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Dáil Éireann debate -
Thursday, 19 Dec 1985

Vol. 362 No. 15

Adjournment of Dáil: Motion (Resumed).

Debate resumed on the following motion:
That the Dáil at its rising on 19 December 1985 do adjourn for the Christmas recess until 2.30 p.m. on Wednesday, 22 January 1986.

As I have only ten minutes, I will speak as quickly as I can. This Government must be judged on their record. The Coalition came into office more than three years ago and since then more than 50,000 people have become unemployed. Since this time last year an extra 12,000 people have become unemployed. No effort by the national handlers and no PR job can disguise this appalling failure on the part of a Government who promised to make unemployment their urgent priority. Indeed, there is much to suggest that the real picture is far worse and has been camouflaged by increasing emigration and various training programmes of doubtful value which are keeping people off the unemployment register.

Many of those without work are now facing their fourth or fifth successive Christmas on the dole, their financial problems are becoming very acute, and many are in extreme poverty. The recent upsurge in the activities of moneylenders can be attributed to the totally inadequate level of financial assistance for the long term unemployed which can mean as little as £78 a week to feed, clothe, house and care for a family of four. How can a single unemployed person live on £32 a week? What kind of life is possible on incomes like that? What kind of freedom do these people have? Can they be said to be free in this so called free society?

What has shocked people most is not simply the increase in the numbers out of work but the appalling indifference of the Government to the plight of those who have been thrown out of work through no fault of their own. Large numbers of unemployed are an enormous burden on the Exchequer and the taxpayer and are costing up to £1,500 million per annum, or possibly even more.

Politicians as well as some economists have tended to suggest that unemployment can be resolved only when the country puts its fiscal affairs in order. However, the burden on the economy arising from unemployment is now so great that the economy cannot be put right until those on the dole queues are put back into productive work.

The Government have devoted enormous time, energy and effort to the New Ireland Forum and following on that to the negotiations on the Anglo-Irish agreement. Why cannot they now devote some of this time, energy and commitment to an all-party jobs forum in an attempt to get all-party agreement on a plan to create full employment? Unemployment is the greatest issue and the Government will be judged on it.

In recent months The Workers' Party have been coming under increasing abuse and attack from all quarters. The Fianna Fáil, Fine Gael and Labour Parties are at one in seeing The Workers' Party as their greatest enemy and so also do the Federated Union of Employers, the Irish Farmers' Association and the newly formed Association of the Self Employed. These are precisely the people who have had a monopoly of economic power since this State was formed over 60 years ago. These are the political and economic organisations who are responsible for maintaining the capitalist system of Government which has exploited the wealth of our country for the benefit of a few, decade after decade, leaving the working people in poverty or forced to emigrate for a decent living.

There is nothing these monopolists of power fear more than a political organisation of workers and oppressed people. It is typical of them at a time of recession and failure of capitalism to attempt to lay the blame on those who have been denied economic power throughout the past 60 years. All organisations of the working class have been put under increasing pressure during the past couple of years in attempts to make them scapegoats for the failure of capitalism. This has been concentrated recently in personal abuse on trade union officials, especially some who are also members of The Workers' Party.

The Workers' Party are in the honourable role of defending the hard-won rights of workers which are under increasing attack so we are not surprised that we are the butt of regular abuse and attack by the political and economic organisations of the bosses. We make no apologies to anyone for standing by the working class, inside and outside the trade union movement.

It is a shock, however, to discover the the Labour Party have sunk so low as to stab the defenders of the working class in the back. Instead of co-operating with The Workers' Party, as we have asked them to do on a number of occasions, to defeat the attacks on trade unionism and the attacks on the living standard of working people, the Labour Party have taken the lead in undermining the basic principles of trade unionism and allowing the bosses to decide who will or will not negotiate on behalf of workers.

This has been an unprecedented year for liquidations and closures of companies and for major redundancies in many more firms both State and private enterprise. Yet the Protection of Employment Act 1977 has not been invoked to protect their interests. The purpose of the Act was to give greater protection to groups of workers faced with redundancy. Under the Act a company must notify collective redundancies to the workers' representatives and the Minister at least 30 days in advance. The Minister may request employers to consult with him, or an authorised officer of his Department, before redundancies take place and he also has powers of inspection. There are penalties, though small, for breaches of the Act.

However, the Minister for Labour, Deputy Quinn, has made no attempt to use this Act to defend workers' rights to a job. Nor does he believe workers have a right to a job, but he does believe entrepreneurs have a right to throw workers out of a job. This is the same Minister who had allowed £250 million subscribed by workers in youth employment levies to be squandered without supplying one person with a job. That was his reply to a question of mine in this House. With that record of gross treachery to the working class is it any wonder that the Minister, Deputy Quinn is trekking about seeking scapegoats for the Labour Party's failures.

I must refer to the Government's policy on public sector pay. A Government who claim inability to pay are a Government who have a gross inability to govern. The Government cannot claim inability to pay when they are handing out hundreds of millions of pounds of taxpayers' money in grants and hand-outs to private individuals, firms, farmers and so on.

The teachers have been grossly maligned. They are paid less than other professional people in the public service. We must decide whether teachers or engineers offer the greatest social benefit to our society. The teachers have proved productivity in the higher teacher-pupil ratio. They should be given the pay and the award that is their due.

During this debate we have heard a number of assertions and claims by the Opposition which are baseless and have no regard to what is happening in the country. I will address a few remarks to those statements before going on to more general remarks.

During the course of his contribution today Deputy Haughey claimed that the Government had to borrow more and more to meet current expenditure at the expense of capital investment and job creation. That claim is based on the fallacious assumption that borrowing for current purposes is independent of the level of borrowing for capital purposes. A major part of borrowing on current account is determined by the growing costs of servicing past capital investment that has not generated an adequate return. Loss-making capital projects or investments that have a long pay-back period in economic terms can place major strains in the short to medium term on the current budget as interest costs have to be met at a time when the projects are not generating real revenue to the Exchequer. Deputy Haughey based some of his remarks on what can only be described as a fallacious assumption.

He asserted also that there was no growth in the economy this year. I wonder how he can reconcile that with the facts? Perhaps he should be getting the advice from Deputy O'Kennedy and not me — that he should go out and talk to the real people now and again. For the benefit of Deputy Haughey and his colleagues I should like to put a few facts on record.

In the first three quarters of this year industrial production was up 4½ per cent on the same period last year. Consumer spending is showing real growth this year. The volume of retail sales in August was almost 4 per cent higher than in the same month last year and exports are up by 11½ per cent in value in the first 11 months of the year. All of this is evidence that the economy will show real growth this year, contrary to the assertion of Deputy Haughey.

It is clear also that growth will not match the surprisingly strong performance of last year, but the main reasons are quickly evident. However, Deputy Haughey chooses to ignore them. The unfavourable weather during the summer badly affected farming and domestic tourism. It would have been unrealistic to expect agriculture to repeat its exceptional growth performance of 1984. It is also the case that the pace of growth in international trade this year has slowed down. Part of that picture which is of importance for us is the worldwide difficulty of the electronics industry. That industry made a major contribution to growth in 1984 but market conditions meant it could not make the same kind of contribution to growth during 1985. Deputy Haughey claimed that output in manufacturing industry is declining and that this decline has been across the board. Not for the first time, Deputy Haughey has been extremely selective in his choice of statistics, choosing those which put matters in the most unfavourable possible light.

Let us look at the facts. I am a believer in looking at facts rather than in trying to find facts that support my prejudices. Statistics on output are available for the first nine months of this year. They show an increase in output of about 4½ per cent compared with the first nine months of last year. Output in electronics was up by some 5 per cent to 6 per cent and, as I said, that is a growth rate that is below last year's record of over 13 per cent. The slowdown is wholly attributable to a deceleration in the growth of chemicals and electronics from the rapid rates we experienced in 1984. That slowdown had been predicted by all commentators. The remainder of manufacturing industry held its ground, with losses in some areas offset by gains elsewhere.

Where, we might ask, did Deputy Haughey get his figures? The answer is very simple. It seems to me he based his comparisons on one short unrepresentative period, the final quarter of 1984 when the level of output reached an all time peak. There is a substantial body of opinion, acceptable, I think, to Deputy Haughey, which suggests that much of the increase in production in certain sectors during that quarter had to be stockpiled, which partly explains why output eased subsequently as stocks were disposed of. That is not simply an official view: it has been explained in public by a number of independent commentators. They underline the contribution to the slow down in output of developments in external markets in 1985, especially in the electronics area.

Deputy Haughey claimed that the Government abolished the 25 per cent tax rate even though we promised in the June 1981 election to make it the standard rate. Both Deputies Haughey and O'Kennedy claimed that current tax rates are stifling enterprise, and Deputy O'Kennedy, to my surprise, claimed that total tax revenue would be 42 per cent of GNP compared with 33? per cent in 1982 — repeating his previous error. The 25 per cent tax rate was abolished in 1984 because more and more of the lower paid, for whom that rate had been marginal, had become totally exempt from tax as a result of the increase in exemption limits. The exemption limits were increased in that year to £5,000 for a married person and by a further £300 this year. The equivalent age exemption limits are now £6,000 for people older than 65 years and £7,000 for people older than 75 years. For either group affected by the abolition of the rate, there were increases in personal allowances and a widening of tax bands which brought about from the beginning a net improvement in their position.

As I said, Deputy O'Kennedy claimed that tax revenue is 42 per cent of GNP. It is not. It will be considerably less than that. A couple of weeks ago when we were discussing these matters here I explained that the figure Deputies Haughey and O'Kennedy were reterring to is for total revenue, that is, the sum for tax revenue and non-tax revenue. For two gentlemen who get so waxy about what tax revenue is or is not, one would think that, having got the hint from me on 26 November, they would have looked up the figures and sorted themselves out——

Perhaps that is what they are doing now. None of them is here.

That may very well be. If so, they will find out there is no point in carrying on with the charade they went on with here this afternoon. On competitiveness, Deputy Haughey spoke about extending the usage of natural gas to industrial customers by making it available at favourable prices. I am glad to say that we anticipated that concern because it is our concern to ensure that gas reserves will be exploited to the full. That means getting full value from the resource for the good of the people. As set out in our national plan, it has been our policy to secure an energy related price for natural gas. We have made it clear that we want to see an extension of the national gas grid.

Deputy Noonan, the gentleman whom we refer to as "the other Michael", gave us some interesting examples of movements in indicators of living standards. He referred to car registrations, in particular, up to 1984. It seems that the habit of selective quotations are spread right through the Front Bench of Fianna Fáil. If he had extended his analysis and brought it up to date, he would have been pleasantly surprised to find that there has been a significant recovery in car registrations this year. That is confirmed by provisional figures issued today which show that private car registrations increased by more than 6 per cent in the first 11 months of this year compared with the corresponding period in 1984. Total new vehicle registrations increased by more than 7 per cent.

I am a believer in getting all the facts together. It is a pity the Opposition do not adopt the same general approach. If they had looked at the facts they would have found that the present situation, with the difficulties explained by the Taoiseach and me and others on this side of the House——

There is one of them coming now. Look, there is one. He is one live member of the Opposition.

A rara avis, as they say.

They had better look out, now.

I was very unhappy on Tuesday last during the course of Question Time to find that a colleague of Deputy Leyden was urging me to use my influence to put pressure on RTE. I had to tell the unfortunate man that he was lucky Deputy Leyden was not in the House. I welcome Deputy Leyden. We had begun to feel very comfortable on this side before the Deputy came in. There has been a good deal of discussion of our budgetary position this year and the Exchequer position. Without a shadow of a doubt I will be able to say when the final figures are issued that the budget outturn this year will be very close to target and that for the third year in a row we will have believable budget targets, adhered to by the Government, showing that the Government can do with the resources of the people what they said they would do without ending up at the end of the year exceeding their targets by an average of 56 per cent.

Current and capital expenditure should be within budget allocations this year. As the Taoiseach pointed out yesterday, tax revenue will be below target but it will be offset in part by increased non-tax revenue. Short falls in tax revenue arise mainly on income tax and VAT. The emerging shortfall on income tax, 1½ per cent on the budget estimate, is largely explained by macro-economic factors. The expected shortfall on the original VAT estimate is significantly outside normal estimating bounds and it requires an explanation. The bulk of it is due to under-estimating in the budget estimate. The data on which costings were based and the assumptions on the timing of VAT at point of import, cash flows and reduced evasion, have all proved to be deficient and over-optimistic, at least in the short-term. A considerable shortfall emerged.

The Taoiseach drew a lesson from that yesterday in relation to the alleged stimulatory effect of tax cuts. There is an interesting lesson to be learned from this. This year we effected a substantial change in the structure but some time will be required before that change works its way through the system and obviously this will have an unsettling effect on the revenue flowing through the system. The emergence of that shortfall does not in any way invalidate the restructure of the VAT system which we undertook this year. The abolition of the 35 per cent rate and the rationalisation of a number of rates have had a tremendous impact on trade and will have ongoing beneficial effects.

I should like to mention briefly the impact of the reduction in duty on betting and spirits. While both reductions have had major favourable effects on the sectors involved, the direct loss to the Exchequer has been considerable. In the case of betting, I estimate that the duty receipts are almost 25 per cent below the level that would have been reached had the duty not been reduced. In the case of spirits where the duty was reduced by 24½ per cent, the volume of sales would have needed to increase by about one third to leave the Exchequer in a break even position on this duty. The volume of sales of spirits has increased by about 18 per cent and that is a very satisfactory outcome from the point of view of the trade.

I am glad that we were able to contribute in no small way to bringing about that result but I estimate that the duty receipts will be about 12 per cent lower than the level that would have been reached had the 1984 real level of duty been maintained in 1985. I trust that once and for all these figures will dispel the illusion of self financing tax cuts and above all that they will banish the contention that in wide areas of the economy we can reduce taxation without at the same time making up our minds on what the accompanying decisions on expenditure must be. The results in the areas I have mentioned indicate that, even if there is substantial cross Border diversion of trade, tax cuts on some commodities require compensating tax increases in other areas or expenditure reductions if the Exchequer position is to be protected. I cannot anticipate what the Opposition will reply because Deputy Leyden must sit mute on those benches for the remainder of the afternoon.

Not necessarily. Has the Minister the figures in respect of the 10 per cent VAT on building trade?

These remarks bring forward that kind of response from Deputies on the other side. They launch into the use of such words as, "monetarism" and others that they read of in the newspapers in the past couple of years but which they do not understand. On the matter of expenditure they come thundering in here demanding that the Exchequer position be protected so that there will be money for the kind of expenditure they advocate. Since the beginning of this year they have discovered, after four years of riding the tiger, though they did not know what the tiger was, budget deficits and Exchequer borrowing requirements. It is regrettable that they did not know about these matters in 1977 because, had they had this knowledge then, we might have had a more sensible approach from them while they were in power.

Is this the Minister's dying kick, his last speech as Minister for Finance?

The Deputy will have to wait a long time for that.

My concern in protecting the Exchequer is not because the Exchequer happens to be my baby, and some baby it is, but because I am anxious to protect the Government's ability to do the kinds of things that this House and the people generally are anxious should be done but which cannot be done without resources. Therefore, in protecting the Exchequer we are protecting the people in a very real way because in a deliberate way we are channelling the resources in a way that will bring about the desired results.

Have the Government been protecting the people by borrowing £8 billion since 1982?

That is something that Deputies opposite have never managed to connect with taxation. They have never succeeded in recognising the role of taxation in protecting the Exchequer, and consequently the people. To the extent that the people opposite criticise me for being over concerned with the revenue effects of tax changes, though I am not perturbed particularly about that kind of criticism from them, what they are really saying is that they do not care about the effects of taxation changes on the ordinary people. Fianna Fáil are saying that tax cuts should be effected in various areas but that they are not concerned about the effects of those cuts on some of the people they pretend they are helping. The Opposition view on this matter is very incomplete as has been made clear by their members during this debate, notably by Deputy Haughey and Deputy O'Kennedy.

I would remind the House that we are making progress in the form of tax structures and in improving tax collection and enforcement. In this year's budget we introduced significant reform in the areas of direct tax and VAT. The number of rates of income tax was reduced and the top rate of 65 per cent was abolished. We took a similar line in relation to VAT, reducing the number of rates and lowering the top rate from 35 to 23 per cent. The commitment in the national plan to halt the rise in the burden of taxation was honoured and this was of special benefit to the PAYE sector. The Government intend that the good work begun in 1985 will continue.

The Commission on Taxation completed their work recently and I take this opportunity to thank again the members of that commission for their dedication and for the excellent quality of their reports. While I have reservations about certain of the commission's proposals, in particular about the introduction of a single rate of income tax at this time, I am entirely in sympathy with their preference for a simplified tax system on as wide a basis as possible. The work of the commission will have a major influence on the determination of tax policy in the future.

In this connection I invite the Opposition spokesman on Finance, since he is the one who most often waves at me the first report of the commission, to suggest how in his view we might go about giving effect to that report. I invite him and other Members of the House who may be interested to read closely what must inevitably go with a single rate of tax in order to bring about the kind of system the commission proposed. Deputies on the other side may be instinctively in sympathy also with the commission's preference for a simplified system on as wide a basis as possible, but I invite them to go further, to study the practicalities and then put forward their proposals.

They have no one to study such proposals. They have thrown out Senator O'Donoghue more or less.

This Government have been more active than any previous administration in trying to fight tax evasion and to improve tax collection and enforcement. The 1983 Finance Act introduced a wide range of anti-evasion provisions and considerably strengthened the sanctions for serious tax offences. A tax clearance scheme for public sector contracts has been introduced. The Taoiseach announced in the House recently a further series of measures designed to counter evasion and enforce tax liabilities. The most notable of these measures are

—The imposition of a surcharge where accounts and returns are not submitted to Revenue within a specified period.

—Expansion of the special inquiry units in the Revenue Commissioners to step up the fight against tax evasion.

—Establishment of local tax collection units on a pilot scheme basis to pursue arrears of tax prior to enforcement.

—Transfer of tax enforcement function from County Registrars to newly established sheriffs.

—Institution of closer contacts between the inspectorates of Revenue and the Department of Social Welfare.

—Extension of the tax clearance scheme to sub-contractors engaged on public sector contracts.

It is intended to proceed with the implementation of these measures with all possible speed and I am confident that they will have a significant impact on tax evasion and default.

Leaving revenue for the other side of the coin, the House will be aware that yesterday the Government published the 1986 Estimates Volume and the Public Capital Programme.

The Minister has four minutes.

It is rather a pity that it will be such a quiet four minutes from the opposite side of the House. No doubt we will have some more debate on these matters in the New Year.

I do not think they fancy taking the Minister on; they stay away when he is speaking.

The Taoiseach should remember that when he is reshuffling the Cabinet.

(Interruptions.)

The prospects for a soft shoe shuffle on the other side of the House seem to be more immediate than they are here.

(Interruptions.)

Deputy Leyden should stay quiet on that. It will be a long time before Deputy Leyden reaches any bit of my scalp. The 1985 outturn figures show that spending during the year was very much in line with estimates. Non-capital supply services expenditure at £5,401 million will be only £17 million above the post-budget estimate of £5,384 million while the Public Capital Programme at £1,696 million is 4 per cent below budget.

These are the figures and the facts which Deputy Haughey and his colleagues chose to ignore. It is no wonder when one looks back from 1977 to 1981 to find that they are totally incapable of dealing with figures. They never understood the figures and never intended to try.

Looking at the 1986 figures, the national plan published last year set targets of £5,630 million and £1,750 million for the non-capital supply services and the Public Capital Programme respectively. The published figures, £5,698 million for the supply of services and £1,706 million for the Public Capital Programme are very much in line with the plan. During Question Time we were treated to what I would regard as another failed attempt to have another debate on the national plan. I am quite happy to deal with the economic motions from the Opposition. They always have the same result. The House has four times voted its confidence in the national plan and this Government have for three years in a row shown that they can be trusted to run budgetary policy in the way we said we would run it at the beginning of the year. There is no mad scramble at the end of the year as there was with Deputy Leyden's colleagues to try to show how they meant to overspend by 56 per cent of their projected targets. It was a very entertaining spectacle.

The time is nearly up.

I will not go into some of the more noteworthy features of the Estimates for next year. I will close this debate by saying that we have come to the end of another year in which both international and domestic opinion have been further strengthened in their belief that the Irish Government can now be relied on to do what they say they will do——

Nothing.

——that is true in the economic field——

There are 228,000 people unemployed and the Government are doing nothing about it.

(Interruptions.)

That is true in the economic field and on a much wider basis. We have restored the Government in both the economic and political arenas and we have restored the faith of people. They know that when we say we will do something we will do it within the resources we say are required and that we will not take any more from people to produce the resources than we believe they can part with.

(Interruptions.)

Order, please. In accordance with the order of the House the Adjournment debate is now adjourned until 4.30p.m.

Debate adjourned.
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