Deputy Gene Fitzgerald has 57 minutes left.
Financial Resolutions, 1985. - Financial Resolution No. 9: General (Resumed).
On a point of order, Deputy Fitzgerald used only three minutes of his time last evening so perhaps I might be allowed use four or five minutes of the time he did not use.
I take it that the Whips will be in touch with me on this.
I welcome a number of features of this imaginative budget, one that has set us on the road to reform of the tax code and which generally has inspired confidence in the economy which undoubtedly has been in serious difficulty in the past number of years.
The changes in the tax code are very imaginative. They remove the difficulties of administering one of the most complicated tax codes in Europe. Another important aspect of this budget is that it is the first in many years not to add anything significant to the cost of living. The fact that social welfare increases are somewhat higher than the rate of inflation and are significantly higher than the increases likely to be awarded to earners this year is an indication of the commitment of the Government to protecting the livelihoods of the least well off.
The Minister has recognised the need to consider seriously the whole area of tax collection and enforcement. He has established a committee to follow up that problem and it is a significant problem. As I have outlined in the House before, there is a chronic problem in terms of the administration of our tax system as it applies to the self-employed. Of the tax to be paid by the self-employed, 40 per cent is paid late, the average delay being about 18 months. Obviously the State is out of money to a considerable extent because of this. The system designed to prevent those delays occurring, namely, interest penalties in respect of late payment, is not being applied. I estimate that about only one-eighth of the money that should be collected in respect of late payments is collected. In addition, the whole area of enforcement whereby demands go before the courts has been slowly grinding to a halt. As recently as 1979, 15 per cent of the nominal yield that was sought by way of enforcement was collected. The figure in that respect today is about 5 per cent. In other words, the system is becoming progressively worse and that is why I consider the Minister to be correct in appointing a committee to investigate this area. Some people may simply yawn when they hear of yet another committee being established but the problem in question is not a simple administrative one of changing a rule here or there, the approach that has been adopted down through a series of budgets in respects of the whole question of evasion and enforcement.
The problem is that the whole system of tax collection from the self-employed is deficient in all its aspects, from the beginning where assessments are levied, assessments which in many cases are totally out of line with the real situation, right through the system of appealing, levying demands and through to enforcement. At every stage the system is fraught with enormous difficulties and is obviously not working. I would ask that the enforcement committee would not concentrate simply on the problem of enforcement through the courts or through solicitors but that they would focus on the whole problem of the system as it applies to the self-employed.
I have advocated here on many occasions that we should move towards a system of self-assessment for the self-employed. Some may say that that would be an easy way out for them but it is far from that. The main purpose of a self-assessment system would be, first, that the money would be paid by the date appointed and, secondly, that the Revenue Commissioners would be free, on the basis of random checks, to explore areas where they think there is tax revenue not being properly reported. Because of the present system the commissioners are engaged to a large extent with ordinary taxpayers' returns, 99 per cent of which are probably legitimate returns and consequently do not warrant the attention of the commissioners. If we were to introduce a self-assessment system for the self-employed with strong penalties for breaches of the code, we would succeed in bringing the money in much faster as well as making the system much easier for the self-employed to operate — those who are making accurate returns while the few who are evading their taxes would be more likely to be caught by the commissioners and, having caught up with them, they would have adequate powers to pursue them.
I stress again that the problem in the area of tax collection is not a problem of an inadequate number of officials in the revenue collection section and neither is it a matter of an inadequate number of people in the courts. The problem is a system that cannot be operated. About one quarter of our civil servants are engaged in revenue collection so we do not need an increase in the number in that respect. We do not need more rules but we need a change in the system. I hope this will be the sort of proposal that will come from the committee being set up by the Minister.
An enormous amount of progress has been made in the matter of tax reform, particularly in the areas of VAT and indirect taxation, but there remains much to be done in this whole area. I point in particular to the area of savings and investment in the context of the tax code. I cannot see the justification for the position in which people who put money aside by way of saving should have to pay tax on the entire nominal value of their savings. That is an obvious disincentive to saving. If at a time of a 10 per cent rate of inflation, one is paid interest on savings at that level, at the end of the year one is no better off in terms of his savings but in addition the Exchequer takes 35 per cent at least of the 10 per cent interest. In effect, then, people who are saving through the normal channels, the banks and so on, are being taxed on their capital. The taxation commission report estimated that the effect in terms of taxation in that regard was about £150 million. The most disturbing feature of this is that it is indicating to people that saving is bad policy.
On the other hand there are those who are cute enough to ferret out other vehicles for saving, such as bonds of various kinds that have been available for some years now, or who can succeed in converting their savings into capital gains and who can avail of allowances for inflation. These people are getting generous concessions from the tax code. It is not logical to suggest to people that they should channel their money into various funds such as pension and insurance funds that by and large finance property investments, Government gilts and other safe channels of investment. We are telling savers that they should put their money into these channels rather than into employment creating channels. It is time we seriously addressed both the offer of incentives to saving and to the type of saving that we are encouraging in the tax code. A similar related problem arises with investment where there is an unfair encouragement to investment that takes the shape of property and Government paper of one sort or another rather than investment that goes into employment creating projects. We have to reexamine the treatment of savings and the treatment of capital gains in order that employment creating investments should get priority.
The second thing that remains to be tackled in the income tax code area is the enormous number of reliefs and exemptions that we have built into the code. The report of the Commission on Taxation estimates that the effective leakages from the tax base come to about 28 per cent of the income tax base and 40 per cent of the capital gains tax base. In other words, by giving concessions we have narrowed the base of our tax and that has forced us to push up the rates. None of us would welcome a tax system that gets very low income earners into the high margin of tax rates. It has been pointed out on numerous occasions that Ireland is unique in the fact that about 40 per cent of the population are paying marginal tax rates over the standard rate. They are in the rates above 35 per cent. The reason for that is that we have over the years conceded on an ad hoc basis reliefs and exemptions many of them seeming desirable in themselves and which can be justified individually but their combination has been to push up the rates of very moderate income earners.
The other related problem with these reliefs is that they are inequitable. They are granted in the form of allowances, therefore people on top rate taxes get the best benefit from them. People on the standard rate tax get much less benefit and people who are not in the tax code at all because of low incomes get no benefit from them. It also means that tax managers of one sort or another waste the time and energy of the Revenue Commissioners and their own time by devising new schemes to ferret out new reliefs and new ways of reducing the tax burden for the better off taxpayers who can afford the services of such tax managers. We must start on the problem of winding back the extent to which we have high tax rates and high reliefs and exemptions. No one says that that can be done overnight. It would be impossible to say to someone who becomes redundant that we are now going to be taxing redundancy payments or to say to people with mortgages that we are now going to withdraw our interest relief on mortgages. But what we can do is start the process of removing these reliefs on a phased basis perhaps by curtailing the ceiling at which one could claim reliefs so that instead of being able to claim them up to the 60 per cent rate one could only do so up to the 48 per cent rate, or we could say that from a certain date we will start adopting a different approach to mortgages. However, I favour the proposal that over a period we bring down the top tax rate at which people can claim these reliefs. In time we would come to a situation where those reliefs would be given as effective tax credits, something that the Taxation Commission and indeed most parties in this House see as the ideal system to move towards.
We still have enormous complexity in the number of tax system we are operating. For example, in the income tax code we are effectively operating five income tax systems with different thresholds and ceilings and different rates. That is an unreasonable obligation on personnel departments throughout the country who have to estimate tax liability. The five systems I refer to are the PRSI, the youth levy, the income levy, the health levy and our ordinary income tax code. There is a great need to consolidate this into a single code which would be simpler to operate.
In the same way we should move further along that road in relation to VAT. Our objective over the long term should be to come from 3 per cent to 2 per cent and perhaps even to a 1 per cent VAT rate. Too much is made of the argument that luxuries should be taxed at a high rate and necessities at a low rate. For many people buying luxury goods is discretionary. In economic terms demand is very sensitive to prices, and what happens if there is a high rate is that nine times out of ten the people who suffer are the producers of these luxuries who very often are not well off. Very often the effect of high tax on luxuries is not on the people with high incomes but on the people in the job of producing luxuries. That is not a sensible approach and if what we are trying to do at the end of the day is to redistribute income we should do it through our income tax code and social welfare code. Trying to do it through VAT structures that create difficulties for traders is counter-productive. It is welcomed that the Minister has made a start in this direction and he should be encouraged to continue.
I will turn from the tax issue to the question of employment. It is the most important issue facing our community and it is important that spokesmen from both sides of the House bend their minds to thinking how we can better tackle the problems of employment. It is not good enough just to say that this Government are not doing enough. We need suggestions to come from both sides of the House. This Government have been remarkably innovative in their approach to employment. They have established the Youth Employment Agency and such schemes as the enterprise allowance scheme, the new social employment scheme, employment incentive schemes, NDC and AnCO schemes and so on, and Fianna Fáil must take credit for the work experience programme. This Government and this State have many schemes available to support either the individual trying to set up in enterprise or the community trying to establish enterprise or the unemployed, be they young or old, who need special State assistance in getting back into the workforce. I do not claim that all of those schemes have been as successful as we would like, but they are in operation. We are experimenting with the various approaches to enterprise and with helping solve the acute problems facing the unemployed, particularly the long-term unemployed who will now be helped by the new training programme and the new social employment scheme giving two and a half days work to people and leaving them free for the remainder of the week. These are commendable schemes. We have a structure established between our industrial strategy and our employment strategy. We have very wide range of supports which are being used, and the Government must take credit for this imaginative approach.
In the years ahead we will have to be far more concerned about the way in which these schemes are administered than we have been heretofore. Bodies such an AnCO, the IDA, SFADCo and so on have not been sufficiently closely monitored in what they are achieving for the money they are getting. We have been too willing to say that employment is the key problem — therefore let us throw a lot of money at it — and not sufficiently discerning to see where the best results are coming from. I know that the likes of AnCO produce figures showing the percentage placement, but I suggest that that is by no means an adequate test of the success of a training programme. One could get 100 per cent placement by putting on a course for which one knew in advance that there would be vacancies. We must be much more discerning about AnCO's activities in ensuring that the training given is reaching an adequate standard and can be certified. We must make sure where people are placed that these jobs are genuine, long term jobs rather than perhaps having those people shunted into a work experience programme being run by some other section of the Government system.
We must go back after six to eight months to clarify whether the people who have been trained are still in employment and to make sure that their training does not fall by the wayside and become lost. It is important that Government Departments, in monitoring these promotional agencies, should do the monitoring themselves and not be content with receiving reports from AnCO or the IDA on the number of approvals, job placements and so on. It is important that the qualitative aspect, also, be investigated. The same applies to the IDA and other promotional bodies as to AnCO in the labour area. As recently as yesterday, the public spending committee were speaking to SFADCo. It was a cause for concern that it did not seem to be common practice in the Department of Industry, Trade, Commerce and Tourism and in SFADCo to report on a regular basis as to how a grant approved a number of years ago had actually performed in relation to the number of jobs that were created, the amount of output that was created relative to what was expected.
It was again a cause of concern that SFADCo can decide on an allocation of funds to building and then discover that, due to changes in plan by companies, the cost escalates. That is not acceptable, either. If we decide that we are willing to give grants to a certain level for a certain project, it should not be possible, due to bad planning by a company, for the State to be caught for a larger bill than was originally intended. In short, Government Departments must take a much tighter control of the various agencies and various programmes being set up, to make sure that we are managing our scarce funds for results.
I would also put a few suggestions as to how we could improve the existing aids to employment creation. It is commonly said that PRSI is a 20 per cent tax on employment and this is true. It is a wrong incentive to have in our system. However, I cannot see that we can quickly dismantle a system which is bringing into the Exchequer of the order of £1,000 million a year. To shift that sort of money into some other section of tax code would cause fearful adjustment problems, in the short term at any rate. What we need to do now is to go for a vigorous extension of the marginal employment subsidies — what is known as the employment incentive scheme. This scheme gives employers expanding their workforce concessions by way of subsidy. That would amount to a short term, selective reduction in PRSI for such companies. There are problems that one may favour one company which happens to be on the crest of the wave over others. That is a difficulty.
We must take our courage in our hands and say that if we are going to provide labour subsidy, we will provide them to the companies able to expand, that we will give that money on a selective basis to those who are expanding. I would ask the Government to look at the possibilities of vigorously extending that scheme. At present it is payable on a relatively small sum, I think about £30 normal payment and that is for the long term unemployed. It is also only payable for a relatively short period and only for two employees at a maximum. They are restrictions which could usefully be relaxed. This scheme could become an important way of expanding employment in the economy.
A second area where we should consider a new initiative involves the National Development Corporation. That corporation will be looking at new schemes on a green field basis. We should also be aware that we have tremendous expertise in our existing commercial semi-State companies. Aer Lingus have shown the way. They have developed new enterprise out of their main stream, which is the air business. They have moved into other ancillary activities, like providing computer services to other airlines and so forth. Their approach is commendable. We should tell the semi-State bodies that new enterprise is something that we would like to see them developing. That is not currently part of their mandate.
It is welcome that the Government are going to clarify the mandate of semi-State bodies. It would be well worth while saying to these companies which have well trained staff that they too, like Aer Lingus, should be thinking of satellite activities which would provide good employment opportunities. We should not rely exclusively on the National Development Corporation, which will be operating in a green field situation and might not have the skills and knowledge of particular areas that some of the other semi-State bodies have.
There is just one other point on employment that I see as a gap and that involves the whole area for new people setting up, particularly in the service area, not the manufacturing one. Under the Youth Employment Agency there is a £3,000 guaranteed loan available for people under 25. That is a useful approach to helping people who might want to establish a service which would not require a lot of money to get going, but who do not have the security to ask funding of a bank. It would be very useful to look at the possibility of similar guaranteed loan schemes where the Government would be a guarantor, not necessarily paying interest subsidies. It would give people the opportunity to establish in service areas. The service sector has been the Cinderella of State aid for a long time and we must bear in mind that the outlook at present, internationally, is that agriculture and industry are not going to be the generators of employment that we would like them to be. We must now develop a strategy for services, as well as for the output producing sectors. A start in that direction would be the possibility of guaranteed loans for establishing in business.
I should like to move on to the question of public spending. It is a serious cause of concern that after four or five years of successive Government trying to tackle the problem of growing public spending, public spending is still creeping up, admittedly at a slower rate, both in absolute, real terms and as a proportion of GNP. That is of much more serious concern than the question of deficits that tends to be the centre of attention in discussing public finances. The progressive growth of spending means both borrowing and taxation in the long run. It is my belief that it is now far more important to tackle the continuing growth of public spending. Current spending, as a proportion of GNP, is approximately 56 per cent recorded, capital spending approximately 11 per cent. In addition we must add £1,000 million on social insurance contributions paid out in social welfare that do not normally come into Government spending figures. Therefore one is talking about another 5 per cent there.
I should point out that there are understatements in the true liability on current spending sides. These understatements emanate from the fact that we do not fund pensions of public servants. If we were, we would need to have a fund now of £6,000 million, the annual servicing of which would be of the order of £9 million. That is something we do not count currently as part of the true liability in Government spending. Nor do we fund depreciation on past investment. If those adjustments were effected the true level of State spending, as a proportion of GNP — instead of the commonly quoted 50 per cent figure — would be about 77 per cent or 80 per cent liability by the Exchequer. That is a very serious cause of concern in this economy, that the level of public spending is now effectively .75 per cent of all output produced in the country. We must begin to turn back that tide.
It is interesting to ascertain from where the growth in public spending in real terms has emanated over the last five years. The large sources of growth are not pay and employment in the public sector. They have been successfully controlled over the years. The large sources of growth are in the other areas, particularly interest payments, social welfare payments and other areas of public spending. In themselves those features of the growth point to what we must do. We must examine how we can control the growth of the interest. We must look also at the way we administer our various spending programmes on health, education, social welfare, through to the economic side of the balance.
I have been privileged to be a member of the Committee on Public Expenditure of this House. I would say honestly that the level of grasp of how one controls public spending in many of our Government Departments is way below what is needed. I mentioned already the inadequacies in control of Departments, say in the Departments of Labour and in Industry, over various agencies operating within their responsibility. The same is true of the Department of Fisheries, the Office of Public Works and other Departments in the way in which they control operations carried out under their responsibility. I am convinced that if we are to begin, not just to turn back the level of public spending as a proportion of GNP but to get some real value from public spending, to generate economic growth therefrom, in each and every one of our Departments we must tackle the lack of appreciation of what they are endeavouring to achieve and how they set about it. I do not intend to go into those details.
In the Committee on Public Expenditure, over the years we shall be afforded an opportunity to pinpoint deficiencies. I see enormous difficulties in efficient administration in all our Departments. While none of us would support much of the economic policy pursued in the USA and Great Britain we do have something to learn from them in the commissions they have established to investigate efficiency in specific areas of public spending. That approach, adopted by the Grace Commission in the USA and the Rayner scrutinies in the United Kingdom have much to commend themselves to a country like ours with very high public spending and, very often, not sufficient expertise with in our Government Departments to tackle the problems of managing the resources placed at their disposal.
We also have a problem in the Department of Finance itself in their approach to the economy on the spending side. It seems that whenever there is discussion on spending economies the types of proposals put up to Governments by that Department always are in the nature of extra charges for existing services or cuts in various subsidies, such as home improvement grants or whatever, going across the counter to the public. Never do economies seem to focus on the main body of public service activity. In our present accounting system the mere fact that increases in charges are shown up, not as taxation but as reducing spending, is wrong. In other words, if one just looked at the aggregate figures, every time there is an increase in charges it looks as if we are cutting spending. That should not be. We should not allow that to continue within our system of accounting because it encourages Departments to look on increases in charges as a way of cutting spending when it is quite blatant that they are not. Increases in charges are much more akin to taxation than to cuts in spending. It would be well worth our while amending that provision, in accounting terms, in Government Departments. I hope the Minister will bear that in mind.
Similarly, it would be well worth our while imposing interest on various Departments that undertake capital projects. For example, in the health area, the Department of Health do not fund the interest component on the construction of their hospitals. Then we have the situation in which the Department do not look on such things as delays in opening as a real charge on their budget because it is swallowed up in the general body of the Exchequer. That is a wrong incentive to be giving Government Departments because interest does constitute a real cost, delays constitute real costs and interest should be strictly imposed or any Government Department undertaking any capital project. If delays occur, if they fail to plan adequately or whatever, then they should carry the can in their budget. It should mean also that, when the preparation of Estimates takes place and there is jockeying for position for spending, they should have, if you like, that albatross around their necks for past mistakes with regard to efficiency in the way they planned and executed their investment ideas.
Public spending control constitutes one of the key areas. It is not merely what Governments are often accused of when they talk about spending controls: it is not a question of That cherism, monetarism, or whatever. If public spending is to be a source of generation of growth in the economy, if it is to contribute to improving the possibility of employment in the economy it must be rigorously controlled and scrutinised and we must reap the best results from it. That is an area to which a very high degree of the public's and the politicians' attention must be devoted in ensuing years because without that approach to public spending we shall have the continuing, creeping growth of spending as a proportion of income that is not diminishing adequately. In turn this means that in the medium to long term we will face very high interest rates and borrowing levels. We must knuckle down to getting better value for the State throughout our public spending programmes.
I understand it is agreed that should Deputy Haughey require to exceed the prescribed time of one hour there is no objection within reason.
The Government could not have been in any doubt about what the majority of people wished this budget to do. Practically everybody outside that small cabal of right-wing Ministers and monetarist economists who are slowly destroying our country clearly see what is needed and what should be done. There is almost universal agreement outside that blinkered circle that the policies which have been implemented over the past two years have failed and that evidence of that failure becomes more manifest every day and that a radical change in direction is essential.
The three problems this budget should have confronted are first, the ominous rising tide of mass unemployment with all the social misery and degradation that entails, second, the crushing burden of taxation which is making life impossible for countless thousands of individuals and families and, third, the serious poverty and hardship that exist across the entire community. Once again we are presented with a budget that fails to confront these three central crucial problems or initiate any worthwhile or significant action in regard to them.
A few key figures show clearly and starkly how completely present Government policies have failed. The current budget deficit, the amount which has to be borrowed to run the country, will be £200 million more in 1985 than it was in 1984, going up from £1,039 million to £1,234 million. Our national debt rose from £12.7 billion to £18.5 billion in the past two years and will go to £21 billion by the end of this year. Our foreign debt two years ago was £5.29 billion. It is now practically £8 billion. Unemployment has climbed to a catastrophic 234,000. One person in every six in the labour force is now out of work. It is estimated that up to 35,000 people emigrated in the last two years.
The past two years have been the two most disastrous years in the economic life of the nation since the depression of the 1930s. The high-tax policies of this Government have contributed greatly to accelerating a deflationary spiral in the economy. Factory and business closures have followed each other in a dismal procession; as demand has slumped dole queues have lengthened and taxation has reached intolerable levels. Whatever about the artificial world of economists and Government Ministers the public see clearly that all the unemployment, hardship and cutbacks inflicited on them have been for nothing and the public finances are worse now than they were two long hard years ago.
Surely the lesson from these figures should have been clear and should have dictated a totally different type of budget this year. The policies being pursued have failed to achieve even their own limited monetarist objectives and unless they are reversed and reversed quickly, the damage done to our economy and to the fabric of our society will be irretrievable. In this situation it is cynically dishonest for the Taoiseach in particular to talk about "restoring national solvency", "turning around the economy", or "light at the end of the tunnel."
Even at this late stage, this Government could retrieve some shared of credibility and honour if they had availed of this budget to frankly and honestly admit that their policies have been totally wrong in Irish circumstances and that they now propose to scrap them and make an entirely new beginning.
While the official figures show unemployment at its highest recorded level of 234,000 persons unemployed in Ireland today the Chairman of the Youth Employment Agency for one believes that it is a great deal higher still. The closures and the bankruptcies continue unabated and redundancies at 31,290 in 1984 were the highest ever recorded. Will the Taoiseach and Government Ministers even now stop political posturing and acknowledge that a rise of 17,000 in two months on an unemployment figure which is already well over 200,000 signals the danger of a total economic collapse?
The Government, we are told, held a two day meeting recently to try to find their bearings but, whatever from that meeting took, the truth of the matter is that the Government do not know where they are or what they are at. They have lost any sense of direction they ever had, and are reduced to the pathetic position of producing an economic policy and a budget whose sole objective is political survival
The document Building on Reality, is already discredited, the unemployment figures at 234,000 are considerably higher than the 220,000 which that document projected for the end of last year. The stipulations in the document in regard to public service pay have been made meaningless and irrelevant. Interest rates have gone up and are staying up, not going down. Sterling has disimproved significantly relative to the dollar and continues to disimprove.
There is still apparently no agreement on the basis for the establishment of a National Development Corporation. We recently had the ridiculous spectacle of an unreal ideological debate about an irrelevant body disposing of assets which no one can be sure it will ever create.
Public capital investment instead of being increased by the £100 million promised in the Programme for Government has been ruthlessly cut back by far more than that amount.
The youth employment levy has not been used to create new employment, but largely to replace previous exchequer funding of AnCO and other agencies. We learned recently that the fund has been illegally raided again in this budget. Where is the social employment scheme promised in Building on Reality?
Government Ministers and their spokesmen have preached about fiscal rectitude and getting the public finances in order. The Minister for the Public Service in an incredible piece in the Irish Independent last Friday indicated that this had been achieved. In fact, the results have been truly dismal, despite the harsh policies pursued, policies which have had a disastrous impact on every sector of the economy, on employment and on the living standards of individuals and families. For this year 1985 the current budget deficit will be £1,234 million or 7.9 per cent of GNP.
According to the Government's document Building on Reality the deficit will be brought down to 5 per cent of GNP in 1987. Does anyone now really believe that it will be? To do so would mean coming down a full 3 per cent of GNP in two years. After this budget there is now no possibility of its doing so and in regard to that crucial aspect also Building on Reality is way off target and totally discredited.
In Building on Reality the Government set their own figure for the current budget deficit for 1985, a figure not related to any particular criteria or economic standards. They set a very large figure for the deficit around £1,200 million. That is an enormous deficit which they now claim credit for achieving. This is a new form of economic achievement. You set your own targets and then praise yourself for having achieved them. Coalition spokesmen are going around saying: “Well at least the Government balanced the books”. They have not. The annual accounts will be unbalanced in 1985 by the staggering sum of £1,234 million; the biggest deficit ever. Let us be clear about that: £1,234 million is the biggest deficit ever in amount and also one of the biggest deficits ever in the amount of GNP, 7.9 per cent of GNP. In 1981, for instance; the current budget deficit was 7.7 per cent of GNP. In 1985 it will be 7.9 per cent. Where is the improvement in the public finances? Where is fiscal rectitude today? As I have already said, it is a dead political duck.
Despite the savage cutbacks in capital expenditure and investment, the national debt has soared. During the last two years of Coalition the foreign debt has increased by nearly £3 billion, an amount almost equal to the entire foreign debt incurred up to mid-1981, while the total national debt went from £12.7 billion to £18.5 billion.
The indirect devaluation against the floating sterling pound in 1983 was a serious mistake by the Minister for Finance which was the principal cause of adding £1,700 million that year to our foreign indebtedness. It was then compounded by the decision to halt borrowing in the EMS currencies, and to switch our foreign borrowing to dollars and yens. This was done in the unwarranted belief by the Minister and his advisers that the dollar was going to fall in value. That disastrous error has added hugely to the size of the debt we have to repay. The whole point surely of belonging to a fixed exchange rate system like the EMS was to avoid that sort of thing happening. What the Minister and his officials did was to gamble irresponsibly with the nation's finances, and lose.
But the real losers, of course, are those who depend for their income maintenance on the State. The halving of the food subsidies in 1984 can be recorded as a matter of history as being directly due to the mistake made by Deputy Alan Dukes, Minister for Finance, and his advisers in handling the national borrowing programme.
In 1984 the Minister for Finance decided to switch most of his borrowing to the domestic market. I believe this was done for no better reason than because they had for party political purposes preached so much about foreign borrowing. The result was a 2 per cent rise in domestic interest rates at the beginning of December, as a result of which we now have a real rate of interest of 8 per cent to 9 per cent which is unprecedented and seriously damaging to the economy. Why should people risk investing in productive activity, when they are assured of a growth in the real value of their assets by simply depositing their money in the bank? No amount of special schemes, grants, or tax incentives will overcome this massive deterrent to risk investment and there is no sign of the much promised early fall in interest rates. Indeed the latest news in that regard is that not alone will interest rates remain at the present penal level for industry, commerce and trade but, in addition to what the Minister foolishly did in his budget, the Government will be responsible for pushing up mortgage rates for unfortunate hard pressed homeowners.
By a unique combination of devaluation, badly timed switching of currencies, and excessive domestic borrowing this Government have imposed a great unnecessary burden of disadvantage on the Irish economy.
Before we come to this year's budget, I think we ought to look at what happened to some of the special features of the last budget so that with benefit of that experience we can assess and evaluate some of the propaganda elements in this budget.
There was much trumpeting on budget day 1984 about an extra £18 million which in fact amounted to a mere 1 per cent increase in capital expenditure. What happened to that increase ? Not one extra penny was spent in 1984. In fact the outturn was even £5 million less than the pre-budget forecast, never mind the £18 million.
Then there was much made in the 1984 budget also of the income tax relief for long term risk capital. The impact of that scheme has been absolutely minimal, involving no more than a handful of modest investments. There were fairly widespread expectations that the scheme would be reviewed and improved this year but it has not been. It was not even mentioned. Why not? Was it never more than a piece of window dressing never seriously intended?
On the welfare front we had a great outpouring of propaganda about the Government's intention to introduce a family income supplement scheme. It was announced in the Coalition's 1982, 1983 and 1984 budgets, and was supposed to represent convincing proof of the Government's social conscience. That no doubt was why it was not introduced till November 1984, and by that time the Government had already made it clear it was going to abolish it again, by 1986. Only 3,000 out of 35,000 eligible persons have applied.
In so far as the 1984 budget therefore is concerned the track record is not good, with two major flops, the risk capital relief scheme and the family income supplement scheme and a cutback effected even on the lower level of capital investment promised in the budget.
I would now like to look at some specific aspects of the present budget. It is nonsense to talk, as one of the more exuberant pro-Government leader writers has actually done, about this budget being mildly reflationary. It is nothing of the sort. It is deflationary, the full extent of which only time will show.
The principal deflationary element in the budget is the reduction in the Capital Budget which follows the pattern set in the two previous budgets. Before we left office, we published our capital investment programme for 1983 which totalled £2,135 million. This was reduced by the Coalition to well under £1,800 million in both 1983 and 1984, which amounts in real terms to a cutback of at least one third.
Total capital expenditure, both programme and non-programme, will be actually reduced from £1,916 million in 1984 to £1,851 million in 1985, that is, by £65 million and, of course, by even more in real terms. This policy carried through to 1987 is in fact the key element of Coalition fiscal policy and is counter, of course, to the international advice the Government are receiving. Borrowing is to be reduced by the device of squeezing investment, which in effect means even more unemployment.
Total expenditure, capital and current, will rise by 6½ per cent in 1985 and a significant portion of the rise, perhaps 3 per cent to 4 per cent, will go abroad in interest payments. The take in receipts on the other hand will rise by 7½ per cent. The Minister is in fact taking £400 million out of the economy in increased taxes, while the increase in supply service and capital expenditure is only £256 million. So up to £140 million or £150 million net is being taken out of the economy or close on 1 per cent of GNP which will have quite a significant deflationary impact in the economy.
Another important deflationary consequence of Government economic policy is the recent rise in interest rates of 2 per cent. This has resulted directly from Government borrowing policies.
It is therefore silly to suggest that the budget is some kind of response to Fianna Fáil's demand for selective reflation. There is no element of reflation in this budget. The budget continues the deflationary process that commenced with the 1983 budget and has been maintained with such disastrous consequences since.
The budget did not reduce taxation; it did not even restrict the growth in taxation to the rise in inflation. Despite specific undertakings given by the Taoiseach and the Minister for Industry, Trade, Commerce and Tourism indexation has not been introduced. At this stage most people have done their own calculations, or read the calculations done for them in the newspaper columns. With any sort of a pay rise the vast majority of taxpayers will be paying more tax. There are no real tax reductions for the lower paid. Indeed, there is no gain for the working family or for those on social welfare in the budget. It simply means more hardship in the year ahead and for the future.
The only measurable relief is at the top end of the scale, although even after the budget personal taxation in the upper middle ranges remains much heavier in Ireland than in other countries. This situation is the product of the 1983 and 1984 Coalition budgets. This 1985 budget does not, in fact, undo the effects of failing to provide any tax relief in those two years. The Coalition imposed the 65 per cent tax rate two years ago. Now they want to claim credit for removing it, thereby admitting that it was a mistake in the first place. The other changes were only cosmetic and of no real benefit to anyone.
The reduction in the number of VAT rates is welcome, but it should be remembered that it was this Minister for Finance who introduced the ludicrous rate of 35 per cent and only last year added two extra rates, 8 per cent and 18 per cent, to the system. Does the Minister really deserve our thanks for correcting his own mistakes? Does he want us to applaud him for undoing the damage he has done over the last two years? If the VAT rates are simplified now it is because he made them complicated in his two previous budgets.
If we look at what has happened to VAT in the three and a half years since the disastrous Coalition budget of July 1981 we see that the 10 per cent VAT rate has become 23 per cent the 25 per cent rate thrown in, and the 3 per cent VAT has become 10 per cent with the addition of clothing, footwear and fuel.
At the end of the day what matters is that VAT will take £122 million more from consumers in 1985 than it did in 1984. Despite all the propaganda inside and outside the Government that is the reality. What is needed is an actual reduction in the weight of taxation. A reduction in personal taxation must be the priority, but there is also scope for reduction in indirect taxation which would be largely self-financing. We accept that the Government have accepted some of the economic arguments we have been making over the past two years. They have accepted that the 35 per cent VAT was disastrous and was leading to severe job losses. They have accepted the case we made for reducing VAT on newspapers. They have accepted that the limits have been reached as far as excise duties were concerned, and in the case of spirits they even made some reduction. But there is much that they have not accepted and which could have been done with considerable economic benefit.
I am told that in the case of some theatres they would prefer that the 5 per cent VAT rate would be maintained because the change made will be to their disadvantage. This arises from the decision of the Minister for Finance to exempt their activities rather than zero rate them. Can they get nothing right? Can the Minister for Finance, even when he means well, get nothing right?
The pensioners, the unemployed and families generally have been badly treated by this Government since they came into office and their general circumstances allowed to deteriorate greatly. The substantial real increases given by Fianna Fáil in each of the years 1980 to 1982 have been used as an excuse for a clawback in social welfare increases from 1983 to 1985. The miniscule increases given this year, 6 per cent and 6½ per cent have been deferred to 11 July, which is a way of defrauding people of part of that increase. The double payment to the unemployed at Christmas has stopped, and short term welfare benefits have been reduced. There is no increase in children's allowances. Pay-related unemployment benefit is being reduced. We in Fianna Fáil had made considerable progress in steadily improving the position of the poorer and weaker sections of the community and we are proud of that, but the Government have cruelly and heartlessly reversed that progress.
In many ways the greatest single detrimental aspect of this budget, the most serious and far reaching for the economy, is its treatment of the building and construction industry. This vital area of this economy has been one of the principal victims of the Minister's misguided budgetary policies. In budget after budget the Coalition have hammered this key sector of the economy. Indeed, at times it seems that somewhere in the Government establishment there is an inexplicable malevolence towards building and construction as an industry. Every week that passes sees another few building and construction firms closing down so that the capacity of the industry is being savagely decimated and its reservoir of skills and experience seriously depleted.
Today employment in the building industry is less than 60 per cent of what it was in the summer of 1981. Public capital investment in building and construction has been drastically reduced. Private investment has almost dried up. The section 23 incentive has been abolished. This year the budget has increased the tax on the building societies which is now leading to a crucifying rise of 1½ per cent to 2 per cent in house mortgage interest rates.
This budget provides, unbelievably, that young couples attempting to buy their first home now have to face an increase in VAT from 5 per cent to 10 per cent. The average price of a new house in the Dublin area for instance is £38,500. A purchaser will therefore have an extra amount of £1,925 in tax on such a house. Even if the purchaser is eligible for the additional £750 grant there will still be an additional £1,175 to be paid by the average purchaser. This has caused consternation in the building industry and represents a body blow to this house-building sector of the industry in particular. In the case of thousands of young couples it will put a house of their own entirely out of reach for the foreseeable future.
Many firms throughout the country which have been barely hanging on see this as the last straw, the final finishing blow. This catastrophic decision to place this exhorbitant new tax on houses, in particular, should not be proceeded with. It is both economically unsound and socially unjust.
It has already been pointed out that the budget makes no contribution whatever toward the improvement or development of the agricultural industry. There is a great anxiety today in all sections of agriculture about the future and uncertainty about Government policy and intentions. The dairying industry in particular is in a state of chaos and confusion and dairy farmers literally do not know where to turn. The disease eradication situation is a cause of serious worry and the level of compensation for reactors is totally inadequate.
The super levy has been grossly incompetently and inefficiently handled from the start. Wrong figures were submitted to Brussels, then the case to the European Court was wrongly presented. There is widespread confusion and all Members should realise it, about how the levy is going to be implemented and how the quota system is going to work. Farmers cannot get reliable information from anyone about exactly what will happen. The situation is also becoming very divisive between farmer and farmer. It is our intention to seek a Dáil dabate on the present state of the dairying industry in order to try to ascertain the facts and have them clarified for a very worried and uncertain farming community.
Capital spending for the development of agriculture has been cut by nearly a half in real terms since 1980-82. The whole situation regarding farmer taxation is once again uncertain, back in the melting pot, following the announcement of the land tax proposals. It would now seem that the farming organisations are opposing the introduction of the land tax on the one hand, while on the other no arrangements are being made by the Government to actually bring it into operation.
The motor trade has been experiencing a very difficult period over the last two years. They might have expected some measure of assistance in this budget but instead the industry has been put at a further disadvantage and its capacity to provide employment seriously impeded by the increase in VAT on repairs, no reduction in excise duty and the increases in petrol and car tax.
The Government have in this budget maintained their record of bungling every important issue. They provided for an additional grant for house purchasers. At the same time they made sure it would mean nothing by greatly increasing the tax payable on the same house. They purported to give some tax relief to home owners but at the same time more than cancelled out any benefit from such relief by acting to push up mortgage interests rates. They abolished VAT on theatre and live performances, but have done it the wrong way so that theatre managers are actually screaming to have their 5 per cent VAT rate back. They extended optical and dental benefits to married pregnant women, whose husbands are insured, even though, as a leading gynaecologist has pointed out, pregnant women do not tend to have active dental treatment and the cost of visiting a doctor to get a certificate of pregnancy would cost almost as much as they would save.
They reduced VAT to stop cross-Border shopping, but added a 10p incentive to the already huge gap in the price of petrol.
These are only a few examples of the inability of this Government to do anything right but rather make a mess of anything they put their hands to.
More and more Members of this House have noticed that when the present Taoiseach starts to protect his integrity, shout loudly about honesty and hurl abuse at others, it is time to look carefully at the small print and to examine the figures in detail.
I think we should all look carefully at the makeup of the budget figures and the arithmetic of the budget. I want to direct the attention of the House, the general public and especially the attention of financial editors and commentators to one very suspicious group of figures which are included in this budget.
The Government had set aside £20 million in 1985 for public service pay. For some time before the budget the strident message was given out again and again by the handlers that this amount was all the Exchequer could afford and that there could be no departure from that limit. Some short time however before budget day, it was decided to abandon this posture and to accept the arbitrator's public service pay award even though this meant an additional amount of expenditure of £108 million in 1985.
Let us put aside at this stage the fact that this represented a major turn around in Government policy and look only at the budgetary implications of this decision. The Government were forced at the last minute to find an extra £88 million, that is, the £108 million less the £20 million already provided for. Now if we look at the budget we find a strange coincidence. There are two particular figures in the budget table which are not measured exactly but which have to be estimated. One of these is revenue buoyancy and the other is estimated savings on staff costs. In the budget table revenue buoyancy is put in at £58 million and the savings on staff expenditure are put in at £30 million. By an extraordinary coincidence these two estimated amounts give exactly the amount which is needed to make up the extra £88 million needed to pay the arbitrator's award. What an extraordinary coincidence — or is it?
There is another aspect of the budget table, and the arithmetic set out in the table, to which I believe it is also necessary to direct attention. For the first time ever as far as I can recall there is included in the budgetary arithmetic in order to make the figures balance a sizeable sum of £28.6 million for extra cuts in expenditure which are not outlined anywhere. This is a very dubious procedure. Until this one, the budget speech and the budget tables every year disclosed the full picture — everything was revealed on budget day in the budgetary documentation. This year however this is not the case. We have not been given the details of cuts in the public expenditure which amount to the sizeable sum of £28.6 million. A week after budget day these details are still not being disclosed even though we have frequently pressed for them. If this information and the details of this amount of cuts is available, why were they not set out on budget day or since? We must conclude either that they have not been made and that there is no list of specific cuts, or alternatively that the Government are seeking to avoid the unpopularity involved in disclosing them. Either way it amounts to nothing more or less than trickery.
The amount provided for in the budget for unemployment is based on a figure of 217,000 which has already proved to be inadequate. I want to suggest that these three elements — the extraordinary coincidence of the £88 million, the nondisclosure of the details of the £28.6 million of cuts in expenditure and the under provision for unemployment — cast serious doubts on the authenticity of this budget, its arithmetic and its presentation. As I have said, the blustering of the Taoiseach in the House when we were debating the budgetary resolutions created the very distinct impression of a man trying very hard to cover up something because he had something to cover up.
This budget is not a plan for economic recovery; it is not even a plan for the economy. It is an attempt by clever manipulation of the different elements to create an impression which will moderate some of the rising criticisms in the Fine Gael and Labour backbenches and restore some political morale in both parties. That is what it is all about. This budget owes more to the little man who carries out the public opinion polls than it does to the economists in the Department of Finance, that is if there are any economists left in the Department; I believe they have all resigned.
Most people hoped that the budget would do something major about unemployment and providing jobs, but there is nothing in the budget that will actually create one single job or provide a glimmer of hope to the countless thousands anxiously seeking them. It should be clearly understood that outside the public sector the jobs we need must in practice be provided by business firms and commercial organisations. Despite this the extraordinary fact is that in a variety of different ways businesses, large and small, are at present hindered and discouraged by Government policy and actions from employing more people.
The most important determinant of business performance is the environment in which it has to operate. The Government's own short-lived Planning Board had commented: "A favourable climate for economic activity is far more important in determining the level and pattern of industrial output and employment than the set of measures that are included in industrial policy"—page 205.
The Commission on Taxation in their "incentives" report notes that the level of economic activity is affected much more by the general economic policy of the Government than by any set of specific measures labelled "incentives". Government decisions about public expenditure, the overall level of taxation money supply and interest rates in particular, have more fundamental effects on economic growth than any incentives which may be provided. The report states that, if general economic policies create a climate that is unfavourable to economic expansion, incentives to compensate cannot provide a long-term solution. In that quotation we have the whole ethos of the mistaken economic policies of this Government.
Despite these clear-cut pronouncements this Government have created the most hostile environment for economic expansion in the past 30 years. Government policies in countless ways are actually adding to the difficulties of business and impeding firms from expanding employment. Their contribution to that environment has been to decrease demand by reducing expenditure and increasing taxation while at the same time stifling enterprise through high rates of income tax. At present the overall business environment is much worse than it need be because of the overall economic recession or the state of the public finances. This unfavourable environment positively militates against natural growth and the normal developments of business opportunities and the creation of jobs.
No effort is being made to eliminate or even mitigate the factors which act as a disincentive to employers to actually employ people. The manner in which PRSI is operated, for instance, has been frequently indentified as one such disincentive.
A good industrial relations situation is another essential element for business growth, but despite promises and lip service absolutely nothing is done in this area. The relationship between this Government and the trade union movement is one of confrontation rather than consultation. Furthermore, by their shameful and despicable treatment of a dedicated group of their own employees in Irish Shipping they have set an appalling example to private employers.
Irish business and in particular manufacturing industry are being seriously affected also by high interest rates, but Government financial policies take no account of this aspect and in fact, as I have already pointed out, have actually pushed interest rates up.
There are other negative features of the present environment some of which are not widely recognised. The penalties they impose are no less serious. The conference on small firms held as part of the European Year of Small and Medium Enterprises in September 1983 named, and I use the words advisedly, "imposed paperwork" as a business deterrent and called on Governments "to implement a paperwork reduction programme for SMES within two years". I would like to suggest the establishment of a task force drawn from the people involved in CII, CTT, Government Departments, and so on, to devise a simplified set of procedures and documentation to eliminate this major bureaucratic bottleneck.
We would have made this budget into a national economic action plan, combining general economic policies favourable to growth with specific individual sectoral programmes and projects. We see an urgent need for selective reflation. The degree and the tempo of reflation is a valid subject for debate and I wish to totally reject suggestions that Fianna Fáil are interested only in recklessly raising the level of demand. We are not. Our reflationary efforts would be carefully anchored to sound viable expenditure proposals. We are, in fact, simply acknowledging the desperate need there is to reverse the current appalling downward spiral into which present policies have pushed us further and further.
In Fianna Fáil we remain convinced of the scope there is and the need that exists for selective reductions in indirect taxation, that there are areas in which the amount of revenue lost by the reduction would be substantially if not totally recouped by the increase in the level of activity generated by the reduction in tax. The situation in the Border areas where substantial revenue was being lost by the Exchequer because of the high VAT and excise rates in this part of the island is clearly a case for an intelligent application of this principle. We cannot understand why the Minister having started the process and, as far as we can see, carried out an entirely successful experiment in regard to spirits, did not take his courage in his hands and go much further along that line in the budget. There was in our view in this budget scope for substantially more cuts in indirect taxation in addition to spirits. We must ask whether the Government have fully explored all the possibilities for such reductions and analysed the relevant data and not just the revenue implications in isolation but the economic considerations as well. If they have then I believe this analysis and the conclusion should be given to the House, so that we could at least see that the Government had done their work and had some basis for deciding not to proceed.
It is increasingly clear to us that the present level of personal taxation is seriously discouraging both enterprise and effort. We are firmly convinced that with imagination, careful analysis and selection there is a scope for reductions in taxation which would have entirely beneficial economic results and which would reduce the tax take by less than the initial cost of the tax cuts. To recognise this, however, requires the ability to transcend the present fixation with statistics and arithmetic and consider the dynamic consequences and possibilities of specific alternatives, particularly in the form of tax reductions.
Careful reduction of indirect and direct taxation can certainly help to reverse the downward trend in demand and promote specific forms of worthwhile economic activity by encouraging enterprise and initiative.
We have consistently argued that capital expenditure rigorously evaluated in terms of future returns is a vital necessity for a recovery strategy. This view which again sets an emphasis on sensible policy evaluation and decision making rather than expertise in book balancing and arithmetic is broadly supported by the recent NESC comments on the Government plan. The National Planning Board have also concluded that foreign borrowing is an appropriate means of financing productive investment by the public sector. That is a very important conclusion. Such expenditure has the double merit of improving the efficiency of the economy in, for example, raising infrastructure quality and directly employing workers in construction projects with high domestic economic content. Any construction activity has the crucial merit of immediate and direct employment creation. Carefully and prudently selected projects would also facilitate a rise in the long term economic growth rate.
As a matter of urgency it is necessary to embark on a programme of capital investment as a shortrun measure to boost economic activity and raise employment but with the added criterion that it improves the long term potential of the economy.
The extension of the natural gas grid to all major centres which should be undertaken immediately is an excellent example of what Fianna Fáil have in mind in regard to capital development and borrowing for productive capital purposes. I do not know how any economist or official in the Government can possibly argue against the immediate all-out expansion of the natural gas grid. All over the country, there are forms of industry and business enterprise which would benefit immediately from having natural gas available to them and the original capital expenditure would be adequately financed. It is typical of the sort of mental block that the Government suffers from that they are not proceeding immediately with that important work of national development.
It is also necessary to consider seriously an accelerated programme of local community social facilities for young people. The returns from such projects are less direct but are real nonetheless.
The nature and type of the specific projects can, of course, and indeed should be the subject of debate but what is beyond doubt is that such potential projects exist in the tourist area; in high technology; in the energy field, in food processing, engineering and in eliminating infrastructural bottlenecks and roadblocks. Once again we must ask if the Government have specifically considered fully and in the round an injection of about £200 million in carefully evaluated capital projects having full regard to the beneficial impact on employment and economic activity which would follow and the return from income tax and PRSI and savings in unemployment payments which would arise.
We need a more positive approach to industrial policy. Our present approach is passive. The State provides various schemes of assistance, grants and incentives and then we hope that someone will come forward and take them up. We must be more specific, selective and active. We should, for instance, establish a product identification centre, a body whose task it is to investigate and identify particular products, especially products related to our national resources, or arising out of new technology. A specific Government agency should then be responsible for seeking out individuals or companies to manufacture these products.
The time has come for another major national effort to develop and expand the potential of the tourist industry. An essential part of any such programme, of course, is a major revision of the entire taxation situation and not just the limited cuts made in the budget. But, as in manufacturing industry, there should be a specific, selective approach. It should be the responsibility of Bord Fáilte to identify specific tourist target groups and put together carefully designed packages for them and centres to cater for them. Suitable areas should be identified and all the necessary amenities and facilities provided to cater for these special groups. What we must aim at is an active policy directed at specific targets and not merely an overall blanket, passive approach.
There should be a new comprehensive look at the potential of our forestry industry with a view to formulating a clear-cut policy with specific economic and employment objectives. There have been enough studies and investigations and papers. What we need now is a policy and the implementation of that policy.
Some years ago in Fianna Fáil, we developed the concept of a national hire agency. I believe that this concept should be reviewed and that such a body could play an important role in the present mass unemployment situation. There are many individuals, groups, companies and organisations who would be prepared to employ people for shorter or longer periods of time, but are not able or willing to undertake all the bureaucratic obligations involved. If there were a body which was prepared to make employees available for particular periods in return for one simple straightforward payment, I believe this could have a significant effect.
The whole position in regard to our labour exhanges, Manpower and AnCO is chaotic. We cannot really suggest that we are serious about providing employment as long as the present structures remain. What is needed is one body responsible for the whole area, which will co-ordinate all the work involved in bringing the people and the jobs that are available together immediately and directly.
Each of our RTCs should establish an enterprise resource centre for local industry and I believe this could be achieved by a re-allocation of existing resources within the college. In each of the RTCs there is a pool of technical knowledge and administrative expertise which should be brought together to bring forward ideas for starting new enterprises locally and supplying management, research and other high level services for local firms.
I believe we should look back to the sort of broad agreement and consensus on national economic and social objectives which were secured in the national understandings of a few years ago and devise some similar kind of mechanism to deploy private sector management, trade union leadership, the scientific establishment, third level education institutions and all other relevant sectors fully behind clearly defined economic policy objectives.
Because there is no coherent economic policy, no clear national economic objectives, nothing with which the entire economic community can identify, the pursuit of selfish sectional interests, at the expense of the economy and the community, has reached alarming proportions. This can, to a great extent, be attributed to the fact that in the right wing philosophy of this Fine Gael dominated Government, employees are not seen as having, through their trade unions, any part to play in economic planning or management. This is a basic and fundamental mistake which must be rectified. If we are to mobilise all the resources of the community to overcome the present critical situation, the full co-operation of the trade union movement is vital.
The national understandings achieved a great deal in their day in mobilising the economic community behind certain specific economic policy objectives. Whether we reconstitute them in the same or some different form today I believe something along those lines is necessary instead of the Government proceeding with their own monetarist economic policies and every day coming into confrontation with some group or other in the community. We cannot achieve economic progress that way nor can we begin to tackle the unemployment problem so long as that position prevails and as long as sectional interests cannot see any overall national objective and are just driven back to pursuing their own narrow sectional group interests.
I recently had the opportunity to visit the two exhibitions in the RDS in Ballsbridge. One was the Aer Lingus sponsored Young Scientist of the Year exhibition and the other was the Craft Trade Fair. Anybody visiting those two exhibitions and seeing the sheer brilliance, the competence and the initiative of our young scientists and seeing the quality, attractiveness and imagination of small firms and individuals engaged in the craft industry in every part of the country can only ask in amazement why a country which has such a wealth of natural ability is not one of the most prosperous in the world. The talent is there, the ability and imagination are there, but the failure is at the level of national economic management. There have been enough studies, investigations, papers, analysis; a recent NESC report lists ten such projects which are ongoing. What is needed now are decisions and action. It is time for a Government, not this one because they no longer have the will or the capacity but the next one, to decide that our salvation lies in our own hands, that what we need is positive action and leadership.
As a nation we can react in two different ways to the present economic difficulties. We can despairingly accept the worst, as this Government have done, keep our fingers crossed and hope that things might get better or at least that they will not get worse. On the other hand we can direct our minds and our efforts towards finding solutions, towards overcoming rather than accepting the constraints and the difficulties. This is the more difficult approach and, of course, one that involves taking risks. It is much easier to persuade ourselves that nothing can be done or that we must wait for all the problems to ease before seriously aiming at the solutions. That is essence the course of action being followed at present.
We are in a self-defeating vicious circle of business closure, rising unemployment, under utilisation of productive resources all of which result in a diminishing tax base allied to a rising bill for social welfare causing further Exchequer difficulties. What is needed is to break out of this trap by reversing the downward trend.
There are many constraints on any strategy to revitalise the economy, the major ones, of course, being the size of the current budget deficit and the balance of payments. But these constraints are not an insurmountable barrier to any attempt at progress as this Government believe. The do not mean that we must wait possibly a long while for time to bring a change. That is not acceptable, it is the worst kind of defeatism to say that nothing can be done and therefore nothing is done. It is in times of difficulty and constraints that creative ideas and positive leadership are really needed.
The right way forward is a combination of selective measures to revive demand and to initiate prudent expenditure programmes. The objective must be to make the economy more efficient and effective and to create the environment which fosters business growth rather than to penalise it. The criterion for public expenditure and taxation decisions should be efficiency and return on investment and not the present totally counterproductive balancing of the books. It is both rational and indeed desirable for Governments to borrow and invest in projects which produce a reasonable return. A classic example is a toll bridge which is in effect self-financing and there are many others which given the right climate of encouragement will manifest themselves to groups and individuals in every part of the country.
This Coalition have been very obviously copying the political and economic policies of the monetarist Government in Britain, though there is absolutely no comparison between the two economies. Britain is a large country, with a long established industry, worldwide investments and above all the huge resource of North Sea oil, providing revenue for the Exchequer of £1,014 billion pounds sterling a year.
Monetarist policies in Britain have devastated even that economy. Because of our relatively underdeveloped economy monetarist policies are creating even more lasting and deeper havoc here.
This Government's mistaken policies, lack of direction and incompetent performance have created a national emergency. Mass unemployment threatens the very fabric of our society and community life. Law and order are no longer maintained over an increasingly wide area. People were crying out for a budget that would do something to restore morale and offer hope for the future. Instead, they have got a dishonest, cynical exercise in political expediency which has already been exposed within a week. Unemployment will not come down. Taxes will not be lowered. The position of the less well off, the handicapped and the underpriviledged and those on lower incomes will be greatly worsened. Benefits that appear to have been given in some directions will be cancelled out before they are even realised.
This budget, with every day that passes, is disintegrating in front of our eyes. The alleged benefits are melting away like snow on a ditch. I doubt if there has ever been a budget which has died such a sudden death.
This Government have ceased to be an effective administration; they have fallen apart. They have broken up into a collection of groups and individuals. The Taoiseach is no longer even nominally in control as he fumbles his way through crisis after crisis. Everyone knows that this is the situation and for a nation depressed by the present and anxious about the future it is a very frustrating and annoying spectacle to have to watch.
People are becoming increasingly angry that this Government are hanging on to office, getting things wrong, making mistake after mistake. There is a mood of sullen anger and resentment in Ireland today that is different from anything ever known before.
To the Taoiseach and the members of the Government, I say: "Listen to what the people are saying. They want rid of you and it is morally wrong for you to continue to use the artificial majority you have in this House to prolong your discredited administration. You no longer have any respect, any authority, any standing, any capacity to formulate or implement positive policies. Your budget achieves nothing; it offers no hope; it is just one more indication of the fact that you are hanging on to office for its own sake without power or purpose."
On a point of order it should be recorded that there has been a deliberate and calculated insult and offence given to the Leader of the Opposition and of our party in that no member of the Government, contrary to all precedent, was here to listen to the Leader of the Opposition.
The Opposition did not manage a great turnout themselves.
It is a long established precedent.
It is not a point of order.
I can well understand the anxiety of Deputy O'Kennedy to intervene for a second time in the budget debate given his rather unfortunate performance last week which was a source of embarrassment to Fianna Fáil members here and to the Fianna Fáil Party in the country and from which he has since been trying to recover. Indeed, the degree of schizophrenia that seems to prevail in the Opposition front bench knows no limits. In every public utterance he has made in recent months Deputy O'Kennedy has complained about the level of funding for State training agencies and various activities under the youth employment levy and, at the same time, his party leader——
Let the Minister of State defend his budget.
——comes here to complain about what he describes as illegal raiding. I will say something about that later. Surely the House is entitled to know who speaks for the Opposition. Is it Deputy Haughey, Deputy O'Kennedy or Deputy Ahern, each one of whom has come in here and adopted an entirely different approach to this matter.
Has the Minister nothing to say for his own budget?
Some of the friends of the Leader of the Opposition in the media——
On a point of order, this is beyond a joke. The junior Minister is supposed to be talking about the budget but he spends his time attacking members on this side of the House.
I am calling on the Minister of State, Deputy Birmingham, to speak without further interruption. Let us have order in the House.
Some of the media friends of the Leader of the Opposition have seen fit at times to describe him as the great survivor and I am sure that title is well merited.
The Minister of State is attacking me now.
For anyone to come here and suggest that the arithmetic in this budget was "dubious"——
It is fraudulent.
The Minister of State should be allowed to continue without interruption.
The Fianna Fáil Government were responsible for the most extraordinary mismanagement of the economy and for them to suggest that the arithmetic in our budget is dubious is nothing short of impudent. Let us look at some of the figures in detail. The budget has been criticised by some Opposition spokesmen on the basis that not enough has been done in regard to the current budget deficit and the complaint has been made that what has been achieved is at variance with what was proposed initially by the Government. That is true. I readily accept that in 1981 and for some time thereafter it seemed feasible to eliminate the current budget deficit by 1987. However, Deputies on all sides will recall the advice of the National Planning Board last year to the effect that the target should be the elimination of the structural component on the current budget deficit by 1987. Adverse international developments since 1981 have made the achievement of the original target of eliminating the current budget deficit not only very difficult but undesirable because of the deflationary effect it would have on the economy. For that reason the Government proposed in the national plan for the years 1985 to 1987 to reduce the current budget deficit to 5 per cent of GNP.
I raise this point because it has been suggested recently by the Leader of the Opposition that somehow the Government's efforts — and, more important, the people's efforts — since 1981 have not been worthwhile because the original target for 1987 will not be reached. Nothing could be further from the truth. Let us look at what has been achieved. First, the public finances are under control. Everyone can remember the chasm that opened up between budgetary projections and actual results in the years 1979 to 1982 when the Leader of the Opposition was Taoiseach, the person who now speaks of "dubious" arithmetic. Let us look at the record during those years and see what right has that Deputy to talk in this House about dubious arithmetic.
In 1979 the current deficit was projected in the budget at £289 million. It turned out at £522 million, an incredible 81 per cent in excess of the projection. In 1980 the current deficit was 58 per cent in excess of the projection; in 1981 it was 62 per cent and by 1982 they were making progress because they were down to 48 per cent. Dr. Whitaker made the following comment:
The under estimation of current deficits and, consequently, of the Exchequer borrowing requirement has been so seriously disproportionate as to invalidate the whole budgetary exercise.
And now they speak of dubious arithmetic. Departing from that horrific, unforgettable background, this Government were able in 1984 to have the budget deficit outturn within target — the first time that happened since 1978. Public finances are firmly under control.
Second, the Government's actions since 1981, but more particularly since resuming office in 1982 after the unfortunate few months of GUBU rule, have contained the explosive growth in Government borrowing that was inherent in our predecessors' actions. The national plan points out:
In the budgets since July 1981 the total corrective action for both raising taxation and reducing expenditure has, with the associated savings on debt service, reduced the potential deficit by almost £1,000 million.
In other words, the current budget deficit at the end of 1984 would be almost £1,000 million higher than now expected if corrective action had not been taken from July 1981.
Third, we have seen the Government bring stability to financial and economic policy with their national plan Building on Reality. Never before in the history of the State have a Government planned economic and social policy, Department by Department, over a period of years and informed the public in detail of the resources available in each area until the end of this, their first term in office.
Fourth, key indicators have begun to move in the right direction. Last year real gross domestic product grew by almost 3½ per cent, a rate of growth appreciably faster than the average for the rest of the European Community. Further, inflation has been curbed from the level of 17 per cent and higher that we experienced in 1982 and before. Since last year we have been down to single figures. In the 12 months to mid-November last, the year on year average increases in consumer prices slowed to 6¾ per cent and we can with confidence rely on having a rate of 6 per cent or lower, the lowest rate we have experienced since 1968.
There has been an exceptionally good response to the budget and perhaps this explains some of the unease of the response of the Opposition. Many have said this is because for most people disposable income will be higher in 1985 than previously and because taxation has been reformed radically for the better. While this is true, I think there is a deeper perception that the Government have skilfully and with little damage to the economy brought us to the point where we are well placed for the sustained economic expansion envisaged in the national plan. They did this while supporting social welfare at levels above inflation.
Of course the pessimists point to our undoubted problem of unemployment. However, they forget what the unemployment picture would have been if the Government had not stopped the slide to the status of a banana Republic under the populist policies of the Leader of the Opposition. The enormous annual increases in unemployment occurred under the stewardship of the Opposition. The Opposition now have no constructive remedies to offer, apart from those curious animals that inhabit their jungle, of self-financing tax cuts and this new concept of pumping £200 million into our economy which, apparently will also be self-financing.
I wish to refer to youth policy. This Government gave a commitment to adopt a national youth policy. In September 1983 the Taoiseach established a committee chaired by Mr. Justice Declan Costello of the High Court. He personally appointed the committee and received the report and thus he demonstrated at the highest level the priority the Government attach to identifying and meeting the needs of young people. It was a clear indication the Government would not treat lightly those needs and would act on the recommendations of the report of the National Youth Policy Committee. The fact that the Government ensured that the report was published within one month of its submission was clear evidence of the determination of the Government to introduce and implement a national youth policy. Currently we are engaged in the formulation of the Government's response based on that report, taking into account the considered views of youth organisations, State bodies, Government Departments and other interested people which I requested as part of the necessary process of consultation. I am particularly concerned that young people should have an adequate opportunity to participate in the whole process of policy review and formulation, so it was with some enthusiasm that I accepted the very last suggestion in the Costello report that a popular version of the report be published which would be aimed at promoting understanding and discussion of the issues raised among young people. That popular version was produced and published in record time and it emerged on 10 December of last year under the title Looking for Action. With the co-operation of the National Youth Council and the Institute of Public Adminstration, the effect of it has been that the work of the Costello Committee has been made available to every second level school in the country and to very many youth groups also. In all, some 20,000 copies of Looking for Action have been distributed. Young people all over the country are being asked to respond to the report and make their views known on a whole range of issues which affect them.
I see the report as a landmark in the development of services to young people. It is charting the way towards a national, but not nationalised, youth service, and providing an analysis of the position of young people in society and the trends and prospects that face them over the next decade. Quite clearly that view is shared by all concerned with youth work and the evidence of that is that the report has been sold out and the Stationery Office are now engaged in a reprint.
Deputies will be aware that in Building on Reality the Government committed themselves to establishing a youth policy for International Youth Year. It said that such a youth policy “will have its own distinctive purposes” but will interact with other policies and measures. The policy will be aimed at assisting all young people to become self-reliant, responsible and active participants in society. It will include a clear philosophy of youth development and a statement of principle to guide Government policy, an objective assessment of the factual position of young people in contemporary Ireland and a detailed plan for the provision of services to young people generally and to disadvantaged young people in particular.
In the context of their work on the national plan and even in advance of having had an opportunity to consider the report, the Government set aside an additional £1.5 million for youth services. That allocation allows for flexibility which facilitates planning on a response to the priorities outlined in the report. The national plan in this year's budget also responds to the need identified in the report for recreational facilities for young people by providing for an allocation of £3 million in capital support for community and youth facilities.
The report recognises, rightly, and pays tribute to the work of voluntary youth organisations in providing services for young people. I share the report's view that the future development of a comprehensive youth service should be firmly based on the promotion and development of voluntary and community involvement in the delivery of services. The Government have been subject to recent criticism which alleged that the Estimate provided for an increase of the order of only 3 per cent to youth organisations. Let us look at the facts.
The subhead from which youth organisations are funded has been increased from £2.222 million in 1984 to £2.8 million in 1985, an increase not of 3 per cent, as some people have suggested, but of 26 per cent. While there is always room for imaginative mathematics, anyone capable of doing mathematics which would produce an answer of 3 per cent for an increase from 2.2 to 2.8 would be an unusual mathematician indeed. I assure youth organisations that the subhead includes provision for increases in grants in line with cost of living increases, provided that the organisation in question meet the criteria for effectiveness under the youth service grants scheme. The subhead also includes £500,000 for the implementation of the youth policy, and that will be targeted particularly at areas of deprivation. Of course, youth organisations will stand to benefit from those moneys to the extent that they can respond to the priorities for youth service as outlined in the Costello report.
This year, 1985, holds the potential of being a very special year in the development of young people in communities in our country, because this year has been designated International Youth Year by the General Assembly of the UN. The three central themes for the year are participation, development and peace. In accordance with the wishes of the UN, the Government established a national committee to plan, stimulate, co-ordinate and assist activities for the year. This committee, known as the National Committee for International Youth Year, are representative of youth, Government, trade union, employer and vocational education interests.
The task of the committee has been to generate general awareness of the very special nature of the year to encourage activities and initiatives in favour of young people by interests, voluntary and statutory, throughout the country, and to assist the exchange of information in relation to activities. In establishing the National Committee for International Youth Year the Government made provision for a sum not exceeding £140,000 initially to facilitate their operation in developing a countrywide response to IYY. Furthermore, in order to give a wide variety of interests and opportunity to participate in preparation for the year at national level, I established an advisory council representative of a large number of voluntary and statutory bodies to assist the committee in their work. In their approach to and preparations for IYY, the committee have endeavoured to secure widespread action for and by young people at national and local level. The main thrust of preparation has been towards locally inspired planning and action. The support of the country's VECs has been obtained in promoting and assisting activity for IYY throughout the country. As I have suggested, it is potentially a very special year which can signal valuable changes in the development of our national community. It is the common cause which can begin to restore the faith of young people in themselves and their community.
Clearly, for the year to be meaningful and of real benefit it must reach young people in the communities where they live. An essential element in the preparation of IYY is the participation of young people in deciding on the manner in which it should be observed. Many thousands of young people will participate in activities and projects of various kinds throughout the year. This signals their desire to accept a greater and more responsible role in the development of their communities.
The adult community also must make an equally generous response if the year is to prove a significant initiative. We must be clear that it will not just happen; it must be made to happen through participation by and co-operation between young people and adults. Throughout the country youth, sport, community, statutory and other bodies have been working together to develop initiative which will give IYY a meaningful and lasting presence in our country. This is the opportunity which the year presents. It brings together a wide range of youth and community agencies to explore and develop ways of maximising participation by young people in their communities.
This Government have proved themselves sensitive in a most practical way to the vital importance of local initiative and voluntary effort in the preparation and observance of IYY. Their initial financial allocation enabled the national committee to provide £43,500 to VECs for the promotion of activities at local level, £37,500 or thereabouts to national governing bodies of organisations in support of specific initiatives of a national dimension, and £3,000 approximately in respect of activities by other bodies. However, recognising the popular desire to make 1985 a time of real progress through action by and on behalf of young people, the Government made provision in the budget for £150,000 to fund initiatives for young people during IYY. This will enable further financial support to be given to activities planned throughout the country and, thereby, facilitate the continuing and growing momentum for the year, particularly at local level.
This year will also see the launch of the President's award scheme. Similar award schemes in many countries have proved their ability to encourage and stimulate the enthusiasm and energies of young people by presenting them with a challenging programme. The President's award scheme will not be a youth organisation. It will be available to young people in any organisation or indeed, perhaps most important, in none. It will be a programme of practical, cultural and adventurous activities which will help young people to acquire self-reliance and a sense of responsibility to others, two essential qualities in citizenship. It will not be competitive, as the awards will be within the potential reach of all young people. Dr. Tony O'Reilly has accepted the invitation of the Taoiseach to be chairman of the Committee for the promotion of this scheme and, I am pleased to say, he has convinced a wide range of leading business people that the awards scheme can be a potent force in developing the qualities of maturity and responsibility in young people. I am confident and expect that the business community will see the obvious benefits of going in with the State in partnership in investing in this scheme. International Youth Year will sow many seeds which will take firm root in the years ahead. I am convinced that the foundation of the President's Award will be seen, in years to come, as one of the greatest fruits of this vital year.
Many Members of the House will be aware that in the past there was a system of support for temporary employment measures undertaken at community level by way of the grant scheme for youth employment.
The scheme has been reviewed and henceforth will be known as Teamwork. The scope of projects has been changing since the Government decision to remove from the scheme projects involving works of a construction nature which will now be undertaken by AnCO under their community and training programme. The type of projects which might be aided include youth services, sport activities — coaching — social services, community services, cultural, drama and artistic activities. Any worthwhile proposal will be considered.
The £6 million being made available under this heading will allow the employment of over 3,000 persons on a programme for an average of six months duration. In addition to the grants of £70 and £105, supervisors sponsors may claim running costs to a maximum of 15 per cent of the total wages grant. A new feature of the scheme is that larger projects will be considered, for example, sponsors who can provide employment for over 20 young people for a period of 12 months. They can then become managing agents and instead of the 15 per cent running costs grant, a sum of £850 per annum can be paid for each Teamwork place, enabling such an organisation to employ a manager. I am sure this will represent a substantial improvement on the existing scheme.
I mentioned earlier that the Government had anticipated the findings of the Costello Report and the recommendation that a system of support for community and recreational facilities be established. My Department operate the community, youth, recreational and employment programme which provides financial assistance to community groups to enable them to employ contractors to undertake on their behalf works on the construction of community — recreational facilities.
I am happy to be able to say that a sum of £1.93 million is provided in my Department's Vote for this programme in 1985 which is an increase in anticipated expenditure of 192.4 per cent. We hear a lot about cutbacks but there cannot be many subheads in the Estimates that have recorded an increase of that dimension. Of this figure, £.93 million has been allocated to meet existing commitments to projects in the course of construction or just about to commence, having been approved earlier. As indicated in Building on Reality, the Government have allocated a sum of £1 million in 1985 towards assisting new projects under the programme. Application forms for participation in this scheme are available from my Department. One other feature of importance I should mention is that a new face lift grant scheme will be introduced. This will provide capital grant assistance to youth organisations who wish to improve existing facilities. From my travels throughout the country in the past two and a half years, I know that many organisation meet in halls that are unsuitable for their needs. This new provision will enable such groups to come together with a proposal to improve their existing facilities. This move has received an enthusiastic welcome from youth organisations and I trust that it will result in improving facilities in the next three years.
There has been much criticism, some of it from the Leader of the Opposition today, of a duplication and overlap of educational and training activities. For that reason, about this time last year, I was asked by the Taoiseach to serve as Minister of State at both the Departments of Labour and Education with specific responsibility for this area.
In discharging my brief I have had detailed discussions with all the parties concerned including the educational, training and manpower agencies, teacher trade unions, employer bodies, the ICTU and other professional bodies. On the basis of these exhaustive discussion I have formulated proposals which have been agreed between the Ministers for Education and Labour and which will be before the Government shortly for formal approval.
Last year in the course of the debate on the Report of the Committee on Public Expenditure on their proposal to establish a centralised State agency for persons registering for employment or training, I stated that following my examination I accepted, and had to accept, that the institutional arrangements could be improved but that it seemed to me that there was little evidence of waste of public funds due to duplication and overlap. I wish to repeat that because those criticisms have continued to be made. It is worth making the point that the criticism is usually of a very generalised nature and that specifics are rarely if ever forthcoming. Having said that, I recognise that institutional arrangements can be improved and the thrust of my report is designed to lead to greater co-operation between the various agencies which in turn will lead to a better delivery of services.
With the present high levels of unemployment the transition from education to working life is an important stage in the lives of young people and all the agencies involved in this area must concentrate their efforts in helping these young people to make the transition successfully and not dissipate their energies in inter-agency demarcation disputes. One of the recommendations of my report proposes to develop the National Manpower Service as the single riser point of contact and as part of this role to have close liaison with the Department of Education in identifying young persons coming on to the labour market who may have problems in making the transition from education to working life. This liaison with the Department of Education will be a key element in the implementation of the EC social guarantee commitment which is an important new development in the area of transition from education to working life. The social guarantee involves a commitment by EC member states to do their utmost to ensure that all young people leaving compulsory education can benefit from a period of full time training and/or initial work experience of at least six months duration. Responsibility for the co-ordination of measures to meet the social guarantee commitment was assigned to the Youth Employment Agency who, following consultation with all relevant bodies, including the education authorities have made the necessary arrangements. These arrangements provide for the flow of information between the education system and the National Manpower Service and for full liaison between the manpower service and other manpower agencies to ensure that adequate programme places are available. To be fully effective the social guarantee commitment will require close co-operation between the education and manpower authorities and I have no doubt but that this will be forthcoming.
In the course of my review it was evident that there was considerable scope for making maximum use of resources within the public sector through increased contracting of AnCO programmes to the educational sector. I have therefore recommended that the educational system should have a first option on all relevant AnCO programmes provided they meet requirements in regard to standards, quality and cost and I am happy to say that arrangements are in train to give effect to that proposal. My review was mainly concerned with existing arrangements and to see how best they can be improved. However, in the course of the review it was evident that a more fundamental examination of policies and institutions was necessary. It seemed to me that much of the concern about duplication and overlap was due to a lack of clarity as to the respective roles of the various agencies and as to policy in general. It is obvious to me that the resolution of some of those fundamental questions could be achieved only on the basis of a general review of manpower policy as a whole.
In relation to the suggested "illegal raiding" which Deputy Ahern has been referring to over the last few days, from what I have said it will be clear that education and training must be very closely linked in order to provide the best possible services for young people. That is why this whole area of co-operation between the manpower and educational authorities was assigned to me and why I was given a specific brief on that area. In line with the determination to ensure co-operation between the educational and manpower areas a number of relevant educational programmes are taken into account where the proceeds of the youth employment levy are being allocated. The final allocation for 1985 has now been agreed and has been fixed as follows — Youth Employment Agency, £8.7 million; AnCO, £40 million; National Manpower Service, £.75 million; CERT, £2 million; the work experience programme, £6.5 million; the enterprise allowance scheme, £2.5 million; the teamwork programmes to which I referred a few moments ago, £6 million; environmental improvement schemes, £2.25 million, making in all, £69 million for the manpower agencies. In addition, £27 million of the youth employment levy will be spent within the educational world. Those allocations provide for an increase of over 1,000 man years in the output from the combined manpower programmes. Equally the output from the educational programmes will also be increased.
In coming to these final allocations a number of provisional figures are annually tossed about and it is during this stage of the operation that the £7 million that Deputy Ahern keeps talking about seems to have arisen, but I am satisfied that in drawing up their programmes during 1985 the programme sponsors will do so in such a way as to maximise the number of places available to young people. I assure the House that there will be no worthwhile activity on area of youth employment and training that cannot proceed because of shortage of funds.
In the course of my examination of the area of co-ordinating education and training it seemed to me that a more fundamental exercise was called for and that it was appropriate and opportune that we address ourselves to the fundamentals of manpower policy, something that we have not done for two decades. The last White Paper on Manpower Policy was on ensuring the availability of a skilled workforce. However, in the meantime, the situation has changed radically and manpower policy as an integral part of employment policy is no longer concerned solely with the quality and supply of labour but with the creation of employment opportunities. While it is accepted that manpower policy must place increasing emphasis on job creation, it is also important that it does not lose sight of its original objectives and must continue to ensure the availability of a skilled and well-trained workforce.
While mainstream job creation programmes supported by various special measures sponsored by the manpower agencies are expected to absorb the labour force growth it has to be acknowledged that these initiatives cannot be relied upon to accommodate fully the growing numbers who will be looking for work in the longer term. It follows, therefore, that if manpower policy is to make a worthwhile contribution to reconciling labour supply and demand in the future, its role in influencing the factors affecting the demand side must be strengthened particularly in the area of local, community based employment initiatives; this includes active involvement in the development of national industrial, economic and budgetary policy and strategy and closer liaison with the agencies concerned.
In future, more and better information on population and demographic trends will be necessary if satisfactory policy responses are to be developed to cope with the needs and expectations of the labour force. Continuous monitoring and analysis will be needed.
In addition to employment expansion programmes the question of how, or to what extent, the existing amount of work available may be redistributed must be addressed. In that context the scope for encouraging self-employment, local employment initiatives, co-operatives, as well as flexible working hours, work-sharing, job splitting, more part-time and temporary work and career breaks will have to be explored in conjunction with other measures such as shorter hours and so on.
The question must also be posed as to whether the present level of unemployment is only a temporary phenomenon, due to exceptional circumstances, which will decline when industry and society adjust to the technological age, or whether it is a structural problem due to the fact that we are moving into a completely new era characterised by rapid changes in technology and the continuous transformation of the industrial base and work organisation practices which will render such ideas as job security and life time careers and occupations obsolete. Despite much speculation, no general consensus has yet emerged as to the longer term implications of current developments in production and manufacturing processes and techniques, and the application of the micro-chip and robotics to a rapidly growing range of commercial, professional and clerical activities. Historical evidence and economic theory would suggest, however, that it may be easier to generate job opportunities when technological advance is rapid rather than when it is slow. Whatever evolves, all countries, including Ireland, will be obliged to come to terms with the new situation. These considerations have clear implications for the roles and functions of the various manpower agencies in terms of delivery of services; their knowledge, analysis and classification of information on the dynamics of the labour market; identification of future trends in labour supply and demand, expressed in quantitative and qualitative terms; and the review and adjustment of training programmes to ensure greater adaptability and versatility among the workforce to respond more readily to shifts in the demand for skills. Even achieving these objectives will still mean difficulties in the labour market for a not insignificant minority of the labour force. Manpower policy must assist these workers to cope with change and their existing situation; to develop their skills to the full; to produce a situation where as far as possible they compete on equal terms with other participants in the labour market.
The Minister for Labour is at present engaged in the preparation of a White Paper on Manpower Policy which will address all these fundamental issues and outline the course manpower policy will take over the next decade.
Another area of the Department's activities that is of concern to me is the whole area of the health and safety policy. The work of the Commission of Inquiry on Safety, Health and Welfare at Work, known as the the Barrington Commission, is the most significant development for a considerable time in relation to safety and health at work in this country. It was the first overall, systematic review of our legislative arrangements for safety and health at work and its recommendations represent a negotiated consensus amongst a wide range of relevant interests. The commission's report calls for major changes at both national level and at workplace level.
At national level the report recommends that legislative occupational safety and health protection should be extended to cover all employers, all employees, the self-employed and others who may be put at risk as a result of hazards arising from work activities. Our present legislation gives protection to only about 20 per cent of the workforce. The report also recommends that major institutional changes be made in relation to the administration, supervision and enforcement of occupational safety and health legislation. Specifically, the report calls for the establishment of a national authority with overall responsibility for occupational safety and health. While these are the central recommendations for change at the national level, some of the more significant ancillary proposals relate to the need to make better use of court procedures and analogous mechanisms in the interest of the prevention of accidents and diseases. Other recommendations refer to the need to change from detailed statutory and regulatory provisions for specific situations to more broadly based statutory and regulatory provisions, supplemented by codes of good practice, guidelines and standards.
The commission's recommendations relating to the workplace reflect current internationally accepted principles on how best to achieve and maintain safety and health at work. The commission recognised the important contribution that appropriate legislative and other State support can play, but it also emphasised the major contribution that those concerned at the workplace must make themselves. This is based on the clear belief that those who are in a position to create a risk are also in the best position to eliminate it or, where this is not feasible, at least to reduce the risk as far as practicable. The commission recommend that statutory recognition should be given to the general duties that all at the workplace are expected to meet in relation to safety and health. It is recommended that each enterprise should be required to prepare a written safety policy statement and to have suitable structures for consultation in matters relating to safety and health at the workplace.
Minister Quinn and I fully accept that there is an urgent need for radical changes at all levels in our system of occupational safety and health. Accordingly, our Department are, as a matter of priority, preparing proposals for legislative change based on the commission's recommendations.
Important developments relating to safety and health at work have also taken place in recent times at EC level. Council directives have been adopted relating to the protection of workers from risks related to chemical, physical and biological agents at work; from ionising radiation; lead and asbestos. Some of these are already due for implementation and the remainder are due for implementation within the next two years. These directives will apply to practically all persons employed at national level as opposed to the limited application of our existing domestic safety legislation. Among the key measures to be provided for as a result of the directives are the provision of information to workers on the hazards involved with dangerous agents and the provision of medical surveillance during exposure to the agent. Again, my Department are working on proposals to give effect to those directives as a matter of urgency.
I have indicated that I believe this budget sets the road for recovery. My Department will be playing a very active role over the next 12 months. Deputies will have an opportunity to debate a number of legislative proposals. Again in the safety and health area, in the course of the next couple of months I shall be bringing before the Dáil a Bill dealing with off-shore safety. For obvious reasons this is an area of importance and concern which has not to date received legislative attention. I regard that measure as being of considerable importance.
Already the House has seen this Government's concern to build on the code of protection available to people in the workplace which was introduced by the Coalition Government of 1973 to 1977. We have seen that extension with the passage by the House in the last session of the insolvency legislation to protect the rights of workers when their companies go into liquidation. In the future we shall see legislation in the area of worker participation. Up to now our whole industrial relations code has been unduly adversarial. An extension of worker participation could do much to change the climate and to bring home to employers and employees alike the realisation that both have a stake in their jobs and in the enterprise and that the idea of "us against them" has no relevance in 1985.
Indeed, the whole area of industrial relations reform will be receiving substantial attention in the space of the coming months, as it has been receiving in the last few months. Members of the House will be aware that a process of consultation with the social partners has been undertaken by a co-ordinator established by the Minister for Labour. I anticipate that following those consultations we shall be bringing proposals for reforms before the House. I believe that an improved system of industrial relations can only improve our prospects of responding to the challenge of unemployment. We have had some very unhappy experiences in recent times. We had the bizarre spectacle in areas hard hit by unemployment of jobs being irresponsibly put at risk. It cannot be believed that that is in the best interest of the trade union movement or in the development of our industrial relations. I regard the bringing forward of proposals to create and improve the climate in industrial relations as being one of our priorities over the next 12 months.
This budget has lifted the national spirit. It has enthused people. It has given them hope. It is up to all of us to see to it that these hopes are lived up to. My Department and I will certainly be playing our part in the next 12 months.
This is a budget to save the Government, but it certainly is not one to save the country. A few sweeteners to selected interested groups to buy popularity and to keep the Labour Party in line is, in essence, what the budget has been about. Like anything that has been grudgingly given, this budget is more shadow than substance. It is unimpressive on everything except the public relations exercise which was expensive, relentless and persistent.
It was gross abuse of taxpayers' money to try to sell the unsellable by a telephone market. This is unprecedented for political cheek. We had disturbing examples of the manipulation of Government Ministers by handlers overseeing their every move. There was no justification for a hot line Government promotion exercise seeking to brain wash the electorate and using improperly the Civil Service as the selling agent for Government mismanagement of the economy. We can see no reason or justification for the expense incurred last week by the Government using their agencies in trying to sell, in a political way, what we can only view now as a total mismanagement of the economy and a total misjudgment of the economic necessities of life.
The Government had a unique political opportunity available. They have missed that opportunity. The public, long suffering from discontent and frustration, were ready for a confidence boosting initiative and a guarantee of some hope for their futures and those of their children. Instead, they have to be satisfied with a politically expedient budget supported by a few borrowed Fianna Fáil policies, but smothered in a litany of tax increases which will further reduce the living standards of the needy and, in particular, of the middle income group. This is a real example of surrogate politics. The Coalition are devoid of any sustainable policies of their own. They are incapable of producing any worth while policies of their own and are using a public relations exercise to hoodwink the electorate.
The annual budget is supposed to be the Government's yearly statement on the state of the nation. It is supposed to be a vehicle used for corrective action or economic rejuvenation. It has failed on both counts. It has failed to address the major political difficulties of unemployment levels. These levels have been referred to in all good Government statements in the past number of years. It was mentioned in the national plan and stated on the unemployment motion debated in this House in the recent past that unemployment was their first priority. Yet they cannot point to one single sentence in this Budget Statement that will go any way towards relieving that problem. The unemployment levels prevailing have not merely exceeded the targets laid down in their national plan but have already reached the levels they were supposed to reach at the end of a three year period of projection of Building on Reality. We contend that it is not merely a figure of 234,000 unemployed. It is our contention that that figure is understated and would be more correctly in the region of 270,000 to 280,000. One must remember those currently in training — I refer to short term training projects under Government agencies — who are not included on the live register, which figure is suggested to be in the region of 20,000 to 25,000. It should be remembered also that in many families more than one member is unemployed and that it has proved useless for all members unemployed in any one household to seek unemployment assistance. There are many thousands of others maintained totally by their parents under the archaic system of means testing in so far as board and lodging estimates are concerned. Consequently such people do not qualify for unemployment assistance. Therefore they do not waste their time and energy signing on daily or weekly at the labour exchanges.
There is no way that the figures obtaining go any way near recognising the full extent of the present unemployment crisis. Yet the Government fail to recognise those facts. If they did recognise such facts surely they would have devoted the major portion of the Budget Statement to producing initiatives, taking courage in their hands, providing the wherewithal necessary to reduce that unemployment figure.
The construction industry, industrial development, motorists and, in particular, the family have been penalised in this budget. It has been labelled correctly an anti-family budget. If ever there was a time in the history of this State when the family needed extra protection it must be now with catastrophic levels of disposable incomes and unemployment. This was a time to do something really positive to reduce the impact on the family budget.
We see the damaging effects on society every day and the return of mass emigration. While this might not affect some areas to the same extent as it does the west, it is as well to put the Government on notice that the traditional areas which suffered the greatest haemorrhage of emigration in the past are the first to take the full brunt again. Western areas are witnessing not just the emigration of children but also of parents: breadwinners must leave their native country to seek employment in foreign lands. Is it not a strange kind of philosophy being practised by the Coalition when they thought it more fit in this budget to give £250,000 to Dublin Zoo for the care of animals there than to the Irish centres in Great Britain who look after the 30,000 new emigrants who have gone there since this Government took office? It is a strange kind of logic that provides money for commercial enterprise of that nature but could find only an extra £32,000 to help out the societies and centres in Great Britain who have taken on board the difficulties this Government should be addressing. Those 30,000 unfortunate people have been banished into exile by the incompetence of the present Government.
It is not merely a question of the difficulties of those who have had to emigrate that must be considered. We must also bear in mind the enormous expense to the state involved in the education of those 30,000 people who have left our shores in the past 12 months, the best educated, best trained generation since the foundation of the State. Their skills, training and techniques gleaned at home are now being put to use helping other jurisdictions, those with whom we must compete in the market place. It makes no sense. Unfortunately, it would appear, not just from statements made by Government Ministers but from Government action as exemplified in their recent Budget Statement, that they have no care for those who must leave and less for those who must remain at home.
There is now a recognition of the existence of the black economy, its recognition as a legitimate and desirable activity. Every single move so far as fiscal policy is concerned has sent more people into that black economy. It is now being made fashionable here to say that one is making money without paying tax on it. There are people leaving legitimate business, taking themselves off registers under the tax revenue system so that they can start afresh in businesses that will not be registered, that will not have to meet the demands placed on them by Government taxation policies.
This is a most undesirable situation. It is estimated that the black economy pervades every single sector of the community now and is responsible for at least 18 per cent of GNP. That loss of revenue to the State, it should be remembered, would help to create the thousands of new jobs necessary to bring about a situation in which people would want to remain in legitimate employment. The whole question of the black economy here has not been adequately tackled and will not be until such time as proper taxation policies of a personal and corporate nature are introduced in this House. That should be the aim of the Government because that is an area that could provide the necessary revenue about which they cry every day to fund the schemes that would provide lasting, sustainable employment.
We see also the other effect of unemployment and disillusionment in the community in the rising levels of violence on our streets which would indicate a breakdown of respect for authority. Certain sections of the community now seem to think that they have a licence to terrorise citizens. Unfortunately, there is a move towards rough justice entering the system in order to deal with that level of violence. Increasingly we hear about new vigilante groups being established to handle their areas so far as law and order is concerned. There is no doubt in my mind that if Saturday night specials were available here as readily as they are on the streets of New York, when an individual for a very small amount of money can purchase a weapon to deal with his situation, we would then have a Wild West situation here. People have to be driven to great lengths before they take measures which will create further violence in the community. The Garda have the power and they must get the backing of the public once and for all to rid the country of the thugs and the vandals who seem to think they are beyond the law and that they have the right to create nogo areas particularly in our cities. It is a scandal and people are very distressed about it. They are asking for Government action to ensure that they can live in decency and in dignity and that they can be sure that, when they leave their property unattended, it will be in the same condition on their return as it was in when they left it.
The youth employment levy was supposed to create new job opportunities. That money is not being expended for the purpose for which it was intended. It is going into the national Exchequer and it is being laundered by the Government for their own administrative purposes. It is being reckoned as new investment money, and it is not being utilised for the reasons stated here when it became part of the Finance Bill. It was suggested to the people of Ireland that they were being asked to pay that levy to create the necessary funding for the creation of new job opportunities. Some day the Government will have to answer to the irish people for what they have done with the large sums of money taken in by this levy. They will be asked if they used it to create job opportunities or for administrative purposes.
Money was voted to this country from the European Social and Regional Funds for specific projects. It was used for selective projects on the east coast. Many projects were put forward from the west of Ireland but the money went into the national maw. The Government say the whole country is regarded as a region by the EC. Sooner or later the Government will be taken to task because of the fact that money granted from European funds was not applied to the projects which were put forward at the time.
The IDA are being used by the Government to smother the bad news about job losses as a direct result of Government inaction. They have been using the IDA to spread sunshine news. A week later the statistics disprove that sunshine news. The Government say the statements were not issued by them. They are using the agencies to spread the news they would like to hear. This is known as a news management policy. Whatever the Coalition Government are good or bad at, they are good at the management of the news media.
The brain drain and the investment drain have reached new limits. The talent which was available and should be available to the Irish economy is being exported for the benefit of our competitors. Never before was there such confused thinking in Government circles. We have been told about emergency Government meetings. We are well used to emergency legislation being introduced by the Government. They seem to be limping from crisis to crisis. The Government had to start to renegotiate their budget before the ink was dry on the paper. They are renegotiating certain parts of it with the construction industry and the building societies. Shortly they will be renegotiating it with the entertainment groups and with certain sections concerning the VAT levels.
In a desperate attempt to balance the books creative accountancy was used on a wide scale. This has discredited the budget and must have serious repercussions on Government credibility at home and on our creditworthiness abroad. Already international assessment of Government policy is unfavourable. This can only damage our negotiating position in foreign money markets. We well know how dependent on borrowing the Government are and that they will continue their practice of negotiating funding abroad. How can they create the proper climate for those negotiations when all international assessments of the Budget Statement last week were negative.
The aftermath of the budget was the shortest lived example ever of political euphoria. The dashed hopes of all sections of the community have led to new depths of despair. The TV trial of the budget in Tallaght last week was an experience which must have chilled even the most enthusiastic Government or backbencher. Nobody believes the budget has tackled the problems of those in or out of work. It can only add to the misery of a disenchanted population and increase the cynicism of people who feel that politicians and politics can do nothing to protect their living standards.
The all-important confidence boost has not materialised. In fact, many now see the budget as a huge confidence trick making the unfortunate middle income group and the less well off the fall guys for Government inaction. There is the controversial figure of £28.6 million of Government cuts which, we understand, will be outlined later today. There is no doubt in anybody's mind that this was a political ploy to keep the Labour Party in line. The idea was to get the Labour Party to vote the budget through the House and later on to tell them the bad news about the cuts. How could they object to something they accepted the week before?
This is not the first time this manoeuvre was used by the Labour leadership. On this occasion it smacks of collusion between Fine Gael and the Labour leadership to outmanoeuvre the normal political process by hiding the facts not just from the politicians or the backbenchers of the Labour Party but also from the electorate at large. That is shabby treatment of the so-called socialists in the Labour Party. It indicates that the Government will do anything to stay in office at least until they qualify for their pensions on May Day.
I referred earlier to creative accountancy. The £28.6 million of cuts, the details of which will be announced later today, is a typical example of modern day creative accountancy.