Financial Resolutions, 1985. - Financial Statement, Budget, 1985. – Dáil Éireann (24th Dáil) – Wednesday, 30 Jan 1985

An Ceann Comhairle

Before calling on the Minister for Finance to make his Budget Statement, I wish to remind Members that none of the confidential information which will be circulated in advance by the Minister to certain Members may be disclosed to anyone until the Minister has revealed it to the House. Premature disclosure of the information constitutes a serious breach of privilege.

Minister for Finance (Mr. Dukes)

This year's budget is designed to bring us towards the objectives set out in the national plan, Building on Reality. It is part of the three-year policy framework set out in that plan which, while taking account of the inescapable financial constraints, aims to:

—improve the environment for increasing employment;

—reform the taxation system; and

—protect those on low incomes from the impact of the recession.

It is widely held that our tax levels are now an obstacle to economic development. Reform of the tax system is needed:

—to help to create the conditions which will favour expansion of employment;

—to reduce both the opportunities and the incentive for evasion; and

—to restore the competitive balance between domestic business and commerce and their competitors in Northern Ireland.

Despite the severe constraints on the public finances in recent years, the Government have protected the incomes of the less well off and introduced important improvements. Real rates of income support have improved in the past couple of years. Today's budget measures will maintain that momentum.

These needs will be met and employment will be promoted by three of the central features of today's budget.

The first is a radical change in the income tax structure, incorporating

—a reduction in the number of tax rates to three: 35 per cent, 48 per cent and 60 per cent;

—a substantial widening of the 35 per cent tax band;

—abolition of the present top rate;

—increases in personal and other allowances; and

—reductions in tax liability all the way through the income scale for both single and married taxpayers.

The second central feature is an equally radical reorganisation of the VAT system, incorporating a reduction in the number of rates to three: the rates will now be zero, 10 per cent and 23 per cent. This new structure will, by reducing the cash-flow and administrative burdens on productive activity and removing much of the incentive for legal and illegal imports, substantially improve the employment capacity of Irish commerce and industry.

The third central feature of today's budget is an increase in social welfare payment rates by an amount slightly in excess of the expected rate of inflation between mid-1985 and mid-1986, together with improvements in a number of social welfare schemes.

Today's budget measures will ensure that developments in the public finances will be in line with the targets set out in the national plan. The effect of these measures on the cost of living will be about one-quarter of one per cent, the lowest impact since 1978.

The international economic outlook for this year is reasonably favourable, after a very strong year in 1984. Growth is expected to continue in 1985 but at a slower pace than last year. The most encouraging factors on the domestic front are the declining inflation rate, now firmly in single figures and continuing to fall, and the improvement in the balance of payments.

REVIEW OF 1984 BUDGET OUTTURN

Last year, for the first time since 1978, the budget deficit outturn was within target. This was a welcome departure from the trend in the intervening years. Improvements in budgeting procedures and controls are clearly beginning to yield results. This financial discipline will continue to be maintained at all levels.

We were able last year to take advantage of improved market conditions and of Ireland's high credit standing to prepay £637 million in foreign loans maturing in the period to 1989 and to replace them with debt carrying a longer maturity and lower cost. We were also able to renegotiate on more favourable terms and for a longer period a $500 million loan which had been raised in the United States in 1983.

THE ECONOMIC SITUATION

Last year real gross domestic product grew by almost 3½ per cent, a rate of growth appreciably faster than the average for the rest of the European Community. Further significant progress was made in curbing inflation, with the average increase in consumer prices in 1984 easing to about 8½ per cent, compared with 10½ per cent in 1983 and 17 per cent in 1982. In the 12 months to mid-November last, the year-on-year average increase slowed further to 6¾ per cent.

The external account continued to improve, with the current balance of payments deficit falling to around 5 per cent of GDP, its lowest level since the mid seventies. Both the agricultural and manufacturing sectors had output increases which were among the highest in recent decades. While unemployment increased by more than 17,000, this increase was considerably smaller than the average increase of almost 30,000 a year in the preceding three years.

At the beginning of 1985, the economy is therefore well placed for the sustained expansion which is envisaged in the plan. If the conditions for sustainable growth in output and employment indicated in the plan are attained, the coming year should be one in which the Irish economy will make further significant progress. The rate of increase in consumer prices, taking account of the effects of this budget, should fall to 6 per cent or below, the lowest rate since 1968. The balance of payments deficit on current account should register a further improvement, with the possibility that the value of exports of goods and services in 1985 will, for the first time in very many years, outstrip the cost of such imports. Unemployment, taking account of the impact of special employment measures, should begin to level out and, given moderation in pay developments, there should be some pick-up in employment.

GENERAL BUDGET STRATEGY 1985

BUILDING ON REALITY

The national plan, Building on Reality sets out the overall shape of budget policy over the next three years. This year's budget targets are consistent with the plan policy.

As recognised in the plan, several factors constrain our ability to achieve reductions in the budget deficit. Interest payments on the national debt have continued to grow; the high level of unemployment has called for considerably increased resources for income maintenance; and an expanding population — now more than 3,500,000 for the first time in this century — creates a greater demand for public services. The strategy outlined in the plan reconciles the tendency towards increased expenditure with the resources likely to be available to us, and the need to generate the extra, sustained employment which we so badly require.

The budget I am presenting today is generally in line with the projections which underlay Building on Reality. The provision for central fund services is unchanged. Overall provision for current supply services will be fractionally higher than planned, but receipts will also be higher than expected, resulting in a current budget deficit almost identical with that envisaged when Building on Reality was published, and equal to 7.9 per cent of GNP. The overall provisions for capital expenditure differ only slightly from those projected in the plan.

EMPLOYMENT

Although it is projected that, given moderation in pay developments, employment should begin to pick up this year, special Government measures are needed to stop the growth in unemployment.

Provision has already been made in the Estimates for major new employment and training schemes which will soon be under way. The gross cost of the social employment scheme alone in 1985 is budgeted at almost £30 million and, when fully operational, it will provide part time employment for 10,000 persons who have been unemployed for one year or more. The success of the enterprise allowance scheme, which has already helped almost 5,000 unemployed persons to set up on their own, and of the many programmes operated under the auspices of the Youth Employment Agency, testifies to the response of this Government to the unemployment crisis.

Expanded provisions in the Estimate for the IDA, Córas Trála, the National Development Corporation and the other promotion and rescue agencies are pitched at the highest possible levels.

My main purpose today is to tackle those features of the tax code which at present inhibit the expansion of employment. In doing this, I have to be conscious of the fact that a relief in one area generally results in a higher tax burden elsewhere. The changes I will propose today have been carefully designed to have the maximum possible beneficial effect on employment.

Before going on to the details of today's budget, I should first like to set out the Government's views on public service pay and incomes policy generally.

PUBLIC SERVICE PAY AND INCOMES POLICY

PUBLIC SERVICE PAY

In the past three years substantial progress has been made in containing the growth of the Exchequer pay and pensions bill. The percentage increase in expenditure over the preceding year has fallen from 15 per cent in 1982 to 10 per cent in 1983 and to just over 7 per cent in 1984, when the provisional outturn amounted to £2,340 million.

The plan provided £2,400 million for public service pay in 1985. This is only £20 million more than the published estimate at current rates of pay. The arbitrator's recent finding of 3 per cent from January and 3 per cent from July in respect of Civil Service grades would cost £108 million if implemented and applied throughout the public service.

The Government are prepared to make provision for a twenty-fourth round in the public service based on this finding. But there must be offsetting savings to secure a budget deficit in line with that planned.

The experience in the past two years has been that public service pay has turned out about £35 million lower than estimated in each year. That is because of tight control over spending in this area. The Government have determined that a saving of £30 million can be made this year, bringing the pay figure at current rates down to £2,350 million.

The excess over the plan provision can be accommodated, taking account of the revenue position and of savings which I will detail later, while the current budget deficit will be kept within £6 million of what was envisaged in the plan arithmetic.

GENERAL INCOMES POLICY

The Government's guideline for pay in the twenty-fourth round, as set out in their statement of 2 April 1984, called for a long pay pause followed by an increase of not more than a few percentage points. The statement identified a number of criteria, particularly the impact of proposed settlements on employment prospects, which parties to pay negotiations were expected to take into account. While settlements in 1984 were more moderate than in previous rounds, and in some instances reflected employment considerations, the trend here was still out of line with trends in competitor countries. In the manufacturing sector last year, for example, hourly earnings increased by about 10 per cent compared with an increase of about 6½ per cent for our main trading partners. This undoubtedly contributed to job losses in that sector.

It is essential that there be a significant further moderation in the rate of pay increases in 1985, in order to maintain, and preferably to improve, our cost competitiveness. The Government's stated pay policy objective is that average pay increases in the private sector should not exceed those in competitor countries. It is now expected that average earnings among our main trading partners will again be limited to an increase of about 6½ per cent in 1985. Here, on the other hand, there will be a substantial carryover into 1985 from last year's settlements, leaving limited scope for new pay increases if the competitiveness of Irish labour is to be improved. The fall in the inflation rate to 6 per cent or less and the income tax improvements in today's budget will provide even further grounds for moderation this year.

CURRENT EXPENDITURE

CENTRAL FUND SERVICES

The estimate for expenditure on Central Fund Services this year, at £2,250 million, is £322 million or almost 17 per cent higher than the 1984 outturn. The debt service component is up by £286 million on 1984, and as a proportion of GNP it shows an increase of about one percentage point. This increase puts a major strain on the 1985 budget arithmetic. To attempt to offset this increase fully this year would, however, require further large-scale expenditure reductions. The Government consider that this would not be justified, particularly as the mediumterm expectations are that interest rates will fall significantly by 1987. This, combined with the absolute necessity of halting the rise in the tax burden, is the principal reason for the Government having decided that the overall level of Exchequer borrowing as a proportion of GNP in 1985 should not be reduced below the 1984 level.

CURRENT SUPPLY SERVICES

The published 1985 Estimates for the non-capital supply services amount to £5,318.5 million. I will be announcing adjustments to these provisions later, the net effect of which, taking account of the addition to the pay provision to which I have already referred, will be to add £115.7 million to current expenditure. Allowing for this, and for the deduction of £50 million Departmental balances, the post-budget provision for the non-capital supply services is just over £5,384 million. This is an increase of some 6¼ per cent in day-to-day expenditure compared with increases of 22 per cent in 1982, 11.4 per cent in 1983 and 8.8 per cent in 1984. The 1985 budget provision of £5,384 million represents a reduction in the proportion of GNP taken up by day-to-day expenditure from about 35.0 per cent in 1984 to 34.6 per cent in 1985, the first reduction in the last seven years, and a start on the way towards the plan target of under 33 per cent of GNP by 1987.

EXPENDITURE REDUCTIONS

Apart from the pay saving mentioned earlier, the Government have considered closely whether other reductions could be made in the Estimates provisions for the cost of providing current services. In the light of the most up-to-date information now available about actual 1984 non-capital supply expenditure by Departments, and the recent slowing-down in the rate of inflation, they have decided on certain reductions in the published Estimates totalling £28.6 million. These reductions, and the other changes affecting expenditure which I am announcing today, will be reflected in the revised 1985 Estimates which will be published shortly.

LOCAL AUTHORITIES

The Government have decided, in the light of the increased provision for public service pay referred to earlier, to make an additional £9.5 million in respect of remuneration available to local authorities by way of an increase in the rates support grant.

SOCIAL WELFARE

This year's total social welfare outlays will exceed £2.25 billion. While economic difficulties have imposed a heavy burden in recent years, other factors have also contributed to the rapid growth in transfer payments. These include demographic changes and real increases in benefit levels.

—Long-term Weekly Benefits

The last two budgets provided increases in long-term rates of benefit totalling almost 20 per cent to cover the period from mid-1983 to mid-1985, while inflation in this period is unlikely to exceed 15 per cent. The Government's commitment to match the rate of inflation has been more than honoured. This is in marked contrast to what has been happening during this period in many other European countries.

The Government have decided to increase long-term weekly social welfare rates by 6½ per cent with effect from 11 July 1985. Weekly health allowances will be increased correspondingly.

— This will mean an extra £3.15 a week for a contributory old age pensioner under 80, bringing the maximum pension up to £51.40 a week.

—For a married couple where both are of pensionable age, the increase will mean an additional £5.50 a week, bringing their maximum pension up to £89.75 a week.

—The non-contributory old-age pension will be increased by £2.70, bringing it to a maximum of £44 a week.

—A widow with three children on a contributory pension will receive an additional £5.25 a week, bringing her weekly income figure to £85.95.

—Short-term Weekly Benefits

The Government have reviewed short-term rates of benefit, notably unemployment and disability benefits, with particular regard to the relationship with disposable earnings. It has been decided to increase weekly short-term welfare rates by 6 per cent from 11 July. However, rates of unemployment assistance for long duration recipients will be increased by 6½ per cent.

Full details of the various increases are included in the "Principal Features of the Budget".

—Equal Treatment

Deputies will be aware that legislative proposals have been introduced to afford equal treatment between men and women in matters of social security. The principal beneficiaries of the proposed changes will be married women who, until now, were eligible for certain benefits at reduced rates only, or for shorter periods of time than their male counterparts and were not entitled to unemployment assistance. The proposed legislation will be debated shortly by the Oireachtas.

—Action to Combat Poverty

The Government have prepared legislation to establish a new anti-poverty organisation, to be called "The Combat Poverty Agency". The functions of the agency will include the promotion of research into the nature, causes and extent of poverty, the making of policy recommendations in areas affecting people in poverty or at risk of poverty and the testing of possible new anti-poverty programmes on an experimental basis.

The second EEC combat poverty programme was recently agreed under the Irish Presidency. Under this programme, assistance will be available for a limited number of suitable projects in Ireland.

—Family Income Supplement

The family income supplement scheme took effect from 1 November last with payments backdated to 6 September for those who claimed before 1 December. The purpose of the scheme is to redress the imbalance between weekly welfare rates and take-home pay for those on low incomes. As a result of the increases in short-term social welfare benefits and today's changes in personal income taxation, the weekly amounts of income which determine entitlements under this scheme will be increased from next July.

—Treatment Benefits

The Government have decided that, from 11 July next, dental, optical and aural benefits under the social insurance treatment benefit scheme will be made available to all pregnant women whose husbands are fully insured. This is a first step in the extension of these benefits to all non-working wives of fully-insured persons. The cost of this measure will be met from within the published provision for social welfare.

—Other Social Welfare Policy Changes

I am pleased to say that for the third year in succession the Social Insurance Fund contribution rate will not be increased, despite higher social insurance expenditure. However, the published Estimates for 1985 provide for an increase in the earnings ceiling from £13,000 to £13,800 with effect from April next. The Estimates also provide for an increase in the income ceiling applicable to the 1 per cent health levy from £12,000 to £13,000, with effect from the same date. Provision is also made for an increase from £43 to £49 from April next in the weekly earnings floor above which pay-related benefit is calculated.

Following the passage of the Protection of Employees (Employers' Insolvency) Act, 1984, the redundancy fund has been renamed the Redundancy and Employers' Insolvency Fund. Under this Act, certain additional charges may arise on the fund. To take account of this and of the need to maintain the solvency of the fund, it has been decided to increase the employers' standard contribution rate by 0.1 of a percentage point, that is, from 0.4 per cent to 0.5 per cent, with effect from April 1985.

—Overseas Volunteers

Before leaving the area of contributions, I should mention that the Minister for Social Welfare is urgently examining the social insurance position of certain Irish volunteer development workers who go to developing countries. The Government wish to ensure that the social insurance position of such workers is safeguarded. The necessary arrangements will be made in the context of the forthcoming Social Welfare Bill.

—Cost of Social Welfare Improvements

The additional cost of the foregoing improvements in social welfare benefits, together with an increase in the value of fuel vouchers which I will announce later, is estimated at £59.4 million in 1985 and £123 million in a full year. I am also making a contingency provision of £600,000 to meet outstanding claims arising from the abolition of the intermittent unemployment scheme with effect from 6 January last. Taking account of anticipated savings on the Social Welfare Vote, the net cost comes to £55.5 million.

SPECIAL EXPENDITURE PROVISIONS

I should now like to mention a number of special additional expenditure allocations which the Government have approved.

—Voluntary Organisations

In each of the last two budgets the Government allocated £500,000 to provide once-off grants to meet special needs of a large number of voluntary organisations engaged in the social services area. We have included a similar provision in this year's published Estimates. In recognition of the valuable work done by these bodies, the Government have decided to increase this provision by a further £150,000 to £650,000.

—Irish Welfare Centres in Britain

It has also been decided that the level of support for the Irish welfare centres in Britain should be increased from the £72,000 provided in the Estimates to £104,000.

—New Park Development in Cork City

The Government are providing £300,000 towards the cost of the development of a new park at South Main Street in Cork, in conjunction with the celebrations marking the 800th anniversary of the founding of the city.

Mr. R. Burke

It will be somewhere for the unemployed to sit.

Mr. G. Collins

Give them jobs.

An Ceann Comhairle

Order, please. The Chair must appeal to Deputies to desist from interrupting.

—International Youth Year

Mr. Dukes

To mark International Youth Year, the Government are providing a further £150,000 to the International Youth Year Committee. This is in addition to the £140,000 already allocated. The Government are pleased to note that many of the projects envisaged involve the development of links with young people in Northern Ireland.

—European Music Year

Twenty-three European nations are taking part in European Music Year 1985. I am providing £100,000 to the Irish committee towards the cost of organising a suitable programme of events.

—Youth Orchestras

A sum of £20,000 is being made available to assist three youth orchestras in their activities this year. A sum of £10,000 will be given to the National Youth Orchestra and £5,000 to both the Cork Youth Orchestra and the Irish Youth Jazz Orchestra.

—Dublin Zoo

Dublin Zoo has given unique enjoyment to generations of Irish people. It is now in severe financial difficulties, and the Government have decided to give it a special grant of £250,000 to help the Zoo authorities clear an accumulated deficit.

An Ceann Comhairle

Order, please. I must appeal to Members of the House to restrain themselves. I ask you to remember that great numbers of people throughout the country are listening to this Statement. If you do not mind disturbing anyone here, please have regard for the people of the country and allow them to listen in quietness.

—“Asgard II” Sail-Training Vessel

Mr. Dukes

The sail-training ship Asgard II provides a valuable experience for young Irish people. This year the ship will make a special visit to the United States. We have decided to provide an additional £25,000 to facilitate crew changes on this voyage.

—Additional Allocations for Sport

Special Olympics

The 1985 European Special Olympic Games will take place in Dublin in July. More than 2,000 mentally-handicapped athletes from 21 countries will take part. I have decided to make £50,000 available to Ireland Special Olympics to assist towards the cost of hosting these games.

Olympic Council of Ireland

Looking further ahead, I am providing a grant of £150,000 to the Olympic Council of Ireland this year to assist in the planning of this country's participation in the 1988 Olympic Games.

Other Sporting Bodies

Additional assistance totalling £75,000 is being provided for other sporting bodies: the details are set out in the "Principal Features of the Budget". The total cost of these special provisions comes to £1.3 million.

NATIONAL LOTTERY

The Government announced in the plan their intention to set up a National Lottery, part of the proceeds of which will be devoted to sport. The Government will shortly be considering detailed proposals in relation to the lottery.

TAXATION

TAXATION POLICY

—Tax Reform

The national plan Building on Reality provides that there will be no increase in the overall level of taxation over the period of the plan. This is the starting point for taxation policy in the present budget. Given the overall budgetary constraints, it will be necessary to offset the reductions which I propose by a widening of the tax base and by limited tax increases in other areas. The overall result will be a very substantial improvement in the distribution of the tax burden, a gain in simplicity and, above all, a positive stimulus to economic activity and employment. The changes which I propose today will also eliminate a number of anomalies and open the way for continuing improvements over the next few years.

INCOME TAX

—All Taxpayers Benefit

Government policy in relation to personal taxation is that, over the period of the plan, bands and allowances will be adjusted each year so that the overall income tax burden on taxpayers will not increase. In order to give effect to this in the coming income tax year, changes are being made in the income tax bands, allowances and exemption limits. I am also taking this opportunity, to the extent that budget constraints allow, to reorganise the income tax structure in order to remove some of the more marked disincentive effects and complexities.

I am increasing the personal allowance from £3,600 to £3,800 for a married couple and from £1,800 to £1,900 for a single person. In addition, the widowed person's allowance and the one-parent family allowance will each be increased by £100.

Last year I abolished the 25 per cent band and widened the 35 per cent band. This was a first step towards simplifying the structure for income tax deductions. This year I am making major changes which will benefit all taxpayers. The 35 per cent band will be widened by 12½ per cent to £4,500 for single persons and £9,000 for married couples. The four bands at present above the standard rate — at 45 per cent, 55 per cent, 60 per cent and 65 per cent — will be replaced by two bands, one at 48 per cent and the other at 60 per cent. The 48 per cent band will be £2,800 for single persons and £5,600 for married couples. The balance of income will be taxed at the new reduced top rate of 60 per cent.

This reform will effect changes all through the system. All taxpayers will benefit from the increases in allowances and there will be benefits from the changes in rates and bands for taxpayers all the way up the income scale.

Some 65,000 taxpayers who are now paying tax at the 45 per cent marginal rate will, as a result of these changes, see their marginal rate reduced to 35 per cent thus cutting by one-sixth the number of people paying tax at the higher rates. A further 80,000 taxpayers, who at present are paying tax at a marginal rate of 55 per cent, will now have a top marginal rate of 48 per cent. As a result of the abolition of the 65 per cent rate, more than 60,000 taxpayers will benefit from a reduction of their marginal rate from 65 per cent to 60 per cent.

In all, 220,000 taxpayers will experience substantial reductions in their marginal rates or become free of income tax. Some 124,000 taxpayers will see their marginal rate move from 45 per cent to 48 per cent, but the marginal rate will, as a result of the changes in allowances and bands, apply to a smaller amount of income than heretofore, so that the net effect for these taxpayers will nevertheless be a reduction in tax liability. The same is true of the 25,000 taxpayers whose marginal rate will move from 55 per cent to 60 per cent. For almost 430,000 taxpayers, the marginal rate will remain unchanged at 35 per cent, while, for some 55,000, the rate will remain at 60 per cent but for both of these groups the increase in personal allowances will result in a reduction in tax liability.

Deputies

Hear, hear.

Mr. Dukes

In line with these changes to the rates, bands and allowances, I am also increasing the general exemption limits for those on low incomes. The limit for single and widowed persons will be increased from £2,500 to £2,650 and from £5,000 to £5,300 for married couples. In addition, the age exemption limits are being increased from £2,800 to £3,000 for persons aged 65 years or over and from £3,300 to £3,500 for persons aged 75 years or over. These limits will be doubled for married couples. Marginal relief will continue to apply to incomes which do not significantly exceed these limits. The changes to the exemption limits and the increases in personal allowances will remove about 15,500 taxpayers from liability. The cost of these adjustments will be £58 million in 1985 and £97 million in a full year.

Mr. Lenihan

That is certainly marginal.

Mr. Dukes

This reform in the income tax system will have four main benefits. First, it will benefit every taxpayer. Secondly, it should ensure that, in respect of income arising in the 1985/86 income tax year, the overall income tax burden on taxpayers will not increase. Thirdly, it achieves a worthwhile simplification of the tax code. Taxpayers, employers and the revenue authorities will all welcome this. Fourthly, overall, the new structure will substantially improve the incentive to produce more and to earn more. I am confident that this will be recognised by the many people who say that their motivation to work has been diminished by high marginal tax rates, and that they will feel again that extra effort is worthwhile.

The special PRSI tax allowance and the temporary levy of 1 per cent on income are to be renewed for a further year.

Last year, I exempted persons earning less than £5,000 a year or less than £96 per week from the income levy. I am now raising this exemption limit to £5,300 per year, which is the equivalent of £102 per week for employees.

The estimated cost of renewing the PRSI tax allowance is £55 million in 1985, while the renewal of the temporary 1 per cent levy with the increased exemption limit will yield £41.2 million this year.

There will be improvements in a number of secondary allowances.

The incapacitated child allowance will be increased from £500 to £600.

The blind allowance will be raised from £500 to £600 and, where both spouses are blind, from £1,200 to £1,400.

Last year, I made a substantial increase in the allowance available where a person is employed to take care of an incapacitated taxpayer or taxpayer's spouse and this year I am proposing a further increase from £2,000 to £2,500.

I propose to increase the ceiling on relief for rent paid by older persons to £1,500 for married couples and £750 for single persons and to reduce the age limit for eligibility from 60 to 55 years.

Deputies

Hear, hear.

Mr. Dukes

The cost of these improvements in 1985 will be £800,000.

—Farmer Taxation

Arrangements for the introduction of the farm tax, announced in the national plan, are in hand, and the necessary legislation will be published soon. Farmers will of course continue to be liable for income tax up to the end of the 1985-86 tax year. I propose to extend the existing stock relief arrangements for farmers for a further year at a cost in 1985 of £3 million.

—Incentive for Land Leasing

In order to promote the long term leasing out of land by persons who are unable to work it to its proper potential, it is proposed to exempt from income tax liability, from 1985-86 onwards, the first £2,000 of leasing income obtained each year by a lessor of agricultural land who is over 55 years of age or who is incapacitated. In order to qualify for this concession, the lease from which the income is derived must be for a period of not less than seven years. The cost of the concession is not expected to be significant in the short term.

—Confining Stallion Fees Exemption to Ireland

There will be a provision in the Finance Bill to confine the tax exemption on stallion fees to income earned from stallions at stud in this country. This change will ensure that the relief benefits the domestic Irish bloodstock industry only, as was originally intended, and not bloodstock operations outside the country.

TAXATION OF FINANCIAL INSTITUTIONS

The bank levy will apply again in 1985 at a level of £25 million. I am looking at the possibility of making some adjustments to the basis for calculating the levy to ensure that it is operated as equitably as possible.

A higher tax contribution will be required from the building societies on interest and dividends payable to their investors. The composite rate of tax is being increased from 75 per cent to 85 per cent of the standard rate, giving a new rate of 29.75 per cent for 1985-86. This will give an extra tax yield of £4 million this year and £10 million in a full year. Should any society feel that this increase is unwarranted, the Revenue Commissioners will undertake a survey of depositors with a view to determining what the composite rate for that society should be. I propose to make permanent the payment date arrangements for building societies introduced in 1984. The combination of this change and the increase in the composite rate adds £32 million to the pre-budget tax revenue estimate for 1985.

SAVINGS RELIEF FOR OLDER PEOPLE

I am introducing a change in the tax relief for certain deposit interest to encourage older citizens to put their savings in safekeeping. For taxpayers who qualify for the age allowance, that is, taxpayers over 65 years of age, the present ceilings for tax relief on deposit interest are being doubled. This new arrangement will apply in respect of interest otherwise assessable for 1985/86.

COMPANY TAXATION

At present, all companies are due to pay a first instalment of corporation tax six months after the end of their accounting periods. The due date for payment of the second instalment varies as between companies from one day to almost nine months after the due date for the first instalment. The lack of a uniform second payment date for all companies is an anomaly which is hard to defend nine years after the introduction of corporation tax.

I propose to advance the second payment date so that all corporation tax will be due for payment six months after the end of an accounting period. To lessen the impact of this change on those companies which will be most affected, I am advancing the second payment date in the first instance by only three months for accounting periods ending in the year beginning on 28 February 1985. In no case, however, will the new second payment date be earlier than six months after the end of an accounting period. This change will yield £10 million in 1985. A similar advancement of the second payment date by a further three months in each instance will apply for accounting periods ending in each of the following two years. This will mean a single due date for payment of corporation tax for all companies by 1987 at the latest.

—Continuation of Partial Relief from Advance Corporation Tax

The transitional arrangements under which advance corporation tax is payable at 50 per cent of the full rate will be extended to distributions made up to 31 December 1985. The cost of this extension of relief will be £2.5 million this year.

INCENTIVES

—Continuation of Stock Relief

The system of stock relief introduced in the 1984 budget will be continued for a further year. This will cost £3 million in 1985.

—Continuation of Capital Allowances

The 100 per cent initial allowance for plant and machinery and the 50 per cent initial and 4 per cent annual allowances for industrial buildings, which were due to expire on 31 March, will be extended to 31 March 1988. There will be no cost in 1985.

CAPITAL TAXATION RELIEF FOR SPOUSES

I propose to exempt from capital acquisitions tax inheritances taken by one spouse from the other on or after today. It is estimated that this relief will cost about £0.5 million in 1985.

STAMP DUTY EXEMPTION FOR YOUNG TRAINED FARMERS

The stamp duty exemption in respect of the transfer of land to young trained farmers, which is due to expire in July 1985, will be continued for a further year.

INDIRECT TAXATION

VALUE-ADDED TAX

In the course of my Budget Statement last year, I indicated that I would look at the possibility of a fundamental reorganisation of the VAT system. There is general dissatisfaction with the existing system and it is clear that we need a more rational arrangement which will give a better return in terms of efficiency and impact on the economy.

The present system gives rise to problems such as a high level of duty-free imports, both legal and illegal, substantial compliance costs for businesses, administrative costs for the revenue authorities and distortion of trading patterns. The main structural causes of these problems are the very high level of some VAT rates, particularly the 35 per cent rate, the multiplicity of rates and the application of widely divergent VAT rates to related goods and services.

In considering the reorganisation of the VAT system, I had the benefit of the Commission on Taxation's Report on Indirect Taxation. The commission recommended that the general objective should be to levy VAT at a single rate on as broad a base as possible. This would undoubtedly be the most efficient system, but the Government do not consider that a single rate is feasible at present, particularly because of the effect on food prices. They have, however, decided on a major rationalisation of VAT.

From 1 March 1985, the VAT system will comprise three rates, zero, 10 per cent and 23 per cent, rather than the present six.

—Abolition of 35 per cent Rate

The 35 per cent rate will be abolished: items now charged at 35 per cent will instead be charged at 23 per cent. This will reduce the tax on a wide range of household items, including for example radios, record players, tapes, soaps and detergents, toys, cutlery, pottery and glassware, bicycles and household durables, and on a wide range of industrial materials. This will minimise the incentive for consumers to purchase these items outside the State. It will also reduce costs for a wide range of businesses and services, including for example the cost of educational materials. It will ease the cash-flow burden of VAT for industry, both at point of import and for domestic transactions, since many inter-industry goods have been liable at the 35 per cent rate. I expect this rate reduction to give a substantial stimulus to output and employment across a wide range of activity.

—23 per cent Rate

The coverage of the 23 per cent rate will remain unchanged, apart from two exceptions.

VAT on Newspaper Sales

The national plan provided for a reduction in the VAT rate on newspaper sales from 23 per cent to 18 per cent. In line with the reorganisation now proposed, this rate will be reduced further to 10 per cent. This will provide a substantial relief for Irish newspapers.

Deputies

Hear, hear.

Mr. Dukes

I will mention the second exception in a moment.

—Reduction of 18 per cent Rate on Tourism

The 18 per cent VAT rate, which covers hotel accommodation and short-term car, caravan and boat hire, will be reduced to 10 per cent. This will substantially improve the competitive position of registered businesses in these areas, with a consequent improvement in their capacity to attract new business and in their employment capacity.

These VAT reductions will allow price reductions of between 7 per cent and 10½ per cent for the items involved.

—Exemption of Theatres and Live Performances

I propose to exempt from VAT theatrical and other live performances which are at present at the 5 per cent rate.

—Increases

In order to complete this reorganisation of the system and at the same time provide part of the revenue required to finance the foregoing reductions, the following increases will apply:

—the 8 per cent rate on adult clothing will be increased to 10 per cent;

—the 5 per cent rate will also be increased to 10 per cent, involving mainly building, fuel other than electricity, certain agricultural contracting services, and car repairs;

—adult footwear, which is zero-rated at present, will be charged to VAT at 10 per cent.

Mr. Dukes

In keeping with the generosity of my mood I would be inclined to exempt the Deputies opposite, but since they are already out of the system there is nothing further I can do for them.

The flat-rate reimbursement of VAT to unregistered farmers will be increased to 2.2 per cent in order to offset the effects of VAT increases on certain farm inputs.

—Relief for Building

In order to reduce the effect on the building industry of the increase in its rate of VAT, the Government will introduce a number of special measures.

Increased Grant for First-Time House-Buyers

The level of grant for first time owner-occupiers of new houses affected by the VAT increase is being increased by 75 per cent from £1,000 to £1,750. An additional sum of £5 million is being added to the public capital programme for this purpose.

Special New Incentive for Letting

A measure will be included in the Finance Bill to provide a tax incentive in respect of certain premises let for multiple residential occupation.

Concrete Blocks

The second exception which I propose in the coverage of the 23 per cent rate is a reduction of the rate of VAT on concrete blocks from 23 per cent to 10 per cent. This will improve the competitive position of registered manufacturers and reduce the scope for evasion.

Fishery Harbour Development Works

An additional sum of £0.5 million is being provided in the public capital programme for fishery harbour development works.

A much greater proportion of public capital expenditure in 1985 than in recent years will benefit the building industry. The expansion in road construction, up 23 per cent or £23 million on 1984, and educational building, up 17 per cent or £14 million on 1984, will provide a boost to the industry. In addition, the building industry will benefit from the preservation of mortgage interest relief, the new £5,000 grant for local authority tenants and tenant purchasers who give up their houses and who acquire private houses, the increased rent relief for older people, the abolition of the 35 per cent VAT rate, the income tax reform, and the general economic recovery which is being supported by this budget.

—Free Fuel Schemes

Free fuel schemes help to meet the heating needs of certain groups of people dependent on social welfare or health allowance payments. The present value of the weekly fuel voucher is £4 and the Government propose to increase it to £5 from next October, the start of the next heating season. The cost of this concession, which will far more than offset the increase in VAT on fuel, is £2.5 million this year and £5 million in a full year.

—Motor Vehicle Parts: Reduction in Duty

Since the reduction in VAT on motor vehicle repairs and servicing in 1983 from 23 per cent to 5 per cent was offset by an increase in excise duty on cars, it is appropriate that today's increase in VAT to 10 per cent should also be matched by a reduction in another tax. I consider, however, that it would be more appropriate to apply the reduction to motor vehicle parts rather than cars. This will reduce the tax differential between parts sold in the State and elsewhere. A reduction in the duty from 25 per cent to 10 per cent is proposed. This will be phased in over a short period, in consultation with the trade, in order to minimise the difficulties arising.

The overall effect of this reorganisation and simplification of VAT will be to facilitate economic and commercial activity, and it will be of considerable help in expanding employment. In addition, I expect a substantial and positive effect on the volume of both legal and illegal imports from Northern Ireland, to the benefit of manufacturers and traders here.

Deputies

Hear, hear.

Mr. Dukes

It is estimated that the net effect of these changes in VAT in 1985 will be a reduction in revenue of £9.2 million. This takes account of gains from reductions in evasion, improved efficiency in the system, revenue from purchases diverted back to domestic sources and a net once-off loss of revenue payable at the point of import.

EXCISE DUTIES

Last October, following the announcement in the national plan, a substantial reduction was made in the duty on spirits. This was designed to win back to domestic outlets the significant proportion of purchases of spirits which had been diverted outside the State and the expectation was that no loss of revenue would arise. It is too early to say whether this expectation will be realised. The indications so far are encouraging, though the initial disruption of the market arising from the reduction, as well as the fact that the full increase in demand will take time to emerge, resulted in the 1984 revenue recipts from spirits being less than they would otherwise have been.

Excise duties are an important source of revenue. Since most of them are specific rather than ad valorem duties, increases are needed each year even to maintain the real level of the duties. In order to meet budget targets, increases in some duties are necessary on this occasion.

—Alcoholic Beverages

No Increase in Duty on Beer, Wine or Spirits

Because of the significant Exchequer cost which would be involved, I am not in a position to reduce the duty on beer or wine, as was done with spirits. There will not, however, be any increase in the duty on these products.

Cider and Perry

There has been a very rapid growth in consumption of cider in recent years. The duty on cider and perry is very low compared with that on other alcoholic beverages and I consider that the gap should be narrowed. I am therefore proposing an increase, with effect from midnight tonight, of 20p per gallon in the duty, including VAT, on the ordinary-strength cider and perry, with a relatively smaller increase for middle strength cider and perry.

—Hydrocarbon

I propose an increase of 10p per gallon in the duty, including VAT, on petrol and auto-diesel, with effect from midnight tonight. Existing rebates on petrol to handicapped drivers will be increased to match the duty increase. The auto-diesel increase will not apply to scheduled road passenger services. The tax on auto-LPG will be increased by a roughly similar amount through the increase in the 5 per cent VAT rate, so no excise duty increase is proposed.

—Cigarettes and Tobacco

I propose a tax increase of 10p on the packet of 20 cigarettes, with pro rata increases for cigars and other tobacco products. This will have effect from midnight tonight.

—“Cigarette” Lighters

The duty on "cigarette" lighters will be increased by 10p, or 13½p including VAT at 35 per cent, with effect from midnight tonight. From 1 March 1985, when the VAT rate will be reduced from 35 per cent to 23 per cent, a further 10p excise increase will be imposed, which will broadly offset the reduction in VAT. These changes are designed to bring the tax on lighters more into line with that on matches.

The total yield from these increases is estimated at £44.6 million in 1985.

In the case of petrol and auto-diesel, increases in retail prices must await new maximum price orders to be made by the Minister for Industry, Trade, Commerce and Tourism, who will determine the appropriate implementation date. Today's duty increase is being applied against the background of falling pump prices in recent months, so that the net impact on the motorist over the period from November to February will be relatively small. In the case of other tax increases which apply from midnight tonight, there should be no increase in the price of goods already in the shops, as the excise duty will apply only to goods imported or removed from bond after tonight.

I propose also to make some concessions in the excise area.

—Televisions: Halving of Excise Duty

The excise duty on televisions, combined with the 23 per cent rate of VAT, results in a big tax differential on these items between the State and Northern Ireland. While televisions cannot legally be imported duty-free by travellers, since they would generally exceed the £55 single item limit, it is clear that large numbers are imported illegally. The trade have been seeking a 50 per cent reduction in the excise duty, in order to reduce these illegal importations. While I do not accept that this reduction would be selffinancing, I feel that the level of illegal imports has grown to such proportions that a reduction is needed and I propose that a 50 per cent excise duty reduction be granted from an early date. The timing of the reduction will be decided following discussions with the trade.

—Duty Refund on Oil Used by Sea-fishermen

Sea fishermen already benefit from a refund of part of the excise duty on the oil which they use, paying only a net 5p per gallon rather than the normal 8p. I propose to relieve them fully of this excise charge from 1 February 1985 by increasing the refund to 8p per gallon.

The loss in Exchequer revenue from these reductions and from the reduction in duty on motor vehicle parts announced earlier is estimated at £3.7 million in 1985.

—Reduction in Betting Duties

Betting is an area where the level of evasion is reported to be high and it can be very difficult to obtain adequate evidence to sustain court proceedings. The 20 per cent duty on off-course betting represents an exceptionally high effective level of tax on betting, since it is applied to the amount staked, not just to the net amount lost by the punters to the bookmaker. It is very difficult to know what the effect of a substantial reduction in betting duties would be. However, I feel that there is a reasonable possibility that the cost of a significant reduction would be relatively small. I propose to make such a reduction as an experiment to test whether this is so. Accordingly, the excise duty on off-course betting will be reduced to 10 per cent with effect from 4 February next. The 1½ per cent stamp duty on on-course betting will be abolished from 1 April next at an estimated cost in 1985 of £600,000. The whole position will be reviewed before next year's budget.

ROAD TAX

Turning to road tax, I propose to increase the annual tax on private motor cars by 50 pence per horse power for cars of eight horse power or less, by £1 per horse power for cars between nine and 15 horse power, and by £2 per horse power for all cars of 16 horse power and over. These changes are specifically designed to favour smaller and more economical cars. I am also proposing that the very low rate of road tax on agricultural tractors and excavators be increased from £15 to £30 this year. These changes will take effect from 1 March and will yield an additional £7.5 million in 1985.

TAX COLLECTION

Attention was drawn in the national plan to the urgent necessity to make the tax collection apparatus more efficient. Substantial improvements have been made in recent years. In particular, wide-ranging changes were introduced in the 1983 Finance Act and these are now beginning to have an important effect. The tax clearance certificate scheme for public sector contracts, which was introduced last June, is proving very effective. Collection, however is still far from being satisfactory.

One of the biggest problem areas in the tax collection process is enforcement, where there is a large accumulation of arrears. I am determined that this log-jam should be removed. I am, therefore, setting up a working group to make recommendations to Government for substantial improvements in the enforcement process.

OVERVIEW OF TAX CHANGES

The changes which I have proposed in our income tax and VAT systems will unquestionably improve the climate for enterprise, effort and employment. Taken together with the tax concessions in other areas which I have announced today, they show clearly the Government's resolve to minimise distortions and disincentives in our system, within the constraints imposed on us by the need to continue with the necessary adjustments to the public finances.

POST-BUDGET CURRENT REVENUE

The net effect of the tax proposals which I have made will be to raise an additional £82 million this year. This includes £33 million from the continuation of temporary tax measures, £58 million by way of increased tax revenue buoyancy arising from the measures announced today and a net reduction of £9 million from the other tax changes made. The total tax revenue estimate, which comes to £5,704 million, shows an increase of 7½ per cent on 1984, which is broadly in line with the projected increase in nominal GNP, fully meeting the Government's commitment not to increase the overall burden of taxation. There is rather more uncertainty than usual about the tax revenue forecast, particularly in view of the major structural changes in VAT announced today. I am, nevertheless, confident that, following the pattern of 1983 and 1984, tax revenue will again this year be quite close to target. Total current revenue is estimated at £6,400 million. The tax changes in today's budget will raise the consumer price index by about one quarter of a percentage point — the lowest, in fact, since 1978.

CAPITAL BUDGET

1985 PUBLIC CAPITAL PROGRAMME

As I have already mentioned, I have decided to make two changes in the 1985 Public Capital Programme, published last November. The level of grant for first-time owner-occupiers of new houses affected by the VAT increase is being revised upwards from £1,000 to £1,750. A sum of £5 million is being provided for this purpose. I am also, as I mentioned earlier, providing a further £0.5 million for fishery harbour development works.

Taking account of these changes, the total provision for the public capital programme in 1985 comes to £1,806 million, of which £1,046 million is Exchequer-financed and £760 million is financed from other sources. Exchequer spending on capital projects in 1985 will be up by £131 million, or over 14 per cent on the 1984 outturn. This, as I have already mentioned, reflects the decision to allocate substantially increased resources in 1985 for road construction and for capital spending on education. Non-Exchequer public capital programme expenditure in 1985 is lower than in 1984 due to major infrastructural programmes winding down or finishing.

EXCHEQUER BORROWING REQUIREMENT FOR CAPITAL PURPOSES

Allowing for the global provision of £45 million for Exchequer-financed non-Programme outlays, total Exchequer capital expenditure in 1985 will be £1,091 million. Exchequer capital resources are estimated at £306 million, leaving a borrowing requirement for capital purposes of £785 million.

DEFICIT AND BORROWING REQUIREMENT

The estimated current deficit for 1985 is £1,234 million, which is 7.9 per cent of GNP. This compares with an outturn last year of £1,039 million, equivalent to 7.2 per cent of GNP as against the original budget target of 7½ per cent. The total Exchequer borrowing requirement for the year will be £2,019 million or 13 per cent of GNP. This compares with an outturn of 12.6 per cent for 1984, as against the original budget target of about 12¾ per cent. The total public sector borrowing requirement for 1985 will come to £2,521 million, or 16.2 per cent of GNP, down from 16½ per cent in 1984.

The target levels of the deficit and borrowing requirement are at the maximum of what it is prudent to undertake, and are closely in line with the projections underlying the national plan.

CONCLUSION

Today's budget measures represent a creative and forward-looking response to our needs and problems. The Government have put forward, within the framework set out in the national plan and within the inescapable financial constraints, a set of measures designed to produce the maximum response in terms of social justice, output and employment from the use of the resources available to us. We will realise our objectives within that framework so as to ensure that we can continue to make progress towards the financial targets set out in the national plan. This budget is an important step in the implementation of the policies which the Government have set out in that plan. Our detailed public expenditure policies have already been announced and are being implemented. A whole range of policies needed to make the economy and the public service more efficient and productive is now in train. The tax and expenditure measures announced today will underpin those policies and increase the prospect of their success. This is the only path to sustained growth in employment levels.

The Government have created the environment in which employment can be substantially increased. We have shown our readiness to meet the problems created for us by recession and by past mismanagement. We are confident that we will get a positive response and that the benefits will be felt by those — and they are many — who want to contribute and who want to work.

To sum up, this budget fully honours the Government's commitment to the less well off in our society. It reforms and simplifies the income tax system, with benefit to all taxpayers.

Revenue	£million		Expenditure
1. Tax Revenue			5,622.0	1. Debt Service and Other Central Fund Charges			2,250.0
2. Non-Tax Revenue			696.0	2. Supply Services (non-capital)			5,318.5
			6,318.0				7,568.5
3. Add Temporary Tax Measures to be continued:				3. Add New Expenditure:
Income Levy	41.2
Bank Levy	25.0			Social Welfare	55.5
Income Tax				Public Service Pay	108.0
—Building Societies	28.0	94.2		Grants to Local Authorities	9.5
				Other	1.3	174.3
Less:
PRSI Allowance	55.0
Stock Relief	6.0	61.0	33.2
4. Add New Tax Increases:				4. Deduct:
Excise Duties				Expenditure Savings
—tobacco etc.	17.5
—hydrocarbons	27.1			—pay	30.0
—road tax	7.5			—other	28.6
Income Tax				Estimated Departmental
—Building Societies	4.0			Balances	50.0	108.6	65.7
Corporation Tax	10.0	66.1
5. Deduct New Tax Reliefs:
Excise Duties	3.7
VAT	9.2
Income Tax
—rates and bands	58.0
—other	0.8
Corporation Tax	2.5
Stamp Duties	0.6
Capital Taxes	0.5	75.3	-9.2
6. Impact of Budget on Tax
Revenue Buoyancy			58.0
7. Deficit			1,234.2
			7,634.2				7,634.2

	1984	1985
	Provisional Outturn	Post-Budget Estimate
	£m	£m
CURRENT BUDGET
1. Expenditure
(i) Central Fund Services	1,928	2,250
(ii) Supply Services	5,063	5,384
	6,991	7,634
2. Revenue
(i) Tax	5,304	5,704
(ii) Non-Tax	648	696
	5,952	6,400
3. Current Budget Deficit	1,039	1,234
CAPITAL BUDGET
4. Expenditure
(i) Public Capital Programme	1,775	1,806
(ii) Other (non-programme)	141	45
	1,916	1,851
5. Resources
(i) Exchequer	270	306
(ii) Non-Exchequer	860	760
	1,130	1,066
6. Exchequer Borrowing Requirement for Capital Purposes	786	785
7. Total Exchequer Borrowing Requirement (3+6)	1,825	2,019
8. Total Exchequer Borrowing Requirement as % of GNP (estimated)	12½%	13%

REQUIREMENTS	£ million
1984	1985
Budget Estimate	Provisional Outturn	Estimate
1. Public Capital Programme	1,798	1,775	1,806
2. Non-Programme Outlays of which	1,189	1,180	1,279
Exchequer-financed
(a) Current Budget Deficit	1,089	1,039	1,234
(b) Miscellaneous	100*	141	45
3. Total Requirements	2,987	2,955	3,085
RESOURCES
4. Non-Exchequer Resources of which	832*	860	760
(a) State Bodies	803	828	725
(b) Local Authorities	29	32	35
5. Exchequer Internal Resources of which	207	205	227
(a) Loan Repayments	59	54	58
(b) Sinking Funds	129	136	150
(c) Appropriations-in-Aid	19	15	19
6. European Regional Development Fund	74	65	79
7. Exchequer Borrowing of which	1,874	1,825	2,019
(a) Net sales of domestic securities
(i) to the public		439
(ii) to the commercial banks		475
(b) Small Savings	1,874	161	2,019
(c) Foreign Borrowing		649
(d) Increase in Central Bank's holdings of Government securities		122
(e) Miscellaneous including change in liquidity of Departmental Funds		-21
8. Total Resources	2,987	2,955	3,085

	1984	1985
	Outturn	Post-Budget Estimate
	£m	£m
Tax Revenue
Customs	92.6	105.0
Excise Duties	1,241.6	1,317.2
Capital Taxes	30.1	33.5
Stamp Duties	112.2	116.4
Income Tax	1,966.5	2,131.2
Income Levy	78.2	77.0
Corporation Tax	209.7	218.5
Value-Added Tax	1,361.6	1,483.9
Agricultural Levies (EEC)	17.4	15.0
Motor Vehicle Duties	110.8	120.5
Youth Employment Levy	83.3	85.3
Total Tax Revenue	5,304.0	5,704.0
Total Non-Tax Revenue	648.3	696.0
Total Current Revenue	5,952.3	6,400.0

Where current expenditure will go	How current expenditure will be financed
Item	1985 Post-Budget £m	%Total Gross expenditure	Item	£m	% of Total
Service of Public Debt			Borrowing	1,234	16.2
Interest	1,841	20
Sinking Funds, etc.	150	2	Tax Revenue
			Customs	105	1.4
	1,991	22	Excise Duties	1,317	17.3
			Capital Taxes	34	0.4
			Stamp Duties	116	1.5
Economic Services			Income Tax	2,131	27.9
Industry and Labour	267	3	Income Levy	77	1.0
Agriculture	438	5	Corporation Tax	219	2.9
Fisheries, Forestry	43	—	Value-Added Tax	1,484	19.4
Tourism	27	—	Agricultural Levies (EC)	15	0.2
			Motor Vehicle Duties	120	1.6
	775	8	Youth Employment Levy	86	1.1
Infrastructure	102	1		5,704	74.7
Social Services			Non-Tax Revenue	696	9.1
Health	1,057	12
Education	929	10
Social Welfare	2,300	26
Housing	212	2
Subsidies	341	4
	4,839	54
Security	609	7
Other	699	8
Gross Expenditure	9,015	100
Supply Services Receipts	1,381
TOTAL NET EXPENDITURE	7,634		TOTAL	7,634	100

Current Expenditure	Current Revenue
Item	£m	% of gross expenditure	Item	£m	% of total
Service of Public Debt:			Budget Deficit (financed by borrowing)	1,039	14.9
Central Fund Services(1)
Interest	1,566	19.0
Sinking Funds, etc.	139	1.7
Total	1,705	20.7	Tax Revenue
Economic Services			Customs	93	1.3
Industry and Labour	211	2.6	Excise Duties	1,242	17.8
Agriculture	400	4.8	Stamp Duties	112	1.6
Fisheries, Forestry	42	0.5	Income Tax	1,966	28.1
Tourism	24	0.3	Corporation Tax	210	3.0
			Income Levy	78	1.1
			Value-Added Tax	1,362	19.5
Total	677	8.2	Motor Vehicle Duties	111	1.6
			Capital taxes	30	0.4
			Youth Employment Levy	83	1.2
Infrastructure	92	1.1	Agricultural Levies (EEC)	17	0.2
			Total	5,304	75.8
Social Services
Health	1,018	12.4
Education	894	10.9	Non-Tax Revenue	648	9.3
Social Welfare	2,121	25.7
Housing	175	2.1
Subsidies	358	4.3
Total	4,566	55.4
Security	572	7.0
Other	627	7.6
Gross Expenditure	8,239	100
Supply Service Receipts	1,248
Net Expenditure	6,991		Total Revenue	6,991	100

	1981	1982	1983	1984 Provisional Outturn	1985 Estimate (1)	% change 1985 over 1984
	£m	£m	£m	£m	£m	%
Service of Public Debt
Central Fund Services(2)
Interest	795	1,143	1,330	1,566	1,841	+18
Sinking Fund etc.	89	106	126	139	150	+8
Sub-Total	884	1,249	1,456	1,705	1,991	+17
Economic Services
Industry and Labour	98	138	184	211	267	+27
Agriculture	255	278	360	400	438	+10
Fisheries	11	13	12	13	13	—
Forestry	22	27	28	29	30	+3
Tourism	18	19	23	24	27	+13
Sub-Total	404	475	607	677	775	+14
Infrastructure
Roads	21	24	26	26	28	+8
Sanitary Services	16	22	29	38	46	+21
Transport(3)	16	18	27	28	28	—
Sub-Total	53	64	82	92	102	+11
Social Services
Health	764	883	973	1,018	1,057	+4
Education	604	730	804	894	929	+4
Social Welfare	1,202	1,639	1,909	2,121	2,244	+6
Housing	87	109	143	175	212	+21
Subsidies(4)	277	324	346	358	332	-7
Sub-Total	2,934	3,685	4,175	4,566	4,774	+5
Security
Defence	207	244	254	271	292	+8
Garda	163	187	208	233	244	+5
Prisons	26	30	33	36	39	+8
Legal, etc.	24	30	34	32	34	+6
Sub-Total	420	491	529	572	609	+6
Other
Central Fund items
EEC Budget	118	144	194	208	250	+20
Miscellaneous	5	7	8	15	9	-40
Supply Services	298	376	353	404	439	+8
Sub-Total	421	527	555	627	698	+11
Gross Total	5,116	6,491	7,404	8,239	8,949	+9
Less: Supply Services Appropriations-in-aid, P.R.S.I. receipts	697	916	1,095	1,248	1,381	+11
Net Current Expenditure excluding expenditure on Post and Telegraphs	4,419	5,575	6,309	6,991	7,568	+8
Post and Telegraphs	322	355	378	—	—	—
Net Expenditure Including Post and Telegraphs(5) (Exchequer Pay and Pensions included in above excluding Post and Telegraphs)	4,7411,729	5,9301,982	6,6872,175	6,9912,340	7,5682,380	+8+2

	Exchequer	Local Authorities (a)
	Revenue	Non-capital Expenditure	Expenditure from revenue (b)	State grants received	Rates collected
	£m	£m	£m	£m	£m
1966-67	273	272	99	51	32
1967-68	305	306	107	57	35
1968-69	345	354	121	66	38
1969-70	411	412	145	77	43
1970-71	482	490	174	94	50
1971-72	569	572	196	115	60
1972-73	659	665	240	138	70
1973-74	793	803	298	183	71
1974 (April- Dec.)	651	744	292	190	61
1975	1,091	1,350	481	332	84
1976	1,470	1,669	567	404	109
1977	1,757	1,944	684	504	111
1978	2,023	2,391	831	670	82
1979	2,384	2,893	1,007	820	91
1980	3,155	3,696	1,318	1,065	103
1981	3,973	4,741	1,575	1,291	102
1982	4,908	5,930	1,891	1,568	93
1983	5,711	6,687	2,077	1,732	104
1984	5,952	6,991	2,267(c)	1,871(c)	127(c)
1985	6,318(d)	7,568(d)	2,414(d)	1,991(d)	146(d)

	1981	1982	1983	1984	1985
Interest	938	1,323	1,554	1,746	2,055
Sinking Fund	116	137	159	157	169
Total	1,054	1,460	1,713	1,903	2,224

	1981	1982	1983	1984	1985
	£000	£000	£000	Provisional	Estimate
				£000	£000
1. Aids reducing production and overhead
costs and production incentives (b):
Grant in lieu of rates on agricultural land	61,585	89,087	113,999	115,000	116,000
Non-EEC interest subsidies	13	1,633	2,170(c)	2,866(c)	5,321(c)
Assistance for extra breeding stock	—	2,558	7,027	8,296	4,000
Reduction of land annuities and deficiency of income from untenanted land (d)	4,031	5,545	5,642	6,616	6,674
Sheep grants, etc.	412	5	2	2	—
Small farm incentive bonus	10	—	—	—	—
Winter fodder schemes	2,872	2,454	3	1	—
Promotion of shared use of farm machinery	—	—	25	—	—
TOTAL	68,923	101,282	128,868	132,781	131,995
2. Schemes operated under EEC regulations and directives:
Farm modernisation	46,272	47,301	28,790	30,070	26,817
Farmers' retirement	1,612	1,737	931	377	651
Aids to farmers in less favoured areas	24,547	21,889	17,580	20,255	19,258
Market intervention	5,153	7,204	14,645	15,372	31,830
Programme of special measures	5,041	10,719	6,137	2,205	(-)2,810
Grants for individual projects and for marketing and processing	17	111	143	143	276
Aids for horticultural producers' organisations	30	22	—	—	30
Dairy herds conversion and suckler cow	24	4	—	—	—
Scheme for cessation of milk production	—	—	—	—	1,000
TOTAL	82,696	88,987	68,226	68,422	77,052
3. Education, research, advisory and inspection services:
Education (e)	11,555	14,729	16,236	17,193	17,673
Research	16,206	17,244	18,093	18,624	18,617
Farm advisory services (f)	12,964	13,523	15,215	17,104	15,664
Technical services	6,635	4,578	5,957	6,044	5,882
Inspection services	5,112	8,976	7,608	8,419	4,726
Rural organisations(e)	223	241	378	398	410
Farmer contributions to education, research and advisory services	20(g)	—	—	—	—
TOTAL	52,715	59,291	63,487	67,782	62,972
4. Disease eradication:
Bovine T.B.	12,691	13,483	15,070	17,448	23,550
Brucellosis	12,679	7,100	7,593	4,107	6,200
Hardship Fund	300	500	350	550	1,750
Other, e.g. leucosis	199	10	102	116	63
Less: Farmer contribution and EEC receipts	(-)1,900	(-)5,702	(-)1,724	(-)7,012	(-)13,702

	1981	1982	1983	1984	1985
	£m	£m	£m	Provisional	Estimate
				£m	£m
FEOGA GUARANTEE SECTION	302.8	342.7	436.7	649.7	680
FEOGA GUIDANCE SECTION	39.8	59.6	63.2	45.1	50

Dáil Éireann debate - Wednesday, 30 Jan 1985