Deputy Yates is in possession.
Finance Bill, 1988: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
Before we adjourned I was speaking in relation to section 54 on the change for disabled drivers. All Deputies have received representations from the Irish Wheelchair Association, the Disabled Drivers Association, from people suffering from multiple sclerosis and so on outlining their concern about the changes which will increase the cost of motoring for them. Since 1968 these people have enjoyed the benefits of cheaper petrol, VAT refunds and lower motor tax. It is extraordinary that 20 years later this scheme is described as cumbersome. Why was it not described as cumbersome before? This seems to be a most unfair penny pinching exercise. The Taoiseach gave a solemn commitment to this House that as he had originally introduced this scheme, he would ensure that disabled drivers would not be less well off. I earnestly call on the Minister to look again at this measure.
Section 52 deals with the £10 charge for bank cards. This is not only a tax on technology but a tax on a sensible security precaution. The level of tax at 20p a week is not excessive but the principle of the tax is unfair. If money is required it is credit cards such as Visa cards and Access cards that should be taxed. The profit margins of those financial companies are very high and they could absorb such a stamp duty charge. As it is, the proposal is indiscriminate and arbitrary and it will penalise people who were using cash cards, not because they were high rolling bank clients but simply because they could not get into the banks during the restricted opening hours and were advised by their employers to get into the cashless system.
There has been a lot of debate on section 68 which relates to the amnesty. While we must have concern for people who paid the full amount of tax prior to the announcement of the amnesty, on balance the amnesty is worthy of support. There is a need to wipe the slate clean once and for all and get tax arrears up to date, and to follow that by very rigorous follow up on current taxes by the Revenue Commissioners. The big problem in the debt collection business is that the longer the arrears grow, the more difficult it is to collect them. The Revenue Commissioners ended up taking a major stake in a lot of companies because they were not on top of their own collection procedures and bi-monthly returns lapsed into six monthly returns and so on. That must be avoided or else we will need another amnesty in two years time and there will be a net loss to those who genuinely pay their taxes all the time.
There has been much debate in relation to self assessment and the power of attachment and this is covered extensively in sections 9 to 20 and in section 69. It is a major change in our tax system and it would be foolish to think that every self-employed person is au fait with the fundamental change that is taking place and with the new responsibility placed on taxpayers to remit their returns of income and their cheques. I have no doubt that the standard of accountancy here is very patchy and the quality of some accountants has left a lot to be desired. Some people who have a blank mind in relation to tax forms immediately hand them to their accountants and 18 months later, because the accountant has been negligent, matters are in arrears. Any sheriff can outline the difficulties with accountants. In order to introduce self assessment we need a major publicity campaign alerting people to their new responsibilities in relation to returns of income. This Bill imposes new stiff penalties for non-compliance with the system and many people are not aware of the new procedure and have a naive attitude to the tax now in that they believe that no news is good news and that if they do not hear anything from the tax man everything if all right. Under self assessment the opposite is the case. The obligation is on the taxpayer. I foresee major teething problems with this. Each taxpayer must be fully advised of the procedures.
I support the power of attachment which is to be introduced on 1 October in relation to getting taxes paid but there are problems. The principle of the power of attachment is that whatever is owing to the taxpayer who owes the tax is genuine money available to the taxpayer. What is the situation where a small businessman incurs major bad debts because some of his traders do not pay him? Will the Revenue Commissioners accept an IOU in that case? In many cases the cash difficulties of small businesses arises because of the domino effect of other business failures. The power of attachment should be used very sparingly and only where there is an undeniable case that the taxpayer is unfairly not meeting his obligations. This proposal should be reviewed in that there should be a set of criteria as to when the power of attachment will be used.
There may be a loophole in the power of attachment in that amounts that are in dispute cannot be subject to the power of attachment. Taken at face value I could say in relation to any taxes I owed which the Revenue Commissioners wished to pursue via a third party debt, that the amount was in dispute and I could therefore avoid the powers in this legislation. Perhaps when replying the Minister will clarify that?
Next week I will be tabling an amendment on Committee Stage in relation to one of the most unfair anomalies I have come across in the system. I hope the Minister for Finance to whom I have written on a number of occasions about this matter and who has not replied to me in any detail, will take particular note of this when replying to the debate. When the Farm Tax Act 1985 was in operation, on 10 December 1986 the Department of the Environment sent a circular, FIN 33/86, to every local authority in the country in relation to the Farm Tax Act. A certain paragraph in it said:
As you are aware the Finance Act, 1986 allows farmers who pay their farm tax in the current tax year to offset this amount against any income tax liability arising in 1986-87. The Government however announced at the end of September that the income tax concessions would be improved for those farmers who pay their farm tax before the end of 1986. The improvement will be the facility to offset any unused portion of the 1986 farm tax credit against their income tax liability for 1985-86 and 1987-88.
You may consider it appropriate to advise persons from whom farm tax has been demanded of the new arrangements, so as to improve early collection of the tax.
Arising out of that circular on 15 December, Wexford County Council sent the following letter to people in my constituency who were due to pay the farm tax:
Dear Sir or Madam,
I refer to the demand for farm tax issued to you on 1 December 1986. Under the Finance Act, 1986, farmers who pay their farm tax in the current tax year can offset this amount against any income tax liability arising in 1986-87. The council has now been advised by the Department that in addition to this facility any farmer who pays his or her farm tax before the end of 1986 will be able to offset any unused portion of the 1986 farm tax credit against their income tax liability for 1985-86 and 1987-88.
That written commitment, made by Government Ministers to Dáil Éireann and by the Department of Finance to local authorities and to the farmers, is on the record in black and white and has been broken. It is very serious that our public affairs should be treated in this way. Many of my constituents paid their farm tax by 31 December 1986 on the understanding that they would get credit against their income tax bill for 1986-87 and 1987-88 and I have tabled an amendment to meet that commitment. It is disgraceful if assurances given by Ministers and by officials in the Department are abandoned at the stroke of a pen. I hope the Minister will look favourably at my amendment which will involve a very small cost on the Exchequer.
In this Bill there is a change in relation to VAT refund to farmers. It is extraordinary that the Minister for Finance should say he is reducing the VAT refund of £9 million to farmers because some of them have not paid their health contributions. In the normal course of events I would not mind that because there should be some penalty for not complying with the system, but why is he penalising farmers who have paid their health contributions? By changing the VAT refund system the Minister is doing this just that. That argument does not hold water. This is a very arbitrary and unfair decision.
Another anomaly about which I am very concerned is the increase in the PAYE allowance from £700 to £800. It has always been blatantly clear in the work area that there is no difference between the sons and daughters of employers and other employees. The fact that they are not allowed this £800 allowance is very unfair. I ask the Minister to look at this on Committee Stage because every year the anomaly is worsening.
Section 27 is very important. There has been a lot of talk about the Financial Services Centre and the job potential there. In my view there is fantastic potential for at least 1,000 jobs in a future market, where people can buy forward in stocks and commodities as a hedge against inflation while others sell on the same basis. The IDA have done a substantial amount of work in this area. I welcome the incentives provided and hope it is not long before this centre is in operation.
One of the facts which emerged from a recent OECD study on tax reforms in member states between management and unions was the effect of our tax structure on competitiveness. One of the striking conclusions they came to was that increases in VAT did not affect competitiveness but increases in excise duty did. It strikes me as very alarming that, in a year when we are spending £4 million on tourism, we have adopted the simplistic answer of putting 8p on a gallon of petrol. In my opinion it is wrong not to take the view that there is a direct link between competitiveness and the structures in the economy if each year we add more excise duty to petrol.
When discussing this Bill we have to take into account recent developments in the United Kingdom. After the last two budgets we have seen a very drastic drop in income tax rates there. The arguments for looking at the medium and higher personal tax rates in this country have been accelerated because of the opportunities opening up in Britain to facilitate a brain drain from Ireland. Studies show there are two forms of emigration — enforced emigration, requiring employment, and optional emigration which involves a person going to a country where he will be better off. We have to take full cognisance of these facts because we have spent a fortune educating our graduates.
The Minister said this is a reforming Bill which introduces self-assessment and reforms corporation tax and company tax. I would like to deal with the proposed reforms in company taxation. It is proposed that we should pay for the reduction in the rate of corporation tax by reducing capital allowances. In Britain they have abolished all capital allowances over a three year period. I take the opposite view. I believe profits should be generated and properly taxed. Let us look at any business in this country. If I were to set up a retailing outlet in the High Street, get a premises, refurbish it, invest in stock and so on, I could write that off against tax, but if I buy the premises I am not able to write off one penny of it against my tax. That is unfair. An incentive should be provided where capital allowances are allowed against the purchase of premises.
If someone makes a profit, he should be allowed to plough it back into the business without being taxed on the double. As I said, if I purchase a building there is not one penny of the capital allowance written off against income tax. To restrict accelerated capital allowances from 100 per cent to 75 per cent to 50 per cent and so on does not seem sensible because there are certain types of business which unavoidably are capital intensive. I would prefer to see companies which make high profits pay taxes rather than poking around with the system.
I have no doubt that there are some very sophisticated business representatives lobbying for this reform of the tax code. It would suit their type of business because either they have carried out their expansion, invested the capital and are reaping the profits — they could not write off the capital allowances if they wanted to because they have already been written off. Such companies would avail of the reduced rate of corporation tax. The small ventures who are starved for capital will be badly hurt by this. I am thinking in particular of the service sector where the rates of corporation tax are minimal. In my view it is a retrograde step and I do not think there has been sufficient public debate about it. There is a need to study the financial problems of small businesses and the type of tax changes that affect the balance between share and equity capital as against loan capital. Those matters were not taken into account.
I do not wish to delay the House unduly on this Bill which is worthy of support in so far as it meets the central target of improving the public finances. In overall terms it increases taxes by £146 million. However, there has not been any real reform in a number of vital areas. I would like to have seen some imaginative step being taken such as a jobs tax credit under which a employer who takes on a new employee would get a credit of £1,000 against his tax bill in the first year and, perhaps, £500 in the second year. I would like to have seen a development of the personal allowances whereby mothers who are teachers could employ baby-sitters, gardeners and so on in the white economy rather than in the black economy by being given a personal income tax relief for such work. I would like to have seen practical support for many of the matters we speak so piously about such as community care. I would like to have seen an increase in tax free allowances to enable people to keep indisposed and disabled relatives at home.
It is unfortunate that such steps were not taken in the Bill. It cannot be a question of money because very little would be involved in such changes. The Minister for Finance has failed to implement in a meaningful way the recommendations of the Commission on Taxation. We will not be opposing Second Stage of the Bill but we have great concern about section 54, which concerns disabled drivers, and section 52, which imposes a £10 charge on cash dispensing machine cards. We are critical of what is not in the Bill.
I listened attentively to the contribution of Deputy Yates and while I would not agree with everything he said I have no doubt that my colleague, the Minister for Finance, will study the points he raised. He mentioned the assistance scheme for disabled motorists and I should like to comment on that. The present scheme, as the Deputy is aware, does have a number of anomalies in it, not least of which is the interpretation of the disability for which people are entitled to have a tax rebate. For example, for a rebate of VAT the person should have no use in both lower limbs. The Government decided to transfer the scheme to the Department of Health to try to make it more balanced and have more equity in it mainly because of the anomalies. The amount of money available to my Department is the same as was available to the Department of Finance, £3.3 million in a full year, and all that money will be spent for the benefit of disabled motorists.
It is our intention that the National Rehabilitation Board will administer the scheme. The Disabled Drivers Organisation were unhappy about a scheme that might be implemented by the eight health boards. They felt there might be variation between the health boards and that all the money might not go to disabled drivers. In my view health boards are well capable of administering a suitable scheme but it is better that the scheme should be administered by the National Rehabilitation Board who possess the necessary administrative and medical expertise to decide on the eligibility of disabled drivers.
After the announcement by the Minister for Finance that the scheme was to be transferred to my Department I established a working party representative of the various interests to study how we might bring forward an equitable scheme. I will name the members of that committee because there is a perception that the committee is not sufficiently representative of disabled drivers and that there is not a balance on it. The members are Brian Malone, who is confined to a wheelchair and is chairman of the Irish Wheelchair Association; Martin Donoghue who is also confined to a wheelchair and is general secretary of the Disabled Drivers Association; John Furey, chief executive officer of the National Rehabilitation Board; Dr. Tom Gregg, former medical director of the National Medical Rehabilitation Centre and a member of the Rehabilitation Board; Derry O'Dwyer, programme manager of community care with the Midland Health Board; Dr. Declan Bedford, director of community care and medical officer of health in County Meath and one official from my Department, John Cronin who is the assistant principal officer involved in the services for physically handicapped. In my view that committee leans very much in favour of the disabled.
We want an equitable scheme. When travelling to Galway six weeks ago I visited the Disabled Drivers Association centre in Ballindine and discussed with representatives the transfer of the scheme to my Department. I explained that what we wanted was the greatest amount of consensus on how a scheme that would benefit the people who are entitled to benefit should be administered. We are suggesting that there should be a lump sum for changing a car on a regular basis and an allocation for running costs each year to the disabled person and that the National Rehabilitation Board, with their expertise, should decide on those who are entitled to benefit.
The present financial position has acted as a spur, an incentive and, indeed, an obligation on all sectors involved in the planning, managing and delivery of public services to reappraise their priorities, demand an efficient and effective approach to service delivery and insist on value for money. It is, perhaps, understandable that there has been a concentration of attention over the past 12 months on the necessary pace of alterations required by the Government in rectifying our financial ills and the difficult choices which have been taken and carried through. There is now an awareness that what has taken place was indeed necessary if we as a country are to continue to have control over our future, have the freedom to make decisions and ordain our own affairs.
The demands placed on our people by the Government in accepting the difficult choices which have had to be made have in so short a time produced tangible results. In the economic and budgetary areas the achievements are there for all to see. The budget deficit in 1987 was £20 million less than originally planned. Exchequer borrowing was also inside the target by £72 million. The current deficit of 6.8 per cent of GNP is the lowest since 1980. Exchequer borrowing, at 10.3 per cent, is the lowest since 1977. Exchequer borrowing is also down by some £359 million.
The general public are not slow to appreciate the efforts taken on their behalf. They recognise that within a short time span the Government have brought about a fundamental and more realistic change in expectations, of confidence in managing our affairs and a sense of purpose and direction which will lead to further economic growth and recovery. That is not to say that our efforts are complete but the signs of a good, productive start are there to see. There remains some further progress to be made in reducing our indebtedness and in curtailing overall public expenditure.
The Programme for National Recovery provides specific targets to be achieved before the end of 1990. An integral feature of the programme is a reduction in the Exchequer borrowing requirement to between 5 per cent and 7 per cent of GNP. This challenge and responsibility, which involves all sectors of the community, particularly Members of the Oireachtas, is in no way diminished by the results we have achieved to date. Further application and response is required by all in our efforts to continue to improve public finances and reduce the burden of debt which remains persistently high.
Given the macro financial position I have outlined already, it is imperative that there be a rationalisation of a very significant amount of resources in financial and personnel terms devoted to the health services, ensuring that all unnecessary and wasteful expenditure is eliminated. The only way forward for our services in the immediate future is the creation of a rational, cost-efficient and effective service in a position to respond to the legitimate health needs of the community. This sound approach has been adopted by the Government since assuming office.
The Estimate for health services for 1988 is £1,109,944,000. That Estimate takes account of the continued funding of the community drugs schemes, the transfer of the disabled drivers' assistance scheme from the Revenue Commissioners to the Department of Health and an increase of 3 per cent in the rates of allowances to disabled persons from July next.
Allowing for Appropriations-in-Aid to the Health Vote, overall non-capital spending this year will be just under £1,300 million. While that represents a slight decrease on last year's spending the provision is satisfactory in the context of the overall position and when account is taken of the effect of the savings implemented in 1987 carried through into this year. That overall figure will allow for the provision of an adequate and comprehensive health service.
In determining the 1988 allocations to the health agencies I felt it essential that the agencies should know as early as possible exactly what level of funding would be available to them this year. It was my view that early notification could only help the health boards, voluntary hospitals and other bodies to plan their service delivery level in good time.
One reason for the problems encountered by the health services in 1987 was the unavoidably late notification of their allocations. Therefore, I was pleased to be able to notify the 1988 allocations to these agencies in October last, affording them an opportunity to begin immediately planning their service delivery for this year.
I met the chairmen and chief executive officers of the health boards and the voluntary hospitals when the allocations were given to them. At these meetings I underlined a number of points I considered to be of critical importance. However, I stressed that they would be required to manage their services so that their expenditure would not exceed their allocations, explaining that that was an absolute requirement on each of them. Since that time my Department have met the agencies to discuss in detail how they intended to remain within their allocations in 1988 while, at the same time, maintaining a proper level of service. I also met the chairpersons and chief executive officers of health boards and a number of the major voluntary hospitals and underlined to them the necessity not to incur expenditure over their approved allocations. As a consequence of these meetings I believe the health boards and voluntary hospitals have taken the necessary steps in terms of controlling expenditure. My Department are monitoring the position intensively to ensure that no unapproved expenditure is incurred and will continue to do so throughout this year.
The controls which my Department exercised last year on expenditure are being maintained in 1988 with a view to ensuring there is no overrun on the part of any agency. Should agencies incur overruns, their financial viability will be threatened. The agencies themselves are aware of the financial realities facing the country, that there are no magic solutions to the problems encountered in the health services. Solutions will come about only by way of co-operation and the will to implement the hard decisions confronting us in the national interest.
Underlying the present position visà-vis the health services, there is the beginning of a fundamental shift in how these services are perceived and delivered and how the service professionals see their role. There are also changes in management approaches apparent to those of us concerned in the everyday management of the services. These changes have occurred not in spite of the control of public expenditure but rather because of it. While concepts of better management techniques, improved health promotion and co-operation between agencies have been with us for some years, the fact is that the challenge facing all of us in the health services has expedited the necessary changes.
It has always been the case that resources allocated to health have fallen short of the demands for health and personal social services. Indeed, we are by no means unique among developed countries in that regard. Wealthy countries such as the United States, the United Kingdom, Denmark, Germany and France all experience the same problem of endeavouring the provide adequate resources to cater for the expectations of all their people. A perspective that projects that unlimited resources will be available at some point in the future to any Government, not alone for health, is fallacious. Resources will always be subject to limitations. In that regard the general public, young and old, healthy and otherwise, health professionals, planners and managers all have a common interest to ensure that resources are used to maximum effect.
Because of the nature of the provision of our health services and the shifting in the mid-seventies of almost the entire funding of services into central taxation, the public have a responsibility to know the basis on which funding and services decisions are taken on their behalf. The underlining principle of decisions taken and choices made at all service levels must be presented in a rational, informed and objective manner. The need for choice in the allocation of resources, for example between competing services, is because resources are limited and the demands are well in excess of the resources which can be made available by Government.
There is an increasing awareness that choices have to be made. Indeed at national level choices are made as to the general direction of Government policy, and the level of resources to be allocated to various Government programmes. Similarly, in the health services informed choices, in many cases very difficult choices, have been taken over the last year or so. I will explain in greater detail some of the informed choices and the direction which I have pursued in conjunction with health agencies. A choice always carries with it a sense of sacrifice as other options, which we would wish to adopt but cannot afford, have to be set aside for the present. This is necessary to ensure that resources are allocated to produce the best results across the full range of health and social services programmes.
As Minister for Health I am fully aware of the range of choices, directions and demands which are and can be made in the health area. However, I have made funding and service choices which are in the best interests of our health services to ensure the maintenances of an adequate and affordable level of service and to allow for priority developments which will be valuable to patients both now and in the future.
The financial circumstances facing the health services have created an increased awareness among management in the services of the need to examine every pound spent so that the best return is achieved. In this regard my Department are actively supporting the health boards and hospitals in every way possible. Here I should refer to the work of the Cost Containment and Efficiency Unit in the Department of Health. I have mentioned before to this House the work carried out by the unit in support of the services. It focuses on promoting cost-consciousness and co-ordinating information between agencies. It is undertaking important work particularly in the key area of prices of medical and surgical consumables which cost about £125 million per annum.
The unit have brought about a price information exchange system between agencies so that they are aware of the prices being paid for a range of items. While such information always would have been of some interest to health boards and hospitals, there can be little doubt that the funding pressures have ensured that agencies see it as a very practical support mechanism. Managers are more and more concerned to make the best use of the resources and information available to them. This is in effect another aspect of the fundamental changes I mentioned earlier as regards how people see their role in the delivery of services. In the past local managers of health services have seen themselves as primarily involved in the delivery of ever expanding services and have not had to be overly concerned with how those services were funded. They saw themselves also as meeting specific needs which had to be met in the same way as they were met in other developed countries. In that situation the question of deciding on priorities did not arise very often because every demand for funding by different interest groups proved to have a validity which could not be ignored.
Inevitably, there will be problems when priorities are decided but the bonus for the health services and for the State in general is that there is a new awareness among all groups in the health sectors of the need to make every penny count. This has meant that health professionals at every level are working closer together in health boards and hospitals than they have done in the past with, for example, administrators in hospitals and other professional groups discussing in the greatest detail how best they can utilise all their resources, whether they be financial or personnel. Not only is there increasing co-operation within hospitals in achieving greater efficiency but there is also a greater willingness among agencies to cooperate with each other in many areas of activity. Agencies are exchanging information on how they are managing their resources. This is building up a pool of ideas and knowledge for the improvement of the health sector generally.
It is fair to say that no other area in the public services is now going through a greater self-examination than the health services. The benefits of this initial approach for administrators, medical or nursing staff is apparent now in the short term and will have long term implications for the health services. In the future it will not be possible to see oneself simply as a service provider; the necessity to match services with available resources will be permanent and inescapable.
In that context, all health and hospital boards should, in so far as is appropriate and within the bounds of existing legislation, maximise their income from various sources. I have expressed this view to health boards in the interests of a clear and open examination of possible additional sources of revenue to assist boards in the existing difficult situation.
To summarise, therefore, it is clear that the changing financial picture has brought about a renewed management vigour in the health sector whether it be in seeking value for money in every pound spent directly or in co-operating with other agencies or with professionals in implementing efficiency measures.
I have also identified the critical elements which require change and have in train various initiatives which will effect change where this is required. These initiatives include the rationalisation of the acute hospital system; a review of funding arrangements for health services; the development of health promotion and preventive services; the development of primary health care services and the improvement of managerial effectiveness at all levels of the system.
The general hospital programme consumes about 50 per cent of the revenue budget of my Department. As such, it is the single most expensive health care programme. For the past decade or so it has become evident in this country and in most other developed countries that its capacity for expansion is almost limitless. It has become evident too that, notwithstanding the rapid expansion of hospital facilities and services in the past, the results in terms of reducing morbidity and mortality have not been significant. On the basis of efficiency alone it has become necessary to assess what level of hospital service is required to provide a modern service.
Deputies will already be well aware of the review of the acute hospital system which I instituted last year. This review has proved to be an excellent foundation for the hospital rationalisation programme.
The review ensured that the programme could proceed on a planned basis, taking account of comprehensive consultation with all the interests concerned. The review focused on the following issues in particular: the steps necessary to rationalise the acute hospital system, so that the resources available are deployed to provide a high level of service on an equitable basis for the whole country; the implications of the extent to which essential services had been reduced due to financial constraints in 1987 and the opportunities that existed for the delivery of a more cost-effective service through better management of the system and the individual hospitals in it.
This review showed that there were hospital beds surplus to our needs in a number of areas. This year has seen considerable progress in attempting to reduce the financial resources taken up by the acute hospital sector so that progressively more funds can be redeployed to the development of community care services.
I should also mention in this regard that in areas where health boards have decided that district hospitals should close I have provided funds from the national lottery to assist health boards and local community organisations in providing a range of day care services and crisis intervention beds for the elderly. I have provided funds in this way for day care facilities in Kilrush, Thurles and Tipperary and for nursing and crisis intervention beds in Lismore. I am also proposing to provide funds for day care in New Ross and Bagenalstown. As a result, institutional beds which are surplus to our needs have been phased out and replaced with day care facilities, which will considerably strengthen community care services in these areas.
Deputies, however, should not forget that while this process of redeployment of resources from hospital care to the community is going on, the existing hospital facilities are continually being developed and upgraded so that while we will have a smaller hospital services sector, it will be of the highest standard. In order to ensure this, I recently approved the provision of funds to allow the commissioning of the new hospital at Cavan and the new developments at St. James's, the Mater, Mullingar and Castlebar. Building is also underway on the major hospital projects at Sligo, Waterford and Wexford and on the new maternity unit in Our Lady of Lourdes Hospital, Drogheda. These developments will ensure that we will have an excellent hospital accommodation stock right into the next century.
The outcome of the review to which I referred indicated that there was a significant number of hospital beds in several parts of the country which were surplus to needs. To continue to provide such beds would be unjustifiable at any time but to continue funding them at this time would be irresponsible. Deputies will be aware of the steps taken in the past year or so to eliminate these beds and I am glad to say that a great deal of difficult but necessary work has now been done to fit the supply to the need.
The financial resources available to the hospital service can now be concentrated on fewer hospitals, but rationalisation is not confined to a reduction in numbers. It also embraces the process of hospitals adapting and co-operating so that the service provided to patients is of the highest modern standard, is accessible to the patients and gives good value for money spent.
The concentration of resources in fewer locations will inevitably mean a more intensive use of beds. This, together with the evolving demands arising from the progress of medicine, will require a new flexibility in delivering services. The development of new techniques and procedures, whether diagnostic or curative, demand careful consideration as to how they can be delivered. It is now clear that the mode of delivery can have a significant saving on cost but, more than that, it is also a matter of great importance to the patient. Thus new methods of delivery such as day care, day surgery, programmed investigations units and five-day wards are now being expanded.
I was very happy to be associated with the opening of Beaumont hospital. The considerable difficulties which attended the commissioning of the hospital have now been left behind: there is a real commitment within the hospital, among clinical, management and other staff, to make the hospital one of our major centres of excellence. Given that commitment and the excellent day-to-day performance of the staff, it is a source of great disappointment and, indeed, concern to me that a few begrudgers in the media and indeed elsewhere portray the hospital in a most negative and false way possible.
Beaumont hospital is providing a very good service to its patients today. In the weeks and months which lie ahead, that service will become even better, as the hospital realises the full potential of its staff, its equipment and buildings. The management and staff of the hospital also know that very high standards of service can be provided for the local community on an integrated basis by establishing well structured working arrangements between the hospital and the Eastern Health Board. They will not settle for anything less than the best and they will have my full support in achieving it.
A further pivotal review which is currently progressing is an in-depth examination of the funding of our health services. Last May, as Deputies as aware, I appointed a Commission on Health Funding, chaired by Dr. Miriam Hederman-O'Brien. The commission are examining the extent and the sources of the future funding of our health services. I am anxious to receive the report of the commission as early as possible in order to have the benefit of their deliberations in the critical area of funding and their advice on possible alternative sources of funding in the future.
The efficiency and effectiveness of our hospital services depends to a very considerable extent on the way in which our skilled medical manpower is utilised. Hospital consultants occupy a deservedly high standing in Irish society and we are fortunate to have so many talented men and women available to treat patients. For that reason, I attach great importance to arrangements under which consultant services are provided to public patients. I am aware that the present common contract has been the subject of some criticism in the past and I was pleased, therefore, to initiate some months ago a review of the existing contract with the Irish Medical Organisation. It is my objective to secure in that review such changes in procedure and practice as may be necessary to provide a clearly visible and equitable basis for the organisation and remuneration of consultant services in public hospitals. Apart from this issue the agenda covers all of the major matters which are appropriate for the consideration of hospital medicine in the last years of this century. I am hopeful that a constructive approach by those participating in the talks will enable a satisfactory result to be achieved at the end of this review process.
It has been acknowledged for some time now that many of the more prominent health problems in Ireland need to be more energetically addressed from a prevention viewpoint. Specifically, such major health problems as heart disease, cancer and accidents are each amenable to some extent to preventive solutions. This is not to deny the need for a high level of services for the treatment and care of victims but it is important to develop an appropriate balance in the emphasis given to different strategies in tackling these health problems. This untapped potential of preventive strategies was the primary justification for the new health promotion structure established by the Government last January. That structure includes a health promotion unit within the Department of Health. During the current year this unit will undertake an extensive work programme, including health education campaigns and the development and implementation of policy related to the promotion of health in a broader sense. Among the specific issues being addressed are smoking, alcohol and other drug abuse, AIDS, immunisation programmes, food hygiene and nutrition.
The unit are also collaborating with the Irish Cancer Society and the European Commission in the organisation of an information week on cancer during the first week in May. Cancer is a major public health problem in Ireland and other developed countries and, to the extent it is related to lifestyle, is preventable through public information and awareness campaigns. This Europe Against Cancer Week provides an opportunity to capitalise on a collective European effort to combat cancer. It is indicative of the growing interest at EC level in tackling the major health problems of the member countries. This is a very useful development and the organisation of this information week on cancer, based around a ten-point EC code against cancer, has my full support.
In a major initiative to prevent cancers and reduce the incidence of tobacco related illnesses I recently introduced a new Tobacco Bill to the Dáil, the primary objective of which is the control of smoking in public places. I feel that it is vital for the protection of public health that exposure to environmental tobacco smoke should be controlled. It is also an important step in the creation of an overall environment which is more conducive to healthy living and it will encourage young people to regard non-smoking as the normal majority adult behaviour. The Bill also includes an important provision to update the law in relation to the sale of cigarettes to children. The sale of oral smokeless tobacco products, which are both addictive and carcinogenic and which have not yet become widely established in this country, will also be prohibited under the Bill.
The promotion of health, given the known association between various lifestyle practices and environmental factors, extends beyond the bounds of the health system. It is therefore necessary to adopt a multisectoral approach to certain health problems and for the first time we now have in this country a formal framework within which this can be done. This framework operates at a mumber of levels. I have set up an advisory Council on Health Promotion to make recommendations to me on changes in public policies which impact on human health. The council are broadly based and include in their membership the main economic and social interests in the community. The council have been meeting on a regular basis and I look forward to receiving their recommendations in due course.
In addition to the advisory council, the Government decided that there should be a committee of Ministers established, reflecting the collective commitment of the Government to health promotion and providing a forum at the highest level at which intersectoral policy issues and, indeed, conflicts can be discussed and resolved. The presence of the Ministers for Agriculture, Energy, Education, Labour and the Environment with the Minister for Health on this committee makes it a potentially powerful instrument in effecting change in public policy on a broad front in the interests of community health.
There is a definite awareness now among health boards that there are certain key community care services which must be protected if we are ever to significantly reduce our reliance on costly institutional care. I have stressed to the boards the need to ensure that basic services like home help, meals on wheels and community nursing continue to be supported as far as possible even at the expense of general hospital care. These are not easy choices to make but they must be made. In the past when funding increased at a higher rate than it can now there may have been assumptions that the hospital services could continue to swallow up more and more of the available resources and that community care services could also benefit but only in a marginal way. That situation no longer exists as the health boards have come increasingly to realise that financial considerations do not allow for hospitals to consume resources disproportionately in the future; at the same time the boards are aware that the community services must be protected if there is to be a significant integrated service. The position now is that it is the institutional services which are, so to speak, under the microscope to justify their existence while the community services must be maintained.
I do not, of course, claim that there will be a massive transfer of resources to community from hospital programmes in the immediate future. There will be a gradual transfer and it will take time, and it is interesting that the percentage of the health budget going to community care has increased about 2 per cent in the last two years. The important thing is that the shift in attitudes does exist and that it has responded to the new funding situation we all face. The general hospital programme is changing to adapt to new conditions. It has also meant a greater commitment to movement away from over-reliance on the general hospitals and to focus interest as far as possible in maintaining a reasonable level of community care support. The financial situation has also underlined the necessity to develop health promotion and education policies which emphasise and support the value of both society and individuals taking clear responsibility for their actions and thereby start the process of turning the health services from a largely curative service into a more positive and dynamic healthorientated system.
The general medical services scheme continues to provide an excellent service to the most vulnerable sector of our community. This sector represents some 37 per cent of the population of 1,323,000 persons. Government's commitment to this sector of our community is evidenced by the fact that a sum of £112.8 million is being made available in 1988 for the scheme. This figure represents, an increase over the previous years funding, despite the continuing financial difficulties facing the provision of services generally. The 1988 level of funding underlines my desire to preserve to the maximum degree possible the level and quality of services available through the GMS. However, Government policy regarding containment of costs and ensuring, as far as possible, value for money in relation to the provision of services must be pursued. In this regard I note that the trend of increased costs in the scheme has continued in 1987. It is vital that this persistent increase in cost be halted and we must, therefore, look to measures which can correct the position.
Deputies will be aware that the future of the GMS has been under consideration for some considerable time, in fact since 1982 when a working party was established to review the present arrangements particularly as regards the participation of doctors in the scheme. Unfortunately, that review and subsequent discussions did not produce agreement on future arrangements. I therefore was pleased when the Irish Medical Organisation responded to my request some months ago to resume the negotiations with a view to achieving an early agreement on a new basis for the provision of medical services in the GMS. My concern is to reach an agreement which would enable medical services to be provided efficiently and the scope of general practice to be expanded as a key element in our health services as a whole. I have, of course, personal experience of the contribution which general practitioners can make to the effective treatment of patients and it is my objective to ensure that that potential is realised in a way which is most effective from the point of view of the patient——
(Limerick East): A Leas-Cheann Comhairle, on a point of order, yesterday afternoon you were in the chair and you made a ruling that contributors should stick more closely to the content of the Finance Bill and that budgetary type speeches in general terms were not appropriate to this debate. I do not want to discommode the Minister but I would like to hear his comments on section 7. With respect the Minister's speech so far has been, in effect, a Health Estimate speech. There are items in the Finance Bill which are relevant to health care and I wonder if the Minister will address them. A Leas-Cheann Comhairle, I would like a ruling.
The Chair yesterday commented on a situation where a Deputy was making predictions as to what might happen next year and I advised him that the practice, as the Deputy has indicated, in respect of the Finance Bill, was that Deputies would refer to what was provided for in the legislation. In so far as the Minister for Health has already referred to matters that are dealt with in that legislation and in circumstances where he is pursuing lines which have by usage been established by former Ministers on Finance Bills I did not feel it opportune to interrupt him. The position as indicated by the Deputy is the idealistic one but unfortunately it has not been pursued. The Minister has listened to the request the Deputy has made to him in respect of the particular section and presumably he will refer to that before he concludes.
(Limerick East): I do not intend to press the matter but it is an extremely ill-attended House. If the business ordered is the Finance Bill and Members of the Cabinet speak to matters which are not related to the Finance Bill in any way whatsoever then it is no wonder that Deputies do not want to come in to listen.
Before the Deputy arrived the Minister had referred to matters in the Finance Bill.
(Limerick East): I would like the Minister to address section 7 because it is the only section of the Bill relating to health matters.
I wish to advise the Deputy that before he arrived the Minister had referred to matters which are in the Finance Bill.
(Limerick East): Had he dealt with section 7 before I arrived?
He has arrived at it and has listened to the Deputy's specific request.
(Limerick East): I would be grateful for a copy of the Minister's speech so that I may catch up on the relevant facts.
The Deputy has put a question to the Minister and I am sure the Minister is quite capable of and agreeable to referring to it when he is allowed continue. The Minister for Health to continue.
(Limerick East): May I have a copy of the speech?
A Leas-Cheann Comhairle, as you rightly point out, when I came into the House Deputy Yates was speaking and he raised certain matters that were pertinent to the Department on the Finance Bill and I dealt with them while Deputy Yates was still in the House. Then there was a period when there was nobody on the Opposition benches and at this late stage Deputy Noonan comes in and wants answers to specific questions some of which had been dealt with already. As far as section 7 of the Bill is concerned, I accept responsibility along with my colleagues in Government and fully support the Finance Bill as presented here by Deputy MacSharry.
(Limerick East): On a point of order I do not accept that line of comment. I was informed that there was nobody in the House except the Minister. I did the Minister the courtesy of coming in and listening to him when I heard there was nobody on his own benches or on any other benches to listen to his speech. If the Minister wants Deputies to be in the House he should extend to them the courtesy of speaking to the matter on the Order Paper.
This is hardly a point of order. It is quite irrelevant who is in posession. The Minister for Health without interruption.
The Government have been sensible in their general approach to maintaining and developing a health service within the finite resources available. They have been sensible also in ensuring that priority needs are met throughout the various health programmes and sensible in laying the foundation for a health service which can develop and grow in a planned, rational and managed manner to meet future health demands.
The caring approach adopted means that those in need have ready access to curing and caring services, that disadvantaged groups in our society are treated in an equitable manner which ensures that ability to pay does not hinder the availability of quality services to meet genuine need. In caring we must ensure that we have in place services which are viable, which meet genuine and identified needs and represent good value for money.
A sensible and caring approach does not mean that we are prepared to be deflected from the difficult courses we have charted. The opposite must surely be the case. An approach which is genuinely in the interest of the community as a whole must be prepared to make difficult choices, choices which are unpalatable and appear unpopular. However, we must recognise that such measures are necessary in the public interest, and I use the term in its true meaning. A positive and productive beginning in improvement and recovery has begun. Nevertheless much unfinished work lies ahead.
The economic performance of Ireland in 1987 was remarkable for a number of reasons: economic growth, at 3½ per cent, was significantly better than envisaged early in the year; exports increased substantially, which helped create a modest surplus on the balance of payments on current account for the first time since 1967; inflation, at just over 3 per cent was the lowest for 20 years. The Government have continued to tackle with determination the problems created by the past high levels of Exchequer borrowing, and as we all know this has meant taking many difficult decisions in reducing public expenditure. These decisions have not been easy or painless, but they are the only sensible approach to reducing both past borrowings from levels which were unsustainable and, consequently, our present levels of taxation to pay for those borrowings. It is, indeed, encouraging to see so many positive indications from the economy after less than one year of the Government's policies.
The year 1988 demands the continuation of those policies, and already there are encouraging indications for the year ahead. The Government earlier this year negotiated one of the more moderate pay rounds of recent years; a substantial rise in exports is predicted; and inflation is forecast to be even lower in 1988, at 2.25 per cent. These are the conditions that face the Irish economy in 1988 and we must use to the maximum effect the opportunities they offer, in terms of increasing earnings from output, exports and tourism, and in terms of employment generation.
Regarding sea fishing and aquaculture, the marine area is in a good position to take the opportunities provided by these more favourable conditions and the Minister for the Marine and I will make every effort to ensure that these opportunities are availed of. There will be no overnight success, and it would be misleading to pretend that we will achieve the full potential of our marine resources in 1988. Instead, this will be a year of investment and funding in the development of these resources.
The quotas achieved for Irish fishermen in 1988 will allow for the continued growth and development of the fishing industry here. The agreement reached by the Ministers in Brussels in December last, after long and very difficult negotiations, will result in increased potential earnings of £7 million approximately for Irish fishermen over and above the original proposal on the table. Both the Minister and I fought hard in those negotiations and were successful in offsetting the very drastic reductions being proposed in respect of the more sensitive species from our viewpoint, namely, mackerel and herring.
The mackerel situation is of paramount importance to the Irish fishing industry and we have succeeded in maintaining this year's mackerel quota at the 1987 level. More importantly, we have been successful in persuading the European Commission to review the mackerel situation in the light of the up-to-date scientific advice.
I should like to pay tribute to the industry for financing the surveys carried out under the Department's supervision in 1986 and 1987. We are convinced as a result of these surveys that quotas and catches can be increased. This information was not available to the Commission in December last year but we have now supplied it and I am reasonably confident that we can achieve an increase in our quota. The results of the surveys have to date been most encouraging and we are in a strong position to negotiate further in late May or early June this year.
I have always felt that the management of our fisheries, quotas, etc. should be carried out in close liaison with the various elements of the fishing industry. Since taking office I have made this a priority and I am happy to say that the management of our more sensitive fisheries involved regular contact and discussion with the representatives of the industry, both producers and processors. Management regimes have been agreed which allow for the balanced and rational exploitation of our quotas, resulting in better prices for our fishermen and greater continuity in supply for the processors. This year the mackerel fishery is still in place and I hope it will run until 28 April. Last year it terminated around 16 February.
As I said earlier, prospects for the industry this year are good. I would encourage our fishermen to build on our catches of non-quota species which will prove vital if these become subject to quota in the future. In this regard I am impressed by the substantial catches of horse-mackerel made to date. This is a developing and highly lucrative fishery and I wish to pay tribute to the pioneering spirit and vision of the fishermen involved and to the processors, who went out and developed the valuable markets.
Exports of frozen horse-mackerel to Japan rose from £2 million in 1986 to £7 million in 1987. This is a new market and demands adherence to very high standards of quality by both the producer and the processor. It represents a major breakthrough by the processing industry as previously Japan only imported sea frozen fish whereas the Irish product is frozen ashore in factories using Irish labour.
BIM are finalising a major development plan covering the expansion of our sea fisheries resource up to the end of 1991. The plan will address the following issues and will propose follow-up action within the framework of Government policy:
—a planned approach to the modernisation of our fishing fleet;
—the development of our aquaculture. This offers exciting possibilities for the production of salmon, trout and mussels;
—the development of our processing sector, to increase the value-added worth of the national catch, and
—the marketing in Ireland and abroad of these fish products.
The Government will give urgent consideration to the plan which should be completed by Easter. While Ireland will continue to work within the framework of the Common Fisheries Policy, there is some scope for action outside the quotas. For example, the use of new fishing grounds outside the Community limits and increasing the catches of our non-quota species are possibilities which are already being pursued. The acquisition by Irish fishermen of the most modern fishing vessels is the best statement of belief in the success of this direction in Irish fishing.
The Department of the Marine will support the plan in every way they can, by funding — to the extent possible within our financial constraints — BIM's development plan and by legislation such as, for example, the introduction of a fish marketing Bill in the next year to consolidate existing controls and quality standards in the processing sector. We should not forget the progress made to date in areas such as aquaculture, where 14 areas of coastline have already been designated and another seven are being considered as suitable for aquaculture and within which licence holders may operate.
As to licensing in particular, there is currently a programme of development of aquaculture to provide a sound legal framework for the development of the industry by licensing bona fide operators.
These measures for the development of our sea fisheries are attainable by selective investment, on the basis of identified priorities, of funding which the Exchequer is already providing and of investment from the private sector which has proved so important in the past. The Government are counting with confidence on the continuation of this investment towards this development.
Our inland fisheries also offer a potential for development as a tourism and leisure resource. The present administrative structures are generally accepted to require some re-organisation. The Minister for the Marine recently spelled out the objectives which he considers should underpin the management of inland fisheries. These are: employment and income generation; optimisation of income distribution; optimisation of the amenity and recreational value; conservation and development of stocks; rationalisation of management and development of community involvement in the management, protection and marketing of the local fishery resource.
The report of the Salmon Review Group was recently published, and the Minister has invited all interested parties to make submissions on their views on the contents of the report, including the restructuring of management, not later than 31 March. The submissions received are being studied by officials of the Department of the Marine. Ireland already has excellent leisure opportunities on its rivers and lakes for boating holidays and a wide range of marine sports, and there is still potential for the expansion of these activities. The development of inland fishing has not kept pace with these activities and the revised management structure must address itself to the obstacles to this development as a matter of urgency. The introduction on I January of licences for inland fishing is an attempt to give inland fishing a source of income in addition to Government funding.
I wish to take this opportunity to emphasise that the revenue from the licences will still be only a fraction of the total cost of the structure which is required to maintain and develop inland fishing, and most people, including many anglers, accept the necessity for these licences, the cost of which are quite modest in comparison with other countries. I would also like to point out that we have had salmon licences for many years. When rod licences were discussed some ten years ago it was suggested that it would be better to allow people to pay a voluntary subscription. While there are 130,000 anglers, only 4,000 of them contribute voluntarily. We believe it is necessary to have an income from licences in these difficult recessionary times. There are financial constraints and the Department and the Government have contributed each year some £4 million towards the development of our inland fisheries. We feel that the rod licence is a modest price. While many people suggest that the income from the rod licence will go towards the Exchequer, I wish to emphasise once more that the income from the rod licence will go directly, not alone this year but every year, towards the development and protection of our industry.
The legislation now appears to be controversial, but Deputies and Senators on all sides had every opportunity to vote against it when it was before the Dáil and Seanad. There was only one vote on Second Stage and the Labour Deputies voted against it at that time. A vote was called on Final Stage but the vote did not take place. By and large this legislation went through the Dail unanimously. It is wrong and unfair of Deputies and Senators to state publicly——
We were led to believe that there was an arrangement with the angling federation while in fact there was no consultation with them.
That is a fair indication of the liaison which takes place between the Opposition parties and national organisations. The Bill went through the House and the Deputies had an opportunity to speak.
Was there liaison between the Government and the anglers?
Deputy McGinley will have his opportunity but in the meantime he should refrain from interrupting.
I have listened to my constituency colleague. I was surprised that so few, and all were in the House at the time, showed an interest in the Fisheries (Amendment) Bill and the development and protection of inland fisheries. Indeed the record shows those who were interested. Deputy Molloy wanted the Bill rescinded while the leader of his party did not vote against it at that time.
Marine tourism is a product area of particular importance in view of our natural resources. The Department of the Marine have been given the specific remit to develop the largely untapped potential which marine related leisure activities represent. Its objective is to encourage the development and promotion of a range of aquatic recreational activities which would have a significant appeal to the domestic market as well as foreign tourists. The unique coastal attractions of Ireland represent a very considerable competitive advantage for developing a range of tourism activities based on marine sports.
Work has already commenced on identifying potential marine related leisure projects, facilities and activities which can be targeted for development and promotion.
Work is progressing to facilitate and accelerate maritime and aquatic sports and related activities such as marinas right around the coast.
The recent announcement of a marina for Dún Laoghaire by and large has been welcomed by all and I hope this is just the start of many new marinas around our coast. The Department of the Marine and the Office of Public Works will facilitate private investment in this area and have instructions to encourage suitable development plans and remove obstacles. These agencies are at present identifying suitable projects and it is hoped that some of these will commence construction in the near future.
Fishing, like agriculture, has a great advantage over other industries in that it is a renewable resource. We have a choice of overfishing for short term gain, or with careful control of our levels of fishing and stock management, of creating a long term stable source of employment, food and exports. A very obvious threat to this resource is pollution, both of sea and inland water. Our tourist industry is also vulnerable to this threat. Since coming into office, the Government have dealt with a number of incidents and have responded with a number of legislative initiatives designed to counter both oil and other pollutants.
The Oil Pollution of the Sea (Civil Liability and Compensation) Bill 1987, has reached Committee Stage in the Dáil, having been passed by the Seanad. The Sea Pollution Bill will be brought before the House, hopefully in this session. It will strengthen the law dealing with discharges of oil from ships and will extend the law to cover non-oil pollutants, as well as introducing new provisions in relation to wreck management and removal. In addition the Minister for the Environment will increase the existing penalties for pollution under the Fisheries Acts, with the Water Pollution (Amendment) Bill, 1987. The Bill will also require the polluter to make good the damage caused by his actions.
The Government will continue to provide support for the fishing and shipping industries, both directly through financial assistance and indirectly by funding services such as harbours and safety services. The 1988 estimates provide £3.1 million for the maintenance and development of commercial and fishery harbours. A number of projects are presently being considered for funding and priority will be given to those projects which can show the best return for this investment. The recent Government decision that public sector bodies may get assistance from the European Regional Development Fund if such assistance would otherwise be lost to Ireland, means that commercial harbours may receive ERDF funds for developments being financed from their own resources.
The Government's policy in relation to fishery harbours is to ensure that the major fishery harbours have adequate facilities to cater for the larger vessels now in use and their catches while at the same time providing a network of piers around the coastline to cater for the needs of fishing communities.
The Government have revived a programme started in 1979, to establish a chain of remote controlled VHF radio stations around the Irish coast. I was pleased to announce last week that the station at Glencolumbkille is now operative. It is important to point out that additional funds have been made available this year and there have been no cutbacks in the area of marine safety. We look forward to resolving the black spot problem off the north Mayo coast and indeed in other areas around the country.
The provision made in the Estimates was recently increased by £250,000 to allow for the establishment of a further four stations to be located in Dublin, Wexford, west Waterford and north-west Mayo. Two stations at Glencolumbkille, County Donegal and Cork airport are now completed. Work has commenced on the replacement of equipment at the coast radio stations at Valentia and Malin Head.
I attended a meeting recently in relation to safety along the west coast. I was very pleased to listen to the views of the fishermen and those who organised the meeting. I look forward to having further discussions with them and with the Minister for the Marine, Deputy Daly, and the Minister for Defence, Deputy Noonan, to establish what can be done to allay the fears of the people of the west of Ireland.
When the Minister for Finance introduced the Bill he mentioned the effects the financial regime which the Bill is putting in place will have on the economy during the coming year. Overall the message he gave was sanguine in tone but I am considerably depressed by the prospects which face our economy this year and in 1989. We are told that the adjustments, which is the euphemistic term for the continuation of the policy of drastic pruning and expenditure cuts, will have to continue into 1990. I am terrified at the prospects for the country if there has to be a continuation of what has been put in place up to now without any adjustment or change.
We are presented with a picture of an economy coming right. There are a number of bright spots on the economic scene but I am afraid they conceal an underlying dire position. We know that the balance of payments last year was in surplus, the first time for many years. Not only was there a balance of trade but there was a balance of payment surplus, something which is rarely achieved in the majority of western capitalist democracies. Occasionally countries like Taiwan, which is an exceptionally vigorous trading nation, can achieve that but it has not been achieved here or, so far as I know, in our neighbouring European countries for a very long time. It is heartening at first sight to know that we have achieved a surplus in our balance of payments. It is of great economic importance that we do so because it has the effect of strengthening the position of our reserves and of ensuring that our currency stays healthy.
We achieved our balance of payments surplus on the basis of buoyant exports but those exports came from an extremely narrow part of our manufacturing industry. They came essentially, and almost entirely, from the pharmaceutical and electronics sectors of industry. These are two areas of industry that are owned entirely — and if that is an exaggeration I can say without any shadow of doubt that they are 99 per cent owned — by foreign owners who came here because they were attracted by the package of incentives, who are entitled, under that package, to repatriate their profits and whose tax liability to the national Exchequer is extremely small.
The position is that the manufacturing sector who are producing these tremendous export figures, an extremely vigorous sector, are not contributing proportionately to the domestic economy. I am not saying that by way of complaint because that is the deal we offered these people and that is the deal they accepted. They came here in good faith and they have to be allowed to continue to operate under the terms of the agreement we made with them. Undoubtedly there is some spin-off to the economy through the employment they give and the lift they may give to the immediate environment in which the plants are located. Essentially that buoyant sector of the economy who are putting a great face on our exports — and that great face on our exports is preserving the strength of our pound and contributing to healthy reserves — are keeping our national statistics respectable. It is those figures and the performance of that sector which gave us the growth we experienced last year. As I said, it is very narrowly based and a proportionate benefit to the Exchequer does not come from them because of the arrangement of our deal with them. That is one side of the economy.
The other side of the economy is what I call the indigenous economy: the trading sector, the wholesalers, retailers and the people in Ireland who manufacture for them. Statistics in the current report of the Allied Irish Banks economic review show that the amount of exports achieved by that sector of the manufacturing industry is less than one quarter of their total output. I know and every Deputy in the House knows, from the empirical observation of moving around through our own communities, that that sector of the economy is in dire difficulty because it is from that sector of the economy that the Government are withdrawing all the assets needed to achieve the cuts and repayments on debt servicing. The Central Bank report told us that for 1987 some £800 million was withdrawn for the service of the external debt alone. That sum had to be paid by what I describe as the indigenous economy — the trading part of this country and the small home manufacturing area. The contribution of the very viable, active and vigorous manufacturing sector in the hands of foreign owners who are here on a tax holiday to these huge withdrawals from our economy is minimal and out of proportion to their size.
We have two economies in this country — the viable manufacturing economy I have referred to and the indigenous economy and the latter has to bear the cost of correcting our dire Exchequer position. It is bearing that cost by having drawn from it comparatively immense sums of money. Comparative to its size and to its capacity to provide those sums, the demand that is being made is comparatively immense. For the life of me I cannot see how the Government can continue to withdraw from that sector of the economy without at the other end putting in fuels to fund growth in that sector to enable it to continue to pay and meet the demands that are being made on it without something giving. There is no investment of any significance going in at the other end. The normal sources of investment would be from the Government through their Public Capital Programme but we know there is going to be a reduction in that as part of the Government's policy to get the Exchequer back in balance. We know that investment from the private sector is reckoned to fall in 1988. The only hope that it will not fall as drastically as 1. fear it will fall is if interest rates are reduced so that there will be an incentive to invest in the economy.
We are also told that gross agricultural output for 1988 is to decline. Again there will be less funds available in that sector of the economy for spending and generating economic growth. The forecast for 1988 is that there will be, possibly, a marginal growth of such size that it will be insignificant. What is talked about is a ½ per cent and some say I per cent growth in GDP. It seems to be common case among all commentators that, when one allows for the repatriation of profits by the multinational companies who are entitled to do so under their arrangement with us, there will be a negative GNP. I have to ask what is the Exchequer going to do for revenue out of a negative GNP or a marginally static GDP situation when we consider that last year revenue receipts were down by £76 million at a time when the economy grew by over 3 per cent? A growth rate of 3 per cent GNP is a significant growth rate by any terms. Yet there is this apparent contradiction. We have a growing economy, yet the fruit coming to the revenue is down by the sizeable sum of £76 million. I know the explanation may be given that for part of the time there was a collection difficulty on the part of the revenue. That does not explain a drop in receipts of the magnitude of £76 million. The reason there was such a drop is that there was a downturn in economic activity in the indigenous sector of the economy, the sector that contributes to the revenue.
If that sector of the economy was so on its knees in 1987, what state will it be in in 1988? What state will it be in in 1989, and what state will it be in in 1990? Businesses have been going to the wall at an unprecedented rate during the past year. They will be falling like skittles during the next two years unless some economic activity can be generated for the indigenous economy. We will continue to have an excellent appearance on the international scene and our national statistics will be good and kept good by virtue of the vigorous performance of the externally owned manufacturing sector of our economy. That is fine as far as it goes but it is concealing a really sick country in regard to the rest of the economy.
I do not know what the answer is because there appears to be common case among economists on all sides of this House on the need for the policy of retrenchment, cutting back on public expenditure, screwing the economy into the ground, reducing consumer spending.
Let me say a word on consumer spending. The Minister for Finance is optimistic that the tax concessions will release some extra consumer spending into the economy. I think he is being less than frank in making such a statement because he knows that the measures in this Bill and in his budget generally are designed to claw back almost as much as is given by way of relief, and the forecasts are that personal consumer spending in 1988 will drop or remain pretty much at the same level as in 1987.
I am worried by the evidence I meet in my daily business, and that I am sure other Deputies meet it in their daily contacts in their own communities, of a very sick and sluggish commercial scene with businesses being harassed for want of cash, wholesalers finding it difficult to sell, manufacturers finding it difficult to sell and, when they can get orders, finding immense difficulty in getting paid. Commercial travellers and the like will say they have never seen such a dire situation in business in this country, that the level of economic activity is so poor that they wonder how many businesses will be in existence when they do their next round of calls. That is because there is no investment coming in to generate activity. The Government have withdrawn from the scene. Schools are not being built. The roads programme had been cut back. This programme and that programme have been eliminated and there just is not any activity funded by Government as happened in the past. Private funds are not there. The businesses themselves are not making sufficient profits to generate a surplus for investment and they are afraid to borrow.
I see a very grim situation where the Government are, in effect, pulling out from one end of the economy money to meet their debt commitments without putting anything in at the other end to generate growth in the economy. If we do not have a growing economy there is no way the Government can continue to withdraw from it.
People may say that we have a growing economy, that we have only to look at the statistics. I have to point out again that those statistics are misleading and we must distinguish between the foreign-owned viable manufacturing sector and the indigenous economy. The former are producing healthier statistics but they are not producing the revenue that would normally come in to meet the demands the Government have to make on our economy.
We are in a very serious situation and in many ways our position is analogous to the large developing countries who got into a mess with their debts. We have many advantages over those countries. We have a sophisticated educational system, good physical infrastructure and a highly trained work force. We are a member of the EC. We have healthy reserves and we are respectable in economic terms. We have the same problem in that we are not able to generate sufficient resources here off our own bat to continue to meet the demands being made on us. I shudder to think what the position for the shopkeepers and the small manufacturers and wholesalers here will be like in 1989 and 1990 when this medicine is repeated because, as commentators tell us, we have to continue it until then. Where will we get funds to be invested into our native economy to try to generate some activity and some growth? We may have to look at some of the solutions, not the same but analogous to those that have been offered by the creditors of the large developing countries.
It is embarrassing to have to say that here. People are not prepared to admit it because they would rather take refuge behind the good statistics. Those statistics are misleading because they are cloaking the true position here. If those statistics were genuine the contribution from that sector in proportion to its earning back into the economy to the Exchequer would be fine and I would agree that the thing is coming right. I do not think it is coming right and I do not think it can come right until some form of investment can be found to compensate the indigenous economy for the demands being made on it. We are caught in a vicious economic circle. To service our debt we have to withdraw huge resources from our economy. The withdrawal of those resources weakens the economy, thereby impairing its capacity to sustain continuing withdrawals that are needed to continue to service the debt, not to speak of other deleterious consequences.
Of course, another indicator of the false nature of the national statistics is that unemployment is rising, notwithstanding a growing economy. Again that does not make sense. Possibly in the first year of growth after the recession there is a slack to be taken up, but unemployment should certainly commence to stabilise in this year if we are to have the modest growth which has been forecast. The statistics are again no longer reliable. All of us Deputies here know from our own observations in our own communities that emigration is taking place at an unprecendented rate and is forecast to continue doing so, and that should not happen if there is growth. That again proves my thesis that the indigenous economy is in dire straits and losing its work force, thereby further impairing the capacity for economic activity. That is the position as I see it.
I do not know who or what institution, if any, can come to rescue us and provide for us the resources we need to try to keep the domestic economy, the indigenous economy, turning over and generating growth. There is an element of "head in the sand" and avoiding the issue by looking at the good national statistics. We must not be misled by them. It is great to have them, they are preserving our currency, keeping our reserves healthy, but they are misleading us as to the true state of our economy. Personal consumer spending will mark time, at best, during this coming year. Public net current expenditure is reckoned to fall, investment is reckoned to fall and gross domestic expenditure is forecast to fall.
I do not know what will become of us, whether we can start to open negotiations for some exchange of part of our debt for equity to some of the resources that we have yet untapped, natural resources, namely, forestry and fishery. These are two areas where there is an open-ended and ever growing demand for their products and our investment in development over the years has been regrettably small and inefficient. There has been no dynamism in these areas. These would be viable investment venues for people or institutions to whom we owe money and to whom we might say, "We think that instead of demanding these payments from us, in view of our position you should put that money back to us and you will get a better return". Our roads infrastructure, in particular, has many possibilities for an accelerated programme with large investment, coupled with tolls. There is room for viable investment there, also. We have seen the start of that on the outskirts of this city. These are two areas regarding which we could go to the institutions to whom we are beholden financially and make a dignified appeal for a reinvestment by them into our sick and under-capitalised economy.
I do not know if any Government are prepared to admit that this is what faces us and to face the obvious consequences of recognising that picture. Where do we get funds to invest in our economy to stop it from dying altogether under the continuing demands that the Government have to make on it to cure the Exchequer imbalance? That is our dilemma. I have indicated some possible ways out of it, not terribly palatable ways, ways which people might see as being undignified and inconsistent with sovereignty — possibly even a confession of failure after 60 years of independence and responsibility for our own economic affairs. However, if we have to endure in 1988, 1989 and 1990 what was endured last year, I cannot see the indigenous economy surviving without huge social and commercial damage to business up and down the country. Businesses are already going to the wall in unprecedented numbers. Commercial anxiety and uncertainty is coupled with a harsh revenue regime. The efficiency of the new Revenue sheriffs is quite outstanding but, yet again, at a huge price, a price that has put people to the wall and has killed morale. Part of the price is depression in rural Ireland.
It is no joy to me to have to speak in such gloomy terms but there is no point in anybody coming into this national Parliament and speaking in less than realistic terms. I think that to some extent we have been fooling ourselves that the cuts of last year and proposed cuts for this year are on the way to curing our economic ills. They may be on the way to rectifying the Exchequer imbalance but by the time we get near that happy state I do not know what sort of economy, if any, will be left here.
Before I conclude, I should like to say one word on a specific matter in the Finance Bill and that is the proposal to introduce withholding tax on payments being made on foot of a contract of insurer to health insurers. I was very unhappy when I heard that mooted. I could appreciate, from the point of view of the Minister for Finance, that he could see a certain consistency between that approach and the withholding tax introduced last year. There were fees being paid to professional persons and why should they not be subject to the withholding tax in the same way as the arrangements already made last year? However, there is one significant difference. That tax was being withheld from fees owed by the State to professional persons who, in turn, would have a liability to the State for tax. There was a mutuality of interest or liability there. In the case of insurance contracts, the State is now proposing to intervene in a private contract and direct the insurer to withhold from the medical person part of the fees the subject of the contract. I have to say that at first sight that particular proposal seemed to be verging on the unconstitutional and the more I think about it the more I am coming to that conclusion.
The Constitution has within it the guarantee of the rights of private property. That is a right that people are becoming impatient with from time to time. They see it as an impediment towards social justice and so forth, but that guarantee of the right to private property is inextricably linked with the guarantee of personal freedoms that are in the Constitution. Consider the situation of your personal freedom if you did not have your right to your property guaranteed. It would be a very hollow right, indeed. The right to property is a real, important, democratic right and it is in the Constitution.
Modern jurisprudence is now tending to interpret property in a much wider way than in the past not only with regard to immovable hereditaments or chattels, but other things such as the protection that one gets by virtue of being in a trade union. That is a property right which might have to be protected in certain legal situations. The right to a pension can be a property right, various things of that nature. The modern trend has been to widen the definition of property. In the light of that trend, it is inconceivable that a court would not interpret my rights under a contract of insurance with health insurers as a property right.
What the State is now purporting to do in this Bill is to interfere with that by directing my insurer not to fulfil his full contract with me which is to pay me X pounds for cover for my medical expenses. I know that there are provisions in it trying to prevent me from being prejudiced but that is not the point. If I wanted to assign my rights under my contract of insurance, I cannot assign what I have contracted for. I cannot assign the property right that I have paid for in my contract of insurance as I contracted it because the State has intervened to make sure that what I will be assigning will be less than the full value of what I am paying for. That is just an example of the interference with my right. People may say that it makes no difference to me in practice and that it is the consultant who will suffer. I do not know what hypothetical situations could arise in the future whereby that simple answer by the Minister in this Bill might not satisfy my position. There is a grave danger in this interference by the State in a private contractual arrangement and I find it obnoxious and constitutionally dangerous. This is something we will have to debate in greater depth on Committee Stage.
A serious economic situation faces the country. We have two economies, one a viable and vigorous manufacturing economy narrowly based on pharmaceuticals and electronics, largely owned by foreigners who are repatriating their profits and who are not contributing to the Exchequer with the result that that very profitable sector is not reflected in the economy or in the Exchequer returns. The burden of cutting back on expenditure and reducing our debt is falling on our native economy. In drawing from the native economy the resources to meet that burden the Government are preventing it from growing. The native economy is in a position where it cannot grow because there is no investment in the native economy to generate the growth to provide resources to meet the Government's demands. I have indicated tentatively what we must do in dealing with the dilemma that that poses.
There are many serious issues facing the country, economic issues, social issues, law and order issues and the national question, so painfully highlighted by recent events in the Six Counties.
In Northern Ireland.
There are no immediate solutions. It is possible to make progress to find a means of easing the burden. The people have recognised, as indicated in the recent opinion polls, that they have a Government who are making progress, who are easing the burden on those in greatest need. The people recognise that we have a Government with the will and the ability to lead the country in the right direction. The first essential condition on putting the country back into reasonable prosperity, is to give hope. It is much easier to detect the absence of hope and confidence than tó notice its presence. We saw the slow erosion of hope during the eighties, falling living standards, shrinking employment, emigration and the closure of businesses plus a huge increase in our national debt and a rise in crime. We had come to a point where the very existence of our independent State was beginning to be questioned. That has changed for the better. One year of real leadership has reversed the most dangerous of those trends. Hope is rising, debt is being contained and there is national consensus to a degree unheard of before. A great deal of energy and maturity is at last being applied to our difficulties. The Government are going about their business with both eyes firmly fixed on their duty. The Government have refused to engage in a popularity contest for the sake of a quiet life. The Government have not shied away from taking hard decisions. The Government may not be universally loved but they have earned the respect of all sectors. We have the unique spectacle of a Government who have tried to convince the social partners that all of them must contribute to the solution. The Government's success in this area is remarkable. There may be disagreements on detail, but there is near unanimity on the general thrust of the Government. This consensus does not emerge by accident. It is brought about by difficult tedious negotiations and by the exchange of views of all interested parties. Consensus only works when all concerned are convinced and confident that there is a management team who will implement agreed policies with a sense of justice and urgency. Nobody here needs to be convinced of the sense of urgency to create jobs and to bring back our many emigrants. I am convinced that the tide will turn dramatically in this area in the years ahead due to the determined efforts of this Government.
I acknowledge that the leader of the main Opposition party, Deputy Dukes, has played a relatively important role in encouraging consensus. Because of his responsible role in the 25th Dáil, when historians analyse the events of the late eighties, he will be credited with being an important political figure who, in recognising the need for political stability, showed altruistic qualities in playing a constructive role in this Dáil.
I cannot say the same about the leader of the Progressive Democrats. The people expect and demand real leadership from politicians. I accept that parties of the Left have advanced sincere ideologically based alternative policies, but I cannot understand some of the stances taken by the leader of the Progressive Democrats. Deputy O'Malley as leader of his party outbid all of us in this Chamber during the last election campaign, when it came to cutbacks, but when it came to cutbacks of health services in his own constituency he opposed this essential element of rationalisation. This was from a party who scorned parish pump politics and politicians. The reputation of the Progressive Democrats, the party of the pocket calculator, has been badly dented by their self-interest approach to the 25th Dáil.
There are many Government decisions on health issues and on education which I find difficult to accept. I do not want to make teachers redundant or to close hospitals. I do not want to cut spending on roads, on industrial development and on farming supports and neither do the Government. More than that, I do not want to be party to the destruction of the country we all cherish. I will not be a party to such destruction so I must and will recognise the greater priority. I and not just the Government must do my duty, however painful. I want to see the day when all our young people are flocking back to fill the vacancies created by sound and courageous Government policies. Under this Government we are witnessing the birth of a new and exciting beginning for our relatively young country, but we still have much work to do.
If we look at our very encouraging export figures, we can still see an overreliance on the UK market. Our improvement in trade last year with the UK which amounted to about £44 million was worth almost twice as much as our total improvement with three other countries in the EC, with similar sized markets and trade conditions, namely, West Germany, France and Italy. With the completion of the European internal market a mere four years away it is obvious that we must make an all out effort to capture a sizeable share of these markets. A central part of this strategy must be becoming proficient or at least having a working knowledge of the language of our customers. It has been suggested that too many of our students are studying French and that German is being neglected. I discussed this matter with secondary school teachers and came to the conclusion that we should not replace the study of French with German. French is still a very important and essential language in the EC and it should not be replaced by German, Spanish or Italian. This presents our educationalists with a problem. Most leaving certificate students are studying three languages, Irish, English and French along with science, commercial subjects and so on. I understand the difficulties of school authorities and students in trying to fit four languages into a leaving certificate timetable. I compliment the schools that manage this. We must look at other options, for example extra curricular courses, a greater promotion of night classes, courses in languages in second level schools and the involvement of business. I welcome the emphasis placed by the business community recently on learning the language of the purchaser. Businesses have a major role to play in our efforts to tap new markets in Europe through a greater proficiency in European languages.
The successes of this Government are quite staggering and very evident to everybody. The business community have acknowledged the Government's many achievements, in particular I refer to foreign borrowing which is at its lowest level since the late seventies. Inflation continues to fall. The inflation rate is now below the EC average and this combined with a reduction in interest rates and the income tax concessions will, I have no doubt, lead to a growth of private investment in the coming months.
The acknowledgment in this Finance Bill of the contribution that the PAYE sector have made to this country in recent years and the need for significant income tax reductions in this sector is one of the principal features of this Bill, and it is one I particularly welcome. The Minister has pointed out that these tax changes are only the beginning. If we are to encourage initiative and reward effort, we will have to continue to reduce income tax, as the overall level of taxation is still too high. Nevertheless, it has to be acknowledged that these changes went far beyond the commitments made in the Programme for National Recovery where £30 million tax relief was promised. As the Minister said, in 1988 relief will cost £91 million and £152 million in a full year. This, I believe, is a major boost to taxpayers and this trend must continue. We are well on the way to having two-thirds of taxpayers paying tax at the standard rate only.
The radical steps taken by the Minister in introducing a new tax assesment and collection system are to be applauded. We will now have a situation where the taxpayer will feel responsible for meeting his or her tax obligations and where the number of appeals will be significantly reduced. We are talking about tax defaulters who are being given a once-off opportunity to clear up their accounts before September. I understand there has been a very positive response to this innovative proposal. It will, I have no doubt, bring in revenue that would otherwise never have surfaced. If defaulters do not take advantage of the scheme then the introduction of the power of attachment will penalise them accordingly. This Government have not just given attractive concessions to the PAYE taxpayer, but have for the first time in years seriously stood up to the tax defaulters and to the whole question of uncollected taxes.
I welcome in particular the return of the section 23 tax measure. This, as we know, allows expenditure incurred on constructing new residential accommodation for renting to be set off as a reduction against all rental income. The Minister has decided to extend the relief to costs incurred in the conversion and refurbishment of property, of rental accommodation. I welcome wholeheartedly this additional measure.
We are all aware that a considerable number of building workers are employed, particularly in the Dublin area, in conversion and renovation of buildings. Many of these buildings, particularly in the city area, are historic and in urgent need of preservation. I have no doubt that this section 23 proposal will play a major role in preserving Dublin's fine architecture and ensuring the renewal of our city as a vibrant and lived in city. It is most appropriate that this measure is being introduced in this the year of the Millenium.
Other Deputies have referred to the International Financial Services Centre. All I would like to say is that I am impressed with the progress made to date on the Custom House Docks project. The fact that 22 projects have been approved in principle, involving 700 jobs, is most encouraging. The Government have rightly placed a lot of emphasis on this development. I am as anxious as anybody else to see building in progress and to see some of our unemployed workforce, particularly in the building industry, back at work and no longer on the dole queues. I am also anxious to see many young emigrants who are part of the brain drain back working in our midst in this Financial Services Centre. I have no doubt this will happen in the near future.
There has been reference in the debate to treatment of disabled drivers. I believe those representing disabled drivers have really misinterpreted what the Government are proposing for disabled drivers in this Bill. What the Minister is proposing is that the Minister for Health, not the Minister for Finance, will, through the National Rehabilitation Board, administer the scheme covering the remission of road tax on vehicles for use by disabled drivers. The Minister for Health has set up a working party with representatives of disabled drivers on the committee. I understand the majority of the members of the committee are disabled drivers. They have the same number as was provided by the Department of Finance. My understanding is that their brief is to eliminate unfairness and distortions in the present scheme.
One such anomaly is that drivers with the full use of one or both legs do not qualify for assistance. In other words, only those drivers who do not have the use of both legs qualify. I think this is wrong. I believe the working party will come up with a more balanced and fair system. I understand they are thinking at present of a lump sum every three years to pay for the car and an allowance for running the car. It is in the interest of the disabled drivers to bring in a new scheme; otherwise I believe the Department of Finance will revert to the original scheme. I also believe there has been a lot of disinformation on this particular measure and it is time the air was cleared. The motives of the Minister and the Government are clear to me, and they are to improve, not to downgrade, the present scheme.
Much has been said in this debate and written in the newspapers about the £10 levy on ATM cards. It has been said that this is taxation on technology. Some of the strongest opponents of this tax have been the banks. I share the concern the banks have for their customers but there is a simple solution to this problem, and that is, that the banks pay the £6 million involved and thus save their customers this new charge. After all, it must be pointed out that the banks have their own charges on ATM cards. For example, the Allied Irish Banks charge 12p per transaction and the Bank of Ireland charge 14p per transaction. In other words, if a Bank of Ireland customer uses his or her card twice a week then he or she is paying the bank £14 in a full year. There are many other bank charges the customer has to pay and I believe the banks should cover the cost in this instance and end the debate once and for all. The Minister has to get the money from somewhere and the banks do well out of this economy.
The Minister in his speech emphasised the fact that the Government were determined to pursue policies in line with cuts in public expenditure. Priority has been rightly given to agriculture, tourism, forestry and fishing, our natural resources. The Government are also making a determined effort to protect and develop our natural environment. This is a strategy I have promoted since my election to the Dáil last year. Most of us would agree that we should protect and develop our environment and ensure that, for health and social reasons, our rivers, lakes and seas are clean, that our air is pure and that our fish, meat and agricultural products are fresh, wholesome and uncontaminated. This is a valid and just argument. But there is another argument to support a strong environmental protection strategy, and that is an economic one. There is no doubt about the direct link between Ireland's environmental state and our economy. It is not just the state or condition of our rivers, lakes, land and agricultural products but also the image of Ireland abroad and the produce of this nation.
An example of this link between our environment and our economy presents itself in the form of what was once a beautiful tourist attraction and popular fishing lake, Lough Sheelin. Much has been written about this lake in recent times. What has been done to Lough Sheelin can only be described as desecration and never be allowed to happen again. The fact that this lake has been taken off the tourist promotional leaflets being distributed throughout Europe speaks for itself. Those who destroyed Lough Sheelin seriously injured our tourist industry in that locality. I can only hope that in time the fishermen will return to Lough Sheelin. I understand all has not been lost and that there is hope that Lough Sheelin can be saved. I hope that we have all learned from this saga.
In conclusion, I believe the Government's approach in controlling public finances is correct. It is imperative that we stick courageously to our targets in the interest of future generations. We must continue to look for job opportunities in the areas I have mentioned — in agri-based products, science and technology, our natural resources and construction.
I appeal to the Minister to continue his efforts to promote the construction industry. I am convinced that the docks site project will be a great success and section 23 concessions in my view will lead to many jobs being created in the building industry. The days of large housing schemes, public or private, are fading. There is a shift towards small selective house schemes. We must assist the construction industry in every way possible. We must listen and consult. The buzz word at the moment is "consensus" and that is the formula for success by the Government. In the years ahead we must continue to strive for consensus. One major achievement by the Government was that they involved so many people in the process of consensus. We must continue to explain what is taking place as we go along. We must outline our problems and the solutions to them as we see them. We must seek the support of our social partners. We are in this together and we will make it if we work hand-in-hand.
I am calling Deputy Anne Colley.
I was in the Chamber before Deputy Colley arrived.
That would not establish the Deputy's right to speak before Deputy Colley. I am calling Deputy Colley. I hope Deputy Boylan will accept the decision of the Chair on this.
I accept the ruling of the Chair but I must point out that I was in the Chamber before Deputy Colley arrived.
That would not signify that the Chair should call the Deputy. I should like to thank the Deputy for his co-operation and for displaying his great Cavan chivalry.
I was anxious to make a number of remarks in response to what the last speaker said about Lough Sheelin.
I had an idea the Deputy might be sensitive about Lough Sheelin but that would not justify me calling the Deputy before Deputy Colley.
I should like to thank the Chair for calling me. At the outset I should like to address the underlying aspects of the Bill which contains many elements that have been promoted by the Progressive Democrats since their inception, namely, taking control of the public finances so that they can be reduced which, in turn, would mean that taxation could be reduced and that real economic growth could take place here. The Government have taken control of the public finances. Elements in last year's and this year's budgets are leading us in that direction. However, my party have difficulty with the thrust of some of those elements and I should like to offer suggestions to the Government for implementation in the future.
One of the main provisions of the Bill which I regard as extremely important in terms of the climate it creates in tax collection is the amnesty for tax defaulters. The provision in the Bill has to be seen as a useful tool in fighting tax evasion, as a once-off incentive to defaulting taxpayers. Apparently it has been very effective and is bringing in amounts of tax from those who have already been assessed for tax. However, it is not having any effect on those who are evading tax completely and are operating in the black economy. On the evidence of figures published by the Government and others, it is difficult to understand how Ireland as a business keeps going. The answer has to be that the black economy sustains economic activity while denying any benefits of that activity to the State as a whole. What is needed urgently is a real onslaught on reducing personal taxation levels. They must be systematically reduced having regard to their effect on the incentive to work. At the same time as pursuing a policy of reducing taxation levels, there must also be a policy to pursue those outside the tax net. It is essential that they should be done hand-in-hand.
The Government are patently not concerned with the latter part of that strategy. In the latter half of last year they approved the transfer of the anti-evasion branch in relation to VAT in the Revenue Commissioners to the Collector General's office. That must indicate to those outside the tax net that the Government are only interested in chasing those who are paying tax and do not have any interest in widening the tax base to include those who are evading tax. There is real resentment among compliant taxpayers and Revenue officials that those who have defaulted over the years are getting special treatment. The benefits of this amnesty, and there are benefits, must be weighed against the disaffection it caused among compliant taxpayers.
There is also the danger that those who have defaulted in the past will do so again in the hope that another amnesty will be declared in the future. Compliant taxpayers must also feel aggrieved that the system whereby interest on overpayment of tax is paid by the Revenue Commissioners at the rate of 1 per cent per month, tax free, is being abused. Many of those who have been tax defaulters over the years and who are now taking advantage of the amnesty and thereby paying no interest on the outstanding taxes are benefiting to the tune of 12 per cent per annum, tax free, on overpayments of this year's assessed tax.
It is very common that initial assessments sent to taxpayers overstate the amount of tax which will finally be due. That means that if a taxpayer pays the full amount of the assessment when presented with it, he or she will in the end be repaid the excess with interest, tax free, by the Revenue Commissioners. That is an attractive proposition as the net rate of interest gained, taking into account that it is tax free, is surely the best available in the city. There is no provision in the Bill for a set-off of overpayment of tax against tax due or interest owing. While a solution such as a set-off may not be technically possible under the terms of the Bill, surely it is not beyond the ingenuity of the Revenue Commissioners and the Department of Finance to prepare a provision that will end the abuse of State money by those who have in the past reneged on their duty to pay their taxes. I should like to call on the Minister to take note of what is happening and restore faith in some vestige of fairness remaining in the taxation system. Compliant taxpayers would be very appreciative.
I must say that unemployment and emigration which were glossed over in the budget speech in January are not of great consequence in the Bill before us. There are a number of provisions in the Bill which are intended to go some way towards creating the right climate for investment and job creation. I am thinking of the financial services centre, the repatriation of dividends of Irish companies abroad tax free and the section 23 tax reliefs on building, refurbishment and conversion of rented accommodation. However, I foresee a number of difficulties arising if we rely on those provisions to create jobs in meaningful numbers. The Minister has said that the financial services centre has issued two licences for projects and that there are a further 20 in line for approval. The number of jobs involved in those projects is in the region of 700 which means an average of 30 jobs per project.
I wish the concept of the financial centre every success. I believe Ireland is sadly lacking in carving out its own niche in areas of commerce or industry but the provision of employment via such a centre for financial services depends to an enormous extent on the personal tax and corporation tax climates here. Firms will find it very difficult to persuade their executives to relocate in Dublin where the cost of living is so much higher than in many other cities and where the takehome proportion of salaries compares so unfavourably with other tax regimes. I do not think we will see the financial services centre take off until there is some appreciable move to reduce tax levels.
The encouragement of Irish companies to repatriate their profits or dividends, tax free if invested in projects which will benefit our economy, in particular in relation to the creation of employment, is also dependent for its success on the tax climate generally here. If the main aim of such a scheme is to encourage job creation, the Government will have to look very seriously at the substantial payroll taxes obtaining. If these are not reduced as a proportion of the total wage bill, firms simply will not be interested in investing in employment. Neither the return to the employer nor employee is an encouragement to do so. We must face the fact that the climate for investment here is still very hostile if jobs are to be the priority.
As an example of how the tax reliefs provided for in this Finance Bill may work against the investment of funds for job creation, the reintroduction of section 23 of the Finance Act, 1981, giving tax relief in respect of small rented accommodation, must be carefully monitored. If not monitored this may well turn out to be a disincentive to the creation of jobs.
The building industry is in the doldrums because of lack of real activity in our economy. I am not aware of any great need at present for a major increase in the numbers of properties available for renting. Certainly there is some need on a continuing basis for such properties to be made available. However, the danger of attracting investors in property, with the use of this tax relief, is that it will concentrate investment in that sector as against investment in business and job creation, the latter also being wealthcreating.
A number of years ago the circumstances prevailing rendered it very attractive to invest in property. As a consequence other sectors were starved of the necessary finance or seed capital. We must be very vigilant to ensure that this does not recur. That is not to say that this tax relief should not be available. However, I must repeat that it should be carefully monitored so that there is not an imbalance in investment in the refurbishment of such premises to the extent that other areas, which would be wealthcreating, would be deprived of such investment.
While not specifically included in the provisions of this Bill I might refer to the question of the national lottery funds which should be examined again in relation to the creation of employment and the stemming of emigration. The national lottery has succeeded beyond all expectations. There is a much greater amount of money available from its proceeds than was ever envisaged. Surely it is time we re-examined the need to divert all its funds for the purposes set out in the Lotteries Act? There is room for diverting some of its proceeds into employment creating projects, particularly community-based ones. This would allow people to contribute to the alleviation of the greatest social problem facing us at present and which we shall continue to face in the foreseeable future. I make my suggestion in the context of the stated Government thrust in favour of job creation. In this respect I should point out that there are already administrative channels in existence. It is a suggestion which would be welcomed by people throughout the country.
I might deal now with the question of the withholding tax dealt with in section 7, its application being widened. It is my belief there should be the concept of a withholding tax. It was one of the recommendations of the Commission on Taxation. It has not been implemented by this Government in the context in which that commission envisaged its implementation. It is a laudable aim to bring as many people as possible on to a current basis of payment of tax. With that in mind it is proper that all those who receive payments from the State — just like PAYE taxpayers — should have the tax withheld at source. I believe that the withholding of tax should be implemneted on the same basis as applies to PAYE taxpayers. The difference between the existing withholding tax system and the PAYE system is that, in many instances, the tax paid by professionals employed by the State is paid not just on their incomes but on turnover. I mentioned this in the course of a number of debates in the past year. I mention it again because I believe it is basically unfair and inequitable.
The Minister should set his mind to doing something about redressing that inequity. Not alone is it inequitable but it is actually putting people out of business and onto the unemployment queues. That seems farcical when one considers the stated intention of this Government, which is to increase employment. The reality is that, when a small firm of, say, consulting engineers, valuers, or others, allied to the building trade receive a fee from the State it does not cover simply their income. It covers all their costs, turnover, staff salaries, any expenses incurred in the carrying on of their business. Therefore, the implementation of this withholding tax is putting an enormous strain on those types of businesses and on their cash flows which become non-existent. If the Minister does not take action immediately the position will worsen.
It should be remembered that the withholding tax applies to rural doctors practising within the GMS. I say specifically rural doctors because they have encountered the problem that 95 to 99 per cent of their practices involve medical cardholders, allowing them no opportunity to have a cash flow by way of private sector medicine. It is quite right that payments to them should be taxed. But it should be remembered that a sizeable element of the payment made to a doctor practising under the GMS scheme is supposed to represent his costs, the provision of a surgery, a secretary, heating, light and so on. It is acknowledged by the health boards that that is the case. A specific proportion of the fee earned by a doctor is supposed to represent those costs and the remainder is supposed to represent his fee. It appears to me to be untenable to allocate the withholding tax to the proportion which constitutes the doctor's fee and not to the practice expenses as a whole. That is an omission from the provisions of this Bill. That has been my concern over the past year since the introduction of this withholding tax. It applies across the board. Presumably some of the groups to whom this withholding tax is being extended under the provisions of this Bill will encounter the same problems. Whether or not they will, the same objections stand.
With specific reference to consultants being brought within the withholding tax net, with payments henceforth being proposed to be made directly to the consultant for his part of any hospital fee by an insurance service, that is only right and proper since other professionals in many other fields who receive payments from a State body must pay withholding tax on their fees. I see no reason why medical consultants should not have to do likewise. I would abhor any move to pass that charge on to patients. It is unworthy of any group representing consultants to so suggest.
I might refer to the system of self-assessment to taxation introduced in this Bill. There is no doubt but that it constitutes a move in the right direction. The Commission on Taxation recommended that there should be a move towards self-assessment. As the Minister said in the course of his remarks, the various aims of that commission are those he is now proposing. I foresee there will be difficulties and I know that the Revenue Commissioners are aware that there will be difficulties in the introduction of this scheme. I also know that many taxpayers will not know how to handle it because they are not familiar with the revenue law. There will, undoubtedly, be problems in the beginning. I know that for the first year there is a certain optional quality but after that it will extend to everybody on a compulsory basis. We have not done enough thinking about what needs to be done to have a smoothly working self-assessment system. For instance, how do the Revenue Commissioners propose to obtain an accurate profile of a typical auctioneer, solicitor or doctor? A profile is needed before they can decide whether a group of people who send in certain self-assessments are telling the truth.
What international models have been used in devising this system? What can we expect in its implementation? I know in the United States they go to extreme lengths to establish what type of profile there is in regard to, say, a hairdresser or anyone who is self-employed. They build up a profile by doing a huge amount of work at the beginning and they can rely on that basis. We have heard nothing about how the Revenue Commissioners intend to implement this. We have heard the rules regarding the taxpayers but not the modus operandi of the Revenue Commissioners.
Fairness must be exhibited by the Revenue Commissioners. Some people consider that this system will favour the self-employed because it means that apparently there is less scrutiny. I believe that if the penalties are right and implemented properly a climate will be created whereby far fewer people will attempt tax evasion than has been the case to date.
How, for instance, will the Revenue Commissioners differentiate between a small trader who simply makes a computational error or who misinterprets the law in computing his tax or filling in the self-assessment form and a small trader who deliberately misleads the Revenue Commissioners by omitting certain details? That needs to be addressed. At present it is addressed by having almost everybody investigated to an inordinate degree and that cannot be the solution under self-assessment or it will be a selfdefeating scheme.
Is it known what percentage of those who will be assessing their own tax will be fully examined? It is a small percentage in the United States but when they fully examine someone they literally take the place apart. They come into your house, office or place of business and they even ask about your dry cleaning bills. Without that kind of approach, this system will not be effective. There will also be difficulties if those found evading or defaulting on tax payments are not subject to publicity, which will be uncomfortable and embarrassing for them. The system will also be ineffective if they are not subject to court appearances and if the full rigours of the law are not applied to them. Will there be imprisonment? What kind of penalties will be involved? We are entering a different phase of tax collection and assessment and we have not yet heard what way the Revenue Commissioners will make sure it will work effectively. There is quite a different concept involved and I do not believe that the public, to any great extent, realise this. I should like to know if the Revenue Commissioners realise it.
There is no doubt that, in order for self-assessment to work, the penalties must be a real deterrent. They must be substantial and publicised because in a small country there is a danger that somebody knows someone who will put in a good word for them, which means that the system will fall apart. I hope that we have reached the stage of maturity where we as a nation, having seen the difficulties which the State has experienced financially over the last number of years, see it as our duty to make sure that we pay what is due because, if we do, we will be better off as a nation.
On a more practical note, the self-assessment system must also be accompanied by a simplification of the tax code. Our tax code and legal system are extremely complicated. Until the tax code is simplified, it is not fair to expect individuals to be able to make returns as they should. Neither is it fair to expect everybody to go to an accountant. There are many small traders who are singly self-employed and they simply cannot afford the extra overheads involved in consulting an accountant for a service which they should be able to do themselves if the code was simple enough. As the Commission on Taxation report indicated, that involves the elimination as far as possible of special allowances. There should be a downward thrust of tax rates and, as far as possible, uniform tax rates should apply across the board, not just in personal taxation but also in company taxation.
I warmly welcome the elimination of the type of frivolous and obstructionist appeals to date. There is no doubt that many appeals were a time wasting exercise which clogged the system and prevented the Revenue Commissioners from collecting money which was due. It is only right that the taxpayer, if he wishes to appeal, should show good faith and make a payment as requested. If it is found he is due a rebate, fair enough, but it is essential that a payment be made when an appeal is lodged.
The Minister made great play in his speech of the fact that, as he believed, there had been a substantial bettering of tax relief and that people should be much better off. In reality, we all know that that will not be the case. He instanced the fact that personal tax reliefs this year will cost £91 million, in a full year they would be £152 million, and £400 million over the next three years.
We should cast our minds back to the pay agreement that was negotiated between the Government and the public sector some months ago in which a commitment was made to pay a percentage increase to the public sector which there is no doubt this Government could not afford to pay and should have been the first to plead inability to pay. The extra pay cost to the State this year will amount to about £100 million. If you look at the tax reliefs the Minister is saying are being offered in this budget it seems that without giving a pay rise to the public sector we could have given everybody the benefit of further tax reliefs. We could have concentrated them on the low paid if we had not spent that £100 million on public sector pay. We could have concentrated them on the lower paid either by increasing tax reliefs at the lower end or by abolishing PRSI, as we have suggested on a number of occasions, on the first few thousands of pounds earned. That is where we must start.
We must make an effort to encourage people who are on marginal levels of pay (1) to stay at work and (2) to try to work their way up the ladder. Where people who are on social welfare assistance or benefit are offered jobs which are, to be fair to them, going to give them less of a financial return than they get at present between the various allowances given to them, medical card and so on, it is not fair to ask them to take a job which will bring in less. We should, therefore, concentrate our resources on trying to include as many people in the working population as possible and not try to exclude them. Many people I meet day in and day out who are offered jobs, even part time, cannot take them up because either they would be financially worse off or they would be running the risk of getting all their payments cut off. Is that crazy or is it not? We are actually paying people not to work. We are building it into our system that they should not work or it will be a penalty on them if they do.
There is no doubt in my mind that a wrong decision was made when it came to negotiating a pay deal with the public sector. That £100 million — or the £70 million which is absolutely involved in the pay deal — could much better have been used towards stimulating people's interest in working, the taking of jobs, promotion and so on at the lower end of the scale so that people are included, not excluded, from the working population.
On a minor note, because it is an interest of mine, I welcome the extension of the tax relief to widowers that widows had up to now in the year of bereavement, I find it anomalous, to say the least, that in many instances either in the tax code or the social welfare code men who are in the same situation as women find themselves financially far worse off. An instance was given to me recently of a doserted husband who had three children and was in receipt of about £20 a week less than a deserted wife with three children. That is disgraceful and there is no reason for it. I have raised this matter in letters to the Department of Social Welfare and essentially they say, "Sorry, we cannot do it; it costs too much." I have got them to give figures for it, and it should be considered seriously because it is hugely inequitable. I do not believe it would cost too much. As a step in that direction I welcome the fact that widowers now are put on the same tax footing as widows from the year of their bereavement.
The Minister has introduced what he calls a once-off levy on pension funds. This is a very shortsighted exercise because already the Minister has done an about-turn on it having heard the facts, and has excluded approximately 23,000 of the 25,000 pension funds that were in the business at the beginning. Despite that, he still says in his speech that there will be no real effect on excepted yield. I would like an explanation of that. I do not understand how that can fit in with the other fact.
There is a mistaken impression that pension funds are somehow like insurance companies or large commercial organisations. They are not. To a large extent they are single pension funds or small groups of people who get together to provide for their own pensions. They are the people we should be relying on. They have taken the responsibility of providing for their old age or their future and what have we done? We have reduced the yield they can expect from this fund in this year and I have grave doubts as to whether this will not be continued next year and the year after.
Another anomaly relating to the pension funds issue is that it has no effect whatsoever on the whole public sector because the public sector run an unfunded pension scheme. The public sector do not provide for their future and, therefore, are not going to be hit by this. Once more, that is anomalous and reiterates to the man in the street that if you are working, providing, doing your job, we are going to get you. That is not fair. I am not saying the public service are not working, but the Government are not providing for their future as they should be and are going on blindly as if there will always be money there to fund these pensions out of current expenditure, which we all know is in grave danger of not being true.
The automated teller machine card duty which is being proposed in the Finance Bill is quite an unbelievable proposal from a Minister who must be aware of the difficulties in this country regarding the huge amounts of cash that have to be carted around the place almost every day of the week. The Minister of State present should know as well because there have been numerous robberies from post offices and employment exchanges and the cash, because it is there, is at risk. There is a movement to pay people directly by cheque. This movement is being encouraged by Government, the employers and the trade unions. It is for once a joint effort and what does the Minister come in and do? He imposes a duty which effectively puts a stymie on the development of that trend.
The Minister in his speech said that we must be prepared for the fact that electronic communication of money and so on is coming in the future and there is no reason why we should not look at this as a source of revenue. I say to him that it is not established here yet. Our country is extremely backward in relation to whether it will accept a cheque or direct credit as opposed to cash. We simply have not got on the band wagon yet. It would be fair enough for the Minister to come back in five or ten years when it is established and say, "Now that it is an established business I am going to look at it at this stage." The real objection everybody has to it is that he is putting a stop to a trend that has begun to gather momentum and get some degree of acceptance from the public at large. It will not continue to do so if he persists with this duty.
On the disabled drivers proposal it is disingenuous of the Minister to come into the House and say he is going to remove the benefits to disabled drivers of the reliefs they get and they are to take on faith that somehow this is going to be catered for in the future, somehow the health boards perhaps will have funds with which to do this—
Not the health boards.
——that somehow somebody will take care of disabled drivers and give them the relief they have enjoyed so far which, I have to say, is well deserved. To a disabled driver a car is an essential tool. It is a replacement for the limb he has lost or of which he has lost the use and that essential tool is recognised by the existing reliefs. The Minister has not spelt out the anomalies, the unfairness and the distortions that he says exist in the way those reliefs have operated. He has not given us details and he is not saying how he will replace those reliefs. That is not acceptable and we will oppose their removal unless we know what is coming in. When we know what is coming in and that it will work, we will look at it in a positive manner.
Deputy Kitt who spoke before me referred to a committee which made recommendations on this matter. The committee which made the recommendations was made up if six persons, two of whom represented disabled people, four of whom did not but represented the State. I believe we cannot hand over in good faith to the Minister the notion that he will provide for disabled drivers if he is not able to come into this House and explain how he will do so.
In conclusion, I commend the Minister and the Government on the moves they are making to rationalise the tax system, be it in the area of assessment or of collection. The main difficulty I would have with what he has proposed is that he seems to ignore the real need for reducing the tax rates particularly at the lower levels. This Government have made great play of the fact that they are aiming at having 66 per cent, two-thirds of all taxpayers, on a standard rate. I should like to say that the standard rate of 35 per cent is completely unacceptable and that it is no great feat to get two-thirds of taxpayers on that rate. What is required is that we reduce the standard rate and allow as many people as possible to pay at a lower rate, possibly 25 per cent, which is a reasonable amount in international terms. To do that we should be moving towards widening the tax base. I know the Minister asked for ideas in his speech. A number of ideas have been mentioned in the debate. I have mentioned a few.
The Minister and the Government are not addressing this urgent problem of the high levels of taxation with any sense of what actually makes things work in the economy. The real incentive is in what I take home at the end of the week. This is another missed opportunity. Because of the haste after taking office last year the Government had to produce a budget and there was some reason to expect that they could not deal with the question of taxation in any real detail but they have now had an opportunity to show faith but that has not been the case. They proclaim that their aim is simply to bring two-thirds of taxpayers to the rate of 35 per cent. We will be a long time waiting for the economic recovery which this country badly needs if we allow ourselves to rest on that.
Initially, I want to refer to my maiden speech last year, on 14 June, when the subject, too, was the then Finance Bill. I made the comment at that time that it was ridiculous to do our business in such a way that we were passing the Finance Bill at a time when almost half the year had elapsed. I would like to put it on the record that I am very pleased that the Government looked at this matter and considered it important that the Estimates should be published prior to the end of the last financial year, that the budget would be placed before the House as early as possible in the current year and the Finance Bill immediately after that. That is a much more businesslike approach and one that has been welcomed by all sides of the House.
Before dealing with some of the matters to which I want to refer in relation to the Finance Bill I would like to refer to a few points which have been made by previous speakers. One of those matters, referred to by Deputy Colley in the course of her contribution, was the lottery fund which she admitted does not come under the Finance Bill. She made the point that we should have another look at how the lottery funds are being dispensed and disbursed and that we should possibly consider other ways of spending lottery funds. So far as I am concerned we have had too many looks at this matter and the funds are too widely dissipated at present. We are in danger of dissipating the funds so much, right across the board, that we end up giving everybody a small amount and nobody sufficient for their means. I would not like to see the lottery funds expended or dissipated any more widely. I would remind Deputy Colley that within the current schemes, particularly in the environmental area, the grants being given for amenity schemes will provide much employment at local level. All the grants in the sports area will also provide much needed employment, particularly in the construction area. I think the Deputy will find over the next year that the dispersal of the lottery funds will have the desired effect of increasing employment throughout the country because grants are being given. I would be wary of introducing another element that would have to be financed from the lottery funds. The question of employment is adequately catered for under the existing schemes.
Not only Deputy Colley in this debate but other speakers in a number of debates during the past six months have referred to the public sector pay deal in the Programme for National Recovery. The general criticism they have levelled is that the money granted for increases in public sector pay could have been better spent and that it was not right that public servants should receive an increase of 2 per cent or 2½ per cent on average. I do not go along with that. The people who levelled that criticism and the charge that the unions were hoodwinked before they signed this agreement does not say much for the Opposition party's opinion of trade union executives and negotiators. Nobody was hoodwinked. This was a good and fair deal. The people who criticised the Government for allowing for a 2 per cent or a 2½ per cent increase in wages are the same people who have criticised the Government for not allowing the implementation of the report on remuneration for higher civil servants. They have criticised the Government for not implementing the recommendations of that report because they say — and I agree with them — that failure to do so would have an effect on morale. If people asked public servants who are working hard to take a pay freeze for the next three years, I would not like to think what the response would be.
Too many people are losing their jobs.
They all have to live, Deputy Colley.
That is right, but other people have no jobs and they do not have a pay increase.
People who have jobs are as entitled to live as those who have not jobs. This Government are looking after people on social welfare equally well.
The point is to get them off social welfare.
That is correct and when I resume my speech tomorrow morning I will outline some of the ways in which the Government are including employment and development measures.
Debate adjourned.