Before Question Time I said that the principal function of the Finance Bill was to give statutory effect to taxation changes announced in the budget statement of 30 January. The Minister said that his aims were to improve the environment for increasing employment, to reform the taxation system and protect those on low incomes from the impact of the recession. I acknowledged that there were serious financial difficulties and the previous speaker, Deputy Séamus Brennan, also some Opposition spokesmen seemed to be acting the part of Robin Hood by demanding the improvement of national services without indicating where the money would come from. An instance of this occurred during the debate on education yesterday when Deputy Hugh Byrne suggested the employment of 7,300 new teachers at an approximate cost of £100 million to the taxpayer.
The gloom and doom which has been preached continuously from the Opposition benches has begun to stick with them and their followers, even in the smallest cumann. I outlined the case of one of their supporters in Ennis, a draper who had an increase in turnover of 25 per cent annually in the last two years but still says that there is an atmosphere of gloom and doom and that business prospects are not looking good.
The Minister for Finance and the Government have given confidence to people. They have done so in a cautious way. It is not as expansionary as the Opposition might like. The Opposition would like to spend millions of pounds without specifying the source of the money. There have been signs that the Government's policy is working. I refer to statements made by industrial and commercial people regarding shopping in Dublin during Easter. It is claimed that the rationalisation of VAT has had a significant effect on trade and prevented many people from going to the North to shop.
This measure has also improved the climate for the tourist industry. In the mid-west region all the hotels are solidly booked for the next four or five months. In addition, Aer Lingus have indicated that they do not have any vacant seats on their trans-Atlantic flights during the next three to four months. Therefore, in the event of fund raising activities in the US on the part of political parties here, advance notice should be given to Aer Lingus.
In their two years in office the Government have brought under control the very difficult financial situation they inherited with the result that we are now reaching a climate in which confidence is being restored and investment encouraged. The Government have had considerable success in this regard as has been illustrated by the decrease in inflation from 17 per cent in 1982 to a projected 5½ per cent this year. A great fillip to the economy also is the fact that last year's budget outturn was on target. The Government are continuing to ensure that the incomes of the less well off are being protected. In this area, too, there have been some important improvements. A prime feature of this year's budget is the increase in social welfare payments by amounts that are in excess of the projected rate of inflation between mid 1985 and mid 1986. There are other improvements in social welfare schemes, too. For instance, there will be equal treatment for married women, and for those who are pregnant and whose husbands are insured fully, there will be an extension of dental, optical and other benefits.
Undoubtedly, unemployment is our most serious problem. The figures in this regard represent a tragedy in human terms and a massive wastage in terms of economic resources. In endeavouring to improve this area no effort must be spared and no possible approach left unexplored.
One might be forgiven if, having listened to the Opposition, one had the impression that the unemployment problem could be solved merely by condemning it loudly enough and often enough without any worthwhile idea being put forward. We would be glad if the position could be improved in that facile manner but that is not possible. No Government in the history of the State has devoted more time to the unemployment problem than the present Government have devoted to it in the past two years. They have introduced a wide variety of very valuable schemes to help stimulate employment. An encouraging number of 5,000 availed of the enterprise allowance scheme in 1984. The social employment scheme for the long term unemployed which is coming into operation now will provide employment for at least one year for up to 10,000 people who have been unemployed for more than a year. This scheme can be availed of now by teachers and by school principals. These people had expressed very strong views about the position whereby temporary caretakers lost their employment. Schools, particularly, should avail of the scheme. Yesterday we had some comments about centre city schools but the social employment scheme affords a ready opportunity for the people involved to take advantage of what is being offered. Local authorities are expected to be major participants in the scheme. Apart from the valuable employment that will be provided, the scheme will enable local authorities to undertake desirable environmental, amenity and other works.
Employment will be promoted also by two central features of the budget which are proposed in parts I and III of the Bill. The first is the alteration in the income tax structure which has been designed carefully to have the maximum beneficial effect on employment and the second is the rationalisation of the VAT system. Already it appears that the improvement in the VAT system is being noticed in the tourist industry. The restructuring of the income tax bands and the increased personal allowances are most welcome. These changes will be some benefit to all income tax payers. The increases in allowances may not be as large as one would wish for but they are an earnest of the Government's commitment to initiating much needed reform in this area. I am confident that the reforms proposed in this Bill will have the effect of increasing the incentive to work, an incentive that is so vital to economic progress.
When referring earlier to the changes in VAT, I alluded to the commercial aspects of the changes but the new rates have resulted in a reduction in prices in respect of a large number of items. The benefit of these reductions will be enjoyed by householders particularly since the prices of such everyday items as soaps, detergents, cosmetics, crockery, glassware, sports goods, stationery, toys, household equipment and so on will be reduced. These items form a large part of the weekly household budget. I welcome also the reduction in VAT on newspapers.
The reduced VAT rates on car hire will have a beneficial effect on employment in my constituency particularly in the context of Shannon.
The building sector will be affected, too, by some of the VAT changes. There has been a good deal of criticism of the increase in VAT from 5 to 10 per cent on building services but this increase must be considered in the context of the overall reform of the VAT system. When assessing the overall effects, one must take into account the various measures taken by the Government to alleviate any adverse effects on building output that might result from the increase. For instance, the new house grant is being increased from £1,000 to £2,000. Many of those who have criticised the VAT increases have exaggerated their possible effects. They have failed to appreciate the context in which the changes are being made and have ignored the alleviating measures.
The need for a fundamental reform in the VAT system had been obvious for some time. The system had evolved in circumstances of a narrow taxation base and of a bewildering array of rates. The high rate of 35 per cent was unacceptable. On many occasions the Opposition criticised that high rate.
