Secondly, there are charities and a whole group of people involved in social work or sporting and recreational facilities. Some of these people have money on deposit while they are collecting funds and it would be wrong to tax the interest on those funds. There is also a problem relating to children. If a parent puts £100 into a bank for a child when he is born I understand the child is not permitted to remove that money until he is seven. In some cases the groups could remove their money and consider putting it where this tax would not affect it, but children will not have that choice. The Minister should look again at how some exceptions could be made to deal with these cases. At the moment there are some alternatives but they would not be suitable to every case.
The savings certificate scheme and index linked savings bonds as well as deposits with credit unions are exempted from this tax so that some people would have the option to invest in those areas. From speaking to people I have found that many are living on the interest earned on bank deposits and that these alternative sources to which they could apply their funds do not generally provide for removing money on a weekly basis. Something must be done in that regard because, very often, they are the people in greatest need. Many of those in the Cork area who got redundancy money invested it in a deposit account and are living on the income from it. Therefore, one cannot justify taking 35 per cent off that income because, in many instances, it is marginal. I hope the Minister will recognise that there is a general consensus in the House regarding this issue. I heard him say outside the House that administratively it would be extremely difficult because of the huge number of deposit accounts. Nevertheless that is not a sufficient argument and justice must be done in relation to this issue.
The rates of building societies, generally speaking, after deduction of income tax, have been superior, even after tax, to those of the bank rates before tax. I wonder why people deposit their money in banks when they could get a better rate of interest in building societies. It may relate to the extra flexibility which one has with funds in a bank and a natural inclination to regard it as more secure, although there is no substance in that argument.
Despite the difficult financial situation and the fact that one would always like to do more, the Minister can hold his head up and say that social welfare payments have been indexed to inflation, or even slightly better, depending on the rate this year. Of course people will say payments are still too low and that those living on social welfare are on the margins of a viable living style. Nonetheless, increased social welfare payments are against the trend throughout Europe. Over the past three or four years some countries who could perhaps afford it better than we can have not increased payments and the Government should be commended for seeing that as a priority even in difficult financial circumstances.
I have mixed views about reading out on budget day a list of sums of money payable to very good causes. That demeans the budget because one is talking about billions of pounds and to read out a litany of relatively small sums of money is a bit pointless. The items are good in themselves but I do not think the budget speech is necessarily the best place in which to announce them. I am glad the Cork Opera House and the enterprise board each got a grant of £50,000. Deputy Lyons thought this was a means of buying votes in Cork but, if he spoke to the board and the staff of the Opera House, he would realise that the grant has ensured the viability of the Opera House for the foreseeable future. It is unfair to suggest that it is simply a vote catching exercise. The same is true of the Cork Enterprise Board. They have just been established and grew out of the experience of a year of celebrating Cork 800 and a belief that people can do better for themselves by getting up and doing something rather than calling in the Government to do it for them. It is also a notable partnership between the statutory bodies and the private sector. It is very encouraging that the Government saw fit to give them a grant.
The grant of £150,000 to women in a business enterprise programme is very interesting. It is innovative because, in the United States, President Reagan set up a commission to study the subject of enterprise. One of the most interesting features to emerge from that study was that women are substantially more enterprising than men if given the opportunity. The main problem was that they had not been given the opportunity and I am sure the same applies in this country. There are very few women in top management or entrepreneurial positions here and this kind of grant to study and encourage such development is worthy of support because there is tremendous potential in the ability of women to create and promote business activity. Sometimes in Ireland it is regarded as a male domain, which is nonsense, because if you look at the results of the leaving certificate year in year out, it is clear that girls consistently outpoint boys. They start off with added advantages at that stage but somehow or other very little of that talent is channelled to job creation and business activity with job creation potential. I welcome that signal from the Minister for Finance.
The state of the economy is still relatively stagnant. Despite the fact that there are good signs here and there, our finances are still in a very tight fiscal bind. That has been the case for some years and will continue like that for the remainder of the decade. Some of the reasons for that are historical but of all the taxation gathered in, broadly divided, one third goes to service the national debt, one third pays the salaries of the public service and one third is left for everything else. While we are bound up in that triangle we cannot get the economy moving.
People attack the Minister for Finance for being obsessed with figures and monetarism but the same will be true of any Minister for Finance in the foreseeable future. Their critics ignore the fact that our finances are and will continue to be in a difficult and precarious situation supported by levels of foreign borrowing which will not be sustainable for much longer and require firm action. There is a necessity to control and reduce Government expenditure.
The new party, the Progressive Democrats, are holding meetings around the country and getting an enormous response. Their leader has been saying over and over again that there is no option but to take tough decisions and he is gaining in popularity. I find it ironical that he is saying the same thing as our Ministers are saying, and gaining in popularity but I suppose if you are in government you must do what you say you will do. There is no easy way to make cuts. There is no point in saying you would not have made the same cuts as the Minister. You have to say exactly what cuts you would make. It is ironical that the Government are doing what the Progressive Democrats are advocating, yet they are losing in the opinion polls while the Progressive Democrats are gaining. I presume that is a part of the price one must pay when one is in power.
We must be more adept when it comes to making decisions because, as a newspaper pointed out in their leader last Sunday, it is much more important to do something than to get the cosmetics right, although in political terms the cosmetics make as much impact as the actual decision. We have to tell the people that we will cut taxation and public expenditure, but if we reduce taxation by 10 per cent the people will have to bear with us and do with fewer public services which would be linked to those tax cuts. If taxation concessions are given in a budget and they are followed by a series of cuts, very often people do not link one with the other.
It is the business of politicians not only to do what is best for the country, but also to carry the country with them and convince them that this is the best course of action. I believe this is the best course of action, but we have not been successful in selling that message to the people. I hope this message gets across particularly to the young people who must wonder what kind of a country this is. We would all love to invest in an enormous growth package if we had the money, but it would not be right if, to do so, we had to sell their future as well as that of their children by borrowing, even if we were able to do it.
Unemployment is the problem of the age, not just in Ireland but all over the world. In a period of six years the numbers of unemployed have trebled. In October 1979 there were 83,000 unemployed and now, six years later, that figure stands at 240,000. This increase took place when Fianna Fáil and Coalition Governments were in power. If there is one thing which should unite this House it is the realisation that this problem will not just go away and that minor adjustments in policy will not correct it. This is a problem which whoever is in power will have to grind at slowly and with great difficulty.
If we look at the causes of unemployment we will see how particularly difficult the problem is for us. Basically there are four causes, two of them outside our control and two which are peculiar to us. The first reason is the international recession, which is no longer the primary cause because the situation has eased, if not reversed. The second is the changing pattern of economic activity and the substitution of machines for people, which seems to be a pre-requisite for survival in the competitive manufacturing and business world. The third cause is the costs and competitiveness of our own economy, and the fourth is the growth in the labour force. That is almost unique to us.
The best estimates of labour force growth were that between 1984 and 1991 there would be an extra 100,000 people on the jobs market. In other words, by 1991 we need to create another 100,000 jobs in order to remain at the present intolerable level. If we were to reduce unemployment to, say, 100,000 and replace lost jobs, we would require another 200,000 jobs. This means we would need to create 300,000 new jobs or 43,000 per annum. Even at the best of times, we never approached that the kind of figure.
I do not know whether people realise the magnitude of the problem or if they are afraid to mention it, but I do not believe that sweeping this problem under the carpet will solve anything. We should not be unduly dismayed because the problem is more difficult and greater than problems we have had to overcome before. First we have to understand the facts. We need to create 40,000 plus jobs each year until 1991 if we are to stem the increase in unemployment and begin to get the figures down to an acceptable level. To do that we must move on every front. We should do conventional things better and look at unconventional and innovative ways to achieve our objective. If necessary, we need to mix ideologies. We need the State, the private sector and combinations of both, but we do not need a long debate on ideology. It is clear that no matter what part of the world we look at, no single ideology had provided an answer to unemployment.
We have a great opportunity facing us now because this county, by its nature, lends itself to a mixture of private and public enterprise and we should encourage that at every level. With regard to the measures needed to combat unemployment, we must get the financial base right. We must continue to work on reducing wasteful Government expenditure and reducing borrowing and taxation. That is a difficult combination but it must be an absolute priority if we are to make any real impact on unemployment.
We have made tremendous strides with regard to inflation. Not many years ago prices were increasing at 20 per cent or more but now the rate is 5 per cent. However, there is no room for complacency because most of the member states of the EC have a rate of 3 per cent. We must not allow ourselves to be priced out of markets. That means that we must have wage restraint and moderation, although those are not the only factors.
Deputy Lyons referred to interest rates. There are international factors over which we have no control in relation to interest rates but we have control over domestic factors. One of the major features of the international scene today is that interest rates greatly exceed the rate of inflation in most countries. The reason is that Governments generally have been taking too much money out of the system and are forcing up the price of money. The question of reducing interest rates is tied up inextricably with the need to get our overall finances right and to reduce the amount necessary to run the country. At the moment Government spending represents about two-thirds of our output. The Government have been sucking up too much money. All Governments have been doing that in the past ten or 15 years, not just here but in other countries. There is now the realisation that that is squeezing the private sector and others who want to borrow funds but who cannot do so. The Government are forcing up interest rates and making it uneconomic for people to borrow and to invest in job creation.
People may weary of listening to the need for Irish industry to improve their competitiveness. However, we are in a competitive world. Our industry grew out of a protected environment and perhaps it was needed in its time to protect fledgling industries. It has taken us a long time to realise that the world does not owe us anything. We must be able to compete from the point of view of price, quality and delivery dates. We must do everything possible to remain competitive because only in that way will we be able to create more employment. The Government should continue to concentrate on increasing incentives to invest, particularly in indigenous manufacturing industry. Some of the budget measures in this regard are to be welcomed. We must continue on that line. We cannot turn around in next year's budget and concentrate on something else. We are headed down that road and we must progress in that direction.
We must find means of encouraging the private services sector to grow. It has been shown elsewhere that the modern trend is that manufacturing jobs have tended to reduce in more developed economies while private sector services jobs have tended to grow. We have a taxation system and financial inducements that almost oppose that trend because we single out manufacturing consistently for preferential treatment. That is justified in some respects but at times we ignore the job creating potential of the private services sector. For that reason I was glad to see in the budget specific measures for reductions in VAT rates on certain elements of the services sector, particularly tourism.
There is a necessity to consider if certain disincentives to employment can be maintained indefinitely in the face of the appalling unemployment figures. The PRSI tax is a payroll tax. In essence, the more people a firm employ the more they pay. This discriminates against any form of labour intensive industry. I wonder if we should not consider an alternative to that, although I accept that would be a radical move. If we could relate PRSI to turnover rather than to the numbers employed it would no longer be a disincentive to employment; in fact, it might be the reverse. In that event if a company employed more people they would pay less per head in respect of PRSI. I have not thought this out in detail and I am sure there would be problems but I think it is a matter that should be considered. We talk a lot about giving absolute priority to the creation of employment but yet we have a tax system that is diametrically pushing in the opposite direction. The difference between the gross and net pay of most employees is a provocation, to say the least. Therefore, any move to narrow that gap must be welcome. While the measures in the budget are only a start, at least they are a move in the right direction.
Legislation to protect employees with regard to unfair dismissal and redundancy was introduced at a different time and in a different era. Most people thought it was just and progressive but when I speak to young people today they question the value of such legislation if it prevents employers from taking on more people. What good is it to an unemployed person to know that we have on the Statute Book legislation dealing with unfair dismissal? I am not suggesting we should dismantle the legislation that has been sought for generations but we should look again at the effect of that legislation on the minds and the mentality of employers who see it as a threat. The normal reaction of an employer who may be considering employing a person is that it is not worth the hassle involved if he has to let him go. Quite often that employer will decide to work overtime and to work harder. In Germany they are perhaps ahead of us with regard to legislation for the protection of employees. However, they have a system that ensures that an employee will enjoy protection for 18 months after commencement of his work. Thus, the employer is encouraged to take on a person in the knowledge that there will not be an enormous hassle if he has to let him go. At least after 18 months he should know whether he wants to take him on the permanent payroll. Then, of course, he is entitled to all the normal protections. If we say our priority is to do something about the unemployed rather than to increase the protection for those who are fortunate enough to be employed, we have to look at those measures.
There are other disincentives to employment unrelated to that topic. One of the most notable is the impact of employers' liability insurance on companies. What is happening to insurance premiums is absolutely staggering but there is no use in bashing insurance companies. I am sure the competitive system between insurance companies works reasonably well and that there is not a cartel as such. Nevertheless the increase in premiums has become a major burden on companies and nowadays they cannot operate without employers' liability insurance. Much of the problem arises from the legal system and the cost and method of setting claims. I am pleased that the Government have taken the decision to eliminate the jury system in certain cases but there are some other fundamental inefficiences in the legal system which must be tackled as well. In any High Court case both sides are required to have four legal representatives in the court — a solicitor, two seniors and a junior. There may also be many professional witnesses and so on. The county simple cannot afford that. In Britain I understand they have moved from two seniors to one senior. The Government and the Minister for Justice must apply themselves to tackling that problem. Many Deputies have spoken about it. The necessity for so many legal representatives on both sides seems to be exacerabating greatly the costs associated with these cases.
I now turn to the subject of food processing. I refer especially to the record of a small country in Europe about one third the size of Ireland, namely, the Netherlands. This small country is the second largest producer of all the produce of the soil, after the United States. It is ahead of Brazil, Argentina and Russia. This tiny country which has many disadvantages is nevertheless the second largest producer of the produce of the land. We should look at that because we are importing more food than oil. Last year £850 million was spent on food imports. There are many changes mooted today and I hope one of them will be the creation of a ministry of food production. This hot potato resides in many different Departments and as a result we have been unsuccessful over generations in developing the potential of the food processing business. We cannot afford to continue along that line.
Another area of great potential is tourism. The tax measures in the budgets of this year and last year have recognised the potential of this service industry to develop and grow in the years ahead. It is a great potential job creator. We have to face up to the problem of getting here and Governments will have to address the problem of the expense of travelling to Ireland. It is in some ways an advantage to be an island but in other respects it is not.
There is a lot of debate, much of it emotional and ideological, about the private versus the public sector and privatisation seems to be talked about more and more. We should not waste our energy on the ideological arguments since there are other ways of achieving progress. In the United Kingdom the success of manager-worker buy-outs of industries has been noteworthy, particularly in the case of the National Freight Corporation. We should look at the possibility of identifying a suitable semi-State company and having a carefully detailed study of the possibilities of selling that company to those who work in it. It is a technical subject but there are innovative ways of doing it. The workers do not have to put up large sums of money. There are methods of IOUs and bank facilities which can be used to bring about this possibility. We cannot continue to sustain heavy losses in one semi-State sector after another and we must therefore look, in the interest of the taxpayer who pays for everything, to see where there are more efficient ways to do it. The only way at present seems to privatise or publicise, but there are other ways. We should examine them and not be diverted by the ideological luxuries of left and right.
I wish to refer briefly to the decentralisation of power. We must face up to restoring the fact as well as the name of local government. The present arrangements are such that local government is a misnomer. Local government, properly structured, with the power to raise finance and the responsibility for dealing with it, would have the potential to create jobs.
Deputy Lyons mentioned the construction industry. I work in that industry and share some of his concerns about it. There is a difference of view about the construction industry. There is a suggestion at times that it is almost an end in itself, whereas in reality it is simply a reflection of the state of the economy and therefore I do not think that it is easy to stimulate it automatically with large sums of money.
In relation to the promotion of this country abroad we need to take a fresh look at agencies like the IDA, Bord Fáilte and CTT and in particular to consider internationalising the boards of those companies to some extent, because their primary functions in promoting the country arise outside the country. Very often, particularly in the US, the presence of one or two prominent Irish Americans would be a significant advantage to the country. A Leas-Cheann Comhairle, how much time have I?
