Dáil Éireann debate -
Thursday, 17 Apr 1986

Vol. 365 No. 6

Finance Bill, 1986: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. J. Walsh

Before Question Time I was speaking about the most serious problem affecting the economy, unemployment. I deplore the fact that this Finance Bill did not address itself to that problem. Since this Government came to power the economic environment has deteriorated drastically. Pessimism prevails throughout the entire industrial milieu. There is no investment in business or in farming. In the absence of this investment unemployment will get worse. The annual Finance Bill should be an important instrument in creating the optimum environment for investment and on this test the Bill fails dismally. It leaves us with rates of tax which are absolutely penal and are forcing young people, particularly young graduates, onto the emigration queues. When young people get their pay cheques and find that their net pay is only half of their gross pay it is hard to blame them for searching for an oasis, a more hospitable climate.

It is extremely sad that the money which the taxpayers invested in the education of very talented people is wasted because their skills are exported to be of benefit to some other economy. That is a pity when our competitor economies are reducing their tax rates particularly in the UK and in the US. In the UK the maximum rate of corporation tax has been reduced recently to 36 per cent and in the US the maximum rate of income tax has been reduced to 35 per cent. In economies similar to and smaller than ours, for example Switzerland, the top rate of income tax is as low as 18 per cent.

It is extremely difficult, if not impossible, to see an improvement in the employment environment with the sort of tax rates we have, in particular when people get into the high tax rates at a relatively low income. This tax system is stultifying enterprise and initiative. There is no incentive to invest or to take a risk because, if any profits are generated — and it is difficult enough to generate profits in the environment in which we live — they are taxed at a confiscatory rate. We will never solve our economic and social problems, and we will certainly not solve our unemployment problem, until we reduce drastically the tax burden.

In the past three years the number of unemployed has escalated from 170,000 people in 1982 to the present level of 240,000, notwithstanding the fact that approximately, 30,000 young, talented, well educated people emigrate each year. I am glad that reality has dawned on the Government and at least one Minister, Deputy Quinn, conceded that fact. There was no point in covering it up any longer because this is one of the tragedies of the economic mess in which we find ourselves.

In essence, this Bill does nothing for the PAYE worker. It makes no attempt to reduce the ludicrous level of taxation. There is a token gesture to increase the tax bands and to provide some form of amelioration. This, however, will not counteract the level of inflation, even though it has been reduced in line with the other economies with which we trade. The reality for industry is that interest rates on borrowing for equity, the real level of which are the highest in the history of this State, are of the order of 17 per cent or 17½ per cent. Many firms have to rely on borrowings to a great extent. With inflation running at 3 per cent to 4 per cent this means the real rate of interest is 12 per cent to 13 per cent.

I call on the Minister for Finance, through the Central Bank, to ask the commercial banks and the lending institutions to reduce the rate of interest on borrowings for business, enterprise and mortgages because, when inflation is at 3 per cent or 4 per cent, when deposit interest is at 5 per cent or 6 per cent and the lending rate is 17½ per cent, surely there is something wrong? As I said, the real rate of interest is 12½ per cent to 13½ per cent, the highest in the history of the State. The result of this is that more firms are finding it harder to meet their commitments to fund their borrowings and they have virtually no money for reinvestment or re-equipment.

The saddest spectacle of all is to see our young people trying to make a living in another country. I submit that our negative taxation régime is the main reason for that. I find it incomprehensible that the Government have not implemented at least some of the recommendations in the five reports issued by the Commission on Taxation in the past few years. I call on the Minister to take these reports seriously and to take on board some of the more positive recommendations.

I should like to comment on people and organisations who are prudent and put money aside. The recent imposition of the deposit interest retention tax will have a serious impact on savings. I congratulate the Minister on the concept of a retention tax in association with confidentiality. This was one of the most progressive steps taken in the recent budget and showed some original thinking. If there was one thing more than anything else that discouraged people from putting money into the financial institutions so that it could be redistributed to industry and farmers, it was the problem of disclosure. In the past two years we have heard of elderly people in rural Ireland being beaten and in some cases murdered because they had a few pounds in the mattress or in a biscuit tin. I welcome wholeheartedly the Minister's initiative in introducing confidentiality and harmonising the regulations which apply to all financial institutions. It is unfair for people with tax free allowances up to a certain limit to be penalised on their savings when they find it impossible to earn enough to bring their income up to those tax free allowances.

The amendments to the Bill do not go far enough. I do not accept that people of 65 years of age and over should be asked to fill in a tax form and claim their refund before they are given any concessions. This means these people will have to disclose what they have in the financial institutions if they want their refund, while the fact cats, the bigger investors, will have the benefit of non-disclosure. These elderly people will have to declare their income and fill out complex tax return forms if they wish to claim a refund on their meagre income. For non-contributory pensioners that could have very serious implications.

It is regrettable that many thousands of people lost their jobs in the past few years. They got lump sums by way of repayments and those who were prudent put their lump sums aside to educate their children, or to have money for a rainy day, but they will now be penalised because the income supplement they receive from their lump sums on deposit will be taxed and, if they want to claim a refund, they will have to disclose what they have invested in any financial institution.

There has been inconsistency in financial planning and programming over the past few years. As late as last year the Minister for Health and Social Welfare — no longer Minister for Social Welfare but Minister for Health — issued leaflets to pensioners advising them in their own interest to keep their savings in financial institutions and not to keep them at home. The threshold was doubled to encourage these people to put their savings in banks and take them out of their homes. That was only last year. This year if those people earn £100 interest they are being taxed £35 out of that £100.

There is a considerable amount of money in non-residents' accounts in the financial institutions here. Some people put it in the order of £2.5 million. In the budget debate it was suggested that, if those accounts were retained in the domestic fiscal system, there would be no difficulty about it, but in the Finance Bill it appears that Irish residents with external accounts will have to disclose the extent of those accounts. Of course, the result of that will be to force that money out of the fiscal system into a more hospitable investment climate, and there are many of these — the Isle of Man, the Channel Islands, the Caymen Islands, Switzerland — waiting with open arms for this money. That £2.5 million is not a considerable sum of money but we need that kind of money in deposits in our financial institutions. If we have not got it here we must borrow it and we know the cost of that in repayments.

We have a banking and financial services sector here second to none internationally and we should have the best possible climate, not alone to retain the savings and deposits we have, but also to encourage an inflow of money into the country. Traditionally our emigrants have returned money to Ireland if they could be sure there was a safe home for it here, and that the greedy palms of the Revenue Commissioners would not be stretched out to grasp it — or at least the interest earned on it — at the earliest possible opportunity. That is a most negative attitude and I call on the Minister, when he is implementing his tax amnesty, to extend that amnesty to non-residents' accounts in the banking institutions, and to have the best possible environment for deposit taking, saving and the encouragement of prudence within the fiscal system. I have made the point in, I think, every budget speech in the past seven or eight years that some of the people in the Department of Finance might take a sabbatical or a few months in Switzerland or some of the more enlightened countries——

Acting Chairman (Mr. Farrelly)

I am sure they would like that.

Mr. J. Walsh

I am sure they would and I hope that, with a more positive attitude the Minister, Deputy Bruton, will second some of his brighter people to those countries at the earliest possible opportunity. I suspect that the language barrier is one reason why that has not been done to date. Any development or any research which has taken place in the banking sector here unfortunately has been too dependent on what has happened in the US, Canada, and the UK, English speaking countries, which operate on far too large a scale to have any real relevance here.

I want to say a few words about young farmers and their exemption from stamp duty. Over the past number of years there was exemption from stamp duty for young farmers who inherited their farms before reaching the age of 35 years, provided they had completed at least a 100 hour course. That has now been changed. The age has been reduced from 35 to 30 years and the number of hours to be completed by the farmer has been increased from 100 to 150. That is terribly unfair particularly when the subvention to ACOT has been reduced and cut back and there is no way possible for ACOT to provide additional hours for young farmers qualifying for this measure. Everybody in this House recognised that the stamp duty exemption was a very advanced social measure which encouraged younger people to acquire holdings and ensured that elderly people gave up their holdings and allowed younger people to take them over.

These are the main points I wanted to make on this Finance Bill. I hope on Committee Stage the Minister will accept amendments which will give a better environment for working people, will allow for employers to take on additional workers and for the services, in particular the financial services sector of industry, to provide jobs in that sector, an environment where people can be allowed to save, that will give an assurance to people who have money in Irish institutions that in the next or the following budget the plug will not be situation. I hope amendments will be put down to allow progress in the transfer of farm land from elderly people to younger people, that the age limit of 35 years will be continued and that the hours will be retained at their present level of 100 instead of 150.

Mrs. Barnes

It must be a matter of some hope and optimism to us that, even between the time the budget was announced and the introduction of the Finance Bill, the climate nationally and internationally has improved. This country needed that badly. One of the fears and anxieties that we all share in this House, and particularly the Government who make decisions, is that the sacrifices, the necessary cutbacks and the tragic collapse of so many traditional industries with the trauma and insecurity that followed for employees, were leading to the beginning of a sense of total depression, disillusionment and apathy about any efforts that were made, a feeling that they were no good anyway. Thankfully, several things have happened to turn that around and I hope it is the beginning of the build-up of confidence at every level, confidence in the people as individuals, in the economy so that we can reduce unemployment and raise job figures, confidence in investment so that more money is invested in research and development and in our young, educated people.

I take Deputy Joe Walsh's point that we would lose our greatest and most valuable resource if our young people gave their talents, skill and educational qualifications to other countries. Let us hope that the Finance Bill is the beginning of that long uphill climb which will give hope and optimism and provide jobs. I hope that it will also allow us to tackle some of the great inequalities in our economic system. It is an incredibly difficult job to draw up a budget and to make decisions on priorities but I will be highlighting some of them. Perhaps the Minister will take cognisance of them on Committee Stage and include them in next year's budget and Finance Bill. Maybe next year's budget will offer more than we were able to offer this year.

There is an attempt in the Finance Bill to encourage investors to break out of traditional moulds, to show a greater willingness to take risks and to build up enterprises. We know to our cost that the traditional industries and moulds are not waiting to be broken, they are being ripped apart and unfortunately it is happening so quickly it is beyond our control. The Finance Bill should be about not just coping with one year but of projecting into the next decade and the incredibly fast changes that that will bring demographically, industrially and educationally.

There are areas in which we must show tremendous sensitivity and planning which, naturally, will cost money and one of those is educational demands for our young people, particularly, in regard to third level education, which should not be the preserve of a privileged few. We should not just give grants to people who gain more points than their fellow students, we should also ensure that if anyone wants to continue in education he or she will be able to do so. More and more people should be able to participate in adult education because the work practices of decades ago demanded that they left school at a very early age. By today's standards, they are on the scrap heap because that is how people are treated when they are not gainfully employed. Those who have little education and have been made redundant should have an opportunity to be retrained and to take refresher courses. Those who retire early should be able to accept the challenge and the mental stimulation of continued education. That is the kind of planning I am talking about which the budget cannot encompass in one year.

With regard to confidence and the greater willingness to take risk, I welcome the setting up of the National Development Corporation and I should like to think that, by their example, they will encourage the private sector to take the same kind of risk. Because that kind of risk venture did not come from the private sector in the past it was necessary to set up this corporation.

Everybody welcomes the assistance given to the construction industry in the budget and I note that Minister Bruton feels that several thousand jobs will be created as a result. It is a welcome provision that home improvement grants will be granted only if the work is undertaken by registered builders and companies, which will at last eliminate the black economy thus encouraging the people who work within the system and who support it by paying their taxes and proper contributions on behalf of their employees.

One of the real tragedies in the collapse of industries has been the neglect of employers to pay the required PRSI and so on on behalf of their employees so that when firms collapse workers not only lose their livelihood but their means of survival on social welfare. It is one of the most immoral and contemptible acts which could be committed and the workers should not be the victims. In that connection. I hope that we will introduce in the very near future the necessary reforms to stop this kind of rip-off. In saying that, I take into consideration that many industries and firms, in a vain attempt to save what they had, decided to sacrifice the payments which should have been made on behalf of their workers. We must have safeguards and early warning systems within our company law to ensure that companies do not feel that is the only resource they can use and so that workers — this is the fundamental point — will know that what is their rightful entitlement from their own and State contributions will be given to them, be it in honourable retirement, or a period of unemployment or in redundancy benefits.

We should not look at a budget or Finance Bill in sheer economic terms. If we want to build on reality and build a sound, just and fair society our financial planning must be in line with our social planning. Such planning must adopt the same priorities, and financial or budgetary decisions should not be made without their social implications being explored. In fact, there should be a projection of the implications of those decisions for ten years hence. The problems with regard to our infrastructure, the way we establish industries and the lack of reforms of company law, arose from an emphasis on economic planning without the necessary social planning being taken into consideration at the same time.

That has resulted in many problems and it will lead to great human cost in the future because of the tremendous change taking place throughout the world in technology and communications. There is a great need for the individual to be allowed to develop and to be valued. Social planning must be part and parcel of the budget and economic planning. I accept that particularly in the area of social welfare the Government attempted to bring the social dimension into their planning. Unfortunately, because of the difficult times we have come through and the hammering suffered by some of our more traditional industries, the demand on our budget for social welfare costs has increased enormously.

Acting Chairman (Mr. Farrelly)

I apologise for interrupting the Deputy but I must point out that the social welfare part of the budget was dealt with in the Social Welfare Bill. We are now dealing with the taxation element as contained in the Finance Bill.

Mrs. Barnes

I bow to the ruling of the Chair but it is this type of categorisation and boxing in that makes my message clearer. Unless we have an interdependence, an overlapping and a total recognition of that without turning them into single factors we will not make progress. On another occasion I will deal with Dáil reform and how relevant the House should be to the huge changes that are taking place.

I welcome the fact that the child benefit scheme is being attempted this year. I do not think our people would begrudge paying a high rate of taxation if they could look forward to a number of things. They should be able to look forward to a softening of that burden, a promise that in the years ahead with a wider distribution of jobs, a greater employment base, there would be a fairer distribution of the tax load. They should be able to look forward to our being able to remove what is an almost intolerable burden at present. I am optimistic about the collective generosity and responsibility within our society. On many occasions I have been told that, if it was understood that the taxes collected were used for the benefit of the disadvantaged and those who cannot get work, people would consider the sacrifice worthwhile. We must consider that urgently.

I look forward to the publication of the report of the Commission on Social Welfare. The sooner all the anomalies are removed from the social welfare system the less tax people will have to pay. If they are removed, money can be directed towards the people who need it most. I welcome the initiatives to tackle tax evasion. There is a perception among the PAYE sector that they are carrying an unfair burden and, once resentment builds up about that, it negates the generosity people may have towards the less well off. If people feel they are taxed to a greater extent than other sectors, a resentment builds up and that can spill over to the recipients of benefits.

We must use the tax we collect in the most cost-effective way. That is about the greatest building on reality we can do. We must consider that an astonishingly high figure is allocated in the budget, more than £1,200 million, for the health services when one considers the size of our population. To spend that much on a health service for what is a very young, and, therefore, a very healthy population is incredible. Every effort must be made before the next budget to ensure that all the schemes are cost-effective.

I believe taxpayers would support a move by the Government towards prevention rather than spending money on highly expensive institutionalised care. We must look at the whole area of community care and, when we are reporting to our taxpayers next year, we should be able to tell them that a structure has been set up in the community that will be more concerned about our elderly and give better value for taxpayers' money.

I appreciate the Minister's reference to profit-sharing schemes in the course of his introductory remarks. This is a return to the philosophy that workers should be part and parcel of a firm or industry, should be aware of how profitable the concern may be. Allied with that is the knowledge and realisation that they have a prior right to purchase shares, a preferential right to those outside the firm to purchase shares. I notice also that the Minister says he will introduce an amendment on Committee Stage to abolish the 1 per cent stamp duty payable on the first sale of such shares. Many workers feel after ten, 20 or 30 years within a firm or industry that they have nothing to take out with them except their tools or a gift of a gold watch or clock. That is a very sterile type attitude. I do not believe any worker, whether in industry, manufacturing or the services area, should be involved in those activities without realising the contribution made by way of his or her physical and mental energy, realising that there is a stake in it for them by way of acknowledgment of their efforts. I welcome that acknowledgment and valuation of effort. It should be recognised that profits made do not emanate solely from clever management and decisions but also by the sweat and hard work of the workers.

For years we have lagged behind with regard to research and development. Because of the huge technological changes new products come on the market daily. I remember reading somewhere recently the prediction that twothirds of the products we will be using by the year 2000 have not yet been invented. That projection was made in an effort to demonstrate the speed with which materials, research and development and technology allow us to replace current machinery and aids. It is absolutely essential that we establish our own industrial base using our natural resources. We must also carry out our own research and development rather than have it carried out by foreigners who can then cream off the best of our available resources. I welcome all initiative and investment in that area. I hope that by this time next year we will have a list of patents and products that will be on stream by then. When we observe exhibitions like the venture one in the RDS last week, when we see the multiplicity of initiative and design, we can be hopeful that, given the right climate and support for such people, they can succeed. However, that can be achieved only if the proper value is placed on their endeavours and proper guidance is forthcoming when needed. There is no reason a small country like ours cannot build up an industrial and jobs base, giving employment to those in need of it, while also sharing the jobs in such a way that we will not relegate hordes of people to the dole queues, considering the employed privileged. We must now seize the opportunities being afforded us by way of lower interest rates and energy costs — which dealt a crippling blow to our growth and development in the seventies and from which the country is still reeling. We must avail of those opportunities, building on them constructively. Certainly we cannot afford not to do so for the benefit of our young population. Out of all the pain and changes we had to experience in the seventies and early eighties must come the knowledge to enable us avoid making the same mistakes and build on what opportunities are now being offered us in a better climate.

I, and anybody representing an urban constituency, welcome any support and recognition given to the training and education of young farmers. They, perhaps more than anybody else — because of what is taking place in Europe at present — will have tremendous demands made on them to diversify from the type of farming in which they have engaged over the last ten or 15 years. With good marketing hopefully they will engage in more diversified farming responding to the market obtaining rather than continuing to build up unwanted, mouldering, highly subvented piles of food which, by the time it comes out of subvention, is 90 per cent unusable anyway. I am aware that there is a Minister of State at the Department listening to me at present.

There are huge challenges presented us at every level. There is no way our farmers can continue to produce or overproduce crops that will be consigned to waste, utilising precious money from European sources and at national level which should be put into areas where it would be better utilised.

I welcome the fact that the budgetary provisions and those of the Finance Bill have endeavoured to allocate support for voluntary organisations who, with very little of taxpayers' money, undertake an incredible task in our society. Had that work to be paid for fully it would be a crucifixion in terms of taxation. We can never over-estimate the importance of their work and, because so much of it is personal, it is highly productive. I welcome particularly the special allocation for the expansion of the Women in Business enterprise programme, a programme of activities for women. While recognising that manufacturing industry has been dealt a severe blow— that we must create a new manufacturing base —we must recognise that the whole of the services area, even the traditional ones, is expanding. We must encourage young and old enterpreneurs to set up businesses for the manufacture of replacements which, if they were produced here, could not only cut down our imports of spare parts but reduce the unacceptably high rate of unemployment.

I should like to say a few words on our voluntary organisations. Among them is a group who were never recognised for the value of their work. Many women and some men work in the homes of Ireland but get no recognition for their contribution to our GNP. It runs into hundreds of millions of pounds. If we had to compensate them we would be bankrupt.

Voluntary organisations, I suggest, are not getting the funding they deserve for the work they do. They deserve better. With the improving climate in regard to jobs, I ask the Minister seriously to consider improving grants to such organisations. Women's organisations deserve a special word in this regard. They have worked for nothing for many generations and, in money terms, that work is invaluable. They are involved in such work as the education of women who have been cut off from traditional educational facilities. They work in the Rape Crisis Centre and in Shelter as well as doing many other socially important forms of work. I hope that in next year's Finance Bill higher funding will be available for such work. For instance, an allocation of £600,000 has been made to our salmon fisheries. If that amount could be made available to women's organisations much more work could be done and the money would be more than usefully used. If that work were left to the State, this Finance Bill would have to carry a lot more than it is bearing. We should not just pay lip service to the voluntary organisations and I am sure the taxpayers would not begrudge extra funding for them.

Mr. M. Brennan

Savings are hard to come by nowadays and with increasing taxation and falling living standards they become rarer and rarer. Incomes are well and truly taxed through income tax, PRSI and other deductions. This new DIRT imposition is double taxation and, apart from that, it is a deterrent to people who would otherwise save, at a time when savings are needed most.

I welcome the concessions made by the Minister to the PAYE sector but I regret he could not give them more realistic increases in allowances. I deplore the abolition of the tax allowance for children. It was progressively reduced and regrettably has been abolished. That decision was anti-family. The Minister has shown callous disregard for the wage earners with families who have to face massive expenses if they are to rear and educate their children. Many of them have gross incomes which do not allow-them to claim in respect of the crippling cost of third level education. They cannot get grants for college fees or in respect of board and lodgings for their children who are in universities, though they are crippled with tax otherwise. I feel very strongly about this and the Minister should do something for those who already contribute massive amounts to the Exchequer.

The Minister has increased by 50 per cent the grant towards the welfare of our emigrants. That is welcome, but the fact that such an increase is necessary is a reflection of the curse of emigration which has fallen on our children once again. It is a shame that so many of them are leaving, the inevitable result of the failure of the Government to provide a favourable climate for worthwhile employment. Emigration today is almost as high as in the fifties but at that time our emigrants were sure of employment in any of the cities in Great Britain. Most of them were successful and many of them returned, but now their families and they themselves are emigrating. Our young men and women are better educated and more talented today than were their counterparts in the fifties, but have great difficulty in finding employment in Great Britain because of the high level of unemployment there. I welcome the Minister's decision to increase the emigration grant by 50 per cent. I emigrated in the fifties, which is why the plight of these young people is so near and dear to my heart. In the fifties many young men and women went to the United States. It was very easy to do so because of the high immigration quota allowed to Ireland and again job opportunities were readily available. Today many thousands of our young people travel to the United States on return tickets, not single tickets. They stay there illegally, some with false social security numbers. Since we have nothing to offer them at home, the time has come to try to open up negotiations with the American authorities in an effort to improve the immigration quota. Rather than have some of our young men and women being illegal immigrants in the United States, the Minister for Foreign Affairs should try to do something for them. They are not covered for health care or hospitalisation. The costs of hospital services in the United States is frightening and I would not like to see any of our young boys and girls in need of such care over there. The cream of the country are leaving for the United States.

I am glad the Minister has made some concessions to the elderly. Too many of our senior citizens are living in constant fear of greedy, violent and ruthless thugs who have terrorised so many in recent years. These people should be given special grants towards alarm systems and and device which ensures their safety in their twilight years. There is a device which triggers off a phone automatically, or a panic button which sets off an alarm. I have seen these devices installed in elderly people's homes. If an elderly person falls or is in fear at night, he or she can press a button and, especially in a builtup area, help will be forthcoming. The Minister should make some allocation towards the cost of such installations.

I may be digressing from the Finance Bill here, but today there is a very strict means test for the prescribed relative's allowance. When you make representations to the Minister for Social Welfare you are told that the son or daughter is not giving the parents full time care and attention.

Acting Chairman (Mr. McGinley)

Deputy, I imagine that subject would be more appropriate on a debate on the Social Welfare Estimate.

Mr. M. Brennan

I ask the Minister for Finance to make money available to Social Welfare to ensure that the prescribed relative's allowance is granted, in the case of our elderly people, not just to sons and daughters but to other relations. I am sure the Acting Chairman has many such cases in his own consitutency where people would gladly live at home rather than in an institution if those who looked after them were getting some type of prescribed relative's allowance.

To come back to the Finance Bill, motorists are being further penalised. Not only are they subject to the highest rate of purchase tax in Europe on a new car, but they are now faced with additional road tax and a further increase in the price of petrol, as announced in the budget. It sounds rather hollow to hear the Minister express confidence in the beneficial effects of the decline in world oil prices on our economy while, at the same time, he is syphoning off these beneficial effects by the savage increases announced in the budget. In this day and age a car is a necessity. There has already been a drop in petrol sales in recent years. I deplore the proposed increase in taxation, because to keep a car on the road today is very expensive.

The Minister should have made available more finance for the repair of our county roads which are in the worst condition in living memory. I make a special plea for an increase in real terms in the allocation of money for roads in rural areas. If this is not done, soon there will be no roads at all. The condition of these roads is creating problems for every Deputy, county councillor and member of a local authority. Our county roads have deteriorated so much in recent times that they are almost impassable.

I wel come the fact that young men are working under the social employment scheme on our county roads at present. This is giving job satisfaction to many who were on long term unemployment. As we have no alternative, this scheme is helping them a great deal.

Debate adjourned.