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Dáil Éireann debate -
Wednesday, 5 Feb 1986

Vol. 363 No. 8

Financial Resolutions, 1986. - Financial Resolution No. 13: General (Resumed).

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

The first point I want to make before dealing with the budget speech refers to budget day. I appeal to the present Minister for Finance — or whoever his successor may be introducing the next budget — with regard to the distribution of copies of the budget speech in this House on budget day. My copy is marked "Confidential. Circulated by the Minister for Finance to Deputy Gene Fitzgerald, TD for his convenience and to be treated as conficential until the Minister has concluded his financial statement." That is fine in itself and I welcome it. Every office holder and former office holder, Minister or Minister of State on both sides of the House gets a copy of this speech on budget day. However, the other Members of the House do not. I honestly think that decision is archaic. It seems a little schoolboyish that Deputies have to look over each other's shoulders into their neighbour's copy of the budget speech. Many by and of their own choice never have been and never will be office holders.

I suggest, as a non-political, non-party matter, that all Members elected to this House should be given the same courtesy and facility on budget day so as not to have discrimination between two different groups of Members all elected to the same House through the same process. I plead with the Minister to consider strongly this suggestion. His successor may be here sooner than he expects as a result of this budget, anyhow.

For eight of the past 13 years Coalition Governments have governed the affairs of this country. During that period many budgets have been introduced by Coalition Ministers for Finance. None has been as unimaginative or unhelpful as that introduced by the present Minister, Deputy Dukes, on Wednesday last. No budget of modern times has contained so many hidden stings in addition to the many impositions that were so apparent on Wednesday last. One must look at the present scenario before getting down to detail. There are almost 250,000 unemployed, or 80,000 more than when this Government took office. They are the figures available to us. The real position, we all agree, is far worse. This budget offered no hope of additional jobs.

Foreign debt stands at £20.5 billion, or £8 billion more than when the Government took office. We have the highest ever budget deficit at about £1,300 million. All this despite the much publicised aims of the Government to introduce financial rectitude in the early months of their tenure in office. Because of their abysmal failure in this regard, as well as the appalling growth in unemployment, they should now resign before irreparable damage is done to our economy. Many young people are coming on to our labour market each summer. Is it any wonder that our next most serious problem is the resumption of emigration on a large scale, with no effort made to assess or measure the magnitude of this problem, much less to arrest it. Perhaps one could accept the unemployment figures if financial rectitude had been achieved. Alternatively, if the unemployment figures had been controlled at the expense of financial rectitude, then one could not be overcritical. But for both problems to have grown to their present magnitude will forever be a memorial to the disgraceful management of our economy by the present Taoiseach and his Government. Not even the highly paid and no expense spared handlers could try to put an appearance on this budget because it was obvious to them that it could not be sold to the community. Indeed, the Government backbenchers are already aware of how that budget has been received on the ground.

Recently these same handlers circulated leaflets to homes in the Dublin and Cork areas telling people, among other things, how successful this Government had been in reducing mortgage interest rates. Will they now send out similar leaflets explaining the Government's role in increasing these same mortgage rates, or will they disclaim responsibility for the increase, having taken credit for the decrease? So much for honest Government as presided over by the present Taoiseach.

I said that this budget was anti-job and there is no doubt that it makes no attempt whatsoever to help or improve the employment position. Before going further, I should say that the speaker before me was the Minister of State at the Department of Education. He spent most of his time speaking on the grants for sporting organisations and for sports, which were welcomed by those sporting organisations. I am a great lover of sport and I agree with the sentiments he expressed regarding the necessity for support in these cases. I welcome the growth in the financial allocations to these bodies. However, it is incredible that that same Minister of State comes from a Department from which we had this announcement yesterday, under most peculiar and unusual circumstances, of the closing of Carysfort Training College. For three quarters of an hour in an address to this House, Deputy Creed, Minister of State, did not think it worthwhile to refer to this matter. The excuse offered was that it did not come within his remit or under his responsibility within that Department.

Surely he could not ignore a disgraceful decision taken in such an appalling manner and received, as it has been, incredibly by the staff, the authorities, the students and indeed by the public, not only of Dublin but of the entire country because of the great contribution which that training college has made. The decision made by his Minister was announced only because the issue was raised by Deputy O'Rourke in this House yesterday morning. It is very hard to understand, despite the fact that the Minister of State and perhaps other speakers will say that it was not within his area of responsibility. That is a poor excuse for ignoring a topic so important and current. Certainly we as a party will be probing for further information as to what really happened yesterday. Why were there no consultations?

Was it a premature announcement? I listened to the Minister for Education on radio this morning. Obviously the Minister in the House did not. The Minister for Education made it very clear that there would be consultations but there had not been. I do not want any interruptions please.

The principal of the college and the Archbishop of Dublin were both consulted early this week.

I listened to the Minister for Education on radio this morning — obviously the Minister now in the House did not. She made it very clear that there would be consultation. There has not been consultation. I do not want interruptions that are not in line with what the Minister for Education said clearly this morning. Indeed she went further and became vehement when asked about the fate of the 109 staff. I wonder if the Minister for Foreign Affairs heard her reply to that question. I will not be goaded into repeating her very unfair response. So much for open Government.

I will now refer to the hidden budget. In his Budget Statement the Minister for Finance said he had cut the Estimates by £55 million plus. He said details would be given to the House in "Principal Features of the Budget", handed around after the speech. I see from that document that there has been a cut back in the Education Estimate of more than £12 million from the amount originally estimated. At no time did the Minister of State at the Department of Education refer to that cut back. We have had announcements — I suppose there will be more coming — of increased fees for vocational and other third level students. The capitation grants are being withdrawn from private schools. It should be remembered that that grant is not in respect of the schools but — the students. One must ask if there are sinister reasons for that.

I saw the performance of the Minister for Health on TV last night. Rupert Murdock would have been proud of him: he would like to have him as his chief handler in difficult situations, because that Minister, with a wave of the hand, told the Irish people that he was responsible for controlling £1,200 million expenditure and for employing 58,000 people. He said that if tough decisions had to be taken he would take them in the interest of the Irish people. That is a far cry from the caring trade union official I first knew.

The cuts do not end there, or the announcement of closures. All one can say is that the longer Ministers are kept in the House the safer we will be because if we let them too loose and too free to roam about they will close everything they see.

There has been a cut back of £19.3 million in the Environment Estimate. What will be the major components in that? There has been a big cut back in respect of the Garda Síochána despite the grave comments we had here last night on the growth in the crime rate.

They are some of the hidden stings in the budget. There will be no jobs created by the budget. My party Leader this morning gave details of the £25 million cut in the capital spending programme, obviously to accommodate a target the Minister wanted to achieve. In addition to cuts in the capital programme throughout the last three years, that cut this year indicates a complete lack of commitment to jobs. This is an entirely wrong approach because we need to take a new look at our infrastructure. The Minister and I travel regularly from Cork to Dublin and neither of us can have any doubt that the Naas by-pass and the Curragh dual carriageway have given tremendous benefit to motorists on the southern road. The same applies to the Cork-Killarney road and many others. However, we need many new bridges and by-passes and we should go further with the development of toll bridges. We should encourage private investment in this respect. Certain members of the Government, perhaps, would object to that type of development.

In France there are many toll roads and bridges. The socialist Government just about to finish office did not abolish any of those toll roads. Without doubt, they earn much revenue. Their provision here would have a twofold purpose: it should provide many jobs and if private people are prepared to invest it would ease State involvement. Simultaneously, we could build many new roads, particularly to the west and south and in other directions. Investment in that type of work would take thousands of people off the dole and at the same time provide the infrastructure we are lacking and which is needed to help regional development.

I read a copy of Aspect magazine, dated December 1985, to help me to remember all the broken promises of the Government and how that affects the budget situation. Broken promise No. 1 was contained in their Programme for Government. It promised firm and decisive action to halt and reverse the growth in unemployment “which stands at the alarming level of 170,000”. The magazine I have referred to stated in December that unemployment then stood at 228,000. Of course the real figure is much worse. Now, in the first week of February, the figure stands at more than 230,000. Again, the real position is much worse.

In broken promise No. 2 the Government said they would pursue domestic budgetary policy that would phase out the current budget deficit by 1987. Do I have to tell the House how far off target that is? The current budget deficit is approximately £1,300 million.

Broken promise No. 3 is that in which the Government said that the portion of tax derived from PAYE on salaries and wages would be reduced. The performance has been the same: income tax as a percentage of GNP is at an all time high record. Do not let anybody tell you that the mickey-mouse improvements of last week will change that substantially.

I could go on with all those broken promises but the House is already aware of the major difficulties our economy is encountering. There was a lot of screaming and noise about the 1981 budget deficit which stood at £802 million, 7.4 per cent. That is a far cry from the £1,300 million of today which represents 8.6 per cent of GNP.

The budget is anti-business in many ways. The Minister and the Department of Finance seem to have got their way at last with section 84. I will quote from an article in The Irish Times, dated 30 January last, the day after the budget, written by Ron Bolger of Stokes Kennedy and Crowley. He referred to the cost to borrowers under section 84 of the Finance Bill. This neutral observer wrote:

The effect will be to increase the cost to borrowers of such loans, since a typical section 84 loan agreement will contain tax warranties allowing the lender to increase the interest rate so as to leave it in the same position after all taxes. The essence of section 84 loans has been to reduce borrowings in Irish pounds to a level comparable with our industrial neighbours. At a time when Irish interest rates are still quite high, the effect is to increase the cost of funding to Irish borrowers. For a relatively modest yield of £6 million in 1986, this proposal will have serious consequences by removing one of the best financial incentives in attracting investments to Ireland.

I said earlier that this is an anti-family budget. One can say that for many reasons, particularly about the 4 per cent increase to social welfare recipients and because of the reduction in food subsidies which will make food dearer. I appeal to the Minister to rethink this situation and to rethink the retention tax, as it is called, not as far as the big investors are concerned but where it concerns small investors. I endorse what the Leader of my party said this morning about old age pensioners. The old age pensioner and his wife are probably getting about £5,000 through his pension. Now the threshold has been raised to about £6,300 so in their tax allowances they have a surplus of £1,300 but, because of the new situation, if they have a nest egg in the bank, that £1,300 tax free allowance cannot be used and whatever nest egg is in the bank or the Post Office is taxed at source at 35 per cent although they have a balance in their tax free allowances. I appeal to the Ministers in the House to consider that seriously. We hope to see amendments to the Finance Bill when it comes before the House. If the Government do not introduce amendments we will submit them.

Over the weekend I was alerted to three cases giving rise to serious difficulty because of this decision. The three cases are somewhat similar but I will cite one, marginally altering the figures, for obvious reasons. A man with a health condition disposed of his assets, on doctor's advice, some years ago. He had two school-going children. He bought a small house from his assets and invested the balance to give him an income of £7,500 per annum which is substantially less than the average industrial earnings, but he can get by on it. Against that income from the investment that man was allowed the normal tax free allowances, marriage allowance, mortgage allowance, life assurance, VHI and so on, which meant that he had to pay income tax on slightly less than £1,000 a year. The tax paid by him last year was £321. Because of the new arrangement that man cannot claim any of those tax free allowances so his income, which after tax amounted to about £7,200, is now reduced to £4,800, because his tax payment now becomes £2,600 instead of £300 as a result of the tax allowances being withdrawn. I checked that situation with the Department of Finance who confirmed that that was the position as far as that man was concerned. Whatever one can say about taxing income at source for big investors this is an example where a caring Government should look at the retention tax very carefully before the Finance Bill is published. The case I have cited illustrates discrimination against the individual, and is surely unconstitutional.

In relation to agriculture, our prime industry, it got little or no treatment from the Minister for Finance on budget day. I among others, was recently criticised for saying that this will be a difficult year for farmers, perhaps our most difficult since we entered the EC. It will be a difficult year but both the Government and the Minister seem to be intent only on confronting every group in society. If it is not the Minister for Agriculture confronting the president of the farmers' association, it is the Minister for Health closing every hospital he can get his hands on, or the Minister for Education closing colleges because of their religious background or for whatever reason. They seem to be intent on confronting communities, organisations——

I do not like to interrupt the Deputy but——

The Minister will get his opportunity——

The Deputy made an imputation that the Minister for Education closed colleges because of their religious background. There is absolutely no truth in that and it should be withdrawn.

I said I wondered if it was so. I did not say it was but if the cap fits the Minister can wear it.

That is an appalling slur and it should be withdrawn. If the Deputy is happy to leave a charge like that on the record——

I appreciate that the Minister is a bit testy, but what I said was, "I wondered was it", because I saw recently a young Fine Gael group saying that they wanted the religious orders taken from control of the schools. Is the Minister aware of that? Is the Minister aware that his Taoiseach was embarrassed about that?

I saw where young Fianna Fáil said recently that the Deputy was going to join Des O'Malley. Are you going to do it?

They did not say that. Will the Minister show me the quotation? I am obviously pinching the Minister for I can let the Minister have the quotation from his Fine Gael group, so am I not entitled to wonder why Carysfort was closed?

This is a very serious time for agriculture. Our family farm is so far behind in average European production that it needs to be protected and one must be concerned about the competence and determination of the Minister and the Government to ensure this protection. We are facing a six months presidency by the Dutch who are very developed, at two and a half times the European average. They are not concerned about setbacks and they are very much into factory farming as compared with our family holdings. For the second half of the year the British, who have no commitment to the CAP but merely to a British cheap food policy, will hold the presidency.

I take this opportunity to thank The Cork Examiner for its leading article this morning relating to the mean and petty tax. Like the Minister, I do not always agree with the leading article in The Cork Examiner but on this occasion the article is well researched and well worth quoting from. The article refers to this retention tax to which I have referred and to the hardship that would be created for people. It states:

Whatever the reason, the end result is a system which can only be described as a monumental piece of financial and social blundering and one which is fraught with physical as well as financial perils, especially for old folk.

It will be recalled that last year, when attacks on the old people were at their height, special concessions were given to them to encourage them to save rather than keep money at home, where both they and the cash would become targets for the robbers.

Now those concessions have been removed at one fell swoop, leaving them wide open once again to the temptation to retain their savings at home...

In more general terms, every small saver is being hit with the imposition of £35 tax on every £100 of interest earned, in the majority of instances on money that has already been subject to taxation.

Not only is this element of double taxation immoral in every sense, but it also brings into the direct tax net, for the first time in this country, children who have small savings accounts.

If this mean and petty tax represents caring Government, more and more people will begin to take the view that the Government should be changed.

And it would be interesting to know whether in fact double taxation is constitutional anyway.

That very adequately covers the points I made, especially in relation to tax on children's savings.

There has been a 2 per cent increase in the standard rate of VAT which has been subject to enormous fluctuations over the years. It is a further example of the anti-family nature of the budget as the standard rate applies to almost all items essential for the home.

The Minister said he would be looking at further improvements in the area of sport and I wish to make a special plea in relation to VAT on hurleys. Hurling is a very old traditional Irish game played the length and breadth of Leinster and Munster and in Galway. It is also played in towns and cities, but the cost of hurleys puts an enormous strain on families. The Minister of State referred this morning to all the amateur associations who do so much for all games, and I agree with him. However, ordinary schools and colleges play hurley from 1 February and when they break for holidays the students continue to play. They all need hurleys and, unfortunately, sometimes they break after only one game. They cost around £5 and the additional imposition of VAT at the rate of 25 per cent should be looked at because no other sporting equipment is as deserving of a reduction in VAT as hurleys. Perhaps hurleys for adults could be taxed and those for children exempted. I know that the Leas-Cheann Comhairle shares my views because hurling is played all over his county also. I will continue to raise this issue, no matter what party are in power, because it is very important.

We will be hearing all about teachers' pay tomorrow but I am disappointed at the motion coming before the House. During my years as Minister I appealed almost daily to all sides to accept negotiated procedures, whether from the Labour Court or the conciliation and arbitration scheme which served the public service so well over the years. If the Government break those procedures it will have a far reaching impact and effect. If that happens it will be very difficult to appeal to other bodies to observe the rules. It is said that, if the rules do not suit you, you should change them but you cannot do so arbitrarily, you do so by negotiation.

It would be very wrong of me to name or compliment anyone but I can claim credit for having appointed the present arbitrator. I went to great pains and trouble to find someone who was suited to the post. Politics did not enter into it and I was not interested in his political views as long as he was competent and had a commitment to perform an extremely difficult job. I have no hesitation in saying that my choice was a good one and it was endorsed when the present Minister for the Public Service reappointed the same arbitrator. The arbitrator, having taken all factors into account, came up with his findings and I am saddened that the Government saw fit to break their word because they are honour bound to pay the award. I hope that many of the Government backbenchers will realise tomorrow how important it is to preserve the conciliation and arbitration scheme because it was negotiated by agreement.

I welcome some aspects of the budget, especially the assistance for Cork Opera House, the Cork Enterprise Board and for other cultural and sporting organisations. Some Members thought they were bitty but these organisations are deserving of support and I welcome any move in that direction.

The overall direction of the budget is very hard to understand. There has been no assistance for jobs or job creation and there are a number of areas which we have neglected over the decades. I refer in particular to the forestry programme. The EC's second largest import after oil is forest and timber products. It is appalling that we cannot make a greater impact in getting revenue from our forests. I do not lay the blame at anybody's door, but successive Governments have failed to tackle this urgent problem. There can and should be a big improvement in this area. I read today that the Taoiseach, the Leader of the Seanad and others had gone to France to a conference covering concern about the deforestation of Europe. I am very concerned about that matter, but did it merit the Taoiseach going to such a conference when we are already ably represented by competent people in the person of the Minister of State and the Leader of the Seanad? At a time like this, with Ministers capable of undertaking any project and closing anything, he is very unwise to go to any such conference. Forestry and its development are very important. It is sad that the Community should be importing from third countries such large quantities when we, as a small nation, could supply some of those needs.

Fisheries is another area where there has been little or no progress. With the advent of Spain particularly, and Portugal to a lesser extent, there are problems facing our fishing industry and our fleet who are responsible for the control of our fishing waters for the transitional period. It seems inevitable that many of our food processing plants have experienced difficulties over the years. It is disappointing to see the difficulties being experienced by the food processing plant in Midleton. I hope they will be satisfactorily resolved for the sake of the workers and the farmers in the Cork area. I am very concerned that this business will be saved for the people of Cork, particularly east Cork.

Despite claims by the Minister, an area which has not been treated well in this budget is tourism. Admittedly small concessions were made. If there are parts of the budget which could be described as bitty, those relating to tourism could be so described. I acknowledge that the reduction in VAT on meals is a help, but only a little help. This Government are not giving a direction to the tourist industry. I was disappointed to hear today that we will not have a ferry between Wales and Cork. I realise the Minister will say that they promised to guarantee so much money many months ago. That may be, but they took too long to reach that decision.

We promised the money six months ago.

It was too late. I realise the Minister is probably testy today because he knows that his Government's treatment of this ferry over the last three years has been disgraceful. It is terrible to think that in the Cork-Kerry region we will not have a ferry this year. This is a tremendous drawback. You cannot expect people coming into Dublin to drive to the Cork-Kerry region. The Minister says the money was promised six months ago but that was too late, as has been proved because when the firm set about getting a suitable vessel it was not available. We must plan ahead but we do not do that.

Yesterday I asked the Minister for Labour about AnCO courses, trainees, the Youth Employment Agency, this year's schemes and projects and the numbers involved. I asked if this year's figures would be as good as last year's and he said he did not know. There is something wrong with planning of that nature. I believe there are many stings in this budget which have not yet come to light.

On budget day the Minister cut back on the original Estimate for the Department of Labour by £6 million. There was a lower estimated take up of £6.4 million from the social employment scheme. Does that mean there will be a cutback of training programmes or what? I am not satisfied with the present position. I would prefer to see jobs created. It is significant that yesterday the Minister was not able to tell me how many placements had been made of people who completed AnCO courses. I suspect that the figure has been dropping because no number of courses can substitute for permanent employment. At a time when unemployment is so high it is important that the present rate of activity be maintained. We must ask if the Minister for Finance is cutting back on those training schemes and programmes.

Deputy Haughey said this morning that the £25 million cutback in the public capital programme was being made to achieve this 14.2 per cent reduction. This is a book-keeping measure. To blazes with more jobs; forget about creating employment; keep the books to suit the Government. Between the time the Estimates were agreed and the Minister presented the budget, there was a cut of £55 million. This was another effort to make the arithmetic of the budget look better.

I can never understand why successive Coalition Governments seem to be completely anti the building industry. I dread to think what is contained in these hidden strings. Perhaps the Minister, Deputy Barry, will tell us. There has been a £19 million cutback in the Estimate for the Environment. This Government, who are worse than their predecessors, seem determined to run the building industry down to a hitherto unknown level.

I referred earlier to the necessity for encouraging privatisation in road development, and there are many other areas I could mention. Resources are scarce but in my city there are more than 50 per cent unemployed. Things are even worse now than they were in the fifties when another Coalition Government were in office. I heard the Minister of State, Deputy Creed, saying this morning that a great job had been done ensuring that work on housing repairs was carried out by registered builders. If any Minister thinks that is going to make a major contribution to employment in the building industry, it shows that he is far out of touch with the feelings on the ground.

The Minister said there had been consultations about the closing of Carysfort College. I listened to the Minister for Education on radio this morning and she specifically said she intended having consultations. When asked about consultation with staff interests — I think 109 was the figure mentioned — she said of course there would be consultations but it would be wrong for her to tell these people what their future would be. Obviously there were no consultations. The same would appear to be true of some of the hospital closures. Yet today the Minister of State told me that the Government had made a major contribution to the construction industry by ensuring that only registered builders would do this work. I admit that was a wise decision, but the impact it will make will be minimal.

I have tried to give an assessment of the budget. It is going nowhere. It is not giving us any direction. It is making life more difficult for everybody and it is increasing the cost of living. The old claim about the drop in the inflation rate is no longer true, that rate has bottomed out and it will turn in the other direction. We must be concerned about the massive run on money out of the country and the apparent inactivity of the Government to arrest that flow. As a nation we will suffer serious consequences.

We have to learn a lot yet about this budget. Its original impact has been catastrophic. Even the Government backbenchers are downhearted and disappointed because of their experience in their constituencies over the weekend. I have made some appeals that certain matters be rectified in the Finance Bill. In particular, I mention the retention tax and its impact on the elderly, the young and on the person whom I gave as an example in my speech. I also make an appeal with regard to the 4 per cent that was not given to child dependants on social welfare. How could any Minister have been so mean? This was done at a time when the Minister present in the House knows that in our city we have poverty of a magnitude I have not seen since the fifties. This Government have lost their way and have not kept in touch with the people.

I have said in this House on many occasions that holding clinics is a very important matter. I know the Minister present holds clinics and he must know now from his experience last week that people, the young, the old and the sick, are worried about their savings. I appeal to him to tell his colleague who does not seem to know what is happening to reconsider this matter in respect of the categories I mentioned. If the Minister cannot rectify the matter in the Finance Bill, surely the Labour Party at least will have to vote with us on the reasonable, caring and concerned amendments we shall submit.

I wish to apologise to the Chair and to Deputy Fitzgerald for interrupting him on two occasions. It is not my wont to do that. It is bad for my blood pressure and I should not engage in interruptions. I hope my future behaviour will not be a cause of concern.

The effect of the tax change in last week's budget is to give to every PAYE taxpayer the equivalent of one week's wages. We have removed the 1 per cent income levy; we have increased the PAYE allowance by £100 for a single person and £200 for a married couple; we have increased the personal allowance by £100 for a single person; we have broadened the 35 per cent tax band by £200 for a single person and £400 for a married couple; and we have raised the age exemption limits to keep pace with inflation. We have reduced the top rate of tax from 60 per cent to 58 per cent and we have doubled the age allowance.

These benefits to those who are PAYE earners are the most significant reductions in income tax that have been given for a great number of years. The effect is bound to encourage the ordinary worker who will know that more of his wages will be under his control after April.

In the budget the Government have been guided by four clear and essential objectives: to allocate scarce national resources in a way that will most benefit all the people of the State; to continue to fight the growth in foreign borrowing and to cut public expenditure; to encourage the productive sectors of the economy with the aim of creating employment and generating wealth; to provide for those in our society who must look to the State for assistance.

The budget is set firmly in the context of the Government's economic policies as set out in the national plan Building on Reality. These policies are working. I make no bones about claiming credit for the Government where I feel it is due. We have had significant economic success since we came to office. Thanks to our determined anti-inflation policies we have succeeded in reducing the inflation rate to under 5 per cent. In 1981 Ireland's inflation rate was among the highest in the western world; today it is down to the average in our main trading partners. That is a considerable achievement. The balance of payments has improved dramatically; the deficit has fallen to the equivalent of 3 per cent of GNP, compared with 15 per cent in 1981. Significant improvement has also been achieved in the public finances, especially in relation to the control of public expenditure. All this represents real progress, especially when you consider the enormous problems the Government faced on coming into office, and the fact that the international economic climate over the past three years has been far from propitious.

It appears from listening to speakers on the opposite benches that they have learned nothing in the past three years. All the sins to which they were prey in 1977, to spend away, borrow away and tax away, are still what they are offering the electorate nine years later. There has been no change. They will raise taxes — there is no other way to pay for the borrowing they envisage or the increased expenditure they propose. They will raise public expenditure, further damage the economy and increase further borrowing, thus passing the debt on to another Government and to another generation.

That is not the way this Government intend to proceed. In the interests of the people who pay the bills, namely the taxpayers, the Government are determined to cut public expenditure and to pass the benefits of cuts in public expenditure to the people whom we forced to pay the bills, the ordinary taxpayers. I suspect that part of the reason there is a division in the ranks opposite is that some former members of Fianna Fáil could no longer wear the policy of borrow more, spend more and tax more which has been the hallmark of Fianna Fáil for the past ten years.

Deputy O'Malley and his party are enunciating precisely the policies I have laid down today. In the past three years the Deputy and his so far small handful of supporters have been battling to bring some form of realisation into Fianna Fáil and to woo them away from the rake's progress they have indulged in in the past ten years. Deputy O'Malley has been endeavouring to bring some reality into the thinking of the economic gurus who guide the political fortunes of Fianna Fáil. Unfortunately, if one is to judge from the contributions to the budget debate from the other side of the House, there is no sign of change. I presume it was in despair that Deputy O'Malley left that party and has been followed so far by three others. He was aware of the economic reality. He knew that the Fianna Fáil policy of taxing more people, borrowing more money and spending more of the money taken from the ordinary man and woman was no longer a realistic policy. The Deputy left before Fianna Fáil sink the ship of what was once a fine party.

The country is still paying for the policies that Fianna Fáil introduced in 1977. Many more years will elapse before we can reverse the damage caused by those policies, but we have made a start. It is significant that the public generally accept what we are doing as being necessary and are prepared to follow us. The level of support for Deputy O'Malley is an indication of what the public preceive as the correct thrust of his policies, though we yet have to hear the details of his policies.

We have set out in the budget details of how we intend to achieve the goals we have set ourselves. Deputy Fitzgerald concluded his remarks by saying that the budget shows no clear sense of direction. I reject that charge totally. The Government do not claim to be all knowing, but we do claim to have the courage of our convictions and the courage to do what we consider best in the interests of this small country. We know where we are going and we are determined to follow our consistent policies through to success. We will not be dissuaded from our course by soft options such as those being proposed from other quarters.

It amazes me that after ten years Fianna Fáil have learned nothing despite the damage they caused to the economy. They continue to suggest easy ways out. There is no painless way by which our economic position can be improved. The national debt, for instance, stands at 128 per cent of GNP. The growth in debt service charges has been absorbing an ever increasing proportion of our tax revenue. This has reduced inevitably the scope for the provision of essential services and for the creation of sustainable employment.

The level of debt has reached the point where debt servicing absorbs almost one third of Government revenue and, with that revenue standing at 40 per cent of GNP, there is little room for manoeuvre on the tax front. Tight control must be maintained on all expenditure programmes if the debt burden is not to escalate beyond control. This is the reality the Government faced in preparing the budget. It is the reality the Opposition refuse to face. The approach we have adopted has been to recognise the constraints this reality imposed. This budget is a major step forward in sharing the national cost fairly and at the same time creating a climate for economic growth and for the creation of employment.

The budget has spread the tax burden more evenly and more equitably. The policy of the Government has been and remains that the overall tax burden will not be increased. We recognised that personal tax levels were very high and we shared the widespread conviction that they must be reduced significantly. As I said at the outset, as a result of this budget every taxpayer will have the equivalent of an extra week's wages this year.

High personal tax levels, as the Minister for Finance reminded the Dáil last week, as well as being a burden on the individual and on families act also as a disincentive to employment creation, discourage initiative and ultimately slow down economic activity. It is no accident that many people when asked before the budget what was the most worrying aspect of their economic situation, replied that it was taxation. We appreciated this concern and, despite the difficult financial position still facing us and the pressure for high tax revenue, the changes announced last week constitute a significant and substantial improvement for the PAYE sector. This has been recognised generally since.

Of course, the Government would have liked to have taken these tax changes a lot further but we must all face up to economic realities. In the light of current constraints, the tax changes announced are as far as any responsible Government could go. However, the changes will mean that an additional 12,000 people will no longer be subject to tax while 191,000 persons — a huge proportion of the population — will be subject to lower marginal rates of tax. The marginal rates of tax have been the bugbear for many in the PAYE sector.

The Government are fully alive to the need for a fairer and better tax collection and enforcement system. The measures announced in November last, together with the further measures, particularly the tax amnesty introduced in the budget, mark a major step forward in this system. The message to the PAYE sector is that the Government are conscious of the burden that sector have been shouldering and are determined to continue to try to lighten that burden further in the future. We have made a significant start this year.

The introduction of the retention tax on bank and building society saving deposits will lead to a more cost efficient collection of tax due to the State in respect of deposit income. It will serve also to prevent the evasion of tax and to ensure a more balanced treatment between the main financial institutions. This creative innovation not only taps the resources of the investment sector but widens the tax spread to such an extent that we can reasonably expect a large portion of our black economy to be forced to make a due contribution to the national finances.

We are being told constantly that there is much tax avoidance and evasion and that the black economy is destroying the legal side of the economy. We are confident that a large proportion of the black economy will be forced to make a due contribution as a result of this new measure. The burden on the legal economy will be thereby alleviated.

No one should question the justification for taxing interest income at source when investors are earning high real interest gains after inflation. Logic and equity demand that the balance of taxation be shifted from the PAYE sector to the incomes derived from interest and other returns on financial assets.

While I am on the subject of the retention tax, I should like to say a few words about the position of savers who would not normally have a tax liability. There have been some alarmist reports in the press about the situation of elderly but small investors. There have been allegations that money, on which tax has already been paid, will now be taxed again when deposited in the bank. Let me make it clear that the retention tax applies only to the interest on deposits and is designed to bring all the financial institutions under the same rules as far as taxation is concerned. This also means that the facility of confidentiality, previously enjoyed only by the building societies, will now be extended to all the other financial institutions. As far as the small saver is concerned, there remain a variety of attractive schemes for saving money on a tax-free basis, such as through the Post Office and so on.

As far as the position of old people in general is concerned, let me underline the fact that this budget and, indeed, the whole economic strategy of this Government is designed to protect the incomes and savings of our old people. Over the past decade the most alarming experience for those on pensions and fixed incomes has been the way in which inflation has eaten into their savings and depleted their spending power. The previous speaker spoke about public representatives holding clinics. If we think back a few years we remember the number of people complaining that the State was encouraging them to save but doing nothing to control inflation which was eating away the value of their savings. That is no longer so. The primary cause of the depletion of the value of savings was the high level of inflation and that has been corrected.

Since this Government came into power inflation has been reduced from 20 per cent to under 5 per cent. For the first time in years people are able to earn real rates of return on their savings and investments. By decreasing even further the rate of inflation, as our policies are designed to do, we are ensuring that old people are protected from the appalling experience of seeing their incomes falling in value and in purchasing power from day to day. Our determination to reduce the burden on taxpayers extends in particular to older people. In this budget we have doubled the age allowance and we have increased by 5 per cent the age exemption limits. I want to spell out what this means. A married couple where either is over 65 can now have an income of £6,300 without paying a penny in tax. A married couple where either is over 75 can now have an income of £7,350 tax free. This is about 75 per cent of the average industrial wage. Of course the removal of the income levy and the other changes in the tax allowances and tax bands will also benefit old people paying tax.

Our objective in stimulating the climate for intitative and enterprise is to bring about real improvements in the productive sector which is central to the creation of growth, employment and wealth. The budget, therefore, provides valuable incentives to improve the investment climate for our industry. I would mention here the plan to increase the attractiveness for private investors of taking shares in companies qualifying for the 10 per cent rate of corporation tax on profits of manufacturing industry and certain services. That is a very important and imaginative initative. It means that in future the compaines in the 10 per cent manufacturing bracket can entice investment in capital from private individuals and save them, the companies, going to the banks to borrow, in the knowledge that they can pass back to those individuals from whom they get the money the benefits of their 10 per cent tax rate. When the implications of this become known and when the possibilities for investment and reward at a very low rate of tax are recognised, I am convinced that we will see a new surge in investment in industry and a consequent surge in the creation of jobs. The details will be spelled out in the Finance Bill which will be introduced in the coming months and I would ask all Deputies to study it carefully and bring it to the attention of companies and of people who wish to invest. I hope that the Government will undertake a series of advertisements or seminars to bring to the attention of investors and people in industry the value we see in this measure for both partners. The benefits for the workers will be extremely positive. I would mention also the reduction in capital gains tax from 40 per cent to 35 per cent on longer term capital gains. This reduction will encourage longer term investment. The Finance Bill will also include an incentive to increase the share of private investment in research and new product development. These are very important for the future industrial growth of this country. We have perhaps been a little tardy in investing in new products and the research which is necessary. This is an indication of the Government's concern that job creation efforts should not be confined only to the present; we must look to the future and establish industries now which will provide work for future generations.

One of the most encouraging aspects of economic performance in recent years has been our export figures. Last year exports of goods and services rose by around 6 per cent in volume. Industrial exports rose by 5 per cent, not as much as in 1984 when we had a record 19 per cent increase, but an encouraging result nonetheless. Agricultural exports went up by 7 per cent. Last year saw a trade surplus of £200 million, the first surplus in 40 years. It is a fact which has not been sufficiently appreciated by commentators. It is an indication of the strength, imagination and dynamism of our exporting sector who could bring about such an achievement in adverse world economic conditions.

Given that the trade sector is the main contributor to growth in the economy, it is essential that our export markets continue to grow this year by at least the same percentage as in 1985. The maintenance of that level of export growth is highly dependent on our maintaining our competitive position. The lowering of the inflation rate is the most significant contributor to what is in all the circumstances a modestly successful economic condition in the past few years. We were able to bring about an improvement in exports because we were able to compete due to a lower rate of inflation. They are all dependent on one another. If we do this we can expect some growth in national output this year, a further reduction in the balance of payments deficit and a further fall in the inflation rate. All this will be conducive to the creation of more employment.

According to the best available estimates a growth of 4 per cent is expected in world trade in the coming year. The Government's priority aim is to create a climate in which Irish exporters can share in such growth. The figures for our trade surplus last year which I have already quoted indicate that we have already met with a great deal of success. With the recent budget and the assistance of our State agencies such as CTT, An Bord Bainne, BIM, CBF and others and, of course, the help that will be given them by the officers of my Department, wherever we have embassies or consular services — with all these agencies — we are fine tuning our export potential to make the most of the possibilities before us. For example, we may find it advantageous to concentrate our efforts more on the European market this year. We have the confidence of our past successes, particularly in the high technology and chemical sectors, to ensure that we take full advantage of every possibility in the coming months and years.

Tourism which is very important to us for economic growth, also turned in a very good performance in 1985. The number of overseas visitors to Ireland rose by 3 per cent and tourist receipts were up by 20 per cent to over £700 million. Together with the grants announced last year for hotels and guest-houses the budget will give a considerable boost to our tourism prospects in 1986. I am happy to note that the tourist industry in general has welcomed the decision to reduce VAT on restaurant meals from 23 per cent to 10 per cent. I believe that this reduction will help to generate further employment in the tourism sector and safeguard existing jobs. Almost one-fifth of expenditure on meals in restaurants and hotels is made by foreign tourists and this expenditure comprises a significant proportion of their spending in Ireland. The VAT reduction on meals, therefore, opens the way to more competitively priced holidays and the attraction of more visitors. Of course, another benefit, not for tourists but for the internal market, is the fact that VAT on food in canteens and such places will also be reduced from 23 per cent to 10 per cent, thereby putting more money back into the pockets of people who use these canteens.

Further the budget introduces a special VAT refund system which will reduce VAT to 10 per cent on the purchase of certain high cost touring coaches used in the tourist industry. There have been complaints in recent years that the high rates of VAT had handicapped Irish coach hire companies in their competition with foreign coach companies operating during the summer. The Government have responded to such complaints.

We are confident that the Irish companies will now be able to compete on a more equal footing and win their fair share of business. I am encouraged by the statement of the Irish Tourist Industry Confederation that they will be able to use the VAT reductions to market Ireland abroad in a much more aggressive manner.

As I said at the start of my statement this afternoon one of the prime considerations of this budget is to protect the less well off members of society. The provisions announced under the various social welfare schemes will ensure that, given that the increases are designed to keep pace with inflation. I am sure these benefits will be felt where they are most sorely needed, whether by the unemployed, particularly the long-term unemployed, the elderly and the other poorer sections of our society.

When I say that we have increased these benefits to take account of inflation I am not sure it is widely appreciated that we are virtually the only country in Europe that have done that. Quite uniquely we have matched our social welfare benefits with inflation over the past number of years. Despite all the other problems with which we have been confronted, our concern for the old, the unemployed and the children has made this Government ensure that we will at least do that when many other countries have abandoned any attempt to do so. Of course, for the first time — in the bonus we gave just before Christmas — we included the long-term unemployed.

Unemployment continues to be an overriding concern for the Government. The thrust of this budget and of other current Government policies is to create conditions conducive to employment through the stimulation of greater economic activity. The enterprise allowance scheme and the social employment scheme have already made real progress in this direction. The 15,500 people who benefit from these schemes are concrete proof of this. Similarly, measures for home improvements are bringing the triple benefits of improving living conditions for individual households, providing employment for those working on such improvements and those who supply the materials for such improvements and arresting tax evasion and related activities outside the legal economy. The budget also aims at giving a further boost to employment and to reducing costs to the consumer by reducing the VAT rate on a number of services. Much of the advice given us is to the effect that this is the most productive sector for job creation — the services sector — and the reduction in VAT from 23 per cent to 10 per cent for a lot of businesses in that sector must help to create more employment.

The budget and our economic performance and prospects cannot, of course, be viewed and assessed except in the context of the international economic scene. As Minister for Foreign Affairs it is important that I say something about this, especially since the Opposition spokesmen and commentators have failed to advert sufficiently and to give due emphasis to the international environment in which we must operate. It is a hard fact of life that the Government's economic and budgetary strategy demands not only concentration on the specific problems in the Irish economy but must also take adequate account of developments in the world economic situation. We are a small open economy, very much subject to world economic and market forces. We must align our strategy with that of other economies in the industrialised world to counter, through co-operative efforts, the difficulties that beset us all. On the positive side, we wish to ensure that our economy will be well situated to avail of an upswing in world economic activity.

We have adopted a strategy similar to that of most other OECD countries in pursuing steady and restrained monetary and fiscal policies. The aim of this strategy has been to reduce inflation, to stabilise it at a low rate, to contain budget deficits and public spending and to seek an improvement in profits and profitability among enterprises which could be conducive to stronger investment and the creation of employment. There has also been an emphasis on improving the functioning of economies and allowing markets to function more effectively. The OECD have recognised the steps that Ireland has taken in pursuit of this strategy.

As a result of this strategy the economic situation in the OECD countries has for the past three years shown a trend of recovery. While this recovery remains gradual, it is now mature. The overall OECD growth rate in 1985 of 2.75 per cent is projected to continue at around 2.5 per cent for the next 18 months. The average inflation rate has declined further to around 4.5 per cent, the lowest rate in 16 years, thus raising confidence in a sustained recovery.

If that sustained recovery takes place our surest way of benefiting is to remain competitive. Our surest way of remaining competitive is to ensure that our rate of inflation is not higher — bearing in mind that the vast amount of our trade is done with the other OECD countries — than at least the average of those countries with which we trade, and preferably at the lower end of the scale. However, these successes are not matched in the fight against unemployment. The rise of 1 per cent in employment among OECD States was concentrated mainly in the US and Canada with only a small increase within the EC. Projections for the next 18 months unfortunately point in the same direction.

The successes achieved to date in turning their economies towards a path of modest but sustained growth will encourage the OECD countries to maintain their basic economic strategy with a view to increasing the growth momentum. Current growth and employment prospects indicate that the major downturn is over although no major upswing is forecast. We must remain concerned about the debt problems of developing countries and the imbalances in current accounts between countries. However, the strengthened commitment among major industrialised countries to address these issues increases my confidence that the present economic recovery among OECD countries will be sustained. It is abundantly clear that the main task which must be effectively tackled by these countries is to bring down the unemployment rate without an acceleration of inflation and without creating new and unsustainable budget deficits. This task is even more urgent in the Community member states where employment growth remains below the OECD average.

Within the European Community Ireland has been in the forefront in focusing attention on the need to mobilise efforts to fight unemployment. This has been a consistent and priority theme of the Taoiseach at successive European Councils. Ireland, along with its partners, has made progress through a co-operative but difficult economic strategy in cutting budgetary imbalances, reducing inflation, securing wage moderation and achieving improved balances of payments. It would be a tragedy and a failure if these hard-won successes are not built upon to achieve success in turning the tide of unemployment in the Community through a rapid expansion of output and employment. The Commission, in its annual economic report for 1985-86, has argued that improvement is achievable. intensification of structural adjustment, including the completion of the internal market, greater flexibility in market structures and wage moderation can contribute to this. It will be necessary also to increase growth in demand by exploiting the room for manoeuvre available and supporting infrastructural projects which yield a good rate of return. These measures would both promote profitability and lead to improved investment. Ireland has lent its support to the Commission strategy which holds out a firm prospect of growth and employment.

We will continue to seek the adoption of this strategy by our partners in Europe, since it is imperative that we, as a Community, can offer a future to the 13 million of our citizens who are unemployed. The urgency of this task becomes clearer when we realise that, unlike past experience, there is little prospect in the immediate future of such major economies as the US acting as a strong motor to force an upsurge in the world economy, since the pace of recovery is as yet merely steady. Europe must show its resolve to force the pace of its own economic recovery. Ireland, which has borne a significantly higher rate of unemployment than many of its community partners, has shown that it is prepared to play its part in a co-operative strategy to counter the problems I have outlined. We must boost growth, output and employment within the Community as a whole. Success in this undertaking will benefit growth and employment not only in Ireland and within Europe but will also mark an effective contribution to increasing the pace of recovery in the world economy which can only be of benefit to us all.

I found the Minister's speech most interesting if not fascinating for the simple reason that the points he mentions, which he says are wonderful innovations in the budget, run counter to established economic thinking. I will try to show that what he says is at variance with what is said by a well known economic writer for The Sunday Tribune and I will quote what he said last Sunday without imposing on the time of the House too much. He Said:

The slick selling of the 1986 budget cannot disguise the fact that the personal tax burden will increase significantly during the year if the government's taxation plans are realised. Taxes on both personal income and personal spending will rise rather than fall as a result of the budget.

That is at variance with what the Minister says. The economist went on to say that taxes are expected to yield £2,477 million this year which represents an increase of 9.6 per cent over last year, and that if we are talking about an inflation rate of 4 per cent, the increase in the personal tax burden will run at more than twice the inflation rate. Here we have a different picture of the effects of this budget presented by a very reputable economist. As he says, the slick selling of the budget cannot disguise this fact.

If ever the country needed a budget of imagination and optimism it certainly did not get such a budget from this Government. Instead, the Minister for Finance threw out the usual hotch-potch of excise increases, VAT changes and juggling with taxes. If one thing positive emerged from it was the admission that the Government's programme Building on Reality 1985-1987 has been finally laid to rest. However, this new reality that the Government claim to be building on is not the reality of the unemployed or the taxpayer. Whether the Minister likes it or not, I tell him that the greatest economic crisis in the history of this State is upon us now, and this budget is in no way responsive to this crisis. It is no exaggeration to say that we have the greatest economic crisis in the history of this State. As evidence of it we have the Taoiseach flying to Paris with no word to the Leader of the Opposition to see what can be done to avert this serious economic crisis. It was a panic measure on his part to fly to Paris.

It is appropriate to ask what has been done in this budget to create employment and to stem the flow of emigration? What has been done to lift the national morale which has never been so low? That is most important.

Because of our relatively underdeveloped economy, Ireland, vis-á-vis our neighbours in the EC, has tended to have a higher than average growth in GDP in European terms. We have always managed to grow that little bit faster than the economies of our more industrialised neighbours. Even so, the Minister for Finance was willing to tell the House in last week's Budget Statement that GDP had risen above the European average in 1984 — that was to be expected — but in 1985 there was a drop; there was no increase in GDP over that of our neighbours. Therefore, even in depressed European terms the Irish economy is fairing very badly.

In his budget speech last year the Minister, Deputy Dukes, forecast that unemployment would level out in 1985 due to the adjustments in taxation in the budget which he said would lessen inhibitions on the expansion of employment. I am afraid it did not work. We have an increase of 14,500 in our unemployment figures — that was the levelling out. These figures were not only nominal but misleading. People whose entitlement to unemployment benefit has terminated, cannot opt for unemployment assistance which is means tested because two of the family are working or the spouse is working and they find themselves facing a potential drop in income. They have opted in very many cases for disability benefit, which obscures and disguises the real unemployment figures. Figures obtained by me last week reveal that almost 6,000 more people drew disability benefit in December 1985 than in December 1984. We could legitimately add 6,000 to the unemployment figures with a very serious result, because the admitted unemployment figure represents 18 per cent of our workforce.

Even by the terms of the Government's own budget forecast last January, the performance of the economy in 1985 has been poor in the extreme. The Taoiseach last year in his budget speech stated:

We can look forward in the year ahead to some increase in the level of employment.

What happened? We have seen a decline in industrial employment in the last year. None of this Government's four budgets succeeded in stimulating economic regeneration and extra employment.

If any Member stands up to criticise the budget it must not be done in a negative, destructive way. Merely opposing for the sake of opposition is deplorable. I shall attempt to offer some alternative suggestions or proposals that the Government could have readily introduced to stimulate the economy and create employment. They failed to grasp this nettle. They chose to ignore problems which were screaming out for attention. They chose to do so because their policy has been dictated by the OECD. That is admitted by the Minister for Foreign Affairs. We see what has happened with this strategy. We see monetarism at its best, with 3,250,000 unemployed in Britain through that same policy. Monetarism may suit the large industrial nations, but it does not suit small economies such as ours. It has brought us to the abyss and unless we supply original, radical, innovative proposals, we will never solve our economic problems.

If only to initiate fresh debate and help the Government to break out of their smug obsession with rapid debt repayment and fiscal rectitude, which is their hallmark, new, radical ideas are needed in the areas of employment, taxation and the infamous national debt. These fundamental problems are not as insurmountable as the Government's negative thinking would have us believe. This is especially the case where one considers foreign debt. When the money for investment is vitally needed, why do the Government not attempt to restructure a repayment arrangement? We have a high reputation; we are considered to be a low risk debtor nation internationally and considered likely to be able to meet our debts in the long term. As such, we should be able to repay these debts in a way that is not inimical to national development. We should be prepared to restructure them over a more realistic period rather than at present break-neck speed. As it stands, this foreign debt acts like a gun pointed at the country's head. Rather than policy-making being dictated to us by this predicament, surely it would be more rational and logical to remove the gun in order to think more clearly and calmly and formulate independent economic policies specific to our own needs?

The Government must decide whether their commitment is to the people of Ireland or to the foreign bankers. I maintain that their first commitment, their first duty is to the people of Ireland. The Minister for Finance and the Taoiseach should have no hesitation in meeting the foreign bankers and telling them that we are not reneging on our debts; that we will honour and are honouring them but we want a longer time; we want a moratorium of five to seven years before we start repayment. This can be done. The Minister is smirking at this but that needs courage, initiative, originality. Other countries have done this, why should we not?

In the document Building on Reality this administration admitted:

The long process of correcting the imbalance in the public finances has necessarily dominated economic policy.

There is an admission, if ever there was a pathetic admission by the Government, of defeat and hopelessness. With the worldwide fall in oil prices and interest rates and the drop in the value of the dollar, the cost of servicing the foreign debt is now less severe than previously. The Department could use this favourable period for the restructuring of this debt which progressively draws more money from us each year which we cannot afford. If foreign bankers want to see their loans repaid they must have some interest in economic growth here and this cannot occur without productive investment. The transfer of some moneys away from debt repayment into productive investment would create a more vibrant economy.

It is not just foreign borrowing that has created our debt problem. Our failure to invest in productive schemes has also contributed. Only economic generation will make it possible to phase out the budget deficit. To try to do this in a time of recession is putting the cart before the horse. Economic growth must occur first. This requires a shifting of economic policy away from rapid debt repayment and into productive investment which would mobilise our people and their resources. Over £750 million went out last year in interest on debt repayments. That money could be a lifeline for this State. It need not necessarily have been rapid like that. Surely it is within our negotiating power to reduce this outflow of money and release the extra funds for the most pressing task of creating jobs.

Many of our unemployment problems have been caused by large scale rationalisation in industry and elsewhere. The biggest curse that could befall our country is this rationalisation. It is like an epidemic which is overtaking us everywhere. This is monetarism, Thatcherism, Reaganism. It will not succeed here. We are inclined to take whatever comes from Britain and impose it on ourselves. This rationalisation, which is dispensing with jobs, has gathered momentum. The idea that it is somehow the panacea for the countries economic problems in dangerous. It has cost the State vast sums in extra social welfare payments. It means taking the responsibility of payment of workers off certain companies and transferring it on to the State. Some scheme could be implemented having a greater subsidy for employment. We should be paying people to work instead of paying them to remain out of work. That should be our aim.

I am prepared to acknowledge that the Government have tried to introduce schemes, but I do not think they have gone far enough in encouraging employers to take on extra staff. Relief from PRSI and these other schemes have been good but we must go a little further. I have checked and found that there are many restrictions connected with these schemes. The Minister must look into this matter more seriously.

Could we not appeal to companies to take on an extra 10 per cent of staff, give them the labour money and extra so that the person employed will get full minimum wage and the employer pay the difference between the labour money and full minimum wage? This could be done as an emergency measure.

A special select committee of the House of Commons in London dealing with employment have decided to subsidise jobs and employment generally. We do not need to be importing all these ideas but there are many jobs which could be got here provided employers are given the facilities to do it. Under such a scheme employers employing ten people would be able to give two extra jobs, and so on. More of our people on unemployment would resume the dignity of working. If 50,000 people extra were employed in that way the Government would accrue £100 million a year in revenue. Apart from that, such a measure would generate a psychological boost. It would mean more money in circulation and increased consumer demand. It would eliminate the presence of unemployed people who are now being paid benefit or assistance and working at the same time. There could be a proviso that employers would not get rid of any of their staff during a period of one year or 18 months. It would create a whole new environment in the country. In a small open economy an 18 per cent unemployment rate is not acceptable. We need original ideas to be applied to Ireland, specifically to meet the needs of Ireland. Instead of importing our ideas we should be exporting them. For years I have been trying to streamline the facilities for the unemployed. First of all we have the employment change and then people have to walk from pillar to post throughout the city to visit the National Manpower Service office and AnCO. In 1978 I asked why we could not have AnCO and the National Manpower Service together in the labour exchanges so that people could avail of the information provided on schemes available to them. That was eight years ago but nothing has been done. There must be a streamlining of the social services so that people will be able to find out what is available.

Let us take the Government tax reduction commitment. Instead of providing anything original, the Government merely reduced the upper tax band to 58 per cent. I have shown from The Sunday Tribune article that the tax burden will increase, that taxes on personal incomes will rise by 9.6 per cent under this budget and inflation by 4½ per cent. Taxes will be higher and therefore there will be less money in circulation. We cannot disguise that. Is it any wonder the public are cynical? Yet it is not the Government's intention to do anything about it.

If the Government were seriously concerned to reduce the burden of tax why not reduce the top rate to 50 per cent as suggested this morning by the Leader of Fianna Fáil? They will argue that they could not afford it. My idea is that, instead of relieving the taxpayers immediately, the Government should introduce tax credit certificates over a period of five years. It would cost £80 million in a year, with the tax credit certificates guaranteed by the State over a period of five years. In such a scheme the tax rate would be reduced to 50 per cent, with a pro rata reduction for the other bands. It would be a form of compulsory saving. This would give a psychological boost to taxpayers.

The present system is a serious disincentive to people to work. Overtime is not being worked at a time when people need to be taught to think in terms of work. Such schemes are necessary if economic recovery is to be encouraged.

Now that the Minister of State at the Department of Social Welfare is here let us look at the social side of the budget. What it has given to the poorer sections of the community is derisory and shows a callous disregard for their needs. It illustrates that the Government, despite the presence of the Labour Party, are punishing people because they are poor. It is a terrible indictment of that party that they support a budget which punishes the needy through the imposition of extra VAT immediately while they have to wait until mid-July to get their miserable increases. How can you, Minister, support such a measure? I am astounded that you, one of the most sincere people in the House, would do this. For the life of me I cannot see how you can come in here in defence of this budget which is a damning indictment of everything you are supposed to stand for.

Please address the Chair.

I am saying to the Minister that I cannot see how he can support this budget which discriminates against the poorer sections. In a miserly fashion it deprives the people dependent on long-term unemployment benefits of cost of living increases. I am astounded that the Labour Party would support such a measure. Not only has the budget not been redistributive, but it has been positively regressive. It must be seen as the most miserly budget since the twenties. The presence of the Labour Party in this reactionary administration is an indication of a death wish on their part. I hope the Minister has read the political correspondent's article in last week's Sunday Tribune which says that if they continue to support this administration they will find themselves coming back in a taxi. The Minister's seat is in jeopardy along with those of many of his colleagues. The only hope of redemption for the Labour Party is to stand up and be counted in this House and say they cannot in conscience continue in this charade supporting a right wing administration.

The budget does not offer any stimulus to employment nor any hope to our young people. It will put more people out of work through the reduction of £55 million in current expenditure. It will narrow the tax base even further. The fewer people who are employed, the greater will be the tax burden on individuals.

Where is the provision in this budget for the NDC which was lauded as a victory for the Labour Party? Not one penny has been provided. It has been quietly forgotten. It has been interred without a word from the Labour Party. In fact, the National Enterprise Agency received £223,000 less than last year. That is the substance of the Government's support for the NDC. The NDC was the greatest farce ever perpetrated in this House. For how long more must the Labour Party be deluded by their colleagues on the right?

When in Opposition in March 1982, the present Minister for Health and Social Welfare, Mr. Barry Desmond claimed——

Deputy B. Desmond.

It is in order to call him Minister B. Desmond. I was in the Chair so I know some of the rules. I would appeal to the Chair to make fewer interruptions when a person is obeying the rules.

There is no necessity——

There is, because the Chair is at pains to interrupt me without justification. I am in order in referring to him as Minister B. Desmond.

I said "Minister". Before I was rudely interrupted I was saying that the present Minister for Health and Social Welfare, Minister B. Desmond claimed that a characteristic of a good budget is that it allocates scarce resources to those in greatest need. That is a significant statement. It is not a characteristic of this budget; it is conspicuous by its absence. Scarce resources have not been allocated to those in greatest need. Will the Minister consider honouring his stated beliefs when he can give practical application to them? The resources have not been allocated to the sick and those in greatest need in mental hospitals as his savage and cynically timed announcement of last week illustrates. It is all very well for a Minister to close hospitals when modern new facilities become available, but many of the hospitals now due to close were to have been kept open for another three to five years because we did not have the facilities to replace them. Alternative care has not been provided. We are seeing here Government by diktat. Announcements are being made and consultation is at a minimum. We see this in the areas of health and education and we will see it in other areas shortly.

The empty Beaumont hospital is a testimony to the Government's commitment to the health services and to the Minister's ineffectiveness at the Cabinet table. We see the Minister's pig headed-ness in evidence in relation to Beaumont hospital. Intransigence on the part of the Minister is keeping that hospital closed. Whether or not we are in favour of private facilities for consultants, that is not the point at issue. The point at issue is that an agreement was reached by a Minister with consultants for the provision of a site for a private hospital, and that was not honoured. The Minister's ideological hang up and his perverse nature are keeping Beaumont closed at a cost to the State of nearly £2 million a year. This should not be allowed to continue. If the Minister is serious in saying that he wants this hospital opened, why has he not reached agreement with the non medical staff unions? I question the Minister's honesty when he says he wants this hospital opened.

The closure of the hospitals, particularly the mental hospitals, is a cynical cost-cutting exercise in which the Minister takes perverse pleasure and it directly contravenes a commitment given in Building on Reality that the small amount of outlay on mental health will be financed through the disposal of existing institutions made redundant by new projects. I would understand that, but where are the new projects?

The Minister was at pains to refer to the Fitzgerald plan of 1968 as being a means of streamlining our hospital services. The Fitzgerald plan which sought to rationalise and streamline our hospitals was never endorsed by this House. The Minister said that the Fitzgerald plan was drawn up by a group of eminent consultants. In fact it was drawn up by a group of Dublin consultants who had no knowledge of the unique circumstances in rural areas. It was not necessarily the answer to our problems. The Minister quoted the 1984 report on the psychiatric services, but again this report was not endorsed by this House.

There have been many proposals from various Department but they are not necessarily the infallible way of solving our problems. I accept that there must be a rationalisation and I am not saying that large regional hospitals are the best answer to our problems. Ireland is strictly a rural country, we have unique rural problems and big regional centres in which paitients are not treated as human beings may not be the answer to the problems either.

What does the Minister propose to do with the psychiatric patients whom we have institutionalised? They are unable to live as ordinary members of the community. They need supportive measures because they cannot live like ordinary people unless they are helped. The Minister said in his flippant way that he would provide support but how? We had a rationalisation programme in St. Brendan's Hospital which produced the revolving door syndrome of patients coming out and ending up in the Iveagh Hostel or in Mountjoy Prison because they could not cope with ordinary life having been in hospital for 25 years. We should learn from that experience and we should not throw these people into the community with no supportive measures. The Minister should pay particular attention to this because he has a very personal interest in St. Dympna's Hospital, Carlow. Where are the alternative community facilities available to the patients from St. Dympna's? Where will they go? I should be glad if the Minister interrupted now and told me but he will not because I know there are no facilities available. This is a serious matter and no Minister has the right to take perverse pleasure in closing hospitals because he is a master of commerce. He is not entitled to adopt this clinical approach without considering the personal circumstances of the patients involved. Unless community care is very supportive these patients will find life very disturbing.

I agree that there is need for a fresh approach to mental health but it must be undertaken after due consultation and regard for the patients' well being. It is a great shame that the Minister for Health does not realise this. His histrionics last night on television on "Today Tonight" will not convince anyone that his dictatorial stand is justified. These people need care when they go outside and it was sad to see the Minister dismissing that as being of no consequence.

Some may say that the State spends too much on health services. I accept that we spend a lot in this area but this is because our demographical situation is unique. High spending need not necessarily be interpreted as wastage. The health service is still underdeveloped in many areas and there should not have been any cuts especially when they were introduced by the Minister with the zest and zeal of a convert.

There is an army of unemployed young people and it is anomalous to see the country, particularly Dublin city, in a state of decay and disrepair while there are so many willing and able young hands idle who would relish an opportunity to undertake repairs and the maintenance of buildings. It must be possible to mobilise our young workforce by means of a public works programme. Many young people have become cynical, with justification, about the training schemes which are offered to them. They merely keep them off the streets for six months. I accept that they acquire skills but they will quickly be forgotten if they are not put into practice. A public works programme would be a long term undertaking which would ease the plight of many young people who are idle through no fault of their own and would be money well spent.

Investment in jobs and a necessary public works programme would save money in the long term. Why should we not consider raising the school leaving age? The problem of unemployment is so serious that it requires new thinking. The school leaving age of 15 years is nothing short of Victorian compared with our European partners. In Germany, for example, many students do not leave school until they are 19 years of age. The education system needs to be reformed in order to allow people in the 15-17 year age group to continue in school without necessarily sitting for the leaving certificate. We could have an advanced vocational certificate which might suit the needs of many young people.

Why not lower the retirement age? It could be an optional age of 60 which could be phased in gradually. People could work a two day or a three day week which would enable young people to be brought into the workforce. The extra cost involved in regard to pension payments would be offset by a parallel reduction in unemployment payments. I accept that there are no simple solutions to unemployment but there are relatively simple ways of easing it if the political will is there and if the Government are prepared to adopt new and bold policies. No doubt, some people will object to the policies I have outlined but the inconvenience caused to some people would pale into insignificance compared to the improvement on the jobs front. The fact that other European countries have a higher school leaving age, lower retirement age and significantly lower unemployment rates speaks for itself. Therefore, these policies must be seriously considered for the future.

The Government had the best of intentions when they came to power and were filled with enthusiasm. However, they have now been overtaken by pessimism which, unfortunately, has worked its way through the whole community. The economic policies which they introduced over the years are an indication of that pessimism and they have given the impression that emigration is the answer to continued unemployment. They must make it clear that there is a future in this country and that everyone has a part to play. I believe that, in this respect more than any other, this Government have failed.

We hear Government speakers say that emigration is not such a bad thing. Over the years emigration has been considered a very serious problem. History tells us that emigration has spoiled family life. When we think of emigration we think of ultimate depression and despair. That is what emigration spells for Ireland and whether we like it or not that is inherent in our system. It is infuriating to hear Government speakers encouraging young people to emigrate in order to ameliorate the political embarassment of massive unemployment. It is a damning indictment that we have such a massive increase in emigration and is an admission by the Government that they cannot cope with unemployment. Rather than considering emigration, the Government should come up with new ideas which would help young people to decide to stay at home. We all accept that old ideas have changed. We must have a radical optimistic rethink and offer the unemployed a future that will make them feel wanted.

Our economy needs rebuilding and our young people must have a part to play in this area. Our economy is crumbling and we need to mobilise our young people by guaranteeing them jobs. I learned from the Minister, Deputy Barry, today that the economic policies we are adopting are those enunicated by the OECD. I believe we need policies which are indigenous to this country but we are not following such policies. Our present policies are chipping away at our industrial infrastructures. We have no footwear industry to speak of and we do not have a national shipping company. The B & I are in existence mainly to provide a means of escape for those who are emigrating. If our young people continue to emigrate we will not have the population to pay for the services we must provide for our increasing numbers of elderly citizens. This is the logical conclusion of the monetarist policies being followed by this Government.

Even in handling the industrial relations problems the Government have been totally lacking in common sense. They have ignored the well established convention of conciliation and arbitration and the present position with the teachers is an example of that. In Building on Reality industrial relations merit only three pages, yet the most dynamic European economies have achieved growth based on meaningful social partnership arrangements. The Minister, Deputy Bruton, advocated more worker participation in private industry, sharing more in the profits and management of private companies — and I am very much in favour of that — but what he has not espoused is worker shareholding in State industries. We have the farce of worker directors intimidated and overwhelmed by the other directors with no say in the operation of the company. Why can semi-State bodies, such as Bord Telecom, Aer Lingus and so on, not give workers shares in the companies, at a nominal cost in proportion to their years of service, making them shareholders and giving them a voice in the running of the companies? Why can we not bring industrial peace to these bodies by such means? This has not been tried. This would give them a real say in the working of the companies. I know the Leas-Cheann Comhairle would be the first to advocate this. I mentioned this to him before and I was surprised that he did not succeed in persuading his colleagues to adopt it as Labour Party policy, which it should be. This would be a genuine incentive to workers and would give them more muscle than the farcical worker directors. These are the kind of new, radical proposals that need to be discussed if we are to get the economy moving again.

It looks as if this Government will trundle along in their usual, merry deflationary way, increasing unemployment and making no impact on the budget deficit. We can continue along those lines or we can look afresh at these problems and can consider the needs of the Irish people in preference to the needs of the foreign bankers. We have a number of choices with regard to economic policies, but the policy this Government have foisted on us by pretending this was the only course of action open to us, has clearly failed over the last three years. A change in policy is vital and is very urgently needed. This Government have to decide whether this is going to happen sooner rather than later.

The politics of retrenchment, rationalisation and reduction in public spending have failed the Irish people. What the country needs is expansion. Anything which blocks this should be removed and should not be allowed to dictate national economic policy, as is happening at present. The destiny of this country is in our own hands and if we make the right choices now and follow new, imaginative policies we can look forward to prosperity and the rebuilding of national muscle in the nineties. I believe we can do this, but I do not believe the present Government have the political will to do it.

I like to come into this House to listen to a speech because it helps me to make a more constructive contribution. I consider I have been most unfortunate having to sit here for the past hour listening to what was a not very inspiring contribution. I could perhaps have tolerated its content with greater patience if it had not been laced with a measure of vindictiveness and bitterness, which rarely makes an appearance in this House, in a speech for one hour. Sometimes one gets impatient outbursts and these are understandable, but the personal vindictive and bitter attacks made, particularly on the Minister for Health and the Minister of State, Deputy Pattison, the last speaker's former colleagues, makes me regret that I was the Deputy who had to sit here and listen to that contribution.

We were told we were being offered a new, courageous and radical approach to a solution of this problem, but the most radical thing proposed by the last speaker was that we restructure our debt. "Restructuring" has become a great word. I am sure there are people in the House who will be impressed by a phrase like "restructuring our national debt in order to resolve our problems". Already we have pushed the burden of paying for our current standard of living on to our children. By restructuring the only thing I imagine the Deputy meant was that we push this burden on to our grandchildren.

I cannot see the countries who have lent us money willing to forego the rates of interest. We know the countries that are involved. We know the banks and the individuals from whom we have borrowed in the developed world. To talk about restructuring our debts means pushing them further back. Surely this country, listed among the 20 richest countries in the world, will not say to our creditors that we want charity in the form of reducing the relatively modest interest rates they are charging us. It is all right for Brazil, Mexico and some African states to talk about renegotiating in a situation where they do not intend to pay all their debts and all the interest due. They might expect to be let off the hook, but we are a country who trade some 60 per cent of our GDP. We trade with America, Germany, and Britain on equal terms and we hope to attract capital from those economies in order to generate jobs. Yet, the best solution that can be proposed by Deputy O'Connell is that we should restructure our debts as a means of resolving our economic problems. We have done a certain amount of restructuring with regard to loans but nobody should get the impression that is anything but putting off the day when eventually the entire loans and the interest due will have to be paid.

There has been an attack on rationalisation measures. Rationalisation is the application of sensible policies with regard to the production of goods and services. It is not sensible for anyone to attack the idea of rationalisation. I accept that sometimes this may lead to a loss of jobs in one area. If two people are doing a job that can be done by one person and if they are to be paid a full wage, obviously the service given or the goods produced must cost more money or otherwise the State must give a subsidy and at the end of the day we do not create extra wealth. The idea that we can cease to talk about rationalisation with regard to making our industries and our public sector more competitive is a clear indication that Deputy O'Connell was not thinking seriously about the solutions he was proposing. He spoke about young people spending longer at school. There is nothing new about that but, of course, it costs money to build the extra schools, to pay the teachers and perhaps extra transport costs. The Deputy was against increasing taxation. I consider I was most unfortunate to have to sit here and listen to such a hodgepodge of contradictions, irrelevancies and bitterness.

The debate in this House at budget time is not very inspiring. On the Government side there are claims of resolving all problems. Credit is grabbed for everything that happens irrespective of whether the Government policies have made any contribution. On the other side there are constant attacks and failure to accept the genuine efforts made by the Government. There is a refusal to understand why some policies fail to achieve their objective even if put forward with the best will. Sometimes a grudging concession is made in the form of obscure compliments to Ministers for minor matters but generally it is a case of attack and counter-attack with not much honesty on either side of the House.

In recent years a regrettable feature is the personalising of the attack on the Minister for Finance of the day. It is a game played in the media and the public appear to enjoy it, particularly the taxpayers and those who have been stung. It has a kind of sadistic humour and I do not like it. The Minister is only part of the Cabinet who make their decision collectively. I am sure that if Deputy Dukes were the president of a republic with absolute power to draft his own budget and with the assurance that he could carry it, the budget he would put forward would be entirely different from the one he presented to this House. I am sure if he were not answerable to his colleagues in Cabinet, to backbenchers, to the Opposition and the media, he would introduce a budget very different from what he has presented. However, while Ministers have considerable powers there are limitations. I do not think the Minister himself thinks everything he has proposed is ideal.

To some extent this has probably happened because Ministers personalised their Departments at a time when we had a different economic climate. I am talking of the day of the Santa Claus Governments when money started to come from the European Community, when there was economic growth here, when our trading partners had a very rapid economic growth rate and full employment and when our unemployed quickly flowed to their markets. At that time the Minister for Finance did not have to pay unemployment assistance to all the people for whom the State failed to create the conditions in which they could get jobs. In that era the question at budget time was what would the Minister give away. Some Ministers liked that but now, instead of playing Santa Claus, they have to play the part of the policeman. This is the age of the policeman government. Now the Minister for Finance does not have so much to give away. He cannot go on borrowing and getting increased amounts from the EC. Thus, the Minister concerned becomes the object of caustic criticism and personal attack that is not justified.

One of the saddest things is the extent to which there is so little understanding of economic and fiscal policy. I honestly believe that there is little understanding on the part of people on both sides of this House of the effects of what we are doing here or of the options open to us. Some of the proposals put forward are totally contradictory. Opposition speakers and backbenchers sometimes take every side of the road at the one time, trying to have it every way. There is immense confusion throughout the country about what is involved in spite of our improved standard of education. Despite the fact that newspapers are available for the vast majority of people and that more families listen to or watch current affairs programmes on radio and television, they appear to be totally confused about the cause and the origin of our problems. They do not seem to have any consistent view on what they would like a government to do. Even though much work goes into the current affairs programmes on RTE, many of them just subtract from the sum of the knowledge that exists about the whole procedure and at the end of the day people are more confused.

Another feature which becomes very obvious at this time is the absence here of any consistent economic philosophy in any of the three major political parties. In all of these parties we get policies and philosophies of the extreme right and the extreme left. Not only is there a failure to understand the influences and factors that operate, but there is no clear political ideology. I do not favour extreme ideological views on economic matters but I like people to be consistent and clear as to where they stand. Some people think the State should solve all the problems while others think it better to leave matters to the private sector. In this House it is very difficult to identify people's political positions. In Europe or in the US one can look at where people are sitting and have a fair idea about their general approach to solutions to economic problems. In any of the three main political parties here I can identify people whose economic views are considerably to the left of a group like, for instance, the Italian communists in the European Parliament. Though it is not likely to happen, I should like to see a shake out whereby people could choose between policies at election time and identify the kind of policies they favoured.

Long ago I used to be grateful that we did not have extremes of political thought in Ireland, that we did not have periods alternating between privatisation and State control whereby at one time the State would be controlling everything and this would be followed by another period when another party would come to office and begin to deregulate everything. I thought then that that kind of situation would not be good in the long term for the economy but today I should very much like people in the House to be identified as having consistent political views so that when the voter went to the polls he knew the kind of social and economic policies he could expect during the period of office of the Government he was helping to elect. We have had a very much mixed up approach to social policies.

There has been much talk in the past two days in this House and elsewhere about the state of the economy. Some people say that we should give leadership and encouragement, that we should tell people everything will be well in the future so as to encourage them to work better. This is the type of philosophy that Deputy MacSharry refers to as the policy of boom rather than the policy of doom. There are two sides to this argument. When I meet young people today and the topic of the economy or of jobs is raised, I notice that there is much disillusionment among them with our economic policies. These young people say we have failed to create the kind of country that would be a lot more attractive for them to live in. On the other hand, some of us like to be realistic and to explain precisely what the difficulties are and what are the prospects. Only by knowing exactly what the position is can we succeed in proposing the right policies and having them accepted. We can view the whole scenario in a number of different ways but when young people complain about the failure of the system to provide jobs for them or about the high cost of living or about the failure of the State to provide a new school somewhere, I like to remind them of the country in which I was brought up when the vast majority of children went to school barefoot and left school after primary level. I remind today's young people that those who went before them did not have the option of State jobs, that their only option was the emigrant ship. We have no wish to return to that situation but for those who seem to think that we have been going backwards all the time it is no harm to be reminded that a certain amount of progress has been made.

On the employment side we should point out that despite the fact that in the rest of the Community 1.5 million jobs have been lost in the past 13 years, there are 50,000 more people working in Ireland than was the case 13 years ago. In other words, we have created more than 50,000 jobs in that time because in that period 75,000 people left the agricultural industry. Therefore, our record in terms of creating jobs is not all that abysmal. If we did not have the kind of demographic structure that we have or if we did not have the kind of birth rate we have, we might have a tolerable unemployment level. I can identify many regions of the Community which are bigger than Ireland and in which the unemployment rate is as high as if not higher than ours. This is the case in parts of Holland, of northern Germany, of Britain and France. We do not have to think of Spain, Portugal or Greece in this context because their position is considerably worse than ours in many respects.

We might ask what the unemployment levels in those other parts of Europe would be if they had birth rates as high as ours. If, for example, the Federal Republic of Germany had our level of birth rate and had pursued the same economic policies as they have pursued, creating the same number of jobs as they have created, they would have an unemployment rate as high as ours but in such circumstances that country would have readjusted its economic policies to cater for an increased population. We have failed in that respect. We have failed to readjust our economic policies so as to take account of the fact that families here are bigger than the family size in other countries.

We might remind young people, too, that 13 years ago the proportion of our people in second level education was 50 per cent less than today's figure — 231,000 compared with 317,000 today. That is considerable progress. Our young people should be reminded that they are being given an opportunity that was not available to those who went before them. Admittedly, there are not jobs in the public service for all those leaving school but our young people are better equipped now to look for jobs. They are better equipped to provide services or to produce goods that some one somewhere is willing to pay for. We cannot continue to raise money from the taxpayer to provide public service jobs simply to accommodate people on the basis that they have spent five years in secondary school.

The number in third level education has increased from 29,000 13 years ago to 48,000 today. Again, this is progress. It ensures that we are turning out as many engineers, for instance, per capita as is the case in the US; that we are turning out many qualified people. Of course these people worked so far as their studies were concerned but their conditions were comfortable by comparison with the sort of places in which my generation attended school. A considerable amount of taxpayers' money is spent on a person's third level education but when that person leaves college with his qualification he is in a good position to render a service to his fellowman in his own country if that is his choice, or elsewhere in the world. A graduate is better equipped to start his own business. He has a better knowledge of the world he is facing into.

Another measure of our progress might be to consider that 13 years ago the ration of telephones per 1,000 of the population was 49. The latest figure I have in that regard is 106 per 1,000 of the population and I am sure that proportion has increased in the meantime. This is another indication of the considerable economic progress we have made. The figure for registrations of private cars went down over a few years but, over the period as a whole, it rose from 155 per 1,000 to 205 per 1,000, another indication that living standards have improved, that comforts and amenities are available to people to a greater extent.

We have increased spending on health, education and social welfare from £336 million in 1973 to £3,728 million today. In spite of the fact that money has depreciated by about 60 per cent during that period, nevertheless in absolute terms we have increased our spending by 300 per cent in volume in that period. That is a considerable tribute to a generation of workers and politicians.

The quality of life in Ireland as measured by the standard of infant mortality, literacy and life expectancy is one of the highest in the world. While there is a lot of weeping and moaning and a lot of depression about our failure to achieve more, the young generation growing up in Ireland and everybody living here should realise that they are fortunate in the time and place in which they are living. We live in a free society where the frontiers of hunger, hardship and disease have been pushed back, where life expectancy is long and where people live in considerable peace and security. We have much to be thankful for.

Of course it is in the nature of human beings to want to make progress. While we can explain to young people that they are fortunate in many respects, it is only fair to make the comparison between what we have achieved and what other successful economies have achieved in the social and economic area, to measure our performance against theirs and to ask ourselves if we could have done better, given ourselves more reason to hold up our heads in the developed world, more muscle as a member of the European Community, in the international political arena, in helping the deprived and the hungry. Certainly we could have done all these things to a greater extent if we had been more careful. Economic progress does give people more muscle.

After the problem of Northern Ireland, we recognise that the vast number of people who are unemployed constitute our biggest national problem. Now that the problem of Northern Ireland has at least been brought to the stage when we have clear understandings between the sovereign Governments about the road they should go, our next most serious problem is unemployment.

I have spoken about the progress we have made during the past 13 years. We achieved a fairly modest economic growth, but all the benefits of that economic growth have been swallowed up by the public sector, taken by the Government in increased taxation and spent in the social areas I have mentioned or in subsidising jobs in semi-State enterprises and other such things. We have arrived at the situation where the Government are spending the highest percentage of GDP of any country in the developed world.

When we talk about economies which are closest to ours such as Holland, West Germany and Sweden, we should not compare our economy as it is today with theirs as it is today. When they were at our stage of development they were taking something like 25 per cent or 27 per cent of GDP into the public sector and spending it. The position in which we find ourselves today is unprecendented anywhere in the world. We cannot say with certainty that it is possible to get out of it, but we know that no other country has ever been there before. While we may look at other economies and say they are spending as much of GDP on social services etc. as we are, when they were at our stage of development they did not have social legislation developed to the same extent as we have.

Thirteen years ago we had a foreign debt of about £200 million. Today it is £8 billion. These are the truths which should be known to us on all sides of this House and to the young people who will have responsibility for keeping this economy going when the rest of us get tired. We have a total public sector debt of £20 billion. This has stunted agriculture because this continuous borrowing by the Government has taken out of our economy the money that would otherwise be available for the development of the agricultural industry. We have made it impossible by our fiscal and economic policies for the private sector to borrow money. We know that the average indigenous company last year was getting an average return of 5 per cent on capital and for expansion or development they were expected to borrow money at 14 per cent or 15 per cent, if they were lucky.

Recently I have come across industrialists and people in the service sector who started their own businesses and find themselves in a different cash flow situation but can produce facts and figures to show that they have viable business, yet they are being charged penal interest at the rate of 22 per cent. This is because this State gobbles up every shilling available in this economy and leaves nothing for the private sector. Let the private sector take the leavings — that has been the attitude in recent years. We have been expanding Government spending, Santa Claus Governments making gods out of themselves at the expense of progress and of the future. We have starved the private sector and stunted agriculture. We have brought our social sector forward more rapidly than perhaps we could afford.

I see a tendency to exaggerate this and make it worse at European level. I am a firm believer in economic convergence between European countries. I firmly believe that Ireland should play its full part as a member of the European Community, doing its best to harmonise social and economic legislation so that the Community may develop without borders of barriers, an area in which our young people will be able to trade and work and move freely. This is one of the more prosperous areas of the world. It is not geographically vast and is quite small by comparison with the USA, but it is a very favoured area.

I should like to see economic convergence and harmonisation of laws but I am concerned about the very progressive social legislation which is being strongly promoted by some of our partners in the European Community and being accepted, apparently without full knowledge of what they are doing by Ministers from different Governments who acquiesce and go along with social legislation which will certainly have the effect of slowing down economic growth. Until we have greater economic convergence we cannot have harmonisation of social legislation. We have moved too fast in pursuance of social legislation. When we talk about the whole problem of unemployment and its solution this question arises, certainly in my mind, and I must ask myself: to what extent has the progress we have made in this area been responsible for much of the unemployment that has been created?

Deputy O'Connell proposed that we give grants to industrialists, allowing them to employ somebody and then give them the social welfare benefits as well. I should have thought that proposal amounted to much the same thing as the scheme already in existence under which the State undertakes to pay the shortfall in income. I refer to the scheme introduced approximately a year ago, the supplementary income allowance, which amounts to much the same thing. Deputy O'Connell forgot that we have introduced legislation which established minimum wage levels, that employers are obliged to pay these levels of wages whether or not they can afford them. The attitude prevailing in many Departments is: if they cannot afford to pay the level of wages demanded by the law, then let them close their factories, put those people on the dole, allowing the Government to pick up the cost, allowing our economy to suffer the production loss as well.

When we move away from a market situation, when the State begins to interfere to a certain extent, then it is very difficult to know where the State ought to stop. If the State is to decide how much money people should receive, the conditions under which people should be employed, under what conditions employees should be dismissed, then the State should go all the way and decide where everybody should work and what wages they should receive. If people say they are out of work, then the State should be able to say to them: "All right, you report in a given place tomorrow morning and take up that job." Once the State begins to interfere to an excessive extent, as it has — and it should be remembered that we now have the social legislation introduced over the past few years, for example, the Unfair Dismissals Act, the redundancy obligations of employers, minimum wages — this creates an environment in which employers are slow to take on labour.

I know that in the past grave injustices were committed against employees by employers, that they were exploited and abused. We must seek to achieve some sort of balance. But the balance obtaining means that employees can walk out of work, mount a picket on a gate, bringing things to a standstill. On the other hand, an employee may not be dismissed by an employer. It has proved extremely difficult to sustain a case in any type of court advancing the argument that an employee has not carried out his or her job efficiently and well. Unless they are caught robbing the till or such like it is very difficult to get rid of them. Employers are aware that when they engage personnel today they are as good as married to them. That is why they are fairly careful about increasing their workforce. This constitutes part of the problem. I do not contend that it amounts to all of the problem. Certainly minimum wage levels form part of the problem. It is interesting to note that in the countries which made most economic and technological progress, Japan, Austria, the United States, and Switzerland, since the first oil shock came, real wages have dropped.

There is such a thing as the labour market. If labour became cheap then production costs would be reduced, economies would become more competitive and there would be additional recruitment of personnel. That is the way the labour market operates. If the State could think of industries or jobs to create and did so without penalising the taxpayer in the process by continuing subsequently to subsidise those jobs I would welcome that. I am not so far to the right in my economic thinking that I would be entirely against that idea. If the State could think of goods and services to be made and sold competitively without the need to continue subsidising employees, I would be quite happy to see the State do so. But I do not think there are easy solutions like that lying around so that some civil servant could say: "Build a factory here; produce this commodity; sell it on the world market," and everybody would have jobs and all would be well. The private sector is not that slow or stupid. If such opportunities existed they would have been identified.

The truth is we have become uncompetitive in our economy. Deputy O'Connell seems to think that OECD reports prepared on behalf of the countries of the developed world that have successfully managed their economies — to the extent that they can lend to us and subsidise us — are somewhat immoral, that there is some thing immoral about accepting their advice. They have told the British that the failure of their economy to respond to the surplus in the labour market by reduced wages and so on has created their unemployment problem. It should be remembered that our wages levels increased more rapidly than those in Britain, as did our social services. If that is what has occasioned the problem in Britain, certainly it has contributed in a big way toward the creation of that problem here.

Over the past 13 years we have seen in the distance prosperity in other European countries, in the United States, and smelled it on the way here. However, we grabbed it too fast. We improved our social legislation and increased our standards of living. We ate dinner at breakfast time. We ate the green fruit and now we have a belly ache as a result. We cut the green corn. We borrowed £20,000 million to pay for those improved standards of living. In addition we received, in today's terms, approximately the equivalent of £1,000 million annually from the EC. We used that money to fuel inflation, rendering our agricultural and industrial production less competitive. That is what we did over the last 13 years, in a period in which we were afforded an opportunity to catch up.

Some people talk about the varying rates of growth as between the different European countries. We should remember that a 3 per cent rate of growth in the Federal Republic of Germany is not the same as a 3 per cent rate of growth here because we start from an entirely different base. If there is a 3 per cent economic growth rate prevailing in the Federal Republic of Germany and the same here, that means that the gap is widening even more between the GDP per capita here and that prevailing in those other countries. That would mean that at present we would need to have double the economic growth rate prevailing in, say, the Federal Republic of Germany, Switzerland or even France or Britain.

While we have the same level of social services as obtain in Britain — and there is not a great difference in wages either — the truth is that in Britain GDP per capita is 70 per cent higher than here. In Germany it is two and a half times, 250 per cent, higher. The truth is that we need to achieve an economic growth rate which is twice or three times that of our partners in order to catch up. Of course the only other solution to the problem would be that they would transfer some of their wealth directly to us. That is the type of solution Deputy O,Connell was recommending. It is a wonderful solution and, I am sure, is popular but I want to warn anybody who cares to listen that it will not take place. If one wants to know what the people of the Federal Republic of Germany, France, Italy, Britain, Luxembourg, Holland or Belgium will give us, then we should ask ourselves: what are the rich parts of Ireland giving to the poor parts of Ireland? Equally we should ask: what is Ireland, as a rich country giving the poorer countries in the world? The answer is: very little.

The truth is that we will receive very little. We have received a fairly generous amount. While the Community have been giving us what I would regard as generous amounts, the gap between our economic performance and theirs has continued to widen. We have not used the money received as we should have used it. The only solution we can think of now is to beg for more. We have stolen from our children. Deputy O'Connell in his contribution was recommending that we steal from our grandchildren as well. That does not represent any solution to the problem. There is one solution only. If we want more money, if we want higher standards of living, we will have to produce more. We have the education, training and resources. Our main fault has been our failure to exploit those resources to achieve our potential and we have more resources per capita than any other country in the EC. We must have, because we are a thinly populated country with quite an amount of good land — not the best in the world but good — a reasonable climate, rich fisheries around our shores and a population structured and educated to produce wealth particularly at this time, and to avail of technological developments in the world and the assistance that has been given to us.

Debate adjourned.
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