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Dáil Éireann debate -
Wednesday, 19 Apr 1989

Vol. 388 No. 9

Finance Bill, 1989: Second Stage (Resumed).

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

Deputy Desmond reported progress and he is not in the Chamber. I have had an apology from the Deputy to convey to the House his inability to be here this morning. I must now cross the floor and call on a Member of the Government party who is offering, Deputy O'Donoghue.

Listening yesterday evening to the debate in the House and listening to Opposition spokesmen one would have been forgiven for thinking that the problems which this country faces at present occurred over the last two to three years. In particular, the Fine Gael spokesperson on Finance, Deputy Noonan,——

I must call for order. It is difficult to hear the speaker in possession.

——was severely critical of what he described as the Minister's "steady as she goes" policy. With all due respect to Deputy Noonan, the "steady as she goes" policy is preferable to the "down she goes" policy which he administered while Minister for Finance and in which he participated when in Government. Unquestionably, during the period of the last Coalition Government the problems facing the Government were never tackled, and certainly were never solved, and the problems facing the economy were exacerbated to a degree previously unheard of.

What was inflation when we came into office, and what was it when we left? What was the balance sheet? What about the State sector?

Doubtless, Deputy J. Mitchell will have an opportunity of speaking in this debate. In the meantime, he should be quiet.

The Deputy is being provocative.

(Limerick East): Do not interrupt the debate.

These policies were, to say the very least, the most disastrous ever administered by a Government in this country. The statistics after that Government had gone out of office are undeniable. The figures are there and the people are aware of them.

Inflation was at 3 per cent. What was the trade surplus?

One would have to contrast the situation that exists today after two years of this Government with that which existed under the previous Administration. It is fair to say that in bringing down interest rates to previously unheard of levels and by reducing the rate of inflation to one of the lowest in Europe——

Inflation has gone up.

Deputy Mitchell should desist from any further interruptions. It is not good enough. The Deputy will have his chance.

——this Government laid the foundation for growth in the Irish economy. It was rather amusing to hear people who were involved in the previous Administration say that there should now be radical tax reform. Indeed, there were even suggestions from the Progressive Democrats' spokesman that caution should be thrown to the wind and a 25 per cent tax rate introduced across the board. Of course, that is a most desirable objective and it is something which every taxpayer, including myself, would want, but is it realistic? It is obvious that such a course, would bring us right back to where we were, facing an uphill struggle which, on the second occasion, would be a more mountainous one than that undertaken to date, of bringing order to the public finances. It is true that taxation levels are too high and that they are to a large extent a great disincentive in the private sector. Not only are they a disincentive in the private sector but one could safely say that they are driving out many very talented people from the public sector, but it would not be prudent to have radical tax reduction at this point, because all the benefits that have been achieved would be lost.

The Finance Bill recognises that there is need for tax reform and in this context the reduction in the rates and the expansion of the tax bands is to be welcomed. It is not a radical but a prudent step which I hope will continue in the coming years. Until order is brought to the public finances one cannot honestly speak about the possibility of having radical tax reform. When order is brought to the public finances, and hopefully we are nearly there, we will be in a position to have further decreases in the tax rates and further expansion of the bands.

It is impossible to contribute to this debate without mentioning the national plan which has come in for severe criticism from Opposition spokesmen, from people who have no plan at all. If something positive is put forward in this country it is ironic that a lot of people with nothing positive to offer will be extremely negative about it. The National Development Plan concentrates on those areas of activity in our economy which require rectification. Without doubt one of the greatest drawbacks in our own resource industry has been the state of the infrastructure required to service it. Our roads are not up to the standard of European roads. Indeed, we are very far behind which means that areas on the periphery are left in a very disadvantaged position. The same has happened with regard to our piers and harbours in various parts of the country where the fishing industry has been unable to lift off because of inadequate infrastructure.

There have been tremendous improvements in the telecommunications network largely due to the present Minister for Finance, but the national plan will have to concentrate on infrastructure in order to take Ireland into the year 2000 and beyond. If we fail to grasp that opportunity now there is little prospect of the infrastructure being improved in future decades. The strategy of the national plan in conjunction with the Finance Bill is the correct way forward. It is the only way forward.

Deputy Noonan in his contribution yesterday suggested that the economic analysis in the national plan had been ignored. Nothing could be further from the truth. One cannot build a house on sand; one must have a solid foundation. In the same way we cannot hope to build large industries from our own resources without the infrastructure required for their development. We will reap the fruits of this national plan in the future and it will be a tremendous success.

One of the largest problems in the economy which is indirectly addressed in the Finance Bill is unemployment and consequential emigration. We have to improve the baseline before there can be any improvement in these areas. We have tried to get the fundamentals of the economy in order with a view to having a consequential spin-off in the creation of wealth and employment. There is evidence today of a strengthening of economic activity and present projections are that the budget targets may well be bettered.

While the public finances were in disarray we could not hope to have tax reform which is desirable. Tax reform will have to be a phased programme spread over a number of years. There has been a sizeable reduction in personal taxation in the provisions of the Finance Bill and that is to be welcomed. The Bill also contains new development incentives.

We must have a tremendous amount of political co-operation in relation to harmonisation which will involve huge credits and losses for the Exchequer. There will have to be across the board agreement in the interests of the country regarding harmonisation if we are not to make a mess of it. I hope we will see that broad political consensus, without which harmonisation will be difficult to achieve, without gravely damaging the economy.

The reduction of tax rates begins the process of driving down income tax rates, it is not the end. Over the period of the Programme for National Recovery we have already seen reliefs amounting to over £700 million. One of the provisions which I most welcome in this Bill is the proposal to change the accounting facilities for small businesses. Up to now people in small businesses found themselves involved in a morass of paper work each month making returns of PAYE and PRSI. This work can take many mandays to complete even if one has only ten employees. The facility whereby those people will be allowed to pay their PAYE and PRSI every year will be of tremendous benefit to small employers, and small employers throughout the country are delighted with it.

The novel proposal about toll roads is long overdue. If this proposal had been in operation even ten years ago it would have made a huge difference to the state of our national primary and secondary roads. However, the danger is that development would naturally tend to occur in the major centres of population only, and centres of medium or low density population would be ignored. It would be a good idea if incentives regarding toll roads in areas of medium or low density population were improved beyond those that exist in areas of higher population. That is the only way to get private investment in toll roads in these areas. I welcome the concept of toll roads generally, but the eastern part of the country will be the major benefactor unless incentives are improved in the western and mid-western parts of the country.

I am delighted that the Minister saw fit to look at the position of disabled drivers. Without question there were anomalies so that a small minority found themselves in difficulties because of the law. I sincerely hope that an accommodation can be reached between all parties to give relief to those who require it. I welcome as well the reduction in VAT on works of art and literary manuscripts. The area of works of art and literary manuscripts is of tremendous importance to our heritage and it is desirable that we try to facilitate and encourage those involved in the arts in every possible way.

I greatly welcome the decision to renew the bank levy. In view of the strengthening of economic activity I wonder if that levy should have been increased this year. The banks have a social obligation to the people, as has any large financial organisation. It is fair to say that over the years the banks have made very large, sometimes embarrassingly large, profits at times when the people were finding the going tough. The banks also have an obligation with regard to the stability of the economy. There is absolutely no reason why they should not make a substantial contribution. If present economic trends continue, if we continue to see a more buoyant economy, the bank levy should be increased.

I welcome the provision introducing mandatory self-assessment in capital acquisitions tax cases. This will have the effect of releasing the staff of the Revenue Commissioners from a very cumbersome task. It is not too difficult to make one return, but to have to assess thousands of these creates considerable bureaucracy. The change is for the better.

I also welcome the extension of the favourite nephew concept under the Capital Acquisitions Tax Act. Up to now, a favourite nephew or niece got the benefit of the highest threshold, provided it was an inheritance. The extension of this concept to inheritance creating trusts is to be applauded. Very often, in rural areas in particular, a person wishes to transfer a farm to a niece or nephew in his or her lifetime. The capital acquisitions tax was a disincentive. I agree with extending the obtaining of an insurance bond to a husband or wife. Up to now this concept, whereby one protected oneself against a charge under capital acquisitions tax, applied to the individual but not to a joint disposition.

I refer now to the financial services area, which is one of growth. Because of our excellent telecommunications system we are now in a position to take full benefit from the growth in the technological industry. The Custom House Dock centre appears to be working well and extension of the financial services industrial base to more peripheral regions in the country must be broadly welcomed. High technology does not depend on location. It can exist on the Aran Islands and possibly prosper more there than in the heart of Dublin city. It was a courageous step taken by this Minister and Government to set out for tender the processing and distribution of prize bonds. This contract which was won by FEXCO Ireland from Killorglin, in my own constituency, had the immediate effect of creating 80 jobs in an area which very badly needed them. There are other State services, other areas of administration which are run by the public sector which could be run by the private sector to give much needed employment in areas where this is badly needed, without creating redundancies in the public sector.

Distribution and processing of the prize bonds in Killorglin, in conjunction with An Post, is a new and innovative step which will have tremendous benefits for the Killorglin area of south Kerry in future years. It will prove to be a marvellous success. Is it not wonderful to see a town in the west actually leading the way in our technological industry? Nobody would have believed that this could be possible, even up to five years ago, but that company have proved that it can be done. This kind of development should be encouraged in every possible way.

It was rather ironic to hear Deputy Desmond, the Labour Party spokesman on Finance, yesterday criticise every kind of public expenditure cut. It is easy to adopt that attitude when one has neither responsibility nor power, or even the prospect of power. Deputy Desmond is now uninhibited and untrammelled by his days as Minister for Health, when he left a deficit of £35 million facing the health services. He is in a position to speak ex cathedra in a populist manner, without ever having to implement the policies which he propounds, or defend the actions which would have to be undertaken to implement them. This kind of argument from the Deputy cannot be accepted on that account alone.

It is true that we have seen a certain degree of boom in the building industry over the past number of months. It is also true that house prices have increased. This is symptomatic of the present low interest rates and it fulfils the prophecy of the previous Minister for Finance that if the interest rates came down the buildings would go up. We are seeing a welcome recovery in the building industry, one of the most labour intensive industries which we possess. I sincerely hope that that growth will continue, that we will see a return to the greater days of the industry.

It would be remiss of me not to take issue with Deputy Desmond for saying that the school transport system was now to be terminated. I cannot see why anybody should say such a thing and can only assume that it was election propaganda with a view to getting that Deputy elected to Europe. This kind of scare tactic is not fair, because ordinary people worry a lot about it. I do not know if Deputy Desmond realises what it is like to have a young family of five or six children, or one child for that matter, and live about 15 miles from the nearest national school. Statements by people such as the Deputy to the effect that the school transport system is to be terminated to some degree frightens people in that position. It is not right to make such a suggestion when it is not based on fact, when it is purely fictitious, mischievous and is blatant propaganda. I am glad further consideration has been given to the film industry. It is fair to say that it can make an enormous contribution to the Irish economy. Following the filming and distribution of "Ryan's Daughter", which was shot in the beautiful Dingle Peninsula, tourism boomed. Indeed, to this day many thousands of visitors wish to see the village where it was made and visit the various places where the film was shot. It is good to see further encouragement being given to the film industry under the provisions of the Bill. We have some of the most beautiful scenery in the world and it would be marvellous if major films were to be made as a result of this incentive.

Deputy McDowell in the course of his address on behalf of the Progressive Democrats stated that we should have radical tax reform on the one hand and also have a tax on property. However, he did not say this directly; he just said we should finance local government separately and have major decreases in the tax rates to compensate for that. To a large extent this suggestion means that we rob Peter to pay Paul and I am not sure that it would be acceptable to the majority of people. I believe we should continue with the phased reduction of our tax rates and that we should try to hold inflation at present levels, although that is going to be extremely difficult because our economy has a high dependence on imports, particularly on oil.

When you import goods, it is fairly clear that you import inflation so that to a certain extent we are not the masters of our own destiny and to a certain degree we are dependent on outside factors as to whether inflation comes down or goes up. This will be one of the great challenges facing our Government over the coming years. Only last week we saw the battle the Minister for Industry and Commerce had with the oil giants. However, we must be seen to stand up to any multinational organisation which would presume to instruct a sovereign Government how it should or should not conduct its business. I congratulate the Minister for Industry and Commerce on his stance. It was the correct thing to do, but it clearly illustrates the difficulty our economy faces in keeping inflation down.

In so far as we are masters of our own destiny, we have been tremendously successful in keeping inflation and interest rates down. The foundation stone for the revival of the economy has been laid and I sincerely hope that in future years we will see the benefits of today's measures.

A Cheann Comhairle, I have had to sit through a speech by Deputy O'Donoghue from Kerry which could only be described as either playacting from beginning to end or means that Deputy O'Donoghue is totally illiterate as far as economics are concerned. I prefer to believe it was mere playacting.

There are a number of things that have to be said at the outset. There have been three Social Welfare Bills and three budgets, but unemployment remains at crisis level despite the fact that — according to the Government's own figures — emigration has multiplied from Kerry, Donegal, Mayo and Dublin and from every parish in the country. When Mr. Haughey left office in 1982 inflation was running at 21 per cent but when he took office in 1987 it was 3 per cent. In 1982 inflation was twice the European level but by 1987 it was only half that figure. Contrary to what Deputy O'Donoghue has said, inflation is now higher than when the Government assumed office and it is going up.

At the outset, I wish to recite the indisputable facts and put right a great deal of the revisionism by economic and political commentators which reflects the sort of outrageous claims by Fianna Fáil. As I have said, when the present Taoiseach left office in 1982 inflation was 21 per cent — was it or was it not? Does Deputy O'Donoghue admit that it was 3 per cent when they returned to office? When Mr. Haughey left office in 1982 the trade deficit was £1,800 million — a crisis in our balance of trade. Was it or was it not? When Mr. Haughey returned to office in 1987 we had a balance of trade surplus for the first time in 40 years. In 1982, when Mr. Haughey left office every single State company was losing money, with the exception of Aer Rianta who made a profit of £100,000 and they do not have depreciation expenses. However, when he returned to office almost all State companies were making profits, some of them for the first time. Indeed, in 1982 the top rate of VAT was 35 per cent but it had been reduced to 25 per cent by 1987 when Mr. Haughey again took office. The top rate of income tax was 60 per cent in 1982 but this was reduced to 58 per cent. Mr. Haughey himself has estimated that emigration for the year ending 15 April 1987——

I would be grateful if the Deputy would refer to the Deputy by his appropriate title, be it Deputy, Minister, or Taoiseach.

The present Taoiseach has estimated that emigration for the period ending 15 April 1987 — the intercensus period — when he had just resumed office was 8,000. However, he has admitted that for the period up to April 1988, the first full year of his Government it was 35,000. The figures are not yet available for the period ending 15 April 1989 but the estimates are that the numbers will be a great deal higher than 35,000. The highest increase in registered unemployment by far in any one year was when the present Taoiseach was in office in 1980 when it increased by 40,000.

The eighth point is that all the major development in urban areas are because of the designated areas which were introduced by the last Government and of low interest rates achieved because of public expenditure cuts by the Government. However, those were the cuts which the Fine Gael Party proposed in Government and which were recklessly opposed by Fianna Fáil as "monetarist and That-cherite". The reduction of interest rates which followed was exactly as we had predicted.

The ninth point is that when the Taoiseach, Deputy Haughey, left office in 1982 no airline, apart from Aer Lingus, had been licensed for international routes. I changed that three months after coming to office and it has led to the air fares revolution which is a specifically Irish phenomenon. The expansions of Dublin, Cork, Galway and Shannon airport were decisions of the last Government——

What about Knock?

They can take credit for that because it cost ten times what Sligo and Galway cost. It is a disgrace.

The eleventh point is that not one single employment scheme was introduced by Fianna Fáil. All the employment schemes were introduced by the last Government. The enterprise allowance scheme, the employment incentive scheme, the social employment scheme and the teamwork scheme were introduced by the previous Government and that is why the rate of unemployment was less when we were in office and why there was less emigration.

My twelfth point is about the economic foundations. The family income scheme was introduced by the last Government to help those on low pay. The Combat Poverty Agency was introduced by the last Government. The business expansion scheme and the major road building programme now on stream was initiated and provided for by the last Government and they also eliminated housing waiting lists. In Northern Ireland affairs it was the Fine Gael-Labour Government who negotiated the Sunningdale and Anglo-Irish Agreements. That is the background to Fianna Fáil coming into office. The outgoing Taoiseach, Deputy FitzGerald, and his successor as leader of Fine Gael, Deputy Dukes, offered in the so-called Tallaght strategy, support for the new Government in tackling the fundamental economic problems. We told Fianna Fáil that expenditure cuts were necessary, something they had recklessly opposed in opposition. We also told them that urgent tax, social welfare and social insurance reforms were necessary. Deputy O'Donoghue, in his economically illiterate speech, talked about tax cuts. Nobody is talking about tax cuts, people are talking about tax reform and at least Deputy McDowell of the Progressive Democrats has pinpointed an alternative for high income tax.

He has a lot in common with the Deputy.

Deputy McDowell referred to property tax as a means of getting more taxation but Deputy O'Donoghue spoke about robbing Peter to pay Paul. Deputy O'Donoghue or his Government do not appreciate that the problem in the economy is the failure of Fianna Fáil to do anything about unemployment. There are still 243,000 people unemployed although a minimum of 7,000 have emigrated during the term of office of this Government.

Deputy Mitchell's party borrowed a sum of £12 million. What have they to show for that?

The Taoiseach said — the Deputy can refer to the Official Report — that emigration has reached a level of 8,000 per annum and that unemployment still stands at 243,000.

Fine Gael doubled the national debt.

We did not. The public sector borrowing requirement was reduced from 23 per cent under Fianna Fáil in 1982 to 10 per cent in 1987. Unemployment, which Deputy O'Donoghue did not even mention, is registered at 243,000. Unemployment among the over 25s has gone up by 5,500 since Fianna Fáil came to office. It has gone down somewhat among the under 25s because, as Deputy O'Donoghue knows, many parishes in his constituency can no longer field a football team as all their youth are in Boston, Croydon or Camden Town. We tax everything dynamic to the hilt——

The Deputy's party were in office for four and a half years and they devastated the country.

For the Deputy's benefit I will repeat my earlier remarks. Inflation was 3 per cent when we left office and we had reduced the public sector borrowing requirement from 23 per cent to 10 per cent. The enterprise allowance scheme, the employment incentive scheme and the teamwork scheme were introduced by the last Government. Moreover, unemployment went up by 40,000 when Deputy Haughey was Taoiseach in the early eighties.

I do not want to keep going over the past but I am trying to illustrate the foundations which were laid due to the unprecedented political support which was offered. All the Government have done is to aim for lower interest rates which, of course, is a desirable aim as far as it goes but it leaves our economy extraordinarily exposed. The alarm bells which are now sounding were evident six months ago and in six months' time we will be reaping the whirlwind of the failure of the Government to do anything else except base their economic policy on one-leg interest rates. If interest rates go up — as they are almost certain to do — given that we have a national debt of £26 billion a 1 per cent increase costs £260 million in a full year which goes straight on to the current budget deficit. A 2 per cent increase costs £520 million and a 3 per cent increase costs £780 million which goes straight on to the current budget deficit.

(Interruptions.)

Deputy Wallace will have an opportunity of contributing to the Debate. In the meantime let us hear Deputy Mitchell without interruption.

If interest rates go up by 3 per cent all the progress of the past two years and the euphoria of organisations like the CII will be hollow. I hope that does not happen but I am fearful that it will.

Inflation and interest rates are very much intertwined. Inflation is on the way up again. It was down to 2 per cent, but it is now estimated that it could be as high as 4.5 per cent this year, much higher than the Government's estimate of 3 per cent, an increase on last year. If interest rates increase and the progress of the last two years is reversed, what will we have to show for the sacrifices we have made? What are the prospects for job creation with both inflation and interest rates increasing when in a period of low interest rates and low inflation we failed to create jobs? We should bear in mind that there has been low inflation for almost five years. Yet after a prolonged period of low inflation and low interest rates, unemployment remains at crisis levels and emigration has grown to new heights, If interest rates go up, what would be the outlook? That is where the great weakness in the Government's economic policies lies. They have failed utterly to make any fundamental changes in three budgets, three Finance Bills and three Social Welfare Bills.

Let us look at the figures. In June 1988, the average industrial wage was £201.88. According to the Central Statistics Office of the European Community, Eurostat and confirmed by the FUE, the additional costs to employers, to cover the payment of disability benefit, maternity benefit and so on, amount to 35 per cent of that figure. Therefore the cost to the employer of paying the average industrial wage of £201.88 is £272.54. In the hands of a married employee with four children this becomes a net disposable income of only £108.82 which, after medical cards and so on are taken into account, leaves him worse off than a married man with four children in receipt of long term unemployment assistance. The man on the average industrial wage is actually worse off than the man in receipt of long-term unemployment assistance. That is not a rare example; our system is littered with examples of this kind.

Because of our tax and social welfare structures, the gross earnings of a married person with a family would need to be just over double the long-term unemployment assistance rate to prevent him being worse off at work. The employer cannot afford to employ and the employee cannot afford to take up the job or even stay in it — the classic poverty trap. This is precisely the problem the Government have not only failed to address but have actually worsened.

In this year's budget to which the Social Welfare Act, just passed, and this Bill give effect, we have widened the poverty trap because the difference in the net disposable income of those in receipt of long-term unemployment assistance and those in work on the average industrial wage, or less, is now even greater. What does this mean? It means that those in receipt of long-term unemployment assistance who want to work — the vast majority want to work — cannot afford to go to work unless they manage to get a job carrying a salary way above the average industrial wage, which of course they will not get. They cannot afford to go to work because then they will be worse off. That is a fact.

That is only one of the many anomalies that litter the system. It arises out of the fact that the man on the average industrial wage of £201.88 ends up paying out about £92 per week in tax, PRSI, pension scheme contributions and transport costs. If the person lives in a local authority house his rent is assessed on gross income rather than net income, with the result that he pays £17 a week more than the man in receipt of long-term unemployment assistance. Medical card entitlement and the family income supplement are also assessed on gross income rather than net income with the result that the man on the average wage will not get either. He ends up worse off.

This highlights the real problem in the economy — all enterprise is trapped. We will never get the economy right until we get employment right. We will never get employment right as long as we tax the living daylights out of all enterprise while leaving the statics untaxed. This is the reverse of what happens in all the more progressive countries. We levy the lowest rates of tax on wealth and property and the highest rates on labour.

With dangerous warnings of higher inflation and interest rates being sounded we continue to have huge unemployment figures, the highest in the Community. Because of the failures of the Government, if interest rates and inflation rise, it is likely our unemployment figures will also rise with a consequent increase in emigration.

The Government have been offered unparelleled latitude by the Opposition to get the affairs of this country in order but they sought to base their entire economic strategy on one leg and one leg only, low interest rates. This is a partial policy which is exposed to outside developments over which we have no control. The alarm bells which the business organisations and economic commentators have been ringing over the past six months are beginning to ring even louder now.

This Finance Bill does absolutely nothing to address the underlying problems. The point that should be made is that it is not too late to do something. We have yet to take the Committee Stage of this Bill and there are between eight and ten weeks of this session left. What can we do? We could agree to accept proposals from this side of the House to dramatically reduce the rates of income tax and to pay for it we suggested a combination of proposals. Two years ago we proposed that an all party committee be set up to agree a means to pay for sharp reductions in the rates of income tax but this was refused by the Government. We have been pressing for sharp reductions in the rates of income tax and have listed a number of items which could be considered, among them the cancellation of some of the concessions to industry which were designed to encourage job creation but have not done so we proposed also the cancellation of grants to industry as these discourage the Employment of people and encourage the employment of machinery. We grant aid machinery but we tax payroll and labour. We proposed, too, some form of local or property tax in order to return local responsibility to the councils and relieve income tax.

On last years Social Welfare Bill when I was spokesman for my party on social welfare I proposed extensive amendments which would help to remove many of the anomalies on the social welfare side. I will highlight some of those anomalies, which have in no sense been addressed by this Government.

First, absenteeism in this country is twice the level of that in the UK — to be precise 1.8 times — which is another major disincentive to employing people. Employers do not know when their employees are claiming disability benefit; they are not notified. Therefore, we have the widespread practice of people claiming disability benefit while still at work or sometimes on holiday from work. Prosecutions are beginning to take place and people are beginning to lose their jobs, but this is still happening on a wide scale. Last year I proposed the simple expedient that when a disability benefit cheque was being issued by post to the recipient a stub of the same cheque be sent to the employer and that when employees submit their medical certificates they should have to supply the name, address and registered number of their employer. That simple expedient, which was not adopted, would have solved that aspect of absenteeism which is one of the great curses preventing employment. When workers progress towards the end of the tax year many of them go into a higher tax band. Consequently, they decide they are not going to pay 56p. in the £ and they go sick for a few weeks and get their tax rebated. Disability benefit is not only not taxed but the person is counted as having no income so he gets a rebate of the tax he paid previously. Therefore, people can be as much as £50 a week better off out sick than at work. There was no reform by the Government of that.

In the Social Welfare Bill last year we sought to give the Minister power by regulation — not forcing it on him, just giving him enabling power — to start to shift the payroll tax, of which social insurance is 12.5 per cent on the low paid from pay to turnover. Nothing was done. We also sought enabling power for the Minister to exempt the first £1,000, £2,000 or £3,000 of income from both employer's and employees' PRSI to help the low paid not be worse off in work than on social welfare. Nothing was done about that either. At the moment the more capital employed, the more machinery employed and the higher the turnover is per head employed, the less social insurance you pay but the more you employ the more tax you pay. In our situation of grieviously high unemployment it is absurd that we should so penalise employment.

The Government refused to take the offer of enabling legislation to inch their way across from payroll to turnover so as to relieve the burden, even in part, on those who employ people. They refused to take the offer of enabling power to stop inching away social insurance contributions from the first few thousand pounds of income and to abolish the upper limit, which would greatly help labour intensive industries. As the House will know, social insurance is payable on the first £16,200. Therefore, an employer who has a large number of employees all earning under £16,200 — there is a considerable number of such employers — pays social insurance on every single penny of payroll. The employer who hires a small number of very highly paid people does not pay unemployment social insurance on every single pound of payroll because anything over £16,200 is exempt. Companies employing high salaried people pay a much smaller contribution than those who are employing low salaried people. Therefore, despite low inflation for the past four or five years, low interest rates for the past two or three years and other good economic indicators, we have not made an impact on employment. We have had trade surpluses for four or five years. We exported more for five years than we imported, yet our unemployment figure is still 243,000. This Government have done nothing whatever to bring about fundamental reform. It has not been for lack of firm offers, firm proposals or firm invitations from this side of the House. Even at this late stage and given the warning signs now emerging on the horizon all the more clearly, the offer of my party to have an all-party committee to report within a given number of months, two or three, on tax reform still stands. The Government refused the offer over the past two years but I am pleading with them to accept the offer now because we need urgently to do something that transforms completely the environment for employing people.

If interest rates go up and if inflation continues to go up as is now evident, what are the prospects in respect of employment and emigration when the figures in these two areas remain at such crisis levels at a time of low inflation and low interest rates? We could have a major crisis in the offing despite the uncritical euphoria of many economic commentators over the past few years. We could be in a crisis in six months. It is not too late for the Government to recognise that much more needs to be done than just relying on low interest rates which can be set aside very quickly owing to international factors.

The great failure of the Government has been on employment. The second emerging failure looks likely to be inflation. The cost of things in this country is already very high and now inflation is creeping up again with all the implications of that for competitiveness, labour costs which transmit themselves into public sector costs for public sector employment and more taxes. Inflation, brought down so successfully by the last Government despite opposite trends internationally, is now looking like a second major problem for us. We can already hear the Fianna Fáil apologists saying inflation is bound to go up by this year, that it has gone up in England. Let them remember that the last Government got inflation down when inflation was going up in England. One of the awful failures of Fianna Fáil in the past ten years has been in controlling inflation. They left office in 1982 with inflation ranging at 21 per cent, twice the European average, and it looks again as if they are going to fall into the same bad habits of high inflation and high costs. They have been an abysmal failure on the inflation side in the past ten or 12 years. They let inflation rip.

In Britain the Thatcher Government have to some extent fallen into the same trap as this Government, that is depending excessively on one aspect of economic policy alone. They have placed incredible reliance on the control of inflation as the key to economic success, a one-legged policy, just as our Government have had a one-legged economic policy of depending on low interest rates. As a result of their failure in regard to inflation, huge interest rates have emerged in Britain, as well as balance of payments crisis. This is 1989. Seven years ago precisely the same situation pertained here as the present Taoiseach left office. Inflation raged at 21 per cent and we had a balance of trade deficit of £1,800 million, the worst in our history. There was an enormous crisis.

Both these problems were brought under control and in the case of trade it was brought into surplus for the first time by the previous Government. Inflation is beginning to rise again in an economy which is already a high cost economy because of past failures.

We talk about the promotion of tourism, yet we tax to the hit two major commodities which affect tourists, namely petrol and drink. Our greatest market in the past was Britain but the British tourists have stopped coming. Initially that was due to the Northern troubles. Any who come now are absolutely shocked by the prices of petrol and drink compared to the position in the UK, yet the Government in the budget increased the price of petrol by 4p. Anyone who lives here knows that it is very expensive to buy anything. There has been progress in the past four years because our inflation rate fell below the British rate and was actually half that rate. Their inflation is going up now, as ours is. How can we expect tourists to come here to buy excessively priced drink and excessively priced petrol? In the latter case 70 per cent of the cost is represented by an imposition by the State.

On the employment front, 1992 is supposed to be all about the Single Market, to create jobs in Europe. The greater the market the fewer the formalities which will be required, the more easily goods and services can flow between countries and the more jobs will be created. It is a sound economic proposition but this Government, while talking a great deal about 1992, are not only doing very little to prepare for it but are putting matters into reverse.

One of the areas of maximum hope for the expansion of employment is the transport sector, yet our road haulage industry is at a 27 per cent disadvantage compared to the same industry in the United Kingdom, who will by 1992 have direct access to our roads and our market. They will be able to pick up goods in this State and deliver to a second point in the State. Of course the reverse is true. Our hauliers will be able to pick up in Birmingham and deliver to London or Glasgow. They would be able to do the same in France but we cannot do it competitively if our hauliers through excessive costs in regard to fuel, insurance and excise duties are at a 27 per cent disadvantage, together with distance from the main market.

I proposed three years ago that there should be a five-year plan to eliminate that 27 per cent disadvantage by stages. The cost would be too great to do it in one or two years. Not only have this Government done nothing about it but the Minister for Tourism and Transport allowed the Government in this year's budget to increase petrol costs yet again, thereby increasing the disadvantage of our transport sector. I also proposed that we as a nation should set up a major Irish distribution centre somewhere in the north-west area of the Continent, a centre where our hauliers could locate as a base, with overnight facilities, translating office and communication facilities, and repair and garaging facilities. I proposed that our small industries would have advance warehouse facilities at cheap cost. Thereby they could have advance goods close to the market so that no strike in the British docks, no shipping crisis or inclement weather could be a factor in delaying the delivery of their goods to the customer. Nothing has been done by the Government to pursue that proposal, despite many communications and a lot of pressure from me.

If we believe, as I passionately do, that 1992 offers tremendous scope for increased employment for Irish drivers and the whole transport industry, it will only do so if we are able to increase our market share of the carriage of goods within the entire Community. If we could get even 1 per cent of that business we would be able to employ as many as 30,000 or 40,000 people in transport. Rather than forcing people to emigrate, we should set up this major distribution centre which would allow drivers to work week on week off. It would be possible to get home quickly and cheaply. Unless we overcome the disadvantages of cost and peripherality we will lose the opportunity that 1992 presents for employment on the transport front.

The Minister for Tourism and Transport is here and he might elaborate in detail during his contribution on the present statistics as to the relative disadvantage of our haulage industry as compared to the haulage industry in the UK and other Community countries. Perhaps he could tell us what has happened since he became Minister over two years ago. What have the trends been in regard to disadvantage? What has happened in regard to fuel, excise and insurance costs? What plans has the Minister to overcome the problem of peripherality for our transport industry or for that industry to capture a market share of the transport business in the Community after 1992? If he has any plans he has kept them very much to himself.

One of the most outrageous claims made by the Minister for Tourism and Transport was at an infamous press conference about tourism figures which he called but at which he arrived half an hour late. It was attended by many people from Bord Fáilte. He claimed it was he who introduced low air fares. The Evening Press is not known to be a supporter of Fine Gael——

There is a bit of sense in that anyway.

The next day the Evening Press derided the outrageous, silly and untrue claims of the Minister, Deputy John Wilson, who had been previously Minister for Transport and had done nothing about opening up the airways. Claiming credit for the airfare revolution was such an absurdity as to be mocked by the Evening Press itself. They said that while they held no brief for Deputy Jim Mitchell it was he and his Government who introduced competition in the air and reduced air fares.

What has the Minister done to promote cheaper air fares and encourage the introduction of more services to continental Europe? What has he done in the Council of Transport Ministers to get increased market access for our airlines? The reality is that we, under the previous Government, decided to open up the airways. Three months after the change of Government in March 1983 we licenced Avair to British mainland airports. Unfortunately that experiment collapsed after a period, as we feared it would, because the airline in question overreached itself too quickly, as we told them we thought they were doing. Some time later Ryanair came on the scene and I was facing a barrage from two sides. The Air Transport Users Committee wanted me to rush my fences and licence them for everything they asked for. On the other hand Aer Lingus and the trade unions said that licensing them would bring ruin. My own judgment was that a progressive opening up of the airways would not bring ruin but would be advantageous not only to the air traveller but to the airlines themselves, and so it proved. That was a phenomenal success. It was described on television last week as one of the most profound economic decisions taken by any Irish Government in recent years.

That needs to be developed. Alongside that policy, we in the Council of Transport Ministers insisted that we would agree to no package of reform unless it led to increased market access. If 1992 is to mean anything it has to mean the removal of distortions of competition. Any airline confined to be a base of three million people is at an enormous disadvantage compared to an airline based on 60 million people as are the British, German, French and Italian airlines. Our objective must be to achieve completely free access to all Community routes. This cannot be done overnight, but it must be the clear objective. The other side of the coin is, of course, that European airlines will have more access to routes within Ireland and from Ireland, but Aer Lingus and Ryanair would be more than willing to take on all on the level playing pitch of equal access. It is difficult for small airlines to compete with those based on populations 20 times as high and having enormous fleets. We need more and cheaper access.

There has been very little progress in regard to air fares to continental Europe. The progress has all been in regard to Ireland and Britain. Sometimes one hears credit being given to the Commission and in particular to my esteemed colleague, Peter Sutherland, in regard to the progress in air fares. While I would not wish to detract from his sterling performance as commissioner, the lower air fares have nothing to do with the Commission. They were local decisions made by the Irish Government to open up the airways to competition. The sharp reduction in air fares between Ireland and Britain is an Irish phenomenon; it has not happened elsewhere in the Community. It needs to happen, and this will only be done by allowing more access, and people will only travel if there is more access, more competition and cheaper fares. That is the lesson of our experience since 1983. That experience needs to be built on in Europe.

As far as I am concerned the Minister, Deputy Wilson, while fully embracing the policies espoused by me in office, has had little success in opening up the airways to Europe or in reducing air fares to continental Europe. If the Minister thinks I am wrong perhaps he will cite figures. What was the air fare to Paris when he came into office, and what is it now?

It is 25 per cent less.

It is not 25 per cent less. There are concession fares available in very limited circumstances. What is the standard fare to Rome now, and what was it when the Minister came into office? Likewise, can the Minister give a comparison of the fares to Madrid, Amsterdam, and Brussels?

There have been substantial reductions.

I challenge the Minister to bring in the figures when he comes to speak.

This is not a debate on the transport Estimate.

I am entitled to speak without interruption.

The Deputy is dealing with transport. It has nothing to do with the Bill before the House.

It has to do with the economic performance of this country which the Finance Bill is supposed to be about. The Finance Bill gives effect to a budget which increased fuel costs for Irish consumers by four pence. Transport is a key part of our economic performance. If we are to get the maximum from 1992 our haulage and air transport industries must have access to the markets and be able to compete on a fair basis. The Finance Bill before use does nothing to achieves this.

As far as road transport is concerned, 1992 is here already. We have full freedom for our operators in Europe.

They still operate with a 27 per cent economic disadvantage.

The Deputy is stuck in his own little period and has not learned what has happened in the meantime.

Fuel costs have gone up. Our petrol is £1 dearer than it is in Britain. Our insurance costs are 100 per cent dearer than in Britain. Our excise costs are two to three times dearer. I ask the Minister if that is right or wrong, and has it not got worse under his Government?

I want the Minister to produce firm facts about air transport costs to Europe. If our businessmen are to be able to sell in the market-place they have to be able to get access at a cost they can afford. What are the standard air fares to Paris, Frankfurt, Copenhagen, Amsterdam, Madrid, Lisbon, Athens, Rome, and what were they two years ago? There has been very little progress. The Minister has failed to follow up the progress made under the previous Government——

Sweet damn all progress.

——in the air fare revolution to Britain and in the reduction in fare to some parts of continental Europe also. Transport will be a key factor in whether or not we succeed post-1992. The Minister has made the audacious claim that everything is already in place for transport. Tell that to the Irish Road Haulage Association. Tell them they are in a position to compete with hauliers from Northern Ireland and Britain. Tell them their taxes, fuel costs and insurance costs are just the same.

You did not even get permission for them to operate.

If the Minister told them that they would have his guts for garters.

They could not even leave the country under the Coalition Government. They are free to go now.

Acting Chairman

Please, Deputies.

I think the Chair could address himself to the relevance of what the Deputy is saying vis-à-vis the Finance Bill instead of taking the Minister to task.

Acting Chairman

The Deputy is entitled to speak without interruption.

The Minister for Tourism and Transport is a very disappointing Minister. He is a man for whom I have a lot of regard, as he knows——

The Deputy is showing it.

——but he has been very disappointing. He has failed to persuade the Government to make the necessary changes or——

By how many pence per gallon did the Deputy reduce the price of petrol when he was Minister? Answer that question.

——to move in the direction of more competitiveness.

Not a penny. The Deputy should stop bluffing.

Acting Chairman

Sorry, Minister. I would like to remind the Deputy that this Bill relates to taxation.

It relates to the economy, Sir. The Finance Bill always allows a wide-ranging debate on the economy. My contention is that the Government's policy has been a one-legged policy which depends solely on low interest rates and if that leg is kicked from under them, as it could very well be in the coming months, their economic policy will be in ruins and this country will be ruined with it. I am trying to illustrate that this Bill, the third Finance Bill of this Government, fails to address many of the key economic problems which continue to force on the country high unemployment and high emigration. There is no reform of income tax——

How many pence per gallon and in what budget did the Deputy reduce the price of petrol?

——there is no reform of social insurance, there is no reform of social welfare, there is no reform of transport and there are no jobs. This is a repetition of the performance of the 1977-82 Fianna Fáil Government which, I will remind the Minister, allowed unemployment to go up by 40,000 in 1980, the worst ever increase in any one year. Inflation rose to 21 per cent by 1982, twice the European average, and the Government are now at it again. I am pleading with the Government not to waste the opportunity in this Finance Bill, if not on Second Stage then on Committee Stage, to accept the proposal of my party for an all party committee on tax reform to report on agreed tax changes and the funding there of within, say, three months. We offered this suggestion before but the Government refused it and we are offering it again. The parameters of that committee could also include changes in social welfare and social insurance as they relate to wages and tax so that we would remove the many anomalies and traps that litter the system.

If people in work apply for a medical card they are assessed not on their take home pay but on their gross pay. Similarly if people apply for family income supplement they are assessed on their gross pay. If people go to the community welfare officer for assistance to buy school uniforms or to pay bills they will be told they cannot be helped because they are employed. When people go for a means test for legal aid, for education grants or for anything else, they are assessed on their gross pay, but they do not receive their gross pay because there is such high tax and PRSI deducted. That means many people with families are much better off unemployed but they do not want to be unemployed. They are taking from the economy when they want to contribute to it. This is creating all sorts of problems in morale, an increase in crime and so on. If we do not address the unemployment problem — and the Government have singularly failed to do that — we will have many other problems. Having failed to address the unemployment problem over the past four or five years when interest and inflation rates were low, we will have less chance of doing so if, as now seems likely, inflation and interest rates rise again.

There was an increase of 36 per cent——

Another one of the economic illiterates. I want to remind the Deputy, now that he has come into the House——

Look at the facts from the Central Statistics Office. If the Deputy looks at them——

I will tell the Deputy some facts.

There was a 36 per cent increase in inflation——

Acting Chairman

Deputy Mitchell without interruption.

Inflation was 21 per cent when Fianna Fáil left office in 1982.

I can give the facts. The Deputy is talking rubbish.

Inflation was 21 per cent in 1982, twice the European average, when Fianna Fáil left office. It was 3 per cent, half the European average, when they came back to office.

It went up 18 per cent.

We had a balance of trade deficit of £1,800 million when Fianna Fáil left office in 1982, a major trade deficit crisis; it was in surplus when they came back to office for the first time in 40 years. There were no housing waiting lists because we had solved the housing problem. The road building programme had started as had the air fares revolution. The maximum rate of VAT was reduced from 35 per cent to 25 per cent. The maximum rate of income tax was reduced from 60p in the pound to 58p. They were the achievements of the last Government.

We were told by a reckless Opposition that we were monetarist Thatcherites. Those same people are now trying to accuse us of increasing the debt too much. The same gombeenmen of the back benches, economically illiterate as they are, are sent in to rally round the flag no matter what the consequences for the country and no matter how many thousands they consign to Camden Town, South Boston, Sydney and Perth. That is where they are sending the people. That is the result of their policy and yet, there are 243,000 people unemployed.

If the Opposition had not shoved up the GNP deficit the funds would have been available to provide the jobs that are necessary.

Acting Chairman

Deputy Ahern, please.

The whole area of transport costs——

The man is talking in his sleep.

Acting Chairman

I have to remind you again, Deputy, that this is the Finance Bill and not a Transport Bill. Please remain with the Bill.

The transport element, Sir, as I have already told you, is a huge part of any economy.

The Chair has been protecting the Deputy's meanderings for long enough.

The Government have failed completely to recognise the importance of transport in the economy. They have failed to reduce excise costs, fuel costs and the insurance costs of transport.

The Deputy did not reduce any of those by one penny when he was Minister.

They have failed. With 1992 three years away our transport industry still suffer a 27 per cent disadvantage compared to our nearest neighbour, and compared to some other countries in Europe we are at an even higher disadvantage.

If that continues, we will not get an extra market share in the transport field in Europe after 1992 and we will not get extra jobs. I believe we could get thousands of extra jobs for Irish workers driving trucks around Europe on a week on week off basis if there was a major national distribution centre for Ireland on the Continent, which I have proposed but about which nothing has been done.

The Finance Bill has again been a major disappointment. It does not contain any fundamental reforms. If inflation and interest rates rise, as predicted, the policies of the Government which have been eulogised so uncritically for two years will be seen to have failed. The unfortunate fact is that thousands of our people now in jobs will be forced on to the unemployment queues. They will add to the legions of unemployed and emigrants. That is not a future any of us wants. I appeal to the Government to accept some of the proposals made by this side of the House in the last two years on tax and social welfare. It is not too late for them to do so.

As was suggested by a Cork Deputy behind me earlier, Deputy Mitchell who has concluded his contribution on the Finance Bill, has a selective memory. He did not remind the House, for example, that when we left office in the early eighties the price of a barrel of crude oil was $39-plus. It dropped and dropped since then but it is going back up. At present it stands at about $19 per barrel. The drop impacted very much on the economy at that time.

European inflation was half ours. What the Minister has said is only an excuse.

I should like to point out that, as was called to the Deputy's attention, when the National Coalition took office our national debt was roughly £12 billion but when we returned to office it was £25 billion.

That was not surprising when one considers the rate of inflation when Fianna Fáil left office.

I agree that it was not surprising because we could not get from the national Coalition any type of agreement on what steps to take with regard to the increasing national debt. The Coalition donkey was being pulled to the right by Deputy Bruton, it was being pulled to the left by Deputy Desmond and it got the head staggers to such an extent that it finally lay down in the middle of the road. The result was that the country was at a complete standstill and the economy was stagnant.

There was a trade surplus and inflation was at 3 per cent.

I should like to indicate to the House that had the Coalition Government stabilised the national debt at £12 billion, which they found it at, there would be £1,000 million available for economic development today. It should be noted that I am not talking about reducing the national debt but stabilising it. The national debt has been stabilised and we intend, despite the messages of doom and gloom which we heard from Deputy Mitchell, to stabilise and reduce it with the other consequent good effects on our economy.

Is inflation increasing again, as it did in 1982 to 21 per cent?

I have paid tribute to Deputy Mitchell in the House for taking a tiny step in the direction of liberalising air transport and he, and his colleagues have been beating his drum on that since then.

The Minister has claimed credit for it.

I want to point out that since I took office, not merely Ryanair, a company that Deputy Mitchell boasted about bringing on the scene, but Virgin Airways——

—and British Midland Airways have been brought on the scene.

Aer Lingus and BA operate the same routes.

The Minister did not bring one Irish airline on the scene.

Deputy Mitchell referred to my ten months in office in 1982 and I should like to remind him that at that time I put through Second Stage the Bills establishing Telecom Éireann and An Post. Who boasts about having done that? Deputy Mitchell does, and the best of luck to him. He knows how to beat his drum and I do not intend to interfere with his little band of self eulogy. He can bang away.

That is because the Minister was found out; the media rounded on him.

For obvious reasons Deputy Mitchell's party leader switched him from Tourism and Transport to be spokesman on some other Department and, consequently, I can forgive him for not knowing what has happened in the Transport area since then. I should like to point out to him that on 14 December 1987 we, after a long and very tough tussel in the Council of Ministers during which I representing the Irish Government, we fought very hard on the liberalisation front and got an interim package which has revolutionised transport in Europe in every way. It is only part of the deal and the next part comes up for treatment in the first six months of 1990. We hope to extend the liberalisation process. Fifth freedom rights are now being exercised once more by Aer Lingus to Amsterdam, Copenhagen, Milan on a combination of points, and four or five other destinations in Europe. That is being done by an Irish company, and it is important to stress that seeing that Deputy Mitchell wants to beat that drum.

I have signed a liberal package with Lord Brabazon with regard to air transport between Ireland and UK. I have had the privilege of asking European Ministers in Council to take that agreement as an example of where we should go with regard to aviation liberalisation. All party committees, the last refuge of failed politicians, seem to play a big part in Deputy Mitchell's thinking. He should know that a camel is a horse designed by an all-party committee. The Deputy referred to stagnation in transport but I should like to tell him that as far as car sales are concerned the figures for this year show a substantial increase. I will not mention cement sales or wander like him. The Deputy could not concentrate on the Bill before the House and I will not follow him in that bad example.

The Minister has not referred to the Bill.

I should like to tell the Deputy that our plans have been well thought out and are well documented. They will be forcibly pushed through. I suggest to him that he should study the Programme for National Recovery. All good Christians should study that plan.

Is it for Christians only?

We can have Muslims, atheists, free thinkers or agnostics but I recommend it especially to all good Christians because I know Deputy Mitchell, from the virtues he is arrogating for himself, must be a very good Christian.

I should like to address the Bill and not to be induced to go down any side tracks by the wandering contribution of Deputy Mitchell. The Maiandros river, that gave a word to the English language, was only in the ha'penny place compared to Deputy Mitchell's speech.

I have listened to the Minister for more that four minutes and he has not mentioned the Bill.

The Finance Bill incorporates changes which reinforce and continue the commitment of this Government to bring order to the public finances and to building up the economy. This commitment is consistent with the broad strategy set out in the Programme for National Recovery. That programme, which has the support of the major social partners, will continue to provide the framework for economic and social development.

Since its adoption in October 1987, the Programme for National Recovery has achieved considerable success and it provides the basis for substantial further progress. The National debt has been stabilised relative to Gross National Product and interest rates have been reduced. Cost and price trends have moderated and there have been realistic improvements in take-home pay. At the same time, business confidence and investment have strengthened. Most significantly, there has been a recovery in economic activity and employment. In these circumstances the Government intend, quite wisely, to adhere to the broad strategy in the Programme for National Recovery. By adhering to that strategy, the Government are reaffirming their commitment to the maintenance of a fiscal, exchange rate and cost climate conducive to sustained economic growth. In turn, this will require a strict discipline on public expenditure and a broadening of the tax base. It is important to realise that the Finance Bill which we have before us today constitutes a key element in our overall strategy for growth and development of the economy.

We are very fortunate that the foundations for improving the growth and employment prospects of our economy have been laid during the past two years by the achievement of a broad consensus on economic and social development. The National Development Plan, 1989-1993, which was submitted to the European Commission last month, builds on those foundations. The plan is designed to prepare the Irish economy as a whole to compete successfully in the single internal market of the European Community. The plan sets out the structural measures, which Ireland proposes to implement over the next five years, in conjunction with the European Community Structural Funds, with a view to achieving the national and Community aim of greater economic and social cohesion.

I will not dwell on the gamut of detailed measures contained in the plan, as such measures were debated thoroughly in the House last week. Of course, I recommended them to Deputy Jim Mitchell for deep study and contemplation.

I am looking for the transport costs and I do not see them. What about transport costs?

Rather, I wish to mention just one dimension of the plan which is relevant to this debate. Of course, Deputy Mitchell's interruption encourages me to ask him by how much he reduced excise duties on vehicles or by how much he reduced fuel in the four years and two months during which he was Minister in that Department?

We did not increase petrol in our budget as did the present Government.

The only way I know he was in that Department four years and two months is that the Bill for his public relations amounted to £2,000 per month —four twelves equal 48, plus two, which is 50 months — totalling £100,000 paid to a public relations office to advertise Deputy Mitchell's achievements. I should have thought he would have been well able to do that himself.

Which was about one-eighth of what Minister Reynolds spent per annum.

I refer to the commitment in the plan to achieving a movement towards greater equity and fairness in the tax system.

The Government recognise that the level of personal and certain other forms of taxation, by adversely affecting the cost competitiveness of the economy, is a major impediment to the achievement of sustained economic and employment growth. There is broad agreement that high personal taxes are a disincentive to enterprises, undermine work incentive and directly inhibit job creation. Against this background, it is necessary to recognise how the reliefs in income tax introduced by this Government in recent years have played an important role in underpinning the moderation in pay settlements agreed under the Programme for National Recovery. Of course, Deputy Mitchell did not mention anything about reduction of income tax at all.

What about transport costs? Will the Minister tell us about transport costs?

As is indicated in the national plan, the further easing of personal taxation, therefore, will be an important objective of fiscal policy over the medium term.

The Government have been pursuing a phased programme of tax reform, whilst having regard to achieving an overall reduction in Exchequer borrowing, so crucial to the stimulation of sustained economic recovery. That tax reform programme has been continued in this year's budget and is spelt out in the Finance Bill. Three key features of the tax reform programme were highlighted by my colleague, the Minister for Finance, in the Dáil yesterday. They merit repeating here today. They are: further sizeable reductions in personal tax including a highly significant cut in the actual rates of tax I think the proposal was a reduction from 60 per cent to 58 per cent. I suggest that Deputy Mitchell takes a look at the rates now; new development incentives and, at the same time, measures to ensure that earlier incentives are not abused; and further improvements in tax administration and reasonable measures to counteract transactions which are aimed primarily at tax avoidance and which, if not curbed, could prove costly to the Exchequer.

Of course, as Deputies will be aware, in the heel of the hunt, it is only by effective tax administration and a broadening of the tax base, combined with savings on Government expenditure, that we will be able to achieve the lower level of personal tax that we all desire. In this context, ordinary taxpayers will welcome the measures introduced in the Finance Bill to counter the avoidance of tax. Section 76 of the Bill has been introduced to counteract certain transactions which have little or no commercial reality but are carried out primarily to create an artificial tax deduction or to avoid or reduce a tax charge. Under the terms of the section, the Revenue Commissioners are entitled to form the opinion that a transaction is a tax avoidance transaction. Where they form an opinion that a transaction is a tax avoidance transaction they will give to each person whom they consider is attempting to avoid tax, by reason of the transaction, a notice in writing describing the transaction, the amount of tax which they consider the person is attempting to avoid and the steps which the Revenue Commissioners would propose to take in order to ensure that the tax is not avoided.

As the Minister for Finance pointed out in the Dáil yesterday this anti-avoidance provision of the Finance Bill represents a new development in Irish tax law but is by no means a new development in the international context. The need for a general provision here was highlighted by a decision of the Supreme Court last July in what has become known as the "McGrath case". It was clear, following that decision, that the means to counter tax avoidance schemes had to be fundamentally reviewed if the Exchequer was not to incur a major loss of tax revenue.

I should emphasise, however, that the introduction of this section on anti-avoidance is designed specifically to ensure that only those who are intent on avoiding tax will be affected. This section of the Finance Bill is not designed to create uncertainties for genuine business transactions or for the normal use of recognised tax reliefs. For that reason this section contains explicit safeguards to allow legitimate transactions to continue.

In short, there is no question of this Government coming under the influence of the Sheriff of Nottingham School of Taxation, about which Miriam Hederman O'Brien wrote in the current edition of The Irish Banking Review; for the uninitiated, the doctrine of that school of taxation is summarised as “You have money, I need it, you hand it over”.

I now turn to a Government scheme which encourages investment in tourism and in certain Irish shipping activities. I refer to the business expansion scheme. As Members of the House are aware, the development of the Irish tourism sector, having regard to its labour intensive nature, is central to the Government's medium-term strategy in relation to employment. At present the sector sustains 67,000 full-time job equivalents, or 6 per cent of the labour force, while export earnings from the sector make it Ireland's third largest source of foreign earnings.

But the tourism sector has a lot more potential which still needs to be harnessed. It was in this context that the Government extended the business expansion scheme in order to stimulate tourist-related investment in the 1987 budget. The extension of the scheme was specifically designed as a means of maximising our share of the fast expanding specialist holiday segment of the tourist market.

As Deputies are aware, some criticisms have been levelled at the operation of the business expansion scheme. It has been suggested that the scheme has not been achieving the original objective of encouraging the provision of equity capital for high-risk companies, which offered the prospect of substantial gains to the economy in terms of output and, above all, jobs. The Government are concerned to ensure that the scheme applies only to those projects for which it was originally designed. Accordingly, the Government decided to make certain changes in the business expansion scheme, which strike a balance between ensuring that action is taken to restrict relief under the scheme whilst, at the same time, enabling BES funding for deserving projects to continue. Section 7 of the Finance Bill contains a number of significant changes which are intended to redirect the scheme back to its original purposes.

Specifically, section 7 of the Finance Act introduces five measures. It provides that, where BES money is being used for the purchase of a ship, that ship must represent a beneficial addition to the Irish shipping register; it imposes a limit of £2.5 million on the amount of money a company or group of companies can raise under the scheme; it excludes from the scheme international leasing and related financial services; it also excludes self-catering accommodation in the city or county of Dublin and the urban areas of Cork, Waterford, Limerick and Galway; and, finally, it provides that BES relief will not be available on shares in relation to which options or guarantees are held which provide for sale at other than market value at the end of the five-year period for which shares must be retained under the scheme. Its original purpose was to aid high risk ventures. Under the section of the Finance Bill the new measures will apply in respect of shares issued on or after the date of publication of the Finance Bill, that is, 12 April 1989. I am quite confident that these measures will enable the business expansion scheme to operate.

With regard to the proposal in section 7 of the Bill to exclude the operation of self-catering facilities in certain urban areas from the scope of the business expansion scheme, the following comments are applicable. As the House will be aware this scheme was extended by the Government to the export tourism sector for the first time in the 1987 Finance Act. The scheme existed before that in relation to manufacturing industry and others. This reflected the Government's desire to encourage private sector investment in tourist accommodation and amenities catering primarily for overseas tourists. This decision met with a welcome and most positive response from the private sector, with Bord Fáilte, to date, having approved marketing and development plans in respect of some 74 projects involving total planned investment of over £110 million. This adds very considerably to our tourism product which we want to develop to attract tourists here.

Notwithstanding this response, both the Minister for Finance and I have been concerned that a few projects involve investment in self-catering houses and apartments in urban areas of the country in whose asset value is appreciating at a high rate. This type of investment has, of late, because of rising house values in isolated areas, received quite a bit of media publicity, highlighting the potentially low risk nature of the investments. This could obviously encourage increased use of the scheme for ventures of this nature thus deflecting investment funds away from tourism products in need of development in other areas of the country. As the House knows one of the strengths of the tourism industry is that it can be developed in areas which have no other industry, either manufacturing or otherwise. Na háiteanna iargúlta, as they say, can benefit very substantially from this industry as distinct from others.

As the House will be aware, one of the main objectives of the scheme is to encourage high risk investment. Projects involving investment in the type of property, which is now being excluded under section 7, scarcely reflects this objective.

Accordingly, the Minister for Finance, in the Bill before the House, is now acting to avert this type of situation. I, therefore, fully endorse the proposal in the Bill to exclude from the scope of the scheme self-catering accommodation in the areas mentioned. This will ensure that the scheme achieves the type of investment which will be of most benefit to tourism, and that investment will be in projects which, while having the potential to considerably increase tourist traffic also carry high risks for the investor. That is the important point. It will also copper-fasten the spirit of enterprise and risk taking which the scheme is designed to encourage.

The Bill proposes an upper limit of £2.5 million on the amount of shares issued by a qualifying company in respect of which relief can be reclaimed. This should have the positive effect of creating a greater and more flexible spread of private sector funding across a broader range of qualifying tourism activities rather than a concentration of large funds into a small number of projects.

Finally, in regard to the business expansion scheme, the Bill proposes that no relief will be provided in respect of shares which are subject to agreements, options or guarantees in regard to the buy-back of investors' shares at a price other than a price equal to the market price at the time of acquisition. Guaranteed pay-back arrangements currently being offered by promoters effectively attempt to use the scheme for profitable low risk returns for the investment. This proposal, therefore, again reflects one of the main purposes of the scheme, namely, to promote risk investment.

I know that my colleague, the Minister for the Environment, Deputy Padraig Flynn, will deal very adequately with the whole environment and the road situation in particular. In my negotiations and discussions with the Irish Road Hauliers Association and IOTA, the international hauliers association, the Confederation of Irish Industry, with whom I met recently for a very long and exhaustive treatment of the transport business in the country, they brought to my attention the importance of the development of the road system, particularly the arteries which take our exports to ports in Dublin, Rosslare, Waterford and Cork. I know that the blueprint for the road development programme which the Minister for the Environment has put together and lodged in Brussels to attract the Structural Funds will cover this area more than adequately.

In the course of my speech to the House last week I referred to the fact that the most significant reason for the relatively high transport costs in this country was the deficient state of the national roads and the access roads to the principal ports and airports. For the record of the House, it is reckoned that transport accounts for 9 per cent of total costs in this country as against 4 to 5 per cent on the mainland of Europe, which is an indication that we have double costs. We have to deal with that problem and the Government and the Minister for the Environment are committed to reducing the difference in costs. Competitiveness is at present the name of the game and will continue to be so in an enhanced and increased fashion after 1992. As a means of reducing transport costs, the Government propose to invest £775 million in the improvement of national roads during the five year period, 1989 to 1993. In addition, the private sector are being encouraged to invest in toll roads. Any such investment will be used to accelerate the programme of investment proposed by the Government for national roads.

In this context, I should like to refer the House to a section of the Finance Bill which introduces a major incentive for private sector investment in toll-road projects. Section 15 of the Finance Bill — and I take it, a Chathaoirligh, you will agree that I should address myself to this Finance Bill—contains an amendment whereby the existing 50 per cent capital allowance relief for expenditure on toll-road projects, which expired recently, is now being replaced by a provision to allow the write-off in full of this expenditure against toll income. In addition, pre-trading interest which arises on capital borrowed to fund this expenditure will also qualify for relief. The new concession will run for a period of three years, and will encourage the active participation of the private sector in a significant way in the future development of toll roads.

There is no doubt that this Finance Bill, which gives effect to the taxation and other changes announced in the budget of last January, forms a vital part of a consistent and comprehensive strategy for economic growth and employment creation. The Bill also demonstrates how this Government are continuing with the process of reforming the structure of the taxation system as well as introducing certain specific incentives to help develop the key economic sectors.

The Government are concerned to foster the efficient working of markets and competition within accepted social conditions. This is necessary in order to improve the efficiency and competitiveness of the economy, to ensure that resources are used to the best effect and to minimise impediments to economic growth and job creation. More economic growth and more jobs are our key objectives. It is towards those objectives that the budgetary strategy, the Programme for National Recovery, the National Development Plan and the Finance Bill are all directed.

I should like to comment on the point raised by Deputy Mitchell about the need for a continental distribution sector. Given the changes that are taking place in the market place, making a large investment in a centre may not make as much economic sense as Deputy Mitchell believes. I think his few years away from the transport scene was apparent in the remarks he was making. He does not know what the evolution or the development in the transport field have been since he left office. The people with whom I am discussing the improvement of our access, the improvement of our road system, our port system, our shipping services and our air services are very insistent on the importance of "JIT" as far as the development of transport is concerned. The "just in time" concept is one that is strongly evident in the European scene. Much more relevant in the economics of transport is the concept of "JIT" which means moving goods from the factory to the customer without any delay in warehousing.

There was one reference to air fares. Deputy Mitchell fails to accept that there have been radical initiatives by this Government in relation to air fares into Ireland which have resulted in a dramatic increase in travel to and from Britain and to and from mainland Europe. Over 250,000 people came last year. As is pointed out in the National Development Plan, in the past two years the increase has been in the order of 50 per cent. I do not find it in my heart to criticise Deputy Mitchell for being out of touch because he has not been spokesman on transport in recent years and he was wandering all over the place. He did not have many effective or punchy points to make regarding transport. I have no doubt that had he been left in transport his contribution would have been more effective and more germane to the issues as they are now and not as they were two years ago when he left office.

Tá áthas orm faill a bheith agam páirt a ghlacadh sa díospóireact seo ar an mBille Airgeadais, 1989. Gheofar sa Bhille seo athruithe ar na polasaíthe a fógraíodh sa gCáináisnéis i 1989. Tá na hathruithe sin luaite agam cheana féin agus pléite agam.

Baineann an Bille agus an Cháináisnéis le forbairt gheilleagar na hÉireann. Tá roinnt mhaith forbairtí ag teastáil d'fhonn a chinntiú go mbeimíd ábalta dul san iomaíocht go rathúil sa Chomhphobal Eorpach, agus dúirt mé cheana féin gurb é "iomaíocht" an focal is tábhachtaí in a leith seo. Mar sin, molaim an Bille seo don Teach.

This Finance Bill comes at a time when we are told that all the indicators in the economy are correct and that the economy is in a period of growth. Economic growth is of importance because it is a measure of the material progress of the country, but there are problems in the measurement of its economic growth and in reflecting how it is affecting the people in the economy. In terms of economic growth if you dig your dinner in the back garden and shoot a rabbit you do not appear in the economic indicators but if you go down to the supermarket and buy a frozen meal you are increasing the national income. There are difficulties in deciding what effect economic growth is having on people. Similarly, the measure of GNP has become less important as people realised that the huge profit outflows are included in the GNP. The huge outflows in the economy in recent years are gone out and are of little benefit to the Irish people. Therefore, Irish economists no longer focus on GNP in relation to economic growth but on GDP because the gross domestic product excludes these outflows of profits. The outflows have been very considerable for some years and the forecasts are that they will continue to increase.

The ESRI, in its medium term forecast, said that the outflows of profits, dividends and royalties in 1987 was £1.413 billion, in 1988 it was £1.652 billion, in 1989 it is forecast as £1.880 billion, in 1990 as £2.141 billion, in 1991 as £2.384 billion and in 1992 as £2.649 billion. There is no evidence that the outflows from the economy will fall or that they will be restricted. This Finance Bill, no more than any other Finance Bill, has done nothing whatever to deal with this enormous loss to the economy of the outflows in profits, dividends etc.

In spite of the shortcomings in the measurement of what is called economic growth it has been relatively consistent. Several years of the 1980s actually saw a decline in growth in Ireland compared to growth in most European countries. Industrial output has increased substantially each year in recent times, rising very rapidly since 1980. Unfortunately, it is the result of greatly increased productivity by fewer and fewer workers who produce more and more and in that way produce more profits, much of which flows out from the country. The resulting profits are exported particularly from the multinational companies which have shown the greatest increase in industrial output and, of course, they are also free of tax because they are exporting. The benefits of the Irish economy are enjoyed not in Ireland but elsewhere. In the last two years we had growth in gross domestic product between 2.5 per cent and 3.5 per cent. The Economic and Social Research Institute has forecast economic growth of 3.5 per cent a year until the early 1990s. I believe the Government concur with this. This is an improvement on previous years but with different policies it could be of real benefit to the country.

Ireland's present economic growth is mainly of benefit to those with capital; it no longer spills over to the mass of the people. In other words the rising tide no longer lifts all boats; the reasons are obvious, and this Finance Bill does not deal with that problem. All the economic indicators are marvellous and yet unemployment and emigration are of huge proportions. The Government have given the impression that nobody can understand why this happens. It is very clear why it is happening. Nothing illustrates the failure of conservative economic policies more clearly than the demographic denuding of Ireland. Had those one million Irish people who live in other countries stayed here and raised families then the economic growth would have been higher and also domestic demand would have been much higher and there would have been more job opportunities and tax revenue and Ireland would be a more prosperous country.

There was unprecedented net immigration of over 100,000 people between 1971 and 1979 but this was reversed between 1981 and 1986 with 72,000 emigrating. Ireland's population is likely to fall by about 200,000 between now and the end of the century. Using optimistic forecasts an estimated 25,000 people will leave Ireland every year up to the year 1996. This is up on the average of 18,000 a year between 1981 and 1986. A total of 325,000 people will have emigrated between 1986 and 2,001 based, as I say, on optimistic forecasts. The medium assumptions are that 25,000 people will emigrate each year from 1986 to 1996 and 20,000 a year after that up to the year 2001. The high assumption is 35,000 a year from 1986 to 1991, 30,000 a year between 1991 and 1996 and 25,000 a year from 1996 to 2001. From the actual outturn in 1986, 1987 and 1988 the high assumptions are the ones which are being reached. In 1986, 27,000 emigrated, in 1987 the figure was 28,000 and in 1988 it was 32,500. These figures are based on the CSO figures and on replies to parliamentary questions. Even taking the medium assumptions a total of 325,000 people will have emigrated by 2001 giving a net loss of 200,000 in the population.

The Irish will no longer be the young Europeans in the next decade. They will be a middle-aged and ageing population the same as the rest of Europe at the moment, with the largest growth in the 45 to 65 age group. There will be a decline in the numbers of young people under 15 — a fairly massive decline depending on the rate of emigration. These changes will have implications for the construction industry, for housing, for education, and for health and welfare spending which will be increasing because of the growing elderly greying population. There will be a decline in the dependency ratio due to the decline in the under-15 age group. In 1971 Ireland's dependency ratio was 42.3 per cent. In 1986 it had declined to 39.5 per cent and by the year 2000 it is estimated it will be 33.5 per cent.

Unemployment is forecast to remain at present levels into the next century. There will be stabilisation in the decline in industrial employment but there will be a continuing decline in agricultural employment. It is interesting that Michael Dillon one of our leading agricultural economists said perhaps six weeks ago that there had been a loss of 20,000 farmers in the last decade. It is estimated that 40,000 will have left farming in the next decade. I do not hear any of the Joe Rays or the Clintons or any of the IFA people screaming about that. Why? Is it because they will be grabbing up the land as the smaller farmers get out? That forecast should shake many people particularly Fianna Fáil in Government who say they have fought for the small farmers for many years. While industrial employment will be stabilised, there will be a continuing decline in agricultural employment and in the number of farmers.

There will be a reduction in public services which will probably have to cease in another year or two because of the need for growth in the numbers in the public service. We have the lowest percentage of people in the public service and in the civil service taking all other countries in Europe, except Greece. The fall in employment in the public service will probably ease off in the next few years but unemployment will remain roughly around its present figure up to the end of the century.

Prices are likely to rise by less than 4 per cent a year in the next few years thanks to the substantial contribution of workers in accepting very moderate wage increases under the Programme for National Recovery in spite of very high and grossly unfair income tax. Productivity has grown enormously in the eighties. Output per worker has doubled and in some modern industries output has trebled. In the past, high productivity profits were shared with workers in the form of higher wages. Workers used to get a wage increase equal to the rate of inflation plus the growth in productivity. That day has gone. In that day as well if a worker got a wage increase he would have been able to keep it and not hand it back in tax. At the end of the Programme for National Recovery it is very likely that workers will seek to make up lost ground on the wages front, particularly as they know that they have generated massive profits with increased productivity, and because they see in this Finance Bill, despite all the promises in the Programme for National Recovery, that there is no sign of tax reform.

One of the major things workers looked forward to in the Programme for National Recovery was tax reform and jobs. Neither has materialised. This Finance Bill is a betrayal of the taxpayer. The Government have failed to deliver on the promise of significant tax reliefs to the PAYE sector. We have the usual minor reshuffling of tax bands with no real tax reform. Since the great tax marches of the late seventies and the early eighties every Government has promised tax reform yet the burden on the PAYE taxpayer has continued to grow.

This year's Finance Bill will do nothing. In fact, the total tax take from the PAYE taxpayer will continue to increase this year. Since the new tax year started most workers have had an opportunity to see in cash terms what exactly the much-heralded tax changes announced in the budget will mean for them. In the case of the lower paid especially, the changes have been derisory. In some cases people on lower incomes have been left worse off. In general terms inflation and the tax concessions will not even be enough to ensure that people are no worse off at the end of the year.

The only tax concession of any significance affects the better off. A married couple with two children, one spouse earning £8,000 a year, will benefit to the extent of a measly £82.42 a year. A similar couple earning £30,000 will benefit to the extent of £718.28 in a year, nine times as much. A single person on £6,000 a year will have an additional £85.92 at the end of the year. A similar person earning £30,000 will have £648 extra in a year, almost eight times as much. It is the well off who will benefit most from the reduction in the tax rates and not those who really need tax relief. The highest rate of tax has gone from 77 per cent in 1976-77 to 56 per cent this year. That is at the top end. That relief will apply to the super rich, the Tony O'Reillys, the Michael Smurfits and Tony Ryans, if indeed they pay any tax at all.

And yourself.

To me? How will it apply to me?

You get a big one, Deputy.

They are not the people who need tax relief. Similarly, the decrease from 35 per cent to 32 per cent will also apply to non-earned income such as bank interest to which the DIRT tax is applied. This is also the case with regard to professional fees covered by the withholding tax. Once again in this Bill, Fianna Fáil have shown where their real allegiance lies — with the rich and the super-rich. On a number of recent occasions I have quoted figures given to me in reply to Dáil Questions by the Minister for Finance, from last October onwards. These show just how much the tax burden has increased on the PAYE sector when compared with other groups. I make no apologies for repeating these and having them written into the record once again. An analysis of the figures given to me by the then Minister for Finance, Deputy MacSharry, shows that during the period between 1983 and 1987 the average tax take from PAYE workers increased from £1,911, to £2,920. That represented an increase of more than £1,000, or 55 per cent. In the same period the average tax paid by farmers decreased from £705 in 1983 to £585 in 1987, representing a decrease of 17 per cent. That means in actual figures that the average PAYE worker was paying £56 a week in tax in 1987 when the average farmer was paying £11.

Incredibly, the average tax paid by farmers decreased in each of the last five years but there has not been any significant improvement, either, in relation to the self-employed. In 1983 the average PAYE worker paid £401 per year more than the average self-employed person. Given that the self-employed category includes very many high earning professions, such as medical consultants, engineers, lawyers, accountants, businessmen, employers of all kinds, it is an outrage that the average return from this sector of self-employed should be only £2,526 compared with £2,920 in the PAYE sector.

We are constantly being told that we are the highest taxed people in Europe. That is totally untrue, of course. What is true is that our workers are the highest taxed workers in Europe. Corporate taxes have been consistently reduced over the past two decades. While they used to constitute 10 per cent of taxation, they now bring in only 3 per cent. Similarly with property taxes, which have also been consistently reduced and are now by far the lowest in Europe. The wealth tax has been abolished and the capital gains tax is just a farce.

Both Fine Gael and the Progressive Democrats now accept that work is overtaxed, what we have been saying consistently over the years. They make great play of the need to reduce tax on employees' wages and salaries, something which we have constantly called for but neither Fine Gael nor the Progressive Democrats have said how this should be done. Labour is overtaxed. How would the shortfall in income to the Exchequer as a result of reducing the tax on the PAYE worker be made up? Are Fine Gael and the Progressive Democrats saying there should be further cuts in education, in health, in social welfare— or perhaps its abolition altogether—if there is to be the enormous drop of intake from the PAYE worker? We say that the shortfall would be made up by an increase in corporate taxes, in property taxes, in wealth taxes, etc. We believe that the total tax take must be maintained. We are not overtaxed in the total tax take. In some cases the tax take must be increased in order to avoid any further cuts in health, in education or social welfare.

A very substantial part of this Bill is devoted to anti-avoidance measures. This is novel in Ireland. It is most unusual, a completely new initiative. It is not a bit novel in many other countries where it has existed for many years. We welcome very much the sections in this Finance Bill on tax avoidance. I hope it is an indication of the Minister's understanding now that what we in The Workers' Party have been saying for many years is true, that there is a crock of gold out there, for a start, in tax evasion and there is another crock of gold in shutting off the loopholes of tax avoidance. We have always been told that everybody was paying his or her fair share but the truth was uncovered last September when £500 million unexpectedly flowed into the Exchequer by post. I hope that this is an indication that Minister Reynolds understands that the finances will never be got into order, that no tax reform can take place and that the PAYE take cannot be reduced until all loopholes have been closed off, all avoiders stopped and all tax evaders punished. We have raised this question of tax avoidance and evasion year after year.

The specific anti-avoidance measures in this Bill arising from the McGrath case are also welcome in so far as they go. It is disappointing that the measures have not been made retrospective, even if it be necessary to change the Constitution to do so. There must be some doubt as to the adequacy of those measures. Too often in the past specific and well intentioned sections of different Finance Bills aimed at ending one vehicle of avoidance ended up opening up further loopholes for the rich to exploit. Tax avoidance has become one of our few growth industries in recent years. People involved in this activity have also had the wealth to employ accountants and tax consultants, availing of every possible device and loophole to limit or totally remove tax liability while the tax burden on workers grew heavier each year, it is outrageous that at a time when those on relatively modest incomes are paying up to 58p in the £ on PAYE the small wealthy elite should be permitted to avail of artificial devices to avoid payment of tax on very substantial capital gains.

It is interesting to contrast the generous way in which our tax regime and our courts treated the McGraths with the way in which the same parasites treated those who had worked loyally for the Irish Sweepstakes. Most of these workers had given decades of loyal service to that company. Yet, when they were no longer necessary to the McGraths' money making exercise, they were cast on the scrap heap, with only token redundancy and little or no pension provision. These workers were left to pick up the pieces of their lives and eke out a miserable existence while the McGraths, courtesy of their lawyers, accountants and phoney companies in the Isle of Man, were able to laugh all the way to the bank.

The tax avoidance schemes are in total contrast with the commitment in the Programme for National Recovery that greater tax equity would be achieved. The Government made a specific commitment in that programme that in the tax area they would make whatever changes are considered necessary whether administrative or legal. Trade unions must now ensure that there is no pulling of punches on the part of the Government. Legislation to close the loopholes must be watertight. It should be retrospective and, as I say, the Constitution should be changed, if necessary, to allow for this.

There are two specific areas in the Finance Bill to which I want to make reference. Section 8 of the Bill — and I mentioned this following the budget — allows the employer to hold on to the employees' PAYE deductions for a period up to one year. In effect this gives the employer a one year interest free loan, and not alone does he have the benefit of the money but he can invest it and gain interest for himself. This money belongs to his employees or to the Government, but certainly does not belong to the employer.

I must raise the constitutionality of the section. A number of people have discussed the constitutionality of the PAYE system and whether it is in accordance with the Constitution to deduct from an employee's rightful earnings, which is the only property that an employee or worker has under the property provisions of the Constitution. It may well be unconstitutional but whether it is or not, I believe it is unconstitutional to hand that money back to his boss. Money is not deducted from the worker's wages to give to his boss but to give to the Government to sustain services, such as health, education, local government and social welfare. The worker is prepared to pay PAYE for these services and does not mind paying a fair rate of tax, if everybody pays the same rate of tax because he understands that it is absolutely essential for running the economy. Everyone should pay as everyone benefits.

The workers are prepared to pay their taxes and have them deducted from their week's wages. However, under this section, the Government are telling the employers that they can deduct the tax from their employees' wages, that they may retain it for one year and that it is theirs to do what they like. That is my understanding of this section, but I cannot believe it. It is totally unacceptable that a boss could be told he can deduct the tax from his employees and hold it for a year. I doubt very much if it is constitutional to hand the tax deducted from the employees to the boss. Why not leave it to the employees until the end of the year?

They might not want that.

I resisted the introduction of the PAYE system some 30 years ago because the employee lost the right to pay or not to pay his tax as he wished. Everybody else had that right and availed of it, but the employee has no such right under the PAYE system.

I now wish to comment on section 15 — incidentally we will be opposing both sections on Committee Stage. Section 15 deals with the allowance for certain expenditure on roads, bridges, etc. and I will now refer to it as the Tom Roche section as it was brought in specifically for him. The section provides that Tom, who up until this time could offset 50 per cent of his expenditure—

Deputy Mac Giolla may have been advised beforehand that it is not the custom of this House to either praise or criticise people who are not here to accept or resist what may be said about them. Because of the Deputy's sense of fair play. I think he would agree that this is desirable, and I know he would want to honour this.

I am not criticising Tom Roche, but I am simply saying that there is only one person who has so far built toll roads or bridges. So I will just call him "Mr. Toll Road". At present 50 per cent of the capital expenditure is allowable against the income from the tolls and now the allowance which can be offset against the income from the tolls is being increased to 100 per cent. In effect, this will mean that no tax will be paid on the toll income over the first ten or whatever number of years, and the amount he can set off each year is set out in the section. The total expenditure is being set off against the tolls. The odd thing is that one of our economists, Mr. Ron Bolger of Stokes, Kennedy, Crowley, thinks it is most unfair that he can only offset his expenditure against his toll income and that he should be allowed offset it against all profits. This gives you an indication of the thinking of the economists writing in the media. It is doing no harm to his job to come out with comments like that.

I am opposing section 15 on the grounds that it is an attempt to remove the possibility of taxation from people who are picking up public money from tolls —"picking up" money is precisely what it is. At present the second toll bridge is being built at the Strawberry Beds by the same person — I suppose I cannot mention his name as the Leas-Cheann Comhairle has said that to mention his name is to criticise him — who built the East Link toll bridge. The odd thing is that a highway with two lanes of traffic approaches from each side but the bridge is a little narrow bridge that holds one lane of traffic on each side. How it was ever passed and agreed I do not know. However, it means he can build the bridge for half of what it would cost to build a bridge wide enough to take traffic from the approach roads. There will be a big bottleneck at the approach to the bridge and everybody will have to pay a toll to cross it. Under this section he will be able to double the expenditure he can offset against his profits in the future.

Finally, we have been compaigning for many years for the immediate reduction of the burden of PAYE. We want to do it in three ways: first, by equalising taxes on all incomes by shifting some of the burden to the self-employed, the farmers etc; second, by leaning much more heavily on capital taxes, increasing corporation profits tax, property tax, wealth tax and capital gains tax and in that way shifting more of the burden from the PAYE worker and labour to capital; and third, by pursuing tax evaders and treating them as criminals, which they are, and by closing the loopholes. I am very glad to see the Minister has taken a first step in closing the loopholes that allow for massive tax avoidance.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.
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