Finance Bill, 1989: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a second time."

Would the House please come to order? Deputy O'Dea is resuming the debate.

When the debate adjourned last night——

I must insist on order. The conversation in the lobby is intruding into the Chamber and constitutes disorder. The Deputy in possession cannot be heard.

When the debate adjourned last evening I had referred to the fact that the bands of income taxable at the standard rate——

Sorry, Deputy. The commotion still continues in the lobby.

——of 32 per cent and the bands of income taxable at the middle rate of 48 per cent had been increased in the Finance Bill by more than 7 per cent which exceeded twice the projected rate of inflation when the Minister made his Budget Statement here last January. The net effect of this, together with section 1 and the other reliefs and allowances which appear throughout the Finance Bill, is that the Government have more than attained their target of bringing twothirds of Irish taxpayers into the standard rate of tax. I say they have exceeded their target because when they first voiced that aspiration the standard rate of tax was 35 per cent. Instead of bringing 66 per cent of the population into a 35 per cent rate they brought 64 per cent of the tax paying population into a 32 per cent standard rate of tax.

The marginal tax rate of more than 600,000 taxpayers will fall as a result of the budgetary provisions and the provisions in this Finance Bill. From 1982 to 1987 the rate of personal taxation was inexorably increasing. Last year that rise in taxation was arrested and this year it has been turned around. That is of great significance to the Government when combating the pay element in inflation. Deputy Desmond, Deputy Noonan and other Deputies have adverted to the danger of a resurgence of inflation in the Irish economy. I take this opportunity to urge the Government not to resort to any drastic action to control resurgent inflation. The approach the Minister has signalled is the correct one, namely, a steady hand on the tiller rather than any drastic or precipitate action which might damage the economic growth which the success of the Government's financial policies over the past two years has generated.

Deputy Desmond spoke at great length about imported inflation. The reason inflation is being imported is that the value of property is rising and the amount of net income available to people after tax is rising. There is an atmosphere of buoyancy and confidence in the economy and consumer spending is on the increase. The borrowing capacity of taxpayers is on the increase because of the increase in the value of their property. When that trend takes place within an economy there is a natural tendency to purchase more imported consumer goods. That is why we are in danger of importing inflation into the economy. It is ironic that because of the very success of the Government's financial policies over the past two years there is a danger that inflation will come back into the economy. Rather than take drastic action, such as has been taken in the United Kingdom, I would urge the Government to maintain their present course of action.

Section 3 of the Bill continues the £286 PRSI allowance against income for tax purposes. The argument has been made on a number of occasions that the average industrial wage earner will pay about £1,000 in PRSI. The rate of PRSI for employees is fixed at 7.75 per cent up to a ceiling of £16,700 per annum. The argument has been used that if an employee is paying 7.75 per cent of his gross wages in PRSI and he is only allowed to claim on average about 2½ per cent, in effect, he is paying tax on income he does not have. That is not correct because no taxpayer in this country is paying tax on more than his gross income because of the system of personal allowances which operates. I do not know why the figure for this allowance was fixed at £286; neither do I know why it is necessary to renew it each year in the Finance Bill. Perhaps the Revenue Commissioners do not want to encourage us to believe that this allowance will stay permanently within the tax system. Nevertheless, it must be pointed out that renewing this allowance for the tax year 1989-90 will cost the Government in excess of £51 million. While the allowance could be more generous in terms of the actual amount of PRSI paid by taxpayers one has to recognise that the Revenue must be protected and that the budgetary provisions must strike a fine balance. Though this is a small allowance it is very expensive. I thank the Minister for continuing that allowance.

Section 4 reflects the success of the Government's economic policies. Basically, the section provides that people on preferential loans who are taxed on the difference between a 12 per cent rate of interest and the actual rate of interest they are paying on their preferential loans will be taxed now on a different amount; they will be taxed on the difference between the actual interest payable on their loan and a figure of 10 per cent. The reason for this change is obvious — it is because of the drastic fall in the rate of interest over the past two years. That is a barometer of the success of the economic policies being pursued by this Government.

I am not quite sure, a Cheann Comhairle, what the reason is for lines 26 to 30 of section 4 of the Finance Bill. This is part of the definition of what constitutes a preferential loan for the purposes of the section. The text states that a:

"preferential loan" ... does not include any such loan in respect of which interest is payable at a rate that is not less than the rate of interest at which the employer in the course of his trade makes equivalent loans for similar purposes at arm's length to persons other than employees or their spouses;

I cannot think of any particular loan or any particular situation that falls within the ambit of those words. Will the Minister indicate what situation he has in mind there?

I would also like the Minister to address the question of the reduction in the benefit in kind in section 4. This is confined to persons who have got preferential loans for mortgage purposes. A loan for a mortgage is one of the very few loans on which the taxpayer can claim against his income for tax purposes. Despite that, these are the people who are benefitting by the reduction in the benefit in kind on which they will be taxed under section 4. In other words, mortgage holders are being given an advantage twice over as a result of section 4. They can claim the interest against their income for tax purposes and those with preferential loans will now be paying tax on a benefit in kind which is substantially less than the benefit in kind on which other preferential borrowers will pay income tax. Will the Minister indicate why this is the case, why persons who have preferential loans other than loans for mortgage purposes will be at a double advantage as against persons with preferential loans for mortgage purposes?I agree that the category of persons who can claim interest on loans against their income for tax purposes is now very limited. However, the Minister will be aware that certain categories of persons who borrow money to purchase shares in a company can claim the interest against their income for tax purposes. If those people are given those loans now at a preferential rate they will pay tax on a notional benefit in kind which is equivalent to the difference between the actual preferential rate and 12 per cent. When replying will the Minister say why the benefit in kind in this case is not reduced to the difference between the preferential rate and 10 per cent, the same as it is for mortgage borrowers?

Section 5 deals with mortgage interest relief and it further restricts the amount of relief which can be claimed against one's income for mortgage purposes from 90 per cent of the amount borrowed to 80 per cent. The maximum limits of £4,000 in the case of a married person and £2,000 in the case of a single person are continued. There has been much comment on this and I notice that the comments being made from the Opposition benches during the debate on the budget when this was first announced are very different from the comments now being made. With the resurgence of the inflationary problem, the Government strategy in further restricting mortgage interest relief is now obvious. In 1987, when mortgage relief was first restricted to 90 per cent of the interest paid, the mortgage rate here was 12½ per cent. Now as a result of sound fiscal and financial policies over the past two years it is down to 8¼ per cent. The greatest impact of the initial restriction and now of this further restriction will be on those on the highest marginal tax rates and that is how it should be. Even with this further restriction and taking mortgage interest at 8¼ per cent, a single person can still claim full income tax relief on up to as much as £20,000 borrowed to purchase a house and a married person can claim full income tax relief on up to £40,000. In view of the concern expressed even in this morning's papers and the comments by the Minister for the Environment yesterday and of various economists who have been warning us about the dangers of inflation coming back into the economy, fuelled largely by galloping house prices, this is a very reasonable provision indeed.

The Government are no doubt conscious of what has happened in the UK over the last few years. Property values, particularly in the southeast, escalated dramatically with the result that the value of people's collateral increased beyond their wildest dreams and this enabled them to borrow. This also gave the financial institutions an incentive to lend and in turn there was an incentive to borrow along with the capacity to borrow more because of the general atmosphere of confidence that was generated. This resulted in a huge increase in consumer spending, a great deal of which went on imports which threw the UK balance of payments out of line. Last year the Chancellor predicted a deficit in the balance of payments of about £4 billion. As a result of irresponsibly reducing rates of taxation, of escalating house prices and increased consumer expenditure, the UK net balance of payments deficit for last year ended up in the region of £18 billion as opposed to a forecast of from £3 to £4 billion. The result is that there is pressure on the currency. The Chancellor had to raise interest rates no less than 13 or 14 times in a period of less than 12 months in order to protect sterling because if sterling is allowed to drop imported inflation in the UK will put the situation completely out of control. We must avoid that. We are in the advantageous position of having seen what has happened there. We must take remedial action to avoid that here. The restriction on mortgage interest relief is one such action that can properly be taken here. If similar action had been taken in the UK to control house prices, I doubt that they would be in as bad a situation as they are today.

The other factor about mortgage interest relief is that even with the reduction to 80 per cent, the cost to the Exchequer in tax foregone will be £165 million in the tax year 1989-90. That is a considerable bonus to persons purchasing houses. It is no more nor less than a transfer of resources to home owners at the expense of all taxpayers including persons who cannot afford to get on the first rung of the housing ladder. In present circumstances with the economic backdrop to this Finance Bill, the Government cannot be expected to provide more.

Deputy McDowell worried about persons on fixed interest, those who took out local authority loans at a fixed rate of 12 per cent. The Deputy's argument was that the restrictions which we are introducing for other taxpayers on mortgages should not apply to those people because they have not benefited from the drop in interest rates. I am not unsympathetic to that approach and I would not fall out with the Minister if he did something about it but if I were in the Minister's position I would be inclined to do nothing about it because when interest rates were raging into the mid teens nobody suggested that persons with local authority loans paying interest at the rate of 12 per cent should be penalisedvis-à-vis other taxpayers because they had the advantage.If we were to do something now to give them a tax advantage vis-à-vis other taxpayers because they are paying interest at a fixed rate when interest rates have dropped, we will be driven inexorably to the conclusion that if interest rates rise again above their fixed rate of repayment we will have to penalise them vis-à-vis the other taxpayers because the pendulum has now swung the other way and the advantage has shifted to them. Rather than get into that sort of situation, it would be better to leave well enough alone. I shall not fall out with the Minister if he wants to do something about the matter, but my view is that people take on fixed interest rates for better or for worse. They must take their chances. The pendulum can swing one way or other. We should not punish them tax-wise if the interest rate goes down any more than we should use the Finance Bill to penalise them if the interest rate goes up above what they have been paying.

Deputy Noonan, Fine Gael spokesman, made reference to indexation of the maximum amount claimable if interest rates go up again. I am unsympathetic to that type of provision in a Finance Bill. I do not agree with an automatic mechanism that operates according to how the interest rate moves. If a similar situation occurred here as occurred in the United Kingdom and interest rates rose by almost 90 per cent — as happened over a 12 month period in the United Kingdom — the budgetary figures put before the Dáil by the Minister for Finance on 25 January would be £100 million out of line. If Deputy Noonan's suggestion had been taken on board, because of the increase in mortgage interest relief which would automatically apply and the increased tax forgone, the revenue side of the account would drop by about that amount. If that were so no Minister for Finance could plan the nation's finances. One would not know where one would be at the end of the year. One cannot predict what will happen to the rate of interest. If the tax take depends to such a large extent on the rate of interest, the Minister might as well not do the figures on it at all.

In his contribution to the budget debate, Deputy Noonan recognised the delicate state of the nation's finances — I give him credit for that. He adverted to the fact that we had to get the figures practically dead on. I quote from his speech in Volume 386 of the Official Report dated 25 January 1989 at column 277. This refers to the current deficit and the Government borrowing requirements.Deputy Noonan said:

On the totality of the figure the Minister goes just over £1 billion on the debt — £1.057 million is the figure he has come in with. I know the sentiment in this city among the people who will be funding this deficit, who were saying during the week that if the Minister passed £1,050 million they were going to get very uneasy and if he passed £1,100 million the game was over. The Minister is very close to the fringe.

It was not a Fianna Fáil spokesman or member of the Government who said that, but Deputy Noonan. This is the very man who is now looking for an automatic mechanism to be inserted in the Finance Bill. In the event of interest rate increases as happened in the United Kingdom, we would be not £50 million over target but £100 million. That is undesirable. It is bad law, inappropriate in a Finance Bill and I urge the Minister to reject it.

Section 7 deals with the business expansion scheme. This is a scheme of tax concessions for investment in certain businesses. Originally it was confined to the manufacturing industry. It was introduced by a former Minister for Finance — I think Deputy Bruton rather than Deputy Dukes. When introduced initially it proved to be very restrictive. Two years ago it was widened considerably to allow the business expansion scheme funds to go into other areas of the economy. Unfortunately, because of the Government's liberalism and their desire to see these funds spread into other areas of the economy and the restrictions lifted and loosened, this scheme has been abused out of all proportion.

There have been statements in the media, two from firms of accountants in the newspapers this morning, urging the Government to withdraw section 76 which contains anti-avoidance provisions.It was necessary to bring in this section because down the years successive Governments had given tax reliefs to get direct funds into particular areas of the economy, tax relief such as allowing capital acquisition losses because it was inequitable to do otherwise.Instead of being glad that they got those reliefs, tax advisers and some of their clients have abused them and turned them into mechanisms of the most blatant and arrogant form of tax avoidance. It was necessary for the Government to move drastically to stop that.

The cost to the Exchequer of the business expansion scheme was rising quickly before the Budget Statement of 25 January.It came to £2 million in 1986 but has cost £13.5 million already this year with a rush of schemes to beat the 5 April deadline. It is estimated that up to £70 million may have been raised in BES schemes in the 1988-89 tax year. The final cost to the Exchequer could be of the order of £30 million.

The safer BES projects which were being touted around the city carried money-back guarantees so that investors were getting the tax advantage with no risks to themselves. People were told that they could not lose, that they were backed by a bank which guaranteed the money. Unfortunately, there are too many people in this country who cannot win.

I am sorry to interrupt the Deputy, but I feel bound to remind the House that there is a time limit to this debate. It must conclude this evening. So far as I know, there are a number of Deputies offering. I am sure Deputies will have regard to the time factor involved.

I want to mention two aspects briefly. First, there has been criticism of the general restriction of £2.5 million maximum per qualifying company.I agree with that necessary provision.I have been recommending it for some time. The initial intention of the Government in introducing the BES tax concession was that small, high risk manufacturing companies, or companies which might not necessarily be in the manufacturing field but be going into a field which might create jobs, would get seed capital. If any company has already obtained £2.5 million of BES funds — there will be exceptions, of course — I cannot see why they could not borrow whatever they need from then on from other sources. If they are not in a position to do that, there must be something wrong.

Section 7(d) provides that relief in relation to certain option or guarantee arrangements will not be available unless the investors' shares are purchased at a price equal to their market value at the time of purchase or acquisition. It will often prove very difficult indeed to establish the exact market value of those shares. Nevertheless, I agree with this provision which is necessary and is designed to counteract a particular tax avoidance mechanism.

Sections 11 to 14 deal with accelerated capital allowances. The 1988 Finance Act reduced these allowances and these sections continue in that vein. They are designed basically to restrict the maximum accelerated capital allowances that could be claimed in any one year to 50 per cent of expenditure. Section 11 deals with machinery and plant, section 12 with industrial buildings and section 13 with farm buildings.

Could I dissuade the Deputy from going into great detail on this, the Second Stage of the Bill? Detail ought to be left to Committee Stage.

There are very detailed sections. I am outlining generally what they provide and what general comments I have to make.

The details should be left to Committee Stage.

I do not want to become involved in an argument with the Chair, but in my experience, having been involved in Committee Stage debates on the last five or six Finance Bills, we spend all the limited time available for Committee Stage debating the first eight or nine sections and have no time to debate some of the more detailed sections at the end of the Bill which have a profound effect on the lives of people. We spent three weeks debating the budget after it had been put into operation. I bow to the ruling of the Chair but I think it should be changed.

If time limits apply to the debates, the Chair has no control over that.

The Whip did not indicate to me that my time was limited in any way.

As I have said earlier, this debate concludes this evening.

We would like to get home tonight.

I am aware of that. The provisions relating to accelerated capital allowances make no distinction between banks and other financial institutions who purchase machines and buildings for subsequent leasing and persons who purchase them for use in business. Regardless of this point, I welcome the provisions because they are in line with the international trend, which is to reduce the rate at which business can claim capital allowances as a trade off in return for reducing the basic rate of corporation tax. We have seen a trade off here also where the basic rate has been reduced to 43 per cent from 50 per cent.

Section 15 deals with toll roads. I welcome the increase in the capital allowance for toll roads from 50 per cent of the capital expenditure incurred in a period to 31 March 1992. However, the section restricts the type of income against which these allowances can be claimed. There is no doubt that this will decrease the attractiveness of the allowances for those who were interested in providing such toll roads as it was hoped that the available capital allowances could be set off against taxable profits from other activities within their company or group. It may take a long time before a positive cashflow is generated by the toll road and therefore the restriction of the allowances to such income seems to be harsh.

I welcome the provisions in the Bill relating to collective investment undertakings.The Minister had indicated that the present system of taxing unit trusts is out of line with what is happening in other EC countries. In Ireland unlike every other EC country, if I am not mistaken, unit trusts are taxable as a unit, but that is now being changed. With the mobility of capital in particular after 1992 we would have been at a comparative disadvantage with other countries which tax individuals on unit trusts. It is the Government's intention to eliminate the competitive disadvantage which results from the peculiar nature of our tax laws. However, I question whether the Minister has actually succeeded in doing that. I am worried that the undistributed income of a unit trust is subject to withholding tax, as some of that income can be attributed to foreign investors. My understanding of sections 16 and 17 is that withholding tax will still apply if some of that income is attributable to a foreign investor and that he would have to apply to the Revenue Commissioners for a rebate of tax. I understand this does not obtain in other countries which have similar unit trust laws. Therefore I ask the Minister to look again to see if there is any way we can avoid that situation. Would it be possible to have some provision whereby the undistributed income of a unit trust which is attributable to foreign investment would not bear the withholding tax and that withholding tax would apply only to a proportion of the undistributed income?

I welcome the provisions in the Bill to restrict the use of section 84 type loans. I had hoped to explain in some detail the basis of section 84 loans but in view of the time limit and the Ceann Comhairle's remarks, I will refrain from doing that.

The Deputy will have ample opportunity of elaborating in great detail on Committee Stage.

I will, indeed, if we get to that section on Committee Stage. In 1986 the Government imposed a levy on the banks to limit their section 84 type gains. However, section 84 lending continued and has exploded from £800 million in that year to £1,300 million last year. The latest refinement in section 84 lending involves a bank borrowing in high interest currencies, then coverting to low interest currencies, covering the exchange risk in the currency markets, lending to the customer at the low rates and claiming tax relief at the high rates. That is an ingenious mechanism but it was high time to stamp it out. Various Deputies wanted to know how much this was costing the Exchequer in terms of tax foregone. The figure for 1986 was £50 million per annum and this year it has risen to £80 million per annum. The restriction introduced in the Bill will put a ceiling on the tax leakage and then it will be sharply reduced as non-manufacturing firms based in Shannon are forced to phase out domestically sourced loans by the end of 1991. The Government are concerned only with domestically sourced section 84 loans and are not concerned with foreign based loans because the tax leakage is from foreign exchequers.

I welcome the provisions relating to capital gains tax. One wonders what benefit capital gains tax is to the economy. I notice the Minister did not give the figure for revenue accruing to the Government from capital gains tax but gave an overall figure of £45 million for capital taxation. In my opinion taxing capital gains is of very little benefit to the Irish economy at this point in time. We have heard arguments from the Left about the low level of capital taxation and how that demonstrates we are living in an unfair economy.We are living in a very delicate economy and the confidence in it was shattered from 1982 to 1987——

Go back to 1977.

——and it is now beginning to get on its feet. That £45 million is as much as the economy can bear in capital taxes because of its vulnerability at this point in time. This is partly due to the fact that the national debt doubled between 1982 and 1987.

It started in 1977.

Deputy Hegarty may interrupt me but facts are facts and you cannot run away from them.

Has the Deputy never heard of Mr. Jack Lynch and Mr. Martin O'Donoghue?

The man who has all the answers now, namely, Deputy Dukes, was the man who presided over the doubling of the national debt between 1982 and 1987. Facts are facts and I ask the Deputy to face the facts because you cannot run away from them. You can run but you cannot hide.

I will tell the Deputy more in a few minutes.

I look forward to hearing what the Deputy has to say, because he has no case. I will skip over a good part of the Bill——

There are 87 sections in it.

——in the hope that we can get to more of these sections on Committee Stage than has been traditional.

There was a good debate on the Financial Resolution relating to the flat rate VAT refund for farmers. Deputies will be aware of how the value-added tax system works. Paying back value-added tax at a flat rate to unregistered farmers is an exception to the general way in which value-added tax operates. Any businessman who wants a VAT refund has to register. Most farm outputs are mainly zero rated. Therefore most farmers would be permanently due refunds. If most farmers were to register it would involve great inconvenience and expense for themselves as well as administratively.Therefore, the Government — I do not remember which Government — decided, rightly, that to avoid all this administrative nonsense, worry, inconvenienceet cetera on the part of farmers, they would try to calculate what VAT they paid on inputs as a proportion of the total value of their output and repay that by way of flat rate repayment pitched at the appropriate percentage. To work out the percentage for unregistered farmers simply take the figure for output and the figure for VAT they have paid on their inputs. The latter is a fraction of the former. People in the Department of Finance tell me the figure is of the order of 1.4 to 2.5 per cent.

When this system was first introduced the rate was 2.4 per cent rebate. It was reduced in stages to 1.7 per cent and then to 1.4 per cent. Now the Minister proposes to increase it to 2 per cent. Apparently the reason for the reduction from 2.4 per cent progressively to 1.4 per cent was that farmers were in arrears with their income levies, health levieset cetera. Admittedly, if this was so — I have no reason to assume it was not — reducing the amount of flat rate VAT refund is a rather crude instrument because you are dealing with the sector as a whole and farmers who were up to date with their levies, health contributions et cetera were punished as were those who had defaulted, had not paid them in time and were in arrears. However, if on the one side the Government have financial obligations, the Government owe money to a sector and on the other hand that sector owes money to the Government, if that sector does not pay the Government fully what it owes, should the Government pay that sector what they owe it? As I have said, it is a crude instrument. The innocent are punished with the guilty. There was considerable improvement in payment last year. There is some speculation as to whether that was due to the tax amnesty or a sudden change of heart on the part of the farming community. I am willing to give the farmers the benefit of the doubt.

Deputy De Rossa in his contribution on the Financial Resolutions on 25 January said that last year farmers paid £42 million in income tax and their flat rate VAT rebate amounted to £80 million. He went on to suggest that farmers were costing the Exchequer money in the sense that they were getting back twice as much as they paid in. That demonstrates a misunderstanding.The £80 million flat rate VAT repaid to farmers represented only a proportion of what those farmers had already paid by way of VAT. Income tax is a separate thing altogether. Since the flat rate VAT was introduced, every year unregistered farmers paid more than they got back. In some cases I estimate they got back roughly only half what they paid over. To say that last year farmers paid £42 million in income tax and got back £80 million VAT is a facile argument. I would say last year unregistered farmers paid something in the order of £130 million to £140 million in VAT. They were getting back only a proportion of that.

The Bill contains provisions in two different Parts to allow the Collector-General of Taxes to allow business people who are paying VAT to pay it on a yearly basis or any basis less regular than the usual two monthly basis. It also provides for allowing employers who are deducting PAYE and PRSI from their employees to pay this to the Exchequer on a yearly basis or on some basis less regular than the usual monthly basis. I am glad the Collector-General is being given a discretion here because the Collector-General's office is not noted for its liberalism or radicalism. Business with a high turnover and low profit margin can get into very severe financial difficulty. Even if they are only a few months in arrears with their VAT, that can be sufficient to drive such a business to the wall and I have seen that happen. As far as PAYE and PRSI are concerned I urge the Collector-General to exercise his discretion sparingly. We are all aware of what has pertained and still pertains where employers need no section of any Finance Bill or encouragement from Government or any other source to withhold PAYE and PRSI not just for a period longer than they were supposed to hold it but to hold on to it altogether. Of all the hard cases, hardship and misery experienced during the recent economic recession, the most traumatic case I have come across concerned employees whose PRSI and PAYE have been deducted from their wages week in week out regularly and then their company goes into liquidation and when they apply for social welfare they find the employer has not paid over for the last six months, the last year or the last two years what he has taken from them for the Revenue Commissioners to whom it is supposed to be paid. An employer who behaves so is beneath contempt and I would not like to think the Collector-General would exercise his discretion under the Income Tax (Employment) Regulations, 1989, (S.I. No. 58 of 1989) in such a way as to give any encouragement to that tendency.

In his Budget Statement the Minister said, as reported in the Official Report, 25 January 1989, column 250, Volume 386, and I quote:

There has been considerable concern expressed in recent years about the steady outflow of works of art for sale abroad and particular mention has been made of the impediment which VAT at 25 per cent represents to their reimportation. In order to facilitate the retention and relocation in Ireland of works of art over 100 years old I propose to reduce the VAT rate on their sale and importation to 10 per cent. A new zero rate is not possible under EC rules. The reduction to 10 per cent will take effect from 1 July next and will cost the Exchequer £0.3 million this year.

I compliment the Minister on section 56 of the Bill where he goes beyond his budgetary aspiration. He has provided this relief regardless of the age of the work of art in question. I welcome that. It is generally speaking for the good. It must be a very rare happening.

On section 56 I want to draw a small matter to the Minister's attention. The definition of the various items which are affected by the change is not entirely clear. I am not quite sure why subparagraphs (a) and (b) of section 56 do not deal with mass produced items. Deferring to the Ceann Comhairle's previous ruling, that is possibly more appropriate for Committee Stage.

I welcome the extension of self-assessment to capital acquisitions tax. Section 67 is particularly valuable. At present when a person is assessed by the Revenue Commissioners for capital acquisitions tax he has three months to deliver a return and one further month after the delivery of the return to pay his tax. I am glad the Minister is extending the four months' amnesty where a person assesses himself. It is entirely right and logical.

Section 70 deals with cases where persons assessing themselves for capital gains tax purposes undervalue the assets which are to be the subject of the tax. The whole idea of self-assessment is that we trust the taxpayer and depend on his integrity. If the taxpayer is caught out undervaluing assets in this way it is only right and proper that there should be some provision to penalise him as a discouragement to others. The section is welcome but I am not happy that it is entirely clear that the surcharge refers to tax on the real value of the property, the value which the Revenue Commissioners, and presumably any independent tribunal to whom the matter has been referred, decide the property is worth. The Explanatory Memorandum refers to the tax ultimately due but there is no such reference in the text of the Bill. The Minister might consider that point with a view to ensuring that the surcharge will apply to the tax on the final value of the property, not the undervalue which gives rise to the surcharge in the first place.

Section 37 (4) of the Capital Acquisitions Tax Act, 1976 provides that a return has to be made on a form provided by the Revenue Commissioners. Section 73 of this Bill adds to that to provide for cases of self-assessment. A return can now be made on a form approved by the Revenue Commissioners. How will that approval manifest itself in practice? Will the Revenue Commissioners publish a list of the returns which will be acceptable?Do they have to write back within a particular period saying that a return is acceptable? Does silence imply consent? If a person does not hear from the Revenue Commissioners after a reasonable period may he assume that the return is acceptable? The position should be clarified.

I welcome that part of section 74 which extends the favoured nephew provision. The additional concession will cover a very small number of persons. It covers the case where a disponer gives a limited interest to himself and the remainder to his nephew. There is no question of extending the scope of the favoured nephew provision. The disponer is the person who creates the limited interest. If anybody else creates the limited interest then that other person is the disponer and the relationship between the nephew and that other person is the relationship that will operate for capital acquisitions tax purposes. Referring to the favoured nephew concession, the Explanatory Memorandum, which was presumably written by the Revenue Commissioners, states:

This concession is being retained, and it is being extended by this section to gifts and inheritances taken by a nephew or niece on the expiration of a limited interest created by the disponer.... At the same time, the opportunity is being taken, in the context of a self-assessment tax, to set out for the guidance of a taxpayer the minimum hours of work constituting "working substantially on a full-time basis".

Perhaps I have a suspicious nature but I am very sceptical of any offer of help or guidance from the Revenue Commissioners.Unfortunately, in this case my suspicion is borne out. The second part of section 74 is a crude attempt to cut considerably the scope of this relief, which the Revenue Commissioners never liked in the first place. They have done so by setting out the number of hours that constitute "working substantially on a full-time basis". In the case of AE versus the Revenue Commissioners in 1984 the High Court decided that a woman who milked cows for her uncle for an hour in the morning and an hour in the evening qualified as a favoured niece, but she would not qualify under this section. I note that a child from the age of 15 upwards can be taken to be working substantially on a full-time basis. It is most unreasonable to have a requirement that anybody of schoolgoing age or furthering their education beyond schoolgoing age into their early twenties——

I know the Deputy's undoubted experience in this area but taxation is about the distribution of wealth. We have to be concerned here about the distribution of time and Standing Orders. Because so many other people are offering, the Deputy might confine himself to more general points in the knowledge that he will have every opportunity on Committee Stage to indulge in any refinements that he thinks necessary.

I have already disputed with your predecessor in the Chair as to whether I will have the opportunity on Committee Stage but I will accede to your request in that regard.

Would the Minister agree to have his officials look at this again with a view to reducing the number of hours? Would he also elaborate on what the word "exclusively" means in line 46 of page 68? Are we to take it that even if a business has a part-time employee that will increase the number of hours which the favoured nephew has to work from 15 to 24?

There has been much debate about section 76. A number of accountants have issued reports asking that this section be withdrawn. One must remember that the Minister did not come in here on a malicious whim deciding to punish so and so. There is a long and dishonourable background to the introduction of section 76. It arises because reliefs, allowances and concessions which have been given in this House over the years have been abused. The Minister is right to close the loophole. The main question raised by Opposition Deputies, particularly Deputy McDowell, relates to the limited appeal procedure. The Revenue Commissioners will form an opinion that a transaction is a tax avoidance transaction.The courts have no jurisdiction to say whether that opinion is right or wrong. They can only say whether it is reasonable that the Revenue Commissioners have arrived at such a conclusion.I must have read about 500 UK tax cases where a High Court judge, an Appeal Court judge or a Member of the House of Lords said, referring to a decision of the special commission on taxation in the United Kingdom, that he would not have arrived at that conclusion himself. The issue has been raised whether that limitation on the power of the courts to hear appeals is unconstitutional.I have studied the matter and it is my opinion that it is not. This legislation is long overdue.

I wanted to say much more but because there are other speakers I will not. I started last night by wishing the Minister well. I want to take this opportunity to do so again. I am confident he will make a success of his new brief. It is in the interest not only of the Government but of the country as a whole that he does. I have every confidence in him and congratulate him on the budget and Finance Bill he has introduced, and look forward to a steady hand on the tiller for many years to come.

The Chair appreciates your co-operation on the matter.

First, I would like to thank Deputy Hegarty for allowing me this slot. It would appear, listening to Deputy O'Dea, that the world has passed him by and he has not noticed. We have a Finance Bill of 100 pages with an Explanatory Memorandum of 15 pages dealing with finances for the current year and, to the ordinary man or woman, and indeed some Members of this House, it means damn all. It is good, I suppose, that there is the odd individual like Deputy O'Dea who is prepared to come in and tease this thing out.

The situation in this House at the moment is very unreal with the Government Party being supported totally by the second largest party in the House. I am referring to Deputy Dukes and all those who support him; I am not one of them at the moment since the Whip was removed from me, so I am speaking as an independent.I cannot understand why a party that is supposed to act as an Opposition are acting the way they are. Hundreds of people around the country have expressed the opinion that the general scene is unhealthy and the youth are emigrating at a desperate rate, but nobody seems anxious to do anything about it. This is what we should be talking about rather than what we have heard during the last hour from Deputy O'Dea. I regret that the party elected to oppose are now collaborating in this way with the Government. The only opposition I see in this House is from the Labour Party. It is necessary for Fine Gael to take up the issues and they are failing to do it; they are failing in their role as an Opposition.

It is what is not in this Finance Bill that I want to talk about. Recently I heard the chairman of the Southern Health Board talking on radio about the imminent collapse of the board. The same applies right around the country. People have to wait weeks for simple medical treatment or operations. Children are awaiting orthodontic treatment, and if they do no get it before they reach a certain age it will be too late. Nobody seems to care and nothing is being done. I know money is tight, but there is a section of the community that cannot afford to have these treatments done privately and on behalf of whom nobody is speaking, and money should be channelled in their direction. The Labour Party say their bit now and again, as do Fine Gael; but when the time comes to go into the lobbies and express opinions as they should be expressed, they will not do it because they are scared the Taoiseach will call an election and obliterate them entirely.

When I was Junior Minister for Health in 1985 the chief executive of the Eastern Health Board almost fought with the secretary of the Department of Health about the allocation of funds. I had to stand between them to stop them from fighting. The chairman complained that he and his board members had built up services in the western area and they were now being decimated. They were not, in fact; there was a small belt tightening exercise. The chairman was upset about it and was continuously available to go on television with other members of the board or on his own to criticise the Government of the day. Today the situation is much worse but I hear no complaint from the Minister of State or from the chairman, Deputy Doherty, who is now seeking election to Europe and who is presiding over the decimation of the services in the western area. His predecessor who is a member of the European Parliament and also seeking election is not complaining either. It is ironic that those who complained so loudly then are silent now. I would like to see some money to help alleviate——

Deputy Donnellan anticipated that I was going to advise him, as I have advised other speakers, that he must not treat the Finance Bill as an opportunity for discussion which might be more appropriate to the Health Estimate. We have to confine ourselves to taxation. Every Deputy is allowed to establish his own background and we then assume that he will move into matters of taxation.

Thank you very much for your guidance, a Leas-Cheann Comhairle.I just wanted to make the point that the Minister could amend the Finance Bill in such a way as to provide money for health. The health cuts hurt the sick, the old and the handicapped and now, with the collaboration of the second largest party in the Dáil, the health services are being decimated. I would like to see money being provided and I am entitled, within the bounds of this 100 page Bill, to ask for that. I am not asking for too much, just a little.

What was once a primary industry here is now reduced to a secondary one, again with the co-operation of the second largest party in the Dáil. Most people and many farmers are not aware that one cannot have an adviser now from an agricultural institute without paying £30. If you are in the category of a big farmer you have to pay £50 and for subsequent visits you also have to pay. Originally it cost £42 million to run the new allembracing agricultural body, Teagasc, but that has now been reduced to £28 million. Where is the remaining £14 million going? As I see it the first thing that has been done is to reduce the number of staff by 600. It is then expected that the farmers will give about £4 million in contributions. The fabric of rural society is being broken down and will eventually go beyond the point of no return. As a result there will not be the revenue one would expect to be generated in small towns and villages.

There has been a lot of talk about closures. The one that got the most publicity in recent times was the closure of the Thurles Sugar Factory. I do not know whether that decision was right or wrong. It would be hard to identify which side the Minister for Agriculture and Food was on. Tuam sugar factory closed three years ago and no replacement industry has been set up since. It is only now that the people in that area feel the pinch of that closure. I am warning the people in the Thurles area to beware.

As I have said, there is mass emigration. There is not a family that has not been affected by it. In some cases entire families have emigrated. We are getting the finances of the State right but there will not be too many around, if there are benefits in the future, to enjoy them. Recently a clothing factory in Longford closed down with the loss of 250 jobs. There was not a word about the closure of Castlebar bacon factory. The factory in Claremorris is being run down until it can be suitably taken over. That factory catered for many families down through the years and nobody is saying anything now to prevent its closure. There is no political clout in that area which has two Fianna Fáil representatives and one Fine Gael representative, and that is the way the position will remain.

I noticed on a television programme that emigrants were brought over on St. Patrick's Day to provide the little battle between the two bands in the St. Patrick's Day parade in Achill. It is regrettable that there was not enough locals to take part. I suggest to Deputy Denis Gallagher that in the first half of the competition next year he can play with one band and in the second half he can play with the other. Recently a member of the Fine Gael Front Bench advocated — I do not know whether or not it is their policy — that there should be free telephone calls for Irish emigrants. What a lousy contribution.

Before the 1985 local authority elections the Taoiseach said the Government would give £500 million towards county roads. I suppose £1,000 million will buy off the electorate in the next elections. They talk big. By 1995 we will not need to be talking about these roads because there will not be many people travelling on most of them. In all probability the entire population will have emigrated. There are water charges, refuse collection charges and many other charges but in many cases the water supply is not even fit for human consumption. Many announcements have been made by the Minister, Deputy Flynn, about sewerage schemes——

Sorry, Deputy Donnellan, I am sure you will appreciate that the Chair has to be seen to be acting fairly towards every Deputy. I am asking you again to indicate to what section in the Bill you are relating your comments.

I think it is in the Second Schedule.

This is not an imaginary Second Schedule?

Indeed it is not. Of course without a little political clout you will not come within any of these announcements being made by the Minister, Deputy Flynn. I know that Border security, by virtue of the better co-operation — if I was to quote the Secretary of State for Northern Ireland, Mr. Tom King, when speaking on the "Late Late Show"——

That does not make it relevant to the Finance Bill.

By virtue of the fact that there is now better co-operation between North and South — to quote Mr. King — under Prime Minister Haughey, Minister Lenihan and that Republican from Limerick, Minister Collins, we will not have to spend the same amount of money there as was spent previously. I am sure there will be a saving in that area and that the money can be spent elsewhere. Of course we all knew there was exceptional co-operation between that party and the authorities in the North, as the Dowra case proved. I think there was a reciprocal arrangement some time later.

In conclusion, I am surprised that a special allocation was not provided in the budget this year for the Gaelic Athletic Association. When it did not appear in the budget I thought it would be in the Finance Bill but I regret to say that is not the case. There was talk of DIRT, VAT on hurley sticks, rates on GAA grounds and buildings and even hospital closures and health services. The questions of emigration and extradition, issues that are also close to the GAA, also arise but they are not saying one word about them. I thought that the GAA, for keeping as quiet as they have done, would have been given a special grant but I am sorry to say that has not been done. Were it not for the fact that I have a couple of friends standing for the European elections I would express my opinion a lot more clearly. However, people generally know what I mean.

Being an inexperienced Deputy who tends to rise to a debate now and then, I would like to say on Deputy Connellan's point——

Donnellan.

That shows my inexperience and lack of time in the House. Despite the amount of publicity the Deputy got in the recent past, he is worried about opposition and the lack of it, particularly, as he said, from the second largest party. He said that the only opposition that is evident is from the Labour Party. What I, as a fairly newcomer, would like to ask him, with his experience, is to define opposition. That is fairly important. Should it be the long hard slog of trying to produce alternative policies, the nitty-gritty of going through legislation — in this case the Finance Bill — dealing with items that may later be used or abused in the High Court or the Supreme Court to get millions of pounds from people, as has happened in the recent past, or should it be the kind of mischievous attack on individuals or on Government policies? A recent example was the criticisms of the beef industry and the stand taken in regard to the price of petrol. Is that what the Deputy thinks being in Opposition should be about? Does he think the Opposition should undermine the economy? Should we oppose submissions made for European funding? Is he referring to opposition for the sake of getting publicity in the newspapers in the run up to the European elections? I do not think that is the role an Opposition should play. I hope we have seen the end of the personalised type of opposition. All Members should be willing to contribute to debates on legislation going through the House in an effort to seal off any loopholes.

There has been mention of close downs but I should like to remind the House that in Cork we lost Fords, Dunlops, Verolme Cork Dockyard and 37 other small companies. There was not too much fuss about those closures and I have copies of suggestions put forward at the time as to what should be done. However, very little was done. In regard to policies for the Cork region we are at last emerging from the nightmare that we experienced over many years. In the last week we have heard the good news about Whitegate and I am sure Members like Deputy Hegarty will welcome it. Some people suggested that we should sell Whitegate, that it was a white elephant and a millstone around the necks of the taxpayers. Now we are being told that we should do something else with it. It has been purchased for the nation and could be a crucial factor in taking on the Seven Sisters and others.

I should like to refer to the call on the Minister to withdraw section 76 which deals with tax avoidance. I accept that there is a need for careful drafting in any Bill but it is important to bear in mind that those in the PAYE sector have welcomed that section. We are all aware of the few notorious cases which forced the Minister to take this action. We are all aware of the abuses of the BES and other legitimate avoidance schemes. It is unfortunate that some people were not satisfied with those schemes and sought a redefinition of tax provisions from the courts in an effort to gain further concessions. The hall-mark of the Government has been their willingness to face up to such abuses and to act speedly to close them off. For example, they acted speedily to cut off tax evasion at the Border and were criticised for doing so. I was shocked to hear one of my constituency colleagues, an old experienced hand, Deputy Peter Barry, saying that we should not tamper with the conditions there, that we should be good Europeans and so on. I cannot understand why he made such a statement at a time when the traders this side of the Border were being bled dry. I am pleased that there has not been too much fuss about that issue since. The Government have also faced up to the abuse of the tax avoidance schemes and sealed the loopholes. That is what the public admire most about this Administration. My advice to the Minister for Finance is to retain section 76. In fact, he should, if possible, strengthen it.

Another issue that was kicked around last week was the warning by the Central Bank on property prices and the dangers involved. There has been a negative reaction to that warning from the building societies, and, as far as I know, the banks have not reacted. It is important to stress that there are dangers inherent in what is taking place.

The increases in the price of house property have been crazy. In my view, encouraging people to seek bigger mortgages to follow such increases is dangerous. There is the danger of fuelling inflation although we are all determined to keep it down. I should like to ask the banks, the building societies and other lending agencies if they have forgotten what the farming community experienced some years ago. At that time there was so much money around that the lending institutions sponsored seminars throughout the country to explain to farmers how easy it was to borrow money, how they should borrow more to improve their holdings and, in particular, buy extra land. Farmers were encouraged to bid against one another and to borrow beyond their means. We are all aware that when the change came they were unable to meet the payments.

Everything was grand until interest rates increased and the unfortunate borrowers were unable to meet the extra cost involved. The banks were not very sympathetic when that occurred. If the bubble bursts again I wonder if the banks, or the building societies, will be sympathetic to the mortgage holder who will find it difficult to meet the repayments. I do not think so. Their record shows that they will not.

There is money available thanks to the careful housekeeping by the Government.The Government are borrowing less and because the money is available lending institutions are tempted to lend above what is called the standard income related levels. If they continue to do that untold damage will be done to the economy.A rule of thumb which was applied to lending has been breached. I appeal to the lending institutions not to let greed change their normal conservative guidelines.I advise mortgage holders not to over extend themselves and to allow for possible increases in interest rates. It is important that they should bear in mind that banks may be unsympathetic partners if they find themselves in financial difficulties. Those intending to purchase property should bear in mind that the Government, by careful management of the public finances, have been able to keep our interest rates approximately 6 per cent below UK rates. At one time we did not think that would be possible but it has been achieved. There is a danger that outside influences will push up our rates. If house prices continue at their crazy level there is a danger that interest rates will be increased.

People should not forget what happened to the farmers some years ago. I advise people not to borrow beyond the limit of their ability to repay. In fact, they should not go too close to their limit. If interest rates are increased people may find that they are beyond their ability to meet the increases. That is an important message, even more important than the danger of fuelling inflation. I am sure Deputy Hegarty will be able to tell the House of the difficulties farmers experienced some years ago.

The Minister for Finance on many occasions has admitted that more must be done in regard to personal taxation. Now the argument is how quickly or radically the change should be. It must be accepted that in the last two years we have seen the greatest changes in the taxation system since the foundation of the State. They took place under this Administration who will continue on that course. We have seen what could be described as radical changes had not people come up with the woolly-headed idea of a 25 per cent standard rate of tax off the top of their heads. We must continue to do more. More will be done as we get our economy under greater control, and greater reliefs can be given.

Yesterday we heard Deputy Desmond O'Malley seeking radical changes in taxation.We saw the results in Britain of their endeavouring to do too much too quickly in that respect. Deputy O'Malley quoted the British rates of taxation, demonstrating in a very negative fashion how they could affect us here. However, he did not couple with that another directly related factor, that is, prevailing interest rates. If he wanted to portray an honest picture of the overall economic position he should have linked the two. Deputy O'Malley must accept that, in endeavouring to alter one too quickly we have somewhat curtailed the other, that being our ability to repay the taxpayer. However, the control of interest rates is a definite point in our favour which he should have mentioned.

It must be said of Deputy Desmond O'Malley that always he wants radical and immediate solutions to all problems. I can remember very clearly the arrogance of that Deputy when, as a Minister of my party, he saw the answer to Ireland's energy problems in the establishment of a nuclear plant. His attitude then was — to hell with the objectors — including those in our party at the time who were worried about the proposal. His radical proposal was not feasible then, nor do I believe his present radical proposal of a 25 per cent standard tax rate to be feasible. The public now accept what is being done; they accept the necessity for control and acknowledge that their interests are being served by this party's efforts to facilitate them and to meet their needs.

Deputy Jim Mitchell yesterday described a colleague of mine as being an economic illiterate. I listened carefully to him. If that phrase were to be used by many Deputies I would regard it as a serious insult and would be regrettable. However, emanating from somebody like Deputy Jim Mitchell with his proven track record and reputation for never really meaning anything he says, it can be interpretated as just another off-thetop-of-his-head statement. Like all his later statements, it was incorrect because the person to whom he referred — to use the jargon of my area — would lose him on economic affairs and most other matters, if I might put it that way.

The Deputy went on to make other factually incorrect statements. He engaged in a long, rambling comparison of figures between 1982 and 1987. At no stage did he comment on the key statistic of that period, a figure mentioned again here this morning, relating to our national debt. He did not tell us that when he and the remainder of his colleagues at the time took over in 1983, as a nation we owed £12 billion. That debt had been accumulated over 60 odd years, granted much of it since 1977, we had been borrowing.The Deputy also failed to tell us that when that Government — which must surely go down in history as one of the most divided and possibly inept ever to administer this country — left office, they had managed to double that debt. Within a very short period, as a nation we owed over £24 billion; that is a fact and it is on record. Lest anybody attempt later to talk about opposition to that Government, about how we shouted at that time, it must also be put on record that that was a majority Government unlike the present one which is a minority one.

Minister Leyden was not so insensitive. He was keeping Castlerea and other hospitals open.

That majority Government were totally in charge of publishing their policies. Had they had the ability and initiative they would have been capable of getting any measure through this House. I will qualify that by saying they could have got any measure through this House had they not been divided, particularly when one examines potential interests arising in my area of, say, oil exploration, which had ceased, and the Broadcasting Bill, which was stopped in its tracks, not by the Opposition of the time but by a divided Government. However, they were not always in a majority position. At one stage, towards the end of their term, one group dived for cover. The remainder, including Deputy Jim Mitchell, brazened it out for a few months.

He stuck with it all the time.

They battled away courageously for another six or eight weeks and spent, I think, another few hundred million pounds.

Deputy Carey will allow Deputy Dennehy to return to specific matter in the Finance Bill.

I would like that, but the Deputy is enjoying himself.

I must refer to various points raised by Deputies. For example, Deputy Jim Mitchell did not tell us yesterday that, in doubling the national debt — this is important because it relates to what Deputy Donnellan had to say a while ago about health matters and so on — his Government burdened taxpayers with additional debt service charges which, if available to this Government today, probably would cover all our health costs.

I must say I was most unfair to Deputy Carey and his colleagues last year when, in my eagerness and youthfulness, I said they had squandered it. Perhaps they did not squander all of it but certainly they spend £12.5 extra billion in four years; that is a lot of money. The servicing of that debt would pay for all our health costs today.

Since Deputy Jim Mitchell claimed yesterday that my well qualified and learned colleague is an economic illiterate it is beyond my ability to come up with a suitable title to adequately describe a Deputy with his record. I will leave it at that.

The provisions of the Finance Bill cannot be discussed in isolation without reference to theNational Development Plan 1989-1993, the national agreement and the overall targets set in the general economic scene supported by the majority of the community including, and most importantly, the leaders of the organised sections of the farming, trade unions and employer groups. There may be fringe groups or individuals at seminars or meetings contending that something should be changed but the leadership are with us. They have said; yes, we are in agreement with you; we might rattle the sabre somewhat but overall we agree with what you are doing for the country. Therefore it would be reasonable to expect across-the-board support in this House and not, as the last speaker said, opposition for opposition's sake. Rather, we should get support on the developmental aspects of these plans.

There is a real danger in interpreting the present reality between the different issues now facing our economy and workforce.Over the past couple of months there have been serious and devious attempts made to undermine Government efforts, even those of individuals. Indeed Members have come into this House and been mischievous in their comments. They have told falsehoods, untruths, deliberate untruths, as demonstrated even at a meeting of the Committee of Public Accounts a few days ago. I hope the people of Dublin and the remainder of the country will answer those people when they next have a chance.

Speaker after speaker has referred to what we regard as our greatest social problem at present, that is unemployment.Yet the same people who complained a couple of years ago about the blackguarding going on in the beef industry, that we should not be exporting beef on the hoof, contending that it should be processed here creating jobs for our workers, now come in here and undermine the whole industry. They must realise they cannot have it both ways.

The whole question of creating jobs, in beef processing or oil exploration — a subject very dear to Deputy Hegarty and me because in our area there is now a free port which can compete with Aberdeen in the servicing of the rigs and so on——

And the Shannon Estuary.

We want support rather than having our efforts undermined.I would plead with Deputies not to undermine the industry for the sake of getting their names mentioned in the media, especially in the period running up to the European elections. On the question of the European elections I have to say that we were lambasted, when Deputies Hegarty, Carey and one or two others had a go at us and we had to soak up the punishment. They said we had no talent or Ministers in Cork.

I never said that. I was quite happy with what we had.

I admit that I am very new at the game but hopefully my time will come. I want to say to the Deputies — and I admit this is somewhat outside the scope of the Finance Bill — that whatever about having Ministers, when we were looking for talented people to run for the European elections we did not have to throw fishing trawls around the country; we picked a local Munster man and we put him before the people. We did not go for Mr. Cushnahan or any other outsider.

Please, Deputy Dennehy——

I apologise, a Leas-Cheann Comhairle, but we did not rise to the bait earlier when they accused us of not being capable.

You took Mr. Lane from our party.

Deputy Lawlor is sitting next to me——

If the Deputy——

We should allow the Deputy in possession to continue.

He is provoking us. I do not know what John Cushnahan has to do with the Finance Bill.

On a point of order——

Deputy Carey will appreciate——

I will oblige the Chair any time.

——that if he assumes the duties of the Chair, which leads to a certain din in the House, the Chair cannot advise the Deputy who is out of order of the fact that he is out of order. Deputy Carey immediately responded to Deputy Dennehy in a fashion that was not helpful.

If I said anything out of order, I apologise.

The Deputy should withdraw his remarks about John Cushnahan.

Deputy Dennehy has admitted to a certain inexperience and innocence——

He is very inexperienced.

——but that is not going to be accepted as a licence for him to continue out of order.

The little book of rules is very simple, if the Deputy could read it.

The Deputy has the capacity to apply himself to what is in the Finance Bill and the Chair asks him to proceed on that basis.

I bow to your words of wisdom, a Leas-Cheann Comhairle. However, I was provoked by the slur cast on my colleague, that he was an economic illiterate.

Who said that?

We did not say that.

A colleague of the Deputy's said it.

On a point of order, I should like Deputy Dennehy to withdraw his comments about John Cushnahan. He is a good Irishman.

The Deputy will appreciate that that is not a point of order——

The only point I made is that he is not a Munster man and that we were accused of not having the talent to act as Ministers. I never said he was anything other than a good Irishman.

Éamon de Valera was not a Munster man and he stood in my constituency from 1918.

Was he not a Limerick man?

He was an American.

I want to get back to the point I was making about undermining our industry for the sake of personal attacks and say that if everybody behaved, as Deputy Lawlor who is sitting beside me has behaved — in a dignified and statesman like fashion — we could all move on to more prosperous times together.

I do not understand why poor John Cushnahan has to pay for it.

We should not be undermining people in a blackguarding fashion. As I said, there was no substance in the claims made. The Government had an air of confidence in dealing with that matter. They also dealt confidently with the huge multi-nationals in the petrol industry and the Minister for Energy took courageous and far sighted moves in relation to Tara Mines and Whitegate. These are the sort of moves I want to see so that we can all move forward together and gain from the actions of the Government.The Opposition are as entitled to gain financially or otherwise, from the actions of the Government as we are and I want all of us to work together.

There was no movement up to 1987 in regard to oil exploration, broadcasting etc., and ideological differences were the main reason for this stagnation. I want to restate that fact——

The Deputy should move away from political ideology and on to the Finance Bill.

I love it.

The Deputy is stagnant.

Deputy Noonan, the Fine Gael spokesman on Finance, said he was disgusted and annoyed with the Government's steady-as-she-goes attitude and one or two commentators outside this House have spoken about a bland budget and Finance Bill. That is rubbish. We had courageous daring Ministers, like Deputy Noonan, who ran up our £12.5 billion bill. If our steady-as-she-goes attitude means getting our foreign debt and balance of payments under control and increasing industrial growth while our Ministers get the best results, I welcome it. Everytime we feel like getting radical the cost of servicing our national debt should bring us back to reality.

I think somebody said yesterday that we should throw caution to the wind with regard to tax but I do not think we should, I do not think that in a short period of three to five years we can achieve a 25 per cent rate of tax for everybody, and I think even the least knowledgable people outside are aware that this is not on. They know that it is a ridiculous scenario to paint in the short term and they agree with the steps the Government are taking at present.

Major changes have taken place and hopefully these will continue. The Finance Bill is a very large document but it is needed in our movement forward with regard to the National Development Plan, the European Community regional submissions, the national agreement and various other initiatives which have been taken, for example, in relation to oil exploration. We need this Bill to control any abuses in this area and also to encourage initiatives in other areas.

I wish to conclude by apologising to the two Deputies on the Opposition benches. If I upset them in any way I am genuinely sorry for doing so, and I am not being facetious in saying that. Both Deputy Paddy Hegarty and Deputy Donal Carey have been most helpful to me since I came to this House and if I upset them in any way it is because of a lack of experience on my part more than anything else.

I thank the Deputy for those remarks.

In calling Deputy Hegarty I want to say to him that he does not have to explain how he thinks his encouragement to Deputy Dennehy might have gone astray but rather he should confine his remarks to what is in the Finance Bill.

You are putting me at a grave disadvantage, a Leas-Cheann Comhairle, before I start. I have to say that I was surprised at the Deputy's comments because I took him to be a more liberal man. In fact, when he was Lord Mayor of Cork on one occasion I publicly commented on his performance as being apolitical. I wish to put it on the record of the House that I was disappointed that the Deputy said John Cushnahan was not worthy to stand for us in Munster. His family were very much involved in the struggle for Irish freedom and I believe that deep down we all wish for the day when we can live together as one nation. This was a brave step by Fine Gael and I believe it will work out well for them. I am sorry that that comment was made in the House.

I know no explanation is allowed but I want to say that I neither inferred nor said that this man was less than capable. I said he was not a Munster man but I did not infer anything else.

(Interruptions.)

The Chair has had more than enough of reminiscence, rambles in Éireann and political ideology and I am going to insist from now on that every speaker shall confine himself to what is in the Finance Bill.

Or what is not in it.

Nevertheless, to what is relevant to taxation.

Going back again to borrowings and what happened between 1983 and 1987, I would have to take the House back a little further to 1977 when the real rot started. Deputy Deenehy said that farmers got themselves into great difficulties. It was not the farmers who got themselves into difficulties. We borrowed substantial sums of money at 6.75 per cent under Richie Ryan, or "Richie Ruin" as he was called at the time.

Somebody who is no great friend of ours, and who was at one time a director of the Central Bank, said that if the same Ritchie Ryan had got another term in office in 1977 we would now probably be in the black. That has to be put into the record. Furthermore, if Deputy Dennehy or any of his friends were foolish enough to get into debt in 1977, they would know how hard it is to get out of it. We did not get out of it for four and a half years. It got worse and it is still not getting any better. The national debt is the same and we are still paying back £2 billion and will be for a very long time thanks to "the bould Jack" and "the bould Martin" in 1977.

I remember one specific case of a man who borrowed £25,000 in 1976, which was well within his capacity to pay, at 6 per cent. That man had a farm injury and between 1978 and 1980 that loan increased from £25,000 to £80,000 because he was injured and did not earn any money on his farm. That was when things went wrong.

A Second Stage Finance Bill is not a subject to excite much concern. The debate is usually one where Deputies hone in on specific areas of concern to us in our own constituencies — and we did some queer things this morning. We are now full and active members of the European Monetary System and if we get our priorities right we should now be in a position to do the right things for all of our people. Everybody agrees that the political consensus on economic management has been particularly beneficial in getting our inflation and interest rates down to the present levels. We have a good base for economic growth and the creation of employment. This country can no longer afford to lose its most talented people and this seems to have been the result of this Government's strategy.

A major reform of our income tax system is more urgent now than ever before. I welcome the move towards self-assessment as a means of simplifying an already very complex business. The PAYE sector should, I believe, be given a much broader scope for claiming allowances.For example, they should be able to claim for education costs especially as greater numbers do not qualify for State grants. The should be allowed to claim the full costs involved in the repair and refurbishment of their homes especially since there are now no grants available for such work.

In relation to VAT we heard much high tech talk this morning. Basically, I see VAT as a see-saw operation. What does the State get at the end of the day with all this to-ing and fro-ing of money and administrative costs? Is there anything in it for the State at the end of the day? As somebody said recently, we must get it right first time.

We are a nation of producers, processors and sales people. We must convince Europe that we are the best and that our goods are the best so that they will buy our goods and will continue to buy them in still larger quantities. We produce sales literature and television programmes showing our country in all its beauty and charm. When visitors come here they see one of the worst litter problems in Europe. This will have to change. Money will have to be provided through the Department of the Environment.

Our country roads are a disgrace and whatever Deputy Donnellan might say, that there will be nobody there to use them, all our infrastructure depends on these roads. Every load of material from a farm has to go out by means of a farm road and a farm gate. These are the most vital roads of all. Any county engineer will tell you that this pothole filling programme of the past few years — this patch upon patch effort by local authorities — is, indeed, very shortsighted and unwise. Our roads are in need of a major overhaul, and they need it now. In the interests of road safety, would the Minister allocate some few pounds to the county councils to ensure that we get our hedges cut?

The Minister for Agriculture and Food referred to flora and fauna. There is no fear of the flora. We have hedge parsley, angelica and all sorts of umbelliferae almost as tall as the cedars of Lebanon, almost meeting in the middle and nothing is being done about it. When we ring the county council we get the lame excuse that they do not have the money. If we are to seriously talk about tourism then, in God's name, allow the tourists to see some of the country, do not trap them in a mass of weeds.

A document on housing was issued recently by the building societies. They pointed out, and the Minister raised it yesterday and on television last evening, that we have a problem. Why have we a problem? The real problem was not mentioned by the Minister when he rounded on the building societies. The problem is we are not building houses any more, There is no such thing as a local authority housing scheme. In my county where we talked about hundreds of houses annually we are now talking about a house here and a house there. Why are houses retailing at inflated prices? Little matchbox houses in towns are making as much as £20,000 for no other reason than that is all young couples can get for £20,000.

With the daily announcements of money from Brussels the Government must introduce a major housing programme.In my own area we have lists as long as your arm of people awaiting council houses. We have people living in flats that are totally unsuitable for human habitation. They are more like rabbit warrens.Some of them are several storeys high, with collapsing ceilings, rickety stairways and of course, no emergency exits. This must stop if we are to have any semblance of a Christian caring society.

We had plenty of builders but, of course, a number of them have emigrated.An entire house can be built from native, indigenous raw materials, thus creating employment. Our chippies and masons will return if these houses are built by our local authorities and if money is provided. We have tenants who will pay the full economic rent for these houses so that they will not be a loss to the State. It will be of multi-benefit to the State because genuine employment will be created — making blocks to the sawing of timber, to building the houses and paying rent for these houses.

I am concerned with the policy to push the responsibility for housing loans to banks and building societies. Banks and building societies are now picking and choosing their clients and local authorities are left basically with low income groups and groups with little security. In the past the county councils had a better cross section of borrowers and were thus in a better position to service their customers.Now they are left with one section, the weaker section, which, obviously, will cause more problems. Reconstruction grants must be restored quickly otherwise we will double our national monuments in a matter of a few years. We will have twice as many of them in our towns as we have now if we do not start our reconstruction programme quickly.

In relation to housing in rural areas many young couples for various reasons — cheaper sites, love of the country, better environment for rearing their childern — are keen to build houses in rural areas. The land owner, who is often under pressure from his bank, is a very willing customer. In the past many such land owners sorted out their own financial problems by selling a few sites. Nowadays, however, it is becoming increasingly difficult for these people to get planning permission within a reasonable period, if at all. There is no point in blaming the planning officers in their diligence to adhere to the letter of the planning laws. We in this House make the laws but the time is now ripe for a major overhaul of these laws.

If otherwise useless land can be utilised for a nice housing development, why not? We are told we cannot have a proliferation of septic tanks. In this age of technology it should be the easiest thing in the world to devise some sort of central treatment plant where all these houses could be linked and this would solve the problem. Much greater social problems have been caused and are being caused by putting too many people together, by cramming them into housing estates, very often in an alien environment without proper services and recreational facilities.Surely modern technology has the answers to the proliferation of septic tanks.

When we get down to debating this allimportant subject we are given reasons why we cannot build — the roads are too narrow, one is upsetting the skyline, that there are too many bungalows together and so on. That is all a lot of rot. The roads can be widened. In every other European country the skyline can be protected with a nice little row of conifers. That is no problem to everybody else but it is a problem for us.

Unemployment is a matter for grave concern in this House and it is dwelt on by the Minister in his budget and in the Finance Bill. The Minister made the point that we must do better than the emigrant ship. Dublin, Cork and Rosslare are the modern Queenstowns. Each week, busloads of well educated, well trained, young people leave our shores for the UK. We must put more real effort into job creation. FÁS schemes are all right but they are not the long-term solution. We have plenty of young entrepreneurs with ideas but they do not get enough help and encouragement to set up in business. There are so many snags attached to starting one's own business that most people cannot qualify under the FÁS schemes. Various snags are hampering what is otherwise a very good scheme. There are people in various State agencies who have a problem for every solution. People who should encourage others to take high risks when they identify areas which could be successful, are far too negative. I had the experience of such people when I was Minister. We still import simple household furniture, garden furniture and simple farm machinery which could be produced here. We have not yet got around to doing that and anybody who has tried has not received the help or encouragement or the seed money to get going on a proper footing.

We as parliamentary representatives would be gravely lacking in doing our duty if we ignored poverty, the greatest problem of our time. We meet people at the weekends who are screaming at us to know what we are going to do about the real abject poverty in our midst. Various voluntary caring organisations have taken it upon themselves to try to do the Government's work in alleviating poverty and hunger. The Society of St. Vincent de Paul has expanded to every town and hamlet and a plethora of new charitable groups have been set up to cope with the growing problem. The Government should start by restoring our welfare homes. These homes cost money but a lot of people who cannot afford to look after themselves and who have nobody to look after them were well cared for in these homes both spiritually and medically.One of the worst things this Government did was to close the welfare homes. The wealthier sections of the community are not affected. They have elaborate places being set up round the country costing something like £200 a week. I am talking about the person on a non-contributory pension of £50 or £60 a week who is being sent from hospital back home to a cold empty house where he will not be a problem for anybody for very long, because he will not last very long in it. That is not in accordance with the precepts of a Christian caring community.That is not the way to behave in so-called opulent times. Since this debate started we have been hearing about how well off we are. If we are that well off, the State should look after these people.

Why should Rehab and others have to do the work of the Department of Health? They often do not have the proper structures to do the Government's work. We in Fine Gael put forward a simple solution to the Government when we were talking about the health boards. We should scrap the health boards. If countries much larger and wealthier than ourselves can manage the entire health scene from one office in the capital city why cannot we? When I was on the Council of Europe I had the pleasure of visiting some of these offices to see how it was done. If with modern technology and computers that can be done in much bigger wealthier nations, why do we need to have counsellors and doctors and all sorts of people traipsing around the country trying to administer a few pounds when this administration could be done from one office in Dublin saving millions of pounds with which we could reopen our welfare homes and look after our old people?

My favourite subject, agriculture, was not mentioned by me today because I spoke on it last week in the House. I was very negative last week but I have to say today that certain good things are happening in agriculture. I compliment the board of ERAD on their work to date in disease eradication. I met Dr. Downey and his colleagues yesterday and I am impressed with their efforts. When I had responsibility in that area I started off to do a few things like the collection of reactors and to implement more positive identification of animals by better tagging systems. I am delighted that the board of ERAD have now decided to go down that road, more or less pointing out that there is not a mysterious solution to disease eradication but that there are a few good pointers, the first being to compensate properly for the loss of the animal. We did not do that and I am the first to admit it. We should also make sure, having compensated for the loss of the animal, that anybody who is messing around with disease is penalised. That approach should get the support of all sides of the House.

Deputy Donnellan accused Fine Gael of reneging on their role in Opposition. I categorically reject that. As somebody who has been in this House nearly as long as Deputy Donnellan, I believe that we in Fine Gael have been highly responsible in Opposition. We identified what had to be done in the run-up to the last general election and we told the people, but of course we all have the vision of a leprechaun at the end of the rainbow with the crock of gold. That Celtic mentality is there and there was a slim hope that perhaps Fianna Fáil had a crock of gold that Fine Gael did not have and people opted for "health cuts hurt the poor, the old and the sick". Unless people are altogether out of their minds, they must know now that there is no soft option and that whoever rules the country will have to keep within budgetary constraints. That is not to say that from now on we will not lambaste them in every way we can because in many areas the Government have not dealt wisely with the talents they got. Like the man in the Gospel, in many cases they have buried the talent. I hope that retribution will come to them in due time.

I am glad of the opportunity to speak on this Bill. The improvement in the public finances since Fianna Fáil returned to office has been dramatic. The trend so far this year suggests that yet again the budget targets will be met and bettered. The Minister and his Cabinet colleagues are to be complimented on this, although the annual addition of new borrowings is still too high. It is interesting to reflect on the recent US presidential election where one of the main items of contention was the growing debt which the country had built up over a number of years.

When one reflects on the ratio of debt to gross national product for Ireland and the United States and considers the hype and anxiety generated in the run-up to the American presidential election and exactly what the figures were and compare those with ours, one will see how serious our problem was on Fianna Fáil's return to office. The 1988 debt-GNP ratio for the United States stood at 30 per cent, whereas our figure was of the order of 133 per cent. This shows, if it needs to be shown, the magnitude of the problem which faced the Government and the country. The position will not stabilise within a short time. The Government have made great inroads into stabilising that debt and it is hoped that within the next year or two it will be stabilised.

The Exchequer returns for the first quarter of this year were very encouraging.The results achieved in the past few years, with inflation at an all-time low — although regrettably there is a small increase again at the moment — with interest rates at six full percentage points lower than those of the United Kingdom, are all indicators of confidence in our economy and our Government. On the downside, we have still the problem of emigration and the stubborn problem of unemployment. If we can get our economy working again these can be overcome, it is hoped, within the not too distant future.

There is a strong recovery in consumer spending at the moment. Retail sales in January were up 7 per cent in volume terms on January 1988. Unemployment in the first quarter of the year was lower than in the first quarter of last year, which is a welcome move. Manufacturing employment in the final quarter of 1988 shows a year to year increase for the first time since 1980. In the building industry, employment in the larger firms in January and February was some 7 per cent higher than in the corresponding two months of 1988. This, together with the increase of 30 per cent in housing starts in the first two months of 1989, is an indication of the substantial recovery which is now under way in the building industry, after several very lean years.

The trends so far support the Government's expectation of a further substantial balance of payments surplus this year. Exports have risen by 24 per cent in value, year to year, in the first two months of this year. It would be opportune to compliment the Minister of State, Deputy Brennan, on the work that he has been doing not just in issuing the good figures on a monthly basis but also on his genuine interest in improving the export performance of our industry and his encouragement to our industrialists to get out and market their products, particularly in the run-up to 1992. These figures reflect the continued buoyancy of our export markets and the all important improvement in competitiveness.

There has been a strong growth in the value of imports. Imports of capital goods are up by 20 per cent. As expected, imports of consumer goods also are strong, in response to the recovery in private consumption. It is important that our industry should be aware of this improvement in consumption and should be in a position to compete favourably with the imports from our neighbours. The overall prospect for 1989 remains one of strong economic growth. The budget time prediction by the Minister of a 3.5 per cent increase in real GNP will, I feel, be realised. As a result of all this there is a new air of confidence. It is good to see new investment taking place around the country. New starts are being made in a number of areas and are to be welcomed.

While the problems are still formidable, people now see that the earlier pattern of despondency and economic decline can and will be broken. This can be done only if we continue along the path this Government have outlined over the past two years.

The recent movement in price increases is a source of worry to all of us, since the cause of this increase comes from within our economy rather than outside it. I would hope that the words of warning echoed here last night by the Minister for the Environment will be heeded and that if we are going to see a major movement in inflation, we ourselves will not be the cause of it.

I should like to deal with some aspects of our movement towards 1992, in particular the EC Directive on the free movement of capital which will certainly affect the Irish economy between now and the end of 1992. On Directive No. 361 of 1988, in a joint statement issued by the Taoiseach and the President of the European Commission in October last year it was announced that Ireland, being committed to the complete removal of exchange controls by the end of 1992 would, from the end of 1988, remove all restrictions on the purchase of medium and long term foreign securities by Irish residents and would not be seeking any further derogation from the Commission in this area. This decision was explained by the Minister for Finance at that time when he revealed that the investments allowance since 1 January 1988 had come nowhere near the limits prescribed by the Commission. He said that in the first nine months of 1988 there had been a big inflow of funds from non-residents to the Irish gilts market. He pointed out that it was no longer possible to plead balance of payments difficulties to justify retaining any restrictions on investments in medium and long term securities. However, he also pointed out that there was no obligation to liberalise short term capital movements, nor any intention to do so. Resident investors would therefore not be free to purchase short term foreign securities or to convert from medium and long term into short term foreign securities.The only exception that would be allowed would be that the institutional investors would continue to be allowed to purchase short term foreign securities with Irish currency within 12½ per cent of their cash flow. This was a vote of confidence in our economy at that stage.

There was an obligation under this directive to submit by the end of 1988 proposals aimed at eliminating or reducing risks of distortion, tax evasion and tax avoidance linked to the diversity of national systems for the taxation of savings and for controlling the application of the systems. The proposals were submitted to the Commission in February 1989. They suggest a minimum of 15 per cent withholding tax on saving throughout the Community, I understand. This would be in line with what we have been doing in relation to our deposit interest retention tax.

The Commission also suggests measures to improve co-operation between tax administrators within the Community and any tax provision of a Community nature must be adopted by the Council acting unanimously. I understand that Luxembourg and the United Kingdom are not too keen on this proposal so far. It is hoped that that can be sorted out in time for the 1992 deadline.

The Directive provides for certain derogations which are to be applied for limited periods in the case of Ireland, Greece, Spain and Portugal. Ireland is permitted until the end of 1992 to continue to apply or reintroduce restrictions on operations in securities dealt with on the capital markets and operations in unit trusts of an undertaking not subject to Directive 611 of 1985 and medium and long-term financial loans and credits. Ireland may also defer until the end of 1992 the liberalisation of operations in securities normally dealt with on the money market, current and deposit accounts, unit trusts, short-term loans and credits, personal loans, physical importation and exportation of financial assets. It must be accepted that the free movement of capital must constitute a constraint on the national policy of management of our public finances. The Department of Finance have said that Ireland should be able without undue difficulty progressively to remove the remaining exchange control over the period to the end of 1992. The experience gleaned from recent relaxation in exchange control restrictions supports this opinion, but the Department's optimistic view is founded on the progress made in rectifying the public finances, improving the balance of payments and reducing inflation. Therefore it is important that Fianna Fáil would continue — and I have the utmost confidence they will — down the road they have been travelling during the past two years. It is my view that maintenance of confidence nationally and internationally in the Irish economy must command a high priority in formulating and implementing national financial and economic policy under this new regime, even at the expense of foregoing desirable projects which might imperil that objective.

The existence of exchange controls and other restrictive legislation may have facilitated the introduction of a range of new taxes on financial services, such as bank and insurance levies and DIRT tax. If we are to move towards a single market as proposed, we will come under pressure as a Government to relax some of these levies so that our financial institutions and insurance companies can compete on what they term a level playing field. At present they feel they are at a disadvantage because of these taxes.

The income tax changes proposed in the Bill are aimed at improving the position of low income families. This is to be welcomed. The reduction in the standard and top rate of tax underpins pay moderation in the economy and begins the process of driving down income tax rates and restoring the incentive for enterprise and effort. Unfortunately, this has been lacking for far too long in the Irish workplace.This first move by the Minister for Finance to reduce the rate of personal taxation is very welcome. The Government have shown the direction in which they wish to go in future reform of personal taxation. The overall cost of this year's income tax package is over £200 million in a full year. Taken together with the concessions introduced in the 1988 budget, cumulative reliefs costing well over £700 million over the period of theProgramme For National Recovery have now been provided by the Government compared with a commitment of £200,000 in the programme. We have shown, if proof were needed, that we are serious about our commitment.

At present data processing and software development services qualify for the 10 per cent rate of corporation tax. In order to reflect the recent developments in the computer industry, certain related consultancy and technical services will now qualify for this 10 per cent rate of tax. This is to be welcomed as the computer and related industries have been of great benefit to the Irish economy over the past ten years. Any move that the Government and the Minister for Finance can make in this regard is to be welcomed. These reliefs will provide significant and substantial assistance to the industry. The relief for corporate investment in films has been sadly overlooked for many years by various Ministers for Finance. The provisions announced in the Finance Bill will assist the film industry, which I regret to say is in a very poor state.

Petrol dealers will be licensed in future. The purpose of the new licence is to equip the Customs and Excise more effectively in the fight against petrol smuggling which is a huge problem. I do not believe that everybody is aware of the significant amount of petrol and fuel oil which is being smuggled across the Border. Anything that the Minister can do to control petrol and oil retailers and indeed wholesalers is to be welcomed and the proposal to license them will go some way towards identifying where the problem occurs.

There is a provision in section 47 for the introduction of a ten year driving licence at a fee of £20. For far too long people have been caught out by forgetting to renew their licence on a three yearly basis and I know that many public representatives have been approached to see if they can do anything when the licence lapses. This is a positive step.

The business expansion scheme takes up a substantial part of the Finance Bill. Section 7 introduces five new measures and restricts the BES to its original purposes.The Minister has clarified and perhaps rectified some of the abuses which may have been taking place under the scheme. For example, where BES money is being used for the purchase of a ship, that ship must represent the beneficial addition to the Irish shipping register. It also imposes a limit of £2.5 million on the amount of money that a group of companies can raise under this scheme; it excludes international leasing and related financial services and excludes selfcatering accommodation in the city or county of Dublin and the urban areas of Cork, Waterford, Limerick and Galway where I understand a number of schemes under the BES had been undertaken. Finally it provides that relief will not be available on shares where options or guarantees are held which provide for sale at other than market value at the end of a five year period, for which shares must be retained under the scheme. I think these provisions will help to restore the scheme to its original purposes.

In conclusion the Minister and the Government have gone a long way in holding the "steady-as-she-goes" policy of rectifying the national finances which must be at the heart of everything the Government and the Minister do. Unless we can reduce our debt substantially we will be unable to create the climate and raise the funding we must get in order to reach the employment levels we need.

The previous speaker, Deputy Hegarty, made a comment in relation to local authority houses. If I am not mistaken, he said a number of local authority tenants would be in a position to pay the full market value of the rent. The full cost to the Government of renting local authority houses is in the order of £80 to £85 per week. As any local authority member will know, in no way can the majority of local authority tenants pay anything like that. If they could they would not have waited two and three years to qualify for local authority housing; they would have secured a mortgage and got their own houses. However, I believe very often people on the local authority list are in flats paying £25 to £35 per week for rent and that once they are allocated local authority houses and rent is set at, say, £15 they claim inability to pay. We should look seriously at this whole area of the return we get on local authority housing.

In general this is a good Bill and I hope it gets a speedy passage through the House.

The new slogan of the Minister for Finance "steady as she goes" seems to be the norm which everybody picks up on this Bill. It is an indication of what the future holds for 1989-90. At the same time we have the hype of theNational Development Plan 1989-1993, the bonanza of £ millions coming from the EC and the claim by the Minister of State, Deputy Máire Geoghegan-Quinn, about the manner in which the Government have handled the proposed plan and the way in which this huge expenditure is to be distributed throughout the country. However, it seems that what is lacking in the Minister's economic commentary is how he sees our relations with the EC. We have provided for this plan, but other elements are ignored.

For instance, last year or the previous year the stress was on harmonisation of taxes. There is no provision at all in this Bill for that. The next, and most important, subject being discussed now is monetary union. There is nothing whatsoever in this Bill to provide for progress towards that. The only real opposition is coming from across the water from Mrs. Thatcher. The rest of the countries of Europe are most anxious to proceed with monetary union. The Irish are going to provide the Presidency in January 1990 and I would have thought we would have set out some small token to indicate our willingness to play a full part in this union. We should at least have put in a simple provision to state the Irish accounts in punts and in ECUs as the Minister does, and in this way try to use dual terminology.

Great efforts have been made to get national plans such as I have referred to put into place so that, when the Single Market comes into being in 1992 all the elements will be there and progress can be made. Therefore, I regret that "steady as she goes" seems to mean "omit as much as you can". I regret that a Minister who has such a terrific background in business, is a successful businessman, became Minister for Finance and was formerly Minister for Industry and Commerce, who had recognised all the elements necessary to make progress and to meet competitive elements, can produce here nothing better than "steady as she goes". However, maybe he will get some action from the Department of Finance particularly with regard to monetary union.

Recently we have seen moves by this Government towards privatisation. The other day here the Minister for Energy defended the sale of Tara Mines. He did not respond adequately to the challenge by Deputy Richard Bruton when he said the Government should have sold the stake in Tara Mines for approximately £60 million instead of £35 million. If the Minister for Finance had put a real value on this mine the expedient price of £35 million accepted by this Government would have been rejected. I would like to see more action from the Department of Finance and across the other Departments of State when it comes to the sale of assets. I may be wrong to criticise the price of £35 million, but it would be better for this Government and for the privatisation process if the relevant documents were laid before the House setting out how the calculations were made. For instance, I am interested in forestry and the Minister for Industry and Commerce had an interest in it some time ago. The forestry people are selling off property and Bord na Móna are disposing of bog. Nobody on the private side understands how this bog is being disposed of to Coillte Teoranta or what the price will be. We are not going to be told. We have asked questions of the Minister and he says this is a private matter, it cannot be discussed, the Department of Finance make their own arrangements. That is not satisfactory. An open tender system should apply to the disposal of bogs and the Department of Energy in supervising this matter should insist that the real base price is put in so competition can flourish between Coillte Teoranta and private forestry and the new companies.

One of the great strategies on which the Government are placing emphasis is the expansion in the rate of planting. That is more or less dependent on whether in the future we can successfully develop a semi-mature timber market. If the private companies feel they are at a disadvantage due to the underhand trading of the State, there will not be great success.The Government are pinning their hopes on successful expansion of forestry development. The EC are providing major grant assistance but the basic principle is that there must be a competitive element with regard to the land acquired for forestry. I want some kind of tendering system.

I have come across another case where the Department of Finance do not seem to be taking a stand against this cloak and dagger way of disposing of State assets. A tour company at Shannon Airport was recently disposed of. A competitor bought into it and there was no public tendering. I do not know how the Department and Aer Rianta succeeded in arriving at this exchange or how the purchase was made. The company who made the purchase is a legitimate, successful company but there are competitors who would have been interested in the purchase, who would have liked a share of this market. They did not get an opportunity to bid. The success of Castle Tours was based on taxpayers' money, which provided the base. The Department of Finance have an obligation to oversee these matters properly. This House has a role to play. The details of these transactions should be laid before the House so that the public can see that the Government are not interested in under-the-counter deals. Open competition is necessary. I appeal to the Minister to have his Department examine this matter.

In the course of his speech the Minister said he was worried about the way this economy might suffer because of its open nature and he asked for restraint in various areas. Restraint for Ireland Incorporated, if one can call it that, is rather a big thing, especially when at the outset this Government got together with various sectors and made a deal and a promise.They gave the labour element an increase. All Deputies on the Government side today were complaining about the huge problem their Government inherited on coming to office and how difficult it was for them. Before the change of Government when we were on the other side we were saying that Ireland Incorporated was insolvent, yet the first action of this Government when they came to power was to make an agreement giving a wage increase to the labour elements in Ireland Incorporated. If the Minister was running his own business in Longford-Westmeath or North County Dublin and his company was insolvent, I do not think his bank manager would give him an additional loan in order to grant another increase. It sounded a bit hollow when the Minister lectured the House recently about restraint in regard to public pay and how he intends to control it. He and his colleagues in Government gave the lead. When they were on this side of the House they wanted to pay everything, including £75 million to the teachers. Of course, the teachers are still looking for that £75 million. The previous Government were criticised for not paying "what was due to the teachers"— they were the words used. The teachers of Ireland still have a share in Ireland Incorporated and they have had to put up with a reduced dividend.

If this country is to be successful we will have to take a hard look at it. This depth charge dropped by the Minister for Finance that there will be no further special increases might bring a round of further unrest, but I hardly think so. I noticed only a little noise, a few ripples from the trade union movement about this denial. In former times when the Labour Party were in Government with Fine Gael there would have been a huge explosion and the Minister for Finance would have been accused of interfering in the bargaining process. How everything has changed. Just look at the difference in a couple of years. The new party in power are able to dictate the trends of the economy. Is it not great that everybody agrees it is necessary? I am not satisfied that they are going far enough. When the Australians arrived at the difficult debt stage we are talking about, they made an agreement. Mr. Hawke put a moratorium on wage increases for two or three years and the Australians were proud to take part in it. In this country the previous Government produced a formula for a standstill in wages but Fianna Fáil said it was wrong. Now they are advising people that no special increases will be allowed. They are still hanging on to the old idea that there is a little deal to be done and if you pick away at it using terms like "steady as she goes" this country will eventually resurrect itself out of the grey mist some fine morning. In the meantime thousands and thousands will have gone away.

Deputies on this side of the House do not have the same flow of language that Fianna Fáil had when they were decrying emigration on those benches. I remember listening to Deputy Frank Fahey, now Minister with responsibility for sport, waxing eloquent over here about emigration and the great loss to the economy. He accused the then Government of absolute neglect. Since then he has been encouraging his Taoiseach, and he has gone himself, to ensure that these lads get into America. The Taoiseach's press releases contain various data about his asking President Bush to legalise all the poor Irish fellows who are over there illegally. He even asked President Reagan to give an amnesty before he left office. How it is acceptable when they are on one side of the House but not when they are on the other is beyond me.

I am coming to the point. The reason there is some small progress and some confidence returning is that this party guaranteed to support the policies which were originally in the John Bruton budget of 1987. What irritates me is that I have never heard any acknowledgment of the support he is receiving. The Minister's predecessor, Deputy MacSharry, is supposed to be a cold man, but when it came to dealing with the Opposition he had a generous streak. He related to the Opposition. He acknowledged that there was a need for financial rectitude, that Ireland Incorporated was insolvent. The present Minister for Finance has the best background a Minister ever had at this juncture. He has a businessman's background.He should be able to expand employment and the wealth of this country. If the Minister is successful in his own business he should be good for Ireland Incorporated. There is talk of confidence in Fianna Fáil and confidence in the economy but that we are only half way there and that tougher decisions have to be made. Deputy Noonan, the Fine Gael spokesperson on Finance, has been asking this Government for the past two years to join with him in a programme of tax reform. The Government do not do that but fiddle around with little things. The target was to bring 66 per cent of taxpayers into the 35p tax rate; now there is 64 per cent on the 32p rate. That does not make a huge difference to the man on the street. The price of the pint of Guinness has gone up by 30p and that will take care of any modest tax relief that has been given in this budget. If the Minister really has confidence in the economy he should take his courage in his hands and accept Fine Gael's offer regarding tax reform as a matter of urgency. Most of the people who have left this country did so because they could see no future and were cynical about the lack of action on the part of politicians.

This Bill further expands the legislation on income tax, corporation tax and capital gains tax. The whole field is getting wider. I wonder if some future Minister for Finance will consider bringing in a consolidation Act of all the tax regimes to get them into some simple form that can be understood.

All of the amendments that have been put in have so complicated things that the Department of Finance now find it necessary to bring in this new section 76, called the anti-avoidance section. The anti-avoidance section is lovely until the Revenue Commissioners get their hands on it. I am sorry to say that I have had sad experiences with the Revenue Commissioners in regard to the way they treat people. The Revenue Commissioners insist on their brief without any regard for the social consequences on some people. I saw some particularly sad cases in regard to the withholding tax. This tax was meant to get at the medical profession in general, resulting from complaints of much tax avoidance in this area. There were to be allowances made for people who were suffering hardship. I had occasion to make representations on behalf of a doctor who had come upon very hard times and was obviously destitute as the result of a drink problem. The reply from the Revenue Commissioners began with the statement that the man was a tax defaulter. That was the first line in the reply from the Revenue Commissioners, the bottom line as far as they were concerned; this man was not entitled to an exemption from the withholding tax because he was a tax defaulter. I understood that but the poor man was suffering from a disease and that should have been taken into account. It is in exceptional cases like this that the withholding tax gets a very hard name and is despised by the people who have to pay it.

The operation of this anti-avoidance section will have to be supervised as to the role to be played by third parties. Their track record to date has not impressed me and that is why I am mentioning it. The other day the Tax Officials' Union had a meeting and decided to black representations made by Deputies. Such cases would no longer receive priority but would take their place in the queue. The reason people come to Deputies is to try to expedite matters that are delayed because of particular difficulties, such as a person being illiterate or some other social considerations. It is for those reasons that Deputies undertake to make representations. The Tax Officials' Union say that Dáil Deputies are exploiting the system to the detriment of the general public. I reject that accusation and I would like the Minister for Finance to get in touch with the Revenue Commissioners and the Tax Officials' Union about this proposal to black representations made by Deputies.

One of the problems about tax here is the way the Revenue Commissioners administer the system as if everything was either black or white. There may be good reasons some people are in difficulty. I am currently dealing with a case about arrears of tax. A man who got sick and had to retire from business is still getting bills for VAT for 1972 onwards. That man is in extremely bad health after having two legs amputated. I received a letter from the Revenue Commissioners saying that as this man is a tax defaulter they are taking proceedings against him. When Deputies make representations they should be listened to on occasion, unless it is the policy of the Revenue Commissioners to ignore them altogether, in which case we would have to have another look at the system in order to defend democracy.

Deputy Dennehy, when speaking earlier, talked about the progress that has been made in this country. He mentioned the oil and the agricultural areas. He spoke very loudly in praise of Deputy Lawlor and the way in which he was vindicated from the assaults made from other benches. The one thing that I regret is that while Deputy Lawlor vindicated himself — and I congratulate him on that — allegations such as those flung across the House, cast a doubt on the Members of this House. I regret very much that business people will now completely lack confidence in the Members of this House. Deputy Lawlor is probably an exception in so far as he has been appointed a director of a public company.

I think Deputy Carey had the benefit of being present during that contribution by Deputy Dennehy when the Chair advised him that it was not directly connected with the Finance Bill. I think Deputy Carey nodded assent and therefore he will appreciate that if it was not in order then it is not in order now.

While I appreciate your bringing me to order, the point I was trying to make is that——

The Deputy is stuck for something to say.

I am not stuck for something to say. I will comment on the Deputy's constituency later if he wishes. The point I am making is that a Deputy has been made a director of a public company and I do not believe that is wrong. It is right that Deputies should have commercial experience at that level because when they get into Government they will have the necessary experience to make hard, cold, commercial decisions. That is the position in every other Parliament in the world. I regret very much the incident about which some Deputies felt they had to launch an attack on Deputy Lawlor. I just wish to make that point which is contrary to the spirit in which Deputy Dennehy made his point.

I spoke earlier about the tender system and the need for competition. In the run-up to 1992 this Finance Bill should be setting us up for competition costs. I champion the cause of Shannon Airport which is in my constituency. In theNational Development Plan which was published recently the Minister for Finance said we would have an air tunnel to reduce the effect of the freight charges following the opening of the Channel tunnel. In this Bill the Minister, instead of reducing hydrocarbon and petrol costs, has increased them. In section 36 provision is made for an increase of 88p per hectolitre in the rate of excise duty on petrol. That is no help to competition; it is anti-export. If the Minister had to make a hard decision he would probably have to cut public expenditure in some area which might even affect the constituencies of both Deputy Aherns——

There would have to be a reduction of 33 per cent——

That would result in a row at the weekly parliamentary party meeting.

There was an increase of 39 per cent in the GNP debt ratio from 1982 to 1987.

When the Minister made his decision in January to increase the price of petrol by .88p per hectolitre, he and the Government were aware that there would be a further increase and also that the National Petroleum Company would be looking for an increase. This matter has been postponed by several hypes such as the visit of Mr. Gorbachev and the visit by the Taoiseach to the USA during which time there was no Government meeting. The effect of these petrol increases did not dawn on the Government.

What increases?

The Minister for Industry and Commerce was doing business in Japan when there was another petrol crisis during which the companies decided they would not supply petrol. I am not objecting to the Minister doing business for the country. He is very energetic, always has been and he will continue in his role. The Government are now going to force huge increases on the Irish public that were caused by their own neglect.

Deputies

Not at all.

I know the Deputies on the other side spoke about the increase in debt during the lifetime of the previous Government. Many of the problems have been ignored since 1972. Everybody wished them away and they were put on the back burner. Many of the price increases such as in the ESB——

Some of us over here cannot remember that far back.

The three Deputies at the back are rather new to this matter but a price increase was denied to the ESB by Deputy Burke when he was in Government on the previous occasion and as a result at a later stage there had to be a huge increase in ESB charges to make up for the losses they suffered.

The Deputy will recall that there was a reduction in ESB prices during my term as Minister for Energy.

We will come to that in a moment.

We want to give the Deputy all the help we can because he seems to be struggling along.

I am doing all right, am I not, a Leas-Cheann Comhairle? The Government miscalculated the whole position in regard to petrol. Deputy Michael Noonan, Limerick East, on budget day, told the Government about the increases that had taken place in the price of crude oil, the probable increases and gave some of the reasons for them. Yet the Government decided to target one of the essential elements of rural life, the motor car. They put additional tax on petrol but now, because of delays in delivery, I understand that the INPC are seeking an increase of 27p per gallon.

It was Deputy Reynolds who reduced the price of petrol by 10p per gallon.

I understand that if there are further delays in delivery an application will be made for an increase of 30p per gallon. In the UK they are talking about the £2 sterling per gallon phenomenon.

It is that price a couple of miles from where I live.

I hope the Deputy does not avail of that price.

I do not but I must be the only one. I have a diesel vehicle.

That is worse. I hope the Deputy does not cross the Border to buy diesel to stink this country. I know I should not listen to the interruptions from the Government side.

They are not interruptions; we are assisting the Deputy.

The Chair would advise the Deputy to disregard the interruptions. If they persist I will attend to them.

The effect of the failure of the Government to make a decision about petrol prices in January will be that motorists will have to face an increase of the order of 30p to 35p per gallon before the end of June. As a result inflation will rise and that will be followed by demands for wage increases. Earlier I referred to Ireland Incorporated and how necessary it was for us all to make a sacrifice. The Government brought the social partners around a table and made a deal under which wage earners were given an increase in pay but the country could not afford that increase and taxpayers complained vehemently about it. On Committee Stage the Minister should announce a reduction in the VAT rate on petrol. If he does not our competitiveness will suffer.

The Minister for Industry and Commerce, who resides in a Dublin constituency, is notau fait with the extreme hardship experienced by those living in rural areas due to the condition of roads. It is bad enough for them to have to put up with a myriad of potholes but now they will have to face huge increases in the price of petrol. People in rural areas are making real sacrifices. I have heard many Government members refer to the success of the economy but it is being achieved at the expense of those living in rural areas in County Kerry and County Clare. There are potholes from Ennis to Loophead and the people have to put up with them. This morning I received a letter from an emigrant following his visit to lovely Doonbeg, an area with which the Leas-Cheann Comhairle is familiar. He told me that he has not witnessed anything like the condition of the road to the White Strand.

The Deputy should tell him to return next year.

That person sympathised with those who have made substantial investments in the new tourist drive.

The Coalition Government did not give sufficient money for county roads.

They gave £2 million for county roads in Cork in 1986.

I attended a meeting of Clare County Council at which the county engineer submitted a report on the condition of roads.

Is the Deputy referring to the special meeting at Shannon?

Yes, it was prior to the meeting with President Gorbachev. I did not have the privilege of shaking his hand.

This is the hand that shook the hand.

The county engineer highlighted our difficulty when he pointed out that we received £2 million from the Exchequer towards the cost of eliminating potholes and for the upkeep of county roads when £6 million was required. As a result of the reduction in the allocation from the Exchequer one pothole in six in County Clare will be filled this year. The condition of the roads will deteriorate unless there is a dramatic change of heart by the Minister for the Environment.

Will the Deputy indicate under which section of the Bill that can be remedied?

I am referring to section 36 under which the Minister increased the rate of excise duty on petrol by .88p per hectolitre. I am asking him to give more money to the Department of the Environment or to reduce the rate of excise duty on petrol to help those who reside in rural areas.

The Minister interrupted me to say that there had been a reduction in the cost of electricity and I accept that that has taken place. The ESB erected a huge generating station at Moneypoint in County Clare and in the course of the construction of that complex did a lot of harm to our road network. The House agreed to put rates on ESB premises but we find that the Ministers for Finance and the Environment do not propose transferring the income from rates on Moneypoint to Clare County Council. They are putting their arms around that money and passing it on to Merrion Street and the Custom House. That is not fair.

There may have been a reduction in the price of electricity but the people of Clare are paying for that reduction by having to cope with potholes, roads caving in and flooding as a result of the construction of the station at Moneypoint.The Minister for Finance, when introducing the Bill which made the ESB liable for rates on their property, should have indicated that it was his intention to transfer that revenue to the national Exchequer rather than hand it over to local authorities. Had he done so we might have had second thoughts about it. Some Members of my party might agree with the Minister's move and for that reason I should like to stress that I am expressing a personal opinion. County Clare has suffered more than any other county as a result of the development at Moneypoint.

It is not in Dublin 4, and that is the Deputy's problem.

And the Deputy's colleagues were not good to him in regard to the European elections.

Fine Gael are doing well in the European election campaign. Deputy Nolan was concerned about the need to meet budget targets and expressed delight that the Government had met their target and would not have any overruns.He was pleased that the Minister did not have to provide for any strange happenings during 1987, 1988 or 1989. However, he should have said that all Governments since 1972 have had difficulties with their budgets and overruns. He should have pointed out that outside influences have a big bearing on what goes on in our economy. Outside influences will have a big bearing on what happens to the price of petrol here in the future. For example, the explosion on the rig in the North Sea yesterday will result in an increase in the price of petrol in the UK. The problem in Alaska also led to an increase in the price of petrol. I should like to ask the Minister to consider reducing the excise duty on petrol before Committee Stage.

In the course of his remarks the Minister referred to a new provisionvis-á-vis inheritance tax. I congratulate him on tackling this problem because I have encountered several difficulties in that respect. The problem seems to arise through the Revenue Commissioners' interpretation of the provisions. The particular phrase that appears to cause the Revenue Commissioners much difficulty is “working substantially or on a full-time basis”. For example, I cannot understand how, in the case of brother and sister or, say, first cousins living in the same house — one occupied in the house most of the time and the other out working on the farm — when the person who has been engaged on the farming activity dies the person who has been minding the house cannot be exempted. I cannot understand when representations are made to the Revenue Commissioners in this respect why they cannot accept a person's bona fides. There must be some response on the part of the Revenue Commissioners to genuine representations.

The introduction of self-assessment constitutes another U-turn on the part of Fianna Fáil which was not acceptable at all when they occupied the benches on this side of the House. They advanced so many arguments about how people's privacy would be infringed — prying officials allegedly releasing information about persons, their bank accounts and so on, a litany of reasons — that self-assessment could not be supported at that time.

Would Deputy Carey quote references?

I would have to resort to the Library but I could find plenty to cite on Committee Stage. I do not know whether the present Minister for Industry and Commerce was in the legion who used to be here shouting about that. I do know that the present Minister for Finance was one of them. I could cite many quotations on self-assessment by the present Minister for Finance, because I love sitting over on those benches.

It will be a while before Deputy Carey gets a chance again.

I bow to the Minister's superior knowledge. It is my belief that Deputy John Bruton made a major contribution to the rapid progress there has been in the area of self-assessment.

He did not do anything for four-and-a-half years.

Deputy John Bruton and the Department of Finance undertook exhaustive investigation of the whole process of self-assessment in other economies.The detailed results of their studies remained in the Department at the disposal of the incoming Minister — now Commissioner Ray MacSharry — to put in place. He availed of that opportunity.When the régime with regard to self-assessment was being advised the then Opposition took great pleasure in shouting about the introduction of sheriffs.

(Interruptions).

The people opposite now know what sheriffs have done for them.

I would remind Deputies D. Ahern and O'Donoghue that Deputy Carey indicated some time ago that he was concluding. Perhaps they would allow him do so without interruption.

What I set out to say was that the penalties proposed under the provisions of this Bill for avoidance of self-assessment, in some cases, might appear to be minimal while in others very severe. I would ask the Minister to take another look at the extent to which these penalties are being imposed, ascertaining whether some could be increased, including perhaps those for a first offence.

I have received a choppy passage but I have enjoyed it.

I will be charitable and will not comment on the last contribution.

This Finance Bill is an essential element of the Government's economic strategy for 1989. The reductions in personal tax rates provided for in the Bill are positive evidence of the success of the recovery programme that has been in operation for well over a year. Lower inflation rates, lower interest rates, moderate levels of wage increases and the hard evidence that the Government are bringing public expenditure under control are further indicators of the success of Government policies. However, there is the danger that the improvement that has taken place over the past two years in these areas may give rise to a degree of complacency. This would be a mistake.

Industry in Ireland can prosper and thereby create jobs only if it is more competitive than those of other nations with whom we trade. In today's environment where approximately 75 per cent of our export values are to the European Community, it is of crucial importance that Irish firms compete not only with their competitors in the domestic market but also in markets abroad. The importance of this fact is becoming more apparent in the run up to the completion of the internal market in the EC Community in 1992.

Recent improvements in the cost structure of Irish industry are, therefore, as timely as they are essential. At the same time it cannot be presumed that the task has been completed. Every other country in Europe is as aware as we are of the importance of reducing input costs to industry. Despite the real improvements that have occurred in Ireland there are a number of cost areas that are high by EC standards. Therefore, cost competitiveness must not be viewed as an objective that has been attained, nor should it be looked upon as a short-term objective. It is an objective that must be pursued and maintained over the long haul.

It is imperative that we maintain the momentum that has brought about the improvements that we have achieved. This momentum must be continued on two points. Firstly, there are a number of cost factors where real improvements have taken place. These improvements took place, however, from a position where Ireland had some of the highest costs in the EC and where now we have average costs by comparison with other EC countries. Our small economy and peripheral geographic location should make us strive to have some of the lowest costs in the EC. Secondly, there are areas where costs are still too high. Transportation is one of these. Insurance is another. Therefore, there remains much to be achieved in attaining sustainable cost competitiveness in our economy. That must be our goal.

This Bill provides for amendments of tax law in a number of areas affecting industry and international services.

Fund management, one of the growth areas in the financial services industry, has been targeted as a priority activity within the International Financial Services Centre.

Section 16 of the Bill implements a special tax régime which will apply to unit trusts and similar investment funds which establish in the centre. Such funds will not be subject to taxation on their income or capital gains provided that they are under management by a company in the centre, are established for the benefit exclusively of persons resident outside the State and are subject to regulations implementing an EC Directive on Undertakings for Collective Investment in Transferable Securities, otherwise known as UCITS. Similar provisions will apply to such funds located at Shannon.

This régime brings us into line with the taxation position in relation to fund management in certain other European countries with which we will be competing for fund management business. In that regard, I wish to announce to the House that I have made regulations implementing the directive. Such implementation, well ahead of the EC deadline of 1 October 1989, makes Ireland one of the first member states to have brought this directive into force.

The regulations, which will come into effect on 1 June 1989, will apply to UCITS whose sole object is the collective investment in transferable securities of capital raised from the public, which operate on the principle of risk spreading and whose units are redeemable at the option of the unit holder. The regulations appoint the Central Bank as a competent authority in relation to the authorisation of UCITS situated within the State. They will enable UCITS situated within the State, and authorised by the Central Bank, to market their products into other member states without the need for further authorisation.

Under the regulations, UCITS may be constituted either as unit trusts, investment companies with fixed capital or investment companies with variable capital.The regulations have been designed to promote both a prudent and flexible environment for international fund managers located here. They herald a new era for investors. Considerably tighter controls to the benefit of unit holders are being introduced in a wide number of areas, including the structure and obligations of management companies, investment companies, and trustees; the investment policies of UCITS; publication and contents of prospectuses and reports; auditing requirements; publication of issue and redemption prices; and inspection and enforcement powers of the Central Bank.

The regulations are expected to give a substantial impetus to the IDA in their marketing of the International Financial Services Centre as the location for fund management within the EC. In anticipation of the implementation of the Directive, the IDA have had detailed discussions with more than 30 international fund managers anxious to operate unit trusts and investment companies from the centre. Five firm proposals have already been received and are likely to receive IDA endorsement shortly. Many more applications are expected to follow the publication of the regulations.

The year 1992, for European fund managers, will begin on 1 October 1989. There is no doubt that the industry, while unsure of its exact effects, is welcoming the considerable opportunities it will provide in relation to marketing into the very large European investment market. The Government believe that the International Financial Services Centre will be a major base for such fund managers. In that context, the publication of the regulations, in close succession to the Finance Bill, will enable fund managers, both here and abroad, to examine simultaneously both the regulatory and taxation aspects applicable to UCITS situated within the State. We are confident that they will respond positively to both.

The business expansion scheme was introduced in 1984 to encourage the private investor to invest his money at risk capital in industrial and other traded services companies. It was a condition of the scheme that the equity investment involved would be maintained for at least five years. Subsequently the scheme was extended to other priority employment generating activities including tourism, shipping and trading houses. As a means of encouraging equity investment by private investors in developing enterprises of this nature the scheme has proven to be very successful indeed. Since the inception of the scheme investments totalling £48 million in 350 separate companies have already been notified.

Most of these companies were smaller companies engaged in manufacturing and other traded activities and the BES investment, by strengthening the financial base of the companies, offered the prospect of a substantial return to the economy in terms of output, foreign earnings and jobs. While investments totalling £26 million for the tax year just ended have already been notified it is clear that the BES investment in that year has been substantially higher. In addition during March last we had a total of eight designated investment funds, promoted by leading financial institutions, active in the market. Between them these funds have been able to raise a further £20 million under the BES scheme from private investors for investment during the current tax year in new equity in eligible companies.

With the accelerated uptake of this scheme widespread concern has arisen about the reduced risk nature of some of the more recent investments made under the scheme as well as arrangements being offered which would have the effect of eliminating the risk to the investors. The generous tax relief granted under the scheme was designed to compensate for the high risk that genuine equity investment in non-quoted developing companies can entail. It would be a matter of concern if investment moneys were to be diverted from these to low or non-risk companies for which a tax relief would be difficult to justify. The amendments to the scheme proposed in the Bill are designed to reorientate the BES scheme back to its original objectives and direct the BES investment to where it will yield maximum benefit to the economy in terms of output and jobs.

Computing services and software development are attractive economic activities for Ireland because they employ professional, highly qualified staff and because they are fast developing sectors with much potential for our young graduates and school leavers. There are now some 4,800 people employed in these activities. I expect that this will increase, given the right mix of strategy and economic management, to a level of 8,500 jobs by 1993.

There is a wealth of economic data concerning information technology and software services and according to such studies the EC market for software and software services reached a value of approximately 22.2 billion ECUs in 1987. That compared with 19.4 billion ECUs in 1986 and represented a growth rate of about 19 per cent. A market volume of approximately 52 billion ECUs is forecast for 1992. Given our highly developed telecommunications links with the rest of Europe, and indeed with the world, there is every reason to expect that Irish operators will benefit from and participate in this European development. I am taking steps to ensure that domestic computing services and software establishments have every chance of doing so. I have been assisted in this by a working group who recently submitted a report to me.

But as well as the domestic, indigenous and local firms, we look forward to growth as a result of the establishment of computing services and software houses in Ireland by overseas companies who will be attracted here not alone by sound economic policies but also by the supply of well educated and well trained young people.

To assist the development of this sector I had been keen to see the scope of the 10 per cent rate of corporation tax which now applies to data processing and to software development activities extended to cover a number of other computer services. This is a sector which is developing and adapting at a very fast rate and not alone are new developments being introduced but there is now an increased tendency for operations to specialise in particular segments of computing services to software development, etc. establishments.

It was for this reason that I was anxious to have a provision in this Finance Bill to permit certain services not comprehended by the terms "data processing" or "software development", qualify for tax treatment on the same basis as those services so as to permit the industry in Ireland to participate in a process of development to be found in this industry in other advanced economies.Were we not to make such provision now there would be a most serious risk that the development of this industry here would be hindered. Provisions have been included in the Bill which will curtail the cost to the Exchequer of section 84 loans. These restrictions on section 84 lending will not affect manufacturing industry but are intended to exclude certain activities of less economic benefit to the country. During the last decade section 84 type finance has been a valuable funding mechanism for manufacturing industry. It has helped to attract new industrial projects to this country and provide a cheap source of debt funding for existing manufacturing operations. For the above reasons the Government are concerned that this financing mechanism should remain available to industry.

Section 8 of the Finance Bill, deals with preferential status of the Revenue Commissioners in certain winding up situations, arising as a consequence of the recent concession to small businesses allowing them to remit PAYE amounts deducted from employees at intervals longer than the normal monthly remittance period. The maximum interval between remittances is one year and, where this facility is used, it would need to have the prior agreement of the Collector General. This concession to business represents an issue within the overall Government initiative to relieve administrative difficulties imposed by Government agencies on business operations. This development is in line with the measures agreed by the Government last year within their programme to eliminate or ease wherever possible, the administrative burdens that are seen by small companies as a hindrance to their business operations.

In the meantime a number of issues have been identified from the submissions of Departments and representative bodies which can be considered in the context of identifying existing regulations and procedures which might inhibit employment creation and maintenance. Generally no one of the measures identified by Departments and agencies appears of major significance in inhibiting employment and any impact from this point of view is likely to lie more from making progress in removing red tape across a whole range of measures so that a cumulative effect is achieved in terms of impact.

The high personal taxation levels which have persisted in Ireland and the relatively low income thresholds at which higher marginal tax rates apply have been widely perceived to be a considerable barrier to employment creation by: (i) acting as a disincentive to enterprise and effort; (ii) serving to push highly qualified and skilled people into emigrating to countries where their qualifications and skills are in demand and not subject to the same high tax levels that prevail in Ireland; and (iii) widening the gap between gross and net wages, i.e. forming a "tax wedge", so that the gross cost of employing people is driven upwards for employers.

The Bill provides for a welcome reduction in the standard rate of income tax from 35 per cent to 32 per cent, a reduction in the highest rate from 58 per cent to 56 per cent as well as increases in the tax bands. This maintains the progress that was commenced in 1987 towards reducing the burden of personal tax and increasing the incentive to work. Reductions in the rates of income tax will result in increased disposable income for households and a corresponding increase in demand for goods and services. An increase in demand for goods and services will lead to more jobs.

I particularly welcome the provision in section 25 of the Finance Bill aimed at improving the fiscal incentives for investing in audio-visual production. This is a topic to which I have referred on a number of occasions in the past year.

In my capacity as Minister for Communications, I am particularly conscious of the opportunities available to this sector arising from current and projected increases in the number of new television services at European level and the increasing internationalisation of these services. It is estimated that over the next five years there will be a tenfold increase in demand for new programme material to fill the schedules of these services.

Increasing attention is being given at European institutional level to the objective of ensuring — for both economic and cultural reasons — that most of the programme material for these new services is European-based. It is recognised that the European audio-visual production sector is in general considerably weaker than the much more dominant US production industry for a variety of reasons, not least the diversity and richness of individual national European cultures and languages.

The aim at European level over the next few years will be to strengthen the European production sector by developing aid packages and fiscal and financial incentives. This is already manifest in the European Commission's Media Programme under which a series of projects under the distribution, production and training aspects of the audio-visual sector have been set in train through the draft Directive on Broadcasting Activities which explicitly recognises the objective of achieving a majority of European-orig-inated programmes on European TV services and through the emerging French proposals for an Audio-visual Eureka programme which will seek to strengthen international co-operation in developing the programme production sector.

A window of opportunity is opening for our audio-visual producers, as broadcasters seek new and expanded sources of supply. In this expanding situation it will be easier for new producers to sell their product to the new and expanding broadcasters. While this is not an area in which Ireland in the past has had a particularly strong tradition, there are good omens for the future. There has been a mushrooming of new production companies in recent years, technical facilities recognised as excellent worldwide in the form of TV and recording studios have been developed here, and the human capital in the form of an imaginative and creative people, whether artistic or technical, is also available.

At domestic level the development of the third television channel, where a significant proportion of the material is expected to come from the independent sector, will greatly stimulate that sector.

What has been lacking is a competitive financial environment. I believe that the proposals in the Finance Bill will make an important contribution towards redressing that particular weakness.

I would now like to refer briefly to telecommunications and postal matters. For the past two years Bord Telecom Éireann have turned the corner and shown a profit.

The Taoiseach recently indicated that downward pressure on service costs, including telecommunications and postal charges, is one of the keys to competitiveness and must be maintained. On the telecommunications side there were reductions of 20 per cent, 25 per cent and in some cases 30 per cent in international call charges by Telecom Éireann in October 1988. The possibility of further reductions in telephone charges is being kept under review but further progress will depend on the company's continued financial improvement. On the postal side there has been no increase in charges since 1986 and the cost of posting a standard letter is now 10 per cent cheaper in real terms than in 1983. The Government is determined to ensure that Ireland's competitive advantage secured through the stringent control of the nation's finances over the past two years is not eroded and I am pleased to note that An Post will be maintaining postage rates at current levels for the remainder of 1989.

I now wish to say a few words about theNational Development Plan 19891993 which was submitted to the European Commission last month. This 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.

The plan recognises that high quality and price competitive telecommunications and postal services are essential to economic development. The services are all the more essential in Ireland's case because of the country's position — an island on the edge of Europe. Since 1980 Ireland has invested £1.46 billion in the modernisation and development of the telecommunications service. This investment is now paying dividends in a significant expansion of the service and improvement in its quality. However, compared with most member states of the Community the level and penetration of telecommunications development remains low and a full range of modern services is still not available nationwide.

To remedy this deficiency it is intended under the plan,inter alia, to continue expansion of the network to cater for market growth at a high quality of service, complete the digitalisation of the telephone transmission system, increase to about 60 per cent (from 45 per cent in 1988) the proportion of telephone exchange lines capacity served by digital exchanges, extend direct access to international networks and complete national coverge for mobile communication services.

During the period of the plan, Telecom Éireann's proposals for capital expenditure will be of the order of £675 million. Of this amount £369 million is considered eligible for assistance from the Structural Funds.

On the postal side the plan provides for automated mail sorting equipment to reduce mail handling costs, modern mail centres in Dublin and other infrastructural development at regional centres. The investment in the foregoing measures is estimated at over £20 million during the plan period.

As I indicated recently the Government objective over the next five years, the period of the plan, is to create 100,000 gross jobs in industry and internationally traded services. It is envisaged that direct expenditure of over £3,000 million will be undertaken on industrial development activity over that period with up to £1,200 million being contributed by the State and the EC Structural Funds.

There is now a great air of confidence on the part of industry. The results of the post-budget survey of the Small Firm Association (SFA) of the CII showed that 75 per cent of small firms are now optimistic about future prospects, a considerable improvement on recent years. In 1987 only 17 per cent of firms expressed this optimism while in 1988 the percentage was 46 per cent.

One might conclude that the growth in business confidence that has occurred in recent years is more determined by the overall thrust of policy and by hard evidence of a Government determination to tackle any underlying deficiencies and imbalances in the economy.

Other important findings of the SFA survey were (i) that over 47 per cent of small firms plan to increase employment over the next 12 months compared to 39 per cent recorded in the second quarter after the 1988 budget. This is an important outcome in that last year small business was the most dynamic employment generating sector accounting for over 7,600 of the 19,600 jobs created in manufacturing industry and international services; (ii) that a growing concern about potential recruitment difficulties with 10.3 per cent of firms expressing concern about "finding qualified employees" and 17.9 per cent indicating concern about "hiring better employees". In similar post-budget surveys in recent years concerns about potential recruitment difficulties did not figure as an issue; and (iii) that the issue of greatest concern to small industry as indicated by the survey is input costs — listed by 27.7 per cent of firms surveyed. This is a finding which supports the Government's concern to resist inflationary tendencies.

Evidence to support the view that Irish industry is indeed set on an expansionary course is demonstrated by the fact that manufacturing output grew by over 10 per cent in 1988. Whilst that growth was highest in the leading sectors like electronics and chemicals, it was more evenly spread than in previous years. Similar growth in manufacturing output is set to continue in 1989 with again a positive contribution from the traditional sectors.

Further evidence to support the growth pattern of Irish industry can be found in the statistics relating to capacity utilisation.The capacity utilisation of Irish manufacturing industry has been improving every year since 1983 and for 1988 was 74 per cent compared with 71.5 per cent in 1987. Capacity utilisation in Irish manufacturing industry is, however, low by EC standards.

Notwithstanding this Ireland remains a very open economy and is sensitive to international developments. The business environment in this country is, therefore, dependent to a large degree on trends in international trade. Strong growth in the UK economy over the last few years and the consumer boom which accompanied that growth will have given a boost to Irish exports to the UK.

A second external factor that will of course impact on the domestic business environment is the advent of the single European market in 1992. The opportunities that will present will be many but there will be threats also. This brings me back to the points discussed earlier in relation to competitiveness and it is, therefore, worth reiterating that in order to maximise the opportunities for selling our goods both in the domestic and the wider European market it is imperative that we be able to produce and sell our goods more competitively than those of our major trading partners.

In the more immediate situation Ireland continues to enjoy excellent export performances. As with the growth in manufacturing, the leading sectors have contributed substantially to this performance but there is evidence that the growth in exports is becoming more broadly based. The outlook for strong export growth is set to continue aided by our relatively low cost economy, an increase in investment spending on the part of Irish industry and the continuance of what is still a good international trading environment.

With respect to sound financing, the growth in recent years of different forms of equity capital in Irish industry is encouraging. The emergence of Nad-corp, the business expansion scheme, venture capital companies and the expansion of the Irish stock market have all contributed to placing Irish business on a sounder footing.

Secondly, the realisation that the management skills needed to run a company today cannot be treated in a haphazard fashion is being more forcefully articulated.Evidence of this can be found in the increasing attention being placed on management development by the industrial promotion agencies. The recent report to the Minister for Labour on management training is also most timely.

This country's future, our living standards and the job prospects of our young people all depend on the enterprise and initiative of Irish industry. All in all the indications are that if we maintain the present path we can look forward to the economic growth and development that are so essential for our future wellbeing. Consequently this Finance Bill introduced by the Minister for Finance on behalf of the Government is an essential element of the Government's economic strategy for 1989. The moves in this Bill in relation to the business expansion scheme, in relation to the financial services area, in relation to taxation of UCITS, in relation to section 84 and in relation to personal taxation changes are all indicative of an economy on the move. The Finance Bill is a central part of that economy.

I welcome the opportunity to speak in this debate and I move its adjournment at this stage.

Debate adjourned.