Dáil Éireann debate -
Thursday, 7 Mar 1985

Vol. 356 No. 9

Financial Resolutions: 1985. - Financial Resolution No. 9: General (Resumed).

Debate resumed on the following motion: That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance. —(Minister for Finance.)

Mr. McGahon

Before we adjourned the debate I was congratulating the Minister for giving much needed relief to the hard-pressed newspaper industry. There is no doubt the Irish paper industry was in a parlous condition and that many jobs were at risk in provincial newspapers and in national newspapers. There was a question mark over the survival of at least two national newspapers. I suggested that the time was ripe for the creation of a press council because I think the level of journalistic licence has exceeded the bounds of acceptability in some journals. The reduction in VAT was welcome and opportune because the circulation of the Irish papers was wilting under the onslaught of papers such as the Daily Mirror, The Star and The Sun. Our papers were unable to compete with the cover prices of the English newspapers.

I congratulated the Minister and Deputy McCreevy for combining so effectively to reduce the penal imposition of 20 per cent VAT on betting to the more realistic figure of 10 per cent. I do not have to tell anybody here of the importance of the Irish racing industry. We lead the world in few things but we lead it with the Irish thoroughbred. The whole Irish racing industry will benefit from the reduction in tax to a more realistic level. The man in the street, the bookmaker and the racing industry will benefit but the chief beneficiary will be the Minister because it is an open secret that there was very considerable evasion of betting taxes. I should like to think that perhaps my own honesty was to a small degree rewarded because Deputy McCreevy and I had to run the gauntlet of some rather self-righteous and sanctimonious criticism, including that of that unofficial ombudsman, the noted letter writer, Liam T. Deegan. However, we succeeded in getting the tax reduced and from various contacts I believe it will be a success. While there are a few cowboys in different areas, the Exchequer will benefit tremendously. If the bookmakers and the punters play their part, I hope we may have a further reduction to 5 per cent next year.

Unemployment is the burning topic in this country, next to the biggest problem which concerns the rising crime rate. Many speakers have suggested that the unemployment level is a recent phenomenon, something that has occurred since we came to office, but that is ridiculous. Unemployment is a problem that is relative to each year and the reason Fianna Fáil are in the political wilderness is because of the level of unemployment in recent years, allied to the ball and chain that hangs around their feet, namely, the 1977 manifesto.

I suggest the time has come for a radical reappraisal of the unemployment situation. Up to now we have been following conventional, stereotyped Civil Service schemes but they are no solution. The various schemes put forward by AnCO and the National Manpower Agency are welcome but basically they are 20th century relief schemes. There is no continuity and many young people are frustrated when they find after completion of a six-month course that there is no possibility of continuing employment. That is why the Government should address themselves seriously to this whole matter.

Many radical proposals will have to be considered. The concept of work sharing will have to be examined and that will be bitterly resented by those who are fortunate enough to have jobs. However, if the thousands of young people are to have any hope of employment, work sharing must become a reality in the future. I suggest that the Government should consider the introduction of an attractive, tax-free retirement incentive scheme to allow people in the public sector to retire at 60 years and ultimately at 55. In that way we could create employment and set a good example in respect of work sharing. The abolition of overtime will also have to be considered.

Another thorny question that will have to be looked at is the number of married women who are working. I am sure I shall draw the wrath of most of the married women when I say that but I believe there are many elderly married women who are working who do not need to work. In this connection I refer in particular to the nursing and teaching professions. There is a school outside Dundalk where there are seven married women employed and each of them is married to a person who is in good employment. I do not think that should be allowed to continue. In the case of elderly ladies whose families are reared, they should move aside and allow young people — perhaps their own daughters and sons — to get employment.

I should like now to say a few words about my own devastated region. I referred to it earlier as the hind-tit of Ireland, the neglected region of the country. I suggested the pendulum of deprivation had swung from the west of 25 years ago to the north-eastern region of today. In the report last year of the European Economic and Social Council it identified the Border areas as the most deprived in Europe. I have lived all my life in Dundalk and I can vouch that Dundalk is on its knees. It is pleading for help and I am pleading on its behalf for some Government support.

In the 16 years of the horrific Ulster troubles no other town has suffered as badly as Dundalk and compensatory measures have not been introduced by any Government. Yet, the British Government have introduced compensatory measures for the border towns in the North. They have provided millions of pounds for extensive developments, for housing programmes, leisure centres, libraries and swimming pools. My town has been denied any of that kind of money but the more serious aspect is the unwelcome tag we have been given by the foreign media of El Paso. That has definitely proved to be a deterrent to the efforts of the IDA to attract industry to my region.

The last investment in Dundalk was in 1969, 16 long years ago. Dundalk is the largest town in Ireland with 27,000 people. Our problems have been further exacerbated by the slow demise of the footwear industry. For many years we were proud of our footwear industry. Dundalk was the home of the footwear industry but now the bell is tolling for that industry. There is very little hope for it because of our entry to the Common Market and the removal of various tariffs. At one time more than 2,000 people were employed in the footwear industry in Dundalk but now there are only 100 to 150 with the proposed closure of Clarks (Ireland) Limited.

Several Fianna Fáil speakers from my constituency have suggested that the Irish Government were at fault for this closure but that is nonsense. There has been a gradual demise in this industry since our entry to the EC ten years ago. I refute the suggestion that the Government did not react quickly enough to the closure of this factory. I want to say quite categorically that this Government were monitoring the situation and were fully aware of the precarious existence of Clarks factory. Contrary to the usual procedure, in which companies in difficulty come to the Government looking for help, this Government called in the management of Clarks on two occasions and offered them very attractive incentives to stay here. But Clarks had a death wish; they wanted to fold up. I believe the Brighton bombing was the final nail in the coffin. That spelled the end of Clarks as we knew it in Dundalk. I want to state categorically that this Government acted very responsibly in this case.

The Minister for Finance has done a lot to alleivate the hardships in the Border region but he has not gone far enough. If the measures he has introduced, such as the reduction in spirits, are effective, why not do the same for beer which is the drink of the average working man? I believe the law of diminishing returns exists in that area; but, if the Minister reduced this tax on beer, it would discourage people from crossing the Border. The real reason people cross the Border is because of the difference in VAT rates and the only answer in the long term is the harmonisation of VAT rates North and South of the Border. A country with 3,500,000 people cannot compete with a country with 60 million people and more efforts must be made to harmonise VAT rates. Otherwise the north-east region of this country will be decimated.

The increased price of petrol has only increased the attractiveness of crossing the Border. I would like to draw the Minister's attention to the figures released by the Ulster Office. They said that £500 million was spent across the Border last year. I cannot understand how that can be condoned. The once ghost town of Newry has been turned into an El Dorado as a result of Government policies. Recently the chairman of the Newry Chamber of Commerce stated that 80 buses each Saturday were going into Newry and that in the 12 weeks before Christmas people from the Republic had spent £150 million in the Six Counties. Dundalk and other Border towns are haemorrhaging as a result of that.

I would like to mention the threat posed to one of Dundalk's remaining industries, an industry of which we are particularly proud, and that is the 150 year old industry of P.J. Carroll. They employ 600 workers. This firm made 115 people redundant last year for the first time in their very proud history. This is one of the showpieces of Irish industry and is the particular pride and showpiece of Dundalk. Out of the £350 million which the Exchequer take from the cigarette industry, P.J. Carrol contributed £175 million plus a further £12 million in employees' taxation last year. That is a very sizeable contribution. While I appreciate that there is a very definite health hazard associated with cigarette smoking, in a democracy the right to choose is paramount. I believe the threat posed to the industry by the Minister for Health is very serious because of its unfairness to home market producers. They cannot advertise yet imported magazines carry large glossy advertisements which were placed outside the country. That puts the future of the Irish tobacco Industry at risk and does not make for fair competition. The industry recognise that there is a health hazard associated with cigarette smoking, but they feel they have been penalised unfairly.

A further inequality associated with the cigarette industry is the fact that each year they are regarded as fair game by successive Ministers for Finance. Everyone accepts that, but each year the industry is taxed at double the rate of inflation. That is very unfair to the man in the street and to the industry, which is worth £350 million to the Exchequer. Some recognition of the value of that industry should be introduced. I suggest that the drink industry brings more hardship, and in some cases even death, to families and the time has come for an easing of the taxation burden on the cigarette industry. This is the heaviest taxed industry in the country.

Dundalk cannot wait for a possible harmonisation of VAT rates in years to come. Some method must be found to stem the flood of people converging on Belfast, Armagh and Newry from every county. The Southern Irish market is so lucrative to the people in the North that the Belfast City Council have taken a stand at the Leisure Fair Exhibition in Dublin. They are offering all types of incentives to people to cross the Border, including the offer of free holidays to the winners. Last November we had the spectacle of CIE carrying 2,000 people across the Border to leave their money with Margaret Thatcher. A semi-State body should not offer cheap excursion fares. The people should be asked to spend their money here so that their children will have a future.

I commend the Government on the definite success of the enterprise allowance scheme introduced this year. It was introduced as a pilot scheme with 100 places and there was an avalanche of applications. The Government opened the doors to receive them and up to 6,000 were accommodated in self help enterprises. This is an excellent scheme which allows people to try to initiate some type of business for themselves with State help. Outside of Dublin the Dundalk area was one of the best successes. It indicates the level of unemployment in my town, a level which has now risen to 24 per cent of the workforce.

I listened to other speakers enumerating the difficulties of their counties on the employment front and, while I understand their plight, the plight of Dundalk is the worst. The unemployment problem here as well as the money flowing across the Border has combined to ravage the whole area. There are more shops for sale in Dundalk than at any other time. We are in a desperate plight for employment. Dundalk has been upgraded by the IDA in recent times but the emphasis on obtaining employment in Cork, Galway, Waterford and Limerick has not been placed on obtaining employment for Dundalk.

The Government have now accepted the great need for employment in the town and I urge them to bring in a major replacement industry for the shoe industry which sustained Dundalk for so long. The Government should give priority to the needs of the Border areas and must accept that the biggest town in Ireland, Dundalk, has been denied a major industry for too long. Political expediency could attract industries to that region and on behalf of the people of Dundalk and north Louth I demand that this Government bring an industry to Dundalk in the next two years.

Mr. S. Brennan

This is the last day of the budget debate. I studied the budget carefully for some weeks and I conclude that it is nothing short of an unimaginative budget. There is a start in it to the process of taxation reform, and I support the Minister in that. But if he adheres to existing policies the promise which he made to this House of a comprehensive tax reform within the lifetime of his Government will be exposed as a bogus promise.

The budget does not contain any measure which will directly stimulate employment, and certain measures will have the opposite effect. There is nothing in the budget to stimulate investment, which is projected to decline in percentage terms over the next few years, and at a time when the need for productive investment was never greater. The Government's fiscal strategy is failing and the cost in terms of redundancies of the Government's attempt to tax their way into fiscal balance has been horrendous. There has been no appreciable progress in reducing the current budget deficit despite the Taoiseach's statement some weeks ago in an interview that since coming to power his Government had halved the Government deficit. The projected current deficit this year is 7.9 per cent of GNP which has little changed from that when the Government took office. Unless the Government introduce further deflationary measures later on in this year to take account particularly of the underestimation in the provision to finance unemployment there will be additional slippage in the current budget deficit this year.

This time last year the Government were still insisting that they could totally eliminate the current budget deficit by 1987. In order to adhere to the fiscal targets that are quite clear in the national plan, of which this budget is a first instalment, the Minister has used seriously misleading data. It took over a year for some of us on this side of the House to convince the Minister that the levels of VAT and excise were counter-productive and that diminishing returns were setting in. Now the Minister has gone to the opposite extreme and relies on buoyancy to create £58 million. Hardly was the ink dry on the Minister's speech when additional cuts of £28 million were announced. It is now clear that the provisions for unemployment assistance, which is now costing £1 out of every £3 contributed in income tax, have been significantly underestimated. The budget figures are quite clear. The budget is based on having an unemployment level of 217,000 and the Minister admits that the figure is now 20,000 higher. The budget makes no provision to pay this extra 20,000 people. How can we say in the budget that unemployment will be 217,000 and put a figure in to pay for that and then stand aside and watch it go up by another 20,000 without a comment as to how it will be paid for? Does the House realise that unemployment has risen by another 20,000 since November and this is only the beginning of March? Is it possible that the Minister with all his advice can be so far out in his Estimates as to predict an unemployment figure of 217,000 and bring forward his budget figures on that basis and then two and a half months later find he is off target by 20,000? That question has still to be answered to the satisfaction of this House.

In the 26 months that have elapsed since the Government came to office the unemployment figure declined by miniscule amounts on only two occasions before returning to its upward trend. Unemployment will continue to rise even though emigration is at levels we have not seen since the hungry fifties. This budget does not provide any stimulus to help industry to produce the kind of employment we need for our population.

I wonder do people realise this or do they just regard it as another statistic, but industry here is operating at 60 per cent of capacity. The EC average today is 80 per cent. Why are we so far out of line with the rest of Europe? It gives the lie to the suggestion that this is a worldwide depression from which Ireland cannot escape. Our industry is working at 60 per cent of capacity compared with 80 per cent throughout the rest of Europe. That means that Irish industry will take another 40 per cent just to fill its order books. That is the difficulty facing us. It is not only our capital, factories and machines that are being underutilised; it is also our people. The percentage of the manufacturing labour force which is unemployed is continuing to rise. Two weeks ago in this House the Taoiseach informed me in reply to a question I put to him that over 20 per cent of the manufacturing labour force were out of work. One person in every five in that key area of our economy, the area we look to to create growth, the jewel in the crown, is now out of work. There is more than 20 per cent unemployment in the engine of growth in our economy. Another engine of growth is the building industry, our second largest industry. Virtually half of the labour force in that industry are out of work. Are we able to get behind that figure and think of the devastation it brings to those who work in the industry and to the country? Let us look at the picture: one in five are out of work in manufacturing and one in two in the building industry. If those two sectors do not improve our economy will not improve. It is important on this the last day of the budget debate to stitch that into the record again.

At this stage most people are tired of the debate on the budget which has been going on for weeks. It is almost a grinding end to a elgthy, boring debate but it is not so boring or so much of a chore for us as it is for those in the manufacturing or building sectors who must face the unemployment figures on a daily basis. It is hard to convey to the House the sense of depression that must be in those industries. It is hard to convey how such people feel about the matter. After all it is looked upon as just another debate with the politicians waffling on about unemployment. I consider it more serious than that. We should try to convey the depth of human misery involved in all of this.

The recent small reduction in electricity charges was welcomed but our industries are at a major disadvantage vis-avis other member states with regard to the cost of electricity. The evidence in the recent NESC report shows just how much out of line our electricity charges are compared to our trading partners. The decision to levy an additional 10p on a gallon of petrol or road diesel will exacerbate the difficulties of the industries that depend on transportation. Many industries depend on transportation and I do not need to list them. Many of our industries are also extremely vulnerable to changes in interest rates. According to the Confederation of Irish Industries, had the Government managed their financial affairs better in 1984 the pressure which caused the sudden rise in interest rates in December might have been avoided. The importance of this lies in the fact that companies' dependence on borrowing has continued to rise. I wonder if we realise that more than 50 per cent of the profits of most Irish companies goes to pay interest. Most companies are working for the banks with 50 per cent of their profits, which are miniscule, going to pay interest rates. They must make 50p in the pound to pay back the interest on borrowings before they make any profit.

Real interest rates here are over 8 per cent, after one adjusts for inflation, and that compares with a figure of under 4 per cent in Germany. How many projects can currently be expected to yield anything like that rate of return? It is clear without labouring the point that the budget did little or nothing to ease the interest rates. Stemming directly from the Government's financial handling of the financial position, particularly in 1984, this year they will borrow an additional £2 billion. We should be clear about this because if one throws out a figure like £2 billion it sounds very interesting but we must remember that the additional borrowing of £2 billion brings the total debt of this small nation on the edge of Europe to £18 billion. I do not wish to be unduly political about this because I know that all Governments have made some attempt to do something about borrowing but, unfortunately, the saga goes on. Unfortunately, nobody seems to be able to put a stop to it. Last year we owed £16 billion and, although I have read speeches by Ministers to the effect that the Government were tackling borrowing, that the figure was being reduced, it was under control, we were turning the corner and the books were back in order, this year the figure has risen by £2 million.

If the unemployment price we had to pay here was one that gave us a reduced foreign debt, if I could say to unemployed young people that we cannot tackle unemployment and deficits at the same time but the sacrifice they were making in not having a job was worth it in the national interest because the debts were being reduced and we were getting the books into shape, they would feel that they were serving the nation in some way by being unemployed. What can I say when I sympathise with them for not having a job but go on to point out that we owe more money now than we did last year? It is a poor deal for the unemployed. On the one hand we do not appear to be able to tackle the problem of unemployment but at the same time the deficit is rising. In other countries, such as the UK, there is some benefit from the huge unemployment problem to the extent that the borrowing is coming down. Here we have the worst of both worlds, rising unemployment and deficits.

We cannot sustain a debt of £18 billion. We cannot go on increasing it by £2 billion annually and cod ourselves into the conclusion that we are tackling the nation's finances. I do not know what it will take to tackle the problem. I have put some proposals before the House but I must point out to all politicians, in Government or in Opposition, that we cannot be here next year and owe £22 bilbillion and two years later owe £22 billion. Where will it stop? Who will pay for it?

Mr. J. Bermingham

The announcements by the Deputy's party would cost another £20 million overnight.

Mr. S. Brennan

There is no easing of advance corporation tax or VAT at the point of entry in the budget. In effect they represent a free loan from hard pressed industries to the State. There is hardly a board of directors that does not have the question of more redundancies on its agenda for its meetings. The reason is not the low productivity of workers or the excessive take home pay. It is not the wage competitiveness which seems to obsess the Minister for Finance. The real problem is that excessive non-wage labour costs such as PRSI are discouraging employers from taking on workers and provide every incentive to employers to let workers go. It is the first element in any cost cutting programme. This is compounded by an industrial policy that makes it significantly cheaper to use capital rather than labour. If an employer uses a machine he gets a grant and a significant tax concession. If an employer takes on a worker he is taxed 20 per cent PRSI on that worker. That is a 20 per cent tax on jobs. Why should any board of directors put on their agenda a proposal to increase their workforce when they have to pay 20 per cent tax for each worker? Is it not better for them to deal with the IDA and get handsome grants for increasing machinery. We need a more sensible and balanced approach to industrial policy and the relationship between capital and labour.

The national plan states that the fall in manufacturing industry over the last four years was attributable in large part to excessive increases in labour costs. Yet the Government's analysis in their Review and Outlook 1984 shows clearly that wage competitiveness has improved vis-á-vis our main trading partners. This obsession with labour costs overlooks the fact that for many new industries wage costs are not the major factors which determine competitiveness here. It is also overlooked that it is the non-wage labour costs, mainly the PRSI type of taxation, which are increased in the budget that are pushing up labour costs. It is therefore all the more regrettable that there is no decrease in PRSI contributions in this budget. It would have given employment here a marvellous boost. I have called for that in this House time and time again. It makes no sense to put a 20 per cent tax on everybody employed in Ireland when we have 250,000 people on the streets. Would we not be far better having a PRSI structure which says that the more people you employ the less tax you pay? Is that not the type of policy needed in this country, one which is called a pro-employment policy, based on employment, instead of saying to every employer: “The more people you employ the more tax you will pay”? Is that not so remarkably simple as to be essential?

You could have a sliding scale of PRSI bringing it down to, say, 2 per cent to 3 per cent when you get to over 100 employees. The more people you employ, the less PRSI you should pay; and the sums that I have looked at in that regard would suggest that that system would pay for itself. The extra people employed would almost certainly give the Exchequer a similar return. I am quite convinced — and have not been contradicted as yet — that most insurance companies if given 20 per cent of everybody's salary would be able to provide an insurance scheme as good as that which we have at present. I would not accept that giving an insurance company that kind of income on a long term basis would not allow them to provide that kind of scheme.

The Minister increases PRSI — directly the wrong policy for this nation at this time. That makes it more unattractive to employ people. I want to quote what the Commission on Taxation have said about the PRSI contributions. Ministers quote from it when it suits them, but unfortunately when it does not they tend to ignore it. They say:

These contributions are a discriminating tax on employment and they are contrary to the declared national goal of achieving full employment. They also reduce the competitiveness of Irish made goods on the home and the export market.

A budget which fails to take account of that criticism must be exposed as unimaginative and bogus in that it has claimed to tackle the unemployment question but ignores the Commission on Taxation's proposals on how to tackle unemployment.

The average family, especially those in the PAYE net, will find that their standard of living has been eroded in the past 12 months or so. Unfortunately, the State has become adept at taxation by proxy. In 1984 the Government's take from the PAYE sector rose by 18 per cent. That is an increase of some 9 per cent or so in real terms. That is quite apart from the quasi-taxation such as income levies, water rates, increases in health charges, utility charges generally. The net effect in these circumstances was that, after tax, income of most families fell sharply. It ill becomes a Minister who has presided over the imposition of such a harsh tax regime to claim in this House credit in the budget for not increasing the tax burden further. The burden is still alarming, at a rate of 36 per cent of GNP. It should be reduced. Instead, the tax take from the PAYE sector is being increased in this budget.

It is the ordinary depositor attempting, despite all the odds, to save some money who will end up picking up the bill for the levy imposed on the banks and the building societies. It is nonsense to say that this is a tax on the banks and the building societies. It will be a tax on the depositor, passed on to the depositor. I should like to see measures to ensure that the banks and building societies are not in a position to pass this taxation on to the depositors, otherwise the Minister might just as well have announced an increase in taxation. It would have been just as simple to collect it in that way.

The standard of living of the average family will be hard hit by the imposition of VAT on clothing and footwear outside the context of the general form of tax system. Higher prices for these basic necessities follow hard on the heels of the insensitive removal of the food subsidies last year. Against this background it can be seen that the so-called tax cuts are totally inadequate. For many families ri = "4"they will hardly offset the increase in value-added tax on petrol and cigarettes.

The budget will also make it much more difficult for young couples to buy their own homes. The Minister seems to be trying to create the impression that the increase in the grant to first-time house buyers covers the increase. That is misleading. It is quite clear that it will not do that. In most instance house prices will rise by 5 per cent, or about £1,500 on a £30,000 house. Even then young couples and others with mortgages face increased repayments amounting to upwards of £30 a month. The fact that all home owners and prospective house buyers now face higher repayments stems directly from the decision of the Minister in the budget.

I was alarmed recently to read that some building societies are now saying that they will not lend people the additional money to pay the VAT on their houses. I call on all building societies to continue their normal lending policy and lend for the additional VAT increase. Where are young people to get the additional cash on top of the deposit to pay VAT? It is no consolation to young people to tell them that they will be lent the price of the house but that they have to find the value-added tax themselves. They will not be treated very sympathetically if they walk into any bank and ask to borrow the cost of value-added tax on their homes.

How sensible is that policy when we have a massive waiting list for public housing? Public housing is costing the taxpayer £4,500, £90 per week per house of a subsidy. That is not the cost of building the house, but just the subsidy. We are driving people out of the private house market into the State housing programme where we will have to subsidise them to the tune of £90 per week.

This budget will also increase the very real poverty which is spreading like a cancer throughout the so-called middle class areas, the middle income groups. The Government's high tax regime has forced many into redundancies. I represent a constituency with a high proportion of these people. The after tax income of many of these who are still at work is now totally inadequate to meet their commitments to their families. I have seen evidence of middle class poverty in my constituency — for example, massively increased indebtedness to banks and financial institutions. Bankers have told me that most couples are now up to their necks in debt with little prospect of clearing such debt. The St. Vincent de Paul Society recently reported 10 per cent of middle income families being in debt, not only to banks but also to moneylenders. That is totally unacceptable. The policies contributing to that situation must change. I see also in my constituency forced sales of the family home. Building societies have indicated that many families now have fallen behind in their mortgage repayments. The number of repossessions, although still small, is growing and an increased number are being forced to sell their homes, for which they worked so hard, and to trade down, if they can, to a smaller house. Some that I know personally are forced to sell at prices which represent a crippling loss. Most building societies would admit that the owners of a number of middle income familes have been increasing to quite a worrying rate.

The number of families who can afford to run a car is also falling. There is plenty of evidence for that. New car sales have halved in the past few years. The total number of cars in the country has declined significantly. The Automobile Association have quantified how much this budget will cost the ordinary family motorist. The Minister has criticised the Automobile Association for exaggerating, but he is wrong and the figures confirm this. The motor industry and the family motorist know it.

There is evidence also of increased marital strain. While the causes and effects are not always easy to disentangle, all the indicators point to the reality of growing despair behind the lace curtains and the French doors of modern suburbia.

The incidence of crime of all kinds has increased sharply. I do not have to emphasise that point in this House. They are clearly related to rising levels of unemployment. They are not my words. The recent NESC study has shown that there is a direct link between crime and unemployment. Some months ago I asked the Minister if he would provide tax relief for the parents of unemployed teenagers. I repeat my request to the Minister in this House today. Hard pressed middle income families, most of them deeply in debt, need some kind of relief if they have unemployed children in the household. It is ridiculous that tax relief is not available to them.

I suggest to the Minister also that he should cut out the nonsense and abolish the residential property tax. When this was introduced the Minister told me in this House — and it is on the record of the House for anyone to check — that it would generate £6 million in a year. I told him at the time that it would generate no more than £2 million. Both of us were wrong. It brought in £1 million. It cost more than £1 million to run that scheme. The result to the State of all the fuss about the residential property tax, hours of officials' time, and so on, was a net loss. The State lost money on that scheme and are still losing money on it. That is not the only point. For many families who have chosen to put their savings over many years into improving their homes, this tax symbolises the determination of the Government to penalise them as if it were some kind of crime to provide themselves with a home.

The deficiencies in the budget reflect a wider deficiency in the national plan, of which this budget is the first instalment. As such one has to take a wider look at the budget. The plan sets the parameters of the budget. It is not enough to merely state the aim of reducing unemployment or restoring the public finances. Everybody now shares these aims. What is required is a coherent and comprehensive set of policies to achieve those aims. What is required is a series of budgets which provide for the implementation of these policies. This House and the country have been disappointed on both counts. The present policies are not coherent, inevitably so given the divergent ideologies involved.

The controversy over the National Development Corporation, that ideological albatross, is but one example. Nor are they comprehensive. There is no discussion in the national plan on the financing of the national plan. Nowhere in the national plan is there a mention of how it is to be financed. Nowhere in the national plan is there any discussion or proposal on monetary policies. Let me highlight those briefly before I conclude. There is no comprehensive proposal in that plan, of which this budget is an instalment, to reform taxation. The measure in this year's budget falls short of anything like reform.

In this context I should like to put before the House again, as I have done on two previous occasions, the words of the Tánaiste before the plan was published. He said they believed that any national, economic and social plan which failed to address the inequity in our system, an inequity which results in the PAYE sector paying a disproportionate share, is not worth the paper it is written on and that on present policies by 1987 the PAYE sector will be paying a disproportionate share of income tax. We all know that. The plan said taxation will not be increased further. It is quite obvious that is not the direction to go in. We should be trying to reduce it.

Investment is set to decline over the duration of the plan. That is in the plan. Yet the scope for productive investment and the need for such investment was never greater. Unemployment, excluding special schemes, is set in the plan to rise in percentage terms. The jump in unemployment in recent months which I mentioned earlier not only invalidates projections in the budget but also in the plan as a whole. That is not just a politician talking. A number of independent experts recently criticised the data in the plan on job creation as optimistic, even though it is predicting that unemployment will not get any better.

In a series of Dáil questions recently I have been trying to press the Minister to give us more detail on the national plan. Unfortunately that is not forthcoming. I challenge the Minister to say that this plan is anything more than a continuous squeeze on the PAYE sector, on public sector workers, and on those who depend on food subsidies. The national plan of which this budget is part, is technically deficient and quite an inadequate response to the massive challenges which face this country.

I want to conclude by saying that any objective analysis of this budget will show that the measures it contains cannot secure even the limited objectives which the Minister for Finance has set. Already the Minister has been forced into a series of U-turns which further undermine the credibility of the budget. It does not improve the environment for increasing employment. How can it, when the measures it contains have increased industries costs, reduced profitability still further in Irish industry, and left a tax on employment in the form of PRSI at an alarming level? It does not reform the tax system. It introduces a degree of simplification in the tax system which I welcome. That falls short of anything which could be called taxation reform.

The Commission on Taxation called our tax system muddled, complicated and inefficient. Already the burden of taxation is at an excessive level. That does not need to be stitched into the record of this House any further. The budget ignores the position of thousands of middle income families caught in a poverty trap. The full consequences of this are only now becoming apparent in increasing personal distress and growing social disorder in middle income Ireland.

There is a positive alternative. It is based on the central thesis of restoring the public finances in step with comprehensive and imaginative pro-employment policies. Such processes will require the restoration of incentives to work, to save and to employ. Over the past two years in this House I have proposed many steps forward which can be taken to restore growth. I will not delay the House with the details of them today because many of them are on the record. I suggested venture capital schemes, mobility between the public sector and the private sector. I suggested a tax regime on firms directly related to the numbers employed and other pro-employment policies. I put forward imaginative taxation schemes directed towards winning foreign markets. I suggested establishing Ireland as a European base for the financial services sector which is ideal for a country with very little capital and many unemployed. I proposed the establishment of agricultural zones which would allow for a Shannon Airport type of development around our smaller towns.

I have suggested a total reform and overhaul of our semi-State companies because they now control the high ground of our economy, turning over £3 billion and employing some 54,000 or 55,000 people. These are positive proposals I have put to the House time and time again over the past two years. Unfortunately, all I can see in the budget is not so much that the detail but the direction is wrong. We are not moving in the direction that will restore growth and some type of hope to the economy.

I might conclude by giving the House a small example of one scheme I suggested during the year to do something about import substitution. I spelled out the details of such a scheme on one or two occasions in the past, but let me show the House the need for such a scheme. There is a small food distribution company in this city which imports £4 million worth of food every year. I stress it is a small company only. Their total sales amount to £4 million. Yet they import £4 million worth of food. I said to that company recently: "Surely with all the young people unemployed you could start buying that amount of food domestically?" They told me they had advertised in the national media, that they had contacted the Confederation of Irish Industry, the ACC, anybody who might be able to help them to find people who would manufacture the products. The answer they received was that there was nobody in Ireland who could manufacture those products to the standard required by Irish supermarkets. I asked them what these products were. I said: "They must be very sophisticated if you must import £4 million worth of them". I was supplied with a list of them. Just to illustrate to the House the work that has yet to be done in this country, these products included for example, £150,000 worth of coleslaw, £50,000 worth of pork pies, steak and kidney pies, sausage rolls, smoky bacon, pies, cheese and onion quiche, celery salad, potato salad, vegetable salad, hamburgers, and so the list continues.

I do not just pick that list out of the blue. I put it before the House to demonstrate that in a country where we should be able to employ our young people by tackling industries like this there is a company in this city that must import £4 million worth of this type of product. Coleslaw must be imported because the people in the trade cannot get it manufactured here. What do we do? We pay out £600 million every year in unemployment rather than being imaginative, pushing out the boats, having some imaginative, radical policies.

Let us take some risk on taxation, let us give some people a reason for working and for taking up such opportunities. If, in the process, it creates a few millionaires, so be it. Let the young generation at least aspire to being among that group of young millionaires rather than say to them: "This country does not like people getting rich. This country does not like people making money. If you want to go on with that kind of nonsense you had better go to America. You had better not try that kind of nonsense in Ireland because this is a socially-concerned State and we do not like people getting ahead of themselves". We must change that philosophy and thinking.

Unfortunately this budget has added to the despair in the economy rather than opening up the windows, showing people that while we believe in this nation, putting in a floor below which we do not allow our people to fall, we do not put in a ceiling just six inches above it and say: "You cannot climb any higher". Let us remove the ceiling. Let people climb as high as they like. Let them grab opportunities like the one I put to the House today, in that way pulling up the rest of the nation with them. Let us keep the floor, because we are a socially concerned nation.

Mr. Timmins

It has been suggested in recent years that in an economy such as ours with all the factors that govern it, budget day has no place in setting the targets necessary for its efficient working. There is no doubt but that this theory was gaining certain acceptance in many quarters recently, particularly in a time of depression which we have been experiencing now for a number of years. This year's budget has certainly put the nail in the coffin of that argument, setting the tone for many years to come for us to pull ourselves out of the difficulties we have been experiencing. The effects of this budget cannot be underestimated. It is clear that it has been accepted by the majority of fair-minded commentators. Our people have seen at least that there is light at the end of the tunnel. With the incentives afforded in this budget we shall at least see our people shake free of the depression into which we were slipping in recent years.

The message is clear from this budget: we can and will overcome the obstacles and difficulties that have beset this nation. No amount of praise on the part of Government Deputies or criticism by Opposition Members will add to or detract from the fact that our people have accepted the challenge posed them by the Government in this budget. They are prepared to give them the necessary support in order to achieve a better standard of living for all.

There has been constant speculation in the media and elsewhere that this constitutes the first budget of the Minister for Finance, Deputy Alan Dukes. It must be remembered that, while, this has been the third budget introduced by this Minister, the first two were introduced in very different circumstances — the first when the Government had been only a very short time in office and could not give the necessary consideration, needed to budgetary strategy. In last year's budget it was necessary that the Minister continue the process of re-establishing confidence in our national finances by bringing forward budgetary targets that could and were achieved for the first time in a considerable number of years. The outcome for 1983 and 1984 showed clearly that the Government achieved those targets. It must be accepted by all that confidence has now returned in the matter of the handling of our national finances.

I should like to deal briefly now with the overall position of our economy, and it is against this background that the budget must be viewed. It will have been accepted by all that the current recession has been deeper and of longer duration than had been anticipated at its outset. We suffered here particularly because of the manner in which we spent our natural resources at a time when a more prudent attitude and approach were called for. I am confident that we are now on the right road. Given the basis of the national plan we can once again achieve an expanding economy. The fact that inflation has been reduced dramatically over the past 18 months, together with the control of the budget deficit, means we are now placed in a better position to benefit from whatever international improvements there may be in the long and short term. There is no doubt but that a major improvement has taken place in the United States. While the strength of the dollar has had a detrimental effect on our loan repayments and on the value of our currency, let us hope that at EC level Western Governments can become convinced of the need to act together in order to achieve the economic stability necessary to bring about the improvements of which we are all desirous.

One of the major features of this budget is the radical reform of the VAT tax system and its beneficial effects on everybody. Of their own admission the Government see this as the initial process in achieving a fair and equitable tax system for all our people. The fact that this decision was taken clearly indicates that the Government are prepared and are able to take the radical steps necessary to get the country back on its feet. There have been the psychological effects on housewives of the reduction in the VAT rates which in many cases equates to a drop of 9 per cent in price and which will do much to illustrate that their concerns are heeded. We are hopeful that in time the Government will be in a position to move to a single VAT rate struck at the lowest possible level. For many years various critics of the Government have pointed to the high rates of VAT applicable here as against those in our competitor countries. But in that time we lost sight of the fact that there were many things zero-rated here that were not zero-rated in those countries with which we were compared.

In the budget the Minister has given an indication of his attitude and approach to the problem. The improvements in the income tax system are extremely welcome and demonstrate that at last the Government are prepared to take the decisions necessary to lighten the burden on the PAYE taxpayers. However, we must redouble our efforts to ensure that those who are liable for tax contribute their full share and this was mentioned recently at a meeting of a committee of this House. The impracticality of collecting taxes from certain groups was also mentioned. The answer is not to employ further tax inspectors but to devise a different system of payments for these groups if the current systems are not viable. It is imperative that the overall tax take must be equitable, which will mean a greater tax revenue, thus ensuring that the burden is eased on the PAYE sector.

I have already said that this budget will be seen in retrospect as a landmark in our economic development. It could be described in many ways as a neutral budget, but its importance lies in the fact that it signals clearly that we are at the start of the long road back to a normal economic climate. This has been demonstrated clearly by the favourable reaction in general which the budget has received. When one removes the arguments put forward by the Opposition as to why they oppose the budget it is obvious that, in their hearts, they accept that the Government have taken the right decisions on this occasion.

While easing the burden of direct and indirect taxation is important, we must not lose sight of the fact that there is a long road to travel. I agree with many of the observations made by Deputy Brennan, but one cannot travel the proper road unless one realises and recognises what the problems and difficulties are and, having recognised, understood and appreciated them, then tackle them.

We must continue to look critically and honestly at the level and degree of public spending to ensure that we are getting value for money. We must appraise certain activities in which the State should not be involved. I am not dogmatic in this respect and I do not think that the State should only be involved in certain loss-making services. Let us not be dogmatic in suggesting that the services now operated by the State must be operated by the State if they could be more economically organised within the private sector. Having appraised the various services that should be run by the State, whether directly or through semi-State companies, we must as a matter of prime public importance ensure that in the spending of public finances we receive the greatest possible value for money. We are not doing enough to ensure that waste and duplication of resources are eliminated as far as possible and we must continue to support the Government in their task of seeing that scarce public resources are put to the best possible use. We must transmit a clear message to the public that, in decisions concerning the allocation of finance and the method by which Departments and semi-State bodies are run, finance is used prudently and wisely.

The Government's decision to accept the independent pay award to the public service, despite the increased cost to the Exchequer, has received wide media coverage. One could criticise the Government for not adhering to the stand they have consistently taken in the past in regard to pay claims. However, that would be to misunderstand the role of Government and politics in general. Governments must achieve a consensus of sorts and they must be prepared to compromise if they believe it is in the public interest to do so. The Government have shown good faith in this matter and I have no doubt that their gesture will be reciprocated throughout the public service. In the final analysis it will be seen as the right step to take. I do not suggest that there may not come a time in the future when the Government will have to stand firm on demands made by various groups, but the gesture at this time will clearly show that the Government are not seeking confrontation, which would have a disastrous effect on the nation as we can see in examples from our neighbouring country.

We must not confine our comments on industrial relations to the public sector: the private sector companies and unions also have a responsibility in this regard. We must all bear in mind that unemployment is our biggest problem. All employees must modify their demands if firms are to survive and achieve the necessary growth to earn additional income to finance the necessary further employment. Everybody who has a job must realise that no company, no matter how solid, is immune to closure if it cannot control its costs. It must also be remembered that new technology and work practices play a significant part in the drive towards further employment. Those at work must modify their pay expectations and be prepared to give up outdated work practices which have no place in the 20th century. Workers should have a self-interest in accepting these changes because the greater level of employment produced will mean a lesser burden on the State from claimants for unemployment and, consequently, the burden of taxation will also be lessened.

Government and employers also have a part to play and their response must be radical. The challenge of new technology is currently changing the face of industrial production with its consequent effect on employment levels. We must realise that scientists have managed to reduce the manual content of everyday work and, therefore, have reduced employment levels in all Western economies. We must share work so that all may benefit from involvement, although not necessarily for the length of time as at present. This will have to be achieved by reduced working hours and by work sharing, which has tremendous implications for the current structure of society. We must also educate our people so that they may benefit from their leisure time.

When one examines the various proposals which the Minister introduced in the budget, it is clear that it is a challenge and, irrespective of party, we all hope, in the national interest that the Minister and the Government will be successful in their efforts to tackle the difficulties and problems which beset us.

Mr. Foley

The Government should be in no doubt about what the people were looking for in this budget. They wanted to see our massive unemployment rate tackled in a positive way because it is the cause of many of our problems, social and otherwise, at present. The burden of taxation is also a cause for concern and no determined effort has been made to undertake a review of our outdated tax system. There is no reduction in the level of taxation. No effort has been made to restrict growth in taxation to the level of inflation, apart from taxation at the top of the scale. Personal taxation for those in the upper middle bracket remains much higher in Ireland than in any other country.

I should like to pinpoint a few areas in which the Government's policies have failed. This year an extra £2,000 million is being borrowed to run the country. In the past two years our national debt increased from £12.7 billion to £18.5 billion and by the end of this year the figure is expected to be £21 billion. Our foreign debt amounts to almost £8 billion as against £5.2 billion two years ago. The unemployment figure is 234,000 or one in every six of the workforce. Statistics indicate that the majority of the unemployed are in the 18 to 25 age group.

We have not escaped this problem in Kerry where the unemployment rate is very high. Our only hope of improving matters lies in the setting up of a single estuary authority to control the Shannon. Through the Minister for Communications and the Tánaiste we have made submissions to the Government in this regard. In addition we have had a number of meetings with our counterparts in Clare and with the Foynes and Limerick Harbour Commissioners on the matter. Our counterparts in Clare have agreed with us on a submission to be sent to the Minister regarding the setting up of such an authority. This is our only hope for the development of that massive land bank along the Shannon between Tarbert and Ballylongford which has been in the hands of the IDA for a number of years. Such development would go a long way towards solving the unemployment problem in the region. I appeal to the Minister to consider seriously our submissions in this regard.

The weaker sections of the community have been treated badly, too, by the Government. The minimum increase in social welfare payments is of the order of 6 to 6½ per cent payable from 11 July next. That represents less than 3 per cent in a full year. The double payment for the unemployed was not made at Christmas. The housewife is to be deprived of an increase in children's allowances. Apart from the loss to her directly there is the general loss of not having that extra money in circulation. There is to be a reduction also in pay-related benefit. Let us contrast these policies with the policies adopted by Fianna Fáil in their last two budgets when every effort was made to increase the standard of living of the weaker sections.

Regarding the change in VAT in respect of theatres, I understand that those concerned would have preferred if this had not happened because the change is a disadvantage in many ways. Instead of exempting theatrical activities from VAT, they should have been zero-rated.

The 5 per cent VAT increase on the construction industry is a further blow to that industry which is now estimating a loss of 5,000 jobs in the coming year. We are told that employment in the industry is 60 per cent less than the summer 1981 level. Public capital investment in the construction industry has been very much reduced and private investment in the industry is now almost nil. The section 23 incentive has been abolished. The cost of a house will increase by a minimum of £2,000, thereby putting house purchase beyond the reach of many young couples.

There is no incentive in the budget so far as those engaged in the tourist industry are concerned. Last year the Minister of State with responsibility in that area promised a reintroduction of the refurbishing grants and the introduction of interest-free loans to help that very depleted sector. In Kerry alone more than 3,000 jobs have been lost in tourism in the past four years but those jobs could be regained by the Government taking the initiative and providing for some incentive in this area. I am appealing for a commitment from the Government for a reintroduction on a permanent basis of the Cork-Pembroke ferry service. I appreciate that £500,000 is being made available for a service for this year only because of the 800th anniversary celebrations taking place in Cork. Having regard to the importance of tourism to the Cork-Kerry region, it is imperative that the Government give a commitment regarding a permanent service on the Cork-Pembroke route. We have been deprived of the services by vested interests.

Cork and Kerry have done more for tourism than has any other county and we have done so with very little State aid. We are still prepared to respond by investing in tourism but we must have a positive response from the Government.

As a member of the Kerry Health Committee I am very concerned about the shortfall in the allocation to the Southern Health Board. Are the Government and the Minister for Health slowly dismantling our health services? The indications are that all the health boards will have to effect massive reductions in their services. Last year a new general hospital was opened in Tralee with the promise that it would be operational fully by the end of October 1984 but that promise has not been fulfilled. Instead, there is a threat that 80 of the 200 beds in operation may be closed. This should not be allowed happen especially when there is such a massive shortage of geriatric beds in Kerry.

Private and semi-private hospital accommodation has been increased by a massive 20 per cent. In allowing this increase the Minister has ensured that many of those who up to now opted for the voluntary health service will no longer be able to afford their subscriptions in that regard and, consequently, will have to revert to the general hospital services. But these services are not at all adequate to cope with such an influx of patients.

There continues the embargo on recruitment to the public service with the result that most Departments are now operating with greatly reduced staffing levels. I should like to refer particularly to the staff level in the office of the Comptroller and Auditor General. As Chairman of the Public Accounts Committee, I am aware that in the past six months there has been a massive shortage of staff in the various Departments. The Comptroller and Auditor General has pointed out the extent of the workload in his office and how the embargo on recruitment in 1981 had affected the staffing levels and, consequently, his capacity to carry out his work.

Debate adjourned.