Deputy Gilmore has some 23 minutes remaining of the time allotted to him.
Financial Resolutions, 1990. - Financial Resolution No. 9: General (Resumed).
Debate resumed on the following motion:
That is is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(The Taoiseach.)
The budget has been described by the Government as a green budget. In support of that description the Government have drawn our attention to the Environment Action Programme published a few days before the introduction of the budget in this House. The environment action programme itself has already achieved its first and principal objective, esentially a public relations exercise. Its second objective will be achieved over the next five months or so, which is to put the Government on side for the duration of the Green Presidency. In his speech to the Environment Committee of the European Parliament on Wednesday, 24 January the Minister for the Environment highlighted, in large print, 13 issues which he hoped the Presidency would advance. Is it purely coincidental that these are also the main areas for action in the Minister's plan and that, by and large, they cover areas already in train within the European Community?
My party fully support most of the objectives of the plan, that is the banning of smokey coal, the proper treatment of sewage, the quality of drinking water, the provision of information on the environment generally, the promotion of recycling, all of which have represented our policy on the environment for some time.
It is much too soon for anybody to start claiming a victory. Fianna Fáil Governments have a long record of making very laudable policy declarations but failing to implement them in practice. In the environment area alone there are several examples. Last summer when dead fish were being hauled out of rivers we were promised tough new laws on water pollution. The water pollution Bill now before the House has been considerably weakened by a deal between the Government and the IFA.
Two years ago we were told the Government were going to take Britain to the European Court over Sellafield. Now we are told that that idea has been dropped. We were told there would be introduced strict new building regulations to ensure public safety and value for money for home buyers. The Building Control Bill still before the Seanad, if anything, undermines building control in major urban areas. It has been the same with planning compensation, water rates, local government reform and so on.
Any serious assessment of the Government's Environment Action Programme has to take account of this record, of the practice not matching the promise. In the programme the small print does not confirm the exciting promises which are in the big print. The impression is being given that an extra £1,000 million is being provided for the environment, but this is not so. The Public Capital Programme for the environment is simply being extended over the course of the ten years. What has been done is that a forward projection has been made of what the Public Capital Programme will be over the next ten years and that is £1,000 million. If, for example, we look at the area of sewage treatment and water quality we find that in 1989 £65 million was provided for sanitary services and £70 million is provided in 1990. The £300 million and £400 million provided for sewage treatment and water supply is simply a projection of what the Public Capital Programme will be over the next ten years.
The reality is that the budget is providing £20 million for the environment. That is welcome, but it is not £1,000 million as was promised. Secondly, the £20 million has to be seen in the context of the severe cutbacks which have taken place in the environment allocation for the past number of years, particularly the allocations to local authorities, the bodies in the front line of environment protection. The £20 million that is being allocated in the budget will not make up for the severe cuts which taken place in financing and staffing of local authorities, the bodies in the front line of environment protection. The £20 million that is being allocated in the budget will not make up for the severe cuts which have taken place in financing and staffing of local authorities.
The extent to which the £20 million will contribute to an improvement in the environment is very marginal indeed. Let us take the question of the banning of bituminous coal. Three years ago the smog problem merited only a defective Air Pollution Act, from the same Minister who is now promising to ban bituminous coal. At that time he was told, indeed by some of his own back benchers, that the Bill he was then putting through the House would not be sufficient to deal with the smog problem in Dublin. A few weeks ago the Taoiseach dismissed the smog problem and now suddenly it is so serious that bituminous coal must be banned by 1 October. Does all this mean that Dublin's air will be clean next winter? I think it does not. First of all, what is being banned is the marketing, sale and distribution of bituminous coal. Many households stock up with coal during the summer and there is nothing to stop CDL from selling as much bituminous coal as they wish before 1 October. The winter of 1990-91 could still be fairly smoggy.
Secondly, the principal reason why most householders have not voluntarily switched to low smoke fuels is that they are dearer. The Environment Action Plan and the budget do not tackle the price of and profits from low smoke fuels. What has happened to the Government's inquiry into the prices charged by the CDL monopoly? Why was the opportunity not taken in the budget to reduce VAT on low smoke fuels? Why did the budget increase VAT on one of the low smoke fuels — electricity — which could be used as a substitute for bituminous coal?
In the budget, £3 million is being provided to offset the extra financial burden on householders but that is simply not adequate. Ironically, it is the same as the cost of security at Dublin Castle for the duration of the EC Presidency. The Minister does not appear to have thought out the implications of the allocation of such a small amount of money. There was a statement, reported in the press, that the £3 million would be allocated through the national fuel scheme. If that is the case, the vast majority of people on low incomes will not benefit from it at all because, as we all know, the national fuel scheme applies only to certain categories of social welfare recipients. Following the budget, there will be 15,000 people on social employment schemes. These people do not qualify for the national fuel scheme and apparently will not qualify for assistance from the £3 million. When the Minister for the Environment spoke here on the budget he did not take the opportunity to clarify exactly who will benefit from this, who will be assisted and how it will be done.
In the area of conversion grants the Minister is proposing to halt the conversion to smokeless heating systems. The amount allocated in the budget for conversion grants is £4 million. That is made up of the £3 million which was already included in the 1990 Estimates and the £1 million which had not been spent in 1989. Therefore no extra money is being provided for conversion to smokeless heating systems.
We have been told that no further special control area orders will be confirmed. In other words, the Government are abandoning the Air Pollution Act. Outside of Ballyfermot, no new smoke control zones will be made. I have been informed that the surveys which were being carried out by Dublin Corporation to establish additional smoke control zones have been abandoned because the corporation have interpreted that the Air Pollution Act is being abandoned and that no further smoke control zones will be made.
The position of workers in the coal industry has not been taken into account. It is far too glib simply to state that these people can transfer to selling low smoke fuels. The implications of the ban on their jobs and earnings will have to be negotiated with them and, again, no provision is made in the budget for any of these implications.
Of the £20 million, £1 million is being made available for the provision of environmental information. The bulk of this is to be provided through the new service, ENFO. I have no doubt that the various publications and brochures which will be distributed and published and the surveys which will be carried out by this body will feature the Minister's name, if not his photograph quite prominently. The problem of environment information is not one of distribution. The Minister for the Environment came in here and made great play of the fact that everybody from children doing school projects to the general public would be able to walk into this one-stop-shop in downtown Dublin and get all kinds of information on the environment. I would suggest that the problem is not with the distribution of environmental information. In many ways the media already provide to the public such information as is available about the environment.
The problem with environmental information is that it is not available in the first place either because there is inadequate monitoring or because the results of monitoring are not made available to the public. Again, no provision has been made, either in the Environment Action Plan or in the budget, to deal with that problem. The question of assembling the information is dealt with in one sentence which states that this will be a matter for the Environment Protection Agency. Ironically, the £500,000 provided for in the Estimates for the proposed Environment Protection Agency is less than the amount being provided for the establishment of the one-stop-shop.
Great play has been made about the money being provided for recycling. We have been told that £500,000 will be provided for what is called small scale recycling. That is a term that is very aptly chosen because I cannot see how the recycling projects could be anything other than small scale due to the amount of money being provided. The £500,000 would work out at an average of £5,000 per local authority. How much recycling would a local authority carry out for £5,000? The reality is that most local authorities are already in a crisis situation as regards waste disposal. They do not have the money to replace refuse trucks in order to carry out the normal collection and disposal of domestic refuse, which they have been engaged in for years.
Quite a number of rural local authorities are getting out of the business of collecting and disposing of refuse and are handing it over to private companies who will charge householders individually for it. As a result of cuts during the past couple of years local authorities are getting out of waste disposal and on the other hand £500,000 in a nice public relations exercise is being provided for the recycling of water. That will work out at about £5,000 per local authority and will not provide for much recycling.
The Minister referred to the number of appeals to An Bord Pleanála and drew attention to the fact that in 1989 appeals had increased by 34 per cent over 1988 and by 24 per cent over 1987. To deal with the number of appeals going through An Bord Pleanála the Minister decided to increase the charges so as to discourage the public from making appeals. A charge of £100 for a large developer could probably be paid from petty cash but it is a lot when it comes to an individual or a residents' association making an appeal. Apart from the £100-£50 to make the appeal and a further £50 for an oral hearing — people may have already been charged for the distribution of planning lists by the local authorities concerned. We are getting here a disincentive to the public to exercise their right to lodge appeals against developments with which they are not happy. It is in fact a charge on democracy.
The Minister for the Environment laid emphasis on what he considered to be a recovery in the construction industry. There is no doubt that the increased employment in the construction industry is to be welcomed but we have to look closely at housing policy. Quite a lot of the construction activity has been taking place at the upper end of the market. In my constituency we have 800 people on the local authority waiting lists between Dún Laoghaire Corporation and the county council, and we have young families who cannot afford to buy their own homes while at the same time great activity is taking place at the upper end of the market and houses are going for £750,000. Ironically, the former home of the late President de Valera a man who was on record as having said that nobody was worth more than £1,000——
We should not enter into personalities.
I appreciate that. Houses are being built on that ground in the order of the huge prices mentioned.
People want to see the value of their houses increasing but we have to look at the effect of that. A house which cost £30,000 a year ago now costs £50,000. A young couple who could afford to buy a house a year ago can no longer afford to buy one. On the other hand what is happening in the local authority area is scandalous. We are told that there are now 20,000 applicants throughout the country waiting for local authority houses. Just over 300 houses were built last year even though we had been promised 900 houses. The Minister in his statement promised that 4,000 houses would be built this year. That is dishonest first because he double counted. The Minister said there would be 1,200 house starts and 1,200 house finishes and made 2,400 out of that and he also said that another 1,600 people would be vacating their houses. None of that will happen. If we go by last year's experience a promise of 1,200 house starts will end up in the order of 400 starts and 1,600 people will not vacate their houses. Any local authority will say that the number of casual vacancies occurring are down to a trickle. Even looking at the most optimistic scenario and assuming that 1,000 houses will be built, at that rate it would take 20 years to clear the existing local authority housing lists.
There is a serious crisis in the provision of local authorities. In my constituency we have applied for sanction for a small scheme of 50 houses and a contractor is already lined up to build the houses. The application has been with the Department of the Environment since February 1987 and there is still no sign of sanction being given. If 1,200 houses are to be built this year the Minister should quickly tell local authorities that they have the sanction to go ahead and build schemes they have already submitted. Even if the Minister were to give that go ahead today it would be some time before construction could commence and houses would be ready for occupation.
There has been no mention of the need for refurbishment of older housing stock. In reply to me in the House last week the Minister for the Environment gave information which showed that there are 3,000 local authority houses throughout the country which do not have indoor toilets and that there are 8,000 local authority houses without bathrooms. Approaching the 21st century it is a scandal that we still have houses built by the British in Victorian times under a Victorian housing policy which have not been renovated and refurbished, after 70 years of native Government.
I intervene to advise Deputy Gilmore that some three minutes now remain to him.
In the time left I will deal with the issue of people on social employment schemes. The Minister informed us that he intended to have an additional 5,000 people on social employment schemes bringing the total to 15,000. That is welcomed and very much appreciated by many communities in which social employment schemes are doing good work. Many of the people on social employment schemes get considerable benefit from them. However, many people on these schemes suffer a worsening in their living standards. They are caught in a no man's land between people on social welfare and those who are employed. They are not employees nor are they on social welfare. There are serious anomalies in the conditions which apply to people on social employment schemes, and they should be addressed. These people are not insured and when they come off the schemes they go on to unemployment assistance. They do not have the benefits of people who are on social welfare. They do not get the free fuel and if money for low smoke fuels is to be distributed through that scheme they will not qualify for that either. They do not qualify for free meat or for the Christmas bonus. Many of the people on these schemes feel sore that they are caught in this in-between situation without the benefits of regular employment and without the benefits of being on social welfare. I hope that will be addressed by the Ministers for Labour and Social Welfare when they introduce legislation in the House.
Our task in this year's budget was to maintain economic progress, to encourage and facilitate the continuation of social consensus, and to spread the gains of recovery so that all the people, but in particular the less well-off, could benefit from it.
That we are in a position to introduce a budget of this kind is a vindication of the Programme for National Recovery. It was established because all concerned were, in the words of the programme, “conscious of the grave state of our economic and social life”. The commitments made by the Government to the social partners in relation to overall economic policy, tax reform, social equity and employment creation have been honoured and in many cases exceeded. The budget itself is based on the achievements of the programme over the past two and a half years. Many of the things that are included in it would have been impossible at the start, but are possible now because Government, trade unions, employers and farmers have been able to work together successfully for the benefit of all.
The Programme for National Recovery represents a new successful formula for national economic management, better than anything we have ever tried before. The programme involves the social partners in deciding at national level the main economic and social policy objectives over a three-year period, and provides for regular consultation during its implementation. Consensus between Government and the social partners where it has been successfully developed is the key to progress all over Western Europe, and has brought new levels of prosperity through industrial peace. Here in Ireland the progress it has brought is impressive and unprecedented. Its potential, if sustained, is even greater still. I have no doubt that the fastest route to higher employment and higher living standards is to continue along this road.
The consensus behind the programme is reflected in the budget. The programme requires that parallel progress be made on a number of fronts; employment, debt reduction, tax reform and social equity. They are all seen as interdependent. The budget is prudent, responsive and caring, but it is also carefully designed to underpin economic progress and to propel it forward. For us the annual budget must not be just an economic and financial document, but a social programme as well.
The 1990 budget and Estimates provide for: further consolidation of the financial position; significant personal tax relief; a downward pressure on inflation; a move towward tax harmonisation; economic growth and employment creation; major development of the economic and social infrastructure; a series of integrated measures to improve the position of all those on low incomes; assistance for families, the elderly, persons living alone and groups in special need of assistance; further resources for priorities in health care and education and a comprehensive programme for the improvement of our environment.
Nineteen eighty-nine was another milestone on the road to national recovery. There was strong economic growth and investment, a healthy trade balance, and a further improvement in employment.
Last year saw another major improvement in the position of the public finances, the prudent management of which remains crucial for national recovery. The restoration of investment and consumer confidence, created directly by the policy of budgetary discipline, were predominant in securing the improvements that have taken place in the economy. The decision to restore the public finances within the agreed framework of the Programme for National Recovery was fundamental and the fountain from which everything else flowed.
For the third year running, the outturn of the 1989 budget was substantially better than had been targeted for. Government borrowing is now reduced to its lowest level for about 40 years. In just three years the Exchequer borrowing requirement was drastically reduced from £2,145 million in 1986 to £479 million in 1989 and from 13 per cent to 2.4 per cent of GNP. The target set for 1993 in the National Development Plan has therefore been achieved in the first year of the plan, four years ahead of schedule.
The current budget deficit in 1989 is 1.3 per cent of GNP, the lowest since 1973. We are now on course to have a balance in the current budget by 1993. The relationship of national debt to GNP, a key indicator, has improved dramatically. It has fallen sharply from 131 per cent in 1988 to 123 per cent in 1989, very close to the National Development Plan target of 120 per cent by 1993. It must be understood, however, that figures are provisional at this stage, but they represent a vitally important turnaround. This reduction, however, is only a start, and we must take advantage of the present favourable circumstances and trends to continue unremittingly in our efforts to keep it moving steadily downwards.
Under no circumstances must we ease up on budgetary discipline or allow any interruption of the steady progress now being made. As the EC Commission's Annual Economic Report states: “In Belgium, Ireland, and, to a lesser extent, in The Netherlands budget consolidation needs to be continued. These countries should exploit better the present strength of economic growth to reduce their budgetary imbalances”.
In 1990 overall borrowing by the Exchequer will be down to £449 million or 2.1 per cent of GNP, and the current budget deficit will be reduced to 1.2 per cent of GNP, marginally below last year's outturn. In assessing the adequacy of these targets some of the commentators have predicted that they may well be bettered during the course of the year, and the Government will make every effort to achieve such an outcome. To measure the distance we have travelled in three years, it is necessary to recall that in the 1987 budget the borrowing target was set at well over £1,800 million and the current budget deficit target at almost 7 per cent of GNP. In this year's budget we have built on the large improvement that took place in 1989, and on the strength of it we have revised our medium-term targets. The new objectives are to eliminate the current budget deficit and reduce the debt-GNP ratio to about 100 per cent by 1993.
We are now clearly stating that we intend to revert to the practice of balancing the current budget as soon as possible. The practice of deficit budgeting on the current side embarked on since 1973 has brought disaster. It was very much in vogue as an economic doctrine at that time. Claims that it would promote growth and employment have proved to be a fraud and the very opposite has been the case. We intend to draw a line under that unhappy 20 year period, and to get back to balanced annual budgets. When we do I am certain that no Government will ever again dare depart from that essential discipline.
In the light of all that requires to be done in the intervening period, both domestically and in response to EC requirements, we have set ourselves challenging and ambitious financial targets by 1993. They are, however, necessary, because we must make ourselves less vulnerable to unforeseen changes in international interest rates and exchange rate movements.
The foreign debt, at just over £9 billion, is £100 million below its 1986 level. This, in fact, represents a rapid fall in the proportion of foreign debt to GNP. Fluctuations in interest rates and exchange rates contributed significantly in the past to the build-up of the foreign debt and to the high cost of servicing the national debt as a whole. They were responsible for some of the financial setbacks experienced in the mid-eighties. A further reduction in borrowing, leading to a lessening of our exposure to unfavourable international financial developments, is therefore a vital priority. It is essential that we continue to make good use of the present relatively favourable climate to insulate ourselves from dangers that may arise in the future and ensure that we will not find ourselves once again in an unsustainable external financial position.
Everyone should fully understand that it is still costing the taxpayer well over £2 billion to pay the cost each year of the national debt. Because of higher international interest rates, this cost was set to increase by slightly over £200 million in 1990. In these circumstances it is essential that the total national debt of £25 billion be reduced. In the meantime it must be managed to the highest professional standards, so as to keep the annual cost of the debt down to the minimum. Last year over £100 million was saved on debt servicing, partly due to lower borrowing than anticipated, but also due to efficient debt management.
New sources of funding our borrowing requirements have been introduced, and the programme of refinancing foreign loans at lower cost through swaps and other arrangements is continuing to be implemented with considerable success. Market conditions have been changing significantly, as restrictions on capital movements are dismantled. Perhaps the most significant development in the past few years has been the large inflow from overseas into the Irish gilt market, as confidence in the management of the Irish economy and in the stability of our currency grows.
The new national debt office, which will become fully operational this year, will recruit highly-expert, professional personnel with modern financial services market skills. This addition to the capacity of the Department of Finance is necessary for the cost-efficient management of our operations in today's complex sophisticated international financial markets. It can provide further significant savings from the employment of market expertise and techniques in the day-to-day management of the portfolio.
The key element in the recent transformation of the public finances and the economy generally has been the reduction in public expenditure over a three year period by over 11 per cent of GNP. It is dangerous folly to forget this simple truth or to talk and act now as if it were not the reality. Those who are now stridently condemning some of the difficulties caused by reductions in expenditure without acknowledging the need for the overall reduction are simply deceiving the general public, no matter what their status or role in our community. The increasingly high levels of expenditure, borrowing and taxation that obtained prior to 1987 could not be sustained. The drastic change of policy in 1987 came just in time.
Taken together, all these demands to restore this or that particular service to their 1986 levels of expenditure amount in effect to a demand to put the whole process of financial recovery into reverse by spending more, taxing more and borrowing more. To allow the country to slide back again into that disastrous sort of situation, having pulled ourselves out of it at such cost, would be unforgiveable.
The process of recovery over the last three years has been difficult and has, of necessity, caused problems in a number of areas. But these have not been nearly so great as might have been expected, and the basic fabric of our public services has been maintained and, in the case of social welfare, significantly improved.
It is still essential, and will be for many years, to exercise very disciplined control over public expenditure in order to achieve substantial reductions in the national debt as well as coping with other major demands that will arise.
Strict control of State expenditure was imposed and is still being maintained for no other reason than to safeguard the future economic well-being of the people of this country, which was in serious jeopardy and must still be carefully watched over. The choice had to be made between continuing with chronic economic and financial problems and being left behind, as Europe moves to economic and monetary union, or take the tough and difficult course of correcting the public finances, improve our economic performance and provide real prospects for a worthwhile future. We took the right decision and, as a result, the present economic recovery is solidly based and offers real prospects of finally overcoming our problems no matter how difficult and intractable some of them still seem.
It is, however, vital to appreciate that, despite the encouraging progress achieved to date, the reduction of the national debt, which is proportionally the second largest in Europe after Belgium, must remain a major priority. We cannot be content to leave a £25 billion debt continuing to impede social as well as economic progress indefinitely. Our debt-GNP ratio at 123 per cent is over double the OECD average, which is below 60 per cent. Too many interest groups falsely claiming that our financial problems are over are now demanding greatly increased expenditure over a whole range of services that must ultimately be paid for by the taxpayer. The reality is that continued economic progress absolutely depends on continuing tight control of public expenditure. Without that, confidence, particularly international confidence, would rapidly dissipate, and we would soon be back into a poverty trap that would encompass the whole nation.
This Government are firmly committed to reducing the burden of taxation. But experience in Britain demonstrates clearly that tax reductions must be prudently geared to the overall budgetary situation and their effect on the economy. In the year 1987, for instance, we could not attempt tax reductions because of the state of the public finances and the size of the current budget deficit. Subsequent progress has vindicated the wisdom of that decision. Despite the dramatic improvements since, it would be unwise to rush into precipitate tax reductions that would have serious adverse effects on overall economic stability and on the balance of payments. Our policy must be to achieve the overall reduction that is required over an agreed time span.
On the basis of the progress already made and prudent economic management, we can now look forward to a future of lower taxes, increasing employment, and a steady reduction in the burden of debt. This will require realism and responsibility by Government and the social partners, so that in our impatience to eliminate our current economic and social problems we do not attempt to do more than can be financed and sustained by the level of resources available to us. It is vital in the competitive world of 1992 with exchange controls removed, a Community-imposed limit on budgetary deficits, and the demands of tax harmonisation, that the fundamentals of our economy be kept in good order, as otherwise we are likely to fall seriously behind our European partners.
In 1989, for the third year running, there was positive economic growth. Compared to the complete stagnation of most of the 1980s, economic growth in the years 1987 to 1989 averaged 3.5 per cent. This is a better performance than anyone would have considered possible at the beginning of 1987. There is every sign that economic growth will continue around this level in 1990. This level of growth has been made possible by the improved financial position, while growth itself has in turn contributed to further improving the financial situation creating what is now known as the "virtuous circle". This has also enabled us to start catching up with our EC partners. The Annual Economic Report of the EC Commission shows that GDP per head at current prices and purchasing power standards in Ireland rose from 63.4 per cent of the EC average in 1986 to 66 per cent in 1989 and is expected to reach 67.3 per cent in 1990. Together with Spain, we have started to gain ground faster than anyone else. We have a long way to go, however, and will need sustained growth over the 1990s.
Inflation, while rising to 4 per cent in 1989, remained below the EC and OECD average, and several points below the British inflation rate of 7 to 8 per cent, and only 1 per cent above the German rate. Our position as one of "the better performing member states" is the subject of some favourable comment in the Commission's Annual Economic Report, which states:
The narrow band countries of the EMS (of which we are one) form a group in which the present degree of price convergence and monetary cohesion, despite the recent acceleration of inflation, is broadly satisfactory. In these countries, the priority during the first stage of EMU should be to win back the ground lost and subsequently to maintain this result.
There are signs that inflation will ease back in the course of 1990 towards 3 per cent or less by year's end.
The budget is specifically designed to help reduce the rate of inflation. This year there has been no increase in excise duties, in fact there have been some reductions. Nothing demonstrates more clearly the change in this country's public finances than the decision to reduce the standard rate of VAT from 25 per cent to 23 per cent. This is not alone a first step on the difficult road to EC tax harmonisation, but it is also a contribution to keeping down the rate of inflation. Even though last December's ECOFIN Council acknowledged that the budgetary difficulties posed by harmonisation for Ireland need to be addressed, and will be studied by the Commission, tax harmonisation will still present us with a major budgetary problem in the years immediately ahead. The net result of the changes announced in the budget will be to reduce the consumer price index by 0.75 per cent.
There will be a significant further increase in real incomes, as a result of the wage provisions of the Programme for National Recovery and the significant personal tax concessions and the antiinflation thrust of this budget. Under the Programme for National Recovery, real take home pay for workers on average industrial earnings will have increased by between 4 per cent and 8.5 per cent over the three years of the programme, taking tax reductions into account. It is very important to keep inflation down, not only for reasons of competitiveness and currency stability, when exchange controls will no longer provide the same degree of protection as in the past, but also, of course in the special interest of all those on low incomes.
The fall in interest rates of 5 to 6 per cent in 1987-88 gave an initial boost to economic recovery, when it was most needed. The rise in interest rates over the last nine months has been due to international factors, in particular the rise in interest rates in Germany and the weakness of sterling. Nevertheless, compared with 1986, the differential with UK interest rates has improved by 6 per cent and with German interest rates by 5 per cent. This is the result of our better domestic situation. Roughly a quarter of the domestic national debt is now held by non-residents, mainly in the Community. This development is directly related to the Government's firm commitment to a policy of exchange rate stability, and a strong currency policy within the European Monetary System, as well as the financial discipline that must go with it.
Nineteen eighty-nine was a third year of buoyant export growth. The 15 per cent growth in exports achieved in 1987 and 1988 is likely to have been exceeded in 1989, with the trade surplus continuing well in excess of £2 billion and with the balance of payments also remaining in surplus for the third year running. This is clear evidence of our status as a successful trading nation. Relatively few OECD countries have both balance of trade and balance of payments surpluses at the present time, Japan, Germany, Benelux, Norway, New Zealand, and ourselves.
With the rest of the Community we have built up a £2.5 billion trade surplus, including a £500 million surplus with the Federal Republic of Germany. Our exports to Japan, though less than half imports, were up by a third in 1989, and are over £300 million. An interesting feature of our expanding export trade is the fact that exports to the Soviet Union in 1989 have increased by two and a half times the 1988 level.
Industrial production over the last three years has put in its best sustained performance ever, with 10 per cent growth or more in volume over the last three years. With the renewed flow of investment during the past two years, there is no reason why our good export performance should not be sustained, with any weakness in the UK market this year being offset by more buoyant markets in Europe.
Translating economic growth and improved conditions into a more rapid rate of employment creation is now the Government's top priority. Our aim must be to step up the level of net job creation, as envisaged in the National Development Plan.
The employment situation since 1987 has been turned round, though the pace of progress is not anything like as fast as we would wish. In the year to December 1988 unemployment fell by 7,000. In the year to December 1989 the fall was nearly 12,000. Average unemployment at 231,500 fell by 10,000 last year compared with 6,000 the previous year. The fall in unemployment has therefore been accelerating. Average unemployment this year is estimated to fall to 222,000.
In the two years to mid-April 1989 net employment rose by 10,000. When the drop in public sector employment and the numbers on FÁS employment schemes are taken into account, underlying net job creation outside of farming was over 30,000. All forecasters are predicting a rise in numbers employed of at least 13,000 in the year to April 1990, figures that will only be published by the autumn. On an annual basis net growth in employment is estimated to accelerate from 5,000 in 1988, to 10,000 in 1989 and to 13,000 in 1990. Further progress in increasing employment is projected thereafter, and will have an impact in reducing unemployment and emigration. To assist in our own efforts to translate higher economic growth into employment we have sought the advice of the European Commission about additional measures and approaches that might be adopted.
Our policy of creating the maximum possible level of jobs is based on the following elements:
First, the pursuit of the correct macroeconomic policies, so as to create a favourable climate for investment and job creation.
Secondly, to maintain the growth of the economy which the Programme for National Recovery has brought about.
Thirdly, to maintain the social consensus so as to continue to improve competitiveness in a climate of industrial peace.
Fourthly, to reduce disincentives to employment by the reform and streamlining of the tax and social welfare systems.
Fifthly, through the National Development Plan to actively encourage investment, improve the efficiency and capacity of the economy and to provide the structures and the trained personnel necessary to secure maximum development in key sectors.
On the personnel side the Government plan to increase the capacity of our universities in consultation with the colleges themselves, so that an extra 3,600 student places can be provided over the next three to four years. The social employment scheme is being expanded by 5,000 places and a new and interesting employment training scheme is being introduced, which will provide places in private firms for an additional 1,000 people with specific job opportunities in mind.
The outstanding characteristic of the Programme for National Recovery is that almost all its objectives have been successfully achieved, something not very common with national economic plans here or elsewhere. Between them the industrial agencies are estimated to have created about 21,500 new jobs in manufacturing and international services in 1989, in excess of the target set in the programme. In all, some 60,000 new jobs have been provided to date under the programme. Net employment in manufacturing industry increased by over 6,000 in the course of 1989. The number of redundancies was down by 42 per cent in 1989 from 23,000 to marginally over 13,000. This compares with redundancies of 30,000 or more in 1983-84. This means that gross job creation will have a far more positive impact on net employment creation. The number of days lost in industrial disputes is the lowest ever.
The trade unions can justifiably claim to have delivered on their side of the agreement, and the effect of good industrial relations cannot be overestimated in their effect on efficiency, security of employment, investment and frequently on the very survival of enterprises. The European Commission have again recently stressed the importance of maintaining conditions favourable to job-creating investment, and the essential contribution that moderate real wage increases have made to this objective.
The programme has made a major contribution to the improvement in the climate for investment, and investment has materialised. Investment as a whole increased by 10 per cent last year, and is forecast to increase by a similar amount this year, the first increase since the early eighties, and the surest sign of recovery. 1989 was a buoyant year for industrial investment. The large Intel semi-conductor manufacturing project which will in time create 2,600 jobs, Motorola, and the Fujitsu Isotec project from Japan are examples of some of the outstanding projects won by Ireland. It may be of interest to the House to know that the German economics minister, speaking in the Bundestag recently, advised, in relation to direct investment, "the responsible authorities in the GDR should look at what countries like Ireland and Spain have achieved in recent years".
Aer Lingus is going ahead with a major aircraft servicing project to create 560 jobs, which is evidence of the Government's commitment to job creation by expansion in the State sector. An even larger project is planned by GPA and leading continental airlines in Shannon. There have also been significant investments in the food processing sector and in computers and clothing.
In 1990 the job creation targets for industry agreed with the social partners will also be met. There is a continuing inflow of new industrial investment, and there is a very strong pipeline of overseas projects to carry forward the current momentum as a number of recent announcements have shown. During 1989, in fact, Ireland increased its market share of international mobile investment. We will be continuing to look for suitable new niche activities, where we can obtain a market lead, such as remote data processing. We also need to intensify the linkages of overseas industry with the Irish economy.
However, the key to industrial success in the nineties will be the presence of a strong indigenous industrial sector, of small, medium and large scale companies, that are capable of becoming a force in the European market. Success will depend on such factors as the quality and commitment of management, the skills and training of the workforce, the overall efficiency of the enterprise, good industrial relations, professional marketing and a well-focused range of back-up services from the Government and their agencies.
The establishment of the International Financial Services Centre in Dublin is well and successfully underway. It represents the Government's determination to take up any opportunity which exists for Ireland to share in the worldwide expansion of activity in the services sector. Right from the start, our priority has been to create in the centre the right environment with the right combination of a high standard of regulation and supervision and an attractive fiscal incentive regime based on the 10 per cent rate of corporation tax.
Our strategy in this regard has been justified by the success to date of the centre. At the end of January, a total of 86 projects had been approved — of which up to 50 have already begun to trade in temporary premises outside the Custom House Docks area. These projects will transfer into the area, once suitable accommodation is available there. The projects include many of the leading Japanese, German and US banks and financial institutions.
The 86 projects approved to date involve commitments to a total of over 1,500 new jobs over the next few years, and the Government are hopeful that many companies will exceed their commitments, as the full potential of the centre is realised by the companies coming into it.
There continues to be significant interest from both domestic and international financial services companies in locating new international business in the general area of the Custom House Docks. These further projects will add to the employment opportunities there, and the Government are confident that the employment targets will rise to at least 2,000 new jobs during this coming year.
Nineteen hundred and eighty-nine witnessed a strong revival of the construction industry, with current sales up by 20 per cent, the number of new house completions up by 13 per cent, and employment in construction firms with five or more employees up by 10 per cent. The general improvement in the domestic economy, increased investment including finance from the Structural Funds, and the urban renewal scheme have all contributed to a greatly improved outlook for the construction industry. While reductions in Government capital expenditure and in various housing subsidies in 1987-88 caused some difficulties and disappointment at that time, there can be little doubt that in the event we now have a much healthier and more securely based construction industry.
Investment in all sectors of the economy will be underpinned by the National Development Plan, which will absorb over £3 billion from the EC Structural Funds over the period 1989 to 1993. Commitments are set to increase from £462 million in 1989 to £557 million in 1990, a 54 per cent increase over the £361 million figure for 1988. These funds will provide a significant boost to the economy at present, and enable us to carry out many urgent projects that would otherwise have been delayed by lack of funds. We have been able to increase the Public Capital Programme by 18 per cent for the first time since 1982, but without increasing Exchequer capital borrowing. We intend to revert to the situation that obtained up to 1973, that borrowing, if any, after 1993 will be in principle for capital purposes only.
Tourism is another success story of the Programme for National Recovery. In the last three years tourism numbers have increased by 50 per cent, and it is estimated that over 10,000 additional jobs have been created in 1988-89 as a result. The principal policy instruments have been the liberalisation of air transport, lower access fares, the extension of external routes and internal access within Ireland, investment in facilities, activities by means of the business expansion scheme, Structural Funds aid, and assistance for cultural and heritage amenities from the national lottery. Our plans for the expansion of tourism are on target, and we have provided an additional £2.7 million in the budget this year for increased promotional activities.
Another undoubted success story of recent years has been the growth of the forestry sector, since we gave new emphasis to it in 1987 by setting up Coillte Teoranta. Planting, which was only 9,000 hectares in 1986, is expected to be 18,000 hectares in 1989, with the sector now employing 13,000 people.
Significant progress has also been made in the food industry, the marine sector and horticulture. In agriculture, while dairying and pig production did well last year, and sheep numbers continued to expand, difficulties were experienced in the beef sector, with the result that a modest but still positive increase in farm incomes of about 5 per cent took place in 1989, bringing the cumulative increase since 1987 close to 50 per cent.
There is a number of specific measures to assist agriculture in the budget including the increase in the VAT refund to farmers to 2.3 per cent, the placing of agricultural trainees on residential courses on an equal footing with other vocational trainees in regard to payment of fees, and changes in stock relief rules to accommodate farmers whose herds are affected by disease eradication. In addition, the indexation of capital acquisition tax thresholds in 1990 and future years are intended to be of particular assistance to farmers in facilitating the orderly transfer of farms from one generation to another.
Most of the specific measures to support employment creation in particular sectors are, of course, contained in the Book of Estimates and the Public Capital Programme. However, many of the tax changes announced in the budget also have important implications for employment.
The reduction of tax to reasonable and acceptable levels is an urgent Government priority, but one which will necessarily take time to achieve.
It is generally acknowledged that the weight of personal taxation and the high levels of indirect tax represent a heavy burden on individuals and families and are also an obstacle to economic development. There can be no serious argument about the disincentive effect of high taxes on employment, about the fact that some of our most skilled people are attracted abroad by more favourable tax regimes to the detriment of our capacity to develop. High levels of indirect tax have also created great difficulties, especially in the Border regions, for business. Taxation, therefore, is an important aspect of competitiveness, and unfortunately during much of the eighties the severe financial imbalances were translated into an ever increasing burden on the taxpayer. That is why the improvement in the public finances was of crucial importance as an essential context for any programme of tax reduction.
The right balance has to be struck between the provision of public services and the impositions the taxpayer can reasonably be asked to bear. We live in a mixed economy. Our people expect a satisfactory level of public services, and they also wish to see reasonable provision made for the basic needs and the dignity of pensioners, the unemployed, and those who are in some way deprived or disadvantaged. We have dearly learned the lesson that these services should be paid for through taxation, and not by borrowing. In addition, the more advanced countries of Europe show us that the best level of services will be provided by the State that is best able to increase its production of goods and services. Experience everywhere has shown that the tax system can help or hinder economic development, investment and employment and that changes in taxation should take place gradually. Sudden, major changes in the system can be disruptive of family budgets, corporate investment plans and general economic equilibrium.
The Government face formidable challenges in relation to taxation, including the reduction of the standard tax rate to 25 per cent, the introduction of a single higher rate, and the requirements of EC tax harmonisation and economic and monetary union.
Over the past few budgets, we have initiated a steady programme of tax reform and tax reduction. Our first step in 1988 was to widen the standard rate band so that it covered 63 per cent or nearly two-thirds of taxpayers, as we envisaged in the Programme for National Recovery. The standard rate band has been widened again this year so as to maintain that position.
In last year's budget we began the process of reducing for the first time in over 20 years the standard rate band, and we are continuing the downward process this year. In the two budgets, 1989 and 1990, the standard rate of tax has been reduced by 5 per cent, from 35 per cent to 30 per cent. In parallel with this, we have reduced the top rate of tax, which is now paid by many skilled workers, expecially those who are single, by 5 per cent also, from 58 per cent to 53 per cent. The value of the cumulative concessions made under the Programme for National Recovery amounts to well over £800 million. That compares with an actual undertaking in the programme of a reduction of £225 million.
The tax yield from the self-employed has been substantially increased through the introduction of self-assessment, the withholding tax on professional fees and increased powers for the Revenue Commissioners to combat fraud or non-compliance. Although the latest figures available only go as far as 1988, they indicate that the average tax paid by business and professional self-employed taxpayers, which up to and including 1986 was substantially less than the average tax payment by PAYE taxpayers, was significantly more in 1988. This is an important step towards the equity in our tax system.
The average income tax payment by self-employed business and professional taxpayers, excluding the impact of the tax amnesty, was 54 per cent higher in 1988 than in 1986. The Government since 1987 have in fact gone a long way towards redressing the balance between these two sectors. As a further step the Minister for Finance has announced that every effort will be made to introduce income tax assessment on a current year basis for the self-employed in this year's Finance Bill.
The Government have in the 1988 budget and again in this year's budget introduced major reforms in corporate taxation. As a result of a halving of accelerated capital allowances and a corresponding reduction in the rate of corporation tax, the yield from this tax, which in real terms was static or falling during the mid-eighties, has increased by a third from £257 million in 1987 to an expected yield of £338 million this year.
The measures in this budget will, leaving aside any increased yield from the ending of export sales relief that will not have full impact till 1992, of themselves increase the amount paid by the corporate sector. Within two years, accelerated capital allowances will be phased out which will result in an increased yield each year of about £45 million from 1992 to 1995. The ceiling of section 84 lending is being reduced by a quarter. These changes will both increase revenue and enable the rate of corporation tax to be reduced from 43 per cent to 40 per cent this year. This will be of benefit, particularly to the services sector which is the sector to which we are looking for many of the new jobs that must be created.
There are some who have argued that there ought to be a minimum tax paid by corporations, benefiting from the 10 per cent rate. However, a minimum tax would be very complicated. Its main purpose would be to restrict, in a very indirect way, section 84 loans, and accelerated capital allowances, but the budget does this directly.
I would like to draw attention once again to the very considerable achievement of the Government in increasing the yield in 1990 and over the last three years under the three headings of the self-employed, capital taxes and the corporate sector. These increases have had a very real impact on introducing a great deal more equity into the system.
Our excise duties and VAT rates are among the highest in the European Community. With the exception of the extension of the 10 per cent VAT base to electricity and telecommunications, which will not be passed on to the consumer, there have been no increases in indirect taxes this year, and as I have already mentioned, we have cut the standard rate of VAT from 25 per cent to 23 per cent. Apart from the positive impact on inflation, and the wider EC dimension, the changes in the budget should have a positive employment impact on a wide range of businesses and industries. The reduction of excise duty on soft drinks, for instance, will have a positive impact on an industry that employs 2,750 in 30 manufacturing plants.
The changes in indirect tax are also designed to reduce smuggling and other distortions in cross-Border trade. The severe increases in indirect taxes, especially in the 1983 budget, had a devastating impact on the commercial life of the Border towns, and indeed a negative effect on centres much further inland. This led us in 1987 to introduce the 48-hour rule which removed some of the worst effects of the gap between indirect tax rates North and South. The measures taken in the budget affecting many of the consumer items involved should improve the situation further, and the abolition of excise duties on gramophone records and compact discs have already been widely welcomed by the music industry.
The tax increases in this budget which amount to just £22 million are far the lowest of any recent year, while the gross tax reductions amounting to £200 million are much the highest. The cost of this is of course reduced by buoyancy of £91 million, which is an indication of the multiplier effect of the tax and expenditure improvements given in the budget. We have clearly moved into a period, where, provided economic progress is maintained, we can continue to lighten the overall burden of tax.
The welfare of the poor and the less well-off, and ensuring that they benefit from the improvement in our economic circumstances, was one of the major priorities of this budget.
The Government have more than fulfilled their commitments on social welfare under the Programme for National Recovery. Over the past three years there has been a consistent policy of giving general increases in line with the expected rate of inflation, together with much bigger increases for the groups that need extra assistance most.
This year, reflecting the general improvement in the economy over the past twelve months, we have introduced a major programme of social improvements, the most comprehensive of its kind for many years, amounting to £235 million in a full year.
We have initiated a new type of co-ordinated approach to improving the situation of those on lower pay which will be followed up in future years. To broaden its impact, we have further extended the exemption scheme introduced in the budget last year for low income families. As a result a married couple with five children and an income of £8,000 or under will be completely exempt from tax. There will be further assistance for lower income families through the family income supplement. We have also introduced a limited PRSI exemption scheme for low paid, and in the main part-time workers who are outside the tax net. Those on low incomes will of course benefit most from the reduction in VAT by 2 per cent on the cost of a wide range of daily necessities. Our intention is that these different measures and others will combine to assist lower-paid families significantly, including small farmers and shopkeepers.
The 5 per cent increase in general rate of social welfare is well in excess of the expected rate of inflation in the coming year of around 3¼ per cent.
The long-term unemployed, particularly those with families, have been identified as a category most in need of special assistance. The personal long term unemployment assistance rate has been increased from £36.70 in the first half of 1987 to £52 later this year. This has involved successive increases of about 11 per cent for each of the last three years in payment levels. Taking child benefit into account, an unemployed person with five children will by October be receiving approximately £150 a week.
The successive changes that have been made since 1988 have been in line with the Commission on Social Welfare Report, as its former chairman has acknowledged. It has not been possible to implement these recommendations in one attempt. In a situation where our primary social aim is to maximise employment, it would obviously be wrong to have a situation where any significant number of persons would be better off unemployed than at work. That sort of situation brings disillusionment and demoralisation. That is why we wish to move towards a closer integration of the tax and social welfare systems, and improve the position of those in employment on low incomes.
For the first time this year, apart from special increases for the long-term unemployed, there have been additional topup payments, for instance, for pensioners, and lone parents on long-term assistance.
In this year's budget we have paid particular attention to the position of spouses in the home. We have been able to give a child benefit increase this year; £500,000 has been provided to support programmes for women in the home, to help them develop their skills. In this sum is included £150,000 for the work of the Rape Crisis Centres.
For families on social welfare the child dependant allowance has been increased in most cases by up to a pound a week. A new clothing allowance often advocated is being introduced in September to help disadvantaged families with the cost of clothing children for school.
Another significant measure is the increase in the carer's allowance of those who look after elderly relatives, who are semi-invalid. When combined with the extra £5 million provided for improved services for the elderly and £2 million for the mentally handicapped service, it strengthens the implementation of the concept of community care.
In comparison with the original health estimate for 1989, we are now providing substantially increased resources in 1990, a gross expenditure increase of over £130 million. Even allowing for inflation, this is a substantial real increase, which fully matches any reasonable and responsible expectations that may have been created. Health now in fact enjoys the same real level of resources as it did in 1986, measured against inflation, and the proportion of total net Exchequer spending on health provision has risen from 19 per cent in 1986 to 21.3 per cent in 1990.
Any discussion of health must begin by recognising that resources are finite. The fundamental issue is not the amount of the resources but the most efficient and best use of the resources we can provide for the benefit of patients who need care and attention.
The correction of the public finances in 1987 was urgently necessary, otherwise it would soon have become impossible to maintain any health service or any other social service. With health care accounting for about one-fifth of Exchequer spending, the general principle had to be applied to health as well as to all the other services. The emphasis for the past three years has had to be on streamlining services, seeking out efficiencies, increasing productivity and protecting key services. Resources are now becoming available to improve the situation, and the last six months have seen real improvements. There have been three increases in health funding since last September. Firstly, in 1989 there was an additional £15 million to deal with specific priority areas in the acute hospital services; secondly, the 1990 Estimates show an increase of £120 million, or almost 10 per cent, in non-capital expenditure on the health services for 1990 as compared to the original 1989 provision; and last week's budget allocated a further £13 million, including, as Deputies know, £5 million for services for the elderly, £3 million for the dental services, £2 million for the mental handicap services and over £3 million for substantial increases in the various health allowances from next July.
It is important to remember that this country has, overall, a comprehensive health service. There are, of course, areas which need considerable improvement and development. Technologies change; demands and expectations change; new developments, new services and new ways of delivering them are constantly needed. But this is a feature of healthcare in every society. I think Deputy John O'Connell gave us a very expert and mature analysis of the whole situation last night.
There is no country at our level of economic development which can boast of facilities or personnel of a quality even approaching ours. The report of the Commission on Health Funding, which makes many recommendations concerning improvements in services and the methods of delivering them, confirms at the very outset that we do indeed have a high standard of health services.
Under the present Minister, Deputy O'Hanlon, the necessary changes are being made in order to direct more resources to the new priority areas. The productivity of the health services has been greatly increased. The steps that have been taken in the last three years are the basis of longer-term development and improvement.
There are many other measures in the budget designed to deal with specific social problems, aid for the voluntary housing organisations, the Simon Community, the extension of the very worth-while scheme for extra teachers in disadvantaged schools, for local enterprise, for adult literacy and for the welfare of emigrants.
The budget represents a significant social advance. We have ensured that pensioners, spouses working in the home; single parents; the unemployed and their families and other disadvantaged groups are able to share in the general economic progress that this country is making. Economic progress must always be accompanied by social advance in any society which wishes to be regarded as enlightened.
The quality of life today is deeply affected by the state of our natural environment. It is now widely accepted that economic growth cannot be at the expense of the quality of the environment. This principle has been implemented by the introduction of the environmental impact assessment requirement for development projects.
As we all know, last week the Minister for the Environment launched the Government's bold and imaginative Environment Action Programme which clearly set out our concern and priorities. The Government have agreed on an expenditure of over £1,000 million to be spent during the next decade on the implementation of this plan, and the necessary funding for this year has been provided in this year's budget.
The budget is both a reflection of progress made and a pointer to the progress that will be made in the future. It fits into a much wider context. It represents the final phase of the current Programme for National Recovery. It is, from a budgetary point of view, the first full instalment of the National Development Plan. It is also the first budget in the new Government's programme, while carrying forward the successful economic policies of the last Government into their next phase. It represents as much as it is possible or prudent for us to attempt at this stage.
In out budgetary plans taken as a whole we have consolidated the improvement in the national finances and in general economic conditions; we have provided a stimulus for employment through increased investment and restoring growth to the economy; we have given the most significant tax relief of recent years; we have introduced important social advances; and we have provided a comprehensive programme to tackle the problems of the environment. All these objectives are set against the background of closer European integration and the increasing demands that this will place upon us.
I would appeal for the widest possible understanding of the extent to which the progress we have made can be attributed to social consensus. The social partners, who have contributed so much to the success of the Programme for National Recovery, should now have the opportunity in a continued partnership with the Government to determine how these growing benefits will be distributed. With consensus there is really no limit to what we can achieve in the economy and socially and in tackling all those problems that are still with us. We have developed in the national programme something new; a formula that works and produces results and benefits. I sincerely hope that we will hold on to it.
I think there is fairly general acceptance about the financial direction in which we should travel. With the exception of my colleagues on my extreme right, who are actually on the extreme Left of the political spectrum, I think we are all in general agreement, even though we may disagree in detail, that the thrust of the Government's financial strategy is basically correct. I believe the public also accept the Government's financial strategy because they understand that we went off the rails for something like ten years, for a few years prior to 1977 and in subsequent years. There is now a general acceptance that matters should be put in order and the thrust of this is that there have been and will be fairly significant cuts in public expenditure and rather minor adjustments in the taxation system.
There is one aspect of the budget which I found quite alarming and I am surprised more reference has not been made to this in the House. It was alluded to by our spokesman on Finance on the day of the budget. It is the question of leaks. The Budget Statement is a highly confidential document and no details of what it contains should become public knowledge prior to the Budget Statement in this House by the Minister for Finance. However, on the morning of the budget this year, that is, 31 January, I clearly heard the financial correspondent of RTE giving explicit details on the 9 a.m. radio bulletin on RTE I of what the Budget Statement contained in regard to personal taxation. I should like to know if the Taoiseach and the Government have carried out an investigation into how this qualified and precise leak occurred.
Obviously this leak was a breach of the Official Secrets Act. There were no "ifs" and "buts" about it or statements to the effect that "rumours had it" or "we believe the changes will be as follows". It was an explicit statement to the effect that the personal rates of taxation were going to be reduced as follows: the higher rate would be reduced from 56 to 53 per cent and the standard rate would be reduced from 32 to 30 per cent. Of course, that is exactly what happened and there must have been a deliberate leak to the person in question or to some other person who passed the information on to this individual.
This was clearly a breach of the Official Secrets Act and also a breach of Dáil privilege. If the Government are not taking action by way of an internal inquiry I believe the Director of Public Prosecutions has an obligation to institute an investigation, or to ask the relevant authorities to institute an investigation, into the matter. Nothing like this has ever happened before during my time in this House.
The implications of this leak of information are extremely serious. As it so happened, there were no major changes in the rates of excise duties in the budget — there were some changes in the rates of excise duties on television sets, videos and gramophone records — but if there had been major changes in the rates of excise duties on the old reliables, as we refer to them, such as beer, spirits and cigarettes, there could be very serious implications. A number of people could make a killing, in other words, a large profit. What worries me with regard to leaks is that the excise duty being charged on liquid petroleum gas was reduced by 50 per cent. If somebody on the outside had that type of information, they could well have speculated on the Stock Exchange on companies which import, manufacture or distribute that gas. That is the one area where there could have been a major abuse. If there had been big changes in excise duties on the commodities I have referred to, including petrol, drink and cigarettes, somebody could have made a lot of money. This would have been a crime. What it constitutes at the moment I am not legally qualified to say but some statement should be issued to clarify what type of investigation is taking place within the Government or through the Director of Public Prosecutions.
During Question Time in the Dáil on Thursday of last week. I referred to the reluctance of the Government to recognise that immense damage was done to our coastal defences during the storm on the night of 16-17 December last. It has occurred to me that because the worst of the storm did not occur in the vicinity of Dublin or in a constituency where there is a Government Minister, its consequences are being conveniently ignored. If they were being faced up to the financial bill would be quite considerable. They will have to be faced up to at some stage. I recall that when we had storms of a different type in the vicinity of Dublin not too many years ago: we had Micky O'Leary's snow blizzard and a few years later we had Hurricance Charlie and the media were falling head over heels demanding some action on the part of the Government because they were happening on their own doorsteps. When it is out of sight and out of reach people in high places do not give a damn.
What happened, a Cheann Comhairle, not too far away from your back door and mine was considerably more damaging and harmful than either of the two other occurrences I have referred to. In my own county, the extent of the damage is put at £11.5 million. In neighbouring counties, such as Cork and Wexford, it is quite considerable, but what have we got. We have got no recognition and no promise of any assistance. We have not even got an acknowledgement of the problems created and the damage which has been done. I am putting down a marker to the effect that if the Government cannot put up the money themselves, they will have to get the money from the EC, be it through the Regional Fund or the Structural Funds.
Specific reference was made in the Budget Statement to what happened on the night of 16-17 December. The Minister stated that "the storms in December 1989 caused severe damage to the coast, harbours and boats on the south-eastern seaboard". He went on to state that just two locations will receive financial assistance, £950,000 to Arklow and £100,000 to Kilmore Quay in County Wexford. We probably all know from the pictures on television that there was substantial damage done to boats in Kilmore Quay but if the Government had properly appraised themselves of the overall situation they would know that harbours, beaches, roads and many other coastal installations right along the Cork, Waterford and Wexford coast was absolutely wrecked.
The only saving grace is that there has not been a subsequent south-easterly gale since the night of 16-17 December. We have had some ferocious gales, even storms, in recent weeks but they have all come from what is for us a safe direction, the south-west. However, there will be south-easterly gales and storms. They could come next week, next month or next year and there will be no protection for areas like Tramore, Ballycotton, Ardmore or Bonmahon. The coastal communities of the south and south-east are being left at the mercy of the sea and the wind and the Government are clearly hoping that the weather will improve and the problem will go away. What I am saying here is that the problem will not go away. The sea defences have been shattered and it will not take much to penetrate them and cause not just tens of millions of pounds worth of damage — as is the case at present — but hundreds of millions of pounds worth of damage with whole communities, harbours and villages being swept away.
One of the better legacies the British left us was a fine system of harbours and sea defences. We could call them bulwarks, sea walls or embankments but what have we done in 68 years of self government? We have witnessed and allowed those very fine harbours and sea protection works to disintegrate and, in many places, to fall into the sea. We have looked on and done nothing. Now we are paying the price which will be considerably greater unless something is done immediately. I was amazed yesterday when a Private Notice Question of mine on this matter was ruled out of order by the Ceann Comhairle on the basis that it was not of sufficient urgency under the Standing Orders of this House. I see Private Notice Questions being allowed day in and day out here on every item to every Tom, Dick and Harry many of which do not border on the same element of importance or urgency as the matter I wanted to raise here yesterday.
The future of the people living in coastal communities who primarily depend on the fishing and tourism industries is in grave jeopardy. I want to see somebody in Government or the Government collectively taking action to ensure that something is done. If we want the local authorities, by which I mean the relevant county councils, to do something, then we can forget about it, but not totally. We can forget about them doing anything significant or worthwhile because through no fault of their own they are being bled of finance. They have only buttons. They put up a few mounds of sand in the hope that the sea will not be too severe and will not flatten them in a day or two. When it comes to real coastal protection works they have not the money to do it. It will have to be a major operation undertaken by the Government hopefully with with the help of EC funds. We want to know fairly quickly if that money will be available, when it will be available and how much will be available. For starters, it might not be such a bad idea if we asked the EC for something very minimal, that is to let us have some of their experts on coastal protection to assess the situation at first hand and let us know here in this country and let the EC know what needs to be done and what the cost of the work will be. It is a case of totally ignoring a very major problem.
There is legislation which allows local authorities in conjunction with the Government to carry out major coastal protection works. The legislation is known as the Coastal Protection Act, 1963 and it is not worth the paper it is written on at the moment because it requires the local authority who put forward the scheme to provide 50 per cent of the finance. That legislation has become self-defeating because of lack of funds in local authorities. If Waterford County Council, for instance, were to put forward a scheme for £11.5 million they then would have to put up something like £5.75 million themselves. They do not have £575,000; they do not have £57,500. It is crazy. They put such a scheme up to the Government when they had more money, when they were more self-sufficient, when they had more means of raising money through rates. They put up a scheme in 1966, 24 years ago, to protect the most vulnerable part of the coast. What has happened? Nothing. The Coastal Protection Act, 1963 is redundant, and we are at the mercy of the elements. Therefore I raise the matter here today. I raised it last week and I am going to keep raising it until something is done. For the life of me, I cannot understand the selectivity of last week's budget where one part of the country got money and areas which were worst affected got nothing. It is a disgrace. I can only deduce that what happened was brought about by strong political lobbying of the Minister for Finance. If that is how you run a country then let God help us, because that is not how it should be done.
We all know it should not be done, but for the Taoiseach and the other members of the Government to allow it to happen is a total disgrace. I will be seeking the support of my colleagues in the south and south-east irrespective of party affiliation when we move a motion on this item in the coming weeks or months because it affects us all. The public in those southern and south-eastern regions are outraged at the Government's total neglect of, and indifference to, this matter. It is as if they do not want to know it happened. Even with communications like television and local community or independent radio stations and all the media-related activities nowadays, rather than becoming a more compact country we are becoming more provincial in many ways.
Isolated.
Well, insular or isolated. If you are not at the hub of the action, that is Dublin, where the Government sit and the moneys are distributed, you are going to suffer. That is what it amounts to. If you are not at the hub you are in trouble, you are ignored and if you have not a Government Minister or some very strong influence within the Government you are just dead. The Cork Examiner, for instance, can rant and rave about the neglect of Cork and the south, but they are whistling in the dark, nobody is listening to them. They might get a mention in “It Says in the Papers”. The Cork Examiner is a national paper, much as some people might not like to admit, but as far as it and provincial papers and provincial radio stations are concerned, there is nobody in Dublin listening, and that is becoming more the case every day. Unless we highlight the problem I cannot see that we are going to solve it. I do not think all the citizens are being treated equally as the Constitution lays down. There is discrimination against certain areas. If they have not pull, muscle or input at Cabinet level or whatever, they are just ignored. The Taoiseach and the Government should rectify that. That is not as it should be, and that is a sad reflection on our society and our political system and because of that all we are going to get is increased cynicism and hostility from the public in those areas, as if we did not have enough of that already. It seems to be the “in thing” to castigate politicians and political institutions, but sometimes happenings that take place encourage this type of activity. It is the duty of Government and all of us to see that it does not happen. However, it is happening. The episode of the coastal damage I have referred to is a graphic illustration of what is happening.
The Taoiseach in his statement referred to the Government's Environment Action Programme. As part of that plan I notice that the price of unleaded petrol is coming down 5p per gallon and the excise duty on auto LPG is being reduced by 50 per cent. That will contribute in some small way to a lessening of smog, particularly in urban areas such as Dublin, but I wonder if anybody has done an equation or calculation to determine what really is causing smog in Dublin, for instance. Is it bituminous coal or other smoke emitting fuels or is the emission of fumes from lorries, buses and cars a very major element? I do not know if anybody has ever done a calculation on that, but I suspect the emission of fumes is a major element in the problem.
Take Dublin Bus. Did anyone here ever walk or stand or drive in close proximity to the rear of a Dublin bus in recent times? You would be lucky if you were not suffocated by the emission of noxious fumes. I suspect it is because the Dublin Bus fleet has not been updated, replaced or upgraded for many years, and that although laws governing the emission of offensive fumes exist, I do not believe they are enforced. I believe that a large part of the smog problem in Dublin, and in Ballyfermot in particular, is due to the non-enforcement of the law governing the emission of fumes from vehicles. We are getting hot and bothered about the emissions from bituminous coal and other smokey fuels but while it is a major element it is only one aspect of the problem. We should look at every aspect of the problem and not just look at one area in isolation.
Recently, I tabled a question to the Minister for the Environment about traffic congestion and the enforcement of the parking laws as they apply to vehicles loading and unloading in busy city centre streets, many of which are the main arteries from the heavily populated suburbs. In reply, the Minister said there were no specific laws dealing with vehicles parking while they were loading or unloading goods. However, in every civilised country of the world where you have large urban populations and dense traffic, there are laws which prohibit the loading or unloading of goods at peak rush hour periods. At St. Stephen's Green or at any of the important entry points to the city, it would not be uncommon to see three or four parked delivery lorries loading and unloading goods, creating a traffic jam between 8.30 a.m. and 10.30 a.m. Yet nobody pays any heed. The traffic builds up a mile or so back and then there is chaos.
We wonder whether we should restrict traffic into the city centre. There is no need to restrict traffic into a city the size of Dublin. The roads are not great but they are capable of carrying the volume of traffic we generate. However, the laws governing parking while vehicles are being loaded and unloaded are non-existent. Legislation should be brought in to ensure that goods can only be loaded or unloaded during non peak periods.
You would think it was a deliberate policy on the part of Dublin Corporation, Bord Gáis, the ESB or other public bodies to cause the maximum inconvenience to the general public. Every week one sees their lorries parked out in the middle of the street and after placing their bollards they then start digging up the street for days on end. We had this in Suffolk Street last year. It was happening in Dawson Street and Kildare Street a few months ago.
It has been on going in Kildare Street for the past decade.
Today I noticed there were road works on Baggot Street. I saw an item in the newspaper, whether it is true or not, that the Taoiseach had told Dublin Corporation or whoever was involved that all the road works in Dawson Street were to be stopped once the Irish Presidency of the EC started. Charlie now gets credit for lots of things; he used to get blamed for lots of things years ago and that he should not have been blamed for, but now things are going well.
The Deputy has some one and a half minutes remaining.
I wish he would bring in a law that demands that that type of work should be done when the traffic is light as is the case in England, where that type of work is done between midnight and 6 a.m. thus causing little or no inconvenience to the travelling public.
Acting Chairman
I must ask the Deputy to conclude.
I will conclude by reiterating what I said at the outset. The leaks in this year's budget are highly undesirable and the source of the leaks must be traced, because if it is allowed to happen once, it will become endemic. Leaks of that type can only lead to one thing, that is, corruption of the highest order and we certainly do not want to see that. I wish to state publicly that if the Government do not do something about it, the Director of Public Prosecutions should make it his business to see that the source of the leaks is traced.
In the short time available to me I do not intend to be repetitious and go into detail on the very lengthy speeches made by the Minister for Finance on the Budget Statement and by the Taoiseach this morning. Various Government Ministers will dwell at great length on the detailed fiscal aspect of the background to the 1990 budget.
The detail of the budget has been well documented and reported in all our newspapers. The situation has been analysed on television programmes. The human and business perspectives have been well and truly explored and debated. I would like to give a quick analysis of the background to the 1990 budget. The political system collectively, which the Taoiseach referred to this morning, set off on the course of deficit budgeting which became the "in thing" in the seventies. This became the cornerstone of all financial planning. There were pertinent reasons that the then Minister for Finance, Mr. Richie Ryan, when confronted with the dilemma of the oil crisis, took the immediate necessary action and set us on a particular course. That Government endeavoured, as did a later Government comprised of the same parties, to grapple with the difficulty that confronted them. We went into Government in the period 1977-81 and share responsibility for the difficulties we are now endeavouring to grapple with in the nineties. I heard a former Minister for Finance, Deputy Bruton, refer to the fact that when his Government resumed office after the 1977-81 period they had to deal with inherited debt and fiscal problems. There could well be an element of accuracy and correctness in those comments. Be that as it may, we now head into the nineties with a debt burden which has been well analysed and we are now trying to manage it more efficiently.
One could well analyse what we achieved by going into debt. Was the investment well spent? We have improved our telecommunications, and this obviously added to our level of debt. We have in place a fairly excellent structure of primary and post-primary educational facilities, which is a positive investment. Indeed one could say that money was well spent on a whole range of areas. However there are a number of major areas where one could be quite critical of the results of huge investment. The disease eradication programme is a case in point. There has been ever-increasing spending on disease eradication, which is a huge cost to the taxpayer but yet all we seem to hear are excuses. We have had new policies and various reports on their implementation, but this area of Government spending does not appear to have been taken under control and it would not appear that the taxpayer is getting value for his hard earned money.
The Tallaght strategy must be viewed against the background. It was desirable that a consensus emerged on economic policy towards the end of the eighties. Of course there was a certain political reality about it, and I must pay tribute to Deputy Dukes, Deputy John Bruton and their colleagues in the Fine Gael Party. When we assumed office after a period in which they had been in office we were faced with the stark reality of endeavouring to manage the country; probably because of the lack of economic consensus within the two parties in that Government they did not really tackle or grapple with the issues. This was probably best emphasised by the then Minister for Finance, the present Leader of Fine Gael, Deputy Dukes, when he made a statement after the formation of that Government to the effect that he hoped the then current budget deficit could be held at £500 million. The present Leader of the Labour Party, the then Tanáiste, Deputy Spring, visited the Taoiseach, Deputy FitzGerald, in hospital and came away from that discussion——
It was the other way round.
Perhaps it was. He came away from that discussion with agreement on £800 million deficit which, as I recall, rose to over £900 million. We were still on the same treadmill of being unable to pay our way and increasing that deficit. In turn this means that, when the global economy improves, our recovery is that much slower because we must pay for our past sins.
My party, in a minority position during that period, got the consensus support of the Tallaght strategy. For good economic and national reasons Fine Gael are to be complimented on that strategy compounded by the political reasons of having endured the sharp shock of having lost ten or 15 Dáil seats, with a new Leader who wanted to consolidate his position. He had damn all political option but to do so. An acceptable consensus emerged clouded in political reality.
The Minister for Finance and his colleagues in the Department framed the 1990 budget we are now discussing. It is a matter of personal regret to me that, in the period from 1977 to 1981, I and my colleagues, then on this side of the House, in the month of October nodded through Supplementary Estimate after Supplementary Estimate increasing that debt without questioning, debating or considering whether it constituted prudent management. In that period I cannot recall the Secretary of the Department of Finance or any of his colleagues over there threaten to resign or resigning in protest at the political mismanagement of the past 20 years. Whether there was a consensus that the debt should have been allowed to roll up in that fashion, collectively we are all to blame.
Even the journalists of the day were not too excited about it.
In the same way one must now question the acceptability of the good news of the past 12 months when a tax amnesty yield was calculated at a certain figure when in fact the amount returned amounted to four or five times that estimate. That begs the question: who calculated that figure in the first place? How can one accept his authentic capacity to provide factual financial information and plan accordingly? The fact that the eventual yield was £400 million greater than the estimate is good news.
The 1989 budget carried a borrowing requirement of something in the region of £800 million or £900 million which turned out to be in the region of £405 million or £490 million, again amounting to £400 million or £500 million of inaccurate estimation. In turn that begs the question: is it prudent fiscal management to under-calculate and announce the good news later? Provided the position remains that way I suppose it is partly acceptable but should it go to the opposite direction it would throw our national finances into a rather sorry state. It is quite unacceptable that the political arm of Government should be acting on figures provided. Probably we should have our own method of scrutinising such calculations because we must accept responsibility for them. They are provided for us by the permanent executive arm of the Government. Some of those calculations have been widely inaccurate in recent times. I want to put on the record that that fact does not go unnoticed. They have been inaccurate; whether because of imprudent fiscal management or an inadvertent error I do not know.
Probably all Members of this House reflect on how the 1990 budget directly affects the people who elect them and whom they represent. In my constituency of Dublin West there are two Government Deputies, one a senior member of the Government, two Fine Gael Deputies and the former Leader of The Workers' Party. It is the most highly populated constituency in the country. There is a general consensus that we lobby for and represent our constituency to the best of our ability, gaining maximum investment whether in education, schools or whatever. That being said, we then tend to divide on where we go from there.
On this side of the House we would claim that this most recent budget has quite a human face. In its provisions we are recognising the less fortunate members of our community, giving them substantial increases. We are endeavouring to address the unacceptably low levels of income of the long-term unemployed and of those who find themselves in the poverty trap. However, because of different political ideologies, my colleagues on the other side of the House might well disagree with me in that respect. Within reason the provisions of this budget are just about acceptable. We have effected improvements but we need to effect others. With regard to the potential for further improvement in the economy generally, in the area of financial management, I have been saying to my colleagues at party meetings and so on that if the Government would cease spending then they could cease taxing. Otherwise they cannot achieve that objective. We must examine every pound of expenditure, whether it is comprised of taxpayers' revenue or borrowing, to ascertain whether the taxpayer is getting value for each pound expended.
There are a number of areas still warranting examination, one of them is in regard to local authorities. We have been arguing in a petty fashion over the past six or seven months about the establishment of an all-party committee on local authority financing. I have been led to believe that the Fine Gael Party are arguing about membership, numbers; anyhow, somebody is delaying the task that needs to be undertaken. I am a member of a local authority with 700 or 800 fewer staff which probably is functioning more efficiently today than heretofore. Dublin Corporation is a massive spender of funds. Local authorities around the country are short of funds. Who analyses value for money? Who will contend that the electric lighting repairs system under monopoly to the ESB represents the best value we can obtain? Who will contend that various other aspects of those services constitute value for money? When we endeavour to examine such issues we run into the ideological argument that one must keep within local authority control, that one cannot do this, that or the other without incurring union confrontation, all putting the matter on a semi-long finger. This means we do not make the urgent progress warranted in so many of these areas. That is what we must achieve in the nineties. We must be big enough to put many political differences aside to achieve the common goal of improving the lot of the people we represent.
The chairman of the Sugar Company suggested the other day that that company needs additional revenue for growth and development. Hopefully we will not get into another ideological argument in that respect that in Opposition we were against doing anything in the semi-State sector, probably irresponsibly making a definitive statement about it whereas now, we might have a different view on it. We must examine these areas and bring an open mind to bear on them.
We did not hear anybody becoming excited when SIPTU, a massive union, was formed. One might well ask will it amount to a monopoly? Will it be too strong? Is that wrong? The strengthening of many of our organisations so that we can compete internationally is an issue of great concern to many people. In a rapidly changing world we must endeavour to stop fighting in our own backyard.
I might now deal with education for which Deputy John Bruton is responsible on behalf of his party. This is all very much entwined with budgetary provisions and the future of this country. I recognise Deputy Bruton's commitment in this respect. He visited an area in my constituency which is worthy of visitation. Additional investment and a recognition of the difficulties experienced is needed in the greater Neilstown and Quarryvale areas. A large urban community has been located there by Dublin Corporation, comprising three parishes, 6,000 homes, which constitute black spots of unemployment and so on. All of the capabilities and resources of Government, State and other sectors should be brought to bear to resolve the types of problems obtaining there and, indeed, in other areas.
Very belatedly the budgetary provisions recognise the need to improve opportunities for third level places. If the young people I represent — and there are more in my constituency than in any other constitutency in the country — are ever to have any real job opportunities they must be given the benefit of those extra two or three years' education. We have been pussy-footing around for a long time, trying to get an RTC for Tallaght where there are 80,000 or 90,000 people. The decision regarding the Lucan-Clondalkin satellite towns has been deferred and we are head-scratching about Blanchardstown. Those who can afford it will ensure that their sons and daughters receive third level education but those who cannot will be denied it. This is an area of urgent need and I have made vigorous representations on the matter. I have also made a recent submission to the Ministers for Education and Labour on the very substantial FÁS training centre in Tallaght and the proposed building of an RTC next door to it. The people in FÁS are concerned that there will be duplication. Should these two establishments not be situated on the one campus? The Departments of Education and Labour should get together to ensure that the work can be carried out efficiently. That is a matter on which we should be seen to have a consensus.
As regards industrial policy for the nineties, there is a great need for change. Enough analysis has taken place in the last 20 years. The Telesis report has been published and different studies have been carried out. The IDA travel the world looking for international investment and have been successful in that regard. We may say that too much of the profits is repatriated and we wonder if this is the right policy, will it continue in the nineties or should some changes be made. This morning the Taoiseach referred to the Intel project. There is now a condition attached to the receipt of a grant by that industry — the multinationals must source £1 million worth of products weekly into the Irish economy. There is no doubt that the major multinational companies repatriate their profits for future expansion. If they are doing well and making a profit in Ireland they invest that profit in places such as the Far East, which is now emerging as a developing area.
Will we continue to see this industry as one of the major platforms for job creaton? Everybody agrees that jobs are not being created quickly enough. I do not think anybody is satisfied with the rate of job creation. The Taoiseach told us this morning that the number unemployed would be reduced to 220,000 but that is only a small improvement and is nothing when compared to what we need to achieve. That figure does not include all the bright young people who have emigrated, people whom we would like to have been able to employ in this country. We have to bridge the gap between investment involved in importing raw material products and exporting them. The export figures may look well but we must consider the trickle on effects such as employment, taxes to the Exchequer from employers, the 10 per cent corporation tax and VAT on purchases. At the end of the day can we refine that policy without breaking agreements? There should be a greater incentive to retain profits within the country. I have no doubt the IDA have considered that matter but the solution must come from the Government.
The great cliché of the seventies and eighties has been added value, great quality, the green basket of Europe and the export of quality food products. There should be a concerted commitment to make that a reality. As regards the dairy sector, Bord Bainne have been the flag carrier and have made great achievements in the seventies and the eighties but what are they doing today? They are probably in the High Court petty arguing with Avonmore about who should share what spoils, who should sit on what boards and so on. That is a complete waste of time. In the north-east there have been problems with milk quotas and this has become a major national debate. We do not know the wood from the trees. The whole dairy industry should be orientated towards exports which would result in increased jobs. There should be some reorganisation of this industry so that the producers can get a better deal. We continually say that we must prepare for the single market but what are we doing? Our strengths are being dissipated. If we made an improvement in this industry we would then be able to compete with some of the large multinational food corporations which dominate this whole area. Hopefully in the nineties there will be a consensus on this matter and the reality of 1 January 1993 will shock us into putting our differences behind us and mobilising our strengths towards growth, investment and development.
When dealing with agriculture the Taoiseach mentioned that the dairy and pig farmers are doing well but the cattle farmers have not been doing so well. There has been major investments in this area but there has been a depletion of the herd. The biggest requirement in Eastern Europe is food particularly meat, but we do not have the cattle numbers to meet these requirements. How long more are we going to stay arguing among ourselves about what we need to do? Why are we in such a position in the early nineties? Have we not had enough reports on these matters in the eighties? Who is responsible for this? These are the issues we really need to focus in on and address. We should do everything we can to capitalise on what is happening in the Eastern Bloc countries and the Soviet Union. We should be able to supply those countries with the products they need. If they succeed in managing their affairs efficiently, by the year 2000 and beyond they will become our great competitors. Countries such as Poland and Hungary have the potential to be great food producing countries. We should do what we can to improve our position in this regard but it is painstakingly difficult to get co-operation. It is much easier to put millions of pounds into the multinational organisations which will create more jobs. They will get priority over the other urgent needs. It is very difficult for the IDA and the politicians to bring together commercial organisations who wish to retain their independence, and understandably so. They do not want to become bigger because they may lose out. These are the issues we must address.
There is probably a need for an all-party committee of this House which would come up with solutions to some of these thorny issues. You have your own ideologies and attitudes, a Chathaoirligh, as have Fianna Fáil and Fine Gael but these attitudes are rapidly changing. Your own Party leader, at your last annual conference, said there must be a mixed economy and that we have to refine State monopoly and State control. That was a far seeing address because we did not predict at that time what would happen in Eastern Europe. The ideology of The Workers' Party has been allied to that type of management of those countries for many years.
Are we prepared to change where necessary? Change is not needed in any area more than it is needed in relation to our attitude to Northern Ireland. This has not been mentioned in any budget but it is one of the single biggest financial drains in the country. How many more times will we invite the representatives of that community to talks? How much longer will it take the Secretary of State to get Unionist leaders together? The Secretary of State has been there for five or six months. We do not expect him to make progress in five or six months after lack of progress over 700 or 800 years, but we could all get rather impatient at the lack of progress in these areas. Should the Taoiseach and the leaders of the main parties not embark on some sort of concilatory trip to some part of Ireland and break the mould, as did Seán Lemass at one time, and do something dramatic, something big to bridge the gaps? In the nineties these issues must be addressed by all politicians.
We must be brave in our attitude and pragmatic and honest in our approach. We must be prepared to put behind us the major political differences. We on this side of the House had to put our differences behind when we formed this Government, although we did so reluctantly. I did not like to have to go to the Comhairle Dáil Ceanntar and defend that bulwark of principle in our party of never forming other than a single party Government. We did not wish to form a Coalition but we had to do so because that is what the people wanted. We were able to put differences behind and form a Government which is working. While the party people might not have wanted this we must be prepared to change. The changes we have seen in Eastern Europe and in the Soviet Union should present a sobering lesson to all of us showing us how we can come together to work in the interests of the people we represent. We can put aside our political differences and give public expression to an effort to get a great consensus moving forward in order to, for instance, reduce the 220,000 unemployment figure. We need a major imaginative change in attitude to progress in that area.
The leaking of this budget to a journalist is something that has not happened before in this way. It constitutes one of the most grave breaches of the privileges of this House for many years. It is well accepted that legislation shall not be published before it is introduced here and that the details of a budget shall not be published before they are announced in this House. As Deputy Deasy outlined, there are very good reasons for this. One wishes to ensure that no individual has the opportunity to make financial gain from having privileged access to information in advance of that information being made available generally in this House. The fact that this information was leaked to a newspaper clearly indicates that it was allowed to be in common circulation. The Minister is personally responsible for this and he should consider his position in view of that. I would remind the Minister that it is a well established principle that a Minister who finds himself in the position of having leaked his budget resigns. The practice was followed in the forties on a famous occasion by probably one of the most able British Chancellors of the Exchequer, Mr. Dalton. He resigned. The fact that there were leaks of this budget in which I believe the Minister had a hand — I may not be accurate in that — calls into question whether Deputy Reynolds should continue as Minister for Finance. I intend to raise this matter with the Committee on Procedure and Privileges. The reasons for the concern were ably stated by Deputy Deasy and need not be further embellished. Be that as it may, we must debate the budget as leaked and subsequently presented.
A leading independent economist, Mr. Joe Durcan of Universiy College Dublin, said in regard to the budget that the danger with the current strategy is that it provides a fiscal stimulous to a fast growing economy and leaves us exposed again to a downturn in activity worldwide. That is a very accurate statement. When one makes the necessary adjustment for carry forward of revenue and so on, the Minister opened with a small budget surplus but when he sat down, despite the fact that we have a national debt larger than any in Europe with the exception of Belgium, he had created, in the space of not much more than an hour and a half an Exchequer borrowing requirement to the extent of 2.1 per cent of GNP. That is not a wise policy and it recalls some of the mistakes made in fiscal policy in the seventies. In the mid seventies the Government in which I was a junior Minister were very concerned as are the present Government to obtain agreement to a national wage accord and they introduced a range of measures which subsequently proved to be extremely expensive, one of which was food subsidies. All of this was justified on the basis that it would be for the greater good of the country because it would facilitate obtaining a wage agreement. The result as we know was that while there may have been some slight improvement in the negotiating atmosphere, the wage agreement that was subsequently obtained was not influenced to any degree by the introduction of food subsidies, and food subsidies continued——
Acting Chairman
Gabh mo leathscéal——
I think we have two meetings here.
Acting Chairman
Ba chóir do na dhaoine atá ag caint lena chéile stopadh.
We continued with food subsidies along with other fiscal expansions introduced at that time to obtain a national wage agreement and we ended up with borrowing being greatly aggravated and with the necessity of introducing a succession of harsh budgets in the eighties, overtaxing our country and cutting spending as well, subsequently. All that can be traced back to the decisions of the mid seventies to borrow more money to finance certain concessions in order to get agreement to a national wage agreement.
The Minister, having converted an opening budget surplus into a significant deficit in the space of an hour and a half, was engaging in exactly the same sort of exercise. He was doing it on the basis of good figures for one or two years. He told us that the budget revenue for 1989 had been particularly good due, among other things, to a 25 per cent increase in the purchase of cars. I imagine that people had postponed buying cars for a number of years and that there was then a once-off increase in their purchase. A lot of suppressed spending also took place during 1989 but to assume that that level of spending, which represents the release of certain pent up demands will continue every year, is a mistaken assumption. Other threats hang over us about which we should not be unduly complacent. We are very much in the hands of German Central Bank, the Bundesbank, in regard to the level of interest rates charged in this country.
The level of interest rates in Germany relates to a concern about inflation and the stability of currencies in the European Monetary System. I read a report of the economic research department of the Commerzbank, one of the big German banks, which predicted a realignment of the EMS in 1990. In the lead up to that, and because of the uncertainty which will prevail if that prediction is true, there will be upward pressure on interest rates.
I am also aware that the German Government are scheduled to introduce a major tax cut during 1990 under a programme set down by the current Christian Democrat-Free Democrat Government. That will fuel inflation in Germany to some degree and the Bundesbank — which are totally independent of the government and care not a whit for the fortunes of any government — may well use that as a basis for further pushing up interest rates in order to mop up any extra demand that may have been created by the tax cut.
We could enter an era of quite significant pressures on interest rates. As the Minister pointed out, the cost of existing interest payments by the Government goes up this year by 9 per cent, in the region of three times the rate of inflation. Any further increase or upward pressure on interest rates in any of the currencies from which we are borrowing would have a disproportionately severe effect on our finances. It is also fair to say that we are budgeting for continued substantial injections from the European Community. I have no doubt that we will get what we have already been promised, I do not think that that is under threat. However, the opening up of Eastern Europe will mean two things, the first is that many projects which might otherwise have come here from continental Europe to avail of our tax concessions will now go to Eastern Europe which is, after all, on the European mainland. It is easier to get from Warsaw to Paris than from Dublin to Paris.
I also believe that because of the very great economic interests of Germany in Eastern Europe there will be a tendency to divert significant sums of prospective EC revenues, not towards Irish farmers through the Common Agricultural Policy, not towards structural developments in Portugal, Spain or Ireland — the existing poorer members of the present EC — but into Eastern Europe. Therefore, any additional funds which come on stream will not tend to come into the Irish Exchequer, they will tend to go east.
There are three vulnerabilities which the Minister should have considered when deciding to go for the extra borrowing over and above the budget surplus. The first is that the tax revenue increases are short term and once-off to some degree; second, the situation in relation to interest rates and, third, the long-term prospects as far as EC funds are concerned. Against that background there is a resumption in the growth of public spending. If you give tax concessions and increase public spending in a budget it is easy to be temporarily popular, especially if you are doing it on the back of a general upsurge in economic confidence, something that is the case and about which everybody in the House is pleased. However, it is not necessarily good budgetary policy. It is ironic but true that it is more difficult to do the right thing in good times in budget terms than in bad times. In bad times everybody recognises that there is a crisis and is prepared to tighten their belts. There is a general anxiety to deal with the problem. In one sense the job of Minister for Finance in bad times is a little bit easier. I speak as a former Minister who had that experience twice. In a sense the job of a Minister for Finance in good times is more difficult because, in trying to preach prudence and a concern about the medium term at a time when everybody is feeling very confident, the Minister is like a Jeremiah, to use a biblical reference. He is seen as preaching a doctrine that nobody wants to hear. That is what happened in this case. The Minister for Finance may have started on the route of wishing to look to the medium term but he gave up under the accumulated pressures for a loosening.
I refer to that because pressure and pressure groups are the source of the fact that Ireland as an economy has underperformed. This budget is not one from the Minister for Finance but from the pressure groups in this House and outside it who look for concessions. The Minister has assembled a sort of dolly mixture of sweets by picking one or two of the nuggets from the different suggestions made to him from different groups. He has obviously picked something from virtually everybody's bag of demands, the IFA, the ICTU, the Conference of Major Religious Superiors and, indeed, from the suggestions of Fine Gael. Quite a number of our suggestions of last year have been incorporated in this year's budget without any acknowledgement. However, I did not expect it and I do not criticise the Minister for Finance for failing to acknowledge that he borrowed some of our idea. That is normal procedure.
The fact is that the Minister has been inclined to curry popularity by picking other people's ideas in order to get all the vested interests lined up so that he will get the wage agreement he wants. I am not saying that we should not look for a wage agreement but I am saying that we should analyse it in terms of the costs and the benefits. There was an opportunity this year to once and for all get the problem of our finances under control finally, and we must weigh that against the disadvantage of not doing it but, perhaps, getting a wage agreement. Are the benefits greater on the one side than on the other? It is my view that the Minister has taken the wrong option particularly at this stage in the life of the Government, assuming that it will last four years. To introduce this type of budget in the first year of what the Minister hopes will be a three to four year Government is politically, as well as economically, mistaken. That is not something that others will say to the Minister but I am prepared to do so.
It is the power of vested interests here that has meant that Ireland has under-performed as an economy over the last 70 years. Vested interests have always had the ear of Government. Their short term concerns have tended to predominate to the disadvantage and to the cost of the long term development potential of the economy. I should like to illustrate that by a few brief historical references. We fought a War of Independence in order to gain independence. In 1918 the majority rejected Home Rule in favour of what they wanted, a republic. What they got was a free state and, ultimately a republic. The main fiscal or economic difference between Home Rule that would have occurred if we had not had the War of Independence and what we got, a free state and, ultimately, a republic, was that what we got gave us the capacity to impose tariffs on imports from Britain whereas a Home Rule Government initially would not have had that power.
We got the power in 1922 but for ten years we did not use it because it was felt that if we did our cattle export market would be jeopardised. One of the strong vested interests in Irish society in the twenties were the cattle exporters with whom I am quite familiar. They succeeded as a pressure group in getting the then Government not to use the power, the main economic lever that we had fought the War of Independence for, namely, tariffs. I happen to believe that they were right, that the imposition of tariffs would have been a mistake but it was in terms of economics, the issue over which we fought the War of Independence, and we did not use it because of pressure groups.
In 1932 Fianna Fáil came to office and they imposed tariffs but instead of those tariffs being used to create a dynamic economy they created a new vested interest, namely, the protected industrialists who produced poor quality shoes at twice the price one could have bought them on the world market. They succeeded in keeping those tariffs in place until 1963 to the extent that Ireland failed to benefit from the post World War trade boom which was founded on free trade and the Bretton Woods system of international currency alignments. Ireland failed to develop, as other European countries did after the Second World War, because we persisted in protectionism due to vested interests. That is another example of vested interests in our society.
In the seventies we made tremendous savings on our agricultural budget as a result of joining the EC. Irish agricultural spending went down from 13 per cent of Government spending to about 3 per cent releasing huge sums of money. The two Governments, the Coalition and Fianna Fáil, used those savings not to develop our economy but to recruit large numbers of public servants of various kinds. They, in turn, became another vested interest in our society, one which is now extremely powerful to the extent that the Government had to design last week's budget specifically to get them to agree to a wage agreement. We are now in the position where the public sector is absorbing ever increasing amounts of money. It is worth noting that, despite the fact that the budget contains some individual tax concessions, the amount of tax to be collected in 1990 will increase over that collected in 1989 by an amount well in excess of the rate of inflation between 1989 and 1990. In other words, the tax take this year will be bigger than it was last year. Again, that has to be done as long as the vested interests have to be kept happy.
The reason Ireland has under-performed is because the Legislature, which represents the general interest in our society, has failed to assert itself against the special interests in our society. We have not been able to govern the country in the interests of the people of Ireland and generations of Irish people yet unborn. Instead we have governed it in the interests of relatively small but well informed vested interests. That is why I describe the budget as a vested interests budget.
I should like to make a number of points about taxation. There are those who will say that this country is not overtaxed. The Conference of Major Religious Superiors made the point that in assessing tax changes in the budget a number of points needed to be borne in mind. They said that we are far from being the most taxed nation in Europe. They made comparisons to indicate that the Irish proportion of GDP is less than that in Luxembourg and France but is, of course, greater than that of Germany and the UK. To some extent that is to miss the point. People in a richer country can afford to have a higher proportion of income taken in tax because the individual will have a sufficient amount to fulfil his or her aspirations. If one's income is twice what it now is, as is the case of the average person in Luxembourg, that person can afford to pay a higher proportion of income in taxes because he or she will have more than enough with the amount they are left with. That is not the case in Ireland.
Another point needs to be made about tax. The relevant comparison is with the country to which the Irish taxpayer has the option of emigrating. We must bear in mind that single people are the people who tend to emigrate. On a pre-tax income of £15,000 an Irish single person will take home £9,100. If that Irish person goes to Britain with the same income he or she will be able to keep almost £11,000. If that person goes to the United States he or she will be able to keep £11,500 and if that person goes to Australia he or she will be able to keep £11,000. That is a factor that we must bear in mind. In Europe after 1992, and in a world in which free movement is accepted, we will be in the position where our tax base can emigrate. If our rates are significantly out of line with those that apply in other countries to which people can emigrate then they are too high because people will leave. Some people will agree with that and suggest that we should reduce income tax and put tax on other items. However, the other items that we would put tax on may also emigrate. For instance, if we put tax on financial assets once exchange controls are removed people will be in a position to move their bank account from an Irish bank to a bank in the Isle of Man and if the tax rate in the Isle of Man is half what it is here they have escaped.
Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.