I would ask that all private and public meetings in the House should cease while the Minister for Finance addresses the House.
Estimates for Public Services 1989 and Public Capital Programme 1989: Motion.
I move:
That Dáil Éireann takes note of the 1989 Estimates for the Public Services (Abridged Version) and of the 1989 Summary Public Capital Programme.
I am happy that this debate is taking place now, because one of the central questions the Dáil will face in the coming months is budgetary policy for 1989. The publication of the Estimates is the first important step in the budgetary process. By tabling the Estimates now, the Government are providing an opportunity for what we hope will be a constructive debate.
The Government's economic and budgetary strategy is aimed at creating the conditions for sustainable growth in output and employment. To establish these conditions we must continue our efforts to restore order to the public finances and in particular to stabilise the debt/GNP ratio as envisaged in the Programme for National Recovery.
This framework for recovery is fully consistent with the strategy and principles outlined by the National Economic and Social Council in their report entitled, A Strategy for Development 1986-1990. This report was quite explicit on the need for curtailing expenditure. This it saw as the most appropriate means of restoring order to the public finances and encouraging strong and sustainable growth in the medium term.
When this Government came into office last year, we were faced with the legacy of the failure to confront the problem of the public finances. The reality of the first part of this decade was a very steep rise in national debt, little real progress in reducing Government borrowing and no real growth in national wealth.
On taking office, we were determined to end this stagnation and to restore the conditions for lasting growth in the future. This required decisive action to tackle the problem of the public finances and the ever rising debt and debt servicing costs associated with that problem. We took bold steps in 1987 and in 1988 to create a new environment for growth.
Some disapproved. Some said that the steps we took would give an adverse shock to the economy which would be too great. They have been proved wrong. They did not realise that strong positive forces would be set in motion by the change in economic strategy which this Government have introduced.
The most important of these are the fall in interest rates and the great improvement in confidence in the economy which we have brought about. There has been a huge fall in interest rates since the 1987 budget. They are now 6 percentage points below their level in the early spring of last year. Gilt yields are also at their lowest point in over 20 years. Not only that, but interest rates here are well below the rates prevailing in the UK, also. We are now in a position where it is generally recognised and accepted that Ireland can continue to enjoy the benefits of relatively low domestic interest rates provided we continue to pursue sensible economic and fiscal policies. Nobody in this House can seriously suggest that this would have been possible without the policies we have been pursuing.
The cost of capital is one of the most crucial factors affecting business decisions. If interest rates are too high, and they reached unprecedented heights before this Government took office, businesses will not invest. Many of them found it hard to survive, and finance working capital, when interest rates were so high. While this Government believe in the case for State policies and incentives to develop industry, we knew that their effectiveness would be greatly reduced while interest rates were too high. To reduce interest rates, we had to cut Exchequer borrowing.
People generally, of course, also benefit from the fall in interest rates. Mortgage payments have fallen markedly since we took office. The cost of personal borrowing has also fallen.
The fall in interest rates, and the clear evidence that the Government were determined, and able, to put the public finances in order, brought about a resurgence in economic confidence.
There is now confidence in the will and the ability of the Government to take charge of events and in the future of the economy. People no longer fear that the economy could drift into chaos, that Ireland could have its future determined by our foreign creditors, and could join the list of those luckless countries with an intractable debt problem.
This confidence is not confined to domestic investors alone. There was a dramatic increase in the amount of foreign investment in the gilt market over the first nine months of this year, with a total of £741 million being invested. People abroad can now see that this Government have the finances under control. This is a direct result of the strong budgetary policy the Government have followed. The huge fall in interest rates and the restoration of confidence are bound to have growing economic and social benefits.
The 1988 budget strategy focused directly on the closely-related objectives of improving the public finances and revitalising the economy. Only by tackling the public finance problem head-on could we turn the economy around.
In the January budget, therefore, I aimed at a further significant reduction in the Exchequer borrowing requirement. The budget projected Exchequer borrowing at £1,457 million or some 8¼ per cent of GNP. This represented a reduction of 2 percentage points of GNP on the outturn for 1987, which itself had shown a reduction of almost 3 percentage points of GNP on the outturn for 1986. Within the overall borrowing target the current budget deficit for this year was set at £1,125 million, or 6.2 per cent of GNP. The reduction in the Exchequer borrowing requirement and the current budget deficit had to be achieved primarily through savings on expenditure, since an increase in taxation was not an option. In our view, and I think in that of most of the Opposition, taxation is still too high.
We should, however, keep a sense of proportion on our tax burden. Recent figures show that the total tax burden in Ireland is not excessive by EC standards. There are six countries in the EC with a higher tax burden relative to GDP than Ireland, and we are below the EC average. But direct taxation in Ireland, excluding social security contributions, is as a percentage of GDP, the fourth highest in the Community. A particular problem in the direct taxation area is the comparatively low levels of income at which single people in Ireland hit the higher rates of tax.
Implementation of this year's budget has proceeded very satisfactorily. We have been confident since early in the year that the budget outturn would be below target for the second year in succession. Our confidence has been confirmed by the end-September Exchequer returns which showed borrowing for the first nine months of the year at only 61 per cent of the budget projection. This compares with 84 per cent for the previous year and 87 per cent for 1986. This very good position reflected the exceptionally good performance of tax receipts and emerging savings.
There will be a saving this year on Central Fund Services of approximately £35 million arising on our contribution to the EC budget. The saving mainly reflects the changes in the method of calculating member states contributions agreed earlier this year by the Heads of State and Government, and from the finalisation of the EC budget expenditure figures for 1988.
Non-capital supply services are also likely to show some expenditure savings by the end of the year. A major factor contributing to the lower expenditure is the projected saving of over £30 million on unemployment payments resulting from a reduction in the live register. Savings are likely to emerge on non-capital supply services, even after allowing for the payment of a Christmas bonus to welfare recipients again this year at a cost of some £21 million.
The much reduced level of the Exchequer's borrowing requirement for 1988 has had a significant beneficial effect on the Exchequer's financial position. This, combined with large purchases of gilts by non-residents, enabled us to repay £230 million of foreign debt during the first nine months of the year. We would hope to make further progress in this area during the remainder of the year.
1988 is a watershed in many respects. The substantial repayment of foreign debt is unprecedented; the performance of the gilt market has been exceptional this year, following on a very good performance in 1987 and we are entering 1989 in a much stronger position than ever before. This will allow various funding options to be exploited according as opportunities arise in the markets.
Tax revenue, especially VAT and excise receipts, has benefited from the stronger pick-up in economic activity compared with what had been expected at budget time. This, incidentally, shows that our belief that our policies would increase economic activity was well founded.
The recent huge inflow of £500 million under the tax amnesty has, of course, boosted this year's revenue receipts even further, to an extent that could not have been envisaged when the budget was being drawn up. I will come back to the implications of the amnesty later.
All in all, it now appears that, barring some adverse developments over the remainder of the year, the Exchequer borrowing requirement for the year as a whole could fall below 5 per cent of GNP. Even if the exceptional proceeds of the amnesty were excluded, the Exchequer borrowing requirement would still fall this year to about 7 per cent of GNP, that is, 1¼ percentage points below the projection in the January budget and three percentage points below the 1987 outturn. This is a tremendous achievement by any standards.
While we cannot allow ourselves to be dazzled by the emerging outturn this year — especially in view of the exceptional factors at work — it provides further confirmation that our strategy for the public finances and the economy is soundly based. It should encourage all sections of the community to continue to support the Government in their efforts to finally resolve the problems that have bedevilled our economy for far too long.
Despite the constraints on us in framing this year's budget, the Government were able to undertake a number of important taxation reforms. The income tax concessions implemented this year have increased to 62.7 per cent the proportion of taxpayers who are paying tax at the standard rate in the current year. This is an important step in the right direction. There has also been a fundamental overhaul of corporation tax, which will reduce the previous bias in the tax system in favour of investment in plant and machinery at the expense of job creation.
Radical initiatives were taken by the Government this year in the area of tax assessment and collection. In line with the commitment in the Programme for National Recovery, new arrangements have been put in place for tax assessment for the self-employed as a major intital step towards a system of full self-assessment for this group of taxpayers. In broad terms, the objectives of the new arrangements are to place more responsibility on taxpayers to meet their tax obligations, to streamline and significantly reduce the number of appeals and to eliminate timeconsuming exchanges between taxpayers and the Revenue Commissioners. The new arrangements will be of considerable administrative benefit to compliant taxpayers while releasing resources in the Revenue Commissioners to counter tax evasion. A significant level of payments is already being made under self-assessment.
A second major initiative taken by the Government in the tax collection area was the introduction of the tax amnesty. We took the view that, with the introduction of self-assessment and the accompanying strong enforcement regime, tax defaulters should be given a once-off incentive to clear their arrears of tax. The success of the scheme has exceeded all expectations. The response to previous amnesties of this kind had been poor. The unprecedented success on this occasion is due not just to the terms of the amnesty itself but to the cumulative effect of the measures to achieve greater enforcement of tax liabilities. These include the interest surcharge, the activities of the sheriffs and the new power given to the Revenue Commissioners in this year's Finance Act to attach the assets of defaulters.
From the Government's viewpoint, the major once-off boost in tax revenue from the amnesty is gratifying. From the point of view of many taxpayers it has provided a great opportunity to wipe the slate clean as regards their outstanding tax liability. This will help place those taxpayers and enterprises who have availed of the amnesty on a sounder financial footing. The tax administration system will also benefit from the elimination of a huge backlog of tax arrears and this will make for a more efficient system in the future.
I would stress that the amnesty scheme offered this year was a once-off measure and the Government are committed to rigorous enforcement of all tax liabilities in the future. I would urge all those who have availed of the amnesty, and indeed all taxpayers, to keep their tax affairs up to date for the future. Those who do so will benefit enormously by avoiding the punitive sanctions for default which are now in place. It is in everyone's interests, in the light of the major effort made under the amnesty scheme to bring tax affairs up to date, that prompt payment of tax should be the norm for the future. This will ensure a more efficient and more equitable system and ensure that every taxpayer is making his/her just contribution to the running of the State.
The European Commission remarked, in its recent Annual Economic Report that the Irish economy, which in the early eighties had one of the highest inflation rates in the Community, a huge external deficit, and spiralling public debt, has made great strides towards stability. That progress will continue this year.
The strong trend of exports and output experienced in 1987 is continuing in the current year. The balance of trade continues to run strongly in our favour. In the first nine months, the trade surplus was nearly £1,600 million, over £500 million better than the first nine months of 1987. For the full year, I expect a trade surplus of about two billion pounds. The surplus on the balance of payments should be at least 3 per cent of GNP compared with 1½ per cent last year.
The balance of payments on current account may seem a bit remote to the man in the street. But it shows how we stand financially with the rest of the world. For a country like ours, so dependent on foreign trade, it is a crucial indicator of the health of the economy. Many commentators reckon that the move into surplus was one of the most important improvements in the economy last year.
Everyone is affected by inflation. Inflation fell to a new low last year and this downward movement has continued this year. We expect inflation to be at about 2 per cent in 1988 compared with 3 per cent last year. At mid-August, the annual rate of inflation was 2.1 per cent. This compares with 5.7 per cent in the UK for August and 3.2 per cent for the European Community average in the same period. In September the UK rate has in fact increased to 5.9 per cent. The wage developments agreed within the framework of the Programme for National Recovery reflect these favourable price trends here and ensure that the cost competitiveness of our products at home and abroad is improving.
Improved competitiveness is essential to increase our share of world and home markets which in turn is the only lasting basis for employment growth.
Agriculture has also been doing well over the last year or so with a strong recovery in incomes after the two dismal years of 1985 and 1986. This big improvement in farm income is very welcome and will have a real impact in rural areas.
I want to turn now to unemployment, which is, with emigration the greatest economic and social problem we face. I will not gloss over the problem. I will not minimise the scale of it or its impact on so many families in this country. Make no mistake, the Government regards unemployment as its number one priority. There is no doubt that the "fundamentals" of the economy are improving very rapidly. So why has employment not risen more rapidly and unemployment fallen faster?
It takes time for a basic improvement in the economy to show up in employment. But there are already definite signs that the employment position is improving and that we have turned the corner. The results of the Labour Force Survey for April of this year were published recently. They show a rise in total employment of 6,000 in the year up to April 1988, in contrast to the decline of 66,000 in the five years up to April 1987.
They also show a stabilisation in industrial employment in the year to April and a strong pick-up in private sector services employment. This confirms what we had said earlier — a turnaround has been achieved in non-agricultural employment. It is clear that the fall in unemployment since we took office is not just due to emigration, as some people have claimed. We have, of course, still a long way to go. But under this Government job creation will accelerate and unemployment will continue to fall.
We recently announced a series of measures under the Programme for National Recovery. These measures are primarily designed to facilitate self-sustaining investment or output with the objective of accelerating employment growth. They are consistent with our overall development strategy. They will make a valuable contribution to job creation in such key areas as tourism, fishing, forestry and agriculture.
Notwithstanding the excellent progress we have made over the last two years in reducing Government borrowing, a lot more remains to be done. The fact is that, even with a borrowing requirement this year well below the budget target, we will still be borrowing on a very large scale in 1988; debt-servicing payments will still cost £2 billion this year; the national debt now stands at over £24 billion; and the underlying trend in the ratio of debt to GNP is still upward. What this means is that too much of our resources are still going to service debt instead of being used for more productive, employment-generating purposes; and that the debt burden on the economy continues to grow.
The debt problem built up over a long period and will require continued determined action to resolve it. We cannot relax until we have halted the rise in the debt/GNP ratio. Indeed our objective over the medium-term must be to bring down that ratio. This is the only way to free the economy from the constraints of a high debt burden, and to protect us from exposure to factors outside our control — such as foreign interest rate and exchange rate changes — that large debt entails. If we do not continue in our work on improving the public finances we could end up back where we started, and the favourable prospects now emerging for higher growth and more jobs would be reversed.
Some people might be lulled into a false sense of security by the success of the tax amnesty. I must stress that the vast bulk of the amnesty receipts are of a once-of nature and will not be repeated next year. They will not be available to finance additional expenditure next year. The reduction in 1988 borrowing arising from the tax amnesty will result in debt service costs in 1989 being about £30 million lower than they would otherwise have been. While this saving is very welcome it puts the yield from the amnesty into its true perspective.
Even allowing for the carry forward to next year of part of this year's revenue buoyancy, as well as the full year expenditure savings flowing from earlier decisions, the 1989 budgetary prospect against which the Government had to prepare the Estimates was not easy. It reflected the heavy costs that will arise next year from certain 1988 budget decisions. The 1988 budget decisions on income tax will cost the Exchequer £150 million in 1989; the decisions on social welfare will cost about £100 million while the second general increase under the 1987 public service pay agreement will cost about £70 million next year. Some commentators have not allowed sufficiently for these factors in forming their views on the opening position for next year.
Taken overall, the opening borrowing requirement for next year in the absence of corrective action was well above the range needed to stabilise the debt-GNP ratio. There was no alternative, therefore, but to make further expenditure savings. Failure to face up to this would damage seriously the economic confidence which we have so carefully nurtured.
For the second year in succession work on the determination of departmental spending allocations has been completed much earlier than was normally the case. The benefits of early publication are clearcut. It demonstrates to the Dáil, the public and the financial markets the Government's continuing commitment to firm management of the public finances and allows for open discussion among elected representatives and interested observers on the direction of public expenditure policy. It also gives spending Departments and the public sector generally time to plan their 1989 expenditure and to put in place the measures needed to keep expenditure within the allocations determined by the Government.
Following the very successful expenditure review process carried out in preparing the 1988 Estimates, the Government decided to adopt the same comprehensive searching approach to settling departmental allocations for 1989.
During the early summer a team of officials from my Department, and an independent economist examined with the spending Departments all expenditure programmes. The recommendations of this team were then carefully considered by the Government in June and July and a wideranging package of expenditure reduction measures was decided upon. Departments were instructed to prepare proposed Estimates during August which reflected the many review decisions taken by the Government. In drawing up their Estimates, Departments were told that no proposal for additional spending on new or expanded programmes would be entertained by the Government. In September the Government gave close detailed scrutiny to the departmental spending Estimates submitted.
The overall results of the review and estimates processes was to reduce Exchequer-funded expenditure by some £224 million in 1989, as compared with the 1988 budget allocations. Of this, £118 million falls on non-capital expenditure and £106 million on capital spending.
The Exchequer expenditure allocations in the Estimates and PCP reflect reductions of some £311 million relative to what expenditure would have been in 1989 if we had not acted. This saving of £311 million is additional to the carryover benefit we are gaining from previous expenditure decisions, and favourable expenditure trends.
I have given the figures of £224 million, and £311 million because it is natural that the House, and the public, should want to know both figures. There has been some comment to the effect that the Government are highlighting the £311 million figure, and are thereby trying to give the impression that they have cut expenditure more severely than is in fact the case. This is not so. We have not given exceptional prominence to the figure. The Government statement on the Estimates was identical in its approach on this matter last year and this; then as now figures on both basis were given.
I feel that the figure of £311 million is a better guide to our approach to public expenditure in 1989 than that of £224 million. Any Government, in settling the Estimates for the coming year, have to deal with upward pressures on public spending, such as the full year effects of the previous year's pay and social welfare increases, and the impact of the coming year's inflation. If their aim was to hold the total level of spending unchanged from one year to the next, the allocations for some programmes in the coming year would have to be reduced just to offset these upward pressures. When expenditure in the coming year is settled at a lower level than in the previous year, and that is the position for Exchequer spending in 1989, the reductions have to be greater again.
The basic point is that the Government, in settling the 1989 Estimates and Public Capital Programme, decided on ways in which £311 million Exchequer expenditure will be saved in 1989. It is not easy to make such large savings, and I have no doubt that we will face criticism from some of those affected by the steps we have decided. We could perhaps have deflected some of this criticism by not publishing the figure, giving only the lower figure of £224 million but that lower figure would have given the House, and the public, a misleading impression of the approach to public spending underlying the 1989 Estimates.
Our aim has been to maintain the downward pressure on the overall level of public expenditure without restricting the access to public services of those groups in our society who must turn to the State for support, and without reducing the effectiveness of our economic development policies. We intend to continue to improve the efficiency and cost-effectiveness of public expenditure while ensuring that the quality of public services and particularly social services is preserved.
Over the last two years we have made significant progress in reducing expenditure. Based on the latest expenditure and GNP figures, total Exchequer expenditure was 53.6 per cent of GNP in 1986. We reduced it to an estimated 50.3 per cent of GNP in 1987 and this year it is budgeted to fall to 49.1 per cent of GNP. Given expenditure savings the outturn for this year will be a bit lower. The Government are confident that the expenditure levels reflected in the 1989 Abridged Estimates Volume and Summary PCP will ensure a further fall in the expenditure-GNP ratio for 1989.
During this debate other Ministers will comment on what the 1989 Estimates mean for their expenditure areas, so I will confine my comments to the general picture and areas which are my direct responsibility.
In examining the Estimates this year the Government again paid particular attention to departmental administration budgets. Travel and subsistence allocations have been very tightly drawn and Departments and public service agencies will have to ensure that only necessary travel is undertaken, and on the most economical basis possible.
The budgets for office machinery and computerisation were also closely scrutinised. While the Government sees computerisation in the Civil Service playing a key role in delivering Government services in a more cost-efficient way, it, like any other investment for which money has to be borrowed, must be looked at in terms of the benefits it brings. Equally importantly, it must be geared to the capacity of the organisations involved to make the changes that effective computerisation demands.
Savings are also being made next year by curtailing maintenance work on Government property and by transferring responsibility for contract maintenance work from the Office of Public Works to individual Departments.
We have also decided to introduce from January 1989, fees ranging from £25 to £75 for first appeals to the Commissioner of Valuation in respect of his determination of the rateable valuation of property and also to introduce a flat rate charge of £20 for all applications for revision of the valuation of a property. The introduction of these fees is fully justifiable. The cost of the valuation process is some £3 million annually and it is time that those benefiting from it contributed something to the cost of the service provided. The fee income will only recover a small proportion of the cost of the service.
Turning to public service numbers, the Government have decided that public service numbers policy in 1989 will follow much the same lines as in 1988. It will remain the case that no vacancy in the Civil Service will be filled without the consent of the Minister for Finance, and that no vacancy in any other area of the public service, excluding the commercial State bodies, may be filled without the approval of the Minister responsible with the consent of the Minister for Finance.
The early retirement terms on general offer to all personnel aged 50 and over in the Civil Service, health boards and non-commercial State bodies will not apply in 1989. People have been told that they must make up their minds on whether they wish to apply for early retirement and, if they do, that they must have left the public service by the end of the year.
The redundancy terms will be offered in 1989 in specific areas only in the public service where surplus staff have been identified. The result is that the requirement for early retirement payments is projected to fall from £80 million in 1988 to £25 million in 1989. The Estimates volume provides accordingly.
The strong budgetary position in 1988 has made it possible to meet part of the 1988 exceptional lump sum redundancy costs from normal Exchequer sources while keeping well within the overall budgetary targets. For this reason it was decided to defer to 1989, £25 million of the advance surplus income payment which the Central Bank was due to pay to the Exchequer in 1988. The Central Bank have agreed to this arrangement. This deferral does not change the total amount which the bank has agreed to advance the Exchequer to finance early retirement payments. Only the timing of receipts from the Bank will be changed.
The repayment terms which will apply to the £25 million advance surplus income payments in 1989 will be the same as applied to earlier surplus income advances. The advance will be repaid, after a one year moratorium, by way of 4 equal annual deductions from the normal surplus income payments due by the bank to the Exchequer. These arrangements with the Central Bank will not affect the normal payment of surplus income which would be due to the Exchequer from the bank in 1989.
As regards the Exchequer Pay and Pensions bill, the allocations for Departments for 1989—shown in the Estimates Volume and totalling £2,948 million — make allowance for the cost of the second general increase under the Public Service Pay Agreement which is due to be paid to most public servants from 1 January 1989 and averages about 2.5 per cent. Low inflation, coupled with the tax concessions granted in the 1988 budget ensure that this pay increase will result in a further real improvement in the living standards of public servants. The total cost is £70 million. The Estimates also make allowance for the cost of special increases under the 1986 PSPA which are already in the process of being paid.
Clause 3.2 of the 1987 Public Service Pay Agreement sets out a framework for the implementation of new special pay increases. That clause provides for the payment of 40 per cent of such increases from 1 July 1989, but includes a statement that if the Government consider that these payments would have such serious financial and budgetary consequences as to put at risk the central objectives underlying the Programme for National Recovery, they shall consult with ICTU by 1 May next. The Estimates volume does not include provision for any such further special pay increases. While it is too early at this stage to speculate as to eventual cost of these claims, it is clear that significant costs will be involved. My Department are continually monitoring the situation, and the Government will consider the whole question of the payment of special pay increases in settling the 1989 budget.
The public expenditure plans for 1989 — set out in the Estimates and Public Capital Programme — represent a further positive step in this Government's strategy to revitalise our economy. They will build on the progress we have made over the past two years. They will continue to improve domestic and international confidence in the management and direction of the economy. Indeed, we can view the commentary on Ireland in the European Commission's Annual Economic Report, to which I referred earlier, as further endorsement of the correctness of this strategy. The report recognises that the prospects for growth are "brighter than for some years". Nevertheless, it says we should continue to give precedence over other considerations to the process of budgetary adjustment.
The reaction of commentators to the Estimates has been mixed. Some have argued that the savings are too great; others that they are too small. The argument that the savings are too small relates to the size of our public debt and the present level of taxation, both of which give legitimate grounds for concern.
It is easy to draw up a notional budget table for 1989 and to form a view on the scale of savings that should be made from, say, the point of view of a high rate taxpayer hoping for a large cut in his tax burden, or from that of someone concerned solely with financial markets. The Government are conscious of these considerations. But they must also be conscious of social and economic considerations. Overall we have reduced expenditure wherever we felt that the economic and social consequences would not be unacceptably harsh. We have been highly conscious of the need to protect the less fortunate.
We have struck a balance between financial considerations and the other factors I have mentioned. I believe that we have got the balance right. Indeed, to judge from the performance of the market in Government paper, the financial markets are satisfied with what we have done.
Anyone who argues that we should have effected more savings should say where we should have done so. Anyone who says we should have achieved less savings must either accept that taxation would have to be increased on a wide basis, affecting those on moderate incomes; or that the public finances should be allowed to deteriorate, with all that would imply for interest rates, confidence, and, quite soon, jobs.
I look forward to the debate to take place over the next few days and hope it will be conducted in a constructive, realistic manner. On the basis of the amendments tabled to the motion I believe it will be conducted in that manner.
I commend the motion to the House.
(Limerick East): I move amendment No. 4:
After "Programme" to add to the Motion:
"published by the Government on 18th October, 1988. In noting the publication of the 1989 Estimates Dáil Éireann draws attention to the fact that they present only one part of the budgetary and financial picture for 1989, and resolves to have a full debate on each estimate as amended, as soon as possible after the 1989 Budget".
The 1989 Abridged Estimates are surprising. Despite a long sequence of leaks on the part of Government Ministers and off-record press briefings suggesting swingeing public expenditure cuts, when the Abridged Estimates for 1989 were published on Tuesday last they arrived more with a whimper than a bang. They are surprising for another reason. Progress made by the Government in the last two budgets in reducing the Exchequer borrowing requirement and moving toward stabilising the national debt/GNP ratio was achieved principally by cuts in public expenditure. If similar progress is made in the 1989 budget it will be done not by cuts in public expenditure but by increasing the amount of revenue collected by the Exchequer from taxes, levies and miscellaneous charges. If this does not happen the Exchequer borrowing requirement will remain too high in 1989 and the prospect of stabilisation of the debt/GNP ratio will recede.
I agree that there are real reductions in the funding of some Government programmes in these Estimates but the ground gained is lost by real increases in expenditure on other Government programmes, principally those with a large pay bill content.
First I should like to discuss the overall impact of these Estimates. Then I should like to examine the allocation for some Government Departments and individual programmes together with the effect of the allocations made on the delivery of services. Finally I should like to suggest what should be our general approach in the medium term.
In the press statement which accompanied the publication of the Book of Estimates the Government claimed credit for expenditure cuts amounting to £311 million. That figure is based on the extra expenditure required to fund all Government programmes had the Government taken no action in this Book of Estimates or in previous budgetary estimate campaigns. Immediately we see that political credit is being claimed again for ground won previously and that the real benefit of the cuts amounts to £224 million rather than £311 million. Eighty-seven million pounds of the claimed expenditure cuts disappears like last year's snow. The £224 million of expenditure cuts claimed for these Estimates consists of £118 million on current spending and £106 million on capital spending. They are significant savings if real but on examination these savings, too, begin to melt.
Let us look first at two major items on the current side. This year the Government introduced a voluntary retirement scheme for public servants. This led to public service pay bill savings by reducing the overall number of public servants. However, it had two cost elements, one immediate, the provision of lump sum gratuities to those who availed of the scheme and one progressive, the cost of ongoing pensions. The Central Bank provided the money to fund the lump sums. This was done, not by means of a loan or a grant, but by the Central Bank advancing £80 million of accrued profits to the Exchequer for this purpose. The Minister, in his speech, has amended this figure somewhat. The Government's early retirement scheme will continue next year but at a reduced level of activity. The lump sum cost in these Estimates is £25 million so this is the amount that the Central Bank will advance in 1989.
A cut in public expenditure of £55 million is being claimed as a consequence but there is no cut, nor is there any saving to the Exchequer because the Central Bank have provided the money for the purpose of the early retirement scheme only and will not advance this extra £55 million to the Exchequer for other purposes in 1989. It is quite proper to present this in the Book of Estimates but it is sharp practice to claim that it represents either a cut in public expenditure or a saving to the Exchequer.
When we examine cuts in the Office of the Minister for Finance, the amount at the disposal of the Minister from expenditure arising from the national lottery is £40 million, a reduction of £20 million on this year's figures. This year's figures, because of delays in gearing up for the expenditure of lottery funds, contained a carry-over from 1987, together with the expected disposable profit from 1988. The 1989 Estimate figure is a one year figure and this explains the reduced Estimate. It is quite properly calculated and presented but to claim it as a reduction in public expenditure for the purpose of fiscal correction is nonsense.
These two spurious cuts, one on the lump sum provision for retiring public servants and the other on the saving on the lottery, eliminates £75 million of the claimed savings of £118 million on current expenditure, leaving a net amount of £43 million. The plot thickens, however, when this is further examined. The 1989 Estimates, as published, represent reductions or increases on the 1988 Estimates as published. It has been clear, however, from mid-year that the 1988 outturn will be lower than the 1988 Estimate by between £50 million and £100 million or, having listened to the Minister today, significantly more than £100 million. If we take the main figure for the purposes of examining it, of £75 million — although the Minister's speech suggests that the figure is far higher — we see that instead of a saving on current expenditure Estimates there will be an increase in current expenditure next year over the 1988 outturn. That is not progress.
I should now like to examine the savings claimed on the capital side. The total, according to the Government press statement, is £106 million. This represents the Government funding of the capital programme but it overstates, by £49 million, the cut in expenditure on the capital programme. The Government have allowed certain State-sponsored bodies to increase their borrowings to fund their capital programmes by a total sum of £49 million. This borrowing is underwritten by the Government. What is really happening is that £49 million has been shifted from the Exchequer borrowing requirement to the public sector borrowing requirement and the real cut on capital spending, on the face of it, is £57 million rather than £106 million. Here again, however, and for the same reason which I pointed out when I was discussing the current Estimate, the national lottery plays a part.
In 1988, so far, a sum of almost £34 million has been included in the capital Estimate. In the 1989 Estimate this has been reduced to £15 million. This accounts for £19 million of the purported capital savings but, as in the revenue side of the Estimate, there is no corresponding increase of £19 million, the reduction claimed does not take place. A cut is a cut is a cut and a saving is a saving is a saving but the whole economic debate has been about the size of the gap between expenditure and income. If £20 million drops off the expenditure side and is matched by £20 million dropping off the income side then the gap is not closed by one iota. That is what has happened in the case of the £55 million on the current side for lump sums for retiring civil servants. That is also what happened in the case of the £20 million for the national lottery funds which are for one year rather than for two. This is what happened on the capital side when the national lottery amount is reduced from £33 million down to £15 million. When the Minister claims a saving of £19 million there is a corresponding reduction on the revenue side of £19 million also and the gap is not closing. Consequently, on the capital side, the purported savings of £57 million on the public borrowing requirement is reduced to £38 million.
Now, it is evident that Exchequer capital spending will fall short this year of the Estimate. By the end of September, according to Department of Finance figures, £181 million out of an allocation of £332 million had been borrowed. Three-quarters of the year is gone and half the money is left. I believe that the 1988 capital outturn will be significantly less than the Estimate and I expect the 1989 public capital programme to involve an increase in expenditure over the 1988 outturn. If there are any savings, they are in the area of the difference between nominal increases and increases which are indexed for inflation. There are real increases in expenditure on the capital and on the current expenditure side over the expected 1988 outturn. The Minister's speech today reinforces this opinion because he is now claiming a 1988 outturn which is lower than I expected, based on the information which was made available by the Minister to the public previously. So much for the overall expenditure cuts and savings achieved in the Book of Estimates.
The progress begun when Fianna Fáil adopted the Fine Gael 1987 budget and continued through the 1988 budget has not been maintained in these Estimates. For years now we have been bridging the gap between expenditure and revenue with a level of domestic and foreign borrowing which is unsustainable, leading to an accumulated national debt which is also unsustainable. There are, of course, two alternatives to borrowing if we wish to close the gap, namely expenditure cuts or increased revenue. We can cut or we can tax or we can borrow. If we want to reduce borrowing we can either cut or tax. If we fail to cut and we will not or cannot borrow we can only tax. That is the foundation on which the Minister is building the 1989 budget.
My primary concern with this Book of Estimates is that the Minister and the Government, having failed to cut, will tax instead. There is evidence in the Book of Estimates which suggests that this will happen.
There are real cutbacks in programmes in some Departments, even though the real increases in expenditure in other Departments cancel these out. Where programmes are significantly cut, however the consequence of the policy decision is that the particular level of service will be maintained by imposing charges, which are in effect tax increases. This is true in the areas of apparent large cuts, for example, in the Departments of the Environment, Social Welfare and Education.
The cut in the rates support grant is about 8 per cent. Local authorities will not be able to absorb this and maintain the present level of services. Now, as the present level of services provided by local authorities is inadequate, it is a pretence to suggest that such a cut can be absorbed by further retrenchment by local authorities.
We understand that the Minister for the Environment has informed local authorities of their allocations for 1989. These indicate a cutback in the rates support grant of between 5 per cent and 6 per cent outside of Dublin, but cuts in excess of 11 per cent in Dublin city and county. It will be the responsibility of Fianna Fáil members of local authorities to make an appropriate response to these decisions. They hold an overall majority on most councils. The decision of the Minister for the Environment and of the Government will lead inevitably to increased local charges in local authorities which already impose them, and to their imposition for the first time by the Fianna Fáil majority on Dublin Corporation and Dublin County Council.
This does not cut public expenditure, it increases taxation.
The Department of Social Welfare show cuts of £89 million. Much of this can be explained by the prediction that the live register of unemployed will be 236,000 on average rather than the 253,000 estimated this year. I have no doubt that this figure will be achieved, if the Minister for Social Welfare continues to chase persons off the live register, through job search programmes and if his colleagues in all Government Departments continue to urge our unemployed young to emigrate, by directly advocating it, by preaching a message of hopelessness and despair and by failing dismally to fulfil their job creation targets and by certain members of the Government, principally the Taoiseach, and Minister for Foreign Affairs, giving the impression that they are the official emigration agents of the United States and Australian Governments.
This live register figure will not be achieved by the creation of jobs and this Book of Estimates will make matters worse rather than better, as those areas of expenditure where real cuts are proposed are those by in large with the greatest job creation linkage.
In the Social Welfare estimate there is a similar trend to that already noted in the Department of the Environment. Where real cuts take place, they are replaced by increased charges, which are, in effect, taxation increases. The ceiling for employee PRSI payments is raised by £500; and for employer PRSI, the ceiling is raised to £20,000. The Minister has not given us a figure for these increases. He may do so in his reply and I understand that this will lead to an extra £70 million flowing to the Exchequer. These are, in effect, further tax increases of the worst kind which load a further burden on the shoulders of the PAYE worker and his employer with all the other attendant ills which follow on, extra increases in personal taxation which on numerous occasions in this House both I on behalf of Fine Gael and Deputy McDowell on behalf of his party, have pointed out to the Minister for Finance.
The Minister for Social Welfare claims that this year's imposition of PRSI on the self employed will lead to an increased return in 1989. I am sure he is correct as it will apply for a full year and at a higher rate. It is another example of increased taxation rather than reductions in public expenditure.
The Department of Education Estimate shows increases in teachers' pay which are due to technical pay roll circumstances, rather than any increases in service. There are two cuts however worth mentioning, one in higher education and one in school transport. The cut will be replaced by increased school bus charges and by a 5 per cent increase in third level college fees, increases in charges equivalent to taxation increases.
The Government may continue in 1989 to make progress towards stabilising the debt/GNP ratio. The Minister has claimed that it will and any time the Minister has stated something categorically in the House, he does not mislead the House. If the Government do make this progress it will be done by tax increases rather than by expenditure cuts, and from the evidence in the Book of Estimates some of these tax increases will be highly objectionable.
Is the Minister signalling to me that he is hitching a lift to another climate and will not be around when these predictions come true?
The Minister may decide to further increase taxes on budget day. Last year he imposed increases of almost £100 million but gave back £91 million in income tax relief.
In the absence of progress being made by either expenditure cuts or increased taxes on budget day, I presume the Minister for Finance is relying on bouyancy of revenue accruing from existing taxes to close the gap between expenditure and revenue. There is evidence from the quarterly returns that there is bouyancy in income tax, VAT and excise receipts.
The prospect is complicated by the success of the tax amnesty. We do not know whether it will lead to increased revenue bouyancy in 1989 by bringing extra taxpayers into the revenue net, or whether it will reduce bouyancy because it has brought forward into 1988 payments of arrears, which would be made in any event in 1989. I invite the Minister to comment on this.
If the Minister is confident that revenue bouyancy will do in 1989 what expenditure cuts did in 1987 and 1988, it still leads to difficulty.
It is only of academic interest to the tax paying rabbit, whether he is caught in last year's snare or in one newly set on budget night. The overall adverse economic effect is the same, regardless of how the increased tax revenue comes about, and while one tax may have a different economic effect than another, a Minister who relies on bouyancy alone does not control the effect of his impositions.
This Book of Estimates does not change, except in a marginal way, the pattern of public expenditure. Many programmes are underfunded, but they lie there in wait, some of them with voracious appetites, for the spending Departments to win back the ground lost to the Department of Finance over recent years. If the state of the public finances improves next year it will be because of new tax impositions, together with extra yields from existing taxes. While this approach may improve the economic statistics, it will act against the creation of jobs.
As well as the general pro-taxation and anti-job trend that underlies this Book of Estimates, I would like to note one other area, where in my opinion the Government have not only let the country down, but have let themselves down.
I have spoken in the past of the necessity of reducing factor costs in our economy. I note some progress has been made by the Government in bringing electricity costs, and telecommunication costs into line with our European neighbours. Transport costs however are totally out of line. We are on the margins of Europe far from the market place and our road network is a national disgrace.
This year the Government announced the establishment of a main roads authority and appointed a board and chief executive. The 1988 Estimate proposed a figure of £120 million for roads; the 1989 Estimate proposes the same figure, a reduction in real terms. Worse than this, however, is the fact that the Government have foregone at least £40 million of EC funds available for roads by not providing matching funds in the Estimates. We need a road network superior to those of our European neighbours to keep us competitive. In the years after 1992, when the channel tunnel is completed we will be the only European island nation. Not only will we need low cost access transport to Europe but an efficient cost effective road network especially to our ports.
The treatment of investment in major roads in these Estimates is tantamount to criminal negligence.
I cannot understand what the Minister foc the Environment was doing at the Cabinet table unless he was trying to impress the Taoiseach that he was the best man around for cutting in case a job vacancy might occur in the near future, because he certainly was neither defending his Department nor improving the services and neither was he acting in the national interest in the job he is in at the moment.
The national lottery looks after County Mayo.
And other places.
(Limerick East): Except East Limerick. I would like, in conclusion, to contemplate our approach to controlling the public finances over the next five years or so. The Minister has stated that the objective of the Government is to stabilise the debt-GNP ratio in the 1989 and 1990 budgets. He has said that on EBR of between 7 per cent and 5 per cent of GNP will achieve this, and that his opening position for 1989 will be significantly above the higher margin.
I am referring to a speech the Minister made some weeks ago and not today's. The Minister slightly amended the situation today but, as presented, it corresponds closely enough to what he said some weeks ago. The ESRI believe that an Exchequer borrowing requirement of less than 5 per cent is required to stabilise the debt. Let us suppose we reach the necessary target, whatever it is, in the 1990 budget. What then? We will have an accumulated debt of more than £27 billion which will no longer be rising as a percentage of GNP, but which will still be rising. Will we continue with present policies, with a cut here and a tax imposition there, to reduce this to proportions safe from the exigencies of rising international interest rates and world slumps? Are we to continue with cuts, real or imaginary, of £300 million a year for the next 90 years until we have paid off the debt? That is what it takes to pay off a debt of £27 billion in modules of £300 million. It would take 90 years to do it. That is not a great financial prospect.
I suggest this is obviously a nonsensical approach but have the Government a view on this matter? Is there life after debt stabilisation? When do the Government expect that this House may look at Estimates objectively, decide the level of service we require in any area and provide the funds necessary to deliver that service? I believe and I strongly advocate that the Minister accepts that it is time to get back to a more traditional approach to the public finances and to accept that there is a real distinction between current and capital expenditure. I believe that if stabilisation of the debt-GNP ratio is around the corner we should accept the elimination of the current budget deficit as our medium-term target. I believe that this generation of politicians should impose upon themselves the discipline of a balanced current budget and agree to achieve this over a period of three to four years and maintain it subsequently.
It is politically easier to cut capital expenditure than to cut current expenditure but the effect of continual capital cuts is very damaging to the economy. The capital budget has been devastated over the past seven years with very damaging consequences for the economy. To cut capital investment to enable us to continue to fund current spending programmes, and to a large extent this is what happened in last year's budget and in the previous year's budget, is a recipe for low growth in the economy.
I believe it is time for us to reconsider our position, to re-establish the real distinction that lies between day-to-day spending and spending for investment purposes. While we should continue with a clear objective of balancing the current budget in the medium-term, we should at the same time begin to free the capital programme from its present enslavement to debt control so that decisions fundamental to the development and growth of the economy can be made. I would advocate that the Minister consider what I have said and, if possible, include it as part of Government policy objectives.
I have moved our amendment to make it clear that Fine Gael are noting the publication of these Estimates but that does not imply an acceptance of the Estimates. The board of directors of a company would not make a decision after seeing only one side of a balance sheet, that is, the spending side, without a clear view of the income side. Fine Gael will not do so either. We want the fullest possible opportunity to debate the individual Estimates at the first available opportunity after the 1989 budget.
The publication by the Government of the Estimates for the Public Service, for 1989 and the Public Capital Programme for 1989, has occurred yet again in October of the year preceding the budget to which they relate. This is commendably early and I congratulate the Minister for Finance on that account. By dividing the budgetary process into two distinct parts and by separating public consideration of those parts by a number of months there are a number of effects, one of which is that there is more room for closer scrutiny of each individual part in its own context. I hope this will mean there will be more room for closer scrutiny of the terms of these Estimates in the next few days and weeks in this House.
I would point out however that a motion to note the Estimates en bloc is not a very satisfactory method of considering their content and that is why I put down on the Order Paper an amendment to the Minister's motion in similar terms to the one moved by Deputy Noonan, to point out and emphasise that these Estimates only derive their meaning and significance from the other part of the budgetary process which is the statement of the Government's budgetary intent which will happen in the early portion of next year. Many of the implications of these Estimates are entirely unclear as of now. We depend not so much on the substance of what is printed in the booklet supplied to the Members of this House and members of the public but rather on what has been leaked about them by members of the Government in press briefings which are not the subject matter of a White Paper or close public scrutiny or debate.
For instance, we learn informally now that it is proposed to increase the ceiling for PRSI from £16,200 to £16,700. We also learn, perhaps correctly or incorrectly, that it is proposed to increase the level of PRSI for employers up to a figure of £20,000. Those amount to increased tax measures and taxes on employment. I will come back later to their effect but let me say this: there is no point in discussing a Book of Estimates in terms which are merely arithmetical when subtending them and justifying them are steps already decided upon which have profound effects and will have profound effects on the pattern of employment in this country. Therefore, I believe that if we are to have this annual debate, noting the Estimates as published in the autumn of the preceding year, then the very least we must do is to have an accompanying White Paper to explain what decisions have already been made which back up those Estimates and to flesh them out in a way which makes sense. It is ridiculous that we have column after column of figures thrown at us which require, effectively, to be decoded to understand their significance.
The Department of Finance, if they are asking us to note these Estimates, and I presume that intellectually means that we come to terms and grasp their meaning and importance in those circumstances owe this House and the Minister for Finance in particular owes this House the duty to come to this House with a White Paper accompanying the publication of the Estimates. It was done in the past in some respects more or less as part and parcel of the budgetary process. Now that the process has been divided we find ourselves with Estimates standing by themselves unexplained and we are looking through a glass darkly at them for their significance.
In the area of health, for instance, I believe that provision is nominally made for a 2 per cent increase in the amount of the ministerial Estimate but in real terms even on the Minister's account today that amounts to a reduction. Taking into account that public sector pay costs are increasing at a rate of between 4 per cent and 5 per cent per annum, the real value of the part of the health Vote which will be spent on non-pay items will decrease by between 2 per cent and 3 per cent next year. That is only one instance of a feature that runs throughout the entirely of these Estimates, namely, that we are proposing to spend more money in 1989 in delivering less services by the same bodies than in 1988.
The level of public sector pay which has increased at a faster rate than the rate of inflation is artificially reduced by the £80 million spent by the Government on the public sector early retirement scheme which has reduced the numbers on the public sector payroll. I also note that the cost of pensions has gone up by 8 per cent this year. It is legitimate to take a look at what the Minister refers to in his speech as the real increase in the value of public sector pay. Why is an insolvent employer offering real increases to its employees when it proposes to do less with them, to provide less services by them and to derive less benefit from them in the next year? It is fine for the Minister to say he is glad to note a real increase in the value of public sector pay because the increases arranged in last year's budget and the increases provided for in the Programme for National Recovery exceed the rate of inflation. They are only part of the story because the special increases that are coming through match those increases. As a result we will find ourselves in 1988 and 1989 paying more and more to the public service generally to deliver less and less.
For instance, in the Department of Agriculture and Food salaries, wages and allowances for the coming year are up 5 per cent, or £3 million. This increase accounts for all of the nominal increase in expenditure in that Department. In crude terms it will cost 5 per cent more in salaries, wages and allowances to deliver about 2 per cent or 3 per cent less in terms of real services to agriculture next year. The same applies in the Department of the Environment. The total budget is down by 11 per cent, but the cost in terms of salaries, wages and allowances is only down by 1 per cent.
In Vote 10, Office of Public Works, there is no change in salaries but that office is spending less and doing less than it did last year. Expenditure is down 11 per cent but the same amount is being spent on salaries. Another example, to go from the large to the small, is the Army Pensions Board where a 6 per cent increase in wages, salaries and allowances occurs in the context of a 3 per cent increase in the nominal value of the pensions administered. Allowing for inflation, it will cost 3 per cent more to deliver the same real value of Army Pensions next year.
The Government have told us there is a 1 per cent decrease in gross non-capital supply services but, as Deputy Noonan pointed out, that is based on a false comparison. Table 5, page xiii of the Book of Estimates, compares an Estimate of £7,189 million for 1989 with an Estimate of £7,244 million for 1988. That would be all very well if we did not know the real figure for 1988 is likely to be £7,150 million, and therefore that this gross non-capital expenditure will be up this year, not down.
Throughout these Estimates and their presentation in public, there has been a sustained effort by the Government to portray the effect of these Estimates as entailing cuts in public spending. I agree with every word spoken by Deputy Noonan, and I will not repeat what he said or attempt to parallel what he said by giving other examples, but the fact is that this set of Estimates does not of itself amount to an independent and selfstarting campaign in 1989 to reduce public expenditure or to make real savings which were not already budgeted for. In reality, the real cuts are arguably much less than £100 million and the notional figure of £311 million trumpeted about by the Government is in the main designed to whet the appetite of the business community who were led by the Government to expect a major drive for economy in the public finances. That drive for economy has not occurred this year.
When you look at the public service in this Book of Estimates, the one thing you can say with confidence is that it has all survived more or less intact. The question then arises: what do the Government have in mind as the strategic view of the service, its structures, and the impact the public sector is to have on Irish society as time goes by? Is it, as Deputy Noonan suggested and I am loath to believe, that all these Departments hope to winter out this particular storm and re-emerge next year if circumstances are better, and make the same mistakes, again waste money and use the same resources to recreate many of the problems that economies have overcome in the last few years?
There is no evidence of any strategic direction in these Estimates. Their effect is that the Irish taxpayer will be charged more by the public sector for delivering less and there is no indication that the Government understand the opportunity they are missing to lay the foundations for a radical reform of our system of taxation. I heard what the Minister said about the tax burden in Ireland and I agree that their is some naiveté shown by those who say that the burden of taxation in Ireland, in European average terms, is excessive. It is true that our tax burden as a percentage of gross domestic product is not abnormal in European terms, but that simple truth tells a much darker and deeper lie. The structure of our taxation system is one of the most anti-work, antienterprise, anti-investment and antiemployment ever contrived by any Government in any country. The Minister's statement, which goes back to the old hoary Fianna Fáil chestnut that their aim in life is to put two-thirds of the taxpayers on the standard rate, must be exposed and thrown out of the water. It is not an aim worth pursuing. It is an aim that can be achieved by very marginal tinkering with the tax rates as they stand and will not, if achieved, amount to any kind of major reform in the taxation system.
Let us remember that when this Government took office more than 40 per cent of the people were paying the higher rate of tax and Fianna Fáil gave an undertaking to reduce that figure to 33 per cent during the life of this Government. That is a commitment to change the marginal tax rate of one taxpayer in ten and does nothing to face the real problem with Irish tax, that is that the structure is hopeless from beginning to end. One of the chief failings must be that we have contrived a tax system where a young single worker is given half the tax allowances and half the tax bands of a married person — that was the Government's response to the Murphy tax decision. It was wrong then and it is wrong now because it means that to give a comfortable taxation existence to a married couple we give only half the allowances to a single worker. He must be put through all the tax bands at an artificially fast rate while, at the same time, we force him to pay exorbitant tax levels on his earnings.
Let us put on the record of this House what we have achieved. We have brought surtax to the masses. We have brought about a tax system where everybody pays 7¾ per cent PRSI on every penny of their earnings. After the personal allowances, every taxpayer is paying tax at the rate of 42 per cent and reaches an all-time high of 65 per cent at the average industrial wage. The consequences of that are that it costs an employer £3.29 to give £1 take-home pay to an employee. That is one of the chief reasons why this country is failing to create employment. The incidence of taxation on employment in Ireland is not simply a matter of the gross take of income tax; it is the structure of income tax itself.
I wish to say on behalf of this party that I totally reject the notion that the system of taxation should be such as to give double the allowances and double the bands to a married couple as opposed to a single person. It is the young single people who are leaving this country to get a fair return for their efforts. It is not fair or right that somebody earning less than the average industrial wage has to pay more than £2 in every £3 at the margin to the State and that he or she costs the employer, over the whole range of their income, £2 for every £1 taken home. That is anti-work taxation and can be changed without a huge alleviation of the tax burden in terms of its relationship to gross domestic product.
I want to say this to those who talk about there being a trade-off between social justice and high taxation. That is one of the great falsehoods being propagated. It is being propagated from pulpits and from editorial chairs. There is not a co-relation between high marginal rates of tax which make the average industrial worker pay two thirds of his marginal earnings in tax and our commitment to tackle social justice; quite the reverse is the case.
I should like to make it clear that we take the view that social justice without a growing employment base will never be achieved and that no amount of redistribution, no amount of redistributive impetus in Irish politics, will achieve social justice if the bottom line is that this country consigns a growing percentage of its people to the dole queue or the emigrant ship. I looked at the Minister's speech to try to find even one passing reference to the whole concept of emigration. Of course, there are happy statistics which can be conjured up to suggest that there are more people at work in Ireland at the moment but what cannot be denied is that the live register of unemployed has only been reduced in the context of a huge haemorrhage of our workforce to economies which will offer them remunerative work in exchange for their presence and their contribution and at much lower tax rates than ours.
I reject the concept that social justice in Ireland is advanced by the notion of a highly progressive tax system which hits work above everything else. There is no strategic justification now for further increasing the employer tax burden to £20,000 on PRSI and the employee tax burden to £16,700 when the effect of those measures will be to make it more difficult to reward workers for their efforts and make it less likely that people will be employed here. Those measures are retrogressive and a mistake. The fact that they are not spelt out in any formal shape in the Estimates is an indication of how futile it is for us to debate columns of figures while keeping the implicit decisions in our inside pockets.
There is a consensus in the House that there should be tax reform and the Minister adverted to that in his speech. There is a consensus in the House that tax reform cannot take the form of a simple ‘Lawsonian' tax giveaway. This country cannot afford tax breaks which are not funded by public expenditure cuts, widening of the tax base nor restructuring of the individual shape of the tax burden on corporate and income tax. That is clear and I do not think it has to be stated again and again. It is wrong of the Minister for Finance to suggest that those who propose tax reform are living in a fantasy world because there is no alternative to our system of taxation. There are plenty of alternatives to the system of taxation we have and virtually all of them will improve the climate for employment here. By doing so, virtually all of them will be moving in the direction of increasing rather than decreasing social justice.
There is a consensus in the House that the overall level of public expenditure explicit in these Estimates is at least not too much and not excessive. I believe there are Members who, like me, would take the view that on this occasion we have missed the opportunity to make further savings of more radical kinds. There is not, however, any agreement that the Government are getting the Irish people value for their money. A strategy such as that being followed by the Government, which is being copperfastened by the Book of Estimates, one which leaves in place the overheads in terms of public service numbers and pay, in terms of health boards, semi-State agencies and public sector companies but cuts the level of State sector output in terms of services, is a strategy that is fundamentally weak and flawed.
I believe the Government have lost their way and have lost momentum. That is a pity because they have not taken on board the fact that they have a unique parliamentary position which no Government in the modern history of the State have had in that they enjoy general parliamentary support to radically transform the tax system and the nature, size and impact of the public sector in the Irish economy. It seems to me that the permanent Government have won out. There is ample evidence that the permanent Government, the Civil Service, have triumphed in these Estimates which represent what looks very dangerously like the high tide mark of Government determination in this period of office. That is what I fear and I do not make that statement with any degree of anticipation or pleasure because I genuinely believe that this Dáil is unique in that a great majority of its Members are prepared to pull together in the same general direction. On this occasion the Government have failed to avail of the opportunity that was presented to them and have, on the contrary, decided to succumb to what I believe is a combination of laziness, departmental thinking, electoral jitters and — I have to say this as a compliment to the Minister — a sign that the Minister is relaxing his grip on the tiller to go elsewhere.
The other members of the Government who have not demonstrated the same singularity of mind and the same determination as the Minister for Finance has in playing his part in what should be a team effort have won out in the context of these Estimates. Their lesser will and determination and willingness to be deflected has won.
Where there ought to have been, if not the substance this year, a map for future years of root and branch change in the public service, there has been what I would term budgetary bonsai. Where farreaching reductions in the amount of services have been made inevitable, as in the areas of health and local government, the Government seem content to allow other bodies, the hapless health boards and local authorities, to give expression in whatever way they can to the implications of the cutbacks provided for in the Book of Estimates. The 8 per cent reduction in the rate support grants to local authorities is a case in point. I note that it is to be concentrated on the Dublin area, presumably on the basis that somebody in some Department has decided that if Dublin city and county can do without charges, they can do with a greater proportion of the cutbacks. The implication of that is, as Deputy Noonan pointed out, that they will be obliged to choose between dismantling their system of local government and local administration in a very substantial way or, on the other hand, to renege on their electoral promise, a Fianna Fáil electoral promise it should be noted, not to introduce such charges and to abolish them where they exist.
It seems clear that the strategy adopted by the Government is to abdicate wherever possible from the real political implications of the financial decisions that are being made. That is typical and it speaks volumes of a Government who are unwilling, even in the widest ideological sense, to map out a real strategy for the country. The Programme for National Recovery was a mishmash of obfuscation. Yet again the trade unions and the Government are at loggerheads with each other in relation to the implications of Government cutbacks as they affect the guarantees apparently given to the trade unions in that agreement. It seems to me that the agreement was always devoid of a strategic sense. It was always flawed and self-contradictory but now we are beginning to see the extent of those inherent weaknesses in it.
The sad fact is that a Government who do not have a direction and who never sought any mandate from the people for any direction now have to resort to mere figures concerned with gross job creation as an alternative to mapping out a strategy for our economy. Where are we going to be in five years' time? What number of public sector agencies will be in existence in five years' time? Must we live in a world of perpetual intellectual striptease where we find, on the front page of The Irish Times today, for instance, that a decision has been made to get rid of the Great Southern Hotels? Was that decision made on foot of a coherent view that the State should not be the proprietor of a hotel chain? If such a view is held should the State be the proprietor of an airline, a shipping line or a bus service? Is there any indication whatsoever of a strategy in any of the measures which are set out in this set of Estimates?
I note, for instance, that the allocation to CIE has been reduced. Why? Is it because you can abdicate responsibility in the circumstances to the board of a semi-State company and let them take the consequences and the political flak for what is set out in this Book of Estimates? What is the thinking behind that reduction in support to CIE? Are services to be lopped; are people to be sacked or is a portion of that company to be privatised? None of these matters are made clear because this Government are a Government of all the cliches and none of the purposes which is demanded of a country that is emerging from a crisis.
It is true that this Government have in many respects controlled public expenditure and have succeeded, because of the consensus in this House, in doing so with relative political ease. I know that because I speak as a member of a party who seem to have suffered in opinion polls for doing so. Deputy Noonan's party do not seem to be doing great in the opinion polls either as a result of forming part of that consensus. It is not as if at this stage there is some pressure on the Government or on supporters of the Government to trim their sails, to deflect them from a sense of purpose or to prevent them from articulating a strategy for this country. There is no political pressure bringing about the weakness that we see in this Book of Estimates. It is quite the reverse. There is every opportunity to move forward politically. This Government have every opportunity to spell out a strategy. There is every possibility, for instance, in relation to the State sector to mark out a five year programme of privatisation and to specify the industries this Government propose to dispose of. Nobody, even in Government, is saying that that should not happen. There is an unwillingness to adopt anything that looks like an ideological view lest the mask of cordiality to the trade union movement should slip from Deputy Haughey's or Deputy Ahern's gaze when they deal with them as social partners in the context of the Programme for National Recovery.
There are signs that this Government are relaxing on their oars and that the opportunity to dramatically alter the impact of Government in our society, of the State sector on the economy, and to come to grips with re-organising and getting good value from the public service is being lost. The public sector requires management and a radical willingness to change and to improve it, to end programmes of expenditure which are wasteful or which amount to a transfer of resources to the haves in society rather than to the have nots. None of that is evident here. I thought that the 1988 budget was the first real budget that this Government could introduce and that perhaps they were postponing the spelling out of a strategy for one more year. Now we are getting fairly near the budgetary half way mark of this Government and there is still no indication whatsoever of any of their broad plans for this country or its economy. Apart from vague, wishful statistics about gross job creation in various sectors, there is nothing of substance in terms of the changes this Government want to bring about in the impact of Government, the public sector and the public service on the society in which we exist.
If this is the beginning of the end for decisive Government it is not because pressure from outside the Government is preventing change; it is because those inside the Government are losing heart. I do not want to say anything that sounds negative or that takes away from the sense of public confidence in our capacity to improve our economic existence and to recover our economic independence. I do not want to say anything to undermine those welcome developments of recent years. I want to say that we are not here like children watching the emperor going naked past us. We will point out that there is a total failure of determination implicit in this set of Estimates, that there could have been something much more dramatic and that there still is an opportunity for something much greater. There is an opportunity for this Government to use the consensus they now have to spell out a programme of dramatic reform which will transform this economy in the next three years. There is an opportunity for this Government to seek, across the political divide, consensus in relation to the method in which the tax burden can be internally restructured and widened in its effect.
The revelations in a recent news magazine article about how the Government went about considering the financing of local government are an eye opener to the ordinary person. Instead of finding out from the public and the other parties in the State what was available or what could be done, the Government instead sat around the Cabinet table and exchanged memoranda which were totally cynical and electorally oriented in their deep-seated thinking. They threw away that decision to postpone further consideration of the matter any real capacity to refinance the local government sector in our society. That to me shows a sense of electorally motivated paralysis which it is very sad to see when things are going so well in some senses for this Government.
It is very sad to see this Government having a failure of conviction, a failure of courage and a failure of leadership when all the objective, parliamentary and political circumstances dictate that now is the time for bold decisions, for radicalism and for political courage which will bring about real improvement in this country. As I have said, it will not be as a result of outside pressure that this set of Estimates, and what appears to be the shape of the next budget, will mark the end of decisive government. Unfortunately, all the problems stem from a failure of conviction, a failure of strategic sense and a failure of leadership within the ranks of the Government party.
One can stabilise and reduce the debt-GNP ratio in most economies and at the same time one does not have to drift into a mentality that social equity in society is outmoded and irrelevant to the process. In that framework the Labour Party believe that these Estimates are just no more than a re-enforcement of the mentality that now dominates political society on this island, namely, that any general approach to bringing about a more socially equitable society within the framework of major restraints is outmoded, dated and even harmful to economic growth generally. We do not accept that view. We strongly hold the view that budget Estimates are and can be a very powerful weapon in bringing about, in our economic and social system, a greater equity. We also hold the view that it is possible to have Estimates which simultaneously provide justice to those who are in poverty, to the old, the handicapped and the unemployed. It is possible to bring about that social justice and at the same time stabilise our national debt-GNP ratio.
I and my party do not accept that we are just doomed in a mechanistic kind of way to unending, slice by slice, thoughtless financial cuts, with little care for social equity and social justice. We do not accept that view and we have never accepted it in the context of framing estimates and framing budgets. Unfortunately, it seems that this Government and to quite an extent the two main Opposition parties have succumbed to a policy framework of what one might call Estimates importance — nothing can be done, just cut and cut again. In that process we fail to confront the fundamental problem of poverty. There is not the slightest effort in these Estimates to give even a token acknowledgment to the existence of that crisis in our society as has been amply brought to our notice time and time again by the ESRI and the Combat Poverty Agency.
Let us take the individual Estimates. For example in Education, a substantial Estimate, there is no evidence of concern for those on low incomes for any greater access to full second level or third level education. It is not as if the money were not there. There are no efforts being made, there are no transfers and no change in policy, just simply cuts.
There is no policy to confront the now rampant two-tier hospital care system. If we look at the Estimate for Foreign Affairs, to our shame there is almost a racial dismissal of our obligations to the poorest of the poor in the world. For these reasons and because we are singularly unimpressed by the exercise presented to us today, we in the Labour Party will vote against those Estimates.
A Leas-Cheann Comhairle one of the most astonishing statements in relation to the Estimates appeared in the Sunday Tribune of last Sunday in a report by their political correspondent, Gerald Barry who quoted a source which looks suspiciously as if it were a Department of Finance source, certainly it is in that framework, though I may be wrong. The final paragraph of that report was:
For those involved in the cost-cutting proposals, however, it looks very different. "We have spent the last two years re-asserting the control of the Department of Finance over spending by all departments. It looks now as if that victory, which was absolutely vital, for the good of the country, is beginning to slip away again."
(Limerick East): It is true.
But who said it?
(Limerick East): It does not matter as he spoke the truth. He was an honest man.
Precisely. On the assumption he is a briefing official of the Department of Finance I must challenge what I regard, if it is from the Department of Finance, as the arrogance and the rather specious assumptions behind that statement.
It is now public knowledge, though I did not disclose it, but I have my suspicions as to who did, that the Department of Finance opposed the introduction of the DIRT tax and then when it was finally pushed through they underestimated the yield by £200 million. That was something in terms of Estimates. We might recall also that the Department were unenthusiastic about the national lottery and that when we finally got it through, with great difficulty, they underestimated it by another £50 million. When one considers, too, that the Department had reservations, to use the polite official word, as late as November 1985 about the power of attachment in taxation reforms, one begins to question the assumptions behind the statements made. We have to consider further that in a totally obsessive preoccupation with social expenditure that Department would never acknowledge there was massive ongoing tax evasion and avoidance to the extent of about £350 million a year. The amnesty brought in £500 million this year but the ongoing evasion is about £350 million a year. However, that was refuted and was regarded as a classical crock of gold attitude on the part of those who kept saying that there was 7 per cent of the GNP lost in the black economy and that the money could and should be got. The attitude of the Department was "no, forget about those things, that is none of your business, it is our business. Instead let us concentrate on cutting the Health Vote; we will cut also the Social Welfare Vote and then the Environment Vote. In fact we will cut the tripes out of all social expenditure." That is the name of the game. That is the name of running a finance economy. They have no concern for taxation reform because basically that is a problem for the Revenue Commissioners. That kind of blinkered bias has dominated the Department of Finance. I regret to say that I think the only cure for that mentality is simply to suggest that those who make those kind of statements that I have just quoted should have a career break and live for three years on long-term unemployment assistance. The most they will get on long term unemployment assistance for a husband and wife with two children is £90.40p. After that they might came back as chastened public officials. I say that because I can claim with some validity to be a Deputy who has protected and supported the public service over many years but I have grown increasingly hostile to the substantial elements who regard it as their role in regard to public expenditure to abolish child benefit, as if that was some sort of divine mission. They tried it again this year and they did not get away with it. They proposed to abolish pay-related benefit and they did not get away with it. This year they proposed to abolish fuel vouchers but they did not get away with it. Like last year and the year before they proposed to abolish three months unemployment benefit and they did not get away with it. At least that much of social expenditure is retained. I reject this kind of perverse policy from whatever source, be it public, private or political.
Another reason why the Labour Party are opposed to these Estimates is that there is no increased allocation towards job creation. I was associated with the bringing in of the social employment scheme in the mid-eighties. This Estimate provision has been cut from £39.1 million for 1988 to £38.6 million for 1989. To cut the social employment scheme in a year in which 32,000 people or 650 people a week, predominantly young people, have emigrated and in a year in which we still have 242,000 unemployed, is scandalous. From the IDA, from the Minister and from almost every news bulletin we have an unending public relations hype about the 20,000 new jobs. This must be put into some kind of rational perspective. In 1986 the number of new jobs in manufacturing was 17,662. This year we are going to have 20,000 new jobs which is an increase of 2,300 jobs over 1986, yet the great claim is that the Programme for National Recovery is solely responsible for the 20,000 jobs. If that is so, why did we have 17,600 new jobs in 1986 and 16,500 new jobs in 1985. The wonderful explosion of employment from the Programme for National Recovery is a mirage. I do not cavil at the production of new jobs but if we put the figures in their proper framework the number of new jobs for the past nine months up to the end of September was 14,500 and it will probably work out at about 20,000 at the end of the year. That is to be welcomed but the number of redundancies notified to the Department of Labour in the same nine-month period was 7,738. One cannot talk about job creation if one is not prepared to take into account redundancies against employment creation in a sector. The 7,738 redundancies in the manufacturing sector are statutorily notifiable redundancies where people have been in employment for not less than 12 months. As we know there is a substantial loss of employment in six to nine months and in less than 12 months, so that the actual total of redundancies may well be much higher. There is not real evidence that the Government are tackling the unemployment crisis. To tackle the unemployment crisis we need far more radical investment and taxation policies than are evident at present. We have the opportunity this evening to go into that area which is imperative in terms of understanding the situation.
Throughout the last general election campaign this Government plastered the countryside with posters relating to law and order. I forget the exact words now but I am sure Deputy Noonan as a former Minister for Justice will remember the slogan in relation to law and order.
(Limerick East):“When did you last feel safe in your streets?”.
I remember it well. I remember being belted over the head as we looked at every poster.
(Limerick East): It was not when we were canvassing, anyway.
What has happened now? In my constituency there has been a rapid increase in non-detected crime because there are now unfilled vacancies of some 20 superintendents as a result of the embargo. There are 30 inspector vacancies, 230 sergeant vacancies and effectively there are 280 middle management positions in the Garda unfilled and blocked by the Department of Finance. The Department of Justice do not have the money and the Minister for Justice is a bit paralysed in getting the money although that is his basic job in Government — to fight his corner for security money. Is it any wonder that there is demoralisation in every major Garda station? That is the reality. It puts those preelection posters in stark relief.
The Labour Party in statement after statement over the last 18 months warned of the dangers inherent in running down the public health services. It is not hysteria to say now that there is a major crisis in those services. There has been a 3 per cent increase in the Book of Estimates and that looks well but if one examines closely the G1 and G2 votes with which I am more than familiar, and if one takes the 2½ per cent public pay increase and add to that increments in the health sector where there are still 58,000 people employed, 50,000 of whom are permanent employees, and if one takes the special pay awards of 1986 which have to be in the vote excluding any other awards, these pay increases alone amount to £45 million but the increase in the vote is £26.5 million for 1989. Also, it looks as though, of the £25 million overall allocation, a certain amount of that in relation to early retirement redundancies will be apportioned to health as a cost of health. Therefore the 3 per cent increase on the vote is no more than marking a general crisis. Contrary to the superficial analysis to date of this Estimate, the dire situation will continue in the health services in the year ahead.
The budgets of the health agencies are also cut by another £10 million on balances — that is moneys which are due from 1987 and 1988 which are paid in 1989. That puts further major strains on the overdraft accommodation where it is very minimal now in the health agencies and in the carry-over cost of their bills for 1989. To compound this unholy mess this Government have paid £13½ million in lump sum payments to 1,500 health board and health agency workers. On top of that, these workers will get pensions for life. I know of nurses in rural Ireland in their mid forties who have bought calves for their farms with their redundancy money. They have spent their redundancy money on buying sheep for their farms and so on. The average redundancy money for a health worker is £9,000 tax free.
The Government have paid out £3.5 million to 1,500 such persons who opted for the lump sum. A total of 4,500 have gone but they were temporary staff who were dumped on the side of the road and got nothing. Quite a number of nurses, male and female, who are in receipt of public service pensions have gone to work in England. Their Irish pensions are posted to them every month by the health boards and the voluntary hospitals. Others have gone to Australia and the United States. What are the Government doing? They have decided to make permanent another 820 of the 7,500 temporary staff and to put them on the pension payroll in due course. This is ludicrous management of the Health Vote and I boggle at the logic of it. In a complete about turn, 820 people from the core of temporary, staff are to be elevated into permanent positions which were formerly held by those among the 1,500 who received lump sums and the celebrated early retirement pensions. It does not even read in terms of a five-year or ten-year cost benefit in regard to public service pay.
There is a clamour that all would be well in terms of the Health Vote if we could only cut down on administration. It sounds well. The reality is that administration in any health board amounts to about 2.5 per cent or 2.6 per cent of total costs. The figure is 3 per cent at the outside. In the Eastern Health Board it is only 2.4 per cent of the total budget. If we were to close down all the health boards we would be lucky to save £750,000. Yet this is the kind of nonsense that is being spoken about at the moment. Somebody has to issue the medical cards in a health board area; somebody has to answer the telephone in a hospital, to look after medical records and to pay the staff. Somebody must be in the office of the chief executive officer when he is attending a meeting in the Department of Health. If we were to close down the whole administrative sector, we would not save one-tenth of the budget of St. Vincent's Hospital, which costs £21 million per annum to run. If the administrative staff of that hospital were to be got rid of it would not save £100,000. The reality is that we have to administer community care and family health care programmes. They are administered at local level and local staff are essential. Somebody must be available to open a health centre in the morning and to close. it in the evening, while somebody must be available to answer the telephone. That is called administration.
There is a great hosanna about setting up a bord sláinte which would save millions and make us all happy. It is a very clever ploy but it is flawed. I put forward many proposals to the Government to set up a bord sláinte. I was totally in favour of the development of the system from the centre of rationality because I saw that the health boards were being totally politicised and dominated by professional interests and I wanted to stop that political nonsense. It was not because I expected to save millions of pounds. I knew the system would still have to be administered. There has been a substantial reduction in the numbers employed by health boards by virtue of the embargo and the general tightening of their budgets in recent years. Every health administrator will see through what I regard as a fairly threadbare ploy to avoid opposition to the Vote in relation to administrative savings. It is bad enough that the politicians are making this ploy but the consultants are at it now. Last weekend they said the health services would be great if there was not wasteful administration. They are at it again.
I have argued time and again that our hospitals and community care programmes need very well paid senior professional managers in charge of the major budget centres. It is ludicrous to have somebody earning £24,000 or £25,000 a year looking after a budget of £36 million, which is the cost of running Beaumont Hospital in a year. St. James's Hospital, a budget centre of excellence which runs on £30 million a year, is managed by somebody who is paid £23,000 or £26,000 a year. I have asked time and again that these people should be paid at least the same as a senior consultant in such a hospital, that is a minimum of £34,000 so that they would have common standing, common authority and the capacity to control the system at the point of entry. That was rejected by the Department of Finance and by the then Department of the Public Service. In terms of public service pay, there is rigidity, inflexibility and a reluctance to cope with anything. Any Minister who proposes to pay somebody £40,000 per year to run a major budget is looked upon as if he had two heads. They think he wants to employ the Taoiseach's payroll. It is unacceptable that in many areas of our approach to the Estimates we have become ossified and incapable of appreciating that budgets must be administered in the most effective possible way.
As a subscriber to the VHI who has benefited substantially in recent months, I am concerned about its future. Last year VHI premiums increased by an average of 9 per cent, three times the rate of inflation. This year, at a time of 2 per cent inflation, VHI rates are due to increase by a minimum of 6 per cent in December. They are looking for 8 per cent and they may get 6 per cent from the Minister, who is terrified at the situation. They are seeking an increase of 15 per cent for plans D and E; they might get 10 per cent in the heel of the hunt. We had a 9 per cent increase early this year and we are to have another major increase, at a time when inflation is running at 2 per cent. The VHI made a net loss of £10 million up to February 1988. I predicted that the Fianna Fáil changes in our hospital system since 1987 would gravely affect the future of the VHI and unfortunately my observations are coming ominously true. The reason is that as soon as I left the Department of Health there were some new appointments to the board of VHI, which was well known, and the VHI caved in to the exclusive demands of the Mater Private Hospital and the Blackrock Private Clinic, to the extent that there is a massive cross-subsidisation from people like me who are on Plan B to those on Plans D and E and more directly to the hospitals. Money was screwed out of the VHI and we are all being screwed in the process. Fianna Fáil are responsible for what happened in that regard.
If that was not bad enough, we had the further development of the two-tier system — over 500 new and converted private and semi-private beds have flourished. This has placed an intolerable strain on the VHI and they have accelerated the two-tier hospital system. In simple terms, the stark reality now is that the ordinary, non-VHI patient may wait for six to 12 months for a routine appointment. I met recently a woman who had received a letter from the Eye and Ear Hospital saying that further to her letter of 1975, Mr. Maguire would now be available to meet her and to discuss her operation. I am quite serious. The woman has reared her family since then. The same hospital sent out another letter to an individual telling her to report for her operation; the husband wrote back saying that the lady was dead. She did not die from a need for that operation although she had been waiting three years — she had died of natural causes. These are examples of the present chaos in the health services. We have elective operations taking up to two years if one is not in the VHI. Conventional procedures for medical card holders and non-VHI patients for hip replacements, hernias, cataracts and ordinary gynaecological procedures have waiting lists at most public hospitals of from two to three years. The Mater Hospital in their latest report mentioned public waiting lists in all departments of 3,400 people.
Many of us have seen the distress and chaos in the casualty departments of most of our public hospitals which even the introduction of a £10 charge has not resolved, where people want a service and have to wait for hours on end. I shall not refer to ENT procedures because the waiting list in that regard is horrendous and basic services such as physiotherapy and public dental care have lists which are a rather sad and sick joke. That is what we have done to the health services in 1987-88. It has been done with the support of the majority of the parties in this House. I do not in any way deny that when I was Minister for Health we had waiting lists — we had waiting lists in health boards and in public hospitals — but at least I can say that the bulk of the waiting lists were manageable. In many areas like cardiace surgery or orthopaedics we substantially reduced the waiting lists. That improvement has disappeared. It was achieved in 1982 to 1987 despite the virulent and destructive opposition of the Fianna Fáil Party at almost every level throughout the country, particularly in the health boards.
In relation to the Health Estimate, the Irish nursing profession is at present in a shambles. A recent pilot study of the Irish Matrons' Association, which covered eight medical wards and three teaching hospitals, showed that these wards had unsafe coverage at night. The Irish Matrons' Association are not known for their virulent public militancy; I think we can say that much. Their report is an indictment of the extent to which an effective nursing mix on wards has declined. One of the reasons is that morale has also rocketed downwards because the pay of 1,300 first year students was cut from £132 per week in January 1987 to £58 last January. That is exploitation of the young people who work on shift rotas, doing trojan work in our hospitals.
Our mentally handicapped children and young adults have had their allocation of incontinence pads halved, which should not happen. I know of parents of mentally handicapped children who used to have an occasional break while their son or daughter was taken into residential care during a family crisis or to give those parents a holiday. That basic facility has been withdrawn at residential and at health board level. It is not appreciated by most male politicians — and the Department of Finance is mostly male dominated also and Government is totally male dominated, for effective purposes——
There are no women in the Dáil in the Labour Party.
We are typical, too. We can claim no exemption. There is as much chauvinism in my party as in the Deputy's.
There is not a single woman Labour Deputy.
I make the point that women are in the front line of the reduction in our health services and suffer as a result from the cuts in these Estimates. As patients, as carers, as providers of services, women carry the brunt of the dismantling which is still under way.
Perhaps the Deputy will now bring his remarks to a close.
Women queue in children's hospitals for hours. They are in the front line with regard to cuts in the services. We in the Labour Party have circulated on the Order Paper our amendment to the Government motion. I do not propose to read it now. I move the amendment on my own behalf, on behalf of the Leader of the Labour Party, Deputy Spring, and all my colleagues in that party. We shall be voting, accordingly, on Thursday next at 5 p.m. against the Estimates as presented here by the Minister for Finance.
I move:
To delete all words after "Dáil Éireann" and insert the following:
"(i) notes with grave concern that the Estimates for 1989 fail to address the many inequalities in our society, including the increasing incidence of poverty, as outlined in the recent ESRI study commissioned by the Combat Poverty Agency;
(ii) believes that these Estimates will lead to increased unemployment and emigration, particularly through the reductions in the summary Public Capital Programme and the Rates Support Grant;
(iii) notes that the Estimates fail to address the continuing and growing crisis in our seriously under-funded health service, and will lead to a further deterioration in that service, with consequent hardship throughout the community;
(iv) believes that the Estimates fail to take account also of the major reduction in access to education caused by the Estimates of 1987 and 1988, and will give rise to further inequality in that area through, for example, the cuts in school transport;
(v) believes that the Estimates will give rise to major cutbacks in essential local authority services, including the fire service;
(vi) believes that continuing cutbacks in housing allocations, at a time when there are more than 17,000 families on approved housing waiting lists, will lead inevitably to a major housing crisis, and is socially irresponsible;
(vii) believes that the further reductions in bilateral aid under the International Co-operation Estimate are totally unjustified;
(viii) notes that there is no provision in the Estimates to enable the continuing embargo on the filling of posts in the security forces (Garda, Army and Navy) which is causing a crisis of morale in those forces, to be ended, and that the provision for army pay is grossly inadequate in view of the Government's commitment to undertake a special review of pay in this area;
(ix) believes that the Government's failure to honour commitments to build regional technical colleges and hospitals in communities where the case for these facilities has been long-established is unacceptable;
(x) resolves therefore that these Estimates will deflate the economy further, and will increase the level of injustice in our society. Accordingly, Dáil Éireann rejects these Estimates and declares that it has no confidence in the Government."
I propose to confine my remarks to horticulture, which is a major part of my responsibility in the Department of Agriculture and Food. I am pleased to be able to say that the provision in the Estimate for An Bord Glas has been increased by almost 50 per cent over the 1988 figure. As Deputies will be aware, An Bord Glas was set up by the Government on an interim basis pending the making of the necessary arrangements to set up a permenant board. Pending the enactment of the legislation to amalgamate ACOT and AFT into Teagasc, it was not possible to complete arrangements for the future structure of An Bord Glas. The arrangements are well advanced and it is hoped to make an announcement shortly.
The interim board has not, however, been idle since it was set up. Over the past number of months it has been examining in detail reports from commodity teams which have examined seven sectors of the horticultural industry in detail. The recommendations from these teams numbered well over 250 involving, in many cases, substantial Exchequer expenditure. To refine the recommendations down to realistic levels has taken a considerable length of time. This work is now almost completed and the board is putting the finishing touches to a development plan which will in general terms aim at regaining a share for home producers and increasing exports by a combined level of £70 million worth and in the process laying the basis for the creation of up to 2,000 jobs.
(Limerick East): On a point of order, can the Minister's speech be circulated in the usual fashion?
It will be circulated shortly. I am looking forward with great interest to the publication of this development plan and to working in close co-operation with An Bord Glas in implementing it and achieving its targets.
One of the areas which has caused me most concern since taking office has been the potato sector. There is no European Community market regulation for potatoes. Efforts over the years to make such a regulation have not been successful. Potato producers more than any other sector are very subject to market fluctuations as we saw in the early part of this year. Apart from the lack of market regulations we in Ireland have a number of weaknesses in the sector. Inadequate storage facilities and badly organised marketing are the most serious.
In order to address these problems An Bord Glas has offered to part fund the employment of a market co-ordinator by the industry with a view to achieving an orderly marketing structure and better co-ordination of production and market outlets. We have also been in negotiation with th EC to extend the officially recognised producer group scheme to the potato sector and I am confident that something positive will emerge here at an early date.
We have also made an approach for increased FEOGA grant aid for the provision of storage for potatoes. An Bord Glas has already identified the need for an additional 80,000 tonnes of storage which would cover national requirements during the critical period of three-four months just before the new crop becomes available and indeed, at the time of the year where the highest level of imports apply.
There is no reason that we should not be able at all times to produce in this country our full national requirements of good quality potatoes. The quality of this product has, I believe, improved in recent times but there is still room for improvement in that respect and great room for improvement in market organisation. The leaders among the potato producers are fully aware of what is needed but there are many who still need convincing.
Apart from its work on the preparation of the five year development plan, Bord Glas has also been active in a variety of other areas. It has been involved in a potato chip promotion campaign and in a promotion campaign on ware potatoes. It has commissioned the making of a video on potato production aimed at educating producers in the proper handling and storage of potatoes and stressing the importance of marketing by providing for the consumers' requirements.
The board has also been involved in promotion campaigns for tomatoes and in promoting the growing of more fruit and vegetables for the processing industry. As regards the glasshouse sector the availability of natural gas should give a boost to increased heated crop production. An Bord Glas and Teagasc have been liaising closely with Bord Gáis to ensure that the maximum possible number of growers will benefit from the availability of natural gas to the horticultural industry in north County Dublin.
The 1988 tomato season has been an encouraging one for producers, the more enterprising of whom now feel that the industry may have turned the corner after a number of years which were made very difficult by high energy costs and foreign competition. It is estimated that producers of early tomatoes in 1988 improved their returns by 10 per cent over 1987.
We are importing quantities of onions which could be produced at home. An Bord Glas has arranged for demonstration onion crops to be grown in Louth, Meath, Kerry and Kilkenny. The intention is that growers will be able to see onion production with the latest techniques at the various stages from propagation to preparation for market. It is hoped that the demonstrations will encourage efficiency and stimulate production. One existing large grower in County Meath is, as a result of these demonstration plots, looking into the possibility of organising a group which would grow an additional 60 to 100 acres next year. A major co-op has submitted proposals to grow and handle 3,000 tonnes within a three year period.
The apple sector has also been a cause of concern. Imports of apples in 1987 amounted to approximately 50,000 tonnes valued at almost £20 million. Home production was to the value of only about £4 million. An Bord Glas has been doing everything it can to promote the development of this sector. One of the major wholesalers had discussions with the board during the past year and has recently planted 40 acres of dessert apples. This is an encouraging development in the light of static acreages and rising imports in the past few years. The same wholesaler has plans for an additional 160 acres and a further 30 to 40 acres are planned by an existing producer group. These developments should help to supplant imported apples.
Another significant area not always thought of in connection with horticulture is the business of producing nursery stock. It is well known how suitable this country is because of our climate for the production of trees and this same advantage applies, of course, to nursery stock. It is the sector in which An Bord Glas has taken a very definite interest and was the subject of a study by one of the board's commodity groups. The sector is making good progress and is building up a valuable export trade. There is, of course, as in other sectors of horticulture, room for improvement and development. This will be covered in the board's development plan which I referred to already.
Bord Glas is also engaged in sponsoring a course run by Teagasc aimed at assisting young farmers to start off their own business or to modify existing businesses to cater for changes in markets by providing expertise in all aspects of business development. The emphasis in the course will be on practical training in developing a commercial business.
The mushroom industry has been a major success story over the past eight years with an estimated farm gate value of over £21 million in 1987 and exports worth over £15 million. On the basis of proposals currently with the IDA and of others which we know are in the pipeline, the industry will double over the next four to five years. This will result in increases in employment of over 600 full time and 2,500 part time employees, thereby making a significant contribution to the wellbeing of many of the disadvantaged areas of the country. All of the State agencies have combined to produce a clear blueprint for the development of the sector. My own Department will be making a major contribution of more than £3 million to mushroom growers during the period I mentioned in grants under the farm improvement programme. Up to 300 potential new growers will have attended a 60 hour training course organised by Teagasc this year.
The research sector of Teagasc is, I am glad to report, receiving increasing financial support from the industry. That is very heartening. The basis of the success of the mushroom industry has been the production of a top quality product which is being marketed professionally by a limited number of companies. These companies have displayed total commitment to ensuring that mushrooms of high quality, but reasonably priced, are continuously available on the UK multiple market. More and more the Irish product is going direct into the super-markets and bypassing the wholesalers. The success of the mushroom industry holds out many lessons for many other agricultural and horticultural areas. For the success of this industry much credit must go to the work carried out at the Teagasc Research Centre in Kinsealy in the development of mushroom growing using the bag system. Great credit is also due to the producers who took up this new system and used it magnificently. The leaders in this industry set an example for us all. The success spells out the importance of the individual growers but also the essential need for growers to be closely organised in groups under a group management.
(Limerick East): I asked for a copy of the script ten minutes ago. I think it is normal practice that the script should be circulated here.
It is intended to circulate it. I am sorry it is not here already but it is intended to have it here.
(Limerick East): The Minister of State is running out of time now and all of us might not necessarily come back for the script at 8.30 p.m.
We will certainly ensure that the Deputy gets a copy even if he cannot come back at 8.30 p.m.
Perhaps the Minister of State would move the adjournment of the debate.
Debate adjourned.