Before lunch I had drawn the attention of the House to the fact that the budget is a fine example of surrogate politics in that the Government were incapable of producing any worthwhile policies and had simply borrowed some Fianna Fáil initiatives and used a very extensive PR arrangement to sell their programme by utilising the telephone sales mechanism and also the Civil Service as their selling agency for Government mismanagement.
The budget penalises the construction industry, industrial development programmes, the motorist and the entire family in terms of their family budget. It will lead to increased levels of emigration, to increased participation in the black economy and to greater levels of violence on our streets. I concluded at that time by saying that the budget aftermath was the shortest lived example of political euphoria ever witnessed and that it had led to new depths of despair in all sections of the community. What should have been an opportunity for the Government for a confidence boosting initiative for the people has turned out to be a huge confidence trick. The fall guys are the needy, the less well-off and the hard pressed middle income groups. I had referred also to the question of the creative accounting which has now taken over the corridors of economic thinking in the Department of Finance. It is well to bear in mind that the cuts amounting to £28.6 million, details of which I understand are to be announced today, are a typical example of giving the bad news in a lump sum figure so that certain Deputies, particularly the backbench Labour Deputies, will be persuaded to regard in good faith the measures to be brought in subsequently, because once those Deputies have marched through the division lobbies in support of the overall package they cannot subsequently opt out.
There is the question also of the £30 million pay settlement with the public service being renegotiated. Would anyone with an ounce of wit be prepared to suggest that it is possible to renegotiate downwards £30 million in terms of pay when a settlement of that amount has been agreed? Would any responsible trade union accept such an attitude on behalf of their hard-pressed members?
There is the question also of the tax buoyancy of £58 million which we are told will result from budgetary measures. How can one expect a buoyancy of £58 million when the total VAT changes, for example, are estimated at £9.2 million? We are talking about a budget of more than £7 billion. I cannot imagine that extra consumer spending of any great quantity will result from a reduction of £9.2 million out of a total budget of £7 billion. It is extraordinary that the budget would show these matters up in this light. However, it is only another example of the creative accounting of which the budget is full. It contains dubious statistics and aspirations which the Government know well cannot be achieved. But the same applies to the national plan. That document is now discredited and we understand that it has been virtually withdrawn from the economics of the Department of Finance.
Last year on the question of interest rates the Minister for Finance, by way of the sales of Government securities to banks and to the public, raised £830 million; but the raising of that money starved the money markets and during the period of deep recession kept interest rate at around 16 per cent when inflation was of the order of 8.6 per cent. What entrepreneur will take risks at such high levels of interest rates? the result is that we are not getting the investment and the job opportunities are not being provided. This is leading to further unemployment. We have not made the climate right for investment. Consequently, businessmen are not prepared to take on any extra accommodation with the banks and so there is continuing unemployment. The unemployment figures are now in excess of what we were told they would be at the end of the three years of the Government plan. Obviously, the Minister does not understand how the creators of wealth work. He will probably go for another £1,000 million from the home investment market this year. That is not the way to create the climate that is necessary for further investment and for more jobs.
The building societies know that the Minister will borrow again this year on the home market and that is why they have decided they must seek compensation to protect their interest and to maintain their cash flow. If there was the slightest hope that the Minister, instead of satisfying the ideology of the Fine Gael practice of reducing foreign borrowing, would undertake borrowing where preferential rates are available to him and leave the native money in the economy so that Irish interest rates could be kept at lower levels thereby providing further investment opportunities for those willing to take up investment, he would be doing a good days work and would not be criticised for that policy by Fianna Fáil.
We must remember that the devaluation situation added £1,3000 million to our national debt. This has been exacerbated by borrowing at home. These increased mortgage interest rates of 2 per cent will make life intolerable for the many people living on marginal incomes. The Minister has robbed the economy of the money which would make such a difference had he left it to those willing to invest here. The Minister borrowed in the dollar and in the yen. The Minister should have borrowed in the EMS currencies where there is virtually no fluctuation and the Minister was told this by our spokesman on Finance and by all the economic commentators. We should benefit from the EMS rather than place our reliance on foreign currency borrowing which is not stable at this time. All the international commentators have made it quite clear that they cannot guarantee stability in those two borrowing markets for the next 12 months.
We have to take note of the change that is taking place in the rate of exchange with sterling, up to 11 per cent over the past six weeks. There is no doubt that that change in the exchange rate has been aggravating the North of Ireland trading situation and has contributed to cross-Border smuggling. The new reliefs that were announced in the VAT charges will not take up the slack in relation to cross-Border trading. While the Minister reduced some articles by 12 or ten per cent because of VAT reductions the money is already swallowed up by the differential in the exchange rate and by the increase in the cost of petrol. The measures taken will not give relief to the hard pressed businessman. That and the exchange rate difficulties are murdering our exports to Britain. The budget last week did not give any consideration to those hard pressed exporters. the Government will have to change their borrowing policies and they will have to do something about reducing interest rates. The Government must alter their borrowing tactics and do something about the essential service costs if we are to avoid a total collapse of manufacturing. We have seen the start of that collapse over the past few years but it seems that the Minister is either unmindful or uncaring as to the consequences and he is happy to allow the dole queue to extend itself until breaking point is reached and breaking point in so far as it has been expressed in violence on the streets has been virtually reached.
There was a very big underestimation of unemployment levels and of the extent of transfers under the social welfare code that would be needed to deal with those levels. From all the projections in the plan and from Government statements we had expected an average of 217,000 unemployed this year and we understood that there would be budgeting for that figure. The plan has been totally discredited in that the figure has far outstripped the projections. We have to bear in mind that every 1,000 extra unemployed costs an extra £5 million so that if the levels of unemployment persist at the end of this year £100 million extra will be required by the Minister for Health and Social Welfare to satisfy the transfers necessary to deal with it. If that kind of extra money is required we will also require a supplementary estimate. The Minister should come clean now and say that the money required to satisfy the social welfare demand has not been adequately catered for in the budget I assume we can look forward to a supplementary estimate as soon as the June local elections are over. We can be quite sure that it will not happen before June.
It is a nonsense for people to say that the figures in the budget or in the national plan can be substantiated. The plan according to all economic commentators was built on false assumptions and dubious statistics which have now been transferred into the budget arrangements. The current budget deficit is not in line with what was agreed in the Joint Programme for Government Action. It is not in line with the programme laid out in the national plan. It seems that the Government are quite satisfied to adjust their figures to suit their requirements whenever necessary. We know that Government borrowing has been greater in the past 12 months than in any other year since the foundation of the State. We know that the national debt has increased from £12 billion and will more than likely be £20 billion at the end of this year. We also know that every one billion extra on the national debt is the equivalent of £150 million extra on our backs. It is extraordinary that while that is being preached here and while every body is talking about it, it somehow has not yet been taken up by the media. But it will, because it is coming home to roost now that the Government, when they came into office, came in on falsehoods and they have not lived up to their commitments or to the Joint Programme for Action.
The Budget has had a serious impact on the construction industry in more ways than one. Apart altogether from the reduced activity in the industry we must bear in mind that many skilled people are now emigrating. These people were trained at considerable expense and would have been regarded as a national asset. We are reaching a situation where there are no apprentices in training here. All our best skilled people are being spirited away to places like Australia and America and the Irish dream of building one's own home has been blown for ever and no matter what we do we will not be able to attract back the engineers, architects, tradesmen and skilled people who are leaving the country now in their thousands seeking work abroad. We will not be able to attract these people back unless we take corrective action immediately. Our country will be left without the skilled workforce that was painstakingly built up over the years, a workforce that has been provided by the Government for our competitors.
Let us take a look at some of the torpedoes that were shot into the building industry since 1977 by this regime. The VAT rate for architects and engineers' fees was increased from 10 per cent to the present 23 per cent; planning permission charges were introduced and are about to be increased again this month; the duration of the mortgage subsidy payments was stretched from three to five years without any increase in the total amount being paid; income tax was levied by this Government on that mortgage subsidy; new VAT rates for builders increased from 5 per cent to 10 per cent. Planning appeal delays are still as long as ever despite the Minister's promise when he sacked the last board that the setting up of the new board would result in increased movement of applications. There has been increased tax on the sale of land; corporation tax has been increased, PRSI levels increased; there is a youth levy on builders' workers; tax relief on mortgages for the second house was abolished in last year's budget and there is a threat to withdraw the tax relief introduced by Fianna Fáil for apartment and flat development; removal of the tax relief on personal borrowings and so on. The whole package when it is put together is an assault on a vital traditional industry if the country is to undertake any worthwhile job creation projects. The Government responded in their budget simply by trying to pick holes in what can be regarded as a leaky bucket, or leaky budget. The difference in so far as the building industry and new house purchase or building are concerned is that in the United Kingdom no VAT whatsoever is imposed on any individual who decides to build or buy his own first house or home. Then we say that we are ahead of all European countries in our building programme.
Motorists again suffered the blunt edge of the Minister's tax axe, with increases in the cost of petrol, road tax, maintenance and repairs. The change in VAT which was supposed to have such a great advantage as regards tourism and car, van and boat hire is reduced virtually to nil by the Minister's insatiable appetite for taxing the old reliables, even when it is obvious to everybody in the street that diminishing returns have already overtaken the revenue source.
In 1981, 106,000 new cars were purchased here; in 1983, 61,000; in 1984, 56,000. The number of new cars in these three years halved. Last year, 63,000 people stopped motoring completely. More people could not afford to stay in motoring than bought new cars last year. Then we hear talk about Ministers of the Coalition Government being proud of what they have done to maintain the standards of living of our people.
The number of uninsured motorists on our roads today is one out of every five. Insufficient care is being taken by those using our roads. Two out of three people currently driving here are breaking the law, if in only one simple aspect of road safety — that they are not wearing their safety belts. As yet, we have seen no positive response to end the uninsured driving, bad driving techniques, and badly maintained "bangers" on the road.
We do not hear any talk about better security with regard to our cars, or mention from the Minister of making it mandatory to have certain devices to protect our property. Since the safety belt legislation came into operation in 1979, six times more people are likely to die in a collision because they are not wearing their safety belts. This is of great consequence for insurers, the Garda force and the Government alike. It is costing £1 million a day in claims for injuries suffered in car accidents. There is carnage on the roads — 219 people died last year and 4,630 were injured. Two thirds of these, according to statistics, were not wearing safety belts. I am making the comment concerning safety belts here because a new campaign is being organised by the Road Safety Association. It should have the full support of everybody in this House. It is not just the costs involved to those who are paying their insurance and the claims that have to be met, but the level of human suffering and misery brought about to so many as a result of road accidents, not to mention the drain on the resources of the State so far as ambulance and medical services and the police force are concerned.
In the United Kingdom, nine out of every ten people wear their safety belts. There has been a reduction, since the legislation became operative there, of 25 per cent in the number of deaths and serious injuries suffered since 1983. If it requires greater surveillance and greater effectiveness in law enforcement, that should be applied so as to reduce the need to meet those claims and also to reduce the pressure on the services of the Minister for Health — or those which are left when he has finished.
The tourism industry is supposed to have got a shot in the arm from the provisions in this budget. That industry, despite repeated requests from this side of the House, has not been given the recognition of its potential to play a worth while part in our economy and in the provision of jobs. There has been a piecemeal response, both in the national plan and in the budget, towards the industry. There must be a complete revision of the total tax system as it applies to that industry. We must organise ourselves to market specialised tourism. Over and above that, why did the Minister not take the opportunity to refer to the amount of venture capital that could be applied to the tourist industry if he would only change his mind and see the industry for what it is — a major exporter and a revenue generator and creator in our economy?
Why would he not indicate that he would alter the daft VAT system for purchases by out of State visitors introduced last year at this time? This has not worked and is the laugh of international tourism. Why do we not hear about new arrangements about access transport? Why do we have to be preaching all the time and trying to get the Minister to listen to the need for proper car ferry services, for proper air charter arrangements? Why do the Government not recognise that, as an island economy, a second location tourist stop, we need an enlightened access transport policy by air and sea if we are going to get the market share that the industry can create for itself. These are matters to which the Government must attend.
We hear no talk about environmental control, or renewals, or refurbishing policies. We do not see the industry treated for the value it is to the economy and could be by way of generation of job opportunity. For that reason, unfortunately, the small step forward taken, of the reduction of VAT on hire and hotel accommodation, while welcome, will not go the distance in bringing about the potential. It is a shame that the Minister would not recognise his responsibilities in that area.
Indigenous industries are battling for their lives on the home market, where consumer spending is so depressed at present. The smallest adverse shift in the money market can close hundreds of native industries and may result in the loss of thousands of jobs. This can be avoided by a relaxed Government interference in the money market, which would result in cheaper money and more of it available in the market place.
They talk about growth in the gross national product. That talk is misleading. It is basing revenue from buoyancy on growth figures, which is wishful thinking. Any growth will come from expanded export performance in the high technology, health care and pharmaceutical industries. Most of their profits, as we well know from the debate last year, will be repatriated to their base companies. With the recent difficulties in the multinational sector, there is great danger of our over-dependence on such industries and new ground rules will have to be devised if we are to protect our market share and employment levels in these industries.
The Travenol experience underlines the problem. It shows that multinationals are vulnerable, that the IDA and the Government have no say whatever in boardroom decisions affecting their future. Sentiment with regard to job creation in Ireland plays no part in the decision making process. Consequently tighter controls will have to be built into start-up grant agreements if job losses are to be minimised. For our part unit costs of production, productivity levels, wastage, energy costs, transport costs, industrial relations, absenteeism levels will have to be just right if our industries are to have a chance to compete. The proper environment is essential if we are to continue to be a suitable location for the attraction of prestigious foreign investment. Our essential costs are noncompetitive, our interests rates and personal taxation levels out of line with those of our competitors and constitute an active disincentive. Not only are we failing to attract new investment but an increasing amount of money is being moved abroad helping to strengthen the economies of our competitors and, worse still, our finest executives, technical and administrative, are moving out to escape the tax trap that has flattened any incentive to work. These are matters directly under Government control. It is futile for the Government to preach competitiveness and stricter management controls to the private sector when they themselves will not respond by an enlightened, realistic basic cost policy.
The marketing, research and development of many products produced by the multinationals is organised outside the State. This means that these companies are simply shipping to order with no involvement by Irish production units in the protection of their market place. There needs to be a greater link-up between the marketing of products by multinationals and our national marketing agency, CTT. It is totally unacceptable that the IDA are not aware of the financial well-being or otherwise of the multinationals that have been grantaided in the first instance and that CTT are not involved in the market place of multinational products. One of the greatest disabilities of multinationals is when their product enters the mature bracket. It is essential that new products become available to take up the slack. This means that more research and development facilities must become part of an ongoing industrial strategy. Technology is a fickle thing. We are over-dependent on outside technology. Increasingly we should be developing indigenous technological research and development programmes. I suggest it would not be unreasonable that existing and future high technological industries should contribute just a little from their not inconsiderable profits to new home-developed technological programmes.
Science and technology in Ireland have not received the attention and support they deserve. With manufacturing industry the main generator of exports and employment opportunities so dependent on technological advance, we must recognise that increased resources should be made available now to guarantee our future market share and reduce our dependency on out-of-State research. There is concern that there is unfair play at present in the area of international competition. We are always over concerned with keeping the rules while other EC countries please themselves and protect their interests irrespective of the consequences. There is the example in France that they will not allow to be used in their network, whether that be in the health care area, in telecommunications or electronics, any products not produced in their country. We regard this as unfair competition. It is against the spirit and letter of the Treaty of Rome. The Competition Commissioner should be put on notice by the Government that treaty rules are being infringed and that consequently we are being disadvantaged.
We must face up to the fact that nobody owes us a living, that multinationals will take commercial decisions based on computer analyses of the marketing of their products and will set up shop in preferential locations. This can be to our mutual advantage, but to benefit we must get our industrial environment act together, rendering Ireland the soughtafter location. We have the skills, educational institutions and willing workforce. The country is crying out for leadership, but all it is getting is rhetoric. The reality of Fine Gael policy is that the so called disciplined financial management, which was to restore State solvency, improve our competitiveness and create jobs, has collapsed. We have all witnessed the 700 closures and liquidations on average that have taken place over the past two years and the statistics must be put on the record — 50,000 people have lost their jobs in the last two years.
The current budget deficit, the reduction of which brought the Coalition into Government, has grown to over £1.2 billion. We owe foreign banks more now than at any time in the past — and all of this has taken place in just two years. The hypocrisy of it all is that the Taoiseach and Government Ministers have the audacity to suggest that the bad times are over. I put it to them that there has been unprecedented hardship over the past two years with no tangible results on the employment front.
Prudent reflation was sneered at in this House, jibed at by Government Ministers right up to a week before the Budget Statement, when the Minister for Finance came into this House on the unemployment motion, jibed and jeered at the Fianna Fáil people for suggesting that there should be any kind of prudent reflation of the economy. There must have been a road to Damascus conversion of the Minister for Finance, whose backbenchers avidly and loudly clapped him when he took his U-turn here last week. But the partial, eleventh hour conversion, with the great U-turn the Government have taken, at least proved one point: that financial rectitude is a failed formula for the solution of small, open economies.
The National Development Corporation was mentioned in the Budget Statement, being advanced as a panacea for all our ills. Would the Minister give the National Development corporation a rest because it has been overworked before it even begins, and the internal wrangling of Ministers over its funding and remit adds to the national cynicism that is all about. There have been sufficient committees, consultancies and so on identifying our problems. They have been well identified. The investment areas have long since been identified as well, where the money is most needed. Instead we need a little action now. Unfortunately the only response we have had is that the Government in their Budget Statement last week quenched the last candle at the end of the tunnel. Our people deserve a better response at this time.