Just before lunchtime Deputy Mac Giolla had various things to say about the Finance Bill. I was surprised at some of what he had to say because on a number of occasions he complimented the Government and the Minister for Finance on some measures brought forward in this Bill, particularly the tax avoidance measures. They must be welcome by all in this House. He acknowledged that an effort had been made by the Government over the last two years to collect the outstanding tax.
Obviously we have much further to go down that road. He also said that the economy was growing and that the indications were very good but he went on to say that this was not affecting the general public very well.
I would not agree with what the Deputy had to say because a report issued last week proved that the differential between prices in Belfast and Dublin has now all but gone. As a Border Deputy from the town of Dundalk this was an issue that affected my town particularly in the early and mid eighties when there were huge differentials between prices in Dundalk and Newry. That has all but gone now and the overflow into Newry from the Dundalk area has, by and large, stopped. There are still one or two items for which people go to Newry, for example, petrol. The fact is that as a result of the economic measures taken by the Government since they came into office in February, 1987 the situation regarding the price differential where the public are going into shops and buying goods has all but evaporated. The Government should be completed on that.
The Deputy also referred to the outflow of profits from this country. The fact is that during the Coalition years, we had the black hole phenomenon. That is all but gone. Most commentators would say there is an in-flow of funds into this country as a result of the confidence that has been engendered by the economic measures that have been taken by the Government. I see that Deputy De Rossa is still here. We on this side of the House are often accused of doing U-turns. I compliment. The Workers' Party on embracing the European Community concept. I noted that at their last conference Deputy De Rossa took. The Workers' Party into the European concept. That is to be welcomed.
The Finance Bill is just another step in a number of steps taken by the Government since coming to power to put the economy on the right road. The major initial step was the Programme for National Recovery which had the idea of bringing the social partners along with the Government, as the social partners have a major role to play in bringing this economy back on an even keel. The Programme for National Recovery was followed most recently by the national plan which is one of the best documents to be put before the House in my time, and I understand that others are of the same opinion.
Our national debt is somewhere in the region of £24.6 billion. When one looks at the sum of over £9 billion that we are talking about in the national plan it is a very small amount in comparison with the national debt. The figures of our national debt and GNP ratio show that we are the worst in Europe. That situation will have to be addressed. As Minister Wilson said earlier, we have succeeded in stabilising the figure at 133 per cent but we have to get it down. It is the Government's intention as per the national plan to reduce that if possible by 1993 to 120 per cent. Most commentators agree that that is possible.
I did not get an opportunity to speak on the national plan because of some of the bleatings of Deputy Barrett on the day I was due to speak which resulted in a delay which lost me my opportunity, but I would recommend the national plan to the House as an excellent guide on how this economy has progressed over the last few years and how it is intended by this Government to advance the economy in the coming years. The national plan indicated in its initial pages that the income levels in Ireland are well below the EC average. That is something the national plan hopes to redress, but the fact is that from the time we came into Government inflation has dropped to 2.1 per cent although it is rising slightly now. In England the inflation rate is in the region of 8 per cent. That has a tremendous effect on our economy and on our ability to trade outside this country. We are 3.5 per cent below the average EC inflation rate.
The rationale behind the Programme for National Recovery was to get the social partners involved in negotiations in order to try to cool down the economy.
Pay increases have been held back to 2.5 per cent annually and that is something on which the general public ought to be complimented. By accepting those increases they have indicated their acceptance of the Programme for National Recovery.
Recently figures were produced to show that last year we lost far fewer days because of strikes than in any other year for the last 20 years. That is because this House and the general public are working to get the economy back on the rails. The average growth in GNP is 3 per cent; interest rates have fallen from 14 per cent to 8 per cent in the last two years. That is a phenomenal decrease in the rates.
Recently I was speaking to someone from just across the Border who was querying a bank bill from a bank in Newry. I was astounded to see the amount of interest this person was paying on his current account and when I checked with the bank they said it was correct and that basically the situation had been reversed from that which obtained two years ago when interest rates here were 15 per cent and 8 per cent across the Border. Now it is the exact opposite with our interest rates down to 8 per cent and interest rates at 14 to 15 per cent across the Border.
Deputies on the other side of the House referred to unemployment and there is no doubt that unemployment is probably the biggest problem this nation will have to face in the next ten to 20 years. The figures over the last two years prove that employment is on the increase. Employment last year increased by 6,000 and this should be acknowledged. It is a small start but hopefully it will improve. Once the general aspect of the economy is held and once there is general consensus, employment will rise. This can be seen on the ground as well as in the facts and figures produced.
Our debt/GNP ratio is somewhere in the region of four times the European average and because of that we are not in a position to compete properly with our European counterparts. From just looking at a number of other European countries, not necessarily in the EC, where the debt/GNP ratio is listed I note that the country at the very bottom is Norway who have a minus ratio. However, the average is about 33 per cent while we are at 133 per cent. Everyone in this House must work to ensure that we get that figure down.
Much play has been made about tax reform. An effort has been made in the three Finance Bills to reduce tax. Obviously we would all like to see tax reform. There is no doubt that major improvements have been made, although we would all like to see the tax base increased. One thing people tend to forget is that mortgage and loan repayments have come down dramatically in the last two years as a result of the interest rate decrease and that actually means money in the pockets of people who are buying houses. That is as good as extra tax relief and it happened very early in the life time of this Government, quite apart from any tax reliefs brought forward in any of the Finance Bills.
Deputy Tomás Mac Giolla found fault with the PAYE and PRSI changes mentioned in the Finance Bill. I would be totally on the opposite side. It is quite obvious that there are quite a number of very small businesses around the country who generally feel that they are working as tax collectors for the State, they quite rightly feel that they are doing this without any compensation from the State and that they have to set up a whole system within their small business to collect tax for the State without receiving any compensation. The fact that they are collecting tax on behalf of the State has lead many people into financial difficulties one way or the other, and they feel that they should be compensated for that.
The changes in the Finance Bill whereby these people will be allowed, subject to the consent of the Revenue Commissioners, to make annual returns rather than monthly returns are welcome and most people welcome them because they will relieve them of a lot of the paper work they are doing at the moment and allow them to get on with their business. Ultimately that will help any employees they may have. Deputy Mac Giolla was trying to say that perhaps the fact that these returns will be annual now rather than monthly may lead to a situation where those people will use the money for their own benefit. That is very unfair. Most people want to return that money. They are so tied up with paper work at the moment that this change would help them immeasurably.
Capital taxation is a much vaunted subject. Many speakers, particularly on what we call the left, say there is more scope there; perhaps there is. This is something that future Governments, and also this Government should look at. There may be one or two areas where capital taxes could be examined in order to bring in some extra taxation.
Self-assessment is now being made mandatory, which is to be welcomed. In my practice I have had occasion to use self-assessment for capital tax over the last year or so and it makes matters much easier for practitioners. Being made mandatory will help, although there may be teething problems in the changeover. This is something the Minister should examine.
There is an in-built surcharge for under-valuation which needs to be included in self-assessment. There is always the danger of under-valuing in property. This may not be found out by the Revenue Commissioners for years to come, which would lead to problems later.
Favourite nephew relief is being extended, which is a very good measure. This relief has been used on quite a number of occasions where a farmer who, perhaps through sickness or for some other reason, is not working his farm and has a nephew looking after it for him. Under previous rules, if the nephew got the farm later he had to pay a substantial inheritance tax. This relief has been invoked for the last number of years. Its extension will particularly benefit people in rural Ireland. There has been a great deal of correspondence with the Revenue Commissioners in regard to individual cases on the aspect of whether these people are substantially working on a full time basis on the farm. By and large, the Revenue Commissioners have been fairly realistic in dealing with these cases.
The maximum interest-free concession where an assessment is put in and the taxpayer has three months grace and then a further month, should be looked at. Four months is a very short period and perhaps the Minister could consider extending it slightly, because it causes some problems in very complicated estates where people may be living outside the country, for example. Having to return the assessment in this short time leads to interest being put on the outstanding tax, if there is such. This has caused hardship in the past and should be looked at with a view to extension.
The extension to both husband and wife of relief for insurance policies which take care of possible inheritance tax is a very good measure. On this whole idea of taking out an insurance policy to guard against possible inheritance tax there have been changing attitudes on the part of the Revenue Commissioners. Previously they were totally against it, but recently they have been for it.
I am pleased to read that there is a revised approach to the Commission's proposals on tax harmonisation. I implore the Government to tread very warily in this regard. I come from a Border constituency and we are in the firing line in this regard. While we all welcome harmonisation, there is no doubt that this country, because of its high rates, will lose substantial amounts of revenue if we reduce our taxes, unless we are compensated in some way. I am glad the Minister said there is a revised approach among the Ministers to the Commission's proposals. This country will probably lose most in Europe as a result of tax harmonisation.
Recently I met deputations from the customs and excise unions and also the customs clearance agents in my town of Dundalk in relation to the implications of tax harmonisation from 1992 on. These people wanted to know if they would have jobs by the end of 1992. I have no doubt that even with an element of tax harmonisation there will always be a need for customs clearance, or some check at borders but these people are genuinely worried. The customs clearance industry in Dundalk is one of the bigger industries. Between that and the customs posts, they are one of the biggest users of the telecommunications system in and around Dundalk. There is a proposal to decentralise a Government Department to Dundalk and it is felt that that Department should be decentralised as soon as possible, so that any adverse implications of 1992 for these people would be taken care of. I would agree with that. Decentralisation is to be welcomed and I know an effort is being made towards progress as quickly as possible. We are in the second phase of that programme and sites are being examined by the Office of Public Works at present.
The business expansion scheme has been a great success. Yet, there have been abuses in that area. Unfortunately, they have given the scheme a bad name. In recent months a figure in the region of £50 million has been invested in BES type schemes. This can only be of benefit to the country in the long term. In the Bill the Minister lays down the upper limit on money invested in the BES scheme as £2.5 million. I am slightly worried about that; in my constituency Ceimicí Teoranta went out of business and were succeeded by the Cooley alcohol factory which suffered quite a number of lay-offs a couple of years ago. That factory is now up and running again, and is called Cooley Distillery. It has been taken over and quite a few people are employed there. They are now planning to produce Irish whiskey. That has been financed more or less under the BES scheme. Before the publication of the Finance Bill, notice was issued saying that the business wanted £3 million investment. I do not know if this will be affected by the limit of £2.5 million; I hope it will not. Perhaps the Minister would clarify this.
With regard to the questions of a united Europe and the EMS, Minister Reynolds has stated that as far as we are concerned there must be a stronger attempt at achieving economic and social cohesion before we look at a monetary union. I feel that we will never have a united Europe unless we have a united currency. It is disquieting to hear the British Chancellor, Nigel Lawson, say that Britain is against this. Ultimately, the EC will have to face up to that whole question of monetary union. A report on that subject was tabled recently and it is planned to start discussions in July. Again, this is something that will have to be faced up to. The attitude of Mr. Nigel Lawson and Mrs. Thatcher goes against the grain of European unity. I think we will have to make it quite clear that we are in favour of monetary union. Because we are one of the less developed areas in Europe, we would, as the Minister has said, have to have some economic and social beefing up. That is where a document like the National Development Plan 1989-93 comes into its own.
The question of toll roads was referred to. This is something that is dear to my heart because phases 3 and 4 of the inner relief road have yet to be completed in the town of Dundalk. One problem is that the road has to cross the Castletown river. The provision in the Bill which will increase the capital allowance relief from 50 per cent to 100 per cent will obviously help someone who may be interested in putting a toll bridge across that river. One individual has let it be known that he would be willing to get involved in the project. I know the question of toll roads has featured in the National Development Plan and both the Minister for the Environment and the Taoiseach have encouraged their use. This is a follow on from that aspiration. There is a provision that a pretrading interest will qualify for relief also under this section.
Another area that is close to my heart and should be looked at is the question of advance factories. I fully appreciate that there are empty IDA factories around the country but a number of areas — including my own — are bereft of advance factories. In both Drogheda and Dundalk there are no advance factories. Proposals have been made under the EC Structural Funds to build advance factories and I ask the Minister for Finance to see if there is any assistance that can be given in that regard.
Last night I listened to Deputy Noonan comment on the Minister's phrase "steady as she goes". This made me smile, especially when I thought of the years of mismanagement under the Coalition. Is it not better to go at a steady pace than to meander as Deputy Wilson so aptly put it? The fact is that the economy has gone from strength to strength over the past two years and it ill behoves anyone to put a stop to that. Efforts have been made by the Opposition to help the situation, but unfortunately some people have been negative about anything that has been done.
The budget and the Finance Bill have been widely welcomed both by the people on the ground and by the financial institutions. Recently a friend of mine from England took a taxi from Dublin Airport and she wanted to know how the budget had been greeted by the people. To her surprise the taxi driver told her that it was an excellent budget — maybe you will say that he was a member of Fianna Fáil — and that the Government were making an excellent effort to bring the country back to its feet. Despite Deputy Mitchell's earlier comments — which Deputy Wilson referred to as his meandering speech — the economy has gone in a straight line upwards all the time, whereas when Deputy Mitchell and his party were in power, things were absolutely out of control; our debt-GNP ratio, our emigration and unemployment were out of control. Thankfully, things have come right and the Government should be congratulated.
The Bill is yet another small step on the road to recovery and I think it should be welcomed by all Members of the House.