Deputy Dermot Ahern is in possession and he has some 40 minutes left.
Financial Resolutions, 1988. - Financial Resolution No. 4: 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.
—(Minister for Finance).
Before the adjournment there were a number of points I wished to make in regard to the differences in the attitudes adopted by Deputy Desmond and myself and the Fianna Fáil Party. This budget continues the budgetary policy which was adopted by Fianna Fáil prior to coming into Government. Before the last election we said that we would stabilise the national debt and the GNP ratio. The figures before the House show that, in fact, we have gone a long way toward achieving that and to getting this economy back into shape. Most commentators agree that this and the last budget have had that result. Before the adjournment I referred to an article in The Irish Times in which Mr. Fitzgerald and Mr. Bradley referred to the fact that while growth may not manifest itself this year undoubtedly in 1989 and in successive years there will be growth and the possibility of extra jobs being created.
When this Government came into power they basically had two alternatives. First, they could have increased taxation or, secondly, they could have reduced spending. All of us in this House will agree that the option of increasing taxation was just not on because by all accounts we are one of the most overtaxed countries in the world. Therefore, we had to reduce spending. The reality is that with 250,000 people unemployed the amount of income coming into the State is reducing all of the time and the amount of expenditure is increasing all of the time. We are and have been living beyond our means. I would say that the cuts in the last two budgets have had the effect of taking a lot of the fat and unnecessary spending out of our economy.
Prior to the election various commentators laughed at the fact that Fianna Fáil had said they would reduce spending, that that was the only promise they were going to make, that they would get the economy going again by restoring confidence. However, confidence has been restored and all commentators agree on that. The Minister for the Environment told us that the representatives of the CII at a meeting he had with them were bullish about the prospects for the economy. Business people I have met have expressed similar sentiments. The fact is that interest rates have reduced by 5 per cent. We hear a lot about the need for tax equity and concessions for the PAYE sector but before the budget, as a result of Government policies, interest rates had been reduced by 5 per cent and that meant a big saving to mortgage holders. They must be aware by now that their mortgages are costing them a lot less than they did in 1986.
Industrial output last year increased by approximately 10 per cent and that came about because of the confidence of the business community in the actions of the Government. They are prepared to invest their money. Those people were reluctant to invest their money under the last administration because they did not see any prospect of getting a return from that investment. Our monthly trade figures have been the best for 30 years and that has helped to instil confidence in the economy. The black hole in the economy has been eliminated. The decision to allow people to repatriate money from abroad will also be to the advantage of the economy. It is pleasing to note that, unlike in previous years, vast sums of money are not leaving for investment abroad.
The decision of the Minister of Finance to introduce the 48-hour rule in regard to goods purchased outside the country has helped business people in Border areas. Being from a Border constituency I could not help laughing when I heard Opposition Deputies say that it did not prove of any benefit to businesses along the Border. Dundalk, my home town, which is in what is called the frontier zone, has benefited from that decision. Very few people who live along the Border travel to the North of Ireland on shopping expeditions and we do not have coaches from Dublin, Cork and other parts of the country passing through going to Newry.
Inflation has been reduced drastically mainly as a result of the actions of the Government in recent months. On taking office the Government identified a number of areas for development such as the marine, horticulture and so on. Resources have been made available by the Government to develop those sectors of the economy and that is to be welcomed. We hear a lot about personal taxation and the need for justice and equity in the system. The Government have made a great effort in the budget to introduce equity. Nobody can accuse the Government of not moving on the taxation front. Following the PAYE march in the early eighties there was a lot of talk about the need for change but there was little action. The day when people can throw requests from the Revenue Commissioners for tax returns into a wastepaper basket has gone, and rightly so. People now realise that if they owe tax they must pay it. Concessions, totalling £91 million, have been made by the Government to taxpayers. There has been an increase in tax free allowances and a widening of the various bands, as we promised during the election campaign. It is our intention to bring two-thirds of those on PAYE into the 35 per cent band. As a result of the measures in the budget 93,000 people will drop to the 35 per cent band while the widening of the 48 per cent band will mean that a further 55,000 people will pay at that rate.
Deputy Desmond harangued the Fianna Fáil party for our attitude to the building industry. I do not accept his criticism because the measures we have taken have helped to revitalise an industry that has been in a bad state for many years. The decision not to change the mortgage interest relief will also help the building industry. I have no doubt that the decision to reintroduce the section 23 relief for a further three years will result in greater activity in building industry in Dublin. I hope the decision will encourage developers outside the Pale to avail of that concession. The decision of the Minister for Finance to introduce a 5 per cent rate of stamp duty on property valued at between £50,000 and £60,000, resulting in a saving of between £500 and £600 per transaction, has been glossed over my many commentators. I welcome that decision which will benefit those buying upmarket.
The yield from corporation tax up to now has been low and I agree with the commentators who stated that the various State incentives favour companies buying plant and machinery rather than taking on labour. I am pleased that the Minister will be having a look at that. The reduction in the capital allowances in the budget will prove beneficial and we could go a little further down that road. Companies will buy plant and machinery, irrespective of the incentives, and we must try to encourage them to create more jobs. The decision to increase capital allowances and running expenses in relation to motor vehicles should help the beleaguered motor trade.
The special incentive to help people bring their tax affairs up to date is close to my heart because I have received representations from many people who have received very large tax bills. Quite recently a man came to me late one Sunday night. He was nearly in tears because he owed £40,000 to the Revenue Commissioners. I understood this debt had accumulated between 1975 and 1979 and that most of it was comprised of interest. He admitted that he owed the principal but claimed he was not in a position to pay this money.
The recent changes in collection and the appointment of new sheriffs in various areas has had an effect. Some people are critical but I consider the system to be reasonably good. In some instances the sheriffs may have been too intent on taking goods rather than giving people a chance to come up with the money. Once a warrant has been sent to the sheriff it seems the Revenue Commissioners will not make any deal or come to an arrangement whereby money can be paid by instalments. The Minister should look at the inflexibility of the system. The sheriff may not be interested in taking the job if he knows that a person can go to a politician who might be able to make an arrangement with the Revenue Commissioners.
Employers often make the point that they have to collect tax for the Government and that they get no allowance for carrying out this time-consuming task. That point was made at a meeting I attended recently. If they get into arrears the Revenue Commissioners come down on them like a ton of bricks.
Self-assessment will mean quicker processing and result in fewer appeals. There will also be an increased flow of revenue to the State coffers. At present the system is overburdened with tax appeals. It is a two-fault process. The Revenue Commissioners send out assessments which bear no resemblance to reality; this means a person must appeal, thus clogging up the system. It must also be said that many people have hitherto thrown the assessment into the wastepaper basket hoping it would go away. The tax demand was always last on the list of priorities.
The power of attachment is similar to the law of garnishment. A number of commentators have said there may be constitutional problems relating to the power of attachment, that the power of the Revenue Commissioners may be excessive. It should be obligatory on the Revenue Commissioners to go to court and apply for an order for attachment, as in the case of the law of garnishment.
I was pleasantly surprised that the Minister for Finance was in a position to increase social welfare payments. This is an area where Deputy Desmond and others on the opposite side of the House often accuse us of being Thatcherite and monetarist. That accusation has been disproved. This has been shown to be a caring Government. An effort will always be made by a Fianna Fáil Government to alleviate the problems of the lower paid to the extent that the budgetary situation allows. An extra £45 million is being provided in 1988 for increases which will come into effect in July. The overall budget in 1988 is £2.6 billion, a massive sum. The scope for increasing it is very limited but generally the Minister has seen fit to increase social welfare benefits by 3 per cent. The caring attitude of the Government is shown by the increase of 11 per cent for the long-term unemployed. The alleviating payments introduced by the previous Government to deflect the brunt of the equality legislation are to be continued. If these payments were to be discontinued there would be horrendous consequences for over 20,000 families. Once again the accusation that this is an uncaring Government has been disproved.
All parties on all sides of the House would agree that the extension of PRSI to the self-employed and farmers is a laudable idea. These people will be entitled to old age, widows or orphans pensions. Less well off self-employed people have had to try to make ends meet by keeping their business going. The alternative was to apply for a non-contributory pension. The extension of the PRSI scheme will mean that they will have stability and security at the end of their days. People have quibbled about the percentage to be paid but I believe a 5 per cent imposition to be very fair. It will recompense the State for the pensions being paid.
It has been put to me that self-employed people over the age of 55 may have to contribute to the persion fund although they may not be in a position to obtain the pension when they retire. Perhaps the Minister would clarify this point.
Deputy Desmond complimented the Government on the reintroduction of the drugs refund and long-term illness scheme. I have had many representations regarding disabled drivers. There appears to have been a change in the attitude of the Revenue Commissioners towards the rebates to which disabled drivers are entitled. It seems that during the past few months it has become necessary to fill in a more detailed form and they felt this was trying to reduce the number of people who would get this facility. The announcement was made by the Minister in the budget of an extra £2.8 million to the health boards so that they could administer a mobility allowance and it remains to be seen how this will be administered. I hope proper consultation will take place with the various groups involved. Obviously we have to help people who are disabled. I think this Government have always shown in the past their caring attitude to this section.
Coming from a Border constituency I would have liked to see no increase in the excise duty on petrol. I would be living in cloud-cuckoo land if I were to say the opposite. Obviously we have to be reasonable and take the rough with the smooth: a budget cannot be all give and no take. The increase of 8p in the price of petrol must be set against the background of a reduction of 21 per cent in the price of petrol over the past ten or 11 months more or less because of Government action. The point had been made earlier in the debate that this increase was made when the price of petrol is on the decrease whereas when the previous administration increased the price by 8 per cent they did so at a time when there was a trend of increasing prices for petrol. That is the difference between then and now. It surprises me to see people coming in here and crying about the 8p increase in the price of petrol when they did not come into the Chamber and vote against it.
In his speech the Minister mentioned the decentralisation programme and he referred to my home town of Dundalk as one of the places where decentralisation will take place in the near future. This is great news for my home town because allied to the recent inclusion of Dundalk in the urban renewal package it leaves a tremendous potential for Dundalk town centre to be revitalised. Anyone who knows Dundalk would agree that over the past four or five years it has been devastated. As I said earlier, these announcements coupled with the 48-hour rule and various other proposals for the Dundalk area show that Dundalk has done very well since the return to office of this Government. For the four and a half years before we came to power the town got virtually nothing and no attention. We had a manufacturing industry base of 6,500 which has been reduced to 2,800,48 per cent of the population are on medical cards and there is a staggering 30 per cent unemployment in Dundalk. I hope these measures, together with other measures such as the gas pipeline which is being brought to Dundalk, will have the effect of revitalising and attracting industry into the town of Dundalk.
A number of local commentators have made great play of the fact that all of these announcements for Dundalk have not meant a penny being spent in the town. That is totally incorrect. The gas pipeline is being funded by Bord Gáis Éireann. The Lake Muckno water supply scheme which is being constructed at present at a cost of £22 million should give Dundalk which has had a very bad water supply over the past number of years a better water supply. A sum of £22 million is being spent on this scheme which is the biggest public works contract in the history of this State. To say that Dundalk is not getting its fair share of State money is nonsense.
Finally, I will come back to my original point, that this budget addresses the problem of the economy. It continues the policy the Government laid down when they came into power. Ultimately it will bring the economy to the stage that it will be fit and hardworking and at that point jobs can be created for our young people. Hopefully, we can entice them back to our country and prevent them from leaving in the future.
It is safe to say that the budget was the prime event in the political calendar down the years but the publication of the Estimates has now taken on that role. Most of the decisions relating to our State spending and economy were made with the publication of the Estimates. The budget has now taken on a secondary role at present.
There were a number of very positive things in the budget — it would be unrealistic not to accept that — but there were some areas which should have been attended to and dealt with which were overlooked. I think it can be safely said that 1987 was the year in which reality came back into politics. In the years 1977-87 we had a full decade of what we could call "Disneyland" politics, when certain groups and parties felt that we could spend and spend and promise and promise without ever asking how this spending or how the many promises would be financed.
In the first months of 1988 there was some consensus of opinion among politicians and commentators on what this country's economic policies should be for the years ahead. I think almost everybody agrees that the highest priority should be to reduce the extent of State borrowing because, unless State borrowing is brought down, the interest repayments will take up more and more of our public finances, resulting in reduced services and reduced benefits for the less well off and higher taxation levels for those in employment.
The difference of opinion that exists at present is how quickly we should reduce our public expenditure. One school of thought accepts the need for spending cuts but argues that it should be done on a gradual basis over a number of years and that areas such as health and primary and secondary education should be exempt from any reductions. The other school of thought argues that the quicker the necessary reductions are made the sooner the economy will return to a position of growth. We have had two conflicting reports; the report from the OECD supports the latter view while the recent ESRI report takes a more optimistic view and suggests that the present level of expenditure reduction is broadly correct and should bring the country back to a growth situation by the early nineties.
In my opinion in our attempts to reduce public spending at present we are seriously ignoring the damage we are doing in the social area. I believe there is an over-emphasis on the cutting of services and very little attention being given to the elimination of restrictive practices abuses and in efficiencies in all sectors of Irish life. In my opinion the economic policies of the present Government have affected the least well off and those who do not have political clout while, at the same time, the vested interests and the most powerful groups in our society have largely remained untouched. Unless we make efforts to take on these vested interests and to try to eliminate restrictive practices abuses and inefficiencies, I believe the whole of our rationalisation programme will fall apart. In addition, we must introduce in a more forceful way the concept of accountability within the public service.
In future I can see the youth of today cursing our generation for the debt with which they will undoubtedly be burdened.
If we meet the cost of current services by borrowing from abroad we are compelling future generations to pay for these benefits. Every taxpayer in the labour force at present is required to pay a growing percentage of his or her income to meet the cost of past spending. Potential taxpayers will opt out and are opting out. Many people who are emigrating at present are not doing so because of lack of work. They are emigrating because of the punitive tax system here. As a result many of our best qualified are emigrating and will emigrate to North America and Europe and we will be left with a greater burden on our hands. What has been happening and which started in 1977 will inevitably leave an inheritance to future generations they surely will not appreciate.
There is ample evidence to suggest that if spending cuts are made the debt burden will fall rapidly. There are many examples of spectacular turnabouts in other economies. For example, in Britain the public sector borrowing requirement — the difference between public expenditure and tax revenue — was negative in 1987, which means that Britain is reducing its national debt. Britain had a very serious debt crisis for almost a decade. We have only to look at countries like New Zealand which had a very serious economic crisis and took the very necessary, hard economic measures to bring their economic crisis under control.
Policies in relation to public expenditure cuts may be painful but at least they offer hope not only to this generation but to future generations. If we do not control our national debt at this stage there is very little hope for any of us in future.
Looking ahead to the year coming up, the three main problems that must be tackled are (1) the control of our debt, (2) elimination of inefficiencies and (3) a reduction of disincentives in our system. It is obvious that cuts in public expenditure must continue. The cuts that will have to be made this year will be harder to apply and the Government will be forced to look at options they rejected in the past year. Factors which add to the Government's problem are two serious major errors made in recent months. One was the Government's commitment to increase public sector pay which has wiped out many of the advantages that accrued from decisions made in relation to public expenditure cuts previous to that. Pay represents 40 per cent of Government current spending at present. Therefore, the Government by committing themselves to increases in the rates of pay, are forcing themselves into having to make stronger and harder decisions in the year ahead in areas such as health, education, defence and security. This country should look at Denmark where budget cutting was combined with employment growth in the early eighties and where there was no serious reduction in public services. They set about the task by freezing pay in the public service and limiting social welfare payments to the absolute minimum required.
As I have said, inefficiency is one cause of our economic stagnation because we have failed to put our resources to the maximum use in a world that is rapidly changing. The Government must move to eliminate public sector monopolies and professional restrictive practices and must deal effectively with political pressure groups. One of the major barriers to any change has been the growth of these pressure groups, at most times encouraged by reckless opposition in the years past. The power of these pressure groups in manipulating public opinion must be dealt with effectively. Pressure groups usually exist to defend the status quo whether it be for existing pay relativities, tax concessions or conditions of employment. The only way the political system can deal with these pressure groups is by becoming more efficient itself and sticking by decisions made.
Having mentioned the disincentives in the present tax system let me say that major disincentives still exist. These have not been dealt with in the present budget. Unfortunately, there are many disincentives to work in the social welfare system. This system must be changed so that the resources available within the social welfare Estimate are channelled to those most in need. One thing I must give the Government credit for is giving the people on long-term unemployment assistance a greater percentage increase this year. It must be acknowledged that there is a start in focusing social welfare moneys into the most needy areas. I hope that trend will continue.
Ireland's economic problems can be controlled provided we have consistent, clear-sighted policies and a political will on all sides to take the necessary decisions. There must be co-operation among all sectors of Irish society. We will not improve the economy by just reducing the national debt alone; we must make a frontal attack on our costs and lack of competitiveness in comparison with other nations within the EC. If we do not achieve the necessary economic growth the net result will be more and more unemployment and more and more emigration. We must make the system work. The problem at present is that there is no incentive to invest or to work. We see week in and week out examples of public companies investing their assets in gilt investments where they can get 10 per cent plus return when, if they invested in risk venture, they would get 1 per cent or maybe 2 per cent growth. Naturally it is easier for them to sit by the fire at night and have their assets appreciate in value by investing in gilts. This area must be reviewed. We must make the investment climate more attractive.
In dealing with some of the budget provisions, speaking now as a Cork politician, let me say certain elements in this budget had a very anti-Cork bias. Four announcements in the Budget Statements discriminated against the Cork region. The first was the changes made in the urban renewal scheme involving the extension of the boundaries of designated areas in Dublin and Limerick as well as the area around Tallaght town centre. These changes give a further advantage to these areas. The Cork urban renewal programme, encouraged by the designation of areas in Cork city, has not really taken off, unfortunately. In what is really a criticism of my own Government, let me say that the areas selected and the boundaries drawn at the time were difficult to understand. The time is now ripe for the announcement of an extension of the Cork designated area. I fail to understand why the Watercourse Road industrial area in the oldest part of Cork city, the Blackpool area, as well as areas around Shandon could not be brought in under the changes announced. Certain parts of the centre of the city were also excluded even on this occasion. I ask the Minister to examine the position before the publication of the Finance Bill. The Minister's announcement that he will introduce provisions in the Finance Bill to enable companies in the Shannon Airport area to qualify for the 10 per cent rate of corporation tax gives a further unfair advantage to the mid-west region.
The decentralisation of Government Departments referred to in the budget to areas such as Ballina, Galway, Cavan, Sligo, Athlone, Limerick, Ennis, Nenagh, Killarney, Letterkenny, Waterford and Dundalk, involving one seventh of the Civil Service workforce, 3,000 staff, is welcome and very sensible. However, I cannot understand why the second city of the Republic, Cork, has been totally excluded from the decentralisation programme. This comes from a Government who are headed by a Taoiseach who, previous to the last election, gave a firm and clear commitment to the Cork region that a decentralisation programme would be initiated on taking office and that Cork would be one of the beneficiaries of that programme. That promise has been totally reneged on. Because I believe the areas picked were selected for purely political reasons, I hold the view that Cork has been penalised again in the budget by a Taoiseach who is seeking to avenge the fact that his party were politically defeated once again in the Cork region in the last election.
The fourth factor I want to refer to is the announcement on the smoke-free zone and the allocation of £250,000 to the Dublin region. Cork has a smog and air pollution problem as well as Dublin but there was no acknowledgment in the budget of that problem in the Cork region.
I am glad that the Minister for Tourism and Transport is in the House because the absence of an announcement in the budget of a commitment to the Swansea-Cork car ferry is another indication of neglect of the Cork area. The Swansea Cork car ferry has an unfair disadvantage in comparison with other routes because the latter enjoy Government support The Cork-Swansea car ferry enjoyed Government support last year but to date this year there has been no help forthcoming from the Government.
As I said already it has been widely acknowledged for some time that the country is suffering from over-centralisation. The continuing growth in the population of the greater Dublin area is unhealthy. It is clear that this does not help either Dublin or the rest of the country. I believe that to date no serious action has been taken to rectify this. While Dublin is drawing more and more of the country's population to its core, Cork has been suffering one hammer blow after another. Its recent ills were well chronicled. This led to the setting up of the Government task force and later to the appointment of a high powered task force for the Cork area within the IDA who, ironically, are based in Dublin.
The Hume report which was recently approved in the European Parliament highlighted the fundamental problem of over-centralisation in Ireland and indicated that it was the worst of its kind in the European Community. It recommended a radical new policy of decentralisation and that a structure of devolved regional development agencies should be established. If a positive effort is to be made to prevent further centralisation there can be no better place to start with than Cork but, unfortunately, that has not happened. Cork has a basic framework in terms of physical, educational and social infrastructure and has plenty of scope for development. I have no doubt that any realistic initiative taken by the Government would win a very ready response from the Cork region.
As the Hume report was being adopted in Strasbourg, the Government announced their intention to proceed with a limited number of integrated development programmes for selected areas throughout the country. To my knowledge, no indication has been given as yet as to which areas are to be selected. I urge that the greater Cork area should be one of the first to be chosen.
It has been made clear in Europe — and this links in with some of the budget announcements — that if the objectives of the Single European Act are to be achieved — the promotion of economic convergence and social cohesion — greater resources will have to be made available to the less well off regions and planning in these regions will have to be carried out on the basis of integrated programmes. This means that the various Community, structural and financial instruments, together with national and local authority resources, must be used in a co-ordinated way in the areas under consideration. The philosophy is that various sources of development finance, including Community, national, regional and local, should be mobilised in support of a coherent set of priority measures covering all the main aspects of the economic potential of a region and that all parties concerned should make a multi-annual commitment to the proposed development programme.
I want to take as an example the largest public project under consideration in the south west region, a tunnel under the River Lee. I firmly believe that this would be considered in a favourable light in Brussels if it was packaged as part of a broadly based and coherent plan for the greater Cork area. Such a plan would feature its key role in exploiting the potential of the Ringaskiddy industrial zone — which again was not referred to in the budget — which has a deep water berth, an abundant supply of fresh water and has attracted Government investment of over £40 million in recent years. Therefore, I ask the Government, in the decisions that will be taken shortly, to consider the Cork region for one of these integrated programmes. The area covered by the Lutz plan which is now drawing to a close would be an obvious area to be considered for an integrated programme.
There were a number of decisions in the budget which affected the area of health. By general consensus, 1987 was the worst year ever for Ireland's health services. Doctors and patients alike felt the effect of Government policies of fiscal rectitude as they announced that there would be reductions in the health estimates. The Government elected last March proposed even tougher medicine for the health services than what had been planned by the outgoing administration in January.
Serious damage has been caused to the health care system through the use of a blunt instrument approach to controlling expenditure. There has been no evidence whatsoever of a planned approach to date and serious inadequacies have already come to light because of the Minister's policies. Serious thought has not been given to the following points. Do we have too many health boards or do we need health boards at all? No consideration has been given to the revision of the community care service programme or the revision of the general medical services. This unplanned approach which has been adopted by the Government in the allocation of resources is — and I agree with what Deputy Barry Desmond said this morning — creating a two-tier health system in which the better off will have access to the better services and the poor will be excluded. It is certain that more hospital beds will have to go in the coming year if health boards are to live within their budgets and in some health boards there is already great alarm at the prospect of losing these beds.
The Minister's decisions in recent months have caused an increase in the proportion of private hospital beds and has seriously exposed the inadequacies of our health care programme, especially our community health care programme. Now is an opportune time to take a look at what has been happening in the area of health. This morning I raised an appalling problem involving a child in Cork who was rejected seven times in the last five weeks when trying to get into Crumlin hospital. The child required urgent surgery for a cardiac problem.
Deputy Allen, I have listened with great interest to your contribution to date, dealing as it should with the budget, financial policy and so on. The Deputy will appreciate that there will be other more appropriate opportunities for him to refer to the matter he has raised but it is not a matter appropriate to the budget.
I am now about to address the issues raised in the budget concerning the drugs refund scheme, disabled drivers and other issues mentioned in the budget. Other speakers were allowed some latitude today. There should be some consistency in judgments from the Chair.
If Deputy Allen is implying that he is not being treated in the same fashion as everybody else, as far as this occupant of the Chair is concerned——
I am not referring to the Leas-Cheann Comhairle but to different occupants of the Chair.
The Deputy is doing rather well. We need not have any great argument about it. I will just ask the Deputy to try to stay within the permitted parameters.
The decisions made have caused serious hardship. Even a member of the Minister's Commission on Health Funding has said taht in recent days old people are reluctant to go to hospital because they have to pay for services. That is a serious allegation. This is a relevant time to raise these issues.
The Government in their budget have shown that they are politically paralysed. The Government do not have a health policy and are therefore not equipped to deal with the fundamental issues affecting health services. It is time for the Government to start reforming. I will not go into detail on reform but the health board structure where money is just being devoured must be reviewed, as must the whole area of hospital services, and changes must be made.
In any rationalisation programme we must consider the facilities available in private hospitals as well as in public hospitals. It is amazing that in an examination of the health services, for example, in my region, the facilities available in the major private hospital were not included in the assessment. That shows a major defect in the assessment going on at present. There should be an attempt to allow for interaction between private and public hospitals. There should be a contracting out of services. That has not been looked at but I will not go into it in detail. The health services must become better equipped to meet the demands of consumers rather than to pander to the interests of the providers.
There is clear evidence that the Government are wallowing in inconsistency in relation to health policies and there is havoc in the entire health service. In relation to the decision to deduct £9 million in retention tax from consultants over the next 12 months, from their VHI payments, I understand that the Attorney General is examining the practicalities of introducing the scheme. This proposal would affect about 1,000 consultants. Until the Finance Bill is published we will not know the details of this but the proposal will mean that for many consultants there will be a retention tax of about £16,000 per year in addition to their PAYE contribution on their contract salaries and income tax from money from non-VHI insured patients. I do not argue with that, but to make this change it is obvious that the Government will have to direct the VHI to deduct retention tax and they must change the current regulations whereby the VHI make payments to their members and not directly to the doctors involved. I can see many problems both practical and legal. Many members of the VHI will insist that they want to continue paying their consultants directly and, on the other hand, consultants can lawfully claim that their contracts are directly with the patients and could refuse to accept payments from the VHI which would cause a clash between patient and doctor and doctor and VHI. This proposal opens up a minefield in an area already devastated by Government decisions. I warn the Government to tread carefully here.
The scheme for the refund of excise duty to disabled drivers is one that needs to be fleshed out. The Minister for Health should make a clear statement on this as soon as possible. I have spoken to the organisations whose members have used the scheme to date and asked for their comments on the proposal. I have also asked the Revenue Commissioners for a breakdown of the £3.3 million spent on the scheme last year, but I have not got that yet. My initial reaction to the scheme is to question the logic of the move. The refund of excise duty is essentially a matter for the Revenue Commissioners. It is a bit misleading to say that it cost the Exchequer £3.3 million last year. The scheme involves the waiving of the collection of excise duty and VAT. If the scheme did not exist many disabled drivers would not purchase a car. There is no real loss to the Government. If the scheme as is suggested now is transferred to the Department of Health, there will have to be communication between the Department of Health and the Revenue Commissioners and it will create another bureaucratic layer of confusion. How will the £2.8 million being allocated to the health boards be divided out? I hope there will not be a quota system for each health board so that once the quota runs out the patient must wait. Another misgiving is that health boards in their present financial constraints may absorb some of that money into other services. I await with interest the Minister for Health's explanation of the scheme.
In relation to the PRSI proposals, the indications are that the scheme will not be self-financing. The idea of expanding the scheme was to get a contribution from the self-employed sector towards the cost of benefits being given to them at present. It would be a typical Irish solution to an Irish problem if the people paying tax under PAYE ended up financing this scheme for the self-employed and for farmers. This scheme must be explained in detail. I will reserve my position on this until we get an assurance that the PAYE sector will not end up footing the bill again.
The budget, as has been said by our spokesman on Finance, Deputy Noonan, is one of lost opportunities. We await with interest the publication of the Finance Bill to have fleshed out many of its provisions. It is a budget which did not do very much for the PAYE man. As a result, as one representing an urban area, I am deeply disappointed in that regard.
I welcome the opportunity to contribute to this debate. It allows me to emphasize the continuing commitment of this Government to resolve our serious economic problems and to get the economy moving again. It also allows me to outline the policy framework which has been put in place for the sectors of the economy for which I am directly responsible, namely tourism and transport. Finally, I refer to the initiatives that are now being taken in those sectors. But before addressing these matters I would first like to refer to some aspects of the budget, and to the Government's economic strategy.
The financial statement delivered by my colleague, the Minister for Finance, last week, underlines once again this Government's commitment to deal with our nation's economic difficulties. As you know our first budget last March was a necessary step back to reality and sanity. It was geared towards improving the public finances, tackling the national debt problem and controlling public expenditure. We also set ourselves the corollary task of putting growth back into the economy. I want to emphasise that getting the finances in order is simply a means to that end. The measures introduced in the budget last week reinforce and continue this overall Government strategy in the management of the economy — a strategy which encompasses two key objectives — improving the public finances and revitalising the economy.
The management of the economy, just like the management of a business or a home, must be effected through medium as well as short term policies. The Programme for National Recovery, which has the support of the major social partners, sets the medium term policy framework for Government. It seeks to regenerate the economy and to improve the social equity of our society through the combined efforts of Government and the social partners in the period up to the end of 1990. The principles that govern such efforts were set out in the National Economic and Social Council's study “A Strategy for Development 1986-1990” 15 months ago. The Programme for National Recovery recognises the importance of putting in place a fiscal policy which faces up to our financial realities. For that reason this Government have set themselves the target of stabilising the national debt to GNP ratio during the period of the programme. That commitment requires a reduction in the Exchequer borrowing requirement to between 5 and 7 per cent of GNP.
In making progress towards this target, last week's budget seeks to reduce the Exchequer borrowing requirement in 1988 to 8.2 per cent of GNP, which is the lowest since 1973-74, and is a reduction of 2.1 percentage points on the 1987 outturn. The House will remember that 1973 was a significant year, the year of the first major hike in the price of fuel oils. This reduction in the borrowing requirement is a clear indication of how we are definitely on the path to improving the public finances. However, as the House is only too well aware, reductions in Exchequer borrowing do not just happen. The reductions which are now coming on stream required a new balance of macroeconomic policies to be struck, necessitating a curtailment in public expenditure in a number of areas. Despite opposition from some sections of the community, I feel that there is nevertheless a broad acceptance of our policies across a wide spectrum of Irish society. This reflects a realism within the country that public expenditure needs to be controlled if we are to remove the burden which the national debt places on all our shoulders, individuals and businesses alike. There is also a realism that strong government is needed to implement such policies unflinchingly, regardless of how unpopular they may be with selected interest groups and that we at the moment are giving such government. We cannot see how people who subscribe to our philosophy, nevertheless, in individual instances choose to oppose and to vote against our policies adducing, as the reason, that they agree with the cuts but that they do not agree with the way the Government are carrying them out.
The benefits of Government policies are already coming on stream. As you are aware, the economy has responded positively to the measures which were introduced by this Government last year. These policies have brought renewed confidence to Irish business. Both interest rates and inflation have fallen, while Exchequer borrowing has been significantly reduced. Furthermore, the level of growth in the domestic economy of 3.5 per cent in 1987 exceeded all expectations, with the decline in overall domestic demand being offset by the improvement in exports of goods and services. The improvement in our balance of payments last year was quite significant, with the current account moving into surplus for the first time in 20 years. The economy also benefited from the substantially improved performance of the tourism sector. The measures outlined in this budget for initiatives in this sector reflect the Government's continuing commitment to the development of tourism, a process which we set in train last year with the crash programme for tourism. Furthermore, through the publication of the Price Waterhouse report and the concentrated efforts of those who attended the tourism forum recently held in the Royal Hospital, Kilmainham, we have brought the issue of short and medium term strategies for tourism to the forefront. I will be turning specifically to this sector a little later. I just want to emphasise how important the reduction in interest rates and the reduction in inflation are to this sector.
The progress we have made so far does not mean that we can now rest on our laurels. The present budget demonstrates that this Government have no intention of relaxing in their efforts to achieve the goals they have set themselves in relation to both restoring order to the nation's finances and securing economic growth. The Minister for Finance referred in his statement to the fact that the recent OECD-Ireland survey takes a less optimistic view of the economy's medium term prospects than the latest ESRI medium term outlook and, therefore, a less optimistic view of the level of budget adjustment. As the Minister indicated, this Government are prepared in their budget plans to seek additional significant savings, should this be necessary.
We are all too aware of the extent to which our domestic economic fortunes are dependent on developments in the world economy. We had the benefit in 1987 of a relatively favourable international environment, particularly with strong domestic demand in the UK and the EC, our main trading partners, even though we had a significant hiccup when the Stock Exchanges in New York, London, Paris and Tokyo began to wobble in the month of October. The outlook for 1988 and beyond may appear less favourable—mainly a reflection of the imbalances between the major world economies. The prospect of lower than expected world economic growth and higher real interest rates cannot be ruled out. Such unfavourable developments would obviously have negative effects on our economy from a range of different perspectives.
Developments on the domestic front will, on balance, contribute little to growth in national output this year. Inevitably, the necessary curtailment of spending in the public sector will modify domestic demand. By contrast, there should be a significant increase in investment in plant and equipment. Anyone who reads the report of the Central Bank will see that while investment was nothing to write home about, the plant and equipment area had a significant increase last year, and we are expecting the same for 1988. Personal consumer spending could show a small increase following an improvement in disposable income on foot of the personal tax reliefs given in the budget, lower interest rates and, as I mentioned, a 2½ per cent inflation rate as is forecast for 1988.
The continuing bright spot on the economic landscape is exports. They should again achieve a substantial rate of growth this year. Accordingly, both the trade surplus and the overall surplus on the current balance of payments should increase further. When all the different components are taken into account, a growth in gross domestic production of between ½ per cent to 1 per cent is projected for 1988. A rate of 1 per cent is mentioned categorically in the Central Bank report.
The rate of growth projected for this year lies far below the true potential of our economy. This is inevitable. We first need to correct the imbalance in our public finances before we can achieve higher rates of economic growth. Such growth is attainable as was pointed out in the recent independent review by the ESRI of medium term prospects for the Irish economy. That review illustrated that, with sufficient financial discipline, improved competitiveness and a stable external environment, our economy could aspire to sustained economic growth of 3 per cent to 3.5 per cent, in GNP terms, once the public finances have been corrected. As I said at the outset, that is the objective for which we are striving. A cut in public expenditure for its own sake would be a fruitless exercise.
If we are to realise the untapped potential of our economy we must ensure that effective use is made of our resources and productive capability through effectively targeted policies. In seeking to restore growth in this economy the Government are pursuing a wide range of policy initiatives. Though we have heard criticism in this debate that the budget fails to address the critical issue of unemployment and job creation this is without foundation. As the Minister for Finance pointed out in his financial statement, practical measures are being intensified on a sectoral basis to exploit the economy's potential and to create new job opportunities. Our ability to create jobs and tackle the unemployment and emigration problems lies in improving the competitiveness of Irish industry. It also depends on developing and improving the performance of the internationally traded sectors and developing our natural resources by targeting specific sectors of the economy for growth. Through competition, greater efficiency can be promoted, costs can be held down and companies encouraged to innovate.
Specific measures to improve the competitiveness of Irish industry include the commitment to pay restraint and to ensuring that industry does not suffer any relative cost disadvantages in terms of its other main input costs. The Central Bank thinks there will be a significant increase in input costs in the agricultural sector, namely fertiliser costs, in 1988, and this will have to be coped with. In this context, as Minister with responsibility for the transport sector, I am concerned to ensure that a range of sectroal policies for transport are in place which will increase efficiency and reduce the cost to the customer. Finally, as I have said, a series of practical initiatives have been taken, or are in hands, which target key sectors. The Government wish to harness the potential of these sectors, many of which have been underperforming in recent years, in order to create sustainable new jobs in the economy. Therefore, I cannot accept these somewhat emotional claims in relation to unemployment and emigration. This Government are concerned about these issues and we are facing up to them.
This leads me to a consideration of the sectors of the economy for which I have responsibility, namely the tourism and transport sectors.
Last year the Government established the Department of Tourism and Transport to ensure effective and co-ordinated management of these two sectors of the economy. The decision was a recognition of the inter-relatedness of these two sectors, particularly for an island country where low cost, high quality and frequent access transport services are essential for the growth of the tourist industry. I think you will agree that the amalgamation of functions has had a beneficial effect. Since taking office the Government have stressed time and again the importance of the tourism sector to our economy both in terms of the foreign revenue it brings into the country and the employment it sustains. Internationally, tourism is a bouyant area with experts currently predicting a doubling in the world tourism market by the year 2000. These same experts have also expressed the view that Europe will remain the greatest single focal point of world travel.
Yet there is no doubt that the tourist industry in Ireland has been failing to reach its full potential in recent years. This fact, however unpalatable needs to be faced, as a prerequisite for the changes which must be effected across the whole industry. These range from our administrative structures to our marketing stance and to the measures necessary to protect and develop our product. If we are to put the economy back on the right path to growth, we must make optimum use of our natural resources. Yet, though the tourism industry is based essentially on a range of natural resources, we have failed to harness its full potential. Inevitably, the effects on the economy have been significant.
One indicator of this is the Price Waterhouse estimate that our foreign tourism earnings would have been £500 million greater in the period 1975 to 1986 had we not fallen behind the general level of international trends. We are all too aware that this is only an estimate of the direct effect; there is no doubt that the wider effects on the economy as a whole are in fact far greater.
A number of recent reports on tourism have cited a variety of reasons for our poor performance. I think everyone will agree that our cost uncompetitiveness, including access transport costs, marketing approach lacking penetration and deficiencies in our tourism product, have been the main reasons Irish tourism has not prospered as much as it should. The failure of successive Governments to recognise the true potential of tourism and its importance to our economic wellbeing undoubtedly contributed to this situation. It is true to say also that the Irish tourism industry itself has not responded adequately to the changes in world tourism.
Given this background it is fair to say that much has been achieved in the tourism sector since the Government took office. As my colleague, the Minister for Finance, pointed out in his financial statement last week, our improved tourism performance contributed to the strong economic recovery in 1987. In fact, he attributed the economic growth to this improved performance, allied to a major advance in exports and a big increase in agricultural incomes.
There is no doubt that the 1987 crash programme for tourism was a resounding success, with significant increases recorded in tourism revenue and visitor numbers. Tourism revenue from out-of-State visitors is predicted to have totalled £721 million in 1987, an increase of 12 per cent on the 1986 outturn. The estimate, and this is more consoling, for the home holiday market, is for revenue of £290 million, over a third greater than the figure recorded for 1986. There is a market for us in this very competitive area. In total, therefore, tourism earnings for 1987 are predicted to have passed the £1 billion mark for the first time in the tourism industry's history. Overseas visitor numbers are predicted to have exceeded two million. We must now build on that success.
On taking office this Government undertook major policy initiatives which have introduced more competition into the access transport market. These have had the desired effect of lowering access transport costs. I can assure the House that further initiatives in this area will follow and that our transport policies will continue to be oriented towards increasing tourist traffic to Ireland, not just in the peak but also in the low and shoulder season.
In the medium term, the Government have set ambitious targets for the tourism industry. The Programme for National Recovery targets the tourism sector as a sector for major development. The objective over the next five years, as set out in the programme, is to increase foreign tourism revenue by £500 million, to double the number of foreign visitors and to create an extra 25,000 jobs. These are very ambitious targets. To achieve them will require radical changes in the whole structure and organisation of the tourism sector, in our marketing and product development.
As I have said, considerable progress was made in 1987 and the measures referred to by the Minister for Finance in the budget are aimed at continuing this work. In his Budget Statement the Minister announced the allocation of £4 million for a special package of measures for tourism in 1988. This decision takes account of the proposals which emerged from the recent tourism forum. A special advisory group have been established by the Government to ensure that these additional funds are expended in the most effective way possible. This task force includes representatives at the highest level from the industry and from my Department. In summary, their specific brief will be to identify how best this money can be invested for the betterment of Irish tourism in 1988. This is the first occasion in the history of the State when the Government have appointed a special advisory group for tourism and it is indicative of the importance this Government attach to the development of Irish tourism.
Access transport will be a key element in our tourism strategy. It is clear, however, that our marketing approach is in real need of an overhaul. Our marketing stance has been too generalised and vague and needs to be much more sharply focused. While the destination Ireland type marketing strategy portraying Ireland as a green island may have been effective in the fifties, sixties and early seventies, it is no longer so, although it is no harm to have the image. Today's tourist is much more discerning. The world is at his feet so to speak and he needs to be convinced that one particular destination offers him more or something different than another. With competition being so keen in the marketplace, we must adopt a more penetrative and effective marketing campaign with more emphasis on the selling aspect of promotion. With access fares falling there are enormous benefits to be derived from a more intensive and effective targeted marketing campaign. Bord Fáilte have been instructed to gear their promotional and marketing programme in this direction and to target in on special segments within those markets offering the greatest potential.
The failure of our marketing approach in the past is probably highlighted most in the German market. That market is the world's single biggest source of foreign tourism revenue. That comes as a surprise to some people but it is a fact. Yet Ireland's share, despite our relative proximity, is a miserable 1 per cent. This Government are determined to attack this market and our other main markets such as Britain, the USA and France much more vigorously in 1988.
The tour operators in the marketplace must be aware of the qualities and attractions of Ireland as a holiday destination. It will be a specific task of Bord Fáilte to put Ireland in the shop window much more prominently than heretofore. Bord Fáilte, however, must have the support of the industry in putting together the holiday packages and selling them abroad. Unless there is increased industry participation in marketing and selling Ireland, the forward momentum seen in 1987 and our lower access transport costs will be to no avail. There is no doubt that the industry itself will have to come closer to the marketplace, to heighten sensitivity and responsiveness to the needs of the modern-day tourists.
To sell Ireland we must have the right product. The recently published Price Waterhouse and Economist Intelligence Unit reports on Irish tourism referred to the need for increased investment in the tourist product. The former report also highlighted the growing importance of the special interest holiday market.
While the standard of our tourist accommodation premises is quite high, there is undoubtedly a need for developing amenities and facilities catering particularly for the special interest or activity conscious holidaymaker. Here again, this Government are determined to address this problem. As pointed out by the Minister for Finance in his budget speech, the Government last year decided to extend the tax benefits of the business expansion scheme to the export tourism sector. The scheme covers most of the tourist accommodation sector as well as a wide range of tourist-related facilities and amenities. I have no doubt that this scheme will attract significant private sector investment in the tourism product because of the many letters I got looking for information as to how it will work. It will help to expand the range of our tourism product and services. In addition, marketing companies specifically involved in marketing those tourist undertakings which qualify can also benefit from the scheme. That is very important as we are putting an emphasis not merely on product development and competitiveness but especially on marketing. I am convinced that this will give added impetus to industry involvement in marketing overseas.
The climate is indeed right for investment. In the general area of equipment and machinery, investment increased quite significantly last year and it is expected to continue this year. We have seen growth in Irish tourism in 1987, the rate of inflation is being held down — 2.5 per cent as I mentioned already— interest rates have fallen significantly and the Government are totally committed to achieving further growth in tourism.
There are other financial incentives which will help to improve the quality and range of our tourism product. The House will be aware of additional funds which are available for tourism development in the Border counties and Sligo. The board of the International Fund for Ireland (IFI) have allocated IR£3 million to a tourism development programme for this region — £1.35 million for an accommodation amenity development scheme and £1.40 million for an amenity development scheme. An allocation of £0.25 million has also been provided for a marketing scheme which offers incentives to North American tour operators to feature both parts of Ireland in their tour programmes.
I understand that considerable progress has been made in evaluating projects submitted for funding under these schemes and that, in fact, the IFI board will shortly be making offers of grant aid to selected qualifying projects.
In addition to the IFI programme, the Minister for Finance recently announced the availability of IR£8 million in funding from the European Regional Development Fund Special Border Area Programme for the development of tourism in this region. Matching funding will be provided by State agencies such as Bord Fáilte, the Office of Public Works and local authorities.
A steering group, chaired by the Department of Finance and on which my Department are represented, have been assigned the task of selecting projects suitable for funding from the large number of submissions received to date. The emphasis of my Department in so far as they can influence or advise in relation to these funds is on revenue generating projects which make a positive net value-added contribution to the economy and have significant potential for job creation.
The allocation from the national lottery of major funds towards the provision of a wide range of sports facilities and many other cultural and recreational facilities will also significantly benefit tourism. Indeed, the performances of some of our sportsmen overseas last year have put Ireland on the world sporting map and will undoubtedly highlight the attraction of Ireland as a venue for sporting events. There are no free holidays for anybody guessing who these sportsmen were who have done this.
The improvement in the quality and range of our tourism products, particularly all-weather facilities, is vital if we are to develop the domestic holiday market. In recent years the home holiday market has been a victim of the economic recession not to mention the competition from the sun destinations. I am glad to say that in 1987 we saw a growth of 33 per cent in revenue from Irish people holidaying at home. The improving economic climate, the more vigorous Bord Fáilte and industry promotion of the home market—there is the launching of a brochure this week—and more competitively priced holiday offers will ensure that this growth is maintained in 1988. In fact, I have paid tribute already in many places to the co-operation of the industry itself when the major drive was being made in 1987. Each sector came in with their offers of reductions in charges and this contributed in no small way to the success of the venture.
Our natural environment is crucial to the development of our tourist industry. The world today is much more conscious of the importance of a clean and pollution-free environment, to such an extent that it has stimulated the development of political groupings in all countries in Europe, in the United States and elsewhere. It is important therefore that we take great care to protect our environment. Some of the measures announced in this budget are specifically aimed at improving the quality of our environment. It is important, however, that the public at large play its role in ensuring that our environment remains pollution-free and our magnificent scenery remains so.
The activities of many Government Departments have a tourism dimension which had become somewhat neglected because of the inadequate degree of priority accorded to the industry prior to our accession to power last March. As one of the mechanisms which we instituted early on to place tourism at the top of the political agenda, we revamped the inter-departmental policy co-ordination committee on tourism which has high level representation from all Government Departments whose activities have a significant relevance to tourism.
My Minister of State, Deputy Lyons, has had exhaustive rounds of discussions with the members of the committee and reported to Government on a number of initiatives of relevance to tourism which are now being taken or expedited as a result of the committee's deliberations. Our natural resources, our environment, our cultural and architectural heritage all have significant possibilities for tourism and the Minister of State, Deputy Lyons, has injected a concern about their tourism dimension into these activities which was lacking heretofore.
Bord Fáilte has come in for much criticism of late. It is reasonable to say that the board's administration costs relative to the level of its direct promotional expenditure have been high. This was the main reason why this Government reduced Bord Fáilte's operational budget in 1988. I am currently reviewing all aspects of Bord Fáilte's expenditure programmes with a view to maximising the effective use of our resources. We are determined to maximise the level of direct promotional expenditure and to create a more lean and hungry promotional agency which will be capable of responding to the challenges ahead. It is our belief that the board's role should focus primarily on product development and marketing and that their resources should be spent primarily in these areas. A strong Government with forthright and positive policies, an active Department discharging a leadership and co-ordinating role and a development and marketing agency properly equipped to implement the policies of Government —these are vital to the progress of Irish tourism and to bringing the best out of the industry.
This Government are indeed bringing out the best in the industry. With our positive approach we have given the industry a new sense of purpose. We are prepared to listen to the industry and to give them a voice in the formulation of Government tourism policy. This was apparent in the Government's decision to convene a Tourism Forum recently which involved well over 100 industry representatives. I was most impressed by the extent of the positive contributions expressed by the industry at the forum. A number of the recommendations emanating from this forum will be considered by the special advisory group in the coming weeks. This group will come up with the necessary initiatives which I am convinced will see much further growth in Irish tourism in 1988. The tourism industry is fully behind this Government's efforts. I mentioned that already they responded positively to our 1987 crash programme. I am in no doubt that they will respond even more positively to our latest initiatives and that we can look forward to a bumper 1988 tourist season.
I shall turn now to the second sector of the economy for which I have responsibility, namely transport. In doing so I should like first to make some broad comments about the overall direction of transport policy, before dealing with a number of specific issues. As the House knows the Green Paper on Transport Policy, published in November 1985, presented the many initiatives and legislative developments which had been taken with regard to the sector. It also sought the views of interested parties on the direction of future transport policy. The response to this invitation has been very positive in that over 80 submissions were received by my Department.
All of these submissions were assessed fully within my Department and have been taken into account in developing policies for the transport sector. It cannot be stressed sufficiently, however, that there have been significant changes in priorities in the last year—both for the economy as a whole, and also for transport. We are all only too aware that the transport sector, as with all sectors of the economy, cannot be immune to the steps that have to be taken to secure long-term sustained economic growth.
At the sectoral level, there has been considerable pressure both nationally and internationally for more competition in the market-place. Liberalisation and deregulation are now an established part of our vocabulary. These are, however, more than mere "buzz" words. The trends to liberalise are evident in the transport sector more than in many other sectors of the economy. It is important therefore that the sectoral policies which are put in place ensure that transport operators can compete successfully in the market-place. Transport operators must not be frustrated in their efforts to tap the opportunities now being presented by the sharp increase in international competition, particularly within the European Community. Within the transport sector there is need for greater efforts to respond to customer needs, to hold down the level of charges and to apply new technology to improve efficiency. As always more dynamic management in the sector is a vital ingredient for commercial success.
The most significant shift in priorities for the transport sector in the last year was the reorientation of transport policy to service tourism. This is particularly evident in the case of access transport. This development underlines the fact that, as transport is a derived demand, the industry must be prepared to adapt to the changing needs of the economy and to the priorities for sectoral development which have been determined by Government. The transport sector has a significant role to play in helping to instil further growth in our tourism industry, and must recognise that servicing tourism is now one of its primary functions.
Since becoming Minister with responsibility for transport I have been putting in place a range of sectoral policies. In doing so I have sought to define the transport sector can operate—a framework designed to enable the industry to respond quickly to market fluctuations.
In setting a framework for transport my primary concern is to ensure that a sector operates efficiently within the domestic economy and that it helps to enhance our competitive position with our main trading partners. Productive resources must be employed efficiently in producing each transport service. At the same time, the transport sector should be producing the combination of transport services most perferred by society. It must also help improve the competitiveness of other sectors and ensure that it does not impose relative cost penalties on industry. Cost competitiveness is essential if Irish industry is to compete in the international market-place.
To conclude these broad comments on transport policy, I would stress that transport is a sector which absorbs a large proportion of scarce national resources. That has been quantified and it is on the record of this House. The manner in which these resources are used must support and contribute to the primary goals of national economic and social policy as set by Government. The State's involvement in the transport sector is significant, not least through the State transport companies. Within the sectoral framework for transport I am determined that these bodies must operate efficiently and profitably.
As regards the air transport sector, low air fares and easy access are two vitally important components in the formula devised by the Government for the development of our tourism industry.
In relation to fares, increased competition in our main markets together with the support by our own air carriers for the Government's plan for tourism now mean that for 1988 we will have the most competitive fares in the market for a number of years. On the London-Dublin route inbound promotional fares are available at £57 sterling, IR£63 equivalent. Fares at somewhat similar levels are available from UK provincial points, e.g. Liverpool or Manchester-Dublin at £61 sterling and Glasgow or Birmingham-Dublin at £81 sterling. The French and German markets are key target markets for tourism. I have mentioned these already. Very attractive new fares from these key markets have been approved by me in recent days; for example, Apex fares of 599 Deutsche Mark, IR£225, and 659DM, IR£248, from Dusseldorf and Frankfurt respectively will apply this summer. A new midweek Apex fare level of 1,090 French francs, IR£125, is available from Paris. These fares are considerably lower than the lowest fares available from these continental points in summer 1987, which were 747DM, IR£281, from Dusseldorf, 830DM, IR£312, from Frankfurt and 1,355FFR, IR£151, from Paris.
On the North Atlantic, Are Lingus, Northwest and Pan Am have introduced a low advance purchase "sale" fare which will apply to sales up to 29 February for travel this summer at levels of $449 in the shoulder season and $479-529 in the peak season from New York-Boston to Shannon. The "sale" fare involves up to a 25 per cent discount off the apex fare level and is up to $225 cheaper than the comparable level to London which of course was the competitor. Delta Air Lines have a "sale" fare from Atlanta to Shannon at $577 in the shoulder and $607-657 in the peak season. Despite the weakening of the dollar, these fares are broadly in line with 1987 levels.
As regards easy access, there have been a number of initiatives in recent months to open up access to Ireland as a tourist destination. Three new services have been introduced to open up the west of Ireland—it is a pity to have the beauty of the west concealed from the rest of the world. Sligo and Galway airports are now served from Dublin by Aer Lingus while Connaught Regional Airport is served from Dublin by Ryanair. These new services should give an added and valuable boost to the west. In addition, I have applications before me for scheduled services from Farranfore which I will decide upon shortly.
As a result of the adoption of the EC package on the liberalisation of air transport in December last, a number of new services have been approved. Ryanair have commenced direct services between Cork and Luton and next month they will commence new services between Shannon and Luton, Galway and Luton and between Dublin and Manchester. I hope to announce shortly further decisions on a whole range of applications from Irish carriers to operate new services between Ireland and the UK and Continental Europe on a third-fourth freedom basis and also on a fifth freedom basis.
Tourism is also being given an added fillip as a result of the liberalisation of charter rules which I announced in November. This is very important and we should continue to highlight it. As a result of these initiatives new charters to Ireland from France, Germany and Italy will operate this coming summer and will be allowed to compete on the same routes as scheduled flights and that is another important point. They will be allowed to mix in some Irish custom with their indigenous custom. In an expected difficult year on the Atlantic the new charter rules will sustain charter flights which might otherwise not have come here.
Turning to sea transport, I am glad to see that the ferry companies are not bemoaning their recent loss of market share in the traditional foot passenger market associated with the low cost air services. On the contrary, as evidenced by recent fares and promotional initiatives from B & I, Sealink and Irish Ferries, the ferry companies are vigorously defending their market position and are making a special effort to exploit their competitive advantages in the motoring holiday sectors. There is some trouble at present in the Sealink operation. I hope it does not last too long.
Staying with the B & I, the House will be aware that the B & I line is implementing a plan of action aimed at remedying the company's financial problems. On the basis of this plan and its across-the-board support by the company's workforce the Government have agreed to provide the company with up to £11 million in Exchequer equity in 1988. The position of the B & I will be reviewed not later than the autumn of this year—we are very insistent on this—on the basis of detailed comparisons of the company's performance against budget. We expect that the B & I management and work-force will continue to work hard to ensure that the plan will be a success. When I say will be a success I mean that the company will become viable and will not depend on support voted in this House.
In a growing tourism market there is clearly scope for all operators, both air and sea, to enjoy the benefits of increased passenger traffic and in the process contribute to the overall growth of tourism.
Finally, the sea carriers also make a significant contribution—in fact are vital —to the economy in the transporting of freight. The amount of contact with my Department today as a result of the problems in Sealink, for example, by people who are trying to get fresh meat out of the country, is an indication of how much a contribution they actually make. In this context the strike by the National Union of Seamen in the UK is a cause for concern given the impact it is having on freight services to and from Ireland. I would be particularly concerned for the impact on Irish exports if this strike is not soon resolved.
I would like to stress the commitment of the Government to stay on course and to secure a resumption of economic growth. As I said at the outset, that is the whole purpose of getting the finances in order. It is not an exercise we are indulging in for its own sake. It has as its objective, economic development, the development of the country and the consequent provision of employment. The budget is clear evidence of that commitment. We shall continue with our policies to control and curtail public expenditure to achieve the fiscal targets set in the Programme for National Recovery. Those targets are part of a comprehensive strategy for economic recovery which includes maintaining a stable exchange rate, improving competitiveness through pay moderation and changes in structural and incentive policies. The Government are making the right moves in a situation of limited options. In essence, we are seeking to provide an economic environment which will attract productive investment and create sustainable jobs.
We had an opportunity before Christmas to debate in some detail the activities of the major inland transport company, CIE, and for that reason I have not emphasised CIE in my speech on the budget. The House had an opportunity to go into great detail on the activities of CIE on the two Acts which are now on the Statute Book and which were debated in full in the House before Christmas.
Mar fhocal scoir, caithfidh mé a rá gur léirigh an Rialtas sa cháinaisnéis seo a dháiríre atá siad beart a dhéanamh chun feabhas a chur ar an staid airgeadais poiblí agus fás a chruthú athuair in eacnamaíocht na tíre. Glactar leis i gcoitinne anois go bhfuilimid ar an mbóthar ceart. Leanfaidh an Rialtas ag cur leis an dul chun cinn atá déanta go dtí seo chun fás aíocht, chun níos mó fostaíochta a chur ar fáil agus caighdeán maireachtála níos airde a chruthú do chách.
Apart from the £4 increase in social welfare benefits for the long-term unemployed the budget was by and large dull, non-productive and uncaring. That view has been accepted by many people. The anticipation was there, the build-up was there and so was the advance PR. We had all the necessary political chemistry that invariably leads up to such a budget. There was an air of expectation that when the Minister opened his briefcase he would unveil an imaginative plan which would again ignite our economy. However, when the Minister had concluded his speech there was an air of gloom, shared by economic commentators and the various segments of our economy and, indeed, by outside experts, that it was a deflationary budget, one which will take money out of the economy and which will, sadly, provide zero, minimal or minus growth. It was not the type of budget we required.
All sides welcomed the Minister's generosity to the long-term unemployed It was long overdue because those recipients deserve special care and attention. That concession should have been introduced many years ago, particularly when the upward spiral of unemployment commenced. However, there is another sector of our society in need of special attention, widows, orphans and deserted wives. I welcome the addition of 11 per cent to the income of the long term unemployed but the windows, orphans and deserted wives should have been given special treatment. Those people suffer heart-rending loss that cannot be compensated for by all the money in the world. I urge the Minister, or the person who will have charge of the Finance portfolio next year, to look at the plight of those people and consider giving them a substantial topping-up in their benefits. There are many ways the Minister could help those people apart from a cash increase. He would be well advised to look into the possibility of giving them some of the ancillary facilities given to old age pensioners. I am referring to the free telephone allowance, which would be of great benefit to widows who lose the companionship of a partner, and the free electricity allowance.
The general consensus is that the budget was a budget of missed opportunities, particularly in view of the fact that there is widespread consensus about the need for drastic remedial action to right our economy. There is a consensus about the need to get our economy back on course, to reactivate growth, to generate dynamism and confidence. Most people believe the Government missed an opportunity to introduce tax reforms. We saw under the Coalition that while we may hand out additional tax free allowances, increase PAYE allowances, juggle the tax bands around and move more people into the lower tax band at the end of the day it all amounts to tinkering and juggling with the system. We are not reforming it fundamentally.
At a time when the Fine Gael Party are fully committed to the recommendations of the Commission on Taxation I regret the Minister did not grasp this nettle and bring about a fundamental reform or restructuring of the tax code. I regret he did not harness the goodwill that has been evident from this side of the House. Had he done so he would have left an indelible mark on our economy. The year 1988 would go down as the year when the disincentives of our tax regime were removed. People could look at a more kindly tax structure which would give them the necessary incentive to invest, to roll up their sleeves and work, happy in the knowledge that they would not be clobbered by punitive taxation every time they added another pound to their pay packet for productivity. I am sorry the Minister did not grasp that nettle particularly when there is a danger that consensus might break down in the future.
One of the startling features of the budget—it was alluded to by way of denial by the Minister—was the omission of any positive or constructive input by way of job creation. It is incredible that at a time when we have 250,000 people out of work, a projected emigration figure of 30,000, and in the region of 140,000 non-status and unregistered Irish people in the United States who are looking across the Atlantic Ocean for some beacon of hope, the Minister did not brig forward an imaginative job creation programme. There is no doubt that emigration is the greatest human tragedy we have experienced since the Famine. Collectively, and individually, we have done very little to stem the tide of emigration. There seems to be grim acceptance of the fact that it is inevitable. It seems to be ingrained in us that there is little, if anything, we can do about it. Surely it is an indictment to us all that we have failed to make a substantial dent in that problem.
Up to now emigration has been confined to young people, post-intermediate, post-leaving certificate and those with RTC diplomas or university degrees. They were mainly single and unattached people. However, there is evidence of a new type of emigrant who was part of the emigrant trail some years ago. There is evidence that young married people are being forced to emigrate leaving behind children, wives and mortgages. The budget has not addressed that tragedy.
We all accept that there is a need for prudent management of the economy and that there must be fiscal rectitude. If it is described as monetarism so be it, but the important thing is that we must stabilise the national debt and get our ratios and percentages right. One would have thought it would have been possible for the Minister to achieve a balance between cutting on the one hand and giving a stimulus to the indigenous growth potential areas on the other hand. This did not happen. The Minister for Transport has just alluded to progress and innovations in the area of tourism but there are other indigenous areas of the economy which were not give the necessary stimulus.
One of our traditional labour-intensive industries is the constructon industry. We all received pre-budget submissions putting forward cogent arguments for the resuscitation of this industry. I am sure the Minister for Finance received far more compelling submissions than those which were sent to backbenchers. The Minister's concession in re-introducing section 23 will not have the desired effect of regenerating growth in the construction area. Whether we like it or not, this industry has become used to being fed on loans and grants. We have virtually abolished SDA loans and terminated the grants which were a vital support. In view of the frightening number of lay-offs in the construction industry, it was felt that the Minister might conceivably reintroduce some modified form of the house improvement grant scheme. Apart from creating jobs, this scheme was singularly effective in luring people out of the black economy and ensuring that much needed remedial work was carried out on dwellings. The money expended by way of grants quickly found its way back into the economy by way of taxes and spending power and made a significant impact on employment. The mortgage subsidy was also abolished and this decision should have been reconsidered. People applying to local authorities for essential repairs grants and disabled person's reconstruction grants are receiving replies to the effect that the local authorities have not yet been notified of their allocations for the coming year. This is an indication that the grim news is about to be conveyed to them that the schemes have been terminated for this year. Another meritorious grant which should have been reintroduced on a scaled down or modified basis is the special tenant grant. Nothing substantial has been done for the construction industry and one can readily identify with their sense of bewilderment.
Everybody welcomes the initiatives in the tourism area. There would be general consensus that the Minister for Transport and Tourism has taken on the task of rolling up the sleeves and doing something to shake up the tourism industry. I am somewhat bewildered by the global figures for tourism earnings last year. We are told that earnings from tourism in 1987 exceeded the amount earned in 1986 by £2 million. I do not know where those tourists were. I wonder what kind of system is used to collect the data on which these global figures are based. Tourists were certainly not evident in increased numbers in the Ireland west region. I would imagine that our tourist statistics for last year were down. There is certainly a case for a transport subsidy or some kind of additional incentive to lure people to what is generally recognised as the most beautiful part of the country. People should be encouraged by every means possible to come to this largely untapped tourist haven. I do not believe, however, that £4 million is enough. I look with a certain amount of scepticism at the setting up of the task force. We have had too many think-tanks and task forces in the past. What we need now is positive action. I welcome the Minister's initiative in calling in the various interest groups and tapping their inspiration, experience and knowledge. An emergency package should have been developed to get our tourist programme off the ground for 1988. The Minister has rightly identified the fact that there is something seriously wrong with our tourism industry. We have failed to exploit the marvellous chemistry for an all-year-round industry, perhaps due to lack of marketing, maladministration or lack of administration. Nobody comes here for the weather. We have other factors which are marketable on a year-round basis, but for some reason we have not produced the desired results.
I am concerned about the proposal by the Minister for Finance to transfer responsibility for the recoupment of various duties to disabled drivers from the Revenue Commissioners to the eight health boards. These people are given concessions in the form of exemptions from duties and taxes. These concessions were introduced by various devices in this House. The first movement in this direction was in section 43 (1) of the 1968 Finance Act which gave a percentage exemption from road tax to drivers of cars which had been modified for disabled drivers. Subsequent Finance Acts amended that section. Then we had Statutory Instrument No. 57 of 1979 which related to exemptions from excise duty. Statutory Instrument No. 307 of 1975 dealt with excise duty on petrol. I think it was in 1980 that we had another statutory instrument which brought in a concession in value-added tax.
All of those concessions have been vital with regard to rehabilitating the disabled. I honestly do not believe there is substantial evidence of any abuse of the scheme. It has been acted upon with discretion and fairmindedness by the Revenue Commissioners. The Minister now proposes to devolve power for this particular scheme from the Revenue Commissioners to the health boards. The health boards are already under pressure. They do not have the competence to deal with the scheme and in my honest opinion if they were asked whether they wanted to run the scheme they would run a thousand miles from it because they have enough administrative problems already. I welcome the indication by the Leader of this side of the House in his address on the budget that he would be seeking on Committee State of the Finance Bill very clear valid, definite and compelling reasons for this measure from the Minister. I think there was a message from this side of the House to the other side that unless those valid answers were forthcoming we would be compelled to vote against that section of the Bill because there is no saving involved. It does not make rhyme or reason and will merely create another administrative red tape jungle.
I welcome the decision on the retention of mortgage interest relief. I think the intention to change it was headed off by this side of the House. Again I welcome the decision to retain tax relief on voluntary health insurance, and also the decision to restore the young farmer's installation grant.
The Minister for Transport and Tourism laid heavy emphasis just now on the need to have greater access from the transport view point. We share this view. However when one looks at the funding that has been given to local authorities this year one sees in fact that the funding to every single local authority across the board has been cut to the bone. The minimum amount of money for maintenance, repair and improvement for roads has been provided. If we are to achieve road standards which are comparable with those of Europe and if we are to lure people in on the ferries at Rosslare, Cork and Dún Laoghaire, we have to promote the development of national, primary and secondary routes, and funding is what is required. I see in my county, which is on the furthermost perimeter of the European Communities, that we are to get this year a princely sum of £1.4 million for national, primary road development. This is negligible; it would hardly remove a decent sized S bend on a national primary road. Unfortunately this has been the pattern thus far in relation to our commitment to funding, particularly on our national primary and secondary roads. We go along and see fine stretches of marvellous road, in some cases dual carriageway and then we have bollards and clowns hats and all types of palings and railings warning us that the road is narrowing and narrowing drastically and that there are black spots ahead, of which unfortunately we have far too many. However, there is money in the EC which we have not drawn down and we are not drawing down our share of the Regional Fund. Perhaps it is difficult to come up with the pound for pound finance that is required, but I honestly believe that if we are to make the impact that the Minister for Transport and Tourism feels we should make in the tourism area we must have a greater input in development of the national primary and secondary road system. As a Mayo man I was very disappointed that the total amount of money allocated to Mayo this year for roads was £6.8 million, when a link road on the outskirts of Dublin is being given £7.5 million — but more of that anon at Mayo County Council level.
The budget has been generally accepted as being mild, because the soft palliatives are what we have seen so far, the increases in social welfare, the tax concessions, the rejuggling of the tax bands et cetera and a little bit of stimulation here and there with the reintroduction of section 23 for the construction industry. But the real trauma and drama have yet to come. You will recall that just over 12 months ago when the budget was being devised by the previous administration the race of death for the pull-out of the Labour Party was their inability to cope with cuts in capital expenditure of £250 million. That budget was eventually adopted by the Government of the day together with the cuts of £250 million. This budget proposes cuts in the region of £480 million, so that it is only when it is taken Department by Department and as the revelations of further hospital closure, ward closures and people being turned away from hip replacement operations and failure to develop on school buildings, it is only when all the cutbacks begin to happen in each Department, that the real political crunch and build up will come on this budget. It will build up because £480 million is the net cut.
I thought you supported the thrust of the budget.
We do but we want a little dynamism and imagination as well.
The school building programme is one of the areas I wish to talk about because, while a certain amount of play was made of the fact that £6.8 million was being provided in the budget for this area one notices that the word "refurbishing" is an addendum to that particular section. I am afraid that refurbishing is where the vast bulk of the money will go because we will see very very little by way of start-ups this year. By and large in the immediate future we can expect refurbishing, nailing up, and new windows and doors to keep out the draughts in the primary sector, and £6.8 million will not go very far in that area.
One of the most forceful of the pre-budget submissions that have always been made to public representatives and to the Minister for Finance, in particular, is from the motor industry. However, there was nothing positive for the motor industry in this budget. The motor industry, like the construction industry, has a high job content and has been high on the casualty list in terms of job losses. There was nothing in the budget for this industry. We collectively bemoan the decision to put an additional 4p on diesel and 8p on petrol. The facts are quite compelling and startling. New car sales are down from 106,000 in 1981 to 60,000 today. Petrol sales are down by 17 per cent from 1.3 billion litres in 1980 to 1.1 billion litres today. The total motoring taxes are up from £482 million in 1980 to over £1,000 million today. In 1980 there were 734,000 cars on the road and today there are only 700,000 cars, many of which are substandard vehicles which are not being put through the necessary rigorous inspections and test to ensure that they are roadworthy. One should look at the job losses in the motor industry which are down 9,000 from a figure of 24,000 in 1980 to 15,000 today. That is apart from the loss of something in the region of 9,000 jobs in the auto-motive components exports. Again another, albeit service area, of the economy has been struck a devastating blow.
As I indicated in my opening remarks the social welfare increases are welcome. Everybody lauded the Minister for giving the additional 11 per cent to the long term unemployed. However there is real poverty in this country and the Combat Poverty Agency and various charitable organisations have made very strong submissions. What is noticeable in particular with regard to poverty is that it is not just ordinary pressure groups who are making the pleas; submissions are coming from religious orders, social workers and people who are in day-to-day contact with people who are in crying need through poverty. I honestly believe the politicians have failed to identify and reach out to this section of the community. While the payment of £4 per week might seem to be a significant increase for a single person on unemployment assistance, that person receives no other ancillary benefit apart from the welcome addition this year of the free fuel allowance for such people — and this is denied to people in rural areas or anybody who has a square perch of land. Apart from that, £42 per week in this day and age is not adequate. I know resources are scarce, but we must do something significant in this area.
Going back to the genesis of the Unemployment Assistance Acts, there seems to be determination in the Department of Social Welfare to retain the dual structure in relation to social welfare. We have the urban rate and the rural rate and the urban rate is approximately £2 higher than the rural rate. That was done on the very valid evidence and assumption years ago that it was more expensive to live in a city or a large town than in rural areas. I submit that the shoe is now very much on the other foot in view of the fact that competitiveness among distributors, etc., door to door services and the proliferation of chain stores in urban areas and cities have made possible access to cheaper services and facilities all round than have people in rural areas. It is time to look at this disparity.
The marriage rate of £70 is not a living wage; it is an existing wage, a subsistence wage. The 11 per cent does not apply to disability benefit holders. I share the view that unemployment assistance people are a special category. The Minister in his Budget Statement said that the rate of disability benefit for a married couple is £71.80 but only if it is topped up with pay-related benefit, and that does not apply in all cases.
Years ago in rural Ireland what I regard as a very laudable scheme operated. It was superseded by the small farmer's dole. Many people in rural Ireland would genuinely welcome going back to the system where people had six months on and six months off. They worked for the summer period and were on the dole for the winter. Many people on small farmer's dole would welcome a working wage from a local authority. One thing that strikes me is the mental breakdown that seems to exist when moving resources form one Department to another. There is so much work to be done and so many people to do it, it is only a case of gelling the lot into some scheme which would give people six months on and six months off, a scheme so much part of the system in rural Ireland years ago.
The Minister for Tourism and Transport, Deputy Wilson, made an excellent speech in this House this evening. I was struck by the vast contrast between the rhetoric he used and the rhetoric used by the Minister for Finance of the last Coalition Government in greeting the budget. Things have changed utterly. It is unfortunate that the conversion came late in the day. The cuts and reductions of £480 million and the public outcry we witnessed and will witness as the cuts bite in every departmental area would not have been necessary were it not for the fact that from 1982 until 1987 every logical economic cutting measure proposed by Members now on this side of the House was taunted and obstructed in its passage through the House. Had we learned the economic lesson and introduced consensus politics five years ago we would have a much easier existence now.
The halving of the capital allowances has not been greeted with any type of welcome by the business community. Even though targeted for the job area to take the emphasis and focus away from machinery and plant to employment, I fail to see it having the desired effects. My analysis and that of people far more expert than I is that, while 1987 was a dull year, 1988 is going to be a grim year, in particular for people on the periphery or in marginalised jobs because their standard of living will drop.
What adjectives would the Deputy use for the previous four years?
I see the greatest chance of economic survival, apart altogether from revival in rural areas, in a speech made in October last year by the Minister of State at the Department of the Taoiseach, Deputy Máire Geoghegan-Quinn. She said this Government were committed to integrated programmes by way of utilisation of the Regional Fund. I hope structures, ideas and plans are now in place to do that. I make a special plea that the Ireland west region, a region that has been devastated by emigration and has never got cothrom na féinne, should be the target of an integrated programme. The regions themselves, apart altogether from the west, have the necessary dynamism to harness the indigenous resources that exist within them if only given the chance and if we could eliminate much of the centralisation that is so much part of the economic fabric at present. I was disappointed that, when an announcement was made of grant aid to various parts of the country and various projects some three weeks ago amounting to £239 million, the entire western seaboard from Donegal to south Kerry got a mere £600,000. That underlines and emphasises the need for areas to be designated for integrated programmes. The people have the ability, the will, the indigenous fabric and the necessary capacity to develop ourselves if we get an opportunity.
The Minister for Tourism and Transport laid heavy emphasis on the need for competitiveness. We should be looking at our main competitor, our main market. England is where the bulk of our goods go. England is our main competitor and should be our target in relation to increased or better competitiveness.
I welcome the Minister's initiative in relation to the reduction of air fares. Deregulation of air fares imposed from the outside and supported by national Government here has been one of the singular success stories in the past year, but I am baffled as to why the Minister refused to grant Aer Lingus the licence to operate from Horan International Airport and decided to keep it monopolised by Ryanair. I admire Ryanair. They brought rationale common sense and low fares into the system and are responsible more than any other factor for the greater numbers of people in the air today. However, it is shortsighted on the part of the airport directors and the Minister to keep the national carrier, who, after all, bear the prestige name, out from any airport. While my view is not shared by the members of the board of Horan International Airport, it is shared by the vast majority of people who have the interest of the airport at heart.
I welcome the Minister's thrust in the direction of the German market. It is scandalous, in the context of our entire tourist population and the revenue derived from tourism, that we get only 1 per cent from Germany. There is a rich harvest out there.
One thing that to an extent has gone unnoticed by John Citizen is that part and parcel of the Government's revenue this year has been the £31 million total clawback of repayments from the ESB. While it is fine as a short-term measure, I hope it will not become the norm. One looks with a certain foreboding at references in the newspapers to the possibility of privatising Irish Life which offers a very attractive prize in a sale price in the region of £232 million. Privatisation is OK in its own way, but there must be always a fairly substantial State control of many sectors of the economy. If we begin to shed those, where do we end? If we start with Irish Life will it be the ESB next, BTE, An Post and Bord na Móna?
Basically, the components of the economy have come right and much of what is now happening has been built on the foundation that was laid by the previous Administration, an Administration who took a lot of flak, stick and derision from the public and paid a high political price, an Administration who did much the same in the years 1973-77 and, again, paid the price at the polls.
Our interest rates are coming down and long may they continue to do so. Inflation is down to something in the region of 2 per cent. Competitiveness is becoming part and parcel of our fabric and is something that we were seeking, and rightly so. Our balance of trade achievements have been startling and substantial and are very welcome. Debt stabilisation is no longer something to be vainly sought after: at least it now appears on the horizon.
So long as the Government chart a sensible fiscal rectitude course, coupled with the necessary imaginative, stimulative growth promotion, they will, by and large, have the responsibile support of this side of the House. I do not think there will be any equivocation about that. However, one thing that does worry me is that while we have zero growth this year, and it is anticipated that growth next year will be in the region of 3 per cent to 4 per cent — and that is what is required if we are to stabilise our borrowing requirement — will the necessary incentive for investment or money be there in the first place? I hope so.
I listened with amusement to the contribution of the Deputy on the far side of the House, particularly when he accused the Minister of not putting enough money into the roads in Mayo because his two colleagues in Wexford are forever accusing the Minister of hijacking all the moneys for Mayo and not giving enough to Wexford. He should have a word with them and tell them that is not the case.
The budget, as put forward by the Minister for Finance, is a good one. It reflects the Government's determination to get the finances of the country right while, at the same time, looking after and developing the economy in the best interests of the people. It is a continuation of the policy initiated by the Government when they came into office last March and confirmed later in the Programme for National Recovery which was signed by all the social partners. The priority of the Government is to build up confidence in the economy, to sustain a strong level of growth and open up the way for new employment. Recent months have demonstrated that the Government are on the right course: interest rates are down substantially since last March, investment in plant and machinery is rising, inflation is at its lowest level for 20 years, there have been major new specific development initiatives in the food processing and tourism areas; there has been the Custom House development in Dublin and urban renewal development throughout the country.
The Deputy on the far side spoke much about his party's support for us. I think it is a case at this stage of the Government doing what they feel is in the best interests of the country and its people and if the Opposition parties dislike what we are doing they have the option of voting against us, going to the country and letting the people decide what they want. However, I am confident that the people are very much in line with what the Government are doing at present.
The budget outlines a number of important changes and strategies that will be in the interests of people in the months and years to come. The taxation package in the budget adds up to a major reform. Many Governments in the past spoke about the taxation system and the need for an incentive, particularly in the PAYE sector, to encourage people to continue in a work environment but no Government had the conviction to change it. I compliment the Minister for Finance on the changes he has made. They incorporate the most significant changes for years, perhaps since the introduction of PAYE in the mid-sixties. It is a concerted plan to overcome the problems in the tax area.
The Minister must be complimented also for trying to tackle the problem of mounting arrears. Numerous business people, farmers and self-employed people who want to pay their taxes, without having to pay the crippling interest involved, have come to Deputies with their problems during the past number of years. I have heard of cases of people who owed £40,000 in tax but because interest had accumulated over the years they owed about £80,000 or £90,000 and there was no way they could pay their tax arrears without folding up their businesses. The Minister has now given those people an opportunity to get their taxes up-to-date and if they pay between now and next September the interest will be written off. The introduction of self-assessment for the self-employed is another move in the right direction. There is also a fundamental overhaul of corporation tax in the budget. Each one of these items represents a major reform in its own right and, taken together, the taxation package is a move in the right direction and is a courageous decision by the Minister.
The Programme for National Recovery included a number of tax packages for income tax payers who would benefit over a three-year period. The 1988 tax relief of £91 million is more than three times the cost of indexing the personal and PAYE allowances and the bands that were expected. The PAYE sector are targeted for a special relief with an increase of £100 in the PAYE allowance. This package goes more than half-way towards putting two-thirds of taxpayers onto the standard rate of tax. Ninety three thousand taxpayers will move from a marginal rate of 43 per cent to 35 per cent. Without the package taxpayers would be paying tax at the standard rate of 48 per cent. In addition, some 55,000 taxpayers will have their marginal rate reduced from 58 per cent to 48 per cent.
The people in the PAYE sector in the real world recognise that this is a move in the right direction. Those people feel that we now have a Government who are prepared to look at the taxation system, who see that it needs reform and who will do something about it. I hope that next year or the year after we will see more courageous reforms in the taxation system that will benefit the PAYE sector. For far too long they have carried too heavy a burden of taxation while other sectors have not paid their fair share. I hope the Government will continue on the courageous road they have gone in reforming the taxation system and will ensure that in the future there will be an incentive for people to work and that all sectors will pay a fair and equitable share of taxation.
Social welfare payments will be increased by about £44 million from July 1988. In passing, I would like to refer to the free fuel scheme which is being extended to rural areas. As a Deputy who comes from a rural constituency, I can assure the House that the decision by the Minister to extend the free fuel scheme to people on unemployment assistance in rural areas was very welcome. It means that those people got an extra £5 per week and in many cases that extra £5 meant that they could have heating, could live above the poverty line and have a reasonable standard of living during the winter months. I compliment the Minister for Social Welfare on extending the free fuel scheme to rural areas. I agree with the Deputy on the far side of the House that there should be no discrimination between rural and urban people in the area of unemployment assistance. I hope that the Government and the Minister for Social Welfare will move in that direction when more finance is available.
The 3 per cent increase in widows' and old age pensions, unemployment and disability benefit and other weekly benefits is in line with inflation. I welcome most the increases in unemployment assistance and in the supplementary welfare allowance. There is an 11 per cent increase in the personal rate of long-term unemployment assistance and supplementary welfare allowances and a 6 per cent increase in the rate for dependent children. The streamlining of rates for child benefits is very welcome. The special increases are a major step in the Government's plan to provide additional assistance for those on low social welfare benefits. Single people particularly have been on very small incomes. This is the first time any Government have recognised this. Some people will say that the Government have not gone far enough, but they have made a start. The last Coalition Government, strangled in many ways by the Labour Party, did not make any changes in this area. The single person on long-term unemployment assistance will now get an increase of £4 per week and the married couple with three children will get an extra £6.70. Single people very much appreciate this extension in unemployment assistance. While they would like to get more they appreciate that we are moving in the direction of giving increases and hopefully those increases will continue next year and in future years.
The Government must look at the position of widowers who do not get a fair deal. There has been a lot of talk about equal rights for women and about women's movements and so on. I support everything that has been given to widows and I would like to see them get an increase but there are many cases where a man, a widower, is at home trying to look after children and his only income is unemployment assistance plus an allowance for the children and his income is way below the income of a widow. There is a serious problem here causing hardship, poverty and misery for families. This problem should be considered very quickly so as to raise the living standard of these people.
When people talk about homelessness they tend to refer to homelessness in Dublin and in the major cities but this problem extends throughout the country. I hope that some of the allocation of £3 million for the next three years will be spent in the rural constituencies where it is also needed. Many young people for various reasons seem to be moving out of their homes and into unfit living conditions. This problem must be looked at.
The Minister has been compassionate in his attitude to the refund of drugs scheme. There has been an increase in the moneys available for this scheme which caters for unfortunate needy people. I welcome the fact that the Government are providing money for this despite the many cutbacks and the demands on our resources. It is important to continue to care for the sick and less well off in our society.
There have been a number of changes which will benefit the agricultural sector. The reintroduction of the installation grants for young farmers is most welcome. Deputies have fought for the last nine or ten months to ensure the reintroduction of this scheme. The scheme is retrospective and is certainly in the best interests of the development of farming. It is important for young farmers to be able to avail of lands as soon as possible. This scheme encourages older farmers to make over their farms to young people. The young farmers are the people who will develop agriculture. The stock relief has been maintained as has the calculation of levies on income after capital allowances, which has been a bone of contention with the farmers for a number of years.
In relation to the tax amnesty, that will be of major benefit to the farming sector who are in arrears in their tax. It should certainly encourage them to pay up. Self assessment will benefit farmers in the future. I hope that as many as possible will avail of this system if introduced in the near future. When they get this opportunity I hope the farmers will pay their taxes.
Some farmers have said that it is not equitable for them to pay the rates of PRSI being demanded. The PAYE sector have been paying PRSI for a long number of years. It is only right that the self-employed and the farming community should be asked to pay their share towards old age pensions. I would ask the farming organisations to make the necessary sacrifices and pay the appropriate PRSI rates. It is in the best interest of the country and in the best interest of the farming community in the long term.
The Minister this morning referred to local government reform and the need to have reforms implemented. We all agree that local government reform is an urgent priority. There is need to put local government on a sound financial footing so that local authorities can provide services for the people in future. The Minister did not spell out what he has in mind but I hope the charges in relation to water and refuse will be looked at. We should have a system which will provide a more constructive financial package for the development of local authorities. The charges at the moment are inequitable. They vary from county to county. Some counties have strong local authorities while other local authorities are feeling the pinch, such as my own in County Wexford.
County roads are in poor condition. There is need for more money in this area. Because a large amount of investment went into the building of these roads it would be a pity and not in the best interests of any government to see them end up as dirt tracks or dust roads again. We must look at the roads structure and ensure that finance is available to bring it up to the necessary standards.
A development much welcomed in Wexford town was the urban renewal scheme. Wexford was designated as an area for urban renewal. I hope the business people in conjunction with Wexford Corporation will avail of this package to create much needed jobs in our county where unemployment is causing a serious problem. Unemployment is one of the big problems for all parties in this House. We all recognise that having a quarter of a million people unemployed is not in the best interests of this country. It leads to all sorts of social problems. I hope the Government will continue to develop our natural resources to ensure that jobs are created quickly.
We have spoken about tourism, the food industry and other areas but one must look at fisheries and forestry. What is needed is quick development of those areas to create jobs. In 1986, 7,000 hectares were planted and, in 1988, 10,000; this is a 50 per cent increase in two years. It shows that the Minister in charge of Forestry, Deputy Smith, is doing a good job. We need now to translate that development into jobs as quickly as possible. Dramatic improvements are taking place in forestry. There is need for more financial support at EC level. There are one million acres of land ideally suited for forestry industry. I should like to see private enterprise, the farming community and others take an interest in forestry, particularly in view of the problems in agriculture at present. There would be financial and job spin-offs from investment in forestry in the next few years.
I could not conclude without mentioning unemployment in County Wexford which has the highest rate in the country and there are many reasons for that. The county has been neglected over the last six or seven years by Government and by the IDA. Many of its old industries which were related to agriculture have closed down because of lack of resources necessary to change with the times. In general, Wexford, which is the model county, the home of agriculture, has seen a decline in that area. The IDA have not done anything to solve the unemployment problem there. I realise that they cannot provide the answer to all problems, but they can at least ensure that people are brought into the county and encouraged to set up industries there.
Regionalisation has been the priority of different Governments over the years. I would say to health boards, to the IDA, to all these bodies based in County Waterford, that Wexford has had no advantage whatsoever.
Waterford does not have a health board.
It is a shame that the IDA continue to neglect Wexford as they have done over the years. How can jobs be developed in a county where there are no advance factories? IDA policy is not to build advance factories there because there are too many factories in Dublin and other parts of the country. My answer is that if there is not an advance factory in Wexford, people will not be encouraged to set up business there. Recently, Padraic White announced that he expected a major job creation programme by the IDA in 1988. I hope that he is correct. I hope he looks further than Dublin and the other major cities, that he looks at counties such as Wexford which has massive unemployment and from where young people are emigrating in their thousands and that he decides to encourage industries into that county.
Minister Reynolds has given us every encouragement in the last few months to attract industry to Wexford and even more pressure should be put on the IDA. There should be more streamlining, more reorganisation. We are not getting value for money from the IDA at present. They have fancy offices; they are full of bureaucracy and red tape. Their output and job creation in the last few years leave a lot to be desired.
Overall, I welcome the budget. It is going in the right direction. The tax incentives, social welfare incentives and others announced by the Minister will show the people that while this Government are interested in getting the finances and the national debt in order, they also care about people. If we continue on that road, in a year's time the country will have turned the corner and there will be a return to prosperity.
The Chair is happy now to terminate Deputy Cullen's long period of audience.
Thank you, a Leas-Cheann Comhairle. At the outset, giving consideration to this 1988 budget, we should consider setting down parameters with regard to the direction in which this country should go in the next couple of years. A budget should not be regarded simply as an annual document put before the nation from year to year. In the long term strategy, it should provide a clear indication of the direction in which we should be attempting to go for a number of years to come. Under the weight of statistics that we are given in pre-budget estimates, budget estimates and forecasts, it is difficult to see a clear picture emerging. For too many years Governments have not taken the long-term approach. There has been a jump from one budget to the next, simply and solely to get over the coming year. The price that we have paid for that kind of attitude has been a lost generation that we have seen depart on the emigration boats and planes over the last two or three years. This probably will continue for at least another year. We can no longer afford to lose another well educated generation. We put much money into the education of our youth who have an excellent education at the end of the day. The cost to the Exchequer and to the people is great and here we are happily funding the education systems of many other counties by providing them with well educated raw material to continue to enhance their economies. We honestly need this highly educated, highly motivated force to remain here. This is what the long-term strategy within the budget should be beginning to indicate, so that this raw material can be used here and not anywhere else.
One of the problems that we have faced over many years is a divisiveness in our society. We have the farmers against the PAYE worker, the self-employed against somebody else, unions against management. We are behaving as if we had a population of 100 million people and could enjoy the luxury of this behaviour. The reality is that we cannot. If we continue along this road we will never have a real future. All these sectors are interdependent. One example that I never heard enunciated over the years is the number of PAYE people who are directly employed as a result of activities in agriculture. There is a dual relationship and interconnection between both facets. It is in that spirit that I would like things to develop in the future.
It behoves politicians to start behaving with goodwill. Over a long number of years they have encouraged this divisiveness and pandered to sectional groups when it suited, to the detriment of other areas within the community. There are people at loggerheads in too many areas of society. The energy put into that divisiveness should be channelled in a much more controlled and definitive direction.
Fianna Fáil in Government have, for the first time in over ten years, faced up to the responsibility of being the largest party. Many cliches have been used to express the change of direction but what they are doing is infinitely preferable to the manifesto on which they fought the 1987 general election. There is a real desire in this Government to go in the right direction and in a sense I do not doubt that for one moment. I am concerned that there is an even greater desire to prove to themselves and to the world at large that they are going in the right direction. This is beginning to cloud the underlying weaknesses and some of the underlying strenghts. If we rely on statistics which suit our case and promote our cause, we may miss the point.
Earlier the Minister for Tourism and Transport spoke about the general support for this Government from the Opposition benches. We supported the Government last October when the Estimates were discussed. I believe that was the right thing to do. Given the financial situation the Government tried to divide the total amount of money available between the various Departments. In many ways I have no argument with the budgets they allocated in many areas but, as a responsible Opposition Deputy, I would be failing in my duty if I did not take issue with many of the policies emanating from the various Departments.
The easiest thing for any Government to do was to introduce cuts. I have no disagreement in many ways with the type of financial constraints imposed and what the Government are trying to do but I disagree when I see cuts taking place with no planned advantage coming from them. I believe the gains that could be made will not be realised in the next few years if the systems and policies of various Departments are not changed. If we leave in place systems which are no longer relevant, the sacrifices which have been made to date and the continuing cuts, will be wasted.
I could allow the Government some leeway last year because they had only come into office, but the time has come when clear definitive policy directions must begin to emanate. I want to see very definite policy directions beginning to emerge in many Departments. If that does not happen I, for one, will not support the cuts and I will not be afraid to oppose the Government. I will not have them claim we were supporting them and I will be able to defend my position. It is all very fine to support the cuts but if they do not achieve any long-term benefits, then the sacrifices made will be wasted and we will be back to square one. That is how I feel about the situation. In many ways it is how the Progressive Democrats feel about it also.
I want to discuss taxation and some of the points made by the Minister for Finance. We had the obvious simplification in the sense of the tax bands being changed, the annual sop to the PAYE sector which at the end of the day produces no real benefit because by the time the workers get the salary increases, we are back to square one. I cannot argue that the Government did not do their best in this area. I am not decrying how small the sums were, because at least an effort was made but to me that is only tinkering with the system. I have heard many Government speakers say this. We need to take another look at the taxation system because if we do not we will continue to tinker with it knowing in our hearts and souls that the system is ineffective.
The Minister has introduced the system of self-assessment. As I sift through what he said I become very concerned that it may be merely a cosmetic exercise. I want to know how it works. There is already self-assessment in the taxation system. People assess their tax liability, go to the inspector, they either agree or disagree, or they get assessed by the inspector. There is nothing new or fanciful in that. The only change I can see now is that the Revenue Commissioners will allow the individual to assess himself and present his tax liability as he sees it, and if the inspector disagrees, he will reassess him. I think that is the way the system operates already.
The self-assessment system must be brought onto an actual year basis to be effective. At what stage will the inspector assess the individual or the company if they fail to assess themselves? What role must he play in the breakdown in this area? One of the keys to self-assessment is that it should be very definitive and the penalties for those who try to get around the system must be such a deterrent that it would not pay anybody to do so. For that to be effective the Revenue Commissioners must have access to all accounts, even bank accounts if necessary. It is unbelievable that they should not have access to some accounts but should have access to others. It is all or nothing as far as I am concerned. Let the defrauders be caught. I have no compunction about putting them in jail. It is up to them to assess themselves fairly and honestly. We should be going in that direction.
I particularly commend the Minister on the introduction of the tax amnesty. It has been most far-seeing and imaginative amnesty introduced for many years. I sincerely hope it is what the Minister wishes and that it will benefit the Exchequer. By getting this amnesty, if it works, out of the way, with real self-assessment being rolled in following on that, we could bring the taxation system, particularly in the areas which cause concern, up to date. This could mean an effective return to the Exchequer. We would not be pretending every year that there are £600 million, £700 million or £800 million owed in taxes when most of it is assessed as notional and does not have any real relevance.
As regards corporation tax the Minister has taken a step in the right direction. We needed to reduce this rate from 50 per cent and bring it more into line with our European partners. The move to 47 per cent and then to 43 per cent is a step in the right direction. The counterbalance of that has been the halving of the capital allowances. In my view this too will prove to be a step in the right direction in the long-term. I hope in years to come we will be properly aligned with the SEA.
One of the points I would like the Minister to answer deals with the export sales relief which is being phased out and which will disappear in 1990. He said the companies operating in the Shannon area would automatically go onto the 10 per cent rate of corporation tax. There are many companies in the rest of Ireland, including my constituency of Waterford, which operate under this scheme. What will happen to them in 1900? Do they get the same incentives as those companies operating in the Shannon area? I would appreciate that point being answered.
It is wrong when regional departments do not have control over the funds collected in their area. If these departments have total autonomy there will be better co-operation between those paying the tax and those collecting it; the flow of information will be better, and the net result from the point of view of the revenue and the Exchequer will be extremely beneficial.
In general the Minister has taken steps in the right direction but there is still a lot more which needs to be done in overhauling our taxation system.
Debate adjourned.