Deputy Haughey has 40 minutes.
Private Members' Business. - Building on Reality: Motion
I move the following motion in the name of our Chief Whip:
That Dáil Éireann calls on the Government to withdraw the document Building on Reality and to put forward, in its place, realistic plans to protect existing employment, create new jobs and alleviate social deprivation.
Building on Reality is a discredited document. It never did represent a coherent or a worth-while economic strategy. The inadequacies of the document were pointed out at the time of its publication and in particular, its failure to put forward any policies to solve our major economic problems, mass unemployment and high taxation. Even if all its projections were fulfilled, we were not going to be any better off in 1987 than we were last autumn, slightly worse in fact. To that extent, it was basically unacceptable to us. However, as time passes, it is becoming increasingly obvious — even to its authors — that even the limited objectives of the document will not be met. Whatever basis of political support might have been claimed for it has been finally debunked by the Labour Party Conference in Cork. It no longer has any semblance of political credibility and should be withdrawn.
Let me, for the benefit of Labour Deputies in this House in particular, recall that their party in Cork condemned Building on Reality, especially the sections relating to public sector pay, jobs and transport reorganisation. The following motion was passed at that conference:
Conference, therefore, rejects the proposals of the National Plan which are contrary to the existing policies and traditional principles of the Labour Party and directs our Members in the Dáil and in Government to withdraw their support for these anti-working class measures.
That is a very specific direction from a party conference in very clear and trenchant terms. I am inviting Labour Deputies to respond to the wishes of their party conference at large and vote for this motion. I want to emphasise — and this is an important aspect of our debate this evening — that all we are seeking in this motion is to change Government economic policy and to have the document which is the basis of present policies withdrawn in order to enable that change of policy to take place. That is surely not an impossible political demand.
It is now generally acknowledged on all sides that the Government's economic policy, to the extent that they still have one, has failed; that it is only making things worse. We have an appalling level of mass unemployment and, at the same time, a financial situation which continues to deteriorate steadily. The burden of taxation and service charges has become absolutely crippling. Families are struggling to make ends meet. The fabric and cohesion of community life has deteriorated, as we suffer a major outbreak of crime and lawlessness.
Unemployment has risen by well over 50,000 since this Government took office. Even at 226,000 unemployed there is no sign that the rising trend has yet been halted, let alone reversed. Any diminution in the figures on the live register is, of course, nothing more than a reflection of a rising tide of emigration. Qualified observers in Britain believe emigration is running at 30,000 a year to Britain alone in addition to the United States. The real level of unemployment is also being masked by training and other schemes.
Redundancies are continuing to rise. They have increased from 26,000 in 1982 to over 31,000 in 1984. The index of employment in the building and construction sector has been almost halved since mid-1981, and the fall has been accelerating again since November last.
The latest ESRI quarterly states bluntly that "A major contribution factor to the employment problem is the depressed condition of the construction sector". Last year housing output fell below 25,000 for the first time since 1977. Building on Reality stated on page 21 in relation to the building industry, that “overall growth should resume early in the period of the plan” and forecast that employment would rise slightly between 1984 and 1987. Since the document appeared in October employment in building and construction has fallen by 9 per cent. The disastrous decision to raise VAT on new houses by 5 per cent in this year's budget will have further aggravated the adverse trend.
Despite our efforts in the Finance Bill, it looks as if the Government will persist with this ruinous proposal to increase VAT on building and construction, to 10 per cent. The Central Bank in their recent annual report contradict the assertion in Building on Reality that “the decline in output is starting to level off”, when it predicts that output will, in fact, decline by a further 4½ per cent this year, practically the same as the 5 per cent decline in 1984. At that rate of progress the levelling off process will not finish till the mid-1990s. The Government's attitude to the building industry is a good example of what was referred to in Cork as “anti-working class measures”.
Building on Reality claimed that unemployment would peak at 220,000 in December 1984. In fact it reached 234,000, and even seasonally adjusted it was 228,500 in February of this year. The ESRI state in their current quarterly review “the outlook for employment remains bleak. Although there could be some increase in the number of jobs in the course of 1985, the annual average of numbers at work is unlikely to be higher than in 1984, while the rise in the labour force will maintain the upward trend of unemployment during the year”. That is a calm, factual statement by the ESRI. Surely that brutal assessment alone is sufficient justification for our motion. Surely, it should inspire any Deputy who has some concern for the future of employees to vote for our motion and for this document to be withdrawn.
The deflationary policies of the Government have been totally counter-productive in so far as rectifying the public finances is concerned. The financial objectives of Building on Reality are already way off target. Not only does all talk of phasing out the current budget deficit by 1987 now seem irrelevant, but even the very high deficit projected for this year will be exceeded. I challenge the Minister to contradict that statement. Unless some action is taken either on the expenditure or on the tax side, the unprecedentedly high budget deficit of £1,134 million will be exceeded this year.
Building on Reality has a target deficit of 5 per cent of GNP by 1987. In a Sunday Tribune interview on 12 May 1985, the Minister for Labour clearly indicated that he no longer believed in any such target. The whole thing has become unreal. All the projections in that document, Building on Reality, in so far as they refer to budgetary policy and current budget deficits are no longer realistic.
Already the Government have had to strain their arithmetic in the most dubious manner in an effort to make the budget appear consistent with Building on Reality. As the months pass, it is increasingly clear that the arithmetic will not stand up. Unsubstantiated figures were put in for savings on pay, for non-pay savings and for revenue buoyancy.
Even with the benefit of all this manipulation the Minister for Finance brought forward a budget with the highest ever planned deficit, which on the estimates of the Central Bank amounts to 8 per cent of GNP. At the beginning of May this year the current budget deficit is estimated to be running at £800 million, or almost two-thirds of the deficit budgeted for the year as a whole. Five months into 1985 income tax receipts are still running behind their 1984 levels instead of the 8.5 per cent increase projected in the budget. There is no sign of buoyancy in indirect tax revenue. Debt service charges are running at 26 per cent ahead of last year's level instead of the 16 per cent budgeted for. The Minister is on record as saying that he will not allow budget targets to be overrun. If he does not, this must inevitably mean another budget this year which, if it is to be effective, cannot be later than July. Experience shows that there is no point in bringing in a supplementary budget after July. Certainly, by the time the Dáil returns after the summer recess it will be far too late to correct any serious discrepancies in the budget.
Are we to have this new supplementary budget the moment the local election polls are closed? In the debate we are asking the Government to be honest with the public. There is now fairly general agreement that this supplementary budget, or some change in the budgetary situation, must be implemented. The Government's credibility is at stake in this matter.
The continuing large current budget deficits will, of course, have to be carried by borrowing. This type of borrowing produces no return which would help to repay it. It has been generally accepted for many years that borrowing should be mainly for productive capital investment yielding a reasonable rate of return. Instead, the Government have been steadily squeezing capital investment, which has borne the main brunt of adjustment in the public finances.
In the two and a quarter years since the Government took office the national debt has grown by two-thirds from £11½ billion to over £19 billion by 31 March, while the foreign debt has increased from just over £5 billion to £8½ billion in the same period.
The Government, in the words of one of their own economist mentors, have thrown in the towel on the public finances. They have completely failed to achieve progress in relation to their own stated financial objective.
The policies pursued by the Coalition over two and a half years have gone a long way towards wrecking this economy. They have locked us into a downward spiral, with jobs lost, services cut, taxes raised, each having a depressing, accumulative effect on the other.
It was in the intensive care unit when we took over.
It is imperative that this spiral be reversed. At the moment young people are leaving without proper preparation for emigration and our social problems are transferred to other countries. This scandal is not being publicly acknowledged, nor is it being admitted how large a phenomenon it is. The official statistics are quite obviously hopelessly inaccurate, but no one in Government seems to be interested in obtaining a more accurate picture. The Government are making claims about impending economic recovery that are devoid of reality. Indeed, whatever international recovery there is, is largely passing us by.
The Government's approach to public service pay was supposed to be a basic element of Building on Reality. £108 million gross had to be provided over and above the figure that, according to the Government's document, “could not be exceeded”. Is there any evidence that the Government will be able to adhere to their stated policy in the next pay round either?
In respect of unemployment, the public finances and pay, all key elements in Building on Reality, the document has already failed, and there is little or no chance of the principal targets being met. That, in my view is a good and sufficient reason why it should at this stage be withdrawn.
But in addition there are specific aspects of the document that are totally unacceptable to us and to the general body of the Labour Party. Building on Reality relies heavily on the system of water charges being imposed by local authorities. No matter what contortions and deceptions the Labour Minister for the Environment engages in coming up to the local elections, the fact is that Building on Reality requires increased local charges not reduced ones. Pages 137 and 138 state that the current level of funding from Central Government is:
... considered to be too high and cannot be sustained... The allocations decided on by Government will provide for only modest increases in this grant over the period of the Plan ... Local authorities will be expected to meet any financial difficulties which may arise by a combination of better management of available resources, and the public generation of local sources of revenue.
That is clear and specific. The document, Building on Reality, clearly stipulates that local authorities must finance their needs in the period of the document out of local charges. That is one of the reasons why we want the document withdrawn. Those local charges have been shown to be unjust, inequitable and unacceptable to the general public. Labour Party members can now demonstrate their rejection of the system of water charges by voting for our motion. The withdrawal of the document will include withdrawal of that whole emphasis in the future on water charges by local authorities.
The 1984 Government Estimates provided only a 3 per cent increase in the grant for local authorities. It is clear from the leaked NESC study that the Government are contemplating the full-scale reintroduction of local rates both on private houses and on agricultural land. The Government's intentions in this matter must be made clear to the voters in the local elections. The people are entitled to know before they go to the polls what the Government are going to do in this area.
On the one hand we have the Minister for the Environment trying to confuse the issue as far as water charges are concerned. Then we have the leaked report which indicates that there will be a new type of tax, in fact, the reintroduction of local rates on all kinds of property. The Government are trying to go into the local election campaign confusing the public. On the one hand they have imposed the water charges —Building on Reality insists that local authorities finance themselves through water charges — while on the other hand the Minister for the Environment is trying to shuffle from one foot to the other indicating that he is half-hearted about them and that maybe people should not pay them. On top of that we have a new proposal. The Government should be honest with the people and come forth clearly and state what their policy is in this area. Our policy is clear. As soon as we are returned to office we will repeal the legislation which imposes these water charges. That is a specific and clear statement by us.
In the document the clear hostility and antagonism of the new Right to the public sector generally manifests itself. Since its publication, the public service has been subjected to consistent attack, often to an unreasonable and unreasoned extent by the Minister for the Public Service who has been unbalanced in his comments. Some of his strictures about our public servants should be withdrawn along with the document. Semi-State companies are in a state of siege. In some cases they have been callously liquidated; in others they have been privatised and in others, like Bord Telecom, they have been and are being deprived of the money needed for investment. There is an all-out attack being made on the public sector in many of its different aspects. That philosophy is inherent in Building on Reality.
If Labour Deputies are sincere in their commitment to the public sector and to semi-State companies and their operations they will have no hesitation about voting for our motion and calling for the withdrawal of Building on Reality in which this anti-public sector philosophy is clearly enshrined.
Our approach to the public sector is a totally different one. We believe that all the commercial semi-State companies, and local authorities should act as development corporations. It has always been our philosophy that an important role of our semi-State bodies is to act as generators of employment, that they have the important mission in our rather under-developed economy of providing employment opportunities as well as discharging their public sector responsibilities, that they should be development and employment minded. That is the opposite to the philosophy enshrined in Building on Reality and also to the policy which is being steadily implemented by the Government since they assumed office. Practically no semi-State company can regard themselves as secure. There is a clear hostility and antagonism in the minds of a number of these Fine Gael Ministers to the whole concept of semi-State economic activity. The message with regard to semi-State companies in the document we are seeking to have withdrawn is clear; reduced investment, therefore reduced employment. There is no emphasis whatever in this document on any positive role for the semi-State sector.
Building on Reality promises a complete abolition of food subsidies. That surely is not Labour Party policy. Today too many people have their backs to the wall, social deprivation and hardship are too real and widespread, too many families are in need for that proposal to be proceeded with, yet it is there in Building on Reality firm and specific. That is another reason why we want it withdrawn and why we seek Labour Deputies to support us in this motion. We believe that, whatever about food subsidies in normal times, certainly the present is not the time to set about dismantling this protection of the poorer and weaker sections of our community. If for no other reason, I believe that we are perfectly entitled to seek the support of the Labour Party and their Deputies in this House on the ground of the proposal in these appallingly difficult circumstances, with so many families seriously deprived and suffering hardship, to go ahead with the abolition of food subsidies altogether.
There is by now ample and abundant proof in terms of both broad strategy and specific detail that Building on Reality was inadequate and unsuitable to begin with and has been shown increasingly to be disastrous in practice. Incidentally, was there ever a document more seriously misnamed than that document Building on Reality when you think first of all of the unreal projections in the document itself and the way in which the entire document has been underlined and made irrelevant by developments? That will go down in economic history as one of the great misnomers of all time. It is time the document was withdrawn and quietly forgotten. The Government should recognise reality, withdraw the document and put in its place, as our motion demands, realistic plans to protect existing employment, create new jobs and alleviate social deprivation. Missing entirely from the Government's document is any attempt to give a forward thrust to the economy to help us to get out of this inflationary spiral in which we find ourselves, to start some movement forward, to offer some incentive. The withdrawal of this document, now that it is clearly discredited, would be some indication, some recognition by the Government of the reality of our situation. It would be some indication that they recognise that the present situation can only keep on getting worse, that they are adjusting everything downwards.
The greatest single statistical manifestation of the failure of their policies is in the falling off of income tax revenue this year. The significance of that falling off in revenue in those figures has not yet been fully grasped. I want to make it clear that it is not just that the income tax returns are falling off but exactly the same pattern is manifesting itself in the 1 per cent employment levy. That shows and proves that it is the body of income that is diminishing. It is not any income tax anomalies. It is not arising from changes in tax bands or otherwise. It is simply that the amount of income in our community which is taxable is falling because both sets of figures show the same pattern. Surely that indicates that the policies being pursued at present, these harsh, rigorous, monetarist policies are wrong and that the whole economy is being depressed to the point where incomes are now no longer able even at these exceptionally high rates to produce the return in the revenue that is expected of them. Apart from the very serious implications that this fall in income tax revenue and employment levy returns has from the point of view of the budget deficit, it is a clear signal that the economy is being depressed beyond the point of recovery. Unless there is a turn around we cannot get out of our present difficult situation. I say seriously to the Minister and to his advisers that if the lesson of those decreasing income tax returns is not learned I despair for our future in the years immediately ahead.
On this side of the House we have on many occasions outlined what we believe must be done, or undone as the case may be, in order to launch national economic recovery. We must increase the productive potential of our economy, exploit new technology and develop more fully our natural resources. There is no sign anywhere either in the document which we are seeking to have withdrawn or in the Government's implementation of the policies outlined in that document of any appreciation whatever of the need for development and particularly to develop our natural resources. The current high levels of taxation must be reduced if any economic progress is to be made. If this is done in the right strategic places it can be achieved without major loss of revenue. The decreasing returns from income tax almost make that case for us. It is proved now that increasing the rates is bringing diminishing returns. Therefore, surely ipso facto to decrease the rates limitedly and prudently in certain areas must have the effect of increasing our returns.
Investment, especially related to the building industry, must be stimulated. We believe that a reasonable sum — our figure is £200 million but we are not prepared to go to the scaffold for it — invested now, immediately, as can be done, in the building and construction industry would pay immediate and beneficial returns and would make an impact, maybe not a big one to begin with, on employment. One thing about the building and construction industry is that the employment content is direct and immediate. It is not like some other forms of investment which would take a long time to filter through the system and give employment. Investment in the building and construction industry has two great advantages. First, it has practically no implications for the balance of payments. Practically everything involved in the building and construction industry for a certain type of contract at any rate can be supplied internally. Second, the impact on employment is immediate and direct.
It just does not make sense to anybody on this side of the House that instead of putting some level of investment into the building and construction industry the Government are moving in the opposite direction and placing a penal tax on it to depress an already depressed industry. We on this side of the House have always maintained as a rule of thumb that if the building and construction industry is doing well the economy is doing well. I offer that lesson sincerely to this Government and particularly to the Labour Party Members who should have the interest of the building and construction industry at heart. I have no doubt that if they put to the Labour Party Conference, which has just concluded, a specific motion to invest £100 million, £200 million or some figure of that order, in the building industry it would have been passed immediately, and with acclamation, except by some people on the platform.
Prudent taxation reductions, an increase in investment, financed by prudent and limited borrowing will help, in our view, to turn this economy round. We believe this is the only way to turn the economy round. I think I have said enough to argue that the present policies are keeping the economy going down and down in one vicious spiral and that there must be some new input to reverse that spiral, to turn things round, to face us in the opposite direction and to give some hope and confidence to people throughout the community.
We believe that, if there are carefully selected, prudent tax reductions and equally prudent investment financed by borrowing, they will generate growth and will give us the resources to reduce our deficit and repay our debts. The way we are going there is no hope of doing that. We will only go further and further downhill and the ever decreasing level of economic activity will ensure decreasing tax returns, no matter how high the rates, more borrowing and a continuing accentuation of our difficulties.
We believe we must attract and develop high technology industries and create the right environment for industrial development, which we had for a number of years. That is our main complaint against this document and the philosophy it enshrines. It gives no acknowledgement to the need to undertake developmental types of activity as well as corrective ones. Particular sectors of our economy can be activated fairly quickly to provide employment if a specific sector by sector approach is adopted by the Government.
Our natural resources must be developed. There is need for development in agriculture. That is one of the serious mistakes this Government have made, cutting back and reducing investment in agriculture. We believe if there is a right approach to our horticulture, forestry and marine resources, it can start providing us with necessary levels of employment.
My colleague, Deputy Reynolds, indicated how this Government are pursuing mistaken policies as regards offshore oil development and the possibility of further gas finds. Why cannot this Government get on with extending the natural gas grid? We are all agreed there is plenty of gas in the Kinsale field and the time to use it is now because the economy is depressed. This is a natural resource with which it would be perfectly legitimate to be slightly profligate to get the economy moving again. Everybody believes there is more gas out there and that it is only a question of time until we find further gas resources. Why cannot the Government immediately extend the gas grid to larger urban centres?
The Deputy is thinking of Inishvickillane——
Deputy Sheehan, please.
Max Smile himself.
What is really missing in this document as far as we are concerned is any development impetus. That is the big fault we find with the Coalition's economic policy. They are not succeeding even by their own standards. If their overall objective is to secure some improvement in our public finances, they are not doing that. They are inflicting hardship and deprivation on large sections of our community. They are stifling economic development and activity, but at the same time they are not doing anything for the public finances because, as I have shown, borrowing, both internal and foreign, under this Minister for Finance is running at a higher level than ever before.
Accept this motion. Take away this document which is no longer realistic or relevant. Pass this motion. If the House does that, the Government will be giving a very clear indication to a very depressed and dispirited Irish public and Irish business community that they are prepared to go back to the drawing board and produce a new plan which would have some necessary developmental element to help to meet the needs of this economy and of our people.
I move amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann reaffirms its approval of the measures contained in the National Plan, Building on Reality 1985-1987.”
This is the fourth occasion that Dáil Éireann has debated the national plan since its publication last October: on each previous occasion the plan was endorsed by the House. During each of those debates the Government were confronted with contradictory calls and prescriptions which ignored the essential reality of the budgetary constraints. We have been treated to the same kind of thing this evening. We were told that we had not gone far enough in eliminating the current budget deficit and that Exchequer borrowing was not being reduced quickly enough. At the same time, we were criticised for cutting Exchequer expenditure too severely, for not reducing taxation and for not spending more money to create jobs.
Those statements can only be described as ambiguous. In sharp contrast to those ambiguous statements the national plan is, first and foremost, a realistic plan. I would like to remind the House of some of the features of that plan and how it was drawn up. One of the earliest decisions made was that we would keep the overall burden of taxation at about present level of 36½ per cent of GNP between now and the end of 1987. The next important decision was that we took a realistic view of what it would be prudent and possible to borrow over the period of the plan. We have taken as hard a view as we can of that, bearing in mind, first, our obvious development needs and, second, the degree to which it is prudent to finance expenditure by borrowing, both foreign and internal.
Members of this House would have to agree that once you have made decisions on the levels of taxation and the level of borrowing you have made decisions on the total amount of resources that will be available over the period. Once you have made decisions on the total amount of resources available over the period, the next set of decisions required consists of the allocation of priorities between different areas of expenditure both current and capital. That is what this national plan consist of. That is how it was put together. We first made the decision to set the limits of the resources that would be available and then we set out in a systematic way to allocate those resources.
The plan recognises the limitations on Government action in tackling the serious problems facing the country. It sets out clearly and unambiguously a consistent and achievable set of medium term policies. Its primary objective is to increase employment and to halt and reverse the upward trend in unemployment. The plan faces up squarely and honestly, without the ambiguity that has characterised the Opposition since it was published, to the urgent need to maintain the jobs of those already in work, to find increasing numbers of new job opportunities for those who have lost their jobs and for those entering the labour force for the first time.
In addressing the unemployment problem, the plan also faces up honestly to the seriously imbalances in the public finances. A typical stance of some of the plan's critics is that there should be no reduction in the level of services provided by the State while at the same time advocating that the the level of capital expenditure should be increased dramatically. Such a stance is completely untenable. The inescapable fact is that the level of public expenditure, current and capital, is constrained by what we as a nation are prepared to finance through taxation and sustainable borrowing. No set of precriptions or criticisms which fail to take account of that can be valid or worth listening to. Most people, including Deputies on the opposite side of the House, agree that the overall burden of taxation should not be increased. There is also general agreement that the relative extent of our reliance on borrowing must be reduced if the debt service burden - now pre-empting one-third of all tax revenues - is not to rise further. It follows therefore that the growth in public expenditure must be curtailed. The commitment in the plan to stabilise the tax burden and the specific allocations for current and capital expenditure reflects the realities of the public finance constraints.
The Government have already made progress in getting discretionary current spending under control. Non-capital supply services expenditure has fallen, albeit rather slowly, as a percentage of GNP since 1983; but this progress has been obscured by the rising burden of debt service payments. Government current spending has come in within budget in each of the last three years and we have set ourselves the objective of reducing current expenditure by the equivalent of a further two percentage points of GNP by 1987. To have attempted to go beyond this might have facilitated an increase in capital expenditure, as advocated by some of the plan's critics, but where would they have made the cuts in current expenditure?
That question is never asked by the critics, but I will ask it. Do they envisage substantial cuts in social welfare services? Would they reduce the strength of the Garda? If they decided that they did not want to make cuts in current expenditure, where would they make room on the capital side for extra expenditure? Would they be prepared to cut the budget of the IDA or the very substancial element of public capital programme expenditure on building and construction? These questions are never answered by the Opposition or by critics, who have failed miserably to take account of the fact that the constraints about which they speak must be fully taken into account in charting any set of fiscal, economic or social development policies. The targets for current expenditure set out by the Government are realistic and achievable but they will require firm discipline and the implementation of the economy measures spelt out in the plan. Many of the most vocal opponents of the plan seem to have a totally uncritical approach to public capital investment and are prepared to expand capital expenditure regardless of whether returns justify it. The Government are not prepared to follow that path.
The returns from public sector investment over the years have been inadequate and have increased rather than reduced the burden of debt service on taxpayers. What we are prepared to do — and the plan makes this clear — is to increase those areas of capital expenditure which will achieve a return to the taxpayer. The allegation by Deputy Haughey that the Government are anti public sector is nothing more than a caricature and the kind of bogeyman politics in which he has been indulging for quite a few weeks now. Deputy Haughey's claim that we are anti public sector takes no account of the measures which we have taken to improve the planning of capital expenditure in the public sector.
Tell that to Irish Shipping.
The drawing up of a series of plans by semi-State corporations and companies means that they and we will be in a better position to assess their needs so that the Government can plan, in participation with them, in providing services and in developing their role to the benefit of the economy. The implementation of that planning process by the Government is designed to help the public sector to make the maximum contribution to the economy. The proponents of indiscriminate increases in capital expenditure are the enemies of the public sector because they would not have us make judgments regarding the most efficient use of capital.
Liquidate a few more companies.
They come into this House and criticise measures taken by me and by my Department to assist in the better planning of public capital expenditure.
What planning?
The people who take that view are the enemies of the public sector because for years they sat by uncritically, did not analyse what was going on and allowed the semi-State companies to get into the difficulties with which we must now grapple.
The Minister just liquidates companies.
That is another example of bogeyman politics.
(Interruptions.)
The Opposition and the Leader of the Opposition are succumbing to the temptation to use buzz words instead of thinking about the meaning of what they say. We have provided for a major expansion of the roads programme which will raise the volume of road building activity by one third. Our predecessors in office adopted a road plan but failed to implement it in the first year of its adoption.
That is not true.
It is a fact; I can show the Deputy the figures. Capital spending in education will also be increased substantially in real terms. Exchequer capital expenditure under the public capital programme will be increased by about £230 million by 1987 compared with 1984 and our objective is to ensure that the bulk of this additional Exchequer investment will contribute towards improving the productive capacity of the economy with its attendant beneficial effects on employment. Non-Exchequer investment will reduce by some £200 million by 1987 compared with 1984, reflecting in the main the completion of the ESB's investment in additional generating capacity and completion of the intensive stage of telecommunications investment by Bord Telecom Éireann.
The Minister said that ten times before.
This plan was published last October. It is a good plan. The Opposition have failed consistently to produce anything better. I will keep repeating the message of the plan in this House and outside it——
If the Minister keeps repeating cliches he will go.
——until somebody comes up with something better which the Opposition are not capable of doing. I was referring to the ESB and Bord Telecom. These and the other State bodies concerned can only invest in the level of fixed assets which are justified by reference to the demand for services which they provide — investment which would create totally surplus capacity would be totally unjustified.
We all know that.
In some, the national plan——
What about the £180 million borrowings?
It was £200 million a few moments ago plucked out of the air. If Deputy Reynolds wishes to discuss that he can come in here tomorrow when we are discussing the section in the Finance Bill.
I will be here.
I have been lonely for him over the past few days. In some, the national plan seeks to strike a fair balance between the employment needs of the economy and the need to reduce the imbalance in the public finances over the period to 1987. It seeks to identify the resources available and to allocate them in a rational and efficient manner. No criticism of the plan which does not identify where other resources would be made available, or how they would be made available, is valid. No such criticism can stand up because it has no base. It would have been easy to bring out a more attractive document setting out Utopian targets based on hope rather than on realistic expectations. The Opposition know all about that. That is precisely what the Opposition did in October 1982 in the now infamous document known as The Way Forward.
I am not surprised that the Fianna Fáil Opposition should be proposing that we move away from the plan we published. They know all about moving away from plans. A month after they had brought out that plan, they moved away from it and disclaimed all knowledge of it. They spent quite some time disclaiming any memory of the fact that one of the many things proposed in that plan was the introduction of charges for local services. We do not hear about that when criticisms are being made of the Government's plan. At least we have the guts to stick with what we put forward. We do not run away from it a month or so after it is published. This Government have taken an honest and realistic look at the situation which faces us.
Some day that will stick in the Minister's throat.
We have set achievable targets consistent with the likely availability of resources. Important measures to implement the Government's programme were provided for in the 1985 budget. They include a radical restructuring of the income tax code which reduced the number of tax bands and eliminated many of the distortions and disincentives to enterprise which had existed. In addition the VAT system was rationalised and simplified.
The number of VAT rates was limited to three and the rate of tax was reduced on many of the items which had been the subject of concern because of diversion of trade across the Border. The general budgetary aggregates for expenditure, revenue and borrowing are consistent with the overall plan policy.
£9.4 million a day.
At the time of publication, the national plan objectives were dismissed by some critics as unrealistic and unattainable. Again at budget time the Government were accused of unreasonable optimism with regard to the prospects for recovery this year. However, I can say that the emerging economic outlook for 1985 is well in line with what we set out in the national plan:
Is the Minister's revenue?
I will come to that in a moment. Strong economic growth is again likely this year following a real increase of over 3½ per cent in national output in 1984, the highest since 1978. The annual rate of inflation at mid-February 1985 had fallen to 6.2 per cent, the lowest in seven years. The average for the year as a whole is not expected to exceed 6 per cent — I expect it to be lower than that — a lower inflation rate then we have seen in 15 years and only about one third of the rate we endured as recently as 1982.
They have no money to spend. It is easy to bring down inflation when people have no money to spend. The Minister should ask the housewives.
The current deficit in the balance of payments was cut to about 5 per cent of national output in 1984 compared to almost 15 per cent in 1981. Further progress is expected this year. The climate for expansion is more favourable now than at any stage over the past few years. International prospects are, from the latest assessments, relatively favourable and in line with the assumptions underlying the national plan. The further easing of international inflation and the more favourable movement in our exchange rate augur well for the pattern of prices in the medium-term.
The Minister should tell us about emigration.
As regards unemployment, the increase in the live register for 1984 as a whole, while still disturbingly large at over 17,000, was the lowest for five years. More significant, perhaps, was the fact that the underlying trend, as reflected in the deseasonalised figures, actually turned down in three months during 1984, for the first time since 1979. This relative improvement, I am pleased to say, has been maintained into 1985. The figures for the past few months are encouraging. By April, the number of persons on the live register was down by some 6,000 on the early part of this year and, even discounting the favourable seasonal influence, there was a reduction of 1,600 compared with February. As a result, the year-on-year increase in the register at end-April was the lowest since July 1980.
The prospects for employment are better now than for some considerable time and this optimism is reflected in the recent assessments published by both the Central Bank and the ESRI. The bank, in its recent Bulletin, expects total employment to increase during 1985, while in the latest Quarterly Economic Commentary from the ESRI, an employment increase almost sufficient to cater for the forecast growth in the labour force is projected over the next year or so. Both institutions are also predicting an increase in employment in the manufacturing sector during the current year and, in that connection, the most recent figures indicate that, in response to the stabilisation of our competitive position and the strong recovery in output, the decline in manufacturing employment slowed further. The fall in 1984 was little over half that recorded in each of the two previous years.
Despite the welcome easing in the employment situation, the reality as shown in the plan is that increases in traditional jobs in industry and services will be insufficient to meet the growth in the labour force over the next few years. The plan gave a strong commitment to help the long-term unemployed. The Government recognised that special measures have to be taken to assist people who have experienced long periods of unemployment and who find it difficult to regain their place in what is a very competitive labour market. If their motivation suffers or the skills which they may have are lost, it will clearly be difficult for them to take up present or future employment opportunities.
The plan increases the provision for existing schemes for the unemployed, both over and under 25 years of age, and the recently published Estimates gave effect to this. In order to give particular help to the older, longer-term unemployed person, the Government decided to establish a new social employment scheme, giving part time work on community based projects to people out of work for a year or more. In addition, AnCO were asked to set up a new "alternance" scheme which would provide periods of training and practical work experience. The Minister for Labour has already announced the establishment of the social employment scheme. The initial reaction has been promising. The first projects are now operating and many other organisations are planning to take the opportunity to employ people under the social employment scheme.
Over the period of the plan, I am satisfied that these new schemes will make a major contribution towards giving real help to the unemployed. These programmes, in conjunction with the existing training and work experience schemes, will benefit the participants by bringing them back into the world of work and ensuring that there is a real return to the community.
The motion put forward by the Opposition calls for measures to alleviate social deprivation. The Government's arrangements to provide the less well-off in the community with better training facilities is a key component in its strategy to alleviate social deprivation. Another essential element of the Government's efforts in this area is a developed income-maintenance policy. Our income maintenance system affords basic protection for those with earning potential but who, for one reason or another, are not currently employed. Of course, it also affords financial protection for those who are no longer in the labour force. For example, the old age contributory pension in July next will be the equivalent of 30 per cent of average industrial earnings or 49 per cent where there is a dependent spouse. In after-tax terms, the percentages are considerably higher. In addition, many ex-employees have supplementary occupational pensions, which supplement the State pension.
Listening to critics of the Government one might overlook the significant real increases in social welfare payments in recent years. Between 1977 and 1984, for example, short-term weekly benefits increased in real terms by about 20 per cent and by double this in the case of long-term beneficiaries. Regarding long-term rates of benefit, the last two budgets provided for increases totalling 20 per cent in respect of the two-year period from mid-1983 to mid-1985, while inflation during this period is unlikely now to exceed 15 per cent. The Government are providing for a further increase from July next of 6 per cent in short term rates and of 6½ per cent in long term rates of benefit. These figures speak for themselves and indicate clearly that we are honouring our commitment to keep long term rates of benefit ahead of the cost of living and to keep short term rates at least in line with the rates for work.
There are two further elements of Government social policy that merit comment. A key element of the Government's income maintenance strategy is to provide more adequately for the children of less well-off families. This is why we have decided, as set out in the plan, to introduce a new, enhanced, child benefit scheme in favour of the less well-off family. This selectivity will be achieved by treating the child benefit as assessable income for income tax purposes. Furthermore, as an earnest of our commitment to alleviating poverty, legislation has been introduced to establish a Combat Poverty Agency to examine the causes and extent of poverty in our society and to recommend ways of alleviating it.
Give them more money.
At the end of the day increases in national wealth and living standards, as well as in sustainable employment, depend on our ability to produce goods and services which can be sold in a competitive international environment. We cannot simply award ourselves higher incomes and living standards without regard to that basic fact. This is why the plan puts considerable emphasis on improvements in competitiveness and on wage cost competitiveness as a key requirement for the achievement of this objective. Accordingly, one of the aims of the plan is that average increases in pay in Ireland should not exceed those in competitor countries. Within that parameter, the plan outlines the need for pay negotiations to have regard to the ability of individual firms to pay and to the likely impact of pay settlements on employment. Put another way, a realistic approach to pay increases must have primary regard to the ability of individual firms to trade effectively on international markets and to the need to preserve and expand employment.
Good sound Labour stuff.
Deputy Haughey may very well make that kind of opportunistic remark but he and every other Deputy knows that those now in jobs have a role to play in ensuring that those who are out of work find jobs. We are all in this together.
The pay objective of the plan must be seen in the context of declines in wage cost competitiveness in recent years. In the five-year period between 1979 and 1984, for example, the increase in hourly earnings in manufacturing industry in Ireland was more than 25 per cent greater than that in our main competitors in national currency terms. Even after taking account of exchange rate changes the increase in Irish earnings was still some 4 per cent faster than in those of our competitors. This loss in wage cost competitiveness has contributed to the significant decline in manufacturing employment in recent years, as well as to a deterioration in the climate for new employment creation.
I wish to dwell for a moment on the question of employment creation. Our manufacturing sector has made enormous strides even in the past two years, in difficult times, in gaining market share abroad. The growth in the volume of our exports has been faster than the growth in the markets to which we export.
But only in two sectors.
This has been achieved despite our having a less favourable cost environment than is the case of some of our competitors. If we can act in accordance with the recommendations set out in our plan, we can capitalise further on the undoubted ability of Irish industry to gain market shares elsewhere to the benefit of those about whom we are most concerned, those who are looking for employment.
Having heard the Minister, one realises that he is even more removed and remote from the people than one would have imagined. The same can be said for the Government as a whole. Perhaps in terms of his political peace of mind, the Minister is lucky though eventually he will have to face reality and when that day comes he will not be able to build on the reality.
In this lengthy contribution the Minister trotted out the same political jargon that he used here two and a half years ago. Government is about economic management. It is about deciding the lifestyle and the standard of living the people enjoy. Can the Minister justifiably and credibly say that the country has benefited since the return to office of the present administration? The Minister is an intelligent man. He cannot believe that we have benefited in the past two and a half years. Can he believe either that the academic exercise in which he has indulged in the past half hour will be accepted by the people as a credible response from a senior Government Minister in dealing with the country's very serious economic problems? The Minister has gone through an exercise of pretending to defend a plan which he knows, as we all know, is a total failure. Would it not be far more credible for him to admit that the Government's initial projections were wrong, that their plans, well intentioned though they may have been, will not succeed in terms of the economic development of the nation? These plans have gone entirely astray. It is necessary, half way through the lifespan of the Government, that is, if they intend continuing in office——
Obviously they do not have any such intention.
Only they know that.
Deputies opposite may continue to dream.
If the Government are serious about continuing in office they owe it to the people and the House to redraw and reformulate a plan which will at least commence tackling the economic problems which the Minister admits exist, a plan which will commence tackling and not contributing to these problems over whatever length of time is left to this Government. It is a shame that the Government did not avail of the opportunity provided for them by the leader of our party and this party generally to review what I was going to call a plan, the document called Building on Reality. We could then have assessed the plan objectively, recognised its total failure and together put forward a salvage plan which this country needs and needs badly at this time.
I rise to support the motion which has been tabled by Fianna Fáil, not for the purpose of highlighting the many failures of this Government since they came to office; as I already said, the evidence of those failures is tragically demonstrated right across our economy. Many of them, although not all, were clearly identified by our leader in his opening contribution to this debate here this evening. In a similar professional manner, the Minister for Finance sidestepped all the points raised by Deputy Haughey which are relevant and important to the future development of this country.
I am not contributing to this debate for the purpose of political point scoring. The situation is now far too serious for that approach. It was a pity that the Minister, instead of pointing the finger of accusation at this side of the House, did not face up to the many relevant headings brought to his notice by Deputy Haughey. The Minister knows that he sidestepped the important issues raised. He knows better than most that those issues are the most relevant as far as the development of this economy and our planning for the future are concerned.
As a party, we tabled this motion because we believe that it is in the national interest at this time that we call on the Government to abandon this document which cannot now be described in any way as a plan and which, if pursued, would do further irreparable damage to our economy. It must be said that it was never regarded by Fianna Fáil as a credible plan and time is now proving, as in so many other instances, that our verdict and our judgment on it when it was first introduced were correct. Neither was it considered to be a credible or an authentic document by many independent economic and political commentators. There are also very many serious thinking people, ordinary citizens, who cast grave doubts on its authenticity when it was first introduced. Unfortunately, they are now the victims and are experiencing the worst effects of the provisions of this socalled plan.
It is also interesting to note that credible commentators at the time of its introduction thought that the plan perhaps had some little thing to offer and that even they are now changing their minds in relation to where it will lead our economy and our people. Day after day, week after week, month after month, when we read articles by the various economic commentators, political correspondents and people who comment generally on the performance of Governments, we see they are beginning to realise also that this plan will not and cannot achieve the objectives which the Government told our people it would achieve. This failure and the proposals contained in the plan and the misleading statements in it are nothing new to this Government. They came to Government following the last general election on a whole wide-ranging series of promises which they told the people they would implement if they were returned to office. Fair enough, a small minority of the people, the floating vote, took them at their word and decided that they would give an alternative Government a chance. They believed that what they were told on the platform would be fulfilled by the Government when they came to office. Those people are sadly disillusioned now.
The Minister himself knows that not only are the floating, marginal voters disillusioned, but many sound, solvent and credible supporters of his own party are also disillusioned. It is arrogant for him to stand boldly before us and pretend that the plan was still being pursued and would still achieve the objectives which the Government stated it would achieve. It is nothing short of misleading to suggest that. They misled the people before the general election by the introduction of the plan and they are still continuing in this House deliberately to hoodwink the people into believing that, somehow or other, that plan will achieve the stated objectives.
Everybody in Government, from the Taoiseach down, still refers to this plan as their blueprint for economic development. The reality is that the plan and specific aspects of it have long since been abandoned by individual members of the Cabinet in the interests of political expediency. I would not disagree with and can understand the reason for some Ministers wishing to distance themselves from some of the proposals contained in that document. I am very concerned that the conflicting decisions taken by individual Ministers for their own perhaps selfish political reasons are not based on some sustainable economic or political criterion. Once Ministers decide to go their own way, as is happening now, and make their own individual political statements, the whole credibility of Government is undermined and the team effort and the unity of purpose are gone. That is what is happening in this House at present. Ministers are departing from certain unattractive aspects of the plan in the interest of political expediency.
Fianna Fáil depart entirely from their plans.
The Minister had his chance to defend the plan. He did a good public relations job but the people who are entitled to benefit are now the victims of the plan the Minister has tried to defend this evening.
Debate adjourned.