Deputy Reynolds, and he has an hour and a half.
Financial Resolutions, 1985. - Financial Resolution No. 9: 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.)
Deputy Kelly is leaving the House. He should come back and tell us about the funny money that he used to tell us about in the last couple of years. The budget handlers do not know what it is all about. There are a few items in this budget which the people opposite do not agree with any more than I do.
This budget was born out of political expediency, not out of economic necessity. The budget in years gone by was the instrument of economic policy. It is no longer so. It is a calling together of the warring factions who have been at each other day in and day out in this administration. On the eve of the budget at the eleventh hour they had to come in and take what will turn out to be the most serious decision affecting the whole strategy of the budget and economic progress for the future. The budget is anti-employment and nobody will deny that. I will deal with that aspect in detail in this one and a half hours that I will be here. The budget is anti-family and anti-social. The soul of that Labour Party has gone out the door. A soul has gone already.
The Deputy should not have reminded him that he was going to speak for an hour and a half.
We have not even one representative of the social conscience of this so-called Coalition Government to pick up the pieces and put them together for the hard pressed people who must carry the brunt of the budget impositions. The social welfare recipients, the lower paid workers, the new poor, the middle class, must carry the brunt of this budget. A budget was brought in this day last year and the papers on the following morning had in banner headlines: "Neutral budget". It was neutral that week but as weeks and months went by and pay packets came out in April and May and boys and girls began to put all their bills together they found that it was not a neutral budget, far from it. The PAYE sector, who are paying for everything at the moment, had to wait until the end of the year to find out the fraud that had been inflicted on them in the juggling of figures in the 1984 budget, and ended up paying 14 per cent more than they had paid in the previous year.
Many questions remain unanswered in relation to this budget. It calls into question the credibility of the Taoiseach and many Ministers in that Government. It also calls into question the credibility of figures in the table presented to us yesterday evening. The Taoiseach was very hurt and pernickety in relation to a few of the figures that must be put in context clearly, honestly, openly, and on the table. I will wait for the whole of this debate and the whole of the day for anybody to tell me I am wrong. I am not wrong.
We know the problems the Government had putting this budget together. We know the nerve strain. We know that the Labour Party, who have been watching the polls recently, were afraid to do anything and were prepared to bite any bullet to keep themselves where they are. I am not as bad as Eamonn McCann in the Sunday World who listed dates on the calendar of when certain people will be entitled to pensions and said that that might decide when they will pull the plug. They have no notion in the world of doing so, and neither has Deputy Sheehan.
(Interruptions.)
When he goes out in the local elections in June he too will find out what the people are saying. We have always found out in by-elections and general elections. They are the real poll.
What I am about to say applies to every Deputy in the House. I want no interruptions from either side. It is impossible for the Chair to get a hearing for one Deputy if any Deputy is interrupted. I do not want anybody to be interrupted.
It is difficult for the speaker to keep his trend of thought in mind also. Let us look at the credibility of some of those figures. We all know that a couple of days before the budget was put together the Minister for the Public Service called in the ICTU and all the unions involved. We know that the meeting went on practically until midnight, that very harsh words were said and that some of the representatives at that meeting went home wishing never again to have to be in the same room with that same arrogant Minister. The Minister failed to do anything on that occasion but then there was another meeting because there was a realisation of the extent of the crisis. From then on the honesty and integrity that this Government preach about so much and which we expect from them were thrown to the wind, sacrificed for political expediency. They had to be confident that Labour would vote for the budget. Consequently, the public sector pay recommendation was accepted, all £108 million of it. The projection in the national plan in this regard was £20 million. Obviously, then, a balancing up situation was necessary so the Government bring forward this lovely figure of £30 million which they ascribe to expenditure savings on pay. There are no details given but I trust that during this debate we will be told which Departments are to lose staff or which ones are to be given more staff. Where is the £30 million saving to be effected?
Thirty plus 20 equals 50 so that left the Government looking for £58 million to balance the budget. On the left hand side of this table we see, miraculously, the figure of £58 million by way of revenue buoyancy. Is that not coincidental? Is it not amazing that in a budget of between £7 billion and £8 billion, the figures fit so neatly at the eleventh hour? I regret that Deputy Kelly has left the House. If he were here I wonder if he would be prepared to repeat the definition of revenue buoyancy that he has been giving year after year. Both he and the Minister for Industry, Trade, Commerce and Tourism have defined revenue buoyancy in the past as funny money. Where is the £58 million coming from? If it is to come from income tax buoyancy, I suggest that the figure be regarded as real income tax and let the PAYE people know what they are to pay instead of leaving them to wait until next year to find out that they have been robbed again.
I have heard the budget described as a budget that is robbing Peter to pay Paul. I would desscribe it as a budget that is robbing both of them. There is give and take but the take is much greater than the give. All those matters are being concealed from the people. They will not realise how they have been conned until they get their pay packets in the months of April and May. They will know then, too, how the local authority levies are to be fixed and they will realise how much more they are paying for their petrol.
Perhaps Deputy Kelly and the Minister I have referred to would let us know whether they still regard revenue buoyancy as funny money which is what they believed it to be before they came into Government. Another sleight of hand, as it was described by the then Deputy Bruton in 1982 and as it has been described also by Deputy Kelly, is the bringing forward of next year's money into this year's budget. Here we find another £10 million being brought forward in this way. In the years 1981 and 1982 the people now in office appeared to have the answers to all our problems but when they are faced with any one problem that might shake their political future as a Government they are prepared to bury their principles in the interest of expediency and to take whatever steps are necessary to keep them in office. Government speakers will have the opportunity of replying to all those questions of credibility including the one raised by Deputy O'Kennedy.
There is an asumption in the budget of a ridiculously low figure for unemployment benefit and assistance. There are 225,000 people unemployed. The Government have taken 217,000 as an average. Is that realistic? The Minister of State opposite will realise that not included in those figures are another 11,000 or so young people who are living with their parents and who, because of their means, are not eligible for assistance. The December figures for unemployment were horrific, the worst ever recorded in the history of the State, worse even than those years in the fifties when the then Coalition succeeded in running so many of our people from the country. If the Government are realistic they will admit that another £40 million is required for unemployment assistance and benefit but since it was not easy to slip such a figure into the budget they rolled back the social welfare figures. There are plenty of other figures, too, that will be questioned during this debate. One that was asked about on the Order of Business today is the £28.6 million that is included under the heading of expenditure savings.
The Taoiseach said yesterday that he and the Department of Finance would stand over every figure in the budget, that all the figures were fully agreed beforehand. I was a member of two previous Governments and I cannot conceive of any situation in which Estimates are published and agreed at Cabinet level and then arbitrarily a Minister for Finance comes in, without decisions being taken as to how the savings are to be effected, and merely throws out a figure. The Minister made no attempt to enlighten us in this regard. In which Departments are the savings to be effected and how?
It is deceitful of the Minister not even to refer to how the £28.6 million can be found. Is it to be got from taxation also? However, I doubt if the information is available but I challenge the next speaker from the Government side to name the Departments in which the cuts are to be effected. I suspect it is another dreamt up figure. If services are to be cut in order to find this money we should be given that information before we pass judgement on the many other aspects of the budget that are in doubt also.
It is very easy to solve the remaining difficulties caused by the two-party Government when they are prepared to allow the budget deficit to increase and the borrowing to continue. Everything is possible when those two things become a moveable feast. Not so long ago, these things were considered sacrosanct by the Taoiseach. I must call into question the credibility of the Taoiseach in his management of the affairs of the country and I would ask him to account for some of the weird statements he has been making in recent times and to explain about the promises he made with conviction in 1982 and 1983. The Taoiseach was held up as a man of virtue, integrity and honesty. The Taoiseach's handlers and excellent media managers had the people convinced that he was something of a new messiah who had all the answers. That was hawked around every church gate. The man who sold the Taoiseach is like the man who sells products in the commercial line and at the end of the day the customer has to come back. The first sale is always successful but the second one is a failure.
I had hoped that this Government would last for a few budgets so that the myth would be exploded, so that the people would have time to find out what the Taoiseach is made from and that the slogan "We have the men for the job" will be seen in its true colours. If they are the men that this country needs I would suggest that the Government go for an election tomorrow morning and they will find out what the ordinary people are saying. Two out of three of the people want to know when will we get rid of this shower. I do not wish to belittle politicians but all the actions of the man who is supposed to be a man of honesty and integrity have done more to bring down the profession. In recent times I could not believe my ears when I heard the statement of the former Minister for Justice in relation to a regrettable shooting. The loss of a life is regrettable. I had thought that the Minister's resignation would have been on the table within 10 minutes of that statement or that the Taoiseach would have sent for him, but recalling what the Minister for Health had done when he flouted the law——
That hardly arises on the budget.
It arises in relation to the credibility of the people who introduced the budget. I wish to know whether they are capable of continuing in Government. It was wrong for a Minister to flout the law. If the law was bad he should change it. The Taoiseach who keeps such people in Cabinet is doing nothing to uphold the profession of politics or democracy.
I will go back to some of the fancy statements that the Taoiseach made from time to time and we will examine his honesty and integrity. In The Irish Times on 30 October 1984, Dr. FitzGerald was adamant that the constraints for public sector pay set out in the plan would be adhered to. He also said that one way or another these figures would be upheld. That was a clear Government decision until the eve of the budget when they found that they would not have a Government, when they found they would not have the Labour Party to enable them to carry on in Government if they kept to that Government decision. That Government decision like many others was tossed to the winds and the best way forward for the survival of this country was thrown to the winds for political expediency. In the same article the Taoiseach went further than the plan itself in confirming that PAYE tax income bands would be indexed each year and he identified the removal of the 1 per cent income levy as a Government priority if the yield from other taxes or adjustments to the taxation system yielded more than expected. The Taoiseach said that they did not know how far they could go beyond indexation this year. That was another statement easily made but not lived up to. Full indexation would have demanded that the Government give the PAYE sector an extra £50 million. This was another sleight of hand to convince the people that they are getting full indexation when they are not.
Deputy Bruton in The Irish Press of 12 July said that it was the definite intention of the Government to introduce indexation in next year's budget and that it wanted it be the first time since 1981 that income tax payers would not be left worse off by the budget. Two prominent men in the Government talked about indexation but it has not occurred. Deputy Bruton asserted that the people would not be worse off. How much income tax will be collected this year? The proof of the pudding is in the eating. I reckon that the Government will lift over £160 million more than they lifted in 1984 and if that does not make the PAYE taxpayer worse off I do not know what does. That is the reality: people will pay more tax in 1985 than they did in 1984.
The Tánaiste was not here to hear what Deputy Bruton said would be the position of the income tax payers and he was not here to hear what the Taoiseach said in relation to indexation and about the 1 per cent levy which was to be removed. What did we end up with? Part indexation, £50 million short of what would yield full indexation. All the figures have been buried and I am beginning to extract them to get the true answers. By this time next year the PAYE sector will know exactly what they have paid and they will have paid far in excess of £160 million. Before the Tánaiste came in I had to call the Taoiseach to task and call his credibility into question in relation to all the deceitful statements that he has been making in more recent times. We all remember the Taoiseach's famous article in the Irish Independent of December 16 when he offered a defence of his stewardship and some of the untruthful gems which littered this extremely tedious epistle are as follows:
Since coming into Government, overspending on the current account has been effectively halved.... We have done this while turning around the economy. The drastic fall in living standards has been halted,...
and that industrial output this year
is up by 12 per cent and our industrial exports by 20 per cent——
The last is the only thing that is near enough to being the truth. We will give the Taoiseach that. He says: "We are not prepared to follow the path of bailing out enterprises which have gone beyond the point where they can be made economic ..." We will take his statements one by one. "Since coming into Government, overspending on the current account has been effectively halved." Words are beginning to lose their true meaning when the Taoiseach makes untrue statements like that. The Minister knows that current expenditure has been the problem of this economy for quite some time. It has arisen from all the current budget deficits going back ten or 12 years. The Coalition got into Government on the understanding that this expenditure was going to be cut. It has increased substantially in the three Coalition budgets and there is no way in which the current expenditure will halve. Why are the Government trying to mislead the people and being totally deceitful and dishonest in trying to get them to believe those twisted facts?
"We have done this while turning around the economy." That was an incredible statement from the Taoiseach last December. He can go on the streets of Dublin, to Tallaght, to Cabra, down to Cork, Tralee or Donegal. Every man, woman and child knows that our economy is on the floor, that nothing is happening. The people have lost hope, are totally despairing and disillusioned about the situation ever being saved. Many are taking the emigrant ship, some by choice, many of the young people, unfortunately and regrettably, not by choice. There is not a single thing emanating from this Government which points in the direction of any turn around in the economy.
At least it is not in the state in which the Deputy's Government left it.
I shall take up that argument with the Minister any day. However, I hope that we will not hear the long-playing record when the Minister gets up to speak, going back for the last ten years and trying to blame Fianna Fáil for the problems.
The Minister has his script prepared from another Department.
I sat up all night.
We all know that the Minister for Foreign Affairs, Deputy Barry, had ideas of leadership——
Aspirations.
——aspirations for quite some time.
Deputy Reynolds has too.
He threw them all away in the Chamber of Commerce in Clonmel when he tried to defend the indefensible — the Taoiseach's humiliation and bending of the knee at Chequers. He made a foolish political mistake by doing so. He made a statement in Cork a few weeks ago that the economy was poised for recovery. I have not been in Cork for a couple of months but I shall be going there on Friday. I shall shake the hand of the Minister, Deputy Barry, if I can see that the economy in Cork, or any other part of this country, is poised for recovery. It was interesting that he used the same phrase in November 1983. He then said that the Irish economy was poised for recovery. I cannot see that recovery. Nobody out there can see it, either.
Nobody in Cork.
We will be all right with the new car park.
I am sure the Deputy does not need any help.
The Government will have to think positively.
Those young lads in RTE are delighted with the jobs.
If the Minister believes, as the Taoiseach believed in December 1984, that living standards have not fallen by one-quarter, then I suggest he contact some of those who used to support him in previous elections but about whom I have grave doubts that they will support him in future elections. He should ask the workers if their standard of living has not been reduced by one-quarter in the last three to four years. They will give him the answer. We have an incredible list of statements from the Taoiseach trying to convince the country that he had done what he has not done, what we all knew he had not done and had not a hope of doing because he did not take the decisions that he should have taken when elected to Government. Perhaps that was because the Labour Government would not go along with those decisions. That is the prerogrative of the Minister's party. However, we are further down the economic slope than we ever were in our history.
We knew what the figures were when we came into Government. The Minister seems interested that I look at those figures. In relation to the financial situation which the Taoiseach said he had put right, the national debt from December 1982 to December 1984 increased by £5.7 billion. The Government are going to add another £2.5 billion to that which means that at the end of this year the national debt will have increased during their term of office by £10 billion. That is a terrifying figure. No wonder there are people who are frightened about where we think we are going.
In this debate last year the Taoiseach said that he could not inflict any more borrowing or indebtedness on future generations. He reminded us all in this House that for every £1,000 million you borrow £150 million is added on to the taxpayers' bill. Today, on his facts and figures, I charge him and the Coalition Government with adding £1.2 billion on to the taxpayers' bill during their term of stewardship of three budgets. I do not know if they will last long enough to finish this term out. That is the reality of the supposed financial rectitude about which we have all heard so much from this Government. If the Minister wanted to deny those facts, he is quite welcome to do so. Our foreign debt increased by almost £3 billion between 1981 and the end of 1984.
I do not recall reading how much the Taoiseach's foreign borrowing requirement for this year will be. I would tell him that the very shaky financial position of many companies would demand that he be a little more careful and tactful in the way he approaches his borrowing this year than he did last year. Early in the year he borrowed his total foreign requirement. When it came to the end of the year, he put pressure on the liquidity of the Irish market and by his policy pushed up interest rates by 2 per cent. Anyone who understands our business climate and the very precarious position of companies trying to hang on by their boot straps would appreciate what real damage that 2 per cent would do. Apparently, he did not. He does not seem to appreciate what makes business tick, or what it requires to make business work and he has done nothing in this budget to give confidence to the business sector to invest. That is the basic rock and foundation on which the recovery and reconstruction of this country will start. That was his insensitive approach in December. Now the damage is done. On behalf of the Irish business community on whom he is relying to produce jobs, I ask him to be a little more sensitive and careful in the way he does his borrowing in the coming year. By the end of this year we will have a £3½ billion increase in foreign debt since his Government came into power.
Do I really need to talk about the current budget deficit? When are the Government going to own up and be honest that they are not going to do anything about it, or are not able to do anything about it? One half of the Coalition Government will not let the other half do anything about it. Where is their commitment to the people when they said the twin challenges of their programme for Government, signed by the Taoiseach and the Tánaiste in Limerick, were a halting and reduction of the unemployment situation, to put the country's financial affairs in order and to phase out the current budget deficit? I will not say the year concerned; it might embarrass the Tánaiste. He managed to renegotiate it; that is his business. But the business of Ireland Limited demands that this continuous financial situation that has built up be corrected. I contend this Government are responsible for an amount of it during their present term of office. There is no point in going back over ten years to apportion blame as to who did what but, if one wants to engage in that exercise, one will find that both sides of this House were equally responsible. They are the people who went before the electorate contending they were the people who would put it right. Their record stands now as a failure and an indictment and calls into question their credibility, honesty and integrity when they gave those commitments. The electorate may have believed them at the time of the election but they do not believe them anymore. No matter how long or short this Government's duration in office is they will never be believed again. They have lost totally the trust placed in them by the electorate which will not be given them again. Most people in the Government know that full well and are prepared to remain in office as long as they can.
The current budget deficit, which stood at £988 million in 1982, has increased every year since. This Government will go down in economic history as the one holding the record for the greatest amount of borrowing in their short term, the greatest amount of foreign debt and the highest current budget deficit this country has ever seen, £1,234 million this year, a movable feast. It was sacrosanct up to the middle of last year until the real decisions had to be taken. But when they had to face reality they backed off, moving to a different position in relation to the current budget deficit. It was not as important as we had all been led to believe, or at least that was their view. They moved it along to a new figure that would accommodate all the things they wanted to do. Then, when they were up against it this year, they moved it along another bit. It is out of line with their national plan, .2 per cent above their national plan, and that plan was produced only three months ago. Is it any wonder I call into question their credibility? Are we to believe anything from this Government in future?
They have now given a new commitment that they will have the current budget deficit down to 5 per cent of GNP by 1987. It is time they came clean with this House and the people and told them it is just not on. Anybody looking at the relevant figures will be aware of the huge reductions they will have to effect in two budgets, that is if they remain in office until 1987. I am not so politically naive as to believe that in a budget before the next election they will take £300 million or £400 million off the then current budget deficit. No way. As a well known economist said yesterday evening, this budget was a well presented exercise but unfortunately the problems remain and become greater. Borrowing continues apace. The day to day spending of the Government is rising all the time. The debts of this Government will have to be paid by future Governments and generations. They should come out clean and say; "We are not going to eliminate the current budget deficit or reduce it to 5 per cent of GNP by 1987 because we know that to be unreal at this stage". But to do so would throw the whole of their national plan up in the air anyway. One wonders how much longer they can withstand the test of credibility. We all remember when that plan was produced in October last. It was founded on three basic assumptions, that the dollar would not remain strong, that interest rates internationally would come down and, to quote its exact words, at paragraph 1.9:
—foreign interest rates, particularly US dollar rates, while remaining high in the immediate future, will fall significantly over the period to 1987. A corresponding reduction in domestic interest rates is also assumed.
We all know that domestic rates rose by 2 per cent since October last. We all know the dollar is remaining strong. We know also that there has been a crash in sterling, with unprecedented interest rates applying in the United Kingdom. If this Government apply that to their foreign borrowings and sterling, if they apply it to all the money they put into dollars last year, in turn applying it to the Irish scene, we know where that assumption will get us.
The next assumption forming the foundation of this plan — a foundation built on quicksand at the time — was a 1 per cent public service pay agreement. I have said already what happened that, despite all the confirmation that that decision would be adhered to. That is another of the basic assumptions gone wrong.
The next assumption, contained in paragraph 1.9 of that plan was:
—the exchange rate of the IR£ will remain broadly stable, although some improvement against the US dollar is expected over the period of the Plan;
Let us look at the position of the exchange rate of the Irish punt today or yesterday. Could anybody have been so naive last October that he could not have foreseen there would be a fluctuating situation in relation to sterling? Did everybody not know there would be a glut of oil on the international market? Did everybody not know the pressures being exerted on Nigeria and Algeria and others to get more and more money for their oil so that they had to increase their production? Did everybody not see OPEC cracking at the seams? Yet this Government came along with a plan like that and we now know that we are within 10 per cent of parity already. There are people in the financial world in this city and across the water who contend that it appears very much as if we will come very close to parity. That was one of the most significant economic factors in this country as of budget day yesterday. Yet there was no mention of it by the Minister for Finance. Does the Minister realise what the real world of commerce is all about? Does he realise that approximately 40 per cent of our exports go to Britain? Does he realise that there has been a 10 per cent movement in the exchange rate vis-à-vis the £ sterling in the last six weeks? Does he know its repercussions and, if he does, does he not realise that we shall see more and more closures? If this trend continues for any length of time — which most economic commentators contend it will — the fact that 40 per cent of our exports go to Britain will wreak havoc on our industrial base, but that does not appear to occur to the Minister. Many people in the business world believe genuinely that either the Minister is not interested or does not want to concern himself with the problems of commerce. But remember that at the end of the day the problems of commerce are problems for all of us and it is time he took some interest and showed concern, even if he does not intend doing anything about it.
This Government's record in regard to their current budget deficit, their foreign borrowing and the national debt has been despicable in the extreme. They conned our people into believing they were going to do something about it and they did nothing about it.
Last year we talked in the budget debate about nothing being done about unemployment, a word that was practically omitted from last year's budget. In this year's budget there is more frequent mention of the word "employment". Yet I cannot see what will be done about it.
Last year we had a lecture from practically every Minister, including the Taoiseach, that the first priority of this economy was competitiveness. I do not recall hearing the word mentioned in this year's financial statement. It was important last year but evidently not important this year, so it is gone, evidently we are competitive. If the Tánaiste believes that this country is competitive I will ask him to take up his bag and go out and endeavour to sell a few products on foreign markets and then he will find out.
The Deputy should look around him.
I believe the only reason it is not mentioned here is that the remaining factor keeping Irish industry uncompetitive is the cost of Government services. Irish industry can do no more to be competitive than it has done over the last two years. It has shaved off every piece it could. There is nothing left. This Government chose not to mention competitiveness because that would leave them open to the charge: what about the regular monotony of increases in ESB charges, telecommunications charges, fuel costs, with taxation on the last imposed yesterday? The Government of the day are the people who are keeping Irish industry uncompetitive. Yet they look to Irish industry, saying, "Look at what we are doing for you, now perform".
Let us look at the reality of what the Government are doing for them. They are certainly keeping them uncompetitive. They are asking them to pay £10 million corporation profits tax long before they are due, despite the pressures on cash flows in that sector of the economy. They have increased the PRSI employer's contribution. As a result of this Government's policies, interest rates are up 2 per cent.
ACT is a chestnut which I have had to raise on the last two budgets, and regrettably I have to raise it again today. Will the Government ever realise that accelerated corporation tax is a disincentive to Irish industry to develop and get strong? I said this last year and the year before. Accelerated corporation profits tax discriminates totally against Irish industry. It does not matter to the multinationals because they are not caught for any tax on their dividends. They declare them in headquarters outside this State. Some strong Irish companies have been building up. The Government have broken faith with Irish industry in not coming clean about accelerated corporation profits tax. I do not know what the yield is. I think they have pushed its full implementation back another bit. Will they come clean and stop the corporate migration out of this country?
The Smurfit organisation are making most of their earnings in America. Most of the profits of the Rohan group are coming from America. Cement Roadstone are very badly affected by ACT. They have invested their money in Ireland. The Government decided to favour foreign industry and not to favour Irish industry in the case of ACT. If they read the Telesis Report they would know that the only long term approach to building a strong industrial and economic base is to strengthen Irish industry. That action by the Government is deterring people from investing here.
The Minister for Energy does not seem to believe that Irish banks have to go abroad to make a profit. Allied Irish Banks are now earning most of their money abroad. That is a sad indictment of the way we are managing our economic affairs. The Government should have the courage to do the right thing and they will be applauded for it. I know there are no votes in this, but there would be votes in the long term if they built up a strong Irish industrial base.
This morning I was stopped at the lights in Northumberland Road and a builder came over and knocked on the window. He said: "I am absolutely disgusted that nobody knows what the reality is of business here." I asked him what he had intended to do. He said he was taking the plane to Florida to enjoy the sun and that he would come back when there was a change of Government. I will have more to say about the building industry later on.
I trust that he can afford a long holiday.
That is indicative of the mood of the people who make the wheels of our economy turn. The Taoiseach and the Minister for Finance boasted about the great year the manufacturing sector of industry had in 1984. I should like to put the figures in perspective so that everybody will know what we are talking about. Fifty per cent of export growth came from the office and data processing equipment; instrument engineering 21 per cent; chemicals 20 per cent. In contrast the food and clothing industry grew by 2 per cent only, while drink, tobacco, timber, paper and printing continued to decline. How could the Minister put 10 per cent tax on footwear on the day Clarks closed? Tuf Shoes, another of our good shoe firms, are on a three day week. Those people are struggling to survive. Padmore and Barnes are under pressure. They got their designs right but they are being given no chance in our economic environment. I heard a backbencher remark yesterday that the Government are more interested in letting everything be imported.
Those are the hard facts of life. The Government are prepared to tax industry out of existence. The food industry grew by 2 per cent in a country which is basically agricultural. How many more times have we to point out to the Government the opportunities that exist to develop the food industry? Two years ago we heard about the task force of junior Ministers, but we heard nothing about them since. The Government's only contribution in the national plan was to appoint an international consulant. Last week I heard a murmur from the Minister for Agriculture that he was considering setting up a Department of Food. I hope he has learned his lesson, even belatedly. At least £700 million to £800 million worth of food is being imported. No effort is being made to co-ordinate any strategy. We have three or four Government Departments and eight semi-State agencies with their fingers in the pie. Nobody is responsible for anything. They are all going their own fragmented way. We want a development agency or a development-oriented Department to put the whole thing together. We do not need the cosmetic approach of appointing an international consultant to develop an industry with great potential, our food industry.
The construction industry is one of our biggest employers. It has always been the hallmark of successive Coalition Governments that once they take power the construction industry distintegrates totally. They take investment and confidence from it and our skilled tradesmen and craftsmen have to take the emigrant ship to find jobs. This Coalition Government are no different. In fact, they are worse. The construction industry is in the worst crisis it has seen over the past 50 years. Approximately 50,000 of the unemployed come from the construction industry, an industry which uses 93 per cent Irish material and labour. I can never understand why the Government do not see the logic of investing in the construction industry. This would provide an immediate response to the problem of unemployment, but the Government have turned their backs on it once again.
We heard about the marvellous dishing out of an extra £750 million for the housing industry. I welcome that, but let me tell Deputies if they do not already know, that the VAT rate went up from 5 per cent to 10 per cent. That means that a £35,000 or £36,000 house will cost an additional £1,750. A builder with a house worth £40,000 on which the VAT is £2,000 is trying to sell that house and he cannot sell it. The Government are now putting another £2,000 VAT on that, bringing the price to £44,000. The Government are telling him to collect £4,000 for them. He could not sell it at £40,000, so how can he collect another £4,000 in VAT and give the Government the money? That is illogical and unreasonable. It will not happen. Nothing in this budget will do anything for the construction industry.
Time and again we have said there is plenty of money in the private sector ready to be invested in joint venture operations to help the construction industry and to put right the defects in our infrastructure. The joint venture operations are waiting for the Government, but they have shown no sign of interest in them. If they want economic activity to happen, they must go out and make it happen. It will not happen while they sit back and wait for somebody else to do it. The Government could have a direct involvement in this area. They could be the catalyst in getting more and more investment in an area which could change the trend in unemployment. Are they interested? I do not know. The building and construction industry was never in a worse position and no amount of cosmetic talk will change that reality. Until the Government take action they will not see any results.
The greatest answer to the unemployment emergency here was to be the National Development Corporation. I am glad to see the Tánaiste here because he may tell us what is the position. It was a stillborn idea of the Labour Party as far back as 1974. By 1984 they still had not made up their minds, or perhaps their partners in Government had not. Last July a White Paper on industrial policy was published containing details of what the Government intended to do. I took that to be a Government document, and I am sure everybody did. Is it, or is it not? Deputy John Bruton said it is.
Many times during the last session of the House I asked that the document be produced here for debate in detail, but it was held back until 12 July when the Dáil was in recess. Only recently we discovered that the Government's concern was just to print it, put it aside and hope that the problems would go away. Last week we heard the Parliamentary Labour Party saying that they reject the concept of the NDC as enunciated by Deputy Bruton. It is time they made up their minds whether they want to have a National Development Corporation or not, but they are concentrating on trying to fool themselves and everybody else.
In its present concept the NDC would not be worth having. The Government are entitled to their ideological point of view but if they accept the principles enunciated by the Minister, Deputy Bruton, then they should let the National Enterprise Agency continue with the job they were doing. The proposed NDC cannot possibly excel what was being done by the National Enterprise Agency. The new concept would just put a new layer of bureaucracy on top of the NEA. If the Government are concerned about unemployment they should let the NEA continue with the job or go back to their own ideological concept of the NDC. What we want is action so that we can discover where we are going.
The Government have been making a big play about their contribution to tourism, an industry that has suffered seriously. The country has priced itself out of the market but there is great potential for jobs in the industry. We should not be fooling ourselves trying to persuade the tourist industry that a mere contribution of £6.74 million will turn the thing upside down and put big job potential in it. That industry has its back to the wall. Those in it have borrowed very heavily and are deeply in financial difficulty. This reduction in VAT will alleviate some of the problems but it will not provide thousands of new jobs. The budget only tinkers around with this major problem.
How can we have the economic development and redevelopment and thousands of extra jobs which the Minister told us would be provided by yesterday's budget? I have gone into all the elements of the budget and I cannot see where the jobs will come from. Traditional industries will be hit by extra taxation on shoes and clothing. The extra 10p on a gallon of oil will hit industry severely because it will have a knock-on effect on distribution costs. No matter what the Government do in regard to taxation, the customer will pay for it in the end, as the CPI will show.
All the Government are doing in this budget is making a start to undo all the harm they have done in the past two years. When the Government introduced the heavy increases in VAT, Deputy O'Kennedy and others from this side told them what the effect would be, particularly in regard to trade with Northern Ireland. Anyone who lives or who has business in Border areas could have told the Government about the adverse effects when conditions were created by increased VAT and excise duties. We do not have to have the rates of tax identical in both parts of the country but we must not create conditions that will encourage people to go north of the Border. This budget will increase the encouragement through the new tax on petrol, and the change in the punt/sterling ratio will aggravate the situation.
As I have said many times, I welcome any reduction of taxation for the electrical industry. We all know about the number of jobs lost in the industry because of taxation. Much damage was done. The Government pushed people out of legitimate businesses into the black economy because they could not survive against the odds and the competition they had to meet, legal and illegal, from Northern Ireland. The damage has been done and in this budget the Government are only trying to roll it back.
I would welcome any move by any Government to simplify the VAT system, but how many reforms have the Government introduced? However, to try to persuade the country that to reduce the 35 per cent VAT rate would be the be-all and end-all is an effort to fool the people. The Government are giving back about £67 million to the economy by the reduction in certain VAT rates but they are making a very foolish assumption if they think that £67 million will be transmitted throughout the economy. The Government cannot guarantee that. They made the same assumption in regard to revenue buoyancy. We know that many of the badly affected industries will hang on to the money available through the reduction in VAT and there is nothing the Minister for Finance can do about it. If the price of the article is not reduced there is nothing the Minister or any of us can do about it. It affects the industry of which I am part for which the VAT rate was reduced from 35 per cent to 23 per cent. The VAT rate in Northern Ireland is 15 per cent. It is the person who sells the product who collects the VAT and it is he who should pass on the reduction to the customer, and the Government have no control over it. Any econometric survey that has been done shows that the first step should be the passing on to the customer of any VAT relief given rather than that the retailers should try to hold on to the amount of the reduction.
The Government side have often said that there have been no suggestions from this side of the House. One of the biggest things in relation to industry that I overlooked was the scheme in regard to venture capital. I note that the Minister did not say one word about the venture capital scheme in his speech. I hope the Tánaiste will tell me that the venture capital scheme set up last year will be changed. Last year I told the Taoiseach that if he had not the scheme thought out fully — he acknowledged he had not — he should bear in mind the fudamental ground rules that would make the scheme work. On that occasion I welcomed that scheme but it has been a dismal failure. I understand that only five applications were received. The scheme will not work because it is too tight and was set up incorrectly. In case the Tánaiste wants to bring back my message to the Taoiseach this year I will explain to him why the scheme is not working. Under the scheme there is a tax allowance to those who put £25,000 into private industry. If that company, for whatever reason, does not pay not alone will the investor lose the £25,000 but he will lose the tax write-off on that money. Is that appreciated? The money invested is locked in for five years although the tax rebate applies for three years only. The Government have made sure that the managing directors, directors and shareholders in companies cannot avail of the scheme although they could help such companies grow. If they take shares or equity in the company they cannot avail of the same provisions as other people.
There is also the problem in regard to capital gains tax. Investors are locked in for five years and when they get out they must pay at the rate of 60 per cent if they make any money. If they lose money they get a tax write-off but they will not get any return for the risk they have to take. Last year I told the Taoiseach that unless fund managers and funds were allowed into the scheme it would not work out but they cannot get into it because of the set up. Unit trusts cannot get involved because of the legislation governing them. If a change is not made the scheme will not get off the ground. The scheme is a good one and is badly needed to equip the equity base in industry because it is over-borrowed. It is an ideal scheme but it should be given a chance to work.
I appeal to the Government not to be browbeaten by officials in Finance who are too restrictive. The commercial world is different. If this scheme works well and loopholes are discovered they can be closed without much difficulty but we must try to get it off the ground. A similar scheme in America made a magnificient contribution to the development of new high technology industries. In fact many multinationals have expanded through that scheme. A similar scheme is making a great contribution in the UK where the figure involved is higher, £35,000 instead of £25,000. I beg the Government to put that scheme right. It is badly needed. The Government should not say that we do not have any suggestions.
Our only suggestions that are being implemented relate to the reduction in VAT rates. We looked for such changes but the reductions are not to the extent we sought. Nevertheless we welcome any reduction. A simplified VAT system would be welcome. One would think, listening to some people, that the income tax changes amounted to a magical reform of the taxation system. We have had a change in the bands but no reductions. Income tax payers will pay more. I welcome the change in bands but one must consider the miserly allowances being given. Those earning between £5,000 and £10,000 per year will get a reduction of £70 per year in tax. When considering that reduction one must take into account the amount housewives will have to pay for clothes, shoes and the extra money that husbands must pay for petrol. This morning I estimated that single people will be 62p per week better off when all allowances and impositions are taken into consideration. That will not set the world on fire. I accept that at the top rate people will be better off. Some of that is necessary if we are to halt the brain drain from here. I agree with the decision to reduce the 65 per cent rate to 60 per cent. The Coalition increased that rate initially but now that they have done the damage they are reducing it. If it succeeds in stopping some of the brain drain I welcome it. The Government should not try to sell the idea that they have come up with a magical type of tax reform because their moves amount to a change in bands, not reductions. At the end of the year those on PAYE will pay more.
We asked the Government to reduce VAT on newspapers to 5 per cent but the Minister for Finance laughed us out of court. He told us that such a reduction could not be contemplated but six months later he reduced the rate to 10 per cent. I hope the reduction does not change the objectivity of the newspapers. They are under severe pressure from the UK and the reduction in the VAT rates should have been granted a long time ago. The UK newspapers have been squeezing Irish newspapers out of business. In recent years they gained a strong foothold in the Irish market and will not be easily displaced. For two years the Government have not done anything about that industry. In fact they almost allowed the newspapers industry to disintegrate. Our newspapers still have a lot of ground to make up.
The budget does not confront the economic realities that will have to be solved. There is a major backlog in regard to tax. The only excuse for that, which two Minister gave me yesterday on a television programme, was, "They say they are short of staff". It is the duty of the Government to govern and ensure that the revenue is collected on behalf of taxpayers. The discipline imposed on the Revenue Commissioners is imposed by the Government but it can be removed tomorrow. It is good business to employ people to collect money. Last year I said what I would do with the Department of the Public Service. I do not have any hang-up about the Minister for the Public Service but it was wrong of the Government to give it a status it never deserved and build it into a huge pyramid of bureaucracy. It does nothing but stifle endeavours of other Departments. It is a super layer of personnel management. What we are doing with personnel sections in all Departments and a super layer of personnel management in the Department of the Public Service I do not know. If somebody wants to reduce the burden on taxpayers he should start there. Those people should not be asked to reform the rest because they are not able to reform themselves.
It is time the Government looked at new concepts in regard to the Revenue Commissioners. It is time they looked at the method of collecting arrears of taxes and thought in terms of paying incentives for the collection of arrears. Why is it that sheriffs are paid a percentage on their collections while officials in the Revenue Commissioners who could bring in hundreds of millions of pounds to help solve our problems do not get such an incentive?
The Government should think in terms of a new radical approach to this. They should give incentives to officials to deal with the backlog. They should think in terms of self assessments for a trial period to stop the build up of tax assessments. I will not mention the figure of tax assessments because it tends to be blown up out of all proportion but whatever the true figure is the Government should try to find a radical way of dealing with the problem of collection. The people are sick and tired carrying this burden and they want to see action. They want to see something done. Either remove the embargo so that the money can be collected or think in terms of my new suggestions, that is, to give the people an incentive to collect arrears and so on. Let us get on with the job of trying to collect the enormous sums of money which are still outstanding, but I am not putting a figure on them.
I have mentioned the suggestions I thought would move this Government to action and to tackle the major problems facing industry, but I would like now to deal with the development of our natural resources. I am still waiting to hear why the natural gas legislation has not been extended to Limerick, Clonmel, Waterford and Kilkenny. As Minister for Energy, I decided in October 1982 that natural gas should be supplied to those places. I know there was an ideological hang-up between the present Minister for Energy and Deputy Cluskey when he resigned from the Cabinet, but have the places I mentioned to wait two and a half years for this gas as happened to Limerick although Limerick Corporation were prepared to accept the minority statement in 1982? Why are the people and industries of those areas still waiting for cheap energy? Why do they have to wait two and a half years because of the ideological paralysis in the present Government?
We saw what happened because of the mismanagement of the Northern Ireland deal. A sum of £600 million was lost to our taxpayers because of this mismanagement, even as late as November 1983, and because of the bookkeeping and changes that took place in the Department. Why not take this opportunity to bring natural gas to as many areas as possible? This will help industry and gain revenue for the Exchequer. Do this Government not see the opportunities they are turning down? Do they not see that by expanding the gas market they will encourage people to find more gas?
The total lack of confidence of the business community in this Government has begun to spread to the oil community. They looked to this Government to be specific in relation to taxation. The Government met some of their requirements but they did not do enough to encourage exploration in the Irish oil fields. The sooner they realise that the better. We must remember that these people are in competition with United Kingdom firms who have set out their terms. They are far more competitive than we are. It is no wonder the third round had to be postponed until next June.
Those are the areas over which the Minister, Deputy Spring, has responsibility and I hope he will tell us when action will be taken and when there will be relief from the political ideological paralysis that exists over natural gas to Limerick, Clonmel, Waterford and Kilkenny. If a decision is not made soon in Kilkenny and if the private sector are not involved, that project will not be viable. The people there will not wait two and a half years as the people in Limerick did. If it is intended that Kilkenny will get natural gas, now is the time to make that decision.
Natural resource development has been sadly neglected not alone by this Government but by many other Governments. People fail to realise the vast potential that exists. Let us take forestry. If the present Government have the same regrettable experience I had trying to deal with that section of the Department, they will realise how little they know about the outside commercial timber world. Is it any wonder that only 25 per cent of the Irish construction industry's requirements are supplied at home? Yet this decade and next decade all EC countries will be net importers of timber. Our timber resources are in the region of £1½ billion, but are we doing anything to manage or regulate them? I looked at the Estimate for the Department of Forestry — correct me if I am wrong because I am speaking from memory — but I think the amount was in the region of £23 million and of that £17 million will go on administration. Would somebody get his priorities right? Why spend £17 million administering £23 million? This natural resource could make a very big contribution to the development of this country but it is not being properly managed. Take it out of the Civil Service arena and get rid of the present crazy tendering system. Timber is a commodity in the world market and prices fluctuate. We must tailor our tendering system to take account of world prices. If this does not happen we cannot blame the construction industry for importing timber. We must adopt a commercial approach to the development of our timber industry. I regret that this will never be done while our forests remain the responsibility of the Civil Service. This is a different world and civil servants are not geared to run a commercial enterprise.
We appear to be content to let our fisheries be exploited by foreign boats. The Government's commitment to the fishing industry in this budget is not fantastic — £500,000 for harbour development. For a good fishing industry a country must have good port and harbour as well as good handling facilities— and, of course, the right fleet. I realise there were problems with BIM and boat owners, but these problems arose because the people concerned did not tailor their operation to the needs of fishing. There is no point asking fishermen to repay loans on boats at half yearly intervals. What should happen is this: the owners should be asked to pay a certain amount each time they land a catch and sell it through the local co-op. These men were probably expected to make their half yearly repayments at the worst time and they would not have the money with the result that the arrears pile up. This happened to many good fishermen in the past and it is still going on. I ask the Minister to do something about this. The resources of the sea are there to be developed. In any country with a developed fishing industry it has been proved that the ratio of jobs is five to one, and in some cases as high as nine to one. Let it not be said that I do not have confidence in Irish fishermen. In Rossaveal one good man is making five different products out of a herring. This is what I mean when I talk about products and process development.
There is an abundance of talent coming from our universities and regional technical colleges but it is not being harnessed to take advantage of our resources. The State will have to take a stand on this because if they do not make a start nobody will. This is a capital intensive industry. We are neglecting our resources and at the same time reneging on our responsibilities to our young people and to the taxpayers who are helping to educate those young people. All the young people are doing is taking the emigrant ship or walking around in circles wondering what tomorrow will bring. They are the leaders of tomorrow. We owe it to them to sort out our national problems and to stop running away from making the decisions necessary to solve them. We will never be forgiven if we let this crazy situation continue. The national debt is heading for £20 billion and the current budget deficit has become a moveable feast.
No action is being taken by the Government. They lost their opportunity in their first two years of Government. They had correctly analysed the problems before coming to office but then took the easy options of imposing penal taxation which led to closure after closure and thousands of people losing their jobs. We were informed yesterday that there would be radical reforms but, before that is possible, they must undo the damage caused by excessive taxation. They should tell the people that the taxpayer will pay more. This would not be so bad if they could see light at the end of the tunnel but there is no sign that the economy is poised for recovery. If that happened, I should be delighted to admit it here but there is no sign of it.
The Government asked for and were given a mandate to govern despite the fact that they sought to denigrate Fianna Fáil. Their advertisements contained phrases such as "Voting Fianna Fáil will cost you a packet", "The Bill for the Fianna Fáil February budget is now due for payment", "Fianna Fáil proposals for 1983 will cost your family an extra £12 per week", "Petrol up by 15p per gallon", "Bus and train fares up by 25 per cent", "Telephones and stamps up by 20 per cent", "Higher health costs", "Free secondary school buses to be dropped", "Pint up by 12p", "20 cigarettes up by 12p". It is extraordinary to realise that Fine Gael implemented all the above charges during the first couple of months in Government. The Minister for Education, Deputy Hussey, tried to do away with the free school transport, but under pressure she had to change her mind. So much for the honour and integrity of the Fine Gael Party under their whiter than white Leader. We will get the opportunity eventually to take him up on all the commitments he made to the people. There is no way that the Taoiseach or the Minister for Finance, by fiddling around with figures as they did yesterday, can convince anybody that the trend of unemployment has been halted or reserved. There have been increasing redundancies over the last few years and the unemployment figures do not reflect the numbers who have emigrated.
The Minister of State at the Department of the Taoiseach insulted us last week by stating that only 6,000 people had emigrated in the past 12 to 18 months. Last year we had a row over the Central Statistics Office and we were told that they would sort out everything. One of the fundamental principles of economic planning is that you must know the statistics and we do not. What has been done in the Central Statistics Office? I can tell them that about 45,000 people emigrated to America and England over the past two years and if you add that to the 225,000 people unemployed at home, plus the 12,000 people who are not on the register, you get a true picture of the hardship inflicted on families. Can any of us in the House imagine what it would be like if we were out of a job tomorrow, did not have a car and had a family to feed? What effect is this having on young people's morale? When they go to a rugby match in Lansdowne Road they cheer on Ireland to win. They are looking for a leader that they can cheer on for Ireland Limited to win. That is what it is all about. The Taoiseach has not got that quality, he has betrayed the confidence placed in him. I will leave the Minister and the Labour Party to sort out their own problems. Whatever social conscience that party had has been buried on the altar of political expediency. Fine Gael also buried theirs and threw their principles out the window. However, we will live to fight another day.
That was a tremendous finish. Well done, Deputy. I always believe in giving credit for a good performance and that was the old Kentucky Derby all over again. I am inclined to award Deputy Reynolds six marks out of ten for his performance.
That is not bad.
I like to give credit where credit it due. However, his efforts were somewhat misdirected. They were a little bit like Reaganomics — you shoot first and whatever you hit is the target.
One John Wayne in the House is enough.
Deputy Reynolds appeared to make a personal plea to me on three occasions during the past hour and a half not to go back over his party's history and their involvement in Government. I do not want to do that; we should discuss the budget and what is in is for the people and for the economy over the next 12 months. We also have to look at it from a positive point of view in relation to its impact on the economy and I am inclined to wonder where Deputy Reynolds has been recently when he left the country——
I was away for only a week.
He must have visited a shrine because there has been an amazing transformation on a personal basis in relation to what should be done for the country.
He referred to mistakes which had been made and even seemed to be claiming credit for some of them. However, the Deputy must be aware that you cannot walk on both sides of the street at the same time.
The Tánaiste said he would walk on both sides——
The Tánaiste, without interruption, please.
As a colleague of mine once said about the Fianna Fáil leader, it is like trying to ride two horses at the same time, you are bound to fall in between them. The Deputy cannot have it both ways and should face up to the economic realities which the Government have had to face up to over the last two years.
The general framework for the 1985 budget was set by the decisions in the national plan Building on Reality. An increase in employment, a stabilisation of the overall tax burden, the protection of the disadvantaged and those relying on social welfare, and the maintenance of our basic system of public services in areas such as housing, health and education were basic objectives of the plan. The budget reflects major concern with these issues, with incentives for employment and with a simplification and restructuring of the tax systems which will favour employment and enterprise.
Most people are already aware, and the national plan itself recognised, that 1985 would be a difficult year financially. High interest rates on domestic and foreign debt will absorb almost £300 million more in mandatory expenditure. The budgetary options are difficult and limited and will continue to be so in the years ahead. Economic reality means that there can be no instant solutions and the Government are determined to avoid bogus remedies. There is no merit, in the budget debate or elsewhere, in holding expensive political auctions or in lengthy lists of hapless political promises. The choices open in 1977 or indeed in 1973 are not now available to any party in this House.
Unemployment, and the misery and hardship it brings for so many people, is the most critical issue facing both the Government and the nation as a whole. Budgetary and financial targets generally have all to be seen in that context. Indeed, it was well recognised in the Programme for Government that the question of the budget deficit would fall to be tackled in the context of due regard to prevailing economic conditions and in particular to the importance of achieving economic growth and dealing with unemployment.
In fact, while the broad overall budgetary targets were met in 1983 and, indeed, exceeded in 1984, it was evident during the prepartation of the national plan that the phasing out of the current budget deficit by 1987 was neither possible nor desirable in terms of public expenditure cuts or increased taxation. It would be excessively deflationary and have severe adverse effects on employment.
During the last two years, the Government have been criticised at different times for being over-concerned with "book-keeping" or "balancing the books" rather than with the problems and difficulties of ordinary people in everyday life.
The facts have never sustained this line of argument either in the past or in terms of the decisions made in the 1985 budget. The truth is that the planned level of the current budget deficit at 7.9 per cent of GNP and of the Exchequer borrowing requirement at 13 per cent are at their maximum practical level. The budget, considered as a package of measures, is designed to promote enterprise and employment and protect the living standards of those on low incomes or in receipt of social welfare payments to the maximum extent possible.
Budgetary policy is one major instrument in seeking employment creation, improved living standards and the advancement of equity and justice. None of these objectives is ensured by a mere "balancing of books" for its own sake. However, the careful planning of the public finances is still of major importance — there will continue to be major constraints and limitations on policy. These arise from the accumulated debt arising from past borrowing both domestic and foreign and the need to service that debt, from the size and scope of the major public expenditure programmes and from the necessity to halt the overall growth in the level of taxation. There is no room for indiscriminate additions to public expenditure. The Government are determined to ensure that the people can continue to exercise choice and discretion on the way we shape our society and to prevent control from external sources over the policy decisions that are proper to us as an independent State.
The Government have indeed been also criticised for not taking more severe action on the public expenditure side. Some commentators and interest groups demand expenditure cuts on a general basis, without specifying the services and activities which would cease. Others have been specific on where cuts should fall. Normally, of course, the direction favoured for cuts has not been an area of public expenditure where the particular interest group or lobby is itself involved, and, at least by implication, is often aimed at services in the areas of welfare, health and other areas vital to the poor and disadvantaged. The Government, however, will not trade tax cuts for wrong and socially damaging types of public expenditure reductions.
Before speaking on specific aspects of the budget, I wish to refer to some of the general economic facts and issues which formed the background to both the national plan and the budget. Employment declined by some 40,000 between 1980 and 1984. At the same time, the labour force was growing rapidly and the combined effects of recession and the state of the national finances constrained the policies that could be followed. Unemployment, therefore, as we all know, doubled. However, in 1984, because of a slowdown in employment loss the rise in unemployment was much smaller than in either 1983 or 1982. There was an increase of 17,400 on the end-December unemployment total in 1984 over end-December 1983, compared with 28,100 in 1983 and 38,000 in 1982.
The measures in the national plan, other decisions by the Government in the last two years, and the initiatives in the budget are aimed at halting and eventually reversing the upward trend of unemployment. The first task is to get overall employment rising again, and the Government are confident that this will be achieved. Experience in other countries of the European Community, whether they are ruled by governments of the right, left, or centre show us that there are no easy remedies and no painless solutions to the unemployment crisis. The Government are determined to avoid bogus optimism; the measures in the plan and in the budget are based on realism and offer a measure of hope that as a society we can gradually, but decisively, again increase the number of our people at work and begin to grapple with the problems of economic and social organisation of the last decade and a half of this century.
However, neither the proposals in the plan nor in a single budget represents a long term solution to our economic problems or the ills of society generally. Although a significant increase in employment is expected between now and 1987, there is no way that an unemployment outcome of the magnitude foreseen could represent a solution to my party or indeed, I am sure, to the other parties in this House. The task of economic reconstruction, which must be accompanied by social equity, is a task for a decade or more. Each budget must aim to get the policies and priorities in place that the situation demands in the short term. Real long term choices for our society will then emerge in a rational way and will be put to the people at an appropriate time in the years ahead.
In 1984, progress was made on many fronts. In 1982, inflation averaged 17 per cent and in 1983 10 per cent. However, the average rate of increase in consumer prices in 1984 was 8 per cent — from end November 1983 to end November 1984 the rise was only 6.7 per cent and the trend is downward. This has been of major importance to those on fixed incomes, to those on social welfare benefits who have been kept ahead of the inflation rate, and to those in the PAYE sector who in recent years were subject to a sharply growing tax burden and a sharp reduction in disposable income. With inflation lower, with the international outlook moderately favourable, and with the continuing recovery in economic activity and the pay developments that are emerging, there should be a rise in 1985 in aggregate real personal disposable income.
A further improvement occurred in the balance of payments in 1984 — the current account deficit is estimated to have improved from over 6 per cent of GNP in 1983 to about 5 per cent in 1984, which is very far below the crisis level of 15 per cent of GNP in 1981. The trade deficit has narrowed, earnings from tourism improved and despite the increase in interest charges and outflows of factor income, the balance of payments deficit on current account should improve further in 1985 in keeping with the aims of bringing it down to a sustainable level. In fact, the value of exports of goods and services may in 1985 exceed the cost of such imports. There was a very strong export performance in 1984. The increase is estimated at about 15 per cent in volume, with industrial exports rising by about 18 per cent, reflecting widespread increases, even in some of the traditional areas and major buoyancy in newer sectors such as electronics and chemicals. In fact, manufacturing output growth in 1984 was substantial by any standards— in the first nine months of the year it was 12 per cent higher than in the same period in 1983.
Overall gross domestic product in 1984 is likely to have risen by about 3½ per cent with GNP rising by about 2 per cent. These developments in 1984 occurred against the background of the best performance in the international economy for some years with output in the OECD area as a whole expanding by about 4¾ per cent and with growth in the US economy close to 7 per cent. Growth in the EC was lower at about 2¼ per cent on average, and in the EC the continued rise in the labour force caused a rise in the unemployment rate to 11 per cent or 12 million persons. World trade increased sharply by about 9 per cent in volume. All in all, for 1985, the international outlook is moderately favourable and, while growth is likely to be slower in the US world trade and Irish export markets are likely to continue to expand. Many of the measures in the budget should reinforce the prospects for growth in the economy in 1985.
I want to refer briefly now to some of the reaction to the budget and to dwell at some length on the reaction of the Opposition. First, I would like to refer to the reaction of the Irish Congress of Trade Unions. Nowhere in their comments did I find any reference to the proposals made by the Government in relation to public service pay, proposals which I would have thought they would find very welcome. What these proposals mean, among other things, is that the Government recognise the importance and validity of the recommendations made by the conciliation and arbitration scheme. In this I think it fair to say that we ought to be seen as sharing ground with the Irish Congress of Trade Unions.
The second comment made related to an alleged reduction in social welfare benefits. They must be aware that what we have done is to ensure that all such benefits at least match inflation over the period they are intended to cover. No other country in western Europe — even countries that have socialists in control of Government — can make that claim. We can make it in respect of last year and the previous year, and we have made that absolute commitment for the next three years.
In so far as jobs are concerned, there is simply no basis on which it can be argued that this budget is bad for jobs. The various measures designed to stimulate activity in our economy, coupled with the specific proposals already announced in the national plan, can only be good for jobs.
I turn now briefly to the reaction of the Irish Banks Standing Committee, and in particular the disappointment they have expressed in relation to the continuing bank levy. I have defended the bank levy previously as a relatively modest contribution, and I find it impossible to agree that, given the constraints within which our economy must operate, there is any sensible case for repealing the levy.
The Irish Farmers' Association have criticised the Government for not curbing public expenditure more. This is a remarkable comment from an organisation whose members benefit more from public expenditure, particularly by reference to the very small contribution they make in return, than any other sector. For several years now they have advocated a tough line in relation to public expenditure, to all public expenditure, that is, except the grants, subsidies, incentives, aids and other resources, including manpower, that are devoted to them and to their industry. When I hear a farmers' leader suggesting that in order to cut public expenditure he will advocate the removal of a subsidy to the farming industry, I will take that sort of comment seriously.
I want to turn now to the reaction of the Deputies opposite. For a number of years, they have relied on the sneering use of phrases like "fiscal rectitude" and "book-keeping" to dismiss any proposals from this Government. Coming from some of the most creative book-keepers this country has ever had the misfortune to see. I have always regarded these phrases as something of a compliment. What they have represented is the envy of people who see things happening that they have never been able to make happen themselves. The principal thing they have never been able to achieve, of course, is that they have never been able to set a target and then reach it. Part of the reason for that is that it is difficult to reach targets that you have plucked out of the air with one hand while you kept the fingers of the other firmly crossed behind your back.
When you belong to the Fianna Fáil college of economic management, the first golden rule you have to accept is that the only target worth aiming at is first preference votes. In case any Deputies are wondering at the possible connection between economic management and votes, let me tell them that the connection is to be found in the second golden rule, which says that anything that gets in the way of the first golden rule must be twisted and subverted until the overriding principle of "votes above all else" is preeminent again.
It was these golden rules which gave us the Government that cooked the books in 1981. It is these that gave us the Government of all the promises in by-election after by-election. These same golden rules gave us the on-again, off-again Way Forward. These rules have lately given us an Opposition who are prepared to reopen everything that is closed, to abolish every charge imposed, to meet every demand with a promise. In this situation one can only come to expect the entirely predictable reaction. No tax cut will be large enough; no social welfare increase will meet the need; no job creation effort will be adequate; no reform of VAT will be fair.
I am sad in a way that Fianna Fáil have not disappointed us on this occasion. In my political innocence I had hoped that perhaps just once we would have had a constructive reaction. Obviously I was expecting too much but I had hoped that, in the interest of the people, for once we would have had a constructive reaction. I had hoped that the Opposition were prepared to work with us in rebuilding hope and confidence in our economy.
When Oscar Wilde said that a cynic is one who knows the price of everything and the value of nothing, he might well have had Fianna Fáil in mind. There is no price they are not prepared to pay for power but its value means nothing to them. It is an end in itself and that is why they will respond so cynically and predictably to everything positive attempted by this Government.
For the past 90 minutes we have listened to Deputy Reynolds. He went through the budget and the direction it is taking virtually apologising that he could not give any credit despite the fact that in a half-hearted way he admitted that some sectors of Irish industry in which he is involved will benefit from measures in the budget. However, he could not see it in his own interest or in the best interests of the people he represents to look at the budget in a positive manner in relation to the contribution it will make to this country in the next 12 months. It is regrettable that Deputy Reynolds who is the Opposition spokesman on Energy and who is a very capable Deputy could not look at the positive side. I accept that perhaps there would be a different budget if his party were in Government or if the parties in Government were in office on their own, but it is regrettable that Deputy Reynolds could not look at the positive side of the budget in relation to the direction it is setting for the economic growth and development of this country over the next 12 months. We on this side of the House may safely leave Fianna Fáil to their own devices, secure in the knowledge that they will never develop any coherent or credible approach to the problems of this country.
In the national plan the Government gave a clear commitment to policy measures aimed at halting the escalation of the overall tax burden. As a proportion of GNP taxation has more than doubled since 1960, and since 1979 the increase has been from just 27 per cent to over 36 per cent of GNP. Reform of the system and a fairer distribution of the impact of taxation is obviously necessary.
Therefore, as regards income tax, the reduction in the number of tax rates to three — 35 per cent, 48 per cent and 60 per cent, the substantial widening of the 35 per cent tax band, the increases in personal and other allowances, and the abolition of the present top rate, which it was necessary to introduce in the 1983 budget but which bears heavily on single people with comparatively modest incomes, represent a serious start in the task of reform. The system will be simpler and will be favourable to the growth of employment and output. The 35 per cent band will be widened by 12½ per cent to £4,500 for single people and £9,000 for married couples, and this will mean that some 65,000 taxpayers now paying at the 45 per cent marginal rate will experience a reduction in their marginal rate to 35 per cent. This will involve a fall of one-sixth in the number of people paying tax at the higher rates.
General exemption limits, which have been raised in the last two budgets, are now increased by 6 per cent from £2,500 to £2,650 for single people and from £5,000 to £5,300 for married couples. In addition, age exemption limits are being increased by £200. As a continuation of the policy initiated last year of exempting those on the lowest incomes from the income levy, the exemption is being raised to £5,300 a year. A number of secondary allowances will be increased. The allowance available where a person is employed to take care of an incapacitated taxpayer or taxpayer's spouse will be raised by 25 per cent from £2,000 to £2,500; the incapacitated child allowance, the blind allowance; and the ceiling on relief of rent paid by older persons will all be increased, and the age limit for eligibility for rent relief reduced from 60 to 55 years.
There has been a major reform of value-added tax in the budget. It was widely recognised that there were too many rates. The top rates were high because a wide range of goods were zero-rated or liable at a low rate. However, it was recognised in the national plan that while a single rate of VAT of about 15 per cent would achieve the same yield as at present, it could not be adopted because it would require VAT at that level on all food items. The ensuing increase in prices would not be acceptable.
In coming to conclusions on what action was appropriate now in the restructuring of the VAT system a number of factors had to be taken into account, including the diversion of trade to Northern Ireland, particularly with items taxed at 35 per cent; the likelihood that a smaller number of rates would reduce the costs of compliance and administration; and the proportion of income spent by the better off and the lower income groups on various items. This is an important factor in relation to most key food items and electricity where those on low incomes spend proportionally more. Also included are the likely favourable direct effect on employment — for example, in tourism following a reduction in tax — and the extent to which demand for the items due to the change in price arising from the change in tax is likely to affect the revenue yield.
It is important to consider the VAT changes as a whole and to refer to some of the compensatory measures that have been taken to counteract certain increases in the rate of tax. The reduction in the 35 per cent rate to 23 per cent should provide a significant boost in output and employment across a wide range of activity. The reduction from 23 per cent to 10 per cent for newspapers and from 18 per cent to 10 per cent in hotel accommodation, short-term car, caravan and boat hire will be of significant assistance to these important areas of employment.
A number of measures will be implemented to reduce the effect on the building industry of the increase in the rate of VAT. The grant for first time owner occupiers of new houses is being increased by 75 per cent from £1,000 to £1,750 through a £5 million increase in the public capital programme. Extra money is being provided for fishery harbour development works, and VAT on concrete blocks is being reduced from 23 per cent to 10 per cent.
It is necessary also to take into account the measures contained in the national plan and decisions taken earlier. Expenditure on road construction will rise sharply by £23 million in 1984. Although State expenditure on improvement and maintenance of roads has increased substantially in recent years it has fallen short of the level projected in the 1979 road development plan by 17 per cent. In the national plan the Government made a substantial commitment to the roads programme. The Government have in fact given a high priority to road improvements, providing for substantial increases each year between 1985 and 1987, bringing the provision for 1987 to £155 million, or 53 per cent greater than that provided in 1984. The total provision for the period will not only match but exceed by 10 per cent the amount envisaged for the period in the 1979 road plan. There is, therefore, a firm medium term commitment for State investment in roads at a level far in excess of anything previously achieved. It will enable the most ambitious roads programme ever undertaken to get underway immediately. Of the total Vote provision of £152.5 million for 1985, £125 million will be spent on road improvement projects — an increase of 23 per cent on last year's provision.
In this area it is of major importance that the local authorities who are primarily concerned with road improvement and development are now in a position to bring forward their planning and programmes without undue delay, knowing that the resources have been allocated to the Department of the Environment to match the demand and allow the programmes to commence without delay, so that the Government's own programme would be implemented and be very evident in increased mileage and an increasing standard of national primary roads before 1987. The commitment will be continued and developed to bring our road network up to the standard common throughout the EC.
Expenditure on educational building will increase by 17 per cent in 1984. In addition, the new £5,000 grant for local authority tenant and tenant purchasers who give up their houses and who acquire a private house, the continuation of the various mortgage interest reliefs, the continuous high level of local authority housebuilding, the improved expectation for investment generally will all help to sustain the construction industry in the year ahead.
To counteract the increase in VAT on fuels, apart from electricity which is still zero-rated, the value of the weekly fuel voucher currently at £4 will be increased to £5 from the start of the next heating season, which is October.
All in all, it is my belief and the belief of the Government that the VAT changes represent a significant reform. They will mean a reduction in evasion, will be helpful in many areas to employment creation, and will contribute to simpler and more efficient tax administration. Judgeing from the reaction of the people and of the experts in the area of taxation, the improvements in the VAT system are seen to be innovative and are expected to make a major contribution to those areas of the economy I have mentioned during 1985 and in the future.
There was a definite commitment in the Programme for Government and in the national plan to keep long term social welfare payments in line with inflation and short term unemployment and disability benefits in line with take-home pay. This commitment has been honoured and will continue to be honoured for the lifetime of this Government. Social welfare transfers have increased from 9½ per cent of GNP in 1977 to about 14 per cent by 1984. Much of this increase is attributable to the major increase in the number of unemployed, the increasing number of pensioners and other beneficiaries and the real increase in benefit rates in recent years.
The increase in rates announced yesterday will take effect in July. It must be remembered that the deferral of the timing of increases to a mid-year date in 1983 followed on from a 25 per cent increase granted in April 1982, originally sponsored by Deputy Eileen Desmond as Minister for Social Welfare, which more than compensated for inflation in that 15 month period.
In addition to the basic increases of 6½ per cent and 6 per cent social welfare rates, a number of further measures will be implemented. The weekly amounts of income which determine entitlements under the family income supplement will be increased from next July, and as a first step in the extension of social insurance treatment benefits to all non-working wives of fully-insured persons, dental, optical, and aural benefits will be made available to all pregnant women whose husbands are fully insured. Legislation has been prepared to establish a new antipoverty agency to be named the Combat Poverty Agency.
No one can be happy with the extent of poverty in our society, with the absolute level of benefits paid in many cases, or with the many anomalies in the social welfare system. However, given the constraint on resources, the increase in payment in recent years and in the budget compare very well with the rest of Europe. In this context, the report of the Commission on Social Welfare should be of major importance to the future evolution of the social services generally.
I turn now to a matter directly related to my own Department. The House will be aware of concern expressed by Members, by industrialists, by many other commentators and, indeed, aware too of the comment made in the Report of the Inquiry into Electricity Prices, published recently, on the high level of electricity prices to industrial users in Ireland. The report is under consideration by both the ESB and my Department, with a view to action on its many recommendations. I have, as a first step, had a look at the possibility that a further natural gas allocation to the ESB in 1985 might assist in stabilising or reducing prices.
After consultation with the ESB and BGE, and subject to the assurance of both for full collaboration with each other as to any constraints that might arise on peak supply or peak use situations, on rare occasions, I have decided to grant the ESB during 1985 an additional allocation of 15 million cubic feet a day. In consequence, the ESB expect to realise a saving on fuel cost of something over £10 million and the ESB will apply this to the reduction of electricity tariffs for industrial users. The reductions will range from 2 per cent for the smaller to 6 per cent for the larger users in the ESB's maximum demand customer category. I know that at the lower end this reduction is modest, but in these times of extreme difficulty a 6 per cent reduction is a worthwhile step in the right direction. It is my hope that it will help in a worthwhile way to protect existing jobs and to create new ones.
I am heartened also to note an upturn in the demand for electricity which, if sustained, should also be a contributory factor in an improvement of the ESB's situation. The board of the ESB will announce the implementation of the price reductions in the near future.
Deputy Reynolds went on a wide-ranging tour of the natural resources area. He mentioned the development of natural gas and the expansion of the national gas grid. I assure him that plans are being finalised for the expansion of the grid to cities such as Limerick, Waterford and other areas and that there will be no delay in respect of having developments of these projects executed as quickly as possible.
Of course we will be looking for the same high standards as those which apply to the development of the Cork-Dublin pipeline which was completed within budget and within time and which was one of the most successful major projects of that nature ever to be undertaken in this State. It was very well managed by BGE. That is the sort of standard we will be expecting in respect of the future development of the national gas grid. My main concern is to ensure that this very valuable natural resource which belongs rightly to the people will be used in a manner that is of benefit to all taxpayers and other citizens.
In my absence Deputy Reynolds alleged that there was mismanagement in respect of the Northern Ireland gas deal. I have clarified to the House that there was no mismanagement either on the part of my Ministry or of the Department in relation to matters totally outside the control of this Government in respect of the Northern Ireland gas deal.
Regarding oil exploration, a decision was reached concerning the deferral of the third round. That was right and proper given that the Minister for Finance was about to make his announcement in relation to the taxation of that industry. That announcement has enhanced the prospects for the third licensing round which will take place in June.
We can have an air of cautious optimism in relation to the development of our offshore, an area that is still relatively unexplored. I will be ensuring that commitments for 1985 will be in keeping with the drilling commitments of the past number of years. I am looking forward to a successful third licensing round. One of the main criteria in this area is the question of attracting more exploration. Unless we have more advanced and detailed drilling we will not be in a position to bring forward our offshore oil exploration programme which is of vital importance.
In Government, during the process that led to this budget, my fellow Labour Minister and I adopted the view that in the short term, with all of the short term considerations we had to face, what was needed was a stimulus to activity in the economy. Such a stimulus, we believed, would begin a process of restoring confidence among investors, incentives for people with managerial and creative skills, and demand for goods and services among consumers. These are in many ways the ingredients of hope for our unemployed.
In a mixed economy like ours, those ingredients are essential. With more resources at our command, it would perhaps have been possible to intervene in a more direct way in the job-creation process, or even to reflate the economy more, leading indirectly to greater numbers of jobs. With the limited resources available to us, I am satisfied that it was right to spread them as we did, always bearing in mind what has been the chief imperative for us in the last two years, namely the protection of the least well-off.
I have no hesitation in saying that we have participated fully in, and subscribe fully to, the decisions presented to this House in the budget.
Having said that, I accept fully that this is not what might be called a socialist budget. One of our aims in taxation reform has been, and will continue to be, the spreading of the burden more fairly, by way of capital taxation and other measures. This Government have committed themselves in the national plan and in the Programme for Government, to increasing the yield from capital taxation, and the attainment of the objective will remain for me a high priority. Justice in taxation will not be served fully until it is brought about.
In other ways, this Government have made such progress towards equity and justice in taxation. Many legislative changes have been effected to help stamp out evasion and avoidance. More has been done in this area, in a legislative sense, than by any previous Government. In this context, the announcement that the Minister for Finance is setting up a working group to advise him urgently on ways and means of improving collection and enforcement is particularly to be welcomed.
It was rather strange to hear Deputy Reynolds remarking on the Revenue Commissioners and on the Departments involved in the collection of taxation. One would have been inclined to think that Deputy Reynolds had just dropped into the political system within the last few months and that he was not familiar with the difficulties that are experienced in relation to tax collection. It is important that there is a positive direction throughout the budget and in the area of taxation. The Minister for Finance's announcement is positive and should be welcomed by all Members of the House. The due amount of tax must be seen to be collected. The collection of tax has been an irritant to many people but the irritation is not well based when we consider the amounts of tax avoidance. The figures speak for themselves in relation to the amounts of taxation which have not been collected in the past. There will always be situations where taxpayers will have difficulties and in that context the human element must come to the forefront so that the Government's attitude will be responsible and will take account of problems in manufacturing industry at times so that repayment periods can be extended. Common sense will always prevail in relation to the question of the collection of taxation.
The Tánaiste has 10 minutes left.
In relation to the collection of taxation I will be asking my Parliamentary Party — and I hope we can consult also with the trade union movement — to place their views, experience, and expertise at the disposal of such a working group, with a view to contributing towards their work and highlighting the priority we attach to this area. 1985 is the first year in which we will see the publication of a list of the names of tax evaders who have been caught. I would hope that this measure, and further ones which may be developed, will have a very significant impact on the collection of tax revenue.
Of course, the budget is not the only item to which we will be devoting our energies during the coming period. The Minister for the Environment has already announced both a major programme for roads development and a very significant measure of local government reform. The Minister for Health and Social Welfare will be introducing measures of important social significance, including the first of a series of Bills relating to children, which is now being drafted following its approval by Government. The Minister for Labour will shortly be announcing the details of the social employment schemes, aimed at providing opportunities for those out of work and in many cases the pathway back to a permanent job.
Other Ministers will be bringing forward legislative proposals, in line with the commitments the Government have made to address the major economic and social issues of the day. This House will shortly debate legislation on a wide variety of critical topics. Among them the Bill dealing with the establishment of the National Development Corporation will bring to fruition the commitments made by Fine Gael and the Labour Party in the Programme for Government.
As the Minister for Finance said yesterday, 1985 will be a year of opportunity. It will also be a year of challenge — the targets to be met are not just financial ones, but social and economic as well.
I have been disappointed at the response from the opposing benches. In the course of the last few years we have constantly debated the size of the problem facing us. We all agree on the size of the problem facing us. We obviously put different emphases in relation to the solutions but the Opposition have a major role to play. A Member of this Government will never accuse the Opposition in their opposition to legislation as long as that opposition is constructive and is set out to make this a better place in which to live. That is what I am asking the Opposition for in relation to the analysis of this budget. I did not envy the difficulty facing the Opposition spokesman on Finance when he rose following the delivery of the budget. It is obviously a very difficult task to respond immediately, as the response has to be made on the basis of a preparation which may not be directed at the budget which has been delivered.
The Opposition, no less than the Ministers and Government Deputies, have responsibility. We have been charged by the electorate with the responsibility of giving this country the hope which it needs for the future and I believe that this budget of 30 January 1985 is the start in relation to the country's fighting back. Some commentators, quite unjustifiably, have described it as hardship over the last two years, but harsh decisions had to be taken. I have said that the path forward is indeed a thorny one, but one which we have to face up to in a realistic manner. We as a Government, in the publication of the national plan in 1984 and in this budget, which has come through unscathed despite economic pressures have come very close, given the overall macroeconomic situation, to the target set in the national plan. I believe we are accepting the responsibility placed upon us and that we and the Irish people will respond in a positive manner.
In conclusion, the main, positive element of this administration, unlike the previous administration, is that it knows what the targets are, and this Government will meet them all.
Hear, hear.
I shall come back later to some of the points made by the Tánaiste and some advocated from this side of the House. However, first I want to remind the Minister and his colleagues that on the day his Government came into power and on the occasion of their first budget on 9 February 1983 the Minister for Finance set himself three objectives as follows, and I quote from the Official Report, Vol. 339, No. 11, Col. 1469:
— to reduce the overall Exchequer borrowing requirement;
— to reduce and control the current budget deficit;
— to minimise the effects of recession and of the necessary adjustment policies on the low-paid and on those on low incomes generally;
In column 1472 he said:
In our Programme for Government we are committed to achieving economic growth and higher employment, while exercising a disciplined financial management and placing special emphasis on competitiveness. This is a difficult target, but the measures which I will introduce today are the first step on the road to genuine progress. This policy will require that we bring about a gradual improvement in the State's finances and eliminate the current budget deficit on a phased basis between now and 1987.
In the first few speeches to this budget by Government representatives and their spokesmen they continue to say, two years on, that this is the start, the Programme of Government and the line they are now going to follow to correct all that has gone before, as if they are not the people who have been in Government during the last two years. One thing which I will admit from these Opposition benches, as I did last October, is that these advisers or "handlers united" do an extremely good job on the day. They managed to put across the perception — and in politics, unfortunately, a lot of the time is not about honesty but about perceptions — that the Government have come back into power after being out of it and are now starting to rectify the mess that somebody else left behind.
They did this in the national plan in October and then fell back for the following three months into their old ways. They were being hammered by opinion polls, decimated by every organisation that had an interest in the economy or in social legislation or agriculture. They came back yesterday with a well-presented document. In journalistic terms, it was well written. It was not the usual 150 pages on budget day, with the first 75 on the state of the nation, about deficits in previous years and the policies of the Central Bank and industrial guidelines. At page 75 you usually come to the part of the speech for which Minister Bruton was a victim, and he knows what I mean.
I write my own speeches.
The Minister certainly did not write the one that brought down the Government and I am sure if he had done, he would not have——
All the wording was my own. The decisions were the Government's.
The Minister has been regretting it ever since. Yesterday we had a two page crispy summary of seven or eight points which did make sense. We on this side of the House accept that the rationalisation of VAT rates and of the tax bands is helpful. There is no argument about that. We have been advocating, for almost the past two years that if we are to get any where we must streamline our whole tax structure and get away from the complicated bureaucracy which we have been following for some time. On the third year of this Government in office, they are claiming to be starting such a process. Many items eliminated yesterday were brought in by them in the last two budgets by the same Minister. From the point of view that he now understands that he was wrong in the previous years and was not achieving what he had set out to achieve, that is, to eliminate the current budget deficit or reduce the national debt and to reduce rather than increase, as they did, by 55,000 the unemployed — 40,000 directly related to the policies he was pursuing and the rest through decreases in the workforce — we welcome that he saw the light. However, it is little bit much for the Opposition to be asked to give credit for the rectifying of mistakes which that same person made. It was not even another member of the Cabinet who was responsible.
It is to be welcomed that there is now a marginally more streamlined and rational tax system than there was a few days ago and that VAT is now a little more sensible in that we have not so many different rates and that it is a bit more manageable and easier for business people, in particular in small businesses. They do not go far enough and there is much more to be achieved. I accept that it could not all have been done yesterday, but yesterday was the third budget of the Minister. On the law of averages he has one budget left. He has now not a hope, as he knows himself, of eliminating any current budget deficit. It was increased yesterday by £200 million. We got doses of the national debt daily in 1981 and into 1982 and it is now £18 billion. I do not think that is mentioned in the 50 pages read out yesterday or in any of the programmes put out last night. But from some of the economic commentators people would believe that in some way the Minister had eliminated the debt with the few gimmicky things he brought in yesterday.
Last week in the debate on unemployment there was a general acceptance that that is the key issue. All documents and statements inside and outside this House on that subject agreed on that. The National, Economic and Social Council report, which came out last week, stated that, given the universal agreement that unemployment is the most serious national problem, the ultimate criterion against which the national plan should be evaluated is the extent to which it confronts the problem of unemployment. Yesterday's budget is the first budget to implement the three year national plan. Seriously, what did that budget do?
A great deal.
The Minister will have an opportunity to speak later on. He should try not to interrupt.
We are to have no interruptions.
His conscience gets at the Minister. It is, indeed, a budget which does absolutely nothing, with one exception. It will create jobs in the tourist industry in our hotels if they go out and sell their goods quickly in the United States and elsewhere.
Hear, hear.
I accept that, but it is a tiny area when we consider the overall problem of 225,000 registered as unemployed. There are 16,000 more who are not entitled to be on that register and emigration is rising steadily. I understand the difficulties of too much being said in this House for people who are emigrating illegally vis-á-vis the various embassies. Perhaps some things said last week were not helpful in this respect. Without going into figures there is an acceptance by the Government and the Central Statistics Office — though they wish to keep it hidden — that emigration is now at a frightening level.
In a small way yesterday's budget may help to stimulate one or two industries but that is not the reason they were included in yesterday's budget. Rather it was to prevent loss of revenue from this State. The proposed changes in VAT rates on electrical goods and in the rates of VAT applicable generally are primarily to prevent the massive leakages the Department of Finance have picked up in the last 12 months. This party in the autumn of 1983 first advocated selective cuts in VAT along with some policy changes in order to keep revenue in this country. That is why those changes were proposed yesterday, not to create employment. Perhaps those measures will save 1,500 jobs in the electrical sector which were at risk. If they do, that is to be welcomed. The VAT concessions to the tourist industry are also to be welcomed.
In the remainder of the budget there were no measures announced to stimulate employment. There were no details given of the social employment scheme about which you, a Cheann Comhairle, will remember you had a difficult morning here in mid December endeavouring to control people on this side of the House. We had been given an assurance that the scheme would be announced on that morning, the assurance having been given by the Minister for Health and Minister for Social Welfare. It was to be announced by the Minister for Labour. That was some six weeks ago. Yet we have been given no details. There is no social employment scheme ready to be launched, no jobs even though they be part time only — not sustainable longer than 12 months. There is no scheme in operation and the National Manpower Service have done absolutely nothing about it.
The Department of Labour have helped to prepare the speech of the Minister for Labour which I hear he will make next week but, meanwhile there are no jobs, no scheme and no details thereof. I said I supported that scheme on the basis that it would provide jobs, though not sustainable, they being better than nothing. I plead with the Minister to introduce that scheme. As Minister for Labour he has done absolutely nothing. It is his duty, with the aid of the Youth Employment Agency, AnCO, CERT and all the other agencies — costing this State a small fortune, a huge allocation of 44 per cent in the 1984 outturn and in their estimate for this year — to produce jobs. One must ask: what jobs have they produced, what job creation programmes are in existence? There are in existence a few incentive allowance schemes, with grants to individuals who want to establish small industries, which is having no effect.
The main priority of this economy, budget, national plan, programme of Government and everything else is to create employment. This time next year, when we look back on 1985, when we ask ourselves: did the measures introduced in the January 1985 Budget help, clearly the answer will be no. It will protect a few jobs that might go otherwise but it will not prevent firms like Clarks of Dundalk from going to the wall or indeed any of the other companies that have closed down in the last five or six weeks. There are no measures in the budget to prevent that. In fact there are a number of measures in it which will help in the opposite direction.
The building societies consider their increased composite tax to be penal. They have said that probably it will lead to a 1½ per cent increase in mortgages which will amount to something in the region of £21.40 at the lower end of the scale.
Then there is the VAT on the construction industry rising from 5 per cent to 10 per cent with an extra £750 grant for first time buyers of new houses which seemed a good idea yesterday until it was scrutinised by people with the necessary information, who know exactly what are the many components of a house. These people have calculated that on a £30,000 house the imposition will amount to an additional £1,500 and that there is no way that can be clawed back. It should be remembered that the increased grant will not help people buying second-hand houses, the industry or people in small houses wanting to move to larger ones. Effectively the whole of the property market, already in shreds is near total elimination. With regard to local authority houses one can hazard a guess that there will be a decline in the numbers built or that their standards will drop, this in a construction industry with already 45,000 people unemployed.
Why that industry should be picked out to be savaged I do not understand because it has proved an obvious area over the years to stimulate employment and, thereby, the economy. It should be remembered that a house is not built of cement blocks only, as perhaps somebody advised the Minister when he zero-rated them. All the components that go into the construction of a house have a roll-on effect in the industry, in turn, leading to the construction of thousands of jobs. In the last decade probably something in the region of 60,000 jobs have been lost in this industry. On several occasions in the last year or two this party have advanced the positive benefits of this industry for our economy which had been totally ignored. More tax is imposed on them, as on the building societies, with no incentive being given to one of our largest industries. If it is contended that this budget will do something for employment all that can be argued is that it has done something for a few tiny sections of that industry linked directly to saving leakages from the revenue of the Department of Finance. Some people like the Tánaiste may contend that it is a case of sour grapes, that Fianna Fáil have been disappointed. I might add that I am not happy that there are 225,000 people unemployed.
The suggestions of the Tánaiste that this party appear to be disappointed in some way because something has been achieved in a few areas is ludicrous. If the Minister thinks that the few paltry things he did yesterday will have any effect on the thousands of people about whom he cried crocodile tears when he spoke of unemployment and the misery and hardship it brings so many people, then he is gravely mistaken. What has he done about that hardship and misery? He has done nothing and it will be exacerbated further this year with more closures, with small suppliers of the construction industry and ancillary services closing down. There is no doubt about that. No doubt the Department have been inundated this morning with inquiries from the construction industry now that they will have had an opportunity of assessing its effects, when it will have become obvious that this budget will create further unemployment. Perhaps the Minister will see that further impositions on the construction industry were an error on his part, whatever about his going after the building societies, and he made some fairly snide remarks about them. He should remember that they do provide a good service to thousands of people to continue the tradition of home ownership. I would not put it past him checking on depositors in building societies, ruining them as he has done so many other things and, in this latest imposition, he has gone somewhat in that direction.
In 1983 this Government said they would maintain the level of welfare increases. They have forecast the inflation rate for 1985 at 6 per cent and have given exactly the same rate of welfare increase to the unemployed, the people who are suffering most from the results of this recession, who are taking the main brunt of the hardship. There is now to be an increased rate of VAT on clothing. Already food subsidies have been reduced in respect of which there has been no compensation. Anybody who has observed the operation of the family income supplement scheme will realise how stupid it is, including this Government who now propose incorporating it in the child benefit allowance. The 6 per cent is derisory. It does not take into account the increase in the price of coal last week. It probably does take into account the increase in VAT on the price of coal. I was told yesterday that the price of a bag of coal costing £6.50 is going up by 70p or 80p. Where does that leave an old age pensioner who is getting an increase of £5.50? He will have to pay an extra £1 for coal and tomorrow and the next day there will be an increase in the price of something else. The tax on clothes is 10 per cent. All these things are eating away at the miserly increases granted.
I remember Deputy Desmond before he was Minister for Health and Social Welfare preaching about the level of the welfare payments and saying that the health services should be expanded, that there should be no cutbacks in the allowances paid to poor people, that those who suffer most should not be neglected. Since he took on the job he has done everything he could to introduce cutbacks. He said he is eliminating wastages. He has cut back on the hospital services. He has eliminated a number of services. He has created delays in the provision of hospital beds and in health board services, and in waiting lists in outpatients departments. He has cut the percentage of GNP spent on the health services. He used to preach all sorts of social philosophies when he was in Opposition. For two years he has tried to eliminate many services which were hard fought for.
A priority of this Government when they took office was supposed to be that they would make sure there was no reduction in the living standards of social welfare recipients. They are now saying that if inflation is 6 per cent and social welfare recipients get 6 per cent, that covers them for all eventualities. Everyone knows that is a silly way to treat a section who are deprived and are suffering severe cutbacks.
The Minister for Health and Social Welfare said he would do away with children's allowances and introduce a fairer system which would ensure that only the rich would lose money and that the vast majority of working people and people on low incomes would not suffer. There was no increase in children's allowances in the budget. The NESC report says that since the child benefits will be subject to income tax which becomes payable at £96 per week, the value of child benefit to almost all working families is reduced from £30 per month per child to just £20 per month per child. The report outlines exactly how that happens.
Many Departments are dealing with the various welfare schemes, with medical cards in one Department, family income supplements in another and unemployment benefit in another. There is no correlation of the schemes. If the child benefit scheme announced by the Minister is brought in at least 8,000 families in the poorest category and with the highest number of children will lose at least £10 per month. I will leave it to the Minister to answer the NESC. They have it all worked out in detail. We maintained for years that the living standards of the old and people on unemployment benefit should keep abreast of inflation. The Government have reneged badly in that area.
I want to turn now to the public service. I was briefed on what happened last month between the Minister and the public service unions. The meeting ended in disarray. There was a total breakdown in the talks. The Minister made it quite clear that the arbitrator's award was not acceptable to the Government. That was late on Monday night. It was understood by a number of senior people in the trade union movement that the Minister had to report back to the Minister for Finance that all they could do was put £2,400 million into the Budget Statement and say that negotiations were continuing. That is what the Minister for Finance and the Minister for Public Service wished to do but the Labour Party, through their contacts realised the danger of that.
Because a number of major public service strikes were about to start, any playacting like that in the Budget Statement would ensure that those strikes went ahead. I have no wish to see any major strikes. The last thing this country could do with is a public service strike, and particularly in the area of the local authorities. We had experience of that before. It does nobody any good and it does a great deal of harm to a great many people and hits mainly at the underprivileged in our society.
The Cabinet meeting went on all day on Tuesday and the position changed. They admitted that the national plan suggeted 1 per cent but that the outside figure was £2,400 million. The Government said that the public service pay deal underpinned the plan and, if that was not achieved, nothing could be achieved, the plan would go out the window and financial rectitude would go out the door. All those speeches were made. Some people believed them. I said consistently that I per cent was unjust, unfair and unworkable. As the months went on, the Minister began to agree with me. Not so long ago at Question Time I could see that he was trying desperately to convince the Government to move away from that figure.
You do not set up a conciliation and arbitration scheme, appoint a chairman and then turn down what he says. If we were to get into that type of a situation, industrial relations would be in a total mess. I am glad we saw some sanity yesterday and that the public service workers got what they rightly deserve. They were clearly entitled to an increase in their living standards at least in line with inflation. They lost out over a number of years. Hammering the public service about their job security does nobody any good. They are not over paid. They are not out of line with the earnings of workers in private industry.
The way this was done should be put on record. In the national plan £2,400 million was available for public service pay in 1985. Prior to the arbitrator's awards, £2,380 million would be required for public service pay. Yesterday the Minister announced £30 million savings on the assumption that the embargo on public service recruitment would continue to have the effect it has had in the past two years and that overtime would be held at the same level.
We will know next year whether that forecast is correct, but if the Departments of the Public Service and Finance are happy that £30 million can be saved we are left with £2,350 million required for pay. The cost of the arbitrator's awards accepted yesterday will be £108 million. That means £2,458 million is required, and that is £58 million more than what the national plan provided for. They say that we on this side should not be knocking this and that, but we heard all the talk from them about financial rectitude when the national plan was issued.
Deputy John Bruton and the Tánaiste and other Ministers said there would not be any change, that there would not be a penny more than £2,400 million for public service pay, that otherwise there would be unemployment in the public service and that there would not be money to pay pensions. All these veiled threats were put out in November and December. Then we had £58 million thrown in at a Cabinet meeting to satisfy the Labour Party.
All this could have been budgeted for in the first instance. I told them in November and December that they would have to pay these awards. The explanatory table on the current budget refers to tax revenue buoyancy amounting to £58 million. However, the Government did not work out where that £58 million would come from. Their balance sheets and budgets are balanced, and everyone is happy. If a small businessman went into a bank looking for a few thousand pounds to keep his business going and presented such a crude manner of bookkeeping he would probably go out the window of the bank with his account closed. But the Government in the budget can stick in in a crude way a sum of £58 million, hoping nobody would say anything about it. If the Government can try such crude methods without anybody saying anything, they will get away with it. They got away with the food subsidy debacle and many other things. I hope that in future the Government will try to conduct their industrial relations in a better way, not by diktat, and then on the last day conceding. They have lost the public service argument, and I am glad they have. I am sad that the finances of the nation are being managed in this way, throwing in figures to balance the books.
Does this mean that the national plan has been thrown out the window? Of course, we are told it does not. The Minister for Labour is working on a White Paper covering various employment schemes. There is to be a programme of incentives to try to create employment. However, there is a strong rumour that £28.6 million is being cut from his Estimate. I assume the reason for that is the inability of the Minister for Labour to agree on a scheme. I hope the Minister can come up with a scheme quickly which will succeed in saving his Estimate. I refer to page 11 of the Budget Statement:
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.
The national plan was issued in October. The Social employment scheme has been with the Department of Labour since May but now at the end of January apparently the Minister for Labour has over estimated. I hope he will not allow the £28.6 million to be taken out of his Estimate. That money should be held there for a job creation enterprise. The few small areas in the budget which provide revenue will not do anything to relieve the lot of the 250,000 unemployed or the thousands of people trying to leave the country.
The Government have been saying continuously that when they get the figures in order and eliminate current budget deficits they could begin to build a country for the future, for the young people now leaving school and those who will leave in the coming years. Would Deputy John Bruton honestly say that having a current budget deficit yesterday of more that £200 million and the national debt going up to £18,000 million from £12,500 million when Fianna Fáil were in office will help the young people coming on the labour market? Are the Government satisfied that they should continue to pay social welfare benefits of £2,000 million a year just to keep the unemployed happy, quiet in some corner of the nation? Do they not believe that the provision of employment is the most important need to be satisfied? Do they not believe that if we do not create jobs for the young people coming on the labour market there could be social revolution? Have all those matters corrected themselves in the last few weeks? Do the changing of tax bands and a few reliefs in VAT take away from the plight of the 250,000 people unemployed, most of whom are just living on the breadline because they spent their redundancy money in the hope that they would get jobs within a few years? Does the prospect of 250,000 people being unemployed long term not worry the Government any longer? Do they honestly believe that this budget has done something to create substainable jobs? I should like to hear all about it.
Last week I asked the Minister for Industry, Trade, Commerce and Tourism to outline his plans for helping small Irish industries. Is it his intention to help entrepreneurs? There are not many innovators left because they left the country due to tax disadvantages. What incentives are there for industrialists to take on additional staff? Does the Minister feel that by confining the increase in the employers' PRSI contributions to 1 per cent he will entice industrialists to take on more workers? It will not. It represents another disincentive, like those that will do damage to the construction industry.
PAYE taxpayers have been given a concession in line with inflation which amounts to a mere £2 or £3 per week. While that amount is welcome it will go on the increase in the price of coal. The reason why people this morning were saying that the budget was not bad, that it was a neutral budget was because in recent years they had become accustomed to the Minister, Deputy Dukes, increasing taxes, quoting figures, discussing national debt and the current budget deficit, topics that were above the heads of ordinary people. It appears that he has changed and is telling us that while he cannot create more jobs he proposes to follow the Fianna Fáil line in a number of areas. After all the Minister has said about it not being possible to have selective cuts in taxation — only a few weeks ago in the course of a debate on the Adjournment he told us that nothing could be done about the VAT rates — he has changed his mind. The Minister got upset last week when we pointed out to him that the decision to reduce the excise duty on spirits was a success and would result in a greater taxation take for the State. It appears that his officials have convinced him otherwise. I suggest that between now and the introduction of the Finance Bill the Minister should have a look at the construction industry with a view to reducing the taxation rates that apply there.
Fianna Fáil are a constructive Opposition and we will continue to put forward proposals to improve the economy and create jobs. Last week Deputy Bruton said that although Fianna Fáil had been given additional money for research we had not suggested one change in policy. I hope he will admit today that the few items his party are claiming credit for were first suggested by the Leader of our party who said that selective cuts in taxes, especially VAT, would help to stimulate the economy and create employment. If the Government were to go down the road further and reflate the economy properly more employment would be created and the closure of industries halted.
It is said to think that as the Minister for Finance was announcing details of the budget yesterday a big concern was closing down in Dundalk. There are rumours that many other companies will be closing down shortly. The Government should give some aid to the footwear, textile and construction industries that employ many people. However, they will suffer as a result of yesterday's budget. The Government have continued to hit the small industries that employ thousands of people. The Minister should continue to follow Fianna Fáil policies and introduce more selective cuts in taxation. Last week in the House I suggested that the approach to the mass unemployment should be to identify the solution and having made that the major objective to produce coherent policies. I suggested selective cuts in VAT. The Minister was upset and told me that that could not be done. He told us that there was no evidence in the Department of Finance that selective cuts would work and that it did not necessarily follow that cross-Border traffic would stop if there was a reduction in VAT. I am glad the Minister has had a change of heart and I hope he introduces further cuts and, eventually, works towards a single rate of VAT. The VAT rate on building materials should be reduced to a sensible level.
I welcome the decision in the budget to give financial support to sporting organisations and to Dublin Zoo, which is located in my constituency. The Government should embark on a campaign to deal with tax evasion. As one who regularly meets trade union officials and those in receipt of unemployment benefits I am aware of how the inequality of the tax system affects everybody. Those who pay tax under the PAYE system are caught instantly for income tax and the various levies and many of them must pay water and service charges also. At the same time many people evade tax. For years we have heard a lot of talk about equality and equity in the tax system but little has been done in this regard. I understand that in the region of 150,000 assessment appeals are outstanding. I do not know how much money is involved and, as Deputy Reynolds stated, if one mentions a figure the self-employed and other right wing organisations will dismiss it as an estimate. The Revenue Commissioners should consider changing the present system and cease allowing private companies to fund their operations from money that is owed to the State. When I was studying accountancy a person who did not pay on the sixth day of the month after he received a demand was liable for prosecution. A tough line was adopted on that. It would be better if that procedure was adopted today.
In the long run the Revenue Commissioners would be doing companies a favour. Many companies purchase goods and services on the basis of not paying PAYE, PRSI and other levies. The sooner the better the Government set out in a statement who owes what and what the real figures are. There is a slight advantage in paying PAYE because it is paid on the nail but I do not understand how people are allowed go for up to three years without paying tax and then allowed reach a settlement with the Revenue. That is unfair to those in the PAYE system. People do not object to paying their fair share but they object to being obliged to participate in a scheme that is not equitable. It is the duty of the Government to correct that at an early date. The setting up of another commission or tribunal rings hollow in my ears. In 1979 following the huge tax marches Fianna Fáil promised all types of things and we set up a commission to report on taxation. What has happened to the reports of that commission? Will the Government implement those reports? Are they going to allow the system of assessment continue with millions of pounds owed to the Revenue?
If one looks at the chart of the top 100 companies published in The Irish Times last December one will see exactly how all these firms work the system. One will also see just how pathetic some of these firms are when it comes to the numbers employed. One realises that they have used the tax system to their advantage. I will not name the companies because it might be unfair, but everybody knows them. These companies which use corporation profits tax, manufacturing taxes and all other taxes to their advantage employ a handful of people. The tax system seems to be there for the advantage of those companies. Yet when poor Joe Soap goes over £98 per week he has to pay service charges, and if he goes slightly outside that net he loses his medical card, he is in trouble with the differential rent, he loses his family income supplement, he has to pay VAT on clothes, he has to pay for education, he loses his food subsidies, his energy costs increase and so on. They are the people I am most concerned about because I believe the system gets even more unjust.
The Minister said he would set up a commission to look into tax evasion. The dogs in the street could tell him that there is evasion — he does not need to set up a commission. All this information is in the files of Maurice Doyle and company in the Department. They have had this information for years. They know the people who are exploiting the system. They know the con-men. They have ways of catching these people if the Government had the guts to do it. It matters little to me which side they are on — farming, the self-employed or businessmen. But if we do not have an equitable tax system and if we have foreign borrowing which looks like telephone numbers and live in a system where a Minister after two and a half years in office says he has to set up a commission to look into tax evasion, that is a very sad state of affairs and throws mud in the faces of all who said reform of the tax system was one of the priorities of the national Coalition Government as set out in the Programme for Government. They have no more intention of doing anything about the tax system or about equity than the man in the moon has.
I will deal now with the Estimates. Yesterday we were side-tracked from the cut-backs and the hardships which have fallen on a number of sections of the community. Perhaps something could be done to improve the lot of these people. I will deal first with health cuts. There are substantial problems in the health service at present. The cutbacks debated before Christmas are hitting one section of the community, the poorer people who depend on either medical card or hospital card treatment. Unfortunately if an issue has been in the news for a long time people stop talking about it and pass to something else. The real effects of the cutbacks introduced by the Minister for Health, Deputy Desmond, over the last few years are biting hard. For a long time many people spoke about ward closures, staff reductions, overtime reductions and so on, but now operation lists are lengthening. There are still casualty departments with half staff providing "half service", but they are still working. It is very difficult now for a person needing a relatively serious operation to get a hospital bed. I cannot understand how a Labour Minister for Health can continue to make these people suffer. People with VHI cover can get private treatment but the people who suffer most are the poor whom this Government continue to hit. I will continue to say this, although it upsets the Tánaiste, when it is said that his party are hitting the less well off, those on the breadline, whether it be by way of health cuts, education cuts, school transport or so on. Would the Minister for Health look at this problem again to see if he can do anything for the people who are finding it impossible to get on a hospital waiting list or even to see a doctor in the outpatients departments under the appointments system?
We should have another look at the Department of Labour, the Youth Employment Agency, AnCO, CERT and all the agencies which come under the Department of Education or the Department of Labour. Each agency competes with the others. There are 70,000 people under 25 years of age unemployed and we have set up five or six agencies to help them. Soon we will have a discussion paper which I hope the Government will follow because I am trying to streamline that area. There is duplication by the million and competition by the billion. Each agency is trying to cut out the other. They are playing politics.
While all this is going on a poor fellow goes to the employment exchange and is told to go to Manpower because they might have a job for him. Manpower fill in a card and file it under "any other business" and that is the last he hears of it. Last week instead of using money to create jobs Mr. Greene apparently gave money to the National Manpower Service to buy a computer. The first thing they did was to send a letter to everybody on their list saying that, if they were on unemployment benefit but did not write back saying they were still interested in work, this could affect their unemployment assistance and it might be stopped. That is not a helpful way to run a National Manpower Service.
This service is totally inefficient and is not worthy of the title, National Manpower Service. I do not mind saying that in this House because I have already made my views known to the man who runs that service. This service is incapable of doing anything to help increase employment. Instead of talking about employment policies the Government should admit that they are wasting all this money. They should not try to save money by increasing mortgage repayments of young people. They should look at the areas where they could make real savings.
If there is not much we can change in yesterday's budget there is one thing we can change, and that is the £28.6 million. It is frightening to think where that money will come from. A very unusual thing happened yesterday. The sheets issued yesterday gave the estimates and the cutbacks. We were given this figure of £28.6 million. Some people say this money will be got by way of food subsidies and others say it will be in the area of education, but I do not believe either. I think this saving will be made in the Estimate for the Department of Labour. Although the Minister made a mess of the employment schemes, I ask the Government to give an agency an opportunity to introduce job creation schemes in 1985 to get young people off the dole. We all accept that we cannot take 10,000 people off the dole queues and give them sustainable employment, but there is plenty of work to be done. Just because the Minister delayed four or five months bringing in proposals, do not take the money from that Estimate because this could lead to another few thousand on the dole.
This budget makes a further important contribution to tackling the unemployment problem.
In my speech here last week on the debate on employment I set out in detail some of the measures that the Government already have under way to deal with this problem. In the last year or so we have initiated almost 20 new schemes designed to create or help to create viable jobs. I dealt in particular with the thinking behind the decisions that the Government have taken in the White Paper on Industrial Policy on the National Development Corporation.
The National Development Corporation is a very important part of the Government's overall attack on unemployment. It will help start new projects and also help build up the equity base of Irish industry, thus making it more secure. Yesterday's budget takes the measures I outlined last week a step further.
Tourism is an industry that can make a hugh contribution to jobs. We in Ireland are failing to exploit our tourist potential. We are only getting a tiny proportion of all the visitors from America who come to these islands to come to Ireland. About one-tenth of all the Americans who visit London visit Ireland. This is an unacceptable statistic. We should be aiming at a much bigger market share.
The reduction in the rate of value-added tax on hotel accomodation, car and boat hire from 18 per cent to 10 per cent will be a major boost to tourism. It will enable tourist operators in Ireland to offer a more competitive product on foreign markets. It comes just in time to help in the promotion of Ireland on the US market which will be commencing next month. I will be visiting the United States in March to attend tourism promotion events and I am delighted that I will be able to use the major reduction in VAT levels as a selling point for Ireland.
I also want to see an immediate response from tourism operators offering "Spring Breaks" and "Easter Packages" on the domestic market to Irish people who want to take a holiday in Ireland. Last year, the domestic market was the least buoyant sector of tourism. Yet it is the easiest market to exploit from an access point of view. Let the Irish tourist industry start the year with an aggressive campaign on the Irish market, using the tax incentives created in the budget.
Let all those involved in transport by sea and air into Ireland respond to the business opportunity created by the budget. We must devise pacakage holidays, based on low fares, which will not compete with business travel. If enough extras, such as accommodation, entertainment and food can be included in the package price, there will be no competition with business travel revenue for national carriers such as Aer Lingus.
The reduction to zero in the rate of VAT applied to live entertainment and theatre performances will also be a major boost to tourism. What Ireland can offer in the area of theatre and entertainment is of major importance to the development of tourism and this also is getting a boost.
As I have said, what is needed now is an active response from the tourist industry to the opportunities that have been created for it. I am working, with the Minister of State at my Department, Deputy Michael Moynihan, on a comprehensive review of tourism. We want to streamline the approach of all Government Departments to tourism so that it is designed to achieve the full potential of this important industry. I will be meeting the confederation of the Irish tourism industry in the near future to hear their views on how this can be done. It is my intention that everything will be done to ensure that maximum benefit is obtained from the concessions for tourism outlined in this budget.
The reduction in the maximum VAT rate from 35 per cent will be of great benefit to manufacturing industry in Ireland. Many businesses have been badly hit by people going to Northern Ireland to buy goods that they could have bought here. Jobs have been lost. The various tax changes introduced by the Government to deal with the problem of cross-Border shopping will, it is estimated, lead to the transfer of £60 million worth of business from shops in Northern Ireland to shops in the State. This business will help preserve and create jobs in manufacturing and retailing in the State. This is very important.
The reduction in the maximum rate of VAT from 35 per cent will also reduce the worst effects of VAT at point of entry on manufacturing. The cash flow of many manufacturing businesses engaged in the importing of components and their further processing was badly affected by the loss of 35 per cent of the value for a period as a result of VAT at point of entry. By the reduction of this rate the burden will be significantly reduced. This will help many firms reduce their overall borrowing requirement and save jobs in manufacturing and help create others.
Manufacturing will greatly benefit from the income tax changes. They enable us to keep top executives in Ireland at competitive salaries. We cannot afford a brain drain in industry and this budget will stop it.
The dynamic development is very important for employment. If jobs are to be created in food processing there must be more production on the land. This requires us to bring young people with dynamism and commitment into control of the land of the country so that it can achieve its full potential. The budget takes two important steps in this direction.
It extends the highly successful scheme for stamp duty concessions for transfers of land to young trained farmers for a further year. I am proud to have introduced this scheme and it has been an outstanding success. Its extension for a further year will bring even more land into the hands of young trained farmers and lead to greater long term agricultural output and, ultimately, to jobs.
The new tax concession for long term leasing of land will also be of great benefit. Much land is under-utilised in the hands of older farmers who are unable to give it the time and money that it needs. But they are not prepared to give up ownership. Long term leasing affords an opportunity for them to hand over the use of the land to people who can make better money from it than they can, while still retaining ownership. The tax concession will ensure that long term leasing will take off. It is a step of incalculable importance in agricultural development in Ireland.
I ask Members of the House to look at these measures in conjunction with other measures already in place to deal with unemployment such as the following:
(1) A technology acquisition and two new marketing grants schemes to help Irish firms launch new products and sell existing ones more effectively.
(2) More money for enterprise centres by the IDA — bringing the total to five — to help people with ideas turn them into jobs and profits.
(3) A linkage programme to help Irish firms win orders from importers. This will keep money in Ireland that is going abroad.
(4) A social employment scheme to give the long term unemployed the opportunity to do useful work and to seek part-time work without losing an assured basic income. This will help them to work themselves back into full time employment.
(5) A special training scheme to help the long term unemployed, many of whose skills are redundant and must be replaced with new skills.
(6) A pay policy in the public sector which will lower pay expectations generally. This will mean more jobs and much less taxation in the long run.
(7) An enterprise allowance and pay-related benefit lump sum scheme, to help unemployed people set up their own businesses.
(8) Measures to build up the equity base of Irish industry by encouraging investment in it by venture capitalists, employers and the National Development Corporation. A stronger equity base will insulate industries against fluctuations in interest rates.
(9) An intensive campaign to get retail outlets to stock more Irish goods and help Irish producers gain access to the shelves of foreign associates of retail chains operating in Ireland.
(10) A streamlining of the services of State agencies supporting Irish industry through an overall management committee at national level, and "one stop shops" for the entrepreneur at regional level.
I think the House must agree that taking the measures contained in the budget, combined with these provisions, one has an excellent package of measures to cope with the unemployment problem. The Government are taking this problem with the seriousness which it deserves.
I now wish to turn to the aspect of social welfare improvements. It is important that while we improve our economic performance we must distribute the benefits gained by this fairly, and in a way which takes account of the needs of those most vulnerable in society. Payments to individuals dependent on social welfare payments are being increased, and this will see the maintenance of the real increase in the value of their payments which has taken place in recent years.
Between 1981 and 1984 — and now into 1985 — the following real increases in social welfare benefits have taken place: unemployment benefit for a single person, 4.5 per cent; unemployment assistance for a married couple with four children, 9.3 per cent; old age pension for a married couple at the non-contributory rate, 6.3 per cent. During the period 1981 to 1984, while there had been real increases in social welfare payments, average wages decreased in real terms by 2.5 per cent. Over that period welfare payments increased faster than wages.
The budget has been criticised by some as giving to those who already have an income. I have illustrated that, taken in an overall context, that is not the case. As a result of this budget the income tax system is still a progressive one. People on higher incomes will continue to pay more money in tax and a higher share of their income in tax. This is the way it should be. However, the point must be made lest selective or intentional misinterpretation of the changes in the income tax system lead people to the mistaken conclusion that somehow the system has become regressive. After this budget a single person taxed under the PAYE system who is in receipt of average industrial wages, which is about £9,000 per annum, will pay 27 per cent of his income in tax. A single person earning £20,000 will pay 45 per cent of his income in tax. This percentage of income paid in tax will continue to rise with the level of income. For a married couple with two children and one spouse earning the percentage of income paid in tax at an income of £9,000 will be 17 per cent while at an income level of £20,000 it will be nearly 32 per cent.
The budget provides for an increase of 25 per cent in the allowance for persons employed to take care of an incapacitated taxpayer or spouse. The new tax allowance will be £2,500. Not only is this a very important and caring aspect of the budget, but it also makes good economic sense. It is much better both for the individual and in terms of the cost on the Exchequer that he be cared for at home rather than in an institution supported by the State. This tax concession will encourage that. The recent history of this allowance is but another example of the caring attitude taken by this Government. The allowance was £330 in 1980, £500 in 1981, £700 in 1983 and then it was raised to £2,000 in 1984 and is now £2,500.
The concession given in respect of rent for private tenancies is again an example of a sensible balancing of social objectives with the constraints on the Exchequer. the income tax relief paid in respect of private tenancies, which was £1,000, is now to be raised by 50 per cent to £1,500. The age threshold which was reduced from 65 years to 60 years in the 1984 Budget is now to be further reduced to 55 years of age. This will have beneficial impacts for those who do not wish to make a commitment to a new house purchase, and this will often be the case with older people. It will also be an important stimulus to the private rented sector of the economy, an area which has been neglected and thus exacerbating the problems of the number on the waiting lists for local authority accommodation.
The doubling of the income tax age allowance on deposit interest will be an important incentive to saving and it will also help increase the amount of personal savings with the banks which are the main providers of funds to the productive sectors of the economy.
Deputies on the other side of the House referred to the deficit figure in the budget. The deficit for this year will be £1,234 million. The money, however which the Government will have to pay this year to service debts, many of which were incurred in the past by the party in Opposition, is £1,991 million. In other words, if we did not have to service past debts we would have a current budget surplus of £757 million. That is something that people need to remember. The problem as far as closing the gap in this year's budget is concerned is entirely attributable to the burden of interest on debts incurred in the past.
That is a long-playing record.
The amount we have to pay this year in debt service is almost as much as what we will spend on health and education combined.
The provision for the launching of the agency to combat poverty is a major feature of the budget. This agency will help people who are most unfortunate in their financial position and who often live in family circumstances from which it is difficult to escape. This agency will help them to help themselves and ensure that they get their rights under existing State benefits. Many of those who are worst off in the community do not get what they are entitled to through lack of information.
The budget will give an important boost to national morale as a result of the additional money being provided for the Irish Olympic Council. The Irish suffer from a surfeit of self-criticism. We are all too quick to see what is wrong with the country and all too slow to applaud what is good. There is something that is good and that is the athletic prowess of our competitors in the international arena. The victories of Eamon Coughlan and John Treacy did a great deal to lift national morale outside the sporting arena. It gave a sense of feeling that we could do things when we put our minds to it and are capable of beating the best in the world in any sphere. The provision of additional funds now to the Olympic Council and not on the eve of the Olympics, to help improve our performance in the Olympics will contribute to the building up of national morale. I am very glad, as the Minister who had responsibility for sport for four years, to see that my successor, Deputy Creed, has been so successful in obtaining additional money for sport in this budget.
In a sense the budget represents only a small part of the total financial position in a year. It represents the adjustments which are being made in respect of taxation, but the bulk of taxation and expenditure is already settled in the Estimates. It is important to look at the Estimates to see where the Government's priorities lie. There was an overall increase of 9 per cent in expenditure this year over last year. Industrial and labour services designed to improve the economic efficiency of the country by giving more money for investment in industry and training are being increased by 27 per cent this year. In other words, industrial and labour services will get three times as much of an increase in expenditure as the overall increase in Government spending as a whole. That represents the correct priority because it is by training our people to do better and by improving industry that we can provide a better living for all the people.
Debate adjourned.