government cut-backs. That is the type of commitment and management that is needed in Government Departments. I do not say that can be done in all Departments but it can be done in some. We need to get more value for money and greater reform. To the Minister for the Public Service who ridiculed public servants for not doing their job I say: "Shame on you; you should start within your own courtyard first". Civil servants are working a system handed down to us by the British and it is not a system that is conducive to any country with a population of 3,500,000 people. There is little point in blaming the people who operate that system. The Ministers should get more involved in the workings of their Departments.

I can never understand what a Department of the Public Service is all about. If the Government were serious about improving the economic position they would abolish that Department. If one looks at the management structure in that Department one will see that there are more officials there spreading all over the place than there are in any of the economic Departments. It is the best built pyramid I have ever seen in public administration. It is not so many years ago when the work of that Department was managed by a section in the Department of Finance.

The Taoiseach

Who built it?

Mr. Reynolds

This Government appointed a Minister to take charge of it and thereby gave it more status than it ever had before. The Taoiseach cannot deny that it is the most beautiful pyramid that exists in the public service. The Government have given that Department extra status by appointing a Minister to take charge of it. If the Government were interested in cutting public expenditure they would scrap that Department and appoint the officials to other Departments.

The Taoiseach

A separate Minister was appointed for very good reasons.

Mr. Reynolds

When I was in Government I considered that Department to be a watchdog and a nuisance. They would not make a decision to keep themselves warm. The structure there is a disgrace and is a reflection on the Government.

If the Taoiseach thinks that our economy can continue with this disproportionatly low expenditure in economic areas it is no wonder that our economy is lagging instead of progressing. Expenditure has been going in the wrong direction and we expect people in those areas, with a lousy 8 per cent increase in expenditure, to produce the wealth that will sustain the services of the country.

It is time we got our philosophy, our planning and our priorities right. It is time we set our priorities against a background of self-reliance because others will not do it for us. It is part of our culture, history and make-up that we have been a dependent nation. We were downtrodden by the oppressor for centuries and we have not got over the lack of selfconfidence. We need leadership to motivate the people, to give them back the confidence that they had to solve their own problems in their own way, but we do not need any more of this leading our people down the garden path, trying to pretend we are reducing the foreign debt when the figures show that we are not. We are trying to pretend we are not borrowing money when the national debt has gone up by £2,900 million this year, with very little to show for it.

The Government have been trying to pretend that they have no responsibility to provide employment. Of course, they have. They have the responsibility to create the environment for proper investment. They have been promising it continually, but like many other things the Government have been saying in the last 13 months, they have been doing nothing about it. They have not done anything about tax reform.

I will leave the details of the various tax impositions to my colleagues. However, I am announcing the broad strategy of my party. This budget will do nothing to solve our major problems. If the good doctor himself, the Taoiseach, had followed earlier prescriptions and did what he said he would do, we would be making a start on the road to recovery. He did not do it though he was prepared to let people think he was doing it. The problems are increasing instead of getting smaller. Postponement from this year to next year is only a soft option. Taking the soft option of reducing the capital programme two years in a row is purely pretending. When the Government should be reducing current expenditure they are reducing capital expenditure. When they should be halting the rise in unemployment they are causing increased unemployment. When they should be reducing inflation and getting us to become more competitive in the market places in which we have to sell, this budget alone puts almost 1 per cent on the CPI. Ministers for Finance in the past kept the CPI increase down to a minimum, but the Taoiseach knows as well as I that when he puts 6p a gallon on oils it will add to manufacturing costs and find its way to the shop shelves, and the consumer will be paying at the end of the day.

I compliment the Government on what I believe is a step in the right direction. Three times this year I have advocated the move towards the setting up of venture capital here. I do not think the Taoiseach or the Minister for Finance knows the format this new tax incentive for people to invest in industry will take. However, it is a welcome move which was badly needed because it is quite clear that the equity ratio to borrowing is far too high and that we need to get venture capital going. The incentive was never there; it was always in favour of the office block builder or the safe investor in Government gilts. The risk that has to be taken to develop industry was never recognised. I am glad to say that the first step has been taken.

I will write to the Minister for Finance to explain the various proposals I have been making. I believe much can be achieved if we do the thing right. There are many people here, professionals, and others, who are earning decent money who, if they thought they could invest £25,000 or as much as £50,000 in industrial projects, would be prepared to pay their capital gains tax if they succeeded and who, if they lost their money could write it off against their tax assessments. If that were to happen there would be quite an influx of money.

However, I do not think this should be confined to individuals. That sort of money lying around the Irish economy has to be corralled and collected together. The Government should recognise the companies who would specialise in getting venture capital ready for investment in Irish industry. The money is there. Nobody who saw the hundreds of millions of pounds available for speculation in oil shares can doubt that. That money needs to be put to better use. It destroys the ethos of our people to see hundreds of millions of pounds coming from nowhere to be speculated in shares, yet when money is needed to give employment, it is not to be had.

The time has come when that type of speculation in shares should not be allowed to continue. It most certainly would not be allowed in America on the stock exchange. It should be stopped here because it is having a detrimental effect on the unemployed, on our young people, on the whole ethos and culture of our people, when they think that hundreds of millions of pounds are changing hands every day for manipulation of the stock exchange, by hook or by crook, call it what you like. Those people would not get away with it in the United States stock exchange. If it is not controlled urgently we will be seen as a paradise for speculators at a time when there is no money for investment in the things badly needed in our economy.

I would applaud any Government that would take action in this area. I cannot understand the logic of retaining ACT. I read the Minister's speech about it but I should like to hear more about it. As I said in the budget debate last year, this advance tax is total discrimination against native industry. It does not affect the multinationals or the foreign investors. It affects only Irish companies who have built themselves up and become strong.

Which philosophy are we to follow in the future? Do we want to build up strong Irish companies that can trade internationally in goods and services or do we want to depend on outsiders to do the job for us? If we want to build up a strong Irish economy we need to look again at ACT. The media and politicians get up and talk about Michael Smurfit and his organisation going to the States to expand their empire and when they see Cement Roadstone going to Denver in Colorado. Will they stop to ask themselves why are those companies going there? They are going there for two reasons: one, the return on risk in the Irish economy is not being remunerated, and two, ACT has been a real slap in the face to a least one major company. I could name others, but I will not name companies in this House. We know what our public companies felt when ACT was introduced. We know what happened to companies who invested £100,000 in Irish industry. We have decided that if we can find foreign investment, and it is becoming scarce, we will let it in and at the same time let imports run riot through the economy. In time we will become a large warehouse with a computer.

Is that what our future is all about? Is that what our people want to see? What we need now is an interim plan to tackle unemployment, to declare an unemployment crisis, to consider a national construction corps. Economists may argue against it. There are jobs which can be done. If infrastructure, roads and other areas use Irish raw materials and use the money we are paying out in dole with very little top-up, that is better economics. Those are the type of questions the people on the street are asking us. There is no point in giving them an airy-fairy answer. They want to know where is the logic of borrowing money to pay unemployment and not borrowing it to put money into infrastructural projects. If somebody does not come up with answers maybe some of the people out there will deliver different answers. We cannot afford to ignore the rising tide of unemployment. We invested a lot of taxpayers' money in educating those young people. They are coming out of the universities and regional colleges very articulated but they do not see any hope for the future.

The Government should be able to give those young people some hope. They are not being given any hope or shown a national economic plan they can follow. They are not being shown anything they can identify with. It is important to give those young people an interim plan to show them that we know where we are going and a long-term national economic plan based on export-led growth and import substitution. I hear very little from the Government on import substitution. During the short term I was Minister in the last Government my colleague, Deputy Ray Burke, and I had two import substitution units established in our Departments because we identified in the import lists a very serious erosion of raw materials not alone in Government contracts but in semi-State contracts and requirements. That programme seems to have died when Fianna Fáil left office. I hope it has not. I would like to think it would be pushed forward. I put it on the record today that on the analysis that was done in the short term I was there, by taking 10 per cent off our import list at the moment we can create 16,000 new jobs.

I will not go into the well publicised scandal of what is happening in our food business. Until some Government take the radical step of deciding that one single Department will be responsible for the development of our food industry and forget the spread which exists between at least three Government Departments and probably eight or nine semi-State bodies we will continue to have an absolutely crazy situation. Somebody at some stage must decide to appoint one man, invest all the authority in him, and finish with a spread all over the place, having one Department fighting against another and each Department wanting to hold on to their own little bits and pieces, their own independence, authority and programme. We have as good food technologists coming out of our schools of technology and universities as there are in any place in the world.

I am still waiting to see the White Paper published. I made a proposition in that White Paper that one organisation should be given the job of developing our food industry on a pilot basis. The organisation which I chose then to do it was SFADCo because I believed they had done a marvellous job in pioneering many new concepts in the small industry area. I believed they had reached their zenith there and that they were looking for new challenges. I genuinely believe they should be given the opportunity on a three-year basis to take over the whole food industry in an area which spreads very far. Perhaps it would be necessary to extend their area slightly to take in another few co-ops but there was an entity there. There was an organisation there and the challenge was open to them.

SFADCo have always shown themselves capable of taking the initiative, doing a pilot scheme on various projects and then coming back to the Government and being able to say that this was the project and the direction we should be going. We continue to talk and set up task forces. I saw recently where a junior task force of Ministers is to be set up to look at what might be done with the food industry. While we continue to do that and have committees sitting on this and committees sitting on that, task forces of Ministers on this and that and task forces going down to Cork to ask what the problems and the answers are down there, we will never get anywhere. We all know what the problems are in Cork. The Taoiseach knows them as well as I do. The Minister for Foreign Affairs and everybody else know them. There is no point in wasting executives' time sending them down to Cork. One would think that Cork was in South Africa. There is no point in sending down task forces of top men, wasting their time, writing another report to pile on top of other reports.

I compliment the Government on giving the go-ahead to the Ringaskiddy project. At least it is some vote of confidence in the area. I cannot understand the logic of the previous Coalition Government taking it out two years ago when they said it should not be done. Now it is put back in again. I consider the Government are right to do it and I compliment them for doing it.

We know there is no instant solution to the problems in Cork. Cork has a long industrial tradition but attitudes have become very rigid in certain areas there. That is not the way forward. I believe they are entitled to know from the Government what is the future of Irish Steel; they are entitled to know what is the future of Verolme Cork Dockyard and the future of NET. All those are coming in on a cloud of depression which has descended on Cork. We must clear that out of the way and start anew. Cork is getting together a new industrial base. That has to be encouraged because it is the future for Cork. There is no point in looking back on what has happened. We want to build anew and restore confidence in Cork.

The electronics industry are building up a fine base in Cork. I believe this should be complimented by setting up a software centre similar to the one in Dublin so that the young graduates and young technologists coming out of Cork can, along with the Micro Electronics Research Centre, get together and use their talents in developing new software programmes. The Taoiseach probably knows as well as I do that the world market for software is not within 35 per cent of being satisfied. Software is the one development that really suits this country because it uses people and not capital goods. It uses brain power. Any industrialists that I met in my short term in promoting the IDA in the east coast or west coast of the States, in Germany or anywhere else, said that our graduates had the most creative minds, that they are far ahead of the US graduates, that the US graduates are stereotyped coming out of the universities but our graduates are very creative, openminded, anxious to learn and anxious to get on with a new challenge. We are letting them go to waste in the dole queues throughout the country.

The Government should put a software enterprise centre in Cork. It will probably cost only £1 million like the one in Dublin will cost. The young people should be put in there and international companies who will set up in Cork and probably in Limerick as an advertisement alone will put computers in there for those people if they want to work on other projects. The Government should use the brain power that is there to develop the software programmes which are needed all over the world today.

A small Irish company, who went public recently, developed their own software programme and went out to the States with only one programme in their bag. That was for the building societies in the States. Many people thought this would not be possible. They have been so successful in selling that programme to the building societies in the States that they have taken over an American company. I visited the Nixdorf computer set up in Germany. This is an interesting and enlightening trip for anybody. This is a self-made man who has built up his computer business despite all the bureaucracy and red tape put in his way, despite not getting any assistance from the German Government and despite their intrusion into the way he was training his people. He set up a training centre on the campus. The German Government frowned on this but four years later they came to recognise that he was doing the right thing.

An Leas-Cheann Comhairle

Deputy, you have five minutes.

Mr. Reynolds

He was doing the right thing. He trains 2,300 young graduates on the computer side, in software programming, writing, technical areas and so on. We need that sort of development. I agreed with Herr Nixdorf before I left Germany, in conjunction with the Irish Government, meaning the IDA, to set up a similar training unit in Bray where he has a very fine plant and he is committed to expand it with no strings attached as to where the graduates trained in that centre are to go. He did not say that because it was on his campus and because he has a 50 per cent share-holding in it he has to get X, Y, Z or 20 per cent of those graduates. Since I left office bureaucracy has bogged that down. Whether it is in the Department of Education, the Department of Labour or wherever, it is a poor response that, having agreed with a man of the stature and calibre of Herr Nixdorf, a year and a half later we have done nothing about it. Any inquiries I have made have led me to believe it is bogged down in bureaucracy and there are 300 young graduates in this city who could well do with that type of training and programme.

I came across a firm in Colarado whose idea was to develop new business and new ideas. They would take over office blocks and get a large international computer company to set a computer on every desk with no charge whatsoever to the young people who wanted to go in and develop their ideas. Out of that grew in 12 months 2,000 business ideas and small businesses. We have plenty of IDA factories idle and we have office blocks idle also. Indeed, it is probable that the Government own office blocks which they have not gone into yet. Irrespective of that, that company were prepared to come to Ireland in response to a request. I do not know if anything has been done about that. Such a positive move would give hope and confidence to young people.

We must not take up a defeatist attitude. There is a way out of our problems if we decide to solve them ourselves. The Government cannot solve every problem for everybody and they have never claimed that they can, but they have a responsibility to create the right environment in which investment can flourish and enterprise will be encouraged and at the end of the day the risk-taker will be rewarded. We must not pander to ideologists left, right and centre and say that we must do this or that because the ideology says so or not do that because it will be seen to be working for private endeavour and private enterprise. Let us have the courage of our convictions, nail our colours to the mast, decide on the best route to take, and take it.

The budget is a disappointment in all the things it did not do and the very few things it did. I welcome anything that is positive in it, but it has been a total disappointment to the PAYE sector who were led to believe that they would find relief here because of a nod here and a wink there, but 50,000 people have gone into a higher tax bracket and £663 million more is being taken out of the economy. I have often heard calls from the opposite side of the House: "If you want to do something where do you get the money?" If only a fraction of the extra taxation taken out was left there, how much could consumer spending be boosted? How many more jobs would be retained that will be lost in the coming year?

Miss Flaherty

What services would the Deputy cut?

An Leas-Cheann Comhairle

Deputy, please conclude.

Mr. Reynolds

She is a lady. I would not like to leave her unanswered.

Miss Flaherty

What services would the Deputy cut?

Mr. Reynolds

I started with one and I will go on with more. I told the House what I did to reduce current expenditure in the Department I was in for nine months and the record is there to show it. Reduce it by 21 per cent and if you get 14 other Departments to do that you are well on the road if you want to do the job properly.

The budget is disappointing generally for what was not in it and what it did not do and could have done, the lost opportunities, no encouragement for investment, for the risk-taker or the man who wants to work harder, more tax taken out, national debt going up by £2,900 million in 1983 and the people on the street asking who is spending their money, what are they getting for it. If that is the best we can do, maybe we should have a different system and if we do not watch ourselves that will happen.

The Taoiseach

At the outset I would like to answer the question posed in a disorderly way on the Order of Business which I would have been happy to answer then but the Ceann Comhairle ruled that I should not do so. There appears to be some extraordinary confusion on the part of the Opposition over these figures about the employment level. It was explained last night. I was not here at the time but perhaps in the hurly-burly in the concluding minutes of the debate they did not take up what the Minister said. The position is simple and I am astonished that the Opposition should not understand it. This was a temporary levy introduced and allowed for in the Government finances for a single year. It has now been extended for a further year. In the estimates of receipts and expenditure the figure shown for 1983 of £40 million, is the product of this for nine months with a lag in payment because payment is X months in arrears; therefore you get less than three-quarters of the full amount in that year. On the other hand, the figure shown for 1984 of £34 million was the amount that would have come had the temporary levy been terminated, allowing for the fact that the lagged payments would mean that you would get that three months' payments in that year. In the budget, however, we decided, as was announced, to continue that levy for a further year subject to a remission in the case of people who in any week earn less than £96. The result of that was as set out in the table at the end of the budget speech, to add £40 million under the heading of "Temporary Tax Measures to be continued, income levy £40 million", that being the £45 million if it were continued without remission less the £5 million remission for people earning less than £96 per week. Then in the yellow table showing the outcome of the budget the £40 million extra as a result of continuing it and it coming in during approximately eight months of this year added to the £34 million from the imposition of last year which would have come in in the ordinary way, add up to £74 million. I fail to understand how the Opposition could not grasp that.

(Interruptions.)

Mr. McLoughlin

Is there a simpler way to put it? It seems it is very hard to understand.

The Taoiseach

We are here on economic debate and the Opposition are supposed to be serious politicians who have been in office and have some aspirations to be in office again, yet they cannot understand that if a temporary levy is introduced for one year then its effects shown in the Estimate of receipts and expenditure will be the effect for so long as it will continue in the new year, that is for three months with a lagged effective payment for four months. If you decide to continue it you will get the money for the rest of the year and you add that in to the budget figures when you produce the budget.

Mr. Reynolds

If the Minister for Finance had said last night what the Taoiseach has said now there would not have been a problem.

The Taoiseach

The Deputy should have listened to him. He explained it.

(Interruptions.)

Mr. Reynolds

I am only interested in the facts.

The Taoiseach

He said that at the column for 1984 in which appears "Revenue £74 million", the period covered is the 12 months of 1984 with the renewed levy. The column for 1983 shows £40 million, the total in 1983. He went on to say that the figure for 1984 includes the figures of the adjustment for the remainder of the year, the reintroduction of the levy, but the Deputies would not listen to him.

Mr. Reynolds

I am not getting into argument.

The Taoiseach

I have read out what he said.

Mr. Reynolds

There were three months to be added in. If you took pro rata three months and £40 million for a full year you would get £13.3 million and if you add that to £40 million you will arrive at £53 million. Instead of that the budget figure is £74 million. There is no explanation of that. Also the budget speech clearly gives the impression that the receipts from this 1 per cent levy are £40 million when in effect they are £74 million. The Taoiseach cannot deny that.

The Taoiseach

I have the text in front of me and the Minister did not say three months. If the Deputy is unaware that payments of tax are lagged by a month and that that effects the figures it is a different matter, but I do not believe he does not understand that. He was one of the more intelligent Ministers on the other side. The Minister's speech explained the additional amount raised by introducing the levy and the table at the end of the speech refers to the addition of temporary tax raised by the income levy at £40 million. The Deputy could have read that. Perhaps other Members opposite were less able than Deputy Reynolds to grasp the simple facts involved. However, having exploded that imaginary balloon which was launched with such aplomb this morning by the Leader of the Opposition, I shall now make my own speech.

This budget is a further step in implementing the strategy set out at the end of 1982 in our Programme for Government.

The extra taxes which the budget imposes are less than in any budget of the last four years and these taxes are balanced by welfare provisions matching the cost of living. The budget will, in fact, take an estimated 15,000 people out of the tax net.

The level of increase in the consumer price index involved in the budget changes — at less than 1 per cent — is smaller than in any of the last four budgets.

The budget will reduce the level of the current deficit from the 12.5 per cent of GNP that it would have reached in 1982 if we had not taken immediate steps to control the situation when we assumed power in June 1981 to a figure for 1984 which on an equivalent basis is just over half that level. That is the progress made on the deficit after two-and-a-half years work by the Government. It reduces borrowing as a proportion of GNP from a threatened 21 per cent of GNP to a figure about two-fifths lower than that. Those are the achievements of this and the other budgets we proposed and in two out of three cases introduced in this House.

In general the budget will add a stimulus to the economy, while at the same time moving in the direction to get the economy right and to increase employment opportunities for our people.

We recognised when we took over in mid-1981 and again after a brief interval at the end of 1982 that the task of halting and reversing the growth of unemployment, while phasing out the current budget deficit, posed a greater challenge than any Irish Government or the Irish people had faced since the early years of the State.

We promised then to face up to this twin challenge in a manner that would evoke from the nation a co-operative response to the policies necessary, given firm leadership and equitable handling of the problems created by the crisis.

We recognised at that time that the phasing out of the current budget deficit over the years to 1987 would have to be undertaken with due regard to prevailing economic conditions as we said at that time. There is now general acceptance of the need for such a prudent but positive approach.

In particular we pointed out the importance of achieving economic growth and dealing with unemployment. The increase of more than 28,000 in unemployment in 1983, though showing a slower increase in the past nine months, only serves to underline the fact that the most urgent economic and social problem facing us is that of unemployment.

The Government have in this budget concentrated on measures to achieve the maximum economic recovery consistent with international economic developments and protection of our international credit standing. Until the economy is once again expanding employment will not rise at a rate sufficient to stabilise and reduce unemployment to a level where greater revenue buoyancy and reduced social welfare spending can contribute to the elimination of the current budget deficit by 1987. The reduction in the current deficit from 8.25 per cent to 7.5 per cent of national output strikes the appropriate balance between correction of the public finances on the one hand and ensuring the stability of the economy and the possibility of growth on the other.

Few if any economic commentators foresaw in 1979 and 1980 the depth of the international recession that has taken place since then and from which we are just emerging. Unfortunately, recovery that began to take place in recent times has not resulted in a fall in unemployment except in the US. In the European Community there were more than 12 million people unemployed at end 1983 compared with six million at end 1978.

At the same time, on the positive side there has been a stabilisation at a low level in the rate of inflation. The OECD forecasts for 1984 show a total for the seven major countries of 5 per cent as compared with 4.75 per cent last year. The rate of inflation in this country in the past 12 months, exclusive of the cost of living effect of last year's budget, was less than 7 per cent. This year the budget adds less than 1 per cent to the cost of living, smaller than in any of the last four budgets and giving an underlying inflation rate of under 8 per cent. Policies to match the lower rate of inflation elsewhere are essential so as to encourage increased employment here and, in time, lower unemployment. We must now move to control internal costs so that our annual rate of inflation through 1984 and into 1985 can with the benefit of international price developments be held at or, possibly and preferably, even below the level elsewhere. This is not an academic argument: it is the only basis on which our economy can grow and our people find employment within their own country.

The overall strategy of the budget is to provide the conditions for faster growth and a recovery in employment. We are doing this by reducing the real level of Government supply service expenditure as much as possible and by redirecting available resources to productive investment. In determining public expenditure policy we bore in mind the advice given recently by the European Commission in their annual report for 1983-84 that:

In pursuing this objective, however, it is important to maintain an appropriate balance between tax increasing and expenditure cutting measures given their respective economic costs. Recent budgets have stressed large increases in the level and scope of taxaction, while the current low level of activity reduces tax buoyancy; this suggests that a new general increase in taxation would not be appropriate in 1984 but that attention should now be directed at achieving significant real cuts in expenditure. Pressure on scarce Exchequer resources is likely to continue, principally because of the continuing high level of interest charges on the accumulated national debt and increasing demand for social expenditure. Great efforts are therefore necessary to reduce both current and capital spending programmes. It would seem appropriate to reduce the Exchequer borrowing requirement in 1984 by 1 to 1.5 per cent of GDP by reference to the likely outturn for 1983 and on the basis of the current budgetary definitions.

That is what we have done. It is against the background of this authoritative advice that I want to present my analysis of the budget.

I propose in the first instance to place this budget in the context of a series of financial measures which had to be taken, and which remain to be taken, in order to restore to us full control over our own financial affairs. The situation in which £3 out of every £8 of taxation is used for interest or sinking fund payments on past borrowings and where, in consequence, only £5 out of every £8 of taxation is available to provide public services, to stimulate growth and employment, and to improve equity in the distribution of resources is frankly intolerable. It is all the more intolerable when the need to raise such sums for this purpose, which offers no present or future benefit to our people, entails a level of taxation which both in respect of direct and indirect taxation is by any objective standards much too high and offers a disincentive both to work and to enterprise.

Once public borrowing has been allowed, as it was allowed, to reach a certain level it is in danger of becoming self-perpetuating because the annual increment of additional interest and sinking fund payment begins to rise at a rate that pushes up faster and faster the total level of current Government spending each year. Every £1,000 million spent to finance the current deficit adds about £150 million to the taxation which the Government have to raise annually in subsequent years. This faces Government and people with a choice between an ever-rising level of total spending, or cutting back with ever-increasing sharpness the actual level of spending on the public services.

This country reached that danger point some years ago after a four-year period in which current public expenditure as a share of national output was recklessly increased by more that one-fifth, from 38.5 per cent to 46.5 per cent of GNP. The initial response of the then Government to the financing of this expenditure explosion which they engineered was to cover about half of it by tax increases, raising taxation from 27.3 per cent of GNP in 1977 to 32.3 per cent of GNP in 1981, but leaving the remainder to be covered by a sharp rise in borrowing.

Because of the threat posed to our financial stability by the enormous rise in borrowing required to finance both half of the extra current spending, as well as a big increase on the capital side, successive Governments of different complexions have had no alternative in the past three years but to take the steps necessary to reduce sharply the total level of borrowing as a percentage of GNP — which in the budgets between July 1981 and March 1982 involved very sharp increases in taxation.

During these past two-and-a-half years an effective start has been made in bringing under control the surging burden of additional interest and sinking fund payments. This action was rendered all the more necessary because the level of borrowing itself had reached proportions which raised the spectre of a loss of control of our own affairs through a possible inability to borrow the ever-increasing proportion of GNP demanded by the spiralling financial crisis set off in 1977 to 1981. Some figures may illustrate the extent of the problem and the extent to which already it has begun to be successfully tackled.

Between 1977 and 1981 the current budget deficit had risen from 3.75 per cent of GNP to 8 per cent of GNP and the level of Exchequer borrowing from 10 per cent to 16.57 per cent of GNP. This situation was aggravated by the fact that during this period the proportion of borrowing that had proved possible to effect on the domestic market fell sharply. In 1977 net foreign borrowing amounted to only £86 million, or 1.5 per cent of GNP, and the bulk of the borrowing requirement, at 10 per cent of GNP, was available from domestic sources. Incidentally, there was no net increase in foreign borrowing that year as that £86 million of extra borrowing was offset by £87 million of a reduction in duty on exchange rate movements which at that time were favourable. We ended that year with a £1 million reduction in the net amount outstanding.

By contrast with the situation in 1977 when 8½ of the 10 per cent of GNP was borrowed at home, the availability of the necessary domestic borrowing had been reduced in 1981 to the point where it was only half as large as a proportion of national output, 4.25 per cent of GNP. The situation had deteriorated to the point where the Government's capacity to borrow at home had been halved in relation to GNP although their borrowing needs had increased by two-thirds. That was the degree of mismanagement of our economy in those four years. As a result, in 1981 no less than three-quarters of the total amount required to be borrowed to finance the current deficit and the increased capital programme had to be borrowed abroad. That involved a level of foreign borrowing equivalent to 12.5 per cent or one-eighth of GNP, an appalling figure and a level of foreign borrowing which to anyone with any knowledge of the kind of foreign borrowing undertaken by countries with stable economies obviously constituted a threat to our stability.

It was this that set alarm bells ringing and it required the most drastic action to be taken if the country's national solvency was to be protected and its ability maintained to borrow at home and abroad the reasonable sums needed to sustain the economy and to prevent a massive economic collapse. That was the position that faced the Government elected in mid-1981, but the threat revealed when they came to power was far greater even than these emerging 1981 figures revealed. On the information provided to the Government by our advisers when we came into office at the time, the current deficit likely to emerge in 1982 in the absence of most drastic budgetary action, would jump further from 8 per cent to about 12.5 per cent of GNP and the level of borrowing required would increase in 1982 from 16.75 per cent to about 21 per cent of GNP.

Immediate action had to be taken to stem this disastrous slide, and the budgets of mid-1981 and January 1982 — the latter of which was actually implemented by the incoming Fianna Fáil Government with some unfortunate modifications as to content — succeeded in reducing these threateningly high figures back down to about the same level as in 1981. Moreover, borrowing on the domestic market was possible on a larger scale as confidence returned following these measures, with the result that foreign borrowing was reduced in that year from 12.5 per cent to 9.75 per cent of GNP.

The progress made since then in the budget of 1983 and in the budget now before the House has been significant. The level of the current deficit this year would, but for the technical adjustment arising out of the vesting of the Post Office, have been just half that threatened for 1982 at the time when this Government took office two-and-a-half years ago. In two-and-a-half years we have solved half of the problem of the current deficit left to us in June 1981 by Fianna Fáil. Similarly, Exchequer borrowing in the current year on the same basis has been reduced by something not far short of half — from 21 per cent of GNP to a figure which but for the Post Office adjustment would have been just over 12 per cent of GNP.

In the light of this presentation let no one say that this Government are preoccupied with book-keeping for its own sake. Since we first came to office in mid-1981, and despite the short break in the life of the Government during part of 1982, we have been fighting a battle against a threat to employment that would have been on a far, far larger scale than that which now faces us. We have been fighting also to create the conditions in which it would be possible to bring in a budget that would not be deflationary in character, that would not add significantly to inflation, and that would contain provisions designed, even if in the first instance on a small scale, to stimulate employment, as well as some measures of relief to the general taxpayer and to particular sectors of the economy faced with extreme difficulties as a result of the recession.

As a result of our persistence during the two-and-a-half years in the face of inevitable unpopularity and political opposition in the Dáil, we have succeeded in attaining this objective of introducing such a budget within two-and-a-half years of starting on this road, and despite the interruption of our work, and a considerable loss of ground resulting from that interruption, during the course of 1982. In this year's budget, for the first time in two-and-a-half years, it has been possible as a result of tight control of expenditure, to limit the net increase in taxation to a small figure, offset twice over by social welfare increases, while, at the same time, continuing the process of reducing the current deficit and borrowing as a share of GNP.

By any standards this is no mean achievement, and I do not propose to under-sell it. To describe the budget as neutral is to understate the position so far as its impact on the man or woman in the street is concerned. Leaving on one side such measures as the earlier date of payment of tax on building societies and the capital tax and stamp duty provisions and other measures of this kind, the actual additional taxation payable by individuals through excise duties, VAT, and so forth, is around £75 million, whereas tax reliefs to persons are about £40 million and additional social welfare provisions about £70 million. Thus, in terms of the availability of money to the broad mass of the people, there is a net relief — small but a relief nonetheless — of the order of £35 million after two-and-a-half years of tackling the crisis left to us by Fianna Fáil.

At the same time the budget contains a number of measures designed to promote employment. The greatest of these is, of course, the restoration of stability in the public finances and the promise it brings that we can, gradually, reduce taxes and encourage enterprise in an environment that is not clouded with uncertainty, either economic or political. But there are a number of other more specific measures to which I would like to draw the attention of the House. In addition to the review of the enterprise allowance scheme, introduced towards the end of 1983, which has been proved so successful, there are:

additional resources for an employment support scheme to be provided by Córas Tráchtála;

tax reliefs for long-term venture capital in new enterprises.

I noted Deputy Reynolds's welcome for that proposal. I share his sentiments generally about the contrast between the need to get venture capital into industry and the type of speculation which we have had with oil shares. Indeed, if I might say so, while the first hour of the Deputy's speech was of an understandably political character of scoring points, the last half hour of his speech, apart from the concluding couple of minutes, was a very interesting and constructive analysis by someone who, as I know, has extensive business experience. It is a matter of regret that these were only between one and three members of his party there to listen to him during that part of his speech. I certainly listened to him with attention and interest when he turned from politics to business.

Mr. Haughey

You are great. You are full of virtue. You are the most virtuous man in Ireland.

An Ceann Comhairle

Order, please.

The Taoiseach

An extraordinarily relevant interruption, if I may say so.

Mr. Haughey

You are great. You are full of virtue.

The Taoiseach

I am very sorry——

An Ceann Comhairle

The Chair will see to it that each Deputy who offers to speak will be allowed to speak without interruption.

The Taoiseach

I am very sorry if I have upset Deputy Haughey by drawing attention to the fact that when his spokesman was speaking there were only between one and three members of his party listening to him, even when he was talking a lot of good sense in the last half hour of his speech. Those are the facts of the matter.

Mr. Haughey

Make a speech on the budget.

The Taoiseach

If members of the Deputy's party were not prepared to listen to him, I listened to him and I am more than happy to take on board some of the useful things he said.

Mr. Haughey

You can never resist making a party political point. Talk about the budget.

An Ceann Comhairle

Deputy Haughey should stop interrupting.

The Taoiseach

Deputy Haughey's irritation at my praise of Deputy Reynolds is highly significant.

A Deputy

The leadership crisis is on again.

The Taoiseach

It is very easy to know how to get under Deputy Haughey's skin.

Other measures in the budget include:

a very substantial improvement in the tax provisions in relation to profit sharing:

a renewal of the corporation tax deduction——

(Interruptions.)

The Taoiseach

If the Deputy does want to listen about the budget, I am talking about it. Would he listen?

Mr. Haughey

I am just saying that the Ceann Comhairle upbraided me, but he let you continue with personal remarks.

An Ceann Comhairle

The Taoiseach has the floor and as long as he is not being disorderly, he is entitled to make a speech. Deputy Haughey presumably will be speaking later on and may reply to it.

Mr. Haughey

I came down to listen to a talk about the budget. He is not talking about the budget.

Dr. Woods

He is going to talk about the budget.

An Ceann Comhairle

If Deputy Haughey is dissatisfied with the Taoiseach's speech, he can leave the House.

Mr. Haughey

I shall keep quiet.

Mr. Boland

Make excuses for him. He is in bad form this morning.

Mr. Haughey

With respect, a Cheann Comhairle, I am not being all that very disorderly that I should leave the House. The Taoiseach is making personal, tendentious remarks about me and he has unfortunately incited me into replying.

Mr. Quinn

You started it.

Mr. Haughey

I do not think I shall have to leave the House.

An Ceann Comhairle

No, I said that if Deputy Haughey does not want to listen to the speech, he need not.

Mr. Haughey

You are being a bit irascible.

An Ceann Comhairle

Not a bit.

The Taoiseach

I was commenting favourably upon Deputy Reynolds's speech and the Deputy opposite interrupted me for doing so and attacked me. The remarks I made about him arose only out of his interruption.

Mr. Haughey

Get on with it and talk about the budget.

The Taoiseach

I am very sorry to have upset the Deputy so much. I shall try to avoid any favourable remarks about any member of his party in future. Sometimes it is difficult to do so.

Mr. Haughey

Your self-righteousness is a bore. You are a boring, self-righteous, virtuous man.

Deputies

Oh.

An Ceann Comhairle

Deputy Haughey should please refrain from interrupting.

The Taoiseach

It is all coming out now in the wash.

Dr. Woods

I am not talking about 1984 for a change. Talk about 1984 and 1985.

An Ceann Comhairle

Every Member of the House is entitled to make a speech and certainly the Taoiseach is entitled to do so.

The Taoiseach

I shall proceed.

Mr. Haughey

We shall listen carefully.

The Taoiseach

I do not feel that we should encourage Deputy Haughey to let himself down any further.

Other measures included were:

a very substantial improvement in the tax provision in relation to profit sharing;

a renewal of the corporation tax deduction in respect of additional employees;

an extension of the initial allowance for plant and machinery and initial and annual allowances for industrial buildings which were due to expire;

an extension of the industrial buildings provisions to laboratories used for analysis work in connection with mining and oil exploration;

an extension for a further three years of the allowances to encourage people to invest in the private sector in the construction of toll roads, bridges and multi-storey car-parks, which were due to expire on 31 March next;

abolition of the claw back of stock relief once granted;

a new system of stock relief on the basis of the opening stock shown on the accounts;

and a reduction of VAT on concrete from 23 per cent to 5 per cent from 1 March next.

In the agricultural sector the AI and ground limestone reliefs which were due to terminate have been extended and a special provision has been made to help with the domestic co-operative marketing of potatoes. In addition, the stamp duty provision designed to encourage the transfer of farms to young farmers has been extended for a further year, taking account of the fact of the difficulties which some young farmers have experienced in acquiring the necessary number of hours training to qualify in time for this relief.

On the capital side, the budget provides:

an additional £8 million for road improvements — £1½ million more than the amount taken in additional road tax; the amount available for housing through SDA loans and Housing Finance Agency have been increased by £3 million each — a total of £6 million more for housing; an additional £2 million has been provided for the repair of primary schools; and funds have been provided for two projects of significant importance to major provincial centres — the Ringaskiddy deep-water berth and Galway airport.

The total increased provision for capital spending on construction work is over £18 million. In sum, taking the range of additional and extended incentives, the measures in the agricultural sector, the additional capital spending in these areas, in a situation of great financial difficulty, I believe that this Government have done well to provide this additional incentive for employment over such a wide range, even if the total allowance necessarily has to be limited. I would add that, in the area of tourism, there has also been extended a reduction in the rate of VAT on car, caravan and boat hire to 18 per cent and the allocation of an additional £300,000 to Bord Fáilte to enable them to take advantage of the present opportunities in the North American market to attract visitors to Ireland, arising from the current favourable exchange rate situation affecting potential American visitors, with the dollar at just half the rate it was at about three years ago. The punt vis-à-vis the dollar is half the rate so that holidays in Europe, and Ireland in particular, are very attractive to American visitors. A further boost to tourism is the scheme to refund VAT on retail purchases by tourists exported in their personal luggage. As I mentioned yesterday in the course of the discussions during the evening, this will be of particular value in relation to American visitors because, of course, visitors in the EEC can export £145 of purchases without paying VAT in the country to which they are returning.

That it has been possible in this budget to make provision for such a wide range of measures designed to assist different sections of the economy, albeit necessarily at this stage in relatively small ways, is a measure of the progress that we have made in the short and interrupted period of two-and-a-half years since this Government first came to power.

But this budget has also concerned itself with issues of social justice and equity. Provision has been made for social welfare including children's allowances in line with the expected increase in consumer prices during the 12 months from when these increases will apply. Following on the accumulated effect of the last two budgets, in which the provision for social welfare over a period of two-and-a-quarter years exceeded significantly the increases in the cost of living during this period, these social welfare provisions indicate the commitment of both parties in this Government to the maintenance of the living standards of the least well-off in the community, even at a time when the living standards of others have necessarily had to fall. I doubt if there are many, or perhaps any, other European countries whose record in this respect during these difficult recent years matches that of our Government in the three budgets which we have had the responsibility for preparing in 1982, 1983 and now in the current year.

Broadly speaking, at a time when average living standards over these years of those in employment have fallen by something in the order of 10 per cent, average living standards of the less privileged groups of the community, those on social welfare, have risen by approximately an equivalent amount. In no other European country of which I am aware, has anything of that kind happened. On the contrary, other European countries have been cutting, in real terms and indeed in some cases in current terms, social welfare benefits. We stand in this respect, as a result of the efforts of this Government in the three budgets which they have prepared, alone and unique in Europe and are proud to do so.

There is also a further point, which seemed to be widely missed last year, that these social welfare provisions have been made now for two successive years without any increase in the pay-related social insurance premiums either by employers or workers. The ceiling for payments of PRSI was increased last year but there was no further increase in the ceiling this year, when the actual rates of payment have, uniquely, been held unchanged with a view on the one hand to minimising the cost to employers, and on the other hand of holding down the amount taken from employees through PRSI. Again I doubt whether this record can be matched in many or perhaps even any, other European countries over this period.

But the social welfare increases, undertaken without any increase in PRSI rates are not the only social provisions of this budget. The tax changes include provisions that will place widows with dependent children in the same favourable position as married people. Pension parity in the public service in respect of general pay increases is being provided for after many years during which it has been sought from successive Governments. A measure of immediate relief to the low paid workers, most of whom are not liable to tax and so cannot benefit from the tax reliefs is provided by the remission of the temporary levy on any pay packets which, in a particular week, fall below £96. And the Government's commitment to introduce a family income supplement, a provision to which my own party have been particularly strongly committed for some years past, is being fulfilled later this year at an annual cost of £13 million in a scheme, details of which will be announced by the Minister for Social Welfare. I am particularly happy that we have reached the stage where such a scheme can be introduced, as I believe that the absence of any such provision has been one of the most undesirable features of our whole income-distribution system for many years past.

Apart from the social inequity of failure to assist families where the breadwinner is at work and whose income may be no more than, or indeed lower than, those on social welfare, there is the economic disadvantage of that situation in which people find themselves, as a result, better off not at work than at work. That we are proceeding to eliminate and, in this budget, eliminate in a positive way by supplementing the incomes of those at work.

Another category of people who will be helped in this budget are older people who are tenants of private landlords and whose age has prevented them from benefiting from the tax provision we provided to cover this category in last year's budget. The lowering of the qualifying age from 65 to 60 will, I believe, be welcomed by the 4,000 persons who will benefit from this provision, quite a number of whom will have suffered as a result of the increase in private rents arising from the abolition of rent control through a constitutional decision of the courts.

So far as the income tax payers are concerned, the budget makes a provision to increase the exemption limits, thus relieving 15,000 people from the obligation to pay income tax. It increases the personal allowances by £350 for a single person, a widowed person and a one-parent family and by £700 for a married couple, which, after allowing for the effects of the elimination of the 25 per cent income tax band, gives a measure of relief from income tax to all taxpayers. The Government would have wished to have been able to make further reliefs available in this area but within the constraints imposed by the need to control the current deficit and borrowing, and the need to provide the employment-creation measures and social welfare increases that I have already outlined, this is the limit of what is possible in the current year. It represents, however, the start of a path which we propose to follow in future years.

At the same time work of securing equity in the tax system has required attention to other areas of taxation. In the face of the very considerable practical difficulties that exist in relation to the taxation of self-employed people on a current year basis — because of the manner in which their income is spread over the year — provision has been made to increase from 80 per cent to 85 per cent the proportion of the final amount payable by self-employed taxpayers who appeal an assessment.

The capital acquisitions tax system is being rationalised, and the new system will yield an additional £1 million this year and £4 million in a full year. At the same time action is being taken to prevent the abuse of discretionary trusts in cases where the settlor has died and the youngest beneficiary has reached 25 years of age. This provision will not interfere with the proper use of discretionary trusts, but will operate as an effective discouragement of the abuse of the trusts for avoidance purposes.

At the same time, in a decision effective yesterday, new section 84 lending and artificial preference share financing will no longer confer a tax advantage, and accelerated capital allowances in respect of assets leased will henceforth be allowed only where such leasing forms part of a grant-aided incentive package from the State agencies. These measures will bring to an end avoidance mechanisms which have proved very costly to the State. In the current year this change will yield £7 million, but the amount involved next year will be many times greater than this.

Other tax avoidance provisions include those against bond-washing and the removal of tax exemption in respect of gains made on Exchequer bills and other similar non-interest bearing securities.

The measures are in addition to the unprecedented drive against tax avoidance which we initiated last year and which included such very wide-ranging measures, indeed by far the majority of those put to us by the Irish Congress of Trade Unions, to deal with tax avoidance and which I understand are estimated to have yielded somewhat more than the figure for which we made provision for tax avoidance measures in last year's budget.

The budget also contains other reliefs or grants which, although very specific will, I believe, be very generally welcomed. These include: reduction in VAT on theatre tickets from 23 per cent to 5 per cent; the grants to the GAA, to the Olympic Council of Ireland, the Olympics for the Disabled and the additional £50,000 for other sporting activities; the additional grant for youth activities in deprived areas which, coming on top of the other measures we have taken, the very substantial increase in grants for youth activities last year, and the making permanent of youth development officers, has shown clear evidence of the strength of our commitment to action in this area; the extra money for the Irish welfare centres in Britain; and the reduced charges for shorter-term passports for people under 18 or over 65.

Within the limits of resources available, the Government have endeavoured to provide relief or assistance to as many areas as possible where it will prove of wide benefit or where it is clearly badly needed.

In implementing these provisions, the Government have had to have regard to the need to make continuing progress towards the target of eliminating the current deficit by 1987 and towards reducing the level of borrowing. As indeed indicated by the Government in advance of the budget, it was our view that the current year was not one in which it would be appropriate to proceed to a reduction of the current deficit by the full amount that would be required if we were to make linear progress towards our 1987 target. I believe that this judgment is widely shared both by the public in general, by politicians and by economists.

It is the Government's view that the correct approach to adopt in the current year is to reduce the current budget deficit as a proportion of GNP by three-quarter per cent by comparison with the figure of seven and a quarter per cent in 1983, which, adjusted to allow for the effects of vesting the Post Office, will on the new basis be eight and a quarter per cent. At the same time the Government were concerned to reduce borrowing by an amount that would fall within the range indicated by the EEC Commission as desirable — namely, 1-1.5 per cent; the actual reduction is in the middle of that range, 1.25 per cent.

These two constraints required — in order to make possible the provisions that I have been outlining in terms of employment creation, benefits to various groups in the community — some increases in indirect taxation this year. The Government have, however, been concerned to limit the amount of these indirect tax increases. The very sharp increases in both indirect and direct taxation that has been necessary in the last couple of years have made it desirable to pursue a policy in the current year which in respect of a number of items — spirits, beer and petrol and equivalent products — falls well short of full indexation of excise duties on these commodities. Indeed in the case of spirits it was our judgment that no further imposition should be made this year and we also decided that the increase in the taxes on beer should be kept literally to a minimum. For petrol, the tax increase is only half the amount that would be required if tax were to be indexed in relation to the cost of living.

The tax yield from these items, together with the new 8 per cent tax on adult clothing, is only a fraction of the amount raised in additional taxation in recent years. I am sorry Deputy O'Rourke is not here. I brought in specially to show her — in view of her concern last night and indeed that of other Deputies who showed their ignorance on the subject — the labels of clothing sold in Dunnes Stores. If I may just mention them, there are, for example: age 5 to 6, girl's sweater, 58 to 60 centimetres; age 10 to 11, cardigan, 70 to 74 centimetres; age 9, boy's sweater, 66 centimetres.

Dr. Woods

Girls are going to be measured by circumference.

Minister for the Public Service (Mr. Boland)

Girls were always measured by circumference.

The Taoiseach

Last night's performance by the Opposition was one of collective ignorance of a most extraordinary kind. I am glad to have the documentary evidence here but sorry that Deputy O'Rourke is not here for me to show it to her personally. It means that if we do not actually visit Dunnes Stores together, the labels are here for her whenever she comes in.

Indeed, the amount of increased taxation this year is no more than one-third of the average of recent years and less, in fact, than in any of the last four years. These additional taxes are balanced by generous welfare provisions.

As I and other Ministers made clear in advance of the budget, it was not possible in the current year to introduce a budget which would have a strongly stimulatory effect on the economy. However, within the constraints imposed on us, I believe that the budget we have presented combines economic prudence, encouragement to economic activity in a wide variety of different areas, and social equity. I believe that this judgment will be widely shared in the community, where there is now a general widespread recognition of the grave difficulties that face the State and the need to pursue a delicately balanced policy.

We must, on the one hand, encourage economic recovery and, on the other hand, continue to make progress towards restoring order to our public finances.

There are of course, bound to be criticisms in details of the budget; it would be odd, and even disturbing, if this were not the case. But there will, I believe, be a broad consensus recognising its balanced character in present circumstances.

There is one danger, however, that one cannot ignore: the danger that in deliberately choosing to introduce a mildly stimulatory budget in present circumstances, public opinion might be misled into under-estimating the financial problems we face. They still remain to be tackled.

It is of vital importance that all should recognise that, while in the current year, it has been necessary for the sake of the economy to reduce the pace of progress towards the reduction in the current deficit and a reduction of borrowing, this progress has to be resumed in the years ahead. If we are fortunate, and if the world recovery now tentatively under way is sustained, and spreads to this country, where it will be aided by the general shape of the budget we have introduced, then the task of eliminating the current deficit and reducing borrowing, and of reversing the hitherto apparently irreversible upward trend in the share of taxation eaten up by debt interest and sinking fund payments, will have been rendered lighter, although still difficult. But the difficulties, even under the circumstances, should not be underestimated.

If, however, the fears now being widely expressed about the danger of a relapse in the world economy prove justified, and the years 1985 and 1986 are once again years of general worldwide economic stagnation, the carrying forward of the process of eliminating the current deficit and reducing borrowing, and of relieving the burden on taxation of interest and sinking fund payments, will be very painful indeed: no one should be in any doubt about that.

We are very far indeed from being out of the wood at this stage. It is necessary to reiterate this and to hammer this message home, lest this budget, designed with great care to meet as precisely as possible the economic needs of the present, immediate, situation, should have the most undesirable effect of misleading people as to the realities we have to face. I would be failing in my duty to the House and to the country if I did not include this warning note in my remarks on the budget.

The general strategy of the budget responds in many respects to the representations we have been receiving from economic and social interests throughout the country who are concerned, as we are, to generate increased economic activity and employment. We think it provides a basis on which the community as a whole can unite in optimistic endeavour so that we can emerge again from the shadows which the appalling rate of unemployment in recent years have cast over our economic and social life. Towards this end we shall in the aftermath of this budget be pursuing the discussions which we have initiated with the major economic and social interests in the State. As well as being delicately balanced to achieve the economic and social objectives appropriate at present, the budget has also helped to stabilise the general situation and I do not think that anybody will doubt that this Government will be introducing further budgets in 1985, 1986 and 1987.

Dr. Woods

It was very depressing to listen to the Taoiseach here today. Yesterday we tried to see what sort of measures were being taken and what positive proposals were being made, what was the direction of the economy for the coming year and what underlying steps were being taken to guide that direction in the years ahead. We did not find that yesterday, nor did we hear it from the Taoiseach today. The one major quality absent from the Taoiseach's speech, apart from the fact that it was a reiteration of yesterday's budget speech, was any indication of leadership. It also lacks credibility.

The Taoiseach is afraid that the public might be misled into believing that the situation will be easier in the near future. I think the public could be misled by not recognising the lack of credibility in the Taoiseach and Government. The Taoiseach told us early on in his speech about the extra taxes and said they are balanced by the welfare provisions which match the cost of living. How can the Taoiseach say that the welfare provisions match the cost of living? He says that inflation will reach 9½ per cent, so how could increases match the cost of living? In any event, these increases do not come into effect until later in the year. I will deal with this in more detail later.

The Taoiseach also said that the budget will reduce the level of the current deficit. He knows quite well that the current deficit has gone up from £750 million which he later adjusted to £897 million and then said that the target for the end of the year would be £950 million. In December it became £960 million and we all know that it is now £1,088 million. Yet he says the budget will reduce the level of the current deficit. Of course he adds a little piece on to that because when things do not work you change the terms of reference and that is what economic statisticians very often do. They switch figures around and confuse everybody. That is what the Taoiseach is doing at present although it is in conflict with what his Minister for Finance said in the statement to which I will refer shortly.

The Taoiseach also said that the increase of over 28,000 unemployed in 1983 only serves to underline the fact that the most urgent economic and social problem facing us is unemployment. Although it is supposed to be our most urgent problem he says he is not going to do anything about it. How can someone be credible when he comes before the House and says that the most urgent problem is unemployment — which it certainly is — and creating jobs and yet say he will do nothing about it? How can such a document be credible or give any leadership? It does not give leadership and that is the sad reality of the Taoiseach's speech here this morning.

It is also quite clear from the Taoiseach's speech that he is looking backwards and confusing figures because he takes them out of context repeatedly. I am sure people realise now that he switches from figures to percentages when it suits him. The Minister for Finance does not know where to look so nobody is looking forward. The Taoiseach is talking about a rosy position but the Minister for Finance is trying to be realistic although he is totally unimaginative and not prepared to look forward.

It is very sad for those who are unemployed or who are about to become unemployed. The Minister for Finance keeps repeating that this is a neutral budget. The Taoiseach does not agree with him, he does not like to think it is a neutral budget. There is a conflict between the Taoiseach and the Minister for Finance because they do not know how to describe the budget. I would describe it as negative and indecisive and anyone who tries to understand our economy, our potential and our problems must recognise that this is the case. It will obviously do nothing to stimulate investment and I will come back to that in some detail later. It is bad for employment but it does not claim to be doing anything to create jobs or to take more unemployed off the register. In fact it will create more unemployment. The budget figures show an average of 225,000 unemployed which means that by the end of the year we will have between 240,000 and 250,000 unemployed. This budget is particularly bad for the poor. I was horrified listening to the Taoiseach talking about the wonderful things they are providing for the poor. I wish he would face the realities in the outside world. This budget offers no hope for 1984 and it does not even lay the foundation for future years.

The Minister must realise that he has gone the wrong way. He has lost an opportunity to lay a firm foundation for the future. We must ask ourselves why should someone who has worked as an economist be so indecisive. I know there is a difference between being an economist and a practical manager, but why is he so indecisive at this time? He has opted out of management. He has cut the capital budget for the second year in a row, increased Government spending and showed no imagination. In my view the real reason for his indecisiveness was that the Government could not decide what to do.

When Deputy Cluskey left the Government he said the Estimates were one thing, that he felt he had not done too badly in that area—he had not done too badly because Government spending had been increased — but the budget was something else. This is where the problems arose because the Coalition partners could not decide on an imaginative programme for the creation of jobs for the future. We heard of the many hours and days the Government partners spent trying to come up with solutions, but they came up with this indecisive, unimaginative budget. This is not realistic or logical and if it is not logical there must be a reason, and in this case the reason was a conflict between the Government parties. Now we have a ship bobbing around the oceans not knowing which way to go. If I were on that ship, I, like Deputy Cluskey, would get off and travel on the nearest trawler or even in a canoe. He knew what was going to happen. In his statement the Minister said a new deal was to be worked out for the exploration of oil and the development of resources. These were obviously the two elements which influenced Deputy Cluskey to get off the ship and, in my view, he got out of the Coalition just in time.

There is a major inconsistency in what the Minister said. He said that taxation cannot be reduced "until current expenditure is reduced and the current budget deficit eliminated". He made it clear that taxation cannot be reduced until these steps are taken, yet he accepts a situation where the current budget deficit is increasing. If he had said that the current budget deficit must be a certain percentage of GNP, that would be a different story but he did not say that. He said he cannot do anything to give the poor, downtrodden PAYE taxpayer the incentive to work and to have a reasonable take home pay until the budget deficit is eliminated. The Minister clearly indicated that nothing will be done for the taxpayer and as far as the PAYE taxpayer in particular is concerned this Government will do nothing to give him the relief he needs so badly.

That fits in with a great deal of what has been said about social welfare. The way to tackle the situation as far as the lower paid worker is concerned is to give him more take home pay and not make it more attractive for a person to stay on social welfare. Let us hear from all those economists who agreed with the Minister when he said that the budget deficit must be eliminated. Over the last 18 months they have spoken about the importance of this step on numerous occasions, but I hope they will identify the realities as spelled out by the Minister and will recognise that this Government are at sea and do not know where to go. This will become clearer as time goes on.

The increases in income tax amount to 20 per cent. While there are some benefits, obviously more is being taken that is being given. From the figures provided it can be seen that the Minister will receive an increase of more than 20 per cent from the hard-pressed income tax sector, of which the PAYE sector are paying 85 per cent. Nothing is being done in this budget to alleviate that position. The temporary income levy is still with us and this had a very seious effect on incomes because it was taken from gross income. While there are some benefits in terms of the tax bands, they are only an attempt at catching up — the overall effect is to take a whopping 20 per cent increase in income tax. If we compare taxation figures for other countries with ours we will see that 40 per cent of our population are taxed at over 35 per cent, while in the United Kingdom it is only 5 per cent and in the United States 12 per cent. The Minister has made it quite clear that he does not intend to do anything substantial about this problem in this budget.

We are all supposed to forget about the PAYE tax allowance, which was a special allowance of £600 given and increased by Fianna Fáil to all PAYE workers, and left at that level for the second year by the Coalition. Nothing will be said about this and employees may even forget it exists, but it was brought in as an equity measure for the PAYE taxpayer. It is quite clear that a married man with an income of £6,000 a year will save only £45 a year from these tax benefits. A married man with £20,000 a year saves £195 and a married man with £25,000 saves £255 per year. If he gets an increase in his income he will pay more tax, and probably end up worse off at the end of the day.

I am most concerned about the social welfare area. In this budget we have seen the lowest increase in social welfare since the Coalition budget of April 1977 which gave a 5 per cent increase. Members of the Labour Party have to recognise the fact that again they have participated in providing the lowest rate of increase for social welfare beneficiaries since 1977. This 7 per cent is given from 1 July. Needless to say, the increases in VAT and other costs come into operation from 1 May. Therefore the figure is probably 5 per cent or 5½ per cent for 1984 as an increase for old age pensioners. That is very close to the Coalition 5 per cent in 1977. The old age pensioners are back to Coalition times. They know that. I meet them quite often and they could smell it coming. It can now be seen as a reality.

A masterful public relations job is being done in relation to the poor. I do not blame the media people because they have deadlines to meet. They are fed information a short time before they have to meet the deadlines. It is important to recognise what is being done, and I am very concerned about it. An old age pensioner needs an increase to stay where he or she is. People who should know better say to me: "They did not do too badly in the past two years. Those paying all the taxes and others on lower incomes are much worse off". What is forgotten is the base for the old age pension. It is very low. An old age non-contributory pensioner is getting an increase of £2.70 a week from 1 July. That will bring that pensioner to £41.30 a week. This is where real poverty occurs.

This morning the Taoiseach said people are doing very well in percentage terms. They are not doing well in percentage terms. When you look at the reality of cash in the hand, how would you live on £41.30 a week? The pension of a contributory old age pensioner is going up to £48.25 a week. A non-contributory widow gets an increase of £2.65 bringing her to £40.50 a week. She will have to meet all the extra costs for clothing and everything else. The tax on clothing will have a much bigger impact on families than the Taoiseach realises. These beneficiaries are not codding anybody. They are on long-term benefit. They have been done down for the second year. They have done much worse this year, and this will hit them very hard. Their real incomes are being reduced systematically.

We stand over our record in this House and our record will stand for a long time. For three years in succession we increased the pensions of old age pensioners and widows by 25 per cent. That sounds like a lot, but we must remember the base level. The Taoiseach and the Minister for Finance keeps switching the figures from the percentages to whatever happens to suit them at the time. It is our job to point out the realities. In their media campaign they talk about the percentages. They even have workers and middle income people and higher income people believing that social welfare beneficiaries have done too well and that the three 25 per cent, which brought them up from abject poverty, were too much, and that we can hold back and do nothing.

That was echoed in the Taoiseach's speech this morning. He kept talking about how well everyone has done over the past three years, and suggested that it is time to take it easy. He said that in Europe they have not done as well, but he did not say what the base is in Europe. What absolute misrepresentation of the figures and the facts. That is a scandalous misrepresentation by the Taoiseach of the position of the elderly and the poor. That is not responsible Government, or responsible management. It is not a responsible speech in this House by the Taoiseach.

It is blatantly misleading to switch the figures around. This is being done in every area by the Government. They get away with it. Outside this House who will say what the Taoiseach is doing to the poor and the elderly? In this House we have absolute democracy. Deputies from the hills or the lowlands, no matter what their status in life, who represent the people can come in here and say what has to be said. Who will print it? That is the question. What is happening to our democracy at that end? That is a very serious question and, in time, we may all be asked to answer it.

That is the reality. We saw a classic example of it here this morning on several fronts. On no front was it worse than on the social welfare front. The reality is that the base for the recipients is too low and must be put right. Of course hard things have to be done to find the abusers and the wasters. Nobody did more about that than we did and, in fairness to the Government, they continued that work which had to be done. We accept that. Those people do not include widows or old age pensioners whose status is quite clear.

When we talk about unemployment assistance a new reality is dawning throughout the country. I know this because it pays to go out among one's constituents and see what is happening. I was at a meeting of unemployed people recently. Of course there were people who wanted to rabblerouse and kick up a row in any way they could. There were also genuine constructive people who were prepared to tell you their problems. One person said to me that there are two realities for the long-term unemployed. One is that they have no hope of getting employment under this Government. The second is that they have been so long on such low levels of income that they are now getting into deep poverty. All the signs are there.

A very significant and striking thing was said to me. It is very hard to convey the reality. One person said to me that what struck him was the smell of poverty in the community. I did not invent that. That is what he said. He was a genuine person. The Government must recognise what is happening on the ground. By holding down social welfare recipients on such low levels of income for so long an environment of poverty is developing within this city and in other parts of the country. A person on long-term unemployment assistance is in great need of something extra and the Government have decided that he is to get an increase of £2 from 1 July, bringing the amount to £30.90 per week. A married person is to get an increase of £3.45, bringing the amount to £53.20. From that sum they must maintain a home and pay all the outgoings. The Minister for Finance has given an extra 1 per cent allowance from 1 July to these long-term unemployed. It works out at slightly under 30 pence per week. This is an insult. How can the Government say that 30 pence per week will do anything for these people? It is difficult to understand the thinking behind it. When I heard the Minister say that something was to be done for these people I welcomed it, thinking that the Minister had taken account of the representations made by me and by others. Something more worthwhile should have been done for these people.

The Government are talking about transferring £70 million to social welfare recipients. In 1982 when we were in office there was a £150 million hard cash transfer to social welfare groups. The Labour Party are forever preaching about the size of transfers of money to the underprivileged. In current terms £210 million would be needed to match the 1982 transfer of £150 million but the transfer announced by the Government is only about one-third of that amount. That is the reality of the harshness of this budget for the social welfare classes.

There was no increase last year in children's allowances and the Taoiseach has talked about the increases given over a number of years while Fianna Fáil were in office. Now he offers a derisory 7 per cent increase from 1 August. The allowance of £11.25 per child per month will be increased to £12.05. This represents an increase of 80 pence per month or 20 pence per week, which would not even buy a pair of socks with or without VAT. It is no wonder that families regard this increase as derisory. We know that our rates of children's allowance are low by international standards and that is one of the reasons they were increased while we were in office.

VAT on clothing will cause a great deal of difficulty and expense for families, expecially those in the middle and lower income groups. The Taoiseach says that imports will bear the brunt of this 8 per cent imposition but this is not so. It will be paid by consumers, basically families. The difficulty of defining the point at which VAT will become payable has already been pointed out. The Minister for Finance has said that it will depend on the size of the garment. Obviously there will be considerable difficulties. Confirmation ceremonies now take place at the age of 12 and it costs about £100 to fit out a child. Should the age of Confirmation be reduced to ten? Is this a Confirmation tax? Is that what the Taoiseach had in mind?

All children moving from junior school will be affected because uniforms will have to be bought. Some schools use simple uniforms which are fairly cheaply available but they will still cost about £100. Other schools use more expensive uniforms which can cost up to £200. This will be a major extra expense for families and I notice that the imposition is to take effect from 1 May, well in time for the new school year in the autumn. The Government are looking for every possible means to obtain money from low income families.

The Taoiseach talked about a visit to Dunnes Stores. I do not know if he realises the age groups in which they specialise. It can cost between £200 and £300 per annum to outfit a teenage girl and not much less for a teenage boy. Somebody who has not had the experience of teenage children might not recognise the growth in the volume of expenditure in this area. Some people would spend a great deal more than the amounts I have mentioned. It would appear that a family with three teenage children will pay an extra £75 in VAT.

Mr. Haughey

Now that a Minister is present perhaps the House could get some information about the crisis on the Dublin Stock Exchange at present as a result of some of the statements made by the Minister for Finance yesterday in regard to stock exchange transactions.

Mr. G. Birmingham

I thought one of your Deputies was making a speech.

Mr. Haughey

This is a major crisis. The position is that there is a major financial crisis on the Dublin Stock Exchange at this moment as a result of certain announcements made yesterday by the Minister in his budget speech. The House should be aware of this and we should have some reaction to it from the Government.

Minister for Health and Social Welfare (Mr. B. Desmond)

I am sure the Leader of the Opposition will have no difficulty in raising the matter at the end of Question Time, which is the normal procedure, and not in the middle of a debate.

Mr. Haughey

This debate is about the budget and about the speech made by the Minister yesterday. We have this startling and dramatic outcome to some of his announcements to the effect that there is a major financial crisis on the Dublin Stock Exchange at this very moment.

Mr. B. Desmond

An appropriate time to raise the matter would be at the end of Question Time if the Chair permitted the matter to be pursued at that stage.

Mr. Haughey

Perhaps between now and then——

Mr. B. Desmond

I will communicate the fact that the Deputy raised the issue.

Dr. Woods

Perhaps the Minister might have some information by the time he makes his own speech.

Mr. B. Desmond

I will communicate the Deputy's views to the Minister for Finance.

Dr. Woods

VAT on clothing will have a devastating effect on families expecially those with teenage children. At Confirmation time it will really be a Confirmation tax. It is a going back to school tax for those going on to second level. It will hit families very badly. Has it been done without any reference to people? Is it that the Government who have set such a dismal scene generally want a dismal people to go along with it?

If there is one thing that could be said about the Taoiseach's speech this morning and the Minister's speech yesterday it is that they were colourless and unimaginative. We are forcing teenagers and young people to be colourless through the taxes which the House was asked to put on these garments. Perhaps the Taoiseach wants us to wear odd socks and one armed suits to reduce costs. There might be many of us going around like Bottler with our trousers at half mast trying to claim they fit us and it is all a question of size. Perhaps we should follow Bottler's example at this stage.

The Government could have been selective in the way they applied the tax. It could have been applied to more expensive items. The bulk to purchases are made by the middle income and lower income families. It will deal a death blow to the textile industry, particularly in the mens area. That is the view of people involved in the industry. It is an industry where there has been a lot of unemployment. It needs assistance and stimulation rather than being hit hard. There will be hardship for the low income group and the long term unemployed. The heaviest demand for clothing is in the 17 to 25 year age group. The heaviest demand also comes from working class people. The factories which produce clothes teenagers go for are usually small factories. They will suffer most and not the big mass produced lines the Taoiseach mentioned when he spoke about Dunnes Stores. The small specialised factories produce more colourful garments which those in the 17 to 25 year age group buy.

The Minister for Finance mentioned medical cards for the elderly and the improvement he was offering in this area of £5 for an elderly person on the income guidelines. The income guideline for a single person is £59. This will be increased to £64, which is a marginal increase. Any increase is welcome. We gave medical cards across the board to those on social welfare benefits. There was a need to remove people on high incomes from that but there was also plenty of scope to substantially increase the basic guidelines. However, the increase is of a minor nature and will have a marginal effect on the number of people covered. Speaking of medical cards, what the Minister did not say was that at the same time as making this very small gesture he was removing from students of 16 years and over eligibility for medical cards in their own right. This is a matter we will be taking up with the Government because we believe the measure is inequitable and very harsh particularly in cases where children have asthma.

Perhaps the most disappointing aspect of the budget and the Taoiseach's speech is that nothing was done to promote jobs. The Taoiseach said this was the most important and urgent economic and social objective at present. If we look at the strategy which the Minister for Finance adopted in opening his speech, where he said that consumption has declined, investment fallen, unemployment risen and growth has been stifled, it contrasts startingly with what the Taoiseach said. That was an unusual admission by a Minister for Finance in the House. However, as Deputy O'Kennedy said, at least the Minister was honest. The Taoiseach was not honest when he gave details of the present position. He tried to paint a rosy picture looking back over two years and he did not look forward. I wonder what type of statement the Minister will make next year having regard to the proposals in the budget. Will the out-turn next year mean that we will have greater unemployment, depression and stifling of investment?

The Government are budgeting for more unemployment and it is likely that next year we will have a similar frank admission by the Minister for Finance of total failure to handle the Government's principal objectives. We are all aware that the country exists on its productive ability and this is maintained by capital expenditure. Through that capital expenditure we are able to maintain and improve the base of our economy and our ability to produce. During a time of recession it is important that we should expand on the capital side and in productive areas. That must be done to maintain confidence and prepare the ground for economic recovery. There is no evidence of that in the Minister's budget speech or in the Taoiseach's contribution this morning.

When preparing the ground for economic recovery we should invest in infrastructure so as to make the recovery smoother once it gets under way. We should provide short-term employment on many projects. For example, road works schemes can be introduced. We made major investments in our road network but that is being downgraded. We can also assist new projects, and modernise older ones to contribute to our earning capacity through increased exports. That can be done, for example, when fighting against factory closures or strongly supporting Fóir Teoranta and the IDA and permitting them to be imaginative in their approach. We can provide them with the resources, and the direction, to take more risks where they can be taken in productive areas. It is no excuse to say that capital expenditure should be cut pending an examination of projects where the machinery is already in hand to do so. Such projects can be examined quickly.

The Government are indulging in yet another review and being indecisive. The capital for new projects should be made available now and the feasibility study of each new project should be ongoing through the agencies set up for this purpose. On that basis we should not be cutting back on the allocation for the IDA as the Government are doing. One of the clearest indicators of difficulty is when the Government tell us that they have vacant factory space and are, consequently, cutting back on the allocation to the IDA. In a time of great recession, horrendous unemployment and a dismal lack of confidence the Government have set before us a programme designed to contract rather than expand the wealth producing base, particularly in agriculture and industry. There is no doubt that we must hold back in our effort to get many of the social things we want until times improve but we should be investing in agriculture and industry.

If we look at the sectoral economic investment plans in regard to agriculture and industry we will see that in 1983 £85 million was provided for agriculture while industry got £322 million. Allowing 10 per cent for inflation the proper figure increases by a further £41 million. A proper budget would have brought the total for those areas to £448 million, allowing £94 million for agriculture and £354 million for industry but the Minister for Finance only increased that figure to £394 million, £77 million for agriculture and £317 for industry. That leaves an overall shortfall of £54 million, which indicates a lack of confidence and preparedness on the part of the Government to invest in those areas.

One would have expected the Minister for Finance, as a result of his previous experience with the agricultural industry, to have appreciated the problems in that area but it is possible that, because of his position in the Coalition and not being able to go one way or another, he is not able to produce plans to get things moving and deal with unemployment. I would have thought that he would have appreciated that by creating an environment that would encourage investment in agriculture he would bring about extra production. There are various options open to the Minister to do this but he has stepped away from them. An allowance for depreciation on farm buildings was suggested as a method of encouraging investment in that sector. That would be an important move to help job creation. We are aware that such major and long-established concerns as Keenans of Bagnalstown and Kellys of Portlaoise went out of business recently. The closure of those concerns indicates to us how much they depend on the Government's approach to agriculture and how they encourage investment in that industry. If the Government do not encourage such investment business for such firms declines. If agriculture was working on a basis comparable to industry it would be possible to encourage development in that sector. For example, livestock housing is inadequate and approximately 50 per cent of our livestock is out-wintered still. There is considerable scope in that area for improvement. If we increased production in that area we would be dealing with farm buildings, exports, and meat factories. That would lead to the creation of many jobs. The Government do not appear to be interested in creating jobs in that area.

If there was encouragement of investment in mechanisation and farm machinery many jobs would be created. An increase in livestock numbers would also help but there is nothing in the budget to encourage farmers to do that. We need improvements in the production areas to create employment. The Minister could have chosen many options but he has stayed away from them. It is hard to understand the Minister's approach in view of the fact that he was an agricultural economist. It appears that the Government are not prepared to tackle the unemployment problem. The agricultural industry is useful during a depression because it remains stable. There is a degree of stability in country areas that does not exist in our major cities such as Dublin, and that is due to the position of agriculture. The import content of our agricultural industry is about 12 per cent overall compared to 40 per cent to 70 per cent for industry.

In agriculture there are approximately 214,000 people directly employed at farm level, while associated industries employ 56,000 people or 26 per cent of the total in manufacturing industry. That means that a total of 270,000 are in employment arising out of agriculture. It is obvious from those figures that if the Government give encouragement, jobs can be created in agriculture and its ancillary industries. That should be part of the Government's programme. The budget is silent in regard to it.

If we look at the proposed expenditure on roads and on the building and construction industry, we do not see any incentive, particularly in the construction industry, to encourage private investment in any substantial way. The building and construction industry has been a great employer. Indeed it and agriculture are the two great employers, and then manufacturing, which is giving a reasonably good return at the moment because it availed of IDA help in the past few years.

I am disappointed that the Minister has not provided additional funds for the Department of Justice. It is clear from the Estimates that various sectors of the Department have been cut back severely. Given the high level of crime and lawlessness, the Department of Justice should have been given high priority but the provision for Garda travel has been cut by 3 per cent, Garda transport has been cut by 21 per cent from last year and there will be major deficiencies in Garda pay and overtime, as has been highlighted recently. The provision for radio and equipment is minus 69 per cent — the amount of £1.6 million is substantially below the figure at the beginning of 1983, which was £2.4 million.

There is a clear need in the Department of Justice for additional resources and I was extremely disappointed, therefore, to hear the Minister for Justice say last week that he will not go ahead with the purchase of helicopters for the aerial wing, though the Minister for Finance has told us he will go ahead with the sea rescue unit. All this is very disappointing, indicating that the Government are prepared to put the crime and subversion operation at risk so that the Minister for Finance may be pleased. There is no excuse for cutting back in such an important area as security. We will be pursuing this matter further so that funds may be made available in this important area.

This budget is a no-win one: we are all losing. It is a depressing, dismal budget for those involved in investment generally. As Deputy Haughey has said, it is having a depressing effect already. The Government have opted out, probably because of the difficulties they are having, as was indicated to us before Christmas, particularly by the departure of Deputy Cluskey. There are indications that things are unhappy and bad in the Government and it is very likely that this will continue to be the position. If we do not face up to the problems now they will only get worse.

Minister for Health and Minister for Social Welfare (Mr. B. Desmond)

Before dealing with the year's budget provisions I should like to refer to the achievements in social welfare during the past 12 months.

Last year was a very difficult one but I am glad to be able to say to the House that despite the many difficulties overall progress in the social welfare area was maintained. In 1983 a budget increase of 12 per cent was granted in the rates of payments to pensioners and those receiving allowances of a similar nature, and there was an increase of 10 per cent at the same time in the rates of short-term payments. These increases were paid from the end of June 1983 and fulfilled the Government's commitment to social welfare recipients.

In my comments on the main Social Welfare Estimate in the House in May 1983 I expressed concern at the plight of the increasing numbers of those unfortunate enough to be unemployed for a long time. They must depend on unemployment assistance, and I was particularly concerned to improve their very low incomes. I was glad, therefore, to be able to provide a further increase of five per cent from the beginning of October last for those on unemployment assistance who had been unemployed for 15 months or more. This was in addition to the increase which had been given in June, and benefited about 75,000 recipients in 1983 at a cost of £2.3 million. I also provided for a double week bonus payment at Christmas which was paid to pensioners and other recipients of similar allowances. The cost of this double payment was £18.13 million and about 404,000 benefited from the provision.

The Government after taking up office provided an additional £31 million in the Estimates for unemployment payments in 1983. Later, however, I had to provide a further £20 million in the Supplementary Estimate which was approved by the House last December to meet the cost of additional unemployment benefit and the associated pay-related benefit. This is a reflection of the continuing rise in the numbers of persons who are unemployed. I should like to point out that in 1983 overall expenditure on unemployment payments alone amounted to some £454 million, as compared with £345 million in 1982. Payments to smallholders amounting to more than £34 million in 1982 and more than £36 million in 1983 have not been included in these figures.

But we are not talking about unemployment payments only. When we mention expenditure on social welfare we are talking about the largest public expenditure programme we have. In 1983 total expenditure on social welfare amounted to some £1,907 million, and the Estimate provision for 1984 amounted to some £2,088 million at current rates of payment. This provision does not take account of the increases provided in the current budget. These figures show the scale of social welfare expenditure which now amounts to more than 14 per cent GNP. These facts show the continuing commitment of the Government to the social welfare structure.

The published Estimates for 1984 show that the Exchequer cost of supporting the social welfare programme will be somewhat in excess of £1,185 million, not including the budget improvements. The balance of more than £900 million will be borne almost entirely by the contributions of employers and employees, employers contributing approximately £600 million and employees £280 million through PRSI contributions.

The increase of £181 million approximately in social welfare expenditure in the 1984 Estimate as compared with 1983 is attributable to the extra cost for a full year in 1984 of the 1983 budget increases and of the 5 per cent increase from October 1983 to those who have been unemployed for more than 15 months. Also there is the increasing trend in the number of beneficiaries particularly those who are unemployed.

In the 1984 Estimate allowance is made for an increase of more than 30,000 on average in the live register. Such an increase has a major effect on the cost of the social welfare services. It affects not only the cost of payments to the unemployed but the income from PRSI contributions to the Social Insurance Fund. Payments to the unemployed by way of unemployment benefit, pay-related benefit and unemployment assistance in 1984 are expected to be £105 million more than in 1983. Every additional 1,000 persons on the live register will cost £2.4 million extra per year in benefit and assistance payments. I very much regret that there has been some exaggerated comment about cut-backs in social welfare. In 1984 the cost of unemployment payments is expected to reach £559 million at 1983 rates of payment, as against £454 million in 1983. This is made up of £325 million for unemployment benefit, including pay-related benefit, and £234 million for unemployment assistance. Moreover, it does not include the cost of payment to smallholders of over £35 million.

When account is taken of the budget increases, the cost of unemployment payments in 1984, excluding the smallholders, will be the quite staggering sum of £579 million. I stress that point. I recently attended a meeting in Athens of Ministers of Social Security and in every single one of the nine countries not only have they not increased any social welfare payments they have reduced them. Index linking is practically abolished, pensions cut by 8 and 9 per cent and employer and worker contributions up by anything up to 15 per cent. We have not done that. When one goes to France, Italy, Belgium, Denmark, the UK or any of the nine, that situation appertains at this time so severe has been the recession and so severe has been the impact on the Exchequer of maintaining basic levels of unemployment payment.

An aspect of the unemployment situation which is often lost sight of is the fact the it generates considerable extra work in the Department of Social Welfare. The work involved in processing claims and paying the increasing numbers joining the live register is only part of the problem. In addition, it is necessary to determine the entitlements of claimants, who because of the duration of their unemployment, are obliged to transfer from benefit to assistance and whose means must be assessed. The extra number of staff required to process the increased numbers of claims and pay the claimants is putting tremendous pressure on existing resources both in terms of staff and physical accommodation. A programme of modernisation to overcome these problems by the use of modern computer technology is being devised and this will in time lead to a more effective and efficient service for the unemployed and I would also hope to considerable improvements in the working conditions for the staff of the Department.

Apart from the increase in the numbers of unemployed, the numbers in receipt of most of the other social welfare services are constantly increasing. Five years ago the total number of weekly recipients excluding the unemployed was 422,000 whereas the corresponding number in 1984 is expected to be about 464,000. I am very conscious of the fact that this constant increase in numbers and consequential increase in expenditure impose an extra burden on contributors and taxpayers generally.

I want to refer to the Social Insurance Fund. The estimated income of the Social Insurance Fund from PRSI contributions in 1984 is £853 million. This takes account of increased earnings in 1984 as well as the loss of jobs arising from the continuing upward trend in unemployment. The figure of £853 million for 1984 is an increase of £91 million over the expected outturn of £762 million for 1983. This increase is mainly due to the general rise in earnings levels in 1984 and to the impact of the ceiling of £13,000 for all of 1984 as against three-quarters of 1983, allowance being made for a drop in the numbers employed. The Exchequer contribution to the Fund in 1984 was estimated for the purpose of the 1984 Estimates to be £306.6 million or about 26.4 per cent of the total fund. This contribution will of course be increased following the implementation of the current budget increases.

There are, however, difficulties in estimating income from contributions and these were highlighted in 1983 when the expected outturn of £762 million was £35.5 million less than the original estimate of £797.5 million. There are many factors which affect contribution income among them and the amount and timing of pay increases, the level of unemployment and the degree of compliance by employers in paying over the contributions. Having regard to the large amount raised by PRSI contributions a variation in any one of factors mentioned can have a significant impact on the total collection. A shortfall in income, such as occurred in 1983, has the effect of increasing the Exchequer subvention to the Social Insurance Fund and, in consequence, the burden on the employers.

In the course of the Adjournment Debate last December I referred to some changes which would be made in 1984 in existing schemes. They are relatively minor and occur in the schemes of pay-related benefit and maternity allowances. They will come into operation from next April and are designed to keep those schemes in line with movements in pay. I wish to give some of the details for the information of the House.

Regarding pay-related benefit the floor taken into account in determining the amount of pay-related benefit a person is entitled to is at present £36. The original floor which was set in 1974 was £14 and it remained at the figure until 1981. Since then it has been regularly increased. If the same basis was now used as applied when the figure of £14 was decided in 1974 the floor would be £87. I do not propose to introduce such a drastic increase but, in continuation of the recent policy of successive Governments to bring the floor more into line with current levels, I have decided to increase it by £7 to £43 from next April. It will apply to all new pay-related benefit claims which arise after 5 April next. The saving in 1984 will be £2.8 million. This saving is minimal when considered in the context of the 1983 expenditure of £48.7 million for pay-related unemployment benefit and a 1984 provision of £62.3 million. It is in this overall context that one must consider this relatively minor adjustment for new claimants.

In determining the maximum amount a person may receive by way of disability benefit and pay-related benefit a wage stop is applied. At present, this operates to limit the aggregate amount of disability and pay-related benefit to 80 per cent of a person's reckonable earnings in the relevant tax year. In order to bring a more equitable relationship between take-home pay and income while in receipt of benefit I am reducing the 80 per cent wage stop to 75 per cent. This will also apply from April next and will save £380,000 in 1984. I want to make it clear that only the amount of pay-related benefit a person on disability benefit receives will be affected by this measure. His flat-rate disability benefit will remain unchanged. In 1983 some £20.5 million was paid out in pay-related benefit with disability benefit.

As part of the Second National Understanding for Economic and Social Development it was agreed that a maternity allowance scheme for women in employment would be introduced. The scheme was brought into operation in April 1981 and the details were worked out with representatives of employers and employees. The purpose of the scheme was to ensure that women would be fully compensated for loss of earnings after all deductions. The formula devised at that time, taking account of tax and other deductions, allowed for payment of an allowance amounting to 80 per cent of reckonable weekly earnings. It is now evident that, because of changes which have occurred in the meantime in tax and other deductions, the original formula can provide levels of benefit which are very much higher than was intended.

I am, accordingly, taking steps to deal with the anomaly by reducing the maximum to 70 per cent of reckonable earnings from April. As a consequence of that change the minimum payment of £64.88 will remain at that figure for 1984. These changes will result in a reduction in expenditure of some £1.13 million in 1984. I would like to stress, however, that women benefiting under the scheme will still receive the equivalent of their normal net take-home pay.

Regarding the 1984 budget increases the rates were stated yesterday. The weekly rates payable to all pensioners and recipients of similar allowances, including health allowances, will be increased by 7 per cent from 5 July 1984. The weekly rates payable to those receiving short-term benefits, such as sickness and unemployment, will also be increased by 7 per cent during the first week of July. These increases will not, however, apply to smallholders whose means for unemployment assistance purposes are still assessed on a notional basis. They will, of course, apply to all those whose means have been assessed on a factual basis.

I have expressed on a number of occasions my concern for the plight of those persons who have been unemployed for a long time. Unemployment is a shattering experience at any time but in present circumstances of increasing duration of unemployment and the extent to which those who become unemployed remain on unemployment benefit for a limited period and then transfer to unemployment assistance, their long-term source of income is diminished severely. In the early stages of unemployment the blow is to some extent cushioned by the more liberal compensation rates of unemployment benefit combined with pay-related benefit. After 15 months a person's entitlement to benefit itself ceases and then he must rely wholly on unemployment assistance. Therefore the differential is being introduced of 8 per cent for those unemployed for 15 months or more. Over 75 per cent of all unemployment assistance recipients, including smallholders whose means have been factually assessed, will benefit from this increase.

There has been a good deal of comment in recent times about the scheme of children's allowances and many commentators predicted confidently that in this year's budget these payments would be taxed. This is not being done. On the contrary, these allowances are being increased by 7 per cent from next August. The extra cost of all these improvements in rates of social welfare payment is estimated to be £67.6 million in 1984 and £139 million in a full year.

As the Taoiseach outlined this morning the family income supplement is being introduced from the beginning of November 1984. The cost will be about £13 million in a full year. I will announce details of the scheme later this year, and it will require new legislation.

On equal treatment, the provisions of the EEC Directive on equality of treatment for men and women in matters of social security are due to be fully implemented before the end of this year. The matters still outstanding affect mainly the entitlements of married women. These include payment of the standard rate of social insurance benefits to married women, provision of unemployment benefit to married women for the same maximum duration as beneficiaries generally, revision of the conditions governing payment of dependency allowances for spouses and children and giving married women entitlement to unemployment assistance on the same basis as married men. These matters will require legislation for their implementation and the dependency provisions in particular are quite complicated. It is my intention that appropriate legislative provision will be made to deal with the outstanding problems later this year. I intend to have the provisions of the directive fully implemented and in operation by December of this year.

Regarding the free travel scheme, free travel is generally restricted to off-peak periods. However, certain categories of disabled persons who attend, full-time, long-term rehabilitation courses have an entitlement to travel during peak-hours in order to enable them to attend the courses. I am now extending that concession of free travel during peak hours, for the purpose of attending such rehabilitation courses, to all blind persons, social welfare invalidity pensioners and recipients of British and Northern Ireland invalidity pension or benefit. This is a facility which those concerned will, I am sure, appreciate very much and is overdue as an amendment.

The free telephone rental scheme was introduced for the purpose of helping, with the cost of a telephone, social welfare pensioners living alone. The intention was that a person living alone would by means of the telephone be able to summon help in the event of an emergency. In meeting the living alone condition disabled persons living with the pensioner were disregarded. Cases have come to the notice of my Department and myself where a pensioner who would otherwise be qualified has had his application disallowed because of the presence of a young child in the house. I am amending the scheme to deal with this anomaly so that in future the presence of a child under the age of 15 will not disqualify a person otherwise qualified from receiving the free telephone rental allowance.

Regarding the question of pay-related social insurance, notwithstanding the increases in the rates of social insurance benefits there will be no increase this year in the rates of pay-related contributions to the Social Insurance Fund. There will be no change either in the earnings ceiling of £13,000 for the purposes of social insurance contributions or in the ceiling of £11,000 for pay-related benefit purposes. There will be a minor change in the rate of contribution to the occupational injuries fund. This contribution is payable by employers only and will be increased by 0.1 per cent from April 1984 to enable the fund to meet the expenditure on occupational injuries benefits.

The fact that the provisions relating to social insurance contributions remain unchanged does not mean that the Social Insurance Fund remains in a static condition. As I mentioned earlier, the fund is dependent on a variety of factors. The chief among these is the level of economic activity which determines the level of employment and in consequence the level of contributions by employers and employees to the fund. A further important factor is wage increases. Whatever the outcome, it is the responsibility of the Exchequer to make good whatever shortfall remains after taking account of the contributions of employers and employees. Therefore, in 1984, taking account of the budget provisions the Exchequer's contribution to the Social Insurance Fund will be of the order of £342.8 million or 28.6 per cent.

Regarding voluntary organisations last year £0.5 million was allocated to my Department towards the work of suitable voluntary bodies in the social services area. This money was fully allocated last year and I am satisfied that the exercise is worth repeating. A further £0.5 million, therefore, has been allocated to my Department for similar purposes this year.

The Commission on Social Welfare were set up in August last year and they have been pursuing their work steadily in the meantime. I am optimistic that much goodwill comes from the activities of the commission and that their recommendations will have a profound bearing on the structure of our social welfare system in the years ahead.

One of the objectives of the Programme for Government was the reestablishment of the structure of the Combat Poverty Organisation. The initial steps towards this end have already been taken and I hope to be in a position to submit proposals in the matter to the Government shortly.

The social welfare system is one with a very substantial framework of schemes and services. The extent of this framework may not be generally appreciated. About 700,000 payments are made by or on behalf of the Department of Social Welfare each week. When account is taken of dependents the total number who benefit amounts to some 1.3 million people. On top of that some 476,000 families receive children's allowances each month. This is a huge volume of activity and affects a substantial proportion of the population.

An indication of the financial progression of the costs of social welfare services in recent years will be seen from the following particulars of overall social welfare expenditure: 1981, £1,192 million; 1982, £1,629 million; 1983, £1,907 million; 1984, £2,156 million (including budget provisions). These figures are an indication of the extent of the commitment of this Government and of the Department of Social Welfare to the needs of the citizens of this State. That commitment cannot be ignored or denied.

Debate adjourned.