Finance Bill, 1988: Second Stage (Resumed).

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

Deputy Noel Dempsey is in possession.

When I spoke last evening on the Finance Bill I referred to a number of matters which had been raised by Opposition Deputies in their contributions. The last point I wanted to make in relation to some of the matters raised by them was the question of the levy on the ATMs, the cash cards. It has been criticised by most of the Opposition speakers I have heard as a levy on new technology and they said the result would be that many people would hand back their cash cards and cash security risks would be increased. I heard no alternative solution proposed by any of the Opposition speakers.

I suggest, as did other speakers on this side of the House, that the banks should pay that levy and save their customers the cost of it. I make that suggestion because the purpose of these machines is to reduce the overheads of the banks and to reduce the numbers of staff necessary in the banks. It has been the subject of ongoing negotiations for many years within the banks and the whole purpose of the banks wanting to reduce their overheads and staff is to increase their profits. Banks are making quite reasonable profits and as they will save money by reducing overheads and numbers of staff some of that profit should be used to the benefit of their customers. It should not simply be used to pay dividends to shareholders. I would respectfully suggest to the banks that they should pass on some of these savings to their customers who are already overburdened by bank charges.

The Finance Bill is an earnest of the Government's intent. It is usually an indication of the strategy the Government are pursuing — the philosophy of the Government—and it underpins the basic policies of the Government. This Finance Bill is no exception. The strategy contained in the budget and in this Bill is a continuation of the policies started in 1987 by this Government and continued through theirProgramme for National Recovery. The basic idea contained in the Bill and in all Government policies is to restore confidence which was all but gone in this economy during the past four or five years. It is also designed to sustain the level of growth we achieved last year and, hopefully, to open the way for new employment. That strategy was started in the 1987 budget and it has been very effective.

Over the past year we have seen a fall in interest rates of the order of 4 to 5 per cent and this has been of tremendous benefit to everyone, including householders with a mortgage, farmers and businessmen who have loans from banks and lending institutions. Last year when we were discussing the Finance Bill the Fine Gael spokesman on Finance referred to the then fall in interest rates of between 1.5 per cent and 2 per cent. He said this had happened in previous years following budgets and that rates would rise again in September or October. I am sure all Deputies are glad that rates are continuing to fall.

Another indicator of how effective this policy has been is that investment in plant and machinery increased by 4 per cent in 1987 and the same rate of increase is expected in 1988.

Most important is the fact that the 1987 budget was effective in controlling Government spending. Very difficult targets were set and they were more than achieved, despite all the scepticism on the Opposition benches. Without exception, everybody on those benches said the targets could not be achieved and that they had seen Fianna Fáil set such targets before. Not too many of them have acknowledged the fact that the targets set last year have been achieved. This year the targets are equally difficult but already we have seen signs that they can and will be achieved.

This Finance Bill contains the most significant changes in taxation for many years. The principal features are the concerted plan to overcome the problem of arrears of tax and the interest on those arrears, the introduction of self-assessment for self-employed taxpayers and companies and the fundamental overhaul of the corporation tax system. The significance of these reforms should be seen in the context of the debate on tax reform which started in the early eighties with the tax marches in the streets of Dublin and in provincial centres. Hundreds of thousands marched because of the inequity of the tax system under which one sector of the community seemed to be carrying an unfair burden of taxation. The Commission on Taxation was then set up and issued several reports but the only reforms were the introduction of the PAYE-PRSI allowance and the appointment of the Revenue sheriffs in 1986. The reason for the agitation in the early eighties was that most people in the PAYE sector considered those in the non-PAYE sector to be paying little or no tax. I am not sure this was fair but it was the public perception.

The reason was that the system, particularly in relation to the non-PAYE sector, allowed the amount of taxes due to increase each year because the collection system was grossly inefficient. Up to 1986-87 it could take two to three years for an assessment to be raised on a new business. Generally speaking when demands for tax came into a firm, particularly a small firm, they were put to one side. Most people seemed to adopt the attitude that if the demands were left aside for long enough they would go away. That did not happen but the system was such that it could be two or three years before the initial assessment would be followed up. Then there was a system of appeals which could take another year or two. For each of these assessments there could be delays of up to four years before tax was collected. Many people were caught in that system. Most taxpayers felt that this was the way the system operated and that they would have three or four years to pay their tax. Most accountants advised an appeal and said they would see about the matter when it came up again. The whole system became clogged up and gradually ground to a halt.

The appointment of sheriffs in 1986 certainly helped to speed things up but the solution was almost more severe than the problem. The sudden change which arose when the sheriffs were handed these demands caused severe hardship. There was a change almost overnight from a creaking bureaucratic machine to a reasonably streamlined system. People who expected to be able to pay their tax at a leisurely pace suddenly found that they had to pay four years' tax and a sheriff was knocking on their door looking for immediate payment or seizure of their goods. The first system which was in force when this delay occurred was unfair but the sudden change was equally unfair to the taxpayers. The Revenue Commissioners were at fault to a certain extent but so too were the taxpayer and his accountant.

The Minister's incentive in relation to interest, which is contained in the Finance Bill and referred to in the budget also, is very fair. It gives everybody an opportunity to adapt to the new system of tax collection. It will help people realise that when they get a tax demand it means that the Revenue Commissioners want that tax. I commend the Minister for what I regard as a most imaginative provision in this year's Finance Bill. It is very welcome and it will eliminate the problem created by the sudden change. This provision is also welcome from another point of view. Much of the outstanding amounts of interest that were due on tax were due on tax already paid and this new scheme will offer a clean sheet to many taxpayers.

The second reform I want to refer to in relation to the tax system is the introduction of self-assessment. This is very welcome and long overdue. I particularly welcome it because it switches the onus to make returns back to the taxpayer rather than requiring the tax inspector to find every possible taxpayer. The onus is now on the taxpayer to make his own declaration, to say he is there and that he should be taxed. I am not sure how Irish people will react to that change but I believe it is a welcome one.

It will also give a more realistic estimate of the amounts due because from now on the assessments will be based on previous returns and payments made by the taxpayer. A criticism which has been levelled at our tax system down through the years, and it is a justifiable one, is that in many cases the assessments were totally unrealistic. People from various interest groups criticised the Revenue Commissioners and Governments for the huge amounts of tax which are allegedly awaiting collection. The figures that have been thrown around vary from £700 million to £1,500 million or £1,600 million, depending on your political persuasion or the particular point you want to make. In fact, the figures are considerably less and this system of self-assessment will show that, perhaps not immediately but as it becomes operational over the years. It is also to be welcomed because it will cut down on the number of appeals taxpayers feel they have to make. They will now have the opportunity to make their own returns and, therefore, there will be less need for appeals.

The new measure in relation to the power of attachment has been described by several people as draconian. Perhaps it is draconian but it is equally wrong to withhold payments which are due to the State. Money that has been paid over to the State by taxpayers, and is owned by the State, is being used to subsidise businesses or perhaps, as many people have done, to build up nice little nest eggs somewhere else and liquidate their companies when the going gets rough. The people who have used this money in the past were simply robbing the taxpayers' and the State. They were also putting their hands in the pockets of the less well off in society who depend on the State for their income.

Another aspect in relation to the using of State money or taxes that have been paid by the taxpayers to businesses is that many of these businesses have an unfair competitive edge and they are forcing legitimate firms who pay PAYE, PRSI, VAT and so on out of business because they cannot compete. They are using taxpayers' and State money to put legitimate firms out of business. While the power may seem to be draconian I believe it is not as bad as what is currently going on.

It is important to note that this power will not be introduced until the end of the incentive scheme which was announced by the Minister. Businesses have up to nine months to bring their affairs up to date and even then the power of attachment will not be invoked straight away. Notice will be given to the taxpayer and he will have time to put things in order. That is a fair system.

I mentioned those tax reforms because they are important in showing that the Government are committed to tax reform and not just nibbling around the edges, increasing allowances, as they have done, and giving the PAYE taxpayer some relief. They are also serious about getting to the core of our problems in the tax area.

Of course, any debate on tax reform must take into consideration the amount of work that has still to be done in relation to tax reform and, in particular, the rates of personal taxation and the composition of the total tax take. Surveys of top management throughout Europe have shown that Irish executives are among the worst paid and highest taxed both directly, through income tax, and indirectly. This will lead to further problems down the line and we will not be able to attract the high powered executives into industry we so badly need. It could also have a detrimental effect on attracting the industries which the IDA are desperately trying to attract.

The figures I have seen in various surveys show that the gross salaries of Irish managers are decent but when tax and social security are taken out of them the net pay is very poor. In addition, I think all of us would agree that Ireland is a very expensive country to live in and that our punt does not have the same buying power as sterling. Most people say that the cause of the problems we have in this area has been the Governments we have had over the past number of years. Many critics will say that the foremost problem is that the country is run like an enlarged parish, that there is too much expansion of central Government and the Government intervene too much in the lives of ordinary people. Most people would agree with that assessment. To take an example, the last minority Fianna Fáil Government under Seán Lemass almost fell on the issue of a turnover tax, and the level of that turnover tax was 2.5 per cent. Today what is essentially the ordinary rate of VAT is 25 per cent so one can see how far we have come.

Let me make a few general remarks in relation to the composition of our tax because it is important to try to reduce the level of personal taxation. We will not attract the type of people we want in this country with the levels we have at the moment. At the lower levels the tax system is operating as a serious disincentive to work. A recent OECD report referring to the composition of our tax shows that as a percentage of GNP personal taxes have jumped from 4.39 per cent in 1965 to 12.3 per cent in 1985. In 1965 only 16½ per cent of all taxes were income tax. This figure has jumped to 31.3 per cent in 1985. The EC average is 26½ per cent so Ireland is well ahead in those stakes and we need to do something about it. Last year's budget and this year's budget are going in the right direction, but a lot of work has still to be done.

In contrast to the personal income taxation levels, corporate tax has fallen drastically from 9.1 per cent in 1965 to 3.2 per cent in 1985. It is unfortunate, but profitable businesses are not paying their fair share. I realise that a good tax package is necessary to attract foreign industry to manufacture things here and export them but the high amount of corporate profits are being invested outside the State and are being repatriated. This budget and the Finance Act go some way to reversing the trend in relation to the low level of corporate taxes.

Another area in regard to tax which it may not be popular to talk about is that of property tax which has fallen from 15 per cent in 1965 to 3.8 per cent in 1985 which is a total loss. The cause of the problems is that although in several areas taxes are down, the average worker is being hit both by direct taxes and indirect taxes. Over 44 per cent of the tax is collected from services and goods. The OECD average is 30 per cent and the EC average is 31 per cent. Except for Norway, Ireland has the highest level of taxes as a proportion of GNP and our total income is really only the equivalent of the Third World countries basically.

I have talked a little bit about tax reform. There are further tax reforms that need to be made to improve the system of collection and to widen the tax base. One of the failings of the Revenue Commissioners over the years has been their failure to come closer to the public. The Revenue Commissioners have adopted an "us and them" attitude. They have stayed away in their ivory towers as much as they can. They believe that their sole purpose is to devise ways and means of extracting taxes and that they have no obligation to the taxpayer at all. I do not agree with that contention. The Revenue Commissioners could do a great service to the State, to the taxpayers and to themselves if they would come out and meet the people a bit more.

The Revenue Commissioners should have local units and offices to provide advice for the taxpayer, to help the taxpayer to make his returns and, in cases of difficulty, work out the problems and go some way to alleviating them. At the moment, because of the increased efficiency of the system a person who has been a good payer of tax and who, for some reason or another, defaults or is late with a VAT return, can find that the next person on his doorstep is the sheriff to demand goods or immediate payment. That is not a fair method of handling people, and it certainly annoys those who are paying their taxes. If there were local units and follow-up when problems arose this local unit could be informed and a local person in the office could call to the taxpayer to find out what has happened. I have heard of several instances where people are paying their VAT regularly without any demur but who, for one reason or another have not made a VAT return and the sheriff has arrived on their doorstep. In two cases the VAT had actually been paid and there was proof of it. The cheque had been sent on time and had either got lost in the post or in the tax office.

That is not good enough and brings me to the point that there should be a greater liaison between the sheriff and the Revenue Commissioners. It appears that at the moment there is little or no liaison. I am sure Deputies on all sides of the House could give examples of cases where the sheriff has arrived to collect taxes that had already been paid. It is not good enough that a demand having been received by the sheriff, if a cheque arrives at the Revenue Commissioners Office that cheque should be sent back to the taxpayer. That is happening. I realise the sheriff may want his 2.5 per cent or whatever it is, but when a person pays his taxes the payment should be accepted no matter what form it takes.

In general, there is a number of practices which have evolved with the Revenue Commissioners and tax inspectors over the years which would be broadly termed non-statutory practices and procedures. There are practices which would be useful for a taxpayer or an accountant to know in order to eliminate much of the wasteful correspondence with the Revenue Commissioners. If that information were published, perhaps not given general circulation but available to the accountancy profession, much of that paperwork could be eliminated.

Everything to do with tax returns and revenue in general should be simplified. Form 11 is a very complicated document for the ordinary taxpayer, making things very difficult for him or her. I know from experience the reaction of any taxpayer on receipt of this form is to throw it on the dresser and forget about it, which leads to all sorts of problems later on. All tax forms should be simple, should be easily readable and should be capable of being filled in by the taxpayer. The only forms that accountants should have to fill in should be very complicated company accounts. It would be possibly a public relations exercise from the Revenue Commissioners' point of view if they were to get somebody to work on simplifying the tax forms.

Another area in which the Revenue Commissioners are falling down is on the supply of basic information. They should place greater emphasis on informing the public of their entitlements, of the dates for making returns and so on. They should use the media much more to inform taxpayers of their exact entitlements. The general attitude of the Revenue Commissioners seems to be: "We know what you are entitled to, but you will have to find out. We are not going to tell you." The sooner that attitude changes the better.

I conclude with a brief reference to employment and employment incentives. The budget and the Finance Bill have been criticised in relation to their employment content. In the context of employment, during the term of the previous Government nobody had any confidence in the country, money was flowing out and nobody would invest money because it was believed that nobody was in charge. With regard to this Government's performance so far, if they can restore confidence in the economy then that will be a major boost for employment. In 1987, Fianna Fáil faced a very difficult task in having to draft a budget within three weeks of assuming office. They faced up to that task and succeeded in producing a budget with the proper balance of financial stringency and development incentives. The results of their efforts were obvious at the end of the year and still are. They met and exceeded all their targets. This year's budget continues that process which will eventually lead to economic recovery.

The criticism by some of the Opposition parties that the budget and the Finance Bill before us do nothing for employment is superficial and a continuation of the negative thinking of the previous Government. The policies being pursued in this and the previous budget have led to an increase of confidence throughout the business community. This brings increased investment which will, in turn, lead to increased employment. The pursuit of development opportunities through the economy, with the special emphasis that this Government have placed on national resources, is beginning to have good effects. Last year's tourism package was a prime example and this year the Government provided further money in relation to the task force.

The construction industry has been badly hit over the past five years. That will benefit from the positive proposals contained in the budget and the Finance Bill, particularly the second phase of the decentralisation programme which should provide many construction jobs in provincial centres. This will eventually lead to people being employed in their own areas. The introduction of the section 23 incentives will have a beneficial effect on the construction industry, particularly now that it has been extended to cover refurbishment and repair. Also, the small reduction in stamp duty on houses in the higher range of the market will help to restore some confidence in the building industry.

Other measures announced previously, such as the restoration of the young farmer's installation aid, will be welcomed and will encourage the transfer of land to younger farmers, which should have a beneficial effect on the economy.

This Government have shown themselves capable of tackling the serious problems facing the country. The people are responding to the leadership that has been shown. I believe very strongly that this year's budget and the Finance Bill before us will ensure a continuation of the progress we have seen and bring economic recovery within the next few years.

There have been references here to our natural resources, that the greatest natural resource we have is our people. That is a cliché. We give tax concessions towards the creation of physical resources. For example, a grant and tax relief are given if you put a physical machine into this country and you are given grants to drain your land but we are taxing our greatest resource, our people, so heavily that many who are single are leaving this country voluntarily. This is not because they cannot find a job here. They can find a job but the cost of staying here, rather than taking a similar job elsewhere where people speak the same language and which is a very inexpensive air fare away, is so much greater. For example, in Ireland a single male on average industrial earnings, faces a marginal tax rate of 65.75 per cent on any extra money he earns and that is almost a world record. In the UK on the other hand, a person on the same amount of money in the same currency will pay tax at the marginal rate of 34 per cent on extra money earned. Yet, Ireland and Britain are really one labour market. There is complete mobility of resources between Ireland and Britain, there is no language barrier and no barrier in terms of freedom to take up work. There is a facility or network in Britain to help Irish people to find work there in the form of the established Irish community. All possible circumstances exist in which to encourage people to move from here to Britain. That is very serious for this country in the long term.

If a person here earns under £6,000 and is married he is better off in tax terms than an equivalent person in Britain, because they have a higher rate of PRSI and we have double tax allowances whereas Britain has a special married person's tax code which means that it is more favourable for people to be married here. Unfortunately the talented people into whom the largest amount of educational resources have been poured are not like myself, 41 years of age and married with three children. I would find it relatively difficult to move. Certainly, it would require a fair tax break to get me to move out of this country. However, people 20 years my junior who are considerably better educated than I in that they have had the benefit of all sorts of advances in education from primary level up which came about in the 20 years since I left school, are the ones who are being attracted out of this country by the differential in the tax rates.

Deputy Dempsey talked about what the Government are trying to do to develop our natural resources, by which, I think he meant our physical resources, streams, rivers, mining resources, etc. We must bear in mind that our biggest resource is our educated talented young people who we are taxing out of the country. They are not being driven out because they cannot find work. Most of them, if they are well enough educated and well motivated, can get work here. The trouble is they would only get half the take home pay of those similarly qualified in other countries. We might say that is a pity but that we are a poor country which cannot afford to reduce taxes. There are countries in Eastern Europe who have an unconventional means of keeping their human capital at home. They built a wall right through the capital city of Germany to prevent their young talented people from leaving, because they wanted some return on their educational capital. We cannot and will not do that, for good reasons. Because we are not prepared to do that, we must bear in mind in our tax policy the fact that as long as we tax people in the fashion I have described those who are single and mobile and well educated will leave. That is very serious in the long term. As was pointed out in a news bulletin this morning, within 20 years the phrase "old Ireland" will take on a new meaning. It will not be a sentimental refrain in a song but a reality. This country will consist of predominantly old people. At that stage, of the five Members here in the Chamber, all but Deputy Dempsey will be not too far from retirement.

You are pre-empting our future.

I know that Morarji Desai when he was Prime Minister of India, because of a special diet, was able to continue on until he was nearly 80 years of age, but I do not know if we could recommend that particular method of life prolongation. I should not digress into personal commentary on my colleagues.

We took it in good part.

The point is that the people who will reach retirement age in 20 years time will want pensions to maintain them at a decent standard of living for a number of years. If the group of people who would be at their peak earning level in 15 or 20 years from now are not here, they will not contribute to the social services or to taxes. We will have a serious imbalance in our population. We will have a small active population at work and a large inactive population depending on pensions. The small active population at work will have undergone a process of negative selection in so far as talent is concerned in that the people who will have stayed here will be the ones who could not find a job abroad. The really ambitious people most interested in maximising their earnings rather than in more humane qualities in life will have left.

We should try to change tax policies to make things better so as to keep talented people at home. We could introduce tax relief on loans taken out to pay university fees. Despite the fact that it costs £30,000 or £40,000 to educate people, for instance, in engineering and architecture, 90 per cent of graduates are leaving and are contributing nothing to this country. If we could finance their education to a greater extent by loans rather than by direct handouts in the form of subsidies, we could say to them that if they took out a loan we would give a tax relief on their repayment of that loan, when they get a job, so long as they are paying the tax in this country. That would encourage people to work here at least for the period during which they were paying off the loan they had taken out to finance their education, or part of it. If people can be encouraged to stay here for the first few years of employment, and even if then they emigrate for a time, it would be more likely that they would return because they would have worked for their formative years in Ireland. At the moment many young people are leaving our universities who never have or never will work in Ireland. There should be a change in the Finance Bill giving tax relief on loans for higher education, during the repayment period of those loans, on earnings earned in this country. That might also have the effect that people who took out loans to be educated elsewhere and returned to work in Ireland would get tax relief even though they had been educated elsewhere. That might be a good idea. It is my first suggestion to remedy this problem. I realise that we in this country cannot talk in terms of vast sums of money. That is a modest proposal which could prove to be immensely effective if the Government took it up.

My second proposal is that we should look at the higher rates of tax. The conventional wisdom is that you need to tax the better off at a higher rate because you do not want to put too much of a burden on those who are worse off. However, there is considerable evidence that high tax rates at the higher income levels result not in poorer people paying less tax and the rich paying more but in the reverse with the rich paying less and the poorer paying more because the rich are able to find ways of burying their income in tax avoidance schemes of one kind or another. If the tax rate on any extra pound which they earn was relatively modest they would declare all their income and pay tax on it rather than going to immense trouble of setting up some form of trust fund, business expansion scheme or some dodge which does not involve the paying of tax. If you bring the rates of tax down it will not be worth their while to pay an accountant to advise them on how to avoid paying tax.

Let me cite a study which was carried out by Richard Stroup, an economist at Montana State University, in respect of the reduction which took place in the top tax rates in the United States in 1981. Prior to 1981 they had a very progressive system of taxation and the reforms were condemned by many as being very favourable towards the better off in the sense that they radically reduced the top rates of tax. They went for a low standard rate at which everyone would pay. The evidence is that if you look at the bottom 50 per cent of incomes in the United States you will find that they paid 8.3 per cent less of a share of the total tax paid in 1984 than they did in 1981. In contrast the share of tax paid by those on the top incomes, even though their tax rate had been reduced, had increased by 5 per cent in 1984 as against 1981.

Exactly the same evidence has been produced in Britain following their reductions in the top tax rate. It has been shown that the result of reducing the top tax rate is that those on higher incomes actually pay more tax as it is not worth their while to engage in tax dodges of any kind. I accept that that runs contrary to all the preconceptions of distribution theory but the reality is that if you reduce the top tax rate two things will happen. More people who might otherwise emigrate and pay no tax here on higher incomes will stay here and pay some tax on higher incomes — that also applies to the United States — and, secondly, more people will declare their income in a form which attracts tax immediately rather than putting it into schemes which involve the paying of no tax or which will defer the paying of tax into the distant future, such as life assurance policies where they will only pay tax on the money they take out. This argument needs to be examined.

Let me cite further evidence. There are very steep marginal tax rates in Greece. Yet they only bring in 4 per cent of the total gross domestic product in income tax. Similarly, in France steep marginal tax rates only bring in 6 per cent of GDP in income tax. On the other hand, in the United States less steep marginal tax rates on the better off bring in 12 per cent of income in the form of tax. Those are a few arguments about what we might look for in terms of more economic activity, more employment, more declared income for tax and more revenue from reductions in the rates of tax which fall in particular on single, young, educated, mobile, potential emigrants, who might otherwise use their talents in this country.

Another concern of mine relates to the barriers which exist to the setting up of a small business in this country. If we are to solve the unemployment problem people must establish small businesses. Most businesses start small and grow into large ones but our tax system is so complicated that it has extremely perverse effects on small businesses and this budget will make the position worse. Let me illustrate this point. All small businesses have to pay VAT, PRSI and PAYE and it costs a company with one employee and a turnover of £100,000 almost as much to calculate VAT and PRSI payments for the Revenue as it does a company with up to 100 employees and a turnover of several million pounds. You still need to have the same computing equipment and somebody dedicated to filling up all the forms, making sure the figures are right and sending them in to the Revenue.

On top of the actual amount of tax they have to pay small businesses have to pay out a large amount of money in simply doing the paper work in order to comply with the rules and to make sure that they will not end up in court. On the other hand, the fact that big companies can collect VAT today and do not have to pay it over to the Revenue for a month and the fact that they are collecting PAYE from an employee today and do not have to pay it over to the Revenue for a month mean that essentially they are getting an interest free loan from the customer and employee. For the big firm this means that the system can operate as a benefit to cash flow and ultimately to the company. They are able to reduce the cost of compliance well below the cash flow benefit.

Conversely, for a small firm the amount of money which they will have to pay over is so small that the cash flow benefit of having the money for a month before paying it over is minimal. We are saying to people that they should go out on their own and not stay in large organisations but, as soon as they do, they are hit over the head with the heavy costs of simply finding out how much tax they have to pay and paying it over in time to the Revenue. For a small business they are disproportionately large. There must be a very strong argument from the point of view of employment for radically simplifying our tax system so as to make it administrable for small businesses, if we believe that small businesses are the route to job creation.

One obvious reform would be the introduction of a single VAT rate. This would be very unpopular looked at in the short term but it would be very popular if it meant that more jobs would be created because the cost of setting up a business had been greatly reduced and people could afford to pay the prices involved. We also need to consider how we can reduce the number of tax rates and tax allowances. Every time you reduce a tax allowance you make the process of filling up a tax form correctly much more easy.

There are two things in this budget that make worse the situation I have described. The first is the fact that this budget is providing for a cut in depreciation allowances for a service company. That does not apply to a manufacturing company because they are only paying 10 per cent corporation tax and whether or not they get capital allowances is irrelevant because even if they do not claim them they are only paying 10 per cent on their profits but a service company pays 45 per cent. This budget is going to reduce the capital allowances that service companies can claim. This means that a small company employing two or three people will find it much more expensive, for instance, to put in computers to enable them to make their tax returns inexpensively because they will have a lower capital allowance against their tax for that purpose. It is going to make it particularly difficult for small two and three man service companies to use technology to reduce some of the costs I have referred to.

Secondly, there are sections such as section 29 of this Bill which are designed to make the law in regard to issuing dividends from manufacturing companies to the person who has set them up immensely complex and difficult. We are saying to people: we want you to assess your own tax; do not bother us, we are not going to assess you, but at the same time we are going to make the rules whereby you are to assess yourself much more complicated than they ever were by introducing provisions such as those in section 29. How is any ordinary individual in a manufacturing company going to be able to make much sense of such explanations in the explanatory memorandum as follows:

Section 29 terminates the "primary fund" provisions of section 45 of the Finance Act, 1980, whereby a company in receipt of income which is effectively charged to corporation tax at the rate of 10 per cent, i.e. manufacturing income, is treated as making its distributions primarily out of that income until it is fully distributed. A distribution treated as paid out of the "primary fund" of a company carries a reduced tax credit calculated as 1/18th of the distribution.

The section amends section 45 of the Finance Act, 1980, so as to provide a new arrangement in respect of distributions made on or after 6 April, 1988. Under the new arrangement a distribution will be treated as made for a specific accounting period of a company. The distribution will be treated as paid partly out of the manufacturing income and partly out of the non-manufacturing income of the specified period in the proportions which the amount of the manufacturing income and the amount of the non-manufacturing income bear to the amount of the total income for the period.

I take it you are with me on this.

The parts of the distribution treated as paid out of the manufacturing and non-manufacturing income respectively will be treated as separate distributions. The tax credit in respect of the "manufacturing" distribution will be calculated as 1/18th of that distribution. The tax credit in respect of the "non-manufacturing" distribution will be calculated without further reference to the provisions of section 45 of the Finance Act, 1980.

That is clear as day. We expect an individual to make up his own mind——

It sounds clear enough as you read it.

——send in his tax and face penalties if he gets it wrong. He has to make a self-assessment of his tax under provisions like that and he will run the risk of paying penal tax rates if he makes a mistake. I was only reading from the explanatory memorandum but I could read the section if necessary. The explanatory memorandum has no legal force.

The explanatory memorandum did not sound confusing.

If that person makes a mistake he will pay extra. It is important, if we are to have self-assessment, that there be a provision for advance rulings whereby people, if they have a doubt about the interpretation of that section, in the case of their individual company, in deciding what is a manufacturing or what is a non-manufacturing part of the company's operations, should be able to get an advance ruling from the Revenue before they send in their self-assessment. The Revenue should be available to advise those people in advance and should not prosecute them if they make a mistake. Otherwise the effect of self-assessment will be to greatly increase the accountancy fees that individual selfassessing taxpayers will have to pay. They will have to rely, not on the Revenue's assessment but on their own self-assessment, to ensure that they do not face penalties for failure to get it right.

I am concerned about section 29 because I think it is watering down the incentives that have been given to encourage people to invest equity in manufacturing companies. It is going to make it more difficult to get such people to use equity rather than bank borrowings as the method for financing manufacturing. I am also concerned, and I have said so publicly already, about the provisions of section 38 of this Bill which allow the Minister to give an individual company, who have an approved investment plan, exemption from tax on dividends paid into this country by an overseas subsidiary of the company. The Minister, not the Revenue Commissioners or the IDA, may give such a certificate if he is satisfied that this approved investment plan is directed towards the creation or maintenance of employment in the State in trading operations carried on or to be carried on in the State. The Minister will be able to decide on those criteria whether Deputy O'Malley's company gets tax relief and Deputy Abbott's does not orvice versa.

It seems it will be virtually impossible to say whether a particular dividend being paid into this country is or is not being used to maintain employment. There might be enough money to maintain employment this year but the company might say: maybe we will run out of money in four years time and we might then need the money to maintain employment. What does maintaining employment mean? Suppose it happened that a company intend to make 40 people redundant but they say to the Minister, if we do not get the tax free dividend we will make 50 people redundant, how is the Minister to know whether they are telling the truth? Yet if they can be believed, by allowing them the dividend tax free we are maintaining employment at a higher level than would have been the case if the dividend had not come in tax free. We will have a situation where businessmen will be depending on the Minister's interpretation as to whether they are going to create or maintain employment in the future. It will depend on the Minister's interpretation of the state of mind of the person applying for the tax relief in so far as their intentions are concerned about creating or maintaining employment, even at a reduced level. To my mind one of the merits of the taxation system has always been that you read the code, you get advice and you know where you stand. Under this Bill the only way you will know where you stand is if you know what the Minister thinks of your intentions in this matter.

It is undesirable to create tax legislation which depends on the decision of a Minister who is politically accountable, who is re-electable or non-re-electable, who does not enjoy the security of tenure of the Revenue Commissioners or a judge but who is open to the hazards of life in terms of where he may be in two or three years time. I do not think it is desirable that individual politicians should be making decisions about the tax payments of individual companies on the basis of whether he, the Minister, believes the company has an honest and sincere purpose of intention — and that is all it amounts to — to create or maintain employment under a particular usage of money which otherwise would bear tax but which, if the Minister says it shall not bear tax will not do so.

I do not think it is good law to introduce that amount of administrative discretion into tax provisions because it creates an unenviable position for any Minister to be faced with the decision that, on such subjective criteria, he may have to refuse one company in his constituency while granting the concession to another. He will only be able to justify his refusal on the basis that he did not believe they would use the money to maintain employment. As I said, that can create an unenviable and difficult situation for the Minister and we will create that type of undesirable and internationally little precedented provision in our law under section 38 of this Bill. I suggest that is bad law.

It is to prevent phoney accountant schemes.

I am glad Deputy Abbott made that intervention because Revenue have people with qualifications in accountancy as long as my arm, people who are skilled in knowing what their colleagues might or might not get up to. Why not let them make the decision? Why let the Minister, who may not be an accountant but who is a politician, make the decision rather than people who are an arm's length away from politics? That is the point I am making. I am not quarrelling with the idea of separating the chaff from the wheat, if it can be done, so far as these claims are concerned. What I do quarrel with is, first, that it should be done by a politician and, secondly, that it should be done on subjective rather than on certain grounds.

If we have a problem and want to discriminate between one situation and another but cannot make the mental effort to draft legislation which clearly sets out in language people can read the basis of our discrimination, we say we will leave it to the Minister, to the IDA or to somebody else to decide whether A or B gets this relief. That is a confession of intellectual and legal incapacity on the part of this House and those assisting it in the preparation of legislation. If we do intend to discriminate between taxpayers, let us say in law the basis on which that is to be done and let the people know. I am not saying this type of provision never happened before, because that is not so, but what is at issue in today's debate is whether we should extend it into a new area where clearly it is undesirable that we should do so.

I want to deal now with the provision for old age. I referred earlier to the problem we will face in 15, 20 or 30 years time in providing for older people. At the moment many older people have to go into homes where they are paying £150 or more a week. There is one such home not far from where Deputy Abbott lives and there is another a short distance from where I live. They are both excellent homes but they cost quite an amount of money to stay there. Many families cannot, or feel they cannot, keep old people at home. Frequently these old people will have been living alone in their own homes for 15 or 20 years prior to going into one of these places. The thought, if they became incapacitated, of moving in with their sons or daughters, who might have teenage children, is not a very happy prospect, and is not one either side is willing to take on. The old people, or the family, are then faced with the prospect of paying £180 or £200 a week for the old person to go into a residential home. Where is that money to come from? If the sons and daughters who are earning have to pay the money, they have to do it out of after tax-income, having paid 65 per cent to Revenue on the top slice of their income, and they have to find £180 a week out of the remaining 35 per cent. That is very difficult. Because of this there is great pressure to have old people admitted to acute hospitals, or to stay in acute hospitals, not because they need acute treatment but because they cannot afford to go somewhere else and the families do not want to take them home. What do we do about that?

The reality is that we are a country rich in one thing and that is the number of privately owned houses. Over the past 30 years we have renewed our housing stock. We are probably the best housed nation in Europe. We have the highest number of people who own their houses but what we also have are people who die rich. They own their houses and have probably lived for the last ten years using only a bedroom and they die in poverty, or even severe poverty. When they die the house is sold and the proceeds are divided between the family. In some cases the proceeds are divided among people who did not look after the old person all that well while he or she was alive.

To deal with that I suggest that we should introduce a scheme known as the home income scheme, as recommended in paragraph 453 of the report, Incomes of the Elderly: An Analysis of the State's Contribution, published by the National Council for the Aged. That report suggested that old people should be facilitated in negotiating with a life assurance company a scheme under which in return for the life assurance company paying them an income while they continue to live in their own home or, if they go into a residential home until the home is sold, the life assurance company will on the death of the person concerned sell the house, take their money back from the proceeds and give the remainder to be distributed in accordance with the intentions of the will of the deceased person.

Is that Edwina Currie's scheme?

It is a scheme that has been proposed by the National Council for the Aged in Ireland. I can assure the Deputy that that body recommended that scheme long before Edwina Currie was ever heard of politically. I do not think we need refer to her for motherhood or anything in connection with this proposal. It is an Irish proposal and a good one. If the British Government are quicker to adopt that proposal than we are, then shame on us and not on them.

They are getting into a spot of bother about it.

However, to make the scheme sufficiently attractive an option mortgage facility would be needed to give an interest rate equivalent to the net tax rate for those who do not pay income tax. Many of those people will not be paying income tax but the system needs to be made relatively attractive for them. Tax arrangements for an option mortgage would necessitate a relatively small amount of extra expenditure.

I should like to ask the Minister for Finance to examine the possibility of devising such a scheme in consultation with the Minister for Health. I made representations to the Minister for Health about this matter nine months ago. I suggest that the Minister should devise a scheme to encourage older people to turn their home ownership into a source of income on the basis of being guaranteed continued residence in the house for as long as they live but on the condition that they will live in that house, or wherever else they wish to live, in relative comfort rather than live poorly and die rich as is the case with so many older people. In my view such a scheme is a good one from every point of view.

The final point I should like to make is in regard to employment. There are many people who, for instance, live in Limerick and are offered a job in Galway but are reluctant to take it because it would cost them approximately £6,000 to move house between stamp duty and other expenses. Very often those people will stay where they are. Therefore, they may not realise their full potential either for themselves or for the jobs that their activity can create for others. Any system that builds rigidities into our society in terms of the movement of human resources — it is very easy to move physical resources; a machine can be put on a lorry and transported to another location but it is difficult to move people geographically because of stamp duty and other costs associated with home sales and purchases — is wrong. If we want to maximise the utilisation of our human resources as distinct from our physical resources, we must encourage the mobility within the country of our human as well as physical resources. One of the great barriers to the mobility of our human resources is stamp duty on the sale of houses. Another barrier is the cost of setting up a new business and complying with the law as against staying in paid secure employment with a lesser earning potential. The Minister should examine that in the context of tax policy. We have very high stamp duty on the sale of houses.

I am reluctant to engage in immediate reflections on Deputy Bruton's contribution. He is from a neighbouring constituency and represents a neighbouring parish. I have always had the best of relations with the Deputy, particularly when he was a Minister and I was a county councillor. However, I cannot let the occasion pass without expressing my disappointment that in his contribution he concentrated on the trivia in the Bill rather than its major features. He was on one of his favourite hobby horses when he dealt with the cost of establishing small businesses.

Is that trivia?

No, it is a matter of substance but it was unfortunate that the Deputy dealt with some minor effects on the cost of small businesses without concentrating on the two major incentives for the expansion of such concerns. I am referring to the dramatic decrease in interest rates which arose as a result of decisions taken in this and last year's budgets. Thankfully, interest rates are still falling in spite of international pressures, particularly from the British financial market. The second major influence on the growth of small businesses was the decision to give business people who in the depression years may have had cash flow difficulties and may have fallen into arrears in regard to VAT, income tax and corporation tax, an opportunity to put a clean face on their taxation affairs by availing of a tax amnesty up to December. Such people will not be asked to pay penal arrears of interest on the amounts due.

I did not criticise that decision.

I am aware of that but I regret the Deputy did not give the major features of the Bill some praise. I intend to do so and I heard other Deputies praising them. However, I found most of Deputy Bruton's contribution interesting. It was unfortunate that he dwelt on minor details such as the cost of computers arising from the lack of capital depreciation allowances which were available hitherto. I do not think Deputy Bruton should urge the House to consider those matters to be of great importance.

The Finance Bill reflects the outline of the Government's policies in their efforts to restore order to the public finances. Government policies are signalling a reduction in tax and interest rates which we all have to bear and which have been punishing everybody. If there is a consensus in the House about anything it is that tax rates are too high. There may be the odd Labour Deputy who would speak about increasing taxation for the purpose of obtaining higher levels of service, possibly more State funds injected into public services generally. But those utterances are not really followed through when it comes to speaking on a Finance Bill or on taxation or budgetary matters.

Government strategy in relation to public finances to date has concentrated on giving our economy a short, sharp shock in relation to cost savings throughout Government Departments which have been borne by the public at large more or less evenly throughout our economy. A feature of those cost savings has been that the Ministers responsible for them have done their best to ensure that everyone is asked to make more or less the same sacrifices. Indeed public comment on the financial and budgetary strategy of this Government appears to bear that out.

The performance of Government in relation to falling interest rates has been dramatic. Could anybody have predicted that interest rates would have fallen so dramatically over the last 14 months or so? The fact that they have is a clear signal of the success of Government policy to date and of the provisions of last year's and this year's Finance Bills.

We appear now to be moving away from interest rates as an indicator of success in achieving financial stability here and towards the taxation area. We are moving away from interest rates as an indicator of success and as a means of stimulating growth in our economy, primarily because interest rates have fallen almost as low as could be expected. In this respect the job has been completed and reasonably well done.

There are all sorts of theoretical reasons for interest rates falling further — and I hope they do — but the influences of the English financial markets now seem to present a certain type of constraint; whether psychological or otherwise does not matter, there is a constraint obtaining. Our financial institutions, primarily responsible for the fixing of rates, seem to be influenced by that psychological barrier. Within the next few months or ensuing year there will not be that much scope for further reductions in interest rates. It is in that context I welcome the Minister's remarks in introducing this Bill that hopefully there will be further scope for reductions in taxation as a result of the good housekeeping of the Government and continued cost savings. The earnest of the Minister's good faith in this regard has been proven by the fact that in this latest budget and the Bill before us there has been provision for significant reductions in the PAYE tax burden, bringing more people into the 35 per cent tax band, indeed far in excess of Government commitment under the terms of theProgramme for National Recovery. This is a process which has begun, regrettably on a small scale, but which hopefully will continue on a larger scale next year following the dramatic success in the other parameter of action, that in relation to falling interest rates. I hope that the concessions granted in relation to the levels of PAYE which will ensue next year and following years will mirror the dramatic success of Government in relation to reducing interest rates.

In saying that, there is absolutely no need to raise unfounded expectations. We must realise that the country still has an enormous domestic and foreign debt problem. Foreigners who come here, representing countries with debt problems, are amazed to hear the level of debt here. They ask, very reasonably, how on earth a small country such as this can sustain a debt so significantly higher than our GNP. Indeed it is to the credit of the population at large and their productivity that we have managed to survive albeit at the brink of bankruptcy, in the last few years with this type of debt burden. It is to the great credit of the present Government that they have set in train policies which have pulled us back from the brink of disaster in relation to this debt of £25 billion and its effect on our country and economy generally.

In the context of the overall debt burden the performance of this Government is remarkable in relation to the structuring of our foreign and domestic debt and the reports of the financial markets this year indicating that the Government had reached a position in which they had borrowed sufficiently on the domestic capital markets some weeks ago to cover their projected borrowing requirements for the entire year. That indicates a significant shift away from foreign to domestic borrowing.

While in college I recollect the great debate among American economists as to whether domestic national debt constituted a burden on an economy. I recollect that that controversy was never quite solved by those economists. One thing is certain, that is that foreign national debt was considered to constitute a very clear burden, massively and indisputably greater than a domesticallyheld national debt.

If we can move away from the foreign element of borrowing — even if the absolute amount of the national debt does not change significantly — then we shall be making great progress. I am aware that the type of arguments that can be advanced in the American-type closed economy cannot necessarily be advanced here in relation to the benefits of the move from foreign-held to domestic-held debt because even our capital markets, which produce the funding for the more dominantly-held domestic debt, are strongly influenced by foreign capital inflows. I would not try to make the case so strongly in favour of the move towards a greater holding of domestic debt as the academics in America would have sought to do in the case of the United States. However, it is without doubt a most desirable move. In addition to the falling interest rates it indicates the success of Government strategy. Nobody could argue against that. In speaking of the national debt I feel some what like a fool rushing in where angels fear to tread. Looking at the activities of this House since last February, there does not seem to be any incentive — or indeed facility — for it to debate the structure, management and development of how the national debt portfolio is held. This is most extraordinary because of the significance of the national debt. The House spends enormous numbers of hours discussing how the Finance Bill and budgetary strategy will affect the GNP for 1988, 1989 or successive years. However, very little time is spent debating how the burden of the national debt, which is now in the region of £26 billion, could be reduced, firstly by holding as much of it as possible domestically and, secondly, by debt and portfolio management. This may be due to the fact that it is a complex area. I do not profess to fully understand it and I do not think that many people outside the House take a great interest in portfolio management.

On the positive investment side in our private lives we tend, as ordinary individuals, to rely on portfolio managers of unit trusts, insurance companies and insurance linked gro-bond schemes to find the advantages of various types of investment in the equity and gilt area. We leave it to them to work out the best possible deal and we do not think any more about it. This House has tended to take the same approach to the policies and individuals who control the management of our national debt. In this context I welcomed the decision of the Government last year to take a more active role in the management of the national debt and to apply portfolio management techniques which, perhaps, had not been applied before. The appointment of a management scheme for the national debt has yielded great results. There was a development in the American capital market where Ireland got massively better borrowing facilities as a result of steps taken which not only reflected the increased international confidence in the Irish economy as a result of the Government's policies but also reflected a more active management of the debt by the Government.

The only response this House took towards the national debt has been the odd query raised by Members of the Opposition in relation to the denomination in different currencies of the national debt, particularly the foreign debt, and the terms on which the various components of the national debt were borrowed. One of the things which impressed me was the fact that when interest rates started to decline in the European markets, hard currency like the Deutsche Mark, we were not in a position to benefit because, from questions put to the Minister for Finance, it was clear that in 1985 and 1986 — and possibly in the years before that — the Government had borrowed fixed interest loans in Germany. To the best of my knowledge, these loans remain at fixed, relatively very high rates, of the mideighties and are not the beneficiary of any fall in interest rates in European markets. That type of borrowing policy in 1985 and 1986 indicated that the Government at that time were very hard pressed for credit and placed the country and the Government — in relation to their German borrowing at least — in a position where they were stuck with their fixed interest loans taken out at a time when even the dogs in the street knew that international rates would fall. They locked themselves away from any possibility of benefit. The position, unfortunately, was not the same in the United States but even in that respect, we were not in a position to benefit all that greatly by the fall in the value of the dollar because the interest rates in the United States went up against us in respect of loans which were not at a fixed interest rate but were, in the main, loans with changeable and changing interest rates.

My reflections are not very knowledgeable but they arise from the broad thrust of movement within the whole debt portfolio on the foreign side and it certainly gave me the impression that things were not so good in relation to the management of foreign held debt in 1985 and 1986 and, possibly, before that. There is — and was — plenty of scope for better management of that portfolio. The decision of the Government to introduce this active element of management and more careful consideration of the whole debt strategy will continue to reap benefits for the economy and for the country. Of course, they will not get the headlines because it is an area fraught with difficulties and technicalities.

This House should not shirk from a good, hearty analysis and examination of the whole situation. If the Committee of Public Accounts were to inquire into it it would be a worthwhile exercise. They could take the last ten years and find out where we are going in relation to policies in this area. They could find out, in a non-controversial way, where we went wrong and how the Government could best approach the job of ensuring the best possible value for money in relation to borrowing in future. No matter how successful Government policy is in the next few years — and I hope it will be as successful as it has been over the last 14 months — there will still be an element of foreign debt for many years to come. These matters should occupy the minds of the Government and Opposition and there is plenty of talent on all sides of the House which could be used to address the issues.

In relation to the income tax provisions of the Finance Bill, the inclusion of more people in the 35 per cent band has been welcomed. In the months ahead, more people will realise that, even in difficult times, it is possible to provide better tax relief and indeed it is a matter of considerable urgency to do so.

The provision in relation to bringing tax affairs up to date by the incentive to pay the tax without penalty of interest up to September of this year has evoked considerable interest and has been welcomed. Other Deputies have spoken about problems of a technical nature which arise when one approaches the Revenue Commissioners. I am confident that the Department of Finance, the Minister for Finance and the Revenue Commissioners will be sensitive to these problems while ensuring that the public interest will be served by keeping a reasonably tight control of matters and will in the coming months facilitate the public who want to bring their tax affairs up to date and continue paying their tax in accordance with their obligations. These people will be facilitated and helped by the removal of any bureaucratic obstacles which might emerge in the teething period of the scheme. I welcome the general anxiety on all sides to ensure that this scheme will work and as a Deputy I would like to help everyone anxious to bring his or her tax affairs up to date and contribute to the Exchequer to do so with the minimum of bureaucratic obstacles.

The area of farm tax is a particular concern of mine in relation to the rural constituency I represent. I recall speaking on Second Stage of last year's Finance Bill to the effect that I had a great apprehension that the Revenue Commissioners might not play absolutely fair in relation to the farm profile form for the farmers who might be on low incomes and might wish to have their income tax affairs dealt with in a simple and summary manner with a view to establishing, without recourse to accountants and spending much money, their tax liabilities for last year and the years before. My apprehension was based on the fact that, in previous years when the simplified form of farm accounts was introduced, the Revenue Commissioners had not really made any great effort to co-operate with that scheme and it fell by the wayside in that it was not a success and never achieved any popularity or wide distribution among the small farming community whom it was designed to help.

I am glad to report with the hindsight of a year and the experience of the working of the farm profile system that the officers of the Revenue Commissioners who are dealing with the farm profile are dealing with it in a very positive way and facilitating the efficient working of the system. Many farmers who have successfully put in their farm profile and have agreed sums of tax which they are happy to pay, many of them coming in for the first time, are establishing themselves as fair and straight taxpayers, something which has given them a certain amount of relief in so far as they were facing the unknown before they got this definite arrangement with the Revenue Commissioners and were being labelled as somewhat shady criminals for not being involved in the payment of tax and the submission of returns to the Revenue Commissioners for reasons beyond their control. Very often they got no communication from the Revenue Commissioners and if they wished to become involved in taxation they had to go to an accountant straight away and pay £200 or £300 at least, very often to prove they had no tax liability at all. The situation there is happy, I am glad to report.

I would regret it if the 7,000 or so farmers who were found under the farm profile system not to be liable for tax this year and in future years because of their persistently low incomes were to be taxed on the basis of some flat-rate or land tax of so much per acre. Would it be in the interest of equity or justice to have all 7,000 — and there are many more out there — who will be turned up by the farm profile taxed on that basis?

However, the situation in other areas of the self-employed is not as happy as reported in relation to the farm profile. When dealing with professionals such as doctors and chemists in particular the Revenue Commissioners are very reluctant to avail of the facilities to pay back the 35 per cent retention tax, a tax which I support which ensured that the professions would be brought as close as possible to PAYE in the circumstances. The legal provisions in relation to the retention tax were such that the professionals who were paying the tax could get refunds if they brought their taxation affairs up to date. This was a sort of carrot combined with the stick of the retention tax to encourage professionals and self-employed to bring their taxation affairs up to date when these people were in receipt of moneys from the State and local authorities who would be in a position to retain the 35 per cent retention tax.

That was all very well in the provisions of last year's Finance Bill which will continue as a result of this year's Finance Bill, some of which are extended over to the medical practitioners who are in receipt of payments from the VHI scheme, but the practice has not been very salutary. The Revenue Commissioners appear to have taken many of the cases which required repayment and adjustment of their retention tax and examined their affairs back a number of years, as far as eight or nine years, to see if they were returning the appropriate level of income. In many cases people who had finalised their tax affairs for many years through accountants in agreement with the Revenue Commissioners, as they thought, are now being told they were returning their incomes on the basis of an incorrect mark up, say, for chemists and incorrect levels of patients and fees for doctors.

This activity is clogging up the system. It is bringing the Revenue Commissioners into a great deal of bureaucratic activity which will result in no great increase in revenue and does not reflect the positive approach of the Revenue Commissioners to getting on with the job and making the system work as at the farm profile end. I think I should repeat my last year's performance when I asked that the Revenue Commissioners should take a more realistic commercial view of their tax collecting activities at the farm end, that the Revenue Commissioners dealing with the retention tax and especially the crediting of retention tax should take the same approach as their colleagues in the farm profile section.

Tax collection generally is something of which the Government can be extremely proud. The quarterly Exchequer returns just published were not only a clear indication that the various incentives given by this Finance Bill as announced in the budget for the payment of tax were working but also indicated that the provisions in relation to administrative arrangements for collection of tax were working very satisfactorily indeed. It can be said fairly that in the past year very few people in this country could say they could safely evade the payment of taxation, or sit down safely and just ignore tax demands without doing anything about them, or fail to make arrangements to have their income tax, PAYE and VAT paid up to the Revenue Commissioners in accordance with the law and within a reasonable time. The fact that that situation has been reached should indicate that, perhaps not this year but in some future year, the VAT refund for the farming community will be looked at and, instead of being reduced as it has been for the past two years, that it will be restored to a level which might be justified on the basis of macro-economic statistics and the refund in other European countries apart from Germany. The farming community should be treated on the basis that the VAT refund is entirely a neutral matter to be done on a mathematical basis rather than an instrument of policy to compensate for the inability of the farm tax system to produce the type of revenue envisaged.

There have been various comments that the present level of VAT refund is grossly inadequate in relation to figures that might be worked out mathematically and in accordance with the principles of the VAT refund. It is said that the level of the VAT refund is inconsistent with the provisions of the free market and that in 1992 there will be very considerable pressure to increase the level. I would think that the conditions for increasing the VAT refund to the farming community will be there and that it will not be possible for any Government to make a case that the farming community are not paying their fair share or that administrative arrangements are not adequate to get the yield of tax from the farming community at a minimum cost.

If the yield on farm taxation goes up this year and next year the Government should look at the question of the VAT refund which has been reduced merely as a temporary expedient, I would think, to provide a rule of thumb compensation for the deficiencies which were allowed to grow into the farm taxation system and resulted in the farming community very unfairly getting a bad name for not paying taxes. I pay tribute to the farming community for co-operating with the farm profile system which has given them the opportunity to get out of the clutches of accountants and professionals who would take very significant sums of money from them, even when not paying tax. I look forward to continued progress and to a continued positive approach by the Revenue Commissioners in this matter.

In general when one considers the high VAT rates continued in the Finance Bill one would have to wish for a reduction. After the priority of reducing income tax, particularly PAYE, will come the priority of reducing indirect taxation. This will be forced on this country by the onset of the internal market in 1992 but even before that it should be a priority to release our resources by the reduction of indirect taxation, VAT and customs and excise duties. I welcome the concession given to business to credit VAT on ESB bills. This will act as an incentive to business and it has been welcomed in the tourism context.

One is very conscious of the fact that tourism offers this country the only possibility to increase revenue from direct taxation, apart from increasing employment, by reason of the fact that domestic-generated demand has been very resistant to increase and is very sluggish, notwithstanding that interest rates have fallen and costs generally throughout the economy seem to be sliding down. If the capacity of the economy to allow the further taxation reductions in future years is to be fully exploited, we should try to co-operate with the Government's campaign to increase tourist numbers as much as possible. In this regard the activities of the task force and of the Minister and Bord Fáilte, as well as other private and public bodies, are to be encouraged.

There is a particular area which merits some attention, even in relation to the Finance Bill, I refer to the current campaign in certain parts of the country against fishing rod licences, a campaign which has gone far outside the bounds of reasonableness in that it is not only making a very strong case against the imposition of rod licences but is actually going so far as to act very destructively in relation to the tourist base of many areas, including my own. As the representative of a county which is highly dependent on tourist angling, it would be very remiss of me if I did not ask those who disagree with the rod licence to consider calling off the campaign of lack of co-operation, threats of intimidation, ambivalence towards intimidation and sometimes even positive encouragement towards some forms of intimidation. There should be no room in this House for any ambivalence or sneaking regard for the type of campaign being waged by some in relation to the rod licence. Certainly there are very few people who will happily pay the rod licence but I know many anglers who are willing to pay, even reluctantly, if given half a chance to do so by those who are seeking to intimidate them.

As one who has always argued for more resources to be put into angling generally, my case has been considerably weakened by the anti-rod licence campaign. There are many areas of expenditure for which I am making a case to the Government, including the reduction of VAT in areas of angling tourism, but the current campaign leaves me in a very weak position. People who are not immediately concerned with angling and angling tourism will say: if the angler is not prepared to pay a small sum for the enjoyment of the facilities which take enormous Exchequer resources to maintain, why put more taxpayers' money into angling? I know I will not be the most popular person for saying this but it is in the interest of my constituency that I should do so.

I speak with the highest of respect for those who oppose the principle of the rod licences. It is a view I do not share but one which I would respect. All I ask is that the intimidation and bullying should stop. At the end of the day the Government, the Minister and all interests concerned can sort out whatever problems exist and make whatever adjustments are required.

I will not take up the time of the House dealing with those adjustments. There are plenty of opportunities for making sure that the licensing system can work in the best interests of anglers and public alike. The current difficulty is a very black mark on the development of the tourism industry and I hope that more positive attitudes will prevail. I do not wish those who oppose the rod licences to abandon their principled opposition to the matter. It is only a question of methodology. Other groups in the economy have been asked to make very severe sacrifices — sacrifices which are much more severe than those being asked of the angling community. While those groups, to their great credit, did make their protest very vociferously and very well, they did not resort to the tactics that are now being resorted to by a minority of those who seek to oppose the rod licence fee. The tragedy is that the minority who are opposing the rod licence fee with bullying and intimidation are spoiling the case of the majority of those who oppose it. The majority who oppose it are being tainted by that minority and all I ask is that they, whether they are Deputies or representatives of angling groups, would distance themselves more effectively and take a stand to bring the intimidation and bullying to an end.

It is vital for our future progress that there should be no foot dragging or half-hearted approach by the Government to bringing Irish VAT and other indirect taxes into line with whatever rates are agreed with our European Community partners. As part of the programme for completing the Single European Act by 1992 Irish firms must be able to compete on the same terms as business in other countries. They cannot be penalised with higher costs or higher taxes.

Great play is being made of the fact that bringing these taxes into line with the European average and the proposals of the Commission might cost the Exchequer here £470 million in year one and £350 million per annum thereafter, according to the estimates of the Department of Finance at least. The figures which the Department of Finance have issued in this regard have not been supported by any information as to how precisely they are arrived at. There is a widespread view that the figures quoted by them are artificially high and are pitched at that level for the purpose of trying to improve this country's bargaining position with the Commission and in the European Community.

Only last night Dr. Thom of the Economics Department of UCD apparently read a paper, a copy of which I do not have, where he seriously questioned these figures and said that the real figure is approximately half of what has been estimated. Whether or not the higher figure is right it certainly calls for changes to be made but it need not be anything as big a problem as Government speakers and official commentators from the Department of Finance and elsewhere allege.

Money lost to the Exchequer in tax cuts does not disappear; it goes to the Irish people. Spending this money and saving some of it too will bring in more tax revenue on whatever items are bought and this will, if you accept the higher figure of the Department of Finance, bring into the Exchequer at least £100 million. Lower taxes will also mean lower prices. A rough calculation suggests that prices will be about 5 per cent lower in this country as a result of the taxation changes. Among other benefits this would mean that less Government spending would be necessary on increases in social welfare in years to come because it would not be necessary to give larger money increases to compensate for higher prices. This would save a significant sum in increases without, it should be emphasised, any worsening of the real value of welfare benefits.

Among the other changes by 1992, Ireland is entitled to receive up to £300 million extra annually from structural funds, such as the regional and social funds. The rate of grant is also to increase so that much of this extra support can be used to reduce the amount of money which the Irish Government must spend. Thus, these changes alone could make good virtually all of the money needed towards tax harmonisation.

Since we have one of the highest tax levels in the world to begin with, the fall in prices that would come from these tax changes would bring a bigger benefit in lowering costs for Irish firms than it would for any other country in the European Community. Our small size and our island location mean that Irish firms face enough natural handicaps when competing with the larger European economies. We cannot afford to worsen these handicaps by any burdens of our own making, be they tax burdens imposed by the Government or cost burdens for privately provided services. There must be a fully committed comprehensive programme of action by all sectors to make a success of the potential opportunities offered by the implementation of the Single European Act.

Even this quick broad outline of the changes suggests that harmonisation need not be an insuperable problem but adopting a more positive approach to these changes would also surely open up further possibilities for influencing their final shape. It seems, for example, that harmonisation would call for substantial cuts in our excise taxes. While some of these should be welcomed — and it would be helpful if we got our petrol and diesel prices down to European levels — there are other areas where we should be trying to persuade our European Community partners to raise their taxes. I am thinking of the excise duties on alcohol and tobacco in particular. For health reasons we surely do not wish to see big price reductions in these cases. I contend that our prospects of getting some increases in European taxes to bring them more into line with our levels would be strengthened if we were seen to be fully committed and positive in our approach to harmonisation of taxes on other items. If taxes on alcohol and tobacco were to remain fairly close to our existing levels this would further reduce the overall costs of harmonisation. The amount involved would obviously depend on whatever new tax rates would emerge but it could easily exceed £100 million.

A separate and related issue concerns the sensitive question of whether VAT should apply to food. I have not seen any clear statement of how the overall alleged cost of £470 million in the first year for harmonisation of these taxes was calculated but I assume it means that food would not be subject to VAT. However, if in order to keep down the overall cost of the programme it is decided to charge VAT at some low rate this need not of itself lead to any enormous hardship.

A 4 per cent rate of VAT on food, which is the lowest rate apparently open to us, should raise about £90 million. Allowing for the fact that low income families spend a higher proportion of their income on food, it would require approximately £40 million to compensate them for this through higher social welfare benefits. These and all other families would also benefit from the lower prices for all other items where VAT rates would be lowered. This would leave a substantial revenue gain to the Exchequer to be used towards meeting the overall cost of the programme. It could also be used to make some of the other necessary tax changes that must occur if Irish firms are to compete successfully in the nineties.

Things like the bank levy and the proposed £10 charge for bank cards, the levy on insurance contracts and so on, will, whether we like it or not, all have to disappear if Irish firms are to be put in a position to match the competition from their European Community rivals. It is not good enough for Government speakers to say, as some of them do, that business must adapt itself to the more competitive situation that will be created by the Single European Act, while they themselves rush off to Brussels to plead that they, the Government, are not able to adapt their fiscal taxation and spending programmes to meet this situation despite the various forms of aid which are available to them. There was a blatant fundamental inconsistency in that approach, an attempt by the Government to have their cake and eat it. Their approach is also unworthy of our position in the European Community and one which is unlikely to receive much sympathy from most other European States. We are no longer the poorest, newest member needing help to adjust to the Community. We have seen Greece and Portugal come to occupy that position and these countries rightly given special assistance to help their transition to full membership. For our part we have had 15 years membership, time enough to adapt our performance to meet the more challenging European standards. It is time then for the Government to think again about their approach to this whole question of harmonisation and VAT and other indirect taxes.

I want to move on to say something about the manner in which reductions in expenditure have been brought about within the past year or so. I have never criticised, nor do I now, the overall thrust of what the Government are endeavouring in that respect. But I have pointed out that they have made a number of particular errors, some of them of relatively small detail, more of them of a more major kind which, in some cases at least, it is open to them to rectify. This very Bill contains on the taxation side two errors which I will deal with later, neither of them enormous in themselves but each very foolish as a matter of principle. But the major error on the expenditure side that I have seen the Government make over the past 12 months or so is what happened last autumn in regard to pay increases in the public sector. An agreement has now been reached to pay from a smaller cake of public expenditure further pay increases over the next three years. This has to be looked at in the context of the recent announcement, or leak, as I think it more accurately was, on behalf of the Taoiseach, that further cuts of £450 million will have to be achieved for 1989. If that is achieved, and it may well be, the pay section within it will continue to increase and the result is that we have an overall reduction in expenditure, an increase, and a not insignificant one, of £100 million a year or more in public sector pay, and therefore an even greater diminution in the non-pay elements in public expenditure. The result is that there is less money available for constructive or development purposes. There is also less money available to help the weakest in our community or for provision of services to them. It seems that these cuts, in particular the necessity to cut all the more from recipients of Government services to provide more money for those who provide the Government services, are very questionable indeed. A fundamental error has been made there, an error of justice and equity. I have said that before and nothing that has happened in the six months since that decision was made has caused me to change my mind because I think that the hardship that is involved for those who would normally be the recipients of public services is proving to be every bit as great as people had anticipated.

At the time that that is happening the Minister for Finance, on Tuesday, talked about the likelihood that we are going to achieve in the present year 0.5 per cent growth in GDP and he seems to think that that made it entirely worthwhile, that we should suffer all these other problems simply for that purpose. I want to comment briefly on that because any forecast of an increase as small as that clearly must be unreliable because it is too small to be reliable. For one thing it totally ignores the fact that transfer pricing now constitutes a major element in the whole question of industrial output here.

It is interesting that the Minister for Finance referred to growth in GDP rather than growth in GNP. He obviously does not wish to take into account what is likely to happen to the paper profits that allegedly arise in relation to some of the industrial transactions which apparently are booming with enormous profitability at present. The reality is that we are likely to have negative growth irrespective of what the statistics will tend to show. The time has come where it is necessary for us now to consider very carefully whether the official statistics on matters of this kind issued in this country are reliable any longer. I am not suggesting that they are mathematically unreliable or that any attempt is made to put across anything fraudulent. That is not the case, but I question whether they are reliable in giving a true picture of the state of the economy here. Members of the House may have seen, in recent weeks, an article inBusiness and Finance on some aspects of our export figures as published for last year. I would commend that article to anyone who has not read it because I think it will give a more vivid understanding of how these figures can be entirely misleading at the moment.

If one sticks to those figures precisely, as that article points out, one will come to the extraordinary conclusion that in export terms the cola export market from this country is bigger and more important than the dairy industry is for exports. There are two small plants in this country, one making coca cola essence in Drogheda and the other making pepsi cola essence in Cork. Between them they employ about 200 people. Their contribution to the Irish economy, while obviously very welcome, is very small. The amount of value-added in the Irish economy by their operations is very small. It might be measured in terms of £10 million to £20 million but their export figures are greater than the export figures for the dairy industry. This seems incredible when one considers the benefit to the economy of the dairy industry and the tens of thousands of people that it employs all over the country both directly and indirectly, and the large amounts of money that it causes to circulate within the economy.

It is therefore necessary for us to look again at the reality of these figures, whether they give a true picture and whether the ostensible growth that was achieved last year was in fact a real growth in GNP at all. It is very hard to imagine that a growth of 3 per cent in GNP could occur in a country that is subject, at the same time, to huge emigration, to enormously increasing unemployment and to the feelings of despair and hopelessness which have afflicted it in recent years and which, unfortunately, continue to afflict it.

It is appropriate that we would also begin to ask ourselves serious questions, in this House and in the country generally, about the public sector voluntary redundancy package which was introduced by the Government last year. The Minister for Finance has admitted that no cost-benefit analysis was done on it before it was introduced and, so far as I am aware, none has been done officially since it has been brought into operation. One does not need to be a skilled analyst to be forced to the conclusion that we are getting, as taxpayers, extraordinarily bad value for that package. We are getting bad value in the sense that it is extremely expensive for the taxpayer on the one hand and, secondly, we are getting bad value in the sense that it is encouraging some of the very best people in our public service in all fields to leave it and set up in private employment.

We are aware now, for example, that 3,000 teachers want to leave. Presumably, they will have to be replaced. After they have left, they will have received substantial golden handshakes and considerable pensions. I understand that most of these teachers want to leave in order to set up in private education. This is because the grind industry here, due to our unfortunate educational and examination system, is a real growth industry. If you can get a pension of £150 or £200 a week and supplement that by at least as much again by giving grinds each day for a few hours, you are very much better off. I do not blame anybody from a personal point of view for taking that course. It is extraordinarily expensive to the Exchequer and is really of no benefit to it.

I have always advocated that we should reduce the cost and numbers of the public service here, which is inordinately high for a country of our size. The only way to do that is by a combination of a pay freeze, which would have been perfectly viable this year and I think perfectly acceptable given the sacrifices that so many other people are making, and of non-recruitment which creates problems, certainly, but is the only thing that makes sense, even though it may create hardship for younger people and schoolleavers. Instead of that, we have this extraordinarily expensive system of paying people large sums of money to leave the public service and at the same time recruitment is going on whereby most or many of these people have to be replaced in any event, with the result that the Exchequer is paying more, in fact, for fewer people and less by way of services. That does not seem to make sense and is something that should be seriously questioned and reconsidered.

The real objective we face has to be the reduction of costs, both costs in the running of the public service and costs in the production of goods and services privately. Even if our budget deficit which is enormous were to be either eliminated or reduced in the near future to a reasonable level, there would still be a huge number of essential elements in this economy faced with such huge distortions in their costs as to make them uncompetitive. They would still be operating, even if we got our public finances in balance, in an environment that is entirely uncompetitive and is forcing them to let people go or not to take on people who might otherwise have been employed.

There is a belief, in official circles in this country at least, that if the two sides of the equation on our budget were to be brought into balance, or even nearly so, that would be all right. I fundamentally question that sort of thinking. Even if they were in balance in the morning, if our costs are still too high it is of no value to us and one of the principal manners in which that balance is being sought is not so much by the reduction of unnecessary expenditure as by increases on the other side of the account in the raising of extraordinarily high and, I would suggest, unnecessary taxation.

The real dilemma facing this country I thought was summed up briefly and eloquently last night in a very brief part of the RTE news at 9 o'clock when Mr. Denis Brosnan, who is perhaps one of the more successful of our businessmen, gave an interview, I think arising out of the publication of his group's accounts for last year. He described the disadvantages of trying to manufacture or trade in this country, the cost of trying to manufacture or do business here. He gave as an example the fact that the pay roll cost of his company increased last year by £4 million, that his employees got out of that amount 20 per cent into their pockets and that the Exchequer got approximately 80 per cent. It was a costly exercise for his company, who paid out £4 million extra but the benefit to their employees was very minimal. If he were to go elsewhere in Europe, as he very easily could, to manufacture the same items, he would not be faced with that problem and he is not unique in that. That is the problem facing so many people who are manufacturing in this country and that is the problem which prevents so many others who would manufacture here from doing so.

We should not be surprised at the fact that so many people are leaving the country to carry on business elsewhere. At the moment, builders here are charged figures for insurance of up to 15 per cent of their turnover. The corresponding figure for a builder in the United Kingdom is 2 per cent. For pricing purposes, a builder in Ireland has to charge out the total cost of an operative, if he is tendering for a contract, at £12 per hour. The total cost of an operative in the United Kingdom as charged out in tenders at the moment is about £7 per hour. Distribution costs in Britain are on average 15 per cent lower than they are in this country. It is not surprising that we have a quarter of a million people unemployed and that we have more than 30,000 people a year leaving this country.

Unfortunately, the Government have not taken the opportunity in this Finance Bill to redress the cost of various essential commodities in the business cycle as against their cost in other countries where our competitors are manufacturing for trade. I will give five brief examples. These are, the cost of cars, of trucks, of petrol, of diesel and of heavy fuel oil, all of which are made so expensive and so uneconomic in this country by taxation alone. It is worth reminding ourselves that the cost of oil has declined in Irish pound terms by 60 per cent since 1981. That is a most spectacular decrease in the cost of a commodity that is vital for the industrial and commercial business process. But we have seen no benefit from it, because every time the price of oil has fallen since 1981, the Government of the day have stepped in and kept the price up. This Bill contains another provision because there was a fall in the price of oil in January this year. The Minister in the budget decided that there would have to be extra taxation lest the price of oil fell to anything like a remotely reasonable level. The tax gathering machine we have built up is crushing our economy and our people. It is forcing our people out.

There is no point in thinking that this Bill is only about the detail of what is in section 6 or in some other section. This Bill not alone does nothing to redress the difficulties that are creating and maintaining emigration and unemployment but it adds to and consolidates those problems. These cost factors are the things at which we must really aim. We cannot aim simply at a reduction in or an elimination of the budget deficit to the exclusion of everything else. That is what has been happening over the last year but, at least it is happening. Before that it was not happening at all and the deficit is getting worse. We cannot reduce the debt in isolation. If we continue in this fashion we are condemning ourselves to continued unemployment and emigration.

Recently I was both in New York and London meeting different kinds of Irish people and I was horrified at the level of emigration of well educated and talented young people. Deputy Bruton mentioned this earlier. It is an absolute tragedy to see people with good jobs here and people with viable businesses leaving with their wives and families for ever because there is no point in staying here when the marginal tax rate on every additional pound earned is twice as high as it is in Britain and more than twice as high as it is in the US. This cannot be ignored. This is killing our country. It is driving our people out. It is not good enough for the Government to say, as the Minister for Finance has, that they will get things balanced in a few years time and we will then start to have a serious look at tax reforms. We cannot afford to wait that long because we will lose countless tens of thousands of people in the meantime.

It is not only educated people who are emigrating. There is a huge contrast in emigrants both to Britain and the US. Many poor people are also emigrating. In the US they have the great disadvantage in that they are illegal emigrants and are taken advantage of. In Britain they are scarcely able to live if they can get a job, because the level of wages for so many of them is so low that they are unable to live in a normal fashion. The assistance they get is almost entirely from voluntary groups in the US and almost entirely so in Britain. The amount of money made available by the Irish State to help emigrants this year is £0.25 million, even though there are vast numbers of emigrants many of whom are in severe difficulties in Britain and in the US. That sum of money is the same as the sum of money made available to meet the difficulties in the Zoological Gardens in Dublin. It seems to me to be a wrong set of priorities.

I welcome the trend which has arisen in the last six months or so, of a reduction in interest rates. This trend has grown from two factors. One is the lower borrowing by the Government and I commend them for this. It is enormously helpful to the economy. The other factor is the strength of sterling and the fact that British interest rates declined due to the strength of sterling and as a result our interest rates declined. We have a vested interest, not in the strength of our own currency, but in the strength of sterling continuing to rise in value, because if it does our interest rates should come down further. I would draw attention to the fact, however, that the benefits of reductions in interest rates are not being passed onpro rata because the lending institutions generally here are increasing their margins on the prime cost funds and the margins at the moment are far too high. The price of money on the money market is about 8 per cent. That is the prime cost, but they are still lending on overdrafts at 13 per cent to 14 per cent, and low rates of interest apply only to triple A borrowers. It is hard to meet them because it is hardly anybody apart from the State.

It is interesting to note that one bank in reducing its interest rates last night reduced them by 0.75 per cent for triple A borrowers — which is almost meaningless because it only means the State — and by only 0.5 per cent for businesses, farmers and so on who are exactly the people who should get the benefit of the reduction. The margin taken by financial institutions above the prime cost of funds to them in the past was traditionally about 33 per cent but the margin being taken by them now is as high as 65 per cent and is frequently 50 per cent or more. Some explanation is called for as to why that change in the margins has come about and why the full benefit of the lower cost of money has not been passed on to borrowers here and in particular to productive borrowers.

I want to deal with some of the specific points in the Bill and to say there has been a major change from the budgetary proposals in respect of the pension fund tax now being proposed in this Bill. This tax on pensions is ill-conceived double taxation. It does not apply to unfunded public pensions and it is, therefore, discriminatory against people in the private sector and in parts of the public sector who were prudent enough to provide for their own retirement. It is, therefore, highly inequitable that it should be applied in this way with exemptions for hundreds of thousands of people which do not seem to be justified.

Proof that the budgetary proposals were badly thought out is afforded by the major changes now being made in the Bill which will have the effect of excluding from this tax over 23,000 of the smaller pension funds, all of which would have been caught under the proposals as announced in the budget. An example of how badly thought out this provision was is that it is now necessary to exempt so many of these. I obviously welcome this aspect of the changes but the uncertainty that will be created by this tax for the future will be a serious discouragement to people to provide for their future. Companies will tend to pay pensions out of current revenue with the result that, when a company fails, as so many unfortunately do nowadays, its pensioners will lose their pensions. This is another example of the State involving itself in areas which it should keep out of and this is particularly so when it is read in conjunction with PRSI for the selfemployed and farmers and is leading to a further increase in bureaucracy and unnecessary public expenditure.

It is interesting to note the discrimination which applies even within the public sector. Some semi-State companies were wise enough to establish funded pension schemes and their employees and pensioners are now subjected to this tax but because the State and most semi-State bodies could not be bothered to provide funded schemes and simply pay out of revenue, the taxpayer pays the pension directly every year and no tax is applied to them. This has been described as a once off but so too were the bank and insurance levies and to the best of my recollection not one of them has proved to be once off and there is no doubt that this will not be once off either.

In conclusion, I want to refer to one other small, absolutely petty and foolish provision in the Bill, that is, the proposal to put a tax of £10 a year on cashcards. In revenue terms it is negligible. It has been shown to the Minister that by increasing the tax on cheque cards and the stamp duty on cheques the small amount of money concerned can be raised but, to everyone's amazement, he has persisted with the foolish tax. I hope there are no Revenue or ideological implications in this. It is plain crazy to persist with this in a country which is subjected almost on a daily basis to armed bank and cash robberies. Scarcely a day passes without there being at least one armed robbery and there are some days when we see three or four of them.

We have an extensive banking and building society system and an abnormally large number of branches of financial institutions spread throughout the country. Unfortunately for us we have an abnormally large number of people who do not use these financial institutions and the trade unions have been very reticent in encouraging their members to use them. We are still subject to the Truck Acts of the 19th century which were brought in totally different circumstances which surely have no relevance to our circumstances of today.

We are perhaps the most over-cashed society in Europe and we are paying a very high price for this. We will ensure, if this particular section imposing this silly, petty tax is passed in this Bill, that we will remain the most over-cashed society in Europe and subject to the highest rate of armed robberies for cash in Europe or in the civilised world. For the sake of £6 million which can so easily be raised in other ways, this is absolutely crazy. The direct cost to the State, apart from the losses involved and the cost to the economy, of providing large numbers of gardaí and armed soldiers driving up and down the country with these vans, which I see every day when I drive on a main road, is ridiculous. We are ensuring through this incredible short-sightedness a continuation of that.

Unfortunately, in the course of these armed robberies which happen on a daily basis people get hurt and people get killed. One can almost guarantee as a statistical certainty. That, given the number of armed robberies we have, three or four people on average will be killed in any given year. I think that is an appalling situation and the removal of this foolish proposal could do a very great deal to alleviate it. It is a pity that the Government for some extraordinary reason which they have not explained have decided to dig their heels in on something petty and silly like this which is entirely unjustifiable.

Twelve months of decisive management by the Government have created the conditions in which the economy can grow again. We have re-established control of the public finances — from listening to the speakers in the House this morning I am glad that the House appears to be in agreement with that — reduced public expenditure and substantially reduced Government borrowing. We have stopped the growth in income taxation and started to take many people out of the tax net. We are streamlining public administration and rationalising agencies and bodies to ensure a greater contribution to our objectives. We are making clear, courageous and effective changes in public services, eliminating, what all Members of the House have spoken about for many years, waste and inefficiency. We have taken decisive action to stimulate development in the areas where there is potential for growth and employment.

This Finance Bill is an essential part of the Government's economic strategy for 1988 — a year which will see many crucial turning points in the development of the country. Together with the Social Welfare Bill, other budget measures and the range of development measures currently being introduced for various sectors of the economy, it provides yet again the evidence that the country is under firm and confident management.

TheProgramme for National Recovery was published last October, just over six months after the Government came into office. It set out, with the consensus of the major social partners — the Irish Congress of Trade Unions, The Federated Union of Employers and the Farming Bodies — the main objectives of Government economic policy for the period to the end of 1990. Those main objectives bear restating:

(i) first and foremost, the ratio of national debt to GNP will be stabilised by the end of the period; this will require a reduction of the annual Exchequer borrowing requirement to between 5 per cent and 7 per cent of GNP;

(ii) this major objective will be pursued through rigorous control of public expenditure; through an appropriate pattern of pay developments; and through a range of sectoral development measures.

It was, and remains, the Government's view that this combination of measures is necessary if the economy is to be turned around and put on a stable and sustainable path of future development. Much has been done in our first year in office to get it onto that path. First, in both 1987 and 1988 we have made major inroads into the problem of public borrowing. The Exchequer borrowing requirement has fallen from 13.2 per cent of GNP in 1986 to a planned level of 8.2 per cent in 1988. Moreover, the evidence from 1987, when the outcome was in fact better than the budget targets, suggests that our 1988 planned levels will be achieved. The figures for the first quarter show that they are at this stage well on target.

The improvement in the fiscal position has been accompanied by a number of other favourable economic developments. Perhaps the most notable has been the fall in interest rates which has resulted largely from the Government's fiscal policy and the confidence it has generated. Key interest rates are now up to 5 per cent lower than they were a year ago and the downward trend was reinforced by further decreases by the major banks as recently as a week ago.

Inflation has also been maintained at a low level, with the recently published figures for the year to February 1988 being the lowest for 25 years. This low level of inflation was a major influence on the pay agreement achieved as part of theProgramme for National Recovery, which provides for pay increases of 2½ per cent in each of the years 1988, 1989 and 1990. The improvement in our inflation performance led to a small gain in our international competitiveness in 1987 despite the significant weakening of the US dollar.

Partly as a result of this improvement, exports grew very rapidly in 1987, with industrial exports up by 18 per cent, and agricultural exports up by 4 per cent. While the growth in industrial exports owed much to the strength of the electronics and computer industries, the more traditional labour-intensive industries also made a contribution, particularly towards the end of the year.

Finally, after increasing steadily for a number of years, unemployment has fallen slightly over the past nine months. Certainly, this development is due in part to the continuing reality of emigration but there are also the underlying favourable developments in the real economy, to which I have referred. The Jobsearch programme has also had an effect by directing public resources more specifically to the long-term unemployed. As a result, the most recent figures — those for October last — show a decline in the numbers out of work for over one year. This is the first such decline for several years.

The Government's first year in office has also seen a number of measures to stimulate sectoral development and, equally importantly, to streamline public administration in support of development. Major headway has been made towards the establishment of the Financial Services Centre on the Custom House Docks site; industrial policy has been made more selective in the types of project supported and there has been a shift in resources to support investment in "brains" rather than in fixed assets and the disbursement of training grants is now related to the achievement of specific employment targets; EC approval has been obtained for the establishment of export trading houses to assist export development for smaller firms, and the first such trading houses have recently been licensed and sectoral programmes have been put in place, in particular for the food and drink industry, and for tourism.

In the sphere of public administration, we have seen the rationalisation of the agricultural advice bodies, the establishment of a new science agency, EOLAS, to replace the IIRS and the NBST and the rationalisation of the Manpower bodies with the establishment of a single organisation — FÁS — operating under my Department. In all cases, the Government's objective has been to ensure that support services whether to companies or to individuals, are provided efficiently and flexibly and at minimum cost to the taxpayer.

The prospects for 1988 are encouraging. As I have already pointed out, the budget will lead to further progress in the stabilisation of the public finances, with a reduction in the borrowing requirement equal to 2 per cent of GNP. Despite this necessary tightening of fiscal policy, economic growth which last year was of the order of 3½ per cent is forecast to continue. A number of factors underpin this forecast: personal incomes are likely to increase in real terms for the second year running, after several years of decline, and the tax changes in this Bill will reinforce this trend; productive investment by industry in equipment and machinery is forecast to grow by 4 per cent in real terms; our competitive position abroad, and particularly in the fastgrowing UK market, will improve this year, with obvious benefits for exports, including those from the traditional sectors of industry.

Overall the Department of Finance's post-budget forecast was for output growth of up to 1 per cent. The early signs for 1988 are encouraging, with further falls in interest rates and record low inflation. These factors further improve the climate for productive investment in Ireland for existing companies as well as for new foreign companies.

Our policies for 1988 extend far beyond the necessary control of public expenditure and borrowing. Equally important will be the contribution of the development policies already put in place. In a number of areas, particularly tax reform, this Finance Bill will contribute to these developments.

I want to turn now to some of the important development incentives and taxation changes which are a feature of the Finance Bill before the House. The Government recognise the importance of the construction industry. We have set out to create a positive environment for the industry which will provide the confidence which is the key to recovery. The drop in output and employment in the construction industry which took place between 1981 and 1986 occurred at a time when grants and expenditure were running at unprecedented levels. We have to take stock of where that leaves us today. There is one very clear lesson. High levels of State expenditure and public investment alone cannot secure a return to growth in coming years. We are on the threshold of a radical change in the balance between public and private financing for the industry.

We need to attract private investment into the construction industry. That is why we have restored a section 23-type incentive for investment in private rented accommodation. This should provide a welcome stimulus to construction activity. Already there is evidence of that. Confidence has also been restored by determined action in other areas. We have seen a unique partnership between the public and the private sectors put to work in the Custom House Docks development. The extent of the investment involved — £250 million — within such a short time scale will have an immediate impact.

The establishment of the Custom House Docks Authority and the progress it has made to date provide a remarkable example of a new kind of partnership between the private and the public sectors. It shows what can be done through a combination of the right powers, resources and human skills. The problem of inner city dereliction cannot be overcome by throwing money at them.

The Authority has set to work by harnessing business expertise and capital in the public interest. The private sector participation is of more importance than just the money contributed. There is a sense of involvement, an assumption even of responsibility for the future of the city. I have no doubt that what can be achieved in terms of bringing life back to the docklands will point the way to new forms of partnership which can generate investment in more job-creating industries for Dublin and elsewhere to the ultimate benefit of the whole population. The extension of the boundaries of the designated areas for the urban renewal schemes in Dublin and Limerick is another example of how we can increase the contribution of the private sector in urban development.

The provision of incentives for urban development in the Finance Bill are consistent with other policy initiatives geared to supporting a diverse social mix living and working in inner cities through measures to provide more education and training, more job opportunities, improved community facilities and better environmental care.

Providing new employment is at the top of the Government's agenda for national recovery. The redevelopment of the Custom House Docks site and the establishment there of the Financial Services Centre will make a significant contribution to the renewal of the whole north inner city and will also generate up to 2,000 new jobs in the construction phase.

The completed project is intended to provide about 7,500 jobs over a period of three to four years. This renewal process will also help to achieve another critical objective: ensuring the survival of a strong commercial centre at the heart of the city. This means creating a more pleasant and efficient business centre in harmony with the development of community life. I am confident that this transformation will reflect the proud traditions of the area.

As part of theProgramme for National Recovery the Government gave a commitment to introduce income tax reductions to the cumulative value, over the next three years, of £225 million. We also undertook to make significant progress towards having two-thirds of taxpayers on the standard rate.

We actually went much further than that in this year's budget. We provided for tax reductions costing £152 million in a full year. That is three times what was required to fulfil the first year commitment in the programme. It means that 16,000 taxpayers are taken out of the tax net altogether and a further 5,000 will become entitled to marginal relief. It also means that nearly 63 per cent of taxpayers will be paying tax at the standard rate in the 1988-89 income tax year.

The changes in personal taxation for which provision is made in Chapter I and in the First Schedule of this Bill, and particularly the broadening of the 35 per cent tax band, were widely welcomed at the time of the budget announcement as a step in the right direction. They will significantly increase the real value of the pay increases provided for in the public and private sector agreements and improve work incentives. The prospects for adherence to pay terms of these agreements and for the smooth operation of the programme itself have been enhanced by the combination of these tax reductions and an inflation rate of 2.5 per cent.

We want to go further. The basis for further progress has been laid in the consensus in favour of reform on the part of such bodies as ICTU, FUE and CII. Our aim quite simply is to reform the tax system. We aim to have two-thirds of taxpayers paying tax at the standard rate by the end of the programme.

In their endorsement in principle of the NESC Report Strategy for Development 1986-1990 and again in more concrete terms in their agreement to theProgramme for National Recovery, all the social partners have recognised the particular need to consider the position of the disadvantaged.

The provisions of the Social Welfare Bill reflect the social equity provisions in the budget and complement the tax reform measures in the Finance Bill. A critical element in our approach to building consensus is to ensure that a consistent strategy is being implemented across the board. Thus we have provided significant increases in social welfare payments for people who are long term unemployed. The higher increases in long term benefits are a direct response to the plight of people living on unemployment assistance, the majority of whom have been out of employment for more than 15 months. These elements of the budget were readily acknowledged as a significant step towards the implementation of the social equity provisions of theProgramme for National Recovery.

The general increase of 3 per cent in social welfare payments will protect their real value, now that inflation has been brought down to 2 per cent. We have given much higher increases to those on the lowest payments, namely unemployment assistance and supplementary welfare allowance. The 11 per cent increase in the personal rate for unemployment assistance recipients, together with the 6 per cent increase in the rate for their children have been welcome as positive measures. These increases are a clear indication of the Government's concern to protect the less well-off in our community. We made sure that the income of social welfare recipients was protected by bringing forward increases proposed by the previous Government from November to July last year. This year we have again arranged for the increases to apply from July.

This Government have never understated the problems we face. We have spelt out the facts clearly to the public. We secured the support of all economic interests to an unambiguous statement in theProgramme for National Recovery of the seriousness of our situation.

This Government have never viewed consensus as an easy option. We know it has to be worked at. We have sought to do this with more energy than any Government before. Our strategy is based on realistic objectives. We have nonetheless set ourselves a level of achievement which calls for constantly renewed efforts on all sides in order to moderate sectional interests and to combine our energies effectively to surmount new difficulties. The measures in the Finance Bill are further confirmation of the Government's willingness to fulfil their commitment and to extend and strengthen that consensus.

These measures are fully consistent with the Government's strategy in relation to developments in the labour market, the special employment and training programmes to assist the unemployed and the promotion of the necessary changes needed to encourage companies to realise the potential of their employees at management and shopfloor levels.

Enterprise is one of the key elements needed for the achievement of our targets under theProgramme for Natioanal Recovery. This requires imagination, innovation and courage in the pursuit of clearly defined objectives. Nowhere, I suspect, is this more important than in the public service. Faced with the need to curtail public expenditures, public service managers have to maintain essential services at an adequate level with greatly reduced resources. We are reducing the administrative overheads of the State by a process of rationalisation and amalgamation of State bodies, by integrating schemes and programmes and by voluntary redundancies. We are reducing the administrative burdens which Government impose on employers by way of review of all demands for information and by examining obligations imposed by statute.

For my own part, I expect from FÁS, which combined the three former Manpower agencies, the following: a single more effective unit with the maximum possible proportion of the budget going to services for the clients; a coherent range of training and employment programmes to replace thead hoc and wide variety of provision currently existing; a standardised pattern of allowances and conditions instead of the present confusing and cumbersome array and a regional focus for their main objectives. I am confident that FÁS will develop its services with maximum responsiveness to the needs of different regions and areas. This involves the full integration of all employment and training services at regional level.

Already there are positive signs for an improved industrial relations climate which, I am sure, will be given added strength by the personal income tax concessions provided for in this Bill. The positive factors are obvious in the continuing reduction in the annual incidence of strikes and in the number of workdays lost as a result of industrial disputes. The number of strikes recorded in 1987 was the lowest in the last 25 years. Another positive sign was the total absence for the first time of any unofficial strikes occurring in the last quarter of 1987.

The agreements negotiated in association with the programme provide for agreed pay levels which should allow management and workers to plan with a degree of certainty for the foreseeable future. Inflation is now below 2 per cent and our balance of payments position has improved dramatically. The level of pay settlements in the private sector is now generally in line with the pay agreement for the private sector negotiated in conjunction with theProgramme for National Recovery. It is imperative that all interests ensure that these pay terms are adhered to in the interest of wage cost competitiveness and the maintenance of employment.

The Government have put the tourist industry on the top of the list of sectors to be actively promoted and developed. We have committed ourselves to the ambitious but achievable objective of creating an extra 25,000 jobs and to attract an additional £500 million in foreign tourist revenue.

As part of the new co-ordinated strategy to develop the industry, last year new air services were introduced, access fares were reduced and novel promotional measures were undertaken. The response was a record number of visitors and greatly increased income and employment.

This year, additional funds have been provided for tourism. A tourism task force put forward a series of major innovations which have been approved by Government and are being implemented. In my own sphere of responsibility, CERT continue to play an important role in improving efficiency and equity in this industry. In meeting the training and development needs of the industry they contribute to employment and economic growth. They perform a valuable social role in taking people from the dole queue and providing them with courses which have consistently high placement records.

Politics they say is the art of the possible. When we came into office a little over a year ago and saw the state of things it looked as if it might be a question of the impossible. However, we examined the situation we found and decided on what was required and we took the necessary action — difficult and unpopular though it was at times — with resolution. It was not just the Government who had to take the hard road; it is now clear that the majority of the people of this country realised what had to be done and have been prepared, at no little hardship to themselves, to support us in our task.

There is nothing subtle or complicated about what was first required; nothing that the application of ordinary common sense would not reveal. The level of public expenditure and borrowing was beyond what this economy could possibly sustain. We were in a downward spiral, things could only have got worse unless we took the necessary action and continued to do so. We cut expenditure and borrowing and we are well on the road to stabilising our national debt/GNP ratio, an essential pre-requisite of survival. It would be fatal to ease off now and undo the good work. The 1987 budget started the process and this year's budget carries it on. Having taken the difficult first steps we were able to put many positive policies, to some of which I have referred, into operation. The signs of recovery are there for all to see. On behalf of the unemployed especially we intend to see things through.

For these and other reasons I commend this Finance Bill to the House.

There is a certain air of unreality about this debate and I suppose it derives from the fact that one would expect a case to be made for the financial strategy of the Government, as reflected in the Finance Bill, and an opposition to the assumptions contained within that financial legislation and strategy. The Minister for Labour is, perhaps, politically wise to take advantage of the fact that there is not a significant difference in the economic logic which his Government are implementing and that of Fine Gael and the Progressive Democrats. Thus it behoves those of us, however small in number, who stand on this side of the House in effective and genuine opposition to the logic of the Government as reflected in the Finance Bill, to lay out the assumptions on which that financial strategy is based and to subject them to some criticism.

The financial logic of the Bill will go a great way towards establishing further in the public mind an acceptability of the fact that there are now two Irelands and that there are clearly opening up for the next several decades two levels of citizenship. It is of some distress to me, and to those who support my political views, that there is such high public acceptability for that. Nevertheless, there are lessons that can be drawn from it and some obvious constructions that can be put on it. Those who have are always limited in their concern for those who have not. In times of economic growth modicums of compassion are allowed to stir people into some kind of concern. That was the reality in the sixties and early seventies. When growth has disappeared and hard financial decisions have to be taken the clear divisions in society become apparent. Thus it is that in April 1988 we are discussing a Finance Bill that will continue the immoral immunity given to wealth and speculation in the Irish economy with all its social effects.

It is a historic point to remember that this House once stirred itself to rage on the question of a wealth tax of 1 per cent which was abolished in 1981. Had that 1 per cent continued, adjusted for inflation, it would today be yielding £20 million and at 4 per cent it would be yielding £80 million. That £80 million foregone from a small number of people at a tiny rate by generous criteria means that £80 million is not available for public expenditure on education, health and innovation. Thus, on the one hand, those who have and who benefit from the great inequalities of Irish society are united in their hymn of joy for the Finance Bill. On the other hand, there are those who tend to be affected by the cuts brought about by this unique moral exemption from any kind of adequate level of taxation of wealth, non-productive wealth at that. The wealthy are precisely the people who benefit at the expense of the abandoned hospital beds, the schoolroom with fewer teachers and so on. This year alone the destruction in the health services, for example, has brought about a net loss of 1,036 beds in hospitals. I am allowing for the number of new beds in Beaumont to be subtracted from the number of beds lost elsewhere.

Across the country, if one adds other ward closures, one will find that in the consultant staffed acute hospitals we lost 2,325 beds; we lost 334 in non-consultant staffed hospitals; we lost 349 beds in geriatric hospitals and 609 in psychiatric hospitals making a total of 3,617 places. I stick to my concept of there being two levels of citizenship. What is happening in health is that those who are already enjoying the benefits of tax exemption for wealth are able not only to use that wealth to have an entirely different type of access to the consumption of health services from that of the vast majority who must depend on a health service with less facilities for them but are uniquely able to draw benefits from services provided by the taxpayer. It is worth noting that 80p of every £1 collected in tax is taken from those in the PAYE sector. Such people can now know that those who have inherited wealth can avail of the same services. Those people do not have any incentive to invest their wealth productively. The total incentive last year to what I referred to as the sick cow of Irish enterprise that refuses to stand and give a dribble of milk was £1,254 million. This kind of private sector dole costs us an enormous amount of money every year but it does not provide the investment or the jobs. That will continue and the exemption of the wealth from tax will continue.

We will, for example, have a difference between class "A" citizens who can have an orthopaedic hip replacement after waiting less than four weeks while the public patient will have to wait up to four years. That is what is called being realistic, taking the hard road or being pragmatic. It is the basis for a unique conversion by a party who, when going around the country, inundated people with the message that health cuts kill the elderly, hurt the old and the young and that education cuts represented a cut against equality. Instead we had this conversion on the road to acute individualism, greed and 19th century economics. That was remarkable. A kind of consciousness has been created that it is an acceptable state of affairs that 20,000 people, by conservative estimates, will leave the country every year until the end of the century, that unemployment will be at 19 per cent and that the gaps will widen between the wealthy and those who are working, particularly those in the lower socio-economic groups. Those who are taxed, such as the PAYE sector, know that while this consensus prevails there will not be a wealth tax. There will never be any attempt to shift taxation away from the direction of those who are caught within the PAYE trap.

In 1970 the total taxation from profits and property was, according to OECD reports, 21 per cent but that figure had fallen in 1980 to 10 per cent. It had fallen still further in 1981 to 7 per cent and I have no doubt that it will fall again this year. In Mrs. Thatcher's Britain — this modern political harridan whose example and logic are being supported by the majority of Members in the House — they have not had the courage to exempt property, wealth and corporations like we have.

In the United Kingdom the proportion of taxes in 1981 coming from profits and property was 25 per cent and in Reagan's United States it was 17 per cent but in the sleeveen mind of the right-wing economists Ireland is a strange place. It is a place where the wealthy really must never be looked at because the opposition to the 1 per cent tax in the seventies was not about the yield of £4 million, it was about the information it was revealing in relation to wealth in Ireland. It had shown, in its brief time, that 12,000 individuals had assets of £1,850 million; it was showing the nature of the wealth structure of Ireland. So it had to go as much for what it was yielding but far more for what it was revealing. There is another assumption in this logic, that is that Ireland is not only a place where the wealthy need to be protected and the peasants need to be driven from the public service hospitals, denied access to education and 20,000 of them exported every year but that it is also a place where the State can never do anything effectively.

We have under-capitalised State companies and as Deputy Des O'Malley said — and I agree with him — created a unique kind of income for the money boxes that call themselves financial institutions here, who incidentally last year gathered £541 million from their treble A customers in the semi-State sector, health boards and local authorities alone. Lending at approximately 9.3 per cent, on average, they took £541 million out of the system. I hear people moaning about bank levies. I am against bank levies. I am in favour of bank taxation and also in favour of a credit and financial policy that would direct them away from job destruction — which they are at at present — to job creation.

Just before Christmas 1987 the H. Williams group, trading on borrowings from a bank in Ireland, and borrowings of £6 million, heading into the Christmas period with a projected turnover of £40 million, had the plug pulled on them leaving 1,200 to 1,500 workers thrown out of their jobs. Then when a speculator bought the company and was asked on television "where did you get the money", he said, "I got it from the banks." So the banks took £6 million, threw 1,200 to 1,500 workers out on the side of the road and then loaned the money by way of a short-term loan to someone who was going to buy the assets and sell them for £12.4 million. That is very interesting to note because in the spirit of enterprise in the land of sleeveens that £6.4 million must remain then in a curiously non-taxed way so that the spirit of enterprise, of asset-strippers and others can be encouraged and developed.

In my constituency the bank did the same thing, again pulling the plug. Then one talks to the banks and they say, "We have had a bad time lending to farmers, lots of bad debts." They forget that they conducted an auction, in pubs and bank managers' offices, that inflated the price of agricultural land and the expectation of a land of eternal milk production and surpluses at the European level despite the fact that they had hired the brightest and the best from the economics departments of the universities.

Let it be said: there is a consensus in this country, a consensus now in favour of individualism, greed, the financial institutions, cowardly politics, people with no conception whatsoever of what it means to live in a republic. In fact, the message of all speeches — and I have listened to every one of them — we have heard in favour of the provisions of this Finance Bill is that any attempt at egalitarianism is abandoned. We are unique in another respect — a Republic without a concept of equality. There is one for you. Deputy John Kelly, if he had no time limit on him, no doubt could spend hours on that one. It will not bother him very much from his position as an antiquarian Fine Gael Nationalist but that is neither here nor there. We are now in the position in which we mumble on about being a Republic, having dignity and so on, while we systematically make worse every division in relation to wealth, income and the transfers of the State under the provisions of this Bill and related legislation. I repeat we are creating two tiers of citizenship in relation to access to health, education and social provision. We are uniquely hostile to the State, a State that has created thousands of jobs. We leave the State companies under-capitalised and we keep firing over £1 billion every year into the notion that private enterprise will encourage jobs.

In my time I had the benefit of studying and teaching economics, many years ago, before this new kind of AIDS in economics developed, the notion that one should run one's fiscal and financial strategies on a paper basis, ignoring entirely the human costs. It is a kind of machoeconomics, an idea thought up or written by people who have never really worked at the interface of life and any of the low paid jobs. They have migrated in a circular fashion between departments of economics, Taoiseach's offices back to departments of economics, bringing their diseased view of the world with them. The notion is that people must die from not being allowed to go to hospital. It is contended that we must have the cuts. One keeps repeating this and thus psyches people into accepting that there have to be all of these harsh realities if we are ever to make progress.

Let us calmly look at the assumptions contained in these daft speeches we are hearing. One can accept the rhetoric; Ministers go in for that all the time. I have just heard the Minister for Labour speak and he opened his remarks by saying:

Twelve months of decisive management by the Government have created the conditions in which the economy can grow again.

The Minister for Finance engaged in a long introduction followed by details. There is no reference in these speeches to inequality, to changed social provision. There are lots of references in all the speeches to the hard road. There are a number of assumptions made in the remarks of the Minister for Finance in particular and, to some extent, in the shorter remarks of the Minister for Labour which we have just heard. The assumption is that if you get lower interest rates you will increase output and, from this you will get increased exports, the economy will be better, a climate of investment will be created and, from that climate of investment, will come jobs.

I have heard this in the short term of this Dáil so often that it is as regular from benches here of those to the right and left of me as the weather forecasts on RTE and is of the same character. The notion is one that a climate of investment is being created by reduced interest rates, increased exports and then investment from which come jobs. I have a simple question to ask: where is the evidence for this?

Let me deal with some of the assumptions. Interest rates have fallen in recent years here on occasion and the money has not found itself being invested in areas that produced anything. There has been speculation in currencies, on the forward markets, on the exchange. Can anybody tell me why, if interest rates are artificial, the money should take risks with conservative financial institutions, with a limited time span on lendings, with an extraordinary requirement in relation to collateral and so on? It will be seen that rates can come down but the investment need not take place.

More important is the artificial nature of Irish exports themselves. There is the core distortion in the Irish export figures of transfer pricing given the structure of our taxation, that is, that given our low levels of corporation and profits tax and our immense levels of export tax relief, it benefits companies enormously to buy cheap and sell high from Ireland. The onus is on me to show, in practical terms, what I mean by this.

The OECD report on Ireland last year stated our exports reached £9,743 million in 1985. It was a good year, producing a surplus of £314.8 million over imports. The following year our exports were valued at £9,388.2 or £758.5 million over imports. Córas Tráchtála were in ecstasy. Unfortunately, when you run the figures for exports alongside those for unemployment it can be seen that in 1981 our exports were £477.6 million and our unemployment figure was 141,000. In 1982 our exports amounted to £5,691.4 million and there were 179,000 people unemployed. In 1986 our exports were £9,388.2 million and our unemployment rate was 250,000. The evidence shows that exports can increase without an automatic benefit in relation to a drop in unemployment.

What is it, other than idle rhetoric, to say that lower interest rates will lead to investment? I again question the true nature of Irish export performance — which I welcome. I am not taking from the achievements of those who have increased the figure and contributed to a positive trade balance but it is a fact that there is not necessarily a connection between the levels of job cration required in the economy and the increase in exports.

A person who is concerned about this must be interested in not simply making a partisan or an ideological point. The tragic consequence of an industrial policy that relies on incentives to the private sector in its crude climatological assumptions that, at the same time, leaves the State sector under-capitalised must take the responsibility for the shortfall in job creation which has led to the loss of perhaps 40,000 people in emigration in a year. A conservative figure is that 20,000 people will emigrate every year up to the end of the century. This is the last time there will be emigration like this in Ireland because all the demographic forecasts show that this was our last chance to make provision in relation to investment and job creation and to increase the population. We are now squandering this last chance by a unique antipathy to planning.

I challenge commentators who want to go to the trouble of reading through speeches from the Government side — or indeed from Fine Gael and the Progressive Democrats — to find more than a half dozen times in the course of a week's speeches any reference to the word "planning". The word "planning" has now gone although it was in every third paragraph in the early seventies. People used to talk about planning the health services, investment in education, job creation and sectoral plans generally. The word has now been replaced by "sectoral job forecasts".

There is a unique antipathy to planning because it requires an industrial policy which could be monitored and a financial policy which could be subjected to scrutiny. It would also involve directive principles in relation to credit provision, strategies in regard to job creation and a response to the internationally traded sector. If you had squandered £1 billion per year on creating companies that refuse to emerge, is it not meaningful, accepting the logic of private enterprise, what happened in Finland, Austria, Denmark and other countries, that having identified niches in the international traded market you would turn to the company that has a capacity for research and development techniques, marketing techniques and the performance and tell them that we intended to expand their activities, having identified products and niches in the international traded market? Of course, that would be to swim against the tide because it would be assisting State enterprise. Therefore, we must keep on taking from PAYE workers to scatter our incentives, as from a pepper canister, across the different areas hoping that, somewhere or other, someone will create a job.

The price we are paying for this hostility to two options, State sector led investment or a mixed option of State sector and private investment, is the sustained high level of unemployment as well as the projected continuation of emigration. The rejection of planning as a technical tool is one for which an enormous price must be paid in terms of noncreation of employment. It also affects the social side and means that the cuts in relation to education and health are entirely unplanned. We are no longer operating on a basic needs version of social policy. There were always three versions lurking in the background of social policy. You could say that people could be provided for when the blood was flowing under the door, which is a residual thing. You could say that people were required to insure themselves or you could say that you wanted to redistribute resources in the direction of those unable to provide for themselves, the casualties of the economic structures.

There is no theory now in social provision. The idea is to remove gross sums across the heads of social welfare, health and education and to monitor the costs afterwards. The idea is to set up committees if the going gets rough. What we are witnessing in the area of health is an outrageous privatisation of the services. We are now telling the old who enter hospital that they will be sent home within five days. In my own health board area, a woman in her late sixties, suffering from cancer, was sent home without any provision for community care being made for her, to her 80-year-old husband in Mayo. I know several patients who have been told the same thing. Members of staff have told me, with tears in their eyes, about the reality of telling elderly patients that they must return home where no provision has been made to care for them.

Many Members believe that this is the sole, hard road for Ireland. If that is so, I challenge them to do the logical thing, to combine and call themselves the Irish conservative party because they have no right to call themselves anything else. What is radical about cutting education posts, hospital beds and imposing the Jobsearch programme crudely? It is just a cheap, populist expression of badly structured right-wing economic argument visited upon people who were decent enough to want, as one stage of their history, the right to be autonomous, to call themselves a republic and to aspire to equality. That is all gone now. There is a paean of praise all round the country about what is happening now in regard to finances. We have even created a unique new little haven to make sure that we will merit the title of an abandoned republic or an abandoned new kind of banana republic by the provision of the Custom House Docks site. There has been no calculation as to what we will lose from the pittance we will get from the financial institutions as they run for shelter in the thickets of tax evasion on the docks site.

Yesterday, the Minister of State for the Gaeltacht, an Teachta Donnacha Ó Gallchóir, stood in for his master who has not honoured us with a paragraph in Irish since he assumed the portfolio of Irish to his personal breast, said, in answer to a Dáil question I asked as to whether we would extend the tax exemption clauses for writers and artists and so forth to women who are getting a few pounds per day for keeping Irish scholars in the Gaeltacht learning the Irish language, that he has no plans to do anything of the kind. You can come and live in tax free Ireland and write a book of dubious literary merit without paying one penny in tax but you can keep hundreds of children for the first national aim of restoring the language, draw water, wash their clothes and telephone their parents when they get sick and you will have to register for tax for the first time under the new provisions of the realist Minister for Finance.

My second point is in relation to the appeal which I support, and about which so many Deputies in this House have spoken, to respond to the request of the Disabled Drivers' Association about the provision made for the replacement of their vehicles. These are simply pleas from the extreme end of deprivation. I will conclude by saying it gives me no joy to have to make these remarks, but I felt it necessary to do so because there is so little criticism of it in the media or elsewhere.

Debate adjourned.